Crane NXT, Co. Q3 FY2025 Earnings Call

Good day, and thank you for standing by. Welcome to the Crane NXT Third Quarter 2025 Earnings Conference 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 third quarter 2025 earnings call for Crane NXT. Before we begin, let me remind you that the slides we will reference during this 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 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 third quarter highlights and our operational and financial performance. We will also provide an update on our 2025 financial guidance as well as some initial thoughts on our 2026 outlook for each segment. 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 today's call to review our third quarter results. I'd like to start by recognizing our NXT team members around the world for their continued dedication and for delivering another quarter of strong execution. As shown in the highlights on Slide 3, our third quarter performance was in line with our expectations with sales growing approximately 10% year-over-year and adjusted EPS of $1.28. Our strong free cash flow resulted in a conversion ratio of 115% in the quarter, which puts us on track for our full year target range of 90% to 110% conversion. In Q3, we continue to build momentum in strategic growth areas. Growth in our international currency business continues to exceed our expectations. And in the third quarter, we saw several new customer wins, including a prominent country in Latin America. This raises the total number of new denominations that specify our micro-optics technology to 9 year-to-date, putting us on track to achieve the high end of our target of 10 to 15 new denominations for the full year. Additionally, our international currency backlog remains at near record high levels, and our third quarter sales were stronger than our original forecast. As we continue to see growth in orders, we're taking several actions to increase production to support our customers. Given this sustained momentum, we're raising our full year sales guidance for SAT and NXT overall. In our U.S. currency business, the Federal Reserve recently released its print order for 2026, including a significant increase in demand for higher denomination banknotes containing our advanced security features. Based on this favorable mix, we expect this business to grow in the high single digits next year. Additionally, we're excited for the release of the new $10 bill with the redesign program advancing as planned. In CPI, our service business continues to expand its offerings outside of traditional cash equipment. And in the quarter, we achieved 2 significant wins with customers for installation and ongoing service of kiosks. These wins are contributing to mid-single-digit annual recurring revenue growth in service and building a resilient business for the long term. We're also continuing to execute our strategy to expand upon our market-leading positions. In September, we signed an agreement to acquire Antares Vision, a global leader in detection, inspection, and track and trace technologies for the life sciences and food and beverage sectors. The acquisition of Antares Vision is another important step, building out our portfolio with differentiated technology offerings and aligning NXT to markets with secular tailwinds. We also continue to make strong progress in our integration efforts within the authentication business. As part of our planned product rationalization and 80/20 actions, we're in the process of upgrading several existing customers from the legacy De La Rue authentication offerings to our micro-optics technology, improving our margins and our customer stickiness over the long term. Finally, like many other companies, we continue to manage the impact that tariffs and broader macroeconomic uncertainties are having, particularly in our CPI short-cycle businesses. Balancing the strong performance in SAT with the outlook for demand in CPI, we're narrowing our full year EPS guidance to a range of $4 to $4.10. Moving to the next slide, I'd like to spend a few minutes discussing the significant announcements we made since our Q2 earnings call. First is our announcement to acquire Antares Vision, providing Crane NXT with a leading position in the $2 billion life science and food and beverage track and trace and detection technologies market. These markets benefit from strong tailwinds driven by the continuous rise of counterfeiting and the need for greater quality assurance and compliance with government regulations. Antares Vision brings to NXT a differentiated portfolio of advanced detection and inspection systems. It also offers field and remote service capabilities for new equipment, commissioning, and aftermarket services, very similar to our service business in CPI. Finally, the company offers market-leading track and trace software to ensure the safety and authenticity of products to consumers, brands, and governments. We're moving forward with customary regulatory approvals and expect to close the first phase of the transaction in December. In this first transaction, Crane NXT will acquire an approximate 30% stake in Antares Vision from its largest shareholders. After this closing, we will launch a mandatory public tender offer to all remaining shareholders. Now as a reminder, Crane NXT has secured voting agreements with the largest shareholders of Antares Vision, which assures our ability to take the company private after the completion of the mandatory tender process. Antares Vision is another key milestone in our journey as we continue to build a resilient company through our disciplined M&A process. Over the past 2.5 years, we've taken significant actions to reduce our exposure to cash-centric end markets. And with the acquisition of Antares Vision, we'll have approximately 60% of the portfolio focused on cash-related products and services, down from approximately 80% at the time of separation. These steps strengthen the long-term durability of Crane NXT and align our portfolio to secular tailwinds to accelerate growth. Moving to Slide 5. Another key announcement we made in September was our outlook for the U.S. currency business based on the Federal Reserve Board's release of their annual currency order for 2026. We're very encouraged by the projected increase in volumes for higher denomination banknotes, specifically $10s, $20s, $50s, and $100 bills. These notes contain higher levels of security features in the substrate and in the case of the $100 bill contain our proprietary micro-optics technology. The expected order volumes of these notes, partially offset by a reduction in volumes for lower denomination banknotes will result in our U.S. currency business growing at high single digits in 2026. Additionally, we continue to move forward with scaling up for the launch of the new $10 bill with production scheduled for mid-2026 ahead of the expected public launch. Finally, I'm excited to announce our team has made significant progress working with the Bureau of Engraving and Printing on the design of the new $50 bill scheduled for release in 2028. As a reminder, the design of each bill is a multiyear process, starting with design and pilot production before moving to full-scale production ahead of the release to the public. More to come on these developments as we move into 2026. So with that, let me now hand the call over to Christina to review our third quarter performance in more detail.

