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Intrinsic Value is all-important and is the only logical way to evaluate the relative attractiveness of investments and businesses.
Intrinsic Value is all-important and is the only logical way to evaluate the relative attractiveness of investments and businesses.
Hello, and welcome to The Brink's Company First Quarter 2021 Earnings Conference Call. Brink's issued a press release on first quarter results this morning. The company also filed an 8-K that includes the release and slides that will be used in today's call. For those of you listening by phone, the release and slides are available on the Investor Relations section of the company's website, brinks.com. [Operator Instructions]. As a reminder, this conference is being recorded.
Now for the company's safe harbor statement. This call and the Q&A session will contain forward-looking statements. Actual results could differ materially from those projected or estimated. Information regarding factors that could cause such differences is available on today's press release and the company's most recent SEC filings.
Information presented and discussed on this call is representative as of today only. Brink's assumes no obligation to update any forward-looking statements. The call is copyrighted and may not be used without written permission from Brink's.
It's now my pleasure to introduce your host, Ed Cunningham, Vice President of Investor Relations and Corporate Communications. Mr. Cunningham, you may begin.
Thanks, Keith. Good morning, everyone. Joining me today are CEO, Doug Pertz; and CFO, Ron Domanico. This morning, we reported first quarter results on both the GAAP and non-GAAP basis. The non-GAAP results exclude a number of items, including our Venezuela operations, the impact of Argentina's highly inflationary accounting, reorganization and restructuring costs, items related to acquisitions and dispositions, costs related to an internal loss and costs related to certain accounting compliance matters.
We're also providing our results on a constant currency basis, which eliminates changes in currency exchange rates from the prior year. We believe the non-GAAP results make it easier for investors to assess operating performance between periods.
Accordingly, our comments today focus primarily on the non-GAAP results. Reconciliations of these results are provided in the press release, in the appendix of the slides and in this morning's 8-K filing, all of which can be found on our website.
With that, I'll turn the call over to Doug.
Thanks, Ed, and good morning, everyone, and thanks for joining us today. This morning, we announced first quarter results that we believe clearly demonstrate the increased earnings power and resiliency of Brink's. Our strong first quarter results were driven by the ongoing successful integration of the G4S acquisitions and our fixed cost reductions, which more than offset the impact of extended pandemic shutdowns, mostly in Europe.
On a reported basis, revenue was up 12%. Operating profit grew 43%, reflecting a margin increase of 200 basis points to 90 -- 9.2%. Adjusted EBITDA was up 32%, with margin improvement of 210 basis points to 14%, and EPS grew 64% to $0.82 per share. It's important to remember that we're comparing to a year ago quarter that was not materially affected by COVID-19. In fact, not until the last week or so of March did we start seeing those impacts.
So we're quite encouraged by the fact that on an organic basis, this year's quarter revenue was down only 6%, while operating profit increased 30%, reflecting an operating margin improvement, as we said earlier, of 200 basis points, and we expect this leverage and margin expansion to continue as revenues recover.
We forecast organic revenue and profit growth to accelerate as we move through this year, 2021, especially in the second half, supported by continued recovery from the pandemic. During the quarter, we completed the final phase of the G4S acquisition. These businesses, which span 17 countries, have been largely integrated well ahead of schedule, and we're on track to exceed our original synergy targets of $20-plus million.
On April 1, we completed our purchase of PAI for $213 million, reflecting a pre-synergy purchase multiple of about 7x EBITDA. PAI provides managed services for approximately 100,000 ATMs and brings its strong management, highly scalable business model and cross-selling opportunities to Brink's. PAI is a great platform on which we can accelerate our 2.3 Strategy in North America. I'll cover PAI in more detail in a few minutes. Together, G4S and PAI are expected to add approximately $130 million in adjusted EBITDA this year and more next year as revenue growth returns and full run rate synergies are realized.
We're increasing our 2021 guidance at midpoint to over $700 million of EBITDA and EPS of approximately $5 per share, which includes the positive impact of the PAI acquisition as well as a cross-currency swap. I'll review guidance more on the next slide. Finally, I'm happy to report that we plan to host an Investor Day in October when we will provide the details behind our 3-year strategic plan and prevent -- and present our financial targets.
Our current strategic plan, which we call SP2, has 3 years -- 3 layers, excuse me, 2 of which expand on the first 3-year plan. We're continuing to drive organic growth by taking our Strategy 1.0 initiatives wider and deeper across our global footprint, boosted by the operating leverage initiatives that are already driving margin growth. WD and lean initiatives are now part of our core Brink's business system and are becoming embedded in our culture.
