Earnings call transcript Q3 2023

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Operator

Good day, and welcome to the Standex International Fiscal Third Quarter Results Call. [Operator Instructions]

Please note, this event is being recorded. I would now like to turn the conference over to Chris Howe, Director of Investor Relations. Please go ahead.

Chris Howe

good and operator, you, morning. Thank

to the Please be website management's statement refer can accompanying on note at Slide the Please company's that found the Investor remarks of Harbor presentation Relations X. Safe Standex's www.standex.com. on portion

will statements. differ that forward-looking could conference call and statements cause uncertainties materially. that are subject actual on include Matters discuss today's to estimates, predictions, management expectations and results Standex These other to risks

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

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

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

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

David Dunbar

call. our fiscal welcome Thank you, quarter third to Chris. XXXX Good and conference morning,

very are the pleased We with results.

fast-growth Sales operating record to of trend our accelerate. margin. markets into continue continued We

the I application support. expand of pursuits Board and our developments want Directors and continue executives product businesses. to New their thank dedication for our to continued employees, our and across new

segments exhibited Slide as can of organic everyone business turn to growth year-on-year revenue We X, X organic our X.X% messages. revenue growth. X if key Now reported

prior $XX growth end continues in grow growth fiscal to XXXX revenue X of organic quarter. Overall, year X XX% year anticipate year the sales improve fast in fiscal to XX% to profile this long-term revenue as approximately into million. million business we in $XX stream growth approximately our by anticipate Our XXXX from markets from grew segments. to We

actions a year-on-year. of Profitability was operating segments level levels. increase set record continues quarter, or effectiveness at eighth Standex's our record near record continued our our our expanded X maintained with XX.X% Consolidated XX% margin. margin reported X operating productivity and business margin XXX point third basis of operating year-on-year. segment delivering margin quarter fiscal XX.X% greater margin. Solutions X margin price representing our quarter The XXXX X adjusted consecutive Specialty in of last of of segments adjusted

see improvement ratio the an debt-to-EBITDA quarter, basis which to free pleased QX FY and ROIC, of through the at million continued cash in our annualized our With of are $XX.X is now invest to Ademir flow allocation This greater leaves $XXX our in detail acquisition in funnel liquidity approximately now million liquidity our performance, available organic in capital later opportunities. and and growth call. at financial X. position us in is net We XX% Procon divestiture focus the healthy of on 'XX. of will

the similar In impact with revenue sales on sequential of we fiscal quarter XXXX divestiture. expect the fourth basis, Procon a organic offsetting growth

pricing the offset and operating XXXX. by significant to fiscal year-on-year higher initiatives. to slightly single-digit organic continued adjusted third operating Procon mid- productivity improvement, On adjusted realization growth, we compared by expect similar margin margin and divestiture to high a driven expect basis, We quarter of

capital greater include of income. year of than $X greater XXXX. adjusted growth billion on XX%, in outlook greater net to long-term high our financial sales, margin free XXX% by invested approximately cash than single-digit at flow reaffirm conversion fiscal than These GAAP operating We targets XX%, and organic return

markets. X: growth Let's Slide Fast to end turn

end Here, voltages, are energy to we role isolation to growth highlight market, efficient fast play growth relays, across how In end high Standex. able enable markets and our our a withstand solar switching. and they which driving critical safe in the inverters renewable are

vehicle properties Moving voltage applications. circuits. to electric are of in The withstand relays our reed to safety batteries high physical designed

increased Here, vehicles we vehicles. electric combustion anticipate to on content engine traditional benefit versus from

costs. highly In manufacturing trim soft and reduces efficient our soft improves trim, productivity tool maintenance

space, solution tank of supplier commercialization fuel leading the launch of we For a vehicles. domes for are

zero-emission like capability Our projects us forming spin next-generation and prototype aircraft. development exciting the differentiated has allowed new to enter

Defense. to Shifting

New such for for new tactical magnetic defense missile hypersonic, and interceptor hardware demand needs are power our solutions custom driving management as critical programs.

discuss turn I our to performance over financial call now detail. greater the Ademir to in will

