Yet Another Value Podcast - $NATL and the sunset of ATMs with Undervalued and Undercovered's Hugo Navarro

Episode Date: December 26, 2025

Hugo Navarro of Undervalued and Undercovered discusses NCR Atlas (NATL), a company operating at the intersection of legacy cash infrastructure and modern outsourcing economics. The conversation centers on whether ATMs represent a declining business or a misunderstood opportunity, unpacking NCR Atlas’s valuation, free cash flow profile, and competitive positioning within a duopoly market. Hugo outlines the company’s ATM-as-a-service strategy, highlighting scale advantages, incremental margins, and incentives for banks to outsource servicing. See Hugo's NATL write up here: https://smallcaptreasures.substack.com/p/a-127-fcf-yielding-duopoly-growing?utm_source=publication-search___________________________________________________[00:00:00] Podcast and guest introduction[00:04:01] NCR Atlas business overview[00:05:27] Why valuation appears cheap[00:07:05] Cash usage decline debate[00:12:55] ATM-as-a-service thesis[00:16:54] ATM replacement cycle explained[00:19:15] Industry scale and servicing[00:20:56] Why banks outsource ATMs[00:24:07] Incremental margin economics[00:26:37] Long-term ATM demand risks[00:35:51] Declining industry outsourcing logic[00:38:34] Free cash flow drivers[00:41:11] Share gains from banks[00:47:36] Accounting and governance concerns[00:53:22] Diebold competitive comparison[00:56:04] Tariffs and guidance outlook[00:57:33] Interest rate sensitivityLinks:Yet Another Value Blog - https://www.yetanothervalueblog.com See our legal disclaimer here: https://www.yetanothervalueblog.com/p/legal-and-disclaimerProduction and editing by The Podcast Consultant - https://thepodcastconsultant.com/

All right. Hello, welcome to the Another Value Podcast. I'm your host, Andrew Walker. Today, I am excited to have on Hugo Navarro from undercovered and undervalued. We are going to talk about NCR Atlas. It's the ticker there is NATL. It is a very, very popular company among small cap investors where they're event-driven, value-driven, activistism, whatever. NCR Atlas, I guess it is. They make ATMs. And I think you're going to hear in the conversation. It's really interesting push and pull of, look, I kind of look at ATMs and I say, cash is on the way out, cash is dying, what is this? And there's a lot going on there, right? And, you know, a famous quote that I always think about is, it may be a sunset, beautiful business, but what a beautiful sunset it can be. And that's applied to tobacco. I think coal less so. People say coal, and they think of the squeeze in 2022, and they don't think of the decade prior. But tobacco, a lot of other businesses, just because things are kind of on the way out, doesn't mean the stock.

is in a goodbye. And hey, things also might not be on the way out. So really interesting discussion. I think you're going to enjoy it. We're going to hop there in one second, but first, a word from our sponsors. Today's episode is sponsored by Trotta. That's try trotta.com. T-R-Y-T-R-A-T-A dot com. Look, and you've probably heard me talk about Trota, if you listen to this podcast, at least. You've heard me talk about Trada nonstop for the past few months, and there's a reason. I like it. If you like this podcast, you're going to like it, too. Trada is expert calls between bysiders. So it's two bysiders. they hop on and they talk about a stock that they are both following, that they both know.

Sometimes it's two bowls talking about a stock. Sometimes it's a bowl and a bear. Sometimes it's two bears, whatever it is. But the best thing I can say about Trotta is I have, you know, people listen to the podcast and they tell me if they like the product, if they like the product, if they don't like the product they're pitching, the best thing I can tell you is two separate investors have emailed me and said, the worst thing I can say about Trotta is it sucks when I start researching a company and they don't have a transcript on that company because my favorite

way to start research on a company is just to go pull up a Trotta transcript and see what two by-siders who know the company what they're talking about, what their concerns are, what their upsides are, everything they're thinking about. It's the cheat sheet for ramping up on a company. So that's my pitch for Trotta. And guess what? If you like Trotta, you're about to listen to the NATL podcast, they have a transcript down there. And I'll include a link in the show notes. You can go listen to it. See, I think it's about half the transcript, but you can see why people enjoy reading these transcripts and using them to get up to speed and thinking about them. And you can also, you know, if you want, you can go join Trada and you can go try and get

on one of these and see why people enjoy doing them. So anyway, we're way over time for this advertisement. Try trotta.com. That's T-R-Y-T-R-A-T-A-T-A dot com to check it out. All right, hello and welcome to yet another value podcast. I'm your host, Andrew Walker. And with me today, I'm happy to have on for the first time from small-cap treasures, Hugo Navarro. Hugo, how's it going? Hello, great on you. Yeah. Is it small-cap treasures or is it undervalued and undercover? Undervalier and undercover.

The thing is like when I started the substack, like I was not going to do it seriously. So I put a different address than the name of the newsletter, but it's undervalier and undercover. I'll include a link in the show notes. People will see when I include the link why I've got difference. Anyway, let's, before we jump into it and everything, a quick disclaimer to remind everyone that nothing on this podcast is investing in advice.

So, you know, please consult to financial advisor. There's a full disclaimer at the end of the episode. So people can listen to that if they want to or receive a legal disclaimer, all that to hers. So anyway, Hugo, the company we wanted to talk about is NCR at Lose. The ticker is N-A-T-L. This has been, you know, on and off, I think a lot of value in event investors' radars over the years because it emerges from a spin and people looked at the old NCR quite a bit. and there's the, but we can talk about that.

