Q4 2021 Diebold Nixdorf Inc Earnings Call
Speaker 1: shorter queues, shorter wait times, by increasing your sales for this period year over year.
Our wait times are increasing their sales for the period year over year.
Speaker 1: This is now the 10th consecutive year that we have achieved this performance goal and a testament to our services capability.
This is now the 10th consecutive year that we've achieved this performance goal and a testament to our services capability.
Speaker 1: We also implemented this program with another large European retailer with the same success, proving this is a repeatable model.
We also implemented this program with another large European retailer with the same success.
<unk>. This is a repeatable model for retailers.
Speaker 1: We believe delivering or exceeding on the service expectations of our customers is one of the best foundations for putting additional technology into the field.
We believe delivering or exceeding on our service expectations of our customers.
He is one of the best foundation for putting additional technology into the field.
Speaker 1: And both of these retailers placed additional self-checkout orders with us in December .
And both of these retailers placed additional self checkout orders with us in December .
Speaker 1: We were glad to see the trust our retailers have in us to continue to deliver quality services for them and their customers.
We were glad to see the trust our retailers have in us to continue to deliver quality services to them and their customers.
Further augmenting our strength in services I'd like to comment briefly now about the strides we've made in the fourth quarter into EV charging stations and especially in Europe .
Speaker 1: Further augmenting our strength in services, I'd like to comment briefly now about the strides we made in the fourth quarter into EV charging stations, especially in Europe .
Speaker 1: Today the EV charging value chain is fragmented. Multiple players, including startups, mid-sized companies, and large electronics conglomerates are puff-heating into space.
Today, the EV charging value chain this fragmented multi.
Multiple players, including startups midsized companies and large electronics conglomerates are competing in this space.
Speaker 1: Additionally, there are multiple roles along the value chain that are inconsistent.
Additionally, there are multiple roles along the value chain that are inconsistent.
Speaker 1: This is a large and growing market with significant demand.
This is a large and growing market with significant demand.
By 2026.
Speaker 1: the number of public EV charging stations in Europe and the United States will be greater than the number of ATM devices.
The number of public EV charging stations in Europe , and the United States will be greater than a number of ATM devices.
So with more EV drivers, especially.
Speaker 1: especially in Europe where they are less likely to have home charging opportunities.
Especially in Europe , where there are less likely to have home charging opportunities.
Speaker 1: and rental and fleet cars and public transportation moving to more electric vehicles, there will be a need for more public charging stations.
And rental and fleet cars.
And public transportation moving to more electric vehicles.
There will be a need for more public charging stations.
Currently there are over 40 relevant OEM or charge point operators globally.
Speaker 1: Currently, there are over 40 relevant OEM or charge point operators globally, and we are working or in talks with many of them.
And we are working talks with many of them.
Speaker 1: Our global service capability, including our technicians and our skills in global spare parts, logistics management and multilingual help desk.
Our global services capability, including our technicians, and our skills and global spare parts logistics management and multilingual help desks.
Speaker 1: have resonated with several market participants that lack access to these skills as they look to scale their own businesses.
Have resonated with several market participants.
Access to these skills as they look to scale their own businesses.
As of Q4 2021.
Speaker 1: We are contracted for several thousand charging stations in Europe and the US.
Our contracted for several thousand charging stations in Europe , and the U S.
Speaker 1: with a short-term pipeline of three times the size of our current base.
With a short term pipeline of three times the size of our card base.
Speaker 1: The team has set a target to service over 50,000 charging stations by the end of 2022.
The team has set a target to service over 30000 charging stations by the end of 2022.
Speaker 1: One notable recent win that I would like to pull out is with Compleo, one of the leading full service providers with charging technology in Europe .
One notable recent win that I would like to pull out this with <unk> one.
One of the leading full service providers with charging technology in Europe .
Speaker 1: With this partnership, DNN will provide a full range of managed services for initially over 1,000 of Compleo's DC fast charging stations.
With this partnership DN will provide a full range of managed services for initially over 1000 of compliance DC fast charging stations and.
Speaker 1: in public locations across Germany with the potential for expansion.
And public locations across Germany, with the potential for expansion.
Speaker 1: Lastly, as you know, diversity and sustainability have been an important focus for us as a company.
Lastly, as you know diversity and sustainability has been an important focus for us as a company.
Speaker 1: I'm proud to note that in 2021, females accounted for over 60% of our senior hires at the vice president and above level. We have to stay focused.
I am proud to note that in 2021 female accounted for over 60% of our senior hires at the vice president and above level.
And we made important strides environmentally.
Speaker 1: producing our scope one and two carbon emissions by six percent.
Using our scope, one and two carbon emissions by 6%.
Our shareholder letter details further accomplishments on this front.
Speaker 1: Our shareholder letter details further accomplishments on this front.
Speaker 1: And I want to emphasize how grateful I am to our teams for their work and dedication in this important area.
And I want to emphasize how grateful I am to our teams for their work and dedication in this important area.
As Christine mentioned earlier.
Speaker 1: We've also announced this morning that Octavia Markins will be the next CEO of Devo Next Office. We'll be the next CEO of Devo Next Office.
We've also announced this morning that our target markets will be the next CEO of Diebold Nixdorf.
Over the past four years, we've undertaken a comprehensive restructuring and transformation efforts.
Speaker 1: Over the past four years, we have undertaken a comprehensive restructuring and transformation effort.
Speaker 1: the company has made significant strategic and operational progress.
The company has made significant strategic and operational progress.
We are growing profitability.
Speaker 1: We have grown profitability, gained market share through our D& series, and self-checkout solutions, and entered new growth markets. And I'm proud that we've...
Gain market share through our DN series, and self checkout solutions and.
And enter new growth markets.
And I'm proud that we've achieved these goals.
Speaker 1: while also delivering four years of consecutive improvements in customer satisfaction.
While also delivering four years of consecutive improvements in customer satisfaction.
We enter 2022 with a strong backlog.
Speaker 1: We enter 2022 with a strong backlog, a seasoned executive team, and operations that have proven to be resilient despite the pandemic and a challenging macroeconomic backdrop.
A seasoned executive team.
In operations that are proven to be resilient, despite the pandemic and a challenging macroeconomic backdrop.
Speaker 1: As we look ahead to move past the pandemic and build further momentum in growth areas like EV charging services and payments.
As we look ahead to move past the pandemic and build further momentum in growth areas like EV charging services and payments.
Speaker 1: While continuing to optimize our core businesses in retail and banking, it is the right time for Octavio to assume the CEO role.
While continuing to optimize our core businesses in retail and banking.
It is the right time for Octavio to assume the CEO role.
Octavio needs no introduction to many of our customers and to our employees.
Speaker 1: Octavia needs no introduction to many of our customers and to our employees.
Speaker 1: He has been leading our global banking segment with responsibility for approximately 70% of the company's revenues, and he's deeply passionate about our customers and our business.
He has been leading our global banking segments with responsibility for approximately 70% of the company's revenues.
And is deeply passionate about our customers and our business.
Speaker 1: He has a deep understanding of our business and is the right person to lead people next off into the future.
He has a deep understanding of our business.
And is the right person to lead Diebold nixdorf into the future.
Speaker 1: I'll remain a member of people mixed off board of directors.
I will remain a member of Diebold Nixdorf board of directors.
Speaker 1: until my term expires at the 2022 shareholder meeting.
Until my term expires at the 2022 shareholder meeting.
Speaker 1: I will also be working closely with Octavio and the rest of the leadership team as an advisor for a few months to ensure the
I'll also be working closely with Octavio and the rest of the leadership team as an advisor for a few months.
To ensure a smooth transition.
It has been a tremendous privilege serving as CEO of Diebold nixdorf.
Speaker 1: It has been a tremendous privilege serving as CEO of Diebold Nexdorf.
Speaker 1: And I believe that we have materially advanced the operational and strategic direction of the organization.
And I believe that we have materially advanced the operational and strategic direction of the organization.
