Brinks Co Q1 FY2026 Earnings Call

Good day, and welcome to the Brink's Company First Quarter 2026 Earnings Conference Call. Operator instructions were provided. Please note this event is being recorded. I would like to turn the conference over to Jesse Jenkins, Vice President, Investor Relations. Please go ahead.

Thanks, and good morning. Here with me today are CEO Mark Eubanks and CFO Kurt McMaken. This morning, Brink's reported first quarter results on a GAAP, non-GAAP and constant currency basis. Most of our commentary 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. We believe these measures allow investors to better compare performance over time and to evaluate our performance using the same metrics as management. Reconciliation of non-GAAP results to their most comparable GAAP results are provided in the SEC filings, which can be found on our website. We will also have commentary on the status of our pending acquisition of NCR Atleos. As a reminder, this transaction is subject to the completion of customary closing conditions, including regulatory approvals and approval by Brink's and NCR Atleos shareholders. Additional details, including risk factors related to the transaction can be found in the pertinent SEC filings. I will now turn the call over to Brink's CEO, Mark Eubanks.

Thanks, Jesse, and good morning, everyone. Starting on Slide 3. We're pleased with another strong quarter of growth and operational execution as we continue to transform Brink's into a more predictable and profitable enterprise. I want to thank all of our team members, especially those in the Middle East region, for their focus in this dynamic global economic backdrop. I could not be more proud of our teams for staying focused and delivering on our Q1 commitments. Our results were at the upper end of our first quarter guidance ranges, and we're off to a strong start to the year. First quarter revenue growth of 10% included 4.5% organic growth, driven mostly by 15% organic growth in ATM Managed Services and Digital Retail Solutions, or AMS/DRS. The growth in the quarter was highlighted by the onboarding of Pandora in DRS and good momentum in AMS, especially in the Rest of World segment. At the segment level, Rest of World delivered 7% organic growth on strong precious metals activity in the Global Services line of business. Overall, organic growth, favorable revenue mix and good underlying productivity drove margin expansion of 10 basis points with over 100 basis points of expansion in both North America and Rest of World and 240 basis points of expansion in Europe. In total, Q1 EBITDA was $238 million with a margin of 17.3%. Trailing 12-month EBITDA was $1 billion for the first time in our history this quarter, reflecting a more than $200 million increase since the end of 2022 as we continue to deliver profitable growth across our business. We also continue to improve cash generation with an increase of $66 million year-over-year in the first quarter. On a trailing 12-month basis, free cash flow exceeded $0.5 billion for the first time in our company's history this quarter with conversion from EBITDA of 50%. Operationally, we saw improvement in both days of sales outstanding and days payable outstanding. Coupled with EBITDA growth I mentioned earlier, total free cash flow has more than doubled since year-end 2022, with free cash flow now exceeding $12 per share. As I review the quarter, we delivered on our commitments with results at the top end of our guidance range. As I mentioned, I'm proud of our consistent execution during volatile market conditions and our team's focus on the heels of the announcement of our transformational acquisition of NCR Atleos. Supported by this strong first quarter, I remain confident in our ability to continue our trajectory and deliver our full framework for 2026. Turning to Slide 4. You can see the components of our value creation strategy, which remain unchanged for 2026 and are well aligned with the strategic rationale of the NCR Atleos acquisition. We expect organic growth in 2026 to remain consistent in the mid-single digits, driven primarily by new and converted customer growth in recurring AMS and DRS revenue, which is expected to approach one-third of our total company revenue by year-end. The acquisition of NCR Atleos is expected to accelerate our ability to capture these AMS and DRS customers by delivering a more vertically integrated AMS offering and lowering our cost base through increased network density on the retail side of our business. On a stand-alone basis for 2026, we expect EBITDA margins to expand by 30 to 50 basis points as we shift revenue to these higher-margin services and drive cost productivity across our operations. This mix shift is expected to continue after completion of the acquisition and cost efficiencies are expected to accelerate behind the $200 million of cost synergies that we previously identified as we eliminate duplicative SG&A and public company costs, optimize our service delivery network and drive global procurement savings. Both companies have delivered meaningful improvement in cash generation over the last few years, and we expect that will compound as we combine our two businesses. In addition to working capital improvements, we've already completed a secured financing arrangement that will allow us to absorb the $1.6 billion of NCR Atleos bank debt at a rate that is more than one full percentage point better than their current level. While we're focused in the near term on reducing leverage, we expect to produce a combined $1 billion of free cash flow from the two companies, providing flexibility to maximize value creation through strategic investments and shareholder returns. Shifting back to the quarter on Slide 5, I'll provide some commentary on performance by line of business. Starting with Cash and Valuables Management, or CVM. Organic growth was 1% in the quarter with good pricing discipline offsetting a couple of percentage points of AMS/DRS conversions. Our Global Service business was also strong again this quarter despite lapping a robust first quarter of 2025. Precious metals movements remain volatile and trends can change rapidly, but we factored in the current favorable trends into our second quarter guidance. AMS/DRS revenue grew organically approximately $50 million in the quarter for a rate of 15%. This was the 13th consecutive quarter of at least 15% organic growth in AMS/DRS as we continue to build momentum in these important businesses. It's important to note that in the fourth quarter of last year, we saw strong growth related to one-time equipment sales, primarily in North America that impacts the sequential comparisons. Factoring in this dynamic, growth in the quarter was in line with our expectations and positions