Crane Company (CR) Earnings Call Transcript & Summary

So good morning. Welcome to Crane's 2022 Investor Day event. I'm Jason Feldman, Vice President of Investor Relations at Crane. Before we begin, I'd like to direct you to the disclaimers regarding forward-looking statements that are posted both in our 10-K and 10-Qs 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 our non-GAAP reconciliations in the appendix of the materials that we provided today. I'm sure all of you saw our press release last night. We have a number of exciting developments to discuss this morning, and I hope that you keep a few key messages from that release in mind throughout the event. First, as we discussed during the course of last year, 2021 was a year of accelerating growth, enabled by consistent long-term investment in our business and technology and enabled by the discipline and cadence of the Crane Business System and our unique culture. Second, we've never been stronger, absolutely phenomenal record results in 2021 despite several end markets still recovering from COVID and despite supply chain challenges and inflation. We have clearly demonstrated continued differentiated excellence in execution. And third, from this position of strength, we're moving forward with a logical next step in our journey, which has always been focused on long-term sustainable value creation for all stakeholders. We're separating the Payment & Merchandising Technologies business, which we have renamed Crane NXT, and our Aerospace & Electronics and Process Flow Technologies businesses, which will retain the Crane Co. name. We expect this separation to support accelerating growth in both businesses, increase strategic flexibility and optionality and to drive superior returns. A critical element of that value creation is ensuring that both businesses retain all that is best about Crane: our culture, our discipline, our processes, what we think of as The Power of Two. And while much more will remain in common, the separation will also enable each of these incredibly strong technology-driven businesses to optimize their investment and capital allocation strategies to further accelerate growth while creating competitive equity currencies that reflect the strength of each business. A few brief comments on logistics for today. First, we expect the event to enter our noon Eastern time. We'll also have Q&A sessions after each of the business presentations, with an additional general Q&A at the end for more transaction-related questions. And for those listening to the webcast, slides are available for download in the Investors section of our website. And to start this morning, our first presenter is Max Mitchell, Crane's CEO.

Well, good morning, everyone. Thank you, Jason. Thanks for everyone being here in person and listening on the web today. We're here in the historic New York Stock Exchange. What an apt location for such an exciting announcement as today, with the rich history. So we're just really thrilled to be here, hosted by the New York Stock Exchange. Today, we will discuss our planned separation into 2 separate public companies that we believe will significantly unlock shareholder value. In addition, we will review where we have been historically, how these entities will be positioned for growth moving forward. We've delivered consistent and differentiated execution for decades, delivering on our commitments, investing and driving growth, remaining fiscally disciplined in our capital allocation decisions. We've assembled 3 incredibly strong global technology-focused platforms through years of successful acquisitions. Today, they have the scale to operate as 2 separate businesses. These 3 platforms consistently deliver outstanding metrics and execution. Comparing each business to its true peers, our operational performance is stellar. From that position of strength, we intend to separate into 2 separate public companies. Crane Co. will own our Aerospace & Electronics and Process Flow Technologies businesses. It will operate under the Crane Co. name and logo, and it will be led by myself, with Rich Maue as CFO. This platform has nearly $2 billion in sales and pre-corporate '22 EBITDA margins of approximately 19%. Our Payment & Merchandising Technologies business will be renamed Crane NXT. This will include both the Crane Payment Innovations and Crane Currency businesses. This year, Crane NXT will have about $1.4 billion in sales and a pre-corporate EBITDA margin of approximately 28%. We have started the CEO and CFO search, considering both internal and external candidates, and we'll announce the management team in the coming months. We intend to list both stocks on the New York Stock Exchange after separation. And we expect that Crane will retain the ticker CR, and Crane NXT will trade under the ticker CXT. We see a compelling rationale for this separation that will create 2 pure-play companies, each better positioned to deliver long-term growth and value creation for all our stakeholders. The new structure will give management an even deeper operational focus and the flexibility to respond to customer needs and requirements. The separation will provide better operating and financial flexibility to pursue growth opportunities, both organic and inorganic. And we'll remove the portfolio balance considerations that we have today. Meaning, we will focus solely on the strategic and financial merits of each potential investment and acquisition target rather than on whether it will skew the portfolio too far towards one segment or another, optimizing their capital allocation strategies to their business strategies, market-specific dynamics and their outlook. We also believe the respective financial profiles and end market exposures of these great businesses appeal to fundamentally different shareholder bases. After separation, each company will be able to better align their unique value proposition with their natural shareholder base, creating substantial value. Having separate equity for each company will also help both companies pursue acquisitions and competitive equity currency -- with a competitive equity currency that reflects the strength of their respective businesses. The rationale for the separation is very strong. But this transaction is also about how our current structure is viewed and valued by investors. We have delivered consistent differentiated execution, really stellar performance over a very long time. However, despite all that we have done right, we are simply not getting credit in the public equity markets for the quality of our underlying businesses, the differentiation provided by the Crane Business System and the best-in-class execution delivered by our strong and deep management team. And it's reflected by our discount to peers, which has widened over the last few years. We believe that disconnect is driven partly by the increasing preference in the equity markets for simpler pure-play assets, which permit investors to tailor their exposure to specific trends. That discount is compounded by what we believe are misperceptions among a portion of our investor base about the trends in some of our end markets, most notably for cash, as well as where we play in those markets. We are pursuing this separation because we firmly believe that a structural solution necessary to unlock value and eliminate our multiple discount compared to peers, and that they -- the planned spin-off permits us to separate with certainty and in a tax-efficient manner. Jason and Rich will describe this in more detail in later sections. But we believe that, as separate companies properly valued based on appropriate peer sets and based on current market conditions and valuations, the 2 companies should be worth approximately 50% more than today's market value for Crane Co. And that our shareholders should be able to realize that value over time after separation. And this is the right time to pursue this separation. We are stronger than ever, coming off record 2021 results, and with more exciting growth opportunities directly in our line of sight across all of our businesses than we have ever had before. Those opportunities are a direct result of our consistent investment in technology, new products, innovation. And that strength will enable us to execute on today's announced plan. We have the scale and balance sheet strength so that both companies will be well capitalized, with the flexibility to pursue all of their growth initiatives. And we are seeing consolidation across our end markets accelerate. And as separate focused companies, each company will be in a better position to participate in that consolidation. Taking all of the best parts of Crane's culture and management approach as a strong foundation for 2 separate businesses will be a critical driver of value creation for both. Our distinctive high-performance culture, our approach and commitment to philanthropy, sustainability, equality and the cadence and discipline of the Crane Business System, while also providing each company the structure to independently optimize their strategies, investment approaches and capital allocation policies. We believe this will ultimately lead to different core investor bases given the different trends, themes, financial profiles and capital allocation strategies of these 2 great businesses. All of this should significantly increase the value creation opportunity and allow the right mix of investors to fully appreciate what makes each of these businesses so special: Crane to The Power of Two. It's also important to remember how we got here, because it highlights both the strength of our execution and our strategic thought process, which should give you confidence in how these businesses will perform after separation. We have been in Payment & Merchandising-related businesses since the mid-1980s when we acquired UniDynamics, which included a small vending business. By 2003, through organic growth and acquisitions, the segment had grown to 10% of Crane's sales. In 2013, we acquired MEI, a great acquisition with strong double-digit returns. And that strengthened our payment business and helped us become a leading global player in the payment market. Following that acquisition, the Payment & Merchandising segment was 24% of total Crane sales. This is a wonderful business, and you're going to hear more about it today, in a space with a large number of highly attractive potential acquisitions. And it's a business with a proven track record of executing and creating value from M&A. However, because of its end market exposure and financial profile, it appears to a different investor base than our Aerospace & Process Flow businesses. The decision to acquire Crane Currency in 2018 was driven by 2 factors. It was an extremely strong and attractive business. And we were confident in our ability to drive strong returns, which we did. And it would get us much closer to the scale necessary to consider strategic alternatives, with the Payment & Merchandising business above $1 billion and 38% of Crane's sales. The same rationale applied to 2020 acquisition of Cummins Allison. That strategy wasn't just about size, it was also about financial strength and building a high-quality, sustainable business. And the results show we did both. The payment-related acquisitions have created an enormous amount of value. And they made the business itself stronger and more valuable, taking margins from the low single-digits into the 20s, with strong return on invested capital as well. Our most recent acquisition, Cummins Allison, hit a high-teens ROIC within 18 months of the acquisition, even though it was acquired just weeks before the COVID-related shutdowns. Intentionality and executing against long-term strategies and key elements of the Crane Business System and how we think about value creation, and you will see that from both companies in the years ahead. The rest of today's presentations will cover the details of each business, but let me give you some of the highlights. Crane. Crane is a leading global provider of highly engineered products and solutions, with differentiated technology, respected brands, leadership positions in its markets; sells mission-critical products for applications with high cost of failure, which drives significant recurring sales; and with about 40% of total revenue from the aftermarket. Many of these products are specified into highly regulated end markets, further driving stickiness. It's well positioned for accelerating organic growth in its large and attractive end markets, with favorable secular trends, new product development and commercial excellence. Our Aerospace & Electronics business is an incredible platform, with differentiated technology, substantial sole-sourced content on virtually every major commercial and military aerospace platform. And it is executing on a technology road map that aligns the business with accelerating trends, most notably, electrification, among others, confident in the 7% to 9% compound average growth rate through at least the end of the decade. The commercial end markets are still recovering from COVID, and we are well positioned to benefit. However, much of this growth is coming from defense programs we have already won that aren't dependent on air traffic, and our strong position on the prototype and demonstrator programs that will lead to the next-generation aircraft platforms, really, a secular growth and investment story. Process Flow Technologies has an extremely strong position in its core target markets of chemical, pharmaceutical, water, wastewater and general industrial. And those key markets now comprise nearly 2/3 of the business. Accelerating new product development is further expanding exposure to those target markets, and there is a substantial opportunity to further expand margins. Growth driven by secular trends, including fertilizers, to support the stretched global food system, new chemicals needed for consumer goods, as well as clean energy and electronics, water, wastewater solutions to serve a growing population with increasing water scarcity. Again, a secular growth story benefiting from years of investment, underpinned by a strong sustainability profile. Crane will also continue to leverage its CBS capabilities across both Aerospace & Electronics and Process Flow Technologies to continue driving margin expansion and free cash flow growth, as we have done for decades. And we'll continue to pursue its many exciting opportunities for M&A, both bolt-ons and adjacencies in our fragmented end markets. A business with substantial financial flexibility, structured with a very strong balance sheet to support a flexible capital allocation policy. Crane NXT, a name that represents an organization pushing for what's next in technology and breakthrough innovation, a forward-looking organization embodying technology, digitization, that enables component, system and service solutions, while striving for next levels of performance and execution, and an avenue to pursue inorganic adjacencies in new areas of growth. Crane NXT today is a premier industrial technology business with global scale, best-in-class margin profile and consistently excellent free cash flow generation, the broadest global portfolio of payment and currency-related products and services with market-leading brands. Differentiated technology for Crane NXT to take advantage of long-term secular trends, including automation, security and productivity across a large and growing addressable market, increasing secular demand for automation solutions in response to relentless labor and wage pressure. A currency business that performs well throughout this cycle, but particularly well during periods of high inflation, as well as economic and geopolitical instability. Once independent, this business will also be better positioned to aggressively leverage its technology in several high-growth adjacent markets that Kurt and Sam will discuss in more details. And Crane NXT will be well capitalized to support investment, organic growth and acquisitions. We have a robust acquisition pipeline for this business, and acquisitions will remain a key component of Crane NXT's growth strategy moving forward. We also expect Crane NXT to provide a healthy level of capital return to shareholders. This is the next logical step in the journey that we have been -- have pursued over the last few decades, and we are confident that it will unlock substantial unrealized value. Let me remind you the progress we have made over the years. Since the early 2000s, we have demonstrated an ability to significantly improve the margins and profitability of our portfolio of businesses, with adjusted operating margins doubling since 2004, while also simplifying our businesses and structure, repositioning to become more asset light. With careful pruning along the way, coupled with outstanding leadership and intellectual capital across our organization, centralizing processes and evolving into an integrated operating company that delivers a consistent execution you have come to expect from us. We have a long track record as a disciplined and effective acquirer that spans decades. Since 2010, we have deployed more than $2 billion on 9 acquisitions across all 3 of our businesses: Aerospace & Electronics, Process Flow Technologies and Crane NXT. Those acquisitions strengthened our businesses, making them more competitive in their core markets and creating new opportunities for adjacent organic and inorganic growth. Our progress on organic growth initiatives has also been impressive. Every area of our business is aggressively pursuing and delivering on organic growth strategies, from new product to commercial excellence, localization. Our team will discuss these details shortly. That journey has put us into an extremely strong position today, delivering record financial results, stronger than we've ever been. In 2021, we delivered record adjusted EPS, free cash flow and adjusted operating margins, credibly delivering on our commitments and consistently driving results. But it's also more -- about more than last year's results. Stronger today reflects how we are positioned for the future. All 3 of our businesses are proving that the results from years of organic investments, acquisitions, repositioning of portfolio are gaining traction at an accelerating pace. The other themes I discussed at last year's Investor Day event also are playing out as expected. We continue to 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, giving our alignment with evolving secular trends. And we maintained all strategic growth investments throughout the pandemic, and we are emerging even stronger. And each business has all of the policies, processes, governance tools in place to make sure that they will both be successful. Both businesses will continue to build on an incredibly strong foundation grounded in our Crane Business System and its disciplined cadence and execution, as well as our strong culture with its emphasis on ethics, philanthropy, sustainability and equality. An ethical culture summed up in the RT Crane resolution written 160 years ago that still guides us to this day. "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, to put my whole mind on the business." These powerful words continue to guide us today, speaking to ethics and integrity and how we conduct ourselves in our business for all stakeholders, with a passion for the business, a resolution that both businesses will continue to honor and carry on in the years ahead. So the next step is the separation itself, but that is really just a new beginning. We have an incredibly exciting story for each business post separation to share with you today. While this separation will result in 2 independent companies, unlocking value in The Power of Two, both will continue with a shared history, culture, commitment to philanthropy, sustainability, equality, a firm and consistent commitment to maximizing value for all shareholders. The Crane Business System, with its cadence, discipline, vast array of tools and processes to drive consistent execution. But beyond those items, we expect the full set of processes, policies and governance tools to be replicated across both companies: strategy deployment, rigorous intellectual capital process, IT processes for security, ERP implementations, and many, many other systems and processes that aren't as visible externally but have been critical drivers of our success. Of course, some things will be different across the 2 companies, and you will hear more about the underlying businesses and opportunities in the remainder of the presentations. But most notably, each company will pursue its own strategy and capital deployment policies, optimized for their business mix and environment and without the constraints of the current portfolio structure. Exponential opportunities, Crane to The Power of Two. Now let me ask Rich to cover off our incredible performance update, which lays the foundation for this separation. Rich?

