Q2 2024 The Brink's Co Earnings Call
Operator: discussed on this call is representative of today only, and Brinks assumes no obligation to update any forward-looking statements.
Operator: Discussed on this call is representative of today only.
Paul is representative of today only.
Operator: Brinks assumes no obligation to update any forward-looking statements.
Brink's: Brink's assumes no obligation to update any forward looking statements.
Operator: This call is copyrighted and may not be used without written permission from Brinks.
Jesse Jenkins: This call is copyrighted and may not be used without written permission from Brinks. I will now turn the conference over to your host, Jesse Jenkins, Vice President of Investor Relations. Mr. Jenkins, you may begin.
Speaker Change: This call is copyrighted and may not be used without written permission from brink's.
Jesse Jenkins: I will now turn the conference over to your host, Jesse Jenkins, Vice President of Investor Relations.
Speaker Change: I will now turn the conference over to your host Jesse Jenkins, Vice President of Investor Relations. Mr. Jenkins you may begin.
Jesse Jenkins: 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 second 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. Reconciliation 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.
Jesse Jenkins: Thanks, and good morning, joining me today are CEO, Mark <unk> and CFO Kurt Mcmackin. This morning, <unk> reported second 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.
Jesse Jenkins: Thanks and good morning. Joining me today are CEO Mark Eubanks and CFO Kurt McMaken. This morning, Brinks reported second 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.
Speaker Change: 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 8-K filing I will now turn the call over to brink CEO Mark Eubanks.
Mark Eubanks: I will now turn the call over to Brinks CEO Mark Eubanks.
Mark Eubanks: Thanks, Jesse. Good morning, and thank you for joining us. We'll start on slide three. We delivered a total organic growth of 14%. Accelerating sequentially over the first quarter, ATM managed services and digital retail solutions, or AMS DRS, grew 26% organically and accelerated sequentially across all geographic segments. Cash Invaluables Management, or CVM, was up 10% organically with strong pricing disadvantages, offsetting continued cyclical market softness in our global services. Adjusted EBITDA grew 16% to $226 million, and margins expanded 200 basis points to 18 Transformation initiatives, led by North America, drove labor and cost productivity throughout the P&L.
Mark Eubanks: Thanks, Jesse.
Mark Eubanks: Thanks, Jessie good morning, and thank you for joining us.
Mark Eubanks: Good morning, and thank you for joining us. We'll start here on slide three. We delivered total organic growth of 14 percent, accelerating sequentially over the first quarter. ATM managed services and digital retail solutions or AMS-DRS grew 26 percent organically and accelerated sequentially across all geographic segments. Cash and valuables management or CVM was up 10 percent organically, with strong pricing discipline, offsetting continued cyclical market softness in our global services business. Adjusted EBIDAC grew 16 percent to $226 million, and margins expanded 200 basis points to 18 percent. Transformation initiatives led by North America drove labor and cost productivity throughout the P&L.
Mark Eubanks: Profit growth and the results of our share repurchase program drove a 31 percent increase in earnings per share to $1.67 per share. Precash local conversion remained strong with the flow through of higher profits, margin expansion, and working capital improvements. We continue to make meaningful progress executing against our strategy. DRS and AMS continue to grow as a percent of our total revenue, exceeding $1.1 billion of revenue on a trailing 12 month basis. Demanding these key business lines remained strong as evidence by the 26 percent organic growth in the quarter. We continue to sell these innovative tech and able solutions to into both underserved and under penetrated markets across all of our segments and are encouraged by the building customer demand in our growing pipeline.
Mark Eubanks: Profit growth and the results of our share repurchase program drove a 31% increase in earnings per share to $1.67 per share. Pre-cash flow conversion remains strong with the flow-through of higher profits, margin expansion, and working capital improvements. We continue to make meaningful progress executing against our strategy. DRS and AMS continue to grow as a percent of our total revenue, exceeding $1.1 billion of revenue on our trailing 12-month basis, demanding these key business lines remain strong, as evidenced by the 26% organic growth in the quarter.
Mark Eubanks: Additionally, we see increased demand for our tech and able solutions from both existing CIT customers as well as new customers in both retail and banking verticals. This mix of higher margin revenue, coupled with the benefits of the rollout of the Brink's business system, drove second consecutive quarter of mid-teens EBITDA growth as we progress towards our year end targets. Notable is the continued margin expansion in North America, which improved 360 basis points year over year in Q2. This was the eighth consecutive quarter of at least 90 basis points of margin improvement in the second.
Mark Eubanks: Notable is the continued margin expansion in North America, which improved 360 basis points year-over-year in Q2. This was the eighth consecutive quarter of at least 90 basis points of margin improvement in the cycle. With a strong first half completed, we remain on track to deliver low to mid-teens organic revenue growth, double-digit EBITDA growth, earnings per share between $730 and $8, and free cash flow between $415 and $465 million. Starting on the left, organic growth of 14% was partially offset by an 11% impact from translational effects. Trillion's 12 month free cash flow was down 7% versus the prior year.
Mark Eubanks: David. Our discipline, capital allocation framework is also creating value for shareholders. So far this year, we've purchased 722,000 shares for just over $91 per share and have allocated $86 million in capital towards shareholders' returns. This represents an increase of 133% over the first half of 2023. And as Kurt will discuss in a minute, we were able to increase liquidity, secure additional credit capacity, and improve flexibility in our capital structure with a successful refinancing of our 2025 bonds. As part of this process, we also received a credit rating upgrade from S&P. With a strong first half completed, we remain on track to deliver low to mid-teens organic revenue growth, double-digit EBITDA growth, earnings per share of between $730 and $8, and free cash flow between $415 and $465 million.
Mark Eubanks: On to slide four. Starting on the left, organic growth of 14% was partially offset by an 11% impact from translational effects. For an currency degraded throughout the period, it was a slight headwind in the quarter relative to our expectations and outlook from our earnings released back in May. Adjusted EBITDA grew $32 million year-over-year on a reported basis. As we discussed in the second quarter of 2023, there was a $12 million increase in security losses that impacted the timing of expense recognition last year. Adjusting from the impact of this increase in the prior year, EBITDA margins increased 100 basis points, slightly ahead of our full year expectations.
Mark Eubanks: Looking at revenue and EBITDA at the segment level, all segments delivered accelerated organic growth in AMS and DRS as we continue to add new customers across the globe. North America growth continued to accelerate as we've now fully lapped the impact of prior year portfolio rationalization efforts we previously discussed. Latin America growth and margins continue to be impacted by currency fluctuations, mostly in Argentina, which are impacting our margins while our pricing efforts catch up to the large devaluations that occurred late last year. And finally, all segments are experiencing growth and margin headwinds related to continued cyclical markets offness in our global services business.
Mark Eubanks: Earnings per share are up 40 cents, driven by a 25% increase in net income and a 5% reduction in outstanding shares, or 2.2 million total, as well as the previously mentioned prior year security loss. Trilling 12-month free cash flow was down 7% versus the prior year. The decline was driven almost entirely by the seasonal timing of working capital, primarily related to DSO on accounts receivable as we lapped a particularly strong prior year comparison. As we've already seen in July, this timing-related impact is expected to unwind over the back half of the year, and we remain confident that we're on track to deliver our full year free cash flow targets.
Mark Eubanks: The decline was driven almost entirely by the seasonal timing of working capital, primarily related to DSO on accounts receivable, as we lack a particularly strong prior year comparison. Operationally, the team is focused on advancing our lean maturity by utilizing structured problem-solving, increasing the use of standard work, and leveraging best practices across our footprint to streamline processes on everyday activities. A few areas where we've made progress recently include the money processing centers and routing and scheduling of our logistics network. While these activities began in North America, we've already started to scale some of these best practices globally and will continue to drive change in future periods.
Mark Eubanks: Turning down to slide 5, I'd like to take a moment to highlight the progress we're making in North America. Since 2018, we've improved our EBITDA margins by 610 basis points and expect to continue the upward trajectory over the balance of 2024. Operation link, the team is focused on advancing our lean maturity by utilizing structured problem-solving, increasing the use of standard work, and leveraging best practices across our footprint to streamline processes on everyday activity.
Mark Eubanks: in the United States of the United States of America, and the United States of America. We're making technology investments in cash processing automation equipment to further automate processes and procedures. We're also investing to improve our IT systems that allow us to use larger data sets and real-time information to improve route density and efficiency. While these activities began in North America, we've already started to scale some of these best practices globally and will continue to drive change in future periods. These process improvements are not going to notice by our customers. We continue to hear positive feedback about the improvements we're making in our execution and increase visibility of funds throughout the cash value stream.
