Good morning. I'm Michael Nelson, Vice President of Investor Relations and Treasurer at NCR. Thank you for joining the call today to discuss NCR's proposal to acquire Cardtronics. Joining me on the call today are Mike Hayford, President and CEO Owen Sullivan, COO and Tim Oliver, CFO. We will not be taking Q and A after today's presentation.
Before we get started, let me remind you that our presentation and discussions We'll discuss forward looking statements. These statements reflect our current expectations and beliefs, but they're subject to risks and uncertainties that could cause actual results to differ materially from those expectations. These risks and uncertainties are described in our presentation 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, ncr.com. With that, I would now like to turn the call over to Mike.
Thanks, Michael. I'm going to turn to Slide 4. Before I start, let me just start with, typically, we would not respond to market rumors as in this case that came out last Friday. This has been a little bit different process. We felt it was important to update you on the strategic fit, why we feel that this is an acceleration of the strategy and the plan that we laid out on December 3 at our Investor Day.
So we felt it was important to see and we're going to do a quick call this morning and share with you the strategic rationale of this transaction. We are not going to get into numbers. We are not going to get into numbers because we simply, we don't have a deal right now. We have an offer on the table. We may not get the deal.
So we're not going to get into a lot of details on numbers. We'll share a little bit at a high level of why we think this is financially a very A strong deal for us, but we're not going to get into any details. And because of that, we're not going to get into any Q and A. So we will not be doing a Q and A today. Status wise, we got involved in December and submitted an offer at the end of December at $39 a share in cash.
We are and have been doing due diligence. Owen is going to speak to that in a bit. The team that we've got literally working around the clock, working on the diligence process. It's a company we know very well, So that has helped with getting through diligence. And again, the just some noise in the market that came out Friday and some questions around how does this fit with our strategy?
That is what we're going to answer today. Rationale, we laid out a NCR strategy on December 3rd. This helps accelerate it, helps accelerate our strategic goals. It also helps accelerate our financial goals, and we'll speak a little bit to that. It's in markets, Kitronik search 2 markets.
They serve retailers and they serve banks. It's the same Markets that we serve at NCR today. The story, the message, the strategy around the rationale for this deal It's going to literally come from the pages of our deck that we shared at Investor Day. We do believe Financially, and again, we're not going to get into a lot of detail today, but financially, we feel that this will be a very compelling opportunity for our shareholders. And then, we have, for the most part, it's complementary products that we're adding on.
We do believe there's some opportunity for some synergies, both cost synergies, But most importantly, some revenue synergies of products that we can take jointly into the market, make ourselves a stronger competitor by putting the 2 organizations together and cross selling into the 2 markets we both serve today, the banks and the retailers. Cardtronics, they're a transaction processor. So they, their revenue streams are transactions. It's recurring revenue. It's subscription revenue.
They drive mostly payment transactions through ATMs either on behalf of their own devices or they do that for banks on an outsourced basis where they'll take over the platform and operate for banks or credit unions. And operate for banks or credit unions. And on top of that, they connect what they do with the retailer and with the banks with a debit network. They use that debit network as called Allpoint as a surcharge free network to help extend and differentiate themselves in the market. Going on to Page 5, this is something we shared at Investor Day.
It's been very consistent for the last Over 2 years now, our strategy stays the same. This is very consistent with that strategy. This is a play to enhance our software and services. The revenues that would Coming in would be software and services revenue. There would be no additional hardware revenues as part of this transaction.
It's recurring revenue. So it's, again, transaction fees, it's surcharge fees, it's intercharge fees, it's subscription fees for helping to operate and manage The network for banks. And then it is a margin enhancer. So their margin today is greater than ours. On top of that, we do believe there will be some opportunity for synergy that will take the margin that we're operating and move it closer to that 20% goal that we've outlined in our eighty-sixty-twenty strategy.
The rationale, the key points here, so we laid out in December NCR as a service, so the ability to go up stack, do more value added services on top of what we do today with both banks and with retailers in the banking arena, what we call ATMs of service. We feel that banks are going to start to migrate and look for a provider that can do more of the functions, not just the hardware, not just the break fix service, not just the software, but also drive the ATM, do the terminal handling, do the Switching to the routing and do the full service end to end. We believe that's where the market will be going. We are moving in that direction. This will accelerate That strategic initiative.
Secondly, again, they have a debit network as part of their portfolio. We believe that would enhance our payment offerings that we have gotten into the market with, JetPay as a merchant acquiring. We also obviously have a very strong gateway product. This will help us create additional products that we can use to connect our retail base with our FI base. 3rd, Tim's going to spend a little bit of time on this would scale up our company, rev, our earnings and also our cash flow.
So we think it would help scale and create a stronger NCR. It advances our eighty-sixty-twenty. It advances the percent of software and services revenue, the 80% target. It advances the percent of recurring revenue and it advances our EBITDA margin, accelerates us on that path from what we laid out at Investor Day by up to a couple of years faster than we had originally shared. And lastly, on an EPS basis, it is accretive to our NCR numbers today.
