Crane NXT(US:CXT)2024-02-15 18:09Financial Data and Key Metrics Changes - The company reported revenue of $1.4 billion for the full year 2023, with core sales growth of 4% in line with guidance [36] - Adjusted EBITDA was $388 million, and adjusted EPS was $4.16, exceeding the high end of the outlook [20][22] - Adjusted free cash flow conversion for the full year was 111%, allowing the company to pay down $245 million of debt, lowering the net leverage ratio to 1.1 times [20][41] Business Line Data and Key Metrics Changes - CPI segment reported a decline in core sales of 7% in Q4, with adjusted segment operating margin decreasing by 260 basis points to 29% year-over-year [39] - Crane Currency experienced a strong performance with core sales growth of 29% driven by international currency business, and adjusted segment operating margin improved by 230 basis points year-over-year [40] - Backlog was up 26% from the prior year, supported by a significant multiyear banknote order secured in Q4 [24] Market Data and Key Metrics Changes - The company expects mid-single-digit growth in CPI excluding the gaming vertical, with strength in the vending business [30] - The international business accounts for approximately half of Crane Currency's revenue, with 17 new denominations designed using micro-optics technology added in 2023 [44] - The U.S. government remains a key customer, with expectations of flat currency sales in the first half of 2024 due to a planned shutdown [46] Company Strategy and Development Direction - The company aims to grow to $3 billion over the next five years, focusing on technology solutions that secure, detect, and authenticate valuable assets [18] - A strong M&A pipeline is in place, with plans for the first acquisition in 2024 [19][124] - The company is preparing for the new U.S. currency program, which is expected to enhance growth opportunities in the currency business [28][72] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the U.S. government's continued leadership in technology and banknotes, anticipating additional security features in new designs [29] - The company expects revenue phasing in 2024 to be more heavily weighted toward the second half, with potential upside based on project acceleration in CPI's retail end market [42] - Management highlighted the healthy underlying gaming market and the expectation of returning to growth in Q4 [48][73] Other Important Information - The company announced a 14% increase in its annual dividend based on strong cash flow [25] - Corporate expenses are expected to rise to approximately $53 million, reflecting a full year run rate of costs for newly hired employees [26] Q&A Session All Questions and Answers Question: What is the expected revenue and earnings weight for the first half versus the second half? - Management indicated a 40-60 split between the first and second halves for both top line and bottom line [53] Question: Can you elaborate on the significant multiyear order in Crane Currency? - Management confirmed a multiyear order secured in Q4 that will significantly impact revenue over the next three years, with 17 new denominations designed using micro-optics technology [54][55] Question: What is the year-over-year growth baked into guidance for the international currency business? - Management expects mid-single-digit growth for the international currency business based on a strong pipeline [59][82] Question: How does the company view the gaming market and its recovery? - Management expressed confidence in the gaming market's health, anticipating a return to mid-single-digit growth as inventory levels normalize [87][94] Question: What are the expectations for the currency business in 2024? - Management expects the currency business to be flat in the first half and to pick up in the second half, with overall guidance suggesting low single-digit growth for the year [100][102]