Q2 2021 Standex International Corp Earnings Call
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Good morning, and welcome to the Standex second quarter fiscal 'twenty 'twenty, one financial results conference call. All participants will be in listen only mode should you need assistance. Please signal a conference specialist by pressing Star then zero on your telephone key.
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After todays presentation, there will be an opportunity to ask questions to ask a question you May Press Star then one on your telephone keypad to withdraw your question. Please press Star then two.
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I would now like to turn the conference over to Gary Farber of affinity growth advisors. Please go ahead.
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 Dot com.
Please refer to Standex is 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 <unk>.
Recent annual report our 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, which is EBIT <unk>.
<unk> restructuring purchase accounting acquisition related expenses and onetime items, EBITDA, which is earnings before interest taxes depreciation and amortization.
Adjusted EBITDA, which is EBITDA, excluding restructuring purchase accounting acquisition related expenses and onetime items EBITDA margin and adjusted EBITDA margin. We will also refer to other non-GAAP measures included adjusted net income adjusted income from operations adjusted net income from continuing operations adjusted.
That earnings per share adjusted operating margin free operating cash flow per pro forma net debt to EBITDA. 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.
<unk> believes that such information provides an additional measurement and <unk>.
<unk> historical comparison of the Companys performance.
On the call today is standex as chairman, President and Chief Executive Officer, David Dunbar, and Chief Financial Officer, and Treasurer, Adam Your source of income.
Thank you Gary.
Good morning, and welcome to our fiscal second quarter 2021 conference call on today's call I will provide commentary on our results and the trends we are seeing in our businesses I will then review our segment performance and outlook.
Adam will follow with a discussion of our consolidated results and financial position for.
Finally, I will conclude with comments on our longer term financial framework, we're introducing today and conclude with takeaways.
Now if everyone can turn to slide three key messages I will discuss second quarter teams and results.
We're very pleased with our fiscal second quarter results, we had solid revenue growth at electronics and scientific segments year on year, while our engraving segment margin improved sequentially.
Chronic nearly half of the 31% year on year revenue increase reflected organic growth with positive trends in electric vehicles general automotive appliances and semiconductor equipment.
Scientific revenue continued to grow at a double digit rate with a 16% year on year increase driven by strong demand for COVID-19 vaccine storage.
We now believe that Covid related storage demand is likely to be at the higher end of our previously indicated 10 million to $20 million range in fiscal 2021.
At the engraving segment margin improved approximately 100 basis points sequentially due to favorable geographic mix productivity and cost actions.
Looking forward our portfolio has never been in better condition and Thats reflected in our outlook, we exited the second quarter with several positive trends positioning us well for a stronger second half in fiscal 2021.
Our total backlog realizable under one year was approximately $173 million at the end of the second quarter and approximately 14% sequential increase.
This reflected strength in electronics and scientific segments, and the gradual market recovery that specialty solutions.
We are also actively engaged with our customers on emerging global opportunities in end markets, such as electric vehicles renewable energy and five G.
In addition, the integration of brink, who electronics is ahead of our initial plan and we are effectively lever leveraging its complementary customer base and end markets.
We also saw continued progress on our productivity and financing initiatives.
We are on track for over $7 million in annual savings in fiscal 2021 for.
Cost actions and are implementing additional productivity and efficiency initiatives, which will provide further opportunity heading into fiscal 2022.
The electronics segment, while we are addressing rhodium material inflation with price actions in the near term. We are also implementing new manufacturing processes over the next two years, which will allow us to offer customers a choice of switches with rhodium or other materials, we're moving our exposure to rhodium inflation once and for all.
Finally, our previously announced interest expense and tax rate initiatives resulted in an approximate 15% reduction in interest expense and 510 basis point reduction in tax rate year on year.
Second quarter fiscal 2021.
We also further strengthened our financial profile in the quarter, providing significant flexibility to pursue our portfolio of organic and inorganic growth opportunities.
We generated strong free cash flow of $17 million in the second quarter and through the first half of fiscal 2021 have achieved 95% free cash flow to net income conversion rate.
