Welcome to the Crane Company Second Quarter 2023 earnings call. At this time, all participants are in a listen-only mode. The question and answer session will follow the formal presentation. If anyone should require operator assistance during the call, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. At this time, I would like to hand the call over to Jason Feldman, Vice President of Treasury and Investor Relations. Thank you. You may begin. Thank you, operator, and good day, everyone. Welcome to our second quarter 2023 earnings release conference call. I'm Jason Feldman, Vice President of Treasury and Investor Relations. On our call this morning, we have Max Mitchell, our President and Chief Executive Officer, and Rich Maue, our Executive Vice President and Chief Financial Officer. We will start off the call with a few prepared remarks, after which we will respond to questions. Just a reminder that the comments we make on this call may include some forward-looking statements. We refer you to the cautionary language at the bottom of our earnings release and also in our annual report, 10-K, and subsequent filings pertaining to forward-looking statements. During the call, we will be using some non-GAAP numbers, which are reconciled to the comparable GAAP numbers in tables at the end of our press release and accompanying slide presentation, both of which are available on our website at www.craneco.com in the Investor Relations section. Let me turn the call over to Max. Thank you, Jason. Good morning, everyone. Thanks for joining the call today. First of all, I would like to acknowledge the sad news that my predecessor and CEO of Crane from 2000 to 2014, Mr. Eric Fast, passed on July 15th. Suffice it to say, I would not be here at Crane, nor in my present position, if not for Eric. Eric drove the vision of moving Crane from a holding company to an integrated operating company. Eric cultivated the beginnings of the Crane Business System, created larger business units, and restructured Crane for success, all of which helped enable the strategic actions and value creation we have delivered on over the last several years. For those who remember Eric, he was a wonderful leader and man who cared deeply for our associates, always upbeat and positive in even the most difficult circumstances. Eric was someone I learned from and tried to emulate to the best of my ability. Above it all, Eric was a deeply loving family man who always emphasized the importance of personal focus and balance for all associates, in addition to a passion for the customer and driving growth and results. Our deepest condolences go out to his wife, Patty, of 43 years, and their children and grandchildren. Eric Fast will be greatly missed by so many friends, family, and work colleagues. Thank you, Eric, for your leadership and for everything you did to make us better and to make Crane a better company. Your legacy lives on forever. Moving on to the quarter. We delivered another impressive quarter, our first as a newly independent company following our April separation transaction. Core sales growth of 5%, with a 30% increase in adjusted operating profit and adjusted EPS of $1.10. Great performance across the businesses, with both of our strategic growth platforms at or above 20% margins in the same quarter for the first time ever. This strong performance gives us confidence to raise our EPS guidance by another $0.20 to a range of $3.80-$4.10. While the comparison to last year's EPS isn't meaningful, given the recent separation, on an operational basis, our revised full year guidance reflects 6% core sales growth, driving an 18% increase in adjusted segment profit. Strong core growth, along with a very impressive execution, delivering 50% operating leverage, with operating profit increase 3 times the rate of sales growth, further evidence of our ongoing execution capabilities. Regarding our end markets, the environment is fairly stable, with some improving but continuing persistent supply chain challenges in Aerospace & Electronics, and signs of continued slowing in end markets at Process Flow Technologies, particularly chemical. We continue to drive strong results and are confident in our outlook for 2023 and our ability to drive significant growth in 2024 and beyond. From a cost and inflation perspective, as you can see from our continued margin strength, we have been appropriately prudent with pricing actions across all of our businesses, and we continue to fully offset the impact of inflation on both a dollar and margin basis. Starting with Aerospace & Electronics, our revised guidance is for 14% core sales growth, driving operating profit growth at roughly twice that rate. Demand remains very strong, with no signs of a slowdown. The supply chain environment has improved slightly, which drove the 3-point increase in our core sales guidance, but we expect further improvements to be at a gradual and measured pace. Even with those supply chain constraints, we couldn't be more excited about the growth profile of this business. We remain confident in our ability to deliver 7%-9% core sales growth from 2024 through the end of the decade. We are now working on opportunities to overdrive that target. With operating leverage in this business typically approaching 40%, we expect this business to generate profit growth well into the double digits into the foreseeable future. Rich, Jason, and I attended the Paris Air Show last month with Jay Higgs and the aerospace team. A great event with over 150 face-to-face meetings with key customers, partners, and peers, not to mention quite a few analysts and investor meetings. Coming out of that show, hearing directly from our industry partners, my confidence in the demand trends and the specific positioning of our business couldn't be higher. Although there are continued industry challenges, from supply chain lead times to labor shortages, demand is extremely strong, and any industry short-term supply constraints will just result in a much longer upcycle this decade and beyond, with some clear benefits for suppliers like Crane. For example, given constraints on OE build rates, the fleet has aged about 15% since 2019, and the number of aircraft in the fleet, less than five years