SXI - Earnings call transcript Q4 2022 | Standex International Corporation

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Operator

Good morning, and welcome to the Standex International Fiscal Fourth Quarter 2022 Conference Call. All participants will be listen-only mode. [Operator Instructions]. Please note this event is being recorded. I would now like to turn the conference over to Gary Farber of Clearview Advisors. ahead. go Please

Gary Farber

refer and accompanying operator, 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

could annual other XX-K You refer announcements of on to and filings recent Standex' for as report well factors. detailed list most risk as public a Form SEC

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

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

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

David Dunbar

welcome fiscal and call. conference our quarter you, to morning, fourth XXXX Good Gary. Thank

execution, has combined which quarter operational financial strengthened highly record The XXXX. positions and pleased of are transformation Standex, fourth very strong market our with concluded delivered significant We performance, a results. with solid fiscal successful our

of entering support. new our are We our and pipeline initiatives productivity and Directors momentum. active dedication further Board employees, on to our the opportunities to business continued their want for thank I an fiscal XXXX executives and of with build

vehicles, company-wide reported operating we four our price We productivity actions. organic executed adjusted at Food and year-on-year. to Revenue in green $XX from increased such to and energy equipment contribution markets recovered end in energy, realization five as revenue XX% strong, electric levels. the reported successfully XX.X% increase pre-COVID Now if The messages. consolidated perspective, fiscal margin attractive businesses strength X, and turn our basis XX.X% fourth a each quarter and is in adjusted fifth segments to of XXXX From Slide margin can record operating year-on-year margin. of represented the Consolidated sequentially X everyone Standex' key point our XXXX despite consecutive quarter with of COVID-XX profiles our reading the impact through was growth segments margin remain XX% least space aviation, results. fourth renewable sales increases. high-growth while increase as margin a operating XXXX point XX quarter in business fiscal XXXX in XX commercial company markets improvement basis Electric defense adjusted approximately a growth as of China. lockdown of of high-quality sales vehicles, business and year-on-year reported of and fiscal commercialization Service fiscal has million

years have as pursued segment $XXX million revenue Electronics we significant Both fiscal sales past more market opportunities. five over than record XXXX. income segment operating milestone of with aggressively doubled the a in Our new achieved and have

has Another XXXX. than more $XX record milestone reached of is since with our by revenue Scientific which segment, doubled million,

year our progressing is grew backlog last remain pilot design quarter. under Ordering for we announced plant energy with with and trends one activities project process ENEL solar healthy, Our well realizable the in leveraging fiscal $XXX active events, business G&A excellence standardization and we including disciplines to calendar, further an million. across our XX% of units XXXX, operating lean In continued of operational ongoing structure. have

continued portion and reducing financial position capital increased client operating our materials to same chain products performance, we is detail allocation in where the In XXXX, Ademir metrics. but We quarter continue we be later region but base sourcing revenue implement in and where to strategic are applicable, supply quarter discuss year-on-year. financial sourced similar in a call. are of fiscal the actions first XXXX, expect fourth and will to fiscal our greater significant manufactured, XXXX, improvement issues. expect in fiscal In margin liquidity

realizable backlog the supported approximately million increase of by year-on-year. XX% approximately $XXX year fiscal Our XXXX, outlook in representing under at one is of end

Now please electric vehicles. segment performance I Electronics. and discuss energy decreased revenue will and X% turn End-market favorable, our renewable trends to of with beginning $XX particularly remain and begin to year-on-year. outlook, million for Slide Segment X,

margin the productivity XX.X% of in expected, a sales represented impact and XXXX fourth lockdown quarter. the as actions. point realization year-on-year, price the COVID-XX in increase approximately XX fiscal However, in primarily China to $X impacted by basis of operating due quarter Adjusted million

opportunities infrastructure vehicles. year XXXX, year-on-year. on Slide pictures increase with Electronics for NBO delivering growth focus The on highlights segment's X sales first such as and XX% $XX remained business a electric New strong charging markets the grid fiscal million systems in

positive 'XX moderate sales, to which of continued recovery fiscal quarter end-market in increase deferred and first to we outlook, a some sequentially, in China. expect lockdown the revenue demand were due our Regarding due

