Q4 2024 Diebold Nixdorf Inc Earnings Call
Bella: Hello, good day, and welcome to Debold Nextdoorv's fourth quarter and full year 2024 earnings call. My name is Bella, and I'll be coordinating today's call. Following our speaker's remarks, there will be a question and answer session.
Speaker Change: In order to ask a question, simply press star, then the number 1 on your telephone keypad. To withdraw your question, press star 1 again.
Speaker Change: I'd now like to turn the call over to our host, Chris Sikora, Vice President of Investor Relations. Chris, please go ahead.
Chris Sikora: Hello everyone and welcome to our fourth quarter and full year 2024 earnings call. To accompany our prepared remarks, we posted our slide presentation to the investor relations section of our website.
Speaker Change: Before we start, I will remind all participants that you will hear forward-looking statements during this call.
Speaker Change: These statements reflect the expectations and beliefs of our management team at the time of the call, but they are subject to certain risks that can cause actual results to differ materially from these statements.
Speaker Change: You can find additional information on these factors in the company's periodic and annual filings with the SEC.
Speaker Change: Participants should be mindful that subsequent events may render this information to be out of date.
Speaker Change: We will also be discussing certain non-GAAP financial measures on today's call. As noted on slide 3, a reconciliation between GAAP and non-GAAP measures can be found in the supplemental schedules of the presentation. With that, I'll turn the call over to Octavio.
Octavio: Thank you, Chris, and thank you all for joining us today.
Octavio: Beginning on slide four, our focus on execution, accountability, and exceeding customer expectations resulted in a strong performance in 2024. Throughout the year, our teams were executing to drive higher profitability and stronger free cash flow.
Octavio: We were successful on both fronts, delivering $452 million of adjusted EBITDA above the high end of our guidance range and $109 million of free cash flow.
Octavio: which is the company's best performance since the formation of People's Excerpt in 2016.
Octavio: Additionally, implementing lean operations has created a solid foundation for gross margin expansion in 2025.
Octavio: We are targeting another year of significant improvement, with low single-digit revenue growth, adjusted EBITDA in the range of $470 million to $490 million, and nearly doubling our pre-cash flow.
Octavio: I am extremely proud of our global, global and extortive team.
Octavio: We delivered on our commitments in 2024 and show consistent progress towards our long-term goals.
Octavio: We remain focused on accelerating our growth as a high-performing banking and retail technology leader.
Moving to slide 5.
Octavio: It is an exciting time at Diebold Nixler. We have taken numerous steps to position the company for long-term success and create value for our customers and shareholders.
Octavio: Activity across our banking and retail end markets remains healthy, and we entered the year with approximately $800 million of product backlog.
Octavio: This normalized level represents roughly six months of product revenue for the year.
Octavio: We close the year strong in banking, securing major deals, including a large agreement with the top three U.S. banks for new DN Series ATMs and three years of attached services.
Octavio: We continue expanding globally in emerging markets, winning major contracts in Asia-Pacific, Brazil, and the Middle East, as customers around the world enhance and grow their self-service channels.
Octavio: We are delivering the innovation our customers demand to increase self-service adoption and drive higher operational efficiency.
Octavio: Last week, we proudly announced a major milestone, shipping 200,000 of our DN Series ATMs.
Octavio: We are very excited to lead the Accelerating ATM Refresh Cycle with our DN Series solutions.
Octavio: as cash recycling gains traction with financial institutions around the world.
Octavio: Importantly, cash recycling technology is beginning to move beyond the ATM and into the branch cash management ecosystem.
Octavio: In 2024, we introduced our Advanced Teller Recycling Unit, which will expand the bank's ability to improve their efficiency in managing cash at the branch level. This is a key differentiator for us.
Octavio: In retail, we reinforced our leadership position in self-checkout technology and service with large wins in Europe. We also strengthened our presence in the North American market with leading quick-serve restaurant brands.
Octavio: In January, we attended the National Retail Federation Big Show in New York, where we showcased our AI capabilities to combat shrink-related loss throughout the store, as well as innovation to speed up the checkout process.
