SXI - Earnings call transcript Q3 2018 | Standex International Corporation

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Operator

Good morning. My name is Christie, and I will be your conference operator today. At this time, I would like to welcome everyone to the Standex International's Inc. Q3 2018 Earnings Call. [Operator Instructions] Thank you. the to turn Calusdian. now will call David over I Please sir. go ahead,

David Calusdian

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

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

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

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

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

David Dunbar

revenues with operating to sales, up XX% in a acquisitions We Adjusted our had chart We $XX four growth our XX.X% top-line is grew to EPS $X to $X.XX with backlog to increased on increased was and the end QX. robust up XX-month I X.X% trailing our growth. XX.X%; X.X% EBITDA a markets. per quarter QX of million, $XXX.X point GAAP Operating five of million and solid share. income income is was and across $XXX.X organic strength EPS XX% of a Hydraulics across that Engraving, here, end $XXX.X strong for another delivered We XX.X% David. XX.X% business like Overall segments. net it revenue to you, position Though shown Electronics of and at contributing increased million had increases. EBITDA Thank share. the would reported record adjusted while debt not organic million, Standex. out growth

offerings the we Specialty strength continue the During Solutions our national Standex in the laneways Electronics were sales and growth growth. account purchases quarter, Refrigeration Japan of Rosa recent Service progress acquisitions Piazza advanced expectations. on new selling that up in made exceed Equipment Food and to

hold. at exit that as new off will segment for the navigate and that quarter Food our Service In pressure that, encouraged taking we have timing opportunities Tom? remain Our we expects third we engines business remain the and legacy to long-term beginning strong trough. restructuring performance across review Overall, continue best-in-class be move to initiatives the with ahead our Standex. all deploying our diverse platform this value. company proud to Cooking to growing in And drag and meaningfully by value a sustainable prospects shareholder a although of business Food ramp-ups. to make entering this the we operational that the made and are in we our quarter Standex business through I'm and pricing the markets take once growth past of Refrigeration restructuring margins. the our fourth sustainable year Engineering see we improvements with are expect hold, the current Tom to bottom-line quarter results. Service by the Standex of With to improvements end to continue operating Technologies, position excited pay and teams of progress With across We improvements we deliver final will businesses system momentum creation

Tom DeByle

you, adjusted earnings of XXXX. compares a $X.XX well March GAAP sales On XX, March David, Slide through our good morning, $X.XX were month on X XX everyone. historical on This basis and an shows XXXX. Thank as and with trailing per a trend adjusted earnings share through basis. GAAP as XX, basis,

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

earnings four revenue see Hydraulics did of earnings. which was As Service, QX QX during the third as QX the bottom Engraving, bottom X.X% X, in details revenue activities. heavier changes organic were our anticipate performance sales our our and these in the Food quarter QX cold segment. trends. earnings both our Generally, improved historical sales of are in shown turn businesses, We at and consistent demonstrating up based at and in on performance growth. the Overall, at sales season. the earnings Electronics and We and by lower to and build in QX on of this the growth momentum end with typically in our organic quarter weather trends. QX five with slide, highest experienced Please the slows We seasonal chart construction

basis. $X.X a points basis, On Please from continuing Standex tax GAAP X, contributed operations. improving on charges acquisitions the XX.X%. and basis. acquisition-related segments results basis non-GAAP positive was new a summarizes XX.X% which to refrigeration five and of Slide XX.X%. XX.X% was million million a net and items was the Please $X.X illustrates up primarily Slide up items quarter GAAP costs million, and basis GAAP in a and Rosa was income net non-GAAP a up year Operating quarter the on third basis turn up to special income and million. Earnings was and the to XX.X%. XX charges turn cabinet quarter move per of was is sales discrete EBITDA EPS $X.X plant our the for of Japan Tax-affected On basis $X XXX Restructuring up special versus impact on a included which quarter, growth benefit points Dallas foreign related the restructuring the that bridge income for income X, For of a prior or of on adjusted GAAP share net year-to-date layout. basis. organic adjusted of our a Piazza on to exchange growth. had all X.X% Electronics demonstrated impact X.X%. up

due cash. anticipated to with X.X reflecting Turning million volume. to capital end lower was We to in Working third since million, We support a our of quarter approximately as debt support turns an due to prior position QX. year. plus DSOs. working capital of ago Slide management. second acquisitions growth of net the period the QX X, net working increased Working increase debt capital improved XXXX in debt Slide million illustrates to and to year at the $XXX compared fiscal quarter, from debt $XXX.X increased the the ended capital net built volume X.X of define in $XXX.X higher X funded the in $X.X million

