Loomis AB (publ)

Thank you very much. Good morning, everyone, and welcome to the third quarter presentation for Loomis.

My name is Aritz Larrea, and I'm the CEO of Loomis. And with me here today, I have our CFO, Johan Wilsby; and Jenny Boström, our Head of Sustainability and Investor Relations.

I'll start by providing a quick summary of our third quarter performance before taking questions. Let's start the presentation by turning to Slide #2.

We delivered a solid and positive performance in the third quarter with revenues reaching SEK 7.6 billion and currency-adjusted growth of 7.1%. Despite the expected decline in our ATM business, the group achieved a strong organic growth of 3.9%.

This was also the first quarter to include the full results of Burroughs, which made a meaningful contribution to our overall growth and further strengthened our position in the U.S. market.

Our efficiency initiatives continue to deliver strong results with the operating margin rising to 13.2%, up from 12.9% last year. We've successfully grown the business without increasing our headcount, further driving margin improvement and demonstrating the impact of our ongoing operational discipline.

We delivered another quarter of strong operating cash flow with a rolling 12-month cash conversion of 95%. This robust cash generation enables us to continue investing in the business while also delivering attractive return to our shareholders.

Our commitment to optimize capital allocation to drive returns is also reflected in the increased return on capital employed, which was above 16% in the quarter. While we have been active in M&A, invested in our business and continued our share repurchase program, our net debt-to-EBITDA ratio has improved compared to the second quarter.

During the third quarter, we completed 4 acquisitions and signed an agreement for a fifth one. I will address each later on in the presentation.

As announced yesterday, the Board has also approved a new share repurchase program of SEK 200 million for the fourth quarter. Let's now turn to our reporting segments, starting with Europe and Latin America.

Our European and Latin America segment delivered a solid performance in the quarter with revenues reaching close to SEK 3.7 billion, and the organic growth was 2.3%. We have seen a different mix of performance across our business lines during the quarter.

While we continue to experience strong demand for our cross-border valuables transportation and storage solutions within the international business line and the Automated Solutions business delivered solid results, the ATM business declined due to previously announced losses in Sweden and France. In addition, there was a negative impact due to the ATM consolidation market in the U.K.

While these developments have led to short-term volume headwinds, we expect the long-term industry trends to continue to favor specialized providers. In addition, revenue in Europe was also affected by the ongoing restructuring activities in Germany, where we continue to discontinue unprofitable contracts as part of our efforts to strengthen profitability.

These developments have temporarily affected growth in the region, but our initiatives are consistent with our strategy to focus on efficiency, scalability and long-term profitability. We can also see that the restructuring initiatives implemented in recent quarters are having a positive effect on profitability, while with the operating margin increasing to 12.9% versus 12.4% in prior year.

In September, we completed the acquisition of Kipfer-Logistik announced in July. Kipfer-Logistik is a leading pharmaceutical logistics provider based in Switzerland, and this acquisition significantly accelerates the growth of Loomis Pharma.

By integrating a well-established company specialized in high-security, temperature-controlled road freight, we are further strengthening our international business line, where Loomis already provides cross-border, high-security logistics for banknotes, precious metals and jewels, including customs clearance. With our long-standing expertise in Secure Logistics, we continue to explore opportunities to expand and enhance our services in this area.

Let's turn to the next page and talk about the performance in the U.S. The U.S.

segment delivered another strong quarter. If we adjust for currency impacts, which was negative 9%, the U.S.

achieved record high revenues and operating profit. Organic growth was 5.4% and the acquisition of Burroughs contributed to the overall growth.

The International and Automated Solutions lines of business had notably strong performance in the quarter. Our implemented staffing planning measures have enabled a more efficient way of working, allowing us to grow the business without adding employees.

At the same time, we have secured a high service quality and maintained customer satisfaction. The volume growth, combined with improved efficiency contributed to the improvement of operating margin.

The operating margin increased to 16.3%, up from 16.1% in prior year. This is the first full quarter with Burroughs, and we continue working on integrating their business into our U.S.

operations and our Loomis culture. We are still early in the integration process, but while the business is adjacent to our existing operations, it represents a new line of work for us, one that is highly technology-driven and involves technical service teams we previously did not manage.

We are seeing great progress and are already observing how it complements our current business. Burroughs is a strong strategic fit as it allows us to provide a fully integrated ATM and automated solutions service offering to our customers.

In August, we acquired Keys Armored Express, a CIT service provider operating in the Florida Keys area. We've also signed an agreement to acquire Precious Metals Vault and storage facility in Toronto.

This acquisition will strengthen our local presence in Canada and increase our depository service and storage capacity within the international business line. Let's turn to the next page and talk about SME Pay.

Revenues in the SME Pay segment increased to SEK 65 million in the quarter. Nearly 40% of this revenue now comes from new small- and medium-sized customers, demonstrating that our strategic focus on SMEs is delivering both growth and margin.

We're also making strong progress on the digital side. Loomis Pay continues to scale, broadening our payments offering and strengthening customer loyalty.

