PGUCY (PGUCY) Q1 2026 Earnings Report, Transcript and Summary

Good day, and thank you for standing by. Welcome to the Prosegur Cash Q1 2026 Results Presentation. [Operator Instructions]. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Miguel Bandrés, Head of IR. Please go ahead. Miguel Ángel Bandrés Gutiérrez: Good morning to everyone, and thank you for joining today's call with Javier Hergueta, our CFO; and myself, will present our Q1 2026 results. The presentation should take around 20 minutes, in which we'll share the most relevant events that have taken place in the period for our business as well as our performance. Javier will review the period's highlights, key financials and our transformation progress, after which I'll share the main developments by region before Javier closes with conclusions and open the Q&A session. Should we not get to respond to everything in this session, we'll get back on any open topics on an individual basis. I want to again thank you all for your attendance. I remind everyone that this presentation has been prerecorded and is available via webcast on our corporate web page, which you can find at www.prosegurcash.com. But before we move to the financial results, I'd like to offer some context regarding the current landscape for the cash industry, which continues to show its resilience and the fundamental necessity our society has for cash. These pieces of information range from access to cash in Australia, the role of cash as a cautionary payment method in Europe, institutional protection of cash in Switzerland or the continued growth of cash in circulation in India. In the first news, we read from Business Insider that the European Central Bank advises holding cash is a key precaution to be taken in the current and growing uncertain environment in the Iran war, broader international tensions, cyber attacks, blackouts or multiple vulnerabilities in digital payment systems. This reminds us that cash is not only a payment method, but also a key element of resilience in moments of uncertainty. Next, as POLITICO Europe covers, Switzerland has decided to safeguard cash after a vote that has drawn broad international attention. This is yet another example of how both institutions and citizens continue to value freedom of choice in payments and the trust that physical money provides. Thirdly, the Monetary Brief from RBA Payments System Board states that authorities in Australia are reinforcing access to and distribution of cash. This is especially relevant for regional and remote areas and ensures that regulators continue to regard cash as an essential service that must remain available to all citizens. Lastly, moving to India, cash in circulation rose to a record level in January, increasing by 11% versus January 2025. This shows that in fast-growing and increasingly digital economies, cash remains highly relevant for everyday transactions and savings behaviors. All these cases emphasize the unique attributes of cash and its vital role for social and financial inclusion. As a market leader, Prosegur Cash remains dedicated to managing this essential infrastructure in close coordination with central banks and financial institutions. With this overview of the cash environment, I would now like to hand it over to Javier, so he can share with us the main highlights of the quarter. Javier Hergueta Vázquez: Thank you, Miguel. Good morning to everyone, and thank you as well for attending. The first quarter of 2026 has been a solid start to the year for our company. Despite an adverse foreign exchange environment, we have been able to deliver strong net profit growth, continue accelerating our transformation and reduce our net debt. All of this once again demonstrates the resilience of our business model. Our top line has shown organic growth of 3.2%, with Europe posting a positive 3.6% trend and building on past quarters. However, this good operating performance has been offset in euro terms by a negative 6.6% foreign exchange impact and a slight 0.2% inorganic effect, with which sales declined by 3.7% to EUR 497 million. Argentina continues to suffer very slow consumption, as we have shared in previous calls, due to the balancing policies the government has set in place. Despite the above, our EBITDA margin has remained broadly stable at 17.3%, in line with the 17.4% reached in the first quarter of 2025. EBITA margin stood at 11.3%, while net profit increased by 8.1% year-on-year to EUR 26 million, showing an improvement in the lower part of our P&L. Regarding Transformation, we continue to advance at a strong pace. These products grew by 6.2% and now account for 36.4% of total sales, 340 basis points more than in 2025. Cash Today continues to be the key driving force of such growth in the period. In terms of cash generation, free cash flow totaled EUR 6 million in the quarter. This has been achieved with lower working capital use than in 2025 and has allowed us to reduce LTM net debt by EUR 47 million. Lastly, I would like to mention the sale of the AVOS in Argentina and Paraguay as well as the cancellation of treasury shares following the buyback process, both of which are relevant milestones of the quarter. I want to underline that we are very closely monitoring the evolution of current geopolitical and strategic tensions, which can have an impact in our business. Despite this is yet to fully materialize, we can already observe an increase in fuel prices that we are in due course passing to tariffs and that should have a marginal net effect, while we have to follow the potential impact on fuel supply chain for which we had already set in place contingency measures such as building fuel reserves. On the other hand, we see that inflation is in an upward trend. This inflationary environment, if it is to stay, will have a positive impact in the speed of cash being used and hence, in our volumes despite lower economic growth. As well as we have read in the news, this growing uncertainty favors the role of cash and its resiliency to the system. As said, different levers that should have a net positive impact are to be monitored. In this context, continuing to control debt and focusing on growing sales to improve our profitability are critical. With this overview, let me now go into the financials in more detail. First, looking at our income statement, revenue reached EUR 497 million in the quarter. As shown on the right-hand side of the page, organic growth stood at 3.2%, while inorganic perimeter had a limited negative impact of 0.2%. Foreign exchange, however, negatively affected us by 6.6%, hitting Asia in a particularly strong manner. When adding all these effects, reported sales decreased by 3.7% year-on-year. EBITDA totaled EUR 86 million, and the margin remained broadly stable at 17.3% of sales, just 10 basis points below the level achieved in the first quarter of last year. Together with depreciation of EUR 30 million, this brings us to an EBITA of EUR 56 million and a margin of 11.3%. Further down the P&L, amortization of intangibles reached EUR 5 million, resulting in an EBIT of EUR 51 million, equivalent to 10.2% of sales. It is also important to note that the financial result improved significantly from EUR 12 million in the first quarter of 2025 to EUR 6 million in the current period. This allows us to reach an earnings before taxes of EUR 44 million, a 2.5% increase year-on-year and to improve our EBT margin over sales to 