Crane NXT (CXT) 7 Nov 232023 Q3 Earnings call transcript

Greetings, and welcome to the Crane NXT Third Quarter 2023 Earnings Call. At this time, all participants are in a listen-only mode. [Operator Instructions].

As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Rima Hyder, Vice President of Investor Relations. you. Thank

begin. may You

call and Investor everyone. to Relations to XXXX of operator, Vice welcome Rima President you earnings quarter third of and the Crane good you, NXT. I'm morning, Hyder, all for Thank I want

we begin, will section on this Relations presentation reference we the call available we website our prepared website. at accessed Before After replay will the will of be be today's via during to call analysts our our slides the questions. open Investor of can cranenxt.com. A remarks, also for

we listeners use Slide the our legal of Before X, discuss review on and results, statements of I non-GAAP risks all notice the forward-looking to encourage financial and measures. explains which the

of XX-K and in Additionally, we refer XX-Q you and to the forward-looking earnings bottom our also our statements. Forms cautionary pertaining the filings to language release at

will release the some to at During be section. website press our the the in slide available at which on cranenxt.com GAAP our Relations are numbers, reconciled the numbers comparable also call, in tables presentation. Both and which of are of Investor we using accompanying end non-GAAP

Chief Cristiano, On Senior and Chief Christina our our Vice is President this Officer; and President call Saak, Executive morning Aaron Financial and Officer. our

to me turn the Now let call Aaron. over

cash launch strong all you, thank to and quarter, efforts Thank Crane to to generation. our associates second NXT. Rima, a to third free I'd a we since our operational everyone. moment Yesterday, quarter And driving morning to excellence for quarter separation deliver and reported good strong our financial results, of take growth their flow like

and was highlights sales ahead by $XXX in Slide an margin with strong growth the prior XX% EPS approximately $X.XX, growth. adjusted the sales expectations. outperformance year. was basis of with was than and overall, strong sales driven was of XX%, costs. third adjusted lower an our EBITDA business, Margin in You on delivered margin core quarter corporate million our this of margins which with performance currency which X. Adjusted along of XX And international X% higher over of We very also can points operating performance see

cash term paydown free was which $XXX our in adjusted flow supported $XX million loan. additional an Additionally, million,

now leverage net giving for and is ratio financial at us X.Xx Our M&A. substantial flexibility

The last gives strength we new year-to-date we reduced orders currency of EPS resulting to adjusting the quarter, international guidance full performance a their reflects adjusted strength gain customers share. in as low continue confidence us inventories of see range our market, narrowed raise to $X to continue to to prior range we year. in the year where end At of This reflect narrowed to the $X.XX. versus lower noted CPI, times, lead our

on $X.X of accordingly. about earlier adjusted we're a free As and inventory demand and track conversion above to continuing billion approximately XX% we're result, levels this adjusting with sales that operating XXX%. cash to year Overall, deliver in the flow our assess we spoke margins

Christina? walk Christina hand through on of more So details going the financials. call now to the to our to I'm over us

Aaron. continued again work. I for would discipline associates to focus NXT Crane thank their you, hard results. Thank drive like global your appreciate to We and our

core as sales quarter adjusted had on strong X, and EPS of adjusted a summarized and operating mentioned Slide of XX% Aaron As of we with margin growth X%, $X.XX.

results strong and continued to this for achieve see on conversion are XXX% with free flow quarter the are by Overall, year. cash free the adjusted track We also cash the we generation pleased approximately operating continue execution both disciplined and flow to segments. full

core sales. Payment Moving X. Crane to flat Slide Innovations reported

XXX by sales, us in partially savings productivity product that improvement core to strong in offset margins adjusted orders impacted QX Despite XX.X% last cost reflecting QX, our discussed last compared year, to increased pricing, supply actions more enabled sales. to we and backlog unfavorable flat as points chain ship out and mix. basis segment As continued operating quarter, of

