Q1 2025 Diebold Nixdorf Inc Earnings Call
Kate: Hello, good day and welcome to Diebold Nixdorf's first quarter 2025 earnings call. My name is Kate and I'll be coordinating today's call. Following your speaker's remarks, there will be a question and answer session.
Kate: In order to ask a question, please simply press star followed with the number one on your telephone keypad. If you would like to withdraw your question, press star one again. 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 first quarter of 2025 earnings call. To accompany our prepared remarks, we post at our slide presentation to the Investor Relations section of our website.
Kate: Before we start, I will remind all participants that you will hear forward-looking statements during this call.
Chris Sikora: These statements reflect the expectations and beliefs of our management team at the time of this call, but they are subject to risks that could cause actual results to differ materially from these statements.
Chris Sikora: You can find additional information on these factors in the company's periodic and annual final fileings with the SEC.
Chris Sikora: Participants should be mindful that subsequent events may render this information to be out of date.
Chris Sikora: We will also discuss certain non-GAAP financial measures on today's call. As noted on slide three, a reconciliation between gap and non-GAAP measures can be found in the supplemental schedules of the presentation.
The set, I'll turn the call over to Octavio.
Good morning everyone and thank you for joining us.
Starling on Slide 4
Chris Sikora: 2025 is off to a strong start with Q1 performance on track with our expectations.
Chris Sikora: By staying focused on execution and exceeding customer expectations, we delivered another quarter of standout results.
Chris Sikora: Importantly, we are maintaining our financial outlook for 2025 while monitoring the Paris situation.
Chris Sikora: Our market-leading automation and self-service technology drove a significant 36% year-over-year growth in product orders.
Chris Sikora: with growth across banking and retail and in all major geographies.
We saw continued strength in the adoption of cash recyclers.
Chris Sikora: This robust momentum, decision as well to achieve our revenue growth in the second half of the year.
Arlene Operating Model and Continuous Improvement Mindset are delivered.
Chris Sikora: Gross Margin, expanded 20 basis points year over year, and 140 basis points sequentially.
Chris Sikora: We are starting 2025 on solid footing and are making solid progress to hit our three-year targets, growing product growth margins 25 to 50 basis points annually and service growth margins approximately a hundred basis points annually.
Chris Sikora: We are maintaining our fortress balance sheet with low net leverage to support our capital allocation priorities, while strengthening our pre-castlow generation.
Chris Sikora: We generated 6 million and positive free cash flow in the quarter. The best first quarter in our company's history as we deliberately take steps towards improving our cash flow seasonality.
Chris Sikora: and we are delivering for shareholders, taking off our 100 million share repurchase program in March by repurchasing 8 million of the end shares.
Chris Sikora: We are proud to take this important first step to increasing capital returns.
Chris Sikora: We believe there is upside potential towards stock and we expect to continue executing this initial program in a prudent manner.
Chris Sikora: In line with our commitments of maximizing value, we remain focused on returning capital to share orders in the form of shared repurchases.
Chris Sikora: Regarding the geopolitical backdrop and the new tariff policies, we are prepared for tariffs, giving our long-time local operations and investment in local to local manufacturing.
Chris Sikora: There are some areas of potential impact in our supply chain, but the team is already taking action.
Chris Sikora: Leveraging our local manufacturing and lean principles to keep costs in check, Tom will hide deeper into this in a moment.
Chris Sikora: I am incredibly proud of our global team for staying focused on delighting customers and advancing our continuous improvement culture.
Let's move to slide five [inaudible]
Chris Sikora: Taking a step back, we wanted to reiterate what we see as the key drivers of value creation for Diebold Nixdorf.
which we communicated at our February 2025 investor date.
Chris Sikora: We are focused on delivering on the three-year growth acceleration plan we set to drive meaningful value as a global leader providing mission-critical hard work, service, and software, transforming the way people bank and shop.
To that end, we are delivering across three T-pillars.
First, we're capturing secular pale winds across our two complementary businesses.
Backing and Retail [inaudible]
where customers continue to seek more self-service and automation solutions.
