Diebold Inc. ( DBD)

Q4 2011 Earnings Call

February 13, 2012 10:00 am ET


Thomas Swidarski – President and CEO

Bradley Richardson – EVP and Chief Financial Officer

John Kristoff – VP and Chief Communications Officer


Kartik Mehta – Northcoast Research

Matt Summerville - KeyBanc Capital Markets Inc

Zahid Siddique - Gabelli & Company

Gil Luria - Wedbush Securities

Paul Coster – JPMorgan Chase & Co

Roman Leal - Goldman Sachs Group, Inc

Dan Doliff - Morgan Stanley



Good day, everyone, and welcome to the Diebold, Incorporated Fourth Quarter Financial Results Conference Call. Today’s call is being recorded.

At this time for opening remarks and introductions, I’d like to turn the call over to the Vice President and Chief Communications Officer, Mr. John Kristoff. Please go ahead, sir.

John Kristoff

Thank you, Tom. Good morning and thank you for joining us for Diebold’s fourth 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 website. 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 financials. 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 complete 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 website. As a reminder, some of the comments today may be considered forward-looking statements. Internal and 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.

And now with opening remarks, I’ll turn it over to Tom.

Thomas Swidarski

Thanks, john. Good morning, everyone. Thanks for joining our call today. We closed 2011 on a winning note with strong performance in revenue growth and profitability across most regions. Most importantly, we delivered on all our prior commitments in several key areas. First, we delivered on our top line revenue commitment by growing 7.5% in the fourth quarter despite a 2% headwind from currency. Second, we generated about $5 million in operating profit in EMEA during the fourth quarter. Third, we exceeded the top end of our EPS guidance even when excluding the tax benefit from Brazil. Finally, our strong free cash flow generation during the quarter enabled us to exceed our full-year free cash flow guidance by more than $10 million.

These results speak to the improving health in our markets as well as our strengthening competitive position and continued operational progress. Our strategy to leverage our capabilities in services, software and innovation is beginning to pay dividends and its meeting the needs of our rapidly evolving markets.

In addition, Diebold delivered significant growth in revenue and generated more than $250 million in free cash flow during the fourth quarter. Our global financial self-service orders grew 17% during the quarter, with growth in every region of the world. The North American market continues to grow an impressive rate as demand remains strong.

As we look to 2012, I’m encouraged by how our business is growing and we’re developing new innovations to help drive further growth. We will once again step up our R&D investments in new solutions in 2012 that will help financial institutions reduce their operating expenses while attracting new customers.

Along these lines we continue to roll out new industry innovations. During our last call, we talked about several key announcements, including the development of the worlds first virtualized ATM and the introduction of our Opteva Flex Performance Series. These developments will help build the foundation for the types of solutions we need to – in order to deliver value for our customers and investors over the next several years.

To that end, earlier this year, we introduced yet another innovation. In January I attended the International Consumer Electronics Show in Las Vegas, where we collaborated with Verizon to introduce a concept for the worlds first 4G LTE enabled automated teller machine. This ATM harness with the same technology used to provide high speed, secured connectivity of laptop computers, smartphones, and other mobile devices and applies it to the ATM.

We were pleased with the positive reactions we received at the show. Subsequently, I’ve personally met with a number of important customers who are very interested in the 4G ATM concept.

The application of 4G connectivity represents a giant step forward in the way financial institutions monitor and manage their self-service networks. The concept is a critical milestone on Diebold’s services roadmap, paving the way for advanced services functionality.

By being the first incorporate 4G technology with the ATM, we’re providing yet another innovation, another innovative means to increase efficiencies, enhance security and improve customer service. It’s critical that we continue to invest in innovations such as these at a time when financial institutions face intense pressure to find new creative and secured ways to lower costs while attracting new customers.

In addition, growth in service and services continue to add an impressive pace. The total contract value of integrated services contracts, we signed in 2011 alone exceeded half a billion dollars. This growth underscores the softness of our strategy to transform Diebold into a software-lead services provider.

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