Q4 2021 Brinks Co Earnings Call
Okay.
Welcome.
We want you to break companies' fourth quarter 2021 earnings call.
Brink's issued a press release on fourth quarter results. This morning. The company also filed an 8-K that includes the release and the slides that will be used in today's call.
But those of you listening by phone the release and slides are available in the Investor Relations section of the company's website Brinks dotcom.
At this time all participants are in a listen only mode.
The question and answer session will follow the formal presentation.
As a reminder, this conference call is being recorded.
Now for the company's Safe Harbor statement.
This call and the Q&A session will contain forward looking statements actual results could differ materially from the projected or estimated results.
Information regarding factors that could cause such differences is available in today's press release and in the company's most recent SEC filings.
Information presented and discussed on this call is representative as of today only brings.
Brink's assumes no obligation to update any forward looking statements.
The call is copyrighted and may not be used without written permission from brink's.
It's now my pleasure to introduce your host Ed Cunningham, Vice President of Investor Relations and corporate Communications. Mr. Cunningham you may begin.
Thank you Jamie good morning, everyone.
Joining me today are CEO , Doug Birch, CLO marquee banks and CFO Ron Domanico.
This morning, we reported fourth quarter results on both a GAAP and non-GAAP basis. The non-GAAP results exclude a number of items, including our Venezuela operations the impact of Argentina's highly inflationary accounting.
Reorganization and restructuring cost.
Items related to acquisitions, and dispositions and costs related to an internal loss and certain accounting compliance matters.
We also provided our results on a constant currency basis, which eliminates changes in foreign currency exchange rates from the prior year.
We believe the non-GAAP results make it easier for investors to assess operating performance between periods.
Our comments today will focus primarily on the non-GAAP results.
Conciliations are provided in the press release and the appendix to the slides, we're using today and in this morning's 8-K filing all of which can be found on our website.
I'll now turn the call over to Doug Perks.
Thanks, Ed and good morning, everyone and thanks for joining us today.
Today, we reported record revenue and operating profits for both the fourth quarter and full year of 2021.
More importantly, our fourth quarter results with organic revenue growth of 7% provide a strong jumping off point to drive continued momentum in 2022, when we expect revenue to return to at least pre pandemic levels on a pro forma basis.
We're looking forward to delivering another record year in 2022, when we expect 2022 revenue to exceed 2019 reported revenue by over $900 million up almost 25 plus percent.
Our confidence is based on expectations of continued recovery of pandemic impacted economies with improving retail markets higher than historical price increases continued core organic growth and accelerating contributions from our strategy to 2.0 digital solutions. We also.
We expect continued execution and acceleration of our productivity and efficiency initiatives building on our 2021 operating profit margin improvement of 90 basis points.
In 2022, we expect revenue growth of between eight and 11% and operating profit.
A growth of between 16 and 23%.
Reflecting strong earnings leverage and a margin improvement of approximately 100 basis points.
Adjusted EBITDA is expected to grow by approximately $90 million to a range of $755 million to $790 million.
Our 2022 guidance was released this morning that we released this morning is consistent with a strong growth rates and margin improvement targets, we presented at our 2021 Investor day.
<unk> to reflect the impact of FX basis.
Impact of FX based on exchange rates as of December 31, 2021.
This guidance supports our belief that 2022 will be a strong start to achieving our three year strategic plan targets, which include revenue of $5 4 billion adjusted EBITDA of $1 billion and free cash flow of $575 million.
Im going to review our full year results and then turn over the call to Mark and Ron who will review our for our fourth quarter performance in more and then I'll close with a more detailed review of our 2022 guidance and our 2004 targets.
First starting to page slide four excuse me our.
Our full year results were very strong with double digit growth in revenue operating profit adjusted EBITDA and EPS on both reported and a constant currency basis. In fact, these all represented non-GAAP records for <unk>.
Full year revenue was up 14.
Ascent to $4 $2 billion at the high end of our guidance.
Driven by 5% organic growth and 9% growth from acquisitions.
As Mark will cover in more detail organic revenue recovery accelerated throughout the year supporting a strong jumping off point for exceeding pre pandemic benchmark levels. This year in 2022.
Last year's revenue also included significant growth from the <unk> acquisition, resulting in 2021 revenue that was higher than 2019 reported revenue by almost a half a billion dollars or up 14%.
