Diebold Nixdorf, Incorporated (NYSE:DBD) Q3 2025 Earnings Call Transcript

Diebold Nixdorf, Incorporated (NYSE:DBD) Q3 2025 Earnings Call Transcript November 5, 2025

Diebold Nixdorf, Incorporated beats earnings expectations. Reported EPS is $1.11, expectations were $0.66.

Operator: Hello. Good day, and welcome to Diebold Nixdorf’s Third Quarter 2025 Earnings Call. My name is Eric, and I’ll be coordinating your call today. [Operator Instructions] I’d now like to turn the call over to our host, Maynard Um, Vice President of Investor Relations. Maynard, please go ahead.

Maynard Um: Hello, everyone, and welcome to our third quarter 2025 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 factors 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 Participants should be mindful that subsequent events may render this information to be out of date.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, a reconciliation between GAAP and non-GAAP measures can be found in the supplemental schedules of the presentation. With that, I’ll turn the call over to Octavio.

Octavio Marquez: Thank you, Maynard. Good morning, everyone, and thank you for joining us. Starting on Slide 4. Q3 was another solid quarter for Diebold Nixdorf. I’m proud of our team’s execution as we grew revenue, profit and earnings per share. This morning, we also announced a new $200 million share repurchase program, reflecting our continued confidence in the strength and cash generation of our business. In Q3, we continue to see healthy demand across our business segments, giving us the confidence to reaffirm our full year outlook. We continue to trend toward the higher end of our guidance ranges across total company revenue, adjusted EBITDA and free cash flow. Product orders grew 25% year-over-year, driven by strength in both banking and retail, with backlog now standing at approximately $920 million.

Total revenue grew 2% year-over-year and was up 3% sequentially, fueled by acceleration in our retail business and continued steady contributions from bank. Operating profit grew 4% year-over-year and 19% sequentially, while adjusted earnings per share grew to $1.39, up over $1 per share year-over-year and up about 50% sequentially. Retail delivered particularly strong results in the quarter as the second half recovery gained momentum. Revenue was up 8% year-over-year and order entry grew 40%, reflecting solid demand and execution. I’m very optimistic about our retail growth trajectory going into Q4. We also achieved an important milestone this quarter, positive free cash flow for the fourth consecutive quarter, another new record for Diebold Nixdorf.

In addition, we received a credit rating upgrade from Standard & Poor’s. As I mentioned, we announced a new $200 million share repurchase program. This underscores the strength of our business, our fortress balance sheet, robust cash flow generation and continued commitment to returning capital to shareholders, a top priority for us and a clear reflection of our confidence in the long-term value of Diebold Nixdorf. Let’s move on to Slide 5. Three quarters into our 3-year plan, we are firmly on track to deliver the key objectives we outlined at our Investor Day. In 2024, we stabilized the business and built strong operational teams. In 2025, we strengthened our foundation, both operationally and financially with tangible improvements in manufacturing, service and profitability.

These gains have translated into sustainable, profitable growth and continued positive cash flow. We have multiple levers to achieve our targets from operational and manufacturing efficiencies to product and service innovation to disciplined capital allocation. As we already demonstrated, we have multiple ways to win across a dynamic market environment. We remain committed to our long-term goals, generating $800 million in cumulative free cash flow by 2027, achieving 60% plus conversion and approximately 15% adjusted EBITDA margins, all while maintaining a fortress balance sheet and returning capital to shareholders. With a clear strategy and a strong execution track record, Diebold Nixdorf is well positioned to deliver sustainable value for all stakeholders.

Now let’s turn to Slide 6. Year-to-date, we’ve made significant progress across the 4 pillars of our growth strategy. In banking, our annual Intersect event in Nashville brought together hundreds of customers and marked the formal launch of our branch automation solutions. This is not just a single product. It’s a comprehensive approach across hardware, software and services that redefines how banks operate by seamlessly integrating and automating digital and physical channels. As the banking landscape evolves, automation will be the defining factor for a bank’s success. Roughly 70% of global bank operating expenses are tied to branches. Our solutions help banks reduce those costs, enhance efficiency and improve the customer experience. We continue to see steady refresh activity in ATM cash recyclers and have successfully rolled out teller cash recycling solutions to our first customers, reinforcing our confidence in the broader branch automation strategy.

