Q3 2024 The Brink's Co Earnings Call
The New York Times
Speaker Change: Good morning, welcome to the Brink's Company's third quarter, 2024 earnings call.
This morning, Brinks issued a press release detailing its third quarter of 2024 results. The company also found an 8K that includes the release and the slides that will be used in today's call.
The release insides are available in the Investor Relations section of the company's website at investors.brinks.com
Speaker Change: At this time our participants are in listen-only mode. A question and answer session will follow the presentation. As a reminder, this conference is being recorded and will be available for replay.
This car in 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.
Speaker Change: Information presented and discussed on this call is representative of today only. Brinks assumes no obligation to update any forelooking statements. The call is copyrighted and may not be used without written permission from Brinks.
Speaker Change: I will now turn it over to your host, Jesse Jenkins, Vice President of Investor Relations.
Jesse Jenkins: Mr. Jenkins, you may begin. Thanks and good morning. Joining me today are CEO Mark Eubanks and CFO Kurt McMaken. This morning, Brinks reported third quarter 2024 results on a gap, non-gap, and constant currency basis.
Speaker Change: Most of our comments today will be focused on our non-GAAP results. These non-GAAP financial measures are intended to provide investors with a supplemental comparison of our operating results and trends for the periods presented.
Speaker Change: Our management believes that these measures are also useful to investors as such measures allow investors to evaluate our performance using the same metrics that our management uses to evaluate past performance and prospects for future performance.
Speaker Change: 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, all of which can be found on our website. I will now turn the call over to Brink CEO, Mark Eubanks.
Mark Eubanks: Thanks, Jesse, and good morning. Thanks for joining us.
Mark Eubanks: Starting on slide 3, we delivered total organic growth of 13% in the quarter. ATM managed services and digital retail solutions or AMS and DRS grew 26% organically marking another quarter of growth ahead of our expectations.
Mark Eubanks: With double-digit organic growth in AMS and DRS in every regional segment, with healthy backlogs, and a good pipeline of future opportunities, we continue to build momentum in these important growth areas.
Mark Eubanks: Cash and Valuables Management, or CVM, was up 9% organically with pricing execution offsetting market softness in our global services business.
Mark Eubanks: The strengthening U.S. dollar caused an 11% FX headwind in the period. The FX headwind was more than we originally expected, primarily due to the devaluation of the Mexican peso.
Mark Eubanks: Adjusted EBITDA of 217 million was impacted by the timing of a 10 million dollar increase in security losses in the quarter. Adjusting for this item EBITDA margins were 18% in the quarter down 80 basis points for the same quarter last year.
Mark Eubanks: The margin declines included a headwind from dollar strengthening in our high margin Latin America businesses.
Mark Eubanks: revenue mix related to our global services business, as well as the impact of a delay in productivity in North America as we deploy a new routing system. I'll have more details on North America performance in a few slides.
Mark Eubanks: We generated $135 million in free cash flow with better asset efficiency and working capital improvements primarily related to DSOs and AR management being offset by the impact of lower EBITDA and the currency impact of our FX hedging portfolio. Kurt will have more on our free cash flow performance and outlook later in the call.
Mark Eubanks: We make two key additions to our executive team in the quarter. Josh Titak is leading our Brinks business system efforts and I've tasked him with delivering cost productivity across the P&L as we continue to standardize and simplify operations worldwide.
Mark Eubanks: Josh's background at GE and Eaton and deep experience in lean and continuous improvement make him the ideal person to help us unlock additional opportunities as we continue to expand our EBITDA margins.
Mark Eubanks: We recently appointed Nader Antar as the global leader of Brinks Global Services. Nader joins us with global experience with companies like Honeywell, United Technologies, and Otis Elevators.
Mark Eubanks: Nodder will be focused on identifying and capturing new growth opportunities across our total addressable market. They'll also focus on improving our operational cadence as well as strengthening our compliance culture and then finally developing our global talent agenda for our Brinks Global Services business.
