The Brink's Company (BCO) Q4 2017 Earnings Report, Transcript and Summary

Welcome to the Brink's Company's Fourth Quarter and Full Year 2017 Earnings Call. Brink's issued a press release on fourth quarter and full year results this morning. The company also filed an 8-K that includes the release in the slides that will be used in today's call. For those of you listening by phone, the release and slides are available on the company's website at brinks.com. [Operator Instructions]. As a reminder, this conference is being recorded. Now for the company's safe harbor statement. This call and the Q&A session will contain forward-looking statements. Actual results could differ materially from projected and estimated results. Information regarding factors that could cause such differences is available in today's press release and in the company's most recent SEC filings. Information presented and discussed on this call is representative as 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. It is now my pleasure to introduce your host, Ed Cunningham, Vice President of Investor Relations and Corporate Communications. Mr. Cunningham, you may begin.

Thank you, Nicole. Good morning. Joining me today are CEO, Doug Pertz; and CFO, Ron Domanico. This morning, we reported results on both the GAAP and non-GAAP basis. The non-GAAP results exclude certain retirement expenses, reorganization and restructuring costs, and certain items related to acquisitions and dispositions, tax-related adjustments and our 2017 debt refinancing. In addition to these items, our non-GAAP results exclude Venezuela due to a variety of factors including our inability to repatriate cash, Venezuela's fixed exchange rate policies and currency devaluations and the difficulties we face operating in a highly inflationary economy. We believe the non-GAAP results make it easier for investors to assess operating performance between periods. Accordingly, our comments today including those referring to our guidance will focus primarily on non-GAAP results. Reconciliations of non-GAAP to GAAP results were provided in the press release in the appendix to the slides we're using today in this morning's 8-K and on our website. Finally, Page 3 of the press release provides the details behind our 2018 guidance including revenue, operating profit, corporate expense, noncontrolling interest, income taxes, earnings and adjusted EBITDA. I'll now turn the call over to Doug.

