Earnings Call Transcript - SXI Q1 2024

Operator, Operator

Good morning, and welcome to the Standex International Fiscal First Quarter 2024 Financial Results Call. All participants will be in listen-only mode. After today's presentation, there'll be an opportunity to ask questions. Please note this event is being recorded. I would now like to turn the conference over to Christopher Howe, Director of Investor Relations. Please go ahead.

Christopher Howe, Director of Investor Relations

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 two. 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.

David Dunbar, Chairman, President, and CEO

Thank you, Chris. Good morning, and welcome to our fiscal first quarter 2024 conference call. Our fiscal first quarter results highlight the quality of our businesses as we continue our trend of record operating margin performance. On the top line, sales into fast growth markets continued to grow as did sales of 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 solid fiscal first quarter 2024 results. Now if everyone can turn to slide three, key messages. In the first quarter, we reported 2.5% organic growth year-on-year, led by our Engraving and Engineering Technologies business segments. Sales in the fast growth end markets grew 20% year-on-year to $20 million in the fiscal first quarter 2024. We anticipate this revenue stream will reach approximately $100 million in fiscal year 2024. In addition, we continue to work on an active pipeline of inorganic opportunities to further strengthen our competitive positioning and gain access to value-added applications within our Electronics segment. Earlier this week, we signed a definitive agreement to acquire Sanyu Switch Company, a designer and manufacturer of reed relays with a particular strength in test and measurement equipment and other switching applications. This acquisition significantly strengthens our product portfolio in Electronics and deepens our access to key customer accounts. We also continued to generate strong profitability from the execution of our price and productivity initiatives across segments and achieved a 10th consecutive quarter of record adjusted operating margin. Consolidated adjusted operating margin of 15.9% in fiscal first quarter 2024 was a 90 basis point increase year-on-year. Our margin expansion was driven by our Scientific, Engineering Technologies, and Specialty Solutions business segments. Three of our five segments reported adjusted operating margin greater than 20% and all five segments reported adjusted operating margin greater than 16.5%. We achieved free cash flow of $12.1 million in the quarter, the highest-ever free cash flow generation in our fiscal first quarter. Our consistent and improved cash flow generation further highlights the quality of our businesses. Our net debt position as of September 30 was $21.7 million. We had approximately $347 million of available liquidity to invest in our healthy funnel of organic growth and acquisition opportunities. We are also very pleased to see continued improvement in our ROIC. Annualized fiscal first quarter 2024 ROIC of 12.7% improved 60 basis points year-on-year. On a sequential basis in fiscal second quarter 2024, we expect slightly lower revenue as continued softness in China and European markets served by Electronics and unfavorable foreign currency are partially offset by more favorable project timing and additional development work in Engineering Technologies, as well as the contribution from our Minntronix acquisition. We expect a similar to slightly higher adjusted operating margin compared to fiscal first quarter 2024 due to continued realization of pricing and productivity initiatives. 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 four, highlights from our Sanyu Switch Company acquisition. We announced earlier this week that we signed a definitive agreement to acquire Japanese-based Sanyu Switch Company. Let me begin with an overview of the company. With corporate headquarters in Tokyo, Japan, Sanyu designs and manufactures reed relays, test sockets, testing systems for semiconductor and other electronics manufacturing and other switching applications. With a 50-year history, Sanyu is highly regarded and respected globally with a reputation for high-quality products and a customer-focused culture. The transaction will be funded by Standex's cash balance and is expected to close before January 31, 2024. The valuation is in line with historical multiples paid. 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 acquisition of Sanyu will add breadth to our product portfolio, expand key account relationships, enhance our engineering and manufacturing capability, and strengthen our geographic footprint. With the Sanyu and Minntronix acquisitions, we will essentially complete the reinvestment of proceeds from our Procon divestiture and in the process deliver nearly double the annualized revenue and operating income lost from the divestiture in the first year of ownership. We've returned the remaining cash to shareholders through share repurchases and an increased dividend. I will now turn the call over to Ademir to discuss our financial performance in greater detail.