During the quarter, we also repatriated approximately $17 million from foreign subsidiaries and we are on track to achieve our previously announced $35 million repatriation target in fiscal 2021.
We ended the quarter with a net debt to adjusted EBITDA ratio of <unk>, nine times, and approximately $200 million and available liquidity.
In regard to our fiscal third quarter 2021 outlook, we expect a moderate sequential revenue and operating margin improvement compared to fiscal second quarter 2021 results. This reflects a sequential revenue increase that electronics scientific engineering technologies and specialty solutions segments.
Engraving revenue is expected to decline sequentially, reflecting both geographic mix and timing of projects, but returned to growth in fiscal fourth quarter 2021, both sequentially and year on year.
Please turn to slide four.
I will begin to Scott to discuss our segment financial performance starting with electronics.
In the second quarter Electronics segment revenue increased approximately $14 3 million or.
Our 31, 2% year on year to $60 1 million supported by organic revenue growth of approximately 15%.
Organic growth reflected a broad based geographic recovery with positive trends in electric vehicles general automotive appliances, and semiconductor equipment end markets in.
In particular as shown in the picture on slide four we have a growing portfolio of content for the electric vehicle market, including released clean, our transformers and coolant level and charging position sensors.
The recent Renco acquisition also contributed to our revenue growth in the quarter with approximately $6 million in incremental revenue contribution year on year.
Electronics operating income increased approximately $2 2 million or 28, 1% year on year from operating leverage associated with revenue growth productivity initiatives and profit contribution from rent growth, partially offset by increased raw material prices.
Our new business opportunity funnel has increased to $56 million across a broad range of markets and is expected to deliver $12 million of incremental sales in fiscal 2021.
Yes.
Sequentially in the third quarter.
We expect a moderate increase in electronics revenue and operating margin.
We expect further growth for <unk>, and renewable energy and electric vehicle applications as well as recovery in Reed switch demand and transportation end markets.
Our near term backlog is very healthy with backlog realizable under a year, increasing $15 million or 25% sequentially.
The second quarter.
Please turn to slide five for a discussion of the engraving segment.
Revenue decreased just under 1% year over year to approximately $37 9 billion and operating income was $6 5 million.
Or 6% year over year decrease the.
The results reflect the economic impact of COVID-19 on our end markets, partially mitigated by productivity and expense savings in the quarter.
Sequentially revenue increased two 5%, excluding foreign exchange and operating margin improved approximately 100 basis points to 17, 1%, reflecting favorable geographic mix and our productivity and cost actions.
<unk> sales increased approximately 9% sequentially to $12 9 million focused around software tools laser engraving and tool finishing.
As highlighted to the left we have further innovated our customer design process, given the global travel restrictions due to the pandemic.
Intensive customer collaboration is at the heart of the customer intimacy model and all of our businesses and was slowed by Covid related restrictions.
By utilizing high definition cameras and <unk> software, we have created a remote approval process to enable customer engagement and design approvals. Despite global travel restrictions, allowing us to further the design process, while maintaining a high degree of client engagement.
Sequentially in our third fiscal quarter, we expect a slight revenue decline and a moderate decline in operating margin and engraving, reflecting geographic mix and project timing in our.
Fiscal fourth quarter 2021, we expect an increase in revenue and operating margin sequentially and year on year.
Turning to slide six and scientific segment.
Scientific segment revenue increased 16, 1% year on year to $17 $9 million largely due to positive trends at retail pharmaceutical chains and medical distribution companies much of it associated with the demand for Covid vaccine storage.
Operating income increased four 4% year on year to $4 2 million, reflecting the volume increase balanced with investments to support our growth opportunities.
Sequentially in the fiscal third quarter, we expect a moderate to strong increase in revenue and operating margin to be slightly ahead of second fiscal quarter of 2021.
This reflects volume growth driven by continued COVID-19 vaccine storage demand balanced with reinvestment in the business for R&D and growth opportunities.
The segment's backlog realizable under a year increased approximately $4 million or 65% sequentially compared to fiscal first quarter 2021.
