Welcome to the Brink's Company's Fourth Quarter 2019 Earnings Call. Brink's issued a press release on fourth 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 website 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 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 and Corporate Communications. Mr. Cunningham, you may begin.

Thanks Drew. Good morning, everyone. Joining me today are CEO, Doug Pertz; and CFO, Ron Domanico. This morning we reported fourth 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 an internal loss and 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 website. Finally, page 3 of the press release provides the details behind our 2019 guidance including revenue, operating profit, non-controlling interest, income taxes and adjusted EBITDA. I'll now turn the call over to Doug Pertz.

Thanks, Ed and good morning everyone. 2019 was another strong year for Brink's, one in which we successfully completed our first three years strategic plan and began developing what we believe will be an even more successful plan for the next three years. This morning we've reported fourth quarter earnings of $1.18 per share, and full-year earnings of $3.89 per share, an increase of 12% in both periods. We achieved this growth despite earnings in both periods being reduced by $0.11 per share due to cash repatriation costs from Argentina and a mark-to-market charge foreign equity investment in MoneyGram International. Neither of these charges were included in our guidance. Excluding these charges, fourth quarter earnings would have been up 23% and full year earnings would have been up 16%. Organic revenue growth for both the fourth quarter and full year was 6% with reported revenue growth of 7% despite the unfavorable FX impact of 8%. Earnings growth for the quarter was driven by a 22% increase in segment operating profit which finished the year up 17%. On an organic basis, which excludes the impact of FX translation and acquisitions, segment profit rose 31% in the quarter and were up 27% for the year. The end of 2019 marked the final year of our first strategic plan which we call SP1 which we launched at our Investor Day in March of 2017. In that strategic plan, we set a very aggressive revenue and profit goals that we exceeded, by a wide margin with a three-year organic profit compound annual growth rate of over 20%. I want to take a moment on the onset of this call to recognize the incredible efforts put forth by everyone at Brink's. Their hard work, strong execution and customer focus drove a share price increase of…

Thanks, Doug and good day everyone. Turning to our fourth quarter results on Slide 6. Dunbar was acquired in the third quarter of 2018 was part of our business for the full fourth quarter in both 2018 and 2019, Consequently Dunbar is not included in acquisitions on this chart, what is included in acquisitions is Rodoban, Balance Innovations, the TVS acquisition in Colombia and a small CIT bolt-on in Brazil. Fourth quarter 2019 constant currency revenue growth was 8% with two-thirds driven by organic growth and one-third from acquisitions. Revenue was reduced by $48 million or 5% by negative ForEx. Reported revenue was $936 million, up 3% versus the fourth quarter last year. Fourth quarter constant currency operating profit grew 34% results included a $29 million increase in segment operating profit that was partly offset by $17 million in higher corporate charges. The corporate increase included $7 million in plan Strategy 2.0 investment, $5 million an unplanned Argentina cash repatriation and $3 million of increased insurance premiums. Acquisitions added $6 million in operating profit, the majority coming from Rodoban. Negative ForEx translation reduced operating profit by $23 million or 22%, which was in line with our guidance. Reported operating profit was $116 million and the operating margin was 12.4%, up 100 bps from the fourth quarter 2018. Moving to Slide 7, constant currency revenue growth for the full year 2019 was 15% with over 6% driven by organic growth and more than 8% from acquisitions. As I mentioned earlier, through mid-August 2019 the first anniversary of the acquisition Dunbar trailing 12-month results were included in acquisition. Operating changes and synergies were recorded as organic growth. Trailing 12 months results for Rodoban, Balance Innovations, TVS and the small CIT bolt-on in Brazil were included in acquisitions since the time that each…

Thanks Ron. Please turn to Slide 16. As discussed earlier in the call, our strong 2019 results capped off our three-year strategic plan SP1. Strategy 1.0 the organic portion of SP1 target accelerating core organic growth and margin improvement and we did just that. Over the three-year period of time, our 1.0 BreakThru Initiatives created strong operating leverage that drove $76 million of profit growth in just three years from $216 million in 2016 to $292 million in 2019. This profit growth was supplemented by another $100 million of profit from Strategy 1.5 acquisitions. Most of these were core acquisitions that is core lines of businesses and geographies where we already had operations and can quickly capture cost base synergies. Together our 1.0 and 1.5 strategies added $176 million of profit from $216 million to $392 million. In total, these SP1 strategies delivered adjusted EBITDA growth of 65% over the plan period to $564 million for three-year compound annual growth rate for EBITDA of 18%. Strategy to 1.0 and 1.5 clearly added lots of value over the last three years and we are confident there is lots more in the next Rep plan to come. In fact, these strategies form the foundation of SP2 with our next three years. We call the continuation of our Strategy 1.0 initiatives and the organic component of this 1.0 WD or wider and deeper. Wider referring to more of our proven initiatives being implemented across our 41 countries and deeper referring to implementation into all branches in every country. So 1.0 WD is a key foundational element of our plan to drive continued growth throughout the next three-year plan period. The same is to of our 1.5 acquisition strategy. As Ron mentioned, we completed 13 acquisitions and invested about $1.1 billion in during SP1…

