Brinks Company (The)

Welcome to the Brinks Company's second quarter 2024 earnings call. This morning Brinks issued a press release detailing its second quarter 2024 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 at the investor relations section of the company's website at .brinks.com. At this time all participants are in a listen only mode. A question and answer session will follow the 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 the 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. This call is copyrighted and may not be used without written permission from Brinks. I will now turn the conference over to your host Jesse Jenkins, vice president of investor relations. Mr. Jenkins, you may begin.

Thanks and good morning. Joining me today are CEO Mark Eubanks and CFO Kurt McMackin. This morning Brinks reported second quarter 2024 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-gap results to their most comparable gap results are provided in the press release, the appendix of the presentation and in this morning's 8K filing. I will now turn the call over to Brinks CEO Mark Eubanks.

Thanks,

Jesse.

Good morning and thank you for joining us. We'll start here on slide three. We delivered total organic growth of 14% accelerating sequentially over the first quarter. ATM managed services and digital retail solutions or AMSDRS grew 26% organically and accelerated sequentially across all geographic segments. Cash and valuables management or CVM was up 10% organically with strong pricing discipline offsetting continued cyclical market softness in our global services business. Adjusted EBITDA grew 16% to $226 million and margins expanded 200 basis points to 18%. Transformation initiatives led by North America drove labor and cost productivity throughout the P&L. Profit growth and the results of our share repurchase program drove a 31% increase in earnings per share to $1.67 per share. Free cash flow conversion remained strong with the flow through of higher profits, margin expansion and working capital improvements. We continue to make meaningful progress executing against our strategy. DRS and AMS continue to grow as a percent of our total revenue, exceeding $1.1 billion of revenue on a trailing 12-month basis. Demanding these key business lines remain strong as evidenced by the 26% organic growth in the quarter. We continue to sell these innovative tech-enabled solutions into both underserved and under-penetrated markets across all of our segments and are encouraged by building customer demand in our growing pipeline. Additionally, we see increased demand for our tech-enabled solutions from both existing CIT customers as well as new customers in both retail and banking verticals. This mix of higher margin revenue coupled with the benefits of the rollout of the Brinks business system drove second consecutive quarter of mid-teens EBITDA growth as we progress towards our year-end targets. Notable is the continued margin expansion in North America which improved 360 basis points year over year in Q2. This was the eighth consecutive quarter of at least 90 basis points of margin improvement in the segment. Our disciplined capital allocation framework is also creating value for shareholders. So far this year we've purchased 722,000 shares for just over $91 per share and have allocated $86 million in capital towards shareholder returns. This represents an increase of 133% over the first half of 2023. And as Kurt will discuss in a minute, we were able to increase liquidity, secure additional credit capacity, and improve flexibility in our capital structure with a successful refinancing of our 2025 bonds. As part of this process, we also received a credit rating upgrade from S&P. With the strong first half completed, we remain on track to deliver low to mid-teens organic revenue growth, double-digit EBITDA growth, earnings per share of between $730 and $8, and free cash flow between $415 and $465 million. On to slide four. Starting on the left, organic growth of 14% was partially offset by an 11% impact from translational FX. Foreign currency degraded throughout the period and was a slight headwind in the quarter relative to our expectations and outlook from our earnings release back in May. Adjusted EBITDA grew 32 million year over year on a reported basis. As we discussed in the second quarter of 2023, there was a $12 million increase in security losses that impacted timing of expense recognition last year. Adjusting for the impact of this increase in the prior year, EBITDA margins increased 100 basis points, slightly ahead of year expectations. Looking at revenue and EBITDA at the segment level, all segments delivered accelerating organic growth in AMS and DRS as we continue to add new customers across the globe. North America growth continued to accelerate as we've now fully lapped the impact of prior year portfolio rationalization efforts we previously discussed. Latin America growth and margins continue to be impacted by currency fluctuations, mostly in Argentina, which are impacting our margins while our pricing efforts catch up to the large devaluation that occurred late last year. Finally, all segments are experiencing growth and margin headwinds related to continued cyclical market softness in our global services business. Earnings per share are up 40 cents, driven by a 25% increase in net income and a 5% reduction in outstanding shares, or 2.2 million total, as well as the previously mentioned prior year security loss. Trillion 12-month free cash flow was down 7% versus the prior year. The decline was driven almost entirely by the seasonal timing of working capital, primarily related to DSO on accounts receivable as we lapped a particularly strong prior year comparison. As we've already seen in July, this timing-related impact is expected to unwind over the back half of the year, and we remain confident that we're on track to deliver our full year free cash flow targets. Turning now to slide five, I'd like to take a moment to highlight the progress we're making in North America. Since 