Diebold Nixdorf (DBD) 2 May 242024 Q1 Earnings call transcript

Ladies and gentlemen, thank you for standing by. Welcome to the First Quarter 2024 Diebold Nixdorf Earnings Call. [Operator Instructions] I would now like to hand this conference call over to our host, Christopher Sikora. Please go ahead.

Hello, everyone, and welcome to our first quarter 2024 earnings call. remarks, Relations posted section prepared to slide our Investor the of accompany we our have presentation To our website.

I statements. statements risks cause differ These this call, start, will that management team and could we will they time participants our from all materially Before of the that beliefs hear of forward-looking to reflect are during actual statements call. but results at this these the expectations remind you subject to

factors these be in company's can events find on You the be should information annual and Participants may to with mindful the filings of information additional periodic subsequent date. out render SEC. this that

also today's We discussing financial non-GAAP call. be measures on will certain

in Slide As the X, of a noted be presentation. non-GAAP on found supplemental the GAAP schedules between and reconciliation measures can

call I'll over Octavio. that, turn to With the

you, Thank for and all you Chris, today. joining us thank

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X. Slide on to Now begin

this for first year. operational XXXX us full with to quarter and achieve expectations build The start strength are We financial progress good in upon our we solid across as a positions year our quarter. well of off our the priority to

backlog with backlog quarter, at winning end is continue consistent the market automation of end billion first of the at and which remained the at levels $X.X we XXXX. technology. self-service our our in with leading Product the First,

the encouraged while over the have remains accelerated which our, also product backlog, demand is supporting several growth are We we quarters. revenue by environment, the last stable and product

traction we services managed Additionally, in with gaining our offering. the market are

During the X a quarter, with in service top bank managed a agreement Western Europe. closed we X-year

to outsourced We model of represents believe banks adopting and retailers continue that service next service wave an the growth.

operational ATMs Our is and operating of resonating value total with proposition of improving customers. reducing and checkout efficiency devices cost well the

customers. we Next, focused and on remain reducing for driving innovation complexity

employees frees intelligence automates the age-restricted recently vision computer introduced Jaeger technology vision solution, and EDEKA for Our retail up items to Leveraging airport. considerably self-checkout transactions and smart artificial at serve Stuttgart gives customers. time more

to are store adverse applied Also, shrink-related leveraging pilots entire over be live the shrink time, checkup. our at retailers anticipate addressing ecosystem. checkout to with technology can we our We global that to during issues running approach retail multiple the

On innovating the with side, we banking and continue winning DN Series recyclers.

launched allows DN weatherized footprint. recently America unit stand-alone continue Series recycler have a We branch the banks North to redefining in that

Our globe, new the usage helping developed is high-capacity recycled, multiple cash note us win heavy the markets specifically customers. for across

easier it to an our hardware which expanding we environments, deploy is our making opportunities. simplified across addition, portfolio, update In software multiple multi-vendor

is focus of of strong improve combined is line. the cash terms to Higher expense bottom our continues following year-over-year operational flow The another performance, our as expansion, to quarter and and team free revenue the benefit In of result with through strong we performance. growth results financial our execution. gross profitability had operating better on management margin

area. focus Cash discipline is a capital and

drive and flow. positive historical are asset a quarter linearizing free in generation. cash first better efficiency cash working The seasonal represents higher to on focused Across we our step capital our operations,

second on straight of stay momentum we for the trade working XX% trailing proud focused $XXX net representing keep leverage that of operating as I million We disclosing capital presentation, topic of and quarter included the our building improvement. delivering team is additional on customers. in of our information XX-month am earnings our revenue,

us Moving our articulate objectives. to last Slide longer-term X. We introduced help quarter continuous improvement the better DN flywheel to

in to we quarter continuous our progress embark are We as improvement journey. the on pleased see

who It starts a people with who the make people make company. great Nixdorf Diebold

to are We so we can people our in investing deliver leading-edge world-class continue products and create service.

