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January 31, 2025 Second Quarter Fiscal 2025 Earnings Call Presentation
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Statements contained in this presentation that are not based on historical facts are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements may be identified by the use of forward-looking terminology such as “should,” “could,” “may,” “will,” “expect,” “believe,” “estimate,” “anticipate,” “intends,” “continue,” or similar terms or variations of those terms or the negative of those terms. There are many factors that affect the Company’s business and the results of its operations and that may cause the actual results of operations in future periods to differ materially from those currently expected or anticipated. These factors include, but are not limited to: the impact of pandemics on employees, our supply chain, and the demand for our products and services around the world; materially adverse or unanticipated legal judgments, fines, penalties or settlements; conditions in the financial and banking markets, including fluctuations in exchange rates and the inability to repatriate foreign cash; domestic and international economic conditions, including the impact, length and degree of economic downturns on the customers and markets we serve and more specifically conditions in the electrical grid, automotive, construction, aerospace, transportation, food service equipment, consumer appliance, energy, oil and gas and general industrial markets; lower- cost competition; the relative mix of products which impact margins and operating efficiencies in certain of our businesses; the impact of higher raw material and component costs, particularly steel, certain materials used in electronics parts, petroleum based products, and refrigeration components; the impact of higher transportation and logistics costs, especially with respect to transportation of goods from Asia; an inability to realize the expected cost savings from restructuring activities including effective completion of plant consolidations, cost reduction efforts including procurement savings and productivity enhancements, capital management improvements, strategic capital expenditures, and the implementation of lean enterprise manufacturing techniques; the potential for losses associated with the exit from or divestiture of businesses that are no longer strategic or no longer meet our growth and return expectations; the inability to achieve the savings expected from global sourcing of raw materials and diversification efforts in emerging markets; the impact on cost structure and on economic conditions as a result of actual and threatened increases in trade tariffs; the inability to attain expected benefits from acquisitions and the inability to effectively consummate and integrate such acquisitions and achieve synergies envisioned by the Company; increased costs from acquisitions to improve and coordinate managerial, operational, financial, and administrative systems, including internal controls over financial reporting and compliance with the Sarbanes-Oxley Act of 2002, and other costs related to such systems in connection with acquired businesses; market acceptance of our products; our ability to design, introduce and sell new products and related product components; the ability to redesign certain of our products to continue meeting evolving regulatory requirements; the impact of delays initiated by our customers; our ability to increase manufacturing production to meet demand; and potential changes to future pension funding requirements. For a more comprehensive discussion of these and other factors, see the “Risk Factors” section of the Company’s most recent annual report on Form 10-K filed with the SEC and available on the Company’s website. In addition, any forward-looking statements represent management’s estimates only as of the day made and should not be relied upon as representing management’s estimates as of any subsequent date. While the Company may elect to update forward-looking statements at some point in the future, the Company and management specifically disclaim any obligation to do so, even if management’s estimates change. SAFE HARBOR STATEMENT 2
