Standex International Q4 2025 Earnings Call Transcript

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Provided by Quartr
August 1, 2025

Key Takeaways

  • Positive Sentiment: 23.2% sales increase in Q4 (23.4% from acquisitions) with a 1.4% organic decline offset by a 16% rise in electronics orders, marking the first quarter of organic growth since 2023.
  • Positive Sentiment: Delivered a record 20.6% adjusted operating margin (up 350 bps YoY, 120 bps sequentially) and cut net leverage to 2.6x through strong cash generation.
  • Positive Sentiment: Fiscal 2026 outlook targets over $100 M incremental revenue and further margin expansion, driven by mid-high single-digit organic growth in electronics, double-digit growth in engineering technologies, acquisitions, and ~300 bps from new products.
  • Positive Sentiment: Expanded grid technologies capacity with lean projects, extra shifts in core facilities, and a new Croatia site set to begin shipments within four months to meet global electrical demand.
  • Neutral Sentiment: Generated $24.9 M free cash flow in Q4 and holds ~$280 M liquidity; plans to reduce DSO from ~70 days to the low-60s to improve cash conversion.
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Earnings Conference Call
Standex International Q4 2025
00:00 / 00:00

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Operator

Good morning, ladies and gentlemen, and welcome to the Standex International Fiscal Fourth Quarter twenty twenty five Financial Results Conference Call. At this time, all lines are in a listen only mode. Following the presentation, we will conduct a question and answer session. This call is being recorded on Friday, 08/01/2025. I would now like to turn the conference over to Christopher Howe, Director of Investor Relations. Please go ahead.

Christopher Howe
Christopher Howe
Director of Investor Relations at Standex International

Thank you, operator, and good morning. Please note that the presentation accompanying management's remarks can be found on the Investor Relations portion of the company's website @www.sandex.com. Please refer to Standex's Safe Harbor statement on slide two. Matters that Standex management will discuss on today's conference call include predictions, estimates, expectations, and other forward looking statements. These statements are subject to risks and uncertainties that could cause actual results to differ materially.

Christopher Howe
Christopher Howe
Director of Investor Relations at Standex International

You should refer to Standex's most recent annual report on Form 10 ks as well as other SEC filings and public announcements for a detailed list of risk factors. In addition, I'd like to remind you that today's discussion will include references to the non GAAP measures of EBIT, which is earnings before interest and taxes adjusted EBIT, EBITDA, which is earnings before interest, taxes, depreciation and amortization adjusted EBITDA, EBITDA margin, and adjusted EBITDA margin. We will also refer to other non GAAP measures, including adjusted net income, income, adjusted net income from continuing operations, adjusted earnings per share, adjusted operating margin, pre operating cash flow and pro form a net debt to EBITDA. Adjusted measures exclude the impact of restructuring, purchase accounting, amortization from acquired intangible assets, acquisition related expenses and one time items. These non GAAP financial measures are intended to serve as a complement to results provided in accordance with accounting principles generally accepted in The United States.

Christopher Howe
Christopher Howe
Director of Investor Relations at Standex International

Standex believes that such information provides an additional measurement and consistent historical comparison of the company's financial performance. On the call today is Standex's Chairman, President and Chief Executive Officer, David Dunbar and Chief Financial Officer and Treasurer, Ademir Sarcic.

David Dunbar
David Dunbar
Chairman, President & CEO at Standex International

Thank you, Chris. Good morning and welcome to our fiscal fourth quarter twenty twenty five conference call. Fiscal year twenty twenty five was a turning point for Standex. We are a different company than we were even a year ago. We've been laying the groundwork for years and our growth drivers have now crossed a threshold.

David Dunbar
David Dunbar
Chairman, President & CEO at Standex International

They're scaling. They have reached an inflection point and are beginning to move the needle in a meaningful way. I'm very excited to share with you what we are seeing and how it is shaping our outlook. I would like to thank our business and corporate teams for navigating this past year and achieving a record profit generation in fiscal twenty twenty five. Now let's look at the results beginning on slide three, e messages.

David Dunbar
David Dunbar
Chairman, President & CEO at Standex International

In the fourth quarter, sales increased 23.2% with contributions from acquisitions partially offset by a slight organic decline. Electronics grew slightly on an organic basis with a book to bill ratio above one and organic orders up 16% year on year. This represents the first quarter of organic growth since 2023 and signals strong momentum into 2026. Our fiscal fourth quarter sales into fast growth market increased to 28% of total company sales. New product sales added approximately 2.8% to sales, ahead of our goal, 2%.

David Dunbar
David Dunbar
Chairman, President & CEO at Standex International

Our grid technologies business continues to perform ahead of our expectations. To support strong global demand for electrical equipment, we are expanding Ameren Narayan capacity with lean projects and additional shifts in their core facility. I am also excited to announce that in the quarter, we established a site in Croatia to serve European customers. We expect to be shipping product from Croatia within four months. Operating performance was very strong in the quarter.

David Dunbar
David Dunbar
Chairman, President & CEO at Standex International

We achieved record adjusted operating margin of 20.6%, up 120 basis points sequentially and up three fifty basis points year on year. This operating performance, along with our cash generation and cash repatriation, enabled us to lower our net leverage ratio to 2.6. Following record profitability in fiscal twenty twenty four, we again achieved record milestones in adjusted gross margin, adjusted operating income, and adjusted earnings per share. In fiscal year twenty twenty six, barring any unforeseen economic, global trade, or tariff related disruptions, we expect revenue to grow by over $100,000,000 with continued adjusted operating margin expansion. This will primarily be driven by mid to high single digit organic growth in electronics, double digit organic growth in engineering technologies, and the contribution from recent acquisitions.

