Q2 2025 Crane NXT Co Earnings Call

Good day and thank you for sending by welcome to the crane. NXT second quarter 2025 earnings call. At this time. All participants are in listen-only mode. After the speakers presentation will open up for questions to ask a question during the session. You will need to press star 1 1 or telephone. You then hear an automated message advising your hand is raised to withdraw your question. Please press star 1 1 again

Please be advised that today's call is being recorded, I would like to hand it over to your first Speaker today. Matt roach vice president of investor relations. Please go ahead.

Thank you, operator, and good morning everyone. I want to welcome you all to the second quarter 2025 earnings call for Crane NXT.

Before we begin, let me remind you that the slides will reference. During this presentation can be accessed. Via the investor relations section of our website at Crane nxt.com in 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, and slide 2, which explains the risk of 4 looking statements in the use of non-gaap financial measures.

Additionally, we refer you to the cautionary language at the bottom of our earnings release and our form 10K and subsequent filings pertaining to 4 lifting statements.

During the call, we'll 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 sake, our president and chief executive officer and Christina Cristiano, our senior vice president and Chief Financial Officer.

On our call this morning, you'll discuss our second quarter highlights. Our financial and operational performance and our 2025 Financial guidance.

After our prepared remarks, we'll open up the call to analyst for questions with that. I'll turn the call over to Aaron.

Thank you, mad, and good morning. I appreciate everyone joining today's call to review our second quarter results. I would 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 second quarter performance was in line with our expectations with sales growth of approximately 9% year-over-year and adjusted EPS of 97 cents we achieved 120% free cash flow conversion in the quarter reflecting continued operating disciplines.

Our currency business. Delivered another standout quarter again achieving a record high backlog.

We also recently introduced new Innovative products in our authentication and CPI businesses, which position us well for future growth.

In authentication, we launched Fortress an advanced proprietary security feature that can be applied to a product surface or label to authenticate the product in real time. And to trace the origin of the product to the point of manufacturing.

This product was introduced to a major customer and has a strong pipeline for additional applications.

And at CPI, we launched several Next Generation products that will enhance our leadership position using Advanced Imaging and detection technology. This includes the new jet scan, Ultra a high-speed currency scanner, that provides counterfeit detection for the banking gaming, and Retail markets,

Since the close of the day authentication acquisition on May 1st, we have made significant progress integrating this business with opsec to form the new crane Authentication.

I'll provide more detail about our actions in this area in a few moments.

We continue to have a strong balance sheet with ample capacity for additional lemonade.

Given the strength and activity. In our m&a pipeline, I am confident. We will have another transaction to announced within the next year.

Finally, we continue to navigate tariff and macro uncertainties and are mitigating these impacts through a variety of pricing and supply chain actions.

Given these initiatives, we remain confident in our Outlook and our reaffirming our full year EPS, guidance in the range of 4 dollars to 4.3.

Now, turning to slide 4, I want to take a moment to review our strategy of building a leading industrial technology company focused on solutions that secure, detect, and authenticate.

Ultimately, what we do here at crane, NXT is focused on providing confidence to our customers and their consumers that the products they buy. And the way they buy them, are authentic and secure.

Over the past quarter, we've integrated Daily, LaRue, authentication, and OpSec to form Crane Authentication. With this business, we have created a leading position in the authentication market.

and a key to our success is utilizing the crane business system or CVS to drive operational improvements in both our existing businesses and those we acquire

And so, with this in mind, I'd like to move to slide 5 to discuss the actions. We've taken over the last 100 days since closing the daily acquisition,

As shown on the left side of this page, we now have a market-leading portfolio focused in 3 areas, first brand authentication, where we sell Advanced security technology for labels, track and Trace software and provide additional online services to the world's leading Brands to protect them and their consumers from counterfeiting. Second Government Solutions where we work with governments to ensure collection of tax revenue and authentication of products.

And finally identification security where we design and manufacture ID documents for governments, incorporating new security features to prevent counterfeiting.

Over the past 100 days, we hit the ground running deploying the crane business system to integrate the business and Achieve our plan synergies.

