Q1 2022 Diebold Nixdorf Inc Earnings Call
Scheduled to increase production of ATM by 17% and self checkout by 100% in Q2 of 2022 as compared to a year ago.
As noted earlier there is no lack of demand for our products, especially for our DN series, which is now live in 80 countries with over 500 certifications.
And our self checkout business, which keeps gaining new customers globally.
We continue to see a shift away from our legacy license with our new VM series Recyclers.
In North America, we now have 87% of all new orders coming from DN series.
We expect.
Expect continued volatility with our supply chain and logistics for the remainder of the year.
And we are focused on gaining velocity to accelerate revenue conversion on the one 2 billion product backlog that we currently have including banking and retail.
We are also evaluating our global manufacturing footprint needs to evolve.
As we have shared previously we continue to invest in our Ohio manufacturing.
Which by the end of the year will be capable of fulfilling most of the demand for recyclers generated in North America.
So taken together.
Improving our operational efficiencies and optimizing our supply chain and manufacturing footprint, we will reach our original financial targets for growth profitability and free cash flow by 2024 as outlined in our three year model.
Overall my leadership approach is very straightforward I will focus on strengthening our core offerings, where customers see great value in DM.
While also instilling a mindset of continuous improvement in efficiency that will help us capture emerging opportunities that increase shareholder value.
For example, we continued to see strong momentum in the EV charging space. Since Q4, 2021, we intensified our partnership with <unk> in several European countries.
As we expand to 10000 of their charging points across Europe . This year. In addition, we.
We signed a contract for a global service desk capabilities with a leading European electric charging station manufacturer for more than 10000 nuclear Chargers.
As well as started a pilot in mid March to service more than 7000 charges in the U S with another manufacturer.
We continue to track to our plan through service 30000, or more charging stations by the end of 2022.
For 2024, we are targeting revenue growth of 2% to 4%.
Greater than 13% adjusted EBIT margin.
And 50% or greater adjusted EBITDA to free cash flow conversion.
Jeff will provide more detail on our financials.
But before I turn it over to him let me reiterate my focus.
We will provide leading solutions to our customer base to help them better serve their customers as we execute on our financial model, we will unlock the intrinsic value inherent in our three year targets.
Thank you.
Now I would like to turn it over to Jeff.
Okay.
Thank you Octavio.
My prepared remarks will include references to certain non-GAAP metrics.
So such as adjusted EBITDA.
Included in our first quarter non-GAAP adjustments to EBITDA were two impairment charges.
$38 $4 million related to our North America cloud based ERP implementation.
Which was indefinitely suspended as we transition our implementation plan.
For the distribution subsidiaries.
And $16 $8 million for assets in Russia and Ukraine.
As a reminder, please see our Form 10-Q and shareholder letter for additional financial details from the quarter here I will highlight a few of our key performance metrics.
Despite seeing very strong demand from customers for our devices and solutions evidenced by strong order entry data, which Octavio noted.
In the first quarter of 'twenty, two total revenue was $830 million.
Kris over the first quarter of 2021 of approximately 12% as reported.
And a decrease of approximately 7%, excluding the foreign currency impact of $36 million.
And the $14 million impact from divested businesses in Russia and Ukraine.
Adjusted for foreign currency and divestitures product revenue decreased approximately 10%.
Services revenue decreased approximately 5% and software revenues decreased approximately 9%.
As compared to the first quarter of 'twenty one.
Product revenue decreased as a result of continued supply chain challenges, which is onshore unfavorably impacted our ability to convert backlog to revenue.
The product revenue decline subsequently led to a reduction in attack services and software in the first quarter.
In addition, as noted previously the company exited certain low margin noncore service contracts.
We originally planned for a 5% increase in product costs. However, in the first quarter 'twenty two we experienced approximately double that rate and the majority of backlog converted to revenue was ordered prior to the price increases.
This resulted in a material decline in product margins during the quarter.
We will continue to increase prices until the inflationary periods. Besides.
For the first quarter operating expenses were flat to the previous period a year ago.
