Standex International Q4 2026 Earnings Call Transcript

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Provided by Quartr
July 31, 2026

Key Takeaways

  • Positive Sentiment: Fiscal 2026 set records, with 5.5% organic sales growth, 42% adjusted gross margin, 19.4% adjusted operating margin, $8.74 adjusted EPS, and record fourth-quarter free cash flow of $35 million.
  • Positive Sentiment: Demand momentum remains strong, with fourth-quarter organic growth of 7.7%, a consolidated book-to-bill ratio of 1.18 and Electronics book-to-bill of 1.27; management expects mid- to high-single-digit sales growth and continued margin expansion in fiscal 2027.
  • Positive Sentiment: Standex Grid is the primary growth opportunity. The company expects grid sales to rise from approximately $148 million in fiscal 2026 to $340 million-$440 million by fiscal 2030 through capacity investments in Croatia, Mexico, Texas, India, automation and expanded shifts.
  • Positive Sentiment: New product sales increased from $40 million to $67 million in fiscal 2026 and are expected to reach approximately $90 million in fiscal 2027, while sales into fast-growth markets such as grid, space and defense are projected to exceed $310 million.
  • Negative Sentiment: Electronics operating margin fell 140 basis points year over year to 27.2% because of growth investments and roughly $2 million of transitory operational issues related to an ERP implementation in the Edge business; Aerospace & Defense revenue and margin are also expected to decline sequentially due to project timing.
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Earnings Conference Call
Standex International Q4 2026
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Operator

Good morning, ladies and gentlemen, and welcome to Standex International Fourth Quarter 2026 Financial Results Conference Call. At this time, all lines are in listen-only mode. Following the presentation, we will conduct a question and answer session. If at any time during this call you require immediate assistance, please press star zero for the operator. This call is being recorded on Friday, July 31st, 2026. 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, good morning. Please note that the presentation accompanying management's remarks can be found on the investor relations portion of the company's website at www.standex.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. You should refer to Standex's most recent annual report on Form 10-K, 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.

Christopher Howe
Christopher Howe
Director of Investor Relations at Standex International

We will also refer to other non-GAAP measures, including adjusted net income, adjusted operating income, adjusted net income from continuing operations, adjusted earnings per share, adjusted operating margin, free operating cash flow and pro forma 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. 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 Sarcevic.

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

Thank you, Chris. Good morning and welcome to our fourth quarter and fiscal year 2026 conference call. A year ago, we made the claim that we are at an inflection point as a company, and that our results in fiscal year 2026 would show that. I'm happy to look back on the year and see that it has indeed played out. We have demonstrated we are a growing engineered components company. Total sales grew 5.5% organically in the year, propelled by our growth initiatives. In our fourth quarter, 73% of our sales were delivered by our engineered components businesses. These businesses serve large end markets, providing a long runway of organic and inorganic growth opportunities. Our new product development efforts are now contributing meaningfully to sales, growing from $40 million to $67 million in the year.

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

The $27 million increase contributed 300 basis points to sales growth. Our sales to fast growth markets increased $80 million to $264 million, contributing 30% of sales. On July 2nd, we acquired the remaining 9.9% interest in Narayan, completing the acquisition of the Amran/Narayan Group, now known as Standex Grid. Together with our new colleagues in Standex Grid, we are completely focused on meeting the rapidly growing needs of customers, building out the world's power infrastructure to support increasing living standards, electrification, replacement of an aging western grid, and the current rapid build-out of data centers. I would like to thank our employees, our executives, and the board of directors for their efforts and continued dedication and support that drove our record in FY 2026.

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

I also want to take a moment to thank Alan Glass for his many contributions these past 10 years. Alan has recently decided to retire, and I will soon be announcing his replacement as we bring in a new Chief Legal Officer to help power Standex through the next leg of our journey. Let's look at the results beginning on Slide three. In the fourth quarter, sales of $228.3 million increased 7.7% organically. Electronics grew 12.9% organically. New product sales grew approximately 43% to approximately $23 million. Sales into fast growth markets were approximately $72 million or more than 30% of sales. We had a record quarterly order intake of approximately $270 million.

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

We are pleased with the momentum in the business, reflected in an overall book-to-bill ratio of 1.18, and within Electronics of 1.27. In FY 2026, sales increased by more than $100 million and 5.5% organically. Electronics grew 7.5% organically. Q4 adjusted earnings per share were a record $2.45 per share, and we generated record free cash flow of $35 million. Following record profitability in FY 2025, we again achieved record milestones with adjusted gross margin of 42%, adjusted operating income margin of 19.4%, and adjusted earnings per share of $8.74. On a sequential basis, we expect slightly higher revenue driven by higher contributions from fast growth end markets into new product sales and similar adjusted operating margin.

