DIEBOLD NIXDORF, Inc: Form 10-Q for the period ended Jun 30, 2023

Overview

Management’s discussion and analysis of financial condition and results of operations should be read in conjunction with the condensed consolidated financial statements and accompanying notes that appear within this Quarterly Report on Form 10-Q.

Introduction

The Company automates, digitizes and transforms the way people bank and shop. The Company’s integrated solutions connect digital and physical channels conveniently, securely and efficiently for millions of consumers every day. As an innovation partner for a majority of the world's top 100 financial institutions and top 25 global retailers, the Company delivers unparalleled services and technology that power the daily operations and consumer experience of banks and retailers around the world. The Company has a presence in more than 100 countries with approximately 21,000 employees worldwide.

Strategy

The Company is focused on consistently innovating its solutions to support a better transaction experience for consumers at bank and retail locations while simultaneously streamlining cost structures and business processes through the integration of hardware, software and services.

RECENT DEVELOPMENTS

Voluntary Reorganization

On June 1, 2023, the Company and certain of its subsidiaries filed voluntary petitions in the U.S. Bankruptcy Court seeking relief under chapter 11 of the U.S. Bankruptcy Code. The Chapter 11 Cases are being jointly administered under the caption In re: Diebold Holding Company, LLC, et al. (Case No. 23-90602). Additionally, on June 1, 2023, Diebold Dutch filed a scheme of arrangement relating to certain of the Dutch Scheme Parties and commenced the Dutch Scheme Proceedings under the Dutch Act on Confirmation of Extrajudicial Plans (Wet homologatie onderhands akkoord) in the Dutch Court regarding the WHOA Plan. On June 12, 2023, Diebold Dutch filed a voluntary petition for relief under chapter 15 of the U.S. Bankruptcy Code in the U.S. Bankruptcy Court seeking recognition of the Dutch Scheme Proceedings and related relief. The Debtors and Diebold Dutch continue to be under the jurisdiction of the U.S. Bankruptcy Court in accordance with the applicable provisions of the U.S. Bankruptcy Code and orders of the U.S. Bankruptcy Court.

On July 13, 2023, the U.S. Bankruptcy Court entered the Confirmation Order confirming the U.S. Plan. The U.S. Plan incorporates by reference certain documents filed with the U.S. Bankruptcy Court as part of the supplements to the U.S. Plan filed with the U.S. Bankruptcy Court on June 21, 2023, June 27, 2023, July 5, 2023, July 7, 2023, July 10, 2023 and August 8, 2023.

On August 2, 2023, the Dutch Court entered the WHOA Sanction Order sanctioning the WHOA Plan in the Dutch Scheme Proceedings.

On August 7, 2023, the U.S. Bankruptcy Court entered an order in the Chapter 15 Proceedings recognizing the WHOA Plan and the WHOA Sanction Order.

The U.S. Plan and the WHOA Plan will become effective when certain conditions are satisfied or waived.

Although the U.S. Bankruptcy Court has confirmed the U.S. Plan and the Dutch Court has sanctioned the WHOA Plan, the Debtors and the Dutch Scheme Parties have not yet consummated all of the transactions that are contemplated by the Plans. Rather, the Debtors and the Dutch Scheme Parties intend to consummate these transactions in the near future, on or before Effective Date. As set forth in the Plans, there are certain conditions precedent to the occurrence of the Effective Date, which must be satisfied or waived in accordance with the Plans in order for the Plans to become effective and the Debtors and the Dutch Scheme Parties to emerge from the Restructuring Proceedings. The Debtors and the Dutch Scheme Parties anticipate that each of these conditions will be either satisfied or waived by August 11, 2023, which is the target for the Debtors’ and the

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(dollars in millions, except per share amounts)

Dutch Scheme Parties' emergence from the Restructuring Proceedings. On the Effective Date, the Debtors and the Dutch Scheme Parties will, generally, no longer be governed by the oversight of the U.S. Bankruptcy Court or the Dutch Court.

The Company cannot predict the ultimate outcome of the Chapter 11 Cases and the Dutch Scheme Proceedings at this time. For the duration of the Chapter 11 Cases or Dutch Scheme Proceedings, the Company’s operations and ability to develop and execute its business plan would be subject to the risks and uncertainties associated with the Chapter 11 process and Dutch restructuring process. The amount and composition of the Company’s assets, liabilities, officers and/or directors could be significantly different following the outcome of the Chapter 11 Cases and the Dutch Scheme Proceedings, and our historical financial performance would likely not be indicative of our future financial performance. In particular, the description of the Company’s operations, properties and liquidity and capital resources included in this Quarterly Report on Form 10-Q may not accurately reflect our operations, properties and liquidity and capital resources following the Chapter 11 process and Dutch restructuring process.

For a more detailed discussion of the Restructuring Proceedings, see Note 2 to our Condensed Consolidated Financial Statements and Part II, Item 1A “Risk Factors” in this Quarterly Report.

Going Concern

Our condensed consolidated financial statements included herein have been prepared using the going concern basis of accounting, which contemplates continuity of operations, realization of assets, and satisfaction of liabilities in the normal course of business. Pursuant to the requirements of ASC Topic 205-40, Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern, management must evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the Company’s ability to continue as a going concern for one year from the date the consolidated financial statements are issued. Our ability to continue as a going concern is contingent upon, among other things, our ability to successfully implement the Restructuring Transactions contemplated in the Plans. There can be no certainty that the Restructuring Transactions will be effected or that disruption from the Chapter 11 Cases and Dutch Scheme Proceedings will not interfere with the Company’s business. As of June 30, 2023, substantial doubt existed regarding our ability to continue as a going concern.

For a more detailed discussion of the Going Concern Assessment see “Going Concern Assessment” in Note 2 to our Condensed Consolidated Financial Statements and Part II, Item 1A “Risk Factors” in this Quarterly Report.

