Brinks Company (The)

Welcome to the Brinks Company first quarter 2023 earnings call. This morning's Brinks issued a press release detailing its first quarter 2023 results. The company also filed an 8K that includes the release and the slides that will be used in today's call. The release and slides are available in the investor relations section of the company's website at investors.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 and will be available for replay. 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 are available in the footnotes of today's press release and in the company's most recent SEC filings. Information presented and discussed on this call is representative 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. I will now turn the call over to your host, Jesse Jenkins, Vice President of Investor Relations. Mr. Jenkins, you may begin.

Thanks and good morning. Joining me today are Brink CEO Mark Eubanks and CFO Kurt McMacken. This morning, we reported first quarter 2023 results on a gap, non-gap, and constant currency basis. Most of our comments today will be focused on our non-gap results because we believe these results make it easier for investors to assess operating performance between periods. Reconciliations of non-GAAP results to their most comparable GAAP results are provided in the press release, the appendix of the presentation, and in this morning's 8K filing. I'll now turn the call over to Brink CEO, Mark Eubanks.

Thanks, Jesse. Good morning, everyone, and thanks for joining us. As you can see at the top of slide three, our 2023 is off to a strong start. Revenue is up 10%, including 13% organic growth. This includes about 30% organic growth in the focal areas of ATM managed services and digital retail solutions. Productivity enhancements, improved revenue mix, and continued strong pricing discipline drove 30 basis points of operating profit margin expansion and 70 basis points of adjusted EBITDA margin expansion. The higher revenue and productivity driven margin expansion led to the highest first quarter profit margins the company has seen since at least 2010. We also have meaningful progress towards our full year free cash flow targets and a 38% improvement year over year in the first quarter. Kurt will have much more detail on the financial results in a few slides, but I'm pleased with the operational discipline of our teams and the strong quarter we delivered. With the momentum carried over from 2022 and this strong start to 2023, last week our board announced a 10% increase in our regular quarterly dividend. This dividend Combined with our existing share repurchase program furthers our commitment to the return of excess capital to our shareholders. The results were aided by continued progress on the strategic priorities we discussed last quarter. AMS and DRS revenue grew 50% in a quarter as we continue to shift our revenue mix towards higher margin recurring revenue services that deliver an enhanced experience for our customers. Our growth, the improved revenue mix, Continued productivity improvement leveraging the Brinks business system and strong pricing discipline in the current inflationary environment were keys to the margin expansion in the quarter. We expect margins to continue to improve sequentially throughout the year as the benefits of these initiatives compound in the coming quarters. While we have yet to see any material changes to demand within the business from the broader economic turbulence, we remain proactive in addressing our cost structure to protect and enhance our margins. In the first quarter, we identified additional permanent cost actions that pull forward future productivity, resulting in improved profits in the back half of the year. The previously announced 2022 Global Restructuring Plan has been updated to deliver permanent annualized savings of roughly $60 million with one-time implementation costs of approximately $45 million. These new improved actions close the program and represent an incremental $10 million of savings above the previous estimates that we discussed last quarter. CURT will provide more color on our updated full year 2023 guidance, but as you can see at the bottom of the slide, we are affirming our revenue growth guidance for the full year while increasing our profit guidance due to the additional benefits from the global restructuring plan. Turning to slide four, I'd like to outline progress on our strategic priorities as we build a stronger BRNCS. The cash and valuables management core of our business grew 9% organically in a quarter. We were able to deliver productivity across several expense lines, including a meaningful reduction in labor as a percent of revenue. This was especially true in the US, where additional employee engagement initiatives and improving labor availability are leading to better employee turnover rates. The development of more tenured employees is driving real improvements in route efficiency, as well as improved customer service levels. These labor-related productivity enhancements, coupled with the benefits of the global restructuring plan, resulted in the North American segment posting 9.6% operating margins in the quarter. In addition to the strong productivity in our core business, we were again able to effectively cover cost inflation with pricing in all segments across the globe in the first quarter. We continue to see strategic pricing opportunities in the years to come as we improve service quality and expand into more value added services. Turning to digital retail solutions and ATM managed services, we delivered 31% organic growth in the quarter and 50% total growth, including the impact of acquisitions and foreign exchange. On a trailing 12 month basis, we now have 18% of our total revenue represented by these higher margin, higher growth customer offerings compared to 16% at the end of Q4 2022. In DRS, our value proposition is resonating in the market. Our customer offering focuses on delivering safer and faster access to working capital and offers seamless technology integration with our customers' back office systems. An example of this is a recent customer win with a multinational retailer in Northern Europe, a conversion of a pilot project we started in the second half of 2022. We were able to secure a recurring revenue long-term agreement to deploy point of sale integrated cash management devices across hundreds of the company's owned locations in Europe. In the North American market, we were able to secure several new contracts in the quarter focused on franchise quick service restaurant space. To accelerate our growth, customer loyalty initiatives, and the innovation agenda of our strategy, we are adding Laurent Bournet to the executive leadership team as our first chief experience officer. With experience in product development and global deployment from prior stops at Stone Ridge, Whirlpool, and Delphi, Laurent will help us drive our DRS strategy forward and develop improved technology-enabled customer experiences. In AMS, we continue to see solid results from the implementation of the ATM network for BPCE, the second largest bank group in France. We're also making progress integrating the ATM expertise from the 2022 acquisition of Note Machine across the global Brinks business. AMS introduces a new value added customer offering that compliments our existing services with additional monitoring and forecasting to simplify ATM management while letting financial institutions maintain their valuable customer touchpoints that ATM networks provide. We are uniquely positioned to provide cost savings to ATM operators by adding density to our existing logistics footprint and increasing volume leverage across our technology stack. We've built a robust global pipeline of opportunities by leveraging our existing relationships with customers where we currently provide ATM replenishment services, as well as engaging new entities that are searching for ways to improve their business. Our differentiated position, starting with the strength of our industry-leading brand, will open doors and support our right to win with customers as we develop new opportunities in both AMS and DRS customer offerings. I'm encouraged by our early progress in these focus areas and am confident we have the right plan in place that will deliver growth and profitability into the future. I will return with a few closing thoughts after Kurt takes us through the financial slides for the quarter. Kurt?