old, down 25% since 2018, creating a long-term structural increase in the demand for aftermarket products and services. This is reflected in the unusually strong aftermarket backlog. In addition to strong industry trends, our team continues to perform well and secure new business. For example, Crane was recently selected by Heart Aerospace for the joint development phase of Heart's hybrid electric ES-30 aircraft. We will be collaborating with Heart to define the electrical power distribution system, utilizing Crane's innovative high voltage power conversion systems and low voltage control and distribution equipment. Our selection on this program is a testament to the vision, strategy, and investment we have made in our electrical power capabilities over the last decade. Those power conversion capabilities are also being used in a variety of other next-generation applications, including a number of large AESA radar power systems that we have already won, as well as more electric and hybrid electric tactical military vehicles. In this area, the US Army recently announced that the Optionally Manned Fighting Vehicle competition downselected to American Rheinmetall and General Dynamics Land Systems, who will split $1.6 billion in funding to develop the M2 Bradley replacement vehicle. Through our strategic investments in high power and bidirectional conversion, we are securing positions on both the demonstrator platforms, which will position us for significant long-term growth in our defense power business. We also continue to be selected to provide content for various 6th-generation fighter demonstrators and collaborative combat aircraft programs, while continuing to execute on others that were awarded within the past 12-18 months. This demonstrates the value Crane is delivering through our strategic investments in advanced brake control, engine lubrication, and thermal management systems. Just an incredibly exciting range of opportunities, reinforcing our confidence in our ability to deliver 7%-9% long-term growth with potential upside to that target. We also have a strong growth story at Process Flow Technologies. Our revised guidance is for 6% core growth, driving 22% growth in segment profit. That's nearly 60% operating leverage, reflecting a number of factors, including strong operational execution, value pricing, and continued structural change in the business. That structural change includes an ongoing mix shift, where today, nearly two-thirds of the business is positioned in our core target markets of chemical, pharmaceutical, water, wastewater, and industrial automation. It's those markets where we have the greatest differentiation and the best ability to create value for our customers. We also continue to invest for the future with new product introductions released at record pace and with structurally higher margins. New product vitality metrics continue to improve year after year, giving us high confidence in the 3%-5% growth profile through the cycle and the substantial opportunity to further expand margins. A lot of exciting developments in this business as well. We are outperforming the markets and gaining share driven by new product innovations. While we are extremely well positioned to continue to outgrow our markets, we have seen some signs of slowing demand as expected and consistent with our full year guidance provided in January, particularly in European chemical, non-residential construction, and industrial markets, as well as some pushouts in project activity in North America. Notably, if you looked at prior cycles, given our specific product exposures, we typically see slowing activity a few quarters before many others playing in the broader process markets. As displayed in 2021 and previous cycles, we also tend to recover a few quarters earlier. As always, we will continue to focus on what was within our control, namely gaining share to outgrow our end markets, and we are well positioned to continue doing just that. For example, last quarter, I highlighted the progress we are making with our new hydrogen initiative, where we qualified a new cryogenic valve for liquid hydrogen applications, to be followed by five additional new product lines over the next 12 months, all targeting a market that is growing at more than 15% annually. During the second quarter, we secured the first 4 firm order for our hydrogen products ahead of our schedule and internal targets. In wastewater, we continue to see great momentum with key growth products. Our chopper pump is now in its fourth year of commercialization, continues to significantly outgrow the market, with 20% year-over-year growth expected this year. The chopper pump is an innovative solution for the most challenging wastewater applications, we continue to see this solution as a differentiator versus the competition for wastewater applications with very high solid content. In the chemical space, where we have a number of significant growth initiatives, we are also making great progress, led by our portfolio of new valve and specialty pipe solutions that have differentiated sealing technology to solve reliability challenges in corrosive, abrasive, toxic, and hazardous environments. Last quarter, I noted the launch of our innovative EL-Torc sleeve plug valve product, which now has three customer-installed applications with commitments from six additional customers. That's incredibly rapid adoption for a new valve, which typically goes through a lengthy evaluation process, reflecting the strength of the product's value proposition. Our recently launched FK-TrieX valve has also continued to gain traction, with quotes year-to-date now nearly triple last year's level, with a growing funnel of opportunities reflecting the valve's unique ability to solve leakage and flow problems in severe service applications. Just continued progress, driving growth in a great business. In Engineered Materials, no change to our view of demand for the year, but margins have outperformed expectations. Despite the sharp declines in the RV market, which we think is approaching a bottom, we are now confident we will keep the deleverage rate to about 25%, with segment margins for the year north of 12%. Really great execution by the