Diebold Nixdorf Incorporated · NYSE:DBD
Diebold Nixdorf — Q3 2020 Earnings Presentation
29 slides from Diebold Nixdorf's earnings presentation, Oct 28, 2020
Slide 1: Investment Community Conference Call Third Quarter 2020
DieboldNixdorf.com Investment Community Conference Call Third Quarter, 2020 Wednesday October 28, 2020
Slide 2: Use of non-GAAP Financial Information
Use of non-GAAP Financial Information To supplement our condensed consolidated financial statements presented in accordance with GAAP, the company considers certain financial measures that are not prepared in accordance with GAAP, including non-GAAP results, adjusted diluted earnings per share, free
Slide 3: Forward-looking Statements
Forward-looking Statements This document contains statements that are not historical information are "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995, including statements regarding potential impact of the ongoing coronavirus (COVID-19) pandemic
Slide 4: Key Messages
Key Messages Business activity improved in Q3-2020 + Robust execution and resiliency as an essential provider to banks and retailers + Strong improvements in orders + Sequential revenue recovery Continued execution of DN Now initiatives drives margin expansion, higher gross profit and operating
Slide 5: Improving Business Conditions in Q3-2020
Improving Business Conditions in Q3-2020 Improving Business Activity Revenue Recovering YoY backlog growth of 9% Sequential growth of 12% YoY order growth of 7%, led by Products • Easing of unplanned reductions, including COVID-19 impact • Banking – ongoing investments in self-service channels and •
Slide 6: Transformation Journey
Transformation Journey Key Drivers TTM Adjusted EBITDA1 & Margin COVID-19 • Higher quality revenue 600 20.0% DN Now initiatives Disciplined sales pursuits 500 18.0% Account rationalization $425 $441 $456 16.0% $401 Non-core divestitures $389 $394 14.0% 400 11.5% 10.9% 12.0% $320 $323 $301 9.9%
Slide 7: Transformation Driving Higher Profitability
Transformation Driving Higher Profitability Strong Profit & Margin Expansion YoY Transformation Highlights Gross Profit1 & Margin Expansion Gross Profit $ Gross Margin % • Digital Transformation 34.0% • Harvesting G&A efficiencies 300 $285 $276 32.0% 28.6% • Software excellence 30.0% 250 28.0% 25.5%
Slide 8: Digital Strategy Is Driving Competitive Differentiation
Digital Strategy Is Driving Competitive Differentiation Enhancing the DN value proposition for our customers Internal efficiency Products Services Software Operations • “Internet of Things” enabled • All Connect Data Engine – Delivering SW as a service • Leveraging digital, automation and Capabiliti
Slide 9: Evolving Services to a Digital, Data-Driven Business
Evolving Services to a Digital, Data-Driven Business Actions to Date Services Gross Margin1 32% – 33% +570 bps Automating incident Standardizing Upgrading customer reporting & response processes touchpoints (ATM or POS) 28.9% 26.5% Connecting Devices to AllConnect Data Engine (ACDE) 23.2% CORRELATE
Slide 10: Q3-2020 P&L Highlights
Q3-2020 P&L Highlights $ millions Q3-20 Q3-19 YoY variance Revenue $995 $1,079 ~$19M increase from incremental business ~$68M unplanned reductions including COVID-19 delays ~$36M from divestitures Gross Profit1 $285 $276 DN Now initiatives drive gross margin expansion of 310 bps • Higher quality rev
Slide 11: DN Now Actions Are Driving Higher Quality Revenue
DN Now Actions Are Driving Higher Quality Revenue Revenue Gross Profit1 Total Services Products Software DN Now execution $276 $285 more than offsets revenue headwinds Q3-19 Revenue $1,079 $552 $415 $112 $148 $146 Services Unplanned Unplanned/COVID-19 ($68) ($26) ($35) ($6) $83 Products $84 Foreign
Slide 12: Eurasia Banking Highlights
Eurasia Banking Highlights $405 YoY drivers include $364 $381 • Incremental business of $22M offsetting non-recurring projects Revenue ($M) from Q3-19 • Unplanned reductions including COVID-19 delays of $38M • Deliberate actions to drive higher quality service revenue including divestitures of $36M
Slide 13: Americas Banking Highlights
Americas Banking Highlights $387 $404 $368 YoY drivers include Revenue ($M) • $12M from planned reduction of non-recurring projects, partially offset by software growth • Unplanned reductions including COVID-19 delays of $5M • Foreign currency headwinds of $17M 2 Q3-20 Q3-19 adj Q3-19 and Gross Marg
Slide 14: Retail Highlights
Retail Highlights $280 $270 $263 YoY drivers include Revenue ($M) • Unplanned reductions including COVID-19 delays of $25M • Incremental business and growth of self-checkout is more than offsetting non-recurring projects from prior year • Foreign currency tailwinds of $10M 2 Q3-20 Q3-19 adj Q3-19 an
Slide 15: Free Cash Flow, Leverage and Liquidity