Ademir Sarcevic, CFO and Treasurer

Thank you, David, and good morning, everyone. Let's turn to slide five, first quarter 2024 summary. On a consolidated basis, total revenue increased 2.3% year-on-year, to $184.8 million. This reflected organic revenue growth of 2.5% and 0.5% benefit from foreign exchange offset by 0.6% net impact from the recent Minntronix acquisition and prior Procon divestiture. First quarter 2024 adjusted operating margin increased 90 basis points year-on-year to 15.9%, our tenth consecutive quarter with the highest adjusted operating margin in company history. Our adjusted operating income grew 8.2% on a 2.3% consolidated revenue increase year-on-year. Adjusted earnings per share were $1.74 in the first quarter of fiscal 2024 compared to $1.60 a year ago, an 8.7% growth year-on-year. Net cash provided by operating activities was $16.4 million in the first quarter of 2024 compared to use of $2.7 million a year ago. Capital expenditures were $4.3 million compared to $5.3 million a year ago. As a result, free cash flow was $12.1 million in fiscal first quarter 2024 compared to free cash flow usage of approximately $8 million a year ago. Now please turn to slide six and I will begin to discuss our segment performance and outlook, beginning with Electronics. Segment revenue of $81.7 million increased 8.6% year-on-year as the 10% benefit from the recent Minntronix acquisition and a 0.4% benefit from foreign currency were partially offset by an organic decline of 1.8%. Adjusted operating margin of 20.4% in fiscal first quarter 2024 decreased 370 basis points year-on-year as the contribution from pricing and productivity initiatives were more than offset by lower organic sales and unfavorable mix. We continue to experience softness in appliances and general industrial end markets in China and Europe. As a response, we are implementing additional cost-saving measures targeting G&A and cost of goods sold, which we expect to yield approximately $7 million in annualized cost savings once fully implemented. We expect to be substantially complete with these actions by the end of the current quarter and incur approximately $1.5 million in restructuring costs. Despite the market softness in China and Europe, we remain confident in our ability to increase share and accelerate presence in fast growth end markets such as industrial automation, smart grid, renewable energy, and EV-related markets. This is also reflected by a new business opportunity funnel, which increased 10% year-on-year and is currently at approximately $72 million. Sequentially, we expect slightly lower revenue in fiscal second quarter 2024 as higher sales into fast growth markets are offset by continued slow recovery in China and Europe. We expect similar operating margins as productivity actions more than offset the impact of the slight revenue decline.

