The Brink’s Company: FY2023 Form 10-K Summary
Business context and reporting period
The filing covers the fiscal year ended December 31, 2023, with comparative results for 2022 and 2021. Brink’s provides cash and valuables management, digital retail solutions, and ATM managed services in more than 100 countries through four segments: North America, Latin America, Europe, and Rest of World. The company employed approximately 68,200 people and operated approximately 1,300 facilities and 16,400 vehicles at year-end.
Cash and valuables management represented approximately 79% of 2023 revenue, while Digital Retail Solutions and ATM Managed Services represented approximately 21%. Revenue and earnings are typically seasonally stronger in the second half, particularly the fourth quarter.
Key financial metrics
| Metric | 2023 | 2022 | Change |
|---|---|---|---|
| Revenue | $4,874.6 million | $4,535.5 million | +7% |
| Operating profit | $425.2 million | $361.3 million | +18% |
| Operating margin | 8.7% | 8.0% | +0.7 percentage points |
| Income from continuing operations attributable to Brink’s | $86.0 million | $173.5 million | -50% |
| Diluted EPS from continuing operations | $1.83 | $3.63 | -50% |
| Non-GAAP operating profit | $615.0 million | $550.3 million | +12% |
| Non-GAAP operating margin | 12.6% | 12.1% | +0.5 percentage points |
| Non-GAAP diluted EPS | $7.35 | $5.99 | +23% |
| Net cash provided by operating activities | $702.4 million | $479.9 million | +$222.5 million |
| Capital expenditures | $202.7 million | $182.6 million | +$20.1 million |
| Total debt | $3,531.3 million | $3,402.8 million | +$128.5 million |
| Net debt | $2,520.9 million | $2,516.0 million | +$4.9 million |
| Cash and cash equivalents | $1,176.6 million | $972.0 million | +$204.6 million |
GAAP profitability was reduced by higher interest expense, a substantially higher effective tax rate, foreign-currency losses associated with Argentina, acquisition-related amortization and other unusual items. The 2023 GAAP effective tax rate was 59.0%, compared with 18.3% in 2022. Interest expense increased to $203.8 million from $138.8 million, primarily because of higher rates on corporate debt.
Net income attributable to Brink’s was $87.7 million, compared with $170.6 million in 2022. Total net income was $98.3 million, compared with $181.9 million. The company paid $195.8 million of interest and $96.3 million of income taxes in cash during 2023.
Segment performance and material changes
- North America: Revenue increased 1% to $1,601.1 million and operating profit increased 16% to $185.2 million. Organic growth was supported by U.S. pricing and cost savings, partly offset by volume reductions from customer portfolio rationalization and lower BGS revenue.
- Latin America: Revenue increased 10% to $1,332.3 million, including 23% organic growth, while operating profit increased 1% to $280.3 million. Inflation-based price increases and growth in AMS and DRS were largely offset in reported results by the Argentine peso devaluation.
- Europe: Revenue increased 22% to $1,136.8 million and operating profit increased 27% to $125.0 million. Results benefited from the NoteMachine acquisition, pricing, and growth in AMS and DRS.
- Rest of World: Revenue decreased 1% to $804.4 million, while operating profit was broadly flat at $164.1 million. Organic growth and cost savings were offset by currency effects and the disposition of Russia-based operations.
- Service mix: Cash and valuables management revenue was approximately $3.9 billion, compared with $3.8 billion in 2022. DRS and AMS revenue was approximately $1.0 billion, compared with $0.7 billion in 2022, continuing the company’s technology-enabled growth strategy.
Cash flow, liquidity, debt and capital allocation
GAAP operating cash flow increased to $702.4 million. Management’s supplemental operating cash flow measure, excluding restricted customer cash and certain customer obligations, increased to $576.9 million from $379.9 million.
Investing cash outflows were $179.8 million, including $202.7 million of capital expenditures and only $1.5 million of acquisition spending, compared with $173.9 million in 2022. Capital investment focused on information technology, armored vehicles, cash devices, machinery and DRS devices.
