Diebold Nixdorf Incorporated Aktie

Hello. Good day, and welcome to Diebold Nixdorf's First Quarter 2026 Earnings Call. My name is Carly, and I will be coordinating today's call. [Operator Instructions] I'd now like to turn the call over to our host, Maynard Um, Vice President of Investor Relations. Maynard, please go ahead.

Hello, and welcome to our first quarter 2026 earnings call. To accompany our prepared remarks, we posted our slide presentation to the Investor Relations section of our website. Before we start, I'll remind all participants that you will hear forward-looking statements during this call. These statements reflect the expectations and beliefs of our management team at the time of the call, but they are subject to risks that could cause actual results to differ materially from these statements.

You can find additional information on these factors in the company's periodic and annual filings with the SEC. Participants should be mindful that subsequent events may render this information to be out of date. We will also discuss certain non-GAAP financial measures on today's call. As noted on Slide 3, reconciliations between GAAP and non-GAAP financial measures can be found in the supplemental schedules of the presentation.

With that, I'll turn the call over to Octavio, who will begin on Slide 4.

Good morning, everyone, and thank you for joining us.

The first quarter was a strong start to the year and another quarter of delivering on our commitments, continuing the operating momentum we have built. We grew revenues 6% year-over-year to $888 million and adjusted EBITDA increased 14% to $99 million. At the same time, backlog grew sequentially to approximately $790 million, reinforcing the underlying demand we're seeing across both banking and retail.

In banking, we continue to build on the strength of our core ATM franchise while expanding our role inside the branch. We are seeing good momentum in teller cash recyclers and broader branch automation, which are increasing our relevance with customers and expanding our opportunity set. In retail, we're seeing growth accelerate as we expected, with revenue up double digits. In North America, we're gaining critical mass with a large and growing pipeline of deals and had important wins in electronic point of sale in the fuel and convenience space and with the regional grocer. And in self-checkout, we delivered initial deployments with a large pharmacy chain. In Europe, we have a large number of electronic point-of-sale wins that drove growth. Free cash flow continues to be a clear point of strength.

We generated $21 million in Q1, more than tripling year-over-year. This marks our sixth consecutive quarter of positive free cash flow, and we expect to remain consistently positive each quarter going forward. We maintained our fortress balance sheet, ending the first quarter with a net debt leverage ratio of 1.2x, while remaining fully committed to returning the majority of our free cash flow generation to shareholders through our $200 million share repurchase program. We had a strong quarter. We did what we said we would do. And importantly, this performance reflects the continued compounding of the strategic and operational improvements we have implemented.

Let's now turn to Slide 5 to review our banking strategy. In banking, we continue to see supportive secular tailwinds. Financial institutions are investing in their branch networks to improve efficiency and enhance the customer experience, while at the same time, remaining under pressure to lower the cost to serve. Importantly, in the U.S., we're seeing a shift from prior years with leading financial institutions actively expanding their branch footprints. That is creating a clear need for solutions that both improve the customer experience and structurally reduce the operating cost.

Our strategy is built for that environment. We go beyond the ATM to help banks automate and run the entire branch ecosystem, combining hardware, software and services to improve customer experience, employee efficiency and overall branch economics. The objective is straightforward: take cost out while improving service levels. Our integrated ecosystem optimizes how cash moves through the branch, reducing the need for cash in transit activity and the expense that comes with it because the best cost is no cost. This is a key differentiator in how we approach the market.

We use technology to eliminate cost and improve the customer experience, not just to manage or reallocate it. We're seeing that the strategy translates into results across 3 areas. First, in our core self-service business, recycling ATMs continue to gain momentum across customer segments and geographies. In the U.S., we won a full network upgrade with a major credit union based in the Southeast with more than 1 million members, deploying over 200 DN Series cash recyclers across their footprint. This is a strong proof point that recyclers are gaining traction across a broad range of institutions.

Second, inside the branch, we're expanding our footprint with teller cash recyclers and branch automation solutions. During the quarter, we secured a significant competitive displacement with one of the largest financial institutions in the U.S., winning 100% of their teller cash recycler install base. In addition, we were selected by FOREX as the single trusted partner to manage and optimize their ATM network end-to-end, reinforcing our ability to deliver both operational efficiency and service performance at scale.

At the same time, we've grown our pipeline and backlog in India for our fit-for-purpose devices, and we have plans to expand this product family into additional markets across Asia. We also plan to extend our teller cash recycler footprint into international markets, further broadening our addressable opportunity. Third, we are increasingly orchestrating how transactions are processed and routed across multiple customer touch points.

During the quarter, we won a major engagement with a leading U.S. financial institution to modernize transaction processing across thousands of branches. Our platform supports transactions not only at the ATM, but also at the teller and across digital channels, enabling banks to manage and optimize transaction flow across both physical and digital environments. And importantly, these are not stand-alone wins. They are part of a broader strategy to increase our integration and wallet share within the branch and transaction ecosystem. When customers deploy across ATMs, teller cash recyclers and software, it creates a natural path to broader branch automation, building our relationships and expanding our role over time.

Stepping back, we're executing well. We're strengthening our core, expanding inside the branch and using technology to structurally improve cost and performance for our customers, while also extending our reach into new geographies.

Now moving to Slide 6. Turning to retail. We delivered a very strong Q1 with revenue growth north of 25% year-over-year, and we continue to see strong momentum building across the business as we move through the year. In North America, the traction we're building continues to strengthen. About a year ago, we identified our top 40 target accounts. And today, we have active projects with the vast majority of them. Our pipeline has grown approximately threefold over that period, and that momentum is converting into wins. During the quarter, we secured a major deployment with a top 10 fuel and convenience retailer for thousands of point-of-sale units.

In addition, we won an initial self-checkout deployment with a leading pharmacy chain and scored an electronic point-of-sale win with a regional grocer in the U.S. Both of those opportunities create pathways for much larger rollouts over time. We're encouraged by the quality of the opportunities in front of us and increasingly confident in our ability to convert that pipeline into meaningful growth as the year progresses. In Europe, we continue to see strong execution with solid point-of-sale performance and wins across multiple markets.

Now turning to Smart Vision AI. We are positioning Smart Vision as a platform that supports multiple use cases across the store. It delivers strong ROI by reducing shrink, improving operational efficiency and enhancing the checkout experience. What started as a self-checkout has now expanded across additional parts of the store from the aisle to the manned checkout, demonstrating the flexibility and scalability of the platform. We are already seeing early adoption. One of the largest retailers globally has deployed Smart Vision in several stores to address shrink across both the aisle and the point-of-sale. And strategically, this platform is opening doors. It allows us to engage earlier with customers, often starting with a targeted use case and then expanding into broader discussions around self-checkout, point-of-sale and software. That creates a natural path to larger, more strategic programs over time. This also aligns well with where the market is going.

Retailers, particularly in North America, are increasingly prioritizing open modular solutions. That's the model we've already proven in Europe. We're pleased with the strong momentum we're seeing across retail. Our focused account strategy is working. Our pipeline is building, and our platform approach is positioning us to continue expanding share.

Turning to Slide 7. In services, we're making solid progress. As we previously indicated, margins are modestly down year-over-year as we continue to invest in the business to strengthen execution and service quality. However, these investments are progressing as planned and positioning us for sequential margin expansion as we move through the year. These investments are delivering results. We are now achieving some of the highest service levels in our history in North America with meaningful improvements in SLAs and overall availability. That level of performance is critical as it drives customer satisfaction, supports product growth and increases service attach rate over time.

At the same time, as we expand our installed base across banking and retail, we're increasing service density, which drives incremental highly recurring revenue without a proportional increase in costs. We're also entering the next phase of our efficiency journey. With the rollout of our field technician software, we now have much more granular visibility into operations, allowing us to optimize dispatch, routing and parts management. For example, in Chicago, a cross-functional team used these tools to redesign service zones, improving first-time fix rates, reducing drive time and lowering dispatcher requirements. We're now scaling those learnings across additional markets.

So overall, we're seeing the right progression, stronger execution, a growing installed base and increasing opportunities to drive efficiency and margin expansion. Now let's turn to Slide 8. Our approach to continuous improvement is now a core part of how we operate the business and has become a meaningful competitive advantage in how we execute. This is not just a set of initiatives. It is an operating rhythm and cultural shift across the organization. We're focused on identifying incremental improvements, scaling them across the enterprise and compounding those things over time to drive margin expansion and reduce complexity. We are seeing that translate into tangible results.

During the quarter, we held Kaizen events across our Asia Pacific service and logistics operations, focused on improving repair cycles, dispatch efficiency and billing capture. These efforts are generating both cost savings and incremental revenue. And more importantly, they are repeatable and scalable across our network. In manufacturing, we're also driving meaningful improvements. In North Canton, we reduced our subassembly footprint by about 40%, freeing up space for additional future production capacity. Similarly, in Brazil, we redesigned our manufacturing process, reducing footprint by approximately 50% while increasing capacity and reinforcing our local-for-local strategy. These are good examples on how we're simplifying the business, improving productivity and structurally strengthening margins.

To put that in context, remember, when I first took over as CEO and prior to launching Lean, product banking margins were in the low teens. This quarter, they were above 30%. Lean has been a key driver of the margin profile you are seeing today. During the quarter, we received multiple global banking and finance awards, recognizing innovation and the strength of our end-to-end banking solutions. And we were added to the S&P SmallCap 600 Index earlier this month. That inclusion reflects the consistency of our execution, the discipline we've built into the business and the credibility we've gained with the investment community.

So overall, this is about building a better company with solid financials, one that is more efficient, has a fortress balance sheet and continues to deliver sustainable value for our shareholders and customers.

With that, I'll turn it over to Tom to walk through our financial results.

Thank you, Octavio, -- beginning on Slide 9. Q1 was a strong start to the year and reinforces that our strategy is working. Our products and solutions solve real problems for our customers and the foundation we've laid out for our growth initiatives is seeing momentum across the portfolio. Non-GAAP revenue was $888 million, up 6% year-over-year, driven by strength in retail, currency and solid execution across services. Backlog increased sequentially, reflecting healthy demand across both segments and giving us stronger visibility as we progress through the year. Non-GAAP gross margin in Q1 expanded 10 basis points year-over-year to 25.4%. Product gross margin increased 60 basis points to 26.3%, driven primarily by disciplined pricing, favorable mix in our banking portfolio and continuing manufacturing cost and productivity improvements.

Non-GAAP service margins were 24.8%, down 30 basis points as we continue planned investments into people and technology. And we're on track and starting to realize the early benefits and already seeing tangible improvements in service levels and fleet efficiency. While you will see us continue these investments in North America and expand the rollout of our field technician software internationally, we expect service margins to increase both sequentially and year-over-year moving forward in 2026. Non-GAAP operating profit rose 27% year-over-year to $61 million, and operating margin expanded 120 basis points to 6.9%, reflecting higher volume, better product margin and continued operating expense discipline.

In Q1, we held operating expenses flat year-over-year while continuing to invest in areas that support service performance and growth. That's a strong signal of the operating rigor we're building into the company. Operating expense discipline continues to be a major focus across the enterprise, and we're seeing real progress. We have a broad pipeline of over 200 actions that are well underway as part of our $50 million cost reduction program, and we're beginning to see some of the green shoots from that work, both from the traditional cost actions and from lean and technology-enabled simplification that removes work altogether.

In 2026, we expect these run rate savings to result in approximately a 1% to 2% reduction in operating expense with benefits building as we move through the year and additional opportunities are identified. Continuing on to Slide 10. We continue to see strong trends across our profitability and cash flow metrics. In Q1, adjusted EBITDA grew 14% year-over-year to $99 million, with margins expanding 80 basis points to 11.2%, demonstrating strong operational execution. We're also making significant progress on non-GAAP EPS, which grew about 81% year-over-year to $0.67, driven by strong operating profit.

Turning to cash flow, which is an important measure of earnings quality and supports our capital return priorities. Our free cash flow in Q1 more than tripled versus a year ago to approximately $21 million. We drove strong working capital performance with days inventory outstanding improving by 6 days and day sales outstanding improving by 4 days. Moving to Slide 11. We delivered a solid quarter with gross profit dollars and margins growing year-over-year. Octavio spoke about some of the secular tailwinds in the banking space and our portfolio of solutions for ATMs, teller cash recyclers and our branch automation solutions align very well to help banks transform their branches, enhance the customer experience and achieve their goals of reducing costs and increasing efficiency.

Revenue was down slightly year-over-year, primarily reflecting the timing of product deliveries, but our solid order entry and sequential backlog growth, along with encouraging momentum in Latin America gives us very good visibility. Banking services revenue was up slightly year-over-year, and our continued delivery of improved SLAs gives us the opportunity for further wins, both in our product and service businesses. Gross margins in our Banking segment increased 90 basis points year-over-year to 26.6%. Within that, product margins expanded meaningfully to 31.4%, up 370 basis points versus last year, driven by product and geographical mix as well as continued cost control in manufacturing. Service margin was 23.7%, down 80 basis points compared to last year, reflecting the investments in field technicians, our field technician software and the ongoing consolidation of our repair and service centers.

Looking ahead, we expect to continue to see steady global ATM shipments with refresh activity in all geographies, and we're encouraged by the momentum in our teller cash recycler adoption, fit-for-purpose rollout and overall branch automation solutions. Turning to Slide 12. Retail delivered strong results with revenue up 26% year-over-year, driven by double-digit growth in both product and services as the recovery in Europe continues as well as revenue growth of nearly 70% in North America. While this is off a small base, these results demonstrate that our growth initiatives are gaining traction and meaningfully advancing us towards the sizable opportunities that we see ahead. Retail customers remain focused on automation, efficiency and lower total cost of ownership, and our platform aligns well with these priorities, supported by complementary software and services that can be layered to fit each store's specific needs.

In product, point-of-sale continued to perform well across our markets as customer deployments accelerated, reinforcing our #1 position in Europe. And as Octavio mentioned earlier, we're seeing important early wins across retail verticals in the North American market. This is another example of our multiple ways to win as the strength in retail gave us the flexibility across our portfolio. We would expect the shape of retail product revenue to be more balanced across the year versus prior years. Service revenue benefited from higher installation volumes, which grew year-over-year. Gross profit dollars increased 17% year-over-year to $61 million. Total gross margin was 22.6%, down 180 basis points year-over-year. Product margins declined 330 basis points, primarily driven by mix as point-of-sale devices carry a lower gross margin within our portfolio.

We also saw some impact from higher DRAM and memory costs but are taking appropriate pricing actions and adjusting our quoting cadence. This does not change our confidence in our full year guidance. Retail service margin improved 80 basis points year-over-year to 27.7%, driven by higher revenues and benefits from the investments we're making in our service operations. Looking ahead, we expect more favorable product mix in the second half of the year, which will improve product margins and a steady performance in services for the remainder of 2026. Moving to Slide 13. Let's review our 2026 guidance. We had a great start to the year with a very strong Q1, and we're seeing very good momentum in our key growth initiatives. Despite a dynamic macro environment, we feel good about where we are and the diversity of our business that provides us multiple ways to win, both of which give us the confidence in our outlook for 2026.

For revenue, we expect a range of $3.86 billion to $3.94 billion. Again, this outlook is supported by our $790 million of product backlog as well as the strong structural work we've implemented to reduce product lead times. We continue to expect total gross margin to increase 25 to 50 basis points year-over-year and service margin to improve up to 50 basis points for the full year as our service initiatives translate into better productivity and performance. As a reminder, after a very strong 2025, with product margins increasing 300 basis points, we expect product margins to remain comparable.

In service gross margin, we expect both sequential and year-over-year improvement through the remainder of 2026 as our scale increases and our investments continue to deliver further returns. For adjusted EBITDA, we project a range of $510 million to $535 million, representing growth of approximately 8% at the midpoint. Turning to free cash flow. We forecast free cash flow in the range of $255 million to $270 million, representing roughly 10% growth at the midpoint, supported by continued working capital improvements and disciplined capital allocation.

We currently expect to generate positive free cash flow in every quarter of this year. We expect adjusted EPS to be in the range of $5.25 to $5.75, assuming an effective full year tax rate in the range of 35% to 40%. From a shareholder value perspective, we view free cash flow as a more direct measure of the value we're generating as it reflects the cash available to return to shareholders and to strengthen the balance sheet while preserving flexibility for disciplined capital allocation. On that basis, we expect our free cash flow per share for 2026 of approximately mid-$7 would be meaningfully higher than our 2026 adjusted EPS guidance, reflecting strong cash flow generation and working capital performance.

As we think about the quarterly cadence, let me give you a little color on how we think about Q2. We expect Q2 revenue to represent approximately 24% of the full year, consistent with 2025. We expect gross margin to be at almost similar levels to prior year, driven more by services, which we said we expect will be up both quarter-over-quarter and year-over-year. Turning to adjusted EBITDA. Though we continue to expect a stronger second half weighted contribution, we now see the first half of the year contributing just above 40% of this year's total adjusted EBITDA. We expect operating expenses to be up slightly quarter-over-quarter, but down on a year-over-year basis.

The tax rate in Q2, we expect to rate more in line with our full year rate. And with regard to free cash flow, we expect positive free cash flow comparable to the prior year second quarter in '25 amount. Unlike some of our direct peers in this market, we've been able to generate positive free cash flow every quarter for 6 consecutive quarters, which is a testament to the durability and consistency of our operating model. For adjusted earnings per share, we expect Q2 to compare favorably versus the prior year quarter. Turning to Slide 14. We continue to operate with a fortress balance sheet with approximately $680 million of liquidity at the end of Q1, comprised of $374 million in cash and cash equivalents and a fully undrawn $310 million revolving credit facility.

The net debt leverage ratio stood at only 1.2x. And our progress continues to be recognized. Fitch Ratings recently initiated a BB- with a stable outlook, our highest credit rating yet and a notch higher than our other current credit ratings. We view this as a meaningful third-party validation of the progress we've made in strengthening our credit profile, supported by our continued focus on free cash flow generation.

During the quarter, we repurchased approximately 747,000 shares at an average price of $73.66 per share. In total, we returned $55 million to shareholders in Q1 under our existing $200 million share repurchase program and have $117 million remaining. In 2026, we're targeting 50% plus free cash flow conversion, and we remain committed to returning the vast majority of our free cash flow to shareholders in the form of share repurchases. We continue to believe that our shares are undervalued and our ability to consistently generate cash flow is underappreciated. Our fortress balance sheet and strengthened financial profile have increased confidence in our ability to achieve our target of $800 million of cumulative free cash flow from 2025 through 2027, while still providing us flexibility for disciplined M&A.

With that, I'll turn it back to Octavio for closing remarks.

Thank you, Tom. To wrap up, we delivered a strong start to 2026. And importantly, we delivered another quarter of doing what we said we would do. Momentum continues to build across the business. We're seeing consistent execution across the businesses. Our core franchise in banking remains solid, while we continue to expand our role inside the branch through automation, software and services. In retail, momentum continues to build, particularly in North America, with a growing pipeline that is starting to convert into meaningful wins.

At the same time, we're continuing to improve the quality of the business. Our operating discipline is driving better margins, stronger cash flow and more consistency quarter-to-quarter. That consistency matters. It is what gives us confidence in our outlook for the year even in a dynamic environment. We're also maintaining a clear and disciplined approach to our capital allocation, supporting a strong balance sheet while returning the majority of our free cash flow to shareholders. Our story is straightforward. We have strong positions in attractive markets, a strategy that is working and an operating model that continues to improve. That combination gives us confidence in our ability to deliver sustainable value over time.

With that, operator, please open the line for questions.

[Operator Instructions] Our first question will come from the line of Matt Summerville with D.A. Davidson.

Can you maybe just talk a little bit about the cadencing of EBITDA? Just doing very quick rudimentary math. It sort of seems like in Q2, your adjusted EBITDA would be roughly flattish relative to the prior year, yet I'm hearing quite a bit of goodness overall on the call across the businesses and with profitability. So can you help me kind of connect the dots there? And then I have a couple of follow-ups.

Yes. We would -- so for Q2, we would expect slight growth in adjusted EBITDA, whereas if we landed last year at $111 million, we do expect it to be north of that number. Does that answer your question, Matt, directionally?

YYes. I guess I'm curious, when I look at the EBITDA growth in Q1, and I kind of listen to all of the positivity you guys are talking about, I guess I'm a little surprised that we wouldn't see more adjusted EBITDA growth in Q2. Having said that, I also think it's important to you guys could give maybe a little bit more color on some of the goodness you're seeing in North American retail. If there's a way to quantify the funnel and maybe how we should be thinking about your conversion rate on that funnel as you look out over the next 12 to 24 months or so? And then I have one more.

Yes. Look, I would -- just to follow up on the adjusted EBITDA, right? If our adjusted EBITDA margins in Q2 of '25 were closer to 12.2%, right? We would expect Q2 to be closer to 13% or just under that as well. So you are seeing that increased growth sequentially and over prior year. And again, that's going to be driven by some of the margins and disciplined CapEx that we have or OpEx that we have.

Matt, this is Octavio. To give you a little bit of color on retail. So this quarter, I think it's important to realize we have 3 very significant wins. One of the largest fuel and convenience retailers decided for our electronic point of sale to replace their entire estate. It's literally thousands of point-of-sale devices. A regional grocer, again, a very important win with them, replacing the electronic point-of-sale systems across their footprint as well. And a very large pharmacy chain out our initial orders for our self-checkout products.

As you know, these are literally thousands of units that need to be deployed across large geographic regions. So you'll start seeing as we -- every quarter, we keep adding more wins to that, we'll start building even more critical mass that will continue to support the growth that we see in North America. We're very excited. As I mentioned in the prepared remarks, we have a very targeted account strategy on the accounts that are in that process of upgrading their self-checkout, software or point-of-sale. And we see that we're achieving very favorable success rates. If you couple that with all the investments that we've made in our Smart Vision technology, it's really opening doors to more meaningful conversations with retailers on how we truly improve store operations for them. Remember, the opportunity in North America is large.

Understood. And just last thing for me. Can you maybe, Octavio, talk through the geographic kind of walk around for your ATM business?

Sure. I'll throw a little bit of retail as well, Matt, so that the retail side of the house doesn't feel bad as we walk through the geographies. But North America, very -- again, we've been very successful deploying recyclers at large financial institutions. I used the example today, and you'll see a press release from that customer, I think, coming up in the coming days. Recyclers are now finding their way into large credit unions, community banks. So you will start seeing that technology permeate even more into the market. So North America continues to be a strong market.

And I would say the most exciting thing about North America is this is where we launched the teller cash recycler for initially. This quarter, we won the complete replacement of a large bank at state for teller cash recyclers. So again, in North America, we're very focused on continue the deployment of recyclers downstream and also expanding the teller cash recycler market. This will start adding to our service density and really improving the profile of our service business. So very, very happy about that. Clearly, we talked a lot about retail in the prior question that you asked. But again, the opportunity is very vast for us in North America retail.

