Good day, and welcome to the Brink’s Company’s Fourth Quarter and Full Year 2023 Earnings Call. This morning, Brink’s issued a press release detailing its fourth quarter and full year 2023 results. The company also filed an 8-K that includes the release and the slides that will be used in today’s call. The release and slides are available in the Investor Relations section of the company’s website at investors.brinks.com. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the presentation. As a reminder, this conference is being recorded and will be available for replay. 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 are available in the footnotes of today’s press release and in the company’s most recent SEC filings. Information presented and discussed on this call is representative 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. I will now turn the call over to your host, Jesse Jenkins, Vice President of Investor Relations. Mr. Jenkins, you may begin.

Thanks, and good morning. Joining me today are CEO, Mark Eubanks and CFO, Kurt McMaken. This morning, Brink’s reported full year 2023 results on a GAAP, non-GAAP and constant currency basis. Most of our comments today will be focused on our non-GAAP results because we believe these results make it easier for investors to assess operating performance between periods. Reconciliations of non-GAAP results to their most comparable GAAP results are provided in the press release, the appendix of the presentation and in this morning’s 8-K filing. I’ll now turn the call over to Brink’s CEO, Mark Eubanks.

Thanks, Jesse. Good morning, and thanks for joining us. Starting with the fourth quarter on Slide 3, we delivered total growth of 5% with organic growth of 9%. The organic growth was driven by strong pricing discipline and 17% growth in AMS and DRS revenue. Profit margins were impacted by geopolitical and economic pressures in certain markets and lower than expected growth in high margin services in North America. Q4 operating profit was $190 million with a margin of 15.2% and adjusted EBITDA of $252 million with a margin of 20.2%. EPS was up 31% to $2.76 per share, benefiting from a few unique items in the quarter that Kurt will discuss later in more detail. We also delivered another strong quarter of improvement in free cash flow on our way to a record year. Free cash flow was up 36% from the prior year, with sustainable conversion improvement to a rate of 70% in the quarter. Moving to the full year, revenue was in line with expectations with 9% organic growth. Approximately 40% of that growth came from AMS, DRS revenue, which was up 21% organically in the year. Adjusted EBITDA was $867 million with a margin of 17.8%, expansion of 40 basis points. Full year EPS improved $1.36 to $7.35 per share. We delivered record free cash flow through record EBITDA, improved working capital and a reduction in CapEx as a percentage of revenue as well as lower cash taxes. For the full year free cash flow, it nearly doubled to $393 million with 45% cash conversion of adjusted EBITDA. 2023 reflects consistent progress executing against our strategic initiatives. We ended 2023 with over $1 billion or 21% of our revenue, now represented by higher margin AMS and DRS offerings. This improved revenue mix and cost productivity across…

Thanks, Mark. Looking at our fourth quarter results on Slide 8, 9% organic revenue growth was offset by 4% translational FX, primarily in Argentina. Adjusted EBITDA was up $5 million to $252 million and a margin of 20.2%. EPS was up 31% and includes a $0.48 benefit from gains on the sale of marketable securities. These were primarily in Argentina as we monetized certain investments that protected our assets from devaluation during the uncertain geopolitical backdrop in the country. EPS also benefited from a lower than expected foreign tax expense relating primarily to higher tax deductible inflation adjustments in Argentina. We have not included additional benefits from these items in our 2024 outlook. Free cash flow in the fourth quarter was $177 million and converted at a 70% rate from our EBITDA, representing a strong improvement year-over-year as we continue to stress the importance of free cash flow across our business. Realizing the heightened interest of this metric by our investors, we plan to present a trailing 12-month view of this metric when we share quarterly performance going forward. On Slide 9, you can see that roughly 40% of our organic growth in the quarter came from AMS and DRS. In total, $102 million in organic revenue produced $31 million of organic operating profit for an incremental margin of around 30%. Translational FX reduced revenue by $46 million and operating profit by $29 million with higher margin Argentina currency devaluation offset by favorability in relatively lower margin Euro denominated countries. On Slide 10, would like to walk you from operating profit to adjusted EBITDA. Starting on the left, interest expense was up $9 million year-over-year to $52 million. The increase is related to higher interest rates and higher debt needed to fund DRS growth. Tax expenses were $42 million in…

