Crane Company

Welcome to the Crane Company first quarter 2025 earnings conference call. At this time, all participants have been placed on a listen-only mode, and the floor will be open for your questions following the presentation. If you would like to ask a question at that time, please press star 1 on your telephone keypad. If at any point your question has been answered, you may remove yourself from the queue by pressing star 2. So others can hear your questions clearly, we ask that you pick up your headset for best sound quality. Lastly, if you should require operator assistance, please press star zero. I would now like to turn the conference over to Alison Poliniak, Vice President of Investor Relations.

Thank you, operator, and good day, everyone. Welcome to our first quarter 2025 earnings release conference call. I am Alison Poliniak, Vice President of Investor Relations. On our call this morning, we have Max Mitchell, our Chairman, President, and Chief Executive Officer, Alex Alcala, Executive Vice President and Chief Operating Officer, and Rich Maui, our Executive Vice President and Chief Financial Officer, along with Jason Feldman, Senior Vice President, Treasury, Tax, and Investor Relations, who is on for Q&A. We will start off our call with a few prepared remarks from Max, Alex, and Rich, after which we will respond to your questions. And just a reminder, the comments we make on this call will 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. Also 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 side presentation, both of which are available on our website at www.craneco.com in the Investor Relations section. Now, let me turn the call over to Max.

Thank you, Allison, and thanks, everyone, for joining the call today. May you live in interesting times. The origins of the phrase are unknown, but we've all heard it used as a Sarcastic euphemism for times of challenge and uncertainty. Some think it's intended more as a curse, but either way, it's times like these that we prepare for at Crane. As a leader of a global diversified manufacturer and for my entire team, what a fantastic time for us to continue to hone our strategic thinking, processes for reacting to fast-changing events, and our ability to execute in an environment that's in constant flux. and an experience the whole team embraces and relishes in this environment as we continue to have the opportunity to grow through adversity. There are many potential scenarios for how the current dislocation progresses over the course of 2025 and beyond. What's common across those scenarios is my strong belief that Crane will emerge in an even stronger competitive position than when we entered this year. and off to a very strong start to 2025. Adjusted EPS was $1.39, driven by an impressive 7.5% core sales growth, reflecting strength across both aerospace electronics and process flow technologies. Core orders were also solid, up 16% in the quarter, driven primarily by the ongoing strength in our aerospace electronics business and with process flow technologies also ahead of our expectations. As we exited 2024, We had a very positive outlook for 2025, given the expectation of executing successfully on our strategy and growth initiatives, along with favorable macroeconomic outlook. As the quarter progressed, we gained confidence in a path to exceed the guidance we provided in January. However, given recent economic developments, policy decisions outside of our control, the balance of the year is likely to unfold differently than we had anticipated. Despite that uncertainty, Based on the current inflationary pressures and demand and supply chain environment that we see today, along with our best analysis of the risks and opportunities ahead of the year for us, we are comfortable, comfortable reaffirming our full year 2025 adjusted EPS outlook in the range of $5.30 to $5.60. Our outlook reflects our views based on current economic conditions, And we will, of course, adjust that outlook if needed based on any updates or changes to trade policy or any incremental changes in the demand environment. The assumptions underlying this guidance range are based on the current conditions known and faced today, including tariffs, continuing throughout the balance of the year. If you believe the situation will improve faster, there is upside to the midpoint of our range. At this point, based on what we know, we believe that we can still achieve the low end of our guidance range with a modest deterioration in demand or slight worsening of the trade environment. While factors outside our control are dynamic, Crane remains extremely well positioned to outgrow our markets and deliver above market returns in the long run. And we are confident in our strategic direction and our execution capabilities. We last met with many of you in early March for an off-site investor day at our Fort Walton Beach Florida Defense Power Facility. That site delivers the most advanced high-power conversion technologies with industry-leading size, weight, and performance capabilities for defense applications, including ground-based AESA radars and more electric tactical military vehicles, among other applications. That business is winning every day with an 11% sales tagger expected for the decade from 2021 through During that visit, you heard and saw the power of the machine that Crane has built into our holistic business system, focused on strategic execution and innovation to support our customers, along with a rigorous cadence and discipline of delivering on results that touches every aspect of the business, from our intellectual capital processes to commercial excellence and operational continuous improvement, which you all saw firsthand. And our results in the quarter reflect what we conveyed. In addition, we described in detail a deeper understanding of our business system in the context of new acquisitions and how we add value to businesses we acquire and our very active and detailed integration process. And we are actively working on opportunities today. We have not slowed down in any way in the present environment. The strength of our underlying business, our strategy, and our capabilities in both operational execution and commercial excellence, coupled with an extremely strong balance sheet, positions us extremely well to continue driving above market growth, both organically and through acquisitions. I want to thank all of you for going out of your way to visit with us in Florida, and our team enjoyed welcoming you to the machine of being Crane, and hopefully encouraging some of you to listen to some classic Pink Floyd. Now, let me pass it over to our Chief Operating Officer, Mr. Alex Alcala, to provide some color on the current environment.