Speaker 1: I'd like to thank my colleagues on the executive team, the board, and all of the employees of D-Bo Nextoff for their support through this journey and to congratulate Dr. Fabio on his appointments.
I'd like to thank my colleagues on the executive team.
The board and all of the employees of Diebold Nixdorf for their support through this journey and.
And to congratulate octavio on his appointments.
Assets will also be my last earnings call.
Speaker 1: I would like to also thank the investment community for your support and ongoing.
I would like to also thank the investment community for your support.
And ongoing interest in the company.
I'd like to hand, the call over to Octavio for a brief introduction.
Speaker 1: I'd like to now hand the call over to Octavio for a brief introduction.
Thank you Gerard.
Speaker 2: Thank you, Gerard. It has been a pleasure being part of our journey under your leadership.
Thanks for being part of our journey under your leadership.
Speaker 2: I am truly excited to be the world expert going forward.
I am truly excited to lead Diebold nixdorf going forward.
Speaker 2: I have been with Deebo's next door since 2014 and have thoroughly enjoyed contributing to our evolution to a leader of self-service banking and retail technology.
I have been with Diebold nixdorf since 2014.
And thoroughly enjoyed contributing to our evolution to a leader of self service banking and retail technology.
Speaker 2: I have had the distinct pleasure of working closely with our customers across the globe.
<unk> has I think been pleasure of working closely with our customers across the globe.
Speaker 2: When I initially joined Diem, I worked closely with our Latin America customers and then managed our America's banking customer segment. And for the past 18 months, have been working closely with our global banking customers.
With 90 initially joined the yen I worked closely with our Latin American customers, and then manage our Americas banking customer segment.
For the past 18 months have been working closely with our global banking customers.
Speaker 2: I have seen firsthand how critical a role we play for our customers and how we can continue to innovate to serve them with a broader range of solutions.
I have seen firsthand how critical role we play for our customers and how we can continue to innovate to serve them with a broader range of solutions.
Speaker 2: We have a passionate and talented employee base that have been instrumental to the progress of the company.
We have a passionate and talented employee base that have been instrumental to the progress of the company.
Speaker 2: I am also energized by our growth opportunities like our strong self-checkout growth in retail, our managed services efforts in banking and retail.
I am also energized by our growth opportunities like our strong self checkout growth in retail are managed services efforts in banking and retail.
Speaker 2: along with our newer but equally interesting opportunities in payment and EV charging services.
Along with our newer but equally interesting opportunities in payments and EV charging services.
Speaker 2: We have been rigorous in execution on improving our efficiency as a company, and I look forward to further enhancing our execution. Thank you, and I will now turn it over to Jeff.
We have been <unk> execution on improving our efficiency as a company and I look forward to further enhancing our execution.
Thank you and I will now turn it over to Jeff.
Speaker 2: Thank you, Octavio, and I look forward to our continued work together.
Thank you <unk> and I look forward to our continued work together.
Speaker 2: I also want to thank Gerard for his leadership during the past four years, which are crucial in helping transform people next to our operating model to what it is today.
I also want to thank Gerard for his leadership during the past four years, which are crucial in helping transform diebold nixdorf operating model to what it is today.
Speaker 2: The team and I appreciate your contributions and wish you well on your future endeavors.
The team and I appreciate your contributions and wish you well on your future endeavors.
Speaker 2: In the year ahead, we look forward to moving past the global macro challenges we have experienced by leveraging our mitigation strategies and delivering for our customers and shareholders.
In the year ahead, we look forward to moving past the global macro challenges, we've experienced by leveraging our mitigation strategies and delivering for our customers and shareholders.
Speaker 2: People at Nixarf is well-positioned to capitalize on the strong demand for our products and solutions as customers continue to desire our market-leading devices, services, and software, and as the market moves toward a self-service automation focus driven by consumers.
<unk> is well positioned to capitalize on the strong demand for our products and solutions as customers continued to desire our market, leading devices services and software and as the market moves toward a self service automation focus driven by consumers.
Speaker 2: My prepared remarks will include references to certain non-GAAP metrics, such as adjusted EBITDA.
My prepared remarks will include references to certain non-GAAP metrics, such as adjusted EBITDA.
As a reminder, please see our shareholder letter for the full financial details from the quarter and full year.
Speaker 2: As a reminder, please see our shareholder letter for the full financial details from the quarter and full year.
Speaker 2: Here I will highlight a few of our key performance metrics.
Sure I will highlight a few of our key performance metrics.
Speaker 2: In the fourth quarter, total revenue was $1.06 billion, a decrease over fourth quarter 2020 of approximately 4% as reported, and a decrease of approximately 1%, excluding the foreign currency impact of $22 million and the $13 million impact from divested business.
In the fourth quarter total revenue was $1 6 billion a decrease over fourth quarter 2020 of approximately 4% as reported and a decrease of approximately 1%, excluding the foreign currency impact of $22 million.
And the $13 million impact from divested businesses.
Speaker 2: adjusted for foreign currency and divestitures. Product revenue increased approximately 4%.
Adjusted for foreign currency and divestitures.
Product revenue increased approximately 4%.
Speaker 2: Services revenue decreased approximately 6% and software revenue increased approximately 3% over fourth quarter 2020.
Services revenue decreased approximately 6%.
And software revenue increased approximately 3% over fourth quarter 2020.
Speaker 2: During the quarter, we experienced delayed revenue due to extended outbound transport times and inbound component delays.
During the quarter, we experienced delayed revenue due to extended outbound transport times and inbound component delays.
Speaker 2: This primarily impacted the U.S., Latin America, and certain APAC countries and increased our revenue deferral to 2022 by $30 million to a total of $150 million.
This primarily impacted the U S Latin America, and certain APAC countries and increase our revenue deferral through 2022 by $30 million to a total of $150 million.
On a sequential basis total revenue increased approximately 11%.
Speaker 2: On a sequential basis, total revenue increased approximately 11%.
Full year 2020 revenue was $3 905 billion that was driven by the by demand for our DN series Atms.
Speaker 2: Full-year 2020 revenue was $3.905 billion and was driven by demand for our DM series ATMs, especially our cash recyclers, our self-checkout devices, and ATT&CK services, offset by approximately $150 million of deferred revenue due to supply chain and logistics challenges.
Especially our cash recyclers.
Ah self checkout devices and attached services offset by approximately $150 million of deferred revenue due to supply chain and logistics challenges.
Speaker 2: On a year-over-year basis, 2021 revenue was approximately flat as compared to 2020, as reported, and also flat excluding a foreign currency benefit of $74 million and a $60 million impact from divested business.
On a year over year basis, 2021 revenue was approximately flat as compared to 2020 as reported and also flat, excluding a foreign currency benefit of $74 million and a $60 million impact from divested businesses.
Speaker 2: Adjusted for foreign currency and divestitures, product revenue increased approximately 4%, services revenue decreased approximately 4%, and software revenue increased approximately 2% over the full year 2020.
Adjusted for foreign currency and divestitures product revenue increased approximately 4% services revenue decreased approximately 4% and software revenue increased approximately 2% over the full year 2020.
For the fourth quarter, we reported adjusted EBITDA of $126 million and adjusted EBITDA margin of 11, 9%.
Speaker 2: For the fourth quarter, we reported adjusted EBITDA of $126 million and adjusted EBITDA margin of 11.9%.
Speaker 2: Four-quarter adjusted EBITDA results reflect a reduction in operating expenses fully offset by the decline in gross profit due to the revenue depral and non-billable inflation of approximately $30 million.
Fourth quarter adjusted EBITDA results reflect a reduction in operating expenses fully offset by the decline in gross profit due to the revenue deferral and non billable inflation of approximately $30 million.
Speaker 2: Full year 2021 adjusted EBITDA was $415 million, the lower end of our guidance range, primarily due to supply chain challenges, which increased the deferral of revenue, as I mentioned earlier, to approximately $150 million.
