CXT - NYSE

Good morning, ladies and gentlemen, and thank you for standing by. Welcome to the Crane NXT Fourth Quarter and Full Year 2023 Earnings Conference Call. At this time, all participants have been placed in a listen-only mode. The lines will be open for your questions following the presentation. Please note that this conference is being recorded. I would now like to hand the call over to Rima Hyder, Vice President of Investor Relations to begin the presentation. Rima, you may begin.

Thank you, operator, and good morning, everyone. I'm Rima Hyder, Vice President of Investor Relations, and I want to welcome all of you to the fourth quarter 2023 earnings call for Crane NXT. Before we begin, the slides we will reference during this presentation can be accessed via the Investor Relations section of our website at cranenxt.com. A replay of today's call will also be available on our website. Before we discuss our results, I encourage all listeners to review the legal notice on slide 2, which explains the risks 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 Forms 10-K and 10-Q filings pertaining to forward-looking statements. During the call, we will also be using some non-GAAP numbers, which are reconciled to the comparable GAAP numbers in 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. On our call this morning, we will discuss 2023 highlights, our financial results and 2024 guidance as well as our goals and strategy for this year. For this discussion with me today are Aaron Saak, our President and Chief Executive Officer; and Christina Cristiano, our Senior Vice President and Chief Financial Officer. After our prepared remarks, we will open the call to analysts for questions. Now, let me turn the call over to Aaron.

Thank you, Rima, and good morning. We appreciate everyone joining the call to discuss our fourth quarter and full year 2023 results as well as our outlook for 2024. 2023 marked the start of Crane NXT's journey as a premier industrial technology company and I wanted to take a moment to reflect on that year and thank all of our associates around the world, who made 2023 so successful. One of our shared values is people matter, and I couldn't be more proud and grateful to be part of this outstanding team. In April, we successfully launched the company, built out our new corporate leadership team, and continued our disciplined approach to operating our core business. We also established our five-year vision to grow the company to $3 billion, building from our strong position as a trusted partner providing technology solutions that secure, detect and authenticate what matters most to our customers. As we announced yesterday, we delivered strong operational performance, growing revenues organically by 4% with adjusted segment operating profit of 28% and delivering adjusted EPS above our guidance. A hallmark of our company is our strong free cash flow. We ended the year with adjusted free cash flow conversion of over 100%, allowing us to further pay down our debt and giving us confidence as we move forward with an increase to our dividend by 14% for 2024. And finally, we developed the strong M&A pipeline. And we are on track for our first acquisition in 2024. I'm very proud of our accomplishments during our first year as Crane NXT and believe we have set up the company for long-term success. Moving to our full year 2023 financial results. We executed very well to close out this year, delivering results at or ahead of our guidance on all key metrics. We had revenue of $1.4 billion, with core sales growth of 4% in line with our guidance and improved segment operating profit margin by 30 basis points over 2022 and above our guidance. Adjusted EBITDA was $388 million, which was also above our guidance and adjusted EPS of $4.16 exceeded the high end of our outlook. Adjusted free cash flow conversion for the full year was 111%. Our very strong cash conversion enabled us to pay down $245 million of debt in 2023, lowering our net leverage ratio to 1.1 times. We will continue to focus on this disciplined execution in 2024, utilizing the power of the Crane business system. And as you saw in our earnings release yesterday, we're starting the year with core sales growth guidance of negative 1% to plus 2% over 2023, and adjusted EPS of $4.10 to $4.35, which we believe is an appropriately risk-adjusted guidance, given the dynamics in our businesses. With that, I'm now going to hand the call over to Christina, to walk us through in more details our Q4 and full year 2023, financial performance as well as provide more details on our guidance. Christina?

