Prosegur Cash, S.A. (CASH) Earnings Call Transcript & Summary

Good day, and thank you for standing by. Welcome to the Prosegur Cash Q2 2026 Results Presentation. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speakers today, Miguel Bandres, Investor Relations Officer; and Javier Hergueta, CFO. Please go ahead.

Good morning to everyone, and thank you for joining today's call, where Javier Hergueta, our CFO, and myself will present our Q2 2026 results. The presentation should take around 20 minutes, and I will share the most relevant developments for our business during the period as well as the key elements of our financial performance. Javier will review the period highlights, income statement, cash generation and debt evolution as well as our transformation progress. After, I'll cover the main developments per region, and then Javier will share advancement in sustainability and the main conclusions ahead of the Q&A session. Should we not get to respond to everything in this session, we'll follow up on an individual basis. I want to again thank you all for your attendance and remind everyone that this presentation has been prerecorded and is available via webcast on our corporate web page, which you can find at www.prosegurcash.com. Before moving to the financial results, I'd like to provide some context regarding the current landscape for Cash. The quarter once again highlights that Cash remains highly relevant for consumers, merchants, central banks and regulators, especially in increasingly volatile and fragile digital economies. In the first news, we can read from Euronews on statements from Christine Lagarde and Piero Cipollone, top officials at the ECB on the debate around the digital euro and the clear institutional position. Digital euro will not replace cash. In Europe, freedom to use banknotes continues to be defended as a core element of Central Bank policy and consumer choice and as such, should be protected. Cash is to be accepted everywhere, and this is the clear stance is defended by regulators. In any case, we must all continue to assure the highest level of availability and usage acceptance to protect the health of the cash system and of its effect in commerce. Along these lines, the legal tender regulation is being finalized in order to assure proper distribution and compulsory acceptance of cash in the region. In the second news, we can read from Harvard Business School about who ultimately pays for payment systems. Analysis highlights that all consumers, including cash users, end up financing credit card loyalty programs since merchants pass card fees on to all consumers. This is an important reminder that cash remains a low-cost payment option and plays a relevant role in payment fairness and inclusion as well as an as for regulator for excessive digital pricing, providing all with alternatives to electronic payments without which they do increase their cost with no limits that are ultimately borne by consumers. Putting it in numbers, in the U.S., there is an estimate USD 30 billion transfer from cash users to cardholders each year, amounting to around USD 400 per household. Third, coming from India, we can read cash withdrawals increased by 12% despite the growth of UPI, the unified payments interface. This is a good example of how digital payment growth does not necessarily eliminate demand for cash. In fast-growing economies, both channels can coexist and serve different customer needs. In fact, recent changes on monitoring UPI transactions together to fees being charged to the service are raising general public strong concern and protests in the country. Lastly, Meta is consolidating a regulatory framework for crypto assets in the European Union. This institutionalization of the sector supports the demand for professional custody and digital security solutions. It is very relevant to assure a proper legal umbrella for the development of digital asset services so they grow securely for all constituencies affected and avoid unneeded volatility to the economy. Altogether, these examples reinforces previously shared situations. Cash remains an essential infrastructure and a necessary complement to the broader payments ecosystem, where digital bears costs and risks that are borne by all consumers in a hidden manner. As well, we see how digital regulation takes important steps forward. With this overview, I would now like to hand it over to Javier for the highlights of the period.

