Executive Summary / Key Takeaways

• Standex International is undergoing a significant strategic transformation, pivoting towards high-growth, high-margin industrial markets like the electrical grid, space, and defense, driven by secular tailwinds and strategic acquisitions.
• The company's robust new product development engine is a key growth driver, with new product sales expected to contribute approximately 300 basis points of incremental sales growth in fiscal year 2026.
• Strategic acquisitions, particularly the Amran/Narayan Group (now Standex Electronics Grid), have doubled sales in fast-growth markets, which are projected to exceed $270 million in fiscal year 2026, growing over 45% year-on-year.
• Operational discipline and a customer intimacy model, supported by regional manufacturing, enable Standex to maintain strong profitability and mitigate risks from tariffs and inflation, as evidenced by a Q1 FY26 adjusted operating margin of 19.1%.
• With a net leverage ratio reduced to 2.4x in Q1 FY26 and ambitious fiscal year 2028 targets of over $1.15 billion in sales and greater than 23% adjusted operating margin, Standex is positioned for sustained, above-market growth.

A Diversified Industrial Powerhouse Forging a New Growth Path

Standex International Corporation, founded in 1955 and headquartered in Salem, New Hampshire, has a long-standing history as a diversified industrial manufacturer. The company operates across five broad business segments: Electronics, Engineering Technologies, Scientific, Engraving, and Specialty Solutions, with a global footprint spanning the United States, Europe, Canada, Japan, Singapore, Mexico, Turkey, India, and China. Standex's enduring commitment to shareholder returns is underscored by its record of paying quarterly cash dividends without interruption since November 1964.

The company is currently in the midst of a strategic transformation, shifting its focus towards "fast growth markets" and emphasizing enhanced organic growth. This strategic pivot, guided by the "Standex Value Creation System," aims to build more profitable, focused industrial platforms. This methodology employs a Balanced Performance Plan, Growth Disciplines, Operational Excellence, and Talent Management to achieve its goals. The company's customer intimacy business model, characterized by regional operations where over 85% of its products are manufactured and sold within the same region, serves as a natural buffer against global trade disruptions and supply chain volatility.

Technological Edge and Innovation Driving Future Performance

Standex's competitive advantage is significantly bolstered by its differentiated technology and a robust commitment to innovation, which are foundational to its strategy and market positioning. The company's R&D spending has been ramping up since 2020, with a target to exceed 3% of sales by fiscal year 2028, fueling a continuous stream of new product releases.

In the Electronics segment, Standex's core technology in instrument transformers and sensors is critical for modern infrastructure. The recently rebranded Standex Electronics Grid (formerly Amran/Narayan Group) is a leading manufacturer of low and medium voltage instrument transformers. These custom products are specifically designed in partnership with OEMs for electrical grid applications, offering high reliability and efficiency. This technology is a cornerstone for robust end-market demand in data centers, electrification, and grid modernization. The Grid business has demonstrated strong profitability, with margins in the mid-to-upper 30s pre-COVID, now consistently in the 40s, significantly contributing to the segment's overall margin expansion. Furthermore, the Edge (magnetics) and Detect (switches and sensors) businesses contribute power conversion and management products, as well as proximity and level sensing devices. Two new products released in Q1 FY26 for test and measurement applications, driven by the needs of new generation chips and electric vehicles, highlight ongoing innovation in this critical area.

The Engineering Technologies segment, encompassing Spincraft and the acquired McStarlite, specializes in net and near-net formed customized solutions. McStarlite's expertise in complex sheet metal aerospace components, including cold deep draw and bulge-formed aviation components like lipskins and nozzles, provides enhanced manufacturing efficiency. This technology is vital for aviation, aerospace, defense, and space markets, expanding the addressable market by over $300 million and enabling participation in wide-body programs for major players like Boeing (BA) and Airbus (EADSY). The synergy between Spincraft and McStarlite allows for the design of new, more efficient parts, strengthening Standex's competitive moat in specialized, high-performance components.

