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Date

Thursday, Jan. 29, 2026 at 8:30 a.m. ET

Call participants

  • Chairman, President, and Chief Executive Officer — David Dunbar
  • Chief Financial Officer and Treasurer — Ademir Sarcevic

Takeaways

  • Total revenue -- $221.3 million, up 16.6% year-on-year, with 6.4% organic growth, 9.4% acquisition benefit, and 0.8% foreign currency impact.
  • Adjusted gross margin -- 42.1%, increasing by 120 basis points year-on-year.
  • Adjusted operating margin -- 19%, up 30 basis points year-on-year.
  • Adjusted EPS -- $2.08, an increase of 8.9% year-on-year.
  • Free cash flow -- $13 million, up from $2.2 million the previous year, as net cash provided by operating activities grew to $20.7 million.
  • Debt metrics -- $10 million debt paid down in the quarter, net leverage ratio at 2.3x, with $437.7 million net debt, and available liquidity of $213 million.
  • Electronics segment revenue -- $115.7 million, up 20.6%, aided by 11.1% organic growth, 9.1% from acquisitions, and 0.4% currency benefit.
  • Electronics segment operating margin -- 28.8%, up 120 basis points year-on-year, with a book-to-bill ratio of 1.08, and orders around $125 million.
  • Engineering Technologies segment revenue -- $30.6 million, up 35.3%, driven primarily by a 33.4% acquisition benefit and 1.2% organic growth.
  • Engineering Technologies segment operating margin -- 18.9%, an increase of 260 basis points year-on-year, mainly due to volume.
  • Scientific segment revenue -- $19.5 million, up 5.5%, as an 8.1% acquisition benefit offset a 2.6% organic decline due to lower demand from institutions impacted by NIH reductions.
  • Scientific segment operating margin -- 24.2%, falling 270 basis points year-on-year due to organic decline and unfavorable mix.
  • Engraving segment revenue -- $35.7 million, up 13.6%, with 10.3% organic growth attributable to improved demand in Europe and North America, and a 3.3% currency benefit.
  • Engraving segment operating margin -- 19.2%, a 490 basis-point year-on-year increase, driven by higher sales and benefits from restructuring actions.
  • Specialty Solutions segment revenue -- $19.8 million, declining 7.2% year-on-year, with operating margin dropping 600 basis points to 10.7% due to difficult North American end markets.
  • New product sales -- Grew 13% to $16.3 million, with more than 15 new products slated for launch in fiscal 2026; year-to-date launches total 9 products.
  • Sales to fast-growth markets -- $61 million, comprising 28% of total sales, and projected to exceed $270 million in fiscal 2026, with about half from the grid business.
  • Order intake -- Record $231 million in quarterly orders, with company-wide book-to-bill at 1.04, and Electronics segment book-to-bill at 1.08.
  • Dividend -- 246th consecutive quarterly dividend of $0.34 per share, marking a 6.3% increase year-on-year.
  • Fiscal 2026 guidance -- Reiterated, with anticipated revenue growth over $110 million from 2025, led by fast-growth end market sales, new product adoption, and full-year acquisition contributions.
  • Capital expenditures -- Guidance set between $33 million and $38 million.
  • Amran Narayan minority interest -- $17.98 million redeemable noncontrolling interest adjustment recognized, as the 10% stake in Narayan remains owned by prior holders; accounting revaluation based on a trailing 12x EBITDA multiple was required due to lack of Indian government share-transfer approval.
  • Capacity expansion update -- Electronics (mainly Amran Narayan) capacity has increased 50% since acquisition, with Croatia, Mexico, Houston, and further Indian expansions expected to more than double capacity over 3-5 years.

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Risks

  • Specialty Solutions margin decline -- CFO Sarcevic said, "segment and we do expect those margins to improve this quarter as the general market conditions improve. But it's market driven."
  • Scientific segment demand impact -- CFO Sarcevic reported a 2.6% organic revenue decline "primarily due to lower demand from academic and research institutions affected by NIH cuts," with margin decreasing 270 basis points.

Summary

Standex International Corporation (SXI 2.51%) posted record quarterly order intake and robust top-line gains, reporting a 16.6% revenue increase driven by both organic expansion and recent acquisitions. The Electronics segment delivered 11.1% organic growth, with grid-related products accelerating in both volume and margin as capacity investments progress globally. Adjusted gross and operating margins expanded, while new product initiatives and penetration into fast-growth markets contributed meaningfully to results and future guidance.

  • Management highlighted that more than half of fast-growth market sales are attributable to grid solutions, with the remainder from defense, space, EV, and renewables.
  • Sales into academic and scientific markets were impacted by external funding constraints, notably NIH cuts, resulting in an organic revenue decline for the Scientific segment.
  • The minority interest liability for Narayan was increased due to an accounting revaluation, as Indian government approval for a share-based transfer remains unavailable, requiring cash settlement under the original purchase agreement.
  • Standex expects its electronics segment's near-term profitability to remain consistent, as upfront costs for capacity expansion in Croatia, Mexico, and Houston are incurred to support long-term growth.
  • The Engraving segment realized significant margin improvement, supported by both increased demand and prior restructuring activities, but management expressed continued caution regarding broader auto/engraving market conditions.

