Earnings call transcript Q4 2023

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Operator

Good day and welcome to the Standex International Fiscal Fourth Quarter 2023 Financial Results Teleconference. [Operator Instructions].

I would now like to turn the conference over to Christopher Howe, Director of Investor Relations. Please go ahead.

Christopher Howe

Thank you, operator, and good morning. presentation Relations remarks website portion the on be at that Investor the of note accompanying can management's found www.standex.com. Please the company's

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

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

onetime purchase like you taxes; to and which In to addition, include of earnings will is today's adjusted references EBIT I'd 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' Financial President On Dunbar; and call is

David Dunbar

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

year. record which completed very are the pleased We fiscal a with results,

of margin performance. We continued record operating our trend

results. to did drove their and sales of our continued XXXX On for thank Directors Board exceptional I into new employees, efforts like would fast-growth our as dedication support and markets the and that executives our the new top and applications. products fiscal accelerate, to line, continued

led everyone X, we both key messages. the In if Engraving by fourth Electronics X.X% growth. double-digit exhibited turn business which Now can and to year-on-year, Slide our reported quarter, growth organic revenue organic segments,

continues improve end markets year-on-year revenue anticipate by in fourth fast-growth Our the quarter grew stream as in to sales We XXXX. greater fiscal growth million $XX to fiscal this $XXX long-term over profile XX% to than million. XXXX year grow XX% to into

us record The price levels. Profitability record quarter and the effectiveness a with of consecutive margin of ninth Consolidated at point our in operating operating quarter combined adjusted year-on-year. continues fiscal helped fourth basis XXXX productivity adjusted of achieve continued lower XX.X% freight was actions, a cost, margin. increase XXX

XX% Our segment business than margin segments, Scientific our was greater stable largest segments margin. segment, X Engraving, reported had X approaching operating Solutions by Specialty margin driven XX% margin. and Electronics, relatively our our our while of Engraving expansion with

discuss in free million With and as flow was to net position capital allocation financial of liquidity million and opportunities. in XX invest cash available $XXX quarter, approximately of will funnel $XX.X performance, $XX.X detail position cash call. acquisition of our later We of had in million. our in growth our Ademir organic the the healthy greater June liquidity

XXX single-digit sales our pleased very high of expect year-on-year. in in also see we continued basis XXXX, ROIC. XXXX fiscal improvement fiscal ROIC to XX.X% are In improved growth. We points

on of XXXX, fast-growth continued of increased fiscal products contribution acceleration achieved ahead long-term our operating are in planned a These fiscal expect applications, also We continued based from and productivity our environment. XXXX, initiatives for improvements markets economic outlook. and more end new expectations margin stable expansion

by in strong China from slight a Minntronix increase Electronics to the XXXX, and Procon quarter markets impact revenue in recovery and year-on-year basis, growth in organic the offset helped slow a served we divestiture. contribution On first Engraving a as in of the fiscal and expect Europe

a On served timing Europe and acquisition project Engineering contribution the offsets expect a our Technologies Minntronix as by we Electronics. slightly unfavorable and revenue in in markets China from lower continued sequential basis, slow recovery

to expect compared to similar margins quarter slightly adjusted fourth higher fiscal XXXX. operating We

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

complementary announced are markets, cultural like from in this these attributes, are excited for our acquisition There competitive we their that has highlights Minntronix week attractive and team to an turn fit. acquired strategic we to Let's Minntronix defensible specific welcome and to end We a Minntronix. look we earlier Slide many and Standex. products, criteria X, acquisition. financial advantage of

these Let as an lighting Dakota, cable markets. speaking, within overview company. applications as XG, with and me in South designs and industrial control like broadly fast-growing home markets security of manufacturers and vehicles customized smart well fit electric and the grid begin and magnetics and in More XXXX automation. Founded Minntronix component end product components certain and for based fiber, products meters, smart standard industrial

