DBD - Earnings call transcript Q1 2018 | Diebold Nixdorf, Incorporated

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Operator

Good day everyone. Welcome to the Diebold Nixdorf Q1 2018 Year End Earnings Conference Call. At this time, I'd like to turn the conference over to Mr. Steve Virostek. Please go ahead, sir.

Stephen A. Virostek

welcome XXXX. Diebold and earnings first Sherwin, for call you, everyone Nixdorf's to quarter Thank

today Gerrard me Chris Joining are, Chapman, Officer; Chief Chief and Executive Financial Officer. Schmid, President and

the slides non-GAAP contains we the as later be results our include remind metric Investor we webcast, company's comments IR reconciled information, page And statements. to post website statements we are dieboldnixdorf.com. a there today. forward-looking actual we metric. performance. our of believe to In your these we non-GAAP of X, available will our characterized the Slide everyone supplemental a and that our During replay Relations that that referring to GAAP schedules of reminder on which which each could number that comparable cause On slides, differ a will financial helpful of the benefit, certain its will comments factors from X directly assessing in for Slide most are materially be webcast to is have may

company's find the these the of forward-looking I call is and information this as additional Gerrard. on may I'd hand out our events filings. that render factors subsequent information with information current to in date. of this And today may listeners will like You remind SEC that, over to

Gerrard B. Schmid

to Nixdorf, performance. I early as Diebold steps with My results, taking improve comments today. the joined company, be overview will first you everyone. the the morning well speaking pleased on reasons very our initial about Good why to I'm of we're observations center as quarter an the

strength Nixdorf; are attracted our retail. banking. United longstanding as the I've services to and the and working workings their well success. technology the the capabilities. committed in been opportunities multiple their trusted a leading customer solid understanding fintech the aware I technology growth developed understand proposition, of roles of was banks with Canada, Wincor is both had companies is banks a States, how who and software United years, reputation our share, I complexities I pressuring banking For in evolve to as also Through customer Kingdom market inner of suppliers leadership by of Diebold as and many have in experience and and revolutionizing

in complexities our Additionally, diverse through companies, yet managing full nuances Diebold workforce. talented, truly solutions. team experience the leverage appreciate the Therefore excited our am connected I multinational here commerce leading be I the strength a to work of and organization, and with to Nixdorf to of

X, to offset quarter challenges XXXX. discuss was slide first in Orders retail and activity. by which company I'll banking lower software respectable to offerings results our continue growth our Moving same with that reflect were from facing the our

terminals more of are front, On sale the customers point tasks their our retail with software connect refreshing to automate mobile devices. and European and

an As of with Europe agreement multi-year example, management. for million lifecycle one in we clothing multinational the store $XX retailers signed an largest

provide at two-year a mobility the largest France. store chains one at contract than grocery of won managed to also million $XX We services in more valued

the kiosks in in operating restaurant the in food United agreement services for quarter April and and the frame initial global a Canada. States ordering service firms and of signed one also We quick largest from received the related order

provide were a we to On the services. bank million and Mexican banking hardware side, awarded $XX contract with leading a

year. in slightly activity, look Topline also a quarter United product XX end backlog increased to will the We the also orders $XX Windows most it more banks. are trends the seeing States good million at of notably on with Total from regional familiar. relating basis line with and was sequential the than activity in in prior

and profit cash cash of perspective, the basis, percent $XXX banking and flow were non-GAAP retail. customer Higher operating company's growth in by up orders. offset From had use services, in which operating X% declined volume, On company inventory to to X.X% lower partially my cash support a the of is revenue Our software a tied due margins largely and use increased was million. results were challenged.

on two important action these decisive metrics. to Our focus is improve taking

During company, our my deepening leaders of early and describe travel employees. my through our the initial observations. to and I've days like business, been discussions with my understanding extensive with the customers, I'd

high First, retail of sustainability by our presence, we European have our the platform a strong industry strong software services market and organization, position quality our engineering. leading supported

recognize offerings and our their and success. the value company's commitment Our customers to

employees. pleased very our I'm depth and the with expertise, of commitment of Second, passion, resiliency

our rests the on Our operations of drive change to attributes the positive significant people. ability in

significant work Third, yielded our integration has cost savings.