Operating profit grew 23% to $471 million, including organic growth of 18% and 90 basis points of margin improvement to 11, 2%.
Adjusted EBITDA grew 21% to $683 million with a margin increase of 100 basis points 2021, EBITDA was up $116 million compared to 2019, representing 20% growth and close to 100 basis points of margin improvement versus pre pandemic levels.
EPS was up 26% on a reported basis, which includes a 24% gain related to our equity investment in moneygram, excluding that impact of the investments are both this period and prior year period, EPS was still up 25%.
Note that our metrics are even stronger on a constant currency basis as you can see in the slides.
In early 2020, we set a goal to emerge from the pandemic as a stronger company than we were before the onset of the pandemic.
Our record setting results demonstrate that we have achieved that goal and more we also clearly.
Demonstrate.
They also clearly demonstrate the resiliency of our business and the persistence and the persistent strength of cash usage around the world.
Now look forward to delivering continued acceleration in revenue and profit growth over our strategic planning period through 2024 on that note I'll turn it over to Mark.
Thanks, Doug and good morning, everyone.
Fourth quarter revenue was up 7% on both a reported and organic basis and up 11% in constant currency.
Our acquisition related growth of 4% was partially offset by a 3% negative impact from FX.
Fourth quarter revenue recovered to 95% of 2019 pre COVID-19 levels are 100% on a local currency basis.
This was a continuation of steady sequential improvement that we've seen throughout the year of course I'll cover this in more detail on the next slide.
Operating profit was up 6% versus a very strong quarter last year organic profit growth was up 11% and.
It was largely offset by negative FX of 9%. It was primarily attributable to the Argentine peso and the euro.
On a constant currency basis operating profit grew 15%.
This year's Q4 progress was the result of strong performance across all four regions, but especially by our Latin America and Europe operations.
I want to thank our nearly 75000 brakes colleagues around the world for their determination and focus in the fourth quarter and throughout 2021.
Last year's operating environment have a dynamic and challenging macro draft.
Macro.
Drop to say, the least and our team nailed it.
In Latin America, our lean transformation and productivity initiatives, particularly in Mexico helped to offset the lingering impact of our pandemic related reopening delays throughout much of the region.
In Europe slightly positive organic growth with strong margin improvement of 100 140 basis points was a result in the fourth quarter. This result was that this was a result of strong cost management and the benefits of prior year restructuring actions.
France was a bright spot in the quarter again with their third consecutive quarter of margin expansion.
Turning to North America after a price price cost timing mismatch that we discussed on our Q3 call. Our U S business was able to implement the necessary price actions to offset wage inflation.
Our rest of World segment was able to grow organically by 9%.
Although margin expansion was muted by prior year comparable related to our global services business and some COVID-19 related government subsidies in 2020.
The operating profit margin for the quarter was 14% slightly below last year, but 160 basis points above the pre pandemic fourth quarter 2019 rate of 12, 4%.
And that was despite all of the delayed reopening in several markets, especially in South America.
This 160 basis point improvement versus 2019 reflects strong operating leverage and is encouraging as revenue continues to approach the pre COVID-19 2019 levels.
The EBITDA was up 8% and 15% on a constant currency basis with margins up 10% 10 basis points over last year to 19, 1%.
This is 240 basis points over our pre Covid 2019 levels.
Excluding the prior year gain of 13 related to our equity investment in Moneygram EPS grew 11% to $1 68 per share and was up 13% in constant currency.
Slide six shows the steady quarterly revenue growth that we saw in 2021 by segment and in aggregate versus the pre Covid 2019 levels.
Those comparisons on both the U S dollar and local currency basis.
The local currency recovery rates demonstrate the underlying resiliency of our business.
The USD recovery rate factors in the impact of foreign currency translation, which is how we ultimately report our results.
Beginning on the left hand side of the slide with North America, you can see modest sequential improvement from 93% to 97% from the first quarter to the second quarter and a slight dip down to 96% in the third quarter as the Delta variant emerged fourth quarter revenue reached 100% of 2019 levels.
As we mentioned last quarter, we've implemented several price increases in our U S business to offset rising labor costs in the fourth quarter, we saw a meaningful lift from these price increases along with the continued improvement in our U S hiring and retention initiatives.
As we closed out the year, our prices were back in balance relative to wage cost inflation.
Moving on to Latin America, you can see that the recovery has been significantly stronger than any other region with a fourth quarter at 109% of pre COVID-19 levels on a local currency basis.
