Executive Summary

Q1 2025 revenue was $841.1M, essentially in line with expectations, with gross margin expanding to 24.1% GAAP and 25.3% non-GAAP; adjusted EBITDA was $87.3M as the company delivered positive first‑quarter free cash flow of $6.1M, a first in its history .
Order entry rose 36% YoY and product backlog increased to ~$900M, giving 80–90% visibility into full‑year product revenue; management maintained FY2025 guidance (Adjusted EBITDA $470–$490M, FCF $190–$210M) .
Headline EPS was pressured by a non‑cash FX loss ($18.5M), resulting in GAAP diluted EPS of $(0.22) and adjusted EPS of $0.09; excluding FX, adjusted EPS would have been ~$0.37, effectively matching consensus and removing the “miss” narrative on core operations .
Banking remained solid with strong cash recycler adoption and broad‑based wins; retail saw macro‑related weakness but a growing North America pipeline and AI-enabled self‑checkout solutions underpin a second-half recovery .
Catalysts: backlog/order momentum, service margin expansion via lean initiatives, tariff mitigation actions, and capital returns (initiated $100M repurchase; $8M executed in March) .

What Went Well and What Went Wrong

What Went Well

Strong commercial momentum: order entry +36% YoY and backlog up to ~$900M, supporting 2H revenue cadence; “we are maintaining our financial outlook for 2025” .
Cash generation and margins: positive FCF $6.1M in seasonally weakest quarter; non-GAAP gross margin expanded 140 bps sequentially and 20 bps YoY driven by lean and mix; “the best first quarter in our company's history” for FCF .
Banking execution: orders up ~50% YoY, accelerated adoption of cash recyclers across regions, and traction in branch automation; “we continue to see strong ATM refresh activity and the adoption of recycling” .

What Went Wrong

Retail headwinds: retail revenue declined 14.2% YoY; retail services and products down 8.6% and 21.3% respectively as macro weakness persisted; management expects stabilization and 2H recovery .
Headline EPS optics: non‑cash FX loss of $18.5M depressed net income, creating an apparent miss vs consensus despite underlying operations tracking to plan; management emphasized the nonoperational nature of FX .
Tariff uncertainty: estimated ~$20M gross impact in 2025 (largest exposures in China and Germany) with ~50% mitigation planned via LEAN productivity, supplier actions, and pricing; guidance maintained but visibility monitored .

Financial Results

Metric	Q1 2024	Q4 2024	Q1 2025
Revenue ($USD Millions)	$895.4	$988.9	$841.1
GAAP Diluted EPS ($USD)	$(0.39)	$0.15	$(0.22)
Adjusted EPS (Non-GAAP) ($USD)	$0.38	$0.99	$0.09
Gross Margin % (GAAP)	23.3%	23.4%	24.1%
Gross Margin % (Non-GAAP)	25.1%	23.9%	25.3%
Adjusted EBITDA ($USD Millions)	$103.3	$112.5	$87.3

Segment breakdown (Q1 YoY):

Segment / Line	Q1 2024	Q1 2025
Banking Services ($MM)	$386.6	$382.2
Banking Products ($MM)	$262.2	$247.3
Total Banking Revenue ($MM)	$648.8	$629.5
Retail Services ($MM)	$138.2	$126.3
Retail Products ($MM)	$108.4	$85.3
Total Retail Revenue ($MM)	$246.6	$211.6
Total Services ($MM)	$524.8	$508.5
Total Products ($MM)	$370.6	$332.6
Total Revenue ($MM)	$895.4	$841.1

KPIs and cash/visibility:

KPI	Prior	Current
Order Entry YoY Growth	—	+36% (Q1 2025)
Product Backlog ($MM)	~$800 (YE 2024)	~$900 (Q1 2025)
Net Cash from Ops ($MM)	$(23.5) (Q1 2024)	$15.7 (Q1 2025)
Free Cash Flow ($MM)	$(36.4) (Q1 2024)	$6.1 (Q1 2025)
Liquidity ($MM)	—	>$635 (cash/STI $328 + revolver $310)
Net Leverage (x)	—	1.5x
Share Repurchases ($MM)	—	~$8 in March

Guidance Changes

Metric	Period	Previous Guidance (Feb 12)	Current Guidance (May 7)	Change
Total Revenue (YoY)	FY2025	Flat to up low single‑digits	Flat to up low single‑digits	Maintained
Adjusted EBITDA ($MM)	FY2025	$470–$490	$470–$490	Maintained
Free Cash Flow ($MM)	FY2025	$190–$210	$190–$210	Maintained
Revenue Cadence	FY2025	45% 1H / 55% 2H	45% 1H / 55% 2H	Maintained
Tariff Assumptions	FY2025	Not specified (pre‑tariff detail)	~$20M gross impact; ~50% mitigation; largest impact from China/Germany; guidance incorporates framework	New detail; outlook unchanged
FX Assumptions	FY2025	3–4% unfavorable (~$115M)	Continued FX volatility monitored	Maintained monitoring

