Diebold Nixdorf, Incorporated (DBD) Q1 2026 Earnings Report, Transcript and Summary

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 Participants should be mindful that subsequent events may render this information to be out of date.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.