Good day, and welcome to the NCR Atleos Q4 Fiscal Year '23 Earnings Call. Today's conference is being recorded. At this time, I'd like to turn the conference over to Brendan Metrano. Please go ahead.

Good morning, and thank you for joining the NCR Atleos earnings call for the fourth quarter of 2023. Joining me on the call today are Tim Oliver, President and CEO; Paul Campbell, CFO; and Stuart MacKinnon, Chief Operating Officer. Tim will start this morning with an overview of fourth quarter financial and operational results, followed with an update on objectives for 2024. Next, Paul will provide an in-depth review of our results and the 2024 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. 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. On today's call, we'll also be discussing certain non-GAAP financial measures. These non-GAAP measures are described and reconciled to their GAAP counterparts in the presentation materials and on the Investor Relations page of our website. A replay of this call will be available later today on our website investor.ncratleos.com. With that, I'll turn the call over to Tim.

Thank you, Brendan, and thanks to all of you joining us this morning. We appreciate your interest in Atleos. The summary Slide on Page 6 describes a very busy 2023, capped by a strong fourth quarter that sets a solid jumping-off point for NCR Atleos in our first full year as a separate company. Importantly, our performance in the second half of 2023 and our current outlook for 2024 are both consistent with the modeling that we use during the separation process for discussions with both debt and equity investors. In the fourth quarter, we posted solid year-over-year revenue growth, with particular strength in our transaction-driven and in our services businesses, that both benefit from our increasingly successful strategy to generate more revenue per machine from our base of 600,000 ATMs. The fourth quarter finished out a year of exceptional execution on three different fronts. First, we completed the separation of a 140-year-old company into two industry leaders with clear strategies and strong competitive positions. Second, we overcame the potential for distraction and the sheer magnitude of the work associated with the spin, and delivered financial results that were well ahead of our 2023 annual budget. And finally, we made significant strategic progress by growing both our ATM-as-a-Service business by 30% to over 20,000 machines and by adding new FI partners and new countries to the network. I'm extremely grateful for the diligence, the fortitude and the dedication of our global NCR Atleos team. And I'm very appreciative of the patience and support our customers showed us as we navigated a very challenging but rewarding year. Based on the company's strong performance throughout this year and the momentum we carried into 2024, today, we announced 2024 guided ranges that are consistent with the preliminary targets highlighted in our December 5…

Thank you, Tim, and thanks to all of you for joining us today. As Tim noted, the fourth quarter was our first reporting period as a stand-alone company, and the work of separating from legacy NCR is ongoing. This, coupled with the use of assumptions, difference in basis of accounting for pre-separation periods and different post-separation capital structure cause us to view the full year 2023 results as less relevant for assessing the company's post-separation fundamental performance. Therefore, my comments today will focus on fourth quarter 2023 results which more closely align to our post-separation operations and reporting. Also, there are some items related to the separation transaction that impact the comparability of the fourth quarter results with the prior year period. Firstly, operations in 11 countries were temporarily delayed in separating from legacy NCR due to local processes of setting up NCR Atleos' legal entities. Undercover accounting, these operations were included in the fourth quarter 2022 results but not in the fourth quarter of 2023. This created an artificial headwind on the fourth quarter of 2023 of approximately $40 million of revenue and $9 million of EBITDA. Of these 11 countries, 4 transferred during Q4 2023 and the balance are expected to transfer by early Q2 2024. Secondly, in successfully separating from legacy NCR, NCR Atleos had dis-synergies of approximately $11 million in Q4 2023. Given these factors, in addition to non-GAAP results that we typically provide when discussing quarterly financial results, in certain instances I will refer to normalized metrics that adjust for these items noted to improve comparability with prior period results. Note that we rely on non-GAAP results internally, along with other KPIs, to track underlying performance of the business. Turning to Slide 10 and a review of the fourth quarter. Total company revenue increased 3%…

Thanks, Paul. Good work. So 2023 was an eventful, exhausting, and rewarding year. The business logic that inspired the separation of NCR and the creation of Atleos is proving out to be correct. As a pure-play company with leading positions in everything that we do, our tactical and strategic plans are clear and focused. Our team is energized and our customers want to buy more from us. We are confident that reigniting innovation, prudently allocating capital and gracefully completing the separation of our company will drive strong financial performance, enhance competitive positioning and the faster uptake of our service and shared financial utility strategies. And importantly for this audience, the recognition of a more valuable NCR Atleos. With that, we're happy to take your questions.