Thank you, Miguel. Good morning to everyone, and thank you as well for attending. The first half of 2026 shows a better quarterly trend in both growth and profitability, while we continue to reduce net debt. This is particularly important because we are achieving it despite a still adverse currency environment and a mixed macroeconomic situation in all regions derived from sustained geopolitical tensions. Reported sales were broadly stable, decreasing by 0.4% to EUR 1,001 million. Still like-for-like and when adjusted for the AVOS divestment, sales grew by 0.7% in euro terms. As well, the negative foreign exchange impact has slowed with even a slight positive effect in Q2 stand-alone. It is also worth highlighting the acceleration in Latin America, where Q2 sales grew by 4.7% in euros. At margin level, EBITDA improved by 1.3% year-on-year and EBITDA margin stood at 11.1%, while net profit grew by 1.9% year-on-year. In the stand-alone second quarter, the EBITDA margin improved by 30 basis points versus last year. In terms of transformation, it continues to be a solid growth engine. Excluding the mentioned AVOS sale, transformation products grew by 7.8% and the penetration reached 35.1% of sales, 240 basis points more than in the first half of 2025. Turning to cash generation. Free cash flow amounted to EUR 29 million this semester, in line with 2025. Committed to financial discipline, we reduced total last 12 months net debt by EUR 53 million and leverage remained stable at 2.3x, which is 0.1x lower than at the end of the first quarter. Finally, I would highlight 2 additional milestones. We obtained the MiCA license to operate digital asset services in Europe, and we renewed our commercial paper program, showing the strength of our balance sheet and the appetite it generates in the market. With this overview, let me now move on to the financials. Looking first at the income statement, sales reached EUR 1,001 million in the first half of the year, a 0.4% decline versus 2025. As shown on the right-hand side of the page, organic growth was positive at 3.0%, while inorganic had a minus 1.1% impact and foreign exchange was minus 2.3%. Like-for-like, isolating the AVOS sale impact, revenue grew by almost 1% in the first semester and by 5.1% in Q2 stand-alone. Important to underline the change in trend in euros when we look at the reported second quarter with sales growing by 3% year-on-year despite the negative effect of 2.2% due to the divestment in the quarter. EBITDA amounted to EUR 173 million, growing 1.3% year-on-year and EBITDA margin increased to 17.3% of sales. After depreciation of EUR 61 million, EBITA reached EUR 111 million with an EBITA margin of 11.1%. Amortization of intangibles was stable at EUR 11 million, bringing the EBIT to EUR 101 million and the EBIT relative margin to 10.1% of sales. Below EBIT, the financial result amounted to EUR 17 million, with which earnings before taxes totaled EUR 83 million, 8.3% of sales. Taxes reached EUR 35 million, implying an improved tax rate of 41.9% compared with 45.1% in the first half of 2025, reflecting the impact of tax efficiency actions as well as the country mix. With all this, net profit reached EUR 48 million, increasing 1.9% year-on-year, while consolidated net profit reached EUR 46 million, up by 0.8%. Earnings per share increased by 1.6% to EUR 3.14. Overall, the P&L shows a good trend with improved performance in the second quarter. Moving now to cash flow and net debt. This first half part of the year reconfirms our focus on disciplined and prudent financial management. With an EBITDA of EUR 173 million, provisions and other items deducted EUR 38 million, while income tax detracted the same amount. CapEx reached EUR 37 million and working capital consumption was EUR 30 million. This implies a particularly good performance in this second quarter where we invested EUR 12 million in working capital to finance the 2.9% organic growth in the period. As a result, free cash flow amounted to EUR 29 million, in line with the EUR 28 million generated in the first half of 2025 and the conversion ratio remained high at 79%, parallel to 2025. After interest payments of EUR 13 million, positive M&A inflows of EUR 9 million, dividend and treasury stock payments of EUR 2 million and other minor items, total net cash flow was positive by EUR 18 million. Our net financial position lowered from EUR 711 million at the beginning of the period to EUR 688 million at the end of June. Foreign exchange also had a positive EUR 5 million effect in the period. Including IFRS 16 debt, deferred payments and treasury stock, total net debt was reduced to EUR 829 million, EUR 53 million lower than 1 year ago, and our leverage ratio improved to 2.3x, reducing 0.1x when compared with the first quarter of 2026. This continued reduction in debt, as stated above, shows that it's a total priority for us, always preserving the investment required to support commercial opportunities and continuing to grow our transformation solutions. Turning to the next page. Transformation solutions reached EUR 358 million on a reported basis, growing 4.7% year-on-year and representing 35.8% of total sales. The evolution is even clearer, excluding AVOS. When this is isolated, transformation products grew by 7.8% to EUR 348 million. Excluding AVOS, penetration increased from 32.7% to 35.1% of sales, which is 240 basis points increase versus the first half of 2025. Cash today continues to show a strong performance and remains one of the main contributors to this growth. We continue to see strong customer acceptance across markets as clients look for solutions that combine efficiency, security and better cash management. Transformation, therefore, remains one of the clearest levers to improve the quality of growth and the profitability profile of our company. With this, I hand it back to Miguel for the regional overview.

