Welcome to The Brinks Company's First Quarter 2019 Earnings Call. Brink's issued a press release on first quarter results this morning. The company also filed an 8-K that includes the release and 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 Web site at 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 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 the projected or 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 & Corporate Communications. Mr. Cunningham, you may begin.

Thanks, Denise, and good morning everyone. Joining me today are CEO, Doug Pertz; and CFO, Ron Domanico. This morning, we reported first quarter results on both the GAAP and non-GAAP basis. The non-GAAP results exclude a number of items, including our Venezuela operations, the impact of Argentina's highly inflationary accounting, reorganization and restructuring costs, items related to acquisitions and dispositions, and costs related to certain accounting compliance matters. We are also providing our results on a constant currency basis, which eliminates changes in foreign currency exchange rates from the prior year. 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 are provided in the press release, in the appendix to the slides we're using today, and in this morning's 8-K filing, all of which can be found on our Web site. Finally, please note that the page three of the press release provides the details behind our 2019 guidance, including revenue, operating profit, non-controlling interest, income taxes, and adjusted EBITDA. I will now turn the call over to Doug.

Thanks, Ed. Good morning, everyone, and thanks for joining us. Today we reported strong first quarter results, including a 19% increase in non-GAAP operating profit. These results were heavily driven by continued profit momentum in the U.S. and Mexico, easily offsetting the $10 million profit decline that we expected in Argentina due to currency translation. In constant currency, operating profit and EPS were up 50% and 59% respectively. First quarter results support our full-year guidance which targets operating profit growth of 20% despite the expected persistence of currency headwinds. Our full-year guidance also includes approximately $20 million to $30 million of increased operating expenses to support our new strategic initiatives and IT expenditures. As we move through the next three quarters of 2019, we expect organic growth initiatives and acquisition-related synergies to drive profit growth across all segments. We also expect the negative impact of currency translation to diminish over the next three quarters, as inflation-driven price increases should exceed projected devaluation in Argentina. Together these factors support an expected increase of 100 basis points in full-year margin rate to approximately 11%, with an EBITDA margin rate of over 16%. In a few minutes, I will review our guidance in more detail, along with some cons about our strategies to drive continued organic and acquisition-related growth. I'll also discuss our plans to introduce our next layer of our growth strategy, but I'll summarize our first quarter results first. First quarter earnings per share increased 16% on an organic revenue growth of 6%. The operating profit growth of 19% reflects a margin rate increase of 100 basis points to 9.4%, and an adjusted EBITDA rose 20% or $22 million to $132 million in the quarter. We achieved these results despite negative currency translation that reduced our earnings by $0.29 per share.…

Thanks, Doug, and good day everyone. Today in the United States is Administrative Assistants Day, and Doug and I want to recognize Kim Harsha and Tracy Wright for their amazing support. I'll start with our first quarter results beginning on the left side of slide seven. First quarter revenue grew 6%, which included $48 million of organic growth, and $100 million from the acquisitions completed over the last 12 months; most notably, Dunbar in the United States and Rodoban in Brazil. Organic revenue growth in North America was 6%, a 400 basis point improvement from the first quarter of 2018. South America organic revenue continued its double-digit trend growing 12%. Rest of world revenue was flat on an organic basis, and was impacted by the loss of $21 million of revenue from the disposition of our French aviation guarding business in the second quarter of 2018, and negative Forex. Total negative Forex translation reduced revenue by $97 million, driven primarily by the steep devaluation of the Argentine peso, and to a lesser degree, the Brazilian real and the euro. First quarter operating profit rose 19% to $85 million despite strong currency headwinds. Organic profit growth of $23 million or 32% were driven primarily by the U.S., Mexico, and Argentine. This growth was supplemented by $13 million from the Dunbar and Rodoban acquisitions, generating a 50% constant currency operating profit growth that Doug referenced. Our consolidated operating profit margin was up 100 bps to 9.4%, despite $22 million of negative Translation Forex. For perspective, it's interesting to note that in the first quarter of 2016, operating profit was $34 million, with over 70% generated by South America and less than 12% from North America. Three years later in the first quarter of 2019, operating profit at $85 million was 2.5 times…