Mark Eubanks: We've also seen a corresponding improvement in safety-related incidents and preventable collisions in North America that should lead to further cost avoidance moving forward. We're encouraged by the success we've seen so far, but we continue to see an opportunity for future improvements in our business, and we look forward to sharing that progress with you as we move forward.
Speaker Change: To improvements in our business and we look forward to sharing that progress with you as we move forward.
Mark Eubanks: Turning now to slide six, I'll discuss the revenue by customer offering. Starting with cash and variables management, CBM, our Q2 organic growth of 10% was the second consecutive quarter of double-digit organic growth. Growth is driven by both volume increases and strong pricing above inflation, offset by conversion efforts as we've shifted customers to higher margin, DRS and AMS offerings, and the continued market softness in our global services business that we mentioned across all segments. Despite the revenue mix on margins from our global services revenue, we drove productivity in the business as we continue to globally scale our OPEX initiatives through the Brink's business system, delivering record second quarter operating profit, EBIDA, and earnings per share.
Speaker Change: Turning now to slide six I'll discuss the revenue by customer offering.
Speaker Change: Starting with cash and valuables management CDM, our Q2 organic growth of 10% was the second consecutive quarter of double digit organic growth.
Speaker Change: It was driven by both volume increases and strong pricing above inflation offset by conversion efforts as we've shifted customers to higher margin Drs in Ams offerings and the continued market softness in our global services business that we mentioned across all segments. Despite the revenue mix on margins from our global services revenue, we drove productivity in the <unk>.
Speaker Change: <unk> as we continue to globally scale, our opex initiatives through the <unk> business system, delivering record second quarter operating profit EBITDA and earnings per share.
Mark Eubanks: We got a strong quarter of growth in DRS, delivering the fastest organic growth rate in the last six quarters. As we explained in prior quarters, occasionally in DRS we see revenue growth that's derived from the sale of equipment at the start of certain customer relationships. We remain committed to sharing these fluctuations with investors in order to help explain trends, both the headwinds and the tailwinds. In the second quarter, equipment sales were approximately an $8 million benefit in our Europe segment as we added a new large grocery store customer to our network. After adjusting for this benefit, AMS, DRS organic growth was 23%, and DRS organic growth accelerated across all segments, with our value proposition continuing to resonate with customers.
Mark Eubanks: We had a strong quarter of growth in DRS, delivering the fastest organic growth rate in the last six quarters. As we explained in prior quarters, occasionally, in DRS, we see revenue growth that's derived from the sale of equipment at the start of certain customer relationships. We remain committed to sharing these fluctuations with investors in order to help explain trends, both the headwinds and the tailwinds. AMS delivered sequential growth acceleration over Q1 with newly installed ATMs at retail locations, driving increased transaction volumes in North America.
Speaker Change: We had a strong quarter of growth in Drs, delivering the fastest organic growth rate in the last six quarters as we've explained in prior quarters occasionally in Drs. We see revenue growth that is derived from the sale of equipment at the start of certain customer relationships.
Speaker Change: We remain committed to sharing these fluctuations with investors in order to help explain trends, both the headwinds and the tailwind in.
Speaker Change: In the second quarter equipment sales were approximately an $8 million benefit and our Europe segment as we added a new large grocery store customers to our network.
Mark Eubanks: With several large customer wins, late in the second quarter, we inter-Q3 with a healthy backlog of orders that provides support for our ongoing outlook. AMS delivered sequential growth acceleration over Q1, with newly installed ATMs at retail locations driving an increased transaction volumes in North America. We continued to improve our capabilities and visibility with potential customers in the AMS markets. We are engaged in discussions with many potential partners across the globe as we educate retail and banking customers on the benefits of cost savings, extension of network useful life, and the improved performance. That come with a moved break.
Mark Eubanks: We are engaged in discussions with many potential partners across the globe as we educate retail and banking customers on the benefits of cost savings, extension of network useful life, and the improved performance that come with a move to Brinks. I remain encouraged by the level of activity and the interest we're generating as we continue to work a large global pipeline of opportunities for both financial institutions and retail customers. We remain in the early innings of our transition to AMS and DRS, and I'm confident in our ability to continue to grow these global offerings above our base business for the next several years.
Mark Eubanks: I remain encouraged by the level of activity and the interest we're generating as we continue to work a large global pipeline of opportunities in both financial institutions and retail customers. In total, AMS-DRS grew to 22% of our trailing 12-month revenue, and we're up a combined 26% organically in Q2. We expect to continue double-visual organic growth in these offerings over the full year, and are now targeting an increase as a percentage of revenue towards the high end of our original 22-23% range. We remain in early earnings of our transition to AMS and DRS, and I'm confident in our ability to continue to grow these global offerings above our base business for the next several years.
Mark Eubanks: Overall, organic revenue growth was in line with our expectations for the quarter, and we achieved double-digit EBITDA growth as we continue to transform into a more consistent, recurring revenue business. We are driving profitable organic growth in all lines of our business and are well-positioned for the back half of the year and beyond.
Mark Eubanks: We are driving profitable organic growth in all lines of our business and are well positioned for the back half of the year and beyond. On slide 7, you can see our organic growth and adjusted EBITDA performance over time. Historically, Brinks has been resilient in times of market disturbance. We have a broad distribution of customers, both geographically and by end markets, that provide stability to our organic growth profile, regardless of the broader economic volatility or, as we saw in the quarter, the global IT systems outage.
Mark Eubanks: On slide 7, you can see our organic growth and adjusted EBITDA performance over time. Historically, Brinks has been resilient in times of market disturbances. We have a broad distribution of customers, both geographically and by end markets, that provides stability to our organic growth profile. Our services are required to securely enable commerce, regardless of the broader economic volatility, or, as we saw in the quarter, global IT systems outages. Our profitability is even more resilient. The large portion of our cost structure, variable in nature, we're able to protect profit margins in times of changing volumes in the business.
Mark Eubanks: You can see in the chart, EBITDA margins were only down 10 basis points in 2020, despite the 7% organic revenue decline over the same period. While no business is completely immune from challenging economic cycles, we're confident that we can continue to drive improvements in the business in any cycle.
Mark Eubanks: We have a bright future here at Brinks, and I look forward to meeting the challenges in front of us head on.
Mark Eubanks: We have a bright future here at Brinks, and I look forward to meeting the challenges in front of us head on. And with that, I'll turn it over to Kurt before I return with some closing thoughts before we open up the lines for Q&A.
Kurt McMaken: And with that, I'll turn it over to Kurt before I return with some closing thoughts, before we open up the lines for Q&A.
Kurt McMaken: Kurt? Thanks, Mark, and good morning, everyone. Starting on slide 8, $167 million of organic revenue increase represents 14% growth over the prior year. 100 million, or about 60% of the growth, came from cash and valuables management, with the remainder coming from AMS and DRS. As Mark mentioned, the US dollar strengthened over the second quarter, and we ended the period with an 11% translational foreign exchange headwind. Through the first half of the year, we've had a 30 million revenue headwind against our original, full-year, constant currency guidance. Total revenue growth of 37 million produced 32 million of adjusted EBITDA.
Kurt McMaken: Thanks, Mark, and good morning, everyone. As Mark mentioned earlier, second quarter EBITDA growth was aided by the lapping of a $12 million increase in security losses from the prior year, primarily related to one large event in our BGS business. Normalizing for this $12 million, $37 million of revenue generated $20 million of EBITDA in the period for a 54% incremental margin. In total, adjusted EBITDA margins increased 200 basis points, or normalized 100 basis points, driven by the realization of cost productivity, improved revenue mix, and disciplined price. The increase is related to higher interest rates and slightly higher debt from growth in provisional capital for our DRS customers. Tax expenses were $31 million in the quarter.
Kurt McMaken: EBITDA growth was impacted by restructuring activities in Latin America and Europe as we opportunistically write-size operations in certain countries. As Mark mentioned earlier, second quarter EBITDA growth was aided by the lapping of a 12 million increase in security losses from the prior year, primarily related to one large event in our BGS business. Normalizing for this 12 million, 37 million of revenue generated 20 million of EBITDA in the period for 54% incremental markets.
Kurt McMaken: Martin. In total, adjusted EBITDA margins increase 200 basis points or normalized 100 basis points, driven by the realization of cost productivity, improved revenue mix, and discipline pricing.
Kurt McMaken: On slide 9, I'll walk you from operating profit to adjusted EBITDA. Starting on the left, interest expense was up 6 million year-to-57 million. The increase is related to higher interest rates and slightly higher debt from growth in provisional capital for our DRS customers. Tax expenses were 31 million in the quarter. The 7 million increase in the other category primarily relates to higher interest income on cash balances. Income from continuing operations was up 25 percent to 75 million. Through the effectiveness of our share report to program, our diluted share account was down 2.2 million shares per 5 percent year-over-year to 45.1 million.