Mark Eubanks: Despite the near-term market headwinds caused by record-high gold and silver prices, we have a leading market presence and are leveraging a large global footprint that makes us the logical choice for customers when these markets return to form.
Mark Eubanks: operationally continue to advance our AMS and DRS businesses.
Mark Eubanks: We are increasing our organic growth expectations for the remainder of the year to more than 20% And we now expect AMS DRS revenues to exceed the high end of our original mixed expectations of 23%
Mark Eubanks: Our customers appreciate the value proposition of these services and our teams continue to embrace the power of shifting our business to these higher margin, faster growing businesses.
Mark Eubanks: With a robust backlog of devices to install in the fourth quarter, we have increasing confidence in our revenue trajectory for the balance of the year. And, with a full pipeline, we're off to a strong start towards achieving our 2025 targets of mid- to high-teens organic revenue growth.
Mark Eubanks: We also continue to execute on our capital allocation framework, maintaining our leverage target below three times, and returning capital to shareholders by purchasing $125 million in shares year-to-date through the third quarter.
Mark Eubanks: In total, we've reduced our share count by 5% year-over-year and continue to target more than $200 million of repurchases in 2024 as we work through the remaining $375 million worth of authorization that runs through 2025.
Mark Eubanks: At the bottom of the page you can see our updated full year 2024 guidance. Revenue over $5 billion reflects the impact of approximately $100 million in currency headwinds primarily from the Mexican peso and to a lesser extent some market softness in our global services business.
Mark Eubanks: Adjusted EBITDA of $910 million at the midpoint reflects the mixed impact of lower revenue and high margin geographies and lines of business.
Mark Eubanks: Free cash flow reflects the EBITDA change, as well as higher cash taxes from geographic mix of income and the impact of currency fluctuation in the quarter.
Mark Eubanks: While our quarter and the balance of the year fell short of our initial expectations, we continue to make good progress executing against our strategy and transforming our operations.
Mark Eubanks: We are seeing strong demand in our higher growth tech-enabled solutions, and we believe we're turning the corner on our routing processes that will help us further operationalize the margin benefits of AMS and DRS, and we have a clear line of sight to the productivity actions and growth initiatives into 2025.
Mark Eubanks: I'm confident we're making the right investments in the business to improve predictability in our results and remain very encouraged by the opportunity still in front of us.
Mark Eubanks: Turning to slide four.
Mark Eubanks: I'll move quickly through the headline results of Q3, as Kurt will discuss
Mark Eubanks: these in detail in a few slides. Organic growth of 13% was partially offset by an 11% impact from translational effects. Adjusted EBITDA declined $4 million year over year when adjusted for the previous mentioned lossy bit in the quarter. Earnings per share was down $0.40 year over year due to higher interest expense and the lapping of a prior year marketable security gain.
Mark Eubanks: Trailing 12-month free cash flow was 262 million dollars with conversion from trailing 12-month EBITDA of 29 percent.
Mark Eubanks: Turn to slide 5. You'll recognize an update to a slide we shared last quarter. On the left you can see we continue to make meaningful progress, expanding margins in North America, up 120 basis points from the end of the year, and delivering EBITDA growth at a 15% CAGR since 2018. In the quarter, we accelerated technology and systems investments that we expect to enable better planning and routing processes across our network, as well as migration of our legacy on-premise data center to the cloud for improved security and global scalability.
Mark Eubanks: We've also moved local logistics plan activities into a centralized control tower equipped with industry-leading, smart algorithms to better optimize our routes.
Mark Eubanks: With the accelerating growth in our AMS and DRS business, it's vital that we have a best-in-class system and process to fully realize the benefits of the additional capacity from the reduction of stops that the operating model delivers.
Mark Eubanks: During the rollout of the system, we experienced system integration issues that caused us to slow the planned deployment to better ensure operational stability and performance.
Mark Eubanks: We have planned this initial investment to be offset by approximately 8 to 10 million dollars in labor and fleet productivity that we did not realize in the quarter.
