Standex Reports Fiscal Fourth Quarter 2021 Financial Results

SALEM, N.H., Aug. 12, 2021 /PRNewswire/ -- Standex International Corporation (NYSE: SXI) today reported financial results for the fourth quarter of fiscal year 2021 ending June 30, 2021.

Fourth Quarter Fiscal 2021 Results 

Commenting on the quarter's results, President and Chief Executive Officer David Dunbar said, "We completed a very successful fiscal 2021 with strong fourth quarter results and solid execution on our growth strategy. Our Electronics, Engineering Technologies, and Engraving segments all reported meaningful sequential margin improvement.  These trends were complemented by robust free cash flow generation further adding to our substantial financial flexibility.  We expect stronger financial results in fiscal 2022 reflecting positive demand trends, further leveraging of our productivity initiatives, and our significantly strengthened operating profile.  

"The transformation of our portfolio around businesses with attractive growth and margin profiles, as well as strong customer value propositions, was evident in the quarter on several fronts.  From a revenue perspective, four of our five segments reported year-over-year growth led by the Electronics and Scientific segments.  Total company backlog realizable in under one year increased approximately 19% compared to fiscal third quarter 2021."

"Our deep technical and applications expertise and innovative solutions continue to resonate with customers. For example, at our Engraving segment, we recently delivered prototype modules to support projects in the renewable energy sector for a global energy company.  We are very excited about the potential opportunity to further scale up our production to support this client's plans and expand our range of organic growth opportunities," continued Mr. Dunbar.

"In addition, our consolidated adjusted operating margin of 12% in fiscal 2021 represented a ninety-basis point increase year-over-year, and our fourth quarter margin of 13.3% is the highest quarterly margin that Standex has ever reported, despite experiencing a work stoppage in Specialty Solutions plants during the fourth quarter. This work stoppage has since been resolved but did have a moderate impact on our fourth quarter financial results in this segment.  In fiscal 2022, we have a healthy pipeline of productivity and efficiency initiatives which will provide further margin opportunity. In particular, our focus on mitigating material inflation and improving our cost position in the Electronics segment through changes in reed switch production and material substitution are expected to be substantially complete by the end of fiscal 2022.

"We also had a very strong quarter for cash generation reflecting solid working capital management.  We reported free cash flow of approximately $26 million, a nearly 36% year-over-year increase, and generated a free cash flow to GAAP net income conversion rate of 118% in fiscal 2021.  At year-end, the Company had approximately $245 million in available liquidity and a net debt to adjusted EBITDA ratio of approximately 0.57x. We continued to repatriate cash in the quarter bringing the total to  $38 million in fiscal 2021, slightly ahead of our initial guidance.  For fiscal 2022, we expect to repatriate between $30 million and $35 million.

"We are entering fiscal 2022 well-positioned for improved financial performance as we continue to build on our portfolio of high-quality businesses. We expect positive trends in end markets such as electric vehicles, renewable energy, and smart grid.  In addition, there are new business opportunities in the space and aviation sectors complemented by ongoing company-wide new product development efforts.   Our consistent free cash flow generation and significant financial strength provide a strong foundation for future growth," concluded Dunbar.

Outlook

In fiscal first quarter 2022, the Company expects a slight decrease in revenue, but similar operating margin compared to fiscal fourth quarter 2021.  Revenue and operating margin will increase year-over-year compared to fiscal first quarter 2021.

Compared to fiscal fourth quarter 2021, the Company expects a slight increase in Electronics and Specialty segment revenue with continued broad-based end market strength and growth in these segments.  Revenue in the Engraving and Engineering Technologies segments is expected to have a slight to moderate decrease due to the timing of projects.  The Scientific segment is expected to have a moderate revenue decrease due to lower demand for COVID-19 vaccine storage refrigeration units.  

Fourth Quarter Segment Operating Performance

Electronics (41% of sales; 50% of segment operating income)

Revenue increased $28.0 million or 62.7% year-over-year reflecting a 42.2% organic growth rate with approximately $1.9 million of the total revenue increase or 4.2% related to foreign exchange.  Organic revenue growth was due to a continued broad-based geographical recovery as well as increased demand for relays in solar and electric vehicle applications.  The recent Renco acquisition contributed revenue of $7.3 million or approximately 26% of the increase in year-over-year segment revenue growth. 

Operating income increased approximately $9.9 million or 168.8% year-over-year which reflected operating leverage associated with revenue growth, profit contribution from Renco and pricing and productivity initiatives.

In fiscal first quarter 2022, the company expects a slight increase in revenue and a moderate operating margin increase reflecting continued end market strength compared to fiscal fourth quarter 2021.

