Welcome to The Brink's Company's First Quarter 2020 Earnings Call. Brink's issued a press release on first quarter results this afternoon. 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 Investor Relations section of the company's website 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, Grant. Good afternoon, everyone. On behalf of all of us at Brink's, I hope you and your families are safe and healthy in this difficult environment and I want to apologize for the delay in starting the call. This afternoon, we – joining me on today's call are CEO, Doug Pertz; CFO, Ron Domanico; and Rohan Pal, our Chief Information Officer and Chief Digital Officer. This afternoon, we reported our 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, costs related to an internal loss and costs related to certain accounting compliance matters. We're also providing an analysis of our results on a constant currency basis, which eliminates changes in foreign currency 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 our non-GAAP results. Thank you and I'll now turn the call over to Doug.

Thanks, Ed, and thanks, everybody, for joining us today. First, let me also apologize for our delayed start as we continue to do work on loading slides into the SEC filings. And hopefully all of you have the opportunity to be able to get to our slides and have access to that to follow along today. In light of the crisis period that we're all going through in a number of conversations that the company has had with investors, we plan to have an extended period of prepared remarks today. If we don't get to all of your questions today, after the prepared remarks, we'd be pleased to answer those in – and more, in fact, on individual calls with each of you. Thank you. This afternoon, we released first quarter results, which as previously disclosed, were negatively impacted by the impact of the COVID-19 pandemic and greater than expected negative currency translation. The pandemic and resultant economic impact began to affect our Asian operations and our global services business in February. And in early March, moved sequentially from Asia through Europe, North America and then to South America. The unfavorable FX translation impact increased markedly beginning in March, primarily in developing countries such as Mexico, Brazil, Chile and Colombia. We believe these currencies were heavily affected by the pandemic driven flight do the safer U.S. dollar. Taken together, we estimate that the pandemics impact on our operations along with the translational impact on currency reduce first quarter operating profit by over $30 million or more than 35%. While the crisis is unlike any the world or Brink's has seen before, we're taking decisive actions to reduce its health and financial impacts. Our balance sheet is strong. We have ample liquidity and a flexible cost structure that we're aligning with…

Thanks, Doug, and good day, everyone. Before I start, I want to remind you that we disclosed acquisitions separately for 12 months, at which time they are mostly integrated and included an organic results. In the first quarter 2020, acquisitions include Balance Innovations in the U.S., TVS in Colombia, a small CIT bolt-on in Brazil, the divestiture of a small monitoring business in France and less than a month of the acquired G4Si secure logistics business. As Doug mentioned, we experienced COVID-19 related volume reductions on our business beginning in Asia in February, Europe in early March, North America mid-March and Latin America by mid to late March. We implemented daily activity trackers. And as a pandemic-related shutdowns began, our organic revenue declined on average about 30%, and in some countries by over 50%. Generally, those reductions persistent throughout April. At this time, we're just starting to see improvements as countries begin phased reopening. We do not have a line of sight on the speed of recovery of business will return to pre-crisis levels. Turning to our first quarter consolidated results on Slide 6. 2020 first quarter constant currency revenue growth was 3%, with two-thirds driven by organic growth and one-third from acquisitions. Revenue was reduced by $60 million or 7% by negative forex, more than we expected due to the pandemic induced flight to the US dollar. Reported revenue was $873 million, down 4% versus the first quarter last year. Versus prior year, first quarter constant currency operating profit declined 4%. Acquisitions added 1%. A negative forex translation reduced operating profit by $18 million or 21%. As countries begin to reopen, we're seeing a strengthening of local currencies versus the US dollar, which will be favorable to our consolidated results. We estimate that the negative impact of the coronavirus…

Thanks, Ron. Over the last six to eight weeks, during this pandemic, all of us on this call together with the rest of the country and probably the rest of the world, have been going through a time like never before, and I'm sure we've had to look at things, all things through a different lens. So I wanted to take a few minutes to provide some foundational information about our business, our customers and the use of cash. Let's start with the customers that drive our business. Slide 16 shows our strong global customer base to assure confidence with Brink's for the future, the next three slides provide a good overview of this customer base, which is diverse, stable, resilient, and in many cases, essential. Our global consolidated revenue is driven by three distinct customer groups: financial institutions, or FIs, as we call them, retail customers and a smaller category called government and other. We've provided a similar breakdown for each of our top five countries, which account for about 72% of our total revenue and as you can see, our U.S. operations have a breakdown quite similar to the consolidated revenue. As does Brazil, whereas Mexico and France are more heavier weighted to retail or the yellow shaded areas on the chart. Some retailers are getting lots of negative attention from investors and the media during this pandemic. So let's drill down into the retail customer base. Given that the U.S. is by far our largest market and roughly mirrors the revenue breakdown of our global business, let's use the U.S. to demonstrate our high quality customer base. Turning to Slide 17, here are the three big takeaways from this slide. Our U.S. retail customers are large, diverse and in many cases, essential and provide a strong base…