quarter. Frank of earlier Vice We President onboarded Excellence, successfully Executive Baur, Operational in the

with operational that We and flywheel will roles in are filling lead chain in service of continuous accelerate execution. practitioners currently the supply experienced improvement

bench We with on are a clear leadership employee development. focus strengthening our

We and deliver expect margin our revenue profitable growth to team gross expansion.

profit to operating expense In was the revenue driven led first execution margin commercial Improved gross and growth. innovation by year-over-year operating expansion quarter, and discipline.

early We continuous developments I implementing in tools well, the so am are we seen have encouraged and of stages operations. by notably the improvement of the most in lean manufacturing.

our future North identified beginning decrease XX%. global team in what already identified Canton approximately example ways just the of production ATM teams Our mindset this think is embrace projects. as by has to and This is possible our time footprint, across I

Finally, costs. we to and free improve cash stronger opportunity driving next to working lower strong efficiency, asset months conversion. restructuring improve the lowering We XX the on leverage see higher and are on flow XX by through profitability capital executing returns with over expansion, to our a focus debt meaningfully margin

and continuous on a track These improvement are few indicators journey. are just progress the right making our that on we

highlight to North our Turning In like strength continue region. we technology. would strong Slide America, X. recent in cash of adoption I to recycling performance to see

performance, improvement. investments improved process from in seeing resources Additionally, internal we is are and benefiting our which service

As our is well getting our better customers our internal profitability. service for higher as to in more we're moving productive, service quality from third as This the cost are away resulting supplement higher used resources workforce. parties

Service across our strong In strong and are stream. in our both usage product region, recyclers. demand is Cash Latin and dispensers Series base growth remains driven driving recurring for installed contract service. revenue we America, by strong large growth the with cash supporting revenue DN

service. banking the and with Europe, stable steady products In activity market remains across

grow we base under contracts. to side, continue retail units our self-checkout of On installed the service

unit placements in have European the self-checkout moved our we our And to as retailers new past represented the of basically shipments the majority doubled market. X adopt vast shipments quickly annually, solution. Over the years,

into XXXX, we As from increasing potential continue growth base installed our self-checkout with more North we to America. coming move expect

Pacific, in Africa, unit additional our In and We had for trends quarter. higher both an facility. cash leveraging contract the Stronger APAC Also, manufacturing shipments region. developing Middle and recycling units, recyclers the cash East first India we are across shipped Asia in X,XXX cash dispensers cash

all we We our solid across our activity are global seeing benefit diversified and from business. regions, levels

call on I that, the details over With to quarterly hand results. to our into more will go Jim

non-GAAP with Slide Thank on you, of Starting Octavio. X our an overview results.

as to our quarters. a represents on start million gross linearizing product of increased points $XXX XXX the and year we The expanded work year-over-year to solid performance. due strong margin quarter primarily basis Revenue first X.X%

profit product basis margin by a in Gross million combined points a year-over-year. benefit chain expanded from this benefits was our our results initiatives primarily Included our $XX gross Normalizing driven XXX Brazil from with tax price is recovery. discipline. item, improvement for logistics supply

incremental seeing the infrastructure. from our benefits also recent service in investments are We

basis to improve Operating down EBITDA expense points million was $XXX adjusted year EBITDA expanded XXX operational the XX% we margin up prior and of is X.X% period prior XX.X%. to year, the compared our compared Adjusted efficiency. to as

unlevered favorable was seasonality. working positive of On which and given first cash basis, million, million a Looking better a slightly at $XX is first quarter, EBITDA in quarter flow efficiency. was our flow, use free an capital was which $XX meaningful by year-over-year, historical by free achievement cash the higher driven

year-over-year revenue of Turning up the year versus X% in Service improvement to growth period, Slide by mix driven $XXX the prior approximately was X. almost up prior. million product product revenue geographic Favorable was versus of Banking the and revenue. approximately revenue drove product X% primarily XX%.