Thank you, Aaron, and good morning, everyone. I'd also like to start by saying thank you to our associates around the world and to express our appreciation for your continued efforts. Starting on Slide 6, we delivered third quarter results that were in line with our expectations. Sales were approximately $445 million, an increase of approximately 10% year-over-year, driven by the impact of acquisitions, favorable FX and continued strong performance in currency. Core sales increased approximately 1%, reflecting accelerating growth in SAT, partially offset by expected softness in CPI. Adjusted segment operating profit margin of approximately 28% was up approximately 50 basis points year-over-year, driven by higher SAT volume and improved mix in currency. Free cash flow conversion was approximately 115% in the quarter, and we continue to expect full year conversion to be in the range of approximately 90% to 110%. Finally, we delivered adjusted EPS of $1.28. Moving to our segments and starting with CPI on Slide 7. Sales of approximately $216 million were down approximately 4% year-over-year as double-digit year-over-year growth in gaming was more than offset by declines in other short-cycle end markets, primarily vending, where like other companies, we continue to face headwinds related to the ongoing macroeconomic and tariff uncertainty. Even with this lower volume, we were able to maintain an adjusted operating margin of approximately 31%, reflecting the benefits of cost reduction measures, pricing, and productivity. Looking ahead, we expect sequential margin accretion in the fourth quarter, driven by continued operating discipline, resulting in CPI's full year adjusted operating margin to be between 29% and 30%. Turning to Security and Authentication Technologies on Slide 8. In the third quarter, sales were approximately $229 million and grew approximately 28% year-over-year, including acquisitions. Core sales increased approximately 9% year-over-year, driven by higher volumes and favorable product mix in currency. The volume growth in currency was driven by our ability to optimize our supply chain to produce more banknotes. We are also benefiting from the recent investments we made in our facilities to increase production. Adjusted segment operating profit margin of approximately 24% increased by approximately 250 basis points year-over-year, reflecting the benefit of acquisitions and strong performance in currency. We continue to outperform in currency, maintaining record high backlog levels with approximately 20% organic backlog growth year-over-year. This, along with our strong supply chain execution and ongoing investments to increase production gives us confidence to raise our full year sales guidance. Moving to our balance sheet on Slide 9. We ended the third quarter with net leverage of approximately 2.3x, which we expect will be approximately 2.9x at the full close of the Antares Vision transaction. As we mentioned earlier, we are on track to achieve adjusted free cash flow conversion of approximately 90% to 110% for the full year. This strong free cash flow generation will enable us to pay down debt while continuing to invest in organic growth. Now I'd like to provide an update to our 2025 guidance as shown on Slide 10. Given our continued momentum in SAT, we are increasing our full year sales growth guidance to a range of 9% to 11% from the previous range of 6% to 8%, reflecting the outperformance in currency, partially offset by a reduced sales outlook for CPI. We are also updating our adjusted segment operating profit margin to approximately 25% for the full year from approximately 25.5% to 26.5%, primarily driven by the flow-through of lower CPI volumes and additional costs we are incurring as we increase our international currency production. With these updates, we are narrowing our adjusted EPS guidance to a range of $4 to $4.10. Looking ahead, I'd like to provide our early thoughts on 2026 sales. In SAT, we expect mid-single-digit core growth, driven by favorable product mix in our U.S. currency business and continued strong performance in international currency, supported by our robust backlog and investments to increase our production. We expect core growth in the Authentication business to be mid-single digits, benefiting from increased pricing discipline and cross-selling opportunities. In CPI, we expect flat to low single-digit growth overall with service growing in the mid-single digits. In our hardware products business, where we serve the gaming, retail, and financial services markets, we expect flat to low single-digit growth. Finally, we expect vending to be approximately flat year-over-year, reflecting the ongoing impact of tariffs on demand. We'll provide additional guidance for 2026 during our Q4 earnings call early next year.