Thanks, Max. Yes, our teams are having great fun. But I must admit, I wish we could enjoy a few moments of boring and repetitive. Before I get into the segments, let me provide some insights into our tariff exposure. Overall, about 7% to 8% of our cost of goods sold consists of materials and components that are directly imported into the United States. Another 3% to 4% of cost of goods sold are intercompany sales into the United States, a portion of which is exempt from tariffs. Our direct imports into the United States are skewed somewhat towards process flow technologies, with aerospace and electronics relying more heavily on a U.S. supply base. For process flow technologies, the largest exposure is China, where we procure bio valves, pumps, castings, and motors. However, our total China exposure is well below 3% of Crane's total cost of goods. The other notable exposures for PST are India, primarily related to castings, and Thailand, primarily for machine parts. Neither of those exposures reaches 1% of Crane's total cost of sales. At Aerospace and Electronics, the primary source of imports is Malaysian, largely related to printed circuit boards and only 1% to 2% of total cost of sales for Crane overall. While much smaller, AME does also import wire harnesses, machine parts, and power sources from a number of countries none of which is particularly material. We expect to offset the majority of the potential tariff impact through price and productivity. We have demonstrated consistently differentiated execution through cycles with this leadership team. The cadence and discipline of the Crane business system, our machine, along with our performance-based culture, are even more valuable in times like these. as they enable us to make data-driven decisions quickly with flexibility to adapt as conditions change and with accountability. We will manage through this dislocation and expect to emerge even stronger. Now some thoughts on the segments. Starting with aerospace and electronics, there is no material change in end market conditions relative to our prior expectations. aerospace remains a very strong demand environment. On the commercial side of the business, activity remains healthy with Boeing continuing to ramp up production and aftermarket activity continuing at elevated levels. On the defense side, we continue to see solid procurement spending and a continued focus on reinforcing the broader defense industrial base given heightened global uncertainties today. Looking ahead to the balance of 2025, we continue to anticipate core sales growth for the year to be up mid to high single digits, with that growth leveraging at 35 to 40%. That guidance assumes continued strong sales with the ramp up of Boeing offset by decelerating year-over-year growth rates in commercial aftermarket that we have previously highlighted as the comparisons become more challenging. Pointing out that this is our 16th quarter of double-digit commercial aftermarket growth that, as we talked about when we last reported, will naturally moderate over time. We continue to see above-cycle growth for this segment for the remainder of this decade. We also continue to pursue new opportunities and win new business across the segment. In the quarter, we want additional new content on the XM30 optionally manned fighting vehicle demonstrator program with our defense power solution. As we have discussed in the past, we are very well positioned, regardless of which of the defense primes is awarded the program, and we are further improving our position. In our sensing and power systems business, We were recently awarded contracts and funded engineering development work on the Bell V-280, Doge Speed 328 Echo, and an unmanned aviation platform, all great programs where we see significant growth over the next decade. While still early in the development process, we remain actively engaged with engineering teams and our key customers on the technical architecture for the next-generation single-aisle aircraft to ensure that our technology roadmaps and development plans are aligned with our customer needs. And really impressive performance by our landing solution team that completed flight test hardware for a leading unmanned fighter aircraft program. in a record six-month timeframe. It's unprecedented for an anti-skid brake system to be developed that quickly, positioning us well for future opportunities. A perfect example of the machine at work in engineering. Outstanding work by our team. Very confident for yet another outstanding year at aerospace and electronics. At Process Flow Technologies, We remain well-positioned to outgrow our markets across cycles. We have systematically repositioned our portfolio around our