Prepared remarks
Good day, and welcome to the Brink's Company Second Quarter 2026 Conference Call. Please note this event is being recorded. 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 today's press release and presentation and in the company's SEC filings. The 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 it over to your host, Jesse Jenkins, Senior Vice President of Financial Planning and Analysis. Mr. Jenkins, you may begin.
Thanks, and good morning. Joining me are CEO, Mark Eubanks; and CFO, Kurt McMacken. Today, Brink's reported second quarter results on a GAAP, non-GAAP and constant currency basis. Most of our commentary today will be focused on our non-GAAP results. These non-GAAP financial measures are intended to provide investors with a supplemental comparison of our operating results and trends for the periods presented. We believe these measures allow investors to better compare performance over time and to evaluate our performance using the same metrics as management. Reconciliations of non-GAAP results to their most comparable GAAP results are provided in SEC filings, which can be found on our website. We will also have commentary on the status of our pending acquisition of NCR Atleos. As a reminder, this transaction remains subject to the completion of customary closing conditions and additional regulatory approvals. Other details, including risk factors related to the transaction can be found in the pertinent SEC filings. I will now turn the call over to Brink's CEO, Mark Eubanks.
Thanks, Jesse. Good morning, everyone. Starting on Slide 3. We delivered a strong second quarter with organic growth of 4% and ATM Managed Services and Digital Retail Solutions, or AMS/DRS, growing 14%. This marks the 14th consecutive quarter of mid-teens or better organic revenue growth in AMS/DRS, more than doubling in total revenue over the same period of time to over $1.5 billion. We continue to focus our strategic efforts on growing these valuable lines of business and have good line of sight into continued growth in the second half, supported by some recent customer wins, which I'll talk about later. Cash and Valuables Management, or CVM, performance was highlighted by continued strong growth in our Global Services business as we drive incremental revenue in the volatile precious metals markets. Supported by favorable revenue mix and widespread productivity initiatives, we delivered record second quarter operating and EBITDA margins. EBITDA margins were 18.5% in the quarter, up 70 basis points year-over-year with expansion across each of our operating segments. Cash flow continues to grow with year-to-date and trailing 12-month free cash flow of $32 million over the prior periods. Total free cash flow generated over the last 4 quarters was $468 million with conversion from EBITDA of 46%, above our full year framework. Year-to-date, our results are slightly ahead of our original expectations. With EBITDA above the midpoint of our prior guidance, we're raising our full year profit expectations. As you'll see from our Q3 guidance in a few minutes, I'm confident in this team's ability to continue to improve the business, accelerate organic growth and drive higher margins and free cash flow over the balance of the year. We remain well positioned to deliver against our full year 2026 framework of mid-single-digit organic revenue growth with EBITDA margin expansion of 30 to 50 basis points. Now turning to Slide 4. I'd like to provide an update on the NCR Atleos acquisition. Over the last few months, we've made considerable progress on many fronts and have moved our estimated closing timeline forward to early in the first quarter. Since our last public comments, we received overwhelming support from both NCR Atleos and Brink's shareholders with more than 99% of the votes cast in favor of the transaction. That endorsement reflects the confidence in the strategic merits of the combined companies. We also have satisfied several outstanding regulatory requirements. During the quarter, we were granted an early termination by the U.S. antitrust regulators. This clearance represents a meaningful step forward with the U.S. representing the largest concentration of combined company pro forma revenue of almost 40%. Other recent antitrust clearances include Brazil, India, Turkey, Colombia, and we continue to work constructively with the remaining other jurisdictions. We're also making meaningful progress with foreign direct investment regulators, having received clearance across the majority of the Euro zone footprint, including France, Germany, Spain, Italy and the U.K. Money transmitter licensing requirements with the U.S. regulators are also moving forward with urgency. We've achieved clearance in more than 80% of the necessary jurisdictions and remain well on track in the remaining markets. Over the next several months until closing, we will stay focused on the stand-alone commitments of both companies while accelerating integration planning. Although we'll continue to operate independently until closing, our dedicated integration teams