Q4 2024 The Brink's Co Earnings Call
Speaker Change: Good day and welcome to the Brinks fourth quarter and full year 2024 earnings presentation.
Speaker Change: All participants will be in a listen-only mode. Should you need assistance, please signal conference specialists by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions.
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Speaker Change: Please note this event is being recorded. This call and the Q&A session will contain forward-looking statements and actual results could differ materially from projected or estimated results.
information regarding factors that could cause such differences.
Speaker Change: are available in the footnotes of today's press release and in the company's most recent SEC filings.
Speaker Change: The information presented and discussed on this call is represented of today only. Brinks assumes no obligation to update any forelooking statements. This call is copyrighted and may not be used without written permission from Brinks.
Speaker Change: I would now like to turn the call over to your host, Mr. Jesse Jenkins, Vice President of Investor Relations. Mr. Jenkins, you may begin.
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 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.
Speaker Change: I will now turn the call over to Brink CEO Mark Eubanks.
Thanks, Jesse. Good morning, and thank you for joining us.
Speaker Change: Starting on slide 3, we delivered total organic growth of 11% in the fourth quarter and 12% in the full year. ATM Managed Services and Digital Retail Solutions, or AMSDRS, grew 23% organically in both Q4 and the full year.
Speaker Change: This marks the 12th consecutive quarter of double-digit growth rates in these key lines of business and our growth outlook remains positive.
Speaker Change: These end markets are growing, our customers continue to value our offerings, and we continue to capitalize on a robust global pipeline of opportunities.
Speaker Change: Cash and Valuables Management, or CVM, grew organically 7% in the fourth quarter and 9% for the full year. Our global services business, which has been softer over the last few quarters, into 2024 has a bright spot in most markets.
Speaker Change: With increasing volatility in the precious metals markets, we are well positioned to benefit from rebounding demand in 2025.
Speaker Change: As we forecasted in our last earnings call, the U.S. dollar strengthened over the end of 2024 and created a 10% headwind in a period, almost entirely in our higher margin Latin American segment.
Speaker Change: Despite this impact, we delivered 912 million dollars of EBITDA in 2024 and expanded our EBITDA margins by 40 basis points to a record-high level of 18.2%.
Speaker Change: EPS of $7.17, including an approximate 4% reduction in share count year-over-year as we opportunistically executed our share repurchase program.
Speaker Change: Our strong fourth quarter performance was punctuated by robust free cash flow. We delivered $400 million for the full year and over $300 million in the fourth quarter alone.
Speaker Change: stronger than anticipated performance in the quarter was primarily the result of continued progress on working capital efficiencies including accounts receivable collection and payables management.
Speaker Change: Kurt will have much more on free cash flow later in the call.
Kurt: From a strategic perspective we're focused on creating value by improving our revenue mix, streamlining our operations, and compounding free cash flow that we can return to our shareholders.
Speaker Change: In 2024, AMS DRS grew $200 million and now represents 24% of our total revenue, at the high end of our previous expectations.
Speaker Change: We also continue to strengthen our global leadership team by adding three uniquely experienced global executives. One to lead Brinks Global Services, a second to lead the Brinks Business System, our continuous improvement program office, and a third to lead our Latin American segment.
Speaker Change: These leaders bring diverse experiences and successful track records from blue chip companies like Eaton, GE, Otis, and Honeywell.
Speaker Change: We are already seeing the benefits from their leadership in areas of growth, continuous improvement, ethics and compliance, and productivity enhancements.
Speaker Change: all of which will help us continue our growth and margin expansion progress into 2025 and beyond.
Speaker Change: We also continue to diligently execute our capital allocation framework, reducing our net leverage in 2024 to 2.8 times EBITDA, while returning approximately 250 million dollars to our shareholders through our repurchase program and our dividend growth policy.
Speaker Change: We remain laser focused on accelerating this strategy, which is forming the basis of our framework for 2025, a continuation of the last three years.
Speaker Change: Next year, we plan to grow total organic revenue in mid-single digits, highlighted by mid to high teens organic growth in AMS DRS.
Speaker Change: Mixed benefits and productivity actions continue to help us deliver a 30 to 50 basis point expansion of EBITDA margins.
