DBD - Earnings call transcript Q2 2024 | Diebold Nixdorf, Incorporated

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Operator

Hello, everyone, and welcome to the Q2 2024 Diebold Nixdorf Earnings Call. My name is Charlie and I'll be coordinating the call today. [Operator Instructions] I'd now like to turn the call over to our host, Chris Sikora to begin. Chris, please go ahead.

Christopher Sikora

Hello, everyone, and welcome to our second quarter 2024 earnings call. remarks, Relations posted section prepared to slide our Investor the of accompany we our have presentation To our website.

I statements. statements risks cause differ These the call, start, will that management team and could we will they time participants our from all materially Before of the that beliefs hear of forward-looking to reflect are during actual statements call. but results at this these the expectations remind you subject to

factors these be in company's can events find on You the be should information annual and Participants may to with mindful the filings of information additional periodic subsequent date. out render SEC. this that

also today's We discussing financial non-GAAP call. be measures on will certain

in Slide As the X, of a noted be presentation. non-GAAP on found supplemental the GAAP schedules between and reconciliation measures can

call I'll over Octavio. that, turn to With the

Octavio Marquez

earnings you, have Timko, Thank happy me for am for And Officer, all Tom Financial first you together. Chris. today. morning with joining I us thank call our this Chief new to our

Before couple we first opportunity some his I from give discuss Tom? the key takeaways and to results, introduce job. himself to the months share on quarterly of Tom an wanted

Thomas Timko

been XX me job. start Octavio. team extremely welcoming Thanks thanking It to an days first has the the to by productive or for so company. a leadership I out want on

company. far, most the initial is encouraging for seeing takeaway rationale confirmation So joining my my and reinforcement of

opportunity to about linear calls to This, see business how GE many roles coupled create our flow. shareholder here, revenue you. Octavio, more strong earnings previous back my XQ here progress at and most and the margin profitable GM, share what improving looking transformations. from and the same historically excites and to and of I a bringing the you. free growth, the I successful a characteristics dependency being many investor run to more I experiences, our on my disciplined unlock reduce with That's prior In value. saw lead significant I'm with approach forward as and helped me multiyear will to we cash expansion meetings developing

Octavio Marquez

have Thanks, to happy Tom. And again, with we're us. you

Now Slide to begin X. on

strong we our customers to execution. serving Second and remain as focused results operational our quarter were improve continued on

as half profitability efforts free the are we flow with finished strong results performance. and cash first positive generating record Our

The foundation commitment service combination for product continuous of our and along solutions the market-leading performance. a provides with strong long-term team's improvement to

Given year-to-date profitability. strong our financial we to our execution, updating reflect are XXXX outlook higher

for continuing positioned future well are into focused half momentum the We are our second year. and on of the success

employees also company our building customers. our are stronger a and for efforts Our

focused We are openness sense We now half and executing, work teams as continuous are on our building can improvement a and adopt our returns early mindset. of performance. our the renewed of evidenced by see a first to pride

and market. we we of do, at remain the winning center the in Customers everything continue

product backlog $X helping Second revenue A Series remains product DN quarter strong environment headwinds ATMs is billion. offset Retail. demand above in for in banking market-related

allowed has However, and which the we for to market. of our long-term for the model to self-service higher the the This points drive profitability benefit end us market outlook positive balance Retail year. the remain on in diversification,

momentum focused stay our in building team operating Americas. the as each now board and quarter on Retail the with tasked shipment on the Europe. customers. The in self-checkout as came I When update the XXXX we And becoming growth CEO, keep Retail #X I leadership market team provider proud turns attention for confirmed our remarkable delivering am achieved to I RBR accelerating milestone. this team our of

make a starts objectives. people The flywheel quarters with visualize Slide we continuous great who X. Nixdorf Diebold to Moving to Two introduced the our longer-term DN us ago, flywheel help always improvement company.

