Crane NXT, Co.

Good day, and thank you for standing by. Welcome to the Crane NXT Q1 2025 earnings call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 1-1 on your telephone. You will then hear an automated message advising that your hand is raised. To withdraw your question, please press star 1-1 again. please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Matt Roach, Vice President of Investor Relations. Please go ahead.

Thank you, operator, and good morning, everyone. I want to welcome you all to the first quarter 2025 earnings call for Crane NXT. Before we begin, let me remind you that the slides we will reference during the presentation can be accessed via the investor relations section of our website, at craneNXT.com, and a replay of today's call will also be available on our website. Before we discuss our results, I encourage all participants to review the legal notice on slide two, which explains the risk of forward-looking statements and the use of non-GAAP financial measures. Additionally, we refer you to the cautionary language at the bottom of our earnings release and in our Form 10-K and subsequent filings pertaining to forward-looking statements. During the call, We will also be using non-GAAP financial measures, which are reconciled to the comparable GAAP measures in the tables at the end of our press release and accompanying slide presentation, both of which are available on our website at craneNXT.com in the investor relations section. With me today are Aaron Stake, our President and Chief Executive Officer, and Cristina Cristiano, our Senior Vice President and Chief Financial Officer. On our call this morning, we'll discuss our first quarter highlights, the completion of the De La Rue authentication solutions acquisition, our financial and operational performance, and our updated 2025 financial guidance. After our prepared remarks, we'll open the call to analysts for questions. With that, I'll turn the call over to Aaron.

Thank you, Matt, and good morning. I appreciate everyone joining the call today to discuss our first quarter results. I'd like to start by thanking my fellow Crane NXT team members around the world for maintaining focus, and being agile in the face of this dynamic trade environment. We continue to prioritize serving our customers, driving continuous improvement through the crane business system, and diversifying our portfolio through disciplined M&A, all while living our core values. And we demonstrated all of these elements in Q1, and I'm very proud of the team's performance. As you can see on slide three, our first quarter performance was in line with our expectations, with sales growth of 5% and adjusted EPFs of 54 cents. Excluding OPSEC, core sales declined 4% as expected, reflecting lower volumes in our U.S. currency business driven by the planned shutdown of key manufacturing equipment for upgrades to support the new U.S. banknote series. I'm happy to announce that the upgrades were successfully completed and full production has resumed. A great job by our team to accomplish this very significant milestone. In Q1, we continued to build momentum in our strategic growth areas, achieving record-high backlog and creating currency with a book-to-bill ratio of 2.4. This is exceptional performance by our currency team and reflects the differentiated value of our leading anti-counterfeiting technology. And at CPI, we continue to invest in and grow our services business, where in Q1, we won a new multi-year contract with a major retailer, provide on-site equipment repair services in approximately 450 of its US locations. Under this agreement, we'll provide service to all of the front-of-store retail checkout equipment, including self-checkout and attended checkout lanes. Our flexible service delivery model will further drive recurring revenue and positions us very well for future growth. We're also making meaningful progress in expanding our market-leading positions in anti-counterfeiting technologies for governments and brands. Last week, we announced we completed the acquisition of DelaRue authentication solutions, and I would again like to extend a very special welcome to our new team members from DelaRue. We're excited to have you join the Crane NXT family. The OPSEC integration is on track, and last week we announced that OPSEC and DelaRue authentication will be combined to form Crane authentication. The combination of the businesses will provide a unified set of products and services to our customers and help accelerate synergies. Finally, our teams are working diligently to mitigate the impact of tariffs through strategic pricing actions and supply chain initiatives. Given these actions, and with our current line of sight to demand, we are reaffirming our full year adjusted EPS guidance, and Christina will speak more about tariffs later in the call. Moving to slide four, I'd like to provide a brief overview of De La Rue authentication solutions. This acquisition complements the OPSEC business and further expands our security and authentication technology capabilities. De La Rue authentication goes to market with three strategic platforms as shown on this slide. Government revenue solutions provides digital and physical tax stamp technologies that link unique identifiers to products, enabling the full traceability of goods through the supply chain and allowing governments to collect tax revenues. Identification security solutions provide solutions to secure the government-issued identity documents of individuals, including polycarbonate passport pages with embedded security features. Finally, brand protection products provide serialized, highly secure physical labels combined with software to track and trace products through the supply chain and provide critical consumer insights to brand owners through data analytics. Like OPSEC, De La Rue Authentication Solutions has an attractive financial profile comprised of a stable and growing revenue base generating mid-single-digit revenue growth. We expect that De La Rue will contribute approximately $80 to $90 million in revenue in 2025 with an adjusted EBITDA margin of approximately 20%. As I mentioned, last week we announced the combination of OPSEC and De La Rue to form the new Crane Authentication business. As shown on slide five, Crane Authentication has a geographically diverse global footprint with majority of sales coming from longstanding customers. Crane Authentication also serves a diverse set of end markets, including governments, consumer products, sports and media, financial services and industrials, providing a highly resilient revenue stream to Crane NXT. And over the past few years, we've made significant progress executing on our strategy to diversify the company through disciplined M&A. With the acquisition of OPSEC, TrueTag Smart Packaging, and Daylaru Authentication, we now have a leading position with Crane Authentication in the security and authentication market focused on protecting products that matter most to our customers. With the continued strength in Crane Currency and the addition of the new Crane Authentication business, the SAT segment will have sales of approximately $735 million in 2025. Our M&A funnel remains robust, and I fully expect we will execute additional transactions within the next year that will continue to expand our market-leading positions and add further resiliency to our portfolio. So with that, let me now hand the call over to Christina to review our first quarter performance in more detail and our updated guidance. Christina?