I'll just pause there because I'm rambling a little bit and turn it over to you. What is NCR Atlas and why are they so interesting? Okay, so quick intro, I came across NCR at Leo's, you know, I think it was around you, you know, something like that. I heard on the company, I started to research into it as a special situation because I thought there was a high likelihood that, you know, they would be announcing buybacks in K2. they did that. I took a good profit and then, you know,

researching money into the company. I thought that it was a really good long-term play. So I stayed invested and added a little bit to that position. So NCRLios is basically an ATM company. They do ATMs and they service them. So it's kind of a razor, race or blade model. You know, you sell the device and then you service it. So just a little bit of a spoiler, but the main thesis is, that basically you are going to increase the price of the reservoir place. You are going to add more value to your customer and get more price for it. So that's what the thesis is wrong.

Perfect. Look, I've got lots of questions on Interior Atlas. Again, I've followed them for a long time. But I guess I'll just start with the question I like to ask everyone. Look, the market is a competitive place, tons of people looking at everything. This has obviously been on the heels of on the radar of a lot of investors for a while. So what kind of makes NCR Atlas today? What is the market missing?

What makes NCR Atlas today a risk-adjusted alpha opportunity? Okay. So first of all, let's start why cheap? Because, you know, the valuation, why is cheap? I think it's 10%, 11% free cash flow yield of the current year. That's pretty cheap, especially in the current market. So why is so cheap? you know, there's been going around a little bit, the history over the last, especially since

they, I think Alta Fox did that presentation and that one went pretty viral. So the first reason is, you know, historically in Sierra has not been a good company to be invested into. So they have done a lot of diluted acquisitions. Not great company to be invested. So, you know, they, They did the spin-off, and you know, they did the spin-up, especially with NCR-A-Layos, and they put ton of depth in trade. So you know, you have a dying industry that we will get into the industry right now, but you know, the consensus around cash is not really positive. So you have a dying industry with a ton of debt that is going through a, you know, a turnaround

of the model that you don't know if it's going to work. So it's an easy past. For most analysts, it needs to pass for most investors. I think that's part of the reason why it's so cheap. People want to invest in industries that are rowing, and the ATM business will probably be flat in a good case scenario and declining in probably the most conservative case. So that's why it's cheap.

Let's go from there. So you mentioned it. Look, when I'm researching this when I've seen this in the past, the key question is this is an ATM business. And we can talk about all the different ways they slice the ATM business. But, you know, I think when I read your piece, when I see the AltaBox piece, when I listen to these guys talk, they say, hey, Andrew, don't believe everything you think about Pash. This is, I mean, it's not an AI growth business, right? It's not growing 100%.

But they say, look, ATMs are taking share for lots of reasons that I'll kind of let you discuss. Don't believe your. And then when I just kind of step back and thinking about like, man, it just seems like, the long-term trend for cash usage is down and maybe you get like, you know, peaks and valleys here, but it seems like ATMs over time are kind of going the way of the horse and buggy, right? So I'll just possibly like, why is, why am I wrong? Why is the company right? Why are ATMs not a declining business?

Yeah, so let's start first with the most various case that I am really skeptic around any, any thesis I invest. So I like to understand really well the birth thesis. So first of all, Google people like me will tell you that money in circulation is an at all-time high, that banks are telling that they will keep, that they will stop like closing bank branches, and therefore that will increase ATM usage and ATM new orders. The main problem around that is some people could argue that ATMs and cash usage has been overshoot due to immigration over the past years. And right now it will come back lower, you know, due to the Trump policies because immigration

usually tends to deal with more cash usage. So that's the biggest bear point. And I think it's completely right. So, you know, we might be in the moment we are over-earning right now. And the industry does not look good in the long term. The problem here is, for example, if I have done a ton of working coal, I think you have been with some people here talking about coal. So, you know, dining industries can be a fantastic industry to be, you know, tobacco, coal, mining.

Those industries can perform really well. if the they are the capital location is right. So in NCR and Leo, first of all, just look at the market perception, the market is pricing in on the industry. We have two players. So this is a duopoly. We have Daibault that has been, they went through our restructuring and things like that. Daibouk really has a 2.5 billion market cap and they are guiding from 190 to 210 million in free cash flow.

So, you know, might range 200 million in free cash flow. That's trading, the companies are 12 point times free cash flow. DiBold, it's a company that they are not looking too wrong. Like they are not going to get into ATM as a service. They've gone through their restructuring and they are really conservatives. So that's a positive point we will talk about data. So, you know, just the base case of the company not growing and just doing buybacks, the market is putting a price tag there of 12.5 times.

Then we look into NCR adelaus. The market cap is $2.88 billion. And the free cash flow is 270 to 300, 10 times free cash flow, basically. So you might argue there that, you know, NCRLOS has basically the same depth as market cap. you might argue that the lower multiple is reasonable. I might argue we will argue about the debt later. But, you know, just on free cash flow basis, the valuation is not so far off.

And for Daibol, the market is not pricing growth. So in a bare scenario, you are in a cheap valuation. We could see the market. Let me just jump in there. So just on the valuation, right, because you laid down. Let's just ignore DiBold for a second, right? We'll put them to the side. These guys trading at 10 times free cash flow.

I think if I look at like EV to EBTA, they're trading around seven and a half or eight, right? Which are not expensive numbers, but you mentioned sunset industry, right? And like coal, I think coal was a terrible investment for a long time until kind of 2021, 2012 came. And then all of them were like hyper levered. You get this squeeze because of Russia and Ukraine, all this sort of stuff. and they all do really well. I hear you tobacco, convenience stores. The sunset industry, I've got a quote that I sometimes do around.