Thanks, Kurt. Before we turn to Q&A, I thought it’d be helpful to investors to provide a comparison of our 2024 guidance against the targets that we set out in our 2021 Investor Day. Through the first two years of this three year framework, we’ve outperformed those Investor Day targets when considering the FX and interest rate headwinds. As a reminder, our targets were given on a constant currency basis and excluded the impacts of FX over the multiyear period. While reported revenue is a little short of the number we communicated over two years ago, there has already been over $400 million of currency headwinds to revenue. Strategically, we also communicated a growth plan that focused on acceleration of our higher margin businesses of AMS and DRS, which we called Strategy 2.0 at the time. Our commitment was to deliver an incremental $500 million over the three year period, and we’ve already delivered $482 million over the first two years. With our 2024 guidance, we expect to deliver over $600 million in total, an outperformance of over $100 million of revenue. Our 2024 guidance has margins of 18.6% at the midpoint, driven by the improved revenue mix exceeding our 18.5% target we set back in 2021. Looking at the EBITDA dollars, we expect to deliver $960 million at the midpoint, $80 million higher than our original target when taking into account the $120 million of negative FX we’ve already experienced in the first two years. Looking at free cash flow, we’ve seen a rapid rise of interest rates over the last 2.5 years that has moved the assumed rates on our debt from only basis points to over 5.25% today. Free cash flow conversion is higher than our original expectations when factoring in the impact of $130 million, largely from higher interest rates. Over the last couple of years, we’ve also sharpened our focus on value creating capital allocation. We completed the Note Machine acquisition in 2022 to bolster our global capabilities in the ATM managed services market. We’ve also returned significant capital to shareholders, approximately $300 million in share repurchases and dividends over the last two years. In addition, we recently announced a two year, $0.5 billion share repurchase authorization. Even with these investments, over the past two years, we were still able to reduce our leverage by a half a turn to 2.9 times. As I look back over the strategy period, I’m confident in the progress we’ve made and remain committed to our strategic direction. The future growth prospects for AMS and DRS remained strong and the demand for our essential services remains high. With the increased financial flexibility and improved operating model that we’ve built over the last two years, we will continue to grow our business and create additional shareholder value during 2024 and beyond. Now let’s open the line for questions. Operator?

Thank you. We will now begin the question-and-answer session. [Operator Instructions] Our first question today will come from George Tong of Goldman Sachs. Please go ahead.

Hi. Thanks. Good morning.

Good morning, George.

Hi. Your cash and valuables management business had organic revenue growth of 7% in the quarter, which was quite strong, a part of this growth reflects improved price realization. Can you elaborate on how much pricing gains drove the growth and how sustainable these pricing increases are looking ahead.

Yes. Thanks, George. As we look at the business just sort of globally, maybe I’ll just spin around the regions a little bit, because there’s some different – some unique aspects around. We’re seeing strong pricing continue, George, relative to inflation. Although, we’ve seen inflation subside in most regions, we continue to see pricing that exceeds inflation that’s allowing us to continue to maintain our margins. Particularly in North America, we’ve seen whilst inflation has subsided, there’s still and you’ll see the numbers today, I’m sure we haven’t seen the PCE number yet, but we’ll still continue to see local inflation here for the workforce, which is putting pressure on wages and we’re continuing to push that through. I think that the demand side, though, has really – we’ve not seen the demand impact, though, from that price pressure, particularly as we shift our business model DRS. This is an area where we continue to see a lot of success, particularly not only in bookings, but also in a growing pipeline, I mentioned the prepared comments, our pipeline is up 50% year-on-year for sales opportunities. By the way, we’re also seeing that around the globe in any other regions. If we move to Latin America, again, there’s quite a few different things going on down there. Some geopolitical uncertainty, of course, in Argentina, and really continue to see the market and the economy in Brazil be light. And so a lot of pricing in those markets as we continue to push through. I’d say in the rest of Latin America, really pretty stable. That pricing continues to follow that a little bit higher than 50-50 mix of price to volume, but we continue to see that. We expect that to continue to normalize as we move into 2024. We’ve already seen that be the case both in Latin America as well as North America. Moving on to Europe, things, again, they’re pretty stable. We are seeing good DRS and AMS pickup, and you can see that in the numbers. We also have a good pipeline of opportunities that we’ve signed and booked that we’ll see come online in Europe, particularly on the AMS side. Moving on to rest of world. Rest of world is predominantly our BGS business. A lot of the global services business is there in that segment. We’ve saw that return and continue to pick up sequentially Q3 to Q4, if you remember, we had a bit of a softness in Q3 globally with our global services business, particularly on commodities and banknotes movements. We’ve seen that pick back up sequentially in Q4, predominantly in rest of world segment. We did see some softness there in BGS in North America, which you can see coming through on the volume side. But all in all, the pricing environment stays pretty consistent with 2023 as we ebb into 2024, levelizing a little bit closer to 50-50.

