Brinks Company (the) · NYSE:BCO
Brinks Company (the) — Q1 2020 Earnings Presentation
45 slides from Brinks Company (the)'s earnings presentation, May 6, 2020
Slide 1: First Quarter 2020
First Quarter 2020 May 5, 2020 1
Slide 2: Safe Harbor Statements and Non-GAAP Results
Safe Harbor Statements and Non-GAAP Results These materials contain forward-looking information. Words such as "anticipate," "assume," "estimate," "expect," “target” "project," "predict," "intend," "plan," These materials contain forward-looking information. Words such as "anticipate," "assume," "es
Slide 3: Today's Message
Today’s Message • First-quarter results affected by COVID-19, currency translation • Strong financial health; ample liquidity • Three priorities during the crisis: • Protect our employees and service customers • Preserve cash and optimize profitability • Position Brink’s to be stronger on the other
Slide 4: Our Priorities
Our Priorities PRIORITY 1 Our people and customers • Our highest priority is the health and safety of our employees, their families and our customers. • Provide “essential services” to our customers. PRIORITY 2 Preserve cash and optimize profitability • Take decisive and timely actions to preserve c
Slide 5: Our People & Customers – Health & Safety
Our People & Customers – Health & Safety PRIORITY 1 • Working with public health authorities to respond to affected employees with contact tracing and aggressive branch cleaning to mitigate further spreading. • Implementing best practices and training for hygiene, sanitization, and social distancing
Slide 6: First-Quarter 2020 Non-GAAP Results
First-Quarter 2020 Non-GAAP Results (Non-GAAP, $ Millions, except EPS) Impacted Globally by COVID-19 Pandemic Revenue (4%) Op Profit (26%) Adj. EBITDA (23%) EPS (56%) Constant currency +3% Constant currency (4%) Constant currency (8%) Constant currency (33%) Organic +2% Organic (5%) Tax Rate Acq +1%
Slide 7: First-Quarter 2020 Operating Profit
First-Quarter 2020 Operating Profit (Non-GAAP, $ Millions) % Change 10% 1% 11% (21%) (10%) (15%) (26%) Devaluation above $9 $1 $94 ( $18 ) original guidance $85 $76 ( $13 ) $63 9.4% ~9.9% ~8.5% 7.2% Margin Margin Margin Margin 9.4% 8.7% 7.2% Margin Margin Margin 2019 Organic excluding Acq / Disp* 20
Slide 8: First-Quarter 2020 – Adjusted EBITDA and EPS
First-Quarter 2020 – Adjusted EBITDA and EPS (Non-GAAP, $ Millions, except EPS) EPS: 1Q19 $0.81 1Q20 $0.36 (56%) vs PY EBITDA (23%) vs PY $7 $101 Tax Rate $39 49.8% vs. 31.4% in 2019 $63 ( $19 ) $37 ( $19 ) ( $6 ) $18 Op Profit Interest Taxes Other Income from D&A Interest Exp Stock Comp Adjusted Ex
Slide 9: First-Quarter Results by Segment
First-Quarter Results by Segment ($ Millions) North America South America Rest of World Revenue +2% Op Profit (25%) Revenue (14%) Op Profit (3%) Revenue (4%) Op Profit (37%) Constant currency +3% (24%) Constant currency: +8% +28% Constant currency (2%) (36%) Organic +2% (24%) Organic +8% +27% Organi
Slide 10: Strong Financial Health - Ample Liquidity
Strong Financial Health - Ample Liquidity PRIORITY 2 ($ Millions, except where noted) Cash and Debt Capacity ~$800 million liquidity expected after $300 G4S Acquisition ~$3.1 B ~$0.8 B • ~$500 million Revolver plus ~$300 Liquidity million cash Cash • Incremental $590 million Term Loan A $285 $258 cl
Slide 11: CapEx – Target 40-60% Cash Reduction
CapEx – Target 40-60% Cash Reduction PRIORITY 2 ($ Millions) Cash Capital Expenditures 2018-2020 Targeting ~40-60% reduction in cash CapEx. $165 $165 Cash CapEx Remaining CapEx $155 primarily for safety and $26 $25 Cash Devices security. $25 ~$100 G4S ~$20 Acquisition Cash CapEx excl. Cash $138 $140
Slide 12: Maximize Cash Flow
Maximize Cash Flow PRIORITY 2 (Non-GAAP, $ Millions) Includes G4S Acquisition1 $564 $564 Adjusted EBITDA Cash From Operating Activities Working Capital and Cash Restructuring Q2 – Q4 • DSO risk ... negotiating with vendors $334 Op Profit Op • Cash restructuring related to G4S acquisition $392 and ad
