Crane Nxt, Co. · NYSE:CXT
Crane Nxt — Three Part Advisors East Coast Ideas Conference 2023
40 slides from Crane Nxt's conference presentation, Jun 22, 2023
Slide 1: East Coast Ideas Conference
EAST COAST IDEAS CONFERENCE JUNE 22, 2023 Aaron W. Saak President and CEO Christina Cristiano Senior Vice President and CFO
Slide 2: Forward-Looking Statements – Disclaimer
FORWARD-LOOKING STATEMENTS – DISCLAIMER This presentation contains forward-looking statements within the meaning of the federal securities laws. Forward-looking statements include all statements that are not historical statements of fact and those regarding Crane NXT, Co.’s (the “Company”) intent, b
Slide 3: Non-GAAP Explanation
NON-GAAP EXPLANATION This presentation contains non-GAAP financial measures. These non-GAAP financial measures are in addition to, and not as a substitute for or superior to, measures of financial performance prepared in accordance with U.S. GAAP. There are a number of limitations related to the use
Slide 4: Crane NXT – Focused on Compounding Value Creation
CRANE NXT – FOCUSED ON COMPOUNDING VALUE CREATION 5-YEAR GOALS • Leading provider of trusted technology solutions to secure, detect, and authenticate our customers’ most valuable assets ~$3B Sales • Durable, resilient business growing at ~MSD today • Best-in-class margins and free cash flow conversi
Slide 5: Built on Technology Leadership
BUILT ON TECHNOLOGY LEADERSHIP OUR FOUNDATION CRANE NXT TODAY • Advanced detection and sensing systems • Micro-optics materials technology • Self-learning image recognition with adaptive algorithms • Advanced substrate manufacturing Crane Paper Co. founded by Zenas Crane in 1801 in Dalton, MA Won ri
Slide 6: Culture Focused on Continuous Improvement
CULTURE FOCUSED ON CONTINUOUS IMPROVEMENT Crane Business System (CBS) KAIZENS ADJ. OPERATING PROFIT* • Rigorous, data-driven 175 management cadence 135 ~110% • Toolkit focused on ̶ Safety ̶ Quality ̶ Delivery ̶ Cost ̶ Growth • Commitment to continuous improvement 2020 2022 2020 2022 Best-in-class op
Slide 7: Crane NXT Provides Trusted Technology Solutions to Secure, Detect, and Authenticate
CRANE NXT PROVIDES TRUSTED TECHNOLOGY SOLUTIONS TO SECURE, DETECT, AND AUTHENTICATE WHAT MATTERS MOST Secure Detect Industry-leading materials technology to protect currency and high-value products Advanced detection systems and software to authenticate and manage transactions Authenticate $1.3B ~40
Slide 8: Broad Geographic Diversity and Resilient Customer Base
BROAD GEOGRAPHIC DIVERSITY AND RESILIENT CUSTOMER BASE SALES BY SEGMENT SALES BY GEOGRAPHY SALES BY CUSTOMER TENURE* ROW <10 Years 100+ Years Emerging 7% Markets 21% 17% 29% 10-20 Years 11% 14% 62% 65% Western Europe North 39% America 20–50 Years ~70% of customers have been with the business more th
Slide 9: Significant Global Scale
SIGNIFICANT GLOBAL SCALE 60+ Countries with Active Sales 4,000+ Employees 15 Global Manufacturing Sites Active Sales Manufacturing Site 10 R&D Facility Major R&D Facilities Ability to leverage footprint for growth and drive operational efficiencies 9
Slide 10: Resilient Core Growth, Accelerated by M&A
RESILIENT CORE GROWTH, ACCELERATED BY M&A $ Millions $1,400 VENZ Sanctions $1,200 COVID $1,000 $800 $600 $400 $200 $0 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 Proven ability to drive growth through multiple cycles 10
Slide 11: History of Improving Profitability in the Core Business and Acquisitions
HISTORY OF IMPROVING PROFITABILITY IN THE CORE BUSINESS AND ACQUISITIONS $400 28% 30% 26% $376 $350 Adjusted Operating Profit* ($ Millions) 24% 25% Adjusted Operating Margin* (%) 21% 21% $300 $342 20% 16% 19% 20% $250 17% $261 $200 $225 15% 13% 12% $184 $181 $150 10% 8% $159 10% $132 $100 $122 5% $5
Slide 12: Multiple Secular Growth Trends Provide Tailwinds to Core Business Growth
MULTIPLE SECULAR GROWTH TRENDS PROVIDE TAILWINDS TO CORE BUSINESS GROWTH GROWTH OF CASH CONTINUED OPERATORS’ FOCUS ON INCREASING SPEND IN CIRCULATION LABOR SCARCITY MARGIN IMPROVEMENTS ON LOSS PREVENTION ~3% ~40% ~11% ~22% growth in banknotes increase in expected CAGR % Growth through 2026 in circul
Slide 13: $28B Addressable Market Growing at MSD+
