My name is Mike Allen, industrial analyst here with Baird, and we're pleased to welcome Crane NXT with us. First time at the conference, which isn't surprising since this is early days as a standalone company. Joining us, Aaron Saak, CEO, Christina Cristiano, Senior Vice President and CFO. Aaron's gonna give some brief, some prepared remarks, make sure everyone knows what the, what the company is, what it does, thesis, everything like that, and then we'll have plenty of time for Q&A. So if you have any questions, we can do the old-fashioned way, raise your hand, I'll call on you. Also, you can send an email to the room's email address, and we'll make sure that we address any of the questions that come your way. Floor is yours. Great! Well, thank you, Mike. Great to be here. Appreciate the invitation. And to talk a little bit about our company, Crane NXT, which I think is probably new, at least to many of you, given, as Mike said, we're new. We just launched the company in April, so I thought I'd take a few moments just to talk about who we are, and what we do. Obviously, always with forward-looking statements as a disclosure, before, before we start the conversation. So with that, NXT is really a company squarely focused on being a premier industrial technology firm. We say our mission is to provide trusted technology solutions that are securing, detecting, or authenticating our customers' most important assets. And I'll explain a little bit more about our two businesses. There are really two segments that we report, one called Crane Currency, and I can go into some details of that business a little later, and Crane Payment Innovations, or CPI. But I think the hallmark of the company, where we've started from out of the gate, are really, really with very strong financial profile. $1.4 billion in revenue. Of that revenue, about 40% is recurring or reoccurring. That's something typically not known or thought about with the company. So these are long-held contracts, as well as service, aftermarket parts, as well as connectivity and software services that contribute to the 40%. We have very strong free cash flow as well, about 100% free cash flow, that's a hallmark of the company, and high operating margins and, and Adjusted EBITDA margins. So I think when you look at the financial profile of the company, we feel we've started on very firm foundation, and we continue with our operational excellence programs to improve upon that. That's core to who we are. And so just to break down the company with a little bit more detail, about 65% of revenue is in the segment called CPI, 35% in Crane Currency. You can see we're very global. In fact, about a quarter of the business is coming out of high-growth markets, call it emerging and rest of the world. About 60% here in the United States. And I think one part of the company that's a surprise to many people new to this story, and fascinating, I'm sure, for anyone who thinks about this, we have customers that have been with us for over 100 years. Not many companies can say that. In this case, these are state central banks. So think of the United States as one of our customers that's been with us for almost 150 years in our currency business. In both businesses, we have very long-standing customer relationships. In fact, 70% of our customers have been with us for over two decades. So a very resilient customer base, and with that, as you can imagine, both in our technology and our channel relationships, very wide moats around the business, because of that. Let me go a little deeper into both businesses, and then we can ask more questions here, Mike, that I know we have. So first, let me talk about Crane Currency. As the name implies, we're really a leader in currency, and our position in this market is to be the technology leader, and that is technology for anti-counterfeiting. So when you think about currency, and you think about what is happening in the world, the high ground we play at is the technical leader in providing the most secure authentication type of technology to central banks around the world. The biggest of which for our company is the United States, where we've been a supplier to the United States for over 100 and almost 150 years at this point in time. We provide all of the substrate or the paper that's used in U.S. currency. As well, if you're familiar with the $100 bill, which I'm sure you are, the blue strip that goes down the $100 bill is our technology, and we call that micro-optics, and it is the leading anti-counterfeiting technology in the world. And we take that technology, obviously, the U.S. $100 bill is a bit of our marquee product, if you will, and we apply that to international currency, where we supply now over 150 denominations with our micro-optics technology to central banks all over the world, where we help design, produce, and supply their currency to the central banks. Very resilient business as cash in circulation continues to grow, and wide moats in the business around the technology. Where we're really excited is an area of how do we take that technology and apply it into other markets that are also facing anti-counterfeiting needs? So think about luxury goods, consumer goods, pharmaceuticals, all looking to replace very low-end type hologram technology that many people are probably familiar with, with this much more advanced micro-optics technology, again, which is the center of who we are. But the business, again, very global. Half of it is in the U.S., that's to the U.S. government, where we're the sole supplier of U.S. substrate in this technology and have been again for over 100 years, and the rest is the international business. So