Good day, and welcome to Diebold Nixdorf's Fourth Quarter and Full Year Earnings Conference Call. At this time, I would like to turn the conference over to Mr. Steve Virostek, Vice President of Investor Relations. Please go ahead, Sir.

Thank you Bettina, and welcome to Diebold Nixdorf's year-end conference call for 2017. Joining me today are Chris Chapman, Interim Co-CEO and Chief Financial Officer. And Jürgen Wunram, Interim Co-CEO and Chief Operating Officer. During our webcast we will be referring to slides, which are available on the Investor Relations page of dieboldnixdorf.com. And for your benefit, we'll post a replay of this webcast to the IR website later today. Slide 2, contains the reminder that we'll be referring to both 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 the supplemental schedules of our slides and today’s earnings release. Moving to Slide 3, 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. This forward-looking information is current as of today, and subsequent events may render this information out of date. And now, I will hand the call over to Chris.

Good morning, everyone, and thanks for joining our call. Let me begin by characterizing 2017 as a year of significant accomplishments and also several challenges. Our focus was on integrating our legacy operations, eliminating redundancies and creating a new industry leader, all while enhancing relationships with our customers. We are firmly committed to the connected commerce strategy, led by a strong services and software business and supported by innovative hardware. Our accomplishments have set a solid foundation for the future, though there are still much work to be done and further investments to be made during the next phase of our transformation. Jürgen and I will be providing an update on 2017 results, our DN2020 program and we'll be introducing our 2018 outlook. We delivered results in line with our latest 2017 guidance, with full year revenue of $4.6 billion. This was in line with our prior expectations as we delivered year-over-year growth in services, software and in our retail solutions in the fourth quarter. Profit highlights for the year included adjusted EBITDA of $382 million and a non-GAAP EPS of $1.13, which were both at the upper band of our guidance range. Supporting the results were over 100 million of cost savings realized from our DN2020 transformation program, which Jürgen will be detailing. Looking to 2018, we are encouraged by the stability and improvements we've seen in the services and software businesses over the past two quarters. We've delivered double-digit growth in software order entry and have a solid service contract base entering the year. On the banking hardware front, we've continued to see a subdued pace of orders during the fourth quarter, particularly in the Americas and in Asia Pacific. While we entered the year with relatively flat backlog and a solid pipeline of opportunities, we don't expect…

Thanks, Jürgen. My comments will now focus on non-GAAP results from continuing operations, unless otherwise noted. Year-over-year variances for fourth quarter financials are comparable given the timing of the Nixdorf acquisition closure in the third quarter of 2016. For the full year of 2017, we will be comparing our financial results to 2016 pro forma numbers to facilitate more meaningful comparisons. On Slide 6, you'll see the total revenue for the fourth quarter was flat at $1.25 billion but was down 5% on a constant currency basis. Revenue declines in the systems line of business were partially offset by growth in both services and software. Looking at the mix of revenue, on a GAAP basis, services and software accounted for 62% of the business, while systems accounted for 38%. The geographic mix of revenue was 52% in EMEA; 34% in the Americas; and 14% from Asia-Pacific. Banking solutions comprised 74% of total company revenue while retail solutions accounted for 26%. Looking at Slide 7, the company generated $4.6 billion of total revenue in 2017, which compares with pro forma revenue of nearly $5 billion in 2016. Revenue was down 8% in 2017 on a constant currency basis, as revenue declines in systems and services more than offset the growth in our software line of business. We've also provided the mix of revenue on a GAAP basis for our lines of business, regions and solutions, which is fairly consistent with the fourth quarter percentage mix. Moving to the next slide, we provided a year-over-year comparison of key non-GAAP profit metrics for the fourth quarter. Gross margin declined approximately 80 basis points to 23.5% for the fourth quarter, primarily due to lower volume and unfavorable mix in our systems line of business. Operating margin decreased approximately 70 basis points to 4.8% due…

Thank you. [Operator Instructions] Our first question today comes from Matt Summerville of D.A. Davidson. Please go ahead.

