Standex International Corporation (NYSE:SXI) Q1 2024 Earnings Call Transcript

Standex International Corporation (NYSE:SXI) Q1 2024 Earnings Call Transcript November 3, 2023

Operator: Good morning, and welcome to the Standex International Fiscal First Quarter 2024 Financial Results Call. All participants will be in listen-only mode. [Operator Instructions] 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: 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 onetime items, EBITDA, which is earnings before interest, taxes, depreciation, and amortization, adjusted EBITDA, which is EBITDA excluding restructuring purchase accounting, acquisition-related expenses, and onetime 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: 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 designed and manufacturers reed relays, test sockets, testing systems for semiconductor and other electronics manufacturing and other switching applications.

With a 50-year history, Sanyu was 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 delivered 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: 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 and 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. 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 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 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 237 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.

David Dunbar: 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.

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Q&A Session

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

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

David Dunbar: Good morning.

Chris Moore: 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 is there any better visibility in either of those markets or you know kind of just how you’re thinking about them?

David Dunbar: Yes, it seems like we’ve been kind of cutting and pasting those comments for about six quarters here, and we are looking at it the both China — both SST and magnetics about six quarters ago the backlog was at a peak and has been kind of gradually coming down and we’ve commented on that nearly every quarter for the last year or so. There’s some destocking, the sort of general industry slowdown, especially consumer goods and appliances, we’ve seen those things. In the last couple of months that we have seen orders they seem to be bought — it’s two months. So it is not a trend make, but they may be bottoming out and firming up, especially in Asia. Sorry, if that, if you’re looking for kind of a recent trend if that’s what you mean.

Chris Moore: Yes. And EMEA anything significant to talk about there?

David Dunbar: I’d say — similar its stabilizing — EMEA’s many declines was not as dramatic as China. We expected much more coming back in Asia in the spring. We didn’t see that. So EMEA, like Germany in particular was it industrial recession starting on your earlier this year and there — that’s I’d say flat.

Ademir Sarcevic: 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: Got it. I appreciate that.

David Dunbar: Let me just add a couple of things on that. The general industry headwind is there. You hear it from other players out there, but our Fast growth vectors sales. Fast growth market sales were up 20%. Our new product sales were up, our new applications sales are up. So we do have — we have growth momentum, and we are still very confident about our positioning in these markets, and as they pick up that will be an accelerator for us.

Chris Moore: Got it. That’s helpful. I think I heard you say, David, that target for fiscal ’24 is — revenue is mid-single digits. Did I get that, right?

David Dunbar: 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: 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: 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: Got it. It’s helpful. I will jump back in line. Thanks, guys.

David Dunbar: Thank you, Chris.

Ademir Sarcevic: Thanks, Chris.

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

Michael Legg: 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: Yes, yes. It’s Ademir, Mike. So yes, I mean I think we are still seeing some inflationary pressures, but frankly, it’s not as strong as it was in a few quarters ago, and specifically, you know we are seeing a bit of a deflation, if you will, because the oceanic freight cost is still at a kind of pre-COVID levels and you know kind of how it exploded during COVID. You know we have developed a pretty sort of playbook around price and productivity, you know few years ago. We continue to abide by the playbook and as you know, as you have seen, we had 10 consecutive quarters of you know highest adjusted operating margin in company history and you know the one of the reasons we are able to do that is because we have a pretty good way of you know managing price and productivity and we expect to be able to continue to do that even in the environment with the — you know with the softer end markets in electronics, we want to make sure we protect the margin, and there will be a combination of price and productivity.

So that will be my take on it.

Michael Legg: 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: Yes. So that project is as you know we’ve reported before that we think — we’ve developed some special technology developed together with ENEL and we are spending this year to complete industrialization to make sure that we are prepared to launch products that target cost and quality. There are two significant things have happened kind of in the external environment to that project. Remember we are talking commercial solar panels here. And in Europe, the market for commercial solar panels has changed quite a bit. There’s estimates there are $80 million Chinese panels in inventory over there. The price for panels about 50% but it was a year ago. So much more competitive end market than it was a year ago. The second external to the project impact is ENEL.

ENEL is government-owned, partly government-owned and the new Italian government appointed a new leader there. They’re in the process of reviewing their entire portfolio of projects. They have been selling some assets. They’ve canceled a couple of renewable projects. So if you add those things into the project we are kind of stepping back and looking at where is the best –what’s the best way to deploy this technology. The market for commercial panels is about 80% of the global market for solar panels. But that other 20% is significant. There’s some potentially attractive niche markets there. So we are stepping back and looking at, is there a better place to introduce this technology in the market, and you know in the next quarter or so we’ll have a clear direction on that.