These actions include utilizing the 8020 process to rationalize product offerings. Consolidating our site footprint leveraging scale to drive supply chain. Savings integrating the organization to simplify and reduce the cost structure and implementing improved pricing processes.

I would like to thank the entire crane authentication team for their hard work during the past quarter. Thanks to their efforts. We are now anticipating accelerated, realization of operating synergies, which will lead to operating profit, margins of approximately 20%, as we exit 2026 ahead of our original expectations.

So with that, let me now hand the call over to Christina to review.

More details.

Thank you, Aaron and good morning everyone. I would also like to start by saying thank you to our Associates around the world. We appreciate your hard work.

Starting on slide 6, we delivered second quarter results that were in line with our expectations.

Sales increased approximately 9% year-over-year driven by Acquisitions and strong performance in international currency.

Core sales declined. 1% reflecting the anticipated lower volume in CPI.

By the lower CPI volume and the expected impact of dilution from acquisitions.

Free cash flow conversion was approximately 120% in the quarter and we continue to expect the full year conversion to be in a range of approximately 90 to 110%.

Finally, we delivered adjusted EPS of $0.97.

Moving to our segments and starting with CPI on slide 7. Core sales were down approximately 7% year-over-year outperforming our expectations driven by timing of shipments.

Adjusted operating margin decreased approximately 300 basis points year-over-year reflecting the lower volume and unfavorable product mix partially offset by productivity, gains.

We expect margin accretion in the second half of the Year driven by improved product, mix from gaming sales growth as well as productivity programs, and disciplines cost management. These factors will result in cpi's. Full year, operating margin to be between 29 and 30%.

CPI ended the quarter with a backlog of approximately 144 million. Most notably gaming orders were up approximately 10% sequentially and up by approximately 30% year-over-year.

Our gaming OEM customers are at normal inventory levels and we expect gaming to have a strong double-digit growth in the third quarter.

Turning to security and authentication Technologies on slide 8 in the second quarter sales grew approximately 32% year-over-year including acquisitions.

Core sales increased approximately 9% year-over-year driven by higher International currency volume.

As a reminder our US currency business. Resumed production in Q2 after successful. Completing the technology upgrades that will support the new currency series, which we expect to begin release in 2026. This was a significant Milestone and we are very proud of the accomplishments of our team.

As Aaron noted, our International currency business continues to perform well with a new record high backlog of approximately 400 million in the second quarter.

We continue to expect mid single-digit growth for the full year. Despite the tough comparison to a strong second half of 2024.

Finely adjusted operating margin of approximately 21%, reflects acquisition dilution as expected.

Moving to our balance sheet on slide 9, net leverage at the end of the second quarter was approximately 2.6 times reflecting the term loan used to fund the daily Ru authentication acquisition.

Importantly, our strong free cash flow generation will enable us to continue to invest in organic growth while also paying down debt.

We expect to end the year with net leverage of approximately 2 times which provides flexibility for additional m&a.

Moving now to slide 10, we are reaffirming our full year guidance. We continue to expect sat sales growth to be between 19 and 21% including approximately 80 to 90 million of daily Rus sales in 2025.

We expect CPI full year sales growth to be between negative 2% and flat.

Adjusted segment. Operating margin is anticipated to be in the range of 25 and a half and 26 and 1/2% reflecting dilution from De LaRue offset by our continued, strong focus on pricing and productivity.

Finally, we are maintaining adjusted EPS in the 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, I want to highlight a few key points.

First, we continue to drive, strong operational execution. Our Q2 performance was in line with expectations and we were utilizing CVS to drive productivity initiatives, throughout the company.

This includes accelerating, the realization of synergies with the integration of Korean authentication, and continuing to drive High free cash flow conversion.

Additionally, we continue to build momentum in our strategic growth areas led by our technology leadership.

In Q2, we achieved another record high backlog in our International currency business, providing confidence in our full year, sales Outlook, and giving us strong momentum heading into 2026.

Also, as Christina mentioned, the US currency redesign program continues to be on track for a 2026 launch.

We're also launching new products across the portfolio. Extending our technology leadership position. These include the new Fortress product and authentication in the jet, scan Ultra in CPI

Long-term value for our shareholders.

