Diebold Nixdorf(DBD) - 2021 Q3 - Quarterly Report

Form 10-Q Filing Information This section provides key administrative details of the Form 10-Q filing, including registrant, filing type, status, and common shares outstanding - Registrant: Diebold Nixdorf, Incorporated[1] - Filing Type: Form 10-Q for the quarterly period ended September 30, 2021[1] - Filer Status: Large accelerated filer[3] - Common shares outstanding as of October 26, 2021: 78,355,253[3] Index This section serves as a navigational guide to the various parts and items within the Form 10-Q report Part I - Financial Information This part presents the company's unaudited condensed consolidated financial statements and management's discussion and analysis of financial condition and results of operations Item 1: Financial Statements This section presents the unaudited condensed consolidated financial statements, including balance sheets, statements of operations, comprehensive income (loss), and cash flows, along with detailed notes explaining the basis of presentation, accounting policies, and specific financial items Condensed Consolidated Balance Sheets This section provides a snapshot of the company's financial position, detailing assets, liabilities, and equity at specific reporting dates Condensed Consolidated Balance Sheets (in millions) | Metric | Sep 30, 2021 (Unaudited) | Dec 31, 2020 | | :----- | :----------------------- | :----------- | | Total Assets | $3,586.9 | $3,657.4 | | Total Current Assets | $1,921.1 | $1,857.3 | | Cash and Cash Equivalents | $215.9 | $324.5 | | Inventories | $624.8 | $498.2 | | Goodwill | $760.6 | $800.4 | | Total Current Liabilities | $1,559.5 | $1,649.5 | | Long-term Debt | $2,447.1 | $2,335.7 | | Total Equity | $(863.5) | $(831.7) | Condensed Consolidated Statements of Operations This section outlines the company's revenues, expenses, and net income or loss over specific reporting periods Condensed Consolidated Statements of Operations (in millions) | Metric | 3 Months Ended Sep 30, 2021 | 3 Months Ended Sep 30, 2020 | 9 Months Ended Sep 30, 2021 | 9 Months Ended Sep 30, 2020 | | :----- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Net Sales | $958.2 | $995.2 | $2,845.6 | $2,796.4 | | Gross Profit | $260.1 | $284.1 | $785.2 | $758.5 | | Operating Profit (Loss) | $38.7 | $23.8 | $87.8 | $18.3 | | Net Loss | $(2.0) | $(100.9) | $(40.4) | $(217.4) | | Basic and Diluted Loss Per Share | $(0.03) | $(1.31) | $(0.52) | $(2.81) | Condensed Consolidated Statements of Comprehensive Income (Loss) This section presents the net income or loss along with other comprehensive income or loss items, reflecting changes in equity from non-owner sources Condensed Consolidated Statements of Comprehensive Income (Loss) (in millions) | Metric | 3 Months Ended Sep 30, 2021 | 3 Months Ended Sep 30, 2020 | 9 Months Ended Sep 30, 2021 | 9 Months Ended Sep 30, 2020 | | :----- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Net Loss | $(2.0) | $(100.9) | $(40.4) | $(217.4) | | Other Comprehensive Loss, net of tax | $(23.5) | $(5.7) | $(30.5) | $(66.1) | | Comprehensive Loss | $(25.5) | $(106.6) | $(70.9) | $(283.5) | | Comprehensive Loss attributable to Diebold Nixdorf, Incorporated | $(25.6) | $(107.0) | $(71.6) | $(282.6) | Condensed Consolidated Statements of Cash Flows This section details the cash inflows and outflows from operating, investing, and financing activities over specific reporting periods Condensed Consolidated Statements of Cash Flows (in millions) | Metric | 9 Months Ended Sep 30, 2021 | 9 Months Ended Sep 30, 2020 | | :----- | :-------------------------- | :-------------------------- | | Net Cash Provided (Used) by Operating Activities | $(291.6) | $(196.7) | | Net Cash Provided (Used) by Investing Activities | $(4.6) | $(53.4) | | Net Cash Provided (Used) by Financing Activities | $189.8 | $160.8 | | Change in Cash and Cash Equivalents | $(110.7) | $(97.0) | | Cash and Cash Equivalents at End of Period | $215.9 | $277.3 | Notes to Condensed Consolidated Financial Statements This section provides detailed explanations and additional information supporting the condensed consolidated financial statements Note 1: Basis of Presentation This note describes the accounting principles and standards used in preparing the financial statements - Financial statements are unaudited and prepared in accordance with Form 10-Q and U.S. GAAP[24] - Adopted ASU No. 2019-12 (Income Taxes) in Q1 2021 with no material impact[28] - Evaluating impact of FASB guidance on transition away from reference rates[29] Note 2: Earnings (Loss) Per Share This note details the calculation of basic and diluted earnings or loss per share, including factors affecting dilutive shares - Basic and diluted EPS calculated using treasury stock method; no difference with two-class method[30] - Dilutive shares excluded from diluted EPS computation due to net loss position[30] Net Loss Attributable to Diebold Nixdorf, Incorporated and Basic/Diluted Loss Per Share (in millions, except per share amounts) | Metric | 3 Months Ended Sep 30, 2021 | 3 Months Ended Sep 30, 2020 | 9 Months Ended Sep 30, 2021 | 9 Months Ended Sep 30, 2020 | | :----- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Net Loss Attributable to Diebold Nixdorf, Incorporated | $(2.1) | $(101.4) | $(40.5) | $(217.9) | | Basic and Diluted Loss Per Share | $(0.03) | $(1.31) | $(0.52) | $(2.81) | Note 3: Income Taxes This note provides information on the company's effective tax rates and the primary drivers of tax benefits or expenses Effective Tax Rate on Loss from Continuing