Thanks, Ed, and good morning, everyone. I'm going to provide a brief review of strong yields we reported this morning as well as our outlook for continued profit momentum in 2018 and '19. I'll spend a few minutes on the solid progress we've made on our three-year strategic plan including an update on our breakthrough initiatives that we're gaining traction on in the U.S. operations. Then Ron will provide a financial review and we'll then open it up to questions. Now to our fourth quarter earnings. Fourth quarter revenue increased 13%, driven by acquisitions and organic growth, primarily in South America. The organic growth rate of 5% reflects a revenue decline in the U.S. versus the year-ago quarter that included the sale of 450 recyclers in 2016 that did not reoccur this last year in '17. Excluding this revenue, organic growth was 9%. Operating profit for the quarter was up 15% and the margin rate improved by 20 basis points to 10.5%, as the previously reported theft charge of $11 million was more than offset by profit growth of 43% in South America and 27% in North America. Fourth quarter profits in the U.S. were up 43% against the year-ago comp, that included the extra $3 million of profit boost from the recycler sales in 2016. Adjusted EBITDA for the quarter was up $130 million, up 16%, even after the impact of the theft loss. And earnings came in at $0.95 per share up 8%, despite the $0.14 charge related to the theft. Excluding lost underlying earnings, we're up 24%. No matter how you look at it, the quarter was a strong quarter and a strong finish to our year. Speaking of the year, our full year results include revenue growth of 10% to $3.2 billion, including 6% organic growth rate. This is in line with our guidance. Operating profit increased 30% to $281 million, which includes the negative impact of the $11 million theft as well. Despite this loss, our full year margin improvement was 140 basis points to 8.8%. Adjusted EBITDA grew 24% to $425 million, reflecting margin growth of 150 basis points to 13.3%. And earnings rose 33% to $3.03 per share. Again, despite the $0.14 theft charge. It's important to note that our interest expense increased in the fourth quarter as a result of the successful refinancing completed in October and the resultant excess cash on our balance sheet. Full year operating profit growth was positive in each of our 3 geographic segments, led by profit growth of 49% in South America and 85% in North America, which included profits in the U.S. that more than tripled as well as continued strong profits in Mexico. We still have lots of room for additional growth rate in the U.S. and it's clear that the turnaround efforts are just beginning to pay off. More on this, specifically on the U.S, in a few moments. Looking ahead to the next 2 years, in our three-year strategic plan, that's through 2019, we fully expect this profit momentum to continue. In 2018, we expect revenue growth of about 8% to a little over $3.4 billion. Again, this assumes 5% organic growth supplemented by growth from the completed and announced to-date acquisitions. 2018 operating profit is expected to grow by more than 30% to a range of $365 million to $385 million, reflecting a margin rate improvement of at least 180 basis points. We expect 2018 adjusted EBITDA to increase to -- by approximately $100 million to a range of between $515 million to $535 million. And we expect earnings growth to be at least 20% to a range of between $365 million and $385 million. This guidance includes full year contribution from the 6 acquisitions completed to date and the estimated 6 months of contribution from the pending acquisitions -- acquisition of Rodoban in Brazil. It also assumes continued margin expansion in all geographic segments, led by the U.S. and Mexico. Finally, we increased our target for 2019 adjusted EBITDA to $625 million. This is up $65 million from our prior target of $560 million. This new target assumes 2019 full year post synergy contributions from the 7 acquisitions, including Rodoban and continued margin improvement, especially, again, in our larger countries. Now let's review the plans and targets supporting this strategy and increased targets that we've laid out. Slide 8 updates our targets for driving core organic growth or what we call our Strategy 1.0. The left side of this chart begins with our actual 2016 adjusted EBITDA of $342 million. And walks through how each segment is expected to contribute to our 2019 new organic target of $535 million. That's the organic target. This means an organic increase of $193 million or 50% -- excuse me, 56% over the three-year plan period. The bar on the far right shows the original target of $475 million that we laid out, everybody, in Investor Day last March. So less than a year after we rolled out our strategic plan, we've increased our organic growth target materially. Keep in mind that this chart, that this Strategy 1.0, does not include 2017 or any future-related growth, growth related to acquisition, that is. In a later slide, we'll layer on another $90 million of expected EBITDA growth from the announced acquisitions to date that will get us to our 2019 target