On behalf of the entire NCR Atleos's management team, I want to welcome you to NCR Atleos's first Investor Day. My name is Michelle Morris, and I'm the Executive Director, Corporate Communications. Before we begin, I'd like to cover a few housekeeping items. The runtime for today's event will be approximately two hours, with a little over one and a half hours of prepared remarks, followed by a Q&A session. We have a full agenda today with presentations from our new NCR Atleos management team. We will provide a comprehensive update of our business and our strategy, and why we believe NCR Atleos is a compelling investment opportunity. You'll hear how NCR Atleos has transformed itself into an as-a-service solutions company, and how we plan to manage our business post-separation. You'll also hear how we are competing and how we are winning in each of our industry segments.
You'll also hear directly from our customers and why they partner with NCR Atleos to integrated ATM as a Service solutions. Throughout today's presentation, we'll be providing many forward-looking statements, which are intended to help our investors understand our growth strategy and overall business strategy. The forward-looking statements include, among other things, statements regarding the planned separation of NCR Atleos from NCR Corporation. 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 these expectations. These risks and uncertainties are described in the presentation materials, as well as our SEC filings, including the company's registration statement on Form 10 and amendments thereto, the final information statement, and the company's quarterly reports on Form 8-K.
Our presentation illustrates our business and preliminary estimated results for 2023 and all years presented on the basis that the spinoff and related transaction occurred as of January 1st, 2022. Today, we will also be discussing certain non-GAAP financial measures. These non-GAAP measures are described and reconciled to their GAAP counterparts in the presentation materials. A replay of this call will be available later today on our website. Enjoy today's presentation. Thank you for joining us.
Welcome. Welcome to the first NCR Atleos Investor Day. My name is Mike Hayford, the Chief Executive Officer of NCR. It's an exciting day for NCR. 130+ years of innovation, of change, of moving forward, and today we're talking about spinning off NCR Atleos into a separately held entity in a tax-free distribution, which we expect to occur shortly. NCR Atleos is our ATM business of NCR that's pulled out of the NCR company. NCR, which will now be renamed NCR Voyix, will remain as the digital commerce portion of NCR. When you think about Atleos, one thing you should think about is that it's not a manufacturing company, not a hardware manufacturing company in its roots of what it does.
What it is, it's a software-led, software-based services company, which provides a full service to its customers literally around the globe. When you think about that, full stack delivering an ATM transaction, we see competitors out in the marketplace in various regions. We see some of the CIT players like Brink's. We see a Euronet in parts of the world. We see an FIS or a Fiserv in other parts of the world. Quite frankly, NCR Atleos is the only provider who can do a vertical integration, top to bottom, to deliver ATM transactions around the globe. Best-in-class product, best-in-class service, best-in-class software, best-in-class support. What is NCR Atleos in terms of an investment thesis? Tim and the team are going to share how they view it. I'm going to give you just how I look at NCR Atleos.
I'm going to start with what's behind me, which is our customers. NCR Atleos is the market share leader, literally in everything it does, whether it's producing and delivering ATMs, whether it's producing and providing a service for ATMs, whether it's doing ATM as a Service, whether it's doing full stack, whether it's doing the Allpoint Network, the world's largest surcharge-free network. It has a business model that will deliver accelerating growth as it continues to shift to more subscription, as it ATM as a Service not only shifts to recurring revenue, but it also unlocks from our customers 2x-3x more spending than a traditional ATM transaction, ATM deal would do. So team's excited about that. It will accelerate top-line revenue growth in future years. It also has ever-increasing predictable revenue streams as we get more and more recurring revenue.
Right now, it's in the mid-60s%. We expect that to go north to 80%, but not only recurring revenue from a subscription, but also just the repeatability of that business model once you sign up for NCR Atleos and its products and services. As it does that, the EBITDA margins are going to continue to increase. Solid EBITDA margins today, growing up in the mid-20s% going forward. Tim and Paul will talk about that shortly. And then lastly, a strong balance sheet with a very shareholder-friendly capital allocation strategy, continue to delever, and also, most importantly, as part of the ability to have high recurring revenue streams, high recurring EBITDA, predictability of EBITDA and predictability of cash flow, NCR Atleos will be expected to deliver a dividend to its shareholders. Let me just spend a few minutes on Tim and the team.
I've worked with Tim literally for over 15 years. Tim has built a phenomenal team. I know Tim's going to continue the tremendous culture that we've built at NCR. I know he's going to continue to invest in products and deliver best-in-class products around the globe, and I know that he's always going to keep customers first as he continues to drive and move to deliver products around the globe. Tim, not only delivering those products, building a culture, he's a great, great leader. He's going to do great. As CEO of NCR Atleos, I'm very excited to have a friend, a colleague over the years, take over the reins, take the baton in effect at NCR Atleos. So I'm going to throw it down to Tim and the team back in the studio.
Thank you, Michelle. Thank you, Mike, and thanks to all of you for being here today for Atleos' first Investor Day. And in particular, thank you, Mike. We would not be here today, I wouldn't be here today without what he's done to transform this company, get the company ready for the spin, and importantly, get me ready to be a CEO. So thank you for that, Mike. This is the first step, and it's going to be a long process, I suspect, to educate the investor community on the new Atleos business. You've known us for some time, but I suspect you've had some misconceptions about our business that we need to disavow you of, and that you misunderstand truly what the investment thesis is. We'll spend 90 minutes doing it today.
I hope when we get on the road over the next several weeks, that you'll join us and hear about this further. So with that, let's get going. This is our investment thesis. You're going to hear this throughout the day. We're going to come back to this, and we're going to try to prove out every one of these five points. First, cash is still an important method of exchange, and ATMs are the most effective and efficient way to make that transaction take place. When we convince you that our end markets are stable to growing, we're going to tell you that we are the largest in everything that we do. We have the most comprehensive and the most trusted ATM solution out there, and we're going to grow above the market growth described in the first bullet.
Our product offerings are best positioned to meet the strategic needs of our customers and, importantly, meet the emerging trends from their customers. Those solutions will be sold as multiyear contracts, often as subscriptions, and certainly from a transaction perspective, harvesting those for profitability. That mix of revenue is going to be much more repeatable, it's going to be predictable, and it's going to throw off cash flows that are very strong. And when we generate that cash, we're going to be very disciplined and prudent in the way we deploy that cash. We expect to pay a dividend. We expect to delever relatively rapidly, and all the while still investing in organic growth opportunities that Paul will talk about. So when, when Mike-- The next four slides, we're going to talk about Atleos, introduce you to who we are. But we should start with people first.
When Mike asked me to do this job and the board approved it, Mike said, "The number one thing you need to do is build a team. Build a good team, build a good board, and everything else gets easy from there." We've done that. This team is incredibly experienced. There's over 200 years of experience on this page in the space that we play in. There's over 80 years of experience at NCR alone. Now, Paul takes up about half of that, but most of these folks have had C-level jobs and some outside the job they currently have in other aspects of their life. Decades of C-level experience here. And importantly, this team likes working together. We have overlapping areas of expertise. We pique- shape with one another.
We find ways to make sure that we interoperate well and make this company better. I'm very pleased with this team. You're going to meet several of them today. It's a balance of folks from outside the company who've joined us as of late, some of us who've been at NCR for a period of time, some longer than others, and there's some Cardtronics executives that we acquired some two years ago, who've become integral to our ATM solution. And to augment this exceptional team, Joe Reece and Katie Burke, on our board, helped us put together a board for our company that really is world-class. They have similar experience set to the folks on this page, only amplified a little bit. I'm thrilled to be able to work with them. So, some speeds and feeds.
800,000 ATMs in service around the globe, largest installed base out there. We produce about 80,000 machines a year and put those back into service. That means that about 10% of our installed base every year, we push back out. These machines last longer than that, and so you'd expect that our fleet is growing somewhat, our installed fleet growing somewhat over time. 80,000 machines that we operate, own and operate as a company. The biggest fleet of owned and operated devices, really, of anybody out there. Euronet is close, a close second, but we own and operate 80,000 machines, and that capability came to us from the Cardtronics acquisition and makes us a legit ATM as a Service space that we'll talk about later.
140 countries. We have ATMs in 140 countries, and almost 40 of those, we're the number one player. And we have 20,000 employees globally. Those 20,000 employees are not in the U.S. Well, 45% of our revenue occurs in the U.S. Only about 20% of our employee base is in the U.S. We're a very global company, with what, what I'll call centers of excellence on all continents, helping us get our jobs done. On the right-hand side, there's some points of bragging, and we could put more up there. We are number one from a network perspective. We're number one from a software perspective. We're number one from a hardware perspective, whether it's ITMs or ATMs. And as I said before, we're number one in many, many countries around the world when it comes to overall ATM revenue.
On the bottom of this slide, maybe the most important thing we'll talk about today, we have the best group of customers on the planet. These folks are exceptional at what they do, and they drive us every day to be better at what we do, to make sure we keep up with them. A breakdown on our revenue base. So looking at this page, you can see it's a diverse revenue base. As I said before, about 45% in the U.S., another 30% in EMEA, a lot of that in Europe, and then evenly split thereafter between APAC and the Americas. If we were to draw a similar graph for profitability, you'd be a little more heavily weighted to the U.S. and EMEA, a little less so to the other Americas.
From a type of revenue perspective, you can see that almost 50% of our revenue comes from software and services today. Another 30% of that comes from transaction volumes, and then the last 22% from hardware. You'll see that software and services piece grow more quickly over time, and the hardware piece shrink as we execute against our as-a-service strategy. And on the right-hand side, some very basic numbers Paul's going to dig in later. This is what we expect for 2023. Almost $4.5 billion in revenue, growing at 14% over the last several years. More important, below that, $3 billion in recurring revenue, growing nearly twice as fast as the overall revenue rate. That has been the case quarter after quarter for this business.
We continue to grow our recurring revenue business much more quickly than the overall revenue. Finally, 18% margin rate, it's okay. It's a lot better than it was a year ago. We're going to exit this year closer to 20%. Len and his team are going to get up here and talk about all the great things that they've done to get us to where we are, and importantly, take us further along. We're not the same company we were just a few years ago. When Mike and his team arrived in 2018, we were riding our legacy hardware business very hard. We were living off of that revenue stream. Our NPS score was terrible.
We were selling on a spot basis with very, what I'll call a one-time, or infrequent selling cycle that caused us not to be nearly as invested in our customers as we should be. Our NPS score showed it at 23. Our recurring revenue stream was at only at 45% of the total, and our execution was spotty. Where are we now? A lot better. A lot better. We have a comprehensive solution set, maybe more comprehensive than anybody else who plays in the ATM space. We lead with our service organization. We pull software and hardware through that selling set. Our NPS score now is north of 60, which is getting closer to world-class. Our revenue stream is now 67% recurring, a huge increase in a very short period of time.
