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Brink's (NYSE:BCO)
Q2 2020 Earnings Call
Jul 29, 2020, 8:30 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:


Operator

Good morning, and welcome to the Brink's Company's second-quarter 2020 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 on the company's website, brinks.com.

[Operator instructions] And 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.

Ed Cunningham -- Vice President of Investor Relations and Corporate Communications

Thanks, Chad. Good morning, everyone, and welcome to our call. Joining me today are CEO Doug Pertz and CFO Ron Domanico. This morning, we reported second-quarter results in both the GAAP and -- on both the GAAP and non-GAAP basis.

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, costs related to an internal loss and costs related to certain accounting compliance matters. We also provided an analysis of 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 in 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. Finally, while we have not provided any specific guidance for 2020 or 2021, Page 3 of the press release does provide sensitivity models that include a range of potential revenue and adjusted EBITDA levels for both years, based on recent trends and customer data. I'll now turn the call over to Doug.

Doug Pertz -- Chief Executive Officer

Thanks, Ed. Good morning, and thank you for joining us. Given the challenges and uncertainties of the ongoing COVID-19 pandemic, our second-quarter results were much better than expected when we reported our first quarter results on May 5. On a sequential basis, compared to the first quarter, we delivered strong growth in operating profit, adjusted EBITDA, and EPS.

We reported operating profit of $73 million with a margin rate of 8.9% despite negative currency translation that impacted revenue by $86 million and operating profit by $18 million. This negative FX impact on operating profit was more than offset by aggressive variable cost reductions in the quarter and the initial contribution from the G4S acquisition. Compared to 2019, our reported revenue, which includes the acquired G4S business operations in the quarter, was down 10% and was flat versus last year on a constant-currency basis. Like most companies, our sequential and year-over-year results were heavily affected by the global pandemic, both in terms of reduced revenue and profit and added costs of operations.

When we reflect on where we were in April, we're very encouraged by the progressively positive impact of our cost reduction actions and what they have had on implementation during the quarter. We are -- we're also encouraged by the strong revenue recovery we saw in June, as economies began to reopen. For example, total company revenue, including acquired G4S businesses, were down 20% on a reported basis versus last year's prior April and revenue recovered to be up 3% in June. Excluding G4S businesses, which may be a better comparison for the market recovery, the April decline at the bottom was 29%, compared to a 14% decline versus prior year in the month of June, a 50% recovery.

Looking at the U.S. alone, there was a similar 50-plus percent improvement during the quarter from a 24% decline in April in revenue to an 11% decline in June. Both Ron and I will provide more detail on the quarter, but first, I want to address some investor concerns that we heard after releasing first quarter results. On February 26, we announced the acquisition of the majority of the G4S cash business.

We believe this is a great acquisition, and early results clearly support this. But with a subsequent onset of the pandemic, the timing was less than ideal. Despite the attractive valuation for the acquisition, our increased borrowings in the face of the pandemic raised investor concerns about our debt covenants. We addressed these concerns by amending our debt covenants through the first quarter of 2024, and we expanded our liquidity to over $1.3 billion.

The G4S acquisition is now 80% closed and with the acquired businesses performing well, and $20 million of annualized synergies expected to fully be realized in 2021. The G4S operations made a strong contribution to our second quarter results and with additional ongoing cost realignment, we expect further profit growth going forward. In March and April, the impact of the pandemic, the sudden downturn of economies globally and the result and impact of our short-term earnings and cash flows or all unknowns, and therefore, potentially, significant investor concerns. In response, and as part of our priority two initiatives, during the quarter, we made substantial and timely progress in reducing cost on a global basis.

Ron will provide more details. The results of these cost reductions were targeted at reducing variable costs in line with expected near-term revenue reductions and are evident in our comparatively strong second quarter results. These cost reductions had increasing impact as we were -- as they were implemented through the quarter. And together, with additional longer-term cost reductions, they should be key drivers for margin growth in the second half of this year and even more in 2021, when we also expect additional revenue recovery.

Investor concerns about our exposure to retail customers, which comprise about 47% -- 45%, excuse me, of our total revenue, is certainly understandable as well. However, it's important to understand that we have a very stable base of large retail and financial institution customers. Furthermore, overwhelming -- the overwhelming majority of retailers do not do business with Brink's or other cash management services. In fact, we estimate only approximately 10% of U.S.

retail locations are vended, which gives us a great opportunity to serve these locations by offering a better cash management solution for these customers, which we're in the process of doing with our Strategy 2.0 initiatives. We believe the stability of our FI customers, the revenue recovery we're seeing and the new 2.0 service offerings for a very large unvended retail market, will limit our downside exposure during these types of times. About 45% of our retail customers in the U.S. never closed because they were considered essential businesses, just as we are.

Of those that have closed, many have reopened. And the customer locations that have reopened are generating revenue for us at or near precrisis levels. In contrary to what many of you have been hearing, every one of our U.S. customers that has reopened is accepting cash from its customers.

Furthermore, cash in circulation has grown a sharp – has grown and shown a sharp increase since the onset of the pandemic. We'll provide more details in a few minutes. With the recent July data indicating continued revenue recovery above the June revenue levels, which was at 86% of last year's revenue level on a comparable basis, we believe revenue for full year 2021 could recover to a range around 100% of 2019 revenue levels or potentially higher. It's too early to provide guidance for 2021.

But with our cost reductions, adjusted EBITDA in 2021 could be in the $700 million range and even higher if 2021 revenue is greater than comparable 2019 levels. For 2020, we expect continued improvement, especially as our cost reductions further take hold and drive adjusted EBITDA margin improvement, with our sensitivity model showing a range of between 14% and 14.5% EBITDA margins for the full year of 2020. Before going further, I want to briefly remind everyone about our top three priorities as we manage through the COVID-19 crisis. The first and most important is to assure the safety of our employees, their families, and to assure a safe working environment.