From the quarter financial markets. the market end and share services a perspective, in we in new business wins are retail services in gaining our with

recurring opportunities We at growth continue of in to services, solid which see high drives and revenue increased customers. key share wallet

customers are orders inventory forward, softness adjust in we chain Looking issues. COVID-related and seeing some of end gaming their pronounced new retail markets, from in CPI's across supply most to as continue

normalizes We dynamic in the continue this this over normalization believe until will quarter to months to backlog next second of levels. expect the We several our occur pre-pandemic XXXX.

now be we Given expect for full we strong prior with CPI QX, to margin this With focus segment to expect be sales year. up in and we slightly productivity, and sales our profit line the operating pricing our in decline flat to year-over-year dynamic, on guidance. CPI execution to expect for

Moving on to of The growth core sales by quarter XX%, sales. was expectations Crane with of Currency Slide X. ahead our international driven

revenue noted business depends is shipments banks. timing to of in we've any the this on quarter and As in the project based central past,

orders margin Adjusted down at mix prior U.S. very unfavorable from year was related segment operating the product government. the from to to XX%, due strong but

a As for denomination orders lower we notes, lower mix we last discussed bank quarter, which come a margin. continue greater to see at of

trend continue of this expect for We the to XXXX. balance

approximately to prior continue increasing the the In orders, international from new year. backlog we XX% win market, our

be strength focus the to of our the leader in the for international market. the in sales continued One drivers technology is

technology, growing new been see to continue already was has customer QX interest in we denominations. in selected for and our new Specifically, which launched several RAPID Vision

technology secure uniquely As security its first facilitates a secure easily is high-contrast is readability. Vision eye-catching With world's the feature. and color, it machine reminder, multicolor RAPID highly infrared micro-optic authenticated its

sheet. to balance on our Moving

approximately further free this cash in was providing million conversion XXX% flow ratio adjusted quarter, flow cash achieving in free of confidence an the year. $XX adjusted Our

paid of third quarter, our Given to cash to another EBITDA reducing term adjusted approximately strong flow, we during free loan the net our million debt $XXX X.Xx.

$X deploy M&A in approximately M&A. billion have flexibility and to capacity towards We substantial capital

CPI, believe of our to EPS softness narrowing to core X% growth as range X% of business we Aaron in based on sales currency mentioned, earlier. the between I are will guidance be We full year mentioned adjusted a to the offset strength Moving $X.XX. to guidance, as by $X

Additionally, we $XX is guidance the to debt. decrease approximately now our of of other year unchanged. by updated to This costs which full million, nonoperating the approximately expenses paydown previous metrics lower from previously due of for All will driven $XX interest remain be XXXX million. guided we expect

premier year-to-date our XXX% conversion. margin with to strong a Overall, adjusted technology performance investment and company free growth, Crane cash as the operating continues for thesis support NXT mid-single-digit industrial flow

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

on thanks who call. everyone Christina, and to this is right. Thanks, All again morning joining us our

where EPS excellence in demonstrate core the guidance to positioned strong strong well generation. growth, and execution range. we are free end and our the within year another flow sales had we raised we of summary, to quarter achieve believe adjusted guidance We continue our results low operational In cash full

our provides opportunity portfolio. sheet diversifying for low leverage our through with Additionally, balance disciplined create the and to M&A value further strength us of the the our shareholders

about want As position. from to that the diversification, we reinforce company launched we've a I think this very strong

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

detection other and which payment Currency, services have focused aftermarket market-leading detecting proprietary offers equipment on all secure We physical and technology which Crane transactions. provides and high products systems, currency and businesses. to X CPI, authenticating

operating billion conversion sales in are above earlier, mentioned free this track we adjusted XX% $X.X deliver cash approximately XXX%. to approximately I margins with on of year As and flow

Crane utilizing Given strategy Improving the core the cash operational flow allocation CBS. continue free by business. to conversion, our capital invest performance strong or to Business our first is and grow System

continue we'll markets. is And and second M&A deploy The that to to same targeting end growth priority playbook pay competitive finally, the NXT, to adjacent resilience a following built capital dividend. higher

execute over time, position shareholder it strong As we compounder, NXT as significant value. will a continue creating strategy, to this

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

strong plan business shown Slide revenue mid-single-digit revenue to XX, foundation, the our As building billion plus. core grow and in at we of $X grow to on

maintain XXX%. free flow along adjusted the in with of EBITDA range XX% margins We approximately high strong cash conversion will

I'd step journey to the call. NXT in thank delivering a their who QX. you thank on our quarter dedication Also, everyone Our to performance us new as the join Again, team company, this another you confidence achieving us to in in took it and entire objectives. on like third their is for time to gives longer-term in these say important today

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

[Operator Instructions].