Thank you, Max, and good morning, everybody. Great to see you all here today. And a lot of good things, great things to share, and look forward to the future points where we get together to share more on our progress. To start, we had a phenomenal record performance in 2021, record EPS, record adjusted operating margins, record free cash flow and a balance sheet stronger than at any point in the 15 years that I have been with Crane. And we achieved these results in a year in which many other companies struggled, addressing the difficult operating environment of supply chain and logistical challenges, inflation and COVID impacts. Our performance demonstrates our ability to deliver consistent, differentiated best-in-class execution, enabled by the cadence and discipline of the Crane Business System and our unique strong culture. Moving to 2022. This is the same outlook we reported in January during our fourth quarter earnings call. We are, of course, monitoring the tragic situation in the Ukraine closely. But we have limited exposure to the region, and we don't expect any notable financial impact. We will not spend time today discussing the first quarter. But to reassure you all, there are no changes to our adjusted EPS or free cash flow guidance, and we are solidly on track. While supply chain issues remain, no major surprises to date, and we are working to over deliver. Where we do want to focus today is on the significant runway for growth that we have, and which you'll hear from our presidents, not just in 2022 but beyond, and with further acceleration, possible post separation, when both companies are positioned to independently optimize their investments and strategies. In Aerospace & Electronics, it's about the cyclical recovery for a segment, which, at the end of 2021, had $160 million in sales and $80 million in operating profit below pre-COVID levels. But it's not about the numerous significant -- sorry, but it's also about the numerous significant contracts and wins that give us the confidence in the 7% to 9% CAGR from 2021 through 2031 that we discussed last May, and our extremely strong alignment with key secular trends, most notably electrification. In Process Flow Technologies, our new product vitality is at record levels and still improving. And secular trends across the chemical, general industrial and pharma verticals will continue to drive growth for years. Demand for materials to support a sustainable future in clean energy, wastewater treatment, biologics and other pharmaceutical advances, all solutions that bring productivity and efficiency to our customers. And at Crane NXT, after adjusting for the Cummins Allison acquisition, Payment Innovations was still $200 million below pre-COVID levels last year. And across both the payment and currency platforms, the strong secular trends of productivity and security, along with the differentiated technology and entrance into adjacent markets, including authentication, create an exciting story. Again, you will hear more about these opportunities in the business presentations later this morning, but I'm going to reinforce why you should feel very confident that we'll be able to execute on these opportunities through any environment. The benefits of the Crane Business System and our culture are the most evident during challenging times. Constantly close to our business and overmanaging the details, that gave us the ability and the confidence to provide detailed guidance throughout 2020 when very few others did. And that same cadence and discipline supported our strong outperformance last year in another challenging environment. Inflation, along with supply chain, logistics and labor challenges in 2021 were not unexpected. Further, these challenges aren't going away in 2022, and we are operating accordingly. And we continue to find ways to grow in this environment. Our results demonstrate that we can generate strong growth and operating performance through the most challenging environments. As we have delivered consistently strong results evident on our P&L, the quality of those earnings also has improved over time. We are now consistently generating an average of 100% free cash flow generation or converting all of our earnings to real free cash flow, up more than 20 percentage points compared to our historical average, another example of our capabilities and differentiated execution. Free cash flow has also grown consistently on an absolute basis, with a 10.5% CAGR from 2010 through our 2022 guidance. That free cash flow has enabled additional investments, both organically and inorganically, again, driving the scale that enabled today's announcement. And it has resulted in a balance sheet that has not been this strong in recent history. At the end of 2021, net debt to adjusted EBITDA was just 0.6x. By the end of 2022, we expect to be in a nearly debt-neutral position, with cash roughly equal to financial debt. That provides us a lot of flexibility to manage our capital structure and optimize it for both post-separation businesses. Even on a Moody's adjusted basis, we expect to be at roughly 2.1x by the end of 2022, after completing our $300 million share repurchase authorization. This balance sheet strength is a direct result of our cash generation and our disciplined approach to capital deployment. Until the separation is complete, we will continue to follow our existing capital deployment process and policies. We continue to pursue acquisitions, but we will be disciplined given this current market and the valuations. We are now looking at acquisitions across all 3 of our businesses, including Payment & Merchandising Technologies, where we had previously paused M&A efforts. And in addition to our $300 million share repurchase authorization program that we initiated last year, as a reminder, we raised our dividend 9% in January. Once the separation is complete, each company will pursue their own capital deployment policy. We will provide additional information over the course of this year, but let me provide our current thinking on the capital structure, financial profile and capital deployment strategy for each company. Starting with Crane Co. The goal is to have a flexible capital deployment strategy with optionality for substantial acquisition activity, while providing a dividend in line with peers. Crane Co. will have a very strong balance sheet that, along with the benefits of an independent equity currency and our expected post-separation valuation, will provide an enhanced ability to pursue accretive acquisition opportunities. Asbestos is linked to our Process Flow Technologies business. And as Max mentioned on our last earnings call, we continue to actively investigate certain vehicles and structures for our asbestos liability. While there are no guarantees that we will be successful pursuing any particular approach this year, the resulting capital structure of Crane Co. will have significant flexibility to execute on its strategy. For modeling purposes, we expect normal post-separation corporate costs in the range of roughly 3% of sales upon separation and declining thereafter, with normalized capital expenditures in the $45 million range. Crane NXT will also be well capitalized. And this business has a track record of very strong cash generation, enabling the business to pursue a wide range of highly attractive organic growth opportunities, while also enabling selective and opportunistic acquisitions at highly attractive multiples. The final capital deployment policy will be set by Crane NXT's new Board and management team, but we believe that this company will be in a position with substantial flexibility to pursue a broad range of both organic growth opportunities and continued acquisitions that are accretive and that will also provide a robust and differentiated level of capital return to shareholders. We expect to redeem our $300 million of outstanding bonds due in 2023 before the completion of the separation. Our other 2 bond issuances will be assumed by Crane NXT post separation. This includes $200 million of our 6.5% notes due in 2036 and $350 million of 4.2% notes due in 2048. That debt was primarily used to acquire assets for this business, most notably the MEI and Crane Currency acquisitions. We also believe that debt with this long-term duration is a benefit to Crane NXT by providing a substantial portion of the capital structure with stability and without near-term maturities. The remainder of the financing and capital structure details will be finalized as we get closer to the actual separation. For modeling purposes, we also expect normalized post-separation corporate costs in the range of 3% of sales and declining thereafter, with normalized capital expenditures in the range of $25 million. We do expect that the spin-off transaction will be tax-free to Crane Co. and/or to our U.S. shareholders. Of course, completion of the transaction is subject to customary conditions, including the effectiveness of SEC filings and final approval of the separation by our Board of Directors. However, no shareholder approval is required. As I mentioned earlier, we will maintain our current capital deployment policies until the separation is completed, including maintaining our current quarterly dividend through the effective date of the separation. We also estimate after-tax onetime separation costs to be in the range of $75 million to $100 million. Regarding timing, the entire separation process should take us approximately 12 months. We will provide periodic updates, including in our Form 10 registration statement. The executives currently leading PMT's business today will continue to serve in senior positions with Crane NXT. And as Max mentioned, the CEO and CFO search is underway. We will provide updates later this year on the Crane NXT management team and Board composition for both companies. We are pursuing this separation from a position of strength, record performance in 2021. Our separation will create 2 focused companies, each positioned for long-term success and value creation, with the same operating principles and disciplined execution that we have today. But post separation, each company will have the strategic and financial flexibility to pursue a more focused growth strategy, supported by a tailored capital allocation policy. At this point, Jason is going to come back and provide the financial overview and equity story for Crane NXT. Jason?

Thanks, Rich. So Kurt and Sam are going to come up in a minute to discuss the Crane NXT business in detail. But I'm going to start with the equity story for NXT, why we're so excited about this business and how we think about valuation. We don't believe that investors fully appreciate the value of Crane NXT, and that's a significant part of the rationale for today's announcement. This business has consistently generated best-in-class metrics and substantial organic growth. Yet in our view, it has been undervalued by the market based in part on a commonly used peer set that doesn't give Crane NXT credit for the strength of its business model. The companies we see most frequently used by analysts and investors as comparable peers valuation have a financial profile, business mix, location in the value chain and history of execution that's completely different than Crane NXT. And I'll walk you through the data in a minute, but when you think about how to value the business, the facts support Crane NXT being viewed as a high-performing mid-cap industrial technology company. Specifically, Crane NXT consistently delivers top-quartile margins and free cash flow conversion, along with above GDP organic growth, by leveraging its differentiated technology and leading market positions in its large and growing global markets. And Kurt and Sam will discuss this later, but we believe that one of the most underappreciated elements of Crane NXT is a recurring revenue base that's about 40% of sales. So starting with the financial profile. This business has consistently strong performance. Sales this year, about $1.4 billion, adjusted operating margins of 22% and pre-corporate adjusted EBITDA margins of 28%. On a pro forma basis, after expected corporate expenses post separation of 3% of sales, you're going to see company-wide EBITDA margins of about 25%. Business also generate substantial free cash flow. Normalized CapEx is only about $25 million, 1.5% to 2% of sales. But depreciation and amortization is about $84 million because of all the intangible amortization that's been acquired over time: Crane Currency, MEI, Cummins Allison and others. Basically, a CapEx-light business with best-in-class metrics and strong free cash flow conversion and a history of growth. So much like for the mid-cap industrial technology peers, the business has also reinvested its free cash flow in the business and has a consistent track record of compounding growth through M&A. The opportunity to continue to execute on M&A at attractive returns remains, and the business has a deep pipeline of bolt-on opportunities that we continue to go after. Post separation, Crane NXT will have a strong balance sheet, which will support not only its growth agenda, but also an attractive dividend. That's just the snapshot of the current financial profile, but it's also important to consider the historical growth as well as our outlook. So moving on to growth. I think this growth profile, again, is not fully appreciated, partly because the data has, at times, admittedly been difficult to interpret given the number of acquisitions and other events. But let's look at it a couple of different ways. First, this is just simple reported nominal sales growth, 2002 through 2022, with a CAGR of 11%, right, and that sales CAGR is 16% for the more recent 2013 to 2022 guidance period. That does include acquisitions, but we believe it is representative of the kind of growth we expect going forward because we do expect acquisitions to be an important part of the story ahead as well. In total, this level of growth highlights our ability to scale the business more broadly over time. And you'll see in a minute, it's a balance between that acquired growth and organic. If we disaggregate that growth, go a step further and just look at Crane Currency, this business has had a 9% sales CAGR 2002 through 2022 guidance. The only acquisition of any material size in that period was Crane Currency's acquisition of the international operations in the early 2000s. So almost all of this growth is organic, with an organic sales CAGR of about 6% since 2004. What this chart shows is that both sides of the currency business, the U.S. as well as international, have grown substantially over time. In the U.S., that's largely driven by print volumes, but also a benefit from increasing content on the security side and bills, most notably with the $100 bill starting in 2013. Sam will cover some of the future opportunities later. On the international side, it's been a great story, driven by core underlying market growth approaching mid-single digits, but also consistent share gains with our differentiated technology that's had accelerated adoption over the last several years. The CPI business has also delivered significant growth, particularly since the MEI acquisition, driven by secular drivers of automation and security, most notably in self-checkout and the gaming markets. If we only look at organic growth, simpler view, since 2015, adjusting for Venezuela, it's been a little bit over 4%, right? And notably, that 4% includes the 2020 COVID impacts. And we have not fully recovered from COVID, right? So if you extend this out another year or 2, that 4% should be a bit higher if you look across an entire cycle. That historical performance, paired with our outlook for market growth and our growth initiatives, gives us confidence in the long-term target core growth range of 4% to 6%. Kurt and Sam will discuss those growth opportunities in a minute, but importantly, this outlook is not different from what we've done in the past. We've been in this range before, and we're confident we'll be able to continue to remain in that range going forward. It's going to be driven by our ability to leverage the service business acquired with Cummins Allison; numerous strategic growth initiatives, including our push into product authentication; an alignment with strengthening secular trends, including security; automation in response to labor and wage dynamics; demand for productivity; and global cash circulation growth. In addition to growth, the business also has a track record of driving operational improvement and margin expansion. We've shown this chart before. You've seen it several times. But improving operating margins, from 2% in 2003 to about 22% today, and that 22% today includes about 600 basis points of depreciation and amortization. Again, that's the intangible amortization from acquisitions. With incremental operating margins in the 35% to 40% range, we also think there's still upside to these already impressive margins. And while the absolute margins are important, the more critical takeaway from this chart is that CBS is deeply ingrained in this business, both to drive growth as well as margins and consistent execution. That capability, along with Crane NXT's financial profile, is we don't believe being recognized in the current valuation. And as a stand-alone entity, with a focused and dedicated investor base, we think it will get that appreciation. So clearly, the data shows Crane NXT as a premier industrial technology business, with significant scale and very strong margins and free cash generation. What you'll hear more about from Kurt and Sam in a few minutes is the rest of the story about Crane NXT with the broadest global portfolio of payment technologies, technology leadership positions in niche markets, new adjacent market opportunities beyond the traditional payment space, proven track record of leveraging CBS and a successful track record through acquisitions. Taken together, it's a really exciting story and one with many commonalities with other mid-cap industrial tech companies, which is our reference peer group. So as we evaluated the different strategies to unlock value, we did some fairly exhaustive work on the business and valuation peers for each of Crane's businesses. The substantial majority of Crane NXT is direct competitors are private companies. So for valuation peers, we looked at a whole bunch of different groups with different criteria. Based on that work, we kept coming back to the conclusion that Crane NXT's business and financial profile is most closely aligned with that of the high-quality, mid-cap industrial technology companies that have the most similar margin and free cash conversion characteristics, companies like nVent, Altra Industrial Motion, Helios Technologies, Brady and ESCO. Overall, we'd categorize Crane NXT in this peer group as niche market leaders with extremely strong technology differentiated positions and a financial profile that reflects that position and underlying technology. On this slide, we have a subset of the metrics we consider: free cash conversion; margin profile; consistent mid-single-digit organic sales growth across the cycle; a strong base of recurring revenue, so sales are not driven purely by cyclical factors; and an ability to compound growth through M&A, with an accompanying strong balance sheet so that can continue going forward. Crane NXT and this group have proven their ability as acquirers with moderate financial leverage to support M&A activity. And many pay a competitive dividend, like we expect Crane NXT, too. These reference peers typically trade at a double-digit to low teens forward EV/EBITDA multiple. Another group that we consider that we don't think is as clean a fit but could be looked at because of more end market overlap are some of the payment and authentication peers. For example, you've got Cantaloupe and Nayax, which are direct competitors to our cashless unattended payment -- cashless unattended payment space. But as early-stage companies, they have certain financial metrics that are not yet meaningful. Elsewhere, we have a fairly similar financial profile to some of the other tech-enabled payment and authentication peers, most of which trade at a premium to the group that we just referenced. And so for more market overlap but a less similar financial profile, we're looking at a mid-teens EBITDA margin. The group that we consistently came back to, where we do not believe the valuation should be based on for Crane NXT, is what we would think of as traditional payment peers. These are the names that we see in some of the parts models from -- for many of you and those listening today. This group is limited, as most of our direct competitors are private, so we typically see some of our customers and partners use for this purpose despite the fact that we occupy very different parts of the value chain with different financial profiles. Well, there's obviously a variation within and across this group, including a public banknote producer and some OEMs for the ATM and self-checkout space. Overall, this group's financial and business profiles is just fundamentally different, lower margin, lower free cash conversion, very different capital structure, most highly levered, and very different capital return policies than we're envisioning for NXT. The only rationale for using some of these traditional payment companies that we see most frequently used, like NCR and Diebold, is that we happen to have some overlapping end market exposure. We're selling different products, different parts of the chain, different financial profile. And while De La Rue is a direct competitor to Crane Currency, that's the only similarity. The financial profile and historical performance here couldn't be more opposite, particularly since nearly half of the Crane Currency business serves the U.S. government. In summary, when we look at this business, Crane NXT has an extremely strong financial profile, similar to the mid-cap industrial tech companies and other tech-enabled payment and authentication peers. Based on its historical performance and financial profile, a strong execution as well as our growth outlook, we're confident that this business over time will trade in line with those reference peers, with a double-digit EBITDA multiple. While we will provide more details on the full capital structure over the course of the year, I think we've given you enough information, at least, as a starting point, for you to start an analysis, sum of the parts and otherwise. And I hope you have a better appreciation of why we're so excited about this business and the opportunities that it is going to have stand-alone. For those of you that I haven't convinced yet, let me hand it over to Kurt Gallo and then Sam Keayes, who will provide an overview of the exciting growth opportunities.