superior so in people, service. products operations, deliver create and implement investing world-class leading-edge we can are our We

also company. team accelerating Markus; banking added the we across In who the coming Colin from Board. new and our a Global Colin significant Parris. our extensive and with improvement adoption and directors: President we further the strong addition the of Vice Citigroup is experience will the Maura from continuous and to sectors, bringing in IBM Their technology to of At Bank and Lean and Promotion, of Tom level, West the Maura assets Board CFO, as will addition already Kaizen GE announced be morning, in X and of strengthen this

the and margin that growth, develop revenue help to gross will flow We deliver new conversion. attract will profitable and free us cash company continue to expansion talent improved

recycling Series This our is ATMs to DN linear and of demand product of product XXX banking a continue innovation gross see margin revenue XX% year-over-year, up points. adoption and example Banking profitable good and more driving increased We DN's technology. basis revenue. strong for is up is

A will consistent and today's expansion gross margin discipline. call operating is driven theme by operating you hear throughout improved profit, expense

requirements. To in support. our better investing desks organization our are Our field sequentially, help service America customers, also customers on our and will focused technicians, to efficiencies our service to customer remain margin a our serve improve help continues serve customer further while driving effectively, improve This service by across exceeding implementing while we more centers operations. cloud-based we North suite dispatch

Moving to Slide X.

very I we stages be in operations, have the are implementing seen While early so continue far. by of encouraged developments to we the lean

quality, safety, are cost. teams prioritizing delivery and Our

Our Kaizen has North team X events. completed manufacturing Canton

the teams standard the we X just the what out I beginning in to similar and plan our On second of the the And showing improved our are we for operating slide, efficiency are We in this Kaizen, and ATM an events across think manufacturing examples lock is global of footprint embrace possible company. safety where as the Paderborn enhancements roll the cost. implemented are we expectation of These rest our year. set of in assembly half example mindset. of helping

turn financial to to results. Tom over With through I will that, the go call our

Thomas Timko

results. Octavio. Thanks, non-GAAP with Starting an Slide our overview on X of

more as another focused improvement and performance strong represents linear quarter work continuous we our on second quarters. remain The towards flywheel

growth increased driven and to continues improving our offset certain $XXX and by expanded and and year-over-year. revenue generate was Revenue X by expanded sales. disciplined points XXX X.X% profitable margin Banking million to Gross performance. now margin has year-over-year. gross straight headwinds of sequentially participate for basis service our lower-margin Retail DN third-party partially no This in Series decision product longer units market by quarters

benefit profit improvement. was driven supply by is benefits margin service America, Year-over-year, was year-over-year, initiatives gross service of North second Also, now logistics quarter improvement reflecting and this our primarily from combined consecutive pricing our improvement gross chain efforts. of discipline. with In up the our

has as we look the Maintaining for improve area company been flat was expense year. our prior the focus compared Operating to a leverage. to expense operating operating discipline

margin As XXX a and up XX% basis year-over-year to prior basis to XX.X% XX% of sequentially. year points EBITDA adjusted result, $XXX up Adjusted points is EBITDA and sequentially. XXX million expanded compared

Looking at free cash flow.

favorable only efforts working which year-over-year. more Second was EBITDA combined $XXX and with efficiency. The cash by quarter million, our a by was of was to capital have better higher $XX favorable million performance driven use linear quarterly flow

prior $XXX flowing X the of disciplined to growth margin and XXX EBITDA expansion points Adjusted and management year; to expanded basis the improvement free Moving is operating on results. and EBITDA year-to-date profitability year-over-year strong line, XX% up to adjusted revenue our million to flow. cash in compared XX.X%. with margin Slide is resulting expense Higher and combined continuous from through initiatives, our bottom gross

a represents record the of achievement free half free performance flow given $XX meaningful Year-to-date, company. a unlevered of cash was levered is basis, cash On flow, a first the year, cash which flow million million the half $XX use historical seasonality. for an for our positive first

of million growth. gross year-over-year performance to Turning basis growth of improved to profit driven versus leverage. delivered Banking increased performance improved the was drove million, year-over-year demonstrating and product primarily $XXX recyclers from by gross $XXX this million mix Banking margin up operating XX.X%. product cash by X.X% Revenue points, expanded X. revenue Slide another prior higher quarter. Favorable service year, outstanding and XXX $XX revenue

gross and up was has up area points Banking gross control cost to a margin, was product sequentially. service driving basis input margin been continued improvement Significant XX which rigor. basis expansion XX for due focus points year-over-year pricing and greater

expect We service year. going improvement half of gross the the in to margin second continued see into