Mark Eubanks: We are being very deliberate in our continued deployment as we work through these issues during the quarter.
Mark Eubanks: in several pilot markets in large U.S. metropolitan cities. While the results are early, we are seeing meaningful improvements in key metrics like service quality and stops per work hour that we believe will ultimately translate into labor and fleet productivity across the entire network.
Mark Eubanks: We now expect these productivity benefits to ramp over the next few quarters and hit full maturity in the first half of 2025.
Mark Eubanks: Turn to slide six. I'll provide some detail on revenue by customer offering.
Mark Eubanks: In cash and valuables management, we saw organic growth of 9% in our core cash management business. Volumes remained stable in most geographies, despite the uncertain retail environment and geopolitical backdrop, particularly here in the U.S., as well as other countries around the world.
Mark Eubanks: This growth was also supported by strong price realization, but was partially offset by BGS market softness with the movement of precious metals and commodities.
Mark Eubanks: The Global Service's softness had a negative revenue and profit impact against our expectations in every segment, including the Americas. With gold and silver prices consistently rising throughout the year with limited volatility, the demand for movement and storage of precious metals from mining operations to refineries and financial institutions
Mark Eubanks: Slowed.
Mark Eubanks: supported by a new dedicated leader in global services, we plan to expand into new growth avenues that further leverage our existing infrastructure.
Mark Eubanks: The DRS business continues to exceed our expectations. Favorable demand patterns are driving double-digit growth in all segments as we continue to penetrate a large unvended market and convert our existing legacy cash and transit customers to more tech-enabled solutions.
Mark Eubanks: Customers are reacting favorably to the value proposition of these services as they look for ways to maximize working capital, reduce bank fees, and simplify the day-to-day operations for employees during a changing retail backdrop, especially here in the U.S.
Mark Eubanks: We've built a backlog that supports our fourth quarter forecast and we continue to expand our pipeline of potential DRS customers into next year. We've had several key wins that we closed here in the quarter including a large U.S. nationwide auto parts dealer, a national pharmacy chain in a Latin American country, and a hypermarket chain in the U.S.
Mark Eubanks: in Asia-Pacific.
Mark Eubanks: AMS delivered the third consecutive quarter of accelerating organic growth as we continue to educate financial institutions on the benefits of outsourcing as well as place new ATMs into retail operations.
Mark Eubanks: With several new customers set to onboard in early 2025, we have significant momentum. We have many new early-stage opportunities that we're just beginning to explore, and an increasing number of opportunities that have already moved into the pilot phase.
Mark Eubanks: Our global pipeline is vast and maturing in quality, and we're very excited about several key wins in the period.
Mark Eubanks: Beyond the previously announced Sainsbury's partnership, which I'll touch on in a moment, we signed an outsourcing agreement with a major grocery store chain in Europe, as well as several ATM outsourcing service agreements with both retailers and financial institutions here in the U.S.
Mark Eubanks: Turn to slide 7.
Mark Eubanks: I'd like to take a second to highlight a key AMS win from the third quarter.
Mark Eubanks: On September 25th, we announced an agreement to provide full ATM managed services for Sainsbury's, one of the largest grocery and convenience store chains in the UK. As part of the agreement, Sainsbury's ATMs will fully transition to our network and we will provide all services associated with the ATM ownership.
Mark Eubanks: We differentiate ourselves during this competitive process by our ability to be a single provider across the entire value stream. Everything from cash in transit, first and second line maintenance, to cash forecasting, and transaction processing.
Mark Eubanks: The addition of Sainsbury's will increase our network of ATMs by about 15% in the UK providing increased route density, increased processing volume, and increased scale while leveraging back office and network infrastructure at higher incremental margins.
Mark Eubanks: We're excited about the relationship with a great partner and are working diligently on the transition plan, which we expect to be completed through the first half of next year.
Mark Eubanks: Overall, I'm pleased with the progress in both AMS and DRS so far this year. We continue to build momentum and strengthen our operating cadence.
