Diebold Nixdorf Incorporated Common stock

Good day, and thank you for standing by. Welcome to the Be Bold, Next Door, Inc. First Quarter 2021 Earnings Call. At this time, all the participants are in a listen-only mode. After this speaker's presentation, there will be a question-and-answer session. To ask a question during the session, you will need to press star 1 on your telephone. Please be advised that today's conference is being recorded. If you require any further assistance, please press star zero. I would now like to have the conference over to your speaker today, Steve Borostec, Head of Investor Relations. Please go ahead.

Steve Borostec Thank you, Whitney, and welcome everyone to Diebold-Mixdorf's first quarter earnings call for 2021. Joining me on today's call are Gerard Schmidt, President and Chief Executive Officer, and Jeff Rutherford, Chief Financial Officer. To accompany our prepared remarks, We have uploaded slides to the investor relations page on DieboldNixdorf.com. Our remarks are being recorded today, and we will post a replay of this webcast on the IR website later this afternoon. Slide two contains a reminder that today's comments will include non-GAAP financial information, which we believe is helpful in assessing the company's performance. Reconciliation schedules for each non-GAAP metric can be located in the supplemental slides as well as the tables of today's earnings release. On slide three, I will remind all participants that certain comments made today will be forward-looking and that there are a number of risk factors which could cause actual results to differ materially from these statements. Additional information on these factors can be found in the company's SEC filings. Participants should be mindful that our forward-looking information is current as of today, and subsequent events may render this information to be outdated. And now I will hand the communications to Gerard.

