Hello, and welcome to the Brink's Company's Third Quarter 2023 Earnings Call. This morning, Brink's issued a press release detailing its third quarter 2023 results. The company also filed an 8-K that includes the release and slides that will be used in today's call. The release and slides are available on the Investor Relations section of the company's website at investors.brinks.com. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. As a reminder, this conference call is being recorded and will be available for replay. This call and 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. Information presented and discussed on this call is representative of today only. Brink's assumes no obligation to update any forward-looking statements. The call is copyrighted and may not be used without written permission from Brink's. I will now turn the call over to your host, Jesse Jenkins, Vice President of Investor Relations. Mr. Jenkins, you may begin.

Thanks and good morning. Joining me today are CEO, Mark Eubanks and CFO, Kurt McMaken. This morning, Brink's reported third quarter 2023 results on a GAAP, non-GAAP and constant currency basis. Most of our comments today will be focused on our non-GAAP results because we believe these results make it easier for investors to assess operating performance between periods. 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 8-K filing. I'll now turn the call over to Brink's CEO, Mark Eubanks.

Thanks, Jesse. Good morning all, and thanks for joining us. Starting on Slide 3. I'm pleased to report another quarter of strong growth in revenue, profit margin and free cash flow as we execute on our strategy. Total revenue was up 8%, including organic growth of 6%. Our cash and valuables management business grew organically 4% and the ATM managed services and digital retail solutions customer offerings were up 18% organically. Operating profit of $166 million was up 38% organically, with margins expanding 230 basis points to 13.5%. Adjusted EBITDA was up 22% with margins expanding 220 basis points to 18.8%. These margins represent historic hikes for the third quarter and reflect the discipline of our teams to deliver strong cost productivity and improved price mix as we continue to ship more of our business to AMS and DRS. I'm happy to report we're well on our way to our year-end free cash flow and leverage targets. Cash generation continues to accelerate, with year-to-date free cash flow up almost 200% from the third quarter just a year ago. The cash generation is strengthening our balance sheet with leverage down two-tenths quarter-on-quarter to 3x adjusted EBITDA at quarter-end. Looking at the key revenue drivers. We delivered solid volume growth in our AMS and DRS offerings and executed strong pricing actions across all lines of business. We've also seen foreign exchange move against us a bit since our last market update with the dollar strengthening considerably across most major currencies where we operate. Margin expansion was highlighted by good progress in North America, where margins expanded 240 basis points year-on-year as we continue to prioritize customer profitability and efficiency across all of our operations. We are leveraging the Brink's business system to further instill our lean culture into our daily work and our operating cadence. Other profitability drivers in the quarter included price realization, improved revenue mix from AMS and DRS as well as restructuring savings. A key highlight of the quarter was our execution on cash generation or the compounding effect of revenue growth and margin expansion are leading to meaningful improvements. Free cash flow in the third quarter was over $150 million. Year-to-date, we have already exceeded the total full-year 2022 free cash flow with our seasonally strong fourth quarter still ahead of us. With the last 12-month conversion rates already over our 40% target, we are well positioned to exceed the midpoint of our previous free cash flow guidance. As we have consistently discussed, our capital allocation strategy remains focused on capital returns to shareholders with $106 million worth of share repurchases year-to-date, which is approximately half of our total free cash flow for the year. As we turn to the fourth quarter and our full-year guidance, we remain committed to the targets that we increased after the first quarter. We expect volume growth in AMS and DRS revenue, strong pricing execution and continued cost productivity, leveraging the Brink's business system. We are monitoring the macroeconomic risks related to the ongoing wars in Europe and the pressure of high inflation on consumers that could both have an impact on our results. Despite these uncertainties, the structural improvements in working capital and clear line of sight to our remaining cash obligations before year-end allow us to increase our guidance for free cash flow to the high end of our previous range. We believe this guidance actually balances the opportunities and risks that we see as we close out the year. And finally, as we disclosed last week, the continued progress on our strategy, the strong free cash flow performance and the recent share repurchase activity has given our Board the confidence to authorize a new $0.5 billion share repurchase plan over the next two years. Kurt will have more in a few slides on both the guidance and our capital allocation priorities.

Thanks Mark. Beginning on Slide 6. Organic growth was split roughly evenly between cash and valuables management and AMS/DRS. As a reminder, customers will move between these two organic lines as legacy customers convert from traditional CIT and ATM replenishment offerings into AMS and DRS offerings. This was also the final quarter of acquisition revenue from NoteMachine, which will roll into the organic result of AMS/DRS starting next quarter. Organic revenue growth from pricing and AMS/DRS volume was partially offset by translational FX headwinds primarily in Latin America. Shifting to operating profit. $72 million of organic revenue became $49 million of organic operating profit for an incremental margin of 68% in the quarter. The high flow through was driven by three main items. First, cost productivity initiatives leveraging the Brink’s Business System. Second, the benefits of revenue mix now with 20% of revenue coming from AMS and DRS, and finally, the continued benefits of the restructuring program we announced in 2022. The quarter also benefited from the lapping of a large loss event and other corporate expenses in the prior year that we don’t expect to repeat in the coming quarters. FX translation reduced operating profit by $15 million. The high flow through impact from currency was due to headwinds in the higher margin Latin America segment, partially offset by benefits in the Europe segment. Looking at the current FX rates, we expect this high margin flow through from FX to continue into the fourth quarter.

