Ladies and gentlemen, good day, and welcome to the Q3 2018 Year-End Earnings Conference Call. At this time, I would like to turn the conference over to Mr. Steve Virostek. Please go ahead, sir.

Thank you, Dave, and welcome everyone to Diebold Nixdorf's third quarter earnings call for 2018. Joining me today are Gerrard Schmid, President and Chief Executive Officer; and Jeff Rutherford, Interim Chief Financial Officer. For your benefit, we've posted slides to the Investor Relations page of dieboldnixdorf.com, which will accompany our discussion today. This webcast is being recorded and a replay will be made available for playback later today on the IR website. On slide 2, we have a remainder that our comments will include non-GAAP financial information, which we believe are helpful in assessing the company's performance. In the supplemental schedules of our slides, we have reconciled the GAAP metrics – excuse me, the non-GAAP metrics to the most directly comparable GAAP metric. On slide 3, we remind everyone that certain comments may be characterized as forward-looking statements, and 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. I'd like to remind our listeners that this forward-looking information is current as of today and subsequent events may render this information out of date. And now, I'll hand the call to Gerrard.

Good morning, everyone. Earlier this month, Jeff Rutherford joined the company as Interim Chief Financial Officer, following the departure of Chris Chapman. Jeff brings 20 years of executive experience at public companies, including successful stints at industrial supply and diversified manufacturing companies. I'm delighted to have him on our management team. Today, my remarks will cover a recap of our capital raise during the third quarter, a summary of our third quarter results and business conditions, an update on our DN Now program activities and savings targets, and some preliminary comments about our perspective on 2019. Slide 3 provide a timeline of events relating to our third quarter capital raise activities. Following our announcement of second quarter results, the company experienced a high volume of redemption requests from Diebold Nixdorf AG shareholders, who had previously elected to hold their shares during Diebold's acquisition of Wincor Nixdorf in 2016. Under German take-over law, minority shareholders have the right to tender their shares for cash compensation. During the month of August, the company settled requests for approximately 4.6 million shares for approximately $300 million. While the company used cash on hand and borrowings under its revolving facility, these redemptions stretched the company's overall liquidity. We engaged with lenders to successfully raise $650 million of new capital through a new term loan and we renegotiated the financial covenants for our credit agreement. Given current debt levels, we are reaffirming our commitment to improving cash flows and using excess cash for deleveraging. Our core priority, as a team, is to improve cash flow performance through operational improvements. Another source of cash, or funds rather, will from divestitures of non-core businesses. As you may recall, last quarter we had announced our intent to divest 5% to 10% of revenue from non-core businesses. We are working…

Thank you, Gerrard, and good morning everyone. I'm pleased to be here at Diebold Nixdorf and I'm looking forward to working with the leadership team to implement the value-creating DN Now improvements, which Gerrard outlined previously. As I discuss the financial results for the third quarter, please keep in mind the comments will focus on our non-GAAP results unless otherwise noted. On slide 7, you can see the total revenue increased 1% on a constant currency basis during the third quarter, as growth in Banking Americas and Retail more than offset the decline in Eurasia Banking. When compared with the third quarter of 2017, foreign currency impacted revenue by approximately 200 basis points, reflecting a strong euro. Looking at our revenue by business line, software and product revenue increased 6% and 5%, respectively, in constant currency during the third quarter due to higher volume. Services revenue declined 2% in constant currency year-on-year due to contract roll-offs in Asia Pacific and lower activity in Latin America. Moving to slide 8, I will discuss the performance of our Eurasia Banking segment. Revenue declined by 5% on a constant currency basis, primarily due to lower product volume from customers in Asia and the role-off of a large low-margin maintenance services contract in India. Partially offsetting these trends were growth in Windows 10 hardware upgrades in Germany and software growth in Asia. Operating profit for this segment increased $3 million versus the prior year due to lower incentive compensation expense, the initial benefits of our DN Now workforce alignment actions and increased software gross profit, offset by the aforementioned change in product and service volume. Slide 9 contains highlights from the Americas Banking segment. Revenue growth of 4% in constant currency for the third quarter is encouraging, as the company benefited from higher product…

Thank you, sir. Our first question comes from Matt Summerville with D.A. Davidson. Matt J. Summerville - D. A. Davidson & Co.: Thanks. Good morning. Couple of questions. First, in the services side of the business, I think gross margins overall were 23.4% in Q3, which is up pretty nicely from what was a bit of a tough second quarter. And I'm wondering if you were to strip out the reversals you had in incentive comp accruals, did you actually see sequential margin improvement in services? And if so, is that sort of progression sustainable and what's driving that?