8.9%. Taxes totaled EUR 19 million, slightly below last year in absolute terms, and the tax rate shows a very positive 300 basis points decrease to 42%, result of active tax efficiency actions as well as an improved tax country mix, which we aim to sustain during the year. With all that, net profit reached EUR 26 million, growing 8.1% versus 1 year ago and representing 5.2% of sales. Consolidated net profit totaled EUR 25 million, up 7.8%, while earnings per share reached EUR 1.68, 8.6% more. I would like to underline the strength of our P&L, especially in the lower part, where the improvement in financial result and tax rate has allowed us to continue increasing profitability for our shareholders despite continued foreign exchange headwinds. Moving now to our cash flow and net debt position. This quarter reflects our consistent disciplined financial management. Starting from the already shared EBITDA of EUR 86 million, provisions and other items deduct EUR 20 million, while tax and ordinary profit amounts to EUR 20 million. Investment in CapEx totaled EUR 22 million in the quarter. A key positive development in the period has been working capital. Its use decreased to EUR 18 million from EUR 40 million in the first quarter of 2025. Thanks to this improvement, free cash flow totaled EUR 6 million, slightly above the EUR 5 million achieved 1 year ago. The conversion ratio stood at 75% and remains at a strong level, especially for demanding first quarter. After interest payments of EUR 10 million, positive EUR 15 million M&A inflows and other minor items, total net cash flow for the quarter was positive by EUR 7 million, a significant EUR 25 million improvement over the same period of last year. Our net financial position improved from EUR 711 million at the beginning of the quarter to EUR 700 million at the end of March. Including IFRS 16 debt, deferred payments and treasury stock, our total net debt stands at EUR 845 million with our leverage ratio at 2.4x. It's important to note that we've achieved a total net reduction of EUR 47 million over the last 12 months, once again, reflecting our disciplined approach to capital management. With this, let me move now to Transformation. Looking into Transformation, I'm very pleased to share that these products continue to grow their relevance and now represent 36.4% of total sales. Revenue from Transformation Products reached EUR 181 million in the first quarter, which is a 6.2% increase versus the same period of 2025. And this all despite as well being negatively affected by currency depreciation. This performance has been supported by a strong contribution from Cash Today. These solutions continue to receive strong customer acceptance across markets. Penetration over total sales has increased from 33% to 36.4%, implying a 340 basis points year-on-year improvement, clearly showing our transformation is advancing at a fast pace. With this, I would like to pass over to Miguel, so he can share with us the key developments in our regions. Miguel Ángel Bandrés Gutiérrez: Thank you, Javier. I would like to start with Latin America, our main region, which accounts for 58% of sales. Revenue in the region totaled EUR 291 million in the first quarter of the year. This implies a decline of 7.4% versus sales achieved a year ago, driven fundamentally by an adverse 8.9% foreign exchange effect. It's important to note that underlying organic growth has remained positive at 1.5%, again, despite the strong halt that Argentina's consumption continues to experience. Transformation Products have also had a very positive quarter. They grew by 5.5% to over EUR 117 million, despite the adverse currency environment and the penetration increased from 35.4% to 40.4% of sales, a significant 500 basis point improvement year-on-year. This development shows that Latin America continues to be a key region for the deployment of our value-added solutions and the customer adoption remains strong. Turning now to Europe that accounts for 32% of group sales. Revenue reached EUR 161 million, 3.6% more than a year ago. This growth is backed by a strong 3.8% organic growth despite a still hesitant economic activity and has had a limited 0.2% negative foreign exchange impact. It's encouraging that the positive trend in Europe continues to strengthen, confirming the good commercial momentum we've seen in recent quarters. Transformation Products in the region grew by 9.1% to EUR 53 million, and the penetration increased from 30.9% to 32.6% of sales, a 170 basis point improvement year-on-year. Europe is, therefore, contributing not only with growth, but also with a higher share of transformation sales that provides a balanced, higher quality growth profile for the group. I'll now turn to Asia Pacific, which represents 9% of group sales and continues to show very attractive underlying dynamics. Reported sales in the region reached EUR 45.3 million, a 2.6% decline versus a year ago. However, this figure is fully explained by a 12.9% foreign exchange impact and a 2.3% inorganic effect, while underlying organic growth remains strong in mid-double-digit territory at 12.6%. Operations in the region continue to evolve very positively with outsourcing opportunities being captured together with growing demand for our services, far outpacing local GDP growth. Transformation Products were broadly stable in reported euro terms at EUR 10.9 million, down 0.6% year-on-year. Excluding currency effect, they, however, have increased by 5.1% and penetration has improved by 50 basis points from 23.6% to 24.1% of sales. The region continues to offer significant growth potential in both the core business and our transformation solutions. Thank you for your attention, and I'll turn back to Javier, so he can summarize our main conclusions. Javier Hergueta Vázquez: Thank you, Miguel. I would now like to summarize our main conclusions. The first quarter of 2026 has been a good start to the year in which despite foreign exchange headwinds, we have delivered net profit growth, continue to accelerate our transformation and reduce our net debt. Reported sales declined by 3.7%, but organic growth was positive at 3.2%, and Europe maintained a particularly good trend at 3.6%. Asia Pacific also continues to show strong underlying growth; while Latin America, again, with the exception of Argentina, remains resilient in organic terms. At profitability level, EBITDA margin remained stable at 17.3% and EBITA margin reached 11.3%. Most importantly, net profit grew by 8.1% to EUR 26 million, emphasizing the behavior of the bottom part of our P&L. Transformation continues to be of growing relevance for us, having grown these products by 6.5% to EUR 181 million and now representing 36.4% of total sales, 340 basis points more than 1 year ago. Cash Today continues as a key growth driver. Cash generation has also been positive with EUR 6 million of free cash flow in the quarter as a result of improved working capital. This cash generation has led to a EUR 47 million reduction in LTM net debt, which results in leverage remaining within our comfort range at 2.4x. Additionally, during the quarter, we completed the sale of AVOS in Argentina and Paraguay that will continue to allow us to focus on our growth verticals. As well, we proceeded to the cancellation of treasury shares following 2025's buyback process. Thank you very much again for your attention. And now we would like to open the line to your questions.