SERVICES AND PRODUCT SOLUTIONS

The Company offers a broad portfolio of solutions designed to automate, digitize and transform the way people bank and shop. As a result, the Company’s operating structure is focused on its two customer segments — Banking and Retail. Leveraging a broad portfolio of solutions, the Company offers customers the flexibility to purchase the combination of services and products embedded with software that drive the most value to their businesses.

Banking

The Company provides integrated solutions for financial institutions of all sizes designed to help drive operational efficiencies, differentiate the consumer experience, grow revenue and manage risk.

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Banking Services

Services represents the largest operational component of the Company and includes product-related services, implementation services and managed services. Product-related services incidents are managed through remote service capabilities or an on-site visit. The portfolio includes contracted maintenance, preventive maintenance, “on-demand” maintenance and total implementation services. Implementation services help our customers effectively respond to changing customer demands and includes scalable solutions based on globally standardized processes and tools, a single point of contact and reliable local expertise. Managed services and outsourcing consists of managing the end-to-end business processes and technology integration. Our integrated business solutions include self-service fleet management, branch life-cycle management and ATM as-a-service capabilities.

The Company's DN Vynamic software is the first end-to-end software portfolio in the banking marketplace designed to simplify and enhance the consumer experience. This platform is cloud-native, provides new capabilities and supports advanced transactions via open application program interface (API). In addition, the Company’s software suite simplifies operations by eliminating the traditional focus on internal silos and enabling inter-connected partnerships between financial institutions and payment providers. Through its open approach, DN Vynamic brings together legacy systems, enabling new levels of connectivity, integration, and interoperability. The Company’s software suite provides a shared analytic and transaction engine. The DN Vynamic platform can generate new insights to enhance operations; prioritizing consumer preferences rather than technology.

In 2020, the Company launched the AllConnect Data Engine (ACDE), which enables a more data-driven and predictive approach to services. As of June 30, 2023, more than 195,000 devices were connected to ACDE. As the number of connected devices continues to increase, the Company expects to benefit from more efficient and cost-effective operations.

Banking Products

The banking portfolio of products consists of cash recyclers and dispensers, intelligent deposit terminals, teller automation, and kiosk technologies. As financial institutions seek to expand the self-service transaction set and reduce operating costs by shrinking their physical branch footprint, the Company offers the DN Series™ family of self-service solutions.

DN Series is the culmination of several years of investment in consumer research, design and engineering resources. Key benefits and features of DN Series include:

• superior availability and performance;
• next-generation cash recycling technology;
• full integration with the DN Vynamic™ software suite;
• a modular and upgradeable design, which enables customers to respond more quickly to changing customer demands;
• higher note capacity and processing power;
• improved security safeguards to protect customers against emerging physical, data and cyber threats;
• physical footprint as much as 40% less vs. competing ATMs in certain models;
• made of recycled and recyclable materials and is 25% lighter than most traditional ATMs, reducing CO2 emissions both in the manufacturing and transportation of components and terminals;
• uses LED technology and highly efficient electrical systems, resulting in up to 50% power savings versus traditional ATMs; and
• increased branding options for financial institutions.

Retail

The Company’s comprehensive portfolio of retail services and products improves the checkout process for retailers while enhancing shopping experiences for consumers.

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Retail Services

Diebold Nixdorf AllConnect Services® for retailers include maintenance and availability services to continuously optimize the performance and total cost of ownership of retail touchpoints, such as checkout, self-service and mobile devices, as well as critical store infrastructure. The solutions portfolio includes: implementation services to expand, modernize or upgrade store concepts; maintenance services for on-site incident resolution and restoration of multivendor solutions; support services for on-demand service desk support; operations services for remote monitoring of stationary and mobile endpoint hardware; as well as application services for remote monitoring of multivendor software and planned software deployments and data moves. As a single point of contact, service personnel plan and supervise store openings, renewals and transformation projects, with attention to local details and customers’ global IT infrastructure.

The DN Vynamic software suite for retailers provides a comprehensive, modular and open solution ranging from the in-store check-out to solutions across multiple channels that improve end-to-end store processes and facilitate continuous consumer engagements in support of a digital ecosystem. This includes click & collect, reserve & collect, in-store ordering and return-to-store processes across the retailers' physical and digital sales channels. Operational data from a number of sources, such as enterprise resource planning (ERP), POS, store systems and customer relationship management systems (CRM), may be integrated across all customer connection points to create seamless and differentiated consumer experiences.

In 2021, the Company announced it entered the electric vehicle (EV) charging station services business, a market with a customer profile potentially comparable to the existing retail business. Our global services capability, including our technicians, our skills in global spare parts logistics management, and multi-lingual help desks have initially resonated with market participants who own public charging stations.

Retail Products

The retail product portfolio includes self-checkout (SCO) products and ordering kiosks facilitate a seamless and efficient transaction experience. The BEETLE®/iSCAN EASY eXpress™, hybrid products, can alternate from attended operation to SCO with the press of a button. The K-two Kiosk automates routine tasks and in-store transactions, offers order-taking abilities, particularly at quick service restaurants (QSRs) and fast casual restaurants and presents functionality that furthers store automation and digitalization. The retail product portfolio also includes modular and integrated, “all-in-one” point of sale (POS) and self-service terminals that meet changing consumer shopping journeys, as well as retailers’ and store staff’s automation requirements. Supplementing the POS system is a broad range of peripherals, including printers, scales and mobile scanners, as well as the cash management portfolio, which offers a wide range of banknote and coin processing systems. Additionally, our retail software solutions are inclusive of a cloud native software platform which is hardware agnostic and multi-vendor capable.

Business Drivers

The business drivers of the Company's future performance include, but are not limited to:

• demand for self-service and automation from Banking and Retail customers driven by the evolution of consumer behavior;
• demand for cost efficiencies and better usage of real estate for bank branches and retail stores as they transform their businesses to meet the needs of their customers while facing macro-economic challenges;
• demand for services on distributed IT assets such as ATMs, POS and SCO, including managed services and professional services;
• timing of product upgrades and/or replacement cycles for ATMs, POS and SCO;
• demand for software products and professional services;
• demand for security products and services for the financial, retail and commercial sectors; and
• demand for innovative technology in connection with the Company's strategy.