A large part of this recovery is attributable to the inflationary environment in Argentina.
But even excluding Argentina Q4 revenue recovery was almost 100% largely on the strength of our business in Mexico.
The fourth quarter rate improved sequentially by 1%, even as volumes decline in Brazil, Colombia, and Chile due to the ongoing impact of the pandemic.
In Europe . The recovery rate has also progressed steadily despite the continuation of the COVID-19 related restrictions and reopening delays many countries, including France, Netherlands, and the UK continue to relax the restrictions and we expect consumer spending and retail markets to continue to improve throughout 2022.
Revenue recovery in our rest of World segment remained in the mid 90% range for the third through the third quarter jumping to near full recovery in the fourth quarter driven by continued growth of our global services business.
Post pandemic reopening and a few of our key markets in this region remain delayed.
At yearend, our USD revenue has recovered to 95% of 2019 levels and 101% when you look at local currency.
In aggregate, our 2021 revenue recovery versus pre pandemic levels has shown a consistent upward trend. Despite the lingering impact of the pandemic in several economies. This trend supports the ongoing strength of cash usage in the global economy, and our confidence that total revenue will exceed pre COVID-19 levels in 2022.
Slide seven summarizes some of the macro factors currently affecting operations in many of our global markets, including the pandemic global inflation, and particularly U S. Labor shortages all of which are obviously related.
Labor is by far our largest cost component.
But we have a proven history pricing execution, that's enabled us to effectively manage this inflation and our teams across the globe are committed to taking disciplined pricing actions to offset the impact of higher wages and other inflationary pressures.
It is important to note that to the surprise of many the impact of inflation on our fuel cost is relatively low.
It is due to the fact that most of our customer agreements include fuel surcharge clauses and other mechanisms that enable us to pass through fuel cost increases onto our customers.
In the third quarter, we implemented several higher than historical price increases in our U S business. The impact of these price increases was not fully realized until late.
In the fourth quarter and at year end, our pricing was back in balance with our cost inflation and we expect it to remain so through 2022.
Another macro topic that we're all hearing about is supply chain pressures that are rippling through the global economy.
Our exposure to these pressures is fairly minimal.
As a service business, our people and our assets are locally sourced and really are not subject to the same global supply chain disruptions that you hear about for many others.
We also don't expect any material disruptions that would affect our digital solutions pipeline as we've developed strong global partnerships with global suppliers and it made early purchases to avoid potential pipeline disruptions.
It appears that the pandemic has finally society here in North America.
We've all learned its not over till it's over.
Operating conditions.
It vary greatly by country at different points throughout the year and we are continuously monitoring the government mandated restrictions and other developments in all of our markets.
As the previous slide showed we've seen steady progression and overall revenue recovery throughout 2021.
The U S and Mexico markets appear to be reopening faster than the other regions and we anticipate further recovery in 2022.
By contrast, economic recovery in Europe , Asia Pacific and some South American countries has been slower than expected.
Despite the delayed reopening Denise regions each each of these regions have shown consistent revenue recovery versus pre pandemic levels.
Levels through 2021.
With a sustainable productivity improvements, we're continuing to implement we are well positioned to capture additional margin leverage as revenue continues to improve next year.
Slide eight summarizes our three year strategic plan.
The bottom layer outlines our strategy, one <unk> initiatives, which we expect to account for approximately three quarters of our organic growth in 2022, driven by higher volumes pricing and additional economic recovery from the pandemic we.
We have a strong foundation of a organic growth and recurring revenue in our base business and we're confident in our ability to continue driving this core organic growth.
With our wider and deeper program, we're executing breakthrough initiatives globally to drive cost savings in five key areas.
Optimization.
Crew productivity branch standardization money processing and fleet management.
These initiatives are supported by our continuous improvement culture and dedicated lean experts in each country.
Our global teams are sharing best practices across the organization and drive consistent growth and efficiency gains.
We're also continuing to leverage the fixed significant fixed cost reductions that we've implemented over the last few years. These.
These cost reductions along with the aforementioned breakthrough initiatives drove 90 basis points of margin improvement last year.
The benefits of operating leverage are expected to continue to yield higher margins as our revenue recovers in 2022 and in future years.
The top of the slide you summarizes strategy to point out a new layer of growth driven by digital solutions and ATM managed services.