overly However, the geographic Since generates this XXXX, one companies profits. two have regions, the used matrix insufficient our a the of of three groupings. business, combination and why and complex business inconsistent consisting three late is structure reasons and of remain lines in operations the of customer we

own we that matrix groups we I've finance, complex model the legacy each structure this that other with than to in Now Correspondingly, attention. of costs. resources has companies. compete I be. to dimension Each marketing support higher and reflects including are can needed support action, These sales, this the management SG&A IT, experienced resources, need still tell its the which for cost drives scarce of more you attributes matrix

regions, too complex a at workarounds this run approach presales the common impeded has supply business many These and with in number a our simply inconsistent Furthermore, we have and broad Nixdorf. operate resource of are planning implications exacerbated number negative environment. culture are a IT evolution large different have in Diebold processes activities, markets by There we to product which a for factors Additionally, of chain. range. manual a needed the of

strategic to So, I culture. will will that unify observation the with the today of final our limits level current flexibility which the be is My concrete team leadership company. taking steps share debt you our

spans relentless operational To and thirdly, this areas: a we on X, slide profitability beginning of and three simplified improve a a focus consistent unified number to streamlined with customers; cash in and will control. we culture. firstly, are secondly, the end, to now our changes forming flows, model Moving to implement make and our of priority operating excellence; clear

two new Our operating which aligned interests. new with consists squarely our model banking and customer are retail, segments, of

We a end-to-end Asia banking results, and are assigning retail one a leader. Americas, global and including P&Ls for to Europe for leader business responsibility for the

first as The has quickly level and will we expect of executive leaders plan named layer We rollout business been next model complete the shortly. our announced as be possible. to

be simpler focus will to and quarter such it collections. financials but two a respect delivery. our expect opportunity, in are redesigned second early Wincor management report and we legacy optimize to will company on rather Diebold levels neither direct model is approach, and to segments. roles identifying than operating nor sales delivery of we of of the as using a a Our complete our customer-facing new workings the the model streamlined at is the an a defining to inner the With customer the contracting, from processes, our of support roadmap stages lifecycle, which internal This

some Nixdorf characteristics around While is support which for efficiency it increase reinforce priorities. this Diebold take drive will absolutely a demands. a we our to necessary growing singular few align and towards To culture, core time, will customer our improve our

us global change passionate allow deeply have to building will accelerate common We agenda. base, employee a our culture a and

our scrutinizing where for the on so we the and time addition, we value is our businesses shareholders. greatest areas are In energy of across drive can profitability the focused all that geographies

act path Given balanced the in margins we're right profit will this efficient to to our cost a will internal beyond and We organization, actions. consistent and of market, more and the customers. operating actions in provide the interests well will the company not expect Collectively, improve profitability. evaluation, as create these which position a best through targets revenue more as changes fully these quickly changes a to decisively XXXX. We now in generate financial nimble of dynamic aim enable margin-accretive

activities, all have for made long-term While creating aligned are greater number shareholders. reference value a towards to I of

to build the priorities, and through of through streamline The target on This today $XXX integration we capital we Turning which XXXX. will simplify to upon discussed these are business previously which operations. savings support includes and cost to designed our activities, in restructuring achievements. continue year following invest announce to million our the our changes allocation

create to company. reduce and improve flexibility actions financial for cash generation, the Our net leverage, aim greater

of Chris for to suspend debt and business dividend the those of and funds we the reallocate discussion hand plan, that reduction towards financial to call part outlook. I'll a have results decided investments. As XXXX our With that, and

Christopher A. Chapman

everyone. good Thanks, Gerrard, morning, and

decreased As usual, today X, otherwise systems my constant comments currency a results to on on noted. non-GAAP XX% on our our unless basis, due Beginning revenue primarily total business. will slide focus

