Standex International Corporation (SXI) Q1 2022 Earnings Call Transcript

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Standex International Corporation (SXI -0.08%)
Q1 2022 Earnings Call
Nov 5, 2021, 8:30 a.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

Good morning and welcome to Standex International Fiscal First Quarter 2022 Conference Call. All participants will be in a listen-only mode. [Operator Instructions] After today's presentation there will be opportunity to ask questions. Please note that this event will be recorded.

I'd like to turn the call over to Mr. Gary Farber of Affinity Growth Advisors. Please go ahead.

Gary Farber -- Affinity Growth Advisors, 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 2.

Matters that Standex management will discuss on today's 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, included 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 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 & Chief Executive Officer

Thank you, Gary. Good morning, and welcome to our fiscal year first quarter 2022 conference call.

I'm very pleased with our first quarter results which reflected solid financial performance and an expanding pipeline of growth opportunities. Standex is a stronger company today as a result of well-executed portfolio moves and a higher level of performance of our businesses. We continue to have a favorable outlook for fiscal 2022, and look forward to further successfully executing on our growth strategy. I want to thank our employees, executive teams, and the Board of Directors for their dedication and support as we further grow our portfolio of high quality businesses.

Now, if everyone can turn to Slide 3; key messages. Revenue and consolidated adjusted operating margin increased significantly year-on-year in fiscal first quarter 2022 as we leveraged positive demand trends and converted new business opportunities from our pipeline. Consolidated organic revenue growth of approximately 17% year-on-year reflected strength at our Electronics and Scientific segment. Electronics revenue increased approximately 37% year-on-year, primarily due to a broad-based geographical recovery with continued solid demand for relays in renewable energy and electric vehicle applications along with positive trends in transportation, appliance, test and measurement and distribution end-markets. Scientific segment revenue increased approximately 29% year-on-year driven by retail pharmacies, clinical laboratory, and academic institution end-markets.

Consolidated adjusted operating margin of 13.4% was a 250 basis point year-on-year increase and represented our second consecutive quarter of delivering our highest consolidated margin in Standex's history. Our results also reinforce the benefit of our continued investment in end-markets that had healthy growth prospects and where we can incorporate our innovative solutions and strong customer value proposition. Sequentially, total company backlog realizable in under one year increased approximately 12%, with strength, particularly at the Electronics, Specialty Solutions and Engraving segments. At the Electronics segment, the new business opportunity pipeline continues to grow and we are seeing positive trends in such end-markets as electric and heavy duty vehicles, defense, industrial and aerospace. In addition, Renco Electronics, which we acquired a little over a year ago is contributing to the growth of our opportunity pipeline as we realized sales synergies from cross-selling opportunities in our expanded customer base.

At the Scientific segment; we are also introducing a new product family, blood bank refrigerators and plasma freezers leveraging our expertise in life sciences and refrigeration to expand into adjacent markets. Execution on our active form of productivity and efficiency initiatives is further adding to our success. We are driving manufacturing and supply chain productivity with actions including new lean programs and mitigating inflationary trends through price realization and value engineering. In addition, our reed switch production and material substitution project at the Electronics segment continues to mitigate some of the material inflation we are seeing, and remains on-track to be substantially complete by the end of fiscal 2020. We continue to have significant financial flexibility to pursue new organic and inorganic growth opportunities given our strong balance sheet and liquidity position and consistent cash flow generation. Ademir will discuss our financial performance in greater detail later in the call.

In regard to our financial outlook, we are off to a solid start to the fiscal year and continue to expect stronger financial performance year-on-year in fiscal 2022. In the second quarter, we expect revenue and operating margin to increase slightly compared to fiscal first quarter 2022 and significantly compared to the year ago quarter. Now, please turn to Slide 4, and I will begin to discuss our segment financial performance beginning with Electronics.