In addition, to assure we provide the essential services to our customers and communities we serve. During the pandemic, we did just that, maintained our essential services to our customers, thanks to all of our 70,000-plus employees globally. The second priority is to act decisively to protect our business by preserving cash and reducing variable and fixed expenses to align our near-term cost structure with the reduced volumes and revenue caused by the mandated shutdowns globally. Unfortunately, doing so has required us to make many tough decisions, including employee layoffs, furloughs, and salary reductions throughout the company.

However, the aggressive and decisive actions taken, supported by our dedicated employee teams globally, produced the better-than-expected second-quarter financial results. Our third priority is to position Brink's to be a stronger company on the other side of the crisis. This priority is focused on rightsizing the business and capturing significant additional fixed cost reductions through restructurings that include headcount reductions and other structural cost takeouts. These sustainable fixed cost reductions are expected to drive higher margins at lower revenue levels and create greater earnings leverage that results in even higher margins as revenue continue to grow.

We're also sharply focused on completing the acquisition and integration of the G4S operations, including synergies, as well as rollout of our Strategy 2.0 initiatives. We're acting with a great sense of urgency and making solid progress on each of these priorities, as proven by our results and our future margin targets that we're sharing with you today. Now for a quick summary of quarterly results. As I mentioned earlier, our reported revenue declined 10% in the quarter, including the significant negative impact of translational FX, partially offset by the G4S acquisitions completed in the quarter.

On a constant-currency basis, without the negative FX impact, our revenue was flat versus last year. Organic revenue was down 17% versus last year. This excludes the addition of the G4S businesses that were added in the quarter and is probably a good integrator, again, of the pandemic's impact in the quarter. Operating profit as reported of $73 million declined 18%, with the entire decline due to $18 million of negative currency translation.

In constant currency, profits were actually up 3% versus last year's second quarter on flat constant-currency revenue growth. The strong operating margin of 8.9% in the quarter compares well with last year's 9.7% margin and, on a constant-currency basis, was actually higher than last year. These results show that our aggressive cost reductions had a very favorable impact in the quarter and position us again well for the future. Adjusted EBITDA fell 6% to $125 million, but reflecting a 15.2% margin rate, an increase of 60 basis points over last year's same quarter.

Earnings declined 22% to $0.67 per share, reflecting a negative currency translation and higher tax rate. In constant currency, earnings were up 3%. Ron will cover more of this in a few moments. Turning to Slide 6.

Predicting the future impact of the pandemic on our business, almost any similar service business, is very difficult, and we acknowledge these uncertainties. Just as government-mandated closings of our customers negatively affected our revenue, and therefore, our profits, the reopenings provide a path to recovery, with the question and the key question being the timing and slope of the revenue recovery. This slide shows year-over-year revenue changes for April and June for a variety of markets and the overall company. As you can see, most of these companies -- countries, excuse me, are recovering from their lowest level of revenue in April to June, the most recent month after reopening started in many countries.

In aggregate, our consolidated recovery, including the acquired G4S businesses with their respected -- respective, excuse me, pre-COVID-19 levels, shows a recovery from down 29% versus 2019 levels in April to a 14% decline in June or an approximate 50-plus percent revenue recovery. These June numbers represent only partial reopenings. And in general, additional openings continue beyond the middle of June and into July, further pushing the overall revenue recovery levels higher than the 86% of last year. Without knowing the timing of future economy openings or the impact of possible resurgence of the virus in the U.S.

and other countries, the June revenue of 86% of 2019 revenue seems to be a reasonable starting point for modeling future 2020 results. The consolidated bar on the far right of the graph shows reported revenue, including the acquired G4S businesses as compared to only the Brink's businesses in 2019. This comparison shows revenue down 20% in April and actually up 3% in June. This illustrates that future earnings will not only be driven by core business revenue recovery from the pandemic, but also by the added G4S acquisition revenue, both in the second half of this year and in 2021.

Here's a closer look at U.S. CIT volumes, measured by stops as well as by actual revenue. At the low point in April, stops were at 68% of pre-COVID levels, or down 32%. They have already recovered to an encouraging 83% of pre-COVID levels.

More importantly, the corresponding revenue recovery has also been rapid and equally encouraging. At the April low point, U.S. revenue was down 24% and has climbed back to 89% of pre-COVID levels in June. And with additional retail openings since the middle of June is currently higher than that level.

The data gives us confidence yet again that more customers -- with more customer reopenings, we're on track to approach and hopefully exceed 2019 revenue levels. Most of the reopenings are for nonessential services, such as clothing, general merchandise retailers, as most of the essential service providers remained open during the pandemic. Dine-in restaurants and entertainment locations, such as sports venues, theaters, and casinos have been particularly hard-hit by the pandemic and may continue to be delayed in reopenings as and if the virus continues. These customers, in total, represent only about 3% of our pre-COVID revenue.

Since the pandemic hit, I often hear that our retail customers will not be accepting cash in the future, and consumers, in fact, will not use cash in the post-pandemic world. Contrary to popular belief and what is often heard in media, every one of our customers that has reopened since being closed by the pandemic is continuing to accept cash from their customers as they reopen. This includes a large, well-known department store chain that media indicated would not accept cash when they reopened. Our revenue with this customer is back close to pre-COVID levels.

In our U.S. retail business, we bill our customers several ways: based on the number of stops, on a monthly flat rate basis or on a subscription basis, such as we do with CompuSafe. We do not bill based on volume of cash handled. Typically, our customers average two to four stops per week or as needed in the case of CompuSafe.

In the second quarter, due to the state-mandated closings, many of our customers that are on flat rate service or CompuSafe subscription agrees -- agreements, temporarily closed, even though, our agreements stipulated that they would continue to pay. Invoices sent to these customers were equal to approximately 11% of overall second-quarter U.S. revenue. However, these invoices were not included in our second-quarter reported revenue, but are included in our accounts receivable ledger.

As customers pay these invoices over the next quarters, those invoices will be booked as revenue without additional cost. If these invoices were recognized as revenue in the second quarter, U.S. reported revenue would have been down about 10% versus the reported 20% decline in the quarter. And the estimated operating income would have been about over 12%.

As disclosed in our last earnings release, significant cost reductions were planned and implemented in the U.S. in April and May. These cost reductions have resulted in the U.S. operating margins of approximately 10% in June, even with the revenue down 11% in June versus the prior year.

