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that our forward-looking information is current as of today, and subsequent events may render this information to be outdated.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.