Just again, summarizing Kind of the key points. If you take a look at what Cardtronics would bring to an NCR portfolio, We're going to do the transaction as we've gone through diligence. We're going to work the numbers and we will have opportunities with some savings to financially make this a very strong financial transaction. But the real reason for this transaction is the strategy, the synergies on the revenue side that will allow us compete stronger in the marketplace, again, as a service company, on the banking side with ATM as service. We also think there's an opportunity on the retail side to roll out some products to our retail customers as well as the existing Cardtronics retail customers.
There's a fair amount of overlap in that customer base, But the products that we can bring to market together, we think will allow us to obtain more wallet share, more market share, do more full function offerings in retailers as well as the banks. And then monetizing payment transactions is the ability to have a debit network and Connect our retailers with our banks on a full function basis. And then on the right hand side, it's just talking about how do we accelerate The metrics, again, there is no hardware revenue as part of this transaction. It's software and services revenue. It is recurring revenue we're adding.
They operate at higher EBITDA margin today and with the synergies that will accelerate the existing NCR EBITDA margin forward closer to the 20%. So again, all it's repeating what we said December 3 in terms of where we want to go, this is an opportunity that would accelerate those initiatives and financially be accretive very soon out of the box. NCR as a service strategy. This is another slide we shared on December 3rd And it's focused on the ATM. So ATM is a service we call that we did a couple of slides.
Again, we believe that in this marketplace, credit unions, banks Are starting to look at ways that they can leverage a 3rd party provider to do the full service function. We do believe that in the banking environment, Banks are finding ways to reduce their footprint and their cost, principally through reducing branches. We also have seen that when they're reducing branches, they're replacing that with full service ATMs to deliver that teller functionality or that branch functionality with a full function ATM. So that market we believe is going to grow and move to having maybe a full service outsourcing model, which clearly we're starting to do today. This would accelerate that move with Cardtronics.
On the picture on the right, we had shared with you on December 3rd. Here's the components of taking Some of the things that we do today, adding more services. We've highlighted 3 things that Cardtronics does today, Including terminal driving, transaction processing and network switching, those are things that we would add quickly with this acquisition. It would give us A full stack suite very quickly in the marketplace, and we believe would allow us to grow that business. Again, the revenue synergy in a very solid way on the ATM side.
It also would take that business. So, it'd be very, very much shifting what is now An upfront sale process turned it into a subscription business where we're providing a full stack on a either transaction basis or a subscription basis in that market for banks. And then obviously, as Cardtronics says it today, for retailers. So really moving to transactions and subscriptions and away from just a plain old ATM hardware business that we have had historically. On this slide, this is actually a slide from the November Cardtronics Investor Day where they went out and talked to the market.
Decided to share this. As you and of course, we added the NCR in the middle here. But They serve the same 2 markets we serve today. They serve retailers and they serve banks and fintechs, including some of the new challenger banks who are Need a way to get access to physical assets to deliver to their customer base. So we believe with our combined focus on these two market sets And then in the middle connecting with the Allpoint debit network, we would have a very strong offering to bring new products to the market, again to connect payment products, But also to use, that Allpoint network, the surcharge free network to create an opportunity as we go into our bank market and sell ATM as a service.
So This just kind of shows you how their strategy and what they're doing with their 2 markets aligns very closely with what we are doing at NCR. I'm going to turn it over to Tim. He's going to share a little bit about the numbers and the metrics. Again, we're not going to get into a lot of detail today, but we thought it'd be important Share with you enough information so that you can understand the financial impact here. Tim?
Yes. In fact, this will be a chart we fill out for you when we're able to do so. I'll just start by saying this is a deal that a CFO can like. First with cash flow generation, Both Cardtronics and NCR made significant progress in cash generation and cash conversion over the last 12 months. In fact, you've seen our performance over the last three quarters.
And I'll tell you that our 4th quarter is every bit as good as we would have thought. So our revolver balance is down to 0, I think, last night. We've made good progress. We're in good stead. Our balance sheet is ready.
And those cash flow improvements on both sides of this transaction should carry forward. We can then delever relatively quickly. I think in the 1st 18 to 24 months of this full months of this transaction, we can likely get back down to leverage levels that are similar to where we are today. But we will have to be very disciplined in the way we allocate capital. We plan to do exactly that if we're successful.
This deal has all three flavors of synergies. It has revenue, cost and cash flow synergies in it. We're doing an awful lot of work right now to size those synergies. They're appropriate to a transaction of this size. They'd be about what you'd expect and they're helpful in getting the transaction done on an accretive basis.
The next point says just that, the EPA will be accretive to EPS and we'll be very descriptive of that if we're successful. And then lastly, on eighty-sixty-twenty, Mike suggested earlier that this will pull things forward. In fact, Right out of the gate, we'll add 4 or 5 points to several, the first two metrics on the revenue side and pull our margin rate up Just because they currently have an EBITDA margin of about 23%. Just folding them in before we even execute on the synergies, it will be accretive to EBITDA margin rate. And this is a chart that we used twice in our earnings release on December 3rd.