$28B ADDRESSABLE MARKET GROWING AT MSD+ CURRENCY TECHNOLOGY, DESIGN AND COIN AND CASH DETECTION AND ADJACENT MARKETS PRINTING AUTOMATION SOLUTIONS & SERVICES ~$3B Addressable Market ~$4B Addressable Market ~$20B Addressable Market ~MSD Growth ~MSD Growth ~MSD to LDD Growth ~25% Authenticate ~15% 25%
Slide 14: Crane Currency
CRANE CURRENCY
Slide 15: Crane Currency Overview
CRANE CURRENCY OVERVIEW US CURRENCY INTL CURRENCY PRODUCT AUTHENTICATION ~$460M ~28% 2022 Sales 2022 Adj. Margin* • Sole supplier of US currency paper • Currency design, security technology, • Leverages micro- optic technology ~15% Sales CAGR >150 Years since 1879 paper and banknotes • Established c
Slide 16: Market-Leading Technology Providing Unparalleled Anti-Counterfeit Protection
MARKET-LEADING TECHNOLOGY PROVIDING UNPARALLELED ANTI-COUNTERFEIT PROTECTION Microscopic printed “icons” that are magnified by the lens array 140 microns Cross section of human hair (for reference) Differentiated solutions used by over 50 countries to protect currency 16
Slide 17: Proprietary Technology and Capabilities That Complement Micro-Optics Technology
PROPRIETARY TECHNOLOGY AND CAPABILITIES THAT COMPLEMENT MICRO-OPTICS TECHNOLOGY DESIGN SERVICES SECURITY PAPER SECURITY TECHNOLOGY BANKNOTE PRINTING Combination of capabilities provides competitive differentiation 17
Slide 18: Growing ~$3B Addressable Market as Cash in Circulation Continues to Increase
GROWING ~$3B ADDRESSABLE MARKET AS CASH IN CIRCULATION CONTINUES TO INCREASE BILLIONS OF BANKNOTES IN CIRCULATION* • Market driven by several factors: ~6% 321 • Global uncertainty and natural 304 CAGR disasters reaffirm need for cash 278 265 254 243 226 • Inflation driving increased demand for 212 1
Slide 19: Track Record of Long-Term Growth
TRACK RECORD OF LONG-TERM GROWTH ~MSD+ Crane Currency sales ($ millions) • U.S. Gov new series • Int’l expansion • Product authentication 700 U.S. Revenue International Revenue 600 500 ~9% CAGR (2002-2022) 400 300 200 100 0 Continued growth expected driven by market tailwinds and new products 19
Slide 20: Crane Payment Innovations Overview
CRANE PAYMENT INNOVATIONS OVERVIEW
Slide 21: Crane Payment Innovations Overview
CRANE PAYMENT INNOVATIONS OVERVIEW COMPONENTS SYSTEMS AFTERMARKET CONNECTIVITY SERVICES SOLUTIONS ~$870M ~28% 2022 Sales 2022 Adj. Margin* ~MSD #1 Provider core sales growth in all key markets Currency, coin and Self-service retail Authorized service Software solutions credit card technologies, for
Slide 22: Leading Technology Solutions for Detection and Authentication of Payment Transactions
LEADING TECHNOLOGY SOLUTIONS FOR DETECTION AND AUTHENTICATION OF PAYMENT TRANSACTIONS DETECTION ADVANCED IMAGE INTEGRATION AND DETECTION TECHNOLOGIES RECOGNITION ASSEMBLY COMPONENTS SOFTWARE Infrared Capacitive Ultraviolet Optical Magnetic Multi Freq. + + Multiple detecting and Over 5 million data p
Slide 23: Diverse Set of Leading Global Customers Across Multiple End Markets
DIVERSE SET OF LEADING GLOBAL CUSTOMERS ACROSS MULTIPLE END MARKETS CUSTOMER BY KEY CUSTOMERS AVERAGE TENURE OF SEGMENT TOP 20 CUSTOMERS IS 28 YEARS Other Transportation Financial 6% Vending NO ONE CUSTOMER’S Services 1% 30% REVENUE IS MORE THAN 18% 5% OF TOTAL CPI REVENUE 20% RELATIONSHIPS WITH Ret
Slide 24: $4B Addressable Market Growing ~MSD
$4B ADDRESSABLE MARKET GROWING ~MSD 5-Year CPI Mkt. ~$4.7B CAGR% Position Macro-trends impacting growth of CPI business ~$4B ~5% #1 • Resilient use of cash for Services payment transactions ~4% #2 Systems • Continued labor shortages Components ~4% #1 • Increased focus on operator productivity 2022 2
Slide 25: Demonstrated Track Record of Margin Expansion Across Multiple Cycles
DEMONSTRATED TRACK RECORD OF MARGIN EXPANSION ACROSS MULTIPLE CYCLES CPI adjusted operating margin* 29% 28% 23% 24% 23% 23% 21% 19% 17% 17% 12% 13% 10% 8.4% 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023G COVID Continued opportunities for expansion with application of CBS 25 *
Slide 26: Value Creation Opportunity
CRANE N><T VALUE CREATION OPPORTUNITY
Slide 27: Crane NXT Provides Trusted Technology Solutions to Secure, Detect, and Authenticate