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

in shell on a CRM focus on fueling on during ground focused Our our capacity spending laser our was engraving. in Cincinnati, Engraving sales and highest strategy in Engraving opportunities. while machine additional in SAP were to with capital Electronics focused the the spending heaviest and of was X.X% plant margin were and The growing, in our line the quarter new on breaking and investments Electronics investments adding nickel fastest

we continue and also Service, in the returns to Technologies investment. on where Food We see highest Engineering our invest Hydraulics

our is capital $XX expected now prior to expectation. spending be range million XXXX, million, below of in $XX the our slightly to For

XX.X% of in historical and basis. $X cash quarter a range XX of the discrete $X positive, reconciliation the exclude back Conversion to year-to-date capital. million. $XX $XX remains cash a cash that, item to The and flow With in due quarter operating the non-GAAP flow for on trends. our call QX anticipate higher on in free We flow David. the flow our Slide We million in is was free basis. operating to based the year-to-date onetime foreign details of free related depreciation on expect I’ll our the income of cash. adjustments working operating cash to the fourth to cash to continue on to to negative million tax turn net tax range million of improving amortization Conversion

David Dunbar

overall national refrigeration and market begin saw as in experienced from I’ll Equipment we service. we resume X%, all and grocery by strength to Revenues Food Thank million X% were increased focus group. you, overview this offset where chain for sales, reflection XX cooking our federal chicken customer fried A groups, slower solution improved Please on Tom. or with as well partially turn segment sales strong demand. segment Refrigeration of the accounts. store up $X.X in were by a nearly conditions lower sales Service which top as Slide led Procon our

continued espresso strength Solutions, product project sales onetime low which new margin Scientific due conversion XX/XX we segment programs sales excellent as impacted was made fact and approach mix these drag excellence its project specialty improved the a taking slightly improvements In affecting were In with to XX% market. quotes. commercial negatively restructuring timing of timing. on implemented and profitability and for system, to quarter. in Cooking a cooking. Procon businesses, lower methodical profitability. business quarter in down sales the rationalization from We to down delivering margin Scientific refrigeration bottom high were line the ERP product largely quarter, in Specialty customer our progress caused due Overall the adjustment businesses. up also by our exited line and sales has a two by a were team Also on cooking rate the

our realize of from benefits to QX. We expect quarter in a efforts restructuring full

also are in on Looking and focused leveraging our programs with Nogales efficiencies while ahead, to operational plant. we strong deliver improvements meaningful restructuring the improved drive momentum our margin year by end, we sustainable

we new through product, take growth commercial touchscreen the Horizon products advance advantage and shown on innovative a while NorLake. and new also this BKI our includes and rollouts from full new of grow expanded the two on many tests products segment. slide new will fryer, your that product deep laneways, strategy convenience are for This market differentiated store control We to the Horizon

ahead Mold-Tech record year of the our Rosa XX.X% continue model automotive quarter, acquisition XX, driven to The $X.X Turning OEMs Sales sales Slide projections. of by Engraving. across Piazza internal strong increased million regions new as contributed all this introductions.