was million. This implies XX approximately $XX a last the price transaction ended XXXX months approximately June X.Xx purchase EBITDA. multiple The of

achieve accretive ownership. on be full first share We return capital expect per the our double-digit earnings invested to acquisition a to in of year to and

for round-trip followed income sales operating ahead. Procon $XX Procon income ownership potential for acquisition effectively contributions with the as of X further of in sales by cash Minntronix divestiture the of $XX and and operating of years an replaced The upside represents Minntronix year million, million, in effective

customer for Minntronix cultural talent fit We resources in seamless engineering line, a complementary provide and participation highly product its end attractive for markets. were to that and attracted base its its and

welcome our as we we Standex team additional to anticipate that are value excited to opportunities integration, done the acquisitions. We discover during to with previous have create and will

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

Ademir Sarcevic

Thank everyone. you, morning, good David, and

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

to margin adjusted XXX basis highest increased operating in XXXX operating Fourth margin XX.X%, history. adjusted points year-on-year quarter company our

Our on year-on-year. grew adjusted income approximately revenue XX.X% consolidated increase a operating X.X%

share approximately to was in ago. a the quarter earnings year growth million million $X.X Adjusted in year compared year-on-year. Net compared fourth to $XX.X XX.X% expenditures activities of ago, were million a year per provided $X.XX operating $XX.X million XXXX fiscal were $X.XX $XX.X ago. quarter to fourth of Capital cash a the XXXX compared by

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

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

remains, Although and regions. and management, across softness in markets remain renewable automation, our markets in EV-related appliances Europe energy industrial and power China distribution end robust

operating offset contribution Europe. sales in inflation in higher points into Adjusted expect fiscal productivity XXXX fast-growth are by contribution basis year-on-year slow pricing initiatives R&D decreased and the partially fiscal higher and of a margin and by were XX% sales and the China as XXXX higher investments. more quarter Sequentially, in Minntronix higher continued as recovery from first fourth revenue from and slightly markets unfavorable we mix, quarter offset XXX than

reflecting on We a similar margin expect a basis, product sequential similar mix. operating

we any will year organic believe to rates run move barring rate As XXXX, we calendar Electronics reflect through economic disruptions. start on growth typical a more basis, unforeseen

in $XX.X headwind XX% was Scientific points XXXX a Asia. Please to sales exchange. Engraving due Engraving X.X% driven productivity increased XX.X% Slide Organic XXX the basis million as Operating in and was for XX.X% foreign by year-on-year to by of higher fiscal fourth of in from and in X strong turn revenue realization growth segments. Europe partially growth to a soft applications demand and trim increased of organic of growth quarter actions. margin discussion offset

fiscal In our a sequential customer higher quarter, operating basis, of timing next margin. revenue, we slightly expect lower and slightly reflecting projects on

we for continue to addition, opportunities long-term of profile Engraving. look enhance to the In margin

Germany, each will fiscal approximately site to Detroit projects customer within in realize X As of our starting We X in these of these XXXX. go have in fourth and fiscal site These projects and the we benefits of result utilization in improve anticipate service capacity with in the payback from to $X years. X which such, initiated in as geographies. we million area expected will restructuring costs consolidations XXXX consolidation quarter

storage. as lower sequential freight were expect for Scientific year-on-year end costs revenue million first revenue X.X% On of basis lower COVID-XX $XX.X margin actions. productivity academic similar XX.X% demand we and Operating margin. and higher decreased increased basis, quarter and sales realization to to fiscal vaccine offset of a due operating in into points research XXXX, by markets XXX

million basis a of mostly segments. the for Technologies Specialty development X an Operating X.X% increased Engineering discussion margin number year-on-year. by as points of year-on-year Slide revenue offset the turn Now Technologies projects XX decreased productivity and were platform to of in new $XX.X increase Engineering initiatives. Solutions of XX.X%

a a revenue, first reflecting we decrease basis, expect of fiscal significant XXXX, In timing quarter projects. on in customer sequential

a decrease mix of as margin a moderate projects. to initiatives of productivity expect slight higher development impact and decline We operating volume modestly in the offset

for in beyond. provide of development platform XXXX demand are and and the segment solid growth funnel half remain current this foundation second The to The new for the robust. long-term expected a fiscal backlog

