SXI earnings call analysis

NYSE:SXI Q4 2025 Earnings Call Transcript Generated on 6/6/2026 Operator | Conference Operator: Good morning, ladies and gentlemen, and welcome to the Standex International Fiscal Fourth Quarter 2025 Financial Results Conference Call. At this time, all lines are in a listen-only mode. Following the presentation, we will conduct a question and answer session. If at any time during this call you require immediate assistance, please press star zero for the operator. This call is being recorded on Friday, August 1, 2025. I would now like to turn the conference over to Christopher Howe, Director of Investor Relations. Please go ahead. Christopher Howe | Director of Investor Relations: Thank you, operator, and good morning. Please note that the presentation accompanying management's remarks can be found on the investor relations portion of the company's website at .standex.com. Please refer to Standex's Safe Harbor Statement on slide 2. The matters that Standex management will discuss on today's conference call include predictions, estimates, expectations, and other forward-looking statements. These statements are subject to risks and uncertainties that could cause actual results to differ materially. You should refer to Standex's most recent annual report on Form 10-K, as well as other SEC filings and public announcements, for a detailed list of risk factors. In addition, I'd like to remind you that today's discussion will include references to the Non-Gap Measures of EVIT, which is earnings before interest and taxes, Adjusted EVIT, EVITDA, which is earnings before interest, taxes, depreciation, and amortization, Adjusted EVITDA, EVITDA margin, and Adjusted EVITDA margin. We will also refer to other non-GAP measures, including adjusted net income, adjusted operating income, adjusted net income from continuing operations, adjusted earnings per share, adjusted operating margin, pre-operating cash flow, and pro forma net debt to EVITDA. Adjusted measures exclude the impact of restructuring, purchase accounting, amortization from acquired intangible assets, acquisition-related expenses, and one-time items. These non-GAP financial measures are intended to serve as a complement to results provided in accordance with accounting principles generally accepted in the United States. Sandex believes that such information provides an additional measurement and consistent historical comparison of the company's financial performance. On the call today is Sandex's Chairman, President, and Chief Executive Officer, David Dunbar, and Chief Financial Officer and Treasurer, Adimir Sarcic. David Dunbar | Chairman, President, and Chief Executive Officer: Thank you, Chris. Good morning and welcome to our fiscal fourth quarter 2025 conference call. Fiscal year 2025 was a turning point for Sandex. We are a different company than we were even a year ago. We've been laying the groundwork for years and our growth drivers have now crossed a threshold. They are scaling. They have reached an inflection point and are beginning to move the needle in a meaningful way. I'm very excited to share with you what we are seeing and how it is shaping our outlook. I would like to thank our business and corporate teams for navigating this past year and achieving a record profit generation in fiscal 2025. Now let's look at the results beginning on slide three, key messages. In the fourth quarter, sales increased .2% with contributions from acquisitions partially offset by a slight organic decline. Electronics grew slightly on an organic basis with the book to bill ratio above one and organic orders up 16% year on year. This represents the first quarter of organic growth since 2023 and signals strong momentum into 2026. Our fiscal fourth quarter sales into fast growth markets increased to 28% of total company sales. New product sales added approximately .8% to sales ahead of our goal, 2%. Our grid technologies business continues to perform ahead of our expectations. To support strong global demand for electrical equipment, we are expanding Amron-Norion capacity with lean projects and additional shifts in the core facility. I am also excited to announce that in the quarter we established a site in Croatia to serve European customers. We expect to be shipping products from Croatia within four months. Operating performance was very strong in the quarter. We achieved record adjusted operating margin of 20.6%, up 120 basis points sequentially and up 350 basis points year on year. This operating performance, along with our cash generation and cash repatriation, enabled us to lower our net leverage ratio to 2.6%. Following record profitability in fiscal 2024, we again achieved record milestones in adjusted gross margin, adjusted operating income, and adjusted earnings per share. In fiscal year 2026, barring any unforeseen economic, global trade, or tariff related disruptions, we expect revenue to grow by over $100 million with continued adjusted operating margin expansion. This will primarily be driven by mid to high single digit organic growth in electronics, double digit organic growth in engineering technologies, and the contribution from recent acquisition. In fiscal year 2026, we expect new product sales to contribute approximately 300 basis points of incremental sales growth, and we anticipate releasing more than 15 new products. Sales from fast growth markets are expected to grow approximately 45% year on year and exceed $265 million. On a year on year basis, in fiscal first quarter 2026, we expect significantly higher revenue, comprise of contributions from recent acquisitions and organic growth, and significant operating margin expansion. On a sequential basis, we expect slightly lower revenue as the impact of recent acquisitions, higher sales in the fast growth and markets, and realization of pricing initiatives are more than offset by projects timing in engineering technologies and the impact of seasonality in Europe within electronics and in grading. We expect slightly lower adjusted operating margin due to lower sales and less favorable product mix. Please turn to slide four. Our growth drivers have reached an inflection point. There are four sources of growth that will help deliver above market increases in 2026. In fact, they will deliver growth even without a general market pickup. First is new product sales. As you know, we began ramping our R&D spending in 2020. New products began to be released in 2023, accelerating to 16 product releases in 2025. Sales of new products increased from $38 million to $55 million in FY 2025, exceeding our internal expectations. We expect their sales to continue to ramp and to be joined by more than 15 new products to be released in 2026, giving us confidence that incremental new product sales will add about 3% to our sales in 2026. New products, once released, take time to reach full commercial impact. In our customer intimacy business model, success depends not only on product innovation, but on deep collaboration with our customers. Our products are often designed into our customers' own systems, which require internal approvals, engineering validation, and their own development timeline. This results in a natural delay between product release and peak revenue. But once adoption begins, momentum builds and endures. Products introduced in prior years continue to ramp, even as we launch additional new offers. This layered effect creates a compounding engine of organic growth that is both durable and scalable. It has taken a while to get this momentum, but we are building a long-term new product capability in this company. And as a -to-be engineer, I think it is beautiful to watch. The second source of above-market growth is our presence in end markets with long-term secular tailwinds and above-average growth. This has been a focus for some time, and our two acquisitions in FY25 increased our presence in electrical grid, space, and defense markets, ramping our total fast-growth market sales to $184 million. All of these businesses are expanding capacity to serve our customers, and we expect sales to grow to greater than $265 million in fiscal 2026. This is also beautiful to watch. A third source of momentum is the support we are giving to recent acquisitions to maintain their growth rate. We are now bringing up a new site in Croatia for Amron Neurion, and are positioned with McStarlight to win new applications that the combined StandX-McStarlight capability is better positioned to win. Last but not least is success at the blocking and tackling of winning new awards in our business through commercial excellence. Two noteworthy areas stand out. Engineering technologies have been awarded applications on next-generation missile programs, which are moving to production. Engraving has successfully expanded into niche production of parts, requiring our proprietary know-how. Based on the above, you can see that the incremental contribution from new products, sales into fast-growth markets, successful acquisition integration, and new program wins lead us to a fiscal year 2020 outlook of over $100 million in incremental sales. I will now turn the call over to Adamir to discuss our financial performance in greater detail. Adimir Sarcic | Chief Financial Officer and Treasurer: Thank you, David, and good morning, everyone. Let's turn to slide five, World Quarter 2025 Summary. On a consolidated basis, total revenue increased approximately .2% year on year to $222 million. This reflected .4% benefit from recent acquisitions and .2% benefit from foreign currency, partially offset by organic revenue decline of 1.4%. World Quarter 2025 Adjusted Operating Margin increased 350 basis points year on year to a record 20.6%. In the fiscal World Quarter, Adjusted Operating Income increased .8% on .2% consolidated revenue increase year on year. Adjusted Earnings Per Share increased .6% year on year to a record $2.28. Next cash provided by operating activities was $33.4 million in the fourth quarter of 2025 compared to $28.7 million a year ago. Capital Expenditures were $8.6 million compared to $6.5 million a year ago. As a result, we generated fiscal fourth quarter brief cash flow of $24.9 million compared to $22.2 million a year ago. Now, please turn to slide six and I will begin to discuss our segment performance and outlook beginning with electronics. Segment Revenue of $115.2 million increased .2% year on year driven by 41% benefit from acquisitions, organic growth of .3% and .9% benefit from foreign currency. Adjusted Operating Margin of .5% in fiscal fourth quarter 2025 increased 640 basis points year on year due to contribution from recent Ameran Orion Group acquisition, pricing and productivity initiatives and product mix. Our book to bill in fiscal fourth quarter was 1.03 with orders of approximately $118 million or increase of $10 million sequentially. Orders in electronics core business were up sequentially with a continued increase in demand in defense, power magnetic application and the electrical grid and market. Since our products are custom in nature, our bookings take longer to convert into revenue but with stronger margins. Our expansion plans for Ameran Orion in Houston and India are well underway to support additional demand. We increased capacity by adding second shifts across facilities. In addition, we began commissioning Greenfield site in Croatia to serve our customers in Europe and support growing power requirements for data centers and grid expansion and upgrades in the region. We expect first shipments of the Croatia site in the next three to four months. Excluding recent Ameran Orion Group acquisition, our new business opportunity funnel increased approximately 27% year on year to $125 million. Sequentially, in fiscal first quarter 2026, we expect slightly lower revenue reflecting contribution from Ameran Orion Group acquisition, higher sales in the fast food and markets and price realization more than offset by the impact of seasonality in Europe. Although we anticipate slightly lower revenue sequentially, we are expecting significant revenue growth and adjusted operating margin expansion along with organic growth on a year on year basis. We expect slightly lower adjusted operating margins sequentially driven by product mix and continuous strategic growth investment. Please turn to slide seven for discussion of the engineering technologies and scientific segments. Engineering technologies revenue increased .8% to $32 million driven by 25% benefit from recent Max Starlight acquisition, organic growth of .9% and .9% benefit from foreign currency. Organic growth was due to growth in sales from new products. Adjusted operating margin of .4% decreased 250 basis points year on year due to product mix. Sequentially, we expect slightly lower revenue and adjusted operating margin due to project timing. Scientific revenue increased .3% to $17.9 million due to .1% benefit from recent acquisition partially offset by an organic decline of .9% primarily due to lower demand from academic and research institutions that were impacted by NIH funding cuts. Adjusted operating margin of .3% decreased 530 basis points year on year due to organic decline and unfavorable product mix as a result of the acquisition. Sequentially, we expect slightly higher revenue and similar adjusted operating margins. Now, turn to slide 8 for discussion of the engraving and specialty solutions segment. Engraving revenue increased .6% to $33 million driven by .2% benefit from foreign currency partially offset by organic decline of 0.6%. Adjusted operating margin of .2% in fiscal four quarter 2025 increased 190 basis points year on year due to realization of previously announced productivity initiatives and restructuring actions. In our next fiscal quarter on a sequential basis, we expect similar revenue and slightly higher adjusted operating margin due to seasonality affecting Europe offset by slightly improved demand in North America and Asia and realization of previously announced restructuring actions. In addition, in the fiscal first quarter, our engraving business secured the source from a major OEM in North America to supply soft-trimmed parts for a calendar year 2026 program. Specialty solutions segment revenue of 23.9 million decreased .2% year on year primarily due to general market softness. Operating margin of .6% decreased 360 basis points year on year. Sequentially, we expect similar revenue and slightly higher operating margin. Next, please turn to slide nine for a summary of Stundex's liquidity statistics and capitalization structure. Our current available liquidity is approximately $280 million. At the end of the four quarter, Stundex had net debt of $448 million compared to net cash of $5.3 million at the end of fiscal quarter 2024. Our net leverage ratio currently stands at $2.6. We paid down our debt by approximately $27 million during the fiscal four quarter 2025. In the fiscal first quarter, 2026, we expect interest expense to be approximately $9 million. Stundex's long-term debt at the end of fiscal four quarter 2025 was $552.5 million. Cash and cash equivalents totaled $1 of $4.5 million. We declared our 244th quarterly consecutive cash dividend of $0.32 per share and approximately .7% increase year on year. In fiscal 2026, we expect capital expenditures to be between $33 and $38 million. Relative to our debt leverage, we will continue to focus on paying down debt and anticipate that our leverage