team. Briefly, on the acquisition front, we continue to work through our deep and extensive funnel of potential deal flow. We expect numerous opportunities will become actionable over the course of the next year. Today, we are involved in 3 very active acquisition processes across both aerospace and Process Flow Technologies. We are cautiously optimistic that one or more will come to fruition by the end of the year. Each of these active opportunities have enterprise values that would probably be in the $75 million-$200 million range. Again, off to a fantastic start post-separation. We remain confident in our ability to execute on the strategy and vision we laid out at our March Investor Day event. A 4%-6% long-term core sales growth rate from resilient and durable businesses that derive about 40% of strategic growth platform sales from the aftermarket, with substantial operating leverage on top of already solid margins today. That should lead to double-digit annual and average annual core profit growth, with potential upside from capital deployment. With virtually no debt, the capital deployment opportunity is significant. A five-year vision to get to a scale with $2 billion in sales at each of our strategy growth platforms, with adjusted EBITDA margins above 20%, giving us the optionality for future strategic portfolio decisions. Now, let me turn the call over to Rich for more specifics on the quarter. Thank you, Max. Good morning, everyone. To start, my sincere thanks to the entire corporate team for their continued efforts on all aspects of the separation transaction and to our business teams for delivering another quarter of great results. An outstanding quarter with 5% core sales growth, driving 30% adjusted operating profit growth and driven by excellent performance across all businesses. I will start off with segment comments that will compare the second quarter of 2023 to 2022, excluding special items as outlined in our press release and slide presentation. At Aerospace & Electronics, second quarter sales were very strong, increasing 17% to $189 million. Segment margins of 20.2% increased 270 basis points compared to last year, primarily reflecting strong leverage on the higher volumes and productivity. Sales growth was better than expected, but we, along with the rest of the aerospace industry, still remain capacity constrained due to continued supply chain issues. The combination of supply chain constraints and strong demand drove our backlog up another 26% to $675 million. In the quarter, total aftermarket sales increased 29%, with commercial aftermarket sales up 41% and military aftermarket up 7%. Commercial aftermarket demand was broad-based across spares, initial provisioning, and repair and overhaul. OE sales increased 13% in the quarter, with 15% in commercial and 10% in military. We raised our core sales outlook for the year to 14% from 11%, reflecting modest improvements in the supply chain environment. We now expect full-year margins of about 20.3%, reflecting 200 basis points of improvement compared to last year. We expect sales to increase sequentially for each of the next two quarters, with margins slightly lower than the first half due to mix with more OE sales in the second half. At Process Flow Technologies, sales of $263 million decreased 11%, driven by the 15% impact from the divestiture of Crane Supply in May of last year, and a 1% impact from unfavorable foreign exchange. Core growth for Process Flow Technologies was solid at 4%. Adjusted operating margins of 20% increased 440 basis points from last year, primarily reflecting strong pricing and productivity gains. Continued excellent execution by our teams in all areas in supporting another 50 basis point improvement to our full-year margin guidance, which is now a record 18.5% for this year. Compared to the prior year, core FX neutral backlog increased 1%, and core FX neutral orders decreased 5%. Sequentially, compared to the first quarter, FX neutral backlog decreased 3%, with FX neutral orders down 5%. Order rates and backlog levels are consistent with the trends we have talked about since the start of the year, reflecting some modest slowing in a few markets, as well as the natural impact of shortening lead times as the supply chain continues to improve. For the full year, we continue to expect 6% core sales growth, which implies a slight sequential decline in the second half. Full-year margins of 18.5% do imply lower margins in the second half, consistent with our commentary last quarter. On a full year basis, our guidance of 18.5% again represents a record year, well above last year's record, 16.2%. It also reflects continued execution on our stated goal of driving an average of 100 basis points of margin improvement per year. In 2019, just before COVID, margins were 13.6%, and when we hit our 18.5% guidance this year, we will have more than outpaced that 100 basis point average. On track for really impressive performance in 2023, driven by strong execution and productivity, pricing net of inflation, and most importantly, a continued structural shift in the business to higher margin, more differentiated products in our target markets of chemical, water, wastewater, pharmaceutical, and industrial automation. The timing of margins within the year has a different set of drivers. Last quarter, I mentioned a few items that shifted some earnings from the second half of this year into the first half. These are just timing items, but the accounting for inventory revaluation helped the first half margins at the expense of the second half, and some investment spending was shifted into the second half of this year, given tight labor market conditions in certain geographies. Some unfavorable mix in the second half. To a lesser degree, we will also see a second half margin impact from the slowing markets that we mentioned, consistent with our expectations dating back to our original guidance provided in January. At Engineered Materials, sales of $57 million decreased 21% compared to the prior year as expected. Adjusted operating profit margins increased 180 basis points to a solid 16.6%, with lower volumes heavily offset by pricing and productivity, and reflecting an impressive deleverage rate. For the full