SXI - Earnings call transcript Q1 2020 | Standex International Corporation

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Operator

Good day, ladies and gentlemen, and welcome to the Standex Fiscal First Quarter 2020 Earnings Teleconference. [Operator Instructions]. Please note that this event is being recorded. I would now like to turn the conference over to Gary Farber. Please go ahead.

Gary Farber

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

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

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

flow net from from results adjusted accounting and margins, We are States. debt will as also measures operations, refer net the in serve continuing a EBITDA. free in financial non-GAAP to share, adjusted adjusted United net operating operations, provided income, to other adjusted These pro income earnings generally including accepted non-GAAP forma per complement adjusted operating accordance cash income to measures, to principles with

company's an believes of such comparison and the Standex consistent that historical measurement additional provides information performance.

and today Treasurer, CEO, call Chairman, Officer Dunbar; is the Financial Standex's Ademir and Chief On David President and Sarcevic.

David Dunbar

point and of milestone. small, that are companies have I to Standex celebrates listed this The number XX York proud to that years would XX like New achieve month, been out Exchange. years on Stock the we're for this continuously

strategic will with our in provide results continued thoughts then in update the our some of with I'll progress Ademir financial our and fiscal of follow our provide on quarter, an outlook. begin an discussion on performance I'll quarter overview our additional a executing on priorities.

expectations to turn on our commentary call. overall fourth and line Now results our The quarter in conference Slide August quarter's with were please X.

operations. on Hydraulics from remained a Engraving fourth quarter and in Electronics strong. which expected, margin XXXX increase in segment our of in Specifically, gain, saw our segment efficiency did as the manage Asia, experience significant we a Scientific headwinds American we're sequential continue Technologies, improvement efforts The impacting We modest Engraving at performance as sales Engineering opportunities, proceeding reported pursuing near-term our second in to both outlook. macroeconomic additional and companywide. our segment, To are market and conditions, overall quarter primarily restructuring is this North

on we're facing, continue headwinds macroeconomic increased growth to for in portfolio laneways particular, $XX.X million. In quarter the we to over our XX% Despite profitability successfully XXXX Electronics, several particularly higher growth position fronts. and first

Engineering, solid Our is most now acquisition, to and GS integrated fully a off recent start.

We also Magnetics particularly revenue. continue as the very to high-reliability funnel, trends business, new positive our converting our in funnel opportunity successfully see we're to in business

maintaining into in Services, sales. leverage technical our investments business backdrop well the to in Food expertise demand convert pharmacy excess grow in the against teams markets. are continues our At retail and deep We and future of these opportunities technical and GDP, sales to higher of Scientific as we application

as basis cost plan Finally, our on exit to we program $X.X run generate million second rate current a in restructuring on the is savings quarter.

of perspective, financial an From call. our we position addition, in strong. later other active continue to discuss some the pipeline have we'll which a opportunities, In remains of efficiency

under debt Xx. adjusted net to is Our EBITDA

We have management. capital approximately liquidity, our $XXX improvements million working made in in and we've available sustainable

first of well in segments. a our generated delivered working all historically we us, in From cash which quarter for very has results been perspective, I'm how capital quarter, improved our a the free liquidity flow as initiatives negative pleased with

attractive active continue acquisition internal In invest repatriate from projects operations. to international cash us our high-return pipeline and addition, These opportunities. we to position well factors of in

approach disciplined allocation Our will balanced. capital remain and

quarterly through Ademir the later detail call. in greater the in results financial walk will

increased currency. X.X% a foreign reflecting due impact lower new Sales the segments model timing review Engineering in Tenibac us balanced recent to GS the let overall Now year-over-year, rollouts with the automotive of and of with of as Slide largely X. level well beginning introductions on acquisitions, Engraving as

basis, improvement million, a in quarter margin to and and XXX sequential a announced point trends, finishing. in sequential restructuring shell, growth North improvement XX% delivered reflecting we a tool by in to grew year-over-year XX%, market laser primarily in laneways the actions basis automotive-related On Growth results. nickel America third end $XX.X Engraving supported

rollouts which and reed inflation. We turn automotive also actions the decline 'XX the of finishing. decline largely further engraving as Total volume in have primarily quarter X, facility the material in improvement and a on completed, we restructuring such growth the declined and segment. laneway as operating The reflected factors announced expansion. expects on sales global ongoing as Electronics new Asia, in address affected third Please operating technologies, Several will in results, soft laser to to switch provide moved trims, to China, larger Electronics' in focus year-over-year new capacity sales second X.X%, fiscal The into of income of are new a increase. Dongguan, well year-over-year tool In Standex continue Slide basis. XXXX, and Asia. markets, as decreased particularly impact XX.X% quarter