I'm not sure I've ever seen that happen before, other than maybe in a pure-play software organization moving from one-time sales to a subscription basis. Then lastly, over this period of time, we've made some very, very important structural changes to the way we manufacture and the way we serve our customers, and most of our productivity initiatives have been project-based, so we've gone after singular incidents and tried to fix that. Going forward, we're going to move to an integrated platform solution. We're going to sell as-a-service everywhere that we can. Our NPS, we've got to go higher. I don't know how high it can go. 65 is pretty high. It's got to go higher.
We hope to get to 80% recurring revenue, and Len's going to talk about a continuous improvement culture that is very similar to the one he's worked in the past, that causes us to drive incremental productivity year after year after year.
Yeah, Tim, I don't think you could hit that slide harder. You know, I was an NCR customer for 20 years before joining the team, and I can tell you that this team here, we're easier to do business with, we lead with software and services, and our focus on the customer has never been stronger, so it's great to be part of the team.
And you always had that at Cardtronics. We might have lacked it a little bit at NCR before Mike arrived, and as you know, it's been his, our primary focus since that time. So thank you. So this page says, "Cash is not dead. ATMs still matter." We push on this rope over and over and over again. You can see on the left-hand side, cash is still a mainstay globally. You all have more cash in your wallet than you've ever had before. You have more cash at home, in store, than you ever had before. We're distributing more cash than we ever have before. We're accepting more cash than we ever had before, and cash payments are not going down. They're not going down globally, they're not going down in the United States.
They're a smaller percentage of the total payment space, but the number of transactions are not going down. You can see the cash in circulation is up. It's up 5%.
Yeah, and increasingly among millennials, and certainly the low to moderate income households, cash is becoming, again, still one of the preferred uses for purchases every day. In times of economic uncertainty, we're seeing those trends continue and increase, as they use cash to budget. And again, we're seeing a less negative sentiment towards cashless societies, and so lots of legislation around the world to enhance payment choice and ensure cash is still accepted everywhere you go.
And it's because it's really important to some communities, right?
That's right.
Communities that are less affluent, some communities of color, some types of transactions, some parts of the world rely on cash. And the absence of the ability to transact in cash for those who either don't have a bank account or who can't get credit, is really difficult. And so our goal is to make sure that cash always stays an important part of the global economy. Then following on from that, on the right-hand side of this page, ATMs matter, and they matter more perhaps than they ever have before. It's not the same ATM. It's more capable than it's ever been, but it becomes the physical footprint for neobanks. It becomes the location at which the folks who are underbanked and unbanked can go to do their banking.
The install base is growing at 1% a year, and our machines put into service have been growing at 3% a year in the last several years. We're growing in this business. We're in the right markets, we have the right technology and our service levels help us drive that, as you described, once you get that service level right, you start gaining more than your fair share of each next new order.
Yeah, and as banks, lots of stories in the news of banks, about banks closing branches, withdrawing branches from communities. The Atleos network, the utility banking network that we operate, really helps fill that in. So when you talk about outperforming the market, as banks change how they deliver services, they're looking to us, they partner with us, and that helps us outperform on a transaction volume basis, on a service delivered basis.
Which is exactly what my next slide says. See that?
Perfect.
Yeah. Yeah. Look, there's two things going on secondly. Banks are trying to have fewer branches. They're transforming what the branches that remain do, and our custom- their customers have really had their preferences shift much toward digital interaction with everything that they do. We can help that. We can help make sure that our bank customers are investing in ATMs and ITMs that help them meet their emerging patterns, let's call it, of their customer set, and make sure that when they want to outsource physical transactions, because they're still out there, still need to be done, we're happy to take those on for them. As you can see on the far side of this page, probably about 6% of the total dollars spent from an IT perspective in the banking community in the U.S., about 6% of that is spent on ATMs alone.
Yeah. Banks have invested a tremendous amount in their self-service technologies, but it gets harder as they go forward. They want to move some of that investment to their digital technologies. They're looking for a stable partner to help them with that, and that's where Atleos steps in.
So you're going to hear about three legs on our growth stool. First, you're going to hear about extending our industry-leading position. It's a very good business, the best ATM business out there, and you'd like that business all by itself. We have this thing called The Network that we acquired from Cardtronics. It is a unique asset. It's a scalable financial utility that can grow into itself, and importantly, enables growth on either side of it on this chart. And then lastly, the move toward ATM as a Service, and Stuart's going to dig into this a little bit later. It's compelling. The economics are compelling for us. They're compelling for our customer. It's already started to take hold in a very big way in some parts of the world, and we anticipate it will in the U.S.
We've had some very nice wins in the U.S., thus far. We're here to catch that trend as it comes to us, and in fact, I think we're the obvious winner when that trend comes our way. So Len's going to walk you through, with Patty's help, our foundational ATM business. Len's going to talk about a service organization whose scale is going to surprise you and whose capability and quality of service is exceptionally high and getting better. He's going to talk about a hardware portfolio that's modern, that's easy to manufacture, easier to manufacture, it's easier to repair, and it meets the, the emerging needs of our customers.
Patty's going to talk about a software stack and make sure you understand what's in there, because it's a pretty big stack of software that has been built over time, and you don't see a lot of new entrants into the ATM software space. Importantly, she's going to talk about where we go from here. Most of the investments we'll make in software, as you'll hear, will be to make that software more efficient and easier to monitor, to drive better service and better uptime for our customers. Then Diego's going to come on stage. He's going to talk about the Allpoint Network. This is a powerful network, 55,000 machines around the world. They make access easy. In fact, 85% of the U.S. population lives within 5 mi of one of our machines, and they use them quite frequently.
The number of transactions taking place at our devices is up, and you'll see that later, and importantly, they're up in cash withdrawals and cash deposits, which is the most lucrative transactions for us. It also complements our ATM as a Service sale. When you go to talk to a bank CEO about letting us take on the entirety of his fleet of ATMs, it becomes clear to him that he can extend his reach and his network very easily and very cost effectively by using us to help them do that. And then Stuart's going to come over the top and talk about ATM as a Service, which as it's said here, is a win-win for our customers. For our customers, we can use our expertise and scale to reduce their costs, both internally and externally.
We can take all the responsibility for upgrades and new functionality on us, and we can commit to industry-leading, system-wide performance metrics that couldn't be met without us. For Atleos, our revenues will grow more quickly, and they'll be more recurring. Our margins will increase because our revenue mix will shift toward a more profitable revenue set, and more importantly, our customer relationship becomes very, very deep and very sticky. All part of the strategic plan of our customers once we take this on. This offering has been received better than we ever thought it might be by our customers. We introduced it back in 2021. We knew that we'd get traction in some parts of the world.
We've had significant traction in the U.S. and some of our smaller FI customers, and importantly, some of the very large FIs have started to come forward and talk to us about what might be the case for their at least at their off-prem machines, if not their on-prem machines.
Yeah, Tim, I think that's the part that surprised us the most, is we really saw this as a great step in for smaller to medium-sized financial institutions, who maybe lack the technology teams, and the wherewithal to manage their ATMs going forward. But you're going to hear from Santander, one of the largest multinational banks in the world, about their partnership with us for ATM as a Service and how that's changing how we deliver to them.
And when we do that, our opportunity for revenue growth increases pretty dramatically. I'd call that TAM, not so much available market, but as a market that we can reach. We have not included in here every part of the world. We've not included every part of the ATM fleet. We basically said, "Of the fleet we currently maintain today, what's the revenue we could go get?" When we move to ATM as a Service, we think that our revenue. We know that our revenue opportunity goes up by 2.5x . We know that because the deals we've signed thus far suggest that over the seven-year cycle of any contract, the total revenue achieved by this company is 2.5x what it would have been otherwise.
You notice that the $5.5 billion is a far smaller percentage of the total light green circle than on the left-hand side, which suggests we're just starting to get traction in this strategy as we exit the outlook period we've got here. In fact, in that 2027 number, we're only about 150,000 machines into this mix. So I think a very small percentage, about 15% of our installed base, will be moved over to ATM as a Service. We're still only delivering about half of our machines, 50% of our machines in that period of time as a service, so we're still selling some 40,000 machines more traditionally. That could accelerate over time.
We could be faster than that, or it could be slower than that, and Paul will walk you through what that might do to our financials, but there's a, there's a natural hedge in there that makes our modeling relatively simple. And when we grow, we're going to do it profitably. We've worked really, really hard on our margin rates around here for some time, in total, in the totality of NCR, and in particular in this business. In 2023, you're seeing much higher margins because of the significant work to lower our overhead cost structure. As we went through 2022, we'd suffered through some pretty difficult times from a direct cost perspective. We hunkered down and focused on our indirect costs and got those lower.
And then this year, we've been able to focus on our direct costs and seen gross margin improve by some 400 basis points already this year. Len's going to walk you through that. He saved money in transportation, he saved money on rebuilding the supply chain and getting our component costs down, requalifying others. We've saved money by getting our manufacturing operations in a singular location that we own and to downscale some of our more expensive operations, and he's driven really nice enhancements in the service network. From here, we're going to rely on two things to get our margin rates up. We're going to change our revenue mix substantially and move it more towards software and services. We'll drive really nice margin expansion, and we'll have annual productivity goals of 3%-4%.
That productivity will come from indirect cost and direct costs. We'll have a leaner cost structure at the top of the house. We're a, we're a clean, simple business model. We're going to keep things, lean and tight, and we're going to gain, we're going to gain from scale. So I think the 25% margin rate on the right-hand side of the page is very achievable and should, when we get there, drive about 15% annual growth in EBITDA.
Yeah, and I think it's important to hammer home on the scale side of our business. No other OEM owns a network. We own 80,000 ATMs that we touch, we operate, we deliver services to our customers every day. We also touch another 600,000 ATMs every day that we're servicing on behalf of our customers, and so that scale is really hard to match. It allows us to, achieve savings, that Len's going to talk about in virtually every area of our business, whether that's operational, SG&A, all of those things come from that scale, and, you know, as you said, I think that margin rate is easily achievable with that.
So I'm a CFO for a few more weeks, so I get to put a numbers page in here. Paul's going to do this later. He's going to do it much more, much better than I'm going to do it currently. I'm only putting it up here to say these are some pretty impressive numbers, and I feel really good about our ability to get there. I think the model that Paul and his team, and maybe me, have put together is very achievable. It's very well thought out. From a revenue perspective, $5.5 billion, we've talked about how we're going to get there. A really good underlying base case, an industry end market demand that's solid.
A position allows us to grow faster than the underlying market, and the whole idea of ATM as a Service, whether it's a total outsourcing or we get more service component, either way, it's going to help us drive that revenue really nicely with a growth rate in the early going, in the low- single digits and exiting the period in the high- single digits. We talked about our margin rate before, and then lastly, on cash flow. We're going to have higher interest expense when we come out. We're going to have higher taxes when we come out because, RemainCo gets to keep all the, all the beneficial tax assets, and they get to keep the debt that's got a somewhat lower coupon. That's fine. That's fine.
We'll generate a lot of cash no matter what, and when we generate that cash, we think because it's predictable and because you can rely on it, that paying a dividend is the important thing for this company to do. It says to the outside world, "We know that we can generate this cash every year." We'll also de-lever. De-leverage was in vogue at one point in time. It wasn't so long ago, our bankers were telling us to borrow more money to buy back shares. Now, it's everybody's analysis that we should have less debt, and we agree. So we want to get our indebtedness down under 3x and somewhere between 2.5x-3x over the next couple of years. All the while, still investing in organic growth.