will work closely to ensure that we capture the strategic benefits of the combined businesses. As I continue to engage with the NCR Atleos team, I'm increasingly encouraged by the potential of the combination. With deep expertise and strong performance across both organizations, I'm confident we'll be able to deliver the solutions to our customers' most important challenges. I look forward to close the acquisition and moving forward as one team as quickly as possible. Now shifting back to the quarter on Slide 5. I'll provide some commentary on performance by line of business. Starting with CVM, organic growth was slightly positive in the quarter with strong Global Services volume and good pricing discipline offset by AMS/DRS conversions. As we discussed last quarter, our Global Services business remained strong through the first half of the year. Moving to AMS/DRS. Revenue grew organically $50 million in the quarter at a rate of 14%. Late in the quarter, we saw several large installations and customer wins move into the second half, primarily reflecting customer-driven timing decisions. In the AMS business, we were recently awarded a full ATM outsourcing agreement for a network consortium of banks in Europe that will come online over the second half of the year. In DRS, we continue to deploy our solution across the Paradies footprint that we discussed last quarter, and I'll talk more about another key win in North America on the next slide. AMS/DRS remains compelling outside of the more penetrated North America and Europe segments with strong growth in both Latin America and Rest of World. These recent wins and solid deployment schedules in the second half give us confidence in our ability to deliver organic growth towards the top end of our full year framework of mid- to high teens for the balance of the year. As we said last quarter, the visibility into our pipeline and backlog continues to support accelerated growth in the second half of the year. Stepping back and looking at total revenue trends for the quarter, we delivered a second quarter in line with our organic revenue expectations and customer engagement with our solutions remains very high. As you'll see in our Q3 guidance, we expect a slight acceleration in organic growth in the second half and remain on track to deliver against our organic growth framework for the full year. Moving on to Slide 6. You can see a few details on a new DRS win in North America. We recently signed an enterprise agreement with a large retail chain to provide a full DRS solution. We are nearly doubling our share of wallet with this customer by providing our tech-enabled solutions at over 5,000 retail locations across a broad U.S. footprint. This customer will enjoy the security and reliability of Brink's solutions, the integration of physical to digital payments, working capital transparency and simplified cash handling. This in-store process simplification will unlock management time for more value-add activities across the entire retail environment like employee training, customer assistance and other in-store operational efficiency measures. While the customer benefits of DRS are clear, Brink's will also see meaningful productivity opportunities from this win as we increase density by adding a network that complements our existing footprint while optimizing the routes that already exist in most of our geographic locations. As I've said before, DRS is a true win-win in the marketplace, and we continue to have meaningful conversations with customers of all sizes in all of our markets. As we continue to improve our go-to-market approach in highly underpenetrated verticals, we expect to continue to deliver these kinds of wins that will set the foundation for future growth and margin accretion for years to come. One other important point before we move to the next page relates to NCR's own U.S. ATM network, Allpoint, which has ATMs in all of these locations. This is an example of the opportunities that will create significant routing synergies and improve service levels as we increase network density. This optimization creates significant benefits for our DRS value proposition while also reducing service costs for an owned ATM network in the combined company. As we look at the next several years post acquisition, we see meaningful additional opportunities to drive operating efficiencies, enhance service levels and create value through the expanded network of the combined company. Now on to Slide 7. You can see detail on our recent AMS win in a key Southeast Asia financial institution market. We recently won an AMS deal with Mandiri Bank in Indonesia, servicing more than one third of their entire estate. Mandiri is the largest national bank in Indonesia, operating over 13,000 total ATMs. Southeast Asia remains an attractive market for AMS as we add Mandiri to the previously discussed wins in Indonesia and more recently, the Security Bank win in the Philippines. These end markets have favorable cash usage trends and remain attractive for outsourcing as banks look to optimize costs and better serve