Good day, and thank you for standing by. Welcome to the Prosegur Q1 2025 results presentation. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question-and-answer session. To ask a question during the session, you will need to press star one and one on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star one and one again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Juan Ignacio Galeano, Head of IR. Please go ahead.
Good afternoon, and welcome to Prosegur Q1 2025 results presentation webcast. Before we start, I would like to remind you all that this presentation has been pre-recorded and that it will be available on our corporate website. I will now hand you over to our CFO, Maite Rodríguez.
Good afternoon, and thank you all for your presence. We are delighted to present a strong first quarter, as it is naturally a very good indicator that we are on the right track to accomplish the objectives, both financial and operational, that we set for 2025. As we shall see through the entire presentation, all relevant indicators outperform those of last year in every single business. Even recognizing that last year's results were somehow impacted by accounting effects, the positive comparison year over year would have still performed it once the accounting impact is wiped out.
Now, with all this in mind, let's deep dive into the most significant aspects of the period. Our top line grew by 11.4% compared to the same period of last year, and as it has been the case for some time now, was fully driven by organic growth.
As per the sustainability of the metric, it can be seen that all regions grew, with a special highlight in the APAC region, where cash volumes continued to increase at very healthy levels. As for profitability, EBITDA stood at EUR 86 million, 43% higher year over year, explained by the strong performance of our cash and security businesses. As already mentioned, even if last year's negative accounting impact is not considered, the year-over-year growth would have still been quite impressive. For our cash business, main reasons had to do with our continued strategy of cost-saving initiatives, coupled with a better performance in Argentina and Australia.
Results in our security business were driven by higher volumes and a very agile commercial strategy that enabled us to rapidly pass through cost to prices. For our alarm business, as we will see, operational performance was clearly enhanced, reflected in better and healthier indicators.
Thanks to efficient working capital management and keeping infrastructure capex under control, the higher achieved profitability redounded in higher cash generation. This is clearly the case because, even though free cash flow is in line with last year, the truth is that volumes were higher, particularly in security. As always, our main premise is to continue growing but always being mindful of leverage. Overall, net debt stands at 2.3 times relative to EVDA, while it's not only very well-structured in the long run but also very cheap. There are two things worth mentioning.
First, the significant reduction in leverage compared to last year's first quarter, and the fact that we should see the current ratio going down throughout the year, considering the seasonality of our cash generation. I would like to mention a few words on the agreement that Argentina and the IMF recently reached.
Not only does it imply the effective elimination of most of the restrictions and costs to access the FX market, but we also see it as a positive step towards the long-term stabilization of the country. Lastly, as you should be aware, a dividend of EUR 87 million was recently approved, implying an almost 5% growth compared to the previous year, clear evidence of the commitment to Prosegur's shareholders. Let's now turn to slide two, where I would like to deep dive into our sales and EBITDA figures. As said, total sales during the first quarter increased by 11.4% over last year, reaching EUR 1.3 billion.
Discounting for the FX effect, almost the entire growth was organic, evidencing our strict policy when it comes to passing through inflation to prices.
At the same time, volumes continued to grow, both in our most traditional businesses without exception and, most importantly, in our transformation products. As for geographic sales diversification, it should be noted that growth continues to be the driver. This is only natural as both US and APAC are included. It's evident that as far as this trend consolidates, and there's nothing that should prevent this from happening, the entire sustainability of the company will be positively impacted. Moving now to further review profitability, EBITDA reached EUR 86 million, marking an outstanding 42.8% increase compared to last year.
As already stressed, even though part of the increase is due to the disparate impact of the hyperinflation accounting, the truth is that operational performance was enhanced, further contributing to the year-on-year growth. Our cash business registered an EBITDA of EUR 61 million, marking a 20.9% higher year-on-year growth.
This was primarily explained by the organic volume growth, especially in APAC, enhanced operating efficiencies, the consolidation of our Indian operation, and the better performance of our Australian operation. Turning now to our security business, EBITDA amounted to EUR 17 million, 49.2% higher compared to the first quarter of 2024. As has been the case for some time now, the continued year-over-year growth rates are due to maintain a strong discipline on the cost side of the equation and increasing margins by acquiring high-quality clients.
