Q1 2021 Diebold Nixdorf Inc Earnings Call
Good day and thank you for standing by welcome to the Diebold Nixdorf, Inc. First quarter 2021 earnings call. At this time all participants are in a listen only mode. After the speaker's presentation. There will be a question and answer session to ask a quest.
During this session you will need to press star one on your telephone. Please be advised that today's conference is being recorded if you require any further assistance. Please press star zero I would now like to hand, the conference over to your speaker today, Steve <unk> head of Investor Relations. Please go ahead.
Thank you Whitney and welcome everyone to Diebold Nixdorf first quarter earnings call for 2021.
Joining me on today's call are Gerrard, Schmid, President and Chief Executive Officer, and Jeff Rutherford Chief Financial Officer.
To accompany our prepared remarks, we have uploaded slides to the Investor Relations page on Diebold Nixdorf Dot Com <unk>.
Our remarks are being recorded today and we will post a replay of this webcast on the IR website.
On the website later this afternoon.
Slide two contains a reminder that today's comments will include non-GAAP financial information, which we believe is helpful. In assessing the company's performance reconciliations schedules for each non-GAAP metric can be located in the supplemental slides.
As well as the tables of today's earnings release.
On slide three I will remind all participants that certain comments made today will be forward looking and that there were a number of risk factors, which could cause actual results to differ materially from these statements. Additional information on these factors can be found in the company's S. E C filings.
Participants should be mindful that our forward looking information is current as of today and subsequent events may render this information to be outdated and now I will hand, the communications to Gerard.
Thank you, Steve and good morning, everyone.
Pleased to join you today to discuss the transformation of our business model.
<unk> is a differentiation at all.
Solid start to 2021.
I'll begin on slide three by Recapping, our investment thesis and our key financial metrics for 'twenty to 'twenty, one, which we are reaffirming today.
We are continuing to make solid progress in transforming our business model to generate strong returns on invested capital.
Significant free cash flow growth.
And leverage our competitive differentiation to grow the top line.
In the first quarter, we delivered 4% revenue growth.
Underpinned by market share gains in ATM and self checkout solutions.
I'll provide additional color about key market trends in just a minute.
I'll simply say that our growth in Q1.
Gives us the confidence to reiterate our 2021 revenue outlook of four to $4 1 billion.
Our return on invested capital continues to improve.
The main contributor has been our DNR work streams, which includes services modernization.
G&A efficiencies from enhancing our digital and cloud enabled capabilities.
And selling a higher mix of self checkout devices and DN series Atms.
The company is off to a good start in Q1.
And we're tracking to our previously disclosed plan of $160 million of gross savings this year.
Transformation restructuring payments are also tracking to plan and our prior comments on this topic.
We'll conclude this year.
The combination of enhanced profitability and lower restructuring payments is driving a strong increase in free cash flow.
Our outlook for 2021 is a range of $140 million to $170 million.
Or approximately 30% of our adjusted EBITDA.
The company's operating rigor is driving our transformation and value creation.
While we are being tested during the global pandemic, we continue to demonstrate tremendous result, with our ability to execute during this challenging time.
And we will continue to leverage this operating rigor going forward.
Okay.
Slide four summarizes our competitive differentiation is playing out in the marketplace and then our first quarter results.
Our retail business is benefiting from accelerating self checkout demand as.
As well as mild growth in our point of sales business.
These trends drove retail revenue growth of 11% in the quarter.
Excluding the impact of divestitures and currency.
We expect growth will continue as retailers improve the end to end experience and reduce operating costs.
We're growing faster than the market because customers value our high degree of modularity.
Increased availability and our open architecture.
During the quarter, we secured a multiyear agreement with the French retail group.
Then moschatel to transform the checkout experience nearly 2000 stores with next generation point of sale and self checkout products.
Our all connect data engine.
And <unk> self service software.
In the United States, we booked at initial order flow DN series easy self checkout units with a high profile convenience store retailer.
Operating in airports and other tourist destinations.
Beyond the value of winning new self checkout hardware deals. We're also benefiting from high services attach rates that increase our recurring revenue.
Moving now to the banking business, we are seeing growing evidence of market share gains due to the advanced features and functionality of our next generation DN series Atms.
In the United States, we're seeing gains among larger financial institutions.