We reported adjusted EBITDA of $9 million and adjusted EBITDA margin of 1%.
Free cash flow for the quarter.
First quarter of 2002 was $230 million in the first quarter of 'twenty one.
Which is largely the result of lower adjusted EBITDA and supply chain challenges, resulting in higher inventory investment couple coupled with lower.
As <unk> mentioned, we have initiated a plan to streamline our operations to focus the organization on our customers.
Drive efficiencies.
Which will result in cost.
$2 million over the next 12 to 18 months.
Based on the continued supply chain challenges conditions.
Okay.
We are revising our 2000 <unk> financial outlook.
Our revenue guidance.
For the full year 2022 is now $3 $73 9 billion, which reflects the elimination of approximately $80 million in revenue from Russia and Ukraine.
Approximately $160 million in revenue from unfavorable FX.
And supply chain impacts.
We see sequential improvement in gross profit throughout the remainder of 2022.
As we begin to.
The realized price increases and improved backlog to revenue conversion and expect adjusted SG&A to remain relatively flat at approximately $160 million per quarter.
And duration net of incremental cost savings.
Our revised free cash flow outlook outlook is breakeven.
Which is directly correlated with the decline in expected adjusted EBITDA as well as working cap.
Capital normalization. This revised guidance is prior to any cash restructuring charges.
Despite these headwinds in 2020 to our long term adjusted EBITDA outlook considers more timely conversion of our orders to revenue.
The normalization between pricing and inflation.
The aforementioned cost savings.
Collectively.
These will allow for us to return to our previously communicated three year financial targets.
Delayed by one year due to the uncertain macro climate that we and countless other companies have experienced over the last two years.
As Octavio mentioned for 2024, we are targeting revenue growth of 2% to 4%.
Greater than 13% adjusted EBITDA margin.
And 50% or greater adjusted EBITDA to free cash flow conversion.
I look forward to updating you on our progress in the upcoming quarters.
Finally, I would like to provide an update on our debt refinancing initiatives.
As communicated in March we secured the covenant relief through 2022.
With the support of our lenders, which will provide access to adequate liquidity and covenant headroom through early 2023.
But as you know we have debt maturities beginning in the second half of 2023.
Management is working with Evercore.
Sullivan <unk> Cromwell to assist in our refinancing efforts and we will provide an update when appropriate.
Now I will turn the call over to the operator for Q&A.
Okay.
Thank you.
We'll now start our Q&A session.
At this time, if you would like to ask a question. Please press Star then the number one on your telephone keypad.
So just a moment to compile the Q&A roster.
And our first question comes from Matt Summerville of D. A Davidson. Please go ahead. Your line is open.
Thanks couple of questions first Jeff just on the debt side of things I mean, the stock is looking like $3 pre market right. Now is there anything you can tell us to give your equity investors confidence that you do actually have a path towards refinancing.
Can you talk about where you're at with that path you discussed standing up an ABL at some point just any other detail you can provide.
Would be helpful. Beyond the prepared remarks, where you just stated years kind of working on it.
Yeah.
Yes.
I understand the question.
And it's a fluid situation alright with the changing.
Environment and.
And as I stated, we we have engaged evercore and Sullivan <unk> Cromwell to help with this and let's just talk about that.
His position.
So first of all we have adequate liquidity and no maturities.
Through.
The first quarter effectively the first quarter of 'twenty three.
And then if you look at the maturity schedule.
It's the revolver in July of 'twenty, three with term fees in the fourth quarter of 'twenty three in EMEA unsecured in the second quarter of 2004.
So that's what we're solving for rite aid and as I've said on or an inventory of assets that we have.
Is better suited for them.
Our revolver position to be with a in.
And ABL.
<unk>.
And I don't think we've actually found anybody who would who would disagree with that journey as I, just mentioned and the fact that today.
The ABL.
<unk> bees in the secured notes our carrier Sue on security.
So thats why we have.
Okay.
Partners that we're working with to help us maneuver through that issue.
Along with.
Addressing the.
The pending maturity schedule and.