Thank you, Christina. In closing, I want to reiterate a few key points from our call today. First, our Q3 performance was in line with our expectations with strong revenue growth, healthy margins, and excellent free cash flow conversion. Second, we continue to build momentum in our strategic growth areas. International currency continues its strong performance, and we're taking actions to maintain our momentum. We're very excited about the trajectory of the U.S. currency business with high single-digit growth expected in 2026, along with the launch of the new $10 bill. Our authentication integration is on track, and we're converting more customers to our advanced micro-optics technology. In CPI, we're making good progress growing annual recurring revenue in our service business into new higher-growth end markets. And finally, we're taking meaningful steps to expand NXT into adjacent markets with growth tailwinds with our recent announcement to acquire Antares Vision. Well, we've been busy, and we're focused on executing our strategy to be a market leader, providing trusted technology solutions that secure, detect, and authenticate our customers' most valuable assets. With all of these actions, we are well positioned to accelerate growth in 2026 and beyond. And I'm excited to share that we'll host an Investor Day on February 25 in New York City, where we'll share more details on our strategy, growth opportunities, and financial priorities. And I look forward to seeing many of you there. In closing, thank you for your time this morning, and I'd like to again thank our dedicated team around the world for their commitment to our customers, our communities, and all of our stakeholders. And so with that, operator, we're now ready to take our first question.

Our first question is from Matt Summerville of D.A. Davidson.

Matt, a couple please.

So first on the currency side of the business, if you're booking in the '27 is it safe to assume you're effectively sold out for '26? And if that's the case, how does this inform what you're doing from a capacitization standpoint in currency overall, whether it be in Malta, whether it be in Sweden or whether it be in New Hampshire? And I guess how much more factory floor flexibility do you have today to accommodate the growth?

Thanks for that question, Matt. And you're right, currency and particularly international currency has just been a standout for us here in 2025. And we're really bullish on the outlook as we look forward. Some customers are wanting orders now shipped into '27. So we're taking that. So I wouldn't quite say to use your words, we're sold out for '26. I would say we are very confident in the backlog and the position it's put us in, in '26 to actually take some of these actions you're referring to. And it's really due to a combination of things. It's both customers reordering their current micro-optic designs. It's also customers moving forward faster to redesign their currency to get ahead of counterfeiting and specifying in our micro-optics. And so where we're at today is we're looking at both organic investments in the near term. That's primarily operational expenditure in terms of adding people and optimizing our own production. It's also working with outside partners. And to your question, that's procuring substrate materials where that makes sense for us; that's a lower margin part of the business, so that's where we'd want to go out to the market with partners. And then also looking at partners as they would do some printing of banknotes for us as well. I believe as we look forward, and as you know, Matt, we're going to look at continued investments in those core micro-optic facilities where we've already made investments and have the ability and space to increase production. And that's something we're certainly looking at for 2026 and beyond. And quite frankly, it's a great investment and a great return for our shareholder investing in core growth. So we're really excited about that as well. So I think we're in a very good place. But as you can appreciate, we're taking it very seriously our role here of keeping governments fully loaded with their currency. And that's really coming in our international business and through primarily emerging markets. And while the backlog is high, the funnel and the sales outlook is equally high, which gives us high confidence in this business as well.

