Welcome to the Brinks Company's Second Quarter 2022 Earning Call. Brinks issued a press release on second 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 the 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 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. Brinks assumes no obligation to update any forward looking statements. This call is copyrighted and may not be used without written permission from Brinks. It is now my pleasure to introduce your host Ed Cunningham, Vice President of Investor Relations. Mr. Cunningham you may begin.

Thanks and good morning everyone. Joining me today our CEO, Mark Eubanks and CFO, Ron Domanico. This morning we reported second quarter results on both the GAAP and non-GAAP basis. The non-GAAP results exclude a number of items including the impact of Argentina's highly inflationary accounting, reorganization and restructuring costs, items related to acquisitions and dispositions, valuation allowance on tax credits, and changes in certain allowance estimates. We're 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 will focus primarily on the non-GAAP results. Reconciliations are provided in the press release in the appendix of 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 Mark.

Thanks Ed and good morning everyone and thanks for joining us today. This morning we reported record second quarter results including double-digit organic growth in revenue, operating profit, adjusted EBITDA, and earnings per share. We achieve these results in a macro environment that continues to be challenging, demonstrating the resiliency of our business. We also affirmed our full year guidance which includes revenue growth of 8% to 11% and operating profit growth of 16% to 23%, reflecting approximately 100 basis points of margin expansion, driven by our lean cost initiatives and leverage from a lower fixed cost base. Our full year guidance is supported by our year-to-date results which are included in our appendix. Through the first half, we've achieved 9% revenue growth, 18% profit growth, 16% increase in EBITDA, and earnings per share growth of 26%. We delivered these results despite a slower-than-expected start to the year due to Omicron related shutdowns in many of our markets. We expect this momentum to continue through the second half which is historically much stronger than the first. Before moving on to the details behind our results, I want to touch on our sustainability efforts. In July, we issued our first corporate sustainability report, which shared more about our priorities and the United Nation's sustainable development goals that align with our operations. We're in the early stages, but sustainability is an important focus for us and we look forward to sharing more about our commitment, the targets we attend to achieve, and the progress in future quarters. Slide four summarizes the strong revenue and profit growth we achieved in the second quarter. Revenue was up 8% with organic growth of 13%, driven by double-digit organic growth in all four of our segments. Second quarter US dollar revenue recovered to 99% of proforma…

Thanks, Mark and good day everyone. Turning to Slide 5. As Mark just mentioned, 2022 second quarter revenue versus prior year, was up 13% in constant currency, almost entirely from organic growth. Foreign exchange had some significant swings throughout the quarter. While the Euro devalued 12%, other currencies such as the Mexican peso, and Brazilian reais were not as negative. In an aggregate, FX was a 5% headwind. Reported revenue was $1.134 billion, up 85 million or 8% versus the second quarter last year. Second quarter operating profit in constant currency, was up 18% versus last year. Organic growth was 17% and acquisitions added another 1%. Negative ForEx was $6 million. Reported operating profit was $124 million and the operating profit margin of 10.9%, was up 40 BPS versus the second quarter 2021. Moving to Slide 6. Second quarter interest expense was $32 million, up $4 million versus the same period last year, due to higher debt associated with the $200 million in share repurchases completed in the last 12 months and higher variable interest rates. Tax expense in the quarter was $31 million, in line with last year as higher income was mostly offset by 110 BPS reduction in the effective tax rate. $124 million of second quarter 2022 operating profit, less interest expense taxes and $1 million in non-controlling interest in other, generated $62 million of income from continuing operations. This equates to $1.29 of earnings per share, up 12% on a reported basis and up 30% excluding the mark-to-market gain on the MoneyGram shares, we held last year. Share repurchases reduced our weighted average diluted shares outstanding by $2.9 million shares, versus prior year or about 6% and accounted for about $0.06 increase in EPS. Second quarter 2022 adjusted EBITDA was $187 million, up $21 million or…

Thanks, Ron. As I mentioned at the outset, our strong second quarter results were achieved in a challenging macroeconomic environment. Like most companies, Brinks is not immune to these challenges. However, we firmly believe that we are better positioned than most, due to the fact that the services we provide are critical to our customers and remain essential throughout economic cycles. Our largest cost by far is labor and we are continuing to offset rising wages with discipline pricing actions. As previously discussed in prior quarters, we implemented several price increases in our US business that went into effect in the latter part of 2021 and the first half of 2022, both of which were well above our historical averages. These pricing actions have positioned us to more than offset labor cost increases in the current quarter. And as we move through the year, we expect pricing actions to continue to offset inflationary pressures, both here in the US and around the world. As a service business with locally sourced people and assets, we are far less vulnerable to global supply chain disruptions than many other industrial service businesses. And where necessary, we've secured long-term partnerships with global suppliers and made early purchases to avoid any potential disruptions. Rising fuel costs have also historically not had a material impact on our profitability, as most of our customer agreements have fuel surcharge clauses. We have a track record of relative stability during recessions and other times of crisis, due to an increase in cash usage and security concerns. This history combined with proactive pricing actions and our operational excellence initiatives gives us confidence that we will sustain our recent momentum and achieve our full year guidance. Moving on to the next slide, we're also a great start in 2022 and on…

We will now begin the question-and-answer session. [Operator Instructions] The first question today comes from Tobey Sommer with Truist Securities. Please go ahead.

Hey, good morning. This is Jasper Bibb on for Tobey. Thanks for taking our questions. So I was just hoping you could update us on, kind of the Brink's complete deployments and how the sales activity is tracking their relative to your expectations.

