Welcome to The Brink's Company's Third Quarter 2020 Earnings Call. Brink's issued a press release on third 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 in 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, Sarah, and good morning, everyone. Joining me today, our CEO, Doug Pertz; and our CFO, Ron Domanico. This morning, we reported third quarter results on both the GAAP and the 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 are also providing our results on both a constant currency and pro forma basis. Constant currency eliminates changes in foreign currency exchange rates from the prior year and pro forma revenue includes this year's G4S acquisitions as if they’ve been part of Brink's in both 2019 and 2020. We believe the non-GAAP results make it easier for investors to assess operating performance between periods. Accordingly, our comments today, will focus primarily on the non-GAAP results. Reconciliations of results are provided in the press release and 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. I'll now turn the call over to Doug. Doug?

Thank you, Ed. Good morning, everyone, and thanks for joining us today. On behalf of all of us at Brink's, I offer our best wishes to all of you and your families during these difficult times. The strong third quarter performance we you reported this morning, is a result of outstanding execution by all of our global management team, which has been sharply focused on three priorities since the onset of the COVID-19 pandemic starting with the health and safety of our employees and their families. And I want to personally thank all of our people for their dedication for providing our services, which are so essential to customers and economies around the world. Our results reflect the team's successful execution of our second priority as well, which is to preserve our financial strength and reduce costs in line with the short-term revenue declines we experienced in the second quarter. We've made great progress in right-sizing our business without sacrificing service levels and qualities to our customers that they expect. Our third priority is to position Brink's to be stronger and more profitable on the other side of this pandemic. This priority is focused on permanent cost reductions that have combined with a successful integration with the G4S acquisition and the initial rollout of our Strategy 2.0 have positioned us to continue to deliver long-term value to all of our stakeholders. We believe that our revenue recover -- that as our revenue recovers and surpasses 2019 levels, our realigned cost structure will provide the operating leverage to drive up margin rates and margin dollars to new and higher levels in 2021 and beyond. Our performance since the onset of the pandemic in March, including our strong third quarter results and our expectation of even stronger finish to this fourth quarter,…

Thanks, Doug, and good day, everyone. Doug reviewed our sequential third quarter results versus our second quarter results. I'll now review our third quarter results versus the third quarter last year. Before I do, please remember that we disclosed acquisition separately for the first 12 months of ownership at which time they are mostly integrated. And then they were included in our organic results. In the third quarter 2020, acquisitions include for the entire quarter G4Si and the G4S cash businesses that we purchased in the Netherlands, Belgium, Ireland, Romania, the Czech Republic, Cyprus, Malaysia, Hong Kong, the Philippines and the Dominican Republic. During the third quarter, we acquired G4S cash businesses in Estonia, Latvia, Lithuania, in Indonesia, and those results were included from the month of acquisition. Acquisitions in the third quarter also include TVS in Columbia and exclude the impact of the divestiture of a small monitoring business in France. Looking at Slide 11. 2020 third quarter revenue and constant currency was up 11% as the pandemic related 9% organic decline was more than offset by a 20% contribution from acquisitions. Negative ForEx reduced revenue by $56 million or 6%, was driven by the pandemic induced flight to the U.S dollar. Sequentially, on average exchange rates improved slightly during the third quarter. Reported revenue was $971 million, up 5% versus the third quarter last year. Third quarter operating profit was up 19% in constant currency as acquisitions more than offset a 1% decline in our organic results, significantly improved from the second quarter organic decline of 18%.The fact that the percent organic operating profit decline was much better than the percent organic revenue decline is a testament to our proactive cost realignment. Negative ForEx reduced OP by $22 million or minus 22%. This included a $10 million charge…

Thanks, Ron. Slide 15 give some much needed perspective on e-commerce as it relates to the U.S. retail market. As the global market leader in cash management, we fully acknowledge that the pandemic has accelerated the adoption of e-commerce, forward at least several years. However, if you step back and look at the big picture, studies suggest that the overwhelming majority of retail revenue more than 80% will continue to be generated from in-person sales. According to a U.S Census Bureau -- according to the U.S Census Bureau, total retail sales in 2019 were approximately $5.5 trillion. And of that 89% was transacted in-person with e-commerce accounting for about 11% of total sales. E-commerce's growth this year is estimated to be around 35% to about 15% of total retail this year, which means 85% of retail sales will still be in-person. In fact, according to the industry experts given even as e-commerce sales continue to grow by 2022, the share of in-person retail sales will remain well over 80% of total retail sales. Given, that in the second quarter during the height of the shutdowns, Walmart reported a 97% growth in e-commerce sales. However, e-commerce sales at Walmart still represented a little over 11% of their total revenue. Similarly, Target's e-commerce sales grew an impressive 195%, but still represented only a little over less 17% of Target's total sales. This means that 83% of Target sales were in-store. And in fact in-store sales were up 11.5% in the second quarter year-over-year. These results are very consistent with the overall retail sales data shown on the table at the top of the slide. In short, speculation that we're becoming a cashless society, only considered some of the facts. And as you'll see in the next slide, we're actually seeing a higher…