G4S and PAI acquisitions provide a strong start to our second strat plan, and with $1.4 billion of liquidity, we're assessing additional acquisition opportunities to support our core business and our 2.0 digital cash initiatives, which are aimed at driving subscription-based recurring revenue streams beginning next year. Our Investor Day event may also include an update on the potential growth opportunity related to cannabis, pending the outcome of recent legislation efforts at the federal level.
Turning to the next page, Slide 5 summarizes our updated and increased guidance for 2021. We're targeting revenue growth of 21% at midpoint to $4.45 billion, driven primarily by inorganic growth from acquisitions and continued organic revenue growth recovery. Operating profit growth of 34% at midpoint to $511 million, reflecting a margin of 11.5%, again, an increase of 120 basis points over last year.
Note that at the high end of our revenue range, which is equivalent to about 2019 pro forma revenue, the margin increase is 170 basis points. Our guidance target is for adjusted EBITDA growth of 25% to $705 million at midpoint and EPS growth of 32% at the midpoint of just under $5 per share.
It's also important to note the top of our revenue guidance range, which only gets us back to around 100% of pro forma 2019 revenue. Our EBITDA guidance is approximately $750 million at 16% margin.
Once again, we're expecting revenue and profit growth to accelerate in the second half of the year. Our confidence is based on continued economic recovery from the pandemic lows and realization of full year benefits from the G4S acquisitions, the sustained -- the sustainability of operating leverage driven by our cost reductions and normal seasonality.
Consistent with prior quarters during the pandemic, first quarter internal U.S. and external cash levels remain elevated versus prior years, contrary actually to what many might have expected during the pandemic. Based on Federal Reserve published data, cash in circulation in the U.S. in the first quarter is up 17% versus prior year, a material increase over the 30-year historical 6-plus percent compound annual growth rate.
Similarly, euro currency in circulation is also up over 12% in the first quarter, which is higher than its historical annual compounding growth rate of about 9%. History has also shown that during periods of recession and economic stimulus, the use of cash increases as a percent of payments, suggesting that we are in and will continue to be in a period of increased cash usage. Our internal metrics also support this data, as the value of notes flowing through our U.S. operations increased 4% over last year's first quarter when the pandemic was not much of a factor.
And our acquisition of PAI also provides what we feel is a leading indicator on cash usage. The number of cash withdrawal transactions at PAI's ATMs that were opened a year ago is up more than 18% over the quarter -- the same first quarter of last year, and the value of these transactions is up even more.
These internal and external data points demonstrate the resiliency and persistence of cash usage even during the pandemic, and they support the fact that cash usage is not going away and, in fact, getting stronger.
Slide 6 presents data from reputable independent sources also demonstrating that cash usage is strong and growing. The combination of a long-term forecast for strong in-person retail sales and the continued use of cash as one of the most popular forms of payment supports the case, that cash management is a great growth opportunity for Brink's.
The graph on the left-hand side on this slide is compelling. In 2020, according to the U.S. Census Bureau, 86% of retail spending was done in person, even during a pandemic. And experts predict that by 2025, in-person retail spending will still account for over 3/4 of total retail sales. And importantly, when it comes to in-person transactions, the most used form payment still is cash at about 35%, ahead of both debit and credit. It's also important to remember that retail sales are expected to reach over $6 trillion in 2025, so the size of in-person retail sales at over $5 trillion will be larger 5 years from now than it was pre-pandemic, even with the projected continued acceleration in e-commerce sales growth.
Again, based on this data, Brink's is very much in a growth business. Given our strategic focus on increasing organic revenue, growth through acquisitions and our development of digital cash solutions for a very large market of unvended retailers, we're highly confident that we'll continue to deliver strong organic revenue growth that will create value for our shareholders.
Please visit our website to see this data and more on cash and retail sales. Please visit investors.brinks.com.
With that, I'll now turn it over to Ron for a review on financials.
Thanks, Doug, and good day, everyone. Slide 7 is a format that we include each quarter that covers the 4 key metrics of revenue: operating profit; adjusted EBITDA; and EPS for the current quarter, the current quarter in constant currency and the reported results for the same quarter in prior years. I'll go into detail on each of these metrics on the next 2 slides.
Turning to Slide 8. Please remember that we disclose acquisitions separately for the first 12 months of ownership, at which time they are mostly integrated, and then they're included in organic results. Our results for this quarter include the February 2021 acquisitions of the G4S cash businesses in Macau, Kuwait and Luxembourg, which completed the G4S acquisitions announced last year. Starting in the second quarter of 2021, our results will also include the recent PAI acquisition.
2021 first quarter revenue was up 13% in constant currency as the pandemic-related organic decline of 6% was more than offset by a 20% contribution from acquisitions. Negative ForEx reduced revenue by $9 million or 1%, as strength in the euro was more than offset by weakness in Latin American currencies.