Transaction volumes through our payment gateway surpassed SEK 2.5 billion in the quarter, representing a 23% increase compared to last year. In addition, in July, we took an important step in Spain with the acquisition of 2 POS companies in Catalonia.

This significantly strengthens Loomis Pay presence in the region, enhances our POS capabilities and expands our customer base among SMEs. Let's now move to the next slide, where I'll share a few updates on our sustainability progress.

This quarter, we adopted 2 new sustainability policies, an environmental policy and a human rights policy, further reinforcing our commitment in these critical areas. Our environmental policy includes our emissions reductions targets to 2030 with the actions being taken to reach these.

The key focus here remains on reducing emissions from our vehicle fleet. For the first 9 months, we have reduced our Scope 1 and 2 emissions by approximately 2% compared to prior year.

I want to highlight that the increase you can see in emissions in the graph here compared to the second quarter is largely related to the acquisition of Burroughs. Initiatives are ongoing to align Burroughs to our carbon emissions reduction plan.

Continuing to decrease emissions while growing the business is, of course, challenging, especially due to difficulties with charging infrastructure for an electrified fleet, but something that we are fully committed to. As a global employer with an important role in society, it is crucial to uphold fundamental human rights across our operations and value chain.

Our new human rights policy reinforces our dedication to safeguarding the rights of our workers and how we intend to uphold our efforts in addressing actual and potential human rights. Now let's turn to the income statement slide, where I'll begin by noting that despite a significant negative impact from exchange rate fluctuations, we achieved a strong currency adjusted growth.

This quarter includes costs classified as items affecting comparability, primarily related to the ongoing restructuring efforts in Europe and Latin America. Our financial net has declined compared to previous years, following lower financial expenses, driven by declining interest rates.

I would also like to highlight that the effective tax rate has gone up to 30% for year-to-date 2025 due to changes in our assumptions for deferred tax assets. This year-to-date adjustment impacts the effective rate in the quarter.

Additionally, the tax rate in 2024 was also lower due to the U.S. green tax credits, which have now been removed.

For the full year, we expect an effective tax rate of about 30%. Despite the considerable currency headwinds and higher effective taxes, earnings per share rose to SEK 7.83 per share.

I would also like to highlight that also our net debt-to-EBITDA ratio is about the same level as prior year, and we also see an improvement compared to the second quarter, even after several M&A and continued share repurchases. Now let's move on to the next slide, where I'll provide a longer-term view of our performance.

As we can see, we have a stable and resilient business model that continues to deliver. We delivered a strong third quarter, and I'm confident in our journey ahead.

Our restructuring initiatives in Europe and Latin America are showing results, and we've seen clear margin improvements over recent quarters. On a rolling 12-month basis, we generated over SEK 30 billion in revenue and reached an operating margin of 12.6%.

Currency adjusted growth was 6.1%, fully in line with our financial targets for the strategic period. The major focus in this strategy is accelerating growth within the SME customer segment.

This is already contributing to our performance. We have seen healthy revenue momentum and solid margin contribution from SMEs across all our key markets.

As we look ahead, it's important to recognize that we are up against a very strong fourth quarter last year, which benefited from favorable movements with U.S. tariff uncertainties.

We're also managing the impact from ATM business losses in Sweden and the consolidation of ATM networks in France, both impacting our European operations. In addition, there's a negative impact due to ATM market consolidation in the U.K.

compared to Q4 last year. That said, we still see solid opportunities for organic growth, both with our actual customers as well as with SMEs.

And as we outlined at our Capital Markets Day, value-creating M&A will continue to be a key lever in our strategy going forward. This concludes my summary of the quarter.

Operator, we are now ready for questions.

I want to start off with the M&A track. I think it's nice to see that you are more active again as you have been talking about, of course.

And I wonder specifically about Burroughs, you mentioned it a bit, and you have had some time now to digest it. So my question is what you're seeing in terms of the turnaround on margins in Burroughs, if that is something that you have already started to see a positive impact on?

I mean, the margins in the U.S. were quite good despite the full integration of Burroughs.

So I guess I wonder if you have seen any margin impact already in Burroughs.

Thanks for the question, Simon. I would say that it's still early stages with Burroughs, but our immediate focus is just on resolving some existing quality issues to ensure service excellence.

Once this is achieved, we will shift our efforts to improving operational efficiency and margins, with the objective of making the business margin accretive over time as we promised when we announced the acquisition.

All right. So I'm guessing that it's fair to assume that it remains quite margin dilutive here as of right now, at least.

You're right, yes.

Then I wonder about the SME Pay segment, just specifically on the organic growth acceleration we saw here in Q3. If there are like any specifics you could point to here, like bigger customers or something that drove the organic growth acceleration Q3?

So as we explained at the Capital Market Day, we've been always focused on big retailers and big banks. SME was never our focus.

And we shifted that, and that has been a shift that our sales teams have made. And we've seen an important progress there.

And consider that Q3 also has the seasonality, the normal seasonality that we have in Europe, but it was a great quarter from that perspective, and we expect the following quarters to continue the same way.

