Brink(BCO) - 2024 Q3 - Quarterly Results

Third-Quarter 2024 Financial Highlights Overview of Third-Quarter 2024 Performance Brink's achieved 3% revenue growth in Q3 2024, fueled by strong organic expansion in high-margin services, though profitability was impacted by currency and a significant security loss - ATM Managed Services (AMS) and Digital Retail Solutions (DRS) demonstrated strong performance with 26% organic growth in Q3[2] - Higher-margin, recurring revenue from AMS and DRS now accounts for over 23% of total company revenue and is projected to achieve over 20% organic growth for the full year 2024[2] - Profitability was adversely affected by the strong U.S. dollar, cyclical market headwinds in global services, and the timing of a large security loss[2] Third-Quarter 2024 Financial Summary Q3 2024 revenue increased 3% to $1.259 billion, while GAAP operating profit declined 19% to $112 million and GAAP EPS dropped 33% to $0.65 Third-Quarter 2024 Financial Results (vs. 2023, in millions) | Metric | GAAP | GAAP Change | Non-GAAP | Non-GAAP Change | Constant Currency Change | | :--- | :--- | :--- | :--- | :--- | :--- | | Revenue | $1,259 million | 3% | $1,259 million | 3% | 13% | | Operating Profit | $112 million | (19)% | $152 million | (9)% | 20% | | Operating Profit Margin | 8.9% | (230 bps) | 12.0% | (150 bps) | 90 bps | | Net Income / Adj. EBITDA | $29 million | (37)% | $217 million | (6)% | 16% | | EPS | $0.65 | (33)% | $1.51 | (27)% | 10% | Security Losses Third-quarter results were impacted by a $10 million year-over-year increase in security losses, primarily due to a single large loss event - A large loss event contributed to a $10 million year-over-year increase in security losses for Q3[4] - The company affirmed that this Q3 increase is not expected to alter its full-year outlook on security losses[4] Full-Year 2024 Guidance Updated 2024 Non-GAAP Outlook Brink's updated its full-year 2024 Non-GAAP guidance, projecting revenues between $5.0 and $5.05 billion and Adjusted EBITDA between $900 and $920 million Updated 2024 Non-GAAP Outlook (in millions) | Metric | Guidance Range (in millions) | | :--- | :--- | | Revenues | $5,000 - $5,050 | | Adjusted EBITDA | $900 - $920 | | Adjusted EBITDA margin | ~18.1% | | Free cash flow before dividends | $320 - $360 | - Full-year 2024 EPS from continuing operations attributable to Brink's is guided to be between $6.50 and $6.80[5] Condensed Consolidated Financial Statements (Unaudited) Condensed Consolidated Balance Sheets As of September 30, 2024, total assets increased slightly to $6.67 billion, while total liabilities rose and total equity decreased Balance Sheet Summary (in millions) | Account | Sep 30, 2024 | Dec 31, 2023 | | :--- | :--- | :--- | | Total Assets | $6,670.6 | $6,601.8 | | Total Liabilities | $6,262.5 | $6,081.6 | | Total Equity | $408.1 | $520.2 | Condensed Consolidated Statements of Cash Flows For the nine months ended September 30, 2024, net cash from operating activities significantly decreased to $56.2 million, while financing activities reversed to a net cash inflow Cash Flow Summary - Nine Months Ended (in millions) | Cash Flow Activity | Sep 30, 2024 | Sep 30, 2023 | | :--- | :--- | :--- | | Net cash provided by operating activities | $56.2 | $293.0 | | Net cash used in investing activities | ($181.4) | ($147.9) | | Net cash provided by (used in) financing activities | $99.5 | ($207.4) | | Net decrease in cash | ($44.8) | ($90.0) | Segment Performance Analysis Third-Quarter 2024 Segment Results (vs. 2023) In Q3 2024, Latin America led organic revenue growth at 34%, Europe showed strong 10% revenue growth, and North America's operating profit fell 13% Q3 2024 Segment Revenue & Operating Profit (vs. Q3 2023, in millions) | Segment | Revenue | Revenue Change | Organic Growth | Operating Profit | Operating Profit Change | | :--- | :--- | :--- | :--- | :--- | :--- | | North America | $413 | 4% | 3% | $42 | (13)% | | Latin America | $321 | (5)% | 34% | $70 | 3% | | Europe | $316 | 10% | 8% | $40 | 12% | | Rest of World | $209 | 4% | 3% | $44 | 3% | Nine-Month 2024 Segment Results (vs. 2023) For the first nine months of 2024, total revenue grew 3% with 13% organic growth, led by Latin America's 36% organic expansion Nine-Month 2024 Segment Revenue & Operating Profit (vs. 2023, in millions) | Segment | Revenue | Revenue Change | Organic Growth | Operating Profit | Operating Profit Change | | :--- | :--- | :--- | :--- | :--- | :--- | | North America | $1,230 | 3% | 2% | $142 | 15% | | Latin America | $987 | 0% | 36% | $197 | (2)% | | Europe | $917 | 9% | 8% | $98 | 13% | | Rest of World | $614 | 2% | 3% | $124 | 2% | Detailed Quarterly Segment Results (2023-2024) Quarterly trends show consistent revenue growth in Europe, stable North American revenue, volatile Latin American revenue, and variable segment operating profit margins - Total segment operating profit has shown a sequential increase through the first three quarters of 2024, from $178.4 million in Q1 to $195.7 million in Q3[23] - North America's operating margin decreased from 12.5% in Q2 2024 to 10.1% in Q3 2024[24] - Latin America's operating margin recovered to 21.9% in Q3 2024 after dipping in the first half of the year[24] Reconciliation of GAAP to Non-GAAP Measures