Before I talk directly about Slide 8, I'll remind you that the charts we've shared in the past regarding cash and circulation are included in the appendix and in other recent investor presentations. Those charts show the cash in circulation, both in value and number of notes, continues to grow in the U.S. and in Europe at annual rates of between 5% and 7%, well ahead of GDP rates. This growth has been consistent for the last 20-plus years, providing a strong underpinning for our business.

They also show that cash in circulation and percent of payments in cash historically has increased during recession, which we're in. While this pandemic is unprecedented, this new slide for 2020 clearly demonstrates that U.S. cash in circulation has increased sharply from pre-COVID levels and at a rate much higher than the historical 5% to 7% annual rate. It also shows a corresponding increase in the volume of notes that Brink's process before and after COVID-19, supporting the stability of our financial institution customers and is demonstrating the increased use of cash as a method of payment.

It is our strong belief that cash is and will remain a very popular form of payment in the U.S. and in the rest of the world. In fact, in emerging markets, like those in Latin America, Eastern Europe, and Asia Pacific, growth rates in cash and circulation, and cash as a percent of all payments are even higher than in the U.S. and Europe.

I'll now turn it over to Ron for a financial review. Ron?

Ron Domanico -- Chief Financial Officer

Thanks, Doug. And good day, everyone. Before I get into the results, I want to remind you that we disclose acquisitions separately for the first 12 months of ownership, at which time they are mostly integrated, and then they're included in organic results. In the second quarter 2020, acquisitions include G4Si for the entire quarter and a partial quarter for the G4S cash acquisitions in the Netherlands, Belgium, Ireland, Romania, the Czech Republic, Cyprus, Malaysia, Hong Kong, the Philippines, and the Dominican Republic.

Acquisitions in the second quarter also include Balance Innovations in the U.S., TVS in Colombia, a small CIT bolt-on in Brazil, minus the divestiture of a small monitoring business in France. As Doug mentioned, we experienced COVID-19-related volume reductions in our businesses beginning in Asia in February, Europe in early March, North America in mid-March, and Latin America by mid- to late March. We implemented daily activity trackers. And as pandemic-related shutdowns began, our organic revenue declined on average about 30% and, in some countries, by over 50%.

Generally, those reductions persisted throughout April. During May and June, as Doug said, we started to see improvements as countries began phased reopening. Those improvements appear to be holding and, when combined with our aggressive cost realignment initiatives, generated results better than we originally expected. Turning to our second quarter results on Slide 9.

2020 second-quarter revenue, in constant currency, was flat, as pandemic-related 17% organic decline was offset by acquisitions. The organic decline was realized across the globe. But as Doug mentioned, the recovery is under way, and the June organic decline was only 7%. Negative ForEx reduced revenue by $86 million, or 9%, and was driven by the pandemic-induced flight to the U.S.

dollar. Reported revenue was $826 million, down 10% versus the second quarter last year. Second-quarter operating profit was up 3% in constant currency as acquisitions more than offset an 18% decline in organic results. The fact that the percent organic operating profit decline was in line with the percent organic revenue decline is a testament to our aggressive cost management and realignment.

We were also helped by government COVID-19 assistance in several countries that partly offset the impact of revenue declines and government-mandated delays in executing some of our cost reduction actions. The constant currency OP margin of 10% was up 30 bps versus last year. Negative ForEx reduced OP by $18 million or minus 20%. Reported operating profit for the quarter was $73 million, and the operating margin was 8.9%, down 80 bps from the second quarter of 2019.

Segment results are included in the appendix and in our press release. However, the impact of and response to the pandemic is unique in each country. Corporate expense in the second quarter was $20 million favorable to 2019, driven by lower headcount-related IT expense, reduced salaries, bonuses, and noncash stock-based compensation and much less travel, partly offset by higher insurance costs. Many of the savings are a part of our fixed cost realignment and support the sensitivity modeling that we're illustrating for 2020 and 2021.

Moving to Slide 10. Second-quarter interest expense was $23 million, up $2 million versus the same period last year, as higher debt associated with acquisitions was partly offset by lower variable interest rates. Tax expense in the quarter was $21 million, equal to last year, as lower income was offset by a higher projected effective tax rate. As you saw in our press release, the full-year ETR is based on pandemic-related assumptions that fluctuate widely.

Our pre-pandemic guidance was a 2020 ETR of 32%. In the first quarter, the estimated full-year ETR was 49.8%. And in the second quarter, the estimated full-year ETR was 37.5%. Effective tax rate volatility is due to changes in assumptions about our ability to utilize tax attributes at varying projected income levels.

The G4S acquisition was also constructive in moderating the ETR. Minority interest and other was positive $5 million, primarily due to a $6 million gain in our equity investment in MoneyGram that reversed losses that we recorded in the fourth quarter of 2019 and the first quarter of this year, reducing the $73 million of second-quarter 2020 operating profit by $23 million in interest and $21 million in taxes, plus $5 million in other, generated $34 million of income from continuing operations. Dividing this by 51 million weighted average diluted shares outstanding generated $0.67 of earnings per share versus $0.86 in 2019. In the second quarter, depreciation and amortization was $42 million.

Interest expense and taxes were $44 million, and noncash share-based compensation was $5 million. In total, 2020 second-quarter adjusted EBITDA was $125 million, down 6% versus 2019. Now let's move to Slide 11 to review the decisive actions that are under way in response to the pandemic to realign our cost structure to protect our profitability and cash flow. As soon as it became apparent that COVID-19 was virulent and that it was spreading beyond China, we took immediate action to develop and implement our three priorities that Doug shared with you on Slide 4.

Sourcing and deploying PPE for our employees around the world was an immense challenge, and our sourcing team really stepped up to make it happen. While 60% of our cost structure is variable, we had to put measures in place to reduce direct labor hours at the same time and to at least the same magnitude as revenue decreased. We also took decisive action to realign our fixed costs so that we could generate similar or greater absolute levels of profitability if the pandemic caused a permanent 10% reduction in revenue. We did this while maintaining the capability to be able to serve our customers when volume levels return.

