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Intrinsic Value is all-important and is the only logical way to evaluate the relative attractiveness of investments and businesses.
Welcome to The Brink's Company's Third Quarter 2020 Earnings Call. Brink's issued a press release on third quarter results this morning. The company also filed an 8-K that includes the release and the slides that will be used in today's call. For those of you listening by phone, the release and slides are available in the Investor Relations section of the Company's website brinks.com. At this time all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. 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 projected or estimated results. Information regarding factors that could cause such differences is available in today's press release and in 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 is now my pleasure to introduce your host, Ed Cunningham, Vice President of Investor Relations and Corporate Communications. Mr. Cunningham, you may begin.
Thanks, Sarah, and good morning, everyone. Joining me today, our CEO, Doug Pertz; and our CFO, Ron Domanico. This morning, we reported third quarter results on both the GAAP and the 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 are also providing our results on both a constant currency and pro forma basis. Constant currency eliminates changes in foreign currency exchange rates from the prior year and pro forma revenue includes this year's G4S acquisitions as if they’ve been part of Brink's in both 2019 and 2020. We believe the non-GAAP results make it easier for investors to assess operating performance between periods. Accordingly, our comments today, will focus primarily on the non-GAAP results.
Reconciliations of results are provided in the press release and the appendix to the slides we're using today and in this morning’s 8-K filing, all of which can be found on our website.
I'll now turn the call over to Doug. Doug?
Thank you, Ed. Good morning, everyone, and thanks for joining us today. On behalf of all of us at Brink's, I offer our best wishes to all of you and your families during these difficult times.
The strong third quarter performance we you reported this morning, is a result of outstanding execution by all of our global management team, which has been sharply focused on three priorities since the onset of the COVID-19 pandemic starting with the health and safety of our employees and their families. And I want to personally thank all of our people for their dedication for providing our services, which are so essential to customers and economies around the world.
Our results reflect the team's successful execution of our second priority as well, which is to preserve our financial strength and reduce costs in line with the short-term revenue declines we experienced in the second quarter. We've made great progress in right-sizing our business without sacrificing service levels and qualities to our customers that they expect.
Our third priority is to position Brink's to be stronger and more profitable on the other side of this pandemic. This priority is focused on permanent cost reductions that have combined with a successful integration with the G4S acquisition and the initial rollout of our Strategy 2.0 have positioned us to continue to deliver long-term value to all of our stakeholders.
We believe that our revenue recover -- that as our revenue recovers and surpasses 2019 levels, our realigned cost structure will provide the operating leverage to drive up margin rates and margin dollars to new and higher levels in 2021 and beyond. Our performance since the onset of the pandemic in March, including our strong third quarter results and our expectation of even stronger finish to this fourth quarter, it is a testament to the disciplined execution on these priorities, and as important to the resilience of our business.
Turning now to Slide 4. Our strong third quarter results were driven by continued revenue recovery from our April lows, significant cost reductions and the successful integration of the G4S acquisition to date. Results include a reported revenue increase of 5% or 11% on a constant currency basis, driven by a revenue recovery in September to 90% of year ago level and the addition to the G4S cash business.
Operating profit of $100 million, reflecting a margin rate of 10.3% in the quarter. Adjusted EBITDA of $147 million and EPS of $0.86 per share. Given the ongoing impact of the pandemic, our sequential results are a good gauge of the progress we're making. Compared to our strong second quarter results, our third quarter revenue was up 17% and operating margin -- operating profit grew by 36%. These results clearly demonstrate the impact of our realigned cost structure, coupled with our revenue recovery.
Our results together with publicly available information on cash and cash data demonstrate the resilience of cash and our business in general. The strong revenue recovery in the third quarter to 88% of 2019 pro forma levels and the 78% in the second quarter is very encouraging given the retail shutdowns and overall economic weakness caused by the pandemic.
Since April, we've seen steady monthly increases in the number of retail customers and customer locations that are reopening and we're processing more cash per location, both in terms of volume, of notes and total value. Our total cash process in the U.S. is also up significantly from pre-pandemic levels. And independent data suggests that cash as a percent of payments has not materially changed from 2019 levels.
Looking ahead, we expect continued improvement in the fourth quarter as ongoing cost reductions, organic revenue growth and additional contributions from the G4S acquisition drive operating profit and margin rates higher. As a result, we've reinstated 2020 guidance that exceeds the top end of the model we disclosed with second quarter results, with respective -- with midpoint operating profit and EPS of $348 million and $3 per share, respectively. This guidance is supported by a fourth quarter operating margin target of approximately 11.5%, which we see as a strong jumping off point for 2021, when the full year benefits of permanent cost reduction realignment and the G4S acquisition are expected to supplement the continued revenue recovery. Slide 5 provides a more complete summary of our sequential results thus far in 2020.
As I mentioned, we believe the second quarter results were very strong, especially when you consider that the initial and most damaging effects of the pandemic were occurred in April and May. Our third quarter results were even stronger and they underscore the impact of increased operating leverage as operating profit grew by 36%, more than double revenue growth of 17%, reflecting a margin increase of 140 basis points to 10.3%. The revenue increase was driven mostly by organic growth with some additional revenue from the G4S acquisition. Adjusted EBITDA was up 17% to $147 million and EPS was increased by 21% to $0.86 per share.