Chris Sikora: Both banking and retail are large and growing opportunities representing a combined 32 billion total addressable market.
Second, we are driving growth and improved profitability.
Chris Sikora: In banking, we are accelerating growth through branch automation solutions and fit for purpose devices and through a long-term ATM refresh spike.
Chris Sikora: In retail, we are driving in hand AI-driven checkout capabilities and penetration of the North American market.
We are improving profitability to our lean operations.
There are significant operational efficiencies being unlocked across the organization.
Chris Sikora: This is really becoming part of our culture and ingrained in the minds and hearts of our employees.
Chris Sikora: We are seeing great action from our team and we expect continued benefit from these finishes.
Third, we are increasing our task generation.
Chris Sikora: Hire free cashflow conversion, enable us to increase shareholder returns via share repurchase.
Chris Sikora: It's worked out to 800 million in cumulative free cash flow over the next three years, and a 60% plus free cash flow conversion in 2027.
Chris Sikora: while maintaining a fortress balance sheet an increasing capital return for our shareholders.
Chris Sikora: With that, I would like to turn to slide six, where we will discuss our growth acceleration strategy progress.
Chris Sikora: I'm excited to share that Q1 shows we're already advancing on the priorities we outlined.
Chris Sikora: In banking, we are transforming how financial institutions operate with cutting-edge branch automation and tailored ATMs for high growth regions like Asia Pacific and the Middle East.
Chris Sikora: Our branch automation solutions integrate advanced ATM and telecast recyclers with our pre-packaged managed service and software offerings, enabling banks to streamline operations and enhance customer experience.
Chris Sikora: We're gaining traction with the number of large national and regional banks in the US and our pipeline continues to grow.
Chris Sikora: Meanwhile, our tailored fit-for-purpose ATMs and recyclers, like the India-made units now rolling out, are designed for local needs, compact, energy and cost-efficient and paired with bundled software and services.
Chris Sikora: Similarly, our high capacity recycler unit developed for the Middle East and Africa has allowed us to win several new logos this quarter.
Chris Sikora: By offending our install base in this high growth region, we will drive high margin recurring service and software revenue.
Chris Sikora: In retail, we are redefining self-checkout with AI-driven solutions like dynamic smart vision.
Chris Sikora: This technology uses advanced computerization to reduce shrink by detecting on scanned items and streamline and check out with Automatic Code's recognition, saving time for shoppers and cutting costs for re-divers.
Chris Sikora: pilots are underway with major chains showing strong results, including a 70% reduction in brought for one of our European customers.
Chris Sikora: Beyond applying AI-driven solutions that self-checkouts, we are leveraging our deep expertise to deploy fraught prevention solutions at the traditional point of sale terminal and the
Chris Sikora: And as we execute our North America expansion strategy, our investments in local manufacturing in Ohio and expanding our North America sales team are showing steady progress with opportunity identified that would contribute to the expected second half recovery in 2025.
Chris Sikora: On manufacturing, supply chain and product, we remain well positioned to achieve our targets.
Chris Sikora: Given our established strategy of local for local manufacturing and the initial impact of applying lean principles.
Thank you. Bye-bye.
Chris Sikora: We're asking swiftly to deploy mitigating actions for our supply chain in base of Bryson CARES and accelerating our development of an in-country supplier base to help mitigate
We also implemented targeted price adjustments in North America.
Chris Sikora: and in services, we are rolling out Oracle Deal services and combining it with our all-connected data engine analytics platform to deliver faster, smarter support, making our customers' lives easier.
Chris Sikora: These solutions aren't just about innovation. They're about solving real problems and creating lasting value for customers and shareholders.
Now on to slide seven.
Chris Sikora: Service is the heartbeat of our business, and in 2025, we're doubling down on making its world class.
Chris Sikora: In Q1, we held intensive Tyson events across six countries, from Canada to India.
Chris Sikora: and as you can see from the pictures hundreds of employees participated.
Chris Sikora: We are advancing our cultural transformation and helping streamline how we serve our customers.