Kurt McMaken: The $7 million increase in the other category primarily relates to higher interest income on cash. Turning to the rest of the year, we expect to see a slight uptick in the quarterly interest expense run rate as debt for provisional credit increases due to the strong growth we've delivered in DRF. As you can see in the maturity chart, we successfully refinanced our 2025 bonds with a new five-year bond maturing in 2029 at a rate of 6.5%.
Kurt McMaken: In total, record second quarter EPS was up 31 percent to $1.67 per year. Turning to the rest of the year, we expect to see a slight uptick in the quarterly interest expense run rate as debt for provisional credit increases due to the strong growth we've delivered in DRS. We're forecasting a tax rate of approximately 28 percent in line with the second quarter, and we expect stock-based compensation to be roughly flat to 2023. In total, EBITDA was up 32 million to 226 million, with margins that expanded 200 basis points to 18 percent.
Kurt McMaken: Before I get to the capital allocation framework, I thought it would be helpful to briefly discuss the refinancing we completed in the quarter on slide 10. The leverage neutral transaction allowed us to eliminate the near-term maturity on our 2025 bonds, while extending and diversifying our future maturities. As you can see in the maturity chart, we successfully refinanced our 2025 bonds with a new 5-year bond, maturing in 2029 at a rate of 6.5 percent. Currently, we were able to issue a new 400 million 8-year bond at 6.3 quarters percent, maturing in 2032, using the proceeds to pay down an existing balance on our revolving credit facility.
Kurt McMaken: Currently, we were able to issue a new $400 million 8-year bond at 6.75% maturing in 2032, using the proceeds to pay down an existing balance on a revolving credit facility. With the completion of the transaction, S&P raised our corporate family credit rating to BB+, looking for it We have opportunities to continue to ladder our maturities, and we'll look to be opportunistic when the market allows us the opportunity. Moving to slide 11.
Kurt McMaken: The net result of the transaction increased our liquidity while having only a marginal effect on 2024 interest expense. At the completion of the transaction, S&P raised our corporate family credit rating to double B+. Now, please, with the execution of the refinancing, we've maintained a strong capital structure with significant financial flexibility, ample liquidity, and diversified maturity days. Looking for it, we have opportunities to continue to ladder our maturities, and we'll look to be opportunistic when the market allows us the opportunity.
Speaker Change: For interest expense.
Speaker Change: The completion of the transaction S&P raised our corporate family credit rating to double B plus.
Speaker Change: I'm pleased with the execution of the refinancing we have maintained a strong capital structure with significant financial flexibility ample liquidity and diversified maturity dates looking.
Speaker Change: Looking forward, we have opportunities to continue to ladder, our maturities and we'll look to be opportunistic when the market allows us the opportunity.
Kurt McMaken: Moving to slide 11, our capital allocation framework and priorities remain unchanged. For the full year, we expect to generate between 415 and 465 million in free cash flow, with conversion from an adjusted EBITDA of between 42 and 50 percent based on our guidance ranges. Compared to the prior year, we pulled forward some capex spend into the first half of the year to drive in-year operational improvements and purchase tech-enabled devices for planned AMS and DRS deployments in the third quarter. Gordon Capital Timing is following normal seasonal patterns at this time of the year. ESO continues to improve, with a two-day reduction over the prior quarter and a five-day reduction over the same quarter last year.
Speaker Change: Moving to slide 11.
Kurt McMaken: Our capital allocation framework and priorities remain unchanged. First, we continue to make investments in our operations. These investments are largely OPEX-related and are managed in our broader profitability guide. Second, with the completion of an attractive refinancing in the quarter, we remain within our targeted leverage range at 2.9 times net debt to adjusted EBITDA. Remaining within the range increases the flexibility of return capital shareholders and complete accretive acquisitions. Third, we have more than doubled shareholder returns in the first half of the year. We have returned $86 million year to date, including $66 million through our share repurchase program. We ended the period down 2.2 million shares, or 5%, compared to this time last year.
Our capital allocation framework and priorities remain unchanged for the full year, we expect to generate between 415 and $465 million in free cash flow with conversion from adjusted EBITDA of between 42% and 50% based on our guidance ranges.
Speaker Change: Compared to the prior year, we pulled forward some capex spend into the first half of the year to drive in year operational improvements and purchase tech enabled devices for planned Ams and Drs deployments in the third quarter.
Speaker Change: Working capital timing is following normal seasonal patterns at this time of the year DSO.
Speaker Change: DSO continued to improve with a two day reduction over the prior quarter and a five day reduction over the same quarter last year.
Kurt McMaken: Moving to use as a cash, first we continue to make investments in our operations to enable sustainable, profitable growth. This includes investments in the North American cash processing and routing initiatives that Mark discussed and investments in the Brinks business system that will help us scale these processes globally. These investments are largely objects related and are managed in our broader profitability guidance. Second, with the completion of attractive refinancing in the quarter, we remain within our targeted leverage range at 2.9 times net debt to adjusted EBITDA. Remaining within the range increases flexibility of return capital to shareholders and complete accretive acquisitions.
Speaker Change: Moving to uses of cash first we continue to make investments in our operations to enable sustainable profitable growth.
Speaker Change: This includes investments in the North American cash processing routing initiatives that Mark discussed and investments in the <unk> business system that will help us scale these processes globally.
Speaker Change: These investments are largely opex related and are managed in our broader profitability guidance.
Speaker Change: Second with the completion of attractive refinancing in the quarter, we remain within our targeted leverage range of two nine times net debt to adjusted EBITDA.
Speaker Change: Remaining within the range increased flexibility to return capital to shareholders and complete accretive acquisitions.
Kurt McMaken: Third, we have more than double shareholder returns in the first half of the year. We return to $86 million a year to date, including $66 million through our share repurchase program. We ended the period down 2.2 million shares, or 5%, compared to this time last year. With $434 million in remaining capacity in our program through the end of 2025, we plan to remain active as we increase free cash flow over the balance of the year.
Speaker Change: Third we have more than doubled shareholder returns in the first half of the year.
Speaker Change: We returned $86 million year to date, including $66 million through our share repurchase program.
Speaker Change: We ended the period down $2 2 million shares or 5% compared to this time last year.
Mark Eubanks: With $434 million in remaining capacity in our program through the end of 2025, we plan to remain active as we increase free cash flow over the balance of the year. And finally, on the M&A side, we continue to target opportunities that have a strong strategic fit, attractive returns, and align with our current leverage targets and capital allocation framework. We remain disciplined in our approach to capital allocation and believe our priorities will continue to drive shareholder value into the future. We expect free cash flow conversion from adjusted EBITDA of approximately 46% at the midpoint. And with that, I'll turn it back over to Mark for some closing comments.
Speaker Change: With $434 million in remaining capacity in our program through the end of 2025, we plan to remain active as we increased free cash flow over the balance of the year.
Kurt McMaken: And finally, on the M&A side, we continue to target opportunities that have a strong strategic fit, attractive returns, and align with our current leverage targets and capital allocation framework. We were made disciplined in our approach to capital allocation and believe our priorities will continue to drive shareholder value into the future.
Speaker Change: And finally on the M&A side, we continue to target opportunities that have a strong strategic fit attractive returns and align with our current leverage targets and capital allocation framework.
Speaker Change: We remain disciplined in our approach to capital allocation and believe our priorities will continue to drive shareholder value into the future.
Kurt McMaken: On slide 12, 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. As a reminder, outside of Argentina, our effects guidance utilizes rates as at the end of the quarter and does not attempt to predict future movement and currencies. Given the strengthening of the US dollar over the second quarter, if rates were to continue at June 30 levels, we would turn slightly below the midpoint of our revenue range to entirely the currency movement.
Speaker Change: On Slide 12, you can see our affirmed 2024 guidance, we expect total revenue growth to be in the mid single digits.
Speaker Change: Full year organic growth is expected in the low to mid teens offset by translational FX primarily in Argentina.
Speaker Change: As a reminder, outside of Argentina, our FX guidance utilizes rates as of the end of the quarter and does not attempt to predict future movement in currencies.
Speaker Change: Given the strengthening of the U S dollar over the second quarter. If rates were to continue at June 30th levels, We would trend slightly below the midpoint of our revenue range due entirely to currency movements.
Kurt McMaken: Adjusted EBITDA is expected between 935 and 985 million, representing double-digit growth over the prior year. Margins are expected to increase 80 basis points in the midpoint of the range. We expect free cash flow conversion from adjusted EBITDA of approximately 46 percent at the midpoint. EPS is still expected to be between $7.30 and $8 per share and contemplates an acceleration of our share repurchase program in the second half of the year.
Speaker Change: Adjusted EBITDA is expected between $935 and $985 million.
Speaker Change: Presenting double digit growth over the prior year.