Remember, it's still a very small part of our overall revenue portfolio, but one that is growing at a very fast pace. So we continue to be very encouraged by the pipeline, the types of customers that we're talking to and just the overall recognition that we're now getting in the market, where before we had to be knocking on many doors. Today, many retailers are actually calling us to participate in different projects with us. So we're excited about that.

Latin America, we moving on Latin America, as you know, very cash-intensive market. We continue to see now a recovery in many of the markets that last year had been a little bit slow due to economic or political things. So Latin America, we're very excited that it's now returning to the type of growth that we've seen in the past. We're still pending some of the large RFPs from Brazil to be concluded, but we're very optimistic that we will win them and that they'll form part of our revenues in the second half of the year.

I would say in Europe, when we talk about banking, we're really benefiting from this trend in Europe of pooling ATMs across customer bases. I had the opportunity this past week to be in Europe with 150 of our customers in one of our customer events. And to be honest, I left very energized as we see projects in France from large banks pooling their ATMs together that really creates an opportunity for us to really refresh and modernize their estate. So we're very excited about what's going on in Europe.

Also our branch automation solutions, the example I gave about FOREX. FOREX runs all these different exchange stores

all over the -- you'll probably see them in airports. They run ATMs, physical stores. We're now managing the entirety of their operation, outsourcing all the parts that they need to run their ATM network. So that is also opening new doors for us in this market that remains very attractive for us.

And I would say when we move to Asia Pacific, our fit-for-purpose strategy is gaining momentum. I don't know if I should say this, but we're ahead of our plan on how many devices we plan for the year, strong adoption in India, some of the large tenders we've been able to win. So we're very excited about our fit-for-purpose strategy, and we're actually going to expand our fit-for-purpose strategy, not just to deploy those devices in India, but in other APAC markets where we think that, that product will also be a very good fit. So excited about how that is going, Matt. I hope that helps.

Hey Matt, just a quick follow-up. As it relates to EBITDA, we -- similar to last year and the linearity, we expect to see a stronger second half weighted contribution. And that mix that we talked about is usually 40, 60, what we see now for the first half of the year is contributing just above 40% of this year's total adjusted EBITDA with the remainder flowing out in the second half of the year. That's kind of what I said on the call. Hopefully, that adds some more clarity to your question.

Yes, it does. I must have missed that nuance that totally checks out.

Our next question comes from the line of Justin Ages with CJS Securities.

Can we get a little more color on the strong retail growth in the first quarter, 25% plus real. So I wanted to know if we could parse that between growth in Europe versus North America.

Yes. So Justin, we mentioned in the call, North America grew 70%. It's a small base still, but very, very fast growth. And in Europe, we had an extraordinary quarter. As we've been saying, we've been seeing the momentum and the recovery in retail in Europe. It started last year, Q2, Q3, Q4, where we kept growing sequentially. Now you can see that this first quarter, again, a very strong quarter for Europe, driven by strength, I would say, across all product lines, whether it was the software, the self-checkout or the EPOS, which was particularly strong, all of them growing.

And North America, again, very targeted wins, 3 very strategic ones this first quarter just because of the magnitude and size of the footprint that we will be covering now with point-of-sale and the opportunity in self-checkout.

So we're excited. And again, probably one of the areas that I love talking about is our Smart Vision. We continue in the -- with one of the largest retailers globally deploying Smart Vision to test shrink in the aisle, shrink at demand checkout and obtaining really outstanding results with these initial rollouts that will undoubtedly lead to expanding that footprint across the retailer. So we're very excited. Retail is a huge opportunity. Europe is our core -- has been our core franchise. It's stable and growing now. And the opportunity in North America is huge in front of us, and we're very excited on how we can capitalize against it.

And then in some of the disclosures you noted shutting down non-core operations in the APMEA region. Just wanted to get a little more color on the thinking behind that as well as more broadly, any impact to deployments around the Middle East region to some of these fit-for-purpose or cash recyclers just due to the conflict?

Well, I'll answer the second part of your question first. No, we haven't seen any real logistical problems that we haven't been able to overcome in the quarter, and we don't anticipate any going forward given the situation there. Look, as it relates to what I refer to as the exiting of a non-core business, it's part of our normal sort of portfolio review to streamline the business. We want revenue, but it's got to be good profitable revenue. The business overall is not material to our position in the region, and we don't have any other current plans or any other actions like that, that we're going to be taking.

Our next question comes from the line of Antoine Legault with Wedbush Securities.

Congrats on the good results and momentum here. I wanted to ask about 2 key input costs, which you briefly touched on earlier, but specifically memory and fuel prices. There's been a lot of chatter around rising memory costs. And I appreciate that memory may not represent a significant part of your hardware bill of materials. But given the sharp increase in memory costs, can you tell us a bit more about how you're managing that? And similarly, we've seen oil prices surpass $100 a barrel, diesel, gas, both up pretty meaningfully over the past few months. How is that impacting you? And how are you managing that?

Yes. Thank you, Antoine. And Tom and me are arguing who should answer, but if I jump in, I'll answer first and let Tom elaborate a little bit more. I think when you think about the memory pricing and in general, hard drives and other components, in the ATM side of the house, it's a very small portion of our total bill of materials. So there, I'd say we're well covered. On the retail side, particularly in electronic point of sale, clearly, that is one of the cost drivers there. What we've done, and we are adjusting pricing with our customers. That's why Tom mentioned how you will see our margins continue to improve as we go through the year.

So we're working with our customers. We Luckily, we have secured the supply that we need for the year. Now it's just a matter of renegotiating with some customers on existing orders. And in some cases, all new orders are being quoted with the appropriate cost structure now. So I think we're well covered on that side.

So I will add to that, that the impact of the quarter of that higher cost from memory was probably $3 million to $5 million. So we think that between repricing and the supply chain impact that we'll be able to mitigate the majority of that headwind in Q2. As it relates to the fuel costs, we're managing that. We have a new fleet rollout that's been going on. Our fleet was aging. So think about much higher miles per gallon vehicles that are out there. And then when you couple that with our field technology software rollout, and the routing and the options that it gives and making sure that we're doing one-time visits and being able to repair the machine with the right people and the right parts, we've reduced the overall amount of miles that our fleet is traveling.

So the combination of more highly efficient fuel vehicles and better routing technology, our consumption of fuel is actually down year-over-year, and we would expect that to continue on a comparable basis quarterly going forward. So no real impact from the fuel costs in Q1. And depending on where prices remain, we really don't see it as much of a headwind for us and still very confident in our guidance.

Understood. That's very helpful. And Tom, can you give us an update maybe on your 200 action points to reduce OpEx. How is that going? And how much of the expected $15 million in run rate OpEx improvements exiting 2026? How much of that is reflected in your Q1 results? Is it still early days on that front?

It's still kind of early days. But look, I think when you're able to grow revenue at 6% in any given quarter year-over-year and hold OpEx flat, that's a win for us. We do have 200 actions that are underway, and we're starting to be able to offset some of the wage inflation that we're seeing in general overall cost inflation. So we're going to take Q1 as a win with the flat OpEx, and we expect to be able to continue to sort of see that throughout the remainder of the year, flat to comparable.

Overall, we expect it to be down 1% or 2% as we exit 2026. So we feel like we're in really good shape. We're continuing to execute against it. And it's like anything you do when you start to dive deeper, you have other opportunities that come up, not necessarily all in OpEx, some are in cost of goods sold. But I would say the entire team is very focused on cost takeout, and it's being done through deploying the lean methodology, which allows us to either improve the way we process workflow or altogether just take that work out. So we remain encouraged on those savings.

[Operator Instructions] At this time, we have no further questions. I'll now turn the call over to Maynard Um for his closing remarks.

So thanks, everyone, for joining us and for your interest in Diebold Nixdorf. If you have any follow-up questions, please feel free to reach out to any of us on the Investor Relations team. Thanks again, and have a great day.

Ladies and gentlemen, this concludes today's call. Thank you for participating. You may now disconnect.

Hello. Good day, and welcome to Diebold's Nixdorf Fourth Quarter and Full Year 2025 Earnings Call. My name is Ellie, and I'll be coordinating today's call. [Operator Instructions] I'd now like to turn the call over to our host, Maynard Um, Vice President of Investor Relations. Maynard, please go ahead.

Hello, and welcome to our fourth quarter and full year 2025 earnings call. To accompany our prepared remarks, we posted our slide presentation to the Investor Relations section of our website. Before we start, I'll remind all participants that you'll hear forward-looking statements during this call. These statements reflect the expectations and beliefs of our management team at the time of the call, but they are subject to risks that could cause actual results to differ materially from these statements.

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

We will also discuss certain non-GAAP financial measures on today's call. As noted on Slide 3, a reconciliation between GAAP and non-GAAP financial measures can be found in the supplemental schedules of the presentation.

With that, I'll turn the call over to Octavio, who will begin on Slide 4.

Good morning, and thank you for joining us. 2025 marked a defining year for Diebold Nixdorf. We strengthened our foundation, delivered on our commitments and most importantly, demonstrated that we are now operating a sustainable free cash flow generator with significantly more stable and predictable financial profile.

We grew revenue, expanded adjusted EBITDA to $485 million and more than doubled free cash flow to a record $239 million. These results reflect the disciplined execution, the strength of our lean operating model and a portfolio increasingly aligned to long-term automation trends in banking and retail.

Today, the conversation will center on the durability of our operating model, our ability to generate strong and consistent cash flow and the opportunities we have to deploy that capital in ways that drive long-term shareholder value. What matters most to us and what our results clearly demonstrate is that we are delivering on what we said we would do quarter after quarter.

This consistency is increasing predictability in our model and strengthening confidence in our long-term outlook. Our core businesses remain strong and our growth initiatives are gaining traction. In banking, we are expanding our role beyond the ATM to orchestrate the broader branch and transaction ecosystem through expanded service offerings, software-enabled automation, cash management solutions and innovative hardware, helping financial institutions operate more efficiently while improving the consumer experience.

In retail, momentum continues to build with 3 consecutive quarters of revenue growth as we expand in North America, win new logos and scale AI-driven solutions that help customers reduce shrink, increase throughput at checkout and operate more intelligently.

We also delivered a record fifth consecutive quarter of positive free cash flow. Importantly, we also received 2 credit rating upgrades this year, independent validation that our operating model and financial model continues to improve. With net leverage around 1x and free cash flow growing, returning capital to shareholders will remain a core part of our value creation framework. Today, we're a stronger and more predictable company with multiple ways to win and create value.

We are entering the year with momentum, a fortress balance sheet and a clear focus on delivering another year of profitable growth and cash generation. With that, let me walk you through our key takeaways for the year.

Please move to Slide 5. Slide 5 reflects the consistent execution and financial progress we delivered throughout 2025, reinforcing the strength of our operating model. We delivered strong year-over-year improvement across our key financial metrics, meeting and in several areas, exceeding the commitments we established at the beginning of the year.

Order entry grew 17% year-over-year, supported by healthy demand across both banking and retail and demonstrating the continued relevance of our solutions as customers prioritize automation, efficiency and innovation.

Revenue performance reflects disciplined execution across the portfolio. In banking, the core ATM business remained stable, while our strategic growth initiatives gained traction. In retail, the core businesses in Europe recovered and strengthened as the year progressed with accelerating momentum in the U.S. behind our SmartVision AI solution. We recently completed a pilot with one of the world's largest retailers in the U.S. and are now transitioning into multiple life store implementations, an important step towards scaling the opportunity.

Adjusted EBITDA grew to $485 million, reaching the higher end of our guidance, with margins expanding 60 basis points. This improvement reflects the structural benefits of our lean operating model, continued cost discipline and operating leverage as we simplify the business and scale more efficiently.

Free cash flow was a standout in 2025. We generated a record $239 million, more than doubling prior year's cash flow and representing approximately 49% conversion, well above our original outlook and approaching our 2026 target of greater than 50%.

We expect this momentum to continue. Stronger working capital, lower interest expense and higher profitability demonstrates the growing cash-generating capability of our model and enhance the financial flexibility to invest in growth while returning capital to shareholders.

Adjusted earnings per share reached $5.59 for fiscal year 2025 with more than doubled EPS year-over-year, even excluding certain noncash nonoperational favorable tax benefits. One year into our 3-year plan, the financial algorithm we outlined is taking hold, and we are executing as committed. That consistency is strengthening confidence in our outlook and reflects an operating model with multiple ways to win and create value.

Slide 6 highlights the growth engines that are strengthening the durability of our revenue and expanding our long-term opportunity across banking, retail and services.

We are gaining traction in the areas that matter the most, automation, software and service recurring revenue, all of which support higher quality growth over time. In banking, our role continues to expand beyond the ATM as financial institutions modernize their branches and optimize cash and transaction ecosystems.

By automating manual processes, reducing cash and transit visits and improving staffing efficiency, our solutions deliver measurable operational value for our customers while positioning us to capture a larger share of their technology spend.

During the year, our branch automation solutions built momentum with large multiyear wins in Europe and a key new multimillion dollar win in North America, reinforcing the relevance of our strategy across major markets.

We also expanded the DN Series portfolio with the introduction of the DN Series 300 and 350, combined with our VCP 7 software that enables interoperability across devices are helping customers increase availability, lower operating costs and simplify branch operations.

Fit-for-purpose continues to gain traction across both high capacity and our smaller energy-efficient configurations. Notably, we received certification from one of the largest public banks in India, positioning us to compete in all public bank tenders and opening the door to one of the fastest-growing ATM markets globally.

In retail, we are encouraged by the momentum we are seeing, particularly in North America, where we secured 9 new logos, including a win with one of our top targeted grocery accounts. The strategy that established our leadership position in Europe, centered around openness and modularity is now gaining traction in North America and significantly expanding our addressable market.

Our SmartVision AI solution continues to differentiate our portfolio and generate strong customer interest. At the NRF show, we engaged with more than 800 customers, partners and prospects, reinforcing the growing relevance of AI-driven capabilities as retailers focus on shrink reduction, checkout throughput and smarter store operations.

In services, our focus remains on being the most trusted service provider in the industry. We continue to optimize our service and repair centers globally, improving turnaround times, driving greater consistency and quality, which led to higher uptime for our customers.

This, coupled with the completed North America rollout of our enhanced field service technician software, resulted in our best SLA performance of the year.

With this, we are strengthening customer loyalty, supporting product pull-through and increasing the lifetime value of our installed base, further enhancing the recurring nature of our revenue. In operations, teams have fully embraced Lean. Bringing new ideas to reshape legacy paradigms about how and where work gets done.

Our local-for-local sourcing and manufacturing strategies are strategic advantages for our company and have allowed us to navigate market challenges like tariffs in 2025 and provide a strong foundation as we enter the new year.

By leveraging common platforms and components across our ATM and branch automation portfolio, we are driving greater efficiency, scale and simplified operations for our customers. Across the company, working capital improvements drove great results.

Days inventory outstanding and days sales outstanding again improved year-over-year. Tom will share details on the significant improvements in a moment. While we remain disciplined in our expectations, the traction we are seeing across the growth engines increases our confidence in the power of our model as we move into 2026. All these advancements position the company to deliver more predictable performance while expanding our long-term growth runway.

Now let's turn to Slide 7. Slide 7 highlights how Lean is becoming a structural advantage for us as we systematically lower our cost base, improve working capital and continue to expand margins. What began as a manufacturing initiative has now scaled across supply chain, services and business operations, embedding continuous improvement into how we operate and creating a more robust and scalable enterprise.

Across global manufacturing, the implementation of a Dynamic Kanban system spanning more than 400 high-use items has driven an approximately 30% sustained reduction in inventory, while eliminating expedites and improving parts availability.

These actions are releasing working capital, strengthening cash conversion and enhancing operational predictability. In our shared business services organization, cross-functional teams from 11 countries, standardized order processing and accelerating invoice cycles, reducing processing time by 17% and improving collection efficiency.

Just as importantly, these improvements are repeatable and are now being scaled across additional geographies. This is how we approach Lean, identify structural efficiencies, institutionalizing them and then extending those benefits across the enterprise.

Our progress has also been recognized externally, including being named by Newsweek as one of America's most responsible companies, reflecting the strength of our supply chain, ethical standards and community engagement, proof that operational excellence and responsible business practices can advance together.

As Lean continues to expand across the organization, we see meaningful opportunity to unlock further efficiencies, strengthen margins and improve cash flow. Importantly, many of the financial improvements Tom will discuss next are being enabled by these structural efficiencies. Lean is not a onetime initiative. It is a core capability that is reshaping how we operate.

With that, I'll turn it over to Tom to walk through our financial results.

Thank you, Octavio. 2025 was an exceptionally strong year of performance for us. We grew revenue, expanded margins and more than doubled free cash flow and adjusted EPS. These results reinforce that we have multiple ways to win and demonstrate our strong operational execution across the enterprise.

Q4 revenue was $1.1 billion, up 12% year-over-year and 17% sequentially, driven by growth in both product and service. In banking, high-capacity fit-for-purpose ATMs and strong performance in Europe drove results. In retail, strong point-of-sale and self-checkout performance globally drove revenue increases.

Total gross margin expanded to 27.1%, up 320 basis points year-over-year and 90 basis points sequentially, reflecting favorable product and geographic mix. Product margins were 28.2%, up 80 basis points sequentially.

Service margins increased to 26.2%, up 80 basis points sequentially. For the full year 2025, total company gross margin was 26.4%, up 110 basis points year-over-year. Margin expansion was driven by products, where gross margin increased to 27.4%, up 300 basis points year-over-year.

Strength in product margins allowed us to accelerate investments in our service infrastructure, consolidating our repair and service centers, the deployment of our field service software and additional field technicians. As a result of these investments, service margins finished the year at 25.6%.

We delivered strong Q4 operating profit of $129 million, up 81% year-over-year and 48% sequentially, driven by higher revenues and continued margin benefits from our mix and our Lean operating model.

Operating margin expanded 440 basis points year-over-year to 11.6% in the quarter. Operating expense was relatively flat year-over-year on higher revenues. We continue executing against our plans to reduce SG&A, and we've made solid progress on the over 200 action items that are part of our cost reduction program.

For the full year 2025, operating expense was up 3.7%, driven by higher labor and benefit expenses, partially offset by our savings initiatives. Exiting '26, we expect annualized run rate operating expense savings of up to $50 million, of which we expect to realize up to half of these savings in '26, resulting in a reduction of approximately 1% to 2% of operating expense.

Lean methodology, disciplined execution are driving our strong improvements in our results. Continuing on to Slide 9. We delivered record Q4 adjusted EBITDA, record full year adjusted EPS and generated record full year free cash flow.

Q4 adjusted EBITDA reached $164 million, up 46% year-over-year with 350 basis points of margin expansion. Sequentially, we delivered 35% growth and drove an additional 200 basis points of margin improvement, bringing EBITDA margins to 14.9%.

Adjusted EPS for Q4 was $3.02 and for the full year 2025 was $5.59. This includes $1.08 of noncash, nonoperational favorable items, including a tax valuation allowance release in the amount of $0.57 in Q4 and as we previously disclosed, a benefit of $0.51 recognized in Q3 due to lowering of the statutory rate in Germany.

Excluding these items, 2025 EPS was $4.51. In 2025, we returned $128 million to shareholders through repurchases, representing 2.3 million shares or approximately 6% of the company at an average share price of $55.47, representing a discount of more than 25% versus where our shares trade.

Free cash flow in Q4 was $196 million, up 5% year-over-year or approximately $10 million. For the full year of 2025, we generated $239 million of free cash flow, more than doubling 2024's result of $109 million and setting a new annual company record.

Strong Q4 performance year-over-year was driven by lower interest expense following our late 2024 refinancing, continued progress in streamlining service contract collections and additional working capital initiatives. Year-over-year, days inventory outstanding improved by 9 days and days sales outstanding improved by 4 days, and we continue to see further opportunities ahead in both.

As I've shared with our teams internally, there is no finish line in our continuous improvement journey, only more opportunity. Moving to Slide 10. Banking delivered strong product and service revenue growth with revenue up 11% year-over-year in Q4 and up 1.2% for the full year. Banking product revenue in Q4 grew 20% year-over-year, driven by strong ATM recycler adoption across our major markets.

Banking services revenue grew 5% year-over-year in Q4, primarily driven by higher revenue contributions from Europe. Banking gross margin expanded 410 basis points year-over-year in Q4 and 160 basis points for the full year, driven by strong product margins, allowing us to strategically accelerate the investment in services.

As a result of these investments, service margins ended the year at around 25%. We're encouraged by customer feedback on these service investments, including engagements with large financial institutions, record Net Promoter Scores and our strongest SLA performance of the year.

Together, these indicators reinforce our confidence in improving banking service margins this year and over the long term. Turning to Slide 11. We had a strong end to the year in retail, achieving our third consecutive quarter of sequential revenue growth.

Q4 retail revenue increased 12% year-over-year to over $300 million, and retail revenue for the full year grew 2.1%. Retail product revenue grew 16% year-over-year in Q4, supported by strength across point-of-sale and self-checkout in major markets.

For the full year, retail product revenue increased 5.4%, driven by strong global point-of-sale unit growth and higher self-checkout shipments in North America. In retail service, revenue increased 8% year-over-year in Q4, driven by core service and higher installation work. For the full year, retail services revenue was comparable to prior year due in part to certain large customers that experienced external cyber-related disruptions that reduced our ability to provide service to them.

We have now resumed full service for those customers. Turning to profitability. Strong demand and higher volumes drove overall retail gross margin expansion of 80 basis points year-over-year in Q4. For the full year, overall retail gross margins declined 20 basis points. This decrease is tied to the service disruptions I just mentioned.

Looking ahead, retail is entering 2026 with strength. We're securing high-quality new business wins, including multiple new logos in the U.S. grocery and QSR segments, in addition to growing our core European business.

Overall, retail is positioned to continue growing revenue and gross profit dollars on a year-over-year basis. This will be driven by the acceleration of our growth initiatives in North America, continued new logo wins, sustained momentum in Europe and the scaling of our differentiated AI-driven solutions.

Turning to Slide 12. Our 2026 guidance reflects our increasing confidence in our operating model and the momentum we are carrying into the year. We're establishing our 2026 guidance for revenue, adjusted EBITDA and free cash flow, all of which are higher than the original targets we shared at our 2025 Investor Day.

For revenue, we're establishing a range of $3.86 billion to $3.94 billion. We expect the quarterly cadence for revenue to be consistent with 2025 based on each quarter's share of the full year revenue. This outlook is supported by our $733 million of product backlog and the significant reduction in product delivery lead times.

Additionally, our January order entry is very strong, which gives us clear line of sight to our first half revenue. We expect total gross margin in 2026 to increase by another 25 to 50 basis points year-over-year.

