Loomis AB (publ)

Ladies and gentlemen, welcome to the LUMIS AB Q1 2025 Report Conference Call. I am Moira, the call's call operator. I would like to remind you that all participants will be in listen-only mode and the conference has been recorded. The presentation will be followed by a Q&A session. You can register for questions at any time by pressing star and 1 on your telephone. For operator assistance, please press star and 0. The conference must not be recorded for publication or broadcast. At this time, it's my pleasure to hand over to Aritzel Larrea, President and CEO. Please go ahead.

Thank you very much. Good morning, everyone, and welcome to the first quarter presentation for Loomis. My name is Aritzel Larrea, and I'm the CEO of Loomis. And with me here today, I have our CFO, Johan Wilsby, and Jenny Bostrom, our Head of Sustainability and Investment Relations. I'll start by providing a quick summary of our Q1 performance before taking questions. Let's start the presentation by turning to slide two. Loomis had a solid start to the year with organic revenue growth of 4.4% in the first quarter. We achieved revenues above 7.6 billion Swedish krona with growth across our three reporting segments. Notably, our international business line performed exceptionally well and we also saw double-digit growth in our automated solutions and FX business lines. Acquisitions had a limited impact on total growth, while currency effects had a slight positive impact. A favorable business mix and increased efficiency resulted in an improved operating margin of 11.6%, up from 10.4% in the prior year. We have successfully grown the business while reducing our employee count, supporting this margin expansion. Our operating cash flow this quarter was exceptionally strong. In the first quarter, operating cash flow represented 112% of our EBITDA. And over the past 12 months, our cash conversion reached 124%. This performance was driven by improvements in working capital, optimized capital expenditures, and higher EBITDA. Our robust cash conversion enables us to invest in our business and distribute return to our shareholders. As we announced yesterday, we have signed an agreement to acquire Boros in the U.S. The company offers digital and onsite first and second line maintenance services for, among others, ATMs, smart safes, and kiosks. I will present the acquisition in more detail later in the presentation. Our capital allocation priorities remain focused on generating returns. This includes investing in our business, distributing 40 to 60 percent of our net income to shareholders annually through dividends and making value-driven acquisitions. We will also continue to distribute additional funds to shareholders through share repurchases. Yesterday, the Annual General Meeting approved the Board's proposal for a dividend of 14 SEC per share, totaling a record 959 million krona to be distributed to shareholders in May. The AGM also decided to cancel 2.5 million of the repurchased treasury shares. Following this cancellation, the total number of shares in Loomis is 68.5 million. Additionally, the board of directors announced the decision to repurchase additional shares for up to a value of 200 million krona during the second quarter. Now, let's turn to the next page and address our reporting segments, beginning with Europe and Latin America. Our European and Latin America segment had a mixed start to the year, with overall revenue increasing to 3.6 billion, reflecting organic growth of 4.1%. Our international business line delivered a strong performance this quarter, driven by speculation around tariffs. However, revenue from automated solutions declined slightly compared to the prior year, as we're comparing it to exceptionally strong performance from Chima during the same period last year. Changes in exchange rates negatively impacted our total growth. While our exports plans for CHEMA to the U.S. have been temporarily forced due to ongoing uncertainties, we remain confident in the long-term potential of this growth initiative. Despite a challenging macroeconomic climate that has affected consumer spending and cash circulation, we increased our operating margin to 9.3 percent, up from 8.8 percent. This improvement reflects our continued focus on profitability. We have taken actions for operational efficiency within our European segment and continue to execute on our communicated review of the European and Latin American portfolio, which is why you see restructuring charges in the quarter. You can expect slightly higher cost of restructuring in 2025 as in 2024. Let's turn to the next page over to the U.S. The U.S. segment delivered another strong quarter, reporting record revenues exceeding $4 billion, with growth across most business lines. Organic growth reached 4.9%, driven primarily by both volume increases. This strong performance was driven by several key factors. Most business lines grew compared to the previous year, except for APM, which was flat year over year. High demand for cross-border valuable transportation and storage within the international business line has had a positive impact on the growth in the quarter. The automated solutions business, including SafePoint, achieved double-digit growth for yet another consecutive quarter, and we continue to see a robust pipeline ahead. The volume growth within the automated solutions and international business lines, combined with the previously implemented efficiency programs within CIT and CMS, led to a record high operating income of 679 million krona and a strong operating margin of 16.6%. These programs have resulted in higher service quality, allowing the segment to capture higher volumes without increased staffing needs. Let's turn to the next page and talk about our new reporting segment, SME pay. As of the first quarter, the segment Loomis Pay has been renamed segment SME Pay, and in addition to revenues from Loomis Pay, also include revenue within other business lines from new small and medium-sized enterprise customers. Even in a more digital world, cash remains essential, especially for underserved communities. We are committed to maintaining strong cash infrastructure while also expanding digital solutions. By combining both, we help small and medium businesses accept cash and embrace digital tools. Our new reporting segment reflects our growth ambition with our bundled solutions. Revenue from the digital payments of Loomis Pay continues to be