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KEY Q2 MESSAGES ▪ In Q2 FY25, sales increased 6.4% with contributions from acquisitions partially offset by organic decline; Highest sales quarter since divestiture of the Refrigeration Group in April 2020 ▪ Electronics Book to Bill of 1.02 indicating continued market recovery ▪ Including Amran/Narayan, fast growth market were >20% of total company sales; New product sales totaled $14.5 million in Q2 FY25, which increased ~$3.5M sequentially and more than doubled YOY ▪ Q2 FY25 adjusted gross margin of 40.9% - up 60 bps YOY ▪ Q2 FY25 record adjusted operating margin of 18.7% - up 150 bps YOY; R&D expenses at 2.8% of sales with continued investments in new product development ▪ Integration of Amran/Narayan acquisition progressing ahead of plan ▪ In Q3 FY25, on a sequential basis, expect moderately to significantly higher revenue and slightly to moderately higher adjusted operating margin ▪ Sales into electrical grid end market anticipated to provide significant tailwind to second half of FY25 ▪ In FY25, plan to release over a dozen new products, at least one in every business; Sales from new products are tracking ahead of expectations and are expected to contribute ~200 bps of incremental growth 3 OPERATING PERFORMANCE SALES PROFILE OUTLOOK
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4 AMRAN/NARAYAN GROUP ACQUISITION UPDATE Electrical enclosure at sub-station Switchgear Switchgear components Closeup of Amran current transformers within a switchgear ▪ Achieved all major integration milestones post 90-day close in areas of Finance, HR, & IT ▪ Fiscal second quarter 2025 sales contribution exceeded expectations ▪ December 2024 was the highest revenue month for Amran/Narayan in its history ▪ With Amran/Narayan, fast growth markets were >20% of total company sales ▪ Global trends in electrical grid investments (i.e., upgrades and expansion) are solidifying a positive outlook ▪ Increased electrical power demand from AI and data centers, further supported by the recently announced $500B Stargate project, will provide additional channel for growth ▪ Order trends support healthy double-digit revenue growth rate in CY25 *Above images highlight instrument transformer landscape
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FAST GROWTH MARKETS REDEFINED 5 ~$23M ~$43M ~$100M ~$170M >$200M >$340M $0 $50 $100 $150 $200 $250 $300 $350 $400 Prior Fast Growth Markets Sales - Fast Growth Markets ($ in millions) Q2 FY25 FY25E FY28E New Fast Growth Markets Electrical Grid - Electronics The Amran/Narayan Group is well positioned in low to medium voltage instrument transformers within the grid, with future tailwinds from infrastructure upgrades, capacity expansion, and data center demand Electric & Hybrid Vehicles - Electronics 3X - 5X higher content in EV and Hybrid than ICE for the Electronics segment. Strong competitive position in high voltage applications Renewable Energy - Electronics Solar market to remain strong with long term growth supported by government investments Commercialization of Space - ETG Strong relationships with major players enables Company to benefit from the long-term trend of increased number of annual launches Defense – Electronics & ETG Within the Electronics and Engineering Technologies segment, well positioned for new programs in development and healthy long term defense spending plans Fast Growth Markets Anticipated to be >$340M by FY28, >30% of Total Revenue • Soft Trim and 5G were removed from fast growth markets while Electrical Grid and Defense (ETG) were added
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6 Q2 FY25 SUMMARY Standex International Corporation ($ in millions) Q2 FY25 Q2 FY24 Y/Y △% Comments Net sales 189.8 178.4 6.4% Organic growth: (8.2%) Acquisitions/Divestitures: 15.3% F/X: (0.7%) Adjusted operating income* 35.5 30.7 15.4% Interest expense 5.6 1.0 447.0% Increase due to Amran/Narayan acquisition Non-op expense / (income) 0.3 0.6 -52.3% Non-GAAP provision for income taxes 6.2 6.4 -3.3% Minority Interests 0.4 - NM Adjusted net income from continuing operations 22.9 22.7 1.0% Adjusted EPS 1.91 1.91 0.0% Diluted average shares 12.0 11.9 1.1% Percent of Revenues: Q2 FY25 Q2 FY24 Y/Y △% Adjusted