year, we continue to expect a sales decline of 14%, but we now expect margins of 12.2%, reflecting the team's great execution. Moving on to total company results. In the second quarter, adjusted free cash flow of $60 million was consistent with normal seasonality, as these businesses typically generate the substantial majority of cash flow in the second half of the year. Our balance sheet continues to strengthen. We have started to pay down our term loan, with total debt at the end of the quarter of $262 million. With cash of $219 million. A lot of financial flexibility, with more than $1 billion in M&A capacity today. Reaching as much as $4 billion by 2028. While this is more financial flexibility than we have had historically, our capital allocation strategy is unchanged. We will deploy our capital with the same strict financial and strategic discipline that we have always employed, prioritizing investments internally for growth, followed by M&A and returns to shareholders. Now turning to our 2023 guidance. We increased our adjusted EPS guidance range by yet another $0.20 to $3.80-$4.10, with adjusted EBITDA guidance now at $350 million or 17.1%. While I have already discussed the segment details, the primary drivers of the increased guidance are higher core growth, now in a range of 5%-7%, up a point from prior guidance. Adjusted operating margins of 15.1%, up 60 basis points from prior guidance. Non-operating and interest expense now at $15 million, down slightly from prior guidance. Another great quarter following our separation and demonstrating that we can deliver in any environment, and a very strong balance sheet and cash generation to support value-creating capital deployment. Operator, we are now ready to take our first question. Thank you. We will now be conducting a question and answer session. If you would like to ask a question, please press star one on your telephone keypad. The confirmation tone will indicate your line is in the question queue. You may press Star two if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. We ask that you please limit yourself to 1 question and 1 follow-up and re-queue for additional questions. 1 moment, please, while we poll for your question. Our first question has come from the line of Matt Summerville with D.A. Davidson. Please proceed with your questions. Thanks. Morning. A couple questions. First, on PFT, you gave a little bit of end market color. I was hoping you could get a little more granular with what you're seeing from an overall end market standpoint, particularly with respect to the four focus areas you pointed out, and add a bit of geographic overlay to that, and then I have a follow-up. Sure, Matt, thanks. Well, you know, overall, I think, you know, fairly stable, slowing as Max mentioned, and I alluded to in certain markets. In the longer cycle process side, you know, we mentioned orders down year-over-year in the low single-digit range, all that consistent with the guidance that we gave at the beginning of the year. What we're seeing is slowing, most notably in European chemical. I would say a handful of project delays and pushouts in North America and China, also in the chemical space. MRO activity and process is generally solid, I would say. What I would add to that is that we are seeing customers keeping inventory levels, you know, fairly lean. Channel inventory below normal levels, we don't see that having much impact here in terms of demand. There's not sort of an exodus of inventory levels. From a project point of view, we're seeing opportunities in different areas, lithium, efficiency programs and upgrades in certain areas, chlor-alkali and so forth. In general, industrial markets are also decelerating slightly, as we pointed out. Pharmaceutical remains strong. I would say that there's some timing on order activity there that we expect to see pick up actually, as we exit the year and move into next year. Generally, just leading indicators continue to reflect this mild downturn that's as we predicted in the beginning of the year here, and starting, you know, again, as we started to speak about earlier. In the shorter cycle businesses, water, wastewater, I mean, just demand continues to be really strong. No signs of a slowdown there. That's our North American business. Then on U.K. non-residential construction, weak all year, continues to be weak, and consistent with our original guidance. Yeah, I would add, Matt, you know, we've called this from January. Just by understanding the cycles and what we've seen historically and how we, how we were trending, that's why we gave the guidance we did starting in January, and it's playing out really as we expected. From Europe, I think we're starting to see the Americas see delays, not cancellations, but some project pushouts in spend, decision making. You know, order rates there almost flat to slightly negative in the quarter. You're seeing that inflection point. As we look at it, as we move forward, this cycle for the broader end markets that we participate in, we'll see this continued order decline through the balance of this year. Maybe, you know, high single digit kind of range. It bottoms out, as we're projecting by, call it, the end of the year. Then you'll start to see slightly improving negative rates going into next year when we inflect positive again by, call it, September, October next year. That's how we're modeling. Great. That was very good colors. Thank you, guys, for the detail. I wanna talk a little bit about the aerospace supply chain and the aspiration that some of the OEs have to drive narrow body build rates higher. Can you talk in a little bit more detail around what you're seeing in the supply chain, whether the Crane-specific supply chain, you feel can support those higher production rates, and whether or not in the context of the upwardly revised guidance for A&E, whether or not you've been able to eat into any of that $50 million of, I think you kind of referred to it as supply chain. Yeah ... stranded revenue that you highlighted earlier in the year? Thank you. Well, you're probably looking for broader color than... You know, we don't have titanium, significant titanium, for example. Our castings, we, you know, related to our flow