ratio will further decline through fiscal year 2026. I will now turn the call over to David for concluding remarks. David Dunbar | Chairman, President, and Chief Executive Officer: Thank you, Adamir. Please turn to slide 10. I want to describe the emotions in the company. There is an energy here and you can feel the shift. After years of building, refining, and preparing, the results are starting to show. There's pride in seeing our efforts take hold and excitement in knowing this is just the beginning. The engine we've built is ready and now we're starting to see what it can really do. I'm very proud of our team for their continued operational execution and for the success of our recent acquisitions, both of which helped us achieve record adjusted operating margin for a third consecutive quarter. We achieved record profit generation again in fiscal year 2025, driven by contribution from recent acquisitions, higher sales into fast growth end markets, and strong operational execution. Both adjusted gross margin and adjusted operating margin expanded by more than 200 basis points, while adjusted earnings per share increased approximately 6% to a record $7.98. Through debt pay down and profit generation, our net leverage ratio was reduced to 2.6 at the end of the fiscal year. In fiscal year 2025, sales into fast growth end markets were approximately $184 million, exceeding our fiscal year 2025 expectation of approximately $170 million. This was primarily driven by growth in data center demand and grid modernization and expansion. Outside of the electrical grid, we are seeing growth in commercialization of space and defense applications. In fiscal year 2026, we expect sales into fast growth markets to grow by approximately 45% and exceed $265 million. To support our future growth, we continue to invest in new product development and new applications across markets with growth potential. We launched 16 new products in fiscal year 2025 and plan to launch more than 15 in fiscal year 2026, which are expected to contribute over 300 basis points of incremental growth. In fiscal year 2026, we expect to grow revenue by over $100 million with continued adjusted operating margin expansion. Growth will be primarily driven by mid to high single digit organic growth in electronics, double digit organic growth in engineering technologies, and the contribution from recent acquisitions. We are well positioned in this fluid economic environment due to regional presence, strong customer relationships, and disciplined approach to pricing and productivity action. We remain on track to achieve our fiscal 2028 long-term targets of sales of greater than $1.15 billion and adjusted operating margin of greater than 23%. We are targeting ROIC of 12.5%, which has been adjusted for recent acquisition. We will now open the line for questions. Operator | Conference Operator: Thank you, ladies and gentlemen. We will now begin the question and answer session. Should you have a question, please press star followed by the one on your touchtone phone. You will hear a prompt that your hand has been raised. Should you wish to decline from the polling process, please press star followed by the two. If you are using a speakerphone, please lift the handset before pressing any keys. Your first question comes from Michael with DA Davidson. Your line is now open. Michael | Analyst, DA Davidson: Yes. Hello. Good morning. Thank you for taking my question. David Dunbar | Chairman, President, and Chief Executive Officer: Morning. Michael | Analyst, DA Davidson: Morning. So I want to maybe first talk about the $100 million or more revenue increase in fiscal 26. As I try to break down some of the numbers here, looking at Amerenamec Starlight, that's $1.5 billion plus of just annualizing those businesses. And they are growing organically, so it could be even higher than that. You've got the new products, which as you said, three points, probably $20 million, $30 million. You have the other fast growth products as well. So I'm just kind of curious that $100 million of revenue is here. I don't want to say it's in the bag, but maybe could there be any sources of upside or is that number a very conservative estimate just based on those areas? Then there's also the organic growth and the other businesses. Just some thoughts as to if there any room for upsides of that $100 million and any concerns you might have on areas that might be more of a challenge in 2026 as well. David Dunbar | Chairman, President, and Chief Executive Officer: Yeah, Mike, your math is good there. The way we look at it is the full year impact of those acquisitions will bring something over $60 million. The new products just over $20 million. The underlying growth in the fast growth markets, and remember the fast growth is largely driven by defense, commercialization of space, grid technologies, electrical equipment, OEMs. These are customer commitments that will drive this year. There's about another $38 million there. So if you just stop right there, we've made no assumptions about an overall market growth that would affect the core business and the other businesses. So we've said over $100 million, and if you just add those things up, you could comfortably say $100 to $130 or even more for 2026. Michael | Analyst, DA Davidson: Got it. Thanks. I also want to turn to electronics and your EV business as well. EV business has kind of been in the headlines. EV broadly has been just some OEMs showing sales decline in recent quarters. You've got US policies pointing towards a tougher environment for the EV market as well. Can you comment on how your EV business is doing, whether that's going to still you think be a positive for electronics in 2026? David Dunbar | Chairman, President, and Chief Executive Officer: Yeah, you know, we still count EVs in our fast growth markets because I think over time the prospects are good, A, because there will be a shift to EV electrical vehicles and our content per vehicle is higher. Although with the growth in defense and grid, it's a smaller piece of our fast growth markets. In 25, our EV sales did dip a little bit from 25, from 24. I guess, yeah, just slightly dip from 24. As you recall, our position in EVs is largely with the European brands, with their higher end models, and with new model introductions, we anticipate a nice growth in EVs in 2026. Michael | Analyst, DA Davidson: Got it. Maybe one last one for me, turning to the Amaran business in Croatia. You said it'll be open in the next four months. I just want to get a sense as to the ramp up run rate there and how fully booked that facility already is and whether that will be a kind of a, in the same sense, in four quarters from now, you'll have some great growth in fiscal 27 as that also ramps up. I'm just kind of curious as to how the cadence might turn out. Yeah, David Dunbar | Chairman, President, and Chief Executive Officer: we're starting, we have customer commitments through this year and we'll ship a single digit millions probably in fiscal 26. But as we look over three years, we think that'll grow, that can go to 30 million plus. There's vast opportunity in Europe. So we want to get in the market, get the customers there to visit. They've got to go through their certification and approval process. Once they do that, we anticipate there's some more upside. We may need another site. I don't know. But as a starting point, this will get us, you know, 10, 20, 30 million dollars in three years. Michael | Analyst, DA Davidson: Okay. Thanks for the color. I appreciate it. I'll pass it along. Operator | Conference Operator: Thank you, Mike. Your next question comes from Ross Sparren Black with William Blair. Your line is now open. Ross Sparren Black | Analyst, William Blair: Hey, good morning, gentlemen. Good Adimir Sarcic | Chief Financial Officer and Treasurer: morning. Ross Sparren Black | Analyst, William Blair: Hey, guys. Just starting off with electronics. Just get a sense of where the kind of run rate demand is. Looks like there is some good core organic order growth in the quarter. Maybe just speak to, you know, what's driving that and kind of assumptions going into, you know, FY26 here. David Dunbar | Chairman, President, and Chief Executive Officer: Yeah, just a couple of things. We mentioned in the script that orders year on year are up 16 percent. In the core business, that's about 12 million dollars. Of that 12, about 10 is from OEMs. So this is OEMs as they've designed our products into their next generation products. So that that will convert over the next three, six, nine months. The other two million goes into distribution. That's a quicker conversion. A lot of it comes from Asia. We're seeing some pick up in North America. Europe's still relatively stable, I would say. But, you know, across your general industry in terms of end market outlook. Ross Sparren Black | Analyst, William Blair: OK, is the expectation this is kind of a new run rate for that segment? I mean, it's been a couple of down years. So like there should be some restocking. Yeah, we think this is. Yes. David Dunbar | Chairman, President, and Chief Executive Officer: We do. Absolutely. And Adam, you mentioned that our new application funnel is growing. It's at a record high in large part. That's because the management team now in this last year has put in place more disciplined commercial excellence processes to track opportunities to fill the funnel. So we do think this is sustainable and this momentum will build. Ross Sparren Black | Analyst, William Blair: OK, and then we put a finer point on the AMRIN with the capacity unlock. I mean, strong growth, but there should be maybe a sequential step up at some point as Europe comes online. Yep. Any loose targets you get there out there? Kind of a base case or, you know, full case on how that could play out. In David Dunbar | Chairman, President, and Chief Executive Officer: some ways, it's embedded in that in the fast growing number. But if you think about capacity, so we've said the Croatia site, I think they're just answering to Mike said in three years, it could be 30 million. A couple of years after that, maybe 60 plus in India and Texas, as you know, we've added second shifts with lean. We're also freeing up some capacity so they can so that continues to support their 20 plus percent growth that they were experiencing before we acquired them. And they continue now in North America. We are also looking at an aggressive expansion in our in our presence in Houston. And depending on where trade and tariffs go to, we'll also look at a Mexico site potentially, depending on where trade and tariffs come in at the request of our North American electrical OEMs. And that would be a step up in capacity as well. So I can't put numbers on it. But if you if you continue to expect a 15, 20 percent growth in Amman, Narayan, I think that's reasonable. And we will add the capacity to support that. Ross Sparren Black | Analyst, William Blair: Yeah, I guess my point is, spk00: you know, Ross Sparren Black | Analyst, William Blair: almost two thirds of businesses in North America and you guys have done a lot of work there. I mean, 15 percent seems like that would be very low bar. Yeah. Are you are you getting good pull through and traction on the capacity that's been added in North America thus far? David Dunbar | Chairman, President, and Chief Executive Officer: Yeah, yeah, absolutely. We were we are every capacity we were selling and we have we have long term customer commitments to drive future capacity ads. I'm not sure if I'm answering your question. Ross Sparren Black | Analyst, William Blair: We think offline. I'll jump back in. Operator | Conference Operator: Your next question comes from Chris Moore with CJF Securities. Your line is now open. Chris Moore | Analyst, CJF Securities: Hey, good morning, guys. Congrats on a nice quarter and encouraging organic growth discussion. So maybe start with with engraving. Just is the restructuring done there? David Dunbar | Chairman, President, and Chief Executive Officer: You know, the engraving business, we work on tools and we need to be close to tool shops because tools are expensive and that shipped a lot. The evolution of toolmakers around the world is kind of shifting. They're in different places now than they were before. And with certain with third, what's the number 30 some sites now around the world, it's likely that there will be this ongoing process to make sure our footprint matches toolmakers. So I think in the coming years, there probably will be some continued restructuring more to align with with where that end market is. With engraving in general, the way we think about it is this last year, we think demand kind of bottomed out. It was a very tough year for for the auto OEMs and their new platform releases. Many of them were delayed, kind of waiting for clarity of industrial policy, especially in America. We think that our outlook now shows some some growth from that. But more importantly, the business to also scramble to find some new opportunities. And Adam here mentioned these kind of differentiated parts that we're making based on our kind of proprietary processes with soft trim. So we think there's a growth opportunity in engraving. So the markets start to stabilize, come up and we've got some some growth on top of that. Adimir Sarcic | Chief Financial Officer and Treasurer: Yeah, and Chris, if I can just add, you know, there was a lot of heavy lifting and engraving due to respect to eliminating some of the some of the unprofitable sites, so to speak. And most of the heavy lifting is done. So to David's point, there's a little bit of work left to do, but majority of the restructuring actions for engraving have been completed. Chris Moore | Analyst, CJF Securities: Terrific. Have the competitive dynamics changed much in that business over the last few years? David Dunbar | Chairman, President, and Chief Executive Officer: No, it's been more the demand. In fact, the competition, there are fewer competitors now than there were five years ago. Right. Because our competitors are mostly, they're mostly smaller regional competitors. And so depending on what region they're in, it's been tougher sailing for them. Chris Moore | Analyst, CJF Securities: Got it. You mentioned and we talked about in the past, the NIH funding on the scientific side. Just any any thoughts there? You know how significant that is? Adimir Sarcic | Chief Financial Officer and Treasurer: Yeah, Chris, about third of our sales incentives go through a channel that it's either, you know, it's affected by NIH funding. And obviously that has impacted our order rates over the last over the last couple of quarters. But in the outlook that we are giving, we are not assuming any pickup or any significant changes in the in the demand from those type of that type of end market or that type of a channel. So, you know, we are more focused around, you know, new products, you know, exploring some additional selling opportunities. And if the NIH funding comes back, there will be an upside to the guy that we gave for 26. Chris Moore | Analyst, CJF Securities: Great. Maybe just my last one. Bigger picture. I mean, if rates come down 50 to 100 basis points, does that have much of an impact anywhere? Adimir Sarcic | Chief Financial Officer and Treasurer: Yeah, of course. And now that repayment. Yes, it does. So we obviously watching that watching that closely. But