As a follow-up, could you explain why, if USD is experiencing high single-digit growth alongside all the positive international factors such as increasing volume and value, market share improvements, and faster micro-optics redesigns, it doesn't point to a more optimistic organic outlook for SAT in 2026?

It's really two things, Matt, and it's a good question. It's the balance of your first question, which is looking at how we're optimizing the supply chain and just overall production. So those are trade-off decisions that we're making. And then the second, and it's simply the math is, we're going to have really strong comps to compete against in 2026 just due to this overperformance and how international currency is exceeding our expectations. So in that way, it's just simply the comps. And we just want to have a very prudent, balanced approach as we're setting this outlook going into 2026.

Our next question is from Bob Labick of CJS Securities.

So I wanted to start with CPI. Could you maybe dig a little further into what was the delta versus expectations in vending? Kind of what happened now between now and a few months ago in expectations? And is this a kind of signal of a larger change? Or is this just a lumpiness cyclicality? Or how should we think about that change?

Yes. Thanks, Bob, for that. And maybe I'll just put that in context the CPI overall to give you some added color. And I think the real point we want to make is we're taking just a very prudent approach to the outlook going forward, particularly in Q4 and to Christina's prepared remarks for 2026. To your question, when we think about vending, this has just been ongoing order softness after the price increases that we enacted due to tariffs. And in Q3, that business was down in the high single digits. And so we expect it to be down in Q4 as well. And it's just continuing delays of customers sweating the assets, pushing out the decisions to buy as we raise prices. So our assumption here, and again, to take a prudent approach is that's not going to change into Q4. At some point, that dynamic does have to change. But again, we just want to level-set for 2026. I think the real standout here for us in the quarter when you back up the CPI is gaming with strong double-digit growth in Q3, performed as expected and good order growth in gaming as well. And then our services business, where we've done a lot of investments to improve productivity and add some new service tools in is growing at mid-single digits and we expect that for the full year. We expect full single-digit growth next year as we're winning new service contracts, improving our annual recurring revenue outside of the legacy CPI equipment. And that's very optimistic outlook than we have for our CPI service business going forward. I think the other hardware businesses and vending will continue just to have a very balanced, prudent approach to the outlook based on what's happening macroeconomically.

Okay. Great. And then just, I guess, for my follow-up, you mentioned in your prepared remarks, you're starting the kind of upgrading De La Rue sales by adding micro-optics versus their previous security products. Can you maybe dig into that, talk about how that works, what the opportunity is, and how it impacts P&L and margins over time?

Yes. Yes, Bob, and I appreciate that. This is an area and I'm really excited where we're heading and appreciate the hard work the team in authentication has done since we closed De La Rue in May. So through Q3, it's really just four months that we had De La Rue in the portfolio. And from day one, really pre day one, we've always focused on synergies and executing those, both operational and commercial. And this one that we're talking about here is a little bit of a combination of both, where we originally came in and identified some legacy De La Rue holographic products and went in and did our CBS approach here using our 80/20 toolkit to decide to sunset some products and transition customers to micro-optics. That will be complete as we exit midyear next year. And what we're finding is very good success, moving these customers from a very good technology that De La Rue had, but into really the leading, most differentiated anti-counterfeiting technology in our micro-optics. And with that, we're going to see a significant lift in gross margin with those customers as well as increased stickiness because they moved into a very proprietary product. When you put that all together, Bob, we're on track for our synergies that we have communicated. In fact, this program is slightly ahead of schedule and feels very good in the traction that we're getting. And we expect to your question on margins, as we get into the fourth quarter, our authentication business is going to be in the high teens in the fourth quarter in terms of operating profit. And for all of next year, we're going to be exiting the year approaching 20% operating profit on track to what we said we were going to do last quarter.

Our next question is from Damian Karas of UBS.

