Standex International Corp Q1 2025 Earnings Call Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Christopher Moore - CJS Securities - Analyst : Good morning, guys. Congratulations. It looks like a lot of work went into this one for sure. Absolutely, just in terms of a reasonable expectation for organic growth for, for 2025. I know things are kind of stabilizing Q2 and, and, and pick up, are you expecting organic growth to be slightly positive for the year or just how should we look at that?

Question: Christopher Moore - CJS Securities - Analyst : Yeah, it does. I appreciate that. So, in terms of the acquisition, can you talk a little bit more? What does it mean to be sister companies? Is there a lot of overlap between what they do? Is most of production happening out of one facility? I'm just trying to understand how that looks. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. OCTOBER 30, 2024 / 12:30PM, SXI.N - Q1 2025 Standex International Corp Earnings Call

Question: Christopher Moore - CJS Securities - Analyst : Got it. That's helpful. So, you talked about growth over the last three years, 30%. A couple of things there. Is that a reasonable target for this business for the next 3 to 5 years or? Just any thoughts there?

Question: Christopher Moore - CJS Securities - Analyst : Got it. That's helpful. Obviously, data center is a hot term these days. The $100 million revenue is half of that data center, is just a piece of it, and that's the fast-growing piece or just trying to understand kind of the end market splits a little bit.

Question: Christopher Moore - CJS Securities - Analyst : That's awesome. A lot of fast-growing markets here. I will jump back in line. I really appreciate it guys. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. OCTOBER 30, 2024 / 12:30PM, SXI.N - Q1 2025 Standex International Corp Earnings Call

Question: Michael Legg - The Benchmark Company, LLC - Analyst : Thanks. Good morning. Congrats on the acquisition. Just want to follow up on Chris' s questions there. So, just on the growth of the 30% growth that they historically had for the acquisitions. I thought I heard you say on the conference call that by joining Standex could accelerate the growth. But then you just answer that we should be modelling the growth. Can you just explain that please?

Question: Michael Legg - The Benchmark Company, LLC - Analyst : Okay, great. And then just on the customer, is there any major customer, any key customer concentration?

Question: Michael Legg - The Benchmark Company, LLC - Analyst : Okay, great. And then just on the EBITA margin there is obviously very strong. Usually when acquisitions, you get some leverage, is there opportunity to even increase that EBITA ahead of where it is for this business?

Question: Michael Legg - The Benchmark Company, LLC - Analyst : Okay, and then just last question, the pipeline is a little lighter than it's been, but your book to bill was extremely strong. Can you just comment on that a little bit more?

Question: Michael Legg - The Benchmark Company, LLC - Analyst : Yeah.

Question: Michael Legg - The Benchmark Company, LLC - Analyst : Okay, great. Thanks guys. Congrats on the acquisition.

Question: Michael Shlisky - D.A. Davidson & Companies - Analyst : Good morning. Thanks for taking my questions. Looking at the acquired entities, the $100 million of revenue with 4% income margins, it's hard to argue with those numbers, but I do have to ask. Do you see any synergies close deal that we should be kind of a model here?

Question: Michael Shlisky - D.A. Davidson & Companies - Analyst : Okay. This may be in some kind of filing. There's a lot being fired this morning. If I missed it, I apologize. The shares that are being issued as part of the deal is that priced as of yesterday's closing price for Standex or I'm not sure what to assume there.

Question: Michael Shlisky - D.A. Davidson & Companies - Analyst : Okay, great. Then just send this to the ongoing businesses. I want to ask about the engraving margins, they were up, I don't know, 4, maybe 5 points from the prior quarter. And I don't recall you being quite that bullish on the margins for engraving and with sales being down. It's even more surprising to see that, a quarter from the previous quarter. What's the story there? Was there a mix in the first quarter here? and what you're seeing right now? Does it make sense to step away from any customers if they're not providing the appropriate returns on your event?

Question: Michael Shlisky - D.A. Davidson & Companies - Analyst : Okay. All right. I appreciate the answers. I'll pass it along.

Question: Gary Prestopino - Barrington Research Associates, Inc. - Analyst : Yeah, good morning. Well, several questions here. First of all, can you consolidate this immediately or do you have to wait until you get this India regulatory approval?

Question: Gary Prestopino - Barrington Research Associates, Inc. - Analyst : Okay.

