Prosegur Compania de Seguridad

Good day and thank you for standing by. Welcome to PROSIGUR full year 2025 results presentation, conference call and webcast. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, please press star one, one on your telephone. You will then hear an automated message advertising your hand is raised. To review your question, please press star one, one again. Please note that today's conference is being recorded. I would now like to turn the conference over to your speaker, Juan Ignacio Caliano, Head of IR. Please go ahead.

Juan Ignacio Caliano, Head of IR Good afternoon and welcome to PROSEGUR full year 2025 results presentation webcast. Before we start, I would like to remind you that this presentation has been pre-recorded and that it will be available on our corporate website. I will now hand you over to our CFO, Maite Rodriguez.

Good afternoon and thank you all for your presence. We are pleased to present Prosegur results for the full year 2025. As you will see throughout the presentation, the company's results exceed those of the previous year in terms of growth and profitability, especially in the security and alarm businesses. This performance resulted in a more diversified and therefore more sustainable cash generation profile. It's worth highlighting that this should be the case now for the foreseeable future. Focusing on the P&L, consolidated net income achieved an impressive 54% increase, demonstrating not only the strong performance of the businesses, but also an efficient management of treasury and taxes. For all the above, we are confident that we continue to be on the right track to comply with our main objective of generating value for our shareholders. Now, with all this in mind, let's deep dive into the most significant milestones of the period. Sales grew by 0.5% compared to the same period last year. Organic growth reached 10%, although it was mostly upset by the FX effect. Meanwhile, the security business has consolidated itself as the main growth engine of the group. driven primarily by increasing penetration in the USA, along with a solid performance across the rest of the geographies. Regarding profitability, EBITDA reached €357 million, an increase of 8.9% year-on-year, mainly driven by the healthy growth in the security business. Indeed, volume growth, together with an agile commercial strategy to pass through costs into prices, explains this performance. Our cash business continues to be affected by the macroeconomic situation in Argentina, which can be summarized in three key points. First, although the trade balance has improved, this has not yet translated into domestic consumption. Second, the Argentine peso has depreciated against the euro. And finally, monetary policy remains highly restrictive. Despite this impact, the business EBITDA margin remains at 12%. mainly explained by the accelerated growth in the European region, the double-digit growth in APAC, and the strong performance across the remaining LATAM geographies. For our alarm business, as we will see, operational performance was clearly enhanced, reflected in better and healthier indicators. This is true for MPA as well as for Prosegur Alarms. As for cash generation, we were able to partially offset the slowdown in our cash business thanks to the impressive full-year cash flow generated by the security business, which delivered 87 million euros and has consolidated itself as a solid contributor to the group's diversified cash flow profile. As mentioned, and as we will review in detail later in the presentation, The combination of the cost-saving program, FX volatility, and the macroeconomic uncertainty in Argentina negatively impacted cash generation in our cash business. We continue to maintain a strong and solid debt position. Indeed, net debt stands at 2.4 times EBITDA, slightly impacted by the decrease in the value of our telephonic shares and the cash outflow associated with the extraordinary efficiency plan in the cash business. We would also like to highlight the proposed €19 million dividend for 2026, which further reinforced our commitment to delivering value to our shareholders. Let's now turn to slide two, where I would like to deep dive into our sales and EBITDA figures. As said, full year 2025, total sales increased by 0.5% over last year, reaching €4.9 billion. Discounting for the FX effect mainly in Latam, almost the entire growth was organic, evidencing, on the one hand, our strict policy when it comes to passing through inflation to prices, and on the other, our capacity to capture additional volume as we continue increasing our market share. As for geographic sales diversification, it should be noted that growth continues to be the main driver of growth, despite the macroeconomic situation in Argentina. Europe is accelerating its growth, and both the USA and the APAC region continue to grow at above average rates. This is highly relevant and highlights the future growth avenues of our main businesses. As you are aware, in our security business, we remain firmly committed to the US market, given its scale, profitability profile, and the considerable potential for further penetration. Compania de Seguridad Moving now to further review profitability, EBITDA reached €357 million, marking a healthy 8.9% increase compared to last year. Our cash business registered an EBITDA of €238 million, marking a 5% decrease compared to the previous year, recovering part of the drop seen in previous quarters. This includes the extraordinary expenses incurred due to the implementation of the cost-saving program, fully offset this quarter by extraordinary income of a similar amount resulting from a lower deferred payment related to the acquisition of change group. Turning now to our security business, EBITDA amount to 19 million euros, 10.7% higher compared to 2024. Healthy volume growth coupled with a strict discipline on cost explains the enhanced performance. Technology sales further contributed to the good results. As we always explain, our ability to provide high-end tech solutions is one of our main competitive advantages and constitutes one of our main pillars. Lastly, our alarms business continues to be on good track and good proof of this is the evolution of main financial indicators such as service margin and churn rate. Let's now turn to our full P&L that as can be seen showed a remarkable increase compared to last year. The improvement in financial results as previously noted in past presentations is largely linked to the ongoing normalization of the Argentine economy. Inflation has been declining rapidly significantly reducing the impact of hyperinflation accounting. At the same time the sharp narrowing of FX streets has also helped making dividend upstreaming considerably more efficient. Moving down to accrued taxes, it is worth highlighting the 561 basis points reduction in the effective tax rate. The rationale behind this improvement is twofold. On the other hand, we recorded strong results across nearly all geographies, which have enabled us to offset prior year losses. And on the other, As mentioned earlier, the negative effects from hyperinflation accounting and dividend upstreaming were significantly reduced. All of the above led to a net income of 119 million euros, representing a 53% year on year increase. Let's now move on to cash generation for the period. At first glance, the 26 million euros reduction in operating cash flow stands out. However, one point must be properly highlighted. The 15 million euros in extraordinary severance payments related to the previously mentioned cost-saving program in our cash business in Latam. Although there was an upset at the P&L level through extraordinary income, there was no positive impact at the operative cash level. Compania de Seguridad With that in mind, the net debt to EBITDA ratio stands at 2.4 times. Although CapEx control and improved working capital have supported performance, net debt remains above the level initially projected, primarily due to the external factors beyond our control, namely the depreciation of LATAM currencies and the decline in the value of our Telefonica shareholding. Excluding these two effects, That's all from me for now. I will now turn the presentation over to our Head of Investor Relations, Juan Ignacio Galliano, who will give you more detailed information on the development of the specific business areas.

