Tech Talks Business Features Tim Oliver, CEO of NCR Atleos

So NCR, one of the first tech companies in the world, based in Dayton, 140 years ago. We funded the first flight of an airplane. We spun out IBM from our company. So a very proud history of the company. Two or three years ago, we started to think about whether we should be one company anymore, and we had a lot of interest from private equity and from other investors who said you're more valuable apart. And ultimately, we decided to do it ourselves. We broke it into two pieces. And since then, the other piece actually sold a small piece of themselves as well, and so we're now three companies which were just a year and a half ago one. So my company, we're about $4.5 billion in revenue, about 21,000 employees. We're in 140 countries, 60 countries with meaningful presence. We have a network of ATMs in 11 countries. We manage and run about 600,000 ATMs around the world. We're vertically integrated: we build them, we write the software, we service them when they break, we do all the settlement of transactions and everything. So we run the device for our customers. Those customers are either banks, traditional banks, some of them are neobanks now. China is one of my biggest customers. Or they're retailers, and retailers say to us, like a Walgreens or Circle K or CVS, they say, 'Please put an ATM in every one of my stores.' And what works for us is we know we can drive more traffic to the store. So if I put a machine in a Circle K, I know I can drive 23,000 more customers through your store every year, which means I don't have to pay them for the machine there, I don't have to share my revenue with them, they're just happy I'm there. So 600,000 machines, but 100,000 of them I own, that's our cash in them. We get paid by the transaction. The other 500,000 belong to our banks and we run them on their behalf.

Fight goes on, it's a never-ending fight. We're very proud to have been partners going through the separation, but at some point you do become adversarial, right? Every asset has to go one way or the other, a liability has to go one way or the other, an expense has to go one way or the other. And we're not equally successful, right? Some quarters are better for one of us than the other, and so it causes a little bit of... it gets a little adversarial. But yes, my office is slightly bigger than his. Well, congratulations on that. He took the outgoing CEO's office, and so I was relegated to something different. Well, I built out my own office, and I told the guys doing the construction it needed to be slightly larger than his, and it's 12 feet bigger.

There's one thing I got right in my first year: I allowed that culture to be what it wanted to be. Our employees are so proud to work for us. I fly around the world and I meet huge cadres of our employees. They meet us out front, I'm not exaggerating, with marching bands. And it's a really beautiful group of people who work for us, and they love the NCR name. And when we put the company in half, there's a debate about who gets that NCR name, or should we both take it forward? And if you watch the GE separation, they put GE in most everything. If you look at the Kellogg separation, they found a way to get Kellogg in each of the two names. We decided the best thing to do is each of us take NCR, and over time, if we rebranded differently, if Atleos becomes a brand instead of NCR, or on David's side if Vox becomes a brand, drop the NCR. But for now, for my employees and my customers, that 140-year history means a lot, and I don't know if they'd be happy if we let it go. I also had that NCR logo on 600,000 machines, so replacing all those... yeah.

So there's three of us: between Diebold, us, and Hyosung. We're the only fully vertically integrated player. Diebold is more of a hardware player, and Hyosung is a global player, they're making inroads into North America. They're a little less expensive machine, and they make some commitments that I'm not willing to make. So three-horse race for the most part. About 82% of the market between the three of us. In most global segments, I'm biggest. I'm not the largest in Latin America. I'm Western Europe, Eastern Europe, North America, great, Southeast Asia, great. We're not in Russia, we're not in China, we're not in Japan. They won't let us into their banking system, so it's hard to be an ATM provider.

The only way you win in our business is service levels. About half of our revenue is now from service, and I think 5 years from now, 75% of our revenue will be service. Hardware doesn't matter. You don't win on hardware. While our special-purpose hardware wins quite frequently, it's not what ultimately carries the day. If half your revenue is services, you have to deliver the best services at the best value and be the most efficient at what you do. And when you think about where we're investing money, in AI and other things, it's how do you drive a much better service level for lower cost? Whether that's remote repair, whether that's dispatching more effectively, whether that's machine-specific knowledge when the customer engineer shows up, whether it's making your first-year engineer as effective as your fifth- or sixth-year engineer because you can push to his device what's wrong with the machine. All that's going to make us the obvious winner. Vertical integration helps, scale helps a lot, but I think it's our service levels that distinguish us going forward.