So, thank you again, for your time this morning. And I'd also like to thank our dedicated team around the world for their commitment to our customers, our communities, and all of our stakeholders. And with that operator, we're ready to take our first question.

Thank you.

And as a reminder to ask a question, you will need to press star 1 1 on your telephone and wait for your name to be announced to withdraw your question. Please, press star 1 1, again, please stand by, we can apply the Q&A roster.

1 moment for our first question.

Our first question with the flying of Matt Summerville from da Davidson your line is open.

Couple questions. Um,

First, you gave some really helpful color on orders in demand, with respect to gaming. Can you go through sort of a similar analysis of the other main CPI verticals and then maybe comment around

How your level of conviction that you can see CPI returned to a sustained, positive, organic trajectory, and then I have a follow-up.

Sure. Hey, good. Good morning, Matt. And thanks for the question. Well, uh, you know, for CPI, I'm very encouraged by, uh, where we're at now in gaming, you know, we we know this in Market, continues to remain healthy, the casino and gaming in market, and we feel very confident in our number 1 market position, uh, as well. And now we're in the position where the inventory, our inventory at our oems is normalized and we talked about that uh, you know, coming out of the last few quarters. We expected this pivot as we got to the second half of the year and and we're seeing it. So uh, we have high confidence here based on the order book and the Outlook that we're going to see strong double digit growth in the second half of the year in gaming and that's playing out, uh, just as we expected. Uh, so, you know, to go to the other verticals, I think in total, they're, they're playing out largely as we expected. And really, as we talked about last quarter, so vending, uh, as you know, we talked about headwinds really from the China.

Tariffs, slowing some orders. We discussed that in q1. Leading to some headwinds and sales that we see there for the back half of the Year. Retail, you know, some positivity, particularly with custom self-checkout and I think it's a mixed bag a little bit among the oems, uh, and, and you could see that in some results earlier earlier this week and then Financial Services, you know, playing out, uh, in line with expectations. Uh, I think what's really encouraging here to CPI to get to your second part of your question?

About the long-term Outlook is, you know, this is a business always in a number 1 or number 2 Market position and Technology differentiation and Leadership is its key. And we're now in the process of launching new products, and we talked about that, uh, in some of the prepared remarks. So, I I feel very good about where we're at with CPI. You can see the, the corner turned and I think, uh, long term. You know, we look at this as a low single digit growth business uh uh going into 2026.

Thanks for that. And then as a follow-up, um, can you maybe talk a little bit about

Um uh we should be thinking about the back half, Cadence in terms of Revenue and earnings between Q3 and Q4. If there's anything, you would want to call out there, and then you referenced on the slides and then your prepared remarks there and that you see opsec uh well I'll just call it the authentication related division inside of sat generating a 20% op margin what would that equate to in terms of incremental EPS secretion in 26 versus 25 in the acquired businesses? Thank you. Uh yeah thanks man. Why don't I let Christina take the first 1 on the phasing in the back half of the year and I'll I'll take the authentication question. Yeah, great and good morning. Uh, you know, it's worth repeating that. We expect full year sales growth uh of 6 to 8% in the SAT segment uh with segments operating margin of approximately

look again, we have confidence in the full year, guidance range and the expected sales growth of 6 to 8%

Yeah.

Thank thanks, Christina. I just had, you know, again think of Revenue and opiates. Christina said, you know, 1 to 2%, kind of waited to to the back half, uh, to the fourth quarter versus the third quarter and, and to your question on authentication, Matt. You know, I think the work here by the team has been fantastic deploying. CBS very quickly. You know, we're we're 100 days basically into the acquisition of De LaRue and integrating that with opsec, uh, so I'm very encouraged by the speed of that execution and that's where we, you know, have line of sight based on the actions, we take in operationally to really exit 26, with an OP margin, that's going to be approaching 20% that, that's a very nice step up from where we're going to end this year, which will be in the low teens. Uh and again that's that's based on our business case and our execution of of our our Synergy uh profiles. So uh in terms of what that means for accretion, in 2026, I think that's too early to say we. We'll make that part of the 26 guidance.

Which, you know, we'll do in the first part of the year.

