SXI - Earnings call transcript Q2 2020 | Standex International Corporation

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Operator

Good day, and welcome to the Standex International Second Quarter 2020 Earnings Conference Call. All participants will be in a listen-only mode. [Operator Instructions] After today’s presentation, there will be an opportunity to ask questions. [Operator Instructions] Please note this event is being recorded.

I would now like to turn the conference over to Gary Farber. ahead. go Please

Gary Farber

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

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

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

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

them. turn Chairman, and to Ademir David and Officer Dunbar; is over Treasurer, today Officer, Standex' I'll Chief and call President and the Executive Chief On Sarcevic Financial it

David Dunbar

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

slide could X. turn if to everyone Now

line results quarter call consistent pleased our as discussion results we Results November Standex' of further driving performance second Let's quarter quarterly into and our conference second as commentary first with in We're were key move strategy. progress quarter in a with trend expectations. themes. the to on made with continues

consolidated -- level, X.X% and of in $X.XX, adjusted Specifically million year-over-year sales on a reported year-over-year we $XXX.X decrease a X.X% increase. increase EPS

flat For quarter, the business third consecutive Engraving sequential sales on improvement demonstrated margin growth. the

addition, on improved the the basis time margin In year-over-year for first in several operating quarters.

the segment business quarter Technologies in Electronics growing. the of were primarily as the continue strong. expected macroeconomic Asia. Results That to North as said headwinds results funnel remain similar Also American of first to trends impact Engineering new is sequentially opportunities

laser opportunities shell, laneways pipeline Growth have also nickel of increased XXXX growth for propelled finishing. and higher quarter further by tool an We offerings and XX% the company attractive second over margin. positioning

positive to global Engineering the the many has see NBOs XXXX. in X% year-to-date GS Electronics, performing increased with North acquisition Mold-Tech We The very particularly, funnel footprint. opportunities fiscal Engraving recently continue closed in in most well Standex across trends America very is where in

precision acquire that sale attractive in adding The to the markets specializes agreement customer Torotel, and we custom aerospace end definitive December In which and including design fit proposition. strengthen expertise magnetic is a acquisition manufacture of strategic strong announced defense value our in a Torotel components. will

of quarter to the expect transaction to close the XXXX. continue in We first calendar

and complemented the through and announced are are Electronics The initiatives focus P&L. on increased flowing and productivity. complete restructuring in cost a These company-wide Engraving savings by actions

Electronics changes materials in inflation address in production We reed the also to segment substitution. material switch and continue through

of further for have goals profitability, positioning leverage us Operations operating expect the volume experienced execution of productivity by income to further fully join In Standex value magnifying in more the Standex further system. an company's Engineering late creation long-term achieve To expanding Technologies and February, growth VP the growth. we leveraging and segment, are to improvements operational benefits drive ongoing productivity, and the

year-over-year liquidity strong. generation turn debt is working balance perspective, results flow a sheet in we the our and $XXX From emphasis closing post Torotel. on EBITDA and Net have and the free to of capital adjusted initiatives remains approximately million under improved available delivered liquidity management X will cash

We cash are million to year. international markets also repatriate plan continue to and $XX this from on repatriate

decreased where shell, X.X% Now continue tool let's on beginning margin progress. and growth to well with Engraving, review approximately acquisition. programs, from operating largely $XX.X customer increased four laneways, with the with balanced make GS timing automotive contribution as reflected the as Engineering nickel in laser we XX% of million, year-over-year. the page segments, This growth which to the Sales finishing,

XX.X% the a leverage and of reflecting increase basis restructuring Operating improvement improved points a and represented point actions. from basis XX sequential quarter execution first prior associated XXX margin year-over-year, margin with operational

expect Next we quarter, several line year-over-year and to drivers. improvement top operating leverage due

new an from will contribution such recent soft level over activity the well automotive laser from new as quarters. be GS Margins the and increased finishing, sales contribution. model a Engineering from restructuring combined volume there leverage trims, savings From of cost will technologies, tool engraving past as benefit as few perspective, rollouts, with

regional discipline Our rolling out to focus tools ERP on as them. we operations support gaining have teams the and operating fully momentum, standardized the is staffed are

results, and year-over-year. XX% five, Electronics although decreased in appear slide these sales Asia continued on weighed segment. destocking, decline income trends end Asia. markets operating sales factors weaker be The reflected moderating. Electronics to and in largely Total declined the to distributed particularly turn Several Please XX%

inflation for operation on margin of impact products defense volume and Asia supported There were margins. year in applications deleveraging Despite of XXXX operating and sequentially including switch first quarter, was to efficiency reed market in positive fiscal actions income operating similar pockets trends, the aerospace material the of grid year-over-year, in utilities. as implemented XX% the in strength smart and new