It's the person who's got kind of the last convenience store in California. And he says, hey, this might be a sunset industry, but what a beautiful sunset it will be, right? I guess my worry here, if you're saying, hey, this is a sunset industry, right? I'm not saying sunset, but, I mean, it's not comparable to tobacco in terms of the rate. it will be declining, but it's no growth to a slight decline industry. But if it's no growth to slight decline, like a 10, I'm just using the number of you, a 10% free cash flow yield, like, you know, no growth, a slight decline, 10% free cash flow, you're kind of talking about your maximum return is 10% annualized, right?

Because if you say no growth and I've got 10% pre-cashel, the maximum you can get is 10%. Yeah, that's the thing. But NCR adlius is not about growing in terms. of the ATM number of units, it's increasing the profit you get per unit. So that's the thesis that people often, like, pass around because they do that reasoning, you know, 10% free cash flow yield is not that cheap for an industry that will offer no growth. But the thing here is that around ATM as a service, before getting deeper into the segments of the business, because I think speaking about the sector a little bit more,

be helpful. Right now, for every extra dollar, the ATM as a service business firms, we are getting around 60 to 80% of that directly to gross profits. So incredibly incremental margins. And we'll get to the offer on that. But yeah, let's talk a little bit more about the industry. So yeah, me too long term, it looks declining to stagnate. Short term, I think it doesn't look as bad. First of all, we have to look at the bank branch's trend. It has been declining at around 2% rate since the financial crisis. So that's pretty ugly and that drives demand for ITMs lower. Atm demand, ATM units has been more resilient. So a decline of 0.7% something like that. So lower than bank branches. This is because, you know, we have like

due to technology current ATMs. You can do a lot of procedures in them that you will normally need a bank branch. So it can if you delete a bank branch, you can just let an ATM for the people there to do some of the procedures. So it's a little bit of how it is say like you delete one. you can have some incremental demand for the other. So what are we seeing right now? Like the banks are saying that, yeah, this trend we have gone to far. People are complaining like all people, villages do not have access to banking. They don't have branches.

And they want to go back a little bit to growth or to remain at the current level. Because, you know, I think you see it in the US, in Spain here, it's, like it's over the news like basically every day that you know people in villages they cannot access to banking services because bank branches are closing down aggressively due to cost cutting so so you know over the next couple of years we might see a decent tailwind from there so a slight optic in in demand so yeah and a little bit around so people understand ATMs, ATMs have an average life cycle of seven years. So it's seven years, they need to be replaced.

So there are two types of ATMs, like the normal ATMs and ATM and ATM recycles that are new, like recycles are three times more expensive, because they recycle the cars, they save some expenses and in the long term, they are worth it, especially for bigger banks. What is the difference between a recycle and an old one, what is the new, what is do? The recycle, yes. You put the cash and it uses it again, like, much more efficiently. Like, they have, like, the newer tech. Oh, so an old, an old, an old ATM, like, you know, a 10-year-old if I went and I deposited $100 and then you went and withdrew $100, it would be two separate,

like, kind of boxes. And then a recycle one, if I'm hearing you correctly, it's, I deposit $100 and it says, cool, we've got $100. Let's use that. So much more efficient, because The other way, yeah, you need to have somebody go and read. That's really interesting. I didn't realize that. Okay. Yeah, the problem around recycles too is they are complex because, you know, they have more sensors. They have more tech.

So, you know, the maintenance is more complex. So, you know, so there are seven-year cycles. So, you know, in 2019, we saw a huge uptick. I think I heard in a learning school of ANCR that it was a 25 or 30% bump into hardware sales. So, you know, seven years 2019 is 2026. So for 2026 and 27, we will probably continuously see uplift in hardware sales. And we will see another uplift on the average price of the device. So in the past, right now, it's like 20% recycles what NCR Adleos is selling, and the rest are normal machines.

Because like a recycle goes like 80K, normal machine is around 6 to 8. So this is an oligopoly industry, right? There's NCR Atlas, there's Diebold, and there's the South Korean company who... Yeah, the smaller player, not... When I look at this, right, building an 811. Even the recycler or the technology is interesting, but it's not, this is not rocket science. I look at this and I say, hey, building the ATM, and I really want to come back to the banking as service everything, but just when I look at the ATM business and NCR Atlas is talking about pretty good returns on capital, pretty good margins, all that sort of stuff, I kind of look at them like, why is with two million plus ATMs worldwide, you know, an ATM gets, as you said, recycled every seven years. So you're talking about. you know, more than 200,000 ATMs getting sold every year because just on the replacement cycle.

Why is this a good business? Like I just look at it. My first thought is, oh, this should be like TVs, like building these aren't rocket science. It's a pretty big market. Why shouldn't there be seven players here kind of splitting the market and competing this down to just like, hey, it's just a, you know, every ATM is, ATMs are pretty much standard, right? Like your ATM versus mine. If you've got a better feature, I can copy that in two seconds. Not really.

That's not true. For example, in the last cycle, so, you know, 2019, NCR-Leos historically suffered around hardware sales because Diablo, so Daible also, it's like a premium free gas flow multiple because they are the leader in tech or they were supposed to be that. So the recycles from NCRLios in the previous cycle were worse than Daibals. So, you know, that affected sales. So it's not an easy industry because, you know, they need to be the verification of the bill.

