Q1 2020 Earnings Call
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Yeah apologized, but delay.
The brakes company first quarter 2020 earnings conference call will become shortly thank you for your patience.
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Yeah apologize for the brief weight welcome to the brakes companies first quarter 2020 earnings.
Breaks issued a press release on third quarter results. This afternoon. The company also filed an eight tape that I could still release on the slide so it will be used in today's call.
But those of you know snake boxes to release some slides are available in the Investor Relations section a company's website breaks dot com.
At this time all participants are in the lesson only love a question and answer session will follow the formal presentation.
A reminder, that's called trenches being recorded.
Now for the company Safe Harbor state.
Call and the <unk> will contain forward looking statements actual results could definitely materially from projected or estimate of results.
Information regarding factors that could cause such differences is available in today's pressrelease and the company's most recent F.C.C. pilots.
Information presented and discussed on this call is representative as of today only.
Breakfast since no obligation to update any forward looking statements.
The call is copyrighted and may not be use without written permission from breaks.
It is now my pleasure to introduce your host add Cunningham, Vice President of Investor Relations and corporate communications.
Mr. Cunningham, you may be again [laughter].
Thanks Grant bigger afternoon, everyone on behalf of all of US a brace I Hope you you and your families.
Philadelphians difficult environment, while apologized for the delay in starting the call.
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Joining me on the today's call or see a doctor <unk> Rhonda Monaco.
Our chief Information Officer, and cheap digital officer.
After I mean, we report or the first quarter result on both the gap.
Basis, the non gap results, excluding number buttons, including our Venezuela operations impact of Argentina's highly inflationary accounting reorganization and restructuring cost.
Items related to acquisitions dispositions costs related to an internal loss and costs related to certain accounting compliance matters.
We also providing an analysis summer is also a constant courtesy basis, which eliminates changes in force changes in foreign currency right from the prior year.
We believe the non gap results make it easier for investors to assess operating performance between periods.
Accordingly, or comments today, including those referring to our guidance focused primarily on or Nongaap results.
Thank you all now turn the call over thought.
Thanks.
Everybody for joining us today first let me also apologized for our delayed start as we continue to work on loading slides into the S.P.C. violence and hopefully all of you had the opportunity to be able to get do our slides and have access to that fall on today.
One of the crisis period that we all going through and and number of conversations at the company has had with investors. We plan to have an extended period of prepared remarks today.
We don't get do all your questions today after they prepared remarks, we'd be pleased to answer those.
More in fact on individual calls with each other you. Thank you.
This afternoon, we really first quarter results, which as previously disclosed we're negatively impacted by the impact of the covert 19 pandemic and greater than expected negative currency translation. The pandemic end result, and economic impact began to affect our Asian operations enter global services business in February.
And early March moves sequentially from Asia through Europe, North America, and then to South America.
The unfavorable F.X. translation impact.
Increased markedly beginning in March primarily in developing countries, such as Mexico, Brazil, Chile and Columbia.
We believe these currencies were heavily affected by the pandemic driven flight do the safer U.S. dollar.
Taken together, we estimate that the pandemics impact on our operations along with the translation will impact on currency reduce first quarter operating profit over $30 million or or more than 35%.
Well the crisis Islam, Unlike any the world or brings the seen before we're taking decisive action.
To reduce it's health and financial impact.
Our balance sheet is strong we have ample liquidity and a flexible cost structure that were aligning with expected near term revenue decline.
Ronald provide more additional information and details on the quarter and our strong financial condition, but before I turn it over to him I want to offer some introductory comments.
In responding to the pandemic, we have three key priorities.
One protecting our employees and sort of thing our customers to preserving cash and optimizing profitability and three positioning brings to be stronger on the other side of the crisis.
<unk> with a great sense of urgency and making great progress on each of these priorities are continues and accelerating execution will ensure that we are position to deliver the kind of performance that our shareholders grew do there'd be accustomed to before the pandemic.
And it's such an impact on or before the pandemic at such an impact on both their employees our customers and our business.
While we're taking actions in line with our priorities. It's also important to understand that we have a large stable resilient customer base. Then it gets is comprised of many essential service providers.
Large institutions and global retailers with hundreds if not thousands of of locations.
At the other end of the customer customers spectrum, we have limited exposure to dine in restaurants, and other small businesses that Unfortunately, maybe also devastated by to spend on it.
Unfortunately, the pandemic forced us to postpone the Investor day that we had schedule for June 1st. So today, we went to share with you a major theme that we've discussed in the past, but had planned to elaborate on during our Investor day event. That's the first part of a significant opportunity we have with our strategy one point overall.
Because they two point I'll roll out.
We see a huge answered retail market opportunity comprised of large branded companies that represented significant and untapped growth opportunity for banks in fact for the really the large business the C.I.T. business in general.
As our present later today in the U.S. alone there were approximately 3.8 million retail locations in our entire management cash management business the C.I.T. industry.
And Bronx, all of its its competitors combine provide services to only 10% of these locations.
In other words, the other 90% of Unvented retail locations represented significant growth opportunity for breaks and are the primary target for 2000 or 2.0 strategy.
More on this in a few minutes.
During the pandemic period, many of US have her claims that cash is less safe than plastic debit and credit cards or the cash payments are going away. These claims are just wrong.
The data will share in a few minutes support the broad popularity of cash around the world and the drivers of cash usage that will be there after the pandemic.
In fact cash as a percent of all payment methods has historically increased during a recession as unemployment and credit card lose losses arise.
Our studies viewpoint, no offers a new and innovative service and the initial feedback from customers, including pilots that we're just getting out supports our belief that offering new and more competitive cash management services will be very attracted to retailers starting with our current customers expanding quickly with many large multiply.
Location retailers that are unvended by our industry.
In the near term, it's impossible to predict the four impact in duration of the pandemic, including the timing of country level economic reopenings and the slowing of infection related recovery curves.
Based on current information, we expect our second quarter results to be the low point of 2020, any second quarter revenue decline of approximately.
25%.
As a result, we are targeting adjusted EBITDA quarter to be at least $45 million, we expect to see meaningful improvement in the second half of our cost reduction as our cost reductions take hold and when revenue picks up from further customer openings, we should see even stronger profit and cash flow grow.
Together with our global operating managers Brink's is taking the near term actions that are needed to assure we make it through the crisis into better position accompany after the crisis within an approved costen operating structure.
We believe these actions together with our new strategies and broader global reach from the G. four S. acquisition, well positioned brink's for long term earnings growth.
Please turn the slide for.
Our priorities.
As I stated earlier, we're focused on three priorities. The first and most important is to ensure the safety of our employees and their families and the service our customers.
The second priority is to act decisively to protect our business by preserving cash and reducing variable and fixed expenses.
Aligned with cost structure, our cost structure with the new economic realities.
Unfortunately doing so has required us to make so many many difficult decisions, including employee layoffs furloughs and salary reductions throughout our company globally.
Our third priority is to position brings to be strong a stronger company on the other side of the crisis.
