Crane NXT Co (CXT) 2023 Q2 法說會逐字稿

Greetings, and welcome to the Crane NXT, Co. Second Quarter 2023 Earnings Conference Call. (Operator Instructions) And please note that this conference is being recorded.

您好，歡迎參加 Crane NXT 公司 2023 年第二季度收益電話會議。 （操作員說明）請注意，本次會議正在錄製中。

I will now turn the conference over to your host, Jason Feldman, Vice President, Investor Relations. Thank you, Jason. You may begin.

現在我將會議交給東道主投資者關係副總裁賈森·費爾德曼 (Jason Feldman)。謝謝你，傑森。你可以開始了。

Thank you, operator, and good day, everyone. Welcome to our second quarter 2023 earnings release conference call. I'm Jason Feldman, Vice President of Investor Relations. On our call this morning, we will also have Aaron Saak, our President and Chief Executive Officer; and Christina Cristiano, our Senior Vice President and Chief Financial Officer.

謝謝您，接線員，大家好。歡迎參加我們的 2023 年第二季度收益發布電話會議。我是賈森·費爾德曼，投資者關係副總裁。今天早上的電話會議上，我們的總裁兼首席執行官 Aaron Saak 也將出席。以及我們的高級副總裁兼首席財務官克里斯蒂娜·克里斯蒂亞諾。

As usual, we will start off our call with a few prepared remarks, after which we will respond to questions. Just a reminder that the comments we make on this call may 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 on Form 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 and tables at the end of our press release and accompanying slide presentation, both of which are available on our website at www.cranenxt.com in the Investor Relations section.

像往常一樣，我們將以一些準備好的發言開始我們的電話會議，然後我們將回答問題。請注意，我們在本次電話會議中發表的評論可能包括一些前瞻性陳述。我們建議您參閱我們的收益報告底部以及我們的 10-K 表格年度報告以及與前瞻性陳述相關的後續文件中的警告性語言。此外，在電話會議期間，我們將使用一些非GAAP 數字，這些數字與我們的新聞稿和隨附幻燈片演示末尾的可比GAAP 數字和表格進行了調整，這兩個數據均可在我們的網站www .cranenxt 上獲取。 com 在投資者關係部分。

Now let me turn the call over to Aaron.

現在讓我把電話轉給亞倫。

Thank you, Jason, and good morning. We appreciate everyone joining the call to discuss our second quarter financial results reported yesterday afternoon. Before we begin, I'd like to take this opportunity to thank all of the NXT team members around the world for their efforts to produce a very strong Q2.

謝謝你，傑森，早上好。我們感謝大家加入電話會議討論我們昨天下午報告的第二季度財務業績。在我們開始之前，我想藉此機會感謝全球所有 NXT 團隊成員為製作出非常強大的第二季度所做的努力。

As many of you know, this is our first quarter post separation, and I'm very pleased with our operational execution. Overall, the results were ahead of our expectations. Both Crane Payment Innovations and Crane Currency had very strong quarters, and year-to-date, both businesses have done better than we guided at the beginning of the year.

正如你們許多人所知，這是我們分離後的第一個季度，我對我們的運營執行情況感到非常滿意。總體而言，結果超出了我們的預期。 Crane Payment Innovations 和 Crane Money 的季度表現都非常強勁，今年迄今為止，這兩家公司的表現都比我們年初的預期要好。

You can see the highlights on our Q2 performance on Slide 3. We delivered $352 million in sales with 6% core sales growth ahead of our expectations. Adjusted EBITDA was $104 million with adjusted EPS of $1.12 in Margin performance was also very strong with adjusted EBITDA margins over 29% and adjusted operating margins of over 26%. Notably, adjusted operating margins were above 30% in both segments, and these margins reflect significant sequential improvement.

您可以在幻燈片 3 上看到我們第二季度業績的亮點。我們實現了 3.52 億美元的銷售額，核心銷售額增長了 6%，超出了我們的預期。調整後 EBITDA 為 1.04 億美元，調整後每股收益為 1.12 美元。利潤率表現也非常強勁，調整後 EBITDA 利潤率超過 29%，調整後營業利潤率超過 26%。值得注意的是，這兩個部門的調整後營業利潤率均超過 30%，這些利潤率反映出環比的顯著改善。

Finally, adjusted free cash flow was $70 million. This supported $50 million of debt repayment in the quarter, driving down our net debt-to-EBITDA to approximately 1.5x. This leverage continues to give us substantial financial flexibility for M&A, and we remain confident in our plan to achieve approximately 100% free cash flow conversion this year. Consistent with our culture, these results were driven by the disciplined execution of the Crane business system and our mindset of continuous improvement. The strong first half positions us very well for the remainder of 2023 and gives us confidence to raise our full year adjusted EPS guidance by $0.10 to a range of $3.85 to $4.15.

最終，調整後的自由現金流為 7000 萬美元。這支持了本季度 5000 萬美元的債務償還，將我們的淨債務與 EBITDA 之比降低至約 1.5 倍。這種槓桿作用繼續為我們的併購提供了巨大的財務靈活性，我們對今年實現約 100% 自由現金流轉換的計劃仍然充滿信心。與我們的文化一致，這些成果是由克瑞業務系統的嚴格執行和我們持續改進的心態推動的。上半年的強勁表現使我們在 2023 年剩餘時間里處於有利地位，並讓我們有信心將全年調整後每股收益指導提高 0.10 美元，達到 3.85 美元至 4.15 美元的範圍。

The increased guidance primarily reflects our revised outlook for higher core growth driven by the strong orders and backlog at Crane Currency. In total, we now expect core growth to be in the range of 3% to 5%, up approximately 100 basis points from our prior guidance. We're very happy with how we performed in Q2 and the improved full year guidance. I'm also very pleased with the progress of our separation. We continue to wind down the [TSAs] with Crane Company, and we are on track with our expectations for all aspects related to the separation.