Got it. Very helpful. And then you noted expectations of double-digit organic revenue growth for DRS and AMS in 2024. Can you talk about how much growth you are specifically incorporating into the guide and how you expect the growth rates of DRS and AMS to compare to each other in the year ahead?

Sure. Well, we actually had a similar look last year, although, maybe it’s a little bit more, but about 50% of our organic growth we’re anticipating to be in DRS and AMS. That’s an expectation. Last year, we were about the same, maybe we were a little bit less of the organic growth, but going forward, we’ll be a little more. And I think as the business becomes a larger percentage of the base, as you know, we exited the year at 21% of total revenue from AMS/DRS. As that base continues to get bigger and the organic growth rates are higher than the CBM business. We’re continued to see that maybe 50-50 split of organic to growth of AMS/DRS to the rest of the business probably accelerate a little bit, maybe be a little more than 50%. So for us, that’s what’s embedded in our guide. Now, that obviously excludes the Argentina impact to organic growth, but that mid-single-digit organic growth that we would expect would be, like I said, about half of that would be AMS/DRS.

Got it. Very helpful. Thank you.

Our next question today will come from Tobey Sommer with Truist Securities. Please go ahead.

Thanks. I wanted to ask a question about free cash flow and conversion, you’re guiding for about $440 million, I guess, and if I assume low-40s in dividend, that’s about $400 million left. If you just let it sit there, the leverage would be lower than what your stated target is. So without paying any debt down maybe 2.6 times, if my math is right, do you intend mostly to do share repurchase with that cash, because that could be in excess of 10% of the stock.

Yes. Hey, Tobey, it’s Kurt. I think, as we mentioned in the remarks, we continue on an active program for share repurchases. And I think the way you can think about share repurchases in 2024 is if you look at our free cash flow and take about half of that, which is what we pretty much did in 2023, then that kind of gets you to pretty close to the amount of share repurchases we’re initially thinking about for 2024. Of course, we’ll be opportunistic and depending on what happens in the market, but I think that’s a good way to think about it.

Is that embedded in the EPS guidance already?

Yes.

Okay. Could you talk about AMS and DRS through, I think, a different lens than the earlier part of the call? Talk about it in terms of the extent to which you’re participating in a market trend versus driving a market trend or taking share, because it is a little bit hard externally, with all of your international exposures, to understand where you’re kind of ahead or lagging on an AMS perspective. And then DRS, I’m curious about the growth coming from kind of transitioning legacy retail customers into the new line of business versus kind of actual net growth of new customers and greenfield stuff.

Sure. Thanks, Tobey. Maybe I’ll take DRS first and then AMS second. On the DRS side, the single kind of one customer, one location, simple retail shop of remote deposits, provisional capital, digital transparency, integration with POS systems. I think that has been an evolution and in some of the larger markets, we have some – obviously have some differentiation that we’re leading with. But I’d say that is largely us with the other participants, let’s say moving that market and driving that market probably in a [indiscernible] in a concerted way, it’s a clear value proposition for customers. I think the other thing that I would say, our DRS is extended, and this is where I think we’re leading, would be as we’re looking to close – put a closed loop on the cash ecosystem inside of retail stores, particularly larger, higher cash usage stores in all regions. And that’s been demonstrated and we’ve released some examples of that in what we’ve done in Europe, particularly where we’ve developed an integrated cash recycling electronic payments, a fully managed service for a fully outsourced solution that allows a retailer to outsource basically their entire POS experience, not just on the electronic side, like you might see with the traditional POS providers, but providing a full closed loop service, both physical and the digital integration in the stores. And I’d say in that area we’re leading, because – and the way I’d say we’re leading is many of our discussions with customers are one to one discussions that we’re collaborating together and evolving a solution, developing a solution, providing the integration, providing program management, and then of course all the managed services post installation. And that’s really been, I’d say, a next level relationship for us that we’ve been able to…

I really appreciate. That was helpful. Could you describe the sales process in length in AMS? Because I think you mentioned pilots, and it’d be interesting to hear you talk about to understand the visibility you have into the ongoing momentum.