Thank you, Doug, and good afternoon to everyone on the call today. As Doug pointed out, Strategy 2.0 was built on the foundation of changing the customer experience for cash management to better appeal to that large unvended segment of walk to bank customers. The solution needed to be easy to use. Holistic to include both deposits and ordering change, non-intrusive and customer friendly and yet provide the same or better working capital benefit to the customer. So we built a solution that we call Brink's Complete to change the prevailing customer experience in our industry. It consists of a digital app, a low cost device tailored to the needs of the business, next day advanced credit for cash deposits and change ordered and delivered to the stores, all for a well published single subscription price that is targeted to be less than 1% of the value of the customers cash transactions. Next slide, please. Here's how it works. Customers use the 24/7 app to make a deposit, order change or track their requests. They then put their cash in a specialty provided Brink's bag and scan and drop it into the device. Brink's take custody for the deposit and provides advanced credit to the customers' bank account the next day. And Brink's continuously monitors the device and schedules a pickup when the device reaches capacity. Now there are two key customer experience changes that I'd like to highlight. First, this is an all digital process to create a deposit. No more time spend counting cash and writing up paper deposits. Second, the deposit is made and credit is received at the customers' convenience, and the benefits to the customer are clear. No more walking to the bank and waiting in line. No more distractions from serving your customers when…

Thanks, Rohan. I'm pretty excited. I'd like to close today focusing and summarizing on our third priority, which is a position Brink's to emerge from this crisis stronger than ever and poised for additional future earnings and revenue growth. Now and during this crisis period, we are continuing to aggressively pursue a new cost structure that it's aligned with the economic realities of the pandemic. But at the same time, the key to emerging from the crisis is positioned for the longer-term growth is to be and it's continuing to execute and be better positioned to execute all three layers of our strategy. Our Strategy 1.0, which we introduced at our Investor Day three years ago was focused on internal organic profit growth initiatives. Our successful execution of these initiatives drove much of the profit growth we saw during our first three-year strategic plan period, and they form a foundation for continued improvement going forward. We now call it 1.0 wider and deeper WD, which simply means that we will accelerate and we are accelerating our execution of internal growth initiatives as well as our right-sizing measures throughout more countries and our goal of a network, which now includes 14 more new countries with G4S. But as part of the priority three, we are also restructuring and resizing our businesses in many countries to better match our revenue during the crisis and to better leverage for greater margins and stronger earnings as revenue growth gradually returns and hopefully exceeds prior levels, if revenue levels return at a slower pace will be positioned for better profitability at these levels. These actions include accelerating building on already developed restructuring and integration plans and accelerating acquisition synergy plans that have been put in place and expanding on those. We've now completed the acquisition…

We will now begin the question-and-answer session. [Operator Instructions]

Any questions?

Our first question will come from George Tong with Goldman Sachs. Please go ahead.

Hi, thanks, good afternoon.

Hi, George.

Hello. You indicated that organic revenue declines persisted through the month of April, but that you're starting to see some improvement. Can you talk about what weekly revenue trends in April look like by geography?

George, I'm struggling a little because it's awfully hard to tell you weekly. What we have seen and it varies by the countries. That's why we're trying to give at least a little bit of background as to when we saw the various regions at least how the way we call it went through with starting with Asia, where we did see, obviously, it have a earlier impact in Hong Kong, but then starting to see some of the improvements in the latter weeks of this month, really leveling out in the first weeks of this month in Hong Kong, and then starting to see some improvements. But that's kind of more in the forefront other markets. And as we said, as it went through Europe, we saw in this – probably about the second week or so in March, the starting of the impacts with the shutdowns of the various countries and the economies. And in some cases, we've not seen it come back in some countries because of the still continued shutdowns. In others like the U.S. over the last week-and-a-half or so, we've just started to see customers and the economy start to open back up again.

Got it. That's helpful. And then as it relates to Brink's Complete, very helpful overview. Can you elaborate on your broader rollout strategy of this new product, if you need to partner with the bank in this product work and how you would frame the longer-term revenue opportunity?