On the service side, leveraging common components between DN Series ATMs and teller cash recyclers is driving greater efficiency, scale and flexibility in how we support our customers. At the same time, our software enables seamless end-to-end cash management and integration into digital channels, helping banks modernize their operations. Together, these capabilities strengthen customer relationships and position us to capture the growing opportunity in branch automation. In retail, while the broader industry continues to face headwinds, our retail product business is bucking that trend. We anticipated an inflection in the second half, and that’s exactly what we’re seeing. We have important new wins with key customers in the point-of-sale and self-checkout spaces as retailers maintain focus on optimizing and improving the customer experience.

Feedback on our AI-powered dynamic SmartVision deployment has been overwhelmingly positive, helping us differentiate from competitors and expand our pipeline. Our ability to rapidly develop, pilot and most importantly, scale this technology is positioning us as an industry leader. Dynamic SmartVision is now live in over 50 stores, and we’re expanding the use cases to address shrinkage and point of sale in manned lanes with future opportunities to extend and tackle shrink across the store aisles. Our service organization continues to deliver. SLA performance has improved meaningfully versus last year. We accelerated investments in technology and people to deliver a premier service experience because great service drives customer loyalty and market share gains.

As we’ve refined our branch automation solution strategy, customers are increasingly asking for a single provider to manage all their service needs. In line with our disciplined capital allocation strategy, we’ve completed a targeted tuck-in acquisition in the service area to enhance our multi-vendor capabilities. As we look at our operations, we have multiple ways to win. I’m proud to report that we saw strong progress in working capital with year-over-year improvements in both DSO and DIO. This highlights the strong cross-functional collaboration across the company. In our manufacturing operations, our lead times are down, quality is up and our supply chain execution remains a strength. North American operations are benefiting from higher throughput at our Ohio facility and increased sourcing of parts in the U.S. We are also on track to achieve at least $50 million in SG&A run rate reductions next year.

Overall, the pillars of our company are strong and provide us with multiple ways to achieve our goals. Now on to Slide 7. We continue to advance in our lean and continuous improvement journey. This approach now extends well beyond manufacturing, empowering teams across the organization to identify and act on new opportunities for efficiency and effectiveness. In Q3, our European operations held a Kaizen week in France, resulting in safety improvements and an optimized invoicing process that accelerated collections. Our field and logistics teams also uncovered process improvements, including a redesign of our logistics network in France that is expected to generate meaningful cost savings and serve as a blueprint for other regions. In Paderborn, our teams focused on eliminating energy waste, implementing daily energy management programs and new LED lighting initiatives that will deliver immediate and growing savings over time.

The facility also achieved ISO 50001 certification, underscoring our commitment to sustainability. I am pleased to share that Diebold Nixdorf was recently named one of the world’s best companies by Time Inc. After a comprehensive analysis of employee satisfaction, revenue growth and sustainability that included participants from thousands of global companies, Diebold Nixdorf earned a place in this prestigious annual list. My thanks goes out to the talented global Nixdorf team. With one quarter left in 2025, we are well positioned to finish another strong year, delivering on our commitments and continuing to create value for all stakeholders. With that, I’ll turn it over to Tom to walk through our financial results.

Thomas Timko: Thank you, Octavio. First, I want to express my sincere appreciation to all Diebold Nixdorf employees for their dedication and hard work. Q3 was yet another quarter where we demonstrated our commitment to doing what we say. Turning to Slide 8. Diebold Nixdorf posted solid Q3 revenue growth, which rose 2% year-over-year and was up 3% sequentially. We finished Q3 with very solid product backlog of $920 million, down from $980 million at the end of the second quarter on planned deliveries, partially offset by strong new order entry, which was up 25% year-over-year, led by retail. As we previously shared, we expected revenue to be weighted toward Q4. Given the momentum we’re seeing and our backlog, we have line of sight to deliver one of the strongest Q4s in recent history for the company and achieve our full year guidance.

