Atleos: A Promising Future in Self-Directed Banking

Atleos is an industry-leading financial technology company that provides self-directed banking solutions to a global customer base, including financial institutions, merchants, manufacturers, retailers, and consumers. The company operates in three main segments: Self-Service Banking, Network, and Telecommunications and Technology (T&T).

Strong Financial Performance

In 2024, Atleos reported total revenue of $4.317 billion, a 3% increase from the previous year. This growth was driven by the expansion of the company’s recurring revenue streams, which now make up 72.6% of total revenue. Recurring revenue includes revenue from hardware and software maintenance, processing, interchange and network fees, and subscription-based software licenses.

The company’s Adjusted EBITDA, a key profitability metric, increased by 7% to $781 million in 2024, representing 18.1% of total revenue. This improvement was due to the higher proportion of recurring, higher-margin revenue as well as cost optimization initiatives.

Atleos’ net income attributable to the company was $91 million in 2024, a significant turnaround from the $134 million net loss in the previous year. This was driven by the increase in revenue and Adjusted EBITDA, as well as lower separation-related costs associated with the spin-off from Voyix.

Segment Performance

The Self-Service Banking segment, which offers ATM hardware and software solutions, as well as managed services, saw a 4% increase in revenue to $2.696 billion. This was primarily due to the growth in the company’s ATM as a Service (ATMaaS) offering, where Atleos owns and manages the ATMs for financial institutions, as well as increased software-related revenue from the shift to recurring subscription models.

The Network segment, which provides ATM network access and transaction processing services, reported a 1% revenue increase to $1.285 billion. This was driven by higher transaction volumes and a favorable mix of higher-margin transactions, partially offset by a decline in Bitcoin-related revenue.

The T&T segment, which offers managed network and infrastructure services to enterprise clients, saw a 1% revenue decrease to $194 million, due to a decline in hardware maintenance and installation revenue, partially offset by an increase in one-time hardware sales.

Liquidity and Capital Resources

Atleos generated $344 million in cash from operating activities in 2024, which was used to fund capital expenditures, debt service, and other corporate obligations. The company’s Adjusted free cash flow-unrestricted, a non-GAAP measure that adjusts for certain items, increased to $242 million in 2024 from $184 million in the previous year.

As of December 31, 2024, Atleos had $419 million in cash and cash equivalents and $2.994 billion in total debt, including $1.413 billion outstanding under its senior secured credit facility and $1.350 billion in senior secured notes. The company’s borrowing capacity under the revolving credit facility was $350 million at the end of 2024.

Strategic Initiatives and Outlook

Atleos is focused on delivering its ATMaaS solution to a large, installed customer base across banks and retailers. The company believes it can build on its leadership in self-service banking and ATM networks to meet global demand for ATM access and leverage new ATM transaction types, including digital currency solutions, to drive market growth.

The company is also continuing its transition to a software-led solutions model, with its cloud-based platform and APIs that integrate with customers’ systems. This is expected to drive a higher proportion of recurring revenue and stable cash flow.

Despite the challenges posed by macroeconomic pressures, such as higher interest rates and increased logistics costs, as well as the uncertainty in the banking industry, Atleos remains well-positioned to execute on its strategic initiatives and deliver value to shareholders.

Key Risks and Uncertainties

Atleos faces several risks and uncertainties that could impact its future performance, including:

• Macroeconomic and geopolitical challenges: The company is exposed to higher interest rates, increased logistics costs, and foreign currency fluctuations due to global economic and political factors, which could negatively impact its business.
• Bank failures and industry uncertainty: The recent failures of several banks have caused uncertainty in the banking industry, which could lead to reduced spending by Atleos’ customers and negatively impact the company’s sales and operations.
• Seasonality and tourism: Atleos’ business is subject to seasonal fluctuations, with lower revenue and fewer transactions occurring during the winter months due to decreased consumer traffic.
• Regulatory and compliance risks: As a financial technology company, Atleos is subject to various laws and regulations, which could change and impact the company’s operations and financial performance.

Conclusion

Atleos has demonstrated strong financial performance in 2024, with growth in recurring revenue, improved profitability, and a positive turnaround in net income. The company’s focus on delivering self-directed banking solutions, particularly through its ATMaaS offering, positions it well to capitalize on the growing demand for self-service banking. While the company faces some near-term challenges, Atleos’ management team is taking proactive steps to navigate these obstacles and position the business for long-term success.