On the left side of the slide, we have listed some of the actions we've taken to address both our variable and our fixed costs. We've reduced direct and indirect labor costs by executing headcount reductions, either through temporary furloughs or severance, and we're aggressively managing overtime. We instituted freezes in hiring, merit increases, and travel. We took temporary salary and benefit reductions across our global footprint.

As I mentioned before, some of these actions have been slowed by government mandates and/or agreements with labor organizations. In some instances, we've been able to take advantage of government programs to offset a portion of our labor costs. We're optimizing our CIT routes, utilizing our most efficient vehicles, rationalizing maintenance, and optimizing our facilities footprint. Our 2020 fleet upgrades have been mostly put on hold.

Non-labor SG&A and other represent 20% of our cost structure, and we've taken actions to reduce discretionary spending at all levels, including headcount, facilities, professional fees, and travel. The right side of the slide illustrates that our cost realignment actions are expected to reduce headcount by approximately 5,500. We expect approximately $65 million in onetime costs associated with taking these actions, and we anticipate about $85 million in ongoing annualized savings at a revenue level equal to 90% of 2019 pro forma results. Now let's look at capex on Slide 12.

Our original guidance for 2020 cash capex was $165 million, which included $140 million for operating capex and $25 million to purchase cash devices. Since the start of the crisis, we've frozen most capex and only purchased assets that are essential to our business operations, safety, and security. We've cut the legacy Brink's cash capex target by more than 50% down to $80 million. We also expect to spend an additional $20 million related to the G4S acquisition, bringing our total cash capex target for this year to $100 million.

Year-to-date, we've invested $54 million in cash capex expenditures. We will monitor the severity and duration of the pandemic, and we may revisit our cash capex target later in the year. Turning to cash flow on Slide 13. Cash flow from operating activities is comprised of adjusted EBITDA reduced by working capital, cash restructuring, cash interest and cash taxes.

Free cash flow equals cash flow from operating activities less cash capital expenditures. In 2019, adjusted EBITDA was $564 million, cash flow from operating activities was $334 million and subtracting the $165 million in cash CapEx, produced free cash flow of $169 million. Due to the pandemic, we withdrew our 2020 guidance, including our original free cash flow target. As Doug will review with you shortly, we've now provided a model to estimate a range for 2020 adjusted EBITDA given various revenue scenarios.

We are using that range on this slide to illustrate estimated free cash flow. Working capital and cash restructuring charges in 2019 totaled $127 million. Due to the addition of the G4S cash businesses and anticipated COVID-related increase in DSO and our aggressive cost realignment initiative, especially severance, we're now estimating a range of $140 million to $160 million for 2020. Cash taxes, which totaled $24 million in 2019 are estimated at $65 million this year.

We received significant tax refunds and accelerated payments last year, which are not expected to repeat. We anticipate cash interest to be about $100 million due to the incremental debt associated with the G4S acquisition. Cash capex, as we just reviewed, is targeted at $100 million. Based on a range of 2020 adjusted EBITDA of $465 million to $515 million and the cash items we've just discussed, free cash flow should be in the range of $40 million to $110 million.

Let's move to Slide 14 to review our debt, liquidity, and covenant headroom. The bars on this chart represent the source of our liquidity, cash available on our business and capacity in our revolving credit facility. At the top of each bar, you can see our cash. Below the cash is our credit facility, both drawn and available.

And below that, our debt and financial leases. The bars each represent a point in time at 2019 year-end, at June 30, 2020 and at June 30, 2020, pro forma for the completion of the G4S cash acquisitions. At year-end 2019, we had approximately $1.2 billion in liquidity. Year-to-date, we have paid $651 million or approximately 80% of the acquisition of the G4S businesses.

On April 1, we closed a $590 million expansion of the term loan A with our bank group. And on June 22, we issued $400 million in new five-year senior unsecured notes. This drove liquidity to $1.5 billion on June 30. Pro forma for the completion of the acquisition of the G4S cash businesses, liquidity at the end of the second quarter would have been $1.3 billion.

Other than the 5% annual amortization of our term loan A, we have no significant debt maturities before 2024. Our variable interest rate, including the expanded term loan A is L plus 1.75% with a LIBOR floor of 75 bps only on drawn revolver borrowings. On June 9, we amended our bank agreement through February 2024 to replace the total debt leverage covenant with a secured debt leverage covenant. The 2020 max of the new covenant is 4.25 times and our June 30 pro forma secured leverage ratio was approximately 2 times.

We don't anticipate approaching our covenant limits at any time in the foreseeable future. We plan to maintain our quarterly dividend, our credit rating remains strong, and we have the capacity to weather the pandemic, even if the impact turns out to be worse than we currently anticipate. Let's look at our net debt and leverage on Slide 15. This slide illustrates our actual net debt and financial leverage at the end of 2017, 2018, 2019, and at June 30, 2020.

Our net debt at the end of the second quarter was $1.95 billion. That was up about $600 million over year-end 2019, due primarily to the G4S acquisition. At June 30, 2020, our total leverage ratio was 3.7 times, our fully synergized leverage ratio was 3.3 times, and as I just mentioned, our fully synergized secured leverage ratio was about 2 times. With that, I'll hand it now back over to Doug.

Doug Pertz -- Chief Executive Officer

Thanks, Ron. As I said earlier in my remarks, predicting the future impact of the pandemic is very difficult, and we acknowledge concerns about the resurgence of the virus in the U.S. and other countries. With that in mind, while we can't predict or guide to the timing or slope of recovery of revenue, we can provide adjusted EBITDA sensitivities around various future revenues.

In the earnings release and slides, we've provided modeling based on the expected results of the significant cost reductions made to date and in progress this year. These aggressive actions that are -- are ones that Brink's can control. The 2020 sensitivity model for adjusted EBITDA assumes a second half 2020 revenue range of 85% to 100% of last year's second half revenue. Since June 2020, revenue was at 86% of 2019 comparable -- on a comparable level, and reopenings have increased since June, we believe, this is a reasonable revenue range for the second half.