X% euro-denominated revenue quarter, impacted around of higher countries. contribution currency strength euro the Foreign the the reflecting both the of revenue from and in

systems while software for the revenue Looking for at our our quarter, for mix two-thirds accounted of business, and services one-third. of accounted

and in solutions geographic company Americas revenue XX%. retail in Pacific. in XX% revenue, followed total was accounted Banking of Asia of by XX% Our mix EMEA, for while XX% was XX% the

these lesser lower extent as to percentage non-GAAP but to second $XX are services revenue first While was flat profit reporting metrics. and segments. and to On slide the X, results higher in was business. volume-related a of the Operating segment XXX presented expense primarily million a using quarter is quarter lower be revenue, change basis in our provide will primary systems profit margins our we of points comparisons first results compared due year-on-year, new retail quarter structure, under XXXX. reporting the banking we for our year-on-year legacy gross for The

of amortization of While and margin well actions, cost the largely share-based impact effect in I X.X% profit approximate operating benefits and the of the as discussed profit of to and $XX the due due compensation from trends million operating were these reduction an to continues in $XX depreciation increase euro. earlier, stronger Operating quarter million expense gross lower which muted our benefit as expense. to the were

down the year, As of versus EBITDA impact quarter lower $X a for result, was the million reflecting volume. first adjusted the prior

as slide utilization which declined gross as XXX our impacted service revenue currency X% year-over-year quarter at modest decreased in X, services constant The the technicians. lower services. lower retail basis services growth in installation banking of of result activity points margin in approximately a offset Looking volume,

two slide to gross timing versus revenue year. down the down basis Retail mentioned total primarily call. XX of revenue due currency of the which margin declined resulting decreased was X, to from by prior in lower systems $XX earnings million prior projects declined chain Systems $XXX year. mix to million gross constant to in XX% Moving lesser XX% delays, a rollouts profit prior supply the and revenue points primarily we the and reflecting large Banking on by XX% volume extent the is business. the and

XX.X% to of X% constant currency prior delivered projects. due versus in a which flat of XX, The business slide gross margin up software Turning decreased revenue the to or is reported services our primarily line million professional $XXX of as to mix higher year.

to and of slide was non-GAAP $X.XX. loss of purchase expense and tied accounting $X.XX. sale first then a of quarter the $X.XX of price the acquisition as matter. to to well from gain consisted excludes indirect relating a Turning $X.XX restructuring items, tax as non-routine Non-routine previously other the adjustments, restructuring XX, building $X.XX expenses was on reported of share non-routine tax per and the and $X.XX The items $X.XX benefit for integration a benefit expense primarily a including for tax reversal

drove build-up XX%. For On slide percent pattern was typical in This as quarter. use a rate capital the to effective up which cash XX%. well as million the $XXX non-GAAP our revenue first free in of inventory, seasonal our was as reflects a quarter, partially first networking tax XX,

slide, inventory gains. the efficiency future the installations, future highlights timing which To the an provide also of of builds targeting this our it we we're to right While liquidity area leverage. and customer of for correlates highlights

of billion of $X.XX of debt $X.X had $XXX million trailing access and debt leverage gross cash credit to the XX the full As facility. around times million end of net quarter, X.X EBITDA. hand on billion, we our With adjusted in our our $XXX is ratio of months

redoubling the remove our our leverage our group in amended credit step to two calculating with discount we were cash as net Gerrard as The change made maximum capital focus downs on X-K disclosure Also to dividend efforts we'll mid-April, appropriate discussion, As you net XXX% drive allocation be our successfully and position. decision our suspend our saw our and during probably efficiencies to we lender XX% capital as changes working total agreement net to of covenant. approval. for the for his leverage the purposes levels actions improve all well ratio financial and of the mentioned to leverage on

second change net approximate We GAAP revenue updating range XX, to reflect company the still compensation $XX the with and $X.X expense million GAAP of X% $X.X currency for The slide non-GAAP quarter are benefit and a par tax of inclusive XXXX to $XXX our $XX billion rate. amortization the year. on entered Moving expects approximately share-based of $XX to our to estimate of for we inclusive an period we income outlook billion the with year, effective same backlog last of around million million. expect reaffirming for depreciation and of net loss million and our and

net GAAP year Our an on million for of earnings. $XX loss book tax the now additional the expected full includes company's expense foreign

tax to assumptions estimate guilty the the of time, credits. impact our of tax tax for global to foreign new update U.S. further analysis mix from cash have resulted pre-tax change expect specifically this global due our concerning we and not underlying to relating intangible this no provision. materially an At low tax our amount While the income in legislation income changed,

maintaining of to million are at at inclusive EBITDA a cost million programs. We least legacy cost to outlook $XXX of the of for for adjusted year, our savings $XX tied range million $XXX

