Diebold Nixdorf, Incorporated (DBD) Q1 2023 Earnings Call Transcript

Diebold Nixdorf, Incorporated (NYSE:DBD) Q1 2023 Earnings Conference Call May 3, 2023 8:30 AM ET

Company Participants

Chris Sikora - Vice President, Investor Relations

Octavio Marquez - Chairman, President and Chief Executive Officer

Jim Barna - Executive Vice President and Chief Financial Officer

Conference Call Participants

Operator

Good morning. My sanction is Glenn, and I'll beryllium your league relation today. At this time, I would similar to invited everyone to the Diebold Nixdorf First Quarter of 2023 Conference Call. All lines person been placed connected mute to forestall immoderate inheritance noise. The telephone volition reason aft the speakers prepared remarks today.

Chris, you whitethorn statesman your conference.

Chris Sikora

Hello, everyone, and invited to our archetypal 4th 2023 net call. I'm Chris Sikora, Investor Relations. To travel our prepared remarks, we person posted our property merchandise and descent presumption to the Investor Relations conception of our firm website. Later this morning, a replay of this webcast volition besides beryllium disposable there.

Before we begin, I volition punctual each participants that during this telephone you volition perceive forward-looking statements. These statements bespeak the expectations and beliefs of our absorption squad astatine the clip of this call. But they are taxable to risks and uncertainties that could origin existent results to disagree materially from these statements. Additional accusation connected these factors tin beryllium recovered successful the company's periodic and yearly filings with the SEC. Participants should beryllium mindful that consequent events whitethorn render this accusation to beryllium retired of date.

We volition besides beryllium discussing definite non-GAAP fiscal measures connected today's call. As noted connected descent three, a reconciliation betwixt GAAP and non-GAAP measures tin beryllium recovered successful the tables of today's net merchandise and supplemental slides successful the presentation.

With that, we'll crook the telephone implicit to Octavio.

Octavio Marquez

Thank you, Chris, and convey you each for joining america today. Our archetypal 4th results bespeak accordant marketplace request for our solutions, arsenic good arsenic affirmative outcomes from operational improvements we've implemented implicit the past respective months. We proceed to spot our robust request situation for our banking and retail products driven by semipermanent maturation drivers astir self-service and automation.

Consumer preferences for ratio and easiness of usage unneurotic with the little outgo of operations for our banking and retail customers are generating ongoing request for our marketplace starring solutions. Our execution and operating momentum are improving arsenic evidenced by our beardown year-over-year improvements successful gross and profitability, arsenic good arsenic higher accumulation levels successful our factories.

In our operations, we proceed to instrumentality steps to amended our concern by becoming much agile and businesslike to amended navigate the macroeconomic impact. We are starting to spot impervious of hard advancement successful the archetypal 4th and it volition beryllium important for america to prolong this momentum for the equilibrium of the twelvemonth to execute our objectives. We proceed to determination guardant with constructive conversations with our banking and lending partners to make a semipermanent solution to our superior structure.

Earlier today, I sent to our employees a memo reinforcing our absorption portion we proceed these conversations. We are dedicated to making our institution healthier and stronger for the long-term, including continued concern successful our radical and products and seamless operations to conscionable our commitments to our customers, our vendors and our partners.

Turning to descent five. We entered 2023 intelligibly focused connected currency procreation and implementing cardinal priorities that volition enactment america successful a stronger presumption to deleverage. Since our past net call, we person further refined our priorities and aligned the institution astir achieving these objectives. Our archetypal precedence is fortifying the equilibrium expanse and accelerate deleveraging. We are afloat focused connected optimizing moving capital, portion we present connected our beardown backlog and bid pipeline. We are carrying elevated level of banking finished goods arsenic we produced units successful beforehand to enactment our lawsuit implementation schedules. The absorption is present getting those units installed and retired of our inventory.

On apical of that, we spot further country for improving successful our earthy materials inventory. As the proviso concatenation and logistic and [Indiscernible] situation begins to stabilize. As I mentioned from a financing perspective, we are moving done abbreviated and semipermanent considerations astir the superior operation to get a much imperishable solution successful place. As discussed previously, we proceed to research the merchantability of non-core assets and we person retained advisors to assistance america marque definite we are exploring each our options crossed the company.

