Diebold Nixdorf, Incorporated 2026 Q3 Earnings Call

Maynard, please go ahead. Hello, and welcome to our third quarter 2026 earnings call.

To accompany our prepared remarks, we posted our slide presentation to the investor relations section of our website. Before we start, I will remind all participants that you will hear forward-looking statements during this call. These statements reflect the expectations and beliefs of our management team at the time of the call, but they are subject to risks that could cause actual results to differ materially from these statements. You can find additional information on these risks in the company's periodic and annual filings with the SEC. Participants should be mindful that subsequent events may render this information to be out of date. We will also discuss certain non-GAAP financial measures on today's call. As noted on slide 3, reconciliations between GAAP and non-GAAP financial measures can be found in the supplemental schedules of the presentation.

With that, I will turn the call over to Octavio, who will begin on slide 4.

Thank you, Maynard. Good morning, everyone. Before discussing the quarter, I want to highlight today's announcement of a new $250 million share repurchase authorization, our largest to date, following our previous $200 million program. This reflects our confidence in the long-term outlook of the business, the strength of our balance sheet, and our commitment to delivering value to shareholders. Turning to the third quarter, we delivered solid performance with continued revenue and earnings growth, good business activity, and further progress against our strategic priorities. Revenue increased 5% year-over-year to $991 million, while adjusted EBITDA also grew 5% to $128 million. Year to date, our book-to-bill ratio stands at 1 times. In banking, we saw growth across nearly every region, including North America and Europe. We continue to see encouraging opportunities as financial institutions modernize their branches and invest in automation, software, and services.

We recently hosted our largest-ever banking customer event in Nashville, Tennessee, where a consistent theme emerged. The physical branch continues to play an important role, but how banks use their branches is evolving. Financial institutions are increasingly focused on automating routine transactions and allowing employees to dedicate more time to higher-value customer interactions. These trends align well with the breadth of our portfolio. In retail, we delivered another quarter of double-digit growth, supported by continued strength in Europe and increasing momentum in North America. We are winning new customers, expanding existing relationships, and building a stronger foundation for future growth in the market where we see substantial opportunity. We also continue to make progress in services and operational efficiency, both of which are critical to improving profitability and cash generation over time.

While our third-quarter performance was solid, we continue to navigate elevated component costs, particularly around memory, an unfavorable product mix, and timing of certain large banking projects. We have taken pricing and operational actions that have partially mitigated these pressures, but their combined effect has led us to revise our expectations for the full-year outlook, which Tom will discuss in more detail. Overall, with a strong balance sheet, continued progress against our strategic priorities, and significant opportunities across banking and retail, we remain confident in our long-term outlook and focus on translating our business momentum into sustainable growth, stronger profitability, and improved cash generation. Let's turn to slide 5. We are excited to announce we are in the early stages of developing a strategic collaboration with Euronet to deliver integrated ATM outsourcing solutions globally.

By combining our cash recycling technology, software, and global service capabilities with Euronet's ATM operations and transaction processing expertise, we can help banks improve operational efficiency, expand self-service capabilities, and create new revenue opportunities. We believe this combination of efficiency, revenue generation, and flexibility would create a differentiated value proposition for our customers. Turning to review banking on slide 6. We delivered growth in three of the four regions we serve, including North America and Europe, our two largest markets, as well as Latin America. The Asia-Pacific, Middle East, Africa region faced a difficult year-over-year comparison following significant shipments of high-capacity ATMs last year, along with a more complex operating environment in the Middle East. Nevertheless, we continue to see attractive opportunities across our banking portfolio in this region.

In our core ATM business, we secured several important wins, including an order for 520 DN Series cash recyclers with one of the largest banks in North America. This is an important validation of our technology and our ability to compete and win with leading global financial institutions. We also secured a contract for more than 1,450 ATMs in a large market in Asia that will further expand our installed base in that market. We are making progress with our branch automation solution strategy, where we are expanding beyond the ATM to help financial institutions better connect their physical and digital channels, while automating more transactions within the branch. In Latin America, we secured a contract for 360 in-branch cash recyclers together with a long-term service agreement. We also signed a significant service contract with a major Spanish financial institution to manage a network of approximately 6,000 ATMs.