core end markets, including chemical, pharmaceuticals, water and wastewater, cryogenics, and industrial automation. These are higher growth end markets, and these are the markets where we have the strongest competitive position and the most differentiation, enabling sustainable market outlook. We remain focused on investing for growth over the long term with continued execution against our multi-year technology and new product development roadmap, as well as commercial excellence initiatives, all enabled by a consistent operational execution. Tactically, we have proven our ability to react to any changes in demand quickly, and we will remain nimble during this period, taking any necessary and appropriate price cost measures. However, our strategy is on change, and we will manage through any potential demand fluctuations without losing focus on longer-term goals and objectives. Looking ahead to the balance of 2025, given our line of sight today, we still anticipate positive core growth goals for the year. A few notable wins in the quarter included significant customer approval for one of our new Saunders pharmaceutical valves with a key target customer. This approval was a critical step for the business, and we continue to drive share gains with new product development, and we are seeing great progress. We were awarded a $5.7 million project for line pipes and line valves for a Saudi Arabian mining company that is working to develop a third complex in Saudi Arabia for fertilizer production capacity. Our localized site was key to secure this order. We continue to build out our capabilities in cryogenic space, including both the CryoWorks TechniFab acquisition from last year, which are now working closely with our organic initiatives to expand our portfolio of cryogenic valves and vacuum jacketed pipes. Our combined platform is continuing to grow at a strong pace. And in the quarter, we had some significant wins. particularly space launch customers. So our businesses remain well-positioned to continue to deliver great results. We still expect to significantly add to those results with acquisitions. We have a very strong balance sheet today with at least 1.5 billion of M&A capacity. We also have a robust pipeline of potential acquisitions. M&A activity has not slowed down at all. The deals we are working on today include a number of opportunities in both aerospace and electronics, as well as process flow technologies. And they range from the small sub-100 million deals, like those we completed last year, to many times that size. We mentioned our rigorous process, the machine for acquisition integration and creating value from any business. We have just as robust a process for M&A opportunity identification and due diligence, and I'm optimistic about our prospects of deploying capital this year on some great opportunities. I also wanted to share some takeaways from our recent annual Senior Leadership Conference. About 200 of Crane's most senior associates spend three days at GE's old Crotonville training facility to share best practices and to keep our global teams around the world connected. Three days to focus on reinforcing the machine that delivers results at Crane. I remember my first senior leadership meeting shortly after I joined Crane in 2013. A great few days, but heavily focused on operational execution only. which was needed, and the focus in those days. We were very good then, but so much better today. Last month, however, the focus was everything we were doing to drive growth and commercial execution. Sharing the best practice examples across crane, our long-term technology and product world maps, commercial excellence tools, simplification initiatives, and strategic pricing. It was followed by training on new enhancement to our process for strategy development, led by Shangaza Besant, who joined Crane last year to lead our process flow technology segment. A powerful few days, and I'm incredibly proud of our teams around the world who have made so much progress and have the momentum to continue to do so. Taking all this together, just a lot of really exciting initiatives at Crane. It all reinforces our confidence that regardless of the current environment, over the long term, we will deliver a 4 to 6 percent long-term core sales growth rate through cycles from resilient and durable businesses with solid aftermarket. Substantial operating leverage on top of already solid margins today. That should lead to double-digit average annual core profit growth with potential upsides from capital deployment. And with virtually no net debt, a capital deployment opportunity is significant. Now let me turn the call over to our CFO, Mr. Rich Maui, for more specifics on the quarter.