In addition to write size in the business and capturing additional costs energies to further restructuring we're sharply focused on completing the acquisition integration of the G. four s. operations as well as the roll out of our strategy to point out initiative.
Party, one is a health and safety of our employees and we've taken significant actions during these unprecedented times to protect them.
We're working with country level public health authorities do we respond to affected employees and implement contact racing to minimize impacts do others.
Well also aggressively cleaning branches this year, we remain operational.
We're also implementing best practices and training for hygiene sanitation, social distancing and daily temperature checks for employees.
We purchased enter distributing substantial quantities of personal production equipment, including mask gloves in hand, sanitizer. We're procuring these items in requested amount and on a timely basis has been although the purchasing these items has been.
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Been a challenge from any other <unk> companies.
Fortunately in the U.S. it appears that the an infection curve as moderated and thankfully in many cases affected employees have returned to work.
To ensure that the trend continues and we protect employees health and our operations remain open we've implemented health screening and temperature checks raw employees and visitors.
I want to take the moment to express my sympathy for those who have been affected as well as their families.
I also off from my sincere gratitude to all of our frontline employees for their dedication to ensuring that the critical services, we provide as a company remain available to our customers around the world.
On that note I'll turn it over now to run.
Thanks again, good day every one.
Four I start I want to remind you that we disclose acquisitions separately for 12 months at which time, they're mostly integrated and included in organic results.
And the first quarter 2020 acquisitions include balance innovations in the U.S.T.D.S. in Colombia, a small C.I.T. bolt on in Brazil.
That's the chair of a small monitoring business in France, and less than a month the acquired G. four S.I. secure logistics business.
And it doesn't mentioned we experience cobot 19 related volume reductions on our business beginning in Asia in February Europe in early March North America mid March in Latin America by mid to late March.
We implemented daily activity trackers, and as a pandemic relate shut down began are organic revenue declined on average about 30% and in some countries by over 50%.
Generally those reductions persistent throughout April.
This time, we're just starting to see improvements as countries begins days reopening.
We do not have a line of sight on the speed of recovery or business will return to precrisis levels.
Turning to our first quarter consolidated results on slide six.
[noise] 2021st quarter constant currency, rather than a girls was 3%, but two thirds driven by organic growth and one third from acquisitions.
Revenue was reduced $560 million or 7% by negative for X.
More than we expected do the pandemic induced flight to the U.S. dollar.
Recorded revenue was $873 million down 4% versus the first quarter last year.
Versus prior year first quarter caught some times the operating profit declined 4%.
Acquisitions added, 1% and negative for X. translation reduced operating profit by $18 million or 21%.
As countries begin to reopen we're seeing a strengthening of local currencies versus the U.S. dollar, which will be favorable tar consolidated results.
We estimate that the negative impact of the current a virus on our first quarter operating profit was around $13 million across all of our businesses.
We were acting decisively to adjust our cost basis to align with pandemic related revenue decline, but with the execution Cos It will take some months reflected in our earnings.
Reported operating profit for the quarter was $63 million and the operating margin, what 7.2% down 220, Beps from the first quarter 2019.
Adjusted EBITDA was down eight per cent in constant currency and down 23% reported due primarily to their reduced operating profit.
E.P.S. 36 cents per share was down 33% versus prior year in constant currency and down 56% reported due to lower operating results combined with a much higher projected tax rate of 49.8%.
19 wasn't perfect storm for our estimate in 2020 effective tax rate. So we expect R.E.T.R. to return to the low 30% range and 2021. It's a pandemic is resolved later this year as we all hope.
The 49.8% non gap effective tax rate estimate it substantially higher than the 32% rate we guide into the beginning of the year.
The material increase is due primarily to coded 19 related volume projected U.S. taxable income.
This will reduce our ability to utilize U.S. tax credits to offset foreign taxes, and also reduce our ability to utilize tax credits for taxes paid by our foreign subsidiaries again, we view the inflated noncat P.T. hours, a pandemic induced aberration that should've date with the virus further details on our income tax.
Are included in the appendix.
Moving the slide seven.
Here, we illustrate for X. and virus impact on first quarter operating profit versus prior year.
Floating the virus operating profit in constant currency was $94 million up 11% and the operating margin was 9.9% 50 beps versus the same period last year.
Foreign exchange this negative $18 million or 21%.
Our original guidance included approximately $14 million a negative for acts on the first quarter.
We attributed the additional for a millionaire negative for access to the material marched evaluations that we interpreted as I said private previously as a pandemic related flight to the U.S. dollar.
In addition, we conducted a comprehensive analysis by country included and concluded that coded 19 revenue declines responsible for approximately $13 million in lost operating profit.
After four X.M. the virus impact reported operating profit was $63 million.
Moving to slide eight.
First quarter 2020 operating profit of $63 million was reduced reduced by 19 million of interest to millions favorable versus last year as hired that was more than offset by lower rates.
<unk> also $19 million was flat with last year as lower income was offset by the higher effective tax rate I just discussed.
Minority interests and other was 6 million, which altogether generated $18 million an income.
Operations dividing by 51.3 million weighted average shares outstanding.
Generated 36 cents earnings per share less than half of the year ago amount.
Depreciation and amortization was $37 million interest expense in taxes were 39 million and noncash Sharebased compensation was seven nine in total 2021st quarter, adjusted EBITDA plus $101 million down eight per cent in constant currency down 23% reported as stated previous.
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Turning a slide nine to look at results by segment.
For the quarter, North America grew 2% organically and on a reported basis and was up three per cent in constant currency.
Segment operating profit was down 25%, mostly due to an organic decrease of 24%.
North America's operating profit margin decrease 270 bits from 10.1% to 7.4%.
In the U.S. in Canada, we began experienced Irish related volume drops in mid March that impacted our results for the quarter by $3 million to $4 million reduce volumes persisted in April we've taken substantial actions to reduce our costs that I'll cover in more detail in a few slides.
Mexico continued strong performance in Q1 began to be impacted by lower Kobe 19 business levels in April preliminary April results suggest that the commercial impacted the virus, maybe relatively less than the impact in U.S. in Canada.
South America generated $198 million of revenue in the first quarter of 2020, reflecting organic growth in 8% and negative for accent, 22% organic growth is driven by Argentina. It was partly offset by decreases across the rest of the region.
Brings sargentini I had a strong quarter in local currency inflation jurgen price increases anvil, lorn and higher volume more than offset cost inflation, which increased margins for the segment first quarter operating profit was up 27% organically and down three per cent in total s. for x. at a 31% negative impact.
South America first quarter operating profit margin increase 230, best from 18.7% to 21.0%.
As noted before we began to see the South American impacted the pandemic in mid March and that dynamic continued in April.
Estimate the <unk> 19 impact in the segment was around negative $3 million on the first quarter.
Everywhere else around the globe, we're taking steps in South America to align our costs, but projected business volumes.
Rest of the world first quarter, rather than it was down 4%.
Panic decrease the 3% and negative for acts of 2%.