2018, we've improved our EBITDA margins by 610 basis points and expect to continue the upward trajectory over the balance of 2024. Operationally, the team is focused on advancing our lean maturity by utilizing structured problem solving, increasing the use of standard work, and leveraging best practices across our footprint to streamline processes on everyday activities. A few areas where we've made progress recently include the money processing centers and routing and scheduling of our logistics network. In money processing, we've changed the layout of our facilities to maximize production and have rolled out standardized workflows in all of our branches. We're making technology investments in cash processing automation equipment to further automate processes and procedures. We're also investing to improve our IT systems that allow us to use larger data sets and real-time information to improve route density and efficiency. While these activities began in North America, we've already started to scale some of these best practices globally and will continue to drive change in future periods. These process improvements are not going unnoticed by our customers. We continue to hear positive feedback about the improvements we're making in our execution and the increased visibility of funds throughout the cash value stream. We've also seen a corresponding improvement in safety-related incidents and preventable collisions in North America that should lead to further cost avoidance moving forward. We're encouraged by the success we've seen so far, but we continue to see an opportunity for future improvements in our business, and we look forward to sharing that progress with you as we move forward. Turning now to slide six, I'll discuss the revenue by customer offering. Starting with cash and valuables management, CBM, our Q2 organic growth of 10% was the second consecutive quarter of double-digit organic growth. Growth is driven by both volume increases and strong pricing above inflation, offset by conversion efforts as we've shifted customers to higher margin DRS and AMS offerings and the continued market softness in our global services business that we mentioned across all segments. Despite the revenue mix on margins from our global services revenue, we drove productivity in the business as we continue to globally scale our OPEX initiatives through the Brinks business system, delivering record second quarter operating profit EBITDA and earnings per share. We had a strong quarter of growth in DRS, delivering the fastest organic growth rate in the last six quarters. As we explained in prior quarters, occasionally in DRS we see revenue growth that's derived from the sale of equipment at the start of customer relationships. We remain committed to sharing these fluctuations with investors in order to help explain trends, both the headwinds and the tailwinds. In the second quarter, equipment sales were approximately an $8 million benefit in our Europe segment as we added a new large grocery store customer to our network. After adjusting for this benefit, AMS DRS organic growth was 23% and DRS organic growth accelerated across all segments with our value proposition continuing to resonate with customers. With several large customer wins late in the second quarter, we enter Q3 with a healthy backlog of orders that provides support for our ongoing outlook. AMS delivered sequential growth acceleration over Q1 with newly installed ATMs at retail locations driving increased transaction volumes in North America. We continue to improve our capabilities and visibility with potential customers in the AMS markets. We are engaged in discussions with many potential partners across the globe as we educate retail and banking customers on the benefits of cost savings, extension of network useful life, and the improved performance that come with a move to Brinks. I remain encouraged by the level of activity and the interest we're generating as we continue to work a large global pipeline of opportunities in both financial institutions and retail customers. In total, AMS DRS grew to 22% of our trailing 12-month revenue and we're up a combined 26% organically in Q2. We expect to continue double-digit organic growth in these offerings over the full year and are now targeting an increase as a percentage of revenue towards the high end of our original 22 to 23% range. We remain in the early endings of our transition to AMS and DRS and I'm confident in our ability to continue to grow these global offerings above our base business for the next several years. Overall, organic revenue growth was in line with our expectations for the quarter and we achieved double-digit EBITDA growth as we continue to transform into a more consistent recurring revenue business. We are driving profitable organic growth in all lines of our business and are well positioned for the back half of the year and beyond. On slide seven, you can see our organic growth and adjusted EBITDA performance over time. Historically, Brinks has been resilient in times of market disturbances. We have a broad distribution of customers, both geographically and by end markets, that provide stability to our organic growth profile. Our services are required to securely enable commerce regardless of the broader economic volatility or, as we saw in the quarter, global IT systems outages. Our profitability is even more resilient. The large portion of our cost structure variable in nature. We're able to protect profit margins in times of changing volumes in the business. You can see in the chart EBITDA margins were only down 10 basis points in 2020 despite the 7% organic revenue decline over the same period. While no business is completely immune from challenging economic cycles, we're confident that we can continue to drive improvements in the business in any cycle. We have a bright future here at Brinks and I look forward to meeting the challenges in front of us head on. And with that, I'll turn it over to Kurt before I return with some closing thoughts before we open up the lines for Q&A. Kurt?

