STANDEX INTERNATIONAL CORP/DE/

Standex International Corporation is a diversified industrial manufacturer with leading positions in a variety of products and services used in diverse commercial and industrial markets. The company operates through six operating segments aggregated into five reportable segments: Electronics, Engineering Technologies, Scientific, Engraving, and Specialty Solutions. The company directs its investments towards markets with long-term, secular growth prospects such as renewable energy, electric vehicles, smart power grid, military and defense, and life sciences. International operations are conducted at 41 locations, including Europe, Canada, China, Japan, India, Southeast Asia, and Mexico, and the percentage of overall net sales from continuing international operations increased from 38% in fiscal year 2024 to 41% in fiscal year 2025.

Standex manufactures and markets products many of which have achieved a unique or leadership position in their market, however, it encounters competition in varying degrees in all product groups and for each product line. Competitors include domestic and foreign producers of the same and similar products. The principal methods of competition are industry and design expertise, product performance and technology, price, delivery schedule, quality of services, and other terms and conditions. Standex competes on the basis of Customer Intimacy in which its teams work as extensions of customers' organizations to apply expertise and technology to address needs with customer solutions. The Engraving business has become the global leader in its industry by offering a full range of services to automotive OEMs, product designers, Tier 1 suppliers, and toolmakers all around the world.

The company generates revenue through the design, engineering, and manufacturing of custom solutions or engineered components for diverse commercial and industrial markets. Most of the company's contracts have a single performance obligation representing the product or service being sold to the customer, and revenue is generally recognized at the point in time control transfers to the customer based on predetermined shipping terms. Revenue is recognized over time under certain long-term contracts within the Engineering Technologies and Engraving groups for highly customized customer products that have no alternative use and in which the contract specifies the company has a right to payment for its costs, plus a reasonable margin. The company's growth strategy is focused on four key areas: increasing presence in rapidly growing markets and applications, executing new product development in both core and adjacent market applications, expanding geographically where meaningful business opportunities exist, and undertaking strategically aligned acquisitions.

The Electronics group is a global component and value-added solutions provider of sensing and switching technologies, high precision instrument transformers, and high reliability magnetic power conversion and measurement components and assemblies. Components are manufactured in plants located in the U.S., Mexico, the U.K., Germany, Japan, China, and India, and end-user markets include appliances, electrification (electric vehicles, solar, smart-grid, alternative energy), military, medical, aerospace, test and measurement, power distribution, security, general industrial applications, and transportation. For fiscal year 2025, Electronics net sales were $400,130 ¹ and income from operations was $87,927 ² with an operating income margin of 22.0% ³. The Engineering Technologies Group is a provider of innovative, metal-formed solutions for OEM and Tier 1 manufacturers, serving applications within the space, aviation, defense, energy, medical, and general industrial markets. For fiscal year 2025, Engineering Technologies net sales were $102,595 ⁴ and income from operations was $15,428 ⁵ with an operating income margin of 15.0% ⁶. The Scientific business specializes in providing specialty temperature-controlled equipment for the medical, scientific, pharmaceutical, biotech, and industrial markets, with products including laboratory and medical grade refrigerators, freezers, cryogenic storage tanks, blood bank refrigerators, plasma freezers, ultra low temperature freezers, and environmental stability chambers. For fiscal year 2025, Scientific net sales were $72,380 ⁷ and income from operations was $17,470 ⁸ with an operating income margin of 24.1% ⁹.

The Engraving group is a global creator and provider of custom textures and surface finishes on tooling that enhance the beauty and function of a wide range of consumer good and automotive products, as well as production of specialized, differentiated parts. Texturing is achieved with either a laser or a chemical etching technique, and the business offers services including the design of bespoke textures, verification on a prototype, engraving a mold, enhancement and polishing, and on-site try-out support with ongoing tool maintenance and texture repair. For fiscal year 2025, Engraving net sales were $128,360 ¹⁰ and income from operations was $17,647 ¹¹ with an operating income margin of 13.7% ¹². Specialty Solutions is comprised of two businesses: Federal Industries, which provides merchandising solutions to retail and food service customers, and Custom Hoists, a supplier of engineered hydraulic cylinders for demanding applications. For fiscal year 2025, Specialty Solutions net sales were $86,642 ¹³ and income from operations was $14,841 ¹⁴ with an operating income margin of 17.1% ¹⁵.