Well, good morning, and thank you, Jason. Again, my name is Kurt Gallo. I'm the Senior Vice President responsible for Crane NXT. I've been part of this platform for 14 years. And with an incredible team, together, we have helped guide this business from a $400 million entity in 2008 to the present powerhouse that it is today, with still significant room for continued growth. Crane NXT includes 2 platforms: Crane Payment Innovations, CPI and Crane Currency, both with great geographic balance and diversity of end markets. The Crane name remains very important to these brands and to our culture, while the NXT is an umbrella brand that signifies the continued evolution of this great company and the next phase of our growth, leveraging our strong core technology and a differentiated service capabilities. But first, let me highlight our strong reoccurring revenue. Roughly 40% of our sales is either contractually locked in for extended periods or repeating for many, many years. This includes the U.S. government currency business, where we have been the sole-source provider for over 100 years; the service business we acquired with Cummins Allison, with annual contracts and a 98% renewal rate; repeat international banknote printing contracts that typically run for multiple years; our connectivity managed services and cashless business; and our spares and replacement component sales. Our growth platform accounts for the remaining 60% of our sales, with strong secular drivers, which will resonate throughout the presentation today: security, anti-counterfeit technologies for both cash and consumer products, secure cashless transaction networks and physical security of currency across our verticals. Labor and wage. Rising wages and labor shortages are driving automation and the increasingly attractive ROI, opening up whole new markets and segments. Productivity. Rising operational costs create demand for productivity enhancements, such as our automated solutions. And finally, cash usage, which, despite the ongoing hype around a cashless world, the facts show that cash in circulation continues to grow year after year. But before diving into our growth opportunities, I want to emphasize that the strong financial profile, differentiated technology and commercial excellence that define this business are built on the foundation of the Crane Business System with its cadence and discipline. As a simple example, at our newest Crane site in Malta, where we print banknotes, the local team held a problem-solving Kaizen focused on improving the quality and efficiency of our printing process. Utilizing CBS tools, the team identified the core process and design elements with the greatest impact and then redesigned the application tools and processes to dramatically improve the quality and consistency of the printing process while achieving over $1 million in annualized productivity savings. And we host hundreds of events like this one every single year across every Crane site, driving repeatable and sustainable results, even during COVID. And these are not just focused on cost savings, but improvement in quality, customer service levels, research and development, new product developments and financial forecasting. The Crane Business System provides the framework and tools to drive consistent and differentiated execution across every aspect of our business. And as Jason has already outlined, the results truly speak for themselves. We also have more than 35 years of success growing through acquisitions. Over the last decade, we have deployed nearly $2 billion of capital at very reasonable multiples, of which we have typically cut in half through synergy realization and driving incremental growth. Looking ahead, we have many opportunities for acquisitions. And as a separate company, we will have greater flexibility to pursue those opportunities with the current portfolio -- without the current portfolio balancing constraints. These opportunities could include acquisitions similar to what we have done in the past, adding to our product and service portfolio and near adjacencies. But there are also opportunities that we are exploring to further accelerate our move into product authentication, moving beyond the micro-optic labels into software, service and tracking aspect of that market, digital currencies and payments, point-of-sale software systems, turnkey retail automation and for bundled hardware, connectivity, software and repair and services. There are truly many, many exciting potential opportunities that align very nicely with this platform. Diving deeper now into the discussion of our individual business segments, let's look first at CPI and its breakthrough growth opportunities. This slide shows the breadth of our products that we serve. Today, we serve a $4 billion global market. We are continuing to gain share, and many of our growth initiatives will further expand this addressable market. Now our historical core components business focuses on OEM integrated bill and coin acceptors and recyclers for automated payment solutions. Here, we are the market leader, and we have added to this offering by expanding into a wide range of cashless payment products. Our System Solutions business is one of our newer businesses. And it serves the large and growing market for user-facing products such as consumer-facing coin counting machines, our Paypod and our PayTower products for small business and payment automation, the Cummins Allison high-speed counting and sorting equipment and, of course, our legacy vending machine business. Our connectivity softwares offering ties all of our solutions together, with particular strength in vending and gaming and now expanding into our other verticals as well. And finally, we entered the field services market with the Cummins Allison acquisition. And it has been, and will continue to be, a strong growth area for us. All of these solutions that I just outlined span across our traditional markets of retail, gaming, vending, transportation and financial services. Across our portfolio, we are differentiated by technology: mechanical systems that perform thousands of cycles between service visits, often in very harsh environments; connectivity and cashless payment software and systems requiring high reliability; and the most sophisticated security protocols, combining hardware and software to seamlessly integrate our systems into existing point-of-sale networks. But our biggest differentiator is our proprietary validation technology, comprised of numerous specifically designed sensors that read the information off of bills and coins and complex algorithms that interpret that information in milliseconds to authenticate the currency. Our technology spans across 120 different countries and are securely processing well over 4 billion transactions weekly. We are a top 3 player in the cashless payment space for vending. And we are leveraging that experience and product portfolio to pursue several emerging opportunities, most notably electric vehicle charging stations. Our cashless payment solution is already integrated and in use by 4 European EV charging companies, and we are pursuing many others. This will be a huge global market that we expect to grow to more than $200 million in size. Other cashless opportunities include smart coolers, the next-generation vending solutions, service pay kiosks, carwashes, service stations, checkout systems and even traditional vending, where cashless penetration rates continue to rise. We also continue to enhance our suite of connected solutions, where we were the first to bring to market the fully connected set of applications and software for the vending management market many years ago. Since then, we have had great success with our EasiTrax Connect solution that provides real-time data, analytics and alerts for the casino market. This solution helps casino operators manage the slot floor much more efficiently. And for CPI, this solution drives both hardware sales and a solid SaaS reoccurring revenue model. We are the leader in this large and growing market, and the adoption is still in the very early stages. The demand for real-time updates, alerts and data analytics goes well beyond vending and casinos. And we are developing solutions for all of our vertical markets. Retailers face -- are faced with a litany of challenges to ensure that they continue to grow profitably, which, as the new norm continues to play out, has become even more difficult. Among the options available, technology has continued to stand out as a clear winner in their efforts to achieve profitable growth. Notably, there are 5 areas that have been identified as key drivers that influence profitability. None of this information is breakthrough or surprising, but it does reinforce and highlight the growth trends that we are seeing in this marketplace and our expectation that it will continue. Our automated payment, connectivity and service solutions are perfectly positioned to take advantage of these industry dynamics. The retail market is evolving and growing quickly. Retail automation has been a trend for many years, driven by the never-ending pursuit of productivity and is even more important in our era of e-commerce and retail store saturation. Those trends have now strengthened further with wage inflation and labor availability issues. And it is estimated that the retail automation market has less than an 8% penetration. And over the next 5 years, we expect a further 490,000 systems to be installed, netting out to an incremental growth of approximately $3 billion. And even with that growth, it would drive only a market penetration of 20%, which still leaves a lot of room for incremental growth. We have always been a leader -- leading provider of bill and coin payment components to the large self-checkout manufacturers. And we still maintain that leadership position today, but we have also added capabilities so that we can now provide the combination of components, systems and services to best meet the wide variety of our customers' needs. For example, many of the largest user of traditional self-checkout solutions are now seeking customized solution -- customized customer-facing solutions optimized for their specific needs. Retailers like Home Depot, Target and Walmart are just a few that have been looking for and installing custom solutions tailored to their stores' footprint and product mix. For custom solutions, we are typically a critical partner, either providing the high-value payment components or providing a fully customized system. And these consumer touch points extend beyond the self-checkout station and now include offerings like coin redemption kiosks that you can find in stores like Wegmans and Publix. We are also seeing growth in categories of retail that historically didn't use self-checkout. Convenience stores, discount stores, quick-serve restaurants and many small retailers are now embracing automation in an effort to improve customer service and profitability. Many of these retailers are turning to customized solutions like those being offered by our Paypod and PayTower system. Today, we estimate that market -- the available market for Paypod over the next 5 years to be $500 million, with continued growth. As an example, our recent integration into the Gilbarco point-of-sale system is giving strong access to the large and growing convenience store market segment. We have already secured wins in over 500 U.S. locations. And one of the most exciting aspects of this new market is that we have also expanded to include service contracts on every unit sold, literally 100% attach rate. Great hardware sales growth, a strong reoccurring revenue model. We are well positioned in the retail markets with hardware. And increasingly, we see opportunities on the software side as well. The trend is towards complete front-to-back and data collection and with comprehensive analytics and store management capabilities, and we see a compelling value proposition for CPI to provide that complete package solution, yet another great growth driver in the years ahead. One of the attractions of the 2019 Cummins Allison acquisition was our national service footprint. Historically, this team only serviced Cummins products. We have now begun to service a broader range of CPI products. Today, these customers typically rely on independent third-party service providers. But moving forward, we'll be able to utilize our nationwide service organization, creating an even stronger reoccurring revenue model. The opportunity is absolutely enormous. CPI has over 5 million products installed in the U.S. alone, many, many multiples of the number of Cummins Allison hardware products in the field. So clearly, there are many exciting opportunities across the CPI platform. And there are equally as many exciting opportunities across the Crane Currency platform. So now let me introduce Sam Keayes, President of Crane Currency.