We expect strategy to no revenue to double this year and to represent at least 5% of total revenue in 2022 and were targeting have a $1 billion in incremental revenue in 2024.
As mentioned at our Investor Day this past December .
The expanding global market for ATM managed services represents a significant growth opportunity for brink's.
Well positioned to capitalize on the opportunity with our already strong relationships with many global financial institutions.
The global market for ATM managed services is estimated at seven 5 billion in.
In 2022 and is expected to grow to 10 billion by 2027.
Brink's complete our digital cash payment solution for retailers continues to gain traction with new customers, New channel partners and point of sale App integrations.
We've created partnerships with payment companies to leverage their sales channels and merchant relationships in return, we're offering our partners a digital cash payment solution that enables them to provide a comprehensive payment solution that they were previously unable to offer their customers. So.
For example, priority technology holdings, a leading payments technology company, serving more than 250000 merchants is in the market today offering our cash solutions to their customer base.
We're also partnering with some of the leading point of sale providers to combine our digital cash payment solution with their point of sale software, providing merchants with an integrated solution to manage cash sales and deposits.
One of these partnerships is with Clover platform from Fiserv.
He is a global leader in providing cloud based Pos payment platforms for small and medium businesses. We're excited about launching our solution on their marketplace and have a digital cash and our digital cash management app will be available for purchase by their clients and the clover at market by the end of the first quarter.
We're executing on our strategy one <unk> and are encouraged by our early progress with strategy to point out.
I'll now turn the call over to Ron for his detailed financial review.
Thanks, Mark and good day, everyone on slide nine please remember that we disclosed acquisitions separately for the first 12 months of ownership.
After 12 months, they're mostly integrated and then included in organic results.
Acquisitions for this quarter are primarily PKI and about 15% of the former <unk> businesses too.
2021 fourth quarter revenue as Mark said was up 11% in constant currency with 7% organic growth versus last year and 4% from acquisitions.
Foreign exchange, which was favorable in the third quarter turned decisively negative in the fourth quarter.
Reported revenue was $1.098 billion up $77 million or 7% versus the fourth quarter last year.
Fourth quarter operating profit in constant currency was up 15% versus last year organic growth was 11% and acquisitions added 4% negative Forex was $13 million minus 9%.
Reported operating profit was $154 million and the.
<unk> profit margin of 14% was down 20 bps versus the fourth quarter 2020, the negative Forex cost US 80 bps in margin accretion.
Moving to slide 10.
Fourth quarter interest expense was $29 million up $3 million versus the same period last year due to higher debt associated with the completed acquisitions and $200 million and share repurchases.
<unk> expense in the quarter was $43 million.
$4 million higher than last year $2 million, driven by higher income and $2 million due to a one 8% increase in the effective tax rate.
Our full year non-GAAP 2021 effective tax rate was 33, 6% versus 31, 8% last year.
$154 million of fourth quarter, 2021, operating profit less interest expense taxes, and plus $1 million in minority interest and other generated $82 million of income from continuing operations. This was a $1 68 of earnings per share up <unk> <unk>.
2% versus the $1 64 in the fourth quarter 2020.
And last year's EPS, there was a 13% gain on marketable securities those securities were sold in the third quarter 2021.
Excluding marketable securities EPS was up <unk> 17 per share or approximately 11% versus last year.
Fourth quarter 2021, adjusted EBITDA was $210 million up $15 million or plus 8% versus prior year.
Turning to free cash flow on slide 11.
Our 2021 free cash flow was $245 million $60 million more than our most recent guidance.
Adjusted EBITDA of $683 million was $23 million better than estimated and $117 million better than last year, we used about $88 million of cash for working capital restructuring and deferred taxes. The working capital growth was driven by increased revenue restructuring.
Restructuring related to acquisitions integration and pandemic cost realignment and we paid $30 million in 2020 deferred payroll and other taxes payable.
Cash taxes were $84 million up $7 million versus last year, but $11 million lower than our previous guidance.
Cash interest was $106 million, an increase of $28 million versus 2020, due primarily to the incremental debt associated with the <unk> and <unk> acquisitions.
Net cash Capex was $160 million $20 million less than prior guidance due to supply chain delays, primarily for armored trucks and cash devices. Those delays continue into this year.
2021 free cash flow, excluding the payment of 2020 deferred taxes would have been $275 million generating an EBITDA to free cash flow conversion ratio of 40% up from the 28% achieved on the same basis last year <unk>.