We expect Covid vaccine storage demand to come in at the high end of our previously indicated $10 million to $20 million sales range from fiscal 2021.
Turning to the engineering technologies segment on slide seven.
On a year over year basis engineering technologies revenue and operating income decreased approximately 33, 9% and 62% to $17 5 million and $1 $4 million respectively.
As expected the revenue and operating income decrease reflected the economic impact of COVID-19 on the commercial aviation market, especially engine parts manufacturing.
On a sequential basis segment operating margin increased approximately 500 basis points on a similar revenue level to fiscal first quarter 2021, as a result of product mix and our ongoing productivity actions.
Besides the early stages of recovery aviation end markets that we are seeing we are also well positioned for continued space end market growth.
In addition to projected government launch forecasts to support NASA and National Security. We also have significant opportunities in commercial space markets.
In the fiscal third quarter on a sequential basis, we expect a moderate increase in revenue primarily due to the early stages of recovery in the commercial aviation end market.
We expect operating margin to be sequentially similar to the second quarter due to higher sales mix of lower margin engine parts business, partially offset by productivity initiatives.
Please turn to slide eight specialty solutions.
On a year over year basis specialty solutions revenue decreased approximately 17, 8% to $22 8 million.
Operating income of $3 2 million or 26% year on year decrease.
As expected the revenue and operating income decline reflected the economic impact of COVID-19 pandemic on this segments end markets.
Sequentially in our fiscal third quarter, we expect a moderate sequential increase in revenue and operating margin, reflecting gradual recovery in the foodservice industry and strong order trends in the refuse markets.
Supporting this outlook, our backlog realizable under a year increased sequentially approximately $3 5 million for 35.
Two 5% compared to Q1 fiscal 2021, reflecting ongoing recovery in food service equipment and refuse markets.
From a strategy standpoint, our emphasis on shifting hydraulics manufacturing capacity towards higher margin aftermarket opportunities continues with aftermarket revenue, increasing 15% year on year.
The hydraulics business is also a potential beneficiary from a potential infrastructure bill with increased investment in roads and bridges.
I will now turn the call over to Adam who will discuss our quarterly results in greater detail.
Thank you David and good morning, everyone first I will provide a few key financial takeaways from our fiscal second quarter 2021 results.
We realized sequential improvement on several fronts during the quarter for.
First revenue increased about electronics engraving and scientific segments, and we expect revenue growth to continue in the third quarter and for at about five reporting segments.
From a margin standpoint, adjusted EBIT margin also improved sequentially, reflecting revenue growth in.
That's about cost efficiency and productivity actions, partially offset by continued rising raw material costs, primarily in total electronics segment.
We continue to focus our efforts on productivity actions and on track for realized savings of over $7 million in fiscal 'twenty, one related to our previously announced cost actions.
In addition, we further strengthened our international profile through initiatives focused on free cash flow generation reduced interest expense net of tax rate and continued cash investigation.
We also generated approximately $17 million of free cash flow in the second quarter, we had.
Approximately 95% for free cash flow to net income conversion rate for the first half of fiscal 2021.
Now, let's turn to slide nine second quarter 2021 income statement summary.
Consolidated basis total revenue increased one 7% year on year and three 3% sequentially.
Year on year revenue increase reflects the contribution from our retail Branco acquisition and foreign exchange, partially offset by the economic impact of COVID-19.
Panic revenue declined four 3% year on year much of it due to the impact of the pandemic.
As we expected COVID-19, economic impact was most evident at the engineering technologies segment due to weakness in the aviation end market and the specialty solutions segment total weakness into food service equipment and hospitality industries.
Retail ranco acquisition and foreign exchange impacts offset the organic revenue decline range.
<unk> contributed approximately 6 million net revenue by three 9% offset for the organic revenue decline on a consolidated basis.
In addition assets contributed a 2% increase for the year on year revenue growth.
One year on year basis, our adjusted EBIT margin declined by 60 basis points to 11, 4%.
The decline was primarily due to the economic impact of COVID-19, pandemic increased raw material cost and increases in research and development initiatives offset by cost and productivity actions on a sequential basis adjusted EBIT margin increased 40 basis points.