Operator, just before we go to questions, this is Paul Campbell here. I just want to clarify. I misquoted the free cash flow number. It's approximately $60 million use of free cash flow rather than $80 million. So a slight misstatement there [indiscernible]. We can go to questions now.

We'll take our first question from Matt Summerville from D.A. Davidson.

You've got Canyon Hayes on for Matt Summerville. I was just wondering if we could get a little bit more of a finer point. I was curious as to the kind of the headwind to revenues and EBITDA due to the as-a-service changeover in fourth quarter. And then also what's baked into the guide for 2024. Kind of on that same line. I'm just curious what sort of levers we had with respect to the free cash flow update. And I've got a follow-up.

So for the impact on Q4, it was around $10 million of impact. Most of the units we put on were asset-light in Q4. What was the second question?

Impact in 2024.

Impact in 2024 is around -- between $80 million and $100 million.

And I was curious if you could touch on the kind of the levers up and down on the free cash flow forecast.

The levers on the '24 forecast. Primarily, we'll -- we put them in the before. So essentially, we're working on the capital deployed. So we'll meet around the capital, as Tim said, we're going to monitor our spend and focus on the projects that bring the payback earlier than the future period. And then it's driving our working capital, making sure that we can make improvements in our days receivable outstanding in particular and tightening up on inventory.

Yes. Historically, we've been a modest use of working capital as we grew. We don't think we need to do that going forward. Our new revenue streams caused us to actually have -- to convert revenue to receivables more quickly. I think that will be helpful. I also think that we -- the primary lever we have is how much CapEx we spend on growth. And while I don't want to ever have to constrain that, I think it's the best way to redeploy capital, if necessary, would. We've got built into our budget a pretty significant use of cash to drive the ATM-as-a-Service business. I think it's sufficient to support the year and to support the units and the forecast. So I feel good about the free cash flow forecast. But it's CapEx and it's working capital.

And I was wondering if we could get a little bit of a regional view of the ATM market and, correspondingly, what we think that industry units did in '23 and what the expectation is for '24 in terms of volume?

Yes, Canyon, we have not gotten back -- we sort of rely on some of the industry analysts to give us a view of what the market does. So we haven't really gotten the '23 view of sort of ATM units sold internationally across all of the vendors. Our volume has been fairly consistent internationally in all of the regions. Fairly consistent with what we said on Investor Day, we expect the market to be sort of flat to 1% up in terms of units sold. We have some upcoming sort of tailwinds, I guess, you could say, in terms of people getting ready to refresh the machines they bought six or seven years ago during the Windows 7 migration. So we expect 2024 to be sort of fairly consistent with '23 in terms of total units.

Yes. And I think another comment there, is that hardware is now becoming less and less a proportion of our total revenue, is now into the teens. And we're more increasingly becoming a consumer of our own hardware through our ATM-as-a-Service business and our Network business. So it's not a -- it's important, we're tracking it, but it's becoming a less dependent revenue stream for us.

And we'll go next to Michael O'Brien from Wolfe Research.

So a few quick ones here. So regarding your outlook for 2024, I'd like to know your macro view going into the year and how that affects the ATM-as-a-Service ramp-up that we're expecting. Obviously, we're seeing some pressure in regional banks and so forth. So I'm wondering if you guys are seeing that on your end with the ATM-as-a-Service initiatives.

Michael, no, not at all. We've got -- we're seeing robust volumes in Q4. The ATM-as-a-Service, I think Tim mentioned earlier, that we've got about one-third of our deployments planned for 2024 already in backlog and just working on getting these put into the ground. But we're not seeing any pressure from the regional bank dialogues. We see that as a potential opportunity for us as banks look to cut their costs, then we can come in, as we said in our Investor Day, we believe we can save them money and generate more profit for ourselves. So this is -- it's something we're watching closely, but we see it as an upside.

And so are you guys still on track for about 35,000 units for year-end?

Yes, we're tracking to 30,000 to 35,000 by the end of this year, just depending on how many get deployed before we cut off the year this year.

Say it differently, if we don't hit 35,000, it won't be for lack of demand. It will be the ability to install quickly enough.

And there are no further questions in the queue at this time.

Excellent. Well, thank you for those who did ask questions. We hope to have a bigger audience as we go forward. I know some folks are thinking about picking up coverage soon. We appreciate your interest in the story. We believe strongly in it. And have a great quarter. We'll talk to you 90 days from now.

That does conclude today's conference. Thank you for your participation. You may now disconnect.