Hey, good morning. Thank you, everybody, for joining. My name is Ian Zaffino. I am the equity research analyst that covers NCR. I have an outperform rating on the stock, and, you know, very thankful to have the company present here today. We're gonna do a fireside chat. I would ask that, I have a bunch of prepared questions, but if anyone wants to have a question answered, you know, please put it in the chat, or you could send me an email directly at ian.zaffino@opco.com. Either one's fine. We'll make sure to get your questions answered. With me today is Mike Hayford, the company's CEO, Michael Nelson, the company's treasurer and investor relations. Guys, thank you very much for joining.
Thank you, Ian.
Okay, now you guys have certainly a, a lot going on here. Came off the back of super strong earnings, really blew out numbers and you're preparing for a spin or separation of the company. You know, m- maybe you could c- just start off w- with kind of a broad description of, of, you know, what's getting you excited here, you know, what the company's doing, how the company's changed since you've taken the reins, you know, several years ago, and maybe kind of give us a broader overview of kind of w- what's interesting.
Yeah, I'll, I'll put the spin to the side. You know, I'm, I'm sure we'll talk about the spin, but just in terms of execution of business, the transformation of the business, you saw in our second quarter numbers, as far as we can tell, we hit an all-time high on earnings, on EBITDA, in the 138-year history of NCR. We, we can only go back to 1998, I think, to find data, but really, really strong performance and really strong performance, quite frankly, during a time that we asked our teams to focus because of all the potential distractions of getting ready for a spin, and they delivered. In a, in a broader context, you know, we started a journey about five years ago. We started with shifting towards a, a customer focus and a market-based focus.
We said, we're going to line around our customer needs and focus on taking care of customers with the explicit purpose of having customers who are not only willing to come back and buy more from us, but also willing to recommend us. We moved our customer sat, our NPS score from 14 to, I think it was 62 in this last go around, which is quite remarkable. We focused on that, we incent people to do that, it shows up then in our numbers in terms of our repeat, repeat business. Second thing we did is we said, we're going to shift our business away from being hardware-centric. We're gonna shift it to being software-centric and software platform specific.
Build out our software, differentiate our offerings in banking, in hospitality, and in the retail business. We set some goals to shift towards 80% software and services. We're, we're right around that number on this quarter. And it's not that hardware's not important to us anymore, it's just not the focus in terms of how we differentiate. We think the hardware is an important component, but clearly differentiating software and service makes us a, a, a stickier, stickier provider and a more strategic provider to our customers. That transformation has been going on. We talked about just the discipline around driving earnings. We've obviously done that. I think we're rounding up right around to 20%, which is our goal.
I do think there's some room for the respective companies to drive even higher margins going forward as they continue to get more leveragable products, on the software side, on the service side, on the outsourcing side, on products like ATM as a Service. Lastly, we talk about improving our products. We put a lot of investment in our products to make them market competitive, bring their technology stacks current. We've done that in retail, we've done in hospitality, and we've certainly done that in digital banking. That shows up again in terms of our, our wins. We talk about our wins each quarter. Across the board, the customer side, the focus on shift to software, the focus on subscription recurring, and the focus on product, it's really started to pay off.
What it really does, Ian, is it really puts us in a position as we separate the two companies, that both of them are in extremely strong position.
Okay, thank you. That, that's really a great overview. You know, if we're gonna just dive into some specifics here, let me just talk about the second quarter a little bit. You know, maybe give us an idea of what's driving a lot of that strength, what you're seeing, maybe go through retail, hospitality, banking, and, and, kind of what are the key levers of growth for, for each of those segments?
