Crane Company (CR) Earnings Call Transcript & Summary

Good morning. I'm Jason Feldman, Vice President of Investor Relations with Crane Co. Welcome to our 2021 Investor Day. Before we begin, I'd like to direct you to the disclaimers regarding forward-looking statements that are posted both in Form 10-K and Form 10-Q as well as in today's presentation materials, which are available on our website. And just a reminder that we'll be citing non-GAAP measures throughout the day. Those measures and their associated reconciliations to reported results can be found in the non-GAAP reconciliations in the appendix materials that we provided today. We will start with the strategic and financial overview, followed by presentations from the leaders of each of our 3 strategic growth platforms. There will be a Q&A session after each of the 3 business presentations with an additional Q&A section at the very end of the presentation, for any corporate, capital allocation or portfolio-related questions. And now it's my pleasure to introduce Max Mitchell.

Good morning, and welcome to Crane's 2021 Investor Day. Crane, 165 years of rich history and what a journey it has been. Due to the virtual presentation environment this year due to COVID, we are changing up our typical format and trying to keep things tighter for you this year. We expect not to go beyond 2 hours. And my team has much to share. So I'm going to try to keep it a little shorter myself. First off, allow me to give my heartfelt thanks to all Crane associates globally, who continued to work together last year to support our customers, all stakeholders and each other during a year that was so difficult, both personally and professionally. Even in the COVID environment, I am so proud that our associates philanthropic efforts continued, not only with presenting donations from the Crane funds, but also with associates volunteering their time during work hours to causes around the world, which had even more significance during this year that adversely affected so many in our global communities. These efforts reflect the best of being Crane. And I am so proud of everyone's dedication and continued focus. My heart goes out to those associates families who lost loved ones during the past year, and those whose lives have been upended in so many ways. Yet I am also so proud of how we were there for one another with compassion and support. We took actions to protect the safety of our associates globally, and we also took incredible steps to protect them financially. I'm proud of the decisions that we made to do the right things at being Crane. Well, moving on to our updates for 2021. Last night, we issued a press release, which increased our full year adjusted EPS guidance by $0.10, reflecting upside in the first quarter compared to our original guidance. This increase reflects stronger momentum over the last 2 months at Fluid Handling, Payment & Merchandising Technologies and Aerospace & Electronics. On our fourth quarter earnings call in January, we provided a lot of detail on our 2020 performance. I won't repeat that today, but suffice it to say that I'm very proud of how we executed last year in the face of COVID-related challenges. We delivered solid financial results relative to demand levels while supporting our associates and customers throughout the pandemic. I want to shift the focus today to the present and the future. And on the opportunities that we have ahead of us. At last year's Investor Day, we communicated a revised focus for capital deployment at Crane, both organically and inorganically. While COVID delayed our progress somewhat, I truly believe Crane is at an inflection point for accelerating growth, both organically and through inorganic capital allocation. And you will hear more about that today as well as on May 26 at our dedicated Aerospace & Electronics Investor Day. Since we now have scheduled that additional Aerospace & Electronics-focused event, today, we are going to spend more time focused on the Fluid Handling and Payment & Merchandising Technology segments. There are 4 themes that you will hear throughout the presentations today. And these are the messages I hope that you take away from this event. First, we expect a strong market recovery as we emerge from this pandemic across all of our businesses. In some markets, this will be a return to normal. In other markets, the post-pandemic growth outlook is even better than it was before, given our alignment with evolving secular trends. At Aerospace & Electronics, those secular drivers include electrification, power conversion, sensing, thermal management, space, among many others. At Fluid Handling, we expect sustained growth for chemical, pharmaceuticals and general industrial markets that will grow above GDP and where we have the strongest position and differentiation. And at Payment & Merchandising Technologies, growth is all about helping our customers with productivity automation and security. The second key theme today is that we have consistently invested in organic growth, and we are seeing those results accelerate. We have built upon our outstanding historical positions in key markets, pushing investments in new technologies and platforms and many with some fairly long time horizons. We are winning today because of the investments we made many years ago, solidly positioned today. And the investments we are making today are solidly positioning us for the future. The consistency of these investments has been critical. We did not cut any of our growth investments last year, and we are emerging from the pandemic positioned to outgrow our markets and competitors. The following business presentations are going to be heavily focused on this topic. And you are going to hear about how we are driving growth through new product development, breakthrough innovation, technology investments, localization of support and commercial excellence. Third, we have growing opportunities for inorganic growth. Last year, we discussed how we refined our M&A valuation process to better reflect our proven historic ability to over-deliver targeted synergies. As M&A activity and deal flow continue to improve, we expect to have increased opportunities for both bolt-ons and adjacencies in Fluid Handling, which Alex will discuss later, and for Aerospace & Electronics, discussed in more detail in May. And after numerous acquisitions in Payment & Merchandising since 2013, we are pausing our acquisition activity in that segment, given the tremendous opportunities those teams have with a continued focus on organic growth and further integration gains. And lastly, across all of these opportunities, we are continuing to build on an incredibly strong foundation, grounded in our Crane Business System, its disciplined cadence and execution as well as our strong culture with its emphasis on ethics, philanthropy, sustainability and equality. While we have always been intensely focused on maximizing sustainable returns for our shareholders and all stakeholders for that matter, we believe that we are at an inflection point and the results from years of organic investments, acquisitions and repositioning our portfolio are gaining traction at an accelerating pace. In this environment with heightened uncertainty, we are not going to provide an updated medium-term earnings framework with an absolute EPS target. However, we are confident that we can deliver above-market organic growth paired with strong operating leverage as markets recover. We also expect that acquisitions in Fluid Handling and Aerospace & Electronics, will contribute meaningfully, and they will be focused in areas that improve our underlying organic growth profile. Together, we believe this is a formula for long-term TSR growth rates well above the average of our peers. I'm resolved to conduct my business in the strictest honesty and fairness to avoid all deception and trickery, to deal fairly with both customers and competitors, to be liberal and just towards employees and to put my whole mind upon the business. These powerful words written 165 years ago, continue to guide us today. Speaking to ethics and integrity and how we conduct ourselves and our business for all stakeholders with a passion for the business. But more than that, R.T. Crane was a Philanthropist, a supporter of his community and a family man. In that spirit, we are extremely proud of our culture at Crane, which embodies so much more than simply bottom line results. Ethics and integrity, honesty and fairness, philanthropy, sustainability in an environment which embraces the quality and respect for all on a global basis. What is the culture of a company? What's it worth? At Crane, we believe it is a differentiator for us, and we will continue to prove that as we move forward. The right behaviors and support for all stakeholders, coupled with the power of disciplined cadence and execution of the Crane Business System, while pushing and investing in breakthrough technology that satisfy and solve our customers' most difficult problems. What a fun journey it's been and what a fun journey we have ahead of us. And we look forward to sharing it with you today. On that note, let me pass it off to our Senior Vice President and CFO, Rich Maue, who will take you through some key financial updates and reminders before we turn to our presentations on our strategic growth platforms.