There's a lot of tech into that. And then you need the software integrated. And then the most important part is the services. So you need huge scale to, you know, we will get more of that into that later, mainly because the ATM as a service. But, you know, servicing 1,000 ATMs, it's more expensive that servicing 500K ATMs. So you get those huge economies of scale.

Okay, so you think the reason is because the Razor-Razer-Lade model, it's not just sale in the ATMs, it's the support is the reason. And like, look, only two or three players can support. That makes sense to me. Let's go to banking as a service. So I just want to ask, I'm a bank, right? I've decided to buy NCR atlas ATM for one reason or another. NCR is going to start pitching me on a lot of services,

including ATM as a service stuff. Why do banks decide to go with ATM as a service versus kind of owning it, all that type of stuff? Okay, so we have to make a big difference. So ATM as a service, it's an easy sell for regional banks. It's a really tough sell from big banks. So, you know, this is basically getting into the segments.

You have like the network side of the business. The network side, it's really easy. You just have ATMs that are owned by Adleus, and Adleus receives a fee by some banks and some institutions for their employees or whatever to use those ATMs. So with those networks, the network is the strategic important because it gives you a scale. What ATM as a service means is not.

So the thing with ATM as a service is not the bank purchases the ATM. The ATM is owned by NCRLOS. So that's KPEX. So in that term, NCRLOS owns the ATM and operates for the bank. So the sale is not, let me just. you know, you purchase this for me and I will manage. Maybe they have some type of that offering. But the full ATM as a service is, it's my problem.

So I will handle everything of that for you. So on why they do that, you know, let's put a village that has a thousand ATMs. So let's see we have four banks. and one of them has, you know, NCR ad-Leos. One starts with NCR-A-Los. N-C-R-A-Los has that bank and also their network. So, you know, NCR-Los at the beginning used to do like one route, like with the truck to refill, with the maintainers,

like do all the things that need to maintain those ATMs, like change the cars, check everything, it's correct. So in the ATM as a service, every problem needs to be. be solved by NCRLEOs, like uptime, everything. So, like a technician with a track doing one route, basically has no extra, it has really little extra cost to add another ATM. So that's why we see huge incremental margins. So the thing here is, in a normal time, we will have like four trucks doing the

servicing, one for each bank, but that's really inefficient. So you know, NCR adelaos goes and he says, so it makes it. So you're saying this is, I mean, it's a logistics and scale business, right? Yeah, logistics scale local density business. So I outsourced the NCR Atlas and I believe what they say. Because look, when I looked at it, I was like, oh, a bank outsourcing their ATM saves 20% by going with them. And NCR Atlas, I think it has a 25% EBITDA margin. I mean, NCR Atlas is basically doing it.

This is very rough math, but it caught, it's costing them half of what it's question the bank, but that makes sense. You know, if you're getting relative to everything, that does make total sense. Am I thinking about that correctly? Yeah, yeah. If you see the incremental margins of NCRALEOS, right now, the ATM as a service has 60 to 80% incremental gross profit. So that's completely

crazy because, you know, doing another stop, it's really low cost. It's really, really low cost and they are able to execute those savings for the clients. And, you know, as they get larger, they would able to offer even greater servings. So the thing here is, right now, penetration is really slow. I think like for the ATMs that they service from third parties, only like six percent.

It's in the in the ATM as a service. The management, they gave guidance like when they did the IPO for like getting to 24 percent in the in the midterm. So doing like 4X around that in the in the, in the, in the round of ATMs they service under that model. So if you look at the economics, it doubles lifetime value of a customer and it increases substantially gross profit. So in the value proposition, why would a bank choose that? So this is like a double let's short. On one place, you lose part of your, you know, your fleet. You lose a little bit of control. So that is why it's very

difficult so for a large bank to this kind of deal. So it's it will be difficult for them to get you know like JP Morgan into this because they get the savings that but you have that long-term pain that you are hooked in somewhat place with NCLA's and if you want to get out you will have an increasing cost and things like that. The second point which I think it gets often diminished is you change capex for OPEX. Like in the normal model, you will need to purchase the machine of front and then do you like the servicing. So it gets like more costs on year one and more cost on capital. You know, if you have your incentives like to free cash flow, you will prefer the second model rather than the first

model, first of all for the savings and second of all because you will have like the, the, the, avoid higher, being less capital heavy and it could improve your your targets. If you they are tied to return on equity and things like that. Let me go, that's great. Let me go back to, just while I'm at it, I want to go back to the ATMs as a dying business, right? Because one thing I had thought, are you familiar with Redbox?

Do you remember that company? No, I don't think so. You're not domestic and you're a little younger than me. That's it. So Red Box used to be, it was literally Red Boxes, giant red boxes parked outside of a CVS, a wall, Greens, a Walmart, and you would go there to exchange DVDs, right? It was DVD rentals, and you'd pay, like, a dollar for three days of a DVD rental

or something, right? And it was a really nice business before streaming came along, obviously. And the reason was it was cheaper than anything else. You know, DVDs were like $20 if you bought them. You generally only watch a DVD once or twice. Stores love them because, you know, it was just one little box and he parked it, and they would pay generally rent shares with the Walgreens or a CBS. so it was like, you know, completely incremental to them

and all this sort of stuff. And then streaming came along. And I remember there were bulls who were like, hey, yeah, streaming's like kind of a risk, but if you want new movies, you've got to go to these Red Boxes. And it's a lot cheaper and all this sort of stuff. And there are older people who don't want to do streaming.