Our Zaffino first questions Ian with line of Oppenheimer. come the from

sort backlog I vertical, mitigate backlog by talk the the let's your destocking wanted then you market also could, thoughts that that's destocking going past help the how you basically to help Maybe as change or destocking, to the end. us if are you the backlog. end ask at is from, you on that so? as have mix far the what And how of line about say, quarter and and understand could the customer what of

question, the for Thanks No. Ian. Sure.

So see as total, just and currency close CPI. very feel good questions there we've Again, fantastic, in backlog, said, XX% that. zooming to about I but is to probably out, year-over-year more both your up specific

XQ where When by When break months, think Xx to our us our at normal year. you that's down look over And gaming are we're burn at about vertical, we're rate backlog there we the when backlog, that next we're how of and gets segment. the really, the several about run down that next at today thinking and CPI you around that primarily comments at into look in probably about level. the what

extended normalize go placed part and are lead have the the to long due that in over as that the last back these So times orders chain several supply continue of months. to middle COVID really were to

So primarily good burn products. we've so the the of kind within of for now need customers we to to coming occur months. that we still line that now expect the a or those last over who have to quarter to of what And backlog really, gaming very expected this down that And sight shipment is discussion.

expectation. at remarks, our line feels at. what mentioned to prepared about services look of them that. look Kind the verticals, to at and that we the conditions, normal feel continues said basically strength, backups we spot under expect where a would you we Christina we as other good a would very be in be with And bright When are in and

burn really, essence, backlog. in hope this gain of the down about that Ian. helps, it's I So gaming

an relatively that's How And what guys kind environment here. do don't know multiples side, this integral know, soon. like something, timing the then on you we because expecting, part M&A No, that's you're or know, great. I thinking are story of I don't look as, is I the about of the or also will

very Yes. on laid we what was would out part of then very to just to which well on again would operational the the continue businesses. I we're company our first the several doing relatively That's that's think to the quarters operate and to at of post our comment core soon. say I QX. Day do track I first launch our and much pillar what your excellence take here, in last focus take on And strategy. Investor in we're

And think $XXX part if was cash think on all of sheet quarter I really the million I quarter of good our as earnings where call, for 'XX the obviously, strong that, our which very with equal. We feel track type about 'XX part flow. in in looking things first to I funnel. So due the this good health free we first of that. would we're our about for we're the be feel to M&A middle mentioned paydown it, of at just We balance window second the like

leverage. I'd first about So again, sometime that's be feel very in good a that. looking 'XX it puts our deal, position And good our at with M&A and us for in what

of Davidson. Our D.A. next Matt questions Summerville the line come from with

questions. of couple A

market be chain, and you is normalization back standpoint, are how seeing if helpful. just through this process. issue? So backlogs all And from little of going that demand going the much could to X this of this just are inventory main would kind a speak a you Or can really bit, to parse -- verticals we if supply CPI, out end demand actually a

Yes, question. go let vertical Sure start through and thing, I'll for you. Matt. me the for Thanks each

in just services say earlier. similar I financial gaming would and don't it think to I vending And and put the performing Ian's retail. seeing my that's same and comments was as So to question they're we're dynamic expected. together that

the would the I to about both outlook feel year. end markets side say, and performing the for we good very pull we within So have those of are rest the how again, quarter the and again, that those

we're look think I very at we the those markets, is very is that as and in burn as it think gaming performing the really I end unique confident down that backlog. out about they're zoom When well. ever of

you are channel in share market how that And our customers, that very partners to in strong. our You continues see relative be performing. market also end see in the