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DIP Facility

On June 5, 2023, the Company entered into the DIP Credit Agreement. Refer to Note 2 for further information.

The DIP Facility provides for the following premiums and fees, as further described n the DIP Credit Agreement: (i) a participation premium equal to 10.00% of New Common Stock upon reorganization (subject only to dilution on account of the MIP); (ii) a backstop premium equal to 13.50% of New Common Stock; (iii) an upfront premium equal to 7.00% of New Common Stock and (iv) an additional premium equal to 7.00% of New Common Stock.

The DIP Facility will terminate on the earliest of (i) October 2, 2023; (ii) the consummation (as defined in section 1101(2) of the U.S. Bankruptcy Code) of any plan of reorganization under the Chapter 11 Cases; and (iii) the date of acceleration of the term loans and the termination of unused commitments with respect to the DIP Facility in accordance with the terms of the DIP Credit Agreement. All outstanding principal and other obligations under the DIP Facility are due and payable in full upon termination.

Mandatory prepayments of the loans under the DIP Facility (the DIP Term Loans) shall be required in an amount equal to 100% of net cash proceeds from any asset disposition or recovery event (in each case, on terms and subject to exceptions set forth in the DIP Credit Agreement).

Interest on the outstanding principal amount of all DIP Term Loans accrues at a rate per annum equal to either (i) the adjusted secured overnight financing rate with a one-month tenor rate, plus 7.50% or (ii) an adjusted base rate, plus 6.50%.

On June 5, 2023, the proceeds of the DIP Facility were used, among others, to: (i) repay in full the term loan obligations, including a make-whole premium, under the Superpriority Facility and (ii) repay in full the ABL Facility and cash collateralize letters of credit thereunder. The payment for the Superpriorty Facility totaled $492.3 and was comprised of $401.3 of principal and interest, $20.0 of premium, and a make whole amount of $71.0. The payment for the ABL Facility, including the FILO Tranche, and the cash collateralization of the letters of credit thereunder totaled $241.0 and was comprised of $211.2 of principal and interest and $29.8 of cash collateralized letters of credit.

If the Plans go effective, the DIP Facility will convert into a facility under the Exit Facility Credit Agreement.

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Results of Operations

The following discussion of the Company’s financial condition and results of operations provides information that will assist in understanding the financial statements and the changes in certain key items in those financial statements. The following discussion should be read in conjunction with the condensed consolidated financial statements and the accompanying notes that appear elsewhere in this Quarterly Report on Form 10-Q.

Net Sales

The following tables represent information regarding the Company's net sales:

(1) The Company calculates constant currency by translating the prior-year period results at the current year exchange rate.

Three months ended June 30, 2023 compared with the three months ended June 30, 2022

Net sales increased $70.5, or 8.3 percent, including a net favorable currency impact of $3.3 primarily related to the euro. After excluding the favorable currency impact and $2.6 of net sales generated during the three months ended June 30, 2022 from divested businesses, net sales increased by $69.8.

Segments

• Banking net sales increased $74.8, including a net favorable currency impact of $0.7, related primarily to the euro. After excluding the favorable currency impact and $0.2 of net sales generated by divested businesses, net sales increased $74.3, which was driven by higher ATM unit sales volume.
• Retail net sales decreased $4.1, including a net favorable currency impact of $2.6 primarily related to the euro. After excluding the favorable currency impact and $2.3 of sales generated by divested businesses, net sales decreased $4.4. Service revenue was comparable between periods. There was growth in SCO revenues that was offset by decline in ePOS revenue.

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(1) The Company calculates constant currency by translating the prior-year period results at the current year exchange rate.

Six months ended June 30, 2023 compared with six months ended June 30, 2022

Net sales increased $98.8, or 5.9 percent, including a net unfavorable currency impact of $23.4 primarily related to the euro. After excluding the unfavorable currency impact and $15.3 of net sales generated during the six months ended June 30, 2023 from divested businesses, net sales increased by $137.5.

Segments

• Banking net sales increased $104.9, including a net favorable currency impact of $12.4, related primarily to the euro. After excluding the favorable currency impact and $6.2 of net sales generated by divested businesses, net sales increased $123.5, which was driven by higher ATM unit sales volume.
• Retail net sales decreased $6.1, including a net unfavorable currency impact of $11.0 primarily related to the euro. After excluding the unfavorable currency impact and $9.1 of sales generated by divested businesses, net sales increased $14.0 primarily due to improved unit pricing and SCO unit sales volume and an increase in Services as a result of an increase in SCO base.

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Gross Profit

The following table represents information regarding the Company's gross profit:

Services gross profit and gross margin was comparable in both the quarter and six months in both periods.

Product gross profit increased due to the product sales increase at favorable pricing, combined with favorable currency impact, primarily related to the euro. Product gross margin increased 1,640 basis points in the three months ended June 30, 2023 primarily due to lower logistical costs and decreases in certain raw material costs, most notably semiconductor chips. Further increase period over period was due to a favorable mix in sales geography.

Product gross profit increased due to the product sales increase. Product gross margin increased 1,110 basis points in the six months ended June 30, 2023 primarily due to the reason described above.

Operating Expenses

The following table represents information regarding the Company's operating expenses:

Selling and administrative expense decreased $12.8 in the three months ended June 30, 2023 compared to the corresponding period in 2022. This decrease is the result of the cost savings initiatives, the most significant of which were headcount reductions that were implemented beginning in the second quarter of 2022, which is partially offset by refinancing related charges incurred in 2023 related to efforts to obtain additional liquidity and optimize capital structure.

Research and development costs decreased $7.7 in the three months ended June 30, 2023 compared to the corresponding period in 2022 as a result of ongoing costs savings initiatives which include the movement of certain research and development activities to lower cost jurisdictions and project prioritization and rationalization.

