Good day, everyone, and welcome to the Diebold Nixdorf First Quarter 2017 Financial Results Conference Call. At this time, for opening remarks and introductions, I would like to turn the conference over to Mr. Steve Virostek, Vice President of Investor Relations. Please go ahead, sir.

Thank you, Maraya, and welcome to Diebold Nixdorf's first quarter earnings call for 2017. Joining me today are Andy Mattes, President and CEO; and Chris Chapman, Senior Vice President and Chief Financial Officer. Per our custom, this webcast is being recorded and a replay will be made available later this afternoon. For your benefit, we've posted presentation slides to accompany our discussion on the Investor Relations page of dieboldnixdorf.com. Slide two is a reminder that we'll be referencing certain non-GAAP and pro forma financial information, which we believe are helpful indicators of the company's performance. We've reconciled these metrics to their respective and most directly comparable GAAP metrics in our supplemental schedules on both our earnings release and in the back of the slides. On slide three, we remind everyone that certain comments may be characterized as forward-looking statements and that there are a number of factors that could cause actual results to differ materially from these statements. You may find additional information on these factors in the company's SEC filings, including our 10-Q, which was filed this morning. As usual, this forward-looking information is current as of today, and subsequent events may render this information out of date. And with that, I will hand the call over to Andy.

Thanks, Steve, and good morning, everyone. During the first quarter, our company completed the transition to Diebold Nixdorf. We've finalized the domination agreement and fully implemented the line of business structure, as evidenced by our new reporting segment, which you can read about in the 10-Q filed this morning. Now we are ramping up our long-term transformation activities with the launch of our DN2020 program, which we announced at our Investor Day in February. I am pleased to report that we're off to a good start. From a market perspective, we're seeing continued strength in retail and we're beginning to see banking order activity pick up. These trends drove systems order growth of more than 30% sequentially in constant currency with double-digit gains in banking and retail across EMEA and Asia Pac. We had a positive book-to-bill ratio in the quarter for the company as well as each of the regions. First quarter orders drove our backlog up around 5% sequentially, adjusting for currency. Branch automation, contactless cash and recycling are driving much of the order activity from our banking customers. A good example is Banco Santander, which selected us to provide more than 1,200 advanced ATMs and recycling units in support of their digital banking strategy. In total, Diebold Nixdorf sold more than 5,000 recycling units during the quarter to different financial institutions in 10 countries. The primary motivation of the bank is improved operating efficiency. Financial institutions who adopt recycling technology typically experience reductions in the order of 35% for cash replenishment costs. And Diebold Nixdorf is the only western supplier with its own recycling IP, giving us a competitive advantage going forward as this market continues to expand. Additionally, orders are benefiting from continued customer investments in anti-fraud measures. One of our national accounts in the U.S.…

Thanks, Andy. And good morning, everyone. First quarter results were presented in our new segment format with the combined Diebold Nixdorf operations. As Andy mentioned, our presentation of first quarter 2017 results includes our new lines of business; services, systems and software. In addition, we are providing select pro forma information for the year-ago period to help facilitate more meaningful comparisons. Please keep in mind that the pro forma financials are illustrative but are definitive due to certain differences in how the legacy businesses were operated in the accounting treatment between the companies with only material changes addressed. As usual, my comments today will focus on our non-GAAP results from continuing operations, unless otherwise noted. Beginning on slide six, we compare total revenue for the first quarter of 2017 with pro forma revenue from the year-ago period. On a constant currency basis, revenue decreased 3% primarily due to our systems and services lines of business, which I will detail shortly. Looking at our mix of revenue for the quarter on a GAAP basis, services and software accounted for 62% of the business, while Systems accounted for 38%. Our geographic mix of revenue was 51% in EMEA, followed by 36% in the Americas and 13% in Asia-Pacific. With respect to our Solutions, banking accounted for 74% of total revenue, while retail was 26% of total company revenue. Moving to slide seven, we compare key non-GAAP profit metrics for the first quarter of 2017 with pro forma financials for the first quarter of 2016. The $34 million change in gross profit is primarily due to the systems and services business, which I will discuss in greater detail later in my comments. Operating expenses down $31 million, or 200 basis points as a percent of revenue, compared to pro forma 2016 results, with…

Thank you. We'll take our first question from Matt Summerville with Alembic Global Advisors.

