Crane NXT, Co. 2026 Q2 Earnings Call

Please go ahead. Thank you, operator, good morning, everyone.

Welcome to Crane NXT's Second Quarter 2026 Earnings Conference Call. Before we begin, I'd like to remind you that the presentation slides we will reference today are available in the Investor Relations section of our website at cranenxt.com. A replay of today's call will also be available on our website following the conclusion of our remarks. Before we discuss our results, I encourage all participants to review the legal notice on slide two regarding forward-looking statements, which are subject to risks, uncertainties, and other important factors that may cause actual results to differ materially. Additionally, please see the note on slide two on the use of non-GAAP financial measures. We also refer you to the cautionary language included in our earnings release for Form 10-K in subsequent SEC filings. During today's call, we'll discuss certain non-GAAP financial measures.

Reconciliations of these measures to the most directly comparable GAAP measures can be found in the table accompanying our earnings release and slide presentation, both of which are available in the Investor Relations section of our website. Joining me today are Aaron Saak, our President and Chief Executive Officer, and Christina Cristiano, our Senior Vice President and Chief Financial Officer. During the call, we will review our Second Quarter highlights, discuss our financial and operational performance, and provide an update on our 2026 financial guidance. After our prepared remarks, we'll open the call for questions. With that, I'll turn the call over to Aaron.

Thank you, Matt, good morning to everyone joining us today to discuss our Second Quarter results. I'd like to begin by thanking our Crane NXT team members around the world for their strong operating performance throughout the quarter. The key message I want to reinforce today is that we are executing against our value creation priorities, delivering growth, building on our leadership positions, and driving operational excellence through organic margin expansion and strong free cash flow. You can see that progress reflected in our Second Quarter results on slide three. Organic sales grew by approximately 3% and total sales increased approximately 22% year-over-year, reflecting both continued strong performance in our SAT segment and the contribution from Antares Vision in our DTT segment. I'm very pleased with the progress we've made in Q2 with the integration of Antares.

We're quickly implementing the Crane Business System, including training and holding Kaizen events to improve productivity and drive growth. We're off to a strong start in our first 100 days and remain confident in our ability to achieve our full year estimates. Importantly, given the strong first half performance and confidence in our continued momentum, we're increasing our full year adjusted EPS guidance to a range of $4.22-$4.42. With that, let me now hand the call over to Christina to review our second quarter performance in more detail and our updated guidance.

Christina? Thank you, Aaron, and good morning, everyone.

I'd also like to express my appreciation to our associates around the world for their hard work in the second quarter. Turning to slide four, sales were $493 million, an increase of 22% year-over-year. Organic sales grew 3%, driven by continued strong performance in SAT. Adjusted EBITDA was $115 million, with adjusted EBITDA margin of approximately 23%, representing 150 basis points of organic margin expansion. For the full year, we continue to expect adjusted EBITDA margin of approximately 24%. We delivered adjusted EPS of $1.10, an increase of 13% year-over-year and ahead of our prior expectations. Finally, adjusted free cash flow was $79 million, resulting in a conversion ratio of approximately 124%. We continue to expect full year free cash flow conversion of 90%-110%, supported by our robust backlog and operating discipline.

Moving to our segments and starting with Security and Authentication Technologies on slide five. Second quarter sales were $227 million, an increase of approximately 17% year-over-year, including one month of inorganic contribution from the De La Rue Authentication acquisition, which closed in May 2025. Organic sales increased approximately 10%, driven by sustained demand in international currency. In the second quarter, we celebrated the 225th anniversary of Crane Currency, which was founded in 1801 and has been the sole source provider of secure currency paper to the U.S. federal government since 1879. We marked the occasion at a celebration in Dalton, Massachusetts, with the Director of the Bureau of Engraving and Printing, whose remarks highlighted our partnership on the development of the new U.S. currency utilizing the next generation of micro-optics security technology.

This event also highlighted our more than 75-year relationship with the U.S. Government Publishing Office, with whom we partnered to make the U.S. passport paper. In Q2, we renewed our contract, extending our relationship for the U.S. passport for another 10 years. We are incredibly proud to serve as the trusted partner to the U.S. government on these important programs. Returning to our results, adjusted EBITDA was $59 million in the second quarter, with adjusted EBITDA margin of 26%, an increase of 30 basis points over the prior year. On an organic basis, adjusted EBITDA margin increased approximately 200 basis points year-over-year, reflecting the positive impact of productivity programs in the currency business and the execution of synergies in authentication as planned. Finally, SAT backlog of approximately $500 million reflects a new record high.

This backlog provides meaningful visibility into customer demand and supports our confidence in the updated SAT sales outlook. We have a healthy pipeline of opportunities and are investing in future growth. Turning to Detection and Traceability Technologies on slide six. Second quarter sales were $267 million, an increase of 26% year-over-year, reflecting a full quarter contribution from Antares Vision. Despite softer hardware demand in CPI, DTT expanded organic EBITDA margin by approximately 240 basis points through pricing discipline and productivity actions. We expect to see further margin accretion in DTT as the year progresses and are on track to end the year with adjusted EBITDA margin of approximately 27%. Segment backlog was $257 million, including $125 million of Antares Vision backlog, which we expect to deliver over the next 12 months.

As we integrate Antares, we are focused on converting this backlog, deploying CBS, and realizing the margin expansion opportunities that supported the strategic rationale for the transaction. CPI backlog of approximately $132 million reflects sequential growth of approximately 10%, driven by order timing with a book-to-bill ratio of approximately 1.1 times. Turning to our balance sheet on slide seven, we ended the second quarter with net leverage of approximately 2.7 times. Looking ahead, we anticipate deploying free cash flow toward debt reduction and expect to end 2026 with net leverage of approximately 2.3 times. As we further strengthen our balance sheet, we will continue to evaluate capital allocation through a disciplined framework focused on the highest return uses of cash and long-term shareholder value creation. Moving now to slide eight. We are updating our 2026 guidance to reflect increased SAT sales and an improvement in non-operating expense.

For the full year, we continue to expect total sales growth of 15%-17%. In SAT, we now expect high single digit to low double-digit sales growth based on the strength of international currency backlog and continued strong demand. In DTT, we continue to expect sales growth in the low 20s% range, with Antares Vision contributing approximately $200 million-$210 million, and with the fourth quarter representing the largest contribution of the year, in line with their historic seasonality. In CPI, we expect sales to be slightly down for the full year, reflecting mid-single-digit growth in services, low single-digit growth in vending, and a mid-single-digit decline in hardware. We are also updating our forecast for non-operating expense to approximately $80 million from $85 million, reflecting the favorable impact of expected debt paydown and lower borrowing costs.

As a result of these updates, we are raising our full-year EPS guidance range to $4.22-$4.42 per share. Looking ahead to the third quarter, we expect low double-digit sales growth. In SAT, we expect sales to be flat to slightly down year-over-year, given the very strong comparison to Q3 2025. In DTT, we expect sales growth in the mid 20s% range, with Antares Vision contributing approximately $55 million-$60 million of sales, while CPI sales are expected to decline in the low single-digits year-over-year. Now I'll turn it back to Aaron to provide closing remarks.