Loomis AB (publ)

Thank you very much. Good morning, everyone, and welcome to the first quarter presentation for Loomis. My name is Aritz Larrea, and I'm the CEO of Loomis. And with him here today, I have Christian Ackerby, our CFO, and Jenny Bostrom, our Head of Investor Relations. I will give a short overview of the quarter and then open up for questions. Let's start the presentation by turning to slide three. We had a solid start to the year. The business in Europe and Latin was supported by continued organic growth, and in the United States, we saw growth across all business lines, and we believe our high-quality services will continue to gain market share. Although there are signs that inflation, energy prices, and supply chains are stabilizing, it is apparent that the macroeconomic uncertainties are having an effect on society around us. Despite the uncertainties, we have seen volumes increasing. We are monitoring how the changing environment may impact both our business and our customers, and we'll adapt the operations as needed. I would also like to highlight that equal access to cash and payments is an increasingly important issue globally, and we see more discussions around the world on the importance of access to cash. We have a fundamental role in supporting central banks to ensure that cash is available and payment flows are functioning. Cash continues to be a common means of payment and important from an inclusivity perspective, and I'm proud of the part that we play in society. Let's move on to the next stage where we have the highlights for the quarter. When it comes to revenue, we reached 6.8 billion Swedish krona, which is the highest revenue ever, and we achieved record revenues for all three segments. The revenue has been mainly supported by volume growth, but price increases to customers, as well as favorable currency movements, have also contributed. Organic growth keeps being strong, with close to 12% in the quarter, and the performance was strong for both the U.S. as well as Europe and Latin. When it comes to the operating margin, that was at 10.5%. The margin was positively impacted by increased volumes and implemented price increases, but negatively by a higher cost base. Finally, our cash conversion was at 100% for the quarter. Despite the increase in accounts receivable due to our strong growth, we have been able to keep our day's sales outstanding stable. Let's turn to the next page. Here you can see how the revenue and the margin have developed over time. We have had a steady increase in our revenue since the beginning of 2021. Including the currency impact, revenues increased 20% in the quarter compared to prior year. For the quarter, we achieved an operating margin of 10.5%, which is 1.4 percentage points higher than prior year. Let's have a look at our segments. We turn to the next stage and start with Europe and Latin. The positive trend in Europe and Latin America continued where we had another strong quarter. We achieved double-digit organic growth and reached record high revenues of 3.3 billion. The operating margin is at 9.5, supported mainly by the higher volumes. Also important to consider is that the full impact of the implemented price increases and negotiations have not been realized in the quarter. There are some markets that have been extra challenging for us, and therefore we have initiated a restructuring plan, mainly related to Germany. Total cost for this program is estimated to 50 to 60 million Swedish kronor, and will be recorded as items affecting comparability. During the first quarter, we have recorded 12 million SEK of the total estimated cost. Turning on to the next stage and focusing on the trend of both revenue and margin, We see that the actual growth was at 16% when looking at the top-line trend. From the beginning of 2021, we have seen a positive recovery expanding quarter by quarter in our main markets. The operating margin increased 0.8 percentage points compared to Q1 last year, and looking at the last 12 months, the margin is 10.9%. As I have already mentioned, the margin was affected by a higher cost base where the impact of the annual price increases have not been fully realized in this quarter. The majority of the price negotiations have now been finalized, which we should see have effect in the next quarter. Let's turn to the next stage over to the U.S. The strong momentum continues in our U.S. business. Revenue was at 3.6 billion, which continued increasing with current revenue. Our revenue related to automated solutions and ATM representing 43% of our U.S. revenue. Organic growth was at 12.5% in the quarter, with our automated solutions business with SafePoint achieving double-digit growth for the ninth quarter in a row. Although we continue to see improvements in the labor market, we're still facing a high turnover in the U.S., which requires an extraordinary effort to continue recruiting and training new employees, all to continue providing high-quality service. Maintaining our service level is key to keep gaining market share. We achieved a strong operating margin of 13.9% despite the impact of recruitment and training-related costs, and the operating income reached 500 million. Moving on to the next page and focusing on the trend of both revenue and margin, we see the exceptional US business revenue trend during the last two years. We are benefiting from a positive FX impact