Thanks. A couple of questions. First, if I heard you right, you anticipate very strong orders in the first half of the year. You saw that in Q1. Interest expense is going to be lower for the full year, I think, relative to how you were thinking about it before, and it sounds like you're comfortable that your synergy targets are going to exceed – I believe your guidance was around $40 million – so that expectation. So when I line that up, I guess, why are we not seeing the low end of your guidance come up or perhaps even guidance raised? If you could close the loop on all that, that would be helpful.

Yes. Thanks for the question, Matt. First starting with the adjusted EBITDA, obviously the change in interest expense is not going to impact that overall calculation. And what we've talked about with the change in revenue coming down, we see the costs offsetting. So the overall pieces there from an adjusted EBITDA stay aligned. When we look at the overall interest expense benefit, keep in mind that we're not going to see the full benefit of this in the second quarter. It's going to be more – we'll get a half quarter of benefit and we get the full impact really in Q3 and Q4. In addition to that, we do have some items that are going against us below the line. You see in Q1 we probably had about a $0.03 to $0.04 headwind that's offsetting a portion of the interest expense just on the translation effect, and we have a couple of other items that are going on below the line. So I did not feel it was prudent to just push all of that benefit through the EPS at this time. Obviously, we'll see how things go later in the year, but that's our current outlook right now.

And then as a follow-up, if you can speak a little bit more directly to what you're seeing in your North American banking business, perhaps delineating between the small and big bank market and maybe what customers are saying about spend plans in context of policy change or lack thereof. Thank you.

Matt, at this point in time, from order book and pipeline, it's still a big boy's game. The larger banks continue to invest and do so very deliberately. What we do see is across a broader universe, more emphasis on software, as people are truly declaring the ATM channel as a very important route to market, and everybody wants to have their own unique approach to how do you address your customers, and needless to say, you need a lot of good software to do so. Other than that, we're getting positive vibes from the regional banks, but so far there have not been any concrete policy changes. Hence people are waiting to see what's coming down the pipe. But should we see some easing on the Dodd-Frank environment, that would definitely be considered a positive indicator by the regional banks. Also, if I talk to the CEOs of the regional banks, the community banks that had an opportunity to meet with the President, they came away pretty constructive from that meeting, but it's still a little bit of a wait-and-see attitude what's coming out of Washington.

Thanks, guys.

And we'll take our next question from Paul Coster with JPMorgan.

Andy, you noted that the big banks are kind of really fully committed to the branch transformation projects. In that context, I don't really understand why the hardware sales would be back-end loaded. You'd expect sort of a slightly smoother deployment schedule. What am I missing here?

Paul, it's just the rollout of the deals. If you take a look at all the deals that we also mentioned in our release this morning, I mean, these are all 1,000 machine plus deals, and they just have their individual set of logics on when the banks are willing to roll out a project. In many cases, depending on factors completely outside of our control, and quite honestly, our market, if there's like branch reconfiguration or something included in that. Having said that, it is a – the industry is shifting towards a big project industry. And I think we've mentioned that on earlier calls. The rip-and-replacement market has pretty much ceased to exist. Anytime somebody looks at upgrading a machine, people look at going to the next generation, people are looking to go for connected commerce, and that turns into a bigger project, which extends sales cycles, and it also makes the rollout cycles a little bit more prolongated.

The software business grew, which is good, and it's material. $110 million in revenue this quarter. Can you segment it at all that which is attached versus unattached and what goes into each segment?

Let me just give you a little bit of an example of where we see momentum building, and then I'll let Chris give you the break-down on the revenue. If I just look back, it's about two years ago that we acquired Phoenix. And between then and today, we've added about two dozens of regional banks in the U.S. alone to our portfolio, and we needed some of the certifications with the large providers. Those are coming in. So we were building our backlog continuously, and you'll start to see that being rolled out. So, good news is we see software activity in the regional banking space, we see software activity in the large banking space, and as banks are moving towards contactless cash, we see upgrade opportunities in the software universe. So it's across all segments, it's across all geographies, and it's predominantly a North America and EMEA play.

Okay.