Full year 2021, adjusted EBIT EBITDA was $415 million the lower end of our guidance range, primarily due to supply chain challenges, which increased to the deferral of revenue as I mentioned earlier to approximately $150 million.
Speaker 2: Non-billable inflation for the year was approximately $50 million.
Non billable inflation for the year was approximately $50 million.
Speaker 2: Lastly, we delivered pre-cash flow of $407 million for the fourth quarter, resulting in $101 million for the fiscal year 2021.
Lastly, we delivered free cash flow of $407 million for the fourth quarter, resulting in $101 million for the fiscal year 2021.
Speaker 2: This record fourth quarter free cash flow was achieved through tremendous efforts of our sales, operation, and finance organizations.
This record fourth quarter free cash flow was achieved through tremendous efforts of our sales operation and finance organizations.
Speaker 2: The fourth quarter marks the conclusion of the D&L transformation and restructuring program.
The fourth quarter marks the conclusion of the DN now transformation and restructuring program.
Speaker 2: As a reminder going forward we will not present non-GAAP adjustments to earnings except for the amortization of intangible purchase accounting assets and when appropriate non-recurring items such as M&A activities.
As a reminder, going forward, we will not present non-GAAP adjustments to earnings.
For the amortization of intangible purchases accounting assets than one appropriate nonrecurring items, such as M&A activities.
Speaker 2: Our revenue guidance for the full year 2022 is $4 to $4.2 billion, which reflects approximately $150 million in revenue deferral from 2021 to 2022.
Our revenue guidance for the full year 2022.
Four to $4 2 billion.
Which reflects approximately $150 million in revenue deferral from 2021 2022.
Speaker 2: partially offset by model divestitures logistics and supply chain disruption.
Pricing growth, partially offset by model divestitures and terminated low profit service contracts.
And the potential ongoing logistics and supply chain disruptions.
Speaker 2: While we are very encouraged by the demand environment for our solutions, our guidance range also reflects caution regarding the timing of global logistics and supply chain environments.
While we are very encouraged by the demand environment for our solutions. Our guidance range also reflects caution regarding the timing of global logistics and supply chain environment.
Speaker 2: Our adjusted EBITDA outlook is $440 to $460 million, taking into account gross profit growth due to increased revenue and a model gross margin expansion of approximately 100 basis points, partially offset by an increase in operating expenses.
Our adjusted EBITDA outlook is $440 to $460 million taking into account gross profit growth due to increased revenue in our model gross margin expansion of approximately 100 basis points, partially offset by an increase in operating expenses.
Adjusted EBITDA will likely be weighted towards the second half of 2022, as our pricing and incremental cost management actions begin to take hold and volume builds throughout the year.
Speaker 2: Adjusted EBITDA will likely be weighted towards the second half of 2022 as our pricing and incremental cost management actions begin to take hold and volume builds throughout the year.
Speaker 2: Our free cash flow outlook is $130 to $150 million, reflecting our EBITDA outlook, normalization of working capital, and culmination of the D&L transformation and restructuring program and related payments.
Our free cash flow outlook is $130 million to $150 million, reflecting our EBITDA outlook normalization of working capital and culmination of the DN now transformation and restructuring program and related payments.
It should be noted that our free cash flow guidance does not reflect any benefit from a potential debt refinancing.
Speaker 2: It should be noted that our free cash flow guidance does not reflect any benefit from a potential debt refinance.
Margins to be comparable to the fourth quarter 2021, due to the continuation of non billable inflation.
Speaker 2: to be comparable to the fourth quarter 2021 due to the continuation of non-billable inflation.
Okay.
Speaker 2: Additionally, we will experience an increase in first quarter operating expenses due to wage inflation and growth in infrastructure investment.
Additionally, we will experience an increase in first quarter operating expenses due to wage inflation and growth in infrastructure investments.
Speaker 2: As such, we expect the first quarter to be the low point for 2022 operating profit in March.
As such we expect the first quarter to be the low point for 2022 operating profit and margin.
Speaker 2: That concludes my review of the results. With our transition to a new CEO just being announced, Gerard and Octavio are now communicating with employees and key customers this morning. And so I will be happy to take your questions.
That concludes my review of the results with our transition to a new CEO just been announced Gerard enact aveo are now communicated with employees and key customers. This morning, So I will be happy to take your questions.
Operator over to you.
Thank you.
Speaker 3: Thank you. As a reminder, if you'd like to ask a question today, please press star followed by one on your telephone keypad now. When preparing to ask a question, please ensure your headset is fully plugged in and unmuted locally. That's star followed by one on your telephone keypad.
A reminder, if you'd like to ask a question today. Please press star followed by one on your telephone keypad now with the parents asked a question. Please ensure your headsets fully plugged in an unlimited locally that star followed by one on your telephone keypad.
Our first question today comes from Matt Summerville with D. A Davidson. Please go ahead your line is open.
Speaker 3: Our first question today comes from Matt Somerville of DA Davidson. Matt, please go ahead, your line is open.
Speaker 4: Yes. Hey, Jeff. So, a couple questions. First, maybe we can start with free cash flow. If we look at the $100 million you did in 21 and simply add back, say, $50 million of cash restructuring related costs that you would have encountered in 21, we're at 150. So, help me understand what the pluses and minuses are that might be weighing on the cash flow outlook and where, you know, upside levers may be therein.
Yeah, Hey, Jeff So a couple of questions.
Maybe we can start with free cash flow. If we look at the 100 million you did in 'twenty, one and simply add backstage $50 million of cash restructuring.
Related costs that you would have encountered in 'twenty. One we're at 150. So help me understand what the pluses and minuses are that might be weighing on the cash flow outlook, and where upside leverage may be there.
Speaker 2: Yeah, Matt, that's a good question. Let's look at what happened in 21 because the answer is related to normalization of working capital. We are carrying
Yes, Matt.
Yes, good question.
Let's look at what happen in 'twenty, one because it's it's Nick.
My answer is related to the normalization of working capital.
We carry we are carrying.
Speaker 2: access inventory into 2022 out of 2021, and it's directly related to that $150 million of deferred revenue. Much of that inventory associated with that $150 million is on our balance sheet.
Access inventory into 2022 out of 2021, and it's directly related to that $150 million of deferred revenue much of that inventory associated with that $150 million.
It is on our balance sheet at year end.
Speaker 2: So we need to normalize our inventory investment.
So we need to normalize our inventory investment.
Speaker 2: And with that comes a normalization of accounts payable relative to term.
And with that comps a normalization of accounts payable relative to to terms.
Speaker 2: So those are two pieces of it. The third piece is working with our customers and Octavio's group did a really good job doing this, is we have certain customers.
So those are two pieces of it and the third piece is working with our customers and <unk> group did a really good job doing us as.
As we had certain customers.
Speaker 2: that was prepaid for the inventory we were carrying for their purchase orders. So if they had ATMs in the pipeline but we couldn't get it to revenue recognition because of supply chain and logistics delays, there were certain customers that prepaid. You're going to see that on our balance sheet in the deferred revenue number.
Prepaid for the inventory we were carrying for their purchase orders so they had.
Atms in the pipeline, but we couldn't get it to.
Revenue recognition because of.
Supply chain and logistics delays, there were certain customers that prepaid and youre going to see that on our balance sheet into deferred revenue number.
Speaker 2: So that will unwind to some extent. The net effect of that, we are currently modeling, that's the variable in the free cash flow. So that's why we're giving the guidance we're providing, it's how does that wash out through free cash flow.
So that will unwind to some extent the net effect of that we are currently modeling that's the variable.
On the free cash flow. So that's why we're giving the guidance we're providing this how does that wash off through free cash flow.
Speaker 4: got it and then in the fourth quarter uh opex seemed uh
Got it and then in the fourth quarter Opex seem.
Speaker 4: be quite low, so maybe help me understand the pluses and minuses there. And then I want to maybe get a little more detail, Jeff, as to how we should be thinking about kind of the first half, second half cadence.