We additional discussed effective the the in first year. our largely of modest current second of tax cadence. actions cost non-GAAP our of to provide more adjusted Taking basis, non-GAAP call. and we a first we line results, financial installations $X.XX in into see timing mid-XXs a second EPS On a for with half continue on account, improvement on quarter conference today quarter expect to to of expect the in in XXXX with rate impact $X will the clarity the our our our XXXX savings EBITDA sequential and earlier quarter the the

open be expected year, million for free With $XX million call of includes restructuring as costs, expenditures. capital and that, Our $XX for $XX about cash to the for the as is still up well I'll outlook integration flow around questions. million and

Operator

Suisse have Paul Condra And Securities morning. Hey. first Suisse. - everybody. We'll question with Credit the LLC on our Credit role. congrats Good Gerrard, from Paul Thanks Condra (USA) hello new

Gerrard B. Schmid

Condra fintech I Paul get evolution, your companies for kind Credit financial (USA) Paul. - first guess, tenure Securities I you, you, and Gerrard is to the of broad the your Thank positioning ATM given Suisse LLC for guess question thoughts I on in wanted wonder, fintech digital got in ATMs and you of long-term kind can industry, banking. world the challenges we shift comment to secular clearly your And I and just the how fit you've to some think of banking? evolution if of on view of

Gerrard B. Schmid

end thank Sure, an payments, it's the payment I and cash generally your have that, on. payments in the kind broadly other more you Paul – to for of I tail and regardless remarks early have is the had day, lot or time there's extremely one of long forms a those legacy observations spent my At of whether instruments. of of

of for a fits when this period strategic about is banks going rapidly that banks is it experience, and the integrated the ATM interplay between both off-premise. experience, plans and of that how regardless need long think will That strong there said, into So hardware, a I away moving some for I the if tend the banks channel have see I about broader being of time. view towards a of branch it solutions purchasing and markets, thinking ATM the especially on-premise pace in be digitization to the quite forward,

that to thinking there on of proposition need overview you're those their Condra But how hardware. services digitizing opportunities, along towards Okay. I'm limiting me could on as on as our the looked for solutions, means an just Securities we to Thanks. Nixdorf increase And remain your interesting Paul and just and of think a debt. something of and end-to-end that assuming journey. implications selling or kind underlying going integrated to mentioned by I proposition, players wondering that represent should out? increasingly flexibility, (USA) I can to Credit came focus leverage opportunity Suisse forward combination LLC that rule down wondered Diebold like are continue obviously about be And relevant building - in on focus focus solutions software we leverage So to well I they banks – paying whether M&A consumer as know continue you the but integrated I'm that we focusing our

Gerrard B. Schmid

from be I I Paul, generation of inner profitability down our improving very position. think on free and towards our profits our we that cash aspects paying view on company. operational several Yeah. the and leverage debts a markets business operate looking my at operating flow the of My for intentionally well existing clear both next will overall businesses as all focused as in, months certain comments and workings and with the focus the improving

the that's guess So, year? it I I already months. margin at guess rate is Okay, Thanks. just compressed of that in the you're Securities my impacting much. on think was where to know that Paul of Condra on coming margin, it figured down be the just lastly that over - for the help lower I want I I wasn't services that and kind we're rest to LLC Suisse I really is focus us will there that guess utilization the Credit coming XQ shape – I And (USA) and anything going modeling down just why and else great.

Gerrard B. Schmid

QX about of that the say primarily Yeah. service that other margin the some special impacted banking than activity, really had installation area, we Nothing in and in utilization. fact the we'll lower the

Thanks. LLC more move a quarters. expect we Securities as Credit Condra of coming the up to the over activity Paul installation (USA) sequential have So we Suisse see -

Operator

to Coster next with Paul go We'll JPMorgan.