Hey, Matt. This is Gerrard. Let me lead off with that. So we do strip out that incentive compensation adjustment. We would have seen the increases in the services margins and the primary driver has been some of the early momentum we are starting to see from our services improvement plan. And as we continue to ramp that, we do anticipate continuing to see those margins expand going forward. Matt J. Summerville - D. A. Davidson & Co.: With respect to – well, I guess sticking with services, are you seeing any uplift as some of your contracts come up for renewal from a pricing standpoint? And if not, I guess when does that come into play? And then what would your cash restructuring costs look like for 2018 and 2019, understanding 2019 might be preliminary with an end goal of what I'm trying to get at is, will you be cash flow neutral or negative next year?

So let me take the contract pricing question and Jeff will take the cash question, Matt. So as I signaled on a prior call, we have started to see some positive momentum as we've looked at pricing activities in services contract renewals. As you can probably appreciate that a large number of our contracts are up for renewal in August and then later again in the latter part of this year. We are seeing a very high attach rate in terms of our ability to secure those pricing improvements. From a P&L perspective, I'd say that you won't get to see it unfold materially in 2018, but that starts to become more meaningful in 2019. And most of those pricing changes that we are seeing are unfolding in the Americas in particular.

And then Matt, this is Jeff Rutherford. The question on restructuring for the year 2018, we are modeling at just under $70 million in restructuring payments. And then when we look at the 2019 model, it's a comparable number. But it's probably worthwhile right now to talk about 2019 from a perception -- cash perception on a higher level. What we anticipate and don't let it be lost that Gerrard talked about the next phase of DN Now and the focus on working capital, because that's important. Because one of the things we really need to do, as we go through this restructuring, is to fund it. And what the funding means is going to be for us to harvest excess cash that is sitting in working capital. So when I look at 2019 and forward, when we look at 2019 and forward from a modeling perspective, our expectation would be that working capital would pay for the restructuring. So that leaves EBITDA to pay for interests and tax payments, right? So that's what we're looking at. We're not giving guidance today on cash flow for 2019. But conceptually, what we're looking at is improvement mainly by harvesting cash out of working cap. Matt J. Summerville - D. A. Davidson & Co.: Thanks, guys.

Thank you. Our next question comes from Paul Coster with JPMorgan.

Yes. Thanks for taking my question. Let me just build on that last point, which is the working capital is generally close to then the fourth quarter of the year and certainly not favorable in the first half of the year. So can you just elaborate a little bit on that point of working capital funding these improvements? And then the related question I've got is, if you look at the last couple of years, the fourth quarter, about half of the working capital improvement relates to what seems to be year-ahead contracts, which is offset by deferred revenue increase. I'm just wondering, are you able to still secure those year-ahead service contracts, or are your customers starting to reduce the term of the contracts and pay on a more quarterly basis, for instance?

Yes. It's a good question. I should have touched on that earlier is that, and the fourth quarter is the harvesting of cash because of the high installation base on product, which is why inventory builds going into the fourth quarter and then we're going to see a big ramp down in inventory as those installations go up in the fourth quarter. So our expectation, our model, is for cash to be generated obviously in the fourth quarter. And then, when – you were asking specifically about deferred revenue. We don't talk specific to customers, but we are seeing basically the same level of activity there. There are some that at least one that has rolled off of a contract so that's not available; it is one. But everything else is comparable with prior periods.

Okay.

What I'd also build on to Jeff's comments on the inventory side is that obviously while we do see a burn down of inventory in Q4 as a result of higher installation activity, notwithstanding that as we take a look at the level of inventory activities specifically in finished goods and in raw materials, we do think there's quite a meaningful opportunity for us to further improve our starting point as we enter into 2019.