very resilient, wide moat, strong business with high operating margin and very good free cash flow as well. Going on to Crane Payment Innovations, or CPI, we, we really talk about this business both by vertical markets that we service, but also by what we provide. And I'll start on the, left side of this page, talking about components. So if you go to a self-checkout facility, and you transact with cash or coin, it's highly likely that's actually our components inside that self-checkout machine. We have a very large market share in these type of applications. In fact, No. 1 in almost every market we play at around the world. So we sell those components, and really inside those components, they're detection systems. They have proprietary detectors with embedded software, and we attach onto that aftermarket services. So think about field services for repair, software for remote monitoring and diagnostics, and we sell that as a traditional SaaS-type model. And that's what really leads this business, although, you know, we're approaching $900 million, 30% of it is recurring. That's the aftermarket service and recurring software sales that come after the one-time component or system sales. So again, very diverse business geographically. We sell in most major markets and have, again, a number one position in the markets that we play in. So, again, a hallmark of this business, as shown on the slide, high EBITDA margins, and as you can imagine, very good free cash flow coming from it. So with that said, that's our two core reportable segments today. We launched the company, as Mike said, in April as a separation of what was, at that time, Crane Holdings. That became Crane NXT and Crane Company. Two very different portfolios today. And we launched with an ambitious five-year growth strategy to take the company from today, about $1.4 billion in sales, up to $3 billion, move from a mid-single-digit growth company to mid-single-digit plus, maintain very high EBITDA margins, and use our free cash flow for M&A, but also to ensure we're at a very healthy leverage ratio. Today, we're at 1.3 times. In fact, last quarter, as we just recently announced, we paid down another $125 million of our term loan simply based on our good free cash flow. So we're in a very good position in terms of the balance sheet, which we want to continue to invest in our core. There are real tailwinds in both businesses, and we can talk about those a little bit more, but we want to diversify the company as well, and continue to add platforms on to what we think is a very good architecture of how we've launched Crane NXT. So we see this as an opportunity at an early time. We're six, seven months post the launch of the company, performing very well operationally, paying down our debt with a strong balance sheet, and in 2024, we'll be looking to deploy the M&A. It makes a lot of sense. I'll pause there, Mike. I think that's the essence of the story of who we are. Starting from a good place, good, good revenue, growth in the mid-single digits, a strong balance sheet, and an ambition to deploy that to diversify the portfolio. Great. Well, appreciate it. Again, as a reminder, if you have any questions, just let me know. We'll weave them in. Let's start with a high-level one. I remember when we caught up for the first time, post-spin a couple of months back, and my first question was certainly an ignorant one, but still, you have a lot of cash. This is cash-centric. Cash in circulation seems like it's going down, but it's not. But everyone's using credit cards. What does that mean for your business? And you're very quick to say, actually, that's not a negative necessarily. Maybe just talk about the dynamics around that and why you're somewhat more insulated than people would think. Yeah. Well, I think that's the first question. It's not an ignorant question. It's the first one that is- Yeah, you never know. Yeah. It was your first one. And so I'd say, let's go to the facts. Mm-hmm. Not what we feel or think. Let's go to the facts, and the and what's surprising to most people is cash in circulation continues to grow every year in low single digits. It's just the truth. And in fact, last about a week ago, the U.S. government, the Federal Reserve, put out their annual currency order, which is where they project what they're gonna order for new currency for the year, as well as what's happened to cash in circulation in the United States. It went up again, and we've see that everywhere across the world. So there's this first realization that folks need to make as they get aware of this story, that we're actually in a market where there is a low single-digit growth tailwind to the currency business. And the second part of the all growth algorithm for the business, if you will, is [I] gotta believe that anti-counterfeiting technology is more important than ever. Most people don't struggle with believing that every government around the world is having to introduce new features to protect their currency, which is really protecting their economy from counterfeiting. That's occurred continuously for the last 100 years, as long as we've been supplying currency, and is continuing today, and that plays to our advantage. We talk a lot about the technology density on every new bill. More bills are getting printed, and every bill that gets printed, typically when redesigned, has more anti-counterfeiting technology on it. That's the story of Crane Currency, and that's why we keep winning share, and you see very strong growth at mid-single digits in that business. Maybe also talk about the impact on the CPI segment. Yeah. You know, it feels to me like the number of