Paul J. Chung

question. for for Paul is Chung on taking This my Thanks Coster. Hi.

scale on what margins, price-based more lot cost And know on do a I competition lot depends the side the here, of current to drive can line there? there to So but on you profitability drive systems top just is a operating the environment? in

Christopher A. Chapman

half, if the over us we've executing margin our at quarters, performance the to the year overall in to clearly we're some you to and pressures. aggressive seeing about can overall program out look at more would price market, been have be cost over most margins and and I fight say, to Asia to to take see cost on last and of the those location. been Yeah. regards maintain a you talked allowing price and continue where our opportunities actions trends With systems last as the number the that you look we've what of the so continues

some price activity little few We seen in bit previous higher in are seeing a markets as additional we've than in that's well the what some of Europe a quarters.

price I to to so indicate at sure the currently. changing on we're to the going would the look are that just make to systems can continue going dynamics overall appropriate And streamline with industry the with the that that business levers on clearly all compete we

Paul J. Chung

was some the channel? that. Thanks capacity deliberate, build And in on excess inventory or something then the is Okay. for in there that XQ,

Christopher A. Chapman

component that just pieces. projects out that in front we of customer Number is biggest Two the to have related one, of us.

so So million, two, QX. had some was there customers. last million roughly it build $XX that talked call, that we we of disruption demand and the revenue of number The of then around chain $XX about is supply we a that had impact those. through the way some our our following in issues, working in And

that. been then the through related working to so as corresponding we've you've And that got inventory

disruptions. you've to supply been more, chain transit I And trying as got a will some say, of those goods so little address in we've

Paul J. Chung

expand the and demand on you you. this their What their upgrading accelerating? aren't do you really not Got you. where reasons primary environment, you think could the just you lastly, that are targeted And Thank is systems, think if banking regionals why and demand? X seeing are market Tier then

Christopher A. Chapman

enough some What the in little Tier have trend Yeah. Tier a within uptick seen, space a bit and X activity we not it we the yet, that call specifically we've seen in call you on talked last well, the but U.S. about call regional it's would X, if as to

saw that saw that activity has there quarter, activity in the we some decent fourth in repeat been so and And QX. we

we But but consistency as not on the to some there bit again well a there, need only see of this the broader conversation say space so on earlier, you more hardware that driving of of And amount as discussion side, little across I going have is Gerrard would the significant discussions is now. mentioned right solutions, really in software there. so a

up, so would to And – indications enough are call say trend a picking I early but is not is yet. activity

Paul J. Chung

Thank you.

Operator

Company. Justin And question our from & we'll have Bergner Gabelli next with

Justin Laurence Bergner

Hi, Gerard. Good morning, good Chris. morning,

Gerrard B. Schmid

morning. Good

Christopher A. Chapman

Good morning, Justin.

Justin Laurence Bergner

the our XXXX in from dividend up wanted cash in free of the flow operating the question. million point, just on time follow that I being is vantage sorry cash reiterated for flow – I the to free goal being guess suspended. $XX at same is

of, you coming that comfort achievable, XQ? give flow cash given is free that Sort of out still build goal can million the $XX us inventory

Gerrard B. Schmid

drive look full you this customer If cetera. inventory the and at to to for you look at the follows going deliveries, inventory how of et sequence is year, the go revenue, build that

streams as getting quarters that that, and the tied the full industry. little that see into going cash, of of be several middle-of-the-year as the itself we'll say next that So over typically flow you next overall is was our year, bit at couple but we the working bubble look turn inventory that QX to over for you you're to capital revenue higher, within quarters. build a some

our earnings So throughout the build pattern really follow we typical it's just as that full see going to year. that

take year million So We're as overall year-on-year. payments major a integration, restructuring at pretty working in of well. overall $XXX on full the cash capital we've things the estimates compared delta change last year. and nothing, That's flow the other that roughly give around out free underpinned we'll say, ordinary significant looking or overall to the the

earnings GAAP that. that that ability us generate to year-on-year improvement we in comfort core our that really gives see it's So

the in and timing of revenue upon that forecasting Now, pace to how cash year also ability deliver collections. your our see for I and But that that our will put and we to in is comfort QX sequencing of into caveat our the and of all models dependent exit the our the now, we on this us out and right ability give turn QX number. there,