The blue portions of the bar represent actual first half revenue and EBITDA for both 2019 and 2020 and the variegated colored areas for organic, acquisition and FX bars represent the 85% to 100% sensitivities to second half 2019 revenues. Starting on the left side, you can see that last year's full year revenue of $3.7 billion included $1.9 billion in the second half of the year. If we achieve 85% to 100% of the second half revenue, the adjusted organic growth revenue from G4S acquisition and negative FX, based on recent currency rates, and taking all this into consideration, the bridge takes you to a 2020 potential range of $3.3 billion to $3.6 billion. The far right of the slide shows a corresponding EBITDA range of between $465 million and $515 million, reflecting a margin rate of 14% to 14.5%, driven primarily by cost reductions we're executing on this year that more than offset the significant translational FX impact we are currently seeing.

Slide 17 uses a similar approach to the model adjusted EBITDA based on potential revenue for 2021. In this model, we use a revenue range of between 90% and 110% of last year's revenue and an EBITDA margin rate of 15.8% at the 100% of 2019 revenue level or 50 basis points improvement versus the 2019 margin reported rate. As shown in the margin improvement chart on the left-hand side, at 100% of 2019 revenue, we expect our significant cost realignment actions to result in more than a 250 basis points margin improvement that more than offsets currently projected unfavorable translational FX of approximately 170 basis points or over $75 million and yields a 50% -- excuse me, 50 basis points margin improvement. To be sure, some of the variable cost reductions we've implemented will adjust as revenue recovers, but we expect our priority three fixed cost reductions to be more permanent, driving incremental operating leverage in 2021 and beyond.

For example, at 110% of 2019 revenue margins, our margins will improve another 50 basis points to approximately 16.3%. And at 90% of 2019 revenue, the model results in an EBITDA of $615 million and at 110% EBITDA over $800 million. As we stated earlier, there's still too much uncertainty to reinstate guidance, but we believe these models provide a logical framework to help investors estimate potential ranges for future revenue and EBITDA, includes the potential impact of the negative FX translation that we see today. It's important to note that neither model includes any benefits from -- related to our 2.0 Strategy initiatives, which, if successful, would provide incremental revenue and margin growth in 2021 and beyond.

In summary, we are very encouraged by the better-than-expected second-quarter results and the revenue recovery to 86% of pre-COVID levels in the month of June, which demonstrates, again, the stability of our customer base, both with financial institutions and the resiliency of our retailers. We expect continued improvement in revenue in the second half of this year, and thanks to our aggressive cost reductions, this revenue will be at higher-margin rates, despite the significant unfavorable effects we've experienced to date. The acquired G4S operations are expected to continue to add revenue and margin growth as well, with cost synergies added throughout this year. We expect the acquisition to be 100% complete by the end of this year, with full realization of synergies next year.

The sensitivity model for 2020 yields full year EBITDA between $465 million and $515 million based on second half revenue between 85% and 100% of last year, with the 86% jumping-off point on revenues in June. For 2021, our plan is to ensure that Brink's emerges from this crisis as a stronger company than -- with substantially growth -- with substantial growth opportunities for revenue, earnings, and cash flow and higher margins as well as return on invested capital. Our confidence is supported by our compelling strategic plan, a strong balance sheet, ample liquidity, and an expanded global footprint, and a realigned cost structure. We look forward to reporting 2021 results that will reflect higher margins for the full year benefit of the rightsizing cost structure, a full-year contribution to G4S and synergies, supported by continued revenue recovery as we go into next year.

As demonstrated in the second quarter, aggressive cost reductions focused on variable costs have already been achieved. Additional cost alignment focused on sustainable fixed cost reductions are also being implemented and are expected to provide margin leverage rates as we go into next year and beyond. It's too early to provide 2021 guidance, as we said, but sensitivity models demonstrate the potential for dramatic margin leverage increases and as revenue increases as well. And this model does not include, again, the contribution of our 2.0 tech-enabled cash management solutions that are -- that we think offer enhanced safety, ease of use, and lower cost for our customers.

We think these attributes will be highly valued in the post-pandemic economy. For example, our new Brink's complete service offering is starting to gain traction with our existing customers and with other retailers that had previously not used a cash management solution. The pandemic showed our marketing -- excuse me, the pandemic has slowed our marketing and rollout a bit, but it also has led to some opportunities as retailers reopen their locations. We now have a number of pilots and customer trials under way.

And to date, we have agreements to serve close to 1,500 locations with a variety of well-known retailers, several of which have the potential to use our solutions in thousands of locations that have not used a cash management solution in the past. We look forward to providing an update on the progress when we report our third-quarter results. That concludes our presentation. Chad, let's now open it up for questions.

Thank you.

Questions & Answers:


Operator

Thank you, sir. [Operator instructions] And the first question will come from George Tong with Goldman Sachs. Please go ahead.

George Tong -- Goldman Sachs -- Analyst

Hi. Thanks. Good morning.

Doug Pertz -- Chief Executive Officer

Good morning, George.

George Tong -- Goldman Sachs -- Analyst

You have indicated that total legacy revenue is at 86% of 2019 levels through the month of June. Can you detail how revenue trends have performed since June? So, through the month of July, how the rate of improvement has progressed.

Doug Pertz -- Chief Executive Officer

Yeah, George. As we stated, there's two indicators. We really don't have reported revenue for a period after June that's why we provided the jumping-off point for June. So, if you kind of look at the June number, obviously, in comparison to the April, which was at the bottom of the pandemic, it would be effectively an average look for the month of June.

We do have -- and we've provided some look at that, continued reopenings have continued since then, which would suggest additional revenue increases, but we don't have specific revenue data associated with that.

George Tong -- Goldman Sachs -- Analyst

OK. Got it. Well, any business activity data around the...

Doug Pertz -- Chief Executive Officer

Well, again – yeah, again, additional reopenings, which suggest that, in general -- and it depends -- I think, as Ron suggested a little bit, it depends by region. We've seen continued European strong reopenings since then. In the U.S., we've continued to see reopenings, probably not as strong a clip as we did in the month of June, and it's been about stable, I would suggest, is the way to look at it in South America. Nothing has gone down that we've seen, but not necessarily at this fast a clip.