Including an initial order to deliver DN series cash recycling Atms.
And maintenance services.
Top 10 U S financial institution, which previously bought hardware from others.
With this win we received DN series orders from five of the top 10 U S banks, and we see opportunities to add to our success.
In Latin America, we're seeing DN series orders from customers in Mexico, Colombia, Peru, and Honduras income.
Moving our contract with Banco <unk>, the medical or Panamax to deliver approximately 1200 DN series Atms dynamic.
<unk> software licenses and maintenance services.
A number of customers have indicated that DN series is not only a hardware upgrade.
It is a critical element for automating digitizing that enhancing the self service channels.
For example, DN series just facilitating.
Facilitating.
Higher service levels due to strong engineering and they all connect data engine.
Which leverages internet of things and machine learning.
To enable a data driven service model.
For legacy Atms, we're seeing service cost reductions of approximately 20%.
For customers upgrading from legacy Atms to DN series.
The potential performance improvements from ACD can be even more significant.
We increased the number of machines connected to ACD by 10% sequentially during the first quarter.
As we connect more devices to all connect that engine, we expect the operational efficiencies will add to our service margins.
And contribute to our target range from 32% to 33%.
Additionally, DN series also supports advanced self service capabilities through enhancements, we're making to our dynamic offering.
Our video as a service offering we're seeing solid demand.
Furthermore, our software team has created a single stack environment to facilitate quicker implementations and.
And more frequent updates of new capabilities, such as cartilage transactions cash.
Cash recycling and video teller access.
We see opportunities to continue to grow our software business.
And as previously disclosed, we're making investments in our dynamic payments suites.
And are seeing heightened interest from early adopters for a cloud native solution.
Although the sales cycle is expected to be longer than our typical software sale.
We're also hearing from all customers about their efficiency agendas and.
And we are responding with pre configured managed services.
Which support advanced capabilities and drive higher service levels.
The number of managed services opportunities has increased in the past quarter.
Across retail and banking customers.
Beyond our growing pipeline.
Managed services success in the quarter included.
A five year contract to be the sole source supplier for maintenance monitoring and help desk services.
For more than 4000 self service terminals at a top five bank in the United Kingdom.
Secondly, and extended managed services contract with increased scope at the largest private sector bank in India.
And thirdly, a three year managed services contract extension covering.
Covering more than 3500 self service terminals with HSBC, the largest bank in Hong Kong.
Our financial results represent a very solid start to 2021.
Adjusted EBITDA of $100 million.
Was the highest first quarter in the company's history.
And while Jeff will discuss the details.
Especially pleased.
That our operating profit growth of 25% net adjusted EBITDA growth of 12%.
Significantly outpaced top line growth of 4%.
This demonstrates strong operating leverage in our business model.
Next on the call, Jeff Rutherford, who will take you through a more detailed discussion of our financials and our financial outlook for 2021.
Thank you Gerard and good morning, everyone.
Our first quarter revenue growth and positive operating leverage demonstrates how our transformed business model is creating value for our stakeholders.
Slide five contains the first quarter.
P&L metrics for the past two years, providing a useful perspective of our transformed business model.
Total first quarter revenue of $944 million reflects foreign currency benefits of.
<unk> $34 million versus the prior year period, partially offset by $23 million headwind from divested businesses.
Adjusted for foreign currency and divestitures revenue increased two 4%.
Led by product growth of 11%.
Software growth of 7%.
And then the services decline of 4%.
We generated $273 million of non-GAAP gross profit in the quarter, an increase of $19 million or 7% versus the prior year period.
Collecting higher revenue and improving margins from our DN now achievements.
Gross margin increased 110 basis points to 29%.
We expanded gross margins across all three segments led by strong gains in software and services of approximately 590 basis points.
And 220 basis points, respectively.
Product gross margins declined 200 basis points due primarily to non recurring benefits in the prior year period on a slightly less favorable customer mix.
Operating profit increased $16 million or 25% versus the prior quarter, while operating margin gained 150 basis points to eight 4%.
SG&A expense was flat versus the prior year quarter, allowing the gross profit from incremental revenue to flow through to operating profit.
R&D expense was $3 million higher year over year due to planned growth investments.
