Prosegur Compañía de Seguridad, S.A. (PSG) Earnings Call Transcript & Summary

Ladies and gentlemen, thank you for standing by, and welcome to the Prosegur 9 Months 2021 Results Presentation. [Operator Instructions] I must advise you, this conference is being recorded today. I would now like to hand over to your speaker today, Antonio de Carcer, Head of Investor Relations. Please go ahead, Antonio.

Good afternoon, and welcome to Prosegur 9 months 2021 results presentation. This presentation is expected to last around 30 minutes, followed by an open Q&A session. As customary, this webcast will be hosted by Antonio Rubio, Secretary General; Maite Rodriguez, CFO; and myself. Prior to starting, I would like to remind you that this presentation has been prerecorded and that it will also be available for download in our corporate web page. I will now hand you over to our Secretary General, Antonio Rubio.

Good afternoon, everyone, and thank you for attending this presentation. The results we are releasing today are good. And the evidence, we are gradually coming back to normal. And although the general conditions continue being slow in some geographies, we are pleased to state that all our business lines are presenting positive company growth, both in accumulated and isolated quarter terms. This is a good indicator that the negative effects imposed by the pandemic are easing, and the path to full recovery is open in front of us. However, full recuperation may still take some time. The recovery base is not even in all geographies. But nevertheless, we are optimistic regarding its continuous evolution. And as you will see, all our business lines are consistently catching up with this trend. Let me start this presentation with a quick overview of the main highlights of the period. Over the last 3 months, we have continuously experienced a gradual improvement on the economic conditions in each of the countries we operate. But as mentioned, this evolution has had different degrees of progress depending on the geography. Europe and the U.S. had been the fastest. In September, vaccination programs had covered near 60% of population in North America, more than 70% in Spain and Germany, and more than 80% in Portugal. This process has led to the wide reopening of all the international airport activity as well as the coming back of large sport and social events. These good dynamics have been supported on our site by additional M&A performed in the U.S., on which I will give you some more color in a minute. However, global figures remained below 2019 equivalents. So most of this coming back to normal has been done in late September, and some recession has still remained under limitations. On the other hand, Ibero-America is severely affected by the pandemic's adverse effects. Confinements and selected lockdowns remain present in Brazil and Argentina, and to some extent, in almost all geographies in the region. Our business in that region continues progressing, but there is still some delay in respect to Europe or U.S. that will hopefully decrease as vaccination advance. Moreover, during the past months, many of the government programs put in place to support population during the hardest times of the crisis had been ended. Setting an end of the extra services we are carrying on some countries where our clients have not yet fully reactivated their activity. AOA, on its side, also suffered an additional stagnation of the activity during the period. Australia has suffered the strongest peak of inflation during the past months that has forced reinstate severe lockdowns and confinements, although now since the vaccination programs are developing very fast. However, in this unbalanced environment, we have managed to develop organic growth in all geographies and in all products. And as you can see on the charts on this slide, it seems evident that the worst of the negative effect from COVID crisis is over, and we are gradually coming back to normal. Analyzing pure organic growth on a year-on-year basis, Q3 in 2020 was the worst performing quarter of the past 3 years, mainly for cash and with a delayed effect also on security. But as you can see, it seems evident that the situation is steadily reverting. And over the past 6 months, our business is rapidly coming back to shape. It's still below 2019 figures though, but obviously, leaving the worst of the crisis behind us. New product sales had also increased during the pandemic, reporting an excellent 4.5% growth in compound terms during this past quarter and accounting for more than 