Revenue increased approximately $20.6 million or 37.2% year-on-year, including 36.1% organic growth reflecting continued broad-based geographic and end-market strength, as well as a 1.1% positive contribution from foreign exchange. Operating income increased approximately $9.1 million or 100% year-on-year due to operating leverage associated with revenue growth and productivity initiatives, partially offset by increased raw material and freight costs. Looking ahead, we have a very active new business opportunity funnel for approximately $61 million, which is expected to deliver first year sales of $19 million with positive trends across all major geographic areas and business units, and are well positioned to further capture additional customer business. Electronics backlog realizable under a year sequentially increased approximately $13 million or 11% in fiscal first quarter 2002.

The picture on Slide 4 highlights the success of our customer intimacy sales model in moving up the value stack in a customer's product. In this example, we addressed a customer application in 2015 by supplying a packaged reed switch. This led to the opportunity to develop an entire sensor in 2018 which expanded by incorporating additional functions in 2021. As our collaboration evolved, so does our value provided reinforcing the importance of our strong technical and applications expertise. Regarding our fiscal second quarter 2022 outlook, we expect a slight sequential decrease in Electronics revenue and operating margin, reflecting a lower number of production and shipping days and product mix in the quarter.

Please turn to Slide 5 for a discussion of the Engraving segment. Year-on-year revenue decreased approximately $1.2 million or 3.4% and operating income was nearly $1 million lower or 17% decrease due to the timing of projects and geographic mix, partially offset by productivity actions. Laneway sales of approximately $14.9 million represented a 27% increase year-on-year, including a positive demand outlook for soft trim tools, laser engraving and tool finishing. Sequentially, backlog realizable under a year increased $5.9 million or approximately 44% in fiscal first quarter 2002. The picture highlighted on Slide 5 shows the Tesla Model Y version. Through cross regional collaboration within the segment, and based upon our soft trim proprietary technology, we were able to supply two sets of tools, substantially faster than our competitors production capability, further driving our growth opportunity in the China market.

In fiscal second quarter 2022, we expect a slight sequential increase in Engraving segment revenue and operating margin. This is due to the timing of projects, regional mix and demand for soft trim tooling complemented by the impact of additional productivity initiatives.

Turning to Slide 6, the Scientific segment. Revenue increased approximately $4.9 million or 29.2% year-on-year reflecting positive trends at pharmaceutical channels, clinical laboratories and academic institutions. Operating income increased approximately $0.4 million or 10.6% year-on-year due to volume growth and pricing initiatives, balanced with investments to support future growth opportunities and higher freight costs. Sequentially, backlog realizable under a year increased $1.6 million or approximately 27% in fiscal first quarter in fiscal 2022. Significant orders in the quarter were placed to support replacement of ageing cabinets from retail pharmacy locations, a phenomenon we expect to expand as our installed base grows.

As highlighted on Slide 6, we have applied our growth discipline processes in a two-year development project to leverage our expertise and intellectual property in life sciences and refrigeration into adjacent product categories, and are introducing a new product family; blood bank refrigerators and plasma freezers. This product launch includes two sizes of refrigerators and freezers designed for hospitals, blood banks and other medical, clinical and research facilities. These products comply with all relevant industry requirements, including those from the FDA and the Association for the Advancement of blood biotherapies. In fiscal second quarter 2022 we expect Scientific revenue and operating margin to be similar to our first quarter reflecting continued demand for vaccine storage accompanied by the return of demand from traditional end segments and pricing actions, partially offset by increased freight costs.

Turning to the Engineering Technologies segment on Slide 7. First quarter revenue at $17.6 million was similar year-on-year due to positive trends in the space end-market balanced with the absence of the recently divested Enginetics and the economic impact of COVID-19 on this segments end-markets. Operating income increased approximately $0.4 million, representing a 91.7% increase year-on-year, reflecting product mix and ongoing productivity initiatives offset by a $1.1 million one-time project-related charge. We have an active new business opportunity pipeline in both, space and aviation. In addition, as highlighted on Slide 7, our opportunities are also expanding international defense end-markets. As shown here, we are collaborating with customers to develop bulk head assembly and additional solutions for domestic and international armored vehicles, and I've also captured customer wins to develop nose-cone [Phonetic] adjacent products in next-generation missile program.