During the second quarter of 2023 and 2022, the Company recognized impairment primarily for certain facilities leases in Poland as a result of an initiative to streamline administrative office space usage.

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Selling and administrative expense decreased $10.0 in the six months ended June 30, 2023 compared to the corresponding period in 2022 as a result of the cost savings initiatives, the most significant of which were headcount reductions that were implemented beginning in the second quarter of 2022, which is partially offset by refinancing related charges incurred in 2023 related to efforts to obtain additional liquidity and optimize capital structure.

Research and development costs decreased $13.6 in the six months ended June 30, 2023 compared to the corresponding period in 2022 as a result of ongoing costs savings initiatives which include the movement of certain research and development activities to lower cost jurisdictions and project prioritization and rationalization.

During the first half of 2023, the Company recognized impairment primarily for certain facilities leases in the U.K. and Poland as a result of an initiative to streamline administrative office space usage. The Company recognized impairment of its North American ERP system of $38.4 as well as assets in Russia and Ukraine of $16.8 in the same period in the prior year.

Operating Loss

The following table represents information regarding the Company's operating loss:

Operating loss was favorable by $87.6 in the three months ended June 30, 2023, compared to the prior-year period. The improvement in operating profit is predominantly the result of higher product gross profits.

Operating loss was favorable by 168.9 in the six months ended June 30, 2023, compared to the prior-year period. The improvement in operating loss is predominantly the result of higher product gross profits and the non-recurrence of the large impairment charges recognized in the first quarter of 2022.

Other Income (Expense)

The following table represents information regarding the Company's other income (expense), net:

Interest income remained materially consistent for the three month periods ended June 30, 2023 and 2022.

Interest expense increased $20.1 due to the terms of the agreement completed on December 29, 2022 and increasing variable interest rates. Additionally, amortization of deferred financing fees from refinanced debt contributed $8.2 of interest expense in the current year quarter compared to only $4.0 in the prior year quarter. The Company ceased making principal payments, and as of June 2023, ceased accruing interest expense in relation to liabilities subject to compromise.

Foreign exchange gain (loss), net remained materially consistent for the three month periods ended June 30, 2023 and 2022.

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Refer to Note 2 for further description of Reorganization items, net for the three months ended June 30, 2023.

Miscellaneous, net remained materially consistent for the three month periods ended June 30, 2023 and 2022 and is primarily driven by recognition of non-service pension items, the most significant of which are in Germany.

Interest income remained materially consistent for the six months ended June 30, 2023 and 2022.

Interest expense increased $53.9 due to the terms of the agreement completed on December 29, 2022 and increasing variable interest rates. Additionally, amortization of deferred financing fees from refinanced debt contributed $21.8 of interest expense in the current year quarter compared to only $8.3 in the prior year period. The Company ceased making principal payments, and as of June 2023, ceased accruing interest expense in relation to liabilities subject to compromise.

Foreign exchange gain (loss), net includes realized gains and losses, primarily related to euro and Brazilian real currency exposure, which was unfavorable, particularly during the first quarter of 2023.

Refer to Note 2 for further description of Reorganization items, net for the six months ended June 30, 2023.

Miscellaneous, net remained materially consistent for the six months ended June 30, 2023 and 2022 and is primarily driven by recognition of non-service pension items, the most significant of which are in Germany.

Net Loss

The following table represents information regarding the Company's net loss:

Changes in net loss are a result of the fluctuations outlined in the previous sections. The change in net loss is also impacted by a decrease in income tax expense for the three and six months ended June 30, 2023 compared with the prior year periods. Refer to Note 4 of the Condensed Consolidated Financial Statements for additional information of tax expense in the current quarter.

Segment Operating Profit Summary

The following tables represent information regarding the segment operating profit metrics, which exclude the impact of restructuring, non-routine charges, and held for sale non-core European retail business. Refer to Note 18 of the Condensed Consolidated Financial Statements for further details regarding the determination of reportable segments and the reconciliation between segment operating profit and consolidated operating profit.

Banking segment operating profit increased $21.9 in the three months ended June 30, 2023, as compared to the prior-year period due to increased sales volume of ATM units and normalization of supply chain logistics and input costs.

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Banking segment operating profit increased $56.1 in the six months ended June 30, 2023, as compared to the prior-year period due to increased sales volume of ATM units and normalization of supply chain logistics and input costs.

Retail segment operating profit decreased $2.5 in the three months ended June 30, 2023, as compared to the prior-year period due to a reduction in net sales.

Retail segment operating profit increased $12.3 in the six months ended June 30, 2023, as compared to the prior-year period due to normalization of supply chain logistics and input costs, most notably when comparing the first quarter in both periods.

Corporate does not represent a reportable segment, but the table above includes charges not allocated to segments as they are not directly attributable and are managed independently by the CODM. These include headquarter-based costs associated primarily with human resources, finance, IT and legal. Costs were materially consistent when comparing the three and six month periods to prior year.

Liquidity and Capital Resources

On June 5, 2023, the Company entered into the DIP Credit Agreement which provided the $1,250.0 DIP Facility. The proceeds of the DIP Facility were used, among others, to: (i) repay in full the term loan obligations, including a make-whole premium, under the Superpriority Facility and (ii) repay in full the ABL Facility and cash collateralize letters of credit thereunder. The payment for the Superpriorty Facility totaled $492.3 and was comprised of $401.3 of principal and interest, $20.0 of premium, and a make whole amount of $71.0. The payment for the ABL Facility, including the FILO Tranche, and the cash collateralization of letters of credit thereunder totaled $241.0 and was comprised of $211.2 of principal and interest and $29.8 of cash collateralized letters of credit.

The DIP Facility is scheduled to mature on September 30, 2023 and liquidity provided thereunder is expected to sustain the Company through an earlier Effective Date. Pursuant to the U.S. Plan and as a condition to its effectiveness, the Company expects to enter into the Exit Facility Credit Agreement. The Exit Facility Credit Agreement is expected to be a $1,250.0 senior secured term loan, maturing in 2028 and bearing interest at a rate per annum equal to the Term SOFR Rate (subject to a floor of 4.00%) plus 7.50%. The form of the Exit Facility Credit Agreement was included in the Plan Supplement filed with the U.S. Bankruptcy Court on July 10, 2023 and August 8, 2023.