Mark Eubanks: We're improving our go-to-market tactics through solution-based selling and aligning our incentives to drive the right behaviors locally.
Mark Eubanks: We've increased our performance expectations this year and into 2025 and I look forward to a continued shift of our business over the next several years.
Mark Eubanks: And with that, I'll turn it over to Kurt to discuss the financials, free cash flow, capital allocation, and our updated guidance. I'll return with some closing thoughts before we open the lines for Q&A. Kurt?
Kurt McMaken: Thanks Mark. Starting on slide 8, organic revenue grew 156 million with about 42 percent of that growth coming from higher margin AMS and DRS services.
Mark Eubanks: The U.S. dollar strengthened significantly in the third quarter, representing $131 million revenue headwind year over year.
Mark Eubanks: Moving to the right side of the slide, you can see how the revenue converts to EBITDA.
Mark Eubanks: Q3 organic incremental margins were impacted by revenue mix especially in global services
Mark Eubanks: a $10 million security loss, and delayed productivity in North America from the deployment of the routing technology that Mark discussed previously.
Mark Eubanks: Excluding the security loss, organic growth represents an incremental margin of 29% in the period. Incremental margins on FX were almost 40% as the majority of the currency impact came in our higher margin Latin American countries.
Mark Eubanks: The End of The End
Mark Eubanks: On slide nine, we bridge operating profit to adjusted EBITDA. Starting on the left, interest expense was up 9 million year over year to 63 million. The increase is related to higher interest rates, slightly higher debt balances, and the one-time impact of the early repayment of our 2025 bonds.
Mark Eubanks: Tax expenses were $28 million in the quarter, with an effective tax rate of approximately 28% as we expected.
Mark Eubanks: The other category was $7 million, $12 million lower than prior year, primarily from the lapping impact of marketable security gains in Argentina in 2023 that did not repeat.
Mark Eubanks: Income from continuing operations was 68 million and our diluted share count was down 2.3 million shares or 5%.
Mark Eubanks: Our earnings per share in the period was $1.51 per share.
Mark Eubanks: To help with modeling a few of these components in the fourth quarter, we expect full year interest expense to be between $235 and $240 million.
Mark Eubanks: We are forecasting a full year tax rate in line or slightly better than the 28% we posted in the third quarter.
Mark Eubanks: stock-based compensation is expected to be roughly flat in dollars compared to 2023 and total corporate expenses are expected to be flat to prior year as a percentage of revenue
Mark Eubanks: On slide 10, you can see the components of our updated Free Cash Flow Outlook.
Mark Eubanks: Starting on the left, the 50 million dollar reduction in EBITDA reflects the flow-through of approximately 100 million in currency impact, mostly in high-margin Latin American countries, in addition to a lower contribution from global services.
Mark Eubanks: The operational cash flow components of the business, primarily working capital and CapEx, are performing as expected.
Mark Eubanks: Cash taxes are trending $15 million higher than expected, primarily due to the geographic mix of income between segments.
Mark Eubanks: We are also now expecting to see an approximately $35 million impact as a result of currency devaluation.
Mark Eubanks: [inaudible]
Mark Eubanks: Like most multinational companies, we utilize centralized cash pooling activities to efficiently manage cash from around the world. These flows require foreign exchange forward contracts to limit volatility from foreign exchange movements on existing cash balances.
Mark Eubanks: In the third quarter, we saw material devaluation in the Mexican peso, which resulted in an approximately $20 million cash settlement in the period. And these flows are reflected in operating cash.
Mark Eubanks: The second component is higher cash interest due to the compounding effect of less cash generation throughout the year, largely driven by foreign exchange headlines.
Mark Eubanks: Overall, free cash flow is now expected to be about 100 million lower than the prior outlook, with more than half of the reduction coming from the sudden currency devaluation in the Mexican peso.
Mark Eubanks: Stepping back from the movements expected in the second half of the year, our free cash flow potential remains strong.
Mark Eubanks: While the quarter was not up to our expectations, the true operational components of these flows are resilient.