us well to deliver our guidance for the full year. In DRS, we continue to see positive momentum with large enterprise customers in North America, including the onboarding of Pandora during the late fourth and early first quarters. In AMS, we're lapping some large wins in the prior year like Sainsbury's, while we stage for other large deployments, including some in the Rest of World segment. We continue to see positive AMS trends with banking customers, including in Southeast Asia, where we recently won the largest national bank in Indonesia with about 5,000 ATMs. Looking to the balance of the year, we expect AMS and DRS to accelerate sequentially, supported by our strong pipelines and DRS backlogs, including Paradies that will lead us directly into the next slide. On Slide 6, I'd like to highlight an example of the type of wins we're delivering with DRS. Paradies is a leading travel retailer and restaurateur, operating over 700 stores in airports across North America. They offer major brands like Chick-fil-A, Tumi, Starbucks and Jimmy John's just to name a few. Paradies came to us to help solve common dilemmas they see across large global retail and quick-serve organizations. I've often discussed DRS as a true win-win for both Brink's and retailers, and that's clearly the case here with Paradies. We designed a bespoke solution incorporating both front office recyclers and smart safes that integrate directly with Paradies' POS software. Our solutions are expected to help them with several pain points across their global footprint. Among other things, we're able to reduce cash handling time for managers and employees, unlocking productivity and efficiency within their stores. Our solution digitizes cash quickly and tracks transactions down to the teller level, reducing operational shrink across the business. We are also able to simplify service delivery for customers as we shift our key quality service deliverable from arriving within a certain appointment window to providing overnight electronic deposits for faster access to working capital. This shift creates flexible routing and scheduling options for Brink's, allowing us to arrive when needed or when easily added to an existing scheduled trip into the area. We completed a successful trial phase with Paradies and are planning for the full rollout across their entire footprint over the balance of the year. While the solution we designed for Paradies is unique to their specific needs, the problems we're solving for customers are universal. Our DRS offerings have a clear and demonstrated value proposition for retailers of all sizes. As we close more of these deals, I remain confident that we're still in the early stages of our efforts to expand our DRS business across the retail landscape in all geographies that we serve. On Slide 7, you can see our methodical progress towards 20% EBITDA margins in North America. In Q1, EBITDA margins in this segment expanded by 170 basis points year-over-year, driving trailing 12-month margins to 19.5%. Revenue mix has been a big contributor to this progression. It was another great quarter of AMS/DRS growth in North America as we continue to convert customers and install new DRS units, including the Pandora win that we mentioned last quarter. Global Services revenue growth was also strong this quarter despite an elevated prior year period comparable. Our shift to higher-margin flexible service recurring revenue is unlocking operational productivity across the business. Over the years, we've improved and standardized our service delivery network to enable profitable growth. This improvement is clear in the numbers as we continue to deliver improvements in revenue per vehicle and labor as a percentage of revenue. This is setting the stage for continued momentum post-closing of our NCR Atleos acquisition as we layer on additional volume to our more efficient network. I'm confident increased scale will position us to drive further expanded margins well beyond our preliminary 20% targets. Turning to Slide 8. I'd like to provide a brief update on the NCR Atleos transaction. While we've been publicly engaged with shareholders over the last 8 to 10 weeks, we've been working diligently behind the scenes to progress this transformational acquisition forward. At the end of March, we successfully completed a refinancing of the secured portion of the bridge loan, increasing our capacity while unlocking attractive rates and improving certain conditions in our credit agreement. Just last week, we filed our registration statement and are progressing towards a shareholder vote over the next few months. We're making good progress on the regulatory front as well with filings submitted in many jurisdictions and reviews progressing as expected. NCR Atleos' first quarter results will be filed after the market closed today, and we understand them to be in line with our business case modeling and on track with our full year projections. Though NCR Atleos will continue to operate independently until closing, we expect our integration management team to work closely with NCR Atleos to plan and prepare for the execution of the potential cost synergies. Importantly, we've created a dedicated integration management team within Brink's that is isolated from the day-to-day operations of our business and will be responsible for driving program execution of cost synergies after closing. While we're still in the early process in many ways, we're making good progress and continue to expect closing will occur by the end of the first quarter of 2027. The more we interact with our internal teams, our customers and the NCR Atleos management teams, the more encouraged I am by the potential of this combination. Supported by strong momentum in AMS and DRS and ATM as-a-Service, it remains clear that this is the right strategic direction at the right time to accelerate our growth and bolster our business for the future. Before I hand it over to Kurt to walk through the financials, I want to thank our team for embracing the power of our strategy. We've lifted our performance by consistently delivering on our external commitments while improving our service levels to our customers, even redefining the definition of what service quality means. Our team is focused on continuing our efforts to move the business forward behind AMS/DRS customer offerings that deliver clear win-wins for both the customers and for Brink's. I'm encouraged by the strong results we delivered, the strong momentum supporting us and I'm even more optimistic about the future potential as we combine with NCR Atleos and position ourselves to accelerate growth, profitability and value creation. And with that, I'll hand it over to Kurt to discuss the financials, and I'll come back for Q&A. Kurt?