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

On a year-over-year basis in fiscal first quarter 2027, we expect moderately higher revenue driven by high single-digit to low double-digit organic growth from growing backlog in fast growth markets and increased new product sales, partially offset by the revenue impact from the Federal Industries divestiture. We expect slightly to moderately higher adjusted operating margin as organic growth and realization of productivity actions are partially offset by growth investments. For fiscal year 2027, we expect mid- to high single-digit sales growth with high single-digit to low double-digit organic growth and continued adjusted operating margin expansion. I'm pleased with the momentum that we are building in launching new products. We expect to launch more than 20 new products in fiscal 2027, on top of more than 15 new products this past fiscal year.

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

We expect new product sales pro forma for the Federal divestiture to grow by $23 million to $90 million, adding nearly 300 basis points of organic growth in the year. Our sales into the fast-growing markets such as space, defense, and grid are expected to increase approximately 20% to greater than $310 million, constituting more than 30% of our total sales. We are looking forward to Ademir transitioning into the electronics business as president of electronics. This is a natural step. To be a Chief Financial Officer at a company like Standex is, in fact, to be a chief operating officer. Our consistent performance these past seven years owes a lot to Ademir having stayed close to the businesses.

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

When there were early signs of issues to address or opportunities to expand, he would get into the details of the business, address the pricing, sourcing, or operating issues to help get things back on track. I will now turn the call over to Ademir to provide more insight as to how we will approach the single biggest opportunity in our business, the expansion of capacity in our grid business.

Ademir Sarcevic
CFO and Treasurer at Standex International

Thank you, David. Good morning, everyone. I am very excited to take on the role of electronics president as we enter this new chapter in Standex's transformation to high-growth and high-performance company. Our electronics business is exposed to several very robust and fast-growing end markets such as grid, defense, and automation. We are well positioned to capture market opportunities through continued targeted investments in R&D and new products, capacity expansion in grid, while serving customers utilizing our customer intimacy approach. Our team is dedicated and accountable. Our products and solutions are robust. Our partnership with customers is strong. I believe we have significant organic growth and margin expansion opportunities in years to come. Let's turn to slide four, which highlights our focus on capacity expansion within our electronics grid business.

Ademir Sarcevic
CFO and Treasurer at Standex International

One of my top priorities as electronics president is expanding capacity within our Standex Grid business. Since I joined Standex as Chief Financial Officer, we never have had such an incredible opportunity for organic growth. When we acquired Amran Narayan, their sales were approximately $100 million on an annual basis. We just closed FY 2026 with approximately $148 million in sales, and by fiscal 2030, we expect grid sales to grow to between $340 million and $440 million. To get there, we have identified six capacity expansion objectives and have dedicated teams driving these important work streams. Key pieces of our capacity expansion efforts include productivity and automation, greenfield facility in Croatia, new lines in Mexico, expanding our footprint in Texas, and additional shifts in footprint in India. Starting with productivity and automation, we are expecting capacity within existing facilities, adding up to $40 million in full year capacity by fiscal 2030.

Ademir Sarcevic
CFO and Treasurer at Standex International

This May, we opened our new facility in Croatia, built as a direct response to customer demand for local capacity, giving us visibility into 2030 and a shot at a meaningful share of the $1.2 billion Europe market. By fiscal 2030, we believe Croatia will add approximately $75 million in annual capacity, well above our original three to five-year estimate of $60 million. Croatia isn't just a new facility, it's a platform for our next phase of growth in Europe. In Mexico, we have freed up space in our existing facility to produce low voltage instrument transformers, adding approximately $25 million in annual capacity by fiscal 2030. In Texas, we signed a lease to triple our footprint to over 200,000 sq ft with machinery on order and production on track to start in fiscal 2028. This expansion is expected to add over $60 million in annual capacity by fiscal 2030.

Ademir Sarcevic
CFO and Treasurer at Standex International

In India, additional shifts in footprint expansion would add $45 million and $50 million of annual capacity respectively. These expansions will strengthen our positions in North America, India, and Middle East markets for low to medium voltage transformers. I would like to discuss our financial performance in greater detail. Let's turn to slide five, fourth quarter 2026 summary. On a consolidated basis, total revenue increased approximately 2.8% year-on-year to $228.3 million. This reflected organic growth of 7.7%, partially offset by 4.5% impact from Federal Industries divestiture and 0.4% impact from foreign currency. Fourth quarter 2026 adjusted operating margin decreased 70 basis points year-on-year to 19.9%. Adjusted earnings per share increased 7.4% year-on-year to a record $2.45. Net cash provided by operating activities was $40.5 million in the fourth quarter of fiscal 2026, compared to $33.4 million a year ago.

