Crane NXT (CXT) 8 Aug 232023 Q2 Earnings call transcript

Greetings, and welcome to the Crane NXT, Co.

Second Quarter 2023 Earnings Conference Call [Operator Instructions]. And please note that this conference is being recorded.

I will now turn the conference over to your host, Jason Feldman, Vice President, Investor Relations. Thank you, Jason.

begin. may You

morning, and Christina quarter operator, Feldman, everyone. to and Chief Officer. call Welcome President Saak, Financial have Thank President Chief our our earnings good Senior release second and this our On XXXX Investor Officer; Jason will conference our also of Aaron and you, Executive Relations. day, we Cristiano, call. Vice President I'm Vice

to which questions. call our As usual, we a prepared will remarks, start respond we with after few off will

using Just the forward-looking accompanying this We numbers, of cautionary forward-looking end will that of Form and a presentation, may are and during which refer to GAAP call Investor and Relations and on the we the which report tables release available at XX-K www.cranenxt.com the our at the section. the to release slide call, on statements. reminder also some subsequent make Also press we non-GAAP comments annual website comparable pertaining in at to numbers include on bottom in statements. some both earnings language the are our our be our of you reconciled filings

Aaron. Now the turn call over let to me

the Thank results morning. appreciate you, call quarter We Jason, second to reported everyone and our joining discuss afternoon. good financial yesterday

I'd for efforts to their begin, opportunity to very team world the QX. thank take we like Before this NXT produce to around all of members the strong a

year-to-date, have very and our you expectations. guided had beginning than were first our with and at is ahead better year. post strong Currency results Innovations the quarters, businesses know, operational Crane Crane very of the done our this Payment Both As of we Overall, many pleased quarter both the I'm execution. and separation, of

over and EBITDA on in with both Adjusted highlights the margins We of $XXX margins operating of $XXX EPS adjusted of on significant was core delivered QX in strong improvement. reflect million margins adjusted million performance X. $X.XX our margins very adjusted X% sales also XX% sales in over expectations. segments, and ahead was XX%. with our see performance these growth with Slide EBITDA XX% can Margin operating above sequential Notably, adjusted were You

conversion basis million XXX in the to our full primarily to for $X.XX guidance million. pleased our quarter, very orders by Finally, confidence adjusted Crane revised core gives we were I'm adjusted X% we strong We're This the remain this driving raise range us M&A, approximately the EPS happy times. these our core how to $XX we of down reflects cash the guidance. In prior was debt very total, well expect achieve mindset of with full debt-to-EBITDA the and results with and range higher remainder improved QX our our positions of to by progress $X.XX. driven Crane with strong be also now X.X year by repayment year. a $X.XX growth to approximately in flow our up $XX and our from points to supported of substantial This us in Currency. the flow us growth continuous the to plan at to business our continues driven backlog system of improvement. separation. flexibility financial of net free XXX% and for the year for guidance confident in increased very X%, approximately guidance. XXXX performed The outlook of and execution give cash culture, half The free Consistent disciplined first leverage

expectations on for with separation. related Crane with our and We track are Company, continue to to wind down aspects the all [TSAs] we the

after details provide strategy. she on call going comments more on come back walk us the hand financials. through speaks over Christina around some our progress Now continued and our to to to additional I'll I'm the

over that, me the call to Christina. pass With let

to I'd thank Crane you. Aaron. this also associates NXT And execution you, We our Thank work for global quarter. appreciate like and their great hard

Aaron quarter. had another strong we mentioned, As

Slide growth of of sales to EPS As last adjusted were of and $X.XX relative X, expectations core and on our quarter. acceleration shown core ahead sales reflect X%

free approximately basis. margins reflects our We normal first XX.X% had and of also increased delivered execution quarter strategic as quarter. flow margins cash of conversion million sequential our we consistent adjusted expectation a great XXX%, Adjusted last basis supportive strong to of also with free significantly improvement seasonality significant by on cash adjusted margins of and $XX the points of XXX EBITDA platforms. XX.X% Free XXX%. with conversion Overall, flow flow from of sequential year of cash operating of increased full compared both

