Brinks Co (BCO) 2021 Q2 法說會逐字稿

Welcome to The Brink's Company's Second Quarter 2021 Earnings Call. Brink's issued a press release on second quarter results this morning. The company also filed an 8-K that includes the release and the slides that will be used in today's call. For those of you listening by phone, the release and slides are available in the Investor Relations section of the company's website, brinks.com. (Operator Instructions) As a reminder, this conference is being recorded.

Now for the company's safe harbor statement. 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 is available in today's press release and in the company's most recent SEC filings. Information presented and discussed on this call is representative as 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.

It is now my pleasure to introduce your host, Ed Cunningham, Vice President of Investor Relations and Corporate Communications. Mr. Cunningham, you may begin.

Thanks, Kate, and good morning, everyone. Joining me today are CEO, Doug Pertz; and CFO, Ron Domanico. This morning, we reported second quarter results on both a GAAP and non-GAAP basis. The non-GAAP results exclude a number of items, including our Venezuela operations; the impact of Argentina's highly inflationary accounting, reorganization and restructuring costs; items related to acquisitions and dispositions; and costs related to an internal loss and certain accounting compliance matters. We're also providing our results on a constant currency basis, which eliminates changes in foreign currency exchange rates from the prior year. We believe the non-GAAP results make it easier for investors to assess operating performance between periods. Accordingly, our comments today will focus primarily on non-GAAP results. Reconciliations are provided in the press release and the appendix to the slides we're using today and in this morning's 8-K filing, all of which can be found on our website.

I'll now turn the call over to Doug.

Thanks. Thanks, Ed, and good morning, everyone, and thanks for joining us. Today, we reported strong second quarter results that clearly demonstrate the resiliency of our business and the continued strength of cash usage around the world.

Reported revenue was up 27%, including organic growth of 15%. On a comparable basis, in local currency, revenue has recovered to 97% of 2019 pre-COVID levels, supporting a strong recovery from the pandemic lows, even with the unanticipated, continued shutdown of many economies, especially in Europe, Latin America and parts of Asia during the first half of this year.

Operating profit grew 51% with a margin rate increase of 160 basis points to 10.5%, which is 80 basis points above the prepandemic second quarter 2019 rate of 9.7%. This suggests that our focus on sustainable cost reductions is having the desired impact on increased margins even with revenues not yet back to prepandemic levels. Adjusted EBITDA was up 39% with a margin rate increase of 130 basis points to 15.8%, which is 120 basis points above the prepandemic second quarter 2019 EBITDA rate, and earnings came in at $1.18 per share, up 62% over 2020 and up 40% over the second quarter of 2019.

We achieved these results despite extended shutdowns that affected the second quarter results. Given the year-to-date impact of the pandemic and the uncertainty regarding the future impact, we now expect full year 2021 percent revenue growth in the mid- to high teens, and we continue to expect earnings to be around the midpoint of the range, reflecting higher margins. We expect continued, gradual revenue recovery in the second half of this year to provide a strong jumping-off point for 2022 when year -- when full year revenue is expected to exceed pre-COVID levels. Our preliminary targets for 2022 continue to include strong revenue growth -- growth in revenue, adjusted EBITDA and cash flow.

In summary, we believe the continued, strong and steady improvement in our results despite the extended pandemic headwinds is very encouraging as we look ahead to 2022 when we expect to also layer on contributions from our digital growth strategies.

We're looking forward to Investor Day in early December when we'll provide detailed review of our core and digital growth strategies as well as financial projections for 2022. We're trying to finalize the appropriate format, a virtual meeting, a live event in New York or a hybrid of such, and we'll let you know as soon as we make that decision.

Turning now to Slide 4, which summarizes our guidance and our preliminary target for 2022. With half of 2021 behind us, we now expect full year 2021 revenue to be at the lower end of the range, but we still expect to achieve year-over-year percentage increases, as I said before, in the mid- to upper teens for revenue. Our revenue expectations were adjusted for 2 reasons. The first is the unexpected persistence of the pandemic-related shutdowns, which, again, negatively impacted our first and second quarter's revenues. The second factor is related to a change in how we recognized revenue for our recent acquisition of PAI. This technical change to net revenue recognition reduced our forecast PAI revenue by $50 million or so this year but has no impact on profit and, in fact, actually increases our margin rate.