Regarding our outlook; in fiscal second quarter 2022, we expect revenue to be sequentially similar with positive commercial aviation and defense trends, partially offset by project timing in the space end-market. However, we expect a significant increase in operating margin due to project mix, productivity initiatives and the absence of the one-time project-related charge which occurred in the first quarter.

Please turn to Slide 8, Specialty Solutions. On a year-on-year basis, Specialty Solutions revenue increased approximately $0.2 million, or slightly under 1%, and operating income decreased $1.1 million or 27.9%. First quarter results reflected end-market recovery, particularly in foodservice markets, offset by the impact of a prior work stoppage which has since been resolved. In addition, we experienced material inflation which we are seeking to recover through pricing actions. We have a very strong backlog position realizable under a year, which sequentially increased $8.7 million or approximately 33% in the first quarter. We also continue to expand our merchandizing product portfolio. Highlighted on Slide 8 is the recently launched Vision Series available in heated, refrigerated and non-refrigerated options. Developed through Standex's GDP plus growth process, this is a ground-up redesign of our core product. The new version of this product has several attractive features including modern styling with a very viewable and accessible product area. The Vision Series can accommodate a significant amount of food product in a highly efficient footprint and is capable of running under a variety of conditions, including high temperature and humidity.

In regard to our second quarter Specialty Solutions outlook, we expect a moderate sequential increase in revenue and operating margin due to execution on our strong backlog position and the absence of the financial impact of the prior work stoppage. We continue to focus on recovering material inflation through pricing actions.

I will now turn the call over to Ademir, who will discuss our financial performance in greater detail.

Ademir Sarcevic -- Chief Financial Officer & Treasurer

Well, thank you, David and good morning, everyone. First, I will provide a few key takeaways from our fiscal first quarter 2022 results which exhibited strength across several important metrics.

Organic revenue growth of approximately 17% year-on-year reflected solid demand trends at Electronics and Scientific segments. In addition, we continue to see overall healthy order trends across the company as we enter our fiscal second quarter. From a margin standpoint, adjusted consolidating operating margin of 13.4% increased both, sequentially and year-on-year, and represented our second consecutive quarter of highest margin in Standex's history. The strong operating performance reflects several factors including effectively leveraging volume growth, realizing the benefits of price and productivity actions, and the positive impact of our prior strategic portfolio moves. Also, our financial strength is supported by consistent free cash flow generation, which increased year-on-year.

In summary, we are entering our fiscal second quarter with positive order trends, active funnel of productivity initiatives, and an expectation for continued solid cash generation in fiscal 2022, all further adding to our strong financial position.

Now let's turn to Slide 9; first quarter 2022 income statement summary. On a consolidated basis total revenue increased 16.1% year-on-year from $151.3 million in fiscal first quarter 2021 to $175.6 million this quarter. This revenue increase primarily reflected strong organic growth at the Electronics and Scientific segments, and a positive contribution from foreign exchange. Revenue growth was partially offset by the divestiture of Enginetics business which occurred in the third quarter of fiscal 2021 and trends at the Engraving segment, which reflect the timing of projects. Enginetics contributed approximately $3 million in revenue in the fiscal first quarter of 2021.

On a year-on-year basis, our adjusted operating margin increased 250 basis points to 13.4%, reflecting operating leverage associated with revenue growth and the readout of price and productivity actions. This was partially offset by a $1.1 million one-time project related charge at Engineering Technologies segment, and the financial impact of work stoppage in the Specialty Solutions segment which has since been resolved. As expected, our tax rate increased to 25% compared to 22% in the first quarter of 2021. We expect that second quarter tax rate will be similar to the first quarter rate, and that the overall tax rate for fiscal 2022 to be in the 24% range. Adjusted earnings per share was $1.34 in the first quarter of 2022 compared to $0.96 a year ago.

Now, please turn to Slide 10; first quarter 2022 free cash flow. We generated free cash flow of approximately $8.1 million in the first quarter of 2022 compared to free cash flow of $4.4 million in the first quarter of 2021. We continue to successfully execute on our financial initiative with working capital turns of 5.6 times, representing a 33% increase year-on-year.

