Q1 2024 The Brink's Company Earnings Call
Operator: Hello, and welcome to the Brinks Company first quarter 2024 earnings call. This morning, Brinks issued a press release detailing its first quarter 2024 results. The company also filed an 8k that includes the release and the slides that will be used in today's call. The release and slides are available in the Investor Relations section of the company's website at investors.brinks.com. At this time, all participants are in a listen-only mode
Hello, and welcome to the Brink's Company first quarter 2024 earnings call. This morning, Brink's issued a press release detailing its first quarter 'twenty 'twenty four results. The company also filed an 8-K that includes the release and the slides that will be used in today's call.
The release and slides are available in the Investor Relations section of the company's website at investors <unk> Dot Brink's dotcom.
At this time all participants are in a listen only mode. A question and answer session will follow the presentation.
Operator: A question and answer session will follow the presentation. As a reminder, this conference is being recorded and will be available for replay. This call and the Q&A session will contain forward-looking statements. Actual results could differ materially from projected or estimated results.
A reminder, this conference is being recorded and will be available for replay.
This call and the Q&A session will contain forward looking statements actual results could differ materially from projected or estimated results information regarding factors that could cause such differences are available in the footnotes of today's press release and in the company's most recent SEC filings.
Operator: Information regarding factors that could cause such differences is available in the footnotes of today's press release and in the company's most recent SEC filing. Information presented and discussed on this call is representative of today only, and Brinks assumes no obligation to update any forward-looking statements.
Information presented and discussed on this call is representative of today only 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.
Operator: The call is copyrighted and may not be used without written permission from Brinks. I will now turn it over to your host, Jesse Jenkins, Vice President of Investor Relations. Mr. Jenkins, you may begin.
I will now turn it over to your host Jesse Jenkins, Vice President of Investor Relations. Mr. Jenkins you may begin.
Jesse Jenkins: Thanks and good morning. Joining me today are CEO Mark Eubanks and CFO Kurt McMaken. This morning, Brinks reported first quarter 2024 results on a GAAP, non-GAAP, and constant currency basis. Most of our comments today will be focused on our non-GAAP results because we believe these results make it easier for investors to assess operating performance between periods. Reconciliations of non-GAAP results to their most comparable GAAP results are provided in the press release, the appendix of the presentation, and in this morning's 8K filing. I will now turn the call over to Brinks CEO Mark Eubanks.
Jesse Jenkins: Thanks, and good morning, joining me today are CEO, Mark Eubanks and CFO Kurt Mcmackin. This morning brakes reported first quarter 2024 results on a GAAP non-GAAP and constant currency basis. Most of our comments today will be focused on our non-GAAP results. Because we believe these results make it easier for investors.
Jesse Jenkins: As to assess operating performance between periods reconciliations of non-GAAP results to their most comparable GAAP results are provided in the press release, the appendix of the presentation and in this morning's 8-K filing I will now turn the call over to break CEO Mark Eubanks.
Richard Mark Eubanks: Thanks, Jesse. Good morning. Thanks for joining us. I'd like to start the call by thanking and congratulating our more than 68,000 Brinks team members around the world for their efforts to deliver a strong start to 2024. Beyond the strong Q1 financial results, we made significant progress on our strategic initiatives in the four key areas of customer loyalty, innovation, operational excellence, and people and talent. This progress includes balancing both long-term investments as well as delivering on our short-term commitments. Now on to the results.
Richard Mark Eubanks: Thanks, Jessie good morning, Thank you for joining us I.
Richard Mark Eubanks: Starting on slide three, we delivered organic growth of 12% for the total company. ATM Managed Services and Digital Retail Solutions, or AMS and DRS, were up 18% as demand remained strong in these key markets. Cash Invaluables Management, or CVM, was up 11% with strong pricing discipline and stabilization in our commodities movement and storage.
Richard Mark Eubanks: I'd like to start the call by thanking and congratulating our more than 68000 Brink's team members around the world for their efforts to deliver a strong start to 2024.
Richard Mark Eubanks: Beyond the strong Q1 financial results, we made significant progress on our strategic initiatives and the four key areas of customer loyalty innovation operational excellence and people and talent.
Richard Mark Eubanks: This progress includes balancing both the long term investments as well as delivering on our short term commitments.
Richard Mark Eubanks: Adjusted EBITDA grew 15% to $218 million, and margins expanded 160 basis points to 17.7%, the highest first quarter margins we've seen since we started reporting this metric more than a decade ago. Profit growth, coupled with share count reductions of about 4%, led to a 20% increase in EPS to $1.52 per share. Trailing 12-month free cash flow improved 61% to $363 million, with a conversion from adjusted EBITDA of 41%. We continue to make meaningful progress on the key tenets of our strategy.
Richard Mark Eubanks: Now onto the results.
Richard Mark Eubanks: Starting on slide three we delivered organic growth of 12% for the total company a.
Richard Mark Eubanks: ATM managed services and digital retail solutions or a M. S. N Drs were up 18% as demand remains strong in these key markets.
Richard Mark Eubanks: Cash and valuables management or C. B M was up 11% with strong pricing discipline and stabilization in our commodities movement and storage business.
Richard Mark Eubanks: EBITDA grew 15% to $218 million and margins expanded 160 basis points to 17, 7% the highest first quarter margins. We've seen since we started reporting this metric more than a decade ago.
Richard Mark Eubanks: Profit growth, coupled with share count reductions of about 4% led to a 20% increase in EPS to $1 52 per share.
Richard Mark Eubanks: Trailing 12 month free cash flow improved 61% to $363 million with conversion from adjusted EBITDA of 41%.
Richard Mark Eubanks: We continue to make meaningful progress on the key tenants of our strategy.
Richard Mark Eubanks: DRS and AMS demand is strong and building, with another quarter of double-digit organic revenue growth and continued expansion of our worldwide pipeline of opportunities. Operationally, we made good progress on our year-end backlog by accelerating installations of DRS devices in Q1 as we focused on shortening the cycle time from contract signature to revenue. This is an example of the Brinks business system at work, improving business processes outside of our traditional OpEx activity in Q4.