Thank you, Aaron, and good morning, everyone. I'd like to start by expressing my appreciation to our associates around the world for their hard work and to welcome the De La Rue authentication team to Crane NXT. Starting on slide seven, we delivered first quarter results that were in line with our expectations. Sales increased approximately 5% year over year, driven by OPSEC and continued strong performance from international currency. Core sales declined approximately 4%, reflecting the expected lower U.S. currency sales related to the planned shutdown of key paper-making equipment in preparation for the new banknote series, and the expected softness in CPI's gaming and market. Adjusted segment operating profit margin of approximately 19% was driven by the impact of lower volumes and unfavorable mix in U.S. currency, and dilution from OPSEC, partially offset by productivity gains. Free cash flow was impacted by the planned lower volumes and the timing of collections in both CPI and international currency, driven by shipments which were skewed toward the end of the quarter. Based on our strong backlog and delivery schedule, we remain on track to achieve free cash flow conversion for the full year between 90% and 110%. Finally, we delivered adjusted EPS of 54 cents. Moving to our segments and starting with CPI on slide eight, Core sales declined by approximately 2%, driven by the expected lower volumes in gaming and in the vending end market, where we faced a tough comparison versus the prior year. We saw growth in the financial services and retail end markets, reflecting a slight pull forward of demand late in the quarter to get ahead of tariffs. Adjusted operating margin decreased 190 basis points year over year, reflecting the lower volumes and unfavorable product mix due to gaming. partially offset by productivity gains. CPI ended the quarter with a backlog of 147 million and a book-to-bill ratio of approximately one. Moving to security and authentication technologies on slide nine. In the first quarter, sales were up 22% compared with the prior year, including OPSEC, which is performing as expected. Core sales were down approximately 8% as expected, driven by lower U.S. currency volumes related to the planned shutdown of key papermaking equipment in support of the new banknote series. As Aaron noted earlier, the equipment upgrades were completed successfully, and we resumed normal production in April. Adjusted operating margin of approximately 7% reflects the impact of lower U.S. volumes, which led to the underabsorption of manufacturing overhead. We also had dilution from OPSEC of approximately 300 basis points in the quarter. Our international currency business continues to have strong performance with a record high backlog of approximately 370 million and five new micro optic wins in the quarter, putting us well on track for our full year target of 10 to 15 new denominations and giving us high confidence in achieving our sales target for this year. In the first quarter, we had several highlights in our SAT segment. At OPSEC, we renewed our contract with the National Football League to provide physical product authentication on merchandise for the next five years. OPSEC also provides anti-piracy and online brand protection services to the NFL, and we are excited to continue our longstanding partnership with the league. We also completed our second sale of micro-optics technology, known as Profound, to a consumer goods company in the OPSEC channel. This two-year contract includes physical authentication and a digital track and trace solution, which increases our recurring revenue. Moving to our balance sheet on slide 10, we ended the first quarter with net leverage of 1.7 times, and we estimate net leverage will be approximately 2.3 times at the end of the second quarter, reflecting a new term loan to fund the De La Rue authentication transaction. Our low leverage and strong liquidity provides us with ample capacity to deploy capital for M&A. Turning to slide 11, I would like to provide an overview of the tariff impact and our mitigation strategy. Based on the tariffs announced to date, we've sized the full year unmitigated impact to operating profit at approximately $25 million, or approximately 4% of our cost of goods. which we expect to fully mitigate with pricing and other cost reduction and productivity measures. Given our global manufacturing footprint, we have an in-region, for-region supply chain strategy, which significantly minimizes the impact of tariffs and provides future resiliency. Taking a closer look at the impact by region, the largest impact is from the tariffs on China, estimated at approximately 20 million. This primarily relates to CPI components, which we sourced from China. Our remaining exposure is approximately 5 million coming from the tariffs related to Europe and the rest of the world. To mitigate the direct impact of tariffs, we have implemented price increases and are optimizing our supply chain strategy. Additionally, we continue to execute productivity programs across the company utilizing the crane business system. Our teams have shown tremendous agility and I'm proud of the work we're doing to navigate this environment. Given these actions, we do not expect the direct impact of current tariffs to have a material effect on our 2025 results. That said, we expect some push out of buying decisions to impact CPI in the second quarter and potentially longer if the China tariffs remain in place at the current level. For SAT, the downside demand risk is more moderate given our diverse set of government customers and strong backlogs. Moving now to slide 12, we are updating our guidance to reflect the increased sales growth outlook in SAT based on our record high currency backlog and the addition of dealer rule authentication. We now expect SAT sales growth to be between 19% and 21%. This reflects 5% to 7% growth in SAT, excluding De La Rue, versus our initial guidance of 3% to 5% growth. And it includes approximately 80 to 90 million of De La Rue authentication sales in 2025. In CPI, given the macroeconomic uncertainty, we are revising our full-year sales guidance from a range of 0 to 2% to a range of negative 2 to flat. reflecting a push out of demand for equipment, which we expect to read through in the second quarter, resulting in CPI sales of approximately flat on a sequential basis from Q1 to Q2. We now expect our full year adjusted segment operating margin to be in the range of 25.5% and 26.5%, reflecting dilution from De La Rue and our continued strong focus on price execution and productivity, which will mitigate the impact of tariffs and lower volumes in CPI. Non-operating expenses are now expected to be approximately $54 million, as we will incur approximately $10 million of additional interest expense related to the borrowings for the De La Rue acquisition. Considering these factors in total, we are maintaining our full-year EPS guidance range of $4 to $4.30. Now I'll turn it back to Aaron for his closing remarks.