X.X% organic tools, slight Revenue product the sequential by We sales in of margin Engraving announced partially efficiency to operating fiscal including XX X% of for sales increase, expertise Engraving's in positive to in picture markets, year-on-year previously actions. trim tool points goggles. basis in initiatives, million exchange approximately a and Slide of reality the due partner offset increase virtual productivity discussion Please of to turn end X soft a million, margin X sales changes. quarter on non-auto this finishing. fourth and Slide case, X.X% Operating to mix. laser illustrates segment. solution approach expect increased from and also engraving The growth in due applicability the progress impact on year-on-year one cost-savings a broad X% XX.X% with including to rate million technological Laneways growth the our headwind grew XXXX $XX year-on-year, $X trends increased of and $XX and

fiscal customers a comprehensive to reducing days, Our customers us in put offers sole texture physical quickly concepts we sequential to due project Standex front operating an Turn by particular, on interior the work trim well project textures. patterns, surfaces digital a to as greatly slight in In to a improvements. physical our decrease basis. next turns quarter, with prototyping approach enabling in In production continued Slide to into segment. few margin X, a sample matter of due mix, times. and expect in opportunity Scientific design, prototyping to as expect from revenue growth higher-quality In a project proprietary timing of our also auto XXXX, move soft offset demand, we rapid reflecting their global manufacturers' fiscal supplier operational partially lead as increasing to

basis due academic clinical in Operating year-on-year million. demand X% vaccine markets with As pharmaceutical, lower expected, decreased the $XX Scientific as lower sales storage. such to This core to and COVID-XX associated volume. XX XX.X% offset points by institutions, reflected ongoing margin of decreased revenue laboratories year-on-year nearly

as on Scientific and capabilities, vaccine a and sequential designed at form the our bank latest such broadening basis highlighted is product including demand. 'XX, storage accelerating, quarter new first line product further X, for and and expect features with due that As Slide introductions families, clinical a COVID blood the In refrigeration new standards we can medical, facilities. patented of blood product operating pace research decrease and for slight of hospitals, margin fiscal lower the to plasma, revenue

volume million X% commercial Revenue Slide aviation markets. year-on-year, reflecting segment page XX% Turning and growth mix. was project energy Operating $XX similar Engineering margin to and increased in continued of the due Technologies year-on-year of end on X. growth to

increase Hydraulics. to turn basis at of Please growth markets volume backlog, timing, fiscal sales. our in second Slide represented On Specialty to price actions a engineering due and a margin XX.X%, XXX points reflecting to on a increase of volume as efficiency sequential convert pictured to project expected revenue begins In on moderate aircraft. quarter, to reflecting extended-leg create quarter increased the and Specialty due suitable has slight for impact in the expect forming significantly with Operating decrease realization the our of to decrease are volume backlog actions. the pushed Solutions basis, 'XX pricing to year-on-year spin nearly Solutions. next initiatives team a $XX application revenue we significant X, lipskin operating wide-body to further the in an operating capabilities As margin X, fiscal impact and impact decrease. process and million in healthy advanced XX% increase Slide of despite revenue margin of offsetting productivity mostly a end healthy to

detail. X, highly unit assortment wide on to a space. productivity we with have I new but merchandise of margin our unloading, less in expect now and pictured we to over including performance Slide This our due in of moderate product product flexibility merchandiser the a and some products quarter to in the loading sequential smaller end-market XXXX, features Ademir discuss call fiscal to the basis, be product initiatives. on schools a of improvement As first original key greater with easy sales, emphasizes revenue financial demand will pricing line. the and turn the In successful version operating expanded to version, milk to for similar

Ademir Sarcevic

David, and Thank good morning, everyone. you,

provide quarter from First, a results. will fiscal few fourth our takeaways XXXX I key and

operational fourth execution COVID-XX several reported year twice with performance of record quarter the the Shanghai demand We and the Adjusted from and X% with End-market the fiscal negative fiscal in operating fourth fourth ratio book-to-bill overall income continue improvement. exchange. growth the one. from of remain impact margin over both drive as successfully Standex XXXX ended the the and areas. to approximately trends an in foreign rate we in in lockdown revenue slightly the growth quarter quarter revenue despite pressure year-on-year increased healthy

margin. consecutive our reported also adjusted record consolidated We fifth quarter of operating

growth XXXX earnings of a increase the of operating growth adjusted initiatives. approximately income XX.X%, resulting XX% margin points in to company, consolidated Our on in strength history of the Fiscal continued year-on-year year-on-year. readout revenue and XX% price productivity our increased and operating basis volume XXX reflected highest

point return XX.X%. to increase XXX contributed to in Our basis on profitability capital invested a increased