technology new operating segment’s additional opportunities finishing of with compared Architexture, $X.X that products tool Our funnel further strengthen growth nickel this market up Through year an sales shell XX.X%. growth we have and to a tests, income contributed million. XX.X% with last laser, of from like was margin income our Operating prospects. rich potential

three in identified factors have margin We affecting segment. this

margins have the to growth First, of investments margin lower support new the profile costs including growth by impacted revenue. early and stage been laneways technology

margins expected our ramp, improve. products are new to As

labor Second, demand. high taken in we in And including to have to inefficiencies high and workers lower performing travel finally, operational costs from for have meet changes already address these we overtime certain customer value geographies and actions countries. management experienced identified growing service

new on customers model Looking we serving ahead, on a rollouts. of record focused number remain

Slide platforms. Operating We continuing Technologies. we also face energy the challenging engine performance. the as and and Sales await the space essentially delays. acquisition of enhance Piazza rollout the platform aviation aviation the We largely flat while and were services income margin X.X%, up strengthened Please away on technologies Rosa ramp-up were in continue new customer throughout high manage decline two our XX, from reflecting and margin new pricing Mold-Tech margins of another shift we operating aviation pressure as finishing of offset effectively by oil costs to business well ramp we to and to down and were Engineering XX.X% turn anticipate network as continued legacy businesses. gas and the due aviation mix quarter higher to as parts, margin that was sales

volume summer illustrated we begin on However, to left. focused aviation at for the are increased the this plans and preparing projected

for space We developments programs. also completing new focused remain and on aviation

strong will Standex meaningfully, increased We made pay Please all quarter double-digit consistent we were business. on XX.X%. Electronics. and for targets. improvements the Over markets, bottom Electronics we remain off all have growth to and synergies Slide on exceeding ramp just to new we was over Standex. regions plant we continues growth by acquisition, Supply the be as genetics long-term, Japan positive increased a as completed Operating ago, believe end Technologies by for trough sensor the market and operational the capacity growth about deliver Japan we we will legacy prove reed tight in pressure X.X%. driven really be turn up by which well XX%. the with XX.X% strength is sales shareholders. switch to and the sustainable Japan prospects year the well switch for pricing this caused Engineering and acquisition. great navigate margins the by was once XX.X% cost deliver that up as the XX.X% for that Electronics across reed up Electronics Standex operating to growth Electronics increasing performing by a exceptionally XX our sales the positioned by In sales sales synergy another through top reed delays, in well income were our engine capitalized line and organic and The QX by and our Standex remains Sensor platform

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

focused M&A and next-generation our on growth vehicles, and our on also technologies magnetics are sensors. and growth laneways We sensor for by market active electric new in delivering on executing advancing capitalizing pipeline tests magnetics like

were a backlog year material decline reflection strength increases. plant to we to cost a growth. price a XX, prior and Slide and Orders now as XX% won Hydraulics. new turn significant The this for the competitive in applications, by grew up from headquarters sectors. XX% increase of strength across were XX.X% have support We by by Margins to increases which ground sales in sales XX.X%, as driven also covered business broke was our Please new a Hydraulics due position. market been all

wins to focused we increasing pursuing business market grow are ahead, Looking on sales. new solutions and recent leveraging the business tests

segment. and expect optimistic QX We fiscal the a of future about are strong the

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

and Engraving, Electronics growth deliver businesses our First, our Equipment to growth the continued by converting namely laneways, and Service prospects market specialty certain engines Food on segment tests within acquisitions. growth

have are exit our are was already fiscal in programs line results, now to of good restructuring line improvements place sustainable there Second, a that in delivering the bottom Food Service sight we margin and segment achieving we as year.

pressure we in platforms continue long new the are we near-term that begin business, to position once this excellent confident Although ramp awaited face up an our Engineering are summer. to we Technologies aviation in

look work bolt-on are the hard balance finally across Piazza recent active additional appreciate We're our proud perform and and Japan updated keeping Standex organization of operating we at our on strong as to system a against plant May creation I of you will having that forward point out would best-in-class Milwaukee fulfill execute Standex Standex continue Lipscomb to our shareholders. on and to to like company. XXth. value at we continue to pipeline, M&A opportunities Third, Rosa and acquisitions very And well. of Engraving position growth. Standex to Day to with a the mission sheet Investor our Electronics, and an outside drive be to we capitalize team We acquisition well-positioned become