Advancing to slide 12.
In 2022, we expect pro forma free cash flow to be in the range of $310 million to $345 million, our adjusted EBITDA guidance of $755 million to $790 million is expected to be reduced by higher net working capital driven by higher revenue.
And approximately $10 million in 2021 deferred payroll and other taxes payable are.
Our guidance assumes no new acquisitions, so cash restructuring should be less than prior years.
Cash taxes estimated at $100 million wood.
It would be up $16 million versus prior year due to higher income and cash interest is estimated at $115 million would be up about $9 million versus 2021, due primarily to expected higher variable interest rates.
Cash capex should be around $180 million in line with our Investor day outlook at the midpoint of the range. Our 2022 expected free cash flow excluding deferred payments is approximately a 42% conversion of EBITDA equates to over $6 50 per share.
Turning to slide 13.
This slide illustrates our actual net debt and financial leverage at year end 2020 year end 2021, and our estimate for year end 2022.
The approximately $400 million increase in net debt from year end 2020 to 2021 was driven by $330 million for the completion of the <unk> and <unk> acquisitions 200 million for share repurchases $86 million in financing leases and $37 million in dividends.
All this partly offset by the $245 million in free cash flow that I just covered.
The expected decrease in net debt in 2022 assumes no additional acquisitions or share repurchases and that free cash flow will more than offset new lease financing and dividends.
Dividing our $2 $3 billion 2021, yearend net debt by the $683 million in 2021, EBITDA generated a net debt leverage ratio of three four turns in 2022, we expect that lower net debt and higher EBITDA will reduce the net.
Debt leverage ratio below three turns our bank covenants include a secured leverage ratio maximum of 375 turns.
Our 2021 secured leverage ratio was 2.0 turns and is expected to decline to about one six turns by the end of 2022, well below the covenant Max.
Moving to sustainability on slide 14.
At our Investor Day late last year, I spoke about <unk> commitment to sustainability and ESG and our progress continues to accelerate.
Our global working group is identifying and sharing best practices across our footprint in 53 countries.
In the past few years, we have taken thousands of diesel trucks off the roads are strategy, two <unk> initiatives, including our brink's complete solution provide the ability to better serve customers, while reducing our on premise stops for many customers from every other day to lessen once a week materially reducing carbon emissions.
We have implemented it expanded dual fuel and alternative fuel vehicles, we've been gone installing solar panels in our branches and our fleet and have ordered our first fully electric armored trucks. We've also expanded globally. Our led lighting replacement initiative and have added recycling programs.
While I'm excited about the continuous improvement of our environmental initiatives and I'm proud of our strong governance, what really sets Brexit Park is our social impact, yes for a signatory to the United Nations Global compact, yes, we've pledged to support CEO action for diversity and inclusion, but even more importantly as.
As the world's largest cash management company, we have a leading role in facilitating economic inclusion, especially for the most vulnerable in society, those who don't have access to credit or debit or even a bank account rely on cash which means they rely on brink's.
In June we plan to issue brings first sustainability report and we're excited to share more about our commitment our targets and our progress with that I'll hand, it back to Doug.
Thanks, Ron.
Slide 15 provides a detailed book and how we expect to achieve our 2020 to revenue and profit guidance.
Revenue is expected to grow 8% to 11% to a range between $4, five 2% and $4 $67 billion.
Revenue at the midpoint of this range approximately $4 6 billion would put us above pre COVID-19 2019 levels plus add approximately $900 million of additional revenue from acquisitions.
We expect 2022 operating profit growth of 16% to 23% to a range between 545 and $580 million, reflecting a margin increase of approximately of 100 basis points and we expect 2022 adjusted EBITDA to be in a range of between 755.
$790 million and earnings are expected to be between $5 52.
To five to $6 per share.
These strong growth rates and margin improvement targets are consistent with what we presented in our 2021 Investor day with financial targets updated to reflect the impact of FX based on exchange rates at the end of 2021.
Our strategy one point of operational excellence initiatives, along with additional revenue recovery as the pandemic continues to subside or the key drivers of our expected revenue and profit growth in 2022 with our strategy to digital solutions expected to add approximately 3% more revenue growth at <unk>.
Margins.
Our closing slide slide 16 illustrates how brinks is now stronger as we come out of the pandemic and well positioned to create significant shareholder value as we execute our strategic plan.
