Please stand by, your meeting is about to begin. Welcome to the Crane Company third quarter 2026 earnings conference call. At this time, all participants have been placed in a listen-only mode, and the floor will be open for your questions following the presentation. If you'd like to ask a question at that time, please press star one on your telephone keypad. If at any point your question has been answered, you may remove yourself from the queue by pressing star two. So others can hear your questions clearly, we ask you pick up your handset for best sound quality. Lastly, should you require operator assistance, please press star zero. I'd like to now turn the call over to Alison Polniak, Vice President of Investor Relations. Please go ahead.

Thank you, Stephanie, and good day, everyone. Welcome to our third quarter 2026 Earnings Release Conference call. I'm Alison Polniak, Vice President of Investor Relations. On our call this morning, we have Alex Alcala, President and Chief Executive Officer, and Rich Malley, our Executive Vice President and Chief Financial Officer, along with Jason Feldman, Senior Vice President, 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 will 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 accompany slides presentations, both of which are available on our website at craneco.com in the investor relations section. Now, let me turn the call over to Alex.

Thank you, Alison, and good morning, everyone. Crane delivered another quarter of record performance, reflecting the strength of our portfolio and many more. We have a broad-based demand across our end markets, exceptional execution throughout the Company, and the continued success of our acquisition strategy. Demand remains very strong across aerospace and advanced technologies. Momentum continues to build within process flow technologies, and our recent acquisitions are performing well ahead of expectations. Together, these drivers resulted in 8% core sales growth, Record margins, record earnings, and a record backlog, while reinforcing our confidence in the outlook for both 2026 and 2027. Of note, order activity was particularly strong in processful technologies, where core orders increased 20% year-over-year and 8% sequentially. This, combined with exceptional strength and resilience across the aerospace and advanced technologies, Total company backlog increased 9% year-over-year, providing strong visibility as we close out the year and enter 2027. Execution continues to be a key differentiator. Adjusted operating margin expanded 130 basis points to a record 22.5%, despite the temporary dilutive impact of our recent acquisition. These results demonstrate our ability to translate growth into meaningful earnings expansion while continuing to invest for the future. Our acquisitions continue to significantly exceed expectations. Revenue growth, margin expansion, and earnings contribution are all ahead of plan. And we now expect to achieve our 10% RYC hurdle approximately 18 months earlier than originally anticipated. We expect these acquisitions to contribute approximately $0.30 per share to 2026 earnings, up from our previous expectation of $0.20 per share, with operating margins expanding more than 500 basis points this year. These incredible results reinforce our confidence in the crane business system. and our ability to create substantial shareholder value to discipline capital deployment. We are equally excited about the opportunities ahead, including the pending acquisition of Trillium Pumps. Given our strong year-to-date performance, record backlog levels, and confidence in both our core and acquired businesses, We are raising our full year adjusted EPS outlook by 35 cents at the midpoint to a range of $7.23 to $7.38 per share. Turning to aerospace and advanced technologies, the segment continues to perform exceptionally well. Demand remains robust across commercial aerospace, defense, and space. supported by a record backlog in a growing pipeline of opportunities. Commercial aerospace remains healthy with solid OE demand and continued strength in aftermarket. On the defense side, investment remains very strong as customers continue to prioritize missile defense, radar, advanced power conversion, and space-based capabilities, all areas where we continue to invest and win. Strong execution and continued program wins are providing increasing visibility into the future growth. As a result, we continue to expect 2026 core growth modestly above the high