Standex International Q1 2027 Earnings Results & Report

Standex International EPS Results

• Actual EPS: $2.41
• Consensus EPS: $2.34
• Beat/Miss: Beat by +$0.07
• One Year Ago EPS: $1.99
• EPS Beat Rate: 7 of last 8 quarters

Standex International Revenue Results

• Actual Revenue: $232.58 million
• Expected Revenue: $229.65 million
• Beat/Miss: Beat by +$2.92 million
• YoY Revenue Growth: +7.00%

Standex International (NYSE:SXI) (NYSE:SXI) is a diversified industrial manufacturer that develops and produces specialized equipment, components and engineered products for customers in a range of commercial and industrial markets. The company serves original equipment manufacturers and other businesses through a portfolio of operations focused on applications requiring specialized technology, precision manufacturing and customized solutions.

Its businesses include Standex Electronics, which makes sensors, switches, relays, magnetic components and power magnetics; Standex Engraving, which provides engraved tooling, mold texturing and patterned rolls for plastics, packaging and other manufacturing applications; and Standex Engineering Technologies, which develops engineered components and systems for industrial and mobile equipment. Standex also has businesses serving scientific, refrigeration and other specialized equipment markets.

Standex traces its history to 1955 and has expanded through the development and acquisition of specialized manufacturing businesses. The company serves customers internationally, with operations and commercial activities across North America, Europe and Asia. David A. Dunbar serves as president and chief executive officer.

Standex International Q1 2027 Earnings Call Transcript

Key Takeaways

• Positive Sentiment: Strong first-quarter momentum: Revenue reached a record $232.6 million, with 12.4% organic growth, adjusted operating margin expanding 110 basis points to 20.2%, and adjusted EPS rising 21.1% to $2.41. Record bookings of $273 million produced a 1.17 book-to-bill ratio.
• Positive Sentiment: Fiscal 2027 outlook raised: Standex now expects high-single-digit total sales growth, more than $100 million of organic sales growth, and high-teens adjusted EPS growth. Management reaffirmed its goal of exceeding $1.1 billion in sales and 23% adjusted operating margin by fiscal 2028.
• Positive Sentiment: Electronics and growth markets are driving results: Electronics organic revenue grew 29.5%, while new-product sales increased 56% and sales into fast-growth markets rose 25%. Data centers are expected to contribute about 30% of fiscal 2027 organic growth, with grid capacity expansion and defense providing additional growth drivers.
• Negative Sentiment: Engraving & Hydraulics remained a weakness: Revenue declined 14.9%, including a 15.7% organic decrease, due primarily to softness in the North American automotive market. Management expects slightly lower revenue and adjusted operating margin in the next quarter for the segment.
• Neutral Sentiment: Capacity investments and leadership changes are underway: Standex plans $45 million–$55 million of fiscal 2027 capital expenditures, mainly for grid expansion, while Croatia, Mexico, Houston, and India capacity projects progress. CFO Ademir Sarcevic will become President of Electronics, and Samantha Stoddard will become CFO on December 1.

Presentation

[Operator]

Good morning, ladies and gentlemen, and welcome to the Standex International first quarter 2027 financial results conference call. At this time, all lines are in listen-only mode. Following the presentation, we will conduct a question-and-answer session. If at any time during this call you require immediate assistance, please press star zero for the operator. This call is being recorded on Friday, October 30th, 2026. I would like to turn the conference over to Christopher Howe, Director of Investor Relations. Please go ahead, sir.

[Christopher Howe, Director of Investor Relations at Standex International]

Thank you, operator, and good morning. Please note that the presentation accompanying management's remarks can be found on the investor relations portion of the company's website at www.standex.com. Please refer to Standex's safe harbor statement on slide two. Matters that Standex management will discuss on today's conference call include predictions, estimates, expectations, and other forward-looking statements. These statements are subject to risks and uncertainties that could cause actual results to differ materially. You should refer to Standex's most recent annual report on Form 10-K, as well as other SEC filings and public announcements, for a detailed list of risk factors. In addition, I'd like to remind you that today's discussion will include references to the non-GAAP measures of EBIT, which is earnings before interest and taxes, adjusted EBIT, EBITDA, which is earnings before interest, taxes, depreciation, and amortization, adjusted EBITDA margin, and adjusted EBITDA margin.

[Christopher Howe, Director of Investor Relations at Standex International]

We will also refer to other non-GAAP measures, including adjusted net income, adjusted operating income, adjusted net income from continuing operations, adjusted earnings per share, adjusted operating margin, free operating cash flow, and pro forma net debt to EBITDA. Adjusted measures exclude the impact of restructuring, purchase accounting, amortization from acquired intangible assets, acquisition-related expenses, and one-time items. These non-GAAP financial measures are intended to serve as a complement to results provided in accordance with accounting principles generally accepted in the United States. Standex believes that such information provides an additional measurement and consistent historical comparison of the company's financial performance. On the call today is Standex's Chairman, President, and Chief Executive Officer, David Dunbar, and Chief Financial Officer and Treasurer, Ademir Sarcevic.

[David Dunbar, Chairman, President, and CEO at Standex International]

Thank you, Chris. Good morning, and welcome to our fiscal first quarter 2027 conference call. Our years-long strategy to reposition the company to serve attractive end markets and to invest effectively in new product development continues to gain momentum and deliver top-line growth. In the fiscal first quarter, we delivered record sales of approximately $233 million, driven by double-digit organic growth. This represents the fifth consecutive quarter of year-on-year organic growth. The electronics segment led the way with organic growth of nearly 30%. Corporate-wide new product sales continued to ramp and grew 56%, while sales into fast-growth markets grew 25%. Our overall order book continues to grow in the fiscal first quarter, with record order intake at $273 million and a book-to-bill of 1.17. This gives us confidence to raise our sales outlook for fiscal year 2027.