Turning to Slide 6. This slide provides more detail on the revenue recovery rates across a variety of our global markets. After hitting a low point in April, almost all of our markets experienced strong recoveries in June, as economies around the globe began to reopen and most continues to recover in the third quarter, although at a slower rate than in June.
The U.S. revenue, as you can see on the left hand side of the chart, recovered in the third quarter to about 91% of 2019 levels, up from 81% in the second quarter -- excuse me, up from 80% in the second quarter as it shows on the chart. U.S operating profit margin was up as well, up a 160 basis points compared to the 2019 third quarter and this is even as revenue was 9% lower in 2020 versus 2019. The right side of the chart shows that on a pro forma basis, which includes both Brink's and G4S results for 2019 and 2020, our total third quarter revenue was about 88% of 2019. Again, up from 78% in the second quarter and 71% in April.
Revenue recovery continued in the third quarter, although at a lower recovery rate with September pro forma revenue at about 90% of 2019. While we're encouraged by the recovery rates, given the fluctuating impact of the pandemic on economies around the world, predicting future revenue levels is at best difficult. As a result, the low end of our 2020 guidance assumes a revenue recovery rate of about 85% in the fourth quarter to accommodate a potential further deterioration in the external environment.
I'll now turn it over to Ron for his financial review. Ron?
Thanks, Doug, and good day, everyone. Doug reviewed our sequential third quarter results versus our second quarter results. I'll now review our third quarter results versus the third quarter last year. Before I do, please remember that we disclosed acquisition separately for the first 12 months of ownership at which time they are mostly integrated. And then they were included in our organic results.
In the third quarter 2020, acquisitions include for the entire quarter G4Si and the G4S cash businesses that we purchased in the Netherlands, Belgium, Ireland, Romania, the Czech Republic, Cyprus, Malaysia, Hong Kong, the Philippines and the Dominican Republic. During the third quarter, we acquired G4S cash businesses in Estonia, Latvia, Lithuania, in Indonesia, and those results were included from the month of acquisition. Acquisitions in the third quarter also include TVS in Columbia and exclude the impact of the divestiture of a small monitoring business in France.
Looking at Slide 11. 2020 third quarter revenue and constant currency was up 11% as the pandemic related 9% organic decline was more than offset by a 20% contribution from acquisitions. Negative ForEx reduced revenue by $56 million or 6%, was driven by the pandemic induced flight to the U.S dollar.
Sequentially, on average exchange rates improved slightly during the third quarter. Reported revenue was $971 million, up 5% versus the third quarter last year. Third quarter operating profit was up 19% in constant currency as acquisitions more than offset a 1% decline in our organic results, significantly improved from the second quarter organic decline of 18%.The fact that the percent organic operating profit decline was much better than the percent organic revenue decline is a testament to our proactive cost realignment.
Negative ForEx reduced OP by $22 million or minus 22%. This included a $10 million charge on the conversion of Argentine pesos to U.S dollars, using the chip swap markets. Reported operating profits for the quarter was $100 million and the operating margin was 10.3%, down 80 bps from the third quarter 2019, but up 30 bps if you adjust for the Argentine conversion.
Segment results are included in the appendix and in our press release and later today in the 10-Q. Corporate expense in the third quarter was $2 million unfavorable versus 2019 driven by negative ForEx, primarily the $10 million Argentine peso conversion costs and higher bonus accruals partly offset by bad debt and reduced expenses for IT, professional fees and travel.
Our reported results include more than $4 million in incremental expenses in the third quarter for personal protective equipment, additional cleaning and other measures to keep our employees and our customers safe.
Moving to Slide 8. Third quarter interest expense was $27 million, up $5 million versus the same period last year as higher debt associated with acquisitions was partly offset by lower variable interest rates. Tax expense in the quarter was $24 million, $1 million better than last year as lower income was mostly offset by a higher projected effective tax rate.
During the quarter, we revised our estimated full year ETR down to 34.1% from 37.5% in the second quarter, reflecting our expectation of higher earnings. Effective tax rate volatility is due to changes in assumptions about our ability to utilize tax attributes at varying projected income levels. The G4S acquisition has been constructive in moderating the ETR.
$100 million of third quarter 2020 operating profits was reduced by $27 million in interest, $24 million in taxes and $6 million in minority interest and other, to generate $43 million of income from continuing operations. Dividing this by50.6 million weighted average diluted shares outstanding generated $0.86 of earnings per share versus a $1.05 in 2019.
Our EPS comparison was negatively impacted versus 2019 by about $0.15 from the Argentine peso conversion and $0.04 due to the higher ETR. Our EPS comparison was positively impacted versus 2019 by $0.01 from the third quarter 1.1 million share purchase, which reduced our outstanding shares by about 2%.
In the third quarter, depreciation and amortization was $44 million, interest expense and taxes were $51 million and non-cash share-based compensation was $9 million. In total, 2020 third quarter adjusted EBITDA was $147 million, up 1% versus 2019.