Thanks, Ron. We're now into our final year of our three-year strategic plan that we unveiled at our March 2017 Investor Day. Our Strategy 1.0, which is focused on driving organic growth and margin expansion is on track to deliver $310 million of reported operating profit, and $480 million of reported EBITDA in 2019, despite the significant currency translation headwinds that we faced already over the last two years, and which we project to continue this year. With respect now this represents an organic-only EBITDA compounded annual growth rate of around 12%, and we still have a lot of runway for additional organic growth from these strategies well beyond 2019. Strategy 1.5 is focused on a accretive acquisitions. In 2019, we expect Strategy 1.5 to drive an additional $105 million of profit growth and an incremental $120 million of EBITDA growth from our 10 completed acquisitions to date. It's important to remember that these amounts include only partial cost synergies gained from route density, infrastructure overlap and efficiency improvements. In most cases, it takes two to three years to achieve all the cost synergies from an acquisition and most of our acquisitions were completed less than 18 months ago. Our largest Dunbar was completed less than eight months ago and we've only own Rodoban for a little over three months. When these acquisitions are fully synergized, we expect to add a total of about $180 million of annual EBITDA. And like 1.0, strategy 1.5 also has a lot of runway for growth through additional accrete of acquisitions. In total, these strategies are expected to deliver $600 million of EBITDA in 2019, representing a compound annual growth rate of approximately 21% over the three-year plan period, well-ahead of our Investor Day 2019 target of $475 million. We expect strategies 1.0 and…

Thank you, Mr. Pertz. Ladies and gentlemen, we will now begin the question-and-answer session. [Operator Instructions] And your first question this morning will be from Tobey Sommer of SunTrust. Please go ahead.

Thank you. I was wondering if you could comment on the approximate contribution to revenue growth, if you just look at the business from a volume and price perspective.

You mean overall, Tobey?

Yes, overall for the company as a whole, just kind of in broad strokes how would you break those two down?

Tobey, we don't do that. We often do it by country, which -- but it's awfully harder to do, and we don't really capture it by even region, segment, or overall.

Okay.

So, we can give you…

Okay. If I were to shift the question and ask you to speak about the pricing climate in your major markets, could we go there?

Yes. Yes, we can go that, and we can give us some background in some of the major markets. In the U.S., it continues to be strong. I think it's more relevant question for the fourth quarter, because we generally see price increases in the U.S. at the latter part of the year. And so, basically the answer is the same; we continue to see strong pricing similar to last year and the year prior to that we were implemented in the latter part of last year to continue to carry through, and they're more favorable than our cost increases in general in the U.S. We're seeing similar things in major countries, in Mexico where we're seeing a similar sort of situation with strong pricing. Brazil is probably not as strong as those markets, but we're still gaining price momentum there as well. Argentina, there is pretty good transparency I think that we provided for you in Argentina, and we're seeing right on track with that trend to improve the inflationary-driven prices there over -- the recovery period that we've laid out of about six quarters longer than historical, but that's a result of what we saw particularly in this first quarter of a year-over-year 50% FX hit offset by partial improvements in inflationary pricing, but it's right on track in Argentina. And probably the other major market that we always talk about is France, which we're starting to see at least some relative year-over-year improvement, and we anticipate that improvement would be markedly [ph] better as we go throughout the rest of this year. Did that give you some background?

Yes, it does.

I mean, I think if you look at this quarter on a revenue basis, significant hits as a result of FX, and that's had an impact for the quarter. We anticipate that will improve as we go out through the rest of this year as we stated. And on top of that, year-over-year, I remember there was an impact of in excess of $20 million as a result of the sale, the divestiture of our French guarding business which was in last year's numbers as well.

Thank you. With respect to your acquisition pipeline, how would you describe the large, relatively large acquisition opportunities versus recent quarters?

A leading question, go ahead.

No, the opportunities have been there for a while. As we've said in the past, acquisition activity is very lumpy, especially when most of the sellers are families. So, the timing is contingent on family dynamics that are out of our control. What we do is we have regular interaction with all the core-core and core-adjacent potential acquisitions, and make sure that when the time is right that we're prepared to present a compelling offer that will drive value for our shareholders, but there's -- you know, the pipeline is bigger than it was on Investor Day of 2017, both in number of possible transactions and in absolute enterprise value, and we are actively pursuing them with the discipline that we've demonstrated today.