Thank you, Steve, and good morning, everyone. I'm pleased to join you today to discuss the transformation of our business model, our competitive differentiation, and our solid start to 2021. I'll begin on slide three by recapping our investment thesis and our key financial metrics for 2021, which we are reaffirming today. We are continuing to make solid progress in transforming our business model to generate strong returns on invested capital, significant free cash flow growth, and leverage our competitive differentiation to grow the top line. In the first quarter, we delivered 4% revenue growth, underpinned by market share gains in ATM and self-checkout solutions. I'll provide additional color about key market trends in just a minute, but I'll simply say that our growth in Q1 gives us the confidence to reiterate our 2021 revenue outlook of $4 to $4.1 billion. Our return on investment capital continues to improve, To date, the main contributor has been our DNNOW workstreams, which includes services modernization, GNA efficiencies from enhancing our digital and cloud-enabled capabilities, and selling a higher mix of self-checkout devices and DN series ATMs. The company is off to a good start in Q1, and we're tracking to our previously disclosed plan of $160 million of gross savings this year. Transformation restructuring payments are also tracking to plan and our prior comments on this topic and will conclude this year. The combination of enhanced profitability and lower restructuring payments is driving a strong increase in free cash flow. Our outlook for 2021 is a range of $140 to $170 million, or approximately 30% of our adjusted EBITDA. The company's operating rigor is driving our transformation and value creation. While we have been tested during the global pandemic, we continue to demonstrate tremendous resolve with our ability to execute during this challenging time. And we will continue to leverage this operating rigor going forward. Slide four summarizes how our competitive differentiation is playing out in the marketplace and in our first quarter results. Our retail business is benefiting from accelerating self-checkout demand, as well as mild growth in our point of sale business. These trends drove retail revenue growth of 11% in the quarter, excluding the impact of divestitures and currency. We expect growth will continue as retailers improve the end-to-end experience and reduce operating costs. We're growing faster than the market because customers value our high degree of modularity, increased availability, and our open architecture. During the quarter, we secured a multi-year agreement with a French retail group, Les Mousquetaires, to transform the checkout experience at nearly 2,000 stores with next-generation point-of-sale and self-checkout products, our AllConnect data engine, and dynamic self-service software. In the United States, we booked an initial order for DN Series easy self-checkout units with a high-profile convenience store retailer operating in airports and other tourist destinations. Beyond the value of winning new self-checkout hardware deals, we're also benefiting from high services attach rates that increase our recurring revenue. Moving now over to the banking business, we're seeing growing evidence of market share gains due to the advanced features and functionality of our next generation DN series ATM. In the United States, we're seeing gains among larger financial institutions, including an initial order to deliver DN series cash recycling ATMs and maintenance services at a top 10 US financial institution which previously bought hardware from others. With this win, we received DN Series orders from five of the top 10 US banks, and we see opportunities to add to our success. In Latin America, we're seeing DN Series orders from customers in Mexico, Colombia, Peru, and Honduras, including a contract with Banco Nacional de Mexico, or Banamex, to deliver approximately 1,200 DN Series ATMs, dynamic software licenses, and maintenance services. A number of customers have indicated that DN Series is not only a hardware upgrade. It is a critical element for automating, digitizing, and enhancing their self-service channels. For example, DN Series is facilitating higher service levels due to strong engineering and the all-connect data engine, which leverages Internet of Things and machine learning to enable a data-driven service model. For legacy ATMs, we're seeing service call reductions of approximately 20%. For customers upgrading from legacy ATMs to BN series, the potential performance improvements from ACDE can be even more significant. We increased the number of machines connected to ACDE by 10% sequentially during the first quarter. As we connect more devices to AllConnect Data Engine, we expect the operational efficiencies will add to our service margins and contribute to our target range of 32% to 33%. Additionally, EN-Series also supports advanced self-service capabilities through enhancements we're making to our dynamic offering. Our video-as-a-service offering is seeing solid demand. Furthermore, our software team has created a single-stack environment to facilitate quicker implementations and more frequent updates with new capabilities, such as cardless transactions, cash recycling, and video teller access. We see opportunities to continue to grow our software business. And as previously disclosed, we're making investments in our dynamic payment suite and are seeing heightened interest from early adopters for our cloud-native solution, although the sales cycle is expected to be longer than our typical software sale. We're also hearing from more customers about their efficiency agendas, and we're responding with pre-configured managed services, which support advanced capabilities and drive higher service levels. The number of managed services opportunities has increased in the past quarter across retail and banking customers. Beyond our growing pipeline, our managed services success in the quarter included a five-year contract to be the sole source supplier for maintenance, monitoring, and help desk services for more than 4,000 self-service terminals at a top five bank in the United Kingdom. Secondly, an extended managed services contract with increased scope at the largest private sector bank in India. And thirdly, a three-year managed services contract extension covering more than 3,500 self-service terminals with HSBC, the largest bank in Hong Kong. Our financial results represent a very solid start to 2021. Adjusted EBITDA of $100 million was the highest first quarter in the company's history. And while Jeff will discuss the details, I'm especially pleased that our operating profit growth of 25% and adjusted EBITDA growth of 12% significantly outpaced our top-line growth of 4%. This demonstrates strong operating leverage in our business model. Next on the call, Jeff Rutherford will take you through a more detailed discussion of our financials and our financial outlook for 2021.