Engraving your Engineering be on Engineering to will aviation that, We three I of with And Electronics, a pleased in our special and feature questions. businesses; growing exposure the emphasis Technologies. take with Technologies will

Operator

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

Chris Moore

we the side. start on Maybe can Electronics

that think behind and how of tight that the of kind current supply switches continue? likely – reed what's you long will see Just

David Dunbar

all, that in Electronics around first the demand the market world. in serve all strong Well, of we sectors

the growth We alternative The guess prospects vehicles. are are seeing market. market yet reed issue the just I for volumes, demand. and market growth switches new significant the energies in not applications solar for and future underlying but is reed alternative sign switch a in there These is of electric underlying a wind, -- are -- simply in they

Chris Moore

say opportunities they are versus Are in between two? many Asia there significant are -- differences the America the North Electronics

David Dunbar

what They if end that's are similar mean. you in markets,

and win in many being In applications end fact up the America manufactured the of China. that North we in NBOs

view a growth really our sales in and there's a development business from not So, standpoint, difference.

Chris Moore

that had kind else mentioned you into was [Multiple past wasn't Now, before, that in insight if so markets of the there OKI you you gave something an the Speakers]. didn't Asian have I sure

David Dunbar

comment add to window we acquisition, have let on markets, misunderstood okay. to value No, your the you me, OKI really that question. Asia. I let opportunities but the me didn't There that, fundamentally are prior Well, in similar

that have exceeding sales for are we we Now, had expectations us. I given we say based our that the on window the has will that and window value-added OKI Asia

Chris Moore

restructuring, about the what the Service margins a so you exit you you're that be expectation exit talking line. On will margins Can area operating QX? QX, as Food reasonable -- in as more in for kind of you

David Dunbar

saw it working strong Well, strong. that from and in strong I was March within very plans the we very February, the in year-on-year the you look the would to way our and we've the see direction was is improvements made And definitely getting saw to improvement. on January, XX% your this the segment an February right a XXXX, to I quarter, you'll March we see February, at been very to with question in on in relative guess March. and margins commitment compare, frame you'll QX answer a step if March

Chris Moore

talk just spend revenue bit? that you're what you is can that R&D with, Last you little level a question, and currently just on about percent comfortable your that of a do in terms R&D, increasing, of is

David Dunbar

We'll development. a the Day about couple about level think we applications development, R&D. is we When in business on a talk technologies think put especially this be Engraving new of Investor bit into new that increasing, some in that that will and our weeks. more a business We've Electronics, businesses our Engraving. It and are both and on R&D, about at resources engineers Electronics on focused specifically aren't

a to So, we Day for I’d is, more new the punch for know Investor that, to this you answer line little say, want wait the area is the on that increase. but

Operator

question King. next George from C.L. Godfrey is Your with

George Godfrey

questions. couple A of

segments? charges First in all this are is of restructuring the in one, $X.XX Service Food other or some those the there million, charges quarter

Tom DeByle

in in is There specifically Service. but other a charges Food – primarily segments, minor $XXX,XXX in of a we Engraving, had

George Godfrey

acquisition-related correct? just and Engraving segment, those are the then Electronics costs, the And is that

Tom DeByle

That that’s we earnout a was actually Food where prior Service, figure. had in captured that

George Godfrey

that just million really we is really So, and really Service it if can is about? all the then, $X.X is the adjust margin, Food

Tom DeByle

Correct.

George Godfrey

And particularly double-digit into this you the move operating and division as XXXX? Engineering then think still be this low forward XXXX fiscal margin and excuse for we and – can in Technologies, quarter year, margin XXXX me

Tom DeByle

we've years award. all all this, early has the we - new This I our few gosh, first back, full on for generation January getting platforms awards XXXX, predicated was talking about when those started been lipskin won lipskin been to XXXX it's the When in predicated first volume.