operating income* 18.7% 17.2% 150 bps Adjusted net income from continuing operations 12.1% 12.7% - 60 bps Free Cash Flow Data: Cash provided by continuing operations 9.1 23.8 -61.6% Capital expenditures 7.0 4.3 63.9% Free cash flow 2.2 19.5 -89.0% Q2 FY25 includes one-time payments of ~$11M for acquisition related expenses Second Quarter Ended December 31 ________________________ Note: In millions, except percentages and EPS; some totals will not foot due to rounding. * Excludes acquired backlog, the step-up of inventory to fair value, and the amortization of the acquired intangible assets; Q2 FY 24 restated to exclude the amortization of acquired intangible assets
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ELECTRONICS $ in millions Q2 FY25 Q2 FY24 % Change Revenue 95.9 79.4 20.8% GAAP Operating Income 17.4 15.9 9.9% GAAP OI Margin % 18.2% 20.0% Adjusted Operating Income* 26.5 17.5 51.3% Adjusted OI Margin %* 27.6% 22.0% Q2 FY25 Summary ▪ Revenue increased due to benefit from recent acquisitions, partially offset by an organic decline and the impact from foreign currency ▪ Organic decline due to softness in automotive and general industrial end markets in North America and Europe ▪ Adjusted operating income increased due to recent Amran/Narayan Group acquisition and realization of pricing and productivity initiatives ▪ Book to bill ratio of 1.02 with orders of ~$98M, driven by order strengthening in core businesses and contribution from Amran/Narayan acquisition YOY Comparison Q3 FY25 Outlook 7 ▪ New business opportunity funnel increased 32% YOY and is currently at ~$100M, excluding recent Amran/Narayan Group acquisition ▪ Sequentially, expect significantly higher revenue and moderately higher adjusted operating margin ▪ Order trends improving and anticipate general market conditions to continue to improve for remainder of fiscal year * Excludes the amortization of acquired backlog, the step-up of inventory to fair value, and acquired intangible assets; Q2 FY24 restated to exclude the amortization of acquired intangible assets
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$ in millions Q2 FY25 Q2 FY24 % Change Revenue 31.5 40.8 (23.0%) GAAP Operating Income 4.1 8.9 (53.7%) GAAP OI Margin % 13.1 21.8 Adjusted Operating Income* 4.5 9.3 (51.9%) Adjusted OI Margin %* 14.3% 22.8% Q2 FY25 Summary ▪ Revenue decreased reflecting an organic decline, primarily due to continued softness in North America and Europe from delays in new platform rollouts, and a foreign currency impact ▪ Adjusted operating income decreased due to lower revenue YOY Comparison Q3 FY25 Outlook ▪ Sequentially, expect slightly to moderately lower revenue and adjusted operating margin due to continued softness in the automotive end markets in NA/Europe and less favorable project timing in Asia due to the Chinese NY Q2 FY25 Summary ▪ Revenue increased reflecting a benefit from the recent acquisition and organic growth mostly due to higher volume from new product sales, partially offset by lower demand from retail pharmacies ▪ Adjusted operating income increased reflecting the contribution from the acquisition and higher volume YOY Comparison Q3 FY25 Outlook ▪ Sequentially, expect slightly to moderately higher revenue and slightly to moderately lower operating margin due to higher contribution to revenue from the recent acquisition, additional R&D investments, and higher freight costs SCIENTIFIC ENGRAVING $ in millions Q2 FY25 Q2 FY24 % Change Revenue 18.5 16.3 13.4% GAAP Operating Income 4.7 4.2 11.1% GAAP OI Margin % 25.5 26.1 Adjusted Operating Income* 5.0 4.5 10.1% Adjusted OI Margin %* 26.9% 27.7% 8 * Excludes the amortization of acquired intangible assets; Q2 FY24 restated to exclude the amortization of acquired intangible assets * Excludes the amortization of acquired intangible assets; Q2 FY24 restated to exclude the amortization of acquired intangible assets