Hi. Thanks. Good morning.

Good morning, George.

Organic revenue trends continued to improve in the third quarter. Can you discuss how organic revenue is performed on a monthly basis moving through the quarter and exiting the quarter? And what organic revenue ranges are incorporated into your full year guidance?

Yes, it varies by country and on a global basis. But in general, as we stated that certainly in the second quarter, as we saw June was by far the highest slope in terms of revenue recovery. But during -- in general, the full month quarter of third quarter we continue to see a monthly improvement during the quarter. And hence, that's why you see the jumping off point from September into the fourth quarter being at the highest level in comparison to the average for the full quarter, which suggests that the slope is still positive in terms of the recovery for revenue recovery in general. And the U.S. is an indication of that as an example. But it is a substantially lower growth rate or acceleration rate versus the second quarter. So we continue to see that. And I think, George, what we -- what we're stating in here and which leads to the second part of your question is we really don't know what will happen during the third quarter in terms of revenue. But based on what we've seen, based on forecast, based on what is open and what we've seen not only in the third quarter, but as you say, as we exit the third quarter that we see the range of revenues that we've laid out in our guidance. And that ranges from somewhere in the 85.5% to 86% range of revenue to the low 90s. And again, jumping off point in September was 90% and the U.S was at approximately 91%. So we think that's a realistic range. Who knows, again, what will happen in these times. But we think that's a realistic range based on our jumping off point, what we've seen to date. And it gives us a little bit of downside protection in the quarter for the revenue growth.

Got it. That's helpful. And stepping back, can you talk about how customer demand for services might be affected by the resurgence of COVID cases. And specifically if you're seeing any change in the number of pickup and drop offs.

Well, I mean, obviously it's too early to tell. Most of the -- most recent changes that you've seen on media, and obviously, that has seemed to have had an impact on the markets over the last couple of weeks are fairly recent. The shutdowns that we've heard about during the -- if you want to call the second wave, have been heavily focused on shutting down restaurants and bars and other areas such as gyms and places where people gather. We've not seen as much of a focus as was the case in the May timeframe, April-May timeframe, the first shutdown and we haven't seen as much focus on shutting down retail. And so we're hoping, and again, we don't know, but we're hoping is we'll continue to see both essential and non-essential retail continue to stay more open this time than we saw in the first wave. And that the openings of restaurants, especially dine-in restaurants, obviously, will be the things that are impacted. And again, those are a lot of the establishment and the customers that we hadn't seen fully reopened. And hence we had not gotten back to our full levels of reopening. We got backed into that 90% range in the U.S. as an example.

Got it. Very helpful. Thank you.

Hope that helps. I think, George, what's important as well is, as we've gone through this even at these levels that we've seen the cost reductions, the cost takeouts balancing with the service levels, excuse me, with the reopening levels, not only balance that, but also provide us the opportunity for that leverage. And you saw that leverage in the quarter. And we anticipate that we'll see that again in our fourth quarter, as we continue to see the resizing and the takeouts of that business. So we're very excited and comfortable with that both from what we accomplished as a team in the third quarter, but also what we anticipate we'll see as result of the continued actions in the fourth quarter. And Ron went through some of those numbers in the U.S. To be able to achieve in the U.S margins that are were greater in -- percent margins that were greater in the third quarter by a 100 -- what was an 130, 140, 660 basis points at revenue levels that were 9% lower than the prior year is a testament of that.

Got it. Thank you.

Our next question comes from Tobey Sommer with - Truist Securities. Please go ahead.

Hey, good morning. This is Jasper Bibb filling in for Tobey. I was hoping you could speak to what you're seeing in pricing in your major markets and also how your labor expense trend is tracking versus prior years kind of amid higher global unemployment. Thanks.