Thank you very much.
Chris Sikora: The results are clear, improved safety for our teams, faster repairs, fewer repeat calls, happier customers, and the reduction in average days of the inventory on hand.
Chris Sikora: As I met with many of our customers this quarter, I was encouraged by the recognition of the positive impact we're driving in their operations.
Chris Sikora: Disimprovements do more than delight our customers. They boost margins, strengthen loyalty, and ensure technicians work safer, fueling our team well-being and profitability.
Chris Sikora: By pairing lean principles with tools like Oracle Field Services, we're not just meeting service agreements, we're focused on exceeding them consistently.
Chris Sikora: This is our path to becoming the undisputed leader in service, delivering unmatched value to our customers and shareholders alike.
Chris Sikora: With that, I'll turn it over to Tom to walk us through our financial results.
Thank you, Octavio. Starting on slide A.
Chris Sikora: We provide a five quarter financial trend, which shows how our business typically builds throughout the year Overall, first quarter results represent the solid start to the year. Most importantly, we delivered in areas that position us well to achieve our full year objectives. Thank you very much.
Chris Sikora: First quarter product backlog increased to approximately 900 million from approximately 800 million at your end on strong new order entry which was about 36% year over year with improvements across both banking and retail. [inaudible]
Chris Sikora: Coming into the year, we expected a 45-55 revenue split, waited to a strong second half of the year and our teens are converting on those opportunities.
Chris Sikora: Our first quarter performance along with achievable due to order entry targets will give us approximately 80% to 90% visibility into full-year product revenue and this is supported by our April order entry levels.
Chris Sikora: Gross Margin continue to improve, up 20 basis points year over year and a hundred and forty basis points sequentially, primarily due to better geographic and product mix, as well as the impact from our lean initiatives.
Chris Sikora: We are maintaining our cost discipline and continuing our work to improve our overall cost profile. In the first quarter operating expense was up year over year due to higher incentive compensation and investments in supporting our strategic growth initiatives that Octavio outlined earlier.
Continuing on to slide nine.
Chris Sikora: We remain committed to strengthening our profitability and improving our free cash flow generation.
Chris Sikora: We delivered a Justice EBITDA of 87 million in the first quarter.
Chris Sikora: We also generated 6 million of free cash flow in Q1, which is the best first quarter performance in Diebold Nixdorf's history during our seasonally weakest quarter.
Chris Sikora: This is a solid start on our journey to improve free cash flow conversion to 40% plus in 2025.
Chris Sikora: which was driven by lower interest expense, working capital efficiency around inventory and accounts payable.
Chris Sikora: Reduced professional fees as well as a better process around timing of non-income tax-related payments that benefited the court.
Chris Sikora: I also want to reiterate our commitment to increasing transparency for investors and our results. Our first quarter results represent an initial step for us in delivering simpler, easy to understand results with fewer adjustments to EBITDA.
Chris Sikora: Moving to slide 10, thanking delivered another solid quarterly performance with accelerated adoption of cash recycling technology and its associated software and service business.
Chris Sikora: Water entry was very strong, up approximately 50% year-over-year, and supports our revenue outlook for the year.
Chris Sikora: Banking Revenue was up 9 million year over year excluding the impact of ethics and a non-return Brazil tax item in Q1 of 2024.
Chris Sikora: First margin was of 20 basis points year over year and 180 basis points compared to the prior quarter with margin expansion across both product and service driven by the impact of lead initiatives and improving North America service performance.
Chris Sikora: We continue to see strong ATM refresh activity and the adoption of recycling.
Chris Sikora: The initial traction we are gaining with branch automation solutions and our fit-for-purpose product portfolio, plus our outstanding order entry performance. It gives us confidence for the remainder of the year.
Thank you.
Turning to Floody 11
Chris Sikora: The macro environment continues to impact retail, product revenue, but as we mentioned before, we are seeing signs of stabilization, that point to a second half recovery and sequential quarter improvement throughout the year.