[Operator Instructions] We will take our first question, and the question comes from the line of Enrique Yáguez from Bestinver Securities. Enrique Yáguez Avilés: The first one is about Argentina. Do you foresee any sign of sequential improvement this second quarter in terms of organic evolution? And I don't know if you could disclose what would have been the organic evolution in LatAm excluding Argentina? Second is about the sale of AVOS Argentina and Paraguay to the parent company. Could you disclose the impact of the revenues and EBITDA last year, just in order to have those impacts in the model? Third, about the working capital consumption. I know that first quarter is usually very negative due to seasonality, but we have seen more than a 50% reduction. Do you foresee this reduction sustainable or should we reverse in the coming quarters? And finally, if you could quantify how much the fuel cost represent over your total OpEx? Javier Hergueta Vázquez: We'll take the questions one by one. In relation to the first one on Argentina, despite the recovery being slower than initially anticipated and consumption still being low, we are starting to see some signs of improvement in April at the beginning of Q2 coming from some changes in the monetary policy in the country. Although we anticipate that, that recovery will still be at a lower pace than initially expected, but we are starting to see some signals then. And when we look at the picture ex Argentina in Latin America, what we see is a mid-single-digit growth in organic terms and also growth in euro terms close to that mid-single digit, which also is the same at the group level, not only in Latin America when we exclude Argentina out of the picture. In relation to the AVOS divestment, what you could expect is an impact in terms of revenues of around 1.5% to 2% on a 12-month basis, meaning that part of the impact you will see in 2026 and part of it in the first quarter next year. And in terms of margins, this transaction is accretive because the margins in the AVOS business is below the average margins of the group. When it comes to working capital, basically, I mean, we are seeing here the impact both from a strong focus on management our DSO and DPO, which has been reduced again in Q1 and also lower organic growth than in previous periods in Q1, so that explains a reduction that you've seen in the numbers. But in any case, as you pointed out, I mean, this tends to be seasonal. And at the end of the year, it tends to revert to lower levels. So we understand that the lower levels will remain for the later part of the year. And fourth question, not sure if I got it right. I think you mentioned the operating cost with... Enrique Yáguez Avilés: No. The fuel cost, how much... Javier Hergueta Vázquez: Fuel cost. Okay. Got it. Yes. Well, so I mean you know that fuel is one of the main cost components, of course, after labor, which is the biggest one for us. But what we're seeing here is that the increase that we've been experiencing since the rise in the geopolitical tensions, we are passing on to tariffs, so that's working in that front quite well. The other front, which we are working on is on preparing ourselves for potential stock-outs or disruptions in the supply chain. So we are adopting measures by making available additional deposits, flexible approaches to that just in case it happens, which is not clear if it is the case or not, but just in case it is. So for the time being, I mean, we feel it is pretty much under control.