[David Dunbar, Chairman, President, and CEO at Standex International]

We now expect total sales to grow high single digits in fiscal 2027, up from our prior outlooks calling for mid to high single digits growth. We expect organic sales to increase by more than $100 million and adjusted earnings per share to grow in the high teens. As we put this quarter's results and the raised outlook into further context, we continue to expect to be on track to reach greater than $1.1 billion in total sales and 23% adjusted operating margin by the end of fiscal year 2028. I would like to thank our employees, our executives, and the board of directors for their efforts and continued dedication and support that drove our fiscal first quarter results. Prior to transitioning into more details about the quarter, I would like to highlight a couple of organizational announcements.

[David Dunbar, Chairman, President, and CEO at Standex International]

First, I want to take a moment to welcome Colby Slaughter as our new Chief Legal Officer and look forward to his contributions in the next leg of our journey. Earlier this month, we announced the appointment of Samantha Stoddard as our next Chief Financial Officer beginning on December 1st. Samantha's experience as a public company CFO and a hands-on operating executive makes her an excellent fit for our needs as we continue to grow and scale efficiently. I am also excited to share that Colby and Samantha fit well in our culture, and we expect them each to make significant contributions to Standex's future growth. I also want to extend a special thanks to Ademir Sarcevic for his contributions as CFO.

[David Dunbar, Chairman, President, and CEO at Standex International]

It has been a great pleasure to work closely with him to shape Standex into the company we are today, and I am pleased to see him diving into his new role as President of Electronics with his usual gusto. Ademir will work closely with Samantha over the next month to ensure a seamless transition. Now, let's look at the results our strategy is delivering, beginning on slide three. In the first quarter, sales of $232.6 million increased 12.4% organically. Electronics grew 29.5% organically. New product sales grew approximately 56% to approximately $17.4 million. Sales into fast-growth markets grew approximately 25% to $77.8 million. We had a record quarterly order intake of approximately $273 million. We are pleased with the momentum in the business reflected in this overall book-to-bill ratio of 1.17. Adjusted gross margin of 44.4% was up 240 basis points year-on-year.

[David Dunbar, Chairman, President, and CEO at Standex International]

Adjusted operating margin of 20.2% was up 110 basis points year-on-year, with margin expansion across each of our segments. Adjusted earnings per share of $2.41 was up 21.1% year-on-year. In fiscal second quarter 2027, we expect moderately higher revenue and adjusted operating margin, and slightly higher revenue and similar adjusted operating margin on sequential basis. For fiscal year 2027, we are raising our sales outlook. We expect organic sales to increase greater than $100 million, and total sales to grow high single digits, from mid to high single digits previously. We expect high teens growth in adjusted earnings per share. I continue to be pleased with the momentum that we are building in launching new products. We still expect to launch more than 20 new products in fiscal 2027.

[David Dunbar, Chairman, President, and CEO at Standex International]

We now expect new product sales, pro forma for the Federal divestiture, to grow by $27 million-$94 million, adding more than 300 basis points of organic growth in the year. Our sales into the fast-growing markets, such as defense, space, and grid, are now expected to increase more than 20% to greater than $315 million, constituting more than 30% of our total sales. In conjunction with results, we announced a new $100 million share repurchase authorization, effective October 27th. On this next slide, I would like to take a moment to highlight the specific areas driving growth this fiscal year. Let's turn to slide four. The methodical implementation of our strategy is showing itself in the independent drivers of growth, each now contributing meaningfully. It is no surprise that the increasing power demand of data centers is our most significant single growth driver.

[David Dunbar, Chairman, President, and CEO at Standex International]

It is behind about 30% of our expected growth in fiscal year 2027. The grid business is also experiencing growth stemming from general increases in grid capacity to support economic growth and increased electrification. Increased investments in defense programs support growth in our A&D business and Electronics Edge business. We also highlight here the incremental growth of new products that are not sold into these end markets, reflecting share gain for our core businesses. Finally, a general recovery in industrial markets is lifting sales across electronics and scientific. This is a balanced set of drivers, and about 70% of our growth in 2027 will come from sources other than data centers. In summary, we have multiple independent drivers of our growth that have long runways ahead of them. Now, I would like to turn the call over to Ademir to discuss our financial performance in greater detail.

[Ademir Sarcevic, CFO and Treasurer at Standex International]

Thank you, David, and good morning, everyone. Let's turn to slide five, first quarter 2027 summary. On a consolidated basis, total revenue increased approximately 7% year-on-year to $232.6 million. This reflected organic growth of 12.4%, partially offset by 4.4% impact from Federal Industries divestiture and 1% impact from foreign currency. First quarter 2027 adjusted operating margin increased 110 basis points year-on-year to 20.2%. Adjusted earnings per share increased 21.1% year-on-year to $2.41. Net cash provided by operating activities was $15.7 million in the first quarter of fiscal 2027, compared to $16.8 million a year ago. Capital expenditures were $6.6 million, compared to $6.4 million a year ago. As a result, we generated fiscal first quarter free cash flow of $9.1 million, compared to $10.4 million a year ago.