上調的指導主要反映了我們對由克瑞貨幣強勁的訂單和積壓推動的更高核心增長的預期的修訂。總體而言，我們現在預計核心增長率將在 3% 至 5% 之間，比我們之前的指引高約 100 個基點。我們對第二季度的表現以及改進的全年指導感到非常滿意。我對我們分居的進展也感到非常高興。我們將繼續與 Crane 公司解除 [TSA]，並且我們對與分離相關的所有方面的期望都在正軌上。

Now I'm going to hand the call over to Christina to walk us through more details on the financials. I'll come back after she speaks and provide some additional comments on our continued progress around our strategy. With that, let me pass the call over to Christina.

現在我要把電話轉給克里斯蒂娜，讓我們了解更多有關財務的細節。她發言後我會回來，並對我們圍繞戰略的持續進展提供一些補充評論。現在，讓我把電話轉給克里斯蒂娜。

Thank you, Aaron. And I'd also like to thank our global Crane NXT associates for their hard work and great execution this quarter. We appreciate you. As Aaron mentioned, we had another strong quarter. As shown on Slide 4, adjusted EPS of $1.12 and core sales growth of 6% were ahead of our expectations and reflect core sales acceleration relative to last quarter. We also delivered strong margins with significant sequential improvement from last quarter. Adjusted operating margins of 26.5% increased 320 basis points as compared to the first quarter and adjusted EBITDA margins of 29.6% also increased significantly on a sequential basis. Free cash flow of $70 million reflects free cash flow conversion of 109%, consistent with normal seasonality and supportive of our full year expectation of adjusted free cash flow conversion of approximately 100%.

謝謝你，亞倫。我還要感謝我們的全球 Crane NXT 員工本季度的辛勤工作和出色的執行力。我們很感激你。正如亞倫提到的，我們又經歷了一個強勁的季度。如幻燈片 4 所示，調整後每股收益為 1.12 美元，核心銷售額增長 6%，超出了我們的預期，反映出核心銷售額相對於上季度的加速增長。我們還實現了強勁的利潤率，較上季度連續顯著改善。調整後營業利潤率為 26.5%，較第一季度增長 320 個基點，調整後 EBITDA 利潤率為 29.6%，環比也大幅增長。 7000 萬美元的自由現金流反映出 109% 的自由現金流轉換，與正常季節性一致，並支持我們調整後自由現金流轉換約為 100% 的全年預期。

Overall, we had great execution by both of our strategic platforms. Moving to Slide 5. Crane Payment Innovations had a solid quarter with core sales growth of 8% driven by a combination of continued end-customer demand and some further easing of the supply chain constraints that we have been managing over the last few quarters. Again, this quarter, the improved supply chain conditions allowed us to ship products out of our backlog earlier than we originally expected. Adjusted segment margins increased 430 basis points to 31.1% as compared to last year, reflecting strong pricing, net of inflation, productivity and cost savings actions along with higher volumes, all partially offset by modestly unfavorable product mix, great execution, both operationally and on pricing.

總體而言，我們的兩個戰略平台都具有出色的執行力。轉向幻燈片 5。Crane Payment Innovations 季度表現穩健，核心銷售額增長 8%，這得益於持續的終端客戶需求以及我們過去幾個季度一直在管理的供應鏈限制的進一步放鬆。同樣，本季度供應鏈狀況的改善使我們能夠比最初預期更早地完成積壓產品的發貨。調整後的分部利潤率比去年增長了430 個基點，達到31.1%，反映了強勁的定價（扣除通貨膨脹因素）、生產力和成本節約行動以及銷量的增加，所有這些都被適度不利的產品組合、運營和運營方面的出色執行力所部分抵消。價錢。

From a market perspective, we continue to see solid demand in the gaming sector, where we are winning new casinos and growing share. We are also seeing continued strength in our service business, allowing us to increase our recurring revenue. This includes a large order won during the quarter from a financial services customer to refresh their equipment and provide ongoing maintenance services. Looking forward, we remain confident in our outlook for 2023 at CPI. As anticipated, we will continue to reduce our backlog in Q3 and Q4 given the improvements in the supply chain. Additionally, we expect order rates to normalize to pre-COVID levels as our customers adjust their inventories to reflect reduced lead times.

從市場角度來看，我們繼續看到遊戲行業的強勁需求，我們正在贏得新的賭場並不斷增長的份額。我們還看到我們的服務業務持續強勁，使我們能夠增加經常性收入。這包括本季度從金融服務客戶那裡贏得的一筆大訂單，用於更新他們的設備並提供持續的維護服務。展望未來，我們對 2023 年 CPI 的前景仍然充滿信心。正如預期的那樣，鑑於供應鏈的改善，我們將繼續減少第三季度和第四季度的積壓訂單。此外，隨著我​​們的客戶調整庫存以反映交貨時間的縮短，我們預計訂單率將恢復到新冠疫情爆發前的水平。

We are continuing to assess the overall demand conditions for CPI's end markets, especially in the shorter-cycle businesses. In total, given our backlog and strong competitive positioning, we remain confident in our full year guidance for CPI. As we discussed at our Investor Day in March, a key component of our strategy is continuing to introduce new products that help our customers improve their productivity and the consumer experience. For example, we recently announced the launch of Paypod Compact, the latest addition to our portfolio of automated cash management solutions for retailers seeking fully customizable, self-service or attended checkout systems. This new product built on the foundation of our core payment detection and authentication technology has the same advantages as other payment automation solutions, including reduced labor needs and improving the consumer experience, but with a flexible footprint that is superior to other self-checkout solutions for many smaller retail environments.

