Crane Co. Aktie

Welcome to the Crane Company First Quarter 2026 Earnings Conference Call. [Operator Instructions] I would like to now turn the call over to Allison Poliniak, Vice President of Investor Relations. Please go ahead.

Thank you, operator, and good day, everyone. Welcome to our first quarter 2026 Earnings Release Conference Call. I'm Allison Poliniak, Vice President of Investor Relations.

On our call this morning, we have Alex Alcala, President and Chief Executive Officer; and Rich Maue, our Executive Vice President and Chief Financial Officer; along with Jason Feldman, Senior Vice President, Investor Relations, Treasury and Tax, who's on for Q&A.

We will start off our call with a few prepared remarks from Alex and Rich, after which we'll respond to questions. And just a reminder, the comments we make on this call will include some forward-looking statements. We refer you to the cautionary language at the bottom of our earnings release and also in our annual report, 10-K and subsequent filings pertaining to forward-looking statements.

Also during the call, we will be using some non-GAAP numbers, which are reconciled to the comparable GAAP numbers in tables at the end of our press release and accompanying slide presentation. both of which are available on our website at www.craneco.com in the Investor Relations section.

Now let me turn the call over to Alex.

Thank you, Allison, and good morning, everyone. We appreciate you joining us today. As I step into the role of CEO, I'm energized by the opportunity to lead Crane at a time when strong leadership, disciplined execution and agility truly matter. Much like this time a year ago, we are operating in an environment that continues to evolve rapidly. Fortunately, our business system, the CBS machine, together with our global team's relentless focus, resilience and commitment to execution with a disciplined cadence continues to differentiate Crane.

We view periods of uncertainty and market dislocation not as obstacles but as opportunities to elevate our performance. Time and again, Crane has emerged from challenging environment stronger than before and increasingly advantaged relative to our competitors. And we're off to a strong start in 2026, with first quarter results reflecting excellent execution across the company, exceeding our expectations and underscoring the strength of our teams and our commitment to delivering shareholder value.

Adjusted EPS of $1.65 was up 15% over the prior year, driven by 4% core sales growth reflecting broad-based strength at Aerospace & Advanced Technologies and continued strong execution at Process Flow Technologies, including solid core order and backlog momentum.

Also of note with the strong performance of our recent acquisitions that drove substantial amount of upside in the quarter relative to our expectations. Druck, Panametrics, Reuter-Stokes and Optek all performed exceptionally well. With integration and deployment of CBS progressing ahead of plan and early benefits emerging faster than anticipated and ahead of what was reflected in our January guidance.

We entered the year with positive momentum of both AAT and PFT. As the first quarter progressed, our execution further strengthened our confidence in the underlying earnings trajectory for the year. At the same time, however, the external environment became more challenging. Geopolitical dynamics are evolving and macroeconomic uncertainty is still very much part of that backdrop. Taking all of this into account, our performance to date and the range of scenarios, risks and opportunities we see ahead, we are raising our adjusted full year outlook by $0.10 to a range of $6.65 to $6.85.

Our guidance reflects what we have clear line of sight to and high level of confidence in delivery, even against a more uncertain macro backdrop, and it assumes continued elevated energy prices and inflation through the balance of the year, and already factors in potential decline in commercial aftermarket. In addition, as you would expect, our teams have actions to get ahead of the increased inflation as we move through the year. We remain focused on execution, continuing to build on our momentum and finding potential opportunities to over deliver.

Across the organization, we continue to stay agile in a dynamic environment. Our deep management teams have been here before, and we will manage with the cadence and disciplined execution that you have all come to expect from Crane.

Now some thoughts on the performance of the recent acquisitions and the segments in the quarter and as we look to the balance of 2026. As I mentioned, the acquisitions performed exceptionally well. I'm extremely pleased with the execution and pace of improvements. Over the years, we have built tremendous organizational capability that has enabled us to integrate 4 businesses simultaneously at speed and with 0 disruption to the core businesses. This performance reinforces the strength of CBS and the opportunity to create meaningful shareholder value through continued disciplined inorganic growth, combined with the power of the CBS machine.

The teams are energized, having fun and are driving results better than our expectations at the start of the year.

Strong operational execution, restructuring cost actions and early commercial excellence momentum drove a majority of the upside relative to our January guidance, reinforcing our confidence in both the quality of the businesses and our integration playbook.

Margins across the acquired businesses were substantially improved from last year and ahead of our plan, and we see opportunity for continued progression in the quarters ahead. More specifically, we now expect the margin and earnings contribution from the acquisitions to be more evenly weighted throughout the year compared to our prior expectation of back-half weighted performance.

Based on what we're seeing today, we now expect accretion for the full year to be at least double what we communicated in January or about $0.15 of EPS. And my confidence in exceeding our target ROIC by year 5 has only increased over the last few months. I'm so proud of all our new associates that have joined Crane this year and I'm excited to see where we will continue to take these outstanding brands in the future. We are already moving beyond just the tactical integration actions and are well on our way with strategy deployment, painting a very exciting future for everyone, including our shareholders.

Turning to Aerospace & Advanced Technologies. We continue to see strength across the aerospace and defense demand environment. The backlog we've built, along with the new programs and opportunities, our Aerospace & Advanced Technologies teams have secured, continue to provide us with great visibility well beyond 2026.

Looking to the balance of the year, we continue to expect full year core sales growth for the segment to land at the high end of our long-term 7% to 9% range.

On the commercial side, OE activity remains healthy with Boeing continuing with strong production rates. Commercial aftermarket revenue was down as expected in the quarter due to unfavorable year-over-year comparisons, while commercial aftermarket orders were up 11% in the quarter. While we haven't seen an impact to orders at this time, given the geopolitical situation, elevated oil prices and long-haul travel disruption through the Middle East, we could see an impact to commercial aftermarket as the year progresses. However, even factoring in a decline in commercial aftermarket, we remain confident in our 7% to 9% sales growth range, leveraging at 35% to 40%. Rich will provide more details on how we're thinking about this.

On the defense side, a lot of activity and interesting industry announcements over the past few weeks. Procurement spending remains solid, and there's a continued focus on strengthening the product defense industrial base given the heightened global uncertainty we continue to see. We are seeing significant demand signals across both missile defense and radar applications among other areas in our portfolio, further strengthening the long-term outlook with the potential for some benefit this year depending on order timing and lead times.

In the quarter, we received strong orders for the PAC-3 program and remain under negotiations for similar wins. Additionally, we received incremental orders for LTAMS and are currently under negotiations for additional contracts with other providers. We fully anticipate additional orders in these 2 defense growth areas as we move through the year. And beyond this, we continue to develop new technologies, win new business and pursue additional opportunities across the segment that gives us confidence we'll deliver above-market growth for the rest of the decade.

Particularly on the defense side, we expect replenishment of military aircraft spares and missiles, along with continued demand for ground-based radar systems, all extending the period of strong demand for years. Very confident for yet another outstanding year at Aerospace & Advanced Technologies.

At Process Flow Technologies, another solid quarter, and we remain well positioned to consistently outgrow our markets across the cycles. We have deliberately repositioned the portfolio around core end markets: pharmaceuticals, wastewater, cryogenics, Chemicals, and nuclear power where we hold strong competitive positions and differentiated capabilities that support sustainable market outperformance.

Overall demand for the quarter came in slightly ahead of our expectations and execution was strong, driving a 50 basis point improvement in adjusted margins even with the dilutive impact of acquisitions.

On the order side, power generation remained a key area of strength. We also saw solid project activity in pharma tied to U.S. capacity expansion. Continued momentum in cryogenics driven by capacity needs within the space launch segment and strong orders in LNG.

In nuclear, as part of the Holtec Palisades restart, we're able to add value by extending contract terms. With respect to the ongoing conflict, note that only about 5% of PFT segment sales are directly exposed to the Middle East.

While we're continuing to ship today and overall demand in the region in the quarter was on track, we do see projects moving to the right and potentially impacting the balance of 2026, along with some shipment lane disruptions. Notably, we're not seeing cancellations.

Longer term, we do see incremental opportunities for rebuilding as the geopolitical environment stabilizes. And even with this uncertain backdrop, we continue to invest for long-term growth through disciplined execution of our multiyear technology and new product development road maps along with ongoing commercial excellence initiatives, all supported by strong and consistent operational execution.

Tactically, we have proven our ability to respond quickly to changes in demand. We will remain nimble during this period, taking appropriate pricing and cost actions as needed. For the full year, we still expect core growth to be consistent with our initial guidance of flat to low single digits, leveraging within our target range of 30% to 35%.

In summary, a really solid start. Our strategy is unchanged and we remain focused on managing through any near-term demand variability without losing sight of our long-term objectives. Taken together, our businesses remain exceptionally well positioned to continue delivering strong results.

We also continue to see significant opportunity to further enhance performance through acquisitions. Our balance sheet remains exceptionally strong, with substantial available M&A capacity and we continue to pursue a robust pipeline of potential opportunities. M&A activity has not slowed, and we are actively engaged on a number of opportunities across both Aerospace & Advanced Technologies and Process Flow technologies. While there is nothing imminent at this point, our pipeline remains healthy, and we remain disciplined and selective as we evaluate potential transactions.

Before turning the call over to Rich, I want to emphasize that while external conditions remain dynamic, our focus has not changed. We remain disciplined in the areas we control. Execution, customer focus, cost improvements, development of our people and continued investment in our growth initiatives and technology road maps. We believe this approach positions Cranes to outperform our end markets and create long-term shareholder value.

Regardless of near-term volatility, over the long term, our approach remains consistent. We will deliver a 4% to 6% long-term core sales growth through the cycles from resilient and durable businesses with solid aftermarket. Substantial operating leverage on top of already solid margins today that should lead to double-digit average annual core profit growth with significant upside from capital deployment.

Now let me turn the call over to our CFO, Mr. Rich Maue for more specifics on the quarter.

Thank you, Alex, and good morning, everyone. Wow, what a start to the year. Let me start off with total company results. Total sales were up 25% in the quarter compared to last year, with 4% core growth driven primarily by the ongoing strength within the Aerospace & Advanced Technologies segment. Sales from acquisitions contributed 18% in the quarter, which was modestly above expectations, reflecting strong execution as these 4 new businesses become a part of the Crane machine.

Adjusted operating profit increased 29%, reflecting the impact of the higher core sales, contribution from the acquisitions and productivity and favorable price net of inflation, a truly outstanding result. And total core FX-neutral backlog was up 9% compared to the first quarter last year, reflecting continued strength at Aerospace & Advanced Technologies, and core backlog was up 3% sequentially driven primarily by Process Flow Technologies.

Core orders were down 5% year-over-year, but were modestly better than we expected. The decline was entirely driven by an unfavorable comparison within Aerospace & Advanced Technologies where a 15% decline reflected the record first quarter orders last year in this business, which included several multiyear orders that we highlighted to you last April. Core orders in PFT increased 5% compared to last year, and core backlog in PFT was up 7% compared to December. Backlog and orders across the acquisitions were also solid, coming in modestly above our expectations and continuing to support a strong full year outlook.

From a balance sheet perspective, we ended the quarter with pro forma net leverage at 1.4x, leaving us well positioned for further M&A, as Alex noted. A few more details on the segments in the quarter. Starting with Aerospace & Advanced Technologies. Sales of $318 million increased 28% in the quarter with core sales up 9.4%. Our backlog of nearly $1.2 billion increased 14% on a core basis and increased 24%, including Druck.

On a sequential basis, core backlog increased 2% with total backlog up 11%. Again, no surprises and at record levels. Demand remains strong. We are seeing increasing RFP and RFQ activities across several defense programs supporting missile defense and ground-based radars, some of which reflect recent wins at some of our defense customers giving us further confidence in our multiyear outlook.

Let me spend a minute on the core business in the quarter. On the OEM side, sales were strong, up 16% with commercial OEM up 20% and military up 10%. Total aftermarket was down 2% in the quarter with military aftermarket posting a very strong increase, up 28% in the quarter, reflecting the breadth and strength of our portfolio. That military strength was offset by commercial aftermarket, which was down 13% as expected. Specific to commercial aftermarket shipments were largely in line with what we expected for Q1, but with an unfavorable comparison against higher initial provisioning in the prior year first quarter. Even with that decline, we came in above our growth expectations for the quarter.

Of note, commercial aftermarket orders in the quarter were up 11% year-over-year and 10% sequentially. While we haven't seen any impacts to order so far resulting from the ongoing conflict, elevated oil prices and disruptions to long-haul travel through the Middle East could create pressure on commercial aftermarket as the year progresses. We are factoring into our guidance that commercial aftermarket could decline on a full year basis. Taken all together, though, we remain very confident in our full year segment sales outlook. We continue to expect total core sales growth at the high end of our 7% to 9% algorithm. While the mix across subsegments may shift as the year plays out, our overall guidance is unchanged and that really speaks to the diversity and durability of our Aerospace & advanced Technologies portfolio.

Adjusted segment margin of 24.6% compared to 26.2% last year, primarily reflecting the impact of the Druck acquisition. This was an outstanding result and nearly 200 basis points better than we expected given Druck outperformance in the quarter as well as continued strong performance in our core A&E business.

At Process Flow Technologies, in Q1, we delivered sales of $378 million, up 23% compared to a year ago with core sales down 0.6%, slightly better than we anticipated with the acquisitions of Panametrics, Reuter-Stokes and optek-Danulat adding 19 points of growth and FX contributed 4 points of growth in the quarter. Compared to the prior year, FX-neutral backlog at PFT decreased 2.5%, but on a sequential basis, improved a solid 7%. In addition, core FX-neutral orders were up 5% and also modestly above our expectations.

Adjusted operating margin of 22.1% was approximately 50 basis points above the prior year, and this was inclusive of the dilutive impact from the recent acquisitions, and like Aerospace & Advanced Technologies, results were above our expectations given better performance across our core businesses and each acquired business. Productivity is reading through as well as price net cost.

In the quarter, the impact from the conflict in the Middle East was nominal, as Alex mentioned, we have just under 5% of total exposure in region on a full year basis. We expect projects to move to the right, and we do expect notable freight and other inflationary headwinds as we move through the balance of 2026. Our teams are already executing to ensure no net inflation risk to the P&L, inclusive of margin impacts. In summary, we continue to expect core operating leverage for the segment between 30% to 35% for the full year.

Moving to the nonoperational items below the segments. Corporate expense for the quarter was $24 million, slightly lower than our expectations. Recall, we anticipated corporate expense to be highest in Q1 due to accounting rules that require accelerated amortization of stock-based compensation expense for associates that are retirement eligible. For 2026, we continue to forecast corporate expense to be in the range of $80 million to $85 million.

Given the funding for the acquisitions of Panametrics, Druck, Reuter-Stokes and optek-Danulat, net nonoperating expense in the quarter was $15 million, and we continue to estimate full year 2026 net nonoperating expense of approximately $58 million. And lastly, we continue to expect our tax rate for 2026 to approximate 23%. Taking all of this into account, our performance to date as well as the risks and opportunities we see ahead. As Alex mentioned, we are raising our adjusted full year guidance by $0.10 to a range of $6.65 to $6.85 again, reflecting what we have clear line of sight to and a high level of confidence in delivering.

Looking at the cadence of quarterly results for the year. We expect Q2 to be similar to Q1 and our full year earnings split to now be more balanced at around 49% to 51% between the first and second half given the strong Q1 performance. The second half earnings performance is expected to be more evenly balanced relative to our historical quarterly cadence of a sequential decline from Q3 to Q4, given the expected performance of our recent acquisitions. We began the year with performance that exceeded our expectations, underscoring the strength of our teams, our strategic direction and our execution. We remain committed to building on that momentum and consistently delivering results. You know, Alex, all the uncertainty that everyone is talking about this earnings season reminded me of a notable quote from the Academy Award-winning actor, Ryan Reynolds from a timeless movie classic, National Lampoon's Van Wilder, "worrying is like a rocking chair, it gives you something to do, but it doesn't get you anywhere." At Crane, leveraging our CBS machine, we are very intentional and focused on what's in our control, no matter what the environment, and we always view periods of uncertainty as periods of opportunity.

And with that, operator, we are now ready to take our first question.

[Operator Instructions] We'll take our first question from Amit Mehrotra.

I wish I had a good movie quote, but I'll have to come up with one next quarter. Maybe starting with the progress you're making on PSI, which is obviously very, very strong and clear. Maybe just unpack where the upside is coming from across Druck, Panametrics, Reuter-Stokes. And obviously, you've had this target of getting from $60 million to $150 million over 5 years to hit that ROI target. It seems like you're achieving that greater or even faster. Maybe you can just update us on timing with respect to that progression?

Yes. Thank you for the question. So related to PSI, the quarter upside, I mentioned 3 areas. First, the execution of the 3 businesses was stronger than expected. Just from a volume standpoint, demand and stronger execution has been very solid. So that created some upside. The cost actions. You may recall that we're taking 2 types of cost actions in the short term. One is eliminated the overall PSI layer, management layer. We're really operating as these 3 businesses. So that was executed very well. And then within the businesses, we're executing product line simplification, there's realignment of the resources and restructuring. So we moved -- teams moved quite quickly in the quarter, and we started to see some of that upside.