And Red Box, obviously, Jay, is dead, done, dying, right? I'm not seeing that happens to ATMs, and I'm not seeing that happen to her. But when I look at this and I hear, you know, I see cash usage over time going down. And I hear them coming and being like, oh, an ATM can do so much more than cash, right? You can open accounts.

Well, all of that you can do online in the comfort of your home. And when I hear, oh, you know, old people, they don't want to do all of this online. Well, they want to do it with a person. They don't want to do it over an ATM. Like an ATM opening an account versus doing it online. It's even more efficient. You have to go. You're using it.

So I just want to ask you, like, I get the arguments on ATMs, but why are ATMs, like, we've got two million globally, why isn't it going down to 1.2 million? Why 10 years would we not be sitting here being like, hey, cash usage has gone down because cash sucks. We've got a more mobile economy. The older people who want to use, who want to use cash or go in person, they're dying out or they're irrelevant or they're finally getting convinced, hey, it's easier to do this your own?

Like, why is the ATM not a dying business? I mean, first of all, on that you can do these things from online. That's not really true. For example, not sure if you have those in America, but here in Spain, when you go to, like, the police, you have these machines. What you can renovate your, like, DNA, not sure how you say that, your identification document. You can do things like that. So also some banking procedures, you need to be like personal verification.

Like, you need a machine that verifies that you are a real person. For what type of transactions at the ATM? On the ATM, it will be, for example, opening an account latch purchases. And, you know, also the NCLA's in the last conference they did, They say the devices could also be used. I think I wrote something here for like, you know, renovating passports, things like that where you need in-person verification. But that's not like ATM, right?

Like now we're getting into different use cases. Like in ATM, you're using it for bank stuff. Renovating passport, that's more like government proceeds and everything. So I hear you, but you're kind of, I mean, Redbox, when they shifted, It was like, oh, hey, we can't do DVDs anymore because Netflix is streaming. We're going to switch to games. And then it was like, I think they started doing more like retail dispensary items or something. But when you're talking about, hey, you need government passports, we're no longer talking about servicing a bank.

We're talking about using the ATM for something completely different, aren't we? No, yeah, I mean, but for some presidios that you will do in a band branch, you can do some of them in the ATM. like if you need to like you sometimes depending on the bank some of them you can do everything digitally and that's also a fair point to the beer case but you know some people prefer to do things you know in person or rather with some type of assistance and having the the ATM you can get like from what I understand like a digital call I don't want to belabor the point, but I guess just what I was trying to say is like, okay, on one hand, I have not opened a bank account in person since I was 15, which is an increasingly long time ago, right? Every bank account I've opened has been www.chase.com open a bank account at this point, right?

So there's that one end, like everything online. On the other end, my dad goes in person to do everything, right? I'm having trouble with the Venn diagram of somebody who says, hey, I don't, I need to do this in person, but I'm going to do it on ATM through a digital transaction versus, hey, I mean, I could do it in app on the Chase app and FaceTime, right, if I want that or I could do it in person. It seems weird to me to say the bull case for an ATM, one of the use cases is, hey, people are going to go and use it as a giant FaceTime machine. That seems a little weird. And I know that's not the only use case, but I'm just saying if I'm thinking eight years out, right, and you're saying ATMs are going to be flat, then I need cash usage to either be similar to what it is today. And it's hard for me to believe that just because digital is so much easier. Maybe I'm just interpreting, I never have cash on me. I just carry my credit card and tap to pay everything.

And, you know, I live in New York City, the MTA about 12 months ago, it's all tapped to pay now. And I just keep seeing it's more tap to pay. it, everything's pushing cash out. Maybe I'm wrong on that. Or you need, hey, these ATMs are going to have a lot of function other than just distributing cash. And when I look at the ATM functionality, I say, oh, well, it's Redbox versus online, right, if you don't have the cash. So I threw a lot out there. I'll kind of just toss it.

Yeah, yeah, I think you are correct in most of that. For me, on the long-term horizon, as you said, it doesn't look pretty for ATMs and cash-reaching. it. But I think there's a big gap about what the market is expecting, about the rate of decline of this, because if you look at statistics and you look at what people say, there's an amount of people that are going to continue to use cash, and they want to keep using cash. So, you know, you can get that push to go digital, but there's still some demand. And if there's still some demand, the banks will have to keep that service. And, you know, ATM is not as expensive to maintain that service,

rather compare an ATM to a bank grant. So, you know, to have that minimum service for the people that will ask you for that. So for me, I agree that if we talk 30 years down the line, it's really different. But in the next, you know, five years, it won't change as much. Can I ask you this question one other way? So branches, you know, J.P. Morgan, Chase, whatever it is, and a lot of other of the big, big banks. And I want to talk about big banks in a second.

They are increasingly, like the branches are to sales point, right? You come in, they're not trying to have you cash your check and get 20 bucks or whatever. Like, that's what the ATM is for Azure technology. The branches are for JP Morgan. They want it as a private wealth management business, right? You come in and they're making the loan or they're talking to you. it's almost like the old, not Ed Jones, because they're not high pressure, but they're coming in and they're trying to do the higher margin, more holistic wealth management stuff with you as you come in.