Speaker Change: Margins are expected to increase 80 basis points and the midpoint of the range.
Speaker Change: We expect free cash flow conversion from adjusted EBITDA of approximately 46% at the midpoint.
Speaker Change: EPS is still expected to be between $7 30, and $8 per share and contemplates an acceleration of our share repurchase program in the second half of the year.
Mark Eubanks: And with that, I'll turn it back over to Mark for some closing comments.
Speaker Change: And with that I'll turn it back over to Mark for some closing comments.
Mark Eubanks: Thanks, Kurt.
Mark Eubanks: Thanks, Kurt in mid June we had our global leadership meeting with our top 150 leaders.
Mark Eubanks: In mid-June, we had our global leadership meeting with our top 150 leaders. Growth in Customer Loyalty, Innovation, and our people in town. Operator, please open the line for questions.
Mark Eubanks: In mid-June, we had our global leadership meeting with our top 150 leaders. We all came together during the week to discuss the potential of our strategy and how we begin to move brings forward as a company. Leaving the event, we align on the unique value creation opportunity that we have in front of us as we execute in the coming quarters and years. I want to thank our leadership team and our employees worldwide for their hard work to get us to this point. I'm encouraged about the future together as we continue to transform the business by focusing on our four strategic pillars.
Mark Eubanks: We all came together during the week to discuss the potential of our strategy and how we begin to move <unk> forward as a company leaving.
Speaker Change: Leaving the event, we aligned on the unique value creation opportunity that we have in front of us as we execute in the coming quarters and years.
Speaker Change: Want to thank our leadership team and our employees worldwide for their hard work to get us to this point.
Speaker Change: I'm encouraged about the future together as we continue to transform the business by focusing on our four strategic pillars.
Mark Eubanks: Grows in Custom Loyalty, Innovation, Operation Excellence, and our People in Talent. Unconfident, continue progress on the pillars of our strategy will position us to drive meaningful, consistent shareholder value for years to come.
Speaker Change: Growth in customer loyalty innovation.
Speaker Change: Operational excellence in our people and talent.
Speaker Change: I'm confident continued progress on the pillars of our strategy will position us to drive meaningful consistent shareholder value for years to come.
Operator: Operator, please open the line for questions. We will now begin the question in the answer session. To ask a question, you may press star, then one on your telephone keypad. If you are using a speaker phone, please pick up your handset before pressing the keys. To withdraw your question, please press star, then two.
Operator, please open the line for questions.
Operator: 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 key. To withdraw your question, please press star, then 2. At this time, we will pause momentarily to assemble our roster. The first question comes from George Tong with Goldman Sachs. Please go ahead.
Speaker Change: We will now begin the question and answer session.
Speaker Change: 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. Please press Star then two at this time, we will pause momentarily to assemble our roster.
Operator: At this time, we will pause momentarily to assemble our roster.
George Tong: The first question comes from George Tong with Goldman Sachs.
The first question comes from George Tong with Goldman Sachs. Please go ahead.
George Tong: Please go ahead. Hi, thanks. Good morning. Morning, George. Hi. You saw significant AMS and BRS organic growth of 26% in the quarter, which was still strong at 23%, even if you exclude the equipment sales benefit.
George Tong: Alright, thanks, good morning.
George: George it's significant.
George: Yes.
George Tong: You saw significant E&S and brs organic growth of 26% in the quarter, which was still strong at 23%. Even if you exclude the equipment sales benefit can you talk more about.
George Tong: Can you talk more about the broader customer traction and receptivity you're seeing within AMS and DRS and how sustainable the current growth rates are?
Mark Eubanks: Can you talk more about broader customer traction and receptivity you're seeing within AMS and BRS and how sustainable current growth rates are? Yes, sure. Thanks, George. We had a strong quarter. I think this is just a continuation of our teams not only executing in the quarter but really developing the longer term pipeline that's led us build up to where we are. We've been talking about this, I think, for some time. I will say that the 26% is a little bit off, as they mentioned in the prepared remarks, with some equipment sales that supported those about 8 million, but still strong 20%-ish growth that we think can continue for the foreseeable future.
Speaker Change: Walter customer traction and receptivity, you're seeing within Ams and Brs and how sustainable current growth rate.
Speaker Change: Yes sure. Thanks George.
Speaker Change: We had a strong quarter in <unk>.
Speaker Change: This is just a continuation of our teams not only executing kind of in the quarter, but really developing the longer term pipeline.
Speaker Change: Let us build up to where we are we've talked to have been talking about this I think for for some time I will say the 26% is a little bit offset as we mentioned in the prepared remarks with some equipment sales that supported those are about $8 million, but still strong 20% ish.
Speaker Change: <unk> growth that we think can continue for the foreseeable future. If you really look at sort of the regions. It was really broad broad based across all.
Mark Eubanks: If you really look at the regions, it was really broad-based across all four regions. In North America, we certainly saw an acceleration that we talked about quite a bit coming out of the fourth quarter with installations and sort of some pent-up demand. As we mentioned, we got through that in Q1. Really, Q2 was just continued solid progression and execution against the platform. Same thing in AMS in North America; we continue to see a re-acceleration of progress with more ATM deployments into our independent ATM network here in North America. If you move on to Latin America, again, good growth there.
Speaker Change: All four regions North America, we certainly saw an acceleration.
Speaker Change: We talked about quite a bit coming out of the fourth quarter with installations.
Speaker Change: There is some pent up demand as we mentioned we got through that in Q1 really Q2 was was just continued solid progression and execution against the <unk>.
Speaker Change: Against the platform same thing in Ams in North America, we continue to see.
A reacceleration of progress with more ATM deployments into our independent ATM network here in North America.
Mark Eubanks: If you move on to Latin America, again, good, good growth there. We've seen some.
Speaker Change: If you move on to Latin America again, good good growth there.
Mark Eubanks: We've seen some; we talked about the fourth quarter, we talked about some re-acceleration, particularly in Brazil, as we continue to really focus more on AMS there versus traditional CIT, and in many cases, in certain market segments, we're only offering DRS. This has really been coming through, and we see this in the numbers and again see that coming not just in Brazil but also in Mexico and other areas. I'd say that the offset to that and what we're seeing this broadly would have been our global services business. That was a bit soft in the quarter again, but as we have talked about in the past, that business really is a good business, good margins.
Speaker Change: We've seen some.
Mark Eubanks: We talked about the fourth quarter. We talked about some reacceleration, particularly in Brazil, as we continue to really focus more on AMS there versus sort of traditional CIT, and in many cases, in certain market segments, we're only offering DRS. This has really been coming through, and we see this in the numbers, and again see that coming not just in Brazil but also in Mexico and other areas of Latin America. I'd say that the offset to that and what we're seeing this broadly would be our global services business.
Speaker Change: We talked about in the fourth quarter, we talked about some reacceleration in particularly in Brazil.
Speaker Change: As we continue to really focus more on Ams, there versus sort of traditional <unk> and in many cases in certain market segments were only offering Drs. This has really been coming through and we see this in the numbers.
Speaker Change: <unk> see that coming.
Speaker Change: Not just in Brazil, but also in Mexico, and other areas of Latin America.
Speaker Change: I would say that.
Speaker Change: The offset to that and what we're seeing broadly would've been our global services business that was a bit soft in the quarter again.
Mark Eubanks: That was a bit soft in the quarter again, but as we have talked about in the past, that business really is a good business, good margins, doesn't have a lot of seasonality. It's more driven, again, by financial markets, whether that's precious metals or currency flows.
Speaker Change: As we have talked about in the past that business really is a.
Speaker Change: It's a good business good margins it doesn't have a lot of seasonality, it's more driven again by financial in markets, whether that's precious metals or currency flows and so that business continues to be healthy business for us we expect some recovery of that in the back half, but it was a bit of a drag on organic growth in the <unk>.
Mark Eubanks: It doesn't have a lot of seasonality; it's more driven by financial end markets, whether that's precious metals or currency flows. That business continues to be a healthy business for us. We expect some recovery of that in the back half, but was a bit of a drag on organic growth in the first.
Mark Eubanks: That business continues to be a healthy business for us. We expect some recovery of that in the back half, but it was a bit of a drag on organic growth in the first, moving on to Europe and the rest of the world. Again, they're Europe, as you know, one of our most highly penetrated AMS DRS markets; we continue to see good progress there. We talked about and highlighted, you know, a big grocery store chain deployment that was, again, We signed the deal in Q2, and then we'll be executing here in Q3 with the conversion. It is really good to see that continued progress.
Speaker Change: Moving on to Europe, and rest of World.
