Crane NXT (CXT) Q1 2025 Earnings Call May 08, 2025 10:00 AM ET Company Participants Matt Roache - VP, Investor RelationsAaron Saak - CEO & President of Crane NXTChristina Cristiano - Senior VP & CFOBob Labick - PresidentDamian Karas - Executive Director Conference Call Participants Matthew Summerville - Equity AnalystMichael Halloran - Senior Research Analyst - Associate Director of ResearchBobby Brooks - Vice President, Senior Equity Research Analyst Operator Good day, and thank you for standing by. Welcom ...

Crane NXT (CXT) Q1 2025 Earnings Call May 08, 2025 10:00 AM ET Speaker0 Good day, and thank you for standing by. Welcome to the Crane NXT Q1 twenty twenty five Earnings Call. At this time, all participants are in a listen only mode. After the speakers' presentation, there will be a question and answer session. To ask a question during the session, you will need to press 11 on your telephone. You will then hear an automated message advising that your hand is raised. To withdraw your question, please press 11 ...

FIRST QUARTER 2025 FINANCIAL RESULTS May 8, 2025 FORWARD-LOOKING STATEMENTS – DISCLAIMER This presentation contains forward-looking statements within the meaning of the federal securities laws. Forward-looking statements include all statements that are not historical statements of fact and those regarding the Company's intent, belief, or expectations. Words such as "anticipate(s)," "expect(s)," "intend(s)," "believe(s)," "plan(s)," "may," "will," "would," "could," "should," "seek(s)," and similar expression ...

Core Insights - Crane NXT (CXT) reported revenue of $330.3 million for the quarter ended March 2025, marking a year-over-year increase of 5.3% and a surprise of +4.40% over the Zacks Consensus Estimate of $316.38 million [1] - The earnings per share (EPS) for the same period was $0.54, down from $0.85 a year ago, with an EPS surprise of +5.88% compared to the consensus estimate of $0.51 [1] Financial Performance Metrics - Net Sales in Security and Authentication Technologies reached $127.40 million, exceeding the average estimate of $119.10 million by two analysts, representing a year-over-year increase of +21.8% [4] - Net Sales for Crane Payment Innovations were reported at $202.90 million, slightly below the average estimate of $197.53 million, reflecting a year-over-year decline of -2.9% [4] - Operating profit for Security and Authentication Technologies was $2.40 million, significantly lower than the average estimate of $14.33 million [4] - Operating profit for Crane Payment Innovations was $49.70 million, surpassing the average estimate of $46.37 million [4] Stock Performance - Shares of Crane NXT have returned +12.2% over the past month, outperforming the Zacks S&P 500 composite's +10.6% change [3] - The stock currently holds a Zacks Rank 4 (Sell), indicating potential underperformance relative to the broader market in the near term [3]

Group 1: Earnings Performance - Crane NXT reported quarterly earnings of $0.54 per share, exceeding the Zacks Consensus Estimate of $0.51 per share, but down from $0.85 per share a year ago, representing an earnings surprise of 5.88% [1] - The company posted revenues of $330.3 million for the quarter, surpassing the Zacks Consensus Estimate by 4.40%, compared to $313.6 million in the same quarter last year [2] - Over the last four quarters, Crane NXT has surpassed consensus EPS estimates two times and topped consensus revenue estimates three times [2] Group 2: Stock Performance and Outlook - Crane NXT shares have declined approximately 18.2% since the beginning of the year, while the S&P 500 has decreased by 4.7% [3] - The current consensus EPS estimate for the upcoming quarter is $1.07 on revenues of $379.04 million, and for the current fiscal year, it is $4.11 on revenues of $1.51 billion [7] - The estimate revisions trend for Crane NXT is currently unfavorable, resulting in a Zacks Rank 4 (Sell) for the stock, indicating expected underperformance in the near future [6] Group 3: Industry Context - The Technology Services industry, to which Crane NXT belongs, is currently ranked in the top 26% of over 250 Zacks industries, suggesting a favorable outlook compared to lower-ranked industries [8] - Empirical research indicates a strong correlation between near-term stock movements and trends in earnings estimate revisions, which can be tracked by investors [5]

Core Insights - Crane NXT completed the acquisition of De La Rue Authentication, enhancing its position in the global authentication market [1][3] - The company increased its full-year sales growth guidance to a range of 6% to 8% for 2025 while maintaining its EPS guidance of $4.00 to $4.30 [1][4] Financial Performance - For Q1 2025, net sales reached $330.3 million, a 5.3% increase from $313.6 million in Q1 2024, driven by a $33.4 million contribution from the acquired OpSec Security business [5][11] - Core sales declined by 4.1%, primarily in the Currency business, reflecting planned upgrades to U.S. Currency equipment [5][6] - Operating profit for Q1 2025 was $37.3 million, down 32.7% from $55.4 million in Q1 2024, with an operating profit margin of 11.3% compared to 17.7% the previous year [7][27] Segment Results - Crane Payment Innovations reported net sales of $202.9 million, a decrease of 2.9% year-over-year, while Security and Authentication Technologies saw net sales of $127.4 million, an increase of 21.8% [9][10] - The operating profit margin for Crane Payment Innovations was 24.5%, down from 25.2% in the prior year, while Security and Authentication Technologies experienced a significant drop in operating profit margin to 1.9% from 19.4% [9][10] Cash Flow and Financial Metrics - Cash used for operating activities in Q1 2025 was $19.1 million, compared to cash provided of $9.5 million in the prior year, leading to an adjusted free cash flow of $(30.5) million [12][43] - As of March 31, 2025, the company held cash and cash equivalents of $173.8 million and total debt of $804.6 million [13][30] Guidance and Future Outlook - The updated full-year guidance reflects the acquisition of De La Rue Authentication and the impact of tariffs, with specific sales growth expectations for different segments [14][16] - The company announced a quarterly dividend of $0.17 per share for Q2 2025, payable on June 11, 2025 [17]