Operations | Period | Sep 30, 2021 | Sep 30, 2020 | | :----- | :----------- | :----------- | | 3 Months Ended | 35.5% | 17.6% | | 9 Months Ended | 21.6% | 2.2% | - Tax benefit for 9 months ended Sep 30, 2021, primarily due to jurisdictional mix of income/loss and valuation allowance on interest expense carryforwards[33] Note 4: Inventories This note breaks down the company's inventory into major classes, such as finished goods, service parts, and raw materials Major Classes of Inventories (in millions) | Inventory Class | Sep 30, 2021 | Dec 31, 2020 | | :-------------- | :----------- | :----------- | | Finished goods | $247.7 | $204.7 | | Service parts | $171.7 | $169.0 | | Raw materials and work in process | $205.4 | $124.5 | | Total Inventories | $624.8 | $498.2 | Note 5: Investments This note details the company's investment holdings, including certificates of deposit and assets in rabbi trusts, and their fair value measurement - Investments primarily consist of certificates of deposit in Brazil and assets held in rabbi trusts for deferred compensation plans, recorded at fair value[35][37] Investments Subject to Fair Value Measurement (in millions) | Investment Type | Sep 30, 2021 Fair Value | Dec 31, 2020 Fair Value | | :-------------- | :---------------------- | :---------------------- | | Short-term investments (Certificates of deposit) | $13.7 | $37.2 | | Long-term investments (Assets held in a rabbi trust) | $6.7 | $6.6 | - Company holds non-consolidated joint ventures (Inspur JV, Aisino JV) accounted for under the equity method[39] Note 6: Goodwill and Other Assets This note provides a breakdown of goodwill by segment and details other intangible assets, including changes over time Goodwill by Segment (in millions) | Segment | Dec 31, 2020 Balance | Sep 30, 2021 Balance | Change | | :------ | :------------------- | :------------------- | :----- | | Eurasia Banking | $298.7 | $277.3 | $(21.4) | | Americas Banking | $322.7 | $319.3 | $(3.4) | | Retail | $179.0 | $164.0 | $(15.0) | | Total Goodwill | $800.4 | $760.6 | $(39.8) | - Goodwill decreased primarily due to currency translation adjustments and divestitures[41] Intangible Assets by Major Category (Net Carrying Amount, in millions) | Category | Sep 30, 2021 | Dec 31, 2020 | | :------- | :----------- | :----------- | | Customer relationships, net | $327.5 | $407.9 | | Internally-developed software | $41.5 | $38.0 | | Other intangible assets, net | $43.7 | $40.7 | | Total | $371.2 | $448.6 | Note 7: Product Warranties This note explains the company's accounting for product warranties and presents the changes in warranty liability - Company records estimated warranty liability at sale based on historical factors[46] Changes in Warranty Liability (in millions) | Metric | 9 Months Ended Sep 30, 2021 | 9 Months Ended Sep 30, 2020 | | :----- | :-------------------------- | :-------------------------- | | Beginning balance as of January 1 | $38.6 | $36.9 | | Current period accruals | $16.1 | $12.5 | | Current period settlements | $(17.5) | $(14.8) | | Ending balance as of September 30 | $34.8 | $33.2 | Note 8: Restructuring This note outlines the company's restructuring programs, including associated charges and accrual balances, aimed at improving profitability - Company is implementing "DN Now" transformation program to achieve greater, more sustainable profitability by end of 2021, with expected gross savings of approximately $500 million[50] Restructuring Charges on Consolidated Statements of Operations (in millions) | Metric | 3 Months Ended Sep 30, 2021 | 3 Months Ended Sep 30, 2020 | 9 Months Ended Sep 30, 2021 | 9 Months Ended Sep 30, 2020 | | :----- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Total Restructuring Charges | $0.0 | $13.8 | $23.1 | $35.3 | Restructuring Accrual Balances (in millions) | Metric | Sep 30, 2021 | Sep 30, 2020 | | :----- | :----------- | :----------- | | Ending balance as of September 30 | $38.8 | $35.1 | Note 9: Debt This note details the company's outstanding debt balances, recent debt issuances, and compliance with financial covenants Outstanding Debt Balances (in millions) | Debt Type | Sep 30, 2021 | Dec 31, 2020 | | :-------- | :----------- | :----------- | | Notes payable | $49.1 | $10.7 | | Long-term debt | $2,447.1 | $2,335.7 | - Issued $700.0 million of 9.375% Senior Secured Notes due 2025 (USD) and €350.0 million of 9.0% Senior Secured Notes due 2025 (EUR) in July 2020, with proceeds used to repay existing debt[55][58] - Company was in compliance with financial covenants (max total net debt to adjusted EBITDA leverage ratio of 6.00 to 1.00, min adjusted EBITDA to net interest expense coverage ratio of 1.50 to 1.00) as of September 30, 2021[68][69] Note 10: Redeemable Noncontrolling Interests This note explains changes in redeemable noncontrolling interests, including adjustments and the impact of put option terminations Changes in Redeemable Noncontrolling Interests (in millions) | Metric | 9 Months Ended Sep 30, 2021 | 9 Months Ended Sep 30, 2020 | | :----- | :-------------------------- | :-------------------------- | | Beginning balance as of January 1 | $19.2 | $20.9 | | Redemption value adjustment | — | $(0.8) | | Termination of put option | $(19.2) | — | | Ending balance as of September 30 | $0.0 | $20.1 | - Redeemable noncontrolling interest reduced to zero in Q1 2021 due to capital contributions and waiver of a put option[70] Note 11: Equity This note provides information on the changes in total shareholders' equity attributable to Diebold Nixdorf, Incorporated Changes in Total