Moving all quarters. expected. operationally than year, increased of pricing, demand net few have to unfavorable actions been offset the quarter strong had savings products over to productivity quarter, Innovations we backlog the execution, reflecting along ship our with allowed by XXX growth mix, of we managing Adjusted sales constraints as supply Payment basis easing conditions improved combination Slide some modestly and and last continued last margins pricing. out end-customer cost and by X. compared Again, both a driven of points to segment chain core product with of great chain higher originally partially earlier to the X% on of XX.X% supply that volumes, Crane inflation, a this solid us further

sector, to are solid perspective, a casinos market continue growing new we where see winning From gaming the demand and in share. we

services includes and provide recurring us to quarter We refresh are our business, from revenue. a strength their equipment seeing continued customer ongoing maintenance during also service order in to financial the services. our This won a large allowing increase

confident outlook remain our XXXX at in forward, Looking we CPI. for

improvements to in and the As anticipated, will supply chain. the continue we in reduce backlog QX QX given our

order rates pre-COVID their normalize reduced Additionally, as levels customers adjust reflect inventories expect to times. our we to to lead

strong end total, markets, in especially competitive full year we shorter-cycle our for to businesses. for guidance positioning, in In conditions remain confident and CPI's are our continuing assess demand CPI. We backlog the the overall given

help As introduce experience. to new Investor key strategy a products is improve at consumer Day our continuing productivity we in our the that component their discussed customers and our March, of

example, added customizable, Compact, experience, reduced seeking our product customers also is announced of the Management solutions recently our that launch built self-checkout payment the or management of on to a many environments. This has and smaller with integration with Remote benefit giving complete our other the retailers flexible to cash for retail self-service Software, Simplifi footprint foundation to Compact detection fully advantages The real-time diagnostics. same superior technology to Paypod needs inventory data solution our of improving example latest on we solutions our solutions addition for of continue portfolio and the For cash attended we value-added core Paypod create of the for automation automated checkout the hardware technology new differentiated how as and leverage solutions, another labor payment consumer has customers. other but health, other systems. authentication including is

the basis strong prior was Crane X. with our driven operating XXX over The X.X% sales by to on with a operational core segment year. of of ahead sales quarter Slide expectations was margin across The business. Moving improvement XX.X%, Currency of outperformance and the and productivity point international performance growth adjusted

U.S. quarter, bill on explained Printing focuses as we redesign a we volumes production program. lower of and are seeing the last $XX As government Engraving Bureau

for denomination to continuing of are we see a greater mix lower bills. orders Additionally,

these the XXXX. the remain the over expect that excited We bill program we business the Overall, continue confident our to trends about decade. next government's for of for redesign opportunity and U.S. balance creates

was we micro-optics at business, year. seeing nearly the of are market, by market Currency side international in continues time the industry-leading this to take On last backlog our strength size reflected our technology. the And with it this broad-based share Crane twice

CPI's we technology. technology. For equipment, machine-readable This win easily best-in-class banknote Crane with its banknotes RAPID just is processing new by another launched of This the technology to is Detect quarter, the detection and our verified equipment. eye, example Currency in authentication continues how with to example, invisible including but HD

our with of in the our operating to existing expectations Given and guidance. with for margins recent expect core line backlog, orders the currency we for the year, full strength growth exceed prior original

X, XXX% ratio an flow in was Slide On confident we cash achieving are approximately free conversion and cash year. flow $XX free this of million, adjusted

M&A and structure our stronger. get capital flow, going $X the million times. net debt reducing given Our EBITDA quarter, billion term X.X the This approximately second is continues substantial to of loan strength We to to free capacity approximately of and forward. cash deploy repaid $XX to flexibility to during flexible capital our us M&A gives of

Slide to X. on guidance Moving

us series the improvements optimistic of to bills, margins international our a we drivers of at to X%. see and driven to We Aaron in CPI, with we core newly of the chain, investment are business key opportunity than very to product business prior core $X.XX production gain thesis we which a from normal expect supply sales in for growth our remainder EPS the leverage the primary which sales The March at automation the More At backlog operating unchanged. Currency, expected. our we is continue Investor to to allowing year. performing QX, now prior is expected redesigned by X% range U.S. of very At a $X.XX. Crane As adjusted Currency, mentioned, the we trends good investment X% years We raising business our productivity, up government as to items, and strong what longer-term of broadly, ship higher the guidance growth share midpoint have prepares U.S. Overall, to ahead. solid in lower Compared range through our us by flow in Crane in execution for the of $X.XX from Day. is supporting the a and and X%, of for in rate. authentication. secular driver a we unchanged to continue had discussed remain is the are as sooner