Chris Sikora: This is supported by our improved order entry in the quarter, up approximately 10% would stronger demand for our self-service solutions.
Chris Sikora: In the US, we are gaining traction and building a strong pipeline with several new customers conducting proof of concepts and pilots with our solutions.
Chris Sikora: Despite declining volumes, Gross Margin was up year over year and sequentially as we continue to implement our lean operating principles and maintain pricing discipline. [inaudible]
Chris Sikora: We are confident in our ability to improve service margins in 2025 given that most of our self-service deliveries represent new deployments in the market.
Chris Sikora: Despite the near-term market challenges, our long-term outwoken retail remains positive.
Chris Sikora: We are especially excited about our dynamic smart vision capabilities and early positive signs in North America with a growing pipeline.
Moving to slide 12 12.
Chris Sikora: We wanted to share additional details with you on how we are framing the terror policy risk.
Chris Sikora: Keep in mind that we have dealt with tariffs in the past, as we are a global company operating in more than a hundred countries.
Chris Sikora: As we have previously stated, our local-to-local manufacturing structure means we don't anticipate a material impact from tariffs. However, given the evolution of the tariffs announced, we wanted to provide a little bit more context.
Chris Sikora: Importantly, even despite broader and higher-terror policies announced since we last quote, we continue to reiterate our original 2025 financial guidance.
Chris Sikora: Based on inactive or proposed terrorists, we estimate the gross impact for 2025 is approximately 20 million, and we are working to mitigate up to approximately 50% of the headwind for the year.
Chris Sikora: Our 2025 guidance ranges incorporate this framework. However, we will continue to monitor and adjust if required as a tariff landscape continues to evolve and our mitigation efforts take hold.
Chris Sikora: We see the largest impact from our imports from China and Germany, collectively about 15 million based on current tariff conditions of 145% for China and 10% for all other countries. Our framework assumes these conditions remain in place for the full year.
Chris Sikora: Our mitigation strategies prioritize the impacts from China and Germany with accelerated productivity efforts from our lean initiatives, sourcing alternative parts, deduishing with our suppliers and wear appropriate pricing initiatives.
and as required, greater S.G.N.A. controls.
Chris Sikora: Keeping this in mind and turning to our guidance on slide 13.
Chris Sikora: We are maintaining our 2025 guidance ranges. Our solid start to the year combined with the current demand levels and our backlog reinforces this outlook.
Chris Sikora: However, as a global company, our visibility is affected by the recent macroeconomic uncertainty and we will continue to monitor this going forward.
Chris Sikora: We are still planning for low single-digit banking and retail revenue growth in constant currency. The FX environment has been volatile, so we'll continue actively monitoring for potential impacts.
Chris Sikora: As it relates to quarterly cadence, we continue to expect revenue to be weighted towards the second half of the year, with a 45% first half and a 55% second half.
This split is based on our customer orders currently in our backlog.
Chris Sikora: In 2025, we expected Justin Evita to be in the range of 470 to 490 million.
Chris Sikora: Primarily driven by continued focus on service gross margin with the team targeting approximately 100 basis points of gross margin expansion through lean operations.
Chris Sikora: In manufacturing, we expect small incremental improvement in full-year product growth margin by maintaining operating expense discipline.
Chris Sikora: Free cashflow is expected to be in the range of 190 to 210 million, representing 40% plus free cashflow conversion.
Chris Sikora: We remain confident in our ability to deliver another strong year of results and build upon our improving safety ratio.
Chris Sikora: Moody on the slide 14, with more details on our free cash flow outlook, there is nothing more important to the company than strengthening our free cash flow.
Chris Sikora: We are pleased with the progress so far in the first quarter generating $6 million of positive free cash flow as this helps to de-risk the year and is a key step toward improving our seasonality in the future.
Chris Sikora: We have line of sight to deliver on our free cash flow guidance range, based on the debt paydown and refinancing we completed in December of 2024, which provides 70 million in annual cash interest savings.
Chris Sikora: $3 million contribution from higher adjusted EBITDA using the midpoint of our guidance range, driven primarily by service gross margin expansion.
