Good day and welcome to the Standex International Fiscal Fourth Quarter 2023 Financial Results Teleconference. I would now like to turn the conference over to Christopher Howe, Director of Investor Relations. Please proceed.

Thank you, operator, and good morning. Please note that the presentation accompanying management's remarks can be found on the Investor Relations portion of the company's website at www.standex.com. Please refer to Standex's safe harbor statement on Slide 2. Matters that Standex management will discuss on today's conference call include predictions, estimates, expectations and other forward-looking statements. These statements are subject to risks and uncertainties that could cause actual results to differ materially. You should refer to Standex's most recent annual report on Form 10-K as well as other SEC filings and public announcements for a detailed list of risk factors. In addition, I'd like to remind you that today's discussion will include references to the non-GAAP measures of EBIT, which is earnings before interest and taxes; adjusted EBIT which is EBIT, excluding restructuring, purchase accounting, acquisition-related expenses and one-time items; EBITDA, which is earnings before interest, taxes, depreciation and amortization; adjusted EBITDA, which is EBITDA excluding restructuring, purchase accounting, acquisition-related expenses and one-time items; EBITDA margin; and adjusted EBITDA margin. We will also refer to other non-GAAP measures, including adjusted net income, adjusted operating income, adjusted net income from continuing operations, adjusted earnings per share, adjusted operating margin, free operating cash flow and pro forma net debt to EBITDA. These non-GAAP financial measures are intended to serve as a complement to results provided in accordance with accounting principles generally accepted in the United States. Standex believes that such information provides an additional measurement and consistent historical comparison of the company's financial performance. On the call today is Standex's Chairman, President and Chief Executive Officer, David Dunbar; and Chief Financial Officer and Treasurer, Ademir Sarcevic.

Thank you, Chris. Good morning and welcome to our fiscal fourth quarter 2023 conference call. We are very pleased with the results, which completed a record fiscal year. We continued our trend of record operating margin performance. On the top line, sales into fast-growth markets continued to accelerate, as did new products and new applications. I would like to thank our employees, our executives and the Board of Directors for their efforts and continued dedication and support that drove our exceptional fiscal 2023 results. Now if everyone can turn to Slide 3, key messages. In the fourth quarter, we reported 7.8% organic revenue growth year-on-year, led by our Electronics and Engraving business segments, which both exhibited double-digit organic growth. Our long-term growth profile continues to improve as sales into fast-growth end markets grew 67% year-on-year to $24 million in the fiscal fourth quarter 2024. We anticipate this revenue stream to grow by greater than 20% in fiscal year 2024 to over $100 million. Profitability continues at record levels. The continued effectiveness of our price and productivity actions, combined with the lower freight cost, helped us achieve a ninth consecutive quarter of record adjusted operating margin. Consolidated adjusted operating margin of 15.4% in fiscal fourth quarter 2023 was a 150 basis point increase year-on-year. Our margin expansion was driven by our Engraving, Scientific and Specialty Solutions business segments, while our largest segment, Electronics, had relatively stable margin. Three of our five segments reported operating margin greater than 20% with our Engraving segment approaching 20% margin. With free cash flow