end of our long-term 7% to 9% growth framework, while leveraging that growth between 35% and 40%. The team continues to execute at a very high level and we remain highly confident in the long-term growth opportunities across the segment. Process flow technologies also delivered an outstanding quarter. The business returned to core growth while delivering record profitability. Core sales increased 6%, orders grew 20%, and adjusted operating margins expanded despite the dilutive impact of recent acquisitions. More importantly, the transformation of the portfolio continues to gain momentum. Growth was broad-based across cryogenics, power, wastewater, nuclear and general industrial markets. We secured additional wins in cryogenics supporting the growing space launch market New pharmaceutical orders related to GOP-1 capacity expansion and further wins in wastewater and power. For the full year, our outlook has improved, driven by solid core growth in the second half. We now expect low single-digit core growth full year and continued margin expansion. We also continue to enhance the quality of the portfolio. to discipline capital allocation. The announced acquisition of Trillium Pumps strengthens our position in the attractive water and wastewater market, while the announced investiture of our building services and utilities business further sharpens the strategic focus of the segment. Before moving on, I want to recognize and thank the outstanding BS&E team. For nearly 120 years, This business has been an important part of Crain, built by incredibly talented people who consistently deliver results the right way. We are grateful for their many contributions and proud of what they have accomplished. As they begin this next chapter, I'm confident they have a bright future ahead. Together, these actions continue to reposition PFT around highly engineered, mission-critical technologies serving attractive growth markets including pharmaceuticals, water and wastewater, power, cryogenics, and nuclear. Importantly, we are not finished. We continue to see attractive opportunities to further strengthen the portfolio and remain confident in our ability to outperform the markets we serve over the long term. To summarize, Crane is performing at a very high level. Our businesses are executing exceptionally well. Our end markets remain attractive. Our acquisitions are exceeding expectations. Our portfolio continues to become stronger and more resilient. We will enter 2027 with record backlog, strong momentum across both segments, increasing earnings power, and significant strategic flexibility. As we look toward 2027, Our confidence continues to grow. Over the summer, we completed strategy reviews across all our businesses, and those reviews reinforce a long-term growth framework. In particular, four themes stand out. First, aerospace and advanced technologies remain exceptionally well positioned. Strong aerospace and defense demand, combined with the benefits of years of investment in differentiated technologies, creating a resilient portfolio gives us confidence in the segment's ability to deliver attractive growth for many years to come. Second, the transformation of the process flow technologies portfolio is gaining momentum. While the benefits are increasingly visible in our results today, we believe we're still in the early innings of that value creation journey as we continue to reshape the portfolio around higher growth, higher margin, and less cyclical markets. Third, our acquisition strategy continues to create meaningful value. We have significant capacity to deploy capital, a robust pipeline of opportunities and a proven ability to integrate businesses and accelerate earnings, margins and returns. And last but most important, we have an incredible intangible asset, the Crane business system. The combination of world-class processes and a high-performance culture built on focus, intensity, and accountability continues to differentiate Crane and drive sustainable value creation. Simply put, our businesses are performing very well, our portfolio is stronger than it has ever been, and we continue to see significant opportunities to create value to both organic and inorganic growth. Before turning it over to Rich, I'm pleased to announce that we will host our next Investor Day on February 9th in New York City. We look forward to sharing more about our strategy, growth opportunities, and long-term outlook at that event. With that, turn the call over to Rich.