Yeah, let me start with banking. I'll start with self-service banking, traditional ATM business. You know, we're continuing to see, and I think Tim talked about this, Tim Oliver, Chief Financial Officer, talked about this on the first quarter call, that we expected a relatively flat year. We now are expecting about 4 points of growth, a little stronger than we anticipated. The flatness is really driven by the fact that we continue to win our ATM as a Service contracts. Those defer revenue, so, while we're deferring revenue and growing ATM as a Service actually a little faster than we anticipated, we're also driving a traditional business at a very, very high rate. Our products are extremely competitive. Our service is by far the best out there in the industry when it comes to supporting and servicing ATMs.
Obviously, we've got a little bit of tailwind from some of the challenges our competitors are facing, right now. We have a very unique offering when it comes to ATM as a Service, in terms of bundling it with our Allpoint etwork and really delivering something to, you think about community bank or regional bank, allowing them to expand their footprint, deliver better service, and quite frankly, it drives revenue lift for us. When we shift somebody to ATM as a Service, it improves our overall total contract value to 2 and 2.5, 2 to 2.5 times what it would be under a traditional model. We're pretty excited about the self-service banking business, coupled with Allpoint. Digital banking, saw a really strong digital banking results this quarter.
We continue to add more accounts, you got to remember, there's about a 6-month lag between signing a customer and getting them up and running, where we start to get revenue. These are customers that we sold last year, on board, driving more account volume, driving more revenue. We talked about wins in the second quarter, continuing to have a lot of wins, doing a really good job on our renewals, and which is obviously important to hold on to your existing customers. Digital banking, we talked about second half of the year, probably delivering 10% growth each of the quarters, and then heading into a strong 2024.
A strong 2024, just because that is a very pure play SaaS business for us, so we can actually project forward the account growth, customer growth, and have a pretty good look at what that business is going to deliver out into the future. On the, on the retail hospitality side, the commerce side, hospitality continuing to have strong growth. SMB, a little more competitive. It's a small part of our business, but competitive. We have had a lot of success, particularly with ARPU, our average revenue per account, by adding payments. When we sign up a new small business restaurant, we add payments, it drives our revenue per account up dramatically. Then the enterprise side.
Enterprise, think large restaurants, restaurant chains, you know, whether it's 50/50 table service restaurants or whether it's a big restaurant chain like a Wendy's. When they grow and they add another restaurant, we grow. A lot of that enterprise growth is literally our customers growing, adding more sites, adding more product, whether it's hardware, whether it's software installs, whether it's the service component. That's driving a lot of that hospitality strength. It's just having embedded market leadership, I guess, is probably the key thing there, particularly on the enterprise side of hospitality. Retail is somewhat similar. We're much, much stronger in the enterprise side. As our customers continue to grow, I'd say in retail, we believe there's a pretty strong imperative for retailers to upgrade.
The, the point of sale is really kind of we call the, you know, the heart, heart and soul of a store. They have been inundated over the last 3 years, a lot of it pandemic-driven, with different channels that they've got to open up, whether it's self-pick, or whether it's delivery, or whether it's having a third party come in and pick. They've, they've got to do that integration of channels. A lot of the technology that they're sitting on makes it difficult. Our new product out there, the NCR Emerald product, and the NCR Commerce Platform, as we look at it, is starting to resonate, and we believe we're winning a lot of those new, again, upgrade imperatives in that retail space.
Okay, great. That's, that, that's very helpful. If we could maybe stick on retail for a second, or stay, stay with it for a second. Self-checkout continues to do really well. You know, what are your expectations there for, for growth? How, as investors, do we think about, you know, maybe the ultimate penetration of this product? You know, maybe compare U.S. to, to what you're seeing in other markets, and what it ultimately can get to?
Yeah, I, I would say, you know, in industrialized markets, the U.S., U.K., Europe, Japan, where labor is still at a maybe a premium in terms of it's more expensive, but also challenges getting labor, customers continue to roll out more and more self-checkout. What we've seen happening, you see this in our numbers, our unit numbers continue to be very strong. Some of the revenue per unit is going down, and we don't actually view that as a negative. What's happening is a convenience fuel store, CFRs, are starting to put it in. When you go into a gas station or convenience store, you're starting to see self-checkout. It's a smaller footprint. It's generally a card only, but you're seeing them deploy typically two, three, four devices.
