Crane Company

Welcome to our second quarter 2025 earnings release conference call. I'm Alison Pliniak, 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's 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 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 non-GAAP numbers, which are reconciled to the comparable GAAP numbers in tables at the end of our press release and accompanying slides presentation, both of which are available on our website at www.praneco.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. I want to start by thanking my teams across the world for delivering yet another excellent quarter, outperforming expectations despite an uncertain macro backdrop and dynamic environment. Adjusted EPS was $1.49, driven by an impressive 6.5% core sales growth, reflecting strength across both aerospace and electronics and process flow technologies. Core orders were also solid. up nearly 20% in the quarter, driven primarily by the ongoing strength in our aerospace and electronics business. This entire leadership team has demonstrated consistently differentiated execution across cycles. And once again, this was reflected in our second quarter results. The cadence and discipline of the crane business system, our machine, if you will, along with our Performance-based culture enables us to make data-driven decisions quickly with flexibility to adapt as conditions change and with accountability. And the benefits of that approach are most noticeable in environments like we're operating in today. And given our consistent and unwavering investment in technology, customer requirements, and commercial excellence initiatives, both of our strategic platforms remain well-positioned to continue to deliver great results. Inorganically, we also announced in June the agreement to acquire the precision sensors and instrumentation businesses, or PSI, from Baker Hughes, executing on our strategy to add proprietary and differentiated technologies to our portfolio and to broaden our unique capabilities through acquisitions. Alex will provide more color on the acquisition in a moment, but I am incredibly excited about the people, technology, and the capabilities that these three iconic brands that make up PSI bring to Crane, and also about the capabilities that we will bring to PSI to enhance its long-term performance. Our balance sheet remains very strong, and we have both the financial and operational capacity for significant additional M&A. We continue to work on a robust pipeline of potential opportunities, And we are optimistic about our ability to deploy further capital on acquisitions over the next several quarters. Just a lot of very exciting activities and developments at Crane overall. As we look to the balance of the year, while the macro backdrop remains unpredictable, Our backlog, consistently strong execution, and our performance year-to-date gives us the confidence to raise our full-year adjusted earnings outlook to a range of $5.50 to $5.80, up from our prior view of $5.30 to $5.60. Now let me pass it over to our Chief Operating Officer, Mr. Alex Alcala, to provide some color on our pending acquisition of PSI, along with comments on the current environment.

Thanks, Max. Well, we're very excited about the technologies and capabilities that Druk, Panametrix, and Rotostrokes bring to Crane. All three brands are global leaders in highly sophisticated sensor-based technologies for mission-critical applications in harsh and hazardous environments. Extremely Crane-like businesses that are a perfect fit with our existing portfolio. Each brand contributes to a robust technology foundation along with a durable and resilient aftermarket presence, further strengthening the Crane portfolio. Combined with the strength of the Crane business system, these businesses will be accreted to our financial profile within the next few years. The drug brand, approximately $150 million in revenue, will be positioned within our L-space and electronic segment. The addition of drugs complementary product line meaningfully strengthens our pressure sensing capabilities across critical applications, including environmental control systems, hydraulics, and aircraft engine monitoring, with strong positions in both single aisle and wide-body aircraft platforms. Additionally, DRUC expands our presence into the ground-based test and calibration equipment for aerospace. further expanding our technological capabilities and market reach. As we're planning for the drug integration and to create the optimal structure for continued growth, both organically and inorganically, within the aerospace and electronics segment, I'm also excited to announce that Jay Higgs, who many of you know as the President of A&E, has been promoted to Senior Vice President of the Crane Aerospace and Electronic segment, reporting to me. Jay, who has been with Crane for 35 years, has been a driving force behind the success of our A&E business. I look forward to partnering with Jay in driving further record growth and operating performance at A&E. The new A&E segment structure now mirrors the organizational model used at PFT under Shangaza Dissent, which is also the role I held prior to our 2023 separation. This structure will give Jay greater capacity to focus on strategic initiatives in M&A for A&E going forward, and it'll give us greater flexibility to integrate complementary acquisitions into our current operations in A&E. as well as to continue pursuing acquisitions including near adjacencies that can be managed as independent business entities like Druk. We point to Jay will be the future president of Druk along with the head of M&A and strategy for the segment and the new president of our current aerospace business, replacing Jay, Mr. Joseph Mondinger. Joseph was previously the vice president and general manager of our largest A&E solution and has been with Crane for 13 years, a reflection of the bench of talent within Crane. The Panometrics business, which is about $150 million of