We also position substantial generation our as to our added increased consistent financial cash and continued. flow a liquidity strength

in inorganic reflecting provides we and trends flexibility end-market our expanding and across XXXX an increased balance to range and well R&D active improvement summary, growth as fiscal fiscal substantial of pipeline strong In key new had financial positioned continued strong and are positive for of profile, in products. metrics XXXX, continued operating support sheet results organic opportunities as capital. well Our in investment

to Organic and XXXX growth quarter let's seemingly Year-on-year, fiscal X, growth increased segment. foreign segment our this On revenue perspective, from total $X in year-on-year. revenue compared COVID-XX approximately consolidated organic reflected XXXX. was China $XXX.X From by revenue Electronics to from a realization. partially Now and a Solutions Sensor X.X% exchange. Engraving of by sales Slide of the the fourth at $XXX.X in statement turn million the from Solutions, basis, year-on-year, quarter This of almost offset and lockdown a Technologies increased million summary. X.X% acquisition, X.X% price a impact contribution offset million between income fourth Engineering X.X% increased in impact was Specialty partially an volume split the segment sales

to his in the the reflecting basis Adjusted comments, sequentially, first begin of and growth portion points of in XXXX. increase actions. year-on-year represented recover quarter price basis indicated XX David sales points fourth an of operating in we fiscal sales XX.X% a of and expect to XX impact and our productivity the margin As of quarter

in in compared year to related year-on-year. to in earnings. tax rate geographic XX% the was year-on-year, basis between per XX%. the in first the rate our expected, slight fourth tax were we full tax primarily quarter increase the year increase earnings quarter fiscal in share or of expect due quarter XXXX a fiscal reflected approximately million fourth the in Sequentially, The As our of points Adjusted XXXX growth XXXX, fiscal rate to Please impact to free and of $X.XX XXX of XX% mix XXXX a fourth turn COVID-XX year flow. lockdown partially Net XX, decrease $X.XX cash quarter $XX.X $XX.X quarter XXXX, deferral operating XX% million cash the from compared of ago. the China. sales the activities a ago, to the Slide was with

a expenditures compared $X.X addition, In capital $XX.X were million, to year million ago.

million to As Standex of result, approximately XXXX, free a in fiscal flow in $XX.X compared of quarter generated flow fourth fiscal fourth free XXXX. $XX.X cash cash million quarter

of please with the remain sequentially a and and We approximately turn for which ended quarter, to of quarter year-on-year. and of $XX.X end XXXX the XX strong. liquidity debt capitalization Standex' $XXX structure, of fiscal million At Next, fiscal had compared of statistics Slide fourth both XXXX. summary at liquidity the increased net million million, Standex the of $XX.X end and the approximately the to million end $XX third available at

long-term primarily by we approximately Our of quarter. XX during net debt the $XX of as of approximately repaid end fiscal million, debt debt totaled at end of million $XXX at the $XX cash equivalents and subs $XXX.X held million XXXX Cash the maturing quarter. the consisted of million with fourth

$XXX our XXXX, subs program $XX in on fourth cash We with year million. $XX from total in foreign bringing to nearly fiscal our the execute repatriation and continue repatriated to quarter approximately three million million

repay and in to remaining we With shares for cash allocation, repurchased current XXX,XXX under million to approximately the to million million quarter $XX and in fiscal $XX million $XX capital XXXX. authorization. in expect We $XX between regards the

capital XXXX. declared quarterly $XX takeaways also last I for expenditures between high-growth We and to $X.XX the The includes over for to million $XX per deepen compared we fourth quarter expansion, our markets. In fiscal expect million, increased will of David approximately week key call approximately turn X.X% efforts additional to results. investment share, as year-on-year. we now actions million presence in our be productivity and in from growth year-on-year capacity increase our XXXX, capital cash fiscal dividend an $XX XXXnd