Thank you, Alex, and good morning, everyone. Starting off with total company results. We drove 7.5% core sales growth in the quarter with strength across both segments. Adjusted operating profit increased 18 percent, driven by volumes, solid net price, and productivity. In the quarter, core FX neutral backlog was up 12 percent compared to last year, driven by outsized strength at aerospace and electronics, and core orders were up 16 percent compared to last year as well, also driven by aerospace and electronics, but also modest growth in process flow technologies that was a bit ahead of our expectations. Further, we are in a net cash position and have more than $1.5 billion in debt capacity today for M&A. A few more details on the segments in the quarter. Starting with aerospace and electronics, sales of $249 million increased 10 percent in the quarter, with all of that growth organic. And even with the continued high level of sales growth, notably our record backlog of $960 million increased even further, of 21 percent year-over-year and up 11 percent sequentially. Total aftermarket sales increased 20 percent, with commercial aftermarket sales up 19 percent and military aftermarket up 24 percent. And OEM sales increased 6 percent in the quarter, with 10 percent growth in commercial and up 1 percent in military. Adjusted segment margin of 26%, a record high for the segment. Increased 360 basis points from 22.4% last year, primarily reflecting higher volumes, price net of inflation, and productivity. At Process Flow Technologies, in the quarter, we delivered sales of $309 million, up 9%, driven by solid core sales growth of 5% in the quarter, along with a 5 percent benefit from the CryoWorks and Technifab acquisitions, offset by a point of unfavorable foreign exchange. Compared to the prior year, core FX-neutral backlog decreased 6 percent, and core FX-neutral orders were up 2 percent, both impacted by project timing. You might recall the notable project wins we highlighted in Q1 of last year. And on a sequential basis, core FX-neutral orders were up 10 percent compared to the fourth quarter. Adjusted operating margin of 20.9 percent, expanded 10 basis points. Importantly, core operating leverage was 35 percent at the high end of our 30 to 35 percent targeted range. As you all know, leverage is always impacted, in particular in the first year of an acquisition, which was the case in this quarter. The strong overall performance was driven by productivity, strong net price, and the higher volumes. Below the segments, some of you may have also noticed that adjusted corporate expense was about $25 million in the quarter, which is higher than the quarterly average you would expect. This is related to accounting rules that require accelerated amortization of stock compensation expense for associates that are retirement eligible. So stock compensation expense will be much higher in the first half and lower in the second half. We still expect $80 million of corporate costs for the full year. Hey, all of the comments on today's call regarding the uncertain environment ahead reminded me of a quote from the classic and timeless romantic drama, Dodgeball, when a great character, Patches O'Houlihan, played by the late Rip Torn, was preparing the team in practice and said, if you can dodge a wrench, you can dodge a ball. There have certainly been a few wrenches thrown around to start the year, and our team is doing an outstanding job dodging them so far. I personally only have a couple of lumps. And with that, operator, we are now ready to take our first question.