21% of cash revenues and 40% of security in the current year. Alarms had overcome the strong slowdown in sales imposed by the confinements. And while Prosegur alarms in Portugal and LATAM is gradually returning to the figures before the pandemic in terms of creation of new clients, our joint venture with Telefonica, Movistar Prosegur Alarmas is regularly increasing their sales, up to more than 37,000 new customer in the last 3 months. An excellent performance that we prepare to accelerate even further with the recently announced commercial agreements signed with both Telefonica and Santander Bank to sell alarms in Colombia and Spain, respectively. On the profitability side, we can appreciate the same positive tendency, although with some temporary lack in respect to revenue growth. As you can see on the upper right chart on the slide, our EBITA margin on an isolated quarterly basis has been mostly affected during the first half of 2021, nearly a 6-month gap with organic sales equivalents. This brings evidence to the strong seasonal profile of our margins that as it can be appreciated on the chart has a very noticeable ascending curve, clearly illustrating how at the beginning of the year, our quarterly margins always suffer the effect of the increased cost base that will be gradually transferred to clients along the second half of the year. During the past 2 quarters, however, we have been experiencing some temporary delay in catching up with sales in some of our businesses. This can be explained principally by the sense of labor and productivity still present in LATAM, mainly in Brazil and Argentina due to extraordinary labor protection regulations in parallel with the time lag between the termination of certain government support programs and the subsequent reactivation of the client activity. This, together with negative FX impact, not yet fully transferred to market through inflation are the main explanation for this temporary delay on profitability recovery. But regarding inflation, I would like to refresh the information we stated in our Capital Markets Day about how inflationary environments can generate a positive effect in our main businesses. Increased inflation will call for higher volumes of cash in circulation in emerging markets, but also for faster velocity of cash movement in mature ones. Security will also benefit from this situation as higher inflation usually calls for faster cost transferring to prices in an industry that is highly ionized and mostly driven by collective bargaining agreements. The chart on the lower right side of the slide shows how, since 2010, we have consistently been able to pass previous year inflation into prices. During the year 2020, due to COVID reasons, the one that has generated a stronger negative impact. But as you can see, we are back ahead of it in 2021, and we hopefully do a full catch up in the coming 12 months. To conclude with my introduction, let me now do a quick overview of the last M&A operation we have done in the U.S. market. As we advised in our Capital Markets Day, we had a very high commitment on growing fast in the North American security market. Not only because it is the largest security market in the world with the high assistance of technology and interesting margins in traditional manned guarding, also because there is currently a good opportunity for a third large global player to capture a significant market share due to the recent merger between 2 of the main 3 players that has left the market too overconcentrated. Our strategy in the U.S. is to propose to clients a specialized security model, fully oriented to meet their industry-specific requirements and supported by the unextensive use of remote monitoring technologies. In this regard, we had acquired the company, Superior Security and Investigations, a security operator highly focused in the air transportation industry with ongoing presence in the state of Oklahoma, Texas and Missouri. SSI has reported consolidated revenues of EUR 7.7 million in 2020, and an EBIT margin close to 10%. With this acquisition, we are gaining higher presence in the mid-south region of the United States, while also increasing our presentation in the air transportation industry. This was all on my side for this introduction. I will be back with you at the end of this presentation to comment on our ESG initiative and for my final remarks. I will now pass the presentation to our Group's CFO, Maite Rodriguez, who will guide you through our financial statements for this 9 months 2021 results. Thank you very much.

