Q4 2025 Standex International Corp Earnings Call
Operator: Good morning, ladies and gentlemen, and welcome to the Standex International Fiscal Fourth Quarter 2025 Financial Results Conference call. At this time, all lines are in a 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, August 1st, 2025. I would now like to turn the conference over to Christopher Howe, Director of Investor Relations. Please go ahead.
Good morning, ladies and gentlemen, and welcome to the standex. International fiscal, fourth quarter, 2025 Financial results conference call at this time, all lines are in a listen-only mode. Following the presentation, we will conduct a question and answer session. If at any time during this call, you require me to assistance, please press star zero for the operator.
This call is being recorded on Friday. August 1st 2025. I would not like to turn the conference over to Christopher Howe director of investor relations. Please go ahead.
Christopher Howe: 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 would 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, EBITDA margin, and adjusted EBITDA margin.
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.st.com.
Please refer to X's Safe, Harbor statement on slide 2.
Matters that spandex 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 stand X's. Most recent annual report on form 10K, as well as other SEC filings and public announcements.
For a detailed list of risk factors.
Christopher Howe: 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.
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 in taxes. Adjusted ebit. Evita, which is earnings before interest taxes depreciation and amortization adjusted. Eva Eva margin and adjusted Eva margin. 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 ibida.
Adjusted measures exclude the impact of restructuring purchase accounting amortization from acquired, intangible assets.
Acquisition-related expenses. In 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, is Chairman president and chief executive officer, David, Dunbar and Chief Financial Officer and and Treasurer at a mere sarcasm.
David Dunbar: Thank you, Chris. Good morning, and welcome to our Fiscal Fourth Quarter 2025 Conference Call. Fiscal Year 2025 was a turning point for Standex. We are a different company than we were even a year ago. We have been laying the groundwork for years, and our growth drivers have now crossed a threshold. They are scaling. They have reached an inflection point and are beginning to move the needle in a meaningful way. I am very excited to share with you what we are seeing and how it is shaping our outlook. I would like to thank our business and corporate teams for navigating this past year and achieving a record profit generation in Fiscal 2025. Now, let us look at the results beginning on slide three, Key Messages. In the fourth quarter, sales increased 23.2%, with contributions from acquisitions partially offset by a slight organic decline.
Thank you, Chris.
Good morning and Welcome to our fiscal fourth quarter 2025 conference call.
Fiscal year 2025 was a turning point for standex. We are a different company than we were even a year ago.
We've been laying the groundwork for years, and our growth drivers have now crossed a threshold. They are scaling.
They have reached an inflection point and are beginning to move the needle in a meaningful way. I'm very excited to share with you. What we are seeing and how it is shaping our Outlook.
I would like to thank our business and corporate teams for navigating this past year and achieving a record profit generation in fiscal 2025.
Now, let's look at the results. Beginning on, slide 3, you messages.
David Dunbar: Electronics grew slightly on an organic basis, with a book-to-bill ratio above one and organic orders up 16% year on year. This represents the first quarter of organic growth since 2023 and signals strong momentum into 2026. Our Fiscal Fourth Quarter sales in the fast-growth market increased to 28% of total company sales. New product sales added approximately 2.8% to sales, ahead of our goal of 2%. Our grid technologies business continues to perform ahead of our expectations. To support strong global demand for electrical equipment, we are expanding AMREN Nurion capacity with lean projects and additional shifts in the core facility. I am also excited to announce that in the quarter, we established a site in Croatia to serve European customers. We expect to be shipping product from Croatia within four months. Operating performance was very strong in the quarter.
In the fourth quarter, sales increased by 23.2%, with contributions from acquisitions, partially offset by a slight organic decline.
Electronic screw slightly on an organic basis with a book-to-bill ratio above 1 and organic orders up 16% year on year. This represents the first quarter of organic growth since 2023 and signals strong momentum into 2026.
Our fiscal fourth quarter sales into fast growth, markets increased to 28% of total companies sales.
New product, sales added approximately 2.8% to sales ahead of our goal 2%.
Our grid Technologies business continues to perform ahead of our expectations.
To support strong, Global demand for electrical equipment. We are expanding amaran capacity with lean projects and additional shifts in their core facility.
I am also excited to announce that in the quarter. We established a site in Croatia to serve European customers. We expect to be shipping product from Croatia within 4 months,
David Dunbar: We achieved a record-adjusted operating margin of 20.6%, up 120 basis points sequentially, and up 350 basis points year on year. This operating performance, along with our cash generation and cash repatriation, enabled us to lower our net leverage ratio to 2.6. Following record profitability in Fiscal 2024, we again achieved record milestones in adjusted gross margin, adjusted operating income, and adjusted earnings per share. In Fiscal Year 2026, barring any unforeseen economic, global trade, or tariff-related disruptions, we expect revenue to grow by over $100 million with continued adjusted operating margin expansion. This will primarily be driven by mid to high single-digit organic growth in electronics, double-digit organic growth in engineering technologies, and the contribution from recent acquisitions. In Fiscal Year 2026, we expect new product sales to contribute approximately 300 bps of incremental sales growth, and we anticipate releasing more than 15 new products.
Sequentially and up 350 basis points a year on year.
This operating performance along with our cash, generation and cash repatriation enabled us to lower our net leverage ratio to 2.6.
Following a record profitability in fiscal 2024 we again achieved record milestones in adjusted gross margin adjusted, operating income and adjusted earnings per share.
In fiscal year, 2026 barring any unforeseen economic global trade or Terror for related. Disruptions, we expect Revenue to grow by over hundred million dollars with continued, adjusted operating margin expansion. This will primarily be driven by mid to high single-digit, organic growth in electronics, double-digit organic growth in engineering Technologies and the contribution from recent acquisitions.
David Dunbar: Sales from fast-growth markets are expected to grow approximately 45% year on year and exceed $265 million. On a year-on-year basis, in Fiscal First Quarter 2026, we expect significantly higher revenue, comprised of contributions from recent acquisitions and organic growth, and significant operating margin expansion. On a sequential basis, we expect slightly lower revenue as the impact of recent acquisitions, higher sales in the fast-growth end market, and realization of pricing initiatives are more than offset by project timing in engineering technologies and the impact of seasonality in Europe within electronics and engraving. We expect slightly lower adjusted operating margin due to lower sales and less favorable product mix. Please turn to slide four. Our growth drivers have reached an inflection point. There are four sources of growth that will help deliver above-market increases in 2026. In fact, they will deliver growth even without a general market pickup.
In fiscal year 2026, we expect a new product sales to contribute. Approximately 300 basis points of incremental sales growth and we anticipate release anticipate releasing more than 15 new products.
They also from Fast growth markets are expected to grow approximately, 45% year-on-year, and exceed, 265 million.
On the year-on-year basis, in fiscal, first quarter 2026. We expect significantly, higher Revenue.
Comprised of contributions from recent acquisitions and organic growth, and significant operating margin expansion.
On a sequential basis, we expect slightly lower revenue as the impact of recent acquisitions, higher sales into fast-growing markets, and realization of pricing initiatives are more than offset by project timing in engineering technologies and the impact of seasonality in Europe within the electronics and engraving.
We expect slightly lower adjusted operating margin due to lower sales and less favorable product mix.
Please turn to slide 4. Our growth drivers have reached an inflection point.
David Dunbar: First is new product sales. As you know, we began ramping our R&D spending in 2020. New products began to be released in 2023, accelerating to 16 product releases in 2025. Sales of new products increased from $38 million to $55 million in FY 2025, exceeding our internal expectations. We expect our sales to continue to ramp and to be joined by more than 15 new products to be released in 2026, giving us confidence that incremental new product sales will add about 3% to our sales in 2026. New products, once released, take time to reach full commercial impact. In our customer intimacy business model, success depends not only on product innovation but on deep collaboration with our customers. Our products are often designed into our customers' own systems, which require internal approvals, engineering validation, and their own development timelines.
There are 4 sources of growth that will help deliver above Market increases in 2026. In fact, they will deliver growth even without a General market pickup,
First is new product sales.
As you know, we begin ramping our R&D spending at 2020. New products begin to be released in 2023 accelerating to 16 product. Releases in 2025, they also have new products increased from 38 million to 555 million in FY 2025 exceeding, our internal expectations. We expect their sales to continue to ramp and to be joined by more than 15. New products to be released in 2026.