Yes. So we are being a little bit cautious on how we let it roll and lay everything out. We have already partnered with what we call a single partner bank, at least for the regions that we are starting the pilots and rolling out so far. The partner with that bank provides us the ability to provide the working capital management and optimization, in other words, the daily credit on an ACH transfer basis directly to our customers’ banks that they’re choosing. So it allows us in partnership with that bank, but through us in an off-balance sheet method, it allows us as Brink’s through one of our Brink’s subsidiaries. Again, an off-balance sheet method, it allows us to provide the credit to those customers. So if we consolidate several hundred, let’s say, store locations for a retailer that are in multi states and that use – historically have used multi-local banks, it effectively allows the ability to eliminate all those and provide an ACH transfer in the next morning to a single bank of the customers choosing.

Great, thank you.

Our next question will come from Tobey Sommer with SunTrust. Please go ahead.

Thanks. If we think about your rightsizing of the organization and making it leaner for the market that will be here post COVID-19 kind of thinking of next year, not the balance of this year. What are you building for if you take January and February or maybe last year’s fourth quarter as 100%, are you building it for 95% next year, 85%? How do we think about that?

It’s a very, very savvy and good question, and it’s one that our management team are working with all of our country managers and our functional teams to really drive. And Tobey, I’m not going to answer it specifically with a specific target, although we do have specific targets that we’re providing to each country. But I think that the – your point is well taken. Your concept is really what we’re driving to. And that is to take a look at our fourth quarter as a jumping off point for 2021 and the future, and say in the fourth quarter this year, how is that new business size? How are we sizing that business at a reduced level of revenue in the fourth quarter, but an improved margin. So it may not be improved margin dollars, but at least an improved margin percentage than we would have seen in the prior year. And that’s a challenge. So if you use an example on the – that Ron used as part of the review of U.S. that CIT labor, that’s the direct labor associated is down about 25%, relatively in line, aggressively in line, I guess, I should say, in line with the expected revenue at the bottom in the second quarter. That is a true takeout of headcount. These are layoffs and furloughs. That have been taken – the action has been taken to take that cost out. And then you jump over on that page as well, 20% of SG&A has been taken out as well. And we can continue. That’s resizing the business model. And if you have 20% of SG&A, and you can maintain that as a cost structure going into the fourth quarter, we don’t – we hope. We don’t know, but we hope that…

Right. Well, one other question from me, and I’ll hop back in the queue. In my coverage, your stock is down the most year-to-date. I know everybody on the phone and your team is acutely aware of that. Are there other strategic things that you can do? Or have you been sort of approached by anybody because we’ve seen private equity transactions at substantially higher multiples and you’ve got innovative strategies that not everybody in the market has.

Well, that’s one of the reasons, Tobey that we wanted to lay out some of what I consider the basic fundamentals of our business. I firmly believe and I hope, after we – our conversation today that the reasons for people using cash are not going – in fact, they’re going to go just the opposite direction. I think that the myopic view that we’ve seen and maybe some of the misinformation we’ve seen about cash and cash usage, both in the U.S. and on a global basis have really skewed some of this, skewed maybe our valuation. The reliance on retail that maybe many of misperceptions about us have maybe skewed that as well. The perception, if you walk down Second Avenue in New York. This is one of my favorite. You look down second in all the restaurants and the dry cleaners and other stores are closed. And you say, well, this must be impacting Brink’s. Well, the fact is we only service less than 10% of those customers because of our vended nature that we pointed out. Which is – means that we aren’t as reliant on own. In fact, most of those are smaller stores, smaller operations, smaller retail operations that we do not serve. And they aren’t impacting our business now. That’s why 44% being essential is really a key number that I think was misunderstood. And the biggest misunderstanding of that is our potential opportunity because there’s 90% and if you think that there’s going to be more online sales going forward than there have been historically, which I do agree with. Maybe you cut that number by 10%, 15%, 20%. It’s still a large, large opportunity that if we implement it correctly, if we roll out our strategy properly, we should see substantial opportunity for growth in a unique fashion, in a step change fashion of services we provide to the customer that offer us greater profitability and greater growth. I can’t answer your other question, have we been approached by somebody to bias.

Thank you very much.

Our next question will from Jeff Kessler with Imperial Capital. Please go ahead.

Thank you for taking my questions. Hi guys, how you are doing? Realizing that there’s probably some of your competition on the phone. I’ll ask this very carefully this question. Coming out of the last recession, you folks lost share because that 10 – that’s 10, 12 years ago, because the value proposition of Brink’s probably was not – was overstated at the time. They’re charging too much. And you lost share for various reasons. Does what we are seeing – those are what we’re seeing now, such as Brink’s complete, do you believe you have you are putting out there as you come out of a recession or even in the middle of recession, the type of tool that can take back some of that lost share, particularly on the financial services side, type of things that you didn’t have back then when you were a high-priced company, you’re now as high-priced or as low priced as anybody else. The question is, do you think you have the value proposition to change the market share with the new – do you want to call it, Brink’s 2.0 and 2.01 and 2.03 as it gets introduced over the course of the next two years.