我們正在繼續評估CPI終端市場的整體需求狀況，特別是周期較短的業務。總的來說，鑑於我們的積壓訂單和強大的競爭地位，我們對全年 CPI 指引仍然充滿信心。正如我們在三月份的投資者日討論的那樣，我們戰略的一個關鍵組成部分是繼續推出新產品，幫助我們的客戶提高生產力和消費者體驗。例如，我們最近宣布推出 Paypod Compact，這是我們自動化現金管理解決方案組合的最新成員，適用於尋求完全可定制、自助服務或有人值守結賬系統的零售商。這款新產品建立在我們的核心支付檢測和身份驗證技術的基礎上，具有與其他支付自動化解決方案相同的優勢，包括減少勞動力需求和改善消費者體驗，但其靈活的佔地面積優於其他自助結賬解決方案許多較小的零售環境。

The solution also has the added benefit of complete integration with our Simplifi Remote Management Software, giving our customers real-time data on hardware health, cash inventory and other diagnostics. Paypod Compact is another example of how we continue to leverage our differentiated technology to create value-added solutions for customers.

該解決方案還具有與我們的 Simplifi 遠程管理軟件完全集成的額外優勢，為我們的客戶提供有關硬件運行狀況、現金庫存和其他診斷的實時數據。 Paypod Compact 是我們如何繼續利用差異化技術為客戶創造增值解決方案的另一個例子。

Moving to Crane Currency on Slide 6. The quarter was ahead of our expectations with core sales growth of 3.7% and adjusted segment operating margin of 30.2%, a 330 basis point improvement over the prior year. The outperformance was driven by international sales with strong operational performance and productivity across the business. As we explained last quarter, we are seeing lower U.S. government production volumes as the Bureau of Engraving and Printing focuses on a $10 bill redesign program. Additionally, we are continuing to see a greater mix of orders for lower denomination bills. We expect these trends to continue for the balance of 2023. Overall, we remain confident and excited about the opportunity that the U.S. government's bill redesign program creates for our business over the next decade.

轉到幻燈片 6 上的克瑞貨幣。該季度核心銷售額增長 3.7%，調整後的部門營業利潤率為 30.2%，比上年提高 330 個基點，超出了我們的預期。這一優異表現是由國際銷售以及整個企業強勁的運營績效和生產力推動的。正如我們上季度所解釋的，我們看到美國政府的產量下降，因為雕刻和印刷局專注於 10 美元鈔票的重新設計計劃。此外，我們繼續看到更多小面額紙幣的訂單。我們預計這些趨勢將持續到 2023 年。總體而言，我們對美國政府的法案重新設計計劃在未來十年為我們的業務創造的機會仍然充滿信心和興奮。

On the international side of the business, we are seeing broad-based strength reflected by our backlog nearly twice the size it was at this time last year. And in this market, Crane Currency continues to take market share with our industry-leading micro-optics technology. For example, in the quarter, we launched new banknotes with our machine-readable RAPID HD Detect technology. This technology is invisible to the eye, but easily verified by banknote processing equipment, including CPI's detection and authentication equipment.

在國際業務方面，我們看到了廣泛的實力，我們的積壓訂單數量幾乎是去年同期的兩倍。在這個市場上，CraneCurrency憑藉我們行業領先的微光學技術繼續佔據市場份額。例如，在本季度，我們推出了採用機器可讀的 RAPID HD Detect 技術的新紙幣。這項技術肉眼看不見，但很容易被鈔票處理設備驗證，包括CPI的檢測和認證設備。

This is just another example of how Crane Currency continues to win with its best-in-class technology. Given the strength of the recent orders and existing backlog, we expect currency to exceed our original expectations for core growth for the full year, with operating margins in line with our prior guidance. On Slide 7, free cash flow was $70 million, and we are confident in achieving an adjusted free cash flow conversion ratio of approximately 100% this year. Our capital structure is flexible and continues to get stronger. We repaid $50 million of our term loan during the second quarter, given the strength of our free cash flow, reducing net debt to EBITDA to approximately 1.5x. This gives us approximately $1 billion of M&A capacity and substantial flexibility to deploy capital to M&A going forward.

這只是克瑞貨幣如何憑藉其一流的技術繼續獲勝的另一個例子。鑑於近期訂單和現有積壓訂單的強勁勢頭，我們預計全年核心增長將超過我們最初的預期，營業利潤率符合我們之前的指導。在幻燈片 7 上，自由現金流為 7000 萬美元，我們有信心今年實現約 100% 的調整後自由現金流轉換率。我們的資本結構靈活且不斷增強。鑑於我們的自由現金流強勁，我們在第二季度償還了 5000 萬美元的定期貸款，將 EBITDA 的淨債務減少至約 1.5 倍。這為我們提供了約 10 億美元的併購能力，並為未來的併購部署資本提供了極大的靈活性。

Moving to guidance on Slide 8. As Aaron mentioned, we are raising the midpoint of our adjusted EPS guidance by $0.10 to a range of $3.85 to $4.15. Compared to prior items, the primary driver is higher core sales growth driven by Crane Currency, which flow through to margins at a normal operating leverage rate. We now expect core sales growth of 3% to 5%, up from our prior range of 2% to 4%. More broadly, the longer-term key drivers of the business remain unchanged from what we discussed at our March Investor Day. At CPI, we have strong secular trends supporting investment in automation and productivity, and we continue to see improvements in the supply chain, allowing us to ship our backlog sooner than expected.

