Diebold Nixdorf (OTC:DBDQQ), Incorporated (DBD), a global leader in connected commerce services, reported its second-quarter 2024 financial results with a revenue of $940 million, marking a 2.4% increase compared to the same period last year. The company saw a significant 300 basis point expansion in gross margin, continuing its growth trajectory for the sixth consecutive quarter. The banking segment experienced a robust revenue growth of 6.4%, primarily driven by a 15.6% increase in product revenue.
Despite an 8% decline in retail revenue due to market headwinds, the gross margin in this segment improved by 220 basis points. Adjusting its 2024 financial outlook, Diebold Nixdorf now anticipates adjusted EBITDA to range between $435 million and $450 million, an upward revision from the previously forecasted $410 million to $435 million.
The company expects overall flat revenue for the year, with banking sector strength compensating for retail challenges. Aiming for a free cash flow conversion rate of over 25% of adjusted EBITDA for 2024, Diebold Nixdorf ended Q2 with $369 million in cash and short-term investments and an improved net leverage position.
Key Takeaways
- Diebold Nixdorf's Q2 2024 revenue increased by 2.4% YoY to $940 million.
- Gross margin expanded by 300 basis points, marking the sixth consecutive quarter of growth.
- The banking segment's revenue grew by 6.4%, with product revenue up by 15.6%.
- Retail segment revenue declined by 8%, but gross margin improved by 220 basis points.
- Adjusted EBITDA outlook for 2024 raised to $435 million to $450 million.
- The company forecasts flat revenue for the year, with banking strength balancing retail challenges.
- Diebold Nixdorf targets over 25% free cash flow conversion of adjusted EBITDA for 2024.
- Cash and short-term investments stood at $369 million at the end of Q2, with improved net leverage.
Company Outlook
- Diebold Nixdorf updated its 2024 financial outlook, expecting adjusted EBITDA to be between $435 million and $450 million.
- Full-year revenue is projected to be flat, with banking sector strength offsetting retail sector challenges and unfavorable foreign exchange impacts.
- The company aims for a free cash flow conversion rate of over 25% of adjusted EBITDA.
Bearish Highlights
- Retail revenue decreased by 8% due to product market headwinds.
- The company noted a slight slowdown in customer decisions within the retail sector.
Bullish Highlights
- The retail service business saw good growth, supported by an expanding install base and improving product profitability.
- The company is optimistic about long-term investment in self-service and automation at the checkout.
- A strong value creation story was highlighted, with a $1 billion product backlog and accelerating gross margin expansion.
- The company expects to achieve greater free cash flow conversion in the next 12 to 24 months.
Misses
- There was a decision to walk away from lower-margin third-party sales, impacting revenue.
Q&A Highlights
- CEO Octavio Marquez discussed the potential for growth in recycling technology, particularly among smaller banks in North America and large government banks in Brazil.
- Marquez expressed confidence in the sustainability of the business model and the team's commitment to continuous improvement.
- No further questions were asked at the end of the call.
Full transcript - Diebold Nixdorf Inc (NYSE:DBD) Q2 2024:
Operator: Hello, everyone. And welcome to the Q2 2024 Diebold Nixdorf Earnings Call. My name is Charlie and I'll be coordinating the call today. You will have the opportunity to ask a question at the end of the presentation. [Operator Instructions]. I'd now like to turn the call over to our host, Chris Sikora, to begin. Chris, please go ahead.
Christopher Sikora: Hello, everyone. And welcome to our second quarter 2024 earnings call. To accompany our prepared remarks, we have 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 be discussing 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.
Octavio Marquez: Thank you, Chris. And thank you all for joining us today. I am happy to have our new Chief Financial Officer, Tom Timko, with me this morning for our first earnings call together. Before we discuss the quarterly results, I wanted to give Tom an opportunity to introduce himself and share some key takeaways from his first couple of months on the job. Tom?
