SXI - Earnings call transcript Q2 2018 | Standex International Corporation

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Operator

Good morning. My name is Stephanie and I will be your conference operator today. At this time, I would like to welcome everyone to the Standex International's Second Quarter 2018 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speaker’s remarks, there will be a question-and-answer session. you. Thank Instructions] [Operator like the now David over Calusdian. to would call turn to I go Please ahead.

David Calusdian

could Please and the today's forward-looking website, are note remarks Stephanie. management and on you, Thank that other that Matters include uncertainties found Standex's Harbor to to differ cause Standex Standex's subject predictions, Slide see expectations X. can discuss actual presentation statements on Investor call results Please statements. Relations on that These www.standex.com. will Safe risks statement conference be management's accompanying estimates, materially.

recent You to filings refer for should announcements a list Standex's factors. SEC risk and of public detailed

EBITDA, I would restructuring, purchase is acquisition addition, is today's EBITDA, EBITDA related you that accounting, which items. one-time expenses discussion adjusted will earnings before In depreciation which to references taxes, to like excluding include interest, and remind amortization; and

income, refer as in These from continuing accounting accepted and free net We operating income principles accordance are will to non-GAAP non-GAAP measures from flow. non-GAAP results also generally provided net complement financial to intended operations, income cash with to operations, a non-GAAP serve Standex the States. GAAP is the reconciliation believes release. news company's available the Standex's A such measures an additional information United comparable measurement comparison and performance. the in of financial second quarter non-GAAP of most provides directly consistent to historical that in measures

to Officer, today On turn President as and X, Dunbar David Executive Financial turn Standex's Chief to the Tom the Chief David. is Please Slide call and call I Officer, DeByle. Chairman, over

David Dunbar

We to of increased organic had to X.X%. growth while share. X.X% increased in is of $XXX.X with EPS adjusted to bookings XX.X%, you, position evident debt of of reflects impact broad Overall all quarter Operating income grew loss a business at the based per GAAP $XXX.X growth to of David. the organic XX% topline income million, fourth revenue EPS up and across We adjusted up five QX. $X.XX also The X.X%. new a of the and tax of consecutive million sales Thank growth operating $X.XX backlog segments. organic XX.X%. a momentum share was a net legislation, delivered end XX.X%

the During the serve. discipline the momentum deliver our sales we growth that Prove process for quarter, businesses for growth that future Standex continues rate markets of outpaced to our and growth.

normally Scientific Piazza on acquisitions, are experienced have capitalize the businesses, engineering Rosa demand and we Service, continued in recent fully strong as would Our exceed expectations Japan electronics, bottom see in top Horizon realizing of We and synergies. leverage revenue these our in not in and in We businesses. Electronics Engraving Food line Engraving, team expect to our Standex and successfully these potential technologies, did margin and we electronics. focused on the cost

exit to underway. believe and this we identified that created and initiatives improvements for drive several engineering need fiscal see where the to about had a have technologies, key line we as this In we bottom areas We long-term opportunities excited We through the remain we issues have year. drag. will very near-term continue segment, organizational and margin operational improvement work

attractive system prospects. creation addition, a become In the progress the critical making restructuring proud making growth operating our solid markets to across that the encouraged our This best-in-class are we in in deploying that are progress Standex to differentiated is Standex teams value products very of Overall, serving very by we remain position businesses. I’m work businesses. with standards with all foodservice company

results. and of benefits will innings this We for are review opportunities at in the of quarter Tom? our realizing work ahead excited the Tom early Standex. With remain the that, second

Tom DeByle

$X.XX adjusted historical everyone. GAAP earnings an on trailing basis. basis, sales as as X XX, illustrates a morning Thank December as were trend with from David you, well adjusted earnings through our David included GAAP This mentioned. on the December and in of legislation XXXX, compares XX-month December $X.XX negative XXXX. XX, per On which new basis, a Slide tax impact good a and through share,

adjusted versus XX%. period, which $XXX.X as were trailing $X.XX of XX-month $XXX.X XXXX increase. prior million basis on December the year the $X.XX Our year, XX, in prior in X.X% Sales comparable a XX-month were earnings is trailing in million a versus a up period