And you can tell me if I'm wrong on that point, right? But I think it's interesting when you say, hey, there are these people who are going to want to use cash, right? And I think the up case for an ATM is, for the ATM is, hey, you go and it's doing a lot of other stuff. But I'm kind of looking at say, hey, a customer who's only using this ATM for pure. withdrawals, right? They're probably a very low-value customer, and what JPMM and them are trying to target are the higher-value customers who are coming in and doing this holistic thing. Now, that could be good for NCR. It's like, hey, JPN wants, they just want to outsource the whole ATM network. That could be great, right? Like, I know Fidelity online. They will just go use any ATM you want

and we'll reimburse your, that could be a great future for NCR, right? But it also could be a kind of terrifying one where it's like, hey, all the banks are actually kind of pushing out that and they just want, you know, you need one ATM in a whole network or something. I don't know. I'll toss it over to you. Yeah, I mean, that's part of the network side of offense here. Like they own the ATMs and, you know, banks who don't want to have that footprint, they just let that do use it. And, you know, I completely agree that long term, this thing will go down on the number of ATMs. But first of all, NCR LEOS is not a bet on the number of ATMs, as this is industry whole. It's more of a bet of who will service the ATMs. And if it's a decline in industry,

there's a high probability that banks will want to outsource. So, you know, the example you put there. So if a village would have a thousand ATMs instead of 2000, it is, you know, it is, even better to have just one operator servicing those than have multiple ones. So also there's a little bit of the what's the market pricing in because, you know, I look this not as a five to 10 year hold. It's more probably as, you know, three to four years rewriting opportunity in my view, as, you know, or you wouldn't like to own coal for a long, long time, but if it has good tailwinds over a certain period, it might be, I would invest them. So the point here in the industry, the bull thesis is that, and the more conservative thesis,

is that the decline will be lower than what is expected in the market and what is being priced in, first of all, because you are seeing what banks are saying that they will stop bank branches disclosures and that also relates to ATMs as it is heavily correlated. And yeah, I mean, if we just see that trend of year over year going down, stopping, we'll see kind of our rating, even if it's on the medium term. But yeah, I completely agree about the longer term risk. But I think we have quite a long time to wait and see. The market won't surely wake up one day and say ATMs are dying.

because, you know, a lot of that is already pricing. Well, you've mentioned valuation a few times, right? So let me just ask you, as you and I are talking, it is trading for, of course, my little stock price went away. It's trading for about $39 per share. You know, I think we talked earlier in the podcast about that's about 10 times price to free cash with equity. Around 10 times.

About seven-a-half times EB to EBDA. Like, what do you think the fair valuation for this company is? Okay, so first of all, I mean, if we go to the details, we have three levers that are non-related to growth. The first one is just, you know, the ATM assess business has been growing. So like the way I sometimes look at these setups when assessing evaluation is like doing a run rate basis and knowing what things, for example, next year won't be there as cost or are sort of one-offs that will disappear. First of all, interest costs. If you take a look at the NCR bonds,

the face interest rate is 9.5%. What the market is pricing in is 6.9. So that's a big difference in terms of the interest rates. They can refinance those in October 2026. So I think this should be able to lower their cost of debt by 1 to 2%. That will be savings of 30 to 50 million. That's quite a lot of money. I mean, that's a 10 to 20% boost to free cash flow. Then we have the higher interest rate cost in the network side. That's another 25 million that if interest rates go down,

as we are seeing right now, this will be another uplift to free cash flow of around 25 million per each 100% basis points because they have around 2.6 billion in cash on circulation. And the next point is around just doing the run rate of the ATM as a service, even assuming no growth, that it's completely nonsense because they have a really good backlog to continue growing that. that would also some substantial gross profit that doesn't carry additional capics. So, you know, for 2026, we probably have extra just on interest related things,

50 to 75 million extra in free cash flow. Then some extra growth from the ATM as a service probably get the free cash flow to near 400. million and now we see a better much cheaper valuation. That's great, but I just want to go back to the quick. So the stock's at 39 right now. What do you think the fair value for the stock is? I mean, it depends a lot of how it materializes and how the ATM as a service is proof. Like if they prove that they can reach scale with the ATM as a service, this is no longer

like an ATM bet on hardware sales or everything, they have basically a near monopoly there because once you get scale there, it's very difficult for another player to enter into that. So you get that even if in a market that is shrinking, you will get a growing share of a shrinking market. When they're taking scale in ATM as a service is what you're hoping for or what you're pitching.

Who are they generally taking share from? Because this is a mature industry, right? They are thinking share from. the banks that actually service their own ATMs. Is it mainly, are most banks still servicing their ATM, even like the small community banks and everything? Yeah, the penetration of this type of service is really low. And when you see other people, the table is not hard into ATM as a service,

but they have all their mainly international competitors with quite a few devices in Europe. It brings a euronet at these ones. Some of them, smaller competitors, call ATM as a service to not all of the service that, you know, what I am trying to say is NCR does the full thing. And another ones do like one of two things like the cars, the maintenance, and they call ATM as a service, but it's not as a service that's the full thing, not full integration on that. The U.S., and again, I painted a domestic lens, and this is a worldwide business, so perhaps that is inefficient. But the U.S., in my opinion, is overbanked, right? Like we, because of legacy, just legacy structures, all this sort of stuff, we've got, you know, JP Morgan, City, Bank of America, and we've got all these small community banks. And we're starting to see consolidation, but I think it needs to go a lot quicker, in my opinion.

I just remember there was an article like three years ago that I always laugh at. was the CEO of a community bank, and he was like, oh, I do all my banking at Bank of America because their app is so much better. Like, we can't invest in the same tech and everything. And I read that and I was like, oh, my God, like every small bank of the world is that. The reason I asked that is if I thought that banks needed to consolidate, right? And the large needs to get larger, the mid-sized banks need to get larger. Is that a bull or it seems like a pretty bad bear case for this, right?