Octavio: While there, I had the opportunity to meet with many of the world's largest retailers who express the need for exactly the kind of technology we excel at delivering.
Octavio: During the show, we announced a new agreement with Group Musketeers, a French retailer with major brands like Intermarché, to enhance its self-service, checkout, and help reduce shrink.
Octavio: We are also excited to continue building our retail market presence in North America, which represents an attractive growth opportunity for our solutions.
Octavio: Our strong performance in 2024 has enabled us to start returning capital to shareholders.
Octavio: In 2024, we paid down $338 million of debt, and today we announced a new $100 million share repurchase authorization.
Octavio: This represents a major milestone for our company and underscores our commitment to delivering significant long-term shareholder value.
Octavio: Tom will spend more time on our capital allocation framework later in the presentation.
Moving to slide six.
Octavio: We are improving our operational performance by implementing better processes and eliminating waste.
In 2024, we started our Lean and Continuous Improvement journey.
Octavio: by driving excellence in our manufacturing, supply chain, and logistics environment.
Octavio: Throughout the year, we conducted approximately 45 Kaizen events that positively impacted safety, quality, delivery, and cost.
Octavio: We achieved a reduction of greater than 30% in lost employee time, ensuring our team members remain safe conducting their daily routine.
Octavio: Looking at quality, our teams realized approximately a 33% reduction in manufacturing defects, saving time and money on our production lines.
Octavio: For delivery, we achieved a 20% increase in on-time delivery, improving customer satisfaction, and reducing lead times.
Octavio: And finally, looking at cost. Our focus on safety, quality, and delivery helped our teams achieve targeted cost reduction expectations for the year, supporting our expanded product growth margin in 2024.
Octavio: As we move into 2025, we are accelerating our Lean and Continuous Improvement journey on the service side of operations.
Octavio: The example you see on the page is a facility in Toronto, Canada, crucial to our North America service operations.
Octavio: where we completed a successful Kaizen event in which we identified several opportunities to address storage inefficiencies and implement a more efficient flow of materials. I anticipate we will see continued measurable improvement in our service operations throughout the year.
Octavio: With that, I will turn the call over to Tom to go through our financial results.
Thank you, Octavio.
Octavio: Before going into the fourth quarter financial results, I want to highlight two changes in the presentation of our financial information in our earnings materials.
Octavio: We received an SEC comment letter addressing two areas of our financial disclosure. The first being the combination of successor and predecessor periods in 2023, and the second being treatment of fresh start accounting amortization as a non-GAAP item.
Octavio: On the first item, going forward, our disclosures will no longer make direct comparisons to combining predecessor and successor periods.
in 2023.
as our successor.
and predecessor financials.
reflect post-reorganization and pre-reorganization Diebold and Ixtora, respectively.
Octavio: Further, full-year 2024 comparisons relative to the prior partial-year successor period are not meaningful. As such, we are not providing any 2024 full-year comparisons against full-year 2023.
Octavio: Next, looking at the second item, treatment of fresh start related intangible amortization as a not gap item. Starting this quarter, we will no longer adjust for this item in our presentation.
Octavio: It is important to remember that Fresh Start Accounting Amortization is a non-cash, non-operational item.
Octavio: So, this fiscal 24 reporting change does not impact revenue, EBITDA, or free cash flow results.
Octavio: What you will see in our earnings release is our fresh start valuation created 900 million of intangible assets.
Octavio: Post-emergence, the amortization related to these assets was backed out of operating profit as a non-GAAP item in order to facilitate comparisons to the predecessor run rates.
Importantly, our conversations with the SEC have concluded.
Octavio: And going forward, this is how we will present results. In order to help you update your models, we are providing the prior five quarters going back to 4Q23. The information on all the remaining slides and this deck speaks to these changes.
Octavio: The resulting impact of this change is a lower gross margin baseline due to increased amortization. However, as I just mentioned, this has no impact on revenue, EBITDA, or free cash flow in fiscal 24, as all changes are non-cash and non-operational.
Octavio: We have included updates and the earnings release accordingly. You can reach out to my investor relations team with any questions.