David Dunbar

can transformation record the you, everyone significant and to with company. Ademir. few please past solid is If key Slide driving years, performance a of takeaways. of discussion Standex turn XX over The the substantial across for execution, growth Thank combined

improvement continued FY expect in in We financial 'XX. metrics

further as and Our sustainable portfolio such vehicles aligned and to commercialization global energy, electric markets profile. with trends space, our and emerging expertise in growth adding end is also favorably renewable of

sourcing very consistent cash inflation our on for offsetting active generation, organic environment. growth productivity, We'll strong funnel now execute flexibility A active Our initiatives challenging questions. of opportunities. provides are to supporting our and inorganic and chain substantial cornerstone line pipeline and price strategic supply our is sheet the growth open realization strategy and flow financial of balance which the

Operator

Thank you.

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

Christopher Moore

few morning good guys. questions. Thanks a for Hey, taking

David Dunbar

Good morning.

Christopher Moore

obviously So key been a Electronics driver.

that profit of right, versus XX% are 'XX. Do numbers to think continue? like I represented trend something XX% in fiscal 'XX expect you operating

David Dunbar

we Yes, do.

income the more serve five of the we mentioned things One in that in market. just Their a doubled than last years, increased. They this operating has great sales. has business

a EVs increase lot CapEx to to serve business renewables. of expand have and We the And in good markets. the growing that a position in capacity is these

we absolutely, yes, do. So

Christopher Moore

of in it. of fiscal perspective? right. terms you cadence don't earnings Got from any guidance, the All thoughts of give quarters Obviously, but in kind revenue 'XX and both

Ademir Sarcevic

similar a segment. the timing give the do be Engineering year-on-year. We project in view sequentially but in kind There's of on QX And a a we to Ademir. of and side It's to Chris. 'XX, that view quarter, FY affecting of quarter. Technologies up that's bit us negative on fiscal that's our Yes, QX last

On Electronics. the side, to in growth positive going get we're

So similar. QX expect QX, into as And we as to we view sequentially revenue margins. QX, be as operating both QX, then well get we

David Dunbar

businesses. almost are this another And out last add that I some coming released are year, coming would as products the out new in we've all got thing some year.

electronics. capacity online course the the have coming year We new of in for

progressive So will through our that expectation the year. growth is drive

Christopher Moore

areas 'XX? kind big it. growth of more achieving of and financial picture. for longer-term trends targets talk on in progress on the just Can the some more the And Got key specifics maybe about you the then

David Dunbar

digit. Yes. at those free ROIC it was in mid-single EBITDA We five months good at about to our We that it long-term -- ago, we're XX very targets. XX%, get February about with back we -- XX%. We get flow I our sales we'd where grow target would years so think three above cash feel was said to XXX%, 'XX, we

our year growth. So quarter last sales, was this this sales organic last -- XX%

We at of we're last We get 'XX to year number. finished that XX%. XX%. So XX.X%. at to finished EBITDA ahead this

I'd that track we're one. So on say on

last flow, one. XXX%. we that X%. year, This zone XX%. year, cash we the In finished finished we XX%. free at were on This year, the ROIC, Our in just last We're year, over

one. on So of that track we're ahead

So months. track, in -- we're on to XX hit and is XX think to those target we last hit the we next there I EBITDA guess, the at

Christopher Moore

for I one it. Last Got Yes. me. appreciate that.

can you thoughts us with terms project in other of any ENEL? that Just the share solar with

David Dunbar

a that deliver -- is bring prove or ability we quiet out of that industrialize in we're us expected year we period pilot we're both plant Yes, ourselves performance do this to to production. satisfied year -- ramp we're building up technologies the the of Between ENEL, this have here in to the benefit. the a somewhat and

designing kind and processes, we're get manufacturing the process now next year. So of production probably equipment. We're sometime low-volume we fine-tuning should into

information will as be we'll But continue advance, we We to about on share progress. good quiet. it very feel it. our somewhat So

We with for priority and increasingly exciting high relationship us. have close for ENEL. a a It's very them

Christopher Moore

it. it it Got I'll leave there. guys. Appreciate

Operator

The Please ahead. Howe from next Research. from Barrington comes question Chris go