Well, every country is different, Jasper. So in the U.S. the fourth quarter is typically when we take price increases. I would say generally around the world, the majority of the price increases occur in the second half. Those are happening. We've not had a lot of resistance. We -- likewise on the labor front, it's still -- believe it or not, in this market a challenge to keep and retain employees. We're able to reduce our variable labor very quickly globally, but at the same time, as we mentioned, that we also were very quick to take down the fixed and permanent labor to levels that have allowed this margin expansion. So I'd say basically the price increases that we had expected are on track and we've not seen anything that would suggest otherwise.

Thanks. And then, I wanted to ask about kind of what trends you're seeing for outsourcing work with financial institutions. Do you see the pandemic kind of accelerating an outsourcing trend more broadly? And how would you describe the RFP environment there?

Yes, I think generally the pandemic has accelerated a lot of the trends that we anticipated in the global cash management ecosystem. So we have been prepared for this. Right now most businesses, including financial institutions are just dealing with how to cope with the pandemic, which changes on a daily basis. What they will see in the new normal is a compelling case for additional outsourcing. We're planning on that and we're planning to be a leader to influence them to use Brink's for that outsourcing.

I appreciate it. Thanks for taking the questions, guys.

Thank you.

Thanks, Jasper.

Our next question -- [Operator Instructions] Our next question will come from Jeff Kessler with Imperial Capital. Please go ahead.

Thank you.

Good morning, Jeff.

Good morning. And I don’t usually say this, but just excellent, excellent execution in these last couple of quarters. You've done a lot better than obviously than people expected, and also did a lot better than most of my comparable companies that I'm covering in your area.

Thanks, Jeff. We’ve had a great team and they're really focused during this pandemic, in particular.

What I want to get to is you are now significantly larger because of G4S than your next competitor. In fact, you're probably about twice the size and it's not just one competitors, the other competitors in the entire group. What can you do to take the scale that you now have the scale advantage you now have? I realize it's somewhat of a softball question, but the fact is that making 2.0 work is kind of critical because it would take you to a place that would combined both scale and technology. What are the hurdles and the milestones that you have to see to show that, if you get this, then you're going to have -- you're going to -- you probably will be able to get market share gains and regain market share that you still haven't gotten back from some institutions. The fact is that you still have some hurdles to overcome in taking your scale and using the new technology. How are you going to go through this process?

Well, Jeff, that's a -- quite a question to be, to be honest and I appreciate your comments upfront. I also think that your strategy, your thought process is exactly where we are and is a key piece of what we call SP2. I would start off by saying, unfortunately, the pandemic has negatively impacted, if you want to call that from the standpoint of slowing things down. It is, if you will, put some timing constraints both from our standpoint of implementation as well as from customers, receptiveness, openness, willingness to engage and may make change because their focus like ours has been heavily focused on the business. I think the good news from our standpoint and our focus, you can see the results of the focus in the second and third quarter. And we anticipate that you'll continue to see those results in the fourth quarter and our leverage going forward. But now we need to come back and we will come back as part of SP2 to put in what we call our 2.0 strategy is layered on top of that and accelerate that. So our focus to answer your question needs to be to accelerate our efforts with all of the various areas including our 2.1, which is part of our Brink's Complete. The roll out of that both in the U.S and on a global basis, accelerate that, and use that as leverage as well as all the rest of our 2.0 strategies that we are aggressively working on to roll on. You can see as part of the strategies as an example, the outsourcing of ATMs. You can see the very significant win that we have in France that will start coming on next year, which is the outsourcing of a completed state to…

Okay. second question is, in my years of covering Brink's for better or for worse, the marketplace generally tends to like the focus on U.S and perhaps secondarily Mexican operations. However, with G4S, you’ve picked up not just Eastern Europe, but a whole bunch of South Eastern Asian countries that are not as affected or have done a much better job, let's call it like it is, done a much better job of keeping down the effects of the pandemic than we have. You kind of showed up in that scale in one of the slides that you showed for Malaysia, Philippines and stuff like that. The answer is are you planning to add new -- any types of new revenue services there? Or are you -- are we going to be seeing a greater percentage of revenues and perhaps an improvement in operating margin in those countries where that are not as -- that you picked up from G4S, that are not as impacted by places like United States and Mexico and France and South America?