Thanks, Mark. I'll begin on Slide 10 with a look at Q1. Revenue increased 10% with 5% constant currency growth and a 6% tailwind from foreign currency. Adjusted EBITDA was up 10% to $238 million with operating profit up 12%. Both operating profit and EBITDA accelerated 10 basis points year-over-year on favorable revenue mix, pricing discipline and productivity in both labor and fleet. Earnings per share was $1.80, up 11%. In the quarter, we completed approximately $30 million of share repurchases prior to the NCR Atleos acquisition announcement, reducing outstanding shares by 5%. As Mark mentioned earlier, trailing 12-month free cash flow was $502 million at the end of the quarter, representing conversion of 50%. I would like to call out that we have enhanced our cash flow disclosures to highlight cash flows related to the NCR Atleos acquisition, which were $2 million in the quarter and are expected to be between $50 million to $60 million for the full year. We believe it is important to isolate these cash flows for investors so they can get a better picture of the true underlying cash generation of the business. These cash flows are included in our expectations to get to approximately 2.3x by the end of 2026. Similar to timing from the prior year, we are currently ahead of our full year cash conversion guidance after Q1. We expect the timing of certain cash tax payments and cash investments over the balance of the year to return us to our target level of 40% to 45% by the end of the year. On Slide 11, total organic growth was $56 million or more than 85% of the growth came from higher-margin subscription-based AMS and DRS. The $8 million of CVM growth was in line with expectations and represents volume growth in Global Services and strong pricing execution, partially offset by the conversion of customers to AMS and DRS. FX contributed $71 million of growth in the quarter with favorable year-over-year rates primarily in the euro and Mexican peso. Shifting to the right side of the slide, growth of $128 million generated $23 million of EBITDA, expanding margins by 10 basis points. As you will see from our guidance for Q2, we expect expansion to accelerate into the second quarter as we continue growth into AMS and DRS. Moving to Slide 12. Starting on the left. Operating profit was up $18 million to $168 million with a margin of 12.2% on strong productivity, pricing and line of business revenue mix. Interest expense was $64 million in the quarter, up about $6 million year-over-year and in line sequentially with the fourth quarter. For the full year, interest expense is expected to be just over $250 million using current interest rate expectations. Tax expense was $29 million in the quarter, representing an effective tax rate of 27.6%, in line with the prior year rate. Interest income and other was down $6 million year-over-year, primarily due to lower interest income related to the prior year repatriation of cash from Argentina. Income from continuing operations was $75 million. Depreciation and amortization was $64 million, primarily reflecting increased depreciation from growth in AMS and DRS equipment. In total, first quarter adjusted EBITDA was $238 million, up $23 million year-over-year with margins expanding 10 basis points. Let's move to Slide 13 to discuss our capital allocation framework. Our capital allocation framework has remained consistent during Mark's and my tenure, including through our transformational investment in NCR Atleos. Our leverage at the end of the first quarter was 2.7x net debt to adjusted EBITDA. During 2026, we expect net debt leverage reduction to be the primary focus of our capital allocation as we position our balance sheet for the NCR Atleos acquisition. Over the year, we expect to reduce our stand-alone leverage to approximately 2.3x. While we expect leverage to be approximately 3.4x, assuming a Q1 2027 closing, we are currently expecting to be below 3x by the end of 2027. We continue to believe that 2 to 3x is the right leverage to balance capital efficiency and appeal to existing and potential equity investors. Our capital allocation framework has generated meaningful shareholder value over the last several years. The growth acceleration potential into high-margin recurring revenue AMS and DRS is expected to continue to drive margin expansion and compound cash generation for years to come. With clear line of sight to a combined free cash flow of $1 billion, we expect to have the flexibility to make strategic investments and return capital to shareholders in the future. Moving to guidance on Slide 14. Our framework for 2026 remains unchanged. We expect to deliver mid-single-digit total organic growth, supported by mid- to high teens organic growth for AMS/DRS. Using rates as of yesterday, we are currently expecting to see an FX tailwind for the full year of between 2% and 3%. EBITDA margins are expected to expand between 30 and 50 basis points with conversion of EBITDA to free cash flow of between 40% and 45%. In the second quarter, we expect revenue between $1.37 billion and $1.43 billion, reflecting organic growth in the mid-single digits. Using yesterday's spot rates, FX is expected to be a year-on-year tailwind of just below 3% at the midpoint. Adjusted EBITDA is expected to be between $245 million and $265 million, reflecting 10% growth and margin expansion of approximately 40 basis points at the midpoint. EPS is expected to be between $1.85 and $2.25. And with that, we are happy to now take your questions. Operator, please open the line.