Industry glossary

  • Book-to-bill ratio: A metric comparing the value of incoming orders (bookings) to completed sales (billings) within a period, used to gauge demand trends and future revenue visibility, especially in long-cycle industrial businesses.
  • Fast-growth markets: Internal classification for rapidly expanding end-use sectors such as grid modernization, space commercialization, defense, EV, and renewables targeted for outsized sales and investment focus.
  • NIH: The U.S. National Institutes of Health, a key funder of scientific research; changes in its funding directly impact demand for scientific and laboratory equipment.
  • Amran Narayan: Refers to the grid-focused transformer businesses acquired by Standex, with Amran (U.S.) and Narayan (India) operating as key growth drivers within the Electronics segment.

Full Conference Call Transcript

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 Second Quarter 2026 Conference Call. I am very pleased to present results that demonstrate our years-long efforts to build a growth engine at Standex are now reading through in top line results. We recorded 6.4% organic growth and a book-to-bill ratio of 1.04, led by our Electronics segment, which grew 11.1% organically with a book-to-bill ratio of 1.08. The contributions from sales into fast growth markets, new product sales and the improving general industrial markets are now evident in our results. As such, the company is well positioned to deliver mid- to high-single-digit organic growth in the fiscal third quarter and remains on track to the fiscal 2026 sales outlook.

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 second quarter 2026 results. Now let's look at the results beginning on Slide 3. In the second quarter, sales increased 16.6% year-on-year. Contributing to this growth were new product sales and sales into fast-growth markets. New product sales grew approximately 13% to $16.3 million. Sales into fast-growth markets were approximately $61 million or 28% of total sales. These results have been literally years in the making as we began our focus on new product development in fiscal year 2021 by increasing our R&D spending from 1% of sales to the current 3%.

In the same year, we began directing our efforts to win more applications with customers serving fast growth markets. In our August earnings call, we said that we believe both efforts were reaching an inflection point and would deliver organic growth this fiscal year. These results show they are paying off. Orders of approximately $231 million were the highest quarterly intake ever, showing our growth engine continues to accelerate and setting us up nicely for the balance of the year. In the second quarter, sales increased 6.4% organically with book-to-bill of 1.04, highlighted by the Electronics segment that grew 11.1% organically with book-to-bill of 1.08. In addition, the engraving segment grew 10.3% organically.

Adjusted gross margin of 42.1% was up 120 basis points year-on-year. Adjusted operating margin of 19% was up 30 basis points year-on-year. We paid down approximately $10 million of debt and reduced our net leverage ratio to 2.3x. We are reiterating our fiscal year 2026 sales outlook. Barring unforeseen economic global trade or tariff-related disruptions, we expect revenue to grow by over $110 million from 2025. The drivers of this increase are the strong momentum we are seeing from new product sales and sales into fast-growth markets and the full year impact of last year's acquisitions.

In fiscal year 2026, we expect new product sales to contribute approximately 300 basis points of incremental sales growth and have increased our expected sales from new products to $85 million from $78 million. We launched 4 new products in the second quarter and remain on track to release more than 15 new products in fiscal 2026. Sales from fast-growth markets are expected to grow over 45% year-on-year and exceed $270 million.

On a year-on-year basis, in fiscal third quarter '26, we expect significantly higher revenue driven by mid- to high-single-digit organic growth from higher sales into fast growth end markets and increased new product sales and slightly higher adjusted operating margin due to higher volume and favorable product mix, partially offset by growth investments and higher medical costs. On a sequential basis, we expect slightly to moderately higher revenue driven by higher contributions from fast growth end markets and new product sales and slightly to moderately higher adjusted operating margin due to higher volume and pricing and productivity initiatives, partially offset by growth investments. 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 4, second quarter 2026 summary. On a consolidated basis, total revenue increased approximately 16.6% year-on-year to $221.3 million. This reflected organic growth of 6.4%, 9.4% benefit from acquisitions and 0.8% benefit from foreign currency. Second quarter 2026 adjusted operating margin increased 30 basis points year-on-year to 19%. Adjusted earnings per share increased 8.9% year-on-year to $2.08. Net cash provided by operating activities was $20.7 million in the second quarter of fiscal 2026 compared to $9.1 million a year ago. Capital expenditures were $7.7 million compared to $7 million a year ago.

As a result, we generated fiscal second quarter free cash flow of $13 million compared to $2.2 million a year ago. Now please turn to Slide 5, and I will begin to discuss our segment performance and outlook, beginning with Electronics. Segment revenue increased 20.6% year-on-year to a record $115.7 million, driven by organic growth of 11.1%, acquisition benefit of 9.1% and 0.4% benefit from foreign currency. Organic growth was driven by sales in the fast-growth markets and increased new product sales. Adjusted operating margin of 28.8% in fiscal second quarter 2026 increased 120 basis points year-on-year due to higher volume, pricing initiatives and product mix. Our book-to-bill in fiscal second quarter was 1.08, with orders of approximately $125 million.