And then the third element is the beginnings of value pricing and commercial excellence that are starting to read through as we move also at great speed, and expect that to improve during the year. Related to timing overall. So this year, we came in thinking on the top line, the PSI set of businesses would be in the range of 4% to 6% on the growth. We're now thinking closer to the higher side of that range. And we were thinking, we would improve 200 basis points of margin, and now we're thinking at least 300 basis points of margin. So ahead of schedule of our plan, which puts us overall in that 5-year time line really gaining ground. So very confident and over delivering to those benchmarks.

Great. And just maybe as a follow-up, can we talk about PFT core order improvement? Obviously, very, very strong sequentially. Is it enough to sort of call an inflection in the process flow cycle? Where you're seeing the strongest momentum across, obviously, you're in various regions and various end markets. Maybe you could just double click on that in terms of where you're seeing that momentum.

Yes. So on the question of orders for PFT, the strength has come in some markets that we've been highlighting in the past has continued. I think that will continue through the year. So power generation in Americas, pharmaceuticals, cryogenics, wastewater, in particular, gave us the upside. So that's been pretty consistent. Interestingly, we don't see those segments impacted by the higher energy prices. So we think demand will remain solid through the year.

Chemical has continued to be sluggish at a trough holding, but I wouldn't call it an inflection point yet until we see that piece of the business changing. Now historically, higher energy prices has led to increased demand in that chemical segment, but it takes a while to read through particularly in the Gulf, where we -- the customers see that benefit of feedstock between gas and oil. And even though the end demand and customer demand for their customers may be slower, it still makes sense to invest and expand capacity debottlenecking and so forth. So I think solid not quite calling an inflection, especially on the chemical, but definitely better than we expected going into the year and feel better about the prospects that we did 3 months ago.

Great. All right. Congrats on good results. Appreciate it.

Thank you, Amit.

We'll take our next question from Matt Summerville of D.A. Davidson.

A couple of questions. Can you maybe comment on the magnitude of EPS accretion you witnessed as it pertained to the acquisitions and specifically what you've done to drive near immediate linearity in those businesses, which last conference call were sort of deemed to be quite second half -- back half loaded overall? And then I have a follow-up.

Rich?

Yes. So we obviously did see some accretion in the quarter, as Alex mentioned. We felt just given the results that -- we feel like we're going to see at least double what we thought on a full year basis. So coming into the year, we were -- had in our minds about an $0.08 number in mind, and we felt comfortable today saying that we would see a full year of $0.15. So we did see a portion of that here in the first quarter. I wouldn't say it's necessarily linear, but perhaps close. So that would be the overall impact and how we're feeling about the business, if that helps.

Yes. I think to add, Matt, on the cost actions that we took, we were able to execute faster than we had originally planned. So that creates not only upside for the year but also more balanced earnings through the year. Now that said, some of this backlog with improved pricing reads through, we'll still expect to see some gradual improvements from the acquisition as the year progresses.

Yes. The only other thing I would add is that you saw -- we saw more -- a little bit more in the way of -- I think as we think about the cadence, the volumes have been a bit stronger as well in particular for Druck.

Understood. And maybe, Alex, or Rich, if you can expand just on kind of the actionability you're seeing in the M&A pipeline, maybe handicap a bit whether you see more deals getting over the finish line before the end of the year into the early part of '27. And if the average deal size you're looking at is starting to kind of melt higher similar -- and maybe more similar in nature to the size of PSI as an example.

Yes, Matt. So deal activity or M&A opportunities continues to be quite strong. There's a lot happening. We're involved in several processes on both sides of the segment. It's a range of sizes. I think we've commented before that our sweet spot is around that $500 million of value and -- but there's deals that are smaller than that, that we're looking at, that seem quite interesting as bolt-ons. And there are some deals that are a little bit bigger than that, that also look interesting. So it's a bit opportunistic. We remain disciplined. So we'll see how the year plays out. But as far as activity and focus, there's quite a bit happening.

You'd add anything, Rich?

No, I think that sums it up. The nature of the transactions, too, I would say, from a complexity and bandwidth perspective, everything we're looking at is -- nothing is going to cause us to hesitate in the way of resource constraints.

We'll take our next question from Jeff Sprague with Vertical Research.

I just wanted to come back to the comments about Aero aftermarket and completely understand it could sort of fade as the year progresses given what's going on, but it's a little unclear what you're actually doing with your guidance. Are you sort of saying, yes, it could be weaker, but we can make it up elsewhere? Or have you actually dialed in a decline in aftermarket in the way you've guided the year here? I think the range has changed, right? But, yes.

Yes. Thanks, Jeff. So I think maybe a little perspective to start as well on this. So if you remember, when we came into the year and we initially issued our guidance for commercial aftermarket, we -- where I would say, on the lower end of perhaps what the rest of the industry was projecting, right? We were saying something like in the mid-single-digit range coming in. And we did get a lot of questions. We did get a lot of questions back on that. And here we are a quarter later, and we see the headwinds in the marketplace potentially from the Middle East, the conflict and so forth. And we're basically saying here, we're going to guide down. So our guidance reflects a down number for commercial aftermarket. Now when you consider what our initial guide was, the move, and you guys can all do the math, right? It isn't a big number overall. And then in terms of offset, what we are seeing is a pretty considerable demand increase in our view, potentially -- I would say, we are seeing in military, in particular in spares aftermarket you saw in the quarter. we were up 28%. We have the incremental benefit that comes in the second quarter through the balance of the year in the F-16 brake control upgrade program, I think you're aware of. So when you look at -- when you step back and you just look at the overall complexion of our aftermarket and where we're coming from off the first guidance number that we put out in January, we feel highly confident that we're going to offset even in this revised down outlook for commercial aftermarket.

It plays out differently, Jeff, right? Because aftermarket demand has been resilient post COVID, as you know, due to higher energy and travel has been resilient. But if it plays better than our assumption, then that's an opportunity for us and [ offside ] but we felt comfortable assuming a more conservative view because we have the offsets already line of sight in our backlog.

Yes. No, great. I was just unclear if you have formally dialed it in or you were just saying you had contingency to deal with it if it happens. So Rich, very clear answer there. I appreciate it.

And then on -- just back to PSI, to what degree have you seen just maybe the commercial front end of the business change? In other words, very good businesses, right, but orphan, so to speak, inside a larger organization. So maybe just a little bit of color on what's happening on the customer side. Are you seeing better order intake or inquiries in some of those businesses than you might have otherwise expected? Or again, is the upside more about -- and accounts, obviously, but it's more about the pricing and some of the cost actions that you already elaborated on.

Yes, Jeff. So what we're seeing right now on the commercial side, there's been significant changes on how we operate, which projects we go after, how we go after them. So I would say we're being more successful in winning the target projects that are more interesting and more profitable for us very quickly. And also around just our pricing practices, value pricing, those would be the primary areas where we're starting to see differences. So we have this long period, as you recall, 6 months to really prepare ramp-up. And those are the areas we've been able to impact shortly. Now we're starting to work the strategies of longer-term growth, which were never baked into our model. And so now we're shifting focus into that, and we think there's upside even to the numbers that we talked about as those initiatives develop.

And maybe just a quick unrelated one. Plenty of capacity in your defense businesses for these missile-related ramps and the like? Or we should expect some more capacity in the ground to ride this wave.

We have plenty of capacity. Actually, Rich and I just did a deep dive review with the team a few weeks ago. We're very well positioned for that. I think the pacing item in the industry will be more [ than the primes ]. We can significantly outpace the ramp-ups of the manufacturers of the actual missile. So we're in pretty good shape there.

We'll take our next question from Justin Ages with CJS Securities.

You mentioned chemicals still sluggish holding at trough levels. And I just want to know how that fits into the broader commentary that you gave about seeing some PFT projects being pushed out. is that chemical being pushed out? Or those have already been pushed out, so no change in the time line there?

Yes. The pushouts that we commented on were specific to the Middle East dynamic, and it's really related to the conflict where some of the petrochemical areas or refineries have been shut down temporarily. So some of that activity has pushed out to the right, no cancellations. So that's very unique to that region and that conflict. Now here as we started Q2, we started seeing those things starting to move a little bit faster than I thought they would. So that said, in our guidance, we did factor in some delays in projects in that region of the Middle East in our guide from a conservative standpoint. If it moves faster, then again, it will be a positive for us. Broad -- more broadly, in chemical, again, higher oil prices. We expect the Gulf at some point to see some momentum in projects that will take several quarters. We are starting to see a little bit of MRO activity pick up, particularly in the Americas which usually precedes project investments here in the year going into next year would be our expectation.

And then staying in PFT, you mentioned good performance in cryo. Can you just remind us or give us some color on the size of that space and the market opportunity there?

Yes. So our cryo business today is about 4% or 5% of total PFT, but it's growing at mid-teens of 15%, 16%, 17%, so it's growing quite fast. It's mainly Americas-based servicing, very high-growing markets like space launch or commercial space launch, as you know, is increasing significantly. So supporting that launch platform, not on the actual rockets or aircraft, but on the launch is where we're seeing a lot of demand supporting general aerospace, environmental testing. So as aerospace keeps ramping up, the investments in infrastructure for testing, pharmaceuticals and other areas, semiconductors as well. So very, very interesting markets, high growth, and growing at a fast pace. So this is an area that has been part of our transformation. We basically went from 0 a few years ago to 4% to 5% now, combination organic and inorganic actions.

We'll go next to Scott Deuschle with Deutsche Bank.

Alex, what are the most PMI sensitive parts of PFT? Is then are you seeing any uptick in demand in those PMI sensitive businesses? Or is it more just areas like pharma and cryo and nuclear?

I mean our biggest uptick has been power generation, which is right now driven obviously by the investment in data centers. That has not, I think, been PMI-related pharma, cryo, wastewater. We did see pretty solid just industrial activity in the quarter. we didn't call it out, but it was a little bit stronger than we expected going into the year.

Yes. I would have said general industrial portion as well of the market where we are seeing a little bit of improvement, Scott. That helps?

Okay. I think you all have described PFT as being pretty early cycle. So if the broader industrial cycle is turning, as the PMI data suggests, I guess, why would it just be a small benefit to your general industrial business?

Well, I mean it was low -- mid-single-digit type activity that we saw there, right? So in the industrial space, that's a pretty healthy activity. We'll see how things progress. But was we're pretty pleased with how it started the year.

Okay. And then Alex, how large is the PAC-3 product line for Crane today? And if it's not material now, I guess, could it be become material if it grows 200%?

I mean we look at the whole missile platform, right, which is the number I have in my head, it's around that $30 million to $40 million range of microwave and modular power or product lines. And so I would use that $30 million to $40 million jump-off point and the projections are from 2x to 4x, 5x growth from now to 2030.

Okay. And then last question -- go ahead.

Yes. PAC-3 would be towards the top end of the programs. We have maybe 12 or so programs that we're watching closely, and that would be one of the ones that are at the top, Scott.

Okay. And then Alex, can you give us a sense as to how much of PFT's cryo sales are related to the space market? And will that space growth within cryo? Is that going to correlate with SpaceX's launch cadence over the coming years?

Yes. On the Space launch, it's about 35%. So it -- and then you put in aerospace in general, now you're looking more like 45% and the balance is other industrials like I said, pharma and so forth. But the growth does correlate with the launch activity, which is increasing but not only SpaceX, but the other companies, like Blue Origin and so forth. So we service -- I think there are 6 or 7 key customers of ours in that space launch, and it's growing exponentially in line with the space launch activity.

We'll take our next question from Myles Walton from Wolfe Research.

I was wondering on the commercial aftermarket comments that whether or not you are reducing the outlook there because of what you're seeing or because of what you anticipate seeing? And if you can give us any clarity or color as it relates to recent bookings trends, the 11% growth in orders versus the 13% decline in the quarter wouldn't suggest you're seeing much, but maybe just add color if, again, you're doing this based on what you're seeing or what you anticipate you'll see.

Yes, I'll comment first and then Rich can add. But I mean, if you look historically, right, over the last 15 years, high energy prices, pre-COVID and post-COVID are 2 different stories. Pre-COVID, it was a pretty strong correlation, higher energy prices, higher airfare, lower activity demand. Post-COVID, we saw a big spike in energy prices in the 2022 with the Ukraine conflict. And it was very resilient. There was no slowdown from there. So we're not sure what is going to happen. We have not seen any decline, as Rich mentioned, 11% up, and we're also sequentially up. However, as we look forward and considering the industry general concerns, we wanted to think through a range of scenarios that would give us a lot of confidence in our guide. So based on that, we assume the decline in our guide to have really, really high confidence. But it could maintain, it could sustain and that would just be upside for us.

You'd add anything, Rich?

No, I think that sums it up, Myles.

Okay. And relative to the decline, you're thinking like mid-single-digit positive was before and now you're sort of conceptually thinking that decline is what you're baking in from a conservative viewpoint. Is that right?

Yes, I think that's fair.

Okay. All right. Great. And then on PFT, just as it relates to core growth as you look to the rest of the year, given the strong orders in the first quarter, are you able to see the turning to get to low single-digit positive organic growth or core growth for PFT in the second quarter?

I think for the year, we're still expecting flat to low single digits. I think for the quarters -- yes. I think we're -- the second quarter may be a little bit consistent with Q1, right?

Yes. I would think if you're looking at just sequentially, think of it as not that different from Q1 into Q2 sequentially, Myles, without having the FX in front of me. And -- but that's the way we're thinking about the overall absolute number.

Okay. And then just one last one. What is the downward pressure on margins for the rest of the year versus the 23.2% you did in the first quarter?

The downward pressure? So we mentioned on the call that increased -- we're definitely going to be seeing and are starting to see the inflation on commodities as well as freight. Earlier in the year, you have a backlog that you're getting through. But -- so just from a timing perspective, we see the opportunity to get more price to offset as we move through the balance of the year and we get through that backlog. So that pressure is -- I would say it's modest, but something that we're working through and comfortable with overall and suggesting an increase net to the margins.

So for the full year, improved margins versus...

About a half -- yes, we're seeing about a half -- I think 0.5 point improved overall margin profile.

Yes. Sorry, I was just comparing the first quarter versus the implied next 3 quarters is. The next 3 quarters are obviously slightly down versus the first quarter on the 23%.

Yes. Well, I think, again, it gets to -- it does get to some of that -- it's basically the same answer, right? I'm going to see some inflationary pressure. I'm going to cover some of it. Net-net, albeit up 50%, but yes, it's going to be that inflationary pressure, Myles.

We'll take our next question from Nathan Jones with Stifel.

A couple of the acquisitions. Alex, you talked about moving to the strategy deployment phase on the acquisitions, I think you talked a little bit about shifting the focus to growth initiatives. Hoping you could maybe provide a little bit more color on what that involves for each business?

Yes. So when you think about -- again, just to be clear, Nathan, none of this was baked into our model, it's all upside. But if you think about Druck, some of the opportunities we saw military defense, Druck has a pretty good position in Europe and not really any position of note in the United States defense where our legacy Aerospace and Defense business has strength. So we're building up the strategies of how to create those synergies and create growth.

There's various regional differences in penetration and share also in Druck, in the business. Europe, U.S. differences channel, non-channel that we are working through. So those are a couple of examples of where there's potential growth upside.

Panametrics in that business, we think about really also regional. I think we see a lot more opportunity in Americas to grow. They have a lower share in Americas than average. So there's opportunity there in aligning those efforts from a commercial standpoint.

And then Reuter-Stokes, we've been -- we have a very, very strong position in power generation piece of nuclear. But we also have some product lines around other platforms of radiation monitoring and Homeland Security. So we plan to build on those platforms as well and grow. So those are some of the things we're thinking about from a strategy deployment standpoint.

That's great. My second question was going to be on the value-based pricing that you're already beginning to realize. I think that's very rapid benefit there. I know some of these businesses have longer-term contracts. So maybe you can talk a little bit about where you're seeing value-based pricing where you'll see it in the future. And I mean it's obviously it's very early in the piece there. So just any color you could give us around that stuff.

Yes. So the longer-term contract, lengthen are probably less than you would think. If you think about Druck, about 30% of the business is on longer-term contracts. So there's a lot of areas where we can move more quickly. On the Reuter-Stokes, part of the business is about 40%. Some of these are naturally coming up and renegotiated. And the Panametrics is very, very low on longer-term contract. So all in all, there's a lot of opportunities within the year and then as we continue to work the longer-term contracts. So very confident in our ability to keep improving these margins through the year and going into next year.

[Operator Instructions] We'll take our next question from Ronald Epstein with Bank of America.

This is Jordan Lyonnais on for Ron. On the balance of the year for commercial aero, if we're going to see aftermarket decline in the guide, how should we be thinking about margins for the segment? And for PFT, are you guys factoring in or have any concerns on the new tariffs that are going through on raw materials?

No. A good question. So on the margins overall, Jordan, when you look at the mix differential, what I would say -- I'd step back and say, first of all, our portfolio in Aerospace & Advanced Technologies. When we say commercial OE, we make money on commercial OE, right? It's -- our model, as you know, is very -- or perhaps different from others in the industry. So when we do mix up and down, yes, there is some impact, but it's not as perhaps drastic maybe in other companies. Specific to the commercial aftermarket as we have that coming down in our forecast or in our guidance. When we look at what we're seeing in military moving in the opposite direction, the margin profiles are not that far off, frankly. They're quite similar. So that mix change is not going to be as significant, if at all, from a margin pressure point of view.

