Brinks Company (The)

Welcome to the Brinks Company's third quarter 2020 earnings call. Brinks issued a press release on third quarter results this morning. The company also filed an AK 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, Sarah, and good morning, everyone. Joining me today are CEO Doug Pertz and our CFO, Rhonda Monaco. This morning we reported third quarter results on both a GAAP and a 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 our results on both a constant currency and pro forma basis. Constant currency eliminates changes in foreign currency exchange rates from the prior year, and pro forma revenue includes this year's G4S acquisitions as if they had been part of BRINCS in both 2019 and 2020. We believe the non-GAAP results make it easier for investors to assess operating performance between periods. Accordingly, our comments today will focus primarily on the non-GAAP results. Reconciliations of results are provided in the press release and the appendix to the slides we're using today and in this morning's 8-K filing, all of which can be found on our website. I'll now turn the call over to Doug. Doug?

Thank you, Ed. Good morning, everyone, and thanks for joining us today. On behalf of all of us at Brinks, I offer our best wishes to all of you and your families during these difficult times. The strong third quarter performance we reported this morning is a result of outstanding execution by all of our global management team, which has been sharply focused on three priorities since the onset of the COVID-19 pandemic, starting with the health and safety of our employees and their families. And I want to personally thank all of our people for their dedication for providing our services, which are so essential to customers and economies around the world. Our results reflect the team's successful execution of our second priority as well, which is to preserve our financial strength and reduce costs in line with the short-term revenue declines we experienced in the second quarter. We've made great progress in right-sizing our business without sacrificing service levels and qualities to our customers that they expect. Our third priority is to position Brinks to be stronger and more profitable on the other side of this pandemic. This priority is focused on permanent cost reductions that combined with a successful integration with the G4S acquisition and the initial rollout of our strategy 2.0 have positioned us to continue to deliver long-term value to all of our stakeholders. We believe that as our revenue recovers and surpasses 2019 levels, our realigned cost structure will provide the operating leverage necessary to drive up margin rates and margin dollars to new and higher levels in 2021 and beyond. Our performance since the onset of the pandemic in March, including our strong third quarter results and our expectation of even stronger finish to this fourth quarter is a testament to the discipline execution on these priorities and as important to the resilience of our business. Turning now to slide four, Our strong third quarter results were driven by continued revenue recovery from our April lows, significant cost reductions, and the successful integration of the G4S acquisition to date. Results include a reported revenue increase of 5% or 11% on a constant currency basis, driven by a revenue recovery in September to 90% of year-ago level and the addition of the G4S cash business. Operating profit of $100 million, reflecting a margin rate of 10.3% in the quarter. Adjusted EBITDA of $147 million and an EPS of 86 cents per share. Given the ongoing impact of the pandemic, our sequential results are a good gauge of the progress we're making. Compared to our strong second quarter results, our third quarter revenue was up 17% and operating profit grew by 36%. These results clearly demonstrate the impact of our realigned cost structure coupled with our revenue recovery. Our results together with publicly available information on cash and cash data demonstrate the resilience of cash and our business in general. The strong revenue recovery in the third quarter to 88% of 2019 pro forma levels and the 78% in the second quarter is very encouraging given the retail shutdowns and overall economic weakness caused by the pandemic. Since April, we've seen steady monthly increases in the number of retail customers and customer locations that are reopening, and we're processing more cash per location, both in terms of volume of notes and total value. Our total cash process in the U.S. is also up significantly from pre-pandemic levels. And independent data suggests that cash as a percent of payments has not materially changed from 2019 levels. Looking ahead, we expect continued improvement in the fourth quarter as ongoing cost reductions, organic revenue growth, and additional contributions from the G4S acquisition drive operating profit and margin rates higher. As a result, we reinstated 2020 guidance that exceeds the top end of the model we disclosed with second quarter results. with midpoint operating profit and EPS of $348 million and $3 per share, respectively. This guidance is supported by a fourth-quarter operating margin target of approximately 11.5%, which we see as a strong jumping-off point for 2021, when the four-year benefits of permanent cost reduction realignment and the G4S acquisition are expected to supplement the continued revenue recovery. Slide 5 provides a more complete summary of our sequential results thus far in 2020. As I mentioned, we believe the second quarter results were very strong, especially when you consider that the initial and most damaging effects of the pandemic occurred in April and May. Our third quarter results were even stronger, and they underscore the impact of increased operating leverage as Operating profit grew by 36%, more than double revenue growth of 17%, reflecting a margin increase of 140 basis points to 10.3%. The revenue increase was driven mostly by organic growth with some additional revenue from the G4S acquisition. Adjusted EBIT was up 17% to $147 million, and EPS was increased by 21% to $0.86 per share. Turning to slide six, this slide provides more detail on the revenue recovery rates across a variety of our global markets. After hitting a low point in April, almost all of our markets experienced strong recoveries in June as economies around the globe began to reopen, and most continued to recover in the third quarter, although at a slower rate than in June. The U.S. revenue, as you can see on the left-hand side of the chart, recovered in the third quarter to about 91% of 2019 levels, up from 81% in the second quarter. Excuse me, up from 80% in the second quarter as it shows on the chart. U.S. operating profit margin was up as well, up 160 basis points compared to the 2019 third quarter. And this is even as revenue was 9% lower in 2020 versus 2019. The right side of the chart shows that that on a pro forma basis, which includes both ranks and G4S results for 2019 and 2020, our total third quarter revenue was about 88% of 2019. Again, up from 78% in the second quarter and 71% in April. Revenue recovery continued in the third quarter, although at a lower recovery rate, with September pro forma revenue at about 90% of 2019. While we're encouraged by the recovery rates, Given the fluctuating impact of the pandemic on economies around the world, predicting future revenue levels is at best difficult. As a result, the low end of our 2020 guidance assumes a revenue recovery rate of about 85% in the fourth quarter to accommodate a potential further deterioration in the external environment. I'll now turn it over to Ron for his financial review. Ron?