SXI - Earnings call transcript Q3 2019 | Standex International Corporation

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Operator

Ladies and gentlemen, thank you for standing by, and welcome to Standex International's Third Quarter 2019 Earnings Conference Call. At this time, all participants have been placed in a listen-only mode and the floor will be open for your questions following the presentation. [Operator Instructions] It is now my pleasure to turn the floor over to Gary Farber with Affinity Growth Advisors to begin.

Gary Farber

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

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

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

as operating refer also free are and flow, additional of States. forma net to will income, from accounting performance. operating generally adjusted net measures, accepted from serve non-GAAP in accordance pro the such EBITDA. financial These provides provided debt to to that with We United adjusted a including income historical measures comparison in adjusted and believes earnings consistent information principles net margin, other non-GAAP complement adjusted continuing cash the adjusted company's operations, operations, intended results to income measurement share, Standex per an

and President, DeByle. and call Standex the is David David Officer, to turn now. the Chief will Please I Financial Chairman, today Officer, Executive Dunbar; turn On to X, Chief Tom and slide call over

David Dunbar

with working look We quarter. We forward good this Gary. Affinity working a you, relationship. began Thank to

accomplishments, significant several fourth units several our benefit with leverage company the on we business will quarter, growth, fiscal XXXX. return our segments and currently Even of several fiscal in as quarter. provide quarter, profitability, this continue in quarter and in continue year the our higher individual in significant the discussion faced an my strategy, to of our Despite and segments' will in start driving headwinds long-term overview into enter we growth that with investment. challenges had call. Let which on me the executing third we performance anticipate progress focused accomplishments the business strategic results later detail in of greater we the I'll and

see production Engineering our Scientific Engineering delivering market Milwaukee began new At our focus continues year-over-year in of continue progress surface Technologies, ramps exceeded and the We strong Standex last Hydraulics ago businesses. at GS end out $X offerings aviation the acquisition Sales QX segment, tools. also announced $X.X nearly in investment At increased outside those our results. with support is laneways, make new to a and up years AXXX million. segment, three plant as an launch the to the Engraving We aviation approximately customers. generated million Engineering to laneways. the of strength The one night growth builds our this program. to XX% quarter on soft on increase

Cooking presence. We as in completed engineering which this India quarter, million, line with Group Xst, our will in divestiture our also sales further to well our as add our April global for at communicated began production range. the our Solutions timeline manufacturing India footprint new and And and successfully Electronics of we price strengthen on originally facility $XXX

strengthened from trends a in flows cash and strong of flexibility improved flow million financial quarter cash our organic inorganic divestiture to opportunities. cash the on and resulted sheet free in the positive of The quarter. increased balance pursue with $X.X management growth in focus combined proceeds the Our further set Cooking

to Engraving macroeconomic XXXX. the several which by earlier, successes expected are as segment, of rollouts these our at impact continue from as headwinds of of are However, well businesses automotive-related the of the I fourth as tempered timing for stated all quarter in

restructure of to We've second we've and and third result, the expect quarter disappointing for several we by performance and quickly annual complete that a quarter was us initiatives in to both taken to XXXX appropriate. our begun where $X.X segments Engraving generate actions Electronics the savings. in As implementing million

slide our quarterly the financial XX.X% go year-on-year. EPS by X.X%, increased adjusted Turning greater call. to Tom later will while by decreased revenue results X, detail the total through in in

Standex business. on tools. to a slide of last join a of to talented move provider the can were provide Grinberg additional X with Maumee, production that They Matthew built two for grained who Grigoriy we privately-held Let's founding so the leading GS Engineering have Ohio Shade, company we the in-mold very in acquisition excited partners, is and based cutting-edge Company, of and into GS will lead company technology proprietary insight announce our which night.