Slide 9 summarizes the four metrics I just reviewed. Revenue, operating profit, adjusted EBITDA and EPS. This is a format that we've used repeatedly and is included here for reference.
Turning to Slide 10. As we discussed last quarter, as soon as it became apparent that COVID-19 was virulent, we took immediate action to put measures in place to reduce direct labor hours at the same time into at least the same magnitude as revenue decreased. We also took decisive action to reduce our fixed costs, so that we could generate similar or greater absolute levels of profitability if the pandemic caused a permanent 10% reduction in revenue. We did this while maintaining the capability to serve our customers when volume levels return.
On the left side of the slide are listed some of the actions that we've taken to address both our variable and our fixed costs. The right side illustrates that our cost realignment actions are expected to reduce headcount by approximately 6,500, 1,000 more than our estimate last quarter. We now expect approximately $70 million in 2020 costs associated with these actions, and we anticipate about $90 million in ongoing annualized savings, each up $5 million versus our projection Last quarter.
We estimate that over half of our cost reductions are permanent and will generate positive operating leverage as revenue levels continue to recover. We continuously monitor and utilize government programs around the world, and we're able to offset a portion of our labor costs in certain countries. However, these programs are diminishing and the benefit was material less -- materially less in the third quarter compared to the second quarter.
Now let's look at CapEx on Slide 11. Our original guidance for 2020 cash CapEx was $165 million, which included $140 million for operating CapEx and $25 million to purchase cash devices. At the start of the crisis, we rationalized CapEx to only purchase assets that are essential to our business operations, safety, and security.
We cut the legacy Brink's cash CapEx targets by more than 50%, down to $80 million.
We also expect to spend an additional $20 million related to the G4S acquisition, bringing our total cash CapEx target for this year to $100 million. Year-to-date, we've invested $79 million. Due to the catch-up CapEx, we invested since 2017 and the implementation of our Strategy 2.0 initiatives that require less capital investment, we expect our new normal maintenance CapEx level to be down to about 4% of revenue.
Turning the cash flow on Slide 12. Cash flow from operating activities is comprised of adjusted EBITDA reduced by changes in working capital, cash restructuring, cash interest and cash taxes. Cash flow from operating activities, less cash capital expenditures equals free cash flow. In 2019, adjusted EBITDA was $564 million, cash flow from operating activities was $334 million and subtracting the $165 million in cash CapEx resulted in $169 million of free cash flow.
We have reinstated 2020 full year guidance, and as Doug will review with you shortly, we estimate that annual adjusted EBITDA of $520 million to $535 million this year. We expect working capital to be negatively impacted by pandemic related increases in DSO receivables collection. And we have a high cash restructuring charges related to both the G4S acquisition and our Priority 3 cost realignment actions. Together, they should consume $140 million to $160 million in cash this year.
Cash taxes, which totaled only $24 million in 2019 are estimated at $65 million this year. We received significant tax refunds last year, which are not expected to repeat at the same level this year. We anticipate cash interest to be around $95 million due to the incremental debt associated with the G4S acquisition. Cash CapEx, as we just reviewed is targeted at a $100 million.
All-in, 2020 free cash flow should be in a range of a $100 million to $135 million, up materially from the $40 million to $110 million we modeled last quarter. And as noted previously, during the third quarter, we used $50 million of cash on hand to repurchase and retire approximately 1.1 million shares.
Let's move to Slide 13 to review our debt, liquidity and covenant headroom. The bars on this chart represent the source of our liquidity. The cash available in our business and the capacity in our revolving credit facility. At the top of each bar, you can see our cash. Below the cash is our credit facility available and drawn and below that our debt and financial leases. The bars each represent a point in time at 2019 year end at September 30, 2020 and at December 31, 2020 pro forma for the completion of the G4S cash acquisitions.
At the end of last year, we had approximately $1.2 billion in liquidity. On April 1, we closed the $590 million expansion of the term loan A with our bank group. And on June 22, we issued $400 million in new 5-year senior unsecured notes. Year-to-date, we use most of those proceeds to complete approximately 90% of the G4S acquisition and the balance increased liquidity to $1.5 billion on September 30.
We expect that free cash flow in the fourth quarter will exceed the cash necessary to complete the remaining G4S acquisitions and liquidity should remain around $1.5 billion at year-end. 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, increased 25 bps in September to L plus 200, reflecting the increased financial leverage associated with the pandemic related EBITDA reduction and the increased borrowings related to the G4S acquisition. On June 9, we amended our bank agreement through February 2024 to replace the total debt leverage covenant with a secured debt leverage covenant.
The 2020 max, the new covenant is 4.25x and our September 30 pro forma secured leverage ratio was 2.0x. We don't anticipate approaching our covenant limits at anytime in the foreseeable future. We plan to maintain our quarterly dividends. Our credit rating remains strong and we have the capacity to weather the pandemic even if conditions worsen.