Mark Eubanks: Moving on to Europe and the rest of the world, again there, Europe, as you know, one of our most highly penetrated AMS DRS markets. We continue to see good progress there. We talked about and highlighted a big grocery store chain deployment that was again. We signed a deal in Q2, and then we'll be executing here in Q3 with the conversion. Really good to see that continued progress. And even with what you saw from a margin perspective in that market, we made good progress. We acted a little bit of restructuring as well in Latin America. Both of those had a little bit of headwind that are in our numbers, but again, good progress, not just on growth in DRS, AMS, but also on good core productivity as well as CVM volumes excluding the BGS side.
Speaker Change: There Europe as you know one of our most highly penetrated Ams Drs markets. We continue to see good progress there, we talked about and highlighted a big grocery store chain dips.
Speaker Change: <unk> deployment that was again.
Speaker Change: We signed the deal and in in Q2, and then we will be executing here in Q3 with the conversion really good to see that continued progress and even with what you saw from a margin perspective in that market. We made good progress, we exited a little bit of restructuring as well.
Mark Eubanks: And, you know, even with what you saw, from a margin perspective in that market, we made good progress; we actually did a little bit of restructuring, as well, in Latin America. Both of those had a little bit of headwind that is in our numbers. But, again, good progress, not just on growth in DRS-AMS but also on good core productivity, as well as, you know, CVM volumes, excluding the BGS side.
Speaker Change: In Latin America, both of those had a little bit of headwinds that are in our numbers, but again good progress not just on growth in Drs Ams, but also on good core productivity as well as CDM volumes, excluding the bgs side.
Mark Eubanks: You know, if I think about kind of what happened in the quarter versus what, you know, would have been relative to our expectations, George, AMS-DRS, stronger than we would have expected. You know, again, at the high end of the range. As we think about, you know, for the full year as a percent of sales trending that direction, CVM a little bit, you know, would have been a headwind. Obviously, the BGS soft, as I mentioned, but also, you know, some impact with conversions, conversion of CIT and customers both in ATM, as well as in, you know, retail, moving to AMS and DRS.
Mark Eubanks: If I think about what happened in the quarter versus what would have been relative to our expectations, George, AMS, DRS, stronger than we would have expected. Again, at the high end of the range, as we think about for the full year as a percent of sales, trimming that direction, CVM, a little bit, you know, would have been a headwind. Obviously, the BGS software, as I mentioned, but also, you know, some impact with conversions, converting of CIT and customers both in ATM as well as in retail, moving to AMS and DRS. And then I guess the other thing that we probably would have not seen would have been, you know, some of the FX headwinds that we saw in the quarter from when we talked to you last to, you know, end of June. Certainly, we would have seen, you know, more headwinds than we expected, particularly in June as, you know, the Mexican Rii and the Brazilian Rii and the Mexican peso, you know, really did weaken at largely. Argentina, you know, performed in line with where we expected.
Speaker Change: If I think about kind of what happened in the quarter versus what.
Speaker Change: It would have been relative to our expectations, George Ams Drs stronger than we would've expected again at the high end of the range.
Speaker Change: As we think about.
Speaker Change: For the full year as a percent of sales trending that direction <unk>, a little bit would have been a headwind obviously, the bgs softens I mentioned, but also.
Speaker Change: Some impact with conversions converting of CIT.
Speaker Change: Customers, both in ATM as well as in retail moving to Ams Drs, and then I guess the other thing that we probably would have not seen would have been.
Mark Eubanks: And then I guess the other thing that we probably would not have seen would have been, you know, some of the FX headwinds that we saw in the quarter. But when we talked to you last at the end of June. Certainly, we would have seen, you know, more headwinds than we expected, particularly in June, as, you know, the Mexican reai and the Brazilian reai and the Mexican peso really did weaken. Nevertheless, Argentina, you know, performed in line with where we expected.
Speaker Change: Some of that.
Speaker Change: The FX headwinds that we saw in the quarter.
Speaker Change: When we talked to you last.
Speaker Change: End of June.
Speaker Change: Certainly we would have seen more headwinds than we expected, particularly in June as.
Bruce: <unk> and Bruce.
Speaker Change: Sorry, the Brazilian Reais and Mexican peso.
Speaker Change: Did weaken.
Speaker Change: Largely Argentina performed in line with where we expected.
Mark Eubanks: Yeah, that's a very helpful color. Sticking with AMS and DRS, could you directionally parse out the growth in terms of which of the two grew stronger? Where was the growth really led? And how much of the growth came from conversions of legacy traditional CIT services?
Speaker Change: Got it that's very helpful color sticky.
George Tong: That's very helpful color.
George Tong: Sticking with AMS and DRS, could you directionally parse out the growth in terms of which of the two grew stronger, where was the growth really led by and how much of the growth came from conversions of legacy traditional DIT services and cash and valuables management versus new business wins of non-existing customers? Sure. So, I'll speak broadly, George, because I don't have that all that much detail all the way down, you know, by segment in each of those. But what I would say is, we think it's about a, well, we think it's traditionally been about a third of new business, kind of, you know, unvended customers, about a third of our AMS, DRS would be conversions, and then the other third would be, you know, competitive wins or, you know, to us, they're new customers whether they were served by another DRS, you know, provider or another CIT provider, that would be, you know, or, you know, for AMS the same.
Speaker Change: Sticking with Ams and Drs could you directionally parse out the growth in terms of.
Speaker Change: Which of the two grew stronger where was the growth really led by and.
Speaker Change: How much of the growth came from conversions.
Speaker Change: Legacy traditional.
Speaker Change: T services.
Speaker Change: Cash and valuables management versus new business wins.
Speaker Change: Non existing customers sure so.
Mark Eubanks: Sure. So I'll speak broadly, George, because I don't have all that much detail all the way down, you know, by segmenting each of those. But what I would say is we think it's about – well, we think – it's traditionally been about a third of new business, kind of, you know, unvended customers. About a third of our AMS DRS would be conversions, and then the other third would be, you know, competitive wins, or, you know, to us, they're new customers.
Speaker Change: I'll speak broadly George but I don't have that all of that much detail all the way down by.
Speaker Change: By segment each of those but what I would say is we think it's about while we've.
Speaker Change: Traditionally been about a third of new business kind of.
Speaker Change: And then did customers about a third of our.
Speaker Change: Our <unk> would be conversions and then the other third would be competitive wins or.
Speaker Change: To us they're new customers, whether they were served by another drs provider or another.
Mark Eubanks: Whether they were served by another DRS, you know, provider or another CIT provider, that would be, you know, or, you know, for AMS the same. So I'd say it's about a third, a third, a third is how we look at it, largely, you know, in the quarter, we would have seen, you know, higher growth, and you can see the numbers in North America, but really a pretty balanced AMS-DRS globally, you know, getting, you know, good growth out of both, neither are sort of outperforming, let's say, the number, and our balance in the AMS-DRS, this has also been, you know, some of the discussion in the past, it's really, you know, it's not 50-50, DRS is a little bit bigger, but, you know, it's not 60-40 either, so, you know, somewhere in that, you know, 50-50, 60-40 range, DRS being a little larger, and that continues to progress at the same scale. Got it. Very helpful.
Speaker Change: Provider that would be.
Speaker Change: Or.
Speaker Change: Ams the same so I would say about a third a third a third is how we look at it.
Mark Eubanks: So, I think about a third to third to third is how we look at it. Largely, you know, in the quarter, we would have seen, you know, higher growth, and you can see the numbers in North America, but really a pretty balanced AMS, DRS globally, you know, getting, you know, good growth out of both, neither are, sort of, outperforming, let's say, the number. And I, our balance in the AMS, DRS, this has also been, you know, some of the discussion in the past, it's really, you know, it's not 50-50, DRS is a little bit bigger, but, you know, it's not 60-40 either, so, you know, somewhere in that, you know, 50-50, 60-40 range, DRS being a little larger, and that continues to, to progress at the same scale.
Speaker Change: Largely in the quarter, we would've seen her.
Speaker Change: Higher growth and you can see in the numbers in North America.
Speaker Change: But really a pretty balanced Ams drs globally.
Speaker Change: Good growth out of both neither are sort of outperforming let's say the number and our balance in the Ams Drs has also been some of the discussion in the past is really it's not 50 50, Drs is a little bit bigger but.
Speaker Change: It's not 60 40, either so somewhere in that 50, 50, 60, 40 range Drs being a little larger and that continues to progress at the same scale.
Speaker Change: Got it very helpful. Thank you.
George: Great. Thanks George.
Timothy Mulroney: Next question is from Tim Mulroney with William Blair.
Tim Mulrooney: The next question is from Tim Mulrooney with William Blair. Please go ahead.
George: The next question is from Tim Mulrooney with William Blair. Please go ahead.
Timothy Mulroney: Please go ahead. Good morning, Tim. Good morning.
Tim Mulrooney: Current mark good morning.
