Summary of Crane NXT Conference Call Company Overview - **Company**: Crane NXT - **Recent Acquisition**: Antares Vision S.p.A. [2][6] Industry Insights - **Market Focus**: Life sciences and food and beverage sectors, particularly in inspection, detection, and track and trace technology [2][3] - **Total Addressable Market (TAM)**: The acquisition of Antares Vision S.p.A. adds approximately $2 billion to Crane NXT's TAM in these sectors [6] Key Points from the Call Acquisition of Antares Vision S.p.A. - **Strategic Rationale**: The acquisition aligns with Crane NXT's strategy to enhance its technology offerings in secure, detect, and authenticate platforms across multiple markets [2][4] - **Differentiation**: Antares Vision S.p.A. is unique as it provides both the equipment and software for tracking and tracing products, which is a core differentiation in the industry [4] Financial Performance and Projections - **EBITDA Margins**: Antares Vision S.p.A. is expected to grow from mid-teens EBITDA margins to low 20% over the next three to five years [8][12] - **Synergy Targets**: Crane NXT aims for around €12 million in synergy targets from the acquisition, focusing on operational efficiencies and commercial synergies [8][9] Authentication Business - **Market Segments**: The authentication business is divided into three segments: brand, government, and ID security, with a combined TAM of over $1 billion [13][17] - **Growth Drivers**: The brand authentication segment is expected to grow through share expansion and new customer acquisition, while government solutions focus on tax stamps and compliance [15][16] Currency Business - **Demand Trends**: The international currency business is experiencing high demand, with a backlog exceeding $400 million, driven by central banks' concerns over counterfeiting [50][52] - **Redesign Cycles**: The upcoming U.S. currency redesign is expected to influence international redesign efforts, as central banks look to enhance security features [53] Operational Insights - **CPI Business**: The CPI segment is characterized as a low single-digit growth business with high operating margins, driven by demand in gaming and financial services [61][62] - **Service Expansion**: Crane NXT is expanding its service offerings, particularly in providing maintenance and repair services for retail checkout systems, which is expected to grow at mid-single digits [66][69] Financial Strategy - **Leverage Profile**: Following the acquisition, Crane NXT's leverage is projected to approach 2.9 times, with plans to reduce it to the low twos by 2026 using free cash flow [71][74] - **Dividend Policy**: The company is committed to maintaining a competitive dividend while focusing on organic investments and strategic acquisitions [74] Additional Insights - **New Product Launch**: The JetScan Ultra was launched to enhance efficiency and speed for financial services customers, showcasing Crane NXT's commitment to innovation [70] - **Technological Advancements**: The company is focused on leading technology evolution in authentication and currency, with ongoing investments in advanced security features [25][51] This summary encapsulates the key points discussed during the Crane NXT conference call, highlighting the company's strategic direction, market opportunities, and financial outlook.

Financial Data and Key Metrics Changes - Crane NXT reported a sales growth of approximately 9% year over year in Q2 2025, with adjusted EPS of $0.97 and a free cash flow conversion of 120% [5][14][20] - The adjusted segment operating profit margin was approximately 24%, down about 350 basis points year over year due to lower CPI volume and acquisition dilution [14][19] Business Line Data and Key Metrics Changes - CPI core sales declined approximately 7% year over year, but gaming orders increased by approximately 10% sequentially and 30% year over year, indicating a strong recovery in that segment [15][17] - Security and authentication technologies saw sales growth of approximately 32% year over year, with core sales increasing by 9% driven by higher international currency volume [16][18] Market Data and Key Metrics Changes - The international currency business achieved a record high backlog of approximately $400 million in Q2 2025, with expectations of mid-single-digit growth for the full year despite tough comparisons to a strong 2024 [17][19] - The U.S. currency business resumed production in Q2 after technology upgrades, with a significant milestone achieved in preparation for a new currency series expected to launch in 2026 [17][75] Company Strategy and Development Direction - The company aims to build a leading industrial technology firm focused on solutions that secure, detect, and authenticate, with a strong emphasis on operational improvements through the Crane Business System (CBS) [8][10] - The integration of De La Rue authentication and OPSEC has created a leading position in the authentication market, with anticipated operating profit margins of approximately 20% by the end of 2026 [12][81] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the outlook, reaffirming full-year EPS guidance in the range of $4 to $4.30, while