Thank you, Aaron. What a great close to this extraordinary year where we celebrated the launch of Crane NXT. Our significant accomplishments in this short period of time, are a testament to the hard work and dedication of our global associates and I would like to thank and congratulate everyone. Starting on Slide 5. We had a strong fourth quarter, with core sales growth of approximately 4% adjusted segment operating margin of 27% and adjusted EPS of $0.99. As Aaron mentioned, adjusted free cash flow conversion was over 100%, in line with our expectations demonstrating our consistent focus on operational excellence. For the full year, we also had over 4% core sales growth 28% adjusted segment operating margin, which is an expansion of 30 basis points year-over-year; and adjusted EPS of $4.16 which beat the top end of our guidance. Overall, we are pleased with the results for Q4 and 2023, which were underpinned by continued disciplined operating execution by both segments. Moving to our segment. CPI reported a decline in core sales of 7% in the fourth quarter as expected. And adjusted segment operating margin decreased 260 basis points to 29% year-over-year, reflecting lower volumes and an unfavorable product mix, offset by strong pricing execution. As we discussed last quarter, this decline was driven by softness in new orders, primarily in our gaming end market, where customers continue to draw down on their inventory overstock and in our retail end market where projects have been delayed. While our backlog has come down significantly since the beginning of the year, we are still at approximately 1.5 times, what we would consider normal. We are working with our customers to assess the timing of their demand while also managing our inventory levels very closely. For the full year, CPI core sales grew at 2%, in line with our expectations and we delivered adjusted margin expansion of 190 basis points, driven by continued disciplined pricing, which more than offset inflation. Moving to Crane Currency. The quarter was well ahead of our expectations, with core sales growth of 29% driven by strength in the international currency business. Adjusted segment operating margin improved 230 basis points year-over-year, reflecting favorable mix. Backlog was up 26% from the prior year, as we continue to see new orders in our international business. This includes a significant multiyear banknote order secured in the fourth quarter which will contribute to elevated backlog levels through 2026. For the full year, Crane Currency had exceptional performance with 8% core sales growth. Adjusted segment operating margin of 26% declined 240 basis points year-over-year reflecting unfavorable mix in the US business where production was more heavily skewed toward lower denomination bank notes. Moving on to our balance sheet. Our adjusted free cash flow was $65 million in the quarter. Given the strong free cash flow we repaid another $70 million of our term loan during the fourth quarter reducing our net leverage ratio to approximately 1.1 times. In total in 2023 we paid down $245 million of our $350 million term loan. We now have over $1 billion of M&A capacity and substantial flexibility to deploy capital toward acquisition opportunities that meet our strategic and financial criteria. Additionally, we announced an increase to our annual dividend of 14% based on our strong cash flow continuing our commitment to deliver value to our shareholders. Moving to 2024 guidance. We expect to deliver full year adjusted EPS in the range of $4.10 to $4.35 with core sales growth between minus 1% to plus 2%. The midpoint of this range assumes that gaming orders returned to growth in the fourth quarter for CPI. And that in Crane Currency we stay on track to return to normal operations after the planned shutdown of our paper making equipment for upgrades related to the new US banknote series. Given these dynamics, I want to point out that the phasing of revenue in 2024 will be more heavily weighted toward the second half of the year versus our historical performance. We see opportunity for upside to our guidance based on the potential acceleration of projects in CPI's retail end market order flow resuming earlier than expected in the gaming market and additional wins in the international currency market. We are guiding to segment margins in the range of 27% to 29% reflecting continued disciplined pricing and driving productivity through the Crane business system. Corporate expenses are expected to be approximately $53 million, an increase from 2023 reflecting a full year run rate of costs for employees that were hired last year. Additionally, we expect non-operating expenses of approximately $37 million reflecting lower interest expense due to the paydown of debt. Similar to 2023 we expect to convert our adjusted free cash flow at approximately 100%. Let me now hand it back to Aaron for additional details on key drivers impacting our outlook within each segment.