Octavio: Moving to slide 8, you can see that we are providing a five-quarter financial trend in our materials in response to these changes. This highlights our updated disclosures and demonstrates our strong performance since emerging from bankruptcy almost 18 months ago.
Octavio: Overall, we deliver on all of our commitments for the year.
Octavio: 2024 revenue was $3.75 billion, with a strong contribution from banking product as we continue to refresh our global ATM install base with our DN Series ATMs and drive increased cash recycler adoption.
Octavio: Service and software attach rates to our hardware sales remain strong. Service revenue of $2.15 billion represents 55% of total revenue and 70% of that is reoccurring in nature.
Octavio: Gross margin for the full year 2024 improved 300 basis points compared to the jumping off point in 4Q23 after the changes in financial presentation. Operationally, this was driven by pricing discipline and the impact of lean operating principles.
Octavio: Turning to operating expense, we continue to maintain our cost discipline two.
Octavio: <unk> 2024 financial results include a full year of normalized incentive compensation, which is the primary driver behind the increase.
Octavio: Continuing on to slide nine.
Octavio: We remain focused on actions that will improve operating leverage our go forward model contemplates higher margin revenue growth dropping through to the bottom line combined with gross margin expansion through continuous improvement and operating expense discipline.
Octavio: We delivered adjusted EBITDA of $452 million in 2024, which benefited from our supply chain and service excellence initiatives that drove margin expansion throughout the year.
Octavio: Full year adjusted EBITDA margin was 12, 1%.
Octavio: In Q4, we generated $186 million of free cash flow at a record $109 million for the full year.
Octavio: This is a solid start on our journey to improve free cash flow driven by higher adjusted EBITDA.
Octavio: Stronger working capital efficiency and lower professional fees.
Octavio: Additionally, we addressed all corporate restructuring related headwinds impacting free cash flow in 2024. This is just the beginning as we aim to nearly double our full year free cash flow in 2025.
Octavio: Turning to slide 10 banking delivered a solid year in 2024 with improving revenue and profitability trends, we continue to see strong ATM refresh activity and the adoption of recycling. We are encouraged by the stable recurring revenue we are seeing in service, where we consistently delivered approximately $400 million.
Octavio: Each quarter.
Octavio: We also delivered more than 25% gross margin for the full year driven by our strong pricing discipline, while also achieving our targets for service gross margin in the fourth quarter.
Octavio: Looking to the first half of this year, we will ship our first fit for purpose Atms in the APAC region in the second quarter of 'twenty, five and launch our branch automation solutions aimed at optimizing the end to end branch cash ecosystem.
Octavio: Adding these solutions to our portfolio gives us confidence as we look at our run rate in 2025 focus on higher margin revenue growth.
Octavio: Moving to slide 11.
Octavio: The macro environment continues to impact retail product revenue.
Octavio: But our team is seeing signs of stabilization with sequential quarter improvement in revenue and gross profit.
Octavio: Q4 sequential quarter revenue was up 15, 7% with growth across both product and service. This is two quarters in a row of sequential revenue growth.
Octavio: Gross profit was up sequentially as we continue to implement our lean operating principles and improved pricing discipline.
Octavio: We're confident in our ability to improve service margins in 2025, given that most of our self service deliveries represent new deployments in the market.
Octavio: Despite near term market challenges the long term outlook and retail remains positive with a recovery in the second half of 2025.
Octavio: On slide 12.
Octavio: 2024 was a strong year for <unk>, where we delivered on our financial commitments for the year.
Octavio: Given this momentum our 2025 financial outlook reflects meaningful improvement in revenue.
Octavio: Adjusted EBITDA and free cash flow.
Octavio: We expect total revenue to be flat to up low single digits, including a 3% to 4% unfavorable impact from FX for the year.
Octavio: The guidance in constant currency contemplates.
Octavio: Banking up low single digits year over year with growth across both product and service.
Octavio: Retail up low single digits year over year with a second half recovery.
Octavio: As it relates to the quarterly cadence revenue is more weighted towards the second half of the year with a 45% first half 55% second half. This split is based on customer orders currently in backlog.