While the ultimate duration and impact of the pandemic remains difficult to predict, we do not expect it to return -- we do expect, excuse me, to return to a more normalized economic conditions as we move through the remainder of this year and, more importantly, as we go into 2022.

Full year 2021 operating profit is expected to be approximately at the midpoint of our guidance, reflecting year-over-year margin rate increases of at least 150 basis points as we drive adjusted EBITDA growth up 25% versus prior year to approximately $700 million and EPS growth of 32% to approximately $5 per share. This slide also shows our preliminary 2022 EBITDA target of approximately $800 million, reflecting growth in the mid-teens. As Ron will show you, we're also targeting 2022 free cash flow growth of about 50% on -- or more of EBITDA.

It's important to note that our outlook for both 2022 -- '21 and '22 was driven primarily by growth in our core operations and does not include any material contribution from our Strategy 2.1 digital solutions. More on our core and digital strategies as we -- as well as on our 2023 financial targets at our Investor Day event in December.

I'll now turn it over to Ron for more financial details.

Thanks, Doug, and good day, everyone. Slide 5 is a format that we include each quarter that covers 4 key metrics: revenue, operating profit, adjusted EBITDA and EPS for the current quarter, the current quarter in constant currency and the reported results for the same quarter in prior years. I'll go into detail on each of these metrics in the next 2 slides.

On Slide 6, please remember that we disclose acquisitions separately for the first 12 months of ownership. After 12 months, they're mostly integrated and then included inorganic results Included in acquisitions for this quarter are PAI and most of the former G4S businesses. 2021 second quarter revenue was up 22% in constant currency with 15% organic growth versus last year and 7% from acquisitions. While the pandemic continues to impact many countries today, the second quarter of 2020 was globally the most impacted. North America, Latin America and Europe all grew organically, while the rest of the world was relatively flat. Positive ForEx increased revenue by $39 million or 5% as currencies in most of our markets have improved versus last year's pandemic-driven devaluation. Reported revenue was $1.049 billion, up $223 million or 27% versus the second quarter last year. In general, revenue recovery was consistent with the first quarter 2021 despite the impact of lower-than-expected economic activity caused by new lockdowns imposed by governments in response to COVID variants and increased cases.

Second quarter reported operating profit was $111 million, up over 50% versus last year. Organic growth was 42%, acquisitions added 5% and ForEx another 4%. Our operating profit margin of 10.5% was up 160 bps versus 2020 and up 80 bps versus prepandemic 2019. This is evidence that our 2020 cost-realignment initiatives are holding and that wider and deeper is gaining traction. Segment information is included in today's press release and in the appendix. Recall that in the first quarter, the corporate allocation methodology was changed to more accurately reflect segment performance but distorts the year-to-year comparisons of corporate expenses.

Now to Slide 7. Second quarter interest expense was $28 million, up $5 million versus the same period last year, primarily due to the higher debt associated with the completed acquisitions. Tax expense in the quarter was $30 million, $12 million higher than last year, driven by higher income. Our full year non-GAAP effective tax rate is estimated at 32%, in line with last year. $111 million of second quarter 2021 operating profit, less interest expense and taxes, plus $6 million in minority interest and other generated $60 million of income from continuing operations. This is $1.18 of earnings per share, up $0.45 or 62% versus $0.73 in the second quarter last year. The gain on marketable securities positively impacted EPS by about $0.16 versus $0.09 last year. Second quarter 2021 adjusted EBITDA, which excludes $11 million in gains on marketable securities, was $166 million, up $46 million or plus 39% versus prior year.

Turning to free cash flow on Slide 8. Our 2021 free cash flow target range is $185 million to $275 million, which reflects our adjusted EBITDA guidance range of $660 million to $750 million. We expect to use about $95 million of cash for working capital growth and restructuring. This includes around $35 million in 2020 deferred payroll and other taxes payable. Cash taxes should be approximately $95 million. Cash interest is expected to be about $105 million, an increase of $27 million, due primarily to the incremental debt associated with the G4S and PAI acquisitions.

Our net cash CapEx target is around $180 million, an increase of $67 million over last year, driven by acquisitions and a return to more normalized investment. Our free cash flow target, excluding the payment of 2020 deferred taxes, would be $220 million to $310 million, generating an EBITDA-to-free cash flow conversion ratio of about 33% to 41%, up from the 28% achieved on the same basis last year. Our preliminary 2022 target is to increase our free cash flow 50-plus percent to a range of $350 million to $400 million, which equates to approximately $7 to $8 per share.