David Dunbar
David Dunbar
Chairman, President & CEO at Standex International

In fiscal year twenty twenty six, we expect new product sales to contribute approximately 300 basis points of incremental sales growth and we anticipate releasing more than 15 new products. Sales from fast growth markets are expected to grow approximately 45% year on year and exceed two sixty five million dollars On a year on year basis, in fiscal first quarter twenty twenty six, we expect significantly higher revenue, comprised of contributions from recent acquisitions and organic growth and significant operating margin expansion. On a sequential basis, we expect slightly lower revenue as the impact of recent acquisitions, higher sales in the fast growth end markets, and realization of pricing initiatives are more than offset by project timing in engineering technologies and the impact of seasonality in Europe within electronics and engraving. We expect slightly lower adjusted operating margin due to lower sales and less favorable product mix. Please turn to slide four.

David Dunbar
David Dunbar
Chairman, President & CEO at Standex International

Our growth drivers have reached an inflection point. There are four sources of growth that will help deliver above market increase in 2026. In fact, they will deliver growth even without a general market pickup. First is new product sales. As you know, we began ramping our R and D spending in 2020.

David Dunbar
David Dunbar
Chairman, President & CEO at Standex International

New products began to be released in 2023, accelerating to 16 product releases in 2025. Sales of new products increased from $38,000,000 to $55,000,000 in FY 2025, exceeding our internal expectations. We expect their sales to continue to ramp and to be joined by more than 15 new products to be released in 2026, giving us confidence that incremental new product sales will add about 3% to our sales in 2026. New products, once released, take time to reach full commercial impact. In our customer intimacy business model, success depends not only on product innovation, but on deep collaboration with our customers.

David Dunbar
David Dunbar
Chairman, President & CEO at Standex International

Our products are often designed into systems, which require internal approvals, engineering validation, and their own development timeline. This results in a natural delay between product release and peak revenue. But once adoption begins, momentum builds and endures. Products introduced in prior years continue to ramp even as we launch additional new offerings. This layered effect creates a compounding engine of organic growth that is both durable and scalable.

David Dunbar
David Dunbar
Chairman, President & CEO at Standex International

It has taken a while to get this momentum, but we are building a long term new product capability in this company. And as I used to be engineer, I think it is beautiful to watch. The second source of above market growth is our presence in end markets with long term secular tailwinds and above average growth. This has been a focus for some time and our two acquisitions in FY twenty five increased our presence in electrical grid, space, and defense market, ramping our total fast growth market sales to $184,000,000 All of these businesses are expanding capacity to serve our customers, and we expect sales to grow to greater than $265,000,000 in fiscal twenty twenty six. This is also beautiful to watch.

David Dunbar
David Dunbar
Chairman, President & CEO at Standex International

A third source of momentum is the support we are giving to recent acquisitions to maintain their growth rate. We are now bringing up a new site in Croatia for Amarin Narayan and are positioned with McStarlight to win new applications that the combined Standex and McStarlight capability is better positioned to win. Last but not least is success at the blocking and tackling of winning new awards in our business through commercial excellence. Two noteworthy areas stand out. Engineering technologies has been awarded applications on next generation missile programs, which are moving to production.

David Dunbar
David Dunbar
Chairman, President & CEO at Standex International

Engraving has successfully expanded into niche production of parts requiring our proprietary know how. Based on the above, you can see that the incremental contribution from new products, sales into fast growth markets, successful acquisition integration, and new program wins lead us to our fiscal year twenty twenty outlook of over $100,000,000 in incremental sales. I will now turn the call over to Ademir to discuss our financial performance in greater detail.

Ademir Sarcevic
VP, CFO & Treasurer at Standex International

Thank you, David, and good morning, everyone. Let's turn to slide five, fourth quarter twenty twenty five summary. On a consolidated basis, total revenue increased approximately 23.2% year on year to $222,000,000 This reflected 23.4% benefit from recent acquisitions and 1.2% benefit from foreign currency partially offset by organic revenue decline of 1.4%. Fourth quarter twenty twenty five adjusted operating margin increased three fifty basis points year on year to a record 20.6%. In the fiscal fourth quarter, adjusted operating income increased 48.8% on 23.2% consolidated revenue increase year on year.

Ademir Sarcevic
VP, CFO & Treasurer at Standex International

Adjusted earnings per share increased 20.6% year on year to a record $2.28 Net cash provided by operating activities was $33,400,000 in the 2025 compared to $28,700,000 a year ago. Capital expenditures were $8,600,000 compared to $6,500,000 a year ago. As a result, we generated fiscal fourth quarter free cash flow of $24,900,000 compared to $22,200,000 a year ago. Now, please turn to Slide six, and I will begin to discuss our segment performance and outlook beginning with electronics. Segment revenue of $115,200,000 increased 43.2% year on year, driven by 41% benefit from acquisitions, organic growth of 0.3%, and 1.9% benefit from foreign currency.