They leverage a single person into maybe 4 self-checkout. That's driving a lot of growth. What you see is our margins going up in that business. While the revenue may not be ticking up as fast as it has in the past, our unit count is going up. Margins are going up because the software stack and the service stack is the same, even on the smaller footprint devices. We've seen smaller grocery store chains that in the past were concerned about maybe the service, maybe about, you know, not having an assisted lane, quite frankly, having to go to self-checkout simply because they can't get the staff. Once they do it and they find...
We, we always say that if you put in an NCR self-checkout, you know, the hardware is the hardware, the user interface and the ease of use of ours is dramatically, we think, better than the others. The marketplace is self, is self-trained. They go to Walmart, they go to Whole Foods, they go. They see, we have 2x more market share than anybody else. That user interface and the ease of use of self-checkout, when somebody puts it into a convenience store, the customers walk in, and they know how to use NCR self-checkout. We think that's gonna continue to grow. We don't see the labor markets abating for that end of the market. It's shifting again to, in some cases, smaller footprint, more software-centric.
We've connected it into our platform, so it comes as a. You can bundle it up with your point of sale, you can have that integration. Then, in some of the innovation, we're rolling out something called Halo. We're integrating the vision side. For convenience store, you don't have to scan everything. What we've done differently is you can put your items on the tabletop, it'll vision scan them, it'll send you a receipt on your, on your, your phone if that's what you desire. What we've seen on competitors, if they can't scan the item, and it's hard to keep up with all the vision scanning, you can pick up the item that it doesn't read, and you can actually scan it with a UPC code.
Our product, we think, is going to be, quite well received in, in that, in that marketplace. Speed, convenience, ease of checkout. We see the industry continuing to grow, move forward, and, we think we're positioned extremely well. Market share leadership, and then innovation on, on new product.
Right. Thank you. Maybe also if we then turn to digital banking here. You had some nice wins recently. Maybe discuss that a little bit, and what were some of the drivers of those wins, and then, you know, should we expect this, this level, you know, going forward?
Yeah, you know, so if you follow us, digital banking has been a little bit of a journey. From five years ago, we stabilized the product, we invested in the product. We, we took it to a new technology platform, so it runs on Google Cloud now. We did that about a year and a half ago. Our availability, our delivery, our consistency is through the roof high. It's, it's really, really good. Getting on the Google platform allows our customers- we then, we then roll out products for all the analytics, so they have the best analytic tools now in the industry.
Feature function stack, capabilities to do the, the functions that banks need to do, whether it's opening and originating accounts online, whether it's payments, whether it's transactions, we think our product is as good as anybody else out there. One of the things that we're seeing, particularly on the Digital Insight side, which is about 600 customers, is we have a leveraged model. Every time we roll in an enhancement, everybody gets it instantly. A lot of our competitors have difficulty keeping up and doing the upgrades. That's been a huge boon for us, I'd say, when we go out and compete for new customers.
We've been able to take some customers away from some of those other providers because the upgrade cost that they were seeing, or the ability to stay current on the digital banking platform, was impaired. We're, we're winning in that regard. In the high end of the market, we had 2 large customers convert last year. We signed another very large, $25 billion of Wintrust, Associated Bank, which are banks, and then SECU, which is the second largest credit union. We think literally to a small credit union, a small community bank, all the way up to a large community bank or a large regional bank, all the way up to some very large entities. We have a very competitive product. Our service, we think, is, is as good as anybody else out there.
Holding onto your customers and then being able to win in the market, and that's what you saw in the second quarter, you saw in the first quarter. We think that will continue in the foreseeable future. Again, we talked, I think, talked about it at our last investor day, a year and a half ago, that we thought that business could grow between 10% and 15%. We're seeing it exiting 2023 at that level, and we think it'll continue to move above.
