Crane NXT's sales rose 12%. Its payment business went the other way.

Crane NXT's third-quarter sales grew almost 12%, but the payment technology business it already owned lost ground. An acquisition supplied $50 million of the $52 million revenue increase.

The split is now showing up in its outlook. The maker of banknote security, payment equipment and product inspection systems cut its annual sales-growth target while lifting the bottom of its adjusted earnings forecast.

The acquisition makes a large difference

Crane NXT took full ownership of Antares Vision on March 31, adding inspection and tracking technology used in industries such as pharmaceuticals and food production. That business helped quarterly group sales reach $497.1 million.

Sales growth excluding acquisitions and currency movements was only 1.1%. Within Detection and Traceability Technologies, the division combining Antares Vision with Crane Payment Innovations, that measure fell 5.3%. Lower demand for payment hardware and vending equipment outweighed growth in services.

This weakness was already visible in August, when the division reported a 3.4% organic sales decline for the second quarter. The latest year-over-year contraction is deeper.

The division's adjusted EBITDA margin fell to 28.0% from 32.3%. Lower volumes hurt, and the addition of Antares Vision also diluted the margin. Cost savings softened the impact. This profit measure excludes interest, taxes, depreciation, amortization and selected acquisition and restructuring items.

Why the earnings floor still rises

The security and authentication division is moving in the other direction. Its organic sales rose 7.2%, while adjusted EBITDA increased to $71 million and the margin improved to 29.2% from 28.6%. Demand for banknote security products and savings in authentication helped.

For the full year, Crane NXT now expects reported sales growth of about 14%, down from 15% to 17%. Its latest presentation shows roughly flat organic sales across the company, with growth in security offsetting a decline in the detection and payment division.

Yet annual adjusted earnings guidance is now $4.32 to $4.42 a share, compared with $4.22 to $4.42 in August. The top of the range is unchanged. Management points to lower borrowing costs as it reduces expected net non-operating expense to $75 million to $80 million from about $80 million.

The quarterly profit picture remains mixed. Adjusted net income was flat at $74.1 million, or $1.28 a share. Reported net income fell to $38.4 million from $50.5 million, with acquisition amortization and other adjustments widening the gap between the two measures.

Cash is improving, with help from working capital

Operating cash rose to $111.8 million from $92 million. After capital spending, free cash flow increased to $90.2 million from $78.7 million.

Research by Ticker Byline shows that the improvement in cash from working capital was larger than the entire increase in operating cash: $33.2 million versus $19.8 million. Collections, inventory and payment timing therefore play an important part in the stronger cash picture.

Crane NXT ended September with $251.1 million in cash and $1.38 billion in debt at its balance-sheet carrying value. Management's net leverage measure stood at 2.5 times adjusted profit and is expected to fall to about 2.3 times by year-end.

The next test is whether payment equipment demand stabilizes while Antares Vision becomes a stronger profit contributor. The Crane NXT company profile tracks the acquisition, changing forecasts and cash record behind that test.