Brinks Company (The)

Good day and welcome to the Brinks fourth quarter and full year 2024 earnings presentation. All participants will be in a listen-only mode. Should you need assistance, please signal conference specialists by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on your touchtone phone. And to withdraw your question, please press star then two. Please note this event is being recorded. This call and the Q&A session will contain forward-looking statements and 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. The 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 would now like to turn the call over to your host, Mr. Jesse Jenkins. Vice President of Investor Relations, Mr. Jenkins, you may begin.

Thanks and good morning. Here with me today are CEO Mark Eubanks and CFO Kurt McMacken. This morning, Brinks reported fourth quarter and full year 2024 results on a GAAP, non-GAAP, and constant currency basis. Most of our comments today will be focused on our non-GAAP results. These non-GAAP financial measures are intended to provide investors with a supplemental comparison of our operating results and trends for the periods presented. Our management believes these measures are also useful to investors, as such measures allow investors to evaluate our performance using the same metrics that our management uses to evaluate past performance and prospects for future performance. 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 8-K filing, all of which can be found on our website. I will now turn the call over to Brink CEO, Mark Eubanks.

Thanks, Jesse. Good morning, and thank you for joining us. Starting on slide three, we delivered total organic growth of 11% in the fourth quarter and 12% in the full year. ATM Managed Services and Digital Retail Solutions, or AMSDRS, grew 23% organically in both Q4 and the full year. This marks the 12th consecutive quarter of double-digit growth rates in these key lines of business, and our growth outlook remains positive. These end markets are growing, our customers continue to value our offerings, and we continue to capitalize on a robust global pipeline of opportunities. Cash and Valuables Management, or CVM, grew organically 7% in the fourth quarter and 9% for the full year. Our global services business, which has been softer over the last few quarters, into 2024 has a bright spot in most markets. With increasing volatility in the precious metals markets, we are well positioned to benefit from rebounding demand in 2025. As we forecasted in our last earnings call, the US dollar strengthened over the end of 2024 and created a 10% headwind in a period, almost entirely in our higher margin Latin American segment. Despite this impact, we delivered $912 million of EBITDA in 2024, and expanded our EBITDA margins by 40 basis points to a record high level of 18.2%. EPS of $7.17 included an approximate 4% reduction in share count year over year as we opportunistically executed our share repurchase program. Our strong fourth quarter performance was punctuated by robust free cash flow. We delivered 400 million for the full year and over 300 million in the fourth quarter alone. Stronger than anticipated performance in the quarter was primarily the result of continued progress on working capital efficiencies, including accounts receivable collection and payables management. Kurt will have much more on free cash flow later in the call. From a strategic perspective, we're focused on creating value by improving our revenue mix, streamline our operations, and compounding free cash flow that we can return to our shareholders. In 2024, AMS DRS grew $200 million and now represents 24% of our total revenue at the high end of our previous expectations. We also continue to strengthen our global leadership team by adding three uniquely experienced global executives. One to lead Brinks Global Services, a second to lead the Brinks Business System, our Continuous Improvement Program Office, and a third to lead our Latin American segments. These leaders bring diverse experiences and successful track records from blue chip companies like Eaton, GE, Otis, and Honeywell. We are already seeing the benefits from their leadership in areas of growth, continuous improvement, ethics and compliance, and productivity enhancements, all of which will help us continue our growth and margin expansion progress into 2025 and beyond. We also continue to diligently execute our capital allocation framework, reducing our net leverage in 2024 to 2.8 times EBITDA, while returning approximately $250 million to our shareholders through our repurchase program and our dividend growth policy. We remain laser-focused on accelerating this strategy, which is forming the basis of our framework for 2025, a continuation of the last three years. Next year, we plan to grow total organic revenue in mid-single digits, highlighted by mid- to high-teens organic growth in AMS DRS. Mixed benefits and productivity actions continue to help us deliver a 30 to 50 basis point expansion of EBITDA margins. We plan to convert 40 to 45% of EBITDA into free cash flow, returning about half of that cash to our shareholders. While our framework will sound familiar, investors have told us they would like to see additional data points so they can better understand the impact of the changing foreign currency environment in our results. In order to provide as much clarity as possible, we're introducing additional guidance for the first quarter, which I'll explain further later in the presentation. Turn to slide four. You can see the specifics on the fourth quarter. Constant currency revenue growth was 11% and total revenue growth was 1% as we exceed $5 billion of full year revenue for the first time in the company's history. Adjusted EBITDA was roughly flat to the previous year on a reported basis and was up 11% on a constant currency basis. reflecting strong productivity and the benefits of AMS DRS growth. While EPS benefited from a lower tax rate, it was down compared to prior year as we lacked benefits of a previously discussed marketable security gain in Q4 of 2023 that we laid out in our initial 2024 guidance. Trillion 12-month free cash flow was also flat to the previous year with conversion from adjusted EBITDA of 44%, reflecting EBITDA growth and improve working capital management. Turning to slide five, I thought it'd be helpful to walk through what we're seeing in each of our reported segments. Starting with North America on the left, organic growth was 2% for the full year and adjusted EBITDA was up 60 basis points for the full year. We exited the year on a strong note in Q4, posting our highest total and AMS DRS organic growth rates of the year. While AMS DRS was consistently strong all year, we did see our global services businesses return to growth late in the quarter and were bullish on the potential that that business has into early 2025 based on the trends in the precious metals markets. Overall, the North American market remains stable and we continue to work on a solid pipeline of opportunities across all lines of business as we plan for continued growth acceleration into next year. Latin America was down 2% in total as we managed through a volatile FX picture. Similar