Ademir Sarcevic

David, morning, and everyone. you, Thank good

to total revenue exchange. and growth of organic turn X.X% decreased foreign quarter Slide consolidated XXXX from Let's from $XXX.X by summary. On X, divestiture million. impact X.X% a the revenue a Procon third impact to year-on-year X.X% This reflected basis, offset X.X%,

operating adjusted increased the XXX quarter. XXXX margin quarter adjusted our history to points Third XX.X%, basis year-on-year company from matching operating highest prior margin in

quarter income compared a operating the activities in per $X.X ago, X.X% ago. year revenue Our to consolidated grew to year $X.X operating approximately $X.XX Capital ago. million, decrease in X% third of year-on-year. quarter compared $X.XX on share, million a Net adjusted earnings to million X% cash growth year XXXX a million $XX.X fiscal XXXX, $XX.X third provided approximately year-on-year. of Adjusted was a of expenditures by the compared

compared was $XX.X flow XXXX approximately ago. cash in result, year million cash quarter free a As $X.X fiscal a million third of to free flow

pipeline increased of in inorganic growth support capital. and Our and well R&D investment balance sheet continues an substantial as to to opportunities as organic provide active flexibility

to as electronics. Slide segment X.X% impact beginning our Segment decreased offset and will a X, of X.X% more I X.X% negative exchange. to discuss performance from turn outlook, and was million with an please of begin increase Now $XX.X revenue organic by foreign than year-on-year

China remain Europe robust. and has demand a From standpoint, was market to slower markets been in distribution North management, EV-related recover. strong, Although appliances renewable and softness markets America power remains, end regional and while energy demand

Adjusted lower quarter and product to slow sales by growth and segment, this fourth period operating fiscal China in Europe in market recovery in the decreased markets, productivity XX.X% margin increased offset year-on-year offsetting our fast-growth unfavorable in expect initiatives. quarter organic sales versus price points a margin due On XXXX year versus similar China improved we we to as Sequentially, ago. and primarily double-digit XXX and fiscal operating due a third of basis in and revenue a ago Europe. conditions in the basis, expect year mix, mostly

engraving for in and In next finishing. XXXX lower trends $XX.X as to positive for primarily exchange. a by by laser storage. offset to Engraving XX more our higher Please flat fiscal relatively the to trim million, growth discussion of turn points operating revenue a revenue $XX.X segments. sales vaccine X.X% demand Scientific decreased offset was mix. continues similar organic X.X% COVID-XX of fiscal Operating margin headwind on remained margin. higher of driven million and expect soft and sequential end markets, tool third see and unfavorable research year-on-year from basis The regional Slide a Engraving basis, academic than the X in we decreased Scientific to revenue at slightly tools, due X.X% quarter, segment to XX.X% in quarter foreign by

of Operating and and sequential a price freight we quarter lower margin productivity costs. basis, initiatives year-on-year On fiscal and of expect higher operating XX.X% increased to fourth similar XXX in margin. slightly basis XXXX, due points revenue

units. vaccine that favorable demand storage our behind the surge comparison more as expect our COVID-related quarters year-on-year become are for We will we upcoming in now fully

Technologies Now moderate of operating basis basis, XX% to quarter new timing, to favorable due partially increase end segments. on development. revenue initiatives XX.X% productivity increased and fiscal Operating Technologies timing points markets. I'll Space of year-on-year turn Slide year-on-year, Aviation $XX.X XXX lower expect Engineering Solutions for decreased In volume. we in revenue million product margin revenue and discussion a in offset more higher volume and offset sequential price reflecting to margin lower Engineering XXXX, of X project a as the by due fourth and Specialty from project a

Hydraulics reflecting million XX.X% the $XX.X Solutions sales Hydraulics higher and ago, Merchandising in Operating by business. year Specialty strong Display the margin the an business, in in organic from divestiture. increased the year-on-year, Merchandising a to and Procon offset business flat growth in remained initiatives driven business significantly of by organic XX.X% decline realization revenue productivity Display the of

Operating fourth the primarily on significantly In quarter fiscal a we to due expected and lower. business. is be expect lower of to sequential divestiture margin moderately decrease the basis, Merchandising XXXX, revenue Display Procon to sales in slightly the to

end prior liquidity, of debt Standex to fiscal please cash third structure, net an at compared X of at $XXX Standex Next, million $XX.X for million liquidity from of $XX $X year. net remains the $XX of XXXX fiscal of debt with quarter and At the and Standex's of million net Slide approximately million a XXXX the XXXX. the available third end ended end quarter, strong. the of capitalization turn summary million which increase quarter of the to statistics third of fiscal had

for third remaining XXXX repurchased was XX,XXX $XXX.X authorization. Standex's long-term allocation, With and $X $XX.X repurchase debt quarter equivalents the Cash third cash million and we end capital shares the quarter is million. in totaled at of approximately to fiscal regards current million. under million the $XXX.X

be XXXX, and approximately expect million $XX between we dividend per and million In million declared to quarterly to share also XXXth year-on-year. our compared cash We approximately of XXXX. expenditures fiscal $X.XX fiscal in increase $XX now $XX capital X.X%