You should definitely go, should carry a lot of cash. My daughter and wife are here today, they carry cash. Yeah, so 20% of the US population can't get a bank account, don't have a bank account. 25% can't get credit. And that's the US. You go around the rest of the world, you go to Eastern Europe, other places, cash-dominant economies. Those folks who like to consume in cash are still consuming cash. They haven't changed their behavior in the last 15 or 20 years. Admittedly, the number of transaction types is growing, the number of electronic transaction types is up dramatically, and as a percentage of total transactions, cash is down. But the absolute number of transactions is up modestly. And so as long as we're capturing most of those transactions, we're okay with that. We've also seen that those who like to consume in cash are now paid digitally, and they need to get access to that cash. And so we're seeing a lot... Believe it or not, 85% of the US population will make a cash deposit to an ATM this month, every month. Well, I've never made one. I don't know, you should try one. But that's because they're getting paid one way and they want to consume a different way. If you get paid in cash, if you're a caddie at a golf course, you want to pay your electric bill, you need to convert that to something electronic. We can do that for you. If you're a gig worker, DoorDash, right? DoorDash is a good customer of ours. Those gig workers are working a second job, they're generating walking-around money. They want that money on the weekend to go do fun stuff with. They don't want it stuck in their payroll system at GrubHub. So we push a code to them, it's called Ready Code. We push a code to their phone, it allows them to extract cash at any one of our devices without having an account, without having an account number. All they have to do is step up, use their app on their phone, tap it, take cash out. So we're changing the way the device is used and how people can interface with it. So that's really innovation and interesting.

I think there's a bank outsourcing wave coming. I worked in a company called Metavante a while back that was a core system provider, the ERP systems for banks. Banks all outsourced them. They didn't want to do it anymore, they thought other people do it better. I think the whole cash ecosystem is going to be outsourced by banks. I think banks are going to get out of the business. They're already having me do most of it anyways. You know, my machine has $185,000 in it. You go into the bank and ask for $5,000, they don't have it, right? They have to go order it. And the big spinny with a big wheel on it, it's like file boxes in there. There's no cash in there anymore. So they've already outsourced some of it. I think they're going to outsource more to us. I think their branches are moving toward these concierge branches, these café-style branches where people walk around with an iPad and sell you product. They don't want to dispense cash, they don't want their customers touching their cash. They want me to do that for them. So I think there's a wave coming. And when I think about, let's go to a CVS. My machines in the back of that, it's probably branded, maybe it says PNC Bank on it, but it's me, it's my machine. I get paid by the transaction. At the end of the night, that CVS desk worker needs to decide what to do with that cash. Sometimes they put it in a vault, sometimes they put it in one of those bags and they take it to the drop box. We don't want them doing that. What if they just put it in my machine? If they just put it in my machine, I can give them credit overnight at their bank, I can count that for them, it's safe. And then that same cash can be dispensed back out the next day to incoming customers and close the cash loop inside of the store. So you don't have trucks, Brinks trucks with armed guards pulling up, distributing cash all over the place. So I think it's coming. I think the wave of outsourcing is coming globally, and I think we're the most obvious ones to catch that wave.

Yeah, there's going to be an AI TM soon. You know, those devices... you heard it here, guys. Right now, we have devices that are big screen, there's an avatar that interfaces with the customer. And when the customer tries to do something that needs a human to interact with, some transactions just require a human by law, a human steps in behind the avatar, and you don't see a difference. It's still the avatar, but there's a human interface now to get that transaction done. That's pretty cool. But to be able to be predictive as to what the customer wants to do, such that when they step up, you already know what they want to do, and importantly, you know what product you can sell them. I know what their bank balance is, right? I know when they get paid, I know how they consume. I can drive product to them from that device. So AI at the ATM is going to be helpful. And I don't know exactly where it's all going to go, but it's going to be interesting for us. It's going to be cost... AI is going to drive a huge amount of cost out of our organization. When you start to think about, I do 30 million truck rolls a year. I have 14 or 15,000 people in trucks driving around every day. And those who've been there four or five years are really successful and really effective, and they fix the device and you never have to go back, and you have back for a couple weeks till it breaks again. Folks who've been there a year sometimes break the machine more than they fix it, right? And I know that with the cash and transit guys, the Brinks and the Loomis, when they go to my machine, they tend to break it. So to use AI to do predictive modeling of the device, to know when a part in that device is wearing out and it's causing this problem, to know who's been at the device such that I won't send them back if they couldn't get it right the first time, to know how much remote repair I can do, to make your connectivity such that I can repair remotely, either push something in or out... people put ham sandwiches in them sometimes, right? And you got to get that ham sandwich out. My God, yeah. Well, yeah, there's a lot of stuff that goes on at an ATM, you've wondered. But so I think AI for us is going to be a tool to allow us to provide the best service at the lowest value, with some cool technology edge at the ATM itself.