Reported revenue was $978 million, up $105 million or 12% versus the first quarter last year. In general, revenue recovery was consistent with the fourth quarter 2020, except for Europe, where lockdowns were reimposed by governments in response to a post-New Year's wave of the pandemic.
First quarter operating profit was up about 50% in constant currency, with organic growth contributing 30% and acquisitions added 20%. As I noted last quarter, we believe that the fact we achieved organic operating growth despite an organic revenue decline is a testament to our proactive cost realignment.
Forex reduced operating profit by $5 million or minus 8%. Reported operating profit for the quarter was $90 million, and the operating margin was 9.2%, up 200 bps from the first quarter 2020 and just 20 bps below our 2019 first quarter pre-pandemic operating profit margin of 9.4%.
Corporate expense in the first quarter was up $15 million due primarily to a change in the methodology for allocating allowance for doubtful accounts with our updated reporting segments. Under the previous methodology, conditions mostly associated with the pandemic overstated the country accrual by $12.3 million. The new methodology, consistent with U.S. GAAP, reversed the country accrual overstatement, resulting in an increase in segment operating profit and a corresponding $12.3 million charge in corporate.
There was no impact to the consolidated operating profit for the quarter. More information on the methodology change is included in our 10-Q filing. Segment results are included in the appendix and in our press release.
Moving to Slide 9. First quarter interest expense was $27 million, up $8 million versus the same period last year, due primarily to higher debt associated with the G4S acquisitions.
Tax expense in the quarter was $20 million, $8 million higher than last year, driven by higher income. Our full year non-GAAP effective tax rate is estimated at 32%, in line with last year. $90 million of first quarter 2021 operating profit was reduced by $27 million of interest expense, $20 million of taxes and by $2 million in minority interest and other to generate $41 million of income from continuing operations. Dividing this by 50.5 million weighted average diluted shares outstanding, it generated $0.82 of earnings per share, up $0.32 or 64% versus $0.50 in the first quarter last year.
Our EPS comparison was positively impacted versus 2020 by about $0.09 from a gain on marketable securities versus a loss last year and by $0.02 from the 1.1 million share repurchase in the third quarter 2020, which reduced our outstanding shares by about 2%. To calculate first quarter 2021 adjusted EBITDA, we started with $41 million of income from continuing operations and added $44 million of depreciation and amortization, which was up $7 million, due primarily to the G4S cash acquisitions.
Interest expense and taxes, as just discussed, were $47 million, and noncash share-based compensation was $8 million. Backing out $3 million in gains on marketable securities resulted in $137 million of adjusted EBITDA, up $33 million or plus 32% versus prior year.
Now on to CapEx on Slide 10. Total cash CapEx for 2020 was $119 million, which included $101 million for operating CapEx and $18 million to purchase cash devices. We acquired another $31 million of assets under financing leases. This year, we expect cash CapEx of about $180 million or approximately 4% of revenue, which includes approximately $125 million for legacy Brink's businesses, $25 million for the acquired G4S cash businesses and $30 million for cash devices. This includes $10 million cash devices for PAI. We expect to acquire about $35 million of operating assets under financing leases.
It's important to note that many of our Strategy 2.0 initiatives utilize cash devices. The cost of these cash devices, whether purchased or leased, will be included as a component of the subscription agreement as a cost of services sold. It's our intent to source the majority of these devices under operating lease arrangements. If we're unable to secure operating leases in certain countries, our cash and/or finance lease CapEx could increase. CapEx could also increase if we identify additional opportunities to deploy capital with returns above our minimum targets.
Turning to 2021 free cash flow on Slide 11. Our 2021 free cash flow target range is $185 million to $275 million, which reflects our adjusted EBITDA guidance range of $660 million to $750 million. We expect to use about $95 million of cash for working capital growth and restructuring. This includes about $35 million in 2020 deferred payroll and other taxes payable.
Cash taxes should be approximately $95 million and cash interest, about $105 million, an increase of around $27 million, due primarily to a full year of debt related to the G4S acquisition and additional debt related to the PAI acquisition.
As I just discussed, our net cash CapEx target is around $180 million, an increase of $67 million versus last year. Our free cash flow target, excluding the payment of taxes deferred from 2020, would be $220 million to $310 million, generating an EBITDA to free cash flow conversion ratio of about 33% to 41%, up from the 28% achieved last year on the same basis.
Advancing to Slide 12. The bars on this chart represent the source of our liquidity, the cash available on our business and capacity in our revolving credit facility. At the top of each bar, you can see our cash. Below the cash is our credit facility, both available and drawn, and below that, our debt and financial leases. The bars each represent a point in time at year-end 2020; quarter end March 31, 2021; and pro forma year-end 2021, considering our 2021 free cash flow target and the impact of the PAI acquisition.