of to $625 million. We have internal improvement initiatives throughout all of our markets with North and South America as the primary drivers of expected organic growth and improved margins. These 2 segments account for the majority of the margin improvement rate over the next three-year plan -- over the three-year period plan. Thereby, increasing our 2019 margin target without acquisitions, that's organic only, to 11%. Within North America, our U.S. operations continue to be our single largest profit growth opportunity followed by Mexico as our second largest opportunity over the plan period. Mexico increased its margins from 7.5% in 2016 to 11% in 2017 and is well on its way to meeting or exceeding its 2019 target that we laid out at an Investor Day of 15%. Our team in Mexico has done a great job of executing on its productivity initiatives including labor practice changes and generating strong revenue growth that will enable it to more than double margins during this three-year plan period. Our U.S. margins more than tripled in 2017, reaching 3.4% in the first year of our strategic plan period including strong sequential and year-over-year improvement in our fourth quarter. We expect 2018 U.S. margins to be in the range of around 6%, and we expect to exit 2019 at margin -- at a margin rate of at least 10% as we continue to execute on our breakthrough initiatives. Speaking of those breakthrough initiatives, the U.S. breakthrough initiatives outlined in our three-year plan are on track as we meet our -- as we met our -- excuse me, our 2017 targets. Here's an update on this chart on our fleet-related initiatives and branch network optimization, which represent 3 of our 4 primary initiatives. Over the three-year plan period, we expect these 3 initiatives to improve our U.S. margin by 550 to 650 basis points. The execution of our plan to purchase and deploy 1,200 more technology-advanced and more fuel-efficient vehicles by 2019 is well underway. Once completed, the average age of our fleet will decrease from 10-plus years in the U.S. to about 6 years. This in turn will lead to a significant reduction in our operating, maintenance and fuel cost. During 2017, we added about 440 new trucks, bringing us to a combined deployment of about 700 trucks, all capable of accommodating 1-person crews. Our actual year-over-year fleet cost savings in '17 was approximately $10 million, meeting our target for the first year of our plan. In addition to the $10 million in fleet cost savings, we achieved our target of another $6 million in labor cost savings from our transition to 1-person crews. On top of that, these more reliable trucks have improved our service and quality to our customers and they're widely accepted by our employees. Our branch network optimization initiative is expected to add another 150 to 200 basis points in the U.S. margin by the end of 2019, with most of this growth weighted toward the back end of the plan. Phase 1 began in 2017 with our investment in high-speed money processing equipment to drive high capacity, improve cycle time and lower cost. We achieved our first-year target of savings in more than $1 million in the network optimization plan. We added 8 high-speed machines in 7 high-volume branches that may eventually serve as our hub processing branches. The next phases of network optimization will roll out over 2-plus years, and as we consolidate our money processing activity from some smaller scope branches to larger hub ones with new money processing equipment. In late 2017, we also started to add several CIT launchpads that allow us to place our trucks closer to our customers and further reduce our cost. As we said over the last several quarterly calls, the ramp-up of our CompuSafe sales team was slower than initially expected, which pushed out the timeline of sales and of installation. This obviously impacted both our sales and installation revenue. However, I'm pleased to report that the 3,300 orders in the year -- that with 3,300 orders in this year, we met our revised 2017 target of between 3,000 to 3,500 orders. As our sales and operating teams ramped up during the year, orders accelerated from 1,100 orders in the first half of 2017 to about 2,200 orders in the second half. So the second half run rate annualized to a rate of about 4,500 units per year. Note that the new orders we see in 2017 were double the average 2015 and '16 actual rates. And that our order backlog going into 2018 is strong. Throughout 2017, we also made good progress in reducing the deinstalls of mostly older pre-2012 model CompuSafe. Of our 3,300 orders in 2017, 2,300 CompuSafes were installed in the year. However, due to these deinstalls and due to our installation backlog going out of the year, our install base only grew slightly in 2000 -- over 2016. Moving forward, at our new and stronger order rate and with a strong installation backlog going into 2018, we look forward to steady growth in our U.S. install base and CompuSafe monthly recurring revenue stream that will be at or above planned. It's important to note, however, that our CompuSafe service is well-established and gaining traction in other markets including