In PFT, with respect to tariffs, I would say the overall tariff change has not been all that material to us so far in the year or it won't be in the year. The one area that I would point to is with the refund process to the extent that we're successful there. We'll, of course, call that out in the balance of the year, but none of that is factored into our guidance. No upside is factored into our guidance.

This concludes the Q&A portion of today's call. I'd like to now turn the call -- floor back over to Alex Alcala for closing remarks.

Thank you all for joining us today. Over the past 13 years, Crane has undergone a meaningful transformation, reshaping the portfolio, significantly improving margins and growth and delivering strong shareholder value under Max's leadership. That foundation positions us exceptionally well for what comes next. This transition is not a change in direction. It's the next phase of the same journey it's about acceleration of profitable growth.

Looking ahead, I am more excited than ever about Crane's future and the opportunity to continue delivering for our customers, our associates our communities and our shareholders. We will remain focused on executing our strategy, leveraging the Crane Business System to drive strong organic growth while continuing to pursue our disciplined approach to accelerating inorganic growth. I've had the privilege of working alongside an extraordinary team across the globe, and I'm energized by the path ahead. With this team, this strategy and this portfolio, I'm confident that the best chapters of Crane are still in front of us.

Thank you all for your interest in Crane and your time and attention this morning. Have a great day.

Thank you. This concludes today's Crane Company First Quarter 2026 Earnings Conference Call. Please disconnect your lines at this time, and have a wonderful day.

Welcome to the Crane Company Fourth Quarter 2025 Earnings Conference Call. [Operator Instructions]. I would now like to turn the call over to Allison Ploniak, Vice President of Investor Relations.

Thank you, Madison, and good day, everyone. Welcome to our fourth quarter 2025 earnings release conference call. I'm Allison Ploniak, Vice President of Investor Relations.

On our call this morning, we have Max Mitchell, our Chairman, President and Chief Executive Officer; Alex Alcala, Executive Vice President and Chief Operating Officer and incoming CEO; and Rich Maue, our Executive Vice President and Chief Financial Officer; along with Jason Feldman, Senior Vice President, Treasury, Tax and Investor Relations, who is on for Q&A.

We will start off our call with a few prepared remarks from Max, Alex and Rich, after which we will respond to your questions. Just a reminder, the comments we make on this call will include some forward-looking statements. We refer you to the cautionary language at the bottom of our earnings release and also in our annual report, 10-K and subsequent filings pertaining to forward-looking statements. Also during the call, we will be using some non-GAAP numbers, which are reconciled to the comparable GAAP numbers in tables at the end of our press release and accompanying slide presentation, both of which are available on our website at craneco.com in the Investor Relations section.

Now let me turn the call over to Max.

Thank you, Allison. Thanks, everyone, for joining the call today. While we've got many exciting things to discuss today as we exit the fourth quarter, and we're already off to a fantastic start for 2026. Our performance last year and our initial guidance for 2026 show that we are consistently and reliably delivering on our commitments and our long-term value creation thesis. 4% to 6% core sales growth, and we were just at the high end of that last year, 35% to 40% core operating leverage and upside from capital deployment. And that's just the baseline. We're always working to over-deliver. All aspects of this thesis have continued to play out as expected and will continue.

For the quarter, once again, we exceeded even our high expectations, underscoring the strength of our team's strategy, excellence in execution and a relentless commitment to delivering shareholder value. Adjusted EPS of $1.53 was up 21% over the prior year, driven by an impressive 5.4% core sales growth, reflecting broad-based strength at Aerospace and Advanced Technologies, and continued strong execution of process flow technologies. For the full year, adjusted EPS increased by 24%, driven by our outstanding teams delivering on customer expectations enabled by our sustained investments in advanced technologies and innovative solutions. [indiscernible], we also continued building on our strong track record of enhancing and shaping our portfolio by adding technologies and capabilities inorganically that will drive growth and support both existing and new customers.

Having previously announced the signing with Baker Hughes on June 9 last year, we are excited to formally welcome the Druck, Panametrics and Reuter-Stokes brands to the Crane portfolio. having closed on the acquisition of these brands on January 1. As a reminder, Reuter-Stokes doubles the size of our nuclear business, adding industry-leading radiation sensing and detecting technologies for nuclear plant operations as well as for Homeland Security applications. Nuclear is an exciting market space today, and we see additional applications for the core Reuter-Stokes technology and a number of other high-growth adjacent markets.

This business is being integrated into our Crane Nuclear business, which Chris Mitchell has successfully run for us over the last years. Panametrics will operate as a stand-alone business unit in our Process Flow Technology segment reporting to SVP and [indiscernible]. This business adds advanced ultrasonic flow meters and precision moisture analyzers, a really incredible portfolio of solutions that enables accurate measurement of liquids and gases across applications such as cryogenic gas storage, LNG transportation, wastewater treatment, chemical and petrochemical production.

And lastly, drug will be maintained as a stand-alone business unit reporting to SVP J. Higgs under the newly renamed Aerospace and Advanced Technologies segment. This new name better captures who we are today and our future strategic direction for this segment than the prior Aerospace and Electronics name. Still the same focus on proprietary, highly differentiated technologies with primarily sole-sourced positions, but continuing to expand our range of technologies and offerings and looking at adjacent end markets where our capabilities are similarly valued.

We expect to selectively and carefully widen our aperture in this segment without losing focus on what differentiates us. Specifically the addition of Druck's complementary product line meaningfully strengthens our pressure sensing capabilities across critical applications, including aircraft engine monitoring and Hydraulics with strong positions in both single-aisle and widebody aircraft platforms as well as environmental control solutions. Druck also expands our presence into ground-based test and calibration equipment for aerospace and certain other end markets, leveraging the same best-in-class pressure sensing technology.

Another exciting news in addition to Druck, Panametrics and Reuter-Stokes business is closed January 1. At the start of the year, we also closed on the acquisition of optek-Danulat, headquartered in Essen, Germany. Optek is the leader in in-line process control, optical sensing measurement solutions for biopharma, pharma and other demanding markets with annual sales of approximately $40 million. Optek is a perfect complement to our growing instrumentation business, my personal thanks to Jurgen Danulat for his trust in Crane [indiscernible] stewards of his legacy moving forward and to the outstanding team at Optek. Just really a fantastic addition.

The teams have hit the ground running across all businesses. The integration process is well underway, and the machine is fully in motion. Further, M&A activity is robust, and we continue to execute and cultivate accelerated opportunities. We see many opportunities progressing through 2026, but at this time, nothing additional is imminent in Q1. Alex will provide more detail on our core businesses as well as the recent acquisition shortly, but let me touch on the planned succession time line that we announced last night. I want to congratulate Alex for being appointed as Crane's next CEO, and effective April 27, 2026, at our next Annual Shareholder Meeting. And at that time, at the request of the Board, I will move to serve as Executive Chairman for a transitionary period expected to be no more than 2 years.

Having partnered with Alex for more than a decade, I can confidently say he is the right leader to accelerate Crane's strong His deep operational expertise, proven ability to develop an extra strategic initiatives and unwavering commitment to our high-performance culture have been critical in shaping crane into the market leader it is today and our proven performance across PFT and AAT. In my new role as Executive Chairman, I look forward to supporting Alex and the leadership team. as we continue driving strategic growth and long-term value creation. Coming off the incredibly strong performance in 2005 and turning to 2026, I am highly confident in the strength and resilience of Crane's team and portfolio.

Moving to 2026 guidance. I'd like to highlight that our guidance for 2026 includes a change to our non-GAAP presentation of adjusted EPS, which now excludes noncash tax-effected acquisition-related intangible amortization. Rich will provide more on this during his remarks. By using this new convention for both '26, I'm pleased to announce our initial 2026 adjusted EPS guidance, $6.55 to $6.75. A 10% adjusted EPS growth at the midpoint. When excluding the $0.16 benefit of onetime hurricane-related insurance recoveries that we received in 2025 as well as after-tax acquisition-related intangible amortization in both years. Importantly, I'm excited to share that we estimate that the acquisitions will be slightly accretive to 2026 earnings results.

As I started with, many exciting developments across the company and our investment thesis is stronger than ever. Now let me pass it over to our Chief Operating Officer and incoming Chief Executive Officer; Mr. Alex Alcala to provide some color on the current environment, segment performance and recent acquisitions. Alex?

Thank you, Max. I'm truly honored to have been appointed the next Chief Executive Officer of Crane. I'm enormously grateful for the Board and in particular, to Max for his trust and support over the years. I'm also thrilled that Max will continue as Executive Chairman, allowing me to keep benefiting from his tremendous experience and leadership.

But this is not about me. It's about our leadership and the 8,500 associates who execute every day, leaving the Crane culture of incredible intensity, focus and accountability. I've been fortunate to be part of the Crane journey for the past 13 years. We've transformed our portfolio, substantially improved our margins and our growth profile, and delivered significant shareholder value under Max's leadership. But I can tell you, I've never been more excited about our future and the progress we will continue to make for our customers, our associates our communities and our shareholders.

Looking ahead, we will stay true to our journey, driving the Crane business system to deliver strong organic growth while also pursuing our strategy of accelerated inorganic growth. Over the years, I have literally traveled more than 1 million miles as part of this incredible journey with Crane, and I'm ready for the next million with this extraordinary team. Now some thoughts on the segments in the quarter as we look to 2026. Let me start with Aerospace & Advanced Technologies. These markets remained very strong. The backlog we built, along with the new programs and opportunities, our aerospace and electronics teams have secured continues to provide us with visibility into 2026 and beyond.

On the commercial side, Things continue to look healthy. [indiscernible] and Airbus continue to ramp up production and aftermarket demand is still running at elevated levels, although the year-over-year comparisons have become increasingly challenging. On the defense side, a lot of activity and interesting industry announcements over the past few weeks. Procurement spending remained solid, and there's a continued focus on strengthening the product defense industrial base given the heightened global uncertainty we continue to see. Given the level of activity we are seeing for 2026, we expect core sales growth for the year to be up at the high end of our 7% to 9% long-term growth assumption.

And importantly, that growth should leverage at about 35% to 40% for the full year despite the less favorable mix, which is moving back to normal levels. Our guidance assumes OEE sales will grow double digits year-over-year, partially offset by decelerating growth rate in commercial aftermarket. We are excited to join the AAT segment and expect over the next few years that it will be incremental to both the segment's growth and margin profile. However, while it will be incremental to growth in 2026, we expect Druck to be dilutive to overall segment margin in the near term.

Overall, we are on track for another outstanding year. And beyond this, we continue to develop new technologies, win new business and pursue additional opportunities across the segment. That gives us confidence we'll deliver above-market growth for the rest of the decade. A few highlights for the quarter in AAT. First, in our Defense Power business, we remain actively engaged and solidly positioned with defense vehicle OEMs collaborate on the common technical truck and new combat vehicle programs.

Second, Crane also continues to win funded next-generation military demonstrator programs for our brake control systems. We will also begin production for the F-16 brake control project in 2026 and received two more follow-on orders, one from the United States Air Force and the other from a foreign military customer. And last, with elevated interest around air defense systems, we are actively tracking and pursuing new high-power AESA radar opportunities.

Overall, our Aerospace and Advanced Technology segment is positioned to significantly outperform its markets over the next decade. We're extremely proud of what this team has accomplished and the momentum they've built. At Process load Technologies, we remain well positioned to outgrow the cycle. Over the past decade, we have deliberately repositioned our portfolio towards technologies and end markets that are higher growth and where we maintain leading competitive advantages and clear differentiation, positioning enough to deliver consistent, sustainable growth ahead of the market. And the latest acquisition enable us to continue that journey.

Similar to Q3, we continue to see strength in segments such as pharmaceuticals, cryogenic power generation and water while chemical markets remain subdued at trough levels. Our disciplined approach and sharp focus enabled us to maintain leadership in this segment, as evidenced by our Q4 performance even given today's macro backdrop. A few highlights from PFT in the quarter. Our collagenic business had another strong Q4, securing orders for a number of space launch customers. We continue to win and expand our share in this important vertical due to our excellence in engineering solutions, along with our ability to rapidly execute orders.

Additionally, we continue to drive solid wins in pharma, securing another large [indiscernible] capacity expansion to manufacture GLP-1 drugs. Our ability to deliver high-performance solutions for our critical pharmaceutical application continues to set us apart in a competitive market and positions us for sustained growth in this segment. And lastly, despite the sluggish chemical industry, our teams continue to secure targeted opportunities within chemicals, securing key new project wins in the Middle East. Looking ahead to 2026 for PFT, given our fourth quarter orders remain sluggish, we are adopting a cautious view of 2020 levels to start the year and expect that core growth to be flat to low single digits for 2026.

However, we do expect more leverage to still be within our targeted range of 30% to 35%, with the additions of Panametrics, Reuter-Stokes and optek-Danulat joining the PFT family, we fully expect over the next couple of years that they will be incremental to both segment growth and margins. In 2026, while there will be incremental to growth near term, we expect them to be dilutive to overall segment margin. Overall, both businesses are strongly positioned for sustained success with the resilience and strategic foundation needed to deliver outstanding results in 2026 and beyond. Before I wrap up, I want to provide additional color on the acquisitions of Panametrics, Druck and Reuter-Stokes.

The integration process is off to a strong start, and our outlook for these businesses is already exceeding our initial expectations. As Max mentioned, we now anticipate these businesses to be slightly accretive to earnings in 2026. compared to our original expectation of no accretion in year 1. We have been preparing for the last 6 months, and I personally spent a significant portion of this month visiting all these teams and the CBS machine is already being deployed. I'm extremely confident that these businesses will become some of our best performing and most profitable businesses within Crane in the years ahead. As I think about the levers of focused improvement, the cost synergies will come from 3 major areas, all driven by CBS.

Organizational simplification and focus. By operating these businesses as three independent entities, we're eliminating the top management cost were. Product Line Simplification or 80/20, reducing complexity and eliminating work with limited return on investment; and traditional productivity improvements, driving efficiency through supply chain and lean tools and processes. In addition, all growth synergies are fully incremental upside to our financial model. We have dedicated teams in place and are off to a great start. I'm very confident we will meet or exceed our targets. Now let me turn the call over to our CFO, Mr. Rich Maue for more specifics on the quarter.

Thank you, Alex. And congratulations as well. I really look forward to having as much fun with you as I've had with Max over the last decade. And Alex, I gave Max this same advice when he became CEO, and borrowed from Michael Cane as Charlie Crocker in the timeless movie classic, the Italian job. It's a difficult job and the only way to get through it is if we all work together as a team. And that means you do everything I say. I'm kidding, of course. I don't -- not really. And to Max, borrowing Humphrey's ever famous line as Rick Blaine, in the Academy Award-winning drama Casablanca, we will always have Paris.

I'm going to get choked up.

Good morning, everyone. Let me start off with total company results. We drove 5.4% core sales growth in the quarter, reflecting the ongoing strength within the Aerospace & Advanced Technologies segment. Adjusted operating profit increased 16%, reflecting the impact of higher productivity and favorable pricing net of inflation. In the quarter, core FX-neutral backlog was up 14% compared to last year, again, continued strength at Aerospace and Advanced Technologies and core FX control orders were up 2%, from a balance sheet perspective, with the close of the acquisition of Druck, Panametrics and Reuter-Stokes, we ended the year with net leverage of 1.1x, which reflected 102% adjusted free cash conversion in 2025 and outstanding performance by our team.

And as Max noted earlier in January, we also closed on the acquisition of optek-Danulat, that port our net leverage to 1.4x, leaving us well positioned for further M&A. A few more details on the segments in the quarter. Starting with Aerospace & Advanced Technologies. Sales of $272 million increased 15% in the quarter, nearly all of that growth organic. And even with the continued high level of core sales growth, our record backlog of just over $1 billion was up 25% year-over-year and was up slightly sequentially. Core orders were up 8%. Again, no surprises and continued strong demand broadly. Total aftermarket sales increased 1% with commercial aftermarket sales up 3% and military aftermarket down 3%. And OEM sales increased 23% in the quarter with commercial sales up [ 27% ] and military sales up 18%, all in line with our expectations.

Adjusted segment margin of 23.6% and expanding 50 basis points from 23.1% last year, primarily due to strong productivity, higher volumes and higher price net of inflation. At Process Flow Technologies. In Q4, we delivered sales of $309 million, flat relative to a year ago with core sales down 1.5% as we anticipated, offset by a slight benefit from the Technifab acquisition and 1.6 points. of favorable FX. Compared to the prior year, core FX-neutral backlog at PFT decreased 7% and core FX-neutral orders remained soft, down 3% driven by the weaker chemical end markets as expected. However, adjusted operating margin of 22% expanded again and in the quarter was 170 basis points higher. Despite the headwinds on the top line, productivity is reading through as well as price.

Moving to the nonoperational items below the segments, along with some additional 2026 guidance matters. The start, as Max mentioned, beginning in 2026, we are excluding intangible amortization from our non-GAAP presentation of adjusted EPS. Following the significant increase in intangible amortization related to this month's acquisition activity, we believe that excluding it from adjusted EPS gives investors a better picture of Crane's free cash flow and also enables better comparison to the majority of our peer companies that use the same convention. Reconciliations recasting last year are in the slide presentation accompanying this call.