Comes in Asia with the first to be impacted by the crisis with operations at Hong Kong being the most impacted.
Europe was impact it a little later than Asia, with France volumes down significantly in the second half of March which continued into April.
Operating profit was down 36% organically in 37% on a reported basis segment operating profit margin decrease 340 best to 6.5%.
Results in France, the largest business and rested world were significantly affected by the crisis on our team there as aggressively managing costs leveraging government assistance to mitigate the internet.
Name can be said for the rest of our businesses in Europe, and Middle East Africa in Asia.
The rest of World segment, we estimate that the virus impact first quarter was around $6 million.
Bgs operations, which cut across all segments are included in segment results are also impacted by reduced volumes in most areas of operation.
No just slide 10, where I'll review, our financial help liquidity.
The bars on this chart represent the source of our liquidity cash available in our business and capacity and our revolving credit facility.
And each bar below the cash you can see our debt in our credit facility, both drawn and available.
The bars each represent a point in time at 2000, a 19 year end at March 31, 2020, and at March 31, 2020 pro forma for the term loan expansion and completion, the previously announced G. four s. cash acquisitions.
At the end 2000 in 19, we had approximately $1.2 billion illiquidity historically, we use cash in the first quarter with the seasonality of working capital and we invested over $100 million in <unk> and the G.P.R.S.I. acquisition.
On March 31, 2020, we had point 9 billion in liquidity on April one we close to 590 million dollar expansion of a term loan aid with our bank group, but the same l. plus 175 rate in terms and conditions as the existing credit facility.
After March 31, we closed acquisitions of 94 S. cash operation, we have eight more to go in total we expect to pay approximately $835 million for G. four S.I. plus cash operations in 17 countries.
Upon completion, we expect to have about point 8 billion in liquidity, which we believe will be animal to continue execution R.S.P. two strategic plan.
Importantly, other than the 5% annual amortization of our term loan a we have no significant debt maturities before 2024.
We plan to maintain our quarterly dividend, but have decided to suspend sherry purchases until further notice our credit rating remains strong and we have the capacity to whether this crisis, even if the impact turns out to be worse than we currently anticipate.
Let's look at our cash cap Exxon slide 11.
Original guidance for cash cap extra 2020 was $165 million, which included 140 million for operating cat backs and 25 million to purchase cash devices. Since the start of the crisis, we have frozen cap that will only acquire assets that are essential to our business operations safety and security.
We have cut the Bronx cash cap x. target by more than 50 per cent down to $80 million. We also expect to spend an additional 20 million related to the G. four s. acquisition bring our total cash target for 2020, <unk> to $100 million, we will monitor the severity and duration of the pan.
And they revisit our cash cats next target later in the year.
Turning the cash flow on slide 12.
Given the uncertainty around the coded 19 impact we withdrew are 2020 guidance, including our free cash flow target of $230 million.
Cash flow from operating activities is comprised of adjusted either.
Reduced by working capital in severance cash interest in cash taxes.
Free cash flow equals cash flow from operating activities less cash capital expenditures and 2019, adjusted EBITDA was $564 million cash flow from operating activities was 334 million and less 165 million a cash cap expertise free cash flow 169.
And 2020, we're not providing adjusted either guidance, but we have provided targets for other items, where we have better ability to estimate annual amounts. These targets include the estimated impact of the G. four s. acquisitions.
Working capital and restructuring charges told 127 million in 2019, we're targeting a range of 120 million to 150 million for 2020.
Based on pandemic hardship to some customers and despite our diligent efforts are assumption includes an increase in accounts receivable days outstanding we continue to incur restructuring charges related to previous acquisition, we'll have additional charges. This year in response to coded 19 and asked we integrate the g. for S. cash business.
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Cash taxes, which totaled $24 million in 2019 are targeted at 65 million. This year and 2019, where he was seemed significant tax refunds and accelerated payments that are not anticipated to repeat this year.
$65 million, an estimated cash taxes. This year is 20 million less than are withdrawn guidance due primarily to lower projected earnings we are targeting cash interest to be around $95 million up from 80 million due to incremental data associated with the G. four s. acquisition cash cap access we just reviewed is targeted.
And at 109.
Yes. The made in 2020 total of increase working capital cash restructuring cash taxes cash interest in cash cap x. isn't the range of $380 million to $410 million offsetting that 2020 depreciation amortization. Another noncash items are estimated at 185 million Adam.
<unk> 2020, operating profit will have to exceed $195 million to $225 million for breaks to be free cash flow positive this year.
With all the uncertainty surrounding the pandemic, we're targeting that we will generate positive free cash flow and 2020 and have ample liquidity to execute our strategies.
Let's move disliked 13 to review our costs structure and many of the decisive actions that we've taken in response to the pandemic protect our profitability and cash flow.
[noise] on the left of the slide we've illustrated our global cost structure labor accounts for 60% of our costs and fleet and freight is an additional 15% <unk>.
Generally direct labor and fleeting freight are variable based on volume.
Hourly workers are only paid for the hours they work vehicles consume fuel oil tires and routine maintenance based on the miles they drive.
Gives us considerable ability to flex our costs with our revenue, but during the pandemic with the rapid change in our businesses. It was not enough to just flex.
We've taken decisive actions to align our costs to go that 19 business levels, while maintaining the capability to be able to serve our customers when volume levels return.
We've reduced direct and indirect labor costs by executing head count reductions either through severance for temporary furloughs and we are aggressively managing overtime.
We instituted hiring married increase in travel phrases, we've taken temporary salary and benefits reductions across our global footprint.
Some of these actions had been slowed by government mandates unemployed.
Or agreements, we have with labor organizations in some instances were able to take advantage of government programs to offset a portion of our labor costs, but these benefits are limited.
What fleet and freight costs were optimizing C.I.T. routes utilizing our most efficient vehicles and rationalizing maintenance to reduce costs are 2020 fleet replacements had been mostly put on old.
S G.N.A. and other represents 20 per cent of our costs and we're taking actions to reduce discretionary spending at all levels, including head count facilities professional teased and travel.
Noncash costs, which include depreciation and stop compensation represent about 5%.
In summary, we're targeting to fully align our cost basis to match pandemic level revenues as we move into the second half of 2020. This will give us material operating leverage when revenues begin to return to the new normal.
Now, let's look at slide 14 to review, what we're doing specifically in the United States.
As I mentioned before the began seeing the effects of the crisis in the U.S. in mid March the impact was rapid and reduce our volume, especially in retail C.I.T.
Versus pre coded 19 levels in April we estimate that brings US total volume was down 30% to 35%, but volumes of notes process was down only 5%.
Estimate that April rather than it was down 25% to 30% and we expect that that will be the low point of the crisis in the U.S.
Retail is disproportionately disrupted versus financial institutions.
R.U.S. management team is implemented many of the cost reduction measures I just discussing our global response that included 20% to 25% head count reductions in both operations and S.G.N.A. 10 per cent salary reductions for management level employees more recently implemented.
Hiring merit increases into four one k. match have all been frozen.