double-digit operating on is its slowdowns. market Our to income due reed switch is deleverage current profitable, Asian largely operation decline highly declines to our and due

and in was our This end about is by markets. enthused strength Military this we decline Aerospace growth end business, driven markets, by and Magnetics a countered our to committed in business This remain in and prospects. its cyclical decline

these quarter, Electronics' Next sales quarter continue. although to decline expect will similar sequentially volume we be as last year-over-year, to headwinds

inflation this near-term $X.X the very the longer QX particular, million well Despite material in in in restructuring changes In segment switch process our announced will we cost are through term. addressing reed improve positioned we're for to challenges, of deliver position. permanently annualized our savings. Previously production

and are well sales in Standex organization Despite new communicated position. new we pipeline market, our customer opportunities. end future strong a of strong market business engineering position with sales significant the result this it our engineering positions and years $XX over in of paying current our new the and us As off long-term This in includes opportunity serves has Electronics growth. several opportunities million for growth. markets, quarter, It last sales good has and well is of development softness that investments business relationships for

Engineering initiatives. X, Technologies' Technologies. our Space continued Defense, Slide increasing leverage well with our strong improvements higher-margin XX.X% to results of in year-over-year. reflects as markets new result growth remained income Turn Aviation, at and core as and efficiency manufacturing Engineering operating associated growing with and processes applications, in volume revenues The XX.X%

growth increasing first X% in one to XXXX. quarter Aviation in year, year-over-year under new to such operating continue AXXX, we programs, for produce continue to delivered lipskin We as ramp. income the equipped of with am the award the backlog CXXX, the and in AXXX expect with I year-over-year communicate, LEAP-XC to received revenue and second be quarter a engines. GE recently to pleased

business new pipeline solid our addition, business. In opportunity in this also is

an actions continue, From that increasing the will such rework machine quarter reducing of perspective, efficiency and utilization. the scrap and first as benefited level our results

to loading application strong Turn volume. on the to of refuse Hydraulics American pack in ramp eject for continue front-end demand, X.X% a continued cylinder including increase new North market, Slide sales as full which trucks, the to such new OEM X. in particularly The reflected

a XX.X% ongoing material of slightly lower margin margin efficiency costs operating The ago. initiatives. XX.X% the volume, increased from increase quarter and First year higher reflected

expansion applications. XXXX, the and market our financial relatively quarter, year-over-year. Hydraulics' traditional expect in improved fiscal operating expect we performance also year-over-year as for income the in second flat we as capacity year well Trailer We're in initiatives to roll-outs opportunities higher-margin Dump to such While as deploy revenue be and offerings, pursuing to

move we Service to was year-over-year, order to coming prior expect Food merchandising. Refrigeration in The Scientific flat sales margin favorable strengthened Now compared to in Food declines customer and to reflecting year. higher due income due due double-digit Refrigeration XX.X% Service the primarily volume decline Equipment let's in which increase to Slide merchandising product fire-related In Group. Sales revenue mix cancellations. increased X, scientific at sales year-over-year, group Group slightly the operating to in was and quarter, business, growth balanced with revenue, X%

momentum continued and also We Scientific sales. merchandising anticipate in

we Finally, in with productivity lean related commercial focus efficiencies. improvements continue refrigeration on pursue to a

financial the detail. discuss more I will Ademir in that, With to the turn call to Ademir? over results

Ademir Sarcevic

weakness everyone. Well, me first let with as EPS of in business. our with communicated previously both good We morning, Electronics well revenue quarter balanced strength David, Scientific, ETG, was in And thank in Engraving our results. and provide This now expectations. an improvement continued as in overview From and margin. experienced our standpoint, line you, results sequential and Hydraulics were

financial Our leverage statistics. and evidenced as be strong, very by our to liquidity position continues

segments working with In reporting initiatives addition, year-on-year, improved performance our improvement cash flow drove all to key metrics. capital

quarter second savings are million QX run year. announcement of of to $X.X on the restructuring from end plan Finally, cost by rate our annualized last we in the of prior achieve

basis year-on-year. which X, reflects organic a balanced Now added and GS headwind, margin X%. with year-on-year, on points impact our non-GAAP in basis strong Engraving Slide X.X% our ETG and XXX turning Tenibac. increased a results. financial was from of a of a recent to at decline gross to XXX quarter. of Hydraulics. and Total with acquisitions remained X.X% which growth provides and This summary due of XX.X% primarily points segments, Agile Engineering, Acquisitions negative to to and growth basis GAAP X.X%, Gross Electronics sales FX declined the margin revenue