Approximately 20 million contribution from reduced professional fees.
Related to our corporate restructuring
Chris Sikora: and we are also factoring into our bridge. Approximately $30 million of impact from strategic investments, including Capac's combined with the impact of strong accounts receivable harvesting in 2024.
Chris Sikora: This outlines what we can achieve this year as we drive towards our goal of free cash flow conversion of 60 plus percent over the next three years
Chris Sikora: Turning to slide 15, we are benefiting from our Fortress balance sheet and bolstered liquidity position that support our capital allocation priorities.
Chris Sikora: At the end of the quarter, we have more than 635 million of liquidity, comprised of 328 million of cash and short-term investments, and 310 million of capacity on our revolving credit facility.
Chris Sikora: Our net leverage ratio is 1.5 times, well within the range we have set for the company of 1.3 to 1.7 times, representing one of the strongest balance sheets in the industry.
Chris Sikora: And after executing the first eight million of shared repurchase of March, we expect to continue strategically executing on our remaining 92 million authorization throughout the year.
Chris Sikora: This is not the Diebold Nixdorf Ebola. The work we have done to build our fortress balance sheet and implement our local to local manufacturing footprint, our foundational elements for the company. [inaudible]
Chris Sikora: and position us well to serve our customers and respond operationally to the current macro uncertainty.
Chris Sikora: Lastly, this is another quarter of DN doing what we said we would do and we intend to keep this positive momentum through the remainder of the year.
Octavio: With that, I'll turn it back to Octavio for some posing comments.
Thank you.
Thank you, Tom, to wrap things up on slide 16.
Octavio: We delivered a strong quarter, focusing on our customers and employees while improving operations, demonstrating significant progress against our multi-year growth plan.
Octavio: In banking, we see steady demand for our DN Series APMs and our focus on optimizing the end-to-end cash ecosystem with our branch automation solutions.
Octavio: In retail, we have invested in accelerating our North America growth opportunity, and then hands our self-service offerings with AI capability.
Octavio: Retailers are impressed with how our solutions address their pain points and drive higher efficiencies
Octavio: We have made tremendous improvements in building efficiency in our operations through a disciplined lean culture.
Octavio: We are expanding our lean efforts throughout the enterprise over the course of 2025 and beyond.
Octavio: and we are focused on maintaining a fortress balance and nearly doubling year over year pre-cast
Octavio: My thanks. Go to our 21,000 employees around the world as we work to build a top performing company.
It is an exciting time at Diebold. Next one.
Octavio: We have taken numerous steps to position the company for long-term success and create value for our customers and shareholders.
And with that operator, please open the line for questions.
Speaker Change: Thank you. We will now begin the question and answer session. As A reminder, in order to ask the question, please press star then the number one on your telephone keypad. We will pause for just a moment to compile the Q&A
Speaker Change: Hi, sorry about that. Some problems that I'm meeting on mine. Thanks for taking my questions and congrats on the positive cash flow. Thanks, Matt.
Speaker Change: The new orders or the backlog growth was impressive, particularly in NQ1. It looks like it was
Speaker Change: Rob Basicross, both product categories. Can you talk a little bit more about kind of what you saw driving that both on the on the baking of the retail set. Thank you very much.
Speaker Change: Yeah, thanks. So look, what what we're seeing comes through, healthy banking, cash recycling adoption, right? We continue to see strengthen with Europe and Latin America, improved retail, self service activity, both of which support our our second half recovery.
and then we're also seeing a robust momentum.
Speaker Change: So hit me water entry targets that we had for ourselves and Q1 was important.
Speaker Change: and given what we're seeing, the activity in April , this continues to support our expectations for a solid full year.
Speaker Change: And I will say, look, I'm almost a year into the role. So my history isn't that deep, but at this point we have about 80 to 90% visibility.
Speaker Change: on to our full year product revenue. And again, as you mentioned, you know, backlog did increase from approximately 800 million at your end to 900 million at the end of the quarter.