David Dunbar, Chairman, President, and CEO

Let's turn to slide seven for a discussion of the Engraving and Scientific segments. Engraving revenue increased 16.5% to $40.8 million driven by organic growth of 15.5% and a 1% benefit from foreign currency. Organic growth continues to be driven by strong demand in Europe and growth in soft trim applications in Asia. Operating margin of 18.6% in fiscal first quarter 2024 increased 190 basis points year-on-year due to higher volume and realization of productivity actions. In our next fiscal quarter, on a sequential basis, we expect similar revenue and slightly higher operating margin due to continued strength of the underlying end markets. In addition, our previously announced site consolidation projects in Detroit and in Germany are well underway, and we remain on track to start realizing the benefits of this project in the fiscal fourth quarter 2024. Scientific revenue decreased 1.4% to $18.2 million as higher sales into research and academic end markets were more than offset by lower demand for COVID vaccine storage from retail pharmacies. Operating margin of 27.1% increased 690 basis points year-on-year due to lower freight costs and pricing and productivity initiatives. Sequentially, we expect similar revenue and operating margin. In addition, we continue to invest in new product development in this segment, as we expand our product portfolio to access a larger customer base. Now turn to slide eight for a discussion of the Engineering Technologies and Specialty Solutions segments. Engineering Technologies' revenue of $18.2 million increased 7.2% year-on-year. This reflected organic growth of 6.1% and the 1.1% benefit from foreign currency. Operating margin of 16.6% increased 560 basis points year-on-year as pricing and productivity initiatives are partially offset by investments towards new product development and new applications. Sequentially, we expect moderately higher revenue reflecting more favorable project timing and a higher level of development activities, and similar operating margin. Specialty Solutions segment revenue of $25.9 million decreased 25.9% year-on-year primarily due to the Procon divestiture. Operating margin of 21.7% increased 430 basis points year-on-year driven by price and productivity realization in the Display Merchandising and Hydraulics businesses. Sequentially, we expect a slight decrease in revenue and operating margin due to fewer shipping days and seasonality in the Display Merchandising business. Next, please turn to slide nine for a summary of Standex's liquidity statistics and capitalization structure, which remain strong. Standex ended fiscal first quarter 2024 with $347 million of available liquidity, an increase of approximately $53 million from the prior year. At the end of the first quarter, Standex had net debt of $21.7 million, compared to net cash of $22.3 million at the end of the fiscal fourth quarter 2023. Standex's long-term debt at the end of fiscal first quarter 2024 was $148.6 million. Cash and cash equivalents totaled $126.8 million. With regards to capital allocation, we repurchased approximately 140,000 shares for $22.2 million in the first quarter. This amount includes $10.2 million of share repurchases to satisfy taxes on vesting of restricted shares. We also declared our 237th quarterly cash dividend with a dividend increasing to $0.30 per share, an approximately 7.1% increase year-on-year. In fiscal 2024, we expect capital expenditures to be between $30 million and $35 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 first quarter results. Thank you, Ademir. Please turn to slide 10. Standex is in a strong position to deliver sales growth within our underlying businesses driven by accelerating activity in our fast growth end markets and our competitive positioning. I am proud of our team for our fiscal first quarter performance that was driven by our strong operational execution and by our increased presence in growing markets and new applications. Our regional presence, strong customer relationships, and disciplined approach to pricing and productivity helped protect profitability and provides opportunity for continued margin improvement. As a result, we are confident we will continue to deliver sustainable, profitable growth through the current economic environment. In addition, our strong balance sheet allows us to continue to pursue additional inorganic investments complementary to our strategy. In fiscal 2024, we expect mid-single digit or better sales growth depending upon recovery across China and Europe end markets served by Electronics and assuming continued resilience of US end markets. We expect continued margin expansion ahead of our long-term outlook. We anticipate our fast growth markets to continue to progress towards our fast market revenue target of $200 million plus by fiscal 2028. 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. We will now open the line for questions.

Operator, Operator

We will now begin the question-and-answer session. Our first question comes from Chris Moore from CJS Securities. Please go ahead.

Chris Moore, Analyst

Hey, good morning, guys. Thanks for taking a couple of questions.

David Dunbar, Chairman, President, and CEO

Good morning.

Chris Moore, Analyst

Good morning. So you talked about softness currently both in China and EMEA. I wonder if you could parse those a little bit in terms of, you know if there is any better visibility in either of those markets or you know kind of just how you're thinking about them?

David Dunbar, Chairman, President, and CEO

Yes, it seems like we've been repeating those comments for about six quarters now. We're looking at both China and the SST and magnetics sectors. About six quarters ago, the backlog was at its peak, but it has gradually been decreasing, and we've addressed this in nearly every quarter over the past year. There has been some destocking and a general slowdown in the industry, particularly in consumer goods and appliances. In the last couple of months, we've seen some orders coming in, but it's only been for two months, so it's not a definitive trend yet. However, there may be signs of stabilization, especially in Asia. I apologize if that's not the specific recent trend you were referring to.

Chris Moore, Analyst

Yes. And EMEA anything significant to talk about there?

David Dunbar, Chairman, President, and CEO

I would say that EMEA's declines were not as severe as those in China. We anticipated a stronger recovery in Asia during the spring, but that has not materialized. EMEA, particularly Germany, is experiencing an industrial recession that began earlier this year, so I would describe the situation as flat.

Ademir Sarcevic, CFO and Treasurer

Yes. And then, Chris, it's Ademir if I can add. For us, it's more around Asia and China than Europe and it kind of ties down to what David was saying about appliances and general industrial end markets, distributor destocking. You know again, we feel that you know it might be bottoming out, but a little bit too early to say. You know we are going to continue playing as you say offense and defense and that's one of the reasons we announced we have taken some of the cost out of our electronics business. So when the market comes up, we'll be in a very good position to you know get that organic growth again, and you know lever up at a higher rate.