Okay. That, that, that's very helpful. You know, I know earlier you, you talked about ATM as a Service. You know, m-maybe kind of give us a, a, a deeper explanation of, you know, the benefits of that, you know, what the opportunities are to maybe broaden it throughout your customer base, and what's the value proposition of it?
Yeah, let me, let me just start from the perspective of NCR, why this is such a game changer for us. If you think about traditional NCR self-service, you know, we're viewed as an ATM company. We deliver a ATM, a very sophisticated box that does some very unique things. We think we have the best ATMs out there. We wrap that with a service module, meaning we'll send people out, we'll roll a truck. We do that all over the world. We have a very leveraged, centralized model to deploy and to deploy the trucks and to run the trucks around the globe. And then we have, we think, the best stack of software out there.
We've been upgrading our software, the software that runs on an ATM, Activate Enterprise, but also the software they use to manage ATMs, manage the, the transactions, manage the cash, et cetera, et cetera. That's our traditional business. When you look at what a customer spends on running an ATM, supporting an ATM, which involves, you know, eyes on glass, watching the tools that we have for a fault, and then, sending a ticket, they send a ticket to us today, managing the software stack on ATM, supporting the installs of ATM, doing the upgrades of ATM, managing the cash in transit vendors. That is another 2, 2.5x, if we get the whole bundle, as opposed to just doing the traditional side. For us, it dramatically increases the addressable market.
In a market that, we think is, you know, a GDP grower, a 2, 3% grower in the markets that we play. Now that we've expanded that, we think it can grow dramatically higher than that. For us, it's a, it's a, a dramatic shift in how we go to market, accelerates our growth. The other important thing to think is the things that we're adding. You know, sending trucks on the road is not very leverageable. You got to send a person in a truck and get to an ATM, and you can optimize the route. When you start looking at all the functions you do with ATM as a Service, they're highly leverageable. The margin in that business will start to go up as we shift more to as a service.
It turns it into a subscription business, so predictability of the revenue stream. Right now, we're probably 60%-63% recurring in, in the, in the bank side when NCR Atleos spins out. They have line of sight to get 80% over the next 4 or 5 years. That's a dramatically different business than what we had 4 years ago, which was maybe 40%-45%. Subscriptions, now you have a subscription business, predictable revenue streams. You have a higher margin rate because those added functions and ATM as a Service are more leverageable, so the margin should start to tick up. We think that business will generate pretty decent cash flow. It's gonna be a very different business. It's already a different business today.
When we go to market, we go to community bank, and we talk about, you know, what they're trying to do to support maybe, 100 ATMs. The challenge they have, quite frankly, is, is similar to what we see, like, in retail staffing. They, they struggle to get the technology resources to support an ATM. They struggle to get the resources to manage an ATM. We can clearly go in there and do that at a better cost point for them. Also, you know, we pick up so much more additional revenue. We can drive additional revenue and additional margin as part of that. Our-- if there's a secret sauce, I'd say it's Allpoint network. We go to a...
We had a customer down in Florida as an example, that we converted to ATM as a Service a year and a half ago, I'd say pre-hurricane. We took 150 ATMs, we started managing them. We managed them throughout, you know, soup to nuts. When they got hit with a hurricane, we kept them up to date, kept those ATMs. Well, the first thing happens in a disaster, those all cash out, right? We can't keep... the CIT players can't keep the cash rolling. They're part of the Allpoint network. We sent a notice to all their customers, "Here's another 500 ATMs in your marketplace that are part of Allpoint," 'cause we have 55,000 devices across the country as part of Allpoint. Total game changer.
She's been very helpful in terms of reference points. What you can do, not only to reduce your costs, deliver better service to your customers as a bank, delivering ATMs, but expand, really expand your network and availability of the network to your customers. It's a pretty compelling argument for the, you know, credit unions, the community banks, but also some of the regional banks just looking at off-prem and delivering a better product at a lower cost point.