All right. Great.

Then lastly, maybe a bit more general reflections, but on Latin America and maybe specifically on Argentina, I mean, it continues to look like the business environment is improving, more politically stable and so forth. So do you have any general reflections right now, what's going on?

And if that's positive or negative for you?

I think, I mean, when you look at Argentina, it's really small when you look at our group. But I think that progress has been made there from the country side.

We keep investing there, and we're looking into growing in that market as well inorganically. So it keeps being an interest market for us.

A couple from my side. Maybe firstly, I was curious to hear how we should think about the revenue mix right now.

I noticed you continue to have very good momentum in both Automated Solutions and also international, which is, of course, good for margins and CIT is down like 5% or so versus last year. And I mean, long term, your mix shift will, of course, continue, but it would be interesting to hear how you think about business mix more near term for coming quarters.

Do you see sort of a near-term recovery in CIT? Or should we expect these trends to continue and revenue mix to continue to be supportive ahead here?

Yes. Thanks for the question.

And my first comment there would be, I was surprised on your comment around CIT because we should look at the business lines currency adjusted, and I don't see that decrease happening in CIT. Looking forward, as I said in the call, I mean, we're facing -- we're up against a very strong fourth quarter that we had last year.

We had the favorability of the U.S. tariffs uncertainty there.

And we are having a negative impact on the ATM business due to the losses in Sweden, France and the U.K., and that will impact our European operations. But we keep working on finding alternatives.

And as you've seen, for example, our international business, despite the slowdown due to tariff uncertainty, the business has also keep growing. So we keep looking at other revenue streams as well.

Yes. Fair point on the currency effect there.

But also interesting on international. I mean, as you say, is the performance and the momentum in international sort of even throughout the quarter?

Was there any notable difference in growth rate July versus September and beginning of October? I mean, before it was tariffs, but now it seems to be other factors driving the performance.

So a little bit of momentum throughout the quarter. And also, is there anything in particular driving the very strong performance you have in international still now?

I mean the front of thing we have with international, Dan, is that it's not a recurring business. So we can't see it as we see our domestic business there.

We do expect the international business line to slow down a little bit versus what we've had in Q3. But again, as I told you, we're looking into how can we keep growing this business and keep expanding as we did with pharma, keep expanding to other verticals and other areas of interest as well.

Yes. Makes sense.

Interesting to follow. And maybe a final one, just a small comment there on the ATM market consolidation in the U.K., just so I get it right there.

Did you experience an impact already this quarter? Is that more gradually ahead as we move into Q4 and further on here?

Sorry, I didn't catch that question. Can you repeat again, please, Dan?

No, it was just -- did you see the ATM slowdown in U.K. already this quarter?

Did it impact the numbers in Q3? Or is that more for Q4 and going forward here?

Yes. You should expect more or less the same trend, rather trend in Q4 and first half of next year.

Maybe following up on Dan's question on U.K. as a start.

And can you quantify the amount of the contract or contracts that you've lost so we can pin down the magnitude of this?

We don't disclose those numbers, Viktor.

Okay. But it's fair to say that it was already in the full quarter of Q3?

It has been -- yes, it's been in the whole Q3 quarter. That's correct.

Okay. You mentioned the tax rate, and it's come up to about 30%, and you guide for that for the full year as well.

Is that a good ballpark proxy going into next year as well?

Yes, I would say so for now.

And on the tax rate from a cash tax perspective, the cash tax has come up quite a lot this year. Are there any one-off items, if you will, in that amount?

Or should we pencil in similar, call it, cash tax rates going into next year as well, do you think?

No, that's going to come down because we had a delay of U.S. tax payments from '24 that came into '25.

So they are artificially large this year. And that piece will wash out when you get into '26.

Super. That's very helpful.

Two final points. One very small on your Loomis Pay and SME.

I noted you have about SEK 9 million of revenue now in automated solutions in this segment, and that's quite an astonishing number for the small size of that segment. But curious to understand, is this Automated Solutions revenue a product sale similar to CIMA?

Or is it actually more installed base type of revenue, more recurring in that sense?

No, it's exactly the same. The only thing is that when you look at CIMA, you have a huge portfolio of solutions, and we're talking about a smaller range of solutions.

Yes, that was my question. So if it is more the actual product installed generating SEK 9 million in the quarter and then in that sense that we maybe can expect SEK 9 million also in the coming quarters or if it's more product sales?

Additional product sales and recurring revenues.

Okay. Super.

Final question on the U.S. and automated solutions growth accelerated quite dramatically.

And my numbers tell me 31% in organic terms. But that begs the question, if you have added revenues from Burroughs or something else into that segment?

Yes, you have revenue coming from Burroughs as well.

All right. So can you give us an indication on the underlying SafePoint or Automated Solutions organic trend?

Is it similar to what we have seen in the mid-teens or so? Or has it started to deviate?

I think you're right that it's more or less same.

Thank you very much all for listening in. Please reach out if you have any follow-up questions.

Thank you. Bye-bye.