Standex International Corporation

Good morning, ladies and gentlemen, and welcome to the Standex International Fiscal Check-in Quarter 2025 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 0 for the operator. This call is being recorded on Friday, January 31, 2025. I would now like to turn the conference over to Mr. 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 STANDX'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. 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.

Thank you, Chris. Good morning, and welcome to our fiscal second quarter 2025 conference call. Following strong operating performance in the fiscal first quarter, we delivered record adjusted operating margin in the fiscal second quarter, supported by the highest sales since the divestiture of the refrigeration business in April 2020. Our sales into fast-growing end markets continue to expand as a percent of the total. Our new product sales are increasing above our projections, and our team's focus on price and productivity continues to deliver strong operating margins. For the remainder of the year, based on increasing order rates and customer activity, we continue to expect our end markets to improve, with the recent Amaran Narayan Group acquisition providing an additional tailwind. Today, we will provide significant updates to our fast-growth market sales, as well as revised and improved 2028 financial expectations. Now, if everyone can turn to slide three, key messages. In the second quarter, sales increased to 6.4%, with contributions from acquisitions partially offset by organic decline. Sales from the Ameren and Orion Group exceeded our expectations. Though organic sales were down in electronics due to softness in automotive and general industrial end markets in Europe and North America, our book to bill was 1.02, indicating that markets are improving and that our commercial strategy is taking hold. With two months of Amer and Orion sales into the electrical grid end market, our fiscal second quarter sales into fast growth markets were over 20% of total company sales. Sales into fast growth markets were primarily driven by the electrical grid, commercialization of space, and defense applications. I will share more detail on our view of fast growth markets later in the call. New product sales totaled $14.5 million in the fiscal second quarter, which increased approximately $3.5 million sequentially and more than doubled year on year. I'm especially pleased that we continue to demonstrate resilient operating performance from the execution of our price and productivity initiatives and from inorganic investments. As a result, we achieved a record adjusted operating margin of 18.7%, up 170 basis points sequentially, and up 150 basis points year on year. led by adjusted operating margin of 27.6% in the electronics business segment. The integration of Ameren and Orion is progressing well and ahead of plan. On a sequential basis in fiscal third quarter 2025, we expect moderately to significantly higher revenue, driven by the impact of the recent Ameren and Orion group acquisition and improving overall demand in electronics. We expect slightly to moderately higher adjusted operating margin due to higher revenue, partially offset by higher investments in selling, marketing, and R&D. For the remainder of the fiscal year, we continue to expect our end markets to improve, with the electrical grid end market providing an additional tailwind. With seven new products just released in the fiscal second quarter, we remain positioned to release more than a dozen new products in fiscal 2025. Sales from new products are cracking ahead of expectations and are expected to now contribute approximately 200 basis points of incremental growth. Now, if everyone can turn to slide four, an update on a recent acquisition. The acquisition of the Ameren Orion Group last October was the largest transaction in the company's history. Considering the magnitude of the transaction, I'm extremely pleased with how our teams have adapted, a testament to the cultural fit of this acquisition. The integration is progressing well, and we have achieved all major integration milestones in the areas of finance, HR, and IT. When we announced this acquisition, we estimated calendar year sales in 2024 of approximately $100 million. We are happy to report that the Ameren Orion Group exceeded this target with fiscal second quarter results higher than anticipated. In fact, the month of December was the highest revenue month in its history. Their contribution led to sales in the fast-growth markets exceeding 20% of total company sales for the first time. The growth in Dynamron Orion is being driven by three powerful forces to increase global electrical capacity, increasing living standards in all countries of the world, modernization of existing aging grid infrastructure, and incremental demand from data centers. We anticipate the Amer and Orion Group to continue growing revenue at a healthy double-digit rate in calendar year 2025. Now, if everyone can turn to slide five, fast-growth markets redefined. Three years ago, we identified end markets driven by long-term secular trends that provide above-average growth opportunities. Of these markets, those that provided STANDEX the best growth opportunities were renewable energy, electric vehicles, soft trim, commercialization of space, and the electronics defense market. Aggregating these sales into a single number provided a shorthand to explain the growth potential of our company. Our fast growth market sales has become an important number for our shareholders as well as for our management as we review priorities. In those three years, our fast growth market sales have grown from $40 million to nearly $100 million. Space, defense, and electric vehicles have been the primary drivers of the growth and remain attractive. Electric vehicle sales have decelerated, but are still growing around the world, and combined with our increased content per vehicle, still represent an above-market growth opportunity for us. Other markets like 5G and soft trim have not provided the lift we expected. Our recent acquisition makes a step-jump change to our growth profile. 100% of the sales of the Amer and Orion Group are into the fast-growing market of the electrical grid, doubling our fast-growth sales. Considering this acquisition and the degree to which the global environment has shifted versus three years ago, we are taking a fresh look to more accurately reflect the company's faster growing markets and to show how we continue to pivot towards markets with above average growth. As the company is comprised today, our new fast growth markets are the electrical grid, renewable energy, electric and hybrid vehicles, commercialization of space, and defense. We removed soft trim and 5G, but of course, we still serve customers in these spaces. We have added the electrical grid and defense sales in engineering technologies. In the fiscal second quarter, sales into these redefined fast growth markets were approximately $43 million. In fiscal 2025, we anticipate approximately $170 million from sales into fast growth markets. By fiscal 2028, We anticipate sales in the fast-growth markets to be greater than $340 million in sales, which would represent greater than 30% of total sales. I will now turn the call over to Ademir to discuss our financial performance in greater detail.