Thank you, Kurt, and good morning to everybody. My name is Sam Keayes. I'm a fairly newcomer to Crane. I joined Crane about 3 years ago, having spent many years leading engineering and manufacturing businesses. And I've been President at Crane Currency for the last 2 years. And at Crane Currency, we are literally in the business of making money. We design, we integrate, we manufacture banknotes for scores of countries around the world. And we integrate security technologies into those banknotes, using processes that are deliberately complex in order to make those banknotes as difficult and costly as possible to counterfeit. And we're now leveraging many of those core technical capabilities to enter new markets, including the product authentication of consumer and industrial goods. So Crane Currency at core is a high-technology business. We have the Holy Grail of modern banknotes, the most secure, most advanced, most easily recognizable and most beautifully customizable banknote security technology available anywhere in the world. Our family of micro-optics are the result of decades of research and development. They can only be manufactured on machines that we design, using unique materials, using processes that we invented, which, together, makes this technology virtually impossible to copy. These secret manufacturing processes produce billions of optical lenses every minute. Each lens is shaped to focus on a customized icon below it and, on varying separation and angular control over these elements, ensure focus and legibility, allowing us to manipulate the technology into completely customizable 3D designs. The result is an optical system that achieves what the security feature industry has sought for decades: distinctive image animation and fluid movement that catches the eye, enabling a banknote to be authenticated intuitively, instantly by anyone or, indeed, by a machine in a fraction of a second. And this instant authentication is what underpins the trust in banknotes, trust that's critical for the reputation of every central bank and, indeed, for the value of every banknote. No other banknote security technology anywhere in the world even comes close. Now around this incredible security technology, Crane Currency has built a vertically integrated business that provides a true one-stop shop for central banks, providing banknote design, durable banknote paper, anti-counterfeit security features, integrated printed banknotes and, indeed, a range of support services that generate ongoing revenues such as secure transportation, secure storage, public education campaigns and customer training. So while the core of our business is the micro-optic security technology, these other capabilities are also significant differentiators that bring value to our customers. For example, banknote printing itself combines specialized printing plates, the ability to print in perfect registration, to align front and back printing, to achieve see-through designs, micro-text printing, numbering, varnishing and the art form of intaglio printing to create the unique tactile feel of banknotes, all this and more to incredibly exacting tolerances. And sophisticated security technologies are then applied to or integrated into the banknotes. And specially formulated inks with ultraviolet, infrared or magnetic properties are used to support machine readability. Trust in the banknote requires that every one of hundreds of millions of banknotes printed is, of course, identical. And even the manufacturing of banknote paper that circulates for years in demanding environments requires advanced technology and sophisticated manufacturing processes to integrate complex blends of fibers, to integrate anti-counterfeiting elements such as watermarks and security threads, pigments and other security technologies. Now due to population growth and overall economic growth, despite the growth of electronic payments, the number of printed banknotes grows every year by about 3%. And this growth accelerates significantly during periods of economic uncertainty, specifically, global pandemics or wars and also during periods of high inflation. Now most of the 170 billion or so banknotes printed each year are still printed by state-owned printworks. And one major opportunity for future growth is that in order to reduce costs and improve quality, some central banks may choose to exit printing their own banknotes and instead rely increasingly on long-established commercial banknote printers like Crane Currency. And when central banks look for a banknote partner, because it is such a specialized industry, there's only a small handful of companies with the right expertise and equipment who are trusted to manufacture banknotes. To enter our industry, all you need is at least 100 years of history of manufacturing banknotes; a security feature portfolio that takes decades of research and development to develop; specialist security-controlled manufacturing technology; and several hundred people with experience of how to design, integrate and print banknotes. And we estimate that this addressable market for Crane Currency, just in commercial banknote printing, is about $2 billion a year. In addition, we are active in the brand authentication market, securing high-value goods and brands, which, conservatively, offers an extra $1.2 billion a year of addressable market. Now in recent years, as you've seen, Crane Currency has significantly expanded our market share. We've grown at over 20% a year since 2019 because of our best-in-class security technology; because we have the world's most modern and efficient banknote printing plant in Malta; because we have this incredible reference of being the sole producer of banknote paper for the U.S. dollar, which is the most durable banknote paper in the world; and because we secure the most significant banknote in the world, the U.S. $100 bill, with our proprietary security technology. This is why we're confident that Crane Currency can continue to expand our market share. Now the core of our business, as I've explained, is security technology. Crane Currency introduced the world's first micro-optic security feature into the SEK 1,000 in 2006, and that technology was later adapted to secure the USD 100 bill, and has subsequently been selected to secure the currency of dozens of other countries. The specific micro-optic product used in the USD 100 is called MOTION. It was designed to produce excellent security for the highest-denomination notes. And it's been adopted by many countries, but its addressable market was limited due to its cost and the security requirement to weave the thread into durable paper substrate. So in recent years, we've developed a full range of products, each adapted to meet the needs of different segments in the banknote market. For example, our new BREEZE security threads are narrow and only available with limited colors and designs. But they have durable sealed lenses and a lower price point. So they're a perfect fit for low-denomination notes used in harsh environments. Our Detect product integrates machine readability into our durable RAPID security threads. This makes our technology a perfect fit for any automated payment environment. And the strike format allows our micro-optics to be applied on the surface of any substrate. And as a result, Crane Currency has moved from being a niche supplier of the very best premium security technology to now being able to provide micro-optic security level technology for every banknote on any substrate. And in the process, we've more than tripled the size of our addressable market. We have, of course, robust product and technology road maps for at least the next 15 years of investment in banknote security technologies, which will continue to push the boundaries of design, of innovation, of security, keeping us several steps ahead of both the banknote counterfeiter and indeed our competitors. The adoption of new technology in the banknote industry takes some time, but you can see the strategy is reading through to growing sales. By 2009, 3 years after our initial success, our first product was specified in 32 denominations across 11 countries. But by 2017, our technology was specified in 62 denominations across 27 countries. And today, in part due to that expansion of our product line, our technology is specified on 145 denominations in 50 countries. And we still see substantial room for additional growth. Just last year, Crane Currency converted 16 new denominations to our security technology. And when we win a new security specification, it typically results in recurring sales for at least 7 years, or until that banknote design is once again updated. Our growth is also being driven by the increasing sophistication of large-scale counterfeiting by organized crime, which drives countries to continually enhance the security of their banknotes. New counterfeiting techniques are now spread around the world on social media. And holograms and metallic-type features in particular can now be reproduced rapidly and cheaply. In contrast, there is no commercial technology that can come close to reproducing the movement and the 3D depth of Crane Currency's proprietary micro-optics. So overall, we continue to see solid long-term growth in the international banknote market. The real world is still a very, very long way away from replacing cash. Cash remains the only truly inclusive and anonymous form of payment. It is cost effective. It is universally trusted. And compared at least to the huge energy requirements for cryptocurrencies, it's environmentally sustainable. And for many, including the more than 1.7 billion people globally who have no access to a bank account or any electronic payments, cash remains absolutely essential. Now turning back to the U.S. Since 1879, Crane Currency has been the sole provider of currency substrate, durable banknote paper, to the Bureau of Engraving & Printing. Crane Currency's distinctive paper uses a unique formulation that no other company has ever successfully produced. And as a result, the U.S. has the most durable banknotes in the world. Durability of low-value notes around the world is frequently measured in months. But according to the Federal Reserve, the average $1 bill lasts 6.6 years in circulation, longer than most polymer notes, while still retaining the unique feel and the watermarks, which are both key parts of U.S. banknote security. And our paper for the U.S. also integrates numerous security features, including the 3D security ribbon or the blue stripe on the USD 100 bill. And as a result, Crane Currency has a strong domestic anchor customer and a very strong international reputation for producing durable banknote paper and best-in-class security features. And although the U.S. enhanced the $100 bill in 2013, the other denominations, the $10, the $20 and $50 notes, were last redesigned more than 15 years ago. And they're all due for a new design. Now whilst we can't discuss a detailed time line, we do expect all 3 will be redesigned and launched over the coming years. And given advances in counterfeiting techniques, we reasonably expect all these redesigns to include additional modern, high-quality security features. Crane Currency is very, very proud of having been a key long-term domestic supplier to the U.S. Bureau of Engraving & Printing and, indeed, to the Federal Reserve. We're also proud of the fact that Crane Currency has developed the world's leading banknote security technology, all designed and produced in the U.S. So it will not surprise you that we have mature technology ready to be offered for integration into any new U.S. series notes whenever they are introduced. Now beyond currency, we're also making great strides into the commercial product authentication market. Product authentication is a broad term used to describe various labels and stamps used to authenticate and prevent the counterfeiting of genuine consumer goods. And counterfeiting is big business. An estimated $3 trillion of sales are lost every year. So many industries are looking for solutions that can be used to authenticate a genuine product. Now you may have seen labels, typically holograms, on pharmaceutical packaging, on branded apparel, on credit cards and driving licenses or liquor bottles. And today, the technology commonly used on these applications is fairly easy to simulate or replicate. So a commercial version of micro-optics provides a quantum leap, both in security and in public engagement, compared to the current labels being used, whilst also, I stress, being completely separate to the special technology and designs that we reserve for use in banknotes. With new and dedicated resources in this area, we are making rapid progress. Max mentioned on a recent earnings call that we'd formed a long-term partnership with an awesome company called Octane5. And through that relationship, we've already secured a number of very well-known new consumer brand customers. We can't mention most of them just yet, although you can see one of the designs, at least, on the screen. This morning, we also signed a new distribution deal with a company called Essentra Packaging that will allow our commercial micro-optics technology to be used to secure pharmaceutical and beauty products. And indeed, I expect further distribution deals to be done in the coming months in automotive and industrial products. This is a logical extension of what we do today. We have the know-how to develop secure and eye-catching label designs that will reduce counterfeiting, that will enhance brands, that will improve customer engagement and trust. And now we have the right partners and the structure and the focus to support this initiative. We see clear line of sight to building this into a $100 million a year business. It's an exciting breakthrough organic growth opportunity, and I look forward to sharing with you new channel partners and customers over the coming months. In conclusion, in the aftermath of the 2018 acquisition, when I joined the business, Crane Currency really focused on implementing the Crane Business System and driving the fundamentals of safety and quality and delivery and cost. But we also accelerated our technology and product road maps to set the foundations for future growth. Crane Currency was always a solid profitable business, but we've made dramatic improvements in our cost base and in other fundamentals over the last few years. The strength of this core business has allowed us over the last 12 to 18 months to expand our product portfolio into every banknote and to accelerate our efforts to penetrate the product authentication market. And together, these investments provide a solid platform for organic profitable growth from Crane Currency and, indeed, make us fit to be able to acquire other complementary technologies or capabilities. In conclusion, Crane NXT, that combination of CPI and Crane Currency, it's a mature business with strong recurring revenues, healthy underlying growth trends and a 4% to 6% long-term core growth rate. And at its heart, Crane NXT has differentiated industry-leading technologies. That's what sets this business apart from its peers. Crane NXT will, as we've discussed, continue to benefit from the Crane Business System, which will drive operational improvements, productivity and growth. We aim to deliver those best-in-class EBITDA margins of 28% and free cash flow conversion of over 100%. And that strong underlying business performance will continue to support investments in organic growth. It will also provide the headroom to allow us to pursue further acquisitions, remembering we have a proven track record in acquiring and integrating companies successfully. So I'm very happy to take any questions in a minute. But I think, first, Max has a few closing comments on the Crane NXT story.

So we'll just close this out. We're going to ask a few -- allow you ask a few questions specific to -- of CPI and Crane Currency. A reminder -- then we'll take a break. Reminder, we have opportunity to ask questions after Alex, after Jay, for -- and then we're going to have general questions at the end as well. Just a couple of points I wanted to emphasize, too, in terms of the opportunity. This was all core. This is core in our line of sight, what we just discussed. I want to emphasize that even -- given all the fantastic deals that we've done, from MEI, Cummins, Crane Currency and the results are reading through, these opportunities gave us the -- or this scale gave us the opportunity to separate. I think it's important to unlock this team to do the deals that they would like to do. We've actually walked away from some transactions recently that had phenomenal return profiles. But quite honestly, we were concerned about the balance of the portfolio and the continued perception of overweighting towards what was PMT now to become NXT. So truly, when these -- when that starts to happen, and you have to question on the logic of not only impeding the business as it moves forward, but the value creation, this is very powerful in terms of the value creation that we will unlock with NXT. And Jason did such a nice job describing the valuation comparables. When I think about the blue sky, thinking this comes from this team, labels is just a part of this ecosystem. And from software component, tracking, digital asset management, direct consumer engagement, there's a whole host of avenues that can be explored here that I think the team will continue to push themselves on in terms of the future of NXT. CPI processes, more retail cash transactions than any other hardware supplier in the world and the data from that is incredibly powerful, and how we can continue to become a data -- we are a data provider today, how that continues to expand. And from a service standpoint, the growth opportunities around our installed field base of 10 million units, some still serviced in-house or by third parties that we will continue to take share from. It's just all incredibly exciting. With that, let me open it up for questions.

Kristine Liwag, Morgan Stanley. So if you look at valuation of companies like Block, right, formerly Square, the market's putting immense value in digital payment and software solutions. I mean, this company has got, what, $84 million in market cap. So if you look at the valuation of Crane NXT versus companies like that, why is there such a big gap? And how could you close that? Because it seems like you're doing your best to convince that there's value in physical security, which there is, but the market disagrees. So why not lean into some of these digital processing capabilities and using the profits that you're getting from the physical payment world and get the best of both worlds and maybe get some sort of hybrid valuation. I mean if you look at these guys, it's like, what, 110x PE or something. I mean it's a little crazy. And you guys are trading where you are. It seems like there should be some sort of happy space.

That is a potential direction that NXT may go that the new CEO, once identified, may pursue. That is an option post separation in a way that lonely, in current structure, it's not, right? Because there are certain transaction opportunities, certain acquisition paths, certain organic paths that require a level of investment that, in our current structure, we couldn't pursue, right? And so we're talking about opportunities. Kurt and Sam talked about what we have specific line of sight to. Max talked about a couple, but certainly not all, of kind of these bigger ideas that you're kind of alluding to, and those are certainly viable as well. The new CEO will have a lot of opportunities or options to choose from, let's put it that way, in terms of different paths and directions.

Certainly, it's very -- your comment is very consistent with our conversations and what the Board -- our Board conversations in terms of the opportunities.

So I think that the trends in the comp slide that you have probably needs another column, right?

Give us...

Fair enough. We didn't want to go too far, too good.

I mean that's the blue sky. That's why you guys are doing this.

Point taken. Good point. Other questions?