Hydraulics Procon the forma Specialty partially were business organic revenue offset business. organic year-on-year Solutions pro divestiture in $X.X million X.X% Display the in basis, Procon, or revenue growth of XX.X% $XX.X excluding the decline million a On the decreased decreased Merchandising as year-on-year. and by

in quarter and Merchandising in of margin. a business, and XX.X% a significantly decrease operational first sales in slight pricing increased sales XX.X% Hydraulics XXXX, In a business. the higher by driven margin from and Display to improvements realization the on aftermarket basis, fiscal expect sequential year Operating revenue higher of ago operating we mix initiatives

Standex debt the million Cash liquidity, end At liquidity prior $XX Next, the million. XXXX X strong. ended totaled capitalization the of at which cash $XXX compared was cash million available $XX Standex' the fourth the turn Standex' the of of had fiscal $XXX.X of quarter, approximately equivalents debt quarter of of statistics end net $XXX.X net fiscal fourth remain XXXX summary million of and end quarter Standex million please long-term and for an fourth Slide with XXXX. increase year. from million. $XX of to structure, a fiscal to at

XX,XXX fourth for the approximately repurchased we shares allocation, capital $X to quarter. in million regards With

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

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

David Dunbar

markets. end XX. operating organic the growth activity to by our solid deliver position Slide We're demand opportunities. you, of is about within an Please Thank excited accelerating Ademir. these as a driven to fast-growth Standex strong turn in company and development

I'm our was team performance a for our and by fiscal proud growth our operational progress of the efforts. record execution that driven of continued by

adjusted achieved margin, milestones per free we include XXXX, cash operating that several fiscal For gross share record adjusted and margin, flow. earnings

XXXX, we expect fiscal In single-digit sales high growth.

fast-growth of our expect towards to continued of our also outlook. revenue markets margin million-plus We fast-growth anticipate XXXX. to We markets' target continue long-term $XXX by expansion ahead our fiscal progress

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

As a this sustainable confident through to environment. profitable we will are result, deliver we growth continue

inorganic Our strong balance investments us additional pursue to to strategy. our complementary sheet to allows continue

line for open now the will We questions.

Operator

Instructions]. [Operator

The Chris Moore with CJS Securities. comes first today from question

Christopher Moore

the is operating long over the Specialty XX.X%, that in low sustainable margin, -- in XXs term? Solutions the

David Dunbar

Absolutely.

the in our One some new Merchandising of right are XX% into heroes business. coming of from new They're the sales now new categories. getting product products. unsung company their Display is markets,

that have and with and year, the in the market investment so in fantastic sustainable business, had presence. And a products is of they coming new America. they've end-market North outlook because got And years the then new solid Hydraulics infrastructure a

Christopher Moore

about just cadence talking Maybe Got bit will fiscal to 'XX about helpful. it. that for you single-digit that year. get little the growth need Very talk to the you're high this a

Ademir Sarcevic

Yes. Chris, Ademir. it's

or acquisition the a kind high growth points the couple of assumes mid-single-digit kind behind on take get Procon inorganically benefits the Minntronix a that it. of to -- our organic of we're So the if sales and out single-digit corporation. growth That for the you from you going acquisition math net mid- to once basis of of Minntronix kind high

math next for are upcoming quarters. behind else end some resolved and do that part, end-market it. everything -- we and that's the But we Europe, healthy the we there. And that's bullish optimistic are softness and very our the remains going exposure the We most specifically in think to the markets. and For see of growth about China Electronics. seeing We get over healthy, over kind fast-growth see