Now moving on to a few nonoperational items. Corporate expense for the full year of 2025 was $87 million, modestly above our prior view of $85 million due primarily to M&A activity. For 2026, we anticipate corporate expense to be in the range of $80 million to $85 million. In Q4, we received $5.2 million of insurance recoveries from the Hurricane Helen flood we had at one of our PFT sites or a $0.07 benefit to results in the quarter. With this final payment, the matter is now fully resolved with our insurers. Remember that our full year 2025 guidance included $9 million of insurance recovery related to Hurricane Helene with $6.7 million received through Q3. So $2.3 million or about $0.03 of the fourth quarter's insurance recovery was in our latest October guidance.

So the actual amount received was $2.9 million or $0.04 per share better than we had expected. Also keep in mind that for the full year, total insurance recoveries benefited adjusted results by $0.16, a benefit that will not repeat in 2026. Given the funding for the acquisitions of Panametrics, Druck, Reuter-Stokes, and optek-Danulat, we now anticipate full year 2026 interest expense of approximately $58 million. And lastly, we estimate our tax rate for 2026 to approximate 23%, slightly higher than our 2025 rate of 22.9%. Looking at the cadence of quarterly results for the year, we expect Q1 2026 to be seasonally softest quarter coming in roughly flat with the first quarter of 2025, [indiscernible] given acquisition integration and increased interest expense.

For the full year earnings split, we expect the first half of 2026 to represent about 45% of full year earnings with 55% weighted towards the second half. Overall [indiscernible] and with that, operator, we are now ready to take the first question.

[Operator Instructions]. Our first question is coming from Scott Deuschle with Deutsche Bank.

Max, what are you going to do about your free time here?

I'm going to remain busy, Scott, very, very busy. In addition to Executive Chair, you kn0ow, I've become a very popular Gen-X influencer. I have my podcast that started and my only fan page is going well. It's going to be...

I'm looking to hire someone from my team [indiscernible] understood [indiscernible] I'll let you ride the Crane nuts. In all seriousness, Alex, I was wondering if you could speak to the pricing opportunity at drop in 2026 and 2027. And specifically, I was curious if there are any meaningful LTAs coming up for renewal this year or next? And what type of price increase might be possible there?

Yes. Thanks, Scott. So just pulling back on all 3 businesses, right? Druck, Panametrics, Reuter-Stokes in our financial model, we assume significant opportunity. I've been working with this team for 6 months, spent most of the months with them. So definitely validate our hypothesis on opportunities potentially more than we even thought. So feeling very bullish about these acquisitions. All three businesses have a significant opportunity to drive the Crane Business System. I talked about the areas product line simplification, restructuring, business model and just traditional operational excellence.

As far as value pricing, as you know, in Crane, we do a good job standing for setting up for a value our differentiated technology. There's opportunity to do better in all three businesses and Druck, we would expect to improvements starting this year, reading more into next year as it takes some time. Just like any aerospace visits, there are some expire naturally that need to be renewed, renegotiated. So everything -- no real obstacles to achieve our goals in that area, Scott.

Okay. Rich, can you clarify what guidance contemplates it relates to cost takeout at PSI. I think you've spoken about high single-digit million corporate cost takeout. And I wanted to clarify if that was in the guide or still on the [indiscernible].

Yes, I think no change to what we've previously discussed. There's a few buckets. I think they're the same buckets Alex mentioned. So the cost element is going to -- is -- our productivity element, however you want to categorize it, is clearly going to be one of them. On the commercial side being another and then leveraging the growth at rates that we would expect to leveraging our operating cadence. So across all three, and I would say no difference versus what we previously had communicated.

And our next question is coming from Myles Walton with Wolf Research.

This is Greg Dalberg on for Myles. First of all, I would like to say congrats to Max and Alex. So first one, I guess with the renaming of A&E to AAT, I think you mentioned in your remarks the widening of the aperture of what you would look at there. Can you go into more detail, I guess, in terms of what adjacent tech and strategic direction this is actually referring to?

Yes, Greg, this is Alex. So just a reminder, our business unit, Aerospace & Electronics was both business unit name and segment name. So last year, we announced the promotion of Jay Higgs, as Senior Vice President of the segment, and it's really positioning us to do more deals like drug. So drug would be a perfect example of the technologies that we would expand in, where it has a foot in traditional aerospace but also get it into lab-based calibration and even some high-growth industrial applications that are combined with the technology. So I think Druck would be a good reference of what you expect to see in that segment.

And the model that we have right now in the structure allows us to keep adding not only bolt-ons, but stand-alone units to keep building out that segment similar to what we've done in PFT. You recall that when we changed the name to -- from fluid handling to process flow technologies, we're thinking about expanding our aperture moving up the technology stack, having more differentiated products, and those have been the acquisitions we've done on that side as well with the sensing applications and now optic as well adding to that. And that's what you would expect to see high technology differentiated, improving our growth and margin profiles on both sides of the segments, growing both segments, doubling the size here in the next coming years is our goal that continues to create shareholder value and also optionality for the future.

And then just quickly on PFT. I know backlog sequentially for the second quarter in a row, mostly due to the Ken side. Can you just talk about what you're seeing? And I guess is there a time frame you'd expect that to typically to the chemicals and, I guess, more broadly your outlook for end markets in 2026 in PFC?

Yes, Greg. So let me pull back just on PST because we have -- we service various segments, right? So first commenting on the areas and businesses markets that grew in 2025 strongly, and we expect to continue in 2026. So wastewater, which is primarily a North America-based businesses. We saw high single-digit growth, we expect strong growth also in 2026. Cryogenics as well, double-digit growth in '25. That will continue pharma. There's a global growth that we're seeing also, in particular, in North America, some increased investments and reshoring from pharma customers that we expect power.

Again, America-based power generation, where we've seen momentum in '25, I expect that to move on to a lot of our segments and businesses continue with strong momentum. You did mention Chemical, which has been sluggish. Just to pull back also, we expect to see similar to what we saw in '25, which has been varied by region. You can't lump it all together. So Americas and Middle East, we saw growth year-over-year on orders in '25. We expect the sort of modest growth to continue in that area. Our team is doing an excellent job winning. Again, those two regions have this feedstock energy advantage. So customers see good return on investment on taking action on capacity expansions or increases brownfields in particular in the Middle East. So those will continue at a moderate pace on a negative or sluggish, Europe, China, the rest of Asia Pac, that's been down. We don't expect those to change.

So on the net, our assumption for 2026 is continue to see working through the trough, not deteriorating, stable, but not planning for a strong uptick in the year, but we're ready for it. If it happens, we'll take advantage of it, but not built into our guidance right now.

And Our next question is coming from Jeff Sprague with Vertical Research.

Congrats Max and Alex, exciting news for both of you. Just a couple from me. First, just back on the deals. You kind of laid out the cost reduction opportunity and plan I think there's also cost in to get these bedded down and integrated given that they were carve-out entities. Could you just maybe speak to that the interplay between kind of cost to integrate versus cost out? And I would assume those sort of flip a '27, '28.

Yes, Jeff. So I mean there is some cost in and cost out on a net basis, it will be a cost out. The improvements in the margins will increase in '27,'28 as a lot of our actions take a few quarters to materialize and read through to the P&L. I've mentioned before, Baker Hughes operated these businesses as PSI. So they had that high-level PSI headquarter structure, which is we're dissolving, shared services and finance, HR and IT. So that goes away, representing the loan business unit resources that we're adding overall on that basis, we expect once we're done to operate leaner and more profitable with all these ins and outs from a cost standpoint and then driving improvements on top of that.

And then just thinking about what Rich shared on Q1, it sounds like the expenses could be heavy here in Q1. Maybe you could just give us a little bit of color on kind of the expected organic performance in Q1 versus kind of the deal impact in Q1 to get to kind of that relatively flat number.

So legacy Crane organic, we'll be clearly up in A&E and likely down a bit in PFT in Q1 would be part of that dynamic in addition to the incremental interest expense that we have compared to last year in the first quarter. Sort of the, I-would say, the big drivers, Jeff. There's also within Druck, Panametrics Reuter-Stokes, there is seasonality, and they tend to be stronger in the second half than the first half historically.

Okay. Great. Understood. And then maybe just kind of stepping back just on the deal activity. So a lot of bandwidth still on the balance sheet. It sounds like you feel pretty comfortable with just the internal bandwidth to kind of execute all this? Maybe kind of address that, the ability for the organization to take on something else of size this year? Or should we expect maybe sort of smaller bolt-ons as the year is progressing here?

Yes, Jeff. So the machine is working, right? At CBS, our funnel. We're integrating these four different businesses very well with resources. We have bandwidth to do more, I expect to do more in '26. I can tell you that we're also building capabilities constantly. We improved our capabilities not only to integrate but also our strategic resources that are evaluating adjacent is proactively increasing the potential targets. So we're only getting stronger on the M&A front and expect to accelerate that going forward. So one of strong, nothing imminent in Q1, but expect to continue the momentum as we move forward. Plenty of bandwidth on our side.

And our next question is coming from Matt Summerville with D.A. Davidson.

Thanks. Couple of questions. First, can you talk about 2026 with respect to the Aerospace segment, what you're expecting from an aftermarket volume standpoint for both OEM and military? And can you also sort of discuss whether there's any sort of government shutdown impact on any of the more material military programs for you guys? And then I have a follow-up.

Yes. Thank you, Matt. I'll comment on it. Let me walk you through all the assumptions here on Arrow in all the segments. So commercial OEM, as you would expect, will continue to be strong, high teens Military OEM, mid-single digits then to your question of aftermarket. On the commercial side, we're anticipating mid-single digits and on the military side mid- to high single digits. So content as the government shut [indiscernible] the only thing that we've seen no change in orders or programs or funding, but we did see the flight test of the program get delayed a few months. So instead of being completed in January, we expect that to be complete more in the early second quarter.

So that will delay a few months, the start of the shipments for the F-16, but that's all baked and factored into the guidance we provided. No other real impact right now that we see related to government shutdown.

So as it pertains to kind of that $30 million sort of per year beginning 26 kind of target you laid out for F '16, is the is that lower than in 2015, meaning is your guidance assuming you don't fully capture that 30%, yet there's an opportunity albeit over a more compressed time frame for you to ultimately deliver that. And then can you just clarify for the PSI group of businesses, what for your 3-year cost synergy target would be if you could remind us?

Yes. So Matt, on the F-16. Yes. In our guidance, we're thinking more on F16,though the annual rate is 30% this year, more like in the 20s, low 20s of revenue. There is an opportunity and a more compressed time line. But in our guidance, we've pulled that back a bit due to few months shifting to the right. Related to the cost synergies, right? So this year, as we're starting off, we're moving fast with the actions. The teams are actually impressed me with their ability to embrace the Crane Business System machine, but it takes some time to read through. So if you're trying to do the math, would expect like mid-single-digit growth and about 200 basis of improvement in the margin profile this year.

And then in the coming years, It'll be a little bit higher than the 200 basis points on a CAGR basis that gets us in that 5-year mark to achieve or beat the 10% return on investor capital. So about 200 basis points and then a greater number in the years ahead.

Our next question is coming from Amit Mehrotra with UBS.

I wanted to ask about the power -- come back to the power generation market for a minute. I think you talked about Power Gen being 10% of the portfolio inside of PFT, but you're also adding nuclear exposure with PSI. And obviously, that's a pretty important place right now. So maybe you can just reset kind of the exposure to total power gen, and then I'll talk about nuclear power gen and how that's changing.

Yes. Thank you, Amit. So like you mentioned, the traditional power combined cycle power plants in our valve segment, that's what I've mentioned in '25, significant, as you know, amount of new combined cycle power plants are being built in the United States. So that's driving our growth. As far as nuclear, as you stated, we're basically doubling our exposure in the nuclear with Reuter-Stokes.

So we have our core business, Legacy Crane Valve Services and then now Reuter-Stokes and then combined, we call it, Crane Nuclear now. So the growth exposure there is pretty attractive. Think about it [indiscernible] you've got the restarts of the various nuclear plants like Polek or the Crane Clean Energy formally 3 miles. So that will drive upside. You have the new construction with AP1000, Westinghouse where we're very strong, have a very strong position with those reactors in our valve business, and there are some expected starts in Europe.

The third area, really, which comes with Reuter-Stokes, we also have very good exposure now to the small module reactors. So -- we have a partnership with one of the leaders that's building the first SMR in Darlington, Canada. That's starting construction already or soon, one of the reactors. And there's three more on the plan depending on how this one goes. This is boiled water reactors that Reuter-Stokes has the neutron sensing technology, which is used to gauge the power that's being generated. And then we're also benefit on this fourth leg with the extension of licenses, right? So 5 years ago, nuclear plants were decreasing or shutting down. And now we're seeing licenses being extended 50 years or so, and that requires upgrades and investments. So a pretty good tailwind that will keep getting stronger as the decade progresses.

Okay. And just as I want to revisit that 55% back half, I guess, obviously, 45% first half. And then you've given us the first quarter. It looks like just the way the math works, there's not a lot of growth year-over-year in 2Q implied by those comments as well. I don't know if I'm doing my math wrong or maybe there's the hurricane dynamic in there in terms of the comp. But can you just talk about

Yes. Jason and Allison will catch up with you. But I would say that, yes, on the part of the headwind in Q1 and in Q2 clearly will be the insurance recovery. Those were included in our numbers, $0.16 on the year, and it was probably close to 50-50 in terms of first half, second half. Yes. But from a growth perspective, I'd rather hold off on commentary on individual quarters from a core growth perspective, frankly at this point.

Fair. That's fair. Can I just ask 1 quick follow-up, if I don't mind, just on the synergies for PSI because you talked about DFT growth flat to up low single digits and then 35% to 40% incrementals. It doesn't feel in that number, there's a lot of synergies in there, but there's still 7, 8 points of margin gap. And so maybe this is just a timing thing or maybe it's conservatism but it would just be helpful to understand maybe if there's an opportunity for EBIT and PFT to grow disproportionately from revenue in 2016, just given maybe some of that margin gap that you can close? Or is that maybe more of a late '26,'27 thing?

Yes. I would probably err towards what you closed there with on your question. The 30% to 35% is on the legacy. And then as we continue to integrate the Druck, Panametrics Reuter-Stokes, we'll start to see some of that incremental coming in more so in the second half versus the first half. So that would be -- that would absolutely be the case for '26.

Our next question is coming from Nathan Jones with Stifel.

Everyone. Congratulations to Alex. And unfortunately, Max, I can't see your only fan page.

I'm not taking your request any more.

I guess, first on the acquisitions. I know you guys didn't include any revenue synergies in the deal model and in that kind of 10% ROIC target by year [indiscernible]. But I also know that you anticipate getting some. So I'd be interested in getting some color around kind of where the most the most bright areas for you to generate revenue synergies are? If you can put any kind of financial framework around that of like would generate 100 basis points of revenue synergies or 200 or whatever the expectation might be over the next several years? Understanding that those are a little more squishy and maybe a little harder to track. But just any color you can give us on how you'll approach that? And if you can give any financial framework around it.

Yes, Nathan. So let me try to answer the first part of -- you're right, we expect some growth synergies in these areas, different for each of these businesses. For example, in drug very strong, very strong position on the commercial side, not as much on the military side. So with our legacy core A&E, as you know, we have an outstanding position there. So there will be some synergies opportunities to grow the businesses there. Traditional CBS commercial excellence and driving key accounts, channel management, project pursuit funnel management, et cetera, that will drive as well within the core business, improved performance similar for Panametrics, Reuter-Stokes incredible position in the power generation.

We're looking at these adjacencies where they also play in homeland security, other industrial applications where there's a lot of room for growth with the right focus. So None of that is baked into our model, our guidance. I'm not yet ready to provide you with the financial numbers as much as I would like on what those growth opportunities would be. but they'll be there and you'll see them eventually read-through in the P&L Nate.

Yes. I think the confidence in -- I forget if it was Max's comments or Alex's is on the 4% to 6% and these businesses taking us towards the higher end of that range, part of that confidence level comes from these adjacencies and other opportunities that we already see. So I think we expect to be at that high end or even slightly above it when you look out a couple of years.

And this is probably just a housekeeping one. I think it was maybe Jeff earlier on was talking about integration costs and the impact that might have on your reported numbers. Are you eating those in the reported results? Or are they adjusted out of the reported results.

Yes. So I think in our response to Jeff's question, clearly, if they are directly associated with the integration, we will be excluding them and keeping them visible for everybody. But there are other investments that we'll be needing to make us as just part of bringing the business to where -- in the certain areas where we need to be. So in finance, for example, if I have to hire people or an HR have to hire people in IT, those are continuing costs of the business, and I can't exclude those. So that's really what we were referring to in the response to Jeff's question.

Yes, I understand. Can you just give us an idea of what the impact to free cash flow will be in 2026 from these expenses, not from the hiring, but from the costs to achieve seg just to level set that for us.

Yes. I don't have that off the top of my head here, Nathan. So we'll look to provide more color on that at the right time. I would expect our free cash flow, though, overall. Just stepping back, we had an outstanding performance here in 2025 in our business, 102% on an adjusted basis. If we didn't adjust for it, for certain items, we were at 98%. So it's not like we pulled the whole heck of a lot out to adjust. Our core business will continue in that 100% range is our view right now. in next year, I would say, including the acquisitions, it will be down a little bit, but we'll be within that 90% to 100% range without a doubt. If that helps.

Our next question is coming from Justin Ages with CJS Securities.

Congrats to Max and Alex on this new chapter. A question on the F-16. You know you noted that some of the win additional in the U.S. and international partners. Is that layered on top? Or is the Internet -- after the U.S. orders get built to maybe not into '27 will we see the benefit of the F-16 from international orders.