Ademir Sarcevic
CFO and Treasurer at Standex International

Capital expenditures were $5.5 million, compared to $8.6 million a year ago. As a result, we generated fiscal fourth quarter free cash flow of $35 million compared to $24.9 million a year ago. Please turn to slide six, and I will begin to discuss our segment performance and outlook, beginning with our engineered components segments. Electronics revenue increased 12.1% year-on-year to a record $129.1 million, driven by organic growth of 12.9%, partially offset by 0.8% impact from foreign currency. Organic growth was driven by sales into fast growth markets and increased new product sales. Adjusted operating margin of 27.2% in fiscal fourth quarter 2026 decreased 140 basis points year-on-year due to growth investments and transitory operational issues in the Edge business, partially offset by high volume and pricing initiatives. Excluding Edge operational issues and other one-time items, adjusted operating margin would have increased year-on-year.

Ademir Sarcevic
CFO and Treasurer at Standex International

Our book-to-bill in fiscal fourth quarter was 1.27 with orders of approximately $165 million. In fiscal first quarter 2027, we expect slightly higher revenue, reflecting higher sales into fast growth end markets and increased new product sales. We expect moderately higher adjusted operating margin. On a year-on-year basis, we expect double-digit organic growth. Aerospace & Defense revenue increased 18.3% to $37.9 million, driven by organic growth of 18.4%. Organic growth was driven by increased project activity in the defense end market. Adjusted operating margin of 22.5% increased 410 basis points year-on-year, primarily due to higher volume and project mix. We expect moderately lower revenue due to less favorable project timing and moderately lower adjusted operating margin. On a year-on-year basis, we expect double-digit organic growth. Turn to slide seven for discussion of the Scientific and Engraving and Hydraulics segments.

Ademir Sarcevic
CFO and Treasurer at Standex International

Scientific revenue increased 5% to $18.8 million due to organic growth. Organic growth was driven by pricing initiatives and a slight market recovery. Adjusted operating margin of 28.6% increased 440 basis points year-on-year, reflecting higher sales and tariff refunds. Sequentially, we expect moderately higher revenue and similar adjusted operating margin. Engraving and Hydraulics revenue decreased 9.7% to $42.4 million, driven by organic decline of 9.6% and 0.1% impact from foreign currency. Adjusted operating margin of 15.9% in fiscal fourth quarter 2026 increased 20 basis points year-on-year. In the next fiscal quarter, on a sequential basis, we expect slightly to moderately higher revenue and slightly higher adjusted operating margin. Please turn to slide eight for a summary of Standex's liquidity statistics and capitalization structure. Our current available liquidity is approximately $148 million.

Ademir Sarcevic
CFO and Treasurer at Standex International

At the end of the fourth quarter, Standex had net debt of $339.2 million, compared to net debt of $448 million at the end of fiscal fourth quarter 2025. Our net leverage ratio currently stands at 1.8. In fiscal first quarter 2027, we expect interest expense of approximately $7 million. Standex's long-term debt at the end of fiscal quarter 2026 was $518 million. Cash and cash equivalents totaled $178.7 million. We declared our 248th consecutive quarterly cash dividend of $0.34 a share and approximately 6.3% increase year-on-year. In fiscal 2027, we expect capital expenditures between $45 million-$55 million, primarily due to Standex Grid growth investments. I will now turn the call over to David for concluding remarks.

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

Thank you, Ademir. Before I move into concluding remarks, I would like to comment about the recent events in Japan. This past week, an earthquake struck southern Kumamoto, the location of our Sanyu relay facility. No employees were injured, and there was very minimal impact on our site, though some of our colleagues had damage to their homes. Our hearts are with our employees and their families as they recover from this natural disaster. Please turn to slide nine. To summarize, I am very pleased to see the continued organic growth in the fourth quarter with a book-to-bill of 1.18. Organic growth was driven by our Electronics and Aerospace & Defense segments, which grew 12.9% and 18.4% respectively. We will continue to align our organic and inorganic growth investments around secular end markets and new products that expand our presence in engineered components and deepen our customer relationships.