We have some unique, smallish, bolt-on, probably more commercial agreements that we're allowed to go out and buy fleets or other things to upscale the ATM as a Service business over the next several years. We want to be able to do those.
Yeah. Since you pitched my slide in there, I think we are going to be a very cash-centric company. We're going to focus on de-levering because of our interest rate exposure and paying a dividend. I think also we're trying to unpack this so it's easier for external parties to look at it. So I think one of the criticisms of the previous CFO was that these KPIs didn't often relate exactly to the revenue stream.
Yeah, don't I know it, Paul? Don't I know it.
We've simplified those, and I'll go through it later.
Thanks. Well, thank God you're here when you are. All right, so you're going to see this this schematic a few more times today. This sets up the conversation with each of the the next speaker sets. First, Patty's going to come up here with Len, and they're going to talk about the foundational ATM business. I think you're going to be supremely pleased with that business all by itself. Diego is going to come up, and he's going to talk about the network, a unique asset that makes what comes before it even more valuable. And then lastly, Stuart's going to tie it all together and talk about ATM as a Service. Then I'll come back at the end, and we'll talk.
So I think, Stuart, before we get Len and Patty up here, we've got a video to go to. Is that right?
Yeah, and you talked about our trusted partner relationships right out of the gate. They're incredibly important to us, so let's hear from a couple of them, talking about their solutions, their partnership with us, and how important it is.
NCR has been a trusted partner for Santander for over 20 years. We'd already moved recently to a fully NCR hardware estate, so we already had our hardware, our maintenance, and some of our software as well with NCR. They're a trusted partner that we work with closely. The NCR passion around the customer experience, but also the technology and the insight that they could bring were invaluable to us in making the decision. We've taken that relationship to a new level. The transparency, the collaboration, and the teamwork that we have between the two organizations has never been more closely aligned. The teams are working hand in hand together, and actually, whilst we do face problems, what's important is that we overcome them together.
Allpoint and Payfare are partnered together so that our cardholders have access to tens of thousands of ATM locations all across America. This means our cardholders, while they're on the go, while they are finishing up a ride or finishing up a delivery, can find an ATM location nearby at a Walgreens, at a CVS. That means that they trust that they can have secure, safe access to their funds at any moment they need it.
There continues to be a trend of branch optimization and financial institutions looking to find a very cost-effective way of serving, servicing their customers. And together, Visa and NCR can provide a retail ATM footprint that addresses their consumers who want low to no-fee ATM access. They want the ability to do more banking transactions beyond just cash withdrawals, primarily cash deposits. And they want more everyday convenient retail access locations that coincide with where they happen to live, where they happen to work, or where they happen to be shopping. And I think together we can make that future a reality by partnering together more closely.
We're looking at Allpoint to power cardless ATM withdrawals, which will allow cardholders even more accessibility to their funds while they're on the go if they happen to forget their physical card, and potentially adding on cash deposit at ATM withdrawals as well, if they happen to have tips or other cash earnings from other type of work that they can deposit into the card at the same ATM location.
We respect the innovation mindset that NCR brings to a lot of our partnership discussions and how they're client-focused, much like Visa's client-focused, to ensure that ultimately the clients are getting what they both need and they want. And we're addressing a lot of consumer pain points and trying to make it easier and more frictionless for consumers to do retail banking.
Yeah, those are three great partnership testimonials, and really, Tim talks about how we've changed as a company, how Atleos is customer-focused and really focusing on our customer solutions and how we improve their business every day.
Sure. It's nice to hear from them. You can notice we're a little closer together than we were before because we had two folks join us on stage. Importantly, Len Graves is here. Len's been with NCR about five years. He's been in the manufacturing space for over 30 years. He's going to lead our field service and manufacturing organizations, and many years at GE Aviation, GE Oil & Gas, I believe, right?
That's right.
One of the best operators I've ever had the experience to work with. I'm thrilled he's part of the team. And then, Patty Watson. Patty joined us 10 months ago.
Yeah.
In anticipation of this transaction.
Yeah.
When the arm wrestling match went down about which side of the house got Patty, I won. Patty's an incredibly experienced executive. She's been an executive at other companies before. She's going to be our CIO and CTO. She's held operating titles and run P&Ls at other companies. She sits on publicly traded boards, and importantly, was a captain in the Air Force not so long ago.
Yeah.
So Patty's a leader, and we're really thrilled to have her here as well.
Thank you.
Thanks for being here, Patty.
Thanks.
Len.
Thank you.
Up to you.
Thank you for that introduction.
Yeah.
So I'd like to say I'm honored to, to lead these teams and thankful today to have the opportunity to share some of the outcomes of the work they have done over the last few years. Before I get into that detail of our services and hardware business, I'd just like to spend a little time to focus on our foundational ATM. Atleos will support the largest footprint of ATMs globally. We have industry-leading hardware and software solutions with a comprehensive hardware suite driven by software and application platforms. Atleos has a best-in-class services footprint that will deliver world-class service levels to our customers, and we are driving productivity and efficiency through our technology and through our operations. Atleos has unmatched scale and capabilities globally.
From our global field service offerings, both remote and on-site maintenance, to our leading ATM software with features such as cash management and forecasting, to our diverse hardware portfolio that has allowed us to be the global ship-share leader for the last five years with products such as our intelligent deposit ATMs, all the way through to our newest product, the cash recycler. Atleos is truly without comparison in the market. A little deeper dive now into our field service offerings to try and give some idea of the size and scale of our services business. On an annual basis, we will receive 16 million service calls from our customers. Many of those calls will be resolved remotely through our global help desks which will leave around 6 billion calls where we will need to dispatch a customer engineer to resolve the issue on-site at one of our 4,000 customers.
Our service capabilities will range from deployment, where we have site preparation and installation, through to maintaining hardware through remote or on-site resolution, through to our managed services with our offerings such as cash management, to continuously improving the customer experience throughout the life cycle of the contract. A little more perspective on the services landscape of Atleos. We will have over 7,500 customer engineers globally across 60 countries, supported by more than 1,000 service planners in our global command center. Our service planners will be able to dispatch engineers within minutes, ensuring that they have the right capabilities and equipment to support best-in-class service levels for our customers.
Yeah, well, and I think that number of engineers, that global footprint, is incredibly important to all of our products and solutions. There's a lot of people that make ATMs, but very few, if any, have that capability globally to deliver, fix, install, services around the world.
Absolutely. I think the size and scale of our services footprint is unknown, really, to the market, and I think it's very important to recognize how we can use that size and scale to grow and support our customers further. This final services slide highlights our continuous improvement philosophy. Our teams are working hard every day to improve the quality of our product and to improve the quality of our repairs. This is enabling us to reduce our demand and perform our repairs more efficiently. Within our operating rhythm, we use a number of KPIs that measure our service levels and the quality of our repairs and the effectiveness of those repairs. The chart on the left represents one of those KPIs and helps to summarize some of our improvements.
The chart shows how we are growing our installed base year-on-year, and we are reducing our dispatches per unit year-on-year. These programs are truly helping us significantly recover our margins from 2023, and we'll continue to deliver margin growth through future years.
It's amazing, at scale like this, Len, how much of a change you can make in our financial performance by very small incremental change in some of these metrics. I know that you measure a lot of things behind this metric. There's dozens of KPIs you measure, and as I last checked, most all of them are moving in the right direction.
Absolutely. That global scale allows us to, when we make an improvement to a product or we make an improvement to the quality of our repair, we are scaling and leveraging that, obviously, across our global organization, and with the demand we have, the effect on that demand is significant to improve our margins. For sure. Now, moving on to our hardware solutions and our supply chain and manufacturing operations. Firstly, with a brief overview of the diversity of the product portfolio. We have single-function cash dispensing units. We have multifunction ATMs with both deposit and dispense capability. A variant of our multifunction ATM is the Interactive Teller Machine, which allows the customer to talk to somebody at the bank. And finally, we have our newest product, the cash recycler.
This has a growing installed base in the field, and this product provides the opportunity of significant savings to the bank through fewer cash refills. In terms of our manufacturing footprint, we have worked tremendously hard over the last few years to both standardize our product and consolidate our footprint. We've gone from six NCR-owned facilities to one NCR-owned facility and two contract manufacturing partners. Our remaining only NCR facility is in Chennai. Chennai has full ATM capability and also produces sub-assemblies that support the rest of our manufacturing network and support our services in the field. 75% of our ATM volume is produced in Chennai. The remaining 25% of our volume is supported by our contract manufacturing partners. We have Jabil in Mexico, and we have Ennoconn in Budapest. These two facilities generally support shorter lead time, more variable products.
The work we have done to consolidate our footprint over the last few years has resulted in significant savings for the business. We've been able to reduce our fixed costs by 60% and reduce our working capital by 50%.
That was not an easy change to make. You didn't have a white sheet of paper where you could build the optimal manufacturing footprint. We had one that was somewhat suboptimal, but it was integrated, and you needed to find a way to break that apart and ultimately make sure we were manufacturing what I believe is one of the lowest cost facilities in the world.
For sure. Closing facilities, standing up capability at contract manufacturing partners, localizing the supply chain to support those contract manufacturing partners. It was work that was done over several years. It wasn't without initial problems, but for sure, now we are reaping the benefits of that hard work. Finally, I'd like to share a little detail on how we are driving efficiencies across our manufacturing and supply chain. The focus on standardizing our product has allowed us to optimize our Chennai facility, and we've almost doubled our volume over the last three years. We're able to manufacture our product in Chennai at 20%-25% lower conversion costs, which gives a significant contribution to expanding our margins. Our engineering and supply chain teams have worked incredibly hard to qualify over 1,000 alternative components.
That has enabled us to overcome global supply shortages and remove single-source dependency. We're now able to move 90% of our material on the ocean. The sum of these actions has given us, again, significant margin expansion in 2023, taking us well above pre-pandemic levels. As we look forward, I see further opportunity to further optimize our footprint, further localize our supply chain, and drive standard factory efficiencies through our lean programs that will generate further margin expansion in future years.
Len, before you hand off to Patty, I don't, I think you do give yourself nearly enough credit. That recovery from the depths of 2022, we were in a world of hurt.
For sure.
We were shipping hardware at a loss, right? At an incremental loss. That recovery was remarkable, it, and it required rebuilding everything that we did from a supply chain perspective, rebuilding all of our transportation lanes, and really getting labor costs to the lowest point that we possibly could. Ultimately, those programs, those changes, pulled forward a lot of productivity effort that you were going to make anyways, in essence, seeds that growth in the out years in margin rate.
Absolutely.
Yeah.
Absolutely.
Excellent.
Thank you. So with that, I'd like to hand over to our CITO, Patty Watson, to talk through our software solutions.
Thank you, Len.
You're welcome.
