Alta Fox Capital: NCR Atleos ($NATL) Investment Case
In their July 2025 presentation, Alta Fox Capital Management presents NCR Atleos Inc. ($NATL) as a compelling investment opportunity with 270% upside potential. Alta Fox positions NATL as a service-based category leader trading at an attractive 15% FCFE yield despite strong fundamentals and 30% annual EPS growth potential. The firm highlights NATL as a prime example of market inefficiency in small-cap stocks, where a high-quality business with durable competitive advantages trades at a significant discount to intrinsic value. Alta Fox’s investment thesis centers on NATL’s dominant position in the ATM-as-a-Service market and the company’s potential for substantial value creation through improving unit economics and strategic capital allocation.
Investment Highlight: NCR Atleos Inc. ($NATL)
Business Overview
- Operates a razor/razorblade economic model in the mature, stable ATM industry
- Spun off from NCR’s point-of-sale business (VYX) in October 2023
- Dominates ATM servicing and hardware market alongside Diebold (36% global market share each)
- Operates largest network of independent ATMs globally at ~77,000 units
Market Position
- Three primary business segments: 3rd Party ATM Services (48% of EBITDA), 1st Party ATM Operations (37% of EBITDA), Hardware (14% of EBITDA)
- Geographically diversified with US representing ~45% of sales
- No customer concentration with global banking client base
- Owns former Cardtronics business acquired by NCR in 2022, providing necessary scale for ATMaaS offerings
Performance Analysis
- Competitive Advantages:
- Route-based servicing business with significant economies of scale
- High barriers to entry due to upfront costs of establishing ATM networks
- Decades-long relationships and trust with banking clients
- Best-in-class software refined over decades of operation
- ATM-as-a-Service Growth Driver:
- Only 6% of NATL’s 3P ATMs currently operate under ATMaaS model
- Management expects growth to 24% by 2028
- Unit economics show 2.0x revenue uplift and 2.9x gross profit uplift vs traditional model
- Incremental gross margins of ~63% on ATMaaS conversions
Growth Runway
- ATMaaS remains in early innings with significant penetration upside
- Mix shift to higher-value cash recycler ATMs (2-3x ASP uplift)
- Inflecting backlogs: ATMaaS units in backlog up 88% year-over-year
- US ATM market stabilizing after years of branch closures
Market Dynamics and Opportunities
- Large banks reversing course on branch closures, planning net expansion
- ATMs increasingly important as multi-functional consumer touchpoints
- Banks incentivized to outsource ATM management for cost efficiency
- NATL’s scale advantages allow competitive pricing while maintaining high margins
Valuation and Capital Allocation
- Trading at ~6x forward PE vs direct competitor Diebold at ~14x PE
- Strong free cash flow conversion expected at 90%+ of adjusted net income
- Management expects to begin share repurchases in Q4 2025
- Opportunity to refinance expensive 9.5% debt when callable in October 2026
Financial Projections
- Base case FY27 EPS target of $7.70 (vs consensus $5.85)
- 30%+ annual EPS growth potential through 2027
- 10% consolidated EBITDA growth annually driven by ATMaaS penetration
- Target price of $100/share at 13x FY27 EPS
Risks
- ATMaaS growth disappointing vs expectations
- Competitive pressure on ATMaaS pricing
- Declines in ATM transaction volumes
- US tariff impacts on hardware margins (limited exposure at ~6% of EBITDA)
- Interest rate sensitivity on floating rate debt and vault cash
Catalysts
- Share buyback announcement expected in 2H 2025
- Medium-term EPS beats vs consensus estimates
- Potential interest rate cuts providing additional tailwinds
- Possible strategic acquisition given rumored interest from Brinks, PE firms, and payment processors
Other Key Points
- Strong leadership under CEO Tim Oliver, architect of ATMaaS strategy
- Credit markets have re-rated NATL bonds significantly (yield dropped from ~10% to 6.1%)
- Unique beneficiary of falling interest rates due to vault cash exposure
- Multiple scenario analysis shows limited downside risk at current valuation
Alta Fox Capital views NATL as a significantly mispriced asset trading below intrinsic value due to temporary perception issues. They believe the combination of improving unit economics, strategic capital allocation, and eventual sentiment improvement can drive the stock to $100/share by FY27, representing 270% upside from current levels of $27.