Well, first of all, Jeff, you’re worse than me with numbers, 2.1, 2.03 and so forth. I get criticized for that. But setting that aside, I think we should keep this in perspective. We set aside the 2.0 and the new solutions that we will be offering, and I’ll talk about that in a moment. What’s important is that as a company over the last three years, I think we have materially improved our service levels, our value proposition, our customer focus to our customers in the U.S. that we haven’t lost market share that I can think of, of any consequence over the last three years. We made lots of accounts from here and there. But in general, we haven’t lost, we probably gained, if anything, some market share. In the FI as an example, one or two large accounts that we’ve gained at least account share with. So I think I can’t speak for what happened in 2010 or 2011. I can speak for when I came in 3.5 years ago that we weren’t doing as well as we should have. We weren’t servicing our customers as well as we should. And I think we’ve made significant progress in better strategies investing more in the business, providing better service, being more customer focused, et cetera, that has gotten us to a position that will see us through in our core business, in our core offerings, in our core offerings versus what our customers – or excuse me, our competitors offer to our customers. I think we’ll continue to see that will see us through and position as well through this recession. What we’re adding on top of that is something that not only should improve the service offering to our existing customers. And we have a name for that as well. But offering the new service to our existing customers that will be much more complete and a better servicing offering – offer at a better value to those customers. But more importantly, will be something that we think will be of great value and of interest to a new range of customers that’s clearly the old Brink’s and our competition has not been able to sell those customers on. That’s the challenge. So this isn’t just about to try and see us through a recession or to take existing customer share from customers. We’re going to do that. We’re going to continue to improve on our core business. We’re going to continue to improve our profitability in our core business. That’s 1.0 wider and deeper. But we’re going to layer on top of that new strategies that provide us the opportunity to further grow our organic growth with new and other un-vended customers with existing and new unvended customers out there on top of that as well. I hope that given answers.

Yes, it does. And one quick follow-up, that is on your global services business. You mentioned that that’s – you’ve done some integration there already. It also felt the pain of the recession. But what I’m interested in is as this recession moves on and you implement some of these new value-added operations that you hopefully will get that provide you more value-added. Is there a role for global services to play a part of let’s call it, the new overview that you’ve just been talking about for about the last 15 to 20 minutes?

Well, I may be missing something here. But the global services piece is really not related. We see a lot of other strategies for global services, but that’s not really related to how we’re servicing larger or vended or under-vended retailer…

No. And that’s – I’m sorry, and I miss – maybe I misspoke. I was specific to global services, the types of new services that you can offer with them to basically just not just improve share, improve service and get even better margins out of that business.

Yes. We are working on a range of plans and new services for that. And certainly, the combination of the, what, eight weeks ago now or six weeks ago, we completed the acquisition of FI the combination of that, the two-thirds of the synergies that we’ve outlined for the G4S acquisition are coming from that business, and that positions us extremely well. To maintain the position and hopefully grow our positions there. So we’ll be looking at how we can add additional services as a part of that.

Great, thank you very much. Appreciate it.

Thank you.

Our next question will come from [indiscernible] Advisory. Please go ahead.

Hey, good afternoon, gentlemen. Thanks a lot for taking my questions.

Yes, yes.

So Doug, as one thinks about the new retail cash solution versus your legacy CompuSafe model. Is there a customer size in terms of cash needs and volume where they have to be a CompuSafe customer? Or is this scalable up almost as high as it needs to be? And then sort of the follow-up question there is, over time, are we really going to be seeing kind of one Brink’s retail cash management solution and really the only difference from customer to customer is just going to be the size of the device. How should we think about this longer-term?

Yes. So I’ll answer it in two ways, and I also want to be a little bit cognizant of competition. So one way is kind of – this is getting back to what Jeff just said. Our 2.1 strategy is really around anything related to any size of CompuSafe or smaller or even a little bit larger. But a type of customer that has a reasonable amount of cash, but not overly so. That has a reasonable number of point-of-sale positions, but not a large number. And the reason I say that, that’s why we call it 2.1, and I’m getting back to Jeff. There’s another version that is 2.2. That is our focus on recyclers, which will be the next level up and that is for larger, much more higher volumes of cash that go through – that have more POS systems that need to manage and control that because there’s so much cash that’s going through that. It’s large supermarkets like Kroger, or Costco, or Walmart, and so forth. Those should be probably using a solution that includes not only a recycler, but then the complete managed services around that recycler as well as in other systems that help track and manage and provide enterprise-wide formation to that customer.