At the end of last year, we had approximately $1.6 billion in liquidity. In the first quarter of this year, we used approximately $108 million in cash to complete the G4S cash acquisitions in Kuwait, Macau and Luxembourg. At the end of 2021, we're expecting to have liquidity of about $1.4 billion, which includes the impact of our completed $213 million acquisition of PAI, in the midpoint of our 2021 free cash flow target of between $185 million and $275 million.
Other than the 5% annual amortization of our term loan A, we have no significant debt maturities before 2024. Our variable interest rate, including the expanded term loan A, is L+ 200. On April 26, 2021, we entered into a 10-year U.S. dollar-euro cross-currency interest rate swap on $400 million notes issued last June. We locked in a 151 bp reduction in rate that should reduce 2021 interest expense by about $4 million and increase 2021 EPS by around $0.06.
Last year, we amended our bank agreement through February 2024 to replace the total debt leverage covenant with a secured debt leverage covenant. The 2021 cap on the new covenant is 4.25x, and our March 31, 2021 pro forma secured leverage ratio was 1.8x. We don't anticipate approaching our covenant limits at any time in the foreseeable future.
Our legacy liabilities, including the U.S. frozen pension plan and the Voluntary Employees Benefit Association, or VEBA plan, benefited from rising discount rates and the American Recovery Relief Act of 2021. As a result, and based on current assumptions, we expect to make no cash contributions to these plans until 2029. Our quarterly dividend is currently $0.15 per share, and our credit rating remains strong.
Let's look at our net debt and leverage on Slide 13. This slide illustrates our actual net debt and financial leverage at year-end 2020, March 31, 2021, and are estimated for the year-end 2021. Current year-end estimates include the $213 million acquisition of PAI, the $705 million midpoint of our adjusted EBITDA range and our free cash flow target range between $185 million and $275 million. Net debt at the end of 2020 was $1.9 billion. That was up over $500 million versus year-end 2019 due primarily to the debt incurred to complete the G4S cash acquisition.
At December 31, 2020, our total leverage ratio was 3.3x. And as I just mentioned, our fully synergized secured leverage ratio at March 31, 2021, was approximately 1.8x.
At the end of 2021, given our free cash flow guidance and the completion of the G4S and PAI acquisitions, we're estimating a net debt range of $2.06 billion to $2.15 billion, which, combined with our EBITDA guidance of $660 million to $750 million, is expected to reduce leverage by up to half a turn to a midpoint total leverage ratio of about 3.0 turns.
With that, I'll hand it back over to Doug for a strategic update.
Thanks, Ron. Let's talk a little bit now of strategy. Slide 15 summarizes our current strategic plan, SP2, which builds on the proven initiatives executed in our first strategic plan that covered the 3 years through 2019 and resulted in 8% annual revenue growth on a compound annual basis during this period of time and compound annual growth rate for operating income of over 20% per year.
The bottom layer outlines our 1.0 initiatives to supporting core organic growth and cost reductions. Our SP2 target is to achieve over $70 million of cost reductions and productivity improvements by 2022 driven by our lean initiatives and core Brink's continuous improvement culture.
We're driving our cost reductions wider and deeper by expanding cost initiatives into more countries and implementing over 18 different proven operational initiatives, including affiliate savings, route optimization, money processing center standardization and more. These initiatives are supported by dedicated lean experts in each country as part of the newly introduced Brink's business system.
Sustained cost reductions of SG&A and other fixed expenses have been realized through our recent restructurings and last year's priority 3 targeted cost takeouts. These cost reductions and structural changes are driving operating leverage, as demonstrated this quarter in the higher OP margins versus last year and 2019, even with lower revenue levels.
The benefit of operating leverage will continue to be material as organic revenue recovers from the pandemic yielding higher margins going forward. This leverage is evident in our 2021 earnings guidance, which shows a margin improvement of 100 basis points from the low end of the guidance, with margins at 11% to the high end of the guidance at 12%.
As organic revenue continues to recover, operating leverage is expected to add over 150 basis points to our profit margin by 2022, and WD initiatives will drive additional growth as well, as we spoke about earlier. The middle layer of our strategy represents our 1.5 acquisition strategy, including G4S and PAI, which are the first acquisitions in SP2, where we have invested approximately $2.2 billion in 15 acquisitions since 2017. Each of these acquisitions support our overall growth strategy and will collectively yield close to 6x EBITDA on a post-synergy basis. With the G4S acquisitions largely integrated and run rate synergies recognized, we're continuing to identify and evaluate additional acquisition opportunities to support our core businesses and our new 2.0 Strategy.
What's new in the SP2 strategy as the top layer, which includes the introduction and development of digital cash solutions through an integrated platform of services, technology and devices, leveraging our core CIT and money processing capabilities and assets. We call 2.0 Brink's Complete as it offers complete digital focused solutions for the broader cash ecosystem.
