Brinks Company (The)

Hello, and welcome to the Brinks Company first quarter 2021 earnings conference call. Brinks issued a press release on first quarter results this morning. The company also filed an 8K that includes a release and slides that will be used in today's call. For those of you listening by phone, the release and slides are available on 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 those projected or estimated. Information regarding factors that could cause such differences is available on today's press release and in the company's most recent SEC filings. Information presented and discussed in this call is representative as of today only. Rinks assumes no obligation to update any forward-looking statements. The call is copyrighted and may not be used without written permission from Brinks. It's now my pleasure to introduce your host, Ed Cunningham, Vice President of Investor Relations and Corporate Communications. Mr. Cunningham, you may begin.

Thanks, Keith. Good morning, everyone. Joining me today are CEO Doug Pertz and CFO Rhonda 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, costs related to an internal loss, and costs related to certain accounting compliance matters. We're also providing our results on a constant currency basis, which eliminates changes in 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 focus primarily on the non-GAAP results. Reconciliations of these results are provided in the press release, in the appendix to the slides, and in this morning's 8K filing, all of which can be found on our website. With that, I'll turn the call over to Doug.

Thanks, Ed, and good morning, everyone, and thanks for joining us today. This morning, we announced first quarter results that we believe clearly demonstrate the increased earnings power and resiliency of Brinks. Our strong first quarter results were driven by the ongoing successful integration of the G4S acquisitions and our fixed cost reductions, which more than offset the impact of extended pandemic shutdowns, mostly in Europe. On a reported basis, revenue was up 12%, operating profit grew 43%, reflecting a margin increase of 200 basis points to 99.2%. Adjusted EBITDA was up 32%, with margin improvement of 210 basis points to 14%, and EPS grew 64% to 82 cents per share. It's important to remember that we're comparing to a year-ago quarter that was not materially affected by COVID-19. In fact, not until the last week or so of March did we start seeing those impacts. So we're quite encouraged by the fact that on an organic basis, this year's first quarter revenue was down only 6 percent while operating profit increased 30 percent, reflecting an operating margin improvement, as we said earlier, of 200 basis points. And we expect this leverage and margin expansion to continue as revenues recover. We forecast organic revenue and profit growth to accelerate as we move through this year, 2021, especially in the second half, supported by continued recovery from the pandemic. During the quarter, we completed the final phase of the G4S acquisition. These businesses, which span 17 countries, have been largely integrated well ahead of schedule and we're on track to exceed our original synergy targets of $20-plus million. On April 1st, we completed our purchase of PAI for $213 million, reflecting a pre-synergy purchase multiple of about seven times EBITDA. PAI provides managed services for approximately 100,000 ATMs and brings its strong management, highly scalable business model, and cross-selling opportunities to Brinks. PAI is a great platform on which we can accelerate our 2.3 strategy in North America. I'll cover PAI in more detail in a few minutes. Together, G4S and PAI are expected to add approximately $130 million in adjusted EBITDA this year and more next year as revenue growth returns and full run rate synergies are realized. We're increasing our 2021 guidance at midpoint to over $700 million of EBITDA and EBS of approximately $5 per share, which includes the positive impact of the PAI acquisition as well as a cross-currency swap. guidance more on the next slide. Finally, I'm happy to report that we plan to host an investor day in October when we will provide the details behind our three-year strategic plan and present financial targets. Our current strategic plan, which we call SP2, has three layers, two of which expand on the first three-year plan. We're continuing to drive organic growth by taking our strategy 1.0 initiatives wider and deeper across our global footprint, boosted by the operating leverage initiatives that are already driving margin growth. WD and lean initiatives are now part of our core Brinks business system and are becoming embedded in our culture. G4S and PAI acquisitions provide a strong start to our second strat plan, and we're With $1.4 billion of liquidity, we're assessing additional acquisition opportunities to support our core business and our 2.0 digital cash initiatives, which are aimed at driving subscription-based recurring revenue streams beginning next year. Our Investor Day event may also include an update on the potential growth opportunity related to cannabis pending the outcome of recent legislation efforts at the federal level. Turning to the next page, slide five summarizes Our updated and increased guidance for 2021, we're targeting revenue growth of 21 percent at midpoint to $4.45 billion, driven primarily by inorganic growth from acquisitions and continued organic revenue growth recovery. Operating profit growth of 34 percent at midpoint to $511 million, reflecting a margin of 11.5 percent. Again, an increase of 120 basis points over last year. Note that at the high end of our revenue range, which is equivalent to about 2019 pro forma revenue, the margin increases 170 basis points. Our guidance target is for adjusted EBIT growth of 25% to 705 million at midpoint and EPS growth of 32% at midpoint of just under $5 per share. It's also important to note the top of our revenue guidance range, which only gets us back to around 100% to pro forma 2019 revenue, our EBITDA guidance is approximately $750 million at 16% margin. Once again, we're expecting revenue and profit growth to accelerate in the second half of the year. Our confidence is based on continued economic recovery from the pandemic lows and realization of four-year benefits from the G4S acquisitions, the sustainability of operating leverage driven by our cost reductions and normal seasonality. Consistent with prior quarters during the pandemic, first quarter internal U.S. and external cash levels remain elevated versus prior years, contrary, actually, to what many might have expected during the pandemic. Based on Federal Reserve published data, cash in circulation in the U.S. in the first quarter is up 17 percent versus prior year, a material increase over the 30-year historical 6-plus percent compound annual growth rate. Similarly, euro currency in circulation is also up over 12% in the first quarter, which is higher than its historical annual compound annual growth rates of about 9%. History has also shown that during periods of recession and economic stimulus, the use of cash increases as a percent of payments, suggesting that suggesting that we are in and will continue to be in a period of increased cash usage. Our internal metrics also support this data, as the value of notes flowing through our U.S. operations increased 4% over last year's first quarter, when the pandemic was not much of a factor. And our acquisition of PAI also provides what we feel is a leading indicator on cash usage. The number of cash withdrawal transactions at PAI's ATMs that were open a year ago is up more than 18 percent over the quarter, the same first quarter of last year, and the value of these transactions is up even more. These internal and external data points demonstrate the resiliency and persistence of cash usage even during the pandemic, and they support the fact that cash usage is not going away and, in fact, getting stronger. Slide 6 presents data from reputable independent sources also demonstrating that cash usage is strong and growing. The combination of a long-term forecast for strong in-person retail sales and the continued use of cash as one of the most popular forms of payment supports the case that cash management is a great growth opportunity for BRICS. The graph on the left-hand side of this slide is compelling. In 2020, according to the U.S. Census Bureau, 86 percent of retail spending was done in person, even during a pandemic. And experts predict that by 2025, in-person retail spending will still account for over three-quarters of total retail sales. And importantly, when it comes to in-person transactions, the most used form of payment still is cash. at about 35% ahead of both debit and credit. It's also important to remember that retail sales are expected to reach over $6 trillion in 2025. So the size of in-person retail sales at over $5 trillion will be larger five years from now than it was pre-pandemic, even with the projected continued acceleration in e-commerce sales growth. Based on this data, Brinks is very much in a growth business. Given our strategic focus on increasing organic revenue, growth through acquisitions, and our development of digital cash solutions for a very large market of unvented retailers, we're highly confident that we'll continue to deliver strong organic revenue growth that will create value for our shareholders. Please visit our website to see this data and more on cash and retail sales. Please visit investors.brinks.com. With that, I'll now turn it over to Ron for a review on financials.