Needless to say, our strategy to include more technology to our service is a cornerstone of the good performance. Lastly, our alarms business continues to be on a good track, and good proof of this is the evolution of main financial indicators such as service margin and churn rate.
Let's now turn to our full P&L that, as it can be seen, showed a remarkable increase compared to last year. The good performance all the way down to EBITDA was almost already explained. Moving on to our financial results, the increase was mainly driven by FX differences, as both the Brazilian real and the US dollar depreciated. However, it must be considered that this is a non-cash item. Going further down to accrued taxes, the 181 basis points reduction in the effective rate should be highlighted. The rationale behind this reduction is twofold. On the one hand, we achieved better results across all individual geographies, and on the other.
The negative impacts from hyperinflation accounting and dividend upstreaming were significantly reduced. All of the above led to a net income of EUR 34 million, achieving an astonishing 69% higher year over year.
Let's now turn to cash generation during the period. As it can be seen, following the historical seasonality of the business, free cash flow resulted in negative EUR 54 million, in line with the previous year. As said before, controlling for volume sold, it can be argued that our capacity to generate cash was higher than 2024. This is evidenced when we take a closer look to the working capital requirements line. Indeed, compared to last year, it went up by EUR 11 million, and the main reason behind it, excluding the fact that we increased our stocks and that suppliers went down, is that this year we increased our volume sold, particularly in our security business.
Additionally, it's worth highlighting that the increase in accounts receivables was partially mitigated by the reduction in DSO in all of our businesses, pointing to good treasury management.
Net financial debt reached EUR 1.3 billion, resulting in a total net debt-to-EVDA ratio of 2.3 x. It's worth highlighting that both the terms and the structure of our debt are very healthy, with an average cost of 2.8% and over 70% at a fixed rate maturing between 2026 and 2029. Prosegur Cash Bond, which matures in 2026, has been reclassified as short-term on our balance sheet this quarter. We have practically completed the refinancing, and the new loans will mature between the next three to five years at a variable rate. That's all from me for now.
I will now turn the presentation over to our Head of Investor Relations, Juan Ignacio Galeano, who will give you more detailed information on the development of the specific business areas.
Thank you very much, Maite. Let's now have a look at the results of each business line covering the main performance indicators and the most relevant aspects of the period. Starting with our Cash Business, I would like to reinforce the 13% of organic growth that we achieved during the first quarter. Not only does this reflect how rapid we were to pass through cost to prices, but more importantly, that volumes continued to increase. That is why our diverse geographic footprint plays an outstanding role. Indeed, both in LATAM and even more so in the APAC region,
volumes are growing at a healthy pace, compensating more mature countries where volumes remain quite stable. The depreciation of the Brazilian real and the Argentine peso resulted in an 8% reduction when measured in EUR, meaning that total sales would have increased by 18% should the currencies have remained the same.
When it comes to profitability, higher sales were leveraged by ongoing enhancements at operating level and by the better performance of our Australian operation. All this led to a 21% increase in EBITDA and a 170 basis points increase in EBITDA margin. Such a high increase is also explained by the fact that during the first quarter of last year, the Argentinian economy was particularly impacted by recent policies. At a cash flow level, operating cash flow reached EUR 12 million, EUR 2 million lower than last year. This reduction is mainly explained by working capital requirements, as DPOs were temporarily reduced.
These positive results are reinforced by the fact that diversification continues its upward trend. Indeed, transformation products are gaining more relevance, exceeding 32% of total sales. We are certainly benefiting from all CapEx deployed in both cash today and forex businesses.
Needless to say, increasing the percentage in the context of higher sales deserves even more credit. Let's move now to our security business, which continues to favorably evolve following past year trends. Total revenues reached EUR 653 million, with the organic share reaching 17%. This is mainly driven by our volume-based strategy that leads to operating leverage, our capacity to pass through inflation to prices, and the outstanding performance of the operation in the US. All the above, coupled with enhanced efficiencies and operating leverage, resulted in total EBITDA reaching EUR 17 million, 49% higher compared to the same period of last year.