We believe our 1.0 and 1.5 strategies form a very strong foundation that, by themselves, will drive double-digit earnings growth well into the future. We expect that the strong base of growth will be supplemented starting latter part or late this year by this new strategic layer, which is designed to drive increased organic revenue growth and higher margins by offering digital cash management and payment solutions.
Turning to Slide 16. With 2.0, we're taking our tech-enabled strengths, including mobile apps, system-wide track-and-trace, customer portals and low-cost devices, and combining them with our core capabilities in cash logistics and money processing. This enables us to deliver complete digital cash management solutions that provide faster access to working capital for retailers and are easy to use -- as easy to use as other digital payment options. By integrating these new services with our core cash operations, we're creating a platform of truly differentiated digital cash management solutions that we include as 4 distinct strategic pillars.
On the left-hand side, 2.1 is a digital cash solution offering a complete hassle-free, tech-enabled cash settlement for retailers that just is -- is just as timely and is easy to use and, in most cases, at least as cost effective as processing credit and debit card purchases. In addition to optimizing working capital, our 2.1 solutions reduce labor cost and theft-related losses.
The box in the upper right-hand corner of Page 16 illustrates how the 2.1 digital cash solution combines an app and Brink's device, similar to a credit card and a reader, to provide credit for cash deposited into the device, delivering an experience similar to processing cash payments.
Our 2.2 solution extends cash process automation and settlement to large big box and enterprise retailers, enabling them to automate and optimize their high volumes of cash from the register to the back office to their banks using Brink's as a single service provider.
Given our acquisition of PAI, I'll cover 2.3 ATM solutions separately in just a moment. On the right-hand side, our 2.4 digital payment solution integrates our 2.1 digital cash management solutions with other payment methods to provide a unified solution for small and medium-sized businesses. Most all digital payment processors are solely focused on processing noncash payments, with no solution offered to retailers for handling cash. For example, Square has stated that cash represents about 30% of their retailers in-store payments. Yet they and most all payment processors do not offer any solution for managing cash payments. Our 2.4 solution is designed to do just that and fill that void.
With the recent PAI acquisition, I wanted to summarize our 2.3 strategy in a bit more detail over the next several pages, just as a preamble to our Investor Day. With 2.3, we provide a full range of ATM services, an important part of the cash ecosystem that also converts digital to cash through the use of cards and other devices. ATMs are critical consumer touch point that are also expensive for retailers and financial institutions to operate and are not core, frankly, to their businesses. By outsourcing these devices to Brink's, retailers and financial institutions can reduce cost and, more importantly, focus on the needs of their customers and their business.
Our BPCE relationship in France is a great example of a fully outsourced FI managed service for a complete ATM estate of more than 11,000 ATMs, which will be coming on in the second half of this year. PAI enables us to offer a similar full range of ATM managed services in North America. We believe the market for ATM managed services will be a steady source of growth for Brink's, as it has been for PAI, and we offer both ATM-only services as well as an expanded complete cash services offering. Retailers need ATM partners like PAI that offer an array of leading technology solutions that are tailored to their needs and desires, up to and including a complete managed service, as illustrated in the right-hand portion of this slide. And as financial institutions rationalize their branch networks, they are increasingly relying on ATMs as a main source of customer interaction and moving to outsourced ATM services.
Before PAI and BPCE, Brink's ATM services, for the most part, were comprised primarily of cash fulfillment and some first-line and second-line maintenance services, as shown in the lower section of the blue services illustration on this page. Brink's now provides a full end-to-end range of higher-value, higher-margin services. The goal is to develop multiple recurring revenue streams with long-term subscription-based contracts. The benefits for customers include single-source access to a full range of proprietary ATM technology and operating and management systems. By operating ATM -- by outsourcing ATM operations and even ownership, our customers can free up resources and capital and focus again on their business.
We believe some of our financial institutions, especially regional and community banks and credit unions, will increasingly look to outsource these functions. And longer term, the outsourcing of ATMs by larger banks in the U.S. Tier 1 and Tier 2 financial institutions should be another growth opportunity, just as it is starting to be for us in Europe. PAI is the largest private-held provider of ATM services in the U.S., with a platform of more than 100,000 active ATM service locations. On a full year 2021 basis, PAI is projected to generate gross revenue of approximately $320 million and adjusted EBITDA of approximately $30 million. Based in Dallas, PAI employs about 225 people and offers a full range of managed services and technology tools for ATM owner operators and PAI-owned ATMs.
In summary, the addition of PAI for us accelerates our execution of Strategy 2.3 with a strong U.S. platform and brings a highly scalable, asset-light business model, offering SaaS technology to both retailers and FIs. PAI also offers significant cross-selling opportunities to market our Brink's 2.0 services to its current customers, starting with PAI's 70,000-plus merchant partners and to market ATM services to banks and FIs as well as other retail customers.