their customers. For reference, the total Mandiri estate of over 13,000 ATMs is larger than many of the top 10 banks in the U.S. market. With the ATM managed services market still underpenetrated, we are having meaningful customer discussions across the globe. We continue to believe that outsourcing the operations and upkeep of these increasingly complex machines is the next logical step for financial institutions looking for ways to optimize their costs while continuing to improve customer experience at the intersection of physical and digital payments. After the completion of the NCR Atleos acquisition, we expect to have a best-in-class set of ATM Managed Services capabilities, positioning us to better serve financial institutions as they evaluate outsourcing opportunities in the markets around the world. Moving on to Slide 8. Before I hand over to Kurt for more detail on the financials, I wanted to briefly update progress on North America margins. We continue to methodically advance toward 20% EBITDA margins, coming in at 19.8% on a trailing 12-month basis at the end of the second quarter. With a solid revenue mix outlook over the second half of the year, supported by recent customer wins at Paradies, Pandora and the large enterprise deal I spoke about a few slides ago, we expect to continue to march towards this level as an intermediate milestone in our continuous improvement journey. Our operations continue to improve and with a good pipeline of productivity initiatives, we expect to continue to drive asset efficiency and labor productivity as we move forward. Over the past 5 years, we've improved our service, strengthened our safety culture, improved our AMS/DRS selling capabilities and eliminated waste from our operating model. The North America business is well positioned operationally to absorb additional capacity as we integrate the NCR Atleos business into our daily activities. With meaningful cost synergies contemplated in the North American markets, I remain confident that 20% margins is just the next milestone in our journey as a company, and I look forward to pressing beyond these levels in future years. And with that, I'll turn it over to Kurt to walk through the financials and Q3 guidance before I return for some closing comments and Q&A.
Thanks, Mark. I'll begin on Slide 10 with a look at the quarter. Revenue increased by 7% with 4% constant currency growth and a 3% tailwind from foreign currency. Adjusted EBITDA was up 11% to $257 million, with constant currency EBITDA growth rates more than double constant currency revenue growth rates. Operating profit was up $25 million year-over-year or 15%. EBITDA margins were up 70 basis points and operating profit margins were up 100 basis points, slightly ahead of our second quarter guidance expectations. EPS growth of 18% was more than double revenue growth as we continue to compound profits faster than our top line. Trailing 12-month free cash flow was $468 million with conversion of 46%. Solid year-to-date cash performance was driven by EBITDA growth and continued capital efficiency as we shift to less capital-intensive customer offerings. As we expected and experienced last year, we are currently ahead of our full year cash conversion guidance. Given the timing of cash tax payments, working capital and CapEx over the balance of the year, we continue to target 40% to 45% conversion for the full year. On Slide 11, total organic revenue growth was $54 million, with the majority of the growth coming from our higher-margin subscription-based strategic focus areas of AMS and DRS. FX contributed $37 million or 3% of growth in the quarter with favorable year-over-year rates in the Euro, Mexican peso and Brazilian real, partially offset by the Argentinian peso. Moving to the right side of the slide, you can see that $54 million of organic revenue growth converted to $21 million of EBITDA growth for an incremental flow-through to profits of 39%, driving total EBITDA margin expansion of 70 basis points over the prior year to record second quarter levels of 18.5%. Moving to Slide 12. Starting on the left. Operating profit was up $25 million to $190 million with a margin of 13.6% on strong productivity, pricing and revenue mix. Interest expense was $63 million in the quarter, flat sequentially and is expected to remain roughly the same in future periods using current interest rate expectations. Tax expense was $34 million in the quarter, representing an effective tax rate of 27.3%, slightly better than the prior year. Income from continuing operations was $88 million on 41.5 million diluted shares for an EPS of $2.13. Depreciation and amortization was $64 million in the quarter and is expected to be roughly $250 million for the full year. Let's move to Slide 13 to discuss our capital allocation framework. Our capital allocation framework remains unchanged despite the pending NCR Atleos acquisition. Our leverage at the end of the second quarter was 2.7x net debt to adjusted EBITDA. With the pending acquisition set to temporarily move us over 3 turns at close, we continue to expect the