look, you know, our objective is to continue paying down our debt. You know, net leverage is now at about 2.6 and we take with the operating cash flow that we generate in this company that we can get that leverage down to about two, assuming current portfolio businesses, you know, by the end of this fiscal year. So even with this type of interest rates. Chris Moore | Analyst, CJF Securities: Got it. And I was thinking more from a product standpoint, but perfect. I will leave it there. Thanks, guys. Operator | Conference Operator: Your next question comes from Matt Coranda with Roth Capital. Your line is now open. Matt Coranda | Analyst, Roth Capital: Hey, guys. Good morning. Just on ETG was curious with mixed starlight. Is that a creative operating margins in the segment? And then are you guys factoring in revenue synergies in the organic growth commentary for this year for ETG? Adimir Sarcic | Chief Financial Officer and Treasurer: It is it is similar margins as our core business with an ETG as far as mixed starlight is concerned. And yes, there are some revenue synergies. David Dunbar | Chairman, President, and Chief Executive Officer: Now, we've actually discovered some pretty exciting energy opportunities that our capabilities plus their capabilities allow us to design new parts with an efficiency that neither of us could do in the past. That that position as well for future opportunities. Now, those take a while to convert, but longer term, we think that opens up a little higher growth rate for both businesses. Matt Coranda | Analyst, Roth Capital: OK, David Dunbar | Chairman, President, and Chief Executive Officer: that's Matt Coranda | Analyst, Roth Capital: helpful. And then maybe just I know it's dynamic, but just given the tariff announcements yesterday, Is there any way to just help us understand if any of those actions would be impactful to the business? I'd assume maybe the India announcement might be meaningful, but and then with regard to copper, any exposure on some of the new announcements there? David Dunbar | Chairman, President, and Chief Executive Officer: Yeah, so let me just a broad statement. We went to Adam and I were talking about that this morning, but we have learned to love uncertainty in this company. If you go back five years, the most dramatic inflation we ever saw with rhodium inflation and we put in place practices to handle those disruptions that come from those unexpected rapid increases in cost with price with pricing practices. We redesigned a product or product line. And through that whole period, we only delivered higher margins. The inflation, the post covid inflation disrupt every part of our business kind of drove that same discipline through all the rest of our businesses. Now, if you look back six months, the last couple of quarters, we've lived in an uncertain trade and tariff environment. And look at the margins we just posted. Our businesses have done a great job identifying how best to deal with that in the short term. Several of our businesses are looking at their sourcing strategies, making sure that any exposure we have is being dealt dealt with with identifying, bringing on some new lines. So from a from a cultural standpoint, we think a highly uncertain environment kind of favors us because we demonstrated we're nimble and agile. The reason announcements may all turn it over to Adam here to look at the actual numbers and what the potential impact is. Adimir Sarcic | Chief Financial Officer and Treasurer: Yeah, so Matt, you know, I, you know, about four percent of our cogs comes from India. It's mostly within our electronic segment. You know, and again, to David's point between pricing, productivity, alternative sourcing, we feel pretty good. We got we got it covered. Matt Coranda | Analyst, Roth Capital: OK, all right. Super clear. Maybe just last one. The longer term target on sales, if we use just sort of an implied kegger off of sort of the maybe the low end of your guidance for fiscal 26, it still would imply sort of a low double digit sales kegger to get to the 28 target. Is that sort of how you think about it? And maybe just how much of that comes organically versus through acquisition in your. David Dunbar | Chairman, President, and Chief Executive Officer: Yeah, let me walk. Yeah, let me walk through kind of a high level bridge. We looked at this in a number of different ways. If you just anchor it on twenty twenty five, you're just finished seven ninety. Our new products were fifty five, fifty five million this coming year. We expect them to grow about 40 percent and we're just getting started with new products. So we anticipate about 30 percent growth annually in the new products. Fast growth market was one hundred eighty five last year, we're going to see sixty five and we're anticipating about 20 percent growth there in twenty eight. So those numbers that puts new products at 130 fast growth at three eighty. If you anticipate that the core, the remaining core business, which is about five fifty, will grow about three percent a year. That adds another 50 or so million that puts us at one just shy of the one point one five. In addition to that, we think there's an opportunity for a little pick up in the scientific markets. These additional defense opportunities we mentioned provide upside and these engraving wins that we described also provide. So there's maybe 30, 40 million dollars of go get in the next three years, but we've got the opportunities to to achieve them. Unknown Participant | Participant: Super helpful alternative. Thanks. Operator | Conference Operator: Your next question comes from Gary Presto Pino with Barrington Research. Your line is now open. Gary Presto Pino | Analyst, Barrington Research: Hi, good morning all. Hey, just want to get an idea with new product sales. I would assume the majority of those are targeted to your fast growth markets. Is that kind of a correct assumption? David Dunbar | Chairman, President, and Chief Executive Officer: Yeah, there is overlap in there. So engineering technologies has is a big contributor there. They've developed new products to expand their their participation in space. And that's those new products are all in fast growth. We've got fast growth in some of our other core businesses, while some of our other businesses, scientific and federal that are just in general industry. So there is some overlap in fast growth. So I'd say about 30 percent, 30 percent of new products going to fast growth. Gary Presto Pino | Analyst, Barrington Research: OK, so 30 percent new products into Unknown Participant | Participant: fast growth. And then as we as Gary Presto Pino | Analyst, Barrington Research: you scale the fast growth markets and grow the sales, as you expect to, is can you give us some idea of relative to your adjusted operating margin that you generated this year? What kind of incremental margin increases do you get from growing that sales into these faster growth markets? I mean, I assume they've got to have a higher higher margin profile. David Dunbar | Chairman, President, and Chief Executive Officer: Yeah, they do. Just think through the businesses in there. It is higher than the average. So we mix up with every growth in fast growth markets in terms of how many basis points of gross margin. It's got to be three, four hundred basis points higher. Adimir Sarcic | Chief Financial Officer and Treasurer: Yeah. Yeah. I mean, I think if you look at our projections, then we say we're going to get to over 23 percent adjusted operating margin by FY 28. If you just assume and it's true that our margins when we do sales into fast growth and markets are higher, you can do back of the envelope calculation and see just on the higher volume. We're going to comfortably get there. And then obviously we're going to have pricing and productivity actions on top of that. Gary Presto Pino | Analyst, Barrington Research: So. OK, and then getting back to new products, what do you say you generate? You put out 16 this year. David Dunbar | Chairman, President, and Chief Executive Officer: In the quarter. So it was 55 in the year. Fifty five in the year. Oh, sorry. Sixty six. Sixteen new six. Yeah. Sixteen new products were released and the sales of products released in the last couple of years that are still new was fifty five. Gary Presto Pino | Analyst, Barrington Research: So. OK, I just want to get an idea. Was there was there anything that that really drove the boat there as far as growth or. In any of those categories that you put out, David Dunbar | Chairman, President, and Chief Executive Officer: put Gary Presto Pino | Analyst, Barrington Research: out David Dunbar | Chairman, President, and Chief Executive Officer: the biggest numbers in the year with engineering technology sales into commercialization of space. These are these are new products for them that expanded their share of wallet and their content on those vehicles. OK, Gary Presto Pino | Analyst, Barrington Research: and then just lastly, how would you the acquisition pipeline? I know you're always active there. You know, would you have the appetite to do another acquisition this year? This fiscal year, the opportunity came up. David Dunbar | Chairman, President, and Chief Executive Officer: You were always working the pipeline and a lot of the deals we do are the result of years of relationship building. So we're out there doing that. And. You know, with with with the projection of our deleverage. So now at the end of this quarter with two point six, we anticipate just with normal course with operating cash flows and things by the end of this year will be a two. So we're rapidly developing the powder to be able to do something. Unknown Participant | Participant: OK, thank you. Operator | Conference Operator: Ladies and gentlemen, as a reminder, should you have a question, please press star one. Your next question comes from Ross Farron Black with William Blair. Your line is now open. Unknown Participant | Participant: Hey, Ross. Why is it open? He's on mute. There we go. Can you hear me? Ross Sparren Black | Analyst, William Blair: Yeah, we have. On that, on the scientific margins, you know, decent squids and uptake with some tougher shipping rates. Can you just give us a sense of what played out there in the quarter and kind of expectations looking forward to 2026 as we think about R&D as well? Adimir Sarcic | Chief Financial Officer and Treasurer: Yeah. So, you know, from a scientific standpoint, you're right. You know, the shipping, the shipping rates, you know, you know, are generally generally OK. You know, the acquisition we have in the scientific space is actually at a lower margin than our core business. So that's impacting our segment margin, if you will, a little bit. You know, but we do expect as we get into the fiscal 26 with the combination of pricing, productivity actions, we're going to be able to offset and alternative sourcing, by the way, in this segment, we're going to be able to offset the tariff pressure we got coming in because scientific is the business that sources some of its base products out of China. So, you know, we do expect scientific margins to hold. Ross Sparren Black | Analyst, William Blair: OK, and then just one more point on free cash. Kind of a tough year. Can you maybe just speak to your ability to maybe get some more turns on the working capital and get that conversion back above 100 percent? Adimir Sarcic | Chief Financial Officer and Treasurer: Yeah. Yeah, Ross. Great. Great question. Yeah. And, you know, if you look at our cash flow creation in the last fiscal year, you know, we were we were significantly impacted to by one time transaction related costs. You know, when you do three deals in a year and, you know, you have to do the payments to the bankers and the lawyers, et cetera, that adds up to be a pretty sizable number. And on top of that, you know, the acquisitions that we did, you know, have credit terms with the customers that are much longer than the credit terms that, you know, we we generally had in our core businesses. So our DSO has actually increased versus what we had prior to the acquisitions. So we are working on and, you know, frankly, some of the structure around collections is, you know, in some of those businesses, not as robust as we had the standard. So we are working to putting our process into place around the receivables and collections. And we think we're going to make a very good dent and progress in collections and receivables and working capital this fiscal year. So we expect conversion of cash to be much, much better this year than last year. Ross Sparren Black | Analyst, William Blair: All right. So can we hold you to a mean reversion back to 60 on the DSOs? Adimir Sarcic | Chief Financial Officer and Treasurer: You can. You can. That's a nice going to put it on the spot. Yeah, you can hold us that we're going to, you know, we're going to drive back to that low 60 number right now. We are about 69, 70 in terms of the DSO. And our goal is over the over this fiscal year to drive that as close to 60 as we can. Ross Sparren Black | Analyst, William Blair: OK, fantastic. Good. Unknown Participant | Participant: That's on the spot. Operator | Conference Operator: I know for the questions at this time, I will now turn the call over to David Dunbar, CEO for closing remarks. David Dunbar | Chairman, President, and Chief Executive Officer: All right. Thank you. Before we wrap, I want to send a special thank you to Tom Hanson, who is retiring from our board after 12 years. Tom has been a valuable board member and made many contributions to the company. I also want to welcome Andy Nemeth, the CEO of Patrick Industries, who is our newest board member. We look forward to working together. Finally, and as always, I want to thank everybody for joining us for the call. We enjoy reporting on our progress at StandX. Thank you also to our employees and shareholders for your continued support and contributions. I'm excited for the company's potential in fiscal year 2026 and look forward to speaking with you again in our fiscal first quarter 2026 call. Operator | Conference Operator: Ladies and gentlemen, this concludes your conference call for today. We thank you for participating and ask that you please disconnect your lines. jsPDF 3.0.3 D:20260606090448-00'00'