Christopher A. Chapman

I I that XXXX. my us for reference as well Justin, important building call earlier an execute think start to impact And exercises in on The the lever on in to of those have are terms still on in and more changes profit through on as flow. impact as being cash worked a in the well of both QX that we'll are SG&A the free cost operating impact update fulsome

Justin Laurence Bergner

follow I Okay, inventory. then, as of million on up like projects it call of half of is the more build relates that ahead of but million great. you, disruptions I'll seems year chain that $XX of weighted. that other sort follows. to I guess lot building $XX to And second inventory a you ahead are supply the affecting inventory guess

much So, materially up chain if the have quarter? so second picked going first not you're excluding the the supply why issue, inventories would higher to in quarter, be delivering in

Gerrard B. Schmid

we following of have have we've that just pace some delivery you locations. got long some and It's to that the larger the of projects well as understand

in trend up. days on for supply that chain how water have the you So, are do is set things roughly with our XX some

just it's customer the following So, activity.

Justin Laurence Bergner

was previously anticipated. are is seems an but the change to for change sort any assessment? is Is it versus remove that what year, the extra in – XXXX there no like SG&A from restructuring then accurate Okay. efforts of additional there there And spend to some organization this

Gerrard B. Schmid

accurate That assessment. Yeah. an is

initial estimates. We the have

after quarter complete exercises those the in call. going we'll get on We and we internal certain further second through are clarity

Justin Laurence Bergner

clarification. down the presentation. the Okay. finally, guess in And revenue, currency change you're but I the then press saying release in was that says just XX% down constant XX%

want just difference? to reconcile So, that I small

Christopher A. Chapman

there right at Yeah. It's sitting XX.X%.

issue a one on So the items. of there there been have might rounding

So that it's team things has up of rounding perspective. got one the from a would just say cut I maybe the

Justin Laurence Bergner

Okay. you. Thank

Operator

from Summerville have We'll D.A. Matt with Davidson. question next our

Matt J. Summerville

of questions. Couple Thanks.

if up First, saw And conclude the book order were that bandwidth? outlook said activity, I that of down. fact incoming EMEA, just you in Asia-Pac you should percentage granularity sort and of at additional North and of banking that they least $XX Can the rates in in million year-over-year? XX your actually then order more America on up in from frame America, you just then some sort on Windows color helpful? And Latin be would context is orders,

Christopher A. Chapman

Yeah, I smaller we've at side that If America, look overall what pace on we've we want that good Matt. about say banks, and Multiple at activity feel we've seen seen items there. seen to good in that North the there.

Looking space it up this and at today, par the orders, large look Asia into at core of the let's both bank from regional spinning are, North on say on it backlog you at banking and one to that's America probably retail, out where individual as of overall comps would view prior of say, some look the to the in activity And year. the entered relevant And within side, year healthy. we've where versus the I as been the you looking we seen drops tough some there. quarter. the those that have, always entry both Americas continues and get here order but largest before quarter look then And at second we has if second activity most area percentage the an of that when perspective, as EMEA overall compared just the we have you prior it clearly cycle total the from backlog slightly around of enter I some maybe sitting or

Matt J. Summerville

about surprised who's of to the question guess problem I've I of every inefficiency, a or really this fix talked company years, what my little environment. the IT $XXX the – this hear here. for Because systems, a the these respect problem? thrown and elevated comments million-plus come of And six guess new And hearing feel made mean CEO long with I'm been has I done to either and IT follow into a or the IT to be not I manual I trying this complexity a every about like company up, company tens has Gerrard five to followed big the a as is, gets Diebold's the massive complexity, still keep this CEO. in if just Diebold overburdened the workarounds needs millions, time. even it's I a

Gerrard B. Schmid

Matt. It's and that Hey, the providing looking Yeah. Gerrard. question of commentary I'll without to sort forward past. take try view on any a

from I it's and are one standardize two in harmonize explore touching supply the on IT part well look know, differences I when in complexity appreciate can my the obviously XXXX the drivers important easy I organizations environment. organizations. between as – vantage as platform. that, ERP combination think our to agenda, made additional the at I late think that the one's environment. not that core the do I probably the I'm especially for do chain two earlier point, the think of in strategic further was cultural You of prior of straightforward, to reference to you ways These sure my initiatives