self-checkout machines; they still need to have a cash component to it- Yeah ... regardless of whether- Well, I think the answer, exactly your point, it's both. Mm-hmm. Right? So CPI, that business, when you think about that growth algorithm, it's about automation, and automation driven by the need to drive productivity with our end customers. Those could be retailers, but for us, it's actually casinos, gaming, it's also financial services firms that use cash in process transactions, but it's also the obvious labor scarcity that we're all seeing and facing. So all of these systems have to get automated, and that really plays to our sweet spot of what we do. And for us, it's a little bit of both. It's not just the cash and coin processing. We also, particularly in our vending and in our gaming businesses, provide services for electronic payment. So we see it as a, as exactly to your point, it's both coming together, driven by this need for automation. So, so I think ultimately, I'm gonna try to get to just the growth algorithm from a component perspective. So the next logical step then is, how do you think about the pricing mechanics for the businesses? Yeah. Don't have as much context on the Crane Currency. I can see how it would work on the- Yeah CPI side, but is this a consistent 1%-2%, whatever type price increase per year, or is it a little bit more dynamic either way? You wanna take that? Yeah, I mean, we're very disciplined in pricing and just actions to make sure that we're in a positive end result, price over cost. Mm. And so obviously, during COVID inflation, right, everything's way up, and so just super disciplined in making sure we're offsetting that. We have a regular annual increase, for example, in our CPI pricing, that happens at the beginning of the year, and we'll continue to do that. And then if opportunities or the market requires something further than that, we'll take advantage of that. But the idea is to be cost plus, price cost positive, right? Mm. In all situations, and our teams are very disciplined in that regard. So if you're gonna talk to this mid-single-digit plus paradigm, you're gonna say 1-2 points of price, and then the remaining piece is currency inflation plus automation- Yeah ... in some component, right? I would actually say price is probably a little stronger- Mm ... depending on which segment you look at, you know, and that helps with our market position. I think that's part of the moat around the business. In CPI, where we have very, you know, in, in some parts, higher market share, that typically comes- Mm ... with higher pricing power, and we also have an installed base, take gaming as an example, where most casinos wanna harmonize on a fleet of product. And so that helps us maintain both share, but gives us more pricing power in the process. It also gives us the ability to attach on recurring services, which come at a obviously a better margin rate when you think of the SaaS and aftermarket services, so that mixes up the margin profile of the business as well. You know, Mike, there's another factor there too, which is productivity, right? So that's a big underpinning of what we do in our business, is just driving operational excellence through what we call the Crane Business System or CBS, to ensure productivity improvements every year, and that's also improving our margins. Mm-hmm. No, makes sense. Makes sense. So let's go piece by piece then. Crane Currency, you know, you mentioned long-standing customers, right? Strong with the U.S. government. How do you think about penetrating the international customer base? Where do you stand today? What's the opportunity set look like longer term? Yeah, I, I think international's been one of the really bright spots for all of NXT. When, when you think about the number of denominations that use our technology, that has grown by about 10-15 every year consistently for the last decade since introducing the technology. And we, we see that continuing. So as I mentioned earlier in the slides, we have about 150 denominations under management today, if you will, using our technology. But if you look at the universe of denominations, there's well over 1,000. So we are, you know, not penetrated fully by any extent into this market, and every time we see a central bank want a redesign, they're putting more technology onto the redesigned currency. That gives us the ability not only to win a new denomination, but to add more technology to it. So we see a very nice tailwind to that business. It's evident in our backlog, which is up about 80% quarter, you know, year-over-year, that we recently announced, and that gives us a lot of confidence in the future, too, that we just keep winning simply based on the fact we have the highest quality, best technology, and design integrated into what we supply to these central banks. We think that's a really winning combination that a lot of competitors can't keep up with. I think you mentioned technology a bunch of times in there. What exactly is the technology differentiation that you bring to bear relative to the competitive base, and how much new innovation happens? Is this more chunky cycles? Is it more iterative? Mm. How does that work? The core of our technology. You've heard me refer to it as micro-optics. So you can imagine that that is a materials technology that has very small micron-size particles of spheres that reflect back on your currency. That's what the technology actually is. It's impossible to reproduce. We're competing there against more basic hologram-type technology that's quite easy to counterfeit, and that's what gives us our advantage. And integrated, not just in the materials, is a