Giving us confidence that incremental new product sales will add about 3% to our sales in 2026.
New products. Once released, take time to reach full commercial impact.
David Dunbar: This results in a natural delay between product release and peak revenue. But once adoption begins, momentum builds and endures. Products introduced in prior years continue to ramp, even as we launch additional new offerings. This layered effect creates a compounding engine of organic growth that is both durable and scalable. It has taken a while to get this momentum, but we are building a long-term new product capability in this company. As a used-to-be engineer, I think it is beautiful to watch. The second source of above-market growth is our presence in end markets with long-term secular tailwinds and above-average growth. This has been a focus for some time, and our two acquisitions in FY 2025 increased our presence in the electrical grid, space, and defense markets, ramping our total fast-growth market sales to $184 million.
In our customer intimacy, business model success. Depends not only on product Innovation, but on deep collaboration with our customers, our products are often designed into our customers own systems, which require internal approvals, engineering validation and their own development timeline.
This results in a natural delay between product release and Peak Revenue.
But once adoption begins momentum builds and endures products introduced in Prior years, continue to ramp even as we launched additional new offers
This layered effect creates a compounding engine of organic growth that is both durable and scalable.
It has taken a while to get this momentum, but we are building a long-term new product capability in this company. And as it used to be engineer, I think it is beautiful to watch.
the second source of above market growth is our presence, in end markets with long-term, secular Tailwinds, and above average growth,
This has been a focus for some time and our 2 Acquisitions in fy2, increased our presence in electrical grid space and defense markets.
David Dunbar: All of these businesses are expanding capacity to serve our customers, and we expect sales to grow to greater than $265 million in Fiscal 2026. This is also beautiful to watch. A third source of momentum is the support we are giving to recent acquisitions to maintain their growth rate. We are now bringing up a new site in Croatia for AMREN Nurion, and our position with McStarlight to win new applications at the combined Standex-McStarlight capability is better positioned to win. Last but not least is success at the blocking and tackling of winning new awards in our business through commercial excellence. Two noteworthy areas stand out. Engineering Technologies has been awarded applications on the next-generation missile program, which are moving to production. Engraving has successfully expanded into niche production of parts requiring our proprietary know-how.
Ramping, our total fast growth market. Sales to 184 million,
All of these businesses are expanding capacity to serve our customers, and we expect sales to grow to greater than 265 million, in fiscal 2026. This is also a beautiful to watch.
A third source of momentum is the support. We are giving to recent acquisitions to maintain their growth rates.
We are now bringing up a new site in Croatia for Amron, Norion, and our position with Marlite to win new applications at the combined Standex. Marlite's capability is better positioned to win.
Last but not least, is Success at the blocking and tackling of winning new Awards in our business through commercial excellence.
2 Note, the area stand out, engineering Technologies has been awarded applications on Next Generation missile programs, which are moving to production.
David Dunbar: Based on the above, you can see that the incremental contribution from new products, sales in the fast-growth market, successful acquisition integration, and new program wins lead us to our Fiscal Year 2020 outlook of over $100 million in incremental sales. I will now turn the call over to Ademir Sarcevic to discuss our financial performance in greater detail.
engraving has successfully expanded into Niche production of Parts, requiring, our proprietary know-how
Lead us to our fiscal year 2020 outlook of over $100 million in incremental sales.
Ademir Sarcevic: Thank you, David, and good morning, everyone. Let's turn to slide five, Fourth Quarter 2025 Summary. On a consolidated basis, total revenue increased approximately 23.2% year on year to $222 million. This reflects a 23.4% benefit from recent acquisitions and 1.2% benefit from foreign currency, partially offset by organic revenue decline of 1.4%. Fourth Quarter 2025 adjusted operating margin increased 350 bps year on year to a record 20.6%. In the Fiscal Fourth Quarter, adjusted operating income increased 48.8% on 23.2% consolidated revenue increase year on year. Adjusted earnings per share increased 20.6% year on year to a record $2.28. Net cash provided by operating activities was $33.4 million in the fourth quarter of 2025, compared to $28.7 million a year ago. Capital expenditures were $8.6 million, compared to $6.5 million a year ago.
I will now turn the call over to admir to discuss our financial performance in Greater detail.
Uh, thank you, David, and good morning, everyone.
Let's turn to slide 5 4 quarter 2025 summary.
On a consolidated basis, total revenue increased approximately 23.2% year on year to $222 million.
This reflected 23.4 benefits from recent acquisitions and 1.2% benefit from foreign currency partially offset by organic Revenue decline of 1.4%.
Work quarter 2025 adjusted operating margin increased 350 basis points year over year to a record 20.6%.
In the fiscal fourth quarter, adjusted operating income increased 48.8% on a 23.2% consolidated revenue increase year on year.
Adjusted earnings per share, increased 20.6% year-on-year to a record $2.28.
Net cash provided by operating activities was $33.4 million in Q4 2025, compared to $28.7 million.
Ademir Sarcevic: As a result, we generated Fiscal Fourth Quarter free cash flow of $24.9 million, compared to $22.2 million a year ago. Please turn to slide six, and I will begin to discuss our segment performance and outlook, beginning with electronics. Segment revenue of $115.2 million increased 43.2% year on year, driven by a 41% benefit from acquisitions, organic growth of 0.3%, and 1.9% benefit from foreign currency. Adjusted operating margin of 28.5% in Fiscal Fourth Quarter 2025 increased 640 bps year on year due to contribution from recent AMREN Nurion Group acquisition, pricing and productivity initiatives, and product mix. Our book-to-bill in Fiscal Fourth Quarter was $1.03, with orders of approximately $118 million, or an increase of $10 million sequentially. Orders in electronics core business were up sequentially, with a continued increase in demand in defense, Power Magnetics application, and the electrical grid end market.
Capital expenditures for 8.6 million compared to 6.5 million a year ago.
As a result, we generated fiscal Q4 free cash flow of $24.9 million compared to $22.2 million a year ago.
now, please turn to slide 6 and I will begin to discuss how segment performance and Outlook beginning with electronic
Segment, revenue of 115.2 million, increased 43.2% year-on-year, driven by 41% benefit from Acquisitions organic growth of 0.3%.
And 1.9% benefit from foreign currency.
Adjusted operating margin of 28.5% in fiscal 4. Quarter 2025 increased 640 basis, points year in year due to contribution from recent amaran Orion group acquisition pricing and productivity initiatives and product mix.
Our book to bill in fiscal 4 quarter was 1.03 with orders of approximately, 118 million or increase of 10 million sequentially.
Orders in electronics, Core Business for obsequent, for the continued increase in demand in defense.
Ademir Sarcevic: Since our products are custom in nature, our bookings take longer to convert into revenue, but with stronger margins. Our expansion plans for AMREN Nurion in Houston and India are well underway to support additional demand. We increased capacity by adding second shifts across facilities. In addition, we began commissioning Greenfield sites in Croatia to serve our customers in Europe and support growing power requirements for data centers and grid expansion and upgrades in the region. We expect fresh shipments of our Croatia sites in the next three to four months. Excluding recent Sensor Solution Technologies acquisition, our new business opportunity funnel increased approximately 27% year on year to $125 million. Sequentially, in Fiscal Q1 2026, we expect slightly lower revenue, reflecting contribution from Sensor Solution Technologies acquisition, higher sales in the fast-growth end markets, and price realization, more than offset by the impact of seasonality in Europe.
our magnetic applications and the electrical grid and Market,
Since, our products are custom in nature. Our booking take longer to convert into Revenue but with stronger margin
Our expansion plans for Imran Orion in Houston and India are well underway to support additional demand.
We increase capacity by adding second shifts across facilities.
In addition, we began commissioning Greenfield site in Croatia to serve our customers in Europe, and support Growing Power. Requirement for data centers, and grid expansion and upgrades in the region.
We expect first shipments of the operation site in the next 3 to 4 months.