And if you think about it just from an allocation between what's license and maintenance versus the professional service, you have to bear with us a little bit, we're still getting all of our detailed reporting in place on that. So I don't feel comfortable giving exact numbers. But I would say we still have a higher portion of this at the professional service level, call it maybe a one-third, two-third between what's professional services versus what's the license and maintenance on a recurring basis, which is in line with what we talked about back in February at our Investor Day event.

All right. Okay. Thank you very much.

And we'll take our next question from Kartik Mehta with Northcoast Research.

Hey, good morning, Andy and Chris.

Morning.

Andy, at the end of last year, you had talked about some issues in EMEA because you were trying to get both the organizations integrated, and that resulted in some market share losses. As you sit today, how do you think you're positioned there, and kind of what's happened in the marketplace that would give you confidence that that trend has stopped?

Kartik, thanks for connecting last quarter to this quarter. Look, Q4 was weak. We had homegrown issues in Europe, including the fact we still had people on different comp plans. We didn't have a common management tool. If you take a look at our growth and our book-to-bill ratio in EMEA, as I said in my prepared remarks, that EMEA had double-digit gains both in banking and retail. So, feel very encouraged, and if I see the customer's feedback and if I see the conversations that we're being invited to, lot of positive momentum. And it's not just one country, it's across a whole bunch of countries where the activity is going strong. You saw our press release about recycling in Russia, which was a huge step forward. You can also see recycling. It was a technology that started in Asia. It's now literally moving east. Starting in Eastern Europe, coming to Western Europe, eventually it'll hit the Americas. So, lot of positive momentum, lot of positive customer feedback. And if I may just take a look at the retail side, if you recall, last year was legacy Nixdorf's probably best year in retail and we're topping those order numbers from where we were a year ago. So, again, lot of momentum building out our leadership position in that market and especially driven by opportunities in the skill market.

And then, Andy, if you look at the retail environment in Europe, obviously in the U.S., a lot of pressure for brick-and-mortar retailers from online retailers. As you look in Europe, how do you think your position there and what kind of pressures is the industry witnessing there, if any, from the online world?

Online is a big topic. But let me put that in – just in context for you. I saw a number the other day that if you take a look at all the purchases in retail, including the U.S., 94% of all the retail sales in the world are done through brick-and-mortar. So it's – again, it's one of those rising phenomena versus what you have installed. Having said that, every retailer has to get their arms around a connective commerce strategy. You want to combine your in-store experience with your online experience, with your loyalty programs, with your return program. And that spells opportunity for software. That spells opportunity for our managed services. Our store lifecycle management is probably one of the hottest offerings that we have as a company. And I was with a large retailer in Europe a few weeks back where we talked exactly about that, where they're basically saying, listen, why don't you guys take over the management of the complete branch? And these are pretty sophisticated lifecycles. We actually set up a whole demo branch with them to see how would it work, can we do it, would they feel comfortable outsourcing it to us. So, very encouraging momentum along the value chain, and feel pretty excited about the opportunity in retail.

Thank you very much. Appreciate it.

And we'll take our next question from Jeff Kessler with Imperial Capital.

Yes. Can you describe the – you're talking about the backlog of projects lengthening, becoming more complex. Can you describe a little more, in a little more detail, what that entails? In other words, what are the aspects that are being added on to what were traditional legacy projects? Is there more – as you've mentioned, is there more cash recycling being added? Is there more bank branch transformation services that may not be full branch transformation services but the beginnings of so being added to so that the banks can move on as they move forward? What are the things that are adding to margin? What are the things that are subtracting from margin as this order flow begins to go through your year and into next year?

Well, I think you've hit on all of them really. Let me start with – biggest drivers, as I said, are recycling as well as contactless cash. So contactless cash is the combination of your mobile device through NFC with a machine. We have sent out quite a few press releases about wins that we had in Europe. If you take a look at what's happening here in the U.S., all of the three largest banks in the country have made very bullish statements that they want to upgrade their complete infrastructure to a contactless environment by the end of the year. And that adds software. And when we talk connected commerce, keep in mind, the software universe is now starting to connect to many more back office software pipes, channels, towers, whatever you want to call them, than we used to do in the past. In the old days, all – quote-unquote, "all" we did was we put software on top of a machine to make the machine run and connected it with the ATM network. Today we start to connect it with the customer database. We start to connect it with the advertising database. We start to connect it with an asset management database. We start to connect it with an online banking database. We start to connect it with a mobile channel database. That's all good news because it actually drives professional services, it's very sticky, but it also just means a little bit more project management planning and we've got to team up with other partners. And one of the points we've also raised in previous calls is that this industry is turning to open APIs to more of the partner ecosystem that really starting to drive that more proactively, but it also means you have to coordinate more people to complete the overall project. So it just – it's good news, but it's driving complexity up and complexity drives time lines up. Simple as that.