To be quite low so maybe help me understand the pluses and minuses there and then I want to maybe get a little more detailed Jeff as to how we should be thinking about Colorado. The first half second half cadence relative to your prepared remarks in the <unk>.
Speaker 4: relative to your prepared remarks. In the past, people have seemingly been willing to give percentages on revenue and EBITDA by half, and I was hoping maybe you would do that again today. Thank you.
Past diebold and seemingly unwilling to give percentages on revenue and EBITDA by half was hoping maybe you would do that again tonight. Thank you.
Yes, thanks, Beth so yes.
Speaker 2: Yeah, thanks, Beth. So, yeah, it's, uh, OpEx was low.
Opex was low.
Speaker 2: into fourth quarter. If you go back to where we were modeling 21, our expectation for OPEX was somewhere in the
In the fourth quarter.
If you go back to where we were modeling 'twenty one.
Expectation for Opex was was somewhere in the.
770 $780 million range.
Speaker 2: 770 to 780 million dollar range.
Speaker 2: with about $640 million of it to $50 million of it being SG&A. The reduction, you'll see that there's approximately a $35 million reduction on actuals compared to that model. That difference
With.
$640 million of at the $50 million of Athene.
SG&A in the <unk>.
Reduction you'll see that there is approximately a $35 million reduction on actuals compared to.
To that model of that difference.
Yes.
Speaker 2: variable incentive compensation relative to the results of the organization.
Variable incentive compensation relative to the results for the organization.
So as we look at that.
Speaker 2: at 2022 those programs will
At 2022 of those those programs world.
Speaker 2: reset, bringing our base back off to that 770 to 780.
The reset, bringing our base back up to that $7 70 to 780.
Speaker 2: And then we'll experience wage inflation and SG&A in 22. And then we have certain investments we're making in the growth projects that Gerard Notcavio touched on.
And then we'll experience.
The wage inflation and SG&A in 'twenty, two and then we have certain investments, we're making in the growth projects.
Gerard <unk> touched on.
Speaker 2: and also incremental infrastructure investments.
And also incremental.
Incremental infrastructure.
Estimates.
Speaker 2: Mainly related to our distribution subsidiary network, where we need to optimize the efficiency of the model, we need to upgrade and standardize processes in our 60 owned distribution subs. And so we've modeled that into 2022. Okay.
Mainly related to our distribution subsidiary network, where we need to to optimize the efficiency of the model.
We need to upgrade and standardize processes in our 60 owned distribution subs and so we've modeled that into.
2022.
I'd say its.
Speaker 2: it's not a permanent cost, but it is a project cost that we're going to begin realizing in 2022. We no longer, as I mentioned earlier, we no longer
It's not a permanent cost but it is.
Our project cost that we're going to begin.
Realizing in 2022.
We no longer.
As I mentioned earlier, we no longer.
<unk>.
Speaker 2: are going to adjust for those types of non-GAAP adjustments. So it will be in our results, in our operating results for...
Are going to adjust for those types of non gas.
<unk> so it will be in our results in our operating results for.
Speaker 2: for 2022. So the other question was cadence relative to revenue. We have not provided that. I would say this, because the supply chain
For 2022, so the other question was.
Cadence relative to.
Revenue.
We have not provided that I would say that because of the supply chain.
Speaker 2: When we look at our revenue payments, it's going to be back-end loaded to some extent.
When we look at our revenue cadence, it's it's going to be.
Backend loaded.
To some extent.
I would say that the front half of the year.
Speaker 2: Let me just, let me do the quick math just to verify the number.
Let me just let me do the quick math just to verify the number.
It's going to be.
Speaker 2: Just slightly less, around 45 to 46 percent of total revenue.
So slightly less around 45% to 46% of total revenue.
So it's not extraordinary because you remember we are a $150 million of deferred revenue coming in.
Speaker 2: So it's not extraordinary, because remember, we have $150 million of deferred revenue coming in in the 22 from 21. The difference from an EBITDA perspective is going to be the front end of the year, especially the first quarter.
End of 'twenty two from 'twenty one.
The difference from a EBITDA perspective is going to be the front end of the year, especially the first quarter.
Speaker 2: is much of that revenue coming out of backlog does not have price increase into it. As you recall, we made a business decision that we were not going to go back and reprice approved purchase orders from our customers, especially if they were scheduled purchase orders, so they were already scheduled into the manufacturing process.
As much of that revenue coming out of backlog does not have price increase into it as you recall, we made a business decision that we were not going to go back and reprice.
Approved.
Purchase orders from our customers, especially if they were scheduled purchase orders. So they were already scheduled into the manufacturing process.
Speaker 2: So the first quarter is going to get hit by a similar non-billable inflationary effect that the fourth quarter. That will obviously change as we work through that backlog, and we feel comfortable, and we said today, that we anticipate a 100 basis point improvement in gross margin for the year. We will have an unfavorable.
So the first quarter is going to get hit by a similar non available inflationary effect that the fourth quarter that will.
Obviously changes as as we work through that backlog.
And we feel comfortable and we said today that we anticipate 100 basis point improvement in gross margin for the year.
We will have an unfavorable.
Speaker 2: comparison in the first quarter. Remember, we had a very good first quarter in 21. So from a revenue perspective, we'll be good in the first quarter. But from a margin perspective,
Comparison in the first quarter remember, we had a very good first quarter in 'twenty, one so from a revenue perspective.
We'll be good in the first quarter, but from a margin perspective.
Speaker 2: we're going to experience a decline in margin. That's why we've said we were going to be closer to the fourth quarter margin in the first quarter of 22. That'll improve as we go forward, and we'll get back to a more normalized margin, in particular, in the second half of the year.
We're going to experience a decline in margin. That's why we've we said we were going to be closer to.
The fourth quarter margin in the first quarter of 'twenty, two that will improve as we go forward that will get us back to a more normalized margin in particular in the second half of the year.
Speaker 2: for op-ex and you already asked the op-ex question, but we will start seeing that wage inflation and those incremental investments in growth and infrastructure beginning in the first quarter. That's why we believe that the first quarter operating income will be the low point for the year and then build throughout the year.
For for Opex, and Urs Opex question, but we will start seeing.
That wage inflation and those incremental investments in growth.
<unk>.
And in infrastructure began in the first quarter. That's why we believe that the first quarter operating.
The income will be the low point for the year and then build throughout the year.
Got it thanks, Jeff I'll get back in queue.
Sure Matt.
Speaker 3: The next question is from Karthik Mehta from North Coast Research. Karthik, your line is open.
The next question is from Kartik Mehta from Northcoast Research Your line is open.
Speaker 3: Hey, good morning, Jeff. Jeff, I wanted to go back to what you said about the price increases and those going in the second half. I'm wondering, I know on the service side, both you and others are trying to put through price increases, and I'm wondering how the banks are reacting and how successful you have been to get the price increases off the inflation pressures you're seeing.
Hey, good morning, Jeff Jeff I.
I wanted to go back to hear what you said about the price increases.
And.
It's going in the second half I'm wondering.
I know on the service side.
Both you and others are trying to put through price increases and I'm wondering how the banks are reacting and success.
Successful you have been to get the price increases off the inflation pressures you're seeing.
Speaker 2: Yeah, you know, and for us, and this is every year for us, we've always had wage inflation, and services obviously are wage intensive. So we and our competitors that provide services are always experiencing wage inflation. The pricing increase for services, and this is an annual level of that. Those service contracts
Yes.
For us and this is every year for us we've always had.
Wage inflation in services, obviously are our wage intensive.
So we and our competitors that provide services are already experiencing.
Wage inflation the pricing increase for services.
And this is an annual event for.
Those service contracts.
Renewal.
Speaker 2: every year, or if they're long-term, they have a provision relative to inflation adjustment for every year. So every year in the fourth quarter, we go through and adjust service pricing for inflation. And it's generally, you know, every contract is a little different, but they're generally tied to wage inflation. So that has happened.