Thank you. The floor is now open for questions. At this time, if you have a question or comment, please press star 1 on your telephone keypad. If at any point your question is answered, you may remove yourself from the queue by pressing star 2. Again, we ask that you please pick up your handset when posing your questions to provide optimal sound quality. Thank you. Our first question will come from Damian Carrasque with UBS. Your line is open.

Good morning, Damian. Hey, good morning. Hey, good morning, Max. Hey, Rich. Hope you can dodge these wrenches about to come your way. Thanks, Damian. Yeah, no, I appreciate all the details around your main tariff exposures. Maybe you could just give us a little bit more clarity on the updated guidance. To what extent is, you know, price contributing to your sales guide at this point? And just, you know, kind of considering the strength of the first quarter orders and that uptick in backlog, is it fair to assume that that's longer lead time backlog that's really more, you know, 2026 and beyond?

Yeah, so, Damian, just to maybe hit your first question first on price, yeah, we would expect to see somewhere in the vicinity of about 3% overall, more heavily weighted to PFT for sure, you know, perhaps a little bit higher in the PFT segment, a little lower in A&E. So, just overall, that's what we would expect for us to offset, you know, the majority or most of the tariff impact. As it relates to backlog, You know, maybe just a little bit of color to provide there. You know, certainly aerospace and electronics was significant overall in the quarter and the growth in the backlog. Fairly broad-based, you know, maybe some color. Aftermarket continues to be fairly strong, as you saw. Alex mentioned also the comps in the latter part of the year. But, you know, aged fleet continues to be a dynamic or signature in the market space. Retirement's not happening at the – levels that would cause you to believe a significant decline in aftermarket. So we feel good about the build that's happened in aftermarket. And then on OE, it was really a combination of both commercial and defense from an orders point of view. On commercial, obviously, the build rates are continuing and widespread there as well, right, between Boeing, Airbus, and Comac, frankly, in the quarter. Defense, to your point a little bit, there's some multi-year orders in there too, so that gives us even further confidence in 2026 already. So a few multi-year orders that contributed to the strength in the quarter.

But in terms of the guide, in relation to the guide and the strength of the backlog, yes, it's related to the length of those orders that's reading through beyond 25. Right, Rich?

Yep. Okay, got it. That makes total sense. And then, you know, follow up some of those comments on defense. I mean, within A&E, you know, if you look at some of the details of the $150 billion defense package that's in reconciliation, you know, are there any items that kind of stand out to you as, you know, crane programs or growth drivers in the future?

Yeah, I would say just overall, you know, we have such a broad exposure, Damian, across defense platforms, whether it's fixed wing, you know, even rotary. You know, we saw some nice aftermarket demand on rotary actually in the quarter, the CH-47 on aftermarket. But overall, from a spend point of view, whether it's munitions or aircraft or radar applications, as you know, where we have a particular strength, we feel really good about The approvals and where we see spend being allocated as we look forward into 26.

Some of those themes, as Rich was just mentioning, I would call out munitions replenishment, unfortunately, in this global environment. Aging military upgrades, that's a key theme. I would say electrification is another key theme for the future, which we highlighted at Investor Day also. So those are some of the major thematic drivers that we continue to see. Thanks again.

Good luck out there. I'll pass it along. Scott Dreschel Thank you.

Our next question will come from Scott Dreschel with Dolce Bank. Your line is open.

Scott Dreschel Hey, good morning. Scott Dreschel Good morning, Scott. Scott Dreschel Rich, can you characterize the growth split between volume and price that you saw at A&E this quarter?

Yeah, it was roughly 50-50. So, you know, almost right down the middle.

Okay. And was commercial OE contributing very materially to the pricing gains in segment experienced?

Yeah, you know, I don't have the full break out of that, but certainly we've been making nice progress on certain areas in commercial OE. But clearly there has been, whether it's from existing contracts with indexed increases or changes that we might have made, you know, in response to contracts that needed to be addressed. But I don't have the specific breakout, but it was pretty healthy, I would say, across both aftermarket and commercial.

Brad Pacheco- Okay. Just to clarify, did any major commercial OE LTAs reprice this quarter that you didn't have repriced last quarter? I'm just trying to understand the sequential EBIT growth at ANA.

Michael Heaney- No. No.

Brad Pacheco- Okay. Rich, consensus has EBIT dollars down at A&E over the remainder of the year versus what you just reported at A&E this quarter. I guess, you know, I realize it's an environment of uncertainty, but is there any discrete reason why you would think that would be the case and EBIT dollars would decline from these levels?

Yeah, so what I would say is that in the quarter, you know, we had a very strong quarter overall, as you saw, with the leverage at 60% in A&E. We had a decent mix. We had strong engineering sales, completing a few, I think, major development programs that had some nice margin to them. So a few things is what I would say added up overall in the quarter that contributed to that 60%. You know, Alex mentioned in his prepared remarks that, you know, the comps will start to kind of move down. But overall, you know, there's nothing that would suggest any sort of overall weakening to any significant degree. There was perhaps just a few items in the quarter that we benefited from.

Okay. And is Comac still taking delivery of the parts he makes of the C919, even with the retaliatory tariffs they have?

