STANDEX INTERNATIONAL CORP/DE/ Q2 FY2026 earnings call

Management Statement and Operational Highlights

• Recorded 6.4% organic growth and a book-to-bill ratio of 1.04, led by the Electronics segment with 11.1% organic growth.
• Sales increased 16.6% year-on-year, with new product sales at $16.3 million (+13%) and fast-growth markets contributing 28% of total sales.
• Adjusted gross margin was 42.1% (up 120 basis points), adjusted operating margin was 19% (up 30 basis points).
• Paid down approximately $10 million of debt, reducing the net leverage ratio to 2.3x.
• Reiterated fiscal 2026 sales outlook, with new product sales expected to contribute 300 basis points of incremental growth, new products to reach $85 million, and fast-growth markets to exceed $270 million.

Segment Performance

• Electronics: Segment revenue increased 20.6% year-on-year to $115.7 million, driven by 11.1% organic growth, 9.1% acquisition benefit, and 0.4% foreign currency benefit. Adjusted operating margin was 28.8%, up 120 basis points.
• Engineering Technologies: Revenue increased 35.3% to $30.6 million, with 33.4% from the McStarlite acquisition, 1.2% organic growth, and 0.6% foreign currency benefit. Adjusted operating margin was 18.9%, up 260 basis points.
• Scientific: Revenue increased 5.5% to $19.5 million, with 8.1% acquisition benefit but 2.6% organic decline. Adjusted operating margin was 24.2%, down 270 basis points.
• Engraving: Revenue increased 13.6% to $35.7 million, with 10.3% organic growth and 3.3% foreign currency benefit. Adjusted operating margin was 19.2%, up 490 basis points.
• Specialty Solutions: Revenue decreased 7.2% to $19.8 million. Operating margin was 10.7%, down 600 basis points.

Guidance

• Reiterated fiscal 2026 sales outlook. Barring unforeseen disruptions, revenue expected to grow over $110 million from 2025.
• Fiscal third quarter '26 expected significantly higher revenue from mid- to high-single-digit organic growth, slightly higher adjusted operating margin. Sequential basis expected slightly to moderately higher revenue and adjusted operating margin.
• New product sales expected to contribute 300 basis points, new products to $85 million, fast-growth markets to grow over 45% year-on-year to over $270 million.

Risks

• Potential unforeseen economic, global trade, or tariff-related disruptions.
• Specialty Solutions segment facing difficult end markets in North America.
• Scientific segment affected by lower demand from academic and research institutions due to NIH cuts.

Question and Answer

• Q: Congratulations on another solid quarter. Maybe we just start with one on the -- on the purchase accounting side, the $17.98 million redeemable noncontrolling interest redemption value.

A: Explanation about the noncontrolling interest redemption value, including details on the Amran and Narayan acquisitions.

• Q: On the business. So maybe just continue with Amran or Grid. How would you characterize the competitive environment here?

A: Discussion on the competitive environment in the grid business, including customer intimacy and market share.

• Q: On the electronics, can you maybe just help parse out the sales and order growth for the grid business versus the legacy?

A: Explanation of grid business book-to-bill ratio, core business growth, and end market drivers.

• Q: On the capacity expansion projects for Amran Narayan.

A: Discussion on capacity expansion in Croatia, Mexico, Houston, and India, and its impact on segment profitability.

• Q: Your new product sales to date, how many products have you introduced?

A: Discussion on new product sales, number of products introduced, and success of new products in fast-growth markets.