The 2nd precedence is adopting a continuous betterment mindset crossed the company. To thrust further efficiencies that volition amended gross profits and trim operating expense. We program to present our products to customers and support operational excellence. We are committed to delivering and gross 60,000 ATMs, 35 self-checkout devices and 134 EPOS devices successful 2023. Efficiently delivering these products is important arsenic it translates straight into gross and profit.

As a reminder, we completed an enactment wide realignment past twelvemonth that made america a much streamlined company. Now successful 2023, we proceed to physique disconnected that programme to thrust incremental savings to the P&L. On the merchandise broadside of the business, we are intimately monitoring ostentation trends, arsenic good arsenic evaluating manufacturing operations and pricing disciplined to thrust further merchandise gross borderline and expansion. On the work broadside of the business, we proceed to instrumentality vantage of section to planetary assets opportunities to thrust further efficiencies.

Our 3rd precedence is to execute connected our way guardant aligned to our lawsuit needs. At the halfway of everything we do, it's our marketplace starring self-service solutions for the banking and retail markets. We person the champion products successful our manufacture and you tin intelligibly spot the traction we person with customers erstwhile you look astatine our beardown backlog of merchandise orders, caller wins and existent 4th gross growth.

On apical of that, we person beardown connect of further services and higher level bundle contracts. We person a beardown concern that customers value. The past twelvemonth has presented respective hurdles for america to enactment through. But we are committed to serving our customers and moving done our near-term headwinds.

If we crook to descent six, looking astatine full institution performance. Let maine punctual you that I americium referring to non-GAAP metrics and you tin find further details connected the GAAP to non-GAAP reconciliations successful the net statements. During the quarter, we delivered coagulated improvement, compared with the anterior twelvemonth crossed our cardinal fiscal measures. Revenue of $853 cardinal accrued 3.4% oregon 8.7% successful changeless currency and excluding the interaction of divestitures with peculiar spot successful our banking merchandise business. Gross nett for the archetypal 4th was $209 million, which was an summation of astir $23 cardinal versus anterior twelvemonth period.

Gross borderline expanded 190 ground points, compared to the anterior twelvemonth quarter, benefiting from earlier outgo savings program, arsenic good arsenic the interaction of little proviso concatenation and logistics costs. Operating expenses was down astir $28 cardinal year-over-year with little walk chiefly successful our SG&A functions.

The nett effect was operating nett up $49 million, compared with the anterior twelvemonth quarter. Adjusted EBITDA is besides up $49 cardinal to $64 cardinal for the archetypal 4th of 2023, compared with the anterior twelvemonth 4th of $15 million. While there's inactive overmuch enactment to beryllium done for the twelvemonth to execute our objectives, this is simply a bully commencement that we tin physique upon that reinforces we are taking the close steps to amended our operating momentum.

In our concern conception performance, customers proceed to amusement beardown enactment and assurance successful our institution by investing successful our solutions. Several large wins during the 4th exemplify the worth of our products and services. In banking our DN Series ATMs and integrated currency recycling exertion proceed to pb the market. Our squad secured a large statement valued astatine astir $86 cardinal with a planetary European-based slope for implicit 4,000 DN Series ATMs and related services to enactment a exertion refresh astatine locations crossed 7 countries.

We besides won an $18 cardinal statement with Sicredi, a recognition national successful Brazil with much than 6 cardinal members and 2,400 branches. For currency recycling and different subdivision translation technology. Additionally, we landed a caller competitory triumph for a $7 cardinal woody with the starring payments processor successful Southeast Europe for Vynamic Payments to regenerate its existing outgo processing level covering aggregate banks successful the region. These wins exemplify the spot our customers person successful our exertion stack and work expertise and supports the maturation we are seeing successful our banking merchandise backlog, which is up beardown double-digits, compared to the anterior twelvemonth quarter.

Looking astatine our banking results from a geographic perspective, astir 60% of archetypal 4th gross was derived from the Americas, wherever we saw peculiar spot successful merchandise sales, compared to the anterior twelvemonth quarter. The gross maturation successful the Americas is underpinned by our DN Series ATMs, which proceed to summation traction with our customers. In the Americas, we are seeing a premix displacement successful our ATM declaration basal towards currency recyclers arsenic we instal much of these units into the market. In particular, we spot determination banks focusing connected improving operational ratio and lawsuit service. This has led to immoderate of them accelerating refresh to amended presumption themselves against the competition.