Excluding recent Omron Orion group acquisition our new business opportunity funnel increased approximately 27% year on year 225 million
Ademir Sarcevic: Although we anticipate slightly lower revenue sequentially, we are expecting significant revenue growth and adjusted operating margin expansion, along with organic growth on a year-on-year basis. We expect slightly lower adjusted operating margin sequentially, driven by product mix and continued strategic growth investment. Please turn to slide seven for a discussion of the Engineering Technologies and Scientific segment. Engineering Technologies revenue increased 26.8% to $32 million, driven by a 25% benefit from recent Power Magnetics acquisition, organic growth of 0.9%, and 0.9% benefit from foreign currency. Organic growth was due to growth in sales from new products. Adjusted operating margin of 18.4% decreased 250 bps year on year due to product mix. Sequentially, we expect slightly lower revenue and adjusted operating margin due to project timing.
The centii in fiscal first quarter of 2026, we expect slightly lower Revenue reflecting contribution from Omron. Orion group, acquisition higher sales into fast to attend markets and price realization more than offset by the impact of seasonality in Europe.
Although we anticipate slightly lower revenues sequentially, we are expecting significant revenue growth in adjusted operating margin expansion, along with organic growth on a year-on-year basis.
We expect slightly lower adjusted, operating margin sequentially driven by product mix and continuous growth investment.
Please turn to slide 7 for discussion of the Engineering Technologies and Scientific segments.
Engineering Technologies Revenue increased 26.8% to 32 million driven by 25% benefit from reset. Max tire light acquisition organic growth of 0.9% and 0.9% benefits from foreign currency.
Organic growth was due to growth in sales from new products.
Adjusted operating margin of 18.4%. Decrease 250 basis points 0 and year due to product mix.
Sequentially. We expect slightly lower revenue and adjusted operating margin due to project timing.
Ademir Sarcevic: Scientific revenue increased 2.3% to $17.9 million due to a 16.1% benefit from recent acquisition, partially offset by an organic decline of 13.9%, primarily due to lower demand from academic and research institutions that were impacted by NIH funding cuts. Adjusted operating margin of 24.3% decreased 530 bps year on year due to organic decline and unfavorable product mix as a result of the acquisition. Sequentially, we expect slightly higher revenue and similar adjusted operating margins. Now, turn to slide eight for a discussion of the Engraving and Specialty Solutions segment. Engraving revenue increased 0.6% to $33 million, driven by a 1.2% benefit from foreign currency, partially offset by an organic decline of 0.6%. Adjusted operating margin of 15.2% in Fiscal Q4 2025 increased 190 bps year on year due to the realization of previously announced productivity initiatives and restructuring actions.
Scientific Revenue, increased 2.3% to 17.9 million due to 16.1% benefit from recent acquisition, partially offered by an organic decline of 13.9%.
Primarily due to lower demand from academic and research institutions that were impacted by NIH funding cuts.
Adjusted operating margin of 24.3% decreased 530 basis points year in year due to organic Decline and a favorable product mix as a result of the acquisition.
The question actually, we expect life slightly, higher revenue, and similar adjusted operating margin.
Now, turn to slide 8 for discussion of the engraving and Specialty solution segment.
Engraving revenue increased 0.6% to $33 million, driven by a 1.2% benefit from foreign currency, which was partially offset by an organic decline of 0.6%.
Ademir Sarcevic: In our next fiscal quarter, on a sequential basis, we expect similar revenue and slightly higher adjusted operating margin due to seasonality affecting Europe, offset by slightly improved demand in North America and Asia, and realization of previously announced restructuring actions. In addition, in the Fiscal First Quarter, our engraving business secured the source award from a major OEM in North America to supply soft trim parts for a calendar year 2026 program. Specialty Solutions segment revenue of $23.9 million decreased 1.2% year on year, primarily due to general market softness. Operating margin of 18.6% decreased 360 basis points year on year. Sequentially, we expect similar revenue and slightly higher operating margin. Next, please turn to slide nine for a summary of Standex's liquidity statistics and capitalization structure. Our current available liquidity is approximately $280 million.
Adjusted operating margin of 15.2%. In fiscal 4, quarter, 2025 increase, 190 basis, point 0 year, due to realization of previously announced productivity initiatives and restructuring action.
In our next fiscal quarter on a sequential basis. We expect similar revenue and slightly higher. Adjusted operating margin due to seasonality affecting Europe offset by slightly improved demand in North America and Asia a realization of previously announced restructuring actions.
In addition, in the fiscal first quarter, our engraving business secured the Source Award from a major OEM in North America to supply software parts for a calendar year 2026 program.
Specialty solution segment revenue was $23.9 million, a decrease of 1.2% year-on-year, primarily due to general market softness. The operating margin was 18.6%, a decrease of 360 basis points year-on-year sequentially. We expect similar revenue and a slightly higher operating margin.
Next.
Please turn the slide 9 for a summary of San Francisco city statistics and capitalization structure.
Ademir Sarcevic: At the end of the fourth quarter, Standex had net debt of $448 million compared to net cash of $5.3 million at the end of Fiscal Q2 2024. Our net leverage ratio currently stands at 2.6. We paid down our debt by approximately $27 million during the Fiscal Fourth Quarter 2025. In the Fiscal First Quarter 2026, we expect interest expense to be approximately $9 million. Standex's long-term debt at the end of Fiscal Fourth Quarter 2025 was $552.5 million. Cash and cash equivalents totaled $104.5 million. We declared our 244th quarterly consecutive cash dividend of $0.32 per share and approximately a 6.7% increase year on year. In Fiscal 2026, we expect capital expenditures to be between $33 million and $38 million. Relative to our debt leverage, we will continue to focus on paying down debt and anticipate that our leverage ratio will further decline through Fiscal Year 2026.
Our current available liquidity is approximately $280 million.
At the end of the 4 quarter, sandx had net debt of 448 million compared to net cash of 5.3 million. At the end of fiscal quarter 2024
On net. Leverage ratio, currently stands at 2.6.
We pay down our debt by approximately 27 million. During the fiscal, 4 quarter 2025
In the fiscal, first quarter 2026, we expect infrastructure to expand to be approximately 9 million.
Stands this long term that at the end of fiscal 4, quarter of 2025 was 552.5 million cash and cash equivalents totaled 1 of 4.5 million.
We declared our 244 quarterly consecutive cash dividend of 32 cents per share and approximately 6.7% increase year on year.
In fiscal 2026, we expect Capital expenditures to between to be between 33 and 38 million.
Ademir Sarcevic: I will now turn the call over to David for concluding remarks.
David Dunbar: Thank you, Ademir. Please turn to slide 10. I want to describe the emotions in the company. There is an energy here, and you can feel the shift. After years of building, refining, and preparing, the results are starting to show. There is pride in seeing our efforts take hold and excitement in knowing this is just the beginning. The engine we have built is ready, and now we are starting to see what it can really do. I am very proud of our team for their continued operational execution and for the success of our recent acquisitions, both of which helped us achieve record-adjusted operating margin for a third consecutive quarter. We achieved record profit generation again in Fiscal Year 2025, driven by contribution from recent acquisitions, higher sales in the fast-growth end markets, and strong operational execution.
Relative to that leverage, we will continue to focus on paying down debt and anticipate that the level of our leverage ratio will further decline through fiscal year 2026. I will now turn the call over to David for concluding remarks. Thank you, Madam Chair. Please turn to slide 10.
I want to describe the emotions in the company. There is an energy here, and you can feel the shift after years of building, refining, and preparing. The results are starting to show. There's pride in seeing our efforts take hold and excitement in knowing this is just the beginning.
The engine was built as ready and now we're starting to see what it can really do. I'm very proud of our team for their continued operational execution for the success of our recent acquisitions. Both of which helped us achieve record, adjusted operating margin for a third consecutive quarter.
David Dunbar: Both adjusted gross margin and adjusted operating margin expanded by more than 200 basis points, while adjusted earnings per share increased approximately 6% to a record $7.98. Through debt paydown and profit generation, our net leverage ratio was reduced to 2.6 at the end of the fiscal year. In Fiscal Year 2025, sales in the fast-growth end markets were approximately $184 million, exceeding our Fiscal Year 2025 expectation of approximately $170 million. This was primarily driven by growth in data center demand and grid modernization and expansion. Outside of the electrical grid, we are seeing growth in commercialization of space and defense applications. In Fiscal Year 2026, we expect sales in the fast-growth markets to grow by approximately 45% and exceed $265 million. To support our future growth, we continue to invest in new product development and new applications across markets with growth potential.
We achieved record profit generation again in fiscal year 2025 driven by contribution from recent acquisitions higher sales and fast growth and markets and strong operational execution.