to increase Gross points the was the Banking year-over-year. input quarter, control which in up profit price XXX greater margin was XX.X% gross Significant due $XXX by is million cost increased $XX and basis gross continuation realization. product of to margin expansion million. year-over-year

the also points includes the $XX expanded basis for banking benefit gross million Normalizing earlier. It margin I Brazil XXX recovery year-over-year. tax item item, our mentioned this of

'XX. going XXX focus has compared to Service margin This area expect One note up to improvement forward. a we been for company, last bank. item continued was points to for and basis XQ see gross the

the prior sales. the Gross down Both by the versus quarter compared decision to strong lower-margin Slide self-checkout more offset our third-party million to was of and the as than of electronic Moving in service hardware X.X% XX.X% digits year revenue point-of-sale exit revenue activity selectively to period. down was X. prior low was $XXX to Retail year flat relatively single compared prior year. approximately margin is

is mix in product is up approximately of nonrecurring onetime gross points However, XXXX. lower quarter first points, benefit driven the up first gross mainly XX a input costs. XX basis and year-over-year, product excluding Sequentially, margin quarter margin by basis

there product trend, good lumpiness X-quarter service retail encouraged the but in growth we overall, can As the profitability. from the you see are and business some to the improving the was with business,

this fourth last volatility the XX, used quarters In free quarter. of more flow our the of first cash quarter, in and substantial linearized complete view past, cash highlight in a quarterly Slide to reports. the in through in the our free and cash the our resulted we had cash On that flow significant efforts generating position year changes X before introduced we present better information

through Now flow the free rigor. to and efficiently commercial company cash is position operating improved better more in a manage

period. improving free $XX the to million You our progress prior first cash can compared in see the evidence year of with flow quarter

quarter which Net pay-down of investments February. first with includes $XXX and impact in the remained debt cash short-term at which is leverage consistent End our million, $XXX XXXX. year-end were million of X.Xx,

back will I to the call turn Octavio. Now

our Thank you, reiterating performance previously outlook. XX, we XXXX Jim. are communicated On Slide

Given full are results the quarter to well our year strength improved deliver of momentum, positioned our expectations. operating first we and on

range to profitably to to is EBITDA expect grow million of and in revenue $XXX be adjusted the million. $XXX expected We

expect the quarterly the half to to year XX% year, adjusted update EBITDA from improvement initial approximately linearize now our of more. year we to year cadence EBITDA. This of XX% stronger at be adjusted first the efforts the the reflects for the Looking full

targeting are EBITDA XX% greater flow of than XXXX. adjusted cash We free of in conversion

than we adjusted working cash to free Additionally, conversion greater deliver are looking XX% flow of beyond XXXX, of EBITDA.

driving greater by our revenue capital margin and conversion on lower profitability outlay, capital a higher working focus strong returns and costs. achieve expenditure lowering through debt consistent to restructuring expansion, expect continued efficiency, growth We with

Slide things To lot we excited to on XX, have Diebold about at Nixdorf. be up, wrap

company, current are value X established and are a there attractive that thesis of we XXXX, the and We trading potentially compelling believe focused operating Diebold no doubt built around stronger a make have Nixdorf a levels, into at our under-appreciated Moving more quarters. story investment last now aspects X momentum components. creation company highly throughout is there for

solid visibility end. our have we and banking retail with First, strong business into

provides which revenue backlog our predictability product recurring, coverage year. total the product top remainder additional XX% approximately performance. service to and approximately for for of stability of of line Our our provides the revenue $X.X higher-margin good billion Also, is

actions, are we reach, improvement Second, these our know We accelerating has the operating and will our expenses. with maintaining gross implement margin profitability. tools as and we we expansion continuous program opportunity and improve overall company

call cash flow of to as the these outlined and have Third, today, aligned generation. The teams we clear. we a benefits. improve us The levers must are on available meaningfully now is capture number to we path

we strategies are all allocation capital stages the fourth, in And early of benefit that value-creating a our stakeholders. will developing