Richard Mark Eubanks: S. M. S demand is strong and building with another quarter of double digit organic revenue growth and continued expansion of our worldwide pipeline of opportunities.
Richard Mark Eubanks: Operationally, we made good progress on our year end backlog by accelerating installations of Drs devices in Q1, as we focus on shortening the cycle time from contract signature to revenue.
Richard Mark Eubanks: This is an example of the brinks business system at work improving business processes outside of our traditional opex activities.
Richard Mark Eubanks: In Q4 our.
Richard Mark Eubanks: Our global product management team led a focused Kaizen event to improve efficiency in the contract to revenue value stream. Leveraging structured problem-solving tools from the BBS system and various lean methodologies, we were able to reduce our time to revenue by more than 30% across North America, Brazil, and Colombia. The resulting actions are now able to be transferred as a best practice to countries around the world.
Richard Mark Eubanks: Our global product management team, let a focused kaizen event to improve efficiency in the contractor revenue value stream.
Richard Mark Eubanks: Leveraging structured problem solving tools from the Bbs system and various lean methodologies, we were able to reduce our time to revenue by more than 30% across North America, Brazil and Colombia.
Richard Mark Eubanks: The resulting actions are now able to be transferred as a best practice to countries around the world.
Richard Mark Eubanks: Yeah.
Richard Mark Eubanks: We also remain disciplined in our capital allocation approach. In Q1, we purchased approximately 275,000 shares, utilizing $23 million. We have continued the systematic share repurchase program into early Q2. With improving operational performance and a healthy outlook for the future, last week, we announced a 10% increase in our dividend, the second consecutive year of a double-digit increase. Supported by our strong first quarter, we affirm our full-year guidance and remain well on track to deliver low to mid-teens organic revenue growth and an adjusted EBITDA margin expansion of approximately 80 basis points. Earnings per share of between $7.30 and $8.00, and free cash flow between $415 and $465 million. Now, let's turn to slide four, starting on the left.
Richard Mark Eubanks: We also remained disciplined in our capital allocation approach in Q1, we purchased approximately 275000 shares utilizing $23 million.
Richard Mark Eubanks: We have continued to systematic share repurchase program into early Q2.
Richard Mark Eubanks: With improving operational performance and a healthy outlook for the future last week, we announced a 10% increase in our dividend the second consecutive year of a double digit increase.
Richard Mark Eubanks: Supported by our strong first quarter, we affirm our full year guidance and remain well on track to deliver low to mid teens organic revenue growth.
Richard Mark Eubanks: Adjusted EBITDA margin expansion of approximately 80 basis points earnings per share of between 730 and $8.
Richard Mark Eubanks: And free cash flow between 415 and $465 million.
Richard Mark Eubanks: Now, let's turn to slide four and starting on the left the revenue growth I mentioned earlier was partially offset by an 8% impact from foreign exchange, primarily due to the year over year devaluation of the Argentine peso.
Richard Mark Eubanks: The revenue growth I mentioned earlier was partially offset by an 8% impact from foreign exchange, primarily due to the year-over-year devaluation of the Argentine peso. I will go into more detail on revenue and adjusted EBITDA by segment on the next slide. Adjusted EBITDA margins continue to expand as lean productivity initiatives from the Brinks business system streamline the way we perform work, and we shift the revenue base to higher-margin services. Profit growth and a share count reduction of more than 2 million shares drove EPS growth of $0.25 to a first quarter record of $1.52 per share. Trillion's 12-month free cash flow was up $137 million, or 61% to $363 million, with a 41% conversion from EBITDA. Moving to slide 5, you can see the segment level details.
Richard Mark Eubanks: I will go into more detail on revenue and adjusted EBITDA by segment on the next slide.
Richard Mark Eubanks: Adjusted EBITDA margins continue to expand as lean productivity initiatives from the brinks business system streamline the way, we perform work and we shift the revenue base to higher margin services.
Richard Mark Eubanks: Profit growth and a share count reduction of more than 2 million shares drove EPS growth of 25 to a first quarter record of $1 52 per share.
Richard Mark Eubanks: Trailing 12 month free cash flow was up $137 million or 61% to $363 million with 41% conversion from EBITDA.
Richard Mark Eubanks: Moving to slide five you can see the segment level details.
Richard Mark Eubanks: This view reflects adjusted EBITDA to align with our full year 2024 guidance from February. Segment level results for operating profit are included in the appendix for your reference. For the quarter, we saw organic growth in all segments of customer offerings. In North America, organic revenue growth accelerated sequentially to 1% in the quarter. Strong growth in AMS and DRS revenue was highlighted by the installation of the most DRS devices in our history in the quarter as we worked through a larger-than-normal year-end backlog.
Richard Mark Eubanks: This view reflects adjusted EBITDA to align with our full year 2024 guidance from February.
Richard Mark Eubanks: Segment level results for operating profit are included in the appendix for your reference.
Richard Mark Eubanks: For the quarter, we saw organic growth in all segments and customer offerings and.
Richard Mark Eubanks: In North America organic revenue growth accelerated sequentially to 1% in the quarter strong growth in Ams and Drs revenue was highlighted by the installation of the most drs devices in our history in the quarter as we worked through a larger than normal year end backlog.
Richard Mark Eubanks: As we discussed last quarter, we expect accelerating growth in North America as we complete our portfolio rationalization efforts from the prior year, starting this year in quarter two, and capitalize on the large and growing pipeline that we have developed in both AMS and DRS. Adjusted EBITDA margins in North America were up 280 basis points in the quarter to a record of 16.9 percent. Good pricing efforts, portfolio rationalization, and cost productivity, especially in direct labor, were the main drivers of the margin. I'm encouraged by the meaningful progress we've delivered on margins in North America over the last two years. The 16.9% this quarter is up 570 basis points from 11.2% in Q1 of 2022.
Richard Mark Eubanks: As we discussed last quarter, we expect accelerating growth in North America, as we lapped our portfolio rationalization efforts from the prior year, starting this year in quarter two.
Richard Mark Eubanks: And capitalize on the large and growing pipeline that we have developed in both arms and D. R. S.
Richard Mark Eubanks: Adjusted EBITDA margins in North America were up 280 basis points in the quarter to a record of 16, 9%.