Ademir Sarcevic
VP, CFO & Treasurer at Standex International

Adjusted operating margin of 28.5% in fiscal fourth quarter twenty twenty five increased six forty basis points year on year due to contribution from recent Ameron Orion Group acquisition, pricing and productivity initiatives, and product mix. Our book to bill in fiscal fourth quarter was 1.03 with orders of approximately $118,000,000 or increase of $10,000,000 sequentially. Orders in electronics core business were up sequentially with a continued increase in demand in defense, power magnetic applications, and the electrical grid end market. Since our products are custom in nature, our bookings take longer to convert into revenue, but with stronger margins. Our expansion plans for MRN Orion in Houston and India are well underway to support additional demand.

Ademir Sarcevic
VP, CFO & Treasurer at Standex International

We increased capacity by adding second shifts across facilities. In addition, we began commissioning greenfield site in Croatia to serve our customers in Europe and support growing power requirements for data centers and grid expansion and upgrades in the region. We expect first shipments of the Alcoracia site in the next three to four months. Excluding recent MRN Orion Group acquisition, our new business opportunity funnel increased approximately 27% year on year to $125,000,000 Sequentially, in fiscal first quarter twenty twenty six, we expect slightly lower revenue, reflecting contribution from Amarin and Orion Group acquisition, higher sales into fast growth end markets, and price realization more than offset by the impact of seasonality in Europe. Although we anticipate slightly lower revenue sequentially, we are expecting significant revenue growth and adjusted operating margin expansion along with organic growth on a year on year basis.

Ademir Sarcevic
VP, CFO & Treasurer at Standex International

We expect slightly lower adjusted operating margin sequentially, driven by product mix and continued strategic growth investments. Please turn to Slide seven for a discussion of the Engineering Technologies and Scientific Segment. Engineering Technologies revenue increased 26.8% to $32,000,000 driven by 25% benefit from recent NexStarlight acquisition, organic growth of 0.9%, and 0.9% benefits from foreign currency. Organic growth was due to growth in sales from new products. Adjusted operating margin of 18.4% decreased two fifty basis points year on year due to product mix.

Ademir Sarcevic
VP, CFO & Treasurer at Standex International

Sequentially, we expect slightly lower revenue and adjusted operating margin due to project timing. Scientific revenue increased 2.3% to $17,900,000 due to 16.1% benefit from recent acquisition, partially offset by an organic decline of 13.9%, primarily due to lower demand from academic and research institutions that were impacted by NIH funding cuts. Adjusted operating margin of 24.3% decreased five thirty basis points year on year due to organic decline and unfavorable product mix as a result of the acquisition. Sequentially, we expect slightly higher revenue and similar adjusted operating margin. Now turn to Slide eight for a discussion of the Engraving and Specialty Solutions segment.

Ademir Sarcevic
VP, CFO & Treasurer at Standex International

Engraving revenue increased 0.6% to $33,000,000 driven by 1.2% benefit from foreign currency, partially offset by organic decline of 0.6%. Adjusted operating margin of 15.2% in fiscal fourth quarter twenty twenty five increased 190 basis points year on year due to realization of previously announced productivity initiatives and restructuring actions. In our next fiscal quarter on a sequential basis, we expect similar revenue and slightly higher adjusted operating margin due to seasonality affecting Europe, offset by slightly improved demand in North America and Asia, and realization of previously announced restructuring actions. In addition, in the fiscal first quarter, our Engraving business secured the Source award from a major OEM in North America to supply soft trim parts for a calendar year 2026 program. Specialty Solutions segment revenue of $23,900,000 decreased 1.2 year on year primarily due to general market softness.

Ademir Sarcevic
VP, CFO & Treasurer at Standex International

Operating margin of 18.6% decreased three sixty basis points year on year. Sequentially, we expect similar revenue and slightly higher operating margin. Next, please turn to Slide nine for a summary of liquidity statistics and capitalization structure. Our current available liquidity is approximately $280,000,000 At the end of the fourth quarter, Sandex had net debt of $448,000,000 compared to net cash of $55,300,000 at the end of fiscal quarter twenty twenty four. Our net leverage ratio currently stands at 2.6.

Ademir Sarcevic
VP, CFO & Treasurer at Standex International

We paid down our debt by approximately $27,000,000 during the fiscal fourth quarter twenty twenty five. In the fiscal first quarter twenty twenty six, we expect interest expense to be approximately $9,000,000 Sandex's long term debt at the end of fiscal fourth quarter twenty twenty five was $552,500,000 Cash and cash equivalents totaled $104,500,000 We declared our two forty fourth quarterly consecutive cash dividend of 32¢ per share and approximately 6.7 increase year on year. In fiscal twenty twenty six, we expect capital expenditures to be between 33,000,000 and $38,000,000 Relative to our debt leverage, we will continue to focus on paying down debt and anticipate that our leverage ratio will further decline to fiscal year twenty twenty six. I will now turn the call over to David for concluding remarks.

David Dunbar
David Dunbar
Chairman, President & CEO at Standex International

Thank you, Ademir. Please turn to slide 10. I want to describe the emotions in the company. There's an energy here and you can feel the shift. After years of building, refining, and preparing, the results are starting to show.

David Dunbar
David Dunbar
Chairman, President & CEO at Standex International

There's pride in seeing our efforts take hold and excitement in knowing this is just the beginning. The engine we've built is ready and now we're starting to see what it can really do. I'm very proud of our team for their continued operational execution and for the success of our recent acquisitions, both of which help us achieve record adjusted operating margin for a third consecutive quarter. We achieved record profit generation again in fiscal year twenty twenty five, driven by contribution from recent acquisitions, higher sales into fast growth end markets, and strong operational execution. Both adjusted gross margin and adjusted operating margin expanded by more than 200 basis points, while adjusted earnings per share increased approximately 6% to a record $7.98 Through debt pay down and profit generation, our net leverage ratio was reduced to 2.6 at the end of the fiscal year.