Interest expense decreased approximately 17% year on year, primarily due to lower overall interest rate as a result of the previously implemented variable to fixed rate swaps.
In addition, our tax rate of 29% in the second quarter of 2021 was low.
Largely due to various tax optimization strategies for began to implement earlier in the fiscal year.
For fiscal 2021, we continue to expect approximately 22% tax rate. This.
This assumes a tax rate in the mid 20% range that third quarter and a tax rate in the low 20% range in the fourth quarter of 2021.
Adjusted earnings per share was $1 <unk> in the second quarter of 'twenty, one compared to 99 cents a year ago.
Please turn to slide 10 second quarter 21 free cash flow.
We continue to consistently generate free cash flow conversion from net income of over 140% in the second quarter of 'twenty one.
We reported a free cash flow of $17 million inclusive of $4 $8 million pension payment compared to $3 6 million a year ago.
This free cash flow increase reflected solid working capital performance as we deleverage the balance sheet by approximately $9 million in the quarter.
Next please turn to slide 11, a summary of standex capitalization structure and liquidity statistics, which remains strong.
Standex had net debt of $99 million at the end of December compared to $106 2 million at the end of September net.
Net debt for the second quarter of 'twenty. One consisted primarily of long term debt of $200 million and cash and equivalents of approximately $109 million with approximately $80 million helped by foreign subs.
Our financial strength was evident as several of our key metrics standex net debt to adjusted EBITDA leverage ratio was approximately 0.9 at the end of the second quarter with a net debt of towards the total capital ratio of 15, 4%.
Companys interest coverage ratio increase sequentially to approximately $10 three times.
We had approximately $200 million of available liquidity at the end of the second quarter and continue to repatriate cash with approximately $17 million would appear for you did during the quarter.
Non plan to repatriate approximately $35 million in fiscal 'twenty one.
From a capital allocation perspective, but it purchased approximately 36000 shares for two and a half million dollars.
There is approximately $35 million left remaining on our current repurchase authorization.
We also declared our 26th consecutive quarterly cash dividend from January 28 of 24.
Finally, we continue to expect fiscal 2021 capital expenditures to be between approximately $25 million to $28 million.
I will now turn the call over to David to discuss our longer term financial framework and closing comments. Thank you Ed Amir.
If everyone from please turn to slide 12 for a discussion of the financial targets, we are introducing today.
Over the past few years, we have meaningfully transformed our portfolio around high quality businesses with attractive growth and margin profiles as well as strong end markets and customer value propositions.
As a result of the substantial changes our portfolio has never been in a better position. We believe it is now appropriate to provide a longer term that is three to five year financial outlook.
Specifically, we are targeting mid single digit consolidated organic revenue growth on a compound annual basis, our outlook assumes a continued macroeconomic recovery or.
Our businesses are well positioned to grow and exciting areas such as electric vehicles renewable energy smart grid space commercialization vaccine storage and <unk>. We also have an active new product development process from our business, particularly.
Electronics scientific and <unk> segments.
We are targeting an adjusted EBITDA margin in excess of 20% compared to the 16, 4% we reported in fiscal 2020.
A few productivity initiatives to highlight include improving our electronics cost position by implementing new manufacturing processes to address rising raw material prices.
Ongoing operational excellence actions further standardize operating discipline across business units and.
And continuing to fully leverage our G&A structure.
We believe our free cash flow conversion ratio of 100% is achievable under these assumptions, particularly given our continued working capital focus.
Finally, it is our expectation that with this financial performance and disciplined capital allocation, we will increase our return on invested capital to above 12%.
Please turn to slide 13.
We will continue to exercise discipline in our capital allocation process as illustrated on this page. We have recently increased our hurdle for internal growth investments to over 20% IRR. In addition, we will continue to buyback our shares on an opportunistic basis.
Please turn to slide 14 for some key takeaways.
We expect a moderate revenue and operating margin improvement in fiscal third quarter 2021, compared to fiscal second quarter 2021 results and are well positioned for stronger second half fiscal 2021.