Initially costs were rationalizing and optimizing C.I.T. routes deploying the best of our fleet and ensuring maintenance costs aren't occurred only when necessary.
We're scrutinizing facilities requirements and professional fees in every news travels to the lowest level required to run our operations.
To date, we it not identified any significant government programs that would benefit us. So we continue to explore every possibility.
What's that I'll turn it over to done to review, our global customer base, our views on the use of cash and continued execution of our strategy Doug.
Thanks, Ron.
You know over the last six days weeks during this pandemic all of US on this call together with the rest of the country.
Probably the rest of the world that's been going through a time like never before and I'm sure. We've had to look at things.
All things.
Different Lynn.
So I wanted to take a few minutes minutes to provide some foundational information about our business our customers and the use of cash let's start with the customers. The drive our business like 16 shows are strong global customer base.
Hmm.
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With with drinks for the future. The next three slides provided good overview of this customer base, which is diverse stable resilient and in many cases essential.
Our global consolidated revenue is driven by three distinct customer group.
Financial institutions or <unk>, as we call them retail customers and a smaller category coat government or another we provided is similar break down for each of our top five countries, which account for about 72% over total revenue and as you can see or U.S. operations have a breakdown quite similar to the consolidated revenue.
Brazil, whereas Mexico, and France are more heavier waited to retail or the yellow shaded areas on the chart.
Some retailers are getting lots of negative attention.
From investors and the media during this pandemic.
So, let's drilled down into the retail customer base given that the U.S. is by far largest market in roughly mirrors. The revenue breakdown of our global business, let's use the U.S. to demonstrate or high quality customer base, turning the slide 17.
Here are the three big take ways from the slide R.U.S. retail customers are large diverse and in many cases essential.
And provide is strong base of recurring revenue.
As you can see on the left hand side of the slide 44% of our <unk> retail revenue is from customers deemed essential which means they're up and running today and they've been since the beginning of the pandemic. Examples include many supermarkets pharmacies gas stations superstores and convenience stores.
When the other hand, we have more limited exposure to the business is facing the most significant challenge in fact, only 7% of U.S. retail revenue was derived from dining restaurants, and many of those customers are large national and international restaurant chains that should be back up and running after that endemic subsides and we have c. reopening.
Another 8% of U.S. retail revenue comes from fast food restaurant chains. Many of these or at least partially open most of the time in are expected to be fully reopened.
Regardless of what businesses names and R.U.S. retail customers are generally heavily weighted toward extremely large enterprises.
In fact, 20% of U.S. retail revenue is from customers with more than a thousand locations and another 30% come from customers with between 100000 locations. It's interesting to note that.
And we'll discuss this point in a few minutes. There are significant number of large retailers that are deemed as essential and are open and that have over a thousand locations, each but breaks or anybody in the C.I.D. industry in the U.S. does not service or minute or provide any minimal service to these customers.
Finally about a third of the U.S. retail revenue on the right hand side of this page is from comp you save customers.
The revenue was characterized by longterm contracts and recurring revenue streams.
<unk> base of retail customers, which is characterized by large heavenly essential customers suggests that we do not have abroad exposure to a large portion of at risk retailers. In fact, you'll see in a moment, we believe the retail market in the U.S. is far larger than most people perceive it to be and because by far the majority of the retailers do not.
Use.
Cash management services.
Or anything from the C.I.T. industry. This also offers a great opportunity for growth. It brings can provide the value of the customers are looking for with our new to Plano offerings turning to the next stage.
In addition to the high quality of our retail customer base are you a financial institution customers offering more resilient recurring base of revenue.
Customer base is comprised primarily of large stable companies that are open in operating.
In fact, 60% 66% of R.F.I. revenue is from is.
Is from.
It is from F. five is for my size at least 50 locations each and the top 25 to your one banks make up about half of our F. five revenue in the U.S. The next largest group is that flies into 10 to 49 locations again, a very significant portion of our F.I. revenue both are large if.
Customers as well as our smaller banks present us actually with a great opportunity for future outsourcing, especially in the post pandemic world, where there'll be looking to reduce costs and focus on their core banking business together or F.Y. and retail customers former very stable base that we believe will prove to be resilient both through much of the pandemic, but as we.
Amount of it as well.
[noise] slide 19.
The next subject that we feel with foundational discussed today is the continue strength of pass usage worldwide. These charts show that cash in circulation, both and value and number of nodes continues to grow when the U.S. and in Europe and annual raise from 5% to 7%.
And his grow and this growth has been consistent for the last 20 plus years at a compound annual growth rate at these similar level.
These rates are well ahead of the G.D.P. growth rates offerings strong underpinning for our business and growth in cash circulation historically has increased during times of recession.
Some may counter that increases in U.S. cash are heavily driven by criminal activities or the cannabis industry, which is not bank in the U.S.
The consistent you after your increases over 5% suggests that this is just not the case.
In emerging markets, such as those and let them Eastern Europe and Asia Pacific.
Growth rates in cancer of occasions circulation or even at higher level.
Based 20.
Turning to slide 20, you can see that the cash is by far the most widely used payment instrument accounting for 75% of global transaction.
It's important to understand the drivers of cash usage to understand why cash is so important even developed economies like the U.S. and we think that these drivers well not only will not willing not change, but they'll continue to be strong drivers after the pandemic.
For example, one out of every four Americans is either underbanked or completely unbanked that means 25% of the U.S. households rely on cash as their primary method of payment.
<unk> potentially they're only method of payment.
That is one of the most that is one of the most developed nations at least we think so in the world.
As you move from the developed in the developing that percent underbanked or Underbanked rose significantly.
Additionally, caches used my all demographic groups in the U.S., including all ages and only income levels. In fact, the recent study by the fed suggests that people in the lower age group actually use cash at a higher percentage of transactions than even an older group.
<unk> offers privacy for consumers and it cannot be happy.
<unk> anonymity, unlike credit card that can be trapped for all of your purchases.
Caches x. accessible to all without hidden fees are required personal accounts that need that are needed. The backup credit cards phones are rather rap and finally caches. The go to payments method during times of crisis. When the power goes out on and then have a cyber attack.
On financial institutions during periods of uncertainty such as the one that when people also gravitate toward holding physical cash as their primary store a value.
Looking ahead, I said looking again at our five largest markets on the right hand side of this page <unk> cash has a substantial payment share in each one of these and it represents the majority of transactions in Mexico, France in Argentina.
Cashews each drivers are similar during a recession and we are most probably entering into recession in the U.S. and globally.
As you can see on page 21.
The data clearly shows at the top left and on the top left on chart the cash payments as a per cent of all payments grew dramatically during the last week recession by almost 50% from the pre recession cash usage levels. This was driven by increased government stimulus significant increase unemployment.
And the resulting drop in consumer credit.
The result.
Oh. It was was reduced was reduced to the result, reduce credit, including credit and debit cards or any account backing a account backing for other forms of payments and therefore, it translates into higher use of cash.