Thank you, Max, and good morning, everyone. You all saw this slide last quarter, but a few key messages I want to leave you with about 2020 before we start. First, we executed extremely well throughout the year. Navigating the significant demand impacts across most businesses with careful and thoughtful cost measures of $105 million, which yielded an overall core deleverage rate of 35%. Overall, results for the year were very close to what we guided to in April of last year when most didn't provide guidance at all. And this performance includes the impact from severe volume declines in Crane Payment Innovations and Commercial Aerospace, 2 of our highest margin profile businesses, and it also reflects continuing investment in all of our key growth initiatives. Second, we drove very strong free cash flow performance through proactive management of working capital and CapEx. I'll cover some details in a few minutes, but structurally, we're in a better place than we were 5 years ago. Third, to remind you, we closed on 2 acquisitions right before the pandemic. I'm pleased to highlight that accretion from these 2 transactions was even better than our pre-COVID expectations, and we're excited about further opportunities for growth and margin expansion in both businesses. While we gave full year guidance just last month, as you now know, we announced last night, our updated range for adjusted EPS is now $5 to $5.20 and for free cash flow in a range of $265 million to $295 million. This increase is driven by modestly improving demand momentum across our businesses compared to where we were a month ago, giving us increased confidence in our outlook. Compared to last month, we feel better about sales trends across all 3 of our strategic growth platforms. And standing here today represent the primary reason for the guidance raise. At Aerospace & Electronics, we're seeing modestly better demand in the commercial aftermarket here in the first quarter and continued traction in our Defense Electronics businesses. At Fluid Handling, we are seeing modestly better momentum, primarily in our shorter cycle businesses. And at Payment & Merchandising Technologies, continued momentum on new customer wins at Crane Currency in the quarter, coupled with demand modestly stronger in our shorter-cycle payment innovations end markets, gives us the added confidence. And as I mentioned on our call last month, because of the cost actions we took last year across the business, when end markets and volumes recover, I expect notable margin improvement. You can see that reflected on the far right side of the page, where I'm already indicating higher confidence in margin expectations. Remember, we do not have a hockey stick earnings cadence in 2021. To reiterate what I said on the January call, 2 primary factors driving a strong start to the year. First, the full $0.06 of fourth quarter supply chain delays that we highlighted last month, will hit the first quarter. And second, we have a strong first quarter outlook in our Crane Currency business, which just reflects normal timing of shipments for the 2021 year, consistent with our customers' needs. Now layering on this $0.10 guidance increase that reflects recent trends, we expect a very strong first quarter, which could potentially be the strongest EPS quarter of the year. In summary, we're feeling better today compared to just a month ago. And as we gain more clarity on the recovery in our end markets and gain further confidence in our outlook, we'll share these updated views with you. Moving to our long-term outlook by segment. Despite the pandemic, no change to expectations outlined on this page, and I'm highly confident in our ability to get well within all these ranges. At Fluid Handling, the pre-pandemic repositioning actions will be completed by the end of 2021, contributing $11 million of incremental savings in 2022 and will drive margins above the bottom of the range presented even with a still depressed top line. So taken together with end markets recovering and most important, share gains through all our key growth initiatives that you'll hear from Alex, the margin opportunity remains exciting. At Payment & Merchandising Technologies, we will be back in the targeted range this year for the first time since we bought Crane Currency. And this is despite the fact that sales at the high-margin Payment Innovations business will remain below pre-pandemic levels. End markets are recovering in that business. And we continue to execute on all key initiatives to ensure we gain even more share. Kurt will give a great summary of where we're focused in this regard. And at Aerospace & Electronics, a slower recovery, as we've discussed in the commercial aerospace end markets, clearly all timing considering the breadth of all the programs where we have content. And the significant recent program wins in the defense electronics side of the business, with production commencing 3 years from now is setting us up nicely, dovetailing with the eventual recovery on the commercial side. It's exciting for me and the team to see what this business will look like in just a few short years. And with the cost reduction measures taken last year and how this business will leverage on growing sales, the margins here will quickly return to the 20% range. I'm confident we can do that by 2022. Engineered Materials. I'll just say that we see a lot of signals that a secular shift is happening in the RV world. RV demand is as strong as it has ever been. Building products markets are recovering with some new emerging opportunities, and the segment's margins are already back to target levels. Fantastic execution. Culture, as Max described, is multifaceted, and we are extremely proud of what being Crane means, how we act, how we behave, the Crane Business System is how we manage the company with the right behaviors and it is what drives our execution. A maniacal focus on eliminating waste and variation while at the same time, enabling and driving innovation and growth. It's this concept of differentiated execution that drives results, driven by a disciplined cadence with extreme accountability. A level of accountability that is only possible in an environment that is data-driven and continuous improvement-focused. It's what sets us apart. And it's what should give investors added comfort in periods of uncertainty. Today, I'm going to focus on a few of the places you see this in our results, in our free cash flow performance and our margin profile. Then from Alex, Kurt and Steve, you will hear how our differentiated execution drives growth. First, we have seen a step function change in free cash flow conversion. This is sustainable and should be appreciated by investors for our results. The chart speaks for itself. On the left side, you see our free cash flow conversion shown over 2 6-year periods, represented by the 2 solid lines. From 2010 to 2015, our free cash flow conversion averaged 78%. And from 2016 through 2021, we expect to average 99%. That's a remarkable change. It's our differentiated cadence of process and disciplined execution that continues to drive these results, with an attention to detail that you would expect to enable this kind of improvement. The right side is simply the same comparison, but adjusting for asbestos cash outflows, showing the true underlying operating performance of the business at 111% free cash flow conversion. In our M&A process, CBS is embedded, starting with our funnel management process, all the way through integration of a successful transaction. Our cadence and disciplined execution yields results in the form of who we evaluate and why, how we value and pay and how we integrate. Equally as important, it provides a disciplined approach to ensure we don't overpay. And simply walk when the math doesn't make sense. The chart on this slide shows the level of M&A integration with realized synergies, close to 2x more than our forecasted synergies has been realized on average across all transactions over the last 10 years. Even during this past year, in the midst of COVID, we successfully integrated 2 acquisitions. And we delivered $0.23 of accretion versus our initial estimate of $0.15, all that accretion driven by incremental synergy realization. And by the end of this year, we will have roughly doubled the margins at Crane Currency compared to pre-acquisition levels, even after the significant intangible amortization that comes with purchase accounting. As we mentioned last February, related to our deal math, we have historically over-delivered on cost synergies. We have used that empirical data to better forecast synergies for potential acquisitions, and we are using that new forecasting methodology in our NPV calculations. That allows us to be a little more competitive on value while maintaining our strict discipline. Another reason we are more bullish on future inorganic opportunities. Even with this updated forecasting methodology, we outperformed our synergy expectations for both Cummins Allison and instrumentation and sampling. So again, another example of differentiated execution capability and excitement over our long-term inorganic prospects in addition to organic. Moving to capital deployment. Our capital deployment priorities have not changed. We will remain disciplined and take a long-term view in our capital deployment decisions. We prioritize internal investments because they have the highest risk-adjusted returns, then it's acquisitions to enhance growth. And as Max pointed out, our focus will be on deploying capital to our Aerospace & Electronics and Fluid Handling businesses. And we will be seeking to acquire in both our core and adjacent markets. And as I just stated, we have always been and will continue to be disciplined buyers. And we will balance acquisition opportunities with the desire to provide adequate return of capital to shareholders. We have a strong resilient balance sheet with ample flexibility. And our liquidity position is as strong as ever, notwithstanding the current environment, driven by our continued strong free cash flow, current cash balances and capacity under our bank facilities. This will enable us to pay down our 1-year term loan in April with a combination of cash and commercial paper and still position us with a stronger liquidity position compared to when we entered the pandemic. Our M&A capacity is poised to grow very quickly, and we have the potential to monetize assets for the right opportunity if the need arises. We are focused on Fluid Handling and Aerospace & Electronics. We've assessed several transactions during the last 6 months. And while nothing executed, we're encouraged by the growing level of activity. In summary, we have proven that we are an outstanding operator with differentiated CBS capabilities. As such, we have a proven track record of driving results and are well-positioned to benefit from markets which have begun to recover. We consistently generate substantial free cash flow in addition to our strong balance sheet, which provides us substantial flexibility for acquisitions, and we are extremely disciplined in how we allocate our capital. Together, our capabilities, markets and financial flexibility create a compelling story. Thank you for your time this morning, and we are now ready to move on to segment presentations, starting with Kurt Gallo on Payment & Merchandising Technologies.