My last question just has to do with free cash flow normalization. I guess if we exclude acquisitions and what that could mean to CapEx needs, what is the timing of free cash flow normalization and when do you think it starts to emerge, understanding it won't all unfold in one quarter?

Yes. So, Tobey, following on our last question, if we were to stop doing acquisitions, normalization would probably start in 2021, but I just indicated, we are not planning on stopping those. This is kind of hard to budget deals that haven't happened yet, but if nothing else were to happen, you would see that 4.5% of revenue in terms of CapEx kicking in around 2021.

And Tobey, I think that's consistent with what we said in the prior quarters and calls. On page 23, I think it is of the deck in the appendix is a slide that we've used in the past that leads you to, that guides you to this in the timeframe that Ron is talking to the 4.5%, excluding obviously acquisitions, and acquisitions contribute to generally higher CapEx, as we stated, the Dunbar acquisition as an example, over the course of the three-year period of time of the implementation of synergies and integration of Dunbar. We've talked to an intermodal $50 million in CapEx spend over that period of time. It also contributes from a cash flow standpoint to the restructuring charges, the one-time restructuring charges that hit, and both of those negatively impact obviously our short-term free cash flow, which are -- we're seeing in the slides that Ron presented on the cash flow in the presentation that…

Thank you very much.

Pleased to our improvement this year, but on a normalized basis, both of those have materially -- restructuring as well as the reduced CapEx would lead to materially improvements in our free cash flow going forward.

Thank you.

Thank you.

The next question will be from Jamie Clement of Buckingham. Please go ahead.

Good morning, gentlemen.

Good morning, Jamie.

Hi, Jamie.

Guys, if you look at organic revenue growth in North America for the quarter up, give a rough breakdown of how much of that was financial institution versus retail, or if you just want to talk, if you want to talk qualitatively, that's fine.

Yes. So, we'll talk qualitatively and I think I've historically said that with the improvements that we are making in our operations which have maybe taken longer than I personally would like but we are clearly seeing improvements in our operations and our operational excellence and our service levels and so forth that are markedly showing results to our financial institutions. We are highly confident that those will result in additional business in the course of this year and therefore show up latter part of this year and next year with financial institutions. Although I don't think you've seen that in the numbers to date.

Okay. Yes. Because I think actually, Doug, I think when you, shortly after you all joined I think I asked you how long have you, how long your service levels would have to be off the kind of proof to some large financial institutions that Brinks was legit?

Yes.

And I think you said it could take three years so it sounds like you're on track, right?

We're on track for the three years. It certainly doesn't meet my timetable personally but I am very pleased with, I complement our team for continuing to show the improvements in our service levels that we think are now equal to competition. And I think that our financial institution, our largest customers are seeing that those do make a difference and are responding to that and I think we'll make a difference going forward. Financial institutions don't necessarily move that quickly either.

Right, right. Ron, if I can switch to you, as we think about the rest of the year, pace of synergy realization, cadence of the $20 million to $30 million in investment spending, is there anything we need to know about sort of the pace of growth, second quarter, third quarter, fourth quarter, is there are there any timing issues we need to be aware of?

Well, you're talking about the several things now you mentioned revenue first of all, and I think the revenue growth should be improved as we go throughout the year. Obviously is going to still be choppy year-over-year, excuse me, quarter-over-quarter and there is seasonality as we know the second-half of the year particularly the fourth quarter is always is always better. So on the revenue basis; we should see some improvement as we see that going forward. Obviously then there's comps that come in as we start in the latter part of the third quarter and in the fourth quarter for us for Dunbar in the U.S. But the second part of your question really is what about op income?

Yes.