Thank you, Javier. I'll first turn to Latin America, our largest region, representing 58% of group sales. Sales in LatAm reached EUR 579 million in the first half, a 1.7% decline in reported terms. However, the underlying operating performance remains positive with organic growth of 2%. This trend accelerated quarter-on-quarter and Q2 stand-alone sales grew by 4.7% in euros. The inorganic effect was minus 1.5% and foreign exchange deducted 2.2%. If we look at the quarter stand-alone, it reflects a very positive plus 2.5% organic growth, the best in the last 4 quarters, which we are sure will continue into the future. As well, currency effect in the quarter was positive 5.5%, a reverse on a long-time trend, which will help us in our euro performance. Ex AVOS divestment, Q2 grew by 8% versus 2025, a particularly positive number. Transformation products delivered strongly in the region. They reached EUR 224 million, growing by 4.3% and penetration increased from 36.4% to 38.6% of sales, a 220-basis-point jump year-on-year. Profitability was resilient. EBITA amounted to EUR 91.8 million, slightly below last year, and the EBITA margin improved by 10 basis points to 15.8% of sales. The region, therefore, continues to combine resilient profitability with increasing penetration of value-added transformation solutions. With this, I'll turn to Europe. That represents 33% of group sales. Revenue in the region reached EUR 330 million, growing 2.2% year-on-year. This performance was supported by an organic growth of 2.4% with limited FX impact of minus 0.2% and no inorganic effect. The quarter showed a deceleration in the organic growth fundamentally driven by a slowdown on non-euro currency traffic due to international conflict affecting our change business. Despite that, transformation products continue to progress well, reaching EUR 111 million and growing by 6.3% to represent 33.7% of sales, implying a 130 basis points improvement over the first half of 2025. Profitability in the region was a touch down with EBITA totaling EUR 7.9 million, 2.4% of sales. This evolution was mainly affected by the performance of the ForEx business and by higher globally related incidents in the period. Even with this short-term pressure on EBITA, the commercial performance of the region remains positive and the continued increase in penetration of the transformation products supports a better mix for the future. With this, I move to Asia Pacific. That represents 9% of group sales and continues to show strong underlying growth. Reported sales reached EUR 91 million, 1.4% below last year, explained by a negative 10.9% foreign exchange impact that continues a now 6-quarter trend, which seems to be smoothening and a minus 2.3% inorganic effect. Most important to underline is that underlying organic growth remained very strong at 11.8%. Transformation products were broadly stable in reported euro terms, increasing by 0.9% to EUR 23 million, but being able to hedge off the negative currency effect and the penetration continues to rise, reaching 25.2% of total sales. That's 60 basis points more than in the first half of 2025. This is quite remarkable, especially taking into account the performance of the core business that continues to be very strong on the back of a strong cash demand and growing outsourcing opportunities. Profitability improved strongly. EBITA grew by 41% to EUR 12 million, and the margin increased by 390 basis points to 12.8% of sales. This confirms the region's progress towards double-digit profitability profile. Asia Pacific consolidates itself as an attractive growth region with a strong organic momentum and an improved profitability profile. With this, I'll now hand back to Javier.

Thank you, Miguel. I would like to briefly review the main sustainability developments of the first half of 2026 before moving to conclusions. On the environmental front, we approved a 5-year climate transition plan. This plan sets a road map to improve environmental efficiency ratios and reduce emissions. In the health and safety area, we as well continue to make progress and productive hours related to vehicle-related workplace accidents decreased by 51% year-on-year, reflecting the impact of ongoing prevention and training initiatives. We are completely committed to increasing the health and security standards of our operations since our people are our main assets. By protecting them, we improve our company health and our operations and as well, we increase our performance. On cybersecurity, an area particularly critical for us as should be for everyone as we can see that on a daily basis, infrastructures across the globe are increasingly attacked and threatened, we have trained and certified 1,500 employees. This is one more step to make us more resilient and secure as we reinforce awareness and readiness across the organization for this rising risk that will only continue to increase. Finally, on the view externals have on us, the lower part of the page summarizes the latest scores achieved. These relevant indicators of how we are seen by the rating and proxy communities are positive and the decrease in rating in some cases, is due to changes in measuring criteria, not reducing as our standards. To conclude, and as I started this presentation, the first half of 2026 shows improved growth and profitability in the second quarter, together with continued debt reduction. Reported sales are stable with a minus 0.4% decline that when we isolate the AVOS divestment means an increase of 0.7% in euro terms. The negative FX impact decreased and even had a positive effect in the second quarter when considered stand-alone. Important to underline the good performance of LatAm, our main region that showed a clear acceleration in Q2 sales in euro terms. Profitability also improved in the quarter. EBITDA grew by 1.3% in the first half. The EBITA margin stood at 11.1% and the Q2 stand-alone EBITA margin improved by 30 basis points and EUR 3 million year-on-year. Net profit increased by 1.9%. Transformation continued to gain relevance. Excluding AVOS, transformation products grew by 7.8% and reached 35.1% of sales, 240 basis points more than in the first half of 2025. Free cash flow was EUR 29 million, in line with the previous year. Total last 12 months net debt decreased by EUR 53 million and leverage remained stable at 2.3x, 0.1x lower than in the first quarter. Lastly, we obtained the initial license to operate digital asset services in Europe and renewed our commercial paper program. Thank you very much again for your attention, and we would now like to open the floor to your questions.

[Operator Instructions] We will now take the first question from the line of Joaquin Garcia-Quiros from JB Capital.