This is by every means impressive, considering the volume-led nature of the business. Margins, for their part, continued to increase, reaching 2.63% during the first quarter. Even though all geographies performed, results were mainly driven by our operations in Spain, Argentina, and the US.
As we have explained in past results, macroeconomic stability in Argentina, evidenced by the significant reduction in the inflation rate, is very positive for the business. As for the US, it continues to be a very important driver, and we are confident that it will continue to be so as we plan to further expand operations there. Operating cash flow resulted in negative EUR 10 million compared to the negative EUR 24 million registered during the first quarter of last year. This was mainly driven by higher sales with higher gross margins, coupled with an enhancement in the treasury management, evidenced by a sharp reduction in DSOs.
Indeed, compared to the same period of last year, higher volumes required an additional EUR 19 million in working capital. Let's now turn to the alarm business, where once again we delivered outstanding results.
As it can be seen, every relevant KPI did better when compared to the same period of last year. Our client base totaled 984,000, marking a 13.1% increase year over year. However, even more important than growing the client base is doing so in a healthy and thus sustainable manner. Being able to do so is not only a good testament to efficient management but also the only way for long-term value creation. As said, every indicator moved in the right direction, further contributing to increased value. Indeed, churn rate went down year over year. It did so by a spectacular 2% in the case of MPA.
This is explained by both enhancements in our customer retention process and in a strict control in the scoring of new clients.
ARPU and service margins, for their part, increased, reaching EUR 21 million per BTC for both Prosegur Alarms and MPA, evidencing a strict discipline of our commercial team when it comes to passing through cost to prices. It's also worth pointing out that the 27.7% increase in service margins in Prosegur Alarms has to do with the macroeconomic dynamics of Argentina, where inflation was much higher than the nominal depreciation of the currency, implying a real appreciation of the Argentine peso. As for acquisition cost, the increase in both cases has to do with a deliberate strategy of increasing marketing expenses.
As thoroughly explained in our last analyst day, following a push strategy sets the virtuous cycle in motion, leading to a multiplication effect. Let's now turn to the following slide to see how all these indicators merge into an enhancement of recurring cash flow.
It's clear that the combination of higher service margin and good performance at a churn rate level implies a significant increase in recurring cash flow. That is, the resulting cash after the clients that churn are fully reacquired. In the charts above, what we are showing is the 12-month rolling recurring cash flow of both Prosegur Alarms and MPA. The one on the right side clearly indicates that the generating cash flow capacity of the two businesses combined for Prosegur stands at EUR 75 million, 40% higher year over year. As we have been suggesting for quite a while now,
it seems that the market is not considering this when calculating the company's fair value, a reason why we see this as a natural catalyst. This concludes our analysis of the performance of each business line for the first three months of the year. Thank you all for your attention.
I will now hand you the microphone back to our CFO, Maite Rodríguez, for her closing remarks.
Thank you very much, Juan Ignacio. Let me now share with you my closing thoughts on the most relevant conclusions of this results presentation. Overall, as we have seen during the presentation, all businesses reported enhanced operating efficiencies and strong results. On a consolidated basis, total sales increased 11%. Even more important is the fact that this increase was widespread across all geographies and further enhancing both geographic and product diversification, thus making the entire operation more sustainable. EBITDA and net income increased by 43% and 69%, respectively,
mainly thanks to the good performance of all our business lines. In our cash business, the remarkable 10% increase in organic sales was further enhanced by strict cost control and operational efficiencies, resulting in a 21% increase in EBITDA generation.
Turning to our security business, sales volumes increased by 12% compared to the previous year, and we achieved higher margins thanks not only to scalability but also to a robust client portfolio and an efficient price pass-through. It is also noteworthy that there was a significant improvement in cash flow compared to last year, despite being offset by seasonal growth. Lastly, our alarm business demonstrated very solid growth, achieving 984,000 connections. This growth is accompanied by strong results in key management indicators. We have seen improvement in churn, service margin, and ARPU. This strong performance translates into a rolling recurring cash flow of EUR 75 million, implying a 40% year-over-year increase and pointing to robust cash generation.