The Company cannot predict the ultimate outcome of the Chapter 11 Cases and the Dutch Scheme Proceedings at this time. For the duration of the Chapter 11 Cases or Dutch Scheme Proceedings, the Company’s operations and ability to develop and execute its business plan would be subject to the risks and uncertainties associated with the Chapter 11 process and Dutch restructuring process. The amount and composition of the Company’s assets, liabilities, officers and/or directors could be significantly different following the outcome of the Chapter 11 Cases and the Dutch Scheme Proceedings, and our historical financial performance would likely not be indicative of our future financial performance. In particular, the description of the Company's operations, properties and liquidity and capital resources included in this Quarterly Report on Form 10-Q may not

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accurately reflect our operations, properties and liquidity and capital resources following the Chapter 11 process and Dutch restructuring process.

Our condensed consolidated financial statements included herein have been prepared using the going concern basis of accounting, which contemplates continuity of operations, realization of assets, and satisfaction of liabilities in the normal course of business. Pursuant to the requirements of ASC Topic 205-40, Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern, management must evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the Company’s ability to continue as a going concern for one year from the date the consolidated financial statements are issued. Our ability to continue as a going concern is contingent upon, among other things, our ability to successfully implement the Restructuring Transactions contemplated in the Plans. There can be no certainty that the Restructuring Transactions will be effected or that, disruption from the Chapter 11 Cases and Dutch Scheme Proceedings will not interfere with the Company’s business. As of June 30, 2023, substantial doubt existed regarding our ability to continue as a going concern.

For a more detailed discussion of the Restructuring Transactions, see Note 2 to our Condensed Consolidated Financial Statements and Part II, Item 1A “Risk Factors” in this Quarterly Report.

The Company's total cash and cash availability as of June 30, 2023 and December 31, 2022 was as follows:

On June 5, 2023, the proceeds of the DIP Facility were used, among others, to: (i) repay in full the term loan obligations, including a make-whole premium, under the Superpriority Facility and (ii) repay in full the ABL Facility and cash collateralize letters of credit thereunder. The payment for the Superpriorty Facility totaled $492.3 and was comprised of $401.3 of principal and interest, $20.0 of premium, and a make whole amount of $71.0. The payment for the ABL Facility, including the FILO Tranche, and the cash collateralization of the letters of credit thereunder totaled $241.0 and was comprised of $211.2 of principal and $29.8 of cash collateralized letters of credit.

The following table summarizes the results of the Company's condensed consolidated statement of cash flows for the six months ended June 30, 2023 and 2022:

Operating Activities

Cash flows from operating activities can fluctuate significantly from period to period as working capital needs and the timing of payments impact reported cash flows. Net cash used by operating activities was $337.6 for the six months ended June 30, 2023, a change of $31.0 from cash use of $306.6 for the six months ended June 30, 2022.

• Cash flows from operating activities during the six months ended June 30, 2023 compared to the six months ended June 30, 2022 were unfavorably impacted by a $405.8 increase in net loss. Refer to "Results of Operations" discussed above for further discussion of the Company's net loss. However, this loss included charges of $636.2 for reorganization items, net in 2023.

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• The net aggregate of inventories and accounts payable was a decrease in operating cash flow of $161.3 during the six months ended June 30, 2023 compared to a decrease in operating cash flow of $90.0 during the six months ended June 30, 2022. The $71.3 decrease in cash usage is primarily to normalize suppliers through accounts payable.
• The net aggregate of trade receivables and deferred revenue was an increase in operating use of cash of $80.5 during the six months ended June 30, 2023 compared to an increase in operating source of cash of $19.7 in the six months ended June 30, 2022. The $100.2 net change is primarily the result of timing within the order to cash cycle as well as lower collections of customer prepayments.

Investing Activities

Cash flows from investing activities during the six months ended June 30, 2023 includes $11.2 and $10.8 for capital expenditures and software development, respectively, compared to $8.1 and $17.4, respectively, for the same periods in 2022.

During the six months ended June 30, 2023, the Company received no cash proceeds from divestitures compared to $10.5 of proceeds from the divestiture of its German reverse vending business in the six months ended June 30, 2022.

During the six months ended June 30, 2023, net maturities from investing activity was $15.4, compared to $8.1 for the six months ended June 30, 2022.

Financing Activities

Net cash provided by financing activities was $563.4 for the six months ended June 30, 2023 compared to a $180.3 source of cash for the same period in 2022. The change was primarily a result of the DIP Facility borrowings offset by net payments under the ABL Facility, including the FILO facility, of $(188.3) during the six months ended June 30, 2023, compared to net borrowings under the Company's prior revolving credit facility of $0.0 during the six months ended June 30, 2022.

The Company paid cash for interest related to its debt of $45.1 and $86.5 for the six months ended June 30, 2023 and June 30, 2022, respectively.

Refer to Note 10 of the condensed consolidated financial statements for additional information regarding the Company's debt obligations.

Contractual and Other Obligations

The Company enters into certain purchase commitments due within one year for materials through contract manufacturing agreements for a total negotiated price. At June 30, 2023, the Company had minimal purchase commitments due within one year for materials through contract manufacturing agreements at negotiated prices.

Except for the items noted above, inclusive of near-term debt maturities, all contractual and other cash obligations with initial and remaining terms in excess of one year and contingent liabilities remained generally unchanged at June 30, 2023 compared to December 31, 2022.