David Dunbar
David Dunbar
Chairman, President & CEO at Standex International

In fiscal year twenty twenty five, sales into fast growth end markets were approximately $184,000,000 exceeding our fiscal year twenty twenty five expectation of approximately $170,000,000 This was primarily driven by growth in data center demand and grid modernization and expansion. Outside of the electrical grid, we are seeing growth in commercialization of space and defense applications. In fiscal year twenty twenty six, we expect sales into fast growth markets to grow by approximately 45% and exceed $265,000,000 To support our future growth, we continue to invest in new product development and new applications across markets with growth potential. We launched 16 new products in fiscal year twenty twenty five and plan to launch more than 15 in fiscal year twenty twenty six, which are expected to contribute over 300 basis points of incremental growth. In fiscal year twenty twenty six, we expect to grow revenue by over $100,000,000 with continued adjusted operating margin expansion.

David Dunbar
David Dunbar
Chairman, President & CEO at Standex International

Growth will be primarily driven by mid to high single digit organic growth in electronics, double digit organic growth in engineering technologies, and the contribution from recent acquisitions. We are well positioned in this fluid economic environment due to regional presence, strong customer relationships, and disciplined approach to pricing and productivity. We remain on track to achieve our fiscal twenty twenty eight long term targets of sales of greater than $1,150,000,000 and adjusted operating margin of greater than 23%. We are targeting ROIC of 12.5%, which has been adjusted for recent acquisitions. We will now open the line for questions.

Operator

Thank you. Ladies and gentlemen, we will now begin the question and answer session. Your first question comes from Michael Schlisky with D. A. Davidson. Your line is now open.

Michael Shlisky
Managing Director & Senior Equity Research Analyst at D.A. Davidson

Yes. Hello. Good morning. Thanks for taking my question.

David Dunbar
David Dunbar
Chairman, President & CEO at Standex International

Good morning.

Michael Shlisky
Managing Director & Senior Equity Research Analyst at D.A. Davidson

Good morning. So I wanted to maybe first talk about the $100,000,000 or more revenue increase in fiscal twenty six. As I try to break down some of the numbers here, looking at Ameren and McStarlight, you know, that's bringing in 50,000,000 plus of just just annualizing those businesses. And they are growing organically, so it could be even higher than that. You've got the new products, which as you said, three points, probably 20,000,030 million dollars You have all the other fast growth products as well. So I'm just kind of curious that $100,000,000 incremental revenues here, I don't want to say it's in the bag, but maybe could there be any sources of upside or is that number a very conservative estimate just based on those areas lump, you know, and there's also the organic growth on top of that and the other businesses.

Michael Shlisky
Managing Director & Senior Equity Research Analyst at D.A. Davidson

Just some thoughts as to is there any room for upside to that $100,000,000 And any concerns you might have on areas that might be more of a challenge in 2026 as well?

David Dunbar
David Dunbar
Chairman, President & CEO at Standex International

Yes, Mike, math is good there. The way we look at it is the full year impact of those acquisitions will bring something over $60,000,000 The new products just over 20,000,000 markets and remember, the fast growth was largely driven by defense, commercialization of space, grid technologies, electrical equipment OEMs. These are customer commitments that will drive this year. There's about another $38,000,000 there. So you're and if you just stop right there, we've made no assumptions about an overall market growth that would affect the core business and the other businesses.

David Dunbar
David Dunbar
Chairman, President & CEO at Standex International

So we've said over $100,000,000 and if you just add those things up, you could comfortably say 100,000,000 to 130,000,000 or even more for 2026.

Michael Shlisky
Managing Director & Senior Equity Research Analyst at D.A. Davidson

Got it. Thanks. I also want to turn to electronics and your EV business as well. EV business has kind of been in the headlines. The EV broadly has been just some OEMs showing sales declines in recent quarters.

Michael Shlisky
Managing Director & Senior Equity Research Analyst at D.A. Davidson

You've got US policies pointing towards a tougher environment for the EV market as well. Can you comment on how your EV business is doing? Whether that's going to still, you think, be a positive for electronics in fiscal twenty twenty

David Dunbar
David Dunbar
Chairman, President & CEO at Standex International

Yes. We still count EVs in our fast growth markets because I think over time, the prospects are good, a, because there will be a shift to electrical vehicles and our content per vehicle is higher. Although with the growth in defense and grid, it's smaller piece of our fast growth markets. In 2025, our EV sales did dip a little bit from 2025 from 2024. From I guess, yes, just slightly dip from '24.

David Dunbar
David Dunbar
Chairman, President & CEO at Standex International

As you recall, our position in EVs is largely with European brands with their higher end models. And with new model introductions, we anticipate a nice growth in EVs in 2026.

Michael Shlisky
Managing Director & Senior Equity Research Analyst at D.A. Davidson

Got it. Maybe one last one for me, turning to the Amarin business in Croatia. You said it will be open in the next four months. I just want to get a sense as to the ramp up run rate there and how fully booked that facility already is and whether that will be a kind of a in the same sense in four quarters from now, you'll have some great growth in fiscal twenty seven as that also ramps up. Just kind of curious as to how the cadence might turn out.