Thank you very much, Antonio, and welcome everyone to this presentation. I will start the financial review over the past 9 months with a quick overlook of the most relevant indicators of the period. Firstly, I would like to remark the positive organic growth across all business lines and geographies, achieving at Group level, a 4% increase, which proves the recovery that our activity is experiencing. The only negative impact in our revenues comes from currency effect. It has also been remarkable the increase of our alarm installed base with total 668,000 active clients. Profitability has also improved over previous quarters as all business lines recover activity. EBITA amounts to EUR 159 million, representing a 6.3% EBITA margin. It remains 7 basis points below same period in 2020 because it is affected by some temporary negative effects deriving from the pandemic, mainly coming from the exceptional services delivered in some markets last year. Operating cash flow of EUR 151 million remains in line with the good cash generation of our group in the past years, increasing the EBITDA to cash conversion ratio up to 60%, boosted by the ongoing optimization of our DSO that has again been improved in this period and a strict control of investments. Additionally, on the liquidity level of the company, we maintained a very solid firepower of up to EUR 1.3 billion. And finally, I would like to highlight that our credit rating has been recently confirmed by S&P as BBB stable. Looking at our consolidated P&L. We observed a 3.2% reduction in sales over the same period in 2020, driven by the negative currency. In terms of organic growth, the Group has experienced a positive impact up to 4% as mentioned before. Regarding the 0.1 in organic growth, it is the result of the increase coming from the acquisition of RedPagos in Uruguay and the latest acquisition in the U.S.A., offset by the proportional part of the Spanish alarm business transferred to Telefonica in 2020. Coming back to the results by region, it is remarkable that positive organic growth in all of them, except Europe, which is affected negatively by the reconsolidation of the Spanish alarm business. If we isolate this aspect, Europe has a positive growth close to 1%. EBITDA has reached EUR 279 million, showing a 4.6 contraction. It's still affected by the tough situation suffered at the beginning of the year. Even so, the cost containment policy supplied has driven to reach 11% margin at EBITDA level. The low EBITDA, financial results reached net cost of EUR 20 million as a consequence of natural hedging strategies in economies with high devaluation plus an efficient financial structure. Our effective tax rate for the period is the result of worse fiscal mix and higher corporate tax in several geographies. Looking now to Group profitability more in detail by business. We see that security has continued increasing their margins compared to last year figures, achieving a 3.3% EBITA margin versus 3.1% last year. This is a success, considering the high level of unproductive labor cases we still suffer in some countries whose regulation did not allow us to properly adapt our cost structure to reduce customer demand during the pandemic, mainly in South America. Cash on its side continues recovering its margins in parallel to the easing of restrictions. And although it still shows a slight reduction on its margins on the full 9 months period, its EBITA has grown 40% on Q3 '21 over Q2. With this an excellent indicator of the steady and sequential improvement that the business is experiencing. Coming back to alarm business, the pre-SAC EBITDA margin of the alarm business, considering both MPA and Prosegur, has decreased to 45.5% due to the increased cost of the reactivation of the commercial activity affected by temporary layoffs last year. Let's now brief comment on our cash flow statement, debt structure and balance sheet. When looking at the cash flow statement, the most remarkable aspect is the extraordinary 61% EBITDA to cash conversion ratio. As in the previous quarter, this metric exceeds the Group historical average, isolating the one-offs occurred back in 2020, standing quite above over the last 3 pre-pandemic years. Analyzing in detail the operating cash flow composition, during the quarter the working capital has been impacted by the reactivation of the activity and the increase of sales. Having said that, it is worth mentioning the sustained improvement of DSO, not only versus previous quarter, but also in comparison with the same period of last year. Regarding provisions and other non-cash items, its variation is driven mainly by the non-current tax deferral with a direct positive impact in 2020 and by the restructuring plans recognized in 2020 in P&L and mostly paid during 2021. Regarding CapEx, its containment continues. Infrastructure CapEx keeps under control, representing 2% of our sales. M&A wise, we already mentioned security company acquisition in U.S.A. and other deferred payment settlement explained the cash out of the quarter in this regard. Lastly, when it comes to dividends, both Prosegur and Prosegur Cash completed their third out of 4 committed installment in July. Looking now at the Group's financial position. At the end of September 2021, total net debt amounted to EUR 844 million, including deferred payment of EUR 99 million, treasury stock at market price of EUR 39 million and Telefonica shares of EUR 201 million. It will furthermore include additional IFRS 16 related debt of EUR 93 million, total net debt reaches EUR 937 million. Regarding net financial debt, its modest increase during the quarter is driven by dividend payments, M&A and CapEx, which offset the positive operating cash flow generation. Leverage-wise, Prosegur keeps showing a moderate net debt-to-EBITDA ratio of 2.2x, far below the current banking covenant of 3.5x. Prosegur maintains its traditional financial discipline, which is in our DNA, guaranteeing a healthy and sound financial position. The best evidence to prove our financial resilience is the recent confirmation of Prosegur BBB stable rating by S&P, as mentioned before. As far as pure cost of debt, I would like to highlight the efficient financial expense management, which allows us to maintain a flat and very low average cost of corporate debt. To conclude our financial information review, let's have a look at our consolidated balance sheet. In general, there haven't been any significant changes during the third quarter of 2021. Once again, the most remarkable aspect is the solid and stable balance sheet Prosegur historically shows. As always, our maturity profile is worth mentioning since more than 85% of our financial liabilities are considered of long-term nature. Liquidity is also one of our greatest strengths with a firepower that currently covers more than 75% of the main indebtedness, which will mature over the next 5 years. On top of that, the maturities of the major financial facilities are fairly separated along the years, avoiding the concentration of the rates. In this regard, I'm proud to share with you the recent agreement signed last week between Prosegur and the European Investment Bank. It involves a credit loan with a limit of EUR 57.5 million and a very competitive financial cost devoted to finance, innovation and digitalization project. This initiative reveals how firmly Prosegur is betting on innovation for the future. Press release wise, the share buyback program that is currently in place has, as I proposed, the acquisition of own shares that eventually will be amortized. This is all on my side for now. Thank you very much for your attention, and I will join you back again for the Q&A session. I will now hand the presentation over to our Head of Investor Relations, Antonio de Carcer, who will provide you with more detailed information on the performance of each individual business line.