The more subtle conclusion here, though also from the same chart is that there's been a recent in the recent years when there's been a lot of talk about the death of cash that that is just the the the the facts or just counter to that if you move back to 2000 age you can see.
That in 2008 prior to the last rate recession, cashew sees wishes at 21% range of all transactions.
And it materially increase since them countering the normal often argument that cash continues on her downward tracking today, it's 26% of all transactions and in fact, 32% of in person retail transactions with trillions of dollars in government stimulus and now record levels of and.
Climate the drivers of cash usage will have an impact on our and our economy as it reopens.
During the last recession from 2008 2010, the organic growth rate of brings you out.
It was only minimally minimally minimally.
Affected dipping some slightly at the bottom might about 4% and then recovering the next year to be flat on a compound annual growth rate basis throughout the three years session period.
Is important to know that even during a time recession. When some retailers have lot have a lot with cash to manage due to lose their lower sales are services are still needed and our revenue is generally not drive.
Drive based on past volume, but on services performed.
Historical data, we think clearly supports our contention that brings isn't essential services provider and as resilient and the time of economic stress.
We're going to slide 22.
We've also taken some data <unk> data driven approach to address a few common misperception that have recently had arisen related to K. safety.
You can see on the left hand side of this page in general cash carries fewer germs than a door handle or park bench or even plastic credit cards.
And in fact as you can see from the chart on the right hand side.
The data that a specific to cope with 19 shows that the virus survives more than three times longer on plastic than it does on cash.
Similarly, the <unk> a virus survives on steel about the same time as it does on plastic cards, that's three times longer than cash.
So it's much less safe to open the door or touch a plastic credit card.
Even if you touch it for contact purposes.
Than it is to use cash.
In summary, based on available data and backed by virus various sources like the European Central Bank in the World Health organization, both of which have made a point to go on record in response to many of the articles representing cash we think caches a safe as if not safer.
Than other forms of payment.
Let me transition now to some of the.
Key theme that we've talked about earlier related to the large opportunity we see in the U.S. retail market and globally for that matter.
As we think it has an extraordinary offering opportunity for breaks.
And we are.
Set the focus on that with our strategy Dewpoint on.
We think we have the right yeah, we think with the right management.
Cash right cash management solution, we think retail customers that are under served or unserved today by our industry will welcome a solution and we think our strategy to point no. We'll offer this step change solution to those customers.
As you can see on slide 20.
Three the retail market the U.S.
At large.
5.5 trillion dollars in size.
At the end of last year, nearly 89% of purchases at retail in the U.S. weren't person.
Physical sales at point of sale.
Per cent.
Come on line sales about 11% for all of 2019 has clearly increase during the coven 19 economy shut down and we may see significant increase in online sales as the Prince's end of all retail sales as we come out of the shut down period.
As you can see on the next slide even with the percentage of in person retail sales transaction as it reduces or if it does reduce it would still represent a tremendous opportunities.
Last year, 32% of those in person purchases were in cash.
<unk>.
So quite simply there's an enormous opportunity.
Cash being transmitted in retail of transactions in retail and while these ratios are percentages may change after the crisis. The magnitude of this opportunity does not it's still very large remarkably the cash management industry and breaks for that matter historic.
<unk>.
As had very low penetration of the total U.S. retail market or the total retail locations.
Now, let's turn to the next slide to go a bit deeper.
In fact, 90% of retail locations are not currently served by cash management or the C.I.T. business. They are what we call underserved.
San percent of retail locations that are offended or serve by our industry. We estimate that brings service about a third of these sort of stayed the obviously there is significant market share opportunities available to us today as long as he presented compelling model do our invented community that have not purchase services from the industry in the past.
The other very interesting, Pat fact and potential opportunity.
These are not just smaller <unk> single stores that are invented the unvented include significant numbers of large retail chains that use little or no cash management services from our industry. These are large brand name change that of thousands of stores, yeah, they've yet to see the value of using.
Our industry services in fact, as you can see you're in the lower right hand corner of the slide.
Most of these retailers use the services.
Of card companies.
To process credit card payments.
And frankly at a very high price do these retailers.
And the slide we all have also illustrators small portion of the large unvented market.
By the Blue stripes life in the chart that we think are key is a key target for new services.
Slice alone of large multilocation retailers could potentially increase our current U.S. retail revenue by over 50%.
[noise] turning to the next day.
So as we've outlined.
And the prior slides caches popular needed form of payment for retailers and will continue to be we think post the crisis for all the reasons and drivers we've cited.
However, it is our belief that the cash management industry, including bring says historically approach to market.
With maybe a one size fits all approach and the fact did not meet or fit the needs.
There are required to meet the needs of those unvented customers.
<unk> receive cash management as expensive inconvenient and unnecessary and maybe even carrying some rest risk as opposed with credit cards.
So the challenge for breaks is the design a complete cash management solution and do so at a lower cost than what retailers pay for credit services.
I like to say that we need to offer retailers a cash payments solution that at least is complete.
Easy to use and hassle free as credit cards.
But hey, much lower cost.
We believe our customers need a way to convert cash into digital optimize working capital with daily deposits into their bank reduce the risk in cost both ends door, an external losses reduce store labor costs associated with managing into positive cash, including eliminated daily trips to their local banks.
The ability to consolidate numerous local bank accounts into a single bank account of that is credited through the service.
And have the complete service off from one source, including all their cash banking cash management banking needs.
Let's turn to the next day page and at this time.
I'd like to introduce again real hard Paul our Chief Information Officer, Cheap Digital officer, and head of our product technology and marketing group to tell you a little bit about how we have brings we'll use tech enabled services to adjust address these needs of our unvended customers.
Thank you, Doug and a good afternoon to everyone on the.
As Doug pointed out strategy to data, though was built on the foundation of changing the customer experience for cash management to better appeal to that large unvended segment of walk to bank customers.
The solution needed to be easy to use holistic to include both deposits and ordering change non intrusive and customer friendly and yet provide the same oh better working capital benefit to the customer.
So we built a solution that we call brings complete to change the prevailing customer experience in our industry.
It consists of a digital out a little cost device tailor to the needs of the business next day advance credit for cash deposit and change ordered and delivered to the stores.
Oh for a well published single subscription price that is targeted to be less than 1% of the value of the customers cash transactions.
Next slide please.
Here's how it works.
Customers use the 24, seven apt to make a deposit order change what track their requests.
Then put their cash in a specially provided brings bag and scan and drop it into the device.
Brings takes custody for the deposit and provides advance credit to the customers Bank account the next day.
And brings continuously monitor is the device and scheduled to pick up when the device reaches capacity.
Now there are two key customer experience changes that I'd like to highlight.
First this is an all digital process to create a deposit no more time spent counting cash and writing a paper deposit slip.
<unk>.
The deposit is made and creditors received at the customers convenience and the benefits to the customer clear.
No more walking to the bank and waiting in line no more distractions from serving your customers when a bring struck arrives to empty. The device. All this at a price point that is affordable and provides more value to the retailer than their current solution.
Next slide.
So how does this solution apply today.