comments. now to Aaron additional hand for me it a few back Let

All Christina. right. Thanks,

Moving to I quarter the takeaways key Slide second X. our results. to summarize for want

better-than-expected quarter. both a and greater forward position. delivered we from Crane Currency increasingly operating share, we had have It to continues an strong strong sales on and performance visibility gain profit. backlog quarter, another For very

with innovations, chain expectations to of the improve. creating on and remains our track it continuing For payment the it the for year supply meets rest

full range time we Taken year expect together, raise these our year, guidance $X.XX this adjusted second in us and now $X.XX. EPS of to give for the factors to a confidence

the operational to even addition continues to performance, strong sheet our get stronger. balance In

at down a already incurred term million and paid us flexibility $XX for approximately separation, have the loan times at million X.X of $XXX net debt-to-EBITDA. we the time M&A of We gives this

the Moving financial recent performance. beyond

near into as business both technology-driven with NXT, a newer those substantial already familiar the the of to core and we're within For a beyond the Crane reminder, for and the opportunities adjacencies. benefit company those story, to grow with

NXT solutions as XX, specifically, leader to providing detect and our to secure, shown authenticate More trusted on most Page technology an is customers. matters industry what

secure deliver provides have We are two this and conversion to on businesses flow high-value Crane detecting of above CPI, These and authenticating businesses, detection approximately adjusted on equipment as with free which margins and transactions. products and track proprietary focused industry-leading services and operating other solutions well cash in year, physical aftermarket billion payment sales currency and which systems, to as Currency, other XX% offers connectivity technology $X.X XXX%.

to sales, the revenue. business the about from our recurring strength reoccurring technology, come XX% and addition which profile In of includes of

our at economic cycles. resilient, business with we core our through mid-single-digit multiple discussed As growth is Investor Day,

Business the very is free flow company a of and Additionally, Crane years. resulted clearly financials demonstrated deployment the drive we improvements through and ability of over cash conversion. This the best-in-class in truly have to operational hallmark strong has System our very many

including leadership RAPID technology built profile capabilities, we as Our Detect our today. launching new number core through like of This of is discussed is a Compact and on products earlier leadership. strengths financial Paypod demonstrated HD and

operational company disciplined Beyond and Crane built of the tools execution the on of another Business System. our our innovation, technology hallmark is our

core formula of starts It's image, with mid-single foundation top shown the resilient of It growing developed the shareholder that at for very a Slide excellence same operational on a value built digits. on on business we XX. focus in the as our creation

XXX%. Crane We CBS time, This disciplined reinvestment put business to And work in business, flow core system increase to our higher deploying we our through generates cycle paying end or cash improve position continue free the in resilient competitive NXT The to capital approximately and the cash free compounder continuous. significant it strong M&A targeting and strong a strategy. This is in includes creating productivity of markets. over this flow deploy growth And core. margins will dividend a shareholder value. allocation the as conversion

very set years. we've of goals the value-creation this part As five over clear next for strategy, the business

we to flow off XX% along As core foundation, to free shown billion grow XXX%. of with on Slide at the We'll conversion revenue revenue XX, plus. strong grow and adjusted margins maintain strong in mid-single-digit high $X business plan EBITDA building approximately our cash

second step to achieving in strong performance these in you the I'd and a call team company, another morning. like journey to for time took quarter us our sincere it who gives Our QX as and their the new confidence NXT the everyone to Again, for is in efforts say this longer-range entire important thank objectives. in a join continued

to So with now that, question. take our ready first operator, we're

the And of line comes question Instructions] first D.A. Matt the [Operator Davidson. with from Summerville

more that's CPI, like a on And And minute to that's talking you for a across in key spend maybe the a whether have than the Aaron, rates I then a saw normalization can that. kind order It you the sounds a like cement you comments, about in concern, of your incoming can concern? of burn I'd follow-up. quarter? comment maybe verticals but backlog

right, that's you think I how framed it.

to of what months CPI orders which lead think gone of adjusting think here. extended to team, back times And from proud now seeing their across that's execution to remembering supply all in very due verticals shorter times, weeks. have are given lead our those I we're I the we're chain down customers the

balance So think to you recently. through we 'XX. are this saw we're in what's other I normalizing, rates pre-COVID. all going order what think is and ultimately, as believe I And similar we that have that and we're I reported behaviors said, to the believe continue seeing more businesses of