[Ademir Sarcevic, CFO and Treasurer at Standex International]

Now, please turn to slide six, and I will begin to discuss our segment performance and outlook, beginning with our engineered component segments. Electronics revenue increased 27.1% year-on-year to record $140.5 million, driven by organic growth of 29.5%, partially offset by 2.4% impact from foreign currency. Organic growth was driven by sales into fast-growth markets, strong general industrial markets, and increased new product sales. Our book-to-bill in fiscal first quarter was 1.23, with record orders of approximately $173 million. Adjusted operating margin of 29.4% in fiscal first quarter 2027 increased 60 basis points year-on-year due to higher volume and pricing initiatives, partially offset by growth investments and higher variable compensation expenses. Sequentially, in fiscal second quarter 2027, we expect slightly higher revenue and similar adjusted operating margin.

[Ademir Sarcevic, CFO and Treasurer at Standex International]

On a year-on-year basis, we expect significantly higher revenue, driven by double digit organic growth and slightly higher adjusted operating margin. Additionally, this marked my first full quarter as the President of Electronics segment. I am very pleased with the results and the strong start to our fiscal year 2027. We achieved several records in the quarter. Record organic growth of almost 30%, record bookings, and record gross margin. At the same time, we continue to invest in R&D, new products, and key growth initiatives. We remain on track to significantly expand global capacity in our grid business, a key project we highlighted in our last quarterly earnings call. During the past few months, I also had an opportunity to visit sites across the globe and attend various customer meetings. Two things became even clearer.

[Ademir Sarcevic, CFO and Treasurer at Standex International]

First, we have strong leaders in our businesses, dedicated talent in an accountable group of employees that work very well as a team. Secondly, customers truly value our custom products and solutions and look at us as partners, not just as suppliers. In summary, we have multiple ways to win, from serving the rising global energy demand related to data centers and AI, grid modernization, and the overall electrification of the world, to providing mission-critical components supporting needs and requirements of the U.S. defense end market, all supported by an active new product funnel to capture additional market share. I remain very optimistic about the future outlook of this segment. Moving to aerospace and defense. Revenue increased 5.1% to $31.4 million, driven by project activity in the space and defense end markets, partially offset by project timing.

[Ademir Sarcevic, CFO and Treasurer at Standex International]

Adjusted operating margin of 19.9% increased 310 basis points year on year, primarily due to higher volume and project mix. Sequentially, we expect significantly higher revenue and slightly higher adjusted operating margin. On a year-on-year basis, we expect double-digit organic growth. Now, turn to slide seven for a discussion of the scientific and engraving and hydraulics segments. Scientific revenue increased 1.8% to $19.8 million due to pricing initiatives and a slight market recovery. Adjusted operating margin of 29.5% increased 420 basis points year-on-year. Sequentially, we expect similar to slightly higher revenue and similar adjusted operating margin. Engraving and hydraulics revenue decreased 14.9% to $40.9 million, reflecting an organic decline of 15.7% from softness in the North American automotive market, partially offset by 0.7% benefit from foreign currency. Adjusted operating margin of 16.4% in fiscal first quarter 2027 increased 40 basis points year-on-year.

[Ademir Sarcevic, CFO and Treasurer at Standex International]

In our next fiscal quarter, on a sequential basis, we expect slightly lower revenue and adjusted operating margin. Next, please turn to slide eight for a summary of Standex's liquidity statistics and capitalization structure. Our current available liquidity is approximately $168.5 million. At the end of the first quarter, Standex had net debt of $401.2 million compared to net debt of $446 million at the end of fiscal first quarter 2026. Our net leverage ratio currently stands at 2. In fiscal second quarter 2027, we expect interest expense of between $7 million-$7.5 million. Standex's long-term debt at the end of fiscal first quarter 2027 was $518.1 million. Cash and cash equivalents totaled $116.8 million. We declared our 249th consecutive quarterly cash dividend of $0.36 per share, an approximately 5.9% increase year-on-year.

[Ademir Sarcevic, CFO and Treasurer at Standex International]

In fiscal 2027, we still expect capital expenditures between $45 million and $55 million, primarily due to grid growth investments. Before I turn the call over to David for concluding remarks, as this is my last quarterly earnings call as the CFO of Standex, I would like to express my deepest gratitude to Standex finance team for all their contributions over the past several years. We are only as good as the team around us, and I am truly grateful for all the hard work and efforts of every individual. The finance team will be in good hands with Samantha, and I look forward to working closely with her in the transition as the President of Electronics. I will now turn the call over to David for concluding remarks.

[David Dunbar, Chairman, President, and CEO at Standex International]

Thank you, Ademir. Please turn to slide nine. To summarize, I am very pleased to see the continued organic growth in the first quarter and the book-to-bill ratio of 1.17. Organic growth was driven by our electronics segment, which grew 29.5%. We will continue to align our organic and inorganic growth investments around secular end markets and new products that expand our presence in engineered components and deepen our customer relationships. Our acquisition strategy will continue to focus on businesses with accretive margins, exposure to fast-growth markets, and the delivery of custom solutions. In fiscal 2027, we now expect organic sales to increase by more than $100 million and total sales to grow high single digits from mid to high single digits previously. We expect high teens growth in adjusted earnings per share in fiscal 2027.

[David Dunbar, Chairman, President, and CEO at Standex International]

We are on track to achieve greater than $1.1 billion in sales and greater than 23% adjusted operating margin by the end of fiscal year 2028. We will now open the line for questions.

[Operator]

Thank you, sir. Ladies and gentlemen, we now begin the question-answer session. If you would like to ask a question, please press star followed by number one on your telephone keypad. If your question has been answered, like to withdraw from the queue, please press star followed by the number two. And if you are using a speakerphone, please lift your handset before pressing any keys. One moment, please, while we compile the roster. The first question comes from Chris Moore with CJS. Please go ahead.