Okay, good. If we were to stick on, on ATMs a little bit longer, you know, just, just as far as ATM hardware and, and, and the ATM business, I guess, in general, what, what's sort of the growth that we should be projecting in this business, and, and what does it grow? Are there any, like, market share gain opportunities now that one of your competitors is, you know, financially not doing so well?
Yeah, you know, I, I think the beauty of that particular market is we serve banks, and I think banks, highly regulated banks, probably have the strongest infrastructure on risk management by requirement. They have to, as part of the regulatory environment. When they see one of their providers go through struggles like Diebold has done, you know, it drives a pretty heavy stream of foot traffic to our, to our teams, to our sales team. That's been fairly active. We do believe it'll pick up some market share regarding that. On a traditional basis, I think we'll pick up market share, it will pick up some customers.
I think as importantly, as we see some of the market shifting to ATM as a service, quite frankly, that's an offering that they can't deliver. They don't have the capabilities, the know-how, but they also don't have a balance sheet that will allow them to deliver ATM as a service. We think that market is a market that we have different competitors in, and we'll continue to pick up market share vis-à-vis that. The, the third thing I'd say, Ian, is, in some regards, one of the outcomes of their, their financial struggles, prior to going into bankruptcy, they continued to price, I'd say, somewhat erratically, because they were very focused on cash flow to make their debt service. I think once they've entered bankruptcy, we see them pricing more rational.
Our pricing has actually improved in 2023. We see that being the new norm, I guess, which, which, quite frankly, helps all of us in the, in the industry. I think all that helps. In terms of overall growth, when we talk about shift to, shift to recurring or shift to ATM as a Service, we're effectively deferring revenues to the future at, at the cost of taking them out of current, current periods. We've called that out, the team's called it out at each call. What that does mean, at some future date, that headwind, which is depressing our growth right now, is gonna shift to a tailwind. When that shifts, I think the...
If you think about it, just, just in a neutral sense, if you're growing 4%-5%, now you're depressing that a little bit. When it shifts, it's gonna accelerate your growth fairly rapidly, just by that shift. The more important part is, you're talking about contracts that are 2-2.5x greater than just traditional business. I think what people are going to see, and they'll probably be a little surprised, probably through 2024 into 2025, you'll start to see that shift, in the back end of 2025, headwinds shifting to tailwinds, and then you'll start to see that growth accelerate.
I think they have a fair amount of room to turn a market that might be, as we said, a GDP grower, into a, you know, a mid to high single-digit grower over time, with a better margin. Simply a better margin, because the stack of what you're delivering is much more leverageable. We have a very good leverage model, and their, their, margins will start to tick up.
Okay, good. You know, I guess just turning to the spin, you know, can you maybe help us understand the rationale for, for the spin? You know, what is it gonna achieve? How did you decide, how to separate each business? What goes in the spin co? What stayed in the remain co? Maybe just some other kinda color you could give us on that?
Yeah, I'd say we, you know, we spent quite a bit of time looking at different alternatives and, and different paths. Let me just start with, you know, the focus on this whole initiative over the last almost 2 years now has been: How do we unlock shareholder value? How do we get rewarded-... for what we think is very, a very strong 5 lines of business that are number one in each of their segments. Have great product, have great customer sat, have the opportunity to grow as we continue to move them forward. The market really hasn't recognized that. As we go to market, and we talk to customers, even as we talk about the spin, they just love what we're doing.
They love the products we're delivering, they love the service, and we're seeing that reflected in the customer sat scores. Our employees, you know, look at NCR and have a great deal of pride in NCR, in the brand, and what we've built. It really wasn't really the customers or employees, it really was in the marketplace. I think if you look at self-service banking, you look at what we're doing at the, you know, the network in the banking side or ATM as a Service. You look at retail, you look at hospitality, and then you look at digital banking. They're, they're different products, they have different competitors. Some of them compete in different markets. We're all over the globe.