Chris Moore, Analyst

Got it. I appreciate that.

David Dunbar, Chairman, President, and CEO

Let me add a couple of things on that. The general industry headwind is present, and you can hear it from other players, but our fast growth vectors in sales are performing well. Sales from our fast growth markets increased by 20%. Our new product sales are up, and our new applications sales are also up. We have growth momentum and remain confident about our positioning in these markets. As they improve, it will serve as an accelerator for us.

Chris Moore, Analyst

Got it. That's helpful. I believe you mentioned, David, that the target for fiscal '24 is mid-single digit revenue growth. Did I understand that correctly?

David Dunbar, Chairman, President, and CEO

Yes, mid-single digit plus depends a bit on those general industry conditions. It's, to the extent that China, Europe come back a little stronger there is upside to that number.

Chris Moore, Analyst

Got it. I appreciate that. And maybe just last one on the EV side. So Ford is postponing, I don't know $12 billion in EV factory building. You know the reason given is I’m willing as to pay extra for electric vehicles. Just curious you know if you think, you know kind of impact that could have potentially either on your ICE auto business or the EV build-out?

David Dunbar, Chairman, President, and CEO

Our ICE business is doing pretty well. With EVs, we are seeing, it's still growing, but it's decelerating. And we have had some kind of rescheduling of orders. So, we anticipate our sales into EVs in '24 will grow less than we had thought they would because of all the headlines that we are reading, and you mentioned Ford.

Chris Moore, Analyst

Got it. It's helpful. I will jump back in line. Thanks, guys.

David Dunbar, Chairman, President, and CEO

Thank you, Chris.

Ademir Sarcevic, CFO and Treasurer

Thanks, Chris.

Operator, Operator

Our next question comes from Michael Legg from Benchmark. Please go ahead.

Michael Legg, Analyst

Thanks. Good morning, everyone. Can you talk a little bit about the inflationary environment what you're seeing in supply chain pricing and your ability to pass that on to your customers? And what that means from a, you know organic growth perspective? Thanks.

Ademir Sarcevic, CFO and Treasurer

Yes, it’s Ademir. We are still experiencing some inflationary pressures, but they are not as intense as they were a few quarters ago. In fact, we are seeing a bit of deflation, as ocean freight costs have returned to pre-COVID levels after spiking during the pandemic. We established a solid playbook for managing price and productivity a few years back, and we continue to follow it. Notably, we have achieved 10 consecutive quarters with the highest adjusted operating margin in the company’s history. This success is largely due to our effective management of price and productivity, and we believe we can maintain this even with the current softer end markets in electronics. We aim to protect our margin through a combination of price adjustments and improved productivity. That’s my perspective on the situation.

Michael Legg, Analyst

Thanks. And then just one other question. On ENEL with your technology you've developed there for solar. What's going on over at ENEL? Can you just give us some comments on that, please?

David Dunbar, Chairman, President, and CEO

Yes. So that project is, as we've reported before, we have developed some special technology in collaboration with ENEL, and we are spending this year to complete industrialization to ensure we are ready to launch products that focus on cost and quality. There are two significant changes in the external environment affecting this project. We are discussing commercial solar panels here. In Europe, the market for commercial solar panels has undergone substantial changes. Estimates suggest there are $80 million worth of Chinese panels in inventory there. The price of panels has fallen by about 50% compared to a year ago, making it a much more competitive market. The second external impact involves ENEL, which is partly government-owned. The new Italian government has appointed a new leader at ENEL, and they are reviewing their entire portfolio of projects. They have been selling some assets and canceling a few renewable projects. Considering these factors, we are reassessing the best approach to deploy this technology. The commercial panel market accounts for about 80% of the global solar panel market, but the remaining 20% holds significant potential. There are attractive niche markets that we could explore. Therefore, we are taking a step back to evaluate whether there's a better opportunity to introduce this technology, and we expect to have a clear direction on that in the next quarter or so.