Thank you very much, Maite. We will now have a look on the breakdown of revenue structure and main profitability drivers of each activity as well as some other relevant key performer indicators. Starting with cash. We see that sales in pure organic terms have grown by 4.4%, that's an additional 0.1% of inorganic nature. This increase comes from a generalized increase in volumes in most of the geographies with the only exception of AOA, where there has been, in the last 3 months, an upturn of COVID cases that led to more confinements and lockdowns, although nowadays, vaccinations are progressing fast and the situation is easing quickly. As you can see, the only negative impact on revenues comes from the translational currency effect that has been milder compared to previous quarters. But nevertheless, still capable of -- to generate a dilution of minus 5% in total revenues in euro terms. New products and cash continue expanding their penetration in market, totaling now 21.3% of total revenues figure. This is a very good figure, considering that they have grown by 15% in respect to Q2 this same year and a good proof of the interest of clients in these type of solutions, mainly the ones related to cash automation services or cash to-date that has overcome the negative effects of the pandemic with barely noticeable impact. On the profitability side, EBITA in the period has totaled EUR 121 million, with an EBITA margin of 11.2%. This implies a reduction of 40 basis points regarding some period in 2020, coming from a still present negative comparable base, worsened by a slower than estimated first half of the year and negative effects. Nevertheless, margins in cash are sequentially improving and coming back to shape. And a good proof of this is the excellent 40% quarter-on-quarter improvement on profitability in the EBITA margin in Q3, 12.9%, with a sustained improvement month-over-month. Moving now to security. We can also appreciate positive organic growth of 1.5%, plus also an additional 0.1% of inorganic nature coming from the acquisition performed in U.S. past August. Currency has had a minor effect on security as nearly 60% of security revenues come from hard currency geographies since the inclusion of the U.S. Cost increase transferring to market has been successfully completed in Spain, U.S., Argentina and in general terms, in most of the country's success for Brazil. Nevertheless, the situation is gradually improving, mainly in Spain, where restrictions to capacity in socials and sports events have been done since beginning of September, and similar is happening in U.S. regarding aviation activity. While in Ibero-America, we are beginning to reduce the strong and productive labor cost we suffer from regulations that dividend allow us for a proper adjustment of capacity to reduce client demand. Likewise, in cash, new products continue expanding the penetration, and now they represent 40% of total sales. It is important to note that integrated security solutions is a combination of both traditional guarding and technology. And thus, an increment in this type of products also drives an increment in guarding services. And therefore, profitability increment coming from increased use of technology is less evident on global margins, although it's gradually being more noticed. Assuming that effect, we're happy to see our profitability in security continues growing, reaching a total of EUR 41 million in the period, with an EBITA margin of 3.3% versus 3.1% in 2020. An excellent result considering that job-keeping aids put in place in the U.S. have been terminated, and there's still some delay on clients returning to volumes prior to the pandemic. Let's move now to alarms. Here, the main noticeable fact is the strong increment in clients that Movistar Prosegur Alarmas continues delivering month-over-month. During the past 9 months, MPA has grown its client base by 68,000 new connections, totaling close to 320,000 clients in Spain and accelerating its growth now with the addition of Santander Bank retail network to its commercial capabilities. Rest of the world client base has also grown, almost covering the gap of the increased churn suffered during the pandemic, mainly in small business clients due to lockdowns and with a final client count that now sits mainly 3,000 connections below what it was last year. With good perspectives to overcome this situation in the following months now that churn rate has come back to lower levels and sales have been resumed in most of the affected countries. A good proof of this is the excellent 19.9% organic growth in revenues in this consolidated perimeter that is only reduced by the combination of the negative inorganic from the deconsolidation of the Spanish perimeter, including Prosegur Soluciones and the negative FX present mainly in Argentina. Regarding ARPU in Prosegur operated alarms, it remains equal as last year with no noticeable impact despite the efforts made in the client retention policies, and only with a minor reduction in Movistar Prosegur Alarmas due to the aggressive market capture offering put in place to boost sales that will be compensated in a 12-month period as clients will gradually enter in the normalized monthly quarters without discounts. Profitability and cash flow generation wise, we see that EBITDA pre-SAC in MPA has grown up to EUR 47 million, due to all the newly generated clients. While in Prosegur side, it has dropped down to EUR 14 million being this fact of pure comparable nature. As in first quarter 2020, it was still consolidating the Spanish connections. Compound EBITDA pre-SAC margin of both MPA and Prosegur diluted slightly to 45.5%, deriving from the increased operational costs coming from the reactivations of sales efforts and increased client base to cover, although they will normalize as these one-off costs are gradually absorbed by the business. Similar situation is appreciated in the cash flow generation that also bears the negative effect of the increased churn during the pandemic. To conclude this review of the independent business lines, let's now analyze the results reported by both AVOS and Cipher. AVOS, our newly created business process outsourcing unit has reported an excellent revenues growth in excess of 15%, reaching EUR 45 million when compared to same figures in previous year. Please note that for comparable proposes, we are extracting AVOS sales from cash in 2020 and in the first 3 months of 2021 when the purchasing transaction was closed. The total revenues figure of high AVOS in isolated terms is EUR 29 million corresponding to the last 6 months of present year. Similar happens to gross margin figures that reached EUR 13 million, of which EUR 8 million correspond to AVOS as an independent business in 2021. In full comparable terms, profitability in AVOS has grown by 20% in the period, while its gross margin has also expanded from 26.8% to 28%, an excellent result that anticipates a very promising evolution for this new business line. Cipher, our cybersecurity specialist unit, has also delivered a near 3% organic growth, eroded in a similar percentage by negative currency effect as part of the revenues are generated in LATAM. And also boosting an excellent 5.2% increase in profitability at gross margin level. That was all on my side related to the evolution and performance of our principal business lines. I will now hand the presentation over to our Secretary General, Antonio Rubio, for his comments on ESG matters and final remarks.