Good morning. I'm Kurt Gallo, Senior Vice President, responsible for the Payment & Merchandising Technology segment. I'm looking forward to sharing with you the exciting opportunities that we're tracking across the entire Payment & Merchandising platform. I'm extremely proud of our team's performance in 2020, although it certainly didn't go as we had initially planned to say the least. Through solid execution, adjusted operating margins declined less than 400 basis points on a 19% end market-driven decline in core sales. To provide some context, CPI faced significant headwinds in 2020 as businesses, casinos and schools shut down worldwide with capital projects globally put on hold. Through this turbulence, the team responded quickly with new plans, consolidating resources and continuing to focus and completely fund our key growth initiatives and finalize the integration of the Cummins Allison business into CPI, which I'll speak about in a bit. At Crane Currency, we had a stellar year with sales up 23%. This success was driven not only by the increased demand for cash globally, but more importantly, by outstanding operational and CBS improvements continuing to read through. Excluding the impact of the Venezuela sanctions, 2020 marks the second consecutive double-digit year of growth for the international markets as we continue to expand our market share as well as a strong recovery in the U.S. market that we expect to continue well beyond 2021. As we first outlined with the acquisition of Crane Currency in 2018, we are on track to achieve at least $1 of earnings per share accretion this year. We were off to a strong start in '21 across all of the Payment & Merchandising businesses. And we expect a solid market recovery as the vaccine distribution increases throughout the year. We expect at least 6% core top line growth with margins above 18%. There is no question about our ability to improve profitability and integrate acquisitions in this business. We drove margins from the mid-single-digit range to more than 20% with our focus on CBS and productivity, volume leverage and the benefits of scale and synergies from our 2013 acquisition of MEI. The 2018 acquisition of Crane Currency was initially dilutive as expected. And then last year, we had additional margin dilution from both the Cummins Allison acquisition and the COVID-related volume declines. However, we expect to be back in our targeted 18% to 22% margin range this year, even though CPI will still be well below pre-COVID levels. We are confident that we'll be able to accomplish this through synergy realization from Cummins Allison, the benefits from integrating our merchandising business into CPI, strong productivity and continued operational improvements we are driving across the business every day. With as difficult as a year as it has been, I'm more excited now about our outlook and growth prospects at any other time over the past 13 years that I've been with Crane. With the combination of organic growth and acquisitions, we built out a position in the automated payment and currency markets that is unrivaled. And that has opened up substantial new market opportunities. We are pursuing new and exciting organic growth initiatives across every part of the business, enabled by our strong technology and market positions as well as a strong value proposition based on productivity and security. That value proposition is well aligned with the market trends, the continued growth in the volume of cash and circulation, the need for increasingly sophisticated security features and increasing automation driven by rising labor costs. Our Payment business has evolved dramatically over the last 3 years as a result of acquisitions, internal mergers and continued investment in new technology and organic growth initiatives. As you can see, our business in 2018 was almost entirely focused on the sale of critical components to the OEM segment, which is roughly a $1.3 billion market. As our market share for OEM solutions continue to grow, we deliberately moved into adjacent markets to expand our runway for potential growth moving both upstream to provide full system solutions as well as overlaying these systems and our OEM solutions with a connectivity offering that provides remote management and diagnostic capabilities. And finally, with the acquisition of Cummins Allison, we now have a nationwide field service organization that can provide on-site support for virtually all cash automation systems. As you can see, with these changes, our global available market has increased from just over $1 billion to more than $3.5 billion. In addition to expanding the addressable market, this business evolution has other significant benefits, most notably, building a reoccurring revenue stream from both the connectivity and service offerings and increasing customer retention by creating deeper relationships with more frequent touch points. Let me take you through some of the examples on how this complete ecosystem now works together to solve our customers' problems as we help them drive operator productivity and security. Referencing a traditional retail setting provides a great microcosm of the range of opportunities that we are now actively preserving. That range starts with our customer-facing solutions. We provide the critical components in the self-checkout lanes such as bill and coin acceptors, dispensers and recyclers. These components must be extremely reliable. And must have incredibly sophisticated algorithms to differentiate between real and counterfeit currency. At the coffee shop, or pharmacy within that store, we can provide complete Pay Station system solutions that automates and simplifies the payment portion of the customer transaction. At the entrance of the store, we provide a coin redemption kiosk that can count large volumes of a customer's change, converting it to in-store credit, in turn, providing both a benefit to the consumer and the retailer. The amusement center or lottery machines can now have our cashless readers, accepting credit cards, Apple Pay or other contactless payment methods to add credit to a card for video games. Moving to the back office. We have a different range of solutions, sharing much of the same critical validation technology. This equipment includes high-speed coin and bill sorting and counting equipment as well as smart safes. Tying all these systems together with our simplified platform of connectivity solution provides real-time management, efficiency data, remote diagnostics and alerts and provides the flexibility to do this across multiple sites. And finally, we now offer a complete on-site service network to ensure high levels of uptime and trouble-free operation. But whether in a retail setting, as I just outlined or an entertainment environment like a casino or an urban transit system, the customers' needs and solutions that we can provide are similar and wide-ranging. And in every case, our solutions are addressing some of the operators' most pressing problems, how to improve productivity, security and accountability, while simultaneously enhancing the customer experience. We have a broad and deep portfolio of solutions, and we continue to innovate further. And over the next few pages, I will profile some of the key product introductions in each of our 4 primary solution categories. Our OEM component business has the industry best-in-class coin and bill validators and recyclers that work with virtually every currency in the world. But we've also been growing our cashless business for many years. And today, we have more than 750,000 cashless systems in the field. Our latest new product offering is the ALIO, all in one, cashless reader and telemeter with full-motion video display. We have always had a very strong cashless position in the vending market, but ALIO will further accelerate our growth in other end markets, including gaming, retail, transit, electric vehicle charging and others. This new product simplifies integration and is configurable for all forms of cashless payment from credit, debit and loyalty cards to contactless payments, such as Google Wallet and Apple Pay. It is also configurable for micro payments and for payments requiring pin entry through our pin on glass technology. Further, ALIO has a connectivity solution that links our customers' payment systems together across a network, allowing for a fully connected and management-enabled system. And with this high-definition screen, it also provides our customers with incremental advertising and promotional opportunities. While the opportunity is different in each vertical market, we are well-positioned for growth with this product given its rich set of features as well as our existing relationships with customers across our target markets. For our Growing System Solutions business, we have both consumer-facing and back-office solutions, collectively adding about $1.3 billion of addressable market. On the consumer-facing solutions side, we continue to address traditional self-checkout solutions by providing components to OEMs, such as NCR, Toshiba and Diebold Nixdorf. However, we are also seeing substantial growth in alternative self-checkout solutions. For example, our Pay Station solution is gaining traction with convenience stores and quick-serve restaurant operators. This solution integrates with our customers' existing point-of-sale solution and automates the payment portion of a transaction. For Pay Station, our late-stage active sales funnels have increased by 50% over the last 6 months, and we expect sales in the first quarter of this year to exceed those of all of 2020. We are also seeing an increase in emerging opportunities for our custom