revenue, adds advanced ultrasonic flow meters and precision moisture analyzers. Similar to drug, Panometrics will be a standalone entity although within our process flow technology segment, reporting to Shin Gaza to send. Panametric sensing solutions support critical process industries by enabling accurate measurement of liquids and gases across applications such as chemical production, LG transportation, cryogenic gas storage, and wastewater treatment facilities. It is complementary adjacency to our current portfolio that expands our capabilities into test and measurement. And finally, the addition of Rhoda Stokes, approximately $90 million of revenue, will double the size and capabilities of our existing crate nuclear business. With its industry-leading radiation sensing and detecting technologies, Rhoda Stokes enhances our offerings for nuclear plant operations and homeland security. It also positions us strongly to capitalize on the renewed global investment in nuclear energy. The Rota Stokes Fund will be integrated into our existing nuclear business under the leadership of our president, Chris Mitchell, who has been serving as the president of our nuclear business for the past six years. We anticipate the acquisition to close January 1st. and the integration planning is well underway and progressing smoothly, working with the existing Baker Hughes and Crane teams. In terms of further M&A, our funnel of intergrantic opportunities remains full, and we continue to look to accelerate EPS growth through additional capital deployments. 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 in deal size from sub-$100 million to $1 billion. Now, some thoughts on the segments in the quarter, starting with aerospace and electronics. Aerospace and defense markets continue to see 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 uncertainty today. Looking ahead to the balance of 2025, We now anticipate core sales growth for the year to be up high single digits to low double digits compared to our prior view for core growth to be up mid to high single digits. We expect that growth to leverage at 35% to 40% for the full year. Our guidance assumes continued strong sales. with the ramp-up at Boeing partially offset by decelerating year-over-year growth rates in commercial aftermarket that we have previously highlighted as the comparisons become more challenging and will naturally moderate over time. We also continue to pursue new opportunities and win new business across this segment that gives us confidence that we will continue to see above-market growth for the remainder of this decade. A few examples. First, we agreed to terms on a development contract for the XM30 demonstrator power converter in our defense power business. Second, activity around air defense systems remained very robust, with Crane having secured multiple orders in the quarter. Third, Crane was also selected to supply the Doors signal system on the COMAC C929 wide-body aircraft. Crane A&E sensing system solution will include nearly 100 proximity sensors, along with proximity sensor data concentrators and door indicators per ship set. In addition, our preparation for the F-16 brake control upgrade ramp-up remains on track. And last, we're also pleased to see a significant increase in funding for the LTAMs in the recent full year 26 defense budget. This is a large ground-based AESA radar program that we've spoken about many times and where we have significant content. This further increases our confidence in the long-term growth for our defense power business in 2027 and beyond. With a record backlog and pipeline of opportunities, aerospace and electronics is poised to well outperform its markets over the next decade. At Process Flow Technologies, while end markets have not inflected in any meaningful way since our April earnings call, we remain well positioned to outgrow across the cycles. As a reminder, we have systematically repositioned our portfolio around our core end markets where we have the strongest competitive position and the most differentiation, enabling sustainable market outlook. And we continue to win in this segment despite the volatile market backdrop. For example, our cryogenics business reached a record high backlog on orders driven by strong demand in space launch and other segments. We've secured key orders in space launch platforms for multiple customers for over $8 million in the quarter. We continue to see our cryogenic strontium engineering support and manufacturing capability as a differentiator in the market, and Crane maintains its leadership position as a supplier of vacuum insulated pipes for space launch platforms. In the chemical space, our teams continue to secure key projects in demanding applications such as chlorine and PVC due to our reliable Solmox line valves and our portfolio of line pipes from Asistaflex and Bond. Despite the overall reduction in capex announced by many of our chemical customers, this quarter we booked a $4 million project for an upgrade to a PVC plant as well as a $3 million project for the expansion of a plant in Texas. And with our new high temperature resistant diaphragm valves, our EX technology in pharma, we continue to take share securing a nearly $1 million win with a key pharmaceutical company. Tactically, we have proven our ability to react to any changes in demand quickly. and we will remain nimble, taking any necessary and appropriate price and cost measures required. However, our strategy is unchanged, and we will manage through any potential demand fluctuations without losing focus on our longer-term goals and objectives. Looking ahead to the second half of 2025, and given our line of sight today, we anticipate core growth to fall at the lower end of our low to middle single-digit core growth range, with volume leveraging at 30% to 35%. So both our businesses remain well-positioned to continue to deliver great results. Now let me turn the call over to our CFO, Mr. Rich Maui, for more specifics on the quarter.