The 2021 column on the left side of slide 16.
Impairs actual 2021 financial results to 2019 level.
With the fourth quarter, showing an accelerating.
To the 2019 level.
Results reported results Skus My full year 2021 revenue recovered about 92 to about 92% of 2019 levels with a fourth quarter, showing an accelerating recovery in rate approaching 96%.
2021 reported revenue of $4 2 billion included acquisition revenue of over $800 million with a margin improvement of 60 basis points versus 2019.
Our 2022 guidance. The next column to the right shows revenue growth of more than $900 million over 2019 reported revenue with core revenue recovery at more than 100% of 2019 levels plus the acquisitions.
2022 operating profit margins are expected to improve more than 150 basis points versus pre pandemic levels.
Looking to the right side of the slide it illustrates that we are well positioned to achieve our aggressive three year strategic plan targets, we presented in last year's Investor day, including organic revenue growth of approximately 1% to $1 $2 billion over the three year period of time, representing a compound annual growth rate of revenue.
Of 8% to 9%.
And operating profit target of approximately $800 million representing a.
Compound annual growth rate approaching 20% and an annual margin improvement of approximately 100 basis points over the three year period of time, each year adjusted EBITDA growth of more than $300 million to close to $1 billion and free cash flow improving to approximately 502500 75 million.
In 2024.
With our record results in 2021, and strong recovery from Covid together with our global management team's proven ability to execute we look forward to creating substantial value for our shareholders over the next three years.
Jamie with that let's open it up for questions.
Yes.
Ladies and gentlemen at this time, we'll begin the question and answer session.
Ask a question you May press Star and then one on your Touchtone telephone if.
If you are using a speaker phone, we do ask that you. Please pickup your handset before pressing the keys.
So withdraw your question you May press Star two.
Once again that is star and then one to ask a question.
We will pause momentarily to assemble the roster.
And our first question. This morning comes from Tobey Sommer from <unk> Securities. Please go ahead with your question.
Hey, Good morning. This is Jasper bibb on for Tobey I was hoping you could update us on the U S. Staffing issues you talked about on the last call. Do you think you are fully staffed up at this point and how are your overtime hours trending versus what might be considered normal.
Yes. Good morning, this is mark.
Yes, we are making progress as we mentioned I think touched on in Investor day, as well continuing to to outpace our terminations and nor turnover with new hires, but we're still not where we need to be.
As we've talked about we thought we would likely get there sometime in the first quarter given our the trajectory Khalid.
Holidays also was a little bumpy on around hiring so.
We still got some work to do there and I think this probably is reflected a little bit in.
In the results with as you said comes to bear and not only over time, but other inefficiencies are on hiring cost productivity related to onboarding training and so forth.
But yeah I think the key message there, though is as we're hiring and continuing to make sure. We are at full staffing our price now is fully imbalance.
With our cost inflation that we talked about quite extensively in Q3.
No.
And then I wanted to ask on the first quarter has trended so far yet decided some reopening catch up left out.
Out of North America.
You started to see volumes in Europe , or APAC countries materially improved through the quarter when restrictions are lifted kind of what's been the experience there.
As we start to see more countries reopen.
Yes, I'd say its too early too early to say yet just given the recent announcements.
Netherlands recently came out of their lockdown I think there's been some announcements in France about.
March.
Openings in Covid restrictions UK talking about this as well yesterday I saw on the news so.
These are continuing to to open, but we haven't seen material.
Increases, but we also haven't seen any declines we can see the continued strength that we saw in the fourth quarter continue so far in the first month of.
Yes.
Maybe maybe that's a little bit of the reopening and those are the ones that are already there we continue to see Mexico and the U S.
Kind of fully continuing not only to stay at the same levels, but not only new customers taking on the brink's.
Complete solution, but also really being able to look at store growth and store openings.
Okay makes sense and then you mentioned the Clover partnership in the prepared remarks.
How much of the Clover base do you think the brink's complete solution.
Might makes sense for how much of an opportunity do you see there is kind of that gets implemented in the first quarter.
Yeah, I don't know that we've got a real limitation to be honest given the flexibility of our brink's complete solution.
Obviously, the larger cash users are going to benefit more here, but.
There is no reason to think that those that are investing in a.
POS type technology solution can't leverage our flexible solution as well Thats really what we think is the beauty of brink's complete allows us to reach more customers.
