Good day everyone. Welcome to the Diebold Nixdorf Q1 2018 Year End Earnings Conference Call. At this time, I'd like to turn the conference over to Mr. Steve Virostek. Please go ahead, sir.

Thank you, Sherwin, and welcome everyone to Diebold Nixdorf's first quarter earnings call for 2018. Joining me today are, Gerrard Schmid, President and Chief Executive Officer; and Chris Chapman, Chief Financial 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 will post a replay of our webcast to the IR website later today. Slide 2 contains a reminder that our comments will include non-GAAP financial information, which we believe is helpful in assessing the company's performance. In the supplemental schedules of our slides, we have reconciled each non-GAAP metric to its most directly comparable GAAP metric. On 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. 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that this forward-looking information is current as of today and subsequent events may render this information out of date.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 with that, I will hand the call over to Gerrard.

Good morning everyone. I'm very pleased to be speaking with you today. My comments will center on the reasons why I joined Diebold Nixdorf, an overview of the first quarter results, early observations about the company, as well as the initial steps we're taking to improve our performance. For many years, I've been aware of Diebold and Wincor Nixdorf; both companies had a longstanding reputation as trusted technology suppliers who are committed to their customer success. I was attracted by our leading market share, the strength of our services proposition, and growth opportunities in software and retail. Through banking leadership roles in the United Kingdom and Canada, as well as working with multiple banks in the United States, I have developed a solid understanding of the inner workings and complexities of banking. I also understand how fintech is revolutionizing the customer experience and is pressuring banks to evolve their technology capabilities. Additionally, through experience in leading multinational companies, I appreciate the complexities and nuances of managing a talented, yet diverse workforce. Therefore I am truly excited to be here to work with our team to leverage the full strength of the Diebold Nixdorf organization, and our connected commerce solutions. Moving to slide 4, I'll discuss our first quarter results which continue to reflect the same challenges that our company was facing in 2017. Orders were respectable with growth from our retail and software offerings offset by lower banking activity. On the retail front, our European customers are refreshing their point of sale terminals and software to automate more tasks and connect with mobile devices. As an example, we signed an $18 million multi-year agreement with one of the largest multinational clothing retailers in Europe for store lifecycle management. We also won a two-year contract valued at more than $30 million…

Thanks, Gerrard, and good morning, everyone. As usual, my comments today will focus on our non-GAAP results unless otherwise noted. Beginning on slide 6, total revenue decreased 12% on a constant currency basis, primarily due to our systems business. Foreign currency impacted revenue around 7% in the quarter, reflecting both the strength of the euro and the higher contribution of revenue from euro-denominated countries. Looking at our mix of revenue for the quarter, services and software accounted for two-thirds of our business, while systems accounted for one-third. Our geographic mix of revenue was 56% in EMEA, followed by 32% in the Americas and 12% in Asia Pacific. Banking solutions accounted for 72% of total company revenue, while retail was 28%. While these results are presented under our legacy segment structure, we will be reporting our second quarter results using the new banking and retail primary reporting segments. On slide 7, we provide year-on-year comparisons for non-GAAP profit metrics. The $23 million change in gross profit for the first quarter is primarily volume-related due to lower systems revenue, and to a lesser extent lower margins in our services business. Operating expense was flat year-on-year, but was 100 basis points higher as a percentage of revenue compared to the first quarter of 2017. While operating expense continues to benefit from our cost reduction actions, the impact of these benefits were muted in the quarter largely due to the effect of the stronger euro. Operating profit of $18 million and operating margin of 1.7% were lower due to the gross profit trends which I discussed earlier, as well as an approximate $16 million increase in share-based compensation and depreciation and amortization expense. As a result, adjusted EBITDA for the first quarter was down $7 million versus the prior year, reflecting the impact of…

We'll have our first question from Paul Condra with Credit Suisse. Paul Condra - Credit Suisse Securities (USA) LLC: Hey. Thanks everybody. Good morning. And hello Gerrard, congrats on the new role.

Thank you, Paul. Paul Condra - Credit Suisse Securities (USA) LLC: I guess, Gerrard I guess the first question is for you, given your tenure in fintech and positioning companies for financial evolution, I kind of wanted to get your broad thoughts on the ATM industry, clearly you've got some long-term secular challenges and we think of the shift to digital banking. And I just wonder, if you can comment on how ATMs kind of fit in to your world view of fintech and the evolution of banking?