轉到幻燈片 8 的指導。正如 Aaron 提到的，我們將調整後每股收益指導的中點提高 0.10 美元，達到 3.85 美元至 4.15 美元的範圍。與之前的項目相比，主要驅動力是克瑞貨幣推動的更高的核心銷售增長，該增長以正常的運營槓桿率流入利潤。我們現在預計核心銷售額增長 3% 至 5%，高於之前 2% 至 4% 的預期。更廣泛地說，業務的長期關鍵驅動因素與我們在三月份投資者日討論的內容保持不變。在 CPI，我們有強大的長期趨勢支持對自動化和生產力的投資，而且我們繼續看到供應鏈的改善，使我們能夠比預期更快地運送積壓訂單。

At Crane Currency, we continue to gain a share in the international business and in product authentication. The U.S. business is performing as expected with lower production as the U.S. government prepares for a series of newly redesigned bills, which is a very good opportunity for us in the years ahead. Overall, our investment thesis is unchanged. We had very solid execution in Q2, and we are optimistic for the remainder of the year. Let me now hand it back to Aaron for a few additional comments.

在克瑞貨幣，我們不斷在國際業務和產品認證方面獲得份額。由於美國政府正在準備一系列新的重新設計的法案，美國業務的表現符合預期，但產量較低，這對我們未來幾年來說是一個非常好的機會。總體而言，我們的投資理念沒有改變。我們在第二季度的執行非常穩健，我們對今年剩餘時間持樂觀態度。現在讓我把它交還給亞倫，徵求一些補充意見。

All right. Thanks, Christina. Moving to Slide 9. I want to summarize the key takeaways for our second quarter results. For another quarter, we delivered better-than-expected performance on both sales and operating profit. Crane Currency had a very strong quarter. It continues to gain share, and we have greater forward visibility from an increasingly strong backlog position. For creating payment innovations, it remains on track and it meets our expectations for the rest of the year with the supply chain continuing to improve. Taken together, these factors give us confidence to raise our guidance for a second time this year, and we now expect full year adjusted EPS in the range of $3.85 to $4.15. In addition to the strong operational performance, our balance sheet continues to get even stronger. We have already paid down $50 million of the $350 million term loan we incurred at the time of separation, and this gives us flexibility for M&A at approximately a 1.5x net debt-to-EBITDA.

好的。謝謝，克里斯蒂娜。轉向幻燈片 9。我想總結一下我們第二季度業績的關鍵要點。在另一個季度，我們的銷售和營業利潤表現均好於預期。克瑞貨幣的季度表現非常強勁。它繼續獲得份額，並且我們從日益強勁的積壓訂單中獲得了更大的前瞻性。在創建支付創新方面，它仍然處於正軌，並且隨著供應鏈的不斷改善，它滿足了我們對今年剩餘時間的預期。總而言之，這些因素使我們有信心今年第二次提高我們的指導，我們現在預計全年調整後每股收益在 3.85 美元至 4.15 美元之間。除了強勁的運營業績外，我們的資產負債表也繼續變得更加強勁。我們已經償還了分拆時產生的 3.5 億美元定期貸款中的 5,000 萬美元，這為我們提供了併購靈活性，淨債務與 EBITDA 的比率約為 1.5 倍。

Moving beyond the recent financial performance. For the benefit of those newer to the story, and as a reminder, for those already familiar with Crane NXT, we're a technology-driven business with substantial opportunities to grow the company both within the core and beyond into near adjacencies. More specifically, as shown on Page 10, NXT is an industry leader providing trusted technology solutions to secure, detect and authenticate what matters most to our customers. We have 2 industry-leading businesses, Crane Currency, which provides proprietary technology to secure currency and other high-value physical products and CPI, which offers detection equipment and systems, aftermarket services and connectivity as well as other solutions focused on detecting and authenticating payment transactions.

超越近期的財務表現。為了讓那些剛接觸這個故事的人受益，並提醒那些已經熟悉 Crane NXT 的人，我們是一家技術驅動型企業，擁有大量機會使公司在核心內部和周邊地區發展壯大。更具體地說，如第 10 頁所示，NXT 是行業領導者，提供值得信賴的技術解決方案來保護、檢測和驗證對我們客戶最重要的內容。我們擁有兩個行業領先的業務：Crane Money，它提供專有技術來保護貨幣和其他高價值實物產品的安全；CPI，它提供檢測設備和系統、售後服務和連接以及其他專注於檢測和驗證支付的解決方案交易。

These businesses are on track to deliver $1.4 billion in sales this year, with adjusted operating margins above 27% and free cash flow conversion of approximately 100%. In addition to the strength of our technology, the business profile includes about 40% of sales, which come from reoccurring and recurring revenue. As we discussed at our Investor Day, our core business is resilient, with mid-single-digit growth through multiple economic cycles. Additionally, we have very clearly demonstrated our ability to drive operational improvements through the deployment of the Crane Business System over many years. This is truly a hallmark of the company and has resulted in best-in-class financials and very strong free cash flow conversion.

這些企業今年有望實現 14 億美元的銷售額，調整後的營業利潤率將超過 27%，自由現金流轉換率約為 100%。除了我們的技術實力外，業務概況還包括約 40% 的銷售額，這些銷售額來自經常性和經常性收入。正如我們在投資者日討論的那樣，我們的核心業務具有彈性，在多個經濟周期中都實現了中個位數的增長。此外，我們已經非常清楚地展示了我們多年來通過部署起重機業務系統來推動運營改進的能力。這確實是該公司的一個標誌，並帶來了一流的財務狀況和非常強勁的自由現金流轉換。

Our financial profile is built on a number of core strengths and capabilities, including our technology leadership. This leadership is demonstrated through launching of new products like Paypod Compact and RAPID HD Detect as we discussed earlier today. Beyond our technology and innovation, another hallmark of our company is our disciplined operational execution built on the tools of the Crane Business System. It's with the same focus on operational excellence that we developed our formula for shareholder value creation as shown on Slide 11. It starts at the top of the image, built on a foundation of a very resilient core business growing in mid-single digits.