France, Mexico, Brazil, Israel and several other countries. In 2017, our install base outside the U.S. grew by more than 2,200 units. We're also investing in our IT system to improve our customer experience and streamline our operations. By mid-2017, we'll launch -- we will launch track-and-trace capabilities in the U.S. to better manage chain of custody and monitor our services. These services will also be monitoring cash levels in face recyclers and other devices. Customers will be able to access this information through new portals and through The Brink's mobile app. We're testing this customer-facing technology in Q1 of this year with anticipated full U.S. rollout beginning in the -- in Q2. In summary, our U.S. breakthrough initiatives are on track to achieve the 2019 planned margin targets of 10-plus percent. Our fleet-related initiatives have already delivered $16 million of cost savings and our CompuSafe sales effort is delivering profitable growth with strong ramp-up of recurring margins. The U.S. margin goal for 2018 of approximately 6% will add another $20 million in operating profit in 2018 and reaching our 10% margin goal will add another $30 million in '19. We still have a lot to do to achieve our goals, but we're confident in our U.S. turnaround plan, and we're confident in our U.S. team and our leadership. And I'm also confident that we'll continue to close that gap versus competition beyond the plan period. With our organic initiatives gaining traction, we began in 2017 to layer on new growth through acquisitions in our core lines of business. Our acquisition growth plans or what we call Strategy 1.5 put a high priority on acquisitions in our core businesses and in our core geographies -- our current geographies that we're in, with the second priority on core business acquisitions in adjacent geographies. We have a strong pipeline of core acquisition targets that offer new opportunities to increase route density, add new customers and capture cross synergies with attractive margins. In 2017, we paid $365 million to complete 6 acquisitions that added $100 million of revenue and $19 million of operating profit, and we expect a greater contribution in 2018, this year, with a full year of results from these 6 acquisitions that have been completed and about 6 months from the Rodoban acquisition. After closing on Rodoban, which is expected in the second quarter, we'll have paid $510 million or 7 acquisitions that are expected to add approximately $90 million of post-synergy EBITDA in 2019, which equates to about a 6x multiple. With our recent capital raise and new credit facility, which gave us $2.1 billion in total debt capacity and greater flexibility from -- for more capacity if needed, we are well positioned to continue to make accretive acquisitions. We plan to complete acquisitions at a rate of above $400 million in enterprise value per year in 2018 and '19. This includes the $145 million already spent or will be spent, I should say, for Rodoban. Valuations will vary based on geography and growth potential. But we will remain disciplined, as we have been, in our goals to achieve post-synergy multiples between 6 and 7.5x EBITDA. Over new debt structure and capacity also provide great flexibility should larger core acquisition become available that would add significant value through synergy capture or entering into higher growth markets, or if we see opportunities for businesses that are complementary to our core cash business that support our overall strategy and accelerate value growth. Our focus and strategy is to accelerate growth and profitability by servicing the total cash ecosystem. As Slide 13 shows, our Strategy 1.0 and 1.5, which includes the 7 acquisitions announced to date, combined to deliver expected EBITDA of $625 million in 2019. We're confident that over the plan period, we can achieve additional margin growth of more than 3.5%, I should say, 3.5 percentage points in North America, 2 percentage points in South America and just under 0.5 percentage points in rest of the world. Note, and this is something that continues to come up from many of you, note that we continue to show a contingency, in red on this chart, that is roughly equal to about 2.5 percentage points that we showed last March at Investor Day. This represents the added -- the additional plan margin growth in each of our regions that sum to more than the 2019 stated target. And it supports the inevitable ups and downs in each of the regions and overall. But also provides, as you've already seen, some potential upside for future guidance increases. In summary, our three-year plan period -- over the plan period, we expect to add more than $280 million of EBITDA through organic growth and 7 acquisitions announced to date. We're already -- we've already added $83 million in 2017, and we expect to add roughly $100 million in each of the next 2 years to reach the $625 million target level that we've talked about. And this does not include any contribution for additional acquisitions that we expect to make and have laid out as part of our targets in 2018 and '19. On that note, I'll turn it over to Ron, for his financial review.