Kurt Hogan Thanks, Mark. Good morning, everyone. Starting on slide eight, $167 million of organic revenue increase represents 14% growth over the prior year. 100 million or about 60% of the growth came from cash and valuables management with the remainder coming from AMS and DRS. As Mark mentioned, the U.S. dollar strengthened over the second quarter and we ended the period with an 11% translational foreign exchange headwind. Through the first half of the year, we've had a 30 million revenue headwind against our original full year constancy guidance. Total revenue growth of 37 million produced 32 million of adjusted EBITDA. EBITDA growth was impacted by restructuring activities in Latin America and Europe as we opportunistically right size operations in certain countries. As Mark mentioned earlier, second quarter EBITDA growth was aided by the lapping of a 12 million increase in security losses from the prior year, primarily related to one large in our BGS business. Normalizing for this 12 million, 37 million of revenue generated 20 million of EBITDA in the period for a 54% incremental margin. In total, adjusted EBITDA margins increased 200 basis points or normalized 100 basis points driven by the realization of cost productivity, improved revenue mix, and discipline pricing. On slide nine, I'll walk you from operating profit to adjusted EBITDA. Starting on the left, interest expense was up 6 million year over year to 57 million. The increase is related to higher interest rates and slightly higher debt from growth and provisional capital for our DRS customers. Tax expenses were 31 million in the quarter. The 7 million increase in the other category primarily relates to higher interest income on cash balances. Income from continuing operations was up 25% to 75 million. Through the effectiveness of our repurchase program, our diluted share count was down 2.2 million shares or 5% year over year to 45.1 million. In total, record second quarter EPS was up 31% to $1.67 per share. Turning to the rest of the year, we expect to see a slight uptick in the quarterly interest expense run rate as debt for provisional credit increases due to the strong growth we've delivered in DRS. We're forecasting a tax rate of approximately 28% in line with the second quarter, and we expect stock-based compensation to be roughly flat to 2023. In total, EBITDA was up 32 million to 226 million with margins that expanded 200 basis points to 18%. Before I get to the capital allocation framework, I thought it would be helpful to briefly discuss the refinancing we completed in the quarter on slide 10. The leverage neutral transaction allowed us to eliminate the near-term maturity on our 2025 bonds while extending and diversifying our future maturities. As you can see in the maturity chart, we successfully refinanced our 2025 bonds with a new five-year bond maturing in 2029 at a rate of 6.5%. Currently, we were able to issue a new 400 million eight-year bond at .75% maturing in 2032, using the proceeds to pay down an existing balance on our revolving credit facility. The net result of the transaction increased our liquidity while having only a marginal effect on 2024 interest expense. With the completion of the transaction, S&P raised our corporate family credit rating to double B+. I'm pleased with the execution of the refinancing. We've maintained a strong capital structure with significant financial flexibility, ample