We also provided a longer term financial outlook today, reflecting our meaningfully transformed portfolio focus around businesses with attractive growth and margin profiles as well as strong end market and customer value propositions.
Our substantial financial flexibility allows us to be opportunistic with an active pipeline of organic and inorganic growth opportunities.
Our ongoing productivity and efficiency initiatives provide further opportunity to leverage these trends for improved financial performance.
I will now open the line for questions.
We will now begin the question and answer session to ask a question.
<unk> you May Press Star then one on your telephone keypad.
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At this time, we will pause momentarily to assemble our roster.
The first question comes from Chris Howe Barrington Research. Please go ahead.
Good morning, David and good morning, Chris.
And congrats on the quarter.
Thank you.
Wanted to start with.
You mentioned the incremental COVID-19 contribution remaining consistent at $10 million to $20 million with a likelihood of coming in near the high end of that range.
Of this incremental revenue contribution I'm not sure if you've mentioned it before but can you talk about.
Margin for that incremental revenue.
As it relates again to the scientific segment.
A follow up.
As the R&D and growth opportunities that you are reinvesting in.
And any opportunities for pricing.
Look at margin for the scientific segment. Thanks.
Okay.
The first question.
The margin. These are cabinets that are very very similar if not identical to some models. We already sell so the margins are going to be consistent with historic margins of that business, obviously with the volume we leverage our fixed costs a bit so we'd see some pick up there.
A question about R&D.
As the year rolls on and we will we will be announcing some new products. We have a very active pipeline and we will be releasing those new products to get into some new product categories that are adjacent and you're very close to the to the core products in our business.
In terms of pricing.
It's a very thoughtful approach to pricing every model, we kind of take a look at where our product fits relative to competition.
Have a good price to value relationship.
We are somewhat dynamic in our pricing right now when it comes to delivery considerations, if customers call I need something.
Quickly are they need very high.
High volume parts.
We sometimes get price for shorter delivery.
That's great.
Another question I had in regard to specialty.
Loosens.
You mentioned, we're on a gradual recovery.
In this scenario, perhaps as we look into fiscal Q4.
Let's say.
The timing works out and there's a full reopening.
Within your end markets.
How would you expect demand to come back in specialty solutions.
Versus the relative.
And market recovery.
Well.
Two of those businesses are tied to food food equipment from surface equipment end markets and the reopening with for the most dramatically affect them.
Our working assumption has been that by Q4 of the calendar year. So in our November December.
The reopening is well underway.
That those end markets returned to kind of pre COVID-19 levels end of this calendar year early next calendar year.
Our businesses would fall.
Now within there also just the hydraulics business, which is it is.
Is it back to pre Covid levels already it's getting day at the end of Q4 is kind of already.
Projected weighted by the time, our fiscal Q4 comes around that that business will be back more or less a pre COVID-19. So that's about half of specialty and the other half for the food service equipment businesses.
Sure.
Okay and lastly.
Because it's big.
Because of the good news nature of the long term outlook three to five year plan.
I'm assuming in organic growth. During this time period will be additive and perhaps push that's true.
Net organic growth rate to the high too.
Low teens.
Potentially depending on whether it's a tuck in or something more meaningful.
Exactly right.
Several years ago, when we gave guidance I guess, we made an estimate of what our inorganic sales numbers will be but it was impossible to predict. So we just took it out and you are absolutely absolutely right any inorganic activity would be on top of that number and as you know pretty strong balance sheet and the ability to react quickly on attractive inorganic opportunities.
So we.
We continue to remain active.
Yes.
That's what I was kind of taking into consideration there seems to be additional upside surrounding these longer term targets because of these large insurer targets I assume are under the framework of the existing businesses.
And there could not saying there will.
Yeah, even more simplified portfolio in the many years to come.
<unk>.
Yes.
Thanks for taking my questions. Thank you, Chris and thanks, Chris.
The next question comes from Chris Mcginnis of Sidoti and company. Please go ahead.
Good morning, Thanks for taking my questions and nice quarter.