Thanks, Doug, and good day, everyone. Let's take a deeper look at our full year 2017 performance, starting with Slide 15. Adjusting for forex, 2017 revenue of $3.2 billion increased $256 million versus 2016. The six acquisitions we completed in 2017 added $100 million in revenue, most of it from Maco in Argentina. This was partly offset by the 2016 divestitures. The 6% organic increase was driven by volume growth and price execution, especially in Argentina, Brazil, Mexico and the United States. Turning to Slide 16. Adjusting for forex, 2017 operating profit of $281 million increased $76 million or 37% versus 2016. The operating margin of 8.8% increased 140 basis points versus prior year. We are rapidly integrating acquisitions to ensure synergy capture. This integration eliminates the distinction between our existing and the acquired businesses. Consequently, we report the operating profit from acquisitions as the pro rata trailing 12-month performance of each company from the date of closing. Using this methodology, acquisitions added $20 million in operating profit and organic growth added $56 million. Our 2017 acquisitions continued to perform in line with expectations and with the guidance we shared with you on our third quarter earnings call. South America operating profit grew 49% or $60 million from volume and margin expansion in Argentina and Brazil and the positive impact of the Maco acquisition. North America operating profit was up 85% or $34 million reflecting progress on our breakthrough initiatives in the U.S. and Mexico. Rest of the world was up 4% versus 2016, with the decrease in France, offset primarily by improvement in Asia-Pacific. In total, our 3 segments had operating profit growth of 30%, which was partly offset by a $32 million increase in corporate expenses due primarily to the $11 million theft loss and higher incentive-based compensation. Cost reduction actions taken during 2016 had approximately a $6 million positive impact on corporate cost. Moving to Slide 17. This slide bridges operating profit, income from continuing operations and adjusted EBITDA. The variance from the prior year is shown at the bottom of the slide. Full year operating profit of $281 million was reduced by $33 million of net interest and nonoperating expense and $6 million of noncontrolling interest. It's important to note that interest expense accelerated in the fourth quarter due to the additional borrowings from our October debt refinancing. In 2018, we expect full year net interest expense to be approximately $50 million. Our 2017 non-GAAP income tax rate was 34.2%, 260 bps favorable versus 36.8% in 2016. The rate reduction was due primarily to the rise in our stock price and the associated deductibility of stocked-based compensation. The lower tax rate was more than offset by the tax on higher earnings. 2017 non-GAAP tax expense of $85 million was up $15 million from last year. I will cover the expected impact of U.S. tax reform on Slide 19. Income from continuing operations was $157 million or $3.03 per share. That was up $0.75 or 33% from $2.28 per share in 2016. 2017 depreciation and amortization of $134 million increased $8 million or 6% versus prior year. EBITDA increased $83 million or 24% to $425 million. On to Slide 18. Including completed acquisitions, 2017 CapEx was $185 million in 2017, an increase of $61 million versus 2016 and in line with our plans and guidance. These capital expenditures support our breakthrough initiatives, and include new generation armored vehicles, high-speed money processing equipment, IT productivity improvement and other investments to drive operating profit growth. Investments are targeted to exceed 15% IRR and many are projected to return more than 20%. Investments over $1 million are subjected to post-completion audits to affirm actual returns. Consistent with our debt covenants, CompuSafe financing is considered as a cost of services sold, so we have excluded it on this slide. In 2017, CompuSafe financing was $38 million. We expect our CapEx to increase to approximately $200 million in 2018 as we continue to invest in our organic breakthrough initiatives to support the acquired businesses and to achieve acquisition synergies. Moving to Slide 19 and U.S. Tax Reform. As we shared in the press release, the U.S. Tax Cuts and Jobs Act of 2017 reduced the federal tax rate for corporations beginning January 1, 2018, from 35% to 21%. We remeasured our deferred tax asset considering the new rate and other changes in the law and recorded a noncash charge in the fourth quarter and full year GAAP earnings of $92 million. The act had no impact on our 2017 non-GAAP tax rate. Just like many other U.S. corporations, we're learning more about how regulators will interpret the act and our current estimates could be adjusted during 2018. In the near term, we expect the unfavorable impact related to the broadening of the U.S. companies tax base to more than offset the favorable impact of the rate reduction. Due to the repeal of the alternative minimum tax between 2019 and 2022, we expect to receive cash tax refunds totaling $32 million. Importantly, due to the availability of credits, elections and deductions, we do not expect to pay any U.S. federal cash taxes for at least 5 years. Turning to Slide 20. This slide illustrates Brink's debt capital structure. The height of each bar represents debt capacity, the top part of each bar represents availability and the bottom part represents debt outstanding. As discussed during our third quarter earnings call, in October 2017, we closed bank credit financing and a notes offering for a total of $2.1 billion. This included a $1 billion revolver that is currently undrawn. The net proceeds from the senior notes and the term loan A remaining at December 31, 2017 are currently held in cash and liquid investments. They are expected to be used to fund acquisitions, capital expenditures and working capital needs. With the refinancing and subject to the terms of the credit facility, our current total availability is approximately $1.4 billion, which gives us the ability to execute our organic and our acquisition growth strategy. And now Slide 21. This slide illustrates Brink's debt and leverage position. As of December 31, 2017, our net debt was $612 million, up $364 million from year-end 2016, due primarily to the acquisitions completed in 2017. Debt used to finance acquisitions in 2017 increased our financial leverage at year-end to 1.4x. Our debt covenants consider the trailing 12-month EBITDA for completed acquisitions. This adds an additional $40 million in pro forma EBITDA and reduces our financial leverage slightly to 1.3x. As of December 31, 2017, our frozen U.S. pension plan was 88% funded. Rising interest rates should augment planned asset investment returns and also increase the discount rate used to calculate the projected benefit obligation. Both dynamics should improve the planned funding level, and we don't expect any cash payments for the primary U.S. pension plan. Similarly, December 31, 2017 actuarial assumptions for the UMWA liability calculate no cash payments before 2027. While the rating agencies include the U.S. pension plan and UMWA as liabilities, significantly, our lenders do not. To Slide 22. We believe that adjusted EBITDA is the most meaningful non-GAAP metric for stakeholders to assess cash flow. Adjusted EBITDA for 2017 was $425 million, up 24%, reflecting our operating profit growth of 30% and our D&A growth of 6%. Adjusted EBITDA as a percent of revenue increased 150 bps to 13.3%. As Doug mentioned, our guidance for 2018 EBITDA is $515 million to $535 million and our 2019 EBITDA target is $625 million. In summary, 2017 was truly a breakthrough year for Brink's. We increased the dividend by 50%, our share price increased by more than 90% and we look forward to adding even more value for our stakeholders. The entire Brink's team has embraced the strategy and has meaningful incentives executed with a sense of urgency. I'm personally excited about the momentum we have established with our breakthrough initiatives, our 6 completed acquisitions, our robust acquisition pipeline and our outlook for continued profitable growth. With that, I'll turn it back over to Doug