Maybe just a couple of questions on the product authentication market there. Can you talk about the difference in your cost, the cost of your product to authenticate those brands versus the lower-tech holograms? Where -- I guess, on low-value products, it's probably not applicable; higher-value products, maybe more applicable, where do you think that -- the break line is there? How do you identify the size of the addressable market?

I'm sure Sam will touch on it, but it's not so much cost as it is value, and the value that we're able to price.

He's taken my first line. That's exactly what I was going to say. Yes, it really is about value. And if you think about the type of brands, the type of business models, the type of value that these companies are looking for, where we work with Octane5, the value that's being provided to a GM, you saw GM on our slide, is when they're licensing their technology to produce something as simple as branded apparel, baseball hats, T-shirts, whatever it is. They're not in that business. So with Octane5, we can help them manage the selection of vendors who are designing apparel for them. We can help them manage the licensing of the production and sale of those products to various parts of the world. And then critically, if you put something as simple as a QR code on the label with our technology on it, which is going to draw the customer in, it doesn't just allow you to authenticate the brand. It doesn't just allow you to enhance the brand because it's a beautiful label. It then allows you to engage with your customers. Because when then they scan on the QR code, they go to a website. They enter themselves their own personal details of someone who is a fan of GM material. You can get quality feedback from your customers. You can get feedback about where -- how well your different distributors are performing. This is about data. It's about driving licensing value for our -- for the brands. And the difference between a hologram label that -- it just kind of flickers, and it can be easily counterfeited and doesn't draw the eye in. And a technology that brings a significant proportion of customers to engage with your brand, that's huge value. So it really isn't about cost, it's about value.

And then just one on the 40 percentage recurring revenue. Can you give us a bit more color on that of what's replacement? If you get a banknote, you're replacing that for 8 years versus subs and aftermarket kind of revenue out of that.

Yes, sure. I mean, I think you're familiar, I think, is -- we had a chat about it when we were last able to travel, when you were able to come visit us in Malta. And you know we don't like to discuss specific countries because the one thing I've learned central banks value above all else is discretion. But I'll give you a couple of examples. We've got one 7-year contract with one country to essentially be their banknote partner, not just to print their banknotes every year when they need additional banknotes, but to do the design, to do the upgrade, to manage as a service all of their needs around banknote production. So at the one end, you can have these kind of long-term partnership deals for everything in banknotes. At the other end, once your security technology, our micro-optics, is specified on a banknote, as I mentioned, it pretty much doesn't come out of that banknote until the banknote is completely refreshed, and I put a minimum time scale on that at about 7 years. It can be considerably longer. In those instances, as a minimum, we are producing the micro-optic thread every year for that banknote until it gets changed. The reality is once you've got our micro-optics technology, and even when you upgrade, you upgrade to the latest generation, and that also allows us on the back of that to produce the banknote paper or indeed print the banknotes for those customers who want those higher-value services. So it's a very sticky model in that respect. Final point is a bunch of services on the back of that, which I just briefly touched on, storing customers' banknotes as a service, transporting their banknotes around, helping to design their banknotes. We do quite a lot of paid consultancy design work for central banks who don't hold those type of skills in-house. They come out to the best in the business, the Crane Currency banknote design team, and get them to do that work as well. So it's a range of technology, full product integration and services that, once you build a relationship with these central banks and you continue to do a good job, they keep coming back for broader services. Does that answer the question?

Yes.

Other questions? Super. We're right on time. Why don't we break until 10:15? [Break]

Okay. We're going to start in just a second. Okay. So we'll be spending the rest of this morning discussing these exciting opportunities at Crane Co. post separation. I'll start with the equity story and some high-level comments. That will be followed by Alex, who will discuss the Process Flow Technologies business, and John will cover Aerospace & Electronics. This is a business that will generate solid mid-single-digit core sales growth that combined with strong operating leverage to drive double-digit EPS core growth with upside from substantial capital deployment. We also believe that the Aerospace and Process Flow end markets are both well understood by general industrial investors, the same group that typically has the least experience with our payment business. For this group of investors, we believe that the strength of the business is evident, premier platforms in both the Aerospace and Process markets, with a clear and directly comparable peer set currently trading in the mid-teens EBITDA today. So Crane Co. after separation will include both our Process Flow Technologies and Aerospace & Electronics businesses. It's roughly a $1.9 billion business with a great balance, 40% of operating profit from Aerospace & Electronics in 2022 and the restaurant Process Flow Technologies. And in the aggregate, about 60% OE, 40% aftermarket, and about 50-50 between long and short cycle. These businesses are leading providers of mission-critical long-cycle Aerospace & Electronics and Process Flow Technologies with a broad portfolio of highly engineered products, strong brands and leadership positions with differentiated technology and design-driven advantages, large and attractive markets, accelerating growth outlooks, all supported by favorable secular trends. Both businesses are great platforms for growth, both organically and through acquisitions, and both are comprised of well-known and highly sought-after assets, a very strong balance sheet well capitalized to support a flexible capital allocation policy, including both acquisitions and capital return. This is a strong financial profile and a business with a lot of opportunities. We expect a core sales CAGR of 4% to 6% at new Crane Co, with high confidence through at least the end of this decade. EBITDA margins are approaching 19% today, and we expect the operating leverage of 35% to 40% on core sales driving, again, 10% average annual EPS growth before capital deployment. And Crane will have the strong balance sheet that both Rich and I have described. When we think about that 4% to 6% core sales growth, it's based on our expectation of a 7% to 9% sales CAGR, at least through the end of this decade at Aerospace & Electronics, and 3% to 5% at Process Flow Technologies. At Aerospace & Electronics, we introduced that 7% to 9% growth expectation last May at our Aerospace & Electronics Investor Day event. We provided a lot of detail that Jay will reinforce today. And since last May, we actually have higher confidence in that growth outlook. Key drivers over the next decade include the cyclical recovery of commercial aerospace markets, a number of very large defense programs that we've already won that will be ramping up over the next few years. Our strong sole-sourced content on all major aerospace platforms and the associated aftermarket, and our continued technology investments, which position us to benefit from secular trends, such as electrification, it's just an incredible gem of the business. At Process Flow Technologies, our 3% to 5% core growth expectation is based on accelerating progress on new product development activities and product vitality at record levels. Secular trends also support continued growth in our core markets, such as chemical, pharmaceutical, general industrial and water. And most importantly, which Alex will cover in more detail, is the long-term shift to this portfolio towards higher-growth markets, now constituting about 2/3 of the portfolio. And at this stage, we have minimal remaining exposure to energy and oil and gas, which have been a headwind to growth over the last many years. These businesses, just like Crane NXT, have a proven track record of driving margin improvement. At Aerospace & Electronics, we've been consistently in the 21% to 24% operating profit margin range since 2011 until COVID. And we're going to get back there very quickly. Rich has already commented that we should be there by the end of this year or early next. As that market recovers, we should quickly see margins in that range again. And at Process Flow Technologies, we expect to hit record margins of 15.5% this year, with still substantial upside as the portfolio continues to shift to higher growth markets and our new products, which are introduced at higher margins. Together with a blended 4% to 6% core growth -- core sales growth, a 35% to 40% operating leverage, again, that's how you get to 10% plus core operating profit growth on average every year. You'll hear more about acquisition opportunities and the spaces we're targeting in the next few presentations. But just a reminder that Crane Co.'s balance sheet, we'll put it in a great position to be a consistent acquirer. The new structure and expected valuation will also give us far more flexibility for M&A than we've had historically, including the potential to consider equity for certain potential transactions when it makes financial and strategic sense to do so. We have a robust pipeline of acquisitions across both platforms comprised of bolt-ons, adjacency as well as some larger opportunities. The peer set for this business, we believe, is well understood, and our thinking is largely aligned with what we've seen published by our analysts and in our discussions with investors. It certainly includes aerospace pure plays such as the TransDigm, the Hexcels, [ Hico ]. The process pure plays like Flowserve, but also the hybrids, Curtiss-Wright, Woodward, ITT, right? This combination of aerospace with process businesses isn't that uncommon. The financial profiles are similar. The end market exposure is match. And while there's certainly many nuanced differences across all of these companies, we think it's a fairly clean fit from a comparable company perspective. We don't expect too much pain over this. These peers typically trade in a 15x EBITDA range. And post separation, we don't see any reason why Crane Co. shouldn't trade similarly. So in conclusion, it's a business that will generate solid mid-single-digit core sales growth, combined with operating leverage, driving double-digit core EPS growth, with additional upside from capital deployment. A set of well-known, well-positioned, high-quality assets that, based on their performance and a clear peer set, merits a premium valuation. And as a standalone business without payment, we think that the transparency and it being viewed that way will lead to the valuation that we expect. So with that, let me hand it over to Alex, who will discuss our Process Flow Technologies business.