Thank you. 1 moment for our next question.

Our next question on confidential Damian Keras from UBS. Your line is open.

Hey, good morning, everyone.

Good morning, morning Damian.

I wanted to ask you about your sat guidance, um, holding the sales uh, growth for the year, uh, unchanged. Um, despite a a really nice solid. Uh,

Second quarter.

If I'm just accounting for the de laru and uh deal and and FX it, it seems like you're implying kind of like a mid single digit year-over-year decline um in the back half and and a pretty notable step down from the second quarter. So could you just help us understand? You know why? Maybe you're a little bit less optimistic on this in the second half of the year for for sat.

Ya think Steam and what we'll have to go through, kind of that, uh, the, the, the sequential numbers you cited there. But, you know, I think the overall takeaway, you know, that, that you started with is, is right. We really have had excellent performance, particularly in the international currency business both in new orders and then, you know, a strong Q2, which was really uh some projects as, you know, very project focused business uh when central banks want their shipment of their currency uh and that came into Q2 so that's where we're not making a change to the full year. We're just seeing that movement into Q2 and out of part of the second half. So so it's really

A balance. And that's really often driven by our customers and their their, uh, timing and their request dates that also Jew, just for contacts with the international shipments in Q2 being up, put some stress on the mix of the SAT margins. So for the full year, we, you know, we still fully expect sat margins uh for the segment to be in the range of around 21%. Uh, but uh, you know, I, I think overall, I'm very, very encouraged by this performance and currency overall, and particularly with the US program being on track. So the particulars of the phasing I think we can do the math on that, but but there's really no change to our Outlook just a little bit of timing.

Okay, got it.

And then this is the first time, uh, I'm hearing about Fortress Aaron. I was wondering if you could maybe just tell us a little bit more about that. You know, this, uh, this customer win. Uh, and and what specifically uh, Fortress is, uh yeah, you know what service that uh, Fortress Is providing them and and I'd love to hear, kind of like the other relevant applications. You could alluded to

Yeah know, hey, I appreciate that. So so uh, for Fortress, you know, came came into the portfolio as, uh, actually part of the dealer U acquisition. And, and it was part of why we were very excited, uh, about the technology that they're bringing in and it and at the same time, it was just recently launched. Uh, so it so it is

Combine the product a B2B type, uh, you know, customer so fundamentally. It's a core Technology based on materials. It's simple to use and you can see it as kind of part of this good better best, you know, uh, technology portfolio. We're providing this would really be at the high end, uh, of our of our authentication type application. So in terms of of pipeline, you know, given what it is, it can be applied to a whole host of in markets, it's more. Uh, it can be applied to any label or any product service, so think food and beverage think, you know, consumer goods. Uh, and we've just rolled it out to a very large customer, uh, in 1 of our emerging markets and, you know, pretty excited about the pipeline for it as well. Happy to show it to you 1 day, too, Damian. When we meet you in person,

Thank you. 1 moment for our next question.

And the next question will come flying at my Quran, from beard. Your line is open.

Hey, good morning, everyone. You've got Pez on for Mike.

Hey Pez.

I'm hoping you could help a little bit with the margin phasing in the back half. You know, it feels like a pretty meaningful swing. Um, you know, Aaron, I know you mentioned the stress of the margin from the international shipments.

Um that came in into Cube, but can you help us a little bit? Maybe with the puts and take specifically to the margins in the back half?

Yeah. What why don't I start and I'll pass it over to Christina. Maybe I'll take CPI because because I think it's a

You know, the the 2 segments independently in CPI, you know, we had a really nice quarter in Topline uh sales a lot of that came from, uh, vending where we had customers that placed orders and we had a book and ship in the quarter, getting ahead of our price, increase for the tariffs, uh, vending is at a lower margin profile than the rest of the business. Uh, so that, that created some compression some stress on the margins, with what we see happening in gaming, and obviously, that moving, uh, that vending moving out of the, let's say third quarter into the second, you're going to see a natural accretion in margins along with the other pricing actions. We've taken in productivity. So pretty, pretty high conviction there Pez in line of sight to our CPI margins on a full year basis to end the year between 29 and 30%. Mhm. Uh, so Christina. I'll pass it to you for and just Bridging the Gap, text it. So we expect sat margins to be in the low 20.