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

Our acquisition strategy will continue to focus on businesses with accretive margins, exposure to fast growth markets, and delivery of custom solutions. We expect fiscal 2027 sales to increase mid- to high-single digits over fiscal 2026, driven by high-single to low-double-digit organic growth with continued margin expansion. We anticipate margin progression as we move through the year. Considering the Federal Industries divestiture, we expect to be on track to achieve greater than $1.1 billion in sales and greater than 23% adjusted operating margin by the end of fiscal year 2028. We will now open the line for questions.

Operator

Thank you. Ladies and gentlemen, we will now begin the question and answer session. Should you have a question, please press the star followed by the one on your touch-tone phone. You will hear a prompt that your hand has been raised. Should you wish to decline from the polling process, please press the star followed by the two. If you are using a speakerphone, please lift the handset before pressing any keys. One moment, please, for your first question. Your first question comes from Mike with D.A. Davidson. Please go ahead.

Mike Shlisky
Mike Shlisky
Managing Director at D.A. Davidson

Good morning, thanks for taking my questions.

Christopher Howe
Christopher Howe
Director of Investor Relations at Standex International

Good morning.

Mike Shlisky
Mike Shlisky
Managing Director at D.A. Davidson

I'm going to grill you a little bit here. Good morning. Ademir, I'm going to give you a little bit of a grilling here. It's about electronics-related questions, Grid-related questions. First, I really liked the waterfall chart you put out there about your plan to expand capacity. It is across two different continents. It's across at least four or five countries. I assume that's just the capacity, not necessarily the sales organization, supply chain, et cetera. It just sounds like a lot going on over a couple of years. Give us a little more detail as to, is there a sequential process here? Do you have one team doing all the work, and they're going from place to place? Just a little bit more about how spread thin is the segments leadership here.

Ademir Sarcevic
CFO and Treasurer at Standex International

Hey, good morning, Mike. I expected grilling, that's okay. I mean, the Grid expansion, as we said on the call, I think as you know, is a top priority for the company in the years to come because the market opportunities are phenomenal, and our opportunity to penetrate that market is significant. We do have, we call it maybe a tiger team. We do have a team that's solely focused on Grid expansion across these different sites. This, Mike, is a multi-year project, multi-year projection. If I walk you through this waterfall in terms of productivity and automation, that's primarily around lean transformation. Kaizen events primarily focus on our key lines in India. We have a team that's in India right now dedicated to work with our local management in order to get it accomplished.

Ademir Sarcevic
CFO and Treasurer at Standex International

David and I have weekly updates on progress on that transformation. Frankly, out of this $40 million that we have identified there, we feel that we can achieve significant portion of that, or maybe half within FY 2027. If you think about Croatia and Mexico, there is a separate team that's working on those two specific sites. The Croatia site is up and running. Mexico, we freed up the space. We are starting to do some shipments out of there. We think within FY 2027, we can probably get $10 million-$15 million out of those two sites. The other thing that we have done, we actually set up what we call a fourth shift in our Houston facility, in our current Amran Houston facility.

Ademir Sarcevic
CFO and Treasurer at Standex International

What that really means is that the plant is going to be running probably about 24/7 going forward, that should probably give us another $5 million worth of additional capacity. As you move forward to this India additional shift, that's really putting a second shift in our plant in India. We think that's probably going to give us another $5 million-$10 million in FY 2027. The Texas expansion is FY 2028 event, followed with the India footprint expansion. We do have teams dedicated on all of this. We have work streams that manage each one of these. You go from our starting point of FY 2026 sales of $148 million, and you add what I just said, we feel pretty good we can get to that $180 million-$200 million range in sales in FY 2027. We'll be set up really nicely as we get to FY 2028 and FY 2029 to execute on these additional things. We got to get it done.

Mike Shlisky
Mike Shlisky
Managing Director at D.A. Davidson

Got it. That's great detail. Thanks for that. To confirm that what was in those comments you just made on that slide, that is the current grid product lineup and customer base. I'm curious if you can share. It's hard to imagine the entire electronics segment not having more to add to the data center story. We've discussed this on previous calls. Are you working on any additional products, additional crossovers, just beyond test and measurement that can take your non-grid business into grid-related products?

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

Yeah, we actually.

Mike Shlisky
Mike Shlisky
Managing Director at D.A. Davidson

Is that not part of the slide in all your discussions? Sorry, go ahead.

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

It is not part of the slide. We do a few million dollars from our legacy Edge business into grid. It supports basically diagnostic equipment and instrumentation that go into grid distribution and monitoring systems. We are exploring ways to combine our sales force so we can ramp that up. That's not on this page that Ademir showed you. Longer term, though, we're quite interested in this evolution and development of an 800-volt DC architecture, which will be not only in data centers, but just it will be an architecture across all electrification and intelligent systems. We're working on development of products to support that architecture. That's a few years away from making a penetration in the industry, but we're working on that, and long term, that's a big opportunity for us.