Speaker Change: We plan to convert 40-45% of EBITDA into free cash flow, returning about half of that cash to our shareholders.
Speaker Change: While our framework will sound familiar, investors have told us they would like to see additional data points so they can better understand the impact of the changing foreign currency environment in our results.
Speaker Change: In order to provide as much clarity as possible, we're introducing additional guidance for the first quarter, which I'll explain further later in the presentation.
Speaker Change: Turn to slide 4, you can see the specifics on the fourth quarter. Constant currency revenue growth was 11% and total revenue growth was 1% as we exceed 5 billion dollars of full-year revenue for the first time in the company's history.
Speaker Change: Adjusted EBITDA was roughly flat to the previous year on a reported basis and was up 11% on a constant currency basis.
reflecting strong productivity and the benefits of AMS DRS growth.
Speaker Change: While EPS benefited from a lower tax rate, it was down compared to prior year as we lacked benefits of a previously discussed marketable security gain in Q4 of 2023 that we laid out in our initial 2024 guidance.
Speaker Change: Trillion 12-month free cash flow was also flat to the previous year with conversion from adjusted EBITDA of 44%.
reflecting EBITDA growth and improved working capital management.
Speaker Change: Turn to slide 5. I thought it'd be helpful to walk through what we're seeing in each of our reported segments.
Speaker Change: Starting with North America on the left, organic growth was 2% for the full year and adjusted EBITDA was up 60 basis points for the full year.
Speaker Change: We exited the year on a strong note in Q4, posting our highest total and AMS DRS organic growth rates of the year.
Speaker Change: While AMSDRS was consistently strong all year, we did see our global services businesses return to growth late in the quarter and were bullish on the potential that that business has into early 2025 based on the trends in the precious metals markets.
Speaker Change: Overall, the North American market remains stable, and we continue to work on a solid pipeline of opportunities across all lines of business as we plan for continued growth acceleration into next year.
Speaker Change: Lighting America was down 2% in total as we managed through a volatile FX picture.
Speaker Change: Similar to North America, we ended the year at the high point of organic growth rates, even when excluding the impact of Argentina's inflationary pricing.
Speaker Change: AMS DRS grew double digits organically over the full year, and despite severe currency impacts on the year, adjusted EBITDA margins in the region were roughly flat compared to prior year.
Speaker Change: In 2025, we expect meaningful year-over-year FX headwinds as we continue to lap the previously stronger Latin American currency basket, especially in the first half of the year. We also anticipate reported organic growth to decelerate as inflation has begun to moderate in Argentina this year.
Speaker Change: We view this as really good progress for the Argentinian economy as well as our business.
Speaker Change: In the rest of this segment, our organic growth rate should remain somewhat consistent in the mid-single digits over the course of 2025.
Speaker Change: We also plan to take some restructuring actions in this segment early in the year to drive productivity, protect margins, and better realize the AMS-DRS operating model that has grown over the last few years.
Speaker Change: Europe grew 7% organically in 2024, with total adjusted EBITDA growing slightly faster at 9%.
Speaker Change: Growth in the region was primarily related to AMS DRS as Europe continues to be a strong conversion market with customers moving from traditional services to AMS DRS.
Speaker Change: Organic growth was 6% in Q4 as we begin to lap strong comparisons to the prior year, which are expected to continue into the new year.
Speaker Change: Relatively modest growth and margin expansion in our rest of world segment was impacted early in the year by the previously discussed softness in our global services business.
Speaker Change: As is the case with other regions, we saw good momentum with global services late in the quarter and have seen positive momentum into early 2025.
Speaker Change: On slide six, you can see our progress growing adjusted EBITDA and expanding margins over the years in North America.
Speaker Change: On the right side, you can see a few of the drivers of the performance. First, we've improved the quality of our revenue considerably. This includes both growth in higher margin AMS and DRS revenue, as well as portfolio rationalization efforts in 2023 that carried into early 2024.
Speaker Change: We've improved the quality of our customer base by eliminating lower margin accounts, either through price realization, a conversion to DRS or AMS, or in some situations, a decision to move on from unprofitable accounts.
Speaker Change: We also delivered considerable cost productivity across the P&L with the rollout of the Brinks business system.