Yeah. Sure. Thanks Jasper. Good morning. Yes. Continuing to progress as planned and still continuing to see more customer interest in a total solution versus traditional CIT services. We talked about it last quarter, where globally our tech enabled solutions that includes our Brinks complete offering grew by more than 20% over the prior year in the quarter. This quarter we saw it grow over 28%. So continuing accelerating growth. In the US alone as we mentioned that, represented over 20% of our revenue in Q1. Now that's pushing up towards 26%. So really seeing the kind of penetration we would expect. Of course listen the economy is still in transition certainly as the looming recessions, retail while continues to see some bumpy reports out there from some of the big retailers we are seeing in-person retail continuing to accelerate and you've seen the numbers I'm sure many have about the transition from online shopping back to in-person, which of course favors cash usage where we still represent almost a third of all the payments for in-person charges. I think the other thing that's also changing in that environment is as you look at – as people start to get squeeze and household incomes are being challenged with inflation, you're starting to see more people, more discount buyers, more discount retailers having success. Again smaller transactions, smaller purchases, which again lend themselves towards more cash transactions. So that's supporting both the interest not only in our core business but in our more technology enabled offerings with Brinks complete.

Thanks. And I just wanted to ask about the high value services business. What's been the slope of recovery for your foreign exchange services, given what seems to be a relatively strong summer travel season so far?

Yes, Jasper, we certainly saw that business subside in some cases retract significantly during the pandemic. And as you can imagine in that high value services area for us in our global services business we saw a shift toward more precious metals moving around the globe. And we're obviously a large player in that market, but as we've seen things shift back to travel, we have seen more bank note movements. Now certainly that is to due to FX and due to travel, which I think we've seen some of the Euro control data that's out there that tourism continues to recover – travelers continue to recover, particularly into Europe but we're still seeing Southeast Asia still slow to recover although our segment results continue to improve in that region but there's still some recovery going on. I think the other thing of note is that the FX markets between central banks and governments obviously has been volatile, which also drives quite a bit of bank note transmission globally.

Got it. And then you mentioned the relative weakness in AsiaPac but the rest of the world segment overall, looks pretty strong here. So what are some of the markets that might be lagging on a relative basis versus the overall segment?

Sure. Hong Kong and Macau, I think continue to have some pretty significant restrictions relative to travel in and out, which is obviously restricted not only tourism but business, commerce, the gaming industry's seeing quite a bit of fits and starts in Macau, certainly, which again is a big travel area in a market we serve. You know, the other big markets that we serve Singapore, Malaysia, Philippines continue to exit their pandemic restrictions and are gaining momentum each month as we go through the summer season.

Last question for me. There's just been some media reports about a large potential 3Q loss on a high value shipment in California. Can you just clarify, how you're approaching that item in your guidance?

Yeah, sure. Maybe just to clarify the -- what happened and maybe a little bit of the media reports maybe set the record straight from our side here. The robbery -- while still on their investigation, we're not going to- we can't really comment on the specifics of what happened or the details. What we can say is that the amount of the loss would be less than $10 million at the worst case. And that's contrary to some fairly salacious media reports out there and $100 million to $150 million. So I want to make sure that that's clear. Our guidance on an ongoing basis routinely includes estimates for losses. This is part of our business. We use historical data to do that. And while this is quantified and was sort of in the media the impact on this loss should not be material to our results.

Appreciate the color there. Thanks for taking the questions guys.

Sure.

The next question comes from George Tong with Goldman Sachs. Please go ahead.

Hi, thanks. Good morning. Could you talk a little bit about what macro assumptions you are including in guidance? And how you're expecting the economy to impact performance in the second half of the year?

Yes. George, I think, we're not building in any significant contraction in our business. In fact we're not seeing any slowing in velocity of our business. The results we have so far have been as we expected. And as I mentioned in the prepared remarks, historically, even with recessions whether it's a technical recession or a mild recession or maybe something more protracted we tend to be really resilient. People tend to return to cash in many cases and with more cash usage becomes for us more not only more volume, but more opportunity for attracting new customers. So that's sort of the macro view on the recession. We don't have any large step function changes built in of course. So we'll operate the business -- flexibly and make adjustments either way, but nothing big in front of us that we've seen or are hearing from our customers in fact whether it be retailers or our financial institution partners.

Got it. That's helpful. And then with respect to margins, could you discuss some of the latest initiatives you have that you're deploying to continue to close the gap in EBITDA margins relative to peers and when you might expect that gap over the medium term to close?

Sure. George listen we feel very good about where our guidance is right now. Our -- three-year targets we laid out at a hundred basis points a year. We expect that to continue and have line of sight to that this year as we've had built into our guidance the first of the year and don't see us coming off of that. The only thing I would say is, listen, we have a mix of businesses around the globe that have different margins. And our North American business particularly is one that we know and recognized has lagged some of our peers. That's something that we're addressing directly and are already starting to see fruits of those improvement activities. We've also recently made and announced a leadership change there. Danny Castillo leads our North American segment, a seasoned executive that's really going to be able to already identify some of the areas of improvement that maybe we recognize, but certainly now are taken action on. And I think this is something we expect to drive continuous improvement quarter to quarter. We saw good improvement quarter one to quarter two already, about 28% sequential earnings leverage out of Q1 to start the year and expect -- if you look forward in our results from prior year, listen, expect to continue to deliver good improvements quarter on quarter for the rest of the year. This is again an area that will obviously help, not only as one of the largest segments, but will help us close the gap in a significant way, in a disproportionate way, not just in North America, but on the global portfolio. And again, as I think about peers, I don't think just about peers in the logistic space. We think about peers across all investment categories. We're all competing for investors against all peers. And we think that our growth rates, both in our EBITDA and free cash flow compare with any.

Got it. Very helpful. Thank you.

[Operator Instructions] This concludes our question-and-answer session and concludes the conference call. Thank you for attending today's presentation. You may now disconnect.