Next, please turn to Slide 11 for a summary of Standex's capitalization structure and liquidity statistics which remain strong. Standex had net debt of $68.9 million at the end of September compared to $63.1 million at the end of June, reflecting free cash flow of approximately $8.1 million offset by $9.5 million of stock repurchases along with dividends and changes in foreign exchange. Our net debt for fiscal first quarter of 2022 consisted primarily of long-term debt of $199.6 million. Cash and cash equivalents totaled $130.7 million, with approximately $102 million held by foreign subs. We had approximately $267 million of available liquidity at the end of September. Our net debt to adjusted EBITDA leverage ratio was approximately 0.58 times, with a net debt to total capital ratio of 11.8%. We expect that we will repatriate approximately $35 million in cash in fiscal 2022.

From a capital allocation perspective, we repurchased approximately 97,000 shares for $9.5 million in fiscal first quarter 2022, with approximately $12.5 million remaining on our current repurchase authorization. We also declared our 229th consecutive quarterly cash dividend on October 28th of $0.96 per share, approximately 8% increase over the prior four quarterly dividend payments. Finally, we expect capital expenditures of approximately $25 million to $30 million in fiscal 2022.

I will now turn the call over to David for closing comments.

David Dunbar -- Chairman, President & Chief Executive Officer

Thank you, Ademir. If everyone can please turn to Slide 12 for key takeaways.

In fiscal '22, we expect stronger financial performance year-on-year as we execute on the positive end-market trends we are seeing, and further drive ongoing productivity initiatives across our significantly strengthened portfolio. Underpinning this outlook is a very active pipeline of growth opportunities with a positive trajectory in our new business opportunity funnel and new product introductions. We are leveraging the significant number of growth opportunities in front of us through ongoing manufacturing and supply chain productivity actions including initiatives such as new lean programs and mitigating inflationary trends through price realization and cost consolidation efforts.

Our strong balance sheet and liquidity position and consistent free cash flow generation position us very well to pursue both, organic and inorganic growth opportunities, and we remain opportunistic and disciplined in allocating capital. As highlighted by some of the order trends discussed today, our approach is resonating with customers reflecting the strength of our deep technical and applications expertise and innovative solutions and reinforcing the value of our high quality businesses.

Operator, I will now open the line for questions.

Questions and Answers:

Operator

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

Chris Moore -- CJS Securities -- Analyst

Hey, good morning, guys. Thanks for taking a few questions.

David Dunbar -- Chairman, President & Chief Executive Officer

Good morning, Chris.

Chris Moore -- CJS Securities -- Analyst

Good morning. Another excellent quarter. It seems like most of the conversation about earnings calls this quarter are focused on supply chain, inflation and labor. Any thoughts how Standex is able to kind of avoid that as a focus?

David Dunbar -- Chairman, President & Chief Executive Officer

Yes, there is a couple of important perspectives there, Chris. You know, a year ago, two years ago how much we were struggling with Rhodium in the Electronics business, and as the team got their arms around that, they completely changed their -- the cost management of the Rhodium, and more importantly, the pricing process. So, they used to have a lot of 12-month pricing agreements, they went to monthly pricing; all quotes were reviewed by management. So that really started last -- by last November, the last 12 months agreement had sunsetted, and you've seen the results have been very effective in managing the price. While we have been communicating that across all the businesses of Standex, and it's really involved into all of our businesses to be a little more bold I guess of our passing price through, whether it's from freight or material. So, we're seeing that margin play. It's never easy to have those discussions with customers; I don't want to say that it's easy, but we've really improved our practice in the last year about that.

The second thing on supply chain; you know, most of our businesses, the supply chain in the -- we source in a region for plants in a region, for customers in the region. We have a couple of businesses though that are dependent on the global supply chain; Scientific and Hydraulics. And you saw the Scientific results, they are doing a very nice job managing through those challenges, managing international freight. So I think it's limited to those two businesses, and that's why at a corporate level, you haven't seen a hit as much by those issues.