Coming off a record year where we expanded product margins by 300 basis points, we expect product margins to remain at these levels as we scale fit-for-purpose solutions. In services, we expect gross margin for the full year to increase up to 50 basis points year-over-year.

In the first quarter, margins will be slightly lower year-over-year as we ramp up hiring in the U.S. in anticipation of converting strong service pipeline and further improving our SLAs. From Q2 onwards, we expect sequential year-over-year improvement as scale increases and these investments begin to deliver returns.

For adjusted EBITDA, we project a range of $510 million to $535 million, representing growth of approximately 8% at the midpoint. Turning to free cash flow. We forecast free cash flow in the range of $255 million to $270 million, representing roughly 10% growth at the midpoint, supported by continued working capital improvements and disciplined capital allocation.

Once again, we expect to generate positive free cash flow in every quarter of the year. Starting this year, we are introducing guidance for adjusted earnings per share. For 2026, we expect adjusted EPS to be in the range of $5.25 to $5.75. Assuming an effective tax rate in the range of 35% to 40%. At the midpoint, this guidance reflects approximately 22% year-over-year growth by a comparable basis when excluding certain noncash nonoperational tax benefits in 2025 that we previously mentioned.

I would also like to point out that our free cash flow per share is significantly higher than our EPS as a result of stronger cash generation than earnings alone suggests. Overall, our 2026 outlook reflects the strong foundation built in 2025, the durability of our operating model that we've put in place and the strength we're carrying forward.

Turning to Slide 13. We ended 2025 in an exceptionally strong financial position with more than $700 million of liquidity, including $416 million in cash and short-term investments and an undrawn $310 million revolver with a net debt leverage ratio at 1.1x.

Our balance sheet strength is a reflection of disciplined execution throughout the year. 2025 was also a standout year for capital returns. We completed our initial $100 million share repurchase program in just over 8 months and announced a new $200 million authorization in the fourth quarter.

Through year-end, we repurchased $128 million of our common shares, representing approximately 6% of the company's total shares outstanding at an average share price that is 25% below where our shares are trading, which we believe is an excellent return on our investment.

We are targeting the completion of the $200 million program in a similar time frame. Our balance sheet strength and consistent free cash flow generation were recognized externally as well. In Q4, Moody's upgraded our credit rating to B1 from B2, our second credit rating upgrade of 2025, underscoring the meaningful progress we've made.

Looking ahead, our capital allocation strategy remains consistent and firmly aligned with shareholder value creation. Since the beginning of 2025, we've delivered substantial shareholder value through strong execution and consistent capital returns with our stock appreciating more than 65%.

Given our performance and outlook, we believe that repurchasing our shares at today's valuation still represents one of the most compelling opportunities to continue to drive long-term shareholder value.

We continue to believe that our stock is undervalued and our ability to generate free cash flow is underappreciated. In 2025, we returned over 50% of our free cash flow to shareholders. This despite having only begun our repurchase program in March of 2025. Going forward, we expect to increase our returns to shareholders as a percent of free cash flow.

Supported by our balance sheet strength and our target of $800 million of cumulative free cash flow from 2025 through 2027, we're committed to prioritizing returns to shareholders through share repurchases by also maintaining the flexibility to pursue small strategic tuck-in acquisitions that strengthen our long-term growth profile.

With that, I'll turn it back to Octavio for closing remarks.

Thank you, Tom. As we look to 2026, what is increasingly clear is the continued strengthening of our operating and financial foundation. We have built a strong, strategically aligned portfolio that balances strong core businesses in banking and retail with scalable growth platforms, positioning us to deliver sustained performance and long-term value.

We are a company with a high-quality business model, fueled by a culture of continuous improvement, delivering consistent performance, generating substantial free cash flow and embedding structural efficiency across the enterprise.

I want to recognize our employees, customers and partners whose execution and trust made these results possible. The progress we are reporting today reflects the strength of our teams and the depth and support of our partnerships around the globe. We are entering 2026 with momentum and confidence in our ability to continue strengthening the business.

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

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

So maybe just start with the kind of the first half, second half cadence a little bit. But more importantly, maybe if you can dig into some of the pluses and minuses we need to be thinking about with respect to Q1 in particular and maybe kind of frame up -- realizing you might not want to give specific quarterly guidance, but kind of frame up how we should be thinking about the first quarter?

Yes. Matt, Look, so we're starting the year with $730 million in product backlog, plus the month of January was a very strong order entry month for us as well. So we have really strong visibility into the first half revenues.

We've guided our revenue cadence to be approximately 45% in the first half and 55% in the second half, very similar to 2025. So on a quarterly basis, we expect our revenues to flow very similar to 2025 with Q1 being approximately 22% of our total revenue for the year.

For adjusted EBITDA, we guided to an approximate split of 40% first half and 61% second half, which again is very similar to 2025. And in Q1 specifically, which I think addresses your question here, we expect adjusted EBITDA margins to be very comparable to Q1 of 2025, albeit on higher revenues.

And is that reflective of the incremental sort of step-up in services investments? And is there any way that you can maybe quantify the level of organic investment you made in the net service organization in '25 and what's on tap for '26? And then I have one more follow-up.

Yes, sure. So as we talked about last quarter, our investments in services really comprised of the field service software rollout in North America. That's primarily behind us right now, and now we're on to the rest of the world. So the cost of doing North America versus the rest will be slightly down. And then we are also in the process of hiring additional field technicians to continue improving our Net Promoter Scores and SLAs. And as we mentioned on the call, we have seen traction in that space.

So we're very hopeful that, that will lead to new wins. And most of the consolidation of our spares and service facilities is behind us as well. Having said that, however, in Q1, that investment will continue. So what you'll see in service margins is a slight decrease into Q1 as we wrap up those investments. And then starting in Q2, we expect sequential year-over-year improvement as the scale increases and these improvements begin to deliver returns. So stepping back for service margins, where we ended the year and looking forward to next year, we're expecting to grow them up to 50 basis points.

And from a product margin perspective as well, coming off a really good year of being able to grow those 300 basis points. We expect to be able to maintain that. And look, obviously, we live by the Lean culture and seeing another 25 basis points of improvement there wouldn't be unexpected either.

And then maybe just another quick one. Can you contextualize the retail logo wins in the U.S. a bit? Is that POS driven, software driven, SCO driven? And how we should be thinking about -- realizing it's off a low base, but how we should be thinking about kind of the go-forward CAGR for U.S. retail? And when does that become a more consequential piece of the portfolio for you?

Yes. Matt, so we had 9 new logos. I would split them between 2 very important ones in the grocery space, a very important one, I would say, in the pharmacy space and then multiple wins in the QSR space where our products continue to really define the standard on what quick-serve restaurants are looking for. So I would say that we have a very solid pipeline.

Some of these wins, if you recall, at the beginning of the year, we said we were targeting 40 very specific accounts. On the grocery side, our largest win came from one of those targeted accounts. And it came -- and we're now rolling out our AI software across still a limited number of their stores, but this is just to prove the case now in the real world.

As I've explained before, these rollouts start with a POC, then some dark stores and then rolling it out into real stores. So we're at that stage. So we're excited about that. So AI has played a very important role. I think what has been surprising in the U.S. is that many accounts outside our 40 targeted accounts have come to us.

So some of the wins that we had this year also in the grocery space came out of Point of Sale, which again proves that the idea of modularity and having a better product does help. And again, during the NRF show, we had over 800 client meetings and prospect meetings. So we feel very good about the pipeline.

We see our retail business, again, remember, a $1 billion business, the majority of it is still in Europe. But we see the U.S. business growing double digits for the foreseeable future, and we're very excited about that. I think importantly, Matt, the retail business in Europe also recovered significantly, as you can see from the numbers from Q1 to Q2 to Q3 to Q4.

And again, that is important to us as that trend, we think, will continue with important wins in self-checkout and the AI-driven platforms.

Next question comes from the line of Justin Ages of CJS Securities.

Nice improvement, obviously, in free cash flow. And you mentioned days sales, days inventory, 9 days and 4 days of improvement. Just wondering if you could give us a little insight into how much improvement do you see left in those eventually, you're going to -- there's going to be a lower limit. So I just wanted to try to triangulate that.

Yes. So look, this year, DSO, as you mentioned, down 4 days. DSO for us ended the year at 50. And if you keep in mind that each day of DSO represents about $10 or so million-ish of free cash flow, we think that there's an opportunity for additional days there. We're thinking 4 to 5 is kind of what our thought process is as we enter next year.

And being able to deliver DSO like we did in Q4 was a result of a lot of hard work. We really ran multiple Kaizens throughout the year to improve our service collections, the down payments related to our service collections in Q4. So that really helped and manifested itself in our results.

So very proud of the team for being able to execute that kind of delivery. And then DIO, right, the way we calculate it is based on a blend of our products and services. So down 7 days year-over-year or thereabouts. Each day represents about 7. And we think that there's multiple opportunities and days there as we continue to roll Lean out and our lead times have decreased pretty significantly as well. So we're turning faster.

Think about where we were just a year or 2 ago at 120 plus. Now we're more somewhere in the range of 70 to 80 days pretty consistently and really really benefiting from our local-to-local manufacturing strategy and helping deploy that. So you think about Germany in Paderborn and Canton in the U.S. and Manaus in Brazil and then our partner in India, that strategy has really worked well in terms of delivering and unlocking value for us.

Very helpful. And then switching to capital allocation. I know you mentioned it in your notes. Just wondering, as we try to balance share repurchases and tuck-ins and then the $950 million note, do you think you'll look at that note in the fourth quarter if it makes sense to take that out? And when you mentioned tuck-ins, is there a list of companies that you have your eye on that you're following that you're not ready to make an investment there yet because you see more value in repurchasing shares? Just trying to weigh the different capital allocation priorities you have.

Yes. Look, we're remaining very consistent to the capital framework that we rolled out a little bit over a year ago. Share repurchases, like I said on the call just now, we still view that as the best return on investment at where our stock is. We believe it's undervalued and the ability to generate free cash flow at this company, we feel still remains underappreciated.

So the stock buyback will be the priority for us. This year, we returned, I think, just about 53% of our free cash flow to shareholders. And keep in mind, we didn't really begin our share repurchase program until March, and we were able to wrap that up pretty quickly. And then as you know, we doubled the size of it. So we're going to continue on a similar, albeit maybe slightly accelerated time frame with a $200 million program, but maintaining that flexibility to be able to do some tuck-ins.

And yes, we have developed a pipeline across multiple categories. But right now, I would say we're primarily focused on some service opportunities as we see the ability to continue to consolidate in that space. And that obviously is one of our core strengths.

And we define an M&A acquisition as something that's got to be almost immediately accretive and a relatively low multiple for us. And we think that there's ample opportunities there to strengthen our growth portfolio.

[Operator Instructions] Your next question comes from the line of Matt Summerville of D.A. Davidson.

Just a follow-up. Octavio, I typically ask you to do this. Can you maybe do a regional kind of walk around the world in terms of what you're seeing from a demand standpoint on the ATM side of the business?

And then if you can speak in maybe a little bit more detail, it was called out several times about the strength in particular you saw in order activity thus far in '26.

Sure, Matt. So I'll talk a little bit about ATM. So North America continues to be very strong for us. So very positive momentum. Our initial branch automation wins are very significant. So this idea of the close-end cash ecosystem, the ATM, the teller cash recycler, the automation software controlling, both devices, really, really gaining traction and interest from customers. So we see that as a very, very positive catalyst.

Add to that, that every bank has now firmly decided that recycling is the way to go. So we continue to see that traction and that -- those investments that we've made and continuing to improve our recycling capabilities will continue to pay dividends in the future.

So North America, we feel very, very, very good about it. In Tom's prior comment around the tuck-in acquisitions, think about also in North America, as we expand our service footprint into the branch, that's an area that we're really looking into it.

How do we create a stronger service experience, not just for ATMs, but for the branch. That is our main focus in North America and Europe. How do we move beyond the ATM into the branch ecosystem. So this resonates very well with customers.

I would say staying in the Americas, Latin America, which traditionally had been one of the highest growth markets in the world, had a, I would say, a slower year in 2025. As you know, there's a little bit of lumpiness that with some big projects that get delayed or move forward.

But after Q1, we see very, very positive momentum in Latin America, and that will be also a catalyst for growth next year. Europe, I would say, throughout the year, very positive momentum. We had very strong wins in Germany, particularly in the savings and credit union space that have now -- are still in the process of refreshing technology. And as you know, those thousands of small customers, not one of them is very big, but 10, 5 ATMs in each, but now fully in refresh cycle. So we're very excited about that.

Same in France, big market where a lot of consolidation is happening in ATM networks, but we've been fortunate enough to capture the majority of those wins. So we're very excited about Europe. We have a strong team there that is looking for how do we accelerate and how do they keep moving into the branch ecosystem.

And lastly, I would say, Asia Pacific, Middle East, probably one of the things I'm the most excited right now, great performance from the team last year. So very, very proud of them. Significant wins across the Middle East, significant wins in different markets in Asia. And I think the fit-for-purpose strategy where we have the high-capacity recyclers that are really proved to be a great year for them in some key markets for us continues to gain traction.

And in India, very importantly, we are now certified to participate in all government and all public government bids. As you know, these are thousands of devices in each bid, which we were not really allowed to participate as we needed to have a certain amount of our fit-for-purpose devices in the market, which we have since achieved. So I'm very excited about ATMs for next year. I think we see steady demand.

And more importantly, in our core markets, the U.S. and Europe, we do see the strategy of expanding beyond the ATM and into the branch really proving to be a key differentiator for us.

That's helpful. And then, Tom, just so I kind of have it straight. When do you anticipate completing the remaining $172 million of share repo?

I would say in a similar time frame to when we completed the $100 million. And then we would expect to be able to go back to the Board, get another program authorized and potentially larger as well.

We'll take our final question from the line of Antoine Legault of Wedbush Securities.

Just on the banking front, clearly, a higher mix of recyclers is having a meaningful impact on your banking margins. Could you give us a sense of kind of the opportunity remaining ahead in terms of continuing to grow that mix of recyclers?

Like how underpenetrated are those products or those machines, especially as customers refresh and upgrade their ATM fleets? And then I have a follow-up.

Yes. So Antoine, I would encourage you to think of this as a continuous cycle. So we've been shipping roughly 60,000 to 70,000 machines every year for the past couple of years. We don't expect that to materially change anytime soon. I think that the penetration is still -- every year, we get a little bit better. So I think that, that will continue to improve. Keep in mind, though, that we are also now ramping up our fit-for-purpose in other parts in Asia, which tend to have a little bit lower margin profile.

But as Tom said, we expect that even with that small change in margins in Asia that we will be more than able to offset that and keep the margins at the high level that we have them right now and through Lean, continue looking for that -- those opportunities to continue expanding margins every year.

And then my last one is, when we look at your EPS guidance range for 2026, can you provide some puts and takes as to what might drive your results towards either the upper or lower end of that range?

Overall, what are some of the factors or parameters that went into your guidance this year? And how should we think about it?

Yes. So if you think about when we talked where we ended the year at about $5.59, and we had those 2 noncash nonoperational items, right? So if you were to back those out, you get to a number that's probably closer to $4.51. I think one of the drivers next year will be our continuation of our share buyback program. And then obviously, sort of the post-tax operating profit will drive that as well. So it's really a combination of both of those items, right?

And when you look at the EBITDA guide being up from the midpoint 8%, we're continuing to leverage our operating model and grow EBITDA at twice the rate of revenues and free cash flow, very successful fourth quarter and overall year, and we expect to be able to sort of continue that same trend into next year.

At this time, we don't have further questions. I would now like to turn the call back to Maynard Um for his closing remarks.

Thanks, everyone, for joining today's call and your interest in Diebold Nixdorf. If you have any follow-up questions post the call, please feel free to reach out to the Investor Relations team. Thanks again, and have a great day.

Thank you for attending today's call. You may now disconnect. Goodbye.

To the Bank of America 2025 Leveraged Finance Conference. I'm Ana Goshko. I cover technology and telecom on the research credit side, and we're thrilled to have Diebold Nixdorf with us this morning, and we have Octavio Marquez, the company's Chief Executive Officer; and Tom Timko, the company's Chief Financial Officer.

So Octavio and Tom, thank you so much.

My pleasure.

So without further ado, I don't know if you'd like to make any opening comments or we could jump right into Q&A.

So Ana, why don't we just jump into Q&A. We're very excited to be hearing Mr. [indiscernible] say that in over $0.25 billion at the spend to Bank of America [ATMs] every week. So we're very deep tuning.

Okay. Good. Maybe yes, I think what's the Mark Twain quote reports of my demise have been great at manager. We talk about cash usage as part of our talk this morning. So just in case we have anyone in the audience that's newer to the Diebold story or just needs a quick refresh. It'd be great if you could just use a minute or 2 to just give a brief summary of the business.

So we have 2 business segments that we serve, one is financial services in banking, where we have [indiscernible] need to consumption our ATMs lower cash flow cycles. But more globally or providing services and software to keep that ATM and branch infrastructure running. The other segment that we cover is [ written ] where we provide self-checkout solutions, point-of-sale solutions and more importantly, the software tool in that infrastructure as well as the services to keep that running.

Okay. Great. So I'll go more in depth, both on banking and retail and then talk about some financial and strategic topic. So banking, I believe that's around 70% of revenue, low 70% of revenue. ATMs, can you just talk about your market position and your geographic presence?

[indiscernible] direct presence and about a little bit over 60 of those and we have an installed base of ATMs globally growing [800, 000] ATM. That makes us the #1 company globally with approximately 33% market share, 34%, 35% market share. So that is our banking business. And again, some of the [indiscernible] financial institution here from technology, whether it's custom reports for the services or simply on some of the new just ATM networks in [indiscernible] one of them being adopted from [indiscernible] some other leading banks in the U.S. and as well as globally.

Okay. And then the revenue split between product, which is the hardware but then services and software.

Yes. So when you look at our business this year, somewhere around $3.8 billion, $2.2 billion versus that is services revenue, $1.6 billion, $1.7 billion will be product revenue. So the beautiful business model is that this service revenue is recurring in nature, a close $2.2 billion, approximately [ 78% ] of it is recurring. It's long-term interest. The average life of an ATM [indiscernible] device depending on [indiscernible] anywhere from 3 to 7 years. And throughout that period, we have an ongoing service contract to maintain to update those devices, but provides great stability for the company with very good visibility on our revenue [indiscernible] since $2.2 billion of almost guaranteed at the beginning of the year.

The nice thing about the hrdware business that we have is the attach rate for the services. If you think about banking, somewhere between 90%, 95-plus percent every time we sell that piece of here you get that annuity stream, Retail is a little bit less, it's the same type of attachment rate.

Okay. And then so switching just for the intro to retail. So it's about 30-ish percent of revenue, high 20%, 30%. And then the 2 main areas are point of sale and then the self-checkouts. So I think your geographic mix is a little different than it is on the banking side. You [indiscernible] talk about that.

[indiscernible] global business. Retail business a little bit over $1 billion. We do over [ $900 ] million a year. So we're the #1 provider of point-of-sales technologies self checkout in the European market. which is worth -- but unfortunately, the European market is not the biggest [indiscernible] biggest retail [indiscernible] in the world is the U.S.

So we were lucky enough that as Europe started adopting self-service in both grocers and general merchandising. We were developing a [indiscernible] with the sales. So that's how we over the past, I would say, 3 years, we captured the #1 position in the telecom space in point-of-sales base in Europe.

The good news for us is as we build this new technology, this new [self-checkout] technology, there's no software technology linked to [indiscernible] capabilities, that gave us that leading market position the ability to recognize [indiscernible] produce at the self check out, the ability to do age verification when restricted products like alcohol or the ability to prevent [indiscernible] self-checkout and the point of sale helped us really gain the low position in Europe.

And we were very fortunate on many of these large European retailers think of companies like [indiscernible], IKEA, H&M, as they expand globally as they the global footprint, they reduce our technology.

So we were just following on large European customers as they expanded globally. Late last year in 2024, once we had very solid business in Europe, the #1 position, and we're confident on our plans we started investing in creating a good sales force the U.S. It's just following [indiscernible] customers but actually being value focused on winning new customers [indiscernible]. We've been going on throughout this year. We're very excited about [indiscernible] in solution is being costed some of the largest grocers in the country. And we have even been something of the fashion retailers, think of the [indiscernible] you'll see that now. So quite obviously moving away just motions where it started, and it's moving into [indiscernible] closing in independent maybe stalling for our filing. So we're really excited because [indiscernible] for us since we enter the U.S. market.

Fascinating. So we have some follow-up questions, especially on the AI and kind of some tangible use cases that you started talking about. And let's just double back to the banking side and to retail. So overall, the growth outlook, I think, obviously, a key driver of growth is branch automation opportunities. So the DN Series cash recyclers, I think you guys talk about that a lot. I think that is where you're generating a lot of growth. Can you talk about what differentiates that product.

Yes. So just for the benefit of think of most [indiscernible]. When you think of ATMs seem like a very simple machine and there's low working than [indiscernible] really do understand how they work, deposit money and then money comes on the other side. Also those who in the past were too different, if you want to think about the 2 different [weakness] of the ATM. So you might ran out cash to dispense, but you would have a lot of cash that was deposited.

Recycling as the name says just basically the same cash that's coming in is the same cash that's coming out. They create tremendous operational efficiencies for banks.

When you think of a bank brand the expenses getting meaning money in and out [indiscernible] stable. So by use of recycling, we can really differentiate reduce the cost of moving cash inside of the branch. We're taking cash to the branch, pulling things. This cannot be recycling [indiscernible]. So that -- we believe that creates a very positive borrowing for our customers or customers that have important technologies with a 20% drop in the cost of [indiscernible] a branch, which just to give you an example of a branch in [indiscernible] just one of these departments get there and a cash [indiscernible] probably cost somewhere between $500 plus that they do.

So you can imagine that quickly, one of the machines [indiscernible]. We've expanded that technology also to do it inside the branch [indiscernible] and also have is recycle. And this creates the ability to really [indiscernible] to more sellers. As both automating along sections or [indiscernible] money is done in the machines. So you're to tell our personnel to now be productive and be focused on servicing new customers will be able doing just a assumption than we've done at the ATM with the other cash recycling is going [indiscernible] for banks.

Okay. And then in terms of the growth outlook in ATM, so just a couple of questions to wrap together here. So where are we in the cycle of ATM refresh? And then with regard to the growth outlook, you already have high market share, but is the DN Series cash recyclers, is that allowing you to kind of increase or capture more market share?

So I always have to be focused on [indiscernible] that we believe we have a very differentiative product. Product that is very unique in the market. We've been -- we were pioneers in the recycling technology. Our product [indiscernible] the recycler, we put more info because the fourth generation recycle that we've built. So we believe it's a [indiscernible]. We look stores globally. So we're very fond of that. And as we look into the [indiscernible] growth algorithm.