Mark Eubanks: We believe there are many opportunities for us to continue to improve the cash generation profile of the business as we expand margins through the growth of AMS and DRS, improve our capital efficiency, and continue to make progress improving day sales outstanding through heightened management attention.
Mark Eubanks: Moving to slide 11.
Mark Eubanks: We remain committed to our capital allocation framework and we continue to focus on maximizing long-term shareholder value through cash allocation that will continue to compound free cash flow generation well beyond the volatility we might see quarter to quarter.
Mark Eubanks: First, we plan to continue to make organic investments in our operations to enable sustainable, profitable growth.
Mark Eubanks: Examples of this include investments in data center migration, cyber security upgrades, and the North American routing system.
Mark Eubanks: These investments have long-term benefits to the growth and margin trajectory of the business and will increase EBITDA and will generate more stable and consistent cash flow in the years to come.
Mark Eubanks: Second, our leverage remains stable, below three times, and we remain comfortable that the targeted range of two to three times is the appropriate level given the strong cash flow profile of our business.
Mark Eubanks: This year, the majority of our free cash flow has gone toward shareholder returns. Year-to-date, we have returned $157 million in the form of share repurchases and dividends.
Mark Eubanks: With $375 million of available capacity under our current authorization, we plan to remain active in the fourth quarter.
Mark Eubanks: And finally, on the M&A side, we continue to explore creative opportunities that have a strong strategic fit, attractive returns, and align with our current leverage targets and broader capital allocation framework.
Mark Eubanks: Despite the near-term FX impact of 2024 cash generation, we remain disciplined in our approach to capital allocation and are confident that our framework will maximize shareholder value over the long term.
Mark Eubanks: On slide 12, you can see our updated 2024 guidance.
Mark Eubanks: We now expect total revenue growth to be approximately 3%, with over 20% AMS and DRS organic growth driving total organic growth into the double digits.
Mark Eubanks: The strong organic growth is expected to be offset by accelerating currency headwinds above our original expectations, led by the Mexican peso.
Mark Eubanks: As a reminder, outside of Argentina, our FX guidance utilizes rates as of the end of the quarter, September 30th, and does not attempt to predict future movement in currencies.
Mark Eubanks: Adjusted EBITDA is now expected to be between 900 and 920 million, reflecting the flow-through of currency and global services headwinds partially offset by mixed benefits from more AMS DRS revenue.
Mark Eubanks: As I walk through a few slides back, we now expect free cash flow between $320 and $360 million with a conversion from adjusted EBITDA of approximately 37% at the midpoint.
Speaker Change: I will now hand it back to Mark for some closing remarks and Q&A. Mark?
Mark Eubanks: Thank you very much. Thank you. Thank you.
Mark Eubanks: Thanks, Kurt.
Mark Eubanks: As we close the challenging second half of the year, I can't help but reflect on the transformation progress we delivered and be encouraged about the future.
Speaker Change: We're committed to improving the foundation elements of our business.
Mark Eubanks: to methodically progress the business towards our long-term operating margin and free cash flow expectations.
Mark Eubanks: Despite the temporary impact of currency fluctuations and market softness in our global services business
Mark Eubanks: We remain resolute in making the necessary investments to fully realize the addressable market expansion opportunities of AMS and DRS.
Mark Eubanks: So far in 2024, execution of our strategy has proven we have a right to win in AMS and DRS. Our customers have recognized the value proposition of our offerings and our Brinks team has executed operationally.
Mark Eubanks: As we begin to plan for 2025, nothing in the second half of 2024 limits us from continuing the financial framework we set in 2021.
Mark Eubanks: We still expect mid-single-digit organic growth when excluding the impact from Argentina inflation, driven by continued strong AMS and DRS organic growth as we capitalize on the momentum from 2024 and realize the benefits of a growing opportunity and backlog.
Mark Eubanks: We still expect to generate 100 basis points of operating profit expansion and we continue to see many operational levers in free cash flow to continue to improve our cash conversion from EBITDA.
