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01/10 22:53
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Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
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.
Sales Sales were approximately $445 million, an increase of approximately 10% year-over-year, driven by the impact of acquisitions, favorable FX, and continued strong performance in currency.
Core Sales Core sales increased approximately 1%, reflecting accelerating growth in SAT, partially offset by expected softness in CPI.
Adjusted Segment Operating Profit Margin Adjusted segment operating profit margin of approximately 28% was up approximately 50 basis points year-over-year, driven by higher SAT volume and improved mix in currency.
Free Cash Flow Conversion Free cash flow conversion was approximately 115% in the quarter, and we continue to expect full year conversion to be in the range of approximately 90% to 110%.
Adjusted EPS Adjusted EPS of $1.28 was delivered.
CPI Sales Sales of approximately $216 million were down approximately 4% year-over-year as double-digit year-over-year growth in gaming was more than offset by declines in other short-cycle end markets, primarily vending, due to ongoing macroeconomic and tariff uncertainty.
CPI Adjusted Operating Margin Adjusted operating margin of approximately 31% was maintained, reflecting the benefits of cost reduction measures, pricing, and productivity.
SAT Sales Sales were approximately $229 million and grew approximately 28% year-over-year, including acquisitions. Core sales increased approximately 9% year-over-year, driven by higher volumes and favorable product mix in currency.
SAT Adjusted Operating Profit Margin Adjusted segment operating profit margin of approximately 24% increased by approximately 250 basis points year-over-year, reflecting the benefit of acquisitions and strong performance in currency.
New $10 bill: The redesign program for the new $10 bill is advancing as planned, with production scheduled for mid-2026 ahead of the expected public launch.
Micro-optics technology: Several existing customers are being upgraded from legacy De La Rue Authentication offerings to micro-optics technology, improving margins and customer stickiness.
International currency business: Growth continues to exceed expectations with several new customer wins, including a prominent country in Latin America. The total number of new denominations specifying micro-optics technology has reached 9 year-to-date, with a target of 10 to 15 for the full year.
Antares Vision acquisition: Crane NXT signed an agreement to acquire Antares Vision, a leader in detection, inspection, and track and trace technologies for life sciences and food & beverage sectors. This acquisition aligns NXT to markets with secular tailwinds and reduces exposure to cash-centric markets.
Free cash flow conversion: Achieved a conversion ratio of 115% in Q3, on track for a full-year target range of 90% to 110%.
Service business expansion: CPI's service business achieved two significant wins for kiosk installation and ongoing service, contributing to mid-single-digit ARR growth.
Portfolio diversification: With the acquisition of Antares Vision, the portfolio's focus on cash-related products and services will reduce to approximately 60%, down from 80% at the time of separation.
U.S. currency business growth: The Federal Reserve's 2026 print order indicates a significant increase in demand for higher denomination banknotes, expected to drive high single-digit growth in this segment.
Tariffs and macroeconomic uncertainties: The company continues to face headwinds related to ongoing macroeconomic uncertainties and tariffs, particularly impacting the CPI short-cycle businesses such as vending.
CPI short-cycle business softness: Declines in short-cycle end markets, primarily vending, are affecting the company's performance in the CPI segment.
Additional costs for international currency production: The company is incurring additional costs to increase international currency production to meet growing demand, which is impacting margins.
Regulatory approvals for Antares Vision acquisition: The acquisition of Antares Vision is subject to customary regulatory approvals, which could delay or complicate the transaction.
Integration of authentication business: The company is in the process of upgrading customers from legacy offerings to new micro-optics technology, which involves operational challenges and risks.
Exposure to cash-centric markets: Despite efforts to diversify, approximately 60% of the portfolio remains focused on cash-related products and services, which could be vulnerable to market shifts.
Vending market flat growth outlook: The vending market is expected to remain flat year-over-year, reflecting ongoing tariff impacts and demand challenges.
Full Year Sales Guidance: Raising full year sales guidance for SAT and NXT overall due to sustained momentum in international currency business and new customer wins.
U.S. Currency Business Growth: Federal Reserve's 2026 print order indicates significant increase in demand for higher denomination banknotes, expecting high single-digit growth in 2026.
New $10 Bill Launch: Production scheduled for mid-2026 ahead of expected public launch.
Antares Vision Acquisition: Acquisition to provide a leading position in the $2 billion life science and food and beverage track and trace and detection technologies market. First phase expected to close in December, with plans to take the company private after mandatory tender process.
2025 Adjusted EPS Guidance: Narrowed to a range of $4 to $4.10.
2026 SAT Core Growth: Mid-single-digit core growth expected, driven by favorable product mix in U.S. currency business and strong international currency performance.
2026 CPI Growth: Flat to low single-digit growth expected overall, with mid-single-digit growth in service and flat vending performance.
Authentication Business Growth: Mid-single-digit growth expected in 2026, benefiting from increased pricing discipline and cross-selling opportunities.
New $50 Bill Design: Significant progress made with Bureau of Engraving and Printing on design, scheduled for release in 2028.
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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