Brinks Company (the) · NYSE:BCO
Brinks Company (the) — Investor Presentation (October 2008)
56 slides from Brinks Company (the)'s investor presentation, Oct 1, 2008
Slide 1: Management Presentation
Management Presentation October 2008
Slide 2: Forward-looking Statements
Forward-looking Statements This document and other written or oral statements made from time to time by Brink’s Home Security Holdings, Inc. (BHS or the Company) and its management in connection herewith may contain “forward-looking statements” within the meaning of the Private Securities Litigation
Slide 3: Agenda
Agenda Introduction Transaction Overview Industry Overview Business Overview Operational and Financial Performance Growth Strategy
Slide 4: Brink's Home Security
Brink’s Home Security ® Founded in 1983 Full service provider of residential and business security systems 2 nd largest monitored security services company by revenues in North America 1.3 million subscribers 3,500 company personnel 250 metro areas, including all 50 states and 2 Canadian provinces O
Slide 5: Key Strengths
Key Strengths Strong heritage and brand name Focus on the customer Superior execution and operational performance World-class facilities and technology platform Broad North American footprint Consistent growth in monthly recurring revenues Strong financial performance Favorable long-term growth oppo
Slide 6: Company Purpose and Values
Company Purpose and Values Our mission is to create customers for life by providing premier monitored security services Disciplined economic approach Select the right customer Exceed customer expectations Focus on customer life-cycle cash flows
Slide 7: Transaction Overview
Transaction Overview
Slide 8: Benefits of Separation
Benefits of Separation Better positioned to focus on strategic initiatives and growth plans More focused management More efficient capital structure to fund growth Better alignment of employee incentives with business performance and shareholder expectations
Slide 9: Key Separation Highlights
Key Separation Highlights Company will rebrand within three years The Brink’s Company will not compete in residential and commercial security monitoring in the U.S., Canada and Puerto Rico for five years Upon spin-off, brand royalty rate will decrease from pre-spin-off rate of 7.0% to 1.25% of reven
Slide 10: Brink's Home Security Holdings, Inc.
Brink’s Home Security Holdings, Inc. Listing: NYSE: CFL Dividend Ratio: 1:1 Estimated Shares Outstanding (Post Distribution): Approximately 45.8 million Distribution Timeline Record Date: Distribution Date: October 21, 2008 October 31, 2008 Dividend Policy: No dividends for the foreseeable future
Slide 11: Pro-forma Capitalization
Pro-forma Capitalization ($MM, Unaudited) As of June 30, 2008 Historical Pro-forma Cash and cash equivalents (1) 4.4 54.4 Revolving credit facility (2) – – Related party loan payable (3) 0.4 – Total indebtedness 0.4 – Total shareholders’ equity (4) 433.9 484.3 Total capitalization 434.3 484.3 Pro-fo
Slide 12: Rebranding Considerations
Rebranding Considerations Three year brand license agreement allows for effective transition Engaged Landor Associates in September 2008 to help create a comprehensive rebranding strategy Anticipate introduction of new brand in mid-2009 Estimate incremental expense of $100 – $150 million spread over
Slide 13: Industry Overview
Industry Overview
Slide 14: Large and Growing Monitored Security Services Market
Large and Growing Monitored Security Services Market ($Bn) Source: SDM Magazine, Barnes Associates, Barnes Reports, IMS Research 2008 Note: (1) Includes residential and commercial revenue. 50% Higher (% CAGR) Projected Revenue for North American Security Market (1) Historic Alarm Monitoring Revenue
Slide 15: Security Monitoring is a Highly Fragmented Market
Security Monitoring is a Highly Fragmented Market Companies Market Share (%) Stanley Convergent Security Solutions 2% Other ADT Total Revenue: $14.0 billion Brink’s Home Security Protection One 2% Monitronics 1% Top 5 Top 100 All Other Source: SDM Magazine (May 2008), Barnes Reports, IMS Research 20