expect decline volume basis. sales we year-over-year Electronics year, sequentially increase and to a Next slightly on

it particularly several in opportunity successfully new positioning from has the ongoing material X% estimated strengthened, XXXX, reed deliver the Applications The cost initiatives. in through fiscal business awarded for in XXXX, production increased will we recently fiscal focus inflation changes addressing While million year-to-date are in our where and there year pursuing are sales funnel process. some future growth. near-term America, North challenges, business on $XX including initiatives, switch productivity funnel an this an incremental in

in Turning year-over-year. well growing aviation, to XX% revenues and times results productivity markets slide that space results income with improvements. six, than Technologies. rate, and reflect Engineering remained defense, Technologies operating X of in as strong, Engineering increasing at XX.X% momentum manufacturing strength as core The more

we in the delivered decrease under revenue fiscal XX% be grew to project quarter to year-over-year. third year in one Backlog timing, year-over-year. Due to expect

income third expect increase new aerospace operating we and quarter productivity However, efficiency initiatives. of the year-over-year, growth in cost parts, the to driven by platform

The slide X.X% truck market, partially offset reflected on positive in as decrease Hydraulics reducing slowdown inventory trends. to customers market levels, refuse sales existing well as by Turning the dump seven. in a

Second quarter operating of XX.X% slightly a margin from XX.X% year ago. increased

The year-over-year increase margin mix. a reflected product solid and management favorable expense

operating decrease on We reflecting of expect the well year-over-year, as as China destocking, from revenue quarter and customer next to plant. our relief select income end products tariff

improvement. higher Standex growth remains on margin positioning Our for and focus

growth the towards providing and Hydraulics example, the capacity segment, sales support opportunities. realigning are greater aftermarket for additional For case new business we in of

and reflecting contribution Sales profit relatively year-over-year. Food in flat balanced of positive increase the Refrigeration move of was Now with X, merchandising were Group. impact income as Equipment in pumps The to from a sales demand year-over-year, the Service slide and Refrigeration. well Scientific flat in operating mix largely growth trends, Scientific a let's reflective lower XX% in contribution including as

pump Group sales sales Food Scientific expect we flat reflecting to Service slightly. quarter, decreasing year-over-year, in growth Next Group be Refrigeration and relatively with

We productivity of of favorable operating an improvements in the increase year-over-year driven businesses. some income higher-margin expect by mix and trends

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

Ademir Sarcevic

and everyone. good David, you, Thank morning,

I our key provide few First, results. takeaways quarter will a second from

Trends leveraging to quarterly faced range with in segment challenging Engineering remain few its performance Overall, year-on-year has for flat initiatives. sequentially Engraving which relatively both quarters, solid. margin expectations. in sales. by margin market and the its continues sequentially Electronics, improved financial XX% productivity a the operating past Technologies in line held be on our

continue year-on-year. key to strong to Working maintain cash capital sheet and initiatives also We our flow position. improved both execute on balance metrics

international successfully repatriate We from markets. to continue cash

cost deliver managing we and implement in The finally, productivity programs additional Electronics remained across million to in we And in cost $X.X Engraving are actions company. complete the structure. restructuring our disciplined annualized will have savings, and

Engineering let's second organic Technologies total GS Now This our X, basis, contribution and quarter Electronics, segment. the a to turn slide XXXX summary. Engraving consolidated from year-on-year. in financial Engineering revenue in weakness strength in X.X% On reflects declined

a but of in FX to extent impact a lesser remained with prior negative quarters a X.X%. than headwind,

year-on-year on and improvements businesses increase an XX basis points improved and a Technologies margin mix quarter basis XXXX. sales second Engineering This gross compared quarter in XX and basis to points adjusted GAAP Second Engraving. reflected several including productivity basis on

XX operating second margin second quarter due of expenses. increase XXXX to Adjusted is of in a basis primarily This declined XX.X% quarter the from million in $X.X points to year-on-year in XX.X% corporate XXXX. the

to headwind stock-based compensation and expense accrued reflects benefit the increased XXXX. in Similar quarter, last corporate expense

November, call year. of As we the move rest comparisons we corporate in we fiscal to expect indicated on year-on-year expense will our as that improve

GAAP interest Diluted on last rate respectively compared of year-on-year. to increase $X expense of an reflected tax on both and and a and share basis X% lower basis representing earnings This $X.XX X.X% per as adjusted year.

segment by consolidated basis. additional provides detail XX and Slide revenue on on