Sure. So our pipeline globally is continues to grow. And the – how that pipeline evolves is typically either an outbound from our team in a local market with our relationships, or an inbound from one of our customers asking for, hey, what do you think? Could you help us with this? And that evolves in many different ways, but the really big decision that a customer makes is when they step into this discovery phase. And that’s where we really sit down and put pen to paper, both from a financial perspective, but from a technology perspective, and an operations logistics perspective, and build out the proposed solution with the customer. And from that point, that the customer either says yes or no to any and all parts of our offering, but predominantly, what they do is move to a pilot phase, and that might feel like 10 ATMs, 25 ATMs, 100 ATMs, depending on how big the pilot is and how big their estate is. And we typically bring those online. It’s for fee, it’s not a charity event. But we developed this solution arms length to develop a proof of concept and frankly, proof to them that the solution can deliver all of what we’ve committed to. From that customers, that can take Tobey anywhere from 90 days to a year. And what we have found is the AMS pipeline and AMS contracts are typically longer lead time decisions than the DRS. And maybe if you have a continuum of time on initial contact to revenue that might – for DRS, on the single ice cream shop or deli, that might be as short as 90 days, where an AMS contract could be as long as a year, two years. And so it just varies, and I think it also varies with where we are in that market. And so where we have existing networks in a market that we’re able to already demonstrate to a customer, we’re helping another customer, it’s easier and faster to bring them online, where if we have – we’re pioneering in a particular market, it’s a little more difficult. It takes a little more time. I use the example of a small country. I’ve mentioned it before in Jordan. Took us a while to get the first ATM network, but once we did, we now have four more banks that have signed on and are part of our managed services network in the country. And so that’s a good example of how once we get a success, we can parlay that into more success and frankly, more value for the incremental customers.

Thank you very much. Last question for me, could you talk about free cash flow conversion from EBITDA in 2024? What are the sort of puts and takes with your guidance number? And where do you think that lands a little bit longer-term? How much more opportunity to increase that percentage do you have? And what are the main levers?

Sure. Yes. Tobey, let me kind of walk you through that thinking a little bit. I mean if you kind of looking at how you would think about a bridge from 2023 to 2024 free cash flow, obviously, the growth and profitability. So the EBITDA expansion is going to be your major item that’s increasing cash flow. And then off of that, we’ll pull off some higher interest and higher taxes both cash interest and cash tax, and then the remainder will be a little bit left related to working capital and other items, so a little bit on working capital as we grow. So that’s kind of the walk. I think with conversion at 46% – about 46% in 2024, we don’t see any reason why we shouldn’t be getting 50% and higher as we look out, there’s nothing really structurally that would hold that back. As we grow EBITDA, we continue to get more efficient with our capital and more efficient with our working capital. The one thing I didn’t mention was CapEx, because we continue to see that as kind of a flat number. So all of those things will help continue to drive that conversion. And I think there continues to be opportunity in our taxes, our tax planning. We’ve continued to work in that area as.

And if I could sneak one last one, from a DRS perspective, I presume that you’re seeing most of your success in the U.S., but maybe you could enlighten us on that and wherever you are seeing the most progress in DRS on a micro level within that country, are you seeing more of a positive influence in terms of holding down CapEx because of better density and utilization of the fleet?

, : But I think where we sit today, DRS and AMS both give us the opportunity to continue to leverage off our existing asset base and be more productive. Obviously, the more DRS we have, the more opportunity we have to control our own network and frequency. I believe that this is going to continue to be an opportunity for us in the future, and there’s no reason why we don’t think that can’t happen. I think customers also view this as more and more as a value proposition as well. And so as we hear from existing customers that are converting or new customers that maybe had passed on the service previously, the idea of them not being responsible to us for appointments and for scheduled pickups and fixed logistics networks, I think is also very appealing.

Thank you very much.

This will conclude our question-and-answer session. I would like to turn the conference back over to Mark Eubanks for any closing remarks.

Yes. Good morning. Thank you, everyone for joining us today. We appreciate your support and we look forward to speaking with each of you soon.

The conference has now concluded. Thank you for attending today’s presentation. And you may now disconnect your lines.