Michael Legg, Analyst

Great. Thank you.

Operator, Operator

And our next question comes from Gary Prestopino from Barrington Research. Please go ahead.

Gary Prestopino, Analyst

Good morning, all. A couple of questions. The acquisition of Sanyu or the planned acquisition. Is there any customer overlap? And what do they bring product-wise that you don't have already in the market?

David Dunbar, Chairman, President, and CEO

There is some customer overlap, but their customers mainly focus on selling relays for automated test equipment. When establishing a manufacturing process for 5G products or battery management systems or smart grid products, these need to be tested. As these processes become more complex, they require more testing points, with each testing point needing a relay. The design of this test equipment relies heavily on relays. The Sanyu team has collaborated with test and measurement companies to design this test equipment and has developed application knowledge that surpasses our understanding in this area. We consider this to be complementary in terms of both their customer base and application expertise. Additionally, we will examine the markets they service. Our fast-growing markets include smart grid, electric vehicles, and 5G, which also drive demand for test and measurement equipment, although we do not report on that directly; it's a secondary effect of these growth markets. Our strongest product line is already relays, and this acquisition strengthens our global position while providing new application expertise and some new customers.

Gary Prestopino, Analyst

Thank you. Can you give us some idea of the revenues? Or you can't until you actually close it?

David Dunbar, Chairman, President, and CEO

Yes. So the way to think about that is if you rewind to April when we announced the sale of Procon a few months after that we announced Minntronix and for less than half the proceeds from Procon we replaced the sales, and in the first, you will replace the operating income from Procon. For about the same price now if you add Minntronix and Sanyu, we more than doubled the revenue we've lost and the operating income we lost to Procon. And with the extra proceeds, we've increased our dividend and bought back shares. So I know we are talking a little bit of code there, but you can think of this as roughly the size of Minntronix and sales and operating income potential.

Ademir Sarcevic, CFO and Treasurer

And I think Gary if I can just add to that, it gives us much better growth potential than what we had with Procon. We replaced those proceeds in two businesses, achieving double revenue and operating income in the first year of ownership, along with a strong double-digit return on invested capital and great long-term growth potential. So we feel pretty good about it.

Gary Prestopino, Analyst

Okay. And then next couple of questions surround the Electronics segment. The applications that are impacting the sales growth and the operating profit growth. When you're talking about appliances, I get that general industrial what end markets are being served there?

David Dunbar, Chairman, President, and CEO

Well, these reed switches wind their way into everything from you know irrigation systems for your in-ground irrigation systems, commercial building construction security systems contain a lot of reed switches. Level and measurement systems in tanks that contain liquids in process plants. So I think and that's why we use the term general industry there are many, many, many, many end applications.

Gary Prestopino, Analyst

Okay. I mean are you serving the same applications in the United States too, North America?

David Dunbar, Chairman, President, and CEO

Yes. Although yes, there is much more volume in China for many of those applications and we tend to, I guess you just think about the manufacturing based in North America, tend to be higher value-add products and more sophisticated products. So we haven't seen the impact in our reed switch sales into North America but that's a smaller end market.

Gary Prestopino, Analyst

Would this business have shown an increase in adjusted operating income excluding the issues that are in China and Europe in appliances and general industrial?

David Dunbar, Chairman, President, and CEO

Yes. Yes. And part of the reported margin change in the group also has to do with mix. You probably recall that the magnetics business in general has a lower margin than the SST, the switches and sensors. So as that mix changes, your mix down a little bit of margin. But the underlying businesses, the margins are improving.

Ademir Sarcevic, CFO and Treasurer

Right. That's right.

Gary Prestopino, Analyst

Okay. Thank you.

Operator, Operator

Our next question comes from Ross Sparenblek from William Blair. Please go ahead.

Ross Sparenblek, Analyst

Hey, good morning, guys.

Ademir Sarcevic, CFO and Treasurer

Hey, Ross.

David Dunbar, Chairman, President, and CEO

Good morning, Ross.