David Dunbar
David Dunbar
Chairman, President & CEO at Standex International

Yes. We're starting we have customer commitments through this year, and we'll ship single digit millions probably in fiscal 'twenty six. But as we look over three years, we think that can grow to $30,000,000 plus. There's vast opportunity in Europe. So we want to get in the market, get the customers there to visit.

David Dunbar
David Dunbar
Chairman, President & CEO at Standex International

They've got to go through their certification and approval process. Once they do that, we anticipate there's some more upside. We may need another site. I don't know. But as a starting point, this will get us 10,000,020 million dollars $30,000,000 in three years.

Michael Shlisky
Managing Director & Senior Equity Research Analyst at D.A. Davidson

Okay. Thanks for the color. I appreciate it. I'll pass it along.

David Dunbar
David Dunbar
Chairman, President & CEO at Standex International

Thank you, Mike.

Operator

Your next question comes from Ross Sparenblack with William Blair. Your line is now open.

Ross Sparenblek
Equity Research Analyst at William Blair & Company, L.L.C

Hey, good morning, gentlemen.

David Dunbar
David Dunbar
Chairman, President & CEO at Standex International

Good morning, Russ.

Ademir Sarcevic
VP, CFO & Treasurer at Standex International

Good morning.

Ross Sparenblek
Equity Research Analyst at William Blair & Company, L.L.C

Hey, guys. Just starting off with electronics, just get a sense of where the kind of run rate demand is. It looks like there was some good core organic order growth in the quarter. Maybe just speak to what's driving that and assumptions going into FY 2026 here.

David Dunbar
David Dunbar
Chairman, President & CEO at Standex International

Yeah, there's a couple of things. We mentioned in the script that orders year on year are up 16%. In the core business, that's about $12,000,000 Of that $12,000,000 about 10,000,000 is from OEMs. So this is OEMs as they've designed our products into their next generation products. So that will convert over the next three, six, nine months.

David Dunbar
David Dunbar
Chairman, President & CEO at Standex International

The other $2,000,000 goes through distribution, that's a quicker conversion. A lot of that comes from Asia. We're seeing some pickup in North America. Europe is still relatively stable, I would say, but across your general industry in terms of end market outlook.

Ross Sparenblek
Equity Research Analyst at William Blair & Company, L.L.C

Okay. Is the expectation this is kind of a new run rate for that segment? I mean, it's been a couple of down years. So, like, there should be some restocking at the

David Dunbar
David Dunbar
Chairman, President & CEO at Standex International

end Yes. Do, absolutely. And Adam here mentioned that our new application funnel is growing. It's at a record high. In large part, that's because the management team now in this last year has put in place more disciplined commercial excellence processes to track opportunities to fill the funnel.

David Dunbar
David Dunbar
Chairman, President & CEO at Standex International

So we do think this is sustainable and this momentum will build.

Ross Sparenblek
Equity Research Analyst at William Blair & Company, L.L.C

Okay. And then we put a finer point on the Ameren with the capacity unlock. I mean, strong growth, but there should be maybe a sequential step up at some point as Europe comes online. Any loose targets you get there out there? It's kind of a base case or full case on how that could play out.

David Dunbar
David Dunbar
Chairman, President & CEO at Standex International

In some ways, it's embedded in the fast growing number. But to think about capacity, so we've said the Croatia site, I think they're just answering to Mike said in three years, we think it could be $30,000,000 Couple of years after that, maybe 60,000,000 plus. In India and Texas, as you know, we've added second shifts. With lean, we're also freeing up some capacity. So that continues to support their 20 plus percent growth that they were experiencing before we acquired them and they continue.

David Dunbar
David Dunbar
Chairman, President & CEO at Standex International

Now in North America, we are also looking at an aggressive expansion in our presence in Houston. And depending on where trade and tariffs go to, we'll also look at a Mexico site potentially, depending on where trade and tariffs come in at the request of our North American electrical OEMs and that would be a step up in capacity as well. So I can't put numbers on it, but if you continue to expect a 15%, 20% growth in Ameren and Orion, I think that's reasonable. And we will add the capacity to support that.

Ross Sparenblek
Equity Research Analyst at William Blair & Company, L.L.C

Yeah. I guess my point is almost twothree of that business is North America, and you guys have done a lot of work there. So 15% seems like that would be very low bar. Are you getting good pull through and traction on the capacity that's been added in North America thus far?

David Dunbar
David Dunbar
Chairman, President & CEO at Standex International

Yeah, absolutely. Every capacity we have, we're selling. And we have long term customer commitments to drive future capacity adds. I'm not sure if I'm answering your question.

Ross Sparenblek
Equity Research Analyst at William Blair & Company, L.L.C

It's fair. We can take offline. I'll jump back in queue. Thanks, guys.

Ademir Sarcevic
VP, CFO & Treasurer at Standex International

Thanks, boss.

Operator

Your next question comes from Chris Moore with CJS Securities. Your line is now open.

Chris Moore
Senior Research Analyst at CJS Securities

Hey, good morning, guys. Congrats on a nice quarter and encouraging organic growth discussion. Maybe we'll start with Engraving. Just is the restructuring done there?

David Dunbar
David Dunbar
Chairman, President & CEO at Standex International

The Engraving business, we work on tools. And we need to be close to tool shops because tools are expensive and not shipped a lot. The evolution of the toolmakers around the world is kind of shifting. They're in different places now than they were before. And with certain with what's the number, 30 some sites now around the world, it's likely that there will be this ongoing process to make sure our footprint matches the toolmaker.