Operator instructions were provided. The first question comes from Keen Fai Tong with Goldman Sachs.

In DRS, can you perhaps quantify how much of the growth came from conversion of traditional cash-in-transit customers versus greenfield wins?

Yes, sure. Again, George, a good quarter for us in Q1 across DRS. About one-third of the installs came from conversions of existing customers, which gives us a headwind in CVM but provides benefits of better margin and recurring revenue. The other two-thirds were new customers that were either unvended or previously served by other solutions. We talked about the Pandora deal last quarter, where we provided an enterprise solution and were able to identify, negotiate and deploy fairly rapidly to collapse our time to revenue. This quarter included another strong deal with Paradies, an airport operator for food, quick serve and retail. Working with customers like that to provide a unique solution—leveraging hardware, software, POS integration and our cash forecasting and balancing software—allows us to tailor solutions to almost any retail environment and streamline the total cash ecosystem inside stores. This is something we'll continue to see going forward.

Very helpful. And then you expect AMS/DRS growth to accelerate sequentially given the strong backlog. What are your latest thoughts on what sustainable medium-term AMS/DRS growth can be?

We think mid- to high teens organic growth for AMS/DRS will continue this year. As we move into 2027 and get the deal closed, we see potential to accelerate that further. Our backlog coming out of Q4 into Q1 positions us well for the second half of this year as installations occur in Q1 and Q2. Q4 was higher at about 22% due to one-time equipment sales in North America, but the core organic growth remained in the high teens and continued into Q1. Q1 is typically lighter because we do fewer installations during the busy retail season in Q4 in North America and Europe, so we tend to carry a strong backlog into Q1 and Q2.

Operator instructions were provided. The next question comes from Tobey Sommer with Truist.

I'd like to double-click on AMS and DRS again. How would you describe the geographical differences you're seeing in customer uptake and demand? And then what do you think it takes to light a fire under financial institutions in North America for this to take off?

Good question, Tobey. We're seeing broader AMS/DRS growth around the world. In Latin America this quarter, Mexico had a good run in DRS allowing us to convert customers and improve margins as we build out an installed base. We're seeing Argentina and Brazil have success as well. AMS in the Rest of World segment is strong because these are large cash markets earlier in the conversion cycle. We mentioned AMS wins in the Philippines and a large deployment in Indonesia with about 5,000 ATMs. Banks in Rest of World and Latin America are continuing to explore better ways to serve their ATM needs. In Europe, we remain highly penetrated and continue to make progress. In North America, our DRS trajectory is increasing, which is reflected in our margins. The pace of full outsourcing with U.S. banks continues to be slower than Rest of World. The Atleos acquisition is part of our approach to offer a full vertical solution that better controls customer outcomes and builds confidence for full outsourcing. Increasing density and participation in our retail footprint should also help accelerate adoption in North America.

If I could ask a specific question on DRS. Are you finding this service is more valuable or less valuable to customers based on their business models—for example, a standalone big box versus areas like airports or malls where retail is clustered—because you've had a couple of marquee customers that fit that latter bucket?