headwinds, Moving revenue $XXX by as X% growth positive more of by than product in Retail year decreasing to prior impacted X.X% service revenue offset offset the Slide product been market down versus XX. XX.X%. in Retail performance service. by was was million trends has revenue partially of

profitability logistics and in lower XXX main product up declined improvement our still the supply basis and up of input chain from costs margin revenue lower-margin improved to due as Retail gross rollouts completed sales. selectively to large multiyear Product lower XX points customers This quarter. decision with self-service points is and the this, The is Despite initiatives. third-party sequentially. XX.X% driver of hardware shipments exit year-over-year our basis

unit We despite We look efficiency years deliveries. business the continually on profit. consumer improve for demand as are base to Retail, product remain and growing we checkout after long-term in in still self-service in at and and challenges profitability automation some market from and softness service the installed investment X the strong Retail Overall, gross are that positive self-checkout we outlook good improving retailers seeing believe experience. the customer straight increase seeing our supporting our is growth in of

across drive XX, this cash we position introduced more cash each Slide more our to and a of highlight efforts present in free On changes view quarter. complete to flow the table our linear

had in substantial resulted in cash year of As flow first quarterly quarters reminder, that the quarter. flow the significant our of a generating historically our X volatility use in past, we cash cash a through majority the fourth in free the free before

efficiently improved and a now to better operating The rigor. manage company with in is cash position flow commercial

of deliver pointed full in see half than our This evidence conversion. of of us progress first out positions you greater well commitment year. XX% already, free the we flow cash to significant can As year the on our

margin lower conversion related anticipated professional Looking by greater restructuring. of vendors XX% nonrecurring XX and XX higher profitability continued efficiency; we next beyond debt of with eliminating to capital EBITDA to working certain over costs adjusted months achieve XX our XQ to approximately corporate reduced cash the flow payments expansion; XXXX, driving continued fees; refinancing; restructuring through free to expect and

Lastly, million, ended the second to investments $XXX and with slightly improved of we short-term approximately and X.Xx. leverage quarter net cash

year. to of for we the expectations On year-to-date second as are higher performance XX, and profitability outstanding our result our the outlook a Slide for updating our reflect half,

expecting $XXX adjusted million, range full million. the million be from our $XXX million previous are guidance year to which is EBITDA of up $XXX to in We to $XXX of

chain on margin through supply year. logistics focus cost the maintaining for generating discipline continued excellence profitability Our higher improvements gross and service expansion and with is combined

flat. are We revenue of growth our our from to guidance single-digit outlook low also year previous updating full

headwinds market which continue growth X.X% year, product the the is expected see unfavorable to and digits, While from offset to modest single FX. full is grow a this we impact to X% banking in by strength being for in low Retail

when in our our XX% revenue can operating EBITDA taking X.X% the with EBITDA of outlook conjunction business This expecting year-over-year guidance, power and leverage journey, deliver. to revenue. So improvement updated adjusted adjusted on our growth speaks flat to we in are model continuous roughly the updated our

already to I covered, conversion of cash greater XXXX. adjusted of as continue EBITDA Lastly, we XX% than free target flow in

With the to call that, Octavio. back I'll turn

Octavio Marquez

to To you, Thank up, lots about. be excited Tom. things wrap we have

our We a for company our have customers and improved are employees operational and execution. stronger

levels. compelling We of current our there for story a trading our are aspects thesis highly believe at investment that value attractive continue to make creation

This story components. is built around X

service XX% backlog of revenue stability our for remainder of product provides billion is our performance. coverage good for product provides higher-margin approximately year. $X the of the recurring, total which additional to approximately Also, revenue Our

accelerating clearly maintaining margin our operating programs discipline. continuous improvement expansion and with are gross We expense

operating to this embrace profitability We will our as improve mindset. teams continue our

of meaningfully to the levers on available number flow to cash outlined we generation. improve us call As have today, free a

value-creating are our that will capital building We a allocation all benefit strategy stakeholders.

our cash the As is business improves, and stage value creation our next invest for additional stockholders. value story. of in will free we conversion the unlock This flow

team strengthening surrounding Lastly, of we our with governance. leadership and and building are talent corporate skilled our bench team, the experienced

the guidance forward. Board put company an Directors of new our of team, Our exciting has with management path on the