of $32.8 million in the quarter, our net cash position as of June 30 was $22.3 million. We had approximately $372 million of available liquidity to invest in our healthy funnel of organic growth and acquisition opportunities. Ademir will discuss our financial performance, liquidity position and capital allocation in greater detail later in the call. We are also very pleased to see continued improvement in our ROIC. ROIC of 12.4% in fiscal 2023 improved 130 basis points year-on-year. In fiscal 2024, we expect high single-digit sales growth. We also expect continued margin expansion ahead of our long-term outlook. These expectations are based on operating improvements achieved in fiscal 2023, planned productivity initiatives for fiscal 2024, increased contribution from new products and applications, continued acceleration of our fast-growth end markets and a more stable economic environment. On a year-on-year basis, in fiscal first quarter 2024, we expect a slight increase in revenue as strong organic growth in Engraving and the contribution from Minntronix helped to offset a slow recovery in China and Europe markets served by Electronics and the impact of the Procon divestiture. On a sequential basis, we expect slightly lower revenue as the contribution from our Minntronix acquisition offsets unfavorable project timing in Engineering Technologies and a continued slow recovery in China and Europe markets served by Electronics. We expect similar to slightly higher adjusted operating margins compared to fiscal fourth quarter 2023. We reaffirm our long-term financial outlook by fiscal year 2028. These targets include high single-digit organic growth to greater than $1 billion in sales, adjusted operating margin greater than 19%, return on invested capital of greater than 15% and free cash flow conversion at approximately 100% of GAAP net income. Let's turn to Slide 4, highlights from our Minntronix acquisition. We announced earlier this week that we acquired Minntronix. There are specific strategic and financial criteria we look for in an acquisition like complementary products, attractive end markets, a defensible competitive advantage and cultural fit. Minntronix has many of these attributes, and we are excited to welcome their team to Standex. Let me begin with an overview of the company. Founded in 1990 and based in South Dakota, Minntronix designs and manufactures customized as well as standard magnetic components and products for cable fiber, smart meters, industrial control and lighting electric vehicles and home security markets. More broadly speaking, these component and product applications fit within certain fast-growing end markets like 5G, smart grid and industrial automation. The purchase price was approximately $30 million. This implies a transaction multiple of approximately 8.5 times the last 12 months ended June 2023 EBITDA. We expect the acquisition to be accretive to earnings per share and to achieve a double-digit return on invested capital in our first full year of ownership. The divestiture of Procon for $70 million, followed by the acquisition of Minntronix for $30 million, represents an effective round-trip of cash as Minntronix sales and operating income contributions effectively replaced Procon sales and operating income in year one of ownership with further upside potential in the years ahead. We were attracted to Minntronix for its highly complementary customer base and product line, its engineering talent and resources that provide a seamless cultural fit and for its participation in attractive end markets. We are excited to welcome their team to Standex and anticipate that during the integration, we will discover additional opportunities to create value as we have done with our previous acquisitions. I will now turn the call over to Ademir to discuss our financial performance in greater detail.