liquidity, and diversified maturity dates. Looking forward, we have opportunities to continue to ladder our maturities and will look to be opportunistic when the market allows us the opportunity. Moving to slide 11, our capital allocation framework and priorities remain unchanged. For the full year, we expect to generate between 415 and 465 million in free cash flow, with conversion from an adjusted EBITDA of between 42 and 50% based on our guidance ranges. Compared to the prior year, we pulled forward some capex spend into the first half of the year to drive in-year operational improvements and purchase tech-enabled devices for planned AMS and DRS deployments in the third quarter. Working capital timing is following normal seasonal patterns at this time of the year. CSO continues to improve with a two-day reduction over the prior quarter and a five-day reduction over the same quarter last year. Moving to uses of cash, first, we continue to make investments in our operations to enable sustainable profitable growth. This includes investments in the North American cash processing and routing initiatives that Mark discussed and investments in the Brinks business system that will help us scale these processes globally. These investments are largely OPEX-related and managed in our broader profitability guidance. Second, with the completion of attractive refinancing in the quarter, we remain within our targeted leverage range at 2.9 times net debt to adjusted EBITDA. Remaining within the range increases flexibility to return capital shareholders and complete accretive acquisitions. Third, we have more than double shareholder returns in the first half of the year. We returned $86 million -to-date, including $66 million through our period down 2.2 million shares or 5% compared to this time last year. With $434 million in remaining capacity in our program through the end of 2025, we plan to remain active as we increase free cash flow over the balance of the year. And finally, on the M&A side, we continue to target opportunities that have a strong strategic fit, attractive returns, and align with our current leverage targets and capital allocation framework. We remain disciplined in our approach to capital allocation and believe our priorities will continue to drive shareholder value into the future. On slide 12, you can see our affirmed 2024 guidance. We expect total revenue growth to be in the mid-single digits. Full-year organic growth is expected in the -to-mid teens offset by translational FX, primarily in Argentina. As a reminder, outside of Argentina, our FX guidance utilizes rates as of the end of the quarter and does not attempt to predict future movement in currencies. Given the strengthening of the U.S. dollar over the second quarter, if rates were to continue at June 30th levels, we would trend slightly below the midpoint of our revenue range due entirely to currency movements. Adjusted EBITDA is expected between $935 million and $985 million, representing double-digit growth over the prior year. Margins are expected to increase 80 basis points in the midpoint of the range. We expect free cash flow conversion from adjusted EBITDA of approximately 46% at the midpoint. EPS is still expected to be between $7.30 and $8 per share and contemplates an acceleration of our share repurchase program in the second half of the year. And with that, I'll turn it back over to Mark for comments.

