Executive Summary / Key Takeaways

• Standex International has reached a significant inflection point, transforming into a higher-growth, higher-margin industrial company driven by strategic acquisitions and robust new product development.
• Strategic M&A, particularly the Amran/Narayan Group acquisition, has doubled exposure to high-growth electrical grid, space, and defense markets, now representing approximately 25% of total sales.
• Fiscal Year 2025 marked record profitability, with adjusted operating margin reaching 20.6% in Q4, fueled by operational excellence and the integration of higher-margin businesses.
• The company forecasts strong Fiscal Year 2026 revenue growth exceeding $100 million, with new products contributing 300 basis points and fast-growth markets expanding by 45% year-on-year.
• Management is committed to deleveraging, targeting a net leverage ratio of approximately 2.0x by the end of FY26, while maintaining flexibility for future strategic inorganic growth.

The Industrial Engine: Precision, Customization, and Strategic Evolution

Standex International Corporation operates as a diversified industrial manufacturer, deeply embedded in various commercial and industrial markets globally. The company's foundational strength lies in its "Customer Intimacy" approach, where its businesses collaborate closely with clients to deliver highly customized solutions and engineered components. This strategy has shaped its historical journey, allowing it to carve out niche leadership positions across its five reportable segments: Electronics, Engineering Technologies, Scientific, Engraving, and Specialty Solutions.

A deliberate strategic pivot began around 2020, marked by increased research and development (R&D) spending and a sharpened focus on markets with long-term secular growth prospects. These include renewable energy, electric vehicles, smart power grids, military, defense, and life sciences. This shift was formalized through the "Standex Value Creation System," aiming to build more profitable and focused industrial platforms. This strategic evolution was underscored by the divestiture of the Procon pumps business in fiscal year 2023, streamlining the portfolio for greater focus on larger, higher-value opportunities.

Technological Edge and Innovation Pipeline

Standex's competitive moat is significantly reinforced by its differentiated technologies across its segments. In Electronics, the company provides sensing and switching technologies, high-precision instruments, transformers, and magnetic power conversion components. Its expertise allows for the design and manufacture of high-reliability solutions for critical applications, ensuring safe and efficient power transformation and system monitoring. For instance, the Amran/Narayan Group, a recent acquisition, excels in instrument transformers, capable of rapid prototype development in days to a week, significantly faster than competitors who may take weeks to months to turn a prototype around. This speed embeds Standex early in OEM design cycles, fostering deep, trusted partnerships.

Engineering Technologies offers innovative metal-formed solutions, leveraging best-in-class forming technologies and vertically integrated manufacturing processes to create complex, lightweight components for aerospace, defense, and energy sectors. This includes specialized capabilities for challenging geometries and single-piece construction. The Engraving segment provides custom textures and surface finishes on tooling using advanced laser and chemical etching techniques, including proprietary Digital Transfer Technology and Model-Tech for precise pattern creation. Their support for In-Mold Graining (IMG) processes also enables customers to achieve more sustainable manufacturing and reduce energy consumption. In Scientific, the focus is on specialty temperature-controlled equipment, meeting stringent regulatory requirements for critical healthcare and laboratory applications.

The company's commitment to innovation is evident in its R&D investments, which began ramping up in 2020. This has translated into tangible results: 16 new products were released in fiscal year 2025, contributing $55 million in sales, exceeding internal expectations. For fiscal year 2026, Standex plans to launch over 15 new products, projecting an incremental 300 basis points of sales growth. This "layered effect" of new product introductions, which typically take about three years to reach full commercial impact due to customer integration cycles, creates a compounding engine of organic growth. This strategic investment in technology and R&D is foundational to Standex's competitive positioning, enabling higher average selling prices, lower costs through optimized processes, and ultimately, better margins.

Competitive Dynamics and Strategic Positioning

Standex operates in a competitive landscape characterized by larger, more diversified industrial players such as TE Connectivity (TEL), Amphenol (APH), Dover Corporation (DOV), Emerson Electric (EMR), and Parker Hannifin (PH). While these rivals often boast greater scale and broader market reach, Standex distinguishes itself through its specialized focus and "Customer Intimacy" model.

Standex's competitive advantages stem from its ability to deliver highly customized, high-value solutions. Its rapid prototyping capabilities, particularly evident in the newly acquired Amran/Narayan Group, allow it to become an indispensable partner in the early design phases of OEM projects. This contrasts with larger competitors who might prioritize high-volume, standardized products. Standex's "in-region, 4-region operations," with over 85% of products manufactured and sold within the same region, provide a natural buffer against global trade and tariff disruptions, a strategic advantage in an uncertain geopolitical environment.