Thanks. A couple of questions. First, in the fourth quarter, Chris, what was your book-to-bill? And I guess what I'm trying to get at is it looks like you saw sequential decline in backlog somewhere in the range of a $100 million to $200 million. I don't have the exact number. So on that band, did you end the year with a backlog you thought you would end with? And did you recently change sort of the definition around – I'm looking at Slide 3, how long it will take that backlog to convert? And I guess, again, what I'm sort of getting at is backlog all that relevant anymore to you guys?

Multiple questions there, Matt. Good morning. Let me just take them one at a time here. So when you look at where the book-to-bill was at, we didn't publish the amount for the quarter. I would say we were a little under $1 billion as we exited the year. When you see the activity in the quarter though, and you're asking around the definition of how we think about backlog or what we're booking, I will say that we had several large awards where we have a positive indication. However, we are not going to book anything through the order entry until we actually finalize certifications which are going to come in the first half of the year, which that would have moved us well north of $1 billion in the fourth quarter. So I would say given some of these longer schedules that we're seeing from an installation, the complications around certification activity, quite healthy. What we actually booked puts us under $1 billion. But indications and the pieces that we're now working through are really going to help us to drive the second half revenue underpinned by actual firm wins from customers but not booked into orders yet.

Got it. And just as a follow-up. Maybe talk about what defines the high versus the low end of the non-GAAP EPS guidance range, which at a $0.30 range is obviously pretty wide. And maybe speak to specifically what the organic expectations would be, high low banking versus retail. And then, similarly, maybe to what your competitor did on their fourth quarter call, how was Diebold sizing up the Windows 10 opportunity? Thanks, Chris.

Yes. Well, first, let me give a little bit of color by the line of business as we go through that now, that will touch a little bit up on the solutions. Obviously, the biggest piece of the range next year is going to be the systems line of business. And the guidance that we've given implies we could be close to flat to maybe down in the high single digits on the systems line of business, and that's really the variability that we see in the banking. And this is really going to be timing-related. As we look at the full year guidance, as we've seen how things have played out over the last 12, 18 months, we did not want to get overly, will say, overly ambitious early in the year based on not having some of these installation schedules finalized. We've seen how that played out in 2017 and took a very prudent approach on how we viewed the overall guidance. And so that's the biggest piece of variability. On the services side, we look at the services business to be maybe down 1% or 2% to flattish to up a little bit. And that's really going to come down to the associated installation activity tied to the systems business and the software business where we have seen strong order of activity, double-digit growth for a number of quarters. Now we expect that business to be up mid to high single digits. I will say that we have a little bit of new ones with the new RevRec that could give us a little bit slower start to the year. But ultimately, we should be able to pick that back up in the second half of the year as we think about the individual pieces. The item that you asked around Windows 10, I would say the activity that we saw specifically associated with Windows 10 in Q4, it definitely was starting to pick up a little bit. But one quarter does not make a trend. And so – I've not seen enough right now to say that we have an inflection point, where that activity is going to pick up. Let's see how Q1, Q2, Q3 play out and give a little more color after we see more activity to see if the market is starting to pick up some momentum there.

Thanks, Chris.

We will now take a question from Paul Coster of JPMorgan. Please go ahead.

Yes, thank you for taking the question. I apologize for focusing in on the systems business, but clearly, it’s sort of the main challenge at the moment. When you say there's been delays and there are certification complexities, can you be specific about what is causing these delays? And what needs to be certified? And why it's complex?

So the specific one I'm talking to it’s a public – it was made public, and this is in Brazil. It's a fairly large order that we won. And it's essentially a new device that we have to go through and finalize the certification on and it was for recycling unison. So that certification activity is going on. And this is roughly a 6,000 unit order that's going to be delivered over in 18, 24 months period. And obviously the timing and completion of that certification and getting that stuff done would impact the installation and how much of that ends up in 2018 versus pushing into 2019. And so it's normal activity I would say from a Brazil standpoint, very large orders that are delivered over multi-quarters and have to have the certifications complete and then see the installation timelines with the banks before we factor all of that or the full impact of that into our 2018 numbers.