Thank you, David, and good morning, everyone. Let's turn to Slide 5, fourth quarter 2023 summary. On a consolidated basis, total revenue increased 1.9% year-on-year to $188.3 million. This reflects organic revenue growth of 7.8%, offset by a 5% impact from the Procon divestiture and a 0.8% impact from foreign exchange. Fourth quarter 2023 adjusted operating margin increased 150 basis points year-on-year to 15.4%, our highest adjusted operating margin in company history. Our adjusted operating income grew approximately 13.2% on a 1.9% consolidated revenue increase year-on-year. Adjusted earnings per share were $1.76 in the fourth quarter of fiscal 2023 compared to $1.54 a year ago, approximately 14.3% growth year-on-year. Net cash provided by operating activities was $40.4 million in the fourth quarter of 2023 compared to $29.5 million a year ago. Capital expenditures were $7.6 million compared to $10.8 million a year ago. As a result, free cash flow was $32.8 million in fiscal fourth quarter 2023 compared to free cash flow of approximately $18.7 million a year ago. Now please turn to Slide 6, and I will begin to discuss our segment performance and outlook, beginning with Electronics. Segment revenue of $79.9 million increased 11.1% year-on-year as an organic increase of 12.3% was partially offset by a 1.2% negative impact from foreign exchange. Although softness in appliances and distribution end markets in China and Europe remains, industrial automation, power management, renewable energy and EV-related markets remain robust across our regions. Adjusted operating margin of 21% in fiscal fourth quarter 2023 decreased 150 basis points year-on-year as the contribution from higher sales and pricing and productivity initiatives were more than offset by unfavorable mix, inflation and higher R&D investments. Sequentially, we expect slightly higher revenue in fiscal first quarter 2024 as the contribution from Minntronix and higher sales into fast-growth markets are partially offset by a continued slow recovery in China and Europe. We expect similar operating margin on a sequential basis, reflecting a similar product mix. As we move through calendar year 2024, we believe Electronics will start to reflect more typical organic growth rates on a run rate basis, barring any unforeseen economic disruptions. Please turn to Slide 7 for a discussion of the Engraving and Scientific segments. Engraving revenue increased 14% to $42.4 million as organic growth of 15.5% was partially offset by a 1.4% headwind from foreign exchange. Organic growth was driven by strong demand in Europe and growth in soft trim applications in Asia. Operating margin of 18.6% in fiscal fourth quarter 2023 increased 240 basis points year-on-year due to higher sales and realization of productivity actions. In our next fiscal quarter, on a sequential basis, we expect slightly lower revenue, reflecting timing of customer projects and slightly higher operating margin. In addition, we continue to look for opportunities to enhance the long-term margin profile of Engraving. As such, we have initiated site consolidation projects in the Detroit area and in Germany, which will improve customer service and capacity utilization as we go from two to one site in each of these geographies. These consolidations will result in approximately $3 million of restructuring costs in fiscal 2024 with the payback expected within two years. We anticipate starting to realize the benefits of these projects in our fiscal fourth quarter 2024. Scientific revenue decreased 2.6% to $18.3 million as higher sales into research and academic end markets were offset by lower demand for COVID-19 vaccine storage. Operating margin of 25.5% increased 570 basis points year-on-year due to lower freight costs and realization of productivity actions. On a sequential basis, in fiscal first quarter 2024, we expect similar revenue and operating margin. Now turn to Slide 8 for a discussion of the Engineering Technologies and Specialty Solutions segments. Engineering Technologies revenue of $21.8 million increased 1.3% year-on-year. Operating margin of 14.2% decreased 80 basis points year-on-year as an increase in the number of new platform development projects were mostly offset by productivity initiatives. In fiscal first quarter 2024, on a sequential basis, we expect a significant decrease in revenue, reflecting customer timing of projects. We expect a slight to moderate decrease in operating margin as productivity initiatives modestly offset the impact of volume decline and a higher mix of development projects. The long-term demand for this segment remains robust. The current backlog and the new platform development funnel are expected to provide a solid foundation for growth in the second half of fiscal 2024 and beyond. Specialty Solutions revenue of $25.9 million decreased 26.6% year-on-year as the Procon divestiture and the organic decline in the Hydraulics business were partially offset by organic growth in the Display Merchandising business. On a pro forma basis, excluding Procon, revenue decreased $0.6 million or 2.1% year-on-year. Operating margin increased significantly to 24.8% from 15.3% a year ago driven by higher sales in the Display Merchandising business, realization of pricing initiatives and higher mix of aftermarket sales and operational improvements in the Hydraulics business. In fiscal first quarter 2024, on a sequential basis, we expect a slight decrease in revenue and operating margin. Next, please turn to Slide 9 for a summary of Standex's liquidity statistics and the capitalization structure, which remain strong. Standex ended fiscal fourth quarter 2023 with $372 million of available liquidity, an increase of approximately $59 million from the prior year. At the end of the fourth quarter, Standex had net cash of $22 million compared to net debt of $70 million at the end of fiscal 2022. Standex's long-term debt at the end of fiscal fourth quarter 2023 was $173.4 million. Cash and cash equivalents totaled $195.7 million. With regards to capital allocation, we repurchased approximately 50,900 shares for $7 million in the fourth quarter. We also declared our 236th quarterly cash dividend of $0.28 per share, an approximately 7.7% increase year-on-year. In fiscal year 2024, we expect capital expenditures to be between $35 million and $40 million compared to approximately $24 million in fiscal 2023. I will now turn the call over to David to discuss our key takeaways from our fourth quarter results.