George Tong -- Goldman Sachs -- Analyst

Got it. That's helpful. And then as a follow-up, you indicated that you expect your 2020 cost actions to generate $85 million in annualized savings. Can you elaborate on how much of this represents permanent versus temporary cost savings and how these actions might change your long-term EBITDA margin target?

Ron Domanico -- Chief Financial Officer

Well, that's why we provided our 2021 numbers. And on Page 17, we provided the 2021 sensitivity model. And in that model, you can see the target that we have laid out, which includes our sustainable -- what we call sustainable fixed cost reductions. And our key focus of our priority three is exactly that to achieve sustainable long-term fixed cost reductions, which are structurally different than where our business has been before, which gives us the upside margin leverage.

So as revenue increases -- just as we've shown in this model, as revenue increases, will not only offset the FX negativity of, what, 1 point -- 170-plus basis points that we currently project for 2021, but we'll also, obviously, gain additional margin. And as you can see on that page, you can actually see some margin leverage, which reinforces the point that, in fact, we've taken fixed costs out. And therefore, each additional incremental revenue dollar drops through at a higher-margin percent than the prior. And that's really what we're showing there.

So, at a hundred percent, you can see the margin is greater than 90%. At 110%, the margin percent is 50% -- 50 basis points, excuse me, greater than the prior revenue. That's margin leverage, which means that we're maintaining and sustaining our fixed cost reductions. And that's our whole objective.

George Tong -- Goldman Sachs -- Analyst

And then the -- any commentary on longer-term EBITDA margin targets, especially compared to competitors? I know, in the past, you've indicated EBITDA margin targets in the high teens or low 20s. So how do these cost savings affect those long-term targets beyond 2021?

Doug Pertz -- Chief Executive Officer

Well, we thought we were pretty aggressive in providing a 2021 modeling for you. It's not guidance. It's modeling. But I think what we're suggesting here, as we take these costs out, depending on what happens with FX, you'll see these types of margin and this leverage going forward.

So if you were to project out the additional recovery in revenue, whether it's organic growth, it's price growth on a global basis, or you see additional increases because of our strategies of 2.0, etc. that adds to this, we'll get improved margins with those alone, let alone, our additional strategy that we've already laid out of our 1.0 wider and deeper initiatives or other cost takeout going forward. So, we would anticipate -- although we're not going to provide guidance on it or modeling yet on it, we would anticipate that we'll continue to see stronger margin leverage in the future than we have in the past based on the actions that we've taken and we'll continue to take them.

George Tong -- Goldman Sachs -- Analyst

Fair enough.

Operator

Our next question will come from Jeff Kessler with Imperial Capital. Please go ahead.

Jeff Kessler -- Imperial Capital -- Analyst

Thank you. The timing of the G4S acquisition, as you said at the beginning, may have not been the best, but on the other hand, in talking to other companies that I've just reported, looking at the, if you want to call it, the tenure of recovery, it appears that both Europe and Southeast Asia have done a far better job in the United States in dealing with the coronavirus. And is it fair to say that when we take a look back at those -- at that chart in which you showed the – you know, the potential of that relative to what you had been earning that -- in terms of revenue, that the recovery that you've been receiving in the second quarter has been a little bit skewed toward those areas, let's call it, the rest of the world, particularly Southeast Asia and Europe relative to the United States?

Doug Pertz -- Chief Executive Officer

Well, so I think, Jeff, you did state it well that the recoveries that we've seen since the downturn or since the reopenings, and they have started at different times, but since the reopenings have been probably stronger in Europe and probably parts of Asia as well. Although in some cases, they didn't start until later. So, I think you got to keep that in mind. In some cases, it really didn't start until June or -- and therefore, it has been a faster slope in these markets.

So, though I do agree with that, we are pleased with that. The data we provided on Page 6, though, was in comparison to legacy versus legacy. So, it was comparable data. And it's not trying to skew it one way or the other.

It's trying to provide as best we can a jumping-off point, if you will, for revenue recovery so that you can determine in your modeling and investors can determine in their modeling, the types of revenue recoveries that you want to take in that. But, in general, we are very pleased with the recoveries that we've seen and there's probably been a little bit better, as you suggested in those markets. I think our point was that if we would not have the pandemic, and we would have had growth on top of the numbers that we purchased at the time we closed on the deal, it would be a much better picture than we have today. But that's true about everything.

We are very pleased and excited about the management teams, the performance to date with our different countries and businesses with G4S. And we have also implemented, I think, fairly aggressive and timely actions to help continue to drive stronger and sustainable cost structures in those countries just as we are in the rest of the Brink's business. And we're very pleased with those actions as well. So, I think all of that together bodes well for a very strong combined business going forward as we all get through this.

Jeff Kessler -- Imperial Capital -- Analyst

Second question is, given what you know about the U.S. because, obviously, you're here, and a lot of investors seem to focus on what's going on in the U.S. unless there's something -- unless something blows up, you know, internationally. And how have you -- in talking with your people on the ground, your operations people, with regard to your, let's call it, your market share -- not necessity your market share, but your value proposition position within the United States, has there any -- has anything changed during the last quarter or two that would give you more optimism or less optimism relative to the rest of the market against your competitors who may or may not have the same ability to take down cost as much as you've been able to take down cost? Since they -- a lot of them had to be lean and need to begin with, you can only get so much leaner.

You probably have a further ways to go. By doing that, you know – by doing that, you could probably, in a sense, offer a lot more incentives to customers to come back to you or to stay with you or to get into new programs such as 2.0 with you that others can't. So the question is, how do you view yourself in the U.S. relative to your competition, given what you've seen in this -- you know, the turnover and the pandemic realizing -- I do realize that you got to have to focus on yourself first and getting your cost structures first? But in terms of providing service and getting market share, how have you been doing in the last, let's say, quarter and a half?