Tom Timko: Thanks, Octavio. I want to start out by thanking the leadership team for welcoming me to the company. It has been an extremely productive first 60 days or so on the job. So far, my most encouraging takeaway is seeing confirmation and reinforcement of my initial rationale for joining the company. In my previous roles at GE and GM, I helped lead successful multi-year transformations. I see many of the same characteristics developing here as I saw from my prior experiences – profitable revenue growth, margin expansion, and improving free cash flow. This, coupled with bringing a more disciplined and linear approach to how we run the business, will reduce our dependency on a historically strong 4Q and create the opportunity to unlock significant shareholder value. That's what excites me the most about being here, and I'm looking forward to many more earnings calls and investor meetings to share our progress with you. Octavio, back to you.
Octavio Marquez: Thanks, Tom. And again, we're happy to have you with us. Now to begin on slide 4. Second quarter results were strong, as we remained focused on serving our customers and continued to improve our operational execution. Our efforts are generating positive results as we finished the first half with strong profitability and record free cash flow performance. The combination of our market-leading product and service solutions, along with the team's commitment to continuous improvement, provides a strong foundation for long-term performance. Given our strong year-to-date execution, we are updating our 2024 financial outlook to reflect higher profitability. We are well-positioned for future success and are focused on continuing our momentum into the second half of the year. Our efforts are also building a stronger company for our employees and our customers. We are focused on executing and our teams are building a renewed sense of pride and openness to adopt a continuous improvement mindset. We can all see the early returns of our work as evidenced by our first half performance. Customers remain at the center of everything we do and we continue winning in the market. Second quarter product backlog remains above $1 billion. A strong demand environment in banking for DN series ATMs is helping offset market related product revenue headwinds in retail. However, we remain positive on the long-term outlook for the retail self-service market. This points to the balance in our model and the benefit of end market diversification, which has allowed us to drive higher profitability for the year. When I came on board as CEO, I tasked the retail leadership team with becoming the number one self-checkout shipment provider in Europe. The 2023 RBR retail market update confirmed the team achieved this remarkable milestone. And now our attention turns to accelerating growth in the Americas. I am proud of our team as we keep building operating momentum each quarter and stay focused on delivering for our customers. Moving to slide 5. Two quarters ago, we introduced the DN flywheel to help us visualize our longer term continuous improvement objectives. The flywheel always starts with people who make Diebold Nixdorf a great company. We are investing in our people so we can implement world class operations, create leading edge products and deliver superior service. In addition to bringing Tom in as our CFO, we also added to the team a Vice President of Global Lean and Kaizen Promotion, who is accelerating the adoption of continuous improvement across the company. At the board level, this morning, we announced the addition of two new directors, Maura Markus and Colin Parris. Their extensive experience in banking and technology sectors, with Maura coming from Bank of the West and Citigroup and Colin from GE and IBM (NYSE:IBM), will be significant assets and will further strengthen our already strong board. We will continue to develop and attract new talent to the company that will help us deliver profitable revenue growth, gross margin expansion, and improve free cash flow conversion. We continue to see strong demand for our DN series ATMs and increased adoption of recycling technology. Banking product revenue is up 16% year-over-year and banking product gross margin is up 770 basis points. This is a good example of DN's innovation driving profitable and more linear revenue. A consistent theme you will hear throughout today's call is improved operating profit driven by gross margin expansion and operating expense discipline. Our service margin continues to improve sequentially while we remain focused on exceeding customer requirements. To better serve our customers, we are investing in our North America service organization by implementing a cloud based service suite to further improve customer support. This will help our field technicians, dispatch centers and health desks serve our customers more effectively, while also driving efficiencies across our operations. Moving to slide 6. While we are in the early stages of implementing Lean operations, I continue to be very encouraged by the developments we have seen so far. Our teams are prioritizing safety, quality, delivery and cost. Our North Canton manufacturing team has completed seven Kaizen events. On the slide, we are showing an example of the ATM lock assembly Kaizen where we implemented five safety enhancements and improved manufacturing efficiency and cost. We plan to roll out similar events in Paderborn in the second half of the year. These examples are helping set the standard of expectation for the rest of our company. And we are just in the beginning of what I think is possible across our global footprint as our teams embrace this operating mindset. With that, I will turn the call over to Tom to go through our financial results.