The ATM market overall globally is flattish on it's probably up 1% 1-year flattish another year. There is 2 million plus ATM in the world, and that's been the same for the past 5 years. We believe that will get the same beyond the coming years.

But every bank is moving to recycling as traditionally in with recycling traditional ATM with recycling can become a lot more efficient. So we've seen that with recycling, we will continue to expand our market share position. And we've seen that in the U.S. one of the biggest is that we see [indiscernible]. The other important part is then once we take [indiscernible] the case but we is really resilient powerful payment [indiscernible]. Spent roughly and globally, the expenses were 98% of payments are done in cash, as like the presentation that around 17% to 18% of payments in [indiscernible]. And that was basically been the same for the past couple of years. Debit, credit [indiscernible] keep growing, but the amount of payments [indiscernible] financial remains stable.

So [indiscernible], we see that with the site team and the things that we're doing [indiscernible]. And then as we look forward, the stable market, we believe we can expect 1% to 2% growth just based on [indiscernible] that's our [indiscernible] global economy inflation, probably 1% to 2% in the [indiscernible]. And then we developed what we call our branch automation solutions, which is based on ATM [indiscernible] recycling, lesser software and services that clearly create a better [indiscernible] for branch cash management. We believe that can give us another 1 to 1.5 point of growth.

And then a very simple. There's the order [indiscernible] payment planted. And particularly in some of the Asian markets in gets in the Middle East markets, we launched a strategic [indiscernible]. I put this, I'll give you an example in India, India, the [indiscernible], the largest [indiscernible] statement of an [ 70,000 ] ATMs. They had 7,000 ATMs in [indiscernible]. We really weren't participating in that market. That's our same point we sell in the U.S. or in Europe or another pets really didn't fit to market requirements.

So we set up a manufacturing facility in India in the country [indiscernible] ended to address that bucket. So our fit this product [indiscernible] Middle East, they think will allow us to really be more table, not another point of growth because we believe that the long-term algorithm for our banking business should be growing in the mid-single digits.

Okay. That's great. You've ramped a lot of my questions. That's great. So teller cash recyclers what's new and differentiated because you've really started to talk about the opportunity there?

So if you think of [indiscernible], [ Magarian ] as is a [indiscernible] technology [indiscernible] but when you think of how do I [indiscernible] the branch experience. How do I need people that have a branch or [product]. How can they be focused on selling products from serving customers rather than doing transactions. That an ATM, you can probably do now 90-plus percent of any transection that you need. But you still have a lot of small medium businesses that touh your branch. So automating the touch point at the teller with the teller cash recycle, you can really make the process to all those deposits almost what really more automated.

Your tellers don't have to touch, it allows you to really change the format of the branch, but before you would have vault where you would keep cash, move it to a teller. Banking [indiscernible] selling and being from your vault. I think that putting [common] technology to teller [ common] technology at the ATM and the software both that infrastructure. We can move the cash from longer ways to [indiscernible] then once again, we like to branch more in. So people don't have out money to put into the ATM [indiscernible] the internal other line, the ATM really trading with public close East ecosystem where all the cash branches are commented for and it can become little more efficient.

Great. So switch to retail. So it was a good introduction. I mean you talked about your position in Europe and the strategic push more into the U.S. So you raised your AI-driven solutions. So what -- if you could just give us another use case of where you rolled this out? And in particular, its effectiveness in improving shrinkage, which I think has been a real Achilles heel for retail, particularly in the U.S. recently.

[indiscernible] highlighting [indiscernible].

Look, it is, we think, a very differentiated aspect to our. [indiscernible]. It's got the ability to -- when you're at the self-checkout, it's got 27 algorithms to [indiscernible]. On your wins conference try to think of 5 and if you get more than 5 you should probably trick yourself [indiscernible] when the business [indiscernible] enable next gen at the [indiscernible] we can develop with the closed caption [ TV systems ] within the supermarket, that track you from the minute that you walk in, obviously, there are regulations and privacy laws that you have to worry about [indiscernible] with and also not the high, right?

If you [indiscernible] must get elsewhere, you could sense that and then when you go out, it kind of just falls the transaction, right? So we can go long as a go and get it in [indiscernible], let me help you now accept that. So we are seeing a second of 70%, and that's been sort of field tested now multiple times, and that average is very consistent across a lot of different usage. But it's not just about the [AIP] steam. It's sold out. We have [indiscernible], and we can help you consider in such a way that just makes it secure [indiscernible] and not only for you but for employees as well.

Okay. And then so it seems like you might be early inning on this in terms of the rollout, but where are you in getting traction on the rollout within your existing customers?

So tell you that in Europe [indiscernible] existing customers [indiscernible] successful deployments in the following sense [indiscernible] or again, where we 70% strength reduction plus grade employee [indiscernible]. So we're very excited about that. We're rolling out the groceries at the [indiscernible]. And particularly in the U.S., we are behind right now and the opening reversal data be them and proof of concepts going on with large grocers in the U.S. where we're testing this in some of the [indiscernible] stores getting really piloted and other solutions. We're excited about by -- hopefully by end of the year, the first ones in the U.S. with some of the more well-known brands here in [America].

Okay. And then is this what you're leading with as you kind of push more into North America to...

I would tell you in North America we have a very unique. Let me think itself [indiscernible]. We were able to win the #1 position in Europe [indiscernible] because we built a modular product and modular product and a modular [indiscernible]. So when you think of the U.S., we started holding itself after probably 25 years ago. And at that time, it was a very [indiscernible] solution. You use somebody's [indiscernible] need to use that same company software. Then today in the modern world, it seems almost absurd that you would be locked into a supplier [indiscernible] and software. But 25 years ago, it was [indiscernible].

Today, they will large gross revenue [indiscernible] to those 2 things and [indiscernible] that way. Our software can run any [indiscernible] from any other part suppliers work [indiscernible] 20 softwares. So when we body business as people look to make [indiscernible] we can start with winning the modular [indiscernible], modular [indiscernible]. And then we can add employees. So we can run both on [indiscernible] particular technology. So those are [indiscernible], I would say, the 3 things: The modular architecture and hardware and software and the ability to [indiscernible].

Okay, great. Let's shift to some financial topics. So for 2025 guidance, I think you've said you're tracking to the high end of guidance, so that's low single-digit percent revenue growth. EBITDA close to $490 million, which is up $30 million to $40 million a year, 6% to 8%. And free cash flow of close to $210 million. So that's a big improvement over 2024. So what has driven you to the high end of your growth outlook, the margin improvement and the strong free cash flow conversion?

Let me start [indiscernible] the biggest [indiscernible]. The ability to [indiscernible] to buy every day in the earlier this year we said over the next 3 years, we would expect to be able to generate a cumulative free cash flow of $800 million. To put that in perspective, our market cap is $2.4 billion as of opening this morning so that's 1/3 market cap that we're able to generate and free cash flow.

Like that, look at perhaps where our stock price is trading today, and you will believe -- we believe that our stock is underappreciated and under [indiscernible]. So that kind of brings us to move capital allocation frameworks, and that's it [indiscernible].So in February of last year, we announced a $100 million share buyback as well. We wrapped that up in October. It came out during our earnings release and announced that we're going to double that and buy back upwards of $200 million something that we would hope to be able to complete in a similar time frame, we build influence.

So when you think about the ability to generate cash over time, this year, we're going to likely nearly double, if not double free cash flow and to be able to continue to grow. So think about even in somewhere between $550 million and $600 million , which is what we said. So the [ 16% ] conversion rate and to free cash flow and/or a CapEx requirement less than 1.5x, right? So very late CapEx environment.

We're not very acquisitive. We do have a pipeline, but they're all sort of strategic, very service-based, right, consolidation within regions. So our mantra acquisition, and we've successfully completed one last quarter, it's going to be small. So I think under $30-ish million, the multiple of revenue, that's something I talk about it and it serves onetime that's going to be immediately accretive, right? So those are great, we put it into form and we're able to grow it. We've been [indiscernible] one last quarter for about $15 million on the East Coast, not only does it serve [indiscernible] other machines on the social environment for growth for us.

But we feel that's one of the tenants of the things looking too big. And at the end of the day, we're very [indiscernible] team to giving back our free cash flow, if not the best, we that won't the vast majority of it to shareholders [indiscernible]

So revenue growth, that mid-single digits is where we expect to land in 2027. And it's not a we get there, it's a combination of banking or brand and retail solutions, right, that Octavio talked about, that fit for purpose. That's a very big opportunity for us. And if you think about a retail business and were roughly it's a $1 billion business, $900 million of it is in Europe [indiscernible] and the rest [indiscernible]. The rest of the world is greenfield to us. Now as Octavio alluded to, we do have very entrenched delivers. But we went out and hired a sales team, particularly in North America, and was focused on 40 accounts, 40 accounts where we know those [indiscernible] to end of life or there's going to be a software upgrade.

Both of those opportunities bring on what I would refer as a RFP opportunity for us. And we feel maybe modularity and flexibility that, that offers with or without our software, right? We always like it with the software, particularly with this AI component and what I can mean to, we think we have a very cooling proposition for the stores. So in order [indiscernible] that.

So Octavio's point, right? We have build proof of concepts. We have many test pilots that are ongoing as well. This is a new technology, a some point, right? So it is seeing the story about [indiscernible] we actually didn't speak on [indiscernible]. When we want to go take out sort of the demos, right, and told them we would install like the real final product, absolutely refused. They said we don't want to last 1 day, the last 1 week. Does it right? So we noted that.

[indiscernible] so obviously, we were able to work with them. We just bring that up as a proof point, right? When the retailers make that investment, it's a big investment and the refurnish there. I mean if you think about bigger retailers [indiscernible] 1% to 2% of revenue. So if you were able to a 70% as we've demonstrated that time and time again, that's a really good [indiscernible] very compelling position. So we think all those factors help us get to mid-single-digit growth, increasing titlement [ 12% ] a year [indiscernible] and [indiscernible] strategic conditions.

Okay. And then on EBITDA margin. So I think the 2027 target is 15%. Your 12% area currently. So is that -- is that mix with higher software attach or is it just good old cost cutting?

Well, it's examination of both, right? So service business, which is approximately point, let's say, $3 billion on $4 billion continued time we're in '27. The origins that we have today, and this is what we said in our third quarter earnings call, we're going to be fluid this year [indiscernible]. We see a pathway to be able to grow service margins, they receive a year we went to say [ 50 ] basis points a year we're seeing a future in the next couple of years, certainly over the man time. And what we were able to do this year because our product margins were so high last quarter is that we pulled in some time investment. So think about a consolidation of our airport depots were going out software technology that not only helps from our field technicians, of which they're 1,000 global as a really big asset for us that can service both banking and retail and just really look at that footprint as well and began to shrink it.

So we feel that we have line slate to be able to grow [ 518 ] basis points each year. [indiscernible] you sell transformation of under Octavio's leadership, done 13% margin about 3 years ago, the last quarter then we still expect to be able to go and grow [indiscernible] 25 to 50 basis points a year [indiscernible] not share because this they'd have to airplanes great geographical.

And let's those opportunities exist because of services and [indiscernible], 100% of those [indiscernible]. We run a few spins a year and they need to not only safety improvements better quality and better profitability, and that is a lot more flexibility than those companies and in the manufacturing line.

Okay. And because this is a credit conference, can you talk about your leverage target and in particular, credit rating profile if you have a target there.

[indiscernible] we're in [indiscernible] with both S&P and Moody's. Recently integrated by S&P at our needles to get closer to [indiscernible]. I'm not actually worked to [indiscernible] where we were, we've actually made a [indiscernible] gap by about 50%. So more work to do, but we feel very encouraged and we continue to do what we said we're going to do. If we need to slow market.

By the way, this year. And if you look across our industry, this is a real challenge. We have positive free cash flow in every single quarter. It doesn't seem like a very big deal, but it is because the unit is going to do it. And we run it to first quarter, think about able [indiscernible] free cash flow was generated in the month of December because that's when we would [indiscernible].

We grow anything into the business. We just really began to focus much more disciplined on DSO, right? So think about DSO is about $10 million or so a day. This quarter, if you [indiscernible] to last year, 9 days in [ DSM ] improvement we have at least another 9 days, right, if opportunity. [indiscernible] about that again, $5 million to $7 million of free cash flow for every single day, 11 days improvement, right? So we're very focused on having the install schedule manufacturing to that in-store schedule with the factory and the meaning finance in there, we have both flexibility.

So the things push and we get a retail order in, we have fixible lines, not their belts. We're not older school manufacturing, we're just able to capitalize on new opportunities more efficiently.

Okay. Great. So with about a minute left, I'd like to offer you an ability to just wrap up if is there anything we didn't touch on or [indiscernible].

[indiscernible]. Today, we're in [ 1.6 ] we have [indiscernible] [ 50 ] million [indiscernible] approximately that we will be refinancing sometime in the fourth quarter of [reception]. We believe we can do much better than we easily [indiscernible]. So we're very excited about the future.

We wrap it up, I would just say we have a very simple business model. We build great technology, great [indiscernible] products that have made a very sticky [indiscernible] and [indiscernible] many, many -- so it's some business model [indiscernible]. The benefit of that simple business model is that it can generate for [indiscernible] of cash when it's [indiscernible]. So once again, that's why we're excited about our company, and we believe that we're in the [indiscernible]. So thank you very much.

Great Octavio and Tom, thank you so much.

Thank you so much for having us.

Thank you.

Okay. We're going to get started. Thanks. Hey, everybody. Amit Mehrotra here. I lead the multi-industry franchise at UBS. Super happy to have Diebold Nixdorf here. Last year, I did this fireside chat. I was telling him earlier, stock was in the early 40s, young 40s, now it's in the young 60s. So we're going to set a pattern here, hopefully, and every year.

I don't want to correct you right off the bat, but it's 65.

Okay, 65. Sorry. So maybe by the end of this fireside chat, it will be 67, let's see. Octavio Marquez, the CEO; Tom Timko, the CFO. Thank you guys for joining us again. Really appreciate it. Octavio, maybe you can introduce the company to the audience and the people on the fireside chat.

Sure. So thank you, Amit. And once again, very happy to be here. And as you said, we've had a fairly good run, but we still believe it's just the beginning of our story. So hopefully, we'll tell a bit more about the story in the upcoming minutes. So for those of you that are not very familiar with our company, we basically serve two industry segments. Banking and Retail. In Banking, we are very focused on automation through ATMs, recyclers, services and software.

So we have a very large installed base of ATMs globally, 800,000 ATMs. We do business with all the top banks, credit unions, community banks in the world. And we have a truly global franchise. On the retail side of the house, our product set is around point-of-sale terminals, self-checkout devices and a lot of the service and maintenance around that.

And we've recently introduced a lot of AI solutions for self-checkout, trying to remove friction at the checkout. We have produce recognition, so fresh produce recognition, age verification and more importantly, in some markets, now shrink reduction, making sure that we help retailers reduce theft at the -- not only at the self-checkout, but also in the aisles and very soon in the -- as well in the warehouses.

So we're very -- we have a very diversified business where 40% of our revenues come from hardware and roughly 60% this year, a little bit more than 60% of our revenues come from services. So our services are recurring in nature, always long-term contracts to maintain equipment and software to really automate and transform the way people bank and shop.

If I think about the company, we have a very strong management team, one that I've built over the past 3 years after we restructured the company and a very involved and very good governance Board of Directors. So we're very happy on where the company is. But as I said, I mean, we believe that we're just at the beginning of our transformation.

Great. And we're going to get into the different businesses and segments in a bit. But Tom, obviously, there's a history here. And so maybe just level set us on where you came from, the hard work you all did on the capital structure, where you are now and just level set us on that.

Yes. So joining a year ago, we're out of bankruptcy for probably about 6 months, 9 months at that point in time. So our focus really was on our capital allocation framework. So I would say, first off, our basis in our capital allocation framework is to return the vast majority, if not close to 100% of our free cash flow to our shareholders, right?

So we just completed our first $100 million stock buyback program. And in the third quarter, we just announced a new $200 million stock buyback program. So if you think about that, and then we also have M&A component, but we have very strict criteria for what an M&A acquisition would look like in our case, which is very low multiple. And when I use the term multiple, I think about as a percent of revenue and immediately accretive. Right? So there are opportunities like that, and we've got a pretty good list, mostly in the services area...

Revenue or a multiple...

Multiple revenue--So we think 1x for services. And we were successful. Last quarter, we announced we had purchased HTX. It was between $10 million and $15 million purchase price. That's the sweet spot, right, immediately accretive for us. And it's a company that we were very interested in because they had very high margins in the service arena, sometimes in excess of 20% of ours, right? So real white glove type of service. So we're kind of keeping them as that white glove type of service and learning from them, and we're going to continue to work that into our service margin.

And what's your balance sheet now in terms of -- where it is now on leverage and then firepower where you want to go to?

Yes. Look, from a leverage perspective, our net debt ratio is 1.6, right, comfortably in the range of 1.25 to 1.75. We have the opportunity actually in '26 at the end of the year after the no call passes to refinance our debt again. Right now, where we think our ratings are and what the credit spreads would say that we could do better than the 7.75%, so maybe 100 to 125 basis points, $10 million to $15 million a year of additional cash flow. So we'll do it, right, if the math works.

And you're generating free cash flow so you're naturally...

Yes, that was actually one of the big achievements we had last year. That was the first time that we had generated free cash flow in every single quarter, right? And that was a very, very significant focus on working capital discipline. So we were able to, as of the end of the third quarter, if you compare it to the end of last year, we took 9 days out of DSO.

We've got the best customers in the world, right? But it really was more on the invoicing and the process side. We took 11 days out of DIO, just having more discipline until getting the orders, getting the prepayments and then building when the install plans are ready. And DPO is something that we're normalizing coming from the corporate restructuring, but we think that there's opportunity in '26 to go exploit there as well.

Cool. Just go to blocking and tackling, I guess, on that stuff. So Octavio, when we think about the banking and the retail, the banking business, obviously, the bigger of the two. But -- it's kind of a mature business, I would think, right? I mean, tell us like what are some of the initiatives to reinvigorate growth in that business? What's the addressable market? And just maybe for people on the webcast that are kind of intrigued by this company that's seeing momentum, but still a relatively small market cap. So there's still obviously equity value opportunity here. Just level set us on like what actually you do in the banking business and the growth initiatives you're pursuing.

If you think of the banking business, our traditional business has always been ATMs and the kind of follow-on technologies, ATM, cash recyclers, everything around the ATM, the software to run ATM networks and the services to do that. That is a fairly stable market. There are roughly 2 million ATMs in the world, bank-grade ATMs, and the number won't really change significantly. It's been stable at 2 million ATMs probably for the past 5 years.

And our predictions suggest that it will remain stable at that number. The good news for us is that there's a very steady refresh cycle. So every year, we're refreshing roughly 60,000 to 70,000 ATMs. So with an installed base of 800,000, and we've refreshed roughly 200,000 to 300,000 every year. So we still have 7 years of refreshing old equipment before we have to start all over again. But again, that's a very stable business.

And again, the important part is that each of those ATMs carries a service annuity that lasts anywhere from 5 to 7 years. And these are long-term contracts. They're necessary for banks to provide service to their customers.

And before you go on, let me -- I know what everybody is thinking Apple Pay, cashless economy. That's not true because I asked that question last year, and I was surprised that the cash in circulation is growing globally.

What I would tell you is, clearly, new payment methods do not detract from current payment methods, but add on to them. So if you look at the volume and cash in circulation in markets like the U.S. cash in circulation is actually up. One of the reasons why we're being very successful with our recycling technology, which basically allows deposits into the ATM and that same cash to be dispensed is because of the huge amount of cash that banks are taking in. So again, cash in circulation continues to grow, denominations continue to grow, and that's the U.S. market.

When I look at internationally -- and remember, we operate in over 60 countries directly and 100 countries in total, cash remains one of the preferred payment methods in many of the world economies. So we believe that there's still a long runway to do that. To that end, there are really two strategies that we're following to actually grow our addressable market because we're moving away from just the ATM, the ATM software and the ATM services. When you think of a bank's total operating cost, one of the biggest components is operating the branch network.

So when you think of operating the branch network, some of the bigger costs are clearly people -- but then it's the cost of managing cash inside of the branch. When you think that you have a teller that needs to have cash a vault inside the bank that needs to have cash and an ATM that usually sits through the wall or in the lobby that needs to have cash, we've developed first products that automate that full cash cycle inside of the branch. So teller cash recyclers, so the teller doesn't ever have to touch cash, allowing the teller to create new branch formats as well, where tellers become more sellers, where all transactions are automated.

And again, we've created the hardware to do that and the software to manage all of that. That produces tremendous efficiencies for banks. As I said, one of the biggest costs in running the branch other than people is managing cash. Think that whenever you see one of those big trucks from the cash movement companies, the cash in transit companies, touching a branch, it costs several hundred dollars for a bank to just get cash into the branch or get cash out of the branch.

With our technology, you can create what we call a closed-end cash ecosystem where you can manage the amount of cash that sits in the branch and really control the cost of the movement of cash. So we're excited about that because that increases our addressable market, not just to ATMs, but to really talk about serving the whole branch infrastructure.

So if we just kind of quantify all those opportunities, what do you think kind of the through cycle or compounded growth is for the banking side of the business based on those opportunities?

So we believe that our natural entitlement should always be 1% to 2% of pricing every year. Again, just global inflation hopefully at some point gets to that. We believe that there's another 2% to 3% that these growth initiatives, one, this branch automation solutions can bring. And I talked a lot about the emerging economies where cash is still very important. We've developed very specific ATM models for these growing markets.

Think of markets like India, Thailand, the Middle East, some Latin America countries where cash volumes are very big and really, they need a product designed specifically for those markets. So we think between those two things, we can have a banking business that grows in the mid-single digits year in, year out.

Got it. Mid-single digits. Okay. On the retail side, very -- I see it every day. I mean, just my grocery store -- while living in Atlanta, I used to check out with people. Now I check out -- self-checkout. Just talk about that dynamic, where you play in that market, how the business is progressing. Obviously, it seems like a smaller base, but probably growing a little bit faster.

So when you think of our businesses, banking, our total company is $2.8 billion. Retail is $1 billion of those $3.8 billion. The interesting part about that is of that $1 billion, we do $900 million in Europe. And clearly, Europe is not the biggest retail market in the world. But we've been successful because we started in Europe. And what happened in Europe, is Europe got into the self-checkout market fairly late.

If you think in the U.S., we've been used to self-checkout for probably the past 20-plus years. Europe started 5 years ago. And when Europe started deploying self-checkout, they were looking for more flexible solutions, more modular solutions, more open solutions. So we were fortunate enough that as we were developing the products at that time, we were able to meet those requirements in a more efficient way than some of our competitors. When you think of the self-checkout market, think of something that started 20 years ago, where you installed a device and you needed software to run that device.