Good morning. I'm Alex Alcala, Senior Vice President, responsible for the Process Flow Technologies business. This morning, I'm excited to talk to you about the transformation we've driven in this business over the course of many years. We've always been good with consistent execution. But today, the business is stronger than ever, positioned for higher growth and further margin expansion. We have repositioned the market focus of the business with substantial expansion in our higher-growth markets, like Jason said, with about 2/3 of the business now in growth markets. And also important, our exposure to the most challenged markets is now immaterial. We've also developed strong capabilities driving growth from commercial excellence and localization to new product development and breakthrough innovation. And we're driving further margin improvement through the deployment of the cadence and discipline of the Crane Business System as well as through targeted growth. Of note, our new product introductions are growing substantially faster than the rest of our business, and our new products carry a very strong margin profile. All these actions have resulted in very strong financial performance, including consistent margin improvement. 2022 is expected to be a record margin year. Overall, we are confident that we are positioned to drive 3% to 5% core growth across the cycle, with an average of 100 basis points of margin improvement per year. Most of this presentation will be focused on the specific initiatives to drive growth and margin improvement, but the market backdrop is also an important part of the story today. Our backlog is at record levels, already higher than it was at any pre-COVID period. And our order rates are strong, with 2021 core orders up 16% compared to prior year. Strength in underlying demand is broad-based, particularly in North America and in our strongest vertical markets, including chemical, pharmaceutical, water, wastewater and general industrial. That demand profile could certainly support higher growth than the 3% core sales growth in our guidance. but supply chain constraints are limiting production today. We are working to over deliver every day, but we don't yet see any material improvement to our supply chain. However, those dynamics, we think, are set up for a prolonged cycle, likely far longer than the typical up cycle, even if growth in any given year is a bit more muted. We are often asked why are we so confident in our growth prospects given our modest core growth over the last decade, but there's a lot more to the story than our historical aggregate top line growth. And there were a lot more significant moving pieces internally that are visible from our reported results. This chart shows our end market exposure has evolved over time. Over the last 5 years, the challenged oil and gas and conventional power markets have declined from about 15% of our sales to 5% today. That's nearly 20% negative CAGR. Over the course of the last 10 years, the impact was even more pronounced, and this portion of our business declined more than $200 million over the last decade. Fortunately, today, our exposure to these markets is largely immaterial. And given the small remaining exposure, it is not a substantial incremental headwind. What is perhaps not fully appreciated is that during the same 5-year period, we have seen substantial above-market growth in our core target markets of chemical, water and wastewater, pharmaceuticals and general industrial. These are the markets with the strongest secular trends in a market where our growth initiatives are focused. Over the last 5 years, these target markets have grown from less than half of our sales to nearly 2/3, positioning us well for accelerated growth moving forward. I know there's a natural tendency to start with historical trends when forecasting the future, but the underlying composition of our portfolio is completely different today, and the largest portions of our current portfolio have a strong track record of growth. Again, there are 4 key markets where we are driving growth that today are nearly 2/3 of our revenue supported by strong secular drivers. The chemical and petrochemical market, our largest market segment, produces products that are absolutely essential to our daily lives and growing economy. Our chemical customers are also providing the products and solutions necessary to support sustainable infrastructure, clean energy and advanced electronics. Crane is helping our chemical customers solve their toughest problems in corrosive, toxic, hazardous and abrasive applications with our innovative process valve portfolio. And our precision continues to improve as our customers' needs become more and more challenging. The wastewater treatment market will continue to grow driven by the investment needed to support growing population, along with tightening regulations and sustainable solutions to reuse water in a circular economy. Our wastewater pumps are designed to solve flow disruption problems, increasing performance and reducing operating costs in the collection and treatment of wastewater. In the pharmaceutical and aseptic markets, we expect strong growth ahead driven by demand for biologics to treat chronic diseases by advancements in personalized medicine and increasing R&D spend to support new drug approvals. Our expanded aseptic valve portfolio is solving tough problems in hygienic production, and our products are differentiated by the extended life and lower maintenance costs. Finally, the industrial market in our space will continue to grow as industrial customers have been -- have a growing need to invest in solutions that help increase efficiency, support sustainability targets and lower operational costs. Our portfolio of pumps, valves and sensing solutions is designed to solve maintenance and reliability challenges through quick installation, extended service life and lower energy consumption. This reduces the unplanned downtime in manufacturing, which is one of the largest causes of loss productivity delays and lost revenue from unhappy customers. Overall, we believe we have strong positions in growing markets. And as we're driving higher growth, we expect very strong operating leverage with a target of 100 basis points per year. While the specific composition may vary from year-to-year, there are 3 key drivers. First, we expect substantial operating leverage on higher volumes driven by market growth, continued share gains and our improved end market mix. Second, as I explained, our new products, which are growing rapidly, are generating well above average margins. And third, we continue to drive productivity as well as improvements in commercial excellence. While some of these drivers are necessary to offset routine inflationary pressures on a net basis, we expect to drive approximately 40% leverage on incremental sales, which equates to about 100 basis points of margin expansion per year at our expected 3% to 5% long-term growth rate. Our strategy and execution are delivering strong results already, and we are confident that our margin expansion benefits will continue, and that margin outlook is supported by our track record. We have already achieved mid-teen margin performance, and we expect 2022 to be a historic record year on operating margin. We have strong momentum, and we are confident on our path to the high teens and potentially beyond. Today, we are highly focused on driving above-market growth, and I'm going to cover some of our most significant growth initiatives. We have a long history and strong culture of innovation at Crane, but the rate of innovation is accelerating, and it's having an increasingly positive impact on our business. Our strong culture and the cadence and discipline of the Crane Business System, combined with consistent investment in new product solutions through the cycle, are the key to our success. As an example, on the process solutions portion of our business, the improvement in new product vitality or the percentage of sales for new products introduced within the last 3 years has been impressive, tripling over the last few years. And we have clear line of sight to hitting 20% within a few more years. We are achieving this in an industry that is risk averse and typically resistant to change. Our initiatives are all focused on solving our customers' toughest problems in our high-growth markets. And these new products coming in at higher margins are accretive to both our overall growth profile and our margin profile. I will share some examples of our innovative new products later in this presentation. At the same time, in addition to product innovation, we continue to drive improvement throughout our enterprise, generating growth and margin expansion through commercial and operational excellence, leveraging the Crane Business System, or CBS. CBS is one of those things that sets us apart from other companies in our industry. It's our holistic management system that builds an incredible performance culture focused on the customer and aimed at driving profitable growth, while driving disciplined execution in safety, quality, delivery and cost. We continue to see significant gains from our relentless deployment of CBS across the entirety of our business, driving enhanced commercial processes with tools that help us improve hit rates and drive growth, reducing lead times to help us win in the marketplace, driving productivity and cost improvements by reducing waste, and often reinvesting these savings into initiatives to drive further growth, developing repeatable processes for new product development and commercialization. And CBS also encompasses our intellectual capital or human resource processes focused on developing talent. The results are evident in the strength of our team, our customer metrics, financial performance and other measures, such as low turnover, which is notably better than industry benchmarks, even given the challenges of COVID in the workplace. I would like to provide more color on our growth initiatives in our focus markets. The chemical market is a long-term growth market, and we have been a major player in this space for decades. While the traditional core chemical market remains strong, we are seeing continued investment by our customers aligned with new and evolving applications in clean energy and advanced electronics. Whether it's membranes for hydrogen applications, materials for semiconductor fabs, elastomers for electric vehicles or materials for electric batteries, the chemical segment is playing a key role in the technologies that will shape our future. It's a great segment to be in, and we already have a strong position in this space with our process valve solutions, yet we continue to innovate and gain more share. On the right side of this slide, you can see some of our leading new products that are designed to solve our customers' challenges in corrosive, abrasive, toxic media applications commonly seen in the chemical production process and among the most challenging harsh, hazardous environments in the industry. At the top right, our new TUFSEAT, severe service metal seated ball valve, combines critical safety and performance features required for demanding severe service applications. Our modular valves are designed to last 2x longer than alternative valves, while withstanding extreme temperatures, pressures, abrasive solids and high-cycle volumes. In the middle, our next-generation sleeved plug valve, the L-TORQ, provides a differentiated design that delivers an industry-leading low torque performance and simplified repair. With 50% torque reduction compared to traditional sleeved plug value, the L-TORQ allows customers to use smaller automation package, significantly reducing cost as well as the amount of space needed for the valve package. Lastly, our FK-TrieX valve is a proprietary innovative triple offset, quarter turn technology, truly breakthrough, which is extremely uncommon in an industry that uses proven designs over numerous decades. And this breakthrough design eliminates the traditional trade-off between flow rate and ceiling capabilities. It is the only isolation valve with both an industry-leading flow rate that can also provide best-in-class shutoff and all at 50% lower cost than the traditional ball valve. These and other innovative products in the chemical space will deliver at least $80 million in incremental sales by 2025. We continue to make great progress with these new products, and customer reception and adoption rates have far exceeded our expectations. The wastewater collection treatment market segment is also an attractive and growing space for us. There is ongoing investment in water infrastructure as well as increasing need for innovative product solutions due to change in operating conditions and increasingly stringent regulations. Solids in the wastewater stream are growing rapidly, and more disposable products are introduced. And as regulations require plants to use less water. Also as collection systems age and decline in condition, groundwater and storm water enter the networks through cracks, joint or illicit connections as influent infiltration. When collection systems are over taxed, sanitary sewer overflows. These can occur resulting in increased solid in the waste stream and then cloud pumps, a costly and inefficient outcome. We have the solutions to handle the high solid content. It's our focus, and we have significant momentum in this space. On the right side of the slide, you can see some of the new products that are driving our significant growth momentum in the wastewater market segment. The SITHE Chopper pump solves clogging with an innovative first of its kind patented chopping technology that slices even the most troublesome solids in the wastewater. SITHE Chopper pumps easily chop and pass solids, like plastic, bottles, wipes, rags, nylon rods, baseballs, pillows, glass, literally any solid in the waste stream. Our envie3 is a high-efficiency air-filled motor paired with non-clog pump. We believe this is the most efficient pump in the market, driving cost savings from lower electricity usage as well as productivity improvement as our non-clog design substantially reduces the need for service calls, and it's designed to run either submerged or dry run. Finally, the Razor grinder pumps are the ideal pump for light commercial and residential solid handling applications. The Razor is designed with an innovative extra cutting technology to efficiently reduce solids, like flushable wipes, diapers and other biodegradable items, commonly found in the modern waste stream that can wreak havoc on the sewer system. We are winning in this space, outperforming the competition, and our wastewater portfolio continues to grow. These 3 products as well as our newly introduced water and wastewater solutions will generate at least $40 million in sales by 2025. The industrial market is an important area of focus for us. We expect to continue to see customers invest in solutions that support energy efficiency, reduced downtime and operating costs. Crane provides innovative solutions in this space to a number of critical applications involving valves, pumps and sensing products that drive productivity for our customers, proven high ROI solutions. On the right side of the slide, I will highlight just a few of our new products. The Westlock smart positioners for rotary and linear valves, in addition to extended product lifetime, this solution has the industry-leading air consumption, which means it is the most energy-efficient valve positioner product in the market. Compressed air is one of the biggest uses of energy in the industrial space, and solutions that reduce compressed air use have clear and compelling business cases. In the middle, the Barksdale pressure transducer is a high-pressure, high-accuracy transmitter that can be customized for critical industrial applications, substantially reducing installation and maintenance costs. This product is typically integrated into equipment used in construction, agriculture, material handling and other applications. Lastly, the Westlock transmitters, which are noncontact, local or remote mounted magnetic sensors with no moving parts. That design enables the highest accuracy and longest life in the industry, reducing customer operating costs. Our new product developments in the industrial space will deliver at least $20 million incremental sales by 2025. We continue to invest and grow in the pharma aseptic space, and this will continue to grow as an overall share of our business. We expect strong long-term growth in the segment driven by aging population and improving global access to health care. In addition, advances in medicine and science are driving investment in cell culture for personalized medicine, along with broad-based growing demand for biologics. Breakthroughs in the pharmaceutical industry are generating investment in mega manufacturing facilities where Crane is one of the key valve providers, with a large installed base at key facilities around the world. On the right side of the page, where -- you can see that we are increasing our already strong position in the market with an expanded portfolio of products and solutions. A few examples. On the top, as the inventor of the diaphragm value, Crane has been a key player in the evolution of high-purity valve technology, expanding the expertise to automation products. Our Saunders-VUE sensors are the most reliable diaphragm valve sensors that provide quick calibration, reduce commissioning and reducing startup cost by 90%. Next product, Saunders EX Endurance Diaphragm is a unique material combination, which offers outstanding performance in applications exposed to prolonged sterilization regimes or higher temperatures, which makes it preferred by customers. This product also offers extended lifetime. And leading durability and reliability always drive productivity for our customers and create strong value proposition. To help our customers' reliability challenges, we are also broadening our polymer portfolio with a range that will replace our competitors' diaphragms, meaning they adapt to our competitors' valves, basically taking share in the replacement parts space. This will further expand Crane's served market by $150 million in the pharma industry. Adding breadth to our product range, we are also launching a new hygienic ball valve that will expand our served market by $200 million and reduce installation and maintenance cost for our customers by 50%. In the next few years, we'll increase our served market by 70%. With product launches starting this year, the new products have already started to drive incremental sales and will accelerate in the years ahead as our commercialization efforts mature. As everyone knows, investments in hydrogen production, storage and distribution are increasing as part of the energy transition to low carbon emissions. The number of projects for green hydrogen are gaining momentum from around 12 projects that started in 2021 to close to 60 projected to start in the next couple of years. This is driven by the increasing number of applications where hydrogen is becoming a cost competitive low-carbon solution. Examples to this include long distance transportation, regional trains and material handling applications. Also demand for hydrogen is expected to increase in applications that are difficult or resist electrification, but still require low carbon solutions, like combined cycle turbines for power generation, steel production and high-grade heating for various industrial processes. Our vast process valve portfolio designed for critical applications positions us well for the expected increase in investment in the hydrogen economy. Our critical application valves are already well positioned to win in 3 out of the 4 key applications: hydrogen production; compressed gas; and ammonia hydrogen carrying applications, where we are ready to compete and win today. We will see the sales growth related to these applications as customer investments and project activity increases in the coming years. That said, we expect half of the market demand for hydrogen valves and critical piping systems to come from cryogenic or very low temperature applications where hydrogen in the form of liquid is needed for storage, a $300 million market today that will go rapidly, as certain hydrogen applications, primarily involving long-haul transportation and similar, are adopted in the marketplace. Given the growing applications with liquid hydrogen, we're extending our existing product lines, and we've already committed [ $5 million ] of internal development to penetrate this segment, and the first product in cryogenic hydrogen portfolio are expected to launch next year. We are well positioned to have a leading portfolio for valves and critical piping systems in the hydrogen market. And given recent transaction multiples for businesses with even limited exposure to hydrogen, the returns on our organic investment in this area are far better. In addition to driving accelerating organic growth, we have a strong record of successful acquisitions, driving synergies and strong financial returns. As you've heard already, Crane Process Flow Technologies is an attractive platform for inorganic growth. As far as target areas, we are focused on expanding our portfolio in critical applications in our target growth markets, such as chemical, pharma aseptic, wastewater, industrial automation and cryogenics and hydrogen applications. We have a disciplined approach to identify and cultivate targets, and we are definitely seeing increased opportunities in the market. Although valuations remain challenging, I'm confident we will find additional opportunities for acquisitions in the near to medium term. In summary, our repositioned portfolio, our success with product innovation and our continued drive on commercial and operational success have created an accelerating growth profile. At the same time, we will deliver strong operating leverage to drive 100 basis points of margin improvement on average per year. More than ever, under our new corporate structure announced today, Process Flow Technologies is an attractive platform for inorganic growth. It's an exciting time for Crane Process Flow Technologies. Thank you.

All right. At this time, we'll see if there's any questions for Alex.

Elizabeth Grenfell, BofA. You showed us the waterfall for expanding margins, but how are you thinking about inflation playing into that and pricing power and ability to offset inflation?

Yes. Thank you. So as you might be aware, we got in front of pricing in 2021. We were quite successful in doing that. I think this year, we're doing the same. We have the process, tools and cadence to drive that. We're seeing quite a bit of inflation, but you saw it didn't affect our margins in 2021. And we don't expect that to negatively impact our margins here in 2022 or going forward. We're confident we can offset the inflation or marginally better than that.

Nathan?

I guess, I'll start with some of the end market exposures that were up on the board there. Crane, in some of those markets, are fairly small player, certainly not top 2, top 3 in terms of market share in those. Has there been any thought to focusing more heavily on some of those core markets, either through inorganic growth, through dispositions? I mean, I'm thinking, I know wastewater is an attractive market and one that you would like to be in, but you're pretty small player against some pretty large players there. How do you see expansion or contraction of those businesses for you from a more strategic perspective?

Well, certainly, both -- I think you're making a good point. Our organic and inorganic focus is on these markets, right? So chemical, we are a pretty significant player in the valve space. Wastewater, as you mentioned, we're a smaller player, but we're growing. And in our segment, which is about a $2 billion served market, we have plenty of space to grow. And so on pharma, similar. Inorganically, as I mentioned, we're focused on acquisitions in that space, be it similar, bolt-ons or adjacencies. Overall, as far as the divestiture or things like that, I'll let Max comment on that. But we're not really planning anything or to speak to any of that right now.

Then just maybe a follow-up one on the margins. I think from '13 through '21, margins were pretty flat. There's obviously been a lot of things going on in the last 10 years. Revenues are pretty flat over that same time as well. But you guys have had accretive new products over the last 10 years, and you have had operational and commercial improvements over the last 10 years. Maybe you can just talk about how those are going to accelerate to get you to this 100 basis points of margin expansion expectation per year going forward.

Yes. So if you look at our new product development, we've always been innovating, launching new products. If you recall that slide where we showed the new product vitality, although we've had a long history of innovation, we've been successful to accelerate it over the last 5 or so years. So the number of new products that are launching and the success we're getting is quite significant. When you think about that graph, every 3 years, any new product falls off of that metric, right? So we have to consistently innovate to get to 20% of total sales of new products is quite an achievement. So from that regard, I think we're seeing that momentum. And secondly, the shift in our base markets has also given us a tailwind to accelerate with those margins. Now over the last few years, we've achieved 100 basis points. We're going to achieve it this year, and we're confident going forward.

Kristine Liwag from Morgan Stanley. Alex, from your prepared remarks, you've got -- you've highlighted some sustainability efforts there particularly for wastewater, and you've also got efficiencies, hydrogen. So for your portfolio, what percent of your business would you say would be aligned to these ESG-type initiatives?

Yes, that's a tough question to answer specifically, but I can tell you that in all these markets, right, when you think about chemical and you read what our customers are doing, the big chemical companies, they are developing new chemicals in sustainable manner. So they're making investments there. They're changing their processes and manufacturing to adapt to these initiatives. So all these chemical trends are happening there, and then their end products are servicing that space. So I think it will grow more and more in chemical, wastewater, industrial demand for energy efficient and so forth. So it's hard for me to give you an exact number, but it's definitely increasing and becoming bigger and bigger over time.