Diebold Nixdorf, Incorporated Shareholders' Equity (in millions) | Metric | Dec 31, 2020 | Sep 30, 2021 | | :----- | :----------- | :----------- | | Total Diebold Nixdorf, Incorporated Shareholders' Equity | $(827.1) | $(872.3) | - Total equity decreased from $(831.7) million at December 31, 2020, to $(863.5) million at September 30, 2021[72] Note 12: Accumulated Other Comprehensive Income (Loss) This note details the components of accumulated other comprehensive income or loss, including translation adjustments and hedging activities Accumulated Other Comprehensive Income (Loss) (AOCI) (in millions) | Component | Sep 30, 2021 | Dec 31, 2020 | | :-------- | :----------- | :----------- | | Translation adjustment | $(299.1) | $(256.7) | | Foreign currency hedges | $(1.7) | $(2.6) | | Interest rate hedges | $(1.2) | $(6.1) | | Pension and Other Postretirement Benefits | $(140.5) | $(146.9) | | Other | $(1.5) | $(0.6) | | Total AOCI | $(444.0) | $(412.9) | - AOCI decreased by $(31.1) million for the nine months ended September 30, 2021, primarily due to translation adjustments[78] Note 13: Benefit Plans This note describes the company's pension and post-retirement benefit plans, including their costs and contributions - Company has qualified retirement plans in the U.S. (closed since 2003, frozen since 2013) and non-U.S. defined benefit plans, mainly in Germany[79][81] - Provides post-retirement healthcare and life insurance benefits for certain retired employees[83] Net Periodic Pension Benefit Cost (in millions) | Metric | 3 Months Ended Sep 30, 2021 | 3 Months Ended Sep 30, 2020 | 9 Months Ended Sep 30, 2021 | 9 Months Ended Sep 30, 2020 | | :----- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | U.S. Plans Pension Benefits | $0.6 | $1.3 | $1.9 | $3.8 | | Non-U.S. Plans Pension Benefits | $0.1 | $0.2 | $(0.7) | $0.6 | | Other Benefits | $0.3 | $0.0 | $0.8 | $0.0 | - Contributions to qualified and non-qualified pension plans were $23.6 million for the nine months ended September 30, 2021[86] Note 14: Derivative Instruments and Hedging Activities This note explains the company's use of derivative instruments to manage interest rate and foreign exchange risks, and their financial impact - Company uses derivative financial instruments (interest rate swaps, foreign exchange forward contracts) to manage interest rate and foreign exchange rate risks[87] Gain (Loss) Recognized on Derivative Instruments (in millions) | Derivative Instrument | 3 Months Ended Sep 30, 2021 | 3 Months Ended Sep 30, 2020 | 9 Months Ended Sep 30, 2021 | 9 Months Ended Sep 30, 2020 | | :-------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Total Gain (Loss) | $(2.2) | $(29.9) | $(10.4) | $(41.5) | - Foreign exchange forward contracts are used to mitigate currency fluctuations on non-functional currency monetary assets and liabilities, and as cash flow hedges for raw material purchases and intercompany sales[90][91][93] - Interest rate swaps are used to add stability to interest expense and manage exposure to interest rate movements[97] Note 15: Fair Value of Assets and Liabilities This note presents the fair value measurements of various assets and liabilities, including investments and senior notes Assets and Liabilities Recorded at Fair Value (in millions) | Item | Sep 30, 2021 Fair Value | Dec 31, 2020 Fair Value | | :--- | :---------------------- | :---------------------- | | Assets: | | | | Short-term investments (Certificates of deposit) | $13.7 | $37.2 | | Assets held in rabbi trusts | $6.7 | $6.6 | | Foreign exchange forward contracts | $0.1 | $1.7 | | Total Assets | $20.5 | $45.5 | | Liabilities: | | | | Foreign exchange forward contracts | $0.0 | $2.7 | | Interest rate swaps - short term | $4.4 | $4.7 | | Interest rate swaps - long term | $0.0 | $3.0 | | Deferred compensation | $6.7 | $6.6 | | Total Liabilities | $11.1 | $17.0 | Fair Value vs. Carrying Value of Senior Notes (in millions) | Note Type | Sep 30, 2021 Fair Value | Sep 30, 2021 Carrying Value | Dec 31, 2020 Fair Value | Dec 31, 2020 Carrying Value | | :-------- | :---------------------- | :-------------------------- | :---------------------- | :-------------------------- | | 2024 Senior Notes | $407.5 | $400.0 | $400.0 | $400.0 | | 2025 Senior Secured Notes - USD | $764.8 | $700.0 | $778.8 | $700.0 | | 2025 Senior Secured Notes - EUR | $438.7 | $405.3 | $466.0 | $429.5 | Note 16: Commitments and Contingencies This note outlines the company's potential obligations from indirect tax matters, legal proceedings, and contractual guarantees - Company accrues for indirect tax matters when loss is probable and estimable; aggregate risk for material indirect tax matters estimated up to $76.3 million as of September 30, 2021[104][106] - Involved in two appraisal proceedings in Germany challenging the adequacy of cash compensation related to the DPLTA and merger squeeze-out of Diebold Nixdorf AG minority shareholders[109][110] - Maximum future contractual obligations for bank guarantees, standby letters of credit, and surety bonds totaled $180.0 million at September 30, 2021[113] Note 17: Revenue Recognition This note details the timing of revenue recognition, contract balances, and remaining performance obligations Timing of Revenue Recognition (9 Months Ended Sep 30) | Timing of Revenue Recognition | 2021 | 2020 | | :-------------------------- | :--- | :--- | | Products transferred at a point in time | 39% | 38% | | Products and services transferred over time | 61% | 62% | Contract Balance Information (in millions) | Metric | Sep 30, 2021 | Dec 31, 2020 | | :----- | :----------- | :----------- | | Trade receivables | $671.4 | $646.9 | | Contract liabilities (Deferred revenue) | $246.4 | $346.8 | - Aggregate amount of transaction price allocated to remaining performance obligations was approximately $1,300 million as of September 30, 2021, expected to be recognized over the next twelve months[120] Note 18: Finance Lease Receivables This note provides a breakdown of finance lease receivables, including gross minimum lease payments and future payment schedules - Company provides financing arrangements to customers, largely classified as sales-type leases[121] Components of Finance Lease Receivables (in millions) | Metric | Sep 30, 2021 | Dec 31, 2020 | | :----- | :----------- | :----------- | | Gross minimum lease receivables | $44.3 | $44.0 | | Allowance for credit losses | $(0.3) | $(0.2) | | Estimated unguaranteed residual values | $0.2 | $0.2 | | Unearned interest income | $(1.4) | $(1.5) | | Total Finance Lease Receivables (net of unearned interest) | $42.8 | $42.5 | Future Minimum Payments from Finance Lease Receivables (in millions) | Year | Amount | | :--- | :----- | | 2021 | $5.8 | | 2022 | $14.1 | | 2023 | $6.5 | | 2024 | $6.0 | | 2025 | $5.5 | | Thereafter | $6.4 | | Total | $44.3 | Note 19: Segment Information This note presents financial data by reportable segment, including net sales and operating profit, based on customer categories - Company's reportable segments are Eurasia Banking, Americas Banking, and Retail, based on customer segments[124] Net Sales Summary by Segment (in millions) | Segment | 3 Months Ended Sep 30, 2021 | 3 Months Ended Sep 30, 2020 | 9 Months Ended Sep 30, 2021 | 9 Months Ended Sep 30, 2020 | | :------ | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Eurasia Banking | $323.5 | $364.2 | $977.3 | $1,012.4 | | Americas Banking | $346.6 | $368.5 | $970.8 | $1,044.6 | | Retail | $288.1 | $262.5 | $897.5 | $739.4 | | Total Revenue | $958.2 | $995.2 | $2,845.6 | $2,796.4 | Segment Operating Profit (in millions) | Segment | 3 Months Ended Sep 30, 2021 Operating Profit | 3 Months Ended Sep 30, 2021 Operating Margin | 9 Months Ended Sep 30, 2021 Operating Profit | 9 Months Ended Sep 30, 2021 Operating Margin | | :------ | :------------------------------------------- | :------------------------------------------- | :------------------------------------------- | :------------------------------------------- | | Eurasia Banking | $26.7 | 8.3% | $77.9 | 8.0% | | Americas Banking | $32.1 | 9.3% | $99.2 | 10.2% | | Retail | $31.0 | 10.8% | $86.3 | 9.6% | - Eurasia Banking operating profit decreased due to timing-related sales decline, unfavorable customer/solution mix, and higher logistics costs[190] - Americas Banking operating profit decreased due to lower net sales volume, increased logistical costs, and raw material cost inflation[193] - Retail operating profit increased significantly (52.7% for 3 months, 107.5% for 9 months) due to increased net sales and gross margin improvements from higher-margin POS/SCO products and professional services[194] Note 20: Subsequent Event This note discloses a significant event occurring after the reporting period, specifically the divestiture of a German business - Company signed an agreement on October 8, 2021, to divest its German reverse vending business, including approximately $10.0 million of net assets[130] - Transaction is subject to regulatory approval and expected to close in Q4 2021 or Q1 2022, with no material gain or loss expected[130] Item 2: Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides management's perspective on the company's financial performance and condition, discussing key business strategies, transformation initiatives, the impact of COVID-19, and detailed analysis of operating results, liquidity, and capital resources Overview This section provides a high-level introduction to the company's business and strategic direction Introduction This section introduces Diebold Nixdorf as a global leader in Connected Commerce, serving major financial institutions and retailers worldwide - Diebold Nixdorf is a world leader in enabling Connected Commerce™, automating, digitizing, and transforming banking and shopping[134] - Serves a majority of the world's top 100 financial institutions and top 25 global retailers in over 100 countries with approximately 22,000 employees[134] Strategy This section outlines the company's strategic focus on innovating consumer transaction experiences and streamlining cost structures - Strategy focuses on innovating solutions for better consumer transaction experiences and streamlining cost structures through hardware, software, and services integration[135] DN Now Transformation Activities This section details the company's ongoing transformation program aimed at operational excellence and customer-centricity - Executing "DN Now" transformation program focused on operational excellence and customer-centricity[136] - Key activities include streamlining operating models, modernizing services (e.g., AllConnect Data Engine), optimizing manufacturing (e.g., DN Series ATMs), reducing administrative expenses, increasing sales productivity, and standardizing back-office processes[136] COVID-19 This section discusses the impact of the COVID-19 pandemic on the company's operations, supply chain, and overall business outlook - Designated as providing "critical infrastructure" services globally during the COVID-19 pandemic[137] - Experiencing longer lead times for electronic components and logistics delays due to the pandemic, but customer demand