Chris Moore -- CJS Securities -- Analyst

Got it. Very helpful. Let me just switch to Electronics; obviously, you know, such an important component of revenue and profitability. And maybe you could talk a little bit more about visibility in this specific segment; any feel for kind of distributor inventory levels? Just kind of any additional thoughts in terms of what you're seeing there?

David Dunbar -- Chairman, President & Chief Executive Officer

Well, we have -- you know, we serve a wide variety of end-markets here. And our sales to distributors is about 20% of the sales of the entire business, and distributor levels have been, kind of, growing consistent with the rest of the business; so we haven't seen any dramatic swing in the mix of our sales by channel. Some people have asked us, are you seeing any excessive buying as customers are trying to get ahead of potential supply issues? There may be some of that in there; however, we see growth in our MBOs [Phonetic], our new applications are ramping up quickly, growth in relay product. So, the overall mix of the business still remains good. And in fact, in October, we just -- sales remained strong, and our book-to-bill ratio in October was 1.2. So, whatever is going on in distribution, it's not enough to dampen the overall demand we're seeing in that market and that business.

Chris Moore -- CJS Securities -- Analyst

Got it. I appreciate that. Last one for me. Just trying to better understand the end-markets where you might still be in a little bit of catch-up mode from COVID, and could provide a tailwind at some point in time. Any more thoughts there?

David Dunbar -- Chairman, President & Chief Executive Officer

Yes, let's see here. So, we have thought all along that the slowest and the latest the catch-up would be the Food Service Equipment markets, and we had thought to-date by next quarter -- starting calendar '22 those markets would be caught up. But I think Procon and Federal [Phonetic] be almost there; got back to pre-COVID levels. I think this quarter the aviation market -- our shipments into aviation will be back to pre-COVID levels this quarter. Everything else I think is at or above pre-COVID levels.

Ademir Sarcevic -- Chief Financial Officer & Treasurer

Yes, Chris. I agree. I think for the most part we're already there. And to David's point, we are seeing really good order rates across our businesses across the market, which is a positive sign for sure.

Chris Moore -- CJS Securities -- Analyst

Fantastic. I'll jump back in line. Thanks, guys.

David Dunbar -- Chairman, President & Chief Executive Officer

Thank you.

Operator

Thank you. The next question comes from Chris Howe with Barrington Research. Please go ahead.

Chris Howe -- Barrington Research -- Analyst

Good morning, David. Good morning, Ademir.

David Dunbar -- Chairman, President & Chief Executive Officer

Good morning, Chris.

Chris Howe -- Barrington Research -- Analyst

I guess starting with the Scientific segments; you continue to do well in that segment coming ahead of expectations here. We know we have the tougher comparisons going against last year but you mentioned continuing demand for vaccine storage, as well as some other initiatives there. Can you just talk about the puts and takes that led to the quarter and your outlook?

David Dunbar -- Chairman, President & Chief Executive Officer

Yes, a couple of positive things in the quarter. I have to say, the sales; if you were to look at our internal discussions a quarter or so ago, the business exceeded our internal estimate, a couple of things happened in the quarter. We are seeing continued orders for COVID vaccine storage, not as great as last winter, but we're seeing the orders [Phonetic] come through the distributors that serve small clinics, physicians' offices, and with the approval of vaccinations for children aged 5 to 11, most of those vaccines will be given in doctors' offices, and most doctors' offices don't have a storage unit. So, we do think there's kind of a steady -- probably steady runway of sales through that channel. Second thing that really is important for us is, we received quite a large order for -- about a six to eight months period to deliver cabinets to replace units that were installed four or five years ago. And as our installed base increases and there are more cabinets around the country, these cabinets have four to seven years of service life, and we expect to see more sustained kind of replacement business. And so that was a factor too.