[Operator Instructions] We will take our next question, and the question comes from the line of Manuel Lorente from Santander.

Yes. So probably my first question is on Europe. We have seen somehow an acceleration in terms of top line growth, both at the core underlying business and transformational business with good and healthy plus 9%. So my question is whether you have winning a new contract, new clients or what is the reason behind that, let's say, improved backdrop? Javier Hergueta Vázquez: Well, I would say that the growth trend that you're seeing in Europe, which is on the 3.5% range more or less, it's quite in line with what we experienced at the latter part of last year. So it's continuing on that front. And that is, as you say, a result of both the Transformation Products and the core business performing in good shape. This is all despite a slower start, a bit slower start of the year in the ForEx business. It is true that the comparable base was not as demanding in Europe in Q1 as in other geographies, and it will be more demanding in the coming quarters. But we feel that given those are also the strongest periods for the ForEx business, we should be able to maintain the same growth pattern across the year. And I would say that it's the result of many customers performing well. There's not any special big contract. I mean, we've won some interesting contracts at Cash Today, which is performing very well. But I think it's the combination of a very good health all across the business in the region.

Okay. And then probably my second question is on the free cash flow line, especially on the provisions and others line. Working capital has improved very well in the quarter as you highlighted. But on the other front, provisions increased roughly EUR 15 million year-on-year. Is there any explanation on that? And how should we expect that line to evolve throughout the year? Javier Hergueta Vázquez: In that one, Manuel, what you see is mainly the combination of 2 factors. One is we've had some more cash outflow coming from payments on redundancies and some more losses or casualties in Q1. And on the other hand, the timing of some refunds mainly linked to taxations has been different. Those were coming in, in Q1 last year and this year, they're coming later in the year. So that part, that second part, should be neutralized or reversed throughout the year. So overall, the net evolution of it should tend to be more in line with what we had last year.

Okay. And just to finalize then, Q1 results were somehow supportive in terms of volumes and pricing, materially offset by FX headwinds. What do you see for the rest of the year? I mean this is going to be a year, to some extent, of limited top line growth and a more healthy bottom line expansion in a context of improved free cash flow? Or do you see room for acceleration in top line throughout the remainder of the quarter that might lead to, let's say, some top line growth at the end of the year because I'm seeing consensus and consensus is pointing to a very flattish revenue and EBITDA for the year, probably on FX? Javier Hergueta Vázquez: So I would say that the year has started quite in line with what we expected. So we were already aware that there was a tougher comparable base in Q1. Then trying to look ahead of us for the next 3 quarters, I think there are a number of factors on the table right now, which are difficult to ascertain. I mean, we have a geopolitical tension that was not there or at least not in such an intensity a couple of months back. We have to see what happens with the FX and also the expected evolution in Argentina, where, as I mentioned, there are some signals of recovery, but it will be quite gradual. So putting it all together, it's hard to say, I mean, how each piece will be evolving. But assuming that there's nothing too disruptive on that, I would say that the consensus as of today in terms of EBITDA, which is EUR 250 million-plus, sounds like a reasonable figure to me. But as I said, I mean, we'll have to see how things evolve because part of that is out of control for us, and on the rest, we are managing it as much as we can. And as I said, excluding Argentina, if you look at Q1, organic growth is at mid-single-digit levels, which, if the comparable basis starts to help, could be a reasonable target for us. But let's see how things evolve, especially the ones that are out of control in the coming quarters.

[Operator Instructions] There seems to be no further questions at this time. I would like to hand back to the speakers. Javier Hergueta Vázquez: Well, thank you, everyone, for taking the time to join today's conference call. Should there be any further doubts or queries, as usual, our Investor Relations team remains available. And in any case, hope to speak again soon to all of you, and in any case, in the Q2 results presentation. So thank you very much.

Thank you. This concludes today's conference call. Thank you for participating. You may now disconnect.