Slide 16: Major Competitors
Major Competitors Company 2007 Security Revenues ($MM) 2007 Subscribers 2007 MRR ($MM) (1) Comment 1,223,800 37.2 Mostly Residential (95%) 4,100 6,000,000 219.0 Evenly split residential and commercial 880,262 (2) 26.7 Shifting to commercial, 30% multifamily 548,034 17.0 Mostly residential (90%) 252,
Slide 17: Business Overview
Business Overview
Slide 18: Strong and Experienced Management Team
Strong and Experienced Management Team Name Age Position With the Company Average Industry Experience of Ten Years Robert B. Allen President and Chief Executive Officer Stephen C. Yevich Senior Vice President – Chief Financial Officer John S. Davis Senior Vice President – General Counsel and Secreta
Slide 19: Superior Execution and Operational Performance
Superior Execution and Operational Performance Sales Marketing Field Service Customer Care Monitoring Customer Initiation Installation Customer Loyalty Creating Customers For Life
Slide 20: Advertising and Marketing
Advertising and Marketing Over $40 million spent annually in advertising and marketing support Direct response advertiser National cable and spot TV advertising Internet Yellow pages Direct mail
Slide 21: Professional Sales Organization
Professional Sales Organization Over 120 telemarketing professionals Close sales and schedule installations Set appointments for field sales Over 600 field sales professionals Close company leads and self-generate sales National account capabilities Inbound and Outbound Sales Field Sales
Slide 22: Installation and Customer Activation
Installation and Customer Activation Over 1,200 professional technicians Well trained Automated remote capabilities Focus on customer satisfaction User-friendly security system Standardized processes Post-installation surveys Customer activity analysis
Slide 23: Delivery of Consistent Rapid Response Monitoring
Delivery of Consistent Rapid Response Monitoring Two fully redundant UL certified monitoring centers Irving, TX and Knoxville, TN Serve as mutual disaster recovery centers Alarm signals routed to first available representative Automated process design Alarm reduction efforts Emergency response dispa
Slide 24: Commitment to Outstanding Customer Service
Commitment to Outstanding Customer Service Focus on single contact resolution Achieved on 82% of incoming calls Integrated and uniform technology platform Significant investment in training programs Certified by J.D. Power and Associates for outstanding customer service for five consecutive years
Slide 25: Dedication to Creating Customers for Life
Dedication to Creating Customers for Life Exceed customer expectations at every step of the relationship Sales Marketing Field Service Customer Care Monitoring Customer Initiation Installation Customer Loyalty Creating Customers For Life
Slide 26: Operational and Financial Performance
Operational and Financial Performance
Slide 27: The Business Model Overview
The Business Model Overview ($) (Year) Cumulative Cash Flow per New Subscriber Invest in new customers Installation costs exceed installation fees Cash flow from recurring monthly fees highly profitable Customer retention is essential Long term value creation from disciplined approach
Slide 28: Typical Installation Cash Flow and Accounting Treatment
Typical Installation Cash Flow and Accounting Treatment 2007 Example (Per Residential Installation) Cash Balance Sheet P&L Installation Revenues $ 300 Deferred Liability $300 $0 Costs and Expenses: Installation $825 Capitalized Asset $825 $0 Sales (related to installation) $125 Deferred Asset $125 $
Slide 29: The Business Model – Accounting View (FY2007)
The Business Model – Accounting View (FY2007) Operating Profit $73.0 Million (1) Cash Net Acquisition Cost – Capitalized and Deferred Amounts = Total Upfront Investment of Acquiring New Customers Monitoring and Service Revenue – Ongoing Cash Costs – Depreciation, Amortization and Writeoffs = Total O