Okay, got it. And then you’ve reduced your manufacturing capacity for ATMs. So I assume this isn't a short-term reaction. It's your view on the overall market. Can you talk about what principles went to reducing the capacity by what nearly, 50%? And also what happens if there is a spike in demand? Do you look to move to more variable model in the future? Thank you. Jürgen Wunram: Yes. I’m Jürgen speaking, so I'm taking that question. So definitely, when we combine the businesses, our joint capacity was higher or much higher than we expect also in the future. And you know that we have seen a lot of changes, for example in Asia, and China and so on. So we have to adjust so to say strategically our capacity, and that is this reduction from 118,000 ATMs to around 100,000. But that's – and Paul, you're absolutely right that is so to say our strategic capacity. And underneath this, we need kind of tactical flexibility that we have. We have that because we use, for example, in Europe and Germany, a lot of temp workers for so to say the near-term scaling up and scaling down because we will have this volatility also in the future. So that I’ll also say tactical flexibility means that we have in the system and strategically we have adjusted exactly to what we see also in future as being the target. Also you should know that the final assembly that is so to say in-house is a pretty small part of the overall value chain components outsourced and the preproduction lines are pretty high automated. And so it doesn't require so much labor of work also, yes. And that we feel pretty fine with where we are in terms of capacity and in terms of flexibility to adjust for short-term volatility.

All right. Thank you.

Our next question today comes from Paul Condra of Credit Suisse.

Hey, thanks, and good morning, gentlemen. I just wanted to ask on the EPS guidance. It sounds like you're talking about that supposed to be a function of what happens on the top line. But if the revenue does feel like it's coming in towards the low-end of expectations, is there anything you can do kind of on the cost or expense side to get that EPS closer to mid or upper range? Or is it all just going to be contingent on the revenue?

Obviously, you look at the activity and how we behaved in 2017 and got more aggressive in accelerating a lot of the actions. And we still have many opportunities on that front. And, so I would just indicate that our behavior would be no different. We need to continue to go after the combination benefits as we brought the companies together, in addition to looking at other areas that we can get more – will say aggressive in construction – on taking cost out depending on where the volume is at.

Okay, thanks. And I also wanted to ask just about the JPMorgan win, I mean the big announcement of the branch overall. What are you hearing from other bank partners kind of a long lead vein? I mean, are you giving the sense that there is may be more activity from other large banks that want to reinvest in branches? Or is that feel kind of a like a one-off?

I think you have to look at it in a couple of ways. Number one, as you've seen the change in the overall brand footprint, the number of ATMs that are actually deployed under service contract has been quite stable and increasing over the last number of years because you still have to have the touch point with your customers. And you still see the branches being an important aspect of that. Obviously, it's a costly component of that and trying to drop down. But what you've seen though is all of the major institutions and retail outlets continued to invest in various branch channels or into various, I would say, micro branch channels as they're looking to interface with the overall consumers and enhance their consumer experience. So I would say there's not a one-size-fits-all more than one-size-fits-all on, but you see significant investments across these multiple channels and then trying to integrate all of those together with the software, with the mobile and how we’ll say a similar looking field across that entire channel. And, so that's where you see things continuing to move.

If I could squeeze in one more, and then I'll jump off. And just on the Vynamic. Who you kind of view as your competitors with that product? Jürgen Wunram: So first of all, Jürgen speaking again. First of all I think with our Vynamic launch, it was a very important step to integrate the different platforms that we have in both companies in one leading architecture. So the Vynamic launch have been received pretty good with our customers, that goes also along with the good order activity we have seen in the last quarter. The Vynamic goes far beyond having software on the physical touch point, so that means on the machines. It is if you want a complete suite and show us that we have secured transactions across mobile channel, across self-service channel and also the Internet. It is pretty much designed along the customer engage, that means the customer experience management that I our clients have on both sides, on the banking and retail space. And last but not least, it has also a core of data analytics functionality that we have and will invest into. So having said this, it's to say a complete suite of software. And you can’t say there's one competitor. On the software space, the market, the offering in the software space it is much more fragmented than you would assume for example for hardware. So by that, we would sort of say have different competitors and different players in the different functionality areas. And just on the ATMs space, we are leading in many, many markets. We are the Number 01, so to say on our software.