And just to put some numbers around it, are we talking like 1/3 of the business, 1/2 the business?

In these growth markets, I would say, more like 1/3 of our business in these spaces, and then it's growing would be a high-level assessment.

Other questions? Super. Alex, thank you very much. Jay?

All right. Good morning. Happy to be here today. My name is John Higgs Higgs. At the beginning of this year, I became President of Crane Aerospace & Electronics, culminating a 30-year career with this business at Crane. Over that time, I've held a number of engineering and general management roles, most recently as the Vice President of what's known as the fluid and thermal management solution. And really, I couldn't be more excited to be here today representing this business. It's an incredible set of technologies and really an incredibly talented team that makes the products that we have. In May of last year, we hosted an Investor Event focused entirely on the Aerospace & Electronics business. During that event, we discussed our incredibly strong core business as well as our differentiated technology and focus on breakthrough innovation to support next generation of aerospace, defense and space platforms and applications. The combination of our strong core and alignment with accelerating secular trends, most notably electrification, have transformed our growth trajectory. And last May, we explained why we believe that 7% to 9% core sales growth, through at least at the end of decade, with operating margins quickly returning to our targeted range in the low to mid-20%. This morning, I'm going to provide you with an update on why we have so much confidence in that outlook. Our long-term market fundamentals are incredibly strong. Crane A&E has roughly a 50-50 split between commercial aerospace and defense markets, with space exposure across both markets. We're positioned with a broad product portfolio, significant backlog and long running programs, which facilitate a resilient business model. Commercial aviation capacity is expected to grow strongly over the next 20 years, with an anticipated 44,000 new aircraft entering service and 4% traffic growth over that same time frame. Key drivers include demographic trends such as global middle-class income, the need for replacement of large legacy fleets and desire to harness new generation of aircraft and engine technology to address increasing concerns about carbon emissions and pent-up demand for travel in this post-COVID environment. On the defense side, of the $750 billion that was in the 2022 DoD budget, almost $112 billion, a 4.6% increase is for research, development, test and evaluation. We expect this trend to continue with a forecast for 2023 in the range of $770 billion to $780 billion. Crane A&E's advanced technologies are key enablers for these R&D programs. And we have enjoyed notable growth across advanced platforms that I'll discuss later and which will ultimately lead to program wins and significant revenue. Additionally, annual demand for commercial aircraft maintenance, repair and overhaul will increase to $141 billion this year, an 8% increase over the last year with a forecasted 4.2% CAGR over the next decade. Crane's legacy products and targeted upgrades are well positioned to support the needs of the defense industry. Our 2022 outlook is consistent with that longer-term view. We see continued recovery in commercial markets with build rates and air traffic driving mid-teens growth, both in the OE and aftermarket. In the defense market, we expect a slight decline in 2022 following a very strong 3-year period of high growth in the double digits from 2018 to 2020. The 2022 decline is primarily due to modestly lower modernization and upgrade efforts and revenue and some supply chain challenges. However, as we will discuss, based on programs we have already won, we'll be ramping up over the next few years, and we have an extremely positive outlook for our defense business over the next several years. From a margin perspective, improvement to the mid-18% range is expected this year, stronger in the second half, of course. And then we expect to be back in the low 20% range next year. The rest of my presentation today will be focused on how we have positioned our business to outgrow those strong trends and deliver above-market growth rates. Our business strength is derived from the combination of operational discipline of the Crane Business System and the strength of our differentiated technology and engineering capabilities. This business has always been at the forefront of technology and innovation within our solutions. And this strength has become more important over time as the pace of change has accelerated. The strength of our engineering team is unparalleled, and our capabilities are differentiated in a number of very critical ways. First, we have decades of experience with our core technologies. In many cases, far more than any of our competitors as we were the first to commercialize many of our solutions. Second, we work closely with our extensive customer base, and we see how our solutions are used by all of the OEMs as well as most Tier 1 suppliers. That very broad view gives us a perspective that captive or in-house suppliers sometimes don't have. Third, we have a large engineering team focused around core capabilities that understand the technology. They work closely with our production teams throughout the development process to ensure that solutions have the right technology and are also designed for manufacturability. On the slide here, you see a few of the recent developments generated by our engineering teams across the various Crane Aerospace & Electronics sites. Both our bidirectional high-power conversion units and integrated motor controls, have applications today and are positioned towards increasing trend of electrification. In our sensing business, we are driving ever-increasing levels of accuracy and reliability, utilize our sensors in new applications. In addition, our depth of knowledge within each of our solutions, we have extensive experience integrating multiple technologies together. Today at Crane, we have a technology readiness focus, investing in technology and capabilities before it is needed by our customers. We are developing that readiness early enough so that we can influence future specifications and work with our customers to understand and serve their needs. While helping them develop their next-generation solutions, we're developing a technology today that will be critical enablers for the more electric vehicles, aircraft, more advanced radar systems and other C4ISR systems as well as for satellite constellations and space exploration. This work on technology readiness is fully aligned with our customers' needs, the secular trends in the industry and the core competencies we have developed over many decades. These competencies include the following: power conversion, with growing capabilities and high power conversion for new and emerging applications that require defense-grade reliability, quality and sophisticated magnetic design, delivering high power and lighter, smaller and more efficient packages and adding bidirectional power conversion capabilities as well. Sensing capabilities, which include condition and precision sensing, pressure and flow measurement with increasing precision and with wireless capabilities to prevent sensors to work sometimes even without aircraft power. Fluid and thermal management systems, which provide high reliability and flow rate with a design that reduces size and weight and increasingly challenging pressure and temperature conditions. Landing antiskid brake control systems, which are based on our unique dynamic modeling and algorithm development capability. And our microwave systems, which provide high-frequency signal processing and ultra-low noise design. Our capabilities continue to improve, and they are centered around the same core competencies we have built on for decades. As I mentioned earlier, we are forecasting 7% to 9% sales growth, sales CAGR, if you will, over the next decade in an industry growing at roughly 5% annually over that same period. There are 3 main drivers to this growth. First, we have an excellent base of business. We have reliable products, unique technology and great customer relationships, which provides a stable position as the market continues to recover and grow. Each of our products provide critical functions with high switching costs, resulting in long-term relationships for the life of the program. We have substantial content on virtually every major commercial and military aerospace platform, supporting a large high-margin annuity-like revenue stream that includes spares to replace our sole-source content as it wears out and needs to be replaced, a consistent revenue stream from repair services, and opportunities for growth with modernization and upgrade programs across the entire fleet. Secondly, we see regular opportunities to capture new business within the core. I presented earlier as new aircraft are introduced, new defense systems are installed and occasionally when one of our competitors falters. This represents our second largest near-term growth opportunity and is displayed in blue on your slide, and I will discuss some of the wins we have had already secured briefly here. Revenue in this area includes a number of programs that are new for Crane, but very high confidence, and we have already been awarded most of the content in this category that we need to achieve our forecast. And our final and most exciting growth driver is the breakthrough innovation that our R&D teams are driving right now. This innovation will position us to win as the military converts to more electric vehicles, as electrification proliferates and as our core customers pivot to the technology of tomorrow. These are the critical investments we are making today, but which require significant long-term development. Shown in green on the slide, this investment matures in the second half of the decade, but becomes the core of our future growth for 20 to 30 years beyond. I'll discuss shortly how well positioned we are for growth in this area. Here you see some of the commercial platforms we currently support. We have substantial content on virtually every single major commercial aircraft platform, including out-of-production aircraft like the Boeing 737NG, which continue to drive aftermarket sales for more than a decade. We have an even stronger position on the current generation of in-production aircraft driving revenue today and creating an aftermarket stream for the years ahead with a particularly heavy level of content on single-aisle aircraft that, as you all know, represent about 70% of aircraft produced on an annual basis. As an example, we have a substantial more content on the Boeing 737 MAX than we had on the prior generation Boeing 737. We have nearly doubled the content on Airbus A320neo than on previous generations. We have a strong content position on every other major aircraft platform from Boeing to Airbus to Embraer. We have solid content on the COMAC C919, including brake control system, the door sensing system and flight control power conversion. Our position today ensures that our commercial business will benefit as aircraft production rebounds from the pandemic, with each new plane generating revenue today and growing our installed base for a long tail of aftermarket activity over the next few decades. Additionally, this experience and technical expertise puts us in an enviable position as OEMs begin to plan for next-generation aircraft. In preparation for Boeing and Airbus's next completely new aircraft, we are working on the solutions we expect will be needed for many of the systems and components. As an example, we leveraged our significant pump experience to secure position on the Airbus Wing of Tomorrow, providing smart, high-voltage fuel pumps, and we're providing our unique vein-type lube and scavenge pumps for engine demonstrator programs at GE, Pratt & Whitney and Rolls-Royce, all supporting next-generation platforms for both commercial and military airframes. In the defense market, the production volume of military aircraft is dominated right now by F-35 Joint Strike Fighter. The F-35 utilizes a derivative of our proven landing gear and brake control system on each of the global fleet of 700 aircraft. One of the most exciting product launches over the last few years was watching Perseverance, NASA's latest Mars Rover, land on the Red Planet aided by Crane power converters, supporting guidance, video and articulating arms. We are proud to support NASA and to be selected as one of the most reliable suppliers in the industry on a program where failure is not an option. These programs are a true testament to both our products and our team's capability. On the ground, our defense power business and microwave business support platforms such as lower-tier air and missile defense sector, or LTAMDS, as well as the TPY-4 radar. Nearly all radar systems include products from our microwave division and our power converters. But the key message here really is that similar to the commercial aircraft market, we have substantial content on virtually every major military platform and a growing presence on ground-based radar systems and space programs. Over the last few quarters, since our May 2021 Investor Day, we have won a number of additional programs that had given us even greater confidence in our sales forecast. During the third quarter, we were selected for a $60 million pressure sensor program over a 15-year life. This program will leverage enhancements to our existing technology to allow installation in the hot section of the engine for a number of installations on standard engine fuel control, which is used in many of the engines used on high production volume aircraft. This will add significant volume to our sensing business almost immediately and significant future aftermarket opportunities. During the fourth quarter, we were awarded the single largest military modernization upgrade program in our business's history. This new award is to upgrade the brake control on the U.S. Air Force fleet of F-16s, which is the largest potential platform based on the number of aircraft in service. Delivery starts in 2026, and this program will create the potential for substantial incremental foreign military sales with numerous other countries who have sizable F-16 fleets. The NASA Artemis program is another exciting win for Crane, not only because it marks another stamp of approval for our ultra-high reliability DC to DC power converters, which are designed to handle the stresses of being launched into space, but also the constant radiation, which is stereotypical electronics is also exciting because this mission will deliver the first female astronaut and the first astronaut of color to walk on the moon. We are proud to be just a small part of this mission. What's really exciting about all 3 of these awards is they are purely incremental. They're not replacing our existing older products. Instead, these are entirely new programs, where we have displaced incumbents. And these are in addition to the several other high-volume programs we have won that we'll be ramping up over the next several years. This is a very exciting time for our industry. For the first time in many years, we are witnessing innovation and disruption in our end markets. Entrepreneurs, special purpose acquisition companies, government agencies are all creating new vehicles. Examples include low earth orbit satellite networks, which are changing satellite projects from quantities of 1 to 5 to many thousands at a time. Additionally, we have seen over 200 proposals related to developing eVTOLs or electric vertical take-off and landing aircraft, air taxis, autonomous and other flying vehicles. And the global focus on reducing our carbon footprint has generated interest in both flying and ground-based vehicles with alternative propulsion. Our core products are readily adaptive to each of these markets, often with only minor changes. And our technology readiness approach is positioning us for accelerating growth as the industry continues to evolve. Some traditional industry participants will see their position erode as their legacy technology is no longer needed. Others like Crane are well positioned not just to adapt, but to thrive and benefit. Our core competencies are still needed in each of the emerging key growth areas across the aerospace and defense markets, and most of them are growing in importance every single day. And our solutions and our customers' needs are not just about incremental iterative improvements, but they are requiring true breakthrough innovation with a substantial step function change in technology and performance. Beyond competing in our core markets, the Crane A&E engineering team is focused on leveraging our technology for each in growth and in adjacent markets. There are 3 main initiatives that excite us over the next decade. Just like we are seeing in many commercial industries, the aerospace and defense world is expecting to begin a transition to a more electric environment. While CO2 reduction is a big driver of this trend, electrification brings many other benefits to aerospace and defense industry, such as increased reliability, silent operation in battle, and simplified fuel and power logistics from forward operating basis. Increased communication in a more connected world is another consumer demand driving innovation. Providers will require a satellite network that is orders of magnitude larger than current global fleet of satellites to deliver the network speed and bandwidth demanded in the future. In addition, a paradigm shift in the quantity of satellites is required. Developments such as the ability to land and reuse launch rockets have decreased the cost to deliver satellite in the space. As this cost decreases, customers are no longer stating that failure is not an option. Satellites are designed with a shorter life span and are uniquely different than the space design standards of the past. At Crane A&E, we see these as evolutions of opportunity to capture brand-new market share. The third opportunity is to provide next generation of sensors to provide the data required to support the smarter aircraft and automated systems on both next-gen Boeing and Airbus aircraft with disruptive technologies. Let me now walk you through some examples of how our core technology play into these opportunities. The first technology I want to highlight here is the investment in developing thermal management systems. For high-powered electronics, which will be required in the next-generation aircraft as well as all electric aircraft, like the Eviation aircraft, which is built in our Lynnwood Washington facility and which currently includes one of our Crane power converters. As the number of electrical systems and power levels increase, the amount of heat generated also increases. This heat cannot be dissipated via traditional methods and the industry is demanding liquid-cooled thermal management systems. These systems are based on many of the components that Crane A&E makes today. The team is now focusing on developing cohesive system mobile offerings that are positioned to support the programs under development now and in the future. We're particularly excited about this technology because it is an underserved market. We are well positioned, and the addressable market size here is expected to grow by 37% over the next decade. Power conversion is our largest skill set and is well aligned to the benefit of the electrification of the aerospace industry. Crane's power offering is extremely broad, providing 1-square-inch devices that power microcomputers on satellites to 1-ton devices that power stationary electronic warfare systems and everything in between. With our long legacy in the industry, we have many standard systems that can support these programs, and we are developing solutions tailored to these new industries. For hybrid and electric aircraft, the power conversion levels are higher than what was typical for a traditional gas turbine engine-driven system. We have developed new devices that are already being tested by a number of new electric aircraft manufacturers. For future hybrid electric ground vehicles, the military needs bidirectional systems, which can provide power to the drivetrain, run onboard systems and when combined with multiple vehicles generate sufficient energy to power a forward operating base on a microgrid. This innovation will transform the logistics of the future Army, all electric and hybrid electric vehicles. The future will also offer numerous opportunities for advancement in sensing and our team is poised to take advantage here. We're developing a longer range to our successful wireless technology, to allow for both increased data consumption by the aircraft and airlines, reduce complexity and weight, and the ability to place a sensor in unique locations such as plane's exterior, on a landing gear or in an engine. Similar to recent engine control wins, which I discussed earlier, we see our unique pressure sensor design leading the industry in future innovations to provide extremely high accuracy in very challenging locations. Earlier, I showed you we are well positioned in each of our 3 main growth trajectories. Given our forecast of the overall market and maturation of our many development efforts, we expect to provide top line growth of 7% to 9% annually over the next decade. As we move beyond our older specification-driven approach to technology readiness, we're also increasingly exploring adjacent market opportunities focused on these same core competencies. Taking a hard look at our core competencies, what we are best at in that and identifying additional markets where these technologies could be valued. In some cases, that may be an organic exercise, finding new customers and new industries for existing technologies that may require additional sales and marketing resources and likely some degree of product modification and redesign, but focused on areas where our existing technology will give us a clear competitive advantage in these new markets. In other cases, gaining traction in these adjacencies may require an acquisition, giving us access to new customers and possible extensions of our existing technology and capabilities. There are a lot of exciting opportunities we are exploring. We will also continue to explore bolt-on acquisitions, but we expect most of the inorganic activity at Aerospace & Electronics to be in adjacencies moving forward, substantially expanding our opportunity set and aperture. But always with discipline; discipline on valuation, discipline in our focus on areas where existing core competencies will provide us a competitive advantage. We expect that acquisitions will provide meaningful upside to the 7% to 9% organic growth we expect to achieve over the next decade. I also want to spend a minute here sharing our continuous improvement efforts to strengthen our team and our execution. Core to Crane A&E's success is using the Crane Business System to eliminate cost and support the execution of our growth vision. If you're familiar with Crane, you don't understand -- you now understand how the Crane Business System can be an extremely powerful tool in driving business improvement. Given our ambitious top line growth projections, the CBS framework is pivotal in preparing our factories for the increased volume as well as helping us manage our numerous technology investments and programs. Additionally, CBS drives near-term continuous improvement even during the recent pandemic experience. We have continued to drive improvements. In 2021 alone, we held 111 Kaizens and trained 27 new tool champions to lead future Kaizens. These efforts and those of our team members drove a 5%, 1 year of improvement in sales per head in 2022. So to wrap up here, I want to leave you with a brief summary of what Crane A&E has to offer. Crane Aerospace & Electronics provides excellent products to leading platforms in a strong industry. We are proud of our products, and we are proud of the customers we support. Our customers will continue to see strong fundamentals from increasing air travel demand, consistent defense spending and evolving space market. Our core base business will continue to grow with this market. Second, we see continued growth from selling similar technology within our core market to new and underserved customers. We have a long history of success, and we'll continue to grow with new customers, new platforms and industry development. Crane Aerospace & Electronics business development team is relentless, and we will continue to win in the market. Similar to our business development team, our R&D team is hard at work developing a technology that will be required to win in the future. Our industry will see innovation as future commercial aircraft engines and defense systems come to shape, and we also have the unique opportunity to see transformative growth in the proliferation of the more electric aircraft and military ground vehicles. We'll be ready with the desired systems, be it high power conversion, more capable heat dissipation or advanced sensing systems. And finally, all the Crane A&E team practices the Crane Business System every single day, reducing our cost basis and driving reliable results. This combination of technology and execution positions Crane Aerospace & Electronics for the 7% to 9% growth, we showed you earlier, with a very strong margin profile, and I'm very excited for the next 10 years ahead. Thank you for your attention. And at this point, I think we'll take questions.