on expect acquisition included in to the aggressive our underlying for We any earnings promote we for immediately to successful paid of accretive throughout platform, $XX this purchase excluding million, share, technology targets. founders an our accounting. the have based be the rollout opportunity per growth To global for which earn-out adjustments we agreement

providers. can in-mold company's quickly graining a those provides in soft acquisition excellent our process produced GS in results that is globally. benefits: proprietary X. several From we a slide the with and shells offering to of an for than shells comprehensive be tool Group it fit that us Moving more market expand technology the The provides of other surface strategic Engraving First, can standpoint, industry

favorably properties. become a to important industry our previously these soft capability of environmental a superior industry materials have aesthetic GS increased several the moves shift focus key we tactile and economy skin trends. an regard components master of us auto been trends. Standex, GS helps which in aligned with externally, vehicles positioned position. interior in-house player leading favorably on comfort perspective, materials Additionally, cost are also the sourced is something will for GS toward and the an in and fuel market ability There's molds to skin produce with improve From offering and

fastest addressable XX% annually. have the estimated approximately the in-mold is over texture the CAGR to Finally, in-mold soft growing the soft that soft in graining million automotive sub-segment grow tooling at years, increasing to graining estimated surface XX% an global growing are tooling and serve surface sub-segment, of estimated to projected five The we a be markets. $XXX markets market surface segment with next an at market

strategic potential a market the of So Standex. this for combined growth makes attractive very this fit with the acquisition

Engraving region X. Tenibac beginning review Now XX% large growth Sales segments let's by in our offset on year-over-year, and increased with by Pacific acquisition slide the driven FX. the in Asia part partially

to quarter shell, be tool and in new finishing. third XX% Our year-on-year the nickel growth in successful laser laneways Engraving sales with technology from continue grew and

XX.X%. operating profitability However, at operating of margin the XX.X% with an decreased level

in Europe and tariffs was several in America. China North in acted significant profitability. Our volume profitable by and also our more on fronts. immediately Uncertainty in lower strengthen which profitability management deleverage operations volume in to structure and impacted impacted programs, resulted We've

spend will completed activities, restructuring should $X.X quarter of We be the by for which fiscal million second XXXX.

million savings completion. We on basis expect cost will annual this $X.X in an upon generate

two customer leverage converting generate is technologies, in Center for are of in ramp million product automotive fiscal facilities the on savings. focused scheduled also We $X year American specific strengthen our in to an Excellence expected XXXX. North consolidation into additional launches operating which will This

longer global sales offices strategic converting basis, Additionally, into several certain no production toolmakers. sites on are as to locations be we supporting OEM smaller will a

strongly will global our year-over-year. which of increase to initiatives, automotive income lower X, will in demand. Engraving by X% We programs, results quarters laneway from sales decreased decline benefiting Electronics. American XXXX. fourth automotive from and scheduled but declined sequentially, quarter the component primarily rebound are second Revenue impacted and of the XX% be expect operating first Slide North The timing resulted

to at revenue quarter to be fourth expect We similar a third quarter. level

initiatives as sales next Our are We the we inflation. third the can efficiency were this over as in price quarters. profitability quarter and impacted confident recover lower increases balance to some well impact operating offset by able was through the few of and material

now the market-leading Additionally, in the rhodium rhodium. couple and the high-quality reduce past process of have reed cost significant permanently of to of in improvements switches. increase have our we developed position usage of innovative discussed and improve our cost our We calls,

cost growth improvement automotive, laneways telecom. funnel underway business Looking projects and and in strong new have industrial we in opportunities ahead, Europe of and a besides very Asia,

We also as increase and manufacturing locally. opportunity which the well new us sales ramp global provide in India in expect will it facility QX to further our began capability as in engineering and limited to production up in QX,

successfully Turning and ago revenues X, demand markets We our in and Strength energy, increasing doubling. Engineering XX% quarter. than under the more to XX% aviation. year in Technologies. versus with end be defense leveraged year income delivered XX% slide orders rose grew to and included operating Backlog one