Financing activities used $207.1 million of cash, primarily reflecting $169.9 million of share repurchases and $39.6 million of dividends to Brink’s shareholders. In November 2023, the Board authorized a new $500 million repurchase program expiring December 31, 2025; the authorization does not require the company to repurchase any specific amount.
Total debt was $3.5 billion, including $1.34 billion of Term Loan A, $542.1 million drawn on the revolving facility, $994.4 million of senior unsecured notes, $265.8 million of other facilities, and $233.8 million of financing leases. Approximately $458 million was available under the $1 billion revolving credit facility at year-end. The company stated that it was in compliance with all debt covenants and expects existing cash, operating cash flow, and available credit capacity to satisfy liquidity needs for more than the next twelve months.
Guidance, outlook, risks and unusual items
- Management did not provide a specific 2024 revenue, operating profit, or EPS guidance figure in the filing. Its stated priorities are revenue growth, margin expansion, improved cash flow, operational excellence, technology-enabled services, and continued transformation.
- Management initiated a multi-year U.S. transformation program in 2023 to standardize commercial and operating processes and drive margin expansion. The company incurred $5.5 million of related expense in 2023.
- The 2022 Global Restructuring Plan generated total charges of $33.2 million through 2023, including $11.0 million in 2023. Total program expenses are expected to be $38 million to $42 million, with anticipated annualized cost savings of approximately $60 million and workforce reductions of 3,200 to 3,400 positions.
- Argentina remained highly inflationary for accounting purposes. The Argentine peso declined approximately 79% in 2023, producing $86.8 million of pretax highly inflationary accounting impact, including $79.1 million of currency remeasurement losses. Argentina also had $72.1 million of net monetary assets, including $62.5 million of cash, subject to currency controls and repatriation risks.
- Other 2023 unusual items included $70.6 million of acquisition and disposition items, an $8.0 million charge related to a non-routine motor vehicle accident, a $0.5 million Chile antitrust adjustment, and $6.6 million of other restructuring costs. The company also exited its Russia-based operations and recorded a $2.0 million disposal loss.
- The U.S. Department of Justice continues an investigation initiated in 2020 concerning cross-border shipments of cash and valuables and anti-money-laundering compliance. No civil or criminal claims have been brought, and no accrual has been recorded because the outcome and potential loss cannot be estimated.
- The Chilean antitrust authority has sought a $30.5 million fine related to alleged collusion in 2017 and 2018. Brink’s is defending the matter and had recorded cumulative estimated losses, including a $0.5 million adjustment in 2023.
- Key ongoing risks include competition and pricing pressure, labor availability and costs, declining use of cash, foreign currency and inflation exposure, geopolitical and regulatory risks, cybersecurity incidents, insurance availability, pension and legacy coal liabilities, debt covenant compliance, and integration of acquisitions.
- The material weakness in internal control over financial reporting identified in 2022 was remediated during 2023. Management and KPMG concluded that internal control over financial reporting was effective as of December 31, 2023.
Important facts for investors to verify
- Whether reported GAAP earnings recover as Argentina-related currency impacts, elevated interest expense, tax effects, and acquisition-related charges normalize.
- The sustainability of 2023’s organic revenue growth, particularly inflation-driven pricing in Latin America and expansion of AMS and DRS.
- Progress, cash costs, workforce effects, and realized savings from the global restructuring and U.S. transformation programs.
- Debt refinancing and repayment requirements, including the $754.1 million of scheduled 2025 debt and lease repayments and the $2.33 billion scheduled in 2027.
- Exposure to further Argentine peso devaluation, inflation, currency controls, and potential restrictions on cash repatriation.
- Developments in the DOJ investigation, Chile antitrust proceeding, legacy coal-related obligations, and other legal contingencies.
- Whether share repurchases under the $500 million authorization remain compatible with leverage, liquidity, acquisitions, capital expenditures, and dividend objectives.
- The sensitivity of goodwill and other assets to changes in revenue growth, operating margins, discount rates, and foreign exchange rates; the 2023 goodwill impairment test found no impairment, but Europe was identified as a critical audit matter.