Thank you very much, Antonio. Now prior to my final remarks and conclusions, I would like to give you an update on our ESG initiatives. In Prosegur, we aim for a continuous improvement of our sustainability model in all aspects. And that means a permanent revision of our ESG policies to keep them in compliance with increasing regulation. In this regard, we have recently updated our sustainability policy to fully meet the requirements of recommendation #5 of the Good Governance Code for Listed Companies issued by the Spanish regulator, CNMV. Prosegur sustainability policy is a code that established the general principles of our sustainable development strategy. It reinforces ESG as a relevant element in the company's corporate governance system. And as a result of this commitment, I am very proud to share with you the recent inclusion of our company within the AENOR good corporate governance certification. As you may know, AENOR is an independent institution legally responsible of development and diffusion of technical standards in Spain, which contributes through a standardization and certification to improve products and services produced by companies. AENOR certificates are one of the most valued in international ambit, since it has emitted certificates in over 60 countries for the past 35 years. Therefore, AENOR is situated between the 10 most important certificators in the world. Prosegur has been the first Spanish company to achieve a certification in good corporate governance. And not only this, we have been recognized with A ++ rating, being the highest scoring the company obtained in this certification. This is an extraordinary milestone for us and a clear recognition of our transparency and good governance practices. Practices that will continue being improved above the highest demand and that will maintain our company being recognized as an example in governance, social responsibility and sustainability. To close this presentation, I would like to share with you my final remarks on this 9-month 2021 results presentation. We have delivered positive organic growth in all business lines and in all geographies. And this is a clear indicator that although pandemic negative effects are still present, we are steadily catching up with the general economy recuperation. We believe this positive trend will accelerate during the next year as market conditions, especially in Ibero-America, will show a better performance. And we will take advantage of our raising macro indicators such as inflation in our benefit. Profitability is also gaining momentum, although with a certain lack in respect to sales, but also with good perspectives. Security margins continue improving both on unaccumulated and in a year-on-year basis. And cash is generally coming back to normal as its profitability is sequentially improving month-over-month. Alarms has delivered an excellent growth in Spain, exceeding previous year, new client addition in more than 36% and increasing its market penetration quarter-on-quarter, while the rest of the world is also catching up quickly with pre-pandemic levels. We will continue reinforcing this super market trend with additional alliances, as the ones recently signed with Santander Bank in Spain or Telefonica in Colombia. Many opportunities are live in all business lines, focusing on new products, as we strongly believe these are going to be the future expansion drivers of the group, being this proven by the good incremental results that had delivered sustaining growth over the COVID crisis period as flow generation in relative terms has been kept above the historical average for the Group. Our DSO is improving, thanks to the digital transformation projects put in place in finance, while our liquidity profile continues to be extremely solid and as has recently been recognized by our renewal of the investment-grade credit rating awarded by S&P. Finally, we are really proud of our rating on good corporate governance by AENOR. This reinforced our commitment with the sustainability and mix willing to continue improving to maintain our reputation as one of the best companies in Spain. That was all for today in this 9-month results presentation. Now both our CFO, Maite Rodriguez, and I, will be glad to attend all questions you may want to ask. Thank you very much.