Dug and I have both indicated there are more than 1 million retail location that have not adopted the conventional industry solutions for cash management, because they just didn't see the value in it.
So we designed to solution to change their minds about the ease and the cost of cash management solutions.
And now with Kobe 19. This solution is so much more relevant for our retail customers with bank branches closing social distancing in bank lobbies and reduce staffing in retail stores customers that used to take the time each day to walk to the bank to make a deposit are struggling.
They can ill afford their managers to be out of the still four hours just to keep their working capital flowing.
This is where it brings complete fits in.
Use enough to create a deposit put your cash in a bag scan and drop it into our device and receive advance credit for it next day no hassle no walking no unnecessary contact with others in a bank and working capital acceleration for your stores.
We are in pilot today with two large customers that used to walk to the bank to make their cash deposits and we have received interest from many of our existing customers in this brings complete solution.
We believe that the brings complete cash management solution address is a critical market need today and easily extends into the new normal environment If tomorrow.
Most likely emphasize social distancing no touch services and the digital focus.
Now, let me turn it during the call back over to <unk> to summer Duck.
Thanks for all on I'm pretty excited.
I'd like to close today, focusing [noise] summarizing our third priority, which is a position brings to emerge from this crisis stronger than ever and poised for additional future earnings and revenue growth.
Now in during this crisis period, we're continue to aggressively pursue a new cost structure that is aligned with the economic realities is a pandemic, but at the same time the key to emerging from the crisis does his position for the longer term Grove is to be and it's continuing to execute and be better position to execute all three layers.
Strategy.
Strategy want Plano, which we introduced at our Investor day, three years ago was focused on internal organic profit growth initiatives are susceptible execution of these initiatives drove much of the profit growth. We saw during our first three years or teacher, playing poker and they form of foundation for continued improvement going.
We now call that one point, a wider and deeper W.D. would simply means that we will look celebrate and we are accelerating our execution of internal growth initiatives as well as our right sizing measures throughout more countries and our goal been network, which now includes 14 more new countries with G. four s.
But as part of priority three we're also restructuring and Rephasing our businesses in many countries do better match, our revenue during the crisis into better leverage for greater margins and stronger earnings as revenue.
Grow gradually returns and hopefully exceeds prior levels.
Revenue levels return at a slower pace will be position for better profitability at these levels.
These actions include accelerating building on already develop restructuring and integration plans and accelerating acquisition synergy plans that have been been put in place and expanding on though those we've now completed the axes acquisition of G. Force operations in nine out of 17 markets, which are now I'm bored and operate.
Seeing as part of Brink's, we're on track to close the eight additional markets before the end of 2020.
So far we're very pleased with the quality of our new G. four as measured teams to understand the importance of achieving their targeted costs energies in her excited about our growth opportunities, including the new brings 2.0 strategies.
We also have said we believe brings complete is the right service at the right time for retailers, who want new cash management solutions.
To be safe easy to use and provide a complete service solution, our marketing efforts to begin with our existing customers, where the logical ones and key to expanding our retail market positions and these services should work just as well for existing C.I.T. customers only with better value.
We are also placing initial bio says wrong on mentioned with flick groups of well known large won't buy location national retailers that currently we either serve only partially or totally invented.
[noise], we're continue to roll out additional services part over to Plano strategy on top of a direct retail, including eight P.M. network management and cash recyclers.
Turning to our last page Oh conclude with a summary of our outlook on slide 31.
In the near term, we are laser focused on reducing costs as we whether the current market uncertainties.
Believe the second for will be our little point in 2020 with steady improvement in subsequent quarters.
Well, there's there continues to be tremendous uncertainty about the reopening of economies, how our customers will ramp up their operations and the impact of global economic recovery.
<unk> quarter to we are targeting to generate at least $45 million in adjusted EBITDA and we're targeting positive operating cash vote for the four year.
As Ron discussed were comfortable with our balance sheet, and we think we have more than adequate liquidity.
As we look forward.
Beyond this year in 2021, we're highly confident will emerge from this chrysler's crisis stronger than ever or leveraging the strong frustration. We've built over the last three years will continue to expand upon and the new global network that we're adding with G. four S.R. aligned new cost structure.
Strategies, and our 2.0 strategy Unisys initiative more importantly, the steel and the dedication of our complete in our entire workforce will help support is through the crisis and beyond.
Please turn to the the last page.
You can see this is a shot down a very lonely street in Paris, but you can see the brings truck there the world counts on breaks.
Will open up now for questions operator grant thank you.
We will now be again the question answer session.
<unk> star than one on your touch tone well.
If you're using a speaker phone please pick up your handset before posting the kids.
Withdraw your question, whose plus star I'm too.
At this time will paused momentarily <unk>.
Any questions.
Our first question will come from George Tong with Goldman Sachs. Please go ahead.
Hi, Thanks, good afternoon.
<unk>.
Hello, you indicated the organic revenue declines persisted do them on April but that you're starting to see some improvements can you talk about what weekly above new trends in April like by geography.
[noise] Oh go to you know George <unk>, you know I'm I'm I'm struck me a little because it's awfully hard to tell you weekly.
What we have seen and it varies by the the country's that's why we tried to give a at least a little bit of background as to when we saw.
The the various regions at least Oh the ways, we call. It went through a with starting with Asia, where we did see obviously you'd have a earlier impact in Hong Kong, but then starting to see some of the improvements in the latter weeks.
Of of.
This month really leveling out in the first weeks of this month <unk> and then starting to see some improvements.
But that's that's kind of more in the forefront other other markets and as we said as it went through Europe. We saw in the <unk> second week or so in March the starting or the impacts with the shut downs.
The various countries in the economy's and in some cases, we've not seen it come back in my in some countries because of this still continued shut downs in others like the U.S. over the last a week and a half or so we've just started to see customers and the economy start open back up again.
God that's helpful and then as it relates to <unk> very helpful. Overview can you elaborate on your rotter rule out strategy.
New product if you need to partner with the bank for this product work in in how would you would train the longer term rather do opportunity.
Yeah. So.
We we are we were being a little bit cautious on how we let it roll and lay everything out we have already partnered with what we call. The single partner Bank at least for the regions that we are starting the pilots ruling out so for the partner with that prevent provides us the ability to provide the working capital management.
Optimization in other words the daily credit.
Underneath the age transfer basis directly to our customers banks are they're choosing.
So it allows us in partnership with a bank, but through us in an off balance sheet method. It allows us as breaks through one of our drinks subsidiaries again and off balance sheet method. It allows us to provide the credit to those customers. So we consolidate no several hundred let's.
Yeah.
Store locations, where retailer that are in multi.
States and that use historically of use multi by a local banks.
It effectively allows the ability to eliminate all those and provide and they see each transfer. The next morning to a single bank of the customers choosing.
[noise] great. Thank you.
[noise]. Our next question will come from Toby Summer with some trust. Please go ahead.
Thanks, <unk>, if we think about you you're right sizing up the organization, making it easier for.
Well the market that will be here post covert 19 kind of taking next year or not but.