我們的財務狀況建立在許多核心優勢和能力的基礎上，包括我們的技術領先地位。正如我們今天早些時候討論的那樣，Paypod Compact 和 RAPID HD Detect 等新產品的推出證明了這種領先地位。除了我們的技術和創新之外，我們公司的另一個標誌是我們基於起重機業務系統工具構建的嚴格的運營執行。正是出於對卓越運營的同樣關注，我們制定了股東價值創造公式，如幻燈片11 所示。它從圖像的頂部開始，建立在以中個位數增長的非常有彈性的核心業務的基礎上。

We continue to deploy CBS or the Crane business system to increase margins and improve productivity in the core. This generates our strong free cash flow conversion of approximately 100%. And we put this free cash flow to work through our disciplined capital allocation strategy. This includes reinvestment in the core business, paying a competitive dividend and deploying M&A targeting higher growth in resilient end markets. The cycle is continuous. And over time, it will position NXT as a strong compounder creating significant shareholder value. As part of this value-creation strategy, we've set very clear goals for the business over the next 5 years. As shown on Slide 12, building off our strong foundation, we plan to grow the business to $3 billion in revenue and grow core revenue at mid-single-digit plus. We'll maintain high 20% adjusted EBITDA margins along with strong free cash flow conversion of approximately 100%.

我們繼續部署 CBS 或 Crane 業務系統，以增加利潤並提高核心生產力。這使我們的自由現金流轉換率高達約 100%。我們通過嚴格的資本配置策略來運用這種自由現金流。這包括對核心業務的再投資、支付有競爭力的股息以及部署旨在彈性終端市場實現更高增長的併購。循環是連續的。隨著時間的推移，它將把 NXT 定位為一個強大的複合企業，創造顯著的股東價值。作為價值創造戰略的一部分，我們為未來 5 年的業務設定了非常明確的目標。如幻燈片 12 所示，在我們堅實的基礎上，我們計劃將業務收入增長到 30 億美元，並將核心收入增長到中個位數以上。我們將保持 20% 的調整後 EBITDA 利潤率以及大約 100% 的強勁自由現金流轉換率。

Our performance in the second quarter is another important step in our journey as a new company, and it gives us continued confidence in achieving these longer-range objectives. Again, I'd like to say a sincere thank you to the entire NXT team for their strong efforts in Q2 and for everyone who took time to join the call this morning. So with that, operator, we're now ready to take our first question.

我們第二季度的業績是我們作為一家新公司旅程中的又一個重要步驟，它讓我們對實現這些長期目標充滿信心。我想再次對整個 NXT 團隊在第二季度的努力以及今天早上抽出時間參加電話會議的每個人表示誠摯的感謝。那麼，操作員，我們現在準備好回答第一個問題了。

(Operator Instructions) And the first question comes from the line of Matt Summerville with D.A. Davidson.

（操作員說明）第一個問題來自 Matt Summerville 和 D.A.戴維森。

Aaron, can you maybe spend a minute talking about the backlog burn you saw in CPI, whether that's a concern? It sounds like for your comments, that's more of a normalization than a concern, but I'd kind of like to cement that. And maybe can you comment on incoming order rates across the key verticals in the quarter? And then I have a follow-up.

亞倫，您能否花一點時間談談您在 CPI 中看到的積壓燃燒情況，這是否是一個問題？聽起來你的評論更像是一種常態化而不是擔憂，但我想鞏固這一點。也許您能評論一下本季度主要垂直行業的新訂單率嗎？然後我有一個後續行動。

Sure. Thanks for the question. I think that's right, how you framed it. I think what we're seeing are customers across all the verticals in CPI adjusting their orders given shorter lead times, remembering those lead times have gone down from extended months to now back to weeks. And I think that's due to the execution of our supply chain team, which we're very proud of here. So I think we're seeing what's similar in other businesses that have reported recently.

當然。謝謝你的提問。我認為這是對的，你是如何構建它的。我認為我們看到的是消費者物價指數（CPI）所有垂直領域的客戶在交貨時間縮短的情況下調整訂單，記住交貨時間已經從延長的幾個月縮短到現在的幾週。我認為這要歸功於我們供應鏈團隊的執行力，我們對此感到非常自豪。所以我認為我們在最近報導的其他企業中看到了類似的情況。

I believe and I think we all believe this is going to continue through the balance of '23. And ultimately, we're normalizing, as you said, to order rates and behaviors that are more what we saw pre-COVID. So long story short then, Matt, the backlog burndown in the quarter is probably a little faster than we originally thought. Again, that's just due to execution and customers who've been waiting on products. So we're happy to ship those products. It's going to be more in line going forward with the backlogs you would have experienced in CPI pre-COVID. And we still feel very good, though, about our market position here, Matt, and our share. So again, in talking to customers, we feel very good about that. So -- given the current backlog, we feel confident about '23, as Christina said, but realize our first half was a little bit better than we really thought at the beginning of the year due to the supply chain improvement. And certainly, that comes out of some of what we expected in the second half. So full year is intact for CPI, again, really strong first half improvement. So maybe I'll pause there, Matt.

我相信，而且我想我們都相信這種情況將持續到 23 年。最終，正如您所說，我們正在使訂單率和行為正常化，這與我們在新冠疫情之前看到的情況更加相似。長話短說，馬特，本季度的積壓工作消耗可能比我們最初想像的要快一些。同樣，這只是由於執行力和一直在等待產品的客戶。因此，我們很高興運送這些產品。這將更符合新冠疫情爆發前消費者物價指數 (CPI) 中所經歷的積壓情況。不過，馬特，我們對我們在這裡的市場地位和份額仍然感覺非常好。因此，在與客戶交談時，我們對此感覺非常好。因此，鑑於目前的積壓情況，我們對 23 年充滿信心，正如克里斯蒂娜所說，但我們意識到，由於供應鏈的改善，我們上半年的情況比我們年初真正想像的要好一些。當然，這符合我們對下半年的一些預期。因此，全年 CPI 完好無損，上半年改善確實強勁。所以也許我會暫停一下，馬特。

Yes, sure. I'd like you to comment a little bit on the 4 main verticals. Obviously, gaming sounds like the real standout. So maybe talk about kind of where you're at in the context of the gaming cycle, maybe using a baseball analogy from an innings standpoint? And then as you know, we follow 2 of the big self-checkout OEMs. They've been very vocal about driving down their own inventories to your comment to improve their own respective cash flow. Have you seen a fairly pronounced impact on your business? And do you expect that to continue to play out in the latter part of the year?