[Chris Moore, Analyst at CJS]

Hey, good morning, guys. Congrats on another really good quarter. Thanks for taking a couple. Maybe you addressed it on slide four, maybe we could dig in a little deeper. Obviously, AI data center build-out, very beneficial to electronics, grid in particular. It does feel like the stock has kind of moved maybe a little bit too much in concert with the AI wins. Can you talk a little further about how important data center AI growth is to grid? That 30% of the growth that you are talking about this year, do you expect it to accelerate as a portion of overall growth moving forward? Or just kind of any thoughts in terms of if AI growth slows a little bit, what that does to electronics overall?

[David Dunbar, Chairman, President, and CEO at Standex International]

Yeah. Thank you, Chris. Obviously, this is an important message. That is why we put the page in here. We have multiple growth levers. All of them really are now contributing meaningfully. A lot of the questions we have had in the last quarters have been data centers, because everybody is excited about that growth, as are we. But to put it into context, of the $100+ million we expect in organic growth this year, it is about 30% of that will come from data centers. If you zoom in on grid, which is where your question was, our growth in grid will be $40+ million. About three-quarters of that will come from data centers. The other is just the increased demands of electricity from electrification, increasing living standards. The way we get that number is we talk with our customers.

[David Dunbar, Chairman, President, and CEO at Standex International]

If you just look at the public statements of large electrical equipment OEMs, there are a lot of growth drivers in the electrical equipment business. Right now, data centers is by far number one, but there is still increased demand for electricity around the world. That is driving an increase. I would not actually expect this mix to change in the future. We continue to see a long-term runway for growth in electrical equipment in general, and data centers right now is providing an additional surge.

[Chris Moore, Analyst at CJS]

Awesome. Very helpful. You talked about, on the electronics side, your customers kind of viewing you guys more as partners than suppliers. Any discussion with any of the big guys in terms of kind of long-term supply agreements? Are they looking to kind of lock in availability? Is that part of any discussions at this point in time?

[Ademir Sarcevic, CFO and Treasurer at Standex International]

Hey, good morning, Chris. It's Ademir here. I'll take this one. Yes. The answer is clearly yes. Our customers have a pretty solid book of business in the next three to five years, and they are looking at us truly as partners, somebody who can grow with them as they grow into their end market. As we are talking to our customers, we are looking actually to signing three to five year long-term agreements with some of our key customers. At the same time, on the grid side, we are reshuffling or rearranging a little bit the way we're going to run the commercial organization. We're going to run grid more as a global grid business with key account managers assigned to each one of those global OEMs.

[Ademir Sarcevic, CFO and Treasurer at Standex International]

We truly believe there's a huge opportunity there for us to partner with them much more closely going forward and get these long-term agreements with many of them. Yes, and they are very, very interested in actually making sure that we have a capacity to support their growth needs.

[Chris Moore, Analyst at CJS]

Got it. Terrific. Maybe just the last one for me. I think missiles were, on the A&D side, $9 million in 2026, talking about teens in fiscal 2027, and potentially $40 million-$80 million over the next four years. I guess the question is, what has to happen to get close to that $80 million number?

[David Dunbar, Chairman, President, and CEO at Standex International]

Yeah. The situation hasn't changed in that it is really a function of the annual procurement cycle, government budgeting cycle, working through the Department of Defense, with the primes, to then cascade orders down to us. We have seen increased activity. Recall that $9 million was really just a couple programs. It was the SM-3, PrSM, and kind of the tail end of the ATACMS program. We had anticipated that to be $15 million this year. I think it will be closer to $20 million this year. We have had more order activity. We think that $40 million-$80 million is likely to be $50 million-$90 million in the coming years. It's the same as we've communicated in the past. To get to that $90 million, we just require the primes to be able to make long-term commitments to replenish those stockpiles.

[David Dunbar, Chairman, President, and CEO at Standex International]

We've had several meetings with them, reviewing multiple scenarios to increase our capacity, and we're ready to go. We would raise that expectation, both on the low end and the high end, by $10 million.

[Chris Moore, Analyst at CJS]

That sounds great. I will leave it there. Thanks, guys.

[David Dunbar, Chairman, President, and CEO at Standex International]

Thank you, Chris.

[Ademir Sarcevic, CFO and Treasurer at Standex International]

Thanks, Chris.

[Operator]

Thank you. Your next question comes from Ross Sparenblek with William Blair. Please go ahead.

[Ross Sparenblek, Analyst at William Blair]

Hey. Good morning, gentlemen.

[David Dunbar, Chairman, President, and CEO at Standex International]

Morning, Ross.

[Ademir Sarcevic, CFO and Treasurer at Standex International]

Good morning, Ross.

[Ross Sparenblek, Analyst at William Blair]

Just starting off on electronics. Can you help us break out the power orders separate from the legacy electronics business?

[Ademir Sarcevic, CFO and Treasurer at Standex International]

Yeah. I will take that, Ross. Our book-to-bill in the quarter was 1.23 for the total electronics. The legacy businesses, as well as grid, were about the same. So, each one of them were over 1.2. So, the orders really continue to be strong across the board for us.

[Ross Sparenblek, Analyst at William Blair]

Okay. Then, just to back out, grid revenue contribution to electronics. Forgive me if you guys gave that already.

[Ademir Sarcevic, CFO and Treasurer at Standex International]

Yeah, so we grew organically almost 30% in a quarter, and every one of our business units grew more than 20%. So it was a really, really strong organic growth across the board. Based on the backlog and our book-to-bill, we would anticipate that we are going to continue to have a strong organic growth across all of our platforms.

[Ross Sparenblek, Analyst at William Blair]

Okay. Should we think that power is leading the charge there? I guess the back half of that question is just where we are with Croatia and ramping that. I know that you guys cut the red tape several months back, and now it's just about filling out the capacity.