Engineering in with weakness market Specifically, Electronics, the of as acquisition and segment. reflected Engraving previously, strength from in in Asian Technologies impact the GS the mentioned revenue primarily the

to a flow. XX% slide to generated $X.X turn Standex compared of in million year-on-year million Please quarter cash XX, second free operating the free increase. XXXX, flow cash of $X.X

million slide we of to in to a to due $X.X in second quarter capital $X.X capital, detailed compared which of will which was is expenditures This of the fiscal due moment; XXXX, a primarily timing XXXX on to million in second in get reduction the several projects. capital factors: of working quarter XX,

now net payments These an by a was these previous to offset partially acquisition from were decrease which earn-out activities, operating in associated complete. and cash due the with are payment primarily trends

and to capital in to capital trends. X.X in to increased from and key inventory year-on-year initiatives The DPO X.X by Now to working focused from nine on improvement company's payables please X.X slide turns Overall, Inventory resulted turns working increased turn improving working metrics. efforts, from XX days. collection capital X.X. turns X.X increased managing --

statistics. at at million of capitalization Standex slide end of and Standex to the of to the $XX.X net the $XXX.X Please summarize liquidity and fiscal $XX.X million turn at first which had compared end second structure quarter quarter end the debt the of XX, million XXXX.

Our of compared quarter. first the remain to The to first The leverage X.X X.X XX.X% net XX.X% company was end net debt-to-capital debt-to-adjusted strong. in of quarter. compared statistics ratio the the ratio EBITDA leverage at

million expect of closing also approximately of Torotel to the have acquisition. post We liquidity $XXX available

growth internal return invest This places very to us capital pursue shareholders. and to a in strategically acquisitions, as sound attractive as initiatives, well position favorable financially

In XXXnd January, we increase declared year-on-year per company's a XX% to consecutive share. $X.XX dividend,

from second XXXX. repatriated to foreign total million plan the million also during $XX.X million and quarter and year-to-date We of in $X.X fiscal $XX repatriate subsidiaries a

We $XX have $XX million $XX also fine-tuned prior the $XX to million capital estimate. between million forecast and to expenditure compared to million

turn with David. And back to will that, I it

David Dunbar

realize and will Standex of sequentially to increase slightly as cost similar sequentially XXXX, you, quarter actions. fiscal similar with company's In of Slide the better quarter third total third results I we year-over-year, benefits we to operating significant expects be improvement show than Thank to Ademir. conclude operating XXXX. to to income, quarter but income reduction In second slightly additional expect regard be XX. of the revenue

the and Performance in assumes in Engraving improved although the improve Technologies year-over-year. year-over-year. be Engineering performance outlook sequentially segment Scientific profitability will Our Electronics following: lower and increased segment

initiatives the emphasis of improvement focus VP be continued and efficiency capital customers evidenced hiring the Underpinning margin as will a results is by will driving success improvement ongoing in Hydraulics the we be on third to the expect but a decrease destock similar quarter quarter working a past quarters. supported Engraving backdrop and discipline as market few now segment, operational environment. of results metrics of further focus year-over-year on and in by XXXX inventory second This softer Operations. the against further Standex' productivity At

agreement and portfolio remain acquire We advantages. and well on positioning NBOs the such higher and growth Engineering definitive as is GS This the transactions and on in company's extending as the laneways Standex' the recent evident opportunities further growth Torotel. as trends focused competitive to return for

we strong sheet Finally, a approach allocation opportunities. a we opportunistic maintaining balance disciplined as we'll committed are capital value complemented creation to to and further by be pursue

With call Operator? open up questions. to that the we will

Operator

We will from question-and-answer CJS. now [Operator question first Our ahead. Moore the begin session Please go Instructions] comes with Chris

Chris Moore

good Hey, guys. morning,

David Dunbar

morning. Good

Chris Moore

I'm there's Is forward? picture. rebound kind look then on to for a start and trying it of XXXX? this Electronics would kind going kind And of you the the bit of further, we that that we headwinds that into do the coming just then how Asia mix. Asia. kind a kind Maybe currently on? here shift morning. in you If are back a expect out could side and of geographic mix from later Good little get bigger there year difficult a maybe moving feel structural year make geographic something to and see of or from just Obviously,

David Dunbar

What's our a in in has down ticked bit. Asia. it sales our level, points that in China in include the others. into are Europe, percentage year roughly driven auto a to mix down softness down the general make activity And is suppliers a tariffs. At global Asia high come few OEMs various in due the third business auto to of Asia lot in relative is that and of It's in last sensors; part slowdown America devices the a a industrial to probably to in a

So we things those relative are – we markets serve. nature and temporary to cyclical in they're the that think

long-term a there's in geographic think our shift don't we So balance.