Because if JP Morgan bought, hypothetically, every bank in America, and you told me JP Morgan kind of does their own maintenance, that's bad for these guys. Now, you could also tell me, hey, J.P. Morgan can't buy anything, you know, after First Republic City can't buy anything. But, hey, First Horizon, mid-sized bank, they can buy a lot. And if they're outsourcing, that could be a huge advantage. So I just wanted to ask on that, like, and I realize it's the very domestic focus, but on that tailwind or potential headwind of bank consolidation, where do you think that falls in?

So the thing here is the penetration of this service is really low. Like most banks, they still do their own servicing. So the thing here is for a mid-size, not even low, a small bank, for a mid-sized bank to get this offering, NCRLs gets to needs to be in a much larger scale. So they need much more devices, a larger network. So the pricing makes sense and the cost advantages make sense. Because right now, I think in a recent conference, the CEO told, the ATM as a service, it's an easy sell for, you know, banks that have, and one source like 500 ATMs, 1,000 ATMs even.

But for more, it starts to be a top sell. Because, you know, once you are talking about 10,000 ATMs, you know, the scale advantages are not as good. And maybe, yeah, it is not. as attractive once you get to a scale. So in the birth thesis you are mentioning, it will depend on if NCR at that point will have gotten to a sufficient scale where they can still offer a pricing advantage to the large banks. So if you know they start doing aggressive consolidation right now, it might be, you know,

pretty bad because they have not the scale yet. and even those banks could get, could make the ATM as a service. I don't think that's a core piece of the business. You know, the banks don't care about doing the ATM as a service. If they can outsource it, lower capex and a lower overall cost, they will do it. So the thing here is most people don't realize the incredible mode it's built with the distribution network and the servicing network. these compounds really, really fast.

Like one year ago, the incremental margins were lower, like 30, 40%. No, we are already at 60 to 80% the burden on the quarter. So, you know, incremental margins also mean that if you need to pull like the pricing lever down to get more clients, you are able to do that. Let me ask one last question. I mean, I saw there was an interesting conversation based on some. of the specific phrases you used on this podcast. I'm pretty sure you were one side of it, but there was an interesting conversation on Trada. Again, I followed this for a while and I've seen

it. You know, one thing I've heard a lot of people knock this company on is accounting, I would say. And that seems weird. Like, having a poor accounting function at a ATM and cash management business seems weird. But, you know, there's been a lot of her statements, a lot of amendments. And I think a lot of people think the adbacks here are pretty aggressive on the EBITDA line. You know, I'm just looking at 2004 amended 10K filed in November restatement. Like there is a lot. So I just want to ask like on the accounting adbacks, accounting restatement, all this type of stuff. Like how are you thinking about that risk?

Yeah. Okay. So the main thing here, if you look at net income for the company, this full year will be like $100 million. So, you know, it does not look cheap if you look at the income. But then you have depreciation expenses like $250 million or something like that. So the free cash flow, just a number that I said, include some adbacks, I think, from stock-based compensation and some one else. But it also, you know, it also, they look some growth capics that you could argue that,

you know, many companies report the free cash flow without growth CAPEX. So I think that on the accounting side, they have some adbacks, but it's not really that concern me. For me, you know, the cash generation is pretty good, more or less the same as stated, even though, you know, I don't like the ad backs of stock-based compensation because it's compensation, it's a real expense. That's pretty bad, but most companies do it. I don't find it, you know, aggressive compared to what most companies do. You know, there's, to be completely honest, there's some red flags on the board, like two or three members of the board,

one also members of the board of companies that went bankrupt. So that will flag a case for some people. Then the CEO, he was the CFO of, you know, how it's called the company. It was MAC systems that became son, who not remember the name, San Edison. You know, and that was not a good thing. I had a lot of history with Sun Edison. I remember running the math and be like, I just, I don't understand like these sale leasebacks they're doing. The math seems crazy. I don't understand how they're creating any value from these. And it was just up and to the right, up and to the right. So I was a younger gun, so I didn't know how to say like, hey, this, this is insanity. But I probably still will know how to say this insanity. Be honest with you. Yeah, yeah.

I mean, so, so that could flag, a red flag. I researched a little bit into that. He was CFO before, you know, all that crazy stuff started before, you know, they became like the, basically a hedge fund that were buying things with crazy leverage. He was out before that. So I don't think that's a big red flag. You know, in terms of guidance and confidence with investors, I think he has been doing a pretty good job. He has been delivering with what most of what he has promised. You know, in the IPO, they overpromised a little bit.

They have mentioned about some of the headwinds that they have been facing, mainly on the ATM as a service business. One interesting thing I would like to comment, though, that I think it gets you to understand better the business and the complications of growing it, is that once they get the sale, like the ATM as a service, they need to get like the connection and integration with the IT systems of the bank. They thought that they would take them like three to four months. That's actually taking eight to nine months from the sale.

So, you know, the sale cycle. The biggest red flag here is that anyone who's ever done anything with tech and integration with banks, if you were like, hey, we're going to integrate this thing that is actually like system critical, right? like literally cash in and out the door. We're going to integrate this thing. If anyone had said, hey, it's going to take us three to four months, they would have been laughed out the room. I mean, eight to nine months, you said that.