I guess just to follow up on that.
Just can you talk about the M&A outlook at this point, what Youre seeing valuations are they picking up or how they've changed maybe through the pandemic.
The opportunities you see out there.
Well, we have a very active pipeline and a lot of the deals that we've done in the past have been privately held companies and have not been part of our process and those are often the product of years of getting to know each other relationship building just a series of many many contacts phone calls and meetings. So those are going on as actively as ever.
I would say in terms of.
Hard to say, what's going on with multiples because in our space a lot of the deals we thought would be taking place.
Place in the last year, it's kind of been put on hold as owners want to wait and see.
How the economy develops.
So.
I don't have a perspective on.
On multiple changes.
Sure Okay I appreciate that.
And then just I guess just for my clarification, just around the scientific piece of the business you talked about Covid I thought that the products that you had wasn't as specific to Covid. So was better you got a new product offering or can you just expand on that a little bit I thought it was more for flu vaccine. When you were talking in previous call.
Well you know last summer we had we were reporting we got a lot of orders in the summer for the just traditional flu season, but.
But the cabinet that we sell for a COVID-19 storage are the same cabinets or in some cases, they are slightly different but they are plus five degree minus 20 degree and I think for a lot of people get confused I shouldn't say continues but theres been so much press and coverage of the minus 70 minus 80 degree storage.
For the Pfizer vaccine and there was a real ramp up in that ultra low temperature storage for their production facilities large warehouses and distribution and so everybody tends to think all COVID-19 vaccines for equals minus 70 minus 80, but where we play is in the last mile of delivery. So the cabin.
Does that get put into doctors' offices, and pharmacies are minus 20 degrees plus five so even the Pfizer vaccine. It gets taken out of this minus 70 degree transportation containers and it can be put in a minus 20 plus five refrigerator.
Refrigerator or freezer for several days before it's administered.
No.
So.
But the bulk of the products, we're selling that are for Covid vaccine storage are essentially the same products, we've been selling for for flu seasonal food storage.
Thanks, and thanks for that clarification I appreciate it.
That's for sure.
Yes.
It sounds good.
On the engineering side, it seems like it's starting to come back maybe a little bit.
Also just highlight just the commercial space markets.
Growth Youre seeing with that business, just given all the kind of.
<unk>, taking place in that market.
Can you just talk about that outlook and how thats gone.
Yeah, I mean, no secret there is a lot of activity.
And we haven't we have a great position with our <unk> plant.
<unk> for per thanks for the large rockets.
The.
Okay.
Quantify this.
We see that.
The number of launches.
If you take everything that analysis planning and the traditional.
Traditional demand for space over the next five years add to that the new commercial ventures like Amazon, putting up their network of satellites.
Sure.
For example, well.
<unk> will virtually double space activity over the next over the next five year space launches and.
Yes.
The end market for our products will follow that same trajectory.
And our.
Or.
Our sales in the space have been in the mid <unk> to 30, all kind of year end year out for for many years.
And so we've seen I guess every day.
And then I guess, just thinking about it would you need to invest and expand to accommodate that growth for our billerica handle and support.
Total Newport.
We would have to make some investments it depends on.
On when those different <unk>.
<unk> hit.
But yes, there would be some additional investment.
Okay great.
And then just.
I know I know you just put it out.
On that 20% EBITDA margin range, how high can you can you get in the current portfolio.
What would be the main drivers in getting.
Maybe to a higher end of the number.
Well, let's get the 21, 20% growth.
It's no secret when you look at our but Youll get a big big business electronics that we've consistently saying very confident at least a 20% EBIT business or you add the Dar youre in the in the low to mid twenties engraving sales a 20% EBIT. So a few points of Dod their scientific.
Businesses as they grow obviously there they are already in.
So I understand where your question is coming from.
But our our path to get about 20% in the next three to five.
And we've put this rhodium issue behind us once and for all over the next couple of years.
Jim Hooven, working very closely with the engraving group on labor efficiency, which will improve the consistency and predictability there and.
We're starting to put in place some exciting kind of back office.