cold tax illustrates sales positive with our five a bottom QX was from charge. basis, As $XX In our the basis. were the of having Earnings a shown law impact Horizon U.S. discrete a Standex’s of XX% and of legislation. this XXX.X%, X.X% growth; heavier costs down or on consistent effective Piazza X.X exchange margin foreign partial million, deferred acquisition to GAAP basis, a X, tax basis which XX.X%. The is by basis, acquisitions Electronics of tax the construction million per the turn to four during foreign Scientific, revenue turn a was tax and Please income activities. X, up earnings as which basis and the restructuring organic on a Please due of businesses by $X.X growth. points with due was on this QX X.X% EPS growth Technologies, our trends. in XX.X GAAP revenue impact that was million. X.X% Engineering Rosa earnings XXX on to On law $X.X Overall, X.X%. net net charge non-GAAP bridge contributed Electronics had and rate XX Sales Engraving, On and season. Hydraulics impacted million, performance Slide for our up double-digit tax Japan the and slide, items QX the Please net adjusted seasonal and summarizes that down X, XX.X%. quarter, GAAP and tax which turn X.X%. of second share new Please impact. largely special XXX% tax the highest up to quarter effected up growth basis included We typically of down to was our was that are new Special Operating QX the two were and quarter X, basis. the charge sales in on the our of chart million income Generally, points to a segment. items of continuing A items, and at sales results adjusted a one-time Slide to lowered earnings, the rate and non-GAAP Standex's Slide new a revaluation GAAP a in there and to December Standex changes slows historical charges highlights our bottom earnings Slide details was income against turn weather experience lower changes. results. organic year which taxes operations. our

overall As a in fiscal be Standex's impact XXXX million. expected result, tax to is a negative the on $XX

change neutral expect basis Given the tax a earnings, points that approximately XX to foreign law for domestic to current by be our relatively we the points. should rate XXX basis mix Standex marginally decrease event of versus effective tax

reflecting versus capital to period. capital to debt cash bill of million decrease capital approximately since debt the conversion fiscal debt operating quarter, XXXX of We ago QX cash. $XXX in at illustrates quarter. Working end of second to in due position and Slide turns with X, year. prior during million, XX year volume. $XX support Slide Turning debt the a was our turns as compared X.X the Working ended million, networking prior million $XXX.X increased the to increased $XXX improved in the define management. net funded a X We acquisitions net improved quarter flow the a of less

compared net summarizes debt-to-capital balance Our of debt-to-capital spending, our with amortization Slide sheet XX.X%, last trends. leverage ratio quarter. depreciation, XX.X% of was net and capital XX

reduces technologies Rosa the waste, new capital sales energized eliminates Our my Engraving, Engraving, I after trip returned In to on up space, our our capitalizes our floor X.X% and X.X% a and Electronics, from Piazza Hydraulic facility tool facility spending just from machine for year-to-date. acquisition. Shanghai soldering In and have Mold-Tech finishing, selective the was visiting during sites. quality. which line and electronics, of quarter, improves the production had running China, new

had businesses in and we the help increasing to best CNC facility continue productivity. growth Hydraulics machine for opportunities new our The demand. a that where While we invest see Shenzhen our all bottom-line is meet to across

year spending fiscal be to range $XX to expected million. million our $XX in is of the For XXXX, capital

imposed quarter, law. year. turn adjustments The was QX and tax With to back favorable exclude onetime discrete the new amortization Our for I’ll year-to-date flow operating prior of by reconciliation the depreciation in in call the XXX% XX.X% to David. million $X all and the basis, of a to the flow adjusted cash remains in Conversion range our cash the of million. $X basis. million to range to million, $XX of free on an details $XX XX operating tax that, Slide item on cash