Christopher Moore

you a loaded, the little Is growth back-half think? bit

David Dunbar

and is momentum have the more the on half a this back they have in Engineering coming year. year. shipments depends backlog of that. business. into visibility lot would to Technologies Engraving lead the to of solid We'll great It

are this we to in year. million in softness consumer the $XXX We the throughout, We're was some year. after last call -- year, in what there's appliances, will of start shipments quarter. that about will electronics growth markets, China $XX grow anticipating overlay fast Europe. million pick steady good-related And of seeing and up that's pretty then quarter which back and That half and this to fast-growth

second be little things -- there So if half. growth relatively it's those you will add up, in all a the more

Christopher Moore

sneak I'll Maybe in. more just it. Got one

in bit fit. of thoughts seeing nice You little update just market Minntronix and in deal. funnel Maybe the just terms closed the M&A you're looks a the your what there. like a It

David Dunbar

we kinds funnels Well, X have. Yes. there's of

We have businesses of there are businesses, privately a owned family-owned there. And Minntronix. out few like kind quite

We many them. have relationships of with

timing the owners Lew came business, in at a And predict The their I'm the I to President fact, decades. And reasons And hard Electronics sell -- earlier John mean known this our think said, year Lew known is Minntronix for ready." it their this has we've Lew "I and times. of opportunity, in because John, few months. called for together own own

quarters. few but in to that the So well there others. coming predict it's be are there And think still we actionable for are positioned hard the could timing, we a out

we're larger of although are category are deals, million of we the may in market quiet of That's they deals. processes acquisition. in year. a second that last be included know opportunities this appears owners. are there getting million few year been those second in bring those getting $XXX come. a ourselves come would It or in signs sales in to to We're And $XXX single when of a in putting the of we in the love terms The position relatively half to to

and funnel the robust So both low I'd good high it the a and on call end. end

Operator

comes The with Benchmark. next from question Michael Legg

Michael Legg

was a on growth quarter. the comment X.X% on much revenue little great related you of how pricing Can a bit to Congrats increases?

Ademir Sarcevic

pricing. is in -- X/X about more But X/X, general quarter, than will of we price. to Mike, probably kind of terms, depending to volume, is it say X/X X/X volume on the is

Michael Legg

all a everything would side? then weakness going And Great. Okay. is like What type of segments. it are seemed what perspective? from you for you pretty And seeing well the that opportunities see from

David Dunbar

weakness want comment... I Mike, the goods I to consumer in that and in the of Well, China. call if -- the towards and I'd The be don't end upside appliances tail would Europe year. weakness, will think I out We know,

Ademir Sarcevic

part, in for kind that's mean, and markets play plays the U.S., I of I most American end we end business No, the We than robust. the market more the Mike, weaknesses at see in that think, strength we for -- our in. North magnetics example, been

markets robust. end pretty Engraving are Our

markets it's overall good look -- we them. the kind the of as health about we globe at across feel pretty the kind of serve, that So of we

David Dunbar

-- mean, I know, guess a you different end of and would have as I add they we I businesses, -- markets. lot it's serve

in They're you at the seeing look inventory week stocking, part business. components. have reported softness. smaller that, destocking, too, pure-play If companies a especially our there's seeing more electronics they're -- last some that's some or that but so, seeing some of in We're

much. doesn't -- we're line the really effects seeing top it same as the So affect as But others.

with half for of I strong. all very it million I to going market this got is million. that. you ETG when Those fast-growth the mix the We're things Chris, confident healthy very backlog add mentioned think in up, from second a $XXX And makes we've earlier But end in $XX markets.

Michael Legg

Okay. quarter. on Great. the Congrats

David Dunbar

Thank Mike. Yes. you,

Ademir Sarcevic

you. Thank

Operator

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

Gary Prestopino

Ademir, to top said growth you is line? I for mid- your want just single-digit embedded guidance clarify, the to high in on XXXX organic

Ademir Sarcevic

Correct.