self-checkout solutions, different from the standard systems that you'd find in your grocery store. Companies like Target and Lowe's, to name a few, are turning directly to us for their cash automation payment systems and working with us to integrate our products into custom design systems. Over the past 5 months, our active sales funnels for custom DIY solutions has increased by 63%, and it now exceeds $190 million of opportunities to roll out over the next upcoming years. The Cummins Allison acquisition also brought us a retail coin redemption kiosk solution, which sorts and counts a retail customers coins. This fits perfectly with our retail sales and service structure. To date, we have installed over 7,000 machines in the field, with notable customers, including Wegmans, Publix and Tesco. Improving efficiencies at the front of the store or venue is only half the story as in every environment we serve, cash travels from the consumer-facing applications in the front of the operation to the backrooms for final reconciliation and processing. Whether it's a grocery store, a casino, a train station or anywhere else, payments are accepted, providing a quick, efficient and secure method of storing and reconciling at every -- at the end of every shift and at the end of every day is an essential part of the complete cashless cycle. Our broad range of back-office system solutions including smart safes, along with note and coin systems, address all forms of physical payment processing and accountability, including coins, bills, checks and tickets. Back-office solutions now account for over 20% of our total sales, up from 0 in 2018. This success is attributed to our continuous flow of new products and strategic acquisitions. Our connectivity solutions are an increasingly integral part of our overall value proposition. A great example of our fully connected vision in action is how casinos and other gaming customers rely on our Simplifi software suite for front and back-office cash management and for functionality, including real-time live alerts and equipment health monitoring. The real-time monitoring is extremely valuable in casinos to optimize revenue generation, but especially critical in distributed markets, with equipment spread across multiple locations where operators can incur higher service and labor cost. The demand for real-time updates and alerts goes well beyond the gaming sector. Any operator whether in retail, transit, vending, gaming or financial services requires information to keep his or her business running efficiently and profitably. And any operator, whether managing a single location or a broadly distributed network can benefit from ensuring that their storefront is active and operational. And the benefit to Crane is a reoccurring revenue stream. And even more importantly, customer stickiness and differentiation that ensures our future hardware position. With the Cummins acquisition, we gained a 450-person strong national field service organization. Today, this business exclusively services Cummins Allison furnished hardware solutions as seen on your left. We are extremely excited about the opportunities to expand our service offering across the full range of CPI Product Solutions and also to expand our preventative maintenance field support to our OEM partners who today rely on numerous small regional players for support. We are already providing this level of service to an OEM-branded ATM. So extending our capabilities to a wider range of products is a logical and straightforward next step. We estimate this segment of the U.S. service market to be nearly $1 billion and with our current offering and customer relationships, we expect this business to deliver double-digit growth for the foreseeable future. The growth opportunities at Crane Currency are as exciting as they are at the payment business. And the underlying global strength of cash in the markets continue to grow unabated. In fact, cash in circulation has increased every year for the past 50-plus years. And this past year has been no exception. Banknote design, formulation and printing is a very technology-oriented business with complex and unique customer substrate requirements, combined with sophisticated equipment and extremely rigorous process control procedures, banknote design requires a combination of mathematics, science and art and the ability to combine those varying skill sets. Our micro-optic security technology is a clear differentiator as it continues to be the only security technology that has never been successfully counterfeited. As you can imagine, not all countries have the same needs or monetary usage demands. This -- the selection of a security product requires a precise balance of aesthetics, counterfeit resistance, size, price, durability and application method. And that balance can vary enormously across countries and denominations. Thus, we have continued to invest for growth and to expand our micro-optic security technology to address the full range of needs that we see across customers and denominations. By applying tools from our CBS toolbox, we have accelerated our new product development cycle and have identified new opportunities to solve existing customer issues. By doing so, this has also increased our addressable market. As an example, coming into 2020, we held a problem-solving kaizen event that identified a critical gap in our product line, along with relevant customer needs that weren't being met by our competition. Out of that very powerful 5-day event, we put a plan in place to launch our new product called Breeze. And in just 8 months later, we've achieved that goal. Increased our addressable market by over $140 million. And as of today, we've secured 2 new countries with that product. While Breeze is based on the same underlying technology as our other micro-optic products, its feature set and corresponding price points were optimized for a specific type of banknote and usage level. Crane's micro-optic technology continues to win share globally. We now provide this technology in over 144 different denominations in across 49 countries. And in 2020, we saw our international business continue to grow at a rate greater than 30%, for the second consecutive year, excluding the impact of the Venezuela sanctions. And as we enter 2021, our international sales funnel and backlog are very strong, and we expect another solid year for this business. As Max mentioned on his last quarterly earnings call, the demand for cash in the U.S. market is very high, and the Federal Reserve is working to rebuild inventory levels. The Federal Reserves provided a range in its yearly currency order from 7.6 billion to 9.6 billion banknotes. Our guidance is in line with the lower end of that range, given our best estimate of the Bureau of Engraving & Printing capacity for this year. Based on cash usage and inventory levels, along with the Federal Reserve Banknote requirements, we anticipate a more level-loaded fulfillment of paper over the next couple of years. In addition to the steady flow of business, we continue to make good progress in our work with the Bureau and the Fed on the technology for the next generation of banknotes. Of course, timing of the new series is still quite fluid. And as stated in the recent press reports, is not anticipated before 2025, but we stand ready to support the exciting Harriet Tubman $20 bill and any other refresh bill designs the government chooses to pursue. Not only do we have a compelling growth initiatives across the Payment & Merchandising Technologies platform, but we continue to be relentless on driving productivity and efficiency through our businesses as clearly shown by the substantial increase in margins we expect this year. To provide a great example of this, let me discuss our success with our most recent acquisition, Cummins Allison. The power of CBS has never been more evident than the results that we are already seeing after just 1 year of ownership. The local teams have adopted the CBS philosophy of customer-centric continuous improvement as kaizen activities have continued to accelerate, so too has the rate of improvement grown. Utilizing our standard work kaizen tool driven at the shop floor level even in this very challenging COVID environment, we delivered 120% operating profit improvement and 13% productivity improvement year-over-year. But more importantly, our customers saw improved quality and significantly stronger on-time delivery. This is just a simple, yet powerful example of what our Crane Business System delivers across all of Crane. So in summary, Crane's Payment & Merchandising Technologies segment has a track record of solid performance in market segments that continue to show long-term growth drivers on a global level. We are a technology-driven business. We invest heavily in R&D. Our technology, whether it be in banknote, security and printing, coin and bill validation technology, connected solutions and world-class field service, positions us well ahead of our competitors. Our scale across the cash cycle provides a fundamental differentiator in the markets. This allows us to expand our reach with new products and service offerings, such as packaged solutions like the Paypod and Pay Station. Fully connected solutions that provide incrementally more data analytics and configurability, enhanced note security features, opening up new countries and denominations; and finally, a national field service team that offers expanded coverage and expansive growth. And these are just a few of their recent new offerings. All of this combined gives the Payment & Merchandising Technologies segment strong fundamentals that will drive long-term growth and profitability.