As conversion unlock creation the in our continues our is and of for will additional the to improve, cash free value invest next stockholders. flow stage business story. This we value

forward with future our Board. solidify capital you priorities with the to allocation look more sharing as details we I

the call open And questions. for please with operator, that,

from comes Summerville [Operator D.A. line Instructions] Davidson. question first of The the of Matt

bit of and linearity also sustainable. touch questions. you've those as into taken couple that you across specific to A on view little delve deeper Can why actions better the a maybe drive of should business we some

This is Sure, Octavio. Matt.

if for I've talking linearizing So you recall, our about now. business quarters been multiple

customers, do the the is efficiently? predict and So better This do and that more needs to deliver align deliver service manufacture most needs to helps actually more as important taken their in how own can our I to of capital would both accurately them. we how step us we customers we've installation to manufacturing schedules? say we And

progress. that this you work tell is So still I will in

very are QX. with We results pleased the in

on linearizing keep half we We do year. the how middle working of now are the

deliver But QX As year, always The QX than middle business. the continuous of QX you quarters, improvement icing. linear we be prior our a And we we're just quarters. as that That's have significantly QX, will a more QX largest as expecting was to smaller the -- percentage. quarter. the as that will bigger know, trends we deliver as linear de-risked then in see in

improvement we for we're it. So these all future. do and be feel And this we're expect that's every taking, actions to improvement, the about that quarter, with sustainable you will see continuous but kind that the should of feeling actions

margins, can in QX in you talk $XX of as want speaking, product I a margins historically how sort the from serve sustainability would year? million how about And a of in Brazil the as to about the margins context then gross benefit similarly, ramp touch on kind service aside. follow-up, we for And service of the sort should point throughout still Is bigger the fourth to lower quarter. throughout into of build terms of gross the service jumping case the year that thinking be setting off

me with start let So Matt. product,

keep around our our But are and be this we chain that might think sustainable. supply orders small pricing we've margins at actions variations So there -- mix. our volume we are around level. Clearly, based margins convinced and that will the taken that discipline on

this that level. is sustainable do believe So a I

we're More we're to this action embarking the particular company making importantly, in. the focused that a no we're or changes that deliver in that journey on quarter. on is continuous one there's improvement one of We're on program

So what as do can we margins we quarter. deliver working the quarter, do next on team better to on is one already

this say headwinds on be that that results that the on. opportunities, and but will that we're So the teams delivering. We they're mentality is always focused the I know working are there improving continuously would

in we side, pleased service have. improving results our significant in quality that we've and very the I'm On on investments made service, the

better North Speaking we've their made how fleet. significant all America that helping changes is to ATM they them our and that the recognize customers, manage

very pleased that. I'm with So

QX in And progress continue QX. progress the making goal to made our compared year. significant to as is We throughout

expect should service continue year our us the you margins quarter of to So we forward move improving every in as operation.

can you kind fashion could, one the kind more. And free in from of then as what to what see the a you if a kind can Jim, how cash guys little the similar just walk EBITDA? sneak of fill terms you through in of for in XX million just last, on of us provided sort it for Slide midpoint I'll in midpoint flow give to If a the you EBITDA of year QX? to get million bit you we blanks is on $XXX $XXX-some

is see against favorability Matt. year I first that for in Thanks, we with Yes. would say all drove I out year, we're see -- starting the from working about and largely just think with that, to you benefits guidance for line came we the that are can what when more prior talked the quarter efficient save management. the capital

all capital points is a that at and time say working and through I'd in point taxes and the those remain we're around gave other more operations items starting and benefit see particularly where diligent little efforts restructuring that things, efficient we like to maybe and more management. intact, So bridging the things bit

that We get. bit expect of go receivable opportunity balance metrics us in through to saw there we from And a there's here with you first the can for quarter, see that inventory to the of and year, that efficiency. to the see continue little

capital really that's working yes, key there variable coming benefits the So through. is

from next comes Bryson question Wedbush of the Securities. Matt of The line

Or but I linear think the better that results moving of on that to I Congrats backlog again, know better bit, sales, anymore? activity sales you again, seen the fluctuate backlog any been why managed there profile Octavio, not sales would have environment explain thought you steady on stable, and unusual than seeing improvement better working you're in you that of given terms in this strong can particularly towards the large through is number. customer contracts it that thought in the shipment but that kind targeting. was despite progress also, better impressive like you going the hold is have Was anything I number. characterized a you've I would course more but added?