[Operator Instructions] And your first question is from the line of Francisco Ruiz from Exane.

I have a couple of questions or 3 questions. Well, the first one is if you could give us an update on how you see salaries negotiation for next year? And what could be the impact of the deterioration of the labor law in Spain, if it finally happened? The second one is, if you could help me to understand the 20% organic growth in alarms as the number of alarms has declined, and the ARPU has declined as well. So I don't know if it's just an increase on the local -- in local currency ARPUs? And the last one, not least, Maite, you have commented that the CapEx continues to be at very low levels, you indicated something like around 2%, 3%. What's the expectation for next year, do you expect a rebound on the CapEx? Or do you expect that this figure will continue in the same levels?

Thank you very much for your questions. Mainly for the first one, because it's an opportunity to, once again, explain how positive inflation is for our 3 businesses. First of all, for cash because you are increasing the cash circulation and you're increasing the need of speed in this circulation. Second, in all our business because they are very intensive in terms of manpower because all of them are covered by collective bargaining agreements that are the same for all the industry and all the sector. So it's an issue to increase the prices that is common for all our competitors. And consequently, and because we are working in high inflation environments because we had an issue with inflation now in Europe, but we are working in high inflationary environments in the rest of our footprint, we have probably the best teams in passing through every year, they see increases in prices in cost to prices, usually with an improvement in margin. So for us, it's a positive environment, and we consider that for us, it's an opportunity. And any change in the law in Spain is something common for the rest of the industry. And consequently, we consider that as an opportunity. And about the performance in the ARPU, you have to consider that in LATAM, the ARPUs will arise. So it's part of the important part of our piece there to maintain the ARPU in terms of U.S. dollar. And about CapEx, Maite?

Yes. About CapEx, as you know, now we have like 2% infrastructure CapEx for this 2021 9 months, but for the full year, we will maintain quite similar. We will have same figures or close to last year figures in relation to CapEx. And for the coming year, even including our digital transformation investments, we will also be around 3%, that is the normalized figure that we usually have.

[Operator Instructions] And your next request is from the line of Alvaro Lenze from Alantra Equities.

I wanted to know on the security business, we see a decline in margins compared to last year. I understand that you have fewer support from physical aid in the United States, whether you could provide us some more information of how the level of activity is recovering and when should we expect activity to be back to normal to offset for the lack of physical aid? And my second question would be on the alarms business, especially in Spain. Of course, growth is being very impressive. I wanted to know whether competitors are reacting significantly to your commercial strategy. I don't know if your main competitors are lowering prices or something like that. And how is the partnership with Santander evolving and whether it's expected to be rolled out to the full commercial network of Santander in the coming quarters? If you could provide some update there.