Thanks, Ron. Like Ron, I want to thank our entire Brink's team for their efforts in achieving our tremendous 2017 results. This slide offers a brief summary of the progress we've made and the additional progress we expect to make in 2018 and '19 during the plan period. I hope it's clear that we're delivering on our commitments to our customers and our investors and that our opportunities for additional growth are substantial. With our organic improvement initiatives gaining traction and an acquisition strategy that's just getting underway, we are more excited than ever about our opportunities to continue to deliver sustainable growth in revenue, earnings and most importantly, shareholder value. Thanks, again, for joining the call, and Nicole, please open up the call for questions.

[Operator Instructions]. Our first question comes from Jamie Clement with Macquarie.

So Doug, I just want to delve a little bit more into the U.S. fleet and the network. So I think you said you had about 700 in the new trucks on the road at the end of '17. Did I get that right?

That's right. About 440 additions during the year. But remember, those additions are not in a straight line. A majority of them were in the second half of the year.

Okay, so I think, back at the Investor Day, I think, the general target was like 1,000 between '17, '18 and '19. Is that still the right number? Or have you found a greater opportunity to actually utilize the more efficient, less expensive trucks?

I think, we're still around that range of somewhere between 900 to 1,000 additions. And remember, we had some going into '17. So that number is going to vary around that number as we go out of that. I think what we'll continue to see is evaluate how many -- what percent of our routes can be 1 person, what type of liability should we use on that. And frankly, if there's even a better way to do it and as we go into '19 and '20. But I think the general direction is still there as you can see in the chart, on Page 9, the 1-person vehicle savings were around that $6 million, actually they were a little bit better than that, $6 million for the year. And there's still a lot of blue there that means as we continue to ramp up and get the full benefit of the 700-plus for the full year this year, we're getting even more benefit from one-person vehicle this year and going through the plan period.

Okay, that's great. And Doug, you used the term launchpad, being close to the -- is that the same concept as the secured garages?

It is. Yes.

Okay.

Launchpad gives us the ability, as you know, to go into markets that we currently have a number of routes going in that area, like Long Island as an example, and having a launchpad there that is basically just that a secured garage, have the trucks out of -- work out of there rather than having every morning to go out of our Brooklyn branch.

Okay. And then I think it should be my last question and I'll get back into queue. In the slide where you have the red bar talking about contingencies with 2019, I think if I remember correctly, at the Investor Day, the absolute dollar number give or take was about $100 million. I thought earlier in '17, you might have knocked it down to $75 million. Is $75 million to $100 million the right way to think about it? Because in the chart you just used a percentage term, so obviously, depending on what revenue number you want to use, et cetera, et cetera, but is $75 million to $100 million the right range?

Yes, so there's two things. We specifically did not put a number on there. We put a range on it. But you're absolutely correct in what we're trying to get the point across on is that in fact that is in that range and it is in that -- originally in that $90 million number. It was pushed down from, I think, $92 million to $67 million. But what we're really saying is it's in that where it originally was and that the roll up of all of our countries and their plans together come out to something more than what the target is. But we anticipate that each year, as we go through the plan, some countries are going to do better, some initiatives are going to be better, some aren't going to be as good, some countries are going to be hit by other external more macro issues, et cetera and they're not going to be as good.