At that time, those things were very tightly coupled, which makes sense when you think of technology 20, 25-plus years ago, hardware and software tended to be very tightly coupled. But in the modern world, you don't want to depend on one software on having the same hardware from the same software provider. We created an architecture where our software can connect to -- our hardware can connect to any software and our software can run any self-checkout device.

So what are we doing? Now we're expanding into the U.S. Last year, we hired our first truly focused U.S. sales team before we were just serving our large European customers. Think of companies like Aldi that as of when over 2,000 stores here in the U.S. or global companies like IKEA, H&M, Sephora, where we're their technology provider globally. But again, all these are European-based retailers.

This year, we've been very focused on winning U.S. customers. And we're doing that through the value proposition of our open hardware and software, but more importantly, the three AI solutions that I discussed that are proving to be very efficient tools to gain attention from large grocers, large retailers. And the success that we've had deploying those solutions in Europe is really helping us open new doors here in the U.S.

And are you taking share from long established players? Or -- and I assume these -- that business, you can make inroads by big chunky contracts with people that have big footprints. How difficult is that given the markets existed for a while?

So clearly, in the U.S., all our gains will come from taking share from others.

Yes.

Because our presence in the U.S. is very small. Contrary to Europe, where we're the #1 company for both self-checkout and point-of-sale and point-of-sale software. In the U.S., we're not in the top 5, let's just say it like that. So clearly, we're making inroads. We're in multiple proof of concepts and pilots with large grocers, large fashion retailers. And we believe that we will be announcing some wins in the short term.

And again, we're very excited about that because that -- all that is incremental growth for us. And we're not planning on capturing as same as we do in Europe in the short term, 40% of the market. We're thinking, hey, if we can just keep adding a couple of tens of million dollars every year, it keeps adding to our growth rate in the retail market, which is also expected to grow probably a little bit higher at a higher rate than our banking business.

And I know it's a small part of the business, but obviously, it could be a faster-growing part of the business. But -- is there technology differentiation there that you guys have the ability to kind of...

I would say that the technology differentiation comes on the hardware side for the self-checkout that we've built a very modular architecture that is very different from the monolithic things when you tell me that you go shopping for your groceries and you see these machines, you clearly look at them and they're not -- they look old, they don't look very flexible. So we've built a modern architecture on the hardware where you can easily replace components, change screen sizes, do a lot of things that are very important for retailers.

The other part our software. We made the decision to move away from a monolithic architecture and software into a cloud-native architecture based on micro services, and we did that 3 years ago. So now we have software that's ready to be deployed. And most of our competitors are just early in that stage. Some of our closest competitors are announcing that they will have that ready in Q1 of next year when we think that we already have it up and running in multiple.

And then how much of your -- that $2.8 billion is hardware versus kind of software?

Yes. So if you look at our $3.8 billion of revenue, roughly $2.2 billion is services. And in those services, 70% of that is recurring service contracts. And these are long-term contracts. Think of the contracts to maintain the ATMs, to maintain the self-checkout devices. These become kind of mission-critical contracts for our customers where strict SLAs very, very stringent response times, and we're very well structured to that.

We have our own field tech infrastructure is 14,000 people across the globe to serve our customers. So when you think of our company, roughly 20,000 people, 14,000 of them are out in the field serving our customers every day, repairing equipment or making sure to keep things operational.

And if you have a team member that repair self-checkout, can they also switch back and forth in banking? Or is it separated?

So luckily, the benefit of us being an integrated company in two industries is that we can share a lot of the back office -- a lot of the -- think about the dispatching of technicians. It's a common dispatching system. So if you're a retailer or a bank, you call the same number, your electronic connection goes to the same call center of dispatch center.

Our technicians are trained in both technologies. So depending on the density of a country, maybe some people will be dedicated to banking, some to retail or in smaller countries, they do everything. So it just depends on the density, but our people are trying to really leverage their skill set across both technology stacks.

And just on the growth side, so you said mid-single digit on banking, on the retail, what's that algorithm?

So the algorithm at retail will be a little bit higher than that mid-single digit. Again, we -- the opportunity is much greater. But one thing that since we've met a couple of years ago, what you've heard from me and Tom is we're always very deliberate in what we say. We want to make sure that whatever we say we do. So we're thinking that it will grow a little bit higher, even though the opportunity is bigger. But believe me, we're very focused on capturing that bigger opportunity.

And I guess, Tom, like when you think about that growth, that's helpful. But then there's another kind of lever of how do you convert that to profitability growth, margin expansion, et cetera, et cetera. And I know you guys do a lot of continuous lean and thoughtful about that. Can you just talk about that?

Yes. I would say culturally, we are a lean company. We've embraced it. It starts with our manufacturing. 3 years ago, our manufacturing, our hardware margins were 13%. Now they're more than double that. And we still think we have the ability that we'll be able to grow those margins over time through Kaizens, which we participate in multiple ones during the year.

The company is probably hosting hundreds, right? And it's just improved to better in whatever situation that you're in. So we do expect to be able to continue to grow product margins 25 to 50 basis points each year. Service margins, we made a lot of investments in Kaizens and in process this year. Think about we used to have multiple warehouse distribution facilities for spare parts. We're now taking much more of a spoke and hub approach to that and consolidating that.

We are beginning to invest in just getting the right facilities footprint down, not only in services but across the board and then really densifying some of the areas where we need more technicians because of those SLAs. And then lastly, you've heard us talk about this OFS software, our field software for the technicians. So it really does everything to improving the routes that they're on to making sure that if Octavio has the right skill, he's being deployed or if I have the right skill to go fix it, I'm being deployed and the right parts on the truck.

So it eliminates second visits, it eliminates overtime. We've rolled it out in the U.S. and Canada, and it's continuing globally. So we do think we have the capacity through that plus some of the other initiatives and the downsizing of our facilities to really drive margin growth, 50 basis points, even upwards of 100.

How do you measure productivity of the field workers? I mean, is it density, stops per day? Like how do you benchmark that?

Yes. So we have -- we measure number of service calls that every person can do, which is a function of complexity of the call, but also the training that we receive people. The other very important metric for us is repeat rate. So we try to make sure that we fix it right the first time and making sure that we have the right spare parts. So all those things are what Tom was commenting around. As we invest more in services, we're trying to make our technicians more productive.

Our machines produce a lot of information. Every one of our self-checkouts or ATMs has a lot of sensors in each of the components. We're capturing that data all the time. So whenever there's a failure, we can be proactive around it. If it fails, our technician will get there. We'll have the history of the machine, and we'll repair things that haven't failed, but that we think that might fail because they're presenting some strange behavior.

Optimizing routes is also very important to us. That's a great productivity. When you think of us rolling just in the U.S., over 2,000 trucks of people moving around, optimizing our route produces significant savings. And again, making sure that the right spare parts are in the right location clearly, it's a great cost avoidance and a great customer satisfaction driver that the machine gets fixed with the right part at the right time.

This is kind of almost like a logistics operation as well?

It is a logistics operation.

Yes. So is that all included in the $50 million that -- the cost-out program that you have? And maybe just update us on what's included in that and the time line because it's a decent number basically.

Yes, $50 million. Well, and I'll tell you, this is one of the things, right? The deep you dive into those processes and the $50 million, we've come out and said we expect to be able to exit '26 with an improvement of $50 million in our sort of SG&A run rate, right? And we've got over 200 actions with individual owners and milestones for success identified to the $50 million. So we feel very confident about that. And I will tell you that the more time we spend looking at those initiatives, we feel like there's even more opportunity, right?

And it's a simple benchmarking exercise. If you benchmark us to some of our competitors, we have more than $50 million of a gap that we're trying to close. And we think that the initial $50 million is a good start, but I wouldn't be surprised if at year-end, we come out and we announced that we're capable of more savings. But we don't want to get ahead of it. We want to make sure we've got those detailed milestones and plans put together so that when we say it, we can go execute towards it.

And the sales force that you guys are introducing in the U.S. or now have in the U.S., what's their incentive structure? How do you kind of make sure that their incentives are aligned with the financial goals of the business? Because that's not that can be quite tricky.

Yes. So we've worked a lot in making sure we hire the right sales team first in the U.S. for our retail business. So we start by hiring a leader that is an industry veteran, 20-plus years in retail and marquee companies like Zebra and others with really deep relationships in retailers. And we've built a very thoughtful sales plan where we have both people harvesting our existing European accounts with one compensation plan that is a little bit more conservative, but people going really after some of the largest retailers in a more aggressive fashion.

And again, since our installed base in the U.S. is so small, we're more focused on gaining share right now in the U.S. But we always want to maintain that discipline around margins. We believe we have a superior product, both hardware, software and services. So we try to compete on value. So pricing is not our key differentiator. It is the value of our solution. And that's how we incent our sales force.

Got it. And maybe just, I guess, in November or a month ago, you guys talked about this -- you gave your guidance and updated the market on the guidance. Maybe just refresh us there and kind of how you're tracking and just where things are right now relative to expectation.

Yes. So what we said is that we see ourselves trending towards the higher end of the guidance that we gave. So if you think about revenue, we said revenue this year would be flat to up 2%, maybe 3%. We're much more towards the higher end of that range. The EBITDA guidance that we gave was $490 million -- sorry, $470 million to $490 million. We're very much on track for the higher end of that range as well. And then free cash flow, this company and the ability to generate free cash flow is probably one of the great attributes that it has.

So last year, if you think about coming out of that corporate restructuring, we had a little bit of overhang. We were able to generate about -- convert 23%, 25% of our EBITDA into free cash flow. So to put it in numbers, that's about $109 million. This year, we expect to nearly double that, if not double it.

And then next year, it's not a doubling, but it will be a conversion of if we end this year at 40-plus percent, next year, be at 50-plus percent. And then '27, we said that we see a pathway to 60-plus percent conversion. So what does that mean? And why is it the single biggest attribute? Cumulatively from '25, '26, '27, we think we have a clear line of sight to be able to generate $800 million of free cash flow.

It feels like just a year ago, like when you guys were starting this journey, and now -- I talk to you now, just kind of -- it feels like the say-do ratio is just really, really high. Like you guys are really focused on kind of maybe not underpromising, but definitely over-delivering on what you promised and just building that track record.

And that track record is not created on quarters. It's measured in years. It feels like you're kind of maybe in the second or third inning of that journey. Is that a fair characterization?

Yes, absolutely. That's why when I talk about OpEx, it's important. We're not going to throw numbers out there until we have a plan to go execute on them, right? We're not going to talk about what we think we can deliver on margin growth until we see a clear line of sight to be able to do that.

And that's what we have now, right, with the leadership team that Octavio has, where we are in the product life cycle and the refresh, we feel -- to give you a perspective, our backlog is about $920 million. That gives us clear line of sight to be able to execute not only what we said we'd do in this year, but then also start next year off on the right foot as well.

Yes. And one thing I've noticed, like it takes 4 to 5 years to build that track record and just 1 quarter to completely go back to square one. So that's a really important point. Do you think that in '26, we're sitting here December 2, I guess, in 2026, we kind of revert back to the longer-term algorithm of mid-plus single-digit growth and kind of that good conversion partly based on the lean and cost opportunity. Is that -- because obviously, we're a little bit below that right now, but do you think '26 offers that opportunity?

I think '26, we have the opportunity to maybe touch mid-single digits, although we're saying it's low to mid-single digits within that range in '27. We think that with a year or two underneath our belt and the success that we envision that we can have within branch automation solutions fit for purpose or the AI and retail in North America, we think that we can sustain mid-single-digit growth from '27 on.

Okay. Got it. Maybe as a final point, if there are any questions, we have a mic that's roaming around. But maybe, Octavio, talk about 2, 3 years from now, we're sitting here having this conversation, like as we look back, what are some of your kind of goals and hey, this is a successful outcome, what I'm trying to do here.

Yes. So what I would say, I mean, and it's a good question thinking about where we will be 2 to 3 years from now. So I preface that by saying we have a very simple business. We build great technology products, whether it's our hardware, our software that help us win in the market. So if you talk to our banking customers, to our retail customers, they all love our products, our hardware and software.

So our goal is how can we deploy the most of those products in the end markets that we serve. Because once we deploy those end products, the simplest of our model is they carry a 7-year annuity, 5- to 7-year annuity. So every device that we put in the market carries service revenue for 5 to 7 years. So when I look at the success of our business, it will be in continuing to invest in innovative technologies that help us continue to build those automation points, whether it's ATMs, recyclers, self-checkout, point of sale, but automating that banking and retail experience and then attaching those services to that.

I think that, that algorithm creates this $2.2 billion that we are hoping to grow in service revenue year in, year out at very good margins and providing great stability to really increase our free cash flow conversion. As Tom said, this year, we'll end somewhere around the 40-plus percent free cash flow conversion, roughly $210 million or somewhere around there.

But our goal is much higher than that. In 3 years, we want that number to be north of 60% and with EBITDA growing also significantly. So our goal is we will measure success that by the end of '27, we've delivered $800 million of free cash -- cumulative free cash flow.

And does that give you opportunity to maybe make bigger deals? Is that -- is there a scope for that in your market?

So I would tell you that right now, we believe that the best use of our cash is to continue our share repurchase program. That's why we announced earlier in February, the first $100 million share repurchase program the company had done in the, I think, in the last 10 years. We completed that -- in October.

Well, a company that had capital structure problems now buying back the equity. That's a big transformation.

Now we're -- we've announced a $200 million share buyback program that we hope to hopefully complete in the same -- in the similar time frame. So we believe that once we do that, we will start evaluating if the share price is where we believe it should be. I think an important part is Tom and myself don't get paid. Our compensation structure, mine and all my management team is very tied to specific milestones. The first milestone for us to get paid is $65...

What's the next milestone?

$85. And the last milestone that we have in our plan is $95. So we're very aligned to that. So again, we're focused on building a company that's sustainable, one that can really serve its customers for many, many years, but also one that is very focused on returning value to our shareholders.

Not to say M&A is not going to play a part in that, but just think small tuck-in, right? Like the HTX example that I gave. It's such a great example, right? Immediately accretive, small, I mean, very service niche oriented, right? That's kind of our sweet spot for the foreseeable future.

Cool. Any questions? Yes. Can we get the mic over to this gentleman, please?

Volume-related revenues on ATM?

What do you mean volume?

Worst in Europe when they're spending...

Volume related we can -- volume-related revenues on your ATM business.

We don't get transaction fees on our ATMs. We sell our ATMs to our banking customers. They own the ATMs. We can manage them for them. We can fully outsource the network for them, but it's on a fixed price basis, not on a volume basis. So that's why our service revenue is very stable because it's a fixed annuity that we have every year with our customers.

Listen, I'm really glad that it's working out with great progress this year, and wish you guys the best of luck. Thanks for taking time to chat with us today.

Thank you for having us.

Hello. Good day, and welcome to Diebold Nixdorf's Third Quarter 2025 Earnings Call. My name is Eric, and I'll be coordinating your call today. [Operator Instructions] I'd now like to turn the call over to our host, Maynard Um, Vice President of Investor Relations. Maynard, please go ahead.

Hello, everyone, and welcome to our third quarter 2025 earnings call. To accompany our prepared remarks, we posted our slide presentation to the Investor Relations section of our website. Before we start, I will remind all participants that you will hear forward-looking statements during this call. These statements reflect the expectations and beliefs of our management team at the time of the call, but they are subject to risks that could cause actual results to differ materially from these statements.

You can find additional information on these factors in the company's periodic and annual filings with the SEC. Participants should be mindful that subsequent events may render this information to be out of date. We will also discuss certain non-GAAP financial measures on today's call. As noted on Slide 3, a reconciliation between GAAP and non-GAAP measures can be found in the supplemental schedules of the presentation.

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

Thank you, Maynard. Good morning, everyone, and thank you for joining us. Starting on Slide 4. Q3 was another solid quarter for Diebold Nixdorf. I'm proud of our team's execution as we grew revenue, profit and earnings per share. This morning, we also announced a new $200 million share repurchase program, reflecting our continued confidence in the strength and cash generation of our business.

In Q3, we continue to see healthy demand across our business segments, giving us the confidence to reaffirm our full year outlook. We continue to trend toward the higher end of our guidance ranges across total company revenue, adjusted EBITDA and free cash flow. Product orders grew 25% year-over-year, driven by strength in both banking and retail, with backlog now standing at approximately $920 million. Total revenue grew 2% year-over-year and was up 3% sequentially, fueled by acceleration in our retail business and continued steady contributions from bank.

Operating profit grew 4% year-over-year and 19% sequentially, while adjusted earnings per share grew to $1.39, up over $1 per share year-over-year and up about 50% sequentially. Retail delivered particularly strong results in the quarter as the second half recovery gained momentum. Revenue was up 8% year-over-year and order entry grew 40%, reflecting solid demand and execution.

I'm very optimistic about our retail growth trajectory going into Q4. We also achieved an important milestone this quarter, positive free cash flow for the fourth consecutive quarter, another new record for Diebold Nixdorf. In addition, we received a credit rating upgrade from Standard & Poor's. As I mentioned, we announced a new $200 million share repurchase program. This underscores the strength of our business, our fortress balance sheet, robust cash flow generation and continued commitment to returning capital to shareholders, a top priority for us and a clear reflection of our confidence in the long-term value of Diebold Nixdorf.

Let's move on to Slide 5. Three quarters into our 3-year plan, we are firmly on track to deliver the key objectives we outlined at our Investor Day. In 2024, we stabilized the business and built strong operational teams. In 2025, we strengthened our foundation, both operationally and financially with tangible improvements in manufacturing, service and profitability. These gains have translated into sustainable, profitable growth and continued positive cash flow.

We have multiple levers to achieve our targets from operational and manufacturing efficiencies to product and service innovation to disciplined capital allocation. As we already demonstrated, we have multiple ways to win across a dynamic market environment. We remain committed to our long-term goals, generating $800 million in cumulative free cash flow by 2027, achieving 60% plus conversion and approximately 15% adjusted EBITDA margins, all while maintaining a fortress balance sheet and returning capital to shareholders. With a clear strategy and a strong execution track record, Diebold Nixdorf is well positioned to deliver sustainable value for all stakeholders.

Now let's turn to Slide 6. Year-to-date, we've made significant progress across the 4 pillars of our growth strategy. In banking, our annual Intersect event in Nashville brought together hundreds of customers and marked the formal launch of our branch automation solutions. This is not just a single product. It's a comprehensive approach across hardware, software and services that redefines how banks operate by seamlessly integrating and automating digital and physical channels.

As the banking landscape evolves, automation will be the defining factor for a bank's success. Roughly 70% of global bank operating expenses are tied to branches. Our solutions help banks reduce those costs, enhance efficiency and improve the customer experience. We continue to see steady refresh activity in ATM cash recyclers and have successfully rolled out teller cash recycling solutions to our first customers, reinforcing our confidence in the broader branch automation strategy.

On the service side, leveraging common components between DN Series ATMs and teller cash recyclers is driving greater efficiency, scale and flexibility in how we support our customers. At the same time, our software enables seamless end-to-end cash management and integration into digital channels, helping banks modernize their operations.

Together, these capabilities strengthen customer relationships and position us to capture the growing opportunity in branch automation. In retail, while the broader industry continues to face headwinds, our retail product business is bucking that trend. We anticipated an inflection in the second half, and that's exactly what we're seeing.

We have important new wins with key customers in the point-of-sale and self-checkout spaces as retailers maintain focus on optimizing and improving the customer experience. Feedback on our AI-powered dynamic SmartVision deployment has been overwhelmingly positive, helping us differentiate from competitors and expand our pipeline. Our ability to rapidly develop, pilot and most importantly, scale this technology is positioning us as an industry leader. Dynamic SmartVision is now live in over 50 stores, and we're expanding the use cases to address shrinkage and point of sale in manned lanes with future opportunities to extend and tackle shrink across the store aisles.

Our service organization continues to deliver. SLA performance has improved meaningfully versus last year. We accelerated investments in technology and people to deliver a premier service experience because great service drives customer loyalty and market share gains. As we've refined our branch automation solution strategy, customers are increasingly asking for a single provider to manage all their service needs.

In line with our disciplined capital allocation strategy, we've completed a targeted tuck-in acquisition in the service area to enhance our multi-vendor capabilities. As we look at our operations, we have multiple ways to win. I'm proud to report that we saw strong progress in working capital with year-over-year improvements in both DSO and DIO. This highlights the strong cross-functional collaboration across the company.

In our manufacturing operations, our lead times are down, quality is up and our supply chain execution remains a strength. North American operations are benefiting from higher throughput at our Ohio facility and increased sourcing of parts in the U.S. We are also on track to achieve at least $50 million in SG&A run rate reductions next year.

Overall, the pillars of our company are strong and provide us with multiple ways to achieve our goals. Now on to Slide 7. We continue to advance in our lean and continuous improvement journey. This approach now extends well beyond manufacturing, empowering teams across the organization to identify and act on new opportunities for efficiency and effectiveness.

In Q3, our European operations held a Kaizen week in France, resulting in safety improvements and an optimized invoicing process that accelerated collections. Our field and logistics teams also uncovered process improvements, including a redesign of our logistics network in France that is expected to generate meaningful cost savings and serve as a blueprint for other regions.

In Paderborn, our teams focused on eliminating energy waste, implementing daily energy management programs and new LED lighting initiatives that will deliver immediate and growing savings over time. The facility also achieved ISO 50001 certification, underscoring our commitment to sustainability. I am pleased to share that Diebold Nixdorf was recently named one of the world's best companies by Time Inc. After a comprehensive analysis of employee satisfaction, revenue growth and sustainability that included participants from thousands of global companies, Diebold Nixdorf earned a place in this prestigious annual list. My thanks goes out to the talented global Nixdorf team.

With one quarter left in 2025, we are well positioned to finish another strong year, delivering on our commitments and continuing to create value for all stakeholders. With that, I'll turn it over to Tom to walk through our financial results.

Thank you, Octavio. First, I want to express my sincere appreciation to all Diebold Nixdorf employees for their dedication and hard work. Q3 was yet another quarter where we demonstrated our commitment to doing what we say.

Turning to Slide 8. Diebold Nixdorf posted solid Q3 revenue growth, which rose 2% year-over-year and was up 3% sequentially. We finished Q3 with very solid product backlog of $920 million, down from $980 million at the end of the second quarter on planned deliveries, partially offset by strong new order entry, which was up 25% year-over-year, led by retail.

As we previously shared, we expected revenue to be weighted toward Q4. Given the momentum we're seeing and our backlog, we have line of sight to deliver one of the strongest Q4s in recent history for the company and achieve our full year guidance. Gross margin improved 10 basis points year-over-year and declined 30 basis points sequentially.

Product gross margin improved significantly year-over-year, rising by 140 basis points. There are a number of puts and takes, but the strong performance was primarily driven by favorable geographic mix as well as improved pricing. On a sequential basis, product gross margin declined by 60 basis points, which was expected and primarily due to the normalization in mix and continued strength in point-of-sale units, which generally realized lower margins.

