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STANDEX REPORTS FISCAL FOURTH QUARTER 2022 FINANCIAL RESULTS
August 04, 2022
- GAAP Operating Margin of 10.4% and Record Adjusted Operating Margin of 13.9% in Fiscal Fourth Quarter; Fifth Consecutive Quarter of Record Consolidated Adjusted Operating Margin
- 14.7% Organic Revenue Growth in Fiscal 2022 Including Record Electronics Segment Revenue of $304 Million; Electronics Sales and Earnings Have More Than Doubled Since Fiscal 2017
- Free Cash Flow Generation in Fiscal Fourth Quarter of Approximately $19 Million Adding to Substantial Financial Strength
- Expect To Further Build on Momentum with Continued Improvement in Key Financial Metrics in Fiscal 2023
SALEM, NH – August 4, 2022 – Standex International Corporation (NYSE: SXI) today reported financial results for the fourth quarter of fiscal year 2022 ending June 30, 2022.
|Summary Financial Results – Total Standex|
|($M except EPS and Dividends)||4Q22||4Q21||3Q22||Y/Y||Q/Q|
|Operating Income – GAAP||$19.2||$22.4||$24.5||-14.3%||-21.4%|
|Operating Income – Adjusted||$25.7||$23.5||$26.1||9.2%||-1.7%|
|Operating Margin – GAAP||10.4%||12.7%||12.9%||– 230 bps||– 250 bps|
|Operating Margin – Adjusted||13.9%||13.3%||13.8%||+ 60 bps||+10 bps|
|Net Income from Continuing Ops – GAAP||$13.2||$14.4||$17.4||-8.2%||-24.0%|
|Net Income from Continuing Ops – Adjusted||$18.6||$17.1||$18.7||9.2%||-0.1%|
|EBITDA margin||14.1%||17.2%||16.5%||-310 bps||– 240 bps|
|Adjusted EBITDA margin||17.6%||17.9%||17.4%||– 30 bps||+20 bps|
|Diluted EPS – GAAP||$1.10||$1.18||$1.44||-6.8%||-23.6%|
|Diluted EPS – Adjusted||$1.54||$1.40||$1.54||10.0%||0.0%|
|Dividends per share||$0.26||$0.24||$0.26||8.3%||0.0%|
|Free Cash Flow||$18.8||$26.4||$8.5||-28.9%||120.4%|
|Net Debt to EBITDA||0.5x||0.6x||0.5x||-5.3%||5.9%|
Fourth Quarter Fiscal 2022 Results
Commenting on the quarter’s results, President and Chief Executive Officer David Dunbar said, “We are pleased with our strong fourth quarter performance which concluded a very successful fiscal 2022. Record consolidated adjusted operating margin of 13.9%, in fiscal fourth quarter 2022 represented a 60 basis point increase year-over-year and a 10 basis point improvement sequentially, despite the impact of the COVID-19 lockdown in China. Each of our five company business segments reported adjusted operating margin of at least 15%, reflecting continued successful company-wide execution on price realization, productivity, and efficiency actions. Sales from fast growth markets such as electric vehicles, green energy, and the commercialization of space increased by 50% to $59 million in fiscal 2022. We are excited about the increasing number of new business opportunities and are well positioned to build on our momentum with improved financial performance in fiscal 2023.
“Highlighting our strengthened operating performance and strategic positioning, the Electronics segment achieved a significant milestone with record sales of $304 million in fiscal 2022. Both revenue and segment operating income have doubled over the past five years as we have aggressively pursued new market opportunities in electric vehicles, renewable energy, and smart grid. Total company backlog realizable in under one year ended at approximately $256 million, representing an approximately 22% increase year-over-year and 4% decrease sequentially.
“Standex’s consistent cash generation and substantial financial flexibility position us well to pursue a very active pipeline of organic and inorganic growth opportunities. We realized approximately $19 million in free cash flow in fiscal fourth quarter 2022 and had approximately $313 million in available liquidity and a net debt to adjusted EBITDA ratio of approximately 0.5x.