In the Scientific segment, new product development, such as the ultra-low temperature freezer, is expanding the business into its largest end market, offering advanced temperature-controlled equipment for medical, scientific, pharmaceutical, biotech, and industrial applications. The Engraving segment leverages proprietary know-how in mold texturing and niche production of parts, securing source awards from major OEMs for specialized soft trim components. These technological differentiators translate into tangible benefits for investors, contributing to higher average selling prices, lower manufacturing costs, improved margins, and a stronger market position in demanding applications.

Competitive Landscape and Strategic Positioning

Standex International operates in a competitive landscape characterized by both large, diversified industrial conglomerates and smaller, specialized niche players. Key publicly traded competitors include Emerson Electric Co. (EMR), Parker-Hannifin Corporation (PH), Amphenol Corporation (APH), and Honeywell International Inc. (HON).

Standex's competitive strategy is rooted in its niche specialization and customer intimacy model. While larger rivals like Emerson and Honeywell offer broader automation and industrial solutions, Standex differentiates itself through highly customized, high-reliability products. For instance, in electronics, Standex's instrument transformers and sensors offer tailored solutions for critical infrastructure, contrasting with Amphenol's more extensive but often standardized connector offerings. Standex's TTM Gross Profit Margin of 39.54% indicates a strong ability to manage costs and pricing in its specialized markets, though larger competitors may exhibit higher overall revenue growth and profitability due to their sheer scale and diversified portfolios.

In Engineering Technologies, Standex's net and near-net formed solutions provide efficiency advantages in manufacturing, allowing it to compete effectively against Parker-Hannifin's broader motion and control technologies. While Parker-Hannifin benefits from extensive distribution networks, Standex's focus on application-specific designs for aerospace and defense can offer superior durability and performance in harsh conditions. The Engraving segment, despite facing demand fluctuations in the automotive market, benefits from fewer, mostly smaller regional competitors, allowing Standex to leverage its proprietary processes for niche production.

Standex's vulnerabilities stem primarily from its smaller scale compared to industrial giants, which can lead to higher operating costs and less leverage in global supply chains. Additionally, while its R&D is ramping up, technological gaps in broader digital integration could pose challenges against competitors like Honeywell, which are aggressively pursuing digital partnerships. However, high capital requirements and stringent regulatory approvals in many of Standex's industries act as significant barriers to entry, protecting its specialized market positions. The company's regional manufacturing strategy also provides a buffer against external shocks, a critical advantage in an uncertain global trade environment.

Financial Performance Reflecting Strategic Momentum

Standex's financial performance in the first quarter of fiscal year 2026 (ended September 30, 2025) demonstrates the tangible impact of its strategic transformation. Net sales increased 27.6% year-over-year to $217.43 million, with recent acquisitions contributing 26.6% and organic growth adding 0.6%. This growth was accompanied by a gross profit margin expansion to 41.6% from 41.1% in the prior year, driven by portfolio evolution, pricing discipline, and productivity actions. Income from operations rose 23% year-over-year to $29.63 million, reflecting contributions from acquisitions and productivity initiatives, partially offset by increased administrative and R&D expenses.

The Electronics segment was a standout, with revenue surging 42.2% year-over-year, largely due to the Amran/Narayan Group acquisition. Its adjusted operating margin expanded by 510 basis points to 28.8%, underscoring the high-margin nature of the electrical grid business. Engineering Technologies also saw robust sales growth of 45.6%, with the McStarlite acquisition and strong organic demand in space and aviation markets contributing significantly. However, its operating margin saw a slight decrease due to purchase accounting expenses and project timing.

For the full fiscal year 2025, Standex achieved record profitability, with adjusted gross margin reaching 41.7% (up 230 basis points year-over-year) and adjusted operating margin expanding to 19.1% (up 210 basis points). Adjusted earnings per share increased 5.8% to a record $7.98. The company generated $69.59 million in operating cash flow and $41.69 million in free cash flow for FY25.