And the growth, the improvements associated with that. And one of things I pointed out in the U.S. that the legacy U.S. business saw tremendous improvement driven by breakthrough in other initiatives. In the first quarter, we should see that we continue to improve as we go forward. So as we've laid out our three-year plan for breakthrough initiatives whether it be in the U.S. and Mexico and other locations and countries, those breakthrough initiatives will continue to improve and drive the improved profitability as we go through the rest of this year throughout the quarter. You'll add to that the synergies; the synergies will improve and grow as we go throughout this year as well. So you build on, those are two big drivers for improved profitability on top of the revenues, so those are margin drivers. As well on a reported basis not necessarily in an operational basis, as we've said, we anticipate particularly in Argentina that throughout the rest of this year particularly in the second-half, well, see FX year-over-year improvements, and therefore our reported numbers will improve with that major push as well. So that gives us the support and the comfort that we'll see some improved top line, but more importantly better leverage and improvements in our margins for the second-half of this year in particular.

And in terms of the advancement spending, you think it should be relatively even as the quarters go, or is there is there any kind of build or any sort of anticipated spike in one quarter versus another?

No, I think the spikes might only be in line with some of the restructuring charges, that's cash spend, as well as some CapEx spends as we go through, but generally no spikes, it's relatively smooth…

Okay, great. Thank you very much for your time as always.

Thanks, Jamie.

The next question will be from Jeff Kessler of Imperial Capital. Please go ahead.

Yes, thank you. Thank you for taking my question. As you look at the rest of the year, you've put in place now you've put in place now a scenario in which you are going to be increasing your spending by about $20 million I guess $30 million on new projects that will bring in a return. Assuming that that return begins to come in towards the end of the year into next year, what are the types of things that can happen in the second-half of the year? I don't -- I know you don't want to push this needle too far, but what are the types of things that can happen in the second-half of the year that could bring increased profitability to the company above and beyond what you've been talking about today? I'm not looking for a fantasy here, I'm not looking for fantasy here, I'm looking for, I'm looking for things like we haven't talked a lot about some of the cast recycling obviously CompuSafe, a lot of, a lot of other things that might be able to improve, lets just, let's call it improved guidance as you move later on into the year.

Hey, Jeff, let me reiterate a couple of things. One of them is the $20-plus million $10 million spending that we've talked about on the Strategy 2.0 spend strategy, the Strategy 2.0 investment as well as the $10 million in an incremental spend this year on IP, we're spending that throughout the year. So we've already spent a portion of that. We'll continue to build a little bit and spend more. That's in the numbers though that's in our projections. What as I said with Jamie's question a moment ago, we anticipate and we have built into here that that our synergies will continue to build. We just we just launched, we just did the first of this year Rodoban and so we're just starting to see the benefits that were seeing. They are clearly building really dramatically from where it is. We're just in the process now of in the second quarter and it will be in the latter part of the second quarter with the U.S. in terms of the Dunbar integration to start integrating our systems. And therefore that's when we'll start seeing more acceleration of our synergies as a result of the Dunbar acquisition in the latter part of this year. Again, our breakthrough initiatives, which contributed fairly nicely are right on track in the first quarter of this year, we'll continue to increase as we've put more trucks in place, we get the benefits of those, and we get the benefits of the rest of our breakthrough and other support initiatives to drive our core margins. So all those things have increases in our margins as we move forward. Those are the projections and where we're going forward I think has some potential for some improvements especially depending on where FX goes and it could go one way or the other I guess. But we don't have and I don't want to guide at this point in time that we are going to see an acceleration of our 2.0 benefits into this year. And it's not because I am negative on it, not at all. What I am really saying is we anticipate that that will help guide us to improvements, more support, more growth in 2020 and beyond but we're highly confident that with our breakthrough initiatives and other initiatives that we already have part of our 1.0 with the benefits associated with acquisition and synergies in 1.5 and the improved FX for the rest of this year. That plus some revenue growth will drive us even with the investments of a 2.0.

We are planning an Investor Day in the second-half, and the reason we're not doing it sooner, Jeff, is we don't have the quantification as a lot of these are in pilot right now. And so, we want to be able to accumulate the feedback from these initiatives and have a more comprehensive view that will inform our guidance going forward and look forward to more information on the timing of that Investor Day as the weeks go by.

At the risk of getting too excited about the first quarter, we were very pleased with our first quarter performance being close to that 19% to 20% overall for the year that we provided guidance on even with the significant negative translational impact of FX in Argentina.