“We are entering fiscal 2023 well positioned for further growth and continued improved financial performance as we continue to build on our portfolio of high-quality businesses. Our deep technical and applications expertise is favorably aligned with emerging and sustainable global trends in areas such as renewable energy, electric vehicles, defense, human health, and commercialization of space. In addition, our ongoing operational excellence initiatives, increased investment in R&D and strong balance sheet provide further leverage to drive our growth strategy and trajectory of profitability.” concluded Dunbar.
Fiscal First Quarter 2023 Outlook
In fiscal first quarter 2023, the Company expects revenue and operating margin to be similar to fiscal fourth quarter 2022, with an increase in revenue and operating margin year-over-year. The Company expects that the Electronics segment will be the primary revenue driver with a moderate increase compared to fiscal fourth quarter 2022. This will be partially offset by the Engineering Technologies segment which is expected to have a moderate to significant decrease in revenue followed by a significant increase in fiscal second quarter 2023 due to project timing. Compared to fiscal fourth quarter 2022, Specialty Solutions segment revenue is expected to be similar, while Engraving and Scientific sales are expected to have a slight sequential revenue decrease.
Fourth Quarter Segment Operating Performance
Electronics (39% of sales; 46% of segment operating income)
|GAAP Operating Income||15.8||15.7||0.4%|
|GAAP Operating Margin||22.0%||21.6%|
|Adjusted Operating Income*||16.2||15.7||3.0%|
|Adjusted Operating Margin*||22.5%||21.6%|
*Excludes purchase accounting expenses of $0.4M associated with Sensor Solutions in Q4 FY22
Revenue decreased approximately $0.9 million or 1.2% year-over-year reflecting 2.5% organic growth and a 2.1% contribution from acquisitions offset by a 5.8% impact from foreign exchange. End markets including renewable energy and electric vehicles remained favorable. However, as expected, the COVID-19 lockdown in China impacted sales by approximately $6 million in fiscal fourth quarter 2022.
Electronics segment backlog realizable in under one year of approximately $149 million increased 26% year-over-year and was sequentially similar to fiscal third quarter 2022. The segment had a book to bill ratio of 1.2 at the end of the fiscal fourth quarter.
Adjusted operating income increased approximately $0.5 million or 3% year-over-year which primarily reflected price realization and productivity actions. Adjusted operating income excludes approximately $0.4 million of purchase accounting expenses associated with the acquisition of Sensor Solutions.
In fiscal first quarter 2023, on a sequential basis, the Company expects a moderate increase in revenue due to continued positive end market demand trends and some recovery of sales deferred due to the COVID-19 lockdown in China. The Company expects a slight increase in operating margin reflecting the sales increase partially offset by product mix.
Engraving (20% of sales; 18% of segment operating income)
Revenue increased approximately $0.6 million or 1.6% year-over-year reflecting the impact of project mix. Operating income increased $0.4 million or 7% year-over-year due to sales growth and productivity and efficiency actions. In fiscal first quarter 2023, the Company expects a slight sequential decrease in revenue and operating margin due to project mix partially offset by operational improvements.
Scientific (10% of sales; 11% of segment operating income)
As expected, revenue decreased approximately $1.9 million or 9.1% year-over-year reflecting ongoing sales in core end markets such as pharmaceutical, clinical laboratories, and academic institutions offset by lower demand associated with COVID-19 vaccine storage. Operating income decreased approximately $0.4 million or 10.2% year-over-year due to the lower volume.
In fiscal first quarter 2023, on a sequential basis, the Company expects a slight revenue and operating margin decrease due to lower COVID vaccine storage demand.
Engineering Technologies (12% of sales; 9% of segment operating income)
|Engineering Technologies ($M)|
Revenue increased approximately $1.1 million or 5.3% year-over-year primarily due to growth in commercial aviation and energy end market demand. Operating income grew approximately $0.1 million or 4.8% year-over-year reflecting volume growth and project mix.