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Off-Balance Sheet Arrangements

The Company enters into various arrangements not recognized in the consolidated balance sheets that have or could have an effect on its financial condition, results of operations, liquidity, capital expenditures or capital resources. The principal off-balance sheet arrangements that the Company enters into are guarantees and sales of finance receivables. The Company provides its global operations guarantees and standby letters of credit through various financial institutions to suppliers, customers, regulatory agencies and insurance providers. If the Company is not able to comply with its contractual obligations, the suppliers, regulatory agencies and insurance providers may draw on the pertinent bank. The Company has sold finance receivables to financial institutions while continuing to service the receivables. The Company records these sales by removing finance receivables from the consolidated balance sheets and recording gains and losses in the consolidated statement of operations (refer to Note 6 of the condensed consolidated financial statements).

Diebold Nixdorf, Incorporated initially issued the 8.5% Senior Notes due 2024 (the 2024 Senior Notes) in an offering exempt from the registration requirements of the Securities Act, which were later exchanged in an exchange offer registered under the Securities Act. The 2024 Senior Notes are guaranteed by certain of Diebold Nixdorf, Incorporated's existing and future subsidiaries which are listed on Exhibit 22.1 to this Quarterly Report on Form 10-Q. The following presents the summarized financial information separately for Diebold Nixdorf, Incorporated (the Parent Company), the issuer of the guaranteed obligations, and the guarantor subsidiaries, as specified in the indenture governing the Company's obligations under the 2024 Senior Notes.

Each guarantor subsidiary is 100 percent owned by the Parent Company at the date of each balance sheet presented. The 2024 Senior Notes are fully and unconditionally guaranteed on a joint and several basis by each guarantor subsidiary. The guarantees of the guarantor subsidiaries are subject to release in limited circumstances only upon the occurrence of certain conditions. Each entity in the consolidating financial information follows the same accounting policies as described in the condensed consolidated financial statements, except for the use by the Parent Company and the guarantor subsidiaries of the equity method of accounting to reflect ownership interests in subsidiaries which are eliminated upon consolidation.

The following tables present summarized financial information for the Parent Company and the guarantor subsidiaries on a combined basis after elimination of (i) intercompany transactions and balances among the Parent Company and the guarantor subsidiaries and (ii) equity in earnings from and investments in any non-guarantor subsidiary.

(unaudited)

(dollars in millions, except per share amounts)

As of June 30, 2023 and December 31, 2022, the Parent Company and the guarantor subsidiaries on a combined basis had the following balances with non-guarantor subsidiaries:

(unaudited)

(dollars in millions, except per share amounts)

Critical Accounting Policies and Estimates

Management’s discussion and analysis of the Company’s financial condition and results of operations are based upon the Company’s condensed consolidated financial statements. The consolidated financial statements of the Company are prepared in conformity with generally accepted accounting principles in the United States (U.S. GAAP). The preparation of the accompanying consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions about future events. These estimates and the underlying assumptions affect the amounts of assets and liabilities reported, disclosures about contingent assets and liabilities and reported amounts of revenues and expenses. Such estimates include revenue recognition, the valuation of trade and financing receivables, inventories, goodwill, intangible assets, other long-lived assets, legal contingencies, guarantee obligations, and assumptions used in the calculation of income taxes, pension and post-retirement benefits and customer incentives, among others. These estimates and assumptions are based on management’s best estimates and judgment. Management evaluates its estimates and assumptions on an ongoing basis using historical experience and other factors. Management monitors the economic conditions and other factors and will adjust such estimates and assumptions when facts and circumstances dictate. As future events and their effects cannot be determined with precision, actual results could differ significantly from these estimates.

As discussed in Note 1 and 2 , the Company has incorporated bankruptcies accounting. All other material critical accounting policies and estimates are described in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022.

Forward-Looking Statement Disclosure

This Quarterly Report on Form 10-Q and the exhibits hereto may contain statements that are not historical information and are "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements give current expectations or forecasts of future events and are not guarantees of future performance. These forward-looking statements include, but are not limited to, projections, statements regarding the Company's expected future performance (including expected results of operations and financial guidance), future financial condition, anticipated operating results, strategy plans, future liquidity and financial position.

Statements can generally be identified as forward looking because they include words such as “believes,” “anticipates,” “expects,” “intends,” “plans,” “will,” “estimates,” “potential,” “target,” “predict,” “project,” “seek,” and variations thereof or “could,” “should” or words of similar meaning. Statements that describe the Company's future plans, objectives or goals are also forward-looking statements, which reflect the current views of the Company with respect to future events and are subject to assumptions, risks and uncertainties that could cause actual results to differ materially. Although the Company believes that these forward-looking statements are based upon reasonable assumptions regarding, among other things, the economy, its knowledge of its business, and key performance indicators that impact the Company, these forward-looking statements involve risks, uncertainties and other factors that may cause actual results to differ materially from those expressed in or implied by the forward-looking statements.

Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof.

The factors that may affect the Company's results include, among others:

• the timing and ultimate outcome of the Chapter 11 Cases and the Dutch Scheme Proceedings;
• the Company's ability to have its New Common Stock approved for listing on the New York Stock Exchange;
• the overall impact of the global supply chain complexities on the Company and its business, including delays in sourcing key components as well as longer transport times, especially for container ships and U.S. trucking, given the Company’s reliance on suppliers, subcontractors and availability of raw materials and other components;
• the Company's ability to improve its operating performance and its cash, liquidity and financial position;
• the Company's ability to generate sufficient cash or have sufficient access to capital resources to service its debt, which, if unsuccessful or insufficient, could force the Company to reduce or delay investments and capital expenditures or to dispose of material assets or operations, seek additional debt or equity capital or restructure or refinance its indebtedness;
• the Company's ability to comply with the covenants contained in the agreements governing its debt;
• the Company’s ability to successfully convert its backlog into sales, including our ability to overcome supply chain and liquidity challenges;

(unaudited)

(dollars in millions, except per share amounts)