Engraving (21% of sales; 18% of segment operating income)

Revenue increased approximately $5.0 million or 15.9% year-over-year with operating income growth of approximately $3.1 million or 119% year-over-year reflecting a favorable geographic mix, timing of projects, and increased soft trim product demand leveraged over segment productivity and cost initiatives.   

In fiscal first quarter 2022, the Company expects a slight to moderate revenue and operating margin decrease compared to fiscal fourth quarter 2021, primarily due to the timing of projects and regional mix.

Scientific (12% of sales; 13% of segment operating income)

Revenue increased approximately $8.0 million or 62.7% year-over-year reflecting positive trends at pharmaceutical channels, clinical laboratories, and academic institutions primarily attributable to demand for COVID-19 vaccine storage compared to fourth quarter fiscal 2020.   

Operating income increased $1.4 million or 48.7% year-over-year, reflecting the volume increase balanced with investments to support future growth opportunities and higher freight costs. 

In fiscal first quarter 2022, the Company expects a moderate sequential decrease in revenue and slight decline in margin reflecting lower demand for COVID-19 vaccine storage refrigeration and increased freight costs partially offset by pricing actions. 

Engineering Technologies (11% of sales; 10% of segment operating income)

On a year-over-year basis, revenue decreased $5.7 million or 21.8% and operating income was $1.1 million lower, representing a 25.6% decrease.  This primarily reflected the absence of the recently divested Enginetics business which contributed $3.6 million in revenue to fiscal fourth quarter 2020 and the economic impact of COVID-19 on this segment's end markets.

On a sequential basis, operating margin increased to 15.1% compared to 6.2% in fiscal third quarter 2021 reflecting a continued broad-based sequential end market recovery and favorable mix complemented by ongoing productivity initiatives.    

In fiscal first quarter 2022, the Company expects a slight to moderate decrease in revenue and operating margin reflecting the timing of projects. 

Specialty Solutions (15% of sales; 9% of segment operating income)

On a year-over-year basis, Specialty Solutions revenue increased approximately $1.7 million or 7.1% as its end markets, particularly in food service and specialty retail continued to recover.  Operating income decreased $0.7 million or 18.7%. This reflected the impact of a work stoppage in the segment's plants and material inflation which the Company is seeking to recover through pricing actions.

In fiscal first quarter 2022, the Company expects a slight sequential increase in revenue and operating margin primarily due to growth in Merchandising and Pumps businesses partially offset by the impact of a prior work stoppage at one of the plants.

Balance Sheet and Cash Flow Highlights

• Net Debt: Standex had net debt of $63.1 million at June 30, 2021 compared to $82.1 million at the end of the fiscal third quarter of 2021 and $80.3 million at the end of fiscal 2020.  Net debt for the fourth quarter of 2021 consisted primarily of long-term debt of $200 million and cash and equivalents of $136.4 million of which $92.2 million was held by foreign subsidiaries.
                           
  Standex repatriated approximately $6.8 million in fiscal fourth quarter 2021 and $37.6 million in fiscal 2021. The company expects to repatriate between $30 million and $35 million in fiscal 2022. The Company's net debt to adjusted EBITDA leverage ratio was approximately 0.57x at the end of the fiscal fourth quarter 2021.
                           
• Cash Flow:  Net cash provided by continuing operating activities for the three months ended June 30, 2021 was $32.5 million compared to net cash provided by continuing operating activities of $25.2 million in the prior year. The Company generated free cash flow after capital expenditures of $26.4 million compared to free cash flow of $19.5 million in the fiscal fourth quarter of 2020. The year-over-year increase is primarily a result of improvement in working capital metrics.  

 Capital Allocation

• Share Repurchase: During the fiscal fourth quarter, the Company repurchased approximately 50,000 shares for $5.0 million.  There is approximately $22 million remaining under the Board's current share repurchase authorization.
                              
• Capital Expenditures: In fiscal fourth quarter 2021, Standex's capital expenditures were $6.1 million compared to $5.7 million in the fiscal fourth quarter of 2020.  Investments were focused on maintenance, safety, and the Company's highest priority growth initiatives.  The Company expects fiscal year 2022 capital expenditures to be between $25 million and $30 million compared to $21.5 million in fiscal 2021.
                         
• Dividends: On July 22, 2021, the Company declared a quarterly cash dividend of $0.24 per share, a 9% year-over-year increase.  The dividend is payable on August 25, 2021 to shareholders of record on August 2, 2021. 

Conference Call Details

Standex will host a conference call for investors tomorrow, August 13, 2021 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 13, 2022. To listen to the teleconference playback, please dial (877) 344-7529 in the U.S. or (412) 317-0088 internationally; the passcode is 10158341.  The audio playback via phone will be available through August 20, 2021. 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.

About Standex

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 https://standex.com/.

Forward-Looking Statements

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, 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; 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; and our ability to increase manufacturing production to meet demand; 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.

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SOURCE Standex International Corporation