Thank you very much, Maite. Let's now review the results of each business line, focusing on the key performance indicators and the most relevant developments of the period. Compania de Seguridad Compania de Seguridad Compania de Seguridad Compania de Seguridad Compania de Seguridad Compania de Seguridad as well as the severance costs associated with the cost-saving program deployed in LATAM during the year. This latter extraordinary effect has been positively offset by another extraordinary impact related to an update on the deferred payments debt. Despite these headwinds, the business EBITDA margin remained stable at 12%, demonstrating both the resilience of the business and strong performance delivered across all countries. Moving to cash generation, operating cash flow reached 171 million euros, reflecting a 26% reduction versus the previous year. As previously explained, the 15 million in extraordinary costs related to the cost-saving program, along with FX effects, largely account for this decline, with no positive offset at the operating cash flow level. A further positive aspect is that the annual cost of upstreaming dividends from Argentina now stands at only 1 million euros, a significant improvement compared with prior years. Given the country's improving microeconomic dynamics, with inflation far below previous levels, we expect this cost to remain negligible going forward. Additionally, the recent credit rating upgrade of Argentina by standards and pours to CCC+, provides yet another indicator of the country's ongoing normalization and recovery. On a final positive note, we should recognize the strong discipline maintained in both CAPEX and working capital requirements. Let's now turn to our security business, which continues to show a solid and positive evolution over time. In fact, this business line has achieved a historical record in revenues. Sales reached 2.6 billion euros with organic growth exceeding 12%. Growth was driven mainly by the Spanish and U.S. markets, with the latter consolidating its position as the primary growth engine of the business. The strong contribution from the U.S. also explains the negative FX impact as the U.S. dollar continued to depreciate against the euro during the quarter. It is also worth highlighting that in addition to these key markets, All geographies contributed positively to the business consolidated performance. These factors, combined with enhanced efficiencies and additional operating leverage, resulted in EBITDA of 90 million euros, representing a 10.7% increase versus the same period of last year. Margins also continued to expand, reaching 3.47%, driven mainly by a greater scalability, improved operational efficiencies, stronger commercial productivity, Compania de Seguridad Compania de Seguridad Compania de Seguridad Compania de Seguridad The extraordinary cash flow generated by security in the period has been positively impacted by approximately 20 millions that should be taken into account. This comes from a positive effect from the use of tax credits from previous years, a one-off impact that will not recur in future periods, and extraordinary advanced collections at year end of approximately 5 million euros, which will be difficult to maintain going forward and will have an impact on working capital during 2026. Under a stable growth scenario, recurring cash flow from the security business should range between 60 million and 70 million euros. And thanks to the strong cash generation of this business, further debt reduction as part of our strategy becomes increasingly secure and achievable. Let's now move on to the alarm business where we keep improving most of API's quarter by quarter and year by year. As explained during the December investor day, The business strategy is strongly focused on profitability maximization and investment efficiency, supported by the various initiatives in product development, redefining a more prudent marketing strategy, improving the customer service experience, and applying operational efficiencies enabled by AI. All of this is having a direct impact on each of the APIs, which continue to improve in the fourth quarter, maintaining the positive trend in 2025. Looking at the client base, we are pleased to report that year-on-year growth reached double digits with a 10.7% increase. Toward year-end, we decided to anticipate our strategy of increasing the acquisition income, that is, the price we charge when acquiring a new client. This will result in a healthier and more robust client base, thus increasing ROIC and reducing paybacks. Evidently, this impacted negatively in the number of acquisitions during the fourth quarter. As we always emphasize, growth is only meaningful when it's high quality in nature, which is why we are very pleased with the achieved results. In MPA, we continue to reduce the churn rate with a stable level of 9%, a reduction of one percentage point versus the previous year. In Prosegur Alarms, churn has shown more resistance to decline, mainly due to the economic situation in Argentina, where severe financial pressure on households is negatively impacting churn behavior. But once the situation is now stable, we expect a churn reduction in ProSegur alarms little by little. Both ARPU and service margins continue to grow at very healthy rates. It is important to note that going forward, we will report margins excluding depreciation expenses following market practice. Regarding acquisition costs, the increase in both businesses is the result of a deliberate strategy. Compania de Seguridad Let's now move on to the next slide to review how all these indicators translate into recurring cash flow. The combination of higher service margin together with a stable or declining churn rate naturally leads to an increasing in recurring cash flow, that is, the cash generated after fully reacquiring the customers who churn. The charts above show the 12-month rolling recurring cash flow for both Prosegur Alarms and MPA. The chart on the right clearly illustrates that the combined cash generation capacity of both businesses for ProSegur now stands at 81 million euros, representing a 14% increase year over year. As we have highlighted in previous presentations, recurring cash flow is consistently reinvested to fuel further growth. Even so, it remains the best reflection of the true cash generation capacity of the alarm business, clearly demonstrating its strong ability to generate sustainable cash flows. This concludes our review of the performance of each business line for the 2025 full year results. Thank you all for your attention. I will now hand the microphone back to our CFO, Maite Rodriguez, for her closing remarks.