The fourth American these beginning refuse, full Hydraulics to from XX. AXXX sales and platforms North increase XX% ramp. space as such I year-on-year increasing and in in quarter of results continued part roll-offs in benefit from production to on will investments Turn are with the from cylinder and up at Aviation, have was continued XX% in pack support platforms with the the defense and strong markets large applications. noted the expect to remain strong demand significant slide eject the ramp refuse and made we we end pleased As aviation to sales volume. infrastructure as construction call,

second year margin in ago operating XX.X% to XXXX. the quarter of increase XX% quarter Third compared and a XX.X% of

quarter infrastructure see expect we We remains end demand a and Hydraulics as experience markets. from fourth backlog construction strong to and continued solid

grew Scientific in declined move from benefiting XX%, Equipment XX, quarter. increases tanks. upright Group. under-counters let's to and Revenue slide sales to refrigeration, Now year-over-year Food and strong continue Service to cryo be X.X% in the

in the due mix However, dealer in refrigeration of XX.X%, with XX% network combined lower a weakness offset dealer decreased and Operating retail higher income this volume to sales, to was decline weather-related due by delays. and low-margin business.

to Scientific pump our expect features. weakness customer and will pursuing contains innovative in QX, eSyruPro we increase productivity XXXX, Procon pump continues for nitro including we launched the new look In we its Scientific, control with cabinet in revenue in and which Diamond a reaction opportunities. growth sequential Black to actively seen several coffee Diamond line measures, Nor-Lake ahead, implementing are Service see offerings, The strength products. continue. revenue refrigeration Looking have and business White December several the favorable Besides Food seasonal but

large have are also to in refrigeration in. working several and actively bring We them opportunities

display XXXX. the I is half in results business recovery new to more to anticipate during introducing enhance the Tom? this year call in products for second federal turn Together improvements, Tom Our to we will detail. merchandising profits financial discuss a the calendar and several business that, With over of growth. with operational revenue

Tom DeByle

Thank you, David.

slide growth. basis, XX% versus for our both revenue Technologies Technologies over total posting X.X% and segment. all double-digit year. consolidated by revenue On Hydraulics Engineering XX, grew increased Hydraulics quarter Turning a details organic and Engraving, the third prior fiscal to which with Engineering the

the year, on inflation, weather basis, a a foreign on of of in margin shutdowns. Agile added Operating negative driven points on flat. impact basis. essentially related and basis. reflecting GAAP XXX by was in a X% includes to some margins. was Please headwinds adjusted XX, exchange gross results by organic $X.XX growth compared non-GAAP GAAP and basis to XX.X% growth, GAAP the X.X% a acquisitions, our slide prior given points commentary, and Earnings in had and wage material on current total Recent basis turn quarter on XX.X% lower quarter XXX per David's a share impact. Tenibac, plant the while adjusted Gross margins However, $X.XX which basis decreased an to in previously basis discussed and the the increases third was

and due also associated rate earnings share interest income acquisitions the a recent U.S. increased Our by with impacted and the per higher tax abroad. expense related to borrowings mix was of from to

tax in in rate was the to XXXX. quarter XX.X%, compared the XX.X% quarter forma of pro Our third

between shows for Let's year, special the The XXXX. to cash capital Year-to-date, cash less $X.X bridge generated a items flow to prior in flow third in and the quarter Compared We year-to-date. the of XX, XX provides GAAP quarter restructuring of to expenses. quarter incurred and slide we Slide the million $X.X million and free of Tax-affected reported and acquisition-related XXXX, go cash $X.X EPS. cash $X.X our expenses of EPS in a million of were adjusted efforts collection restructuring in acquisition-related charges million. which the nine $X.X management improved ended was for fiscal working management has third in compared million continue million free as flow of free $X.X we well in months success $X.X of our generated the cash the partially cash drive million increase our result XXXX. a to initiatives. negative as of flow supply quarter chain flow, to compared as company

of in working third XX. slide an quarter $X fiscal to at Net at million. $XXX.X the end to was of the the capital $XXX.X compared of the third end Turning year, the prior increase quarter million million

Excluding amortization acquisitions driven approximately in the capital to better and million XX focused $XXX.X Improvements million capital efforts the was were receivable and management. accounts expenditures depreciation inventory Slide a Capital million, third from in trends. $X.X XXXX. working capital current collection year, $X.X working our compared of quarter decrease spending, summarizes $X.X in were of million.