David the our now third key call takeaways quarter to turn to will results. over on our I discuss

David Dunbar

Ademir. you, Thank

as company, fast driven markets. Standex is growth activity Please end Slide positioned within solid turn XX. demand operating to by an growth organic deliver to increased well our and

opportunities excited materialize are We seeing these expand. and about

from and presence, Our and to approach relationships customer challenges supply and provide regional chain productivity, disciplined protection inflation. pricing strong

As deliver sustainable, growth have to continued environment. we through this profitable a result,

internal us strong of balance and pipeline candidates. positions to an an opportunistic funnel Our inorganic sheet investments of active well on be active

open the line now questions. for We'll

Operator

begin now session. will question-and-answer the Instructions] [Operator We

Securities. question from from comes Moore CJS first Our Chris

Chris Moore

Maybe with we'll start electronics.

slightly. revenue talk like about the you visibility to is be So basically QX can the segment. will Backlog it year-over-year. down Maybe Electronics flat be -- on beyond just looks

David Dunbar

be a And I distribution to function a to, fast-growth markets, have like we going different channels, it's very And we a different channels. I more feel markets. less Well, the have the guess, growth in are continued channels. of We of those economy. general end visibility lot little we through good visibility go think different serve for we about

business. through But we very tend about cycle, feel this at strongly look the to this

good position We have a end strong growth prospects. good markets in and competitive

term Ademir. -- If shorter look it the over to you I'll in turn

Ademir Sarcevic

been feel we Yes, a Chris, that is the as David more soft, said, end and demand a general but more America about good our very, standpoint, has we It's I bit in than think economic market we feel the terms. up holding very we or Europe fast-growth offset can seeing and recovering. regional and are feel plans. -- the The very and -- still appliance general, markets goods white slowly strongly from China North we end the our softness some of is exposure,

optimistic. So we are

Chris Moore

Got there. it. leave Helpful. I'll it

positioning growth SST your fast those both of significant electric side, term? defense, and the more either said, magnetic On like vehicles, driver is a is a of function smart longer revenue That markets grid growth your products.

David Dunbar

You SST Magnetics? mean or

Chris Moore

Yes.

David Dunbar

that... Isn't

Chris Moore

Correct.

David Dunbar

markets, vehicles, the Yes, fast-growth drive We in for in tailwinds sales we But energy these drive renewable I think guess there's -- in they example. and it Defense, position SST. a -- each will electric will anticipate -- faster I got are great contributing into particular, equally Magnetics. behind

market fast-growth probably the see growth there. So I faster we'll group. in rates mean

Ademir Sarcevic

Chris, our where add, SST Xx combustion And that's to vehicles a content current a X if that's just Yes. scenario. we And good I the about very seeing at more if look position. in has replace vehicles, for you those can per business where example, than keep vehicles, vehicle combustion and electric as take

is in a market SST to position on capitalize So clearly trends. these good

Chris Moore

maybe little helpful. guys' of you M&A been last a more M&A. your Strategic bit a it. maybe the That's about Got just part history. big one, has obviously talk And can

long term? anything out say, characterize M&A how have ago? there looking certainly significant the at some you a the efforts Just there? currently, X. How And you versus, is Or at it's would net add-ons? just balance You are year sheet, debt it is

David Dunbar

acquisitions us. historically. deals Always don't own very We the at trends the owners X broader for important follow privately-owned those market. their play family-owned -- do sell own and in their different times M&A of or our reasons businesses. in X necessarily don't a And We for -- They're different markets. lot M&A those

such of pipeline active an have We now. companies

the long Some a term. of transition, long, We are some actionable feel be And in We ready there. a preferred could comes to over relationships positioned that well we time. them the build these when period time of owner as attractive near they're for companies. when we're

track are -- bring On into year actionable record especially the a of opportunities although bringing there's and these the just so, M&A acquisitions of pause. market. in we in fewer in Electronics near actionable broader in have More because building activity our funnel. the other broader in larger -- a term business, funnel, because the into confidence been has businesses to or last the hand, there's working M&A in of in market our And bit there less taken the our

Operator

Our next Legg question from comes Benchmark. from Michael

Michael Legg

on Congratulations a quarter, nice guys.