Liquidity and capital management remain a priority. Standex successfully reduced its net leverage ratio to 2.4x in Q1 FY26, down from 2.6x in Q4 FY25, by paying down approximately $8 million of debt. The company maintains approximately $198 million in available liquidity and expects to further reduce its leverage ratio through fiscal year 2026. Capital expenditures for fiscal year 2026 are projected between $33 million and $38 million, supporting ongoing growth initiatives.

Outlook and Strategic Trajectory

Standex is raising its fiscal year 2026 sales outlook, now expecting revenue to grow by over $110 million (an increase of $10 million from previous guidance) compared to fiscal year 2025. This optimistic forecast is underpinned by several key drivers:

• New Product Sales: Expected to contribute approximately 300 basis points of incremental sales growth in FY26, with over 15 new products planned for release. New product sales grew over 35% to approximately $14.5 million in Q1 FY26 and are projected to grow over 40% to approximately $78 million for the full fiscal year.
• Fast-Growth Markets: Sales in these markets are anticipated to grow over 45% year-on-year, exceeding $270 million in FY26. The Standex Electronics Grid (Amran/Narayan Group) is a significant contributor, expected to grow more than 20% year-on-year in FY26, driven by robust demand in data centers, electrification, and grid modernization.
• Geographic Expansion: Operations have commenced in Croatia and Mexico, with the Croatia site specifically designed to serve European customers and support growing power requirements for data centers and grid expansion. The Croatia site is expected to reach $60 million in sales within 3-5 years.

For the second quarter of fiscal year 2026, management anticipates slightly higher sequential revenue, driven by increased contributions from fast-growth end markets, new product sales, and pricing initiatives. Adjusted operating margin is expected to be slightly lower to similar, reflecting increased investments in growth and a less favorable product mix.

Standex remains firmly on track to achieve its ambitious fiscal year 2028 long-term targets: sales greater than $1.15 billion, an adjusted operating margin greater than 23%, and a return on invested capital (ROIC) greater than 15.5%. These targets are supported by the continued ramp-up of R&D investments and a commitment to approximately 100% free cash flow conversion of GAAP net income.

Risks and Mitigating Factors

While the outlook is positive, Standex acknowledges several risks. Unforeseen economic, global trade, or tariff-related disruptions could impact performance. The company's regional presence and disciplined approach to pricing and productivity are key mitigating factors against tariffs, with management noting that most of its supply chain is strategically located to service regional demand. For instance, while approximately 4% of its cost of goods sold comes from India, and some Scientific segment products are sourced from China, Standex is implementing pricing, productivity, and alternative sourcing strategies to manage these impacts.

The Scientific segment faces specific challenges from lower demand at academic and research institutions due to NIH funding cuts. Management's current outlook does not assume a significant pickup in this area, but the introduction of new products like the ultra-low temperature freezer aims to diversify revenue streams. Softness in general automotive end markets has impacted the Engraving segment, but restructuring actions, including the closure of four sites, are projected to yield approximately $5 million in annualized cost savings, with realization expected in the second half of fiscal year 2026.

Conclusion

Standex International is executing a compelling strategic transformation, shifting its portfolio towards high-growth, high-margin industrial markets. The company's foundational strengths in specialized technology, a customer-centric business model, and disciplined operational execution are driving robust financial performance, as evidenced by strong Q1 FY26 results and an upward revision of its fiscal year 2026 sales outlook. With a clear roadmap for new product development, aggressive expansion in fast-growth markets like the electrical grid, and a commitment to deleveraging, Standex is building a durable engine for sustained growth. While macroeconomic uncertainties and specific segment challenges persist, the company's proven agility and strategic investments position it favorably to achieve its ambitious fiscal year 2028 targets, making it a compelling consideration for discerning investors seeking exposure to a transforming industrial leader.