We delivered adjusted EBITDA of $100 million in the quarter, which increased $11 million or 12% over the prior year, our adjusted EBITDA margin expanded 80 basis points year over year to 10, 6%.
The next three slides contain financial highlights for our segments.
Slide six Eurasia banking revenue of $328 million increased 5% versus the prior year period.
Excluding a foreign currency benefit of $21 million and a $20 million impact from divestitures.
Growth was driven by higher product volume as the team converted our backlog, which has been building for several quarters.
Segment gross profit increased $7 million year over year with contributions from all three business lines.
Foreign currency benefits of $8 million were partially offset by interim cost benefits from the prior year.
Gross margin expanded 60 basis points year over year led by software and services improvements while product margins declined due to a less favorable customer mix.
Moving to slide seven Americas banking revenue of $312 million declined 7% versus the prior year, excluding a $6 million foreign currency headwind.
And a $2 million divestiture headwind.
We experienced lower product volumes and installation activities and U S regional accounts and in Mexico versus the prior year period.
Though we see order growth picking up.
As Gerrard mentioned, our national account business is showing strength in both orders and revenue due to a customer acceptance of DN series.
The software business delivered strong double digit growth in the quarter due to the revenue recognition of a large contract.
Segment gross profit of $97 million was down $7 million year over year, due to lower volume and modest currency and divestiture headwinds.
Gross margin expansion of 100 basis points to 31, 3% was.
It was driven by benefits from DN now initiatives.
On slide eight retail revenue of $304 million increased 11% year over year after adjusting for $19 million foreign currency tailwind and the divestiture headwind of $1 million.
During the quarter, we experienced continued strength from self checkout solutions as well as mild growth from point of sale products.
Software growth was driven by a large project in Europe.
When compared to the prior year period retail gross profit increased 32% to $79 million due primarily to revenue growth.
Gross margin gross margin expanded 260 basis points demonstrating their team is doing a great job delivering positive operating leverage revenue growth a more favorable mix of self checkout solutions and continued execution of DN now initiatives.
On slide nine we summarize our free cash flow performance and update our leverage and debt maturity schedules.
Free cash flow use of $70 million in the quarter was up slightly compared with the prior year quarter and is and was in line with our internal plan.
Versus the prior year free cash flow was impacted by higher interest payments related to the timing of our secured note payments and higher cash use from inventory the.
The combination of our growing product backlog, coupled coupled with longer lead times for electronic components, and a weaker U S dollar, resulting in higher cash requirements for inventory.
We're working closely with our suppliers to manage these challenges. However, just like other technology companies. These dynamics will remain on our watch list.
Cash from receivables and payables improved slightly versus the prior year.
On an unlevered basis free cash flow use improved from $30 million to $10 million year over year due to higher profits and lower restructuring payments.
For modeling purposes investors should expect our cash interest payments to be approximately $30 million in the second and fourth quarters and approximately $60 million in the third quarter of 2021.
Yes.
When compared with year end, the company's cash balance reflects seasonal cash use plus approximately $30 million used to pay down a portion of the revolving credit facility.
The company ended the quarter with $573 million of total liquidity, including $260 million of cash and short term investments.
At the end of the quarter the company's leverage ratio of 4.4 times was unchanged versus year end and down 110th of a turn from the prior from the year ago period.
On the right side of this slide we update our gross debt levels as of March 31.
Note that we have no material debt maturities until November of 2023.
We remain committed to strengthening our credit profile and we'll continue to evaluate opportunities to refinance debt on more favorable terms.
Slide 10 contains our 2021 outlook, which we are reaffirming today.
We expect to generate revenue of four to $4 1 billion, which equates to 3% to 5% annual growth.
Our adjusted EBIT or EBITDA range is $480 million to $500 million for the year.
Our 6% to 10% growth as we benefit from top line growth and operating leverage.
As most of you are aware our second quarter results for 2020 included significant nonrecurring benefits to our services gross profit margins.
In operating expense.
We do not expect these benefits to recur during the second quarter of 2021.
Operating expense for the second quarter is expected to be in line with the first quarter or approximately $194 million, although it could be slightly higher if the euro continues to get strength against the U S. Dollar.
Based on these factors, we expect adjusted EBITDA for the second quarter to be similar to our first quarter results.
Moving on to cash flow, we continue to expect $140 million to $170 million of positive cash flow for 2021 <unk>.
