Diebold Nixdorf(US:DBD)2020-10-28 17:24Financial Data and Key Metrics Changes - The company reported a sequential revenue improvement of approximately 12% in Q3 2020, totaling $995 million, with a 5% constant currency year-over-year decline when normalizing for divestitures [17] - Gross profit increased approximately $9 million to $285 million, driven by DN Now initiatives that resulted in a gross margin increase of 310 basis points [38] - Adjusted EBITDA of $130 million increased by 15% over the prior year period, with an adjusted EBITDA margin expanding by 230 basis points to 11.4% [39] Business Line Data and Key Metrics Changes - The banking business saw strong order growth, particularly for next-generation DN Series ATMs, with significant orders from major banks in the U.S., France, and Egypt [12][13] - In the retail segment, demand for self-checkout solutions surged, highlighted by a milestone deal with a pan-European grocery store operator for 14,000 self-checkout devices [14][15] - The services segment also performed well, with new contracts to service thousands of ATMs in Italy and Thailand, and a $3 million managed services contract in the U.S. [16] Market Data and Key Metrics Changes - The company experienced broad-based order growth across banking segments, with a notable rebound in Asia Pacific and strong activity in the Americas [65] - In Europe, order momentum varied, with Eastern Europe showing more strength compared to Southern Europe [65] - The retail segment's revenue declined by 6% in constant currency, primarily due to unplanned revenue reductions, but gross margin expanded significantly [47][48] Company Strategy and Development Direction - The company is focused on digital transformation and enhancing service offerings through the AllConnect Data Engine, which aims to improve operational efficiency and customer satisfaction [26][29] - The DN Now initiatives are expected to deliver around $160 million of savings in 2021, with a focus on higher free cash flow conversion and growth [60] - The company plans to leverage its DN Series recycling capability and expand its market reach for cloud-native debit software as part of its growth strategy [61] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to navigate the challenges posed by the pandemic and highlighted a solid backlog and operating momentum [10][11] - The outlook for Q4 2020 is positive, with expectations for revenue of approximately $3.85 billion and adjusted EBITDA of around $440 million [55] - Management acknowledged the uncertain macroeconomic environment but emphasized the company's resilient operations and commitment to driving revenue growth and profit margin expansion [62] Other Important Information - The company tightened its 2020 outlook to the high end of its prior range, reflecting a balance of opportunities and risks from macroeconomic uncertainty [55] - The company expects to see a robust harvesting of working capital in Q4, driven by inventory management and improved payment patterns [90] Q&A Session Summary Question: Can you talk about the ATM business by region and DN Series uptake? - Management noted solid order activity across all regions, with a rebound in Asia Pacific and strong activity in the Americas, while DN Series is becoming the dominant order in many markets [65][67] Question: What are the unusually strong or weak parts of the business in Q3? - Management indicated that there were no unusual margin results in Q3, with improvements in services and software margins being sustainable [75][76] Question: How important is managed services to the P&L? - Managed services are not a material driver currently but are strategically relevant for future growth, particularly as financial institutions look to outsource more operations [84]