The balance of this year well what do you believe it for if you take January and February or maybe last year's fourth quarter as as 100% or you building at 495 per cent next year 85, how do we think that.
It is a very very.
Savvy and good question and is one that I our management team are working with all of our country managers and our functional teams to really drive and and don't be I'm not going to answer it specifically with a specific target. Although we do have specific targets. So we're we're providing to each.
Country.
But I think they the your your point is well taken your concept is is really what we're driving too.
And that is to take a look at our fourth quarter as a jumping off point for 2021, and the future and seeing the fourth quarter. This year, how was that new business sized how are we sizing that business Eddie reduce level of revenue in the fourth quarter.
But don't improve margin.
So it may not be improve margin dollars, but at least it and improve margin percentage then we would've seen in in a prior year and that's the challenge. So if you use an example on the that Ron used as part of the review of the U.S.
That C.I.T. <unk> labor, that's the direct labor associated is down about 25%.
Relatively in line aggressively in line I guess I should say in line with the expected revenue at the bottom in the second quarter that is a to take out of headcount.
Oh these are layoffs and furloughs that have been taken the action has been taken to take that cost out.
And then you jump over on that page as well, 20% of S.G.A. has been taken out as well.
We can continue that's we sizing the business model.
And if you have 20% of S.G.N.A. and you can maintain that as a cost structure going into the fourth quarter.
We don't we hope we don't know, but we hope that you know our our fourth quarter revenues will not be down that much and I'm not trying to speculators suggest one with the other but I'm, suggesting that we don't think that are are as we see a recovery. However, gradual wherever that slope might be that are revenue should be stronger than that is compared to prior year.
Not down as much but if we see a cost structure and a business model that puts his effectively.
<unk> S.G.N.A. out of those types of levels will have leverage to the up side.
And the challenge the opportunity is to use that leverage going forward and then layer on top of that our new strategies.
To get us additional organic growth that'll continue again to leverage that cost structure, even more going forward. That's why we think we're going to be very well positioned it's tough it's not easy as we go through this period of time, it's not easy on the people that you know, we're not part of us as a team anymore, but it should be great.
The other people that are left and that's the majority by a long shot and taking the decisive actions now we'll put us in a much better position.
For the future not only in the fourth quarter this year, hopefully, but that as a jumping off point for 2020 want to be on.
Right well one other question for me and I'll hop back in the Cube. Your you know in my coverage your stocks down in the most year to date.
Everybody on the phone on your team is acutely aware of that.
<unk> are there other <unk> strategic things that you can do or have you been you know sort of approached by anybody because you know we've seen private equity transaction slips at substantially higher multiples and you've got you know innovative strategies that not everybody in the market has.
Well, that's one of the reasons Toby that we we wanted to lay out some of the when I consider the basic fundamentals of our business you know I I firmly believe and I hope of after we have our conversation today. The the reasons for people using cash or not going away in fact, they're going to go just the opposite direction.
I think that the the myopic view that we've seen and maybe some of the misinformation we've seen about cash in case usage.
Both in the U.S. in on a global basis have really skewed some of this skewed maybe our evaluation the reliance on retail.
That maybe many of Miss and misperceptions about us that may be skewed that as well the perception as you walk down you know second Avenue in New York. This is one of my favorite you look down second hand, and all the restaurants in the dry cleaners and other stores are closed and you say well this must be impacting brink's well. The fact is.
We only service less than 10% of those customers because of of a offended nature that we pointed out which is means that we aren't as reliant on on is that most of those are smaller stores smaller operations smaller retail operations that we do not serve and they aren't impacting our business now that's why 44% being.
Ah essential is really keen number that I think was misunderstood.
And the biggest misunderstanding you that is our potential opportunity because there's 90% and if you think that there's going to be more online sales going forward. Then there have been historic which I do agree with maybe you cut that number by 10 15, 20%. It's still a large large opportunity that if we implemented correctly every role at our strategy properly.
We should see substantial opportunity for growth in a unique fashion into step change fashion of the services, we provide to the customer that offer us greater profitability in greater growth.
I can't answer your other question of we've been approach by somebody to buy.
Thank you very much.
[noise]. Our next question will come from just Kessler with Imperial Capitol Police car Q. and say you retain my question.
<unk> I use how're you doing huh.
There's probably some of your competition on the phone Oh, it's just very very carefully. This question coming out of the last recession, you folks lost share a because you're they <unk> <unk>. That's 10, that's 10 to 12 years ago, because the value proposition of breaks probably was just not was.
Overstated at the time, the charging too much <unk> and you lost share for for various reasons.
Does what we are seeing those are what we're seeing now in a in such such as <unk> brings complete do you believe you have you are putting out there.
As you come out of a <unk>, a recession or even in the middle of recession. The type of tool that can take back some of that lost share, particularly on the financial services inside type of things that you didn't have.
Back then when you were a a high price company, you're you're now as high price stores low prices anybody else. The question is do you think you have the value proposition to change the market share with with the new do you want to call. It brings brings 2.2 0.01 and 2.03 you as it.
As it gets introduced over the course of the next two years.
Well first of all Jeff your worse than me with numbers 2.12, 0.2, or three and so forth I get criticized for that but it was setting that aside I think we.
Yeah, we should keep this in perspective.
You know we.
Set aside the 2.0 and the news solutions that we will be offering and I'll talk about that in a moment. What's important is it as a company over the last three years I think we've materially improved our service levels are value proposition, our customer focus to our customers in the U.S. that we haven't lost market.
Share that I can think of any consequences over the last three years. We may lost it comes from here and there but in general we haven't lost we probably gained if anything some market share in the F.I. As an example, we know one or two large accounts that we've gained at least account share with so I I think I can't speak for what happened in 2010 or 11 I.
Can speak for when I came in three and a half years ago that we weren't doing as well we should have we weren't servicing our customers as as well as we should I think we've made significant progress in better strategies investing more in the business, providing better serve as being more customer focused et cetera that has gotten is still position.
<unk>, we'll see is through in our core business in our core offers offerings in our core offerings versus what our customers are excuse me our competitors offered to our customers I think we'll continue to see.
That that will see is through and position as well through this recession, what we're adding on top of that is something that not only should improve the service offering to our existing customers and we have a name for that as well, but offering the news service to our existing <unk> customers that will be much more complete and a bit.
Her servicing offering offer at a better value to those customers, but more importantly will be something that we think will be of great value and of interest to a new range of customers. That's clearly the old breaks and our competition has not been able to sell those customers on that's that's the challenge so.
This isn't just about to try and see it through a recession or to take existing customers here from customers. We're going to do that we're going to continue to improve on our core business, we're going to continue to improve our profitability in our core business that is one point, a wider and deeper but we're going to layer on top of that new strategies that provide is the opportunity do further grow our organic.
Growth with new and and and other unvended customers with existing and new Unvended customers out there on top of that as well I hope that <unk>.
Does one quick follow up that is if you're you're global services business. You mentioned that you know that you mentioned that that's you've done some integration they're already it. It also so has also self the pain of.