In some cases, we deliver hardware stacks, which obviously hit us last year during some of the challenges in 2022. You know, we concluded that it's just it's difficult for the marketplace investors to really look at it and say, "I wanna invest in X," and then under NCR, you get some things you may not be interested in. At the end of the day, we said the most critical thing to pull out is really the ATM business. The ATM business is a, is a unique business. We think it's extremely strong. We think the future for that is really bright. Not everybody who wants to buy into a software platform business, like retail, hospitality, and digital banking, wants to come along with a ATM-focused business.
Quite frankly, we have a lot of interest in the ATM business because of the stability, the leadership in that market, the global footprint, that people like that, but they don't, they don't like the, the software platform side, which is a higher growth and a little bit more higher investment. The decision was just to pull out the ATM business. If you look at NCR, we pulled out the ATM business. ATM, self-service banking segment today, and then the payment business, but it's the Allpoint payment business. The merchant side, we kept with the commerce business. That was the decision on how we pulled it out. We've been on the road since last September, just doing, non-deal roadshows, talking to investors.
I got to tell you, Ian, I think it's working because when we sit down and walk through those two companies and what they do, their profile going forward, what we, what we're planning to do with the businesses, the level of interest. I'd say the level of understanding is much greater, as you can parse upon two businesses, one ATM-focused, one software platform-focused. You can make decisions on where you want to invest, whether you invest in both or invest in one or the other. I think we feel pretty good about that. The decision to spin was the right decision. We think it's starting to play out, and our interaction with investors has been very positive around that step.
Okay, good. Maybe, you know, you talked about the ATM spin. You know, maybe help us understand, you know, how you arrived at that leverage target. What are you now thinking as far as free cash flow? Especially since free cash flow has been super strong at the company level so far, how are we thinking about the free cash flow on that ATM spin business?
Yeah. I mean, we're driving very high free cash flow this year. Now, again, part of that is last year we, we didn't do as well on free cash flow. A lot, a lot of that was due to some of the impacts hitting us, and we ended up with a little bit elevated inventory levels. You, you saw some of that, you know, when, when we had earnings calls last year, third quarter, fourth quarter. Tim talked about the fact that some of that's going to come off working capital in 2023. You saw that in first quarter, you saw some of that in the second quarter. Very, very strong cash flow year to date. Some of that coming off the balance sheet.
On an operating basis, continuing to show that we have a business, it's a scale business, it drives profit, and it drives free cash flow to the bottom line. On the two business going forward, NCR Atleos, which is the ATM business, we think over time, that will be a little bit higher cash flow. And again, as that starts to tick up, high subscription, very predictable revenue stream, higher margin, and a higher free cash flow, we anticipate on that side of the business that... It's gonna be out about 3 and a half-ish, 3, 3 and a half, 3.6 times leverage. Little higher leverage than we're gonna have on RemainCo or Voyix, simply 'cause it's, it's just a much more predictable business.
It's a very steady business, doesn't have much volatility at all in the revenue streams, and it has very predictable free cash flow. We still look at potentially delevering somewhat in that business, so down from the 3.5 towards 3. We also expect that has enough cash flow that they will declare a dividend and pay a dividend on that business. Then, and then, and then they'll have investments to continue to invest in that business and grow.
That side of the house, very stable, steady, a little bit higher leverage, cash flow, probably a little bit higher on a, on a conversion of EBITDA to free cash flow than we do as a company today, on that side than on the RemainCo, side of the business.
Okay, good. Thank, thank you for that. You know, and then also, just maybe talk about the inflationary environment now. You know, especially in the hardware side, we're seeing a moderation in a lot of the costs, whether it's freight, component costs, et cetera. You know, how are we thinking about inflation going forward, and what does that maybe mean to the margins and the tailwinds you'd, you'd, you'd enjoy on the margin side?