Including up to $50 million for D&S restructuring payments.
Our outlook reflects a material improvement in the company's EBITDA to free cash flow conversion rate from 12% in 2020 to approximately 30% in 2021.
This concludes our prepared remarks, so I'll hand, the call back to the operator for our Q&A session.
As a reminder to ask a question you will need to press star one on your telephone to withdraw your question press the pound key please stand by while we compile the Q&A roster.
Yeah first question is from the line of Matt Summerville with D. A Davidson.
Thanks, Good morning.
To your comment just a few moments ago regarding second quarter EBITDA sort of matching up with what you delivered in Q1 can you talk about maybe what's driving what sounds like a little bit of a change in cadence in that metric as we move through the year, perhaps a little bit more second half loaded than maybe you would've thought coming into the year.
Yes, Matt.
It's it's mostly related to.
What happened in the second quarter of 2020, if you recall if you go back to our reporting on the second quarter of 2020, we said at that time.
Our service gross margins were higher than what we model mainly related to.
The decrease in the use of service parts during that period.
During the Lockdowns.
And we also took steps to reduce our SG&A costs.
And significant cigna.
Significantly reduced SG&A. So so are our second quarter is going to be a quarter, where we're going to see.
Revenue growth as I think most companies in the U S. We'll see in the second quarter, we're going to see good margin.
As our DN now initiatives continue to generate.
Increases in growth in gross.
Margins.
It'll be offset a little bit by the onetime effect of what happened in the second quarter in services margin.
And then from an SG&A perspective, we're not going to repeat what happened obviously in the second quarter of last year, where we had no travel.
U S hospitalization rates were way down we deferred a merit increase and we adjusted our accruals for for bonus so what youre going to see us in the second quarter as revenue growth good margin, but.
SG&A and Opex fence, youre going to be more comparable to.
The first quarter.
Then the second quarter last year. The end result of that right now is what we're saying it's going to be EBITDA will be generally flat with the first quarter of this year.
Got it and then as a follow up can you maybe talk a little bit on the retail side of the business you had a win here in North America, which to my knowledge is is probably one of the first steps throughout the first you've had on go and POS is that a sign of more to come and can you also give us a sense for what kind of gross.
Youre seeing and expecting in self checkout for the first quarter and the full year. Thank you.
Hey, good morning, Matt.
I'll take that one.
So we are we were very pleased with that win in the U S.
It actually is not off first but it's certainly one of the more notable ones that we've seen.
As we said in my prepared remarks related to fairly high profile airport convenience provider.
We continue to believe there is room for us to expand our presence in the United States and if you take a look at.
The expansion plans of certain large European retailers, where we have very very deep relationships. We would expect them to undertake some fairly material expansion plans in the U S. Over the next couple of years and early signs are positive that we may be able to leverage those relationships to further advance.
Self checkout presence in the United States as it relates to overall growth in self checkout as you're well aware, Matt we don't break it out separate from other parts of our retail business, but.
Last year, we grew exceptionally strong and I would say that this year, while it's still only the first quarter.
The answers that we will start to see a similar trajectory for 2021.
Great. Thanks George.
Your next question is from the line of Justin Bergner with G Research.
Good morning, Gerard morning, Jeff.
Morning, Justin.
I guess my first question would be on.
The.
Payments platform that you are trying to develop our payments solution sort of if you could provide a little bit more color on how your views have divvy.
Developed and evolved over the last.
Three months that would be helpful.
Yes sure.
So Jonathan just to manage everyone's expectations I did say in our prepared remarks that we would expect the <unk>.
Sales cycle to be somewhat longer than our typical software sales cycle. So just please do keep that in mind as you're thinking about modeling.
But that being said I would tell you that as we look at the market opportunity as we look at engagements that we're having with clients.
Our degree of confidence and conviction around the around the market up share the has certainly grown in the past quarter.
As evidenced by the nature of the interactions, we're having with several larger banks across the world.
So it's still early days in the journey, but I would say, we're fairly certain that we have something thats pretty interesting to the company going forward.
Okay great.
Secondly, I wanted to ask about.
Sort of order patterns in.
In the quarter I think you might have alluded to it in your prepared remarks, but are there any sort of metrics you want to highlight is the order environment. Good are you being somewhat limited versus what you can deliver from backlog given the supply chain constraints any color there would be helpful.