23, and 'twenty four.
To get us, where we need to be and also a longer duration.
Of maturities.
Sure, it's not as straight a task as as we want.
Planned floor in late 'twenty two.
Late 'twenty, one and then the early 'twenty two it's changed.
The model has taken on incremental inflation, we continue to.
To see incremental.
Supply chain issues, but there is a path to get there with with the help we have and working with us.
With our debt holders to get us, where we need to be because the model is as we stand today, we do have a clear path with the with the costs, we're going to be able to take out of the model to get back to our targets so that.
So to answer your question Matt.
And is there is a path to get there is not a straight line like it was but there is certainly a path to get there anchored by an ABL.
Got it.
And maybe a couple of other questions does the increased asset optionality.
Come part of this process is that part of the discussion is kind of anything and everything on the table. At this point is that kind of where we're at.
Number one and then.
What do you anticipate the cash costs.
Of the restructuring being thank you.
Yes, so Matt Thank you for your questions.
So I strongly believe in our three year model.
Thanks <unk>.
Looking to our model, we have a pathway for the company to get to those targets that we've established.
Obviously with this ever changing environment, we will evaluate any again as far as cost.
Our restructuring I will turn that over to Jeff <unk>.
Yeah, Matt So it's still early days my estimate would be around $75 million in cash.
Cash cost.
But it's early days in what I would say is we haven't modeled it and a cash flow yet because we're still working through the details.
But it'll be it'll be an add approximately $75 million range from a cash perspective.
Understood. Thank you I'll get back in the queue.
Thank you so much mark for your question.
Our next question comes from Jeff <unk> of Barclays. Please go ahead. Your line is open.
Hi, good morning.
So Jeff can you talk a little bit about.
The visibility on being able to push through the backlog and where do you stand with your suppliers getting the components.
Additional headwinds obviously.
The revenue guidance by a log your orders are strong but maybe.
Maybe you can talk about that.
A little bit.
<unk>.
And then also.
Adjusted EBITDA sort of.
Bridge as you see it now to bridge from.
Last year the current over prior guidance to current.
Yes, So let me take the first part of your question on what we're doing to address the velocity of converting our backlog.
So clearly since we last spoke in February we've seen.
Current macroeconomic events like the closure of ports in China with <unk>.
<unk> equivalent policy affecting our ability to source material and also affecting our ability to ship finished product out of that.
Richard.
With that said.
We keep investing in our Ohio manufacturing facility, which will now be ready by end of year to supply most of the demand for the North American market. This will undoubtedly to shorten the time from order placement manufacturing to revenue conversion.
I think an important factor to consider this demand remains strong for our products.
And some of the headwinds that we have receiving components are.
Our starting to subside as evidenced by our factories manufacturing a lot more units during Q1 of this quarter than the prior year now we're trying to install for how do we get those products into a handful of customers faster again that reiterate the importance of rethinking our manufacturing footprint.
And making sure that our Ohio manufacturing.
And running as quickly as possible at full speed.
So again.
Q2, we're seeing a similar trend.
Our factories are fully loaded with significantly higher volume than what we had last year.
We now just need to expedite how we did all of those products into the hands of our customers. We are working with our customers and our customers understand the global challenges we're experiencing.
And are working with us to make certain that we can deliver the most appropriate and cost effective way to them.
So Jeff can you take the third part of that question, yes, So so Jeff.
As we.
Communicated and both the release and.
And in the script.
The $300 million reduction.
Glen.
Okay.
A $300 million reduction in revenue.
Margin will generate approximately $80 million of.
A reduction in <unk>.
Gross product and then the balance to get to the revised EBITDA numbers are.
Effectively <unk>.
Duration incremental inflation higher inflation and particularly in the first quarter than we had originally modeled and then a longer duration of inflation. We had originally said we expected some normalization, especially in logistics costs post the lunar new year that has not happened so there.
As incremental.
Inflation in the model so between the reduction in revenue and inflation is how we bridge from EBITDA.
To the original outlook to the revised outlook.