Yeah, thanks for that question. This is Alex. We actually met with Comac a couple of weeks ago to look at the ramp up, and everything is moving forward very smoothly. They have a big ramp up projected this year, and they're on track. They're still taking deliveries, emphasize the importance of staying on track. They have to market as well. So everything's progressing quite well. As you know, we have a really strong position with that 919 platform. And they're also in the development of the 929, the white body, which we expect to also have a great position. Our team's doing a great job. A lot of our key members were in China last week.

know all looks positive from that regard okay thank you i'll pass it along thanks guys thank you our next question will come from jeff sprague with vertical research partners your line is open thank you good morning hey good morning max hey uh high level one for you first and then a couple of detailed questions you know um in your opening commentary just talking about emerging stronger and the like Was that just kind of an overarching view that, you know, kind of sweating the organization, exercising the muscle trial by fire makes you better? Or do you actually see some places maybe where you have competitive footprint advantage or other advantages versus competitors that you might be able to leverage here?

Both, Jeff, both. I think, you know, any time that you exercise like this, it sharpens the sword. But the other is we're seeing some opportunities where our competitors, our position or some decisions that they're making that we think we have some openings.

Interesting. Okay, great. And then just on the tariffs, again, so I think the 7% to 8% of COGS called $100 million or so run rate. I didn't follow quite what Alex was getting at with the additional three to four intercompany. Was that kind of a USMCA comment and not a cost headwind? Or maybe you could just elaborate on what that meant and whether I'm right on the roughly $100 million.

Yeah, Jeff, thank you. Thank you for the question. Yeah, the $100 million is related to direct imports from external suppliers, and then there's another 2% or 4% of interunit. Some of that is exempt because of the USMCA from the interunit shipments. But those are the imports. That's not the tariff impact that we expect in our P&L. So that's just the overall. The tariff impact is more around the $60 million range for this year, considering all factors, indirect impact on suppliers. And that's mostly on the PFT side, because as you know, our aerospace business is very heavily sourced domestic.

Right. So we'll call it $100 million or so direct annualized, $60 million on an in-year basis. Um, and then just maybe one other one for you, Alex, just, um, where you might see some demand risk in your, in your business. I'm kind of thinking cam, right? Those guys are cutting cap X and chem prices are declining. Is that, is that where you've hedged your guide from a end demand standpoint? And maybe if there's other verticals and within PFT that you'd want to address.

Yeah, Jeff, so in PSP, where we think about the MRO side and the project side, so across all verticals, I think the MRO side, usually when there's softness, remains somewhat consistent, and that's all about the project activity and shifting to the right. So on the chemical side, What we've seen last year and this year, different dynamics by region, U.S. continue to move, Middle East continue to move forward, Europe softening. We did start hearing customers thinking about delaying decisions, trying to see how this tariff points out. So we did make assumptions on projects shifting to the right, in particular in the chemical in the United States, but also in other regions. And one quick one for Rich.

Great. Thank you. And then one quick one for Rich. FX is still guiding minus one. It sounds like you're dropping a couple pennies in your back pocket there. Is that a 330 rates or maybe just update us on that?

Yeah, it's exactly what it is. We just hung it. We're not going to, you know, all the changes that can happen there. And so we just stuck with 330 rates. Yeah, there's been some favorability here. We'll see if it sticks. But your hunch is correct. A couple of pennies in my pocket. Thank you for next one. Yep, yep.

Our next question comes from Nathan Jones with Spiegel. Your line is open.

Good morning, everyone. I guess in the spirit of jokes, I won't say that I wish I was there, but I do wish you were here. Oh, good. I like that. I guess the first question is on supply chain. During COVID, there was obviously a lot of supply chain disruption, and you guys are components that go into other systems. I'd be less concerned about your ability to manage your supply chain and more concerned about, you know, people who supply into those same projects being able to manage their supply chain. Do you see any risk to any parts of the business that could arise just from other impacts on...