On February 4, 2025, the company acquired McStarlite Co., a leading provider of complex sheet metal aerospace components, for $57.0 million ¹⁶ net of cash acquired, with its results reported in the Engineering Technologies segment. On October 28, 2024, the company acquired the Amran/Narayan Group in cash and stock transactions representing a combined enterprise value of approximately $467.5 million ¹⁷, comprised of 85% cash and 15% in Standex common stock for Amran Instrument Transformers and 90% cash and 10% in Standex common stock for Narayan Powertech Pvt. Ltd., with the cash consideration financed using cash-on-hand, existing credit facilities, and a $250 million ¹⁸ 364-day term loan. On November 18, 2024, the company acquired Nascent Technology Manufacturing for $7.6 million ¹⁹ net of cash acquired, and on November 14, 2024, acquired Custom Biogenic Systems for $4.7 million ²⁰ net of cash acquired. On May 3, 2024, the company acquired Sanyu Electric Pte Ltd for $3.5 million ²¹, and on February 19, 2024, acquired Sanyu Switch Co., Ltd for $20.9 million ²² net of cash acquired. On July 31, 2023, the company acquired Minntronix for $29.2 million ²³ in cash. In the third quarter of fiscal year 2023, the company divested its Procon business for $75.0 million ²⁴, receiving $67.0 million ²⁵ cash consideration and recording a pre-tax gain on the sale of $62.1 million ²⁶. During fiscal year 2025, the company repurchased 31,308 ²⁷ shares of treasury stock for $5.5 million ²⁸ and paid dividends of $15.0 million ²⁹.

For fiscal year 2025, net sales increased by $69.5 million ³⁰, or 9.6% ³¹, to $790,107 ³² compared to $720,635 ³³ in fiscal year 2024. Gross profit margin improved to 39.9% ³⁴ from 39.1% ³⁵ in the prior year. Income from operations was $93,549 ³⁶ compared to $101,738 ³⁷ in fiscal year 2024, a decrease of $8.2 million ³⁸ or 8.0% ³⁹. Net income attributable to Standex International Corporation was $55,760 ⁴⁰ compared to $73,074 ⁴¹ in the prior year. Diluted earnings per share from continuing operations was $4.64 ⁴² compared to $6.18 ⁴³ in fiscal year 2024. Net cash provided by continuing operating activities was $69.6 million ⁴⁴ compared to $93.3 million ⁴⁵ in the prior year.

Looking forward to fiscal year 2026, barring any unforeseen economic, global trade, or tariff related disruptions, the company expects revenue to grow by over $100 million ⁴⁶, primarily driven by mid-to-high-single-digit organic growth in Electronics, double-digit organic growth in Engineering Technologies, and the contribution from recent acquisitions. The company plans to release over fifteen new products which are projected to contribute approximately 300 bps ⁴⁷ of incremental growth. Sales from fast growth markets are expected to grow approximately 45% ⁴⁸ year-on-year and exceed $265 million ⁴⁹. In fiscal year 2026, the company is on track to further reduce its net debt to EBITDA ratio, positioning the company well to fund future organic and inorganic opportunities.

The company expects increased exposure to the high growth, high margin electrical grid end market as a result of the Amran/Narayan Group acquisition. Growth of new product sales is expected to continue to accelerate as recently released products continue to ramp and new products slated for release in 2026 enter the market. Commercial aviation and defense end markets demand is expected to increase based on current program expectations and new product development. Space markets are expected to remain attractive, with volume to slightly increase from fiscal year 2025 due to new product development for existing customers. The company expects continued stability in hybrid and electric vehicle programs despite softness in general automotive end markets and planned new platform launches.

The company expects scientific cold storage demand to decline due to anticipated effects of NIH funding cuts. Refuse and dump end markets are expected to remain stable, and stable demand levels are expected in food service equipment markets. The company expects capital spending for fiscal year 2026 to be between $33 million ⁵⁰ and $38 million ⁵¹. Depreciation and amortization expense for fiscal year 2026 is expected to be between $24.0 million ⁵² and $26.0 million ⁵³ and between $15.5 million ⁵⁴ and $17.5 million ⁵⁵, respectively.