Thank you very much, Juan Ignacio. Let me now share with you my closing thoughts on the most relevant conclusions of this results presentation. Overall, as we have seen during the presentation, all businesses reported enhanced operating efficiencies and strong results. On a consolidated basis, total sales increased by 0.5%, reaching 4.9 billion euros, despite the adverse impact of currency depreciation and the macroeconomic situation in Argentina. EBITDA increased by 9% while net income increased by a remarkable 53%, thanks to the good performance of all our business lines. Normalized Consolidated Operating Cash Flow reached €316 million, once the €15 million extraordinary impact are excluded. In our cash business, organic sales grew by a solid 5%. while we continue rolling out an ambitious cost-saving program. This was supported by the strong adoption of our transformation products, which will enable further improvements in EBITDA margins over the coming months. Turning to our security business, sales increased by 4% compared to the previous year, and with margins reaching 3.5%. driven not only by scalability but also by a robust client portfolio and effective price pass-through. Even more importantly, the business generated 87 million euros in free cash flow, marking an all-time record. Lastly, our alarm business delivered very solid growth, accompanied by a strong performance across key management indicators. We saw improvements in churn, service margin and ARPU. This trend translated into a rolling recurring cash flow of 81 million euros, representing a 14% year-over-year increase and confirming the business's robust cash generation capability. As mentioned at the beginning of the presentation, we delivered solid results this year, paving the way for the new 2026-2029 strategic plan that we have just launched. This concludes my remarks for today's results presentation. Thank you all once again for your time and attention. We will now open the floor for questions.

Thank you. As a reminder to ask a question, please press star 1 1 on your telephone and wait for your name to be announced. To withdraw your question, please press star 1 1 again. Once again, please press star 1 1 on your telephone and wait for your name to be announced. To withdraw your question, please press star 1 1 again. Please stand by while we compare the Q&A roster. This will take a few moments. Once again, please press star 1 1 on your telephone and wait for your name to be announced. to answer your question, please press star one again. We are now going to proceed with our first question. And the questions come from the line of Carlos Torres from CaixaBank BPI. Please answer your question. Your line is opened.