Thank you, Alex. Another outstanding quarter with certainly more to come. Alex, as you just said, the Crane business system, this machine that we have, and this unique culture, It's what enables us to consistently deliver the results that we do quarter after quarter. And it reminded me of the Academy Award-winning movie, Fletch, during an iconic scene where Chevy Chase was impersonating Gordon Liddy, an airplane mechanic supervisor. During that scene, I was reflecting on our well-oiled machines, and I thought about all our coaching for our leadership teams and even how we talk with our investors. When Fletch Proclaims. It's so simple. Maybe you need a refresher course. It's all ball bearings nowadays, guys. Now, you just prepare that Fester valve with that 3-in-1 oil and some gauze pads, and I'm going to need about 10 quarts of antifreeze, preferably Prestone. No, don't make that Quaker stand. And we'll just keep delivering top quartile results quarter after quarter. Hey, with that in mind, let me start off with total company results. Total sales were up 28% in the quarter compared to last year with 8% core growth, reflecting broad-based strength across both process flow technologies and aerospace and advanced technologies. Sales from our four acquisitions contributed 21% growth in the quarter, once again outperforming our expectations. Adjusted operating profit increased 36%, reflecting the impact of the higher core sales, contributions from the acquisitions, productivity, and favorable pricing net of inflation. Another outstanding result. And Total Core FX Mutual Backlog was up 9% compared to the prior year, reflecting strength at both aerospace and advanced technologies and process flow technologies. Core orders increased 11% year over year with continued strength in aerospace and advanced technologies, up 2% as expected, and when excluding a multi-year order received in the same period last year were up in the mid-teens, and process flow technology is up an exceptional 20%. We generated strong free cash flow in the quarter and repaid $170 million of debt, resulting in pro forma net leverage today at 1.1 times, a very strong balance sheet that positions us well for further M&A. Before discussing segment performance, I wanted to remind everyone that our adjusted results exclude the net benefit from IEPA tariff recoveries recorded during the quarter. Once again, in our view, it's important to isolate these one-time benefits from the true underlying operating trends in the business. A few more details on the segments of the quarter here. Starting with aerospace and advanced technologies. Sales of $344 million increased 27% in the quarter, with core sales up 9.5%. Our record backlog of nearly 1.3 billion increased 9% on a core basis and increased 20% including the impact of the drug acquisition. Once again, demand remains very strong across our highly diverse portfolio. Top line strength in our core business was driven by the commercial OE ramp as well as ongoing broad-based strength within the defense market. Total aftermarket remained strong bolstered by military and when isolating prior year initial provisioning was up 11% with core commercial aftermarket up at a high single digit rate. Exactly what we expected. An adjusted segment margin was exceptional at 26.3% ahead of our core leverage expectations and up 100 basis points year over year. That performance is notable given the higher OE sales and expected dilution from the drug acquisition and it speaks to the resiliency of our margin profile irrespective of any changes in OE aftermarket mix. Drug continued to outperform our expectations and our core A&E business delivered another very strong quarter. Taken all together, we remain very confident in our full year segment sales outlook and continue to expect full year core sales growth slightly ahead of our seven to nine percent algorithm. The diversity of the overall AAT Portfolio supports the durability of that 79% regardless of periodic changes in sales composition, whether that be in OE versus aftermarket or commercial versus military. Moving on to process flow technologies, in Q3 we delivered sales of $413 million, up 29% compared to a year ago, with core sales up 6.2%, and the acquisitions of Panametrics, Werder Stokes, and Optech Danielat adding nearly 24 points of growth. Demand improved significantly in the quarter. Compared to the prior year, core FX neutral backlog at PFT increased 8%. Sequential basis was up 2% and core FX neutral orders were up 20% year over year and up 8% sequentially. Adjusted operating margin was a record 24% and was 80 basis points above the prior year. And like AAT, results were above our expectations given better performance across both our core businesses and each of our three acquired businesses. In summary, another outstanding quarter. Moving to the non-operational items below the segments, corporate expense for the quarter was 20 million as expected, and for the full year, we expect to be within our previously guided 80 to 85 million range. Net non-operating expense in the quarter was 14 million, and we continue to estimate and a full-year 2026 net non-operating expense of approximately $58 million. And lastly, we continue to estimate our tax rate for the year 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 35 cents to a range of $7.23 to $7.38. Overall, again, an outstanding year to date and momentum continues to build. And with that, operator, we are now ready to take our first questions.