The company expects to pay estimated interest payments of $176 million ⁵⁶ within the next five years based upon the loan balance, interest rate, and credit spread as of June 30, 2025. If taking into consideration the change in credit spread that will take effect in August 2025 and the interest rate at June 30, 2025, the amount of estimated interest payments for the next five years would be $169 million ⁵⁷. The company expects to pay estimated post-retirement benefit payments of $6.9 million ⁵⁸ during fiscal year 2026.

The company expects required contributions of $6.5 million ⁵⁹ to the United States funded pension plan for fiscal year 2026, and expects to make contributions during fiscal year 2026 of $0.1 million ⁶⁰ and $0.3 million ⁶¹ to its unfunded defined benefit plans in the U.S. and Germany, respectively.

The company's capital allocation strategy is funded by cash flow generated from operations, which is used to fund investments in capital assets to upgrade facilities, improve productivity and lower costs, invest in strategic growth programs including organic and inorganic growth, and return cash to shareholders through payment of dividends and stock buybacks. The company has a Stock Buyback Program originally announced on January 30, 1985 and most recently amended on April 28, 2022, under which the company is authorized to repurchase up to an aggregate of $200 million ⁶² of its shares. As of June 30, 2025, the maximum dollar value of shares that may yet be purchased under the program was $27,812 ⁶³.

The company faces structural headwinds from general economic softness in Europe and North America in the Electronics segment, the impact of National Institutes of Health (NIH) funding cuts in the Scientific segment, and continued softness in North America from delays in new platform rollout in the Engraving segment. Several of the company's segments may be impacted by recent tariff announcements, and while the company cannot predict the impact of potential new tariffs on global trade and economic growth, its regional presence, strong customer relationships, and disciplined approach to pricing and productivity actions position it to manage through these challenges.

The company is subject to inflationary impacts across the world which could materially increase costs of materials, labor and transportation. The company attempts to maintain profit margins by anticipating such inflationary pressures and increasing prices where possible in accordance with contractual requirements and competitive conditions, but may be unable to continue to increase prices sufficiently to offset cost increases. Recessionary economic conditions could adversely impact major markets served by the company's businesses, including cyclical markets such as automotive, aviation, energy and power, heavy construction vehicle, general industrial, consumer appliances and food service.

The company relies on its revolving credit facility, in part along with operating cash flow, to provide sufficient capital to operate its businesses and to fund acquisitions, and the availability of borrowings is dependent upon compliance with covenants including maintenance of certain financial ratios; at June 30, 2025, the company had borrowings of $553.2 million ⁶⁴ under the facility. The company operates in 41 locations outside of the United States and is subject to international business risks including fluctuations in currency exchange rates, restrictions on repatriation of earnings, and import and export controls. The company purchases large quantities of steel, aluminum, refrigeration components, and other metal commodities, and significant price increases for these commodities could adversely affect operating profits if the company cannot timely mitigate the price increases by successfully sourcing lower cost commodities or passing increased costs on to customers. Current and threatened tariffs on components and finished goods from China and other countries could result in lower net sales, profits and cash flows and could impair the value of the company's investments in its Chinese operations. The company's primary U.S. defined benefit plan is not 100% funded under ERISA rules at June 30, 2025, and required contributions of $6.5 million to the United States funded pension plan are expected for fiscal year 2026.

Management's message emphasizes the transformation of Standex to a company with a more focused group of businesses selling customized solutions to high value end markets via a compelling customer value proposition, with the narrowing of the portfolio allowing for greater management focus on driving operational disciplines and positioning the company well to use cash flow from operations to invest selectively in its ongoing pipeline of organic and inorganic opportunities. Looking forward to fiscal year 2026, barring any unforeseen economic, global trade, or tariff related disruptions, management expects revenue to grow by over $100 million , primarily driven by mid-to-high-single-digit organic growth in Electronics, double-digit organic growth in Engineering Technologies, and the contribution from recent acquisitions. Management plans to release over fifteen new products which are projected to contribute approximately 300 bps of incremental growth, and sales from fast growth markets are expected to grow approximately 45% year-on-year and exceed $265 million . The strategic priorities emphasized for the period ahead include increasing exposure to the high growth, high margin electrical grid end market as a result of the Amran/Narayan Group acquisition, accelerating growth of new product sales, and further reducing the net debt to EBITDA ratio to position the company well to fund future organic and inorganic opportunities.