Thanks, Kurt. In mid-June, we had our global leadership meeting with our top 150 leaders. We all came together during the week to discuss the potential of our strategy and how we begin to move Brinks forward as a company. Leaving the event, we aligned on the unique value creation opportunity that we have in front of us as we execute in the coming quarters and years. I want to thank our leadership team and our employees worldwide for their hard work to get to this point. I'm encouraged about the future together as we continue to transform the business by focusing on our four strategic pillars, growth and customer loyalty, innovation, operational excellence, and our people and talent. Unconfident continued progress on the pillars of our strategy will position us to drive meaningful, consistent shareholder value for years to come. Operator, please open the line for questions.

We will now begin the question and answer session. To ask a question, you may press star then one on your telephone keypad. If you are using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press star then two. At this time, we will pause momentarily to assemble our roster. The first question comes from George Tong with Goldman Sachs. Please go ahead.

Hi, thanks. Good morning. Morning, George. You saw significant AMS and DRS organic growth of 26% in the quarter, which was still strong at 23%, even if you exclude the equipment sales benefit. Can you talk more about broader customer traction receptivity you're seeing within AMS and DRS and how sustainable current growth rates are?

Yeah, sure. Thanks, George. We had a strong quarter, and I think this is just a continuation of our teams not only executing in the quarter, but really developing the longer-term pipeline that's led us build up to where we are. We've been talking about this, I think, for some time. I will say that the 26% is a little bit offset, as we mentioned in the prepared remarks, with some equipment sales that supported those about $8 million, but still strong %-ish growth that we think can continue for the foreseeable future. If you really look at the regions, it was really broad-based across all four regions. In North America, we certainly saw an acceleration that we talked about quite a bit coming out of the fourth quarter with installations and sort of pent-up demand. As we mentioned, we got through that in Q1. Really, Q2 was just continued solid progression and execution against the platform. Same thing in AMS in North America. We continue to see a re-acceleration of progress with more ATM deployments into our independent ATM network here in North America. If you move on to Latin America, again, good growth there. We talked about in the fourth quarter, we talked about some re-acceleration, particularly in Brazil, as we continue to really focus more on AMS there versus sort of traditional CIT and, in many cases, in certain market segments, we're only offering DRS. This has really been coming through, and we see this in the numbers, and again, see that coming not just in Brazil but also in Mexico and other areas of Latin America. I'd say that the offset to that, and we're seeing this broadly, would have been our global services business. That was a bit soft in the quarter again, but as we have talked about in the past, that business really is a good business, good margins. It doesn't have a lot of seasonality. It's more driven, again, by financial in markets, whether that's precious metals or currency flows. That business continues to be a healthy business for us. We expect some recovery of that in the back half, but was a bit of a drag on organic growth in the first. Moving on to Europe and rest of the world, again, there, Europe, as you know, one of our most highly penetrated AMS DRS markets. We continue to see good progress there. We talked about and highlighted a big grocery store chain deployment that was, again, we signed a deal in Q2, and then we'll be executing here in Q3 with the conversion. Really good to see that continued progress. Even with what you saw from a margin perspective in that market, we made good progress. We actually did a little bit of restructuring as well in Latin America. Both of those had a little bit of headwind that are in our numbers, but again, good progress, not just on growth in DRS AMS, but also on good core productivity, as well as CVM volumes, excluding the BGS side. If I think about what happened in the quarter versus what would have been relative to our expectations, George, AMS DRS, stronger than we would have expected. Again, at the high end of the range, as we think about for the full year as a percent of sales trending that direction, CVM a little bit would have been a headwind. Obviously, the BGS soft as I mentioned, but also some impact with conversions, converting of CIT and customers both in ATM as well as in retail, moving to AMS and DRS. Then I guess the other thing that we probably would have not seen would have been some of the FX headwinds that we saw in the quarter from when we talked to you last to end of June. Certainly, we would have seen more headwinds than we expected, particularly in June as Mexican REI and the Brazilian REI and the largely Argentina performed in line with where we expected.

That's very helpful color. Sticking with AMS and DRS, could you directionally parse out the growth in terms of which of the two grew stronger? Where was the growth really led by? How much of the growth came from conversions of legacy traditional VIT services and cash and valuables management versus new business wins of non-existing customers? Sure.

I'll speak broadly, George, because I don't have all that much detail all the way down by segment each of those. What I would say is we think it's about a third of new business, unvended customers. About a third of our AMS, DRS would be conversions. Then the other third would be competitive wins or to us, they're new customers. Whether they were served by another DRS provider or another CIT provider, that would be for AMS the same. I'd say it's about a third, a third, a third is how we look at it. Largely in the quarter, we would have seen higher growth and you can see the numbers in North America, but really a pretty balanced AMS, DRS globally getting good growth out of both. Neither are outperforming, let's say, the number. Our balance in the AMS, DRS, this has also been some of the discussion in the past, it's not 50-50. DRS is a little bit bigger, but it's not 60-40 either. Somewhere in that 50-50, 60-40 range, DRS being a little larger. That continues to progress at the same scale. Got it.