Got it. And my other question is on the head count reductions. Can you just talk to us about whether it's surgical or whether it's across the board? And I guess we're generally speaking kind of feel better if there were discrete functions being cut out or discrete products. But I think you get what I'm aiming at here, perhaps you can elaborate?

Yes, sure. So let me just start at a high level. A lot of the focus of that effort has been to impact non-customer-facing roles. So we have not impacted our frontline services technicians nor our frontline sales force. We've really been looking at middle management roles in particular. There are 1,600 people roughly that are impacted by this effort. And as I said, 85% have exit dates. The work has been both surgical and across the board. This wasn't a blunt instrument approach that we adopted. It was a very, very analytical thoughtful look at spans of control, levels of management across the board. So we've seen reductions in a number of our SG&A functions, some modest reductions in R&D, but it has been more modest, as well as middle management layers and some of the other functions. So it has been both surgical and across the board.

Okay. Thank you.

Thank you. Our next question comes from Kartik Mehta with Northcoast Research.

Good morning. Just for Jeff, maybe going back to what you had talked about from a cash interest, could you just give an idea of what the cash interest expense is right now for the company? And just a better idea about the cash taxes, because I think that's been difficult to figure out because your tax rate has been all over the place.

Yes. Okay. I get both of those, right? Interest is going to be approximately cash. Interest will be approximately $50 million a quarter under the current capital structure. That's the easy one. The tax is a little more difficult to explain. Let me give it to you the way I understand from a higher level, and we can get into whatever level of detail you want. But basically, here's where we are from a tax structure prospective. And now I can go back and talk about what multi-nationals have historically done that are based in the U.S. We all spent time trying to move income out of the U.S. to foreign jurisdictions. And then the Tax Act came and everybody's role that was doing that was turned upside down. And so, our position is a little more difficult because of interest and the limitation on the deductibility of interest. So here's where we get to. When you look at us from a global perspective and tax perspective, we all have tax laws in the U.S., and we have taxable income in our foreign jurisdictions. We are going to pay taxes in those foreign jurisdictions and it's going to be based on current modeling approximately $80 million. And then we don't have a place to get a credit for that in the U.S. So we can get a credit in the future. We can get deductions in the future from our net loss and our interest expense in the U.S. But right now, there's no way for us to benefit that. So we need to look at tax from a strategic perspective and see what we can do. And also ultimately, when the time comes, it's going to be a debt capital issue too as to where our interest should be. But those are -- that's an issue down the road. And in the interim, we'll be paying approximately $80 million of cash tax.

That's helpful. Gerrard, in the slide, you laid out kind of multiyear outlook for 2019 from a revenue standpoint. You talked about growth in retail in Americas Banking and then a decline in Eurasia Banking. Is the decline the result of just you walking away from business because of the profitability, or is the decline the result of some fundamental changes you're seeing in those markets and that's why you projected that?

Kartik, let me break the answer into two questions. First of all, Eurasia is obviously a very, very broad region. Within Europe in particular, we're seeing no change whatsoever to our competitive posture. We remain highly competitive. Our market share is exactly where we would anticipate it to be and the buying patterns appear pretty stable. The real issue, as we discussed in prior quarters and continue to experience, has been in Asia Pacific where in a number of markets, most notably China, Southeast Asia and India, you're starting to see a number of deals where quite frankly we just don't believe it's appropriate for us to be competing. The margins are negative in many, many cases, and we also see a number of customers trying to extend out service warranties to multiple years. So it's a multiyear loss-making proposition to be in that business in certain countries. We don't see that expanding broadly into multiple markets, but we definitely are seeing that in several Southeast Asian markets, and we're just electing to do not participate in that game.

So maybe Gerrard, if I looked at what you said, is it fair to say that the declines in Eurasia Banking are probably low single digits and then that will be made up with low single-digit growth in the Americas?

Yes, as I said in my comments, we definitely anticipate robust activity in the Americas. And that largely offset – this gets offset by some of the declines we see in Eurasia.