remains robust[138] - Ultimate impact of COVID-19 on business, results of operations, cash flows, and financial position is uncertain and could be material[138] CONNECTED COMMERCE SOLUTIONS™ This section describes the company's comprehensive solutions for banking and retail, encompassing services, products, and software Banking This section details the company's offerings for the banking sector, including services, products, and software solutions Banking Services This section describes the DN AllConnect Services portfolio for banking, focusing on outsourced ATM operations and managed services - DN AllConnect Services℠ portfolio offers outsourced ATM fleet operations, including installation, availability, managed services, and branch management[142][143] - Leverages DN AllConnect Data Engine (ACDE) with IoT technology and machine learning for proactive and predictive service, aiming for higher availability and reduced call rates[144] Banking Products This section highlights the company's banking product portfolio, including cash recyclers, dispensers, and the DN Series ATMs - Banking product portfolio includes cash recyclers, dispensers, intelligent deposit terminals, teller automation, and kiosk technologies[145] - DN Series™ ATMs are a key offering, featuring superior availability, next-generation cash recycling, Vynamic® software integration, modular design, higher note capacity, improved security, and a streamlined footprint[146] Banking Software This section outlines the DN Vynamic Software for banking, an open and flexible portfolio supporting various channels and payments - DN Vynamic® Software is an open and flexible portfolio for banking, supporting channels, operations, consumer experience, and payments[148] - Includes hardware-agnostic applications for ATMs, kiosks, self-service devices, online, and mobile channels, utilizing WebApp architecture and APIs[149][150] - Vynamic Payments, built on a cloud-native platform with microservices architecture, offers enhanced features like cardless/touchless transactions and video-teller capabilities via a Software as a Service model[151] Retail This section details the company's offerings for the retail sector, including services, products, and software solutions Retail Services This section describes the DN AllConnect Services for retailers, optimizing performance and total cost of ownership for retail touchpoints - DN AllConnect Services® for retailers optimizes performance and total cost of ownership for retail touchpoints and infrastructure[154] - Services include implementation, on-site maintenance for multivendor solutions, on-demand service desk support, remote monitoring of hardware, and application services for software deployments[154] Retail Products This section highlights the company's retail product portfolio, including POS, self-service terminals, and cash management systems - Retail product portfolio includes modular and integrated POS and self-service terminals[155] - Key products are the DN SERIES EASY line, SCO products, BEETLE®/iSCAN EASY eXpress™ (hybrid), and K-two Kiosks for automating tasks and transactions[155] - Also offers a broad range of peripherals and cash management systems[155] Retail Software This section outlines the DN Vynamic Software for Retail, an open and flexible portfolio with modular micro-services architecture - DN Vynamic® Software for Retail is an open and flexible portfolio with modular micro-services architecture, supporting various retail verticals[158] - Promotes standards and open API-based architectures for integrating third-party technologies and optimizing efficiency[158] - Self-service element leverages AI for automatic item recognition, automated age verifications, and screen mirroring for touchless checkout, supporting online/offline promotions and loyalty programs[160] Business Drivers This section identifies the key factors influencing the demand for the company's products and services, including upgrades and advanced self-service capabilities - Demand for services on distributed IT assets (ATMs, POS, SCO), including managed and professional services[161] - Timing of product upgrades/replacement cycles for ATMs, POS, and SCO[161] - Demand for advanced self-service capabilities supported by software licenses, maintenance, and professional services[161] - Demand for innovative and secure technology aligned with the Connected Commerce strategy[161] Results of Operations This section provides a detailed analysis of the company's financial performance, including net sales, gross profit, operating expenses, and net loss Net Sales This section analyzes the company's net sales performance, including changes in revenue and contributing factors by segment Total Net Sales (in millions) | Period | 3 Months Ended Sep 30, 2021 | 3 Months Ended Sep 30, 2020 | % Change | 9 Months Ended Sep 30, 2021 | 9 Months Ended Sep 30, 2020 | % Change | | :----- | :-------------------------- | :-------------------------- | :------- | :-------------------------- | :-------------------------- | :------- | | Total Net Sales | $958.2 | $995.2 | (3.7)% | $2,845.6 | $2,796.4 | 1.8% | - For the three months ended Sep 30, 2021, net sales decreased by $37.0 million (3.7%), with a constant currency decrease of $52.7 million[165] - For the nine months ended Sep 30, 2021, net sales increased by $49.2 million (1.8%), with a constant currency decrease of $46.7 million[173] - Retail net sales increased significantly (9.8% for 3 months, 21.4% for 9 months) driven by POS and SCO roll-outs in Europe and professional services