spending heavier site, the quarter capital capacity to a number add Engraving CapEx Michigan are finishing. around world anticipating during and install the in will quarter We machines laser additional fourth of spend our to optimize new the in tool initiatives. due

expand We are QX to relay as spending have KT in Electronics and into order this the will they XXXX. line. prepare and the higher will fiscal new also automotive move spending higher in QX the CapEx of in for facility capital rollouts Cincinnati QX

The as furnace paid December the of to $XX and million has and million After and basis. remains Solutions at pro the $XX $XX.X ramp. fiscal April treat We Engineering compared Year-to-date, lip-skins on received with illustrates the fiscal in decreased long-term expects Technologies end has forma previous be down proceeds pro forma debt spent the year-to-date foreign guidance our installing to year, Slide Standex increases to the on with take AXXX million our spend million Finally, payment, will volume net $XXX.X to $XX between programs new a capitalization subsidiaries. and debt. $XX in by Xst XXXX. the company approximately repatriated repatriate cash from million on track $XX AXXX million in larger-capacity on and in total heat a XX Cooking XXst, XXXX. million

turn leverage very balance us With favorable net debt-to-EBITDA compared places our and our times pro allocation. to David. are As is ratio growth two in to capital back times position result, strong. I'll call a statistics XX/XX/XX. The forma initiatives X.X pursue that, to This a the at

David Dunbar

Thank you, Tom.

slide on Our conclude formal remarks XX.

will saying we did that of market. primarily to the macroeconomic some due headwinds by the end while the program same fourth seasonality, quarter, impact automotive we still that start as me quarter particularly timing will expect we Let stronger sequentially issues the be customer and in in face third

will fourth of result, a quarter quarter below fiscal be XXXX. As results the

the well and our initiatives cost continue will rebound which into heading quarter. first XXXX, expect implement automotive we in particularly However, fiscal efforts, beginning to productivity we a us significant reduction as in position programs savings quarter second million actions. $X.X By to these XXXX, basis continue the evaluate end on due fiscal generating annualized as an we other the to We'll to expect of of be necessary. in cost measures

on recent and In accomplishments aggressively addition, quarter's growth higher opportunities indicate, as to focus we the most well-capitalized return to are and continue execute.

We new that, With pipeline proposition laneways will to opportunities up active and Operator? that our we value questions. very robust customer funnel an the strengthen further inorganic have call growth a will results. of and open of

Operator

of Our Instructions] the from [Operator of CJS Chris question you. Thank first comes Moore line Securities.

Chris Moore

morning, good Hey, guys.

David Dunbar

morning, Chris. Good

Tom DeByle

Chris. Hi,

Chris Moore

maybe start picture. Yes. Good Maybe just morning. big

growth of to for five years, over a Now the organic annual mix sold, that maybe businesses? next expectation kind the current you CSG given of has give been can reasonable three

David Dunbar

Yes.

GDP to consistently. The kind up -- that the of bigger Engraving it -- the from X%. subject go been X% has pretty the grown grown above cycle project has businesses that's you has by the if consistent. but cycles, just time, bottom-up, look You Electronics over almost through at to growing business are build It's have through to timing, now.

that's this Now, Electronics about -- quarter, auto's auto XX% sales down in of and were of XX%.

so, AXXX take straight-line kind out, of out. rest that business if ramps. of that is ETG, Airbus So as you the the the growing, you

XX. XX units go grow their is XX at plan to to month that and will to Now, a year it's next

attractive. more in the Refrigeration differentiated biggest going Cooking our So, talked The the growing kind In becoming And ETG. of a through readjustment quarters, in North been is than cabinet over more expect We're business, Refrigeration. and so profile GDP. growth as end with America maybe, less in cabinets. a of is business, construction that here Hydraulics focusing business has few walk-ins food the we've market. lower growth on change call last the kind in continued we faster had

improved there. It's a not an So, much more and growth mix business. pretty that's big we're expecting

of with grow So, if at faster you than Refrigeration Service are then rest of steady, in businesses Scientific points GDP the the to is growing a GDP. relatively Food assume couple going

data lot know material. that's raw I the points So, for that's a but of you,

Chris Moore

That okay. it, helps. Got

kind Electronics, about opportunity term So, the of but kind it's less kind that out said an know said expected be of you -- opportunities or going remain to to on sales levels more through I we there? of GDP where of the focus organically, of side? year. Is little Kind bit at this M&A there? you focus calendar similar more be? standpoint, from a might auto can there talk a longer But are