Operator: Hey, Tim. Good morning. Welcome to the call. Glad to have you on board.
Tim Mulrooney: Hey, Tim Good morning, and welcome to the call glad to have you on board.
Mark Eubanks: Welcome to the call. Glad to have you on board. Glad to be here. Thank you very much. Just a couple questions from me this morning. You know, we saw some nice improvements in the North America organic growth in the second quarter here. So I'm curious. Is there a good way to think about organic growth run rate as we move into the back half of this year? You know, is that what we saw in the second quarter? Is that a good number to think about representative for the back half, or do you expect another step up here as we move into the second half of the year?
Tim Mulrooney: Hi Tim. Glad to be here. Thank you very much.
Tim Mulrooney: I'm glad to be here. Thank you very much just a couple of questions from me. This morning, we saw some nice improvement in the <unk>.
Mark Eubanks: Just a couple questions for me this morning. We saw some nice improvements in North America organic growth in the second quarter here. So I'm curious, is there a good way to think about organic growth run rate as we move into the back half of this year? Is that what we saw in the second quarter, is that a good number to think about representative for the back half? Or do you expect another step up from here as we move into the second half of the year?
Speaker Change: North America organic growth in the second quarter here.
Speaker Change: I'm curious.
Speaker Change: Is there a good way to think about organic growth run rate as we move into the back half of this year.
Tim Mulrooney: Yes.
Speaker Change: Is that what we saw in the second quarter is that a good number to think about representative for the back half or do you expect another step up here as we move into the second half of the year.
Mark Eubanks: Yeah, Tim, as we talked about, you know, a year ago, really, we were in this portfolio rationalization we did in Q2 of last year. So there's a little bit of a hangover, I'd say in this quarter still, that was a headwind for us. But if you think about the progression we saw in Q4, Q of last year, Q1, and now in Q2, we think there's a little bit more of a step up as we think about Q3 and Q4 that will continue, you know, sort of toward that mid single-digit run rate that we think is the exit rate.
Mark Eubanks: Yeah, Tim. And we talked about, you know, a year ago, really, we were this portfolio rationalization we did was in Q2 of last year. So there's a little bit of hangover, I'd say, in this quarter still that was a headwind for us. But if you think about the progression we saw in Q4, Q, you know, last year, Q1 now in Q2, we think there's a little bit more of a step up as we think about Q3 and Q4 that will continue. You know, sort of toward that mid single-digit run rate that we think is the exit rate for the year.
Tim Mulrooney: Yes, Tim.
Tim Mulrooney: And we talked about.
Tim Mulrooney: A year ago really we would this portfolio rationalization. We did was in Q2 of last year.
Speaker Change: So there's a little bit of hangover I would say in this quarter still.
Tim Mulrooney: That was a headwind for us.
Speaker Change: If you think about the progression we saw in Q4 Q3 of last year Q1, now in Q2, we think theres a little bit more of a step up as we think about Q3 and Q4 that will continue.
Speaker Change: Sort of toward that mid single digit run rate that we think is the exit rate for the year.
Mark Eubanks: Yeah, that's exactly what I was wondering, Mark, about lapping the portfolio rationalization. There was a little bit more there. So, thank you. Yeah, and Q2 should be, I'm sorry, Q3 would be our first full clean quarter on that.
Speaker Change: Yes, that's exactly what I was wondering Marc.
Mark Eubanks: Yeah, that's exactly what I was wondering, Mark, that laughing the portfolio rationalization; there was a little bit more there. So thank you. Yeah, and Q2 should be, I mean, I'm sorry, Q3 would be our first full clean quarter on that. Now, the underlying piece of this a little bit is the, you know, it's still the global services business that's in the North America segment. That has been a little bit soft, and that's a, you know, substantial business for us. But that's in the CVM numbers. Got it. Okay, thank you.
Speaker Change: Lapping the portfolio rationalization, there was a little bit color there. Thank you.
Speaker Change: Q2 should be I mean, I'm, sorry, Q3 will be our first full clean quarter on that.
Mark Eubanks: Now, the underlying piece of this a little bit is the, you know, still the global services business that's in the North America segment that has been a little bit soft. And that's, you know, a substantial business for us. But that's in the CBM numbers. Got it. Okay. Thank you.
Speaker Change: Now the underlying piece of this a little bit is the still the global services business Thats in the North America segment that has been a little bit soft and thats a substantial business for us.
Speaker Change: But thats in the CDM numbers.
Mark Eubanks: And then shifting gears here from North America down to Latin America. You know, it just looks like that FX headwind spikes quite a bit in Latin America, you know, and you're able to get pricing offset most of that, but can you just step back, can you just help us understand a bit better? how you're approaching this inflationary issue, whether there is an expectation for this elevated headwind to continue through the year, and any detail on how the Latin America segment is performing outside of these highly inflationary areas like Argentina.
Speaker Change: Got it okay. Thank you.
Mark Eubanks: And then shifting gears here from North America down to Latin America. You know, it, I mean, it just looks like that effect headwind spike. Quite a bit in Latin America. You know, and you're able to get pricing off that most of that, but can you just like stepping back? Can you just help us understand a bit better how you're approaching this inflationary issue? If there is an expectation for this elevated headwind to continue through the year and any detail on how the Latin America segment is performing outside of these highly inflationary areas like Argentina. Sure, so maybe I'll take the Argentina piece first.
Speaker Change: And then shifting gears here from from North America down to Latin America.
Speaker Change: I mean, it just looks like that FX headwind spike.
Speaker Change: Quite a bit in Latin America.
Speaker Change: And Youre able to.
Speaker Change: To get pricing offset most of that but can you just stepping back can you just help us understand a bit better.
Speaker Change: How you are approaching this inflationary issue.
Speaker Change: If there isn't sure patients for this elevated headwind to continue through the year and any detail.
Speaker Change: On how the Latin America segment is performing outside of these highly inflationary areas like Argentina.
Mark Eubanks: Sure, so maybe I'll take the Argentina piece first. You know, Argentina is largely in line with our expectations for the year and really has not been a.., a big headwind for us relative to where we are today and what we see for the rest of the year. We have seen a little bit of margin compression that I mentioned in the prepared remarks about just really catching up on the steep devaluation that occurred at the end of the year last year, but on a revenue perspective, largely okay.
Speaker Change: Sure So maybe I'll take the.
Speaker Change: The Argentina piece first.
Speaker Change: Hi.
Mark Eubanks: You know, Argentina largely is in line with our expectations for the year and really has not been a big headwind for us relative to where we are today and kind of what we see the rest of the year. We have seen some a little bit of margin compression that I mentioned in the prepared remarks about just really catch up over the steep devaluation that occurred at the end of the year last year. But on a revenue perspective, largely okay, our pricing, you know, continued cadence continues. And we think we can hold, you know, continue to do what we've done in the past.
Speaker Change: Argentina largely is in line with our expectations for the year and really has not been a.
Speaker Change: A big headwind for us relative to our to where we are today and kind of what we see the rest of the year, we have seen some a little bit of margin compression that I mentioned in the prepared remarks about just really catch up over the steep devaluation that occurred at the end of the year last year, but on a revenue perspective largely okay.
Mark Eubanks: Our pricing cadence continues, and we think we can hold, you know, continue to do what we've done in the past. I think that the one that we would have caught in the second quarter was the Mexican peso and the Brazilian real. And, you know, there was an election down there that that's not really a highly inflationary market as we think about it.
Speaker Change: Our pricing continued cadence continues and we think we can hold.
Speaker Change: <unk>.
Speaker Change: Jim do what we've done in the past I think the one that we would.
Mark Eubanks: I think that the one that we would, you know, that caught us in the second quarter, you know, was the Mexican peso and the Brazilian ri eye. And, you know, there was an election down there that's not really a highly inflationary market as we think about it. But those are good businesses for us; for us, they're big businesses for us, and they're their profitable businesses. So that, you know, we did see some headwind that we had to largely perform through in the first half. If we took the, and that's sort of the way we're thinking about the future, you know, in the back half, we, in Kurt mentioned it, you know, in the prepared remarks, that we think there's a, you know, if it took current rates, we think there could be anywhere from 50 to 75 million worth of revenue headwind from those currencies.
Jim: It caught us.
Speaker Change: In the second quarter was the Mexican peso and the Brazilian real and there was an election down there.
Speaker Change: Not really a highly inflationary market as we think about it but those are good business for us for us they are big businesses for us and they are they are profitable businesses. So that we did see some headwind that we had to largely perform through in the first half.
Mark Eubanks: But those are good businesses for us. They're big businesses for us, and they're profitable businesses.
