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The Brink's Co (BCO) Q1 2024 Earnings Call Transcript Highlights: Strong Start with Significant ...

GuruFocus Research
·4-min read

  • Organic Growth: 12% for the total company.

  • Adjusted EBITDA: Grew 15% to $218 million.

  • EBITDA Margins: Expanded by 160 basis points to 17.7%.

  • Earnings Per Share (EPS): Increased by 20% to $1.52 per share.

  • Free Cash Flow: Improved by 61% to $363 million, with a 41% conversion from adjusted EBITDA.

  • Share Repurchases: Approximately 275,000 shares, utilizing $23 million.

  • Dividend: Announced a 10% increase.

  • Full Year Guidance: Low to mid-teens organic revenue growth, adjusted EBITDA margin expansion of approximately 80 basis points, EPS between $7.30 and $8, and free cash flow between $415 million and $465 million.

Release Date: May 08, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

  • The Brink's Co (NYSE:BCO) reported a strong start to 2024 with a 12% organic growth for the total company.

  • Adjusted EBITDA grew 15% to $218 million, with margins expanding 160 basis points to 17.7%, marking the highest first quarter margins in over a decade.

  • Profit growth and share count reduction led to a 20% increase in EPS to $1.52 per share.

  • Trailing 12-month free cash flow improved by 61% to $363 million, with a conversion from adjusted EBITDA of 41%.

  • The company announced a 10% increase in its dividend, marking the second consecutive year of a double-digit increase.

Negative Points

  • Revenue growth was partially offset by an 8% impact from foreign exchange, primarily due to the devaluation of the Argentine peso.

  • The company continues to face geopolitical and economic headwinds in Latin America, including currency devaluation impacting the economy of Argentina.

  • The company's cost structure adjustments in early Q1 impacted EBITDA margins negatively.

  • Interest expense increased by $9 million year-over-year due to higher interest rates and slightly higher debt.

  • The company's guidance for the full year reflects concerns about FX in Argentina, expected to weigh on total growth and margins early in the year.

Q & A Highlights

Q: Can you elaborate on the changes made and the initiatives to shorten the time from pipeline contract signing to revenue in DRS? A: Mark Eubanks, President and CEO of Brinks Co, explained that the company has streamlined contract processes and internal teams to align with the supply chain, including staging devices and integrating software to accommodate customers promptly. This involves technical management and improving parallel processes with legal and commercial teams.

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Q: Are there any initiatives to shorten the timeframe from pipeline to actual contract signing, effectively winning deals more quickly? A: Mark Eubanks mentioned that while speeding up contract signing isn't entirely within the company's control, they have reorganized their customer-facing sales team to focus on segment-specific needs, which has helped expedite negotiations. Additionally, they've adjusted the timing of contract stages to avoid peak retail periods, improving the efficiency of installations and contract finalizations.

Q: Can you discuss how AMS growth in the quarter compared to DRS growth and where in AMS you're seeing the most opportunity? A: Eubanks noted that growth was balanced between AMS and DRS, with significant opportunities in offering combined solutions, especially in retail. The company is also seeing interest from financial institutions in ATM outsourcing, particularly in Europe, which is expected to contribute to growth in upcoming quarters.

Q: Can you talk about DRS and quantify to what extent you are seeing migrations from GRS and new sales to unvended customers? A: Eubanks highlighted that growth in DRS comes from three areas: unvended space, conversions from traditional CIT customers, and expansions from existing DRS customers. He emphasized that all three areas are balanced and represent significant growth opportunities.

Q: Is it possible to quantify how much of the existing book has migrated over to DRS? A: Eubanks stated that it's still early in the migration process, with significant potential remaining both in unvended markets and among existing CIT customers. He believes there is a lot of growth yet to be captured.

Q: Can you speak to your competitive positioning in ATM managed services and your market share in specific geographies or overall? A: Eubanks described the ATM managed services market as nascent but growing rapidly as banks consider outsourcing. He believes Brinks' integrated solution, which optimizes the entire value stream, positions the company competitively by offering cost-effective and reliable services.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

This article first appeared on GuruFocus.