Thanks, Christina. Moving on to slide 13. I want to highlight some of the dynamics we see playing out in 2024. At Crane Currency we delivered an outstanding performance in 2023 with 8% core sales growth and increased our international market share driven by further adoption of our micro-optics technology. Now as a reminder, the international business is approximately half of Crane Currency's revenue. And in this business we added 17 new denominations designed using our micro-optics technology in 2023 to bring our total to 150. And this is a 14% growth rate from 2018 when we acquired the business through 2023. Also we now provide our technology to 48 countries an increase of approximately 12% year-over-year. The launch of RAPID Vision the world's first multicolor micro-optics technology has generated significant interest from our international customers and will provide growth opportunities in the years to come as new denominations are currently being designed that specify this technology. And so we ended 2023 with a backlog growth of approximately 26% and this positions us very well for 2024. Now the other half of revenue from Crane Currency comes from the U.S. government, a very important and long-standing customer. And I want to remind everyone about the work we're doing to prepare for the new US currency program and the impact it will have on the Currency Business in 2024 and beyond. As previously discussed, this is a tremendous long-term tailwind to the business as the U.S., redesigned its banknotes, starting with the $10 note, expected to be released to the public in 2026. And this will be followed by a new note every two years, culminating with the new $100 bill, in 2034. This program remains on track. And we continue to be very optimistic about our position with the U.S. government, as their sole supplier of currency paper, a relationship we've held since 1879. Additionally, we are very optimistic that the U.S. government will continue to be a leader, in Technology and Banknotes, incorporating additional security features in their new designs. Today, only the U.S. $100 bill contains our Micro-Optics Technology. So we see opportunities for additional technology to be incorporated in these new banknotes going forward. As part of this program, and in very close coordination with the U.S. Bureau of Engraving and Printing, we stopped production in one of our papermaking facilities in late Q4 2023, for approximately four months to complete necessary equipment upgrades to accommodate, the new Currency Technology. As a reminder, we recognize revenue for this business when we produce the paper, for the U.S. government. So given the shutdown and our revenue recognition policy, we expect currency sales to be flat year-over-year in the first half of 2024, and then gradually increasing throughout the year as we produce products in advance of the next scheduled shutdown to begin in late Q4 of 2024. Overall, we're very excited to continue to be a trusted partner with the U.S. government for this very important program, and look forward to the future growth that will bring Crane Currency both with new technology for paper and the opportunities for increased use of Micro-Optics. Now moving to Slide 15. In 2024, we expect CPI to grow mid-single digits, excluding the Gaming Vertical. We see strength in our Vending business, growing in mid-single digits coming off COVID lows. We also see momentum in the Financial Services Vertical, particularly with our field service business where we continue to expand our offerings and grow recurring revenue. And in our retail end-market, we're seeing positive momentum from our OEM customers coming out of 2023. As Christina mentioned, we're still seeing slower new orders in gaming, as our customers are working down heightened levels of inventory due to the pandemic. We've been in very close communication with these customers and now forecast their inventory positions will return to pre-pandemic levels by the end of Q3. This will result in gaming orders returning to growth in Q4. The underlying gaming market is healthy. And we continue to maintain our strong leadership position in hardware, software and services. Based on the underlying drivers of CPI's end-markets, including labor scarcity and the need for increased automation, we continue to believe that our business is well positioned to deliver mid-single-digit growth in the long term, as we navigate through the transitory headwinds in gaming. As we look ahead, we're on track to execute our five-year road map to significantly grow Crane NXT and diversify the portfolio. This includes our continued reinvestment in our core businesses, execution of the Crane business system to drive productivity, simplification and cash conversion, along with disciplined M&A. And in terms of M&A, we believe that the strength of our pipeline and the strategic fit of the targets will enable us to execute on a transaction in 2024 as planned. We are actively cultivating companies with a focus on differentiated technologies and services that secure detect and authenticate our customers' most valuable assets. These markets are aligned to secular tailwinds that will drive long-term, durable growth above mid-single digits and enable us to achieve a ROIC of greater than 10% by year five, utilizing CBS to drive value. Certainly, more to come in this area and I look forward to providing an update at the appropriate time. Moving on to our final page. 2023 was the start of our journey as Crane NXT. We launched the company, delivered on our financial commitments and established a long-term strategy for growth that we believe will drive significant value creation for our shareholders. In 2024, it will be the year we accelerate this strategy, building up the technology leadership in our currency business and investing for the new US banknote series, returning to mid-single-digit growth in CPI, as we work through inventory normalization with our gaming customers and continuing to drive strong free cash flow conversion, allowing us to increase our dividend, while also providing ample liquidity to execute our first M&A transaction. Taken together, I'm confident in our ability to achieve our long-term objectives, drive profitable growth and create substantial value for our stakeholders. So thank you, again, for your time this morning and we're ready to take our first question.