this So continues you us. I'm been didn't market North it in when much prior there's on really retail as I us. to different the our from thanks, regions, sales still little that -- through Matt. I recycling hold. unprofitable we bit America Again, third-party that made exiting America always see even contribute walked a market the the that revenue I fell a Latin And short think certain take conscious strong quarter Europe, think a can has we decision was you in year, though strength for to that

But I would -- as I characterize as said, demand I stable.

base We continue focused this is with winning. the teams And I that trend built a think a strong very that We've on. are recyclers.

customers technology want We adopt. to that have good

very We've now -- year really first we expansion do this we're inroads side, the and the market, accelerate where retail on how the our X Europe. into focused into we've in on over on our is years, significantly the the grown focused made And we're U.S. past U.S.

are of would kind that serving So the strong of it's in keep but you winning tell I focus the and drivers, a teams to particularly, customers. our the those key market our

the improvement margin you're and terms assuming is that At talked that you time, improvements continue unchanged. can all margin about that EBITDA same upside, improve the know I the you you're to metric. to in assume or manage can see higher guide? free that you Or to keeping the already else guidance see. gross that unchanged? was gross The you And ability your flow quarter nice we'll we Were cash think envisioned seeing getting initial when of in execute if provided your

Yes, Matt.

teams. built So product took, the particularly, some planning. across of seeing favorably, clearly, some with hold our -- working say, our the these on taking actions pricing sales our on in do particularly things pricing we that I would of all see component we we're We return into had our faster side. enterprise

be QX, before. of benefits hoping that QX, more we're would realizing those some So were we

that throughout we're year, and the confident that. can do to need those we We improvements maintain

consistent the still over to execution that we want quarters. we provide sure anything, linearize more coming change make the quarters. operational need to we Before We

to said I we beginning, are start. As at good the a off

a taking the off Now we're strong working is table QX, QX, spirit. the as risk But on that we a and strong linearizing things. keep

as improving And yes, year. throughout opportunities we have keep will we that, the to clearly, do

of We Matt Summerville now Davison. have follow-up from DA question a

maybe Just X relegated Is of maybe see quick ones still migrate North to that Are adoption into Octavio, in X largest the you you you're level maybe. can Tier institutions? America? to inning financial and recycling if kind that it America North analogy, the starting market? primarily small the seeing likely into market down describe In baseball at to use play regional adoption how could with we're describe year bank recycling in out a bank, you heading addition, will and where this wise, 'XX.

Matt. Yes,

clearly So say -- significant so are again, as better Remember, had innings that of with the you with QX I large large know, that wins provides would that efficiency. on in that banks down service, starting just journey. large but banks started we're banks. still operational a in the have lot We've But customer recycling early those journey.

as part adopting -- So banks other they that provide -- different software and opportunities need this these of for things start larger remember, change their us. to and

banks fleets large of large And particularly years. multiple smaller that to building in refresh. remember, all market, are still recycling financial are U.S. take these They it's are which As note smaller journey, heavily and switches these I institutions many investing institutions that. think capabilities. in to mature But national connected financial of the clearly,

seller at a recycling which the at whole also is Recycling Think traction cash important our have not ecosystem part which stages cash just is early would point. starting in level. recently recycler, that gain of but of So seeing We're the benefits adopting a the very the as branch we're at not to the recycling. provides very ATM. ATM, say that you just whole branch, in launched I of

process. on switches have would to own. significant runway The still I are the a it's their we say it go, adjust So to We but recycling. big banks to need that doing