Core Insights - Crane NXT has completed the acquisition of De La Rue Authentication Solutions, enhancing its portfolio in security and authentication technologies [1][2] - The acquisition is expected to be accretive to Adjusted EPS in the first full year and aims for double-digit ROIC by year five [3] Company Overview - Crane NXT is an industrial technology company focused on providing technology solutions for security, detection, and authentication [4] - The company operates through two main segments: Security & Authentication Technologies and Crane Payment Innovations, employing approximately 5,000 people [4] Strategic Fit - The acquisition of De La Rue Authentication Solutions is seen as a strategic fit within Crane NXT's Security and Authentication Technologies segment, allowing for a broader suite of solutions [2] - A new business unit called "Crane Authentication" will be created, integrating OpSec and De La Rue Authentication Solutions to enhance customer service and value creation [2]

Company Overview - Crane NXT, Co. is a premier industrial technology company focused on providing trusted technology solutions for security, detection, and authentication [2] - The company operates through two main business segments: Security & Authentication Technologies and Crane Payment Innovations [2] - Crane NXT employs approximately 4,500 individuals dedicated to helping customers protect valuable assets and ensure secure transactions globally [2] Upcoming Financial Events - Crane NXT is scheduled to release its first quarter 2025 earnings on May 7, 2025, after the market closes [3] - An earnings call will take place on May 8, 2025, at 10:00 a.m. Eastern Time, accessible via the company's website [3] - Archived webcasts of the earnings call will be available on the Crane NXT website [3]

FOURTH QUARTER & FULL YEAR 2024 FINANCIAL RESULTS February 13, 2025 FORWARD-LOOKING STATEMENTS – DISCLAIMER This presentation contains forward-looking statements within the meaning of the federal securities laws. Forward-looking statements include all statements that are not historical statements of fact and those regarding the Company's intent, belief, or expectations. Words such as "anticipate(s)," "expect(s)," "intend(s)," "believe(s)," "plan(s)," "may," "will," "would," "could," "should," "seek(s)," and ...

Financial Data and Key Metrics Changes - Sales growth was approximately 12% in Q4 and approximately 7% for the full year [9] - Adjusted EBITDA margin was approximately 27% in both Q4 and the full year [10] - Adjusted EPS was $1.20 in Q4 and $4.26 for the full year [10][21] - Adjusted free cash flow conversion was approximately 109% in Q4 and approximately 76% for the full year [10][21] Business Line Data and Key Metrics Changes - CPI sales were flat compared to Q4 2023, with mid-single-digit growth across most end markets, offset by softness in gaming [22] - Security and authentication technologies saw core sales up over 7% in Q4, driven by international currency [25] - CPI core sales decreased by approximately 1% for the full year, driven by softness in new gaming orders [24] Market Data and Key Metrics Changes - CPI ended the year with a backlog of $146 million, reflecting a return to more normalized levels [23] - The security and authentication technology segment ended the year with a backlog of $248 million, indicating strong future sales confidence [26] Company Strategy and Development Direction - The company is focused on diversifying its portfolio and has made significant acquisitions, including OpSec and TruTag Smart Packaging [15][46] - The anticipated acquisition of De La Rue Authentication Solutions is expected to close in Q2 2025, expanding the customer base and product offerings [15][27] - The company aims to reduce exposure to cash-centric markets, moving from approximately 80% to 65% of the portfolio focused on cash-related products [48] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the long-term growth opportunities presented by the new US currency series, with production upgrades ongoing [42][50] - The company expects overall sales growth of 1% to 3% for 2025, with specific segments experiencing varied growth rates [30] - Management highlighted the importance of maintaining a strong balance sheet and free cash flow generation to support future growth and acquisitions [28][51] Other Important Information - The company announced a 6% increase in its annual dividend, reflecting a commitment to a balanced capital allocation strategy [29] - Adjusted free cash flow conversion is expected to be between 90% and 110% in 2025, influenced by the timing of international currency shipments [34] Q&A Session Summary Question: Gaming market dynamics and confidence in second-half recovery - Management reiterated confidence in the gaming market's health and expected order inflection in Q2, despite delays in inventory burn-down [56][58] Question: First-quarter dynamics and margin expectations - Management confirmed high double-digit declines in US government currency sales in Q1 due to production shutdowns, with expectations for margins to return to high twenties percent in subsequent quarters [62][64] Question: Expectations for leverage and acquisition pipeline - The company ended the year with 1.5 times net leverage, expecting it to rise to 2.3 times post-acquisition, while maintaining a healthy acquisition pipeline [70][75] Question: Impact of acquisitions on margins - OpSec has been dilutive to margins by about 250 basis points in 2024, with expectations for similar impacts in 2025, but management is implementing strategies to improve margins over time [78][80] Question: Retail end market trends - Management noted a shift in retailers exploring various self-checkout solutions, leading to softness in traditional OEM orders but growth in custom solutions [110][111] Question: Security authentication sales growth guidance - Management acknowledged lower-than-expected sales growth in Q4 due to timing and softness in the US market but expressed confidence in international currency growth moving forward [122][124] Question: Potential tariff impacts - Management does not foresee material impacts from tariffs, having taken proactive measures to mitigate risks in the supply chain [128][130] Question: Currency business growth sources - Growth in the currency business is expected to come from a mix of existing contracts and new wins, with a strong sales funnel supporting future performance [134][135]