business, we see a little bit there. You know, the casting suppliers in the U.S. are somewhat constrained, I understand, not impacting us to the same degree, although a little. You know, it remains broad-based. It's improving generally, methodically. You know, many are calling out the improving trends. On the, where it's impacting us the most is on the electrical components, semiconductors, actives, passives. You know, we're tracking less shortages, we're tracking less SKUs that we're having to chase, there's still enough that we're not seeing a material improvement in what we're able to get out the door. That's why we just continue to see this trend, just slowly, methodically getting better. It is getting better, but not allowing us to have, you know, a significant inflection point on working the backlog down in an accelerated manner. I can't. I don't think I wanna speak more broadly for the entire industry on the build rates for the ramp up, other than we're keeping up with current demand for sure, and not causing any of our customers problems at this point. The backlog, you know, that $50 million, if you look at the increase in sales, overall, that, based on revised guidance, and then you look at the increase in the backlog, which is we predict is gonna continue to grow, it's probably closer to $55 million-$60 million, maybe in that range now. You know, that's just a plug number that just we kind of look at, what technically we could get out the door if we had unconstrained supply through the balance of the year, that customers would accept. It means, you know, opportunity as we head into 2024. Hopefully, we'll see continued improving trends. Did you guys add anything else? I mean, the only thing I would say, just on that, just to, on that point with the $50 million, you, as Max mentioned, if you look at our guidance range, it implies roughly, I don't know, half of that number, but not necessarily consuming that $50 million. We're continuing to see that $50 million grow, I think is the point there. You know, beyond that, I don't, I have no other comments. I think you captured it all. It's not the same 50, right? It's not, it's not as if there's just- Correct. Trapped, $50 million that we can't ship. It's just a backing into an ideal number that we could have shipped unconstrained. Understood. Thank you, guys. Thanks, Matt. Thank you. Our next questions come from the line of Damian Karas with UBS. Please proceed with your questions. Hey, good morning, gentlemen. Nice work on another- Good morning. ... solid quarter. Thanks. Thank you. Good morning. Absolutely. I have a few follow-up questions for you on PFT. You know, one kind of repeat question that I hear from investors is regarding your margin guidance. You know, now that you're running up more than 20% for the first half, you know, I think the implied guide, you know, 16% or so, if that. Rich, I know you talked a little bit about your expectations of some volume declines on the short cycle, but is there any way you might be able to give us a bridge on that margin for PFT, kind of thinking about, you know, short cycle mix, the investment ramp up, anything else that's kind of factoring in there? Yeah. Look, I'll give you some broad strokes that hopefully will be helpful. You know, when we look at that first half to second half performance, you know, there's a few things that are playing in there, right? It's clearly sales, call it, you know, price volume, right? It's sales, you have mix elements, you have investments that we had planned to make at the beginning of the year and are flushing through more so in the second half of the year. Then some inventory revaluation associated with inflation that we benefited from in the first half. When you look at each of those components, I would think about them as each within a range of 100 to 200 basis points, something like that. As I look at them, all of them in my mind are temporary, without a doubt, but for, clearly what will play forward with respect to some of Max's comments on demand, which could impact the sales and obviously mix elements, which we'll get more and more comfortable with as we move through the balance of this year and implications to 2024. Structurally, we are super comfortable with, the way we're set up in this business, to continue to demonstrate what we've committed to historically around that, on average, 100 basis point margin improvement year after year. Great, that's helpful. Then, Max, you mentioned being positive, price cost on both a dollar and margin basis. Could you just talk about the price trends more recently and what kind of pricing you're anticipating through the rest of the year? Just kind of thinking about some of that short cycle demand weakness, you know, is that gonna present an opportunity, perhaps for customers to maybe jab back at some of the price inflation, from recent years? Or are you kind of expecting, you know, prices there to remain sticky? I mean, I think overall, we're seeing price stick with that, you know, stick without a doubt. I would say that the price cost relationship in the first half was, you know, very favorable. It's still gonna be favorable in the balance in terms of you know, margin and so forth, but it does close a little bit in the second half. Not as accretive, but still positive. That's sort of the dynamic, you know, first half to second half. You know, as it relates to customers, you know, I think it's about the value of the products, and we'll continue to do all that we should be doing to make sure that those prices stick. Understood. Thanks. I'll hop back in the queue. Thanks, Damian. Thank you. Our next question has come from the line of Nathan Jones with Stifel. Please proceed with your questions. Good morning, Nathan. Good morning, everyone. Good morning. Good morning, Nathan. I'll just follow up there on Damian's questions about the margin and the impact from first half to second half. You know, obviously, those makes a fair amount of sense, right? You're not gonna get inventory valuation all the time. It's a one-timer. I just wanted to follow up on the investment side of it. Can you give us some more color on what these investments are? Are these kind of one-time in nature, or it's more hiring engineers