Thank you, Gerard, and good morning, everyone. Our first quarter revenue growth and positive operating leverage demonstrates how our transformed business model is creating value for our stakeholders. Slide five contains the first quarter P&L metrics for the past two years, providing a useful perspective of our transformed business model. Total first quarter revenue of $944 million reflects foreign currency benefits of $34 million versus the prior year period, partially offset by $23 million headwind from divested businesses. Adjusted for foreign currency and divestitures, revenue increased 2.4%, led by product growth of 11%, software growth of 7%, and the services decline of 4%. We generated $273 million of non-GAAP gross profit in the quarter, an increase of $19 million, or 7%, versus the prior year period. reflecting higher revenue and improving margins from our D&L achievements. Gross margin increased 110 basis points to 29%. We expanded gross margins across all three segments, led by strong gains in software and services of approximately 590 basis points and 220 basis points, respectively. Prior gross margins declined 200 basis points due primarily to non-recurring benefits in the prior year period on a slightly less favorable customer mix. Operating profit increased $16 million or 25 percent versus the prior quarter, while operating margins gained 150 basis points to 8.4 percent. SG&A expense was flat versus the prior year quarter, allowing the gross profit from incremental revenue to flow through to operating profit. R&D expense was $3 million higher year-over-year due to planned growth investments. We delivered adjusted EBITDA of $100 million in the quarter, which increased 11 million or 12% over the prior year. Our adjusted EBITDA margin expanded 80 basis points year-over-year to 10.6%. The next three slides contain financial highlights for our segment. On slide six, you raised a banking revenue of $328 million, increased 5% versus the prior year period, excluding a foreign currency benefit of $21 million and a $20 million impact from divestitures. Growth was driven by higher product volume as the team converted our backlog, which has been building for several quarters. Segment gross profit increased $7 million year-over-year, with contributions from all three business lines. Foreign currency benefits of $8 million were partially offset by interim cost benefits from the prior year. Gross margin expanded 60 basis points year-over-year, led by software and services improvements, while product margins declined due to a less favorable customer mix. Moving to slide seven. America's banking revenue of $312 million declined 7% versus the prior year, excluding a $6 million foreign currency headwind and a $2 million divestiture headwind. We experienced lower product volumes and installation activities in U.S. regional accounts and in Mexico versus the prior year period, although we see order growth picking up. As Gerard mentioned, our national Account business is showing strength in both orders and revenue due to a customer acceptance of DN series. The software business delivered strong double-digit growth in a quarter due to the revenue recognition of a large contract. Segment gross profit at $97 million was down $7 million year-over-year due to lower volume and modest currency investiture headwinds. Gross margin expansion of 100 basis points to 31.3 percent was driven by benefits from D&O initiatives. On slide eight, retail revenue of $304 million increased 11 percent year-over-year after adjusting for a $19 million foreign currency tailwind and a divestiture headwind of $1 million. During the quarter, we experienced continued strength in self-checkout solutions. as well as mild growth from point-of-sale products. Software growth was driven by a large project in Europe. When compared to the prior year period, retail gross profit increased 32% to $79 million due primarily to revenue growth. Gross margin expanded 260 basis points, demonstrating their team is doing a great job delivering positive operating leverage, revenue growth, a more favorable mix of self-checkout solutions, and continued execution of D and now initiatives. On slide nine, we summarize our free cash flow performance and update our leverage and debt maturity schedules. Free cash flow use of $70 million in a quarter was up slightly compared with the prior year quarter and was in line with our internal plan. Versus the prior year, free cash flow was impacted by higher interest payments related to the timing of our secured note payments and higher cash use from inventory. The combination of our growing product backlog coupled with longer lead times for electronic components and a weaker U.S. dollar resulted in higher cash requirements for inventory. We are working closely with our suppliers to manage these challenges, however, just like other technology companies, these dynamics will remain on our watch list. Cash from receivables and payables improved slightly versus the prior year. On an unlevered basis, free cash flow use improved from $30 million to $10 million year over year due to higher profits and lower restructuring payments. For modeling purposes, investors should expect our cash interest payments to be approximately $30 million in the second and fourth quarters and approximately $60 million in the third quarter of 2021. When compared with year end, the company's cash balance reflects seasonal cash use plus approximately $30 million used to pay down a portion of the revolving credit facility. The company ended the quarter with $573 million of total liquidity, including $260 million of cash and short-term investments. At the end of the quarter, the company's leverage ratio of 4.4 times was unchanged versus year-end and down one-tenth of a turn from the year-ago period. On the right side of this slide, we update our gross debt levels as of March 31st. Note that we have no material debt maturities until November of 2023. We remain committed to strengthening our credit profile and will continue to evaluate opportunities to refinance debt on more favorable terms. Slide 10 contains our 2021 outlook, which we are reaffirming today. We expect to generate revenue of $4 to $4.1 billion, which equates to 3% to 5% annual growth. Our adjusted EBITDA range is $480 to $500 million for the year or 6% to 10% growth as we benefit from top line growth and operating leverage. As most of you are aware, our second quarter results for 2020 included significant non-recurring benefits to our services gross profit margins and operating expense. We do not expect these benefits to recur during the second quarter of 2021. Operating expense for the second quarter is expected to be in line with the first quarter, or approximately $194 million, although it could be slightly higher if the euro continues its strength against the U.S. dollar. Based on these factors, we expect adjusted EBITDA for the second quarter to be similar to our first quarter results. Moving on to cash flow, we continue to expect $140 to $170 million of positive cash flow for 2021, including up to $50 million for DNL restructuring payments. Our outlook reflects a material improvement in the company's EBITDA to free cash flow conversion rate from 12 percent in 2020 to approximately 30 percent in 2021. This concludes our prepared remarks, so I'll hand the call back to the operator for our Q&A session.