And we will take our first question from Matt Summerville with D.A. Davidson.

Just one question on the self-checkout side of business. Can you talk about what has prompted the likes of Target and Lowe's to opt from more of a homegrown solution versus leveraging traditional OEM offerings from the likes of NCR, Diebold, Toshiba? And do you see this spilling over into other store formats beyond sort of big-box and home improvement?

Yes. Yes. Great question. What's prompted it? It's really been driven -- if you look at the origination of the self-checkout devices, they were first introduced into the grocery outlets. And what we're seeing and what our customers are seeing, such as Lowe's, Target and frankly, others as well, is that the -- sorry, I had a little bit of a miss there.

Yes, we can hear you, Kurt.

You can hear me all right?

Yes.

Okay. My phone beeped. Yes, the change that we're seeing is that the current configuration of the self-checkouts that were used in the grocery outlets are quite different and didn't -- weren't quite meeting the needs of the big box or some of these other big box stores or the smaller box retail outlets. And that's it. You really forced them to look at a different type of solution, a less expensive solution than what they're currently seeing through the larger OEM providers. And your second question, Matt, yes, we are seeing this spread into other retail outlets. We're seeing this happening in quick-serve restaurants. We're seeing this in convenience stores as well as small box retailers as well.

And we will take our next question from Damian Karas with UBS.

You had mentioned that part of the reason for the improved guidance versus last month was some new customer wins within Currency. I was wondering if you could elaborate on that a bit in terms of where you're winning. Are these existing governments that you're just getting new wins? Or are we talking new customers altogether? And I guess, thinking about the future opportunity, on the slide, you show that you're working with 49 different countries right now. Do you view the future opportunity as sort of continuing to win new countries? Or is it increasing the penetration with your existing customer base in Currency?

Yes. It's really both. We've seen a nice increase in the number of new countries that we're servicing this past year, and we would expect that to continue to grow through 2021 and 2022 as well and on. As you know, there's about 120 different countries that have their own currencies worldwide. So that is absolutely helping to drive the business as well as reprints and advanced business with the existing customers. So it's really a nice mix combination that's driving that 30-plus percent growth in the international markets?

Okay. Great. And if I could, I'd like to ask you additional question on the Pay Station solutions. It sounds like that's really picked up. I think you mentioned the funnel being up 50%. Would you be able to put any numbers around that just in terms of how much it's kind of contributing to the business today and what you think the overall market opportunity might be?

Well, what I can outline is that the funnel today that we see that we would expect to have active projects with over the next call it, also the next few years, right? Because rollout schedule certainly varies about $190 million, and that's up about 60% from where it was just 6 months ago. So really strong momentum across the board that we're seeing driven there.

And we will move next to Ken Herbert with Canaccord.

Kurt, I wondered if you could just -- for the guidance in the up 6% core growth. Can you just remind us how much of that's coming from Currency relative to CPI?

It's -- yes, Ken. It's really a nice mix between the 2 businesses. We're seeing -- as I mentioned before, we're seeing some really nice momentum on the Currency side and that is both on the U.S. side of the business as well as the international markets. And then the recovery, we've planned a moderate recovery due to the pandemic on the CPI side of the business. And so the mix between those 2 is really quite equally split.

Okay. And I'm just curious, within CPI, as you look at the 4 sort of as you've expanded the market opportunity and the 4 from OEM solutions across the Services and Solutions, as you grow the Services and Solutions business off of the Cummins Allison acquisition, is that margin accretive as you build out the Services business? And could that help with sort of a reset of what we would normally think of as the CPI margin opportunity?