Mark Eubanks: So, you know, we did see some headwind that we had to, you know, largely perform through in the first half. If we took the, and that's sort of the way we're thinking about the future, you know, in the back half, we, and Kurt mentioned it, you know, in the prepared remarks that we think there's a, you know, if you took current rates, we think there could be anywhere from 50 to 75 million worth of revenue headwind from those currencies. This is not really, again, an Argentina issue.
Speaker Change: If we took the and thats sort of the way we're thinking about the future.
Speaker Change: In the back half.
Speaker Change: And Kurt mentioned it in the prepared remarks.
Speaker Change: <unk>.
Speaker Change: We think there is a.
Kurt: If you took current rates, we think there could be anywhere from $50 to $75 million worth of revenue headwind.
Speaker Change: From those currencies. This is not really again on Argentina issue.
Mark Eubanks: This is not really, again, an Argentina issue. And so, you know, for us, this is where we would continue to think about how we're going to run the business and how we manage the business. And, you know, whether that's on controllable costs or overdriving productivity, you know, that we have been doing. In fact, we did a little bit of restructuring in the first half. And quite a few percent of that happened in Q2. That was a way to march in Latin America. Otherwise, you would have had, you know, good expansion in Q2, excluding that restructuring.
Speaker Change: And so for US this is where we would continue to think about how we're going to run the business and how we manage the business and whether that's on controllable costs are over driving productivity.
Kurt McMaken: And so, you know, for us, this is where we would continue to think about how we're going to run the business and how we manage the business and, you know, whether that's controllable costs or overdriving productivity, you know, that we have been doing. In fact, we did a little bit of restructuring in the first half, and quite a bit of that happened in Q2. That was a headwind to our margins in Latin America.
Speaker Change: We have been doing in fact, we did a little bit of restructuring in the first half.
Speaker Change: And quite a bit.
Speaker Change: Okay.
Speaker Change: Okay.
Speaker Change: That was it.
Speaker Change: Right.
Speaker Change: Latin America, otherwise would've had.
Kurt McMaken: Otherwise, we would have had, you know, good expansion in Q2, excluding that restructuring. Of course, that's in our numbers, but we think it was the right kind of investment to make for the future to right-size our footprint in those markets. Kurt, anything else you want to add? It's as much as that.
Speaker Change: Good expansion in Q2, excluding that restructuring of course.
Kurt McMaken: Of course, that's in our numbers. But we think we're the right kind of investment to make for the future to, to the right size our footprint in those markets.
Speaker Change: That's in our numbers, but we think it was the right kind of investments to make for the future.
Speaker Change: Right size, our footprint in those markets.
Kurt McMaken: Pretty much what you want to add. That was also a reason; you know, we mentioned that we had, you know, about a 30 million headwind in the first half of the year. Yeah, you know, really overdrive on productivity and mix to drive the profitability. So we kind of overcame a lot of those headwinds from the effect side. And just add kind of what Mark was saying about, I think it was also a good way to think about the second half in terms of how we're thinking about trying to overdrive on other areas to overcome, you know, those kinds of headwinds if you were to use those rates.
Speaker Change: Anything else you want to add.
Kurt McMaken: It's in my mind that that was also a reason we mentioned that we had, you know, about a 30 million headwind in the first half of the year, yet we really overdrove on productivity and mix to drive profitability. So we kind of overcame a lot of those headwinds from the FX side, and just add kind of what Mark was saying about how I think it was also a good way to think about the second half in terms of how we're thinking about trying to overdrive in other areas to overcome, you know, those kinds of headwinds.
Speaker Change: There was also a reason we mentioned that we had.
Speaker Change: About a $30 million headwind in the first half of the year, yet really over drove on productivity and mix to drive the profitability. So we kind of overcame a lot of those headwinds from the FX side.
Speaker Change: Just add kind of what Mark was saying about I think it was also a good way to think about the second half in terms of how we're thinking about trying to overdrive on.
Mark Eubanks: Other areas to overcome.
Mark Eubanks: Those kinds of headwinds if you were to use those rates.
Mark Eubanks: Okay. Yeah.
Mark Eubanks: Okay.
Mark Eubanks: Okay. One last thing, the tough thing for us, Kim, obviously we don't... We don't prognosticate on FX. I think this color is more about sort of the current state, sort of the end of the quarter. I mean, I looked this morning and the peso actually is, has strengthened, you know, this morning by about a percent and a half. So, you know, We've not traditionally seen the Mexican peso be volatile. And so obviously, the election down there in the second quarter was part of that.
Mark Eubanks: Yes.
Mark Eubanks: The tough thing for us, you know, obviously we don't, we don't prognosticate on FX. I think this color is more about sort of current state. It's sort of into the quarter. I mean, I look this morning, you know, peso actually has strengthened, you know, this morning, about a percent and a half. So, you know, we've not traditionally seen Mexican pace of beef, beef volatile. And so, you know, obviously the election, you know, down there in the second quarter was part of that, but also, frankly, it's really central central bank interest rate policy. And so, as the regimes are moving back towards cutting or not cutting, I think this is something we'll continue to watch and be fluid as we go through it.
Speaker Change: The tough thing for US obviously, we don't.
Speaker Change: We don't prognosticate on FX.
Speaker Change: I think this color is more about sort of current state sort of at the end of the quarter I mean I looked this morning.
Speaker Change: Peso actually is.
Speaker Change: Strengthened.
Speaker Change: This morning.
Speaker Change: As a percent in half so.
Speaker Change: We have not traditionally seen Mexican peso be.
Speaker Change: Volatile and so.
Speaker Change: Obviously the election down there in the second quarter was part of that but also frankly, it's really central Central bank interest rate policy and so as the regimes are moving back towards cutting or not cutting I think this is something we will continue to watch and be fluid as we go through it and Inorganically we're on.
Mark Eubanks: But also, frankly, it's really central bank interest rate policy. And so as the regimes are moving back towards cutting or not cutting, I think this is something we'll continue to watch and be fluid as we go through it. And organically, are we on track?
Mark Eubanks: And organically, we're on track. Yeah. Understood.
Speaker Change: On track yes.
Operator: Yeah. Okay. Hey, thanks very much and a great quarter guys. Yeah, thanks, Tim. Welcome again.
Speaker Change: Understood. Okay, thanks, very much and great quarter guys.
Mark Eubanks: Okay.
Mark Eubanks: Thanks very much, and great quarter, guys. Yeah. Thanks, Tim.
Speaker Change: Yes, Thanks, Tim and welcome again.
Toby Summer: The next question is from Toby Summer with Truest Securities. Please go ahead. Yeah. Hey. Good morning, guys.
Tobey Sommer: The next question is from Tobey Sommer with Truist Securities. Please go ahead.
Speaker Change: The next question is from Tobey Sommer with Trust Securities. Please go ahead.
Jack Wilson: Yeah, hey, good morning, guys. This is Jack Wilson on for Tobey.
Speaker Change: Yeah, Hey, good morning, guys, Jack Wilson on for Tobey.
Jack Wilson: Jack Wilson on for Toby.
Jack Wilson: Maybe just to start out, can we sort of maybe dig into sort of the long-term business mix and sort of how you see that developing with AMS and DRS growing so quickly?
Jack Wilson: Maybe just to start out, we're in sort of maybe digging the sort of the long term business, and it can sort of how you see that developing with sort of AMF and DRS growing so quickly. Yeah. Sure. Jack. Good morning. You know, we can we think this. Let's back up. We started the beginning of the year talking about high teens to 20% kind of growth rates in AMF DRS. for the year and likely into the coming years. We think we can sustain that kind of growth rate. We obviously get into a small or larger numbers as we go forward.
Jack Wilson: Maybe just to start out.
Jack Wilson: Maybe dig into sort of the long term business mix and sort of how you see that developing with.
Speaker Change: And that's in Drs growing so quickly.
Mark Eubanks: Yeah, sure, Jack. Good morning.
Speaker Change: Yeah, sure Jack and good morning.
Speaker Change: We think this.
Mark Eubanks: You know, we can think this week, let's say, let me back up. We started at the beginning of the year talking about high teens to 20% kind of growth rates in AMS DRS for the year and likely into the coming years. We think we can sustain that kind of growth rate. We obviously get into a lot of small or larger numbers as we go forward, but we have accelerated here. We think some of these big customers are still pretty lumpy. You know, we get some big ones.
Speaker Change: Let me back up we started the beginning of the year talking about high teens to 20% kind of growth rates in Ams Drs.
Speaker Change: For the year and likely into the coming years, we think we can sustain that.
Speaker Change: That kind of growth rate, we obviously get into a lot of small small or larger numbers as we go forward.