Shifting to retail. In the retail concern self-checkout solutions proceed to thrust maturation with accordant demand. Delivering outgo ratio and accrued user engagement. Among our large wins during the 4th was a woody for $22 cardinal successful continued concern with a large British Multinational retail for hardware, installation and related services. And a $19 cardinal declaration with a ample Eastern European discount retailer to enactment caller store openings and exertion migration. We besides closed the framework statement valued astatine astir $5 cardinal with a large pharmacy concatenation based successful Mexico.

In addition, we are unrecorded successful Belgium with our archetypal AI-driven inventory shrinkage solution astatine 1 of the country's biggest retailers, this done successful practice with our spouse SeeChange. We are precise excited astir our retail exertion worth proposition and we are blessed to spot a large woody of lawsuit activity.

Looking astatine retail from a determination perspective, astir 80% the archetypal 4th gross was derived from Europe, which is our halfway marketplace for retail. In Europe, we are focused connected securing and increasing with our agelong lasting lawsuit and helping them thrust much automation and ratio successful their store checkout technology. The Americas it's a maturation marketplace for the institution arsenic we person been supporting the rollout of SCO Units for a planetary retailer with a large beingness successful the United States. This meaningful lawsuit narration has helped america physique the beingness successful the Americas and we judge much opportunities volition present follow.

If we crook to descent seven, you tin spot the sequential 4th improvements successful portion shipments for ATMs and self-checkout. We are each alert of the challenges our institution had. As good arsenic galore different companies faced successful this country successful 2022. With the 3rd 4th of 2022 being the debased constituent of our caller production. However, we person been capable to statesman stabilizing accumulation during the past 2 quarters and are present seeing a much affirmative trend. Managing the proviso concatenation has not been casual and we’ll inactive necessitate a batch of attention. Due to the timing and humanities seasonality of the business, we tin expect to spot quarter-over-quarter variances that are somewhat supra oregon beneath our portion shipment expectations.

However, our efforts springiness maine assurance to accidental we expect to spot meaningful sequential 4th increases successful ATM and income checkout shipment units successful the 2nd 4th and a much unchangeable and accordant accumulation successful the backmost fractional of the year. Part of the assurance comes from the existent mill capable rates, which gives america visibility not lone to adjacent quarter, but to the remainder of the year. Factory capable complaint measures steadfast orders successful the works with confirmed shipment dates.

For banking, we presently person an 88% capable complaint connected our existent portion shipment people for the year. For retail, we person 68% self-checkout capable complaint for the year. Even much encouraging is that we person the orders from our customers successful backlog that volition thrust full-year mill capable rates higher arsenic we determination done the 2nd quarter.

So to necktie this each unneurotic earlier handing it implicit to Jim, erstwhile we harvester our beardown lawsuit demand, with our improved operating momentum connected the accumulation broadside with the information that we are inactive carrying elevated level of finished bully units successful the 2nd quarter. The effect is simply a beardown level of visibility into securing our merchandise gross units for the year.

Now for much details connected our fiscal results, I'll manus the telephone implicit to Jim.

Jim Barna

Thank you, Octavio. Starting connected descent eight, banking gross of $593 cardinal was up astir 5% versus the anterior twelvemonth period, and was up 9% aft adjusting for a overseas currency interaction of $13 cardinal and a $6 cardinal interaction from the Russia-Ukraine war.

Higher gross was driven chiefly by the merchandise business, which benefited from the improving proviso concatenation and logistics situation resulting successful a much mean archetypal 4th compared to the anterior year. ATM gross units successful the 4th of 12,500 were up astir 2,800 units, compared to the anterior twelvemonth with DN Series units accounting for astir 90% of the portion mix.

Service gross connected a changeless currency ground was besides up successful the archetypal quarter, driven by stronger physique enactment and installation activity. Thanking gross nett successful the archetypal 4th accrued by $15 cardinal year-over-year to $141 cardinal with improved profitability and products driven mostly by little merchandise related ostentation costs. This resulted successful banking gross borderline of 23.7% successful the quarter, which is an enlargement of 130 ground points year-over-year with merchandise improving by 600 ground points and work improving 10 ground points.

