Standex International (SXI) Tops Q2 EPS by 5c, Revenues Beat

Standex International (NYSE: SXI) reported Q2 EPS of $1.05, $0.05 better than the analyst estimate of $1.00. Revenue for the quarter came in at $156.3 million versus the consensus estimate of $153.41 million.

Commenting on the quarter's results, President and Chief Executive Officer David Dunbar said, "We are very pleased with our second quarter results as our performance improved sequentially, end markets continued to show signs of recovery, and we are well-positioned for a stronger second half in fiscal 2021. In particular, the Electronics and Scientific segments experienced strong demand and have healthy backlogs. Our productivity initiatives are becoming further embedded within the organization, demonstrated by the sequential increase in adjusted operating margin in the quarter. We remain on track to deliver over $7 million in annual savings in fiscal 2021 from our cost actions.

"Our financial profile also further strengthened in the second quarter. We reported free cash flow of $17 million and have generated a 95% free cash flow to net income conversion rate through the first half of fiscal 2021. We ended the quarter with approximately $200 million in available liquidity and a net debt to adjusted EBITDA ratio of 0.9x. We continued to repatriate cash, approximately $17 million in the quarter, and are on track to repatriate about $35 million in fiscal 2021. With our financial position further strengthening, we expect to remain active in opportunistically repurchasing shares.

"In the second quarter, we continued to build on our solid start to the fiscal year and expect stronger results in the second half of fiscal 2021, both sequentially and year-over-year. We are actively engaged with our customers regarding emerging global trends that will shape the future of our end markets such as electric vehicles, renewable energy and 5G. Our technical expertise and strength of client relationships position us well for these opportunities as we continue to build on our portfolio of high-quality businesses. Our ongoing productivity and efficiency initiatives provide further opportunity to leverage these trends," said Mr. Dunbar.

Outlook

"In fiscal third quarter 2021, we expect a moderate revenue and operating margin improvement compared to fiscal second quarter 2021 results. This reflects a sequential revenue increase at the Electronics, Scientific, Engineering Technologies, and Specialty Solutions segments. Engraving revenue is expected to decline sequentially reflecting both geographic mix and timing of projects but recover in fiscal fourth quarter 2021.

"Over the past few years, we have meaningfully transformed our portfolio around businesses with attractive growth and margin profiles, as well as strong end market and customer value propositions. As a result of these substantial changes, we believe it is now appropriate to provide a longer-term financial outlook.

"Specifically, we are targeting mid-single digit organic revenue growth on a compound annual basis, assuming continued macro-economic recovery, and an EBITDA margin in excess of 20%. We believe a free cash flow conversion ratio of approximately 100% is achievable under these assumptions. It is our expectation that with this financial performance we will increase our return on invested capital to above 12%. Finally, with our substantial financial flexibility, we plan to continue to execute on an active pipeline of organic and inorganic growth opportunities," concluded Dunbar.

For earnings history and earnings-related data on Standex International (SXI) click here.

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