Diebold Nixdorf revises FY2022 revenue guidance as ATM market continues to shrink
The specialist said ATM installation has been “flat declining” over the past six years as banks increasingly focus on digital channels. The threat of a recession in either H2 2022 or Q1 2023 also means banks are unlikely to spend on new machines as they look at ways to reduce OPEX, we were told.
The long life of ATMs – up to 10 years depending on the machine – and fewer devices mean there are fewer opportunities for Diebold to sell licences or obtain recurring revenue from services, the specialist told us. The lack of an upcoming software upgrade similar to the Windows 10 upgrade a few years ago added to the specialist’s bleak outlook for the industry.
The specialist said Southeast Asia is an expanding market for ATM installation, as populations are still more “cash-centric” than Europe or the US, and require more banking needs as society reaches “middle class” status. However, Diebold and competitor NCR could face stiff competition in this market from Chinese and Korean firms, and the specialist questioned whether both companies could find the margins to make such an investment worthwhile.
We heard that Diebold is likely to increase its prices in light of inflationary pressures, with the specialist noting that the effectiveness of such increases would differ depending on its customers. They said large financial institutions might be able to negotiate better with Diebold compared to community banks and credit unions, as they have more options to switch providers.
The specialist said Diebold should aspire to 60-80% margins on the software side of the business and 25-40% margins on the managed service side. Managed services are, however, labour intensive, and with increasing labour, fuel and supply costs, as well as banks reducing investment in new machines, the specialist said Diebold could miss its 2022 revenue target by 10%.
Over the next 3-5 years, the specialist said some ATM companies may win more market share. But they added that they are winning in a market that is “shrinking”, with customers spending less and less.
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