Yeah, our... Ian, our thesis last year was that some of the cost spikes, particularly in supplies, component costs, that deliver ATMs, deliver SCO, or even point-of-sale devices, wasn't really embedded inflationary. It was opportunistic pricing that some of the suppliers took, and it hit us hard, obviously, first quarter of last year, hit us throughout last year. We've seen those mitigate dramatically in 2023. Existing supplies coming down to more normalized levels, supply costs. Also, you know, because we engineer our components, we've been able to engineer around. If we had a chip set that we had spec'd up for an ATM, we, we engineered and qualified other chips. Now we go out in the market, we get a little more competition.
That's helped us dramatically as we look at our, our raw material costs in 2023. The other piece that has helped us a lot is just pure transportation. In 2023, I think everybody understands or just read the paper, that global transportation was broken last year. Container costs were extremely high, but worse than that is you couldn't rely on putting an ATM or SCO on a container, on a ship, and getting it to your customer in a timely fashion. We had expedite freight costs that were 4x the normal year in 2022. That's come down dramatically in 2023. We put things on containers. Containers are cheaper. They get to our customers in a timely fashion. All of those costs that hit us in 2023 are starting to unwind.
I think we got a little bit more room for them to continue to unwind. I don't see embedded inflation costs, you know, continuing to push those costs in, in the way that we saw in 2022. We feel really good about where the hardware component costs are right now, the margins in hardware, as you saw, the gross margins improving, quite a bit year-over-year.
Okay, and then what does that in turn mean, I guess, for, for your pricing algorithm, you know, with inflation now coming down?
Yeah, what we did last year is, again, like everything else we do, we, we put our customer first. We actually delivered last year. I know some of our competitors say they were unable to deliver to their customers. We delivered to our customers, and in many cases, it hit our bottom line. The flip side of that is now when customers go to order, they come back and order from us because they know we were there, whether it's point of sale, whether it's SCO, whether it's ATM. We have been able to maintain pricing. What we did last year is we did some surcharging. We did some expedite surcharging. If somebody needed something in a time frame, and we had to put it on a plane, our costs went up. Well, we surcharge.
We let the customer decide, do you really need it that fast, or can you wait? So we pushed through surcharges. Our pricing, you know, as we look at our pricing every year, we actually have a pretty sophisticated pricing model. When a rep goes up in prices an ATM, they can see what the market prices are, they can see what we've been charging, what we've been getting in the market. So I'd say our prices have firmed up a little bit in 2023. Some of that driven by our competitors being more rational in 2023, but I think the pricing right now is, we feel pretty good about it.
Okay, good. Thanks. Maybe just returning back to the, to the spin and, and the RemainCo. Less leverage, less, I guess, cash flow. What are we thinking? How does that-- are there any inorganic opportunities in that business? Are you thinking about, any bolt-ons or, or, you know, as far as just kind of the capital structure of that business?
I think, again, they're gonna go out to spend about 3.25-3.3x leverage. I do think they're gonna continue to focus on deleveraging somewhat, try to get below 3 in that business. It's, you know, still gonna be a pretty good cash flow generator. It's just not gonna be quite as high going forward as the ATM Co. side. You know, the point on bolt-on, we've put money. Our digital banking platform right now, we think is investment in the industry. It's leverageable, it's scalable, it competes very well, it's winning. We think it's winning as many new flags as anybody on a quarter-over-quarter basis. We think the technology stack, we have no technology debt left in that business.
So it's all adding on capability to get new customers. Retail and hospitality, you know, focus on the platform, the NCR Commerce Platform, getting customers on that journey. We share with you platform lane conversions every quarter. Those have been going quite successful. There's, you know, it's a small piece of the overall base, but it's working, getting them on the platform with point of sale, getting on the platform of SCO, getting them on the platform of Software Defined Store, getting on the platform of payments. So one component and then adding on other, other feature functions. So that, you know, that's a strategy in those two sides.