Slide 13: Protecting Profitability and Free Cash Flow
Protecting Profitability and Free Cash Flow PRIORITY 2 2019 Cost Structure 2020 Actions (Percent of Total Costs) Direct, Indirect & SG&A Labor • Headcount reductions … severance and furloughs • Negotiated with unions and works councils • Government programs offsetting some payroll costs • Overtime m
Slide 14: United States COVID-19 Volume Impact and Actions
United States COVID-19 Volume Impact and Actions PRIORITY 2 Volume & Revenue Impact Revenue • Service volume reductions began in mid-March … April expected to be low point • Q3 & Q4 improvement expected with economies re-opening • Retailers more impacted than Financial Institutions 100% • 44% of ret
Slide 15: Our Customer Base
Our Customer Base Diverse, Stable, Resilient and Essential
Slide 16: A Strong Global Customer Base
A Strong Global Customer Base Percent of Revenue1 Brink’s Consolidated U.S. Mexico Brazil Argentina France = Financial Institutions = Retail = Gov’t / Other | 16 1. Brink’s Internal Analysis
Slide 17: U.S. Retail Driven by Large, Essential Customers & CompuSafe
U.S. Retail Driven by Large, Essential Customers & CompuSafe® 44% Essential Services Multi-location Customers Strong Recurring Revenue Temporarily Essential <20 CompuSafe closed Services ~30% 100+ Limited Operations 20-99 CIT Retail Revenue1 Retail Revenue by Retail Revenue1 customer size (locations
Slide 18: Recurring Revenue from Large U.S. Financial Institutions
Recurring Revenue from Large U.S. Financial Institutions (FI) 66% of U.S. FI Revenue from Customers with 50+ Locations1 <10 • Top 25 Tier 1 banks comprise ~50% of FI revenue 52% 10-49 • Recurring revenue and 18% long-term contracts 18% • Stable recurring revenue during the crisis • Outsourcing oppor
Slide 19: Cash in Circulation Continues to Grow
Cash in Circulation Continues to Grow Cash Availability Continues to Grow Number and value of notes in circulation consistently grows faster than GDP • 2009 – 2018 CAGR Value of Notes: USD ~7%, Euro ~5% • 2009 – 2018 CAGR Number of Notes: USD ~5%, Euro ~6% USD – notes in circulation1 Euro – notes in
Slide 20: Cash is Most Preferred Payment – 75% of Global Transactions
Cash is Most Preferred Payment – 75% of Global Transactions Drivers of Cash Usage Strong Cash Usage in our Largest Markets • Unbanked or underbanked rely on cash as a primary payment method • 25% of U.S. Households are unbanked / underbanked1 • All demographics use cash – all ages and income • Cash
Slide 21: During a Recession, Cash Usage Grows
During a Recession, Cash Usage Grows Cash usage grew significantly in the last Drivers of Cash Usage recession in a Recession Cash as a % of Total Payments - U.S. • Cash usage in 2008-2009 grew significantly with 31% government stimulus and constrained consumer 29% credit 27% • Unbanked and underban
Slide 22: Cash is Safe and Vital to the Economy
Cash is Safe and Vital to the Economy Cash has Lower Germ Index COVID-19 Virus Survival Time NYC (in hours)1 Fast Food 664 Door Handle NYC 70 Park Bench 503 60 Average Germ-Score 285 for Credit Cards 50 NYC 40 Train Station 163 Bathroom 30 Average Germ-Score 160 Average for Cash 20 Average Cash Germ
Slide 23: Large U.S. Retail Opportunity for Brink's Pre- and Post-COVID-19
Large U.S. Retail Opportunity for Brink’s Pre- and Post-COVID-19 Large in-person retail market with one-third of purchases in cash 2019 Total U.S. Cash accounts for 32% Retail Market $5.5T1 of in-person purchases2 Check 89% of 2% Purchases Credit In-Person at 28% Point-of-Sale E-Commerce Cash 11% 32
Slide 24: Opportunity: 90% of U.S. Retail Locations Not Served by Cash Management Industry
Opportunity: 90% of U.S. Retail Locations Not Served by Cash Management Industry in 2019 ~90% Unvended ~10% Vended BCO 3.8M Retail Brink’s initial Strategy 2.0 targets include select Locations1 enterprise companies with >500 locations Credit / Debit2 Unvended ~3% Market Landscape (Estimated) • 90% o
Slide 25: Why Do So Few Retailers Have a Cash Management Solution?