David Dunbar
David Dunbar
Chairman, President & CEO at Standex International

So I think in the coming years, there probably will be some continued restructuring, more to align with where that end market is. With engraving in general, the way we think about it is this last year, we think demand kind of bottomed out. It was a very tough year for the auto OEMs and their new platform releases. Many of them were delayed, kind of waiting for clarity in industrial policy, especially in America. We think that our outlook now shows some growth from that.

David Dunbar
David Dunbar
Chairman, President & CEO at Standex International

But more importantly, the business to also scramble to find some new opportunities. And Adam here mentioned these kind of differentiated parts that we're making based on our kind of proprietary processes with soft trim. So we think there's a growth opportunity in engraving. So the markets start to stabilize, come up and we've got some growth on top of that.

Ademir Sarcevic
VP, CFO & Treasurer at Standex International

Yes. And Chris, if I can just add, there was a lot of heavy lifting in engraving due to, you know, with respect to eliminating some of the some of the unprofitable sites, so to speak. And most of the heavy lifting is done. So so to David's point, there's a little bit of work left to do, but majority of the restructuring actions for engraving have been completed.

Chris Moore
Senior Research Analyst at CJS Securities

Terrific. Have the competitive dynamics changed much in that business over the last few years?

David Dunbar
David Dunbar
Chairman, President & CEO at Standex International

No. It's been more the demand. In fact, there are fewer competitors now than over five years ago. Because our competitors are mostly smaller regional competitors. And so depending on what region they're in, it's been tougher sailing for them.

Chris Moore
Senior Research Analyst at CJS Securities

Got it. You mentioned, and we had talked about in the past, NIH funding on the scientific side. Just any thoughts there, you know, how significant that is?

Ademir Sarcevic
VP, CFO & Treasurer at Standex International

Yeah, Chris. About a third of our sales incentive, they go through a channel that it's either it's affected by NIH funding and obviously that has impacted our order rates over the last couple of quarters. But in the outlook that we are giving we are not assuming any pickup or any significant changes in demand from those type of end market or that type of a channel. So we are more focused around new products, exploring some additional selling opportunities. And if the NIH funding comes back, there will be an upside to the guide that we gave for for '26.

Chris Moore
Senior Research Analyst at CJS Securities

Great. Maybe just my last one. Big bigger picture. I mean, if if rates come down 50 to a 100 basis points, does that have much of an impact anywhere?

Ademir Sarcevic
VP, CFO & Treasurer at Standex International

Yeah. Of course. On our on our debt repayment. Yes, it does. So we're obviously watching that watching that closely.

Ademir Sarcevic
VP, CFO & Treasurer at Standex International

But look, our objective is to continue paying down our debt. Our net leverage is now at about 2.6, and we take with the operating cash flow that we generate in this company that we can get that leverage down to about two, assuming current portfolio businesses, you know, by the end of this fiscal year. So even with this type of interest rates.

Chris Moore
Senior Research Analyst at CJS Securities

Got it. And I was thinking more from a from a product standpoint, but perfect. I will leave it there. Thanks, guys.

Operator

Your next question comes from Matt Koranda with Roth Capital. Your line is now open.

Matthew Koranda
MD & Senior Research Analyst at Roth Capital Partners, LLC

Hey, guys. Good morning.

Ademir Sarcevic
VP, CFO & Treasurer at Standex International

Good morning.

Matthew Koranda
MD & Senior Research Analyst at Roth Capital Partners, LLC

Just on ECG, I was curious with McStarlight, is that accretive to operating margins in the segment? And then are you guys factoring in revenue synergies in the organic growth commentary for this year for ETG?

Ademir Sarcevic
VP, CFO & Treasurer at Standex International

It similar margins as our core business within ETG as far as mixed highlight is concerned. And yes, there are some revenue synergies, which

David Dunbar
David Dunbar
Chairman, President & CEO at Standex International

Now, we've actually discovered some pretty exciting synergy opportunities that our capabilities plus their capabilities allow us to design new parts with an efficiency that neither of us could do in the past that position as well for future opportunities. Those take a while to convert, but longer term, we think that opens up a little higher growth rate for both businesses.

Matthew Koranda
MD & Senior Research Analyst at Roth Capital Partners, LLC

Okay. All right. That's helpful. And then maybe just I know it's dynamic, but just given the tariff announcements yesterday, is there any way to just help us understand if any of those actions would be impactful to the business? I'd assume maybe the India announcement might be meaningful, but and then with regard to copper, any exposure on some of the new announcements there?

David Dunbar
David Dunbar
Chairman, President & CEO at Standex International

Yes. So let me just a broad statement. Adam and I were talking about that this morning, but we have learned to love uncertainty in this company. If you go back five years, the most dramatic inflation we ever saw with rhodium inflation, and we put in place practices to handle those disruptions that come from those unexpected rapid increases in cost with pricing practices. We redesigned our product line.

David Dunbar
David Dunbar
Chairman, President & CEO at Standex International

And through that whole period, we only delivered higher margins. The inflation the post COVID inflation disrupt every part of our business kind of drove that same discipline through all the rest of our businesses. Now if you look back six months, the last couple of quarters, we've lived in an uncertain trade and tariff environment. And look at the margins we just posted. Our businesses have done a great job identifying how best to deal with that in the short term.