Thank you. [Operator Instructions] Our first questions come from the line of Matt Summerville with D.A. Davidson. Please proceed with your question.

Thanks. Good morning. With respect to the comments you made regarding kind of the first half, second half weighting, CPI totally makes sense very intuitive given the gaming dynamic. Walk through in a little bit more detail that currency dynamic, the shutdown impact. At the end of the day, trying to understand, how much of revenue and earnings is likely to be weighted first half, second half and how we should kind of think about that cadence? And then I have a follow-up. Thanks.

Great. Well, I'll start and then maybe Aaron can jump in at the end. So, we can't give any specifics on any one customer or amounts there, but there was a multiyear order in Q4 that will have a meaningful impact on the revenue over the next three years. And we're really excited about that. The team continues to do great in winning new contracts internationally. So, really great job there. And as Aaron said earlier, 17 wins in the year, which really just reflects our leading technology, our ability to deliver what our customers need and our commitment to quality. So, just really great all around there. Just in terms of the denominations, so 150 in the portfolio right now, and it's been accelerating over the last few years. So just again, really strong story for the international currency business.

Thanks, Matt.

Good morning, Damian. How are you?

Yes, I'll take that one. So it's mid single-digit growth for international and really just based on the high visibility we have into our pipeline. So we feel very confident about delivering on that this year. Now remember this is a project-based business and the timing of our shipments impacts our revenue recognition. So that could vary. But overall based on our pipeline we feel confident in mid single-digits.

Okay. That's really helpful. Thank you. And then just looking at the overall company guidance flat to up slightly sales is your expectation for the year. The margin guide kind of at the midpoint may be down modestly versus where you were in 2023. Is there a way you could maybe just give us a bridge or a way to think about these various headwinds and tailwinds thinking about the productivity price and then the mix impacts anything else?

Yes. Sure, Damian. Let me take few moments on that and Christina can add in as well. Again I think when -- as I said in my remarks a few minutes ago, we believe the full year guidance is appropriately risk-adjusted and we're very confident with that. And I think the way you asked the question is appropriate if you got to break down the analysis into some of the constituent parts. So when I think of the currency business as Christina just mentioned, we're looking at mid single-digit growth there. Again the margin rate of that business a little bit less. So that creates a natural mix headwind inside of currency alluding to the question you've raised. So you can think of it as just as international is growing at mid single digits. There's a mix down effect naturally in currency where the US government given the shutdown and what we see in terms of their volume forecast we're assuming that we have flat volumes in a similar mix that we had last year in terms of the denominations. So that's really the story in currency. Again long-term on the US government as we exit 2024 and get to the launch of '26 a fantastic story for the business. Now in CPI as I mentioned we expect all parts of the portfolio ex-gaming in aggregate to be growing to mid-single digits. Now again gaming with that said is typically a higher-margin part of our portfolio. So we do have a mix headwind there and that's what's really driving the margin question that you alluded to and the range we've set in the guidance. But again, we see gaming with the visibility we have into our customers with a lot of confidence that the natural inventory burn down is going to complete the cycle in Q3 orders return back and we exit at mid single-digit growth in gaming which should give us some improvements as we look ahead into 2025. So that's really the mix. I would just reiterate to the question Matt asked that because of these phenomena with the US government and gaming in 2024 the phasing of our revenue will be a little bit different than we normally see in the company. And again I think that 40-60 is a good high-level guide. So hopefully that helps Damian.