Chris Moore

a you. about it. little Torotel. just Thank Maybe Got talk bit

little further the what capabilities, you bit Standex? a you customer brings of can terms the expanding value proposition, In to further talk that about,

David Dunbar

brings Yeah. a It things. few

be the has that the long-term defense aerospace in They're in that many of years. Torotel they coming up very -- us. platforms First attractive These markets new position have. to are all, on is relationships are will significant ramping and

we the the results essentially business between, an of that is, close that collaboration engineering in engineering based customers' Magnetics high-reliability and customers. like as with is teams of very characteristics fundamental on, teams, The our which technical extension group functioning

a future these long-term design We is sticky the get its to opportunity very relationships earns performance platform, in And into with basically part market. through then an ride on platform. good that aerospace attractive life. into our designed platform the ourselves defense customers so and And

and believe a players are a There there. acquisitions Magnetics. this We in we're somewhat competitive fragmented of series market, position market. building advantage strong high-reliability out smaller competitive with a a a of in It's still number

have North Torotel $XXX here million with about And the acquisition, business America. in we'll

to our in bigger, able invest development our are in develop in than tools, We development equipment a competitors. labs, product new deeper product and capability, quality many

to additive all Torotel's of So that. capabilities are

for our of in for capability so, the look is what to the And high-reliability customers strategy engineering That's Magnetics. to premise deliver. us really develop central magnetic strongest North America

Chris Moore

it, very appreciate Got helpful. line. I'll in it’s jump I back it guys.

David Dunbar

Thank you, Chris.

Operator

Chris Our with go next McGinnis Sidoti question ahead. & comes from Please Company.

Chris McGinnis

taking for Thanks questions. morning. Good Hi. my

David Dunbar

Chris. Hi

Chris McGinnis

on composition kind the Can you the last just the changing I formation changing an provide was of an composition talked you Thanks. you update of switch. of just -- -- just one Can maybe that the pressures it. you sort And that? the update or year, the in reed that? over of know give the the about on Electronics talk of

David Dunbar

last years. the point us really for few has pressure This Yeah. a been

acquired all you it are plant. we OKI. our from switches Kofu the We reed rhodium. that call in business with And now switch plant If recall XXXX, nearly tipped back the reed in

ounces the a the We time, is in rhodium. switches At year. $XX,XXX Rhodium half in an with about $X,XXX at use X,XXX XXXX we about same the was our time over about selling ounce. It our ounce. of U.K. $X,XXX, for an back now plant tipped reed

very It traded is commodity, a very volatile. thinly

year other the are where the performance is of precious of And of rhodium look ruthenium. determined, so what we where done and applications last rhodium advantages all in has or can as we've necessary, use with iridium the minerals, a at take and increased, our rhodium replace of price the

those of materials. be we to we'll project quarter as iridium. -- begin And transitioning more about And we'll to or reed I so, think we a switches be more switches moving other to complete XX reed months think started we our ruthenium every and

price able through the advantages. will because remainder then, to performance And market, mission-critical, in the pass such, we'll rhodium be that applications with high-value to of the be

Chris McGinnis

about to any two of can expectations questions. and just what's then, a with and impact just any potential talk happening One, Coronavirus Right Asia? little you business? more your And bit

David Dunbar

Well, a we're cap modest in with presence China. industrial small Yeah. somewhat a

I customers is the extra expectation shut lunar Our businesses, will current be just plants year. week after down our from an to our our for talked new

staying operating forecast -- will assumption now Most plants employees within next returning baked to the Employees we that, within supply And our we The quarter. interruption current just get and again. are make focus have business from when into start is working the to is our here our our production the up of home. the we'll they at to chain week And our of any February. back end safe. in be

Chris McGinnis

just Yeah. Engineering. Thanks. one one last And the on

down years expectation you through really can coming little how just strong the that make talk Can with being bit us QX that does timing from maybe that or growth walk just the even revenue that out? Or segment and in obviously Just of over should about -- QX, you play stronger? a X.X timing two. last Thanks.

David Dunbar

you're our quarter is next. supply the in project to of These It one customer customers. are These timing from on projects inspections can and to the it. Well, strictly slip chain, right question or a items others. large sometimes customer depending with other projects say

We current are doing up for see can schedule try capacity to The don't to our that. this can get although support quarter, the this business customer very a XX%. shipments they And you backlog do their more strong is some everything we QX. strong. However, prospects necessarily so schedules anticipate are teams

yeah. short and the We prospects. -- good answer is long-term QX strong So

Chris McGinnis

for Thanks and questions good my QX. taking Okay. in luck

David Dunbar

Thank you, Chris.

Operator

questions. conference closing turn remarks. further would no David Dunbar At the this like there to over any [Operator back are I Instructions] for time, to

David Dunbar

your us interest want again you their speaking Thank with and thank and to to quarter All you. continued shareholders in for vision. We our for results, look Also share Standex to fiscal employees today XXXX in letting third right. I want thank accomplishments I call. and our everyone forward support. the

Operator

The Thank conference presentation. has today's attending for now you concluded.

disconnect. You may now

Standex International (SXI) 4 Feb 202020 Q2 Earnings call transcript