Standex International Corporation

Good morning, and welcome to the Standex International Fiscal First Quarter 2024 Financial 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 Christopher Howe, Director of Investor Relations. Please go ahead.

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 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, free operating cash flow, and pro forma net debt to EBITDA. 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, Adamir Sarcevic.

Thank you, Chris. Good morning, and welcome to our fiscal first quarter 2024 conference call. Our fiscal first quarter results highlight the quality of our businesses as we continue our trend of record operating margin performance. On the top line, sales into fast growth markets continue to grow, as did sales of new products and new applications. 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 solid fiscal first quarter 2024 results. Now, if everyone can turn to slide three, key messages. In the first quarter, we reported 2.5% organic growth year on year, led by our engraving and engineering technologies business segments. Sales into fast growth end markets grew 20% year on year to $20 million in the fiscal first quarter 2024. We anticipate this revenue stream will reach approximately $100 million in fiscal year 2024. In addition, we continue to work on an active pipeline of inorganic opportunities to further strengthen our competitive positioning and gain access to value-added applications within our electronics segment. Earlier this week, we signed a definitive agreement to acquire Sanyu Switch Company, a designer and manufacturer of reed relays with a particular strength in test and measurement equipment and other switching applications. This acquisition significantly strengthens our product portfolio in electronics and deepens our access to key customer accounts. We also continue to generate strong profitability from the execution of our price and productivity initiatives across segments and achieved a 10th consecutive quarter of record adjusted operating margin. Consolidated adjusted operating margin of 15.9% in the fiscal first quarter 2024 was a 90 basis point increase year on year. Our margin expansion was driven by our scientific, engineering technologies, and specialty solutions business segments. Three of our five segments reported adjusted operating margin greater than 20%, and all five segments reported adjusted operating margin greater than 16.5%. We achieved free cash flow of $12.1 million in the quarter, the highest ever free cash flow generation in our fiscal first quarter. Our consistent and improved cash flow generation further highlights the quality of our businesses. Our net debt position as of September 30th was $21.7 million. We had approximately $347 million of available liquidity to invest in our healthy funnel of organic growth and acquisition opportunities. We are also very pleased to see continued improvement in our ROIC. Annualized fiscal first quarter 2024 ROIC of 12.7% improved 60 basis points year on year. On a sequential basis, In fiscal second quarter 2024, we expect slightly lower revenue as continued softness in China and European markets served by electronics and unfavorable foreign currency are partially offset by more favorable project timing and additional development work in engineering technologies, as well as the contribution from our Mintronics acquisition. We expect similar to slightly higher adjusted operating margin compared to fiscal first quarter 2024, due to 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 percent, return on invested capital of greater than 15 percent, and free cash flow conversion at approximately 100 percent of GAAP net income. Let's turn to slide four. highlights from our Sanyu switch company acquisition. We announced earlier this week that we signed a definitive agreement to acquire a Japanese-based Sanyu switch company. Let me begin with an overview of the company. With corporate headquarters in Tokyo, Japan, Sanyu designs and manufactures read relays, test sockets, and testing systems for semiconductor and other electronics manufacturing and other switching applications. With a 50-year history, Sanya was highly regarded and respected globally with a reputation for high-quality products and a customer-focused vulture. The transaction will be funded by Standex's cash balance and is expected to close before January 31st, 2024. The valuation is in line with historical multiples paid. We expect the acquisition to be accretive to earnings per share and to achieve a double-digit return on invested capital in our first full year of ownership. The acquisition of Sanyu will add breadth to our product portfolio, expand key account relationships, enhance our engineering and manufacturing capability, and strengthen our geographic footprint. With the Sanyu and Mintronics acquisitions, we will essentially complete the reinvestment of proceeds from our Procon divestiture, and in the process, deliver nearly double the annualized revenue and operating income lost from the divestiture in the first year of ownership. We returned the remaining cash to shareholders through share repurchases and an increased dividend. I will now turn the call over to Ademir to discuss our financial performance in greater detail.