What we're also seeing is a lot of the startups, maybe over the last 3 to 5 years, who got in the business with maybe a product, have a few customers, haven't reached scale. They're subscale, they don't really drive earnings, and certainly, they don't have cash flow, and they're probably struggling at the point where I do think there might be some opportunities. I think the teams also have to be careful about trying to maintain their leverage ratio at an acceptable level, closer to 3. If they have an opportunity to bring something on, and I, and I do think they will, at attractive prices, I think they'll be looking at taking advantage of those opportunities.
Okay, thanks. Then on, on the spin, what's the timing of the spin now? And what needs to get done, from a formality standpoint, to get this, completed and done?
The gates that we've been tracking to some regulatory gates, we believe were pretty close, if not done with SEC. As we filed, you've seen the Form 10s going out. I think we're very close to being completed with the SEC. IRS, we've received our letter ruling of a tax-free spin to IRS, which is a obviously critical step. We did not anticipate issues, but it's always good to get a confirmation. Our internal work to get the teams ready. You know, some of the things we'll do, we'll run with the Transition Services Agreement, some of, some of the technology, the CIO's area. The go-to-market teams are ready. They're, they're aligned. Tim and David have built out the management teams. They've got their boards ready. The internal activities are done.
Regulatory, we're ready. The internal activities are ready. Next big step is to get out and raise the debt stack. Remember, on RemainCo, we talked about the leverage ratio. They get to keep some of the more attractively priced bonds on that side, so their cost of money is gonna be a little bit lower than SpinCo. We have to go raise a new balance sheet for SpinCo. We're doing a debt and equity investor day on September 5th, so the day after Labor Day. 2 of them, 1 for each team, to really present their business strategy, their management teams, and to lay out what they expect to see going forward. Immediately thereafter, we're gonna get on the road with SpinCo, Tim and the team, to... and Michael, to raise, to raise the debt stack.
As soon as we get that done, we will then look at declaring a spin date or declaring a dividend date. We're, we're in really good shape to get that done. We keep saying fourth quarter. We think that will be in really good shape coming out of Labor Day.
Okay, great. That was, you know, what I had prepared. I don't know if there's anything you wanna say as far as the closing comments, 'cause we're pretty much out of time. We have maybe another minute or so. If you guys kinda wanna give us a final kind of thoughts or anything that we didn't cover that you'd like to kinda communicate.
Yeah, you know, I would, I would just reiterate, I think for investors out there looking at NCR. The other thing that's been interesting is we talk about NCR as two different companies, over the last, you know, nine months. People look at it and they say, "Wow, those are two really great businesses." number one market share in ATM, number one market share in self-service devices, number one market share in the Allpoint network, number one market share, we think, in ATM as a Service, number one market share in hospitality software, number one market share in retail software, number one market share, self-checkout. We think we're the largest scale number one player in digital banking. As you start to lay that out, I think people start to see the value of those companies.
I think we've seen a lot of people say, "I kinda like both of them." They're different. One's gonna have a coupon attached to it in terms of a dividend, stable, steady, absolute, market share, winner on the ATM side. We think it's gonna continue to improve market share. On the other side, software platform stacks with great opportunity. If you just keep hold of our customers and transition them, your ARPU's gonna grow, your margin's gonna grow. Both of them, we think, have room to improve margins from around 20 that they're at today, upward. If you strip out the hardware stack on RemainCo, it's this pure software play.
If you look at our software companies in that market, you see that they have a lot of room for, for margin. I think people are gonna be a little surprised, just understanding it, and I think they're gonna be very pleased with where those two companies are headed.
Well, that, that, that's very helpful, and certainly an exciting period of time for you guys. Us as, you know, investors and sell-side analysts, this is also very exciting for us. Looking forward to the Investor Day. Thank you very much for joining us, and you guys, good luck with the rest of your one-on-ones today.
Thanks, Ian.
All right, take care.