Richard Mark Eubanks: Good pricing efforts portfolio rationalization and cost productivity, especially indirect labor were the main drivers of the margin expansion.
Richard Mark Eubanks: I'm encouraged by the meaningful progress we delivered on margins in North America over the last few years.
Richard Mark Eubanks: The 16, 9% this quarter is up 570 basis points from 11, 2% in Q1 of 2022.
Richard Mark Eubanks: This represents a 66% improvement in total adjusted EBITDA in just two short years. As I look forward, I remain encouraged by the potential of key transformational initiatives still to come in routing and scheduling, fuel efficiency, and labor optimization that will help us continue our positive momentum in North America. In Latin America, organic growth of 37% was driven by pricing efforts to offset inflation, which more than outpaced the impact of foreign exchange. We continue to monitor ongoing geopolitical and economic headwinds in the region, including the impact of currency devaluation on the economy of Argentina and the headwinds we've discussed previously in Brazil.
Richard Mark Eubanks: This represents a 66% improvement in total adjusted EBITDA in just two short years.
Richard Mark Eubanks: As I look forward I remain encouraged by the potential of key transformational initiatives still to come in routing and scheduling fuel efficiency and labor optimization that will help us continue our positive momentum in North America.
Richard Mark Eubanks: In Latin America organic growth of 37% was driven by pricing efforts to offset inflation, which more than outpaced the impact of foreign exchange, we continue to monitor ongoing geopolitical and economic headwinds in the region, including the impact of currency devaluation on the economy of Argentina, and the headwinds we've discussed previously.
Richard Mark Eubanks: In Brazil.
Richard Mark Eubanks: The trends in the region have led us to streamline our cost structure in the early part of the year, which is impacting this quarter's EBITDA margin. However, as you can see from the total revenue growth of 6%, we are offsetting those impacts through disciplined pricing and a shift to DRS AMS, which was up more than 25% in the quarter in the segment. Europe delivered 6% organic growth with 60 basis points of margin expansion in Q1 and remains on a strong trajectory.
Richard Mark Eubanks: The trends in the region have led us to streamline our cost structure in the early part of the year, which is impacting this quarter's EBITDA margins.
Richard Mark Eubanks: And you can see from the total revenue growth of 6%, we are offsetting those impacts through disciplined pricing and a shift to Drs, Ams, which was up more than 25% in the quarter in the segment.
Richard Mark Eubanks: Europe delivered 6% organic growth with 60 basis points of margin expansion in Q1 and remains on a strong trajectory.
Richard Mark Eubanks: With recent large DRS and AMS wins that are due to begin producing revenue over the balance of the year, we expect continued strong performance in the segment for the rest of the year. And then, finally, in our Rest of the World segment, we realized organic growth of 4% with 150 basis points in margin expansion. The quarter was highlighted by a stabilizing performance in our global services business as commodity shipping and storage picked up in all areas outside of North America. Turn to slide 6.
Richard Mark Eubanks: With recent large drs in a M. S wins that are due to begin producing revenue over the balance of the year. We expect continued strong performance in the segment for the rest of the year.
Richard Mark Eubanks: And then finally in our rest of World segment, we realized organic growth of 4% with 150 basis points of margin expansion. The quarter was highlighted by stabilizing performance in our global services business as commodity shipping and storage picked up in all areas outside of North America.
Richard Mark Eubanks: I will provide an update on our results by customer offer. Starting with CBM, Q1 organic growth of 11% accelerated sequentially from 7% in the prior quarter, driven by disciplined pricing efforts and a stabilization in our global services business. While total global services revenue growth was broadly in line with the total company results, this was a headwind for North America as commodities moved out of the segment into other regions.
Richard Mark Eubanks: Turning to slide six I will provide an update on our results by customer offering.
Richard Mark Eubanks: M. A C. B M Q1 organic growth of 11% accelerated sequentially from 7% in the prior quarter driven by by disciplined pricing efforts and a stabilization in our global services business.
Richard Mark Eubanks: While total global services revenue growth was broadly in line with the total company results. This was a headwind for North America as commodities moved out of the segment into other regions.
Richard Mark Eubanks: As you can see by our strong margin improvement, we continue to build on our lean and transformation initiatives across all markets. These initiatives and growth in AMSDRS revenue have driven a reduction in miles driven and fuel usage that has led to higher levels of productivity. Broadly, we saw continued improvements across all metrics related to safety, quality, cost productivity, and service delivery, highlighted by another quarter of reduced safety-related incidents with our employees. DRS was highlighted by another quarter of sequential improvement in North America. In Q1, we delivered record installations in the first quarter and reduced our backlog to a more normalized level.
Richard Mark Eubanks: And you can see by our strong margin improvement.
Richard Mark Eubanks: We continue to build on our lien and transformation initiatives across all markets.
Richard Mark Eubanks: These initiatives and growth in Ams D. R. S revenue have driven a reduction in miles driven and fuel usage that led to higher levels of productivity.
Broadly we saw continued improvements across all metrics related to safety quality cost productivity and service delivery highlighted by another quarter of reduced safety related incidents with our employees.
Operator: Yeah.
Richard Mark Eubanks: Drs was highlighted by another quarter of sequential improvement in North America in Q1, we delivered record installations in the first quarter and reduced our backlog to a more normalized level.
Richard Mark Eubanks: The value proposition of less frequent business interruptions and working capital optimization is clearly resonating with our customers. In the quarter, we completed several new agreements in the discount and convenience store verticals and are continuing conversations with customers across a robust worldwide pipeline of opportunities that increased again this quarter. We have significant room for growth in DRS as we continue to penetrate a large white space of unvended customers, convert existing retail customers from traditional CIT services, and expand our footprint and share of wallet with existing DRS customers, the purest form of customer satisfaction.
Richard Mark Eubanks: The value proposition of less frequent business interruptions and working capital optimization is clearly resonating with our customers.
Richard Mark Eubanks: In the quarter, we completed several new agreements in the discounting convenient store verticals and are continuing conversations with customers across our robust worldwide pipeline of opportunities that increased again this quarter.