Mike Shlisky
Mike Shlisky
Managing Director at D.A. Davidson

Got it. Thanks for that. I also wanted to turn to some of the growth you've been seeing in the Aerospace & Defense segment. I think both aerospace and defense have quite a few tailwinds behind them coming up here. Maybe we just touch on the defense part with global conflicts that are kind of burning out there. Always sad to see it, but it is certainly happening. I know that some of your products serve the missile industry and certain military aircraft. I'd be curious as to if you could tell us a little about the portfolio of opportunities you've got going forward in FY 2027, FY 2028, and also whether any of that is included in some of your organic projections. Sometimes these things order kind of quick turn or last minute and be tough to put in there. I'm just kind of curious whether there's some upside if we start seeing even more defense spending going forward.

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

In the investor presentation that we started using a month or so ago, we showed a projection of our missile business, which I think last year was $9 million. This year in the teens. We see that growing to between $40 million and $80 million over the next four years. We're confident in that $40 million number. We are getting increased levels of orders for the programs we're on, which is SAM-3, PrSM. We do parts that go into Patriot's system as part of our legacy electronics business. We also are doing development on future generation missile programs. We do see upside to that, and it is quite active, as you say.

Mike Shlisky
Mike Shlisky
Managing Director at D.A. Davidson

All right. Well, thanks much for the information. I'll pass it along.

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

Thank you.

Christopher Howe
Christopher Howe
Director of Investor Relations at Standex International

Thanks, Mike.

Operator

Thank you. Your next question comes from Chris with CJS Securities. Please go ahead.

Chris Moore
Chris Moore
Analyst at CJS Securities

Hey, good morning, guys. Thanks for taking a couple.

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

Morning. Yep.

Chris Moore
Chris Moore
Analyst at CJS Securities

Maybe just start with electronics overall. 12.9% organic growth Q4 looks like double digit in fscal 2027. Can you provide a little more detail here? Is this all Grid, or are you seeing some kind of increasing contribution from kind of the core electronics business?

Ademir Sarcevic
CFO and Treasurer at Standex International

Yeah. Hi. Good morning, Chris. It's Ademir. It's not just Grid. Grid is extremely strong for us, been strong for us, but we are seeing a pretty nice uptick and increase in demand in kind of our core businesses, Detect and Edge. If you kind of look at our book-to-bill in the last quarter, every single one of our business units was over 1.2 book-to-bill. If you kind of look at our sales progression over the FY 2026, we did, I think, $110 million in Q1 of 2026, $115 million in Q2, $120 million in Q3, about $129 million in Q4. We expect that to continue to increase gradually through to FY 2027.

Ademir Sarcevic
CFO and Treasurer at Standex International

When we say, for example, in double-digit organic growth in electronics in Q1 of FY 2027, that's more like high teens or low 20% if you compare it to the base of 110. Between these new products that launches, between kind of a general economic strength we are seeing in APAC region right now and all this strength and demand in Standex Grid, we feel pretty confident that we'll be able to achieve the double-digit organic growth in electronics in FY 2027. If few things work our way, could be higher than that.

Chris Moore
Chris Moore
Analyst at CJS Securities

Got it. Very helpful. Grid, at one point you talked about EBITDA margins in the 40% range, suggesting that was likely not sustainable, but north of 30 was. Are we getting closer to that 30% range or just any color there?

Ademir Sarcevic
CFO and Treasurer at Standex International

Our margins in Standex Grid are continuing to be very strong, kind of in line to historical levels. They have not declined.

Chris Moore
Chris Moore
Analyst at CJS Securities

Got it. Maybe just the last one from me. Can you talk a little bit about the early payment for the Narayan shares, which I am all for. Given the growth in Standex Grid, all things being equal, I assume the holders would likely wait until year four, allow the value of the shares keep increasing before your right to repurchase kicked in. I'm guessing there was some incentive payment to get the holders to make that early conversion. You paid $64 million for the remaining 9.9%. Can you just maybe walk through the math a little bit in a little more detail?

Ademir Sarcevic
CFO and Treasurer at Standex International

Yeah, sure, Chris. Great question. As you kind of know us for a while, whenever we look to do an acquisition, we always want to make sure there's a management continuity. We look at kind of few things for every acquisition. We look at strategy, we look at, obviously, financially has to make sense, and then culturally. As part of that assessment, we always want management to stick around for a few years and kind of help us learn the business and help us grow the business to the next level. We have been working together now with Amran Narayan in a leadership for almost two years, and the partnership and collaboration has been exceptional. Probably, we always thought it's going to be strong and good, but it's been even better than we thought. It's really a great relationship. You're right.