Speaker Change: I mean, it sounds like on the tariff side, you guys are-
The impact isn't that substantial and you already have mitigation.
Speaker Change: Plans in place to offset the support of the tariffs but have you seen customers at all exonerated their order a
Speaker Change: Given kind of uncertainty around what things might look like going forward, that not really plain your business at all.
Speaker Change: This is Octavio Matt. No, not really. You know, remember the tariffs were announced, you know, after our quarter had ended so even though there was some talk about it, there was no.
Speaker Change: No real impact during Q1 of the tariff. So I would say that it's just the strength of the of the business during Q1 that drove the higher orders in the quarter.
Speaker Change: I have the chance to speak with many of our customers here in the US both in banking and retail we have this.
Speaker Change: and we've touched after the quarter ended on the possible impact of tariffs and I would say that customers understand that there might be an impact in pricing, but nobody has expressed any real concern about a slowdown or changing their investment plans for the year.
Speaker Change: You have a relatively large foreign exchange expense. I think it was an 8.5 million. You just talked about the dynamics there are obviously currencies fluctuated a lot.
Speaker Change: This task order bid is that hadn't been any income statement, the net profit would have looked really good.
Speaker Change: Yeah, so first, let me, let me read a rave, right? This is non-cash, non-operational impact.
Speaker Change: to our P&L tied to our intercompany loans and what we've seen in the volatile currency fluctuations in the first quarter.
Speaker Change: So again, it's driven primarily by some of the loans that we have, you know, with Brazil and Europe through our sort of internal banking structure that lost value from a weakened dollar, right? We've seen some of this reversal of this trend in the second quarter, and this is something that we intend to monitor as we go forward through the year.
But again, boss let me reiterate, Ruth time, time cash non-operational [inaudible]
Van Clausen, Spriglitz, Versus, I think in terms of, thanks for the call, Agrest.
Matt: Thanks Matt. Our next question comes from the line of Matt Summerville with Day Davidson. Your line is open.
Matt: And, excuse me, couple of questions first. It's back on the banking side of the business orders up 50% year on year. Can you maybe just give a little bit more granularity in terms of how that played out across?
You know, the four major regions in which you compete.
Matt: and additionally just with respect to recycling adoption, are we starting to get a little long in that cycle at this point or do you still see, or I guess how much runway do you still see there in and then I have one or two follow-ups?
Speaker Change: Sure, Matt, I'll start with the reset, with the refresh cycle and recycling adoption.
Speaker Change: I would tell you that we're still fairly early. Just at the beginning of the year we should are, I think, 200,000.
Speaker Change: TN series, ATM globally. If we look at our install base, we still have 600,000 devices to upgrade, so we're roughly 25, 30 percent in, so I still think we have a lot of runway to go.
Pfft
Speaker Change: Again, the major markets when I look at them, you know, kind of support these pieces that we still have a long way to go. When I look at the US
Speaker Change: Again, important new orders around recycling, but some large financial with some of the largest financial institutions in the country that keep that are in the midst of a refresh cycle. And we see that now permeating to our regional accounts and credit unions and community banks across the US. So the US had top very positive momentum through the, you know, to the first quarter.
A lot of four-directivity.
Speaker Change: So, we feel good about the US, you know, we are very focused in the US on how do we improve, keep improving our service because that keeps being the driver of additional customer awards, the better service we provide, the more orders we get for product and I think that's customer CR.
Speaker Change: Improvement in our service operation and how we're modernizing things because they reward us with more order so you're very happy with the performance in the in the US or North American March
Speaker Change: If I go to Europe , Europe continues to be a very positive surprise for us in the ATM side. As you know, Europe is a very stable market.
Speaker Change: A lot of consolidation and a lot of, you know, these shared networks across banks in multiple countries, but we continue to win. So even as bank networks consolidate, we continue to gain share and gain a better part of those networks. So.
Speaker Change: in France, we've had significant awards in Belgium so we continue to see us winning in the European market. And again, as I mentioned, the very positive surprise, very proud of our European team as they're clearly winning share in that market.
Latin America, as you know, cash heavy society, still.