Earnings Call Themes & Trends

Topic	Q3 2024 (Prev)	Q4 2024 (Prev)	Q1 2025 (Current)	Trend
Lean operations & margin	7th consecutive margin expansion; supply chain/logistics benefits	Expanded lean to service; Q4 margins in line; FY GM 25.3% non‑GAAP	Sequential GM +140 bps; lean driving improvements	Positive, sustained
Banking recyclers/refresh	Banking revenue +3.8% YoY; highest product margin ever; major wins	Strong finish; DN Series milestone; branch automation rollout	Orders +~50% YoY; broad regional strength; recycler adoption accelerating	Strengthening
Retail outlook	Macro pressured; expecting recovery in 2025	Sequential growth; 2H 2025 recovery expected	Retail down YoY; pipeline building in NA; AI Smart Vision pilots	Stabilizing; 2H recovery
APAC/India strategy	Reentry plan; short‑term margin mix impact (~100 bps)	Shipping fit‑for‑purpose ATMs in Q2’25; service annuity focus	India production ramp; high‑capacity recyclers winning logos	Executing
Tariffs & mitigation	Not yet top of mind	Prepped via local‑to‑local footprint; <25% China component exposure	~$20M gross impact; ~50% mitigation via lean/suppliers/pricing; guidance maintained	Manageable
Free cash flow linearity	Year‑to‑date cash use improving	FY FCF $109M; targeting ~40% conversion in 2025	Q1 FCF positive; bridge to $190–$210M reiterated	Improving
Capital allocation	—	Authorized $100M buyback	Executed ~$8M in March; plan to continue repurchases	Shareholder returns up
Backlog/visibility	~$1B product backlog, strong service base	YE backlog ~ $800M	Backlog ~$900M; 80–90% product revenue visibility	Higher visibility

Management Commentary

“2025 is off to a strong start…We delivered another quarter of standout results…We are maintaining our financial outlook for 2025 while monitoring the tariff situation” — Octavio Marquez .
“Gross margin expanded 20 bps YoY and 140 bps sequentially…We generated $6 million in positive free cash flow in the quarter, the best first quarter in our company's history” — Octavio Marquez .
“Order entry was very strong…backlog increased from approximately $800 million at year‑end to $900 million at the end of the quarter” — Thomas Timko .
“Based on enacted or proposed tariffs, we estimate the gross impact for 2025 is approximately $20 million, and we are working to mitigate up to approximately 50% of the headwind” — Thomas Timko .
“We are proud to take this important first step to increasing capital returns…repurchasing 8 million of DN shares” — Octavio Marquez (share repurchase initiation) ; “we expect to continue strategically executing on our remaining $92 million authorization” — Thomas Timko .

Q&A Highlights

Backlog/visibility: Management now has ~80–90% visibility to full‑year product revenue, supported by backlog growth to ~$900M and April order activity .
FX impact on EPS: ~$18.5M non‑cash, non‑operational FX loss tied to intercompany loans; management noted reversal trends in Q2 and emphasized core operations would have beaten consensus absent FX .
Retail North America pipeline: Pilots/POCs underway at some of the largest U.S. retailers; management sees real opportunity to gain share as buyers unbundle hardware/software/services and adopt AI anti‑shrink solutions .
Tariff mitigation & pricing: Clear line of sight to ~50% mitigation via lean productivity, supplier actions, and selective pricing; SG&A discipline adds flexibility .
Capital returns: ~$8M repurchased in March; intent to keep repurchasing through the year as excess cash is returned to shareholders .

Estimates Context

Metric	Consensus*	Actual	Beat/Miss
Revenue ($USD Millions)	844.1*	841.1	Miss (~0.4%)
Primary EPS (Adjusted) ($USD)	0.36*	0.09 (Adjusted EPS)	Miss (FX‑driven)
Adjusted EBITDA ($USD Millions)	85.3*	87.3	Beat
# of Estimates (Revenue / EPS)	3* / 3*	—	—

Values retrieved from S&P Global.
Note: Management disclosed non‑cash FX loss of $18.5M; excluding FX, adjusted EPS would have been ~$0.37, effectively aligning with consensus .

Key Takeaways for Investors

Core operations healthy: revenue in line, margins expanding sequentially, and adjusted EBITDA beat consensus; backlog/order momentum supports a 2H‑weighted year .
EPS optics are misleading: headline miss was driven by non‑cash FX; excluding FX, adjusted EPS aligns with consensus, reducing risk of estimate downgrades on fundamentals .
Banking remains the anchor: cash recycler adoption and major wins across regions, with branch automation and fit‑for‑purpose devices driving mix and future service annuity .
Retail inflecting in 2H: near‑term softness persists, but NA pipeline and AI computer‑vision solutions (Smart Vision) suggest a recovery path; Deutsche Post POS modernization underscores commercial traction .
Tariffs manageable: ~$20M gross headwind with ~50% mitigation identified; local‑to‑local manufacturing and supplier diversification limit structural impact; guidance maintained .
Cash discipline and returns: positive Q1 FCF de‑risks 2025 conversion; liquidity >$635M and net leverage ~1.5x enable continued buybacks under $100M authorization .
Near‑term trading angle: watch for tariff/FX headlines versus underlying backlog and margin expansion; a clean ex‑FX EPS print would likely reframe sentiment toward execution and capital returns .

Earnings Call Themes & Trends (Detail)

AI/technology initiatives: Vynamic Smart Vision pilots reducing fraud (e.g., 70% reduction cited in Europe), broader deployment beyond SCO into POS/store aisles .
Supply chain/tariffs: Local‑to‑local footprint and lean productivity underpin mitigation; largest exposure in China/Germany, pricing actions targeted .
Product performance: Banking products seeing strong recycler adoption; retail product declines near‑term but margins held via pricing/lean .
Regional trends: U.S. banking momentum, Europe share gains (Windows 11 migration), Brazil wins (TecBan), APAC fit‑for‑purpose expansion .
R&D/service execution: Oracle Field Services + AllConnect analytics to improve field efficiency and service margins toward ~30% target .

Additional Relevant Press Releases (Q1 2025 context)

Deutsche Post modernization: ~13,000 locations POS upgrade and 5‑year services contract; supports retail services narrative and pipeline into 2H .

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