These services include, obviously, our 2.0 cash management and ATM solutions for retailers, all from one source. And again, as we said, PAI also expands the potential for 5 value outsourced ATM networks for FIs, both in the U.S. and on a global basis.
Under the leadership of CEO David Dove, PAI has an exceptional management team with deep industry experience and offers significant potential for cost and revenue synergies. In other words, PAI is ready to go and is expected to be accretive to our earnings this year.
I'll close with a slide that summarizes our recent performance, our increased guidance and our next 3-year strategic plan. We expect substantial improvement in 2021 and beyond, with midpoint 2021 guidance of revenue up 21%, EBITDA up 25% to $700-plus million and EPS up over 30%. As a reminder, our 2021 guidance does not include any material contribution from our Strategy 2.0.
As we -- and as we enter what we believe will be a robust post-pandemic economic recovery brings us emerging stronger than ever, with substantial growth opportunities underpinned by operating leverage that will increase with our recovery. We have a proven global management, proven results, a strong balance sheet, ample liquidity, an expanded global footprint, a realigned cost strategy structure and a compelling strategic plan to expand our presence in the cash ecosystem with new digital solutions.
Once again, I want to thank our global team and all of our employees around the world who have proven their ability to execute very effectively under difficult conditions. We recognize that the last year under the global pandemic has been tough for all of our team members and their families. Thanks to them, we are well positioned to deliver accelerated growth as economies reopen and as we execute on our strategic plan. We look forward to disclosing more information on these strategies when we host our Investor Day.
Keith, I'll turn it back to you, and then open up for questions.
[Operator Instructions]. And the first question comes from George Tong with Goldman Sachs.
You indicated that the high end of your 2021 guidance assumes a return to 2019 revenues on a pro forma basis. Can you discuss what trends you're seeing with market share gains, market penetration and pricing across each of your 4 geographies that support this outlook?
Well, George, that's a pretty significant question if you're looking at all the geographies and looking at the pricing and everything else. I think what we really are seeing is a recovery that is quite different in many other geographies, but will start to accelerate at different paces through each of the geographies. What we saw in the first quarter was the U.S. not accelerate dramatically, but continue to improve, and we think that's a very good sign.
If you think back, as an example, in the U.S., while things seemed like they have come a long way, it's only really in the start -- the latter part of February that we started rolling out true vaccines of any consequence in the U.S., but they started to really make a material improvement in the economy and where things are going. And the U.S. clearly is ahead of most other countries, not all, like Israel, but I think that's what we will continue to see that will drive organic revenues back to 2019 levels and beyond.
Remember, I didn't suggest that our guidance for the year will be that. That's our high end of our guidance, and what we're really suggesting is the midpoint is closer to about 5% below the top end of the range. But clearly, we expect to see significantly increased acceleration in the second half of this year as we see economies come back.
And as we said in our comments, and I think as most people have seen, this was a tougher-than-expected quarter for European markets, and particularly with government shutdowns and mandated lockdowns, which we start -- we're starting to see some light of the tunnel in Europe from those government-mandated lockdowns in the latter part of this quarter.
Got it. That's helpful. And just a follow-up on that question. Can you discuss the relative potential growth in each of the 4 geographies? In other words, where do you expect the recovery to be the quickest? And then where do you expect it to be most lagged or most mixed in performance?
Again, I think we'll see steady recovery in our markets in the U.S., and it's ahead of other countries. Israel probably is one that, because of the vaccination rate, it jumped ahead, but not until the end of the quarter when they really reopened the economy in Israel, and that's an interesting example of that.
So I think it's -- if you take Europe as a whole, It's lagging at least by 1/4 of the U.S. and maybe some other markets, but that will be the key drivers when vaccinations happen and as they move forward.
We expect, though, to continue to see strong cash usage in places that we have new platform positions in like Eastern Europe, in Asia. Certainly, South America continues to be extremely strong and it varies. Brazil is lagging in terms of its recovery, but the use of cash in all those locations, including Mexico and other countries in South America, is extremely strong. And in some of those countries, we're at or back at 2019 levels for revenue already.
Got it. That's helpful. And then secondly, on the cost side, you're expanding your cost initiatives into more countries to help drive margin expansion. Can you elaborate on where you see most opportunity for cost savings outside of North America with your wider and deeper strategy? And what EBITDA margins can expand to longer term?
Well, we won't share what our EBITDA margins will expand to longer term until we get to Investor Day, and I think that's the appropriate time to provide that across the board.