David Dunbar
David Dunbar
Chairman, President & CEO at Standex International

Several of our businesses are looking at their sourcing strategies, making sure that any exposure we have is being dealt with identifying, bringing on some new lines. So from cultural standpoint, we think a highly uncertain environment kind of favors us because I think we've demonstrated we're nimble and agile. The recent announcements, maybe I'll turn it over to Adam here to look at the actual numbers and what the potential impact is.

Ademir Sarcevic
VP, CFO & Treasurer at Standex International

Yes. So Matt, about 4% of our COGS comes from India. It's mostly within our electronics segment. And again, to David's point between pricing productivity alternative sourcing, feel pretty good we got it covered.

Matthew Koranda
MD & Senior Research Analyst at Roth Capital Partners, LLC

Okay. All right. Super clear. Maybe just last one. The longer term target on sales, if we use just sort of an implied CAGR off of sort of the maybe the low end of your guidance for fiscal twenty six, it still would imply sort of a low double digit sales CAGR to get to the '28 target.

Matthew Koranda
MD & Senior Research Analyst at Roth Capital Partners, LLC

Is that sort of how you think about it and maybe just how much of that comes organically versus through acquisition in your current

David Dunbar
David Dunbar
Chairman, President & CEO at Standex International

Yes, let walk through kind of a high level bridge. We look at this in a number of different ways. If you just anchor it on 2025, you're just finished, dollars $790,000,000. Our new products were $55,000,000 This coming year, we expect them to grow about 40%. And we're just getting started with new products.

David Dunbar
David Dunbar
Chairman, President & CEO at Standex International

So we anticipate about a 30% growth annually in the new products. Fast growth market was 185 last year, Laguardia is two sixty five and we're anticipating about a 20% growth there. In 2018, so those numbers, that puts new products at 130, fast growth at three eighty. If you anticipate that the core, the remaining core business, which is about five fifty will grow about 3% a year, that adds another 50 or so million. That puts us at one just shy of the 1.15.

David Dunbar
David Dunbar
Chairman, President & CEO at Standex International

In addition to that, we think there's opportunity for a little pickup in the scientific markets. These additional defense opportunities we mentioned provide upside and these engraving wins that we described also provide. So there's maybe a 30,000,040 million dollars of go get in the next three years, but we've got the opportunities to achieve them.

Matthew Koranda
MD & Senior Research Analyst at Roth Capital Partners, LLC

All right, super helpful. I'll turn it over guys. Thanks.

Operator

Your next question comes from Gary Prestopino with Barrington Research. Your line is now open.

Gary Prestopino
Managing Director at Barrington Research Associates

Hi. Good morning, Hey, just want to get an idea with new product sales. I would assume the majority of those are targeted to your fast growth markets. Is that kind of a correct assumption?

David Dunbar
David Dunbar
Chairman, President & CEO at Standex International

Yeah, there is overlap in there. So, Technologies is a big contributor there. They've developed new products to expand participation in space, and those new products are all in fast growth. We'll be at fast growth in some of our other core businesses, while some of our other businesses, scientific and federal that are just in general industry. So, there is some overlap in fast growth.

David Dunbar
David Dunbar
Chairman, President & CEO at Standex International

So, I'd say about 30%, 30% of the new products going to fast growth.

Gary Prestopino
Managing Director at Barrington Research Associates

Okay. So, 30% new products into fast growth. Okay. And then, as we as you scale the fast growth markets and grow the sales as you expect to is can you give us some idea of relative to your adjusted operating margin that you generated this year, what kind of incremental margin increases do you get, from growing net sales into these faster growth markets? I mean, I assume they've got to have a higher margin profile.

David Dunbar
David Dunbar
Chairman, President & CEO at Standex International

Yes, they do. Just think through the businesses and it is higher than the average. So we mix up with every growth in fast growth markets in terms of how many basis points of gross margin, it's got to be 300, 400 basis points higher.

Ademir Sarcevic
VP, CFO & Treasurer at Standex International

Yeah. I mean, I think if you look at our projections and we say we're going to get to over 23% adjusted operating margin in FY 2028. If you just assume and it's true that our margins into when we do sales at the fast growth end markets are higher, you can do back of the envelope calculation and see just on the higher volume we're going to comfortably get there. And then obviously we're going to have pricing and productivity actions on top of that.

Gary Prestopino
Managing Director at Barrington Research Associates

Okay. And then getting back to new products, what do you say you generate? You you put out 16 this year?

David Dunbar
David Dunbar
Chairman, President & CEO at Standex International

In the quarter. So it's 55 in the year.

Gary Prestopino
Managing Director at Barrington Research Associates

55 in the year.

David Dunbar
David Dunbar
Chairman, President & CEO at Standex International

Oh, I'm sorry. 16 new products were released. And the sales of products released in the last couple of years that are still new was 55.

Gary Prestopino
Managing Director at Barrington Research Associates

Okay, I just want to get an idea. Was there anything that really drove the boat there as far as growth or in any of those new product categories that you put out?

David Dunbar
David Dunbar
Chairman, President & CEO at Standex International

The biggest numbers in the year with engineering technology sales into commercialization of space. These are new products for them that expanded their share of wallet and their content on those vehicles.

Gary Prestopino
Managing Director at Barrington Research Associates

Okay. And then just lastly, how would you the acquisition pipeline, I know you're always active there. Would you have the appetite to do another acquisition this year, this fiscal year, the opportunity came up?

David Dunbar
David Dunbar
Chairman, President & CEO at Standex International

We're always working the pipeline, and a lot of the deals we do are the result of years of relationship building. So we're out there doing that. With the projection of our deleverage, so now at the end of this quarter with 2.6, we anticipate just with normal course with operating cash flows and things by the end of this year will be at two. So we're rapidly developing the powder to be able to do something.