Thanks, Christina. Moving to our final slide, we remain agile and resilient through the current economic environment, maintaining our full-year EPS guidance range. We are proactively addressing the direct impact of tariffs through diligent management of our sourcing and manufacturing footprint, pricing actions, and utilizing CBS to drive productivity. We're also building momentum in key strategic growth areas. We achieved a record high backlog in our international currency business which gives us confidence in our full-year sales outlook and positions us very well for 2026. Additionally, we completed the final upgrades in our U.S. paper-making facility that will support the new series of banknotes with the new $10 bill on track to launch in 2026. Also, our CPI service business continues to build momentum, securing new contracts that drive growth in our recurring revenue base. Finally, we continue to take a disciplined approach to capital allocation. We closed the Delarue authentication transaction and we're excited about the launch of Crane authentication. We hit the ground running with integration activities and are very confident in the outlook for this market leading technology portfolio. Our M&A funnel is active and our strong balance sheet gives us ample capacity to continue building our portfolio of differentiated technology solutions delivering long-term value creation for our shareholders. Thank you again for your time this morning, and I'd like to again thank our dedicated team around the world for their commitment to our customers, to our communities, and to all of our stakeholders. And with that, operator, we're now ready to take our first question.

Thank you. At this time, we will conduct the question and answer session. As a reminder, to ask a question, you will need to press star 1-1 on your telephone or and wait for your name to be announced. To withdraw your question, please press star 11 again. Please stand by while we compile the Q&A roster. Our first question comes from Matt Somerville with DA Davidson. Your line is now open.