Ademir Sarcevic
CFO and Treasurer at Standex International

We didn't have the right to start purchasing shares until year four. We reached out to the owners to see if we can renegotiate an early buy-in, and we did have to pay a little bit of a higher multiple based on the trailing 12 months EBITDA. We paid about 15x multiple to settle those shares. The reason, frankly, if you think about future growth and investments we have to make, and in order to expedite some of these decisions, and frankly, to remove some of the accounting complexities around tracking how these investments are made, who makes it, what adjustments to be made. We approached them and we settled it at the $64 million or about 15x trailing 12-month EBITDA.

Ademir Sarcevic
CFO and Treasurer at Standex International

The other thing I will tell you, if you add what we paid in October 2024 for the business, and you add this additional $64 million and compare it to the trailing 12-month EBITDA of FY 2026, the multiple would be about seven to eight times. It's a great deal for Standex. We feel also it's a great deal for Amran and Narayan, and ownership and people, because it's really one of those things where 1+1 makes three. We are very excited to continue working with them. That's the story behind it.

Chris Moore
Chris Moore
Analyst at CJS Securities

That's really helpful. Perfect. I will leave it there. Thank you very much.

Ademir Sarcevic
CFO and Treasurer at Standex International

Thanks, Chris.

Operator

Your next question comes from Ross with William Blair. Please go ahead.

Ross Sparenblek
Ross Sparenblek
Analyst at William Blair

Hey, good morning, gentlemen.

Ademir Sarcevic
CFO and Treasurer at Standex International

Ross.

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

Morning.

Ross Sparenblek
Ross Sparenblek
Analyst at William Blair

Hey, guys. Just starting with electronics on the margin front here, can you maybe help us size the growth investments in the quarter and what the impact of this transitory operational issues are?

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

Yeah, let me start with that. Ademir can pick up. The transitory issues, let's just start with that. In our Edge, the business we used to call magnetics, we implemented an ERP system in two large plants, complex plants in the U.S. Right about, I think December, we went live. That created a lack of visibility for that team. It slowed down some problem-solving. It impacted their ability to execute and drive the things they had to drive. At the same time, their backlog was growing, and their book-to-bill is terrific in that business. The impact on margins in that business was in just $2 million, just over in the quarter. We've got some new folks involved in driving the corrective actions there. We see that turning the corner. Truly is transitory. We'll get our arms around it and get that back on track.

Ademir Sarcevic
CFO and Treasurer at Standex International

Yeah. Ross, as we think about margin progression in electronics and in FY 2027, we clearly see an opportunity to expand the margin, even with some of these growth investments that we are making. It is our objective to get to that 30% number pretty soon.

Ross Sparenblek
Ross Sparenblek
Analyst at William Blair

Okay. I guess I'm just trying to gather when these growth investments start to step down. Do they continue into this time next year as the new Texas facility stood up and is going to be what? $1 million-$3 million a quarter?

Ademir Sarcevic
CFO and Treasurer at Standex International

I think most of the investments. If you think about investments, just the start of Croatia, there's a little bit of a cost that you have to have before you start production. I know we are starting to get that ramped up, we think that's going to normalize in the upcoming quarters. Mexico, we already have a facility. We have a fixed cost base already. We don't think that's going to give us a lot of margin. I don't think that's going to give us a margin compression. There is some investments we have to make in people. Again, all in all, we feel as we closed FY 2026, that we have margin expansion opportunities in FY 2027, and we'll continue driving productivity and price to offset some of those growth investments and get the margins up to what we think they should be.

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

Like we said, we see margin expansion in the year. At the same time, we're adding a handful of people to the Standex Grid expansion.

Ademir Sarcevic
CFO and Treasurer at Standex International

Right.

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

We continue to grow selectively the engineering teams for new product development.

Ademir Sarcevic
CFO and Treasurer at Standex International

Right.

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

We're paying for that with leverage and gross margin improvements.

Ross Sparenblek
Ross Sparenblek
Analyst at William Blair

Okay. No, that's helpful. For the legacy electronics, do you guys know where those orders shook out? The consolidated was pretty strong.

Ademir Sarcevic
CFO and Treasurer at Standex International

Yeah. No, the overall book-to-bill was about 1.27. The book-to-bill, Ross, for each of the even for the legacy businesses in the quarter was over 1.2. Strong book-to-bill across the board.