Speaker Change: Direct labor as a percent of revenue is down an impressive 310 basis points over the last two years.
This productivity is widespread and consistent.
Speaker Change: During 2024, our major productivity metrics in both routing efficiency and money processing improved year-over-year every quarter of the year.
Speaker Change: Maybe most importantly, these efficiency gains happened while we improved employee safety and customer service and quality with our total recordable incident rate continuing to improve both year over year and sequentially in the fourth quarter.
Speaker Change: The system and technology investments we discussed last quarter to centralize planning processes and improve messenger routing remain on track for full realization by the middle of 2025.
Speaker Change: These actions were necessary to drive improvement in subsequent years and fully realize the benefits of the AMS-DRS operating model.
Speaker Change: I'm confident we're making the necessary investments to move our North American business towards our target of 20% EBITDA margins in the coming years.
Speaker Change: Turn to slide 7, I'll provide details on revenue by customer offering.
Speaker Change: Starting with the chart on the left, you can see that AMS-DRS now represents 24% of our total revenue and we're targeting an increase to between 25 and 27% of the business by year-end.
Speaker Change: AMS-DRS is now about three and a half times bigger than it was when we first began to report it in 2020 and we're expecting mid to high teens organic growth in 2025.
Speaker Change: Our cash and valuables management business grew 7% organically in the fourth quarter and remains stable looking into next year.
Speaker Change: A positive in the fourth quarter in CVM was the stabilization of our global services business.
Speaker Change: Precious metals shipments picked up late in the quarter with additional momentum into early 2025.
Speaker Change: As we've discussed previously, volatility in these markets can be beneficial and we're seeing this dynamic play out in the cycle.
Speaker Change: Trends in the global services business move quickly and our ability to leverage pre-existing infrastructure and relationships is key to capturing increased revenue and profit during times of volatility.
Speaker Change: Our capabilities are characterized by a global footprint of secure storage facilities and an established logistics network around the world. As one of the largest global players in the market, we're well positioned to capitalize on this opportunity.
Speaker Change: In DRS, we're still seeing strong demand patterns and have a healthy backlog of booked business.
Speaker Change: Over the year, we increased our installed base of DRS devices by 20%. Operationally, we shortened our selling window and improved time to install devices.
Speaker Change: Despite strong double-digit organic growth in DRS in every segment, we exited the year with an expanded backlog of signed agreements in most countries, providing a good line of sight to our 2025 targets.
Speaker Change: In the U.S. specifically, our backlog more than doubled from the beginning of the year compared to where we exited the year.
Speaker Change: our wide range of solutions are driving increasingly diverse in-market demand.
Speaker Change: From single stores to large enterprise operations, we have a DRS solution that can be tailored to meet various customer needs.
Speaker Change: While our performance has been impressive, the markets are still growing and remain largely underpenetrated, giving us confidence we can continue our growth trajectory in the near term.
Speaker Change: On the AMS side, we increased ATM counts by double digits while driving mid-teens organic growth across all segments. Pipelines remain full and we're having active conversations with many financial institutions and retailers across the globe.
Speaker Change: We're on track for full deployment of the previously announced Sainsbury's deployment in the UK by mid-2025. And early results of our onboarding have been positive and ahead of schedule.
Speaker Change: The pace of growth remains robust across all regions and we recently added a large customer in Asia-Pacific that will onboard later this year.
Speaker Change: As a trusted partner with major banking customers, we're well positioned to capture market share as outsourcing trends continue to accelerate.
Speaker Change: Overall, I'm pleased with the quarter and the year. AMS and DRS continue to deliver and have a bright outlook.
Speaker Change: We remain positioned to benefit from the recovery in our global services business in markets and we continue to drive operational excellence in our traditional cash and valuables management business.
Speaker Change: I'm encouraged by our progress and I look forward to executing on our strategy in 2025.
Speaker Change: And with that, I'll turn it over to Kurt to discuss the details of the quarter, including a focus on free cash flow and capital allocation.
Speaker Change: I'll return to discuss our new guidance methodology and take questions. Kurt?
Kurt: Thanks Mark and good morning everyone. Starting on slide 8, organic revenue grew 133 million with 46% of that growth coming from higher margin AMS and DRS recurring revenues.