Have you been given any idea of how long – in other words, trying to project out an IRR for these new, more complex projects also involves customer loyalty and how long you believe you can now keep customers and keep that customer loving you, so to speak, for a longer period of time if you're going to invest more human beings into writing code and if you're going to invest to involve more partners that you're partnering up with and opening up, which opens you up to potential margin dislocation if, on the other hand, offset hopefully by the value proposition you're presenting to your end users. What are the checks and balances there that you're considering?

Well, any time you look into software, the agreements are usually three year agreements, but in reality, people are usually very loyal software customers for five years plus. Most of our managed services agreements, as you can see also with the large two ones that we've renewed, are five-year or five-year-plus type of agreements. So I'd tell you realistically, we have at least a five-year horizon where customers would commit to a relationship with Diebold Nixdorf, and that's a good thing anyway you look at it, gives us an opportunity to upgrade, gives us an opportunity to sell into an existing base, gives us an opportunity to sell software upgrades, modify things, sell additional professional services. So everything is moving towards stickier, longer term relationships, which overall for the shape of the industry I think is a good thing. Now, everything I've said is predominantly a developed market play. You still have the – buying ATMs by the pound and reverse e-auction type of mentality in the Chinas of this world, and that's a different universe. But that's why we're so focused on Europe and the Americas at this point in time.

Okay. Great. Thank you very much.

And we'll take our next question from Joan Tong with Sidoti & Company. Joan K. Tong - Sidoti & Co. LLC: Good morning, guys. You guys talked about the sort of the conversions from backlog to revenue, was somehow stretched out last year, and then you talk about the same thing this quarter. I'm just wondering like if it is getting worse and – or is it just because the complexity of the deals – it's more this year versus last year? Because I specifically remember you talk about this similar – have similar comments like around this time last year in 2016.

Yeah, Joan. It's much more the latter there. It's really about the complexity of the projects. And so when you see this activity in North America and Europe specifically, the complexity of the projects, this is not just a bundled – we go out and we install hardware and we have a break/fix service contract. This is hardware, software, new applications, bundling all of this together, which is a much longer project, in addition to the fact that some of these are quite large. As Andy said, these are pretty decent sized volumes. So this is not going out and installing 100 ATMs across a handful of locations. This is a much larger rollout. So it's a combination of items. Joan K. Tong - Sidoti & Co. LLC: Okay.

I'd say the industry in general is shifting. It's a trend that started last year and it keeps on going forward. And as I said, at the end of the day I think it's a good thing for the industry because it starts to be more meaningful just as you do your revenue comps until these things start to tail and to compare with similar environment, you'll see that a little offsetting the comps. Joan K. Tong - Sidoti & Co. LLC: I see. Got it. And then for the software business, it's like a little bit over 10% of your total revenue. Just wondering if – looking at the capability like the software functions, just wondering is there any sort of area that you think that might be conducive to M&A activities going forward and that you can maybe fill in the holes a little bit faster and maybe offering a more comprehensive software type of offering for your client? Just want to get a sense of what you're thinking about potential M&A just to beef up that piece a little bit more. Obviously, it's a very attractive revenue business on a margin standpoint.

Joan, you hit the nail on the head here. When you take a look at where do we want to generate IP, it's in the software space. And whenever we do something there, we undergo a very normal review process of make, buy or partner. And we will probably come up with a tick in every one of those boxes as we look at the next 18 months going forward. Also, if you take a look at our universe, the number that I saw the other day is that there are approximately 20,000 startups in the fin tech industry. That's probably reasonable to assume that not all of them will turn into a commercial success, but that doesn't mean that there isn't attractive IP that we want to guzzle up while it's available at very opportunistic prices. So we have a very clear radar of what's happening in the market. We're very committed to investing into the software space, organically as well as inorganically, and we'll keep you posted as things progress further. Joan K. Tong - Sidoti & Co. LLC: Okay. And then finally, can you give us an update on the pending litigations with Hyosung? I think there was still one or two of them we're waiting for some sort of final conclusion there. Thank you.