NYSE:SXI Q3 2025 Earnings Call Transcript Generated on 6/6/2026 Operator | Conference Call Moderator: Good morning ladies and gentlemen and welcome to the Standex International Fiscal 3rd Quarter 2025 Financial Results Conference Call. At this time, all lines are in a listen-only mode. Following the presentation, we will conduct a question and answer session. If at any time during this call you require immediate assistance, please press star 0 for the operator. This call is being recorded on Friday, May 2, 2025. I would now like to turn the conference over to Christopher Howe. Please go ahead. Christopher Howe | Investor Relations Representative: Thank you, Operator, and good morning. Please note that the presentation accompanying management's remarks can be found on the investor relations portion of the company's website at www.standex.com. Please refer to Standex's safe harbor statement on slide two. Matters that Standex management will discuss on today's conference call include predictions, estimates, expectations, and other forward-looking statements. These statements are subject to risks and uncertainties that could cause actual results to differ materially. You should refer to Standex's most recent annual report on Form 10-K, as well as other SEC filings and public announcements, for a detailed list of risk factors. In addition, I'd like to remind you that today's discussion will include references to the non-GAAP measures of EBIT, which is earnings before interest and taxes, adjusted EBIT, EBITDA, which is earnings before interest, taxes, depreciation, and amortization, adjusted EBITDA, EBITDA margin, and adjusted EBITDA margin. We will also refer to other non-GAAP measures, including adjusted net income, adjusted operating income, adjusted net income from continuing operations, adjusted earnings per share, adjusted operating margin, free operating cash flow, and pro forma net debt to EBITDA. Adjusted measures exclude the impact of restructuring, purchase accounting, amortization from acquired intangible assets, acquisition-related expenses, and one-time items. These non-GAAP financial measures are intended to serve as a complement to results provided in accordance with accounting principles generally accepted in the United States. Standex believes that such information provides an additional measurement and consistent historical comparison of the company's financial performance. On the call today is Standex's Chairman, President, and Chief Executive Officer, David Dunbar, and Chief Financial Officer and Treasurer, Adamir Sarcevic. David Dunbar | Chairman, President and Chief Executive Officer: Thank you, Chris. Good morning, and welcome to our fiscal third quarter 2025 conference call. Following strong operating performance in the fiscal second quarter, we achieved several new records in our fiscal third quarter. These achievements include record sales since the divestiture of the refrigeration business in April 2020, record adjusted gross margin of 42.3%, and record adjusted operating margin of 19.4%. Our growth engine continues to develop with sales into fast-growing end markets representing a greater percentage of total sales. I am also encouraged that new product sales are increasing above our projections and have added approximately 3% to our sales year-to-date. Once again, our teams have demonstrated their ability to navigate through difficult market conditions and deliver strong operating margins with price and productivity actions. Now, if everyone can turn to slide three, key messages. In the third quarter, sales increased 17.2% with contributions from acquisitions partially offset by organic decline. Electronics book-to-bill was 0.98, indicating that markets are stable. And electronics organic bookings were up more than 10% year-on-year. Sales from the Ameren Narayan Group were greater than $33 million, with book-to-bill of 1.04. The Ameren Narayan Group continues to perform ahead of our expectations. In the quarter, we made significant progress in planning expansions in India, Europe, and the USA. In all regions, customer commitments extend years into the future and give us confidence to expand our existing facilities in India and the United States. At the request of the largest European electrical equipment OEMs, we are beginning work on a greenfield site in Europe and expect to be shipping product from that location by the end of our first quarter, 2026, less than six months from now. Our fiscal third quarter sales into fast growth markets increased to 29% of total company sales. Sales into fast-growth markets were primarily driven by electrical grid, commercialization of space, defense applications, and renewable energy. New product sales totaled $13.4 million in the fiscal third quarter, which doubled year on year, contributing approximately 3% to top-line sales, ahead of our goal of 2%. I am especially pleased that we continue to demonstrate resilient operating performance from the execution of our price and productivity initiatives and from inorganic investments. As a result, we achieved record-adjusted QRIS margin of 42.3%, up 140 basis points sequentially, and 230 basis points year-on-year, and record-adjusted operating margin of 19.4%, up 70 basis points sequentially, and up 280 basis points year-on-year. The integration of Ameren, Norion, and McStarlight are progressing well. On a sequential basis, in fiscal fourth quarter 2025, we expect slightly to moderately higher revenue, driven by the impact of recent acquisitions, higher sales into fast growth end markets, and realization of pricing initiatives. We expect slightly to moderately higher adjusted operating margin due to higher revenue and realization of productivity actions, partially offset by tariff costs and targeted investments in selling, marketing, and R&D. With three new products just released in the fiscal third quarter, we have released 13 products year-to-date, achieving our previously communicated target for over a dozen products in the fiscal year. Sales from new products are tracking ahead of expectations and are expected to contribute over 200 basis points of incremental growth. Now, if everyone could turn to slide four, tariff and inflation updates. Before we discuss our fiscal third quarter in more detail, I would like to address the recent tariff announcements and how we are navigating their impact. Our customer intimacy business model requires that our plants are near customers, limiting exposure to tariff and trade disruptions. We have in-region, four-region operations, and greater than 85% of our products are manufactured and sold within the same region. This serves as a natural buffer to any impact tariffs may have on economic activity. In addition, most of our customer relationships are based on a deep value proposition and long-term partnership that typically only gets stronger during turbulent times, positioning us well for the long term. To put another lens on this, imports of material inputs to U.S. operations are a relatively small percentage of total cost of goods sold. Approximately 6% of our cost of goods sold are due to imports of materials to U.S. operations from China. Approximately 4% are from India, and approximately 3% are from other countries. We have started implementing additional productivity actions and select price increases and working to optimize our supply chain to mitigate the impact of tariffs. An intangible benefit of this uncertain economic environment is that our management teams around the world are coming together, as they did in COVID, to simultaneously protect margins and support strategic priorities, and strengthen collaboration across the enterprise, a demonstration of our growing and strong culture. We plan to continue to invest in our key growth priorities and in new product development as we work with customers on their next-generation product platforms. We came out of the COVID downturn a much stronger company, and I anticipate the same results during this disruption. We are confident in our agility, resilience, and business-by-business execution over the short and long term to continue to deliver for our shareholders. Now, if everyone can turn to slide five, highlighting our recent acquisition. In early February, Standex acquired McStarlight, a leading provider of complex sheet metal aerospace components, for $56.5 million in cash. With facilities in Harbor City, California, McStarlight designs and manufactures cold deep draw and bulge formed aviation components, including single piece lip skins, nozzles, complex metal assemblies, and tooling to support production hardware. We have admired McStarlight for many years, and this represented an ideal bolt-on acquisition for engineering technologies. The integration has been seamless since its customer base, product line, and technologies are highly complementary to our SpinCraft business. We are excited about our expanded product breadth and forming capabilities in commercial aviation, space, and defense applications. With the addition of McStarlight, the addressable market within engineering technologies expands by greater than $300 million. McStarlight enables expansion into wide-body, military, and MRO Lipskin segments and into space and defense sectors. Likewise, it expands SpinCraft's Lipskin addressable market by three times and doubles addressable missile solutions while providing opportunities to cross-sell solutions to existing space customers. I will now turn the call over to Ademir to discuss our financial performance in greater detail. Adamir Sarcevic | Chief Financial Officer and Treasurer: Thank you, David, and good morning, everyone. Let's turn to slide six, third quarter 2025 summary. On a consolidated basis, total revenue increased approximately 17.2% year-on-year to $207.8 million. This reflected a 26.3% benefit from recent acquisitions, partially offset by an organic revenue decline of 8.1% and 1% impact from point exchange. Third quarter 2025, adjusted operating margin increased 280 basis points year-on-year to a record 19.4%. In the fiscal third quarter, adjusted operating income increased 37.3% on 17.2% consolidated revenue increase year-on-year. Adjusted earnings per share increased 3.7% year-on-year to $1.95. NAP cash provided by operating activities was $9.6 million in the third quarter of fiscal 2025 compared to $24.4 million a year ago. Capital expenditures were $6.1 million compared to $5.2 million a year ago. As a result, we generated fiscal third quarter free cash flow of $3.5 million compared to $19.3 million a year ago. Our fiscal third quarter cash flow was impacted by one-time transaction-related payments, certain annual tax payments, and longer customer credit terms related to recent acquisitions that affected cash conversion in the quarter. Now please turn to slide seven, and I will begin to discuss our segment performance and outlook, beginning with electronics. Segment revenue of $111.3 million increased 38.4% year-on-year, as 48.1% benefit from acquisitions was partially offset by an organic decline of 8.9% and 0.8% impact from foreign currency. Adjusted operating margin of 29.8% in fiscal third quarter 2025 increased 760 basis points year-on-year, as the contribution from recent AMRA and Orion Group acquisition to the activity initiatives and product mix were partially offset by lower core volume. Excluding recent AMRA and Orion Group acquisition, our new business opportunity funnel increased approximately 50% year-on-year to $117 million. Further progress of our operational and commercial excellence initiatives throughout commercial expansion in India increased activity in the test and measurement end market supported by AI and data center expansion, and higher activity and demand in mill arrow end market. Our book to bill in fiscal third quarter was 0.98, with orders of approximately 109 million, driven by stable orders in core businesses and contribution from Ameren Orion Group acquisition, which had a book to bill of 1.04. Organic bookings increased over 10% year on year. Since our products are customized in nature, Our bookings take longer to convert into revenue, but with stronger margins. As David mentioned, our expansion plans for Emra and Orion within the U.S. and India are well underway to support additional demand. In addition, we are working on our greenfield site in Europe that should be operational within six months. Sequentially, in fiscal four quarter 2025, we expect slightly higher revenue and similar to slightly higher adjusted operating margin driven by the Emra and Orion group acquisition higher sales into fast growth and markets, and price realization, partially offset by higher tariff costs and continuous strategic growth investments. Please turn to slide 8 for a discussion of the engraving and scientific segments. Engraving revenue decreased 15.7% to $30.6 million, driven by organic decline of 12.6% and a 3.1% impact from foreign currencies. Adjusted operating margin of 11.2% in fiscal third quarter 2025 decreased 720 basis points year-on-year due to low revenue. In our next fiscal quarter, on a sequential basis, we expect slightly higher revenue and moderately higher adjusted operating margin due to more favorable project timing in Asia, slightly improved demand in North America and Europe, and realization of previously announced restructuring actions. To address the continued softness in end markets served by this segment, Our previously announced structuring options are underway and are projected to yield over $4 million in annualized savings once fully implemented. Scientific revenue increased 8.1% to $18.3 million due to 16.1% benefit from recent acquisition, partially offset by an organic decline of 8%, primarily due to lower demand from academic and research institutions that were impacted by NIH funding cuts. Adjusted operating margin of 22.6 percent decreased 780 basis points year-on-year due to organic decline and product mix as a result of the acquisition. Sequentially, we expect slightly lower revenue and adjusted operating margin due to soft demand from academic and research institutions affected by NIH funding cuts and higher tariff costs. To counteract the impact of higher tariff costs, we plan to implement pricing and productivity initiatives while continuing to optimize our supply chain to alternate sources. Now turn to slide nine for discussion of engineering technologies and specialty solution segments. Engineering technologies revenue increased 36.2% to 27.4 million, driven by 26.3% benefit from recent McStarlight acquisition and organic growth of 9.9%. This strong organic growth was due to more favorable project timing in the space and market and growth in sales from new products. Adjusted operating margin of 18.6% increased 110 basis points year-on-year due to contribution from recent acquisition and higher volume. Sequentially, we expect similar to slightly higher revenue and similar adjusted operating margin. Specialty solution segments revenue of 20.2 million decreased 13.9% year-on-year, primarily due to general market softness. Operating margin of 16.2 percent decreased 370 basis points year-on-year. Sequentially, we expect moderately higher revenue and operating margin. Next, please turn to slide 10 for a summary of Standex's liquidity statistics and the capitalization structure. Our current available liquidity is approximately $170 million. At the end of the third quarter, Standex had net debt of $470.4 million compared to $10 million at the end of fiscal third quarter 2024. Our leverage ratio per our bank credit agreement currently stands at 2.8. In fiscal fourth quarter 2025, with the addition of Max Starlight, we expect interest expense to be approximately $9 million. Stanis' long-term debt at the end of fiscal third quarter 2025 was $580.2 million. Cash and cash equivalents totaled $109.8 million. We declared our 243rd quarterly consecutive cash dividend of $0.32 per share in an approximately 6.7% increase year-on-year. In fiscal 2025, we expect capital expenditures to be between $25 and $30 million. Relative to our debt leverage, we will continue to focus on paying down debt and anticipate that our leverage ratio will further improve at the end of the fourth quarter and will continue to decline through 2026 as we announce the acquisition of Hammer & Ryan Group. I will now turn the call over to David for concluding remarks. David Dunbar | Chairman, President and Chief Executive Officer: Thank you, Adamir. Please turn to slide 11. I'm very proud of our team for their continued operational execution and for the success