Tom Timko: Thanks, Octavio. Starting on slide 7 with an overview of our non-GAAP results, the second quarter represents another strong performance as we remain focused on our continuous improvement flywheel and work towards more linear quarters. Revenue of $940 million increased 2.4% and gross margin expanded by 300 basis points year-over-year. Gross margin has now expanded sequentially for six straight quarters and year-over-year. Banking continues to generate disciplined, profitable revenue growth driven by our DN series units and improving service performance. This was partially offset by retail product market headwinds and our decision to no longer participate in certain lower margin third-party sales. Year-over-year, gross profit improvement was primarily driven by benefits from our supply chain and logistics initiatives combined with pricing discipline. Also, service gross margin was up year-over-year, reflecting the benefit of our service improvement efforts. In North America, this is now our second consecutive quarter of improvement. Operating expense was flat compared to the prior year. Maintaining operating expense discipline has been a focus area for the company as we look to improve our operating leverage. As a result, adjusted EBITDA of $119 million is up 41% compared to prior year and up 15% sequentially. Adjusted EBITDA margin expanded 340 basis points to 12.6% year-over-year and 110 basis points sequentially. Looking at free cash flow, second quarter was a use of only $16 million, which was favorable by $237 million year-over-year. The favorable performance was driven by our efforts to have more linear quarterly cash flow, combined with higher EBITDA and better working capital efficiency. Moving to slide 8 and our year-to-date results. Higher revenue and gross margin expansion from our continuous improvement initiatives, combined with disciplined operating expense management, is flowing through to the bottom line, resulting in strong year-over-year growth in profitability and free cash flow. Adjusted EBITDA of $222 million is up 50% compared to the prior year and adjusted EBITDA margin expanded 370 basis points to 12.1%. Year-to-date, levered free cash flow, a use of $53 million, represents a record first half cash flow performance for the company. On an unlevered basis, free cash flow was positive $24 million for the first half of the year, which is a meaningful achievement given our historical seasonality. Turning to slide 9, banking delivered another outstanding performance this quarter. Revenue of $707 million was up 6.4% versus the prior year, driven primarily by product revenue growth of 15.6%. Favorable product mix from higher cash recyclers and improved service performance drove year-over-year revenue growth. Banking gross profit increased by $33 million year-over-year to $198 million, and gross margin expanded 310 basis points, demonstrating improved operating leverage. Significant product gross margin expansion was due to greater input cost control and continued pricing rigor. Banking service gross margin, which has been a focus area for driving improvement, was up 20 basis points year-over-year and up 70 basis points sequentially. We expect to see continued improvement in service gross margin going into the second half of the year. Moving to slide 10, retail performance has been impacted by product market headwinds, partially offset by positive trends in service. Retail revenue of $232 million was down 8% versus the prior year as growth in service revenue of 2.9% was more than offset by product revenue decreasing 20.5%. Product revenue declined due to lower self-service shipments as customers completed large multi-year rollouts and our decision to selectively exit lower margin third party hardware sales. Despite this, retail profitability still improved with gross margin of 27.2% in the quarter. This is up 220 basis points year-over-year and up 80 basis points sequentially. The main driver of the improvement is lower product input costs from our supply chain and logistics initiatives. We are seeing some softness in our self-checkout demand after two straight years of strong unit deliveries. Overall, we're still seeing good growth in retail service business from our growing install base and improving product profitability is supporting gross profit. We believe that despite the market challenges in retail, we remain positive on the long-term outlook for investment in self-service and automation at the checkout as retailers continually look to increase efficiency and improve the customer and consumer experience. On slide 11, we introduced this table to present a more complete view of the changes in