Question: Gary Prestopino - Barrington Research Associates, Inc. - Analyst : 55%

Question: Gary Prestopino - Barrington Research Associates, Inc. - Analyst : That the rest of Asia is there, particularly with their Indian operations. Is their functional currency over there? The Rupee or are they, how are they billing? I mean, are we going to have, FX risk here regarding the Rupee? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. OCTOBER 30, 2024 / 12:30PM, SXI.N - Q1 2025 Standex International Corp Earnings Call

Question: Gary Prestopino - Barrington Research Associates, Inc. - Analyst : Well, now, I'm just trying to understand. When this entity was a separate entity, how are they billing? Are they billing in INR? And then you have to convert that back into dollars once the billing is done.

Question: Gary Prestopino - Barrington Research Associates, Inc. - Analyst : Okay, that's fine. Thank you. And then did you say this opens up a $200 billion market for you? I was trying to write it.

Question: Gary Prestopino - Barrington Research Associates, Inc. - Analyst : $2 billion Okay.

Question: Gary Prestopino - Barrington Research Associates, Inc. - Analyst : You wish it was (inaudible)

Question: Gary Prestopino - Barrington Research Associates, Inc. - Analyst : Okay? Do they is their business? You said it's custom solutions? So, they're working with whatever entity needs their products. Is the initial step based on an RFP to bid on the business or it doesn't involve an RFP. It involves direct contact between.

Question: Gary Prestopino - Barrington Research Associates, Inc. - Analyst : Okay. That's good. Great. And then just lastly and I'll drop off. It looks like if you use the stock portion of both of the consideration for both. I'm sorry, the cash for both, acquisitions, it looks like about $400 million of cash which I assume that that's going to be borrowings or the majority of it. What kind of are you paying right now on those borrowings?

Question: Gary Prestopino - Barrington Research Associates, Inc. - Analyst : Okay, thank you.

Question: Ross Sparenblek - William Blair & Company - Analyst : Hey, good morning, guys.

Question: Ross Sparenblek - William Blair & Company - Analyst : Hey, I just like to get a sense of the genesis of how these two acquisitions came in the fold. I mean, were they sourced, were you talking to them for several years here? I never really got the sense that this opportunity existed.

Question: Ross Sparenblek - William Blair & Company - Analyst : Yeah. So, do you, did they reach out to you guys, or did you just stumbled across it and wanted to see if they wanted to partner?

Question: Ross Sparenblek - William Blair & Company - Analyst : Yeah, absolutely. And congrats to Chris on that. Hopefully, you guys remember that bonus time. Thinking about kind of the competitive landscape, $2 billion (inaudible) looks like 5% market share globally. Why do they have a right to win? Is it the customized aspect higher into the market? Well, what is truly unique about these two companies? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. OCTOBER 30, 2024 / 12:30PM, SXI.N - Q1 2025 Standex International Corp Earnings Call

Question: Ross Sparenblek - William Blair & Company - Analyst : Okay. You guys are the number one globally. Do you have a sense of this is a couple other larger competitors out there?

Question: Ross Sparenblek - William Blair & Company - Analyst : Yeah, that's very helpful. Quickly electronics. Can you maybe just update us on how orders move through the quarter on like a monthly basis? I'm just trying to gauge the confidence for the second half recovery. We take out the $11 million of new products. It looks like first quarter revenue overall, we're down about 15%. It is difficult to just try to assess where we are in the overall macro cycle versus maybe anything that's maybe idiosyncratic like potential share losses on certain product lines that we should be aware of.

Question: Ross Sparenblek - William Blair & Company - Analyst : Yeah, I definitely imagine that the distribution channel is pretty balanced at this point, if not a little stuff.

Question: Ross Sparenblek - William Blair & Company - Analyst : Okay. Maybe just one last one. So, I'm on the tail end here, productivity versus mix for electronic margins in the quarter. And I know you guys have done some great cost out. There's a division over there that's finding a broader project funnel for you guys. But how should we just think about the legacy business going forward?

Question: Ross Sparenblek - William Blair & Company - Analyst : Acquisitions. Yeah.

Question: Ross Sparenblek - William Blair & Company - Analyst : Yeah, getting back to kind of that mid-20 range though, do you have a sense of the timeline there? You've done a lot so far, right?

Question: Ross Sparenblek - William Blair & Company - Analyst : So, thanks for the time gentlemen, and congrats again.

Question: Ross Sparenblek - William Blair & Company - Analyst : Thanks.