Kurt: Currency headwinds amounted to $123 million in the period, primarily from the Argentine Peso, Mexican Peso, and Brazilian Real.
Kurt: Organically, adjusted EBITDA grew $28 million, or 11%. Incremental margins on FX were 24%, with the majority of the impact coming from our higher margin Latin American businesses.
Kurt: Total adjusted EBITDA margins were down 30 basis points from the prior year impacted by the regional revenue mix impact of foreign exchange.
Kurt: On slide nine, starting on the left, interest expense was up 8 million year over year to 60 million. The increase was driven by higher debt, including growth in DRS provisional capital and slightly higher financing leases.
Kurt: Next year we expect interest expense to remain roughly flat year-over-year using current market expectations for two interest rate reductions.
Kurt: Tax expense was $29 million in the quarter, representing a full year effective tax rate of 23%, better than our expectations.
Kurt: The tax rate benefit was driven primarily by the impact of inflation adjustments in Argentina and the geographic mix of earnings.
Kurt: In 2025, we expect our tax rate to return to a more normalized level of 28%, a consistent reduction in our baseline effective tax rate of about 560 basis points less than 2021.
Kurt: Interest income was $11 million in the quarter and $49 million for the full year.
Kurt: With inflation rates moderating in Argentina, we expect 2025 interest income to return to the more normalized levels we saw in 2022, especially in the second half of the year.
Kurt: The other category was $6 million, $28 million lower than the prior year, primarily from the lapping impact of marketable security gains in the prior year that did not repeat, which are excluded from adjusted EBITDA.
Kurt: Income from continuing operations was 94 million and our diluted share count was down 1.7 million shares or 4%.
Our EPS in the period was $2.12 per share.
Kurt: Walking back up to adjusted EBITDA, depreciation and amortization was $56 million in the fourth quarter, and we expect total depreciation and amortization to rise modestly in 2025, primarily reflecting increased depreciation from AMS and DRS equipment.
Kurt: In the stock comp and other category, stock-based compensation was up about $6 million in Q4.
Kurt: Looking into next year, stock compensation is expected to decrease slightly to between $30 and $35 million.
Kurt: Moving to slide 10, you can see our free cashflow performance over the last several years. We generated 400 million of free cashflow in 2024 with conversion from adjusted EBITDA of 44%.
Kurt: With a focus on continuous improvement, we continue to identify and implement actions to improve cash flow, including from working capital management with a particular focus on more timely collection of trade accounts receivable and optimizing payment terms to vendors.
Kurt: On the trade accounts receivable side, we were able to reduce our DSO by seven days.
Kurt: Over the last several years, we have increased our focus on DSO because it's the largest driver of our working capital performance.
Kurt: We are earlier in our journey on accounts payable but during the fourth quarter and into 2025 we begin to centralize and standardize our procurement teams and processes.
Kurt: We continue to work with certain key vendors to improve payment terms and relationships throughout the year.
Kurt: With planned systems and process enhancements underway in 2025, as well as continued growth in AMSDRS revenue, we expect to continue to make methodical progress in these areas in the coming years.
Another component of success this year was capital efficiency.
Kurt: Our fleet decreased by over 300 vehicles during 2024, and we reduced our facility count by over 60 locations as we continue to drive operational efficiency with AMS and DRS growth.
Kurt: Cash Cap Ex of $147 million in 2024 represents 2.9% of total revenue, well below our target of 3.5-4%.
Kurt: While we expect this number to increase slightly next year, we expect to remain under 3.5 percent of revenue in 2025.
Kurt: The other major components of free cash flow came in roughly as expected and are expected to remain stable into 2025.
Thank you very much.
Moving to slide 11.
Kurt: Our capital allocation framework has been consistent over the last several years, and we don't expect any changes next year.
Kurt: As always, we strive to allocate capital prioritizing long-term shareholder value.
Kurt: Our framework is designed to compound free cash flow in future years by investing first in organic growth and margin enhancing opportunities.
Kurt: We are targeting CapEx as a percentage of revenue below 3.5% next year and plan to continue to drive capital efficiency by shifting our revenue to AMS and DRS.
Kurt: In 2024, we were able to lower our net leverage to 2.8 times, moving further into our target range of 2 to 3 times.