Sure, Paul – and thank you for your kind remarks early on. At the end of the day, I have spent a lot of my time in payments more broadly and one of the observations I had have is that, regardless of whether it's cash or other forms of legacy payments, there's generally an extremely long tail to those payment instruments. So I tend to have a strong view that regardless of the pace of digitization in some markets, there will be a long need for this channel for quite a period of time. That being said, when I think about how it fits into the broader strategic plans of banks going forward, I see that it is moving rapidly away banks purchasing hardware, towards banks thinking about integrated solutions and the interplay between the branch experience, and the ATM experience, especially if the ATM is both on-premise and off-premise. So for me the implications on players like Diebold Nixdorf are that we need to continue to increasingly focus towards building and selling integrated solutions that represent a combination of our services proposition, our software proposition as well as obviously the underlying hardware. And I think by focusing on those integrated solutions, we can continue to remain relevant to banks going forward as they focus on digitizing their end-to-end consumer journey. Paul Condra - Credit Suisse Securities (USA) LLC: Okay. Thanks. And I know in your overview you mentioned leverage limiting flexibility, but I wondered – and I'm assuming that means focus on paying down debt. But I'm just wondering how you're thinking about M&A opportunities, and whether there could be an opportunity to increase leverage of something came along that looked interesting or just should we kind of rule that out?

Yeah. Paul, I think I very intentionally focused my comments on the inner workings and operational aspects of the company. My clear focus for the next several months will be on improving our operating profits and free cash flow generation from our existing business as well as looking at the profitability of certain markets and businesses that we operate in, all with a view towards both paying down debts and improving our overall leverage position. So, I think that that is really where my focus will be over the coming months. Paul Condra - Credit Suisse Securities (USA) LLC: Okay, great. And I guess just lastly on – just on the services margin, I guess it was down and I kind of figured we're already at the lower utilization rate and that's I guess why I wasn't modeling it coming down that much. I just want to know is there anything else impacting that compressed margin in 1Q and you're going to help us shape that for the rest of the year? Thanks.

Yeah. Nothing we'll say special about the service margin in Q1 other than the fact that we had lower installation activity, primarily in the banking area, and that really impacted some of the utilization. So we expect to see a sequential move up as we have more of the installation activity over the coming quarters. Paul Condra - Credit Suisse Securities (USA) LLC: Thanks.

We'll go next to Paul Coster with JPMorgan.

Hi. This is Paul Chung on for Coster. Thanks for taking my question. So just on the systems operating margins, I know a lot depends on top line to drive scale here, but what more can you do on the cost side to drive profitability there? And is there a lot of price-based competition in the current environment?

Yeah. I would say, if you look at the overall margin performance and you look at the trends over the last number of quarters, you can see where our cost actions have been allowing us to maintain the overall systems margins as we've been executing on our program that we've talked about over the last year and a half, and so clearly more opportunities to continue to take cost out and to fight some of those pressures. With regards to price and what we're seeing in the market, Asia continues to be the most aggressive price location. We are seeing some additional price activity in a few markets in Europe as well that's a little bit higher than what we've seen in some of the previous quarters. And so I would just indicate that clearly we're going to continue to look at all the appropriate levers to streamline the overall systems business to make sure that we can compete with the changing dynamics on the price that are going on with the industry currently.

Okay. Thanks for that. And then on the inventory build in 1Q, was that something deliberate, or is there some excess capacity in the channel?

Two pieces. Number one, the biggest component of that is related to just customer projects that we have out in front of us. So there is a build following the demand of our customers. And then number two, we talked about it in the last call, that we had some supply chain disruption issues, and so working our way through some of those. The revenue impact of that was roughly around $15 million, $20 million that we had in Q1. And so then you've got the corresponding inventory related to that as we've been working through that. And so you've got a little more, I will say, goods in transit as we've been trying to address some of those supply chain disruptions.

Got you. And then lastly, if you could just expand on the Tier 2 banking demand environment, and why you think this market is not accelerating? What do you think are the primary reasons that their regionals aren't really upgrading their systems, and where are you seeing targeted demand? Thank you.

Yeah. What we've seen, and we talked about it a little bit on the last call as well, it's not enough to call a trend yet, but we have seen some uptick in activity in that Tier 2, if you would call the Tier 2 regional space specifically within the U.S. And so there has been some decent activity that we saw in the fourth quarter, and we saw that activity repeat in Q1. And so again we need to see a little bit more of consistency there. But I would say there is a significant amount of discussion going on there, not only on the hardware side, but as Gerrard mentioned earlier, this is really across the solutions, so you have some of the software conversation as well driving broader discussions in that space right now. And so I would say early indications are – is activity is picking up, but not enough to call a trend yet.