demand[170][176] Gross Profit This section examines the company's gross profit and margin, highlighting factors affecting profitability from products and services Total Gross Profit and Margin (in millions) | Metric | 3 Months Ended Sep 30, 2021 | 3 Months Ended Sep 30, 2020 | % Change | 9 Months Ended Sep 30, 2021 | 9 Months Ended Sep 30, 2020 | % Change | | :----- | :-------------------------- | :-------------------------- | :------- | :-------------------------- | :-------------------------- | :------- | | Total Gross Profit | $260.1 | $284.1 | (8.4)% | $785.2 | $758.5 | 3.5% | | Total Gross Margin | 27.1% | 28.5% | | 27.6% | 27.1% | | - Services gross margin remained materially consistent (excluding non-routine charges) for both periods[178] - Product gross margin declined due to higher logistics costs, reduced sales volume, unfavorable solution and geography mix, and non-recurrence of interim cost benefits[179] Operating Expenses This section details the company's selling, administrative, and R&D expenses, explaining changes over reporting periods Total Operating Expenses (in millions) | Metric | 3 Months Ended Sep 30, 2021 | 3 Months Ended Sep 30, 2020 | % Change | 9 Months Ended Sep 30, 2021 | 9 Months Ended Sep 30, 2020 | % Change | | :----- | :-------------------------- | :-------------------------- | :------- | :-------------------------- | :-------------------------- | :------- | | Selling and administrative expense | $195.5 | $226.0 | (13.5)% | $603.7 | $629.7 | (4.1)% | | Research, development and engineering expense | $25.6 | $30.2 | (15.2)% | $95.3 | $93.4 | 2.0% | | Total Operating Expenses | $221.4 | $260.3 | (14.9)% | $697.4 | $740.2 | (5.8)% | - Selling and administrative expense decreased due to lower non-routine and restructuring expenses, and changes in bonus plan accruals[182] - R&D expense decreased for the three-month period due to initiatives meeting capitalization thresholds, but increased for the nine-month period due to growth initiatives[183] Operating Profit (Loss) This section analyzes the company's operating profit or loss and margin, attributing changes to various operational factors Operating Profit (Loss) and Margin (in millions) | Metric | 3 Months Ended Sep 30, 2021 | 3 Months Ended Sep 30, 2020 | % Change | 9 Months Ended Sep 30, 2021 | 9 Months Ended Sep 30, 2020 | % Change | | :----- | :-------------------------- | :-------------------------- | :------- | :-------------------------- | :-------------------------- | :------- | | Operating Profit (Loss) | $38.7 | $23.8 | 62.6% | $87.8 | $18.3 | 379.8% | | Operating Margin | 4.0% | 2.4% | | 3.1% | 0.7% | | - Improvements in operating profit are primarily due to the non-recurrence of prior-year restructuring, transformation, and loss-making contract provisions[185] Other Income (Expense) This section details non-operating income and expenses, including interest, foreign exchange gains/losses, and miscellaneous items Other Income (Expense), Net (in millions) | Metric | 3 Months Ended Sep 30, 2021 | 3 Months Ended Sep 30, 2020 | % Change | 9 Months Ended Sep 30, 2021 | 9 Months Ended Sep 30, 2020 | % Change | | :----- | :-------------------------- | :-------------------------- | :------- | :-------------------------- | :-------------------------- | :------- | | Interest expense | $(51.3) | $(144.3) | 64.4% | $(149.7) | $(240.6) | 37.8% | | Foreign exchange gain (loss), net | $4.4 | $(2.3) | N/M | $0.9 | $(9.5) | N/M | | Miscellaneous, net | $4.6 | $(1.5) | N/M | $6.6 | $4.1 | 61.0% | | Other income (expense), net | $(41.3) | $(146.2) | 71.8% | $(137.2) | $(240.6) | 43.0% | - Interest expense decreased significantly due to the non-recurrence of July 2020 refinancing costs (make-whole premium, deferred debt issuance costs write-off) and reduced interest rates[186] - Foreign exchange gain in Q3 2021 primarily from favorable Brazilian real and euro exposure[188] - Miscellaneous, net, includes recognition of non-service pension plan benefits in Germany and a $7.2 million gain from COLI plan surrender in 2020[188] Net Loss This section analyzes the company's net loss and effective tax rate, identifying key drivers for changes in profitability Net Loss (in millions) | Metric | 3 Months Ended Sep 30, 2021 | 3 Months Ended Sep 30, 2020 | % Change | 9 Months Ended Sep 30, 2021 | 9 Months Ended Sep 30, 2020 | % Change | | :----- | :-------------------------- | :-------------------------- | :------- | :-------------------------- | :-------------------------- | :------- | | Net Loss | $(2.0) | $(100.9) | 98.0% | $(40.4) | $(217.4) | 81.4% | | Percent of net sales | (0.2)% | (10.1)% | | (1.4)% | (7.8)% | | | Effective tax rate | 35.5% | 17.6% | | 21.6% | 2.2% | | - Decline in net loss primarily driven by reduced interest expense due to the non-recurrence of the July 2020 refinancing event and a $6.2 million increase in income tax benefit for the nine-month period[189] Segment Operating Profit Summary This section summarizes operating profit and margin by reportable segment, explaining performance variations across banking and retail Segment Operating Profit and Margin (in millions) | Segment | 3 Months Ended Sep 30, 2021 Operating Profit | 3 Months Ended Sep 30, 2021 Operating Margin | 9 Months Ended Sep 30, 2021 Operating Profit | 9 Months Ended Sep 30, 2021 Operating Margin | | :------ | :------------------------------------------- | :------------------------------------------- | :------------------------------------------- | :------------------------------------------- | | Eurasia Banking | $26.7 | 8.3% | $77.9 | 8.0% | | Americas