And call with questions. the open please for that, operator,

Operator

Matt from Summerville [Operator D.A. Davidson. Instructions] Our of comes first question

Matt Summerville

I Octavio, business. the when banking find Yes. about always it Maybe talking useful

what step trends the you talk in maybe about a as more talk Just take seeing to if if bit a you're will, walk around detail back demand the little about globe. -- maybe and across a regions, do you and

Octavio Marquez

so. Happy Matt. do Sure, to

not I've So as why quarters, America, to with see smaller the adoption said the big start technology, continues don't where again, the the recycling banks but that strong, landscape. prior in we we trickling are embracing the American of where, down now across North to North be only banks

for healthy remains demand us. America North So

cash growth. in heavy usage expecting, still is As contracts again, you very up and America a that us. will both important coming market, in market as know, product we that in significant a as for see Important the well come note service government is to in growth sales Latin strength very continue as Brazil the to period. that big business We're in market,

So we're America. about Latin excited

it's stable, wins those key in and network how demand has around in we significant remains our infrastructure. with pooling very see exercises as as actually been Europe, how new pleasant Europe continue they build customers their their a recyclers well, shapen and with the kind market DN Series some momentum will but choose up on of points surprise

lastly, Pacific. And Asia

ATMs happy the there's Asian business does around be pursuing particular, As to working you had, Asia business of efforts business our to profitability the where deployers world meet and in markets, of of not very, in know, some we're enter PAC, we've but Again, made one the very being we're more probably significant with in disciplined be now that profile. India, with gaining to them. not largest

As you know, very that's market. a competitive

way. So want that in we as sure very in profitable to we make do market, we grow it a that

Series environment of a I the built DN for good story around positive, technology. say demand So and and would remains it's overall, recycling back banking on our

Matt Summerville

Maybe moving over to retail.

trying transition feel this pause, in about change is a in in in least self-checkout does had, Is conversations how an that but this a I to this think evolved shipments temporarily years be Is row on and many market XXX talk the a XX the get early changing. at guess, Or you've XX how view more year a you I a what last trend? days in over give I'm happens business. know record years or for where have more the 'XX? Just in last the don't of of how like now, is this kind what investments for of tone here. customer discernible you may that? to on something And

Octavio Marquez

around years had So This have team we've Europe, for made ago our conscious achieved. self-checkout Matt, us probably that decision the years shipments #X become X Nixdorf a gave Diebold they to and I now record in of task X solutions. -- we at the was that

Now our into emphasis market. we the turns accelerate growth Americas do in how

slowdown slowdown this we haven't customer year, at clear we've decisions. Looking perspectives of that the the seen a is slight generation. With market, it pipeline said, that a in in seen

healthy pipeline. It's we taking bit just So make a a those still little very to customers see longer purchase decisions.

that see One customers robust important is hardware, integrate services. are trend solutions looking that we and more software for

have we shrink with pilots currently, solution. So going on several our AI

while decision, believe little on bit will going a create much of the solution forward. a more slowdown again, puts we that a it purchasing So sticky

rate my there slowdown we're for And and that. years growth. also view that I in look growth market many industry resumes and if XXXX, it see ourselves healthy a we after the a XXXX reports, in of at did high more is analysts' But the view that preparing

Matt Summerville

I'll one sneak more just Maybe in.

for you probably gross something little X first year-over-year bit saw talking about years, don't inflection I of time in, know, the a services that. like Just margin,

are bump beyond sustainably You in low can far How saw range? Is a something services sequential XXs that gross we from back is in margins nice to that? up. that that seeing Or XXXX? something look we away

Octavio Marquez

Yes.

action mention, everything I the turn little and thing do. service a every in our customer over So finances very center on the sure make Tom that service about am it take keeps to to talk to making business. then remember, want key we we sure at I focused Matt, one around I there's of I'll that bit

to customers. to sure we in #X during be mentioned So my SLAs, exceeding customer investing our making keep meeting serve or requirements call, technology priority. I better the that continues we're improving

better, to So North more the operations we've just our be call but customers market in serve -- technicians, America be our our efficient help completed of the desk rollout centers, solution our also of parts cloud-based that service more efficient. new will run help