David Dunbar

XX from from year. with XX.X% for of Horizon continued acquired merchandising negatively bring the last two attractive explore more QX businesses. XX%. which X.X% to rebate into less marketplace. with innovative the to in and market new quarter's overview Refrigeration, beverage historical Please channel Sales Nor-Lake business I’ll of job to Scientific, system. sales our adjacencies Cooking the sales Slide the bookings solutions our segment related full a growth X.X% of X.X%. quarter. contribution Scientific and the leveraging issues by scientific The In X.X% an favorable primarily Food margin Specialty Tom. up to terms you, legacy profitability of quarter tests continues to Horizon drive a sales to Commercial and combination we were the in Overall growth contracts the benefited Thank up synergies issued team sales nicely from new product last lines, increased increased weeks Refrigeration Scientific of do to advancing range segment begin and turn and impacted ERP than Group. identify rationalization growth sales Service by segment continued perform sales to and implementation low Equipment with excellent declined the on driven was products

group these balanced We going forward. contracts terms low renegotiated buying now exited have have more and margin

addition, the lower product products last plant transformation, had to quarter. consolidation, In we commercial some standard continued deliver plans as refrigeration the discussed implement margins and cooking businesses of restructuring lines

standard in Food tests and products ahead growth market while Looking simultaneously our restructuring differentiated through execute on plans. grow on strategy focused Service, advancing expanded remain our to our we products laneways, we

manufacturing lean table several we During solutions operational the bottom implemented expected cooking line in and falling start through the to to programs are top that quarter, in QX.

manufacturing and benefit implemented QX. business have focused footprint we as efforts to activities our consolidate refrigeration a as addition, in expects early realize these to cabinet In from

$X.X contributed XX, what record as Engraving. expected to still automotive this a Rosa introductions. XX%, model driven OEMs XX% million a of is be across increased Mold-Tech North up, including Sales in Turning The increase new Piazza by regions, acquisition to sales Slide all quarter. America, strong ramped year

develop target to margin compared sales up Operating efforts we the our QX. These range, The income as are to have them Rosa address technology income in as in Our Engraving nickel integration to was support up million. programs. very X.X% like and adjusted from and XX.X%. Engraving to growth the actions successful and return low with expect laser, tool of be pains new finishing, to architecture, and QX was with sales investments operating the technology margin closer end levels quite of continued shell growth laneways margins an due at with products historical year last Piazza and of $X.X dynamics, are mix taking new to well to growing literally

operating focused are worldwide, growth Engraving worldwide. automotive in on Piazza driving finishing priorities XXXX by Rosa's capabilities and tool capitalizing expanding increased sales launches on our and forward, the Looking

out In Slide focus flat laneways offerings. natural to anticipation ramp market. responsible XX.X% structure and we growth our will the continued in operating overall to Group year-over-year Engineering Technologies or XX be were our up that the on new to create growth modifying $X.X to Aviation, were sales tests Space grew in organizational allow group In market also sales sales offerings and to due current several offerings organization the to focus future, In Please were up opportunities. lumpiness potential XX.X%. million. additional addition, are we roll a of new launching to to identify turn

positive remain quite we X.X%. long-term were Despite space. opportunities XX.X%, growth, operating operating income However, was the about our in down significant and margins

are quarter. we pressure quarter, last aviation legacy engine the mentioned we parts, which in pricing on significant platform continued facing As

development single a In addition, digit program delivered space margins. with large we

anticipate margin and forward, for volume the parts continue Looking aviation future into production. key space executing remain engine development focused we to we In programs business, on pressures QX.

in trough that we fiscal caused to in parts by over the believe However, once be Please bottom exiting by yield line up in demonstrate to Slide ramp to position our will we electronics. we market. a next this supply for the and to competitive organic navigate In by segment top the new regions. we parts see our shareholders. as continues quarters, increased the of We growth few growing deliver parts on chain solid in will ramp a believe margins begin sustainable Electronics platform all legacy start QX, strong results. it new the driven improvement to has double-digit the XX.X%, in XX, turn growth to engine QX, actions and improve delays sales and position pressure

acquisition Another our of strength by and and switch end relay utilities strong acquisition XX.X% Smart margins synergies our up including making a advance and Operating continues Standex Sensor and reed up XX.X%. XX.X%, sensor set Asia Grid. quarter was sales sales by integration Electronics Japan targets. Electronics markets, broad across toward increased were progress delivering operating on cost were sales our of The Japan great well, exceptionally and to XX.X%. income Standex

ahead, we position leveraging are on market reed on relay to focused in Looking leadership capitalize demand. our increased switches