reported as the Loomis Pay business line, while cash-related revenue from the bundled solution is reported into either CIT, CMS, or automated solutions. Revenue for the quarter amounted to $30 million, And we saw solid revenue growth with increased transaction volumes within the Loomis Pay business line compared to Q1 2024. We're still in early stages, and digital payments within the Loomis Pay business line stand for most of the segment's revenue. However, I'm confident that we will continue to see growth from our cash-related business lines as well as we advance with our bundle solutions. Now let's move on to the next slide where I will share a few highlights on our progress with our sustainability initiatives. Our sustainability-related initiatives are progressing well. Throughout 2024, we have been preparing the organization for the Corporate Sustainability Reporting Directive. We published our CSRD-inspired report at the beginning of April and continue to strengthen our sustainability reporting with the ambition to be the leading sustainable partner in our industry. One of our key initiatives is reducing emissions from our vehicle fleet. Following a successful pilot program, we have committed to fully transitioning our entire fleet in the region in France to HVO biofuel. By switching to HVO, we will reduce our scope one emissions without needing to replace our existing fleet of armored vehicles. This change is also beneficial from a resource efficiency and scope three perspective. We will continue to look for similar solutions in other regions as well. I'm also proud to announce that this quarter we have adopted the United Nations Women's Empowerment Principles. This reaffirms our commitment to promoting gender equality in our industry and providing an inclusive work environment. I firmly believe that empowering our employees is not just important, it is essential. This commitment applies to all employees at Loomis. We are dedicated to fostering an environment where ambition is met with opportunity, ensuring equal support, recognition, and pathways for growth for all employees at every level of our organization. Now, let's move on to the income statement slide, where I will start by highlighting our revenue growth. The growth for the quarter was very solid, with increases across all segments. However, as mentioned earlier, performance varied among the different business lines. We have costs classified as items affecting comparability in the quarter, which relate to the ongoing restructuring in Europe and Latin America. We can see that the financial net has declined slightly compared to the previous year. Now financial expenses have decreased because of declining interest rates, and the monetary losses from hyperinflationary economies are lower in the quarter compared to the same period in the previous year. It is worth reminding you that while most of our financing has variable rates, our leasing liabilities tend to have fixed interest rates. Moving on to the next slide, I just wanted to highlight our performance in relation to our history. Since the onset of COVID, we have consistently maintained strong financial performance, continuing the positive trajectory established before the pandemic. We have a stable and resilient business model that has proven its strength over time. On a rolling 12-month basis, we generated over 30 billion Swedish kroner in revenue and achieved an operating margin of 12.2%. Looking ahead, we will continue to drive our growth by prioritizing recurring revenues and increasing margins to our structured approach to gain operational efficiencies. This is why we're taking decisive action to restructure the business, ensuring we are well-positioned for the future. Our organization has a proven track record of efficiently managing macro challenges by leveraging our robust risk management and decision-making processes. Our current assessment is that our core business remains unaffected by the introduction of tariffs. Ahead of the announced tariffs, we experienced a surge in demand for our cross-border logistics and storage solutions for gold and precious metals. Given recent developments and the uncertainty surrounding tariff implementation, it is difficult to predict how this situation will develop over time. But we expect these flows to be of one-timer character. Before I open up for Q&A, I'm pleased to share more information on our announced acquisition of Burrows. The acquisition aligns with our strategy to grow our business through value-adding acquisitions that strengthen our services surrounding our ATM and automated solutions. Boros delivers comprehensive services across a wide range of device types in the U.S. and Canada. The company is a manufacturing agnostic, ensuring that its solutions and services are adaptable to various types of ATMs, automated solutions, and kiosks. The acquisition of Boros strengthens our ability to provide first and second line maintenance in the U.S. market. With a total workforce of approximately 600 employees, of which the majority are service technicians, Boros has established itself as a leading player in the industry across the US and Canada. In 2024, the company reported revenues of $107 million. Together, we will offer comprehensive full-service solutions within ATM and automated solutions. This will enable us to provide more services to existing customers, and expand our addressable market, thereby capturing a higher market share. We have cross-selling opportunities, and by leveraging our combined customer base and also gaining better control of the service supply chain, we're positioning ourselves for profitable growth. Our adjacent services have been instrumental in our growth journey, and we are committed to continuing this trajectory. And I'm confident in our business and our journey ahead. With that, I'm done with my summary of the first quarter, so let's turn to Q&A. Operator, we are now open to questions, please.

We will now begin the question and answer session. Anyone who wishes to ask a question may press star and 1 on their telephone. You will hear a tone to confirm that you have entered the queue. If you wish to remove yourself from the question queue, you may press star and 2. Questioners on the phone are requested to disable the loudspeaker mode while asking a question. Anyone who has a question may press star and one at this time. The first question comes from Simon Johnson from ABG Sundial Collier. Please go ahead.