Okay, and how are you looking at the linearity of that based on your.
Your current view in terms of.
The build into Q3 Q2 <unk>.
Yeah, well one of the factors involved in that.
Is the nature of the backlog.
As we stated that the backlog that was converted to revenue in the first quarter was primarily prior to price increases and we honored.
We have contractual pricing.
Those orders.
Now, we're getting into a mix, where we're going to be experiencing price increased conversion to revenue. So the progression will be.
Margin margin improvement in the.
In the second quarter, and then a more normalized margin in the third and fourth quarter.
Okay, great. Thank you.
Okay.
Perfect. Thank you very much for your question.
Our next question comes from Paul Chung from Jpmorgan. Please go ahead.
Hi, Thanks for taking my questions. So just a follow up on.
Our portfolio of assets today, where could you see opportunities to monetize assets.
Sounds like you are saving cost on real estate.
How committed are you as well to your retail business.
Thank you Paul I'll take that so <unk>.
You've seen our retail business has tremendous momentum, particularly around self checkout.
Orders grew 100% on a year over year basis.
So it is an accretive business to us and it's one that we're committed to.
As I mentioned earlier.
We are we.
Our model being able to perform once we normalize.
The speed of backlog conversion.
Appropriate cost actions over the coming quarters with that we see our model getting back from performance.
But as I mentioned.
We are always evaluating if there are opportunities.
To accelerate shareholder value so as of today, we believe in our model and we believe that by accelerating backlog conversion and taking the cost out the incremental cost.
We will have a performing model.
So I'll just leave at that but we are always evaluating what the best way to unlock shareholder value.
Okay, Great and then.
Self checkout was was the bright spot in the quarter.
So how big was that contribution.
What's your visibility into the year.
And.
Are you, making more progress in North America beyond the kind of airport win.
Yes, so so as mentioned orders are up 100% in our manufacturing facility.
Our scheduled to almost.
Double the amount of self checkout with us that will be shaped.
A good portion of that will be tied to some important wins in North America that you will see starting to rollout in the coming quarters.
So we are making progress in the North America business with important important retailers then you will start seeing that in the coming quarters.
Okay and then last question just on the EV.
EV charging business, you mentioned 27000 signed contracts.
How do we think about the revenue and margin contribution per charging station.
Is the cash paid upfront and how material can this business be over time, you mentioned I think 30.
30000 by end of year.
And then the North America opportunity. Thank you.
Yes, Thank you Paul.
The EV charging business is one that is constantly evolving.
Had multiple conversations with.
Fuel companies, starting with large deployments in Europe .
Charge point operators and Theres, one commonality everybody is looking for a global service provider that can help them maintain and operate a global fleet.
I think we are in the early stages of how this market will evolve but.
But we do see some something where our service infrastructure can be leveraged.
And we will be updating you on whatsapp financially once we're done with all the pilots that we have ongoing right now, but we do see this as an accretive business in the coming in the coming quarters and years.
I would say that it's still an industry that's trying to figure out what's the appropriate service model lift that you saw some of the wins that we have have been on our service techs or our capability to take Paulson dispatch service two locations. So so first of all I would say a confluence of events that will make this business can do.
Continue to grow and we want to be a company, that's helping shape, how the services provided in that market.
Thank you.
Perfect. Thank you so much for your question Paul.
Our next question comes from Amit <unk> with Bank of America. Please go ahead.
Hi, Thanks very much.
So.
I'd like to get some additional color.
On the restructuring plan. So obviously you had.
Our multiyear very thorough restructuring.
That you completed at the end of 'twenty, one and.
It appears that.
The vast majority of the challenges you're facing right now from exogenous factors, So obviously supply chain and cost inflation.
Im wondering.
Next phase.
Our restructuring.
What areas of geography and products.
Okay.
Do you feel that there's still room to go and if.
If it wasn't for that.
Is that in this bathroom and.
And challenges that you're facing right now.
Are these operational mode.
And to that are there all kind of things and let them finish with regard to the prior program.
So thank you.