You heard it from Tim, you heard it from Len, and now you're going to hear it from me. Atleos is a leader in the ATM space due to our differentiated ATM software and services. We command this lane because we offer a full suite of software solutions, and I'd like to give you a brief overview of them. First, our terminal management provides full lifecycle management of our ATM terminals. Cash management optimizes cash in our ATMs, cash vaults, and banking centers, allowing us to provide ATM services at the lowest possible cost. Our security platforms are a suite of products integrated with our ATMs to mitigate against known and predicted attack vectors. Transaction processing enables our ATM to connect and transact across the broader network and card rails, and this is a capability that sets us apart from our competitors.
Content management allows our customers the ability to digitally market and make offers across our network of ATMs. Examples of this include creating polls, advertising on the ATMs, and even creating special offers for cardholders. And finally, our client solution software allows us to lead the market with modern user experiences, enabling easy integration of new technology as it's developed. Atleos is the industry-leading provider of ATM technology and services. We're also the world's largest ATM owner and processor, with over 800,000 ATMs operating our software in over 140 countries. We're the partner of choice for banks who want to transform their branch experience, which is made possible by the investments that we've made in our interactive teller machines.
This enables our clients to modernize and transform their branch experience by allowing more complex digital transactions to be performed or completed at an ATM or through a teller-assisted tablet. In the U.S., by winning our ATM software deals, we've been able to convert more than 60% of our customers who previously used non-Atleos hardware to 100% Atleos-owned hardware. This demonstrates that winning in the software space allows us to increase our revenue streams in other parts of our business. With 130,000 ATMs at banks and credit unions running our software, we own 45% of the market share in North America. We are the number one provider of software that can run on any ATM, and over the past three years, we've shifted our perpetual license model to a more modern subscription service, allowing us to take advantage of a more steady and predictable revenue stream.
Patty, when you talk about a software or services-led sale, that's exactly what was described in this chart, but I don't think-- Len made a very good case that we should sell more hardware because his service performance is much better than anybody else's. You can make the very same case here, right? Our software stack is more robust than most, it's more integrated than most, and it allows us to pull, get more hardware sales through. When we don't lead with hardware, we lead with what you two do.
Absolutely. So our value is in being the choice for our customers' ATM requirements. Our software solutions are focused on delivering modernized digital-first user experiences, creating value and efficiencies for our customers, and also creating greater capabilities for both our customers and for consumers. From a user perspective, our Atleos digital-first solution provides intuitive, modern user experiences and seamless interactions between bank platforms, our ATMs, and consumer handheld devices. Consumers are able to conduct more complex transactions seamlessly through the integration between their handheld device and through our interactive teller machines. We create efficiencies for our customers through our software by freeing them up from the daily maintenance activities required to run large ATM networks. This allows them to redirect their focus and investments to other strategic priorities.
By transitioning to our software, our customers benefit from our ongoing investments and our innovations without having to expend time, energy, or even the resources in development. Our agility is demonstrated through our singular focus on developing integrated ATM software and the fact that we own our own global ATM network. Because of this, Atleos has a unique capability and to scale and respond to ATM servicing requirements, as well as grow our cash digitization market share. To keep pace with the rapid changes in consumer behavior, Atleos has invested in the development of cash digitization software, giving us access to a multi-billion-dollar global market of stored value cash. This stored cash is held in millions of digital wallets around the world. As an example, our cash digitization solution enables gig economy payments providers like Payfare to allow workers to withdraw cash daily at any of our convenient locations.
No card or account is required because our APIs are embedded directly into our partner applications, allowing the customer to make mobile withdrawals or deposits with their mobile device. Consumers can deposit or withdraw cash at our global network of ATMs, thus giving them access to their stored value cash almost immediately. Currently, we have over 40,000 ATMs operating in the U.S., the U.K., and South Africa, enabled today to offer this solution. Our flexible software has been developed with the end user in mind, and therefore, our single solutions offers our consumers the flexibility to access digital cash to perform transactions such as bill payment, cryptocurrency purchasing, money transfers, and digital wallet loads. With safety and security in mind, at the forefront, our software solution leverages our embedded security features, our single-use codes, which creates a frictionless environment to enable bidirectional conversion of physical and digital cash.
The continued investment in our software solutions, coupled with our innovative culture, ensures the ongoing modernization of our ATM technology stack. This simple yet highly versatile system enables Atleos to continue to grow our physical to digital market share. As you can see, Atleos is leading the industry when it comes to ATM software. But in order to continue to win in this space, we are investing and transforming to a solutions-based business. For many years, NCR was a leader in inventing, building, and selling market-leading ATM hardware and software. To better serve our customers, we then built a global services platform, allowing us to assist banks in deploying and managing their ATMs around the world. We then acquired Cardtronics, allowing us to rapidly expand our transaction processing capabilities. Through these acquisitions, we had multiple legacy on-premise systems that provided duplicate capabilities.
Customers had their own instances of our software running in their data centers or their branches. Not to mention, they were highly customized. And depending upon which geography you were in, you might have a different software solution to perform the same function in different regions. Today, we've been able to advance on our transformation journey, shifting to ATM solutions. We've continued our investment in ATM networks, including Allpoint and Allpoint+ , which drives both ATM transaction revenues and enables the growth of our ATM as a Service platform. We've already made the shift from legacy perpetual licensing to subscription. In doing so, we've been able to ATM as a Service technology stack, which has enabled a significant 300% year-over-year growth in this emerging market. We have accelerated the deployment of recycling technology to new markets, which optimizes cash costs for both Atleos and for our customers.
We are the partner of choice for banks and credit unions who want to modernize their branch customer experience. All of these complementary solutions are all driven today by a much more simplified single suite of software. The key to unlocking our growth is for us to accelerate the standardization of our global platforms by continuing our cloud-native journey, which supports our ability to scale, expanding our platforms into adjacent geographies across Europe and Asia, and further enhancing our machine learning and AI platforms to help us continue to optimize our field operations and to help us make sure that we're placing our ATMs in the most profitable locations. By changing how we deliver, manage, and service software, we're able to focus our innovative and service-oriented culture on one suite of products.
The value in Atleos is that we are leading in ATM software features and continue to expand into the digital cash ecosystem. There are very few competitors in this space, and they're not investing in the same manner that we are, nor do they have the scale. And finally, we are the only provider that can deliver ATM as a Service.
Great! Len, Patty, thank you. You set the table really nicely for Stuart later when he talks about ATM as a Service. This is a really good foundational business, and it'll be a good business all by itself, and then you're going to add some gravy to the top as we go forward. We're going to do one more roster shift. We've got another video. I think we'll do one more roster shift on the stage, and we'll be back with Diego.
Yeah, we got another video coming up. I really love that cash digitization solution you talked about, Patty. You have the capability to take any stored value that you have in a digital wallet, take your phone, show up at any of our convenient ATMs, and withdraw cash. For people like Payfare, you're going to hear from Sue again in our video coming up. It's incredibly valuable for them to enable their gig economy workers, whether rideshare drivers or delivery drivers, to be able to get their cash daily at the end of their shift. So let's roll the video and hear from them again.
But the acquisition of Cardtronics for us was game-changing because not only did we have the technology and the software expertise, but that we then had the operational expertise of managing estates at scale. It was critical for us that we found a provider that could provide an end-to-end solution. We already had different components through different suppliers, but actually having that end-to-end capability, which not only delivered the cost efficiencies, but also enabled an improved customer experience as well as offering a broader protection across our estate, was critical.
The ability to use and find free and low-fee ATM locations on the go is really a critical service for our cardholders. Our cardholders are on the road quite a bit, making deliveries, driving passengers, and being able to find an ATM location almost anywhere, at almost every major pharmacy or grocery location, makes it really easy for our cardholders. And actually, the ATM locator feature in our app is one of the most used features, and we have over 2 million downloads for our apps.
I think the Santander ATM as a Service outsourcing will be watched with interest within the market. I think the opportunity to manage your hardware, your software, your maintenance, as well as your back-end operations all in one place, under one supplier, offers not only cost efficiencies, but it also offers you the opportunity to co-develop technology going forwards. So such as the integration of smartphones, new functionality, and also giving customers more choice. So I expect that it will be watched both with interest in the U.K., but also more globally.
So we've been working together with Allpoint for over five years now, and the reliability and the speediness of response that we get from Allpoint is always really appreciated. We're actually working together to expand our suite of offerings right now.
We both see immense opportunity in the future of self-service and retail banking because we both know that consumers are looking for three things. They're really looking for more low-cost, no-fee ATMs. They're looking for more convenient, everyday locations, and they're looking for the fact that they can do more than just cash withdrawals, so more banking transactions at an ATM, including cash deposits. That's why I think we have a strong partnership ahead.
Those are some great points from our partners, talking about the solutions and the benefits it brings to their business and the importance of the partnership we have with each of them. Joining us on stage is Diego Navarrete. Diego runs global sales for us. He's been with NCR for six years, and prior to that, extensive experience as a board member, as a CEO, really bringing a lot to the table here. We're excited to have him on board.
Thank you.
So let's move forward. Patty and Len talked about our foundational ATM solutions. Those are really the base for everything we do at Atleos, and we build off that field service, software, and hardware to support our network and ATM as a Service offerings. You know, we've been delivering these solutions to banks for decades, really establishing long-term relationships as a technology partner that enables them to keep pace with the evolving needs of their customers. So let's dive right in. Before going into all of this, I'm going to talk about some of the strategic highlights of our network and ATM as a Service solutions. You know, our digital-first platform, that comprehensive suite of software solutions that Patty talked about, that really helps us with our end-to-end capabilities, driving that at significant scale. We talked about how big our network is.
We talked about all the ATMs we touch. We leverage that platform to deliver those best-in-class self-service experiences to banks, which is really a diverse global customer base, and that makes us uniquely positioned to deliver on the promise of outsourcing as the only global OEM that operates an ATM network at scale. Combined, these capabilities enable our customers to enable that branch transformation journey that they're on, through a combination of ATM as a Service and our utility banking network in Allpoint. As the largest surcharge-free retail network in the world, Allpoint supports financial inclusion and access to banking services on a global basis, allowing our partners to focus on their core business while we manage their physical infrastructure.
Tim talked about the importance of cash and the increasing relevancy of the self-service channel, which are really important to our customers as they go on that branch transformation journey, whether by closing branches, reducing branch footprints, or going to cashless branches. That self-service channel, those ATMs that we deploy, are increasingly relied upon by their customers, and that transformation is happening against the backdrop of steady and, in many regions, increasing demand for access to cash. With cash in circulation growing, branch footprints reducing, customers are increasingly relying on the Atleos estate of secure, convenient utility banking locations. In the U.S., our network transactions saw growth in the past three years, and our network continues to outperform the network trends, driven by our blue-chip retail locations.
Those Allpoint Network locations being located within 5 mi of over 80% of the U.S. population, easy to see why that network continues to grow share annually. When surveyed, consumers will tell you, access to convenient, safe ATMs is the number one reason they select a primary financial institution to do their everyday banking. And with low-income households making up over 20% of the U.S. population, those cash-preferred families rely on access to cash for their everyday purchases, and that is increasing the relevance of cash. And as we go into economic uncertainty, we see, again, people relying on cash for budgeting and everyday access. I'm going to pass it over to Diego, who's going to talk about our large global network.