Slide 30: Key Performance Measures
Key Performance Measures Profit from Recurring Services Monthly monitoring and service earnings generated from subscriber base Profit from recurring services of $168.9 million in 2007 Subscriber Base Growth 1.2 million subscribers in 2007 Major driver of MRR expansion Leverage costs of operations Di
Slide 31: Stable and Growing Monthly Recurring Revenues
Stable and Growing Monthly Recurring Revenues ($MM) Monthly Recurring Revenues 11.5 12.0 10.4 Growth (%) 13.7 12.4 12.5 12.0 Growth driven by subscriber growth and an increase in average customer recurring revenue
Slide 32: Total Revenue
Total Revenue ($MM) 11.3 9.9 Growth (%) 13.5 12.0 10.3 9.2 11.8 Recurring revenues were 85% to 89% of total revenues from 2003 through 2007 Recurring Revenue Other Revenue
Slide 33: Installation Growth
Installation Growth New Installations (000s) 15.2 Growth (%) 19.8 14.6 3.3 5.2 (2.4) 4.6
Slide 34: Subscriber Growth
Subscriber Growth Period-End Subscribers (000s) 8.7 Growth (%) 10.5 10.6 8.8 9.6 8.2 10.4
Slide 35: Annual Disconnect Rate
Annual Disconnect Rate Trailing 12 Month Disconnect Rate (%) Based upon an article in SDM, a leading trade magazine, and the public filings of competitors, BHS believes it has the highest customer retention rate of the four largest security monitoring companies Source: Company Filings Note: (1) 1H20
Slide 36: Brink's Home Security
ry |e HOME SECURITY
Slide 37: Key Growth Strategies
Key Growth Strategies Grow residential subscriber base and recurring revenues Develop light and mid-market commercial monitoring business Expand recurring revenue per customer Maximize customer life-cycles Improve productivity and enhance operating efficiency Selectively pursue growth opportunities
Slide 38: Growth Opportunities – Residential
Growth Opportunities – Residential Expand penetration of monitored security systems Only 18% of U.S. households (1) Continue national direct response marketing National sales force coverage Increase volume through expansion of customer acquisition channels Authorized dealer network Home inspection N
Slide 39: Growth Opportunities – Commercial
Growth Opportunities – Commercial Expand products and service capabilities Intrusion, Fire, Video, and Access Control Leverage existing nationwide sales, installation and service platform 150 dedicated salespeople 140 dedicated technicians Provide consistent service to national account customers
Slide 40: Growth Opportunities – Recurring Revenue per Customer
Growth Opportunities – Recurring Revenue per Customer Provide additional value to customers through new products and services Cellular and IP communications Extended service plans Environmental monitoring services Other value added services Recurring revenue per customer has grown 9% since 2003 Work
Slide 41: Growth Opportunities – Customer Retention
Growth Opportunities – Customer Retention Continue focus on the full life-cycle value of each customer relationship Select the right customer Exceed customer expectations Retain customer Deliver consistent service Measure customer satisfaction Mine data for identification of process improvements Enh
Slide 42: Growth Opportunities – Process Improvement
Growth Opportunities – Process Improvement Find a better way Continuous process improvement initiatives Leverage national scope and scale Invest in technology Enhance operational capabilities $8 – $12 million annual capital expenditures for IT and infrastructure
Slide 43: Growth Opportunities – Selective Acquisitions
Growth Opportunities – Selective Acquisitions Selectively pursue strategic acquisitions as part of our larger growth strategy Take a disciplined approach New assets or capabilities to support the growth strategy Potential for incremental growth and cost savings Complementary to existing businesses a
Slide 44: Brink's Home Security – Positioned for Growth