's

Yes, Justin. So on F-16, the way we think about it is this $30 million annual sales doesn't really change much what -- as we get into the whole program link. So it goes out further benefit. We will ship first to the United States Air Force and then complement that with foreign military sales. at that $30 million or so rate per year.

We have orders that are in excess of that annual rate today. So it's not like we have to wait for the orders. It's -- we have them in backlog today, Justin. So anything incremental to that, just to Alex's point extends.

All right. That's helpful. And then you guys have done a bunch of acquisitions. You talked about your M&A capacity. You're levered now at 1.4. Can you discuss a little more what your target leverage is? What would you would be willing to go to if the right acquisition is out there?

Yes. So with the right acquisition, we don't have a problem going to 3x even strategically, if it made a lot of sense even going beyond as long as there was a path to come back down within a pretty short period of time to be in between, I'll call it, 2x, 2.5x, something like that on a -- from a target perspective. But we have no problem going up as high as 3% or even above that for the right deal.

And our next question is coming from Jordan Lyonnais with Bank of America.

On Aero and the name change, how are you thinking about adjacencies or opportunities into IGT or aeroderivatives. And then two, [indiscernible] on the military side, is there any changes to your thinking on CCA's with the new group of 1 [indiscernible].

You're breaking up just a little bit, Jordan, if you can say that again.

Apologies. Yes. Sorry, is this better?

That's much better is better.

On CCAs, that opportunity changed at all for how you're thinking about the program with tranche 2 now coming online with a batch of 9 new contractors?

And you're opening as well because it was a repeated again, that would be great.

Yes. For Aero and Advanced Tech now with the name change, the adjacencies that you're looking into, are you thinking about opportunities in IGT or aero derivatives.

I think on the first piece of the question on the AAT, again, we are exploring many different types of adjacencies. Traditionally, right, our core business has been in improved power control. So expanding beyond that in aerospace, just like we did in sensing, many different avenues, land-based. We're thinking about -- I don't want to call out specific adjacencies at this point, but many, many other adjacencies that complement both military and aerospace technologies and also play in other high-growth markets at the same time. And on the second part of your question, with CCA, do you mean collaborative combat aircraft?

I mean we're definitely playing in that space. We think we're very, very well positioned both with the, I guess, the traditional primes and the new entrants. In fact, in prior quarters, Jordan, you may recall that we have this great position in one of the new program Fury to call it out where we expect significant growth in the future. So in this different cycle, different sales cycle, different type of speed that is required, but all the demonstrators we have won our position there. And also with the new entrants, we have excellent content. So we feel very, very bullish about that segment and our ability to benefit from that. SP1 Got it.

[Operator Instructions]. This concludes the Q&A portion of today's call. I would now like to turn the floor over to Max Mitchell for closing remarks.

Fantastic. Alex, congratulations again. Thank you all for joining us today. Great call, great team, great performance. There's a great deal of momentum here at Crane. We delivered an exceptional 2025, and I couldn't be proud of our teams. We continue to innovate, win critical projects and execute and deliver exceptional results. We also accelerated and delivered on our M&A efforts, adding differentiated technologies that further strengthen the crane portfolio, and we're set up for an even stronger 2026 with a leadership transition that will drive a continued focus on transformation, execution and the relentless pursuit of improvement, relentlessly driving towards perfection while accepting the reality we will always fall short that is what pushes us forward driving change as a late great performer, Diane Keaton once said, what is perfection anyway, here's the depth of creativity. That's what I think.

While change on the other hand, the cornerstone of new ideas. As always, change Crane is constant, and it remains the catalyst for fresh ideas, strategic evolution and continued outperformance with our excellent strategy, exceptional talent, strong momentum, our progress speaks for itself, and truly, there's no limit to what we will accomplish in 2026 and beyond. Under Alex's leadership and the team. Thank you all for your interest in Crane and your time and attention this morning. Have a great day.

Thank you. This concludes today's Crane Company Fourth Quarter 2025 Earnings Conference Call. Please disconnect your line at this time, and have a wonderful day.

Welcome to the Crane Company Third Quarter 2025 Earnings Conference Call. [Operator Instructions].

I would now like to turn the call over to Allison Poliniak, Vice President of Investor Relations.

Thank you, operator, and good day, everyone. Welcome to our Third Quarter 2025 Earnings Release Conference Call. I'm Allison Poliniak, Vice President of Investor Relations. On our call this morning, we have Max Mitchell, our Chairman, President and Chief Executive Officer; Alex Alcala, Executive Vice President and Chief Operating Officer; and Rich Maue, our Executive Vice President and Chief Financial Officer; along with Jason Feldman, Senior Vice President, Treasury, Tax and Investor Relations, who is on for Q&A.

We will start off our call with a few prepared remarks from Max, Alex and Rich, after which, we will respond to your questions.

Just a reminder, the comments we make on this call will include some forward-looking statements. We refer you towards the cautionary language at the bottom of our earnings release and also in our annual report, 10-K and subsequent filings pertaining to forward-looking statements. Also during the call, we will be using some non-GAAP numbers, which are reconciled to the comparable GAAP numbers in tables at the end of our press release and accompanying slide presentation, both of which are available on our website at www.craneco.com in the Investor Relations section.

Now let me turn the call over to Max.

Thank you, Allison, and thanks, everyone, for joining the call today. We are proud to report another strong quarter with results coming in ahead of our expectations. Adjusted EPS was $1.64 driven by an impressive 5.6% core sales growth, primarily reflecting broad-based strength at Aerospace & Electronics and continued strong execution at process Flow Technologies.

This quarter's results yet again underscore our differentiated technologies and operational discipline. In addition to our continued long-term investments in new technology and solutions, the Crane business system, the machine that we described in great detail at our March Investor Day, combined with our unique culture, enables our teams to adopt to the many unforeseen events that we're all facing every day and deliver on the results.

Our pending acquisition of precision sensors and instrumentation from Baker Hughes remains on track to close at year-end, and our strategic outlook for these businesses has only improved over the last 3 months. Many work streams are already well underway to ensure a seamless integration and create shareholder value starting day 1.

Our balance sheet remains very strong. Our pipeline of acquisitions remains robust, and we remain very active on the M&A front. And there's a tremendous amount of momentum and continued innovation happening at Crane, but Alex will cover off.

As we exit 2025, we are once again raising, but also narrowing our full year adjusted earnings outlook to a range of $5.75 to $5.95 from our prior view of $5.50 to $5.80, given our backlog, consistent execution and year-to-date performance. That reflects 20% adjusted EPS growth at the midpoint compared to 2024. Another outstanding year for Crane and our shareholders. And as we look to 2026, our consistent investment thesis remains firm. The strength of our underlying business, our strategy and our capabilities, in both operational execution and commercial excellence, support our 4% to 6% organic growth assumptions, leveraging on average of 35% into next year. We will provide greater detail on 2026 expectations as well as PSI in early January once we officially close on the acquisition.

Now let me pass it over to our Chief Operating Officer, Mr. Alex Alcala to provide some color on the current environment and segment performance.

Thanks, Max. First, let me comment on the pending acquisition of PSI. As Max said, the acquisition remains on track to close January 1, and the integration planning is well underway and progressing smoothly with the existing Baker Hughes and Crane teams. As you would expect, my team and I, as well as the PSI leadership have been intimate with all posting details on integration planning to accelerate strategic execution in 2026.

As we discussed last quarter, each brand will contribute a robust and complementary technology, further strengthening the Crane portfolio. Combined with the power of the Crane Business System, PSI will be accretive to our financial profile, both margins and growth within the next few years and our confidence in what we'll deliver has only increased as we work closely with the PSI team on a daily basis planning for day 1.

In terms of further M&A, our funnel of opportunities remains full. The deals we are working on today include opportunities in both aerospace and electronics as well as process load technologies, and most range and deal size purchase price from $100 million to $500 million.

Now some thoughts on the segments in the quarter. Starting with Aerospace & Electronics. Aerospace and defense markets remain very strong. The backlog we built and new programs and opportunities our teams have won provide a strong visibility into 2026 and beyond. On the commercial side of the business, activity remains healthy with Boeing and Airbus continuing to ramp up production and aftermarket activity continued at elevated levels.

On the defense side, we continue to see solid procurement spending and a continued focus on reinforcing the private defense industrial base given heightened global uncertainty today.

Looking ahead to the balance of 2025, we now anticipate core sales growth for the year to be up low double digits compared to our prior view for core growth to be up single digits to low double digits. And that growth will be leveraged at 35% to 40% for the full year.

Our guidance assumes growing year-over-year OE sales, partially offset by decelerating year-over-year growth rates in commercial aftermarket in Q4 that we previously highlighted. Overall, a really outstanding year.

We also continue to win new business and pursue new opportunities across the segment. That gives us confidence that we will continue to see above-market growth for the remainder of this decade.

Let me highlight a few examples. First, Crane continues to win fund and next-generation military demonstrator programs for our brake control systems for both fixed and rotary wing platforms. Second, we continue to advance our vehicle electrification solutions. Heightened by the launch of our new 200-kilowatt traction motor inverter generator control of product at the Association of the United States Army or AUSA trade show in October. We remain actively engaged with defense vehicle OEMs regarding collaboration on the common technical trust and new combat vehicle programs. Related to this, I would comment that over the past 2 years, customer vehicle development efforts were fragmented with numerous concepts in play and uncertainty around government funding.

This year at AUSA, however, the landscape was noticeably different. The focus was clear: industry attention is now centered on competing for the [indiscernible]. This shift aligns precisely with the strategic direction we've defined for our defense power business. With government funding priorities now well established, vehicle primes are concentrating their efforts almost exclusively on winning these programs. Very exciting for us.

And last, activity around air defense systems remains very robust. Golden Dome is still being defined by the DoD. However, we strongly believe we will benefit directly to existing positions of today on systems like [ LAMS ] radar system and Patriot Missile programs. Among others that will certainly be part of Golden Dome solution let alone pure increased demand drivers.

We also anticipate additional growth from new emerging opportunities that our technology is well suited for. Specifically in the scaling and upgrades of radar, counter unmanned aerial systems, high-power energy and space-based assets for Golden Dome.

With the record backlog and pipeline of opportunities, Aerospace & Electronics remains poised to well outperform its markets over the next decade. Very proud of our team.

Our Process Flow Technologies, similar to Q2 end markets are stable, and we remain well positioned to outgrow across the cycle. We continue to see strength in segments such as wastewater, pharmaceuticals, cryogenics and also power, while chemical markets remained soft, yet stable. As a reminder, we have systematically repositioned our portfolio over the past decade around our core end markets where we have the strongest competitive position and the most differentiation, enabling sustainable market outgrowth. Tactically, we have proven our ability to react to any changes in demand quickly, and we will remain nimble, taking any necessary and appropriate price and productivity measures required.

Our focus and discipline enabled us to continue to win in this segment despite the slower growth environment, and that was reflected in Q3. For example, our municipal wastewater pump business is on track for double-digit growth driven by strong momentum in new product adoption. At WesTech this year, we introduced the highest [indiscernible] wastewater pump, featuring advanced noncloud and polos technology with leading efficiency metrics. Shipments began in Q3. And as we head into 2026, a robust sales funnel gives us confidence in delivering another year of strong growth for this business.

Also, our collagenic business continues to execute commercially with a number of orders across aerospace and defense, space launch, satellite production and semiconductor investments. Overall, we secured double-digit growth in new orders in the quarter within Cryogenics, reflective our front end engineering support and manufacturing capability as a differentiator in the market. Additionally, we won a 6 million large pharmaceutical orders supporting capacity expansion to manufacture GLP-1 drugs. Our ability to deliver high-performance solutions for critical pharmaceutical application continues to differentiate us in a competitive market and positions us well for future growth in this space.

And lastly, despite the headwinds facing the chemical industry, our teams continues to secure targeted opportunities largely tied to preventive and maintenance and technology upgrades. Looking ahead to the balance of 2025, given our line of sight today, we maintain our view for core growth to fall at the lower end of our low to mid-single-digit growth range that we guided to last quarter. But with greater margin expansion as core volumes were leveraged at the higher end of our targeted range for the full year despite tariff headwinds.

Overall, both our businesses remain well positioned to continue to deliver outstanding results into 2026. Now let me turn the call over to our CFO, Mr. Rich Maue for more specifics on the quarter.

Thank you, Alex, and good morning, everyone. As we were getting ready for our Q3 earnings release this past month, and as I reflected on the consistency of our execution and overall results, generally, a movie quote came top of mind that one of our investors mentioned at a recent sell-side conference in describing our consistency. One of my favorite actors, Ryan Reynolds, had this moving while portraying AAA-rated executive protection agent, Michael Brice, in a romantic and touching comedy to Hitman's Bodyguard, when describing his job. Boring is always best. I have heard from many of you and appreciate all the movie quote suggestions that you have all sent over the last year. So feel free to send me your best thoughts on lines in the future that tie to Crane in your view. And anyone suggesting a quote that we actually use on our call will receive a free Crane coffee mug autographed by me.

In all seriousness, while the environment is certainly not boring, our story remains unchanged and our teams continue to execute to win, driving results above expectations in the most consistent and boring manner possible despite the well-documented headwinds we are all facing every day. And with that, let me start off with total company results.

We drove 5.6% core sales growth in the quarter driven primarily by the ongoing strength within Aerospace and Electronics. Adjusted operating profit increased 19%, driven by continued strong net price of -- net price and solid productivity. In the quarter, core FX central backlog was up 16% compared to last year, reflecting continued strength at Aerospace & Electronics and core FX-neutral orders were up 2%.

From a balance sheet perspective, while we are in a net positive cash position at the end of the quarter, we completed financing with our bank partners for our pending acquisition of PSI. We entered into a credit agreement that included a $900 million delayed draw term loan and a $900 million revolving credit facility, both maturing on September 30, 2030. We expect to finance PSI primarily with the proceeds of the term loan and cash on hand, leaving the $900 million revolving credit facility available for further M&A and normal working capital management.

And consistent with our prior commentary, after the PSI transaction, our net leverage will be just over 1x, still well below our 2x to 3x targeted range, leaving us well positioned for further M&A.

With respect to tariffs, we continue to expect the gross cost increase to be roughly $30 million for the year, inclusive of the impact of the Section 232 tariffs, so no change there. And as we said last quarter, we expect to offset tariff impacts through price and productivity and our teams are prepared to react appropriately to any further changes that may occur in this dynamic area.

A few more details on the segments in the quarter. Starting with Aerospace & Electronics, sales of $270 million increased 13% in the quarter, nearly all of that organic growth. And even with the continued high level of course, sales growth, our record backlog of just over $1 billion, up 27% year-over-year, was up slightly sequentially. Core orders were up 5%, in line with our expectations as some orders that we anticipated later in the year were received in the first half. Again, no surprises and continued strong demand broadly.

Total aftermarket sales increased 20% with commercial aftermarket, up 23% in military aftermarket up 12%. And OEM sales increased 10% in the quarter with both commercial and military, up 10%. Adjusted segment margin of 25.1% expanded 160 basis points from 23.5% last year, primarily reflecting strong net price, solid productivity and the impact from the higher volumes. We expect operating margin to be modestly lower in Q4 due to typical seasonality and less favorable mix between commercial OE and aftermarket.

At Process Flow Technologies. In Q3, we delivered sales of $319 million, up 3% with flat core performance in the quarter, along with a 1.6% benefit from the Technifab acquisition and 1.5 points of favorable foreign exchange. Compared to the prior year, core FX-neutral backlog decreased 5% and core FX-neutral orders were down slightly as expected. Adjusted operating margin of 22.4% expanded again and in the quarter was 60 basis points higher than last year, driven by strong productivity, mix and net price inclusive of tariff headwinds in the quarter.

Moving to guidance. There were a couple of nonoperational changes below the segments. We now expect corporate expense of $85 million, modestly above our prior view of $80 million during -- due primarily to M&A activity. We also now anticipate net nonoperating income to be closer to $7 million, up from $4 million due to higher investment income on our cash balances. And a quick reminder that this nonoperating income also includes about $9 million of business interruption insurance recovery recorded in other income expense related to Hurricane Helene, around $6.7 million of which has been recognized year-to-date and with $2.7 million in the quarter.

And last, our tax rate for the full year will be slightly lower with us now estimating a 23% tax rate for the full year versus our prior estimate of 23.5%. Those 3 nonoperational items net to a very slight benefit of about $0.01 with the other $0.19 of the guidance increase at the midpoint coming from the segments. Operationally, we didn't change the full year core growth guidance range of 4% to 6%, but we now expect to be in the upper half of that range given the strength at Aerospace and Electronics, and that growth should leverage at our normal rates on a full year basis.

So given our excellent results to date and our current view on Q4, we are raising adjusted EPS guidance by $0.20 at the midpoint and narrowing the range to be within $5.75 to $5.95, again, reflecting 20% growth year-over-year at the midpoint.

Overall, another outstanding quarter, another outstanding year against a very dynamic macro backdrop. And with that, operator, we are now ready to take our first question.

[Operator Instructions] Our first question is coming from Matt Summerville with D.A. Davidson.

A couple of questions. First on PFT. Can you talk about -- if the expectation is that the business is up organically low single digits for the year, if you look at the nonchemical portion of PFT, how does that look relative to that low single-digit number? And then on the chemical side, what specifically you expect out of that end market this year? And maybe how you're thinking about that exposure, which is fairly large for the segment through, say, an 80-20 type of overlay? And then I have a follow-up.