Thanks. Good morning. Good morning, Matt. Aaron, I wanted to talk about, and Christina, CPI for a minute. Can you give a little bit more granularity in what you expect for the full year in terms of, you know, growth rates across the four major end markets served by CPI and how much of the, I guess, this cascade could look like from a push-out standpoint? You know, are we talking, it sounds like $20 million round numbers, but I'd like you to kind of verify that. And I'd be curious as to which verticals are most impacted by this deferral. And then I'd follow up.

Yeah, thanks, Matt. And just off the bat, I think you have that sized correctly at the 20 and most of that really in Q2, given what we see happening with the tariffs. But, you know, just to back up for CPI overall performed as expected in Q1. And I would say that that's true across really all the verticals from what we said last quarter. You know, going back to kind of your broad question, You know, gaming for us performed right as expected. We continue to see that as a very healthy market and maintaining our position. And as we indicated last quarter, see orders, you know, continuing to come and build as we exit Q2 and return to top-line growth as we get to the second half of the year. So still looking at low single-digit growth in gaming for the full year. Retail performed, again, really as expected. There, we're facing this dynamic of OEM sales down, and I think that was confirmed this week with two major OEMs reporting sales down in double digits. We're seeing that. But we're seeing that offset with our custom self-checkout offerings, which are performing very well, so net-net for the full year, still in line with expectations that we mentioned of high single-digit decline. in retail. And when you get to financial services, you know, mid-single-digit growth for the full year, performing as expected. And then lastly, vending, and it's really where we see this impact of tariffs. You know, overall, as Christina mentioned, it's really the Chinese tariffs that are impacting principally CPI, and that's the vast majority is vending. And so we've taken action to mitigate those with price increases. Those are already out to our customers, and we're expecting that to really hold back some demand, particularly in Q2 as they're in a wait-and-see mode. Ultimately, at some point, you have to order your repair parts and enact pricing through the rest of the vending supply chain, and in discussions with our customers, that's what we expect to happen. So, really, that would be the change for vending where we now expect that to be a low single-digit decliner for the full year. So, net first quarter kind of as expected, the big change in vending, the rest of the verticals, Matt, performing as expected.

Got it. Thank you for that color. And then moving over to the current currency portion of SAT, can you talk a little bit about how the U.S. performed relative to expectations in Q1? And then similarly, I mean, mathematically, you had to have some pretty phenomenal growth internationally. So touch on that. But maybe more importantly is how kind of the currency business plays out for the rest of the year, just knowing there can be a little bit of lumpiness and variability from quarter to quarter, kind of, again, parsing between the divergent, at least for now, sides of the business between USG and international.

Yeah, Matt, you know, I'd say overall currency performed just as expected in Q1, probably a little bit better in international. And you could see that, you know, with the orders. Certainly, that was a standout for us in Q1. Execution here in currency has been fantastic, particularly with the upgrades on the U.S. We're back to full production, and I would say BEP volumes are playing out right in line with our expectations, and we expect that for the rest of the year. International currency, just based on what we put into the backlog and how we can optimize our production, is where we just have very high confidence in raising that sales outlook for the balance of the year. So I would say U.S. expected to play out similar to what we guided early, and international slightly better, again, just continuing to build momentum based on micro-optic wins. Thanks, Aaron. I'll get back in queue. Thanks, Matt.

Thank you. Our next question comes from Bob Labic with CJS Securities. Your line is now open.

Good morning. Congratulations, and thanks for taking our questions.

Good morning, Bob.

So I wanted to start with authentication and Ukraine authentication. Obviously, congrats on closing the De La Rue. This is, you know, the whole segment's new to you guys, new to us. So maybe you could kind of take a step back and talk about how the authentication market acts in, you know, kind of the unique time we're in with potential inflationary environment, could be a recession, U.S. isolationism. You touched on tariffs, but you may as well, you know, throw that in there too. How is the, you know, business positioned in this kind of uncertain world and what do you expect in terms of growth from it?