[Ademir Sarcevic, CFO and Treasurer at Standex International]

Yeah, so on Croatia first, Ross. Right now we are going through customer audits. It's a new site. The site has to be certified and audited by our customers before we can actually start manufacturing parts there. We are going through some of the audits by our key customers, and a little bit we are at the mercy of their own schedule as to when their teams can come. That's going really well, and we are now anticipating that we're going to start making, actually manufacturing and shipping products out of Croatia within this quarter. We had some buy and resale sales coming out of Croatia in the prior months, but we're going to see a pretty nice ramp up there in Q3 and Q4. Then your question on power?

[David Dunbar, Chairman, President, and CEO at Standex International]

Right.

[Ademir Sarcevic, CFO and Treasurer at Standex International]

Oh, you mean the-

[Ross Sparenblek, Analyst at William Blair]

Yeah, was it at the higher end? It was at the higher end of the growth range. You said like 20%-30%.

[Ademir Sarcevic, CFO and Treasurer at Standex International]

Yeah, so, yeah. I got it. I now understand. Yeah, so we said, if you go back, we gave that outlook of $340 million-$440 million years out. That range still holds. We feel pretty confident about $340 million, and obviously we're going to work to get close to the higher end of the range. For this fiscal year, Ross, our initial range was about $180 million-$200 million. We are very confident that we're going to be at least $190 million-$200 million. So, we do think we're going to be more at the midpoint or the higher end of the range for this fiscal year.

[Ross Sparenblek, Analyst at William Blair]

Okay. But it's safe to assume that sequentially, the grid business stepped up on the revenue side?

[Ademir Sarcevic, CFO and Treasurer at Standex International]

Yeah.

[David Dunbar, Chairman, President, and CEO at Standex International]

Yeah, no question.

[Ademir Sarcevic, CFO and Treasurer at Standex International]

Yeah.

[David Dunbar, Chairman, President, and CEO at Standex International]

I got to say, we're very pleased with the work that the capacity expansion team has done. It was a very strong first quarter.

[Ross Sparenblek, Analyst at William Blair]

Okay, fantastic. I'll pass along and head back into you guys. Thank you.

[David Dunbar, Chairman, President, and CEO at Standex International]

Thank you.

[Ademir Sarcevic, CFO and Treasurer at Standex International]

Thanks, Ross.

[Operator]

Thank you. Your next question comes from Matt Koranda with ROTH Capital. Please go ahead.

[Matt Koranda, Analyst at ROTH Capital]

Hey, guys. Good morning. Appreciate the bridge on slide four. Just wanted to maybe dig into, in the new products component of the organic sales bridge, is there any data center exposure there? Just curious to think about sort of the overall exposure to data center growth that you have in the growth bridge in the-

[David Dunbar, Chairman, President, and CEO at Standex International]

Yeah, good. Yeah. We tried to make this easy to read and not overdo it with explanation. But that new product number, that is only the new product sales that are outside those other markets. There are new products into data centers, but those are included in the data center box to the left.

[Matt Koranda, Analyst at ROTH Capital]

Okay. No, that makes total sense.

[David Dunbar, Chairman, President, and CEO at Standex International]

That answers your question.

[Matt Koranda, Analyst at ROTH Capital]

Appreciate that, David.

[David Dunbar, Chairman, President, and CEO at Standex International]

Yeah.

[Matt Koranda, Analyst at ROTH Capital]

Yeah, totally does. Okay.

[David Dunbar, Chairman, President, and CEO at Standex International]

Yeah

[Matt Koranda, Analyst at ROTH Capital]

Maybe one for Ademir here. It was kind of touched on a little bit tangentially in some of the responses to questions, but just wanted to hear, I guess, sort of your main areas of focus now that you're fully in the seat in electronics. It sounded like maybe there was a bit of a reorganization of the way you go to market with some of your longer term OEM partners. But maybe could you touch on some of the bigger changes that are either in motion or already made since you took the seat?

[Ademir Sarcevic, CFO and Treasurer at Standex International]

Yeah. Well, I've been in the seat for now a little over three months and kind of still double doing.

[David Dunbar, Chairman, President, and CEO at Standex International]

It's been dog years, though.

[Ademir Sarcevic, CFO and Treasurer at Standex International]

But look, I'll start answering the question by telling you, as I visited some of the sites and spent more time with our employees and leaders, we really have a solid group of employees in electronics who truly value Standex's culture. This is really a special place in the way we operate. You can see that people are fully committed to their jobs and really serving the customers. We have capable business leaders. Frankly, Matt, we got exposure to some really exciting end markets in terms of our product solutions. As I said in my prepared remarks, meeting with customers, what was really a little bit eye-opening is they truly look at us as partners. They want to partner with us in the years to come.

[Ademir Sarcevic, CFO and Treasurer at Standex International]

One of the things we are trying to do is make it easier for them to partner with us. So we are looking a little bit in the way we go to market. For example, in grid historically, we would go to market a little bit separately between North America and India, or Asia. Our customers are really looking to have one point of contact. So we are setting up a global commercial organization. We're going to have key account managers really focused on supporting our key customers and their growth initiatives. So that'll be one example. We're going to continue with the strategy we've been on for years in terms of new products. We have an opportunity to continue to expand our wallet share.

[Ademir Sarcevic, CFO and Treasurer at Standex International]

We have an opportunity, for example, in our grid business to look at the outdoor opportunities, which we haven't. That's a huge market for us. We haven't really had an opportunity or chance to truly explore that much in the past. The strategy is basically going to continue. So, we got talented people. We are making some changes on the commercial side. The grid expansion, the capacity expansion remains a key priority, and we'll keep on-

[David Dunbar, Chairman, President, and CEO at Standex International]

What I would say about, like Matt teed it up for you, Ademir has worked with the team to put in place the first steps of this new global commercial organization so it's not just words. I mean, there's structure coming in behind it. We've also redeployed some talent in North America to drive improvements here. That was a headwind for us last quarter. It's not fixed yet, but it is reversing and improving. So, in three months, you're having an effect.