So be or to XX% With is we strong that's requirements. said, do margins. always focus Everything of that have goal north exceeding meeting will in our kind service a basis. in the customer our services on of

over So around some I'll turn color that. Tom give to it to

Thomas Timko

gross SLAs basis America at improving indicates XX XX.X%, the weighing Yes. previously result Thanks, service we're up encouraging on we the results, points as the highlighted rebounding Octavio. right? marketplace, customer margin, some Really of direct that from as a North QX continuous year-over-year. the quarter to of we margin gross improvement and issues ended teams it up while in Really we're work our sequential in monitor. growth that drive quality we

gross to position XX% we're QX work will Octavio like but towards the XXXX. XX% a in drive then targeting year, with for this to. do to, to finish are, that's driving full Still We year this what to margin, us more alluded

Octavio Marquez

the be drive target able level level clear, the that to XXXX. and year Matt, to is So start year our end throughout that at and same be

Operator

[Operator Instructions] comes Our from question Matt Bryson Wedbush Securities. of next

Matthew Bryson

bit the being you would I that that to the terms expected? it a the just of decision versus be? you just much more a color that business on How being revenue much thought how than start was we Retail side. bit Can provide third-party lighter to was away in softer walk than a of of environment wanted from bit

Thomas Timko

third-party Yes. sales. sales. third-party the terms, away Thanks, Look, And the from was a is to rough in between XX-XX lower-margin hardware of Matt. remember, decrease checkout and some walk decision that

Matthew Bryson

bit know long you know the about the talked Got a softer, of a in seen that being a it. couple the about I the I you're game talked being broader do a I and last bit pipelines. bit of just Octavio mean, you've see so environment you success when And as talking about maybe pause. years, market?

based? Is I going ago? bit X something months you causing see anticipated macro that's that technology? softer a say guess is you do little might the what shifts would are to broader in it that dynamics that on you is things be is But have than

Octavio Marquez

would very I that technology the say positive for checkout at Matt, So still point. see very, one, about deploying customers we self-service

environment whole now investments how many how lanes, is are traditional what's have. self-checkout their I looking the holistic that and customers checkout we in think on way at many devices [ balance to happening more ] trying a

do more behavior always improve the our lanes I are also Clearly, favoring looking make economics do self-checkout it experience, But clients the I how at customer that. how and favor is frictionless. that

longer cycle more I something But think bringing create the of modularity actually that of sales in, the the we're robust does solution play a it a our the bit that end at in. that, that's us. better starts the helps serve their It a of I where markets. creates and software, for for of innovation lot them end, lot devices in a to customers customers own think a little

Matthew Bryson

chance feels the of much it. like can you're like color. EBITDA mean, might -- I Got are bit you pretty and Shifting provide being explicit drive I appreciate kind coming how around over more back the to look Any them that's improved a of it about how services? more over where coming much color of from you're where able much margins the optimistic improvements what product that guidance, year. to versus from half explicitly gross

Octavio Marquez

Yes.

started And of direction. terms, we're general service margin. to in in we remember, when year, probably end trending the So still year kind at around the XX% targeting that -- XX% Matt, were we

always about side, being forward. the in margins talked see mid-XXs. is that, low margins product now forward. And very going product we're believe that stronger the in XXs, we On We've going the sustainable do we product

that that's say of the picture. I big kind So would

Tom, it have turn that. if to additional you over I'll on any Maybe comment

Thomas Timko

XXX margin, right? the really would I to the margin, our cost as being year-over-year, on logistics gross QX that really XX.X%, gross to supply of input well driven pricing points benefit drive little just continuing bit up basis produce add programs Look, product discipline lowering the throughout, right? by Yes. chain a product just are as

flywheel at vary quarter-to-quarter, bit our the small incremental these drive continuous little efforts. Now levels margins working through current mix is to a improvement then to going sustain and look, improvements and we're

Matthew Bryson

side. then is guess last just my backlog And question on I the

into how So still not question somewhat hits a you is and down when relatively trending that XXXX keeps quarter-on-quarter. it on my kind you levels, backlog to you robust, are anymore? backlogs, of banking but ship guess, that Octavio, banking that rates can just get at of because but -- sustain out it's revenue there this-year I normal question, current your versus have backlog confident don't comes additional you revenue run off

Octavio Marquez

Yes.

