DIEBOLD NIXDORF, Inc

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

Three months ended September 30, 2026 compared with three months ended September 30, 2025. Net sales increased by $49.1, driven by a stronger Retail products sales, primarily electronic POS and SCO solutions, despite a net unfavorable currency impact of 0.1%. Banking net sales increased by $8.0, with growth in North America, Latin America and Europe and a net favorable currency impact of 0.3%, partially offset by lower product volumes in Middle East and parts of Southeast Asia due to non-recurrence of several large orders in the prior year period. Banking net sales represented 70.2% and 73.0% of total net sales for the three months ended September 30, 2026 and 2025, respectively. Retail net sales increased by $41.1, primarily due to increased product net sales driven by higher electronic POS and SCO volumes, principally in Europe, despite a net unfavorable currency impact of 1.0%. Retail net sales represented 29.8% and 27.0% of total net sales for the three months ended September 30, 2026 and 2025, respectively.

Nine months ended September 30, 2026 compared with nine months ended September 30, 2025. Net sales increased by $115.3, driven by stronger electronic POS business and a net favorable currency impact of 2.7%, partially offset by lower Banking product volumes. Banking net sales decreased by $38.4, primarily due to lower product volumes in Middle East and Europe, partially offset by a net favorable currency impact of 2.5%. Banking net sales represented 69.6% and 74.0% of total net sales for the nine months ended September 30, 2026 and 2025, respectively. Retail net sales increased by $153.7, primarily due to increased product net sales driven by stronger electronic POS business and a net favorable currency impact of 3.3%. Retail net sales represented 30.4% and 26.0% of total net sales for the nine months ended September 30, 2026 and 2025, respectively.

Services gross margin increased 190 and 40 basis points in the three and nine months ended September 30, 2026, respectively, compared to the corresponding periods in 2025. In the third quarter of 2026, the increase was due to VAT credits of $7.6 and improved operational performance. For the nine month period, the increase in margin was primarily driven by VAT credits and improved operational performance, partially offset by investments in our service fleet modernization and our technician capabilities and coverage. Product gross margin decreased 510 and 140 basis points in the three and nine months ended September 30, 2026, respectively, compared to the corresponding periods in 2025. Declines in the quarter and the nine month period are primarily driven by elevated memory costs, an unfavorable regional mix of Banking product sales and a higher proportion of electronic POS sales, partially offset by tariff recoveries of $10.0 and customer pricing actions.

Selling and administrative expense increased $21.3, or 14.1%, in the three months ended September 30, 2026 and increased $34.8, or 7.6%, in the nine months ended September 30, 2026, compared to the corresponding periods in 2025, primarily due to transformation costs related to continuous improvement initiatives. Transformation costs were $30.7 and $57.2 for the three and nine months ended September 30, 2026, respectively, and $9.9 and $23.0 for the three and nine months ended September 30, 2025, respectively. Refer to Note 11 to our condensed consolidated financial statements for additional information. Research and development costs reflect the Company's ongoing investment in hardware and software innovations and enhancements in service offerings. Other operating expense (income) increased $16.3 and $17.3 in the three and nine months ended September 30, 2026, respectively, compared to the corresponding periods in 2025 primarily related to a $16.9 impairment of our investment in an unconsolidated Chinese subsidiary as the company explores strategic options related to that investment.

Foreign exchange, net includes realized and unrealized gains and losses on foreign currency transactions and derivative instruments. Variability during the three and nine months ended September 30, 2026 primarily reflected fluctuations in the Euro and Brazilian Real relative to the U.S. dollar, mitigated by the Company's derivative hedging program. Refer to Note 12 to our condensed consolidated financial statements for additional information regarding derivative instruments not designated as hedges.

Changes in net income were a result of the fluctuations outlined above. The changes in net income were also impacted by an increase in income tax expense for the three and nine months ended September 30, 2026, compared with the prior year periods. The effective tax rate was higher in 2026 primarily due to decreased interest expense deductibility and provision to return adjustments in 2026. Refer to Note 8 to our condensed consolidated financial statements for additional information regarding tax expense.