是的，當然。我希望您對 4 個主要垂直領域發表一些評論。顯然，遊戲聽起來確實很出色。所以也許可以談談你在遊戲週期中所處的位置，也許從局數的角度使用棒球類比？如您所知，我們關注兩家大型自助結賬原始設備製造商。他們一直非常直言不諱地表示要根據您的評論降低自己的庫存，以改善各自的現金流。您是否看到這對您的業務產生了相當明顯的影響？您預計這種情況會在今年下半年繼續發生嗎？

Yes. No, that's a great question. Let me go back to the top then to gaming in each of the verticals. So again, we've had a really strong year -- strong several years in gaming. We feel very good about our share position there and our win rate with new casinos. Certainly, we think that that's playing out. And we're probably normalizing that kind of use your baseball analogy. We're into the back half of the game, so to speak, into the later innings. But again, we have now a very rich, deep installed base in gaming that gives us a long-term ability to continue to grow our service business and to have spare parts and upgrade cycles which is fantastic for NXT. We see strength in financial services, too.

是的。不，這是一個很好的問題。讓我回到頂部，然後談談每個垂直領域的遊戲。再說一遍，我們度過了非常強勁的一年——遊戲領域強勁的幾年。我們對我們在那裡的股票地位以及我們在新賭場的贏率感到非常滿意。當然，我們認為這種情況正在發生。我們可能正在正常化這種使用棒球的類比。我們進入了比賽的後半段，可以說，進入了後幾局。但同樣，我們現在在遊戲領域擁有非常豐富、深入的安裝基礎，這使我們能夠長期持續發展我們的服務業務，並擁有備件和升級週期，這對 NXT 來說是非常棒的。我們也看到了金融服務業的實力。

As Christina mentioned, we won a large order. This quarter, we think there's additional service business to come that will continue to grow recurring revenue. So again, feel good about financial services. I think vending another one of our large verticals kind of executed as expected. We're going to see growth in that vertical this year. But again, probably one of the more challenged verticals coming out of COVID, as we've talked about at Investor Day. And then to your last point in retail, I think the dynamic you just described is exactly what we're seeing with our -- 2 of our largest customers in that vertical in Diebold and NCR, where we know they're focused on a variety of other things right now from separations to coming back out of bankruptcy and exactly the dynamic you mentioned is playing out in our business.

正如克里斯蒂娜提到的，我們贏得了一份大訂單。本季度，我們認為將會出現更多服務業務，這將繼續增加經常性收入。再說一遍，對金融服務感覺良好。我認為我們的另一個大型垂直產品的銷售是按預期執行的。今年我們將看到該垂直領域的增長。但正如我們在投資者日討論的那樣，這可能是新冠疫情帶來的更具挑戰性的垂直行業之一。然後，關於零售業的最後一點，我認為您剛才描述的動態正是我們在迪堡和 NCR 的垂直領域中最大的 2 個客戶所看到的，我們知道他們專注於各種產品現在還有其他事情，從分居到走出破產困境，而您提到的動態正在我們的業務中上演。

Now with that said, if you zoom out on the long-term trends and the focus here on how do we continue to provide solutions that help the labor scarcity with automation? Is that trend going to continue to play out long term? Absolutely. I think we have high conviction in that. And in fact, we think both Diebold and NCR, who are very good customers of our, come out better and stronger post the separation and bankruptcies. So I think in the near term, it certainly created a different focus for them in the long term. We feel very confident in the dynamics underlying the market.

話雖如此，如果您關注長期趨勢，並將重點放在我們如何繼續提供解決方案，通過自動化來幫助解決勞動力短缺問題？從長遠來看，這種趨勢會持續下去嗎？絕對地。我認為我們對此抱有很高的信念。事實上，我們認為 Diebold 和 NCR 都是我們的好客戶，在分拆和破產後，它們都變得更好、更強。所以我認為，從短期來看，從長遠來看，這肯定會為他們帶來不同的關注點。我們對市場的動態充滿信心。

And the next question comes from the line of Bob Labick with CJS Securities.

下一個問題來自 CJS 證券的 Bob Labick。

Congratulations on another strong quarter.

祝賀又一個強勁的季度。

Thanks, Bob. Thank you. Appreciate that.

謝謝，鮑勃。謝謝。感謝。

Absolutely. So maybe I'll jump over to currency. And it sounds like U.S. kind of remains on track with expectations going into the year, and the upside really is from the international. Can you tell us, is it new country wins? Is it more volume at existing customers? Is it more technology shift in kind of mix? What's the upside in international? And how does this play out beyond this year as well?

絕對地。所以也許我會轉向貨幣。聽起來美國在今年仍處於預期軌道上，而且上行確實來自國際市場。你能告訴我們，這是新國家的勝利嗎？現有客戶的銷量是否更大？是否更多的是混合技術的轉變？國際化有什麼好處？今年以後情況如何？

Sure, Bob. So just a reminder, I know for some other folks listening, currency versus the CPI business, certainly very project-based. So we look at projects coming in, whether those are new currency designs or those are existing customers wanting upgrades to a particular bank note. And it tends to come in these type of waves. But what I'll tell you is we're winning multiple projects for new designs incorporating in our technology, and it's fairly broad-based.

