Brinks Company (The)

Hello, and welcome to the Brinks Company's first quarter 2022 earnings call. Brinks issued a press release on the 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 in the investor relations section of the company's website, brinks.com. At this time, all participants are in listen-only mode. A formal 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 on 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's now my pleasure to introduce your host, Ed Cunningham, Vice President of Investor Relations and Corporate Communications. Mr. Cunningham, you may begin.

Thank you, Keith, and good morning, everyone. Joining us today are Executive Chairman Doug Pertz, CEO Mark Eubanks, and our 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 the impact of Argentina's highly inflationary accounting, reorganization and restructuring costs, items related to acquisitions and dispositions, valuation allowances on tax credits, and changes in certain allowance estimates. We're 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 will focus primarily on the non-GAAP results. Reconciliations are provided in the press release, in 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 Pertz.

Thanks, Ed, and good morning, everyone, and thanks for joining us today. This morning, we reported record first quarter results with revenue growth of 10%, a strong start to the year despite a slower than expected start in the quarter due to the Omicron related shutdowns in many of our markets. Revenue continued to recover versus pre-COVID 2019 levels as we progressed through the quarter, starting at 92% in January and ending with 97% in March. In preliminary April, revenue suggests continued momentum. We also achieved record operating profit, EBITDA and EPS, with operating profit up 24%, reflecting 120 basis point margin improvement. Adjusted EBITDA up 21% to $165 million, and EPS up 46%. We're affirming our four-year guidance, which includes revenue growth of 8% to 11% and EPS growth of 16% to 26%. We expect continued momentum throughout the year to propel full-year 22 organic revenue to at least pre-COVID levels supported by continued recovery from the pandemic, organic volume growth, price increases, and accelerating contributions from our Strategy 2.0 digital solutions. Reported full-year revenue is also expected to include more than $900 million from acquisitions completed since 2019. We anticipate operating profit growth of 16% to 23%, reflecting about 100 basis points of margin expansion driven by our lean cost initiatives and leverage from our lower fixed cost base. Despite our slower than expected start to the year due to Omicron, our full year guidance is clearly supported by our first quarter results, 10% revenue growth, 24% operating profit growth, and 46% EPS growth. Mark and Ron will review our first quarter results and full year guidance in more detail in a few moments. During the pandemic, there was much speculation about its potential impact on retailers and consumers and their spending habits. Many investors were concerned that there would be a permanent shift of retail sales moving online and that the new normal would be that e-commerce sales would eventually be greater than in-person retail sales. That just didn't happen. U.S. in-person retail sales are higher now than they were in 2019. And e-commerce sales as a percent of total retail sales are close to pre-pandemic levels and were just starting to come out of the pandemic. The graph on slide four shows recent quarterly trends for both e-commerce and in-person retail sales in the United States. The blue bars on the graph show that the size of in-person retail sales in total dollars is much larger than it was before the pandemic, growing from $1.2 trillion in the fourth quarter of 2019 to $1.5 trillion in the fourth quarter of 2021, a substantial increase of 20%. It's important to note that while e-commerce sales accelerated in 2020 during the pandemic, this growth has since slowed materially. In the second quarter of 2020, mid pandemic, e-commerce moved to 15.7% of total retail sales. Since then, e-commerce sales have slowed considerably, as shown by the dotted line, while in-person sales growth has picked up, as shown by the solid line, with e-commerce dropping to 12.9% of total retail sales in the fourth quarter of 2021. This 12.9% e-commerce percentage is close to the levels we saw before the onset of the pandemic. Furthermore, the most recent estimates for e-commerce penetration in 2025 have been materially revised downward from 24% to 20% of total retail sales. This means that in 2025, About 80% of retail transactions will still be in person, where cash is a preferred payment method. The data suggests that the in-person retail market is even larger than we expected and would be post-pandemic. More importantly, the permanent shift to retail sales moving online that many expected just didn't happen. According to MasterCard, e-commerce sales in March were down 3% versus the prior year. while in-person sales were up 11%. The stock market, which always looks forward, is finally factoring in at least one part of this equation. Just look at the long list of stocks that benefited from projections of a pandemic new normal in their businesses, only to see in recent months as the pandemic impacts started to recede and these realities were not really the new normal. Valuations for many of these companies are now reverting back to pre-pandemic levels. Conversely, the long-term forecasts for in-person retail sales remain strong and should support an increased growth company valuation for Brinks post-pandemic. The pandemic also raised investor concerns that cash would dramatically decline as a payment method, and the new normal, would be the credit cards, debit cards, and other forms of digital payments would permanently become the primary forms of payment. While we expected, with the onset of the pandemic in 2020, cash payments as a percent of total in-person payments in the U.S. declined from being the highest form of payment used to the payment level similar to other credit and debit cards. all three in the 29 to 32% range as shown on this slide, slide five. In the latest Federal Reserve study just released, the data showed that in October 2021, when the Delta variant was still in full force, cash as a percent of total in-person payments remained strong at 29% of all transactions. U.S. in-person sales growth of 20% since the start of the pandemic together with a solid 29% of in-person transactions being in cash, supports our view that cash payments will continue to be a growth business well into the future. And when you consider that only 20% of U.S. locations currently use our industry services, we believe that our digital cash payment solutions are well positioned to drive even stronger growth as customer acceptance and markets continue to grow. On that note, I'll turn it over to Mark. Mark?