Yeah, I bought a crypto company. We bought a crypto company, paid a lot of money for it, and it's not worth nearly what it was when I bought it. So we can dispense... you can buy Bitcoin at our machines. And for a while, you saw these Bitcoin kiosks where people were buying Bitcoin at a kiosk, which is foolish. Our ATM is already there. You don't need a separate special-purpose kiosk, just do it at the device. That was mildly entertaining for a period of time when Bitcoin... believe it or not, people buy more of it when it's ramping up, not so much when it's down. So the transaction volumes are now down. People are buying Bitcoin elsewhere, they're not using our devices to do it. Last month, I rolled out a transaction type that allows people to sell Bitcoin and monetize their Bitcoin at a convenience store, and we're starting to see some traction there. There's a lot of folks who have stored value in what really is an investment vehicle in Bitcoin. It's not really been a consumption vehicle. We believe that cryptocurrency will matter to us when people can consume, when you can buy a Big Gulp with your cryptocurrency. That's when I win, because you're going to come to me and I'm going to help you transact. We've seen a nice uptick in those transactions, people taking out $40, $50, $60 against their Bitcoin holdings. So we'll see where it goes. We're a consumption company, and so the cryptocurrencies have become speculative investment vehicles. They don't do much for us. But there's going to be a time that there's a stablecoin or some other coins, maybe even a government coin, to allow people to transact, and we'll be there to help them transact.

So we've had a lot of finance folks. As an ex-CFO, we've had a lot of finance folks in our building as interns, we've hired a bunch. And what I love about your business program... I went to a place called Stern, we were a capital markets company, we talked about valuation all the time and big modeling and kind of macro stuff. The folks I've met from here know how to apply what they've learned right now. It's not modeling, it's real life, driving business performance. And so the analytics and the capabilities around supply chain and others that people leave this institution with are incredibly valuable to us right out of the gate. I was a liberal arts guy, so I was useless when I went to Wall Street, and I had to catch up with the guys from Wharton and everywhere else. I'm not sure that skill set that they taught us is all that valuable. I know it's not all that valuable to me in my business. What you all are doing here is far more valuable to us. And then on the engineering front, we've had as many as 400 engineers from here working in our building at various points in time. Knowing how to manage an electromechanical device is not something a lot of people are good at anymore. They're probably pretty good at the electronic side of that. So anybody who has those electromechanical sensibilities is really valuable to us.

So it's a very different job. I didn't know I wanted to be a CEO. We went through the separation. Mike Hayford, our prior CEO, was a good friend, and he said, 'You can do this. I want you to try it. I know that you're ready to do this.' I was a little apprehensive. I was a pretty good CFO, I knew how to do it, I'd done it a lot of times, I knew what my job was. But Mike said I could do it, so I'm giving it a shot. I think we had a pretty good first year. It's a different job. The CFO job is all about you're in the mix every day, you're grinding it out, you're driving the analysis that then fuels the decisions that the company makes. But you're there when the analytics are being done, so when the answer gets presented, you're behind that answer. CEO is a lonely job. I sit in my office and wait for people to bring me decisions they've already done all the analysis on, and I just have to nod with them or shake my head. It's a very different experience for me. And it's all about people, probably a lot like your job, right? If my customers are happy and my employees are engaged, we win. But when either of those things doesn't go well, it's on me to go figure out how to fix that. And so being a quantitative thinker in a CFO moving into the CEO chair, you need to shake some... you need a new toolbox, right? You need to shake that old toolbox and get a new toolbox. And you're right, there's a lot of CEOs in Atlanta right now who started in the CFO chair and have moved up to the CEO chair.

You need to get better at one thing. I don't know what that one thing is, but be really good at something. Be really... so when you enter any conversation, any room, everyone looks to you for a portion of that conversation. You don't have to own the whole room, but getting really good at something is your entree into the discussion. And once you get there, you can flex your muscles a little bit and have opinions on things that may be outside of your one thing that you're really good at. For me, I could digest data very quickly. I could take a chart deck of 40 charts and know right away where I needed to look and where the hole in the analysis was, or whether it's a good idea or not. And I don't know why that was my thing, but I was good at that. And so I pushed really hard on that. I got good at the capital markets side of the job. I started as a bond trader, as an investment banker, then a bond trader. I wasn't very good at it, obviously, because I stopped doing it. But I took a 75% pay cut to go sit at a metal desk at a company called AlliedSignal, now Honeywell, to learn how to be a true finance person. I took that risk early. I think that's the other thing I'd say: when you're young and you don't have very much, you can swing for the fences because you don't have that much to lose. And we get more apprehensive as we have more things in our life we need to take care of, or as we move up a certain career path, we start to think only about that path. Whereas the world's open to you, right? The vectors available to you early in your career are huge. So take a lot of stretch assignments, a lot of risky assignments, and just use that one thing to get you into the room.