Advancing to Slide 9. This slide illustrates our actual net debt and financial leverage at year-end 2020; at June 30, 2021; our year-end 2021 estimate; and the 2022 year-end preliminary target. The current year-end estimates include the $213 million acquisition of PAI, our adjusted EBITDA range and our free cash flow target range. Net debt at the end of 2020 was $1.9 billion. That was up over $0.5 billion versus year-end 2019 due primarily to the debt incurred to complete the G4S cash acquisition. On December 31, 2020, our total leverage ratio was 3.3x.

At the end of 2021, given our free cash flow guidance and the completion of the G4S and PAI acquisitions, we're estimating a net debt range of $2.055 billion to $2.145 billion, which, combined with our EBITDA guidance, is expected to reduce leverage by up to 0.5 turn to the midpoint total leverage ratio of about 3 turns. Our preliminary target for year-end 2022 would reduce the leverage ratio approximately another 0.5 turn.

Moving to Slide 10. Look, we spent the last few minutes talking about what we've done and what we're going to do. I want to wrap up my remarks with some comments about how we do it.

For 162 years and today in 53 countries, we have practiced continuous improvement in corporate citizenship. That work has been formalized into the Brink's sustainability program. It's a comprehensive program under my leadership and directed by the Brink's Board, and I'm very pleased with the progress we're making. We're a signatory to the United Nations Global Compact on Human Rights. We pledged to support CEO action for diversity and inclusion. We've hired dedicated leaders for diversity, equity and inclusion and supplier diversity. We've expanded the Brink's Women's Leadership Forum and created employee resource groups. We've significantly increased our disclosure and recently completed a materiality assessment that will help guide additional sustainability progress for the next 18 to 24 months.

We've been reducing our environmental impact by modernizing our fleet, taking thousands of diesel trucks off the road, implementing dual fuel and alternative fuel vehicles and continually optimizing routes to minimize miles driven. Our Strategy 2.0 solutions target not only increased customer service but also a major reduction in weekly stops that could take many more trucks off the roads. We have made improvements to our already robust governance and risk management, and I direct you to our website to learn more about Brink's sustainability program.

But perhaps the most compelling role Brink's has is economic inclusion. Approximately 20% of the U.S. population is unbanked or underbanked and doesn't have access to credit. The numbers globally are much higher. As the world's largest cash management company, Brink's has a critical role in facilitating the global cash ecosystem to serve everyone but especially the most vulnerable. For this reason alone, I believe that BCO belongs in every portfolio that is concerned about sustainability and ESG.

With that, I'll hand it back to Doug.

Thanks, Ron. Moving to Slide 11. It summarizes our current strategic plan, SP2, which builds on the proven initiatives executed in our first strategic plan that, over the 3-year period through 2019, resulted in compound annual growth rate of 8% for revenue and for more than 20% for operating income.

The bottom layer outlines our 1.0 initiatives supporting core organic growth and cost reductions. Our SP2 target is to achieve annual organic revenue growth of at least 5%, and we've laid out more than $70 million of cost reductions and productivity improvements by 2022. We're driving our cost reductions wider and deeper by expanding cost initiatives into more countries and implementing over 18 different proven operational initiatives, including things such as fleet savings, route optimization, money processing center standardization and much more. These initiatives are supported by dedicated lean experts in every country and by our overall continuous -- underlying continuous improvement culture.

Sustained SG&A cost reductions and other fixed cost expense reductions have been realized through our recent restructurings and last year's targeted cost takeouts. These cost reductions and structural changes are driving operating leverage, as demonstrated this quarter by higher OP margins versus last year and versus 2019. The benefits of operating margins are expected to continue to yield higher margins as revenue recovers from the pandemic lows.

The middle layer represents our 1.5 acquisition strategy, including G4S and PAI, which are the first acquisitions in SP2. We've invested approximately $2.2 billion in 15 acquisitions since 2017. Each of these acquisitions support our overall growth strategy, and we expect them to collectively represent a post-synergy, post-multiple of less than 6x EBITDA. With the G4S acquisition largely integrated and run rate synergies largely recognized, we're well positioned in 2022 to drive revenue and margin rates above prepandemic levels in the 17 markets included in that acquisition. As demonstrated by our recent PAI acquisition, our future acquisition focus is primarily on supporting 2.0 growth initiatives, pivoting away from larger core 1.0 acquisitions. However, we'll continue to consider smaller tuck-in core acquisitions that offer compelling returns.