as in primarily reflected transition increased with non-GAAP our lower particularly expense decreased expense. corporate X.X% in year-on-year in expense of Electronics basis margin compensation new rollouts was to XXX our benefits as to XX%. model relates points cost. gross increase as management and decrease weakness as The primarily XXX This stock-based at basis level GAAP along basis year-on-year margin The 'XX, accrued operating well Engraving decreased Asia, decline well fiscal points in driven automotive business, decrease corporate operating margin segment. by the to increase and

move of year. expense were an balance adjusted year-on-year. corporate decrease a share we XX.X% $X.XX of to improve comparisons as expect per the basis, Earnings on year-on-year We to the

provides XX by segment basis. detail and the drivers Slide consolidated a greater And of on on revenue

Slide with a and Now reported GAAP first $X.XX. XX, EPS a difference net EPS reconciliation provides between which of quarter please to turn adjusted

fire-related New $X.X $X and impact EPS of the adding million, a net of EPS of insurance quarter, of a balanced restructuring acquisition-related EPS tax-free bridge from and back $X.X $X life facility in and million million proceeds of to expenses impact in a approximately had EPS $X.X million GAAP an to which items charges related Albany for This include: adjusted which The insurance $X.XX. our is $X.XX $X.XX. created benefit of with

All of GAAP reduction this non-GAAP to resulted net in a EPS. EPS $X.XX from

cash Now XX, turn Slide free flow. to please

cash a quarter to quarter metrics compared from takeaways free cash key We first XXXX positive our our free X year-on-year flow first in results. from improved results. historical working each negative Key $XX flow the in 'XX trend million free 'XX. improvement million fee had in flow in the $X.X to at flow Three quarter a of the year-on-year cash positive a showed Our negative segments. first first prior the of quarter free of capital cash all

collection in year-on-year Our all focused accounts initiatives payable supply free efforts, cash inventory contributed improvement around turns management the improved to and flow.

trends. to X.X quarter in showed Now Slide XX, metrics increased turning capital improvement working our a to turns capital the Key first year-on-year all XXXX. working ago from X.X of and capital working year

AR Specifically, X.Xx a by X to increased increased and full days, inventory by improved by X DSOs turn days. turns DPOs

of our had of September end trends. million $XXX.X to structure, the 'XX expenditure compared Standex debt summarizes end and at of liquidity at June million capitalization XX capital the statistics $XX.X XXXX. Slide net

XX.X% strong. are quarter X.X ratio capital adjusted first fiscal net leverage net debt The to fourth the with The at XXXX. ratio Our quarter statistics debt sequentially the leverage at end XX.X% was flat was of quarter, the of company to fourth EBITDA compared 'XX. to

liquidity. acquisitions, a were attractive addition, and places capital million in dividend, of sound as compared In a as and In foreign in quarter very during XX% pursue a $XX have favorable to approximately approximately we last year. in year-on-year $XXX declared XXXst growth us return to well expenditures our position $X internal available to increase. million year. Total fiscal $X.X to total repatriate million first initiatives, In subsidiaries shareholders. invest first the million All from strategically $X.X we consecutive this million plan we October, financially quarter the of repatriated fiscal of 'XX, approximately capital

turn between million to fine-tuned that, between to million of $XX forecast million to prior We fiscal David. will of to it the have million expenditure for 'XX. our $XX also and the $XX range compared back outlook With I capital $XX

David Dunbar

Thank you, Ademir.

Our XX. with formal Slide remarks conclude

Engraving Electronics segment followed continued segment, Engineering expect to in improved in particularly second quarter in to and the quarter the We financial second Asia, performance businesses. be performance similar first half. by results, in strengthening growth weakness This and the assumes continued Scientific Technologies

leverage run previously cost rate, contributes at restructuring to further full its structure. our we expect our announced As

drive to will initiatives throughout our We productivity continue efficiency businesses. and

metrics driving Our improvements our initiatives cash good free value benefiting how a the in throughout example are of is company. results and

growth execution growth and continue the expect our to and rates as today. traction on gain We trends return higher to by evidenced opportunities discussed

priorities consistent With will our leverage strength, generation. questions. free Finally, strategic our we're as liquidity financial from of to a we pursuing and well that, Operator? metrics open as flow given up cash position

Operator

[Operator Instructions].

first is from question Moore Our Chris CJS. from

Christopher Moore

coming little some Yes, Electronics to rough how terms could both kind geographically understanding and a, maybe on of a from? near-term David talk difficulty Auto, the we can a is where get markets, then bit breakdown et just of, kind of a of focus just bit. cetera, of better little much in you end