Very helpful. Thank you.

Great. Thanks, George.

The next question is from Tim Mulrooney with William Blair. Please go ahead.

Mark, good morning. Hey, Tim. Good morning. Welcome to the call. Glad to have you on board.

Glad to be here. Thank you very much. Just a couple of questions for me this morning. We saw some nice improvements in the North America organic growth in the second quarter here. So I'm curious, is there a good way to think about organic growth run rate as we move into the back half of this year? Is that what we saw in the second quarter, is that a good number to think about representative for the back half, or do you expect another step up here as we move into the second half of the year?

Yeah, Tim. We talked about a year ago, really, this portfolio rationalization we did was in Q2 of last year. So there's a little bit of hangover, I'd say, in this quarter still that was a headwind for us. But if you think about the progression we saw in Q4, of last year, Q1, now in Q2, we think there's a little bit more of a step up as we think about Q3 and Q4 that will continue sort of toward that -single-digit run rate that we think is the exit rate for the year.

Yeah, that's exactly what I was wondering, Mark, that lapping the portfolio rationalization, there was a little bit more there. So thank you.

Yeah, and Q2 should be, I'm sorry, Q3 would be our first full clean quarter on that. Now, the underlying piece of this a little bit is the, you know, it's still the global services business that's in the North America segment that has been a little bit soft, and that's a, you know, substantial business for us, but that's in the CDM numbers.

Got it. Okay, thank you. And then shifting gears here from North America down to Latin America, you know, it, I mean, it just looks like that FX headwind spiked quite a bit in Latin America, you know, and you're able to get pricing offset most of that, but can you just like step it back? Can you just help us understand a bit better how you're approaching this inflationary issue, if there is an expectation for this elevated headwind to continue through the year and any detail on how the Latin America segment is performing outside of these highly inflationary areas like Argentina?

Sure. So maybe I'll take the Argentina piece first. You know, Argentina largely is in line with our expectations for the year, and really has not been a, you know, a big headwind for us relative to our, to where we are today and kind of what we see the rest of the year. We have seen some, a little bit of margin compression that I mentioned in the prepared remarks about just really catch up over the steep devaluation that occurred at the end of the year last year, but on a revenue perspective, largely okay. Our pricing, you know, cadence continues and we think we can hold, you know, continue to do what we've done in the past. I think that the one that we would, you know, that caught us in the second quarter, you know, was the Mexican peso and the Brazilian Riai, and you know, there was an election down there. That's not really a highly inflationary market as we think about it, but those are good business for us, for us, they're big businesses for us, and they're profitable businesses. So that, you know, we did see some headwind that we had to, you know, largely perform through in the first half. If we took the, and that's sort of the way we're thinking about the future, you know, in the back half. We, and Kurt mentioned it, you know, in the prepared remarks that we think there's a, you know, if you took current rates, we think there could be anywhere from 50 to 75 million worth of revenue headwind from those currencies. This is not really, again, an Argentina issue, and so, you know, for us, this is where we would continue to think about how we're going to run the business and how we manage the business and, you know, whether that's on controllable costs or overdrive and productivity, you know, that we have been doing. In fact, we did a little bit of restructuring in the first half, and quite, you know, percent of that happened in Q2. That was a headwind to our margins in Latin America. Otherwise, we would have had, you know, good expansion in Q2, excluding that restructuring. Of course, that's in our numbers, but we think it was the right kind of investment to make for the future to right-size our footprint in those markets. Cody, anything else you want to add?

Yeah, Tim, I might just add that was also a reason, you know, we mentioned that we had, you know, about a 30 million headwind in the first half of the year, yet, you know, really overdrove on productivity and mix to drive the profitability. So, we kind of overcame a lot of those headwinds from the FX side. And just to add kind of what Mark was saying about, I think that was also a good way to think about the second half in terms of how we're thinking about trying to overdrive on other areas to overcome, you know, those kinds of headwinds if you were to use those rates.