Foreign exchange, also, right? Foreign exchange, you can't control that, yes.

And there's other things that will go up and down. And so what we're saying, which I knew, this would be a topic, is that effectively, we still think there's about 2.5 percentage points in there that is a cushion or gives us the ability to cushion for those ups and downs as well as potentially give us the upside should we see that it's consistently being achieved to push up the target, again, as we get closer to the timeframe.

[Operator Instructions]. Our next question comes from Tobey Sommer of SunTrust.

I'm wondering if you could update us on the traction and realization of the price increase that you implemented in the fourth quarter in the United States?

Yes, Toby. Thanks. I think, we laid out that we were late, obviously in getting the balance of the increased cost that we saw in the third quarter that negatively impacted the third quarter. We were late in getting that out into the fourth quarter. We've been very pleased, though, with the responsiveness that we've seen, in other words, the traction, the ability to make it and let it to get it stick. And we think that that's supported by the rest of the marketplace. It is also seeing similar sorts of macro conditions that suggest customers are accepting that. So it's been well accepted and the impact is very similar to what we initially projected. So we're pleased.

In terms of the long-term effective tax rates, could you give us a little bit more color on the ability for that to perhaps come a little bit lower than the 2018 level?

Yes, absolutely. So we're still, like everybody else, digesting this. We are a multinational company as you're well aware. We're on the ground in 21 countries. The U.S. is about 1/4 of our revenue and 10% of our earnings.

So long.

So long. So as that mix changes, we will be able to take advantage of the lower U.S. federal statutory rate. We also have opportunities to move debt into countries where the earnings are being realized to take a greater advantage of that. The number we put out there, Tobey, was based on where we are right now and the anticipated time it's going to take to make some of those changes to optimize our tax. The main message to everybody is that we're not going to be U.S. federal taxpayer for at least, say, the next 5 years. And that as our mix of earnings from our foreign entities and the U.S. change, we'll be able to take advantage of the lower rates. So the rate we put out there, we feel is the best we could come up with based on our understanding of the interpretation of the act, but we were fully mobilized to reduce the rate as much as possible. And we will keep you and the rest of the investment community up to date on our initiatives in that area.

Could you comment on the acquisition pipeline, in particular, maybe some color about acquisition size? So far the targets have been kind of discrete country operations, but wondering if there's anything larger that can touch multiple countries or geographies?

Look, Tobey, I think the best way to continue to describe it is, we continue to have a reasonable good sized backlog that continues to be about the same size in terms of numbers of deals. They vary in size from what we've done so far in terms of the sizes. There are always potential for larger ones and I tried to talk a little bit in my script about some of those that would be in our core, but larger than what we've done so far. And those will be potentials, but we're certainly not suggesting that something is out there nor are we -- do we have anything in the sites at this point. I think it's more important to say that we have the capacity to do it and we are open to doing that and similar to what our core priorities are in our acquisition strategy. I think the best way to look at this and this is the guidance we've tried to lay out there is, our targets internally and our teams are certainly driven by this, both our operating teams in the field as well as our M&A team is driven to try and achieve or exceed the $400-plus million enterprise value in acquisitions per year, this year, which we've got $145 million in the works so far. And that yet again, in '19, hopefully we can exceed that, but we'll see.

Last question from me and I'll get back in the queue. Any changes to management incentive compensation variables this year kind of versus last year?

Not materially. One of the things that we mentioned, I think, it was in our strat plan meeting, investor meeting in last March, was a significant expansion in the breadth and probably depth as well, of our long-term equity plan that was tied very closely to our three-year strategy plan targets. And that will continue, we expect that, I should say, to continue this year. And I think that's very important in terms of assuring that we have everybody pulling the same way and very much aligned with shareholder value creation. And again, those are three-year longer plan target -- longer-term plans that are tied to achieving specific performance goals that are linked to, I think, shareholder value. So I don't know that we're changing much from where they were last year, but that's certainly has changed from where things were in the past. And I think what you'll see is, that's helping change the culture, the thought process, the sense of urgency, the customer focus and all that is very important and linked together with, I think, what your investors want to see and get paid on.