It's more about customer disclosure and willingness to talk about it. We see DRS value across the spectrum from small mom-and-pop shops up to large big-box retailers. Mid-sized customers often have similar solutions, while smaller customers and larger, more sophisticated customers have different complexities. Complexity can be helpful for us because we can solve problems with technology and an integrated service model. On the low end, we're able to lower our cost to serve and provide a better value proposition as we build density. The Atleos integration will help build density across our network, lowering cost to serve and delivering better value propositions to both small and large customers, ultimately creating a stronger network effect.

If I can ask one last one, and I'll get back in the queue. With respect to conversion of EBITDA to cash. You had some numbers in your recent filing that gave a look at expectations for a number of years for stand-alone Brink's. Could you touch on the opportunity or what the combination with NCR Atleos does to the opportunity to increase that conversion over time?

Yes, Tobey. From a profitability perspective, the synergies will help with flow-through. Below the operating profit line, we see opportunities for capital efficiency improvements in both CapEx and working capital. We need to develop those plans further together, but we certainly see opportunities to drive increased conversion.

Another area is global supply chain and procurement. We're starting to see benefits now from improved payment terms as we operate as one large enterprise across 52 countries. Both Brink's and Atleos have been improving in this area. Together, we can drive contract changes and efficiencies in systems, operational execution on credit and collections, and payment terms—improving working capital management.

One other point: if you look at cash interest and cash taxes, there will be opportunities there with the combined firm as well.

Operator instructions were provided. The next question comes from Samuel Kusswurm on behalf of Tim Mulrooney with William Blair.

This is Sam on for Tim. Maybe I'll pivot away from some of the AMS/DRS questions and ask about your Latin America business. This year you'll be moving past some of the Argentina inflation impacts for the first time in a while. How are you thinking about the growth rate and margins for this business? I noticed a competitor made a sizable acquisition in Peru. How might this impact competition you face in the region?

We actually exited Peru years ago and are not in that market today, so that acquisition does not create cost synergies for us nor does it change our competitive posture materially. We are comfortable with the geographies we serve today. Our strategic focus is moving up the stack around DRS and AMS—technology and service efficiency—rather than geographic expansion. Post-Atleos, we may reassess resources and optimize cost and supply chain in markets where it makes sense. We love Latin America from a fundamentals perspective: high cash usage and good margins. We have good businesses and leadership teams there. As you note, Argentina should be less of a headwind at current rates as we get to the back half of the year, which will provide less noise for investors and better apples-to-apples comparisons. AMS is a huge opportunity in Latin America; we are in the biggest markets down there—Brazil, Argentina, Mexico, Colombia, Chile—and the banks are relatively sophisticated and consolidated. Discussions and pilots are progressing, and we have active networks and pilots that we are working to convert in 2026 and 2027.

Sam, I'd add that you should expect margins to improve sequentially, and that is what we're seeing.

As a note, our Q1 performance and Q2 guide include about $10 million to $11 million of EBITDA above the midpoint of our framework, and part of that is LatAm margin improvements. EBITDA margins in Q1 benefited from AMS/DRS mix and a strong quarter in BGS. Our Global Services business saw increased activity due to volatility in the Middle East and movement of precious metals around the world. We have assumed that favorable activity continues into Q2, but for the second half, these markets are volatile and we are not assuming the same performance in the back half that we saw in Q1.

If you think about progression, it's typical to see about 45% of our EBITDA in the first half and 55% in the second half. We're a little ahead of that this year, and as Mark said, we expect that to flow through for the year.

Got it. Super, very helpful. I was going to ask about BGS next, but you already addressed it. Maybe I can leverage this next question and ask about fuel prices. I know your contracts generally have fuel surcharges. Is that fully capturing the impact you're seeing right now? Any impact to margins you might expect for the remainder of the year?

We've been effective at ensuring fuel does not have an adverse long-term impact. Indexes and adjustments vary—monthly, quarterly, semi-annually—so there may be timing differences and potential delays by a quarter. Fuel impacts were present in Q1 and you can see our performance still landed at the high end of our guidance. We believe our pricing discipline covers these costs and expect any future effects to be a short-term blip. We've seen episodic interruptions in some locations, but no structural supply impacts that would cause concern.

Our guide and framework contemplate these dynamics, Sam. We've been good about covering fuel and still feel comfortable continuing to do so.

Well, thanks. We appreciate everyone's time. I appreciate your support and interest in the company and look forward to speaking with you either in the next few days or when we're on the road at conferences coming up in May and June. Have a great day.

Thank you. The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.