Release Date: August 07, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- The Brink's Co (BCO, Financial) reported a strong total organic growth of 14%, with significant contributions from ATM Managed Services and Digital Retail Solutions (AMS/DRS) growing 26% organically.
- Adjusted EBITDA increased by 16% to $226 million, with margins expanding by 200 basis points to 18%, driven by transformation initiatives and cost productivity.
- Earnings per share rose by 31% to $1.67, supported by profit growth and a share repurchase program.
- The company successfully refinanced its 2025 bonds, increasing liquidity and securing a credit rating upgrade from S&P.
- The Brink's Co (BCO) maintained strong free cash flow conversion, with improvements in working capital and margin expansion.
Negative Points
- Foreign currency fluctuations, particularly in Latin America, posed an 11% translational FX headwind, impacting revenue growth.
- The Global Services business experienced continued cyclical market softness, affecting overall growth and margins.
- Trailing 12-month free cash flow was down 7% compared to the prior year, primarily due to the seasonal timing of working capital.
- The company faced margin compression in Latin America due to currency devaluation, particularly in Argentina.
- Despite strong growth in AMS/DRS, the Global Services business remained a drag on organic growth in the first half of the year.
Q & A Highlights
Q: You saw significant AMS and DRS organic growth of 26% in the quarter. Can you talk more about broader customer traction and receptivity you're seeing within AMS and DRS? And how sustainable are current growth rates?
A: Mark Eubanks, CEO: We had a strong quarter, and this is a continuation of our teams executing and developing a long-term pipeline. The 26% growth includes some equipment sales, but we still see strong 20%-ish growth that can continue for the foreseeable future. Growth was broad-based across all regions, with notable acceleration in North America and continued progress in Latin America and Europe.
Q: Could you directionally parse out the growth in terms of which of AMS or DRS grew stronger? How much of the growth came from conversions of legacy services versus new business wins?
A: Mark Eubanks, CEO: Traditionally, about one-third of AMS/DRS growth comes from new business, one-third from conversions, and one-third from competitive wins. Growth was balanced globally, with neither AMS nor DRS significantly outperforming the other. DRS is slightly larger than AMS, but both are growing at a similar scale.
Q: Is the North America organic growth seen in Q2 representative for the back half of the year, or do you expect another step-up?
A: Mark Eubanks, CEO: We expect a slight step-up in Q3 and Q4 as we fully lap the portfolio rationalization from last year. We anticipate reaching a mid-single-digit run rate by the end of the year, although the global services business in North America remains a bit soft.
Q: Can you help us understand how you're approaching inflationary issues in Latin America, and how is the segment performing outside of highly inflationary areas like Argentina?
A: Mark Eubanks, CEO: Argentina is largely in line with expectations, with some margin compression due to last year's devaluation. The Mexican peso and Brazilian real presented unexpected headwinds in Q2. We are managing these through productivity and restructuring efforts, and we remain focused on overcoming these challenges in the second half.
Q: Are there opportunities to grow inorganically in the AMS/DRS space or to add new technologies to the portfolio?
A: Kurt McMaken, CFO: We have a pipeline of opportunities in AMS/DRS and assess acquisitions that align with our strategy. Any significant M&A would focus on AMS/DRS, ATM networks, or technology that extends our value proposition to customers, leveraging our existing network and customer base.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