our cash position and highlight our efforts to drive more linear free cash flow across each quarter. As a reminder, in the past, we historically had substantial quarterly volatility in our free cash flow that resulted in significant cash use through the first three quarters of the year before generating a majority of our free cash flow in the fourth quarter. The company is now in a better position to efficiently manage cash flow with improved commercial and operating rigor. As we pointed out already, you can see evidence of our significant progress in the first half of the year. This positions us well to deliver on our full year commitment of greater than 25% free cash flow conversion. Looking beyond 2024, we expect to achieve greater free cash flow conversion over the next 12 to 24 months of approximately 50% of adjusted EBITDA by driving higher profitability through continued margin expansion, continued working capital efficiency, reduced restructuring and professional fees, lower debt costs with anticipated 1Q 2025 refinancing, and eliminating non-recurring payments to certain vendors related to our corporate restructuring. Lastly, we ended the second quarter with cash and short-term investments of approximately $369 million and net leverage improved slightly to 1.5 times. On slide 12, as a result of our outstanding performance year-to-date and our expectations for the second half, we are updating our outlook to reflect higher profitability for the year. We are expecting full-year adjusted EBITDA to be in the range of $435 million to $450 million, which is up from our previous guidance of $410 million to $435 million. Our continued focus on gross margin expansion through supply chain and logistic improvements and service excellence, combined with maintaining cost discipline, is generating higher profitability for the year. We are also updating our full-year revenue outlook from our previous guidance of low single-digit growth to flat, while we continue to see strength in banking for the full year which is expected to grow in the low-single-digits. This growth is being offset by retail product market headwinds and a modest 0.5% to 1% unfavorable impact from FX. So when taking our updated revenue outlook in conjunction with our updated adjusted EBITDA guidance, we are expecting roughly 8.5% to 12% year-over-year growth and adjusted EBITDA on flat revenue. This speaks to the power of our continuous improvement journey and the operating leverage our business model can deliver. Lastly, as I already covered, we continue to target free cash flow conversion of greater than 25% of adjusted EBITDA in 2024. With that, I'll turn the call back to Octavio.
Octavio Marquez: Thank you, Tom. To wrap things up, we have lots to be excited about. We are a stronger company for our customers and employees and have improved our operational execution. We continue to believe there are highly attractive aspects of our value creation story that make for a compelling investment thesis at our current trading levels. This story is built around five components. Our product backlog of approximately $1 billion provides good coverage for product revenue for the remainder of the year. Also, approximately 70% of our total higher margin service revenue is recurring, which provides additional stability to our performance. We are clearly accelerating gross margin expansion with our continuous improvement programs and maintaining operating expense discipline. We will continue to improve our profitability as our teams embrace this operating mindset. As outlined on the call today, we have a number of levers available to us to meaningfully improve free cash flow generation. We are building a value creating capital allocation strategy that will benefit all our stakeholders. As free cash flow conversion improves, we will invest in the business and unlock additional value for our stockholders. This is the next stage of our value creation story. Lastly, we are strengthening our leadership team, building our bench of talent and surrounding the team with skilled and experienced corporate governance. Our new management team, with the guidance of our Board of Directors, has put the company on an exciting path forward. And with that, operator, please open the call for questions.
Operator: [Operator Instructions]. Our first question comes from Matt Summerville of D.A. Davidson.
Matt Summerville: Maybe, Octavio, I always find it useful when talking about the banking business. Just if you take a step back and maybe talk about – maybe do a walk around the regions, if you will, and talk about what you're seeing in a little bit more detail as to demand trends across the globe.