Okay, thanks a lot.

We will now take a question from Justin Bergner of Gabelli & Company.

Good morning Chris, good morning Jürgen.

Good morning Justin.

Kudos on running a good call under the new management structure. I guess I just wanted to start-off by exploring if you could sort of describe how the interim management structure is working in your own word or words. It seems like there's a good division of responsibilities that's allowing smooth functioning. But it would just be great to hear a little bit about how this arrangement is working.

Yes, Justin. I would just say, first of all, Jürgen and I had a very close working relationship prior to any of the changes. And we've continued that after the change at the CEO level. So I would just indicate that we've split it, along with our day jobs in terms of what we're focused as CFO and COO, around the geographic orientation that we are sitting in. Obviously, Jürgen has got a little more of background on some of the European side, where I do on the Americas, and we've split certain things on Asia Pacific. You look at it from the banking versus retail and Jürgen was already overseeing the retail operations. So he oriented there and I oriented towards the banking. And we were both already heavily steeped in the operational activities from various negotiations, issues with customers and working very closely with our extended leadership with our regional leadership and our line of business leadership as well. So I would say it's been, obviously, these things, these type of changes do have impact and do have some impacts inside the company. But we've tried to make it as seamless as possible while we're in the process of conducting our search for the new CEO.

Okay, great that is helpful. Jürgen Wunram: Sorry, Jürgen speaking, I can absolutely confirm. I think together we will drive, so to say, our strategy going forward. Our connected commerce strategy and the other falls pretty naturally, so to say, how we divide the work. So, I think we're pretty good aligned on that one. Yeah.

Okay, thank you. Switching gears, with respect to the free cash flow guide, I mean, if I take the $1 to $1.30 of adjusted EPS and subtract out the restructuring and integration expenses, assuming that most of those are cash. I get to a number that would probably suggest a little bit less than $50 million of free cash flow, are all those restructuring and acquisition expenses that have been added back to adjusted EPS in 2018, cash and if so are you getting a working capital benefit in that $50 million plus free cash flow guide.

If you just look at high-level bridge, you've got an $80 million, roughly $80 million swing to the bottom end of that $50 million versus the $30 million use. On a year-over-year basis, we said we had integration restructuring payments of roughly $140 million in 2017 and $90 million next year. So there's a $50 million swing just in cash. That's cash payments, not expense, in terms of what we've outlined there. Then you have the underlying improvements as well and the overall adjusted EBITDA or the overall GAAP earnings as well where that piece would pull through. And then an additional working capital efficiencies that we have the opportunity to still go after and get those benefits through the companies. So those are the major pieces of the change from 2017 to 2018 on the free cash flow.

Okay, thank you. And then finally, in the waterfall chart for the EPS bridge. You have a mix volume bar, which I'm not sure you spelled out, but it looks like its a $0.30 headwind or about $30 million pretax? What's the mix component of that? It would seem like if hardware is more negative, that would be beneficial to your mix. So where are you getting the mix headwind?

You always have certain regional and customer mix that you have to contemplate as well. And so more developed market volume comes through with better overall mix versus what you have coming through in some of the more price competitive developing markets. And so just depending on that total mix of activity, that could be one component there. And obviously, if we're able to pull through more on the services and software, as you indicated, that would come through at a premium margin compared to where we would be on the system. So just quantifying those big pieces that we have in the overall range there and understanding that you have to factor in the installation pull-through as well that you get on the hardware. And you start missing on some of the hardware volumes in the developed markets, and you're going to bleed a little bit more on your underutilization and your service organization. So that's what we were factoring in with that range that we provided there.

Great, thanks for taking my questions.

[Operator Instructions] Our next question today comes from Rob Wildhack of Autonomous Research. Please go ahead.