Octavio: Also in the first half of the year. The second quarter is expected to be couple of basis points stronger than the first quarter as a percent of revenue. We are continuing to work with our customers and drive operational improvements to deliver a more linear year.
Octavio: In 2025, we expect adjusted EBITDA to be in the range of $470 million to $490 million.
Octavio: Our improvement is primarily driven by continued focus on service gross margin expansion through lean operations and maintaining operating expense discipline.
Octavio: There is an opportunity for improvement in services with the team targeting 100 basis points of gross margin expansion in.
Octavio: In manufacturing, we expect small incremental improvements in full year product gross margin.
Octavio: Free cash flow is expected to be in the range of $190 million to $210 million, representing approximately plus 40% free cash flow conversion.
Octavio: Now moving on to slide 13, with more details on our free cash flow outlook.
Octavio: There is nothing more important to the company then strengthening our free cash flow.
Octavio: We are pleased with our progress so far, particularly in our ability to clear the decks in 2024 relating to our corporate restructuring, which positions us well for 2025.
Octavio: Building off our strong momentum in 2024, we have line of sight to delivering on our free cash flow guidance range based on the debt financing. We completed in December that provides approximately $70 million in annual interest savings.
Octavio: Approximately $30 million contribution from higher adjusted EBITDA using the midpoint of the guidance range driven primarily by service margin expansion.
Octavio: Approximately a $20 million contribution from reduced professional fees related to corporate restructuring and we are factoring into our bridge a $30 million impact from strategic investments, including Capex combined with the impact of strong accounts receivable harvesting in 2024.
Octavio: Cell lines, where we can achieve next year as we drive towards our goal of best in class free cash flow conversion plus 60% over the next three years.
Octavio: It is also worth noting we will be providing additional details on our longer term business and financial outlook at our Investor Day on February 26 in New York City. Please Mark your calendars and plan to join US for the morning, as we cover our value creation framework for customers and shareholders. Please reach out to Investor relations team for more information.
Octavio: <unk>.
Octavio: Turning to slide 14.
Octavio: Since our corporate restructuring in 2023, we have been focused on building a fortress balance sheet.
Octavio: Our actions have created significant shareholder value with our stock more than doubling since that period.
Octavio: At the end of the year, we have more than $600 million of liquidity.
Octavio: Apprised of $328 million of cash short term investments.
Octavio: And $310 million of capacity on our revolving credit facility.
Octavio: Our net debt leverage ratio was at one four times well within the range. We have set for the company of one three times to one seven times.
Octavio: We paid down $338 million of gross debt in 2024 as part of our refinancing activities.
Octavio: We achieved credit ratings from S&P and Moody's that reflect the impact of the work we are doing and remain committed to <unk>.
Octavio: And we extended our debt maturities to 2030, while significant reducing our cost of debt.
Octavio: Stock price appreciation reinforces that we are taking the right steps to build a solid foundation by reducing leverage and strengthening liquidity to support our operations. This.
Octavio: This is a foundational element of the company going forward that we worked hard to put in place.
Octavio: Moving to slide 15.
Octavio: We are implementing a disciplined capital allocation framework.
Octavio: First and foremost we are committed to maintaining our fortress balance sheet.
Octavio: We are focused on strong liquidity.
Octavio: Low leverage.
Octavio: Proved credit ratings and further reductions in long term debt.
Octavio: We are making strategic investments in the business to continue driving portfolio innovation and infrastructure upgrades.
Octavio: That which better position the company for future growth, our capex and strategic investments in the business will be focused on growing the north American retail business and building out our banking branch automation solutions.
Octavio: <unk> benefits from running a capex light model, representing only approximately one 5% of sales, which compares favorably to our peer set.
Octavio: Third we continue to be guided by our commitment of returning capital to shareholders. We are doing so in the form of a share repurchase program.
Octavio: At current levels. We believe this is the best use of excess cash we announced our first $100 million authorization that we will start executing against this year.