Doug Pertz -- Chief Executive Officer

Yeah. I think the best answer to that is, I think, our market share and our position with customers has been good. We've not, in our opinion, lost anything, and we think that the -- our focus has been to service our customers, make sure we do that in a way that helps them restart. Our customers, in general, and I think this is true in the marketplace, they've been focusing on their restarts, their opening, their continuing to make it through the crisis period, and the more we can do to help support them on that, that's better.

As I've mentioned in my brief comments on the 2.0 Brink's Complete, in many cases, the customers wanted to focus not necessarily on a new solution or a better solution for them that we think provides more value, but on restarting and focusing on making sure their operations were in line with costs. They weren't focused on anything except getting going again. On the other hand, we do think that -- and many of our customers said, man, that fits and meets a lot of our objectives and our concerns, especially in a post-pandemic world that are better than what the offerings were in the past. And therefore, they like the value and the features associated with the Brink's Complete, and that will be enhancing and, I think, we'll catch on pretty quickly and be something that others -- other competitors don't have.

We certainly have a financial strength. We have the operational strength and -- but we're not looking to view this as a time to not strengthen our margins and our cost position as well. I hope that answers much of that.

Jeff Kessler -- Imperial Capital -- Analyst

Yeah.

Doug Pertz -- Chief Executive Officer

You know, I -- we did talk about some of our invoicing and so forth in the quarter. I think that's something to take a hard look at, and we'll see how that washes out over the following quarters.

Jeff Kessler -- Imperial Capital -- Analyst

And, just quickly, are your people on the ground in Texas, Florida and California, evidencing any concern about business there as it stands today, given those places seem to be hotspots?

Doug Pertz -- Chief Executive Officer

No. We aren't seeing any specific retrenching necessarily. Most of what we've seen is reopenings, as we said in the comments, have been around reopening of retail establishments. And I think what some of the retrenching or more of that you're hearing about is dine-in restaurants, entertainment locations, theaters, and so forth, which haven't seen as much of the reopenings to the extent that retail locations have.

I think that's a bigger [ Inaudible]

Jeff Kessler -- Imperial Capital -- Analyst

Great. Thank you. Thank you very much.

Doug Pertz -- Chief Executive Officer

Thank you.

Operator

And our next question will be from Tobey Sommer with SunTrust. Please go ahead.

Doug Pertz -- Chief Executive Officer

Morning, Tobey.

Tobey Sommer -- SunTrust Robinson Humphrey -- Analyst

Good morning. Just starting with just kind of a broad question. Of the many items and themes in today's quarterly update, do you -- what's the most surprising aspect of the businesses' performance compared to, you know, where you stood in the prior quarter results and call? Where is the biggest delta?

Doug Pertz -- Chief Executive Officer

Well, when you -- we would suggest you lay that out in two ways. One of them is that we didn't know what was going to happen, over what time frame, and what that recovery curve of our customers coming back, the revenue impact and so forth when we were laying that up. We had some idea. We tried to lay that as best we could as what the bottom would be, and we laid that out.

So that's the number one thing. So, I think that to see a recovery back to the 86%, if you will, in June revenue numbers and continued reopenings actually beyond that, that's the first thing. So at least gives us all at least a footing, a foundation, a jumping-off point for where I think it's reasonable to suggest where things could go into the future. So, I think that's the first thing, and that's a footing that we didn't -- any of us know or see, and it was a big unknown out there.

Second, I think that our cost reductions that we have talked about, that we talked about in terms of general terms is of both being the focus in the short-term related to variable cost reductions to address the near-term revenue reductions at the bottom were very important but weren't quantified and were just being implemented in the April and May time frame, particularly in the U.S. And then supplemented with that without quantification related to our longer-term fixed cost reductions, providing the sustainable margin leverage going forward. Those weren't necessarily quantified as much either. We've now quantified a lot of those.

We've provided some guidance on the things that we can control, which is the cost reduction, which are those activities, which is a substantial amount of restructuring charges that Ron went through that support the sustainable margin improvement and leverage that we see going forward in the future. Those are things we control and we can now talk to and predict to based on what we see and where we're going. So, the combination of those two things, I think, are the biggest points that we feel is much different for investors. I don't blame investors.

As I said in our talk and in my speech of -- I don't blame not knowing having uncertainty around things in the past, but those are now much more quantification around that and investors have to then say, well, based on the recovery on revenue, what should that slope be going forward? And second, OK, now I can apply some quantification around both the short-term and long-term cost structures around that. And obviously, there's the overview of the marketplace, which probably is a third point. And that third point is that cash in circulation is actually up that, in fact, -- that this isn't something that people aren't going to touch or use. And that it is continuing to be something that is an important part of commerce that we have a need in society that we'll continue to use, and it's not going away.

Tobey Sommer -- SunTrust Robinson Humphrey -- Analyst

Thanks. With respect to Brink's Complete, could you give us a little bit more color on progress in the pilots or betas, and at this point, the extent to which you see sort of the transition of your book of traditional legacy CompuSafe business toward the complete solution?

Doug Pertz -- Chief Executive Officer

Yeah. As I said, I think, it's a tale of two different sets of customers as we start to roll out, particularly in the U.S. One set that is very interested in what we have to offer, the benefits of that, the value equation and so forth with existing customers. But at the same time, it's something they don't necessarily want to focus on at this point.

They want to get up and running, worry about their business and making it through. And the – and another set of customers is pretty exciting on the other side is that even with existing customers and new customers that they see the value, and they're starting to roll up on that. And they're -- and many of them are jumping on the value proposition and starting up with it rather than waiting. And so, I think as we see this evolve and the reopenings become much clearer and stronger and get a little bit of time under, we'll get even more traction around it that we -- and proof, if you will, of the value equation going forward.

Tobey Sommer -- SunTrust Robinson Humphrey -- Analyst

I appreciate that. I just wanted to follow-up and I think you've touched on, but maybe ask it a different way. With respect to the company's position in the marketplace from a competitive perspective and opportunity to take share, how would you describe it on a geographic place basis where, you know, maybe there are some markets with more mom and pops? And is that where there's more opportunity? Or is it markets with larger firms that, you know, may have stumbled for another reason -- for one reason or another? Thanks.

