Brinks Company (The)

Welcome to the Brinks Company's first quarter 2020 earnings call. Brinks issued a press release on third quarter results this afternoon. 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 in the investor relations section of the company's website, 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, Grant. Good afternoon, everyone. On behalf of all of us at Brinks, I hope you and your families are safe and healthy in this difficult environment, and I want to apologize for the delay in starting the call. This afternoon, joining me on today's call are CEO Doug Perch, CFO Ron DeMonaco, and Rohan Pal, our Chief Information Officer and Chief Digital Officer. This afternoon, we reported a first quarter result 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, costs related to an internal loss, and costs related to certain accounting compliance matters. We're also providing an analysis of our results on a constant currency basis, which eliminates changes in foreign currency 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 our non-GAAP results. Thank you, and I'll now turn the call over to Doug.

Thanks, Ed, and thanks, everybody, for joining us today. First, let me also apologize for our delayed start as we continue to work on loading slides into the SEC filings. And hopefully all of you have the opportunity to be able to get to our slides and have access to that to follow along today. In light of the crisis period that we are all going through and a number of conversations that the company has had with investors, we plan to have an extended period of prepared remarks today. If we don't get to all of your questions today after the prepared remarks, we'd be pleased to answer those and more, in fact, on individual calls with each of you. Thank you. This afternoon, we released first quarter results, which, as previously disclosed, were negatively impacted by the impact of the COVID-19 pandemic. and greater than expected negative currency translation. The pandemic and resultant economic impact began to affect our Asian operations and our global services business in February. And in early March, moved sequentially from Asia through Europe, North America, and then to South America. The unfavorable FX translation impact increased markedly beginning in March, primarily in developing countries such as Mexico, Brazil, Chile, and Colombia. We believe these currencies were heavily affected by the pandemic-driven flight to the safer U.S. dollar. Taken together, we estimate that the pandemic's impact on our operations, along with the translational impact on currency, reduced first-quarter operating profit by over $30 million, or more than 35%. While the crisis is unlike any the world or BRINX has seen before, we're taking decisive actions to reduce its health and financial impacts. Our balance sheet is strong. We have ample liquidity and a flexible cost structure that we're aligning with expected near-term revenue declines. Ron will provide more additional information and details on the quarter and our strong financial condition. But before I turn it over to him, I want to offer some introductory comments. In responding to the pandemic, we have three key priorities. One, protecting our employees and servicing our customers. Two, preserving cash and optimizing profitability. And three, positioning Brinks to be stronger on the other side of the crisis. We're acting with a great sense of urgency and making great progress on each of these priorities. Our continued and accelerating execution will ensure that we are positioned to deliver the kind of performance that our shareholders grew to be accustomed to before the pandemic. and before the pandemic had such an impact on both our employees, our customers, and our business. While we're taking actions in line with our priorities, it's also important to understand that we have a large, stable, resilient customer base that is comprised of many essential service providers, large institutions, and global retailers with hundreds if not thousands of locations. At the other end of the customer spectrum, we have limited exposure to dine-in restaurants and other small businesses that unfortunately may be also devastated by this pandemic. Unfortunately, the pandemic forced us to postpone the Investor Day that we had scheduled for June 1st. So today, we want to share with you a major theme that we've discussed in the past but had planned to elaborate on during our Investor Day event. That's the first part of a significant opportunity we have with our strategy 2.0 rollout. We see a huge unserved retail market opportunity comprised of large branded companies that represented significant and untapped growth opportunity for Brinks and, in fact, for the large business, the CIT business in general. As I'll present later today, in the U.S. alone, there are approximately 3.8 million retail locations, and our entire management, cash management business, the CIT industry, and Brinks, all of its competitors combined, provide services to only 10% of these locations. In other words, the other 90% of unvended retail locations represent a significant growth opportunity for Brinks and are the primary target for our 2.0 strategy. More on this in a few minutes. During the pandemic period, many of us have heard claims that cash is less safe than plastic debit and credit cards, or that cash payments are going away. These claims are just wrong. The data we'll share in a few minutes support the broad popularity of cash around the world and the drivers of cash usage that will be there after the pandemic. In fact, cash, as a percent of all payments methods, has historically increased during a recession. as unemployment and credit card losses arise. Our Strategy 2.0 offers a new and innovative service, and the initial feedback from customers, including pilots that we're just getting out, supports our belief that offering new and more competitive cash management services will be very attractive to retailers. Starting with our current customers and expanding quickly, with many large multi-location retailers that are unvended by our industry. In the near term, it's impossible to predict the full impact and duration of the pandemic, including the timing of country-level economic reopenings and the slowing of infection-related recovery curves. Based on current information, we expect our second quarter results to be the low point of 2020 and a second quarter revenue decline of approximately 25%. As a result, we are targeting adjusted EBITDA for the quarter to be at least $45 million. We expect to see meaningful improvement in the second half as our cost reductions take hold. And when revenue picks up from further customer openings, we should see even stronger profit and cash flow growth. Together with our global operating managers, Brinks is taking the near-term actions that are needed to assure we make it through the crisis and to better position the company after the crisis with an improved cost and operating structure. We believe these actions, together with our new strategies and broader global reach from the G4S acquisition, will position Brinks for long-term earnings growth. Please turn to slide four, our priorities. As I stated earlier, we are focused on three priorities. The first and most important is to ensure the safety of our employees and their families and to service our customers. The second priority is to act decisively to protect our business by preserving cash and reducing variable and fixed expenses to align our cost structure with the new economic realities. Unfortunately, doing so has required us to make many difficult decisions, including employee layoffs, furloughs, and salary reductions throughout our company globally. Our third priority is to position Brinks to be a stronger company on the other side of the crisis. In addition to right-sizing the business and capturing additional cost synergies through further restructuring, we are sharply focused on completing the acquisition integration of the G4S operations, as well as the rollout of our Strategy 2.0 initiatives. Priority one is the health and safety of our employees, and we've taken significant actions during these unprecedented times to protect them. We're working with country-level public health authorities to respond to affected employees and implement contact tracing to minimize impacts to others, while also aggressively cleaning branches to ensure we remain operational. We're also implementing best practices and training for hygiene, sanitation, social distancing, and daily temperature checks for employees. We've purchased and are distributing substantial quantities of personal protection equipment, including masks, gloves, and hand sanitizer. We're procuring these items in requisite amounts and on a timely basis although purchasing these items has been tough to do on a timely basis, has been a challenge for many other companies. Fortunately, in the U.S., it appears that the infection curve has moderated, and thankfully, in many cases, affected employees have returned to work. To ensure that the trend continues and we protect employees' health and our operations remain open, We've implemented health screening and temperature checks for all employees and visitors. I want to take the moment to express my sympathy for those who have been affected as well as their families. I also offer my sincere gratitude to all of our frontline employees for their dedication to ensuring that the critical services we provide as a company remain available to our customers around the world. On that note, I'll turn it over now to Ron.