As said at the beginning of the presentation, these results not only reinforce the adopted strategy so far but are also a good indication that we are on the good track to accomplish the objectives set for the year. This was all on my side for this results presentation. I would like to thank you all once again, and we are now open for Q&A.
Thank you. If you would like to ask a question, you will need to press star one and one on your telephone and wait for your name to be announced. To withdraw your question, please press star one and one again. Thank you. We will take our first question, and this is on the line of Manuel Lorente Ortega from Santander. Please go ahead.
Yes, hello. Good afternoon. My first question is on the security business. We have seen a pretty strong 17% organic growth in the quarter. It would be great if you can give us some color regarding pricing volume trends beneath that strong delivery and what we should expect for the coming quarters.
Thank you, Manuel. In relation to security, we are very happy with how it's evolving and how the results that we have this quarter. It is true that this quarter we really want the price pass-through around 5%. It is not extrapolable, these results, for the rest of the year and for year-end because we are having more coming from those pass-through, cost pass-through to prices. We are happy on the trend, on the positive trend that we are having because we still continue. We are very happy for year-end also because our budget is better than the last year's figures, and we are going to continue improving in a high single-digit our growth.
That means that our margin is also going to improve little by little because, as you know, security business is a volume business, so we have to do it little by little.
Yes, with a very strict discipline in passing through inflation, control and an improvement on absenteeism, and even having a lean operational structure and a healthy customer portfolio, we think that our budget is achievable, and we are very positive in the margins that we will achieve for year-end. We will continue with the same positive trends, but not as positive as it has been when we compare Q1 2024 and Q1 2025.
Just a follow-up on security then, you mentioned that the improving in margins is a combination of the operational level of the business plus some, let's say, mixed effects from the client base. What we should expect going forward, do you think that there is still room for further improvement in mix given the enhancing play in mix or any other consideration?
In this business, in security business, as I mentioned, all the improvements are little by little, and they are based in we always say the same thing. We have like five different strategies at the same time. It is like a little bit coming from everywhere, a little bit coming from trying to pass through cost more than inflation. A little bit will come from there. A little bit will come from scalability because we are growing, and that growth will bring scalability. A little bit is going to come from controlling the absenteeism that we are really doing well also there.
A little bit will come from the turnover of our customers trying to implement more technology or trying to have better margins on the customers that we have, also on the geographies where we are because, as you know, in the USA, we have higher margins than in other countries. That means that if we grow more in the USA, we will have better margins also at group level. Also on the operational structure, if we are more lean, we will also, or if we are leaner, we will also have a little bit of better margins. It is not going to be something that we will really, our goal is just the passing through, or our goal is just scalability or just operational structure.
No, it is a little bit of everything.
That's why if you add all these, that's why we were saying that we should improve our margins significantly. I don't want to give you guidance on the margins because we have to analyze also the investments that we are doing in the USA. If we exclude those investments, the margins will be very good also for year-end, but not as good as we have had them now, that it was like a kind of, I don't know, a big, it was like a 49% increase. Last year, we closed in 3.26%. For 2025 full year, it's not going to be those 49% increase. That's what I was trying to say. It's going to be a little bit of everything.
Okay. Okay. Brick by brick. Probably my last question is on the leverage side. The 2x net debt to EBITDA, let's say, soft indications that you mentioned sometimes, is it still your central scenario for this year, given to some extent slightly higher net debt at the beginning of the year?
In terms of debt, I think that I already mentioned it on the full year results presentation, that we were going to be between 2x-2.2 x. I maintain it. We will be around there, between 2x-2.2 x. It will depend on the growing of security because, as you know, for example, this quarter, our cash flow was around EUR 19 million smaller just because of the volumes of security. If we have good internally, we always say if we have good growth, good quality growth, we are going to invest that cash flow. At the end of the year or at the end of the quarter, the Q4, if we continue having very good growth, maybe we could have a little bit more debt.
For sure that we are going to decrease the debt that we had last year, and we will be between 2x and 2.2x depending on this security business growth.