to North America, we ended the year at the high point of organic growth rates, even when excluding the impact of Argentina inflationary pricing. AMS DRS grew double digits organically over the full year. And despite severe currency impacts on the year, adjusted EBITDA margins in the region were roughly flat compared to prior year. In 2025, we expect meaningful year-over-year FX headwinds as we continue to lap the previously stronger Latin American currency basket. especially in the first half of the year. We also anticipate reported organic growth to decelerate as inflation has begun to moderate in Argentina this year. We view this as really good progress for the Argentinian economy as well as our business. In the rest of the segment, our organic growth rate should remain somewhat consistent in the mid-single digits over the course of 2025. We also plan to take some restructuring actions in this segment early in the year to drive productivity, protect margins, and better realize the AMS DRS operating model that has grown over the last few years. Europe grew 7% organically in 2024, with total adjusted EBITDA growing slightly faster at 9%. Growth in the region was primarily related to AMS DRS, as Europe continues to be a strong conversion market, with customers moving from traditional services to AMS DRS. Organic growth was 6% in Q4 as we began to lap strong comparisons to the prior year, which are expected to continue into the new year. Relatively modest growth and margin expansion in our rest of world segment was impacted early in the year by the previously discussed softness in our global services business. As is the case with other regions, we saw good momentum with global services late in the quarter and have seen positive momentum into early 2025. On slide six, you can see our progress growing adjusted EBITDA and expanding margins over the years in North America. On the right side, you can see a few of the drivers of the performance. First, we've improved the quality of our revenue considerably. This includes both growth and higher margin AMS and DRS revenue, as well as portfolio rationalization efforts in 2023 that carried into early 2024. We've improved the quality of our customer base by eliminating lower margin accounts, either through price realization a conversion to DRS or AMS, or in some situations, a decision to move on from unprofitable accounts. We also delivered considerable cost productivity across the P&L with the rollout of the Brinks Business System. This is the most noticeable in direct labor, our largest expense category. Direct labor as a percent of revenue is down an impressive 310 basis points over the last two years. This productivity is widespread and consistent During 2024, our major productivity metrics in both routing efficiency and money processing improved year-over-year every quarter of the year. Maybe most importantly, these efficiency gains happened while we improved employee safety and customer service and quality with our total recordable incident rate continuing to improve both year-over-year and sequentially in the fourth quarter. The systems and technology investments we discussed last quarter to centralize planning processes and improved messenger routing remain on track for full realization by the middle of 2025. These actions were necessary to drive improvement in subsequent years and fully realize the benefits of the AMS DRS operating model. I'm confident we're making the necessary investments to move our North American business towards our target of 20% EBITDA margins in the coming years. Turn to slide seven, I'll provide details on revenue by customer offering. Starting with the chart on the left, you can see that AMS DRS now represents 24% of our total revenue and we're targeting an increase to between 25 and 27% of the business by year end. AMS DRS is now about three and a half times bigger than it was when we first began to report it in 2020 and we're expecting mid to high teens organic growth in 2025. Our cash and valuables management business grew 7% organically in the fourth quarter and remained stable looking into next year. A positive in the fourth quarter in CVM was the stabilization of our global services business. Precious metals shipments picked up late in the quarter with additional momentum into early 2025. As we've discussed previously, volatility in these markets can be beneficial, and we're seeing this dynamic play out in the cycle. Trends in the global services business move quickly, and our ability to leverage pre-existing infrastructure and relationships is key to capturing increased revenue and profit during times of volatility. Our capabilities are characterized by a global footprint of secure storage facilities and an established logistics network around the world. As one of the largest global players in the market, we're well positioned to capitalize on this opportunity. In DRS, we're still seeing strong demand patterns and have a healthy backlog of booked business. Over the year, we increased our installed base of DRS devices by 20%. Operationally, we shortened our selling window and improved time to install devices, ultimately decreasing the time to revenue. Despite strong double-digit organic growth in DRS in every segment, we exited the year with an expanded backlog of signed agreements in most countries, providing a good line of sight to our 2025 targets. In the U.S. specifically, our backlog more than doubled from the beginning of the year compared to where we exited the year. Our wide range of solutions are driving increasingly diverse in-market demand. From single stores to large enterprise operations, we have a DRS solution that can be tailored to meet various customer needs. While our performance has been impressive, the markets are still growing and remain largely under-penetrated, giving us confidence we can continue our growth trajectory in the near term. On the AMS side, we increased ATM counts by double digits while driving mid-teens organic growth across all segments. Pipelines remain full, and we're having active conversations with many financial institutions and retailers across the globe. We're on track for full deployment of the previously announced Sainsbury's deployment in the UK by mid 2025, and early results of our onboarding have been positive and ahead of schedule. The pace of growth remains robust across all regions, and we recently added a large customer in Asia Pacific that will onboard later this year. As a trusted partner with major banking customers, we're well positioned to capture market share as outsourcing trends continue to accelerate. Overall, I'm pleased with the quarter and the year. AMS and DRS continue to deliver and have a bright outlook. We remain positioned to benefit from the recovery in our global services business in markets, and we continue to drive operational excellence in our traditional cash and valuables management business. I'm encouraged by our progress and I look forward to executing on our strategy in 2025. And with that, I'll turn it over to Kurt to discuss the details of the quarter, including a focus on free cash flow and capital allocation. I'll return to discuss our new guidance methodology and take questions. Kurt?