Yes, Matt, thank you. This is Alex. So just to frame up the markets and what we're seeing and responding to your question, I think regionally different than by market is different. As a reminder, we're in PST, primarily almost half or a little bit over half on Americas-based business, which is a positive in this environment.

So first, speaking to the nonchemical market, wastewater, for example, North America based, we're seeing double-digit growth in that business driven by just investment in the aging infrastructure environmental. So that's been strong. We expect that to continue to be strong going into next year. Cryogenics through our new acquisitions in various applications, semiconductors, electronics and space launch I mentioned last quarter, just driven by that commercial aerospace market of launch, and we participate in the platforms and the build-out of platforms. That's been growing also double digits, and we're gaining significant share as well.

Just recently visited with the team there, and they were highlighting their commercial excellence in the front end where they have a tablet now on their own site, they're able to sketch the project converted into a drawing with this application, send it into the front end and really reduce the lead time, which is important to our customers. So doing very well. Also highlight pharma, in particular, in North America, strong growth there this year. We are seeing this reshoring activity happening in North America. We expect that to continue in the U.S. Big project that we won with a key customer related to the deal P1 drug as they're expanding and producing in the U.S. We expect more of those investments to happen.

And also in power, very North American-based driven just by the demand and power that everybody knows about AI, data centers. So those are all the nonchemical markets that will highlight, that are positive, and we continue to see positive going into next year.

When we think about chemical, also varying by region. So North America, we've seen some good projects this year, good activity on expansions, productivity. So a reminder, in Americas has the advantage of this feedstock cost event. So even though there's capacity globally, customers have advantage to investing in the U.S. and expanding and getting more output. So that's moving in a positive way. And also Middle East, those are the 2 markets that will highlight in chemical that have been positive and then softer Europe and China as well have been down.

As far as our exposure in Chemical, how we think about it, to answer your question -- your second part of your question. Look, the chemical market, there's a lot of things that we like in the applications that we play, very critical, corrosive, toxic abrasive applications that give us an opportunity to differentiate, add value for our customers. And so we like that. Obviously, the cyclicality of the market sometimes is a challenge. So as you know, over the last decades, we've worked to reshape the portfolio, investing in cryogenics, organically and organically wastewater and we'll continue to do so. Highlighting our recent PSI acquisition as well in the markets where they play in nuclear and aerospace, differentiated technology, also wastewater.

So we'll continue to invest in these higher growth markets, but maintain our current presence in chemical and keep building on that. And overall, we'll continue to save that underlying growth in our PST segment.

And then just another one on PFT, the margin upside you saw in the quarter, maybe help parse out what the key drivers of that upside may have been, whether it be price/cost mix or just cost out and then how we should be thinking about those various levers at a high level as we think about next year?

Yes. So as we think about PST, the journey we've been on, right, for the last decade growing and delivering more than 100 basis points, or close to 100 basis points on average, those are driven by several factors. One is our continued innovation, new product launches that we've highlighted in the past, our new product sales keeps growing as a percent of our portfolio. The new products are in these target markets more differentiated and we're able to have higher margin because of that. And then we're driving commercial excellence, value pricing, standing up for the technology and the problems we're solving for our customers. And third, this traditional relentless focus on operational excellence and weight elimination, which is -- which is core. So I think that would highlight those 3 elements.

I think what's different in this environment is this tariff dynamic, which I've been very, very pleased with how the teams have been able to manage that through both price and supply chain, which I think is a real differentiator for us to be able to do that and not only maintain, but expand our margins in this environment that speaks to the quality of our portfolio and the quality of execution from our teams.

Our next question comes from Justin Ages with CJS Securities.

I was hoping you mentioned in PFT some softness in chemicals. But just wondering if you could comment, maybe you're seeing signs of ongoing stabilization or maybe return to growth? Just trying to get a sense of when that might rebound?

Yes. So we're definitely seeing it stable, right, throughout the year. In the first half, we hit some big projects, projects continue to move more so in Middle East and North America. MRO globally has been stable throughout the year. So that's been a big part of our success. So definitely no signs of deterioration, stability. And it's just a matter of when this will start recovering at some point, we expect next year for chemical. But no clear inflection yet, but stable. And expect it to improve next year.

Justin, as I think about what's taking place globally, and we've -- and everyone else has had to react to changes in the tariff structure and other news that happens on a daily basis. But again, I'm pleased with how we continue to stay very agile to react as appropriate. I'm one that -- I mean, within our control, I'm incredibly proud of what we continue to drive within our control. If I look at the broader market, I'm more on the bullish end just generally because I believe that while there's a lot of noise right now that we're all having to deal with, I believe that this will be settling out here towards the end of the year into next. Just my own reading of the tea leaves and the administration's approach and I'm more optimistic and planning around it for our teams in terms of what that means.

It's still early days. We have our planned meetings coming up here in the month of November to really kind of lock in what it means for 2026. But I'm more optimistic of where all this shakes up and then what that means for the broader global economy. What that's worth. My opinion is not worth anything more than anyone else.

Yes. That's worth a lot. I appreciate the answer. And then switching to the PSI, just back of the envelope, the margins a little bit under Crane. So can you just talk about applying the Crane business system or the machine to PSI and what you're expecting to see in margin improvements once you've integrated them?

Yes, Justin, this is Alex. So we haven't close the business yet. We haven't closed the deal. We expect that on January 1. So we'll provide more details after. But generally speaking, these businesses have incredible technology, very stable aftermarket. We expect these businesses to become one of our best businesses within Crane from a margin and growth standpoint in our portfolio.

And the improvements that will drive are not different than what we've been able to do, particularly on the PFT side through driving overall CBS. So these will become accretive to our profile over the years. They have all the fundamentals, and I'll speak into more detail of how the different elements will play out or how we see them play out with the coming year. But I can tell you, I'm very, very confident that we will deliver with this acquisition. Very pleased with everything I'm seeing and our preparation flexing it.

We will move next with Damian Karas with UBS.

Congrats on the progress. So I wanted to ask you a follow-up question related to margins. And in particular, your guidance for the year, it seems like it's -- I'm taking in a step down in fourth quarter margins, definitely a notable break from the strength you've been exhibiting so far the first 3 quarters of the year. And I think even on a year-over-year basis, the incremental margin is definitely well below kind of the 35% to 40% plus you guys aspire to. So could you just maybe provide a little bit more color around that margin expectation for the fourth quarter? Any moving pieces there?

Yes, sure. Damian, this is Rich. The primary area would be similar to what we talked about the last couple of quarters with respect to the year-over-year headwinds that we're going to see in commercial aftermarket. Now I would admittedly say that we actually had a little bit of a better quarter here in Q3, and so we didn't see as much of that headwind. We do expect that in the fourth quarter.

A couple of items that I would point to is that we did see a few initial provisioning orders that we benefited from in Q3. We saw a decent claim recovery. So we did see a few things that did benefit us here in the quarter. And then what I would also say is 2 other things. One, we're continuing to see the OE build rates continue. And so that's a natural mix, unfavorable mix element, although we are excited about it. And then the second item would be when you look at the fourth quarter, we tend to have lower production hours. So there's a little bit of seasonality in what we would typically exhibit in the fourth quarter at A&E.

Now all that said, I would tell you that on a full year basis, we're going to probably be at the higher end of our targeted leverage range for A&E and will exceed at PFT. So, Yes, we had a great 9 months. We still expect a great fourth quarter, but it will be a little bit more muted for those reasons.

Understood. That's really helpful. And sorry if I missed any comments related to this earlier kind of hopping around a bunch of calls today, but would you guys give us your thoughts on the U.S. government shutdown? Are you seeing or expecting any impact from that? And just kind of thinking about that, should this continue into the extended future?

Yes. I mean right now, we don't -- it's not impacting us today. So the things that we would look to are paying bills and things like that, and we've got no signals of that at all. So far, so good in terms of any impacts to Crane. And at this point, there's nothing on the horizon that would suggest any impact to us here even as we get into the first quarter.

Our next question comes from Scott Deuschle with Deutsche Bank.

Alex, you mentioned power and data center demand as being a supportive market for PFT in response to Matt's question, I think. I guess, can you share a bit more detail there on what you're seeing in that market and how it's benefiting Crane?

Yes. For sure. So power, primarily U.S.-based for us less than 10% really our portfolio in PST. We've been in this business for a very long, long time with our valve portfolio primarily. And what we're seeing is these power demand that is well documented and the investment in combined cycle -- natural gas combined cycle plant around the country. I think just this year, there's more than close to 30 power plants that are moving forward. So we see content there. Natural [indiscernible] plants are still a very economic ways to produce electricity, very reliable. And as you know, abundance of natural gas in the United States. So that is our participation there with our valve portfolio, and we expect that to continue into next year.

Funnel has been increasing, projects are up.

Funnel has been increasing. I think they can't build them fast enough basically on the natural gas side.

And do you have any content on smaller reciprocating engines like those that Caterpillar makes?

No. No, we don't have content in that.

Okay. And then, Max, are you investing organically at PFT to increase your ship set content on [indiscernible]. Obviously, some big news out this morning. So just curious if that can maybe be a bigger driver for you all than your historical content suggested?

Yes. Thanks, Scott. But you could argue that order stokes long term is absolutely aimed at gaining content on the AP1000. We -- the team is already underway with technology investments to penetrate the pressurized water reactor in addition to boiling water. So long term, absolutely, as we continue -- the current team is doing a phenomenal job and has done as we have when we first won AP1000 content many, many years ago to the tune of about $10 million per ship set. We're identifying another 30% increase in content right now that we're bidding on capturing additional share gain also. So both organically as well as inorganically as we move forward for sure.

And that was an exciting announcement today -- exciting announcement that I think in addition, just the announcement today related to the $80 billion investment that the government announced and support, I think you're just seeing this change over time that will continue this trend of nuclear as part of a broader global solution to clean and efficient power that will continue to bode well for us in our position also.

Our next question comes from Nathan Jones with Stifel.

I'm finding it a bit hard to concentrate with the promise of a signed Rich Maue Crane coffee mug, I guess. I guess just another question on the PSI businesses. Max, you -- one of the comments you made was that you, from a strategic perspective, are more bullish on that business than you were 3 months ago. Maybe you could just talk a little bit more about what you've learned in the last 3 months that makes you strategically more positive on the outlook for that business?

Well, I'll let Alex chime in as well. But it starts with the team itself. And I think we just continue to be impressed with the caliber of the talent that's going to be joining Crane. I just love the openness and transparency that we've been met with to date. So that feels really good in terms of integration, integration planning, working well together. It's what I know is taking place already. This is not a team that has stood still. They've been investing for growth, and we're going to get -- quickly get aligned strategically as we're moving forward.

It just all feels very, very positive from that standpoint. Sharing of data, kind of getting clarity strategically on what we're going to be working on together from day 1. It's been a fantastic relationship. What else would you highlight, Alex?

Yes. I think over these months, Nathan, just giving more clarity on the specifics of how we're going to collaborate and work together, the detailed plans and the opportunities just having a very clear line of sight to the gains, starting with the Aerospace and [indiscernible] in the nuclear also with Panametrics, and just a level of detail that we've been able to get and the plans of what we're going to prioritize, and we're going to -- where we're going to be able to have quick gains gives us these higher confidence where we were 3 months ago. So it just keeps increasing as those clients get more defined and more details get clarifying.

And I guess I'll just ask a broader question about 2026. You guys have always been pretty willing to share your outlook. So I mean, our -- you're obviously going to get towards the top end of the growth, 4% to 6% growth target this year. We have seen organic growth slow down a bit as we've gone through the year. Maybe you could just talk about do you think we're in the 4% to 6% range next year, maybe it will be a little more towards the middle of next year? Or just any thoughts you have on how the growth outlook might shake out for next year?

Well, it's still early days. We've got our planned meetings coming up. There's a lot to monitor here in the fourth quarter. Having said all that, based on what I know today, based on what we feel today based on thinking through the end markets and how that will continue to play out. It still feels like our investment thesis holds into next year, Nathan, from that standpoint.

Okay. I guess we'll wait for the updates.

Our next question comes from Jordan Lyonnais with Bank of America.

[indiscernible] defense and how should we think about the opportunity for you guys if we start to see announcements for FXX, CCA downselect in some of the larger group 4-5 drones, have been kind of reviewed?

Yes, Jordan, this is Alex. On the FXX or the -- just the AnGes platforms, we are very well positioned on all the demonstrators really. So we've been successful in having multiple horses in the ray. So we're going to see strong benefit from that. On the CCA activity, I think we've mentioned we've already secured a position with one of the leading emerging players in that space with TCA, which is going to start ramping up here in the years to come.

And then in general, in drones, right, we're actively involved overall. I think, as you know, there's a wide range of drones that exists from the small battery powered and launch, those that are called like Switchblade or Phoenix, and we do not participate in that small where we do play is on the medium or larger drones that are part of that CCA, like those that you see called out like [indiscernible] Global Hawk, Predator. So we're well positioned there with various solutions, and we expect to benefit that as that market continues to grow.

Got it. And then on -- for how strong demand has been book-to-bill in Aerospace & Electronics, how are you guys thinking about the current capacity you have in place to meet that demand?

As far as capacity, we're -- we've been -- we're well prepared to meet the demand and the ramp-up rates of the OEMs, both Airbus and Boeing. I think teams have done a really nice job preparing for that, even taking advantage of preparing inventory buffers to execute at a very high level to support those ramp rates. So quite confident in our ability to support.

Our next question comes from Tony Bancroft with Gabelli Funds.

Congratulations on the great quarter and all your great work. I recently toured a new facility and was pretty overwhelmed by the amount of automation that was going into it. And I just want to get your view on sort of automation and you've talked a lot about -- it looks like you guys have a lot of backlog growing and -- I mean, on the commercial side, it sounds like you're ready to go with capacity, but it sounds like there's a lot of growth on both sides of the businesses and in other areas, obviously, things like Golden Dome and all that. Maybe you could just talk about how you view automation in the long term? And what could that get you maybe on a margin basis? And then just maybe overall ability to grow faster?

I'll take a stab and then if Alex says anything else. Look, we've always looked at enhancing productivity, easing the work by trying to error-proof and take out cycle time. What's manual, how can we automate? We have a lot of success with cobots across the organization on a localized level. I would be completely honest, Tony, I'm not sure what the technology is that you saw, what type of facility. There are certain technologies that just warrant themselves to complete automation from start to finish and that level of investment. There is no one Crane site that I can think of that would have that type of vision. It will continue to be -- while automation is clearly a direction that we will go down, it tends to be very spot based and specific to very specific tasks that continue to take out variation overburden on our associates.

At some point in the future, do you link work centers to begin to get flow, sells that flow. The human element for us will always be important in the near future with the type of work that we do across the organization. So I see it as part of the broader strategy for us holistically as we drive productivity on a number of fronts. But that is not one that you would say Crane is going to get down the path of completely automated facilities.

Yes. Just to add to Max's, like he said, very specific areas where work is difficult to make it more reliable. So we have a lot of projects in that, not factory-wide automation. The second area where we're investing in automation is just where skilled labor is difficult to get like welding. So we're trying to get more and more automated and various welding applications. So again, to summarize, more focused on specific tasks that are difficult to maintain and then trying to address skilled workforce gaps more so than fully automating a particular factor.

[Operator Instructions] We have a follow-up from Scott Deuschle with Deutsche Bank.

I'm going to be beat up on Rich with a few follow-ups. First is the F-16 break retrofit program still on track to hit that $30 million revenue target for 2026?

Yes, it is.

Okay. And then for 2025, there's essentially nothing in the base, right?

Correct.

Okay. And then Rich, is it fair to think that any organic growth accelerates next year, given what seems to be a story of acceleration across commercial OE, military and military aftermarket?

I would say that when you think about how our external guidance over the long term has been 7% to 9%. I think it's safe to say we'll be at the high end of that range at this point, Scott.

Commercial OE continues to be positive. I think what we're continuing to -- we're going to be meeting with our teams on a full plan. It's on the aftermarket discussion, right, which is -- it's been much stronger than we even anticipated coming into this year. Does that pace year-over-year on a comp basis continue? Or what does that mix look like? I think that is the unknown for us right now. Is that fair?

Yes, I do think that's fair. I think our algorithm there still holds. But what elements would be OE versus aftermarket is going to be something that we'll be easing out over the next couple of months. But as you're thinking about it, Scott, I would -- I would look at that long-term algorithm in the way I position it where we think we're going to fall.

Okay. And then just one last one to corporate costs. PAUSE Is this level is $85 million number? Is this a level you think you can hold for next year? Or is that going to want to grow next year with PSI coming in? Anything like that?

Yes. No, we don't see it growing next year. To be frank with you. You look at what our rate is today, it's like, I don't know, 3.8%. I would expect that to go down and we're going to leverage the growth and you'll see it closer to 3% next year, all up online.

And this concludes the Q&A portion of today's call. I would now like to turn the call over to Max Mitchell for closing remarks.

Thank you all for joining us today. We often talk about the Crane business system that is our foundational and holistic operating system. Many companies claim to have some form of an operating system, and I often get the question from investors as to what makes ours unique. We believe it is the intensity of the culture, people and processes and how we apply the principles to our processes down to the smallest details, which makes the Crane business system unique. Results are celebrated, but never good enough. And every detail is important to us moving forward. As the late great Giorgio Armani said, to create something exceptional, your mindset must be relentlessly focused on the smallest detail. At Crane, our teams are relentless with the details, building a stronger and more exceptional Crane.

