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01/10 22:52
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Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
The earnings call highlights strong financial performance with record high backlog, strategic acquisitions, and new contracts, indicating robust demand and growth potential. The Q&A section reveals confidence in future growth, particularly in the gaming vertical and international currency, despite some headwinds in other areas. The unchanged SAT guidance despite a strong quarter suggests cautious optimism. The focus on M&A and margin improvements further supports a positive outlook. Given the market cap, the stock is likely to experience a moderate positive movement in the short term.
Sales Growth Sales growth of approximately 9% year-over-year, driven by acquisitions and strong performance in international currency.
Adjusted EPS Adjusted EPS of $0.97, reflecting strong execution and operational discipline.
Free Cash Flow Conversion Achieved 120% free cash flow conversion in the quarter, reflecting continued operating discipline.
Core Sales (CPI Segment) Core sales declined approximately 1% year-over-year, reflecting the anticipated lower volume in CPI.
Adjusted Segment Operating Profit Margin Adjusted segment operating profit margin of approximately 24%, down approximately 350 basis points year-over-year, driven by lower CPI volume and the expected impact of dilution from acquisitions.
CPI Core Sales Core sales were down approximately 7% year-over-year, outperforming expectations driven by timing of shipments.
CPI Adjusted Operating Margin Adjusted operating margin decreased approximately 300 basis points year-over-year, reflecting the lower volume and unfavorable product mix, partially offset by productivity gains.
CPI Backlog CPI ended the quarter with a backlog of approximately $144 million, with gaming orders up approximately 30% year-over-year.
Security and Authentication Technologies Sales Sales grew approximately 32% year-over-year, including acquisitions. Core sales increased approximately 9% year-over-year driven by higher international currency volumes.
International Currency Business Backlog Achieved a new record high backlog of approximately $400 million in the second quarter.
Adjusted Operating Margin (Security and Authentication Technologies) Adjusted operating margin of approximately 21%, reflecting acquisition dilution as expected.
Net Leverage Net leverage at the end of the second quarter was approximately 2.6x, reflecting the term loan used to fund the De La Rue Authentication acquisition.
Fortress: An advanced proprietary security feature for real-time product authentication and tracing the origin to the point of manufacturing. Introduced to a major customer with a strong pipeline for additional applications.
JetScan Ultra: A high-speed currency scanner with counterfeit detection for banking, gaming, and retail markets.
De La Rue Authentication acquisition: Integrated with OpSec to form Crane Authentication, creating a leading position in the authentication market. Focused on brand authentication, government solutions, and identification security.
International currency business: Achieved a record high backlog of approximately $400 million in Q2, with mid-single-digit growth expected for the full year.
Operational synergies: Accelerated realization of synergies from the De La Rue acquisition, leading to expected operating profit margins of approximately 20% by the end of 2026.
Free cash flow conversion: Achieved 120% free cash flow conversion in Q2, with full-year conversion expected to range between 90% and 110%.
M&A activity: Strong pipeline with confidence in announcing another transaction within the next year.
U.S. currency redesign program: On track for a 2026 launch, supported by completed technology upgrades.
Tariff and macroeconomic uncertainties: The company is navigating tariff and macroeconomic uncertainties, which could impact pricing and supply chain operations. Mitigation efforts are in place, but these factors remain a risk.
Lower CPI volume and unfavorable product mix: Core sales in the CPI segment declined approximately 7% year-over-year, driven by lower volume and unfavorable product mix, which negatively impacted operating margins.
Dilution from acquisitions: The integration of acquisitions, such as De La Rue Authentication, has led to expected dilution in operating margins, which could affect profitability in the short term.
Dependence on gaming sales growth: The company is relying on strong gaming sales growth to improve product mix and margins in the second half of the year, which introduces risk if gaming sales do not meet expectations.
High leverage post-acquisition: Net leverage increased to approximately 2.6x due to the term loan used for the De La Rue Authentication acquisition, which could limit financial flexibility until leverage is reduced.
Currency business backlog dependency: The international currency business achieved a record high backlog, but the company’s performance is heavily dependent on this backlog, which could pose a risk if there are delays or cancellations.
Full Year EPS Guidance: Reaffirmed full year EPS guidance in the range of $4 to $4.30.
CPI Full Year Operating Margin: Expected to be between 29% and 30%, driven by improved product mix from gaming sales growth, productivity programs, and disciplined cost management.
Gaming Sales Growth: Strong double-digit growth expected in the third quarter, with gaming orders up approximately 30% year-over-year.
International Currency Business Backlog: Achieved a record high backlog of approximately $400 million in Q2, providing confidence in full year sales outlook and strong momentum heading into 2026.
U.S. Currency Redesign Program: On track for a 2026 launch, following successful technology upgrades.
SAT Sales Growth: Expected to be between 19% and 21% for the full year, including $80 million to $90 million of De La Rue sales in 2025.
Net Leverage: Expected to end the year at approximately 2x, providing flexibility for additional M&A.
Operating Profit Margins for Crane Authentication: Anticipated to reach approximately 20% by the end of 2026, ahead of original expectations, due to accelerated realization of operating synergies.
The selected topic was not discussed during the call.
The earnings call indicates strong performance in gaming and SAT sales, with growth and improved margins. The company maintains a positive outlook with a strong backlog in international currency and plans for U.S. currency redesigns. While there are concerns in vending and unclear guidance on some fronts, the overall sentiment is positive due to optimistic guidance, strong financial metrics, and strategic acquisitions. The market cap suggests a moderate reaction, leading to a positive stock price movement prediction.
The earnings call highlights strong financial performance with record high backlog, strategic acquisitions, and new contracts, indicating robust demand and growth potential. The Q&A section reveals confidence in future growth, particularly in the gaming vertical and international currency, despite some headwinds in other areas. The unchanged SAT guidance despite a strong quarter suggests cautious optimism. The focus on M&A and margin improvements further supports a positive outlook. Given the market cap, the stock is likely to experience a moderate positive movement in the short term.
The earnings call presents mixed signals: moderate sales growth and strong backlog are positive, but declines in core sales and adjusted margins are concerning. The Q&A reveals uncertainties about tariffs and specific growth rates, which tempers optimism. The stock's market cap suggests a moderate reaction, aligning with a neutral rating.
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