Crane NXT, Co. 10-Q

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations This Management’s Discussion and Analysis of Financial Condition and Results of Operations contains information about Crane NXT, Co., some of which includes “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are statements other than historical information or statements about our current con dition. Investors can identify forward-looking statements by the use of terms such as “believes,” “contemplates,” “expects,” “may,” “could,” “should,” “would,” or “anticipates,” other similar phrases, or the negatives of these terms. References herein to “Crane NXT,” “the Company,” “we,” “us” and “our” refer to Crane NXT, Co. and its subsidiaries. References to "organic sales” exclude currency effects and, where applicable, the first-year impacts of acquisitions and divestitures. Amounts in the following discussion are presented in millions, except employee, share and per share data, or unless otherwise stated. Management believes that non-GAAP financial measures that exclude these items provide investors with an alternative metric that can assist in identifying underlying growth trends in our business and facilitate comparison of our sales performance, for example, with prior and future periods that are complementary to GAAP metrics. We have based the forward-looking statements relating to our operations on our current expectations, estimates and projections about us and the markets we serve. We caution investors that these statements are not guarantees of future performance and involve risks and uncertainties. In addition, we have based many of these forward-looking statements on assumptions about future events that may prove to be inaccurate. There are a number of other factors that could cause actual results or outcomes to differ materially from those expressed or implied in the forward-looking statements. Such factors also include, among others: the impact of tariffs and other trade measures; changes in global economic conditions (including inflationary pressures) and geopolitical risks, including macroeconomic fluctuations; demand for its products, which is variable and subject to factors beyond its control; risks associated with conducting a substantial portion of its business outside the U.S.; information systems and technology networks failures, breaches in data security, theft of personally identifiable and other information, and non-compliance with its contractual or other legal obligations regarding such information; being unable to identify or complete acquisitions, or to successfully integrate the businesses the Company acquires; fluctuation in the prices of, or disruption in its ability to source, components and raw materials, and delays in the distribution of its products; loss of personnel or being able to hire and retain additional personnel needed to sustain and grow its business as planned; being unable to successfully develop and introduce new products, which would limit its ability to grow and maintain its competitive position; governmental regulations and failure to comply with those regulations; the ability to protect its intellectual property; risks from litigation, claims and investigations, including those related to product liability and warranties, and employee, commercial, intellectual property and environmental matters; risks related to its ability to improve productivity, reduce costs and align manufacturing capacity with customer demand; significant competition in the Company's markets; additional tax expenses or exposures; adverse impacts from intangible asset impairment charges; inadequate or ineffective internal controls; and risks related to the Separation, including not obtaining the intended tax treatment of the Separation transaction, failure of Crane Company to perform under the various transaction agreements and actual or potential conflicts of interest with Crane Company; and other risks noted in reports that we file with the Securities and Exchange Commiss ion, including our Annual Report on Form 10-K for the fiscal year ended December 31, 2025, and subsequent reports and other documents filed with the Se curities and Exchange Commission. We do not undertake any obligation to update or revise any forward-looking statements to reflect any future events or circumstances. 23 MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Recent Transactions Antares Vision Acquisition Crane NXT acquired a controlling interest in Antares Vision S.p.A. (“Antares Vision”) through a multi‑phase acquisition which was completed on March 31, 2026, resulting in 100% ownership. Antares Vision is a global provider of inspection, detection, and track‑and‑trace solutions serving life sciences and food and beverage end markets. Prior to obtaining control, the Company accounted for its investment in Antares Vision under the equity method of accounting and recognized its proportionate share of Antares Vision’s results of operations in "Equity investment income" in the Unaudited Condensed Consolidated Statements of Operations. Credit Facilities In the three months ended March 31, 2026, we drew down $30.0 million and repaid $30.0 million on our Revolving Facility to fund working capital requirements. We borrowed €317.9 million, or $366.9 million, under the Term Loan B to fund the acquisition of Antares Vision and assumed $123.5 million of Antares Vision debt, which is expected to be paid in the second quarter of 2026. In addition, we repaid $112.4 million of Term Loan A. Conflict in the Middle East The Company is closely monitoring the ongoing conflict in the Middle East and other active military engagements, for the potential effects on global markets and business operations. Although our direct presence in affected regions is limited, our status as a global enterprise with international operations means we distribute products and solutions across numerous countries. Management has taken appropriate steps to secure the safety of its associates in affected regions, as applicable. At present, the duration and scope of these conflicts remains uncertain, and we may experience increased risk of adverse impacts on our financial results such as increased financial market volatility and rising energy costs. Basis of Presentation See Note 1, “Organization and Basis of Presentation” for more details on financial statement presentation basis. 