software design process that helps a central bank or a luxury goods manufacturer or anyone who wants this type of technology on their label, to design in a look and feel to the imagery. So that's a real differentiator for us. To answer your question, we've produced an offshoot of that technology, constantly innovating a new iteration of it about every year. Recently this year, we launched RAPID HD, which is the next iteration of the technology, which adds machine readability. We also have now multiple colors that have come into the design. So it's a continuous process of adding and improving upon the base technology. How often does a typical customer then upgrade their content? That's a very good question. Depends on the central bank. If we're talking currency, it can be anywhere between 2-10 years. That depends on where you are in the world and the durability that they actually want out of their currency. In the case of the United States, we are starting a process to redesign each of the current denominations over the next 10 years. And this is public from the Department of Treasury, starting in 2026, every two years, the U.S. will provide a new updated bill. It'll start with the $10, it'll end 10 years from now with the new $100 bill. And you can imagine that a large part of that redesign is incorporating new security features into the U.S. currency. So we're working very closely with the U.S. Treasury on that redesign process. We see that as a, you know, very significant tailwind- Mm-hmm. in this business for the next decade. When you think about it from a... Oh, go ahead. Thanks. In China, for example, it's almost a cashless society. Mm-hmm. Okay. People in China- Yep. If central banks decide to progress and adopt digital currencies, what impact will that have? Well- So the question for those, if they couldn't hear it, was just what's the impact if central banks decide to adopt digital-only currencies? Right. I think that that is a disruptive threat, simply put, to, to the business. The question is, when would that occur and where? How quickly? We think that that will inevitably, at some point, have penetration into other markets, but it's a very long time from now. And, I think you can look at the investment the U.S. is making, which is a 10-year investment to redesign all of the currency, as a proof point that large central banks and, particularly, those in the U.S., Europe, and in more emerging markets, are gonna continue as at least as far as they can see, to continue to increase cash in circulation. It's probably a both, but yeah. What is your win rate, typically, when you compete with a project? Do you win 100% based on technology, or do they choose to change those regulations? Yeah, that- The question was on win rates in when they're bidding out for new content, new projects. You want to take that? Yeah, sure. Please. I mean, so generally, we win the contracts that we bid on, and there are several competitors, but we're very selective, right? So we're not bidding on every denomination that a country will put up for bid or central bank will put up for bid. Perhaps they're putting up different denominations, and we'll only bid on the higher value ones that have more technology, which is where we get the most margin. So if we're losing in that case, it was intentional. We're looking to specifically put our technology out into the world, and that generally is on the higher denomination bills. But our win rate is very strong, and as Aaron said, we have approximately 150 active denominations right now, and we win between, you know, roughly 10 and 15 new denominations each year. Your new public company, can you elaborate a little bit on the management incentive plan for the, I guess, the profit side and kind of what's the motivation for them to kind of a base? Sure. The question is just on the management incentive structures. Yeah, it's actually very straightforward. It's based on earnings, EPS, and free cash flow. Those are the two core metrics, and very traditional in terms of a base bonus structure that are incentivized on those two. And then obviously, longer-term grants that are more based on shareholder return relative to a peer group, which are traditional mid-cap, small-cap industrials. How big is the pool? The size of the equity pool, that's... In total, I don't have that off the top of my head. I'd have to get back to you on that. Yeah, just curious around the sustainability here. How often are the central banks visiting with providers to see if there's, you know, ways to that, or what is the contract like? The question is on essentially duration of contracts and what the competitive dynamics look like as far as how often frequently those come up to bid. Yeah. So I mean, it's a project-based business that you have to go out and bid on every few years. You know, potentially, a tender will come out, and we will bid on that. But it's a very sticky business. So once you get your technology embedded into a note, it's unlikely that they would make that change. So as they reprint and refresh their currencies, they're likely to go back to the same technology provider, and that's why winning for us has a very long tail then, because then when they do that next tender, in some cases, we're already specified as the technology in the note. Now, as I mentioned, there's other competitors in the market, and so in some cases, we're not providing the entire banknote, we're just providing the technology, and someone else is providing the substrate or paper that the note is printed on. So there can be different competitive entities, including Crane Currency, involved in any one note. It's not always exclusively our