Turning to descent nine. In the retail business, gross of $260 cardinal was comparatively level versus the anterior twelvemonth period, but was up 8% aft adjusting for a overseas currency interaction of $13 cardinal and a $6 cardinal interaction from the Russia-Ukraine war. Higher gross was driven chiefly by the merchandise business.

Retail gross nett successful the archetypal 4th accrued by $9 cardinal year-over-year to $69 cardinal with improved profitability crossed some products and services. Retail gross borderline of 26.3% was up 330 ground points, compared to the anterior twelvemonth play with merchandise improving by 490 ground points and work improving 240 ground points.

Looking astatine the adjacent slide, arsenic we person antecedently disclosed successful our SEC filings, determination is important interest astir the company's superior operation and liquidity. Our humanities seasonality of operating with a currency usage done the archetypal 3 quarters of the twelvemonth and past generating currency successful the 4th fourth has created a near-term backing contented that we are moving with our lenders.

At the extremity of 2022, we closed our erstwhile refinancing discussions with our lenders with a caller plus backed lending installation and we were palmy successful pushing retired important portions of the Term Loan B and Senior Unsecured Notes with near-term maturities into 2025 and 2026. However, arsenic we determination done the archetypal 4th nether the ABL, and proceed to analyse our full-year forecast, we felt it indispensable to reengage with our banks and lenders.

We added liquidity successful the signifier of a $55 cardinal silo indebtedness to money our operating requirements successful the short-term. We proceed to determination guardant successful constructive conversations with our banking and lending partners to make a semipermanent solution to our superior structure, which volition amended enactment our operating exemplary and the cycles of our business. As mentioned successful the net merchandise this morning, is expected that immoderate resulting deleveraging transaction that is portion of the solution volition substantially oregon afloat dilute shareholder equity.

Looking astatine the results for the quarter, escaped currency travel for the archetypal 4th of 2023 was a $101 cardinal usage, compared to a $234 cardinal usage successful the archetypal 4th of 2022. The betterment is mostly the effect of accrued year-over-year profitability and timing of disbursements. The currency usage successful the archetypal 4th resulted successful ending liquidity of $263 million.

Turning to our outlook for the remainder of the twelvemonth connected descent 11, delight enactment our 2023 show outlook is contingent upon the company's quality to successfully navigate the ongoing slope and lender conversations and assumes a full-year of uninterrupted operations. We are committed to present successful gross 60,000 ATM units, 35,000 SCO units, and 134,000 EPOS units successful 2023 successful enactment with what we disclosed past quarter. We are seeing immoderate imaginable premix displacement successful our outlook connected the retail broadside betwixt SCO and EPOS with SCO units trending higher than anticipated and EPOS units trending little than anticipated, but this should not person a meaningful interaction connected gross arsenic they mostly met each different out.

Total gross is expected to beryllium successful a scope of $3.7 cardinal to $3.9 billion, which represents astir 9.5% year-over-year maturation successful gross and is mostly underpinned by our gross portion expectations. Adjusted EBITDA is expected to beryllium successful a scope of $380 cardinal to $420 million, which represents and astir $135 cardinal betterment year-over-year astatine the midpoint of the range. We proceed to expect the bulk of our adjusted EBITDA successful the second-half of the twelvemonth and we volition stay focused connected improving EBITDA to escaped currency travel conversion.

Now, I'll crook the telephone backmost to Octavio.

Octavio Marquez

Thank you, Jim. In closing, we had a bully commencement to the twelvemonth from an operational perspective, and I americium encouraged by the affirmative momentum we've created successful the company. I americium arrogant of the enactment of our planetary squad and we each cognize we person important enactment up of us. Given the ongoing conversations with our banking and lending partner, we volition not beryllium taking Q&A today. As we advancement further with those discussions, we volition stock immoderate further details erstwhile appropriate.

At this time, we volition adjacent the telephone and convey you for listening today. We look guardant to speaking to each of you soon.

Operator

Thank you. This concludes today's league call. You whitethorn present disconnect.

Question-and-Answer Session

End of Q&A