I wanted to ask for more clarity on the redesigns in the U.S. currency business. You mentioned that production of the $10 note will ramp up around the middle of next year. Are you in a wait-and-see mode until you receive the go-ahead for the launch, or is there anything else you're working on regarding the $10 in the meantime? Additionally, regarding the $50 note that you are starting to develop for a 2028 launch, can you help us understand the financial model around these redesigns for the $50? Is it currently treated just as a cost item while you spend on R&D and SG&A, or will you begin to generate some revenue at these early stages?

Thank you, Damian. I'm really excited about the developments in our U.S. currency business. As you know, it's been a long time coming, but we're reaching a significant turning point as we approach 2026. The $10 program is right on track. We upgraded our equipment in the first quarter and have been running qualification pilot runs as we close out this year, while closely collaborating with the Bureau of Engraving and Printing on the order forecast. We are preparing for full-scale production of the new $10 bill by mid-next year, and everything is proceeding as planned. I recently visited our facility in Dalton, Massachusetts, and the team there has done a fantastic job preparing for the $10 launch. Looking ahead to 2026, we feel confident about our outlook. Regarding the new $50 bill, this represents a significant milestone in the ongoing development of the new U.S. currency series and showcases the progress we're making in the SAT segment. Currently, we do not foresee a financial impact from this in 2026 or even into early 2027. It is important to note that we are in the design phase, working with the Bureau of Engraving and Printing and the Federal Reserve to integrate advanced security features into the new $50, similar to what we did for the $20. We anticipate that more details will be released when the Bureau and the Fed announce the new design, which we expect around the middle of 2026. To put things into perspective, the current variable printing cost for denominations like the $100 bill is about $0.10, while the $50 and $20 bills are between $0.05 and $0.06 each. Though the difference is only a few cents, it adds up significantly across billions of banknotes, with much of that cost attributed to advanced security features, some of which we provide. As we approach 2026 and our Investor Day, we'll share more context about what this means for us in the coming years. We feel very optimistic about the direction we are headed.

That's really helpful. And then I'd like to follow up on CPI. It sounds like really it's just vending that's kind of the incremental source of weakness in the lower guidance there. Would you happen to be able to give us a sense on your CPI orders in the third quarter? Like if you excluded vending, what were the rest of the orders overall trending on a year-over-year basis? And I guess just kind of thinking about as we get past these vending headwinds, do you think that the CPI overall is kind of back in growth territory when we get into the first quarter of the next year?

That's a good question, Damian. I would refer back to Christina's comments about being cautious regarding the outlook, particularly concerning the flat to low single-digit growth in CPI for 2026. Specifically, looking at our orders, our service business is performing well, and we have a growing backlog of service orders that matches the mid-single-digit growth we're experiencing. We plan to continue investing in this area moving forward. In gaming, part of our hardware business, we saw orders increase by double digits, aligning with our expectations and the current market trends, which is promising. The main challenge we face is in vending. If we experience some positive developments, whether due to tariffs or the need to purchase equipment for maintenance, that could benefit us, but we remain cautious about the outlook. Retail results have been mixed among OEMs, with some performing better than others, a trend reflected in public results this week. While we're still supporting our customers' go-to-market strategies, overall, the OEM business has shown mixed performance, leading to a decline in Q3 results. Additionally, equipment orders in our financial service sector also saw a slight decrease in Q3. We believe this mirrors what many other companies are experiencing, with some short cycle businesses showing a bit of uncertainty in the macro environment, resulting in minor delays in orders across those three areas.

Our next question is from Michael Pesendorfer of Baird.

This is Michael Pesendorfer from Baird. I wanted to follow up on the upgrade of some De La Rue products to micro-optics. Is there revenue we should consider as we approach next year? What feedback are you receiving from customers? Also, could you provide some insights on the response to transitioning away from the holographic product towards micro-optic and more proprietary technology?

Thank you. I believe this is a great opportunity to address your question regarding how we are executing the integration as we anticipated. Regarding the 80/20 process, which I'm sure you know well, the material impact on revenue is negligible, effectively rounding to zero. Most of our customers are adopting the new technology, which offers a better price point and improved margins. For those who are not transitioning, the net effect is still minimal for us. The advantage here is that we have simplified our offerings, improved our supply chain, achieved higher margins, and built stronger relationships with our customers. Overall, the response from customers has been excellent, with many expressing enthusiasm for the advanced technology we are providing and how it can enhance their products. This positive reception has been consistent throughout the authentication integration process, from the initial acquisition of OpSec to the unification of OpSec and De La Rue into a cohesive company. The favorable customer response gives us confidence that our strategy is sound, and we have established ourselves as a market leader in authentication technologies.