Ross Sparenblek
Ross Sparenblek
Analyst at William Blair

Okay. It seems like you guys are clipping above what you noted the prior capacity was. You put up $156 million of orders in the quarter. Our last discussion, you were doing around $50 million in the first quarter and saying that you're constrained on both businesses. I guess the question really here is, what's changed? Is it an unlock on the Grid side and just progress with Mexico and Croatia? Are you guys assessing the footprint in Japan as well?

Ademir Sarcevic
CFO and Treasurer at Standex International

Yeah. No, as far as Japan, which is kind of a bread and butter reed switch business, we do have additional capacity in Japan to be able to service some of the higher demand. We probably think we can do about, call it 20%-25% more in terms of units produced in Kofu in FY 2027 versus what we did in FY 2026.

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

We have.

Ademir Sarcevic
CFO and Treasurer at Standex International

Capacity is there.

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

Some new machines came online recently. We got a couple more coming online in the year or so.

Ademir Sarcevic
CFO and Treasurer at Standex International

That's right. Yeah, the orders are strong. As you know, it takes us a little while to convert from backlog to sales. We are a few couple of quarters behind, but we feel good about book-to-bill. We feel good about where the orders are, and we're just going to continue to execute and get our sales up.

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

With the capacity.

Ademir Sarcevic
CFO and Treasurer at Standex International

With the capacity, right.

Ross Sparenblek
Ross Sparenblek
Analyst at William Blair

Maybe just one more really quick. It looks like your Standex Grid orders shook out around, call it $55 million. If that's the case, it seems a little light. Do you think you're moving fast enough on your capacity ramp here? You called out $180 million-$200 million for FY 2027. If this demand persists, which we expect it will, we're already a bit behind in that range.

Ademir Sarcevic
CFO and Treasurer at Standex International

Look, we feel pretty good that we can hit that number that I went through early on the call between $180 million-$200 million. We are moving as quickly as we can, Ross. Some of this things takes time as far as getting the machinery in, we are optimistic that we can capture the market opportunity.

Ross Sparenblek
Ross Sparenblek
Analyst at William Blair

All right. Well, good problems to have. Congrats, guys.

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

Cheers.

Ademir Sarcevic
CFO and Treasurer at Standex International

All right.

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

Exactly.

Operator

All right. Thank you. Your next question comes from Matt with ROTH Capital. Please go ahead.

Matt Koranda
Matt Koranda
Managing Director at ROTH Capital

Hey, guys. Good morning. Just wanted to go back to the slide four that you guys were presenting on the capacity increase. I guess the range of growth profiles that you highlighted are kind of in the low 20s to +30%.

Matt Koranda
Matt Koranda
Managing Director at ROTH Capital

in terms of the compounded annual rate of growth if I look at it through fiscal 2030. How stairsteppy is that growth supposed to be? It sounds like it's relatively smooth based on what Ademir kind of highlighted for this year, which I'm gleaning is probably in the low to mid-20s in terms of the growth rate for Grid for 2027. Maybe it's relatively smooth. Maybe just talk about how chunky is that growth that you expect over the next few years, given the capacity increases that you're highlighting. There's this range that you give, I guess $100 million of upside. Maybe can you talk about where that's derived from and how we should think about the, I guess, the range of the $340 million-$440 million?

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

Well, let me say a word, then let Ademir jump in. Recall when we acquired the business, in managing expectations, we said, "Plan on 15% growth. They've been growing faster than that, but we need to get to know them. They need to get to know us. We need to have confidence in our ability to add capacity and understand the certainty of demand." Well, now we're putting out, we're pretty confident in this +20%. There may be upside to that as we execute. We tried to reflect in here. We have high confidence in that dark shaded, that lower number, which is $170 million increase, $150 million-$340 million. The additional $100 million on there is there's a little upside to all of these if the demand continues, and we execute well. It's just to recognize that we live in a somewhat uncertain world, so we plan for a scenario of capacity expansion that we're confident is that within that range of $340 million-$440 million, is where we'll end up.

Ademir Sarcevic
CFO and Treasurer at Standex International

Yeah, that's right. I couldn't have said it better.

Matt Koranda
Matt Koranda
Managing Director at ROTH Capital

Okay, just in terms of the smoothness of that growth rate, it sounds like it's relatively, I guess, smooth across the years is how we're thinking about it.

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

Yeah.

Matt Koranda
Matt Koranda
Managing Director at ROTH Capital

Are there any long pole items in that stairstep that you provide?