As a reminder, to ask a question, you will need to press star 1 on your telephone. To withdraw your question, press the pound key. Please stand by while we compile the Q&A roster. Your first question is from the line of Matt Somerville with DA Davidson.

Thanks. Good morning. Jeff, to your comment just a few moments ago regarding second quarter EBITDA sort of matching up with what you delivered in Q1, can you talk about maybe what's driving what sounds like a little bit of a change in cadence in that metric as we move through the year, perhaps a little bit more second half loaded than maybe you would have thought coming into the year?

Yeah, Matt. You know, it's mostly related to what happened in the second quarter of 2020. If you recall, if you go back to our reporting on the second quarter of 2020, we said at that time that our service gross margins were higher than what we modeled, mainly related to a decrease in the use of service parts during that period, during the lockdowns. And we also took steps to reduce our SG&A costs. and significantly reduced SG&A. So our second quarter is going to be a quarter where we're going to see revenue growth, as I think most companies in the U.S. will see in the second quarter. We're going to see good margin as our D&L initiatives continue to generate increases in gross margins. It'll be offset a little bit by the one-time effect of what happened in the second quarter in services margin. And then from an SC&A perspective, we're not going to repeat what happened, obviously, in the second quarter last year where we had no travel. U.S. hospitalization rates were way down. We deferred a merit increase, and we adjusted our accruals for bonus. So what you're going to see is, in the second quarter is revenue growth, good margin, but SG&A and op expense are going to be more comparable to the first quarter than the second quarter last year. The end result of that right now is what we're saying. It's going to be EBITDA will be generally flat with the first quarter this year.

Got it. And then as a follow-up, can you maybe talk a little bit on the retail side of the business? You had a win here in North America, which to my knowledge is probably one of the first, if not the first you've had on SCO and POS. Is that a sign of more to come? And can you also give us a sense for what kind of growth you're seeing and expecting in self-checkout for the first quarter and the full year? Thank you. Good morning, Matt.

I'll take that one. So, we were very pleased with that win in the U.S. It actually is not our first, but certainly one of the more notable ones that we've seen, as we said in our prepared remarks, related to a fairly high-profile airport convenience provider. We continue to believe there is room for us to expand our presence in the United States. And if you take a look at the expansion plans of certain large European retailers where we have very, very deep relationships. We would expect them to undertake some fairly material expansion plans in the U.S. over the next couple of years. And early signs are positive that we may be able to leverage those relationships to further advance our self-checkout presence in the United States. Yeah, as relates to overall growth and self-checkout, as you're well aware, Matt, we don't break it up separate from, you know, other parts of the retail business. But, you know, last year we grew exceptionally strong. And I'd say that this year, you know, while it's still only the first quarter, our sense is that we'll start to see a similar trajectory for 2021. Great. Thanks, Gerard.

Your next question is from the line of Justin Bergner with G Research.

Good morning, Gerard. Good morning, Jeff.

Good morning, Justin.

Good morning. I guess my first question would be on the payments platform that you're trying to develop or payment solution. Sort of if you could provide a little bit more color on how your views have developed and evolved over the last three months, that would be helpful.

Yeah, sure. So, Justin, just to manage everyone's expectations, I did say in our prepared remarks that we'd expect the sales cycle to be somewhat longer than our typical software sales cycle. So just please do keep that in mind as you're thinking about modeling. That being said, I would tell you that as we look at the market opportunity, as we look at engagements that we're having with clients, our degree of confidence and conviction around the market opportunity has certainly grown in the past quarter, as evidenced by the nature of the interactions we're having with several larger banks across the world. So it's still early days in the journey, but I would say we're fairly certain that we have something that will be pretty interesting to the company going forward.