Well, hey, thanks for that, Bob. You know, again, as you know, I couldn't be more excited by closing De La Rue and the launch of Crane Authentication as a unified business and brand. And I invite everyone to go check out the website and the upgrades that we've made as we've launched the new business. I back up for a second, Bob, just you mentioned economic uncertainty and tariffs. And I would say we've taken very deliberate steps. It really goes back many years. with our acquisitions to build resiliency into the portfolio. And that's no more evident now than in crane authentication, where about 40% of that business is government contracts that are very resilient through economic conditions. And in fact, that's now with authentication, our tax stamp business and our ID business, passports and national IDs. So that really adds a nice foundation for the entire SAT segment, particularly when you add on currency that tends to perform very well in recessionary environments, particularly with inflation. So we think we've built in some natural insurance and shock absorbers into the portfolio for the economic conditions that we see. Now, with that said, take the example in authentication around brands like the NFL, which are franchise brands, fantastic customers that Christina mentioned, A new multi-year deal that's both physical authentication and digital authentication that are services. So that adds a lot of resiliency, too, because those are ongoing recurring services that, in this case, the league bought for the next several years ahead. And there's more deals inside of authentication that look and feel like that, that are contractual, that are resilient to different economic spikes or declines in demand. So I think there's a natural resiliency built into the business just simply due to that portfolio.

Okay, super. That's great. And then I guess that kind of answers my follow-up already, but maybe I think in your prepared remarks, you said that obviously the balance sheet is still very strong and the pipeline for M&A, a lot of the companies we cover in different industries, M&A has slowed down because of the uncertainty, but How's your pipeline look? What are your expectations there? And what areas in authentication can you build versus buy?

Yeah, I think that's directionally true, Bob, just maybe on the velocity of transactions occurring now. But our pipeline remains very healthy, really no change in the last few quarters, probably more things, to be honest, getting added in. And our focus here, regardless of the environment, is that we're I think being very consistent that with M&A and I would say capital allocation overall, our fundamental goal is we're going to drive long-term shareholder value creation around these three pillars of investing in the core, like you just saw with the U.S. government investments that have gone very well for us, paying a competitive dividend, so getting some cash back to the shareholders, which we increased this year, as you know, and then executing disciplined M&A like the De La Rue's, like the OPSEC's, And our funnel is composed of companies that fit that profile in that $100 to $500 million range, things that matter for us. A few technology bolt-ons are in the funnel, like you saw with TrueTag. But to your point, we have to make sure in any deal we announce and transact that we're generating returns on capital well above 10% over the next five years. That's unchanged. So that makes it a little, with where the market's at right now, We have to be extra diligent and disciplined. But quite frankly, the funnel is healthy, and it's in adjacencies that expand off our technology leadership. Some of that's geographic. Some of that's in new markets. Some of that's with process capabilities. But these are all vectors that are inside the M&A funnel. And I'm confident, Bob, we're going to see additional deal flow over the next year.

Thank you. Our next question comes from Damien Karras with UBS. Your line is now open.

Hey, good morning, everyone. Good morning, Damien. How are you doing? I'm doing well, thanks, Aaron. Congratulations on closing the De La Rue deal. I know that's a big step for you guys. It sure is. Thanks. Yeah, so maybe you could just talk a little bit more about that and what you think are the key priorities as you kind of focus on integrating the business and kind of planning for the future of authentication?

Well, I'd separate it into the market, Damian, and then what I would call is us doing what we do with CBS when we put these type of businesses in the portfolio, and in this case, uniquely put two businesses together. And that really gets to the synergies. You know, we like this neighborhood, so to speak. We're playing in authentication. It's growing, and we've just created the leading market position in the space of securing and protecting products. And I think that's a very enviable position with differentiated technology, including our micro-optics that's now in the portfolio. So it's about ensuring we're winning customers, renewing those customers like the NFL, and gaining share of wallet with new services that we're adding on that only we can do now with the technology portfolio we have. So that's the commercial focus. Then when you put these two businesses together, you can see quite a bit of synergies across commercial SG&A, opportunities in operations, and that's really where the CBS discipline comes in, 80-20, lean program and deployment in our factories. And that's where the synergies now will get accelerated by finally closing the transaction and moving forward. So I think it's a, call it a two, you know, two steps, two different vectors here, one commercial, one around executing the synergies. We feel very good. We've got a good team on the ground. They're meeting this week as we just closed last week. And we're off to the races on the integrations. That's great.

And then I wanted to ask you a follow-up on CPI and how you're thinking about, I guess, kind of moving past the second quarter, how that business progresses through the year. Because correct me if I'm wrong, I think you said kind of like, you know, roughly 200 million or so in sales again in the second quarter. So I think the guidance kind of implies you would ramp up to more like a, you know, 230-ish, 240-ish sort of level per quarter in the back half. So could you just talk about like how you're thinking about it as you get past the second quarter here and your confidence in the guide?