Yeah, So Justin.
As I think about 2021 in absolute terms.
I think the demand environment is pretty robust across retail in particular.
And banking with somewhat.
Bias towards America's demand track.
Tracking somewhat ahead of Eurasia demand, but I think the demand environment is actually pretty solid.
We continue to work through multiple factors through the year, primarily on the supply side, notwithstanding how strongly the U S is coming through the pandemic, we're not we're not through this yet Frank we.
Still need to watch what's happening in markets like <unk>.
Southeast Asia, and India, we still need to watch what's happening in terms of logistics and supply chains, but all in all of the demand environment is looking pretty decent.
Notwithstanding the decline in <unk>.
America's revenues in Q1.
Behind that it was actually pretty strong order activity in the quarter in America. So net net we're feeling pretty good about demand looking through the year.
Okay and then.
Lastly.
Maybe you could address sort of whats, causing the decline in product margins.
Its mix, maybe a little bit more elaboration, there or is that sort of temporary are sustained will that.
Revert once the DN series ramps up as a larger percentage of your hardware mix.
Yes, Justin.
It's temporary typically you start to see mixed reflecting.
A different mix between high margin markets versus less high margin markets in the quarter. That's what we saw it's not structural I think youll start to see that.
Reverse itself as DN series becomes a more dominant part of the portfolio. So we don't see it as being a structural phenomenon at all.
Okay, and as part of that sort of Americas versus Europe, when you say high margin markets versus less high margin markets.
No.
Both within Eurasia banking and America is we have different.
Different markets that are higher margin versus less high margin. So it is not America's vessels Eurasia.
Lee on a country by country basis Justin.
Okay. Thank you.
Youre welcome.
Your next question is from the line of Paul Chung with Jpmorgan.
Hi, Thanks for taking my question. So just another follow up on margins.
Performance there on gross margins on the services side.
In retail you.
You mentioned, the tough comps on <unk>, but.
How do we see kind of services gross margin as we move kind of through.
<unk> and longer term, particularly as you see.
The DN series ramp.
Okay.
Yeah.
Yes.
Paul when we look at services gross margin.
As I said earlier, we would expect.
The second quarter to be.
Comparable to the first quarter this year.
And if you look back.
At the second quarter last year, we went over 30% I think it was 37% margins in the.
In the second quarter of last year. So that's net.
That's the headwind on services margin now going forward.
We're going to continue to see.
Strengthening service margins.
Especially as we rollout DN series and all connect data engine.
It won't be.
It won't be significant it will be gradual as.
As.
Those things are rolled out an exception acceptance and.
And utilization of ACD increases.
But it's true.
In his prepared remarks talked about the.
The target for services margin.
That'll be over the next quarters, but we should see gradual increase in service margins as we progress through the rollout of DN series.
Utilization of ACD.
Okay, Great and then can you just talk about.
The wins across the globe, our DN series orders kind of tracking your expectations then.
Where could you see upside there in terms of regions and <unk>.
Customers and St.
The same question on the services side.
You had some nice wins there how is the pricing environment then and.
Are the contract extension is kind of seeing any any uplift there on price as well.
Yeah, Hey, there pulse Gerard.
So our DN series ROI lock is tracking squarely in line with our plan, we set ourselves a pretty ambitious goal in terms of how we expected it to ramp and it's actually tracking right in line.
That ambitious expectations. So yes, there is from an order perspective, the DN series is already.
The majority of our order activity and that will continue to dial up as we move through the year.
And on the services side I think that the overall environment remains solid from a pricing perspective, there are one or two markets that are always complicated but beyond that.
Overall service environment remains broadly stable.
Pricing certainly is something we continue to keep an eye on I think we're all are sensitive to inflationary pressures in the markets I wouldn't say that we've seen much.
Much evidence.
Yes of that from some of our competitors, but certainly something we keep an eye on right now.
Okay, Great and then last question just on free cash flow.
Inventory side any component shortages kind of.
Impacting your investment cycles there.
And then given the DN series ramp in the second half.
Should we expect more than kind of typical inventory build this year or kind of pretty similar to past years and then.
I think you mentioned restructuring charges and cash would be about 50 is that correct.
Yes.