Okay, great. Secondly, I wanted to ask about sort of order patterns in the quarter. I think you might have alluded to it in your prepared remarks, but are there any sort of metrics you want to highlight? I mean, is the order environment good? Are you being somewhat limited versus what you can deliver from backlog given the supply chain constraints? Any color there would be helpful.

Yeah. So, Justin, as I think about 2021 in absolute terms, I think the demand environment is pretty robust across retail in particular. and banking with somewhat bias towards America's demand, tracking somewhat ahead of Eurasia demand. But I think the demand environment is actually pretty solid. We continue to work through multiple factors through the year, primarily on the supply side, notwithstanding how strongly the U.S. is coming through the pandemic. We're not through this yet, right? We I still need to watch what's happening in markets like Southeast Asia and India. We still need to watch what's happening in terms of logistics and supply chains. But all in all, the demand environment is looking pretty decent. And notwithstanding the decline in America's revenues in Q1, behind that, there was actually pretty strong order activity in the core of America. So net-net, we're feeling pretty good about demand looking through the year.

Okay. And then lastly, maybe you could address sort of what's causing the decline in product margins. If it's mixed, maybe a little bit more elaboration there. Is that sort of temporary or sustained? Will that revert once the DN series ramps up as a larger percentage of your hardware mix?

Yeah, Justin, it's temporary. Typically, you start to see mix reflecting a different mix between high margin markets versus less high margin markets and in the quarter that that's what we saw it's not structural i think you'll start to see that you know reverse itself as dn series becomes a more dominant part of the portfolio so we don't see it as being a structural phenomenon at all okay and as part of that sort of america's versus europe when you say high margin markets versus less high margin markets No. Both within Eurasia banking and Americas, we have different markets that are higher margin versus less high margin. So it's not Americas versus Eurasia. It's literally on a country-by-country basis, Justin.

Okay. Thank you.

You're welcome.

Your next question is from the line of Paul Chong with J.P. Morgan.

Hi, thanks for taking my question. So just another follow-up on margins, you know, nice performance there on gross margins on the services side in retail. You mentioned the tough comps on 2Q, but, you know, how do we shape kind of services gross margin as we move kind of through, you know, past 2Q and longer term, particularly as you see, you know, the DN series ramp? Yeah, Paul, when we look at services gross margin, as I said earlier, we would expect the second quarter to be comparable to the first quarter this year. And if you look back at the second quarter last year, we went over 30%. I think it was 30.7% margins in the second quarter last year. So that's the... That's the headwind on services margin. Now, going forward, we're going to continue to see strengthening service margins, especially as we roll out DN series and all connect data engine. It won't be significant. It will be gradual as time goes on. Those things are rolled out and acceptance and utilization of ACB increases. But we've, in this prepared remarks, talked about the target for services margin, and that'll be over the next quarters. But we should see gradual increase in service margins as we progress through the rollout of DM series and utilization of ACBs. Okay, great. And then can you just talk about, you know, the wins across the globe are, you know, DN series orders kind of tracking your expectations and, you know, where could you see upside there in terms of regions and target customers? And same question on the services side. You have some nice ones there. How's the pricing environment been? And, you know, are the contract extensions kind of seeing any, Any uplifts there on price as well?

Yeah. Hey there, Paul. It's Gerard. So our DN series rollout is tracking squarely in line with our plan. You know, we set ourselves a pretty ambitious goal in terms of how we expected it to ramp, and it's actually tracking right in line, you know, with that ambitious expectation. So, you know, from an order perspective, the DN series is already, you know, majority of our order activity, and that will continue to dial up as we move through the year. On the services side, I think that the overall environment remains solid from a pricing perspective. There are one or two markets that are always complicated, but beyond that, the overall service environment remains broadly stable. You know, pricing certainly is something we continue to keep an eye on. You know, I think we're all sensitive to inflationary pressures in the markets. I wouldn't say that we've seen, you know, much evidence of that from some of our competitors, but certainly something we keep an eye on right now.