Free Cash Flow, Leverage and Liquidity Free Cash Flow1 Leverage Ratio2 and Liquidity $5 4.7x 4.7x 4.4x 4.5x 4.5x ($152) ~3x YTD 2020 YTD 2019 Q3-19 Q4-19 Q1-20 Q2-20 Q3-20 Target YTD performance is in-line with pre-COVID plan YoY variance due to • Leverage ratio2 changed from 4.5x to 4.7x due to + H
Slide 16: Debt Maturities and Benefits of Refinancing
Debt Maturities and Benefits of Refinancing Prior Maturity Schedule (M) Current Debt Maturity Schedule (M) Benefits of Refinancing $1,400 $1,400 No material maturities until 2023 $791 of Term Loan B $340 Revolver $1,110 Provides time to complete DN $1,200 $1,200 ($150 undrawn)2 $344 Revolver1 No
Slide 17: Tightening 2020 Outlook to High End of Prior Range
Tightening 2020 Outlook to High End of Prior Range Prior 2020 Current 2020 Key Expectations2 Outlook Outlook Reflects net unplanned effects of COVID-19, net planned reductions including the Total Revenue $3.7 - $3.9B ~$3.85B company’s focus on higher-quality revenue and divestiture headwinds of $110
Slide 18: Focus Areas for Value Creation
Focus Areas for Value Creation Shifting to a balanced agenda of higher free cash flow conversion and growth Drivers of free cash flow conversion + DN Now initiatives drive higher adjusted EBITDA and improved profit margins + Substantially complete our DN Now transformation in 2021 and reduce our res
Slide 19: Supplemental schedules
Supplemental schedules 18 | DIEBOLD NIXDORF
Slide 20: Transformation Update
Transformation Update Increasing gross savings target from ~$470M to ~$500M through 2021 Timeline for completion 2019 2020 2021 Streamline operating model Simplify product portfolio & manufacturing footprint Benefits Operational Services modernization plan Excellence • Gross savings target of ~$500M
Slide 21: DN Now Transformation Expense and Cash Flow Bridge
DN Now Transformation Expense and Cash Flow Bridge GAAP Majority of expense is severance related 1 Restructuring to headcount reduction Expense Cumulative One-time implementation costs: ($ in millions) FY 2018 FY 2019 Q1 2020 Q2 2020 Q3 2020 Total – Accounting compliance, including setting up re
Slide 22: Q3 2020 Profit & Loss Statement
Q3 2020 Profit & Loss Statement Reconciliation GAAP to non-GAAP ($Millions) 2020 (GAAP) % of Net Sales Restructuring and DN Now Amortization of Wincor Nixdorf Legal / deal Other 2020 % of Net Sales transformation expenses purchase accounting intangible assets expense non-routine inc/exp (non-GAAP) (
Slide 23: Q3 2019 Profit & Loss Statement
Q3 2019 Profit & Loss Statement Reconciliation GAAP to non-GAAP ($Millions) 2019 % of Net Restructuring and DN Now Amortization of Wincor Nixdorf Legal / deal Divestitures and Acq. Inventory Other 2019 % of Net (GAAP) Sales transformation expenses purchase accounting intangible expense fixed asset s
Slide 24: YoY Revenue Variance for FX, Divestitures and Related Actions
YoY Revenue Variance for FX, Divestitures and Related Actions Reconciliation GAAP to non-GAAP ($Millions) $Millions Q3-20 Q3-19 Variance F/(U) Variance % 2020 YTD 2019 YTD Variance F/(U) Variance % Segment View Eurasia Banking Revenue (GAAP) 364 405 (41) -10.2% 1,012 1,218 (206) -17.0% FX Impact - 1
Slide 25: YoY Gross Profit Variance for FX, Divestitures and Related Actions
YoY Gross Profit Variance for FX, Divestitures and Related Actions Reconciliation GAAP to non-GAAP ($Millions) Segment View $Millions Q3-20 Q3-19 Variance F/(U) Variance % 2020 YTD 2019 YTD Variance F/(U) Variance % Eurasia Banking Gross Profit (Non-GAAP) 112 118 (6) -5.2% 304 348 (44) -12.7% FX Imp
Slide 26: Gross Profit and Gross Services Margin
Gross Profit and Gross Services Margin Reconciliation GAAP to non-GAAP ($Millions) Gross Profit – Segment View Q1-19 Q2-19 Q3-19 Q4-19 2019 Q1-20 Q2-20 Q3-20 Revenue (GAAP) $1,028 $1,150 $1,079 $1,152 $4,409 $911 $890 $995 Americas Banking 363 420 404 418 1,604 345 331 368 Eurasia Banking 383 430 40
Slide 27: Operating Expense
Operating Expense Reconciliation GAAP to non-GAAP ($Millions) Operating Expense Q1-19 Q2-19 Q3-19 Q4-19 2019 Q1-20 Q2-20 Q3-20 Revenue (GAAP) $1,028 $1,150 $1,079 $1,152 $4,409 $911 $890 $995 Total Operating Expense (GAAP) $271 $272 $248 $303 $1,094 $253 $227 $260 Selling and administrative expense
Slide 28: Adjusted EBITDA
Adjusted EBITDA Reconciliation GAAP to non-GAAP ($Millions) $Millions Q4-17 Q1-18 Q2-18 Q3-18 Q4-18 Q1-19 Q2-19 Q3-19 Q4-19 Q1-20 Q2-20 Q3-20 Revenue (GAAP) $1,250 $1,064 $1,106 $1,119 $1,290 $1,028 $1,150 $1,079 $1,152 $911 $890 $995 Net income (loss) ($103) ($66) ($116) ($220) ($128) ($132) ($55)
Slide 29: Free Cash Flow and Net Debt Reconciliations
Free Cash Flow and Net Debt Reconciliations ($Millions) Q1-19 Q2-19 Q3-19 Q4-19 2019 Q1-20 Q2-20 Q3-20 2019-YTD 2020-YTD Net cash provided by (used in) operating activities - continuing - GAAP ($57) ($11) $75 $128 $136 ($80) ($91) ($39) $7 ($209) Excluding the impact of changes in cash of assets hel