Thank you. We will now take the next question. This is from Alvaro Lence from Alantra Equities. Please go ahead.
Hi. Thanks for taking my questions, and congratulations on the good set of results. The first question is coming back to security. You're investing a lot on the US. I don't know if you are seeing any slowdown from the, for example, Q1 GDP in the country was already negative, and the macro seems to be becoming a little bit less stable or more adverse. I don't know if you're noticing any slowdown on the security business. My second question would be on alarms. I have seen that you have reported a very strong increase in ARPU in Q1 in Prosegur Alarms.
I wanted to know whether you expect to maintain these EUR 46 per unit for the rest of the year, or if you expect a decline, maybe you have front-loaded a little bit of the inflation in Argentina, and you expect that to come down in euro terms in the rest of the year. My third question would be regarding if you could provide some disclosure on the EBITDA generated by the other businesses that is not security and Prosegur Cash because we do not have the breakdown between alarms and the other business and the corporate costs. It has been significantly better than last year.
In fact, it has been positive. Last year, you reported a little bit of an operating loss. If you could clarify that, it would be very helpful. Thank you.
Thank you, Álvaro, for your questions. In terms of the slowdown of USA that you are mentioning, USA is doing amazing. It's really doing very, very well. We are not observing these macroeconomic problems on our business, mainly because in the type of in our budget for this year, our main goals were to focus on big customers and trying to achieve a name on USA. In this type of customers, they are really valued; they really are adding value to their business. We are not really noticing any kind of decrease in margins or not. We are still growing. We are even going to be above the budget in sales and in margins, in both.
We are very happy with USA. I don't know. Maybe in the future, I don't know if we will have delays on DSO. We are not having them now.
I don't know. Maybe if the country goes slowly or something, I don't know, maybe we could be affected there. Now we have zero impact coming from the evolution of the country, USA. Going back to your second question about the ARPU of alarms, you are right. I think that we already mentioned also on our script, but now the ARPU that we have is a little bit high coming because of the Argentinian inflation. If we compare it to last year, the inflation is higher, and we have a higher ARPU. We also have a higher cost because now if you go, if you visit Argentina, you will see that everything is super expensive.
It is because of that. That is why you do not observe so much that impact in our service margin, but you observe it in the ARPU.
Yes, from my point of view, I think that during the year, something should decrease. It's not going to be very significant, but something should decrease coming from Argentina. In relation to your third question about how is Prosegur Tech doing, the sales of Avos. Here we have Avos and Cypher, two different business lines. Avos in sales, we achieved EUR 20.7 million of sales. That is 8% higher than last year. In EBITDA, we are in EUR 1.3 million. Last year was zero. We have increased also there, and we have a margin of 6.2%. In the case of Avos, we are happy. It's evolving very well. We are doing very well also with Cisnet.
We have an international plan. We are trying to enter in Colombia and in other different countries. We are happy.
As you know, for full year, I do not know. I really do not know the total budget that we have for the full year, but it is not more than EUR 100 million or EUR 100 million-something. It is a very small, still very small business. In the case of cybersecurity, we have close to EUR 5 million of sales. The EBITDA is negative in EUR 2 million. Last year was more or less the same. I think that this year is EUR 5 million, and last year was EUR 4.6 million, something like that. The EBITDA was also exactly the same, like EUR 2.3 million and EUR 2.3 million this year in negative. Why is it negative? As you know, this is a startup.
The full year's total sales, I think that last year were around EUR 15 million or EUR 16 million, something like that. It is a startup. It is very small.
We are happy because we are achieving, as you know, we entered in USA last year. We have a lot of, that's why our EBITDA is mainly negative because we are investing a lot in product, but also in Salesforce. The Salesforce in USA is quite expensive. That is why, while they are learning the product and so on, it is taking time. This month, in April, for example, they are starting to have a very good pipeline and winning big customers. We will see how it evolves. From now on, we are just like a kind of tasting because it is very, very, very small.
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Thank you very much for attending this presentation. If you need further information, please contact our investor relations department, who is open to help you at any time. Have a nice day.
Thank you. This concludes today's conference call. Thank you for participating, and you may now disconnect.