David Dunbar

last shared XX% business, XX% goes through the the some that shipments the of couple we that Auto are distribution. quarters, of about in In Yes. of to

where So Asia. XX% exactly it's standpoint, Europe about -- good From it's XX% the has is and good that been to unclear XX% in but a it's America, goes North -- a business indicator. a geographic

Auto. decline, products, slightly. wide. breakdown But largest. military, last though tick industry communications, going to Asia being mean, balanced global revenues shown to In we've the this power with think significant be quarter going -- I I were Auto fairly consumer past, quite is down the there with aero, industrial the is to exposure

Christopher Moore

changing on bit? bit little the it like Got from is there, you. you structure the cost That's switches, about helpful. little -- improving. -- a a And your talk Can reed specifically that sounds

David Dunbar

highly year comes XX% decremental, that reasons sales it ago, when the Yes, things. when the One a which quarter and is we've a a up, When think, little there's significant the costs, get Electronics one that EBIT. high I itself with down, levers structure two is fixed seen. it operation posted automated go one of you cost a -- that's beautifully, more

for to rhodium actions is series a in the there's that we of and on our addition of In switches much place so to described reed that, volatile majority a use significantly in our future we'll the -- results. putting market rhodium and team actions we does the impact material a smaller that use our -- that rhodium, are reduce and of as that our have

Christopher Moore

you're $XX other medium about and And talked finally, talk about specific more term, looking you maybe of anything at, it. Got there? could you pipeline kind that million things that

David Dunbar

Well, this broad. the in There's smart there's is very opportunities industry, telecommunications, grid, some auto applications.

expected that, business I hadn't didn't is that we Just million new this one guess, generate number include us today sales for would year. of we $X of opportunities list that, about

ramp. sales The were those new expected first than products as stronger quarter

that'll to we a to ramp, downdraft a year think year, to us, it markets begins volume. So cycle pre-sales new core the years takes for ramp the for Once now opportunity for some counter can to full these two the business or it to year a upside or two about. year -- be we more to which the in maybe cycle. in And a talked provides -- XX typical take

growth funnel see that's we a -- XXXX. bit year, that for as So $XX XXXX opportunity plus this million little our and

Operator

next question Godfrey George from CL The is of King.

George Godfrey

compare you questions. rate, versus is type Engineering up easy demand temporary high an how XX%, a that and to the made Two that that revenue And mix? of and the or mix is Service margin organic the a buildup Technologies, changes can and offloaded more it second favorable? Or that be organic that Cooking to margins led is in perhaps One much much that was businesses the in troubled growth, a significantly more this growth Was part let pent then sustainable? is, Equipment, that of there. it you teens improved Food restructuring the

David Dunbar

Yes.

had a those 'XX. Technologies. and So in orders completion like let's one-off. in QX drove buys last question business some of QX term Had first Technology about kind that Engineering $XX We our the last I same have quarter, of asked 'XX final you definitely Energy that million Engineering was would handle some said sales

the X% are the Those years, as AXXXneo as model these represents in our annual volume, build like the will over And to long be is for new just term. an the coming communicated past the But applications XX%. rate. new ramp lips is growth what that really we're this just single-digit growth ramp things The underlying and growth the on -- of still to applications business, get I fair AXXX, in our quarter, this we've this expectations. think XX% -- I mid- those on a we're This EBIT, -- X% business. full wouldn't strength of your new and the business into

business, On both year's in results. Service your Food which has out April, we question, taken is the actually divested been of cooking --

muddied last improvement was So largely that within by margin year-on-year compare the business. inclusion due is mix Cooking of not year. The to this shift a year

we've know Pumps in X very to business a high-profit grow quarter a with Merchandising Scientific and digits. high Commercial got our continues very Service, It Merchandising P&Ls double good and Scientific, Refrigeration. very Food in You had is profits. business,

the XX.X%. differentiated that So as those more move business mix drove of to effect EBIT we to businesses, mix,

Operator

[Operator Instructions].

David Dunbar

All right.

it know let companies a today. busy conclude. of announcing a me So is I lot day,

you. you accomplishments and listened in So participation. today thank of Standex, your in for interest I you those results share We vision our fueled you to who want We letting especially, Stock for to next our years to Exchange quarter Thank and with us support. forward on their XX our call. speaking you. York our on New I who look for again thank us And your with shareholders and thank have the employees continued

Operator

gentlemen, call. presentation. you sir. today's Thank concludes for Ladies conference that this attending you, and Thank

lines. disconnect your now may You

Standex International (SXI) 10 Nov 192020 Q1 Earnings call transcript