20% for the full year is Aaron said, you know, in terms of currency continued, strong performance driven by International and uh, the year was was uh pretty pretty evenly weighted. It'll be slightly more weighted toward the second half. Uh, in terms of margin. As as Aaron said, we had a little bit of unfavorable mix coming through in the quarter. That'll that'll kind of resolve itself before the end of the year. As you know, we're seeing dilution from the Acquisitions about a few hundred basis points, which was expected. And now, with the closing of the daily routine, transaction is Aaron discussed earlier. We're accelerating the realization of operating synergies and so that'll drive margin accretion in the second half in the authentication business. Uh, there's also some normal seasonality and opsec where revenue and op are typically just a little bit more weighted toward the second half. So considering all those factors, you know, we have high confidence that we'll get to that. Op margin Target of 21% for the full year, with a, a step up in the second, half driven mostly by the actions that we've already taken in Q2.

Excellent. That's that's super helpful to her, I appreciate that. Um, you know, Switching gears a little bit on the m&a front, you know, obviously as we continue to work through the training authentication and the integration of the assets, you know, maybe talk a little bit about how

Um, some of the vectors of opportunity have changed.

If at all and, you know, maybe some technologies that are more interesting than they were 2 years ago. And then, you know, lastly, maybe just give us a little color on how you view the funnel. I know Aaron, you said you feel confident about closing a deal in the next 12 months but maybe more broadly talk about how you feel about the funnel.

Do exactly what we said we were going to do. I think the key here and maybe to the first part of your question is, we want to continue to apply the same framework, right? This is a, a Hallmark has got to be disciplined m&a. That's focused on a very clear framework that we put out that I think will serve us well. So we don't want that to change. Uh, and that's around assessing the market, first of all, and looking at technology leadership positions and to your point with the new acquisitions, that we now have with Alan that opens up new near adjacencies to us around extending our brand authentication portfolio. You know, ID verification now is a is a 1 step adjacency. We couldn't have said 2 years ago when we started the company. So I think there is uh you know, a a broader uh adjacency set. That's fueling our funnel. And then we look at these companies, right? That's Step 2 to make sure they have wide modes that have defensible IP and we could be better or

A very good owners of those companies and then third uh the criteria is around value creation. We've got to find a path that we can always apply CBS and synergies to generate very good returns so we're going to continue to be prudent, you know, opportunistic as as we see uh targets emerge and keep on this. Uh very clear framework that we've established that I think is going to serve us well and be consistent in this approach.

Thank you. 1 moment for our next question.

Our next question will come from the line of Bob labucq from CJs Securities. Your line is open.

Good morning. Thanks for taking our questions.

Hi Bob.

Hi. Um I wanted to start with crane authentication now with Dale, LaRue closed. Um you've you know very rapidly built this um, segment up to scale and could you, you know, talk about the core drivers for this business going forward and maybe break it down between, you know, the physical security and tags. And then the online, um, security and and, and brand management and digital sales as well and what drives, you know, each of those the physical and the and the kind of online digital sales for Authentication.

Yeah. Well hey thanks Bob. I I agree with you here. Uh, that, I'm excited by the leadership position we've created in the scale, uh, you know, really, uh, by integrating these 2 together and adding. And again, our core technology that came over from the currency business in micro Optics. And it's been a very busy, 100 days, uh, since the clothes and, you know, I've had an opportunity in that time too, to go around to most of the daily LaRue major sites, visit the team, uh, meet with customers. And it's, it's really been fantastic. I think we've we've done a very good job in the launch of the new crane, authentication brand, uh, to, you know, to get a little more precise on your question. I would really think about

The business as we showed on those slides. In these 3, buckets ones around brand authentication, which is a combination of physical, uh, and, uh, track and Trace software. Uh, that you know, grows not only with the, uh, growth of the market a branded Goods, which is, you know, depending on the brand, call it a mid single digit to high single digit grower but also on the fact Brands continue to ask for more authentication Solutions. So you have this ability to be a really strong single digit growth Market in brand. Uh, we're single mid single digit plus growth in the brand Market. When you get to the government section, uh, that we talked about Government Solutions, that's really primarily, tax stamps for governments. And their it's it's really about, uh, expansion to not only new products within the government that we already sell to. But also new governments that want to increase their tax revenues. So again, I think a very solid consistent