Mark Eubanks: I am confident we're building the right team and the right culture to capture the opportunity in front of us.
Mark Eubanks: Operator, please open the line for questions.
Speaker Change: Thank you. We will now begin our question and answer session. To ask a question, you may press star then 1 on your touchtone phone. To withdraw your question, please press star then 2. And at this time, we will pause momentarily to assemble our roster.
Speaker Change: You too.
Speaker Change: And the first question will be from Toby Sommer from Truist Securities. Please go ahead.
Toby Sommer: Thank you.
Speaker Change: This is Jasper Bibbon for Toby. Looks like the organic guide for this year is rise to low teens versus I think low to mid-teens last quarter. Just on the organic side, could you outline the relative impact of softer global services demand versus what sounded like an increase in your AMS and DRS assumptions?
Speaker Change: Yeah, sure. Morning Jasper. Yeah, the global services business, yeah, was a headwind in the quarter relative to our expectations, and I again want to make sure we counter the right way. You know, full year, we expect, still expect some growth from the business and have seen that.
Speaker Change: Albeit, we saw probably the most impact in North America, where it actually had some declines in the quarter.
Speaker Change: The total organic, though, we expect to continue to be kind of low single digits for the year. You know, this business for us is...
Speaker Change: a really good business. It's a place where we have a lot of high market share, margins are good.
Speaker Change: But at the same time the incremental profit flow through both on the upside and the downside are quite high We have a high fixed cost in that in that market, you know, a lot of vaults hubs people all over the world
Speaker Change: that, you know, really formed that network.
Speaker Change: you know, for us.
Speaker Change: historically, you know, with historic precious metals, highs in precious metals, particularly gold and silver, and we even saw some more today, actually. You know, this is, this volatility, or lack of volatility, let's say, in the last three quarters has not helped our business, because when volatility occurs, we tend to move metals.
Speaker Change: when prices are really high, there tends to be less demand with no volatility. So for us, what we're seeing today in the markets already, hopefully provide some lift for Q4, but we're not expecting any.
Speaker Change: large bounce back or large decline going into fourth quarter and the rest of the year.
Speaker Change: free cash conversion looks like it's going to be high 30s through the year I think at the end of the prepared remarks you mentioned getting back to the long-term framework
Speaker Change: To clarify, do you think approaching, I think, the near 50% long-term pre-cash conversion target could still be achievable in 2025?
Speaker Change: or would that component potentially take a little bit more time?
Speaker Change: Yeah, Jesper, it's Kurt. I'd say, you know, we still think, you know, it's intact to eventually reach that, but we wouldn't put a timing on that. You know, we continue to march towards that.
Speaker Change: and Burton.
Burton: Thanks, guys. Love you.
Speaker Change: Last question for me, you mentioned the FX headwinds.
Speaker Change: Obviously, you know, we're looking at a pretty big move in the dollar this morning. Should we think about what we're seeing this morning is potentially an incremental headwind versus 4Q, I guess, absolute revenue guidance if the FX move holds?
Speaker Change: Yeah, we would. This is obviously a, you know, unprecedented move here this morning, but obviously that's also tied to the election and, you know, we think likely, you know...
Speaker Change: investors in foreign currencies are repositioning portfolios and so let's see where this you know where
Speaker Change: you know, where it lands. But I would say a good way to think about it is, you know, as we think about the rates that we have built into the guide, you know, that it was a couple, you know, weeks ago, right when the, at the end of the quarter. So.
Speaker Change: It's not gotten better since then. In fact, it's got a little got a little worse, but let's see after you know these things settle out
Speaker Change: Thanks for taking the questions, guys. Thanks, Jasper. Again, if you would like to ask a question, please press star, then 1.
Speaker Change: The next question is from Tim Mulrooney from William Blair. Please go ahead.