Thank you. The floor is now open for questions. At this time, if you have a question or comment, please press star 1 on your telephone keypad. If at any point your question is answered, you may remove itself from the queue by pressing star 2. Again, we ask that you pick up your handset when posing your questions to provide optimal sound quality. Thank you. and we'll take our first question from Jeff Sprague with Vertical Research. Please go ahead. Your line is open.

Hey, Max. Good morning, everyone. Hey, good morning, Jeff. Going deep into the archives there. So on TSI, Alex, obviously very, very encouraging. You know, is the endpoint now much higher on this than you thought? also, obviously, you're ahead of schedule on what you wanted to do, but is the upside here even bigger than you thought? Maybe you could kind of frame that relative to how you, you know, initially bridged the deal, you know, shortly after you closed it.

Yeah, thank you, Jeff. So, yeah, the upside is higher. I think, you know, we have that five-year mark where we're going to go from 60 million EBITDA to 150 in five years. Now we think that's going to be quicker than that. And then when we look at the five-year mark, the growth is going to be higher and the margins are going to be higher as well. So outside to that five-year reference point for sure.

And then one of the other sort of interesting things here, and I don't know if it's how you plan to approach all deals, but a lot of companies that are doing deals seem to be Allergic to trying to fix stuff, you know, they just want to pay for growth. Not saying that everything you'll be looking to buy is a fixer-upper, but both PSI and Trillium, right, they seem to rhyme, you know, good assets maybe not run the way they should be an opportunity to kind of run it through your business system. As you look at the M&A pipeline, is there a lot of that sort of asset opportunity out there?

Yeah, that's a good observation. I think we do look at deals from the lens of CBS, so we obviously would see more opportunity than the seller. But each deal is different. There's other deals. You may remember Optech, which we also did earlier this year, a smaller deal we don't talk a lot about. But that was a high-growth business, very well run, and we're just adding, contributing to it. So I think we're open to a combination of circumstances. certainly not opposed to turnarounds or improvements like what we've been doing. It's all about where we see shareholder value creation and a combination of a path to improving the portfolio when we're hitting that three, five-year mark.

Great. Thank you. I'll leave it there.

Thank you. We'll take our next question from Matt Somerville with DA Davidson. Please go ahead. Your line is open.

Hey, Matt. Thanks. Hey, morning. I was wondering if you could maybe comment. You've sold the business up in Canada. You're in the process of selling the UK business. Are there more consequential portfolio actions still to be had specific to PFT? And I'm also curious, sort of tangential to that, given that I would assume that Crohn's action in isolation is going to be dilutive, maybe and how much Trillium can backfill relative to that dilution.

Yeah, thanks, Matt. So there is no more substantial divestitures that we're looking at right now. We evaluate the portfolio every year and that, you know, our thinking could change. But if you recall, like you mentioned, we divested that crane supply in Canada, exposure to non-residential construction, this business in BS&U, Primary Exposure is also non-residential. So this completes our exit of that market, a very well-run business operated by a great team, but not really aligned to the markets that we're trying to expand into. As far as the accretion, dilution, I'll let Rich answer that.

Yeah, Matt. Yeah, I think the way to think about the VS&U business, right, we did – this is a business that does roughly – 160 million will be the outlook this year in revenue, and they're essentially at fleet margin. So when you look at that and compare to Trillium, Trillium is 115 million in revenue with below fleet margin. So there'll be some dilution to your point. Obviously, the timing and the amount, the timing of the close and the amount will coincide, right? So, you know, we're currently thinking that that'll close sometime near the end of the first quarter. So if you try to create a model around that, you know, it's not a full year impact, but we would expect to offset a good portion of that with Trillium in the year. If that helps.

Perfect. And then maybe if you could just provide a little bit more end market and geographic color specific to PFT in the context of that 20% year-on-year improvement you saw in organic order activity. Thank you.

Yeah, Matt, so it's looking quite positive from our perspective for PFT. I think a number of end markets that are seeing the growth, which is a positive from our perspective, makes us confident on sustainability. where we've seen the tailwind, those markets where we've been focused on over the last few years in increasing our exposure cryogenics, which is driven by space launch, water, wastewater, primarily U.S.-based business where it's been resilient, pharma, which our backlog is growing, and we expect increased investment, particularly in the U.S., power as well. So all these markets, and of note, chemical continues to be flat. In the past, we've depended on chemical recovery to boost our growth. That's not the case anymore in PST. So that chemical recovery is all upside still. We expect to drive low without depending on that and that'll be additive to it. I think regionally, US continues to be the best market overall. Europe, pretty flat. I think Middle East has recovered from the first half and continues to be solid. And then we have much less exposure in the rest of the world.

Thank you, Alex.

Thank you. We'll take our next question from Nathan Jones with Stiefel. Please go ahead. Your line is open.