Got it, Aaron. That color is super helpful. Maybe switching gears to CPI. Just based on the pieces that you gave us for the 2026 framework, how should we be thinking about the impact to margins as we move into 2026, given the elevated contribution from service in terms of growth rate relative to some of the other pieces of that portfolio and obviously, what's going on with vending. How should we be thinking about the margin trajectory in that segment as we move into 2026 and that mix impact?

Well, I'll begin and then pass it to Aaron. It's important to emphasize that we are very confident in our full year target of a 29% to 30% margin for CPI. We are maintaining disciplined operating execution despite the lower volumes we are facing. As mentioned in our prepared remarks, we anticipate this softness to persist. We are adopting a cautious approach to our outlook for next year, but we still plan to uphold a disciplined CBS cadence. Therefore, you can expect our margins to remain in a similar range, if not slightly higher, due to the synergies we are achieving and the execution of pricing and productivity initiatives.

Yes. Thanks, Christina. Just to add a little more to what she said. As a service business is very profitable for us. And so that is a positive impact for us in and across CPI as well as it's a very sticky annual recurring revenue business. So we like that very much, and we're going to keep growing that, as you can see in our results and our outlook. The focus for the hardware business and our vending business is really about maintaining the high operating margins that we have in that 29% to 30% range. As Christina said, I think this is excellent work by the team despite some softness in the top line that we're maintaining this near 30% margin. And that's execution of productivity, cost, CBS toolkit, et cetera. And then I'd be remiss not to say that another hallmark of this business that comes from hardware and vending is great free cash flow, really an excellent free cash flow profile. And that's another key metric as we look at CPI to maintain the high margins, continue to generate this very strong free cash flow and continue to invest and grow our service business and drive recurring revenue. That's really the playbook of CPI as we get into '26.

Our next question is from Bobby Brooks of Northland Capital Markets.

In your expectation of the high single-digit revenue growth for the U.S. currency business next year, does that bake in the uplift of what I think is safe to assume a content uplift in the new $5? I'm just trying to get a gauge on if there could be upside to that outlook when the new design is initially revealed.

Bobby, I'll start on that one. And let me just for a point of clarification, it's the $10 note that we're redesigning right now that will be launched next year, that we're super excited about. And so the high single-digit guidance is really based on the order that came out earlier in the quarter from the Federal Reserve, which had that favorable product mix, as you remember, toward the higher denomination notes. And that includes the $10 note in there as well as increased volumes for the $20, $50, and $100 bills. So we're super excited for that program to launch next year. And as a reminder, the timing of that is out of our control. We're not controlling that release, but we are prepared to do our production, as Aaron said in the prepared remarks, towards the middle of the year. And so we'll expect to start seeing that production happening in the back half of next year.

Got it. So it seems like it doesn't necessarily bake in what an uplift in content might look like on $10?

Yes, it does include the $10 note based on that order. Remember, it's a small part of what we expect for next year considering the timing of the launch. If we begin production in the middle of the year, it won't cover the full year. However, we are very confident in the sales guidance range we provided, which indicates high single-digit growth for U.S. currency.

I appreciate the information. Regarding international currency sales, they are still very strong. In your prepared remarks, you noted that the third quarter was better than expected. I am curious if this was mainly due to timing, such as countries requesting deliveries earlier than planned, or if they initially ordered a certain quantity and then increased that order. I am trying to understand what has driven this increase during the quarter.