Kurt: With leverage within our targeted range, over 60% of the cash we generated this year was allocated to shareholder returns.
Kurt: We spent $204 million on share repurchases, a 20% increase over last year, reducing share count by over 2.1 million shares.
Kurt: We have also been diligent with our dividend policy, passing along double-digit increases in each of the past two years.
And finally, on M&A, our posture on deals hasn't changed.
Kurt: We have a full pipeline and continue to explore accretive opportunities that have a strong strategic fit, attractive returns, and align with our current leverage targets and broader capital allocation framework.
Kurt: Turning to slide 12, you can see recent capital allocation trends over time.
Kurt: Starting at the top right, shareholder returns have accelerated significantly to be the largest component of our capital allocation in each of the last two years.
Kurt: The increase is primarily driven by share repurchases with dividends remaining roughly flat in total dollars despite the double-digit increase in each of the last two years.
That leverage is down approximately half a turn since 2022.
Kurt: I'm proud of the success we have had accelerating shareholder returns while consistently reducing debt levels over the last few years.
Kurt: I'll now hand it back to Mark for guidance and Q&A. Mark?
Mark Eubanks: Thanks Kurt. Our new approach to guidance intends to provide investors with a full-year framework for value generating metrics like organic growth, adjusted EBITDA margin expansion, and free cash flow conversion.
Mark Eubanks: We also plan to provide quarterly guidance throughout the year for revenue, adjusted EBITDA, and EPS in order to provide investors with as much real-time information as possible during the year.
Mark Eubanks: We believe this approach will allow our investors to focus on the components of our long-term strategy that will ultimately create value.
Mark Eubanks: This changing guidance methodology is primarily the product of the current volatility that we see in the in the FX markets.
Now, let's take a look at the numbers.
Mark Eubanks: Our full-year framework should look very familiar, with total organic growth in the mid-single digits, and AMS-DRS organic growth in the mid-to-high teens, reflecting the continuation of recent performance.
Mark Eubanks: If FX rates across our basket of currencies hold at the current levels, we're expecting a little less than 5% headwind over the full year.
Mark Eubanks: We expect margin expansion of 30 to 50 basis points as we deal with continued currency pressure in high margin Latin American countries and factor in lower interest income resulting from Argentina inflation moderation.
Mark Eubanks: Free cash flow conversion will be in line with 2024 and we're targeting at least 50% of that cash towards shareholder returns with repurchases of shares at similar level as 2024.
Mark Eubanks: In the first quarter, we expect revenue of $1.225 billion at the midpoint, reflecting organic growth in the mid-single digits, and currency is expected to be a headwind of around 6%.
Mark Eubanks: The revenue guidance assumes strong continued growth in AMS DRS, positive momentum in global services, and reflects current inflation moderation trends in Argentina.
Mark Eubanks: Adjusted EBITDA is expected to be between $190 and $210 million.
Mark Eubanks: We expect to see year-over-year margin expansion in all segments outside of Latin America, where we plan to take some restructuring actions to improve margins and right-size our business for the balance of the year.
EPS is expected to be between $1.10 and $1.40.
Mark Eubanks: Looking back over the year, I'm pleased with our performance. AMS and DRS are approaching 25% of our total business and the mixed shift is delivering improvements in profit margins and free cash flow generation.
Mark Eubanks: Our productivity journey is well underway as we deploy the Brinks business system deeper into our operations and our cash flow is resilient and growing.
Mark Eubanks: Our team of over 68,000 employees is a line behind our strategy and we're working diligently to enable commerce across the globe.
Mark Eubanks: 2025 is off to a great start with continued momentum in our key lines of business of AMS, DRS and global services and I'm excited for the year ahead.
Mark Eubanks: With that, we're happy to now take your questions. Operator, please open the line. Thank you. We will now begin the question and answer session.
Speaker Change: To ask a question, you may press star then 1 on your touchtone phone. If you're using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed, and you would like to withdraw your question, please press star then 2. And at this time, we'll pause momentarily to assemble our roster.
Speaker Change: And the first question will come from George Tong with Goldman Sachs. Please go ahead.
George Tong: Your cash and valuables management business grew 7% in the quarter. Can you deconstruct trends you're seeing from a price and volume perspective?