Okay, great. The second question is looking at what you are providing now to your customers in terms of both customer facing and if you want to call more, more types of services, you are obviously pushing toward evaluation parameter in which you're not being compared anymore against, let's call it, pure cash in transit competition and you want to be compared against root structure based recurring revenue SasS oriented companies, which obviously are being valued at higher than you. What are the things or the types of services that you think you need to add or at least in from the market if you have them and you haven't really pushed them that far that you need to create that type of aura, to be able to be to get on the to have your IR and PR people talk about, "This is what this company does that is different than the others that were in our old comparison," so that in -- we can be compared against the syntaxes of the world and things like that?

Yes. So Jeff, part of it is, we don't think we're even today, we don't think we should be compared with our competition that are in a different exchange and in a different country and so forth. I think what's most important is what separates is our financial performance so far that should set us apart and should have set us closer to the industrial services companies that we've laid out right. And then, going forward, there will be even more associated with that. So to date, we think if you look on page 11 and you run down that list of the comparisons versus the route-based peers, which I think there is a in the there is a page 21, there's a list of some of the peers like you suggested that we look at, we stack up very handsomely, very nicely versus the financial results around that. And then, as you then start adding to that, all right, well-paced obviously is a key piece of this, but probably more importantly is things such as strong recurring revenue streams, consistent maintenance of customers and stickiness of those customers. Subscription based pricing that is simple for our customers. That suggests we have customers for a longer period of time. All those things I think will be things to look for. The tech enabled component around this, we think well probably even be better than many of these are route-based or industrial services peers. That is what we anticipate that you'll see going forward in the future. But I'd suggest you take a look at what we're already doing today. If you take a look at our op income what would I say 24% compound annual growth rate over the last three years and we're suggesting with our strategies going forward, we'll at least to do something in that 20-plus-percent range going forward. And compare that versus the peers on page 11. All of those are very strong correlations that suggest we outperform them. Now that we suggest that they clearly outperforms our European peers directly in our space, but this is really more of a direct comparison that we think should be made. That's a value equation, it's a value creation equation and we intend to continue to provide that value to our shareholders.

Great. Thank you very much. Appreciate it.

Thanks, Jeff.

[Operator Instructions] The next question will be from Sam England of Berenberg. Please go ahead.

Morning guys, and first one, could you touch on the trends you saw in labor costs in Q1 and you made market?

Labor cost primarily…

Yes…

-- I guess I presume you're saying in the U.S. in particular?

I mean U.S. is pretty flat as Doug mentioned we see a lot of the price increases and labor increases in the back half of the year. Argentina had negotiated that the regularly scheduled wage increases that happened in three phases typically 50% of the increases in July, 25% in November and 25% in March. This year they had a supplemental to that, but we've had a corresponding improvement in price increases to offset that. You know basically there's been no surprises on wage increases, the U.S. labor market remains tight, but that's also what is enabling the price increases in the last two years that we were unable to get in the three years prior to that. So it's manageable and whenever we're able to cover higher wages in pricing, it's normally a good situation for all involved.

Right, thanks. And then next one, I'm wondering how the Rodoban integration is going and any surprises you found naïve underneath that business?

So it's going better than expected the performance of Rodoban was a positive for us in the first quarter, a lot of times you don't know, so well actually get behind the wheel of an acquisition, and what were finding there is very encouraging. Its going to take his most acquisitions due two to three years before we fully integrate and get all the synergies, but right now Id say were on track and were very pleased.

Okay, great. And then last one for me, just with some of the potential M&A activity that's being talked about in the market in 2019. How do you guys think about the opportunity to entry new geographies outside the once you've already in?

We've always talked about core would be our first priority, but core adjacent. There's something that is a part of strategy, 1.5 and as we complete more core acquisitions by definition that means more of the acquisitions left are core adjacent. So we do look at going into other countries. It's more difficult because there is less synergy as you would expect and because of that the discipline is high and then the premiums that we can pay are by definition lower. So it's harder to get deals done from families and there are the sellers, but we continue to evaluate expansion into other countries on a regular basis.

All right. Thanks very much. That's all for me.

Thanks, Sam.

Thanks, Sam.

And ladies and gentlemen, this will conclude our question-and-answer session and it will also conclude our conference call for today. We thank you for attending the Brinks Company's first quarter 2019 conference call. And at this time, you may disconnect your lines.