I think it continues -- yes. So it's certainly -- Services business is a strong margin business. What I would say is that as we continue to grow, there's a couple of legs here that will continue to help us grow that service business. Certainly, as we continue to build out the systems side of our business, as we talked about the Paypod and Pay Station as well as the Cummins Allison services equipment, that will help drive the service side of the business as we expand also, obviously, to the OEM -- other OEM providers, who today use the small regional service providers across the U.S. It is accretive. It is a strong margin business. And so I think that will continue to help build the margin profile across the payment merchandising platform and keep us, again, as we mentioned, we expect to be in the range of 18% to 22%. Certainly, Service will be a strong contributor to that as it builds out.

There are no more questions at this time. I will turn the call back.

Super. We can move forward with our next presentation.

Good day to all participants. I'm Alex Alcala, Senior Vice President, responsible for the Fluid Handling segment. Today, my message is about our growing momentum, driving growth and share gains through product innovation and commercial excellence as well as our strong execution in a difficult environment. And our confidence in our path to an average of 100 basis points of margin improvement per year. In the context of the significant market challenges we faced during in 2020, the business performance was strong. Core sales declined 50%, driven entirely by COVID-related market pressures, which we partially offset with share gains. Despite that substantial sales decline, Fluid Handling's deleverage rate, excluding the I&S acquisition, was an impressive 24%. We were able to deliver that performance, thanks to our effective adjustments in our cost structure, solid operational execution and all of our sites continue to operate globally throughout the pandemic. Although tough cost-cutting measures were taken, we continue to invest in all our strategic growth initiatives as well as ongoing operational improvement initiatives, positioning us well for both share gains and margin expansions as our end markets recover. Like many businesses, our orders reached a trough during the second quarter of 2020 and then began to slowly recover during the balance of the year. Looking forward to 2021, we are seeing further signs of sequential improvement, with orders potentially inflecting and turning positive on a year-over-year basis as early as next quarter. However, due to the longer cycle nature of our business, we expect sales will be relatively flat in 2021. In our main market segment of Chemical, we saw chemical production reach positive territory in many regions during the fourth quarter, driven by increased demand generally, but particularly with improving trends for durable goods. In 2021, we expect positive trends to continue and possibly accelerate. We expect a similar recovery profile for our general industrial business. Nonresidential and municipal orders also saw improving trends in the fourth quarter. And we expect continued recovery, but not quite yet at pre-COVID levels. The spaces where we play in oil and gas and power will be relatively flat. Remember, our oil and gas exposure is only about 12% of sales with a balance between upstream refining with very limited midstream exposure. And our power exposure is primarily related to stable service work for domestic nuclear power plants. Overall, we are confident in our ability to deliver at least 110 basis points of margin improvements as our markets continue to recover in 2021. Over the last few years, we have shared numerous examples of how we're winning in the marketplace, through innovative product solutions, commercial excellence and increased service fee and through localization efforts. We have great success driving share gain, and our position in the market keeps getting stronger. We clearly have momentum towards a goal of delivering growth at twice the rate of our underlying markets. Crane has a long and rich history of innovation. When it comes to the flow of fluids, Crane literally wrote the book in 1942. So we have always been good. However, the pace of innovation is accelerating, and this is having a positive impact on the business. The percentage of sales from new products have more than doubled over the last few years and is expected to increase further in the years ahead. But it's just not the number of product introductions that is increasing. We continue to make substantial improvements in our speed to launch. Over the last several years, we have cut the time required from concept to commercialization by as much as 50% in some cases. What is the key to our success? First, it's having a deep understanding of our customers' toughest problems, then developing an innovative and winning solution. Second, it's having the right culture to invest and make the bets even during tough market conditions. And lastly, it's about executing with a disciplined cadence and accountability. At Crane, we call this thinking big, being bold and acting fast. Our innovation and new product development is very valuable to our customers, but it's also transforming our business. All of our growth initiatives are grounded in our structured strategic planning process that ensures that we're investing in the right technology and right solutions for our customers' needs as well as our own. As we continue to win with new products, it will drive higher organic growth for us as well as higher margins. We will accomplish this by continuing to focus our growth initiatives on the markets with the highest long-term growth rates, the strongest secular trends, and where we have our strongest positions, particularly chemical, pharmaceuticals and wastewater. As we continue to gain share in these areas, we will structurally improve our long-term growth profile. So it's not just the share gains themselves that drive growth, but how these share gains help us reposition our portfolio for better alignment with secular growth trends. Let me share a few examples of our new exciting solutions to give you a sense of our momentum with product innovation. Some of you have heard already about our triple offset valve solution that is competing and winning in the marketplace because of its superior sealing performance in the toughest environments, paired with lower torque and superior fugitive emission capabilities. This product line continues to show double-digit growth year-over-year even during the downturn. That said, what I want to highlight today is a further innovative addition to that triple offset valve line. The FK-TrieX product is breakthrough in nature. And focus on replacing other valve technologies and expanding our addressable market by another $500 million for this product line. This valve is completely new in the industry, solving problems that have never been solved before. In particular, it takes an innovative approach to handling the constant trade-off that customers have to make between sealing effectiveness and flow volume. TrieX delivers 4 to 6x better flow than the competition, while maintaining the superior sealing technology of a triple offset valve. And therefore, reducing the total cost more than 2x, truly breakthrough. And breakthrough is not something you see very often in the isolation valve space. This is an industry that relies on incremental improvements over time to the same fundamental designs that have been around for decades. True innovation and new to the world products are very rare. The TrieX product launches later this year, but we already have orders in the backlog, the latest of which from a chemical customer for a chlorine unit application where various valve solutions have failed repeatedly. I'm confident that TrieX will be able to solve their problem. Overall, the triple offset product line will deliver $50 million of incremental sales by 2025. Our new tough seat metal seated ball valve launches this year, giving us access to an incremental $400 million market. Our seating technology extends the seating life by 50% compared to competition. Another breakthrough innovation that adds value for our customers. This solution targets difficult slurry applications, primarily in the chemical and petrochemical markets. In a similar manner to what we did with TrieX, we have been able to secure early orders in advance of the launch, with the most recent order for a polycarbonate production application. In the middle of the slide, you can see our next-generation Sleeved Plug Valve, the L-torque series. With the industry continuing to move toward more valve automation, customers are constantly trying to reduce torque requirements, as higher torque increases the cost of automation substantially. Our new solution reduces torque requirements by more than 50% compared to the competition, creating substantial value for our customers, who can then use smaller, lower-cost actuation packages. This is a true game changer in this space. Finally, on this slide, in the pharmaceutical high-purity space, we're expanding our leading sensing and automation portfolio, which is designed to substantially reduce maintenance and installation costs. Currently, our portfolio is limited to diaphragm valves, but we are excited to expand our offering by targeting additional aseptic applications with a new series of ball valves, an angle seat valve expanding our pharmaceutical addressable market by $100 million. These are just a few examples. We have more than 20 new product introductions launching in the next 2 years for critical applications in the process space. Too many to cover today, and these innovation solutions will collectively deliver $150 million of incremental sales by 2025. Moving to wastewater processing. The demand for our products is driven by the ongoing challenges municipalities see from clogging pumps, the result of dramatic increases in the percentage of solids in the wastewater stream, as low flow appliances such as toilets, showers and washers have resulted in a 35% decline in water usage over the last decade. Combined with the ever-increasing use of solids flushed into the waste stream, the result is ever more clogging problems. We are focused on the $400 million market for centrifugal pumps used in North America wastewater applications. Our chopper pump, introduced in 2018, reduces clogging, and therefore maintenance calls, by 75%. This product grew 52% in 2020 and is expected to continue strong growth trajectory. You also see on the right side of the slide, our new high-efficiency non-clog pump. This product will launch later this year, and we believe that it will be the most efficient pump in the market. The key technology breakthrough is a patent pending cooling system that allows the motor to operate far less resistance as improving efficiency. The innovative pumping solution platforms will deliver $30 million in incremental sales by 2025. We have a strong portfolio of mechanical pressure sensing products used in industrial niche applications. Our new industrial compact sensor provides industrial customers with device management, continuous monitoring and diagnostics and opens up the fast-growing digital pressure transducer market, which is nearly $500 million in size. Our new product is uniquely designed for ease of customization, enabling us to have the most efficient customized solution in the market. The flexibility for customization is derived from the product's new and innovative design, with far fewer components that are more easily configured. This has value for our customers, but it also improves our profitability and reduces manufacturing complexity. We are launching this product later this year and expect it to deliver $10 million of incremental sales by 2025. To complement our strong product innovation, we continue to drive commercial excellence by leveraging CBS. We recognize that driving increased and more effective facetime with our growth customers is critical to helping them solve their toughest problems, and consequentially to drive growth. We are seeing incredible gains in our commercial execution, with automation tools and configurators eliminating more than 30% of the manual work from our application specialists and increasing speed to quote by 50%, driving best-in-class customer metrics. For our outside sales team, our new generation of digital sales tools streamlines administrative transactions and provides advanced product information through mobile devices. This, combined with optimization of the sales call allocation process, will increase our face time with growth customers by 40%, truly an excellent enabler for growth. We continue to see strong benefits from localizing of key products in targeted growth markets. We've shared in the past our success with lined valve products in China for the chemical market as well as localizing aseptic diaphragm valves in India for the pharma market, where we are driving consistent double-digit share gains. We will continue to expand our localization efforts in the next few years, focused on China. Localizing wider portfolio valves for the chemical market as well as localizing our aseptic diaphragm valves for the pharma market. Both markets will be seeing strong growth in the region, and we will continue to build on our proven model to gain share. Similarly, our new site in the Kingdom of Saudi Arabia will become operational this year with primary focus of chemical and petrochemical markets. Localization will include a wide range of valve products and also our leading lined pipe product. These are already proven winning solutions that will deliver $20 million of incremental sales by 2025 in these target markets. We have a very long history of successful acquisitions in fluid handling. And inorganic growth continues to be a strong priority for us. We are focused both on bolt-on consolidation opportunities as well as new platforms for adjacencies in the fluid handling markets. We have a rigorous process in place to continue to systematically assess market spaces, identifying new opportunities by prioritizing attractiveness based on end market growth drivers, the ability to technically differentiate and price for value as well as extendability or potential deal flow. Adjacency or new platform opportunities are always grounded in our strong core competencies, new spaces where we can leverage our technical and manufacturing capabilities as well as our distribution and customer relationships and knowledge of end markets. Fluid handling is an attractive platform for inorganic growth, and we are focused on transactions that will be accretive both to our growth and margin profiles. We will remain disciplined, but I am optimistic about our ability to find additional inorganic opportunity across our targeted areas in the years ahead. Our strong momentum on share gains and operational improvements as well as our repositioning actions make us confident in our ability to deliver 100 basis points of average margin improvement per year. And we are on track to achieve record margins within a few years. That margin growth will be driven by volume leveraged from share gains as well as market growth, mix benefits from our new product introductions and, of course, continued operation improvement from our Crane business system approach. Our pre-COVID repositioning actions announced in early 2018 and 2020 continue to go exceptionally well, and we are on track to deliver $25 million in cost savings by 2022. Almost half of the projects have already been completed, with the balance on schedule to finish within the next 18 months. Related to this, we are investing to expand campuses where strong teams already exist, creating centers of excellence where the end result is improved operational performance, positioning us for growth. Repositioning isn't just about saving costs, it's about ensuring we have the right footprint and capabilities in the right locations to support ongoing investments in growth. In summary, although 2020 was a challenging year from a market standpoint, we continue to invest in product innovation and other initiatives. We are winning in the marketplace, and we have increasing momentum with share gains. We have strong focus on inorganic growth opportunities and see fluid handling as a strong platform for acquisitions. Lastly, given our share gain momentum and margin expansion actions, we are confident in our path to drive 100 basis points of average margin improvement per year. Thank you for your time.