Richard Mark Eubanks: We have significant room for growth in Drs, as we continued to penetrate a large white space of unvalued customers convert existing retail customers from traditional <unk> services and expand our footprint and share of wallet with existing drs customers, the purest form of customer satisfaction.
Richard Mark Eubanks: AMS delivered sequential acceleration over Q4, highlighted by the closing of a few key deals to bring new ATMs into our managed network in high-traffic retail locations. We continue to evolve our go-to-market approach in AMS as we engage with our banking partners on our value proposition and technical capabilities across all geographies. Additional recent contract wins in Europe and Latin America, as well as a robust and maturing pipeline of opportunities, support our expected growth for the rest of the year.
Richard Mark Eubanks: Ams delivered sequential acceleration over Q4 highlighted by the closing of a few key deals to bring new Atms into our managed network and high traffic retail locations. We continue to evolve our go to market approach and Ams as we engage with our banking partners on our value proposition and technical <unk> technical capabilities across all Geos.
Richard Mark Eubanks: <unk>.
Richard Mark Eubanks: Additional recent contract wins in Europe, and Latin America, as well as a robust and maturing pipeline of opportunities support our.
Richard Mark Eubanks: Our expected growth for the rest of the year.
Richard Mark Eubanks: In total, AMS and DRS represent 21% of our trillion 12-month revenue and grew 18% organically in Q1. We expect at least double-digit growth in these offerings over the year and are targeting an increase as a percentage of total revenue of one to two points by the end of the year. I believe we're still in the early stages of our transition to these higher-margin recurring revenue offerings, and I'm excited about the opportunities that remain in front of us.
Richard Mark Eubanks: In total a M. S N D. R. S represent 21% of our trailing 12 month revenue and grew 18% organically in Q1.
Richard Mark Eubanks: We expect at least double digit growth in these offerings over the year and are targeting an increase as a percentage of total revenue of one to two points by the end of the year.
Richard Mark Eubanks: I believe we're still in the early stages of our transition to these higher margin recurring revenue offerings and I'm excited about the opportunities that remain in front of us.
Richard Mark Eubanks: Overall, revenue growth is in line with our expectations for the quarter, and we delivered record EBITDA margins as we continue to make strides transforming our business. The shift to new revenue streams on top of productivity actions across the globe is improving our operating consistency and predictability. With our AMS and DRS offerings delivering reduced operating costs for our customers, we remain well positioned to deliver on our commitments for the year and continue to create value for our shareholders. With that, I'd like to turn it over to Kurt to talk through the additional details on the quarter and our full year guidance. I'll return with some closing comments and thoughts before the Q&A.
Richard Mark Eubanks: Overall revenue growth is in line with our expectations for the quarter and we delivered record EBITDA margins as we continue to make strides transforming our business.
Kurt: The shift to new revenue streams on top of productivity actions across the globe is improving our operating consistency and predictability.
Kurt: With our a M S N drs offerings, delivering reduced operating cost for our customers, we remain well positioned to deliver on our commitments for the year and continue to create value for our shareholders.
Operator: Kurt?
Richard Mark Eubanks: With that I'd like to turn it over to Kurt to talk through the additional details on the quarter and over our full year guidance I'll return with some closing comments and thoughts before Q&A Kurt.
Kurt B. McMaken: Thanks, Mark. And good morning, everyone.
Kurt: Thanks, Mark and good morning, everyone.
Kurt: On slide $746 million of organic revenue increase represents 12% growth over the prior year.
Kurt B. McMaken: Starting on slide seven, $146 million of organic revenue increase represents 12% growth over the prior year. This includes 11% for cash and valuables management and 18% in DRS and AMS. When factoring in an 8% translational FX headwind, DRS and AMS made up about 75% of the 4% total growth in the quarter. Total revenue growth of $51 million produced $28 million of adjusted EBITDA for a robust incremental margin of 55%. Adjusted EBITDA was marginally impacted by the benefits of higher interest income in the quarter, primarily from higher rates in Argentina. The translational FX impact in the quarter was primarily due to the devaluation of the Argentine peso, offset by favorability in the Mexican peso, and to a lesser extent, the euro.
Kurt: This includes 11% for cash and valuables management and 18% in Drs in Ams.
Kurt B. McMaken: When factoring in an 8% translational FX headwind.
Kurt B. McMaken: And Ams make up about 75% of the 4% total growth in the quarter.
Kurt B. McMaken: Total revenue growth of 51 million produced $28 million of adjusted EBITDA for a robust incremental margin of 55%.
Kurt B. McMaken: Adjusted EBITDA was marginally impacted by the benefits of higher interest income in the quarter, primarily from higher rates in Argentina.
Kurt B. McMaken: Translational FX impact in the quarter was primarily due to the devaluation of the Argentine peso offset by favorability in the Mexican peso and to a lesser extent the euro.
Kurt B. McMaken: Adjusted EBITDA margins increased 160 basis points in the period, driven by balanced execution and realization of cost productivity improved revenue mix and disciplined pricing.
Kurt B. McMaken: Adjusted EBITDA margins increased 160 basis points in the period, driven by balanced execution and realization of cost productivity, improved revenue mix, and disciplined pricing. On slide 8, I will walk you from Operating Profit to Adjusted EBITDA. Starting on the left, interest expense was up $9 million year-over-year to $56 million, increases related to higher interest rates and slightly higher debt from growth in provisional capital for our DRS customers. Tax expense was $29 million in the quarter, for an effective tax rate of 28.9%, a rate we expect to continue over the balance of the year.
Kurt B. McMaken: On slide eight I will walk you from operating profit to adjusted EBITDA.
Kurt B. McMaken: Starting on the left interest expense was up $9 million year over year to $56 million <unk>.
Kurt B. McMaken: The increase is related to higher interest rates and slightly higher debt from growth in provisional capital for our Drs customers.
Kurt B. McMaken: Tax expense was $29 million in the quarter for an effective tax rate of 28, 9% a rate we expect to continue over the balance of the year.
Kurt B. McMaken: The $9 million increase in the other bucket primarily relates to higher interest rates on our cash balances, creating more interest. Income from continuing operations was $69 million. Our diluted share count was down 2.1 million shares, or 4% year-over-year, to $45.3 million, contributing to a record first quarter EPS of $1.52 per share, an increase of 20%. As we work back to adjusted EBITDA, you can see the $9 million of stock compensation and other, which is roughly $3 million less than the prior year.