I very around was quarters, So remarks, backlog up to much through in a demand. burn down again, and again, us, level, over the working said that as order market is just for kind think X.X gaming at we're a built high strong position intake not of and again, the vertical in that the I as earlier next expecting

So in situation again, unique a gaming.

probably And with as And of our also of through then different ex-COVID. We've focus over course, been higher last restocking when cash factors. for that's their intense at the than bigger go retail. the think going some several complicated Again, more changes seen would with them. level a to I that's to own well, at then, in channel. a combination customers know, months you just X project present speak you of that Matt, channel very a X the have the inventory we customer where One on they is retail, think, inside is an I inventory with pushouts have demand little the end management

of combination I to as helps, of for retail. markets, together you different of market We continue obviously, growth. that that about talk think out all those just in we're to are tailwinds labor driving ahead. positions zoom in we're QX we and these in softness unabated. both look Automation, When we the QX going Hopefully, that long here that, scarcity, unchanged. have what's QX. in we term are obviously, the those continue proportions X So and factors though assess those And that the think retail assessing, continued Matt. And

difference based may may latest calendar 'XX currency. year? have Yes, you what a Fed's calendar make fiscal that versus observed are it that in they're of order the this XXXX. year the for course does now does. sort any maybe you over issuing government your over And skew takeaways to seasonality have that point, that versus the on then from had Aaron, a to Does business? that print trends And of

Yes.

question, our expectations. Let your me just with start first

in at the bottom think here I You've saw $XXX our for versus your anything, is write denominations. each skewing Series, been very you working us year the and Fed here Matt, just close those to for and would much increased if $XX and into prior a met in expectations the up, our in report with is Catalyst $XX, very the there's look technology the that planning the which and I BEP that the line, goes with you benefit relationship obviously and say as a of as

a particularly others. so obviously, So $XXX, the more than

line to had. that's demand positive to for the go they're The total move pilot a also So the it on in feel 'XX work into that a basis, out think at for Catalyst, production relative about launch executing very with we pointed that is into expectation time we continued us. 'XX. right in and again, on the which good I to, And going continued

overall, So that feels good pretty Matt.

or the to from Moving materially year from calendar moving fiscal impact. the the calendar year, no year

think it us. think just helpful is year. about we perspective a I how obviously from for planning That's a

business. simplification, call of aid and material in would it change any I the part So but not an a

Instructions]. [Operator

from the UBS. come Karas questions next Damian Our line with of

of then rest curious XXXX. So how of you of over Christina, of in target to you of you destocking of in guidance kind the would the headwind term? sort for you're mid-single-digit quarter, expecting first -- to that just half the CPI type are a back revert do much the be growth the longer you expect to the once that second updated year. that get And through I'm you

Damian, good Yes. calling morning. in. Thanks for

We're So giving just our just we're today. up not operating -- the plans on XXXX now. rolling guidance

with to as a And in year, our we're for that early weeks, just this this be as I gaming, be also margins, the realignment rest XXXX for and are guidance -- will we're this February year. of said, put compared release. last seeing on mentioned, on next And that's to to the down So Aaron working But some CPI going on as overall, over delays orders earnings out just several year-end in despite track though, that, with as pricing and softness relating based the in retail. still overall we we primarily in continuation project of productivity. our and said, we'll

year operating the of what roll out more for really now this to that's on So come rest the we're next saying as plans. year and we

seeing a you're to of any that was more strength that optics production? be that of then an I if customers? might provide business new projects, you're the redesigned or in that international able be this you could Is speak micro of just you the color could type would perhaps in of you examples wondering provide international appreciated. there Okay. Understood. the are I'm driving. that strength And kind curious, on currency, to few maybe any uptick type Really

Yes. in year up a it and denominations new sets the and very in that There's this feeling the we're backlog orders of which for really the international well Really also to happy really rest us we're that. strength good great winning about seeing right for internationally, now, and next includes year. for do

you as our just and mentioned, sales or overall share. combination, bank a it's So winning sales of technology note

really overall. the feeling good business currency just So about

next with CJS the Bob come Securities. from Labick Our questions line of

apologize. having there. was some I I So difficulty technical

have just about currency. So really wanted the Obviously, missed just this, ask may strong to backlog. answered if I I you it. But

there? and ago, what one. how now the guess opportunity are a and bidding the internationally of pipeline ahead, new part does opportunities other that's year versus I Looking look rebids

I at come 'XX is, two does preparation? it's supposed Series Catalyst to impact it later, but impact out does in And operating profit, how all? the operations then how know part if

Yes. Thanks, Bob.