Why Do So Few Retailers Have a Cash Management Solution? Facts • Cash is a popular payment method for retailers & will be post COVID-19 • Cash logistics industry provides incomplete, limited-value service vs. credit cards Customer Perceptions Customer Needs Cash-in-Transit: • Digital credit for cash
Slide 26: Strategy 2.0 – Brink's Complete: The Right Service at the Right Time
Strategy 2.0 – Brink’s Complete™ The Right Service at the Right Time 26
Slide 27: Seizing the Unvended Opportunity with Strategy 2.0
Seizing the Unvended Opportunity with Strategy 2.0 Brink’s Complete disrupts cash management’s one-size-fits-all paradigm with flexible, tech-enabled solutions for a wider range of customers. Introducing Brink’s Complete A Strategy 2.0 Offering • Subscription-based cash management service, target co
Slide 28: Brink's Complete – How It Works
Brink’s Complete – How It Works Retailers use Brink’s 24SEVEN app to create and track deposits, place 1 change orders, and request support 2 Retailers place cash in a secure device – (provided by Brink’s) 3 Retailers receive advance credit for deposits the next day Brink’s collects and processes cas
Slide 29: Brink's Complete: The Right Service at the Right Time
Brink’s Complete The Right Service at the Right Time Brink’s Complete Value Proposition Simplified, cost-effective cash management Customer Benefits • Next-day credit • Target cost <1% of cash payments • Eliminates trips to the bank • Bank agnostic • Hassle-free onboarding, use and billing • Enables
Slide 30: Priority 3: Position Brink's to be stronger post-crisis
Priority 3: Position Brink’s to be stronger post-crisis PRIORITY 3 Continue to execute on all 3 layers of our strategic plan Strategy 1.0 WD – Wider and Deeper • Continue to implement organic growth initiatives across global network of countries • Accelerate restructuring to re-size business • Conti
Slide 31: Outlook
Outlook 2020 – Targets through the Crisis • At least $45M of Adjusted EBITDA in 2Q • Improvement in 3Q and 4Q with aggressive cost reduction actions and gradual economy re-openings • Positive operating cash flow for the year and ample liquidity 2021 and Beyond • Emerge from crisis stronger than ever
Slide 32: The world counts on Brink's.
The world counts on Brink’s. A Brink’s truck alone on the streets of Paris. We are grateful to our employees who continue to provide essential services to customers around the world during the COVID-19 pandemic. | 32
Slide 33: Appendix
Appendix 33
Slide 34: Non-GAAP Income Tax
Non-GAAP Income Tax Tax Rate 49.8% • Excludes impact of post Q1 G4S acquisitions • U.S. taxable income limitation • Inability to credit any taxes on cross border payments, plus 34.2% 34.2% 31.4% 32.0% • U.S. tax net operating loss with no tax benefit because of U.S. taxation of global earnings • U.S
Slide 35: Net Debt and Leverage
Net Debt and Leverage (Non-GAAP, $ Millions) Net Debt Adjusted EBITDA and Financial Leverage Leverage Ratio1 1.4 2.4 2.4 3.0 Fully-Synergized ~$2,342 G4S Acquisition ~3.5 Pro-forma Leverage Remaining G4S Adjusted EBITDA acquisition $1,577 ~$668 Pro-forma Fully- Synergized $1,349 G4S $1,214 $564 Acqu
Slide 36: Debt Maturity Profile