other suppliers supply chains that could impact your ability to or your customers ability to finish projects and take delivery of products similar to maybe what happened during code yeah nathan thanks for questions this out so i think you have to think about separately from pft and ame perspective on the pft side i would not expect anything significant that supply chain has returned uh since last year to normal rates it's pretty stable. Of course, the shipment lanes and things like that from Asia are getting clogged up and so forth. But I would not expect any significant change in supply chain ability to deliver on that side. I think on the A&E side, through here the first month, we saw pretty stable, slightly improving. I know everybody saw on the news the issues with the SPS fastener facility and the Chicago magnesium foundry. That did not directly impact us. That said, as some companies try to adjust their supply chains, and the tariffs won't help supply chain improvement in aerospace, for sure. So we would expect some lead time extensions as people get out of certain regions and try to get others and capacity constraints from some suppliers from those movements in supply chain. But we're not seeing any major disruption caused by that. And we're planning for some of those lead times to in some areas be extended, and that's what we factored in as well.

Thanks for that. I guess my second question, you talked about PFK orders being a bit stronger than you'd anticipated in the first quarter. I guess the question there is, do you think customers were pre-positioning ahead of tariff-related price increases? And then did you guys pre-position some inventory in front of Paris during the first quarter yourself?

Yeah, good question. On the inventory, no, we didn't. You know, we have experience managing these tariffs. As you know, we're engineered to order. It's never the right inventory if you try to play games. So from that standpoint, we didn't. On the pre-buy, I mean, we did hear some activity pre-buy from distributors, stocking a bit more. That's not really significant. I would say it's not material. Really what drove this better than expected are some projects that I've been tracking for a while now since last year that hit in the quarter that drove some of that favorability. So I would say a little bit of pre-buy, but not anything major.

Great. Thanks very much for taking my questions, and I'll see you on the dot side of the main. Thanks, Nathan. Well done.

Thank you. Once again, if you would like to ask a question, you may press star 1 on your telephone keypad at this time. Our next question will come from Ronald Epstein with Bank of America. Your line is open.

Hey, good morning. This is Jordan on for Ron.

Hi, Jordan.

A couple of questions. The first one for M&A, have you guys seen any slowdown in deals or pauses happening just because of the macro?

No, we haven't. We haven't seen any slowdown. It's very, very active for us.

Okay. And then on Boeing's call, they made a comment about their buffer stock having been high to stabilize the supply chain and that it would go back down to normalized levels. You guys have been very good about controlling the inventory that you guys have in the channel. Are you concerned at all, though, for other suppliers that you might be feeding into that would be getting destocked?

I mean, I think Boeing has done a great job being transparent on their inventory position with us, I imagine with other suppliers as well. So we are very well aligned to what they need and are expecting, and we're planning to support that so our factories are well in tune and efficient to support that ramp up. So my understanding is that it's the same with many other suppliers that are well in tune with Boeing's inventory position and planning appropriately. Got it. Thank you guys so much. Thanks, Jordan. Thanks, Jordan.

Thank you. Our next question will come from Matt Somerville with DA Davidson. Your line is open.

Morning, Matt. Thanks. Hey, morning. Just a couple of follow-ups. That $60 million, I just want to clarify, is that the unmitigated number, meaning that is the magnitude by which your COGS are going higher, all else equals, as a result of the tariffs? I just want to be clear on that.

Yeah, that would be the gross number, right, that we will substantially mitigate.

Assuming these tariffs exist through the entire balance of the year, no change. Up or down?

Got it. Thank you for that clarification. And then you talked just very briefly on the chemical market with respect to PFT. Can you maybe do a little bit more of a deeper dive in terms of what you're seeing across both the MRO and project side of the business, geographic color around the major end market buckets and product lines that you guys typically refer to in that business?

Yeah, I mean, for PST, as you know, chemical, really strong position. We have a substantial presence globally. I think we went into the year with expectations different by region, and we saw that play out in Q1. So in the Americas, we saw positive growth, both on MRO and project activity, where customers are expanding, round-sized driving efficiency, upgrades. things of that nature. Middle East, similar, continued investment and growth. And then since last year in Europe, it's been soft, declining, and that has continued. China as well, somewhat soft, and Asia-Pac kind of mixed. So kind of how we closed out last year was the first four months of the year. Now going forward, like I mentioned, we expect some of that project activity in the Americas to shift to the right, some softening demand versus what we saw in Q1, and that's what we baked into our guidance.