Gross margin improved 10 basis points year-over-year and declined 30 basis points sequentially. Product gross margin improved significantly year-over-year, rising by 140 basis points. There are a number of puts and takes, but the strong performance was primarily driven by favorable geographic mix as well as improved pricing. On a sequential basis, product gross margin declined by 60 basis points, which was expected and primarily due to the normalization in mix and continued strength in point-of-sale units, which generally realized lower margins. Importantly, we remain well ahead of our initial expectations with product gross margins on track to exceed the 50 basis point year-over-year improvement we projected earlier this year at Investor Day.

On the service side, gross margins declined by 10 basis points sequentially and 80 basis points year-over-year. In prior quarters, we discussed how vital delivering the best service in the industry is to our customers and to us. To that end, we accelerated and increased investments in the rollout of our enhanced field services software, new field technicians and the consolidation of our spare parts and distribution facilities in Europe. Strength on the product side of the business gives us the conviction to make and accelerate investments we believe will generate profitable growth for products and services going forward. By continually raising the bar, we’d strengthen our relationships and create a positive cycle. Outstanding service leads to greater customer loyalty and over time, more opportunities for product sales.

As a result of these investments, we now expect margins for services to be comparable to last year at approximately 26%. These service headwinds are offset by product margins and OpEx improvements, demonstrating that DN has multiple ways to win. Turning to operating expense. We continue to take disciplined cost actions through focusing on facilities and indirect procurement. Operating expense was down sequentially, reflecting these efforts. This is part of our ongoing actions to improve our cost structure. 2025 is about strengthening our foundation for accelerated profitable growth in 2026. As part of this effort, we’ve conducted a comprehensive review of SG&A spend across the organization, identifying over 200 actions, which are expected to deliver up to $50 million in net run rate savings next year.

We’re confident in our ability to sustain cost discipline while reinvesting in areas that support long-term growth. Continuing to Slide 9. We continue to see strong trends across our profitability and cash flow metrics. In Q3, adjusted EBITDA reached $122 million with margin expansion of 70 basis points. sequentially and 20 basis points year-over-year, underscoring our commitment to driving higher quality earnings growth. Operating expense controls contributed to 4% year-over-year and 19% sequential increase in operating profit, reaching $87 million for the quarter and a very solid 9.2% operating margin. We’re also making significant progress on non-GAAP EPS, which increased about 50% sequentially to $1.39 and increased by over $1 a share year-over-year.

In Q3, our effective non-GAAP tax rate came in at approximately 19%. This improvement was primarily driven by the recent announcement of lower tax rates in Germany. As a result, we now expect our non-GAAP effective tax rate for the full year of 2025 to be in the 35% to 40% range, down from 45%. Free cash flow nearly doubled sequentially to approximately $25 million. Q3 marks the first time the company has generated positive free cash flow for 4 consecutive quarters, a clear demonstration of our ability to build and sustain a consistent quarterly cash flow generating business. We’re very proud of the continuous progress we’ve made in working capital management. As of the third quarter, we have realized year-over-year improvements of days inventory outstanding, or DIO, by 11 days and days sales outstanding or DSO by 9 days.

Looking ahead, we see continued opportunities. Moving to Slide 10. Banking continued to deliver solid results. We achieved sequential growth across key global markets. Revenue was roughly flat year-over-year and up $11 million sequentially. Gross margin in our Banking segment increased by 20 basis points year-over-year and was down 70 basis points sequentially. Last quarter, we benefited from a favorable geographic mix, while this quarter was more balanced. Looking ahead, we expect to continue driving steady ATM refresh activity in all geographies, and we’re encouraged by the first orders of our teller cash recyclers in our branch automation solutions strategy. Turning to Slide 11. Our Retail segment delivered strong results for the second consecutive quarter with sequential growth in order entry, revenue and backlog.

Gross margin was up 100 basis points sequentially with improvement in service margins and continued point-of-sale strength. As we committed to last quarter, retail revenue and gross margin grew sequentially. We expect to continue driving sequential growth in this segment through year-end. Moving ahead, let’s review our guidance on Slide 12. We’re maintaining the guidance we shared last quarter and continue to trend toward the higher end of the ranges across total revenue, adjusted EBITDA and free cash flow. The strong performance we posted so far, along with what we see shaping up to be one of the strongest Q4s in recent history, gives us a high level of confidence we can close the year well positioned to achieve further growth in 2026. And as we’ve shown, we have multiple ways to win.