We started I started with it and I ended with it. Mike, if you hit the one more time. All I wanted to do is say things will change and they'll change for the better in all four quadrants of this chart. We talked about an approximate 5% growth rate organically over the next several years for NCR. That growth rate their growth rate is a we think will be about that organically in the absence of a of a transaction.
With it, we think, the 2 of us could have an organic growth rate in excess of 5%. From an EBITDA margin perspective, margin will accrete two reasons. 1, because their margin rate currently is higher than ours and secondly, because we will execute on cost synergies that help both of our margin rates get higher. On free cash flow in the bottom. $3,000,000,000 of cash generated over that period of time to both delever and to redeploy the 2 strategic growth between the 2 of us.
That number is a little bit higher than you might have extrapolated from the previous chart simply because we've added a little more discipline in what we would otherwise invest in to help us delever relatively quickly. And then lastly, as Mike said, from an execution perspective, this pulls our strategy forward by almost 2 years and allows us to get to the eighty-sixty-twenty metrics we talked about that much faster. So a deal that we look forward to further negotiations and hope that it will be successful. So, Mike, that's all I got.
Thanks, Tim. So again, not a ton of numbers. We're still in the offer mode, the negotiation mode, the diligence mode, as Tim referred to. If we were to get to end of job, we would fill in those numbers and share the details. We wanted to give you a flavor for We do think this could be a strong financial transaction.
So just in closing on next steps. So we are so again, we've got an offer on the table. They have another transaction, as you would be aware, that they've already signed. We are in the process of doing diligence, and so we've got some work to do to get to end of job. We may not get to end of job, but we're going to work hard to get there.
I'm just going to have Owen comment briefly on the efforts we're doing on diligence and then the efforts we would do preparing for an integration.
Sure. Good morning, everyone. So we've had about 70 people from our team in the data room working on the due diligence process. As both Mike and Tim commented, our focus is on the cost synergy. That's the basis for the business case that we'll put forward.
We clearly see and we have our entire team on the banking side, David Wilkinson from the retail side, Brian Dugan from Payments have their teams looking at revenue synergy, and we have the confidence that, to Tim's point, that we see this as a lift to the combined growth rates that we're seeing, but it's about cost. And so we've got over 70 of our people involved in that process today. We have engaged some ex employees from Cardtronics that are helping us with some insight. This is a public company. It's also a great client of ours.
So we have really good working relationships with them. We understand their business. And as we look at this, most importantly, this is part of our knitting. NCR is in this space of ATM. As we talked, we believe there's a shift happening As banks, in particular, shift their infrastructure costs and want a more efficient operation, ATM as a service fits that Bill, significantly.
On the retail side, we're seeing the application of the opportunities here on a large scale basis. So Our focus is on the cost. We believe everything from distribution to warehousing, our services platform will bring cost efficiency to the table. So as we continue over the next week or so working through the data room, our confidence is our team is familiar with this space, Not only NCR folks, but as many of you have mentioned, we've brought a lot of people with us from prior lives who drove ATMs, who have been in the payment space. So this is an area that we're comfortable we know where to go, where to ask and to get through this due diligence.
So we feel like we're on the right path. It's a lot of work. Appreciate all the effort from our teams, but we think we have a pretty good handle getting to the cost synergies that we need to identify.
Thanks, Owen. And As Owen referenced, a lot of us have done deals of this size and magnitude in our past lives, and we actually have a very strong team of executives who have been with us now for a couple of years who I'm really able to jump in and dig into not only the diligence, but also would be the integration. So a recap. So three things to keep in mind, strategic fit, why this is of interest to NCR. Number 1, it accelerates our ATM as a service strategy.
So the ATM as a service strategy we outlined on December 3, this will accelerate our ATM as a service strategy. Number 2, it provides an opportunity to cross sell into the retail customer base that we have and that Cardtronics has and leverage the Allpoint debit network that Cardtronics has. So cross sell into the retail marketplace and leverage the payment network. That'd be number 2. And number 3, on all the financial metrics that we have laid out as our strategy, eighty-sixty-twenty, the mix of software and services, the percent of recurring and our EBITDA margin, all three Those metrics would accelerate forward as part of this transaction.
Net net, Our strategy is not changing. This is an accelerant of the strategy that we laid out on December 3. We're excited about the opportunity, but we do not have a deal yet. And again, it's a little unusual in the timing. We felt it's important to share Why this fits with the strategy we've laid out.
We have an offer. We're in the middle of a process to try to get to end of job. Hopefully, we can get to end of job. But whether we get to end a job or don't get there, it's the same strategy. We're going to stay consistent with the strategy we outlined on December 3rd.
So hopefully that Gives you a sense of why we are pursuing this combination and why we feel it's a great strategic asset with A lot of financial positive impacts very quickly. With that, we're going to sign off today. Thank you for joining us this morning. We would not plan, obviously, to give you updates on what happens until something were to be completed if, in fact, we were to get there. Thank you.