Importantly, we remain well ahead of our initial expectations with product gross margins on track to exceed the 50 basis point year-over-year improvement we projected earlier this year at Investor Day. On the service side, gross margins declined by 10 basis points sequentially and 80 basis points year-over-year.

In prior quarters, we discussed how vital delivering the best service in the industry is to our customers and to us. To that end, we accelerated and increased investments in the rollout of our enhanced field services software, new field technicians and the consolidation of our spare parts and distribution facilities in Europe.

Strength on the product side of the business gives us the conviction to make and accelerate investments we believe will generate profitable growth for products and services going forward. By continually raising the bar, we'd strengthen our relationships and create a positive cycle.

Outstanding service leads to greater customer loyalty and over time, more opportunities for product sales. As a result of these investments, we now expect margins for services to be comparable to last year at approximately 26%. These service headwinds are offset by product margins and OpEx improvements, demonstrating that DN has multiple ways to win.

Turning to operating expense. We continue to take disciplined cost actions through focusing on facilities and indirect procurement. Operating expense was down sequentially, reflecting these efforts. This is part of our ongoing actions to improve our cost structure. 2025 is about strengthening our foundation for accelerated profitable growth in 2026. As part of this effort, we've conducted a comprehensive review of SG&A spend across the organization, identifying over 200 actions, which are expected to deliver up to $50 million in net run rate savings next year. We're confident in our ability to sustain cost discipline while reinvesting in areas that support long-term growth.

Continuing to Slide 9. We continue to see strong trends across our profitability and cash flow metrics. In Q3, adjusted EBITDA reached $122 million with margin expansion of 70 basis points. sequentially and 20 basis points year-over-year, underscoring our commitment to driving higher quality earnings growth.

Operating expense controls contributed to 4% year-over-year and 19% sequential increase in operating profit, reaching $87 million for the quarter and a very solid 9.2% operating margin. We're also making significant progress on non-GAAP EPS, which increased about 50% sequentially to $1.39 and increased by over $1 a share year-over-year.

In Q3, our effective non-GAAP tax rate came in at approximately 19%. This improvement was primarily driven by the recent announcement of lower tax rates in Germany. As a result, we now expect our non-GAAP effective tax rate for the full year of 2025 to be in the 35% to 40% range, down from 45%.

Free cash flow nearly doubled sequentially to approximately $25 million. Q3 marks the first time the company has generated positive free cash flow for 4 consecutive quarters, a clear demonstration of our ability to build and sustain a consistent quarterly cash flow generating business.

We're very proud of the continuous progress we've made in working capital management. As of the third quarter, we have realized year-over-year improvements of days inventory outstanding, or DIO, by 11 days and days sales outstanding or DSO by 9 days. Looking ahead, we see continued opportunities.

Moving to Slide 10. Banking continued to deliver solid results. We achieved sequential growth across key global markets. Revenue was roughly flat year-over-year and up $11 million sequentially. Gross margin in our Banking segment increased by 20 basis points year-over-year and was down 70 basis points sequentially. Last quarter, we benefited from a favorable geographic mix, while this quarter was more balanced.

Looking ahead, we expect to continue driving steady ATM refresh activity in all geographies, and we're encouraged by the first orders of our teller cash recyclers in our branch automation solutions strategy. Turning to Slide 11. Our Retail segment delivered strong results for the second consecutive quarter with sequential growth in order entry, revenue and backlog.

Gross margin was up 100 basis points sequentially with improvement in service margins and continued point-of-sale strength. As we committed to last quarter, retail revenue and gross margin grew sequentially. We expect to continue driving sequential growth in this segment through year-end.

Moving ahead, let's review our guidance on Slide 12. We're maintaining the guidance we shared last quarter and continue to trend toward the higher end of the ranges across total revenue, adjusted EBITDA and free cash flow. The strong performance we posted so far, along with what we see shaping up to be one of the strongest Q4s in recent history, gives us a high level of confidence we can close the year well positioned to achieve further growth in 2026. And as we've shown, we have multiple ways to win.

Turning to Slide 13. We remain committed to maintaining our fortress balance sheet, which underpins our disciplined capital allocation strategy. During the quarter, we received a credit rating upgrade from S&P Global from B to B+, validating our efforts to strengthen financial performance and focus on maintaining our strong balance sheet.

Also today, we announced our new $200 million share repurchase program. Our goal is to maintain the momentum established with our prior program. This action reflects our disciplined approach to capital allocation and our confidence in the long-term value of the company.

We will continue to prioritize actions that drive profitable growth, maintain our fortress balance sheet and deliver value to our shareholders. At the end of the quarter, we had approximately $590 million of liquidity, including $280 million in cash and short-term investments and $310 million of our revolving credit facility, which remains untapped. Our net leverage ratio remains comfortably within our targeted range of 1.25x to 1.75x. With that, I'll turn it back to Octavio for closing remarks.

Thanks, Tom. To wrap things up on Slide 14, our banking business continues posting solid performance, and we're executing well. We're seeing strong growth in APAC and the Middle East, which is expanding our installed base and driving recurring service revenue. In North America, we expect to build further momentum with our branch automation solutions.

In retail, we're back to year-over-year and sequential growth, and our solutions continue to resonate well with the market, driving efficiency and enhancing customer experience. Across the organization, we're streamlining our structure, aligning functional expertise with strategic objectives and leveraging AI and standardizing processes. These actions are expected to further reduce SG&A and enable faster, more scalable growth.

Finally, we strongly believe in the long-term value of Diebold Nixdorf and remain laser-focused on delivering shareholder value. We appreciate your support as we advance on our journey building a stronger Diebold Nixdorf for many years to come. And with that, operator, please open up the call for questions.

[Operator Instructions]

Our first question comes from the line of Matt Summerville with D.A. Davidson.

Maybe first, can you talk about the magnitude of impact on service profitability associated with the accelerated investments you referenced and if this changes kind of the margin cadence into '26 and '27 as it relates to your targets? And then I have a follow-up.

Yes. Sure, Matt. So service margins this quarter and what we're looking at for the year, we expect now to be flat to slightly up, really driven by -- you heard Octavio on the call mention our product margins and some of the OpEx resilience that we're seeing, and this is the best thing about sort of the new Diebold, right?

We have multiple ways to win. So although service margins are going to be flat, what we decided to do because of the product margins and some of the OpEx upside that we saw earlier was to accelerate some of the investments that we need to make into that service business to get to a world-class service level for our customers.

That included the consolidation of repair and spare parts depots across Europe, and we're looking at other opportunities in labs and where we have commercial offices as well, but also the field technician software rollout, the acceleration of that in North America, and then lastly, as our C-base has expanded, we've added more field technicians to the mix as well to really help improve our SLAs. So that investment was about $10 million, and that will be spread between Q3 and Q4.

So that's really what drives the service margins down. But again, we're still able to do what we said we were going to do and meet total EBITDA expectations because of the multiple ways to win on product margins and OpEx.

And then maybe spend a minute focused on the retail business, specifically in North America. Some of the KPIs you've been disclosing around proof of concepts, pilots, no mention of that this quarter. Maybe just a refresh on where things stand. And obviously, no logos mentioned per se. So maybe talk about how that effort is tracking versus your expectations.

Yes, Matt, and again, sorry for not talking to more in this call about proof of concept. But again, we keep increasing the number of proof of concepts globally, particularly in North America. We're happy that we're now in several dark stores at some large grocers where they're testing our solutions.

So we remain optimistic that we've created a differentiated product for the market. It keeps resonating. And as you know, we're trying to unseat some very long-standing incumbents in those markets, but we remain very optimistic that through the strength of our technology, the strength of our service team and the focus that our new sales team is putting on things, we should be seeing results.

And we remain very, very optimistic about the retail business. As you saw, order growth was very substantial. Revenue growth was substantial as well. And we're very well positioned to do that again in Q4. So we remain very optimistic about the retail business.

Your next question comes from the line of Antoine Legault with Wedbush Securities.

Just on the banking front, Octavio, I think you had mentioned expecting a pace of about 60 to 70 annual refresh orders on your installed base. Is that still the right way to think about cadence? And are those typically simple refresh orders of existing machines? Or are those -- can those be orders that are upgrades to recyclers? Can you just help us think about that?

So Antoine, I think that, that pace of around 60,000 machines every year is the right way to think about it, and all these will be new placements. We are not upgrading old machines into recyclers. It's more cost effective and it's a much better machine, the BS Series, every customer I talk to keeps reminding me that we have the best product in the industry there and that we should just accelerate the deployment of those because of the reliability, the functionality that it provides to customers. So yes, keep thinking about it that way, 60-plus thousand machines every year for the foreseeable future.

Noted. And on the gross margin front, you are looking at Q4, I think last year, gross margins dipped a bit sequentially due to geographic mix in the ATM business. How should we think about it this year? I know you mentioned you're expecting continued sequential improvement in retail in the fourth quarter, but how should we think about it from both on a segment basis and on a consolidated basis?

Yes. So margins for Q4 we expect a pretty -- in total, I would say, pretty similar run rate to what we saw in Q3 as we finish out the year, and the split between banking and retail, I would say, is compared to last year, banking coming in closer at 20 -- where do we end the year at 24% last year, probably closer to 26.5-ish, which is very consistent with what we did last quarter, and then retail coming in at 2024. So a little -- that was last year and then this year, it would be closer to 25%. So again, you'll see sequential improvement quarter-over-quarter and year-over-year. So think mid-25s on retail.

Our next question comes from the line of Justin Ages with CJS Securities.

Can you give us a bit more detail on that small acquisition you mentioned? What capabilities are you getting out of it and how it better serves your customers or what your customers are looking to do?

Yes. So yes, Justin. So it's a fairly small acquisition, but it gives us a very important capability that we didn't have in the U.S., which is to serve different brands of equipment in the branch. When you think of our branch automation solutions, we're clearly very focused on having our own teller cash recyclers in the branch. But this is a process for most banks that are already using teller cash recyclers or teller cash dispensers, replacing those machines.

So there has to be a transition period where they're asking us to maintain their old fleet from different vendors. So with this small acquisition, we've acquired the skill set to repair third-party parts. And this company had also a fairly robust process on how to serve third-party products. So that's the capabilities that we're acquiring, something that will expand our addressable market going into this multi-vendor space, particularly around branch products.

Okay. That's helpful. And then now that BAS has formally launched, can you give us some insight into the response versus the big national banks and the smaller regional banks? Are you seeing more demand on one side than the other?

So Justin, as with everything in banking, kind of the leading banks of the world set the pace for the rest of the market. So we had the opportunity a couple of weeks ago to -- or a couple of months ago to have some of our largest customers present our customer event.

Some of our large customers were up on stage with us touting the benefits of this closed-end cash ecosystem where you have the ATM recycler, the teller cash recycler, the interchangeability of the cassettes inside the devices, the overall management software that not only controls the cash at the branch level, but that helps integrate the branches more to the digital world of banking.

So big banks are very excited about that. And the response is that as we presented this to literally hundreds of our smaller customers, there's now increased interest on them on how can they actually deploy similar solutions. So I think that the thing that would happen with recycling, we started with the larger banks and it's trickled down to the regionals, now to the smaller credit unions, community banks, I think that we will see that same trend with our branch automation solutions.

Our next question comes from the line of Matt Summerville with D.A. Davidson.

Just a couple of quick follow-ups. Obviously, you accelerated pretty materially the cadence of your share repurchase wrapping up that $100 million. How should we be thinking about how that $200 million just announced, how that unfolds heading into 2026?

Yes. Look, our goal is to really maintain the momentum that we established under the prior program and maintain as much flexibility as we can for the company as we go forward. But look, Matt, as we're looking at 2026 as a year where we end up converting more cash, our EBITDA conversion, our cash conversion number increases by over 10% year-over-year.

We're going to have more cash during the year to deploy. And right now, we think given the stock price, and we just feel very confident in our company's ability to generate cash. And we feel the stock is the best return on investment that we can make at this point in time.

So again, we're dealing with stock that we feel is undervalued and underappreciated. And we're going to continue to be in the market, I would think, at a similar pace that you saw, but we reserve the right to be flexible as opportunities like HTx come up or other type of bolt-on acquisitions as well. So -- but right now, our plan is to sort of maintain that same level of buyback that you saw over the last 2 quarters.

Got it. And then, Octavio, I always find it useful if you take a minute and just kind of talk through the ATM side of the business in terms of what you're seeing with respect to geographic demand trends?

Yes. So thank you, Matt. So I'll -- let's walk around the world. So North America, I would say we see a very steady business. The refresh cycle in large banks continues to evolve at the same pace that it's been over the past couple of quarters.

Recyclers are now, I would say, basically the only product that we sell in North America with a few exceptions that customers that still require cash dispensers, particularly like in the casino space or customers that have a large presence in convenience stores.

But North America remains at a very steady pace. I'm happy with the progress that we're making. I think that's a big opportunity in North America is as we mature branch automation solutions, teller cash recyclers will start becoming a bigger part of the mix. So I'm happy that we're manufacturing them here in Ohio because that clearly creates a competitive advantage for us.

As far as Europe, Europe, to be honest, is having a blockbuster year. I'm super proud of the team there. The -- as Tom likes to say, they found multiple ways to win in a market that is not really growing that much. We continue to gain share, gain customers, significantly improve our service capabilities there. So I'm very happy with Europe.

We had strong orders from all major markets in Europe. So again, I think Europe will end the year in a very strong note. So Europe continues to be very healthy. Asia Pacific, we made that big decision to reenter, as you know, India create fit-for-purpose devices for multiple markets.

The Middle East with the high capacity cash recycler, the highest capacity device in the world, India with a more energy-efficient, smaller footprint device, and we've been winning business, which is very important because, as you know, we have been -- had a shrinking installed base in that part of the world, which we are now starting to reverse the trend. So that provides significant upside for us in future years around the service and software opportunity.

Lastly, let me talk about Latin America. As you know, it's always been dear to my heart. This year hasn't been as strong in Latin America overall. It hasn't been a bad year, but it hasn't been as strong as we had hoped for. There's a little bit of political turmoil in most markets in Latin America. So banks are a little bit more cautious.

But -- as we look at our opportunity there, continues to be the most heavy cash usage society in most places. So we're optimistic that as we enter Q4 and go into next year, Latin America will once again pick up the pace. And again, I always separate Brazil from Latin America because it's such a unique market.

But now that Brazil is manufacturing devices for all of Latin America, we're gaining also a lot of efficiency in our Brazilian manufacturing. And we're still waiting for some of these big government RFPs that keep being postponed, but we know that we will get them. We're just hoping that they can materialize faster.

But again, Latin America, still very optimistic about the market, even if this year wasn't as strong as we had hoped for. But once again, that's the importance of having the geographic diversity that we have that when one market is suffering, then a couple of others can pick up.

So North America picked up some of the slack, Europe picked up some of it, Asia Pac. So we're very confident that the model that we have, the distributed manufacturing footprint, the local to local clearly is a strength for the company.

Thank you. At this time, we have no further questions. I'll now turn the call over to Maynard Um for his closing remarks.

Thanks, everyone, for participating in today's call and your interest in Diebold Nixdorf. If you have any follow-up questions, feel free to reach out to the Investor Relations team. So thanks again, and have a great rest of the day.

Ladies and gentlemen, this concludes today's call. Thank you all for joining, and you may now disconnect.

Okay. Let's go ahead and get started. Good morning, and welcome. I'm very pleased to be joined by Octavio Marquez, CEO of Diebold Nixdorf and Thomas Timko, CFO. Thank you both for being here with us today.

Thank you. Our pleasure.

All right. A couple of quick disclaimers before we begin. You'll be hearing forward-looking statements during today's presentation. These statements reflect the expectations and beliefs of management as of today and are subject to risks that could cause actual results to differ materially from these statements. You can find additional information on these risk factors in the company's periodic and annual filings with the SEC.

Participants should also be mindful that subsequent events may render this information to be out of date. We will also discuss certain non-GAAP financial measures today. Reconciliations between GAAP and non-GAAP measures can be found in the company's most recent earnings presentation.

Okay, with that out of the way, Octavio, for those newer to the Diebold story, can you start with a high-level overview of the company, its core markets and where you see the most opportunity over the next few years, and then Tom, similarly, can you walk through your high-level priorities and opportunities for the company?

Sure. So thank you, George, and thanks for hosting us today. Of course, so at the end, we serve two primary markets, banking and retail. So those are two end markets. And each of those, we see very different opportunities.

In banking, we have a global franchise. We basically do business with every global bank. And when you think of the banking industry, banks are looking to how do they make their branch infrastructure more efficient. And we've taken the approach with our solutions, which we call Banking Automation Solutions to not just look at the ATM channel, which is probably what you've known Diebold Nixdorf in the past. But looking holistically at how do we make that branch network more efficient as banks move the smaller footprint, more selling in the branch and more automation.

We've developed recycling ATMs, teller cash recyclers, a suite of software to really help manage that cash ecosystem at the branch level, whether it's the ATM, the teller line or the vault, clearly creating a lot of efficiency. And when you think that running a branch network is 60% of a bank's expense, it's a very strong value proposition. In retail, we have a different opportunity. We have a very strong European franchise, where we're #1 in self-checkout, #1 in point of sales across Europe, but we still have a very small presence in the U.S. market.

So all our efforts are now tailored at how do we expand that very strong European franchise into the U.S. market. Self-checkout is kind of our leading solution, but our point-of-sale software point-of-sale terminals plus our service capabilities to really look at the complete store as a technology hub for new consumer experiences, new selling of products, I think that, that's what really differentiates us.

So those are our two main areas, I think, in banking expanding our service capability and our product offering to really address that end-to-end cash ecosystem at the branch level and in retail, truly expanding into the North America market where we've invested heavily in the team. We have very targeted approach. We're doing significant proof of concepts with our AI solutions around shrink that unfortunately has proven to be one of the more popular topics with retailers in the U.S., how to prevent shrink, not just that self-checkout, we can prevent shrink in the point-of-sale terminal, shrink in the aisles. So again, those are the areas where I'm very optimistic that we will continue to grow our business.

Yes. Thanks, George. So I've been here about a little bit over a year now. So the first priority out of the gate for me was taking what was a very small tactical team in finance and turning that more into a strategic business partner. So the level of analytics, the level of discipline, the level of discussion that we have right now is far more robust than it's been in the past about how we make operational decisions and how we allocate capital.

So first and foremost, coming out of Q2. That was our third consecutive quarter of free cash flow, right? That doesn't sound like an impressive feat. But for this company and for that matter, most of those against who we compete, positive free cash flow in the first half of the year is an event. And we've now been able to sort of turn that event into what we think is a very sustainable and repeatable process. We also came out and raised our guidance, well, reaffirmed the range, but said we're going to be at the high end, right?

And the culture that Octavio is fostering is really a say-do culture. So if we come out and say something, we're going to execute towards accomplishing that. And I think one of the things that separates us from the old Diebold is -- in addition to that is how we react in certain circumstances. If it's -- this year, we've been telling everybody the second half is going to be 55% of revenue, and we're now managing our DIO much better instead of just building that and sitting on that inventory, right? which has allowed us to really generate free cash flow.

So we're very focused on the free cash flow aspect of things. I will say our prize, if you will, is what we talked about on our 3-year strategic plan, which is to be able to generate $800 million of free cash flow, which is about -- I think when I said this originally at our IR meeting in February, about half our market cap.

The good or bad news is depending on whether you bought in, is now it's only about 1/3, right? But still, like if you look at '27 for us, mid-single-digit growth from a revenue perspective, up from low single digits, EBITDA of 15%, I think $600 million and then free cash flow conversion of over 60%.

So I think [ 375 ] to 400-ish range. And the good news is that, that's all well within our control. That's core businesses. The strategic initiatives that Octavio talked about and just execution. And then lastly, coming up with our capital allocation that we walked everybody through, it's -- it's really focused on a couple of core principles, one of which is -- one of the foundations to that allocation strategy is a 1.5x net debt leverage ratio by far the best balance sheet in the industry.

And that is something that we intend to keep, right? We don't intend to grow it. In fact, if EBITDA grows the way we think it will, we would expect that to shrink over time. And right now, the other mean of capital allocation is for us and returns -- returning to shareholders is stock buyback. So we announced our first $100 million buyback program through the second quarter of this year. We bought back $38 million, got $62 million to go.

And we would expect to sort of continue that. We don't think that there's a better investment that we can make than buying back our own stock given where we think the value really should be.

It's a great overview. Thank you for that. So over the past 2 years, Diebold has made some pretty significant changes, bringing in a number of new senior leaders, refreshing the Board. Can you talk about the most meaningful of these changes and how this has improved execution and accountability.

Yes. So I have my partner here, my most meaningful probably Tom, but clearly bringing a CFO with a return space mindset thinking Tom's experience in marquee companies like GE, GM, where he was instrumental in the great performance of those companies over time. I have brought that culture to Diebold, as he said, the say-do culture, whatever we say we're going to do, we're going to do it.

So bringing in an experienced CFO like Tom has been clearly critical. I would say that the other part that's closer to the operations was the way I want to run Diebold is in this continuous improvement mindset. That we get better every week, we get better every quarter. And you can see that in the margin trajectory. When we started this journey two years ago, our product margins were in the low teens.

Today, they're in the mid- to high 20s. And that has been achieved through our lean and discontinuous improvement mindset. So I brought in Frank Baur, who is our Chief Operating Officer or VP of Operational excellence, as I call him, to really drive that continuous improvement mindset. So between Tom, Frank, just striving to get the company better every quarter. We've improved margins significantly in product. We're focused on improving margins significantly in services.

And we believe that we can achieve that in small increments every single quarter. And again, as Tom said, when we look at our 3-year price target, it's all within our control. It's just maintaining the improvement in our operations every quarter. And we feel very comfortable that we can achieve that. We've also refreshed our Board significantly. So I would say that from our original Board members two years ago until today, there's one that remains.

And that Board refresh has been really focused on creating better governance, more transparency for our investors. The Board is led by Pat Byrne. Pat has been CEO of multiple companies, serves in many Boards. Has great career experience in operations as well. It's a strong lean practitioner, that also helps me as I implement lean across the enterprise.

So I would tell you that those are the more significant changes as we try to make the company that's focused on returning value to investors, making sure we maintain the leadership position we have in the segments where we operate and something that's very dear to me. Also making Diebold Nixdorf a great place for our employees to develop their careers.

Makes sense. Now how is executive compensation aligned with longer-term shareholder value creation and absolute shareholder return.

Yes, it's 100% aligned. I would say our shareholders and our Board, we're very focused on that alignment. So to sort of give the room sort of an idea of what does that mean? The grants that we got originally coming out, we're not -- they weren't time-based. They're price, stock price based. So think about -- we don't vest until the stock price hit 65, and we don't vest again until the stock price hits 75 and then we do vest again until the, the stock price hits 95.