Both adjusted gross margin and adjusted operating margin expanded by more than 200 basis points, while adjusted earnings per share increased approximately 6% to a record $7.98.
Through a debt paid on a profit generation. Our net leverage ratio was reduced to 2.6 at the end of the fiscal year.
In fiscal year, 2025 sales in the fast growth and markets were approximately 184 million exceeding, our fiscal year 2025 expectation of approximately 170 million
This was primarily driven by growth and data center, demand and grid modernization and expansion.
Outside of the electrical grid, we are seeing growth in commercialization of space, and defense application.
In fiscal year 2026, we expect sales into fast growth markets to grow by approximately 45% and exceed 265 million.
David Dunbar: We launched 16 new products in Fiscal Year 2025 and plan to launch more than 15 in Fiscal Year 2026, which are expected to contribute over 300 basis points of incremental growth. In Fiscal Year 2026, we expect to grow revenue by over $100 million, with continued adjusted operating margin expansion. Growth will be primarily driven by mid to high single-digit organic growth in electronics, double-digit organic growth in engineering technologies, and the contribution from recent acquisitions. We are well positioned in this fluid economic environment due to regional presence, strong customer relationships, and a disciplined approach to pricing and productivity actions. We remain on track to achieve our Fiscal 2028 long-term targets of sales of greater than $1.15 billion and adjusted operating margin of greater than 23%. We are targeting ROIC of 12.5%, which has been adjusted for recent acquisitions. We will now open the line for questions.
To support our future growth. We continue to invest in new product development and new applications across markets with growth potential. We launched 16 new products in fiscal year 2025 and plan to launch more than 15 in fiscal year 2026 which are expected to contribute over 300 basis points as incremental growth,
In fiscal year 2026, we expect to grow Revenue by over 100 million dollars with continued adjusted operating margin expansion.
Growth will be primarily driven by mid to high single-digit, organic growth and electronics.
Double-digit organic growth and Engineering Technologies and the contribution from recent acquisitions.
Relationships and a disciplined approach to pricing and productivity actions.
We remain on track to achieve our fiscal 2028 long-term targets of sales of greater than 1.15 billion and adjusted operating margin of greater than 23%.
We are targeting ROIC of 12.5%, which has been adjusted for recent acquisitions.
We will now open the line for questions.
Operator: Thank you, ladies and gentlemen. We will now begin the question-and-answer session. Should you have a question, please press star followed by the one on your touch-tone phone. You will hear a prompt that your hand has been raised. Should you wish to decline from the polling process, please press star followed by the two. If you are using a speakerphone, please lift the handset before pressing any keys. Your first question comes from Mike Shlisky with D.A. Davidson. Your line is now open.
Thank you, ladies and gentlemen, we will now begin the question and answer session. Should you have a question please? Press star. Followed by the 1 on your touchtone phone. You will hear a prompt at your hand has been raised. Should you wish to decline from the polling process? Please press star followed by the 2?
If you are using a speaker-phone, please lift the handset. Before pressing any Keys? Your first question comes from Michael schleske with da Davidson your line is now open.
Mike Shlisky: Yes, hello, good morning. Thanks for taking my question.
David Dunbar: Morning.
Mike Shlisky: Morning. I wanted to maybe first talk about the $100 million or more revenue increase in Fiscal 2026. As I try to break down some of the numbers here, looking at AMREN and McStarlight, you know, that's a brilliant $60 million plus of just annualizing those businesses. They are growing organically, so it could be even higher than that. You've got the new products, which are, as you said, three points, probably $20, $30 million. You have all the other fast-growth products as well. I'm just kind of curious that that $100 million of incremental revenues here, I don't want to say it's in the bag, but maybe could there be any sources of upside, or is that number a very conservative estimate just based on those areas? You know, then there's also the organic growth on top of that and the other businesses.
Uh yes hello good morning. Thanks for taking my questions morning. Um morning. Um so I I I wanted to maybe first talk about the hundred million dollar or more um Revenue increase in fiscal 26.
As I try to break down some of the numbers here, uh, looking at Aaron MX Starlight, you know, that could bring in 60 million plus of this this annualizing those businesses.
Um, and then and there are growing organically, so it could be even higher than that. You've got the new product which has you said, 3 points probably 20 30 million
You have all the other fast-growth products as well.
Mike Shlisky: Just some thoughts as to is there any room for upsides of that $100 million and any concerns you might have on areas that might be more of a challenge in 2026 as well.
So I'm just kind of curious that that that that hundred million dollars of of uh incremental revenues here. I don't want to say it's in the bag but maybe could there be any sources of upside or is that number of very conservative estimate, just based on those areas lump, you know, and then there's also the organic growth on top of that in the other businesses. Just some thoughts as to, um,
David Dunbar: Yeah, Mike, your math is good there. The way we look at it is the full-year impact of those acquisitions will bring something over $60 million. The new products, just over $20 million. The underlying growth in the fast-growth markets, and remember, the fast-growth is largely driven by the defense, commercialization of space, grid technologies, electrical equipment OEMs. These are customer commitments that will drive this year. There is about another $38 million there. You are, and if you just stop right there, we have made no assumptions about an overall market growth that would affect the core business and the other businesses. We have said over $100 million, and if you just add those things up, you could comfortably say $100 to $130 or even more for 2026.
Uh is there any room for upsides to that 100 million and any concerns, you might have areas that might be more of a challenge in 2026 as well?
Yeah, Mike. You met your your math is good there. Um, the way we look at it, is you the full year impact of those Acquisitions will bring something over 60 million?
Uh, the new products just over 20 million.
The underlying growth in the fast growth markets. And remember the fast growth is largely driven by the defense, commercialization of space a grid Technologies, uh, uh, electrical equipment, oems. These are customer commitments that will drive this year. Uh, there's about another 38 million there,
so, you're
And if you just stop right there, we've we've made no assumptions about an overall market growth. That would affect the The Core Business and the other businesses. So we've said over a 100 million and if you just add those things up, you could comfortably say 100 to 130 or or even more uh, for 2026.
Mike Shlisky: Got it. Thanks. I also want to turn to electronics and your EV business as well. EV business has kind of been in the headlines. EV broadly has been just some OEMs showing sales declines in recent quarters. You have, you know, U.S. policies pointing towards a tougher environment for the EV market as well. Can you comment on how your EV business is doing, whether that is going to still, you think, be a positive for electronics in Fiscal 2026?
Got it. Uh, thanks. Um, I also wanted to try to electronics and your EV business as well. These businesses kind of been in the headlines DV brought the has been just to
David Dunbar: Yeah, you know, we still count EVs in our fast-growth markets because we think over time the prospects are good. A, because there will be a shift to electrical vehicles, and our content per vehicle is higher. Although with the growth in defense and grid, it's a smaller piece of our fast-growth markets. In 2025, our EV sales did dip a little bit from 2025, I'm from 2024. From, I guess, yeah, just slightly dip from 2024. As you recall, our position in EVs is largely with the European brands, with their higher-end models, and with new model introductions, we anticipate a nice growth in EVs in 2026.
Some oems showing sales declines, in recent quarters, you got, you know, US policies pointing towards a tougher environment for for the EV Market as well. C. C. Can you can you comment on how your e business is doing? Whether that's going to still? You think be a positive for electronics? If this was 26
Yeah, you know, we still count EVS in our um, fast growth markets because I think over time the prospects are good. Um, a because there will be a shift to Eve, uh, electrical vehicles and our content per vehicle is higher. Although it with, with the growth in defense and grit, it's a, it's a smaller piece of our, um, our fast growth markets in 25. Our EV sales did dip a little bit from 25, a lot of time from 24. Um,
From I guess. Yeah. Just slightly different from 24.
As you recall. Our position in EVS is largely with the, uh, with the European brands with their higher-end models. And with new model, introductions, we anticipate, uh, a nice growth in EVS in um in 26.
Mike Shlisky: Got it. Maybe one last one from me, turning to the AMREN business in Croatia. You said it will be open in the next four months. I just want to get a sense as to the ramp-up run rate there and how fully booked that facility already is and whether that will be a kind of a, in the same sense, in four quarters from now, you will have some great growth in Fiscal 2027 as that also ramps up. Just kind of curious as to how the kinks might turn out.
Got it.