that we reached all time high revenue figures in local currency once again. And Q1 2023 is 30% higher than Q1 2020 from an organic point of view. Regarding the operating margin, we improved the prior year's numbers by 0.9 percentage points. We have successfully hired more employees to support our growth, and the related costs for recruitment and training temporarily impacted the margin for the quarter. We will keep focusing on recruitment and retention as well as on efficiency to keep improving our margins. In most recent statistics publicly available, the indication is that labor market should ease up somewhat, but remains to be seen. Let's turn to the next page and talk about Loomis Pay. Also for Loomis Pay, we had a strong revenue growth in all markets. Notably, we also increased revenue compared to the fourth quarter, despite the seasonality effects. We keep seeing transaction volumes keep increasing as we move ahead. From the quarter, the increase was 90%. Over time, there is a strong correlation between increase in transaction volumes and revenues. However, from quarter to quarter, this can vary. The LumiSpace solution, which was launched in Spain at the end of last year, is progressing as planned, and we are continuing to tailor the offer to the customer demands. In the coming quarters, our main focus will be on growing the business in Spain, but also growing in the Nordics. Turning to the next slide, we see our continued initiatives for a sustainable business. We strive to reduce the carbon emissions from our business, and with the order of 150 new armored electric vehicles for the US market that we announced in February, we have taken a significant step. Here in the image, you can see one of these electric vehicles on the streets of New York. I would also like to highlight that we have made a commitment to the New York City Department of Environmental Protection to be completely emissions free in New York City by the end of 2025. As a result of this pledge, they have also granted us a variance against idling penalties, which is important since we are unable to turn off vehicles while on route for security concerns. I'm proud that we are leading the transformation in the industry, and it is a strength that we are finding the initiatives to reduce our carbon footprint that are interlinked with the business needs. Bluemis has zero tolerance for bribery and corruption. Our anonymous whistleblower hotline, Bluemis Integrity Line, has since its inception in 2010 been an important tool to ensure compliance with our code of conduct. I strongly believe in promoting a culture where everyone is encouraged to speak up, and I'm therefore pleased to share that we have continued to develop the integrity line and introduced an update in the quarter. Let's turn to the income statement slide, where we have highlighted the items affecting comparability, which are related to the restructuring plan I commented on earlier. The increase in net financial items is largely a result of the increased interest rates. The majority of our financing is in variable rates, The monetary loss from hyperinflation was at about the same level in this quarter as the same period the prior year. It's important to highlight here as well that we have achieved the highest earnings per share for our first quarter and the second highest earnings per share ever. Moving on to the next slide, I just wanted to highlight our performance in relation to our history. As you can see, also on a rolling 12-month basis, we have achieved record revenues, and with a continued improvement to our margins, and now at 11.1%, to be viewed in relation to our target for the strategic period of 12 to 14%, we are on the right track. Let's now move to slide 14 to summarize the first quarter. We achieved record revenues with double-digit organic growth for both Europe, Latin, and in the U.S. Secondly, we increased the margins for both Europe, Latam, and the U.S. compared to Q1 2022. Thirdly, transaction volumes keep increasing in LumiSpain. While we are still in early phases after the launch in Spain at the end of last year, where we have high expectations due to the merchant's feedback and our unique offer. With that, I'm through with my presentation, so let's turn to Q&A. Operator, we're now open to questions, please.

Thank you. Ladies and gentlemen at this time we will begin the question and answer session. Anyone who wishes to ask a question may press star followed by 1 on the touch tone telephone. If you wish to remove yourself from the question queue you may press star followed by 2. If you are using speaker equipment today please lift the handset before making your selections. Anyone who has a question may press star followed by 1 at this time. Your first question is from Victor Lindeberg with Carnegie.

Please go ahead. Good morning. Thank you for taking my questions. I have a couple of questions both on the numbers as well as maybe from diving into your annual report. Starting on the restructuring in Europe and in Germany, when looking at this program, what is it in Germany that you aim to address? predominantly employees you want to shut down reshuffle branches or just to understand what's happening in germany secondly you mentioned that it's not only germany so what other markets and initiatives are you aiming to do in this 50 million cost frame here starting on that maybe continuing up with a few more