Let's look at our net debt and leverage on Slide 14. This slide illustrates our actual net debt and financial leverage at year end 2018, 2019 and at September 30 this year. The fourth bar on each side estimates our net debt and financial leverage at this year end. Our net debt at the end of the third quarter was $1.95 billion. That was up about $600 million over year end 2019 due primarily to the G4S acquisition. At September 30, 2020 our total leverage ratio was 3.7x, and as I just mentioned, our fully synergized and secured leverage ratio was 2.0x.
With that, I'll hand it back over to Doug.
Thanks, Ron. Slide 15 give some much needed perspective on e-commerce as it relates to the U.S. retail market. As the global market leader in cash management, we fully acknowledge that the pandemic has accelerated the adoption of e-commerce, forward at least several years. However, if you step back and look at the big picture, studies suggest that the overwhelming majority of retail revenue more than 80% will continue to be generated from in-person sales.
According to a U.S Census Bureau -- according to the U.S Census Bureau, total retail sales in 2019 were approximately $5.5 trillion. And of that 89% was transacted in-person with e-commerce accounting for about 11% of total sales. E-commerce's growth this year is estimated to be around 35% to about 15% of total retail this year, which means 85% of retail sales will still be in-person.
In fact, according to the industry experts given even as e-commerce sales continue to grow by 2022, the share of in-person retail sales will remain well over 80% of total retail sales. Given, that in the second quarter during the height of the shutdowns, Walmart reported a 97% growth in e-commerce sales. However, e-commerce sales at Walmart still represented a little over 11% of their total revenue.
Similarly, Target's e-commerce sales grew an impressive 195%, but still represented only a little over less 17% of Target's total sales. This means that 83% of Target sales were in-store. And in fact in-store sales were up 11.5% in the second quarter year-over-year. These results are very consistent with the overall retail sales data shown on the table at the top of the slide.
In short, speculation that we're becoming a cashless society, only considered some of the facts. And as you'll see in the next slide, we're actually seeing a higher levels of cash in the U.S retail business. And we believe that the in-person retail opportunity will continue to grow over the next several years.
Slide 16 represents data supporting our assertion that cash as a percent of total payment methods in recent months has effectively remained at or close to pre-pandemic levels in the U.S. And the data is from a combination of external sources and internal metrics. Starting at the top left, labeled one, based on a regular annual statistically significant survey by the Fed, cash has -- cash was the most preferred form of in-person payment at 35% of all transactions ahead of credit cards, debit cards and other forms of payment.
Moving to the left part of the slide, labeled two, the Fed also issued special -- a special COVID-19 report, which examined consumer payment behavior in April and May of this year during the height of the nationwide lockdowns. Notably, the Fed study reported that people were using cash at similar rates to pre-pandemic levels for in-person purchases. And that 90% of those surveyed said that cash was accepted at retailers they visited.
The data at the top right of the slide, Number 3, reflects a survey of Square Inc.'s sellers and is perhaps the most telling confirmation of the staying power of cash. Square has publicly stated that since the onset of the pandemic, cash as a percent of sellers payments remains in the mid 30% range, consistent with the Fed's pre-pandemic level. While the Square survey indicated that cash as a percentage of all of its payments -- all of its sellers transactions declined from the pre-pandemic level of 37%. It still remained at the 33% level in both April and in August.
The Square's survey also notes that 85% of its sellers intend to continue accepting cash over the long-term future, which is actually an increase over their 2019 survey results. To compliment the Square and the Fed Data, Number 4 on the bottom right of the slide represents internal Brink's analysis of cash levels we're seeing at our U.S retail consumers -- customers.
The gray bar on this chart shows that our retail customers were reopening at a steady pace throughout the second and third quarters resulting in over 90% of the locations reopened in September. Importantly, over the same period, the blue and the yellow bars indicate that we're processing more cash per retail location in the U.S than at pre -- at the pre-COVID baseline. This supports the premise that cash has a percent of payment methods remains largely unchanged and supported -- and is supported by other independent sources.
This is strong support for the resiliency of cash and the solid future of our business even during the pandemic as evidenced by first -- Brink's is picking up and processing more cash in the U.S today than before the pandemic. And the cash as a percent of payments has not meaningfully changed in 2021 and also the U.S. cash in circulation is at a record level, up around 10% since March.
Moving to Slide 17. This slide summarizes our strat plan -- our strategic plan two, which is a continuation of our first strategic plan that we call SP1. As our new 2.0 initiatives are layered on top of the 1.0 organic growth initiatives and our 1.0 acquisition initiatives, both of which were successfully executed in SP1. Together, they form a strong foundation for continued growth.
From 2017 through 2019, our SP1 plan period, these initiatives added $75 million of operating profit via 1.0 organic improvements. And another $100 million from the $1.1 billion invested in 13 acquisitions. This year's G4S acquisition brought our total to -- total 1.5 strategy investments to $1.9 billion. Our SP1 initiatives drove a 27% increase in revenue with an average annual organic revenue growth of 7%. We improved operating profit by 81%, equating to a 22% compounded annual growth rate over the 3-year period through 2019.
Adjusted EBITDA grew by 67% -- 65%, excuse me, over this time and EPS grew by 71% or 19% compounded over annual growth rate. The Brink's team has a solid track record of execution. And despite the pandemic we expect to continue to build on this track record throughout SP2.
