DIEBOLD NIXDORF, Inc Q1 FY2025 earnings call

• 2025 started strong with Q1 performance on track. Product orders grew 36% year-over-year. Gross margin expanded 20 basis points YOY and 140 basis points sequentially. Generated $6 million in positive free cash flow in Q1, best first quarter in company history. Kicked off $100 million share repurchase program, repurchased $8 million of DN shares in March. Focused on three-year growth acceleration plan across banking and retail, leveraging secular tailwinds, driving growth and profitability, and increasing cash generation. In banking, transforming branch operations with automation and tailored ATMs; in retail, redefining self-checkout with AI-driven solutions. Implemented lean principles and local-for-local manufacturing to mitigate tariff impact. Held Kaizen events across six countries to improve service, leading to faster repairs, fewer repeat calls, and happier customers.

Banking: Order entry was up approximately 50% year-over-year, with revenue up $9 million year-over-year excluding FX and non-recurring Brazil tax item in Q1 2024. Gross margin expanded 20 basis points year-over-year and 180 basis points sequentially. Retail: Macro environment impacted product revenue, but showed signs of stabilization with order entry up approximately 10% year-over-year. Gross margin was up year-over-year and sequentially despite declining volumes. Banking and retail together represent a combined 32 billion total addressable market.

• Maintaining 2025 financial outlook. Expect low-single-digit banking and retail revenue growth in constant currency. Adjusted EBITDA expected to be in the range of $470 million to $490 million. Free cash flow expected to be in the range of $190 million to $210 million, representing 40% plus free cash flow conversion. Continue share repurchase program, with $92 million remaining authorization to be executed strategically throughout the year.

• Geopolitical backdrop and new tariff policy pose potential impact on supply chain. Estimated gross impact of tariffs on 2025 is approximately $20 million, but working to mitigate up to approximately 50% of the headwind through lean initiatives, sourcing alternative parts, negotiating with suppliers, pricing initiatives, and SG&A controls.

Q: The new orders or the backlog growth was impressive, particularly in Q1. Can you talk a little bit more about what drove that, both on the banking and the retail side?

A: On banking, healthy cash recycling adoption, strength in Europe and Latin America, improved retail self-service activity; on retail, orders up year-over-year with strong pipeline in North America. Backlog increased from ~$800 million at year-end to ~$900 million at end of quarter, with about 80% to 90% visibility on full-year product revenue.

Q: Did you see customers accelerate their order rate given tariff uncertainty?

A: Tariffs were announced after Q1 ended, so no real impact during Q1. Customers understand potential pricing impact but haven't expressed concern about slowing down or changing investment plans.

Q: Talk about foreign exchange expense dynamics. If that hadn't been there, net profit would've looked good.

A: Foreign exchange expense is non-cash, non-operational, tied to intercompany loans and volatile currency fluctuations. Reversal of this trend seen in Q2, and monitored going forward.

Q: Granularity on banking orders across major regions and recycling adoption runway.

A: Banking orders up 50% YOY across regions. Recycling adoption still early with 600,000 devices to upgrade. U.S. seeing positive momentum, Europe winning share, Latin America with big orders in Brazil, Asia Pacific with fit-for-purpose devices and high capacity recycler wins.

Q: Tangible details on retail growth in North America.

A: Have pilots and proof of concepts with large retailers in North America; technology and solutions expected to prove valuable as pilots evolve.

Q: Why not more price muscle to offset tariff impact?

A: Can mitigate up to 50% of tariff headwind through lean productivity efforts, supplier negotiation, alternative suppliers, pricing, and SG&A controls, with clear line of sight to doing so.

Q: Color on working capital improvements for free cash flow.

A: Favorable working capital efficiencies on inventory and AP, reduced professional fees, better discipline on prepayments leading to improved free cash flow, with focus on continuing to drive DSO, inventory, and AP.

Q: Capital allocation priorities, especially with more free cash flow.

A: Excess cash flow returned to shareholders via share repurchase, with best ROI seen in stock price, and continuing to execute share repurchase program while making necessary investments for growth strategies.