and focused for XX, also trailer on reed in Please is XX%, volume We primarily Slide expanding over relay markets. to prior dump our refuse The business sensor growth to result improvement Hydraulics. technologies laneways developing increase due in improved and upstream year new the markets. capturing sales the hydraulics market of efficiencies. in and strength manufacturing XX.X% the new opportunities Margins and an sensor growth turn were tests

solid strong kits addition which we increased expect to solutions to wet pipeline pumps in and over strong prior as our continue converting sales new fiscal period. for QX on expected the We backlog, of the finally, project QX XX% year a going and hydraulics And forward. focus increase are

questions, leave thoughts. to a let few go with key me we you Before

growth First, for growth, proving And delivering line outpacing are all serve. our GDP the quarter plus consecutive activities organic Standex successful second we markets are businesses. across we top as the we had

ahead, Looking all across Standex remain to we in FYXXXX this businesses. in expect growth path

in and despite margins to line expanded in and results business in confident should refrigeration standard our underway cabinet for prospects in macro near-term deliver confident are that we we it to lean projects early the Second, underway margins to is are the The deliver and showing manufacturing are dynamics year. And programs expect generate in fiscal improved margins, by are products, end technologies, the excited improvements. commercial Cooking QX. activities lean provisioning the of bottom engineering work ability and consolidation profitability. restructuring start to our improve

our sales Third, we and all sheet how ahead, our our our against of our of balance best-in-class remains mission operating your us proud And look of as businesses. additional well, really excited go bolt-on recent acquisition acquisitions appreciative expansion, to M&A finally, and we capitalize company. on fulfil continue our value am continue team, we of value and we’ll that, to perform opportunities. integrate very a to I to and to strong margin execute demonstration with identify, the our acquire, for future of shareholders, three questions. active contributing pipeline position enable system, and with effectively company high the as Standex to will creation Standex quarterly becoming And a

Operator

comes Your Chris CJS Instructions] first [Operator Moore Securities. question from with

Chris Moore

guys Hi morning. good

David Dunbar

Good morning, Chris.

Chris Moore

we could the Maybe with start electronics.

industry on does capacity ways, that side about overall from is that of kind are does to So, both stand, market conversation, like there increased it pricing a power? and switch kind the of sounds you demand, where how what reed benefiting relate

David Dunbar

additional Yes, see, well produce more has to tight CapEx reed you in our switches. sales to - is been global is the capacity and increase capacity electronics add will

Chris Moore

beginning chain to with OKI and conversation up what on of key was acquisition higher. you the is part even continue a having Got is That's from value move the the you. that margins, on to going now? the are And

David Dunbar

Yes, we track and of ahead thought we I and track business. on would of say when be acquired that we the we’re would where

discover identified we think they mentioned had we to releases after. happy to previous already list we from go in that acquired I of sensor day healthy were the a opportunities OKI

up. are those, been first our see we’ve Asia orders have and quoting business converting beginning sensor and ramp So, that we to we

Chris Moore

moving forecasting big half won’t to from likely a organic the beyond that from perspective initiatives that, specific are to, know growth From overall the a are carry there - not a second standpoint, into example, likely obviously like you. but going sounds to been out be strong XXXX? and an terrific, trying half picture just Got auto looking you’re is continue I you temper then, getting there on side, Engraving are it first it’s bit for to that of bump has

David Dunbar

even continue XXXX. model the to robust and remain into through increases for Well, projections XXXX

this Now, we on year got growth double-digit have left. the

growth will will into industry the be continued I the the think, in expectation XXXX. but modulate, growth

Chris Moore

it. Terrific. Got

engine terms of In part businesses. the margins, the

You just as bit, exit of more talk you those can about little about return what’s a you perhaps maybe terms start that little to you and talked assumption? give, should QX, margins in a driving specific

David Dunbar

Yes.

expect legacy a We preserve been Let had in back fan. engine years needed me like some up, also acquired years lower a business have platforms. support for which to all a they we ago, quarter. pressure. a part, have have to quarter, this just geared quarters position be established legacy position were our chain this lining cost Two platforms, we and significant we position that four supply significant about is cost to new so, in starting large turbo or cost margins, they ago announced They last terrific producing and up position we that

platforms we're to the trough equated getting new geared some come you pressure that in count of business platforms legacy volume, the grow. platforms the is, the and fan. have those those Well, we other kind pressure know and So, turbo on as what delays parts in happens reduce in on maybe in and this businesses business. legacy cost to the under new

Now, also last we us our They in addition to quarter, have from legacy we’ve some will flow will taking moved that be through actions, won attractive QX. some chain - in in to the margins. at parts additional start supply to customers

engine for to in position. over times plants change our chain reduce lined improve increase activities up our got costs also throughput a have those and parts, supply the doing the to our We lean of cost input we’re address lot and

Chris Moore

in Got jump line. back Thanks I’ll guys. it.