of our recent acquisitions, both of which helped us achieve record-adjusted operating margin for a second consecutive quarter. Sales into fast-growth end markets are well on track for our fiscal year 2025 expectation of approximately $170 million. This was primarily driven by growth in data center demand and grid modernization and expansion. Outside of the electrical grid, we are seeing growth in commercialization of space, defense applications, and renewable energy and markets. To support our future growth, we continue to invest in new product development and new applications across markets with growth potential. We have released 13 new products here today, and new products are now expected to contribute over 200 basis points of incremental growth this fiscal year. While we cannot predict the impact of new tariffs on global trade and economic growth, our regional presence strong customer relationships, and our disciplined approach to pricing and productivity actions position us well to manage through the current and short-term challenges. Most of our supply chain is strategically located to service regional demand, with China imports to the U.S. representing approximately 6% of the cost of goods sold. We plan to continue to invest in our key strategic priorities while implementing additional productivity actions and select price increases and working to optimize our supply chain to mitigate the impact of tariffs. We remain on track to achieve our fiscal 2028 long-term targets of sales of greater than $1.15 billion, adjusted operating margin of greater than 23%, and ROIC of greater than 15.5%. We remain confident in our ability to pay down debt and reduce our net leverage ratio. We will now open the line for questions. Operator | Conference Call Moderator: Thank you. And ladies and gentlemen, we will now begin the question and answer session. To ask a question, you may press the star followed by the number one on your cell phone keypad. If you're using a speakerphone, please pick up your handset before pressing any keys. To withdraw your question, you may press the star followed by the number two. With that, our first question comes from the line of Chris Moore with CJS Securities. Please go ahead. Chris Moore | Analyst, CJS Securities: Hey, good morning, guys. Thanks for taking a couple. All right. Morning. Good morning. Maybe we'll start with So 6% of COGS imported from China. Is that mostly scientific and hydraulics? David Dunbar | Chairman, President and Chief Executive Officer: Yeah, so it's split in about three parts almost equally. About one-third of that goes into electronics, one-third into specialty, and the remaining third into scientific. Chris Moore | Analyst, CJS Securities: Got it. And I guess the... The two primary, you know, one is looking for alternative sources and two is, you know, pricing. Is pricing power, you have a little more pricing power in, you know, in one of those splits or how do you look at that? David Dunbar | Chairman, President and Chief Executive Officer: Yeah, it is. That's a great question because it is very business by business. So within electronics and specialty, we think because of the, I guess, the significance of the bill of materials, the relationship with customers and, the overall value proposition, we're confident we cover the China tariffs with price productivity actions working with customers. Scientific's a little bit different. Now you have to assume what will happen with tariffs. If the China tariffs stay where they're at right now, 145% on China, we think we can, scientific can cover about 70% of that incremental tariff with price and productivity. and then longer term would have to look at some changes in supply chain and product design. It would take about a year to make up the rest of that. Chris Moore | Analyst, CJS Securities: Got it. Very helpful. All right. So it doesn't look like Q4 will show any organic growth. I guess on just the puts and takes for organic growth in fiscal 26 is obviously you've Invisibility isn't where you'd like it to be at this point, but is that more of a back half conversation or just any thoughts there at this stage? Adamir Sarcevic | Chief Financial Officer and Treasurer: Well, hey, good morning, Chris. It's Adam here. I think if you look at electronics specifically, we are very pleased with the order intake rates in a core business we are seeing over the last couple of quarters. And obviously, Amaran Orion has been a phenomenal acquisition for us, albeit it's not organic yet. So as we enter FY26, we do, again, you know, assuming current economic environment and, you know, no significant changes, we do believe we're going to start seeing organic growth, you know, and electronics is our engine. You know, as far as the other businesses, you know, engineering technology group, very robust order book, you know, very strong end markets. We feel very, very confident that they will continue to show organic growth. And then engraving, frankly, is coming from a very low starting point at this stage with the auto market in North America being an all-time low. So there's a possibility, and we feel that we'll be able to turn the tide there as well. Scientific remains a little bit of a challenge because of what David just described. And that specialty has been, you know, we feel pretty good about specialty as far as the organic growth is concerned as well. So... David Dunbar | Chairman, President and Chief Executive Officer: Well, I guess another way to look at it, because you mentioned both the Q4, the upcoming quarter, and the rest of the year. If you just zoom out a little bit and think about what's driving growth long-term in the portfolio, those things that we're confident in that we know we can control. So the fast growth markets, Ameren Orion alone, if it continues its growth, will add about $20 million of sales to the company over a year. That's over two points of growth. Our new products are running ahead of what we had said earlier this year, contributing just over about 200 basis points of growth. So that's 400 basis points from all the investments and movements we've made in the last few years to focus more on organic growth. And now we have to make assumptions about underlying market. If you assume no recession, and say we return to say 2.5% GDP, On top of that, we typically get about a point of price in quote-unquote normal times. So you add those all up, making assumptions about the end market that fell out of bookend or both expectations. Chris Moore | Analyst, CJS Securities: Got it. That's very helpful. Maybe just the last one on Amer and Narayan. The planned expansion, it sounds like you said about six months before you start selling in Europe, right? Is there a significant investment required to begin there, or just kind of what the primary kind of milestones are over the next two quarters? David Dunbar | Chairman, President and Chief Executive Officer: Yeah, thank you for that question. We're very excited about this. Europe is actually the biggest end market for their products. It's over a $2 billion market, whereas America is about $1.5 billion. And they have served European OEMs out of India. And I think we announced even at the acquisition, those OEMs have been asking them to create a footprint in Europe. So the last quarter, we've made several trips to Europe. We're progressing rapidly. And this will go in stages. So the initial stages, the investment will not be significant. We just, you know, we obviously need a building. We'll start stocking and doing some testing and then gradually add equipment. So in the first year or two, maybe a million, $2 million of investment. And then as it grows, we will, you know, we'll expand it from there. Adamir Sarcevic | Chief Financial Officer and Treasurer: Yeah, Chris, it's not a very high capital investment required for us to get it started. So there should be a lot of cash outflows there. Chris Moore | Analyst, CJS Securities: Perfect. All right, guys. Thanks. I'll leave it there. on Ross Perrin-Blackweed’s line\ Thank you. Operator | Conference Call Moderator: And your next question comes from the line of Matt Crandall with Roth Capital. Please go ahead. Matt Crandall | Analyst, Roth Capital: Hey, guys. Good morning. Maybe just continuing on with the electronics questioning. So Amer and Orion, the order trend looks pretty encouraging. Just wanted to see if maybe you could unpack the end markets that are driving strength for them between data centers and the electrical grid infrastructure expansion. And then could you talk about capacity utilization there right now? It sounds like I would imagine we're running quite high, given that we're going to be adding a plant in Europe. And so what does capacity utilization look like right now? Is there a hit to margins as you kind of ramp the new plant in Europe? Maybe just talk about the transition there over the next couple of quarters. David Dunbar | Chairman, President and Chief Executive Officer: Yeah. So first of all, the sources of growth are more or less what they were when we announced the acquisition. You've got grid modernization in all parts of the world. There's expansion of electrical capacity just to support economic growth and living standards. Data centers and – and artificial intelligence are driving investments. So we're not seeing any change in that momentum. Our relationships are with the large electrical equipment OEMs. They still have demand that goes out several years. So we see no change in those drivers for the growth. Our capacity, we still have capacity in our current plants, and we're probably running, I don't know, 60%, 70% capacity. We recently added second shifts in India and in Texas. But we also announced in the script we will expand in India. We'll add footprint. We'll expand in the U.S. We'll add footprint. And we have the Greenfield site coming in Europe. We have good visibility to the demand from customers. And so that capacity will come online in time to meet that demand. Adamir Sarcevic | Chief Financial Officer and Treasurer: Yeah, and Matt, if I can add this, from a margin standpoint, we don't anticipate that the margins in Europe will be any different than the margins of the consolidated group as they stand today. Matt Crandall | Analyst, Roth Capital: Okay, very clear. I appreciate that. And then maybe just on the core order book in electronics, I think you guys mentioned kind of flash in terms of order trend quarter over quarter. What does that mean for sort of when we inflect to the positive in terms of organic growth in the electronics segment? How soon could that come? What would that look like over the next couple of quarters? Adamir Sarcevic | Chief Financial Officer and Treasurer: Yeah, I mean, you know, and the other thing that I just want to mention, Matt, you know, we are about 10% up organically on orders in electronics if you look at the year-on-year. So, you know, we are kind of at that reflection point now, to be quite honest with you. And as we move into the next fiscal year, which would be, you know, our fiscal first quarter, FY26 next quarter, you know, we feel we are turning the corner and we should start showing organic growth. Matt Crandall | Analyst, Roth Capital: Okay, great. And then maybe just the last one, if I could. Thinking about the sort of the overall deposition here, what are your thoughts on sort of leverage and where we'd be willing to take it if we found an attractive acquisition over the next few quarters? Or I guess should we think about sort of leverage as coming down over the next few quarters? And we're driving cash to deliver the balance sheet with the macro uncertainty that we're dealing with. Just wanted to hear your thoughts on that front. Adamir Sarcevic | Chief Financial Officer and Treasurer: Yeah, so Matt, our leverage as it stands today is about, per our bank facilities, about 2.8. If you kind of annualize our fourth quarter EBITDA, it's less than that. It's about 2.5, 2.6. Obviously, our priority is to pay down debt. And we also have a lot of very exciting organic initiatives that David has just been talking about, specifically in electronics and some other businesses. So our priority would be to invest in organic growth and the things we know the best and we control. And then at the same time, obviously work down to pay down the debt and take the leverage down. And we think we're going to make a dent in leverage this quarter. We're going to continue to work at RFY26 and We are a very good cash-generating company, and we'll continue to focus on both organic growth, investments, as well as paying down the debt. David Dunbar | Chairman, President and Chief Executive Officer: Yeah, let me add something. From a philosophical standpoint, I guess we're about as high in leverage as we'd like to be. We are still in the market. A lot of the acquisitions that we make are based on years and years of relationship building. So we continue to do that, and in the next year or so, we'll be at a leverage point we could consider. on Ross Perrin-Blackweed’s line\ Okay, got it. Thanks, guys. Appreciate it. Operator | Conference Call Moderator: And your next question comes from the line of Mike Sischke with DAD Winston. Please go ahead. Mike Sischke | Analyst, DAD Winston: Good morning. Thanks for taking my questions here. So leverage at 2.8 sounds like it's coming down. That's certainly good to hear. Besides just, you know, rolling in Amran Narayan and the McStarlow EBITDA into the numbers that you implied, Adamir. Do you have any other levers that you're looking to pull on the debt side? I mean, I wasn't sure if you needed to or could liquidate any working capital in the near term or if you even have to. Just curious as to how you feel about other parts of your balance sheet at the current time. Adamir Sarcevic | Chief Financial Officer and Treasurer: Yeah, now look, we certainly have some opportunities in our working capital metrics. As an example, some of the businesses we recently acquired generally have longer credit terms with some of their customers. Those credit terms are sometimes over 90 days. So obviously we will be working with our new acquisitions as well as the customers to try to improve those terms and get them a little bit more balanced, if you will. So we clearly have opportunity on receivables. We'll obviously continue to manage inventory as well. So, yeah, I mean, there's clearly an opportunity to get more operating cash flow in the upcoming quarters, and we plan to do that. Mike Sischke | Analyst, DAD Winston: Great. I also wanted to circle back to some of your answers and comments on tariffs from earlier. Given that Scientific is, at this point, such a small part of the overall company, and the China part of it is even smaller, of course, and the other things that you mentioned in the other segments, Does it feel like the total potential impact from the tariffs that you're seeing today, if anything changing going forward, is pretty de minimis? And would you agree with the thought that maybe the efforts you have to take to mitigate it through pressing and productivity is relatively minor and doesn't seem all that challenging? At this point, this just doesn't sound like you're in any kind of concern or huge panic here at all. Adamir Sarcevic | Chief Financial Officer and Treasurer: Yeah, I think that's a fair way to summarize it, Mike. But obviously, you know, it's our fiduciary duty to do the best we can to continue maintaining