Every year or if they're long term they have a provision relative to inflation adjustment for every year. So every year in the fourth quarter.
Go through.
Adjust service pricing for for inflation and it's it's generally average contracts a little different but they are generally tied to wage inflation. So that has happened.
The non billable inflation effect that we experienced in 'twenty, one and that we will experience in the first quarter 'twenty two isn't it from.
Speaker 2: inflation effect that we experienced in 21 and that we will experience in the first quarter 22 isn't from
Speaker 2: services, wage inflation, it's from raw material inflation and increased logistics costs. And so it goes directly back to product price.
Services wage inflation from.
Raw material inflation, and an increased logistics costs.
So it goes directly back to product pricing.
Speaker 2: So product pricing for us, we did put through price increases. It happened in the third quarter and continues to happen. And there's some level of pricing pressure within the marketplace, depending on market and competition. And we all know who the aggressive pricing competitors are. So it varies by region.
So product pricing for us.
Just put it through.
The price increase this has happened in the third quarter and continues to asset and there is some level of pricing.
Pressure within the marketplace, depending on market and competition and we all know who the aggressive pricing.
Competitors are so it varies by region.
Speaker 2: Um, and and again, we did not go back. So if you had an improved P. O. At in the beginning of second quarter.
And again, we did not go back if you had an improved <unk> acid.
At the beginning of second quarter.
Speaker 2: into the, I'm sorry, at the end of second quarter into the third quarter and as agreed upon pricing, we did not go back and demand a pricing adjustment to our customer base.
Into the end of the I'm sorry at the end of the second quarter into the third quarter at agreed upon pricing we did not go back.
Demand and pricing adjustment to our customer base.
Speaker 2: So that backlog, and you know our backlog is pretty large, so we're going to move in at 22 with a backlog of just under, and we'll disclose it to 10k, but it's going to be somewhere just under $1.1 billion for product backlog.
So that backlog and you know our backlog is pretty large so we're going to we're going to move into 'twenty two.
The backlog of just under and we will disclose at the 10-K, but it's going to be somewhere just under $1 1 billion for product backlog.
Speaker 2: And that backlog, our backlog is really based on an 18-month cycle.
And that backlog our backlog is really based on an 18 month cycle.
Speaker 2: So at any point in time, it's really dependent upon when it's scheduled for installation. So we are still burning through the backlog that existed during the third quarter. So again, the first quarter is gonna get hard because the product that we'll be recognizing, have revenue recognition in the first quarter.
So at any point in time.
It's really dependent upon one is scheduled for installation. So we are still bringing through the backlog that existed during the third quarter. So so again, the first quarter is going to get hard because the product.
That will be recognizing revenue recognition in the first quarter.
Speaker 2: a large percentage of that is not going to have a price increase. And as we move through the year, and we turn over that backlog, we'll see those price increases come through in products. We're also going to get to the point, quite frankly, that
A large percentage of that is not going to have.
Price increase and as we move through the year, we'll and we turn all of that backlog, we will see those price increases come through and products will also going to get to a point quite frankly.
Then.
We will be able to <unk>.
Speaker 2: we'll be able to, you know, we'll have a more favorable comparison as we, as we, in fact, we think that as we move into the back half of the year, we're going to see some logistics deflation costs as the logistics pipeline and supply chain clear out. The range in our revenue recognition, quite frankly, is it's worst case that things continue as they are in the back half of
More favorable comparison as we as we in fact, we think that as we move into the back half of the year, we're going to see some logistics deflation cost as as the logistics pipeline and the supply chain clearer.
The range in our revenue recognition quite frankly.
Its worst case that things continue as they are.
In the back half of 'twenty, one to a point, where we think that there is a break in and logistics backlog in the higher end the revenue can be recognized.
Speaker 2: 21 to a point where we think that there's a break in logistics backlog and the higher end of revenue can be recognized.
Speaker 2: So we just have a very, that's a long answer to a simple question card, but it's really related to the first quarter inflation and where we're at in the pricing cycle for products.
We just have a very sort of answered it is a long answer to a simple question kartik.
It's really related to.
The first quarter installation and where we're at in the pricing cycle for products.
Speaker 3: That was helpful, Jeff. Thank you. And the second question, I just wanted to understand, I know everybody out there is having a hard time finding labor, and I'm wondering on the service side, if you've been able to find labor you need and meet SLAs for the banks and retailers?
No that was helpful. Jeff. Thank you and the second question I just wanted to understand I know everybody out there is having a hard time, finding labor and I'm wondering on the service side.
If you've been able to.
<unk> labor, you need and meet at delays for the banks and retailers.
Speaker 2: Yeah. We and everybody else obviously have challenges. Our recruiting people have done a really good job. Talent retention is a primary key for us in the model going into 22.
Yes.
We and everybody else obviously have challenges are.
Our recruiting people have done a really good job.
Talent retention as is.
As the primary key for us in the model going into 'twenty two.
Speaker 2: So far, we've been able to do it. I would say that overtime is up.
So far we've been able to do it.
I would say that over time is up.
And.
Speaker 2: You can only do that so long to your workforce, but they've done a really good job. The service organization has done a really good job of managing through that. But it is a challenge, and it is a risk factor as we look into 22, but so far, we've been able to manage through it.
You can only do that so long to your workforce, but they've done a really good job. The service organization has done a really good job of managing through that.
But it is a challenge and it is.
It is a risk factor as we look into 'twenty, two but so far we've been able to manage through.
Hey, Thank you so much I appreciate it.
Sure. Thanks.
Speaker 3: The next question is from Matt Bronson of Wetbush. Matt, please go ahead.
The next question is from Matt <unk> of Wedbush. Please go ahead.
Hey, Thanks for taking my question.
Speaker 4: Hey, thanks for taking my question. Jeff, I really want to drill down on the revenue outlook. So if I step back to early 2021, I know it was a long time ago, but you guys were looking for $3.9 billion to $4.1 billion in revenues, and it sounded like prior to the supply chain disruptions that if anything you were tracking to the higher end of that target.
Jeff.
I really want to drill down on the revenue outlook.
If I step back to early 2021.
So it was a long time ago, but.
You guys were looking for $3 9 billion to $4 1 billion in revenues and it sounded like prior to the supply chain disruptions that if anything you were tracking to the higher end of that target.
Speaker 4: Now for 2022, you're guiding for $4 to $4.2 billion, and part of that is a benefit from $150 million in product that's been pushed into the current year. What I'm really trying to get at is, I know there are some divestitures that are impacting revenue, but it sounds like you're going to see higher pricing, which I think would be a bigger tailwind than any revenue that went from the divestiture.
Now for 2022, Youre guiding for four to $4 2 billion.
And part of that is a benefit from a $150 million.
Product that's been pushed into the current year and what.
What I'm really trying to get at is I know there are some divestitures that are impacting revenue, but it sounds like youre going see higher pricing, which I think would be a bigger tailwind than any revenue headwind from the divestitures. So how do I think about that guide in the context.
Speaker 4: So how do I think about that guide in the context of your previous outlook for 2% to 4% revenue growth, where the implied guide, unless I'm assuming steadier or higher backlog exiting the year, you wouldn't get any growth. If anything, the midpoint would suggest that there's a slight decline.
Your previous outlook for 2% to 4% revenue growth were.
The implied guide unless im assuming steadier or higher backlog exiting the year.
You wouldn't get any growth if anything.
Good point.
Yes.
There is a slight.
Decline in revenues.
Yes, yes, that's a good question.
Speaker 2: Yeah, yeah, that's a good question. And and obviously, one that we've talked about internally.
And obviously.
One that we've talked about internally.
Speaker 2: are we being too circumspect relative to guidance? I think that's what the question is. So when we look at, and I'm going to give you some numbers, so it is $150 million deferred. So we have a big backlog of product, right? Pretty steady in services. We do see some
Our reveal two circumspect relative to guidance I think it's for the questions.
When we look at I'm going to give you some numbers.
So it is $150 million.
Deferred.