We will now begin the question-and-answer session. [Operator Instructions] The first question comes from George Tong of Goldman Sachs. Please go ahead.

This is Blake on for George. Regarding the $5 million cash repatriation expense in Argentina and the $10 million impact expected in 2020, when do you expect these expenses to begin tapering it sounds like 4Q might be, might be a target, but just curious about timing there?

Well, I think you're correct that we are looking for the FX translational impact based on our target of 36% inflation - excuse me a devaluation for the full year to start seeing that turn positive. In other words, in the fourth quarter of 2020 will start seeing the inflation driven price increases in domestic pricing will start offsetting the deflation for the year and we'll start seeing profits on a reported U.S. dollar basis in Argentina to be favorable and positive, but the other three quarters will not be. So that's when it will start coming back as we saw in 2019 actually and that's the translational part of this based on the assumptions that we have in place. Now, what we've seen so far since the election, which I think is pretty interesting is that - the FX has been much more muted. I guess this is the way to put it, than many might have expected, so we'll see where that goes over the course of the year, but a 36% FX translation issue, so to speak, is the one that will be offset and start turning positive in the fourth quarter based on our projections. The difference in the repatriation is more of an issue that is not across the board on an FX rate, it's that - it's only applied obviously with the cash that is repatriated. So a portion of our current operating of our operating income for the year is spent internally in fact - the majority of it is spent internally on taxes, CapEx and other expenses in Argentina, then it becomes the free cash flow that is generated that we would then look to repatriate. And at the current as a result of what happened in the late part of the year currently, that a premium for that repatriation that is included in the assumptions for the year, an additional $5 million versus prior year. Does that explain it?

Yes, that's very helpful. Thank you.

I think it's pretty important. I know this gets confusing, but I think it's pretty important that we don't know when and if that will be taken that repatriation portion will be taken away but they are two totally separate pieces. You can't add that to the FX rate because the FX we don't repatriate 100%. I wish we could I wish we had 100% free cash flow on our operating income, but in fact it's only the portion that is really true free cash flow that we repatriate.

And then regarding the MoneyGram investment I know it's pretty early but just curious how you see this partnership taking shape going forward and what the potential commercial opportunities are for Brink's longer term?

Well, certainly what we've suggested is we're looking for technology enabled total solutions that make it much easier, much more effective for any retail customers, which would include specific areas such as MoneyGram agents do better new business and for MoneyGram to do business with our agents. And we think that our solutions that we're rolling out and will provide more detail around are a great example of that and a great solution for that. It provides a method to make sure the funding is there to give almost instant information about their funding because the tech-enabled around that in a fully integrated, easy to use solution that we think provide significant value. And so there is a near-term and hopefully a near-term and it turns into a longer-term opportunity for both parties. In other words, for us to sell and provide these services and for hopefully MoneyGram to gain some benefits and their agents to gain benefits related to those services. So that's the first portion of this in the commercial benefits side of this for both sides. And then we think there is a longer-term joint development of strategies around cash, payments in cash to digital and digital to cash payments in the long-term that we can work on together. We're both very global businesses, the fit is very nice and we think there is great strategies that can be developed together.

The next question comes from Sam England of Berenberg. Please go ahead.

The first one, just around the OpEx in the $20 million investment for 2.0, is that going to be second-half weighted this year? And then how do we think about that growing going forward, is that something you're going to on the Strategy Day?

Yes, I think what we've said in past conference calls is consistent where we have in place today. It will be fairly smooth throughout the year and this is very similar to the, if you will, OpEx investment and what do you want to call it investment is OpEx spend that we will continue to have to continue to develop drive and support the 2.0 initiatives. The difference this year versus last year is we are starting to roll out pilots. Those pilots will then start hopefully do yield additional sales, as we go through the year and that additional sales will start translating into revenue as we go forward into the second half of this year. So if you think about it, we're going to be heavier weighted in the first half of this year to seeing the expenses which what we said in our guidance, those expenses will be absorbed, if you will, and are in the guidance by organic growth and our core business. And there may be some benefit, but it's only limited in the current plan, and the guidance for the second half to start seeing some benefits associated, but most of that is not in the plan. Most of it is not in our guidance, but we'll start seeing in the second half and as we do, we'll get both the benefit to offset those expenses and potentially some upside depending on where the ramp up and how the ramp up goes.