Financially, Standex's TTM gross profit margin of 39.31% and operating profit margin of 12.34% demonstrate its ability to maintain healthy profitability, often competitive with or exceeding some larger peers like TEL (34% gross, 19% operating) or APH (34% gross, 22% operating) in its niche areas. While its P/E ratio of 43.71 suggests a premium valuation compared to some competitors (e.g., DOV at 9.58, TEL at 14.54), this reflects market anticipation of its accelerated growth trajectory driven by strategic shifts. The company's proprietary technologies and flexible business model allow it to command strong pricing power and maintain robust margins, even as it expands.

Barriers to entry in Standex's industries, such as high R&D requirements and complex regulatory hurdles, further protect its market position by deterring new entrants. This favors Standex's strategy of continuous innovation and deep customer integration, supporting sustained profitability.

The Inflection Point: Strategic Acquisitions and Accelerated Growth

Fiscal year 2025 marked a definitive "turning point" for Standex, as its long-laid groundwork for growth drivers began to scale meaningfully. The most significant development was the acquisition of the Amran/Narayan Group in October 2024 for approximately $462 million. This was the largest transaction in the company's history, and it immediately enhanced Standex's financial profile. The Amran/Narayan Group, with expected calendar year 2024 revenue of approximately $100 million and adjusted EBITDA margins exceeding 40%, operates entirely within the fast-growing electrical grid market. This acquisition effectively doubled Standex's exposure to fast-growth markets to approximately 25% of total sales on a pro forma fiscal year 2024 basis.

This strategic move aligns with the redefinition of Standex's fast-growth markets to include the electrical grid, renewable energy, electric and hybrid vehicles, commercialization of space, and defense. These markets are driven by powerful secular tailwinds: the global electrical grid is projected to expand by 175% of its current size over the next 25 years, driven by infrastructure upgrades, aging grid modernization, and significant incremental demand from data centers (contributing 10-15% of Amran/Narayan's growth).

Further bolstering its portfolio, Standex acquired Nascent Technology Manufacturing and Custom Biogenic Systems in November 2024, and McStarlite Co. in February 2025. McStarlite, a leading provider of complex sheet metal aerospace components, is a highly complementary bolt-on for the Engineering Technologies segment, expanding its presence in space, defense, and commercial aviation. These acquisitions have not only expanded Standex's market reach but also contributed to its record profitability.

Financial Performance: A Story of Resilience and Margin Expansion

Standex's financial performance in fiscal year 2025 reflects the successful execution of its strategic transformation. Consolidated net sales increased by 9.6% year-over-year to $790.11 million. This growth was primarily driven by acquisitions, which contributed 17.2% to sales, partially offsetting an organic sales decline of 7.5% due to general economic softness in Europe and North America, NIH funding cuts affecting the Scientific segment, and delays in new platform rollouts in Engraving.

Despite top-line pressures in some legacy areas, the company achieved record profitability milestones. The gross profit margin expanded to 39.9% in FY25, up from 39.1% in FY24 and 38.5% in FY23, driven by higher volume, productivity initiatives, and the favorable impact of acquisitions. This operational discipline culminated in a record adjusted operating margin of 20.6% in Q4 FY25, a significant 350 basis point increase year-on-year. For the full fiscal year 2025, adjusted operating margin reached 19.1%, leading to a record adjusted earnings per share of $7.98, up 5.8% year-on-year.

Segment-wise, Electronics demonstrated strong momentum, with FY25 sales of $400.13 million (+24.3% YoY) and an operating margin of 22.0%. Crucially, the segment achieved its first quarter of organic growth since 2023 in Q4 FY25, with organic orders up 16% year-on-year, signaling a turning point. The Amran/Narayan acquisition significantly contributed to this segment's performance, driving its adjusted operating margin to 28.5% in Q4 FY25. Engineering Technologies also showed robust growth, with FY25 sales of $102.60 million (+22.9%) and 8.6% organic growth, driven by new product sales and increased activity in space and aviation.

Challenges persisted in Scientific, where FY25 sales increased by 5.0% but faced an organic decline due to NIH funding cuts impacting academic and research institutions (affecting about one-third of segment sales). The pharmacy side of the business is currently at a trough, down from over $20 million annually during COVID to approximately $2 million. Engraving experienced a 14.8% sales decrease in FY25, primarily due to delays in new automotive platform rollouts. However, the segment is undergoing restructuring actions (facility consolidation, headcount reductions) projected to yield $4 million in annualized savings, and has secured new OEM awards for calendar year 2026. Specialty Solutions saw a 9.4% sales decrease in FY25 due to general market softness.