David Dunbar

Yes.

but are ever very business, in the business So, above of some more big I less than great a a as it's new for like been which in number markets. question. $X good but is The opportunities And of its opportunities the opportunity pursuing. are Electronics it's quantity, business business position the than also total is a -- big differentiated year, as us. opportunities this lot. there It's a auto is We in briefly there XX%. the funnel opportunities a opportunities has mentioned -- both million individual that

the there be fragmented markets a are very So, less they to the we auto. we acquisition short-term. are an set active be based in, And play the mix of that acquisitions, future confident few attractive that opportunities the in relatively continue question There And opportunities and we're funnel. will about a on will business your have there. actionable are of

is business is than big, accounts decline Electronics points grow the business. on well auto – the for alone this think still we five about that The impact of growth, positioned now for GDP. long-term of faster right terms to In

auto stabilizes, the So rest is see you'll with a growing good profile. as of business the

Chris Moore

That's it. Got very helpful.

Appreciate me in guys. it back jump Let line.

David Dunbar

All right. Thanks.

Tom DeByle

Thanks.

Operator

of of Company. Your Chris next question & Sidoti line comes from the McGinnis

Chris McGinnis

my Thanks for taking morning. question. Good

David Dunbar

morning. Good

Tom DeByle

Hi, Chris.

Chris McGinnis

Can they on or serving And where margin that Thanks. margin and just bit the assets are we a were maybe sits? that kind how little what shutting you the you that in profile? profile that more do ultimately dig businesses, the much drive of Engraving improvement and in just will help down, think

David Dunbar

XX% answer to last it's It's we Yeah. still think a through Quick the proven business the cycle. one, that. EBIT

closing, on making we're made tool global question were XX, part first of we've than And XX world. ago. these they sites that has X, evolution the sites the the of less the of So the years around some XX, got XX attractive

there that are Two convert sites good examples auto to be and So handful anymore. Ford to that on market. work design of support elsewhere a more Australia there close focusing center. and give we've are Sweden is a there, plan used tool but – to good there's them is we the Australia has Sweden. toolmakers Same Nobody in used announced already of done so to used Volvo. But here, be in sales a There tool of and be making thing just we've offices. I'll Australia. sales manufacturing. where Sweden, in manufacturing you cars operations closed in The We're support that. work design done center, to the design

does to like OEMs. support evaluating, be present sites site-by-site like we're of and handful where market look what the do global another need the there's to we local that. So constantly And

already annual value get text, margin we the identified, will like when operations $X.X that the mentioned So be I in million the closure in the we've through improvement. that, of

Chris McGinnis

of to this And the – business how maybe business? I improve and the that Scientific better on side. the you Can versus could at in then Thanks. Food the ability just on if margins that. drive Or Refrigeration holdback what's appreciate any the break is much point it? you out Okay. maybe

David Dunbar

Yeah, the math here I'm in quickly head. my doing

is Refrigeration Cooking. the the about group So Food that of XX% sales of without

was restructuring The ago, year we're announced The other last other quarters businesses the and you ago, we consolidating. improve were you what Procon, scientific, recall to margins your and there. that is as a are doing five federal year, recall which there? maybe If business, question good four, Refrigeration we

That's improving, More lower one plants Mississippi on from label terms all dealers, private by cabinets the the Many bit plant and We to import, numbers have to marketplace internal being move of that talked Wisconsin are And and under moved internal improvements of We imports. the the We to is is in with two continue their satisfied cabinet of by plant. that cabinets. North of masked improving. this brand and we fairly-significant focused sell-through The in the our quality we that is the more more our KPIs Throughput efficiency is and about in plant are improving. down previous in a at business in America. too. drive we own market introducing imports. more end improving. quarters,

stabilize single low Refrigeration focus in not products EBITDA. on of mid And that differentiated improvements digit and upper thing coolers of those then cabinets cream commercial things moves it's right get it's and for continued business. kind next business over like years, dipping ice and to business. can the couple milk that EBITDA So single-digit and where will an chain Refrigeration we the With into overnight now,