Doug Pertz -- Chief Executive Officer

So, are you talking about 2.1 and our Complete solution or just in general?

Tobey Sommer -- SunTrust Robinson Humphrey -- Analyst

In general. Thank you.

Doug Pertz -- Chief Executive Officer

In general, it varies dramatically by country and where we are. Our objective over the last quarter has not been to go out and take market share. It's been to improve our cost structure but, more importantly, to service our customers, help them get back, service our customers and make sure we provide the service levels as we transition with our cost structures going forward. We service our customers.

We think that will take care of things. We're not looking to reduce price and go out and get more -- other issues, you know, and take share as a result of price and not at all. We're looking to service our customers based on our value equation to gain more business. And we think we're in both the strongest financial position as well as our operational position.

And then on top of that, we are starting some of our other actions of ATM outsourcing, such as the announcements we made in Ireland, and we'll see more of that going forward. More outsourcing from banks that we're starting to see as well, even financial institutions in the U.S., where we're seeing more outsourcing of vaults. We'll see more of that going forward. So, all of that will be great opportunities and not necessarily to take competitive share, but to grow through that additional outsourcing with customers as well as we see the opportunity, especially with our unique value propositions going forward to grow in the unvended space as well.

Customers, I think, as a result of the pandemic will not go and say we don't want more help in cash, whether it be retail or FIs. They're going to be saying just the opposite, we want more help, we want you to find a better solution. And that's what we started to see. The customers, retail customers, as an example, that are only partially vended today, I think they're going to become a lot more vended because we have a better solution for them.

I think what banks have suggested, whether it be ATMs or vaulting that is currently done in-house, that will be outsourced. So those present growth opportunities as we go forward as well as taking market share. But that's not our focus on competition at this stage.

Tobey Sommer -- SunTrust Robinson Humphrey -- Analyst

Thank you.

Operator

The next question will be from Sam England with Berenberg. Please go ahead.

Sam England -- Berenberg Capital Markets -- Analyst

Hi, guys. Just a couple for me. The first one, could you talk a bit about your expectations for South America and particularly Brazil in the second half? It was obviously a region that was later to be impacted by the pandemic. Brazil clearly held up very strongly in Q2 given they didn't go into a full lockdown.

So, I was just wondering how you're thinking about that region for the second half.

Doug Pertz -- Chief Executive Officer

I'll answer, and then I'll let Ron answer it as well. Look, I think South America is holding up very well under the circumstances. We -- I think I'd first say that we have seen more of our people and our employees impacted health-wise by COVID, and we are concerned and take -- you know, take more focus on that. On the business side, we think that Brazil, South America, in general, is -- has more than flattened out, and we may not see the curve be as steep coming back or as fast in coming back as Europe, which, I think, we said earlier is probably the fastest that we've seen coming back and that's what I think has seen in the economies as well.

But we do think it has flattened out. The numbers suggest that Brazil, in particular, that you mentioned, has performed extremely well financially during this time frame, and we think we'll continue to improve, probably not just as fast as an improvement in some of our other markets.

Ron Domanico -- Chief Financial Officer

Yeah, if you look at Slide 6, you can see that Mexico declined the least. That's basically because the country didn't shut down. And as Doug mentioned, the business toll was probably the lowest, but the human toll was the highest within Brink's. So, we're concerned about that.

You know, it's -- you say South America, but it's really country by country, as I mentioned in my remarks. I would say Mexico was the least responsive and then, you know, followed by Brazil. I would say Argentina has been the most disciplined with incredible lockdowns, followed by Colombia. So, it really is on a country-by-country basis.

We continue to monitor, not day-by-day in all cases, but certainly on a weekly basis. We have war room meetings with every country to determine what's happening and how we can respond. But again, on a case-by-case basis, you see that Mexico was the least impacted and is starting to be impacted now just because of measures the country did not put in place.

Sam England -- Berenberg Capital Markets -- Analyst

Great. And then the second one was, I was wondering what you're seeing on consumer credit availability at the moment and whether we're seeing the usual recessional shift into higher cash usage? I suppose how much of the benefit do you think the cash market is seeing from stimulus checks here in the U.S., but also actions in other countries to support unemployed people?

Ron Domanico -- Chief Financial Officer

I think it's more with reopenings than it is with actual cash and circulation. I mean, there's all the statistics that show cash is increasing, that show availability to credit is declining. But if people are not leaving their homes and going into establishments to spend anything, whether it's cash or credit, you're going to see a delay in reaction. But as Doug mentioned in his comments, we're not compensated on the volume of cash.

We're compensated in other ways, whether it's the number of stops, fixed monthly billing, subscription fees, things like that. So, we'll see the revenue increase as customers reopen, and that's more of a driver than actual growth in cash.

Doug Pertz -- Chief Executive Officer

But with that said, you can see the growth in cash. And it's certainly contrary to what many have suggested or predicted. And if you take a look at where credit card companies are projecting and banks have reserved, in fact, I saw something in the news the other day that banks are suggesting that their losses on credit cards and consumers related to that will be greater than what we saw -- what they saw in 2008 and '09. And that suggests and portends that, in fact, consumers will maybe not get the credit and credit cards, and there will be a lot to tap to then revert back to, which is the typical cycle in a recession like this, use more cash, and cash will become a greater payment method.

That's what we suggest and we think. And certainly, the numbers are starting to show that.

Sam England -- Berenberg Capital Markets -- Analyst

Great. Thanks very much, Doug.

Doug Pertz -- Chief Executive Officer

Thanks, Ron.

Operator

[Operator signoff]

Duration: 76 minutes

Call participants:

Ed Cunningham -- Vice President of Investor Relations and Corporate Communications

Doug Pertz -- Chief Executive Officer

Ron Domanico -- Chief Financial Officer

George Tong -- Goldman Sachs -- Analyst

Jeff Kessler -- Imperial Capital -- Analyst

Tobey Sommer -- SunTrust Robinson Humphrey -- Analyst

Sam England -- Berenberg Capital Markets -- Analyst

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