Brinks Company (The)

Welcome to the Brinks Company's first quarter 2019 earnings call. Brinks issued a press release on first quarter results this morning. The company also filed an 8K that includes the release and the slides that will be used in today's call. For those of you listening by phone, the release and slides are available on the company's website at Brinks.com. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. As a reminder, this conference is being recorded. Now for the company's safe harbor statement. This call and the Q&A session will contain forward-looking statements. Actual results could differ materially from the projected or estimated results. Information regarding factors that could cause such differences is available in today's press release and in the company's most recent SEC filings. Information presented and discussed on this call is representative as of today only. Brinks assumes no obligation to update any forward-looking statements. The call is copyrighted and may not be used without written permission from Brinks. It is now my pleasure to introduce your host, Ed Cunningham, Vice President of Investor Relations and Corporate Communications. Mr. Cunningham, you may begin.

Thanks, Denise, and good morning, everyone. Joining me today are CEO Doug Kurtz and CFO Ronda Monaco. This morning we reported first quarter results on both a GAAP and non-GAAP basis. The non-GAAP results exclude a number of items, including our Venezuela operations, the impact of Argentina's highly inflationary accounting, reorganization and restructuring costs, items related to acquisitions and dispositions, and costs related to certain accounting compliance matters. We are also providing our results on a constant currency basis, which eliminates changes in foreign currency exchange rates from the prior year. We believe the non-GAAP results make it easier for investors to assess operating performance between periods. Accordingly, our comments today, including those referring to our guidance, will focus primarily on non-GAAP results. Reconciliations of non-GAAP to GAAP results are provided in the press release, in the appendix to the slides we're using today, and in this morning's 8K filing, all of which can be found on our website. Finally, please note that page three of the press release provides the details behind our 2019 guidance, including revenue, operating profit, non-controlling interest, income taxes, and adjusted EBITDA. I'll now turn the call over to Doug.

Thanks, Ed. Good morning, everyone, and thanks for joining us. Today we reported strong first quarter results, including a 19% increase in non-GAAP operating profits. These results were heavily driven by continued profit momentum in the U.S. and Mexico, easily offsetting the $10 million profit decline that we expected in Argentina due to currency translation. In constant currency, operating profit and EPS were up 50% and 59% respectively. First quarter results support our four-year guidance, which targets operating profit growth of 20%, despite the expected persistence of currency headwinds. Our full-year guidance also includes approximately $20 to $30 million of increased operating expenses to support our new strategic initiatives and IT expenditures. As we move through the next three quarters of 2019, we expect organic growth initiatives and acquisition-related synergies to drive profit growth across all segments. We also expect the negative impact of currency translation to diminish over the next three quarters as inflation-driven price increases should exceed projected devaluation in Argentina. Together, these factors support an expected increase of 100 basis points in four-year margin rate to approximately 11%, with an EBITDA margin rate of over 16%. In a few minutes, I'll review our guidance in more detail, along with some comments about our strategies to drive continued organic and acquisition-related growth. I'll also discuss our plans to introduce our next layer, of our growth strategy, but I'll summarize our first quarter results first. First quarter earnings per share increased 16% on an organic revenue growth of 6%. The operating profit growth of 19% reflects a margin rate increase of 100 basis points to 9.4%. and an adjusted EBITDA rose 20%, or $22 million, to $132 million in the quarter. We achieved these results despite negative currency translation that reduced our earnings by 29 cents per share. While the dollar strengthened against most currencies, most of the unfavorable FX impact was in Argentina, where strong local currency growth was more than offset by the approximate 50% devaluation in the peso, that drove a year-over-year operating profit decline of $10 million. The fact that we reported strong overall earnings growth of 19%, I think, is a testament to the successful execution of our strategy. We continue to believe that our true operating performance is probably best illustrated by evaluating our results on a local currency basis. In constant currency, revenue is up 17%. Profit growth was 50%, adjusted EBITDA was up 42%, and EPS was up 59%. This strong start to 2019 supports our full-year guidance and keeps us on a track that is well ahead of our initial three-year strategic plan targets. It's clear that our strategy to drive profitable growth, both organically and through acquisitions, is working, and we still have great opportunities to accelerate the momentum we've already achieved. Before turning over to Ron, I want to discuss the U.S. and its efforts to improve margins in our core legacy business and integration of the Dunbar acquisition. Both of these initiatives are going well. Our U.S. business was the single biggest driver in their first quarter, both in terms of revenue and profit growth. It's also our current single greatest opportunity to drive future value creation. First quarter U.S. revenues grew 53% to $297 million, due primarily to the addition of Dunbar, which was not part of Brinks in last year's first quarter. This year's first quarter revenue in our legacy U.S. business was up 4.5%. U.S. operating profit for the quarter increased more than 200%, half from the acquired Dunbar business and half from our legacy breakthrough initiatives and synergies. This reflects a doubling of our overall U.S. margin rate to 8.1% versus 4.1% last year, which includes a 50-plus percent organic margin rate improvement in our legacy business. Our integration efforts are ahead of schedule, and our U.S. operations are on track to achieve our targeted 2019 exit margin rate of approximately 10%. Looking ahead, we're on track to deliver at least $45 million of growth excuse me, a profit growth through cost synergies by 2021 or sooner. And as we disclosed earlier this year, our U.S. business is targeting a margin rate of 13% by the end of 2021 on a revenue base that we expect to exceed $1.3 billion. The increase in our U.S. margins to 13% from 6.8% last year will be driven by continued organic improvement from our breakthrough and other initiatives, and supplemented by the Dunbar acquisition synergies. Now I'll turn it over, Ron, to review our financials.