Banking | $32.1 | 9.3% | $99.2 | 10.2% | | Retail | $31.0 | 10.8% | $86.3 | 9.6% | - Eurasia Banking operating profit decreased due to timing-related sales decline, unfavorable customer/solution mix, and higher logistics costs[190] - Americas Banking operating profit decreased due to lower net sales volume, increased logistical costs, and raw material cost inflation[193] - Retail operating profit increased significantly (52.7% for 3 months, 107.5% for 9 months) due to increased net sales and gross margin improvements from higher-margin POS/SCO products and professional services[194] Liquidity and Capital Resources This section assesses the company's ability to meet its short-term and long-term financial obligations, including cash flow and debt management Liquidity and Capital Resources Summary This section provides an overview of the company's cash position and available liquidity, including credit facilities Total Cash and Cash Availability (in millions) | Metric | Sep 30, 2021 | Dec 31, 2020 | | :----- | :----------- | :----------- | | Cash and cash equivalents | $215.9 | $324.5 | | Additional cash availability (from held for sale, uncommitted lines, Revolving Facility, short-term investments) | $126.3 | $364.1 | | Total cash and cash availability | $342.2 | $688.6 | - Management expects capital resources (retained income, credit facilities, leasing) to be sufficient for planned working capital, R&D, investments, and pension contributions[195] - $95.1 million available under the Revolving Facility as of September 30, 2021[196] Operating Activities This section details the net cash provided or used by operating activities, explaining changes due to working capital and other operational factors Net Cash Provided (Used) by Operating Activities (in millions) | Period | 9 Months Ended Sep 30, 2021 | 9 Months Ended Sep 30, 2020 | | :----- | :-------------------------- | :-------------------------- | | Net cash provided (used) by operating activities | $(291.6) | $(196.7) | - Increased cash use in operating activities primarily due to higher inventory levels (managing longer supply chain lead times and increased customer demand), timing of income/non-income tax payments, and increased severance payments[200][201] - Partially offset by a $177.0 million decrease in net loss and successful management of payables[200][201] Investing Activities This section outlines the net cash provided or used by investing activities, including divestitures and investment maturities Net Cash Provided (Used) by Investing Activities (in millions) | Period | 9 Months Ended Sep 30, 2021 | 9 Months Ended Sep 30, 2020 | | :----- | :-------------------------- | :-------------------------- | | Net cash provided (used) by investing activities | $(4.6) | $(53.4) | - Impacted by non-recurring net use of $53.7 million cash in Q1 2020 from Portavis Gmbh divestiture[204] - Increased net cash proceeds from maturities of investments (primarily in Brazil) by $17.4 million[204] Financing Activities This section details the net cash provided or used by financing activities, including debt issuance, repayments, and capital contributions Net Cash Provided (Used) by Financing Activities (in millions) | Period | 9 Months Ended Sep 30, 2021 | 9 Months Ended Sep 30, 2020 | | :----- | :-------------------------- | :-------------------------- | | Net cash provided (used) by financing activities | $189.8 | $160.8 | - Change primarily due to non-recurrence of debt issuance costs related to 2025 Senior Secured Notes in Q3 2020[206] - Includes $12.7 million in capital contributions from noncontrolling shareholders in Q1 2021[207] - Net debt to trailing 12 months adjusted EBITDA was 5.4 times as of September 30, 2021[208] Contractual Obligations This section summarizes the company's future contractual cash obligations and contingent liabilities - Minimal purchase commitments due within one year for materials through contract manufacturing agreements[209] - Contractual cash obligations and contingent liabilities generally unchanged from December 31, 2020[210] Off-Balance Sheet Arrangements This section describes the company's principal off-balance sheet arrangements, such as guarantees and sales of finance receivables - Principal off-balance sheet arrangements include guarantees and sales of finance receivables[211] - Issues performance guarantees, backed by standby letters of credit or surety bonds, on behalf of subsidiaries[211] - Sells finance receivables to financial institutions, removing them from the balance sheet and recording gains/losses in the statement of operations[211] Supplemental Guarantor Financial Information This section provides summarized financial information for the Parent Company and guarantor subsidiaries, as required by debt indentures - Provides summarized financial information for the Parent Company and guarantor subsidiaries on a combined basis, as required by the indenture governing the 2024 Senior Notes[212][215] - Each guarantor subsidiary is 100% owned by the Parent Company and fully and unconditionally guarantees the 2024 Senior Notes on a joint and several basis[213] Summarized Balance Sheets (Parent Company and Guarantor Subsidiaries, Combined, in millions) | Metric | Sep 30, 2021 | Dec 31, 2020 | | :----- | :----------- | :----------- | | Total current assets | $491.7 | $449.9 | | Total non-current assets | $2,007.2 | $1,504.6 | | Total current liabilities | $1,207.7 | $1,252.5 | | Total non-current liabilities | $2,210.2 | $2,084.3 | Summarized Statements of Operations (Parent Company and Guarantor Subsidiaries, Combined, in