Debt Maturity Profile ($ Millions) Maturity Schedule for Credit Facility and Senior Notes $1,000 Revolver Senior Notes $1,089 Term Loan A1 $600 $62 $70 $70 $70 2020 2021 2022 2023 2024 2025 2026 2027 1. Pro forma for April 1, 2020 $590M Term Loan A addition | 36
Slide 37: Legacy Liabilities – Underfunding
Legacy Liabilities – Underfunding ($ Millions) Frozen Primary U.S. Pension UMWA Assets $ 721 729 777 687 699 Assets $ 227 217 219 182 178 Obligations $ (835) (837) (879) (794) (817) Obligations $ (433) (444) (513) (479) (425) Primary U.S. Pension UMWA 2015 2016 2017 2018 2019 2015 2016 2017 2018 201
Slide 38: Estimated Cash Payments for Legacy Liabilities
Estimated Cash Payments for Legacy Liabilities ($ Millions) Payments to Primary U.S. Pension Payments to UMWA $310 $14 $18 $16 $10 $16 $25 $24 $2 $0 2019 2020 2021 2022 2023 2024 2025 2026 2019 2028 2029 2030 After 2030 Primary US Pension • Based on actuarial assumptions (as of 12/31/19), no additio
Slide 39: International Pension Plans
International Pension Plans ($ Millions) Underfunding Estimated Future Benefit Payments from Plan Assets Assets $ 165 173 203 180 215 $15 Obligations $ (263) (267) (302) (264) (318) $14 $13 $12 $12 2015 2016 2017 2018 2019 ($84) ($94) ($98) ($99) 2020 2021 2022 2023 2024 ($103) Note: 2019 amounts ba
Slide 40: 2017-2018 Non-GAAP Results Reconciled to GAAP (1 of 3)
2017-2018 Non-GAAP Results Reconciled to GAAP (1 of 3) The Brink’s Company and subsidiaries Non-GAAP Reconciliations (In millions) 2017 2018 Full Year Q1 Full Year Revenues: GAAP $ 3,347.0 $ 879.1 3,488.9 Venezuela operations(a) (154.1) (25.8) (51.4) Non-GAAP $ 3,192.9 $ 853.3 3,437.5 Operating prof
Slide 41: 2017-2018 Non-GAAP Results Reconciled to GAAP (2 of 3)
2017-2018 Non-GAAP Results Reconciled to GAAP (2 of 3) The Brink’s Company and subsidiaries Non-GAAP Reconciliations (In millions) 2017 2018 Full Year Q1 Full Year Income (loss) from continuing operations attributable to Brink's: GAAP $ 16.9 $ 22.1 (33.3) Retirement plans(c) 22.3 6.9 25.3 Venezuela
Slide 42: 2017-2018 Non-GAAP Results Reconciled to GAAP (3 of 3)
2017-2018 Non-GAAP Results Reconciled to GAAP (3 of 3) The Brink’s Company and subsidiaries Non-GAAP Reconciliations 2017 2018 (In millions) Full Year Q1 Full Year Adjusted EBITDA(j): Net income (loss) attributable to Brink's - GAAP $ 16.7 $ 22.3 (33.3) Interest expense - GAAP 32.2 15.0 66.7 Income
Slide 43: Non-GAAP Reconciliation – Other
Non-GAAP Reconciliation – Other The Brink’s Company and subsidiaries Other Items Not Allocated to Segments (Unaudited) (In millions) Brink’s measures its segment results before income and expenses for corporate activities and for certain other items. See below for a summary of the other items not al
Slide 44: Non-GAAP Reconciliation – Cash Flows
Non-GAAP Reconciliation – Cash Flows The Brink’s Company and subsidiaries (In millions) Full Year 2019 Cash flows from operating activities Operating activities - GAAP $ 368.6 Increase in restricted cash held for customers (23.7) Increase in certain customer obligations(a) (11.4) Operating activitie
Slide 45: Non-GAAP Reconciliation – Net Debt
Non-GAAP Reconciliation – Net Debt The Brink’s Company and subsidiaries Non-GAAP Reconciliations - Net Debt (Unaudited) (In millions) December 31, December 31, December 31, March 31, (In millions) 2017 2018 2019 2020 Debt: Short-term borrowings $ 45.2 $ 28.9 $ 14.3 $ 14.1 Long-term debt 1,191.5 1,52