Kurt B. McMaken: The 9 million increase in the other bucket primarily rate relates to higher interest rates on our cash balances, creating more interest income.
Kurt B. McMaken: Income from continuing operations was 69 million, our diluted share count was down $2 1 million shares or 4% year over year to $45 3 million contributing to a record first quarter EPS of $1 52 per share an increase of 20%.
Kurt B. McMaken: As we work back to adjusted EBITDA, you can see the $9 million of stock compensation and other it is roughly $3 million less than the prior year.
Kurt B. McMaken: We expect to finish the year with slightly higher stock compensation expense than in 2023. In total, EBITDA was up $28 million to $218 million, with margins that expanded 160 basis points to 17.7%. This represents the highest first quarter margin since we started reporting adjusted EBITDA. Turning to slide 9, you can see our capital allocation framework. As we discussed last quarter, we are not contemplating any changes to this structure as we move through this year and beyond.
Kurt B. McMaken: We expect to finish the year with slightly higher stock compensation expense and a 2023.
Kurt B. McMaken: In total EBITDA was up 28 million to 218 million with margins that expanded 160 basis points to 17, 7%.
Kurt B. McMaken: This represents the highest first quarter margin since we started reporting adjusted EBITDA.
Kurt B. McMaken: Turning to slide nine you can see our capital allocation framework as.
Kurt B. McMaken: As we discussed last quarter, we're not contemplating any changes to the structure as we move through this year and beyond.
Kurt B. McMaken: For the full year, we expect to generate between $415 and $465 million in free cash flow, with a conversion from adjusted EBITDA of approximately 46%. As a reminder, our cash flow fluctuates seasonally due to the timing of EBITDA, tax, and interest payments, and working capital.
Kurt B. McMaken: For the full year, we expect to generate between 415 and $465 million in free cash flow with conversion from adjusted EBITDA was approximately 46%.
Kurt B. McMaken: As a reminder, our cash flow fluctuate seasonally due to the timing of EBITDA tax and interest payments and working capital.
Kurt B. McMaken: On a trailing 12-month basis through the end of March, free cash flow was up 61% to $363 million, and we were well on pace to achieve our target for the year, given the normal timing we experienced in the first quarter. Starting at the top, we have an attractive menu of organic investments that are focused on increasing revenue growth, profitability, and future free cash flow. These investments are primarily OPEX related and fit within our broader EBITDA and free cash flow guidance. We target leverage between two and three times of adjusted EBITDA, and we remain within our range. Over the course of the year, we expect to slightly reduce leverage, primarily through EBITDA growth.
Kurt B. McMaken: On a trailing 12 month basis through the end of March free cash flow was up 61% to $363 million and we are well on pace to achieve our target for the year given the normal timing we experienced in the first quarter.
Kurt B. McMaken: Starting at the top we have an attractive menu of organic investments that are focused on increasing revenue growth profitability and future free cash flow.
Kurt B. McMaken: These investments are primarily opex related and fit within our broader EBITDA and free cash flow guidance.
Kurt B. McMaken: We target leverage between two and three times of adjusted EBITDA and we remain within our range.
Kurt B. McMaken: Over the course of the year, we expect to slightly reduce leverage primarily through EBITDA growth.
Kurt B. McMaken: We remain active in returning capital to shareholders. In the first quarter of the year, we completed $23 million of share repurchase, and we continued our buying early into Q2. Through the end of April, we have purchased an additional $13 million and plan to remain active over the balance of the second quarter and full year. We have 464 million of capacity available as of May 1st that expires at the end of 2025.
Kurt B. McMaken: We remain active in returning capital to shareholders in the first quarter of the year, we completed $23 million of share repurchases and we continued our buying early into Q2.
Kurt B. McMaken: Through the end of April we have purchased an additional $13 million and plan to remain active over the balance of the second quarter and full year.
Kurt B. McMaken: We have $464 million of capacity available as of May 1st that expires at the end of 2025, we.
Kurt B. McMaken: We continue to see share repurchases as attractive and plan to be active in the market through a combination of systematic and opportunistic purchases. On the dividend side of capital returns, just last week, we announced an increase in our dividend by 10% for the second consecutive year. It's consistent with our broader capital allocation framework and prior communications that we expect modest increases every year. Our M&A philosophy remains the same; we target opportunities that have strong strategic fit, attractive returns, and align with our current capital allocation framework.
Kurt B. McMaken: We continue to see share repurchases as attractive and plan to be active in the market through a combination of systematic and opportunistic purchases.
Kurt B. McMaken: On the dividend side of capital returns just last week, we announced an increase of our dividend by 10% for the second consecutive year. This is consistent with our broader capital allocation framework in prior communications, we expect modest increases every year.
Kurt B. McMaken: Our M&A philosophy remains the same we target opportunities that have strong strategic fit attractive returns and align with our current capital allocation framework.
Kurt B. McMaken: We remain focused on accretive capital allocation that drives profitable growth and compounds cash generation in our business. Our disciplined capital allocation framework is designed to maximize shareholder value for years to come, and I'm encouraged by the progress we have made. On slide 10, you can see our affirmed 2024 guidance. We expect total revenue growth to be in the mid-single digits. Full-year organic growth is expected in the low to mid-teens, offset by translational effects, primarily in Argentina.
Kurt B. McMaken: We remain focused on accretive capital allocation that drives profitable growth and compounds cash generation in our business are.
Kurt B. McMaken: Our disciplined capital allocation framework is designed to maximize shareholder value for years to come.
Kurt B. McMaken: Encouraged by the progress we have made.
Kurt B. McMaken: On Slide 10, you can see our affirmed 2020 for guidance.
Kurt B. McMaken: We expect total revenue growth to be in the mid single digits.
Kurt B. McMaken: Full year organic growth is expected in the low to mid teens offset by translational FX primarily in Argentina.
