Dive Brief:

• Payments software and technology company NCR Corporation is betting its ATM-as-a-service approach will fuel growth for its soon-to-be spun-off ATM business, according to a filing this week with the Securities and Exchange Commission.
• The spin-off is expected to occur in the fourth quarter, according to the filing which offered more details on the separation of NCR’s ATM business and its retail, hospitality and digital banking operations. Tim Oliver, currently CFO and a senior EVP at NCR, will become CEO of the spun-off business, NCR said.
• “Should alternative options become available in the future that could deliver superior value to our shareholders than the planned separation, such as a whole or partial company sale of NCR, the Board remains open to considering alternative scenarios,” the company said in a June 26 news release.

Dive Insight:

NCR announced last September that it planned to separate into two publicly-traded companies. The separation is geared toward enhancing both the long-term potential and overall valuation of the two businesses, NCR CEO Michael Hayford said in the filing. Last year, the ATM business reported revenue jumped 16% over the prior year, to $4.1 billion, and net income fell 43%, to $107 million, according to historical figures in the filing.

Dan Antilley has been named designate chief security officer and cash operations of the NCR ATMCo company; Stuart Mackinnon, designate chief operating officer; and Patricia Watson, designate chief information and technology officer.

The spun-off business will include NCR’s ATM-focused operations, including self-service banking, payments and network, and telecommunications and technology businesses, according to the filing. It will continue shifting toward a recurring revenue model focused on offering ATM-as-a-service “to a large, installed customer base across banks and retailers,” according to the filing. 

This approach, expected to expand the addressable market for the business, has NCR ATMCo handling the management of ATMs, instead of clients themselves, or third-party providers, managing certain ATM services and functions.

Operations remaining with NCR will include the digital commerce operations, such as its retail, hospitality and digital banking segments. Despite these plans, the company isn’t closing the door on other possibilities, such as a sale.

The board views the ATM business spin-off as enabling each operation to focus on their respective business and strategy without needing to consider the impact to the other, since the two “differ significantly in several respects,” according to the filing. The spin-off could attract new investors who’ve been uninterested in NCR thus far due to its complexity, the filing noted.

The board also sees the spin-off eliminating the “competition for capital inherent” in NCR’s current business structure. “NCR will seek to reinvest in high growth opportunities across retail, hospitality and digital banking industries, while NCR ATMCo will seek to maintain global leadership while generating stable and sustainable cash flows and capital return,” according to the filing.

Still, the board outlined several risks to the spin-off, including one-time expenses tied to it and the “potential for increased aggregate ongoing administrative costs;” increased susceptibility to market fluctuations as two stand-alone companies; and the possibility that the spin-off doesn’t bring expected benefits and proves disruptive to the businesses, according to the filing. 

Looking ahead, the ATM business faces a number of competitive risks, the filing noted. Rivals include Fiserv, Fidelity National Information Services, Temenos, Diebold Nixdorf and ACI Worldwide, “many of which have more financial and technical resources, or more widespread distribution and market penetration for their platforms and service offerings, than we do,” the filing said. 

And increased use of alternative payment methods such as peer-to-peer payment methods Venmo, Zelle and Cash App and digital wallet Apple Pay could affect ATM use and eat into the company’s gross margins, the filing said.

The number of ATMs in the U.S. fell for a third straight year last year, according to Euromonitor International.

NCR anticipates a significant share of its ATM business revenue to continue coming from outside the U.S., although that percentage has dipped in recent years. Last year, the share of the ATM unit’s revenue coming from outside the U.S. was 55%, compared to 59% in 2021 and 62% in 2020, the filing said.