Explanation of Non-GAAP Adjustments The company excludes reorganization, acquisition, Argentina's inflationary impact, transformation initiatives, and certain legal costs from Non-GAAP results to clarify core operational performance Reorganization and Restructuring Costs related to the 2022 Global Restructuring Plan, primarily severance and asset impairments, are excluded from Non-GAAP results - The 2022 Global Restructuring Plan has resulted in $34.2 million in total charges and reduced the global workforce by about 3,200 positions[29] Acquisitions and Dispositions Non-cash amortization of acquisition-related intangible assets and integration costs are excluded due to their inconsistent timing and nature - Amortization expense for acquisition-related intangible assets amounted to $43.8 million in the first nine months of 2024[32] Argentina Highly Inflationary Impact Pretax charges of $23.8 million related to Argentina's highly inflationary economy, including currency remeasurement losses, are excluded from Non-GAAP results - In the first nine months of 2024, the company recognized $23.8 million in pretax charges related to Argentina's highly inflationary accounting[34] Transformation Initiatives Expenses of $21.5 million for a multi-year business transformation program, primarily for third-party services, are excluded from Non-GAAP results - The company incurred $21.5 million in costs for its business transformation program in the first nine months of 2024[35] Other Legal and Compliance Matters Several non-recurring legal and compliance costs, including accruals for a DOJ investigation and a Chilean antitrust matter, are excluded from Non-GAAP results - Accrued $7.7 million in the first nine months of 2024 related to a U.S. Department of Justice (DOJ) investigation into AML compliance[36] - Recognized a $1.1 million adjustment in the first nine months of 2024 for a potential fine related to a Chilean antitrust investigation[37] Reconciliation Tables Detailed reconciliations bridge GAAP figures to Non-GAAP measures, adjusting for items like restructuring, acquisition impacts, and Argentina's economy to derive core performance metrics Reconciliation of Operating Profit Q3 2024 GAAP Operating Profit of $111.6 million was adjusted for acquisitions, Argentina's impact, and transformation initiatives to reach Non-GAAP Operating Profit of $151.6 million Q3 Operating Profit Reconciliation (in millions) | Description | Q3 2024 | Q3 2023 | | :--- | :--- | :--- | | GAAP Operating Profit | $111.6 | $137.7 | | Acquisitions and dispositions | $16.5 | $19.4 | | Argentina highly inflationary impact | $10.8 | $8.1 | | Transformation initiatives | $9.5 | $0.0 | | Other Adjustments | $2.8 | $1.1 | | Non-GAAP Operating Profit | $151.6 | $166.3 | Reconciliation of Net Income and Adjusted EBITDA In Q3 2024, Net Income of $28.9 million was reconciled to an Adjusted EBITDA of $216.8 million, representing a 6% year-over-year decline in Adjusted EBITDA Q3 Adjusted EBITDA Reconciliation (in millions) | Description | Q3 2024 | Q3 2023 | | :--- | :--- | :--- | | Net income attributable to Brink's | $28.9 | $45.6 | | Interest expense | $63.0 | $53.8 | | Income tax provision | $27.2 | $37.3 | | Depreciation and amortization | $74.8 | $69.1 | | EBITDA | $193.9 | $205.8 | | Non-GAAP Adjustments | $22.9 | $24.7 | | Adjusted EBITDA | $216.8 | $230.5 | Reconciliation of Earnings Per Share (EPS) GAAP EPS for Q3 2024 was $0.65, adjusted to a Non-GAAP EPS of $1.51 after accounting for acquisitions and Argentina's inflation, a 27% decrease from Q3 2023 Q3 EPS Reconciliation | Description | Q3 2024 | Q3 2023 | | :--- | :--- | :--- | | GAAP EPS | $0.65 | $0.97 | | Acquisitions and dispositions | $0.36 | $0.31 | | Argentina highly inflationary impact | $0.22 | $0.67 | | Transformation initiatives | $0.21 | $0.00 | | Other Adjustments | $0.07 | $0.12 | | Non-GAAP EPS | $1.51 | $2.07 | Reconciliation of Free Cash Flow For the nine months ended September 30, 2024, free cash flow before dividends was $98.0 million, derived from GAAP operating cash flows with specific adjustments Free Cash Flow Reconciliation - Nine Months Ended (in millions) | Description | Sep 30, 2024 | Sep 30, 2023 | | :--- | :--- | :--- | | Cash flows from operating activities - GAAP | $56.2 | $293.0 | | Adjustments for restricted cash & customer obligations | $170.3 | $50.4 | | Capital expenditures | ($159.9) | ($133.1) | | Proceeds from asset sales & financing | $31.4 | $25.5 | | Free cash flow before dividends | $98.0 | $235.8 | Other Information Forward-Looking Statements This section contains cautionary language regarding forward-looking statements, including the 2024 outlook, subject to various risks and uncertainties - Forward-looking statements include the updated 2024 outlook and are subject to risks such as currency volatility, geopolitical conflicts, and ability to integrate acquisitions[18][19] - The company directs readers to its Annual Report on Form 10-K for a comprehensive discussion of risk factors[20] Conference Call Information Brink's scheduled a conference call for November 6 at 9:00 a.m. ET to discuss third-quarter results, with details provided for access and replay - A conference call to review Q3 results was scheduled for November 6 at 9:00 a.m. ET[7]