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

Well, Ademir did a great job explaining it. That some of these things are expanding right now. We'll see a little more capacity every month from the lean efforts across the businesses. Mexico and Croatia are producing, so they're ramping up. Texas doesn't come online until next year, so that's maybe a long pole, but that comes in in the later years of this, as does the India footprint.

Matt Koranda
Matt Koranda
Managing Director at ROTH Capital

Right.

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

Everything else will deliver capacity this year.

Ademir Sarcevic
CFO and Treasurer at Standex International

That's right.

Matt Koranda
Matt Koranda
Managing Director at ROTH Capital

Okay. All right, great to hear. I guess, shifting gears to the A&D segment. I guess there was a pretty big step up in operating margins in the quarter. Just wanted to hear a little bit about sort of, I guess it sounded like project mix that was the driver. How repeatable is that, I guess, over the next year or so? Are we reaching a new level, in operating margins in A&D? Is there potential to reach a new level that's kind of similar to the fourth quarter rate that you did?

Ademir Sarcevic
CFO and Treasurer at Standex International

Yeah. Matt, we always said that A&D should be really around +20% adjusted operating margin. They closed a little higher than that last quarter. The business is a little bit lumpy, as you know, depending on project mix. You could have one quarter 22%, next quarter 18%. We do believe as you look at it over a 12-month period, that business should be over 20% operating margin. They do a really good job supporting their key customers. They're running some productivity initiatives in the plants to make them more efficient. The market demand is there. We are pretty excited about not only the margin opportunity in A&D, but also the organic growth opportunity as well. We do feel that kind of a 20% operating margin for A&D is not an unreasonable expectation.

Matt Koranda
Matt Koranda
Managing Director at ROTH Capital

Yeah. Okay, great. Maybe just last one, the fiscal 2028 target that you put out of $1.1 billion in sales. If I kind of plot that against the 2027 outlook roughly, that would imply sort of mid-teens growth rate in 2028. I guess, is that all organic that we're assuming? Are we assuming any kind of tuck-ins or M&A activity that's embedded in the 2028 numbers you put up?

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

Yeah, no M&A. I think if we do two years at 12%, we get there. When we put that number out, it's about 18 months ago, we explained the contributions to that new product sales, fast growth vectors. Those 2 parts of the business, they're doing their job. They're growing as we expect or even faster. We also said there's, I think a 3% general industry growth. That kind of lagged for the last year and a half. That is starting to pick up. We're confident about the things we control. In the range that we gave, looking forward to next year, upper single digit to low teens.

Matt Koranda
Matt Koranda
Managing Director at ROTH Capital

Yeah.

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

We get in that range, that keeps us on track. I'd say if you want to handicap it, we said by FY 2028, we'll be at that range. Maybe it slides by a quarter or two, but we're very confident about the progression of our growth initiatives and how they'll get us there.

Ademir Sarcevic
CFO and Treasurer at Standex International

Yeah, Matt, if we just look at kind of the opportunities within electronics and A&D, we are pretty optimistic about our opportunity to capture some of this growth in the end markets, as well as some of the new products we have coming up. That's going to be a growth engine.

Matt Koranda
Matt Koranda
Managing Director at ROTH Capital

All right. Excellent. I'll leave it there. Thanks, guys.

Operator

All right. Thank you, ladies and gentlemen. There are no questions. At this time, I will turn the call back over to David Dunbar, Chief Executive Officer. Please go ahead.

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

All right, thank you. I want to thank everyone for joining us for this call. As I mentioned at the beginning of the remarks, we enter 2027 a new company. We are truly an engineered components company. We sell picks and shovels to a variety of industries, where we work tightly with our customers. Our new product development engine is contributing meaningfully to growth. Our fast growth markets are over 30% of our sales now. We serve large markets that provide a long runway of growth, both organically and inorganically in these large attractive markets. It's so gratifying to see this play out for us. I want to thank all the employees, our board of directors, the shareholders who create an ecosystem of advice and input and reflection to keep us moving in the right direction.

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

I also want to thank Alan Glass, who's here with us now, who's been, this is what, like the 40th call or something you've been with us?

Ademir Sarcevic
CFO and Treasurer at Standex International

Something like that.

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

Been through many of the major events over the years. We appreciate Alan's contributions over the years. With that, we thank you all, and we look forward to reporting to you at the end of this next quarter on our first quarter 2027. Thank you.

Operator

Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect.

Executives
    • Christopher Howe
      Christopher Howe
      Director of Investor Relations
    • David Dunbar
      David Dunbar
      Chairman, President, and CEO
Analysts
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