Infrastructure, so that we can be.
Become more efficient with G&A over the coming years, and so that will certainly power is for the 20% EBITDA and then.
Well I mean, when I came here.
For the target that I picked up from Roger.
Would you recall he said, 15% EBITDA, we got there after a couple of years, we raised at the 17, where basically there now so we continually range. These targets has.
The business matures and our performance dictates.
No.
Great job on a quarter.
Good luck in Q3, and thanks for taking my questions.
Great that's great.
The next question comes from Chris Moore of CJS Securities. Please go ahead.
Hey, good morning, guys Chris.
Good morning.
$7 million in savings that you're on track for.
Roughly how much of that was kind of recognize in the first half of the year. Thank you for you Mike.
Yes, Chris I think as we've said previously and most of that most of that readout would be kind of for the first three quarters of this fiscal year. So you know I would probably tell you within the first six months, maybe two thirds of that $7 million has been recognized already.
Got it.
Talking a lot about the three segments, 20% operating margin potential scientific is already there.
Safe to say that the the path to 20 percentage is probably a little clearer for electronics and engraving it right now.
Okay.
Well I wouldn't say it's correct.
Engraving team has clarity what they need to do it.
And its primary labor efficiency and driving the best practices consistently around the world.
So.
With electronics its more focus on that one single item of rhodium. So it's maybe a little more.
A simple in that way.
Got it and the EV opportunity within electronics.
Can you just remind me roughly how much of what <unk> is is in electronics at this point in time.
Total auto is in kind of low low 20%.
Between the sensors, we sell and.
What goes through distribution.
And.
For example, this last this last last quarter, our sales into EV applications for about $2 million in that in that business.
So it's not a huge number now, but it's growing fast.
If you look at the projections for electric electric vehicles.
Our current content in those vehicles that we're on is about twice our content on it.
Compared to a traditional combustion engine vehicle and there are some additional applications. We are pursuing that could increase the content beyond that so.
Even though it's a relatively small number it provides a healthy portion of the growth that electronics will see in the next five years.
Got it that's helpful.
Fiscal 'twenty, two obviously, a long way away, but big picture when you look for the segments from what we're talking about electronics appears to be in very good shape for some revenue and margin standpoint.
<unk> and specialty or are.
It certainly is going to be helped as COVID-19.
Winds down scientific it seems like.
The one put and take there would be the COVID-19 refrigeration sales that you hadn't in 'twenty. One so I guess the question is.
Do you have any any any thoughts in terms of that COVID-19.
Revenue.
Continuing into 'twenty, two or any thoughts there.
Yes.
Just to kind of put some numbers around this.
When we first estimated that that $10 million to $20 million number.
Based on.
The numbers aren't there are about 30000 retail pharmacies in America about 100000 physicians offices, 35000 hospitals clinics urgent care facilities.
And we estimated how many of those sites would be adding storage, we know what our market share is in those segments and I would tell you that our communication that we anticipate being toward the upper end of that $20 million.
That would be on pace to outfit about one third of the pharmacies with with the storage unit. So the question then would be once we get into the summer and in our new fiscal year will there be a continued build out of that last mile of vaccine distribution into the remaining.
Pharmacies and.
Clinics in urgent care, and it's frankly premature for us to say.
Got it very helpful. I'll jump back in line. Thanks, guys. Thanks, Chris Thanks.
This concludes our question and answer session I would like to turn the conference back over to David Dunbar for any closing remarks.
Thank you.
Closing, we made solid progress in the fiscal second quarter and expect continued improvement in the second half of fiscal 2021 long term outlook is reflective of the significant transformation. We've accomplished at standex in the past few years I want to thank everyone today for their interest in standex, and allowing us the opportunity to discuss with you our results and accomplishments in our fiscal second quarter last and not <unk>.
So I want to thank all of our employees, it's a pleasure to work get up every day work together and and.
Transform this company and I. Thank our shareholders for your continued support we look forward to speaking with you again on our third quarter fiscal 2021 call. Thank you.
The conference has now concluded. Thank you for attending today's presentation you may now disconnect.
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