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Q2 FY25 Summary ▪ Revenue increased primarily driven by more favorable project timing in the space end market and growth in sales from new products ▪ Operating income increased reflecting higher volume YOY Comparison Q3 FY25 Outlook ▪ Sequentially, expect slightly lower revenue and slightly higher operating margin due to project mix 9 Q2 FY25 Summary ▪ Revenue decreased reflecting general market softness in Display Merchandising and Hydraulics end markets ▪ Operating income decreased due to lower volume YOY Comparison Q3 FY25 Outlook ▪ Sequentially, expect similar revenue and slightly higher operating margin ENGINEERING TECHNOLOGIES SPECIALTY SOLUTIONS $ in millions Q2 FY25 Q2 FY24 % Change Revenue 22.6 19.9 13.9% Operating Income 3.7 3.4 8.4% OI Margin % 16.3% 17.1% $ in millions Q2 FY25 Q2 FY24 % Change Revenue 21.3 22.0 (2.9%) Operating Income 3.6 4.0 (10.2%) OI Margin % 16.7% 18.1%
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CAPITAL SPENDING AND D&A ▪ $7.0M of CAPEX in Q2 FY25 compared to $4.3M in Q2 FY24 ▪ CAPEX expected to be between $30M to $35M in FY25 ▪ Expect depreciation between $20.0M and $22.0M in FY25 ▪ Expect amortization between $12.0M and $14.0M in FY25 FAVORABLE LIQUIDITY PROFILE ▪ Net debt to Adj. EBITDA of 2.9x ▪ ~$185M of current available liquidity ▪ In Q3 FY25, expect interest expense to be between $7M and $7.5M 10 Q2 FY25 CAPITALIZATION Standex International Corporation ($ in millions) 12/31/2024 9/30/2024 Debt including issuance costs 534.3 $150.0 Cash 121.1 164.6 Net (Cash) Debt 413.2 (15.6) Net Debt to Capital Ratio 38.6% (2.4%) Funded Debt to Capital 44.9% 18.6% Leverage Ratio per Bank Credit Agreement 2.65 0.66 TTM Adjusted EBITDA 143.7 139.0 Net Debt to Adjusted EBITDA 2.9x (0.1x)
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UPDATED LONG-TERM TARGETS ~ FY28 11 Above targets assume current portfolio of businesses *Adjusted figures exclude the impact of restructuring charges, purchase accounting, amortization from acquired intangible assets, insurance recoveries, discrete tax events, gain or loss on sale of a business unit, acquisition costs, and other special one-time items; Prior adjusted operating margin target did not exclude the impact from acquired intangible assets ** ROIC target does not include impact of future acquisitions Prior Targets ~ FY28 New Targets ~ FY28 Sales >$1B >$1.15B Adj. Operating Margin * >19% >23% FCF Conversion ~100% GAAP NI ~100% GAAP NI ROIC** >15% >15.5%
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KEY TAKEAWAYS 12 ▪ Q2 FY25 highlights: ▪ Adjusted gross margin of 40.9% increased 60 bps YOY ▪ Record adjusted operating margin of 18.7% increased 150 bps YOY ▪ Adjusted EPS of $1.91 ▪ Emerging, sustainable and secular global trends will continue to drive demand in fast growth markets ▪ Sales into electrical grid end market anticipated to provide tailwind to second half of FY25 ▪ On track to release new products in every business in FY25; New products now anticipated to add ~200 bps of incremental growth ▪ Intend to use cash flows to reduce debt, while we maintain optionality to support an active pipeline of organic and inorganic opportunities that support future growth ▪ Increasing FY28 long term targets to >$1.15B in sales, >23% adjusted operating margin, and >15.5% ROIC
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APPENDIX
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14 Q2 FY25 SEGMENT SNAPSHOT Segment Breakdown (In millions, except percentages) Q2 FY25 Q2 FY24 Y/Y △% Comments Net Sales by Segment Electronics 95.9 79.4 20.8% Organic decline of 10.7%; Acquisitions: 32.3%; F/X: -0.9% Engraving 31.5 40.8 (23.0%) Organic decline of 22.2%; F/X: -0.8% Scientific 18.5 16.3 13.4% Organic growth of 3.9%; Acquisitions: 9.5% Engineering Technologies 22.6 19.9 13.9% Organic growth of 14.5%; F/X: -0.6% Specialty Solutions 21.3 22.0 (2.9%) Organic decline of 2.9% Total 189.8 178.4 6.4% Adjusted Income from Operations by Segment Electronics 26.5 17.5 51.3% Engraving 4.5 9.3 (51.9%) Scientific 5.0 4.5 10.1% Engineering Technologies 3.7 3.4 8.4% Specialty Solutions 3.6 4.0 (10.2%) Corporate (7.7) (8.0) (3.3%) Total Adjusted Income from Operations 35.5 30.7 15.4% Adjusted Operating Income Margin by Segment Electronics 27.6% 22.0% 560 bps Engraving 14.3% 22.8% (850 bps) Scientific 26.9% 27.7% (80 bps) Engineering Technologies 16.3% 17.1% (80 bps) Specialty Solutions 16.7% 18.1% (140 bps) Total Adjusted Operating Income Margin 18.7% 17.2% 150 bps ________________________ Note: Some totals will not foot due to rounding.