Kurt B. McMaken: Net of FX, we expect the growth to be roughly evenly split between high-margin AMS DRS offerings and growth in our cash and valuables management business, which is expected to grow by approximately 11%. We expect free cash flow conversion from adjusted EBITDA of approximately 46% at the midpoint. EPS is still expected to be between $7.30 and $8 per share and contemplates a continuation of our share repurchase program through the remainder of the This guidance reflects our current expectations for FX in Argentina, which we expect to weigh on total growth and margins early in the year. All other currencies reflect rates as of March 31st, 2024.
Kurt B. McMaken: Net of FX, we expect the growth to be roughly evenly split between high margin Ams Drs offerings and growth in our cash and valuables management businesses.
Kurt B. McMaken: Adjusted EBITDA is expected to grow by approximately 11% with margins up about 80 basis points at the midpoint.
Kurt B. McMaken: We expect free cash flow conversion from adjusted EBITDA of approximately 46% at the midpoint.
Kurt B. McMaken: EPS is still expected to be between $7 30, and $8 per share and contemplate a continuation of our share repurchase program through the remainder of the year.
Kurt B. McMaken: This guidance reflects our current expectations for FX in Argentina, which we expect to weigh on total growth and margins early in the year.
Kurt B. McMaken: All other currencies reflect rates as of March 31, 2024.
Kurt B. McMaken: And with that, I'll turn it back over to Mark for some closing comments.
Kurt B. McMaken: And with that I'll turn it back over to Mark for some closing comments.
Mark: Thanks, Kurt I'm pleased with the strong start to the year and I'm confident in our ability to deliver our commitments for the full year.
Richard Mark Eubanks: Hi, I'm Kurt. I'm pleased with a strong start to the year, and I'm confident in our ability to meet our commitments for the full year. The progress we've made with the first quarter EBITDA margins up 230 basis points in just two short years is encouraging. First, we're shipping our revenue mix through innovation with higher margin, faster growth solutions that better meet the needs of our customers. Next, we continue to make strides to improve our operational execution of our business at a branch-by-branch level, focusing on improved customer quality and service and, most importantly, on the safety and well-being of our team. Finally, we're streamlining our cost structure across the company to drive operational leverage, as well as optimizing our business model to improve fixed asset utilization and CapEx efficiency.
Richard Mark Eubanks: The progress we've made with the first quarter EBITDA margins up 230 basis points in just two short years is encouraging.
Richard Mark Eubanks: First we're shifting our revenue mix through innovation with higher margin faster growth solutions that better meet the needs of our customers.
Richard Mark Eubanks: We continue to make strides to improve our operational execution of our business at a branch by branch level, focusing on improved customer quality and service and most importantly on the safety and wellbeing of our team.
Richard Mark Eubanks: Finally, we're streamlining our cost structure across the company to drive operational leverage as well as optimizing our business model to improve fixed asset utilization and capex efficiency.
Richard Mark Eubanks: I'm confident in the trajectory of the business and our ability to continue our improvements going forward. Last week, we celebrated Brinks' 165th anniversary with celebrations with our team members around the world. While we have a lot to be proud of in our history, the future of Brinks has never been brighter. We have a sound strategic plan, large under-penetrated in-markets, an aligned leadership team, and over 68,000 motivated team members to transform Brinks into a company that is prepared for the next 165 years. I'll turn it back to the operator to open the line for questions.
Richard Mark Eubanks: I'm confident in the trajectory of the business and our ability to continue our improvements going forward.
Richard Mark Eubanks: Last week, we celebrated brink's is 165th anniversary with celebrations with our team members around the world.
Richard Mark Eubanks: While we have a lot to be proud of in our history. The future of Brink's has never been brighter.
Richard Mark Eubanks: We have a sound strategic plan large underpenetrated in markets and aligned leadership team and over 68000 motivated team members to transform <unk> into a company that is prepared for the next 165 years.
Richard Mark Eubanks: With that I'll turn it back to the operator to open the line for questions.
Operator: Thank you very much. We will now begin the question and answer session. To ask a question, you may press star, then 1 on your telephone keypad. If you are using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, you may press star, then 2. Today's first question comes from George Tong of Goldman Sachs. Please go ahead.
Speaker Change: Thank you very much we will now begin the question and answer session to ask a question you May Press Star then one on your telephone keypad. If you are using a speakerphone. Please pick up your handset before pressing the keys to withdraw. Your question you May Press Star then two.
Operator: Today's first question comes from George Tong with Goldman Sachs. Please go ahead.
Keen Fai Tong: Alright, thanks, good morning.
Keen Fai Tong: Good morning. In DRS, you mentioned implementing Kaizen initiatives to shorten the time from contract signature to revenue. Can you elaborate on the changes made and any initiatives to shorten the time from pipeline to contract signing?
Keen Fai Tong: Hey, Good morning, you mentioned.
Keen Fai Tong: In Drs, you mentioned implementing Python initiatives to shorten the time from contract signature to revenue can you elaborate on the changes made and any initiatives to shorten the time from pipeline and contract signing.
Richard Mark Eubanks: Sure, George. Thanks for the question. It's been a big change for the company in a pretty short period of time. Part of that was making sure that our contracts themselves, as well as our internal PMO teams, are able to progress those agreements in sync with our supply chain. That also includes staging those devices, both hardware as well as the onboarding and integration of software layers to be able to accommodate customers when they're ready. That also means it's partly technical, partly program management, but it's also about improving the parallel path with our legal teams as well as our commercial negotiations.
Keen Fai Tong: Sure George Yeah. Thanks, Thanks for the question it's been a.
Richard Mark Eubanks: A big change for the company in a pretty short period of time.
Richard Mark Eubanks: Part of that was making sure that our our contracts themselves as well as our internal PMO teams are able to progress those agreements in sync with our supply chain.
Richard Mark Eubanks: That also includes staging those devices, both hardware as well as the Onboarding and integration of software layers to be able to accommodate customers when they're when they're ready that also means.
Richard Mark Eubanks: Partly technical partly progress program management, but it's also about improving.
Richard Mark Eubanks: Improving the parallel path with our legal teams as well as our commercial negotiations.
Richard Mark Eubanks: Great, and any initiatives to shorten the time frame from pipeline to actual contract signing, basically winning deals or converting deals more effectively?