good relationships with suppliers, with customers, and obviously to protect our margins. But yeah, I mean, in a grand scheme of things, it's not Again, as David said, we are in the region, for the region, for the most part, in terms of our supply chain as well as customer relationships. So, yeah, the impact for us is certainly not significant. David Dunbar | Chairman, President and Chief Executive Officer: You laid it out pretty clearly earlier that of that 6%, there's about 10 million, 10 million, 10 million. Just the 10 million is scientific. That's going to require some work. So it's not to minimize the work that they have to do. So in that business, there's plenty of work, but they've got a line of sight to actions to do. To contain that, as I described earlier. Adamir Sarcevic | Chief Financial Officer and Treasurer: It's our job to worry, Mike, right? David Dunbar | Chairman, President and Chief Executive Officer: But no, you're right. Overall impact at a corporate level, de minimis. Yes, that's correct. on Ross Perrin-Blackweed’s line\ Okay, great. Mike Sischke | Analyst, DAD Winston: And I want to turn to some of your comments you made on the new products that are kind of in the process of rolling out from fiscal 2025. But, you know, at this point, fiscal 2026 starts in just two weeks. months from now. Can you maybe just share with us some of your plans for new products during 2026? Could it be on the same order of magnitude as 2025? And also, is there a tailwind from stuff that got introduced during 2025 that still has to lap in 2026 or has ongoing adoption that will be beyond just small organic growth next year? David Dunbar | Chairman, President and Chief Executive Officer: Yeah, those are great questions. I think we've talked before that because of our business model and our products are sold to OEMs who are incorporating that into their next generation platforms, it typically takes about three years for any application, any new opportunity we win to ramp to full volume. So that's true of new products as well as just the applications of existing products. So everything released this year will continue to ramp in the coming years. We also have a pipeline, and we would expect order magnitude, the same number of products to be released in FY26 as in FY25. on Ross Perrin-Blackweed’s line\ Outstanding. I'll pass it along. Thank you. Operator | Conference Call Moderator: And your next question comes from the line of Ross Perrin-Blackweed. William Blair, please go ahead. on Ross Perrin-Blackweed’s line\ Good morning, gentlemen. Hey, Ross. Hey, Ross. Ross Perrin-Blackweed | Analyst: Hey guys, kicking off with Core Electronics. Can you maybe just update us on where we are with the broader restocking phase and what's underwriting confidence for return to growth in 2026 on the organic side, just again for the core business? David Dunbar | Chairman, President and Chief Executive Officer: Yeah, so if you look at the underlying business, We're seeing strength in Asia. North America is ticking up. Europe remains soft. Most of the stocking, destocking impact was in Asia and China for us, and that is a few quarters ago. We said it was bottoming out. That's picking up. Ross Perrin-Blackweed | Analyst: Okay. Well, then maybe just help us size the automotive and general industrial exposure again. Just trying to think about the ebb and flow of China picking up with North America and Western Europe getting a little weaker there. at least on the auto side. David Dunbar | Chairman, President and Chief Executive Officer: What's the question? You mean auto? The exposure. Ross Perrin-Blackweed | Analyst: Yeah, and general industrial, because those were both noted as being weaker again this quarter. David Dunbar | Chairman, President and Chief Executive Officer: Historically, just think out loud here, auto's been about 20% of the electronics business. A little lower now just because it's been soft. Yeah, it's been more like 15% in recent quarters. So EVs have been flat. Other combustion engine has declined. It's over about 15% of total electronics. Ross Perrin-Blackweed | Analyst: And then just on the scientific side, can you maybe help us frame the risk here from the NHI funding? Based off last quarter, it looks like a couple million, and that probably counts for the next three quarters going forward. And then I believe on the pharmacy side, that's pretty much at trough. Are you seeing any signs of recovery there? Adamir Sarcevic | Chief Financial Officer and Treasurer: Yeah, I think, Ross, for the NIH, I think you just sized it pretty well in terms of the potential impact. Yeah, and, you know, for the pharmacies, you know, yeah, you're right. It's kind of at the trough. We are waiting to see if the new capital equipment requests are going to come in. You know, maybe some of that is a little bit impacted now with some of the economic uncertainty, but certainly those units that we placed years ago are due to be replaced. And, you know, we do expect we're going to see some uptick in the near future. Ross Perrin-Blackweed | Analyst: I mean, are you having active conversations there? It's two key players, right? Okay. That's good to hear. Maybe just one last one on McStarlight. Can you call out the major programs there? You know, the wide bodies. Is there any Boeing exposure, Airbus, anything we can point to? David Dunbar | Chairman, President and Chief Executive Officer: Yeah, both. Boeing and Airbus. They're on the wide body programs of both those players. Ross Perrin-Blackweed | Analyst: All right. I mean, is this primarily sole sourced, single sourced for what they offer? on Ross Perrin-Blackweed’s line\ Yeah. Yes. Awesome. All right. Thank you, guys. Thanks, Rod. Operator | Conference Call Moderator: And your next question comes from the line of Gary Pristapino with Barrington Research. Please go ahead. Gary Pristapino | Analyst, Barrington Research: Hi. Good morning, all. A couple of questions here. In the guidance that you gave us for Q4, In terms of the organic decline, is it going to be very similar to the organic decline in sales that you saw in Q3? Adamir Sarcevic | Chief Financial Officer and Treasurer: Hey, good morning, Gary. No, it will not, because we do believe electronics will, which is, again, our engine, will do better than they have done in Q3. So we should see some improvement there. You know, the only one that I would, you know, point to that might be a little soft, you know, from kind of a comparison would be obviously Santa Fe for the reasons we just spoke about. But, yeah, we do expect that, yeah. Gary Pristapino | Analyst, Barrington Research: No, you know, when you say sequentially up, and I'm just, you know, back of the envelope, you know, Amron, let's say you bought it, it had $100 million of revenues, you had $25 there. McStarlight, about $8 million, that's $33. So... I'm just trying to get an idea of when you're talking about the changes you're seeing or contemplating or the growth you're contemplating, just what we have to work off there. So we really shouldn't be looking at about an 8% organic decline in Q4 as we saw in Q3. No, no, no. Okay, that's good to hear. I just want to ask, in terms of fast growth markets, Were your sales last quarter about $26 million? I think I went back and looked at that, and you were about $60 million this year. Is that kind of correct, or this quarter? David Dunbar | Chairman, President and Chief Executive Officer: Yeah, that's right. About $60 million this quarter. The $26 you quoted, what period were you referring to? Gary Pristapino | Analyst, Barrington Research: I was looking at last year's Q3. David Dunbar | Chairman, President and Chief Executive Officer: Yeah, yeah, that's right. Yeah, and you recall this last quarter, we kind of bridged – kind of a recasting. We have an old number, new number, because the Ameron and Orion sales are all into fast growth. So we're including that in the 60, of course. Gary Pristapino | Analyst, Barrington Research: Right. So the guess, phrase the question this way, given that Ameron had a pretty good margin profile, how has that changed the margin profile, adjusted operating margin profile of your sales in the fast growth markets? You know, is it, could you give us an idea of the magnitude or the basis point increase year over year? David Dunbar | Chairman, President and Chief Executive Officer: Let's see. Well, yes, that's a great question. Our margins into fast growth markets have always been higher than our average margins. They tend to be newer products. There's a great value proposition. The Amaranth and Orion margins still are higher than that average. So it's about half of our – it probably has a couple hundred basis points to our fast growth margins. Gary Pristapino | Analyst, Barrington Research: Okay, a couple of hundred basis points. So as this grows, it's going to become very accretive. Yeah, yeah, yeah. Okay, and then lastly, one of the things you mentioned was the tariffs. You can offset some of this with price increases, and I realize this is rather de minimis relative to other companies, but have you informed your customers that you're going to increase prices as of yet? And I just want to get what's kind of been their reaction to that. David Dunbar | Chairman, President and Chief Executive Officer: It runs across the board. I mean, all the spectrum of reactions. But there are hundreds or thousands of discussions going on with customers and many of our businesses about price increases. So I don't know. I guess the bottom line is what we conveyed earlier. We think we can cover to the extent we can cover the tariffs. The one challenge is going to be in the scientific business based on the competitive nature of that market and their ability to get price. In all the other businesses, a combination of price and productivity will cover tariffs. Adamir Sarcevic | Chief Financial Officer and Treasurer: Yeah, Gary, we're not just approaching this purely from a price standpoint. We're looking at productivity, sourcing savings as well. And the way we're approaching this with our customers, we're kind of all in this together, and we're going to come up with the best optimal solution for us as well as for our customers. So it's a combination really of three things, pricing, productivity, and sources of supply. Gary Pristapino | Analyst, Barrington Research: Well, let me ask you this. With your existing sources right now, we're coming from, say, China and India, can you go back to them and say, hey, you guys got to share some of this burden? I mean, is what you're getting out of China, is that coming out of mainland China or Taiwan? David Dunbar | Chairman, President and Chief Executive Officer: Well, the 6% we quoted is mainland China. And so we have, there again, you've had discussions with all the suppliers. Some of them have participated a bit, I guess, with others. Others have not. It just depends on the business and the supplier. Right. Gary Pristapino | Analyst, Barrington Research: Okay, that's it. David Dunbar | Chairman, President and Chief Executive Officer: Thank you very much. Gary Pristapino | Analyst, Barrington Research: Thank you, Gary. Operator | Conference Call Moderator: And we hand over to questions at this time. I would like to turn it back to David Dunbar for closing remarks. David Dunbar | Chairman, President and Chief Executive Officer: All right, I want to thank everybody for joining us for this call. We always enjoy reporting on our progress at StandX. And finally, again, I want to thank our terrific employees. for their hard work, continued support of our strategic objectives, and delivering another solid quarter. And thank you to the shareholders for your continued support and contributions. We look forward to speaking with you again in our fiscal fourth quarter 2025 call. Operator | Conference Call Moderator: Thank you, presenters. And ladies and gentlemen, this concludes today's conference call. Thank you all for participating. You may now disconnect. jsPDF 3.0.3 D:20260606090450-00'00'

NYSE:SXI Q2 2025 Earnings Call Transcript Generated on 6/6/2026 Operator: Good morning, ladies and gentlemen, and welcome to the Standex International Fiscal Check-in Quarter 2025 Financial Results Conference Call. At this time, all lines are in listen-only mode. Following the presentation, we will conduct a question-and-answer session. If at any time during this call you require immediate assistance, please press star 0 for the operator. This call is being recorded on Friday, January 31, 2025. I would now like to turn the conference over to Mr. Christopher Howe, Director of Investor Relations, please go ahead. Christopher Howe | Director of Investor Relations: Thank you, operator, and good morning. Please note that the presentation accompanying management's remarks can be found on the investor relations portion of the company's website at www.standex.com. Please refer to Standex's safe harbor statement on slide two. Matters that Standex management will discuss on today's conference call include predictions, estimates, expectations, and other forward-looking statements. These statements are subject to risks and uncertainties that could cause actual results to differ materially. You should refer to STANDX's most recent annual report on Form 10-K, as well as other SEC filings and public announcements for a detailed list of risk factors. In addition, I'd like to remind you that today's discussion will include references to the non-GAAP measures of EBIT, which is earnings before interest and taxes, adjusted EBIT, EBITDA, which is earnings before interest, taxes, depreciation, and amortization, adjusted EBITDA, EBITDA margin, and adjusted EBITDA margin. We will also refer to other non-GAAP measures, including adjusted net income, adjusted operating income, adjusted net income from continuing operations, adjusted earnings per share, adjusted operating margin, free operating cash flow, and pro forma net debt to EBITDA. Adjusted measures exclude the impact of restructuring, purchase accounting, amortization from acquired intangible assets, acquisition-related expenses, and one-time items. These non-GAAP financial measures are intended to serve as a complement to results provided in accordance with accounting principles generally accepted in the United States. Standex believes that such information provides an additional measurement and consistent historical comparison of the company's financial performance. On the call today is Standex's Chairman, President, and Chief Executive Officer, David Dunbar, and Chief Financial Officer and Treasurer, Ademir Sarcevic. David Dunbar | Chairman, President, and Chief Executive Officer: Thank you, Chris. Good morning, and welcome to our fiscal second quarter 2025 conference call. Following strong operating performance in the fiscal first quarter, we delivered record adjusted operating margin in the fiscal second quarter, supported by the highest sales since the divestiture of the refrigeration business in April 2020. Our sales into fast-growing end markets continue to expand as a percent of the total. Our new product sales are increasing above our projections, and our team's focus on price and productivity continues to deliver strong operating margins. For the remainder of the year, based on increasing order rates and customer activity, we continue to expect our end markets to improve, with the recent Amaran Narayan Group acquisition providing an additional