Octavio: Lastly, we want our capital allocation framework to allow for small disciplined and opportunistic M&A and strategic growth investments. We are always evaluating tuck in opportunities for small investments that would accelerate our growth.
Tom: Now I will turn it back to Tom.
Tom: Thank you Tom to wrap things up on slide 16.
Speaker Change: We delivered a strong year, focusing on customers employees and improving operations.
Tom: I am excited about the future of <unk>.
Tom: In banking, we see steady demand in our end markets were DN series Atms.
Tom: And our focus on optimizing the end to end cash ecosystem with our branch automation solutions.
Tom: In retail we have invested in accelerating our North America growth opportunity.
Tom: And enhance our self service offering with AI computer vision.
Tom: Retailers are impressed with how our solutions address their pain points and drive higher efficiencies, while better serving their customers.
Tom: We are at the initial stages of our lean journey.
Tom: And as you have seen we have made tremendous improvements building efficiency in our operations.
Tom: We are expanding our lean efforts throughout the enterprise going into 2025 with a particular focus on our service business.
Tom: And finally, my Thanks goes to our 21000 employees around the world as we work to build a top performing company for our customers and shareholders.
Tom: And with that operator, please open the line for questions.
Tom: Thank you we will now begin the question and answer session. As a reminder, in order to ask a question simply press Star then the number one on your telephone keypad we.
Tom: We will pause for just a moment to compile the Q&A roster.
Tom: Yes.
Speaker Change: Our first question will come from the line of Matt Summerville with D. A Davidson. Your line is now open. Please go ahead.
Speaker Change: Yes, thanks, good morning, guys.
Speaker Change: So maybe let's start in retail two things so you're talking about the second half recovery.
Speaker Change: First help me understand if that led by pause if thats led by Cisco a particular region do you already have orders in hand to support that view help me understand the thinking on the second half recovery and then I have a couple of follow ups.
Speaker Change: Sure Matt This is octavio and thank you and apologies for my voice.
Speaker Change: I've been so happy with the results that I've been jumping up and down celebrating my voice is a little bit scratchy.
Speaker Change: But in all seriousness, we ended the year strongly and retail with sequential improvements in revenue.
Speaker Change: And also significant orders for the back half of the year, particularly in Europe around both scope and pass to.
Speaker Change: <unk> won some very large contracts.
Speaker Change: Our European clients that will start to be delivered in the second half next year and those include both scope and Pos so that gives us good visibility on why we see that second half recovery.
Speaker Change: Secondly, we've made significant investments in our North America sales team.
Speaker Change: I am convinced now as the market transitions from very tightly coupled.
Speaker Change: Self checkout solutions that include hardware software and services to the U S.
Speaker Change: First region in the world to deploy self checkout solutions. These were very tightly coupled solutions.
Speaker Change: Customers are now looking at unbundling, those solutions, where they're looking for best of breed software best of breed hardware, coupled with the services to support.
Speaker Change: I am confident that with this investments and fees.
Speaker Change: Feedback from customers, our AI capabilities around shrink.
Speaker Change: Proving self checkout efficiency.
Speaker Change: As well as hard.
Speaker Change: Software, which is cloud native micro services based clearly start addressing the needs of retailers in North America. So I think we can win by one keep for watsco.
Speaker Change: Being better at delivering in North America that open scalable hardware and scope.
Speaker Change: David is the number one position in Europe and gives us another avenue through software our software is now.
Speaker Change: Open micro services and very easily integrated to updates infrastructures.
Speaker Change: Most retailers to look.
Speaker Change: Yes.
Speaker Change: Thanks Octavio.
Speaker Change: Just with respect to the scope side of the business.
Speaker Change: The market, obviously, you had a reset in 'twenty four and I'd be curious off of a record 23.
Speaker Change: How much of a decline do you think we saw in 'twenty four and do you think the secular lead driven nature of what had been driving the business, leading up to and through the pandemic until last year is that still alive, well and firmly intact or should we.
Speaker Change: Be thinking differently about the scope market going forward.
Speaker Change: So Matt I would say that.
Speaker Change: Declined very significantly by region.