Yeah. That's still winding its way through the process. I think over the next – really in the next quarter, we'll have an opportunity to give a bigger update after we see how some of the things progress in the court system. Joan K. Tong - Sidoti & Co. LLC: All right. Thank you, guys.

Thanks, Joan.

And we'll take our next question from Paul Condra with Credit Suisse. Paul Condra - Credit Suisse Securities (USA) LLC (Broker): Hey, thanks. Good morning, everybody. I just wanted to follow up on the retail business. I think you mentioned something about a new deal in the U.S. So, can you talk a little bit about progress on the U.S. side and maybe growth in terms of systems and software?

Paul, thanks. Look, the U.S. – not just the U.S., the Americas basically think of them as a near greenfield opportunity for us. So just about anything we do is upside. Now, the one thing is that we're saying, hey, we've got cooler technology and great service. The other thing is that people say we want proof. And I think we've talked about this earlier that our first port of call will be large multinational customers who are already working with in Europe, who know us, who know our technology, who trust us, who say, well, listen, now that you've got this great service offering, we'll give you also business as we expand into the U.S. And you saw that with the two deals that we've got; one in the U.S. as well as one in Brazil, where those large customers said fantastic, we now work with Diebold Nixdorf. I was actually with a customer in Europe when the Brazilian business was being decided, and the guy looked me straight in the face and said, Andy, you realize Nixdorf of old would have never gotten this deal irrespective of the fact that we like the software and the hardware. It's just we were super-worried about the technology support. So I'm encouraged about the early wins. You'll see more of our machines being rolled out in the Americas. Those will be proof points. And it's a little bit of, like, penguins off the iceberg. Once the first ones are in the water and they enjoy swimming in it, you'll see other ones follow. Paul Condra - Credit Suisse Securities (USA) LLC (Broker): Can you – I mean, can you give us any expectation or numbers just in terms of how you think that might grow in the Americas over this year, or are you just not quite there yet?

Hi, Paul, this is – this is early. As I said, a lot of people are looking at the pilots we're putting out there. I can tell you we're getting a lot of unsolicited requests. People are excited, especially also on the – in the SCO business, in the kiosk business that there is a new alterative in the market. And we'll take our chances and we'll keep you updated as we start winning deals. Paul Condra - Credit Suisse Securities (USA) LLC (Broker): Okay. Thanks. And then I just wanted to return to the kind of complexity of deals. I was just curious – to what extent is it you're beginning these conversations and maybe it's kind of a sales-driven up-sell of your capabilities versus really being client-driven that they want you to do things that maybe you weren't expecting kind of going into the negotiations? Can you just talk about that?

It's actually probably a third variety. And we see that especially in the MS Outsourcing conversations where you start the conversation with one side of the house, whether it's in banking or in retail, where they're saying you know what? Given the market pressure, we want to innovate the business model. Then they kick the tires with us every six-month project, and then they feel comfortable, but then they also have to sell the project inside of their own community because – especially larger banks are complicated animals. And then you've got the retail channel with the digital channel, with the CIO organization. And you've got to cross a lot of T's and dot a lot of I's until the customers are being lined up. And it's very exciting that we talk about omnichannel and connected commerce, but it also means on the customer side the number of people that you talk to gets bigger and that gets larger. So it's – as I said, I think ultimately it's a good thing. You'll just see things starting to move from the six-month rule of thumb maybe to nine or even 12-month in the rollout. And again, we'll keep you updated as things become more pronounced in our backlog conversion. Paul Condra - Credit Suisse Securities (USA) LLC (Broker): Okay. Thanks. Thanks for the responses. Thanks.

And this concludes today's question-and-answer session. Steve, at this time I will turn the conference back to you for any additional or closing remarks.

Yeah. I just want to thank everybody for participating in the first quarter 2017 earnings call. If you have follow-up questions, please call us or email us. Thank you.

And this concludes today's call. Thank you for your participation. You may now disconnect.