Thank you. Thanks, Stuart. So, yes, outside our foundational ATM platform that we sell all over the world, we run and operate more than 80,000 ATMs that drive durable, organic, and recurring revenue. We are the only OEM company that owns, runs, and operates a global network, delivering convenient, secure access to banking services in blue-chip retail locations. To do that, we leverage our global field services, our software, and our hardware technologies. As a retail network, we deliver both traditional ATM revenue streams, surcharge, interchange, currency conversion, as well as extend to new services like the cash digitization solutions that Patty mentioned. Our retail partners benefit from the value of our innovation and technology to expand their self-service transformation and to get additional and better revenue streams around cash management.
Our financial institution partners trust us servicing that extended cardholder access to everyday banking in those retail locations where we have reach. As mentioned, eight out of ten Americans are within a 5-mile range of one of our ATMs. Thanks to that trusted partnership and relationship with the financial institutions, we are able to expand our solution opportunity to include branding. With branding, we provide banks and credit unions brand equity and awareness by putting their brand on one of our ATMs in prime retail locations like CVS and Walgreens in the U.S. With branding, financial institutions are able to achieve targeted market expansion without significant capital allocation by leveraging our Atleos footprint of more than 80,000 ATMs. And with branding, with a branded ATM, the entire ecosystem benefits. Financial institutions get their extended reach and their brand equity.
The retailers, as you can see on the chart, are able to increase foot traffic, and by doing that, increase their revenue streams, both in the ATM and also in-store transactions. And third, and lastly, the community, the consumers benefit for being able to do their everyday banking, where they are already doing their everyday shopping. With this, let me pass it back now to Stuart, so he can tell us and further leverage or how we further leverage our network with our Allpoint solutions.
Thanks, Diego. Again, you notice that layering effect. We talked about the foundational ATMs, the base off which we do everything, our, our estate of 80,000 ATMs globally, which makes up our retail network, and Allpoint, which are our convenient utility banking network, which is a combination of those 80,000 retail locations and that trusted relationship we've built over decades with our financial institutions. Banks need partners that they can trust with their brand, and more importantly, as a key delivery point for all of their customers. And Allpoint delivers on these promises. Of those 80,000 locations that we talked about, over 55,000 make up the Allpoint Network. And much like Visa and Mastercard, Allpoint is a payments network that financial institutions join to deliver services to their cardholders. The Allpoint Network is the largest independently owned retail surcharge-free network in the world.
Financial institutions who join Allpoint can provide their cardholders with free, free access to a network that is larger than the biggest three bank ATM-owned networks combined. This allows them nationwide access without capital expense, providing early beachheads into new markets in advance of building branches or as their only dedicated physical infrastructure in locations where they have substantial cardholder bases without any branches. Banks can confidently send their customers to locations like Target, CVS, Walgreens, and Circle K, knowing they're safe, well-lit parking lots and have extended hours of service. The retailers benefit from this as well. By growing affinity, the cardholders have for their locations, banks actively promote Allpoint locations through their mobile banking apps, resulting in repeat foot traffic to our retail locations, and that translates to increased basket, basket size on in-store spend.
Consumers, of course, benefit from free, free access to banking services in their own community or anywhere they may be traveling. The Allpoint Network is growing. With 55,000 global locations servicing over 75 million cardholders and 1,100 financial institutions, the network has grown from 55 million cardholders to 75 million cardholders since just 2021. On any given day, we are delivering fee-free access to eight cardholders per second, with Allpoint transactions growing 17% year-over-year from 2022 to 2023. The benefits that Allpoint drives to the merchants are demonstrated in the charts here, which are a real example of a partnership between one of the largest neobanks in the U.S. and one of our largest convenience and fuel operators.
We partnered with the neobank in 2021, becoming their primary physical infrastructure as critical service delivery channel for a bank that has no branches. Through active promotion of the Allpoint locations, their volume of transactions grew at a rate of 6x in the first 13 months, and continues to grow. The Allpoint Network saved cardholders over $20 million in fees versus transacting at traditional surcharge locations. Atleos partnered that neobank with one of the largest convenience and fuel operators to provide fee-free access to cardholders at ATMs in their stores. The retailer benefit from substantial foot traffic into their stores as a result.
Over half of the users surveyed came to the store to use the ATM due to it being fee-free, with almost 40% indicating they would not have come in otherwise, and of those, nearly half of them made a purchase with an average basket size higher than average. The Allpoint Network is a unique asset because both the neobank and retailer actively promote the programs with targeted offers to cardholders. They build brand equity for both partners. We're unmatched by any of our OEM competitors, who typically only play in the hardware and software space, and who lack the ability to operate a global ATM network. This combination of our trusted relationship with our financial institutions and our demonstrated operational capabilities worldwide has really accelerated the migration to ATM as a Service.
Financial institutions globally are looking to outsource their ATM operations to a trusted scale partner, where most competitors can provide hardware and software, none match the breadth and scale of our field service capabilities that Len talked about, a critical component of our offering, and more importantly, none can extend a bank's branch infrastructure with a complementary utility banking network like the Allpoint Network. This combination of solutions is an ideal match to the branch transformation journey underway at the majority of financial institutions around the world.
Absolutely, Stuart. As a go-to-market, our sales, we love the network. The number one, it provides a competitive advantage. No one else, no other fintech, and definitely not in our industry, has the same capabilities. Second, it gives us a unique value proposition based on that competitive advantage. We can be flexible with our customers. We can help them advise the banks, the credit unions, whether to go with an extended version with our Allpoint solution, a membership, quick time to market, and expanded reach, or whether we can service their ATM as a Service or do a combination of both, which is already happening. And third, it gives us the credibility that we are absolutely the largest operator of ATMs, independent operator in the world, that they can trust us as we take over that ATM as a Service and run the network for them.
Yeah, that's a great point. You know, for many decades, we would go into a bank that had 100 ATMs, and we would sell them another 100 ATMs, and that was our business and our foundational ATM business for a long time. Today, we go to a bank with 100 ATMs, and we evaluate their retail distribution.
That's right.
Maybe they only need 80 ATMs and access to Allpoint to fill in the gaps, whether gaps they are moving into or gaps where they want to reduce their branch footprint. So really, it's a really complementary offering, really helpful for the sales team as they go out and sell.
Sell a few ITMs over there, too.
Get some ITMs coming as well.
Yeah, good.
Now, let me tell you, at ATM as a Service, that's not something that Atleos invented, that we're trying to push into the market. Rather, banks, credit unions, they're demanding the services. They look to move to reduce costs and focus on their digital channel innovations. Operating ATMs is not for the faint of heart. As banks increasingly look to outsource non-core technologies, they're looking for stable scale operators to assist them. They're challenged to keep up with channel-specific technologies, to keep the skill sets for those that they need in-house. ATMs are complex electromechanical devices. They require twenty-four-seven monitoring and management, and in order to meet the service levels expected by their cardholders, who expect the ATM to work every time they walk up to them, banks are looking to outsource those sort of non-core functions.
Keeping up with the pace of technological change to meet compliance requirements, stay competitive with the larger banks who are investing substantially in the ATM channel because of its relevance, is leading many to consider outsourcing their ATM channel. Lastly, and probably most importantly about this, banks are seeking to reduce costs in every area of their business, and that's a promise delivered by Atleos ATM as a Service. By virtue of that foundational ATM solution we talked about, our capabilities as a scale operator of a global network, we can deliver cost savings that financial institutions and competing OEMs are not capable of achieving on their own. Our ATM as a Service product delivers a predictable business outcome. It's a single contract for services that reduces the complexity of managing the ATM network and the multiple vendors typically used to support it.
We remove the headache of operating the network in-house, managing compliance, security, and the entire back office, while ensuring the network is available when cardholders need it. As an innovative leader in the space, we help customers stay current with the latest solutions, and that's a challenge for most financial institutions. Let me talk about the cost reduction a little more, because that's really one of the most important parts of ATM as a Service when we talk to a bank. They love, obviously, being able to get rid of all the heartache and the headache of operating a service, but they're all seeking to reduce costs, with the cost pressures they're under.
So, not only do we reduce the costs, but we benefit from a 2.5x revenue increase over the life of the contract when we deliver as a service in comparison with how traditional ATM technology purchases have been made. Now, that's not because the bank is spending more. Conversely, they're actually achieving an estimated 20% savings, but rather, Atleos is able to gain a larger portion of the bank spend that they're spending today already, either internally or with certain third parties to support their ATM network. Again, we leverage that foundational ATM platform, the service, the software, the hardware, all of the platforms that we've developed to operate at our owned ATMs. We achieve scale in back office, transaction processing, cash management, monitoring.
We deliver that complete service offering to the bank, and that provides a result both to the bank, who achieves improvements in service, as well as total cost operation reduction, and Atleos, who achieves an increased share of the existing spend on ATM services. Put simply, as Tim said earlier, this is a win-win for Atleos and for our global customer base.
This is not about us dropping the price on things we already do. Okay? There is plenty of room in the gap between our efficiencies and those of some of our customers to drive savings on one side, it's going to be income opportunities on the other side. And so when you think about some of these, these things in the dark green on the right-hand side, we can do all of those today, with the exception maybe of cash in transit, which we do a little bit in the U.K., but there's no one else who can do all those things.
No, not only can we do them, we do have these things every day for our network of owned 80,000 networks. We're doing everything you see on this slide. And 80,000 machines is a lot bigger than 100 machines, which is sort of the average size of a bank-owned network, and that's where that scale and that efficiency that we leverage to be able to deliver reduced costs to the bank comes to play. Now, that, that is a, a compelling economic story when you sort of put that across, and we've got a real deal model here that we completed in the U.S. for 25 ATMs at a U.S. community financial institution.
You can see in our traditional model, had we gone and just sold them the hardware and the software and the services up front, we realized over the course of five years, about $1.7 million or a total economic value there. But in an as-a-service model, over the course of those five years, over $4 million in total economic benefit back to Atleos. And again, that is not an increase in spend for the bank. The bank is actually decreasing the amount of spend that they have on their ATM network. We're just really increasing that overall wallet share. You can see some of our key customers up there, Bank of India, Bank of Baroda. This is a global phenomenon. We're delivering ATM as a Service all over the world, Santander in the U.K., FNBO in the U.S.
A lot of customers that have migrated to this as-a-service solution so that they can continue to focus on their core business and let us do what we do best. I'm going to pass it over to Paul, because he's going to give you a lot more detail around the financials of our entire business and ATM as a Service.
I'll let you do a numbers slide, huh?
Yeah, if you let me have one.
All right.