And I would have taken the over on eight to nine months. So I think that's the biggest red flag I've heard here, to be honest with you. Yeah, yeah. I mean, they are pretty honest about most of these things. Because, you know, it's not a secret that banks are really inefficient entities. That's part also of the whole thesis, why they are able to generate all of these cost savings and things like that. And, you know, for me, a big part of why this makes so much sense is about that, you know,

this is a duopoly and the other big player is not taking part into this market, mainly because they... Let me ask you why. So the other big players, DiBold, we talked about them. They emerged from bankruptcy. They've got a clean balance sheet, right? And they're not pursuing this opportunity. And now the reason I think Bulls would say is, hey, DiBold,

conservative and they're getting run like a post-BK company and it is cash cow return the cash right yeah i think the counter would be and i've had this in some other investments where there are more competitors but you know sometimes when one competitor does something and no one else does it's a stroke of strategic genius but a lot of times when one competitor does something and no one else does it's because everyone else has examined the opportunity and said the economics are not there and when i see die bold which is bigger uh unless you can correct me wrong there i think they're when I see DiBold turning down this growth opportunity that... No, it's not bigger.

It's not bigger. I thought they had a little bit more of the market share, if I remember the pie charts. They had like the exact market safe. Okay, so same size. When I see them turning it down, I say, oh, clean balance sheet turning this down. Why do they... Is it really just conservatism or did they do some math and say, hey, the pricing and all this, it doesn't make any sense?

So, yeah, first thing here, something that a lot of people do not take into consideration. I think that's fault of the cost. because they don't make this easy to understand, is that it does not have the network business. So, you know, building a servicing fleet from the start, if you have no network business, it's incredibly expensive. Like, let's say, if you have already 100 ATMs that are yours in a city, it's really easy to integrate a bank.

If you have zero, starting from serial, it's much more costly, costly and it takes much longer. In Sierra Leos also acknowledged that when they look to expand, they look for countries and cities where they have already a sizable network of their own

devices. So everything is about the network, the scale, and the scale economics. Because you know, the DiWold does not have. They have the premium pricing because they are known like in the industry from the premium technology, like

they have the best technology. They are the leaders on that. Right now, it looks like NCR has been improving on that end. Like, they have been seeing, like, really good growth in the hardware. So compared to the devil, even though the devil doesn't report exact numbers of the specifically hardware sales. But, you know, they have been improving on that end. They have invested quite a bit amount of money there. And just to show the importance of that, recently management has solved that,

that when looking about deploying capital, they are looking about acquiring fleets of ATMs and servicing, basically, underutilized fleets and ATMs, just to increase the network, increase scale economics, and it's just about that, increasing scale and network. And once you have that, you have a huge mode, you have incremental pricing, both to get really good margins or in the other side to offer better pricing.

I, unfortunately, have a hard stop at 3 o'clock. So I actually have four more questions I want to hit, but we're not going to have time to get to this. So I just want to turn it over to you. I do think we've done a nice job about talking about a lot of different pieces of this business. I think we've done a nice job of Framing the upside. You know, my downside red box case, I wanted to test with that.

But I just want to turn it over to you. Is there anything, you know, you wrote, I think it's a 21-page report on this. I'll include a link to the show notes. Is there anything you think we should have hit or do you think we should do it harder that we kind of didn't get to and kind of the confines and constructions of an hour-long podcast? Yeah, I think some things that people will need to research a little bit.

First of all, tariffs, they will have 25 to 35 million heat this year. They're on one day, they're off the next. Who knows at this point? Yeah, yeah. So that's also some thing that could add some extra upside because they do the manufacturing on India. then, you know, CEO guidance basically is for like $400 million next year. That's pretty conservative.

It's basically no growth. Just some refinancing are for $500 million in 2027. If they are successful with the ATM as a service business, that should be okay. So overall, they have some pretty bullies. They have good backlog. They should continue pretty well. And, you know, long term, I just tepick about the ATM's as a service. right now, it makes sense.

So. Can I ask one last question here? You mentioned interest rate cuts earlier, right? And that makes sense. They have to own the cash. If you subscribe to them as ATM as a service, I'm guessing that they have to own and control that cash. That's a real working capital. That's a real expense.

They have to borrow or pay for it in some way, shape, or form. You mentioned going down. Is there a bare case if interest rates, you know, we just saw them go from zero to five percent, pretty much like that. if they went for 5 to 10% are these guys choking on financing the ATM costs or are there levers they can pull

where they somehow get less cash in the ATM? Yeah, they have already done that. Like they took some efficiency from from billion in circulation to 2.6 so they can do things. They have already done some of them. But yeah, the cost would go up significantly.

We go like 10% interest rates. And they can, They can manage that, right? Like, they can just say, hey, you know, we were doing 3x leverage. We have to do 2x leverage because our cash is basically dead at this point. But it was just one thing, you know, everybody likes to say interest rates coming down, that cuts and the Fed is cutting, but it can go the other way. Yeah, also my main point about interest rates is that their depth is priced too high.

Apart from, you know, the Fed coaching interest rates, they issue, you know, their bonds that are publicly traded. Oh, well, the bonds were issued. Yeah, yeah, absolutely. I was just thinking about the cash. Cool. Hugo, I'm going to include a link to the write-up in the show notes for anyone who wants to go read, subscribe, follow along, greater. This was awesome. And looking forward to chatting and having you on again. Perfect.

Thank you. Andrew. A quick disclaimer. Nothing on this podcast should be considered investment advice. Guests or the hosts may have positions in any of the stocks mentioned during this podcast. Please do your own work and consult a financial advisor. Thanks.