Sure, thanks George. Good morning
Speaker Change: You know, we continue to see volumes continue to improve and improve that ratio, you know, more towards the balance 50-50 like we've talked about.
Speaker Change: you know previously. I think part of that is some of the Argentina inflation moderation you know we're seeing that come down which is why you see the printed organic growth numbers you know more in line with the rest of the regions and the long-term trends.
Speaker Change: I think you'll also see, you know, in 2024, we did have some more price built into the market. Part of that is we talked about North America with the portfolio rationalization in the first half of the year.
Speaker Change: But I think if you just sort of look in general, price inflation remains positive across all of our regions. So if you think about looking around, just sort of around the world, that also...
Speaker Change: is in line, George, with our money processing volumes, kind of some of the underlying metrics operationally that continues to be consistent throughout the year in all of our regions.
Speaker Change: Of course, you know, as you think about our revenue profile and growth profile, a lot of that is, as we've talked about, is AMS DRS growth, which is really a mixed impact as well, not just, you know, that's not part of price.
as we continue to look forward.
Speaker Change: that CBM part will continue to be positive in 2025, particularly as we saw BGS start to pick up in the fourth quarter. And we've seen that momentum continue, as I mentioned, into 2025.
Speaker Change: that's you know on the back of a lot of this you know metals movement we've seen around the world.
Speaker Change: Got it, that's helpful. And then, you're accelerating investments to improve margins in North America. Can you outline the opportunity you see there, how much in investments you're making, and if you think the opportunity to close the gap of margins in North America is greater than the international margin opportunity?
Sure. Well, you know, we don't think, George, there's...
Speaker Change: really a ceiling for us on those margins. You know, we talked about a 20% EBITDA as a near-term target. We think that's still in line of sight. The investments we're making are really focused.
Speaker Change: predominantly right now on route optimization technology and we talked about that in Q3. We expect to have that fully implemented by mid-year this year and expect to realize those benefits in the second half of the year. I think you know some of the other
some of the other opportunities.
Speaker Change: that we've seen for investment are really around some of our legacy tech debt that we've moved some on-prem data centers to the cloud. We talked about that as well in Q3 to really give us more flexibility and scalability as we take the business up.
Speaker Change: You heard my prepared remarks. We started disclosing labor as part of a breakout in our gross margin cost of goods. You can see that's improved 310 basis points.
Speaker Change: attributed to our real productivity benefits coming through in both our external routing and
Speaker Change: Logistics Network, but also our money processing, as you think, in our internal cash centers. So we really are starting to realize those benefits and seeing that margin progression step forward, particularly in North America. We think that's going to, again, close the gap with our
Speaker Change: particularly you know Latin America as we see you know our lean journey in Latin America is you know a couple years ahead to be honest from North America but but we expect that to catch up and we expect to scale some of these best practices not only into Latin America but also into Europe and rest of world
Got it. That's helpful. Thank you. Thanks, George.
Speaker Change: The next question will come from Sam Cussworm with William Blear. Please go ahead.
Hey, Mark. Hey, Kurt. Thanks for taking our questions here.
Mark Eubanks: Yeah, good morning Sam. Good morning. I guess to start, your guidance is assuming mid-single-digit organic growth for 2025 and I think you also shared mid-to-high-teens organic growth for AMS-DRS business. I think you touched on this a bit briefly in a pair of remarks, but can you also break down for us your assumptions for the CIT and BGS businesses?
in terms of the components of growth.
Yeah, just organic growth assumptions.
Mark Eubanks: Yeah, so if you, I mean, kind of if you do the math, I mean CVM would be back into the low single digits growth.
is the way to think about that.
Sam, that's total.
Rose, what?
and then you said BGS.
Mark Eubanks: Can you say BGS is part of CBM? Yeah, we don't break that out, but I mean, you know, it's gonna, again, be in that, I would say, consistent, that whole group of businesses, think about that as low single digits.
Mark Eubanks: got it okay think about one thing you know we got to keep in mind is that there is a conversion impact that you know does kind of keep that rate in that lower single digit relative to the the AMS the DRS growth so there is some shift that's going from CVM and into AMS DRS
I think, Sam, we can, though, characterize where we're seeing
Mark Eubanks: You know where we are seeing growth we again we continue to see the
sort of BGS, global services business in total.
organic growth.