And then the second one is around the 1.0 plan. I just wondered, what's left to do to bridge the rest of the GAAP up to 13%, are there any particularly large parts of the plan you still need to deliver on this year?

Well, so when you say 13% that is the number for the U.S. There are very specific targeted plans as we laid out before to achieve the 13% and frankly more beyond the run rates of 2021 and that's a combination of continued Argentine BreakThru Initiatives that were laid out as part of our 1.0 strategy for the U.S. as well as 1.5 Dunbar synergies and benefits associated with that. So that's really the U.S. look on it that hasn't changed from what we laid out before going from the 8% that we've talked about that we hit this year to 10% plus full year op income for next year and then going out of 2021 I'm sorry - next year being this year 2020 I apologize. And then the 2021 exit rate of 13%. So that's the U.S., but what we're talking about is on a global basis including South America and in other countries, France is a key piece of this as well, continue to see improvements in our core business there by taking initiatives but those countries started out with as part of their 1.0 plan and expanding, a widening those having more initiatives to implement in each of those countries, more than other countries that we have implemented new strategies and we have helped put together and then making and taking those more that wider initiatives and then driving them deeper into the operations. In other words, if we have right optimization that was implemented in the first strap plan period of time, those route optimization strategies may have been preliminary may have been ones that we test marketed, may have been ones that we only put in 10 branches and now they'll be deeper, they'll go deeper and go into every branch. They'll be implemented throughout the organizations, and you can take those and say whether it'd be new trucks or other strategies around that money processing, room efficiencies that's putting them deeper into the organization. It's taking the multiple initiatives that we've laid out and our wider and putting more of those in each country. So we don't view that there is a set amount of initiatives or amount of cost reduction that can be out there and we're just taking what's left. We're continuing to build and grow and implement and expand on those across all of our operations.

[Operator Instructions] The next question comes from Jeff Kessler of Imperial Capital. Please go ahead.

Doug, I know you're going to be talking a lot about this at - on June 1, but I'm just wondering, you've alluded several times perhaps many times today to number one, a declining amount of capital investments towards as we move on in 2020 as well as the first increase of being able to recapture some of the inflationary pressure that you've got from Argentina. Can you talk about this in terms of free cash flow, free cash flow was slightly below our expectation, but the way you're talking is that free cash flow will begin to actually begin or I would say become a metric that you're going to start talking about and focusing on more towards the fourth quarter and particularly into 2021? And can you, can you elaborate on that a bit given that I think a number of analysts are going to start looking at free cash flow because of what's going that possibly happen in 2021 as it - as a valuation indicator?

Yes. So it is a very good questions. Let me separate those and then I'll pass the last piece, specifically around the free cash flow projections for 20 and now we're going to impact on at least on a more global basis rather than specifics beyond that for the rest of SP2 period. But let me bifurcate and separate some of those. The Argentina piece on this is a different issue versus free cash flow but it clearly is one that is related to continue to improve our free cash flow. It's more the one projections based on the recovery period of time for the local price increases in Argentina offsetting the already seen and projected FX issues. That's what we're projecting. I think it's a reasonable projection based on assumptions that we have seen to date for the year and we've laid it out pretty straightforward with great I think transparency and suggesting that in Argentina, we will start seeing that turned to be positive in the fourth quarter and suggesting as well that this is at least a $15 million negative impact going into the year. And hence that's why we say, if you take a look at our business without the Argentina piece, the rest of the business and the projections in the guidance we're providing are pretty darn healthy. So that's one piece of it and obviously as that turns the other way we'll get more of free cash flow generation, as we go forward. But the 2.0 strategy, that I think that we've laid out is suggesting that a great portion of that strategy is related to OpEx investment versus CapEx investment, it's related to a combination of a total offering of services that are unique, differentiated, higher value to the customer but they don't…

Yes, Jeff, simple math, we had CapEx in 2019 at 5.4% of revenue, of our targets 4.5% that 0.9% times our revenue is about $35 million in improved cash flow just from returning to a normalized spending. But on top of that in echoing with Doug said, we're moving more towards a global lease arrangements and devices associated not only with our 2.0 strategy, but also looking at some of our 1.0 wider and deeper investments and our object there is to have the cost of any capital included in the monthly service fees and also increasing the percent of our recurring revenue to make sure that we've got a model, as Doug mentioned that has higher margins, lower CapEx and is more recurring. It's a trifecta, I think that has got a lot of merit.