In fiscal first quarter 2023, on a sequential basis, the Company expects a moderate to significant decrease in revenue reflecting timing of projects and a slight decrease in operating margin, with productivity initiatives mostly offsetting impact of volume decline. Revenue and operating margin are expected to increase significantly due to an increased level of project activity in fiscal second quarter 2023.
Specialty Solutions (19% of sales; 16% of segment operating income)
|Specialty Solutions ($M)|
Specialty Solutions revenue increased approximately $9.4 million or 36.4% year-over-year due to volume growth in food service equipment and refuse end markets and impact of price realization actions at Hydraulics. Operating income grew approximately $2.4 million or 80.4% year-over-year reflecting the volume increase combined with pricing and efficiency actions.
In fiscal first quarter 2023, on a sequential basis, the Company revenue to be similar and operating margin to slightly increase reflecting end market demand trends and the impact of pricing and productivity initiatives.
- Share Repurchase: During the fiscal fourth quarter, the Company repurchased approximately 107,314 shares for approximately $10 million. There was approximately $90.6 millionremaining on the company’s current share repurchase authorization at the end of the fiscal fourth quarter 2022.
- Capital Expenditures: In fiscal fourth quarter 2022, Standex’s capital expenditures were $10.8 million compared to $6.1 million in the fiscal fourth quarter of 2021. The Company expects fiscal year 2023 capital expenditures between $35 million and $40 million with key investments focused on growth initiatives and capacity expansion Capital expenditures were $23.9 million in fiscal 2022.
- Dividend: On July 28, 2022, the Company declared a quarterly cash dividend of $0.26 per share, an approximately 8.3% year-over-year increase. The dividend is payable on August 25, 2022, to shareholders of record on August 11, 2022.
Balance Sheet and Cash Flow Highlights
- Net Debt: Standex had net debt of $70 million on June 30, 2022, compared to $63.1 million at the end of fiscal 2021 and $65.8 million at the end of fiscal third quarter 2022. Net debt for the fourth quarter of 2022 consisted primarily of long-term debt of approximately $175 million and cash and equivalents of $104.8 million of which approximately $94 million held by foreign subsidiaries.
Standex repatriated approximately $10 million in fiscal fourth quarter 2022 and $30.8 million in fiscal 2022. The company expects to repatriate between $30 million and $35 million in fiscal 2023.
- Cash Flow: Net cash provided by continuing operating activities for the three months ended June 30, 2022, was $29.5 million compared to net cash provided by continuing operating activities of $32.5 million in the prior year’s quarter. The Company generated free cash flow after capital expenditures of $18.8 million compared to free cash flow after capital expenditures of $26.4 million in the fiscal fourth quarter of 2021.
Conference Call Details
Standex will host a conference call for investors tomorrow, August 5, 2022, at 8:30 a.m. ET. On the call, David Dunbar, President, and CEO, and Ademir Sarcevic, CFO, will review the Company’s financial results and business and operating highlights. Investors interested in listening to the webcast and viewing the slide presentation should log on to the “Investors” section of Standex’s website under the subheading, “Events and Presentations,” located at www.standex.com.
A replay of the webcast will also be available on the Company’s website shortly after the conclusion of the presentation online through August 5, 2023. To listen to the teleconference playback, please dial in the U.S. (877)-344-7529 or (412)-317-0088 internationally; the passcode is 8952199. The audio playback via phone will be available through August 12, 2022. The webcast replay can be accessed in the “Investor Relations” section of the Company’s website, located at www.standex.com.