Mark Eubanks: accelerating out of Q4 into Q1 and probably, you know, as our outlook anticipates, you know, through the rest of 25. And if you just remember, you know, we've been talking about softness really for the past three quarters in our global services business.
Mark Eubanks: that predominantly showed up in North America, although it's part of our North American segment, where we actually were slightly negative last year and expect that to flip this year to positive.
Mark Eubanks: Yeah, within that total CDM number that we were just talking about.
Speaker Change: Got it. Awesome. And then you also finished the year with AMS, GRS, organic growth of 23%, I think for the year as well. So moving that business towards mid to high teens growth, is that more about the conflict you're going to have to deal with or moving towards a more normalized growth rate? Just trying to understand that a bit better.
Sure, two things there, Sam, you know, for us.
Speaker Change: One, it's just a lot of large numbers, you know, that that number is getting bigger and bigger. And so, you know, we would anticipate, you know, that a little bit slowing down, but it's also there's some impact here in Argentina, also, as as that
Speaker Change: inflation starts to moderate because we have you know we have some AMS DRS business down there that also you know becomes a little bit of a growth headwind compared to what we had previously but our commitment on this mid to high teens
Speaker Change: frankly it's what we said last year, Sam, and outperform that. We expected that to be, you know, mid to high teens and that continued to surprise us. I'd say our
Speaker Change: performance in the quarter. We expect that to continue in the near term, just given the nature of the recurring revenue piece of that. And, you know, we would hope to outperform that as we go forward. You know, we had two nice wins in the quarter.
Speaker Change: You know with with AMS DRS in North America specifically with two new logos first in AMS
the BP convenience store gas station chain.
Speaker Change: You know, this is hundreds of locations for our AMS business.
across several of their logos.
Speaker Change: you know that they that they brand or franchise with really that deployment has already started and we expect it to to finish up you know sometime in the third quarter so again a good incremental organic win in the marketplace. On the DRS side
Speaker Change: we're thrilled to partner with Western Union and are announcing that now to bring DRS technology to hundreds of locations across their network.
We think this is going to be a...
really strong initiative to help them not only enhance security.
their cash handling, but also help their agents.
Speaker Change: locally operate more efficiently. We've started this rollout already. We're excited to announce the partnership and look forward to getting the rollout complete by the end of Q1 this year. So again, two good...
Speaker Change: Big partnerships that we're excited about You know building on a strong backlog that we brought into the year into 2025
Speaker Change: Got it. That's a helpful color there. Thanks. If I could squeeze one more in then. Sure. I wanted to ask about these effects as it relates to your free cash flow and ability to deploy that free cash flow towards areas like share repurchases.
Speaker Change: So, to put it simply, to what extent do these headwinds impact your ability to generate and deploy free cash flow in 2025, particularly as it relates to share repurchases?
Sure. So for us, you know, free cash flow conversion...
Speaker Change: will continue to improve, we think, with margins. And so, as we do have some...
headwinds to FX in those high-margin geographies.
that could be a...
could be a headwind to free cash flow conversion.
Speaker Change: I'd say on the other side, we think interest rate reductions obviously are going to help us across the business.
Speaker Change: but of course, faster AMS-DRS deployment as well. AMS-DRS is an inherently more capital-efficient...
for us both in
Speaker Change: allowing us to optimize our network, but also allowing us to improve our payment terms and, you know, collapse our cash cycle. So that does...
Speaker Change: again, provide tailwind, we think, to the ability to convert free cash flow.
Speaker Change: You know, one of the examples of that, that we would
Speaker Change: could point to on this capital efficiency side, you know, this year, we would see about...
Speaker Change: to see some of this capital efficiency benefits as we start to reach a, you know, or maybe approach some tipping points here, allowing us really to optimize our networks.
Got it. Appreciate that. Thank you.
Toby Sommer: The next question will come from Toby Sommer with Truist. Please go ahead.
Speaker Change: Good morning. It's Tyler Bearish-Shawn for Tobii. All right, good morning. How much of the growth in AMS DRS came from legacy conversions versus new business wins?