Forecast taken all that stuff.

Yes, exactly, exactly. Yes, so that will be the larger customer. But anything below that and down to the very small mom-and-pops type stores, we think this solution is really the right and best solution. And it provides it for what’s interesting. We initially started this, looking for that smaller unvended. And what we really come up with, we think this is actually as good, if not a better solution that is really applicable to a lot of much larger retail operations that aren’t using a cash management solution or only have a partial one. They have multiple locations, multiple stores and use multiple banks and therefore, they have to track and manage and reconcile all that, pay all the fees that they don’t even know what they are, do the cash management, et cetera, around that. And that can be consolidated all into one. Eliminating local banks, eliminating all the reconciliation and cost around that. The difference between that and CompuSafe or Smart Safe in the marketplace today is those are always provided by – excuse me, the services around those are provided by the bank. The next day services, the next day credit is provided by the bank that the customer has to go against their separated services. And so this is combining that service. It’s eliminating those hidden fees and all the other costs around that and putting it into one. I don’t know, if we lost you.

Thank you very much. That was good. Thanks a lot for your time. Appreciate it.

All right, thank you.

Our last question will come from Sam England with Berenberg.

Hi guys, just a couple for me. The first one, on Brink’s complete, can you give us an idea of how you’re thinking about pricing the offering and whether you think it will be better margin than core businesses at the moment?

It will be better margins than our core business.

Okay, sure.

And it will be competitively priced because it offers a complete solution. Now the challenge in this – and this is pretty straightforward. The challenge in this, it’s a value proposition, and the value that we offered, we think, will be far superior versus all of the cost and the related value that is being lost by the customer today. But if they don’t take all those costs into consideration, what’s the cost of your working capital? What sort of the losses that they may be seeing internally or externally? What’s the cost of walking to a bank, the time it takes for that branch or the store manager to do that. All of those things, if they don’t take that consideration, then it may be viewed as more than just a $25 CIT pickup. But if they take the real cost that they’re seeing, both the hard and the soft cost, but mostly just the hard costs that they’re seeing today, this will be a very attractive, complete solution, and it will provide better margins for us as well.

Okay, great, thanks. And then maybe one for Ron if you could just give us an idea of what you’re putting on hold by cutting the CapEx by 50%. So what projects you’re putting off? And I suppose, how quickly can you restart them when you sort of get that down the line?

Yes, Sam, a lot of it has to do with the fleet. We have a lot of body builders around the world have been shut down with the virus. So it really was easy for us to postpone that CapEx. And again, the fleet is an upgrade for us. We’re going to the removable chassis body solution. We’re going to the one-man operation solution. So these have cost advantages, both in labor and maintenance and fuel. And so they’re incrementally good returns, again, over 20% IRR. But the return that we would get versus the CapEx putting out in an environment where we’re really focused on cash and cash preservation, made all the sense in the world to postpone the fleet upgrades. And quite frankly, I don’t know if we would be able to continue them with a lot of these body builders being shut for the time being.

Yes. It’s not a natural based on the other things that are happening related to this. There’s one other piece that comes into this as well. As we start transitioning into and hopefully selling more of our 2.1 or our 2.0 solution that we’re talking about the Brink’s complete, that there could be a natural evolution to fewer stops anyway. We’ll be able to manage when those stops are, and we should not need nearly as many stops, which means that our future requirements for trucks may be reduced. Over lining, and it also means that, again, as Rohan pointed out, we don’t need to have for like a typical CIT stop, the customer doesn’t have to wait for us at 10:30 every Tuesday morning and every Thursday morning to drop off the bag in person to one of our CIT messengers. Instead, we can come anytime because we are the only people that can open up the Brink’s device that we provide to that customer as part of our service. And so it’s – from the standpoint of cash and handling of cash, there’s much reduced time and handling of cash and the labor and so forth associated with that. And once the cash is put into our device using our cloud-based app, it then is magically appears – and is converted to digital and appears in the customer’s bank account. So he doesn’t need to worry about it any other way at any time. And that’s much different than before or the way that business is done today. And it’s actually much better for us in terms of optimization of routes. Number of stops and costs associated with them.

Okay, great. Thanks very much.

Any other questions? I think, George, did you have one more?

It looks like this will conclude our question-and-answer session. The conference has now concluded. Thank you for attending today’s presentation.