Speaker Change: We keep talking about Brazil and the big banks and how that plays out through the year. I'm happy to look at the report. Matt sat at Q1, another big opportunity was won in Brazil with tech fund.
Speaker Change: The Bank, the network owned by all the banks they're in Brazil. So on large order that we were able to start delivering even in late March for the customer. So we continue to see that momentum across Latin America.
And lastly, Asia Pacific, as we've mentioned before, we've…
Speaker Change: Field, the very deliberate strategy that we're calling it a bit for purpose devices.
are
Speaker Change: First products in India are now officially in production being certified by multiple customers. So we feel good about the prospects there strong order entry in the Asia Pacific Middle East regions. And we also, you know, have the significant success with our high capacity recycler, the highest capacity recycler for markets like, you know, like.
in the Middle East like Saudi Arabia, the Emirates
Speaker Change: Where we won significant new customers. So again, I would say that this quarter we saw very healthy demand for banking products across our four regions. And as Tom alluded, you know April we see the trend continuing even in the face of the global uncertainty.
Speaker Change: And for retail, I would say that we are happy that retail orders were up.
Speaker Change: You know, on a year-over-year basis. So we're starting to see that trend and I'm also proud that the new US team that we build for retail has created a very solid pipeline of opportunities that I'm sure will fuel our growth in the second half of the year. [inaudible]
So, I want to thank you for that detail. I want to… [inaudible]
Speaker Change: Sort of dovetail off your last comment on the retail side of things in North America. You're obviously talking about that You've said it twice now that that's going to contribute to your growth in the second half of the year [inaudible]
Speaker Change: So maybe if you can give some additional color there, that'd be helpful [inaudible]
Matt: Yes, so so Matt clearly I don't want to get ahead of ourselves but we have pilots and proof of concepts in some of the largest retailers in North America as we speak.
Matt: So remember, you know, we are the new kid on the block per se in the US market. So our products are being tested by some large brochures, by some of large general merchandise and companies and again, as those pilots evolve, we feel that.
Matt: Same as we've done in Europe , the technology and the solutions we've improved themselves valuable and and again as these large companies make their purchasing decisions, I think we have a real shot of starting to gain market share in the US.
So, if I can, maybe just-
to ask one more on the terror side of things.
Matt: I would imagine you've learned some lessons, if you will, relative to how contracts are structured with customers during the supply chain crisis when you had all that inflation, when you're fighting to keep Diebold's head above water. Why not flex more price muscle?
Matt: today to fully offset that that tariff impact of 20 million. I guess what I'm trying to get at is maybe why why don't you have more price power than maybe you're exhibiting. [inaudible]
Matt: Hi Matt, it's Tom. I'll take that one. Look, if we just take a step back, right, as we stayed in our remarks our local to local manufacturing structure and agility to adapt. We're going to take a step back.
Mings.
Matt: We can greatly mitigate the material impact from some of these tariffs.
Matt: You know, and I want to break down sort of the 20 and the 10 that we're talking about right so right now we have very clear line of sight to being able to mitigate up to 50% and that's really a third based on lean productivity efforts.
Matt: A third based on supplier negotiation and alternative suppliers, and then a third on pricing.
Matt: We have more left in each of those tanks, right? But that is what we have a very clear line of sight too and remember we're one month in and we expect to be able to continue our mitigation efforts.
Matt: and as a side note, as I mentioned in our IR Day, we are very focused on S-G-N-A and OP-X.
Matt: So it's not just those three levers but we also have the operational lever of implementing more costs.
Matt: Discipline over the remainder of the year. So that's why we're very comfortable in our current guidance range. When you think about, you know, the, the lean the supplier of the pricing and that, you know, opportunity for additional SG&A. [inaudible]
Great, appreciate the color. Thank you guys.
Speaker Change: We will take our final question from the line of Justin Aegis with CGS Securities. Your line is open.
Let's just go ahead.
on the improvements in Freakashra both.