tailwind. Today, we will provide significant updates to our fast-growth market sales, as well as revised and improved 2028 financial expectations. Now, if everyone can turn to slide three, key messages. In the second quarter, sales increased to 6.4%, with contributions from acquisitions partially offset by organic decline. Sales from the Ameren and Orion Group exceeded our expectations. Though organic sales were down in electronics due to softness in automotive and general industrial end markets in Europe and North America, our book to bill was 1.02, indicating that markets are improving and that our commercial strategy is taking hold. With two months of Amer and Orion sales into the electrical grid end market, our fiscal second quarter sales into fast growth markets were over 20% of total company sales. Sales into fast growth markets were primarily driven by the electrical grid, commercialization of space, and defense applications. I will share more detail on our view of fast growth markets later in the call. New product sales totaled $14.5 million in the fiscal second quarter, which increased approximately $3.5 million sequentially and more than doubled year on year. I'm especially pleased that we continue to demonstrate resilient operating performance from the execution of our price and productivity initiatives and from inorganic investments. As a result, we achieved a record adjusted operating margin of 18.7%, up 170 basis points sequentially, and up 150 basis points year on year. led by adjusted operating margin of 27.6% in the electronics business segment. The integration of Ameren and Orion is progressing well and ahead of plan. On a sequential basis in fiscal third quarter 2025, we expect moderately to significantly higher revenue, driven by the impact of the recent Ameren and Orion group acquisition and improving overall demand in electronics. We expect slightly to moderately higher adjusted operating margin due to higher revenue, partially offset by higher investments in selling, marketing, and R&D. For the remainder of the fiscal year, we continue to expect our end markets to improve, with the electrical grid end market providing an additional tailwind. With seven new products just released in the fiscal second quarter, we remain positioned to release more than a dozen new products in fiscal 2025. Sales from new products are cracking ahead of expectations and are expected to now contribute approximately 200 basis points of incremental growth. Now, if everyone can turn to slide four, an update on a recent acquisition. The acquisition of the Ameren Orion Group last October was the largest transaction in the company's history. Considering the magnitude of the transaction, I'm extremely pleased with how our teams have adapted, a testament to the cultural fit of this acquisition. The integration is progressing well, and we have achieved all major integration milestones in the areas of finance, HR, and IT. When we announced this acquisition, we estimated calendar year sales in 2024 of approximately $100 million. We are happy to report that the Ameren Orion Group exceeded this target with fiscal second quarter results higher than anticipated. In fact, the month of December was the highest revenue month in its history. Their contribution led to sales in the fast-growth markets exceeding 20% of total company sales for the first time. The growth in Dynamron Orion is being driven by three powerful forces to increase global electrical capacity, increasing living standards in all countries of the world, modernization of existing aging grid infrastructure, and incremental demand from data centers. We anticipate the Amer and Orion Group to continue growing revenue at a healthy double-digit rate in calendar year 2025. Now, if everyone can turn to slide five, fast-growth markets redefined. Three years ago, we identified end markets driven by long-term secular trends that provide above-average growth opportunities. Of these markets, those that provided STANDEX the best growth opportunities were renewable energy, electric vehicles, soft trim, commercialization of space, and the electronics defense market. Aggregating these sales into a single number provided a shorthand to explain the growth potential of our company. Our fast growth market sales has become an important number for our shareholders as well as for our management as we review priorities. In those three years, our fast growth market sales have grown from $40 million to nearly $100 million. Space, defense, and electric vehicles have been the primary drivers of the growth and remain attractive. Electric vehicle sales have decelerated, but are still growing around the world, and combined with our increased content per vehicle, still represent an above-market growth opportunity for us. Other markets like 5G and soft trim have not provided the lift we expected. Our recent acquisition makes a step-jump change to our growth profile. 100% of the sales of the Amer and Orion Group are into the fast-growing market of the electrical grid, doubling our fast-growth sales. Considering this acquisition and the degree to which the global environment has shifted versus three years ago, we are taking a fresh look to more accurately reflect the company's faster growing markets and to show how we continue to pivot towards markets with above average growth. As the company is comprised today, our new fast growth markets are the electrical grid, renewable energy, electric and hybrid vehicles, commercialization of space, and defense. We removed soft trim and 5G, but of course, we still serve customers in these spaces. We have added the electrical grid and defense sales in engineering technologies. In the fiscal second quarter, sales into these redefined fast growth markets were approximately $43 million. In fiscal 2025, we anticipate approximately $170 million from sales into fast growth markets. By fiscal 2028, We anticipate sales in the fast-growth markets to be greater than $340 million in sales, which would represent greater than 30% of total sales. I will now turn the call over to Ademir to discuss our financial performance in greater detail. Ademir Sarcevic | Chief Financial Officer and Treasurer: Thank you, David, and good morning, everyone. Let's turn to slide six, second quarter 2025 summary. On a consolidated basis, total revenue increased approximately 6.44% year-on-year to $189.8 million. This reflected a 15.3% benefit from recent acquisitions, partially offset by an organic revenue decline of 8.2% and 0.7% impact for foreign exchange. With the recent acquisition of the Amaran Orion Group, the largest in the company's history, Non-GAAP measures will now exclude amortization of acquired intangible assets, which affects our electronics, engraving, and scientific business segments. You may refer to our appendix slide in the presentation for historical reconciliation. Second quarter 2025 adjusted operating margin increased 150 basis points year-on-year to a record 18.7%. In the fiscal second quarter, adjusted operating income increased 15.4%, on 6.4% consolidated revenue increase year on year. Adjusted earnings per share remain flat year on year at $1.91. Net cash provided by operating activities was 9.1 million in the second quarter of fiscal 2025 compared to 23.8 million a year ago. Capital expenditures were 7 million compared to 4.3 million a year ago. As a result, We generated fiscal second quarter free cash flow of $2.1 million compared to $19.5 million a year ago. Our fiscal second quarter includes one-time payments of approximately $11 million for acquisition-related expenses. Now please turn to slide seven, and I will begin to discuss our segment performance and outlook, beginning with electronics. Segment revenue of $95.9 million increased 20.8% year-on-year as 32.3% benefit from recent acquisitions was partially offset by an organic decline of 10.7% and 0.9% impact from foreign currency. Adjusted operating margin of 27.6% in fiscal second quarter 2025 increased 560 basis points year-on-year as the contribution from recent Amra and Narayan group acquisition, productivity initiatives and product mix were partially offset by lower volume. Excluding recent Amra and Orion Group acquisition, our new business opportunity funnel increased approximately 32% year-on-year, and is currently at approximately $100 million. Our book-to-bill in fiscal second quarter was 1.02, with orders of approximately 98 million, driven by orders strengthening in core business and contribution from the recent Amra and Orion Group acquisition. Sequentially, in fiscal third quarter 2025, We expect significantly higher revenue driven by the recent Amra and Narayan group acquisition, accelerating new product sales, and higher sales into fast growth and markets, and moderately higher adjusted operating margin as contribution from recent acquisition and pricing and productivity initiatives are partially offset by higher investments in selling, marketing, and R&D. Please turn to slide eight for discussion of the engraving and scientific segments. Engraving revenue decreased 23% to $31.5 million, driven by organic decline of 22.2% and a 0.8% impact from foreign currency. Adjusted operating margin of 14.3% in fiscal second quarter 2025 decreased 850 basis points year-on-year due to lower revenue. In our next fiscal quarter, on a sequential basis, we expect slightly to moderately low revenue and adjusted operating margin due to continued softness in the automotive end markets in North America and Europe, and less favorable project timing in Asia due to Chinese New Year. To address the continued softness in end markets served by this segment, the company initiated additional restructuring actions that project to yield $4 million in annualized savings once fully implemented, starting in fiscal fourth quarter 2025. At the same time, we are starting to see some encouraging signs that the market is slowly recovering in North America, based on recent visit to one of the largest tool shops in the region and large amount of tools currently being worked on. Scientific revenue increased 13.4% to 18.5 million due to the recent acquisition and organic growth of 3.9%, mostly due to higher volume from new product sales, partially offset by lower demand from retail pharmacies. Adjusted operating margin of 26.9% decreased 80 basis points year-on-year due to the impact of the recent custom biogenic systems acquisition. Sequentially, we expect slightly to moderately higher revenue and slightly to moderately lower adjusted operating margin due to higher contribution to revenue from the recent acquisition, additional R&D investments, and higher freight costs. Now turn to slide nine for discussion of the engineering technologies and specialty solution segments. Engineering technologies revenue increased 13.9% to 22.6 million, driven by organic growth of 14.5%, slightly offset by 0.6% impact from foreign currency. This strong organic growth was due to more favorable project timing in the space and market, and growth in sales from new products. Operating margin of 16.3% decreased 80 basis points year-on-year, as higher development work was partially offset by higher sales. Sequentially, we expect slightly lower revenue due to project timing and slightly higher operating margin due to product mix. Specialty solution segment revenue of 21.3 million decreased 2.9% year-on-year, primarily due to the general market softness in display merchandising and hydraulics businesses. Operating margin of 16.7% decreased 140 basis points year-on-year. Sequentially, we expect similar revenue and slightly higher operating margin. Next, please turn to slide 10 for a summary of Standex's liquidity statistics and capitalization structure. Our current available liquidity is approximately $185 million. At the end of the second quarter, Standex had net debt of $413.2 million compared to $6.2 million at the end of fiscal second quarter 2024. Our net leverage ratio currently stands at 2.9. In fiscal third quarter 2025, we expect interest expense to be between $7 million and $7.5 million. Tandex's long-term debt at the end of the fiscal second quarter 2025 was $534.3 million. Cash and cash equivalents totaled $121.1 million. We declared our 242nd quarterly consecutive cash dividend of $0.32 per share and approximately 6.7% increase year-on-year. In fiscal 2025, we expect capital expenditures to be between 30 and $35 million. Let's turn to slide 11 that highlights our updated long-term targets by fiscal 2028. We communicated our long-term financial targets by fiscal 2028 two years ago during our fiscal second quarter 2023 earnings call. This prior outlook excluded the impact of potential acquisitions and divestitures. Since then, we have acquired Mintronics, Sanyo Switch, Amra Narayan Group, and Custom Biogenic Systems and Divested Procon. As such, the composition of the company is meaningfully different. We now target reaching greater than $1.15 billion in sales by fiscal year 2028 versus the prior target of greater than $1 billion in sales. We now target adjusted operating margin of higher than 23% by fiscal year 2028 versus our prior target of greater than 19% margin. We expect to continue to ramp up our R&D investments with a target over 3%. It is now our expectation that with this financial performance, we will increase our return on invested capital to greater than 15.5% versus the prior target of greater than 15%. We expect our free cash flow conversion target ratio to remain at approximately 100% of GAAP net income. Our financial targets apply to our current portfolio of businesses, and exclude the impact of any future acquisition or divestiture. I will now turn the call over to David for concluding remarks. David Dunbar | Chairman, President, and Chief Executive Officer: Thank you, Ademir. Please turn to slide 12. I'm very proud of our team for their continued operational execution and for their efforts in integrating the largest acquisition in the company's history, both of which helped us achieve our record-adjusted operating margin in the fiscal second quarter. We remain optimistic about the long-term secular trends that will benefit from infrastructure upgrades, capacity expansion, and data center demand within the electrical grid, the evolution of space exploration, defense applications, and from the transition from internal combustion to hybrid and electric vehicles in automotive. For the remainder of fiscal 2025, we expect our end markets to improve with sales in the electrical grid and market providing an additional tailwind. To support our future growth, we continue to invest in new product development and new applications across markets with growth potential. We are on track to release over a dozen new products this fiscal year across our businesses, which are now expected to contribute approximately 200 basis points of incremental growth. With the acquisition of the Ameren Orion Group, we intend to use our cash flows to reduce debt while we maintain flexibility to fund an active pipeline of organic and inorganic growth opportunities that support future growth. We are increasing our fiscal 2028 long-term targets to sales of greater than $1.15 billion, adjusted operating margin of greater than 23%, and ROIC of greater than 15.5%. We will now open the line for questions. Operator: Thank you. Ladies and gentlemen, we will now begin the question and answer session. Should you have a question, please press star followed by the one