Hi, Chris. Hi, Jürgen. Can you expand on the software margins a bit? I know you said license did well, and that seems like it should be higher margin. So what's driving the year-over-year decline this quarter and then how do you think about the gross margins in software in the next year and beyond? Jürgen Wunram: Yes. Jürgen speaking. So overall, what we have seen in the order book is quite a good order activity on the license part of the business. But you know in our industry, we have to implement the IP, so to say, and that is called professional service. And this professional service is in terms of margin, definitely below what you would book, so to say, for license or Software-as-a-Service margin. So from that point of view, the margin that we have seen overall in the software business is pretty much a function of the mix. So mix also in the fourth quarter, we have seen a higher portion looks down in professional service that more or less describes why we have seen that margin points down.

Thanks. And then has there been any noticeable uptick in activity with U.S. regional banks?

We saw decent activity actually in Q4. That was up from what we've seen over the last probably, I don't know 12 quarters. But one quarter does not make a trend. And so there is the expectation of just the age of the overall fleet, what our market position is across that fleet and the Windows 10 tailwind that should be driving additional activity there. But we start to see how the next couple of quarters play out to see if that trend is going to continue to, we'll say, get better.

Thanks.

Our next question comes from Justin Bergner of Gabelli & Company.

Thank you. One quick follow-up here, should we assume that new midterm targets will have to await sort of the CEO appointment? Or should we expect something, some update before that?

Any additional updates, we're not going to be forthcoming here in the near-term. We're committed to executing on our DN2020 program. As Jürgen indicated, our strategic pathways that we're pursuing, we're going to continue head down those pads very aggressively get the cost out and any additional updates on midterm and longer term numbers will come at a later time.

Okay, great.

We'll now take a question from Matt Summerville of D.A. Davidson.

Just a follow-up, Chris. I think it was towards the end of your prepared remarks. You mentioned that you're having some supply chain issues as a result of some of these manufacturing transitions. Can you get into a little bit more granular detail in terms of what exactly you're encountering and where and perhaps how much of a revenue and profit headwind that issue in and of itself is contributing to sort of the first quarter “guidance” you issued a few moments ago.

Yes. I'll let Jürgen give the details on the manufacturing side. Just to hit the last part of what you said. We're looking at Q1 impact roughly around $15 million from a revenue standpoint with, I would say, a little bit higher than our average gross margins tied to that. So you can do the math on that component, but I'll let Jürgen speak to some of the issues on the manufacturing side. Jürgen Wunram: Yes, Matt. As we have talked you through, we have moved a lot in our supply chain. So we have reduced capacity, we have closed a factory in Hungary. We have to relocate a lot of stuff and so on. So there are a lot of movements and a lot of people movements, process movements, systems – new systems installations and so on. And in that, at the same time, we see a kind of shortage in the market on some electronic components. And here, we see from today's perspective, a minor risk for Q1 that Chris just gave you a kind of assessment on the quantification. This will not go away. This probably will shift from Q1 in a later quarter. So that's a story behind so we have done a lot of work on the supply chain, a lot of good work. If you see also the robustness of our gross margin in the systems line of business, after this down tick on the volume side, you see that it was quite effective. So from that point of view – I think this is a story around it. But again, we see only a minor dip from that one in two months.

And then just as a follow-up Chris. Heading into 2017, I think you guys originally guided to about $40 million of realized cost savings. You ended up pulling forward delivering, it sounds like a little over $100 million. You sort of set the guidepost towards $50 million incremental realized in 2018. Is there any magnitude of pull forward opportunity that you can layer in on top of that? And if so, is it a substantial is what you were able to do in 2017? Thank you.

Well, as you pick up speed on these activities, the further you get into the program, the tougher it gets. So we went after every opportunity we could. And frankly, the financial performance of the company allowed us to go at some things a little more urgency and aggressiveness than we could have otherwise. And so we're not going to sit idle. We've established the baseline of $50 million for 2018. We're going to work on delivering that component first. And if we have the opportunity to be north of that, rest assured that we'll be doing everything we can to do that.

Thanks Chris.

[Operator Instructions] There are currently no questions in the queue.

Okay, very good. I'd like to thank everybody for joining us for our year-end 2017 earnings call. And reminder, that if you have follow-up questions, please give a call to Investor Relations. Thanks very much.

That will conclude today's conference call. Thank you for your participation. Ladies and gentlemen, you may now disconnect.