navigating tariff and macro uncertainties through pricing and supply chain actions [8][19] - The company is optimistic about the M&A pipeline, expecting to announce another transaction within the next year, supported by a strong balance sheet and free cash flow generation [7][60] Other Important Information - The company has launched new products, including Fortress for authentication and Jetscan Ultra for currency scanning, enhancing its technology leadership position [6][21] - The anticipated realization of operating synergies from the De La Rue acquisition is expected to accelerate, contributing to margin improvements [12][81] Q&A Session Summary Question: Analysis of CPI verticals and long-term outlook - Management expressed confidence in the gaming segment, expecting strong double-digit growth in the second half of the year, while other verticals are performing as expected with some headwinds from tariffs [24][25][29] Question: Revenue and earnings cadence in the back half of the year - Management indicated a slight step up in core revenue in Q3, with expectations for a more weighted performance in Q4, maintaining full-year guidance [30][32][34] Question: SAT guidance and sales growth expectations - Management clarified that the unchanged SAT guidance reflects timing of customer orders and project-focused business dynamics, with no change to the overall outlook [41][43] Question: Details on Fortress product - Fortress is a new materials technology for product authentication, allowing users to trace products back to their origin using a smartphone app, with a strong pipeline for various applications [45][47][49] Question: Margin phasing in the back half - Management expects margin accretion in CPI due to improved product mix and productivity initiatives, with SAT margins anticipated to be in the low 20s percent for the full year [52][54] Question: M&A opportunities and funnel health - Management expressed optimism about the M&A funnel, indicating a healthy pipeline and confidence in closing a deal within the next year [58][60] Question: Core drivers for Crane authentication business - The authentication business is segmented into brand authentication, government solutions, and government ID, with each segment expected to grow consistently due to market demand and technology leadership [66][68][70]

Financial Data and Key Metrics Changes - The annual revenue for 2024 was 4% below the revenue in 2023, with Q4 revenue at $7.7 million compared to $8.7 million in Q4 2023, a decrease of $1 million [7][15] - Gross profit decreased by $0.5 million to $2.4 million in Q4 2024 versus $2.9 million in Q4 2023, with a gross margin of 32% in Q4 2024 compared to 33% in Q4 2023 [16][17] - Full-year gross margin improved to 36% in 2024 from 32% in 2023 [17] - The net loss for Q4 was $0.5 million, or a loss of $0.05 per diluted share, compared to net income of less than $0.1 million in Q4 2023 [18] Business Line Data and Key Metrics Changes - In the Precision Logistics segment, the number of proactive customers increased by 6% over 2023, but shipments by existing customers in the proactive service line were down 6% in 2024 [11][12] - The Authentication segment experienced a divestiture of the Trust Codes Global business, which had an operating loss of $1.2 million in 2024 [13] Market Data and Key Metrics Changes - The overall market conditions appear to be down slightly, with a decrease in the total number of shipments [32] - The loss of one significant customer continues to impact performance, particularly in the Premium services [31][36] Company Strategy and Development Direction - The company is focusing on reducing investments in areas that do not yield desired returns and is working on strategic investments to enhance shareholder value [8][10] - There is an emphasis on optimizing sales strategies and exploring avenues for expansion in the Precision Logistics segment [23] Management's Comments on Operating Environment and Future Outlook - Management indicated that 2024 was a transition year and expressed optimism about the foundation laid for future growth [45] - The company does not plan to provide guidance for 2025 due to unpredictable market conditions and the need to align costs with revenue changes [36][38] Other Important Information - The company completed a $4.7 million warrant inducement capital raise and retired its bank debt, reducing convertible debt from $1.1 million to $800,000 [8][9] - As of December 31, 2024, cash was $2.8 million, a decrease from $3.1 million on December 31, 2023 [19][20] Q&A Session Summary Question: Expected share count for Q1 - The expected share count for Q1 is about 12.5 million [29] Question: Commentary on logistics trends in Q1 - The loss of a significant customer will continue to impact Q1 and Q2, but the proactive business remains stable [31][32] Question: Guidance for 2025 - The company has not provided guidance for 2025 and does not plan to do so, citing stability in the business aside from the lost customer [36][38] Question: Modeling assumptions for Q1 and Q2 - It is reasonable to model a low double-digit decline on the topline through the first half due to the loss of the customer [39][40]