Good day, and welcome to the NCR Atleos Second Quarter Earnings Call. Today’s conference is being recorded. At this time, I’d like to turn the conference over to Mr. Brendan Metrano. Please go ahead.

Good morning, and thank you for joining the NCR Atleos second quarter earnings call. Joining me on the call today are Tim Oliver, CEO; Paul Campbell, CFO; and Stuart MacKinnon, Chief Operating Officer. And we will start this morning with an overview of second quarter performance and update on 2024 objectives. Next, Paul will review our financial results and the outlook. Then we’ll move to Q&A. Before we get started, let me remind you that our presentation and discussions will include forward-looking statements, which are often expressed by words such as may, will, include, expect and words of similar meaning. These statements reflect our current expectations and beliefs and are subject to risks and uncertainties that could cause actual results to differ materially from those expectations. These risks and uncertainties are described in today’s materials and our periodic filings with the SEC, including our annual report. Also, in our review of results today, we will refer to certain non-GAAP financial measures, which the company uses to measure its performance. These non-GAAP measures are described and reconciled to their GAAP counterparts in the presentation materials and on the Investor Relations website. A replay of this call will be available later today on our website, investor.ncratleos.com. With that, I will turn the call over to Tim.

Thank you, Brendan, and thank you to everyone for joining us on the call today. For those following along in the presentation from the Investor Relations website, we will start today on Slide 5. Before I launch into a discussion of a very successful second quarter and because I’m hopeful many of you are newer to the Atleos story, I think it makes sense to reiterate the significant opportunity and accompanying strategy of Atleos now as an independent pure-play ATM company. Atleos has an installed and service fleet of approximately 600,000 ATMs, including over 80,000 that we own and operate in our own network. In a global environment that continues to demonstrate steady cash-based consumer transactions and a stable installed base of ATM hardware, our growth will come from generating more revenue for every Atleos machine that we support. Whether that’s from providing higher quality, more efficient and more comprehensive services to our financial institution clients or by driving more transaction volume across our network machines located in blue chip retail locations. Both of these strategies are fueled by our customers’ desire to improve financial access for their customers while outsourcing more of their cash ecosystem. And as we service both growth vectors from a common infrastructure that has unmatched scale is leverageable and is world-class. As global banks seek to improve their customers’ experience in the most cost-effective way, the importance of self-service devices is increasing. As a result, our customers are reinvesting back into their retail banking footprint and embracing shared financial utilities. For them, this strategy will result in lower cost, higher quality, better consumer experience, broader reach and higher foot traffic. For NCR Atleos, it will drive higher revenue growth, higher profitability both from scale and a richer revenue mix and predictable free cash flows. In…

Thank you, Tim, and thank you all for joining us today. We closed out the first half of the year with a strong second quarter that was on the higher end of our expectations. We were particularly pleased with the financial results, momentum of our business and accelerated progress of our key objectives. Importantly, the results further validated the earnings power of our strategy to generate higher revenue and profit per unit across our global installed base of 600,000 ATMs by adding incremental transaction and service revenue streams. We will start on Slide 9 for a review of the consolidated second quarter results. Total company revenue was $1.08 billion, led by 7% growth in software revenue and 6% growth in services revenue that demonstrated continued success in generating consistent and higher margin sources of revenue from stable installed base of ATMs. The strong software and service revenues contributed to 9% growth in recurring revenue to $793 million, which comprised 73% of total revenues, up from 70% in the prior year. We delivered second quarter adjusted EBITDA of $193 million and a margin of 17.9%, benefiting from upside in revenue growth for self-service banking and upside in margins for the network business. EBITDA margin rate expanded 250 basis points sequentially. The year-over-year decrease in EBITDA and margin was consistent with our projections that incorporated known dis-synergies and higher labor costs. Macro headwinds remained consistent with last quarter, partially offsetting the productivity savings we have accomplished. Moving down to P&L. Interest expense was $79 million on an average total debt balance of $3.2 billion that includes approximately $1.8 billion of variable rate debt. The weighted average interest rate on the debt was approximately 9.4%. The second quarter effective tax rate of approximately 18% was 200 basis points lower than we projected due…

[Operator Instructions] We will go first to Matt Summerville with D.A. Davidson.

Thanks. A couple of questions. First, just with respect to the balance sheet, you mentioned you may embark upon some sort of debt refinancing this fall. Can you remind us what your cash interest expense is on an annual basis and where you think ultimately your new weighted average cost of debt, what that could look like relative to the 94. And then similarly, I think with respect to your comments on buyback and dividends, what leverage level would you need to see to start entertaining those ideas again? And then I have a follow-up.

Paul, I will take the first one and I will let you take the second one. Sorry, I will take the second one and you take the first one on the debt cost and the potential relief from refinancing. So, I think on the second half of that question, 3x leverage is probably where we want to get to. And we have talked about getting to 3x in the midpoint of next year. We think we can get there more quickly if we don’t pay a dividend or we don’t return cash to shareholders either as a dividend or a share repurchase. A share repurchase authorization would take an action by our Board. We have had one in the past. I think it was a very compelling choice last quarter when our stock was in the $22 range. I still believe we are undervalued, but not as undervalued. So, I would – I think once we get down to 3x, which should be sometime in the first half of 2025 that we could reinitiate this discussion. Paul, would you take the first one.

