Diebold, Incorporated
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2014 ANNUAL REPORT ANNUAL 2014 Building Better DIEBOLD, INCORPORATED 2014 ANNUAL REPORT Building Better In everything we do, every day, we are building better. We are collaborating with customers and technology partners to shape innovative solutions that address industry, customer and consumer needs. And we are embracing an eight-point program to redefine our business as we shape a better Diebold. We are building Diebold 2.0. 2014 REVENUE BREAKOUT 7% 16% 21% 46% 8% 46% Industry Solution Region 72% 54% 14% 16% Financial Self-Service Service North America Security Product Asia Pacific Brazil Election/Lottery Europe, Middle East and Africa Latin America Brazil “… in 2014 we made meaningful progress against each of our objectives to build the foundation required for long-term, sustained profitability.” ANDY MATTES President and Chief Executive Officer To Our Fellow Shareholders Winning companies – those that communicate their successes, PROGRESS THROUGH OUR sustainably grow and increase their challenges and the work TRANSFORMATIONAL ROADMAP value – are characterized by that remains to fulfill their In last year’s report, I described the several distinct attributes. They strategic objectives. three phases of our transformational possess a clearly defined strategy The enterprise-wide effort we call roadmap – crawl, walk and run. and establish a track record of Diebold 2.0 has put us on course The crawl phase encompasses reliable execution against it. There to build such an organization. To the foundational changes required is a high correlation between what be certain, we remain a company to stabilize the company and they say and what they do. Their in transformation, and not yet reverse negative performance innovations are guided by deep fully transformed. But in 2014 we trends. We executed against insights into customers’ needs, made meaningful progress against each of our crawl objectives in propelled by a team of dedicated each of our objectives to build the 2014. Cost-reduction targets people working together with foundation required for long-term, were achieved, sales effectiveness a shared goal. They relentlessly sustained profitability. was strengthened, talent was attack costs and prudently upgraded, the product portfolio reinvest in growth. Finally, these was enhanced and we undertook organizations transparently the overhaul of the organization’s DIEBOLD 1 IT infrastructure. We begin 2015 In 2014, we extended the company’s 2017, expecting to generate still in the crawl phase, but with a long-term record of returning cash an additional $25 million in net clear line of sight to walk. to shareholders in the form of a savings. We are well positioned dividend, a consistent record of to meet our five-year net This progress underpinned a year which we are very proud. savings goal of approximately of solid operational performance. $100 million. We delivered year-over-year Our focus on reducing costs – with revenue growth of nearly 7% savings allocated equally between Customer needs in the financial (9% on a constant currency basis); reinvestment in the business and self-service and electronic security revenue totaled $3.05 billion the bottom line – is delivering as markets are evolving rapidly. We in 2014. For the year, net promised. Since 2013, our work are focused on continuing to income grew significantly from to reduce Diebold’s cost envelope build a track record of consistent the prior year to approximately has hit the target of $55 million execution; doing so requires that $114 million. in net savings – with another we align services-led, software- $20 million to come through in enabled solutions with emerging Diebold’s balance sheet remains 2015. We also extended cost- market needs. solid and provides the capacity to reduction initiatives through make prudent growth investments. COST GROWTH CASH DIEBOLD 2.0 Four Pillars and Eight-Point Program TALENT ESTABLISH1 A DRIVE2 SUSTAINABLE IMPROVE3 SALES INCREASE4 SPEED COMPETITIVE IMPROVEMENT IN EFFECTIVENESS. AND AGILITY. COST STRUCTURE. CASH FLOW. Flattened management Exceeded free cash Global implementation Shorter time to market structure flow expectations of Salesforce.com for new solutions for the year Product and service Grew core business gross margins above mid-term targets 2 2014 ANNUAL REPORT NEW WAYS FOR CONSUMERS TO currency usage, according to a These demands mean Diebold has CONNECT WITH THEIR MONEY 2014 study by the Federal Reserve an important role to play in the Diebold automates the way Bank of San Francisco. Projections changing landscape of financial people connect with their money indicate that the amount of cash transactions. in a highly secure, convenient in circulation globally will continue INNOVATIONS THAT