Maybe 1 last 1 for me to the amaran business in Croatia.
You said, it'll be open in the next 4 months. I just want to get a sense as to the ramp up, run rate there and how fully booked um, that
The facility already is. And, um, whether that will be a kind of a.
In the same sentence.
David Dunbar: Yeah, we're starting, we have customer commitments through this year, and we'll ship, I don't know, single-digit millions probably in Fiscal 2026. But as we look over three years, we think that'll grow, that can grow to $30 million plus. There's vast opportunity in Europe. So we want to get in the market, get the customers there to visit. They've got to go through their certification and approval process. Once they do that, we anticipate there's some more upside. We may need another site. I don't know. But as a starting point, this will get us, you know, $10, $20, $30 million in three years.
Did 4 quarters from now, you'll have some great growth in fiscal 27 as that also ramps up just kind of curious as to how yeah, the Kings might turn out. Yeah, so we're starting. We have customer commitments through this year and, you know, we we'll ship, I know single digit Millions. Uh probably in fiscal 26, but as we look over um, you know, 3 years, we think that'll grow that can grow to 30 million plus
Get the customers there to visit. They've got to go through their certification and approval process. Once they do that, you know, we anticipate there's some more upside. We may need another site. I don't know, but as a starting point, this will get us.
You know, 10 20 30 million dollars in 3 years.
Mike Shlisky: Okay. Thanks for the color. I appreciate it. I will pass it along.
David Dunbar: Thank you, Mike.
Okay, thanks for the color, I appreciate it. I'll pass it along. Thank you, Mike.
Operator: Your next question comes from Ross Sparenblek with William Blair. Your line is now open.
Your next question comes from Ross. Baron black with William. Blair. Your line is now open.
Mike Shlisky: Hey, good morning, gentlemen.
David Dunbar: Good morning.
Mike Shlisky: Hey, guys. Just starting off with electronics, just get a sense of where the kind of run rate demand is. It looks like there was some good core organic order growth in the quarter. Maybe just speak to what is driving that and kind of assumptions going into FY 2026 here.
Hey, good morning, gentlemen. Good morning.
Hey guys. Uh, just starting off with electronics. Uh, just to get a sense of where the kind of run rate demand is. Looks like there is some good core organic order growth in the quarter.
Uh, maybe just speak to, you know,
what's driving that and kind of assumptions going into, you know, FY 26 here.
David Dunbar: Yeah, just a couple of things. We mentioned in the script that orders year on year are up 16%. In the core business, that's about $12 million. Of that $12 million, about $10 million is from OEMs. So this is OEMs as they've designed our products into their next-generation products. So that will convert over the next, you know, three, six, nine months. The other $2 million goes through distribution. That's a quicker conversion. A lot of it comes from Asia. We're seeing some pickup in North America. Europe's still relatively stable, I would say. Across your general industry in terms of end market outlook.
Yeah, just a couple things. We we mentioned in the, in the script that, uh, orders year on year up 16% that
In in the core business, that's about 12 million dollars of that 12 about 10 uh, is from oems. So this is oems as they've designed our products into their next Generation products. Um, so that
That will convert over the next, you know, 369 months. The other $2 million goes through distribution. That's a quicker conversion. A lot of that comes from Asia. We're seeing some pickup in North America; Europe is still relatively stable, I would say. But, you know, across your general industry.
In terms of the market outlook,
Mike Shlisky: Okay. Is the expectation this is kind of a new run rate for that segment? It has been a couple of down years. It feels like there should be some restocking a bit.
David Dunbar: We think this is, yes, we do absolutely. Ademir Sarcevic mentioned that our new application funnel is growing. It is at a record high. In large part, that is because the management team now in this last year has put in place more disciplined commercial excellence processes to track opportunities to fill the funnel. We do think this is sustainable and this momentum will build.
Okay. I mean, you is the expert for expectation. This is kind of a new run rate for that segment. I mean, it's been a couple down years; there should be some restocking. Yeah, we think this is. Yes.
Mike Shlisky: Okay. We put a finer point on the AMREN with the capacity unlocked. I mean, strong growth, but there should be maybe a sequential step up at some point as Europe comes online.
We do. Absolutely and Adam, you're mentioned that our new application funnel is is growing. It's at a record high in large part. That's because our the, the management team now, in this last year, has put in place more disciplined. Commercial Excellence, processes to track opportunities, to fill the funnel. Uh, so we do think this is sustainable and this momentum will build
David Dunbar: Yep.
Mike Shlisky: Any loose targets you could throw out there as kind of a base case or, you know, bold case on how that could play out?
Okay. Uh, and then we we put a fire point on the uh amaran with the capacity. Unlock, I mean strong growth, but there should be, maybe a, a sequential step up at some point as you know, Europe comes online. Uh yep. Any loose targets? You get they're out there it's kind of a base case or you know,
David Dunbar: Well, in some ways, it is, you know, it is embedded in that, in that, in the fast-growing number. But if you think about capacity, we have said the Croatia site, I think we are just answering to Mike Shlisky, said in three years, we think it could be $30 million. A couple of years after that, maybe $60 million plus. In India and Texas, as you know, we have added second shifts. With lean, we are also freeing up some capacity. So they can, so that continues to support their 20%-plus growth that they were experiencing before we acquired them, and they continue. In North America, we are also looking at an aggressive expansion in our presence in Houston.
Phone case on, well, I can play out, you know, in some ways. It's, you know, it's embedded in that, in that, uh, in the fast-growing number. But if you think about capacity. So we've said, um, the Croatia site, I think it just answering to Mike, that in 3 years, I think it could be 30 million; uh, a couple years after that, maybe 60 plus.
uh,
In India and Texas, as you know, we've added a second shift with Lean. We're also freeing up some capacity.
David Dunbar: Depending on where trade and tariffs go, we will also look at a Mexico site potentially, depending on where trade and tariffs come in, at the request of our North American electrical OEMs. That would be a step up in capacity as well. So I cannot put numbers on it, but if you continue to expect a 15%, 20% growth in Sensor Solution Technologies, I think that is reasonable, and we will add the capacity to support that.
So they can so that continues to support their 20 plus percent growth that that, that they were experiencing before we acquired them and they continue. Now in North America, we are also looking at a, a, an aggressive expansion in our in our presence in Houston. Um, and depending on where trade and tariffs go to. We'll also look at a Mexico site, potentially, depending on where trade and tariffs come in at the request of our North American, um, electrical oems. And that would be a step up in capacity, as well, so, I can't put numbers on it. But if, if, you, if you continue to expect a 15 20% growth in, uh, amaran Orion, I think that's reasonable and we will add the capacity to support that
Mike Shlisky: Well, I guess my point is, almost two-thirds of that business is North America, and you guys have done a lot of work there. So 15% seems like that would be a very low bar.
Yeah, well, I guess my point is, you know,
David Dunbar: Yep.
Mike Shlisky: Are you getting good, you know, pull-through and traction on the capacity that has been added in North America thus far?
Uh, almost 2/3 of that business is North America and you guys have done a lot of work there. So I mean, 15% seems like that would now be very low bar. Uh, yep. Are you, are you getting good? You know, pull through interaction on the past has been added in North America thus far.
David Dunbar: Yeah, yeah, absolutely. We are, every capacity we have, we're selling, and we have long-term customer commitments to drive future capacity adds. I'm not sure if I'm answering your question.
Yeah, yeah, absolutely. We're um we are
Every capacity we have, we're selling, and we have long-term customer commitments.
Uh, to drive future capacity ads. Um, I'm not sure if I'm answering your question.
Mike Shlisky: It's okay. We take offline. I'll jump back and keep it. Thanks, guys.
It's okay, we take offline. Uh I'll jump back and keep, thanks guys.
David Dunbar: Thanks, Ross.
Thanks. Bye.
Operator: Your next question comes from Chris Moore with CJS Securities. Your line is now open.
Chris Moore: Hey, good morning, guys. Congrats on a nice quarter and encouraging organic growth discussion. Maybe we will start with engraving. Is the restructuring done there?
Your next question comes from Chris Moore with CJs Securities. Your line is now open.
Hey, good morning, guys.
congrats on a nice quarter and I'm encouraging, uh,
Organic growth discussion. So may, maybe we'll start with with engraving. Um, just is is the restructuring done there.