Thank you all for your interest in Crane and your time and attention this morning. Have a great day.

This concludes today's Crane Company's Third Quarter 2025 Earnings Conference Call. Please disconnect your line at this time, and have a wonderful day.

Welcome to the Crane Company Second Quarter 2025 Earnings Conference Call. [Operator Instructions]

I would now like to turn the call over to Allison Poliniak, Vice President of Investor Relations. Please go ahead.

Thank you, operator, and good morning, everyone. Welcome to our second quarter 2025 earnings release conference call. I'm Allison Poliniak, Vice President of Investor Relations. On our call this morning, we have Max Mitchell, our Chairman, President and Chief Executive Officer; Alex Alcala, Executive Vice President and Chief Operating Officer; and Rich Maue, our Executive Vice President and Chief Financial Officer; along with Jason Feldman, Senior Vice President, Treasury, Tax and Investor Relations, who's on for Q&A. We will start off our call with a few prepared remarks from Max, Alex and Rich, after which we will respond to questions.

And just a reminder, the comments we will include some forward-looking statements. We refer you to the cautionary language at the bottom of our earnings release and also in our annual report, 10-K and subsequent filings pertaining to forward-looking statements. Also during the call, we will be using some non-GAAP numbers, which are reconciled to the comparable GAAP numbers, in tables at the end of our press release and accompanying slide presentation, both of which are available on our website at www.craneco.com in the Investor Relations section.

Now let me turn the call over to Max.

Thank you, Allison, and thanks, everyone, for joining the call today. I want to start by thanking my teams across the world for delivering yet another excellent quarter, outperforming expectations despite an uncertain macro backdrop and dynamic environment. Adjusted EPS was $1.49 driven by an impressive 6.5% core sales growth reflecting strength across both Aerospace & Electronics and Process Flow Technologies. Core orders were also solid, up nearly 20% in the quarter, driven primarily by the ongoing strength in our Aerospace & Electronics business. This entire leadership team has demonstrated consistently differentiated execution across cycles. And once again, this was reflected in our second quarter results.

The cadence and discipline of the Crane Business System, our machine, if you will, along with our performance-based culture, enables us to make data-driven decisions quickly with flexibility to adapt as conditions change and with accountability. And the benefits of that approach are most noticeable in environments like we're operating in today. And given our consistent and unwavering investment in technology, customer requirements and commercial excellence initiatives, both of our strategic platforms remain well positioned to continue to deliver great results.

Inorganically, we also announced in June the agreement to acquire the Precision Sensors & Instrumentation businesses, or PSI, from Baker Hughes, executing on our strategy to add proprietary and differentiated technologies to our portfolio and to broaden our unique capabilities through acquisitions. Alex will provide more color on the acquisition in a moment, but I am incredibly excited about the people, the technology and the capabilities that these three iconic brands that make up PSI bring to Crane and also about the capabilities that we will bring to PSI to enhance its long-term performance.

Our balance sheet remains very strong, and we have both the financial and operational capacity for significant additional M&A. We continue to work on a robust pipeline of potential opportunities, and we are optimistic about our ability to deploy further capital on acquisitions over the next several quarters. Just a lot of very exciting activities and developments at Crane overall. As we look to the balance of the year, while the macro backdrop remains unpredictable, our backlog, consistently strong execution, and our performance year-to-date gives us the confidence to raise our full year adjusted earnings outlook to a range of $5.50 to $5.80, up from our prior view of $5.30 to $5.60.

Now let me pass it over to our Chief Operating Officer, Mr. Alex Alcala, to provide some color on our pending acquisition of PSI, along with comments on the current environment.

Thanks, Max. Well, we're very excited about the technologies and capabilities that Druck, Panametrics and Reuter-Stokes bring to Crane. All three brands are global leaders in highly sophisticated sensor-based technologies for mission-critical applications in harsh and hazardous environments, extremely Crane-like businesses that are a perfect fit with our existing portfolio. Each brand contributes to a robust technology foundation along with a durable and resilient aftermarket presence, further strengthening the Crane portfolio.

Combined with the strength of the Crane Business System, these businesses will be accretive to our financial profile within the next few years. The Druck brand, approximately $150 million in revenue, will be positioned within our Aerospace & Electronics segment. The addition of Druck's complementary product line meaningfully strengthens our pressure-sensing capabilities across critical applications, including environmental control systems, hydraulics and aircraft engine monitoring with strong positions in both single-aisle and widebody aircraft platforms. Additionally, Druck expands our presence into the ground-based test and calibration equipment for aerospace, further extending our technological capabilities and market reach.

As we are planning for the Druck integration and to create the optimal structure for continued growth both organically and inorganically within the Aerospace & Electronics segment, I'm also excited to announce that Jay Higgs, who many of you know as the President of A&E, has been promoted to Senior Vice President of the Crane Aerospace & Electronics segment reporting to me. Jay, who has been with Crane for 35 years has been a driving force behind the success of our A&E business. I look forward to partnering with Jay in driving further record growth and operating performance at A&E.

The new A&E segment structure now mirrors the organizational model used at PFT under Shangaza Dasent, which is also the role I held prior to our 2023 separation. This structure will give Jay greater capacity to focus on strategic initiatives and M&A for A&E going forward. And it will give us greater flexibility to integrate complementary acquisitions into our current operations in A&E as well as to continue pursuing acquisitions, including near adjacencies that can be managed as independent business entities like Druck.

Reporting to Jay will be the future President of Druck, along with a Head of M&A and Strategy for the segment, and the new President of our current Aerospace business. Replacing Jay, Mr. Joseph Mundinger. Joseph was previously the Vice President and General Manager of our largest A&E solution and has been with Crane for 13 years, a reflection of the bench of talent within Crane.

The Panametrics business, which is about $150 million of revenue, adds advanced ultrasonic flow meters and precision moisture analyzers. Similar to Druck, Panametrics will be a stand-alone entity although within our Process Flow Technologies segment reporting to Shangaza Dasent. Panametrics' sensing solutions support critical process industries by enabling accurate measurement of liquids and gases across applications such as chemical production, LNG transportation, cryogenic gas storage and wastewater treatment facilities. It is complementary adjacency to our current portfolio that expands our capabilities into test and measurement.

And finally, the addition of Reuter-Stokes, approximately $90 million of revenue, will double the size and capabilities of our existing Crane Nuclear business. With its industry-leading radiation sensing and detecting technologies, Reuter-Stokes enhances our offerings for nuclear plant operations and homeland security. It also positions us strongly to capitalize on the renewed global investment in nuclear energy. The Reuter-Stokes brand will be integrated into our existing Nuclear business under the leadership of our President, Chris Mitchell, who has been serving as the President of our Nuclear business for the past 6 years. We anticipate the acquisition to close January 1, and the integration planning is well underway and progressing smoothly, working with the existing Baker Hughes and Crane teams.

In terms of further M&A, our funnel of inorganic opportunities remains full and we continue to look to accelerate EPS growth through additional capital deployment. The deals we are working on today include a number of opportunities in both Aerospace & Electronics as well as Process Flow Technologies and they range and deal size from sub-$100 million to $1 billion.

Now some thoughts on the segments in the quarter, starting with Aerospace & Electronics. Aerospace and defense markets continue to see a very strong demand environment. On the commercial side of the business, activity remains healthy with Boeing continuing to ramp up production and aftermarket activity continuing at elevated levels. On the defense side, we continue to see solid procurement spending and a continued focus on reinforcing the broader defense industrial base given heightened global uncertainty today.

Looking ahead to the balance of 2025, we now anticipate core sales growth for the year to be up high single digits to low double digits compared to our prior view for core growth to be up mid- to high single digits. We expect that growth to leverage at 35% to 40% for the full year. Our guidance assumes continued strong sales with the ramp-up at Boeing partially offset by decelerating year-over-year growth rates in commercial aftermarket that we have previously highlighted as the comparisons become more challenging and will naturally moderate over time.

We also continue to pursue new opportunities and win new business across this segment that gives us confidence that we will continue to see above-market growth for the remainder of this decade. A few examples. First, we agreed to terms on a development contract for the XM30 demonstrator power converter in our defense power business. Second, activity around air defense systems remains very robust with Crane having secured multiple orders in the quarter. Third, Crane was also selected to supply the door signal system on the COMAC C929 widebody aircraft. Crane A&E sensing system solution will include nearly 100 proximity centers along with proximity sensor data concentrators and door indicators for ship set.

In addition, our preparation for the F-16 brake control upgrade ramp-up remains on track. And last, we are also pleased to see a significant increase in funding for the LTAM in the recent full year '26 defense budget. This is a large ground-based AESA radar program that we've spoken about many times and where we have significant content. This further increases our confidence in the long-term growth for our defense power business in 2027 and beyond. With a record backlog and pipeline of opportunities, aerospace & Electronics is poised to well outperform its markets over the next decade.

At Process Flow Technologies, while end markets have not inflected in any meaningful way since our April earnings call, we remain well positioned to outgrow across the cycles. As a reminder, we have systematically repositioned our portfolio around our core end markets where we have the strongest competitive position and the most differentiation, enabling sustainable market outgrowth. And we continue to win in this segment despite the volatile market backdrop. For example, our cryogenics business reached a record high backlog on orders driven by strong demand in space launch and other segments. We secured key orders in space launch platforms for multiple customers for over $8 million in the quarter. We continue to see our cryogenics front and engineering support and manufacturing capability as a differentiator in the market, and Crane maintains its leadership position as a supplier of vacuum insulated pipes for space launch platforms.

Also in the chemical space, our teams continue to secure key projects in demanding applications such as chlorine and PVC due to our reliable XOMOX line valves and our portfolio of line pipes from Resistoflex and Baum. Despite the overall reduction in CapEx announced by many of our chemical customers, this quarter, we booked a $4 million project for an upgrade to a PVC plant as well as a $3 million project for the expansion of a plant in Texas. And with our new high-temperature resistant diaphragm valves, our EX technology in pharma, we continue to take share, securing a nearly $1 million win with a key pharmaceutical company.

Tactically, we have proven our ability to react to any changes in demand quickly and we will remain nimble, taking any necessary and appropriate price and cost measures required. However, our strategy is unchanged and we will manage through any potential demand fluctuations without losing focus on our longer-term goals and objectives. Looking ahead to the second half of 2025 and given our line of sight today, we anticipate core growth to fall at the lower end of our low to middle single-digit core growth range with volume leveraging at 30% to 35%. So both our businesses remain well positioned to continue to deliver great results.

Now let me turn the call over to our CFO, Mr. Rich Maue, for more specifics on the quarter.

Thank you, Alex, and good morning, everyone. Starting off with total company results. We drove 6.5% core sales growth in the quarter driven primarily by the ongoing strength within Aerospace & Electronics. Adjusted operating profit increased 15% driven by strong net price and productivity. In the quarter, core FX-neutral backlog was up 18% compared to last year driven by continued outsized strength at Aerospace & Electronics, and core FX-neutral orders were up 19% compared to last year as well, also driven by Aerospace & Electronics but also modest growth in Process Flow Technologies. We are in a net cash position today. And after the PSI transaction, our leverage will be roughly 1x net debt to EBITDA, still below our 2x to 3x targeted range, leaving us well positioned for further M&A.

With respect to tariffs, as a reminder, only about 7% to 8% of our cost of goods sold consist of materials and components that are directly imported into the United States. Another 3% to 4% of cost of goods sold are in our company sales into the United States, a portion of which is exempt from tariffs. Based on current tariff rates, we anticipate the gross cost increase to be roughly $30 million for the year, down from the $60 million we noted last quarter due to the reduction in the China-related tariffs relative to when we last spoke. But this is subject to change, of course, as we move forward. And as we said last quarter, we expect to offset the tariff impacts through price and productivity.

A few more details on the segments in the quarter, starting with Aerospace & Electronics. Sales of $258 million increased 12% in the quarter, nearly all of that organic growth. And even with the continued high level of core sales growth, notably, our record backlog of just over $1 billion increased even further, up 29% year-over-year and up 9% sequentially. Total aftermarket sales increased 18% with commercial aftermarket sales up 9% and military aftermarket up 37%. And OEM sales increased 9% in the quarter with both commercial and military up 9%. Adjusted segment margin of 26.3% are record high for the segment, increased 250 basis points from 23.8% last year, primarily reflecting higher volumes price net of inflation, favorable mix and productivity. We continue to expect operating margins to be lower in the second half due to a less favorable mix between commercial OEM and the aftermarket.

At Process Flow Technologies, in Q2, we delivered sales of $319 million, up 7%, driven by solid core sales growth of 3% in the quarter, along with a 3% benefit from the CryoWorks and Technifab acquisitions and 1 point of favorable foreign exchange. Compared to the prior year, core FX-neutral backlog decreased 4%. However, core FX-neutral orders were up 4%. On a sequential basis, core FX-neutral orders were down 1% compared to the first quarter. Adjusted operating margin of 20.7% expanded 20 basis points. Importantly, core operating leverage was 35% at the high end of our 30% to 35% targeted range driven by strong net price and productivity, inclusive of net tariff headwinds in the quarter.

Below the segments, adjusted corporate expense was about $25 million in the quarter, which is spot on what I guided last quarter. Similar to Q1 and as anticipated, it was higher than our normal quarterly average because of accounting rules that require accelerated amortization of stock compensation expense for associates that are retirement eligible. So as I noted last quarter, this year stock compensation expense was much higher in the first half and will be lower in the second half. We still expect just above $80 million of corporate costs for the full year.

I also wanted to address some questions we received about the $14 million swing in net nonoperating income compared to our previous guidance. The largest component of that difference was just a change in geography on how we treated the insurance recovery related to Hurricane Helene in September of last year. As we discussed in January, our guidance included about $9 million of business interruption insurance recovery, $4 million of which was recognized in the second quarter. Our original guidance assumed that recovery has a separate component of operating income. In our revised guidance issued today, we have moved that $9 million recovery to nonoperating income, which we believe is a better presentation and more clearly illustrates the strength of our core operating performance in the quarter. This change does not impact segment income or EPS in any way compared to our original guidance. The remaining $5 million difference reflects greater than expected payoff of our 2023 term loan, and better investment income on our cash.

For the full year, as Max noted, we are raising our outlook to a range of $5.50 to $5.80, and from an earnings cadence perspective the second half will be weighted more towards Q3, consistent with typical seasonality. Outstanding quarter, teams continue to be energized and motivated, and if not for some of the events outside our control and keeping us penned in, we would really be flying high. Reminds me what Mark Wahlberg said, as detective Terry Hoitz in the thrilling crime drama, The Other Guys, when he screamed. "you can't keep me cooped up in here. I'm a peacock. You've got to let me fly."

And with that, operator, we are now ready to take our first question.

[Operator Instructions] Our first question is coming from Scott Deutschle with Deutsche Bank.

Rich, I'm still recovering from that one. It was pretty good. So Max, you grew the backlog at A&E by 29% year-over-year and 10% sequentially. Obviously, it's just a strong environment broadly that maybe you can go around the horn and talk about the areas of the A&E business, maybe even the specific programs that are driving this recent booking strength.

Yes, Scott, I'll take that. It's Rich. Look, I would start off by saying that it is fairly broad-based across both commercial and military as well as broad-based across customers, right? So not one unique customer set. If I was to point out just a couple of areas where we were -- where we saw some outsized strength, I would say air defense in particular was fairly strong with some orders that were not -- they were not actually for 2025. They were for '26 and '27 primarily. And I think you're familiar with some of those programs that are in the air defense that we have.

I would say another area was a long-standing program that we have legacy program in the C4ISR space; communication platform where we have some power solutions, also a pretty sizable order in the quarter and then also was for '26 and '27 as we think about the backlog. And then if I was to pick another out on the comm OE side, Alex highlighted in his prepared remarks, successes we had on the C929 program, but we also had some really nice order flow coming in for the C919 if I was to pick something out. And again, for 2026, demand satisfaction and forward. So just really, I think to come back to it, it was broad-based, both military and commercial. But hopefully, those are some examples that are helpful.

Yes, that's helpful, Rich. And then to get to your EBIT guide, I do have to have the A&E margins drop a lot in the second half, I think, down to like a 30% incremental margin, which is below your own kind of longer-term framework. I guess what's going to drive that, particularly since I think you do make money on OE and you should have volume leverage on the higher sales overall in the second half?

Yes. I would say very consistent with what I had mentioned in my prepared remarks last quarter that the mix shift between comm OE and aftermarket will clearly go in the direction where comm OE is increasing pretty significantly. We had a very nice print on the comm OE side here in the quarter, but that's going to go up, call it, 10%-ish when you look at Q3 and then sustaining at that level. And then with commercial aftermarket, similarly, that comp is going to be very difficult.

If you look back to our Q4, it was the highest level of commercial aftermarket that we've ever shipped. And so we faced that. Still good levels, I would say. We're not saying that it's going to decline. But on a year-over-year basis, it will be a challenging comp. In the quarter here in Q2 as well as in Q1, we enjoyed some benefits from engineering programs that really fall through nicely. We don't see that opportunity in the second half. So those are some of the elements, I would say. So yes, at 30%, perhaps a little bit on the lower side and perhaps exhibiting a little bit of caution on our side.