that are gonna be continuing? Just any color on those investments. The bulk of it is related to the hydrogen investment and building out this team. You know, we've got investment that we... and we have product, and we're launching. We're accelerating that investment. We had the spend that we had identified, you know, was fairly from a plan standpoint, equal in each quarter, and probably only 20% of it's been spent in the first half. We've got the balance that is ramping up into the second half. That's a little bit of the overweight there. This is a very conscious decision, investing in a market that we like, that it has significant growth and the products that are right in our sweet spot. We've told that story. Yeah, I think, as we look forward, though, in terms of spend into next year, there's other investments that we've talked about that are rolling off. I wouldn't look at this as necessarily a headwind, even into 2024. I think we can normalize into 2024 as we move forward. Yeah, I was gonna follow along with just that point. I was gonna follow along with a question about that, so I guess that takes care of that one. I wanted to follow up on a couple of comments that you made during your prepared remarks, Max. Firstly, on the unusually strong aftermarket backlog, is that something that's constrained by supply, or is there something else driving that unusually strong aftermarket backlog? What are your thoughts on when you can convert that? Yeah, good question. Yes, look, we're balancing our customer's needs to the best of our ability and doing a really good job. Aftermarket sales would be stronger if we were unconstrained. There's a mix and a margin impact that we're not seeing read through. No risk of loss, no risk of cancellation. It's just a matter of the improving supply chain that allows us to clear that, what we talked about. I think, Rich, we've kind of sort of rough. Yeah, I mean, if you were to, if we were unconstrained, we were able to ship, you know, the aftermarket that, you know, we otherwise could, you know, you could see us almost reaching 2019 levels in sales, you come close to that. The margin profile on those, on those sales, in aftermarket essentially bring us back to where we were in 2019, if I'm not mistaken. Yeah, it's definitely a nice tailwind, is the way I think we think about it as we look at future years, future periods. You know, the other thing I would add is, you know, some of it is you have airlines that are, they are buying a little bit more, you know, sort of moving away from just in time a little bit and having, and keeping some, on the shelf. By no means, in our view, and based on all the discussions we're having, is there any sort of inventory building. There's just continued solid demand here, that we are, again, pretty bullish on in terms of its impact to us as we look at 2024 and 2025. Yeah, I mean. Of that. Go ahead. I was gonna say that the inventory position, I think everybody would like more, not less at this point. We're still at that stage in every part of the channel. That $55 million-$60 million you're talking about, of being able to ship if you were unconstrained, is primarily aftermarket stuff, so very rich margin, as well as constraining some of the revenue growth? Predominantly, it's weighted towards aftermarket for sure. I don't know if. Yeah. What I'd say is that it's more weighted to the aftermarket than our overall mix. That's about 70/30, right? I don't know that I'd say predominantly. Okay. Makes sense. I just wanted to follow up on some of the PFT questions. You talked about and in great color on the end market weakness. I was wondering, with lead times coming down, how that's impacting the order rates of your customers. It sounded like you don't think there's any excess inventory in- No. out in the market. This is really what you're looking at as, you know, underlying fundamental softness in some of these markets. I mean, Europe and chemicals, not particularly surprising, given some of the PMI numbers out there. This is... you would characterize this more as end market weakening or totally as end market weakening, rather than some normalization of the inventory at customer, at the customer level? Everything we continue to we see here feel is end market completely. No inventory correction. With lean inventory in the channels, right, and in our customers, that we think reduces what you often see as kind of that multiplier or magnifying effect. Yeah sort of decline. Also recovery flows through much more quickly, right? No one's tools trying to clear things, right? It's much more direct, much faster impact, we're not seeing any of this being related to inventory right now. You mentioned lead times, Nathan, the lead times have been more normalized here for the entire year. It's been, you know, nowhere near what we're seeing or continuing to have to battle with in A&E. That's, I would say, almost 12 months now or more of quote, "back to normalized levels." I'm not hearing any issues with lead time, so that really hasn't impacted, you know, the kind of dramatic reductions in people then canceling or... I'm seeing none of that. Okay, that's helpful. Thanks for taking my questions. I will get back into queue. Thanks, Nathan. Thanks, Nathan. Operator, operator? Thank you. Our next question has come from Ron Epstein with Bank of America. Please proceed with your questions. Morning, Ron. Morning, Ron. Good morning. Hey, this is Jordan on for Ron. Okay. Just had a quick question. For the industrial segments, if there is a downturn in the U.S. or more of a slowdown, I know you said you guys are seeing orders get delayed. How should we think about how that would impact pricing that you guys are pushing through or even for aftermarket, how resilient that would be? You're speaking specifically to Process Flow Technologies? Yes. Yes. Yeah, I mean, I think, look, right now our view is that, you know, we're not seeing our view is that we're not seeing a large, you know, impact here. This is as Max pointed out a little bit earlier, the nature of the declines are such that, you know, we're gonna continue to hold price, you know. Do you have to give a little bit in some cases? Maybe, our view is that we're gonna continue the price