David Dunbar: You know, the engraving business, we work on tools, and we need to be close to tool shops because tools are expensive and that shipped a lot. The evolution of the tool makers around the world is kind of shifting. They are in different places now than they were before. With what is the number, 30-some sites now around the world, it is likely that there will be this ongoing process to make sure our footprint matches tool makers. I think in the coming years, there probably will be some continued restructuring, more to align with where that end market is. With engraving in general, the way we think about it is this last year, we think demand kind of bottomed out. It was a very tough year for the auto OEMs and their new platform releases.
Um, you know, the engraving business.
David Dunbar: Many of them were delayed, kind of waiting for clarity in industrial policy, especially in America. We think that our outlook now shows some growth from that. But more importantly, the business to also scramble to find some new opportunities. Ademir Sarcevic mentioned these kind of differentiated parts that we are making based on our kind of proprietary processes with soft trim. We think there is a growth opportunity in engraving. The markets start to stabilize, come up, and we have got some growth on top of that.
Tools are expensive and they're not that shipped a lot. The evolution of the tool makers around the world is kind of Shifting. They're in different places now than they were before. Uh and with with what's the number 30, some sites. Now around the world it's likely that there will be this ongoing process to make sure our footprint matches the tool makers. So, I think, in the coming years, I probably will be some continued. Restructuring, more to align with, uh, with where that and Market is with engraving, in general. The way we think about it is this last year, we think demand kind of bottomed out. It was a very tough year for, um, for the auto oems and their new platform. Releases many of them were delayed, kind of waiting for a Clarity, uh, an industrial policy especially in America. Um,
Ademir Sarcevic: Yeah, Chris, if I can just add, there was a lot of heavy lifting in engraving due to respect to eliminating some of the unprofitable sites, so to speak. Most of the heavy lifting is done. So to David's point, there's a little bit of work left to do, but the majority of the restructuring actions for engraving have been completed.
We think that our Outlook now shows some some growth from that, but more importantly, the business to also scramble to find some new opportunities and admir mentioned these, uh, kind of differentiated parts that we're making based on our kind of proprietary processes with with Soft Trim. So we think there's a growth opportunity and Engraving so the markets start to stabilize, come up. And we've got some some growth on top of that. Yeah. And and Chris, if I can just add, you know, there was a lot of heavy lifting and Engraving due to the respect to eliminating some of the, some of the unprofitable sites. So to speak and most of the heavy lifting is done. So the so the David's Point, there's a little bit of work left to do.
but majority of the restructuring actions for Engraving have been completed,
Chris Moore: Terrific. Have the competitive dynamics changed much in that business over the last few years?
Terrific.
Have the competitive dynamics changed much in that business over the last few years?
David Dunbar: No, it's been more the demand. In fact, there are fewer competitors now than there were five years ago.
Chris Moore: Right.
David Dunbar: Because our competitors are mostly, they are mostly smaller regional competitors. Depending on what region they are in, it has been tougher sailing for them.
No it's it's been more the demand in fact the comp there are fewer competitors now in the north 5 years ago, right? Because our competitors are mostly they're mostly smaller Regional competitors. And so depending on what region they're in um it's been tough for sailing for them.
Chris Moore: Got it. You mentioned, and we had talked about it in the past, the NIH funding on the scientific side. Just any thoughts there, you know, how significant that is?
Got it.
You you mentioned um and we had talked about in the past uh nah funding on on the scientific side, just any any thoughts there. You know how how significant that is.
Ademir Sarcevic: Yeah, Chris, about a third of our sales in scientific go through a channel that it is either, you know, it is affected by NIH funding. Obviously, that has, you know, impacted our order rates over the last couple of quarters. In the outlook that we are giving, we are not assuming any pickup or any significant changes in the demand from those types of that type of, you know, end market or that type of a channel. We are more focused around, you know, new products, you know, exploring some, you know, additional, you know, selling opportunities. If the NIH funding comes back, that will be an upside to the guide that we gave for 26.
Yeah, Chris about third of our sales incentive, we go through a channel that it's, it's either, you know, it's affected by knee, NIH funding. And obviously that has, you know, impacted our order rates over the last over the last couple of quarters. Uh but in the Outlook that we are giving we are not assuming any pickup or any significant changes in the in the demand from those type of uh that type of uh and you know End Market or that type of a channel.
So you know, we are more focused around, you know, new products you know exploring some uh you know additional you know selling opportunities and if the NIH funding comes back that would be an upside to the guy that we gave for for 26.
Chris Moore: Great. Maybe just my last one, bigger picture. If rates come down 50 to 100 bps, does that have much of an impact anywhere?
Great. Uh, maybe just my last big picture. I mean, if rates come down 50 to 100 basis points, does that have much of an impact anywhere?
Ademir Sarcevic: Yeah, of course. Our debt repayment, yes, it does. We are obviously watching that closely. But look, our objective is to continue paying down our debt. Our net leverage is now at about 2.6, and we think with the operating cash flow that we generate in this company that we can get that leverage down to about two, assuming current portfolio businesses, by the end of this fiscal year. So even with this type of interest rates.
Yeah, oh, yeah, of course. And I, I know that repayment. Uh, yes it does. Uh, so we obviously watching that watching that closely but look, you know, our objective is to continue paying down our debt. You know, on that Leverage is now at about 2.6 and we take with the operating cash flow that we generate in this company that we can get that leverage down to about 2 assuming current portfolio businesses. Uh, you know, by the end of this fiscal year. So, even with this type of interest rates,
Chris Moore: Got it. I was thinking more from a product standpoint, but perfect. I will leave it there. Thanks, guys.
Got it and I was thinking more from from my product standpoint but perfect I will leave it there. Thanks guys.
Operator: Your next question comes from Matt Koranda with ROTH Capital. Your line is now open.
Your next question comes from Matt kuranda with Roth Capital, your line is now open.
Matt Koranda: Hey, guys, good morning. Just on ETG, I was curious with Metal Forming Solutions. Is that accretive to operating margins in the segment? Are you guys factoring in revenue synergies in the organic growth commentary for this year for ETG?
You guys. Good morning. Um, okay, just on ECG, uh, was curious with mcstarlite. Uh, is that a creative to operating margins in the segment? And then are you guys Factory in Revenue synergies? Um, in the organic growth commentary for this year for EtG?
Ademir Sarcevic: It is similar margins as our core business within ETG as far as Metal Forming Solutions is concerned. Yes, there are some revenue synergies.
David Dunbar: Now, we've actually discovered some pretty exciting synergy opportunities. Our capabilities plus their capabilities allow us to design new parts with an efficiency that neither of us could do in the past. That positions us well for future opportunities. Now, those take a while to convert, but longer term, we think that opens up a little higher growth rate for both businesses.
Uh it is, it is similar margins as our Core Business, uh, within EtG uh as far as mixed highlight is concerned. And yes, there are some revenues synergies with now that we've actually discovered some pretty exciting Synergy opportunities that our capabilities plus their capabilities allow us to design new parts within efficiency.
That neither of us could do in the past that that position is well for future opportunities. Now, those take a while to convert um but you know longer term we think that opens up a little higher growth rate for both businesses.
Matt Koranda: Okay. All right, that is helpful. Then maybe just, I know it is dynamic, but just given the tariff announcements yesterday, is there any way to just help us understand if any of those actions would be impactful to the business? I would assume maybe the India announcement might be meaningful, but, then with regard to copper, any exposure on some of the new announcements there?
Okay, all right, that's helpful. Uh, and then maybe just uh, I know it's Dynamic. Uh, but just given the Tariff announcements yesterday. Um,
On on some of the new announcements there.
David Dunbar: Yeah, so let me just, a broad statement. Ademir Sarcevic and I were talking about that this morning, but we have learned to love uncertainty in this company. If you go back five years, the most dramatic inflation we ever saw was rhodium inflation. We put in place practices to handle those disruptions that come from those unexpected rapid increases in cost with pricing practices. We redesigned our product line, and through that whole period, we only delivered higher margins. The inflation, the post-COVID inflation that disrupted every part of our business, kind of drove that same discipline through all the rest of our businesses. Now, if you look back six months, the last couple of quarters, we have lived in an uncertain trade and tariff environment. Look at the margins we just posted.