Then we're able to take advantage of traditional <unk> service.
No.
Makes sense and then last question for me can you just update on how youre thinking about share repurchase this year in context of the longer term.
Capital deployment targets, yet at the Investor day.
Jesper I don't think as a policy, we've we've changed what we've done over the last several years, we have an outstanding authorization from the board to continue.
Purchases from time to time.
However, I think consistently what we've done is when we think as a company we are undervalued.
Valuation Wise, then we look at the best interests of our shareholders and <unk>.
Make purchases in the open market, but at this point in time, we don't have anything that is similar to our announced last year accelerated share repurchase plan, but we do have the authority going forward.
Okay I appreciate the color thanks for taking the questions guys. Thank you Jennifer.
And our next question comes from George Tong from Goldman Sachs. Please go ahead with your question.
George Alright, Thanks, Good morning, I'm wondering you.
You mentioned in the U S price actions are fully offsetting wage inflation and has been fully offset by really ended the year. In 2021 can you elaborate on how much pricing is increasing by currently and how price actions compared to wage inflation outside of the U S.
Sure George this is mark.
We talked about this in Q3 and I'm happy to report that we were able to realize price increases across the market that as I said, we're in balance as we exited the year and would be.
Certainly in.
In balance in Q1, which would take away that sort of a headwind.
I Couldnt say that isn't the exact percentage just given the fact that we have a different customer base and different impacts whether it's.
With our with our banking partners are with our retail customers and so.
Want to characterize that so specifically, but I think typically we've seen in these types of environments that pri.
Pricing is typically 50%.
And volume, 50%. So just looking at the increases and I think that translate to not just in the U S but globally.
<unk>.
And George maybe I can add to that I think the important piece here is we recognize and this is why mark certainly presented a lot of this in as it is.
No comments.
This is a major issue inflation supply chain impact.
And what that is impacting many companies today, but we are industrial services business and really not your typical.
Our industrial business looking at a key cost of our goods coming from imported raw materials or from other costs associated with that that either we can't get because of the supply chain are delayed or.
The costs are going up materially and we're trying to stay ahead of it our biggest component. Obviously is labor and then you drop down from that or other cost associated of inputs.
A relatively small and they clearly are not related to other inflationary costs associated with it other than some of the things such as as fuel costs, and so forth, which mark addressed so I think thats. The major difference that we're seeing clearly we were not ahead of the inflationary labor cost in the.
The second half of last year, I should say probably more than system just in the last year, but as Mark suggested we've gotten ahead of that now we're pleased with that and that has helped us in the labor supply demand market in the U S. As he suggested as well so both of those things are positive things as we as we start this year and go through the year, but it's quite a bit different and I don't want to <unk>.
<unk> this is quite a bit different than many other industrial businesses that are seeing the impact of both supply chain availability of their inputs as well as the cost of those inputs.
Got it that's helpful. And then you mentioned strategy two pointed out revenue should double this year to about 5% of total revenue can you elaborate on some of the recent traction you've seen with Brink's complete and also your ATM management services.
Yes so.
We are continuing to see that.
I'll start with the ATM, we are continuing to see growth there.
The <unk> acquisition that we did last year not only continues to perform.
<unk>.
As we modeled but we're continuing to see organic growth there as well, bringing on new customers new terminals and so forth. The second part of that is around the retail solutions with our brink's complete solution that we talked about at Investor Day, and again, we mentioned some of the some of the customers and some of the large names.
<unk> that we'd already.
Agreed to and that continued I would say that progress continues George and nothing.
Beyond what we talked about in December I guess from a.
Large customer announcements.
But many on the way as we've started to really flush out our pipeline of opportunities and have.
Pretty bold expectations for the rest of the year and George that includes things such as our continued ramp up of BPC and the onboarding of that business in France other additional ATM.
Wins.
Mark talked about that are in place that we will see this year and then.
Continued like you suggested of our of our retail solutions that are really what we consider to be the digital cash payment solutions and that latter part of this year and into the rest of our Strat plan period of time, hopefully we'll see.
And acceleration of things such as the partnerships that you mentioned.
With Clover as well as other.
Well, what I would consider what I call noncash digital payment players offering the full suite of payment solutions for them that they don't have today.
Our pipeline is getting bigger now.
Thank you.