Yes. Thank you, Tim, and thank you, Matt. The annual interest cost, Matt, is between $295 million and $305 million in 2024. We have roughly $3 billion of debt, around $750 million of that as a term loan B, which is no call through the end of Q3, and then it’s callable at the end of Q3. So, that’s our highest cost debt at super plus 485 [ph]. So, that’s the debt we are probably looking to refinance, Matt, just the $750 million up to $3 billion. We don’t know yet what the interest would be. There is a number of different options we can take when we are refinancing that we are replacing with more term loan A, there is options around converts and there is just re-pricing the debt. So, we are working with our bank partners to come up with the best optionality is for us for interest rates that are available at the time we can refinance.

Got it. And then with respect to the hardware side of self-service banking, it sounds like there is a pretty good chance you actually see some unit growth in ‘24 over ‘23 based on some of the order comments you had. Does this give you an early read on how you are thinking about ‘25 big picture for that portion of the business? And what inning would you say we are in with respect to this recycling proliferation in the western part of the world, particularly in North America?

Yes, I will take this one. I feel good about demand for hardware this year. Our demand is going to be better than we anticipated at the beginning of the year. The order book is very strong, particularly in the second half of the year. Our recycler product will compete exceptionally well going into next year. And I think that from a hardware perspective, both because demand feels pretty good, it feels good, not just for recycling, but for all things ATM. I think we are at that somewhat of a sweet spot in the refresh cycle at this point. I think we are in the third inning, the fourth inning, I think it’s going to play out more slowly than the 2019 bubble. But I think 2025 for us would be a very, very good hardware year.

If you think about – I will just sneak in one more. If you think about the network side of the business and kind of the growth algorithm there, if LibertyX is sort of lower for longer and back of the envelope, that to me, it looks like a 2 percentage point, maybe 3 percentage point drag network organic growth this year. So, first one, if you could confirm that. But I want to think about the long-term growth algorithm outside of Liberty, how much growth can you get from incremental withdrawal transaction volume gains versus continuing to add to the transactional side? I guess I am trying to make sure I understand, which is the bigger underlying driver of incremental growth from here in network.

Yes. It’s going to be the withdrawal transactions in the shorter run. The new transaction types we are describing are relatively small compared to the whole. And so despite the fact they are growing very rapidly, they are not moving the whole business that much. Fast forward a couple of years, and I think deposit transactions and our – some of our card less, pin less transactions might be significantly – still growing very rapidly and be contributing still the overall growth rate of the business. So – but I think for the next several quarters, it’s going to continue to be really robust growth in our withdrawal transactions.

[Operator Instructions] We will go next to George Tong with Goldman Sachs.

Hi, thanks. Good morning. You are continuing to target 30,000 ATM as a Service units by 4Q of this year compared to about 22,000 in the second quarter and cited strong visibility into large contracts that will likely close in the second half. Can you describe where these large contracts are coming from and your confidence around the timing of implementation?

Paul, why don’t you take that?

Yes, certainly. Thank you for the question, George. We have a line of sight. These are customers we have today, George, that have moved somewhat along the continuum. They have outsourced some services to us today. We are looking to convert them to an ATM as a Service structure either late third quarter or early fourth quarter. So, we have good line of sight, specific customers, it’s negotiations that are deep into the closing cycle.

I want to add – and I would love to add there that we are not going to chase units. We could chase units and be less profitable and have returns that are not what we have been targeting. We are going to continue to participate in transactions in lower-cost markets, but it’s unlikely the trend we are seeing right now will allow us to be as competitive there. So, we are going to – you are going to see more smaller deals in the U.S. and Western Europe, and it takes a little longer for those to accumulate. But we are not going to chase that metric of 30,000 simply because we want to hit that metric. We will do it profitably or we won’t do it. As Paul said, we have got a line of sight to get to 30,000 units. There is – I guess there is two relatively large transactions in there that we think will get closed. Other customers we have spoken about before you would know them. But we are not in a mad tear trying to get that unit number up.

Got it. That’s helpful context. Related to that, you are leaning more and more into your ATM as a Service light strategy. Can you talk more about that strategy, how many ATM as a Service light implementations there were in the quarter? And if the strategy alters your medium-term target, assuming you continue down this path of preferring light implementations?

That is certainly one of the reasons why we have reined in our units expectation is because we are not inclined who want to own the device unless the return is significant. And in some deals, particularly in India, they are not significant enough. The returns are disappointing. And so we would rather not own the device. It’s really been our customers’ preference thus far that has caused the strategy to be less capital intensive. We are admittedly prioritizing transactions that are asset light. And we have been able to take our free cash flow number for the guidance for the year up a bit, as Paul described, because we are not spending nearly as much as we thought we would to drive these strategies. So, I think part of it is a choice that we are making and part of it is our customers understand that their cost of capital is significantly lower than ours. And they just soon own the devices themselves and let us do what we do well, which is serve those machines.

Got it. That’s helpful. Thank you.

And at this time, there are no further questions.

Operator, thank you. I think that concludes our call. I appreciate everyone joining tonight. And I know that Paul and his team will be standing by to take any questions that you have today or tomorrow, hopeful as well. Bye.

Thanks everyone.

This does conclude today’s conference. We thank you for your participation.