Yeah, so, let me just a, a broad statement. Adam. And I were talking about that this morning, but we have learned to love uncertainty in this company. If you go back 5 years, the most dramatic inflation we ever saw with rhodium inflation and we we put in place practices to handle those. Those disruptions that come from those unexpected rapid increases in cost with price. Uh with pricing practices. We redesigned a product our product line and through that whole period, we only delivered higher margins.
The inflation, the postco inflation that struck every part of our business. Kind of drove that same discipline through all the rest of our businesses.
David Dunbar: Our businesses have done a great job identifying how best to deal with that in the short term. Several of our businesses are looking at their sourcing strategies, making sure that any exposure we have is being dealt with, you know, identifying, bringing on some new lines. From a cultural standpoint, we think a highly uncertain environment kind of favors us because I think we have demonstrated we are nimble and agile. The recent announcements, maybe I will turn it over to Ademir Sarcevic to look at the actual numbers and what the potential impact is.
Now, if you look back 6 months to the last couple of quarters, we've lived in an uncertain trade and tariff environment. Just look at the margins; we just posted our businesses have done a great job identifying how best to deal with that in the short term.
several of our businesses are looking at, uh, the, the sourcing strategies, uh, making sure that any exposure we have, uh, is being dealt dealt with with, you know, I identifying bringing on, um, some new lines,
Ademir Sarcevic: Yeah, so Matt, about 4% of our COGS comes from India. It is mostly within our Electronics segment. Again, to David's point, between pricing, productivity, and alternative sourcing, we feel pretty good we got it covered.
So from a, from a cultural standpoint, we think a highly uncertain environment kind of favors us because what we we I think we've demonstrated with Nimble and agile. The reason announcements may be I'll turn it over to Adam here to look at the actual numbers and what the potential impact is
Yeah, so Matt you know, I, you know, I bought 4% of our cogs comes from India. It's mostly within our electronic segment, you know. And again to David's point between, you know, pricing productivity, alternative sourcing, we feel pretty good. We got, we got that covered. So um,
Matt Koranda: Okay, all right, super clear. Maybe just last one. The longer-term target on sales, if we use just sort of an implied CAGR off of sort of the maybe the low end of your guidance for Fiscal 2026, it still would imply sort of a low double-digit sales CAGR to get to the 2028 target. Is that sort of how you think about it and maybe just, you know, how much of that comes organically versus through acquisition in your current?
Okay. All right, super clear. Um, maybe just last 1, uh, the longer term, uh, Target on sales. Uh, if we use just sort of a, an implied kegger off of, sort of the, maybe the low end of your guidance. For fiscal 26, it still would imply sort of a low double digit sales kegger to get to the 28 to Target is that sort of how you think about it and and maybe just um, you know, how much of that comes organically versus.
David Dunbar: Yeah, let me walk through kind of a high-level bridge. We looked at this in a number of different ways. If you just anchor it on 2025, the year just finished, $790 million. Our new products were $55 million. This coming year, we expect them to grow about 40%. We are just getting started with new products. So we anticipate about a 30% growth annually in the new products. Fast-growth market, with $185 million last year, we will grow to $265 million. We are anticipating about a 20% growth there. In 2028, those numbers, that puts new products at $130 million, fast growth at $380 million. If you anticipate that the core, the remaining core business, which is about $550 million, will grow about 3% a year, that adds another $50 million or so. That puts us at just shy of the $1.15 billion.
Through acquisition uh, and your current. Yeah, let me walk. Yeah, let me walk you through kind of a high level Bridge. We looked at this in a number of different ways. If you just anchor it on, on 2025, you're just finished. 790. Our new products were a 55 555 million. This coming year, we expect them to grow about 40%, and we're just getting started with new products. So, we anticipate about a 30% growth annually in the new products, fast growth Market, with 185 last year, we'll go to 265, and we're anticipating about a 20% growth there in 28. So those numbers that puts new products at 130 fast growth at 380, um,
If you anticipate that the core, the remaining core business, which is about 550, will grow about 3% a year.
David Dunbar: In addition to that, we think there is an opportunity for a little pickup in the scientific markets. These additional defense opportunities we mentioned provide upside, and these engraving wins that we described also provide. So there is maybe $30 million, $40 million of, you know, go get in the next three years, but we have got the opportunities to achieve them.
In addition to that we think there's an opportunity for a little pick up in the scientific markets these additional defense opportunities. We mentioned provide upside in these engraving wins that we described um also provide. So this may be a 3040 million dollars of you know go get in the next 3 years but we've got the opportunity to to achieve that.
Matt Koranda: All right, super helpful. I'll turn it over, guys. Thanks.
All right, super helpful. I'll turn it over guys. Thanks.
Operator: Your next question comes from Gary Prestopino with Barrington Research. Your line is now open.
Your next question comes from. Gary Presto Pino with.
Mike Shlisky: Hi, good morning, all. Hey, just want to get an idea with new product sales. I would assume the majority of those are targeted to your fast-growth markets. Is that kind of a correct assumption?
Barington research. Your line is now open.
David Dunbar: Yeah, there is overlap in there. Engineering Technologies is a big contributor there. They've developed new products to expand their participation in space. Those new products are all in fast growth. We've got fast growth in some of our other core businesses, some of our other businesses, scientific and federal that are just in the general industry. There is some overlap in fast growth. I'd say about 30% of the new products go into fast growth.
Hi. Um, good morning all hey. Um just want to get an idea with our new product sales. I would assume the majority of those are targeted to your fast growth markets. Is that kind of a correct assumption?
yeah, there there is overlap in their um, uh
So engineering Technologies. Uh, uh,
Has is, is a big contributor there. They've developed new products to expand their, their, their participation in, um, in space. And, uh, that's those new products are all in the fast growth, uh, but we got fast growth in some of our other core businesses. Uh, well, some of our other businesses scientific and, uh, Federal that are just
Mike Shlisky: Okay, so 30% new products into fast growth. Okay. As you scale the fast-growth markets and grow the sales as you expect to, can you give us some idea of relative to your adjusted operating margin that you generated this year? What kind of incremental margin increases do you get from growing that sales into these faster-growth markets? I mean, I assume they have got to have a higher margin profile.
You know, in General Industry. So there is some overlap in fast growth. I'd say about 30% 30% of the new products going to fast growth.
The 30% new products into fast grow, okay?
And then, um,
As we?
As you scale the fast growth markets and grow the sales as you expect to is, can you give us some idea of relative to your adjusted operating margin that you generated this year? What what kind of incremental margin uh?
David Dunbar: Yeah, they do. Just thinking through the businesses in there, it is higher than the average. So we mix up with every, you know, growth in fast-growth markets. In terms of how many basis points of gross margin, it has got to be 300, 400 basis points higher.
Growing that sails into these faster growth markets. I mean, I assume they've got to have a higher, a higher margin profile.
Yeah, they do. Um,
uh,
Ademir Sarcevic: Yeah. Yeah, I mean, I think if you look at our, you know, our projections, then, you know, we say we are going to get to over 23% adjusted operating margin by FY 2028. If you just assume, and it is true that our margins when we do sales into fast growth end markets are higher, you can do back of the envelope calculation and see just on the higher volume, we are going to comfortably get there. Then obviously, we are going to have pricing and productivity actions on top of that.
I think through the businesses in there, it is higher than than the average. So we mix up with with every you know, growth in fast growth markets. Uh in terms of how many basis points of gross margin, it's it's got to be 3 400 basis points higher
Mike Shlisky: Okay. Getting back to new products, would you say you generate, you put out 16 this year?
Yeah, yeah. I mean I think if you look at our, you know, our our projects and you know, we say we're going to get to over 23% adjusted up pretty margin and you know by 28 if you just assume and it and it's true that our margins. And when we do sales at the fast growth and markets are higher, you can do back of the envelope calculation and see just at the higher volume, we're going to comfortably get there. And then obviously, we're going to have pricing and productivity options on top of that, so,
Okay. And then getting back to new products would you say, you generate you, you put out 16 this year?
David Dunbar: In the quarter. So it was 55 in the year.
In the quarter.
Mike Shlisky: $0.55 in the year, we'll say.
David Dunbar: Oh, yeah. I'm sorry.
Mike Shlisky: 16.
David Dunbar: Sixteen new products were released. The sales of products released in the last couple of years that are still new was 55.