Speaker Change: Great and any any initiatives to shorten the timeframe from pipeline to actual contract signing basically winning deals are converting deals more effectively.
Richard Mark Eubanks: Well, we'd love for that to happen immediately, but unfortunately, that's one that is not completely in our control. That being said, last year we started our transformation program, particularly in North America, a reorganization and realignment, I think we spoke about it in Q3, of our customer-facing sales team, moving from geographic coverage to more segment-focused verticals that allowed our sales teams to understand not only the needs and the product offerings of those businesses but also the particular pain points and negotiation terms and conditions that allow us to move those through negotiation faster.
Speaker Change: Ah well boy, we'd love for that to happen immediately but.
Richard Mark Eubanks: Unfortunately, that's one that is not completely in our control that being said in last year, we started.
Richard Mark Eubanks: Through our transformation program, particularly in North America, our reorganization and realignment I think we spoke about it in Q3 of our.
Richard Mark Eubanks: Customer facing sales team moving from geographic coverage to more segments.
Richard Mark Eubanks: Segment focused verticals that allowed our sales teams to understand not only the needs and the product offerings of those businesses, but also the particular pain point of negotiation in terms of conditions that allow us to move those through negotiation faster I think that's really been.
Richard Mark Eubanks: I think that's really been a key learning for us in the last, let's say, 12 months. The other thing, George, as I mentioned in Q4, is really a timing issue and thinking about how we stage those contracts to make sure that we're not bumping up against some specific industry event, like in retail, particularly department stores and shops, don't want us touching their stores. That's something that certainly we'll want to work out in front of and make sure that, you know, we've got our PMO teams as well as our installation team staged to be able to drive those in advance of those seasons, which likely means that we have to back up from our timeline into that contracting period to make sure that, you know, we're writing those orders earlier in the year. And frankly, that's what we did in Q1 and we had pretty good success here in Q2.
Richard Mark Eubanks: A key learning for us in the last let's say 12 months I. The other thing George as I mentioned, we mentioned in Q4 is really a timing issue and thinking about how we stage those contracts to make sure that we're not bumping up against some specific.
Richard Mark Eubanks: Industry lighted industry related event like in a.
Richard Mark Eubanks: Retail, particularly.
Richard Mark Eubanks: Department stores and shops like doing that around the Thanksgiving and Black Friday holiday season, where retailers don't want us touching their stores that's been something that certainly will want to work out in front of and make sure that we got our PMO teams as well as our installation teams staged to be able to drive those.
Richard Mark Eubanks: In advance of those seasons, which likely means that we have to back up from our timeline into that contracting period to make sure that we're writing those orders earlier in the year and frankly, that's what we did in in Q1 and having pretty good success here in Q2.
Richard Mark Eubanks: That sounds great. And then can you discuss how AMS growth in the quarter compared to VRS growth and where in AMS you're seeing the most opportunity? So in the quarter, Georgia
George: That sounds great.
George: And then can you discuss how a M best growth in the quarter compared to D. R S growth and where you're seeing the most opportunity.
Richard Mark Eubanks: So, in the quarter, Georgia was about the same split between the two, but we have seen quite a bit of opportunity for a combined solution. This is something that we've talked about, particularly in retail, where AMS and DRS are very complementary. We're not in the market selling, you know, having sales people call on customers that are AMS offerings only or DRS offerings only, meaning we don't have two of the same sales people calling the same customer.
Speaker Change: So in the quarter, Georgia was about the same between split between the two.
Richard Mark Eubanks: But we have seen quite a bit of.
Richard Mark Eubanks: Of opportunity in a combined solution and this is something that we've talked about particularly in retail where Ams and drs are very complementary.
Richard Mark Eubanks: We're not in the market.
Richard Mark Eubanks: Selling you know, having our sales people to call on customers that are Ams offerings, only or Drs offerings, only meaning we don't have to have the same sales people, calling the same customer and in fact, it's a pretty unique offering because we don't see a lot of.
Richard Mark Eubanks: And in fact, it's a pretty unique offering because we don't see a lot of competitors in the space that are able to offer both AMS and DRS, as well as the back-end network to satisfy all the cash logistics. We've seen some really nice wins here not only late last year but in Q1 that allow us to do that. The other side, as we have talked about, particularly outside of North America, is continued interest from financial institutions around ATM outsourcing. And those conversations, those pilots, those opportunities will continue. And in fact, we're in the process, both in Q1 and which continues actually into Q2 and Q3, of onboarding a few other bank networks.
Richard Mark Eubanks: Competitors in this space that are able to offer both Ams and Drs as well as the backend network.
Richard Mark Eubanks: To satisfy all the cast logistics, we've seen some really nice wins here in not only late last year, but in Q1 that allows us to do that the other side as we have talked about particularly outside of North America is continued interest from financial institutions around ATM outsourcing.
Richard Mark Eubanks: And those conversation those pilots and those opportunities continue.
Richard Mark Eubanks: And in fact, we are in the process.
Richard Mark Eubanks: Both in Q in Q1 and continues actually in to Q2 and Q3 of Onboarding.
Richard Mark Eubanks: Few other bank networks in.
Richard Mark Eubanks: In Europe.
Speaker Change: Very helpful. Thank you.
Richard Mark Eubanks: Sure.
Operator: Thank you. The next question is from Tobey Sommer with Truist Securities. Please go ahead.
Richard Mark Eubanks: Thank you. The next question is from Tobey Sommer with <unk> Securities. Please go ahead.
Jack Wilson: Yeah, good morning. This is Jack Wilson on behalf of Tobey. Maybe for my first question, can we talk about DRS and sort of quantify to what extent you are seeing DRS migration and to what extent you're seeing sort of greenfield, new sales to unvended customers. Is it possible to segment those two?
Operator: Yeah. Good morning. This is Jack Wilson on for Tobey.
Jack Wilson: My first question can you talk about D R S and sort of.
Jack Wilson: Is it possible to quantify to what extent, you're seeing drs migrations and to what extent, you're seeing sort of greenfield, new new sales to uninvented customers as possible to segment those two.