primary use of capital during 2026 to be preemptive debt paydown. Over the year, we expect to reduce our stand-alone leverage to approximately 2.3x as we position for the transaction. As we have mentioned previously, we plan to rapidly delever after closing and are targeting net leverage below 3x by the end of 2027. Once we return to our targeted leverage level of 2 to 3x, we expect to resume our prior capital allocation model with at least 50% of free cash flow focused on shareholder returns. Given the expected EBITDA growth after closing, both organically and through synergies, we expect to continue net debt leverage reduction during 2028. With approximately $1 billion of free cash flow approaching $20 per share, we will have ample flexibility to capitalize on accretive uses of capital that will compound cash generation. Moving to the guidance on Slide 14. Our framework for 2026 is unchanged. We expect to deliver mid-single-digit total organic growth, supported by mid- to high teens organic growth for AMS/DRS. With the second quarter EBITDA above the midpoint of prior guidance, we are raising our full year organic profit numbers despite the recent change in foreign currency. Using rates as of yesterday, we are currently expecting an FX benefit for the full year of between 1.5% and 2.5%, less than our expectations last quarter. EBITDA margins are expected to expand between 30 and 50 basis points with conversion of EBITDA to free cash flow of between 40% and 45%. In the third quarter, we expect revenue between $1.365 billion and $1.415 billion, reflecting slight organic growth acceleration sequentially. As Mark mentioned earlier, we expect second half organic growth in AMS/DRS to be towards the top end of our full year framework to drive this acceleration. Using yesterday's spot rates, FX is expected to be flat to less than a percentage point of benefit year-on-year. Adjusted EBITDA is expected to be between $263 million and $283 million, reflecting margin expansion of approximately 60 basis points to 19.6% at the midpoint. EPS is expected to be between $2.23 and $2.63. And with that, I'll turn it back over to Mark for some closing comments.
Thanks, Kurt. On Slide 15, you can see how we plan to create value for years to come in our business. The key tenets of this strategy are unchanged over the years and will guide how we move forward through the rest of '26 and through the acquisition. We continue to operate at a high level, improving the growth profile, profit margins and cash generation of the business in a consistent and measurable way. We've made good progress over the years, but in many ways, we're still in the early innings. There remains ample opportunities in our base business to continue to improve our operating model and drive waste out of our day-to-day frontline and back-office activities. After this acquisition, we'll be well positioned to accelerate these efforts across a $10 billion global enterprise with fresh new growth and margin opportunities. While the size of the business changes, the strategy remains constant. We will grow the business behind higher-margin recurring revenue service offerings that solve the complex problems of our retail and banking customers. We will be positioned to capture industry outsourcing momentum in the ATM market while we continue to transform the retail cash management industry through DRS. As I approach my 5-year anniversary with Brink's next month, I'm proud of the progress we've made transforming our business, shifting our business model to higher-margin recurring revenue AMS/DRS offerings while driving consistent productivity, margin expansion and improved free cash flow conversion. Even with this progress, I'm even more excited about the opportunities that remain in front of us. Working from the strong foundation we've built, I'm energized for the future and I look forward to driving shareholder value creation to new levels in the years to come. Before we take questions, I want to congratulate both the Brink's and NCR Atleos teams on a strong second quarter and for their steadfast focus on delivering for our customers and for our shareholders. And with that, we'll open the line for questions. Operator?
Questions and answers
Our first question today comes from George Tong of Goldman Sachs. I'm even more excited about the opportunities that remain in front of us. Working from the strong foundation we've built, I'm energized for the future and I look forward to driving shareholder value creation to new levels in the years to come. Before we take questions, I want to congratulate both the Brink's and NCR Atleos teams on a strong second quarter and for their steadfast focus on delivering for our customers and for our shareholders. And with that, we'll open the line for questions. Operator?
This is Sammy on for George. Can you break down the 14% AMS and DRS organic growth between pricing, new customer wins and expansion with existing customers? And how much of your second half AMS and DRS growth outlook is already supported by contracted business versus opportunities still in the pipeline?