It does. Thank you for all that color, Aaron. I will pass it along.

Thank you.

Thank you. Our next questions come from the line of Bob Labick with CJS Securities. Please proceed with your questions.

Good morning and congratulations on a great year and quarter.

Thanks, Bob.

Thank you.

Yes. I wanted to just follow-up on I guess your last comment there Aaron because you mentioned visibility in gaming. Could you just talk about -- I feel like CPI has played out exactly as you've said to this point and obviously coming down off of higher backlogs from COVID supply chain disruptions and whatnot. So, maybe just talk about your relationships in gaming and in retail and the visibility that you have to the underlying demand and the inventory corrections and that gives you the confidence that we should see resumed growth in the back half of this year.

Sure Bob. In gaming, why don't I, again, break these down, as you've asked the question market-by-market, because there are some important differences? Gaming, again, I'd say from a forecast perspective or an outlook, we believe this is appropriately risk-adjusted again, so that we can continue to do exactly what we say we're going to do each quarter and through the course of 2024. I want to bring it back at least to the gaming market, which is an important part here of our thesis, which is, it's very healthy. Casinos continue to be healthy and our OEM customers continue to be healthy. We see this as a market that's growing even in 2024, anywhere between low-single-digit to mid-single-digit plus, highly dependent on the geography. And of course, we service a global market. So, that gives us a lot of confidence that this underlying market is healthy, and we see that in both again, the casinos all the way through the OEMs. Now, we've also done a lot of channel checking, Bob, as you can imagine, and we are very confident we're maintaining strong market share, both in our hardware, software and services offering. Just as a reminder, we had a major competitor that lacked certifications and was largely out of this market in 2022 and for a good part of 2023. They're back in the market, but I think as a testament to our team at CPI, we gained market share through this period. And so, we have a very sticky customer base and a higher set of installations on the floors of these casinos. So again, we feel confident in our market position. Now when it gets into the visibility to our customers' inventory, we spent a lot of work here, both in December and January, reassessing as we exited the year and as customers have started the new year, on what their order forecasts are going to be. We sell the vast majority of our equipment through OEMs. And there's only a few OEMs globally at scale. So, it's a short list of customers that we have very close relationships with. And that allows us to get very deep into their inventory levels, customer-by-customer. And that's where I'd say on average, we see six months of inventory above the normal holding that they would ascribe to. So again, I think we have a very good visibility into that, and knowing their order rates and their forecast for the year, how they're going to draw down that inventory, that's what gives us confidence that we're going to see a return to order rates as we get into Q4 and exit the year back in a mid-single-digit growth dynamic in gaming. So Bob, I'll pause there on gaming and then I'm happy to talk Retail as well.

Yes. Perfect.

Yes, let me go to that. I think Retail is a different market, but a dynamic where we're seeing improvements as we exited last year and as we're already starting off here in 2024. Again, I'd go back to the thesis on the underlying market, which we see is very healthy, driven by our customers needing increased automation and still battling issues with labor scarcity. And so, we don't think those change in the next months or years ahead, and that gives a tailwind to this market. And when you put that in context right, 2023 had a few items that are not repeatable that we expect will play out in 2024. It starts with our OEM business, which was softer than we expected in 2023. But remember, some of these OEMs were going through their own transitions, very significant transitions in 2023, managing cost and inventory. And we see improvement already in that OEM business as we start 2024 and it's meeting our expectations. We also saw some pushout of projects in the second half and in discussions with customers, we believe and have confidence those are going to be coming back in 2024. So I think a different dynamic for us in the retail market in 2024 and already meeting our expectations as we start the year and that gives us confidence in this outlook.