CRANE NXT PROVIDES TRUSTED TECHNOLOGY SOLUTIONS TO SECURE, DETECT, AND AUTHENTICATE WHAT MATTERS MOST Secure Detect Industry-leading materials technology to protect currency and high-value products Advanced detection systems and software to authenticate and manage transactions Authenticate $1.3B ~40
Slide 28: Adjacencies Leverage Similar Technologies & Capabilities
ADJACENCIES LEVERAGE SIMILAR TECHNOLOGIES & CAPABILITIES Secure & Detect Software & hardware for face, fingerprint, palm, and iris recognition Secure & Authenticate Detect & Authenticate Overt and covert authentication & Hardware and software systems security technology for physical used to improve
Slide 29: Proven M&A Framework
PROVEN M&A FRAMEWORK Where we start… Focused on technology solutions that secure, detect, and authenticate what matters most Market • Niche technologies with high barriers to entry • Fragmented market segment with consolidation opportunities • Market growth of >MSD Leading position in their market n
Slide 30: Long Track Record of Successful M&A to Expand the Portfolio
LONG TRACK RECORD OF SUCCESSFUL M&A TO EXPAND THE PORTFOLIO INTO GROWING ADJACENT MARKETS ~$2B TAM ~$7B TAM Programmatic M&A Detection Components and Systems Pre-2010 Acquisitions Currency and Authentication Technology (2010) Aftermarket Services (2018) (2013) (2020) (2013) (2017) Separation provide
Slide 31: Disciplined Capital Allocation Strategy
DISCIPLINED CAPITAL ALLOCATION STRATEGY Organic Investment Cash Available to Deploy • Expect core business growth of ~MSD (2023-2027) • ~2% to ~2.5% CapEx as percent of sales • Focused on new product development and added capacity for Cumulative US Gov and micro-optics technology Operating $1.6B Deb
Slide 32: Crane NXT Value Creation Formula
CRANE NXT VALUE CREATION FORMULA Resilient core revenue growth at • Investing in core business to ~MSD capitalize on opportunities to enhance organic growth • Continuously utilizing CBS to improve M&A to Expand to CBS to drive Strong FCF margins and generate high FCF Higher-Growth continuous convers
Slide 33: 5-Year Roadmap
5-YEAR ROADMAP 2023 CONTINUE TO DRIVE DISCIPLINED 5-YEAR TARGET INVEST AND OPERATIONAL M&A TO ~$1.3B GROW CORE EXCELLENCE DIVERSIFY ~$3B Sales BUSINESS THROUGH CBS PORTFOLIO Sales ~MSD U.S. Government Productivity to drive Focus on MSD+ Core Growth new series margin expansion technologies that Core
Slide 34: Crane NXT – Focused on Compounding Value Creation
CRANE NXT – FOCUSED ON COMPOUNDING VALUE CREATION 5-YEAR GOALS • Leading provider of trusted technology solutions to secure, detect, and authenticate our customers’ most valuable assets ~$3B Sales • Durable, resilient business growing at ~MSD today • Best-in-class margins and free cash flow conversi
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Slide 36: Non-GAAP Explanation
NON-GAAP EXPLANATION Crane NXT, Co. reports its financial results in accordance with U.S. generally accepted accounting principles (“GAAP”). This presentation includes certain non-GAAP financial measures, including Adjusted Net Sales, Adjusted Operating Profit, Adjusted Operating Margin, Adjusted Ne
Slide 37: Segment Information
SEGMENT INFORMATION (in $ Millions) 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 1Q20 2Q20 3Q20 4Q20 2020 1Q21 2Q21 3Q21 4Q21 2021 1Q22 2Q22 3Q22 4Q22 2022 Crane Currency Net Sales 458 353 94 107 116 118 434 152 131 160 96 539 122 123 114 107 466 Operating Profit 31 2 4 11 19 15 49 55 40 41 8 1
Slide 38: Non-GAAP Reconciliations
NON-GAAP RECONCILIATIONS (in $ millions) 2018 2019 2020 2021 2022 Net Sales $ 1,257.0 $ 1,158.3 $ 1,104.8 $ 1,345.1 $ 1,339.9 Acquisition-related deferred revenue 10.2 Net Sales before special items (adjusted) $ 1,257.0 $ 1,158.3 $ 1,115.0 $ 1,345.1 $ 1,339.9 Operating Profit (GAAP) $ 186.0 $ 177.3
Slide 39: Non-GAAP Reconciliations
NON-GAAP RECONCILIATIONS (in $ millions) 2018 2019 2020 2021 2022 Net Income as reported $ 157.1 $ 118.1 $ 106.8 $ 226.2 $ 269.9 Adjustments: Intangible asset amortization 40.6 37.7 44.0 38.6 37.1 Interest and other Corporate cost, net of tax (39.9) (39.5) (39.8) (41.1) (39.7) Interest expense, net
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