RESONATE and reliable manner. Despite the to increase through the rest of IN AN EVOLVING MARKET growth of electronic payment the decade. In 2014, we launched the first systems and broader adoption of While cash will remain highly stage of a new series of ATMs online and mobile transactions, relevant, changes are underway in designed to address compelling cash remains highly relevant to how consumers connect with their customer and industry needs. global consumers. In fact, during funds – into and out of payment These new solutions include the past 10 years the number of systems and financial institutions advancements in productivity, notes in circulation has grown – with mobile technology playing security, power management and at a robust pace: 50% for the an important role. Concurrent with branch transformation. It is our U.S. dollar and 80% for the euro, these trends, the financial industry first new product line in several according to the Federal Reserve is seeking increased automation years and was developed in close Bank and the European Central to lower costs while preserving collaboration with dozens of Bank. Notably, consumers 18 to customer service satisfaction. 24 exhibit the highest level of global customers. “We are focused on continuing to build a track record of consistent execution.” INSTILL5 A WINNING COLLABORATE6 WITH FURTHER7 LEVERAGE GENERATE8 LONG-TERM, CULTURE GROUNDED CUSTOMERS AND SERVICES AND PROFITABLE GROWTH. IN EXECUTION. PARTNERS TO DRIVE SOFTWARE. INNOVATIVE SOLUTIONS. Employee incentive Continued rollout Grew Managed Grew operating plans aligned with of new product Services double digits profit 4x revenue company goals platform in 2014 growth in 2014 on and performance a percentage basis Cardless cash withdrawal Corning® Gorilla® Glass DIEBOLD 3 The financial industry and outset. When customers deploy It has an array of technology- consumers alike are concerned our new solutions, they reduce enabled experiences such as about threats to the security operating costs while meeting touch surfaces and sensing of transactions. Our new ATMs their sustainability objectives. devices, cardless transactions incorporate an encrypted PIN Even with their high efficiency, this and intelligent virtual tellers. pad from Cryptera, a Diebold new product platform offers a full While still a concept today, the company, and the patented array of features, including a high- RBC serves as a testing ground ActivEdge™ secure card reader, definition screen, mobile-ready to demonstrate new thinking to which defeats all known skimming functionality, and various options integrate cutting-edge technology attacks. ActivEdge’s innovative such as cash recycling capabilities. in ways that resonate with design is simple and elegant – it customers and consumers. Today we are working with a accepts the card wide-edge first growing number of financial Another innovative solution so that the magnetic strip cannot institutions as they explore we recently announced is our be read until it is securely inside automation technologies to antimicrobial touchscreen that the terminal. make the branch channel even was developed in partnership Energy consumption is a significant more flexible and cost-effective. with Corning Incorporated. The contributor to the cost of operating Purposeful innovation requires Corning® Gorilla® Glass inhibits ATMs. To combat this, we offer close collaboration and a the growth of bacteria on its the world’s “greenest” terminal. willingness to fully reimagine surface, which is important for New ATM series like the 5500 what’s possible. In 2014, Diebold touchscreen ATMs – especially incorporate an intelligent power debuted the Responsive Banking in high-traffic areas like airports, management system, originally concept (RBC), a high-tech, fully since they are a universally designed for the Indian market, automated branch prototype that shared device. that reduces power draw by up to provides personalized interaction 60% compared with conventional without staffing a branch. LEVERAGING THE SERVICE AND SOFTWARE ADVANTAGE designs. Notably, the 5500 is Customers have expressed the first product series in the excitement about this “micro In financial self-service, the company’s history to be designed branch” concept, which can be unmatched scope of Diebold’s for international markets from the deployed in a matter of hours. global services capabilities 4 2014 ANNUAL REPORT represents a core competitive self-service, digital and teller- This is exemplified by SecureStat®, advantage. Our comprehensive assisted channels. This is an area a software platform that is a key managed services offering ranges where Diebold is evolving and can differentiator and is foundational from installation to monitoring, add value. We have infused our to the company’s