We're we the this of probably So as of process. doing early an in see early our stages innings this. still

you of that put the just we some headwind put just you point on past, more maybe can exit bit you little a can in finer from a as relationship then retail there? around deliberate in bit undertook XXXX point the of that would you exactly worked overall follow-up, the just revenue finer how And have should what And little a that in business? guys expect a exactly on exited

Yes.

great solutions is that. So Matt, verification I same are age solution, challenges believe that and I of in the doubt we to very our Retailers those And robust. developing keep we technologies. make still continue no want facing the growth. of shrink is one part of complementary some avenue focused have important the think to more investing -- we're even thing, solution SCO solutions a our on the our

handheld products a we In part different look that environment, Think but into being the scanners, we of past, as were a for just customer, we selling electronic of reseller products large these shelf we many providing retailers. a to our would retail third-party service at were about that labels were else. integrate basically somebody

So decision different the cash utilize in that we've better ways. made to it's our

a that -- this revenue be will would it our increase profitability you while I headwind, be business. say -- retail it a for can

why focused that. that's we're So on

I the those overall, electronic sales. throughout more year decline in third-party in SCO the than growth think will point-of-sale that offset and

stable see much we mix. So product a business but with better retail a do

of question Securities. Matt now follow-up from We have Bryson Wedbush a

operating and from inventories doesn't or profit to seem to have cash there free capital at working solid the all. accounts flow, the -- the any with headwinds receivable So been

what lot mind a was cash is through reasons cash that in of led free negative? walking do category was what category. being that So other exactly just the negative us flow was was other you to flow seems that Jim,

would Matt, we I at how the say, items. year-end again, cash question. to flow group think this about I talked thanks we Yes. with respect And for

in we've that at disclosure working apart the breaks think how given And look so I capital. we deck the incremental

And assets those what flows receivables, deferred liabilities revenue payables, lines. of of current through and portions current so outside inventory, what are

the biggest driver the in so other the tax here payments. And quarter on is category indirect of first timing

here, sources, first terms in to the and flips the around cash fourth typically think timing we about in items have where of out. then quarter the the if positive so we goes And that quarter,

item that. significant So that's most the really of

And at then the of movements is of the prepaid made and beginning balance accruals timing year. other on up the

new You AR we helpful give be inventory, table revenue can bridging AP incremental put of deferred back. in items rise to Matt, to a It's but that supplemental actually should the those the that deck the the some and into of schedule, in it towards movements. outside see

So accrual the biggest followed timing paid of categorized there item get is accounts by indirect other are on that payable. within payments taxes, accounts that out not

sounds like as it's But to predominantly opposed timing items it anything structural.

And so net those are...

If you were able to...

That's right.

I for us going I guess to going Or estimates. all? don't last you help to those all? can there know, Are circumstances sequential just we're know at not any we them, then force filings? will some ATM, in guidance we see the for debt that at to see if And one rough around guys the question those not Or you're us, around me. It like numbers? give point see those Or or the self-checkout, I look of you sale. unit disclosing give anymore doesn't

Matt. Yes,

the you I So We're volume mix Indian reentering focused ATM in still see, particularly SCO away new you the tell market. on I we're moving would more tell different ATM, of But we're price kind as units that get realization is markets. regions. across we're we that would and and for we what from units, entering units

we across our geographies. see expect So growth to in do volumes

metric focused better clearly, I a revenue and That on. of is, on us products. think, more So would focus margin the and away say for that mix be I will our that we expansion move to from

we QX is so better, and see most as quarters, thing more a and a results. linearize -- for that will QX yearly me, little better then not to And will be be bit the again, dependent manageable important will be will QX our you than which will QX. we

thing but that the that linearizing spike so say important that growth we're in in see the have more So is we big still QX. across we that don't year units,

our I'd remarks. over like Q&A hand to call Christopher closing session. Sikora As the for to back conference this concludes

to again, Please reach me, in to a earnings and if in Sikora for Thank questions out information. free additional call. day. of Relations, rest Chris or have you any today's you participating Thanks good the have Investor need feel

for joining thank and gentlemen, Ladies you call. today's

You may lines. disconnect your now