I that important of of a agenda. Yeah, not an think it was this ahead question time. I to part just necessarily -ahead getting say, and my simply determinant needs would of but be

Matt J. Summerville

And one then just more slide in follow-up maybe there.

report that you referred Gerrard If banking running and your of to the first retail team, you? it kind leadership the will up can I those of you've line, the out they to who as selected individuals lay piece are already piece think executive be you

Gerrard B. Schmid

posted Yeah. are I'm on website. not sure, actually they the

and to their I guide you get at look So, backgrounds. their to that just names

Matt J. Summerville

you. Thank it. Got

Operator

Northcoast from have next We'll Mehta Kartik question is Research. with our

Kartik Mehta

or Gerrard. or about that was to will is or service and banking you and related it's more talked retail Gerrard I you say that good morning, complex entire about if specifically the hardware wondering Chris Hey, operations company? or

Gerrard B. Schmid

driven it's two by I think factors.

looks we're models variation are that in different ATM types might a is there The of is When markets, in at it's using of the terms first that, the a by one there while commoditizing. whether configurations keypads or business out some printers. different say that or buying, safes they're is customers broad

I'd breadth is range the the core driver one say product So complexity. of for certainly

from I'd makes can required matters. sense in norms fourth frankly is that, have number I services to of us I some to plan space. be and is complicates meaning still in last driver of levels models of our point the then the have operating globe entities. also we're as historical overhead supported across ATM complexity of in two item, involved we and effectively those the which ensure and in And current many, I markets as SG&A reflects item different is fully which the different driver operating to third we're that, to we the markets comments, by characteristics around ascertain the my a with different legacy earlier other country that, quite alluded in and And to a of of varying the markets. my And to at and in And as of many whether model in The result, quite elements all levels areas. alluded the business operate for those profitability that our to markets look it growth comments, businesses aspects we

Kartik Mehta

divesting you more maybe talk those many more go you you you is out model about where in, in markets, when how maybe of markets to have market, about or markets, indirect are more have and Gerrard, markets scale? that that don't scale, you So a where to going changing about profitable is figuring what

Gerrard B. Schmid

Yeah.

exit In markets, that needs by to. of each depend you be nature return, markets it'll sustainably at global I think ones to we it we the different to on I am we some need to a those In definition the prepared be can't customers, an convinced look as our markets very can those generate fully may where that be some if example, made market. decent models, I of reference to may in serve other markets. both, including

looking say quite we're at I'd frankly those options. all So,

Kartik Mehta

terms that? suspending those, dividend can greater about possibly in covenants, the money that relation reflection the of flexibility? and are in close debt a then to to or it And of you covenants, using reduce Is just too Chris, you're you where to getting talk is that having it debt

Christopher A. Chapman

U.S. on came in, is new tax that that we change latter. and Well, more had that impact we in XXXX that had and given But an had Then gave offshore. we the the a reset talk we lot opportunity had legislation a profit. our XX% backwards, event, it removing look it's had of from cash, the top we line really about the haircut fairly large the on that to if the also us a

flexibility went a overall the room so of XX% And giving and little thing we in haircut. more prudent removing that bit in the did and ourselves covenants, on addition in terms to

plenty at, If we where perspective. have our financial now covenants, right we're you look all of at of headroom across agreement a from debt

Kartik Mehta

much. very you Thank

Operator

Rob our Research. with Autonomous We'll from have next Wildhack question

Robert Wildhack

guys. Hey,

I initially straight activity night the they Windows think the XXXX. you XXXX, repeated XXXX, in seemingly commentary know past had I mentioned to kind now said, last I is they there's and your your saying but competitor, were of in for second XXXX, But You conservative, shifted quarter. some maybe to whereas XX flipped. relative more activity, think

your you small, detail of around just XX Windows more banks, right give thinking and can large now? So what kind are around some us