Turning to Slide 13. We remain committed to maintaining our fortress balance sheet, which underpins our disciplined capital allocation strategy. During the quarter, we received a credit rating upgrade from S&P Global from B to B+, validating our efforts to strengthen financial performance and focus on maintaining our strong balance sheet. Also today, we announced our new $200 million share repurchase program. Our goal is to maintain the momentum established with our prior program. This action reflects our disciplined approach to capital allocation and our confidence in the long-term value of the company. We will continue to prioritize actions that drive profitable growth, maintain our fortress balance sheet and deliver value to our shareholders.

At the end of the quarter, we had approximately $590 million of liquidity, including $280 million in cash and short-term investments and $310 million of our revolving credit facility, which remains untapped. Our net leverage ratio remains comfortably within our targeted range of 1.25x to 1.75x. With that, I’ll turn it back to Octavio for closing remarks.

Octavio Marquez: Thanks, Tom. To wrap things up on Slide 14, our banking business continues posting solid performance, and we’re executing well. We’re seeing strong growth in APAC and the Middle East, which is expanding our installed base and driving recurring service revenue. In North America, we expect to build further momentum with our branch automation solutions. In retail, we’re back to year-over-year and sequential growth, and our solutions continue to resonate well with the market, driving efficiency and enhancing customer experience. Across the organization, we’re streamlining our structure, aligning functional expertise with strategic objectives and leveraging AI and standardizing processes. These actions are expected to further reduce SG&A and enable faster, more scalable growth.

Finally, we strongly believe in the long-term value of Diebold Nixdorf and remain laser-focused on delivering shareholder value. We appreciate your support as we advance on our journey building a stronger Diebold Nixdorf for many years to come. And with that, operator, please open up the call for questions.

Q&A Session

Operator: [Operator Instructions] Our first question comes from the line of Matt Summerville with D.A. Davidson.

Matt Summerville: Maybe first, can you talk about the magnitude of impact on service profitability associated with the accelerated investments you referenced and if this changes kind of the margin cadence into ’26 and ’27 as it relates to your targets? And then I have a follow-up.

Thomas Timko: Yes. Sure, Matt. So service margins this quarter and what we’re looking at for the year, we expect now to be flat to slightly up, really driven by — you heard Octavio on the call mention our product margins and some of the OpEx resilience that we’re seeing, and this is the best thing about sort of the new Diebold, right? We have multiple ways to win. So although service margins are going to be flat, what we decided to do because of the product margins and some of the OpEx upside that we saw earlier was to accelerate some of the investments that we need to make into that service business to get to a world-class service level for our customers. That included the consolidation of repair and spare parts depots across Europe, and we’re looking at other opportunities in labs and where we have commercial offices as well, but also the field technician software rollout, the acceleration of that in North America, and then lastly, as our C-base has expanded, we’ve added more field technicians to the mix as well to really help improve our SLAs. So that investment was about $10 million, and that will be spread between Q3 and Q4.

So that’s really what drives the service margins down. But again, we’re still able to do what we said we were going to do and meet total EBITDA expectations because of the multiple ways to win on product margins and OpEx.

Matt Summerville: And then maybe spend a minute focused on the retail business, specifically in North America. Some of the KPIs you’ve been disclosing around proof of concepts, pilots, no mention of that this quarter. Maybe just a refresh on where things stand. And obviously, no logos mentioned per se. So maybe talk about how that effort is tracking versus your expectations.

Octavio Marquez: Yes, Matt, and again, sorry for not talking to more in this call about proof of concept. But again, we keep increasing the number of proof of concepts globally, particularly in North America. We’re happy that we’re now in several dark stores at some large grocers where they’re testing our solutions. So we remain optimistic that we’ve created a differentiated product for the market. It keeps resonating. And as you know, we’re trying to unseat some very long-standing incumbents in those markets, but we remain very optimistic that through the strength of our technology, the strength of our service team and the focus that our new sales team is putting on things, we should be seeing results. And we remain very, very optimistic about the retail business. As you saw, order growth was very substantial. Revenue growth was substantial as well. And we’re very well positioned to do that again in Q4. So we remain very optimistic about the retail business.