[Operator Instructions]. Our next question is a follow-up from Jamie Clement of Macquarie.

Ron, two, I think, quick ones. First is, what was the diluted share count for the quarter? I'm not -- I don't think I saw it in the press release, I believe, and although I could be very wrong.

We're still around 51 million shares, Jamie. But we'll look for a more precise number and we'll get that out.

And when is the Q coming out? Excuse me, pardon me, the K coming out? I apologize. Do you have a rough week for that?

No, we're allowed 60 days. I think we'll use 59. So we...

Fair enough. And on the tax front, thanks a lot for the disclosure there. So the purpose is -- of your non-GAAP -- excuse me, your GAAP to non-GAAP tax guidance for 2018, you're not assuming a 0 rate in the U.S. because you're a 0 taxpayer in your estimations, right? You're still assuming a rate on the U.S, right?

Absolutely. Our effective -- yes, our effective tax rate is based on the analysis we're doing. And it's not reflective of our cash tax payments.

Our next question is a follow-up from Tobey Sommer of SunTrust.

Two questions for me. One I was wondering if you could comment on the turnaround in the sales, kind of, culture in the U.S. You have several initiatives. You already described CompuSafe, but maybe you could touch on mid and small market, small-sized financial institutions and other facets of that turnaround? And if you could comment on the opportunity and impact of, kind of, new technology initiatives on trucks and perhaps even on staff? Those 2 topics would be great.

Yes, I don't have any necessarily specifics to provide details on the sales piece on it. But I'm very pleased in our direction that we're starting to ramp up, if you will, which is kind of my favorite word in terms of the CompuSafe and so forth. Because I do think it's a process, it's going to take some time, but is improving. It's improving from both the operating standpoint, in other words the customer service levels, the on-time delivery, the services we are providing to our customer as well as the sales management and support for our customers. As you know, we have a new head of sales from about 9 months ago. And I think, very pleased with what we've started to see in terms of the results, the focus, the digging in, in terms of just what you're suggesting. How do we increase our account share with our existing FIs in particular? How do we make sure we have the right focus in the retail sector? And then how do we then bring that down to the sub-tier 1 credit unions and others making sure that we can work with them to help provide the best service to their customers. Now that's linked together with what I did talk a little bit about with the launch in the U.S. of our track-and-trace programs, which we think by implementation by midyear, will provide a better customer-facing technology, better service levels and hopefully be a step change from what we've been providing in the past that our customers will see a real difference. And along with that, we're going to be launching some new services, effectively new products in our industry for both our retail and our FI side of the business that will be linked to the track-and-trace, that will be linked together with the real time availability, the real time ability to be able to see where the services are that we provide to our customers as well as be able for our customers to be much more efficient in the way that they interface with us. So those are pretty exciting things. Now your other specific question is more on the operational side, which obviously improves costs for us, efficiencies and also links together with the track-and-trace and our ability to provide information to our customer. We have rolled out the route optimization tools that are dynamic route optimization tools called RoadNet in a major portion of our U.S. branches. And we're very excited about that because it is helping us improve things. It's going to be able to then -- to be linked together that with our telematics, we'll be able to provide realtime information, linked together with our track-and-trace and thorough either a specific dedicated customer portal or through a new Brink's app to our customers. So help with our efficiency as well as the customer service side on it. And the route optimization tool is something that is, again, will dramatically improving the service as well as our efficiencies. And by the way, Brazil has done a great job with that and many of the areas and branches, larger branches, in particular in Mexico they've done a great job and has had a tremendous impact there as well. So this is not just a U.S. push. As I mentioned in the CompuSafe side of the sales and CompuSafe, the -- while we talk about it in the U.S., because it is the largest market, we're doing a very good job in the other countries there as well.

If I could just follow up on Jamie's question, the dilutive share count for the full year 2017 was 51.8 million shares and for the fourth quarter alone was 52.2 million.

So Tobey, did that help answer that question?

Absolutely.

This concludes our question-and-answer session as well as the conference. Thank you for attending today's presentation. You may now disconnect and have a nice day.