In SP2, our original 1.0 initiatives become 1.0 wider and deeper, which stands for -- which is -- WD, which stands for wider and deeper. During the first 3 years, the 1.0 initiatives were heavily focused on the U.S. and Mexico. We are extending these improvements throughout the 50 additional countries in our global footprint. And we'll continue to drive operational excellence and cost improvements.
Additionally, during the pandemic, we have restructured and resized our business with a key focus on permanently reducing fixed costs, which we expect will lead to higher operating leverage and higher margins. In SP2, our 1.5 initiatives include the addition of G4S this year, which adds 14 new markets to our global footprint, including very desirable cash intensive markets in Eastern Europe and in Asia.
And the top bar represents a new third layer to SP2, which we call Strategy 2.0. 2.0 is designed to expand our presence in the global cash ecosystem and provides a path to digital payments. Our initial focus today is on Strategy 2.1, which rolls out our Brink's Complete solution.
Turning to Slide 18. Strategy 2.0 -- excuse me, Strategy 2.1 specifically refers to our new Brink's Complete service. We developed this service with unvented and underserved retailers in mind, and we're also introducing it to our current customer base. For years, the cash management industry has drifted toward commoditization, relying on efficiency gains throughout density to compete heavily on price and to increase our margins. Simply put, the industry including Brink's has not made cash management easy to use or provided a complete cash management solution to our customers.
To illustrate this unfilled need and opportunity, I'll use again the Square example. Square's customers state that 33% of their total payments are in cash, yet Square service is designed to handle other forms of payment, but not cash. In the U.S., Brink's Complete is the right cash management service for retailers, both large and small.
Brink's Complete is a subscription base, fully developed digital cash management solution. The service consists of a digital app, a low cost tech enabled safe for cash deposits tailored to the needs of each business. And most importantly, it provides next day credit for cash deposited into the device. We believe Brink's Complete is an ideal solution for a large portion of the Brink's existing customers and retail market that currently doesn't use any cash management services. This includes large retail chains that currently walk cash to local banks and to SMB Square sellers discussed above in the survey.
While the pandemic has slowed the rollout and retailers engagements with Brink's Complete, today -- to date, we have agreements for about 2,500 devices to our current customer locations. And in the last quarter, we've gained traction on our sales efforts with the large underserved retailers. And we now have initial pilots with 6 nationally branded retailers that together operate over 50,000 locations.
We believe Brink's Complete offers compelling benefits that will transform the way retailers manage their cash, similar to how they handle their other payment methods. The pandemic has certainly slowed us down on the rollout, but we're accelerating the launch and remain convinced that Brink's Complete has the potential to accelerate organic growth and increased margin in the years to come.
Turning now to Slide 19. It shows our actual revenue recovery rate and strong operating margin growth for the first three quarters of this year, as well as our guidance for the fourth quarter and full-year. The steady upward margin progression on the right side clearly demonstrates the impact of our costs realignment this year with a focus on permanent fixed cost reductions. And we're targeting a margin rate of over 11.5% in the fourth quarter, a sequential improvement of at least 120 basis points and a great jumping off point most importantly for as we enter 2021.
As I mentioned earlier, there continues to be much uncertainty related to the potential impact of the pandemic and political changes that could affect the pace and magnitude of our revenue recovery. Therefore, our full year 2020 guidance is based on a range of recovery rates, including about 85% in the fourth quarter at the low end.
Slide 20 offers us an approach from modeling non-GAAP operating profit based on potential 2021 revenue as a percent of 2019 pro forma revenue. On the right side, our model uses a revenue range of 90% to 110% for 2019 revenue. Our third quarter results are already close to the 90% recovery mark with September revenue at 90% of 2019.
So with the low end of the range to 2021 model resolves in OP income, OP profit of $425 million, or EBITDA of $615 million. At the 110% range revenue range OP profit rises to $615 million, EBITDA of over $800 million demonstrating improved margin driven by operating leverage. At the midpoint, assuming recovery to a 100% of 2019 revenue next year and with an expected operating margin of 11.5%, which is approximately a 100 basis points above 2019 margin, we expect to generate a profit of $550 and million and EBITDA of over $700 million.
The chart on the left shows, what's driving the margin improvement. At 100% of 2019 revenue, we expect cost actions in the G4S synergies to more than offset the projected unfavorable FX impact of approximately 170 basis points of margin, yielding the 90 basis points of margin rate improvement. Variable cost will adjust upward as revenue recovers, but we expect our Priority 3 fixed cost reductions to be more permanent, driving incremental operating leverage in 2021 and beyond. Hence our estimate that 110% of 2019 revenue, margins would improve another 100 basis points to 12.5%.
It's important to note that this model does not include any benefits related to our Strategy 2.0 initiatives, which is successful would provide incremental revenue and margin growth in 2021 and beyond.
In summary, we're very encouraged by our third quarter results, the positive margin impact on our cost -- of our cost actions and the strong revenue recovery that demonstrates the resiliency of our business. We're also encouraged by the fact that support -- by the facts that support the continued strong use of cash as a primary method payment at similar to pre-pandemic levels, and the increased level of cash we're processing and in circulation in the U.S.
