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In Q3, Diebold continued to hammer out change

CEO Andy Mattes cites improvements but says more hard work lies ahead as the company retools for growth.

October 30, 2013 by Suzanne Cluckey — Owner, Suzanne Cluckey Communications

Yesterday, Diebold Inc. reported a third quarter 2013 net loss of $21.7 million, or 34 cents per share, year over year, with total third quarter revenue of $705.4 million down 0.6 percent from the same period last year.

Still, Andy Mattes, Diebold CEO, president and director of nearly half a year, said he saw signs of improvement.

"Our ongoing business improvement and cost reduction efforts started to show during the quarter," he said. "We continue to execute on our strategy to globalize and transform our operations to better leverage our scale, which has resulted in an improvement in our service gross margin."

Mattes said half of Diebold's savings would be reinvested in the company and added that "we have yet to fully ramp-up investments in our transformation initiatives."

He also announced at the top of call that the company's CFO, Brad Richardson, had announced his resignation from the company. Mattes said that this was a personal decision by Richardson and was unrelated to the company's strategic direction or financials.

Diebold has initiated a search for a new CFO; in the interim, Chris Chapman, VP of global finance, will serve as the company's principal financial officer, effective as of Nov. 6.

From there, Mattes went on to outline several takeaways from Q3. First, he said, global order activity grew in the mid-teens during the quarter and revenue performance outside of North America was positive.

"While these are promising steps toward achieving sustainable top line growth, we still have a long way to go," Mattes said. "Total revenue is down year-over-year and sequentially. This is largely due to challenges in the North American market, particularly in the financial self-service business, which adversely impacted our revenue and orders during the quarter."

Mattes said during the Q&A portion of the call that he was optimistic that the U.S. market would see a recovery in 2014 — most likely in the second half of the year, based on the types of conversations the company was having with its customers about brand transformation and outsourcing, among other topics.

"Let's keep in mind, these are all long sales cycles and there is no pending event that would force a customer to make an immediate decision at any given point in time, but we're carefully optimistic about the U.S.," he said.

Second, Mattes said, non-GAAP earnings in the quarter benefited from a lower tax rate, as well as foreign exchange gain.

And third, he said, Diebold is beginning to see bottom line results from cost-saving initiatives instituted earlier in the year. However, Mattes cautioned that net cost savings will vary as the company ramps up investments in its transformation initiatives, and the nature of the investments will not follow a linear trend.

Asked during the follow-up Q&A what areas the company would reinvest in, Mattes said, "We're going to invest, especially on the deal side, to regaining more customer mind share as we talk about the change of our industry, about innovation and future products and solutions."

"We've made progress on several of our initiatives during the quarter," Mattes said in summation. "We are beginning to instill the operational rigor required to drive the transformation. There is still a great deal of work to be done before we can finalize our full potential as a company. After five months on the job, I'm confident in the steps we have identified to build on our core strength and capitalize on key opportunities in the marketplace."

Mattes promised that the company would share details of its transformation strategy and 2014 outlook in two weeks at the Diebold Investment Community Conference in New York, which will be viewable as a webcast.

The full Q3 report is available at the Diebold website.

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photo: Markus Wichmann

About Suzanne Cluckey

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Suzanne’s editorial career has spanned three decades and encompassed all B2B and B2C communications formats. Her award-winning work has appeared in trade and consumer media in the United States and internationally.

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Diebold Nixdorf

As a global technology leader and innovative services provider, Diebold Nixdorf delivers the solutions that enable financial institutions to improve efficiencies, protect assets and better serve consumers.

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