Recession, but what I'm interested in is as you as this recession moves on and and you and you and and you implement some of these new value added operations that you hopefully we'll get.
Provide you more value added is there a role for global services to play a part Oh.
That's cool if the so new overview that you are you've just been talking about it that's the last 15 to 20 minutes.
Well.
I may be missing something here, but the global services piece is really not related we see a lot of other strategy for global services, but that's not really related to how we're servicing a larger or unvended or under vended retail and that's it I'm sorry.
Maybe I misspoke I was <unk> I was specifics specifics alone global services. The types of news services that you could offer.
You know with them too you know shoot to basically just not just improve share. It was improved sir improve service and and and and get even better margins out of business. Yeah. We we are working on on a range of plans and and new services for that and certainly you know the combination of the what's eight weeks ago now or six.
Weeks ago, we completed the acquisition of S.I. the combination of that the two thirds of the synergies that we've outlined for for.
The G. four S. acquisition are coming from that business and that position six extremely well to maintain the position and hopefully gore positions. They're so we'll we'll be looking at how we can add additional services as a part of that.
Okay, great. Thank you very much appreciate it thank you.
[noise]. Our next question will come from Jamie equipment.
Or stuff advisory. Please go ahead.
Hey, good afternoon gentleman, Thanks, a lot for taking my question.
Yeah, Yeah, so duck duck I like as as one thinks about.
Retail tax solution versus <unk>. Your your legacy copy safe model <unk> is there a customer size in terms of cash needs and volume, but where they they'd have to be a cop you save customer.
Or is this scale bowl up almost as high as it needs to be and then sort of the follow up question areas over time.
Really going to be seeing kind of you know one branks retail cash management solution and really the only difference in customer customers just going to be decides it device I actually think about this longer term.
Yeah, So I'll I'll answer in two ways and I also want to be a little bit cognizant of competition. Okay. So it's a one way is a kind of this is getting back to what Justice said, our 2.1 strategy is really around.
Anything related to any size of compu safe or smaller or even a little bit larger, but but type of customer that has a reasonable amount of cash, but not overly so that has a reasonable number of a point of sale <unk>.
Positions, but not a a large number and reason I say that that's why we call. It 2.1.
And I'm getting back and yet there's another version that is 2.2 that is our focus on recyclers, which will be the next level up and that is for larger much more higher volumes of cash that go through a that have more P.O.S. systems that need to manage your control that because there's so much cash that's going through that this large supermarkets.
Grover or <unk> or or Walmart and so forth those should be probably using a solution that includes not only a recycler, but then the complete managed services around that recycler as well as then other systems that help tracking manage and provide <unk> enterprisewide.
Category and all that stuff exactly exactly yeah, so that would be the larger customer, but anything below that right down to the very small mom pasta type stores. We think this solution is really the right and best solution and it provides it for what's interesting. Yeah. Initially started this looking for that smaller.
<unk> and what we really come up with we think this is actually as good if not a better solution that is really a political too a lot of much larger retail operations that aren't using a cash management solution or only have a partial one they have multiple locations multiple stores and use mobile.
Will banks and therefore, they have to track and manage and and reconcile all that pay all the fees that they don't even know what they are do the cash management et cetera around that and that can be consolidated all into one.
Eliminating local banks, eliminating all the reconciliation a cost around that.
The difference between that and Compu safe for smart saves in the marketplace. Today is those are always provided by [noise].
Excuse me the services around though.
Divided by the Bank. The next day services. The next day credit is provided by the bank that the customer has to go get their separated services.
And so this is combining that service, it's eliminating those hidden fees and all the other cost around that and putting into one.
[noise] I don't know if we lost you.
Oh no sex. Thank you very much that would that was it thanks a lot.
Alright, thank you.
Our last question will come from Sam and one with band Bird. Please go ahead.
Hi, guys <unk> thoughts on on breaks complete.
Eric Hi, you're thinking about pricing the offering them, what do you think it'll be <unk> that nicole bit.
<unk>.
It will be better margins than our core business.
Okay, sure and and it would be better Libra and it'll be competitive price because it offers that complete solution.
Now the challenge.
And this and this is this is pretty straightforward the challenging this it's a value proposition and the value that will be offered we think will be far superior versus all of the cost and and and the related value that is being lost by the customer today.
But if they don't take all those cost into consideration. What's the costs are you working capital what sort of losses that they may be seeing internally or externally, what's the cost of walk into a bank. The time it takes for that branch or the store manager to do that you know all of those things that they don't they have to consideration then it may be viewed as well more than just you know way.
25 dollar C.I.T. pickup.
But if they take the real costs that they're seeing both the hard and soft cost, but mostly just the hard cause they're seen today. This will be a very attractive complete solution and it will provide better margins for us as well.
Okay, great. Thanks.
<unk> <unk> yeah, Yeah, that's an idea of what you're paying on how old by tying the cabinet by 50% said what projects, you'll playing golf and I say, how quickly can you stop and when you.
<unk> down in the log.
Yeah same a lot of it has to do with the fleet, we have a lot of bodybuilders around the world and been shut down with the virus. So it really with with E. for us to postpone that cap <unk> and again the the fleet is an upgrade for us we're going to get removable chafee body solution.
We're going to the one man operation solution. So these have cost advantages both in labor and on the maintenance and fuel.
And so they're incrementally good returns again over 20 per cent I.R.R.
But the the return what we would get versus the cap x., putting out in an environment, where we're really focused on cash and cash preservation made all the sense in the world to postpone the fleet upgrades and quite frankly, I don't know who would be able to will continue them a week a lot of these bodybuilders being shot for the <unk> yeah. It. It's it's got a natural based.
On the other things that are happening related to this there's one other piece it comes into this as well as we start transitioning into and hopefully selling more of our 2.1 or 2.0 solution that we're talking about that brings complete that there could be a natural evolution to fewer stops anyway.
We'll be able to manage went those stops are and we should not need nearly as many stops which means that our future requirements for trucks maybe reduced.
Silver lining right back and and and also it also means that.
Again as role on pointed out.
Oh.
We don't need to have for like a typical C.I.T. stop the customer doesn't have to wait for us at 10, 30 every Tuesday morning, and every Thursday morning to drop off the bag in person or two one of our C.I.T. messengers. Instead, we can come anytime because we're the only people. They can open up the brink's device.
That we provide do that customers part of our service.
And so it's it from the standpoint of of cash in handling of cashiers much reduced time in handling of cash.
And and and the labor and so forth associated with them.
And once the cash is put into.
Our device using our cloud based out of.
It then is a magically appears and is converted the digital impairs in the customers Bank account. So he doesn't need to worry about it any other way anytime and that's much different than before or the way that businesses done today and it must be much better for us in terms of optimization of routes number of stops and and costs associated with them.
Okay, great. Thanks very much.
[noise] any other questions I think George did you have one more.
[noise] it looks like this will conclude our question answer session.
The conference has now included thank you for attending today's presentation.
You may now disconnect.
[noise].