So the ability the redesign with denominations a and both asked, we've or us I year, question we the is the 'XX. as you if that seen in to say would and activity are first to through if for product continue same going out -- you in bid largely to incumbent next new look denominations to have the

trajectory. to us, we'll of strength really to this for 'XX. about the course, in talking delivery ability be that are projects The gives And our up set and of of bids kind that point, at continue So in again, we're lot our 'XX bring that, really in XXXX international This backlog business all-time backlog, total. going business. which that highs next at the year. is for a confidence And us for gives of a the into side that's in of near

I us a favor 'XX in So to designs of all of beautiful currency, performance more to for gives more operationally to and think again, anti-counterfeiting dynamics question firm and the technology market technology, your very continuing which strengths. our high-quality that, foundation are play sophisticated

that market So going believe think nice only I the last tailwind in but 'XX, a continue to not we that's beyond. is for to

To U.S. currency recent or your last question WCO in series on as annual It Catalyst the order the was track. on remains government for report. the mentioned

that call they'll they looking 'XX in launch in production at report, be out As 'XX. in

it's us So material for 'XX. a really item not in

has rate you potentially what looking then helped earlier comments on up M&A of interest targets? Great. expectations just hurt environment something get How kind higher the done key for are Obviously, the M&A. you And Okay. in mentioned areas to prospects? or following your 'XX. And on

of talked us or we've answer right but secure future. to question since the pillars part and thematically, the new who really would give in still your authentic we company about the create strategy of, we're platforms the that reinforce on March areas option I around the for first, today, Yes. detect are technology-focused last inside sticking

only grown. I in action feel And coming Ian's continues more It the to around see deals through And what to we and funnel has very said earlier every to confident quarter. grow, question again, list XXXX. some

pay think interest down has the us we rate debt. I environment actually given helped our

we at the free low our deals. for gives enormous strong first firepower is leverage so us the need an now few X.Xx flow amount sitting And advantage the us, of right for cash

very feel option other to has anything, people think, table. I favor. out about takes So we the off competition it takes the a in that our it. again, of do And good If that little moved Bob, M&A

Our line Summerville Matt next D.A. questions Davidson. come of with from the

on retail the obviously to ask sluggishness. OEM the to sort a CPI of. aware there and wanted a X if inventory Is follow-up point being issues, we're way, I I drawdown those of that

have out third-party of end the are users so evaluating project options potentially line. elongating also We deployers there, self-checkout time that then And some aware the also the rate/macro. are you

insignificance in how to you of that? think had what of kind to you Aaron, those rank kind about would If the seeing you're business, force relative

we in in. the fair follow-up, Matt. a you number that's checks talking probably I That's inventory drawdown, that our No, those own that's on as would channel issue, Yes. right. where position one, OEMs, Matt, and stocking say from they're said, to the understand understand OEMs,

So that's one. number

a I the we're this think ourselves put other our some expected options. probably by would just project systems. as both would have X pushouts, I as of installations few install evaluation created the Matt, going end from to It's partners to at and you occur. those number result, go or pushout the where said of months change doesn't that It self-checkout

those the here. are think to all comparison things those other fall X. Again, big drivers I in X really

taking up is One, high recollect as is I in P&L an think in Massachusetts still is of I for then there the downtime accurate. the happening? that? level and a 'XX, the division first quarter capture And And more try we about I we to that And equipment two, said, little should installation. what Okay. guess, currency new impact

it's Hi, Christina. Matt, Yes.