• the ultimate impact of the ongoing infectious disease outbreaks and other public health emergencies, including further adverse effects to the Company’s supply chain, maintenance of increased order backlog, and the effects of any COVID-19 related cancellations;
• the Company's ability to successfully meet its cost-reduction goals and continue to achieve benefits from its cost-reduction initiatives and other strategic initiatives, such as the current $150.0 million-plus cost savings plan;
• the success of the Company’s new products, including its DN Series line and EASY family of retail checkout solutions, and electronic vehicle charging service business;
• the impact of a cybersecurity breach or operational failure on the Company's business;
• the Company’s ability to attract, retain and motivate key employees;
• the Company’s reliance on suppliers, subcontractors and availability of raw materials and other components;
• changes in the Company's intention to further repatriate cash and cash equivalents and short-term investments residing in international tax jurisdictions, which could negatively impact foreign and domestic taxes;
• the Company's success in divesting, reorganizing or exiting non-core and/or non-accretive businesses and its ability to successfully manage acquisitions, divestitures, and alliances;
• the ultimate outcome of the appraisal proceedings initiated in connection with the implementation of the Domination and Profit Loss Transfer Agreement with the former Diebold Nixdorf AG (which was dismissed in the Company’s favor at the lower court level in May 2022) and the merger/squeeze-out;
• the impact of market and economic conditions, including the bankruptcies, restructuring or consolidations of financial institutions, which could reduce the Company’s customer base and/or adversely affect its customers' ability to make capital expenditures, as well as adversely impact the availability and cost of credit;
• the impact of competitive pressures, including pricing pressures and technological developments;
• changes in political, economic or other factors such as currency exchange rates, inflation rates (including the impact of possible currency devaluations in countries experiencing high inflation rates), recessionary or expansive trends, hostilities or conflicts (including the war between Russia and Ukraine and the tension between the U.S. and China), disruption in energy supply, taxes and regulations and laws affecting the worldwide business in each of the Company's operations;
• the Company's ability to maintain effective internal controls;
• unanticipated litigation, claims or assessments, as well as the outcome/impact of any current/pending litigation, claims or assessments;
• the effect of changes in law and regulations or the manner of enforcement in the U.S. and internationally and the Company’s ability to comply with applicable laws and regulations; and
• and other factors included in the Company’s filings with the SEC, including its Annual Report on Form 10-K for the year ended December 31, 2022.

Except to the extent required by applicable law or regulation, the Company undertakes no obligation to update these forward-looking statements to reflect future events or circumstances or to reflect the occurrence of unanticipated events.

You should consider these factors carefully in evaluating forward-looking statements and are cautioned not to place undue reliance on such statements.

(in millions, except share and per share amounts)

Refer to the Company’s Annual Report on Form 10-K for the year ended December 31, 2022 for a discussion of market risk exposures. As discussed elsewhere in this Quarterly Report on Form 10-Q, the COVID-19 pandemic and related impacts on the global supply chain have negatively impacted our business and results of operations. As the Company cannot predict the full duration or extent of the pandemic, the future impact on the results of operations, financial position and cash flows, among others, cannot be reasonably estimated, but could be material. There have been no other material changes in this information since December 31, 2022.

This Quarterly Report on Form 10-Q includes the certifications of the Company's Chief Executive Officer (CEO) and Chief Financial Officer (CFO) required by Rule 13a-14 of the Securities Exchange Act of 1934 (the Exchange Act). See Exhibits 31.1 and 31.2. This Item 4 includes information concerning the controls and control evaluations referred to in those certifications.

Based on the performance of procedures by management, designed to ensure the reliability of financial reporting, management believes that the unaudited condensed consolidated financial statements fairly present, in all material respects, the Company's financial position, results of operations and cash flows as of the dates, and for the periods presented.

Disclosure Controls and Procedures

Disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) promulgated under the Exchange Act) are designed to ensure that information required to be disclosed in the reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission's (SEC) rules and forms and that such information is accumulated and communicated to management, including the CEO and CFO as appropriate, to allow timely decisions regarding required disclosures.

In connection with the preparation of this Quarterly Report on Form 10-Q, the Company's management, under the supervision and with the participation of the CEO and CFO, conducted an evaluation of disclosure controls and procedures as of the end of the period covered by this report. Based on this evaluation, the CEO and CFO have concluded that such disclosure controls and procedures were effective as of June 30, 2023.

Change in Internal Controls

During the quarter ended June 30, 2023, there have been no changes in the Company's internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, its internal control over financial reporting.

(in millions, except share and per share amounts)

Refer to the Company’s Annual Report on Form 10-K for the year ended December 31, 2022. There has been no material change to this information since December 31, 2022, except as provided below.

We are subject to risks and uncertainties associated with our Restructuring Proceedings.

The Company cannot predict the ultimate outcome of the Chapter 11 Cases and the Dutch Scheme Proceedings at this time. For the duration of any Chapter 11 Cases or Dutch Scheme Proceedings, the Company’s operations and ability to develop and execute its business plan are subject to the risks and uncertainties associated with the Chapter 11 process and Dutch restructuring process. The amount and composition of the Company’s assets, liabilities, officers and/or directors could be significantly different following the outcome of the Chapter 11 Cases and the Dutch Scheme Proceedings, and our historical financial performance would likely not be indicative of our future financial performance. In particular, the description of the Company’s operations, properties and liquidity and capital resources included in this Quarterly Report on Form 10-Q may not accurately reflect our operations, properties and liquidity and capital resources following the Chapter 11 process and Dutch restructuring process.

Until the Effective Date, the Debtors will continue to operate the business as “debtors-in-possession” under the jurisdiction of the U.S. Bankruptcy Court and in accordance with the applicable provisions of the U.S. Bankruptcy Code and orders of the U.S. Bankruptcy Court. We are subject to a number of risks and uncertainties associated with the Chapter 11 Cases and Dutch Scheme Proceedings, which may lead to potential adverse effects on our liquidity, results of operations, condition (financial or otherwise), brand or business prospects. Our operations, our ability to develop and execute our business plan, our financial condition, our liquidity, and our continuation as a going concern, are all subject to the risks and uncertainties associated with the Chapter 11 Cases and the Dutch Scheme Proceedings. These risks and uncertainties include, but are not limited to, the following:

• our ability to consummate the U.S. Plan and the WHOA Plan;
• the high costs of bankruptcy and related fees;
• the imposition of restrictions or obligations on the Company by regulators related to the bankruptcy and emergence from bankruptcy;
• our ability to obtain sufficient financing to allow us to emerge from bankruptcy and execute our business plan post-emergence;
• our ability to maintain our relationships with our suppliers, service providers, customers, employees, and other third parties;
• our ability to maintain contracts that are critical to our operations; and
• the actions and decisions of our debtholders and other third parties who have interests in our Chapter 11 Cases and Dutch Scheme Proceedings that may be inconsistent with our plans.