Okay. Super. Thank you. And then shifting gears and jumping over to currency. Just you gave us good color on how this year is going to play out. But maybe just in general, if you could talk about, because you kind of have this decade of visibility, how does the rollout of the catalyst series play out for you? What will the cycle there be like shutdown -- when do revenues benefit from the enhanced security or whatever we think it's going to be and shut down every year then boost in revenue. Has it become a little bit more cyclical as it comes out? How should we think about it?

Yeah. Thanks, Bob. I think we're on the early stages here of this. As you said, it's a decade-plus program, right? It's going to take 10 years just to launch the new bills. But we've been already actively working on it, as you know with the BEP. So 2024 has this again very well planned set of shutdowns that we've been planning for with the BEP for well over a year. We're in the middle of one now and we'll institute the next one at the end of the fourth quarter again, just to allow both us and the BEP time to make their necessary upgrades and our upgrades, qualify the new product coming off of that papermaking equipment. And of course, in Q2 through 3Q, produce the product that they need to satisfy their demand. So that's going as expected on track on target on budget. What that means for 2024 as I alluded to earlier is, a headwind particularly in the first half of the year and that will moderate. And then again, we'll have a shutdown likely in the latter part of Q4. We don't really see the benefit then Bob of the new series, until we get into production, full production of that product. And that first one is the $10 that goes into public circulation sometime in 2026. So I think I would frame it and model it as we start to see assuming again, increased technology density on those bills and uplift in margins that starts to occur more in the 2026 time frame. Again, we can't and we're in no position now to announce any significant announcements on the design of the currency. That's left to the US Department of Treasury to make those announcements and they'll do that at the appropriate time. But I think if you go back to that slide that I referenced earlier in the presentation, today only the US $100 bill has our leading micro-optics technology and we believe that's an opportunity as each of these new bills gets introduced to increase generally all types of new technology on the US government notes. And so, I wouldn't think that this is modeled then episodically, as I think the term you used, but more continuously as new bills get released, we naturally mix up the business starting in 2026 through 2034.

Thank you. Our next questions come from the line of Ian

Hey, good morning. This is Isaac Sellhausen on for Ian. Thanks for taking our questions. The first is on CPI and the guidance. I'm not sure how detailed you can get. But maybe if you could just talk about CPI, core sales growth and what guidance assumes as far as volume and price mix? And then, maybe just a broader discussion on pricing in general and how you think about that through the year?

Yeah. Well, I'll just start at the end of your question in terms of pricing. Our teams do such a great job here Isaac. And we are continuing to more than offset costs with pricing. And that's really just based on our great business system, Crane business system and the operating discipline that our teams have. So, really great job there and we expect that to continue. In terms of the CPI Verticals, just looking ahead in our guidance, we're assuming mid-single-digit growth in all the verticals outside of gaming. So as Aaron said, the underlying markets are healthy. And we're expecting to see continued strength. We have some tough comparisons in some of the markets, but overall feeling very confident. And gaming, as we said by Q4 should return to mid-single-digit growth once our major OEM customers primarily work through their inventory levels which we expect to start happening in Q2.

Okay. Great. And then just as a follow-up on currency. Could you touch on the product authentication business and maybe trends you're seeing within that market. You mentioned the M&A sales pipeline and have previously expressed interest in expanding within product authentication, so, maybe any higher-level comments on potential M&A targets? Thanks.