Tim Mulrooney: Yeah, Kurt, Mark, good morning. Thanks for taking my question. I just want to build off of the conversation you were having with Jasper there real quick on foreign currency. You know, I think before, in the second quarter, you were expecting a $65 million dollar
Speaker Change: or so incremental headwind, correct me if I'm wrong, relative to your original guidance for the second half of the year. So can you help me understand just exactly, okay, what that incremental headwind was for the third quarter and now what you're expecting for the fourth quarter?
Speaker Change: sure so in total we're expecting a hundred million dollar impact to the to the to the guide we had at the end of the quarter you know last quarter that incremental into you know into the back half of the year is
Speaker Change: basically broken out between sort of let's say two things 50 million year to date through Q3 and another 50 million in Q4.
Speaker Change: And that's the net numbers, Tim, based on kind of the ups and downs, you know, in the first half of the year.
Speaker Change: We were a little bit positive in the Q1. And again, as we think about this, it's largely...
Speaker Change: the Mexican peso that we've seen and we saw, you know, an end of or an in June with the election there when it
Speaker Change: moved sharply, which we talked about quite a bit last quarter. But again, today's volatility, you know, sort of is everywhere. And so, you know, I wouldn't have...
Speaker Change: We're not reading into that so much.
Speaker Change: more focused on, like I said, on what we know and kind of where we see the rest of the quarter based on that. Remember, Mexico is in, it's in our Latin American segment, very profitable. So the flow through is pretty high, similar to what you'd see in the segment margins.
Speaker Change: I think that the thing to remember, particularly about Mexico, is really still strong in Latin America, frankly, but, you know, strong operational performance, you know, that we had.
Speaker Change: in the quarter, really year-to-date in those markets. So they're still good businesses, just this macro backdrop has become a bit troublesome here in the second half relative to currency.
Speaker Change: Understood. And just last question on FX before we get to like, you know.
Speaker Change: the fundamental parts of your business, Kurt, just so that I understand what your guide is based off of.
Speaker Change: Is it still based off that traditional framework? I think you even said this in your prepared remarks. Basically, when you roll forward the foreign currency rates as of the end of the third quarter, if you're not prognosticating.
Kurt McMaken: Yeah, that's right.
Kurt McMaken: that's right at the end of the third quarter that's where we snap the line on the rates and
Speaker Change: The only one that we don't treat that way is Argentina, but everything else is based on that end of Q3 rate. And maybe, Tim, a way to think about that is what we have in the guide is probably the low end of the FX impact, just given what we've seen today.
Tim Mulrooney: that's where I was going with it I mean you already know
Speaker Change: today or yesterday even before the election results. I mean you already know that the rates have appreciated since then. I just want to make sure you're doing September 30th of like 21.9.
Speaker Change: and Matt, you know, okay, okay. All right, so we already know that there's more of a headwind than the midpoint. Okay, that's enough. Beat that to death, thank you. Getting on to AMS and BRS. You know, organic growth,
Speaker Change: 26% in the quarter again, you know, it's above what we were expecting. You guys have consistently outperformed expectations all year here.
Speaker Change: I just kind of wanted to, I guess I was level set on a mid-teens or high-teens organic growth rate.
Speaker Change: for these businesses as we entered the year. Is that still where we, where the investment community should be anchored as we think about growth going forward? Or are you feeling really good about that 20% plus growth rate given the performance year to date and the white space opportunities you got ahead of you?
Speaker Change: Yeah, great. Appreciate it, Ken. Yeah, so we are...
Speaker Change: We are surprised as we mentioned, you know, this kind of mid to high teens was what we thought would be It's better than that really started in q2. We saw it again in q3 Which you know, we had some nice
Speaker Change: just big things. It was a lot of little things, you know, that our teams globally are delivering.
Speaker Change: you know, we talked about equipment sales being kind of an outsized impact in Q2. That wasn't the case in Q3. We had some, of course, but that wasn't what the driver was. It really was just continued penetration of white space and conversions. You know, as we think about
Speaker Change: kind of the roll forward on four quarters.
Speaker Change: you know, these are largely recurring revenue businesses. No reason to believe that.