Hi, good morning, Carlos from CaixaBank. A couple of questions on my side, if I may. First, to have a better understanding on the reported EBITDA overheads, contributed positively with 20 million in the first half, and we were told to assume a positive evolution on this line. So I'm wondering if you have allocated some of this margin across the rest of divisions, and if so, in what proportion? Second, you also mentioned a harsh backdrop in Argentina, and we were told Argentina margins in cash were higher. So I would like to understand if it all comes from the efficiency measures, and therefore if we can think of similar margins going forward. and whether there's upside once Argentina activity and inflation reduction picks up or conversely a lower inflation backdrop is waiting in volume. So I didn't comment on Donerson Argentina's drivers a bit more. And finally, if I may, similar for alarms reported, EBITDA is also high compared to the first half and I'm having trouble to get to this figure. So, I'm wondering if there's any change in SAC capitalization, or if, going forward, we can think of a similar or incremental figure year-on-year now that, as you mentioned in the capital market, there are more focus on cash flow generation in this division.

Thank you, Carlos, for your questions. In relation to the first one about the overhead, here you have to consider that this year, as we have been mentioning during the rest of the previous quarters, we have a higher loyalty coming from Trademark mainly because of an agreement with the tax authorities that we signed last year. This has to pose finally with final figures because, as you know, those Compania de Seguridad Compania de Seguridad Compania de Seguridad Compania de Seguridad Compania de Seguridad Compania de Seguridad Compania de Seguridad and maybe your question is also more related because it is true that in the second and in the third Q the differences between 2025 and 2024 were higher and it was also because the headquarters overhead Compania de Seguridad Compania de Seguridad Compania de Seguridad Compania de Seguridad Compania de Seguridad is when we both these headquarters expanded. Moving to your second question in terms of what's happening in Argentina, Yeah, the drop is mainly coming from the macroeconomic situation that we are suffering there. As you know, we have had a 60% depreciation of the currency, 30% inflation impact. Compania de Seguridad Compania de Seguridad Compania de Seguridad Compania de Seguridad there is a big impact. As you know, in the alarm business, we have a big amount of assets that, like around 35% of the acquisition cost, we book them as bigger assets, and we have to hyperinflate those assets, and that's why we have this impact this year because last year was smaller.

Once again, as a reminder, to ask a question, please press star 1 1 on your telephone and wait for your name to be announced. To withdraw your question, please press star 1 1 again. We are now going to proceed with our next question. And the questions come from the line of Enrique Yagues from Best Inver Securities. Please answer your question.

Good morning, Michael. I was late at the conference. I don't know if this question has been asked, but I will ask anyway. The first one is if you could provide what has been the impact of the increased royalties received by the holding company in cash and security, in other words, what would have been the adjusted LTA margin between those because probably it was higher than reported. And the second question, you know, with the artificial intelligence disruption, I don't know what impact can this have in your ARBOS business? How likely is to suffer a disruption from this trend?

Thank you.

Quique, in relation to your first question, I just had in my mind the impact, the differences, those 8.5 million euros of increase between 2025 and 2024. But if you want later on, Juan Ignacio could provide you the higher detail, because I really do not have it now. And in terms of the Abos question, I couldn't hear you well. If you could repeat it again.

Yes. How likely is to be affected by the artificial intelligence disruption taking into account that this is affecting companies in software, back office, support, this type of stuff?

Okay, thank you. It's an amazing opportunity. We are really working hard on implementing a lot of artificial intelligence on the full business, not just in the, as you know, Compania de Seguridad Compania de Seguridad Compania de Seguridad Compania de Seguridad Compania de Seguridad is sometimes with some of them it's even in parallel so we think that we really we could have a lot of efficiency and a lot of a different type of providing service for the future so it's a huge opportunity for this business and we will see how this evolves but just for your knowledge in our new strategic plan we are planning to double our sales in this business and also the margin.

Thank you.

Thank you. We have no further questions at this time, so I'll head back for you for closing remarks.

Thank you very much for attending this presentation. If you need further information, please contact our Investor Relations Department. We're open to help you at any time. Have a nice day.

This concludes today's conference call. Thank you all for participating. You may now disconnect your line. Thank you and have a good rest of your day.