Speaker Change: The Europe, which is one of our biggest markets saw the biggest decline but countries like the.
UK Ireland.
Speaker Change: More pronounced declines in other markets.
Speaker Change: At the same time.
Speaker Change: It is important to note that.
Speaker Change: Self checkout is moving into other retail verticals, whereas we were very concentrated on grocery.
Speaker Change: We've announced wins in fashion general merchandising. So clearly the market is expanding for self checkout and that is very tied to those secular.
Speaker Change: They are ones that we think will return in those in the latter half of this year around more sport efficiency, improving customer journey and frankly, a shift in consumer preference for these types of technologies on the other side remember we are the number one provider of full checkout in Europe.
Speaker Change: A distant number three in the U S.
Speaker Change: <unk> is one of the largest retail markets overall.
Speaker Change: I am very encouraged by new team that we've put in place with the changes in buying behavior from our from our North America retailers and I'm sure that that will.
It will help us reaccelerate growth in retail in the second half of the year.
Speaker Change: Got it and then maybe I'll do one more.
Speaker Change: On the banking side of the business.
Speaker Change: Thank you talked about.
Speaker Change: And then early slide.
You have about 75% of the installed base that still sort of up for grabs with respect to refreshes. So maybe talk about.
Speaker Change: The go forward view of this recycling lead of refresh cycle, maybe a baseball analogy maybe helpful, adding a little bit of regional color as to overall demand I know there were a couple of big tenders in Brazil up for grabs any update there would all be beneficial. Thank you.
Speaker Change: Sure sure Matt.
Speaker Change: And once again, if you consider that we have a global installed base of <unk>.
Speaker Change: 800000 Atms.
Speaker Change: We just completed.
Speaker Change: Shipments of our 200000 DN series last quarter.
Speaker Change: So again, we're roughly 25%.
Speaker Change: Paul.
Speaker Change: My math is correct no baseball analogy, we should be somewhere in the third third anything going into the quarter.
Speaker Change: Or somewhere around there.
Speaker Change: So we're still in the early stages of upgrading this large installed base into recycling.
Speaker Change: If I look at it by geography, which I think is an important part.
Speaker Change: Start with Brazil, as you mentioned, Brazil.
Speaker Change: Brazil has a very concentrated financial industry with a couple of large banks and also some very large government backs.
Speaker Change: We were fortunate that we announced two wins these large banking tenders in Brazil.
Speaker Change: And <unk>.
Speaker Change: And those the reasonable start in the second half of 2025, Thats a little bit of the reason why.
Speaker Change: Our our year will be a little bit more backend loaded this time around.
Speaker Change: These large tenders in Brazil are all for recyclers. So banks are adjusting their infrastructure to incorporate more of this recycling functionality, which again has to do more with software and hardware, but it does take time.
Speaker Change: Another growing market for Us is Latin America and.
Speaker Change: And as you know Latin America continues to be a very.
Speaker Change: Cash heavy.
Speaker Change: Market and banks use the Atms as an entry point for their consumers into the digital ecosystem. So it is not strange to see Latin America, ATM, providing significant functionality around bill payments and even insurance in some cases, so we see very healthy demand coming from Latin America and it continues to.
Speaker Change: An expanding market.
Speaker Change: Also to Europe.
Speaker Change: What's the Berry lessons for price this year, it's been a very stable market for our products and our fruit and.
Speaker Change: Also very stable installed base, so again, even with Paul consolidations.
Speaker Change: <unk>.
Speaker Change: Our.
Speaker Change: Larger customers joining networks, we still see a very steady installed base and.
Speaker Change: It's still steady growth in Europe.
Speaker Change: I will turn to North America were up.
Speaker Change: I am very excited about the print opportunity that we're looking at.
Speaker Change: Which will also apply to Europe.
Speaker Change: Do you think of recycling that today, we've been very focused on implementing recycling at the ATM.
Speaker Change: But when you think of a bank's overall cost structure in running our branch network.
Speaker Change: We are now seeing banks start deploying recycling inside of the branch.
Speaker Change: Last year, we introduced our teller cash recyclers, which uses the same technology that we use in our DN series Atms. This provides EC.