Mids single digit grower and a lot of synergies, there are commercially with our currency business because we're a trusted partner already to the central banks. And, and you see that and you feel that playing out under the SAT segment and some of the work Sam Keys is doing

And then finally government ID, that's a new segment for us, back back to uh 1 of the questions from Pez. Uh right before you up now we have an ID portfolio that presents opportunities to add more sophisticated technology, upsell technology, just like we do in the currency business and provides more adjacencies for both organic and inorganic expansion. So, again, I see that as a lot of nice Tailwind for the business. So that that's how I'm thinking about it. We're thinking about it Bob in these 3 segments. And again, that's also where organic investment and m&a could play.

Here's a little to the the 2026, uh, whoa, the yearly currency order Outlook and timing, you know, there's a lot of numbers out there. There's, you know, there's the budget. Then there's the currency order itself, which is going to be wide enough to drive a truck through. And then ultimately, you know, the final order will come out at at, at some point later and we'll find out the real number. Um, so my question is, can you give us a sense for your expectations, um, towards this, I guess, you know, we'll learn, you know, the next thing maybe September October but give us a sense. Uh, you know what you're working towards in in calendar, you know, 26, in terms of us volumes and and how we should think about it.

Yeah, thanks Bob. So, first on the timing, I think you're right. You know, it'll be some type of where September October time frame. Uh, we we don't know. Precisely, uh, we'll we'll find that out when when the FED publishes it, uh, in terms of the Outlook, you know what, what we're thinking for our base cases volumes, probably in the same range as we've been in. Uh, this year. The key thing we want to we want to look at is mix. That's really the Big Driver for our business and so that's what we're going to have our eyes on is, you know, that mix between call it, the 1 dollar bill and the hundred dollar bill in, in the varieties, the nominations in between. So, uh, again, we we'll know in the next 60 90 days, uh, where that sits mix will will be the key for us and, you know, maybe

Christine, if you want to add just about the US currency redesign program where that sits or any more color on that. Yeah, I mean, we're super excited about the

and as you know, we resumed production in our US currency paper making processes in the second quarter which was very successful in a very significant milestone for our team. So I'll take the opportunity to say, congrats to our currency, team, on a job. Well done. Uh, so we're feeling, uh, really excited about the trajectory of currency.

Thank you. One moment for the next question.

Our next question will come from the line of Bobby Brooks from Northland, Capital markets. Your line is open.

Hey, good morning, Aaron and Christina. Um, now that you've had Dale LaRue under your ownership for about a 100 days now and you're on your way to applying or already on your way of applying CBS. And even mentioned accelerating, those actions. I was just curious to hear maybe some actions that you've already taken or plan to take to elevate the margins there, or maybe where you see the most opportunity for enhancements.

Yeah, thanks Bobby. Uh so yeah it's a 100 days and and we're not on our way to applying and we we were ready to go on day 1 and they're they're well in Flight. Uh you know a as a reminder when when you looked at the entire 2 deals that form crane authentication, we targeted about 16 million dollars combined in run rate synergies. We typically Target that by year 3 to achieve those as we apply them. And most of those, the vast majority are operational synergies. So to answer your question, those come out of simplification of the cost structure. So, putting together sales marketing, the management teams of the companies, you know, there's a natural cost structure, uh, reduction from doing that. So, that's

Has been executed to a large extent. Uh, there's also rooftop consolidation and that's in has some has been executed. Some is coming and we've indicated, uh, that to the teams and and respective. Uh, leaseholders. And then also, you get into synergies around product rationalization. So this is trying to take the best that was crane the best that was off. Second De La Rue and creating a portfolio that simplified and still has options for customers at different price points. So that also allows for some cost structure, uh, rationalization as well. So, those are 3 examples, all of which are being done, uh, all of which,

Fall under you know our Mantra of deploying, CBS kaizens uh different kinds of productivity initiatives. The application of 80/20 to the product lines, all these tools in the toolkit are getting deployed uh in in real time and again high confidence then because we've deployed and taken those actions that you're going to continue to see the margin increasing in the authentication business steadily through the rest of 25 and into 26 exiting next year, you know with the business. That's uh right at about 20% op.