Thank you.

And we'll have our next question from Justin Bergner with Gabelli & Company. Justin Laurence Bergner - Gabelli & Company: Hi, good morning, Gerard. Good morning, Chris.

Good morning.

Good morning, Justin. Justin Laurence Bergner - Gabelli & Company: I just wanted to follow up on the free cash flow question. I guess from our vantage point, the goal of $50 million in operating – sorry in free cash flow for 2018 is being reiterated at the same time that the dividend is being suspended. Sort of, can you give us comfort that that $50 million free cash flow goal is still achievable, given the inventory build coming out of 1Q?

If you look at the inventory build and you look at the sequence of how this follows for the full year, that inventory is going to go to customer deliveries, drive revenue, et cetera. So that you're getting some of that, we'll say middle-of-the-year bubble that you typically see within our industry. Q1 was a little bit higher, but as you look at that overall working capital flow for the full year, the inventory is going to be tied to revenue streams over the next couple of quarters and turn itself into cash, as we build that over the next several quarters. So really it's just going to follow that typical pattern that we see as our earnings build throughout the full year. So nothing, we'll say, out of the ordinary on the overall working capital and the other major things that we've underpinned around the overall full year free cash flow estimates compared to last year. We're looking at roughly give or take $100 million change in the overall integration, restructuring payments as well. That's a pretty significant delta year-on-year. So it's really that core GAAP earnings improvement that we see year-on-year that gives us comfort in our ability to generate that. Now, I will put the caveat out there, this is also dependent upon timing and the sequencing of how we exit the year and the pace of revenue that we see in Q3 and Q4 and our ability to turn all of that into cash collections. But right now, our models and our forecasting give us comfort in our ability to deliver on that for your number.

And I think building on that as well Justin, the SG&A exercises that I start to reference earlier in my call are an important cost lever for us to execute on in 2018. The impact of those changes are still being worked through and we'll have a more fulsome update in Q2 both in terms of the impact on operating profit as well as the impact on free cash flow. Justin Laurence Bergner - Gabelli & Company: Okay, great. I'll follow up on that as follows. I guess you call that $15 million to $20 million of supply chain disruptions affecting inventory. And then, I guess a lot of the other inventory build relates to building inventory ahead of projects that are ahead of you, but it seems like the year is more sort of second half weighted. So, excluding the supply chain issue, if you're not going to be delivering materially higher in the second quarter, why would inventories have picked up so much in the first quarter?

It's just following the pace of some of the larger projects that we have and you have to understand as well that we've got some long delivery locations. So, you do have some in trend things that are on the water for roughly 30 days with how our supply chain is set up. So, it's just following the customer activity. Justin Laurence Bergner - Gabelli & Company: Okay. And then is there any change – there is no change to the restructuring sort of spend for this year, but it seems like there are some extra efforts to remove additional SG&A from the organization in 2018 versus what was previously anticipated. Is that an accurate assessment?

Yeah. That is an accurate assessment. We have the initial estimates. We are going through certain internal exercises and after we complete those we'll get further clarity in second quarter on the call. Justin Laurence Bergner - Gabelli & Company: Okay. And then finally, just clarification. I guess the press release says that the change in constant currency was down 11% revenue, but you're saying down 12% in the presentation. So, I just want to reconcile that small difference?

Yeah. It's sitting right there at 11.5%. So there might have been a rounding issue there on one of the items. So it's just I would say one of the things that maybe the team has got cut up from a rounding perspective. Justin Laurence Bergner - Gabelli & Company: Okay. Thank you.

We'll have our next question from Matt Summerville with D.A. Davidson. Matt J. Summerville - D.A. Davidson & Co.: Thanks. Couple of questions. First, just more granularity on the banking orders, you said they were down. Can you just sort of frame that up at least in some sort of percentage bandwidth? And then if you saw $50 million in Windows 10 activity, should I conclude from that that in fact your North America order book is actually up year-over-year? And then additional color on EMEA, Latin America, and Asia-Pac in the context of incoming order rates and outlook would be helpful?