Use of Non-GAAP Financial Measures
In addition to the financial measures prepared in accordance with generally accepted accounting principles (“GAAP”), the Company uses certain non-GAAP financial measures, including non-GAAP adjusted income from operations, non-GAAP adjusted net income from continuing operations, free operating cash flow, EBITDA (earnings before interest, taxes, depreciation and amortization) adjusted EBITDA, adjusted EBITDA to net debt, and adjusted earnings per share. The attached financial tables reconcile non-GAAP measures used in this press release to the most directly comparable GAAP measures. The Company believes that the use of non-GAAP measures including the impact of restructuring charges, purchase accounting, insurance recoveries, discrete tax events, loss on sale of a business unit, and acquisition costs help investors to obtain a better understanding of our operating results and prospects, consistent with how management measures and forecasts the Company’s performance, especially when comparing such results to previous periods. An understanding of the impact in a particular quarter of specific restructuring costs, acquisition expenses, or other gains and losses, on net income (absolute as well as on a per-share basis), operating income or EBITDA can give management and investors additional insight into core financial performance, especially when compared to quarters in which such items had a greater or lesser effect, or no effect. Non-GAAP measures should be considered in addition to, and not as a replacement for, the corresponding GAAP measures, and may not be comparable to similarly titled measures reported by other companies.
Standex International Corporation is a multi-industry manufacturer in five broad business segments: Electronics, Engraving, Scientific, Engineering Technologies, and Specialty Solutions with operations in the United States, Europe, Canada, Japan, Singapore, Mexico, Brazil, Turkey, South Africa, India, and China. For additional information, visit the Company’s website at http://standex.com/.
Statements contained in this Press Release that are not based on historical facts are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements may be identified by the use of forward-looking terminology such as “should,” “could,” “may,” “will,” “expect,” “believe,” “estimate,” “anticipate,” “intend,” “continue,” or similar terms or variations of those terms or the negative of those terms. There are many factors that affect the Company’s business and the results of its operations and that may cause the actual results of operations in future periods to differ materially from those currently expected or anticipated. These factors include, but are not limited to: the impact of pandemics such as the current coronavirus on employees, our supply chain, and the demand for our products and services around the world; materially adverse or unanticipated legal judgments, fines, penalties or settlements; conditions in the financial and banking markets, including fluctuations in exchange rates and the inability to repatriate foreign cash; domestic and international economic conditions, including the impact, length and degree of economic downturns on the customers and markets we serve and more specifically conditions in the automotive, construction, aerospace, defense, transportation, food service equipment, consumer appliance, energy, oil and gas and general industrial markets; lower-cost competition; the relative mix of products which impact margins and operating efficiencies in certain of our businesses; the impact of higher raw material and component costs, particularly steel, certain materials used in electronics parts, petroleum based products, and refrigeration components; the impact of higher transportation and logistics costs, especially with respect to transportation of goods from Asia; the impact of inflation on the costs of providing our products and services; an inability to realize the expected cost savings from restructuring activities including effective completion of plant consolidations, cost reduction efforts including procurement savings and productivity enhancements, capital management improvements, strategic capital expenditures, and the implementation of lean enterprise manufacturing techniques; the potential for losses associated with the exit from or divestiture of businesses that are no longer strategic or no longer meet our growth and return expectations; the inability to achieve the savings expected from global sourcing of raw materials and diversification efforts in emerging markets; the impact on cost structure and on economic conditions as a result of actual and threatened increases in trade tariffs; the inability to attain expected benefits from acquisitions and the inability to effectively consummate and integrate such acquisitions and achieve synergies envisioned by the Company; market acceptance of our products; our ability to design, introduce and sell new products and related product components; the ability to redesign certain of our products to continue meeting evolving regulatory requirements; the impact of delays initiated by our customers; our ability to increase manufacturing production to meet demand including as a result of labor shortages; and potential changes to future pension funding requirements. In addition, any forward-looking statements represent management’s estimates only as of the day made and should not be relied upon as representing management’s estimates as of any subsequent date. While the Company may elect to update forward-looking statements at some point in the future, the Company and management specifically disclaim any obligation to do so, even if management’s estimates change.
Ademir Sarcevic, CFO