Yes, I'll start with the last question that the restructuring payments this year.
We continue to forecast US 50 million when we when we talk about working capital.
So there's a couple of components of working capital that we've seen increase in working capital investment one I think we're all very happy to two experienced <unk> and revenue growth.
Seeing an increase in <unk>.
And the value of our days sales outstanding week. So we are seeing a little bit of increase in.
Investment from revenue growth and we will take that all day right. The other piece that we're seeing a little bit of investment increase is in.
Days inventory on hand.
We are being.
Very conservative relative to May.
Making sure we have.
<unk> inventory on hand for for order entry. So we are carrying.
Some level of incremental inventory youll see that when we file the Q today, you'll see that in our in our inventory footnote in raw materials and.
<unk> web is going to be up approximately $30 million. So.
We are investing an incremental one more in.
And inventory, we expect that as.
Logistics issues and.
Supplier issues.
Curtail that.
<unk> will be to harvest that investment the other thing that's hitting us.
Working capital side, obviously is as FX from European markets.
Okay, great. Thank you.
Sure.
Your next question is from the line of Kartik Mehta with Northcoast research.
Hey, Good morning chart and Jeff.
To ask a little bit about the Eurasia strength in the ATM business, especially on the product side, maybe where youre seeing that strength in what you would anticipate for the year.
Yes, good morning Kartik.
So.
As I said early on to one of the prior questions. We're not through this pandemic globally, notwithstanding the progress the United States is making.
And when we take a look at demand activity in Eurasia.
It is slightly more mixed and we might see in Americas, we're seeing solid activity in markets like Germany like the middle East certain parts of Southeast Asia.
And equally a little bit more of a muted activity in some parts of eastern Europe.
But I'd say that the markets, where we have a very strong position our markets continued to track nicely.
And then just.
Just out of curiosity why was that service down so much in Eurasia.
The ATM side imagine the product growth help with insulation installation revenue, but I'm wondering can be y.
Service was down.
Yes.
Yeah, Kartik I'm, just taking a quick look at things.
Pretty sure, but Jeff correct me, if I'm wrong that we just had.
Somewhat lower installation activities in the quarter, rather than anything that was structural.
Yes, she base remains pretty level, and we see a good pipeline to growing the contract base.
But in any given period service revenue.
Just based on installation timing.
And then last number we still have the.
Divestiture impact coming through so we had the poor tavis divestiture as well as the China defect divestiture coming through that's about $40 million and those will anniversary as of the end of the second quarter. So the year over year pressure on services will abate in the second half of the year.
Okay.
Just one last question, Jeff I know you talked about it extensively last quarter during the conference call, but I'm. Just wondering if you have any change in thought process on refinancing timing.
From your perspective.
We're still.
We will continue to evaluate that we don't have we don't have any.
I've said in my prepared remarks, we don't have any maturities until 'twenty three.
But there is certainly opportunities before then.
With the debt we issued in July.
Of last year.
There is no call provision until July of 'twenty.
'twenty two.
But we will look at the other.
Opportunities look good.
The term fees are three <unk> well priced in and.
There may be some opportunities in unsecured but.
But our position hasn't changed that.
Natural target for refinancing would be.
In the second half of 'twenty, two unless there is a really attractive opportunity before that.
Perfect. Thank you very much appreciate it.
Sure.
Your next question is from Marla backer with Sidoti.
Thank you.
So.
You said a couple of times now let's call.
We're not through this pandemic, yet by any means but and.
It all from might be early.
Reopening of those markets.
Of reopening, but based on what you're seeing now from what Youre hearing from your banking customers do you believe that there are any sustainable changes coming out of the pandemic and how people are using Atms, perhaps managing four fewer visits.
And if so what if any impact do you think it could have on the business.
Yeah, Good morning Merrill Lynch.
The theme that we continue to hear several of our customers talk about is whether the pandemic is reshape their point of view around.
Branch presence in their branch footprint, so around the size and scale.
Other ATM network, so I'd say, if anything as banks continue to accelerate their own Digitization journey.
Continuing to look at.
Recycling is an important capability on the ATM sites to further shift small business transactions to the ATM away from the branch.
Are they continuing to look at the video capabilities on the ATM to enhance their interaction with their consumers. So we're not seeing or hearing any structural post pandemic expectations at Atms will necessarily have.