Yeah, my job as a CFO was to allocate scarce resources: people, capital, and expense. That was it. And I learned quickly to discern what was the best next use of the next dollar of capital, next dollar of expense, or the next person that we could apply to a problem. That really is all I look for in the analytics: is this the best next idea? When I have that, when I generate that next dollar of profit, where am I going to apply it? And we tend to start out in a planning process, we rank order things coming into the year such that when we do overachieve and we do need to apply that new capital, we know where to go. But I look at the data quickly, I look at the people who made the decision, to be honest. You know, who brings the decision is important as well, because they have track records, and some tend to be a little more aggressive or maybe even... and others are sandbaggers. And so having that intuition that says I can trust his analytics is crucial. I'm getting there, I'm starting to figure my team out.

Yeah, painting really bright lines, good guardrails, is essential. And I worked at a company called Raytheon for a while, a project company, not a product company. And to know when a project was off the rails, I looked at two things: I looked at calendar and I looked at budget. And if you're behind in one of those things, you can probably fix it. You need to stop, you need to rework the plan, but you can probably fix it. If you're behind in both calendar and budget, it's over, you need a whole redo. And I learned a lot there watching these red teams drop into these projects and fix things. But those are the two metrics that mattered the most. And we painted bright lines, and if you get outside those lines, you had to come sit down with the red team and figure it out. We're trying to do the very same thing. We don't have capital to spend on technology that's not going to work or the customer is not going to want. And so we've made very clear delineation between those buckets of capital that are used for speculative ideas and those that are going to be then deployed for commercially available product. The same goes to whether it's hardware or software or our service portfolio, because too often you can get excited about the shiny new thing, the customer doesn't want it or isn't willing to pay. They don't want to pay for it, it's even worse, right? And so we found that quite a bit, and so we're trying very hard to make sure that we're willing to spend some money to be speculative and innovative and different, but at some point in time, you need to make a decision whether that's going to be commercial or not. You have analytics on machines, you're able to really see... yeah, we can do that. Our machines do give us a lot of data, right? We know what the people, how they behave inside of our stores. We know how much cash they do or don't take out. We know what types of transactions they do. And we get a lot of good data from those machines about human behavior. It helps us a lot with pricing. I can do testings. I have so many machines, I can test pricing in different neighborhoods and see, get feedback within about two weeks. I can have statistically significant data sets back to tell me what I can do with pricing. And that's exciting stuff, actually, in a world where people have gotten used to paying a convenience fee for almost every way that they transact. For us to figure out where that convenience fee is for us, and you know, nickel here, a dime there, on as many transactions we do, can add up.

Yeah, we were a product company for a long time, for 135, 140 years. You've been a product company. And so our engineering talent and our selling organizations are built around the selling of a device or a product. And to change that to a solution sales model and to change that to an engineering model that starts with service, not with the device, but starts with the serviceability of that device, the ability to deliver the service that the customer expects, it's a very different shift for us. And we're struggling a little bit to make that happen. We have an excellent selling organization, but many of them grew up in technical sales, so you can't really learn it overnight, right? You have to develop your salespeople. But a lot of those folks who are with us grew up as product salesmen. We're trying to move them to be on the solution side. And the second half of the question was... what else? Yeah, I think it's... we get about 35 cents in every dollar of money spent on an ATM across its lifecycle. I get that now. The other 65 cents is either cash and transit, so it's the Brinks and the Loomis guys, or it's banks doing work for themselves. They don't want to do that work, they're not good at it. I'm a lot better at it. I have the biggest fleet in the world, I have 100,000 machines, I run them every night, I know how to run machines. And so if your average bank has 300 machines in the United States, I know I can run those machines better than you. And so for us to figure out how to convince that bank and prove to that bank, 'You should just hand me the keys to your whole fleet. Give me the keys, I got it. I can guarantee uptimes for you that are better than you could ever deliver yourself. I know a better customer experience because I'll upgrade those machines all the time. I'll make sure there's cash always in them, but not too much cash, because banks just jam them full at the top, it's real cost for me every night, right? So I know exactly how much cash is in there, and I want it down to the last bill before I then fill it back up again.' I think that's probably where the biggest opportunity is going to be for us.