note. [audio distortion] Exactly right, and it's driven by this underlying need for anti-counterfeiting, right? Which is, which is very strong around the world. I would just add once, as Christina has said, once you're spec'd in, you can think about the position of a central bank. Intuitively, the switching cost is very high. Mm. Because the risk of counterfeiting your currency is, you know, as we'd say, there's a high leverage to the value we're providing for a security feature to the downside risk of actually having high denomination store of value type currency notes being counterfeited. So that switching cost is high, and that helps the moat around the business be very wide as well. Maybe switch gears and do some CPI dives. How do you think about the growth algorithm and the growth drivers of that segment specifically? I know you mentioned a chunk of different types of customer base. What drives the volume growth? What drives the adoption curve, and how does that sell process work? Yeah, in some ways that we actually alluded to it, Mike. I think you look at each of the underlying markets that we play in. That's a good way for us to kind of stratify the business. Mm. There are four main markets. There's financial services, so think of bank branches, but more so cash-in-transit type facilities- Mm-hmm ... where you're processing cash. That's a low single digit type growth, core volume business. Gaming, which is a very strong vertical for us, you know, think there about the end market are the casinos, and they're doing very well. All right, that's an end market that's doing well. They're refurbishing the casino floors, they're adding new technologies in, and they're also building the casinos worldwide. So we see that as a bit of a mid-single digit business. The next is retail. That's what's really driven by self-checkout technologies. So again, retail can be somewhat temperamental, depending on the consumer, but long term, the gotta believe is around automation and self-checkout as the primary technology. That's a mid-single digit business. And then vending is our last vertical. That's one that has had a structural change coming out of COVID. We've all probably experienced that in how we return to the office, and we interact in buildings like this. Mm-hmm. And in fact, this conference is a good example, where if you think about where vending plays in travel and tourism, it's back, in fact, back with gusto, and we're seeing, you know, good demand there. In school and education, that's back. That's where there's a lot of vending. In office and commercial properties, not so much. Mm. And so we think that's a structural change. That's a low single digit, flat to low single digit type growth business. That's how the markets play, and then to the last point we just talked about, that's volume. You add good pricing power onto that, long term, that's where we say again, this is a mid-single digit growth business. So basically track markets, and then- Absolutely ... you have a little bit of a kicker potentially on the retail based on the adoption curve. That's right. That's right. And our ability to execute price and add on- Mm-hmm ... via share of wallet after-market services, which is really where we're taking the business, building out our service fleet. We have 450 technicians across the United States today, the largest by far of any competitor, that services the installed base, as well as adding on connectivity services, like I mentioned, which are a more traditional SaaS type model. Makes sense. I don't mean to short shift the CPI piece. I do want to get a capital allocation question in, though. So how are you thinking about the optionality on the M&A side? You have a ton of firepower. You know, the bridge from today's revenue to five-year- Yeah ... out revenue clearly involves a lot of M&A. Yeah. Maybe just provide some thought process on what that means as far as the opportunity to expand, particularly on the Crane Currency side and what that might look like. CPI feels a little more at least directionally intuitive to me, so just help out on that- Yeah ... however you can. Maybe I'll just zoom out a second. Yeah, sure ... to talk about the company. You know, the company has been built off of M&A. We've done about 20 acquisitions to build Crane NXT. It's a muscle that has, you know, been exerted to get to where we are today, so that's not new for us, and I think we've been very disciplined in that process. To then kind of go off that point, in each of the two portfolios or two segments we have today, we see near adjacencies that we can add to. So when you think about currency, it's not so much currency per se, but it's taking this type of technology and moving into more product authentication, and track and trace type solutions, which are all around how you secure a product, detect it, and move it through the supply chain, whether that's for luxury goods or pharmaceuticals, and there are some very interesting targets in that space. And then to your point, when you think about the CPI business, that's more how do we grow with services, how do we add on connectivity and get an increasing recurring revenue portfolio? We feel very good about the funnel, but as we said when we launched the company, the first several quarters are about getting out of the gate, educating who we are, operating very well, and then M&A comes in 2024 as we delever further and have more M&A firepower. And so I'd say we're doing exactly what we said we were gonna do at the time of launch. Great. Well, thank you for your time. Please join me in thanking Aaron and Christina for the time. Thank you. Thank you. Thanks for joining, everybody.