Chris Howe -- Barrington Research -- Analyst

Okay. That's very interesting; certainly some positive dynamics there. You finished the quarter at about 20.9% operating margin. You've kind of hinted that it's around 20% continuing to make investments along that segments. How should we think about margin or am I too far in the --

David Dunbar -- Chairman, President & Chief Executive Officer

I'd say we continue to kind of peg people's expectations, kind of low 20% margins in this business; quarter-by-quarter, of course, there is some variation. This last quarter -- this is a business that is facing headwinds in their supply chain, the cost of freight from Asia, I mean, gosh -- couple of year and a half ago, this $4,000 container at $15,000, even $20,000 at a spot price; so yes, they're dealing with that, they are passing price through. We're also making investment, we had -- about three, four years ago, we had one or two engineers in this business, we've got a team of 15 now that are working in active pipeline of new products. And on this page, you see our new products, the blood bank and plasma freezers; this is a brand new market segment for us, it's a very attractive segment. This is a more than two-year development, and I'm very proud of the teams, I'm very excited about this; and in quarters passed we've referenced the fact that we're developing new products and the release of these new products could get us into new segments to provide the next leg of growth for this business. So, this is just the beginning. And we have blood bank and blood plasma freezers; it's another gear that this business can shift into.

Chris Howe -- Barrington Research -- Analyst

Okay. And my last question, just following up on the previous questions about the supply chain. Certainly this is a fantastic quarter in my view, given the challenges that we all faced with freights and supply chain delays. How would you assess how you balance optimism over caution in this environment? Certainly, we'd like this trend to continue from Q1 versus expectations. And I guess more specifically, is there a way to put a number on the challenges that you had to offset in the quarter?

David Dunbar -- Chairman, President & Chief Executive Officer

Yes, let me take a stab at that and Ademir can correct everything I get wrong. How we balance optimism versus caution, our internal targets are always higher than what we communicate. I think as we get better at forecasting, and -- you know, we just implemented a new consolidation system across our businesses; we have much better visibility to the cost structure month-by-month with all of our businesses. So we think we're tightening up our ability to forecast, and overtime, maybe that buffer between our internal estimates and what we communicate externally will get narrower. On the headwinds we faced in the quarter, yes -- our estimate that we rolled up from our businesses supply chain issues; there was maybe $4 million across the corporation of shipments that we couldn't get because we're missing a component or there were some supply chain issues. So, that maybe gives you an idea of the order of magnitude across our business.

And I've got Ademir, who can fill them in.

Ademir Sarcevic -- Chief Financial Officer & Treasurer

Actually, I've got nothing to correct. This is the good way to summarize it. So the best thing, we expect we're going to continue to see supply chain issues like in all other companies, and -- but I think one point that we want to make sure doesn't get lost; we are really turning the corner and becoming an operating company where we can manage our costs really, really well and we have productivity initiatives in place. In order to David's point, we have a forecast A, B and C; and we know how to manage or try to manage against in a different [indecipherable] that the market can throw at us. So, we are fighting on the banks again.

Chris Howe -- Barrington Research -- Analyst

Okay, great. Thanks for taking my questions. Appreciate it.

David Dunbar -- Chairman, President & Chief Executive Officer

Yes. Thank you, Chris.

Operator

Thank you. The next question is coming from Chris McGinnis from Sidoti & Company. Please go ahead.

Chris McGinnis -- Sidoti & Company -- Analyst

Hey, good morning. Thanks for taking my questions, and congrats on -- on obviously, a really strong quarter. David, would you mind just -- maybe talking a little bit about -- you know, you made some management changes last quarter with Flavio. And can you just talk a little bit about maybe how they are progressing in the new roles? If you don't mind, spend a couple minutes on that. Thanks.

David Dunbar -- Chairman, President & Chief Executive Officer

Yes. So the changes we highlighted last quarter, we're moving Flavio in this innovation and technology growth which I'd actually wanted to do a couple of years ago but we have so much portfolio management we had to do there it just wasn't the right time. So, Flavio's primary focus is hitting some key deadlines on that solar energy project, we referred to last quarter, which in the next couple of months are some important milestones there. He has started a process with all the businesses to develop a pipeline of technology ideas that will now start moving through the pipeline for evaluation, and maybe, eventually to new product development. Most of our new product development has come from our current products and current customers, and sort of the next step for those things; so very customer input focus. Flavio is bringing a technology view of how new technologies may be threats or opportunities for us. So I'd say he is off to a good start.