One follow-up question, that is on CompuSafe number one, could you reiterate the domestic CompuSafe number that you said?

4,100 units.

Okay. And with that, can you talk a little bit about the CompuSafe strategy internationally given that you've now expanded internationally, where is it taking faster than other places? And number two, will CompuSafe be integrated differently into some of the international strategies as well as, I guess, domestic strategies will be integrated differently into South America, Rest of world into Europe, then you're seeing it here?

I'll tell you that we've had tremendous success in Mexico with CompuSafe I mentioned 50% compounded annual growth rate of CompuSafe units installed over the last three years, but I would…

Brazil.

Yes. And it's working in other countries. I would tell you on June 1 you will learn more about a strategy to further penetrate global retail markets with a solution that is less expensive and more profitable for the retailer and for Brink's. And we're looking forward to that because even though CompuSafe has been a tremendous asset to retailers certainly larger ones. We believe there is an entire segment of the market that's ripe for penetration with a better solution.

And the last question today will come from Jamie Clement of [ERG]. Please go ahead.

Doug, I don't know why. I don't know if you could comment on this, but obviously looking over the Atlantic to Europe, global competitor of yours, lots of stories out there about whether they're going to spin off a business or whether they're going to sell it at all of that kind of thing any comments on kind of how the Brink's Company looks at that situation from a competitive perspective that sort of stuff?

We think Loomis is a great competitor and they did a great job of improving margins in the U.S. and we think it will translate into new good targets for us to hit going forward.

Overall M&A i.e. sort of size of the pipeline versus where it's been seller's expectations, all that kind of stuff, did you kind of give us a sense of where that's at?

Well I said in my comments, Jamie the pipeline has more potential deals at the greater enterprise value. And as I said in the past all these deals are lumpy.

Okay.

We've also said that we look at everything, but as Doug mentioned in his comments, we're extremely disciplined, which means we won't overpay in fact in 2019, we walked away from several deals that got above the point where we believe they would achieve our required rates of return. So we really don't want to say more than that. I think we've been consistent and all and we continue to exercise discipline in everything we look at.

Yes, and Jamie, certainly all we know is the public information that's out there regarding G4S. I think they publicly stated that they're going to be looking at what they - by the middle of this year and their primary path is a demerger.

Ron, apologies if I missed this, but in terms of organic growth in the U.S., obviously this is a first quarter Q4 where you fully annualize the Dunbar acquisition certainly didn't expect to maintain all of that business. How much of an impact in terms of like planned customer attrition impacted maybe the organic growth rate year-over-year?

Yes. Jamie, I would say it was at least 3%. It's very hard to quantify. But as Doug is looking at me said that I didn't think it was that big, but now, if we had several customers that had two vendors, one was Dunbar, one was - they had to invite one of our competitors to take a portion of that business. And so it is difficult to quantify, we haven't spent a lot of time on it. We've been looking more towards the future and how we present a compelling opportunity for growth. The penetration of a large financial institution is just beginning of that, we've also had some other wins and we're really focused on that. But quite frankly, we were pleased with the 2% based on the planned attrition.

And then Doug last thing, if you think about the outsourcing trend whether it's money processing or whether it's ATMs globally, I'm not asking for a global number, because I don't know how you quantify it, but in terms of the U.S. and obviously some countries are ahead of the U.S. and this sort of thing, if you think about your big FI customers or potential customers, longer-term outsourcing trend, what do you think the market opportunity is there for Brink's?

Well, I think for us in the whole industry, we think it's fairly significant. We saw obviously banks to start outsourcing vaults money processing a number of years ago. There is still a substantial amount of that to continue to be done, whether it'd be in the U.S. or other countries and other locations and we're just starting to see with BPCE being the first one globally of the major financial institutions to look at and move forward with the outsourcing of ATMs. We think that's going to be another major place for outsourcing there as well. And then we take this, the next step. We are looking at as our 2.0 strategy for significant look of where the market is going to handle including FIs, the total cash ecosystem management. And so if you take a harder look at rather than just the components associated with that with everything within the cash ecosystem, we think there's a lot more to do there. It's a combination of outsourcing as well as assuming much more of a total requirements at a lower cost and better value for customers before that follows.

This concludes both the question-and-answer session and the Brinks Company's fourth quarter 2019 earnings call. Thank you for attending today's presentation. You may now disconnect.