Diebold Inc. ( DBD)

Q3 2011 Earnings Call

October 27, 2011 10:00 AM ET


John Kristoff – VP and Chief Communications Officer

Thomas Swidarski – President and CEO

Bradley Richardson – EVP and CFO


Kartik Mehta – Northcoast Research

Matt Summerville – KeyBanc

Gil Luria – Wedbush Securities

Roman Leal – Goldman Sachs

Zahid Siddique – Gabelli & Company

Paul Coster – JP Morgan



Good day, everyone, and welcome to the Diebold, Incorporated Third Quarter Financial Results Conference Call. Today’s call is being recorded. At this time for opening remarks and introductions I would like to turn the call over to the Vice President and Chief Communications Officer, Mr. John Kristoff. Please go ahead, sir.

John Kristoff

Thanks, Dana. Good morning, everyone, and thank you for joining us for Diebold’s third quarter conference call. Joining me today are Tom Swidarski, President and CEO and Brad Richardson, Executive Vice President and CFO. Just a few notes before we get started. In addition to the earnings release, we’ve provided a supplementary presentation on the Investor page of our Web site. Tom and Brad will be walking through this presentation as part of their comments today and we encourage you to follow along.

Before we discuss our results as with past calls it’s important to note that we have restructuring, non-routine expenses, non-routine income and impairment charges in our results. We believe that excluding these items gives an indication of the company’s baseline operational performance. As a result, many of the remarks this morning will focus on non-GAAP financial information. For a reconciliation of our GAAP to non-GAAP numbers, please refer to the supplemental material at the end of the presentation. In addition, all results of operations reported today, including prior periods, exclude discontinued operations.

Finally a replay of this conference call will be available later today from our Web site. And as a reminder, some of the comments today may be considered forward-looking statements. Internal and/or external factors could significantly impact actual results. As a precaution please refer to the more detailed risk factors that have previously been filed with the SEC.

Now with the opening remarks I’ll turn it over to Tom.

Thomas Swidarski

Thanks, John. Good morning, everyone. Thanks for joining our call today. Once again we delivered sound performance during the past quarter showing significant improvement in our profit margins, particularly in our Services business and are delivering on our commitments to generate the majority of our earnings in the back half of the year. We continue to effectively reduce our cost structure and drive improvements in our operations while focusing on more profitable business opportunities globally.

In addition North America continued to perform exceptionally well with high demand for our financial self-service solutions. Given our market improvement of profitability and the continued strength in our North American business we have increased confidence in our earnings outlook for the remainder of the year. As such we are raising our full year EPS guidance to $2.15 to $2.25 per share.

Total revenue for the third quarter decreased as we continue to be selective in the markets in deals we pursue, particularly in EMEA. The security business for bank branches in the United States remains challenged. However we have clearly improved our profitability through our continued focus on developing strategic relationships with customers and differentiating ourselves through high valued services. In turn we expect a strong fourth quarter with year-over-year increases in orders, revenue, margin and EPS. Our solid third quarter results combined with an expected strong fourth quarter provide us with momentum as we look to 2012.

During the quarter we had several key announcements regarding new innovations that help build the foundation to deliver even more value to our customers over the next several years. In August we unveiled a prototype of the world’s first virtualized ATM at VMworld. This is a very influential event hosted by VMware, the industry leader in Cloud computing and virtualization technologies and is attended by thousands of global IT professionals and decision makers worldwide.

Developed in collaboration, the virtual ATM prototype removed onboard computer from the terminal, assigning each machine in a fleet to centralize computing resource. The result is now at a consolidation ensuring resources through our self-service network, but also across delivery channels. This opens the door to more effective channel orchestration. In short, virtualization will lead a lower total cost of ownership and increase ATM uptime. The virtualization concept has not only generated a significant amount of media coverage, but more importantly it has spawned a number of thought leadership discussions with strategic customers around the world.

Virtualization represents an important milestone on Diebold’s roadmap, deleveraging cloud computing technology in the financial space, and will fundamentally change the way solutions are deployed in the marketplace. This technology is game-changer for our industry.

Also in August we announced the Opteva Flex Performance Series. The most robust of service terminal we’ve ever offered, it combines traditional deposit automation capabilities including bulk cash and check-accepted with full currency recycling, the first in our industry. It can be configured with a separate cash dispenser and recycling module all in one ATM. This makes it well-suited for deposit automation intense market such as Latin America, Asia and EMEA, and as the North American market for deposit automation continues to evolve, the Flex series puts us in a very strong competitive position. We dramatically improved reliability and flexibility of these terminals, enabled financial institutions to transform the way they mage cash at the ATM, including efficiencies, decreasing cost and minimizing the administrative burden.

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