Ross Sparenblek, Analyst

Maybe just to put a finer point on Chris's question with the rescheduling of the EVs. Can you maybe give us a sense of what is sitting in that backlog? I mean it looks like the orders are decently well and I know the second half expectations were for at least some pretty stable Chinese demand coming through that could help drive those margins. So, anything around that would be helpful.

David Dunbar, Chairman, President, and CEO

We are experiencing a slowdown in North America and Europe, while China is maintaining its pace, particularly with vehicles operating at over 400 volts. I don’t have a specific backlog number, but we usually receive an annual schedule from the OEM about their expected quarterly needs. What we’re currently seeing from some European and American electric vehicle manufacturers is a push out of that schedule.

Ross Sparenblek, Analyst

Yes, the expectation is still there. You know you should have some good volume and at least some year-over-year growth in the second half from Chinese adoption, right?

David Dunbar, Chairman, President, and CEO

Yes. Chinese adoption, but also in Europe we anticipate growth just not as much as we had thought. Growth in China, you know some growth in Europe. North America, we don't know if that's going to be flat or slightly up.

Ademir Sarcevic, CFO and Treasurer

And Ross, just as a good reminder as you know our content per EV is three to five times the content in ICE. So even if the EVs are growing at a lower rate, as long as they're growing it's a good thing for us and I think to David's point you know because of all the headlines we are seeing you know these days and some of the push outs, the growth is slowing down, but again our content is still, you know we are still benefiting from the content change and we expect that to continue in the years ahead.

Ross Sparenblek, Analyst

Yes, absolutely. I'm trying to understand the $7 million in cost savings actions. Coming into this quarter, everything appeared to be steady with EVs in the second half. Now we need to do some restructuring, which suggests that something may have changed. I recognize the situation with the magnetics and that the volume wasn't significantly lower year-over-year. Generally, the slowdown in industrial PMIs is causing some hesitation or concern for you all in Electronics.

David Dunbar, Chairman, President, and CEO

Yes. Because like I mentioned before, I think it was to Chris' question. Our new product sales are up. Our new applications are up. And the fast growth market numbers they're growing not as fast as we thought. So the problem is not there. It's just this kind of legacy-based general business through distribution and through the various, and sundry applications that I mentioned earlier.

Ademir Sarcevic, CFO and Treasurer

Yes, I understand, and regarding the cost actions in electronics, we might be speeding up some of those measures due to the softness in the market. However, as part of our efforts to expand margins and meet our targets, we constantly evaluate our back office structure and components of our cost of goods sold. This is just one approach we are taking to ensure we continue to enhance our margins and protect them amidst the market challenges.

Ross Sparenblek, Analyst

Okay, yes.

Ademir Sarcevic, CFO and Treasurer

But what's really important is that we are not reducing our R&D. Our R&D is almost 3% of revenue this quarter. It's crucial that we continue to focus on our growth priorities.

Ross Sparenblek, Analyst

Yes, that's excellent.

David Dunbar, Chairman, President, and CEO

No, I'm sorry, I'm just going to say yes. I view the cost reduction as a precautionary measure, considering the uncertainty around how long this softness in the industry may last. It's a cautious approach that does not compromise top line opportunities and...

Ross Sparenblek, Analyst

Okay. Really quick on just commercial space and understanding the timing of the project pipeline. Obviously, really strong quarter expectations for another strong second quarter here. I thought that was going to be kind of more of a second half story. So there wasn't any pull forward to be concerned with, right? I mean this is pretty steady eddie there's enough in the backlog that we are going to see some material expansion from mix as we move through the year.

David Dunbar, Chairman, President, and CEO

Yes, the only one thing I would say about the steady-eddie as you know, it is a project business so projects can move a bit you know, and cross from one quarter into the next. But with that caveat, I'd agree with everything you say, it's pretty steady-eddie, we have a good backlog, a good number of platforms that are growing.

Ross Sparenblek, Analyst

Awesome. Thank you, guys.

Ademir Sarcevic, CFO and Treasurer

Thanks, Ross.

David Dunbar, Chairman, President, and CEO

Thank you.

Operator, Operator

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

David Dunbar, Chairman, President, and CEO

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

Operator, Operator

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