Sure. We'll start with the back half first. We have a very strong pipeline. In the quarter, we had a few deals whose deployments on AMS/DRS moved out of the second quarter into the third. So we expect to have continued acceleration in the back half and have good visibility to many of those contracts and sales pipelines where we have high confidence. As we've said in the past, DRS is usually a shorter window of certainty, maybe a quarter or two, and AMS usually a bit longer, two quarters to maybe a full year in some of those deployments. So as we look at the third quarter guidance, we've anticipated this acceleration as well as getting back to our full year framework for organic growth in the mid- to high teens. That continues to be supported by a few large deals. As I mentioned, the enterprise retailer we came to an agreement with in the second quarter for 5,000 locations is an interesting opportunity for us as we look at the overlap of the NCR Allpoint network post-transaction and being able to improve service to those customers as we visit for both DRS solutions and AMS support. We're really excited about that. And if you move around the world, we've got several large ATM deployments. One I mentioned in Europe around a bank consortium and the second we explicitly talked about, which was Mandiri. Again, a large opportunity in Indonesia. When you think about that market, both Indonesia and the rest of Asia Pacific, it's a very large cash market with a growing population that continues to be an area of strength for us. You can see in the individual growth rates for that market. Rest of World grew 44% year-on-year, up admittedly from a smaller base, but a large growth number in that region. We expect that to continue in the short term.
I might just add on the question on price versus volume. Remember, AMS and DRS is mostly volume. There's some pricing in there, but it's a much smaller piece of total change. It's really a volume-driven number.
So that means mainly new customers or share of wallet. You asked about expansion within existing customers. I don't have that exact split in front of me. We are expanding share of wallet with customers, but for the most part, as Kurt said, that's really new locations, new deployments and new services because the nature of these agreements are longer-term recurring revenue.
That's helpful. And then just on organic growth, North America, Latin America and Europe all decelerated to about 2% this quarter. Was there a common factor driving that across the regions? And where do you expect improvement as you move through the back half of the year?
Yes. This was largely a timing issue. North America specifically was a timing issue on customer deployments, as I mentioned. We expect total organic growth to pick up in the back half, and that AMS/DRS story is a large part of the growth. For Latin America, the economy is actually fairly stable across the region, though Argentina is an outlier with depressed consumption given austerity measures. Our team there is managing through a tough situation and performing well. In Latin America, we continue to see strong AMS/DRS penetration and unvended opportunity; for example, Latin America contributed 34% quarter-on-quarter growth in AMS/DRS, and some deployments that we have in hand moved timing into Q3. So overall, while there were some regional timing and macro differences, we're still very bullish on growth in these regions and expect improvement as those deployments come online in the second half.
The next question comes from Tim Mulrooney of William Blair.
So you're getting really close to your intermediate target for North America margins. As we think about your ability to press beyond that 20%, can you talk about how you think about incremental margins in this business, just a framework here or potential incremental margins? Help us understand what the opportunity is to press beyond 20% because if incremental margins aren't much higher than that, then folks are going to assume it kind of tops out there. I thought I'd give you the opportunity to talk about it in a framework way.
Sure. The way we think about it, particularly on the AMS/DRS side, is relative to the existing market it's very large. The unvended space is substantial, and as we shift our business model away from a linear investment of capacity to serve incremental customers, network effects and density drive incremental margins higher as we create more density. That comes from incremental new locations and from trapped productivity sitting inside of existing non-DRS customers that we can convert. Layer on the NCR Atleos business and the synergies we've outlined, and we expect to continue to improve density on the retail side, not just where the Allpoint network exists today but across our service base. The 20% number is a milestone investors have asked about; it's not a destination. We view it as an intermediate milestone and expect to continue to press beyond it as we drive density and optimization.
That's a good point, Mark, that the incremental margins are not static as you continue to densify the network. And you also brought up how a combined Brink's and NCR could drive those incremental margins in North America higher. Is there anything beyond the cost synergies that would drive that higher? Or are there other opportunities beyond cost synergies that could also drive that higher?
The cost synergies are a big part of the case and what we've laid out. Beyond that, as we build density and leverage a shared network, we will optimize where we send the right technician, the right service person with the right material and skill set. That optimization will drive lower costs and better service and quality for our customers, which in turn will allow us to grow more. The strategic thesis of the acquisition is to be a catalyst for an end-to-end solution, whether full outsourcing or a subset, and that should enable incremental margin leverage as we grow locations and services.