Michael Legg: Great. Thank you.

Operator: [Operator Instructions] And our next question comes from Gary Prestopino from Barrington Research. Please go ahead.

Gary Prestopino: 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: There’s a little bit of customer overlap, but their customers, they have a high concentration in selling relays into automated test equipment. So if you think of putting in place a manufacturing process for 5G products or even battery management systems or smart grid products these things only to be tested. As they get more complex, there are more testing points and when you think of it is for every testing point you need to relay. So the design of — this test equipment depends on a lot of relays. The Sanyu team has worked with those test and measurement companies to design these pieces of test equipment and developed kind of application knowledge there that’s deeper than our knowledge in the test and measurement.

So we see it as complementary both in the customer base they bring and the application expertise they bring. And we will look at the markets they service. When we talk about our Fast growth markets, smart grid, EVs, 5G, the growth in those markets also pulls through business in this test and measurement equipment, although we don’t report it, but it’s kind of a secondary effect of this growth markets. So it’s, our best product line already the relays. This strengthens our position globally. It brings us new application expertise and some new customers.

Gary Prestopino: Thank you. Can you give us some idea of the revenues? Or you can’t until you actually close it?

David Dunbar: 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 is roughly the size of Minntronix and sales and operating income potential.

Ademir Sarcevic: And I think Gary if I can just add to that. You know it does give us some much better growth potential than what we had with Procon. So we replaced those proceeds in two businesses, a double revenue and operating income in the first year of ownership with a double ROIC — with a double-digit ROIC with a great growth potential over the long term. So we feel pretty good about it.

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

David Dunbar: 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: Would this business have shown an increase in adjusted operating income x-ing out the issues that are in China and Europe in appliances and general industrial?

David Dunbar: Yes.

Gary Prestopino: Okay. All right.

David Dunbar: 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 so your mix down a little bit of margin. But the underlying businesses, the margins are improving.

Ademir Sarcevic: Right. That’s right.

Gary Prestopino: Okay. Thank you.

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

Ross Sparenblek: Hey, good morning, guys.

Ademir Sarcevic: Hey, Ross.

David Dunbar: Good morning, Ross.

Ross Sparenblek: 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: Well, we are seeing — the slowdown we are seeing is in North America and Europe, primarily, as you said China is plugging along and we are in — those China vehicles that operated at more than 400 volts. So there’s — I don’t have a backlog number for you, but the scheduled — what we do with these, we get awarded a platform and we get an annual schedule from the OEM of what they think they’ll need in the quarter. So what we are getting from some of the European and American EVs is kind of a push out of that schedule.

Ross Sparenblek: 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: 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, don’t know if that’s going to be flat or slightly up.

Ademir Sarcevic: And Ross, just as a good reminder as you know our content per EV is three times 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: Yes. No, absolutely. That’s why I’m just — I’m trying to reconcile the $7 million of cost savings actions, I mean come into this quarter you know everything seems pretty steady EVs in the second half. Now, we need to do some restructuring. So it feels like maybe something changed. I understand the mix with the magnetics the volume wasn’t that lower year-over-year. I mean generally, just general industrial PMIs slowing and that’s just kind of the pause or concern for you guys at Electronics?

David Dunbar: 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: Yes. I know, and the cost action electronics, these are the app, you know we might be accelerating some of those actions, because of the market softness. But you know as part of our margin expansion progress you know to hit those targets that we gave, you know we always look at our back office structure, our cost of goods sold components and this is just one — you know one way we are working through to make sure we continue improving our margins and protecting our margins through some of the softness, if you will.

Ross Sparenblek: Okay, yes.

Ademir Sarcevic: But again, what’s really important rather you know touching, we are not touching — we are not touching R&D. Our R&D is almost 3% up — you know 3% of revenue this quarter. So that’s really important that we are still preserving our growth, you know our growth priorities.

Ross Sparenblek: Yes, that’s excellent. [Multiple Speakers] yes.

David Dunbar: No, no, I’m sorry, I’m just going to say, yes. I’d think of the cost reduction is kind of an abundance of caution, not knowing how long this period of softness in general industry will endure. So particular cautious approach — do not affect top line opportunities and…

Ross Sparenblek: 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: 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: Awesome. Thank you, guys.

Ademir Sarcevic: Thanks, Ross.

David Dunbar: Thank you.

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