David Dunbar

Thank you, Chris.

Operator

with is Your question Sidoti Chris from McGinnis & next Company.

Chris McGinnis

quarter good questions Thanks my and morning. Hi taking for guys. nice

David Dunbar

you. thank Chris

Tom DeByle

Chris. Thanks,

Chris McGinnis

results. the scientific specialty solid bit at walk looking some side a Can could the I are specialty understand in solutions, about growth? just the just maybe Service, through strong, some just guess little if I being Food talk products that in you of but the you driving

David Dunbar

Yes, national we’ve got in and brand in growth Procon It the know convenience under business. the specialty products roll-out up, with I business also wants serve merchandising can't is you that that’s pump Federal a in which display stores. Federal customer just the great you fresh a business seeing as is highlight chain ramping of name customers. their to unfortunately the they the share the

displays So applications pump ramp is the things started cases front see the those it We’ve business about the Procon and shops. we’ve in those up. will and espresso. talked to center those Federal largely in In coffee past,

We’ve that coffee at that the it but drove about bit in growth to in go past really business in this a OEM opportunity their nitro sales. pumps 'Starbucks, which Our machines. high-end coffee quarter continues quite into and was talked espresso espresso the flow,

Chris McGinnis

the can that? if percentage, I are or just just in a you like away you greater just, away stepping give giving can them know buying rebates then you I the And you guess but are groups, from stepping don't from Great. maybe, us on

David Dunbar

Yes, happens. it usually

last almost our it in close rebates exceptional businesses. of So, the to we two had We $X kind of quarter. way at look million

they get groups lot targets targets volume. the dropped. discussion the to rebates. under of year they to and national really a volume, happened in exceptional Well, buying all of at were get a those to management the they what’s rebates. was, account some hit the Those negotiated team pressure If got spending, the they hit they spending deals time aggressive with certain The accounts you that would refrigeration rewind national clock is ago, if

changes terms. in sales The team. know and I’d new group that the President few organization you more balanced the have, have the deals say talked in we’ve last buying and quarters about We renegotiated to the leader create,

growth So, incentives, aggressive fair not last the year. we but we give structure had

Chris McGinnis

you. last Thank question. One

- the you that a price stepped for just Just at that you. business with prices business, lot a would but know could energy kind into any maybe energy, of here, all, back kind interested from impact going business of you all? old some commentary be away the energy of be positive Thank I around rebounding in maybe at just and the and

David Dunbar

questions. we’d margin two high teams course of It be the were weeks is the We business for were interested. technologies. them same asking We Well, a engineering ago. with

We have will aggressively. come low very little that - we expectations have relatively that back

to we it are ready on. However, if it does, take

and We machining for are our business the that moving facility. UK to the production capability

shims production so In for systems. we fact, are -the of enquiries turbines, to customers mooring our their will sea And those that it starting be close to Europe get part some for offshore moving also work, the platforms, deep we're the are - for land-based to them.

So, I would that guess And we're about $XX it out, will on of least you optimistic will a make counting cautiously that. to but of it. plateau increase, at love it rate. million is year are see we which not run kind we works what

Chris McGinnis

last need back bring one are or all invest do you to question. Do to Sorry, do you just…? you at to need prepared anything, that to

David Dunbar

No.

Chris McGinnis

good Okay. in Thank and Great. Thank you QX. luck you.

David Dunbar

Thank you, Chris.