So we have a big backlog of product pretty.
Pretty steady and services.
We do we do see some <unk>.
Speaker 2: especially in Eurasia and especially in Asia.
Especially in Eurasia, and especially in Asia. Some contracts some very low profit contracts are going to come off.
Speaker 2: some contracts, some very low profit contracts are gonna come off that is highly likely that we will not renew those because it doesn't meet profitability standards if it's profitable at all. And we think that that number, we've modeled that number at somewhere from 40 to $50 million.
That is highly likely that we will not renew those because it.
It doesn't meet profitability standards, if it's profitable it on and we think that that number we've modeled that number at somewhere.
$40 million to $50 million.
Speaker 2: The small divestitures that we have planned and will happen are a similar number.
The small divestitures that we asked that we have planned and will happen.
Or a similar number it's.
Speaker 2: $40 to $50 million, so that's the headwind.
It's $40 million to $50 million or so so that's the headwind.
Speaker 2: So if you, and I understand what you're doing, so you take that and add a 50, you add it to 3.9, and it looks rather light on our revenue guidance. I will say this, that just, you know...
So if you and I understand what you're doing so you take that net of 50 added.
Three nine and an.
It looks rather light.
<unk> on.
On a revenue guidance I will say this that the.
Just like what we experienced in 'twenty, one if we hadn't experienced that deferred we debated the high end of the range. So when we built a range for 'twenty two.
Speaker 2: Just like what we experienced in 21, if we had an experience that deferred, we'd have been at the high end of the range.
Speaker 2: I guess what I would say is that we hedge relative to supply chain. If we experience the same kind of issues that were experienced in the back half of 21, we'll be at the long of the range. I will say this.
I guess, what I would say is that we hedge relative to supply chain, if we experience.
The same kind of issues that were experienced in the back half.
Of.
'twenty, one we will be at the long end of the range I will say this.
Speaker 2: internally and what we are being measured on is at the higher end of the range.
Internally and what we are being measured on is at the higher end of the range.
So there is some level of.
Speaker 2: of a hedge in the range for supply chain disruption.
Hedge in and.
The range for supply chain disruptions.
Speaker 4: Thanks, that's really helpful. And just one more quick one for me. Taxes were relatively high in the quarter. Can you just talk about that and give us some insight into how we should be thinking about taxes?
Thanks.
Helpful and just one more quick one for me.
Taxes were <unk>.
Relatively high in the quarter.
Can you just talk about that and give us some insight into how we should be thinking about.
Taxes moving forward.
Speaker 2: Yeah, you know, we concentrate on on cash taxes. We get some.
We concentrate on noncash taxes, we get some.
Speaker 2: because of the restructuring charges and that we get some odd provision numbers. From a cash tax perspective, our cash taxes
Because of the restructuring charges that we get some odd.
Provision numbers from a cash tax perspective.
Our cash taxes.
Speaker 2: because of what is going on globally, the statutory rates are going to go up for everybody.
Because of what is going on globally.
The statutory rates are going to go up for everybody.
Speaker 2: Here's what here's what we need to do and.
Here's what here's what we need to do.
Speaker 2: relative to controlling our cash taxes and it's related to
Relative to controlling our cash taxes and that's related to cloud.
Speaker 2: our capital structure, and I think Matt would probably talk about this, but I will say it again. Our capital structure is not
Our capital structure, and I think Matt, we probably talked about this but.
I will say it again, our capital structure is not.
Speaker 2: conducive to being interest deductibility efficient.
Conducive to be interest deductibility efficient.
Speaker 2: Too much of our debt and interest payments are in the U.S. The restrictions relative to the U.S. tax code makes them non-deductible. We have approximately a $400 million interest carry forward and probably build a little bit off of that.
Too much inventory or too much of our debt and interest payments are in the U S. The restrictions relative to U S tax code make some non deductible, we have $400 million.
<unk> $400 million interest carryforward is probably build a little bit off of that.
Speaker 2: When we refinance in 2022, one of our goals is to rebalance the interest payments between the two tax principles of the U.S. and Germany, maximizing deductibility and efficiency of interest from a tax perspective.
When we refinance in 2022, we will our one of our goals is to.
Rebalanced the interest payments between the two tax principles of the U S and Germany.
Maximizing deductibility inefficiency of interest from a tax perspective.
When we do that.
Speaker 2: We believe that we can hold
We believe that we can hold.
Taxes.
Speaker 2: you know, at a 30 to 35% provision rate. Now, our tax payments will go up.
And at a 30% to 35% provision rate now.
Now our.
Our taxes, our tax payments will go up.
Speaker 2: when we run out of foreign tax credits and that's that's going to be in 23.
When we run out of foreign tax credits and that's that's going to be in 'twenty three.
Speaker 2: But be assured that we continue to work. We have some very good tax people working on this, and right now we are very concentrated on cash taxes. You know, we're very close now that we got out of the restructuring transformation business.
But but be assured that we continue to work.
We have some very good tax people working on this.
And right now we're very concentrated on cash taxes, we're very close now that we got out of the restructuring and transformation business.
Speaker 2: And the adjustments, you know, we're very close to being on a gap basis profitable and the provision numbers will mean more.
The adjustments were very close to being on a GAAP basis profitable within the provision numbers will mean more.
Speaker 2: Um, so here's what I would say that as we move into.
So here's what I would say that as we move into.
Speaker 2: 222, we're going to see some slight increase in cash taxes because of the statutory rate increases that we're seeing globally. But then we should be able to level that out with the refinancing.
Through 'twenty, two we're going to see some slight increase in cash taxes because of the statutory rate increases that we're seeing globally, but then we should be able to level that out was the refinancing.
Speaker 2: but we will see an increase in 23 as we run out of foreign tax credits. We're going to be profitable. We're modeling to be at a much higher profitability level, right, in 23, and so we'll have a more normalized tax provision in 23 than we have historically as we've gone through this structure.
But we will see an increase in 'twenty three as we run out of foreign tax credits.
Yes.
We're going to be profitable, we're going to be we're modeling.
Much higher profitability level in 'twenty, three and so we'll have a more more a more normalized tax provision in 'twenty three than we have historically as we've gone through restructuring.
Thanks for the explanation Jeff.
Sure.
Speaker 5: The next question comes from Rob Jost from Invesco. Rob, your line is open, please go ahead.
The next question comes from Rob Jost from Invesco. Your line is open. Please go ahead.
Speaker 3: Hi, thanks. I wanted to go back to your comments around the back. I think you said you had about a billion one backlog.
Hi, Thank you Rob wanted to go back to your comments around the back okay.
I think you said you had about $1 billion one backlog.
Speaker 3: talked about not putting through price increases right away. So first quarter, margins are going to be a bit lower.
<unk> talked about putting through price increases right away so first quarter.
Margins in video a bit lower.
Speaker 3: But when I think about product for first quarter, that's only a fraction of that billion one. How should we think about that burning off in terms of, you know, maybe the price increases coming in? And then also, if you could offer some commentary around where you think we are with the supply chain issues and the logistics.
But when I think about product for first quarter.
<unk> of that 1 billion won.
How should we think about that burning off in terms of.
Maybe the price increases come in.
And then also if you could offer some commentary around where you think we are.
Supply chain issues.
<unk> com.
Yeah.
Speaker 2: Um, yeah, so, so the backlog, but by the way, and I will, I will add, we continue to see very strong order entry as we moved into the first quarter of 22. So, so the, we, we, uh,
Yes, so the backlog.
But by the way and I will I will add we continue to see very strong order entry as we moved into the first quarter of 2002, so so the Wii.
Speaker 2: We are experiencing a lot of support from our customers and a lot of interest in both our, especially our cash recycling ATMs and our self-checkout units. So the backlog...
We are experiencing.
A lot of.
Support from our customers.
Lot of interest in our both our especially our cash recycling Atms and self checkout units.
So the backlog has built.