Alvaro, in relation with the security business, during this quarter, we have suffered an increase in margins. We are recovering volumes, and the month of September has been a very important month because at least in Spain and U.S.A, we are recovering volumes quicker, mainly because the restrictions are less coming from the big events like football, and airport, and tourism is also increasing. So we should see this recovery should maintain during the -- this 4Q that it's coming. And in terms of -- and if we just focus on U.S.A, we are very focusing volumes. We are increasing our indirect cost mainly because we wanted to win more Asia share -- market share. So for next year, margins might not be -- might not increase so much, but volumes at least should do it in a very significant way. And in relation to the second question, Antonio?

Alvaro Lenze, we are very, very happy about the performance of our joint venture. We have accelerated every month the rhythm of new acquisitions. And in some of the months this summer, we have been the first company in Spain in numbers of new connection at some point in time. Obviously, our competitors are reacting, but we have to remember that this is a push market. So we are increasing the number of families and homes in Spain with domestic alarm. So the performance of the market is normal in this environment, but we remain very optimistic about the regional growth and we don't see any reason for not maintaining in the next years, the same rhythm of growth that we have in the last 1.5 years, considering that there has been a COVID impacted period. And about the collaboration with Santander, it's performing better than our initial expectations, both in the bank and in our side. We consider that we have an additional very positive effect in the growth in Spain.

Okay. A follow-up, if I may. So would you say that your growth in alarms comes mainly from homes that did not have an alarm previously? Or are you taking market share from your competitors? And secondly, whether you could roll out these kind of agreements both with Santander and Telefonica to other countries maybe in LATAM because you have a complementary footprint?

Most of the growth is coming from new homes with alarm because it's a push market, and you don't have the need of stealing customers to 20 competitors. So when I say most probably more than 80% is coming from new acquisitions. And the alliance is clearly is the nicest formula for growing, and banks, insurance companies and telcos are the best alliance. And we are working in all LATAM looking for alliances. And of course, with Telefonica who is our preferred ally.

Your next question is from the line of Enrique Yaguez of Bestinver Securities.

I have some follow-ups questions about the alarm businesses. I don't know if you could provide some time frame about how long is expected to last the current marketing campaign in Spain that is giving you so good results in terms of the installed base. And I don't know if there is a specific mid-term target in terms of subscribers that you would like to achieve before reducing it potentially. And secondly, I don't know if you foresee the need to implement special commercial campaigns in LATAM and in Portugal to recover the subscriber that you lost during the last 1.5 years? And finally, on digital transformation, if you could provide some quantification about the efforts made in these 9 months? And how much do you expect to close in at the end of the year?

About the marketing strategy in Spain is, I think, is very opportunistic. Marketing is the main professional profile of the people leading the joint venture. It's depending of the scenarios. And in many cases, city by city. So you see the TV and radio campaigns, but there are many local ones. And it's very opportunistic. And depending also about the strategy of the rest of the market. But what is clear is that this is a push market. The Spanish market slightly penetrated with less than 10% of households with an alarm and 28% of our houses in the U.S., for example, with an alarm. This is an opportunity and more players pushing is an opportunity for growing the market. Distribution market is a little bit different. You know that the pandemic has demonstrated the worse effect during the first half of this year. Families are suffering a lot and also businesses, also due to the confinements and lockdown. But clearly, the best practice is about alliances and commercial strategy that more establishments were announcing -- implementing in Spain can be followed in the rest of the areas because we are sharing best practices in technology and also in marketing. About the digital transformation?

Yes. In relation to the digital transformation, as we mentioned in our Capital Markets Day, we are going to invest around EUR 90 million for the next 3 years. And in CapEx, now you can observe, we booked quite like around EUR 12 million. And in our P&L, you have like EUR 9 million more than last year.

[Operator Instructions] And your next question is from the line of Brian Ruttenbur of Imperial Capital.

Yes. Just a question about U.S. expansion plans. You made one acquisition in Oklahoma, relatively small. Can you talk about the competition right now for the M&A market in the U.S. and how multiples are trending? Is there a lot of competition right now? And are multiples trending up or down given the environment?

Brian, thank you very much for the question. M&A market in the U.S. in this moment is an I don't know because really, multiples are really high. We remain -- our same strategy, very conservative. And when we acquire a company, we are paying multiples that we can create value very soon after the acquisition. For us it's key to buy niche companies with a very good management and usually buying the companies with a commitment that the managers remain with us some years. We are now the structure for maintaining them with us. So you are absolutely right. The market is very complicated. We have a local team of M&A working there for finding more opportunities. But despite this multiple and remaining in our conservative, and very prudent strategy of not paying too much, you will see in the following months, more acquisitions in the U.S.