Octavio Marquez: Why don't we start with North America, where, again, as I said in prior quarters, the adoption of recycling continues to be strong, where not only now the big banks are embracing the technology, but we see that trickling down to the smaller banks across the North America landscape. So North America demand remains healthy for us. As you know, Latin America is still a very heavy cash usage market, and we continue to see strength in that market, both in the product sales as well as in service growth. Important to note that, for sales, very important market for us, we're expecting, again, significant growth in that business as big government contracts will come up in the coming period. So we're excited about Latin America. Europe remains very stable, and it's been actually a pleasant surprise how demand has –shaping up in Europe, and we see momentum in the market with significant wins as some customers continue with those pooling exercises around their network, but choose our DN series recyclers as the kind of key point on how they will build their new infrastructure. And lastly, Asia-Pacific. As you know, we've made significant efforts to reenter some of the Asian markets, in particular India, where we're now happy to be working with one of the largest deployers of ATMs in the world and gaining business with them. Again, in Asia-Pac, there's probably more business to be had, but we're being very, very disciplined around not pursuing business that does not meet our profitability profile. As you know, that's a very competitive market, so we want to make sure that, as we grow in that market, we do it in a very profitable way. So, overall, I would say demand environment for banking remains positive, and it's built on the back of a good story around recycling and our DN series technology.
Matt Summerville: Maybe moving over to retail, just talk about how customer conversations have evolved in that business over the last 90 to 180 days, and how the tone on investments may be at least temporarily changing. And does this give you an early kind of view on what you think happens in the market in 2025? Is this more of a transition year where you've had – I don't know how many years in a row now, but record shipments in self-checkout for the last 10 years or something like that? Is this a discernible change in trend or is this more of a pause, I guess, is what I'm trying to get a feel for here.
Octavio Marquez: Matt, we've had probably two years of record shipments for us at Diebold Nixdorf around our self-checkout solutions. We made the conscious decision to become number one in Europe, a task that I gave the team two years ago and that they have now achieved. Now our emphasis turns into how do we accelerate growth in the Americas market. Looking at the perspectives of the market, it is clear that this year we've seen a slight slowdown in customer decisions. With that said, we haven't seen a slowdown in pipeline generation, so we still see a very healthy pipeline. It's just taking customers a little bit longer to make those purchase decisions. One important trend that we see is customers are looking for more robust solutions that integrate hardware, software, and services. So, currently, we have several pilots going on with our AI shrink solution. So, again, while that puts a little bit of a slowdown on the purchasing decision, we believe it will create a much more sticky solution going forward. And as I look at the industry reports, we did see a slowdown in 2024 after many years of high growth. But it is the analyst's view and also my view that in 2025 the market resumes a more healthy growth rate than we're preparing ourselves for that.
Matt Summerville: Maybe I'll just sneak one more. And just talking about services gross margin. You saw a little bit of year-over-year inflection for the first time in, I don't know, probably three years, something like that. You saw a nice sequential bump up. How far away are we from seeing services' gross margin sustainably back in that low 30s range? Is that something we can look to in 2025 or is that something beyond that?
Octavio Marquez: Remember, Matt, there's one key thing that I want to make sure I mention, and then I'll turn it over to Tom to talk a little bit about the finances around the service business. I am very focused on making sure that every action taken in service keeps the customer at the center of everything we do. So improving SLAs, making sure that we're meeting or exceeding customer requirements continues to be my number one priority. I mentioned during the call, we keep investing in technology to better serve our customers. So we've just completed the rollout in parts of our North America market of our new cloud based solution to run our service operations that will help our technicians call centers. Help us serve the customers better, but also be more efficient. So that's kind of the basis. Everything we do in services will always have a strong focus on meeting or exceeding customer requirements. With that said, our goal is to be north of 30% in our service margins. So, I'll turn it over to Tom to give some color around that.