Speaker 2: um you know over a period of time so if you if you look at a billion one if you look at our order entry um
Over a period of time, so if you look at $1 billion, one and you look at our order entry.
<unk>.
And you look at yes.
Speaker 2: And you look at how we burn off backlog.
And how we burn off backlog.
Speaker 2: We burn off backlog. I think our definition of backlog, and you see it in the 10-K, is an 18-month expected delivery date. Because we have some fairly long lead times on purchase orders. Banks put in a purchase order and then they schedule installation, which is primarily the trigger for revenue recognition. It could be over 18 months. Our backlog will burn off in any given year,
We burn off backlog I think our I think our definition of backlog and you see it in the 10-K as in 18 months.
Expected delivery date, because we have some fairly long lead times on purchase orders base put us a purchase order and then a schedule installation, which is the revenue contributor for <unk>.
Primarily the trigger for revenue recognition it could be over 18 months. So our backlog will burn off in any given year is somewhere in.
Speaker 2: you know 50% range you know so we're probably if you look at just backlog we're probably covered on revenue for 2022 about 70% for scheduled backlog at this point in time it's probably 50% percent of that we're covered so I would say that from a
50% range. So we're probably if you look at just backlog, we're probably covered on revenue for 2020 to about 70% for scheduled backlog at this point in time, it's probably 50%.
And then recover.
So.
No.
Would say that from a.
Speaker 2: from a margin perspective, we will work through most of that.
From a margin perspective, we will work through most of that.
In the first quarter, we should we should expect.
Speaker 2: in the first quarter. We should expect higher product margins in the second quarter and a normalization in the third and fourth quarter.
Our product margins in the second quarter and a normalization in the third and fourth quarter.
Speaker 2: the first quarter is going to be the difficult because it's going to have a higher percentage of pre-price increase backlogs going to roll through in the first quarter.
The first quarter is going to be the difficult because it is going to have a higher percentage.
Pre price increase backlogs going to roll through in the first quarter.
Yeah.
Speaker 2: Does that make sense? That's great. Yeah, it does. And so it sounds like just based on the commentary, you're, yeah. Okay.
Does that does that makes sense that's great.
Got it.
And.
So it sounds like just a net monetary.
Yeah.
Okay.
Speaker 3: No, I was just going to say, so it sounds like you don't expect things to get worse.
No I was just going to say so it sounds like things.
Things to get worse.
Speaker 2: No, I don't expect, we're not modeling for things to get worse.
No.
<unk>.
I don't expect we don't we're not modeling for things to get to get worse.
Speaker 2: But they haven't gotten significantly better from a cost perspective, it's logistics cost.
But they haven't gotten a significantly better from them from a cost perspective logistics costs.
Speaker 2: We are very interested in what happens now that we've gone through the Lunar New Year of what happens relative to
We are very interested in what happens now that we've gone through the lunar new year.
What happens relative to.
Speaker 2: to the backlog in logistics and the high cost. Now, there are, you know, the good news of when you have extremely high costs like we're having, there are alternatives.
To the to the backlog and logistics and the high cost now there are.
The good news.
One when they have extremely high cost like we're having there are alternatives.
Speaker 2: For example, Amazon has opened up the ability to utilize their backhaul capabilities, and they're even, I think they're buying ships, and we do have a relationship with them. And so there are some mitigating factors relative to alternative logistics channels. And also, as we've talked about previously, we are building...
For example, Amazon has opened up.
The ability to utilize their backhaul capabilities.
And they are even I think their volume shifts and.
And we do have a relationship with them and.
And so there are some mitigating factors relative to alternative logistics channels.
And also as we've talked about previously.
Our building DM.
Speaker 2: PM series capabilities into our North Canton plan.
DN series.
<unk> capabilities into our north Canton plant.
Speaker 2: which will relieve some of the backlog of.
What's real relief.
Some of the backlog of finish.
Speaker 2: finished goods coming out of Paderborn and, you know, with destination to the customers on that long logistics path, that as we build the DM series capabilities in North Canton, it's going to relieve some of that, you know, last mile distribution.
Finished goods coming out of <unk>.
And with with destination to the customers.
That long logistics.
Path.
As we fill the DN series capabilities.
And not candidates going to relieve some of that.
Last mile distribution costs.
Speaker 2: But the expectation, like everybody's expectation, and everybody's guardedly optimistic that in the back half we'll see some relief in these high logistics costs.
But the expectation like everybody's expectation and everybody is guardedly optimistic that in the back half, we'll see some relief in these high logistics costs.
Speaker 2: Uh, in fact, uh, you know, again, part of our.
In fact.
Again part of our.
Speaker 2: variable in our guidances, whether we get that or not. But we do expect that we burn, you know, from our own, what we can control from our own gross margin perspective, we will see us be able to burn through.
Variable in our guidance is whether we get that or not but we do expect that we brought from us from our on what we can control from our own.
Gross margin perspective, we will see us be able to bring through.
Speaker 2: the backlog of the lower priced product and see better margins as we move into the back half of the year. Again, we anticipate that we'll start seeing relief on costs by the fourth quarter.
The backlog of the lower priced product and see better margins as we move into the back half of the year again or are we anticipate that we will start seeing relief on costs.
By the fourth quarter.
Got it.
Speaker 6: Okay, great. Thank you. That's helpful. My other question was around this new venture with the charging station.
Okay, great. Thank you that's helpful.
My other question was around this new venture with the charging stations.
Speaker 6: how much I don't know if you can quantify or I don't know that you have but you know thinking about the investment in this business um
How much.
I don't know if you can quantify.
I know that you have but.
Thinking about the investment in this business.
<unk>.
Speaker 6: Can you give us some sense of what that's going to look like? And is that an add back to either dot or is that not in your guidance?
Can you give us some sense of what that's going to look like and is that in.
Add back to EBITDA or is that not.
In your guidance.
Speaker 2: Yeah, it's, uh, it's, uh, it's built into our guidance.
Yes.
It's built into our guidance.
Speaker 2: It's not going to be material in 22.
It's not going to be material.
'twenty two.
Speaker 2: You know, we're early stages in EV charging. We have filled a void in the marketplace where there are plenty of manufacturers, there are plenty of organizations with service capabilities. What has not been determined within EV charging is, you know, we have two different... Yeah.
We're early stages in EV charging.
We have filled a void in the marketplace, where there are there are plenty of manufacturers there are plenty of.
Bob.
Organizations with service capabilities.
What has what has not been determined within an EV charging as you know we have two different.
<unk>.
Yes, you have two different.
Speaker 2: Chargers they have AC and DC the DC are more complicated. They we just don't know what the
Chargers have AC and DC to DC are more complicated.
We just don't know what the.
Speaker 2: call rates are going to be. Right now it's time and materials. It's a good extension of our service network. It's a good horizontal. We fill the void. We're going to see some level of revenue.
Call rates are going to be right now.
Time and materials, it's a good extension of our service network.
Horizontal.
We filled the void, we're going to see some level of revenue.
Tom.
Speaker 2: you know, modest margin contribution. But so far, the investment has been minimal.
Modest.
Margin contribution, but so far the investment has been minimal.
Speaker 2: What has to be determined since we're not the manufacturer is where the spare parts come from and the contracts we have now.
What has to be determined since we're not the manufacturer is where the spare parts come from in the contracts we have now.
Speaker 2: It's generally supplied by the manufacturer in a pass-through to the customer. So we're in early stages. It's extremely interesting. It's obviously going to be a growing business. It's yet to be determined ultimately where it lands out. But many of our customers, especially in Europe , many of our retail customers...
Generally supplied by the manufacturer and the pass through to.
To the customer so we're early stages.
It's extremely interesting, it's obviously going to be a growing business and it's yet to be determined.
Ultimately, where it lands out, but but many of our customers, especially in Europe , many of our retail customers.
Speaker 2: both in fuel and convenience and in grocery retailing, are interested in it, obviously, for their own purposes.