discipline that we have been exercising for the last, you know, couple of years, for sure. I think price won't be because of competitive issues as I see it. It's gonna be because there's real continued deflation that we're still staying ahead of and passing some on to the customer. That's something we would normally do anyway. I don't see that as a significant challenge for us at this time. Got it. Thank you. Mm-hmm. You're welcome. Our next question has come from the line of Damian Karas. Please proceed with your question. Yes, Damian. Hi again, guys. Just have a few follow-up questions here. First, could you just clarify on the PFT guidance, are you assuming that it's really just chemicals that, where you kind of take a hit, as we progress through the year? Or are you kind of expecting a broader spanning impact across, you know, your short cycle markets? Yeah, it's chemical, it's a little bit of the industrial markets, I would rope into that also the non-res- ... construction in particular in the U.K. and Europe. You know, the rest. Got it. Yeah, delayed projects and such, those would be the categories or the areas. Okay, got it. Then you talked a little bit about the, you know, the sequential improvement in A&E on the top line, you know, margins sort of being negative mix. Could you remind us sort of where, on average, your commercial aerospace margins are relative to the segment? You're talking about commercial versus defense. I mean, on a blended basis, they're very. Very similar. There's a different aftermarket profile on the commercial side, right? As a result, you know, where we have less aftermarket, our OE pricing tends to be stronger. There's not a material difference. Okay, okay. One last question for you here. There has been some deal activity in those markets. You know, Velan got acquired, obviously, CIRCOR in the process of likely going private here. Just any thoughts on, you know, what these transactions could mean for the industry? Any potential impacts on your business? You know, do you think that this recent deal activity is gonna have, you know, any effect, impact on your ability to, you know, kind of land an attractive deal in that space, whether, you know, for better or worse? No, I don't see anything unusual, nothing that we predict out of those particular deals that would impact us, either negatively or positively. I think the trends are generally, you know, those in the, those that have consolidated the space, whether it's in the Process Flow Technologies side or, Aerospace & Electronics, are looking at their portfolio and making strategic decisions about what's strategic and what's not. I think that's gonna provide more opportunities for us, some of which we're very much interested in. We're tracking a number of them that we expect to continue to come out. You know, I'm not gonna discuss whether we participated or not. I can say that we're absolutely active in each and make conscious decisions about what we want to choose to play in and what we don't. I think we'll be very competitive for those that we do want to play in. The ones we're looking at right now are some nice bolt-ons that just would be a clear fits within the business. I think the shareholders would immediately understand and appreciate the value creation that we would drive, so right down the middle of the fairway on those. Certainly activity is high, and I think it's gonna continue. I think this is a market that will continue to see lots of opportunities. I think in some cases, some of our peers, for various reasons, are constrained, whether it's leverage, whether it's deals that they've already done, it actually helps us. We're properly positioned, no debt, ready to move, and I think that helps us. Anything else that you'd add? No. All right. Well, thanks for all the color, guys. Best of luck. Thanks, Damian. Thanks, Damian. Thank you. Our next questions come from the line of Matt Summerville with D.A. Davidson. Please proceed with your questions. Thanks. Just one or two quick follow-ups. If some of these defense opportunities, and Max, I think it was you, went through quite a few, if some of these break in your favor, you know, ultimately, what can that 7-9 look like in more of a bullish scenario for A&E through the course of the remainder of the decade? Well, to take the Heart example, I mean, if you take their projections, I mean, is it gonna hit? There's a lot of assumptions, right, Matt? Even the Heart Aerospace, which is years away, based on the projections and orders that are out there, you know, could add 5 points of growth alone just from that opportunity on an annual basis. On the defense side, some of the others that we're looking at. Yeah, they're of similar size to sort of the ones that we've recently won in our high-power defense business. These are 9-figure programs over multiple years, 10 years, 15 years, some cases, 20 years. The one that Max, you know, highlighted on the call, the Heart, the Heart Aerospace one, you know, really exciting technology and really a nice fit for us, and very successful. That program is a development program today that finishes around 2027, the sales that could come would be out there. It would be in the 2027 timeframe and starting there for about a 10-15 year period, provided that they're successful, right? This is a smaller 30-seat regional aircraft, sub-regional aircraft. if the. Very exciting, yeah. Optionally Manned vehicle. Oh, yeah. So forth. You know, you're probably looking at double-digit. The seven and nine would move to a low double-digit potential. Yeah. All in. Yeah, for sure. There's a lot of assumptions in that, though, and it's early days... Right. The other key takeaway, I think, is not just that there's upside to the 7, 9, but that that 7-9 is sustainable, right? I mean, when we originally put this out in May of 2021, I believe, it was for this decade, right? Some of these are extending well beyond that. I think that part of the takeaway is, yes, there's upside to 7-9, but also that 7-9 is really structurally how we position the business to continue to have new wins following on some that we've already announced, right? That there's a huge portfolio of the next set of wins after the ones that we've already kind of