Crane NXT(US:CXT)2024-11-09 14:30Financial Data and Key Metrics Changes - Sales increased over 14% year-over-year, reaching approximately $400 million, with core sales growth of approximately 5% excluding OpSec [10][21] - Adjusted EPS was reported at $1.16, with adjusted segment operating margin at approximately 27% [21][28] - Adjusted free cash flow conversion was approximately 89%, impacted by the timing of shipments [21][28] Business Line Data and Key Metrics Changes - CPI reported core sales growth of 1.5%, with mid-single-digit growth across all end markets outside of gaming [22] - Security and Authentication Technologies (SAT) sales grew 36%, including OpSec, with core sales up over 10% [24] - The backlog for SAT was up approximately 57% year-over-year, indicating strong demand [24] Market Data and Key Metrics Changes - The U.S. currency business is expected to see volume declines of approximately 18% year-over-year, with a mix skewed towards lower denominations [31][32] - International currency backlog remains strong, expected to sustain respectable growth for the SAT business [43] Company Strategy and Development Direction - The company is focused on expanding its portfolio through strategic acquisitions, including De La Rue Authentication Solutions and Tru Tag's Smart Packaging technology [10][14] - The strategy aims to build a resilient business aligned with secular tailwinds in the authentication market [19][77] - The company continues to explore additional M&A opportunities to diversify its business [19] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the long-term growth prospects, particularly in the authentication market, despite short-term challenges in the gaming sector [19][30] - The company anticipates a flat revenue outlook for 2025, factoring in the contributions from OpSec but excluding De La Rue [86] - Management highlighted the importance of maintaining strong relationships with customers and adapting to market changes [80] Other Important Information - The company published its first ESG report, emphasizing its commitment to sustainability and governance [12] - The integration of OpSec is on track, with operational improvements already being realized [11] Q&A Session Summary Question: Discussion on CPI and gaming market outlook - Management noted that while CPI is performing as expected, order rates in gaming have not accelerated as anticipated, leading to a forecast adjustment for Q4 [40][42] Question: Currency business and mitigation strategies - Management acknowledged the expected decline in U.S. currency volumes but expressed confidence in strong international growth to offset this [43][44] Question: Breakdown of authentication end markets post-De La Rue acquisition - Management provided insights into the expected distribution of sales across government tax stamps, ID documents, and brand protection, highlighting the diversification benefits [53][54] Question: Growth strategy for product authentication - Management emphasized the potential for share-of-wallet expansion and new service offerings in brand protection and government tax stamps [75][77] Question: Impact of Tru Tag acquisition - Management indicated that Tru Tag's financial impact would be minimal initially but represents a growth driver for the authentication business [62] Question: Expectations for U.S. currency margins - Management projected that segment adjusted operating margins would remain stable, driven by productivity initiatives and OpSec synergies [59][60] Question: Normalization of U.S. currency business - Management confirmed expectations for a normalization in 2026, with potential upside depending on the timing of the new $10 bill release [49][90]