And we believe with our ability to do just what we said we were going to do in our 3-year plan. If you just focus on that cash flow multiple, you're in excess of those amounts, right? Theoretically, that's what the math would tell you, coupled by a share buyback program. So I would say it's very closely aligned, and it's just something that we are very driven to go execute on, right?

And it's not a new acquisition. We have very stable markets in which we operate, and we're taking advantage of that through our cash recyclers, our investments in AI and retail to help reduce shrink. So again, we think the opportunity to grow our business, increase our TAM is there for us as long as we remain focused on executing and delivering.

Yes. Makes sense. Let's dive into some of the segments, starting with the banking segment. So can you talk a little bit about what the key differentiators are with Diebold's banking solutions and what you see as the major drivers of the business going forward?

Yes. So as I said, George, initially, when you think of our bank's operations, 60% to 70% of their cost is running the branch network. And every bank is looking at how do I become more efficient in that branch network to upsell my customers, make them more as an advisory hub rather than a transaction hub, and the way to do that is by automating everything that -- every transaction that you can inside of the branch.

Again, this is where I think we have a great opportunity because we don't talk just about how do you make the ATM channel better. We talk about how do you make the branch channel more efficient. And that includes the ATM recyclers. And again, for those of you that are probably not so familiar with the ATM technology.

Our recycler just means that things that get deposited into the ATM, it's the same cash that gets dispensed back out. So we're in the fourth generation of that technology. So we're very proud that it's a mature technology that's helping back, but we're deploying that same technology at the teller line, where the teller now doesn't have to count cash, you avoid having the -- if you understand a little bit about bank branching tellers are constantly going to the vault to buy cash.

And so you avoid that whole process, you make the teller line more efficient. Just a week ago, when we had our customer event in Nashville, where some of our customers that are deploying this technology were telling us that the productivity of their tellers has improved by 50%, which allows you to have a smaller footprint branch, less tellers and more people selling.

So I think that when you look at that, there's clearly a very big efficiency play that our branch automation solutions play. But the other more important part is through our software, we connect this physical branch footprint into the digital channels. So the ATM can become part of a broader ecosystem of the different channels of a bank.

You could start a loan application online, deposit, take out that money at the ATM or complete that transaction at the branch and that we do through our orchestration software that runs in some of the largest banks in the world and some of the largest banks here in the U.S. So I think that that's where we're very excited about that we built this comprehensive solution that solves a real-world problem for banks.

How do I make this branch infrastructure more efficient. And it's a combination of our hardware, our software and our services. Remember, in banking, over 60-plus percent of our revenue in banking comes from services. So the more devices that we put inside the branch, the greater the attach rate, more services can be done with very little incremental cost because we're using common technology components across all the products that we're selling.

I'll switch very quickly to retail. As I said, we invested very -- two years ago or three years ago when I became CEO, I gave the team in Europe, the challenge. We need to become #1 in self-service in Europe. That means growing our self-checkout portfolio. We were a distant #3. Today, we're #1. So we achieved that in two years, and it was a combination of creating a different experience in the self-checkout. One for the retailers building a more modular, more open architecture. Self-checkout has been around for many years, but it was usually a very tightly coupled solution.

If you had hardware from one vendor, you needed to have software from that vendor. And you can -- and what we decided is we'll make our -- both our software, our POS software, our self-checkout software and hardware totally open and modular, so you're not really tied into using our hardware and our software, you can -- or you can make any combination. So that proved very beneficial as retailers were looking in Europe to deploy self-checkout and really innovate.

And this open architecture really helped us do that. This past year, we've been very focused on, let's bring that to the U.S., which is, by the way, the largest self-checkout market in the world and where we have a very small market participation. So we hired a very experienced team at the beginning of the year. We made a plan where we targeted 40 large accounts, where today, we have 19 proof of concepts going on and 6 pilots.

So we're very optimistic about the second half of the year and the first half of next year really having some significant wins. But what we're trying to differentiate in the U.S. is the use of our AI solutions in retail, as retailers rethink with what they're doing. So one of the challenges that retailers have in the U.S., more than any other region in the world is theft at checkout.

So our AI solution can help retailers prevent theft at the checkout. We've developed approximately 25 different use cases on how theft happens at the self-checkout. And we can either stop the transaction, so there's an intervention from the staff store. Do different things to prevent that. We've moved that same technology to be able to detect theft as well in the manned lanes.

Again, I didn't know a lot about this, but there's also a lot of theft that happens in retail through the [indiscernible]. So again, how do we deploy the same AI algorithms, computer vision to detect that and alert management at the stores. And lastly, we're deploying our AI computer vision solution to capture shrink also in the aisles. So connecting to the CCTV system inside a store, analyzing the consumer behavior, the patterns and really detecting when something anomalous happens, so that either lost prevention at the store or when they get to the checkout, we can -- that people can take an action.

So this has proven to be a key selling point. On top of that, we have fresh produce recognition through computer vision. So if you've ever checked out at a self-checkout and you bought a lettuce, it's always a little of knowing that the screen stops and you have to choose what lettuce you want. Through computer vision, we can identify what product you're actually buying -- and for some age restricted items, and this depends a little bit on jurisdictions, but we can automate age recognition through our computer vision technology so that if you're buying alcohol or cigarettes, or any restricted product, you can -- the transaction flow can just go through this liberate staff makes a frictionless journey for the consumer.

So we're very excited that these solutions are really combined with the hardware, the software are really providing a key differentiator for us in the U.S. market.

Right. Those are great applications of AI and computer vision. Let's talk a little bit more about the ATM side of the business. Would you -- could you characterize where we are in the ATM refresh cycle and in terms of revenue growth? And how many ATMs would you say, get refreshed in any given year?

Yes. So let's -- we take a big-picture approach. There's roughly 2 million ATMs in the world. And that number has been steady for the past probably 10 years. So it's not a huge growth market. It's more of a replacement market. It's not a shrinking market, but every year, it will grow 1%, be flat, grow up 1%, 2%.

Of those 2 million, we have an installed base of 800,000 ATMs roughly. So far, we've upgraded to our new recycler, DN Series ATMs, roughly 250,000 so far. We refreshed approximately 60,000 to 70,000 every year. So just within our own installed base, if we were to continue at the same pace that we're going, we still have probably 5 years of very steady demand before the first generation of ATMs that we shipped a year ago needs to be refreshed.

Think of the ATM as having a useful life of between 5 to 7 years. That's kind of the life cycle that banks run their ATMs. The important part is that all these endpoints come with a service contract. 95-plus percent of every ATM that we sell has a service contract attached to it.

So we sell the ATM, but then we have a 5- to 7-year annuity on the service side. And we're very -- that provides a lot of stability for our business. And that's one of the things that Tom is helping us do. Make sure that we can predict that revenue stream accurately that we manage margins correctly so that we can have a very accurate, if we know that the hardware will be refreshed at this rate, but we have the strong service annuity, it really provides a very stable platform for us to invest in things like the Branch Automation Solutions, creating new devices inside of the branch to add to that service offering and hardware offering.

Right. I actually want to dive in more into the Branch Automation Solutions. Can you talk a little bit more about what drives a bank to adopt BAS and whether this is more of a top-down or a bottom-up process?

So I would say every CEO of a bank credit union that I talked to, there's two key things that they talk about. One is how do I become more efficient operations. The efficiency ratio in banking is kind of one of the key metrics that every CEO is measured against. The other one is how do I make my consumers buy more products or how can I upsell more products. So those are the -- regardless of the size of the bank, you hear those two themes constantly.

Our Branch Automation Solutions help in both ways. As branch rethinks of their branch footprint. Again, nobody is building a marquee branch in downtown San Francisco with teller lines, marble floors, everybody is thinking, how can I build smaller branches and closer to consumers that instead of a transaction hub are actually a sales and marketing hub for us, an advice center for us.

With Branch Automation Solutions, we can automate roughly 90 plus percent of any human transaction, whether it's done at the ATM or whether it's done at the teller, with the teller cash recycler, which really creates significant operational efficiency transaction that we can automate. If you were to do it at the teller line, it would probably -- and I'm using U.S. data, but in the U.S., probably every transaction costs $8 at the teller line.

If you do it through automation at the ATM or using teller cash recyclers that cost drops to below $1. So we truly create operational leverage for banks and operational efficiency there. The other part is, as you're avoiding the need to have vaults and cash vault in a branch since you have in these devices that are interchangeable, you can move money around between the devices, you really liberate the branch staff to do more selling. So when you ask me, so a top-down or bottom-up decision, I think that the operations people love it, because it really simplifies operations at the branch.

And I think that when you're talking to the head of a retail bank, they say, yes, this is great because it helps me sell more. So I think it's a combination of operations and retail banking that really come together to push these solutions.

Makes sense. Let's talk a little bit more about your retail segment strategy to push more into North America. So you've seen a lot of success internationally. What steps are you guys taking to replicate that success here in North America and what industries are the most attractive for you to target.

So we're basically targeting grocers and general merchandising. And as I said, we targeted 40 very specific accounts, where we see them at that point in their life cycle where they're running on old technology, whether it's hardware or software because remember, we have multiple ways of winning. We can either win through the POS software, through the self-checkout to the point of sale, but targeting accounts where we see them at that point in the refresh cycle where they need to make a decision.

These 40 accounts, we're running pilots, proof of concepts with them. So we're excited about that. And we built a very strong team. Our international success created a good footprint for us in the U.S. When you think of some of our marquee customers, think of companies like H&M, IKEA, Aldi and the grocery space that European retailers, but with a very strong presence in the U.S.

So they allowed us to create a base of business. And now we're very focused on winning U.S. and Canadian customers to add to that base of business. As Tom said, we -- we believe that the plan that we put forward and how we're going to grow retail, we can grow retail continuously for multiple years, just winning a couple of customers.

So as we said in our Q2 earnings call, Q3, we will see sequential growth in retail and year-over-year growth. And a lot of that is going to be fueled by our U.S. expansion.

Makes sense. Let's drill into some of the numbers. Tom, can you talk a little bit about how the company plans to achieve 4% to 6% top line growth by 2027 with the bridge to get there?

Yes. If you think about it, it's really coming from two distinct components. One is kind of what we're entitled to. If you think about just how the market is expanding and pricing associated to that. That's probably somewhere between 2% to 3% -- the other 2% to 3%, which gets us to that mid-single-digit growth, right, which is our ''27 target is going to come from some of these strategic initiatives that Octavio has talked about.

So when you think about branch automation solutions, right, and you start to get the cash recycling not only at the ATM, but at the teller lines as well. That also opens up other suites, right, other additional value that we can add in terms of helping manage the cash, right? You think about a city like San Francisco to have some of the CIT guys come with the big trucks and the big guys, that's an expensive visit, right? It's hundreds to $1000, right, depending on where. So the refreshed technology that we have allows you to take these cartridges and go from the teller to the ATM, right?

I mean if you think about it just years ago, all ATMs did was dispense and intake, right? It did not have that refresh technology. So that is innovation that we were able to bring about and drive into the market. And we continue to think that we can grow that into other opportunities for all the reasons that Octavio went into on the -- what the banks want to ultimately do at the branch. And the ROI on that proposition is really good, right, in terms of what the savings are, which is why we're starting to see some initial success.

So then you think about Asia-Pac and other areas of the world, we're reentering that market. We've developed a fit-for-purpose ATM and fit-for-purpose can be defined in those markets as smaller footprint, much more energy efficient and deployable in numerous locations. So -- we're in the process of getting that certified. And I would say that, that represents a really significant growth opportunity for us to be able to expand.

And then just -- you just talked about retail growing in North America with the AI and the shrink, right? Again, there's proof of concepts are real with some very big-box grocers, big-box retailers that would have a pretty dynamic sort of footprint, right? So again, we're feeling really positive about that. So you think about it, it's just our -- that stable market in banking and then our retail customer base, allowing 2% to 3% and then the other 2% to 3% comes from that right?

If you look at banking and retail, how would you say demand is trending between those two segments from a relative perspective? And what's your visibility into the backlog and inbound orders for the back half of this year and 2026.

Yes. We've had a couple of record quarters back to back for our business. So our backlog is 980. That's the highest it's been in years. So what does that do for us? -- that allows us to get about 9% of insight visibility into how we're going to round out the year. So if you're an investor, and you're following us, you understand that second half was pretty heavily weighted.

So to have a backlog number like that, that sort of gives us visibility. It's probably 90-plus percent on the product side. Kind of -- we begin thinking about how can we deliver, when do we deliver and then it's on to '26 in terms of Q1 and Q2, et cetera. But it's that ability, right? And as Octavio mentioned on the product side, our ability to take an order and then process and ship that finished good was probably in excess of 180 days at one point.

But because of the strategy that we've deployed in our local to local manufacturing, so you think about Germany, servicing Europe, you think about North Canton servicing, America, you think about our Brazil plant in servicing South American part of LATAM.

And then we have a contractor in India who we use to help us develop those smaller footprints. That strategy has helped on not only the margin side, but a significant reduction in terms of being able to take an order and turn it and produce it, which is now probably 60 days, right? So -- and the margins have come through.

I think when Octavio started lean in that introduction of the continuous improvement journey, product margins were 13%. Now there -- last quarter was a record for us at 28%, almost 29%. And when we think about what we can continue to deliver, right, with '27 and what we said about our 3-year plan, we expect to be able to grow product margins, 25, 50 basis points a year which is what we expect to see this year over that 3-year plan.

And I would say service margins, that's probably our biggest opportunity. When you think about services is 70%, 75% of recurring revenue. If you think about where we ended last year at 26%. There's an opportunity, we believe that we can execute towards that allows us to see 50 or 100 basis points of growth in service margin over that time each year.

Makes sense. Now product margins, we are at a level now that we haven't seen in over a decade. Can you elaborate on what's really driving this and whether it's sustainable?

Yes, it's absolutely sustainable. That is the beauty of lean. Our manufacturing effect, our supply chain, just one back-to-back awards. This is our European group. And the amount of improvement that they're seeing year-over-year is a 30% improvement in quality. I'm trying to quote these numbers because the press release just came out today. So forgive me, but like a 25% improvement in on-time delivery.

So -- and that's back to back. So lean is foundational for us. And the great thing about lean is -- yes, it happens at the factory floor and it allows us to continue to drive those product margins. Again, growth at 25 to 50 basis points a year, very sustainable. We have lots of opportunities for Kaizens and continuous learning, but it also applies to the functions as well. So I'll take finance, for example, we've been able to take our closing process and take days out of it, right, which helps get the right information to the right people at the right time.

So we're all making better decisions in a more timely manner. And it applies everywhere, right? And you do have a culture that is brought into that. And once you -- that's why I love the continuous like the flywheel, right? Once you give individuals the empowerment and the taste of what success looks like, when you're on that lean journey, it becomes very sort of self-motivating and self-fulfilling.

So the projects that come up, not only improve safety, but also profitability. We've got thousands of them going on at any point in time in either any function or manufacturing at the company.

Makes sense. Let's talk a little bit about tariffs. So can you describe your current tariff exposure and what you're doing to mitigate any expected tariff impact -- and also talk about your global manufacturing footprint and strategy, what plans you have to shift and adapt to the evolving tariff landscape.

Yes. So tariffs for us, as we've kind of discussed, is probably somewhere of about $5 million to $10 million or so of impact. And I think it's a competitive advantage for us from the perspective of what I spoke about, that local to local manufacturing footprint that we have.

We, for instance, with the tariffs -- we have a [indiscernible] plant in Germany used to build subassemblies, we would send it over and put it in a production in Canton. It was already on the list to kind of shift, but the tariff certainly accelerated that. And now we're building everything soup to nuts in Canton as it relates to the ATMs. So we were able to mitigate that. I think our footprint kind of naturally mitigated that.

And that is a difference from where we were 5, 10 years ago, right, as a company, where a lot came out of Germany and was the logistics of having to ship that around the world globally. We don't experience that anymore, right? And the improvements in supply chain has really sort of led to that. So from a tariff perspective, we've got to go deal with it. Certain parts are just going to be built in certain parts of the world because you just can't find them elsewhere. But we continue to either be able to react to that via pricing, via negotiations with our suppliers or kind of how we think about productivity initiatives through lean to offset that.

So tariffs it's going to have an impact, but it's not outsized and it's something that we feel we can more than mitigate.

Makes sense. And then lastly, Tom, can you talk about the progress you've made on free cash flow generation and what your capital allocation priorities are?

Yes, laser focused on free cash flow generation. This year, we expect to double free cash flow or nearly double what we did last year. So that's the upper end of our guidance of about $210 million, which would be a 40% conversion. And I think next year, we're at 50% and the year after we're in 60, and honestly, we don't see that slowing down.

We think that we'll continue to be able to do that year after year, and that's been a lot of focus for us on working capital. We still have a lot of opportunities in DIO, we're getting better every year, continuous improvement. And even from a payable perspective, right, there's opportunity. So it's a rich environment for us. And again, when you think about '27 cumulative cash flow, upwards of $800 million and the impact that has, right? That is why everybody is super focused, right?

So the volume on the additional strategic streams helps -- but again, a lot of that free cash flow and that conversion is in our own wheelhouse to deliver.

Great. Well, thanks, Octavio and Tom for the great discussion. Please join me in thanking them both.

Hello. Good day, and welcome to Diebold Nixdorf Second Quarter 2025 Earnings Call. My name is John, and I'll be coordinating today's call. [Operator Instructions]

I would now like to turn the call over to our host, Maynard Um, Vice President of Investor Relations. Maynard, please go ahead.

Hello, everyone, and welcome to our second quarter 2025 earnings call.

To accompany our prepared remarks, we posted our slide presentation to the Investor Relations section of our website.

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

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

We will also discuss certain non-GAAP financial measures on today's call. As noted on Slide 3, a reconciliation between GAAP and non-GAAP measures can be found in the supplemental schedules of the presentation.

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

Thank you, Maynard, and good morning, everyone. Thank you for joining us. Before I get to my prepared remarks, I'd like to extend my sincere gratitude to Chris Sikora for his invaluable contributions during his time as Head of Investor Relations. Chris has played a critical role throughout the years wearing multiple hats at DN, and his dedication and expertise have been instrumental to the company. Chris moves on to head our business finance operations for retail, where his skills and experience will continue to be invaluable with the large retail opportunities and growth we see ahead of us.

I'd also like to welcome Maynard Um as the new Head of Investor Relations. Maynard brings over 25 years of Wall Street and investor relations experience across multiple industries. His deep knowledge and expertise will help build on the strong foundation already in place. We're excited to have him on board and look forward to strengthening the relationship with the investment community and communicating the company's value proposition.

Starting on Slide 4. Q2 was another standout quarter, where we delivered strong performance in our key objectives amidst a volatile global environment, generated the third consecutive quarter of positive free cash flow and finished the first half with great momentum, giving us confidence in our ability to deliver strong operational performance in the back half of the year.

Product orders grew 10% year-over-year, reaching the highest level in 3 years. Our backlog now stands at approximately $980 million. This momentum, combined with our robust first half, gives us conviction to reaffirm our full year outlook, with the business trending towards the higher end of our range for revenue, adjusted EBITDA and free cash flow.

Our solutions continue to see strong demand in the market, and we remain focused on exceeding the expectations of our global customer base. Gross margins expanded 50 basis points year-over-year and 120 basis points sequentially, driven by favorable product mix and our commitment to continuous improvement, lean principle and pricing discipline.

Demand for advanced ATMs with cash recycling and video teller capabilities is accelerating across multiple markets. In Q2, we achieved a historic milestone with positive free cash flow for the third consecutive quarter and first half of the year.

To maximize shareholder value during the quarter, we repurchased $30 million of DN shares, reflecting our priority of returning capital to shareholders and our strong belief in the long-term value of our company.

Let's move on to Slide 5. We had a great second quarter that we're very proud of. As my team and I shared during our Investor Day, we have multiple ways to win across our markets and deliver for our shareholders. Our 3-year growth plan shared at our February 2025 Investor Day is on track. Here is how we're executing.

We're capitalizing on market opportunities. Diebold Nixdorf is a leader in a $32 billion banking and retail automation market that we serve. Our innovative self-service solutions continue to gain traction and are well positioned to capture growth in this highly attractive market. We're driving disciplined growth and profitability.

In Banking, we're accelerating branch automation by introducing teller cash recycler technology and additional managed services. We're capitalizing on the ATM refresh cycle with tailored solutions, gaining momentum in fast-growing markets. And in Retail, our AI-driven checkout solutions solve real customer challenges, provide a high return on investment for customers and our strong competitive difference. Our focus on lean operations is enhancing profitability.

Our first half free cash flow success sets the stage for $800 million in cumulative free cash flow by 2027, with 60%-plus conversion and approximately 15% adjusted EBITDA margins, all while maintaining a fortress balance sheet.

Now let's turn to Slide 6, where we will discuss the progress on our growth acceleration strategy. In Q2, we made solid progress at financing our key priorities. In Banking, we are seeing the benefits of branch automation, cash recycling and our fit-for-purpose strategy.

In the Middle East, we introduced dual-power ATMs that open the door to new customers and opportunities. QNB was the first bank in the Middle East to deploy DN's extra high-capacity DN Series 500, with both the cash deposit capability and the highest deposit, recycling and dispensing capacity in the market.

We also recently announced the rollout of state-of-the-art interactive teller machines with Kuwait International Bank, which are video-capable and instantly print and activate debit cards, and facilitate high-value deposits and withdrawals. These advanced recycling ATMs essentially service a branch in a box, and customer acceptance has been great.

We also spoke about our new line of ATMs rolling out in India. These are purpose-built to being compact and very energy efficient to meet the needs of the market. We expect to see continued growth in this large market and are encouraged by our pipeline and product wins, as this fuels growth in our installed base and long-term, higher-margin service agreements.

In Retail, AI continues to change the way our customers think about their operations. In Q1, we announced wins with large European customers, and I am now pleased to share that we have our first live customer in the U.S. A midsized grocer has rolled out the first 18 stores operating our Smart Vision product. The feedback we've received has been tremendous, supporting our optimism that the increasing number of pilots and proof of concepts we're running will lead to long-term growth opportunities.

In fact, Vynamic Smart Vision shrink reduction, age verification and produce recognition technology was recognized by a leading French retail industry publication, LSA, and won its tech for AI business award. It's nice to see the solution winning external accolades. It is further proof of the value and innovation we're keenly focused on delivering.

On the product side, we launched retail manufacturing in Ohio to serve our North American customers, building upon our local-to-local manufacturing strategy. I am extremely proud that through implementing lean principles, we were able to optimize our overall footprint and strengthen our U.S. manufacturing capabilities.

In services, my commitment to our customers is to make DN the prime example of service quality and the most trusted service provider in the industry. To strengthen our ability to deliver the outstanding service that we are committed to providing, we are consolidating our repair centers, further rolling out technician software and adding field technicians to support our growing portfolio.