Thank you for that, Alex. Can you talk about some of the other end markets in that business as well, what you're seeing with cryo, industrial, automation, water, wastewater, et cetera?

The water, wastewater in the quarter orders were strong, up. So we feel good about that continuing. Cryogenics has been our fastest growing segment, you know, double digits. So that has been a really exciting platform that we've added and continue to expand and gain share and take advantage of the market. A lot of that's driven by space launch activity where applications are used for the platforms that are being built out in various parts of the country. And then general industrial activity has, in the first part of this year, in the quarter, has been slightly up. So I think overall, a lot of positives in the first quarter. I think partially offset by what I mentioned on chemical, particularly in Europe and other parts of the world as well.

Got it. And then maybe just one final one, Rich. As we look out over the balance of the year, is there anything you would want to draw our attention to in terms of kind of the remaining earnings cadences move through Q2, Q3, and Q4?

Yeah, I think the high level would be, as you're looking at next quarter, just slightly down, you know, slightly. And then I would think of the full year as, you know, more, you know, equally weighted, frankly, first half, second half overall.

Got it.

Thank you.

You're welcome.

Thank you. Our next question will come from Justin Ages with CJS Securities. Your line is open.

Morning, Justin. Morning. Question, there's been a bunch of headlines about travel being down given the political environment. Have you seen or do you expect to see that impacting your business at all?

Look, we're seeing the same headlines, reading the same reports, but we're not seeing it read through. I mean, I think this age fleet is still requiring the same level of maintenance. Aftermarket continues to be strong. Deliveries are still not where they need to be in terms of the replacement cycle. Boeing's trying to ramp up. So, you know, we just don't see it. And we're not hearing it from our customers either.

All right. That's helpful. And then following up on the M&A commentary, can you give us any indication of how far along or in any processes in PFT or in A&E, any deals that you guys are in?

Well, the first two weeks of May, yeah, the first two weeks of May, Alex and I will be traveling with the teams. We've got kind of nonstop due diligence across multiple acquisitions, both domestically and internationally in terms of locations. So we're very, very active in the process. You know, really nice fit, really nice fit, attractive. We're going to be competitive. I'm hopeful that – we'll have some activity to announce in 2025.

All right, great. I appreciate you taking the question. Thank you.

Once again, if you would like to ask a question, please press star 1 on your telephone keypad at this time. Our next question will come from Tony Bancroft with Gabelli Funds. Your line is open.

Good morning, Vince. Hey, great job on the quarter. Very well done. I know you've pretty much said that the tariffs are going to be relatively mitigated and not an impact. But on the arrow side, you're hearing comments from the China trade ministry yesterday about disruptions in China. in commercial travel. And then you've seen people in France, you're seeing the aerospace and defense industry talking about tariff exemptions. How do you see this all playing out? Maybe it's not as impactful to you, but maybe you could talk to that a little bit next.

Well, if anybody's interested, Anybody's guess, honestly, in terms of how it moves forward. Quite honestly, I'm more optimistic, quite honestly. I think things will get resolved. I think our trading partners, while there's certainly a number of serious issues that are being addressed, our global environment is too important to one another. And I think these things will get sorted. I think when that does, it's going to be very positive for all of us as we move forward. Thanks so much. Great job. Thanks, Tony.

Thank you. This concludes the Q&A portion of today's call. I would now like to turn the floor over to Max Mitchell for closing remarks.

Thank you all for attending today. Our focus today is executed on everything within our control, reacting swiftly to what is outside our control, serving our customers, and continuing to invest in all of our growth initiatives and technology roadmaps and driving profitable growth. I fully expect to emerge from this dislocation in an even stronger competitive position than when we entered the year. As the late, great Gene Hackman said, challenges are what make life interesting. Overcoming them is what makes life meaningful. Our teams at Crane continue to make our lives hugely meaningful as we continue to deal successfully with life's interesting challenges. Thank you all for your interest in Crane and your time and attention this morning. Have a great day.

Thank you. This concludes today's Crane Company first quarter 2025 earnings conference call. Please disconnect your line at this time and have a