And just as we are now beginning to communicate, we have new products coming out of our pipeline. In the coming quarters, I'd expect that we'll be coming and communicating output of that technology role. And as Flavio has been in this role, we moved Jim Hooven [Phonetic] from the Corporate Ops role to lead the Engraving business. And it's always -- I guess, interesting and fun and rewarding to see what happens when there is a management change in an organization because everybody brings a different set of skills and different perspective. I'll say the transition has gone very smoothly. I think Jim and the Engraving team are working together very well, and Jim brings a deep toolkit of operational discipline and operational practices that are being applied across the business to improve forecasting, improve labor management. So, we're very pleased with the early returns on both of those moves.

Chris McGinnis -- Sidoti & Company -- Analyst

Great. Just given the strength of our balance sheet, would you mind commenting on the M&A environment as well? Thanks.

David Dunbar -- Chairman, President & Chief Executive Officer

Yes. We have an active pipeline, we're working it pretty hard, and yes, there is no saying I mean quoting, it's maybe a cliche, but you have to kiss a lot of frogs to find a handsome prince, and we are -- I guess, I'm the Chief Frog Kisser -- Chief Frog-Kissing Officer [Phonetic]. We're -- we are working a lot of opportunities, and we -- I think we made 11 acquisitions since I've been here, many more good ones and bad ones; and on the whole we're very pleased with the discipline we've created in identifying businesses that meet our strategic criteria, valuing them fairly, paying a fair price, and then getting value out of them. So, we apply all those same principles as we evaluate these opportunities.

And I have -- I guess the final point to make Chris is, in recent years, I have mentioned this, I should maybe restate it. We are working to get larger businesses into our pipeline; as we have more track record, especially in Electronics of integrating businesses, we think we can start to bring in more sales in larger businesses at the time where our typical acquisition were family owned businesses that were $10 million, $15 million, $20 million, $30 million in sales. We're widening the aperture of our funnel.

Chris McGinnis -- Sidoti & Company -- Analyst

I appreciate that. And then, just one last question. Obviously, you've really handled the external environment pretty well in terms of the inflationary environment, supply chain. What most concerns you when you -- you looked out of the -- kind of the global economy versus your business? And I guess, what are your concerns, David? Thanks.

David Dunbar -- Chairman, President & Chief Executive Officer

Well, I guess my concern -- I may answer a slightly different question then you asked. My main concern is, our businesses are in a great situation now. We have good positions in our markets, we have a great portfolio, you see the performance of this portfolio is reading through now; we have a collection of really good businesses. We are pivoting a lot of our attention to identifying new opportunities, developing new products, bringing new technology to market, and I want to use this opportunity we have now to invest those funds wisely to provide the next leg of growth for the company in the coming years. So, I guess what keeps me awake at night is, are we going hard enough, are we fast enough, are we putting in place the discipline and really being smart about investing for growth.

Chris McGinnis -- Sidoti & Company -- Analyst

Great. I appreciate that. Thanks, again, for taking my questions. Congrats on the quarter and good luck in Q2.

David Dunbar -- Chairman, President & Chief Executive Officer

Thank you.

Ademir Sarcevic -- Chief Financial Officer & Treasurer

Thank you.

Operator

[Operator Instructions] At this time we have no further questions. Now, I'd like to turn the conference back over to Mr. David Dunbar for closing remarks. Please go ahead.

David Dunbar -- Chairman, President & Chief Executive Officer

All right, thank you. Thank you to all for your interest in Standex. I just want to say, again, thank you and a great appreciation to the employees of Standex, we're managing very well through a difficult environment. And we look forward to reporting back to you three months from now on our second quarter. Thank you.

Operator

[Operator Closing Remarks]

Duration: 39 minutes

Call participants:

Gary Farber -- Affinity Growth Advisors, Investor Relations

David Dunbar -- Chairman, President & Chief Executive Officer

Ademir Sarcevic -- Chief Financial Officer & Treasurer

Chris Moore -- CJS Securities -- Analyst

Chris Howe -- Barrington Research -- Analyst

Chris McGinnis -- Sidoti & Company -- Analyst

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