Richard Mark Eubanks: We actually don't have the numbers on that to give out, but I would say it's pretty balanced. And really, there are three areas of growth for us. The first is the unvended space, as you mentioned, and again, pretty balanced between that and conversions here recently in the quarter. And that's really customers who don't use... Cash Logistics Service at all today. They've basically walked their cash to the bank. The second is obviously conversions of our existing traditional CIT customers.
Speaker Change: We actually don't have that I wouldn't say the numbers on that to give out but I would say it's pretty balanced.
Richard Mark Eubanks: And those are clear as well. And again, I said it was balanced. The third area is existing DRS customers who are expanding their footprint or expanding DRS across more of their portfolio. And this is more of either a gain of share of wallet or growth as that customer is growing. And I'd say all three of those are happening, you know, clearly areas we're focused on.
Richard Mark Eubanks: And really there is three areas of growth for us. The first is the unfunded space as you mentioned and again pretty balanced between that and conversions here recently in the quarter.
Richard Mark Eubanks: And that's really customers, who don't use <unk>.
Richard Mark Eubanks: Cash logistics service at all today.
Richard Mark Eubanks: If you walk their cash to the bank the.
Richard Mark Eubanks: The second is obviously conversions of our existing traditional city customers and those are our clear as well and again I say.
Richard Mark Eubanks: It's balanced in there the third area, our existing Drs customers, who are expanding their footprint or expanding drs across more of their portfolio and this is more of a either.
Richard Mark Eubanks: Gain a share of wallet or growth as that customers growing and I would say all three of those are happening and.
Richard Mark Eubanks: Clearly areas we're focused.
Richard Mark Eubanks: Okay, that makes sense. Then, is it possible to maybe quantify how much of the existing book has been migrated over?
Speaker Change: Okay that makes sense then is it possible maybe quantify how much of the existing book has been migrated over.
Richard Mark Eubanks: I don't, I wouldn't have that, Jack, but I can tell you we're still in the early innings in my view. We've got a lot left to go, not only in the white space, which is probably the bigger, you know, unit volume and location count, but in fact, our existing CIT customers are also prime targets for our value proposition. In fact, in some regions, this is, you know, really the only offering or the primary offering that we're delivering to customers, as opposed to traditional CIT.
Richard Mark Eubanks:
Speaker Change: I don't I wouldn't have that.
Richard Mark Eubanks: Jack but I can tell you. It's we're still early innings in my view, we've got a lot left to go not only in the white space, which is probably the bigger.
Richard Mark Eubanks: Unit volume in location count, but in fact, our existing city customers are.
Richard Mark Eubanks: You know are also prime prime targets for our value proposition and back in in some regions. This is really the only offering or the primary offering that we're delivering to customers.
Richard Mark Eubanks: As opposed to traditional CIP.
Richard Mark Eubanks: Okay, that's helpful. Thank you. Maybe on the AMS front, can you speak to sort of how you see your positioning in the sort of competitive landscape and how you see your market share in specific geographies or just as a whole?
Speaker Change: Okay. That's helpful. Thank you maybe on the Ams Bryan can you speak to sort of how you see your positioning from a sort of a competitive landscape and how you see your market share in specific geographies or just as a whole.
Richard Mark Eubanks: Sure.
Richard Mark Eubanks: So I say that the ATM managed services market is still pretty nascent. And, you know, if you look at industry reports or, you know, our competitors, or, you know, discussions, particularly from the equipment manufacturers on the ATM side, the market is big and likely expanding by multiples as banks continue to evaluate and execute outsourcing agreements. And so I'd say right now it's still a pretty nascent market to try and quantify specifically.
Richard Mark Eubanks: I would say that the.
Richard Mark Eubanks: ATM managed services as a market is still pretty nascent and.
Richard Mark Eubanks: If you look at industry reports or our competitors.
Richard Mark Eubanks: Discussions, particularly from the equipment manufacturers on the ATM side the market is.
Richard Mark Eubanks: Big and likely expanding by multiples as you know <unk>.
Richard Mark Eubanks: Banks continue to evaluate and execute outsourcing agreements and so I'd say right now.
Richard Mark Eubanks: It's still a pretty nascent market to try and quantify specifically we feel like.
Richard Mark Eubanks: We feel like our position, though, and we've seen this in discussions both in open competitive environments, sort of RFPs, or even direct one-on-one negotiations with financial institutions, that our value proposition of being able to offer not only a hardware and software solution that comes from many of the traditional suppliers but integrate that into our network allows us to optimize the full value stream to a higher level. And as we've talked about before, that's really based on the fact that the amount of cost in the full, in the current traditional value stream is really under our control.
Richard Mark Eubanks: Competitive position, though and we've seen this in discussions both in open competitive environment sort of rfps or even direct one on one negotiations with financial institutions.
Richard Mark Eubanks: Our value proposition of being able to offer not only a hardware software solution that comes from for many of the traditional suppliers, but integrated that into our network allows us to optimize the full value stream to a higher level.
Richard Mark Eubanks: As we've talked about before that's really based on the fact that the amount of cost in the fall and the current traditional value stream is really under our control and so as we were able to optimize that we're able to not only provide an accretive solution for brink's, but also provide a nice value proposition.
Richard Mark Eubanks: And so as we're able to optimize that, we're able to not only provide an attractive solution for Brinks but also provide a nice value proposition, both lower cost and equal or better reliability of the network.
Richard Mark Eubanks: Lower cost and an equal or better.
Richard Mark Eubanks: Reliability of their network.
Speaker Change: Okay. Thank you very much.
Richard Mark Eubanks: Thank you. Since I see no further questions, I would like to hand the call back to Mark Eubanks for closing remarks.
Richard Mark Eubanks: Thank you seeing no further questions I would like to hand, the call back to Mark Eubanks for closing remarks.
Richard Mark Eubanks: Great. Thanks, everyone. We appreciate your interest and look forward to talking to you next quarter.
Richard Mark Eubanks: Great. Thanks.
Richard Mark Eubanks: Thanks, everyone. We appreciate your interest and look forward to talking to you next quarter.
Operator: The conference has now concluded. Thank you for your participation. You may now disconnect your lines.
Speaker Change: The conference has now concluded. Thank you for your participation you may now disconnect your lines.
Operator: [music].
Operator: [music].
Operator: Oh.