a to to ability wanted about today chain, then and in increase bit you the supply your wages, on on seeing pricing bit you're impact base seeing please? touch and Just the a costs. chain just little that, what talk on your supply your Can we're little related economic to hiring

David Dunbar

last statement. the team's it pandemic. spades varies material, bit very, umbrella their the pandemic. to can cost throughout they both see we've inputs, manage and business that how But inflation business feel the to years you materials, margins price just proved and a It in the We through the of about out. all, plays of our abilities expanded good by first supply X chain of our very cover Well,

eased In or the current now, for years. current supply it's impacting deliveries terms commitments. any our few have conditions, our of of businesses right issues chain And our not last in

Ademir Sarcevic

I to Yes, got add. nothing

Michael Legg

and And wages? on hiring

David Dunbar

Europe fill it we are hiring. here. pressure and in able a North are them We've especially company. to say delays to America. in We finding can't taken attract It's we I'd statement, good this quantify -- But -- No, We're good I seeing some and more positions, we But bring a longer seeing got story inflation wages. good on a little but and candidates candidates. in. are wage has

Michael Legg

one on just now last project? then update any ENEL, And question. that

David Dunbar

energy the is project solar ENEL, with Well, a great project. Yes. this our partner

improvements X We panels. developed together in do have solar last performance the technologies the we've year proven deliver of months that the the for

are industrialization. in model -- the models it's in I'd what to a working business project We're still a has We're with designing development. phase become also We on of is. participation right manufacturing the them determine processes. say little the

to little predict the So it's harder line. time a

to we it, So we're kind excited is still ago, communicate support maybe we and we'll year phases taking a thought maybe to longer the But put than we're as final project but of way from development we a make has about would lot of the We're this it. ENEL. continue of progress. in

Ademir Sarcevic

And just that from include Mike, the put of in if do I not contribution guidance can project. numbers add, we out any longer-term all of the terms there this

communicated. So contributing if numbers our be to on the factor of becomes when this that performance, top a we and will

Operator

Barrington [Operator from question Instructions] Gary next Research. Our Prestopino comes from

Gary Prestopino

A couple here. of questions

been is would was big operating a terms margin, that to due lift quarterly pricing on In of the of consecutive you're of adjusted there? Has productivity it point X think Yes, what I XXX year-over-year. I records side. the basis doing majority assume issue

of do than guess is fast-growth question margin operating the then higher markets I a those the the I other top with then layer on margin would sales, consolidated that company? profile the have And for

David Dunbar

Yes.

turn say really me Let I'll over multiple it Ademir. is to -- things. It

new margins you products go performing There If fast-growth the inflation. in well, than through. covering at done corporate productivity their much portfolio realizing years, And markets X is average. better. businesses all our programs are They've back the are price, are reading All the higher well. the

up as grows. So that in we mix margin

Ademir Sarcevic

think Yes. I mean right. I that's

fortunate we people productivity the the businesses robust of units track to we future. know very We see business businesses. are know who in for model, the initiatives customers, And pricing quarters our X units a have the Gary, it of and our well. across have operating of those all proud we and kind pretty where are run we'll And and markets, the are achievement very plays how of of accountable each consecutive and in

Gary Prestopino

markets much the higher is Could -- don't quantify public? margins you could is just make or it how that are something fast-growth you possible you that

David Dunbar

made haven't public. it We

you higher. Just They're answer how do that?

Gary Prestopino

Okay.

David Dunbar

if is you for -- gross it margin, margin -- X.X%? our Gross think what's side

Ademir Sarcevic

X.X%. its Yes,

David Dunbar

is that several basis fast-growth the X.X%. markets above by Gross hundred points. margin on

Ademir Sarcevic

Correct.

Gary Prestopino

Okay. That's not doing you're market, what just things delivery then of think like And very cars, EV also my off-road standard to things them? passenger doing refresh helpful. in standard the you're more correct? Are trucks, the vehicles, that last-mile lastly, both memory, you doing we EVs as are about

David Dunbar

of play, systems, at management of vehicle Most The our relays way the in where with operate in higher escalation The is the battery circuits Yes. vehicles for volume vehicles. up. think passenger and is those starting that to the we delivery especially pick have last-mile to voltages. applications safety volume

are operating All are efficiency. as more the and voltages off-road vehicles newer voltages well. So vehicles achieve to higher last-mile higher at vehicles the

Operator

our conference would This any David to question-and-answer turn closing for remarks. over Dunbar back the to concludes session. I like

David Dunbar

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

Operator

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

disconnect. now may You

Standex International (SXI) 5 May 232023 Q3 Earnings call transcript