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Q2 FY25 REVENUE DRIVERS 15 Q2 FY25 YOY Change % Electronics Engraving Scientific Engineering Technologies Specialty Solutions Total Organic (10.7%) (22.2%) 3.9% 14.5% (2.9%) (8.2%) Divestiture 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% Acquisitions 32.3% 0.0% 9.5% 0.0% 0.0% 15.3% Currency (0.9%) (0.8%) 0.0% (0.6%) 0.0% (0.7%) Total 20.8% (23.0%) 13.4% 13.9% (2.9%) 6.4% ________________________ Note: Some totals will not foot due to rounding.
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Q2 FY25 GAAP TO NON-GAAP INCOME BRIDGE 16 Standex International Corporation Q2 FY25 Pre-tax Income Tax Noncon trolling Interest Net Income EPS Reported - GAAP 2.0 (0.7) (0.4) 0.9 0.07 Add: NI (loss) attributable to redeemable noncontrolling interest - - 0.4 0.4 0.03 Restructuring charges 0.9 (0.2) - 0.7 0.06 Purchase accounting 6.2 (1.5) - 4.7 0.39 Acquisition-related costs 16.4 (3.2) - 13.2 1.10 Amortization of acquired intangibles 3.5 (0.9) - 2.6 0.22 Gain on Procon sale - - - - - Discrete tax items - 0.4 - 0.4 0.04 Adjusted 29.0 (6.1) - 22.9 1.91 Diluted Shares 12,025 Q2 FY24 Pre-tax Income Tax Net Income EPS 24.5 (5.4) 19.1 1.61 - - - - 1.4 (0.3) 1.1 0.09 0.3 (0.1) 0.2 0.02 1.2 (0.3) 0.9 0.08 2.0 (0.4) 1.6 0.13 (0.3) - (0.2) (0.02) - - - - 29.1 (6.4) 22.7 1.91 11,858 % Change Pre-tax Income Net Income EPS -82.0 -82.8 -83.2 -0.4 1.1 - ________________________ Note: In millions, except percentages and EPS; some totals will not foot due to rounding.
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17 RECONCILIATION OF ADJUSTED OPERATING INCOME & ADJUSTED EPS ________________________ Note: Some totals will not foot due to rounding. * FY24 restated to exclude the amortization of acquired intangible assets; FY24 adjusted EPS based on restated shares Standex International Corporation (In millions, except percentages and EPS) Q1 FY24 Q2 FY24 Q3 FY24 Q4 FY24 FY24 Prior adjusted operating income 29.4 28.7 27.3 28.7 114.2 Prior adjusted operating margin % 15.9% 16.1% 15.4% 16.0% 15.8% Amortization of acquired intangible assets 2.1 2.0 2.0 2.0 8.2 Restated adjusted operating income 31.5 30.7 29.4 30.8 122.4 Restated adjusted operating margin % 17.0% 17.2% 16.6% 17.1% 17.0% Prior adjusted net income from continuing operations 20.8 21.1 20.7 20.9 83.5 Net impact of above adjustments 1.6 1.6 1.6 1.6 6.5 Restated adjusted net income from continuing operations 22.4 22.7 22.3 22.5 90.0 Prior adjusted EPS 1.74 1.78 1.75 1.76 7.01 Amortization of acquired intangible assets 0.13 0.13 0.13 0.13 0.53 Restated adjusted EPS 1.88 1.91 1.88 1.89 7.54