But in the comments and in our numbers on Page 15, we did provide some indication of the improvements, and we laid out that the layering of the cost reductions that we've laid out some targets on with the expanded rollout to more countries. Remember, we're in 50-plus country now on the ground. So as we roll out to more of these countries, including the additional 14 new G4S countries, we're rolling out a lot of the same initiatives that have been proven to be significant cost improvements and implementing our lean strategies, which drive both cost and capacity improvements, and those give us the ability in those countries to continue to improve our margins.
This is not a 1-year, 2-year and then it ends. This is a way that we do business. This is part of the culture and that we'll continue to roll and continuously improve our capacity, improve our service to our customers and improve our costs going forward. But in the short term, we've laid out this year and next year, $70 million associated with cost savings related specifically due to the wider and deeper programs as well as then the cost leverage improvement, the margin improvements that we suggested would be -- we project to be probably 100-plus basis points through next year, depending on where revenues recover to.
And those two combined give us the base with then adding to that the 100 -- or excuse me, the 1.5 acquisition benefits from synergies and then growth from those additional countries as well.
That's our core business, and that's what's going to continue to drive double-digit growth this year and next year. And then on top of that, we're laying on these new strategies that we'll talk more about in October and that I did speak a little bit about already today with the 2.3 strategies.
I think the key piece here, and I want to emphasize this, is that this is part of the culture. This is part of where we're going. And in 2023, we'll be talking about more cost reductions as a result of 1.0 wider and deeper and the way that we move forward.
And the next question comes from Tobey Sommer with Truist Securities.
Could you talk about your ATM transaction, some of that data you cited? How much was the value of transactions up in the U.S. in the quarter? And could you explain the leading indicator and nature of this metric for core CIT in the U.S.?
Yes. Tobey, I think what we -- with the acquisition of PAI, it -- we gained some additional insights that we really didn't have before, a good-sized ATM player in terms of the transactions that go through. And so we just wanted to provide some additional insights.
This is effective of the same-store sales, in other words, same ATM locations that were opened last year, and the increase of withdrawal transactions. And as we said, the number actually for dollars going through was up even a little bit higher than the 18%.
So we think that's a good indicator. And I think most of the many industry analysts suggest that ATM transactions and the amount that's being put into the economy is a good indication. That is a good indication of where the economy is going and the amount of cash that we see going forward.
Our primary purpose of continuing to provide this information is not to suggest that when we see a 4% or 5% or 8% or 10% increase in our numbers or a 17% increase in cash and circulation that we should see a 17% increase in our revenue. Unfortunately, I kind of put it that way.
Our model in the U.S. is not directly tied to the amount of cash that is going through the economy, which, unlike credit card and debit cards, it is. But it does give a very strong and, I think, very positive indication that, that number is not flat. It's not going down, and it's greater than the historical numbers have been, which is suggesting the cash is not going away. In fact, in no way is it going away. It's just the opposite.
That's the primary message and point here, which means that our opportunity is strong, our business opportunities are strong. And in fact, there's significant white space, what I'd like to call it out there, of transactions that are using cash that don't have any services -- vended services by a third-party provided to them, and that's the message that we're trying to get to, and that's the opportunity in the future.
So our core business is very much intact. Margins are improving. We see the growth opportunities with recovery in the economy. And then on top of that, there's an opportunity to go after these additional white space of cash payments that have not been tapped to into the past.
Yes. And I know the vaccination program in the U.S. has been very fluid and it's very recent, but has the increased vaccination rate translated into an ability to roll out your pilots and beta customers for Strategy 2.0 in a better and perhaps faster fashion, so they'll be able to get up and running and use the service and start to assess what it means for them?
It's starting to, Tobey. As I've said, what, two months ago when we talked about the end of our fourth quarter result at the end of February, we're disappointed, if you will, in the lag times and the delays. A lot of this is caused in the program. It's also given us some time to make sure that we get things right as well.
But I think we're just starting to see that. I was just speaking with some of our team over the last week, and what they're seeing is a refocus of many retailers to start taking a look at what can we do to improve efficiencies going forward, rather than just how do I survive through the pandemic time frame, how do I focus on restarting my business which, in those types of situations, which is what we're just starting to get out of, retailers are that is. In those types of situations, what you end up with is the focus is not as how do I materially change my processes or how do I put new things and to improve my productivity and efficiency.
I think they're just starting to take a look at those things, and we'll start seeing a refocus on that. And that's going to also be, I think, hastened by the fact that, I think, the focus is going to be more on labor, ability to get labor, and stores are going to be more focused on making sure that labor and their people support this significant, I think, increase in retail sales.
Great. And I had one other question. With respect to free cash flow conversion from EBITDA, thanks for that bridge for 2021. That's helpful. Could you give us a sense for what a normalized free cash flow conversion range might look like as the business kind of continues to bounce back post pandemic if the 2021 range is appropriate for out years as well?