Certainly. Bobby, I’ll address that and then pass it to Christina. We’ve noticed that customers are seeking to receive the currency more quickly, and we’re actively exploring ways to deliver it to them sooner. This ties back to my earlier comments regarding our efforts to enhance shipments, which include boosting our internal productivity, adding resources, and increasingly collaborating with partners, although this does come with a slightly higher cost, as reflected in the segment financials. We don't anticipate this changing, as the backlog remains substantial. We're receiving a growing number of orders to address this backlog, and our sales pipeline is very robust. We believe the trend shows that more customers, especially in emerging markets, are requiring additional currency, which answers the first part of your question. At the same time, they’re speeding up their redesign processes to incorporate more anti-counterfeiting features. This was a critical factor behind the major success we announced in our prepared remarks in Latin America, where we assisted a nation that was eager to expedite its redesign to include our advanced anti-counterfeiting capabilities. We're observing this trend in emerging markets globally. I hope that clarifies things, Bobby.

Extremely helpful. I appreciate the color. And if I could just squeeze in one more. Of the 8% core sales growth in SAT, that was really strong, but was that really entirely driven by the increase in international currency? Or were there any authentication wins or expansions that were a part of that core sales growth as well?

Yes. Thanks for that question. It's primarily international currency, Bobby, but we did see some favorability in volume and mix in the U.S. currency side of the business and authentication continues to perform as we expected.

Our next question is from Damian Karas of UBS.

I have a couple of follow-up questions. First, I wanted to ask about Antares. How should we consider the business organization now that you have Antares, particularly regarding future segmentation? Also, do you plan to include Antares in your initial guidance for 2026 when you announce your fourth quarter earnings in a few months?

Thanks, Damian. And I'll answer the first part and hand it over to Christina for the second. I'd tell you, I just am incredibly excited by the announcement we made a few weeks ago on Antares. I think it's a very key milestone that I think you know in this evolution of the company that's further strengthening our position and it's not only expanding our total addressable market, but aligning us in the markets with very clear secular tailwinds with a clear technology leadership position in both equipment services and software. So we're on track to the normal process of regulatory approvals that we discussed. When that comes to an end, we'll make our first tranche of investment that will be about 30% of the company. We want to wait, see that through and really not get ahead of ourselves into any segment or alignment discussions, just let that process naturally play out, as you can probably appreciate. And as we get into certainly early next year in our Investor Day and our Q4 earnings call, as that progresses, we'll solidify the alignment as well as some of the guidance. But Christina, I'll let you take the other half of that.

Yes. And I'll just reiterate how excited we are to bring Antares into our portfolio. In terms of guidance, I think we will not include Antares in our initial guidance. We'll wait until the close happens at some point in 2026 after that public tender process is completed, and then we'll do an update to the guidance at that time.

Okay. Great. That all makes sense. And then, Aaron, I wanted to ask you a little bit about the strength you're seeing in the service business in CPI and building out that service footprint. Could you just remind us, are these kind of like generalist service contractors that are kind of doing service across the various end markets and customer base? Or are there any particular end markets where you're seeing a lot of this service stand out?

Yes. Thanks, Damian. I would say these are not general service technicians. They are highly skilled and trained in CPI equipment as well as in ancillary equipment from other manufacturers, particularly at the front end of stores, in checkout areas, kiosks, and similar settings. Currently, our service business represents about 15% of CPI and is growing at mid-single digits. It's actually distributed across various market segments. This distribution is key to our margins and optimizing the business, allowing us to maintain good density in the regions where we deploy service technicians. Presently, about 60% of this business is focused on financial services, which aligns with the legacy CPI and Cummins-Allison products added to our portfolio in 2019. The remaining portion is spread across other sectors such as gaming, retail, and vending, giving us a diverse range of offerings with similar types of equipment. Our significant wins this quarter involve kiosks, which are unrelated to cash and coin operations. These kiosks can be found in places like doctor's offices or retail stores, and they primarily involve standard service contracts and maintenance. This represents an annual recurring revenue stream for us, which is growing and diversifying due to these wins. This is why I am particularly optimistic about the progress the team is making.

I am 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, operator. Well, as we conclude today's call, I'd just like to again thank the entire Crane NXT team for all of their hard work and their dedication over the past quarter. As you've seen today, we've taken and continue to take significant steps to evolve the company, and that will continue as we go forward. And as a reminder, we look forward to telling you more about this in our journey ahead during our upcoming Investor Day on February 25 in New York, and I look forward to welcoming you all there. So thank you again for your time this morning and all of your questions, and I hope you have a wonderful week.

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