Yeah, you can't count on the Houthi rebels, right? So on AI, two things. I made AI available to everyone in the organization. So we have a safe internal use of AI that anybody in the organization can use. And that was a big deal for us, because system security is so important to us. And we're seeing right now, 74% of our employees have used that AI tool in the last month. So we're getting people to experiment with it and start to use it. The other, we stood up an AI Council, because everyone was running off and partnering and doing different stuff on AI, and they found different vendors they wanted to work with, and I was getting very disjointed. I was terribly worried about where my data was going, and importantly, how it was being aggregated, because not all my data is clean and good and helpful. And so to have somebody who manages that data set and allows AI to be applied to it was essential. So our AI Council has a certain amount of money to spend every year, and they're prioritizing projects. As I said earlier, the biggest ones right now for us are for predictive maintenance on our devices. And as far as the geopolitical global, you just got to roll with it, right? It's been brutal. We came into 2020. I started at the company in May of 2020. I was alone in that building for a while. We figured it out. We get to 2022, supply chains are completely turned upside down. We can't get chipsets. Chipsets I was paying $11 for, I was paying $99,000 for so I could deliver a machine on time to a customer. It got way out of hand. Last year, my freight costs were awful because the Houthi rebels clogged up the Red Sea. And I build a lot of devices that need to move around the world. I do about 65,000 heavy ATMs a year. I like to move them by boat. I couldn't move them by boat. So having a supply chain that is variable, meaning don't ever have one vendor for anything, right? We had gotten very specialized, we had singular vendors for some things. We were running on old chipsets, long old run chipsets, they're cheap. That was a bad idea. We were out of China completely. We couldn't count on China's supply chain coming out of China, so I have no ties to China when it comes to supply chain. And then you just hang on and hope. We have outages that are global, right? And we have a command center that watches it every night to see where our machines are being affected. We have people trying to steal from us every minute, trying to... so you can only put up so many early warning systems. You put up war rooms, and you communicate quite frequently. We have four updates a day from our command center that tell us red, green, or yellow. And those updates, most times I'll get one, we up here I suspect are usually okay. But when they're not, we jump at it. NCR has always been really good at responding to an emergency, responding to a fire. We can put out any fire. The problem has been sometimes we set the fire, right? So we set our garbage can on fire, and we're heroes for putting it out. Trying to set fewer fires. But knowing that our employee base reacts incredibly well to challenge like that and figures things out.

Yeah, I could not have been a CEO earlier in my career. I was a very aggressive, very pugilistic in my approach to business. I grew up as an athlete, I was an athlete in college, and everything looked like a contact sport to me. And that works for a period of time, and then you have to diversify your toolbox. And you learn how to motivate people, and you learn that that style doesn't always work for everybody. It works for some people, it has to work for finance people because I know that's how we are, but it doesn't work for everybody. I coached elite women's athletes for a period of time, and I learned more about how to be an executive from coaching those women than I could have learned in years at work. Because I watched how they were motivated, I watched how they interact with one another, I watched how the camaraderie between them was far more important than their relationship with me. I had to relate to the group, not to the individuals. It made me a better executive to go through that. But it's an evolving thing. And look, you probably need a therapist or a coach, right? I mean, we all do, because we don't always get it right. And that's the other thing I learned: how to quickly know when I'd cursed someone. There were jobs in my life when I was a bond trader, I didn't care if I hurt someone, right? I was just there to make money, make more than the guy sitting next to me. As you go through life and you sit through meetings and you watch your behavior, you get much better at seeing who in the room you may have injured or hurt in some way, and making sure you correct that quickly. You go find them and you say, 'Okay, I saw that. That's not right. We need to fix that.' But it's an iterative process. But yeah, you got to keep... if you're going to be a CEO, if you go from CFO to CEO, you got to change your toolbox, because a CFO has the right to be completely unreasonable, right? That's the prerogative of a CFO: be unreasonable, say no a lot. A CEO has to let that happen and say yes more often. And that's the... yeah.

Yeah, I think it's going to have to happen, right? I think, and I don't know whether it's this administration who does it or somebody else does it, I think it's going to have to happen because it's the Wild West out there. And none of the currencies that are currently out there can be used to consume. None of them can be trusted to hold value in any particular way, right? They're investment vehicles, they're not consumption vehicles. I think it's coming. We're ready. The acquisition we did to get in it was really a coin-centric acquisition, but that technology can be applied to any coin. And the reason we bought it wasn't for Bitcoin, but more for what might come. Thus far, we've not seen much change, right? There's not much commitment to a federal coin or a government coin, but I think it's coming.