[Ademir Sarcevic, CFO and Treasurer at Standex International]

Well, let's see in six months, nine months before we. Yeah.

[Matt Koranda, Analyst at ROTH Capital]

Yeah. We'll give you a little bit more time before we ask the question again, Ademir. Thanks. Appreciate it. Maybe the last thing I just wanted to ask was just capital allocation priorities. With the stock sort of moving against you a little bit in the last several months, and I guess the upping of the repurchase authorization, is that a signal that we should look at as, hey, we're going to go a little bit harder on deploying the buyback here? I noticed it did sort of tick up sequentially in the first quarter in terms of deployment. But wanted to hear a little bit about that versus how you balance sort of the opportunity set that's in the funnel for acquisition as well.

[David Dunbar, Chairman, President, and CEO at Standex International]

Yeah, there's a few things. One is, we had a great discussion with the board recently about our share buyback authorization. And our last authorization, we were running low on it. We maybe had about $20 million left on that. And our approach to buybacks has been to be somewhat opportunistic, because there are times we think the market doesn't fully appreciate the value of the company. And a few years ago, we bought a lot of shares when that was the case, and we wanted to be ready to move if the same situation presented itself. And we have been trading with more of the data center stocks. There's been more volatility in the Standex stock recently than our consistently improving results would justify. So, we just wanted to be ready to respond to market conditions.

[David Dunbar, Chairman, President, and CEO at Standex International]

We are still full speed ahead on the capacity expansion and that $40 million-$50 million CapEx this year. I would say on the M&A front, our funnel is becoming more active. We actually are adding a person to focus on corporate development so we can drive more consistently M&A activity. So, no slowdown in the growth investments or the capital we expect to put into growth.

[Matt Koranda, Analyst at ROTH Capital]

Okay. Appreciate all the detail, guys, so I'll leave it there.

[Operator]

Thank you. Your next question comes from Tomo Sano with JPMorgan. Please go ahead.

[Tomo Sano, Analyst at JPMorgan]

Hi. Good morning, everyone.

[David Dunbar, Chairman, President, and CEO at Standex International]

Morning.

[Ademir Sarcevic, CFO and Treasurer at Standex International]

Morning.

[Tomo Sano, Analyst at JPMorgan]

Thanks for having us. Maybe just on margins, which were very strong this quarter, both gross margin and operating margins. How do you think about the path from here? How much of the opportunity is mix versus productivity and then operating leverage?

[Ademir Sarcevic, CFO and Treasurer at Standex International]

Yeah, I think it's a combination of both in terms of, obviously, the businesses that are growing at the highest rate are our highest margin businesses, so we are mixing up from that standpoint. Tomo, as we said in a prior quarter, we had some operating issues in our Electronics Edge business in North America. We had an ERP implementation a few quarters ago, and that created a little bit of an issue for us, so to speak. We've been resolving that, so we feel we are kind of on the tail end of that, and we're going to see some of the margin lifts coming from those activities. So, we're going to continue driving productivity across all of our businesses. Obviously, when the volume is up and you're running at a higher capacity, that's just going to help you get the margins up as well.

[Ademir Sarcevic, CFO and Treasurer at Standex International]

We do believe there is a margin expansion opportunity in all of our segments going forward, and we're going to continue driving that across the board.

[Tomo Sano, Analyst at JPMorgan]

Thank you, Ademir. One follow-up. You remain on track for more than $1.1 billion of revenue and over 23% operating margins by the end of next year, fiscal year 2028. After this quarter, where do you feel most confident, and where is there still the most work to do?

[David Dunbar, Chairman, President, and CEO at Standex International]

Well, yeah, we are very confident about that $1.1 billion and the 23% operating margin. The margin, you kind of answered the question on the margin yourself. We are hitting the $1.1 billion because the higher margin businesses are the ones providing the growth. We will lever into that 23% operating margin. We are quite confident about that. If I look at our results, I am very pleased with the multiple growth engines that are firing right now. I would say the new products has been kind of an underappreciated growth avenue for us, because this is something that is very much in our control. This is a flywheel that is gaining momentum every year. This year we will have $94 million of new products, which, you think of where we came from four or five years ago, it was almost close to zero.

[David Dunbar, Chairman, President, and CEO at Standex International]

Every year we get better at identifying new opportunities, launching new products. In the first quarter, the sales year-on-year were 56% growth in new products. So, it is a smaller number than the fast growth markets, but it continues to grow every quarter. Personally, I am most excited for the long-term potential that that new product number brings for us.

[Tomo Sano, Analyst at JPMorgan]

Great. Thank you, David, and congrats on the quarter.

[David Dunbar, Chairman, President, and CEO at Standex International]

Yeah, thank you.

[Operator]

Thank you. Your next question comes from Mike Shlisky with D.A. Davidson. Please go ahead.

[Mike Shlisky, Analyst at D.A. Davidson]

Good morning. Thanks for taking my questions here. Can you provide us a little bit more detail on the footprint expansion in electronics? Maybe just tell us what's currently open as of today and what's still to come for the fiscal year? Which exact facilities?