Wall Street Journal article out about a month ago that detailed the rise in trend of super fake luxury handbags. And the stats, I really stuck out to me was that lvma spent about 11 billion on Advertising last year, but that compared to only 45 million in counter anti-counterfeit, uh, counterfeit efforts. So as it pertains to you guys with those stats in mind, my logic leads me to believe that 1 that validates, that product authentication is really in its infancy stage and 2 that there's a pretty sizeable opportunity for sat. Do you feel like my logic here is fair and maybe just any additional comments, you'd add or any detail. You'd you could disclose about how the team is pursuing the broader opportunity for, uh, product authentication in luxury goods.

Thanks Bobby. I mean I think that logic is incredibly sound. In fact. That's the entire strategic pillars that this business is standing on because we see the same thing. And exactly to your point, you see it a reported about I I believe the Gap here that we always talk about. Is it takes these Brands maybe surprisingly, uh, given the numbers like you just quoted longer do adopt the technology and implement it, then maybe we would all like, but we know the trajectory that this is headed on because counterfeiting is not getting

Better.

And the sophistication of the counterfeiters is only increasing, and we occupy the high ground as the leading technology provider in this space. So that's, you know, putting it into a, uh, another one of our customers' analogies. Uh, that's where the ball's headed, or the puck is headed. We know it's going there. We just, it is. It's, we're waiting and driving it with those brands to bring up the issues you're seeing and actively working with those customers to adopt, you know, different features. Whether that's embedded, whether that's covert, you know, call it overt. But you're exactly correct, Bobby. That's where this market's going.

Thank you. 1 moment for our next question.

All right, our next question will come off the line of Ian sophina from Oppenheimer. Your line is open.

Hey, good morning. This is Isaac, Sailin' On for Ian. Thanks for taking the question. I just had one international.

Hey, where everyone? Uh, I just had 1 question on International currency. Um, I know you're limited on what you can say, on on customers and activity, but maybe if you could help us understand what's driving growth on the international side in terms of mix and volume. Um, you know, if you're seeing higher denominations, um, and then it just overall Trends uh around uptake on micro Optics. Thanks,

Yeah, great. Uh, thanks Isaac. So you know, we have very high confidence in our full year sales guidance, uh, particularly related to International currency and some important data points. So it's just looking at our core backlog, which is up almost 20% year-over-year. And we expect about 60% of that will deliver in 2025 and we expect our backlog to stay in a range of above approximately 300 million for the rest of the year based on our strong orders funnels. So, what's driving that? It's our differentiated technology, we believe, we're the world's leading provider of technology and we continue to win in the market. Uh, you know, this quarter the growth in the backlog was primarily related to um recurring Revenue as we call it order existing customers that continue to order from us because they trust us to provide the world's leading technology. Uh but we have a pipeline to expect 10 to 15 micro optic wins with new customers for the full year. And we have high confidence that we're going to achieve that Target. So, you know, we're super excited.

About the trajectory, as I said earlier, and the pipeline is very rich for opportunities for the rest of the year.

It's very helpful. Thank you.

Thank you. And as a reminder that star, 11 for questions, star 1, 1 1 moment for any questions.

I'm not showing any further questions in the queue. I would like to turn it back over to Aaron Sach for any closing remarks.

All right. Thank you operator. Well, I think you can see uh from

What we provided in the last, uh, day that our Q2 was another strong quarter of execution and performance for the cranien XT team. And I again, would like to thank all of our Associates around the world, for their hard work and dedication to the company. I remain confident in our future as we continue to build. And grow this company, the leader in technology that secures the tech and authenticate.

Thank you to everyone who joined us. We hope you have a great day, and we'll see you next quarter.

Thank you for your participation. In today's conference, this does conclude the program. You may now disconnect everyone have a great day.