Maybe a follow-up around the chem... Good morning, everyone. Maybe a follow-up around the chemical market there. I would imagine it's probably the tail of a couple of different regions with capacity still coming out of Europe and maybe capacity improvements in the US. Maybe you could talk about chemical in a little bit more detail from a regional perspective and your outlook for a recovery there. I mean, if Europe just gets to being kind of a flat chemical market or something like that and stops going down, can the US add growth to that? Just how you view the shape of the recovery there?

Yeah, Nathan. So, yeah, I think you stated Europe, we expect to continue to be flat even going into next year. I think the two markets that are the most interesting for us is the U.S. and Middle East. I think the U.S., as I mentioned last call, is held up pretty well. As you know, when oil prices are high, there's a feedstock advantage on natural gas. So even when there's capacity globally, it makes sense for chemical companies to invest in the US. So we see some sporadic project activity. Middle East also recovering. I think a full recovery that you'll notice in the P&L will come is usually driven by construction, residential construction, durable goods, which I'm not expecting, I'm not counting on At least in the first half of 27, we'll see after that. But again, very pleased with the transformation of the portfolio that we're much less dependent on that recovery to drive growth.

Just to add, if you recall, our chemical exposure is mainly in the U.S., right? So maybe 70% of our chemical exposure is U.S.-based.

Thanks for that. I'm going to try and pin you down a little bit more on PSI. You know, the five-year target was $150 million of EBITDA. You said you're going to get there quicker than that now. Do you have a new target for the five-year number that's over that $150?

Yeah. I mean, I think it'll grow in the 4% to 6% range. The leveraging of that 35, 40% after the three-year mark.

Okay, on top of the 150. Yeah, at a minimum. All right, got it. Thanks very much for taking the questions. Of course.

Thank you. We'll take our next question from Myles Walton with Wolf Research. Please go ahead. Your line is open.

Thanks. Good morning. I'm curious if I can bounce something off you. Were the acquisitions at PFT about 100 basis points dilutive to the reported margins? Backing into it based on you talked about 500 basis points this year for the acquisitions. And then if that's the case, the 300 basis points of core margin expansion on 6% core growth, could you just maybe help us understand how you got that kind of operating leverage in the core business? Thanks.

Yeah, I mean, in the quarter, look, it was, I think you're correct. You know, our performance from a margin point of view was exceptional. The leverage on the core business, and if I just, I'll give both. In the aerospace and advanced technologies sector, we were just above the high end of our 35 to 40%. So think low 40s in terms of operating leverage there. and, you know, it's a combination of everything, right? We just continue to execute really well from a price-cost point of view, a productivity point of view, and so forth, even in the face of any changes in mix. So, like I said, the durability and resiliency of our aerospace and advanced technologies part of the portfolio, we're going to see that kind of performance irrespective of the composition of revenues. On a PFT side, We're already creative in that zone today with the deals as we're exiting the year. Our core leverage in the quarter was just, I think it was just north of 40%, something like that, so fairly solid.

Hey, Miles, just to add to that, we've continued to invest in PST through the cycle, so there's no Thank you very much.

The margins of 500 basis points, that's for the full year. So you're saying you're already above that level here in the third and fourth quarter, is that right? In terms of the PSI acquisition?

Yeah, in the second half of the, yes, in the second half, just mathematically, I think we have to be there.

Yes. Okay, great. And then, so then this PFT performance from a margin perspective, we should think about this as being reasonably sustainable at these levels?

Yes. Yeah, again, it gets back to our core leverage rate in that 35% to 40% range through cycles. We expect Q4 to be, you know, very, very similar. Thank you.

Thank you. We'll take our next question from Dan DeCicco with BMO Capital Markets. Please go ahead. Your line is open.

Great. Thank you for taking my question. Hello. You mentioned some PFT wins throughout the quarter. I think power, cryogenics, wastewater. Could you provide some color on what you're seeing there? Thanks.