Boston and fuel and convenience and grocery retailing are interested in it obviously for their own purposes, and so we have a lag in with many of them relative to the service, we're providing them in self checkout and point of sale.
Speaker 2: And so we have a leg in with many of them relative to the service we're already providing them in self-checkout and point of sale.
Speaker 2: We have remote monitoring capabilities that we've developed within retail that could apply. So there's a lot of good things and a lot of good possibilities, but for 22 it's going to be a relatively modest contributor.
Have.
Remote.
Monitoring capabilities that we've developed within retail that could could apply so theres a lot of good things.
And a lot of good possibilities.
But for 'twenty, two it's going to be relatively modest contributor.
Okay. Thanks.
Yes.
Speaker 5: Our final question today comes from Justin Bergner of G-Research. Justin, please go ahead, your line is open.
Our final question today comes from Justin Bergner G Research Justin. Please go ahead. Your line is open.
Good morning, Joe adjusted.
Speaker 2: Just to loop back to the revenue guide, I just wanted to make sure I understood. So $150 million of deferrals aiding revenue, $40 to $50 million each of divestitures and exit of low-margin service business, getting you sort of to something flattish. What are the divestitures? First of all, I guess just please verify that, and then secondly, what additional divestitures are being contemplated?
Just to loop back to the revenue guide.
I just wanted to make sure I understood so $150 million of deferrals aiding revenue, 40% to $50 million each of divestitures and exit of low margin service business getting you sort of to something flattish. What are the divest is that first of all I guess just please verify that and then secondly, what additional divestitures or bidding on.
Complete it.
Yes.
Bob.
Speaker 2: The divestitures we have built in are the non-strategic divestitures.
The divestitures, we have built in or the non strategic investors we have.
Our recycling business.
Speaker 2: in Germany that is a unit that you put into a facility and you can go in, you know, we've all seen them, right? You put your glass in and it gives you cash for your recycle. That business has been an asset sell for sale. And then we have some other small non-strategic services business that we're going to be sold. And again, it's only going to be, the impact is going to be in that $40 to $50 million range. But that's it.
Germany is a huge.
So you put into a facility and you can go in and we've all seen them already project Glas and <unk> and it gives you cash free recycle.
That business has been an asset held for sale and then we had some other small.
Non strategic services business.
We're going to be sold and again, it's only going to be the impacts can be in that 40% to $50 million range, but that's that's it.
Speaker 2: As far as these non-strategic assets, we're coming to an end of what we're looking to sell.
Yes.
As far as these non strategic assets.
We're coming to an end.
Of what we're looking to sell so so.
Speaker 2: After 22, we shouldn't see any headwind like that. As far as the terminated non-profitable contracts, we're tied into some contracts that we would have liked to have been out of. They don't qualify for a discontinuance because
After 'twenty two it we shouldnt see any headwind like that as far as the terminated non profitable contracts.
Tied into some contracts.
We would have liked to have been out they don't qualify for a discontinuance because.
Speaker 2: because of their nature. They're very low margin. So it's those contracts. And when we can exit, we do exit. We're always going to be in
Because of their nature.
They are very low margin so as those contracts.
When we can exit we do exit.
We're always going to be.
Speaker 2: Especially in Asia where there's pricing competition, if a contract is profitable, we'll attempt to retain it. But where it doesn't make any sense, we've walked away and that's the $40 to $50 million of terminated service contracts. But all that is basically coming to an end.
Especially in Asia, where there is or there is pricing competition.
If the contracts profitable we will.
We will attempt to retain it but where it doesn't make any sense, we've locked away and that's the.
The $40 million to $50 million of terminated service contracts, but all of that is basically coming to an end.
Speaker 2: I don't believe we have, when we look at the long-term model, the three-year model, we don't have anything significant built in for that. In fact, we have growth through managed services built into that model. And I should mention that we mentioned that in our shareholder letter, that obviously we have, we're not back on our strategic model yet.
We are.
I don't believe we have when we look at the long term model. The three year model, we don't have any significant build and throw that in fact, we have growth through managed services built into that model and I should mention that that we mentioned that in our shareholder letter that obviously we have.
We're not back on our strategic model again.
Speaker 2: You know, we will be, we do feel good about our ability this year to offset the wage inflation and services with price increase. We already talked about the delay and from a product price increase and the effect on product margin, especially in the first quarter, a little bit in the second quarter.
We will we do feel good about our ability this year to offset the wage inflation in services with price increase we already talked about the delay in.
And from a.
A product price increase and the effect on product margin, especially in the first quarter limited second quarter.
Speaker 2: 23 we feel good about during 23 with the price increases.
'twenty three we feel good about.
<unk> 23, with the price increases with.
Speaker 2: with the normalization of supply chain costs.
With the normalization of supply chain costs.
Speaker 2: uh... will get back on spread out by the end of twenty three we did we feel strongly that we're gonna be back on are out
Look it back on the spirit.
By the end of 'twenty, three we feel strongly that we're going to be back on our.
<unk>.
Speaker 2: our strategic model that we previously disclosed the targets to. With Octavio coming on, I think that I would anticipate that by the first quarter we'll have an update.
Our strategic model that we've previously.
Disclosed the targets too.
Octavio coming on.
I think that.
I would anticipate that by the first quarter.
We'll have an update.
Speaker 2: on that topic relative to the target and where we are from a strategic model perspective.
On that topic relative to targets and where we are from a strategic model perspective.
Speaker 2: Octavio is very much an operator and very interested in efficiencies, and if you look at his background and who he's worked for, you'll see he's got very good background and very good background relative to operations and efficient operations and revenue growth. So we're looking forward to that, and I look forward to working with him.
Octavio has a very much a an operator and in various did in efficiencies and if you look at his background and who has worked for you will see here Scott.
Very good background and very good background relative to operations and efficient operations and.
And revenue growth. So we're looking forward to that and I look forward to working with him.
Speaker 2: You know, we've worked together. I've been here a little over three years. We've had a very good working relationship and that'll continue.
We've worked together I've been here a little over three years, we've had very good working relationship.
And that will continue.
Speaker 2: debate. His win rate is probably going to go up a little bit on debates now that he's the CEO , but I anticipate that
Debates as win rates, probably going to go up a little bit on debate now that he's the CEO .
I anticipate that.
Speaker 2: you know, the management team is here to support him and we'll get back on track, we'll get through this.
The management team is here to support him in.
We will get back on track, we will get through this.
Speaker 2: logistics issues and these COVID issues and the model is performing. And it continues to perform and we see strong order entry in the first quarter. We feel good about where we're heading in 22 and beyond. So with that, I'll thank everybody for their questions and attention and turn it back to the operator.
Logistics these logistics issues in these COVID-19 issues and the model is performing.
<unk> to perform and we see strong order entry in the first quarter, we feel good about where we're heading.
And 'twenty, two and beyond so with that I'll, thank everybody for their <unk>.
Questions and attention and turn it back to the operator.
Speaker 5: Thank you. This concludes today's Q&A, so I'll now turn the call back over to Christie Matryzka, VP of Investor Relations for DBOD Nextdoor.
Thank you. This concludes today's Q&A. So I'll now turn the call back over to Christine <unk> VP of Investor Relations for Diebold Nixdorf.
Speaker 7: Thank you again to everyone who joined us for today's call. We look forward to talking with you all at upcoming conferences and our next earnings release. And in turn, please do not hesitate to reach out to me or Bus Relations if you have any additional questions. Thank you again.
Thank you again to everyone, who joined US for today's call. We look forward to talking with you all at upcoming conferences and our next earnings release and in time, please do not hesitate to reach out.
Me or our Investor Relations. If you have any additional questions. Thank you again.
Okay.
Speaker 5: This concludes today's call. Thank you very much for your attendance. You may now disconnect your line.
This concludes today's call. Thank you very much for your attendance you may now disconnect your lines.
Speaker 8: Pro the cre. We serv on.
Yes.
Sure.
Right.
Okay.
Right.
Okay.
Okay.
Sure.
Alright.
Alright.