We expect the G4S cash acquisition to be completed by the end of this year and full synergies is realized and strong earnings contribution in 2021. We expect to have a strong finish to the fourth quarter. And as a result, we've reinstated our full year 2020 guidance to a level that exceeds the high end of the model we provided in the second quarter earnings, including adjusted EBITDA that is now expected to be in the $520 million to $535 million range.
I'm highly confident that Brink's will emerge from the current crisis as a stronger company with substantial opportunities for growth in revenue, operating profit, adjusted EBITDA, earnings and cash flow. Our confidence is supported by our strong balance sheet, ample liquidity, our expanded global footprint, our realigned cost structure and a compelling strategic plan to expand our presence in the cash ecosystem with tech enabled services like Brink's Complete.
We look forward to reporting 2021 results that we believe will reflect the benefits of a full year's contribution to the G4S acquisition and related synergies, continued revenue recovery rates and a full year of margin growth driven by realigned cross structure.
Sarah, let's now open it up for questions.
Thank you. [Operator Instructions] Our first question comes from George Tong with Goldman Sachs. Please go ahead.
Hi. Thanks. Good morning.
Good morning, George.
Organic revenue trends continued to improve in the third quarter. Can you discuss how organic revenue is performed on a monthly basis moving through the quarter and exiting the quarter? And what organic revenue ranges are incorporated into your full year guidance?
Yes, it varies by country and on a global basis. But in general, as we stated that certainly in the second quarter, as we saw June was by far the highest slope in terms of revenue recovery. But during -- in general, the full month quarter of third quarter we continue to see a monthly improvement during the quarter. And hence, that's why you see the jumping off point from September into the fourth quarter being at the highest level in comparison to the average for the full quarter, which suggests that the slope is still positive in terms of the recovery for revenue recovery in general. And the U.S. is an indication of that as an example. But it is a substantially lower growth rate or acceleration rate versus the second quarter. So we continue to see that.
And I think, George, what we -- what we're stating in here and which leads to the second part of your question is we really don't know what will happen during the third quarter in terms of revenue. But based on what we've seen, based on forecast, based on what is open and what we've seen not only in the third quarter, but as you say, as we exit the third quarter that we see the range of revenues that we've laid out in our guidance. And that ranges from somewhere in the 85.5% to 86% range of revenue to the low 90s. And again, jumping off point in September was 90% and the U.S was at approximately 91%. So we think that's a realistic range. Who knows, again, what will happen in these times. But we think that's a realistic range based on our jumping off point, what we've seen to date. And it gives us a little bit of downside protection in the quarter for the revenue growth.
Got it. That's helpful. And stepping back, can you talk about how customer demand for services might be affected by the resurgence of COVID cases. And specifically if you're seeing any change in the number of pickup and drop offs.
Well, I mean, obviously it's too early to tell. Most of the -- most recent changes that you've seen on media, and obviously, that has seemed to have had an impact on the markets over the last couple of weeks are fairly recent. The shutdowns that we've heard about during the -- if you want to call the second wave, have been heavily focused on shutting down restaurants and bars and other areas such as gyms and places where people gather. We've not seen as much of a focus as was the case in the May timeframe, April-May timeframe, the first shutdown and we haven't seen as much focus on shutting down retail.
And so we're hoping, and again, we don't know, but we're hoping is we'll continue to see both essential and non-essential retail continue to stay more open this time than we saw in the first wave. And that the openings of restaurants, especially dine-in restaurants, obviously, will be the things that are impacted. And again, those are a lot of the establishment and the customers that we hadn't seen fully reopened. And hence we had not gotten back to our full levels of reopening. We got backed into that 90% range in the U.S. as an example.
Got it. Very helpful. Thank you.
Hope that helps. I think, George, what's important as well is, as we've gone through this even at these levels that we've seen the cost reductions, the cost takeouts balancing with the service levels, excuse me, with the reopening levels, not only balance that, but also provide us the opportunity for that leverage. And you saw that leverage in the quarter. And we anticipate that we'll see that again in our fourth quarter, as we continue to see the resizing and the takeouts of that business. So we're very excited and comfortable with that both from what we accomplished as a team in the third quarter, but also what we anticipate we'll see as result of the continued actions in the fourth quarter. And Ron went through some of those numbers in the U.S. To be able to achieve in the U.S margins that are were greater in -- percent margins that were greater in the third quarter by a 100 -- what was an 130, 140, 660 basis points at revenue levels that were 9% lower than the prior year is a testament of that.
Got it. Thank you.
Our next question comes from Tobey Sommer with - Truist Securities. Please go ahead.
Hey, good morning. This is Jasper Bibb filling in for Tobey. I was hoping you could speak to what you're seeing in pricing in your major markets and also how your labor expense trend is tracking versus prior years kind of amid higher global unemployment. Thanks.