From a liquidity standpoint, Standex generated $69.60 million in operating cash flow and $41.25 million in free cash flow in FY25.

While cash flow generation was impacted by one-time acquisition-related costs and longer customer credit terms in newly acquired businesses, the company successfully reduced its net leverage ratio to 2.6x by the end of Q4 FY25. Management has prioritized debt reduction, aiming to lower the net leverage ratio to approximately 2.0x by the end of fiscal year 2026, leveraging strong operating cash flows.

Outlook and Guidance: A Compounding Growth Story

Standex's management articulated a confident outlook for fiscal year 2026 and beyond, projecting continued growth even without a significant general market upturn. For fiscal year 2026, the company expects revenue to grow by over $100 million. This growth will be primarily driven by:

• Acquisitions: The full-year impact of recent acquisitions is expected to contribute over $60 million.
• New Products: Sales from new products are anticipated to add approximately 300 basis points of incremental sales growth, building on the 16 products launched in FY25 and over 15 planned for FY26. New product sales are expected to grow about 40% in FY26 and 30% annually long-term.
• Fast Growth Markets: Sales in these strategically redefined markets are projected to grow approximately 45% year-on-year, exceeding $265 million in FY26, and are targeted to reach over $380 million by FY28. This includes significant capacity expansion for Amran/Narayan in Houston, India (adding second shifts), and a new greenfield site in Croatia, expected to ship within four months and potentially grow to $30 million+ in three years.
• Core Business: The remaining core businesses (approximately $550 million in sales) are expected to grow around 3% annually.

Combining these drivers, management comfortably projects a $100 million to $130 million or more increase in revenue for FY26. The company also anticipates continued adjusted operating margin expansion in FY26.

Longer-term, Standex is on track to achieve its fiscal 2028 targets of sales greater than $1.15 billion and adjusted operating margin greater than 23%. The strategic redefinition of fast-growth markets and the significant acquisitions underscore a deliberate pivot towards higher-growth, higher-margin opportunities. Management's confidence is rooted in its proven agility in navigating challenging economic environments, having emerged "a much stronger company" from the COVID downturn.

Risks and Mitigation

While the outlook is robust, Standex faces several risks. General economic softness in Europe and North America, particularly impacting the Engraving and Specialty Solutions segments, remains a concern. The Scientific segment continues to be affected by NIH funding cuts, and while management does not assume a recovery in their FY26 guidance, any improvement would be an upside.

Inflationary pressures on raw materials like rhodium, steel, and other metal commodities, as well as transportation costs, pose a challenge. However, Standex has a proven track record of mitigating these through disciplined pricing, productivity initiatives, and supply chain optimization. Tariffs, particularly on imports from China (representing about 6% of COGS), are managed through its regional operational footprint, which acts as a "natural buffer." The Scientific segment, with higher exposure to China tariffs, expects to mitigate about 70% of the impact through pricing and productivity, with the remainder addressed by longer-term supply chain and product design changes. Cybersecurity threats are also a recognized risk, managed through a multilayered program with board and senior management oversight.

Conclusion

Standex International stands at a pivotal moment, having successfully executed a multi-year strategic transformation that has reshaped its portfolio and accelerated its growth trajectory. The company's deep-rooted "Customer Intimacy" model, combined with its differentiated technological capabilities in specialized industrial components, provides a robust competitive advantage. This is particularly evident in its ability to deliver custom, high-reliability solutions and its rapid prototyping capabilities, which foster enduring partnerships with leading OEMs.

The strategic acquisitions in fiscal year 2025, especially the Amran/Narayan Group, have been truly transformative, significantly expanding Standex's presence in high-growth, high-margin electrical grid, space, and defense markets. These moves, coupled with a robust new product development pipeline, position Standex as an industrial engine now operating at full throttle. Despite ongoing macro challenges and specific segment headwinds, the company's consistent record profitability, disciplined operational execution, and clear forward guidance for substantial revenue growth and margin expansion in fiscal year 2026 and beyond underscore a compelling investment thesis. Standex's commitment to deleveraging while actively pursuing organic and inorganic growth opportunities further strengthens its long-term value proposition, making it a compelling consideration for discerning investors.