(in millions, except share and per share amounts)

The Plans may not become effective.

While the U.S. Plan has been confirmed by the U.S. Bankruptcy Court and the WHOA Plan has been sanctioned by the Dutch Court, they may not become effective because they are subject to the satisfaction of certain conditions precedent (some of which are beyond our control). There can be no assurance that such conditions will be satisfied, and therefore, that the Plans will become effective and that the Debtors will emerge from the Chapter 11 Cases and Dutch Scheme Proceedings as contemplated by the Plans. If the Effective Date is delayed, the Debtors may not have sufficient cash available in order to operate their business. In that case, the Debtors may need new or additional post-petition financing, which may increase the costs of consummating the Plans. There is no assurance of the terms on which such financing may be available or if such financing will be available. If the transactions contemplated by the Plans are not completed, it may become necessary to amend the Plans. The terms of any such amendment are uncertain and could result in material additional expense and result in material delays in the Chapter 11 Cases and Dutch Scheme Proceedings.

We are subject to claims that will not be discharged in the Chapter 11 Cases and the Dutch Scheme Proceedings.

The U.S. Bankruptcy Code provides that the effectiveness of a plan of reorganization discharges a debtor from substantially all debts arising prior to petition date, other than as provided in the plan of reorganization or the confirmation order. For example, the U.S. Plan provides that holders of allowed general unsecured claims would be reinstated and paid in the ordinary course of business in accordance with the terms and conditions of the particular transaction or agreement giving rise to such allowed general unsecured claim.

To the extent such claims could have been asserted prior to bankruptcy or arose during the bankruptcy, such claims can be asserted after we emerge from bankruptcy. The outcome and timing of potential matters is uncertain, and it is possible material costs, penalties, fines, sanctions, or injunctive relief could result from such a matter. As a result, an adverse ruling with respect to potential matters could have a material impact on our financial condition, results of operations, liquidity, and cash flows.

The Restructuring Proceedings have consumed and will continue to consume a substantial portion of the time and attention of our management, which may have an adverse effect on our business and results of operations, and we may face increased levels of employee attrition.

Our management has spent, and continues to be required to spend, a significant amount of time and effort focusing on the Restructuring Proceedings. This diversion of attention may have a material adverse effect on the conduct of our business, and, as a result, on our financial condition and results of operations, particularly if the Restructuring Proceedings are protracted. During the pendency of the Restructuring Proceedings, our employees will face considerable distraction and uncertainty and we may experience increased levels of employee attrition. A loss of key personnel or material erosion of employee morale could have a materially adverse effect on our ability to meet customer expectations, thereby adversely affecting our business and results of operations. The failure to retain or attract members of our management team and other key personnel could impair our ability to execute our strategy and implement operational initiatives, thereby having a material adverse effect on our financial condition and results of operations. Likewise, we could experience losses of customers or business partners who may be concerned about our ongoing long-term viability.

In certain instances, the Chapter 11 Cases may be converted to a case under Chapter 7 of the U.S. Bankruptcy Code.

Upon a showing of cause, the U.S. Bankruptcy Court may convert such Chapter 11 Cases to cases under chapter 7 of the U.S. Bankruptcy Code (Chapter 7). In such event, a Chapter 7 trustee would be appointed or elected to liquidate our assets for distribution in accordance with the priorities established by the U.S. Bankruptcy Code. We believe that liquidation under Chapter 7 would result in significantly smaller distributions being made to our creditors than those provided for in a prepackaged plan because of (i) the likelihood that the assets would have to be sold or otherwise disposed of in a distressed fashion over a short period of time rather than a controlled manner and as a going concern, (ii) additional administrative expenses involved in the appointment of a Chapter 7 trustee, and (iii) additional expenses and claims, some of which would be entitled to priority, that would be generated during the liquidation and from the rejection of leases and other executory contracts in connection with a cessation of operations.

As a result of the Chapter 11 Cases and the Dutch Scheme Proceedings, our historical financial information may not be indicative of our future financial performance and our Board of Directors and management team may change significantly.

During the Chapter 11 Cases and the Dutch Scheme Proceedings, we expect our financial results to be volatile as restructuring activities and expenses, contract terminations and rejections, and claims assessments significantly impact our consolidated financial statements. As a result, the amount and composition of the Company’s assets, liabilities, officers and/or directors could be significantly different following the outcome of the Chapter 11 Cases and the Dutch Scheme Proceedings, and our

(in millions, except share and per share amounts)

historical financial performance is likely not indicative of our future financial performance. In particular, the description of the Company’s operations, properties and liquidity and capital resources included in this Quarterly Report on Form 10-Q may not accurately reflect our operations, properties and liquidity and capital resources following the Chapter 11 process and Dutch restructuring process.

In addition, the composition of our management team may change significantly. Qualified individuals are in high demand and we may incur significant costs to attract them. In addition, the loss of any of our senior management or other key employees or changes in the composition of our management team could materially and adversely affect our ability to execute their strategy and implement operational initiatives and have a material and adverse effect on our financial condition, liquidity and results of operations.

Our existing common shares will be cancelled without any recovery under the U.S. Plan.

Under the U.S. Plan, all existing equity interests of the Diebold Nixdorf, Incorporated, including common shares, will be extinguished without any recovery. Additionally, if we are unable to consummate the Restructuring Transactions, it is unclear whether we would be able to reorganize our business and what, if anything, holders of claims against us would ultimately receive with respect to their claims.