Gerrard B. Schmid

say talking some Yeah. system. the time that order work the specifically Obviously comments I activity. hitting would to that through about takes on, the we're we're

first year, is but So half, orders some in the bleed the that half to XXXX. see predominantly second that you're we're seeing end the here going activity in into of of going up that to

picks be there year, more. move if see not we going current that be that in but activity coming some of will the quarters, in as as up meaningful as So it's forward you impact to

the So specifically that. we're more the about sequencing versus of the around entry order talking revenue side

software about is is not broader there were that's to a well so because just And we'll are side of I the right much it's with now. ATM out going on and upgrade hardware that about on nuanced say, the regards are think There there's a And that going additional of of more so have regards point with software little activities the as being update an the platforms the there, overall one with asking that it. as other to conversations discussions talked hardware. you sale discussion, an you bit, banks,

we solution into coming up, we go quarters picking are expect selling up, picking the XXXX. activity conversations activity over that the that is as to ramp and So

Robert Wildhack

moving than you that's line? little better or say going Thanks. Would a about you initially faster it expected, in or is

Christopher A. Chapman

in It's line. in about line. About

Robert Wildhack

you've around for the point there on at that – working Okay. And Is then been efficiency, working but continued morning, this cash of on anything kind we've while. a as that's flow, capital commentary improving soon? go-on get make us would that for easier coming giving least these of it credit more can to for relatively or you over tangible of you us, improvements, sort harped

Christopher A. Chapman

Yeah.

pushed a is at things DPO then we're some as the but and there, we're legacy don't metrics, same little you the we you moving would much items we global overall this up cetera, and if DSO – of do it we et different that's overall this things improving view the you changing basis. where look the with If positive lengthening rationalizing a is on in Yes, looking can see do has and trends manufacturing set – on of you efficiency but around the the out, terms it say out put several can side. with everybody capital working the accounts on the inventory your at of at calculations appropriate time. look bit dealing to we're platforms, there, at product own, I have also given two more payable AR for and to all where And work regards these overall and stuff the

we're the for. the yet on to inventory dealing full side that pains some the operational with we of and that of have efficiencies benefit some growing normal so, And see the on integration inventory side

seeing inventory in The right show and you're results. focus we'll yet those on So, direction put behaving AR, the has more those. moving as to we've AP, say

And have the so to where work biggest we area room and the most the for do. that's improvement

Robert Wildhack

Thanks.

Operator

Bergner with We'll & go Company. next Justin Gabelli to

Justin Laurence Bergner

follow-up. Thank for my you taking

was behind pressure you price starting to decreased you any I seeing Are that might think take and price in there hold? earlier in was America be just that. I mentioned North increased Europe some pressure wondering what

Christopher A. Chapman

markets, developed say see check but markets of configurations X%, the you still had overall some Within of and that you see lower depends the has a there – volume, of that historically. that been lot X%, margin we'll but we've some higher in just in out typically the prices the then on in

more type the couple Europe sake in a there a seen other we've on I that competitive of And little the think bit mindset. seeing. of situations maybe more Eastern price volume markets, we've for price just been and in

trying of to we're we're those looking at as So a opportunities. maintain discipline level

I really detail so on level of that's And give would the that topic. them that

Justin Laurence Bergner

division of continues approach go they're software company or based picture to question for then as you that Gerrard the hardware, preserve? And of feel back and benefits had of versus services sort the the that not and How one preserve benefits do that reporting segment business. to been banking you Great. to competitor of many retail, Okay. using your big sort that do shift the the sort use from system the of you

Gerrard B. Schmid

day, have banking, distinct I those both propositions emphasis take when across continue we an and at not. than a perspective go-to-market a to our of both services manufacturing of be from tend we will So go-to-market obviously end to background, right, scale value and on put think the at In which more environments. the retail for that integrated environment hardware, leverages the look software selling increasing our to will you continue approach, our integrated

the will in scale that go-to-market rather the up our say be see than I'd back we might difference So approach degradation is you that more in giving any end.

Christopher A. Chapman

to revenue And of on systems software and the services Justin, and systems profit. the profit face the you'll gross continue for P&L breakout see revenue, gross and

required those GAAP. So are under

Justin Laurence Bergner

Thank Okay. you.

Stephen A. Virostek

today's Seeing want Thanks. thank please that other in e-mail. an feel there to you a me everybody And are ring for I questions, no or have to participating give free call. if follow-up, a

Operator

for conclude does Thank That participation. your today's conference. you

may now disconnect. You

Diebold Nixdorf (DBD) 2 May 182018 Q1 Earnings call transcript