Yeah, why don't I, I'll start, maybe Christina will jump in here. You know, I would say again, broadly, Damian, with this exception of vending and the tariff implication, which is driven by China in tariff, you know, at a scale I don't think anyone would have anticipated even three months ago. The rest of the portfolio, quite frankly, is performing as expected. And that's all of the verticals and some great wins in our services business. That's a strategic priority for us. In terms of the actual numbers, you know, we said it will be approximately flat sequentially in Q2. So that's just slightly north of 200 million. And then I think it's a little less than what you said, probably numbers more in the high 220s to 230 range in the back half of the year.

Okay, that's really helpful. I'll pass it along. Thanks.

Thanks, Damien.

Thank you. Our next question comes from Mike Halloran with Baird. Your line is now open.

Hey, good morning.

Good morning.

Good morning, Mike. Can we just talk a little bit about the back acceleration that you saw here? Obviously, some of it's tied to international wins on the currency side, probably the NFL piece, but any detail beyond that? And then secondarily, maybe just talk about how you expect that backlog to cadence through this year, probably some in the next year, and just help essentially with the rollout and how to think about that.

Yeah, I'll take that one, Mike. And first, it's just another opportunity to congratulate our currency team for excellent performance and driving this record high backlog. We're really proud of the work that's been done there. And this gives us high confidence in our full year sales guide for SAT. So in Q1, as you said, we had incredible backlog. It's primarily related to the international currency business. And it was expected and really driven by the timing of of projects. If you remember last quarter, we were a little bit lower in Q4, and that's because of a few significant deals that we closed in the first quarter. And we also had five micro-optic wins, so really just a lot of great milestones in the quarter that we're celebrating. We raised our sales guidance for SAT to 5% to 7% for currency, excuse me, and we expect about 65% of that backlog to deliver in 2025, with the remainder through in 26. you know, this is another proof point, you know, in summary that we're winning in the market with our technology leadership and really excited for the rest of the year.

And then maybe back to the De La Rue edition and then the authentication segment creation. Can you just talk about what the go-to-market strategy looks like and what the consolidation looks between the two, meaning you know, these have been different, somewhat different channels, somewhat overlapping channels. How does that go-to-market approach change? Where does the consolidation points happen internally? And then any of the kind of operational side on what shifts on that go-to-market?

Yeah. Yeah. I would say my, you know, the natural synergies between these two, I think is probably very obvious to you and many others on the phone. And You can really think of it as four different business segments broadly. One is around government tax stamp revenue. That's where the De La Rue business is the biggest part of that business. And so any of that revenue or product line that was coming from OPSEC will get integrated into the core of the De La Rue business. We have the ID business now, passports and national IDs. That's brand new. There was no analogy to that in the OPSEC business. So that'll stand on its own, a direct sale to governments. And think of government ID agencies around the world. And then you have brand protection. And I would divide that into two areas. One's the physical brand protection. That's where OPSEC was really strong. It was a smaller part of the De La Rue business. Those two will come together. And really, the OPSEC group has the lead in that front. And then finally, online brand protection, which was uniquely part of OPSEC. So that stands on its own. So those are the really four main buckets of products. And then some natural synergies and sales SG&A across those four groups. So hopefully that helps.

Thank you. As a reminder, to ask a question, you will need to press star 1-1 on your telephone and wait for your name to be announced. We ask you to please limit it to one question and one follow-up. Our next question comes from Bobby Brooks with Northland Capital Markets. Your line is now open.

Hey, good morning, guys. Morning. Morning, Bobby. So kind of piggybacking on the last question but a little bit different just on the go-to-market strategy, obviously authentication business is now a pretty sizable scale and it even has its own branding now. So I was just curious if you could discuss the go-to-market strategy on winning more business. I think broadly brands want to protect themselves, so I feel like it's not about pitching them on your values. So then what really are these discussions centered on with potential new customers?