當然，鮑勃。所以提醒一下，我知道對於其他一些人來說，貨幣與 CPI 業務當然是基於項目的。因此，我們會關注即將到來的項目，無論是新的貨幣設計還是想要升級特定鈔票的現有客戶。它往往以這種類型的波浪形式出現。但我要告訴你的是，我們正在贏得多個融入我們技術的新設計項目，而且基礎相當廣泛。

So we feel very good about the backlog build reported again today being up over 90%. That's giving us visibility into the rest of '23, now into early parts of 2024. So it's not just one country or it's not one bill. It's multiple coming through that have already entered into the backlog. And when we look out in just the amount of volume going on with our sales team and quoting and activity in the funnel, we feel very good about that. And fundamentally, to answer your question, Bob, it's technology. It's the superiority of our micro-optics technology, and we're -- that's already been deployed. It continues to increase share across the fleet of denominations.

因此，我們對今天再次報告的積壓工作增長超過 90% 感到非常滿意。這讓我們能夠了解 23 世紀餘下的時間，現在到 2024 年初。所以這不僅僅是一個國家，也不是一項法案。有多個已完成的任務已進入積壓工作。當我們觀察銷售團隊的交易量以及漏斗中的報價和活動時，我們對此感覺非常好。從根本上來說，鮑勃，回答你的問題就是技術。這是我們微光學技術的優勢，而且我們已經部署了。它在各種教派中的份額不斷增加。

And then I think secondly, and something we probably don't talk about as much, but it's incredibly important here is the quality of our product, the quality of our paper, the quality of our facility in Malta and Dalton. And the teams who have worked very hard to produce the world's most beautiful and well-designed banknotes and our customers feel that. So I think that's, again, some confidence we have here in currency, just the broad-based nature of wins we're seeing internationally. And then the U.S. government business, as Christina mentioned, meeting expectations. As you know, it's one customer who is going through a new design cycle and they're performing as expected this year, and again, progressing very well along the new design of the $10 note.

然後我想其次，我們可能不會談論太多，但這裡非常重要的是我們產品的質量，我們紙張的質量，我們在馬耳他和道爾頓工廠的質量。那些為生產世界上最美麗、設計最精良的鈔票而付出巨大努力的團隊，我們的客戶也感受到了這一點。因此，我認為這再次表明了我們對貨幣的信心，以及我們在國際上看到的基礎廣泛的勝利。然後，正如克里斯蒂娜提到的，美國政府業務達到了預期。如您所知，該客戶正在經歷一個新的設計週期，他們今年的表現符合預期，而且 10 美元紙幣的新設計進展順利。

Okay. Great. And then just one more for me, and I'll jump back in queue. But can you talk a little bit about -- I think you mentioned product authentication, brand authentication. I know it's a small but rapidly growing and increased focus part of your business. Give us a sense of where you are right now, any new opportunities out there? Or how you see that playing out the balance of this year and maybe going forward from there?

好的。偉大的。然後再給我一個，我就會插回隊列。但你能談談——我想你提到了產品認證、品牌認證。我知道這是您業務中規模雖小但增長迅速且日益受到關注的部分。讓我們了解一下您現在的處境，有什麼新的機會嗎？或者您如何看待今年餘下的時間以及今後的發展？

Yes, happy to, Bob. As you mentioned, this is a very small part of the business right now, far less than -- or less than $10 million. We had a few million dollars, $5 million last year. As you said, we see this growing and it's going to grow this year at a very high rate, which we feel good about. I think when you look at the funnel of this business and just the amount of inquiries coming in, it's very optimistic of where we think we take this business over the next several years.

是的，很高興，鮑勃。正如您提到的，目前這只是業務的一小部分，遠低於 1000 萬美元。我們有幾百萬美元，去年有五百萬美元。正如你所說，我們看到這種增長，而且今年將以非常高的速度增長，我們對此感到滿意。我認為，當你看看這項業務的漏斗以及收到的詢問數量時，我們對未來幾年這項業務的發展非常樂觀。

We also think it wins based on technology, and that's what we're seeing based on applying the micro-optics technology that is the hallmark of our currency business into product authentication. And so again, to summarize, Bob, we feel very good. We're going to have high growth rates in that business this year in a funnel that's building in an area we're applying more people, more resources, and a more focus to continue to diversify NXT over the long term.

我們還認為它的勝利基於技術，這就是我們在將微光學技術應用到產品認證中所看到的，微光學技術是我們貨幣業務的標誌。再次總結一下，鮑勃，我們感覺非常好。今年，我們將在該業務中實現高增長率，我們將在這個領域投入更多的人力、更多的資源，並更加註重繼續實現 NXT 的長期多元化。

(Operator Instructions) And the first question is a follow-up from Matt Summerville with D.A. Davidson.

（操作員說明）第一個問題是 Matt Summerville 和 D.A. 的後續問題。戴維森。

Just a couple of quick follow-ups. Can you guys maybe comment on how we should be thinking about the second half earnings cadence given some of the mix and just general revenue lumpiness for lack of a better term, dynamics you see in both CPI and currency?

只需幾個快速跟進。你們能否評論一下我們應該如何考慮下半年的盈利節奏，考慮到一些組合以及由於缺乏更好的術語而導致的總體收入不穩定，以及您在 CPI 和貨幣方面看到的動態？

Sure. I think, Matt, as we look at the back half, with the updated guidance, let's call the midpoint at 4, we see that playing out kind of an equal part, call it, 50-50 in terms of where we see earnings per share playing out in Q3 and Q4. And as you rightly just said, that's due to where we see some order shipping out of currency, where we see the backlog burn probably being strong again in Q3 here in CPI just due to the supply chain improving. So again, I would kind of say, if you think both about revenue and you think about earnings or OP, it's probably a 50-50 split in Q3 and Q4.