Speaker Change: you know, one quarter of 25 to another of 26, you know, wouldn't continue for two more quarters. We've got a good backlog.
Speaker Change: certainly in Q3 of signings.
Speaker Change: feel good about what we see in Q4.
Speaker Change: So, you know, we're
Speaker Change: Maybe the first half of the year, there's no reason we shouldn't think that shouldn't continue. And so we are more optimistic.
Speaker Change: I think the 15-18 is sort of, was our long-term, medium-term view in the next couple of years, they thought we had runway to do that.
Speaker Change: it's proving that we're maybe the value proposition is resonating with customers more, our right to win and our ability to execute on those opportunities is also, you know, getting better. And frankly, we're, I think, starting to get better at collapsing our time to revenue from bookings and signings with customers as well.
Speaker Change: Well, all the FX conversation aside, that is incredibly exciting.
Speaker Change: You know, I just one more for me that the equipment sales that you mentioned.
Speaker Change: Would that impact that 26%? Does that drag it down to 25, 24? No, not impactful. Not impactful at all this quarter, in fact, on a year-on-year basis.
Speaker Change: got it okay well thank you for taking my questions and good luck in the fourth quarter here
Speaker Change: Yep, thanks Jim.
Speaker Change: And the next question is from George Tong from Goldman Sachs. Please go ahead.
George Tong: Hi, thanks, good morning. In your global services business... Hi, going back to your global services business, can you talk a little bit more about how new leadership there could improve performance?
Speaker Change: above and beyond what external market conditions might imply and what the timing for when improved performance might look like.
Speaker Change: Sure. Yeah, thanks George.
Speaker Change: Again, we've talked about this business largely depends on the global macro world around precious metals and currency and banknotes.
Speaker Change: The other thing to think about is, you know, it's not
Speaker Change: We're not helpless in improving our results and and we're not waiting for this to happen to us I think that the the new leader not air that just joined us You know really I think we'll have an opportunity to take a fresh look at the business take a fresh look at the in markets
Speaker Change: take a fresh look at how we attack those in markets and how we cover customers, how we expand services, and I think this is always, you know, healthy in businesses with, you know, with leadership changes. I also think as we think about
Speaker Change: strengthening
Speaker Change: our operating cadence around these services as well as the predictability around the future guidance and forecast we think you know will help as well. Nader brings a pretty strong you know background you know from his past and and really being able to set
Speaker Change: you know, set a strong agenda and really, you know, being able to
Speaker Change: create a high say-do relative to forecast and outlook. So, again, we're excited about that. I think the other is...
Speaker Change: you know, I mentioned it in my prepared remarks.
Speaker Change: other global companies as well that can really help continue two big things, really focus on
Speaker Change: you know, improving our talent agenda and making sure that we're attracting the best people into the industry as well as, you know, strengthen our compliance culture. And this is something that, you know, we've talked about, you know, in the...
Speaker Change: you know previously around making sure that we're doing business right and setting the right tone not only with our employees but you know with our customers and the rest of the market and I know he's committed to doing that and it has done that in a prior this prior life
Speaker Change: Thank you for watching.
Speaker Change: got it that's helpful and then separately can you talk a little bit more about the 10 million in security losses that you saw in the third quarter
Speaker Change: Sure, we had a...
Speaker Change: a theft, George, that is ongoing investigation. Can't really talk about the specifics, but it's a timing issue between Q3 and Q4, similar to what we saw.
Speaker Change: We got to this sort of deductible, if you will, with our insurance coverage and our self-funding, and so we wouldn't expect any more impact for the rest of the year.
George Tong: Got it. That's helpful. Thank you.
Speaker Change: Great.
Speaker Change: And ladies and gentlemen, this concludes our question and answer session. I would like to return the conference to Mark Eubanks for any closing remarks.
Mark Eubanks: Thank you all for joining us today. We appreciate all your support and we look forward to speaking with you soon in the fourth quarter.
Speaker Change: Thank you, sir. The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.