Brink’s Home Security – Positioned for Growth Strong heritage and brand name Focus on the customer Superior execution and operational performance World-class facilities and technology platform Broad North American footprint Consistent growth in monthly recurring revenues Strong financial performance
Slide 45: Brink's Home Security
ry |e HOME SECURITY
Slide 46: Brink's Home Security Locations
Brink’s Home Security Locations Dealer Markets Branch Offices – ( ) Indicates Multiple Locations Headquarters and National Customer Contact Centers Vancouver Seattle Tacoma Spokane East Wenatchee Richland Portland Coos Bay Brookings Medford Bolse Caldwell Reno Sacramento Concord San Francisco Modest
Slide 47: Separation and Distribution Agreements
Separation and Distribution Agreements Separation and distribution Brand licensing Transition services (HR, Finance & Accounting, Legal) Tax matters Non-compete Employee matters
Slide 48: Brand Licensing and Non-Compete Key Provisions
Brand Licensing and Non-Compete Key Provisions License rights to use “Brink’s Home Security” and other variants of the Brink’s name Scope: United States, Puerto Rico, and Canada Duration: 3 years (1) Annual licensing fee: 1.25% of revenue Brink’s agrees not to compete in residential and commercial s
Slide 49: Transaction Structure and Distribution Mechanics
Transaction Structure and Distribution Mechanics Approved by Brink’s Board of Directors No ongoing ownership retained by Brink’s Key tax points: Conditioned upon Brink’s receiving a private letter ruling from IRS, which has been received, and an opinion of counsel affirming tax-free status Brink’s a
Slide 50: Credit Facility
Credit Facility (1) $75 million Unsecured Revolver with a $50 million expansion option Four year term JPMorgan Chase is lead bank Guarantor – Brink’s Home Security, Inc. and future material domestic subsidiaries Grid-based pricing determined by leverage ratio (range: LIBOR +175 bps to LIBOR +225 bps
Slide 51: Select Historical Financial Data
Select Historical Financial Data ($MM) 2005 2006 2007 1 H 2008 Statement of Income Data (Unaudited) Revenues 392.1 439.0 484.4 261.7 Operating Profit 57.1 63.2 73.0 46.5 Net Income 36.0 36.3 44.2 28.3 Balance Sheet Data (Unaudited) (Unaudited) Cash and Cash Equivalents 3.4 2.6 3.3 4.4 Property and E
Slide 52: Other Historical Information
Other Historical Information ($MM) 2005 2006 2007 1 H 2008 Primarily marketing and selling expenses, net of the deferral of subscriber acquisition costs (primarily a portion of sales commissions and related costs) incurred in the acquisition of new subscribers. (2) Includes cash receipts from new su
Slide 53: Pro-forma Consolidated Income Statement
Pro-forma Consolidated Income Statement BCO 10-K Historical Adjustments Year Ended December 31, 2007 ($MM) Form 10 Historical Pro-forma Adjustments Pro-forma 114.2 484.4 (41.2) — Revenues 484.4 — 484.4 Costs and Expenses Cost of Revenues 271.9 (27.2) 244.7 Selling, General and Administrative Expense
Slide 54: Reconciliation of Non-GAAP Measures – Monthly Recurring Revenue
Reconciliation of Non-GAAP Measures – Monthly Recurring Revenue 2003 2004 ($MM) 2005 2006 2007 1H07 1H08 310.4 282.7 27.7 2.4 2.0 23.3 345.6 315.6 30.0 1.8 2.1 26.1 Monthly Recurring Revenues (“MRR”) (1) 29.1 33.1 37.2 35.1 39.3 Amounts Excluded from MRR Amortization of Deferred Revenue (2) 3.3 2.5
Slide 55: Reconciliation of Non-GAAP Measures – Profit for Recurring Services
Reconciliation of Non-GAAP Measures – Profit for Recurring Services ($MM) 2005 2006 2007 1H07 1H08 Profit from Recurring Services (1) 141.0 151.2 168.9 85.3 97.9 Investment in New Subscribers (2) (83.9) (88.0) (95.9) (46.1) (51.4) Operating Profit 57.1 63.2 73.0 39.2 46.5 The purpose of this table i
Slide 56: Disconnect Rate
Disconnect Rate The annual disconnect rate is a ratio. The numerator is the gross number of customer cancellations during the period, and the denominator is the average number of customer subscribers for the period. The gross number of customer cancellations is reduced for customers who cancel servi