Gary Prestopino

right? currency, constant that's And Okay.

Ademir Sarcevic

Correct.

Gary Prestopino

talk can your you Minntronix their drive their growth products and Okay. how within about legacy And acquisition, itself? that within then increased business to with can business platform this and leverage you

David Dunbar

acquired those Renco, of the other business businesses. synergies our their channels. existing that sales from points years, few Well, in Agile, XX Northlake, last experience the products added offering come with to magnetics have that And our the sales about we've of is we've through each

businesses and -- accounts, And applications. our name although of today. our the couple other, the on based the experience next getting the over they of that But applications are years, business, from million all know we're dollars $X we'll so is those -- same synergies be Minntronix, adding also sales each to you if specific added few specific other can't I with of million the Electronics expectation accounts still million $X that from some and to

Gary Prestopino

mean, and things them, of or outside the that. selling No, do carry I that's North is the U.S., of U.S. understand business was you I can that one Minntronix outside the their America? of

David Dunbar

know they America, engineering model ours. secure America They have very in application do work sales expertise the design. they you have They -- the application in it's to and similar -- teams with and with the business a what,

the here Some the ship-to North But decision address is North in made China America. and actually in regions, America. China of and primarily in customer is other

-- we in into help Europe hypothesis customers we and some Asia get a in additional can them and customers is China. So

more reach have than We there. they do

Ademir Sarcevic

be to things extremely are help us. Yes. they'll help then as we'll to of kind and and able think companies, forward. of -- combination X a be move us, And them able able them. with we'll be And I the there that that's compete to get us Gary. attracted on, the customer whole right is their of we intimacy I strong, customer relationships to And mean Minntronix model one

Gary Prestopino

this you gentleman it, mean, was business a and And a running as just this ready that... and Is sell. just said said, family-run hunch. that then was I maybe -- that I'm I was to assume Okay. the

David Dunbar

thing. that of Yes, $XX replaced the during we from owned Procon same. businesses. business America. with earlier, more than our acquisition. We growth Yes, that's the some well $XX this At we positioned do call of interject sale did income yes. million the if other and operating And right. with also million profitability experience just And could sales some we're Procon the of had I privately point We one can based And in This on the the other with opportunity. a was businesses the the proceeds. make with improve we we'll point, think

example a Chris' classic is earlier been to I good ourselves what And of larger this a So we're acquisition. I some as has positioning for Standex mentioned think, opportunities. question,

Gary Prestopino

geographic But I lot a they guess, actually some the of wall terms a on in these beat getting just you're are here, if general, in smaller of to horse with a the presence, dead companies, see more these to but with competing spread bigger -- that bigger and... handwriting acquisitions, not of you're starting

David Dunbar

two... guess I Well, there's just

Gary Prestopino

Go ahead, I'm sorry.

David Dunbar

Yes.

First in of great reputation the all, have we market. a

family-owned these proud I the say there -- first larger like get would are other call. -- very reputation. So businesses of we're phone them. think we companies We other acquiring our companies companies

being It relationship. competitors, have this the interesting business. important. engineers the relationship on business OEMs Minntronix. And compete of creates thing intimacy is only a a terms we with long-term really In the is with about fringes, frankly, the customer really And Minntronix is magnetics that

applications time. We them have over some competed with on new

expertise. the what more relationships has capabilities. by is what has this characterized magnetics similar But who who market customer industry We some have -- and

of XG smart brings grid weren't we some in us -- So especially and so strong knowledge in design. applications Minntronix

So there. less issue of a competitive there's

they position some to a industry, smaller in statement getting they have with. they're that general, is on in to see they're in going your where going the these consolidation and choose However, who align businesses, family-owned true themselves

Operator

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

David Dunbar

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

Operator

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

now may disconnect. You

Standex International (SXI) 4 Aug 232023 Q4 Earnings call transcript