So that is correct.

there and So earlier. be the just we in testing will of trials advance planned, to as prepare in that production discussed series XXXX downtime new as for we

kick more mix new that we until we'll implied, favorable with saw on and year that be starts little lower in in down, bit still right, is order volume U.S. a is this there'll be mix, as what to in you build the denomination about follow And a the think so how should which it that the side, 'XX. and in right, maybe

this saw in in continue U.S. see we expect and just QX, can what the year we this backlog and we well will this expect by you year really international So on strength in next like consistent is down but which the offset on had based our into be QX year. orders, to side with currency, to

question line next from Our is Damian of the UBS. with Karas

on know just XXs get denominations currency. question in you you and $XX of relationship. I here $XX nature versus could per sense follow-up can't those the between Xs thinking denominations, a on kind bill Hi, for Xs U.S. relative lead and But $X contractual and content us and the the Aaron, $X give about and a that XXs. of maybe the difference

answer Happy Damian, Yes, to that part. in

of As said their get you government and government. produce the those U.S. that's the I contract publishes the to can in with can't rightfully cost to anyone bills, to at public point thing at. the The there to information. the That's out specifically is beginning, we look best details what for

strip our micro blue the bill of where visually Really, $XXX add the at is are differentiator that a anti-counterfeiting lot we you bill. the all optics more to the that's to BEP significant for us, the for as see add that a can technology product key know,

bigger much bills. than the end a denomination dollar or the it's So differentiator lower lower

would there's and really as categories. There's this I X delineation. think other there's of this all main kind you where the So see of $XXX

you And at of look of that to that amount for in the much can excited impact public or us as records goes technology denomination, bit those little think those less an as series, for an of new differences cost different right? $X $XX you get new between it think into But scales that's example. So when you proportionately how I a I the the each design into why we're the denominations. about assume

with very good of rest the feel around closely international the the both that currency, technology. business, the in We're working every of States Fed. the and adds like very the just redesign new more United world, and We about on And relationship. BEP our

the decade. as why And to new is really tailwind the the asked next Bob important and Currency so significant business so But material us as as see item that's for we that I for P&L. in for a Crane inside XXXX, this series don't a think

And follow-up helpful, question Aaron. really M&A. That's on just a then

XXXX. just looking you're deals earlier just is at close and to -- anything actively your mentioned execute not eye on just You deals don't kind moment, ready out there you're any soon? some to you'd you it Can expect or what's of actively in are pursuing until expect anytime keeping clarify, an the really you so

bit Well, a it's deal, cycle it's at look of for it's time both, a days right? little a of I think weeks. Damian, you the not combination If or months,

So very over passed And QX, there's mentioned cultivating active active some. I market. we reviewing that inside been deals passed and the I last we're believe, would we that say in in on and on some months. the several And I we've

the portfolio ultimately, the the very deal, to adds not to M&A to a and think it in disciplined I value to I disagree with. that's way that key any it's is value think shareholder. out hard doing the And but it's doing

So itself those, started both terms owners very financial of enterprise around spaces and size the out had where size, go considerations into and we we in drive could work synergies. from that the good the in where deal asset very then revenue set to strict with criteria we've our beginning, value be market could of of

good for our #X don't think those we would capital you take deals and that's be fruition, So a been doing And we coming what priority. that's gives something I deals it see know process are think shareholders, would I have to there want to what that our because heart, based can on allocators passed confidence very we're we and me prudent actively will be we're 'XX. we I here, to doing And and in just say I pursuing.

you. Thank

end the would reached over have floor We turn I the now remarks. back to question-and-answer Aaron closing for like Saak of our session. to

again, you like thank Well, over. very today by Thank efforts NXT And just to the all operator, call I'd handing thanking very in the you, strong for right. team QX. it All end much. results produce for their back to

we we serving the People company. without not could I the is one world our titled every makes results dedicated a launched new know difference first core values day Matter. the in team customers. around that month, for a And these having this Earlier achieve And our

team QX. So a entire to again, thanks very our for strong

thanks call for who the today your appreciate to everyone those. and also joined And questions. We

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

Thank teleconference. today's you. This does conclude

disconnect participation. lines time. at your this you may your hope the rest day. your appreciate You enjoy of We I