Crane NXT, Co. Q1 FY2025 Earnings Call

Good day, and thank you for standing by. Welcome to the Crane NXT Q1 2025 Earnings Call. 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 Roache, 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 2, 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 Saak, our President and Chief Executive Officer; and Christina 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 will 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 3, our first quarter performance was in line with our expectations, with sales growth of 5% and adjusted EPS of $0.54. 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 updates to support the new U.S. bank note series. I'm happy to announce that the upgrades were successfully completed in 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 in Crane 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 to provide on-site equipment repair services in approximately 450 of its U.S. 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 De La Rue Authentication Solutions. And I would again like to extend a very special welcome to our new team members from De La Rue. 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 De La Rue 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 4. 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 3 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 million 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 5, crane authentication has a geographically diverse global footprint with the majority of sales coming from long-standing customers. Crane Authentication also serves as 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, TruTag, Smart Packaging, and De La Rue 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 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.

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 7, 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 papermaking equipment in preparation for the new banknote series, and the expected softness in CPI's gaming end 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 $0.54. Moving to our segments and starting with CPI on Slide 8. 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 1. Moving to Security and Authentication Technologies on Slide 9. 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 bank note 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 under-absorption 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 5 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 5 years. OpSec also provides anti-piracy and online brand protection services to the NFL, and we are excited to continue our long-standing 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 2-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 1.7x and we estimate net leverage will be approximately 2.3x 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 provide 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 source 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 pushout of buying decisions to impact CPI in the second quarter and potentially longer if the China tariffs remain in place at the current levels. For SAT, the downside demand risk is more moderate, given our diverse set of government customers and strong backlog. 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 De La Rue 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 million 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 pushout 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 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 upgrade in our U.S. papermaking facility that will support the new series of bank notes, 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 De La Rue 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.

Our first question comes from Matt Summerville with D.A. Davidson.

Thanks. Good morning. Aaron, I wanted to talk about CPI for a minute. Can you provide more detail on what you expect for the full year in terms of growth rates across the four major end markets served by CPI? How much of this could potentially be pushed out? It seems to be around $20 million, but I would appreciate your confirmation on that. I am also interested in which verticals are most affected by this deferral. I have a follow-up as well.

Yes. Thanks, Matt. And just off the bat, I think you have that sized correctly at the $20 million and most of that really in Q2, given what we see happening with the tariffs. But just to back up, our 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. Going back to kind of your broad question, 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, we see orders 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 2 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, 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. 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-net, first quarter kind of as expected. The big change in vending, the rest of the verticals, Matt, performing as expected.

Got it. And then moving over to the Crane 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?

Yes, Matt, I'd say overall, Currency performed just as expected. In Q1, probably a little bit better in International. And you could see that 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. 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.

Our next question comes from Bob Labick with CJS Securities.

Good morning and thank you for taking our questions. I wanted to start with the new Crane Authentication. Congratulations on closing the De La Rue deal. This entire segment is new for you and for us. Could you provide some insight into how the authentication market is behaving given the current economic climate, which includes potential inflation, a possible recession, and U.S. isolationism? You mentioned tariffs, so feel free to include that as well. How is the business positioned in this uncertain environment, and what growth do you anticipate from it?

Well, thanks for that, Bob. 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'd invite everyone to go check out the website and the upgrades that we've made as we've launched the new business. I'd 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 ID. 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 franchised brands, fantastic customers that Christina mentioned, a new multiyear 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 does your pipeline look? What are your expectations there? And what areas in authentication can you build versus buy?

Yes, I believe that's generally accurate, Bob, although the speed of transactions is currently different. Our pipeline continues to be robust, with no significant changes over the past few quarters; in fact, we're seeing more opportunities added. Regardless of the market conditions, our primary focus remains consistent with our mergers and acquisitions strategy and overall capital allocation. Our main objective is to create long-term value for shareholders through three key pillars: investing in our core business, exemplified by successful U.S. government investments; distributing a competitive dividend, which we've increased this year; and executing disciplined M&A efforts, such as the acquisitions of De La Rue and OpSec. Our pipeline includes companies within the $100 million to $500 million range that align with our strategy. We have a few technology additions in the pipeline, such as TruTag. It's crucial that any deal we undertake generates returns on capital exceeding 10% over the next five years, which remains our standard. Given the current market environment, we need to proceed with additional caution and discipline. Nonetheless, our pipeline is strong and includes opportunities that leverage our technological leadership, whether geographically, in new markets, or through process enhancements. I'm confident we will see more deal activity in the upcoming year, Bob.

Our next question comes from Damian Karas with UBS.

Hey, good morning, everyone. Congratulations on closing the De La Rue deal. I know that's a big step for you guys.

It sure is. Thanks.

Yes. So maybe you can 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've separated into the market, Damian, and then what I would call as us doing what we do with CBS when we put these type of businesses in the portfolio. And in this case, uniquely put 2 businesses together and that really gets to the synergies. 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, there's a, as 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, call it, 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 integration.

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 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 $230-ish million, $240-ish million 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?

Yes, I'll start and Christina may add to this. Overall, aside from the effects of vending and tariffs related to China, which have reached an unforeseen scale in recent months, the rest of our portfolio is performing as anticipated. This includes all verticals and some significant achievements in our services business, which is a strategic priority for us. Regarding the numbers, we expect sales to be roughly flat sequentially in Q2, slightly above $200 million. For the second half of the year, our projections suggest that sales will be in the range of $220 million to $230 million.