Christopher Howe

David Ademir. morning Good and

David Dunbar

morning. Hey Chris. Good

Ademir Sarcevic

morning. Good

Christopher Howe

about on different as the of business 'XX. in how or I its that about to Hey, Engraving soft translate lines the benefit you overall in that would trim to I growth consider focus anticipate the continued Engraving here talked growth segment. Can we wanted business to first you fiscal business? aggregate talk for

David Dunbar

Engineering an GS soft back and that advantage a pandemic in of of of the textures in Then We our slowed bit. a kind have more have business business, We the in the and in increasingly that the couple OEMs -- year they higher-end on vehicles. the trim. dollars facility. we hit the focused pilot improving But in course more they years, we you whereas vehicles trim. XXXX, on more kind in you're And finding and few had if and of gives downturn, soft in a in trim auto quality did in soft down them time Portugal surfaces lead acquired the little were process vehicles, soft million interiors. a last mid-tier years, of trim become the past cost go a Well, we had only

Slush result on soft in detail, slush So to saw grow year, this molding European the the And a too want even I don't -- business European past year been now for in based targets. OEMs, our get process, ESG be we've a our efficient into called meet is getting them OEMs maybe which last more could inquiries is we in that. backlog European a very GS energy-intensive about as process. from And this energy trim doubled more the is process but more of molding. much their year, helping applied and and

we're that coming little the may more So this in business. we year optimistic a Europe in growth in see opportunity

relatively dollars, exploring in grow now So growing portfolio, in in is that millions we're business, although primarily to it's Asia, opportunity double-digits, Europe. of it's small our mid-teens this but

gives that a you for hope framework I So it.

Christopher Howe

Yes.

Okay. Helpful. I to guess Engraving. shifting question on another here

think I mentioned there that You was outlook impacts project quarter. that the 'XX first your QX in timing

the Engineering about in same QX So second Technologies, segment reverse? from as to kind outlook you in of we of Engraving think kind the your quarter quarter the recovery first for the expect would

David Dunbar

We do, Chris.

a while. the business for followed You

know Europe a the they slip tool we from to is business loaded be we us and shop. somewhat tool America can one always to in for know in shipped tools. shop our because But the these shops easily what Engraving was with quarter the to So tool do are when next. quarter-to-quarter the project And from from will projects forecast don't difficult from

in in show will shops tools tools we up now, We from those up. there based on But show schedule have a the think of are texturizing. those for QX. described a those bit be we going we decline to think toolmakers So our will as our

back we in they QX. think come So

Christopher Howe

the pricing of sheet an And update? us back robust. look as still pipeline opportunity. I'll look there Okay. could in area others. can next what characterize this just And business? to one for M&A area and yes, then But queue balance maybe does and remains the months? for in Perfect. as of be and can what you like the more healthy you're guess, in Your XX we you seeing then and uncertain an active ask I somewhat in you kind Or We're far hop this strategic the environment. give as

David Dunbar

Yes.

part the of deals we process. So a of kind do are not formal often

lot to markets plans And the do relationships deals more long-term and have with We of those of play. timing personal with of participate has the the companies where the in we that the owners founders. a

businesses still this actionable are So our some out includes there quarters there could that that, be the like and in coming funnel in year.

working did expand of we few our or acquisition. more a $XXX Now sales million include could start pipeline that in, businesses in years ago, to more say, bring to an

those, function with of there a general a bit have seen as we number of Now a world. just the out are that M&A of deals in slowdown the

However, pipelines. in we our remain working active

trip core a involved. long-term there's Sometimes

So and They we're we're that close out. these interested. these may staying to businesses larger know owners come

if of if you and acquisition as over just assumption our into to kind project and of at the expectation think and you that's be few as annual back probably that take average step years back safe would the last think your look M&A Standex, activity what I were an ever. future, So

Christopher Howe

for my Thanks right. All questions. taking

David Dunbar

Thank you, Chris.

Operator

to [Operator Dunbar turn This over for question-and-answer in queue. Instructions]. like conference more our are There David the concludes questions remarks. any back the no to session. closing I'd

David Dunbar

look forward I enjoy with first again fiscal All call. our in us support everybody for quarter again, for for to you the want finally, progress our and employees I to We your XXXX thank We reporting right. and Standex. our shareholders speaking want to on thank contributions. continued joining at And call.

Operator

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

disconnect. now You may

Standex International (SXI) 7 Aug 222022 Q4 Earnings call transcript