Operator: Your next question comes from the line of Antoine Legault with Wedbush Securities.

Antoine Legault: Just on the banking front, Octavio, I think you had mentioned expecting a pace of about 60 to 70 annual refresh orders on your installed base. Is that still the right way to think about cadence? And are those typically simple refresh orders of existing machines? Or are those — can those be orders that are upgrades to recyclers? Can you just help us think about that?

Octavio Marquez: So Antoine, I think that, that pace of around 60,000 machines every year is the right way to think about it, and all these will be new placements. We are not upgrading old machines into recyclers. It’s more cost effective and it’s a much better machine, the BS Series, every customer I talk to keeps reminding me that we have the best product in the industry there and that we should just accelerate the deployment of those because of the reliability, the functionality that it provides to customers. So yes, keep thinking about it that way, 60-plus thousand machines every year for the foreseeable future.

Antoine Legault: Noted. And on the gross margin front, you are looking at Q4, I think last year, gross margins dipped a bit sequentially due to geographic mix in the ATM business. How should we think about it this year? I know you mentioned you’re expecting continued sequential improvement in retail in the fourth quarter, but how should we think about it from both on a segment basis and on a consolidated basis?

Thomas Timko: Yes. So margins for Q4 we expect a pretty — in total, I would say, pretty similar run rate to what we saw in Q3 as we finish out the year, and the split between banking and retail, I would say, is compared to last year, banking coming in closer at 20 — where do we end the year at 24% last year, probably closer to 26.5-ish, which is very consistent with what we did last quarter, and then retail coming in at 2024. So a little — that was last year and then this year, it would be closer to 25%. So again, you’ll see sequential improvement quarter-over-quarter and year-over-year. So think mid-25s on retail.

Operator: Our next question comes from the line of Justin Ages with CJS Securities.

Justin Ages: Can you give us a bit more detail on that small acquisition you mentioned? What capabilities are you getting out of it and how it better serves your customers or what your customers are looking to do?

Octavio Marquez: Yes. So yes, Justin. So it’s a fairly small acquisition, but it gives us a very important capability that we didn’t have in the U.S., which is to serve different brands of equipment in the branch. When you think of our branch automation solutions, we’re clearly very focused on having our own teller cash recyclers in the branch. But this is a process for most banks that are already using teller cash recyclers or teller cash dispensers, replacing those machines. So there has to be a transition period where they’re asking us to maintain their old fleet from different vendors. So with this small acquisition, we’ve acquired the skill set to repair third-party parts. And this company had also a fairly robust process on how to serve third-party products. So that’s the capabilities that we’re acquiring, something that will expand our addressable market going into this multi-vendor space, particularly around branch products.

Justin Ages: Okay. That’s helpful. And then now that BAS has formally launched, can you give us some insight into the response versus the big national banks and the smaller regional banks? Are you seeing more demand on one side than the other?

Octavio Marquez: So Justin, as with everything in banking, kind of the leading banks of the world set the pace for the rest of the market. So we had the opportunity a couple of weeks ago to — or a couple of months ago to have some of our largest customers present our customer event. Some of our large customers were up on stage with us touting the benefits of this closed-end cash ecosystem where you have the ATM recycler, the teller cash recycler, the interchangeability of the cassettes inside the devices, the overall management software that not only controls the cash at the branch level, but that helps integrate the branches more to the digital world of banking. So big banks are very excited about that. And the response is that as we presented this to literally hundreds of our smaller customers, there’s now increased interest on them on how can they actually deploy similar solutions.

So I think that the thing that would happen with recycling, we started with the larger banks and it’s trickled down to the regionals, now to the smaller credit unions, community banks, I think that we will see that same trend with our branch automation solutions.

Operator: Our next question comes from the line of Matt Summerville with D.A. Davidson.

Matt Summerville: Just a couple of quick follow-ups. Obviously, you accelerated pretty materially the cadence of your share repurchase wrapping up that $100 million. How should we be thinking about how that $200 million just announced, how that unfolds heading into 2026?