You are right some of the actions that we're thinking are responsible for upwards of a changing environment one that we've got.
We couldn't have predicted just three three to four months ago.
With that said.
When you think of our company.
The value that we bring to customers.
Both in banking and retail is that we have leading hardware and software technologies that coupled with the tremendous service capability provide.
Very unique value proposition to our customers, that's what our customers value our great technology and the great service that we have attached to that.
So what are we doing right now we're doubling down our efforts to make sure that those two areas building the best technologies, whether it's our self checkout on our Acs.
<unk> continues to have very strong demand in the market.
We've reinforced those series, we reinforce our service capabilities at surface as the main driver of customer satisfaction and that we keep streamlining the periphery around both areas, but making sure that we strengthened our core offerings that we're focused on.
<unk> growing those core offerings.
And then.
Taking an approach where everything else and support a low serious needs to be streamlined through digitization and process improvement globally.
Okay.
Jeff anything else you would like to lead with.
I would say that the.
The DN now initiatives.
Was much more focused on.
A top down approach.
<unk> restructuring.
I think that the unique.
Viewed in Octavio has from running the banking organization.
And determining where inefficiencies lie within those support structures.
This is <unk> communications and then.
Internal factors involved but I think the difference is.
It's not targeted on enablement function so much in top down it's.
It's perspective and and.
And the model.
Okay.
Okay, and then so the cash restructuring costs.
Okay to be coming back.
So those are largely G&A for things like <unk> and <unk>.
And facilities.
Any kind of consultant then.
To work on this project.
Thanks.
Included.
Yes, any consulting fees to support us with the list of projects are included in those suites and those numbers that Jeff provided however, we feel that we have a strong team internally to drive some of these changes.
The team has been working on that with me for the for the past couple of weeks on making sure we execute against that in a very timely manner.
Okay, and then just on the EBITDA guide for the year for any of these.
I'm, assuming that that class.
That's the restructuring are not included in EBITDA guidance.
I'm kind of on top of the EBITDA guidance that rate.
That's correct.
Okay. Okay. Thank you.
Sure.
Perfect. Thank you.
Our next question comes from Mark <unk> at Wedbush Securities Equity Research. Please go ahead. Your line is open.
Hey, good morning, Thanks for taking my question.
One question and one follow up.
I'll caveat.
You talked to production systems increasing.
You had obviously shipments.
We're a bit disappointed I guess I just wanted to understand what exactly is the delta between you guys producing the system versus getting in the hands of the customer bookings revenue is it is it logistics now thats the primary bottleneck or is there something else.
Then I guess.
My second the second part of that question is when we do think about backlog.
When you give your in terms of your revenue projection.
Is there an implicit understanding that as you get to the end of the year.
Some of that youre going to be able to capitalize.
Capitalize on some of that backlog growth bring backlog down or is that not part of your revenue.
Our revenue assumptions and we should assume youre still going to exit this year with heightened backlog. Thanks.
Yes, So first let me address the production cycle.
And the difficulties of getting product for our customers.
If you remember for for the past couple of quarters, we've been talking about material challenges in our supply chain and getting our manufacturing facilities up and running.
Not to say that there arent still component shortages and difficulties getting material to our into our factories, but I would say that the team has done.
A fairly good job of mitigating those effects.
Yes.
Now the main challenge is how do we get those products from our factories, both in Germany, and China into a handful of our customers globally.
They're.
Logistics challenge has proven to be greater than what we had expected as Jeff mentioned.
We have planned for the year with normalization of shipping after the Chinese lunar.
New year in February something that clearly has not happened.
And we're not forecasting that to improve anytime soon.
So to us it's important to accelerate the manufacturing of those devices.
<unk> them as quickly as possible.
And remember that's the reason why we're standing up our Ohio manufacturing facility to reduce that cycle times.
In today's world shipping something from Europe into the America or from Asia to the Americas or Europe continue North of 48 46, So we have.
So that's why we need to shorten that cycle and Thats and Thats. The expectation that we have that we keep planning for this we will be able to take those machines scheduled or installation with customers or as necessary.