Speaker Change: Comprehensive view of total cash being managed at a branch level.
Barry: This is Barry.
Speaker Change: Very powerful way for banks to optimize.
Speaker Change: <unk> cash ecosystem and cost the branch so we're excited.
Speaker Change: We've seen share gains, but we still have a long way to refresh our installed base.
Speaker Change: With our branch automation services that you will see us talking about really expanding our target addressable market.
Speaker Change: And lastly, when I think of Asia Pacific.
Speaker Change: Yes.
Speaker Change: One of the things that I'm very excited about that.
Speaker Change: Tom mentioned that starting in Q2, we will start shipping our fit for purpose devices for the Asia Pacific region. This includes.
Speaker Change: A smaller footprint machine for the Indian market, where there's huge volumes with lower transaction volumes. So we built the machine specific for that market at the same time, we built the highest capacity fast recycled for markets like the middle East and some parts of Africa. So we're very excited because that will continue to drive the adoption.
Speaker Change: Recycling and that part of the world.
Speaker Change: I think that we are stocking in the early stages buildup. This recycling adoption and were looking up waste on how do we expand our target addressable market, particularly in our more mature markets. We're optimizing the end to end cash ecosystem becomes paramount backs.
Speaker Change: That's great. Thank you for the detail.
We will take our final question from the line of Matt Bryson, where the Wedbush. Your line is now open. Please go ahead.
Matt Bryson: Okay, Thanks, guys and sorry for the background noise here.
Speaker Change: Congrats on the strong Q4 in the guide, particularly given the currency headwinds just.
Matt Bryson: I'm just curious I know a number of other company could talk to.
Matt Bryson: Potential disruption from everything that's going on in the political sphere.
Matt Bryson: Are you seeing any.
Matt Bryson: Any of that impacting your business and executing through it or is it just something that's.
Matt Bryson: Not really affecting you in part because you've got this diversified.
Matt Bryson: Supply chain at this point.
Matt Bryson: Okay.
Matt Bryson: So Matt this is Javier let me, let me jump in and help them with this one.
Speaker Change: I think we've been.
Speaker Change: Tom is looking at the funding.
Speaker Change: But I think that we started our supply chain transformation a couple of years ago, where we were very focused on really.
Speaker Change: Creating a local local supply chain, so our north American installation here in northeast, Ohio supply our products for the U S and Canadian markets, our European facilities supply products for Europe, Our India facility will supply products for <unk>.
Speaker Change: And our <unk> facility in Brazil supplies products for South America.
Speaker Change: Also made a very conscious effort of developing.
Speaker Change: Local supplier spin around each of these facilities. So we believe that we can very effectively minimized.
Speaker Change: Some of the impact of tariffs again, we don't know exactly what they will be they seem to change very frequently.
Speaker Change: Theres always some dependency from some Asian innovation component manufacturers, but we think that overall, we can we can manage that fairly effectively in the supply chain going forward.
Speaker Change: Look the only thing that I would add to that I think we're well positioned.
Relative to the competition as we've really re July as much of our production capacity and supply chain less than 25% of our component based <unk>.
Speaker Change: Is sourced from China that was a much different number.
Speaker Change: Few years ago. So we feel no matter what the tariffs are we don't expect really a material impact at this point.
Speaker Change: Got it and just.
Speaker Change: But you are also you haven't have you seen any shift in how your customers are asking in terms of.
Speaker Change: I'm, sorry zero because of conditions changing how they're thinking about things and youre just executing through that or it's just something we're not really sick.
Speaker Change: I would say at this point, we're really not seeing anything.
Speaker Change: Got we've got strong backlog.
Speaker Change: We feel we feel pretty confident as we look into 'twenty five that will be able to deliver what we say we're going to do.
And have another year. So at this point no no real headwinds other than really some of the FX that we're seeing right, which is pretty substantial for us on the on the revenue side, probably 3% to 4% about $115 million unfavorable impact year over year, but really other than that we feel we feel pretty comfortable in that.
Speaker Change: This stage.