當然。我認為，馬特，當我們看後半部分時，根據更新的指導，讓我們將中點稱為4，我們看到，就我們看到的每股收益而言，我們看到了平等的部分，稱之為50-50。分享在第三季度和第四季度進行。正如您剛才所說，這是因為我們看到一些訂單以貨幣形式運輸，我們看到第三季度 CPI 中的積壓訂單燃燒可能會再次強勁，因為供應鏈有所改善。所以，我想說，如果你同時考慮收入和收益或運營成本，那麼第三季度和第四季度可能會出現 50-50 的分配。

Perfect. And then just as a follow-up on M&A. Can you talk about how the activity levels maybe have been evolving over the last 90 days, actionability in the funnel, which business segment you see the most near-term opportunity, what you're seeing with multiples, et cetera?

完美的。然後作為併購的後續行動。您能否談談過去 90 天內的活動水平如何演變、漏斗中的可操作性、您認為哪個業務部門近期有機會、您看到的倍數是什麼，等等？

Yes. what I'd say, Matt, is I think we're optimistic in how that's playing out over the last 90 days. I think that's a good frame of what's changed since the last time we spoke. We continue to see more deals coming our way. By nature of this discussion, there's some we passed on, but we're getting good looks, and we see that activity probably increasing for us. And we think our position is stronger with how -- how our stock has performed, but also the strength of our balance sheet, as Christina mentioned, the ability to pay it down and reduce our leverage.

是的。馬特，我想說的是，我認為我們對過去 90 天的情況感到樂觀。我認為這是自上次我們交談以來發生的變化的一個很好的框架。我們繼續看到更多交易即將到來。根據這次討論的性質，我們傳遞了一些內容，但我們得到了很好的關注，並且我們看到這種活動可能會增加。我們認為，我們的地位更強大，因為我們的股票表現如何，而且我們的資產負債表的實力，正如克里斯蒂娜提到的，償還債務和降低杠桿的能力。

So we've got the capacity. We see some targets playing out in both areas of the business. But I think even more importantly, as we discussed at Investor Day in near adjacencies, they really start to expand and diversify NXT, which we're particularly excited about. So we're going to continue to cultivate the funnel. It's an active part of what I'm doing. It's an active part of what a lot of folks across the NXT leadership team are focused on, not taking our eye off the ball, obviously, on operational execution, that's first and foremost. But as we've said before, Matt, you know the first deal is very important. It's more important to us than the deals probably that follow because, by nature, it's the first and sets the tone. So we're going to be very disciplined in our process. And with that, we're going to make sure it fits the strategy around secure, detect, authenticate that we're good owners of the business, and we can add value and generate that double-digit ROIC that we talked about is a threshold for us and generate strong returns long term.

所以我們有能力。我們看到一些目標在這兩個業務領域都在實現。但我認為更重要的是，正如我們在投資者日附近討論的那樣，他們真的開始擴大 NXT 並使之多樣化，對此我們感到特別興奮。因此，我們將繼續培育漏斗。這是我正在做的事情的一個積極的部分。這是 NXT 領導團隊中許多人關注的積極部分，顯然，我們的注意力集中在運營執行上，這是首要的。但正如我們之前所說，馬特，你知道第一筆交易非常重要。對我們來說，這比後續的交易更重要，因為從本質上講，它是第一筆交易並定下了基調。因此，我們將在流程中非常遵守紀律。有了這個，我們將確保它符合圍繞安全、檢測、驗證我們是良好的業務所有者的策略，並且我們可以增加價值並產生我們談到的兩位數的 ROIC，這是一個門檻為我們帶來豐厚的長期回報。

So with all that said, our focus here, I think, as you've seen both last quarter and this quarter is to get out of gate strong operationally, to cultivate the funnel. We're doing that, let the stock season that's occurring and make sure we don't miss a beat operationally. And we're going to keep doing that for the balance of the year. And when the right opportunity comes, which I have a lot of confidence, it will, based on what we're seeing, we're going to be ready to go.

綜上所述，我認為，正如您在上個季度和本季度所看到的那樣，我們的重點是在運營上走出困境，培育漏斗。我們正在這樣做，讓庫存季節到來，並確保我們不會錯過任何運營節奏。我們將在今年剩下的時間裡繼續這樣做。當合適的機會到來時，我對此充滿信心，根據我們所看到的情況，我們將做好出發的準備。

Ladies and gentlemen, at this time, there are no further questions. And I'd like to pass it back over to Aaron for any closing comments.

女士們、先生們，現在沒有其他問題了。我想將其轉回亞倫以徵求結束意見。

All right. Thank you, operator. Well, I'd like to end today's call by again thanking all the NXT team members across the world for just excellent performance in Q2. It's really their hard work, their dedication to our customers that makes the results like we reported today possible. Also, I'd like to thank everyone listening today and for the questions that were asked. And so with that, I hope you have a great rest of your day, and we look forward to speaking to you again next quarter. Thank you.

好的。謝謝你，接線員。好吧，在結束今天的電話會議時，我想再次感謝全球所有 NXT 團隊成員在第二季度的出色表現。正是他們的辛勤工作和對客戶的奉獻才使得我們今天報告的結果成為可能。另外，我還要感謝今天聆聽的所有人以及提出的問題。因此，我希望您今天休息愉快，我們期待下個季度再次與您交談。謝謝。

Ladies and gentlemen, this does conclude today's teleconference. You may disconnect your lines at this time. Thank you for your participation, and have a great day.

女士們、先生們，今天的電話會議到此結束。此時您可以斷開線路。感謝您的參與，祝您有美好的一天。