Yeah. Thanks, Isaac. I really appreciate that question. So we continue to be very optimistic and confident in the position we have in product authentication. We see that as a market in general, that's growing at mid-single-digit plus. And it's very global in its growth rate. And we think those core drivers of the need for more anti-counterfeiting protection whether that's in Physical products or Digital products will continue for the foreseeable future. I think that's as we'd say a pretty straightforward got to believe, in this market. In terms of our own business, again, we continue to win new accounts leading with our Micro-Optics Technology. But with that said, and to the question you raised, we really see M&A in this area as an accelerator of our strategy where we can leverage our very strong technology leadership in the Physical products with other capabilities that grow Crane NXT. So as I mentioned in my prepared remarks, our pipeline has grown significantly over the last year. It's matured also, in terms of where we're at in that cultivation status. And we feel very confident and on track, as we exit 2023 that we will be in a position to announce our first acquisition in 2024. As I've said many times, that first acquisition is more important than any. We want to make sure, it's on strategy. Focused on secure detect and authenticate. We want to make sure we're good owners of the business. And we can add value, particularly through the deployment of CBS. And we want to generate a strong return. And nothing has changed there, from what I've said over the last several quarters. That's a double-digit ROIC by year five. And making sure we're maintaining our leverage below three or if above three, we're able to draw that down very, very quickly based on our strong free cash flow. So again, feel on track and very confident we're in a good position as we head into 2024.

Okay. Very helpful. Thanks so much.

Thank you, Isaac.

Thank you. Our next questions come from the line of Damian Karas with UBS. Please proceed with your question. Damian, could you check if you're muted, please?

Yes, I'm sorry, I was muted. Thanks. I got a few follow-up questions. First, I just want to make sure I heard correctly. Did you say that you are expecting the currency business to be kind of flat in the first half of the year and then you get some pickup in the back half? Or did I mishear you there?

No, that's directionally correct, Damian. That's -- I'd say, mid-single-digit growth as Christina alluded to in the international business, but then the headwind in the first half due to the shutdown from the US government.

Okay. All right. So then, I guess I'm just trying to piece together kind of like that 40-60 first half, second half, which would I guess more or less suggest like 15% to 20% decline year-over-year in the first half and then you kind of get this step back in the second half. If I'm interpreting correctly then, so then, it seems like kind of like the destocking and CPI is expected to be significantly worse kind of at the outset of the year and then really snaps back in the back half?

I think you have that right. Exactly, Damian. We're going to hit tougher comps year-over-year in the first half on CPI, where gaming was still at a very elevated level in the first half of last year. So your logic there is correct.

Okay. I appreciate you clarifying that. And then, sorry if I -- if you guys alluded to this earlier, but I was just curious, thinking about the denomination redesign cycle here in the US. When do you think you might have a better sense whether the $10 redesign will involve micro-optics?

I would answer that that we feel very confident in our long-standing relationship with the BEP. But as I said before, we're not going to be in any position to comment on the new redesign until after the treasury has announced that redesign. And I would expect that will come sometime in late '25. Again, that's more their time line than ours on the announcement. But I think you can appreciate, we can't comment on that until it's actually announced by the US government.

Thank you. Our final questions will come from the line of Matt Summerville with D.A. Davidson. Please proceed with your question.

Yes. You sort of answered it with respect to the prior questions, but I wanted to just put a finer point on it. I mean CPI organic is going to be down based on what you said, very substantially in the first half of the year. How should we think about margins in that context? How bad will this business delever? And are you doing anything, in the near term to adjust the cost structure in that business. I just want to make sure I'm not taking this -- getting over my skis in my assumptions. But CPI is going to kind of get hammered, if lack of a better word there.

Thanks, Matt.

Thank you. There are no further questions, at this time. I would now like to hand the call back over to Aaron Saak for closing remarks.

All right. Thank you, operator. Well, it's hard to believe, but we are just 50 days away from the first anniversary of the launch of Crane NXT. It's a year that is flown by and been filled, with enormous accomplishments by our team. And so I want to again, thank all the NXT team members from across the world for their hard work in 2023, to make the launch of Crane NXT so successful. And I am extremely confident, that 2024 will be an equally exciting year for the company as we start our second year as a public company. So thank you again, to everyone who joined us today for your questions, and I hope you all have a great rest of your week.