Gary Prestopino
Managing Director at Barrington Research Associates

Okay. Thank you.

Operator

Your next question comes from Ross Farenblack with William Blair. Your line is now open.

Ademir Sarcevic
VP, CFO & Treasurer at Standex International

Hey, Ross.

David Dunbar
David Dunbar
Chairman, President & CEO at Standex International

My line is open. He's on mute.

Ross Sparenblek
Equity Research Analyst at William Blair & Company, L.L.C

There we go. Can you hear

David Dunbar
David Dunbar
Chairman, President & CEO at Standex International

me? Have to.

Ross Sparenblek
Equity Research Analyst at William Blair & Company, L.L.C

For that.

Ross Sparenblek
Equity Research Analyst at William Blair & Company, L.L.C

Yes. Just on the Scientific margins, decent sequential uptick with some tougher shipping rates. Can you just give us a sense what played out there in the quarter and kind of expectations looking forward for 2026 as we think about R and D as well?

Ademir Sarcevic
VP, CFO & Treasurer at Standex International

Yes. So from a scientific standpoint, you're right. The shipping rates are generally okay. The acquisition we have in the scientific space is actually at a lower margin than our core business. So that's impacting our segment margin, if you will, a little bit.

Ademir Sarcevic
VP, CFO & Treasurer at Standex International

But we do expect as we get into the fiscal twenty twenty six with the combination of pricing productivity actions, we're going to be able to offset. And alternative sourcing, by the way, in this segment, we're going to be able to offset the tariff pressure we got coming in because scientific is the business that sources some of its based products out of China. So, you know, we do expect scientific margins to to hold.

Ross Sparenblek
Equity Research Analyst at William Blair & Company, L.L.C

Okay. And then just, one more point on, free cash. Kind of a tough year. Can you maybe just speak to your ability to, you know, maybe get some more turns out of working capital and get that conversion back above a 100%?

Ademir Sarcevic
VP, CFO & Treasurer at Standex International

Yeah. Yeah, Ross. Great. Great question. Yeah.

Ademir Sarcevic
VP, CFO & Treasurer at Standex International

And, you know, if you look at our cash flow creation in the last fiscal year, we were significantly impacted too by onetime transaction related costs. When you do three deals in a year and you have to do the payments to the bankers and the lawyers, etcetera, that adds up to be a pretty sizable number. And on top of that, you know, the acquisitions that we did, you know, have credit terms with the customers that are in a much longer than the credit terms that, you know, generally had in our core businesses. So our DSO has actually increased versus what we had prior to the acquisitions. So we are working and frankly some of the structure around collections is in some of those businesses not as robust as we had the standard.

Ademir Sarcevic
VP, CFO & Treasurer at Standex International

So we are working to putting a process into place around receivables and collections. And we think we're going to make a very good dent and progress in collections and receivables and working capital this fiscal year. So we expect conversion of cash to be much, much better this year than last year.

Ross Sparenblek
Equity Research Analyst at William Blair & Company, L.L.C

All right. So can we hold you to a mean reversion back to 60 on the DSOs?

Ademir Sarcevic
VP, CFO & Treasurer at Standex International

You can can. That's a now you gotta put me on the spot. Yeah. You can hold us that we're gonna, you know, we're gonna drive back to that low 60 number. Right now, we are about 69, 70 in terms of DSO.

Ademir Sarcevic
VP, CFO & Treasurer at Standex International

And our goal is over this fiscal year to drive that as close to 60 as we can.

Ross Sparenblek
Equity Research Analyst at William Blair & Company, L.L.C

Fantastic. Thanks for the time.

David Dunbar
David Dunbar
Chairman, President & CEO at Standex International

There

Operator

There are no further questions at this time. I will now turn the call over to David Dunbar, CEO, for closing remarks.

David Dunbar
David Dunbar
Chairman, President & CEO at Standex International

All right. Thank you. Before we wrap, I want to send a special thank you to Tom Hanson, who is retiring from our Board after twelve years. Tom has been a valuable Board member and made many contributions to the company. I also want to welcome Andy Nemeth, the CEO of Patrick Industries, who is our newest Board member.

David Dunbar
David Dunbar
Chairman, President & CEO at Standex International

We look forward to working together. Finally, and as always, I want to thank everybody for joining us for the call. We enjoy reporting on our progress at Standex. Thank you also to our employees and shareholders for your continued support and contributions. I'm excited for the company's potential in fiscal year twenty twenty six and look forward to speaking with you again in our fiscal first quarter twenty twenty six call.

Operator

Ladies and gentlemen, this concludes your conference call for today. We thank you for participating and ask that you please disconnect your lines.

Executives
    • Christopher Howe
      Christopher Howe
      Director of Investor Relations
    • David Dunbar
      David Dunbar
      Chairman, President & CEO
Analysts
    • Ademir Sarcevic
      VP, CFO & Treasurer at Standex International
    • Michael Shlisky
      Managing Director & Senior Equity Research Analyst at D.A. Davidson
    • Ross Sparenblek
      Equity Research Analyst at William Blair & Company, L.L.C
    • Chris Moore
      Senior Research Analyst at CJS Securities
    • Matthew Koranda
      MD & Senior Research Analyst at Roth Capital Partners, LLC
    • Gary Prestopino
      Managing Director at Barrington Research Associates
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