These points flow straight into my financial model and dovetail well. I really appreciate it. My name is Paul Campbell, I'm CFO of Atleos. I'm the longest-serving member of the management team. My time with NCR spans 34 years and four continents. This is a global business that I know very well, and I'm excited to share a business model that I have every confidence this team will deliver. This company I originally joined was a hardware-centric company that was primarily focused on shipping more boxes than competition. Atleos is not this company. ATM hardware revenue represents less than 20% of our 2023 revenue, and it's representing less than 10% of our 2027 revenue. At Atleos, we're focused on driving incremental recurring revenue mix, expanding profit, and lowering debt in order to pay increasing dividends. Moving on to our investment highlights.
Currently, Atleos generates $4.4 billion in revenue, with 67% recurring and an EBITDA margin of 18%. Continued operational excellence will help us drive to our 2027 goals of $5.5 billion in revenue, importantly, 80% of which is recurring and an EBITDA margin of 25%. Free cash flow in 2027 is targeted to be $500 million, which we intend to deploy to pay increasing dividends and simultaneously de-lever our debt. Our expected growth for 2024 revenue and EBITDA is in the 1%-3% range. This is below our 2023 to 2027 CAGR, driven by a couple of headwinds in the early years. Firstly, as part of the split of NCR into Atleos and Voyix, Voyix exited a number of international countries.
These countries ended up causing $100 million of historically Voyix revenue to be adjusted into Atleos's history. So about $75 million of this revenue is one time and will not be repeating into 2024. We also, as Patty and Stuart went through, have a significant switch to recurring revenue in both software and ATM as a Service. Well, this takes revenue out of the current periods and pushes it forward into future periods. This impact impacts 2024 by about $120 million-$150 million. The EBITDA margin rate will expand through the term, and this is driven by-- This will be a common theme through the presentation, is revenue mix to more profitable revenue recurring, recurring revenue streams, operational productivity and efficiency, as Len went through earlier today, and there are operating expenses.
We're going to get very efficient on expenses as we have done with cost, and this will also drive through. From a free cash flow perspective, in 2024, we're guessing about $145 million, and that will increase to $500 million in 2027, largely driven by the improvements in our profits. Moving to our revenue bridge. Recurring revenue leads growth for us, and that's very important. Before I get into that, I just want to call out for 2023, we've adjusted our 2023 total revenue to reflect that when we move into two independent companies, the transactions between Voyix and Atleos, that would have been intercompany transactions from a cost allocation perspective, that when we're independent, become revenue transactions.
So there's around $260 million of revenue being added to the 2023 EBITDA number to give a proper comparison for 2024. As you can see, our recurring revenue mix, although our revenue has been largely flat from 2022 to 2023, our recurring revenue mix importantly increased from 64%-67%, and we're focused on driving that up to 80% in 2027. Just for context, in 2020, the recurring revenue mix was less than 50%. So looking at recurring revenue, you see our recurring revenue is growing 11%. You can also look at our non-recurring revenue shrinking 10%. That's not because we're losing market share to our legacy hardware box shipping competitors. Our ship shares, as Stuart mentioned earlier, we're No. 1 ship share for five consecutive years.
We expect to be No. 1 ship share for the next five years and beyond, but we're taking our legacy one-time revenue and moving to recurring revenue over time. The key drivers for that are software banking, shifting to more software, more services, and then ultimately ATM as a Service, and then monetizing our existing fleet, as Stuart mentioned, of 80,000 units, and adding more transaction types and more users to those, to that fleet.
There's a couple of things that make that a messy story right on revenue, and it all really comes from the transaction. When Voyix exits countries, and we finish out their contracts for them, those will not be revenue streams that grow, and they'll hold back the growth rate somewhat. And in prior periods, of course, they had revenue that we had to reflect in the history that just won't recur because we're not going to sell their product overseas, and so that adjustment needs to be made, and we'll help you make that.
And the other then is the shift to recurring revenue, which will be variable, and we'll call out as we go. If ATM as a Service is very successful, you're going to see modestly lower growth rates in the current period of much more rapid growth rates in the out years. But to your point, non-recurring revenue here going down, it's not leaving us, it's just converting into the, in the, dark green bar to the left of it.
Moving on to adjusted EBITDA. This is a very strong EBITDA story. We're moving from $800 million this year to $1.4 billion. I'm just going to walk through that bridge of how we believe this is a very comfortable plan for us to get there. Firstly, the headwinds. Again, unfortunately, with the separation of two companies, there's a lot of moving and moving and toing and froing within the companies, and we learned a lot about separation accounting that we didn't know before, frankly. First is we've got a headwind of dis-synergies. There's about $100 million of headwind in that spin adjustments line. As a combination of dis-synergies for functions that had to add cost for the split, so think of corporate functions and to some extent in the service space initially, that will eventually recover with reduction activities.
And then also through the Voyix exited countries to move back into the Atleos's historical results. Moving to the more positive items, we have network growth, which is predominantly driving more transactions through the existing estate. That's around $120 million. We've got volume increase in our products and services for around $100 million. And then you can see the expenses, the operating expense in bars is just a sliver in the middle. We're going to control our operating expenses and grow that line significantly slower than we're growing revenue, and that's through optimization and leveraging what we're doing in the cost side. We've also got $150 million in for price increases in productivity. Again, a big portion of that's what Len's already told us about. And then the big bucket on the right-hand side is the revenue mix shift.
This is where a lot of our strategy is, moving more of our existing one-time revenue into recurring revenue streams, and this is including ATM as a Service. Overall, we feel confident in the 25% margin rate, and as I walk through, watch Len do his presentation, I think he has some upside to help us get there and beyond there.
No doubt.
No pressure on Len.
No.
Moving into segments, we're going to have three segments next year and another segment. The three segments are the one on the page just now, self-service banking. This is effectively the same segment as we had today in Legacy NCR. There's a second segment called Network. So if you think of the reported NCR segment, today's payments and network, it's basically that segment, excluding merchant payments, which is around $100 million per year. And then the third segment is T&T, and in Legacy NCR, it was T&T, was folded into other. Now, with this, the relative size of Atleos being roughly half of the legacy NCR, that's now material enough that we have to call out as a segment.
The other segment is going to be initially quite messy for us because it's going to contain the revenue flows between Atleos and Voyix from an, that would previously have been intercompany cost. It also contains the countries that Atleos were in, that we're going to get out of, along with our corporate segment. Moving on to talk about the self-service banking segment. This is a fantastic segment. If you look at the 2020-2023, this looks like it's a flat business, it's not going anywhere. This is a segment that's endured an unparalleled level of headwinds. If you think of, we think of all the things that hit this business, you think of pandemics, you think of supply chain, you think of logistics, you think of wars, inflation, currency fluctuation.
This is just a segment that's been brutalized for the last four years. But if you look at it, we've actually sustained quite a strong historical path. And as we look at this segment going forward, we're going to grow at an 8% CAGR. The growth drivers in this business is predominantly the move to more subscription software, more services and more revenue, and ultimately, ATM as a Service. When we look at profit, the profit growth is ahead of the revenue growth, and that's because most of the savings that Len had talked about in his slides flow into this segment. And also the other pieces, the higher value revenue streams that we have coming in the top line are flowing through to drive profit as well. This is a very positive segment.
Going to the economics for the ATM as a Service, Stuart covered this chart earlier. I just want to point out a couple of other things. You see the first bar on this chart is just over $1 million. This is for the 25 ATMs Stuart talked about. The light yellow piece of this bar that would happen on. That's the first milestone. As soon as we deliver a product, we take that revenue upfront. If you look at the chart on the left, this revenue is monthly, so if we deliver an ATM towards the end of the year, the revenue we take is very little.
The purpose of explaining the difference between these two is that if the ATM as a Service adoption is slower than we think, it's customer-led ATM as a Service movement, but if it's slower than we think, then we'll end up taking more revenue in the earlier years because we'll still still get the unit shipment, but it'll just dampen the growth in the later years because we'll lose the compounding effect.
Yes, we were going to get this sale one way or the other, right, Paul?
Right.
Either they're going to buy traditionally or they're going to buy as a service. In this instance, they bought as a service. If they had not, we actually would've shown better economic results in the current period than we otherwise, than we actually did show, and the crossover point would be about 22 months. So at 22 months in, we wouldn't care that much. We'd have broken even. But there's a modest deferral of revenue and profitability forward associated with every ATM as a Service deal we sign.
Yeah. And I just want to reiterate again, it's a 2.5x TAM. So every time we, we do that switch, we get 2.5x of revenue over the TAM. Moving to KPIs, as I said when I was interrupting Tim earlier, I think it's very important that the KPIs directly correspond to the business. So if the KPIs move, the business should move almost linear to that. So our, our KPIs in self-service banking are very key. It's, we're trying to move up to the, to get more recurring revenue. Recurring revenue is stable, it's predictable, and it's more strategic for our customers. The further we move up this recurring revenue, the, the better business we're going to have.
ATM as a Service is a little bit of a subset of that in that it's ATM as a Service is all recurring, and it's moving our biggest piece of non-recurring today, hardware, into here. It's also taking customer estate, so our big deal last year with ICE with Santander, they already owned their own hardware. All we did is we operated the network for them. So we took it. We outsourced it. They outsourced to us, and we took everything on. This measure for us going forward, it's a very strict definition that includes all the factors that Stuart mentioned to get to ATM as a Service, but it's also going to include where we do all those things, but the customer chooses to own their network. Today we have, I think we have 70 customers, 70 customers live.
We have 18,000 units live in ATM as a Service, a good backlog, a very solid funnel, and we feel very confident that the market will take us to 125,000 by 2027. If it doesn't, our business model is still largely intact because this isn't incremental units to what we'd normally ship. We're largely just moving units between taking them upfront or taking them over time. Moving on to our network segment. This is a very exciting segment. This is the one I think Stuart spent-- You see a twinkle in Stuart's eye when he presented this one. This is a segment that's predominantly driven by transaction fees and services on our own estate of around 80,000 units that are located in convenient and safe locations. We say that a lot because it's very important.
This business is predominantly, if you think of where it came from, it's predominantly the acquisition of Cardtronics in 2021 and then the acquisition of LibertyX in 2022. This business is growing at 7% CAGR, and the growth in this business, it, it's not requiring a huge amount of investment. The growth in this business is about adding more transactions to the existing network, network fleet of 80,000 units that we've got. So most of our revenue today comes from cash withdrawal transactions, but as, as Patty and Stuart went through, we have so many more transactions to go through here. We have deposits are kicking in heavily now. There's person-to-person, and then the other piece is adding more users. Stuart talked about going from 55 million users to 75 million users. As we add more users, drive more transactions.
With the addition of the cardless, then this opens this network up for significant volume increase. One area where we haven't assumed a lot of increase in install base, and I'll get to that in when we go to the KPIs, because I think there's tremendous upside in geographical expansion. If you think back to Len's slide, Len talked about being physically in 60+ countries doing physical service. This network business is currently in 11. So we have 49 incremental countries. There's an opportunity for us to leverage the footprint we've got in country and expand this, build out our network in different geographies that we haven't got in the plan or in place today. Jumping to KPIs. Again, this is one of our KPIs before that were difficult to attach to.