Thanks, Kurt. As we approach the last few months of the year, we remain focused on fulfilling our commitments in the near-term, while continuing to advance our long-term strategy. So far this year, we’ve improved the quality of our revenue, with over 20% of our base now being in higher margin AMS and DRS revenue. Second, we’ve improved our profitability through the global deployment of the Brink’s Business System, leveraging our lean culture, resulting in continued repeatable efficiency initiatives across our global business operations. And third, we’ve improved our cash generation by delivering CapEx efficiency and diligent working capital management. We continue to consistently deliver on our commitments, and I’m confident we remain on the right path. I look forward to building on the momentum we’ve generated and execute on our strategy into 2024 and beyond.

Hi. Thanks. Good morning. You saw 4% organic growth in your cash and valuables management business in the quarter. Can you discuss how much of that growth came from pricing actions and how volumes progressed over the course of the quarter?

Yes. Hey, George, it’s Kurt. Let me just kind of address the price volume mix. We typically target in the 50-50 range for price volume. And last year what we saw – what we’re seeing consistent this year is that we’re heavier on the price versus the volume piece. And we expect that to be the case for the full year. So it’s really a consistent message. And what’s driving that is we continue to see inflation in the business that we are working to overcome with price and make sure that we’re not only overcoming the inflation, but maintaining margins. I’d say, too, we continue to have really a lot of opportunities with strategic pricing going forward, as we’ve talked about. And so we think that this continues going forward as we look ahead.

Hey, George, this is Mark. The only other thing I would say is, as we think about the strategic pricing piece, that’s going to be as we look at different segments within specific markets to ensure that we’re getting equivalent returns customer to customer. I think the other thing that Kurt mentioned is inflation does continue to be persistent globally, and that’s why our pricing posture continues to be strong there. And frankly, we thought, like most, that inflation would subside. And we thought, as we talked about in Q3 and in Q1 that our pricing might subside, but we would remain vigilant in the market in the event that inflation continued and it has. And so have we.

Okay. Got it. Just to clarify, of the 4% growth, is it the 50-50 split between price and volumes currently?

No, it’s not. It’s skewed more heavily toward price. I think that was the same discussion we had in Q2.

So the takeaway, George, it’s a consistent message. We haven’t seen really a change. We expect that to be that way for the full year.

Okay. And then what about the volume trends over the course of the quarter? Were they stable, improving, or inflecting lower?

Sure. Maybe I should just give you some insight from the regions, George. First, in North America, we continued to see good momentum in DRS and continue to have a healthy pipeline there, with our pipeline, as I mentioned, up 20%, and those activities and bookings continue to exceed prior quarter and prior year. So that’s all good. Obviously, very strong margin improvements. We’re very happy with that 200 bps year-to-date and 240 basis points Q3 on Q3. I wouldn’t say we’ve seen demand change much in North America in the marketplace, although I think what we did see was a very strong GDP print, which may be in some cases you can see a little bit counterintuitive some of the retailers that you’ve seen out there. But from our side, we really haven’t seen much demand change. And the other good thing here is our leadership team is clicking very well here in the region. LatAm again is a good pricing market, with a lot of inflation in that market, particularly as you think about foreign exchange and the impacts there. But certainly, we’re seeing markets that have really good penetration. DRS continues to be healthy. We’ve got several large customers doing AMS pilots with us today where we actually have full stack services in pilot of multiple ATM units to continue to drive there. We are seeing a little bit, as we mentioned in Q1 and Q2, continued to see some economic headwinds in Brazil that have been well documented, as they’ve lowered interest rates and continue to try to manage their fiscal policies. Obviously, some continued weakness in our global services business, which is really related to precious metals around the world that’s been equally, let’s say, soft or softer than we expected with the movement of gold, silver, and central bank movements. But again, those are all ebbs and flows that we see in this business from time to time. In Europe, things are going very well despite some of the reports I’d say on their GDP. DRS and AMS continued to grow well. We continue to add two new banks onto our network in France, which is really good reinforcement of our strategy, but also of our execution. I think that's something we continue to be proud of. And in the Rest of World segment, again, probably the highest mix of global services business in that region, whether that's mining or central bank movements of currency and also exchanges moving gold and silver. That's one area where we’ve seen the kind of macro weakness. On balance, though, we feel like from what we can see looking into the fourth quarter, our guidance reflects that. We think we've got the right amount of AMS and DRS growth, as well as our core business growth to offset that softness to continue to meet our commitments.

Got it. Very helpful. And then a quick follow-up on the cost side. Productivity and cost initiatives contributed to 200 bps of margin expansion in the quarter. Can you elaborate on additional levers to drive productivity gains in which geographies you're focusing most of your efforts on to improve margins?

Sure. I'd say, we're focused everywhere, George. One of the biggest levers for us, again, as we talked about, is this shift of our business model from scheduled pickups and services to a managed services environment, whether that's with ATMs or in the retail environment with DRS. As we drive more penetration there, we continue to not only create more productivity, i.e., more revenue across our existing cost base, but also allows us to be more efficient with our CapEx as we go forward. The other really significant lever, again, we've mentioned last quarter is the stabilization of our labor force. That really is predominantly a North America issue, but we see that in other markets as well, where we've been able to create more tenure with employees that allows us to drive more productivity and, frankly, avoid the churn of hiring and retraining of employees. Great. Thank you all for joining us today. We appreciate all your support and we look forward to speaking with each of you soon. Have a great day.

Thank you. The conference has now concluded. Thank you for attending today's presentation, and you may now disconnect your lines.