As Ron mentioned, our key focus is on increasing free cash flow and capital allocation that maximizes total shareholder return. We expect our CapEx spend as a percent of revenue to continue to decrease while supporting increased revenue growth in our core and 2.0 strategies at above historical levels.

What's new in SP2 is the top layer of our strategy, which includes the development and introduction of digital cash management solutions through an integrated platform of services, technology and devices, leveraging our core CIT and money processing capabilities and significant assets. We call Strategy 2.0 Brink's Complete as it offers complete, digitally focused solutions for a broader cash management ecosystem from one provider, Brink's.

We believe our 1.0 and 1.5 strategies form a very strong foundation that, by themselves, will drive double-digit earning growth well into the future. This strong base of growth will be supplemented by a new strategic layer, which is designed to drive increased organic revenue growth and higher margins by offering digital cash management and payment solutions.

We plan to provide much more detail about the digital solutions at our Investor Day event, including specific financial targets and an update on some initial customer wins, but today, I want to simply remind investors, in general terms, about the potential impact that this opportunity could have on our company and, frankly, on our industry. We believe that managing cash for retailers and other merchants is a significant growth opportunity for Brink's, especially when you consider that about 85% of retail and merchant locations in the U.S. do not currently use any of our services or the services offered by our competitors. This means that literally millions of potential customer payment locations are completely unvended.

Why is this the case? Well, given the sheer size of the unvended market, it's hard to pinpoint all the reasons. Some unvended retailers are simply too small, and a cost-effective and simple-enough management solution for cash has not historically been available, but many larger, unvended or undervended retailers that are nationally known and have thousand of locations are also unvended. To be blunt, in some cases, some of them probably perceive our industry's traditional solutions and services to simply be too costly or to be, frankly, too much of a hassle. This is a potential -- this is potentially a transformational opportunity, and our strategy is targeted directly at this opportunity. We believe that Brink's Complete digital solutions offer a easy-to-use, attractively priced, subscription-based solution for cash management services, offering a compelling benefit for both vended and unvended retailers.

The benefits listed on this slide on the right-hand side add up to what we consider a step-change in value, making cash management easier, much safer and far more efficient than anything else offered by our industry. Simply, our goal is to offer digital cash management solutions that are easy to use and are as cost effective as other debit and credit payment solutions.

As with the development and introduction of many new products or services, we've had our share of growing pains on this along the way, including, frankly, the global pandemic. But we're now expanding our rollout in the U.S. and in several other global countries with a primary focus on unvended and underserved national retailers with multiple locations. And with several recent wins, we're feeling confident that the value of our solutions is beginning to be recognized by customers that historically have used limited or no cash management solution.

The chart on the left side of Slide 12 illustrates the total number of retail and commercial locations in the U.S. estimated to be in the 300 -- excuse me, the 3 million-plus range. The portion in brown shows that only about 15% of these locations are currently served by Brink's or any of our competitors, while almost all of them are vended by debit/credit payment processors. This suggests that with the right cash management solution and value proposition, the opportunity or, what we call, the cash white space shown on the chart is tremendous.

To put this opportunity in perspective, we believe that we can capture a significant portion of the potentially unvended market, the light blue, and even if we capture only a small portion of the rest of the white space unvended market, the result could increase our retail sales by more than 50-plus percent over the next several years in the U.S. alone.

We have a ways to go in reaching such a lofty milestone, but we expect to begin showing some meaningful progress as we exit 2021, and remember, our 2022 financial targets do not include a material impact from our Strategy 2.1 Brink's Complete initiatives. Again, more to come on this in Investor Day.

Let me summarize. Even with the unanticipated impact of continued shutdowns during the second quarter, we reported revenue growth of 27% and operating profit growth of 50%. That's good leverage, and it's supported by strong margin improvement. We anticipate that revenue will continue to gradually recover over the second half of this year, providing a strong jumping-off point for achieving revenue in 2022 that will exceed prepandemic levels and will include the benefits of the 2 acquisitions completed since 2019: G4S and PAI.