And we will take our first question from Brett Linzey with Vertical Research.

First question on petrochemical in the downstream space. We're seeing more stories around infrastructure getting shuttered and perhaps those shift to biofuels or other revenue pools. But how are you thinking about the near-term impact for Crane? And then maybe longer term opportunities? And then just a follow-up there is, in terms of the crude to chemicals conversions over the coming years, where does Crane play in that transition? And are you able to share any specific wins as it relates to those conversions?

Thank you, Brad. Thanks for the question. So I mean on the short term, petrochemical and chemical trends that we're seeing here as the market recovers, we're really seeing positive, right? When you think about what happened last year, global chemical production went negative in the second quarter and then started recovering at different paces depending on the region. Europe and the Middle East went positive in Q4. China went positive a little bit earlier than that. And the U.S. had gained ground in Q4 but was lagging to other regions, so not yet positive. So I think we're seeing our demand will follow a similar pattern. Midterm, longer term, what's driving it? We're seeing -- our customers are seeing demand from packaging and other nondurable products. So this has been pretty resilient, during the downturn it has continued to increase, but also durable goods is increasing in the fourth quarter. If you look at what our customers have been reporting for production on polyethylene, polypropylene, polyutheranes (sic) [ polyurethanes ]. This is all about construction, durable goods and consumable goods. So positive trends in the fourth quarter. Then when you think about what their CapEx budgets are, certainly went down significantly in 2020, but our customers have come out with increased CapEx budgets in 2021, not quite at 2019 levels, but pretty substantial increases in both turnaround, maintenance spend and capital expansion. So we're starting to see that demand on MRO already. And we expect in the second half more investments on debottlenecking, efficiency, even some greenfields. So we're quite positive on that chemical - petrochemical recovery globally, short-term and then continuing midterm and long term.

