Loomis AB (publ)

Thank you very much. Good morning, everyone, and welcome to the second quarter presentation for Loomis. My name is Haritz Larrea, and I'm the new CEO for Loomis. And with me here today, I have Christian Ackerby, our CFO. I will give a short overview of the second quarter and then open up for questions. Let's start the presentation by turning on to the next page. Here we have the disclaimer, which is an integrated part of this presentation, including the Q&A. I want to highlight that we're using some non-GAAP measures to facilitate the analysis of the group's performance, and you can find the explanations and reconciliations in the interim report. Let's turn on to the next page. Bluemis is at the center of the payment ecosystem, and our services are essential for society. We have a complete product offering that covers the need to handle in-store payments. This allows the merchants to focus on their customers and increase sales. Let's turn on to the next page. It's encouraging to see consumers back from pandemic lockdowns. More difficult to find a table at the restaurant, but confidence is back, and people want to make up for the lost time and travel again. We see more and more discussions around the importance of granting accessibility to cash. It provides options for people with limited or no access to digital money, making it crucial for the inclusion of socially vulnerable citizens. Despite the current economic uncertainties, we keep seeing volumes increasing, and tourism is not showing signs of slowing down so far. Retail keeps increasing despite surging prices, and we still see a resilient consumer who continues to spend despite the headwinds of rising inflation. Although we don't have a direct impact on Loomis from the Russian invasion of Ukraine, we do see specific supply chain issues that have impacted our business, which obviously could delay our efficiency programs, both from a financial and environmental point of view. As we have proven before, LUMIES has a strong history of navigating macroeconomic and geopolitical uncertainties, since the basic need for cash and payment solutions is vital in our society. Let's move on to the next page, where we have the highlights for the quarter. Let me start by emphasizing that when it comes to revenue with $6.2 billion, this has been the best quarter ever. This is mainly supported by strong organic growth and favorable currency movements. We gain from the fact that we are a global company with the majority of our business denominated in other currencies than this reduced corona. Organic growth was at 16.1% in the quarter. As I mentioned, open societies and increased travel have supported our growth. It has been our third consecutive quarter with higher organic revenue than pre-pandemic. When it comes to the operating margin, that was at 10.8% excluding Loomis Pay. We see that increased volumes and the efficiency measures initiated during the pandemic are already paying off. Operating cash flow was at 104%. Despite the increase in accounts receivable due to our strong growth, We have been able to offset that by reducing our cash stock. And last but not least, we continue with our buyback shares program. We have already repurchased 884,000 shares in the second quarter, and the Board of Directors has approved additional buying of 200 million for the third quarter. Let's turn to the next page. Here you can see how the margin has developed over time. We had a low point in Q2 2020, and had a strong recovery after that. We have improved our operating margin by 1.2 percentage points, which brings it up to 10.8 in the second quarter this year if we exclude loomis pay. This should also be viewed in the light of headwind we are currently facing with cost inflation and supply chain issues. Turning to the next page and starting with the segments, we first start with Europe and Latin. The positive trend in Europe and Latin America continues. We have had a strong quarter of revenue and margin wise. Regarding revenue, we slightly above 3 billion and we had organic growth of 16.8% with strong development in all European countries and a clear signal that the FX business is back. The operating margin is at 10.3% supported by the increase in volumes In addition, the work done optimizing the infrastructure is paying back. Integration of acquisition in Switzerland last year is according to plan and expected to be completed by the end of the year. Turning on to the next page and focusing on the trend of both revenue and margin, we see that total growth was at 22.5% when looking at the top line trend. The positive change started in mid-2021 and continued into the first and second quarters this year. expanding month by month with a strong recovery in our main markets. Regarding the operating margin, despite the impact of inflation and supply chain issues, we have increased it by 4.3 percentage points year over year, bringing it up to double digits. The strong revenue growth, together with the efficiency plans we have in place, has allowed us to make such improvements. Let's turn to the next page over to the U.S. The strong momentum continues in the U.S. business. Revenue was at 3.25 billion, with our recurring revenue business representing close to 42 percent. Organic growth was at 15.7 percent in the quarter. We must remember that we are comparing to all-time high revenue in prior year. State points grew by 21.8 percent, and now accounts for nearly 20 percent of the U.S. revenue. When it comes to the operating margin, that was at 13.2% in the quarter. As mentioned in our Q1 presentation, we have had structural labor shortages in the U.S. market and supply chain issues that have temporarily impacted our margins. We have focused on capturing the growth opportunities, but with a temporary negative impact on the margin. We see improvements in the labor situation in the U.S., and now it's a matter of time to get all the people trained and focused on keeping providing high-quality service. Turning on to the next stage and focusing on the trend of both revenue and margin, we see the exceptional U.S. business revenue trend during the last year. We had a high FX impact but reached all-time high revenue figures in local currency. It is important to remember that during the pandemic, Loomis U.S. only showed a negative organic growth in the second and third quarter of 2020. We keep working on efficiency, And although the supply chain issues we suffered have impacted our efficiency plans, we expect a margin recovery in the second semester of the year, as we already communicated in our Q1 presentation. Let's turn to the next page and talk about Loomis Pay. We're moving ahead with Loomis Pay, building the sales organization in the countries we have launched, and those are Sweden, Denmark, and Norway. We're investing money, time, and effort into the Loomis Pay platform, It is state of the art, both hardware and software-wise, and the customers' reactions are very positive. It is also promising that we are seeing a significant increase in transaction volumes. We have started piloting the solution in Spain, a country with great potential in the SME market. Just as an example, there are more food and beverages SMEs in Madrid than in all of Sweden. We expect the launch in Spain in the second half of the year. Turning to the next slide, we see our continued initiatives for the sustainable business. We continue lowering Lumis' carbon footprint and dependency on fossil fuels by introducing more sustainable vehicles and optimizing our routes. We added new electric vehicles on the road in the second quarter, despite the supply chain issues. We also carry on our cleaner energy with higher efficiency proposals, introducing new solar panels in some of our main branches in Spain. And last but not least, LUMIES has issued sustainability-linked bonds that amount to 600 million linked to CO2 emissions. Let's turn to the slide with the income statement. Here, we have highlighted three specific items that impact our income before tax in this quarter. In total, these items amount to $110 million. And moving on to our last slide, I just wanted to summarize what we have been presenting. To summarize, we have had the highest revenue ever and highest operating profit for our second quarter. We've had great organic growth in Europe and in the U.S., where we were comparing with all-time high numbers last year. And we had a significant increase in our operating margin year over year, despite the challenging market environment. I'm through with my presentation, so operator, we can turn on to Q&A.

Thank you. If you would like to ask a question, please signal by pressing star 1 on your telephone keypad. If you are using a speakerphone, please make sure your mute function is turned off to allow your signal to reach our equipment. A voice prompt on the phone line will indicate when your line is open. Please state your name before asking your question. Once again, press star 1 to ask a question. We'll pause for just a moment to allow everyone an opportunity to signal for question. We will now take our first question.

Sorry. Hi, Daniel from ABG. Can you hear me? Hi, Daniel. Yep. Excellent. Okay. Thank you very much. I have a question on Europe here. You say that the European organic recovery continued month by month during the second quarter. Can you say something on how the quarter ended in June versus 2019 levels and also the start of July and kind of your expectations for traveling, tourism activity in Europe around July and August, the signs that you see, I guess it's reasonable to continue to see the organic recovery versus 2019 levels to continue to increase really near term here.