Our next question comes from Mike Halloran with Baird.

Hey, good morning. Can you just talk a little bit about the backlog acceleration that you saw here? Obviously, some of it is tied to the 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 into next year, and just help us essentially with the rollout and how to think about that?

Yes, I'll take that one, Mike. First, I want to congratulate our Currency team for their excellent performance in driving this record high backlog. We're really proud of the work they've done, which gives us high confidence in our full-year sales guidance for SAT. In Q1, as you mentioned, we had an incredible backlog, primarily related to the International Currency business. This was expected, driven by the timing of projects. Last quarter, we were a bit lower in Q4 due to a few significant deals that we closed in the first quarter, alongside five micro-optic wins. So overall, we had many great milestones in the quarter to celebrate. We raised our sales guidance for Currency to 5% to 7%, and we anticipate that about 65% of this backlog will deliver in 2025, with the remainder in 2026. In summary, this is another proof point that we're winning in the market with our technology leadership, and we're really excited for the rest of the year.

Can you discuss the go-to-market strategy and the consolidation between the De La Rue addition and the Authentication segment? These channels have been somewhat different and somewhat overlapping. How will the go-to-market approach change, and what will the internal consolidation points look like? Additionally, what operational shifts can we expect on the go-to-market side?

Yes, I believe the natural synergies between these two are quite clear to you and others on the call. You can think of it as four broad business segments. First, there's the government tax stamp revenue, with De La Rue being the largest component. Any revenue or product lines from OpSec will be integrated into the core De La Rue business. We have the ID business now, encompassing passports and national IDs, which is new and has no direct counterpart in OpSec, so it will operate independently, selling directly to governments and government ID agencies globally. Next is Brand Protection, which I would categorize into two areas: physical brand protection, where OpSec had a strong presence but was a smaller part of De La Rue, and online brand protection, which is unique to OpSec. These will also operate independently. Overall, there are two main product groups with natural synergies in sales and SG&A across these four segments. I hope that clarifies things.

Our next question comes from Bobby Brooks with Northland Capital Markets.

Hey, good morning, guys. 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 value. So then what really are these discussions centered on with potential new customers?

I believe you're correct, Bobby. We currently hold a significant leading position in the market, especially with respected brands like the NFL utilizing our services. Conversations typically focus on our technological leadership and the range of products and services we provide. For instance, with a contract like the NFL, it's about expanding their share of wallet as they seek to protect more of their items through our physical authentication while also incorporating our digital services. This approach is common across various brands, especially those with physical products they aim to secure. Our sales process involves reaching out directly to these brands as Crane Authentication, using our account leads. We leverage our reference customer base, which includes major sports and consumer brands globally, as a strong selling point. While we can disclose some customers, others remain confidential. This establishes a solid foundation for showcasing the adoption of authentication by other, lesser-known brands. The process typically takes around 12 months to bring in a new client, but once engaged, we usually employ a land-and-expand strategy to introduce additional offerings.

Got it. That's very helpful. Building on that, as you consider the authentication business over the next 18 months, do you see the possibility of the growth rate accelerating as it gains more traction? Or is it more about securing a significant deal with a major high-volume brand? I'm trying to understand your perspective on the growth potential here, as I believe it could be substantial.

Yes, I'll start with 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 Crane Authentication under our 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 call right now.

Yes, I would just like to add to what Christina mentioned. We are very optimistic about this. We believe that expectations are appropriately set for mid-single-digit growth. Regarding the sales process, you typically work on securing the account, and then there is a natural increase as the brand introduces more products. It's not a sudden leap; as they add more products, it gradually grows, resulting in a nice incremental increase in both revenue and volume. This is why it remains very resilient because as it expands, it typically does not decline. So, it represents a nice, steady recurring type of offering. Therefore, I would describe it as steady, consistent, and stable growth of the products.

Our next question comes from Damian Karas with UBS.

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. I think you were expecting over time to kind of get like 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&L today?

Yes. Thanks for that, Damian. Yes, OpSec's performing as expected. We continue to 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. So I would fully expect 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 2 together.

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

Yes, there is a very clear path forward, Damian. We can achieve it by combining the two.

Yes. It makes sense. And then you mentioned kind of like mid-single-digit or better long-term target for authentication. Both OpSec and De La Rue obviously are inorganic contributors to current financials. But could you just maybe parse that out a little bit for those 2 pieces of the business, what you're expecting this year for kind of the underlying growth?

Yes. I'm sorry, I just want to make sure I hear it correctly. Is your question regarding OpSec and De La Rue, Damian?

Yes, I believe you were anticipating OpSec to grow in the mid-single digits this year. Could you provide an update on the underlying growth for those two areas?

Yes. Thanks for the clarification. You're correct. We expect OpSec to grow at mid-single digits. We are performing as expected, and that's our outlook for the full year. Combined with our leading position, we hope our technology will allow us to grow a bit better than the market. Overall, we see this as a consistent mid-single-digit grower now under the Crane Authentication umbrella.

I'm showing no further questions at this time. I would now like to turn it back to Aaron Saak 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.