Okay. Yeah,

one last thing. The tough thing for us, Tim, obviously, we don't prognosticate on FX. I think this color is more about sort of current state, sort of into the quarter. I mean, I looked this morning, you know, Peso actually has strengthened, you know, this morning, about a percent and a half. So, you know, we've not traditionally seen Mexican Peso be volatile. And so, you know, obviously the election, you know, down there in the second quarter was part of that. But also, frankly, it's really central bank interest rate policy. And so, as the regimes are moving back towards cutting or not cutting, I think this is something we'll continue to watch and be fluid as we go through it.

And organically we're on track.

Yeah. Understood.

Okay. Hey, thanks very much. And great quarter, guys. Yeah, thanks,

Tim. Welcome again.

The next question is from Toby Summer with Truest Securities. Please go ahead.

Yeah. Hey, good morning, guys. This is Jack Wilson on for Toby. Maybe just to start out, can we just sort of maybe dig into sort of the long-term business mix and sort of how you see that developing with sort of AMS and DRS growing so quickly?

Yeah, sure, Jack. Good morning. You know, we think this, let me back up. We started at the beginning of the year talking about high to 20% kind of growth rates in AMS, DRS for the year and likely into the coming year. We think we can sustain that kind of growth rate. We obviously get into a lot of small or larger numbers as we go forward. We have accelerated here. We think some of these big customers are still pretty lumpy. We get some big ones and so they end up impacting quarters. We think 20% still kind of the right kind of organic growth rate. If you run that forward the next few years, it's not so hard to imagine we get to 30% penetration of our total portfolio in the coming two to three years, three to four years, whatever that math is. So we don't think there's a structural reason why we can't continue to grow given not only the conversion capability or potential in our portfolio but the multiple of the unvendored space, particularly in DRS when you think about small retailers, small, medium retailers, but then also on the AMS side as we start to see more banks globally outsourcing their networks to drive better productivity and efficiency in their networks.

Okay, thanks for that color there. And then just sort of on the allocation front, sort of in the same vein, are there any sort of opportunities you see in the AMS, DRS space to sort of grow inorganically or to sort of add new technologies to the portfolio?

Yeah, Jack, this is Kurt. I mean, we have a nice pipeline of opportunities in AMS, DRS that's, you know, as we look to allocate capital, if there's an acquisition that in terms of that looks attractive to us to advance our strategy, that's where we would do it. And so it's something we assess all the time. And as we talk about acquisitions, generally for us, you know, there are a lot of hurdles that it has to cross to make sense for us relative to our total allocation of capital. And we have to, the other thing we always do is make sure that we're doing it connected with all the other aspects of the our capital allocation philosophy. So it's got to make strong strategic sense. And we do have opportunities that we're always looking at.

And so let me just put a bit of a finer point on that. We have talked about this historically as well. We're, we like our footprint. We like our portfolio today. We think geography, we've got a big geography, you know, 52 countries operate in over 100. But anything that we would do of significance in M&A would be very tightly aligned to AMS and DRS, whether that was ATM networks, and you've seen us, you know, in the past, you know, whether it's PAI or Note Machine in the UK, we've done a couple of little small bolt-ons here lately that were ATM networks. But we would be focused on that or somewhere in the hardware software technology space connected to DRS or to AMS. And again, these would be with the focus of extending the value proposition to our customers that allows us to leverage our network that we have installed already and our customer base already to serve those customers in, you know, further up the value chain that would be a good value prop to them. And we talked about that on the call, whether that's cost productivity or improved reliability for ATM networks, this is an area where we continue to focus on thinking about the outsourcing of bank infrastructure that leverages our network. Sounds good.

Thanks, Scott. I'll turn it over. Great.

This concludes our question and answer session. I would like to turn the conference back over to Mark Gubanks for any closing remarks.

Thank you all for joining us today. We appreciate all your support and look forward to speaking to you all soon. Thanks and have a great day.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.