Tom Timko: Q2 service gross margin, we ended up at 28.8%, up 10 basis points year-over-year. Really encouraging as it indicates we're rebounding from the issues we highlighted previously in North America marketplace that were weighing on results, right? Really a direct result of our continuous improvement as the teams work to drive sequential quarter growth in gross margin, while improving customer quality and some of the SLAs that we monitor. We are, like Octavio alluded to, targeting to finish Q4 with a 30% gross margin, then this will position us to drive towards 30% for the full year in 2025. Still more work to do this year, but that's what we're driving to.
Octavio Marquez: Matt, to be clear, our target is to end the year and start the year at that level and be able to drive that same level throughout 2025.
Operator: [Operator Instructions]. Our next question comes from Matt Bryson of Wedbush Securities.
Matt Bryson: I just want to start on the retail side. Can you provide a bit more color in terms of revenue being a bit lighter than you expected. How much of that was the decision to walk away from that third party business versus how much of that was the environment just being a bit softer than you thought it would be?
Octavio Marquez: Look, in rough terms, the decrease is 60/40 between checkout hardware and third-party sales. And remember, that was a decision to walk away from some of the lower margin third party sales.
Matt Bryson: When you're talking about the environment being a bit softer, do you see that as being the broader market? I know you talked a bit about the success you've seen in the last couple years and so maybe a bit of a pause. And, Octavio talked about elongating pipelines, but is that something broader that's going on that you would say is macro based? Is it shifts in technology? I guess, what do you see the dynamics that are causing things to be a little bit softer than you might have anticipated three months ago?
Octavio Marquez: Matt, I would say that. For one, we see customers still very, very positive about deploying self-service technology at the checkout point. I think what's happening now is [Technical Difficulty] whole checkout environment in a more holistic way and trying to balance their investments on how many traditional lanes, how many self-checkout devices that we have. Clearly, the economics always favor the self-checkout lanes and also customer behavior is favoring that. But our clients are looking at how do I improve that experience. How do I make it more frictionless? I think that's where a lot of our software, a lot of the innovation that we're bringing in the modularity of the devices starts to play in. It does create a little bit of a longer sales cycle for us. But at the end, I think it creates a more robust solution for customers and something that actually helps them serve their own customers better in the end markets.
Matt Bryson: Shifting over to the improved EBITDA guidance, it feels like that's pretty much explicitly your being more optimistic about where you're able to drive gross margins over the back half of the year. Any chance you can provide a bit more kind of explicit color around what improvements might look like and how much of them coming from product versus how much are coming from services?
Octavio Marquez: Probably in general terms, Matt, remember when we started the year, we were targeting to end the year at 30%, around 30% service margin and we're still kind of trending in that direction. On the product side, we do see stronger product margins going forward. We've always talked about product margins being in the low 20s. Now we're in the mid-20s and we believe that that is very sustainable going forward. So, I would say that that's kind of the big picture. Maybe I'll turn it over to Tom, if he has any additional comment on that.
Tom Timko: Look, I would just add a little bit on the product gross margin. Q2 product gross margin, 26.4%, up 700 basis points year-over-year. Really being driven by the benefit of our supply chain logistics programs that are lowering the input cost to produce as well as really just continuing to drive pricing discipline throughout. Look, the mix is going to is going to vary a little bit quarter to quarter and we're working to sustain margins at these current levels and then drive small incremental improvements through our continuous improvement flywheel efforts.
Matt Bryson: I guess my last question is just on the backlog side. So backlog is still relatively robust, but keeps on trending down somewhat quarter on quarter. I guess, Octavio, my question there is, it's not this year question, but when you get into 2025 and that backlog hits normal levels, how confident are you that you can sustain your banking revenue at kind of current run rates versus banking revenue just comes off because you don't have that additional backlog to ship out of anymore?