Yes. Tobey, if you look at Slide 11, where we went through the free cash flow, as Doug showed on his concluding slide, and it still may be up on the screen, we see post pandemic based on all the initiatives that we just discussed, both the cost initiatives, the WD, the Strategy 2.0, continued growth in our adjusted EBITDA. We do not see continued growth in restructuring. That's primarily tied to acquisitions.
And so in 2021, that yellow bar has quite a bit of restructuring in there, and we will continue to have working capital needs as the revenue grows, but that first box should be smaller cash taxes. We don't talk much about it, but we have years of NOLs and tax attributes that we can utilize that will keep our cash taxes about at the $100 million range in the future, even as earnings and EBITDA grow.
Interest is going to get a little bit higher when we have a full year impact of the incremental debt that we assumed with the G4S acquisition, primarily the incremental $400 million in June of last year. When that rolls over, you're going to see an incremental increase in cash interest. Interest rates, we do have a lot of it locked in fixed, and we're going to be able to keep the rate pretty flat, despite what you're hearing in the market about increased rates generally.
And then finally, the cash CapEx, we mentioned in my prepared remarks that 2021 is going to be at 4%. As we start coming up in the next few years to the anniversary date of some of the new generation trucks where we can replace just the chassis and not the entire truck, we're going to get what I call a CapEx holiday. And you'll expect that CapEx number to decline below 4% of revenue. We're targeting at least 3.5%, but it's yet to be seen. So you'll see CapEx as a percent of revenue decline.
And then dividends, we look at that all the time. So far, what we've heard for the past few years is our investors prefer us to redeploy capital through CapEx and M&A, which has much higher returns. And so the Board obviously looks at that regularly, certainly on an annual basis. But right now, at $30 million to $35 million in cash CapEx, it's not a material number.
So I think I've given you all the pieces, but the main driver of our free cash flow conversion metric is going to be the growth of EBITDA, where these other metrics are relatively flat or declining.
But Tobey, I just want to reemphasize. We're looking at EBITDA going up at least $100 million this year versus last year and 2019 on a midpoint basis. And so it's not only these other areas that we're reducing CapEx spend and managing working capital, reducing any restructuring expenses going forward. But also we're growing that top line fairly materially. $100-plus million a year is pretty material.
[Operator Instructions]. And the next question comes from Sam England with Berenberg.
The first one, I was just wondering, should we expect that future M&A is going to focus more on adjacent markets, like the PAI deal? Or is core-on-core CIT still the main focus of M&A? Or are you envisaging it being a bit of both going forward?
We look at absolutely everything, Sam. We have a record of being highly disciplined, but a lot of this is based on what's in the market at a certain time. So the ability in the 14 additional geographies that we got with the G4S acquisition to do bolt-ons in our core business is something that we're exploring, but none of these are really going to be large deals, but you could expect some transactions in the future in the new geographies.
To accelerate the growth and the impact and the timing of our 2.0 initiatives, we're also looking at potential acquisitions there. But again, we're highly cognizant of Brink's multiple -- in the multiple that some of these more fin-served acquisitions have make a lot of acquisitions in that space highly challenging to be accretive, and we do focus on our shareholders and the returns. So you're probably going to see a lot of continued organic growth, but our eyes and ears are open, and we do look at a lot of different things.
Said kind of another way, in our core 1.5-type acquisitions, the bigger elephants have already -- most of those have been taken, but there are still opportunities for nice tuck-ins if they're accretive and they make a lot of sense.
And the PAI, I think, though, is a good example of one that we think gives us a platform. Tied together nicely, it gives us great synergies at least on the top line, which weren't as much as what we were focusing on with the core acquisitions we've done to date, but gives us that opportunity for expanding our organic growth, cross-selling, et cetera.
And we think we did that at a pretty reasonable multiple, staying consistent with a post synergy that's going to be closer to the 6s and, therefore, good value for investors as well. It's a good example.
Great. Yes, I was going to come on and talk about the PAI deal. I just wondered if you're seeing interest already from existing customers in that offering and how long you're thinking it will take to get to the full sort of cross-selling benefit from that deal?
We already have seen interest from customers on both sides, and I think the ability to put the package together to expand where we go out with this, both in what I'm saying is a complete package, will be very interesting.
I think it will take some time to ramp that up, but we're already starting to get the organizations aligned to do that and having the conversations with a lot of the customers on both sides. So I think it will be exciting and compelling, and a complete package gives us much more latitude and options and ways to put it to a complete package to customers.
Great. And then one more.
Yes. Go ahead. No, go ahead, please. Go ahead, Sam.
Actually, I believe his line did disconnect. So as there are no further questions, ladies and gentlemen, that will conclude our call for today. You may now disconnect your lines.
Thank you. Thank you very much, everybody. Appreciate your comments.