most important is would talked linear in I is creating it say me little this about profile. mentioned this, -- things and his Matt, the revenue remarks, So a that we bit one for Tom of

know, So QX, keep you strong weak avoiding this the trying those we're huge very do -- as to as between historically, the very What as quarters. had company a us quarters $XXX quarters difference QX, Having of similar quarter million manufacturing every management $X better only the to it efficiency. between a our we working provides not little us, shy billion in for can. bit helps capital is

So that it's revenue linear. us to really keep for important

keep said, and order seeing momentum that With banking. we strong in entry

supply that we and $X our backlog a still around in we're think we European running and believe our quarters very facility, chain Brazil facilities, I with maintain our product revenue. facility, way improved end little Asian manufacturing bit a of business. lower, for bit to we've stable maybe with moving covered our that, So North in efficiencies in, higher, closer the provides the a America X that worked manufacturing And users of maybe if that billion, little that

keeping revenue linear. that say in would big effort this I year, So

to going going linearity, keeping out year, range bit maintain billion still $XXX to second our we're but of the million try to half orders a of to the year. to the $X shy little So of close in that have we're that

do linearize better. linearize little or a flow also cash flow start be cash will we our our effort to how Next year, our big now bit

but where model of sustainable we're I'm one. the kind is very building that's a are, confident that So that we

teams, we've it of up, wrap now to And continuous of of, adopted idea of the our one improvement. proudest things this I'm

people that know that better. Nixdorf make the know get better, I we once we we are, also we can continue wherever that up we would XX,XXX only tell get And get to can you only better. Diebold So

new me excites So what is future mindset the company. for that about the

Operator

next question Matt is [Operator Summerville D.A. a Davidson. follow-up of Instructions] Our from

Matt Summerville

Yes.

Just on a big a what And adoption. maybe the American a could provide additional Octavio, was in we're baseball in North this of delineate proliferation. quick of of I maybe and I wondering kind the banks the little in small recycling inning between if banks terms follow-ups. couple guess you color of terms using at point analogy

Octavio Marquez

Matt, I still on capture So say, refresh installed more able base we have it have installed our just still we -- to and refresh. would only base to technology. than we That's in we new if with North America, today our of currently were what have XX%

market. operating that changes. banks, question, and big We some Obviously, we're and grow But that. remember, we banks the community specific credit banks, banks see in around to software your requires recycling. would unions, big embracing changes I around winning actually be now we it Again, regional more say, can believe all

preparing but is themselves today, So that that. for -- everybody recycling the buying machines

banks, technology. would say in if big in investing probably opposite, smaller the XX% in I So in the XX% the investing XX-XX, XX-XX, a technology; little I'm thinking about But done the or the probably banks conservative. we're are

switches now market is adoption that switching all part lot be the are recycling drive to capable. America networks that important the The adapting their a North in of the

So will in say, provide the coming recycling. would impetus years, of adoption that to I additional the

Matt Summerville

question other my to Brazil. made you comment a then on And helpful. That's

would potentially important a think of larger in half I pretty mentioned portend that you guys. second tenders You the in year the coming that there government good for up market some XXXX

of make -- sort was we've of and think I the it's been a refreshes. material years -- do since So government-run material seen number banks I big

around mean just put what you guys? more So can a for little could you color maybe that bit

Octavio Marquez

Matt. Yes,

So bit as adopting a see recycling. know, we so these government always tenders, But it's little that. banks large there's involved government you always the risk of in

of -- recycling. have pioneers in were some So them

were recycling several sold in Brazil Some our of years first RMX ago. engines

all has So But that they're clearly, that government fleet. expanding their large looking to performance for now at good banks. provided

market. banks these renewing as once a large continue that we optimistic great in we're players their there's fleet, opportunity. So have you few that will know, And

So be provide technology service feel able banks. those new should business feel to we the we a -- confident that that of win country, we with the portion and in significant we our in

Operator

by you. hand have any closing questions Sikora At back final over to no Chris stage, remarks. lines, we Thank the registered or further so telephone this I'll for

Christopher Sikora

call. Thank in you again today's for participating

have you out great of the any questions, Investor me free to Have and please rest Relations. feel reach to day. If a

Operator

and gentlemen, for Ladies concludes today's this joining. you call. Thank

You may lines. now your disconnect

Diebold Nixdorf (DBD) 7 Aug 242024 Q2 Earnings call transcript