Speaker Change: we don't have that broken out but it's actually we've said before it's probably less than a third in fact it's been you know pretty low we most of what we've done in the DRS side you know continues to be unvended or competitive
Speaker Change: acquisitions from other providers, whether that service was DRS or CVM, we wouldn't know. I think that on the AMS side, it's a little bit more difficult to say because...
Speaker Change: You know, the retail ATM networks are, you know, would largely be, you know, new business for them. Maybe they're changing providers and, you know, it's a market share shift for us.
Speaker Change: But when we talk about bank outsourcing, that's really a continued expansion of the available market.
Speaker Change: Traditionally those banks, you know, were insourced already, and so, you know, for them, maybe all we were doing was...
Speaker Change: was CIT only, and so that really is a pure conversion of CIT to AMS. But I would say that's not been the...
Speaker Change: The majority of what we're doing, most of it is new business, new to cash management, largely in DRS, and new to AMS, you know, under the retail banners.
Got it.
Speaker Change: Just depending on tariffs, can you talk about the impact that would have seeing gold prices rise, which can be a positive, but can you maybe just talk about the impact if some other economies around the world slow down maybe slightly from tariffs?
Thank you for your attention.
that would impact. Sure.
Yes, sure, you know certainly tariffs for us we've seen
Speaker Change: that impact global markets in total, as we've all seen. And one of those impacts has been around precious metals, particularly gold and silver. And so, you know, as we exited Q4 and have, you know, seen what's going on in Q1, what we expect to continue is a lot of movement of...
Speaker Change: gold and silver, certainly into the U.S. That's been well chronicled, I think, publicly in Wall Street Journal and Bloomberg, you know, that this is happening and we are, as one of the biggest logistics, the biggest logistics player in the space, you know, we have seen those benefits.
Speaker Change: I think we're also seeing this, though, movement around Asia, again, as global markets are balancing.
Speaker Change: around currency and around hedges with around inflation and interest rates. This volatility is beneficial for our global services business.
and so we we already have a large
Speaker Change: installed Logistics Network, both of vaults and logistics hubs, but also, you know, well-established.
Speaker Change: relationships with, you know, banks, custodians, so forth. So for us this is really good.
Speaker Change: being that it's a big fixed cost network, those create good incrementals for us on incremental profit conversion.
Speaker Change: But frankly, it's a reward for carrying this fixed infrastructure in times that aren't so robust. So this is a good opportunity for us. I'd say on the other side, from a tariff perspective on the non-global services business,
Speaker Change: We really don't see any large impacts for us, one way or the other. I think, to your point, I think you insinuated, you know, maybe there's some economic, local economy issues that could...
you know, that you could see and...
Speaker Change: But we certainly have not seen that yet. We've seen, you know, Brazil has had some economic headwinds in the last few quarters, but largely unrelated to the tariffs.
Speaker Change: But we don't see any direct impacts, Tyler, I think, that we would see that you would hear from other companies, particularly those that are importing or exporting goods.
Speaker Change: Tyler, the only thing I would add to that to Mark's comments is we're keeping a close eye on input costs And we're ready, you know to take actions, you know if that becomes an issue
Speaker Change: Got it. And then just one final one. There's been some reports that penny being discontinued. Would that have any meaningful impact on your business?
Speaker Change: Yeah, you know, there is news out there about the discontinuation of the penny, but for us that is really not an issue.
Speaker Change: We have a coin business, but that's an immaterial kind of concept to us in terms of impact.
Thank you.
Speaker Change: Yeah, and maybe even a benefit. I mean, we are one of the largest, I mean, we're the largest in North America when it comes to, you know, physical currency movement and coin is a large, also part of that, that we.
Speaker Change: partner not only with retailers, but also with the Fed as part of the distribution network.
Thank you.
Thank you.
Speaker Change: This concludes our question and answer session. I would like to turn the conference back over to Mr. Mark Eubanks for any closing remarks. Please go ahead, sir.
Speaker Change: Yeah, thank you, and we appreciate everyone for joining us today. We look forward to speaking with you each soon in the future.
Speaker Change: Conference is now concluded. Thank you for attending today's presentation. You may now disconnect.
and Andrew Nice.