on your telephone keypad. You will hear a prompt that your hand has been raised, and should you wish to cancel your request, please press star followed by the two. If you are using a speakerphone, please lift the handset before pressing any keys. spk06: One moment, please, for your first question. Operator: Your first question comes from the line of Gary Prestopino from Barrington Research. Please go ahead. Gary Prestopino | Analyst at Barrington Research: Hey, good morning, Dave and Adam here. David Dunbar | Chairman, President, and Chief Executive Officer: Good morning, Gary. Good morning. Gary Prestopino | Analyst at Barrington Research: A couple of questions here. First of all, I just want to make sure we clarify this with these new targets. Is the sales number and the adjusted operating margin number, is that an exit rate in Q4-28, or is that for the full year? Ademir Sarcevic | Chief Financial Officer and Treasurer: That would be, Gary, that would be for the full year or exit rate at the end of FY27. So either full year 28 or exiting FY27. Gary Prestopino | Analyst at Barrington Research: Okay, so full year. Okay, great. And then, Adamir, I know you gave us what the interest expense is going to be quarterly going forward. Could you maybe give us an idea of what the DNA is going to be when you have a full three months of the acquisition under your belt on a quarterly basis? Ademir Sarcevic | Chief Financial Officer and Treasurer: Yeah, sure. So our historic amortization expense before the Amaran Orion acquisition was about $2 million per quarter. We think that's probably going to be around $4 to $5 million going forward, once we have three months of Amaran Orion in our run rate. So that will be for the amortization, and then for depreciation, $20 to $22 million per year. Gary Prestopino | Analyst at Barrington Research: Okay, so $22 million for depreciation. And what did you say was the amortization? $4 million per quarter? spk11: Yeah, $4 to $5. Okay. Per quarter. Great. Gary Prestopino | Analyst at Barrington Research: And then given the – when you made the acquisition of Amron, you said it had about a 40% adjusted EBITDA margin, and I would assume that that holds – for what they did in calendar 24? spk11: Yes. Gary Prestopino | Analyst at Barrington Research: Okay. And then last question and I'll jump off. With this potential Stargate project, who would be your main competition there and what you supply, you know, if this project gets off the ground? David Dunbar | Chairman, President, and Chief Executive Officer: Yeah, so we would get into those facilities in a couple ways. If you think about Amer and Orion with the instrument transformers, those sales would be into the OEM equipment providers like Eaton, GE, Schneider, depending on who gets the contracts. So we're actually agnostic about who gets it because they're all customers of ours. Gary Prestopino | Analyst at Barrington Research: Okay, so I guess the inference from that is that if this gets off the ground, these companies would be supplying most of the products, and you would be in a great position to be supplying what you supply to each of these companies. David Dunbar | Chairman, President, and Chief Executive Officer: Yeah, so they'll provide the switchgear, the transformers, and the substations to support the power there, and in each of those pieces of equipment would be the instrument transformers from our business. Gary Prestopino | Analyst at Barrington Research: Okay, thank you very much. David Dunbar | Chairman, President, and Chief Executive Officer: Yeah, thank you, Gary. Gary Prestopino | Analyst at Barrington Research: Thanks, Gary. Operator: Thank you. And your next question comes from the line of Chris Moore from CGA Ask Situate Youth. Please go ahead. Chris Moore | Analyst at CGA Ask Situate Youth: Hey, good morning, guys. Thanks for taking a couple. Chris? Yeah, maybe just talk a little bit about the puts and takes for organic growth in 2H. You know, is Q4 more likely than Q3? Just, you know, what kind of visibility? you have towards organic growth at this stage. David Dunbar | Chairman, President, and Chief Executive Officer: I'll say a couple words and turn it over to Adam here. If you look at the first half to second half, the first half, the downside surprise for us was the softness in the engraving business from the auto OEMs with their delays and cancellations of programs. So they were at a low point in Q2. Their Q3 is always soft. As Adam mentioned in the prepared remarks, though, the tool shops are getting very busy. So we do anticipate that by Q4 and into Q1 next year, engraving will pick up. In all other businesses, order trends are good. We see a ramp there. Ademir Sarcevic | Chief Financial Officer and Treasurer: Yeah, no, I think that's right. You know, we're very pleased with the order rates we are seeing in electronics and both in the core business as well as in the Amaran Orion Group. And we think that's going to provide us a nice tailwind as we kind of get into this core, especially when we get into our fiscal Q4 and beyond. So we feel pretty optimistic about general trends we are seeing, minus the engraving. Chris Moore | Analyst at CGA Ask Situate Youth: All right. I appreciate that. So I just want to make sure I'm looking at Amaran correctly. I mean, we When you closed, you had talked about $100 million in revenue. You know, in two months, it looks like you said it was a record December. It looks like they did closer to $25 million. Is there any seasonality here? Can sales be lumpy quarter to quarter, you know, just with some big quarters that happened to be in December? Just any thoughts there? spk02: Yeah, sure, Chris. Ademir Sarcevic | Chief Financial Officer and Treasurer: There's really not much seasonality. And, you know, just as a reminder, we had Amaran Orion in our portfolio as part of Standex Company for two months. And in those two months, the sales for the Amaran Orion group were about $19.5 million. So, you know, it's about $10 million per month run rate right now. So you can annualize that and see that, you know, that $100 million is not $100 million anymore. It's more like $120 million. Chris Moore | Analyst at CGA Ask Situate Youth: Okay. Got it. And in terms of moving forward, the 30% that they did, that's aggressive, but double digit is what we're talking about, you know, more in the, somewhere in the teens. David Dunbar | Chairman, President, and Chief Executive Officer: Yeah. So I'd say that their current run rate, their current growth continues to be at that same momentum we showed last year, the 20, 30%. But if you look out over a year or two, we're still recommending a 15% model. We need some more time with this business as we get to know the customers and the customers' plans. We think 15% is a very solid expectation, could be higher than that. They certainly are growing faster than that at this moment. Chris Moore | Analyst at CGA Ask Situate Youth: Got it. And maybe just one more big picture on Ameren in terms of the integration. You know, just trying to get a sense of how long it takes. I mean, for example, you talked about them needing to create a footprint in Europe. Is that something that can be done over the next year or just any sense as to kind of what that evolution looks like? David Dunbar | Chairman, President, and Chief Executive Officer: Yeah, no question. Our plan is to have a footprint in Europe in the calendar year. It's receiving a lot of attention now. We put some of our European management team on this, working with the Narayan team out of India. And we've already had many discussions with customers to sort out the planning of which particular products need to be ramped up first. So this is very much a live project. Chris Moore | Analyst at CGA Ask Situate Youth: Got it. And maybe just the last one for me. The engraving restructuring, it's $4 million. Is there, is that, people, is that facilities, and any insight there? spk02: It is, Chris, it's both. It's both facilities, consolidation, and, you know, headcount reduction for the roles we don't plan to replace. Got it. I will leave it there. I appreciate it, guys. Thank you. spk11: Thank you. Operator: Thank you. And your next question comes from the line of Frost Bear Black from William Blair. Please go ahead. spk11: Hey, good morning, gentlemen. Frost Bear Black | Analyst at William Blair: Hey, Ross. Hey, guys. Can you maybe remind us where capacity stands for the Amron asset and then just maybe what the margin profile was a couple years back before we saw the acceleration in orders? David Dunbar | Chairman, President, and Chief Executive Officer: Well, the margin – let me start with the last question first. The margin before COVID was – they were in the mid to upper 30s, and they've kind of ramped into the 40s primarily on leverage, but it's always been a healthy margin profile. So I think we think where they're running now is representative. In terms of capacity, they were running their plants at one shift. And so we're working with them now to add a second shift and even a third shift. So what would that mean? They're maybe at 60% capacity with the expansion that those shifts can give us. And then as we just mentioned before, we're looking at this European site to add additional capacity. spk02: Yeah, that's right. Frost Bear Black | Analyst at William Blair: Got it. That's very helpful. And then a good segue there. We think about kind of, you know, the coming capacity expansion in Europe. I mean, what does that imply for the 23% margin walk? I know you guys also have, you know, a growing productivity pipeline for the core business. Cause you know, first glance, it looks like that 23% is largely just the mix of Amran and the Amort exclusion. spk02: Yeah. I mean, I think, uh, Ademir Sarcevic | Chief Financial Officer and Treasurer: You know, obviously, Amaran margins are extremely healthy. And, you know, we do expect we're going to get, you know, leverage on the sales or the setup we're going to have in Europe. You know, but we also think we can get a very healthy margin expansion on our core businesses. I think historically, Ross, we have proven between price and productivity. You know, we know how to drive margin improvement. And, you know, we do expect as we get into the later part of this fiscal year, into next year, that we're going to start seeing a healthy organic growth in our electronics core business. which also should help us drive the margin expansion. And scientific also has been very, very healthy. And those are the two segments that drive the overall margin expansion for the company. And as you have seen, engraving has given us a little bit of a headwind this quarter. And we think as we get into the next fiscal year, that's going to be that and get a little bit easier from a comp standpoint as well. Frost Bear Black | Analyst at William Blair: Okay. If I can, you know, two more here. I mean, on scientific with the pharmacy decline, can you maybe help us size what that, you know, deceleration was versus kind of the growth in the research and industrial? I believe it's like a third of that business. And maybe just remind us where we are in the down cycle for pharmacy at scientific. David Dunbar | Chairman, President, and Chief Executive Officer: Well, maybe a way to look at it. I think Adam is looking up the numbers. At a peak back in COVID, I think the pharmacies were running just over $20 million a year. I think now it's about $2 million a year. Ademir Sarcevic | Chief Financial Officer and Treasurer: That's right. David Dunbar | Chairman, President, and Chief Executive Officer: Yeah, that's right. So you can maybe back into it. So we have had kind of a strengthening in the other parts of the business. You can kind of do the math there. Frost Bear Black | Analyst at William Blair: But we're really at a trough level here, so it's all upside. And then this last one on electronics. Book the bill. It was slightly positive. But what were the organic orders for electronics? Ademir Sarcevic | Chief Financial Officer and Treasurer: Yeah, so the book to build for the core business was about one, and Amaran Orion was at about 1.2. So that gets us to about 1.02 average. Frost Bear Black | Analyst at William Blair: Perfect. All right. Thank you, gentlemen. Thank you. Thanks. Operator: Thank you. Once again, should you have a question, please press star followed by the one on your telephone keypad. Your next question comes from the line of Mike Schliske from DA Davidson. Please go ahead. spk11: Hey there. Good morning. Thanks for taking my questions. Mike Schliske | Analyst at D.A. Davidson: Hey, David, I wanted to talk about maybe your thoughts on your new product launches and the pipeline there. I was kind of curious as to what might happen after fiscal 2025, which is really only a few months away at this point. Do you have a similar cadence for next year or maybe even an acceleration ahead? Just give us some thoughts as to what the next wave is like. what new product discussions might look like. David Dunbar | Chairman, President, and Chief Executive Officer: Yeah, so we do have, if we look at FY26, I think we've got roughly the same, well, you know, it's 18 months out to the end of fiscal year 25, but fiscal 26, the products that are queued up to be released in fiscal year 26, about the same order of magnitude as those in FY25. So we've got, you know, we started the new product development three or four years ago. It takes a while for these things to start coming out, but the pipelines are full. So we anticipate a stream of new products, you know, every year going forward. And this is the first full year, the first year the pipelines have been full in launching new products. spk11: Great. My other question is, Mike Schliske | Analyst at D.A. Davidson: There have been some successful space launches over the last month or two here from some newer players or players expanding greatly in what they're doing in this first space initiatives. Can you comment on, are there any major chunky pieces of business coming in the next couple of quarters that we should be aware of for our models, or do you see more of a smooth delivery pipeline ahead? spk11: Let's see. First of all, our David Dunbar | Chairman, President, and Chief Executive Officer: our content in space is on the larger vehicles. So some of the newer players you've heard about have smaller vehicles and we don't make the domes for them. So if you listen to the launch announcements from ULA, the larger vehicles from everybody, that's what drives our business. And that is still ramping into next year and the year after and then should be kind of on a gradual and steady increase as we get to 26, 27, 28. spk11: Great. I'll leave it there. Thanks so much. All right. Thank you, Mike. Operator: Thank you. There are no further questions at this time. I would now like to turn the call over to Mr. David Dunbar for any closing remarks. David Dunbar | Chairman, President, and Chief Executive Officer: I want to thank everybody for listening to the call today. We enjoy reporting on our progress at STANDEX. And finally, I want to thank our employees, the board of directors and shareholders for your continued support and contributions. We look forward to speaking with you again in our fiscal third quarter 2025 call. Operator: Thank you. And this concludes today's call. Thank you for participating and we all disconnect. jsPDF 3.0.3 D:20260606090451-00'00'