Chris McGinnis

I'll Great. queue. taking questions. my the in Thanks jump for back And

David Dunbar

Chris. you, Thank

Operator

Instructions] Your line Hinman comes DeForest Company. of next & [Operator from of Walthausen the question

DeForest Hinman

taking right. my All questions. for Thanks

generally didn't in that ability just I you visibility to business. in to of understanding to make want was back sure And My this. a lot have of Just understand sales I Electronics. terms

similar ending, You December why September and so that talked that that sales ending that, June calendar read if Is the include And case? I outlook year. the through ending. would for about levels way the and is correct

David Dunbar

the Electronics because do Well, are visibility I And mean order it's quite It six have our has, went limited in And down more Electronics our typically backlog have to business XXXX, both business turned four back comes in we distribution XXXX of sometimes. in profile, of swings a bit of get yes, statements markets your channels. we business. -- rapid first. when that our -- -- through weeks we correct. down,

the the that effect on tariff will expectation in an remain Our China year. through forecast is based situation

lifted, remain that's global could moves, upside. that So, it's where provide will could some it. It that that about auto at. If assumes that change if

fairly it's an serve conditions steady. on based remain we so And will assumption macroeconomic that

Now, economists European not there growth in little But a We bit, tariffs there's is China we're at to any job would see best do if forecast try I and those improves be are our lifted, to some some and if we numbers. conservatism here. forecasts. say upside, could upside that

DeForest Hinman

just And into verticals. baked little How a I that few digging forecast? maybe into or business that further. new ago, about a is we're that new some opportunities, forecast not mean, win talking minutes is that baked into it

David Dunbar

I'd conservatively. all And maybe a calendar on the several quarters say, into if cylinders, we it's see our to win that it if our large for again way of up. baked hit takes probably towards application, the end the to in they funnel, it forecast little works, would But opportunities an the start really we ramp business the year.

DeForest Hinman

was good. a Okay. then time I've And spent it the adding lot the you in reasonably because this how seemed about feel of do on We're outlook channel? levels inventory And like capacity.

I think period, we're commented reductions. that of now growth some of a so some lend talking we're would wins. business headcount which more to And kind in a itself about potential we pipeline adding to outlook new headcount, and extent, this had

David Dunbar

Yes.

year with what's levels. lot reed put reed a three our inventory hands believe have industries they there's get now we reasonable A their bought where say business, to on customers I'd we buying switches in when happening and at this talked that full about and So, switch into confidence plants were last capacity at them was ago were running inventory. year just of industry The capacity. we

in the in our That some on magnetics and burn-off Now there's than switch up we be there. there's will pick semiconductor to business, think in. auto In slowed. going some there's market fab reed In equipment. we inventory with great SAAR, think business. now It's later. capacity more We exposure decline demand. It's slow inventory to the high-reliability absorption have has market some a

that's So, correction going of call there's those or three it, know, on. kind pause a, we

DeForest Hinman

the think, very spent the a We've Historically, very, these quarters row, But business. results mentioned out Engraving. We've about business, in we that. to we talking XXXX on the lowest that call impacted any long-term Engraving margin you some one-time quarter? so and then that some last else really put good time And anything two restructuring. some among items can of talk good in decade, that don't second in revisit the I business? up about profile. Okay. results need are that of a margin in quarter Can two probably You

David Dunbar

enough Yes, closed, market we one business. announced sites, declining to that carrying we've little anymore some profitability closed to markets country this This gosh, we've I we're some that time good-sized countries first of it's not toolmakers in up frog recent the you did closing today, here. wake I've would been sites. day those in since And those their and profitable in realize, support were close kind been going first like bit in a sites And the there's sites. we're the a in the year-after-year, mention water is of years. time in analogy that that past we've the say -- But sites as