We had previously, I think in the Cardtronics days, used transactions as the KPI. Transactions are not all equal, and, you know, transaction value to us could be a couple of cents or $10. So measuring transactions can drive an outcome that's not great. We could significantly improve transactions and revenue don't move. So we go with revenue per endpoint. We've got a good history of growing revenue per endpoint, grown from $12,000 per endpoint to $15,000 in the historical period. This is going to be a pretty simple metric. It's going to be total revenue divided by the number of endpoints. Moving to the right, the number of endpoints. This isn't a metric that will always go up. There'll be some quarters where the number of endpoints will go down.
We're going to look at our network on an ongoing basis. There'll be units that perform less than we expect, units that don't make enough money. We'll take these units out, we'll move them, we'll replace them, we'll exit them, because we're not strategically trying to grow that number. We want each of those units to be profitable and drive incremental profitability in its own right. Cash is important. I think this, we said at the start, when I interrupted Tim, is this is going to be a cash-centric business. We're going to focus on driving cash. We're going to focus on delevering our expensive debt and focusing on giving cash back to our, our investors. Walking down our cash bridge, we have. We're starting with EBITDA, so $1.4 billion of EBITDA we've explained so far.
Starting from the left, because I think they're simpler buckets from the left, the cash taxes, unfortunately, we have to pay tax, that's around $225 million. We're also assuming around $250 million of our interest for our expensive debt. Working capital is a very slight use. It's volume-based. This is an opportunity for us. We have a discount, and our customers take longer to pay us than we pay our suppliers. That's a gap we need to deal with. Then there's a small other PP&E. It's around $130 million. That's about $85 million for expanding and maintaining our network of 80,000 ATMs, and then a little bit of software cap. But, Patty went through all of our software businesses.
It's a very big business for a $20 million software cap, and then other misc— about $20 million of other miscellaneous. Our largest spend is in the ATM as a Service CapEx. That's the funding of the 125,000 units we stored in the self-service banking KPI. We're assuming we're going to fund around 50% of that through non-recourse financing. Now, when we look at this, an alternative scenario is that the ATM as a Service doesn't get adopted as quickly, as I said, on the KPI chart. In this environment, we'll still take the revenue up front because we're not assuming these are incremental units in most cases. What will end up happening is we'll end up taking more revenue up front, and we'll have a less intensity on our capital, so probably end up driving more free cash flow in this situation.
Yeah. By the nature of the separation, those two bars on the right went up. Went up. We have more interest to pay and more taxes to pay because all the tax benefits stay with the parent company, and we're going to have some more expensive debt. That said, over time, we hope to be able to work those down as our interest expense becomes more deductible because our profitability goes higher. That should help. And then working through working capital for us has not been a huge use of cash in the past. It's getting better. We've, as you all know, we've harvested it over the last several quarters. I don't think it'll be a major use of cash. I think the CapEx is very modest in that first bar.
When it comes to investment in software, investment in the network, it's been relatively modest and can stay that way. And to Paul's point, then, how much we decide to invest into ATM as a Service and how many machines we decide to put on our balance sheet is, for the most part, entirely up to us. And we can toggle that on and off to make sure that we deliver the kind of free cash flow that we want for both our debt holders and our shareholders.
Thank you, Tim. Speaking of debt, let's go there. So starting on the top left-hand side, this is our estimate of debt. We believe we're going to take a total debt of just under $3 billion. At spin, our cash balance is going to be $450 million. I've put $300 million here because we've got an obligation to pay a voluntary contribution to our pension fund of $150 million, which I'll talk about in the next section. We're going to have a revolver of $500 million, which is undrawn, which will get us to a net debt position of 3.4x leverage. The pension was important to put on here. I think it's been a common topic in North American companies.
We've got an unfunded pension balance of $407 million at the end of last year. We're going to make the I call it a voluntary contribution, but it's kind of, it's within our separation agreement.
It's agreed to.
Yeah. It's not voluntary for us, but it's voluntary from a legislative perspective, and that gets down to an unfunded position at the end of this year of around $257 million. We don't have to make any involuntary, any mandatory comp contributions in 2024. We've assumed that roughly $40 million per year from 2025 to 2027. Jumping on to our capital allocation. This is kind of like our prioritizations. We've got organic investments to drive growth through both our network and our ATM as a Service expansion. We currently have no plans for any material M&A activity. I think Tim mentioned earlier, we may look at some networks in countries where we can drive significant efficiency that will add profitability and cash flow in year.
We may look at something like that, but we've no plans on any material M&A. Leverage is going to be key for us. We're going to look to drive down to below 3x as soon as we possibly can. Our current model has us driving to that position in the first half of 2025, and we'll get there as quickly as we can, particularly with the interest rates where they are today. And then from a dividend perspective, we are going to pay a dividend. That I'm going to go into a bit more detail in the next slide, but we're targeting to pay a dividend of between 35% and 50% of our free cash flow. Let me just jump to the next slide.
So our intent is to declare a dividend in Q1 of 2024 for around $60 million, paid quarterly, so roughly $0.20 per share on the assumption we exit, we enter with around 73 million shares. This is a dividend that we expect to to materially increase over time as our, as our free cash flow increases. Looking at the, at the bottom of the chart, our net leverage, we think we're going to exit 2024 with 3.3x, so a bit above our max on target. We'll get below there in 2025, and then 2026, we would naturally get below 2.5x. We've just held it at 2.5x for 2026 and 2027. When we get there, we'll decide what to do. You know, we'll, we'll work with our board.
We may do stock buybacks, we may do acquisitions, we may pay more dividend, we may pay debt. So I think we're going to. We'll wait and see when we get a bit closer to that time, what we do.
So our best guess is when we get together with our board for the first time, they'll enable us to get this done. That we'll be able to declare a dividend of some $0.20 a quarter or to a total of $0.80 a year in a full year's time. As Paul said, there's no sense in taking the leverage in the bottom of this page down below 2.5x because we have no desire to go there. And at that point in time, we'd have other optionality for our cash flow, and perhaps at that point start buying some shares back. But this is a very powerful cash flow model, and we believe that delevering and paying a dividend can occur simultaneously.
Just in closing, I want to summarize again that the 2027 financial targets on a model that was built by me and my team, and we're very confident to execute. The Atleos team are strongly positioned to monetize the market-leading positions on our best-in-class people, products, and services. We'll see revenue growth at 6% to $5.5 billion, with a mix shift to software and services as banks look to outsource their ATM estates and users execute more transaction types to safe locations convenient to them. The mix shift to higher margin line, lines, increasing transactions on our existing network, and driving out cost and expense, supports the target to get to 25% EBITDA by 2027 and to get to $500 million free cash flow.
Atleos will become an increasingly efficient organization and will drive to quickly delever and return cash to shareholders in the form of dividends starting in Q2 2024. With that, I'll pass it back to Tim.
Thanks, Paul. Closing remarks. There it is. So we threw a lot at you today, and I hope that you know more about our company than you did when you started. I hope that we've actually convinced you that some of the ideas you held about us beforehand were misdirected and mislabeled. This is a good company. It's a very good company, and it's ready to be on its own. Our base business, our foundational ATM business, is a sound business that has very good underlying market dynamics. Not only are there modest growth in the end markets that we serve, but we're positioned to grow faster than those because of our position in the industry. That's augmented by our ability to continue to drive our margin rates higher, therefore, throw off more cash flow and pay a meaningful dividend.
That unto itself is a good investment. Good investment for both our debt holders and our shareholders. Take that into the longer run and talk about ATM as a Service or just more service revenue, whether it's a full-up outsourcing or not, we will capture more service revenue. Our software will distinguish us and help us pull through more solution sales. We will grow even more quickly than that. This option on growth in the out years that drives a, what is now, let's call it a GDP grower, to something that's greater than that, maybe even a high single-digit grower, is a powerful story, and you won't have to wait that long to see whether that's working. We believe it's working already. We've seen traction in those strategies already. We believe strongly that this is where the world's going to go.
But even if you don't, you might, we might be wrong, but we're wrong by a year or two, which means the ARR or the higher growth rates may not occur in 2027, maybe they're all the way out to 2028. But it's gonna happen, and we're going to be there to catch it. We're the obvious ones to win. So, thank you very much for being with us today. We threw a lot at you. We're going to be on the road. We're going to make sure that we see as many people as we possibly can. We'll tell this story as many times as people are willing to hear it, and we look forward to a successful launch. So thanks for your time today. We're going to head to Q&A now.
All right, operator, if you can hear us out there?
Thank you.
Yep, please go ahead.
Thank you. If you would like to ask a question, please signal by pressing star one on your telephone keypad. If you are using a speakerphone, please make sure your mute function is turned off to allow your signal to reach our equipment. Again, please press star one to ask a question. We will take our first question from the line of Matt Somerville with D.A. Davidson.
Hi, Matt.
I thank you for taking my question, everyone. This is Canyon Hayes on for Matt Somerville today. I was wondering if we could get a little bit more color on transaction volume trends over the past couple of months, just kind of across the various geographies there.
Sure. I'm not going to give you a couple of months. I'll give you a couple of quarters. Maybe you want to fill them in on where you think transaction volumes have been in the first half of this year and where they might go from here?
Yeah, I think we've had very strong transaction growth in North America. Really strong, certainly rebounding back to pre-COVID levels. And in the rest of the world, depending on where you look, we're either stable or growing, depending on the region you're looking at. Certainly, recent transaction volumes have been very positive.
They've been the right transactions, too. They've been high, high revenue for us transactions rather than, say, just checking balances and the like that we sometimes get.
Yeah.
Awesome. Great to hear. On that 20% bank cost reduction figure, I was curious to see when that would be realized by said bank.
It depends on the size of the bank. You know, it takes a little longer to move 1,000 ATMs than it does to migrate 100 ATMs, but certainly, they start to realize cost efficiencies right out of the gate. Cash optimization, better customer experience, all of those things are realized from the very first ATM that's put in. And then some of the things like reallocating their own internal costs to different things, those are really up to the bank to determine when they want to realize those. Any third-party spend is obviously realized as a savings right away for them as well.
Great, thank you for that color.
Okay.
We will take our next question from the line of Erik Woodring with Morgan Stanley. Please go ahead.
Awesome. Thank you, guys, for for spending the time with us today. I have a few, if I may. You know, maybe the first one is-- I realize this, this is a different management team, but if we go back to kind of the post-Cardtronics NCR outlook, you know, the view at the time was self-service banking would grow at, I think it was 3%-4% annually. Now we're looking at, you know, double that. And so, you know, where have your views maybe changed the most, significantly versus 2021 to get to this new kind of higher growth rate and I have a follow-up. Thanks.
Yeah, thanks for the question. So you're exactly right. At that point in time, we thought that we'd get some price increases annually, that our number of units shipped would go up somewhat, and then generally hold our own in the ATM space. The Cardtronics acquisition gave us some really nice, let's call it sales synergies at the time, but we hadn't contemplated really the ATM as a Service taking over. And when that starts to take hold, it's what drives all the out-year upsides. So if we can hold on to 2%, 3%, and 4% growth rates in the shorter run as we convert that hardware to as a Service and kick those revenues and those profits forward, it will seed growth in the out years from an ARR perspective that's very compelling.
