Standex International Corp Q4 2024 Earnings Call Transcript

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

Question: Michael Legg - The Benchmark Company, LLC - Analyst : Thanks. Good morning, everyone, and congratulations on another nice quarter. I wanted to kind of dig into a little bit on the new product development. Can you explain a little bit of the development phase alongside the customer and how you work with them to come up with the new products, whether the next-generation products or new products? And then as they work into the production cycle of the customer, the first year, you gave us 100 basis points improvement. But what does that really mean the second, third year as these things start to be rolled into it? And then just a follow-up on that would be you have 12 that you've mentioned for fiscal '25. What does the R&D pipeline look like longer term for new products? Thanks.

Question: Michael Legg - The Benchmark Company, LLC - Analyst : Year two and three, what -- first year, 100 basis points --

Question: Michael Legg - The Benchmark Company, LLC - Analyst : Great. And then just one other question. On your five-year target for '28 on those goals, historically, you've exceeded your previous long-term guidance over those time frames. With this new one, where would you say you are in comparison to making those numbers by '28 or earlier?

Question: Michael Legg - The Benchmark Company, LLC - Analyst : Congratulations on the quarter. Thanks.

Question: Chris Moore - CJS Securities, Inc. - Analyst : So it looks like you're expecting fiscal '25 to be more back-half loaded. Can you maybe just talk a little bit more about the visibility kind of surrounding the belief general markets will begin to improve? And really, are there specific segments or markets that you're thinking about? I think you talked a little bit of electronics and maybe on engraving, but just trying to understand which segments you're thinking are really more likely second-half loaded. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. AUGUST 02, 2024 / 12:30PM, SXI.N - Q4 2024 Standex International Corp Earnings Call

Question: Chris Moore - CJS Securities, Inc. - Analyst : Got it. I appreciate that. Conversely, are there any segments where growth is still going to be from where you sit today, a little bit more challenging, might be flattish or up a little bit versus what we just talked about?

Question: Chris Moore - CJS Securities, Inc. - Analyst : Got it. In terms of the longer-term goals, the organic growth, high single-digits, it seems like that would be -- lots of things would have to go right in '25 in order to reach that. Is that a fair way to look at it?

Question: Mike Shlisky - D.A. Davidson & Co. - Analyst : So I want to follow up on one of the earlier questions -- on one of your answers. I don't want to get too far ahead, but the level of product introductions you have this fiscal year, is that supposed to be the kind of the new norm going forward? Have you unlocked kind of a new cultural imperative to keep that product cadence fairly high?

Question: Mike Shlisky - D.A. Davidson & Co. - Analyst : Of course, fantastic. We haven't talked much about the M&A environment yet. I am curious if you can tell us a little bit about the pipeline, what's in the later stages, or even if you're looking to divest anything, how anything is going on that process?

Question: Mike Shlisky - D.A. Davidson & Co. - Analyst : Got it. Maybe last one for me -- back to the topic of your new products. Have they then been released yet, just the first month and into the fiscal year here? And if so, how has it gone?

Question: Gary Prestopino - Barrington Research Associates, Inc. - Analyst : Ademir, you -- I couldn't write this down fast enough. You talked about sequential changes in orders. Could you just go through that? I think you gave some data on June and July.

Question: Gary Prestopino - Barrington Research Associates, Inc. - Analyst : Okay. Good to hear. And then just on your new products that you're going to roll out, over a dozen new products, how many of these are targeted for your fast-growth markets? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. AUGUST 02, 2024 / 12:30PM, SXI.N - Q4 2024 Standex International Corp Earnings Call

Question: Gary Prestopino - Barrington Research Associates, Inc. - Analyst : Okay. And then in terms of these new products, is there any -- looking for the right word here -- increase in the specialization, technology or whatever, with these products that you should be able to attain a higher margin or contribution margin on these new products versus some of the legacy business that you have?

Question: Gary Prestopino - Barrington Research Associates, Inc. - Analyst : So David, right off the bat, as you roll these things -- these new products out, they do have a higher incremental gross margin and we should see positive impact to the gross margin as we go through the year?

Question: Ross Sparenblek - William Blair - Analyst : Starting on the new products. I mean, [it was a curious] comment that you don't expect all of these are going to succeed. The vast majority are voice of the customer. I believe 70% are educated there. Is that still a way to think about it, maybe 30% of these dozen are just kind of throwing out there to see what sticks?

Question: Ross Sparenblek - William Blair - Analyst : Okay. Maybe I'm just reading too much into it, but thanks for the clarity there. And then maybe just kind of framing the average TAM expectations, I mean, a dozen products, 7% -- or $7 million of sales. They're not all going to hit July 1, obviously. But what are you guys targeting? And then what is maybe like your ROI or product vitality index threshold as you think about conceptualizing that ramp and how these can build if they are successful?

Question: Ross Sparenblek - William Blair - Analyst : Okay. Is there anything you can call out particular, like, this is a $20 million opportunity, and we're really excited. Any other ones that you're just kind of taking a little adjacent share here and there?

Question: Ross Sparenblek - William Blair - Analyst : Yeah, that's very clear. And last one here on just electronic margins and expectations. I know we have 200 basis points of prior cost out. I think there's like five magnetic products that are launching, which are dilutive. So how should we think about the incrementals this year given the cross currents? And then what level of revenue do you think we need to achieve for electronics to get back to the 2023 -- kind of 22%, 23%?