Yeah, Matt. Multiple items there. If we look at what we've seen in North America, I want to say at the smaller banks, we've seen good activity on that side and feel good about that overall pace that we've seen there. Looking at the individual orders, Asia clearly has been an area where we've seen one of the largest percentage drops from the overall activity out there. And then you have some of that cycle of just some of the large bank activity where you have, you always get into some of those tough comps on the overall order entry side, but I would say that regional space in North America continues to look healthy. And maybe spinning it around and looking at it from this perspective, if I look at the core backlog both within banking and retail, sitting here today, both the Americas and EMEA are, let's say, on par or slightly up versus prior year before the total backlog as we entered the second quarter as compared to prior year. And that's probably the most relevant view when we look at it as we enter the second quarter. Matt J. Summerville - D.A. Davidson & Co.: And as a follow up, just with respect to the comments Gerrard made about the complexity of Diebold's IT environment. I mean I've followed the company for a really long time. I feel like every CEO who's either been elevated or come into the company has talked about the complexity, the inefficiency, the overburdened IT systems, these manual workarounds and I keep hearing this every five or six years, Diebold gets a new CEO. And I guess my question is, what needs to be done here. Because the company has thrown tens of millions, if not even a $100 million-plus in trying to fix this massive – this IT problem and I guess I'm a little surprised to hear it's still this big of a problem?

Yeah. Hey, Matt. It's Gerrard. I'll sort of try and take a forward looking view to that question without providing any commentary on the past. You know, I think at the – from my vantage point, the combination of the two organizations in late 2016 was probably one of the core drivers for the additional complexity in our IT environment. I do think it's important that as part of my strategic agenda, I look to explore ways to further standardize and harmonize that platform. These are obviously not straightforward, easy initiatives as I'm sure you can well appreciate especially when one's touching supply chain in the ERP environment. I do think that, I made earlier on reference to the cultural differences between the two prior organizations. I think that was a determinant and not necessarily getting ahead of this question -ahead of time. Yeah, but I would just simply say, it needs to be an important part of my agenda. Matt J. Summerville - D.A. Davidson & Co.: And then maybe just slide one more follow-up in there. If you've already selected Gerrard kind of the first line, I think you referred to it of your executive leadership team, can you lay out who those individuals are that will be running the banking piece and the retail piece as they report up to you?

Yeah. I'm not sure, they actually are posted on the website. So, I just guide you to look at that to get their names and their backgrounds. Matt J. Summerville - D.A. Davidson & Co.: Got it. Thank you.

We'll have our next question is from Kartik Mehta with Northcoast Research.

Hey, good morning, Chris and Gerrard. Gerrard you talked about complex operations and I was wondering if that is related to specifically hardware or service or banking or retail or will you say that it's more about the entire company?

I think it's driven by two factors. The first is that, while we're in a ATM business that some might say is commoditizing. When one looks at the different configurations by different markets, there is a broad variation out there in terms of models that customers are buying, whether it's the types of safes they're using or keypads or printers. So I'd say the breadth of the product range is certainly one core driver for complexity. The other driver is that, we're in many, many markets with varying levels of overhead required to ensure that we can operate effectively in those markets. And then the third driver of complexity is that, as I alluded to in my earlier comments, the current operating model still reflects some elements of legacy norms from the historical two entities. And as a result, we have quite different country models across the globe meaning we have different levels of SG&A supported by different markets which quite frankly complicates matters. And the fourth item, which I'd point to and the last item is that, we're also involved in a number of businesses in and around the ATM and services space. And as I alluded to in my comments, I plan to fully look at the profitability and growth characteristics of all aspects of our business and our markets to ascertain whether it makes sense for us to be operating in those areas.

So Gerrard, when you talk about many markets, is that more about figuring out what markets you are profitable in, where you have scale, and divesting those markets, or is that more about changing how you go to market, maybe going to more of a indirect model in markets where maybe you don't have scale?

Yeah. I think by very definition it needs to be both, it'll depend on the nature of each market. In some markets, if I can't be convinced that we can sustainably generate a decent return, I am fully prepared to exit those markets. In other markets where we may need to be in those markets to serve some of our global customers, as an example, we may look at different models, including the ones that you made reference to. So, I'd say quite frankly we're looking at all those options.

And then Chris, can you talk about where you are in terms of debt covenants, in relation to suspending the dividend and using that money to possibly reduce that? Is it that the debt covenants, you're getting too close to those, or is it just a reflection of having greater flexibility?

Well, it's really more the latter. But if we look backwards, we had a fairly large reset in 2017 from the top line change and the impact that that had on the profit. Then we also had an event, we had the new U.S. tax legislation that came in, and it gave us the opportunity to talk about removing a 25% haircut that we had on our cash, given a lot of that is offshore. And so we went in and did the prudent thing in terms of giving ourselves a little bit more room and flexibility on the overall covenants, in addition to removing that 25% haircut. If you look at where we're at, right now we have plenty of headroom across all of our financial covenants, from a debt agreement perspective.

Thank you very much.

We'll have our next question from Rob Wildhack with Autonomous Research.