Okay. And maybe just to follow up to that. The strength you saw or I guess, the positive inflection in Europe and Middle East, I mean, how much would you attribute that to new products into the marketplace and maybe some share pickup versus underlying activity?

Yes. Good question. So we feel good and very confident about our share gain. So that's definitely helped us. If you look at our backlog, we're actually up versus last year, helped by chemical, pharmaceutical and other places where we won. But there is underlying recovery in the market. When you just look at the market indicators themselves in those regions, demand is definitely picking up. Q4 for our customers, chemical production customers, big players was quite positive. So we are seeing that market starting to recover. And over time here in 2021, we'll see that demand translate 2 ways. We're already starting to see it on the MRO side, and we expect second half to see, like I said, on the capital project side.

And we will move next to Damian Karas with UBS.

Alex, you mentioned the product vitality and new product introductions doubling and obviously showed a nice slide with further expected new product rollouts there. I was just wondering if you could maybe give us your thoughts on the mix impact of all of that. I'm assuming that some of these newer products are potentially capturing a higher price, and hence might be margin accretive, but maybe you could just give us a sense on the impact on the business as you roll out these new products?

Yes, definitely. Great question. So it's an intentional approach to focus on these markets that have both growth trends and also applications that are critical, difficult where we could add value or maximize our value to our customer. So our new products definitely mix us up from a margin standpoint in all cases, especially in chemical, pharmaceutical, wastewater, and we're focused on those applications where we can differentiate. So it's certainly a part of our story and our commitment of 100 basis points of margin improvement going forward on average per year. So that's part of that gain. So as we increase, we'll continue to see our margin profile change and improve.

Okay. That makes sense. And as a follow-on to that, I mean, the 13% to 18% kind of longer-term target, obviously, you're a bit of a distance today to the higher end of that 18%. How much of getting to that 18% would be volume dependent versus how much you think you can capture just from operating initiatives, this mix aspect that you mentioned, maybe just any color on how much volume you need to get to that high end?

Yes. Yes, that's a good question. So like you said, our target range is 13% to 18% in this segment. So we're quite confident that we'll be inside that range by 2022, next year, even if we see soft market demand. And we do think the market will recover, but we're very confident that our share gain, the momentum that we have like we just talked about, the margin benefits we'll see with new products and also the repositioning savings that are going to kick in here in the next 2 years will get us within that range. After that, we're still quite confident that we'll continue to drive this 100 basis points of margin improvement beyond that. Similar approach, driving share gains mixing up with the new products and continuing to leverage CBS to drive our future factory vision, material cost savings. So our expectation on the market long-term is good, but we're making moderate assumptions. So even under moderate market assumptions, we're -- we think we can continue to hit those 100 basis points on average.

We will take our next question from Matt Summerville with D.A. Davidson.

Just a quick one, Alex. For fluid handling this year, what are you looking at in terms of price versus input costs, given some of the inflationary pressures we've seen out there with steel and other metals?

Yes. Thank you for that question. So we're definitely seeing -- we do expect to see some higher prices on commodities, like you mentioned, steel, iron, alu products. Also freight. I would say that for fluid handling, it's very manageable. I don't expect any headwinds for us on margins. We're quite good at managing this. We have early indicators so we've been expecting this. And we already started adjusting our pricing to mitigate and pass along these increases. We think the market is going to accept that. So we're definitely ahead of it and feel good about not having any headwind for sure, because of that this year.

And we will go now to Ken Herbert with Canaccord.

Alex, if I could, I just wanted to follow-up on your comments regarding inorganic opportunities. I mean, you outlined your priorities and sort of where you're looking, I guess. But relative to sort of pre-COVID or maybe coming out of the downturn here. Can you just talk about your level of activity? And maybe how much it's picking up? And are you seeing a real sort of material increase in opportunities? As you look at the segment, how should we think about that, or maybe some metrics around just what you're seeing as we think about the inorganic opportunity materializing this year?

Yes. So a little bit on -- thank you for the question. A little bit on the profile. So we're definitely seeing -- we saw sequential improvement on orders in Q4, we'll see sequential improvement in Q1. Q1 will be still down from a year-over-year basis from an order standpoint. And then we expect to see that inflection in Q2 going positive. Then in the second half, maybe more momentum on the project side. So that's sort of the profile that we expect from the market. As far as share gains for us, in addition to that market recovery.

Alex. I think you heard orders are organic. Let me just repeat what I think Ken mentioned. He was calling out the slide about inorganic priorities. And kind of thinking about pre-COVID activity to post-COVID and/or during COVID and trying to describe the inorganic growth opportunities that we're seeing, is there a material increase? Was there any metrics? How do we frame this up? I think, Ken, if that's what -- I'm paraphrasing, M&A front.

That's it exactly. Yes. Thanks, Max. And be [ all about that ] Alex.

Oh, sorry about that, Ken. I heard organic. So as you know, we're coming off of the I&S acquisitions. First of all, very pleased with that, how that's going. Synergies are turning out more than we assumed, and it will be a really, really good acquisition as the market recovers. So as far as inorganic, as you heard from Max and Rich, fluid handling is a priority for us and we plan and expect to contribute meaningfully here inorganic growth for Crane. So we're looking at opportunities. Some of them you already mentioned, where we have strong positions already. Like the market secular trends specifically chemical, pharmaceutical.

Let me help a little bit, Alex, too. Just let me help a little bit and then just see if you agree or disagree. So I would say through COVID, things were like absolutely stopped. I mean, it was -- everybody just paused on activity. I think we're seeing -- I don't have a metric on it, Ken, in terms of an absolute increase. That's an excellent question we can follow up on. We have a disciplined process we've been following for years in terms of the funnel and looking at opportunities. In addition to that, from an over-the-transom standpoint, we're seeing strategics looking at their portfolios and making decisions; that's accelerated, without a doubt. I don't have a factor. But the strategics are clearly surfacing things that no longer make sense, and we're seeing a lot of that activity. And then private equity is also teeing up opportunities in this environment. So we feel pretty bullish that -- look, you can never predict. It's always opportunistic and it happens, if it happens. But we've had some significant activity to date, and there are some things that are, we're looking at now, and we expect more to surface. So in the scheme of all my years at Crane, I would probably say I probably feel more bullish that something is going to occur in '21, but no guarantees because it's -- you can never tell. Is that -- and Alex, would you add anything differently than that in terms of the activity?

No, I would just echo that. Definitely optimistic about our ability to add this year organic growth, so in line with your comments, Max.