Standex International (SXI) Tops Q3 EPS by 13c, Revenues Beat

Standex International (NYSE: SXI) reported Q3 EPS of $1.19, $0.13 better than the analyst estimate of $1.06. Revenue for the quarter came in at $172.2 million versus the consensus estimate of $162.65 million.

Commenting on the quarter's results, President and Chief Executive Officer David Dunbar said, "We are very pleased with our third quarter results which were ahead of our expectations as our Electronics, Scientific and Specialty Solutions segments all reported strong sequential growth. These demand trends were complemented by ongoing productivity and efficiency initiatives and strengthening of our financial flexibility supported by our consistent free cash flow generation. We expect our momentum to continue with stronger financial performance in fiscal fourth quarter 2021.

"From a growth perspective, Electronics segment demand in end markets such as electric vehicles and renewable energy continued on a favorable trajectory with segment backlog realizable in under one year increasing approximately 26% sequentially. Scientific segment growth continued to benefit from demand for COVID-19 vaccine storage and we remain on plan to achieve the high end of our initial guidance of $10 million to $20 million for COVID-19 related sales. In addition, many of our other end markets such as commercial aviation, food service and refuse are also showing sequential recovery.

"Strategically, we continue to further position Standex around platforms which strengthen our customer value proposition and financial performance. During the third quarter, we announced the sale of Enginetics which allows our Engineering Technologies team to increase its focus on the higher growth and margin opportunities of its core spin forming solutions business that serves the space, commercial aviation, and defense end markets. In addition, at the Electronics segment our focus on mitigating material inflation and improving our cost position through changes in reed switch production and material substitution continues to progress. We remain on track to substantially complete this transition by the end of fiscal 2022.

"Our financial profile also further strengthened in the third quarter and we continue our opportunistic approach to investing in our active pipeline of organic and inorganic growth opportunities. We reported free cash flow of $12.4 million and have generated a 92% free cash flow to net income conversion rate through the first nine months of fiscal 2021 as working capital performance continues to improve. At quarter-end, the Company had approximately $209 million in available liquidity and a net debt to adjusted EBITDA ratio of 0.8x. We also repatriated approximately $6 million of foreign cash in the quarter and are on track for our target of repatriating about $35 million in fiscal 2021," concluded Dunbar.

Outlook

In fiscal fourth quarter 2021, the Company expects a slight to moderate revenue increase compared to fiscal third quarter 2021. Organic growth should more than offset the approximately $4 million of revenue associated with the Enginetics business divested at the end of the third quarter. The Company expects a significant operating margin improvement compared to fiscal third quarter 2021 results.

From a revenue perspective, Electronics, Engraving and Specialty Solutions are all expected to improve sequentially reflecting end market strength in Electronics, the timing of projects at Engraving, and continued end market recovery at Specialty Solutions. Engineering Technologies revenue is expected to be sequentially similar to the fiscal third quarter reflecting growth in commercial aviation, defense, and space offset by the absence of Enginetics sales due to its recent divestiture. Scientific revenue is expected to decrease sequentially due to lower demand for COVID-19 vaccine storage, but still have a significant increase on a year-over-year basis.

From a margin perspective, the Company expects a slight increase sequentially in Electronics operating margin and more significant increases in Engraving and Engineering Technologies operating margins. The Company expects a moderate decrease in operating margin at Scientific due to lower volume and a slight margin decline at Specialty Solutions associated with material inflation which the Company is seeking to recover through pricing actions.

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

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