So it's 55 in the year, 55 in the year. Oh yeah, I'm sorry, 16, 616 new, 60, yeah, 16 new products were released.
Mike Shlisky: Okay. I just want to get an idea. Was there anything that really drove the boat there as far as growth or in any of those new product categories that you put out?
And the sales of products released in the last couple years that are still knew, was 55. So,
Okay, I just want to get an idea, was there was there anything that that really drove the boat there? As far as growth or
David Dunbar: The biggest numbers in the year were the engineering technology sales into commercialization of space. These are new products for them that expanded their share of wallet and their content on those vehicles.
in any of those new product categories that you put out, put out the biggest numbers in the year with engineering Tech
Mike Shlisky: Okay. Then just lastly, how would you the acquisition pipeline? I know you were always active there. Would you have the appetite to do another acquisition this year, this fiscal year, if the opportunity came up?
These are these are new products for them that expanded their share of wallet and their content on those vehicles.
Okay, and then just lastly, how would you the acquisition pipeline? I know you're always active there, you know, would you have the appetite to do another acquisition this year? This fiscal year, the opportunity came up
David Dunbar: You know, we're always working the pipeline, and a lot of the deals we do are the result of years of relationship building. We're out there doing that. With the projection of our de-leverage, now at the end of this quarter with 2.6, we anticipate just with normal cores, with operating cash flows and things, by the end of this year, we'll be at two. We're rapidly developing the powder to be able to do something.
um,
you know, we're always.
Lot of the deals we do are the result of years of relationship building. So we're out there doing that. And, um,
Mike Shlisky: Okay, thank you.
And, um, you know, with with with, with, with the projection of our de-lever. So now at, at the end of this quarter with 2.6, we anticipate just, normal course, with operating cash flows and Things by the end of this year, it will be at 2. So we're we're, we're rapidly developing the the, the powder to be able to do something.
Okay, thank you.
Operator: Ladies and gentlemen, as a reminder, should you have a question, please press star one. Your next question comes from Ross Sparenblek with William Blair. Your line is now open.
Ladies and gentlemen, as a reminder, should you have a question please? Press star 1.
Your next question comes from Ross. Faren black with William. Blair your line is now open.
Ademir Sarcevic: Hey, Ross.
Hey, Ross.
Mike Shlisky: Why is that? He is on mute.
Why is it up and he's on mute?
Ademir Sarcevic: Can you hear me?
Mike Shlisky: We have you now.
Ademir Sarcevic: will just polish that. Yeah, just on the scientific margins, you know, decent sequential uptake with some tougher shipping rates. Can you just give us a sense, you know, what played out there in the quarter and kind of expectations looking forward for 2026 as we think about R&D as well? Yeah, so from a scientific standpoint, you are right, you know, the shipping rates are generally okay. The acquisition we have in the scientific space is actually at a lower margin than our core business. So that is impacting our segment margin, if you will, a little bit.
There we go. Can you hear me? Yeah.
Apologize for that. Uh, yeah, it's on the scientific margins, uh, you know, decent squiggle. Uptick with, you know, some tougher shipping rates. Can you just give us a sense uh you know what played out there in the quarter and kind of expectations, you know, looking forward for 2026 as we think about, uh, R&D as well.
Ademir Sarcevic: But we do expect as we get into the fiscal 2026 to be the combination of pricing and productivity actions. We are going to be able to offset and alternative sourcing, by the way, in this segment. We are going to be able to offset the tariff pressure we got coming in because scientific is the business that sources some of its base products out of China. So, we do expect scientific margins to hold.
Yeah, so, you know, uh, from a scientific standpoint, you're right, you know, the shipping, the shipping rates, you know? Uh, you know, uh, I generally generally okay, you know, the acquisition, we have in the scientific spaces is actually at the lower margin than our core business. So that's you know, impacting our segment margin if you will a little bit, you know, but we do expect as we get into the fiscal 26 with the combination of pricing productivity. Actions, we're going to be able to offset and alternatively sourcing. By the way, in this segment, we're going to be able to offset. You know, the, the Tariff pressure. We got coming in because scientific is the business that sources. Some of the, it's based products out of China.
so, you know, we do expect scientific margins to to hold
Mike Shlisky: Okay. Just one more point on free cash. Kind of a tough year. Can you maybe speak to your ability to get some more turns out of the working capital and get that conversion back above 100%?
Okay. Uh, and then just, uh, 1 more point on, uh, free cash.
Kind of a tough year. Um, can you maybe just speak to your ability to, you know, maybe get some more turns out that working capital and uh,
Ademir Sarcevic: Yeah, Ross, great question. You know, if you look at our cash flow creation in the last fiscal year, we were significantly impacted by one-time transaction-related costs. When you do three deals in a year and you have to do the payments to the bankers and the lawyers, etc., that adds up to be a pretty sizable number. On top of that, the acquisitions that we did have credit terms with the customers that are much longer than the credit terms that we generally had in our core businesses. So our DSO has actually increased versus what we had prior to the acquisitions. We are working, and frankly, some of the structure around collections is in some of those businesses not as robust as we had with Standex International Corporation.
Get that conversion back above 100% yeah yeah Ross great. Great question. Yeah. And you know if you look at our cash flow Creation in the last fiscal year you know we were we were significantly impacted to buy 1 time. Transaction related cost. You know when you do 3 deals in a year and you know, you have to do the payments to the bankers and the lawyers Etc, that adds up to be a pretty pretty sizable number. And on top of that, you know, the Acquisitions that we did.
Ademir Sarcevic: So we are working to put our processes into place around the receivables and collections, and we think we are going to make a very good dent and progress in collections and receivables and working capital this fiscal year. So we expect conversion of cash to be much, much better this year than last year.
Mike Shlisky: All right. Can we hold you to a mean reversion back to 60 on the DSOs?
Of the structure around collections is, you know, in some of those businesses, not as robust as we had the standard. So we are working to putting a process in the place around the receivables and Collections. And we think we're going to make a very good dent in progress, in in collections and receivables. And working capital, this fiscal year. So we expect conversion of cash to be much, much better this year than last year.
All right, so can we hold you to uh a mean reversion back to 60 on the dsos?
Ademir Sarcevic: You can, you can, yeah, that's, you know, you're going to put me on the spot. Yeah, you can hold us that we're going to, you're going to drive back to that low 60 number. Right now, we are at about, you know, 69, 70 in terms of DSO, and our goal is over this fiscal year to drive that as close to 60 as we can.
Mike Shlisky: Okay, fantastic. Thanks, Daniel.
You can you can. Yeah, that's a nice going to put me on the spot. Yeah you can hold us that we going to you know we're going to drive back to that low 60 number right now, we are about, you know, 69 70 in terms of the so and our goal is over the over this fiscal year to drive that as close to 6 years, we can
Ademir Sarcevic: That's on the spot.
Okay, fantastic. Thank you.
That's on the spot.
Operator: There are no further questions at this time. I will now turn the call over to David Dunbar, CEO, for closing remarks.
David Dunbar: All right, thank you. Before we wrap, I want to send a special thank you to Tom Hansen, who is retiring from our board after 12 years. Tom has been a valuable board member and made many contributions to the company. I also want to welcome Andy Nemeth, the CEO of Patrick Industries, who is our newest board member. We look forward to working together. Finally, as always, I want to thank everybody for joining us for the call. We enjoy reporting on our progress at Standex. Thank you also to our employees and shareholders for your continued support and contributions. I am excited for the company's potential in fiscal year 2026 and look forward to speaking with you again in our fiscal first quarter 2026 call.
No, no further questions at this time. I will now turn the call over to David Dunbar CEO for closing remarks.
All right. Thank you. Before we wrap, I want to send a special. Thank you to Tom Hansen who is retiring from our board after 12 years.
Tom has been a valuable board member and made many contributions to the company. I also want to welcome Andy Nemo, the CEO of Patrick Industries, who is our newest board member. We look forward to working together.
Finally, and as always, I want to thank everybody for joining us for the call, we enjoy reporting on our progress at standex. Thank you. Also to our employees and shareholders for your continued, support and contributions. I'm excited for the company's potential and fiscal year 2026 and look forward to speaking with you again, in our fiscal, first quarter 2026 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.
ladies and gentlemen, this concludes
Conference call for today, we thank you for purchasing.
I say you, please disconnect your lines.