Octavio Marquez: Matt, I would say that one of the most important things for me is, and we talked a little bit about this – Tom mentioned it in his remark – is creating this linear revenue profile. As you know, historically, the company has very weak Q1, very strong Q4 and a huge difference between the quarters. What we're trying to do is keep those quarters as similar as we can. Having quarters between the $900 million to a little bit shy of $1 billion every quarter provides not only better working capital management for us, it helps us in our manufacturing efficiency. So it's really important for us to keep that revenue linear. With that said, we keep seeing strong momentum in order entry and banking. So we believe that, if we maintain our backlog around that $1 billion, maybe a little bit lower, maybe a little bit higher, we're still covered for two quarters of product revenue. And with the efficiencies and manufacturing and improved supply chain that we've worked in moving manufacturing closer to end users with our North America facility or Brazil facility or European and Asian facilities, I think that that provides a very stable way of running the business. So, I would say that, this year, big effort in keeping revenue linear. So we're going to still have a second half of the year, but we're going to try to maintain that linearity, keeping our quarters in that range of $900 million to a little bit shy of $1 billion to close out the year. Next year, our big effort will be how do we now linearize our cash flow or start to linearize our cash flow also a little bit better. So that's kind of where we are, but I'm very confident that the model that we're building is a sustainable one. And to wrap it up, one of the things I'm proud is of our team. We've now adopted this idea of continuous improvement. So wherever we are, I would tell you the 20,000 people that make up Diebold Nixdorf know that we can only get better. And once we get better, we know we also know that we can only continue to get better. So that new mindset is what excites me about the future for the company.
Operator: [Operator Instructions]. Our next question is a follow-up from Matt Summerville of D.A. Davidson.
Matt Summerville: Just a couple quick follow-ups. Octavio, I guess I was wondering if you could maybe provide a little additional color on the North American kind of recycling adoption. And maybe delineate between the big banks and the small banks using a baseball analogy in terms of what inning we're in at this point in terms of proliferation.
Octavio Marquez: I would say, Matt, on our installed base in North America, we still have more than 55% of our installed base to refresh. That's just if we were able to only capture what we currently have today and refresh it with new technology. Obviously, we're winning in the markets. We believe that we can actually grow that. But to be more specific around your question around big banks and, I would say, regional banks, community banks, credit unions, we see all big banks now embracing recycling. Again, remember, it requires some operating changes, some software changes. But everybody's buying the recycling machines today, preparing themselves for that. So I would say the big banks are in a 80/20, probably 70/30 if I'm a little conservative. But in the smaller banks, we're probably in the opposite 30% done or investing in the technology, 70% thinking about investing in the technology. The important part is that all the switching networks in the North America market that drive a lot of the adoption are now adapting their switches to be recycling capable. So that will provide, I would say, in the coming years, additional impetus to the adoption of recycling.
Matt Summerville: A comment you made to my other question on Brazil, you mentioned some larger government tenders potentially coming up there in the second half of the year that I think would portend a pretty good 2025 in that important market for you guys. So I think it's been a number of years since we've seen the big government run banks make material, sort of do material refreshes. So can you maybe just put a little bit more color around what that could mean for you guys?
Octavio Marquez: As you know, it's always a government tender. So there's a little bit of risk always involved in that. But we see these large government banks adopting recycling. So some of them were pioneers in recycling. Some of our first RM4 recycling engines were sold in Brazil several years ago. So, clearly, that has provided good performance for large government banks. But now they're looking at expanding that to all their fleet. So we're optimistic that once these large banks continue renewing their fleet, we will have a great opportunity. And as you know, there's few players in that market. So we feel confident that with the technology and the service that we provide in country, we should be able to win a significant portion of new business in those banks.
Operator: Thank you. At this stage, we have no further questions registered via the telephone lines. So, I hand back over to Chris Sikora for any closing or final remarks.
Christopher Sikora: Thank you again for participating in today's call. If you have any questions, please feel free to reach out to me and Investor Relations. Have a great rest of the day.
Operator: Ladies and gentlemen, this concludes today's call. Thank you for joining. You may disconnect your lines.
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