Questions for Jay. Will?

Well, my name is Will, coming from D.A. Davidson. As you were going through Slide 23, I noticed power conversion and liquid cooling, and I couldn't help but think about those being some core technologies towards ultrafast DC charging for electric vehicles. Has it ever come across your radar to potentially apply those expertise to charging military electric vehicles, for example, especially in that military application where you need something really durable and reliable?

Yes. That's a really good question. Yes, that is a significant focus for us. Our defense power systems and what we're doing for the new defense land vehicles when they're moving to the hybrid environment. It's a real key market place for us. We're winning really nicely there on some of the land-based radars and some of those other applications. We're just starting to see some, I'll call, technology development opportunities with those same suppliers for the military vehicles, but yes, that's certainly a growth area for us.

Other questions? You answered all the questions...

I guess so. All right. Thank you.

I'm going to give a shout out to a special visitor we have in the back of the room, Mr. Mario Gabelli. It's an honor to have him here today. You guys may know him as President and CEO, Chairman and Founder of GAMCO, Gabelli Asset Management Company, one of the -- James Brown was known as the hardest working managed show business, right? Mario Gabelli is like the hardest working man and he's been here, one of our largest shareholders, takes the time to come in person, working nonstop in the back of the room. It's phenomenal for me to see. One of the sharpest, one of the few people that intimidates me when he questions me, by the way. Mario, great to see you, 80 years young this June 19. For those that have -- you got to get a selfie, get your picture put it on social media, legend, same on TV, I enjoy, I have my picture. I have him in the Crane hat, when he came -- visited, although I'm not on social media. At this time, we'll open it up for general questions. General questions. Kristine?

Thanks, Max. So maybe first question, I was hoping to ask a few, so I raised the hand first. First one...

There's plenty of time. We can pass it, we play and then we'll come back.

So why split the company in 2 instead of 3?

First of all, I really was hoping you would ask that. Let me make sure that our investor base understands the diversified industrial model still works. We are stronger together, but what you're listening to in terms of the results that we drive, the systems we share, the scale, the resource supply chain and region works. And quite honestly, PMT is an example of that. 3 years ago, just to do a gut check of our strategy from a portfolio standpoint, we had one of the big houses come in. I normally never use consulting. We always do the work to -- Mario Gabelli, we pride ourselves and we roll up our sleeves. We're an executive group that we roll up our sleeves, we get the work done. That's why I think of Mario. Sorry, Mario. I just keep thinking about you. So we always do our own work. But we just wanted a gut check. And quite honestly, we were surprised that there were no surprises. And at the time, the guidance was, wow, you guys execute incredibly well. You're adding value. The discount wasn't the same as I was saying it was keep investing in all 3 segments in dry, but you've got phenomenal opportunity. So if anything, it was full bore ahead and continue to drive in that consolidated world. And we've driven the results. But you know when -- and as one of the largest individual shareholders now, who has a lot of passion for the business and the team, but also clearly understand shareholder value, we've to do both. And when every time you're in front of investors and they say, why are these businesses together? Why these businesses together? And you see this widening market discount, we're going to make the right move at this time to unlock the value that we've described. And what I can assure you is both of these entities have an exciting future. Both I can see above $3 billion individually in short order. We're going to be making some things happen here. There is a rich history of flow businesses with A&E businesses because there's overlap in flow of fluids and technology. And so there's even more similarities, and it's a common fit. So I think I would stay focused on the power of the 2 and what we're going to be driving together, both from a Crane standpoint and Crane NXT, and we're going to be making some exciting things happen. You want to pass or you want to ask another one?

Yes. And then when you look at the Crane Co, the fluid business and aerospace business together, when you look at that kind of SMID-cap industrials company in that category, what we've seen is the market puts a higher multiple on just higher margins, right? And it's not linear. There's going to be a point when your margins are high enough and you're going to be viewed as a very niche cold stock, hopefully? How do you get there? What is that threshold? And when you look at this company together, is it possible for you to be a 30% EBITDA margin company? Is there a path to something like that? I mean one of the comps you guys called out is TransDigm. I mean they're at almost 50% adjusted EBITDA margin. That adjustments got a lot of things in it. But let's say, 30% to 40% EBITDA margin, is that doable for the portfolio that you have? Is that the vision?

We haven't focused on it quite the way you described. We certainly feel very, very confident on the margin generation profile as we move forward. I don't know how you might...

Yes. No, I would say everything that you heard today in terms of the growth initiatives, what Jay outlined, what Alex outlined in terms of new product development and so forth, in the spaces that we can still go and win it and -- is really -- I mean, when Jay was speaking, I had goose pumps, frankly. I mean I live and breathe it with Jay. So there's an excitement there on the growth side that's going to command a higher margin profile just by the nature of the products that we're providing. What might, I don't even want to say the words, hold back, but we continue to invest on the R&D line more than most aerospace companies today. And I would actually point to TransDigm. We're looking for the future, all the areas that Jay spoke to. So we can toggle about it at any point, but that's not what we want to do. We want to continue to invest to win and that might cause us to make conscious decisions not to let the leverage rate get too high.

Great. And if I can sneak a third one and then I'll pass it along. In terms of the currency business, right, we talked about the potential blue sky, maybe comps like Block or something. But then alternatively, you -- it's a really attractive cash-generative business where I could see potentially would that be a better fit being levered up, part of a PE portfolio. So when you guys think about that as a stand-alone, can you give us an idea in terms of what's a more realistic path? Is it 50-50, where it could be this massive grower into some sort of digital payment world or being part of a portfolio where it's valued for its cash-generative properties and you don't need to worry about multiples of the market will...

Well, I clearly think that the value creation is going to be on the growth story and technology, and that's the path that we're on, very focused on. Yes. Nathan, did you have a question?

Couple of them. I'm a bit offended that you're not intimidated by my questions. Just following up on Kristine's comments there on the Payment & Merchandising business. Maybe you could just talk a little bit about the decision here to do it as a spin rather than a sale?

Just that it makes much more sense, tax efficient. Really think it's going to provide a greater value creation for the future for both entities moving forward, just was the right decision.

And then a couple of questions on capital structure. I think, Rich, the slide you put up, had 0.6 net debt at the end of 2021. That doesn't include the asbestos liability, I don't think.

Correct.

You guys made some changes in the corporate structure, which I've seen precede getting rid of an asbestos liability before. There might be some assets out there that you may or may not have shown interest in previously that are for sale these days. So by the time we get to this split, you could have a vastly different capital structure to what you do today. So just any thoughts. I mean I did some rough math maybe it could be up towards 3x if both of those things happened or some other acquisitions or whatever. Just how you would look at splitting the leverage between the 2 companies under some hypothetical circumstance like that, whether or not you would consider maybe issuing some equity to give both companies a more flexible balance sheet at spin. Just any more color you can give us on that.

Yes. So thanks, Nathan. So when you look at what I would say is our base case scenario, the debt stack would remain with PMT, which I think I had in my prepared remarks, and we're looking to settle out the $300 million 2023s that are coming due early. A combination of cash on hand is what we would expect and maybe a little bit of commercial paper. And so when you look at what's left from a debt point of view, overall for both businesses you're sitting with -- largely with the asbestos in the A&E PFT business, maybe a little bit of pension, right, some of the nondebt-related items and on the payment side, you have the remaining bonds of $550 million, plus even a smaller amount of pension and related liabilities like that. So that would be the sort of the starting point as to how you should think about sort of the capital structure and the leverage rates. And then from there, it's really going to depend on what happens as you point out, and I'd rather not necessarily speculate in terms of divestiture proceeds or what might be possible with asbestos, but certainly, those are in our calculus today and something that we're looking at pretty hard from a number of different angles. But I think the base case is where I would start.

And I know you guys have a $300 million share repurchase you're looking at doing. I think that was largely offsetting dilution from the Engineered Materials sale. That's now likely being delayed at least from the DOJ. Any thoughts to maybe not doing that share repurchase at the moment to give yourself some more flexibility in the interim?

No, we'll continue on that path. It's almost complete at this stage anyway. Other questions? Well, thank you all for attending Crane's 2022 Investor Day. I'd like to extend my thanks to Rich, Jason, Kurt, Sam, Alex, Jay, awesome job, for representing your team so well today, sharing the compelling stories about each of the businesses and updates. I also wish to thank our 11,000 associates globally who are working hard every day for our customers, our shareholders, our communities as well as our incredible customers who put their trust in us every day, and we work so hard to maintain and our suppliers who work so closely to partner with us, especially in this environment. Well, an exciting juncture and an exciting path ahead on multiple fronts, exciting core growth, which you heard about in detail today, continued inorganic growth and now important structural change as well. Moving forward with a process that will unlock shareholder value and unleash the power of 2. Crane and Crane NXT are both positioned to pursue separate but equally exciting growth path, incredibly strong global technology-focused businesses, great financial profiles and consistent execution, supported by the discipline and cadence of the Crane Business System and our strong, unique culture with both companies able to independently optimize their strategies, investment approaches and capital allocation policies. All of this should unlock value and allow the right mix of investors to fully appreciate what makes each of these businesses so special. Stay tuned for updates through the year, and I look forward to speaking to you again on our Q1 earnings call on April 26. Thank you all again for your time today. Thank you for your interest in Crane. Have a great day. Thank you, Mario Gabelli.