Speaker Change: in the quarter and for guidance and long-term guide. Can you give us a more color on the working capital permit? I know you mentioned the counts payable was positive or contributed positively this quarter, but a bit of an AR headwind. So just hoping to get some more detail there.
Speaker Change: Yeah, yeah, first let me, let me just, you know, I want to congratulate you organization.
Speaker Change: on the first quarter free cashflow results, right? Positive 6th.
Again, reiterating what we said in our opening remarks, right? That's...
Speaker Change: That's the first time, perhaps ever, and certainly a long time to be able to achieve positive cash loan, what's our seasonally the lowest quarter. And if I were to bridge sort of Q1 and 24 to Q1 and 25, right? Obviously the financing that we did at the end of Q4 alleviated cash interest expense. And we did, we do have less volume, so we do have less EBITDA, so that needs some of that up.
Speaker Change: You know, we did have favorable working capital efficiencies on inventory and AP. Again, you know, the new Diebold, very conscious about when we start to buy the raw materials to get into production for the second half of the year. So I think you're starting to see more operating discipline on the manufacturing.
side of the house.
Speaker Change: We had a lot of AR coming out of a bankruptcy that we were able to sort of seize on and collect so that will be a headwind for most likely the remainder of the year but we expect to continue to drive BSO and continue to drive inventory NAP.
Speaker Change: But, you know, in addition to that, we did have reduced professional fees as well, which helped, but, you know, one of the things that I'm, again, it's kind of the new DM team here.
Speaker Change: We exercised a better discipline about what we did in terms of getting prepayments in the fourth quarter of the year.
Speaker Change: So, if you were to go back in time to 2023…
Speaker Change: We spent a lot of time issuing discounts and getting prepayments into the fourth quarter of 2023, which resulted in a very large fat payment.
Speaker Change: in the first quarter of 2024. So the management team, we discussed that, we did not think it was worth the discounts to drive that level of prepayments. We let things happen more in the natural rhythm of the business.
and because of making that decision.
Speaker Change: You know, we sort of ended up in the same place, a better place.
Speaker Change: But we didn't have the discounts and the that timing was much more manageable and that that really improved free cash flow by about you know 20 20 million. So again, it's it's the operating discipline that we're starting to execute instead of doing things come the way we always did.
Speaker Change: I'm very helpful. Thanks for that comprehensive breakdown. And then my last question on capital allocation priorities, can you just...
Speaker Change: You know walk us through how you're thinking about that especially in light of starting to generate more free cash flow I know you repurchased.
Speaker Change: 8 million of shares this quarter, but just want to get a sense of that going forward.
Speaker Change: Yeah, happy to. So it wasn't eight million, it wasn't eight million in the sheriff's quarter, but it was only our program, if you may recall, started in March. So it was really one month.
Speaker Change: So, you know, a typical quarter would be more, you know, eight times three, and depending upon the seasonality of our cash flow towards the end of the year, we would expect to increase it. You know, let me be clear, and I think Octavio and I were pretty succinct about it in our IR day, right?
Speaker Change: R.X.S. Cash is returned to our shareholders. Right now, we feel the best R.O.I. is our stock price.
Speaker Change: and that is what we're doing. We're executing through the share we purchase. I would say everything else is kind of in line as it relates to some of the investments that we need to continue to make here in terms of cat-backs and...
Speaker Change: to drive our growth strategies forward, but that excess cashflow is being returned to shareholders.
Visa Visa Repurchase [inaudible]
Alright, thank you. I appreciate that.
Okay, welcome. Thank you.
Speaker Change: Thank you at this time. We have no further questions. I'll turn the call over to Chris Sikora for his closing remarks.
Speaker Change: Thank you for participating in today's call and your interest in Diebold Nixdorf. If you have any follow-up questions to the call, please feel free to reach out to investor relations. 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.
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Speaker Change: Isobel Diaz, MaybeLosha, Tia Shou Kido, Maddison Affil, The Frainski Brothers, politician Christopher Sikora, the Dreamers Artists of the World, Ho Mayer, Chairman of the Board of Directors, Diversity, Drivenn 3
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