Well, every country is different, Jasper. So in the U.S. the fourth quarter is typically when we take price increases. I would say generally around the world, the majority of the price increases occur in the second half. Those are happening. We've not had a lot of resistance. We -- likewise on the labor front, it's still -- believe it or not, in this market a challenge to keep and retain employees. We're able to reduce our variable labor very quickly globally, but at the same time, as we mentioned, that we also were very quick to take down the fixed and permanent labor to levels that have allowed this margin expansion. So I'd say basically the price increases that we had expected are on track and we've not seen anything that would suggest otherwise.
Thanks. And then, I wanted to ask about kind of what trends you're seeing for outsourcing work with financial institutions. Do you see the pandemic kind of accelerating an outsourcing trend more broadly? And how would you describe the RFP environment there?
Yes, I think generally the pandemic has accelerated a lot of the trends that we anticipated in the global cash management ecosystem. So we have been prepared for this. Right now most businesses, including financial institutions are just dealing with how to cope with the pandemic, which changes on a daily basis. What they will see in the new normal is a compelling case for additional outsourcing. We're planning on that and we're planning to be a leader to influence them to use Brink's for that outsourcing.
I appreciate it. Thanks for taking the questions, guys.
Thank you.
Thanks, Jasper.
Our next question -- [Operator Instructions] Our next question will come from Jeff Kessler with Imperial Capital. Please go ahead.
Thank you.
Good morning, Jeff.
Good morning. And I don’t usually say this, but just excellent, excellent execution in these last couple of quarters. You've done a lot better than obviously than people expected, and also did a lot better than most of my comparable companies that I'm covering in your area.
Thanks, Jeff. We’ve had a great team and they're really focused during this pandemic, in particular.
What I want to get to is you are now significantly larger because of G4S than your next competitor. In fact, you're probably about twice the size and it's not just one competitors, the other competitors in the entire group. What can you do to take the scale that you now have the scale advantage you now have? I realize it's somewhat of a softball question, but the fact is that making 2.0 work is kind of critical because it would take you to a place that would combined both scale and technology. What are the hurdles and the milestones that you have to see to show that, if you get this, then you're going to have -- you're going to -- you probably will be able to get market share gains and regain market share that you still haven't gotten back from some institutions. The fact is that you still have some hurdles to overcome in taking your scale and using the new technology. How are you going to go through this process?
Well, Jeff, that's a -- quite a question to be, to be honest and I appreciate your comments upfront. I also think that your strategy, your thought process is exactly where we are and is a key piece of what we call SP2. I would start off by saying, unfortunately, the pandemic has negatively impacted, if you want to call that from the standpoint of slowing things down. It is, if you will, put some timing constraints both from our standpoint of implementation as well as from customers, receptiveness, openness, willingness to engage and may make change because their focus like ours has been heavily focused on the business.
I think the good news from our standpoint and our focus, you can see the results of the focus in the second and third quarter. And we anticipate that you'll continue to see those results in the fourth quarter and our leverage going forward. But now we need to come back and we will come back as part of SP2 to put in what we call our 2.0 strategy is layered on top of that and accelerate that. So our focus to answer your question needs to be to accelerate our efforts with all of the various areas including our 2.1, which is part of our Brink's Complete. The roll out of that both in the U.S and on a global basis, accelerate that, and use that as leverage as well as all the rest of our 2.0 strategies that we are aggressively working on to roll on.
You can see as part of the strategies as an example, the outsourcing of ATMs. You can see the very significant win that we have in France that will start coming on next year, which is the outsourcing of a completed state to what we are doing in Ireland that we won another 500 units there. These are all key outsourcing. These are things that will start rolling. If they're not ones, they're not projects, and they're not changes the banks financial institutions make overnight and they take time to do that. But you can start seeing gain traction and we have now the global platform to do that.
The biggest piece and the best answer to your question, I think is that we do have, by far the largest platform, we have 50 plus countries. We have the global platform that is much larger than we can scale and roll these strategies, these solution out on. And that's the benefit. And I think you'll see that as we start getting the acceleration of our 2.0 Strategy to end up with higher organic growth, higher than that 7% organic growth that we had compounded over the last 3-year period of time. We'll have higher organic growth. It'll take some time to do it, but organic growth as a result of our strat plan.
You'll see higher margins because these are complete total services to our customers that can and should demand both higher pricing. And I should say higher value for the complete services in the supply chain as well as then lower CapEx. And the ability to roll this out in our scale on a global basis and to use our scale for the cost management and the unique tech enabled ways that we do this, I think we'll have a tremendous impact as we roll out of the pandemic and as we see the acceleration of these strategies. So I think that will be unmatched, which is not in the numbers we're talking about. The numbers that we're talking about that you saw in the second and the third quarter that you're going to see in the fourth quarter have been primarily because of the strong focus of this management team of our company on what we've been able to accomplish as we've gone through the pandemic.
Okay. second question is, in my years of covering Brink's for better or for worse, the marketplace generally tends to like the focus on U.S and perhaps secondarily Mexican operations. However, with G4S, you’ve picked up not just Eastern Europe, but a whole bunch of South Eastern Asian countries that are not as affected or have done a much better job, let's call it like it is, done a much better job of keeping down the effects of the pandemic than we have. You kind of showed up in that scale in one of the slides that you showed for Malaysia, Philippines and stuff like that. The answer is are you planning to add new -- any types of new revenue services there? Or are you -- are we going to be seeing a greater percentage of revenues and perhaps an improvement in operating margin in those countries where that are not as -- that you picked up from G4S, that are not as impacted by places like United States and Mexico and France and South America?