These wins demonstrate how our integrated portfolio of hardware, software, and services enables banks to modernize their operations, create more seamless customer experiences across physical and digital channels, and expand our recurring revenue opportunities. We are also beginning to extend our Smart Vision AI capabilities into banking. Building on our experience in retail, we are working with financial institutions to explore how AI computer vision can improve branch operations, automate processes, and enhance the customer experience. Finally, our fit-for-purpose portfolio continues to gain traction in India, where we expect growth in sequential unit shipments in the fourth quarter. These opportunities also include long-term service contracts, and we are exploring additional geographies where this portfolio can address market-specific needs, as well as the expansion of the portfolio. Together, these developments reinforce our confidence in the long-term opportunity across banking from our core ATM business to broader branch automation, software, and recurring services.

Let's turn to slide 7 to discuss retail. Turning to retail, we delivered another strong quarter with revenue growing 16% year-over-year, reflecting continued customer demand and the significant opportunities to expand our market presence, particularly in North America. Our North America opportunity pipeline continues to grow, and we see substantial growth opportunities ahead. An important part of our strategy is to establish relationships with new customers and expand those relationships over time by demonstrating the value of our broader portfolio. A good example is a national U.S. retailer where we began with a software integration project. Successful execution helped establish us as a trusted partner, leading to a hardware opportunity with the potential for significant volume, and more recently, opening the door for our Smart Vision AI solution. We are seeing this approach translate into additional wins.

During the quarter, we secured a new customer with a regional North American grocer for approximately 1,200 point-of-sale lanes across 200 stores. Each of these wins expands our customer base and strengthens our presence in North America. Just as importantly, we are gaining market recognition and building confidence in our ability to deliver at scale, creating additional opportunities to compete for larger customer engagements. In Europe, we continue to build on our market leadership. During the quarter, we secured a 6,000-lane self-checkout refresh with a major grocer and a service agreement valued at more than $25 million with a U.K.-based retailer. This service win is particularly encouraging because it demonstrates how our technology and expertise can create opportunities beyond traditional checkout solutions and help customers improve their broader retail operations. Finally, Smart Vision AI continues to gain traction with major retailers.

Our pilots and initial deployments are meeting or exceeding customer shrink reduction targets, and we remain on track to exceed 1,000 deployments by year-end. While Smart Vision AI's current revenue contribution remains relatively small, it is offered as a software-as-a-service solution, creating a growing base of recurring software revenue. Beyond its direct software revenue contribution, Smart Vision AI differentiates our broader portfolio, helps drive hardware and service opportunities, and deepens customer relationships. Our leadership in Europe, growing momentum in North America, and increasing adoption of Smart Vision AI reinforce our confidence in the long-term growth opportunity ahead. Let's turn to slide 8 to discuss services. We continue to make progress against our priorities of delivering industry-leading service levels, improving operational efficiency, and expanding recurring revenue opportunities. During the quarter, we maintained high levels of service performance globally and delivered on our commitment to grow service gross margins.

Service gross margin reached 27.7%, reflecting a one-time benefit of approximately $8 million. Even when excluding that benefit, service margins grew meaningfully sequentially and year-over-year, driven by operational discipline and the investments we've made in the business. We are continuing to strengthen our service delivery capabilities. In Latin America, we completed the consolidation of our regional support organization, creating a more integrated and efficient service platform. In North America, our service fleet modernization is helping us improve technician safety and first-time fix rates. These improvements matter beyond cost efficiency. Consistently delivering high service levels builds customer confidence, strengthens retention, and creates opportunity to expand our relationships. Ultimately, our service strategy is about more than maintaining equipment. It is about delivering greater value to our customers, strengthening long-term relationships, and creating a more predictable, profitable business.