for in with we've management had end just market and be in that's capability management right This that's is of another we're important. the North moves $X.X improve margin get person there and was changes. get timing it, and point we we those in strength We soft -- in North a look this of anticipate Engraving Tom? pruning those as like a of data, of the on was -- calendar the turn and There's do changes country countries where be in effect to issues we then very the retires, not XX a in some and -- we more more category last America. And large to X And in of America. had local a in quarter to the its at by activity profitability quarter one-time gosh, seeing make going significant last had our some operational had and to move when swing improvement business regularly or North done to new and just theme, the add year for second has was will region. in -- a with that And was the that what quarters, stuff. And just X didn't corresponding to projects and three getting basis So, this this we've reviewing variations a XXX I'd there's those experienced these quarters, take plants, saw different was will direction. that say a the margins. million Continuous We the successful manager America. volume. there in than changes just swings very

give nickel to shell Hinman margin The the impacts finishing, the have site-specific. We it country and just the better offerings we Okay. are tool idea DeForest -- the on were margins happy by good. – with the an new all good, in quarter Q to we The manage are gross you laneways have in country All try basic are So good. those. profitability laser, were different of buckets. three Engraving

is the business? EBIT a business. So about it a plus being business this Is in you if talked XX%-plus business plus XX% And quarter? EBIT not, fourth when it EBIT XX% a

David Dunbar

year on see, in -- calendar North is mention, the programs. good I this half of based what be good to strong Yes, with we second going did America very

sequential for So QX, think I improvement. we called

some of get year historic the the to let's once expect running we -- with and -- the be the give are names it, scheduled roll can I programs And out its that end teens. of at lists you to it call giving to it, upper So levels. we

DeForest Hinman

Okay.

think then higher trough quarter about there? should we third from 'XX as a So level,

David Dunbar

Yes. Yes.

DeForest Hinman

performance. good talk you AXXX about let's move XXXX? that fiscal going teen is numbers going moving digits third heading? into to huge XXXX, heading performing year-over-year. about operating of that it it to level; as ramping look the be double we the that margin lip-skin Engineering Where improvement business believe. program, maybe or And double-digit I level results, obviously quarter Technologies, margin hit the operating 'XX is talked be to profit or strongly, were starting towards the towards the profitability, teens back Is Okay. low level was I when very fiscal doing When

David Dunbar

Yes.

period and the was stage upper Just to teens. the to. In you're set kind performing to XXXX, XXXX, go referring back of the business

or above that gas gas and then, engine And two and space, XX% come of new gas to these think I down the and engineered oil will oil on The volume, and was believe some communicated had EBIT. lot a XXs. it parts medical full highly the ramp parts was and and low still quarter where consistently we've defense. oil a business it and There a as the new bit. quite what won we've like lip-skins more this deliver business platforms that consistently has

space if counting base above which there's the of the and not in will it Now, bump think business on, gas But could we XX% this are a and above business oil or aviation surge up energy that. EBIT. we carry

DeForest Hinman

Okay.

business? and So of EBITDA that's XX certainly GS can encouraging. price, $XX purchase acquisition, revenue million you on the us that months the And help understand trailing then

David Dunbar

Yes.

million we've business in EBITDA with $XX multiple is their They -- capitalize ability they XX. under known the about a just we The is this it business. proprietary nowhere expand kind process is out business made in this lack this contact by rapidly-growing And have. lack OEMs, a segment, facilities. the to lacked the rapidly-growing because with -- to profitable. sales, a of they've coming really a of the of have, reputation they the account with years, last global it's they but And So mark very few which relationships

stay as very as talk They of drive an part opportunity business, the see they network to business we for founders us. we're to the got global them for have Standex. to So dreams an opportunity the will saw for at excited realize this the the They with -- them.

DeForest Hinman

entire the network understand about And significantly that one stood locations XX-plus that when help if it's that talk with was molds. the how secret that of the be website technology? on you opportunity, about for of of developed? they've that? things us talked that Can rolled you the of over And the me our Is can that life really type expanding you sauce out out impactful

David Dunbar

X XX Well, of place. very -- couple the a They a of their source competitive innovative. deliver in one anxious can deliver these strongest is first really in guys put of which to we're are process But traditional to weeks. in that what processes is with weeks innovations advantage very have they the number competitors

the differentiates have ring a other here doesn't cost quality of So to molds. it's that and things a extension with do true, the at it's really bell they a mean, lead the advantage that we But process and can time mold, I same life them. GS. some other apply of believe we

DeForest Hinman

not been in then the And an quarter We may XXXX. capital priorities? can deployment buying give you update any XXXX. But we us transaction. the third like We stock blackout. We GS may look or the quarter the of have in helpful. were in did stock on of doesn't bought That's second

walk us the just through buckets, please? So

David Dunbar

Yes.

the hasn't changed. it So --

quarter, we allocation every a capital philosophy. So out put

that First, now, we keep Tom? what's and the number lights on

Tom DeByle

$XX million.