While we feel confident as we move into the second quarter this year, we believe that setting the stage for 2022 and beyond is even more important. I can assure you that we're sharply focused on achieving our 2022 targeted EBITDA of $800 million, which is supported by continued revenue growth and strong margin improvement and includes only, again, a limited contribution of 2.1 initiatives.

Cash usage continues to grow, and cash continues to be a key method of payment in the U.S. and globally, underpinning our future growth and recovery from the pandemic. We have a proven global management team, a strong balance sheet, ample liquidity and expanded global footprint from our acquisitions, a realigned cost structure coming out of the pandemic and a compelling strategic plan to expand our presence in the cash ecosystem with new digital solutions. We look forward to disclosing more information on these strategies and our 2023 financials when we host financial -- Investor Day in December.

Kate, now back to you and open for questions.

(Operator Instructions) The first question is from George Tong of Goldman Sachs.

You all expect 2021 revenue performance to come in at the lower end of the full year guide due in part to rising COVID cases. Can you discuss how revenue trends progressed through each of the months moving through the second quarter and into early July?

Yes. I think, George, what we tried to point out that when we started the year, and actually, as we were going through the first quarter, we continued to see shutdowns. And I'm not sure it's increased COVID cases, but the shutdowns in the first quarter -- coming out of the first quarter going into the second quarter continued in Europe further and longer than we would have anticipated and several countries in South America as well as actually in Asia as well.

Kind of the good news, and we don't know yet, I'm not sure anybody knows yet, the good news is as we moved out of the last month, in other words, June of the second quarter, we started to see the European opens up -- open up -- countries open up markedly. We don't know, and I think that we're all speculating where the Delta -- the next wave that we're seeing in various countries in varying degrees, depending on the vaccination rates in the countries, we're not sure all that will impact things, but we clearly saw an improvement, particularly in Europe, in the latter part, in June, the latter part of the second quarter.

And I think the key that we are trying to point out is we saw an improvement even in the second quarter that was not as strong as we would have liked because of the government-mandated shutdowns to a local currency rate of 97% of pre-COVID levels, up from the April year-to-date rate of 96% that we disclosed as we -- even as we went through the second quarter. So hence, we are suggesting that we'll continue to see, not a step change, but a gradual increase from that to get to a level of 100% of pre-COVID levels or 2019 levels for the full year of next year.

Got it. That's helpful. And just to follow up on some of the geographic performance you mentioned. Talked a little bit about Europe, Asia and Latin America. Can you also conclude in your discussion how those geographies compare with North America in terms of the recovery and perhaps rank order where you see the most strength coming out of 2Q?

Well, coming out of the quarter, George, I would say that the U.S. has the opportunity. We have, after Israel, I think, the highest level of vaccination. It seems to have stalled for whatever reason around half the adult population, but nevertheless, we're seeing openings quite strong. So I would say the biggest opportunity for recovery would be in the U.S.

Every country is different. Israel, with their reopenings and a vaccination population now approximately 70%, is doing extremely well. And again, as Doug mentioned, France, for example, when it started to reopen on June 20, so we don't have a lot of experience there, people are ready to get out, to start spending money in retail, to go to restaurants, and the cash is flowing. The question that we all have right now is, is this going to be a continued, gradual recovery around the globe or are we going to see a surge in some variant of the virus that causes governments to go into another phase of shutdown.

So it's very hard for us to predict what's going to happen, and because of that, we didn't change our guidance range. We're just saying that based on what we've seen so far, where Q1 and Q2 had continued or new shutdowns due to various strains, that we think we'll probably end up on the lower end of the range. And also, as Doug mentioned in his comments, the technical adjustment on the revenue for PAI versus the April 6 press release that we put out on expected revenue, instead of recording gross revenue for that business, we will, according to accounting convention, record net revenue.

And so those 2 things are causing us to be at the lower end of the revenue range. But as Doug also mentioned, the margin expansion, both from a combination of the cost-realignment initiatives we took -- those initiatives are really hanging on. The team around the globe, the Brink's team is really holding on to those savings, and in addition, the wider and deeper initiatives that we talked about previously are gaining traction. Those 2 things are really driving our margin expansion.

The next question is from Tobey Sommer of Truist Securities.

I was wondering if you could give us a sense for -- just refresh, if you would, the principal cost savings in the realignment that you've been able to undertake over the last 18 months, and also, on a net basis, just describe sort of the costs that would reinsert themselves in the income statement.