I did have one more question, but I don't want to be rude. Should I ask one more question? Or you want me to hop back in the queue?
Yes, that's fine. Sure.
Okay. Shifting gears completely. Ever since you announced this deal with NCR Atleos, we've been getting a lot of questions from investors around ATM Managed Services, AMS. The one big question we've been getting is around the pace of ATM outsourcing in the U.S. and Europe with financial institutions. So what inning do you think we are in with regional and national banks? And is there anything that suggests this is something that will or could accelerate in the coming years?
I think we are in the early innings. You can see strong growth numbers from the NCR Atleos team around ATM as a Service and our growth rates and announcements as well. There's a bit of bifurcation between North America and Europe. In Europe, we've seen more activity with financial institutions outsourcing networks; for example, we outsourced BPCE in France, which is over 10,000 locations. Some banks are also building cooperatives or consortiums and outsourcing fits into that trend. We're seeing meaningful pipeline activity and conversations with many banks. In North America, much of the traction has been with small banks, community banks and credit unions, where outsourcing is a clear cost and efficiency scale play, and both our team and the NCR team have had good progress there. As for the very largest financial institutions in the U.S., there will be a point where full stack managed services is attractive to them, and we expect that to be part of our future growth algorithm, though I'm not ready to say a large bank is ready to outsource everything today. Overall, the available market could be multiple times the current size over the next decade, which is a significant long-term opportunity for us.
It sounds like a very exciting opportunity, Mark. Thanks for laying that out for me and good luck on the next 5 years.
Our next question comes from Tobey Sommer of Truist.
On the regulatory front associated with the deal, nice to see you say, the early part of '27. Could you maybe speak to what are the longest lead time items and geographies associated with that? And what would need to happen to be able to close even earlier?
Sure. We're hyper-focused and moving with urgency and pace. I mentioned in my prepared comments not only antitrust but foreign direct investment and money transmitter licenses here in North America. There are many parallel paths, so it's hard to point to any single item as the gating factor. All of the activities we contemplated when we announced the deal have trended positively. I highlighted the DOJ early termination here in the U.S., which was a meaningful step forward. To move the date earlier would require early resolutions in some of the remaining jurisdictions, including parts of Europe, Latin America and Asia Pacific. We continue to work constructively with those regulators, but there's nothing specific to report today that would suggest we could close materially earlier than early Q1.
I wanted to ask a question about your incentive comp and how you're thinking about that for the firm as you join with NCR Atleos. You've had a successful track record of changing compensation throughout the organization to focus efforts on growth in AMS and DRS. How would you contemplate any modifications to that to drive further growth and integration within the business as you turn the page into '27 and beyond?
It's a very good question. The key tenets of our strategy are intact. This deal is aligned with our strategy, supporting AMS and DRS. As we think about incentive compensation going forward, we want to continue to do more of the same—align incentives to accelerate AMS/DRS and also to drive free cash flow. The NCR team is already highly focused on ATM as a Service and improving long-term contracted recurring revenue, and their performance has been strong on free cash flow. Culturally, alignment should not be difficult. We will ensure people are pointed toward the right North Star and reward them accordingly. From management to the Board, aligning incentive comp with shareholder interests and the company profile is paramount, and we'll continue to refine that as integration progresses.
I appreciate that, Mark. I want to pull out a string there, and that's the cash conversion. You've done very well year-to-date, and noticed in some of your projections associated with the deal that maybe there's an opportunity to crack that 50% barrier. Could you talk about the puts and takes around setting and achieving an even higher cash conversion from EBITDA?
Tobey, both companies are focused on improving free cash flow conversion. For us, a big piece is changing the business model toward AMS and DRS because these are less capital intensive, and getting capital out of the system. We're also focused on working capital turns and the basics of free cash flow generation. Both companies have been making progress on capital management and working capital improvements. Between EBITDA growth, better capital management and ongoing working capital initiatives, we expect to continue to improve free cash flow conversion and see no structural barriers to moving toward higher conversion levels.
This concludes our question-and-answer session and brings us to the end of our conference. Thank you for attending today's presentation. You may now disconnect.