Our next question comes from Kenneth Williamson from J P. Morgan. Please go ahead with your question.
Hi, Thanks for taking my question I was just curious if you could maybe share a little bit more detail on the margin improvement that youre anticipating for 2022, I'm curious you talked a little bit about your pricing strategy in court.
Being in line with costs.
Any of that margin improvement coming from cost increases that exceed the overall, increasing the cost to serve side of things or is that coming from mostly from other initiatives that you could maybe kind of walk me through the.
The breakdown of where that margin improvement is expected from I appreciate it.
So as we mentioned, we're targeting and if you look at the range of our guidance, we're targeting approximately 100 basis points improvement.
And margin.
And in 'twenty two guidance.
And that comes from a combination.
And what our increase in our revenue is and the costs associated with that and what we're basically looking to try and make sure we get to this year as it relates to labor is that that's in line, that's balanced and the balance of what we see is continued.
What we call lean cost reductions.
We call the WD as Mark pointed out.
And the cost reductions associated with that and then with the improved revenue the leverage associated with that organic revenue increase and the margin that drops from that increases our overall margin percentage because it generally drops to the bottom line at a margin that's a little bit higher than our overall margin because.
Our fixed cost don't go up as much as our variable cost.
So those are the two things that drive that and then as we said before a doubling of our of our 2.0 digital solutions.
Revenue.
<unk> three percentage points of margin excuse me revenue growth in the year.
That is also at higher margins as I said I call it accretive to our margins at higher margins than we are.
Than our overall average all of that translates into a projection as we suggested in our margin. If you take a look at the range of 90 basis points to about 120 basis points margin improvement or our target of 100 basis points improvement throughout the year.
Hope that helps.
Thank you that's that's very helpful.
Ask one follow up you guys talked a little bit about your.
Your pipeline for acquisition I'm kind of curious what have you.
Your competitors made an acquisition of title recently.
I'm curious if that changes at all how you think about what it could be used for providing some of those digital solutions.
It is an interesting move.
Move in the marketplace, and we think that what we offer as a complete system again, our <unk> solutions.
We think our leading in our industry and frankly in the digital payment marketplace. We offer the only true digital cash solution in the marketplace today that includes hardware, but as important it's our unique hardware with our software then interconnects that highly tech enabled and.
When complete ecosystem that provides the complete solution <unk>.
Including.
The next day working capital payments, just like any other card based or other digital payment solution.
What other players in the marketplace, including the one you mentioned.
It's not a complete total solution like that.
No.
It's our job to keep make sure our strategy continues to be out in front and ahead of competition.
And offering a solution that is as we say is for cash is equal to or better than other noncash digital solutions and the ability to execute that in a way that is just as good as other digital solutions. So that then can be integrated and with and take.
Advantage of.
The payments, whether the two partners other channels of distribution.
And take advantage of the significant what we call white space or unwanted portion of the digital payments marketplace that doesn't have a cash solution today, that's our strategy, that's where we're accelerating to get to.
Last year, we kind of mature that product dramatically and are now in the process of aggressively rolling that through not only our existing direct channel, which is the channel that you mentioned the competitors going after as well as these indirect channels with partners.
And we think we have a better mousetrap, a better total solution, which has to be a total solution and we're out in front and it's our job to stay out in front.
Okay. I appreciate that do you think that the from the hardware standpoint, either that you anticipate any changes to your strategy in light of that transaction.
Well, so part of our strategy on hardware Alright is a total solution and that total solution is very tech enabled.
Which allows us frankly to have the hardware portion of our total strategy to be less costly for us and therefore less costly for the.
The customer it's the tech enabled portion of this that pulls it all together that allows us to do that.
And so that's one advantage and we think it is an important advantage in is proprietary in terms of the hardware solution and everything that pulls it together. So our hardware is proprietary now versus where it was before.
And one of the things that the earlier question.
<unk>.
We've talked about of how can we go after and how do we think we can expand that market for the large portion of the market over 75% of the U S market is uninvented today.
For a cash management solution, we think.
A way to go after that is to make sure that we are able to provide a cost effective.
Easy to use similar to rest of digital payments solution for that marketplace and Thats. What we think we have that's different than others out in the marketplace today.
Okay. Thank you.
And ladies and gentlemen, with that we'll end today's question and answer session as well as today's conference call. We do thank everyone for attending today's presentation. You may now disconnect your lines.
Okay.