Thank you, Ademir. Please turn to Slide 10. Standex is in a strong position to deliver solid organic growth as an operating company driven by accelerating activity and demand within our fast-growth end markets. We're excited about the development of these opportunities. I'm proud of our team for a record fiscal performance that was driven by our operational execution and by the continued progress of our growth efforts. For fiscal 2023, we achieved several record milestones that include gross margin, adjusted operating margin, adjusted earnings per share and free cash flow. In fiscal 2024, we expect high single-digit sales growth. We also expect continued margin expansion ahead of our long-term outlook. We anticipate our fast-growth markets to continue to progress towards our fast-growth markets' revenue target of $200 million-plus by fiscal 2020. Our regional presence, strong customer relationships and disciplined approach to pricing and productivity continue to provide protection from supply chain challenges and inflation. As a result, we are confident we will continue to deliver sustainable profitable growth through this environment. Our strong balance sheet allows us to continue to pursue additional inorganic investments complementary to our strategy. We will now open the line for questions.

The first question today comes from Chris Moore with CJS Securities.

Specialty Solutions operating margin, 24.8%, is that sustainable in the low 20s over the long term?

Absolutely. One of the unsung heroes in the company right now is our Display Merchandising business. 26% of their sales are coming from new products. They're getting into some new markets, new product categories. And so they have had a fantastic year, and that is sustainable because of the new products and the new market presence. And then Hydraulics business, they've got a solid end-market outlook with infrastructure investment in the coming years in North America.

Got it. Very helpful. Maybe just talk a little bit about the fiscal '24 cadence that you will need to get to the high single-digit growth that you're talking about for this year.

Yes. Chris, it's Ademir. So our high single-digit sales growth assumes a couple of points inorganically that we're going to get from the Minntronix acquisition or the benefits of the Minntronix acquisition once you take out Procon kind of on a net basis and kind of mid- to high mid-single-digit organic growth for the corporation. That's the math behind it. For the most part, we see healthy end markets. We do see some softness in China and Europe, specifically for Electronics. We think that that's going to get resolved over the upcoming quarters. But everything else remains healthy, and we are very optimistic and bullish about our fast-growth end-market exposure and the growth we are seeing there. That's the math behind it.

Is the growth a little bit back-half loaded, you think?

It depends on the business. Engraving is performing well, and there is significant momentum heading into this year. The backlog in Engineering Technologies suggests more shipments will occur in the latter half of the year, providing us with good visibility. We are noticing some weakness in electronics and appliances, as well as shipments related to consumer goods in China and Europe. However, we expect that to improve in the second half of the year. Additionally, we have fast-growth markets, which generated about $83 million last year and are projected to reach $100 million this year, showing consistent growth each quarter. Overall, this indicates there will likely be a bit more growth in the second half.

Got it. Maybe I'll just sneak one more in. You just closed the Minntronix deal. It looks like a nice fit. Maybe just update the M&A funnel a little bit in terms of what you're seeing in the market and your thoughts there.

Yes, we have two types of opportunities. The first involves family-owned and privately owned businesses like Minntronix, with which we have established relationships. Predicting the timing of these sales can be challenging because the owners sell for their own reasons and timelines. For instance, our connection to Minntronix came about when Lew, who is known to John, our President of Electronics, reached out earlier this year to express his readiness to sell. The process moved quickly, and while timing remains unpredictable, we believe we are well positioned for similar opportunities, some of which may arise in the coming quarters. The second type involves larger transactions. We are eager to pursue opportunities that could bring in $100 million or $200 million in a single acquisition. Activity in this area has been quiet over the past year, but we are building relationships with the owners and positioning ourselves for when opportunities arise. It seems that there are some indications that a few larger deals may become available in the latter half of this year. Overall, we have a healthy pipeline of opportunities at both ends of the spectrum.

The next question comes from Michael Legg with Benchmark.

Congrats on a great quarter. Can you comment a little bit on how much of the 7.8% revenue growth was related to pricing increases?

Mike, in general terms, we would probably say about half to two-thirds is volume, one-third to half, depending on the quarter, is pricing. But more of it is volume than price.

Okay. Great. And then it seemed like everything is going pretty well for all the segments. What are you seeing from a weakness perspective? And what type of opportunities would you see from that side?

Well, Mike, I want to call out the weakness in appliances and consumer goods in Europe and China. We think that will be upside towards the tail end of the year. The weakness, I don't know if I'd comment...

No, I mean, I think, Mike, we see more strength than weaknesses kind of at the end markets that we play in. Our magnetics business plays in the U.S., in the North American end market for the most part, and that's been robust. Our Engraving end markets are pretty robust. So as we look at the markets across the globe that we serve, we feel pretty good about the overall health of them.