Mark Eubanks: We have accelerated here. We think some of these big customers are still pretty lumpy. We get some big ones, and so they end up impacting quarters. We think 20% still is kind of the right kind of organic growth rate. If you run that forward in the next few years, it's not so hard to imagine we get to 30% penetration of our total portfolio in the coming two, three years, three to four years, whatever that math is. So we don't think there's a structural reason why we can't continue to grow. Given not only the conversion capability or potential in our portfolio, but the multiple of the unwinded space, particularly in DRS when you think about small retailers, small media retailers, but then also on the AMS side, as we start to see more banks globally outsourcing their networks to drive better productivity and efficiency in their networks.
Speaker Change: We have accelerated here.
Speaker Change: Think some of these big customers are still pretty lumpy, we get some big one and so they end up impacting quarters. We think 20% still is kind of the right kind of organic growth rate. If you run that forward. The next few years, it's not so hard to imagine we get to 30%.
Mark Eubanks: And so they end up, you know, impacting quarters. We think 20% still is kind of the right kind of organic growth rate. If you run that forward for the next few years, it's not so hard to imagine we get to 30% penetration of our total portfolio and, you know, in the coming two, three years, three to four years, whatever that math is. So we don't think there's a structural reason why we can't continue to grow, given not only the conversion capability or potential in our portfolio but the multiple of the unvended space, particularly in DRS when you think about small retailers, small, medium retailers. But then also on the AMS side, as we start to see more banks globally outsourcing their networks to drive better productivity and efficiency in their networks.
Speaker Change: Penetration of our total portfolio.
Speaker Change: In the coming two.
Speaker Change: Two to three years three years four years, whatever that math is so we don't think there's any structural reason why we can't continue to grow given not only the conversion capability or potential in our portfolio, but the multiple of the <unk> space, particularly in Drs. When you think about small retailers.
Speaker Change: Medium retailers, but then also on the Ams side as we start to see more banks globally outsourcing their networks to drive better productivity and efficiency in their networks.
Mark Eubanks: Okay, thanks. I color there.
Jack Wilson: Okay, thanks for that color there. And then, sort of on the capital allocation front, sort of in the same vein, are there any sort of opportunities you see in the AMS DRF space to sort of grow inorganically or to sort of add new technologies to the portfolio?
Speaker Change: Okay. Thanks for that color.
Mark Eubanks: And then just sort of on the capital allocation, fronts are in the same vein. Are there any sort of opportunities you see in the AMS DRS space to sort of grow in organically or to sort of add new technologies to the portfolio? Yeah, Jack is correct. I mean, we have a nice pipeline of opportunities in AMS DRS that's, you know, as we look to allocate capital, if there's an acquisition that in terms of that looks attractive to us to transfer strategy, that's where we would do it. And so it's something we assess all the time.
Speaker Change: And then just sort of on the capital allocation front, serving the same vein are there any sort of opportunities you see in the Ams Drs space to sort of grow inorganically or some sort of add new technologies to the portfolio.
Kurt McMaken: Yeah, Jack, this is Kurt. I mean, yeah, we have a nice pipeline of opportunities in AMS-DRS that, you know, as we look to allocate capital and make acquisitions, in terms of that looking attractive to us to advance our strategy, that's where we would do it. And so it's something we assess all the time, and as we talk about acquisitions, generally for us, you know, there are a lot of hurdles that it has to cross to make sense for us relative to our total allocation of capital.
Yes, Jack this is Kurt.
Speaker Change: Yes.
Kurt: Nice pipeline of opportunities in <unk>, that's as we look to allocate capital if there's an acquisition that.
Speaker Change: In terms of that looks attractive to us to advance our strategy.
Speaker Change: That's where we would do it and so it's a.
Speaker Change: It's something we assess all the time and as we talk about acquisitions generally for us.
Mark Eubanks: And as we talk about acquisitions, generally for us, you know, there are a lot of hurdles that it has to cross to make sense for us, relative to our total allocation of capital. And we have to; the other thing we always do is make sure that we're doing it connected with all the other aspects of our capital allocation philosophy. So it's got to make strong strategic sense. And we do have opportunities that we're that we're always looking at. And so let me just put a bit of a finer point on that. We have talked about this historically as well.
Speaker Change: Our.
Speaker Change: A lot of hurdles that it has to cross to make sense for us relative to our total allocation of capital.
Kurt McMaken: And we have to, the other thing we always do is make sure that we're doing it connected with all the other aspects of our capital allocation philosophy. So it's got to make strong strategic sense. And we do have opportunities that we're always looking at. And so, let me just put a bit of a finer point on that. We have talked about this historically as well, where we like our footprint, and we like our portfolio today. We think geography, we've got a big geography, you know, 52 countries we operate in over 100.
Speaker Change: And we have to the other thing we always do is to make sure that we're doing it.
Speaker Change: Connected with.
Speaker Change: All of the other aspects of the of our capital allocation philosophy. So it's got to make strong strategic sense and.
Speaker Change: And we do have opportunities that we are.
Speaker Change: But we're always looking at and so let me just put a bit of a finer point on that.
Speaker Change: I've talked about this historically as well.
Mark Eubanks: We're, we like our footprint. We like our portfolio today. We think geography; we've got a big geography. You know, 52 countries operate in over 100. But anything that we would do of significance in M&A would be very tightly aligned to AMS and DRS. Whether that was ATM networks and you've seen us, you know, in the past, you know, whether it's P.A.I. or Note Machine in the UK, we've done a couple of little small bolt-ons here lately that were ATM networks. But we would be focused on that. Or somewhere in the hardware software technology space connected to DRS or to AMS. And again, these would be with the focus of extending the value proposition to our customers that allows us to leverage our network that we have installed already and our customer base already to serve those customers in, you know, further up the value chain that that would be a good value prop to them.
Speaker Change: We like our footprint, we like our portfolio today, we think geography, we've got a big geography 52 countries.
Mark Eubanks: But anything that we would do of significance in M&A would be very tightly aligned to AMS and DRS, whether that were ATM networks, and you've seen us in the past, you know, whether it was PAI or Note Machine in the UK. We've done a couple of little, small bolt-ons here lately that were ATM networks, but we would be focused on that or somewhere in the hardware and software technology space connected to DRS or to AMS.
Speaker Change: Operate in over 100.
Speaker Change: But.
Speaker Change: Anything that we would do.
Speaker Change: Of significance.
Speaker Change: In M&A would be very tightly aligned to Ams and Drs, whether that was ATM networks and you've seen us in.
Speaker Change: In the past.
Speaker Change: Whether it's AI or no machine in the U K, we've done a couple of little small bolt ons here lately.
Speaker Change: That we're ATM networks, but we would be focused on that or somewhere in the hardware software technology space connected to drs or to Ams and again these would be with the focus of extending the.
Mark Eubanks: And again, this would be with the focus of extending the value proposition to our customers that allows us to leverage our network that we have installed already in our customer base to serve those customers further up the value chain that would be a good value proposition to them. And we talked about that on the call, whether that's cost productivity or improved reliability for ATM networks. This is an area where we continue to focus on thinking about the outsourcing of bank infrastructure that leverages our network.
Speaker Change: Value proposition to our customers that allows us to leverage our network that we have installed already in our customer base already to serve those customers in.
Speaker Change: Further up the value chain.
Speaker Change: That that would be a good value prop to them and we've talked about that on the call, whether that's cost productivity or improve reliability.
Mark Eubanks: And we talked about that on the call, whether that's cost productivity or improved reliability for ATM networks. This is an area where we continue to focus on thinking about the outsourcing of bank infrastructure that leverages our network. Sounds good.
Speaker Change: For ATM networks. This is an area, where we continue to focus on thinking about the outsourcing of bank infrastructure.
Speaker Change: That leverages our network.
Operator: Sounds good. Thanks, Scott. We'll turn it over.
Speaker Change: Sounds good thanks, guys I'll turn it over.
Mark Eubanks: Thanks, Scott. We'll turn it over.
Operator: Great.
Speaker Change: Great.
Operator: This concludes our question and answer session.
Mark Eubanks: This concludes our question and answer session. I would like to turn the conference back over to Mark Eubanks for any closing remarks.
Mark <unk>: This concludes our question and answer session I would like to turn the conference back over to Mark <unk> for any closing remarks.
Mark Eubanks: I would like to turn the conference back over to Mark Eubanks for any closing remarks. Thank you all for joining us today. We appreciate all your support and look forward to speaking to you all soon.
Mark Eubanks: Thank you all for joining us today. We appreciate all your support and look forward to speaking to you all soon. Thanks. Have a great day.
Mark <unk>: Thank you all for joining US today, we appreciate all your support and look forward to speaking to you all soon.
Mark Eubanks: Thanks and have a great day.
Mark <unk>: And have a great day.
Operator: The conference has now concluded. Thank you for attending today's presentation.
Operator: The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.
Speaker Change: The conference has now concluded. Thank you for attending today's presentation you may now disconnect.
Operator: You may now disconnect.