Okay, great. And then last question, Jeff, on free cash flow, you know, inventory side, any component shortages, kind of, impacting your investment cycles there. And then given the DM series ramp in the second half, should we expect more than kind of typical inventory build this year or kind of pretty similar to past years? And then I think you mentioned restructuring charges and cash would be about 50. Is that correct? Thanks. Yeah. Yeah. I'll start with the last question. The restructuring payments this year, we continue to forecast as $50 million. When we talk about working capital, so there's a couple components of working capital that we've seen increase in working capital investment. One, I think we're all very happy to experience, and that is in revenue growth. We're seeing an increase in and the value of a day's sales outstanding. So, we are seeing a little bit of increase in investment from revenue growth, and we'll take that all day, right? The other piece that we're seeing a little bit of investment increase is in day's inventory on hand. We are being very conservative relative to making sure we have a proper inventory on hand for order entry. So we are carrying some level of incremental inventory. You'll see that when we follow the queue today, you'll see that in our inventory footnote and raw materials and WIP is going to be up approximately $30 million. So we are investing incrementally in inventory. In inventory, we expect that as logistics issues and supplier issues curtail, that the opportunity will be to harvest that investment. The other thing that's hitting us on the working capital side, obviously, is FX from European markets.

Okay, great. Thank you. Sure.

Your next question is from the line of Cardick Meta with North Coast Research.

Hey, good morning, Jordan and Jeff. Jordan, I wanted to ask you a little bit about the Eurasia strength in the ATM business, especially on the product side. Maybe where you're seeing that strength and what you would anticipate for the year.

Yeah, good morning, Cardick. So, as I said early on to one of the prior questions, we're not through this pandemic globally, notwithstanding the progress the United States is making. And when we take a look at demand activity in Eurasia, it is slightly more mixed than we might see in America. We're seeing solid activity in markets like Germany, like the Middle East, certain parts of Southeast Asia. and equally a little bit more of a muted activity in some parts of Eastern Europe. But I'd say that markets where we have a very strong position are markets that continue to track nicely.

And then just out of curiosity, why was that service down so much in Eurasia on the ATM side? I imagine the product growth helped with installation revenue, but I'm wondering maybe why – service was down.

Yeah, Karthik, I'm just taking a quick look at things. I'm pretty sure, but Jeff, correct me if I'm wrong, that we just had somewhat lower installation activities in the quarter rather than anything that was structural.

yeah cbase remains pretty level and and we see a good pipeline to growing the contract base but but in any given period service revenue can can adjust based on installation timing and then last member we still have the uh uh

divestiture impact coming through. So we have the Portavis divestiture as well as the China defect divestiture coming through. That's about $40 million, and those will anniversary as of the end of the second quarter. So the year over year pressure on services will abate in the second half of the year.

Okay. Just one last question, Jeff. I know you talked about it extensively last quarter. during the conference call, but I'm just wondering if you have any change in thought process on refinancing, timing, from your perspective?

You know, we're still, we will continue to evaluate that. We don't have any, as I said in my prepared remarks, we don't have any maturities until 23, but there's certainly opportunities before then. With the debt we issued in July of last year, there is a no-call provision until July of 22. But we'll look at the other opportunities. Look, the term Bs are extremely well-priced, and there may be some opportunities in unsecured, but But our position hasn't changed that the natural target for refinancing would be in the second half of 22 unless there's a really attractive opportunity before that.

Perfect. Thank you very much. Appreciate it. Sure.

Your next question is from Marla Backer with Sidoti.

Thank you. So as you've said a couple of times now on this call, you know, it's, We're not through this pandemic yet by any means. And it also might be early in the reopening of those markets that are in the process of reopening. But based on what you're seeing now, what you're hearing from your banking customers, do you believe that there are any sustainable changes coming out of the pandemic and how people are using ATMs, perhaps managing for fewer visits? And if so, what, if any, impact do you think it could have on the business?

Yeah, good morning, Marla. You know, the theme that we continue to hear several of our customers talk about is whether the pandemic has reshaped their point of view around branch presence and their branch footprint, less so around the size and scale of their ATM network. I'd say, if anything, as banks continue to accelerate their own digitization journey, they continue to look at recycling as an important capability on the ATM side to further shift small business transactions to the ATM away from the branch. They continue to look at video capabilities on the ATM to enhance their interaction with their consumers. So we're not seeing or hearing any structural post-pandemic changes expectation that ATMs will necessarily have a lower role in banking distribution going forward.