Yes. Tobey, in, I believe, our year-end 2020 earnings presentation, we had a dedicated slide that spoke not only about the costs incurred but also the recurring savings, and then there was a blurred bar that talked about how much was variable and how much was fixed.

I will tell you that as a part of our global cost realignment, we demanded that each business take out 10% to 15% of their SG&A, and across the world, that happened, and those costs have remained down. As you know, those are step-change costs, and they're only added back deliberately, and we have not added those back.

The variable costs, we required everybody to reduce their variable labor hours by at least as much as the percent revenue decline. They did that. I would love to tell you that the variable labor costs and head count is coming back with the revenue, but quite frankly, especially in the United States and in other countries, we're actually having trouble attracting and retaining necessary variable labor to meet the recovering revenue, So that's been a challenge.

But we took out the least-efficient vehicles in the fleet. We shut down facilities. In Paris, for example, we closed 3 of the 6 branches. I mean -- so every country was different, but overall, the permanent costs, whether they be fleet, whether they be facilities or SG&A, we're hanging on to those.

Tobey, I laid it out in my script and in my comments in 2 ways, and we try and lay this out as well as -- we continue to drive down costs and will continue into the future with our lean continuous improvement methodologies and culture. And the $70 million in cost-reduction takeouts in 2000 -- this year, 1 and '22 are really based on those lean cost takeouts, and we'll continue to do that into the future as well, and we'll give you more guidance on that in December when we talk about the rest of our strat plan period of time.

But that's our continuous improvement, wider and deeper cost takeouts that we'll continue to see this year. We've given you targets going forward, and as Ron mentioned, the L portion of this, the leverage portion of this, was the restructurings, and they showed up in our significant restructuring numbers and cash that we spent last year and for part of this year as well. Those restructurings are taking out the fixed costs, the SG&A and other fixed costs and structural costs that give us the ability to get the strong operating margin leverage as revenues come back, and we continue to have confidence that we'll see that margin leverage on top of our lean WD cost takeouts as we go forward into '22 and continue to see those takeouts.

So that's kind of the benefits of the underpinning of this that positions us well for continued margin improvement in the future as we see revenues come back. We can't tell you precisely when all those revenues will come back, but we have confidence that they will gradually come back this year, and that we don't think it's unrealistic to suggest that the 2022 revenues, based on what we can see, will be at close to or above 2019 for the full year next year, and that will drive back the leverage as we maintain our fixed cost structure as to -- on the levels that we've taken them down to.

And Tobey, it was actually our October 29, 2020, presentation, Slide #10, that has all the detail there.

Perfect. And could I just get your kind of brief comments on the pricing trends for your existing lines of business? I'm not asking about the new strategies. And maybe as I see the targets for '22, the leverage coming down, could you just describe a comment on what the acquisition climate is like?

I'm not sure what you mean by the leverage coming down for next year, Tobey.

The debt leverage coming down as you...

Okay. Yes. Okay. That makes sense. Because I think about operating leverage and margin improvement leverage. I think what you're alluding to is the debt leverage coming down because that slide only talks to using free cash flow generated next year, which we anticipate, as Ron suggested, on Slide 9, that free cash flow will be improved fairly dramatically next year as we reduce our restructuring expenses and other things like that. We maintain our CapEx level, which will then reduce our CapEx level as a percent of revenue, and that will, again, all contribute to the reduction -- or the increase, excuse me, in free cash flow.

And then it's a question of what's our best allocation, what's the best use of that free cash flow, as I said in my comments, to optimize shareholder return. This page shows that no new acquisitions on -- as an assumption, no new acquisitions and using that free cash flow to pay down debt, and so that's what the leverage -- financial leverage chart shows and the use of that.

Increase free cash flow, paying down debt with that free cash flow, and as I've said in my comments, about 1.5, our acquisition strategies, I think we're pivoting away from core acquisitions, core business acquisitions but acquisitions more like the PAI and others to support our 2.0 strategies and growth associated with that, which we think will continue to add to increase above and beyond our target organic growth levels as well as improve margins. That's where our key focus will be going forward in the future on that.

He also asked about pricing.

