DIEBOLD NIXDORF, Inc Q3 FY2024 earnings call

• Execution and Margin Expansion: Achieved seven consecutive quarters of margin expansion. Invested in people, added Chief People Officer Kathleen Creech. Conducted three Shingijutsu Kaizen events to improve safety, quality, etc. Invested in lean operating principles and cloud-based service suite to enhance customer support.
• Financial Results: Total revenue $927 million, down 1.7% year-over-year. Gross profit up 8.2% year-over-year. Adjusted EBITDA $118 million, up 7.7% year-over-year. Year-to-date adjusted EBITDA $340 million, up 32% year-over-year.
• Future Plans: Well positioned to finish 2024 at high end of adjusted EBITDA guidance ($435 million to $450 million). Plan to accelerate banking reentry in Asia Pacific. Investor Day on Feb 26, 2025, to provide details on 2025 and long-term outlook.

Banking: Revenue up 3.8% year-over-year driven by strong demand for DN Series recycling units and improving service performance. Product revenue growth 10.1%, gross margin expanded 400 basis points. Retail: Revenue $236 million, down 15% year-over-year. Product revenue declined due to lower self-service shipments. Service revenue down slightly. Gross margin 25.7% in the quarter, with product gross margin up 40 basis points year-over-year but offset by decrease in service gross margin due to project timing push-out.

• Expect to finish 2024 at high end of adjusted EBITDA guidance ($435M-$450M). Flat revenue and +25% free cash flow conversion.
• 2025 expects low-single-digit year-over-year revenue growth, mid-to-high single-digit adjusted EBITDA growth, and +40% free cash flow conversion. Anticipate debt refinancing to lower interest expense and reduce professional fees.

• Macro environment impact on retail product revenue. Timing issues with service revenue projects in retail leading to margin pressure. Intense price competition in Asia Pacific hardware market affecting profitability.

Q: Could you expand on why retail is expected to get better in 2025 and delineate between pause and self checkout?

A: Retail service margins were impacted by push out of large projects, but pipeline continues to build. Added talent to North America organization. Pipeline is there, need to accelerate converting to orders.

Q: Talk about regional deeper dive on banking demand and strategy in Asia Pacific, specifically India.

A: Banking in North America sees progress with recycling machine adoption. Europe has continued growth. In Asia Pacific, invested in India facility for competitive cost profile to compete in hardware. Aim to regrow service base in APAC for profitable service annuity.

Q: Details on EBITDA bridge from 3Q to 4Q and effective tax rate.

A: 4Q EBITDA guided at high end due to disciplined operating approach. Effective tax rate was high in 3Q due to recapitalizing entities in higher tax rate jurisdictions to save on cash taxes, expecting non-GAAP effective tax rate for full year to approach 45%.