Okay, thank you. Your next question is from Matt Somerville with DA Davidson.

Yeah, there's a couple quick follow-ups. Maybe, Gerard, could you give a little bit broader overview on what you're seeing with respect to DM series uptake as it pertains to recycling in North America, Latin America, and EMEA, recognizing it's a little bit more mature in some of the bigger Asian markets?

Yeah, Matt, in the prepared remarks, we said that we believe we're in a phase right now where Yeah, DM series is showing up really strongly relative to some competitive alternatives. And we're seeing a very noticeable uptick in demand amongst larger U.S. banks, several of which weren't necessarily periodic buyers of hardware from people mixed off. So that's a very strong sign for us. We have continued to enjoy strong market presence in Latin America, and those markets have been, in particular certain countries, have been strong users of recycling for some time. So we see that trend continuing. And EMEA has been more mature than the United States, but that dial just keeps shifting by a few percentage points each year in favor of recycling. So all in all, the trend continues. across all markets is continue to shift in favor of recycling.

And then just with respect, if you gave these metrics, I apologize if I missed it, but periodically you've been updating us as to where you are with certification projects as it pertains to BN series. So maybe if you're able to provide those metrics around how many are underway, how many have been completed, you know, thus far here, you know, through the first quarter.

yeah so you know for the us what's most important are you know the network processors and ensuring that you know those certifications are complete so those are all now competing behind us which allows us to you know take dn series to to all natures of uh banks in the united states in terms of the the broad accounts yeah i know steve will keep me correct here if i get it wrong Yeah, but I believe that at the last count, we were up around 240 certifications that were complete. But Steve, correct me if I'm wrong. I just don't have that number handy. It's top of mind. Yeah, Matt, we'll follow up with you separately. It looks like Steve's trying to dig it up. We'll follow up with you separately on that. No problem. Thank you, Gerard.

Okay, our final question is from the line of Justin Bergner with G Research.

Thanks as well for the follow-up. To build on your earlier question, do you think the pandemic is creating, you know, changes that are favorable for your retail business looking forward?

Justin, there's no doubt that, you know, changing consumer and retailer expectations have added further tailwinds to an existing tailwind that was building around self-checkout. So we see that tailwind likely to be in place for several years still to come. As we see mature markets in self-checkout, further accelerated adoption of self-checkout, and as we see other markets that have been historical laggards show real interest. So I think that The pandemic has been a nice boost on that front. On point of sale demand, as we said in our prepared remarks, we saw some modest demand and modest growth in point of sale this quarter. I think we continue to watch how long that trend will sustain itself. I suspect that in due course, the shift will continue to lean more and more in favor of self-checkout and perhaps modestly at the expense of point of sale, but that's not necessarily a bad outcome for us given the you know, higher unit economics for us as well as the higher services and tax rate, which allows us to drive higher recurring revenue.

Okay, great. And then just lastly, is there any element of your guidance while unchanged that may reflect, you know, higher cost inflation pressure or certain, you know, sales maybe in the hardware side? not have been the potential to come through in a strong environment because of logistics and supply chain pressures?

Yeah, Justin, I'll go back to the answer I gave earlier. From a demand perspective, we're feeling pretty good about this year, both on retail and banking. So demand might lean one to be perhaps modestly more bullish than how we're currently looking this year. The flip side is there's still some issues to work through. So all in all, our view is that the guidance that we've provided is a balanced set of outcomes, and we're feeling positive about our outlook for the year. But clearly we're not through it, and we're only one quarter in, and obviously we'll update the market as we move through the second quarter. Great. Thank you.

At this time, there are no further questions. I will turn the call back to Mr. Vorostek for any closing remarks.

Thanks, everyone. I just wanted to follow up to Matt's question on the certification. So we're sitting at about 225 certifications out of about 700 projects, and that's up from about 150 certifications at the end of 2020. So with that, I want to thank everybody for being with us on today's call. If you have follow-up questions, please give a call or an email to Investor Relations. Have a great day. Thank you, everyone.

This concludes today's conference call. Thank you for participating. You may now disconnect.