And then just one last question, Gerrard. If you look at order activity and you look at order activity for ATMs, excluding kind of what's happening in Asia, it sounds like Asia is more a result of you just not wanting to have unprofitable business. So you kind of exclude that. What's happening to orders, or what happened to orders in the third quarter if you just – you took Asia out and you looked at Europe and North America?

Yes. So Europe was modestly ahead over prior quarters from an order activity. I would probably describe the overall environment in Europe as relatively muted, fairly balanced. So not seeing tremendous weakness nor seeing tremendous strength, but fairly balanced. However, in the Americas, and when I say Americas, I include Latin America and North America, we're seeing very strong activity across the board. And it's coming from big banks, regional banks, community banks, and we anticipate that strength sustaining itself going forward.

Thank you very much. Appreciate it.

Welcome.

Thank you. Our next questioner is Paul Condra from Credit Suisse. Paul Condra - Credit Suisse Securities (USA) LLC: Hey guys. Thanks for taking the question. I guess -- could you elaborate on that last point, I mean just in terms of the strengthening order demand? It would sound like it's across both large and small banks. And how much would you kind of attribute that to Windows 10 refresh cycle? Whatever else it is that it just kind of feels like it's a bit more positive than what we were talking about over the past years. So I am just wondering what the change is? Anything about banks being in a better position to make these purchases, or being more aggressive in their expansion plans? Maybe if you could just discuss that a bit.

Sure Paul. If you go back to what we were discussing on our Q1 call, we started to say that we were starting to see the green shoots of growth starting to emerge in the Americas, and I think we have just see that momentum continue to build. And we described the drivers as being somewhat different by markets. So if we look at markets like Mexico, as an example, there is a big push by a large number of the big banks where we have significant market share to refresh their entire environments as a large percent of the Mexican population moves from being unbanked to banked, and order activity and ATM transaction increases (43:23) dramatically. If you look at North America, it's much more of a Win 10 refresh drive that's fueling that activity. And in the Latin American region, that's more of a general refresh of their overall hardware, given that some of those environments have been sitting on relatively old aging machines. So I think those are three different factors based on the different market conditions we're seeing. Paul Condra - Credit Suisse Securities (USA) LLC: Yes. And then I think your competitor mentioned a little bit more of a favorable competitive dynamic. And I was just curious, given everything that's been happening over the last couple of months, how you're feeling about the stability of your contracts with your client base and how the competitive environment has changed?

Yes. Obviously, I'll point you back to our performance in the quarter where we saw 5% topline growth in our hardware and equal strength in our software business. So I think I would suggest we are more than holding our own competitively. I'd also reflect and comment back, if you take a look at the amount of order activity that we are seeing in the Americas and Europe, which is where profit pools are the greatest, I think we are more than holding our own. So we don't see any meaningful change in our market share position in markets where it really matters. Paul Condra - Credit Suisse Securities (USA) LLC: Great. Thanks. If I can just squeeze in one last one, what are you seeing in terms of tendering the DN AG shares recently? And just given the cash flow use next year, how do you feel about your current capital position, and whether you might need to raise more capital?

So the tendering activity has tapered off quite substantially over the past several weeks. I would probably describe it more of a trickle than anything else. And as Jeff alluded to in his comments, we'll be initiating squeeze out proceedings in the very near term, given that we have restricted cash on the balance sheet specifically for that purpose. In terms of our overall capital structure, I'll go back to my earlier comments. Clearly, our focus as a management team and our number one focus is to drive a substantial improvement in our free cash flow position as an organization primarily to move towards addressing our capital structure. At this stage, I don't anticipate, and Jeff can comment on it too, I don't anticipate any need for additional capital next year.

Based on our models, we have sufficient capital for 2019, absolutely. Paul Condra - Credit Suisse Securities (USA) LLC: Great. Thanks much.

Thank you. Our next question comes from Justin Bergner with Gabelli & Company.

Good morning, Gerrard, and welcome aboard, Jeff.

Thank you, Justin.

I want to go back to the service business. Could you maybe just remind us what the tailwind -- I'm not sure I caught the exact tailwind from incentive -- lower incentive compensation in the third quarter, and if will be any of that in the fourth quarter. And maybe would you be willing to sort of quantify how much that helped the service gross margin in the third quarter?