24 MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Results from Operations – Three Month Periods Ended March 31, The following information should be read in conjunction with our Unaudited Condensed Consolidated financial statements and related notes. All comparisons below refer to the first quarter 2026 versus the first quarter 2025 , unless otherwise specified. Three Months Ended March 31, Favorable/(Unfavorable) Change (in millions) 2026 2025 $ % Net sales $ 387.7 $ 330.3 $ 57.4 17.4 % Cost of sales $ 231.8 $ 190.1 $ (41.7) (21.9) % as a percentage of sales 59.8 % 57.6 % Selling, general and administrative $ 130.6 $ 102.9 $ (27.7) (26.9) % as a percentage of sales 33.7 % 31.2 % Restructuring charges 3.1 — (3.1) NM Operating profit $ 22.2 $ 37.3 $ (15.1) (40.5) % Operating margin 5.7 % 11.3 % Other income (expense): Interest expense (17.8) (11.5) (6.3) (54.8) % Equity investment income 4.7 0.1 4.6 NM Miscellaneous income, net 0.1 2.2 (2.1) NM Total other expense, net (13.0) (9.2) (3.8) (41.3) % Income before income taxes 9.2 28.1 (18.9) (67.3) % Provision for income taxes 2.4 6.4 4.0 62.5 % Net income before allocation to noncontrolling interest $ 6.8 $ 21.7 $ (14.9) (68.7) % Less: noncontrolling interest in subsidiaries’ earnings $ 0.4 $ — $ 0.4 NM Net income attributable to common shareholders $ 6.4 $ 21.7 $ (15.3) (70.5) % Sales increased by $57.4 million, or 17.4%, to $387.7 million in 2026. The change in sales included: • sales benefit from the De La Rue acquisition of $26.5 million, or 8.0%, • organic sales growth of $18.3 million, or 5.6%, driven primarily by the Currency business, and • favorable foreign currency translation of $12.6 million, or 3.8%. Cost of sales increased by $41.7 million, or 21.9%, to $231.8 million in 2026. The increase was driven by the impact of the De La Rue acquisition of $18.9 million, or 9.9%, acquisition related amortization, higher manufacturing expenses, unfavorable foreign currency translation and unfavorable mix, partially offset by productivity gains. Selling, general and administrative expenses increased by $27.7 million, or 26.9%, to $130.6 million in 2026. The increase was driven by the impact of the De La Rue acquisition, stock-based compensation expense from the Antares Vision acquisition and higher transaction related expenses, partially offset by the impact of cost saving actions. Operating profit decreased by $15.1 million, or 40.5%, to $22.2 million in 2026. The decrease was driven by incremental costs related to acquisitions, such as higher transaction related expenses of $9.3 million, or 24.9%, and higher stock-based compensation expense as a result of the Antares Vision acquisition of $10.7 million, or 28.7%, partially offset by the impact of higher volumes in Currency net of higher manufacturing expenses of $6.8 million, or 18.2%. Our effective tax rate for the three months ended March 31, 2026 was higher than the prior year’s comparable period primarily due to the lower excess stock compensation deduction in the U.S. as of March 31, 2026. 25 MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Segment Results of Operations - Three Month Periods Ended March 31, Security and Authentication Technologies (“SAT”) Three Months Ended March 31, Favorable/(Unfavorable) Change (in millions) 2026 2025 $ % Net sales by product line: Banknotes and Security Products $ 140.4 $ 93.4 $ 47.0 50.3 % Authentication Products and Solutions 52.4 34.0 18.4 NM Total net sales $ 192.8 $ 127.4 $ 65.4 51.3 % Cost of sales $ 129.1 $ 86.3 $ (42.8) (49.6) % as a percentage of sales 67.0 % 67.7 % Selling, general and administrative $ 46.4 $ 38.7 $ (7.7) (19.9) % as a percentage of sales 24.1 % 30.4 % Restructuring charges $ 2.2 $ — $ (2.2) NM Operating profit $ 15.1 $ 2.4 $ 12.7 NM Operating margin 7.8 % 1.9 % Sales increased by $65.4 million, or 51.3%, to $192.8 million in 2026, driven by organic sales growth of $28.6 million, or 22.4%, the sales benefit from the De La Rue acquisition of $26.5 million, or 20.8%, and favorable foreign exchange of $10.3 million or 8.1%. • Banknote and security product sales increased by $47.0 million, or 50.3%, to $140.4 million in 2026. The increase was driven by organic sales growth of $37.0 million, or 39.6%, reflecting higher sales in both U.S. and international markets. Favorable foreign currency translation of $10.0 million, or 10.7%, reflects the strengthening of the Swedish krona and euro against the U.S. dollar. • Authentication products and solutions sales increased to $52.4 million in 2026, driven by the sales benefit from the De La Rue acquisition. Cost of sales increased by $42.8 million, or 49.6%, to $129.1 million in 2026, due to the impact of the De La Rue acquisition of $18.9 million, or 21.9%, acquisition related amortization, higher manufacturing expenses, the impact of higher volumes in the Currency business, and unfavorable foreign currency translation. Selling, general and administrative expense increased by $7.7 million, or 19.9%, to $46.4 million in 2026, due to the impact of the De La Rue acquisition. Operating profit increased by $12.7 million, to $15.1 million in 2026, reflecting the impact of higher volumes, net of higher manufacturing expenses, of $12.6 million. Productivity gains and the impact of cost saving actions were largely offset by acquisition related amortization. 