[Ademir Sarcevic, CFO and Treasurer at Standex International]

Yeah. So, Mike, if you remember, there's four different pieces of this project. First one is expanding our India capacity, and we are up probably about 30% year-on-year in terms of expanding capacity in our current sites in India, and we're going to continue working on those efforts. Croatia, as we mentioned earlier, is just going through customer audits right now and is going to start manufacturing and shipping out of the site within this quarter. Again, we expect that's going to get started to ramp up more in Q3 and Q4 of this fiscal year for us. Mexico is up and running, so they're shipping products out of Mexico. There's an existing electronics facility right across the border of Arizona. We allocated a portion of the space to the grid business, and that's already up and running.

[Ademir Sarcevic, CFO and Treasurer at Standex International]

In Houston, we are already working 24/7 in terms of the current site as of actually two weeks ago. We are in the process of getting a much larger facility, probably about three and a half times the size of the current facility. It's a new construction, and we expect to get the keys from that site in a June, July timeframe of next year, and then probably going to take us a couple of months to get the production fully up and running. In the meantime, the other site is going to be running at full capacity, so we don't lose any opportunities.

[Ademir Sarcevic, CFO and Treasurer at Standex International]

But it's all on track, it's all moving as we would expect it, and that one of the reasons we're actually raising that $180 million-$200 million in grid sales to $190 million-$200 million is because we feel confident that capacity expansion work is yielding results.

[Mike Shlisky, Analyst at D.A. Davidson]

Great. Thanks for that. Then I also wanted to ask about the pipeline you've got in aerospace and defense. As you look ahead at what's in the backlog today of what you signed more recently, does some of that have a higher margin profile, maybe next 12 months than you saw over the last 12 months? It sounds like for a lot of contractors, they're seeing better margins. You're a supplier to other contractors, but just curious as to whether you're seeing a better mix or kind of better project work there.

[David Dunbar, Chairman, President, and CEO at Standex International]

I would say that the new programs that we're winning, we're winning because we have a competitive advantage in our process in making those parts with spin forming versus traditional methods. So that tends to be reflected in gross margin where we're able to generate. So, they are marginally higher margin than the core business. So, these new programs will help the aerospace and defense continue to mix up in margin.

[Mike Shlisky, Analyst at D.A. Davidson]

Great. Thanks for that, David. I'll pass it along. Thank you.

[David Dunbar, Chairman, President, and CEO at Standex International]

All right.

[Operator]

Thank you. Your next question comes from Gary Prestopino with Barrington Research. Please go ahead.

[Gary Prestopino, Analyst at Barrington Research]

Hey, good morning all.

[David Dunbar, Chairman, President, and CEO at Standex International]

Gary.

[Gary Prestopino, Analyst at Barrington Research]

Couple of quick questions just on the numbers. I noticed that it looks like the corporate expense, when you look at the segments and implied corporate expense, it really jumped year-over-year. What happened there, and is that the run rate we should expect going forward?

[Ademir Sarcevic, CFO and Treasurer at Standex International]

Hey, good morning, Gary. So yeah, it's up about $3 million year-on-year, versus prior Q1. About two-thirds of that increase, Gary, relate to higher variable compensation expenses and stock comp, as well as higher medical costs. The medical costs have been increasing for us over the past year or two, and that continues. Then about one-third of that increase is more like a one-time cost, primarily related to some of the executive recruiting and transfers we had at the company, and that obviously is not going to continue. So, we would expect the corporate cost is going to come somewhat down in Q2, and get a little bit more normalized as we get into the Q3 and Q4.

[Gary Prestopino, Analyst at Barrington Research]

Okay. That's helpful. Then, before I just get into general industry questions here, if you're looking at high teens adjusted EPS growth, what kind of growth would that come to on an adjusted EBITDA basis? Will we be looking at a similar level of percentage growth from adjusted EBITDA with an adjusted EPS growth of mid-teens or high teens?

[Ademir Sarcevic, CFO and Treasurer at Standex International]

Yeah, I think that's probably not that far off. Mid-teens is probably a good way to look at it.

[Gary Prestopino, Analyst at Barrington Research]

Okay. Then, David, with the slide that you provided with the growth drivers, data centers, grid, et cetera, and Ademir, maybe you can help chip in here. What are your thoughts on all of the noise that's coming out against data centers, and is there a similar movement in international markets against data center growth?

[David Dunbar, Chairman, President, and CEO at Standex International]

We're actually seeing more data centers planned outside America in the last three to six months. Our discussions with our customers indicate that they're seeing an increase in activity investments outside the U.S. I was just in Europe a few weeks ago. Depending on the country you're in, there is some of the same debate about the impact of data centers on electricity prices, on water, on the local economy. I think all the governments and society are going to have to work that out. But we see no change in our expected outlook. Individual programs may be pushed out. They may move geographically, but there's such a hunger to get this productivity online. All the language we hear from our customers is that they are exploring multiple options where necessary to bring that capacity online.

[Gary Prestopino, Analyst at Barrington Research]

Okay. Thank you. Oh, the other thing I just wanted. Well, never mind. I'll ask that offline. Thank you.

[Ademir Sarcevic, CFO and Treasurer at Standex International]

Okay.

[Operator]

Thank you. Ross has a follow-up. Please go ahead.

[Ross Sparenblek, Analyst at William Blair]

Hey. Thanks, guys.

[David Dunbar, Chairman, President, and CEO at Standex International]

Yeah.

[Ross Sparenblek, Analyst at William Blair]

Just wanted to get a sense of the expectation of the capacity unlock on demand. You noted in the past that everything that you are making is shipping, and so if the demand is that immense, and we know that there is a massive imbalance between the supply and demand of gigawatts in the channel. Should it be a pretty healthy unlock as you start to get these machines, get these employees? Or do you think it would be more measured, kind of like the linear path that you presented here recently?