Yes. Hey there, Justin, it's Gerrard. I'll take the first question. So, our services margins increased 230 basis points sequentially from Q2. Across the board, we saw lower incentive comp in Q3 to the tune of $10 million, so that impacted multiple lines business, not just the services piece. So if we were to strip out that incentive comp line item, we would still have seen margin expansion in our services business. I think the more important point that's underpinning what's going on in services is the work we're doing around our services modernization plan, which will deliver $70 million of improved margin over the next several quarters.

Okay, great. And just building on that point, I mean given that it's so early in the service modernization plan, were there specific things that took effect in the third quarter that led to that sequential improvement even when you back out the incentive comp?

Well, don't forget, we have two different drivers unfolding within our cost structure. You're starting to see our DN Now operating model changes take hold. And as I've said in my earlier comments from one of the other callers, this was a surgical and broad approach that impacted levels of management across multiple functions, services being one of those two. So one of the things you are starting to see in services is some of the benefits of that early action there, less so the services improvement plan which is still developing.

Okay great. And then just lastly on the service business. Should we think about the pricing adjustments as sort of needed to catch up for sort of not having priced inline with higher costs? Or should we think about the pricing adjustments as actually driving EBITDA growth looking into 2019?

Yes, I think there's probably a little bit of both, Justin. At the end of the day, it's been my view that we have an opportunity to be more disciplined in our pricing activities to make sure that we're pricing for the value that we're delivering to customers and pricing for activities that might be different for newer machines versus older machines. So I think I'll broadly simply say I think there's room for us to continue to use pricing as a lever going forward. In terms of whether it simply offsets increased costs, I think you'll start to see some modest uptick that will positively contribute to EBITDA. It won't all go towards offsetting costs.

Okay, great. And then just lastly on the hardware business or I guess sort of your regional segmentation, rather. Given that you're walking away from some unprofitable business in the Asia region, should we see sort of the flat revenue in 2019 versus 2018 as being mix positive? Obviously revenue was down in the third quarter in Eurasia, but operating profit was up, which was different than the rest of the segments. So how should we look about mix in 2019 versus 2018?

I think on balance, Justin, it should be mix positive, with more of our activities coming from the Americas, which obviously have a greater pull-through. And we also continue to anticipate strong growth from our regional banks where we are very, very well positioned. So I think on balance, our mix will skew towards the positive.

Okay. And then will the Asia decline also sort of be mix positive as well from that perspective?

Yes, broadly it should be, that's right.

Okay. thanks for taking all my questions.

You are welcome.

Thank you. Our next question comes from Rob Wildhack with Autonomous Research.

Good morning guys. I wanted to get some more detailed thoughts on cash flow over the longer term. Can you expand on what you consider to be significant cash flow, and if your thoughts have changed or evolved around the overall cash generation profile of the business?

Well, it's easy for me to say because all my thoughts are right now, right, so they haven't changed. So all I can do is talk about future, right. So look, it's going to be a combination of parts when we're talking about cash flow, and just make it simple. There is – based on the DN Now and the activities that we have and the activities to come, we are going to have continued growth in EBITDA, which is where all of our value and all of our cash are being generated. Our expectation is that, over the next year, 18 months, we are going to be getting to a point where our working capital is where it should be with -- for a company of our size. It's heavily weighted in inventory right now. We need to get to own inventory of a lower day sales kind of aspect where basically payables is paying for inventory, and then our working capital basically is going to become accounts receivable, offset by deferred revenue. So then it gets to – our another cash flow outbound is restructuring. We are going to get through restructuring, right? It's going to be heavy for the next 12 to 18 months. And we're going to come out the other end and we're not going to have restructuring payments, which leaves our capital structure and interest. As I said earlier, it's $50 million a quarter and that will be addressed at some point, and then tax payments. Right now we're in an upside down tax structure where we are paying foreign taxes. We need to address that from a strategic perspective and also from a capital structure perspective. But those are the drivers of our cash flow and we've touched on all metrics as we are going to this. So if you take that into consideration, you can see at a point in time where the model -- as the model converge from where we are at to a value-creating model that there will be positive free cash flow.