Well, I'm not sure the answer to your question is absolutely, yes. We're going to improve, which is our 1.0 wider and deeper, our leveraged strategies. We're going to improve margins of those countries in the core base businesses. And we're going to leverage 2.0 new services, added services in these markets. I'm not sure I fully understand or agree with the question around the pandemic, is that changing how we're going to roll them out in those countries versus others. In other words, we're not looking at just over the next quarter. Over the next year, we think we have the opportunity to start rolling out in many, many of the countries our 2.0 strategies and the pandemic is going to impact it as it has some already in slowing some of that down. But that doesn't mean it's still not a great solution. In fact, in many cases, a lot of the solutions we're talking about make a heck of a lot more sense. So I understand there'll be ups and downs associated with that. And your evaluation of Hong Kong is an example. You can see Hong Kong stayed about flat or within a couple of percentage points of revenues over that period of time. That's why there's not much different and change in color there. And Singapore continued to improve. And it was back at levels that like you said, were like pre-pandemic or better. So Malaysia has continued to improve. So you're correct in terms of your analysis there. But we're not going to let that stand in in a way of any place to really say we shouldn't be aggressively implementing our 2.0 strategies and our continued 1.0 strategies to improve our business as you're seeing this year.

Okay. And let me just throw this last one quickly. Do we not think in terms of the CompuSafe brand anymore? Is CompuSafe not going to be part of 2.0 and will it -- and as a whole, or is CompuSafe still going to be sold to some as a separate or sole, should say, sole rented out and put out there as a separate entity.

Well, if you think about CompuSafe or you think about other smart safes that are offered in the classic CIT system like we did and others do, it's a different offering. It's not a complete offering. And the value proposition for the customer is not as strong. Therefore, I think that the market will move over to our Brink's Complete system. It will include all the same benefits if there are significant benefits of a smart safe that's out there today, but it will also be a complete fully managed system, providing daily credit from one source including Brink's as at one source plus all the integrated benefits associated with that. So the answer is it will transition.

Okay, great. Thank you very much.

Thank you, Jeff. Thanks for your comments. One more question? I think we have time for one more, then we have to cut it off.

Our next question comes from Sam England with Berenberg. Please go ahead.

Hi, Sam.

Good morning, Sam.

Good morning, guys. Yes, just building on one of those last questions. You mentioned the broadening of Strategy 1.0 cost improvements globally. But I just wondered which markets you think represent the best opportunities for that? Is it mainly the developed European markets that you've acquired with G4S? And then are you planning to set a longer term margin target at some point, similar to the original 1.0 plan, presumably once things get less volatile.

The answer to your second part is absolutely we do. We anticipate that some point in time in the future, we will have -- we'll hold a Investor Conference. And in such as we committed to in the past, we anticipate that we'll roll out some targets in the future. Those targets and as we talk about on that slide, our strategy includes continued 1.0 wider and deeper initiatives, that are costs initiatives, that are productivity initiatives, that are productivity improvements that help support our customer service initiatives and those are in every country. That's why they're called wider and deeper in those countries. We believe -- and the continuous improvement is a way of life and part of our culture. We believe that we can always do better both for our customers and for our productivity and our efficiencies. And that, therefore, it's an integral piece to each of our business plans that are rolled up both as part of the strat plan and annual plans, every country as a target for cost reduction, margin improvements, and productivity improvements that are passed on to our customer. That is now augmented by the leverage initiative, which is the Priority 3 strategy that was part of the pandemic focus that allows us to gain the leverage that we spoke about because of our management and controlling of what I consider permanent fixed cost reductions ongoing as well layered on top of that. What we're suggesting is every country is part of this and you'll see the benefits associated with that. So we will come out and say that, and that's prior to doing anything at 1.5 beyond G4S. And it's prior -- this is in addition to our 2.0 Strategy roll out as well.

Okay, great. And then if you've got time for one other quick one, I just wondered what happened with the revenues you talked about in Q2 that have been invoiced for, but not recorded in the numbers. And I think it was within the U.S. retail business. I didn't see anything mentioned about it. Sorry, if you talked about it.

Yes, that -- those continued to be able to invoice some of those, but a much smaller component of those as they -- as those customers come back. We do the credit memos that offset negotiations, if you will, by customer and you end up with some benefit in the third quarter of that. But it's also offset in general by the credit memos as well as bad debt reserves. So there is some benefit, but it's very, very minimal and that'll continue to be less and less going forward.

Okay, great. Thanks very much.

Thank you.

Thanks, Sam.

I think that …

Ladies and gentlemen, this …

Yes, please go ahead.

This will conclude our question-and-answer session, and it also concludes our call for today. We thank you for attending the Brink's company's third quarter 2020 conference call. And at this time, you may disconnect your lines.