26 MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Detection and Traceability Technologies (“DTT”) Three Months Ended March 31, Favorable/(Unfavorable) Change (in millions) 2026 2025 $ % Net sales by product line: Detection and Inspection Products and Solutions $ 160.1 $ 169.9 $ (9.8) (5.8) % Services 34.8 33.0 1.8 5.5 % Total net sales $ 194.9 $ 202.9 $ (8.0) (4.0) % Cost of sales $ 102.7 $ 103.8 $ 1.1 1.1 % as a percentage of sales 52.7 % 51.2 % Selling, general and administrative $ 59.9 $ 49.4 $ (10.5) (21.3) % as a percentage of sales 30.7 % 24.3 % Restructuring charges $ 0.9 $ — $ (0.9) NM Operating profit $ 31.4 $ 49.7 $ (18.3) (36.8) % Operating margin 16.1 % 24.5 % Sales decreased by $8.0 million, or 4.0%, to $194.9 million in 2026, driven by lower organic sales of $10.3 million, or 5.1%, offset by favorable foreign currency translation of $2.3 million, or 1.1%. • Sales of Detection and Inspection products and solutions decreased by $9.8 million, or 5.8%, to $160.1 million in 2026. The decrease was driven by organic sales decline of $12.0 million, or 7.1%, due to lower hardware volumes. The sales decrease was partially offset by favorable foreign currency translation of $2.2 million, or 1.3%, reflecting the strengthening of the British pound and Australian dollar against the U.S. dollar, partially offset by the weakening of the Japanese yen against the U.S. dollar. • Service revenue increased by $1.8 million, or 5.5%, to $34.8 million in 2026, driven by favorable pricing. Cost of sales decreased by $1.1 million, or 1.1%, to $102.7 million in 2026, mainly due to the impact of lower sales volumes, partially offset by unfavorable mix and unfavorable foreign currency translation. Selling, general and administrative expense increased by $10.5 million, or 21.3%, to $59.9 million in 2026. The increase was driven by stock-based compensation expense from the Antares Vision acquisition. Operating profit decreased by $18.3 million, or 36.8%, to $31.4 million in 2026. The decrease reflects the impact of lower volumes of $7.2 million, or 14.5%, and stock-based compensation expense as a result of the Antares Vision acquisition of $10.7 million, or 21.5%, unfavorable mix of $2.1 million, or 4.2%, partially offset by the impact of cost saving actions. 27 MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Liquidity and Capital Resources Three Months Ended March 31, (in millions) 2026 2025 Net cash (used for) provided by: Operating activities $ (14.0) $ (19.1) Investing activities (231.2) (13.6) Financing activities 239.8 38.0 Effect of exchange rates on cash, cash equivalents and restricted cash (1.8) 6.7 (Decrease) increase in cash, cash equivalents and restricted cash $ (7.2) $ 12.0 Our operating philosophy is to deploy cash provided from operating activities, when appropriate, to provide value to stockholders by reinvesting in existing businesses, by making acquisitions that will strengthen and complement our portfolio; by divesting businesses that are no longer strategic or aligned with our portfolio and where such divestitures can generate capacity for strategic investments and initiatives that further optimize our portfolio; by paying dividends and repaying prepayable debt. At any given time, and from time to time, we may be evaluating one or more of these opportunities, although we cannot assure you if or when we will consummate any such transactions. Our current cash balance, together with cash we expect to generate from future operations along with borrowings available under the Credit Agreement, is expected to be sufficient to finance our short- and long-term capital requirements. In the three months ended March 31, 2026, we borrowed €317.9 million, or $366.9 million, under the Term Loan B to fund the acquisition of Antares Vision and assumed $123.5 million of Antares Vision debt, which is expected to be paid in the second quarter of 2026. In addition, we repaid $112.4 million of Term Loan A. Operating Activities Cash used for operating activities was $14.0 million in the first three months of 2026, compared with $19.1 million during the same period last year. The decrease in cash used for operating activities was primarily driven by lower working capital requirements. Investing Activities Cash used for investing activities primarily consists of cash used for capital expenditures and acquisitions. Capital expenditures are made primarily for increasing capacity, replacing equipment, supporting new product development, and improving information systems. Cash used for investing activities was $231.2 million in the first three months of 2026, compared with $13.6 million in the comparable period last year. The increase in cash used for investing activities was primarily driven by the payment of $225.4 million to acquire the remaining ownership stake in Antares Vision. Financing Activities Cash provided by (used for) financing activities consists primarily of dividend payments to shareholders, repayments of indebtedness, and proceeds from our credit facilities. Cash provided by financing activities was $239.8 million during the first three months of 2026, compared with $38.0 million in the comparable period last year. The increase in cash provided by financing activities was primarily driven by higher net proceeds from the Term Loan B borrowing of $366.9 million to fund the Antares Vision acquisition, partially offset by $112.4 million repayment of the Term Loan A and $53.5 million lower net revolver borrowings compared to the prior year. Recent Accounting Pronouncements Information regarding new accounting pronouncements is included in Note 1 to our Unaudited Condensed Consolidated Financial Statements. 28 Item 3. Quantitative and Qualitative Disclosures About Market Risk There have been no material changes in the information called for by this item since the disclosure in our Annual Report on Form 10-K for the year ended December 31, 2025.