Thomas Timko: Yes. Look, our goal is to really maintain the momentum that we established under the prior program and maintain as much flexibility as we can for the company as we go forward. But look, Matt, as we’re looking at 2026 as a year where we end up converting more cash, our EBITDA conversion, our cash conversion number increases by over 10% year-over-year. We’re going to have more cash during the year to deploy. And right now, we think given the stock price, and we just feel very confident in our company’s ability to generate cash. And we feel the stock is the best return on investment that we can make at this point in time. So again, we’re dealing with stock that we feel is undervalued and underappreciated. And we’re going to continue to be in the market, I would think, at a similar pace that you saw, but we reserve the right to be flexible as opportunities like HTx come up or other type of bolt-on acquisitions as well.

So — but right now, our plan is to sort of maintain that same level of buyback that you saw over the last 2 quarters.

Matt Summerville: Got it. And then, Octavio, I always find it useful if you take a minute and just kind of talk through the ATM side of the business in terms of what you’re seeing with respect to geographic demand trends?

Octavio Marquez: Yes. So thank you, Matt. So I’ll — let’s walk around the world. So North America, I would say we see a very steady business. The refresh cycle in large banks continues to evolve at the same pace that it’s been over the past couple of quarters. Recyclers are now, I would say, basically the only product that we sell in North America with a few exceptions that customers that still require cash dispensers, particularly like in the casino space or customers that have a large presence in convenience stores. But North America remains at a very steady pace. I’m happy with the progress that we’re making. I think that’s a big opportunity in North America is as we mature branch automation solutions, teller cash recyclers will start becoming a bigger part of the mix.

So I’m happy that we’re manufacturing them here in Ohio because that clearly creates a competitive advantage for us. As far as Europe, Europe, to be honest, is having a blockbuster year. I’m super proud of the team there. The — as Tom likes to say, they found multiple ways to win in a market that is not really growing that much. We continue to gain share, gain customers, significantly improve our service capabilities there. So I’m very happy with Europe. We had strong orders from all major markets in Europe. So again, I think Europe will end the year in a very strong note. So Europe continues to be very healthy. Asia Pacific, we made that big decision to reenter, as you know, India create fit-for-purpose devices for multiple markets. The Middle East with the high capacity cash recycler, the highest capacity device in the world, India with a more energy-efficient, smaller footprint device, and we’ve been winning business, which is very important because, as you know, we have been — had a shrinking installed base in that part of the world, which we are now starting to reverse the trend.

So that provides significant upside for us in future years around the service and software opportunity. Lastly, let me talk about Latin America. As you know, it’s always been dear to my heart. This year hasn’t been as strong in Latin America overall. It hasn’t been a bad year, but it hasn’t been as strong as we had hoped for. There’s a little bit of political turmoil in most markets in Latin America. So banks are a little bit more cautious. But — as we look at our opportunity there, continues to be the most heavy cash usage society in most places. So we’re optimistic that as we enter Q4 and go into next year, Latin America will once again pick up the pace. And again, I always separate Brazil from Latin America because it’s such a unique market.

But now that Brazil is manufacturing devices for all of Latin America, we’re gaining also a lot of efficiency in our Brazilian manufacturing. And we’re still waiting for some of these big government RFPs that keep being postponed, but we know that we will get them. We’re just hoping that they can materialize faster. But again, Latin America, still very optimistic about the market, even if this year wasn’t as strong as we had hoped for. But once again, that’s the importance of having the geographic diversity that we have that when one market is suffering, then a couple of others can pick up. So North America picked up some of the slack, Europe picked up some of it, Asia Pac. So we’re very confident that the model that we have, the distributed manufacturing footprint, the local to local clearly is a strength for the company.

Operator: Thank you. At this time, we have no further questions. I’ll now turn the call over to Maynard Um for his closing remarks.

Maynard Um: Thanks, everyone, for participating in today’s call and your interest in Diebold Nixdorf. If you have any follow-up questions, feel free to reach out to the Investor Relations team. So thanks again, and have a great rest of the day.

Operator: Ladies and gentlemen, this concludes today’s call. Thank you all for joining, and you may now disconnect.