Diebold Nixdorf Incorporated Common stock

Good morning. My name is Adam and I will be your conference operator today. At this time, I would like to welcome everyone to the dBuild Nextdoor second quarter 2022 conference call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, please press star followed by two. Thank you. Ms. Machuska, you may begin your conference.

Hello everyone and welcome to our second quarter 2022 earnings call. I'm Christine Marcheska, Vice President of Investor Relations for Diebold Nixdorf. To accompany our prepared remarks, we have posted our press release and shareholder letter to the investor relations section of our corporate website. I would encourage investors to review the shareholder letter as it contains additional information regarding the progress of the company. Later this morning, a replay of this webcast will be available on the Investor Relations section of our website. Before we begin, I will remind all participants that during this call, you will hear forward-looking statements, including related to an update on guidance. These statements reflect the expectations and beliefs of our management team at the time of this call, but they are subject to risks and uncertainties that could cause actual results to differ materially from these statements. Additional information on these factors can be found in the company's periodic and annual filings with the FCC. Participants should be mindful that subsequent events may render this information to be out of date.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. A reconciliation between GAAP and non-GAAP measures can be found in the tables of today's earnings release. And now, I'll hand the call over to Octavio.

Thank you, Christine, and thank you all for joining us today. Over the past several weeks, our company has worked quickly to take important steps to become more agile, customer focused, and better equipped to face the volatile macroeconomic environment. During my first full quarter as CEO, we delivered on our prior commitments with sequential quarter over quarter improvement on several key measures, including revenue growth, margin expansion, adjusted EBITDA, and cost savings through our restructuring initiatives. All of this leading us to reaffirm our EBITDA guidance for the full year. Our solution set is as strong as it has ever been, and we continue to see robust demand in order entry from a stable customer base that wants our market-leading solutions. We ended the second quarter with $1.4 billion in product backlog, our highest backlog today. Order intake continues to outpace our ability to convert backlog to revenue. Important to note that approximately 90% of our 2022 total company revenue is secured either via contract or scheduled backlog, which means committed spend. Additionally, approximately 70% of our service business is recurring in nature at any given time, and we expect to grow this metric. Banking and retail are two of the world's most competitive and demanding industries, and we continue to play a vital role in supporting our customers' efforts to succeed in an ever-evolving customer landscape. Demand remains strong across both areas, specifically for our cash recyclers and self-checkouts. In banking, we address the demand for cash recyclers as banks rethink their branch footprint and move more transactions towards the self-service channels. DN series cash solutions are now live in over 90 countries with over 500 certifications. And we continue to see a shift away from our legacy devices with our new DN series cash recyclers, compromising now 82% of new banking orders in North America. We achieved a year-over-year growth of 79% in connected ATMs to our DN all-connect data engines. In retail, the evolution of consumer behavior, along with the rapidly changing labor dynamics, have led to increased demand for self-service and automation, and growth is being driven by customer momentum for our self-checkout solutions. Our self-checkout, or scope business, keeps gaining new customers globally and continues to grow faster than the market, specifically in Europe, and we are seeing success now also in the North America markets. We continue to look for ways to deploy one of our best assets, our service organization, which includes a dedicated and talented global technician base, spare parts and logistic capabilities, multilingual help desk, all working together to deliver on customer SLAs. Leveraging these assets, we continue to expand and explore the EV charging services business. We saw progress as we extended pilots with several existing customers, We also added several new countries to our service footprint and projects through original and new contracts with OEMs, charge point operators, and retailers. EV charging stations are a great example of a service horizontal for our managed service capabilities. And we are looking forward to more opportunities where we can add horizontals or verticals that align where we can leverage the scale of our service business. Importantly, We recently implemented a new and simplified operating model that is helping us improve our financial performance, elevate customer service, and put us on a path forward to a stronger future. We have confidence in our operating model to drive us forward and double our efforts on what matters most, serving our customers and building value for shareholders. We have the industry's best self-service solutions and leading-edge technology, coupled with the world-class services. And our simplified operating model will allow us to strongly leverage what we do best. Going forward, our operating segments will be global banking and global retail. And we will be discussing our business in terms of technology product solutions and services. In terms of these new segments, technology product solutions includes our hardware as well as our software licenses, And services includes our product-related services, including installation, maintenance and support for both hardware and software, professional services, billable work, as well as advanced managed services and others. This reporting better reflects how we will run the business and measure success. Jeff will go through the numbers in more detail, and we also have provided historical comparisons in our shareholder letter. While we try to improve what we do and how we do it as a company, we are still working against expected headwinds that we discussed over the past few quarters, namely a difficult supply chain and inflationary environment that is challenging our ability to deliver solutions to customers in a timely and cost-efficient manner. Specifically, we are still experiencing higher costs in parts and key components necessary to manufacture our products during the quarter, but availability has improved. In addition, shipping products have moderately improved, but we continue to experience longer lead times to deliver our solutions as global shipping demand is exceeding capacity in logistic channels around the world. The war in Ukraine continues to add complexity and uncertainty to logistics related issues and the global economy with respect to inflationary pressures, as well as the impact on foreign exchange. Looking at the world today, we want to provide you a better picture on how our business is doing geographically, especially considering the FX challenges I mentioned earlier. Our year-old denominated business constitutes approximately $1.6 billion of annual revenues. We have seen, from our original planning assumptions to today, a devaluation of 15%. On a constant currency basis and adjusted for divestitures, we expect growth to be flat on a year-over-year basis. Jeff will provide more commentary on this as well. We are seeing steady progress with constructive discussions on repricing the backlog and are increasing our operational rigor and better managing costs as a company. We continue to make progress reconfiguring our supply chains. We are proud that our facility in North Canton, Ohio, keeps ramping up to meet demands of our North American market, exemplifying the can-do attitude of Northeast Ohio and supporting our investments in the region as we expand and develop local suppliers. We reiterate our targets of meeting 80% of North America demand for cash recyclers from this US-based operation by the end of 2022. However, as it stands today, Paderborn, Germany continues to remain our main production facility for both banking and retail, followed by Asia and lastly North Kansas. This will shift as we continue to see more production coming out of the U.S. Important to note that our Brazilian facility in Manaus is solely dedicated to the Brazilian ATM market. During our Q1 call, we announced the commencement of our 150 million plus cost savings restructuring plan. As of today, we have identified and are executing against 120 million of this initiative and have clear line of sight to more than 30 million of additional cost savings. We are implementing these initiatives as quickly and efficiently as possible. Finally, We often receive questions from investors about mergers and acquisitions, including potential divestitures and other value-creating strategic opportunities. As part of our constant efforts to maximize shareholder value, we will continue to evaluate strategic alternatives that will benefit our shareholders. Before Jeff provides more detail on our financials, I want to thank our employees for their dedication, our customers, for their continued trust and our shareholders for your support. We have the right strategy in place, and more than ever, our leadership team is committed to improving our business and creating long-term growth and value for our company. I will now turn it over to Jeff.