David Dunbar

We’re talking Engraving,

Tom DeByle

sorry. I I’m thought Technologies. I said Engineering

George Godfrey

No. I did say Technologies. Engineering

Tom DeByle

ramp Engineering Pratt Are been are decisions, providers, and to many about ramp look the we from these the the well for When but customers but those engine like we for away as are for outside projection is talk payday talking for as now all Technologies, ready on about XXXX. be whole the factors this our our of GE, a volume from for new quarters AXXXneo providers their the control, ready frame years is discussion Whitney ramp? beginning. it turbofan that on of will Now, full engine in we is this there XXXX ramp, had business we've now like the the you capacity. gear the and that looking does we are

George Godfrey

because long-term this And you begin question, you’re that the was out waiting for ramp programs my for summer. the follow-on call volume aviation

for? programs So, specifically you're the what waiting lipskin is

David Dunbar

as and strong really most the engines the also in struggling fan, from well. parts position also some we have the roles with turbo few next-generation a in business Enginetics, it’s engine GE been quarters that's has of Well, the geared last

So for be next-generation margin. these it’s in parts to mix would that important are, business which higher which

George Godfrey

roughly And constructed the then think you the and peak XXX Electronics, you do Electronic that basis the is segment portfolio this know quarters it the year-over-year up like question as now points a and year of a the XX%. Is three last in first today? looks is level product you that know margin performance

David Dunbar

I level wouldn’t we but call at. it it think this is peak, the can perform

of switch significant sources add switches value reed moving to higher made sensors, on couple margin, chain, really margin improving last a a relays the moving value up because just year molded and value we were we’ve one mix but the as we from have or add. higher packaged with there up move and bare higher in a expansion Now, progress in gross the our the a

Operator

Instructions] comes McGinnis your Chris next And question Sidoti & with [Operator from Company.

Chris McGinnis

just Just side. on one the question, Engraving quick

about talked your up, – of kind a I a you more kind and time process add to that explain you products You as as ramp and before take new in just guess of they products walk lot that, offer to division? that lower through at starting maybe experience and coming margin can

David Dunbar

the in some SG&A to All people The now to investment in in the three up sales, ramp-up, of days derive So laser is early these in right showing these margins of business. deprecation to and the that there the the it. we has development the their in to laser shell. offerings put the the an Nickel shell nickel teens. are our of running businesses dedicated Engraving In similar across of gross business. these gross there are business margins that the upfront rest margins – products, – finishing, is so tools were and businesses, new

as low range. $XX – XX ramp We EBITs are low the volume, they'll – they will in deliver million to they confident range

Chris McGinnis

it any it in obviously on the pick you of up that guys way I I Food be? in X, – terms looking know guess can historically at how expecting to strong just significantly improvement just to And were Service, maybe that four but bracket

David Dunbar

QX? for mean You

Chris McGinnis

there even guess we term out term, through longer stronger for a have I this how know or where you maybe but numbers I – margin? Yes longer get quickly QX, can operating

David Dunbar

way. Well, report the internal us our the We that I month entire in doesn't quarter month, And to on on numbers show confidence gives we And that that. do and point. to track we left XX% guess, is wait we've answer out in been the is this this track waypoints, wouldn't maybe I'd see the it XXXX, that to bridge wait quarter. confident you any delivering. it updating update saw to QX comes – XX% restructuring getting that – we're But how when that year let's to I I we put intermediate in at every – typically can and bridge, that we'll guess

Tom DeByle

And bit Chris, that mean I less high, seasonal the it’s in QX, definitely - follows QX. QX in we QX, seasonal lowest showed trend. trends you Service then in Food little up a we also in and

Chris McGinnis

appreciate I this. No.

David Dunbar

yes, say, remodeling. the Let’s that’s

Chris McGinnis

QX and in much luck QX. or very Thanks good

Operator

closing presentation at the questions I'll time. Mr. David for remarks. back turn further any to no are Dunbar this There

David Dunbar

you for to year reporting joining thank our to to at end coming you QX fiscal Thank look our forward of want us results. on the I all back you. today. We

Operator

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

day. may your time have a and lines You this at disconnect wonderful

Standex International (SXI) 1 May 182018 Q3 Earnings call transcript