BRINKS CO Q1 FY2025 earnings call

• Brink delivered total organic growth of 6% in Q1, top end of previous guidance. AMS and DRS grew over 20% for 4th consecutive quarter.
• Record Q1 operating profits up 40 basis points. Adjusted EBITDA was $215 million with a margin of 17.2%. EPS $1.62.
• AMS and DRS represent 1/4 of business, supporting margin expansion and free cash flow. CVM business strong with Global Services due to elevated precious metal movement.
• Year-to-date repurchased 1.3 million shares. Third consecutive annual dividend increase.

Brink's delivered total organic growth of 6% in the first quarter. North America had constant currency growth of 4% and organic growth of 2%, with DRS growth a highlight. Latin America saw 7% organic growth but was impacted by currency devaluation, with AMS and DRS mix increasing to 18% of total revenue. Europe had 5% organic revenue growth, with AMS/DRS mix at 42% of total revenue, and EBITDA flat year-over-year due to restructuring. Rest of World had organic growth accelerated to 9% driven by precious metal movement, with record first quarter EBITDA margins up 130 basis points.

• Full year: Mid-single-digit organic growth, 30-50 basis points EBITDA margin expansion, free cash flow conversion 40-45%.
• Q2: Revenue $1.25B-$1.3B, adjusted EBITDA $205M-$225M, EPS $1.25-$1.65. FX headwind in Q2 due to lapping of last year's Mexican peso devaluation.

• Currency headwinds from Mexican peso, Argentina peso, Brazilian real.
• Interest income deceleration expected in Argentina.
• Economic uncertainty impacting business from potential bankruptcies or store closures.

Q: Can you talk a little bit more about your tariff exposure, specifically how much of your hardware is imported, measured as either a percentage of revenue or percentage of cost, what your country exposures are and what average effective tariff rate across your country exposures is assumed in your guidance?

A: Sure. Thanks, George, for the question. We -- first and foremost, we talked a little bit about it in the prepared remarks, but we don't really expect, frankly, any direct exposure from tariffs. As you know, most of our costs and our revenues are all in the same currency. And we don't import, export much of our services. Obviously, our Global Services business, a little bit different and I think that's why you saw some of the activities in Q1, there were some concerns about precious metals, which caused a lot of shipments from around the world, frankly, that showed up in our Rest of World segment as really a step-up in revenue, bringing precious metals, particularly to the U.S. That eventually was sorted out as you're probably aware in those commodities were exempted from any tariffs. So today, we really don't see any of that. Even as we think about like trucks, parts and so forth, most of those are locally sourced in region or at least in inside of trade unions. And so we don't really have any impact. I think the issue where we would see impact to our business like any business, would be any sort of moderation to growth -- global growth that occurred or any local, let's say, cost of living increases or inflation. And of course, in those cases, we do all we can to manage those costs with productivity. But also we'll remain disciplined, obviously, in our pricing posture as we go to market.

Q: I have a few here. First, on your second quarter margin guide, you're looking at about 16.9%, I think, which is down -- on a year-over-year basis for the second quarter of last year, down a little more than 100 basis points, I think. Can you just walk me through the puts and takes here? And also with margins being down year-over-year in the first half, but full year guidance, anticipating 30 to 50 basis points of margin expansion. Can you help us bridge that gap between first half margins and second half margins?

A: Yes. Tim, it's Kurt. Let me kind of walk you through. First, on first half, I think some of the biggest drivers are really going to be around two main things. One is FX and the mix of the FX, particularly from the Mexican peso and how that impacts our margins. And the second is around Argentina interest income because that rolls off -- has rolled off year-over-year and has a significant impact. So those two are big drivers of ultimately the margins. There's also a bit of restructuring in there. We have more restructuring this year than last year in the first half. So those are your three big items when you think about the first half and even the second quarter. If you look at the second half and how things are ramping, again, you have some FX impacts on that. #1, you don't -- the Mexican peso starts to roll off. So the FX impact in the second half is quite a bit more muted. And then you have normal seasonality for us. So we ramp in the second half, our organic -- actually, if you look at the organic growth in the second half, it's pretty consistent with the first half, but because the FX is moderating, your growth, your total growth is actually quite a bit higher. So -- and then if you look at the flow-through on that, it's pretty much as we would expect.

Q: Markets were quite volatile post Q1. Can you maybe describe some of the trends in the BGS segment quarter-to-date?

A: Yes, sure. Certainly, what we saw in Q1 was very unusual. The tariff scare or tariff concerns around being able to get precious metals into North America, certainly drove a lot of volatility in the markets, but a lot of shipment volumes for us. And you saw that in our Rest of World segment as they really had a great quarter, fulfilling customer needs to keep what we thought might be to keep functions -- markets functioning around precious metals, particularly in North America. We don't see that same level of activity in April. And in fact, we would say it's really been slowing throughout April into the rest of the quarter and probably would look more like what we would have seen with -- in the other regions around mid-single-digit organic growth. I think our guide right now reflects that current trend baked into that, and we think -- we feel pretty good about where that is.