Amend our contractual customers take ownership of those devices once they leave our factory and both are all things that we're working on to try to accelerate our revenue conversion.
Okay.
Yeah.
And then the backlog question, we are still forecasting.
Higher order entry than revenue. So it's we would expect a backlog increase year over year, when we get to the end of the year. So we're not.
Order entry has been really good obviously in the first quarter and we're forecasting that to continue throughout the year.
Awesome. Thanks, and then I guess for my follow up.
Im looking at Salford gross margins I'm trying to think about gross margins being kind of <unk>.
Somewhat more stable more predictable.
The quarter over quarter Delta.
What is the primary factor there is it I know, it's a lot of customization work so that underutilization of software engineers.
It's just obviously you don't have the same input cost challenges that you do to.
Gross margin declined so much can be helpful.
Yes.
Thats, just a one quarter.
We don't anticipate that happening.
So normalized software margin.
That's a one time contract hit in the first quarter.
Thanks, Jeff.
It comes from Rob Jeff.
Okay LTE.
Please go ahead.
Hi, Thanks, Jeff I wanted to ask about.
How you can respond I don't know if David.
And the industry.
Industry wide change here, but.
<unk> talked about being much more aggressive about taking cost and setting themselves up to.
To protect them.
What can you say about what you can do.
To do the same.
Maybe from a operating costs.
Yes.
Exactly.
Yes, and I think that what we're doing we're doing in life.
Well.
If we're looking at the model for inefficiencies and taken out.
Excess or inefficient costs and announced that 150 plus of savings.
Are you talking about.
Something beyond that.
Laura on driving price increases.
Getting the customers on board with the environment that we're in where everything is more expensive now so as a result prices have to go up.
Okay.
Yes, So let me thanks, Matt Jeff So clearly we are discussing with customers.
The new cost associated with delivering both the products and the services associated customers are open to those to those discussions and we're being.
I would say that all new orders. We are we have now implemented price increases we are we started not profit.
The back half of last year.
We are continuing to increase prices as we see.
You put cost go up.
So you should and Thats why were forecasting more amount of season of margins towards margins improving.
The challenges that we're facing so they are open to lease discussion, we're actually approaching customers too.
Backlog that have long durations, and some long term contracts or asking them for.
And the current the current pricing.
Another important theme.
We're doing the managed service business with fuel prices increasing significantly.
Implemented fuel surcharge or not and all of our contracts in North America.
Which which is now helping us which will help us offset some of those things.
Coming periods as well.
And that probably lesser churn that Matt.
Okay.
Towards two is for some just something that will cease.
It seems like when you are talking about is our actions taken in response to what's.
Turning around you is that fair.
Fuel surcharge is this the kind of thing where once it's in place next time, there's a fuel increase that you are protected.
Is it just based on current level, just trying to understand kind of the structure of what youre, putting in place with these new contracts.
Yes.
So again, the example of a fuel surcharge, where we're basing it on X percentage of fuel movement. So next time that there is some.
Manuel upward.
We will be protected in that respect to the contract.
Early on the hardware part of our business, we need to monitor input costs more closely thus part of the supply chain reengineering that we're doing to be more proactive around our material procurement and making sure that we're passing those those costs in a timely manner. It will reflect in our list.
Prices in and our selling prices to customers.
What we've done is we've got adjusted our thinking to be a lot more proactive to your point.
<unk>.
Start getting ahead of the future challenges that might appear and have the mechanisms in place, though that it's not a reaction, but in a proactive manner be able to address both those future changes.
Okay. That's helpful. My second question is just around the outlook given the pricing increases given the backlog.
The topline growth seems.
Given that that's probably even under what inflation is.
Currently and I know, it's probably not expected to go on at that level, but I'm. Just wondering is there are we.
Looking at a mix of ongoing churn in unprofitable contracts on the services side that are going to offset some of its natural.
Growth that we would just get from what we're seeing today.
Yes, so so maybe it would be good for me to walk you through.
A bridge from.
From 'twenty, one to the outlook for 2002 and hence.
