Release Date: November 07, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Crane NXT Co (CXT, Financial) reported a 14% year-over-year increase in sales, reaching approximately $400 million, with core sales growth of 5% excluding the OpSec acquisition.
- The company announced two strategic acquisitions: De La Rue Authentication Solutions and TruTag’s Smart Packaging technology, which are expected to drive future growth and shareholder value.
- Crane NXT Co successfully integrated OpSec, achieving operational improvements in manufacturing and back-office processes.
- The company published its first ESG report, highlighting its commitment to philanthropy, sustainability, and good governance.
- Crane NXT Co repaid approximately $65 million of outstanding debt, ending the quarter with a net leverage of approximately 1.7 times, demonstrating strong financial management.
Negative Points
- The gaming segment underperformed expectations, with order rates not accelerating as anticipated, impacting overall revenue growth.
- Adjusted segment operating margin was diluted by the OpSec acquisition and an unfavorable product mix, reflecting challenges in maintaining profitability.
- The company lowered its adjusted free cash flow conversion guidance to approximately 70% due to the timing of international currency shipments.
- Crane NXT Co expects a double-digit decline in US currency volume in 2025, driven by the Federal Reserve's anticipated orders, impacting future revenue.
- The company anticipates flat revenue growth for 2025, indicating potential challenges in achieving organic growth across its segments.
Q & A Highlights
Q: Can you provide more detail on the outlook for CPI verticals in 2025, particularly regarding gaming?
A: Aaron Saak, CEO, explained that while vending, financial services, and retail are performing as expected with mid-single-digit growth, gaming order rates were slower than anticipated due to OEM partners reducing inventory levels. The company expects CPI revenue to be flat year-over-year in Q4, with other markets growing at mid-single digits.
Q: How should we think about the impact of US currency volume declines on the SAT business in 2025?
A: Aaron Saak noted that while US currency volumes will decline due to Federal Reserve order rates, strong international currency growth and the integration of OpSec will help offset this. Overall, Crane NXT expects flat revenue in 2025, with productivity improvements and OpSec synergies maintaining segment margins.
Q: Does the flat revenue guidance for 2025 include the De La Rue acquisition?
A: Aaron Saak clarified that the flat revenue guidance does not include De La Rue, as they will not assume any contribution until the acquisition officially closes.
Q: Can you elaborate on the potential impact of the $10 bill redesign on Crane NXT's business?
A: Aaron Saak expressed confidence in Crane NXT's relationship with the US government and the inclusion of advanced security features in the new $10 bill. He explained that the cost difference between current and redesigned bills could be attributed to added security features, benefiting Crane NXT.
Q: What is the strategy for growth in product authentication, and how do recent acquisitions fit into this?
A: Aaron Saak highlighted the integration of OpSec and the planned acquisition of De La Rue as steps to build a strong authentication portfolio. The company is focusing on expanding wallet share with existing customers and exploring new markets like pharma and healthcare, aiming for high single-digit growth in the authentication segment.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
