Standex International Corporation

Good day and welcome to the Standex International Fiscal Third Quarter Results Call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. Please note this event is being recorded. I would now like to turn the conference over to Chris Howe, Director of Investor Relations. Please go ahead.

Thank you, Operator, and good morning. 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, which is EBIT excluding restructuring, purchase accounting, acquisition-related expenses, and one-time items, EBITDA, which is earnings before interest, taxes, depreciation, and amortization, adjusted EBITDA, which is EBITDA excluding restructuring, purchase accounting, acquisition-related expenses and one-time items, EBITDA margin, and adjusted EBITDA margin. 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, pre-operating cash flow, and pro forma net debt to EBITDA. These non-GAAP financial measures are intended to serve as a compliment 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, Adamir Sarjavik.

Thank you, Chris. Good morning and welcome to our fiscal third quarter 2023 conference call. We're very pleased with the results. We continued our trend of record operating margin. Sales into fast growth markets continue to accelerate. New product developments and new application pursuits continue to expand across our businesses. I want to thank our employees, our executives, and the board of directors for their continued dedication and support. Now, if everyone can turn to slide three, key messages. We reported 1.5% organic revenue growth year on year as three of our five business segments exhibited organic revenue growth. Our long-term growth profile continues to improve as sales into fast growth end markets grew 40% from prior year to $23 million in the quarter. We anticipate this revenue stream to grow by approximately 50% in fiscal year 2023 to approximately $85 million. Overall, we anticipate organic revenue growth in fiscal year 2023 from four of our five business segments. Profitability continues at record levels. The continued effectiveness of our price and productivity actions maintained our record margin set last quarter, representing our eighth consecutive quarter of record level adjusted operating margin. Consolidated adjusted operating margin of 15.2% in fiscal third quarter 2023 was a 140 basis point increase year on year. Three of STANDEX's five business segments expanded margin year on year. Four of our five segments reported operating margin near 15% or greater, with our specialty solution segment delivering 22.2% margin. We are pleased to see continued improvement in our ROIC, which is now at 12% on an annualized basis through Q3 FY23. With free cash flow of $17.6 million and the divestiture of ProCon in the quarter, our net debt to EBITDA ratio is now at zero. This leaves us approximately $344 million of available liquidity to invest in our healthy funnel of organic growth and acquisition opportunities. Adam here will focus our financial performance liquidity position, and capital allocation in greater detail later in the call. In fiscal fourth quarter 2023, on a sequential basis, we expect similar revenue with organic sales growth offsetting the impact of the pro-con divestiture. We expect similar to slightly higher adjusted operating margin compared to fiscal third quarter 2023. On a year-on-year basis, we expect mid to high single-digit organic growth offset by the pro-con divestiture and significant adjusted operating margin improvement, driven by continued realization of pricing and productivity initiatives. We reaffirm our long-term financial outlook by fiscal year 2028. These targets include high single-digit organic growth to greater than $1 billion in sales, adjusted operating margin greater than 19%, return on invested capital of greater than 15%, and free cash flow conversion at approximately 100% of GAAP net income. Let's turn to slide four, fast growth end markets. Here we highlight our fast growth end markets and how they are driving growth across STANDEX. In the renewable energy end market, our isolation relays, which are able to withstand high voltages, play a critical role in solar inverters to enable safe and efficient switching. Moving to electric vehicle applications, the physical properties of our reed relays are designed to withstand high voltage batteries in safety circuits. Here we anticipate to benefit from increased content on electric vehicles versus traditional combustion engine vehicles. In soft trim, our highly efficient soft trim tool improves manufacturing productivity and reduces maintenance costs. For the commercialization of space, we are a leading solution supplier of fuel tank domes for launch vehicles. Our differentiated spin forming capability has allowed us to enter new and exciting development projects like the next generation prototype zero emission aircraft. Shifting to defense, new defense power management needs are driving demand for our custom magnetic solutions, such as critical hardware for new hypersonic, interceptor, and tactical missile programs. I will now turn the call over to Ademir to discuss our financial performance in greater detail.