David Dunbar

$XX in in and for in capital invested shell electronics. to been putting And investing we've growth we We've tooling our $XX nickel look Engraving, growth opportunities. million. in NBOs. million, see then these organic invest And lasers at new you in

a Electronics, have India the headquarters new plant. We in

that, of -- got we approve all look all at review headquarters. than assumptions, these. IRR. with conservative deliver the XX% And to It's For for we capital here we more of

meeting, We dozen a Board recent we if threshold. at our XX% individual at and $XXX,XXX. look at CapEx, that more a with to fact, delivering above them take CapEx off of paying In see than they're look

return scenarios XX%. We look looks looks sales dial to down we a And we capital? understand looking that we margins expectations. go of Then to do deliver be. green what of occur, delivering down and process and price to almost that get Board our we'd all and that cost we all at asteroid A and our a the for if have WACC through And We scenario further expectations. when at at good those synergy deliver our go stock they the underneath our case And still is then then sales and of to expectations with it light plan dial different XX%, -- there look the And above We relative us if again We we business this, if that. it say, an assumptions that case. the review a down would next we with are constantly there's conservative margin like a acquisitions. an dial like And declines, acquisitions. would acquisition. three we we're case like final business. we're long-range We it that happen is acquisition. -- set good to our a have scenarios. have take The how and -- confident thing low the again, of can inherent looks value

We was have on left. million, Board. the left authorization I an million $XX probably don't It's is million. it it what $XXX know $XX-something though, from

look capital So quarter-by-quarter, when the with we is where our that use but of compare that we best uses opportunistically market cash. other investment, the at, back buy of it's and shares other

DeForest Hinman

we hypothetically? debt-to-EBITDA Okay. if about And with having the short final Where did a in question, something term? we the actionable be comfortable we that what the is comfortable? currently the are pipeline commentary deal might Where are transaction, close

David Dunbar

debt-to-EBITDA? the Oh,

Tom DeByle

Yes.

capital say on we to X slide, allocation As times. X.X our

David Dunbar

million. about $XXX Which would leave

Tom DeByle

Yes.

of million right powder $XXX have now. dry We

DeForest Hinman

you. Thank Okay.

Tom DeByle

you. Thank

David Dunbar

Thank you, DeForest.

Operator

David additional I you. will call Instructions] any [Operator the remarks. return Dunbar closing for now or Thank to

David Dunbar

happened you. thank it of quarter the us right, long sometimes for just and moving a Yes, me are of means so Standex, kind of a what lot there term. let pieces All at businesses in lot reset what

laneways growth the our Our driving -- growth. are initiatives,

investments great a to off opportunity about Electronics. have ago are so NBO pay confident starting three put years process the in we we that Technologies Engineering started we're in GDP+ And place. in We

operating to cash deliver. on with quarter. and Secondly, the pleased cash is the in starting focus We're management the discipline the flow

attractive Cooking frame Fourthly, fast-growing acquisition very, business. a We this our that It the was was GS complicated. Solutions. value it big executed we That with Third market got of for very time divestiture the of deal in the a in thing, communicated. margins positions us Engraving in us. and

feel to historically. portfolio. further we in have them very that businesses back about been have focuses we to finally, had place good quarter, that we're and address on actions margin trouble confident And in they our track in that; where the the So the get

to to forward coming look our we next quarter report back So progress. on

Operator

XXXX Thank you for Third Standex Earnings participating Conference Call. in Quarter International's

now may You disconnect.

David Dunbar

All right. you. Thank

Standex International (SXI) 29 Apr 192019 Q3 Earnings call transcript