Standex International Corporation

Good morning ladies and gentlemen and welcome to the Standex International Fiscal 3rd Quarter 2025 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. 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, May 2, 2025. I would now like to turn the conference over to Christopher Howe. 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, 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, Adamir Sarcevic.

Thank you, Chris. Good morning, and welcome to our fiscal third quarter 2025 conference call. Following strong operating performance in the fiscal second quarter, we achieved several new records in our fiscal third quarter. These achievements include record sales since the divestiture of the refrigeration business in April 2020, record adjusted gross margin of 42.3%, and record adjusted operating margin of 19.4%. Our growth engine continues to develop with sales into fast-growing end markets representing a greater percentage of total sales. I am also encouraged that new product sales are increasing above our projections and have added approximately 3% to our sales year-to-date. Once again, our teams have demonstrated their ability to navigate through difficult market conditions and deliver strong operating margins with price and productivity actions. Now, if everyone can turn to slide three, key messages. In the third quarter, sales increased 17.2% with contributions from acquisitions partially offset by organic decline. Electronics book-to-bill was 0.98, indicating that markets are stable. And electronics organic bookings were up more than 10% year-on-year. Sales from the Ameren Narayan Group were greater than $33 million, with book-to-bill of 1.04. The Ameren Narayan Group continues to perform ahead of our expectations. In the quarter, we made significant progress in planning expansions in India, Europe, and the USA. In all regions, customer commitments extend years into the future and give us confidence to expand our existing facilities in India and the United States. At the request of the largest European electrical equipment OEMs, we are beginning work on a greenfield site in Europe and expect to be shipping product from that location by the end of our first quarter, 2026, less than six months from now. Our fiscal third quarter sales into fast growth markets increased to 29% of total company sales. Sales into fast-growth markets were primarily driven by electrical grid, commercialization of space, defense applications, and renewable energy. New product sales totaled $13.4 million in the fiscal third quarter, which doubled year on year, contributing approximately 3% to top-line sales, ahead of our goal of 2%. I am 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 record-adjusted QRIS margin of 42.3%, up 140 basis points sequentially, and 230 basis points year-on-year, and record-adjusted operating margin of 19.4%, up 70 basis points sequentially, and up 280 basis points year-on-year. The integration of Ameren, Norion, and McStarlight are progressing well. On a sequential basis, in fiscal fourth quarter 2025, we expect slightly to moderately higher revenue, driven by the impact of recent acquisitions, higher sales into fast growth end markets, and realization of pricing initiatives. We expect slightly to moderately higher adjusted operating margin due to higher revenue and realization of productivity actions, partially offset by tariff costs and targeted investments in selling, marketing, and R&D. With three new products just released in the fiscal third quarter, we have released 13 products year-to-date, achieving our previously communicated target for over a dozen products in the fiscal year. Sales from new products are tracking ahead of expectations and are expected to contribute over 200 basis points of incremental growth. Now, if everyone could turn to slide four, tariff and inflation updates. Before we discuss our fiscal third quarter in more detail, I would like to address the recent tariff announcements and how we are navigating their impact. Our customer intimacy business model requires that our plants are near customers, limiting exposure to tariff and trade disruptions. We have in-region, four-region operations, and greater than 85% of our products are manufactured and sold within the same region. This serves as a natural buffer to any impact tariffs may have on economic activity. In addition, most of our customer relationships are based on a deep value proposition and long-term partnership that typically only gets stronger during turbulent times, positioning us well for the long term. To put another lens on this, imports of material inputs to U.S. operations are a relatively small percentage of total cost of goods sold. Approximately 6% of our cost of goods sold are due to imports of materials to U.S. operations from China. Approximately 4% are from India, and approximately 3% are from other countries. We have started implementing additional productivity actions and select price increases and working to optimize our supply chain to mitigate the impact of tariffs. An intangible benefit of this uncertain economic environment is that our management teams around the world are coming together, as they did in COVID, to simultaneously protect margins and support strategic priorities, and strengthen collaboration across the enterprise, a demonstration of our growing and strong culture. We plan to continue to invest in our key growth priorities and in new product development as we work with customers on their next-generation product platforms. We came out of the COVID downturn a much stronger company, and I anticipate the same results during this disruption. We are confident in our agility, resilience, and business-by-business execution over the short and long term to continue to deliver for our shareholders. Now, if everyone can turn to slide five, highlighting our recent acquisition. In early February, Standex acquired McStarlight, a leading provider of complex sheet metal aerospace components, for $56.5 million in cash. With facilities in Harbor City, California, McStarlight designs and manufactures cold deep draw and bulge formed aviation components, including single piece lip skins, nozzles, complex metal assemblies, and tooling to support production hardware. We have admired McStarlight for many years, and this represented an ideal bolt-on acquisition for engineering technologies. The integration has been seamless since its customer base, product line, and technologies are highly complementary to our SpinCraft business. We are excited about our expanded product breadth and forming capabilities in commercial aviation, space, and defense applications. With the addition of McStarlight, the addressable market within engineering technologies expands by greater than $300 million. McStarlight enables expansion into wide-body, military, and MRO Lipskin segments and into space and defense sectors. Likewise, it expands SpinCraft's Lipskin addressable market by three times and doubles addressable missile solutions while providing opportunities to cross-sell solutions to existing space customers. I will now turn the call over to Ademir to discuss our financial performance in greater detail.