Brinks Company (The)

Welcome to the Brinks Company's fourth quarter 2019 earnings call. Brinks issued a press release on fourth 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 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, Drew. Good morning, everyone. Joining me today are CEO Doug Pertz and CFO Ron DeMonaco. This morning, we reported fourth 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 an internal loss and 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, 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 Kurtz.

Thanks, Ed, and good morning, everyone. 2019 was another strong year for Brinks, one in which we successfully completed our first three-year strategic plan and began developing what we believe will be an even more successful plan for the next three years. This morning, we reported fourth quarter earnings of $1.18 per share and full-year earnings of $3.89 per share, an increase of 12% in both periods. We achieved this growth despite earnings in both periods being reduced by 11 cents per share due to cash repatriation costs from Argentina and a mark-to-market charge for an equity investment in MoneyGram International. Neither of these charges were included in our guidance. Excluding these charges, fourth quarter earnings would have been up 23% and full-year earnings would have been up 16%. Organic revenue growth for both the fourth quarter and full year was 6%, with reported revenue growth up 7% despite the unfavorable FX impact of 8%. Earnings growth for the quarter was driven by a 22% increase in segment operating profit, which finished the year up 17%. On an organic basis, which excludes the impact of FX translation and acquisitions, segment profit rose 31% in the quarter, and we're up 27% for the year. The end of 2019 marked the end and final year of our first strategic plan, which we call SP1, which we launched at our investor day in March of 2017. In that strategic plan, we set up very aggressive revenue and profit goals that we exceeded by a wide margin. with a three-year organic profit compound annual growth rate of over 20%. I want to take a moment on the outset of this call to recognize the incredible efforts put forth by everyone at Brinks. Their hard work, strong execution, and customer focus drove a share price increase of 200% over the past three and a half years. And I'm confident that our global team of over 60,000 employees will execute equally as well on SB2, our next three-year strategic plan, which is aimed squarely at accelerating the ongoing transformation of Brinks and creating even more value to our shareholders. As part of SB2, we've already begun to pilot Strategy 2.0-related retail cash management solutions with customers, and we expect to start to ramp up these sales in the second half of this year. And we're continuing to develop a full range of additional 2.0-related strategies and solutions to serve what we consider to be the total cash ecosystem. I want to remind everybody, though, that in addition to these new initiatives, the core of our next three-year strategic plan, especially in 2020, is our expanded Strategy 1.0 initiatives, which will drive additional organic growth and margin leverage. The continuation of these 1.0 initiatives alone are expected to drive significant value creation over our next three-year plan period before being supplemented by a new layer of growth with our 2.0 initiatives which will take hold in 2021 and 22. We'll disclose more of these details at our June Investor Day. For 2020 guidance, we're targeting EPS growth of 13% and operating profit growth of 10%. Our guidance takes into account continued FX-related headwinds, additional cash repatriation charges, and continued operating expenses related to developing and commercializing Strategy 2.0. Once again, this guidance is driven primarily by a continuation and expansion of our 1.0 organic growth initiatives that we began implementing in 2017. In fact, our guidance suggests that the continuation and expansion of our proven Strategy 1.0 initiatives in 2020 are expected to offset these other significant impacts. I'll cover our 2020 guidance in more detail in our closing remarks. Today, we also disclosed an equity investment in MoneyGram International. In the fourth quarter, we invested $9 million in MoneyGram through open market purchases of stock equaling about 4.9%. 4.95% of its outstanding shares. MoneyGram is one of the largest money transfer companies in the world, with 350,000 locations in more than 20 countries globally. We're in discussions with MoneyGram to explore a long-term strategic partnership agreement that we think will offer significant commercial benefits and long-term strategic alternatives for both parties. Developing this partnership is just one component of our near-term Strategic 2.0 and longer-term payments initiatives. In the fourth quarter, we recorded a non-cash charge of $3 million, or 5 cents per share, related to a decrease in the fair market value of this initial investment based on the value of the shares at the end of the quarter. Today, we also announced that our board authorized a new $250 million share repurchase program Under the previous program, which expired on December 31st, we acquired 1.3 million shares at an average cost of $69.35 per share. As we have stated in the past, and based on our past behavior, our intent is to use the share repurchase authority only if we view our share price to be materially undervalued. While share repurchases are certainly one avenue that we have to return capital to our shareholders, we continue to believe that we will have more attractive opportunities to increase returns and increase shareholder value by investing capital in organic growth initiatives as well as acquisitions. Now turn to slide four. This summarizes our full year results for 2019. As you can see here, our team delivered strong growth by all measures. Revenue growth of 7%. It was up 15% on a constant currency basis and on an organic basis, it rose by 6%. Operating profit rose 13%, up 36% on a constant currency basis. Adjusted EBITDA rose 10%, up 27% on a constant currency basis, and EPS rose 12%, up 44% on a constant currency basis. Even with a negative translational impact of currency, we converted 7% top-line growth to 12% EPS growth. And as I mentioned earlier, these results include the late-in-the-year charges equal to 11 cents per share that were not in our guidance. If these charges were added back and reported, the results would have been $4 out of adjusted EPS or a 16% increase. The cash repatriation charge reduced operating profit by $5 million. And despite our 2019 operating margin, despite this, our operating margin in the year increased 60 basis points to 10.6%, capping off a 320 basis points increase in margin over the SB1 three-year plan period. Now turning to the next slide. And before I turn it over to Ron, I'd like to quickly recap the results of our Strat Plan 1. When Ron and I joined the company in mid-2016, The board charges with affecting change and driving shareholder value. We assessed the challenges as a team, which at that time were many, but we also saw and we still see great opportunities. At our investor day in 2017, we laid bare how Brinks had significantly underperformed its peers. and we developed strategies with specific breakthrough initiatives to drive organic profit growth over a three-year timeframe ending in 2019. We also recognize that our balance sheet was severely underutilized, so we launched our strategic plan for acquisition and acquisition strategy. SB1 included specific three-year targets for revenue, operating profit, adjusted EBITDA, and earnings per share, as shown in the middle of these bars. And all of these aggressive targets were materially exceeded. And summarily, we achieved 27% growth in revenue, or on a compound annual growth rate basis, 8% growth per year over the three-year period, with organic revenue growth of 7% per year. An 81% increase in operating profit, or 22% on a compound annual growth rate basis, 320 basis points of margin improvement. a 65% increase in adjusted EBITDA, or 18% compound annual growth rate, and a 71% increase in EPS, or 19% compound annual growth rate over three years. Most importantly, our shareholders benefited from a share price increase of 200% since mid-2016. With that, I'll turn it over to Ron for his financial review. Ron?