A clear example of this is the rollout of our upgraded field technician software in Canada, which produced improvements in response time, call rates, incident rates, so we're accelerating the initial deployment in the U.S. World-class service is the top priority for Diebold Nixdorf.

Additionally, in Q2, our centralized operations center in Ohio went live. This center efficiently controls dispatching, training and parts logistics for our technician network in North America, where we will continue to invest to drive efficiency and growth. We have seen positive early results with real-time monitoring of customer KPIs, driving improvements in client satisfaction. We are delivering innovation with our products and solutions that address real problems, driving efficiencies and creating lasting value in our markets for customers and shareholders.

Now on to Slide 7. Continuous improvement is critical to our success, not only to drive margin improvement, but also to ensure our teams are safer, more productive and the most efficient in the industry. I recently visited our manufacturing facility in Paderborn, Germany, and I'll tell you that the team is incredibly motivated. From just 1 year ago, we've been able to meaningfully reduce floor space and improve first time through in manufacturing, an important metric that reduces rework and enhances product quality. I am very proud of the team for what they've been able to accomplish.

In services, we're laser focused on not just consistently meeting, but exceeding our service agreements. Our lean principles are key to supporting the enhancements to our service, leading to greater productivity, faster repairs and fewer repeat costs, resulting in greater efficiency, higher customer satisfaction and more business for us.

One of the enablers to launching retail manufacturing in Ohio were our lean principles. We freed up space and increased future opportunities for growth. I am proud of how our U.S. manufacturing team has embraced continuous improvement and lean as a way of life.

Lastly, I wanted to highlight our work in Poland, where we're consolidating our European repair and service operations. A new simplified delivery model developed with direct involvement of our install and repair technicians will help us improve efficiency. As you can see from the photos, our teams are committed to continuous improvement and enhancing our operations through lean principles.

Overall, the momentum we've generated in the first half gives us confidence that 2025 will be another great year of progress for our company. With that, I'll turn it over to Tom to walk through our financial results.

Thank you, Octavio.

Starting on Slide 8. Overall, we're very pleased with our second quarter and first half results. Our execution gives us strong confidence in our full year outlook, which we currently see trending toward the higher end of our guidance ranges.

Product backlog at the end of the second quarter increased to approximately $980 million, up from approximately $900 million at the end of the first quarter on strong new order entry, which was up 10% year-over-year, led by Banking.

As we shared previously, we expected revenue to be weighted towards the second half, given customer project activity, and this is playing out just as we expected. In Q2, FX was a tailwind to revenue of $19 million. However, for the first half, FX was a net headwind of approximately $4 million. First half revenue came in at 46% of total year's revenue, in line with our previous guidance of approximately 45%.

Gross margin continued to improve, up 50 basis points year-over-year and 120 basis points sequentially. Product gross margin saw a significant improvement, both year-over-year of 250 basis points and sequentially of 230 basis points, primarily driven by better geographic mix, pricing discipline and the ongoing impact from our lean initiatives. Product gross margins remain on track for up to 50 basis points of improvement year-over-year. On the services side, gross margin improved 40 basis points sequentially and was down 80 basis points on a year-over-year basis.

We remain focused on driving sequential improvement throughout the year as we continue to enhance the best service organization in the industry. We also remain on track to exit Q4, with a run rate in service margins up 100 basis points versus prior years.

In the second quarter, operating expense was up sequentially, primarily due to FX and stock compensation. Excluding these impacts, operating expense would have been comparable. Earlier this year, we discussed plans to reduce our operating expenses by $50 million on an annual basis. Going forward, operating expense represents another opportunity for us to work to improve our cost profile and achieve our 3-year strategic plan objectives. We've been working on through these plans, and we'll be taking the initial steps in the coming months and look forward to providing updates.

Continuing on Slide 9, we look at our 5-year quarter financial trends. As we've said in the past, we remain committed to strengthening our profitability and significantly improving our free cash flow generation by nearly doubling year-over-year. We delivered adjusted EBITDA of $111 million in the second quarter. Sequentially, our adjusted EBITDA margin grew 180 basis points.

Typically, our adjusted EBITDA builds throughout the year and we expect a continued ramp through the end of 2025. To add some additional color, we expect to generate approximately 45% in Q3 and the remainder in Q4.

We also generated $13 million of free cash flow in Q2. This is the third consecutive quarter of positive free cash flow and the first time in DN's history of positive free cash flow in the first half of the year. Historically, the first half has been a significant use of cash, so our ability to reverse the trend and sustain positive cash flow is a testament to the discipline and hard work by the entire company. We feel confident about our ability to improve free cash flow conversion to 40%-plus in 2025, which again nearly doubles our 2024 free cash flow generation.

Moving to Slide 10. Banking continued to deliver solid quarterly results behind favorable geographic mix and disciplined pricing. Revenue was up $50 million sequentially, and order entry was strong, supporting our revenue outlook for the year.

Gross margin was up 140 basis points year-over-year and 180 basis points sequentially, led by product margin expansion driven by favorable product and geographical mix, pricing discipline and our ongoing lean initiatives.

Going forward, we expect to continue driving solid ATM refresh activity and momentum in all geographies, and we are encouraged by the first orders of our teller cash recyclers in our branch automation strategy. We're very pleased with how our strategy is playing out with strong hardware growth that will positively impact our service operations.

Turning to Slide 11. In Retail, we drove sequential growth in order entry revenue and backlog in Q2. We are more optimistic than ever that the second half will bring on a firm recovery in our Retail business and fuel sequential and year-over-year improvement throughout the remainder of 2025.

Gross margin was down sequentially 70 basis points and year-over-year 190 basis points, with strong product margins being offset by service margins. In Q2, we delivered higher volumes of point-of-sale terminals with lower margin-related services. As we look into the second half of the year, we're expecting a stronger contribution from self-checkout and more normalized gross margins in the mid-20% range as Retail total gross margin improves through the remainder of the year.

In the U.S., our AI-enabled Smart Vision solutions are gaining traction with increasing proof of concepts and pilots underway, and the first live installations are now operating. The long-term outlook in Retail remains positive. We are especially excited about our Vynamic Smart Vision capabilities and early positive signs in North America with a growing pipeline.

Moving ahead, let's review our guidance on Slide 12. We see the business trending toward the higher end of our guidance across revenue, adjusted EBITDA and free cash flow. Our strong start in the first half of the year, combined with current demand levels and our backlog, reinforces this outlook.

We expect total company revenue to continue building throughout the year with an approximate split of second half revenues at 45% in Q3 and the remainder in Q4. On a constant currency basis, we expect to grow at least approximately 1%. Under current conditions, we also expect FX to be a tailwind of approximately 1% for the year.

Our multiple operational levers, whether it's gross margin or OpEx improvements, have given us the ability to achieve the higher end of our adjusted EBITDA guidance of $470 million to $490 million, despite the impact of tariffs. For the second half of 2025, we expect to generate approximately 45% in Q3 and the remainder in Q4.

In Q2, taking into account discrete onetime tax benefits, we were able to achieve an effective non-GAAP tax rate of 33%. As a result, we expect our non-GAAP effective tax rate for the year to be in the 40% to 45% range.

We expect free cash flow to once again be positive in Q3 similar to Q2. For the full year, we are trending toward the higher end of our expected range of $190 million to $210 million, representing 40%-plus free cash flow conversion. We are extremely confident in our ability to nearly double free cash flow based on lower interest expense, adjusted EBITDA growth and significantly better working capital management.

We remain confident in our ability to deliver another strong year of financial results for the company and our shareholders and once again demonstrating our commitment to doing what we say.

Turning to Slide 13. We remain committed to maintaining our fortress balance sheet, allowing us to support our capital allocation strategy. At the end of the quarter, we had approximately $620 million of liquidity, balanced between $310 million of cash and short-term investments and $310 million of capacity on our revolving credit facility, which remains untapped. Our net leverage ratio is 1.5x, what we believe is the strongest balance sheet in the industry.

We repurchased approximately $30 million or 637,000 shares in the second quarter. This brings our total share repurchases to $38 million or 822,000 shares at an average price of $46.08. Remember, we started our buyback in March, so this buyback represents only 4 months of activity. We intend to continue executing on our remaining $62 million authorization.

Maintaining a strong balance sheet and our local-to-local manufacturing footprint are foundational elements for the new DN. The way we have positioned our company allows us to best serve our global blue-chip customer base and quickly respond operationally to the dynamic global environment without undermining our ability to achieve our longer-term financial targets.

Lastly, we've talked a lot about doing what we say, or our say-do ratio. I think it's fair to say that we've delivered again in the second quarter. We're proud of our progress, while at the same time focusing on operational execution and driving even better results over the long term.

With that, I'll turn it back to Octavio for some closing remarks.

Thank you, Tom. To wrap things up on Slide 14, we delivered yet another strong quarter with a relentless focus on our customers and improving operations, demonstrating the progress we're making against our multiyear growth plan. We've built a strong backlog that gives us visibility to the back half of the year.

In Banking, we're gaining momentum with a growing customer pipeline for teller cash recyclers and tailored solutions in fast-growing markets, while the refresh cycle continues to progress.

In Retail, we expect to see continued sequential improvement for the remainder of the year. Our pipeline continues to grow, particularly in the North America market. We continue to make great strides in building more efficient operations through a disciplined lean culture, and there's still much more to come.

And of course, we will continue to focus on maintaining a fortress balance sheet with a target of nearly doubling year-over-year free cash flow generation and returning capital to shareholders.

In closing, I'd like to thank our loyal customers, partners, employees and shareholders for their trust and support. We've laid a strong foundation for long-term success, and I am optimistic about the opportunities ahead.

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

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

I was hoping maybe to start with Retail. Expand a little bit on the fact that you have all this confidence regarding that business inflecting in the second half of the year. Can you speak to where that is being driven from a pause versus still standpoint? Is it North America? Is it Europe?

And then can you maybe discuss a little bit how the funnel in North America may be starting to mature and if you'd be willing to maybe put a value on that North American funnel?

Yes. Thanks, Matt, for the question. Look, in the quarter, what we saw was a much higher mix of point-of-sale revenue versus SCO revenue. That mix unfavorably impacts us in terms of margin performance from the perspective of not only services, but hardware as well. Some of that backlog and order entry growth that we're seeing, and Octavio will comment on this in a second, it's led by Banking, but we're seeing really positive signs of recovery in Retail.

And we -- remember, in that backlog sits our Deutsche Post win, which we would expect to start converting into product sales towards the end of this year or early next year as well. So we remain confident that over the next quarters, we'll be able to sequentially improve both revenue, operating profit and margin as well.

Yes. Probably just adding to Tom's comment, Matt, remember, we started the year with big expectations for North America. We created a very focused strategy. We understand where the opportunities lie in the market. We have a targeted pipeline. We identified the 40 best accounts for us to target initially this year. We've engaged with most of them. We have pilots in many of them.

Again, these are some of the largest grocers, general merchandising companies in the U.S. Again, it's a long complicated sales process where we're trying to unseat formidable incumbents. But I am convinced that as we keep showcasing the capabilities of our products and our solutions that, particularly, I am very impressed with all the pilots that we -- or all the proof of concepts and pilots that we're driving with our AI solution, that gives me a lot of confidence.

As far as the size of the pipeline, probably I can't comment on an exact number, Matt. But what I can tell you is if you think of our business, where our European business has always been 80%, 85% of our total revenue, I can tell you that our North America pipeline now supports the idea that we will have a North America business that is growing much faster than the rest of the world for us, again, be it from a small basis, but we're very optimistic about that, and the team is very focused on it.

Maybe as a follow-up. It was mentioned several times in the prepared remarks, but can you talk a little bit about the TCR, the penetration rates as they sit today across the major geographies? And I guess, where you see banks prioritizing branch automation? Is it more at the ATM? Is it more at the teller counter? And I guess, are you seeing verified sort of cross-sell opportunities between those 2 products?

And maybe just -- again, I've asked this in the past, using a baseball analogy, what inning are we in with TCR adoption? What inning are we in with the recycling-led replacement cycle?

Thank you, Matt, and thank you for asking that because talking about TCRs is probably my favorite thing to do nowadays when I'm with customers in Banking. So remember, the TCR, the hardware that we're deploying to take recycling into the teller line is part of our broader branch automation strategy. We will be launching officially this strategy -- or kind of communicating more broadly in our Intersect customer event later this month.

But what it basically boils down to, when you think of the cash ecosystem at a branch, it encompasses the ATM, the teller line and the vault. So through our services, through our hardware and through our software, we're now able to manage that complete cash ecosystem.

So when I think of branch automation services, it encompasses the ATM where we can do -- just sell you the hardware or manage it completely for you. Now we will be able to help you manage the cash at the teller line by selling you the hardware with our recyclers, keeping tabs on where that cash is, whether it's in a teller at the ATM.

Our products are interoperable, so we can change cash from one device to the other and provide you a complete view on how you're operating the cash ecosystem at the branch level.

This resonates with banks tremendously. As you know, cash operations is one of the biggest cost drivers in many -- in any retail -- branch retail network, and this is really providing a strong ROI for customers.

I would say that we're in the -- for us, we had our first significant order with -- for Teller Cash Recyclers this quarter. I'm extremely proud of the team because this is a customer that wasn't our customer for ATMs, wasn't our customer for Teller Cash Recyclers. And again, this opens the possibility to start at the branch level, but then move to the ATM.

And where we are already very strong with the ATM, it allows the opportunity to incorporate a complete ecosystem at the branch level, giving us additional service, additional software opportunities. And more importantly, as banks look to outsource more of these functions, I think that having the ATM, the branch and the vault and being able to provide a holistic view really changes the value proposition that we bring.

So again, we're very early in that. So I'm proud of the progress that we've made, and I'm also proud that these Teller Cash Recyclers are being manufactured here in Northeast Ohio for our North America market, which is the one with the highest adoption rates right now for us.

And again, we will see this continuing to expand as some of our large banks deployed. We'll see it trickling down to others and then advance eventually expanding globally.

As far as the recycler, where are we in the cycle? I would tell you, once again, it's always the analogy, and I keep forgetting what inning we were last quarter in, but we're probably now in the fourth -- third, fourth inning with still a lot of runway to go. And again, remember, as we keep adding functionality to our product set, we are creating new use cases.

You heard me talk about some of the Middle East wins, where now in one of our large recyclers, we're able to print debit cards, we're able to incorporate video teller technology. So I think we're taking all these components and really creating a very strong value proposition for our banking customers.

Your next question comes from the line of Antoine Legault with Wedbush Securities.

Just, Octavio, you mentioned about the Indian market, and it's clearly a very large addressable market. And you mentioned that the ATMs you sell there are more compact and energy efficient. Overall, are you able to achieve a similar margin profile in these machines? And just can you speak more broadly to the opportunity ahead in India?

Yes. So Antoine, India is probably one of the largest ATM deployer market today or one of the largest ones. We built our strategy around local manufacturing in India with a more compact, more energy-efficient product, smaller footprint because that's what the market needed.

So this new redesigned product that meets all of our DN Series quality standards does allow us to compete and command similar margins to those that we have in the rest of Asia Pacific.

Remember, the importance of this market is that it is a very fast-growing hardware market and more -- and one where we weren't particularly strong since we had exited manufacturing there a couple of years ago. By reentering, this allows us to once again start growing our installed base there.

And the important part is as we grow this installed base, we have a very strong service annuity for the future. And I would say that the service annuity in the APAC market is probably one of the strongest margin profiles that we have, as many as these customers like to give the service of their ATMs to their OEM providers.

Understood. That's helpful. And just one more follow-up. I just want to confirm, you're looking for retail and product gross margin to lift in the second half as the scope picks up. And to expand a bit on that, I'd assume growth efforts in Retail, either Smart Vision or the incremental software features or the push into North America, should be margin accretive for your retail business. Is this the right way to think about things?

Yes. What I would encourage you to think, Antoine, is we will get better in margins in Q3 in Retail. We will get better in margins in Q3 -- in Q4 in Retail, and we will also see revenue growth in Q3 and Q4.

So as Tom said, we're very optimistic about the growth in Retail, and this is driven by what we're seeing, a steady European market with slight recovery and some large projects that we need to deliver there and our continuous efforts into growing in North America.

Understood. And maybe last quick one on the tariffs. I know you mentioned $5 million to $10 million or $7.5 million at the midpoint, which is down significantly from your initial assessment, which I think calls for about $20 million of annualized costs related to tariffs.

Is this mostly a result of the now lower tariffs on those jurisdictions? Or is it also the impact of your mitigating initiatives taking hold now that we're about 4 months into this?

Yes. So I'll let Tom talk about a little bit kind of the tariff rates and all those calculations because, to be honest, as they change every day, I have a hard time figuring them out.

But let me tell you what the part that I'm very focused on. One of the things that we said is that we would mitigate some of those impacts with our own operational efficiency. One of the impacts that we had -- or that we were forecasting last quarter was importing the engine of our recyclers, the RM4 modules from Germany. We would manufacture them in Germany and then distribute them to our multiple manufacturing facilities, whether it was Ohio, Manaus, Brazil or India.

Since then, we've localized manufacturing of the RM4 engine to Northeast Ohio, thus avoiding the impact of the tariffs that were imposed in the EU. So again, we are continuing to look at all these different alternatives, the idea of expanding our manufacturing footprint here in Northeast Ohio for retail products. We started with the self-ordering kiosks for quick-serve restaurants, expanding to self-checkout. All these things help us really mitigate the impact of tariffs.

So Tom, do you want to talk a little bit about the rates?

Yes. Look, you know what our assumptions are China, 55%, everyone else at or around 15% for the remainder of the year. We were very transparent in the first quarter, came out and said our gross impact could be up to 20%, but we have line of sight to mitigate 10%.

So think about that 10% in the first quarter now going down to a range of 5% to 10%. And we think that we have multiple ways to win here and continue to mitigate that even further, which is why we're confident despite tariffs, we're still going to be able to execute towards the high end of our range.

Your next question comes from the line of Justin Ages with CJS Securities.

Positive to see the pilot program and the one customer on the uptake in Retail for the Vynamic software. Can you just give us a sense of the conversion of pilot programs or the lead time that, that takes?

Yes, Justin. And again, it varies, to be honest, depending on the size of retail, the complexity of what they're trying to deploy. We're encouraged that this is a midsized grocer that had a couple of hundred stores, but they've started with the first 18 that are now live. So we're happy to see that.

That was a process that roughly took us 6 months from the inception of the first proof of concept to piloting in one of the stores to now starting to roll out in the first 18 stores.

So I would say that for midsized companies, we're anywhere from -- 6 months should be a good time frame. We see that in some of the larger grocers, some of the larger retailers, that process is a little bit more extensive, particularly as retailers with multiple -- with hundreds or thousands of stores really create a more comprehensive testing process and evaluation process.

So I would say that, that probably takes 6 to 9 months. But I think that, that is the average time frame, anywhere from low end 6 months to high end 9 months. And remember, we started some of these proof of concepts and pilots early Q1, so we're starting to see the early green shoots of those efforts.

That's helpful. And then one more. I appreciated the color around guidance on the tax rate. Can you give us an update on where you are in getting to a more rational tax rate? I know that was a bit longer-term focus. Just wanted to get a sense of the progress being made there.

Yes. Thank you, Justin. It's a great question. This quarter, we were able to capitalize on some discrete onetime items in the quarter that dropped the rate to 33%, right? So we were able to adjust our range, lowered it a little bit from 45% to 40% to 45%.

Again, we -- some of the tax planning initiatives and strategies are going to take some time to not only implement, but then also manifest themselves on our results. So we are still committed to doing what we said at IR Day. And by 2027, we believe that we can drive the rate down to the low to mid-30s. And we think that, that at that point would be a sustainable type of range for us, right?

We do have good -- I guess, it's a good problem, maybe a bad problem of making a lot of our money in high tax jurisdictions like Brazil and Germany and the U.S. So it's a little bit more of a headwind for us, but we're confident in our ability to lower that rate over time and not only rate, but some of the cash tax payments as well.

Your next question comes from the line of Matt Summerville with D.A. Davidson.

A couple of follow-ups. I want to make sure I understand kind of the go-forward cadence in service's gross margins. And I want to understand, you talked about a lot of different investments you're making on that side of the business, which will obviously bear long-term fruit.

But I'm curious, are those investments actually weighing on margins at present? And again, if you can remind us how we should think about Q3 and Q4, the margin evolution. And then I have a follow-up.

Yes. So look, our view is the 100 basis points of service gross margin continues to be our North Star, right? And remember, it's not just this quarter, it's not just this year, it's that whole 3-year journey, right? So we have increased margins Q1 and Q2. And as Octavio and I both pointed out, continue to expect that sequential improvement throughout the year.

But let me give you a road map for the remainder of 2025. So look, first half service margin came in at about 25.3%. We're projecting full year service margins of at least 26.5%, and we're targeting multiple opportunities to incrementally improve that through the remainder of the year.

I think what's important to keep in the back of the mind here is as we exit the year, we do expect our Q4 service margin run rate. So as we exit the fourth quarter to show at least 100 basis points of growth over the Q4 2024 exit rate of '26.

So you are correct that there is an elevated cost associated to the repair of those -- the consolidation of the repair centers, the field software for our technician, the software rollout and then also adding field technicians to support our service portfolio as well. But again, we remain confident on the ability to achieve what we've said and overall maintain the higher end of our guidance.

Yes. Matt, and just to add to Tom's point because this is one of the things that I've committed to all our customers. We will be the best service organization. We will continue improving using technology, incorporating AI into the way we serve our customers. So we're very focused on that, and that is something that -- that's what I think of our 3-year journey are the investments that will clearly elevate our capabilities around service and really distinguish Diebold Nixdorf in the market.

As a follow-up, can you maybe expand a little bit on that $50 million sort of OpEx target you're looking at in terms of annual savings? Tom, maybe where you and Octavio are seeing the greatest sort of magnitude of kind of opportunity going forward? And are you executing towards that type of number for 2025 as well? I want to be clear on that.

Yes. We'll have more to share with you. We're working towards those plans and developing those plans. We think we've got opportunities in shared services. We think we've got opportunities in our manufacturing and operations kind of across the board. As we continue to roll out lean, it's been -- it's really been embraced by the company, and we expect, given the number of kaizens that you saw on the slide, we continue to roll that and see it as well.

And then in the functions, whether it's our back office and shared services and whatnot, we think that we have opportunities to begin executing to that. So I would ask for a little bit more time to more fully develop those plans and give you an idea, but we would expect a favorable impact to the current year.

And it seems that we have no further questions. I will now turn the call back over to Maynard Um for closing remarks.

Okay. Thanks, everyone, for participating in today's call and your interest in Diebold Nixdorf. If you have any follow-up questions, please feel free to reach out to the Investor Relations team. Thanks again, and have a great day.

This concludes the meeting. You may now disconnect your lines.