Okay thanks, very helpful.

Thank you. Our last question today comes from Saliq Khan with Imperial Capital. Mr. Khan, your line is open. You may have muted yourself, you need to unmute to ask a question.

Great. Thank you for that. Hi, good morning guys. Just a couple of questions from my end, the first one being is, which changes are you seeing currently within the end customer or the industry that you are targeting? What are they going through that is creating a headwind for you in the medium or longer-term? And I recognize that the financial industry, the ATM industry is going through a lot of changes over the years as a result of bank price (53:55) transformation. So if you can kind of highlight that and how that influences your thinking.

Yes, Saliq, I do definitely say that there is nothing that we would have seen this quarter that would have changed that much longer term outlook. Ultimately, you almost need to look at that question on a regional by regional basis. So in developing markets, and I use Mexico as an example, we're seeing a substantial growth in ATM transaction activity, as more and more of the population move towards a banked customer base. By contrast, you've got markets like the Nordic countries that are much more cash light and the need for ATMs is more de minimis. And then you've got the rest of the world including North America somewhere between those two endpoints. So when you look at in aggregate over the next several years, over the longer term, we clearly anticipate a modest degradation of long-term demand, but not an elimination or a rapid fall off. And we just don't anticipate that happening anytime in the next several years at all.

Got it. And then can you also speak to the divestitures of the noncore assets or the geography of the growth rates? And kind of speak to about how divestiture could potentially impact your relationship with your current customers?

Yes, so the first thing I'd say is these are noncore divestitures, and part of our consideration of what defines noncore are divestitures that don't meaningfully impact our main core customers. So these are small assets. They tend to be focused in Europe and a couple of other areas. Quite frankly, our main customers that matter really will have nothing to be concerned about. It's really not relevant to their businesses.

Got it. And all of the (55:56) questions that I've been fielding for over the last several years has been about the future of ATMs in the banking industry as a whole. So as you're going through the realignment of the overall business, I'm not seeing the bank branch transformation that we have spoken about maybe five years ago. So what is the future of the ATM industry where you guys believe you can meaningfully take the lead, either on the services side, software side? How does that influence your overall thinking?

Yes, so I'll simply build on the comments I made earlier on. We continue to strongly believe that there's a long tail to cash. And given that there's a long tail to cash that continues to drive needs for ATMs for many years into the future. On top of that, when we speak to our major customers in large markets around the world, many of them will continue to advocate and have strategies where they will be increasing the number of physical touchpoints that they'll have with consumers. And many of them see the ATM as the most natural device to increase those touchpoints. So from my perspective, I don't see ATMs on a go-forward basis as purely being cash dispensing, but having far richer functionality to allow banks to maintain that physical touchpoint with consumers. So that's a broad perspective that I think we have a meaningful role to play in the banking industry for several years still to come.

Sure thing. I'll try to squeeze in one last question on my end, which is probably over the last two to three years, we are seeing a convergence of a number of industries that has been impacting financial services. So most recently, we saw the acquisition JetPay that NCR had made. As those convergences are happening and you're realigning the business, how should I be thinking about the next-generation of products or solutions that you guys are thinking about to be able to retain and go out there and grab more market share?

Sure. So, at the end of the day, I think there are broad buckets that your question falls into. We continue to believe that, given that we have such a large number of touchpoints with consumers, it's natural for us to evolve our software portfolio both in retail and banking into customer engagement and loyalty applications that continue to strengthen our relevancy to customers. I think that's broadly how I would describe where we will play. Clearly, we are aware of our competitor's acquisition of JetPay and the intersection between that and the retail point of sale. I think that payments more broadly continues to be an area that's interesting and rapidly evolving within banking, but that's a longer-term call for us given that our focus as a management team is going to be on operating improvements and on cash flow enhancement to this business.

Great. Thank you, Gerrard.

At this time, I'd like to pass it back to our speakers for closing comments.

Good. I'd like to thank everyone for joining the call today. With follow-up questions, please send me an e-mail or call our Investor Relations line. Thank you very much.

Ladies and gentlemen, that concludes this morning's presentation. You may now disconnect. Thank you.