announced ramp up fully to sustain that growth rate well into the 2030s and beyond. Absolutely. Got it. That's helpful. Then I apologize if you touched on this, but just a little bit more deal color in terms of the multiples you're seeing, between the two businesses and, you know, if you were a betting man, where you see the higher probability you close the deal between A&E and PFT? Thank you. Actually, I'm bullish on both spaces, and I think we're gonna be competitive. You know, the multiples are for the flow businesses, probably still averaging, you know, averaging in that 13x. But it depends on the business, it depends on the specifics, of course, north, south of that, and the synergies that the acquirer can bring. A&E deals are, you know, maybe still averaging 15+. Yeah, high teens, we'd say. You know, which is, when you think about where our multiple is today relative to where we were, you know, 12 months ago, you know, obviously our currency is a little bit different today as well. For sure. Totally agree. Thanks, guys. Thanks, Matt. Thanks, Matt. Thank you. Our next question has come from the line of Nathan Jones with Stifel. Please proceed with your questions. Nathan? Yeah, a couple more follow-ups. I'll go on the capital allocation side first. Obviously, aero multiples are higher than flow multiples at the moment, and the, you know, aerospace markets are pretty hot for deals. You know, do you think more about flexibility from that perspective? Maybe it's better today to be acquiring PFT, it might be better later on to acquire aero, or are there, you know, specific deals out there where you have an advantage in terms of being able to generate synergies or being able to leverage those assets? Just any more color you can give us on just how you're thinking about the differences in multiples and how that maybe changes your approach to allocating capital here in over the, you know, the short term, next year or 2. Yeah, you bet. Thank you. It always starts with the strategic fit, you know, the attractiveness of the space and extendability, you know, in some cases, there's some technology and some extensions that are just really nice fits for the portfolio. We don't like to value and pay for any sales synergies, but there's significant synergies that we can bring through CBS and integration and some consolidation. It all starts with attractiveness. You know, as we think about it, you know, there's, there might be an ideal timing that you can wish for, but the reality is, when these opportunities come up, it could be in private equity that's coming out, it could be a family-run business that all of a sudden the owner decides to make a life change decision, or, you know, a large industrial group decides to carve out something that's no longer strategic. You've got to be prepared to move, and that opportunity is not gonna come back around. We're gonna stay disciplined, we're not gonna overpay, but we're going to bring the full synergies that we can bring. I think we're gonna be very competitive, and I think we're gonna get some things accomplished towards our accelerated growth strategy in becoming more of a serial acquirer, post-separation. Yeah, I would just add that, you know, our objective here is to grow both businesses, right? through, you know, organic and inorganic means. With both of these businesses at $2 billion plus, as we've alluded to, you know, that enables other optionality for us to consider. Trying to decide on multiples and pricing and does it make sense today versus tomorrow, or to wait, and considering everything that Max just mentioned as well, what I just said sort of plays into our calculuses as well. Just one on aero, with the supply chain constraints. Are there any opportunities on pricing that creates for you? Not specifically for aero. I mean, we're always value pricing, depending on the opportunity and, when are our contracts up, renegotiating and having those discussions, standing up for our value prop. The technology that we drive, whether that's in microwave, whether that's on the defense power side. Not necessarily due to supply chain constraints. I don't see that. Yeah, I would agree with that. You know, the team is doing, I would say, a very good job with price and aero, just like across the rest of the business. You know, I'd offer up that if, you know, there's an area of potential upside in the future to our, or to really just increase the confidence level of the high side of our 7 to 9, it's our successes that we think we're gonna continue to see in price. Because of the technology we're driving and the differentiation and the value to the customer. These additional opportunities we've been discussing over the last few questions on upside to the 7%-9%, would you expect those to be accretive to the margin profile? Yeah, we would expect them to be I would say, consistent with our margin profile, not necessarily something that's gonna continue to drive them up. I mean, I would say consistent, Nathan, at this point. Fair enough. Thanks for taking all the follow-ups. Thank you, Nathan. Thanks, Nathan. Appreciate it. Thank you. We have reached the end of our question and answer session. I would now like to hand the call back over to Max Mitchell for any closing comments. Thank you, operator. A great first half of 2023 with excellent results and a strong outlook ahead. On the broader macroeconomic front, I have no predictions. Soft landing, minor recession, no recession, inflation tamed, inflation persistent, global tensions, elections. As the late great Tina Turner once said, reflecting on life's journey: "It's not about what happens, but how you deal with it." At Crane, as always, we are ready for anything with a proven ability to execute under any set of circumstances, responding by being nimble and quick to adjust while driving execution and results. That's what gives us such high confidence in our ability to create value in the years ahead. I look forward to speaking to you next on our Q3 call in October. Thank you all for your interest in Crane, and have a great day. Thanks, everyone. Thank you. This does conclude today's teleconference. We appreciate your participation. You may disconnect your lines at this time. Enjoy the rest of your day.