I would add that we have a diverse range of businesses that cater to different end markets. Recently, some pure-play electronics companies have reported some softness, particularly in inventory stocking and destocking, especially among components. We are experiencing some of these trends, but they constitute a smaller segment of our business, so they don't significantly impact our top line. Nevertheless, we are noticing similar effects as others. On a positive note, we have a fast-growing market projected to increase from $80 million to $100 million, which gives us confidence. Additionally, the backlog for the Engineering Technologies Group in the second half is very strong. When you consider all these factors collectively, they contribute to a healthy mix of end markets.

Okay. Great. Congrats on the quarter.

Yes. Thank you, Mike.

Thank you.

The next question comes from Gary Prestopino with Barrington Research.

Ademir, I just want to clarify, you said embedded in your guidance is mid- to high single-digit organic growth for 2024 on the top line?

Correct.

Okay. And that's constant currency, right?

Correct.

Okay. And then can you talk about with this Minntronix acquisition, how you can leverage their products and their platform to drive increased growth within that legacy business and within your business itself?

In the past few years, we have acquired Agile, Renco, Northlake, and other magnetics businesses. From our experience, we have been able to enhance the sales of each of those companies by approximately 10 points due to the sales synergies achieved by offering their products through our established channels. We are still familiarizing ourselves with Minntronix, its specific accounts, and applications. However, we anticipate that in the next couple of years, we will generate an additional $2 million to $5 million in sales synergies from that acquisition, based on our experiences with other acquisitions, although I am unable to specify the accounts and applications at this time.

No, I understand that. I mean, was Minntronix selling outside of the U.S., and that's one of the things that you can do is carry them, their business outside of the U.S. or North America?

They have a sales model that closely resembles ours. They collaborate with engineering teams in America and secure business domestically through their application expertise and design. Some shipments are directed to locations in China and other regions, predominantly China and North America. However, the customer decisions are made in North America. We believe we can assist them in reaching customers in Europe and additional markets in Asia and China. Our presence in those areas is greater than theirs.

Yes. And their customer relationships are extremely strong, Gary. I mean the whole customer intimacy model we compete on, Minntronix is right there with us. And that's one of the things that attracted us to them. I believe as a combination of two companies, we'll be able to help them, and they'll be able to help us and then move forward.

Okay. And this was just a hunch. I assume that this was maybe a family-run business and the gentleman running it, as you said, just decided he was ready to sell. Is that...

Yes, yes. Yes, that's right. If I could just interject one thing. We did make the point during the call that with the sale of Procon earlier, we had $70 million of proceeds. This was a $30 million acquisition. We more than replaced the sales and the operating income from Procon with growth opportunities. We can also improve the profitability of this business based on our experience with other businesses. And we think we're well positioned with some other privately owned businesses in America. At some point, we'll do the same. So this is a good example of what has been a classic Standex acquisition. And as I mentioned earlier to Chris' question, I think we're positioning ourselves for some larger opportunities.

In general, regarding these acquisitions, if you are competing with smaller companies, are they beginning to recognize that you are expanding, gaining a larger presence, and increasing your geographic reach?

Well, I guess there's just two...

Go ahead, I'm sorry.

Yes, we have a strong reputation in the market. Family-owned businesses are being acquired by larger companies, and we take pride in our reputation, which often leads to us receiving the first phone call. Regarding competition, it's interesting to note that the magnetics business at Minntronix is focused heavily on customer intimacy. The relationships engineers build with OEMs are crucial and foster long-term commitments. We only compete slightly with Minntronix, occasionally in new applications, and while we share some capabilities, competition in the magnetics market largely hinges on customer relationships and industry expertise. Minntronix enhances our knowledge, especially in smart grid applications and 5G design, which were areas we weren't as strong in. Generally, your point is valid that smaller family-owned businesses are recognizing the ongoing consolidation in the industry and are preparing to decide who they will align with.

This concludes our question-and-answer session. I would like to turn the conference back over to David Dunbar for any closing remarks.

Thank you. I want to thank everybody for joining us for the call today. We enjoy reporting on our progress at Standex. And finally, again, I want to thank our employees and shareholders for your continued support and contributions. We look forward to speaking with you again in our fiscal first quarter 2024 call.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.