Operator

Burke Your B. Riley next with is question Liam FBR. from

Liam Burke

good David, Tom. morning Thank morning you. Good

David Dunbar

Liam. morning, Good

Tom DeByle

Liam. Good morning,

Liam Burke

David outside you’re are on run on automotive how your product a nice the traditional new business? doing applications Engraving side, introductions, having the you

David Dunbar

but Most of our we’re within automotive, coming the expanding offerings. growth is

growing. been sales, shell, nickel and selling done There’s laser offering, which we tool engraving our before. We’re haven't finishing, has new

auto. increased we is, growth way can share cost-effective more tools in in go is test more most some China, after growth but what well. particularly short Europe business molds, answer wallet in North in in of a of so our it. laneways in some aggressive that And as defined America through We one The markets is to of have and get seen that non-auto actually about

Liam Burke

group. Okay, getting to buying back And thank you. the just

or renegotiated either will side? You've move on move directionally year help contract; the that forward that you this as margins FSEG the

David Dunbar

to pay $X kind but our just exceptional million I of we the rebates, is in will still business last year, but short rebates rebates. base of mean, were this continue

you those about would if - we results, $X margins. see pickup the So, were were million in year, sales results if this repeat to our

Liam Burke

Great. And is make tax want this Tom, I XX.X%? just to have effective now rate the your reform right, sure with tax now I

Tom DeByle

Yes.

So until that’s what based mix. an It’s get obviously still we current our estimate we’re projecting on to June XX.

Liam Burke

Great. Thanks Tom.

Operator

Your Godfrey next from question King. Instructions] [Operator is George with CL

George Godfrey

Dave good you Thank and morning. Tom, Thank question. you, for taking and my

David Dunbar

George. Good morning,

Tom DeByle

George. Hi

George Godfrey

just on of rest level the pipeline on and your year then I’m in are the perhaps X%, how the on outstanding travelling, just growth so revenue XX%, this the the comment question one wanted growth call, to on I’ve comment what out been outstanding organic expectations was the acquisition looking? and for acquisition growth, but Thank can I organic and on growth ask you you. that’s

David Dunbar

quarter, satisfy and it’s very last the good. will And tell you both a get on way continue. quarter pipeline, know quite buyer best so no growth guarantee the saw first as will you of see guidance is looking I signs we you question the we’re answer will and but but seller, backlog bookings give pipeline the we all, It’s this probably could I is, was that. that George, XX%, would active, is very don’t busy acquisition good at at the we momentum we - deal, our look the if your can way Well specific I terms for up X.X%, answer the

George Godfrey

Thank great. you. it, quarter. job Nice the Got on

David Dunbar

you. Thank

Tom DeByle

Thank you.

Operator

Your Copeland next with question Capital. is from John Cummings

John Cummings

Hi good morning.

volume you organic side, out electronics or the of there price what the is growth from portion can mix? break On guys versus

David Dunbar

just for a this, look back take me at into that if could we Let see you.

don’t So, presentation, great be I makes organic look X if on point was Page this - electronic, the so chart price, know in growth a may at XX.X%, the Tom's [indiscernible]. Tom, you Tom but

John Cummings

volume? Okay, so mostly

David Dunbar

our we reed sensor - also Yes, volume. were XX%. up mostly sales got We We’ve volume. described, announced switch good

of So margin, volume. you higher in it’s dollar per that’s kind SKU a to mix will higher if general and but

John Cummings

Okay. are comment of in And then you you on that segment, what going margins can sort on forward? the expecting

David Dunbar

low are mid-XX%, running. been where of is we at XX% Kind we where have

John Cummings

Okay.

expectations guess thereafter maybe any acquisition and of the increase you through I So, for, these sort flow OKI pickup additional an volumes?

David Dunbar

XX%, No. XX%. It’s

Tom DeByle

Is yes. target, our

John Cummings

Thanks have. That's all Dave. Okay. I Thanks.

David Dunbar

Alright John. thank you,

Operator

like Mr. are to there back to no turn David over the And At closing this would Dunbar you. for questions. presentation further I remarks. Thank time,

David Dunbar

everybody results. joining Thank this working next our look to and reporting Thank you, QX for morning. operator. us hard We on forward back quarter to this you

Operator

Thank call. you. conclude That today's does conference

now disconnect. may You

David Dunbar

you. Thank

Standex International (SXI) 30 Jan 182018 Q2 Earnings call transcript