So to that's execution short probably Again, been products. in than is backlog customers the faster waiting originally just long and burndown Matt, story then, little the on quarter thought. who've a due we

in going ship backlogs to market pre-COVID. line still share. Matt, products. And to happy our forward CPI those you more about going with our would feel It's very position the in here, we're experienced So though, we be have and good,

So we again, talking feel very to in customers, about good that.

that Christina of our feel given supply chain what we better the expected of little said, due in but really 'XX, the thought the the And second first we at the backlog, current some as to a out year bit we So confident about half was than of improvement. certainly, comes realize half. beginning

CPI, again, is strong really half year full for first improvement. So intact

Matt. there, pause I'll maybe So

Obviously, the I'd verticals. a the little bit standout. like on you to main comment like X gaming real sounds

their follow in talk about And cycle, the from of self-checkout kind know, then as maybe the OEMs. the big maybe you're baseball context of very using gaming about at So where of analogy They've we vocal a standpoint? an two innings flow. you in comment your been fairly own pronounced that to business? year? And a out you down to play to cash the continue respective to own part your improve you seen do on inventories Have the of driving latter their expect impact

then top back of me to each the gaming to verticals. the go Let in

gaming. and long-term We game, that to casinos. is several fantastic and analogy. strong service position so and gives our So baseball we base We have years a win see in the very But parts kind later out. new probably that's in into our services, upgrade us have the in there gaming to that of had innings. again, we're business too. speak, rich, feel cycles rate continue And that strong grow to normalizing Certainly, about our year to NXT. share strength installed deep ability which use into financial half spare really now we We're with of for think a your the very we've -- back a playing again, good

large we order. mentioned, won a Christina As

recurring additional think will that revenue. service come to continue grow quarter, This we business to there's

good feel financial So services. again, about

in We're think exactly on seeing in I challenged last verticals you of bankruptcy out another separations business. focused and probably Day. our they're that one at your more to talked described playing is mentioned kind see we're to where one Diebold as the now our of point again, out dynamic exactly dynamic we've is variety of large vertical But of expected. NCR, executed think going year. with vending verticals then know growth a our that COVID, Investor I as of this coming in about And the vertical the to retail, -- just what out things largest back right coming customers other our in from we of you in two and of

that the long out solutions and said, we with automation? continue to that scarcity on going Now focus that play to you Is out if do provide trends continue zoom term? here on with help the labor how Absolutely. long-term to trend the

think that. separation who of I NCR, And we customers and come stronger in and fact, good Diebold in our, think we conviction out post high bankruptcies. and better very both are have the

in the long very focus it So I the created confident them for in market. different the a the think term. near We in term, feel certainly underlying dynamics

And Bob the Securities. of line the next question comes CJS Labick from with

strong Congratulations quarter. on another

So the more out And it wins? remains in I'll is shift more And you how at What's jump this really this customers? to mix? from U.S. it the does year, country international? volume beyond with of new year on maybe is expectations in existing Is it kind kind into the and international. us, track sounds Is going like over tell currency. well? as it of play technology upside Can upside the

So know business, CPI currency project-based. reminder, other just very a some I folks certainly for the listening, versus

in fairly a come But those whether are type you technology, our look tell projects or existing multiple bank is new it's waves. it these we to wanting And in, incorporating for we're customers of coming particular broad-based. note. winning I'll to upgrades new those in what are So at currency designs designs and projects tends

today of visibility the That's 'XX, XXXX. the early parts feel backlog up being of giving good now build into over about we rest XX%. into reported again very So us

as So and quoting it's into bill. fundamentally, technology. the and of your And been country it's micro-optics to already in to team it's our increase much, And one the probably have we're quality amount I the important not produce that. of incredibly deployed. And It's in very we facility Dalton. Malta then and teams and of hard volume it's our It's just well-designed of denominations. look through across sales about in our the and our talk of we feel It to answer out worked have the activity multiple of quality the beautiful continues -- question, we with fleet one but world's backlog. the Bob, secondly, not coming product, and think paper, quality something already good and funnel, just that's or that. the when our banknotes is technology, customers here our superiority on feel very entered And about that who the most share don't the going

we confidence So here think broad-based business, again, wins some as the I have mentioned, seeing And internationally. currency, Christina expectations. we're meeting in the that's, nature then just government of U.S.