But I have to reiterate on a full year basis, it's still 35% to 40% and we feel comfortable with that construct going forward. In any given quarter, there can always be a couple of items here or there, but that's the right way to look at the business in the medium and long term.

Right. Okay. And then last question, sorry to be a pig, but is the GTF program a material part of your commercial aftermarket mix yet? And then can you give us, Rich, any sense for how quickly GTF aftermarket revenues have been growing in the last couple of quarters?

Alex, do you want to take that one?

Yes. Scott, it's Alex. So I think the second part of your question first, we're seeing pretty strong growth rates in the aftermarket and repair and overhaul. For that program for the GTF, I think this year, around 15% or so, and those rates accelerate. So next year we're expecting somewhere around 30% growth as we see how the projections and the flat hours come together. That said, it's still today a relatively small part of our aftermarket sales, to address the first part of your question, less than 5% today of commercial aftermarket sales. We're growing. So an important platform for us.

And our next question comes from Matt Summerville with D.A. Davidson.

Can you talk a little bit about the cadence you saw throughout the quarter in PFT orders and what you're seeing in July? And I'd always appreciate if you can do a little bit of a deeper dive on the business in terms of end market and geographic trends. And then I have a follow-up.

Yes, Matt, this is Alex. So for PFT, the quarter played out pretty much as expected. We mentioned orders were up 4.7% year-over-year, sequentially up a little bit. So I think starting at the high level, overall, the market continues to be stable, somewhat sluggish. I think there are some areas of strength and other areas that are soft.

I think I'll start with the softer side. As expected and as we anticipated coming out of Q1, not really surprised on the chemical market where we're seeing some softness, and we included that in our guidance. Projects pushing to the right. I think Europe, in particular, has been the softest with other regions holding in there better. Customers have, as you know, lowered CapEx expenditures this year, but it's been relatively stable for us. And we continue to win some important projects, as you heard in my remarks. So I think chemical is soft but stable.

Bright spots in the market for PFT, cryogenics is growing at double digits. I mentioned space launch, biopharma. These acquisitions that we've done over the last couple of years are really growing very strongly. Water, wastewater segment, also seeing that strength. So that's how we ended up with that result on orders. I think when we look at the second half, we expect something similar, stable, and we're still going to see some growth in PFT on the low single-digit side on core growth sales for the year.

Got it. And then as a follow-up, if I think about 2025 in the $550 million to $580 million, if I wanted to try and derive a cash EPS number, Rich, what would be your acquired intangibles amortization for this year? And are you thinking any differently about guiding towards cash EPS going forward?

Yes. We're -- I mean we're not going to make a final decision until we provide guidance, but that's something that we're seriously considering as we've said previously.

It was a two-part question. Did you...

I didn't catch it, sorry. For '25, if we were to look at our '25 guide, it's not a material -- yes, it's about $7 million.

Yes. Let us grab that for you.

We have the math, but it's not -- as you'd expect, we're modeling that stuff as we're thinking through the details. So we do have it. We'll make sure we share that.

And then just I'll add in one final one quickly. Can you just give a little bit of insight into the more immediate-term actionability in your M&A funnel, which business segment that may be tilted more heavily towards?

Yes. It's still balanced, Matt, across both. I would say that there's nothing active immediately. There's a number of things in queue. There's some things that we know are coming across -- expected to come up from market, some others that we've been working long term. As we've described in the past, we have a rich, robust funnel of opportunities both what we track within conglomerates that make strategic decisions, private equity that's coming out, private companies that are family run that we establish great relationships with over the long term. The funnel is very, very full on both PFT and A&E, balanced. What's in front of us is balanced. Nothing imminent within the next quarter for sure. Hopefully, that helps.

And our next question comes from Jordan Lyonnais with Bank of America.

So on the Big Beautiful Bill and the R&D tax changes that have come through, how are you guys thinking about the impact there?

Yes. Well, we're still studying it, as you might imagine, looking at the R&D capitalization as well as accelerated depreciation for CapEx, so things that we're still modeling. We would expect a modest improvement in free cash flow this year and next year but nothing overly significant, but it will be a nice modest improvement, I would say, less than 5% of our total free cash flow.

Got it. Okay. And then on Druck, could you guys just talk through a little bit on why you're confident in the value you guys are going to be able to add? What should it look like? And what does that do going forward?

Alex, you want to take that?

Yes. So I mean, we love these businesses, Jordan. We love the technology, the robust aftermarket it has. We love the improvements that the team has driven, especially over the last few years with the recent management that they implemented. So at a high level, these businesses have all the fundamental characteristics to be really one of the best businesses in Crane as we execute our integration plan over the next 5 years and deliver that 10% ROIC.

So we have a bit of a different vision of how we will operate those businesses versus Baker. And if you -- for those of you that attended our investor meeting in Fort Walton Beach, you heard a little bit about our playbook and driving the CBS machine. I can tell you that we have very clear line of sight on how we're going to achieve that and potentially some upside. And we'll share more after closing and educate on our road map in our path to do that. But very confident and very excited that these businesses are going to be one of the best businesses in our portfolio.

And our next question is coming from Damian Karas with UBS.

Congratulations on a big beautiful deal to accompany the Big Beautiful Bill out there. Just a follow-up on PSI. So I just want to make sure, you're not really expecting any synergies, per se, but you're just planning on running the business a little bit differently to drive that financial profile uplift? And Alex, I think you made a comment that it's going to make it easier going forward to integrate complementary acquisitions. Could you just elaborate on what you meant by that?

Yes. So I think on -- first, I'll address the second part of your question. So we reorganized to create a segment similar to what you've seen in the PFT side, which is the role I had before the split. You may recall, we have 5 independent business units on PFT reporting to a Senior Vice President, Shangaza Dasent, in this case. So on the A&E side, with this change, Jay Higgs is now a leader of the segment, and two presidents will report to him, the future President of Druck and Jay's replacement, which is Mr. Joseph Mundinger, a long-tenured Crane leader.

So this structure allows us to incorporate future stand-alone businesses under the A&E segment right under Jay under -- just how we operate PFT. So from that regard, that's why we're prepared to do more and it positions us to continue to execute on inorganic growth.

I think on the synergy side, there are some synergies from the aspect of Druck has a very strong content on aerospace. It's not necessarily run in the traditional aerospace model. So with our skill sets and customer relationships and processes, we're going to see some benefits and synergies on the aerospace side in particular. And then on the execution of the CBS machine, we're going to see the majority of the gains with these businesses, just like we've done in the last few acquisitions. .

But your summary is pretty spot on, Damian. In the traditional sense of synergies, it's less about the synergies. It's more about the focused investment, commercial excellence, execution in each of these businesses and the focus that we're going to drive and leveraging broader synergies in terms of operating models, if that makes sense.

Yes, understood. And Rich, you alluded to earlier on the price productivity strength that you saw in the second quarter. Could you maybe give us a little bit more color on kind of how the pricing actions you've taken have played out and how we should be thinking about pricing in the second half of the year here?

Yes. I think I would say pricing has played out as we expected and thought we were going to execute back when we issued -- had our discussion at the end of the first quarter. So we expect to fully offset that tariff incremental cost with price in the year. So a little bit of a headwind here in the quarter but nothing really to shout out about or call out. We pretty much covered it all. But yes, consistent, I would say, from here through the balance of the year on price/cost relative to tariffs.

From a margin point of view, when you look at -- our typical model is to ensure that we're holding our margin profile. So a little bit of a headwind there. That's included in our guide and included in those leverage rates here as we close out the year. .

Okay. So just to clarify, you wouldn't expect to need to take any additional price because of some of the steel, copper or the raw material tariffs?

Copper really was not material. I don't know, Alex, if you had anything.

Yes. I mean we are taking additional price offset and additional supply chain tariffs in that regard. Copper is really less than $1 million of impact on our total tariff projections, so not really a significant headwind overall. It's all around PFT primarily.

And our next question is coming from Nathan Jones with Stifel.

I guess I'll push a little bit more on PSI, understanding that you're not even going to own it for 5 months yet. It looks like to get to 10% ROI by year 5, there's going to be -- need to be some pretty significant margin expansion across those businesses. I imagine these are noncore for Baker and probably a little bit -- less a little bit of attention, less a little bit of investment. Maybe just any details you can give us on how you plan to get those margins up to kind of the place you need to be to generate that kind of ROIC?

Yes. Sure, Nathan, this is Alex. So I think if you -- just to compare and contrast, the PFT journey that you've been a part of or seeing or witnessed from 2017 on and more than 1,000 basis points of margin expansion and those fundamentals, I think what we see is a strong resilient aftermarket. We see technology that's incredibly sticky, hard to replace. We see many opportunities to adjust the model and be more efficient and reduce cost.

So were -- in those regards, has even more of the traits that we liked in some of our traditional businesses where we've achieved very, very strong margin improvement. So very, very confident on that path to significantly improve the margins in the first few years, certainly hitting that 5 year 10% ROIC or beating. I would say that our model has upside to -- any of the additional growth that will drive is all upside, right? So we have a very clear line of sight to how to increase those margins. And then there's other opportunities that can drive upside. So level of confidence is extremely high.

Maybe you can comment on what value-based pricing -- I mean, I'm sure you're not going to do it in terms of...

Nathan, I think we'll be more comfortable commenting on the full path once we're able to outline the full guidance, which we gave you in January and after the transaction is closed. And so I think we'll wait on providing some additional specificity and details to that.

Fair enough. Can't blame me for trying. I guess a last one on the A&E orders then. I'll ask last one on the A&E orders then. They can be lumpy, and you guys did talk about some of the larger orders in the quarter that stretch across '26 and '27. Do those phase in? Or are they single large orders that you would then ship in '26 and '27? And how should we think about the potential for sustainability of this kind of level of orders?

Yes. So these are -- it's -- they're in a phase in. There's not -- it's not like we received a $20 million order and it's going to hit in the fourth quarter of next year. It's a phase in. Think of it as a blanket order, Nathan, on each of those opportunities that I mentioned.

Yes. I mean I think we ship to meet the demand of the customer from a build standpoint, right? So it's not all at once. We ramp up, level load and continually ship. And then we expect orders to continue to come in and fill as we continue to grow.

And our next question is coming from Jeff Sprague with Vertical Research Partners.

Just back on PSI, if I could. Just wondering if this deal itself, do you see it kind of further opening the aperture to go further in kind of these sensing weighted end markets? And also, kind of the nature of my question is, when I look at Panametrics in particular, right, I see the ABBs and Emersons in the near neighborhood. And just wondering your kind of degrees of freedom in that space in particular, or should we view this as more of kind of a rifle shot kind of targeted situation as it relates to those capabilities?

Thanks, Jeff. I would say that the aperture has always been open, as we've discussed in the past, around sensing and sensing technologies. We like the niche position that the Panametrics, Druck and Reuter-Stokes holds even against some of the more larger competitors. There's a wide range of additional sensing solutions that are attractive as we think about it. This is going to be one of a few spaces that we'll continue to look at for continuing ongoing portfolio transformation as we move forward. I don't know, would you add anything else, Alex?

Yes. I mean I think that this test and measurement space is something that we've always targeted, tried to build on. So we'll continue to work in this space and other adjacencies both in A&E and PFT. To the other part of your question, Panametrics is positioned in this high end of the highest accuracy in these products. So in particular, flow, a distinct position versus those other competitors you mentioned and also gas analyzers.

So Panametrics was really the pioneer of the ultrasonic flow technology. So they've maintained that top highest accuracy for those most critical applications. So they do quite well and we're pretty confident they'll continue to grow. .

Great. Understood. And then, Alex, I was on a little late but I heard your comments about PFT and some of the projects slippage that's happening in some verticals. Would you characterize that as simply slippage at this point around kind of uncertainty around tariffs and the like? Or are you starting to see projects get canceled? Think of Europe chemical in particular being pretty rough, right? And tough news out of Dow Chemical last week. So that vertical market in particular.

No. I mean we don't see this big trend of projects being canceled. It's really things shifting to the right as we expected coming out of Q1. I think it varies in degrees from region to region. I think you've probably seen in Europe some of the plant closures that occurred in the chemical space. It hasn't added any significant headwind for us. But I think some just pushing to the right.

It's all based on customer demand, right? And customers waiting to see that inflection in demand of their product, which is driven by a few key factors in the economy like housing, durable goods and so forth. So as customers start seeing some recovery in those markets, these projects are moving again. And that's what we've seen when we've been in these cycles. So things will inflect back at some point.

So we'll continue to watch carefully. I mean, all the announcements coming out, but we still have not seen it worsened. So as we look into the back half, it feels more of the same.

And then, Max, on the OB3, or Big Beautiful Bill, whatever we want to call it, I think as Rich said, for 2025, we're probably just working through deductibility of CapEx and R&D and figuring out what applies. But when you think about this bill going forward, do you see it actually impacting CapEx decisions leading to further investment in the U.S.? Sure it's probably early to have gotten any kind of demand signal from customers, but just interested in your opinion on that.

I'll pull back. We're going to continue to study the Big Beautiful Bill. But we've always made the right business decision regardless. Our presence in the U.S. is very strong. A number of our sites that are growing significantly are U.S.-based, many of our locations. Our historic weaknesses is in some of the LCC countries is a strength right now for us overall.

I don't see any unique decisions at this point in time specifically driven because of the bill. We always look at the right capital allocation decisions regardless, that it's the best interest of shareholder value long term. And if there's some benefits in addition because of some tax policy, we take advantage of that. But that's historically how we've operated.

And our next question is coming from Justin Ages with CJS Securities.

Question on the PSI acquisition, and maybe this is a bit early, but can you give a sense of the opportunity in nuclear? I know a lot of investors are keyed in on that. So I wanted to get your comments.

Yes, Justin, thanks for the question. This is Alex. So Reuter-Stokes has a very strong share position in the boiling water reactor installed nuclear facilities. So very mature position there over the years. So the base business is really about replacement in those. And secondly, taking advantage of any of the new nuclear plant restarts, I think, would be the second growth opportunity that are happening, and they're well positioned to take advantage of that.

And then third would be the small module reactors. I think Reuter-Stokes is positioned to be a leader in radiation sensing for small modular reactors. They actually have a formal partnership with one of the leading firms in small modular reactors. So in all three legs, I think they are very well positioned to take advantage of replacement, restarts and new technologies that come in the nuclear space.

Homeland security.

And then separate than that, Max reminded me, there's a whole space about radiation sensing, monitoring in homeland security, Reuter-Stokes has a position on that. So that will be a market that will be interesting to continue and explore and grow beyond nuclear power generation as well, medical, homeland security or other segments for their technology. .

Great. That's helpful. And then shifting to PFT. I know you have made some comments about the core segments that you're focused on. Is there any signs of brightness in those PFT subsegments that are not core? Like any pockets of strength there that you're seeing?

Yes. So outside of chemical, there's a lot of pockets of strength, right? So in the cryogenic space, as you may recall, we did a couple of acquisitions, CyroWorks, Technifab plus our organic investment. So we're very strongly positioned in the space launch platforms, which is growing. So that's driven by the increased demand of satellites. So this is a reference point. The number of launches that occurred in 2012 for SpaceX platform were 2, and then 10 years later in 2022, 60. This year, I think it's more than 160. So that's growing significantly in the cryogenic space as well as biopharma solutions. So very strong demand there.

On the -- for our Crane Pumps & Systems business in the wastewater, we're seeing high single-digit growth demand. Municipalities look to become more efficient, attacking critical problems, cost of operation. Middle East from a regional standpoint, Saudi Arabia, where we have a presence there in a facility, they continue to invest both in the process side and also just in the building services side with our building services business, water utilities, clean water as well with our Viking Johnson brand. So there's a lot of bright spots that make overall PFT strong. And as you know, those portions of those markets have become a bigger part of the overall portfolio over the last 7 years that we repositioned PFT. So definitely a lot of good areas in growth.

And our next question is coming from Tony Bancroft with Gabelli Funds.

Well done on the quarter. I know you talked about this in your comments. But just any -- obviously, a pretty big deal closed today with Baker Hughes -- not closed, assuming it was announced today with Baker Hughes and Chart. Any potential for acceleration of the PSI closing or any changes with that? I know you said it's going -- expected in January, but just maybe any color with that since you're sort of connected there, I guess, in that sense? .

Yes. Tony, this is Rich. No change in time line. We still feel like end of the year, December 31, January 1 is the way to think about the close. And tracking nicely, as Alex said, from an integration perspective and our cadence. But still end of year.

Thank you. This concludes the Q&A portion of today's call. I would now like to turn the floor over to Max Mitchell for closing remarks.

Thank you all for joining us today. Another solid quarter at Crane, and we continue to strategically cook up some exciting opportunities for the future with the latest PSI acquisition and more to come. As the late great celebrity chef and Food Network star, Anne Burrell said regarding the cooking process, "Taste as you go. When you taste the food throughout the cooking process, you can make adjustments as you go."

Strategy deployment and execution is sampled often at Crane to ensure we're adding the right ingredients and delivering the best product for shareholder returns. The PSI acquisition adds a dash of spice to kick up performance for the long term. New savory dishes being added regularly. Thank you all for your interest in Crane and your time and attention this morning. Have a great day.

This concludes today's Crane Company's Second Quarter 2025 Earnings Conference Call. Please disconnect your line at this time, and have a wonderful day.