Yeah, if you think about those markets, Dan, you know, cryogenics, the two main markets are space launch, not on the rocket itself, but on the launch pads, and those buildups continue. So we're seeing good traction there. And then the second biggest market is just general aerospace projects. and the factories with environmental testing. So as Aerospace Roundup continues, we see that demand and the teams are doing an exceptional job. When you think about power, again, our power business is mainly U.S.-based and the expansion on natural gas, combined cycle turbines, that's where we see the momentum. And, you know, pharma, similar in the U.S., the reshoring activity of funnels are increasing. So capacity expansion in the U.S., those type of project wins. Those are some highlights, Dan. Always what we expect to continue, those markets to continue to 227. Great.

Thank you. That's it for me. Very helpful.

Thank you. And we'll take our next question from Ronald Epstein with Bank of America. Please go ahead. Your line is open.

Good morning. This is Andrew Steinart on for Iran. Thank you for taking our question. Hey, how are you? I'm doing well. I just wanted to ask a quick one on the missile demand and, you know, the broader domestic munitions ramp. You know, with several crimes securing UPAs over the past few months, can you talk about, you know, how the process towards getting under contract for these programs has looked from your end so far?

Yeah, I'll comment, and then I'll let Rich comment. Just to reset, we're in about 15 missile programs. I think our jump-off point this year is around 35 million, mostly our different type of product, power products and microwave products. And we expect next year to grow 40%, 50%. A lot of that demand is already in the backlog. And then the projections for after that, you know, four to six times growth off that 35% and I think it's where these contracts come into play, securing a bit more growth next year, but also securing that continued expansion and growth through the rest of the decade. Do you have anything?

I would just echo that and just say that the demand signals that we're getting just continue to increase. We continue to see a lot of activity, a lot of RFQ work and so forth to the point that you made. We're seeing a lot of that. It's not slowed, it's increased.

Can you just comment on what the process with these UCAs actually looks like from the view of a subcontractor?

Oh, you broke up a little bit. Can you repeat?

Yeah, I was just looking to see if you guys could provide some color on what the UCA contracting process would look like from the view of a subcontractor.

Yeah, I think you asked, I don't know if everybody heard, but we're seeing the break of how the contract processing looks for that missile demand. So we get RFQ requests for tranches, you know, multi-year opportunities for the different programs, and we provide those updated quotes. And then we align with the customer, secure, and then get a contract and a purchase order. So it's all happening at different times and different programs for different tranches for different periods of the year, just on an ongoing basis. Hope that helps.

Thank you. And once again, if you do have a question, you may press star 1 on your telephone keypad at this time. I'd like to now announce Justin Agies with CJS Securities. Please go ahead. Your line is open.

Hey, Justin. Hey, morning, all. Given the ongoing repositioning that you guys have done in PFT, can you give us an update on, you know, what the relative contribution of each of the end markets is? You know, you used to say, like, nuclear 5%. Anything like that so we can see what the current contributions are?

Yeah, I'll give you a quick snapshot. So I think starting with chemical, right? In the past, it's been like 30%. Now we have it close to 20% in chemical. Water, wastewater is around 14%, 15%. General industrial, about 20%. And then our power business combined with, when I say power, it's gas and nuclear. It's like 15%. What did I miss? I think those are the main ones.

Great. Thank you. And then given the lingering conflict in the Middle East, can you just remind us what your current exposure there is?

So exposure, it's mainly in PST and it's less than 5% overall. So what we We don't see really any material impact this year or going forward. We saw some delays in shipments earlier in the year. That's somewhat normalized. There's plenty of activity, so not really a headwind that we expect.

I'd say maybe tangentially it's just the freight costs being higher and things like that that we've been able to more than offset.

Great. Thank you for taking the question.

Thank you. This concludes the question and answer portion of today's call. I would like to now turn the call back to Alex Alcala for closing remarks.

Thank you for your questions and continued interest in Crane. We have significant momentum across the company, a record backlog, and substantial opportunities ahead. Most importantly, we have a proven team, a proven system. We remain highly confident in Crane's future and our ability to create Long-Term Shareholder Value. Thank you and have a great day.

Thank you. This concludes today's Crane Company third quarter 2026 earnings conference call. Please disconnect your line at this time and have a wonderful day.