Release Date: August 02, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Standex International Corp (SXI, Financial) achieved record profit and cash generation in fiscal 2024 despite challenging market conditions.
- The company expanded its gross margin by 90 basis points and operating margin by 60 basis points in fiscal 2024.
- Research and development investments reached an all-time high, increasing by $3.3 million to 2.8% of sales.
- Standex International Corp (SXI) plans to release a record number of new products in fiscal 2025, contributing over 100 basis points of incremental growth.
- The company maintains a strong balance sheet with $347 million of available liquidity and declared its 240th consecutive quarterly cash dividend.
Negative Points
- Total revenue decreased by approximately 4.3% year on year in the fourth quarter of 2024.
- Sales in the electronics segment were down due to continued soft demand in appliances and general industrial end markets in China and Europe.
- The engraving segment experienced a 22.8% revenue decline due to slower demand in North America.
- Net cash provided by operating activities decreased to $28.7 million in the fourth quarter of fiscal 2024 from $40.4 million a year ago.
- The company anticipates moderately to significantly lower revenue in the engineering technologies segment due to unfavorable project timing.
Q & A Highlights
Q: Can you explain the development phase of new products alongside customers and the expected impact on sales in the first few years?
A: David Dunbar, CEO: Our new product ideas come from customer needs, and we work closely with them to develop specifications. It typically takes about three years for a new product to ramp to full volume. We expect new products to contribute over 100 basis points to sales growth in fiscal 2025, with a full pipeline for future releases.
Q: How confident are you in achieving your five-year targets by 2028, given historical performance?
A: David Dunbar, CEO: Despite a step back this year due to market conditions, we expect market recovery and continued growth in fast-growth markets and new product development to help us meet our targets. We remain confident barring any unforeseen economic disruptions.
Q: Which segments are expected to improve in the second half of fiscal 2025, and which might face challenges?
A: David Dunbar, CEO: We expect growth in engineering technologies, particularly in defense, aviation, and space. Electronics, especially in semiconductor manufacturing, should also improve. However, the engraving segment in North America may face challenges due to OEM platform delays.
Q: Is the current level of new product introductions expected to be the norm going forward?
A: David Dunbar, CEO: Yes, we anticipate maintaining this cadence of new product launches, supported by increased R&D spending. We aim to release new products consistently across all businesses.
Q: Can you provide an update on the M&A environment and any potential divestitures?
A: David Dunbar, CEO: We have an active pipeline of acquisition opportunities, primarily with privately owned businesses. While we are optimistic about potential deals, there are no immediate plans for divestitures, as we are satisfied with our current portfolio.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