Well, I think you're right on it, Bobby. You know, we've got the leading position now by far, and, you know, the most important prestigious brands in the world like the NFL using us. So typically the conversation is around, you know, just like our currency business starts with technology leadership and the kind of products and services we're offering. And if you take a contract like the NFL, it's about share of wallet expansion as they want more of their articles protected with our physical authentication and then adding on the digital services as well. That's kind of a common refrain, right, across every brand, particularly when they have a physical product they're trying to protect. And our sales process is direct to those brands. So we go direct now as Crane Authentication with our account leads to those brands. Obviously, we use our reference customer base as probably one of the strongest calling cards you can have given we're servicing all of the major, particularly sports brands, worldwide as well as some consumer brands. Some of those, obviously, we can disclose, some we can't. But that really sets a really good foundation to show what these other brands are doing as second-tier brands and other people start to adopt more authentication. So that's the cycle. You know, it takes 12 or so months to get someone in, as we've talked about. But once you get them in, it's typically a land and expand strategy around new offerings.

Got it. That's super helpful. And then just kind of piggybacking on that as well, as you think about the authentication business over the next 18 months or so, do you guys see the potential of the authentication growth rate accelerating as it gains more momentum, or maybe it's more so you land kind of a really large deal with a major high-volume brand? Just trying to get a sense of how you think what you think the growth potential is here, because I think it's really big, but trying to get a sense of what your thought is.

Yeah, I'll start that one and then maybe turn it over to Aaron for some other remarks. We're expecting mid-single-digit growth in the market, and now we're headed out as green authentication under a new platform, and we've got a lot to do, but we feel very confident that we can achieve that growth level. I think there's not anything further than that that we'd call right now.

Yeah, I would just add to what Christina said. I think we're very excited about it. We think expectations are set appropriately at mid-single-digit growth. And also, I would say, Bobby, just on the sales process, you typically work on the account to secure it, and then you get just a natural step up as the brand brings products online. It's not quite a... just a dramatic step up. So they add more products in, it grows, it's a nice incremental increase in revenue and volume. It's also why it's very resilient, because as that grows, you typically never go backwards. So it's just a nice, steady, recurring type of offering. So I would say steady, consistent, stable expansion of the products.

Thank you. Our next question comes from Damian Karras with UBS. Your line is now open.

Hey, guys. Just a few follow-up questions here. First one, I just wanted to see if you could give us an update on OPSEC in terms of the synergies. You know, I think you were expecting over time to kind of get, like, you know, high single-digit, millions or so of synergies. Where do you stand? Like, how much of that benefit might not be reflected yet in your P&Ls today?

Yeah, thanks for that, Damon. Yeah, OPSEC's performing as expected. We continue to kind of execute our both commercial and internal synergy programs. What I would add now that we've closed De La Rue, that actually helps us accelerate some of those activities. I would fully expect, you know, as we now go through into the back half of this year, that we'll start to see an acceleration of those synergies now that we're able to combine the two together. It helps us get at some of the opportunities, as you can imagine, a little bit simpler.

Okay, so it sounds like the lion's share of that is still kind of out there.

Yeah, but very clear line of sight to that, Damian, and now we can unlock it with a combination of the two. Yep, it makes sense.

And then you mentioned kind of like mid-single digit or better long-term target for authentication. You know, both OPSEC and DailyRoot obviously are inorganic contributors to current financials. But could you just maybe parse that out a little bit for those two pieces of the business, what you're expecting this year for kind of the underlying growth?

Yeah, I'm sorry. I just want to make sure I hear it correctly. It's for OPSEC and De La Rue, Damian, is your question?

Yeah, just kind of like, you know, I think if I recall correctly, like I think you were expecting OPSEC to kind of maybe grow mid-single digits this year, but just an update on those two pieces, like how much 2005 growth looks like.

Yeah, thanks for the clarification. You're correct. We expect OPSEC to grow in mid-single digits this Again, performing as expected, and that's what our outlook would be for the full year. And then combined, with our leading position, we're going to grow hopefully a little bit better with our technology than market, but that's where we would say this is a consistent mid-single-digit grower now under the umbrella of crane authentication.

Okay, great. Thanks for your time.

Thanks, Damian.

Thank you. I'm showing no further questions at this time. I would now like to turn it back to Aaron Sake for closing remarks.

Thank you very much. And thank you all for joining us and for your time this morning and your questions. As I mentioned earlier, I sincerely appreciate all the efforts from our Crane NXT team over the course of Q1. It's been fantastic for me personally to be part of this team navigating the economic environment while also driving forward our key growth and strategic priorities. And that includes the close of the De La Rue transaction. So we're just doing what we said we were going to do. And I look forward to continuing this conversation in a few months with our Q2 results. So with that, thank you again and have a great day.

Thank you for your participation in today's conference. This does conclude the program. You may now disconnect.