Standex(US:SXI)2025-10-31 20:18Financial Performance - Net sales for the first quarter of fiscal year 2026 increased by $47.0 million, or 27.6%, to $217.4 million compared to the prior year quarter, with acquisitions contributing $45.3 million, or 26.6%[111] - Gross profit margin improved to 41.6% in the first quarter of fiscal year 2026, up from 41.1% in the prior year, resulting in a gross profit of $90.4 million[112] - Income from operations increased by $5.5 million, or 23.0%, to $29.6 million in the first quarter of fiscal year 2026, driven by contributions from recent acquisitions[117] - Income from operations in Q1 FY 2026 increased by $11.3 million, or 66.1%, compared to the prior year quarter, driven by recent acquisitions, pricing initiatives, and product mix[126] Sales Growth by Segment - The Electronics Group reported a 42.2% increase in net sales to $110.6 million in the first quarter of fiscal year 2026, with acquisitions contributing $35.3 million[125] - Net sales in Q1 FY 2026 increased by $9.4 million, or 45.6%, attributed to the acquisition of McStarlite, which added $6.6 million to revenue, and an organic sales increase of $2.6 million, or 12.7%[129] - Scientific Group's net sales in Q1 FY 2026 increased by $1.8 million, or 9.9%, primarily due to an 18.6% benefit from the Custom Biogenic Systems acquisition[131] - Engraving Group's net sales in Q1 FY 2026 increased by $2.5 million, or 7.4%, with organic sales up by $1.8 million, or 5.6%, due to improved demand in Europe[134] - Specialty Solutions Group's net sales in Q1 FY 2026 increased by $0.5 million, or 2.6%, primarily due to slightly improved demand in the Hydraulics business[136] Expenses and Costs - Selling, General, and Administrative (SG&A) expenses rose to $54.4 million, representing 25.0% of sales, compared to $43.0 million, or 25.3% of sales in the prior year[113] - Corporate expenses in Q1 FY 2026 increased by 22.2% to $9.94 million, primarily due to higher variable compensation and employee medical costs[140] - Restructuring expenses for the first quarter of fiscal year 2026 totaled $6.0 million, primarily related to facility rationalization activities[114] Tax and Interest - The effective tax rate from continuing operations for the first quarter of fiscal year 2026 was 24.6%, up from 21.4% in the prior year, influenced by various tax-related items[119] - Interest expense increased to $8.9 million in the first quarter of fiscal year 2026, with an effective interest rate of 6.10%[118] Backlog and Future Expectations - Total backlog as of September 30, 2025, increased by $95.5 million, or 31.5%, to $302.5 million compared to $206.9 million in the prior year[122] - Backlog realizable under one year increased by $67.6 million, or 37.8%, to $246.3 million at September 30, 2025, primarily due to acquisitions in the Electronics and Engineering Technologies segments[122] - The company expects fiscal year 2026 capital spending to be between $33.0 million and $38.0 million[151] Cash and Leverage - Total cash balance as of September 30, 2025, was $98.7 million, with $78.9 million held by foreign subsidiaries[143] - Net cash provided by continuing operating activities for Q1 FY 2026 was $16.8 million, compared to $17.5 million in the prior year[144] - As of September 30, 2025, the leverage ratio was 2.62:1, below the maximum allowed of 3.5:1[149] Market Risks and Supply Chain - The company is exposed to fluctuating market prices for commodities, particularly steel, aluminum, rhodium, and copper, which are key materials in its manufacturing processes[168][169] - The company has experienced price fluctuations for materials and plans to implement price increases to offset these changes, subject to competitive acceptance[169] - The company monitors inflationary pressures on expenses such as wages, benefits, and raw materials, adjusting reserves as necessary[157] - The company does not enter into purchase contracts that extend beyond one operating cycle, maintaining flexibility in supply chain management[168] - The company has a good relationship with suppliers but acknowledges the risk of potential supply shortages[168] Financial Instruments and Hedging - The company employs financial instruments for hedging purposes to manage market risks related to interest rates, commodity prices, and foreign currency exchange[163] - The effective interest rate on borrowings was 6.10% as of September 30, 2025, with a potential annual interest expense increase of approximately $0.9 million for a 25-basis point rise in interest rates[166] - The company has $225 million in active floating to fixed rate swaps, converting interest payments from a SOFR-based rate to a fixed rate of 3.48%[166] - As of September 30, 2025, the fair value of open foreign exchange contracts was a liability of $0.5 million, with primary translation risks associated with the Euro, British Pound Sterling, Peso, Japanese Yen, and Chinese Yuan[164][165] Customer Base - No single customer accounted for more than 5% of consolidated outstanding receivables or sales as of September 30, 2025, indicating a diversified customer base[167]