Great. And just as a follow-up, are multiples higher than they were a year ago, 2 years ago? Can you give me some kind of -- 20% higher, are they in line with what they've historically been? Give me some kind of data point.

It depends, Brian, of the sectors they were working for. So there are some companies that have suffered more. And in this area, the multiples are lower in companies, they bought to sector more technology, they remain growing, including with this historical heights that we have seen in the last year. So really, we are working today in historical height -- sorry, investment multiple in the U.S.

And we have one more question that's from Manuel Lorente from Mirabaud.

My first question is in the inflation opportunity issue. We saw a massive decoupling between the nominal GDP growth in LATAM and Prosegur's revenues in the area. And you -- as you have personally highlighted at some point on your presentation, right? To some extent, we were expecting, let's say, some faster bounce back this year, right, which has not been the case, the situation is gradually improving. But still you have plenty of catch up to do in terms of correlation with the GDP in LATAM. Probably my question here is regarding the speed and the magnitude of this catch up is something that we are continuing to see a gradually and sequentially slow improvement or at some point, we should see a bigger jump?

Manuel, thank you for the question. Obviously, the situation with COVID is very visceral. We are very proud of our portfolio of customers. We have a long-term relationship [ 10 years ] with them. And in some cases, we need to be very comprehensive about the situation. There are many reasons explainable about the delay that we have suffered in this year in all this process. But usually, in the countries where this delay can be more important, for example, Brazil, there is a retrospective effect when you finally sign the increasing prices. So this is the reason because we remain optimistic because it's true that mainly in this third quarter, we see the seasonal impact of the delay in Brazil societies. But this is not due because the inflation environment is very tough and more difficult than any other year to pass-through a cost increase, it's because the COVID situation and the time that are taking this negotiation. But we are not worry about recovering the margins due to this inflation. On the contrary, this is one of the reason of our optimism about the rest of the year and the next year. And in our opinion is that if more delay of acceleration in process of catching up, we are foreseeing that acceleration probably in the following months.

Okay. And regarding your specific issues in Brazil on this passing through? Can you give us some more color about this?

You know that Brazil is in a special environment now. The delivery market changes and you know that in Brazil we are applying more than 100 different collective bargaining agreements due to the number of the state and different activities we perform. And this is the reason because usually some customer banks, retailers are preferring -- and in the moment we find the last collective bargaining agreement to negotiate the whole country in a single moment. And this is the main reason for regulated asset in Brazil, they increased retrospective from the beginning of the year. So this the reason we consider, in this quarter and the beginning of following year, we will catch up them up.

Great. And probably, my last question on alarms. I don't really -- I'm sorry, because probably it's about my lack of understanding of the business that why in a context of higher subscribers in this year, you have lower subscribers in acquisition cost year-to-date EUR 22 million versus EUR 25 million last year?

Manuel, thank you very much for this question because it's in the very -- in the very core of the beauty -- of one of the beauties of this business. We had more volume, so we can dilute fixed costs. And at the same time, we are incorporating more financing in the cost of acquisition. So you can dilute your fixed cost of the commercial force, and we are incorporating more financing. This is the main reasons. But in alarm business, as you are growing, your margin has to improve because you are diluting cost. And this is the reason because our guidance is mainly explained and EBITDA pre-SAC improvement for the following years even in this environment of accelerated growth.

That will conclude today's Q&A session. I would now like to turn the call back to Mr. Antonio Rubio for any additional or closing remarks.

Once again, thank you very much for attending this presentation. These 9 months usually, and mainly this year, are effective for the seasonal effect in all the process of passing through cost to prices. But nevertheless, we remain optimistic about the rest of the year. And this is the reason because we can maintain all the guidances we provided in our capital -- market capital day some months ago. So once again, you had your -- our IR department at your disposition. And thank you very much for attending the presentation, and have a nice weekend. Thank you.

That will conclude today's conference. Thank you for participation. Ladies and gentlemen, you may now disconnect.