While I think that the growth rate in the earlier years of your model will look a lot like the one we described back at the time we did the Cardtronics acquisition, we should exit the period at a growth rate that's much higher than that and be approaching high- single digits.
Okay, super. That makes a lot of sense. Thanks. And then, you know, it, it seems like a lot of what you're, you're pitching on, on this uplift to contract value as a shift to ATM as a Service is very important. So just curious, when, when, when we're thinking about the customers that you expect to, that you expect to transition, are, are we saying that all customers see that 2.5x uplift, or what's the average you're assuming? And then how does that maybe differ between larger banks versus smaller banks or U.S. banks versus international banks?
Yeah, I'll let Stuart take that one.
Yeah, I think so. We're seeing about, you know, anywhere from 2.4x-2.6x, sort of, in that 2.5x-ish revenue increase, really, which is driven by us taking on more services from the bank that, as we said, they either do internally today or they outsource to other third parties. So it's really us taking our foundational ATM business, the Cardtronics business that we took on, delivering all of those services as a whole to the bank, you know, reducing their costs. As the prior questioner asked, you know, "When do we get those reductions?" That's really what's driving that.
We're seeing it both internationally, you heard from Santander, and in our domestic markets, where both small, medium, and even some of our super-regional institutions are starting to look ATM as a Service as they look to sort of get more focus on their digital assets and look for someone trusted and stable that they can rely on to deliver on the physical infrastructure.
And really, that 2.5x is on the more, let's call it the physical outsourcing, right? The asset-rich done ATM as a Service deals like Santander, where they've already owned the software, the hardware. They bought the software for us from us some period ago, and so really the uplift on revenue is much more dramatic than the 2.5x.
Absolutely.
Yeah.
So many of ATM as a Service, asset rich, as you said, and asset light, and really, depending on where the bank is in, on their journey, that depends on how that model looks like. But we're ready to deliver either of those, and whether that comes at the start or the end of our sort of 2023 to 2027 journey, our outlook remains very positive.
When Paul and I review these deals, we make sure that that multiple and revenue is there. We're not in this business to finance hardware. We don't need to do that. We don't have the lowest cost of borrowing. Actually, our customers have one far, far lower than ours. The goal here is to drive higher and more profitable revenue. We do not have to sell as a service in instances where it's just not-- it doesn't meet those criteria. So we're relatively specific, and hard over on some of those metrics.
Yeah, and the market's clearly driving us that way. Diego can talk a little about the funnel he's seeing in the market and the geographical nature of where these opportunities are and the customer sizes, Diego.
Yes, it's actually quite nice to see the alignment. So the split, we have 45%-50% North America, 50%-55% rest of the world. You look at the ATM as a Service funnel, it's quite aligned to the markets we run in those major markets. The 40%-45% of the funnel will be in North America. It's a combination of a small, medium, and a few large customers conversations. If you go outside, depends on those markets. So if you go to places, to markets where it's driven primarily by large banks, Santander is a good example, we see that the large banks are also doing that, as Stuart mentioned.
It's the combination of the credibility that we can run, we can operate better, more efficiently, and then providing that technology that will be future-proof for the banks as their core business shifts from a running and operating networks to doing the customer experience, the digital-first approach. Thank you.
Awesome. That's really helpful. And then my last question is just when you guys is on capital allocation. When you guys talk about the dividend increasing materially over time, can you maybe help us level set, or how should we think about the dividend payout? You know, is that increasing with EBITDA or EPS, or is it increasing at the pace of free cash flow? Maybe those will be relatively aligned, but just how to think about that. Thanks so much.
Yeah, so cash flow should grow a little bit more quickly than EBITDA, because some of the things that come after the B in EBITDA actually are relatively constrained and don't grow as quickly. And our dividends should grow with free cash flow. The intention is to allow that the payout to increase from 35% to 50% over time as we have higher and higher free cash flow numbers. We're a little challenged in our first year out at about $150 million of free cash flow. We'll be a little gentle in that year. As we grow, and we get more profitable, and we lap some of the carryover effect of the separation, we'll be able to start to take that dividend up.
I think that we'll be able to communicate that well in advance as we took our guidance forward, each year from a free cash flow perspective. I don't know, Paul, if you want to add?
Yeah, I do. I know it's a little unorthodox to tie the dividend to free cash flow rather than EBITDA. With the current environment and with the cost of debt, when we were coming out of the gate, we wanted to tie it there. We've got an objective to delever as quickly as we can and get down below the 3x. Then when we get there, we can take a different approach. The other thing is that the cost of the debt is higher than we would like it to be, so we're trying to get there as soon as we can.
That's right.
To delever.
Makes sense. And then, the last one—sorry, just going to ask one clarification question, and that was, if self-service banking is growing 8% and network is growing 7%, what's the, what's the offset again? Just remind us to get to the 6% for the, at the total company level.
Yeah, there's some synergies in there. As part of the separation accounting, there's revenues that go between the two companies. There's transactions between the two companies that become revenue after the separation, and they're going to go down over time.
Yeah.
So I think in my talk track, I pro forma around $260 million of revenue in 2023E, and I think we- that bleeds down to around 120 by 2027. There's also around $100 million of historically Voyix revenue that's, that they're exiting, that's in legal entities that get consolidated into Atleos. And the, that $100 million will bleed down to around $25 million in y eah, 2024, and then to zero by 2027. So there's, there's a few hundred million of, let's say, $300 million or so of headwinds just relating to the separation accounting.
Yeah, we'll be close cousins with our sister company for a long time, and we're going to complete the transaction to complete some of the contracts that are outstanding as we go across time. We'll manufacture for Voyix for some period of time.
Yeah.
And we'll do that at a profit margin rate that's, let's say, a lot less than we would if we were to do this for somebody else. And so, and that's contractual, and that'll go out four or five years. That will bleed off over time, and it will put some pressure on margin rate, and it'll also put a little bit of pressure on the overall growth rate, but we'll break this out by segment, you'll be able to see that.
Awesome. Thanks so much, guys.
Thank you.
We will take our next question from the line of Kartik Mehta with North Coast Research.
Good afternoon. I was wondering, are there any revenue dis-synergies with digital banking staying with Voyix? I know originally when it was acquired, there was thought that there would be revenue synergies with the ATM business and digital insights. So I'm wondering if there's any revenue dis-synergies coming along.
No, as Tim said, we're going to be close cousins with our partners over at Voyix for a long time. We have some reselling agreements between us that help Atleos, who has an international business, resell some of those digital business into countries where we exist that David is looking to grow into. So we don't see any dis-synergies from the digital banking move over to Voyix. And we're going to be very close with them as we have sort of close engagements with banks that use both of us and making sure that our products and our partnership is very tight.
We'll make sure our selling organizations are incentivized on each side to make the other side successful.
Then on the down margins, obviously you're expecting significant improvement, and I'm wondering, you know, as you look, the primary driver to that, is that just the ATM business, as you go to ATM as a Service model that really drives the margins? Is it cost efficiency? I know it's a little bit of everything, but I'm wondering what you consider the primary driver there?
Yeah, Kartik, it's a number of things. I think one of the primary ones is obviously Len went through the cost erosions that he's working through, but also in the, in the network space, if you think of incremental transactions flowing through the existing network with minimal expansion of the base, the incremental cost we have is very, very minimal, so the flow-through margin on incremental revenue is very high. Likewise, if you think of an ATM as a Service deal, we have our own installed base and fleet that's, that's ginormous. So to add 100 units from a bank into that fleet, the incremental cost we have to add i s pretty minimal.
So it's really scale and leverage, and then as we move more to ATM as a Service and the recurring revenue streams, they are higher margin streams for us.
Just one last question, just to understanding clarification. On Slide 56, where you talk about ATM SaaS units, it goes from 600 to 21,000. Would that 21,000 be all bank ATMs, or would it include any Cardtronics ATMs?
No, that's your ATM as a Service metric, Paul.
Okay.
That's entirely banks.
That's entirely banks, yeah.
Perfect. Well, thank you very much. I really appreciate it.
Our pleasure.
Our next question comes from the line of Charles Nabhan with Stephens. Please go ahead.
Good afternoon, and thank you for taking my question. I wanted to get a little clarification around Slide 48, specifically on the chart at right, ATM as a Service. There's a bit of a step function from year to year, which ranges from anywhere from 30,000-70,000, from year two to year three. So I wanted to get a better understanding of what was driving that step function, as well as what the what leads to the variability from year to year.
Now, Paul, he's talking about the ATM as a Service model that you described before.
Oh, okay.
You know, so what, what's the composition of the revenue as it plays out across the seven-year life of the contract?
So the incremental is mostly driven by CPI. So if you think of on the right-hand side, it's the fixed cost for the bank, and then there's assumed CPI on top of that. In our model of ATM ourselves, we didn't assume adding incremental services, although that is something that we're seeing that is in play for us.
Yeah.
Got it. And as a follow-up, I wanted to get a little more color around geographic expansion, whether it's on the self-service banking side or on the payments and network side, to get a sense for if there are any specific geographies or regions that you find to be of particular interest or see, you know, particular opportunities for expansion across the businesses.
Yeah. So I'll answer the antithesis of that question first and then pass off to Stuart. We're in 140 countries right now. We have service provided in about 80 of those countries, and in some instances, it's too much. I think we need to be very, very careful and targeted in the way that we approach new markets. If scale is going to matter, and efficiencies of those scale are going to matter from a margin perspective, we need to make sure we go places where we can achieve that scale and add on to it and harvest the incremental margins that Paul described. So you're likely to see us de-emphasize some countries as we emphasize others. Sir?
Yeah, Paul talked about us being in 60 countries directly for service. We're in 11 countries in terms of the network, where we own and operate ATMs. This year, we launched in Portugal and Greece, two countries that have cash-preferred communities, and that business is going incredibly well for us. We're very excited about those two launches, and they're sort of emblematic of the types of countries we would look for, where we can launch in cash-preferred geographies, where cash is still a very valued and much-used preference for payment. And those are the opportunities we're looking for in terms of where we would get the best return on our investment, in terms of leveraging the scale of the 60 countries we're already in, where we have a field service footprint, and we've got customer service and salespeople already there.
Those are the kind of countries we think are right for expansion of our network product.
Got it. Okay, I appreciate the color. Thank you.
Great. Thanks very much. I think that concludes the questions on the phone. I'll wrap up quickly. First, if I could have my whole team come up front. We had a studio audience here today. You just couldn't hear from them. An awful lot of effort goes into putting these days together. It's not easy, and I know we look like professional actors up here, but it took a lot of prep to get us ready. I appreciate very much what this team has done. The studio team, I'd love to have them come up here, but they can't come up here because they're too busy working. So we're done. This has been a great day. I hope you all learned a lot. I hope you're willing to learn more.
We're going to be on the road in the next several weeks, talking to both debt investors first and then equity investors. We'd love to meet as many of you as you're willing to have us. We'll stay as long as you'd like. Thank you very much to everybody, and we'll see you on the road.