And there is a couple factors.
We need to take into consideration. So first of all the in 'twenty, one the Ukraine, Russia revenue was approximately $80 million.
So that that's coming out of the model.
And.
And FX now on a year over year, we originally had modeled FX to be.
Moderate now now we're looking at.
And modeling that to be approximately $130 million unfavorable year over year.
From from the strike ASR so.
And then we have divestitures, we had we had small divestitures from 'twenty, one that's going to affect this $40 million. So if you take those into consideration youre going to get something in the mid three 6 billion and then and then we're guiding.
Obviously.
At the low end a modest growth at the upper end.
A more robust growth so that range is really around.
Supply chain and the ability to deliver product and convert from backlog to revenue.
At the same time.
<unk> mentioned, we have pricing increases that are coming through so it's the combination that growth is the combination of both.
Pricing.
Adjusted for supply chain.
I mean, it's.
It's fairly straightforward.
Alright, I appreciate the detail there.
Sure.
Perfect. Thank you very much for your question. Our next question comes from Alan <unk> from Credit Suisse. Please go ahead.
Yes, hi.
Jeff Thanks for taking my questions. A couple from me first just to understand the magnitude of the margin improvement in Q2, and Q3 is there a way to is there a way to sort of quantify and say if Q1.
If the Q1 revenue was delivered at a sort of normalized margin what would that what would that what would.
Gross profit has been just to get a sense for I guess broadly the risk to your your full year forecast.
Yep.
We haven't we didn't give that number but I can tell you that it's just the product side of it is approximately one.
$100 million.
On the product revenue.
And so.
So you take that as margin.
Alright.
And theres going to be good attachment associated with that and in services and software. So.
So it was material.
Got it understood. Thank you for that Jeff and then as far as the repricing of the backlog goes.
Is that is that contractually written into your I guess your prior backlog or is it dependent on customers basically.
Wanting to preserve their position in line and therefore agreeing to.
Reprice.
Yes.
We're approaching each customer in each cup customer happened individual situations and.
<unk> been very transparent and open with our customers on what has changed that.
Need for us to reprice, but also giving them the option if they want to prepay for that backlog and maintains our current pricing also doing back to improve our cash position. So.
The good news that I'd like.
Remember every machine that we build every single HCM, our self checkout device.
Has the customer attached we don't we don't build inventory without having the customer attached to it.
So.
The best solution for them and for Us.
Got it. Thank you for that last thing for me I guess, a couple of smaller things one is the <unk>.
The restructuring charge I understand it's not fully set in stone.
The cash restructuring.
Is that can we just assume it's distributed between 22 and 23 or and any color. At this point you can provide in terms of the mix in 'twenty two versus 23 of that $75 million in cash restructuring.
Yeah, we haven't.
We havent provided that I would say this.
Yes.
There is a sense of urgency on our part.
And then in.
We have to take care of our internal communications and work, but we're committed to this and that's it.
It's going to be faster than.
It's not something that we're going to delay it we're going to do this as fast as.
While maintaining the proper controls and harvest the savings equivalent.
Thank you Jeff last thing for me the software margin.
Prior question.
Jeff you talked a little bit about software margins being a little bit lower because of.
One.
One or two.
Specific.
Contracts.
Were these so I assume these are sort of multi <unk> multi multi country sort of contracts because we didnt see the margin go.
Go down.
Pretty much across all the businesses on the software side.
Thank you very much for your question.
Our final question comes from Matt Summerville. Please go ahead your line is open.
Yes.
Okay Repriced, if you will.
So very good question.
Matt <unk>.
<unk> remember that we have many long term contracts.
Probably we're signed middle of last year and probably run through.
Thank you.
Even longer durations.
I would tell you that this will be done on an individual basis customer by customer trying to find the most appropriate solution in some cases, where customers have a big urgency to deliver equipment, we're talking with them about them paying for expedited freight.
To meet their commitments so.
I would say that this is still working progress.
The whole organization is very focused on how do we recover that on billable inflation built into our backlog.