Third Quarter 2026 Earnings Conference Call - BRINKS CO

Financial Performance:

• Reported 3% total revenue growth with 4% organic growth for Q3 2026, driven by a 16% sequential acceleration in AMS/DRS segments.
• Adjusted EBITDA reached $274 million (up 8% YoY), with margins expanding to 19.9% (up 90 bps YoY).
• Operating profit increased 11% to $208 million, with operating margins expanding 100 bps.
• Diluted EPS was $2.46, representing an 18% year-over-year increase.
• Trailing 12-month free cash flow totaled $413 million with a 40% conversion rate; net leverage reduced to 2.6x net debt to adjusted EBITDA.
• North American segment achieved a record 20% adjusted EBITDA margin (trailing 12 months), while European margins expanded by over 400 bps.
• Currency tailwinds contributed 1% to revenue growth, though a strengthening dollar is expected to impact Q4 results.
• Malaysia deconsolidation negatively impacted revenue by 2%, a trend expected to continue through the first half of 2027.

Guidance and Future Outlook:

• Full-year 2026 framework remains unchanged: mid-single-digit organic revenue growth, 30-50 bps adjusted EBITDA margin expansion, and 40-45% free cash flow conversion.
• Q4 2026 revenue guidance set at $1.365–$1.415 billion (3–4.5% organic growth).
• Q4 2026 adjusted EBITDA guidance set at $275–$295 million, implying margin expansion of ~40 bps to a midpoint of 20.5%.
• Q4 2026 EPS guidance is $2.45–$2.80.
• Management expects to accelerate synergy capture from the NCR Altis acquisition, aiming to reach full $200 million run-rate synergies by end of 2029.
• Strategic goal to return net leverage below 3.0x by end of 2027 post-acquisition, resuming capital allocation with 50% of FCF toward shareholder returns.

Business Segments and Product Lines:

• AMS/DRS (Automated Teller Services & Digital Retail Solutions) achieved 16% organic growth, representing 30-32% of trailing 12-month revenue mix.
• Cash & Valuables Management (CVM) revenue declined 1.5% organically due to faster conversion to AMS/DRS, though pricing discipline and global services volumes remained strong.
• Secured a major contract with a top Canadian bank to support cash management services starting in 2027.
• Launched a turnkey solution for the "Bancomat" shared ATM network in Luxembourg, involving multiple major banks.
• Signed a significant agreement with a large North American retailer to service ~5,500 DRS locations, with deployment expected to begin in early 2027.
• DRS backlog in North America is up 80% year-over-year, driven by broad-based growth across mid-market and large retail customers.
• Strong momentum in Latin America, particularly Brazil and Mexico, despite macroeconomic headwinds in Argentina.

Market and Competitive Landscape:

• The NCR Altis acquisition is projected to expand the addressable market from $36 billion to two to three times the current size.
• Market trends show financial institutions seeking to simplify ATM ownership through full outsourcing and managed services models.
• Customers are increasingly delaying decisions on new contracts pending the combined entity's value proposition, focusing on end-to-end integration of hardware, logistics, and software.
• Competition involves shifting from asset-heavy models to flexible, service-based networks that offer better efficiency and capital deployment for clients.

Risks and Challenges:

• Regulatory clearance remains pending in the UK and EU for the NCR Altis acquisition; CMA concerns require divestiture of note machine and test link businesses in the UK (approx. $120M-$130M revenue).
• Macroeconomic headwinds in Argentina (consumption down) and Mexico (retail sales weakness) pose regional risks.
• FX headwinds expected to impact Q4 2026 results significantly due to dollar strength.
• Potential delays in large-scale contract sign-offs as customers wait for the combined NCR/Brinks offering to mature.
• Integration risks associated with combining two large organizations, though management views this as a strategic opportunity.

Management Commentary and Tone:

• Management expressed high confidence in the "strategy-first" acquisition rationale, citing potential for cost synergies and expanded revenue opportunities.
• CEO Mark Eubanks emphasized a "flywheel" effect from service network densification and back-office synergies, anticipating faster-than-expected value capture.
• CFO Kurt McMacken highlighted strong operating leverage, with profit growth rates more than double revenue growth rates.
• Tone was optimistic regarding long-term margin expansion, noting the company is "just getting started" on margin growth in North America and Europe.
• Management indicated that the acquisition will enable a "blank canvas" approach with customers, allowing for bespoke, integrated solutions rather than rigid menu options.

Analyst Questions and Answers:

• George Tong (Goldman Sachs): Asked about the financial impact of the UK divestiture and future AMS/DRS growth sustainability.
  • Answer: Divestiture impacts ~$30M EBITDA but was fully contemplated in synergy modeling; no reduction in the $200M synergy target. AMS/DRS growth is supported by robust backlogs (e.g., 80% DRS backlog growth in US) and conversion rates, despite some customer delays pending deal closure.
• Tim Mulrooney (William Blair): Queried the breadth of the DRS backlog and Latin American exposure to digital payments.
  • Answer: Backlog growth is broad-based across mid-market retail, not just a few large wins. Digital payment adoption (e.g., PIX in Brazil) has not hindered growth; the team is targeting previously unserved, lower-cash-volume customers.
• Toby Sommer (Truist): Asked about customer reaction to the NCR/Brinks combo and the shift to flexible networks.
  • Answer: Customers are highly interested in the integrated value chain (logistics, maintenance, software) to reduce inefficiencies. Flexible networks are projected to increase from ~33% of revenue to potentially 50% in the future, driving productivity.
• Chris Senyak (Wolf Research): Inquired about the nature of additional synergies (cost vs. revenue) and memory chip cost exposure.
  • Answer: Additional synergies are primarily cost-side (procurement, G&A, service network density) and timing (accelerated close). Revenue synergies are being mapped but not yet quantified. No material impact from memory costs expected, as both companies have inflation protection mechanisms.

Other Key Points:

• The NCR Altis deal is on track to close in early January 2027, ahead of the previously expected timeline.
• Joint integration planning teams are finalizing organizational structures and "quick win" action plans for Day 1 post-closing.
• Management confirmed that no sales infrastructure will be eliminated; instead, the combined sales force will be used to deepen market penetration and capture new customers.
• The company plans to utilize $1 billion in projected free cash flow (by 2028) for accretive capital uses and shareholder returns.
• The acquisition of NCR Altis allows for a complete vertical stack offering, from hardware to cash logistics, software, and processing.