A lower role in banking distribution going forward.
Okay. Thank you.
Your next question is from Matt Summerville with D. A davidson.
Yes, just a couple of quick follow ups, maybe gerrard could you give a little bit broader overview on what youre seeing with respect to DN series uptake as it pertains to recycling in North America, Latin America, and EMEA, recognizing it's a little bit more mature and some of the bigger Asian markets.
Yes, Matt in the prepared remarks.
We said that we believe we're in a phase right now where dean.
DN series is showing up really strongly relative to some competitive alternatives are we're seeing.
A very noticeable uptick in demand amongst larger U S banks.
All of which wont necessarily periodic buyers of hardware from Diebold nixdorf So thats.
Very strong sign for us.
We have continued to enjoy strong market presence in Latin America, and those markets have been.
Particularly as certain countries have been strong users of recycling for some time, so we see that trend continuing.
And EMEA has been more mature than the United States and but that all just keep shifting by a few percentage points each year in favor of recycling. So all in all the trend.
Across all markets is continuing to shift in favor of recycling.
And then just with respect.
These metrics I apologize.
If I missed it but periodically you've been updating us as to where you are with certification projects as it pertains to be M series. So maybe if you are able to provide those metrics around how many are underway they have been completed.
Thus far here.
Through the first quarter.
Yes, so for the U S. What's most important are the <unk>.
Net with processes and ensuring that those certifications are complete so those are all now complete and behind us which allows us to.
Take DN series to all natures of banks in that I'd states in terms of the broad accounts I know, Steve will keep me correct here, if I get it wrong, but.
I believe that at the last count we were up at around 240 certifications that were complete but Steve correct me if I'm wrong I, just don't have that number handy it's top of mind.
Yes, Matt will follow up with you separately it looks like Steve's trying to dig it up but we'll follow up with you separately on that.
No problem. Thank you Gerard.
Okay. Your final question is from the line of Justin Bergner with G Research.
Thanks, as well for the follow up.
To build on earlier question do you think the pandemic is creating.
<unk> that are favorable for your retail business.
Looking forward.
Justin there's no doubt that.
Changing consumer and retailer expectations have added further tailwind.
To an existing tailwind that was building around self checkout, so we see that tailwind.
Likely to be in place for several years still to come.
As we see mature markets and self checkout further accelerate the adoption of self checkout and as we see other markets that have been.
Historical Laggards show real interest so I think that the.
Pandemic is has been a nice boost on that front.
On the sales demand as we sit in our prepared remarks, we saw some.
Modest demand and modest growth in point of sale this quarter.
I think we continue to watch how long that trend will sustain itself.
I suspect that in due course this shift will continue to lean more and more in favor of self checkout and perhaps from modestly at the expense of point of sale, but thats not necessarily.
Bad outcome for us given the higher unit economics for us as well as the higher services attach rate, which allows us to drive higher recurring revenue.
Okay, Great and then just lastly is there any element of your guidance, while unchanged that may reflect.
Higher cost inflation pressure or certain.
Sales maybe in the hardware side.
Not had been the potential to come through in a stronger environment because of.
Logistics and supply chain pressures.
Yes, Justin I'll go back to the.
Answer I gave earlier.
From a demand perspective, we're feeling pretty good about this year, both on retail and banking.
Demand might lead one to be perhaps modestly more bullish than how we're currently looking at the year.
Flip side is there is still some issues to work through so.
All in all our view is that the guidance that we've provided is a balanced set of <unk>.
Outcomes and we're feeling positive about our outlook for the year, but clearly we're not through it from only one quarter in and obviously, we'll update the market as we move through the second quarter.
Great. Thank you.
At this.
There are no further questions I'll turn the call back to Mr. <unk> for any closing remarks.
Thanks, everyone I just wanted to follow up to Matt's question on the certification. So we're sitting at about 225 certifications out of about 700 projects and that's up from about 150 certifications at the end of 2020, so with that I wanted to thank everybody for being with US on today's call. If you have follow up questions. Please.
Give me a call or an E mail to Investor relations have a great day.
Thank you everyone.
This concludes today's conference call. Thank you for participating you may now disconnect.
Okay.
I can hear you now can you hear me.
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[music].
Thank you.