Speaker Change: Awesome.
Speaker Change: Just on the ship to recyclers, I mean, it sounds like theirs.
Speaker Change: A number of favorable dynamics from that from that transition.
Speaker Change: Can you give us some where.
Speaker Change: Rough idea of.
Speaker Change: I guess, how far along in that transition.
Speaker Change: Do you think the industry is and then.
Speaker Change: Any rough numbers, you can give us around <unk>.
Speaker Change: Favorable that shift is to either.
Speaker Change: Asps or gross margins for the banking products.
Matt Bryson: Yes, so Matt I think it's been a steady progression towards recyclers.
Speaker Change: If we start in 2022.
Matt Bryson: The 345% of our shipments were recyclers.
Matt Bryson: Then that move to closer to 15 in 2023 and we estimate.
Matt Bryson: We will be somewhere around the 55% as we move forward. So there is still.
Matt Bryson: Increased adoption of recyclers.
Matt Bryson: This is primarily driven by big markets like the U S.
Matt Bryson: Big markets like Latin America and again.
Matt Bryson: Eddie based in Europe, which has used besides this for a longer time, but are now entering that space in there.
Matt Bryson: Once again in keeping up.
Matt Bryson: I think their installed base.
Speaker Change: The only other thing I would add to that Matt right, obviously favorable impacts on the model.
Speaker Change: Your margin potential.
Speaker Change: Contract revenue per cycle or for Recycler excuse me is higher compared to just a cash dispenser and then average.
Speaker Change: Higher selling prices across the board driving higher revenue.
Speaker Change: Even in the face of the FX headwinds that you see.
Speaker Change: Okay.
Speaker Change: Awesome.
Speaker Change: Okay.
Speaker Change: Yes.
Speaker Change: Regards to the backlog I know you I don't think you mentioned it on the call I think you've targeted having about 1 billion exiting the year just curious if thats, where you ended up.
Speaker Change: Yes, so our again, we had strong banking backlog that burned down in 2024.
Speaker Change: Going forward. Our objective is to have a book to bill greater than one times, which would hold backlog at approximately 800 million Q3 earnings we expected somewhere to be around 902 1 billion.
Speaker Change: We did end the year with a little bit of impact from negative FX closer to $800 million.
Speaker Change: Okay. Thank you and I guess just the last thing is I really appreciate the color around.
Speaker Change: Sales linearity.
Speaker Change: In the coming year, but.
Speaker Change: Our cash flow obviously.
Speaker Change: To be backend loaded at the same time, you're trying to make it a bit more linear.
Speaker Change: Any color you can give us there about how we should think about.
Speaker Change: About cash flow.
Speaker Change: In terms of linearity until 'twenty five.
Speaker Change: Yes, absolutely.
Speaker Change: First half cash flow like likely a use.
Speaker Change: We are we are targeting breakeven, but I would say likely are used less than prior years. We think we have some real opportunities in the first half with working capital to continue to offset some of those use headwinds that we've seen historically, we would expect third quarter to be a positive to offset some of that use and then fourth quarter positive.
Speaker Change: And we feel that we're on our way to nearly double what we did this year.
Speaker Change: Certainly.
Speaker Change: Have a good strong second half.
Speaker Change: Awesome. Thanks again for all the time this morning.
Speaker Change: Okay.
Speaker Change: Welcome.
Speaker Change: Yeah.
Speaker Change: Thank you at this time, we have no further questions.
Speaker Change: Now ill turn the call over to Chris <unk> for his closing remarks.
Speaker Change: Thank you again for participating in today's call and their interest in Diebold Nixdorf. If you have any follow up questions. Please feel free to reach out to Investor Relations.
Speaker Change: Lastly, we hope many of you will join us for Diebold Nixdorf in 2025 Investor Day on February 26 in New York City, We look forward to Shang an in depth look at our businesses markets and outlook for the company. Thanks, again and have a good rest of the day.
Speaker Change: Ladies and gentlemen that concludes today's call. Thank you all for joining you may now disconnect.
Speaker Change: Please wait the conference will begin shortly.
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