Well, I'm not sure the answer to your question is absolutely, yes. We're going to improve, which is our 1.0 wider and deeper, our leveraged strategies. We're going to improve margins of those countries in the core base businesses. And we're going to leverage 2.0 new services, added services in these markets. I'm not sure I fully understand or agree with the question around the pandemic, is that changing how we're going to roll them out in those countries versus others. In other words, we're not looking at just over the next quarter.
Over the next year, we think we have the opportunity to start rolling out in many, many of the countries our 2.0 strategies and the pandemic is going to impact it as it has some already in slowing some of that down. But that doesn't mean it's still not a great solution. In fact, in many cases, a lot of the solutions we're talking about make a heck of a lot more sense. So I understand there'll be ups and downs associated with that. And your evaluation of Hong Kong is an example.
You can see Hong Kong stayed about flat or within a couple of percentage points of revenues over that period of time. That's why there's not much different and change in color there. And Singapore continued to improve. And it was back at levels that like you said, were like pre-pandemic or better. So Malaysia has continued to improve. So you're correct in terms of your analysis there. But we're not going to let that stand in in a way of any place to really say we shouldn't be aggressively implementing our 2.0 strategies and our continued 1.0 strategies to improve our business as you're seeing this year.
Okay. And let me just throw this last one quickly. Do we not think in terms of the CompuSafe brand anymore? Is CompuSafe not going to be part of 2.0 and will it -- and as a whole, or is CompuSafe still going to be sold to some as a separate or sole, should say, sole rented out and put out there as a separate entity.
Well, if you think about CompuSafe or you think about other smart safes that are offered in the classic CIT system like we did and others do, it's a different offering. It's not a complete offering. And the value proposition for the customer is not as strong. Therefore, I think that the market will move over to our Brink's Complete system. It will include all the same benefits if there are significant benefits of a smart safe that's out there today, but it will also be a complete fully managed system, providing daily credit from one source including Brink's as at one source plus all the integrated benefits associated with that. So the answer is it will transition.
Okay, great. Thank you very much.
Thank you, Jeff. Thanks for your comments. One more question? I think we have time for one more, then we have to cut it off.
Our next question comes from Sam England with Berenberg. Please go ahead.
Hi, Sam.
Good morning, Sam.
Good morning, guys. Yes, just building on one of those last questions. You mentioned the broadening of Strategy 1.0 cost improvements globally. But I just wondered which markets you think represent the best opportunities for that? Is it mainly the developed European markets that you've acquired with G4S? And then are you planning to set a longer term margin target at some point, similar to the original 1.0 plan, presumably once things get less volatile.
The answer to your second part is absolutely we do. We anticipate that some point in time in the future, we will have -- we'll hold a Investor Conference. And in such as we committed to in the past, we anticipate that we'll roll out some targets in the future. Those targets and as we talk about on that slide, our strategy includes continued 1.0 wider and deeper initiatives, that are costs initiatives, that are productivity initiatives, that are productivity improvements that help support our customer service initiatives and those are in every country. That's why they're called wider and deeper in those countries. We believe -- and the continuous improvement is a way of life and part of our culture.
We believe that we can always do better both for our customers and for our productivity and our efficiencies. And that, therefore, it's an integral piece to each of our business plans that are rolled up both as part of the strat plan and annual plans, every country as a target for cost reduction, margin improvements, and productivity improvements that are passed on to our customer. That is now augmented by the leverage initiative, which is the Priority 3 strategy that was part of the pandemic focus that allows us to gain the leverage that we spoke about because of our management and controlling of what I consider permanent fixed cost reductions ongoing as well layered on top of that. What we're suggesting is every country is part of this and you'll see the benefits associated with that. So we will come out and say that, and that's prior to doing anything at 1.5 beyond G4S. And it's prior -- this is in addition to our 2.0 Strategy roll out as well.
Okay, great. And then if you've got time for one other quick one, I just wondered what happened with the revenues you talked about in Q2 that have been invoiced for, but not recorded in the numbers. And I think it was within the U.S. retail business. I didn't see anything mentioned about it. Sorry, if you talked about it.
Yes, that -- those continued to be able to invoice some of those, but a much smaller component of those as they -- as those customers come back. We do the credit memos that offset negotiations, if you will, by customer and you end up with some benefit in the third quarter of that. But it's also offset in general by the credit memos as well as bad debt reserves. So there is some benefit, but it's very, very minimal and that'll continue to be less and less going forward.
Okay, great. Thanks very much.
Thank you.
Thanks, Sam.
I think that …
Ladies and gentlemen, this …
Yes, please go ahead.
This will conclude our question-and-answer session, and it also concludes our call for today. We thank you for attending the Brink's company's third quarter 2020 conference call. And at this time, you may disconnect your lines.