know, they're through year, this going customer design who again, and along new as it's very performing cycle $XX one expected well the of is progressing a design you As and note. the new

mentioned authentication. the -- new And this know Or there? now, year I'll jump and you me, and that of brand more balance talk us then of a and I there? playing going bit of where little you business. any right sense from growing authentication, product you part about queue. opportunities you maybe are forward Give in But how rapidly one your focus out a out increased see I can a but it's for small think just back

few million now, business this of less or had small As million dollars, the $X $XX than than less year. a We million. last part you mentioned, -- is a very right far

growing see it's we high this good grow which year at said, very rate, a this to you going we about. feel As and

this I over just think of years. of think very business you next amount look coming when we this the we it's at business where in, of several the the funnel and take inquiries optimistic

product on based authentication. seeing our it business think based micro-optics hallmark into wins what the applying that's also currency the is that technology, We on and technology we're of

a to over have year business that a to resources, this high we're continue again, more funnel growth feel in very that's to in focus so we area diversify people, summarize, Bob, long an to the NXT and rates We're And good. term. more building going applying in more

is Davidson. D.A. question from first the Summerville with a And Instructions] [Operator follow-up Matt

maybe a in of Just the see half Can about comment of be just how term, the CPI revenue of thinking given better you a should currency? couple and dynamics quick we some follow-ups. earnings on for lumpiness guys cadence second both general mix you and lack

just I see call in in the of some that see in here QX the said, midpoint to QX as burn think, call Matt, out let's updated the due we where it, terms see out we where and back being at part, per that's the chain to at QX. an order with playing improving. out where share the again we we half, look And rightly see in currency, as probably due shipping kind XX-XX of X, you backlog of guidance, supply equal just we strong playing earnings CPI

if So say, think revenue I about or probably split think about QX. would and earnings kind both and XX-XX it's OP, QX in of again, a you you

XX which been with most just as you what a how the about funnel, the the maybe have And in levels you're follow-up days, over you the see business last M&A. et actionability on near-term evolving multiples, talk activity opportunity, Can then cetera? seeing segment

I'd Matt, playing in What optimistic that's I we're XX is the how say, think days. out last over

changed we last the what's I of a think since good that's frame spoke. time

performed, but reduce our mentioned, down the as leverage. it we We to we pay we of of continue has balance looks, way. stronger and that ability -- our think this but passed By our probably increasing also us. the position And Christina discussion, is deals activity coming some our on, how getting how sheet, with see strength see we're more stock to and our nature for there's good

about. Day at of as the capacity. both NXT, the got they near in particularly start which business. really excited we've So more even and discussed in But Investor diversify think see some areas to we We adjacencies, expand importantly, out we're targets I playing

what So active continue what off across we're It's active the funnel. focused leadership taking our folks of cultivate going the and execution, deal it's foremost. But as operational more tone. we've the eye on of It's because, first ball, the a to is before, team that It's to first important an by obviously, are on, lot know us important. to that's and NXT very the doing. part I'm the said first an the you of deals Matt, follow nature, probably not sets part than

So to with we're in process. ROIC add good owners that and for detect, fits returns generate we're long value the about is threshold going to secure, a going us disciplined strong can be sure it we make term. very strategy our authenticate generate And business, and the that we that, double-digit talked around we're of and that

a when miss we're on beat going make opportunity funnel. the here, we're which a all of operationally. We're quarter confidence, what our that, cultivate to the I of to get And year. gate keep operationally, we're go. doing occurring don't the season both out we strong going for as to think, comes, ready let with So that quarter of it be you've doing focus is said, and lot stock the last that right to will, seen I sure and this based the seeing, have balance to And that's

it pass at for and comments. like questions. time, any gentlemen, I'd back this to no Aaron there over Ladies are closing to further And

to possible. world thanking call reported the you, again results work, and like like NXT asked. today today QX. all operator. for members end to listening questions their makes today's All like I'd our dedication across that just everyone Well, excellent to we that for I'd by their customers right. were Also, hard the team performance in really the the It's thank Thank

And of to so again forward great you day, and quarter. I look rest to speaking we with next your hope Thank you that, a have you.

conclude this today's gentlemen, teleconference. and does Ladies

your You at time. you participation, a may Thank your great disconnect and for day. have lines this