Standex(SXI) - 2021 Q1 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Consolidated revenue increased by 8.5% sequentially, exceeding previous expectations of flat to slightly above the fourth quarter of fiscal 2020 [4] - Adjusted operating margin was 11%, compared to 11.3% a year ago, with gross margin decreasing by 20 basis points year on year [15] - Free cash flow generated was $4.4 million, an increase from $2.8 million in the first quarter of the previous year [15] Business Line Data and Key Metrics Changes - Electronics Segment: Revenue increased by 23% sequentially and 18.6% year on year, with operating margin rising by 800 basis points to 16.1% due to cost efficiency initiatives [5][9] - Engraving Segment: Revenue decreased by 5.3% year on year but increased by 15.1% sequentially, with operating income improving significantly due to increased customer activity [10] - Scientific Segment: Revenue increased by approximately 13% year on year, driven by demand for vaccine storage solutions [11] - Engineering Technology Segment: Revenue decreased by 28.4% year on year, reflecting the impact of COVID-19 on the commercial aviation market [12] - Specialty Solutions Segment: Revenue decreased by 19.7% year on year, primarily due to the economic impact of COVID-19 on food service and hospitality industries [13] Market Data and Key Metrics Changes - The electronics segment's new business opportunity pipeline is valued at $56 million, expected to deliver $11 million in incremental sales across various end markets [9] - The scientific segment anticipates $10 to $20 million in incremental sales related to COVID-19 vaccine storage [11] Company Strategy and Development Direction - The company is focused on building higher-margin segments, having divested the Refrigerated Solutions business and established scientific as a standalone reporting segment [6] - Cost-saving initiatives are expected to deliver over $7 million in savings for fiscal 2021, with tax-related actions anticipated to result in cash savings of $2 million to $3 million [6][17] - The company is actively pursuing M&A opportunities, with a strong balance sheet and ongoing relationships with potential targets [56] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about continued growth and margin improvement throughout fiscal 2021, with expectations for consolidated revenue to be flat to slightly above the first quarter [19] - The company is well-positioned to capitalize on opportunities related to COVID-19 vaccine storage and has a healthy funnel of new business opportunities in electronics [19] Other Important Information - The company repatriated approximately $8 million in the first quarter and expects to repatriate a total of $35 million in fiscal 2021 [7][17] - The tax rate for fiscal 2021 is expected to be approximately 22%, significantly lower than the previous year [15][29] Q&A Session Summary Question: Engraving segment margin recovery - Management noted that the engraving margins rebounded due to improved operating disciplines and increased volume as tools were released from tool shops [21] Question: Electronics segment improvement and Renco integration - Management highlighted successful integration with Renco, noting cultural fit and early cross-selling opportunities exceeding expectations [22][24] Question: Cost savings cadence - Management indicated that most of the expected $7 million in cost savings would be realized in the first three quarters of fiscal 2021 [25][27] Question: Tax rate expectations - Management believes the tax rate may increase slightly to around 23% but will remain significantly lower than the previous fiscal year [28][29] Question: Scientific segment margin outlook - Management expects operating margins in the low 20s for the scientific segment, with investments supporting growth while maintaining margin levels [34] Question: Overall business trends and monthly performance - Management reported steady customer activity and backlog, indicating a positive outlook for sequential growth [44]