Hey, guys. You mentioned some Windows 10 activity, I think for the second straight quarter. But relative to your competitor, I think your commentary is kind of flipped. I know in the past they had said, maybe 2018, and they shifted last night to saying 2019, 2020, whereas you were initially more conservative, but now there's seemingly repeated activity in 2018. So can you just give us some more detail around what your banks, large and small, are kind of thinking around Windows 10 right now?

Yeah. I would say the comments that we're hitting on, we're talking specifically about the order activity. Obviously that takes some time to work through the system. So orders that we're seeing here in the first half of the year, some of that activity is going to end up in the second half, but predominantly you're going to see that bleed into 2019. So there will be some impact of that in current year, but it's not going to be as meaningful as you see as we move forward in the coming quarters, if that activity picks up more. So we're talking more specifically about the order entry side versus the sequencing of the revenue around that. And so that's one side of it. And I think the other point that you were asking with regards to conversations that are out there, it's not just about an ATM hardware upgrade right now. There is the software discussion, there is much broader discussions going on with the banks, and so you have a little bit, we'll say, more of a nuanced sale going on because there's additional activities that are being talked about with regards to the software platforms as well as an update of the overall hardware. So that solution selling activity is picking up, the conversations are picking up, and we expect that activity to ramp over the coming quarters as we go into 2019.

Thanks. Would you say that's going better than you initially expected, or is it moving a little faster or about in line?

About in line. It's about in line.

Okay. And then continued commentary around improving efficiency, working capital cash flow, but as we've kind of harped on this morning, that's – you've been working on that for a while. Is there anything tangible you can point to that would make it easier for us, or at least get us over sort of the go-on of giving you more credit for these improvements, coming relatively soon?

Yeah. If you look at it – and we don't put all this stuff out, you can do calculations on your own, given everybody has a little bit different view of it – but if you look at the working capital efficiency metrics, I would say you can see two positive items with regards to the overall AR and the DSO and the trends improving there, and the overall accounts payable in the DPO that's out there, as we pushed for appropriate lengthening of terms et cetera, where we have much more work to do is around on the inventory side. And this is where we're dealing with several things at the same time. Yes, we're looking at rationalizing the overall legacy product platforms, but we're also then changing manufacturing set up and moving some of these things on a global basis. And so, we're dealing with some of the normal integration growing pains on that inventory side and some of the operational efficiencies on the inventory side that we have yet to see the full benefit for. So, you're seeing AR, AP, we'll say behaving and moving in the right direction as we've put more focus on those. The inventory has yet to show those results. And so that's the area where we have the biggest room for improvement and the most work to do.

Thanks.

We'll go next to Justin Bergner with Gabelli & Company. Justin Laurence Bergner - Gabelli & Company: Thank you for taking my follow-up. I think you mentioned earlier that there might be some increased price pressure in Europe and I was just wondering what was behind that. Are you seeing any decreased price pressure in North America starting to take hold?

Within the developed markets, prices has typically been in check and then you still see 1%, 2%, but a lot of that just depends on the overall configurations that you see out there in some of the – we'll say in some of the higher volume, but lower margin markets that we've had historically. I think more in the Eastern Europe type of mindset. And in a couple of the other markets, we've just seen a little bit more competitive situations there on price and maybe price for volume sake that we've been seeing. So we're trying to maintain a level of discipline as we're looking at those opportunities. And so that's really the level of detail that I would give them on that topic. Justin Laurence Bergner - Gabelli & Company: Okay. Great. And then one big picture question for Gerrard as you shift the segment reporting and go back to sort of banking versus retail, sort of the division of the business. How do you preserve the benefits from sort of the hardware, software services based approach that the company had been using and that your competitor continues to use or do you feel that they're not many benefits of that system to preserve?

So I think at the end of the day, when you take a look at our go-to-market approach, right, we will continue to put increasing emphasis on integrated selling of our hardware, software and services value propositions for both retail and banking, which tend to be from a go-to-market perspective more distinct than not. In the background, we obviously will continue to have an integrated manufacturing environment that leverages our scale across both those environments. So I'd say the difference that you will see is more in our go-to-market approach rather than any scale degradation that we might be giving up in the back end.

And Justin, you'll continue to see the breakout on the face of the P&L for systems revenue, systems gross profit and services and software revenue and gross profit. So those are required under GAAP. Justin Laurence Bergner - Gabelli & Company: Okay. Thank you.

Seeing that there are no other questions, I want to thank everybody for participating in today's call. And if you have a follow-up, please feel free to give me a ring or an e-mail. Thanks.