[Ademir Sarcevic, CFO and Treasurer at Standex International]

Ross, I think it will probably be a little bit more linear, as we kind of unlock the capacity. What I will tell you, the orders remain very, very strong, and we have no worries that as we unlock the capacity, we will be able to fulfill that capacity in terms of being busy, in terms of sales. We do think it is going to be a little bit more linear in the quarters to come.

[Ross Sparenblek, Analyst at William Blair]

All right. Well, maybe a better way is just when purchasing patterns. Do these things come in and measured in thousands, tens of thousands, or they are kind of batch orders of size, and there is a certain timeframe to fill them? Or is it just kind of, again, back to the book and ship? There is just demand available in the market, and so everything that you are making is going out the door. Just what does that customer sales process look like?

[Ademir Sarcevic, CFO and Treasurer at Standex International]

Yeah. Customers are actually now looking. We talked about these long-term agreements in this space, right? Customers are actually kind of looking to give you a bit of a longer lead time, a longer forecast in terms of what they need. So, some of the customers are now looking and giving us a forecast 6-12 months out. So, there is that visibility we are starting to get. Part of that is also just making sure that we have capacity to support them. But again, what I will tell you is, as we unlock the capacity, that capacity gets filled pretty quickly, so.

[David Dunbar, Chairman, President, and CEO at Standex International]

Now, I would just add too that the customers are managing their entire supply chain. They are being quite transparent with us about their demand and their requested schedules. We may receive orders for products to be delivered in a month or two months, but we have long-term planning sessions.

[Ademir Sarcevic, CFO and Treasurer at Standex International]

Right.

[David Dunbar, Chairman, President, and CEO at Standex International]

They give us an idea what is likely to come in a quarter, in two quarters, in three quarters. Then our input on our capacity affects their own plan too. It is a very interactive process.

[Ademir Sarcevic, CFO and Treasurer at Standex International]

Very dynamic, yeah.

[Ross Sparenblek, Analyst at William Blair]

Yeah. Well, I imagine that their internal build rates have only been increasing over the last 18 months.

[David Dunbar, Chairman, President, and CEO at Standex International]

Yeah.

[Ross Sparenblek, Analyst at William Blair]

Well, then maybe just-

[David Dunbar, Chairman, President, and CEO at Standex International]

I do want to remind-

[Ross Sparenblek, Analyst at William Blair]

Ademir. Yeah? Sorry.

[David Dunbar, Chairman, President, and CEO at Standex International]

I am sorry. I just want to make another point. When we have talked about the opportunity for our grid business with instrument transformers, in our investor presentation, there is a breakdown of the total market. Total market is $12 billion. We have been serving about a $1 billion piece of that in North America and India. There is a $3.5 billion piece of that which is aftermarket repair. It is local business that is sold to utilities, and that is an opportunity for us to unlock as this capacity comes online. We are not concerned about a long-term imbalance with capacity and demand because we have another larger market to begin serving longer term.

[Ross Sparenblek, Analyst at William Blair]

That's what I wanted to kind of get into, is just Ademir, you're a couple months in the seat. You mentioned partnership opportunities, and David just talked about kind of a servicing aftermarket. What else are you seeing out there? How can you start to get a bigger piece of this TAM, and is M&A required?

[Ademir Sarcevic, CFO and Treasurer at Standex International]

I think, Ross, quite frankly, I think organically we feel pretty good we can capture significant market opportunities. And to David's point, there's this additional markets we haven't even explored, and we're going to start exploring opportunities in those markets as well. On an M&A side, we have a pretty busy M&A pipeline, and obviously we're going to continue to be acquisitive at the same time. Our strategy is going to continue from new product development, organic focus on capacity expansion, sales and commercial excellence, organic growth, at the same time complemented by inorganic opportunities as they come. As you know, those you can't really predict when they're going to happen, but we remain out there.

[Ross Sparenblek, Analyst at William Blair]

Okay. No, that's great, guys. I'll leave it there. Thank you. Ademir, good luck. Or Godspeed.

[Ademir Sarcevic, CFO and Treasurer at Standex International]

I'll miss you.

[Operator]

Thank you, Ross. There are no further questions. I will turn it back to Mr. Dunbar for some closing remarks.

[David Dunbar, Chairman, President, and CEO at Standex International]

All right, thank you. I want to also mention that Joanne Edwards will be retiring from the Board of Directors after eight years. She has been influential in supporting our strategy to grow in the electrical equipment and the markets, which is obviously paying off. I want to thank her for her many contributions. We wish her and her family all the best in her retirement. We are also happy to welcome Brenna Preisser from Brunswick to the board. Brenna brings strong strategic planning skills and deep talent development experience, which will be valuable as we chart the next steps in our journey. I want to thank you all for joining our call today. We truly enjoy reporting on our progress and the outlook of Standex.

[David Dunbar, Chairman, President, and CEO at Standex International]

Thank you again to all of our employees who are solving problems and taking care of customers every day, making Standex a great place to work. I look forward to speaking with you again in our fiscal second quarter 2027 call.

[Operator]

Ladies and gentlemen, this concludes your conference call for today. We thank you for participating and ask that you please disconnect your lines. Have a great day.

Participants

Executives

• Christopher Howe, Director of Investor Relations
• David Dunbar, Chairman, President, and CEO

Analysts

• Ademir Sarcevic, CFO and Treasurer at Standex International
• Chris Moore, Analyst at CJS
• Ross Sparenblek, Analyst at William Blair
• Matt Koranda, Analyst at ROTH Capital
• Tomo Sano, Analyst at JPMorgan
• Mike Shlisky, Analyst at D.A. Davidson
• Gary Prestopino, Analyst at Barrington Research