millions) | Metric | 9 Months Ended Sep 30, 2021 | Year Ended Dec 31, 2020 | | :----- | :-------------------------- | :---------------------- | | Net sales | $759.2 | $1,097.4 | | Loss from continuing operations before taxes | $(157.4) | $(292.7) | | Net (loss) income attributable to Diebold Nixdorf, Incorporated | $(40.5) | $(269.1) | Critical Accounting Policies and Estimates This section highlights the significant management judgments and assumptions used in preparing the financial statements - Financial statements require significant management estimates and assumptions (e.g., revenue recognition, valuation of receivables, inventories, goodwill, intangible assets, legal contingencies, income taxes, pension benefits)[218] - No material changes to critical accounting policies and estimates since December 31, 2020[219] Forward-Looking Statement Disclosure This section cautions readers about forward-looking statements, outlining key risks and uncertainties that could affect future results - Report contains forward-looking statements subject to significant risks and uncertainties[220][221] - Key risks include global supply chain complexities (e.g., component delays, logistics), ultimate impact of COVID-19, ability to achieve benefits from cost-reduction initiatives (DN Now), success of new products (DN Series, EASY family), cybersecurity breaches, ability to service debt, and market/economic conditions[222][224] - Readers are cautioned not to place undue reliance on these statements, and the company assumes no obligation to update them[222][225] Item 3: Quantitative and Qualitative Disclosures About Market Risk This section refers to the company's Annual Report on Form 10-K for market risk disclosures, noting that the COVID-19 pandemic has negatively impacted the business, and its future material impact cannot be reasonably estimated. No other material changes were reported since December 31, 2020 - Refers to Annual Report on Form 10-K for market risk disclosures[227] - COVID-19 pandemic has negatively impacted business, and its future material impact cannot be reasonably estimated[227] - No other material changes in market risk information since December 31, 2020[227] Item 4: Controls and Procedures This section confirms that the CEO and CFO have certified the report, and management, under their supervision, concluded that disclosure controls and procedures were effective as of September 30, 2021. No material changes in internal control over financial reporting occurred during the third quarter - CEO and CFO certifications are included as required by the Exchange Act[228] - Management concluded that disclosure controls and procedures were effective as of September 30, 2021[231] - No material changes in internal control over financial reporting during the third quarter ended September 30, 2021[232] Part II - Other Information This part includes disclosures on legal proceedings, risk factors, equity sales, defaults, mine safety, other information, and exhibits Item 1: Legal Proceedings This section states that the company is party to several routine lawsuits not considered material to its financial position or results of operations. It refers to Note 16 for more detailed information on legal contingencies - Company is party to routine lawsuits not considered material to financial position or results of operations[234] - Refers to "Legal Contingencies" in Note 16 for more information[235] Item 1A: Risk Factors This section refers to the company's Annual Report on Form 10-K for a discussion of risk factors, stating there have been no material changes since December 31, 2020 - Refers to Annual Report on Form 10-K for risk factors[236] - No material change to risk factor information since December 31, 2020[236] Item 2: Unregistered Sales of Equity Securities and Use of Proceeds This section provides information on share repurchases made during the third quarter ended September 30, 2021, primarily related to share-based compensation plans Share Repurchases (Third Quarter Ended Sep 30, 2021) | Period | Total Number of Purchased Shares | Average Price Paid Per Share | Maximum Number of Shares that May Yet Be Purchased Under the Plans | | :----- | :------------------------------- | :--------------------------- | :----------------------------------------------------------------- | | July | 145 | $13.66 | 2,426,177 | | August | — | — | 2,426,177 | | September | 1,071 | $10.16 | 2,426,177 | | Total | 1,216 | $10.58 | | - All shares were surrendered or deemed surrendered in connection with share-based compensation plans[237] Item 3: Defaults Upon Senior Securities This section states that there were no defaults upon senior securities - No defaults upon senior securities[238] Item 4: Mine Safety Disclosures This item is not applicable to the company - Not applicable[239] Item 5: Other Information This section states that there is no other information to report - None[240] Item 6: Exhibits This section lists all exhibits filed as part of the Form 10-Q, including articles of incorporation, certifications, and XBRL documents - Lists various exhibits, including corporate governance documents, subsidiary guarantors, CEO/CFO certifications, and XBRL data files[242] Signatures This section contains the required signatures of the President and Chief Executive Officer, and the Senior Vice President and Chief Financial Officer, certifying the report on behalf of Diebold Nixdorf, Incorporated - Report signed by Gerrard B. Schmid (President and CEO) and Jeffrey Rutherford (SVP and CFO) on October 28, 2021[246][247]