Pricing. I'm sorry. The U.S., it seems to be a bit more of the hotbed, if you will, in terms of pricing, labor issues, et cetera, much more so than most other countries around the world. And as we see in many other industries, we are continuing to struggle with being able to get labor as we need them across the U.S., and in many cases, as we saw in the second quarter, we are raising wages in order to attract and maintain our employees, especially on the front line, and as a result of that, we've pulled through -- we pulled ahead our normal October price increase in the U.S. to be implemented in the first part of the third quarter, and that is being implemented right now.

And that -- so part of what you saw is wage increases -- increasing our costs in the second half -- excuse me, second quarter of the U.S. that we'll start seeing some of the benefits of pricing come back in the second quarter, but it continues to be an issue with many other -- as many other businesses, an issue from the standpoint of being able to get labor as well as the continued pressure on cost.

(Operator Instructions) The next question is from Sam England of Berenberg.

The first one, just on the G4S acquisition exceeding the synergy targets. Could you talk a bit about which geographies or areas of the business are turning out better than the original plan? So do you have any idea of the scale of the extra synergies at this stage? And is it something you'll talk about at the Investor Day in December?

Well, we certainly will talk about it at Investor Day, and I think, Sam, it's more around not as necessarily the synergy targets and exceeding those. I think what we did say that we're close to being on track for the annualized synergy levels. Again, weren't all really dramatic, if you want to put it that way, because of -- there's only overlaps in 3 of the countries and on the SI BGS business.

I think what the more important piece of this is as we see revenue recover, we think that we'll see that revenue recovery up next year, 2022, in most all of the markets back to or above 2019 levels, but as important, as we talked about earlier, we are seeing strong improvement in operating margins as a result of the cost takeouts, the focus on the fixed-cost takeouts, which will provide us the leverage on margins and operating margins going forward.

So a portion of it clearly is the integration, we feel, is almost completely done. And the synergies are pretty much there and the run -- to gain the run rate on the implementation of those. But more important, I think, is that we've taken additional steps in almost every country for cost takeouts to position us well, as with the rest of the Brink's business, to get the leverage going forward with improved margins, and we're highly confident in that.

Sam, I might add that the performance overall, the G4S acquisitions, has exceeded our expectations. Which countries are doing better? That depends on the shutdowns in those countries, quite frankly, but the team -- the management team is excellent. And we're talking about cost synergies, but I will also tell you there are revenue synergies with sharing best practices. The hunger around the world for Strategy 2.0 as it's being developed and rolled out in certain countries is really there.

So as we continue to integrate, operate and the world returns to a new normal, we're really looking forward to the growth from these new businesses and sharing all of those ideas to really turbocharge the top line, and that will bring leverage -- operating leverage to the bottom line as well.

Great. And then the next one was just around cash usage trends. I just wondered how they're looking in markets outside the U.S., particularly Europe. I know you've got the data around cash in circulation, but do you have any idea what's going on with things like ATM transaction volumes and levels of sort of cash being processed in some of the other markets?

Yes. So Sam, that's a good question, and I think it's a yes and no answer. We have some data. We have some anecdotal evidence support. On Page 16, I think it is on the slides in the appendix, we did provide our -- kind of our usual slide, if you will, on the U.S. cash in circulation, which continues to be strong year-over-year versus prior years and prepandemic levels. The euro circulation is there as well, and you can see below there are 2 bullets on similar sort of currency in circulation in both Brazil and Mexico, which, interestingly enough, has similar trends to the U.S. and the euro in terms of cash that's there.

And then on the right-hand side, you can see like the PAI. You're asking the question there. Unfortunately, that is mostly U.S., if you want to look at it there, but it's continued, strong transactions there. I think that part of what's driving PAI, though, we have to be a little bit careful there, is the continued stimulus piece.

And so the bottom line point that we and I like to say on all this is it clearly is not going down. It's abnormally up versus all historical levels, and that's not suggesting there's any trend or anything in sight that's suggesting things are different or materially below. In fact, they're materially above prepandemic levels.

The only other thing we have on top of that is kind of anecdotal things like in Ireland with our transaction levels at our ATMs there. They spiked back up when we started to see the openings, but that was only the last part of June. And again, it's only anecdotal, and that's because things were shut down, and now they're starting to spike back up again. But I can't give you anything definitive around that.

This concludes our question-and-answer session and today's conference. Thank you for attending today's presentation. You may now disconnect.

Thank you.