This marks the sixth consecutive quarter with book-to-bill near or above 1. As mentioned before, due to the customized nature of our products, the conversion cycle is longer, but with higher sustainable margins. The healthy order funnel is now being realized in our organic growth results. Sequentially, in fiscal third quarter 2026 we expect slightly to moderately higher revenue, reflecting higher sales into fast growth end markets and increased new product sales. We expect similar adjusted operating margin, primarily due to product mix and continued strategic growth investments. Please turn to Slide 6 for a discussion of Engineering Technologies and Scientific segments.

Engineering Technologies revenue increased 35.3% to $30.6 million driven by 33.4% benefit from recent McStarlite acquisition, organic growth of 1.2% and 0.6% benefit from foreign currency. Organic growth was suppressed by delays in customer project timing. Adjusted operating margin of 18.9% increased 260 basis points year-on-year, primarily due to higher volume. Sequentially, we expect moderately to significantly higher revenue due to growth in new product sales and more favorable project timing. We expect slightly to moderately higher adjusted operating margin due to higher volume. Scientific revenue increased 5.5% to $19.5 million due to acquisition benefit of 8.1%, partially offset by organic decline of 2.6%, primarily due to lower demand from academic and research institutions affected by NIH cuts.

Adjusted operating margin of 24.2% decreased 270 basis points year-on-year due to organic decline and product mix. Sequentially, we expect similar revenue and slightly lower adjusted operating margin due to product mix, investments in research and development and tariff costs, partially offset by pricing and productivity initiatives. Now turn to Slide 7 for a discussion of the Engraving and Specialty Solutions segment. Engraving revenue increased 13.6% to $35.7 million, driven by organic growth of 10.3% from improved demand in Europe and North America and 3.3% benefit from foreign currency. Adjusted operating margin of 19.2% in fiscal second quarter 2026 increased 490 basis points year-on-year due to higher sales and realization of previously executed restructuring actions.

In the next -- in our next fiscal quarter, on a sequential basis, we expect similar revenue and slightly lower adjusted operating margin due to project and regional mix. Specialty Solutions segment revenue of $19.8 million decreased 7.2% year-on-year. Operating margin of 10.7% decreased 600 basis points year-on-year. Sequentially, we expect moderately to significantly higher revenue and operating margin. Next, please turn to Slide 8 for a summary of Standex's liquidity statistics and capitalization structure. Our current available liquidity is approximately $213 million. At the end of the second quarter, Standex had net debt of $437.7 million compared to net debt of $413.2 million at the end of fiscal second quarter 2025. Our net leverage ratio currently stands at 2.3x.

We paid down our debt by approximately $10 million during the fiscal second quarter 2026. In fiscal third quarter 2026, we expect interest expense between $7 million and $7.5 million. Standex's long-term debt at the end of fiscal second quarter 2026 was $534.7 million. Cash and cash equivalents totaled $97 million. We declared our 246th quarterly consecutive cash dividend of $0.34 a share, an approximately 6.3% increase year-on-year. In fiscal 2026, we expect capital expenditures between $33 million and $38 million. Relative to our debt leverage, we will continue to focus on paying down debt and anticipate that our leverage ratio will further decline through fiscal year 2026. I will now turn the call over to David for concluding remarks.

David Dunbar: Thank you, Ademir. Please turn to Slide 9. I'm very pleased to see the inflection in organic growth in the second quarter as new product sales grew 13% and as fast growth markets contributed 28% of revenue. Organic growth was driven by our Electronics, Engineering Technologies and Engraving segments. The year-on-year organic growth reflects actions and investments since fiscal year 2021. During this time, we ramped up new product development across our businesses and further positioned ourselves in fast growth end markets like Grid, commercialization of Space and Defense. We will continue to align our organic and inorganic growth investments around secular end markets and new products that expand our presence and deepen our customer relationships.

This continued momentum in fast-growth markets and from new product sales helped support a record order book in the fiscal second quarter. We are reiterating our sales outlook for fiscal 2026 and remain on track to achieve our fiscal 2028 long-term targets. We will now open the line for questions.

Operator: [Operator Instructions] Your first question is from Chris Moore from CJS Securities.

Christopher Moore: Congratulations on another solid quarter. Maybe we just start with one on the -- on the purchase accounting side, the $17.98 million redeemable noncontrolling interest redemption value. I know that relates to the 10% that you could not acquire of Amran, Narayan. Maybe you could just kind of walk us through the math there and how that works?

Ademir Sarcevic: Yes. Sure. It's Ademir here. So it's a bit of a technical answer. So we -- and we anticipated this question, so we prepared a few remarks. So let me try to explain. So kind of in general, whenever we acquire the business, our goal is to ensure full alignment in objectives and incentives between owners of the business and Standex and in many cases, actually owners and team management of the acquired business stay on board with us not only to ensure successful integration, but also, frankly, to help us grow the business in the future. And that's been our key success with our prior acquisitions has been really strong, strategic, financial and cultural fit.

So last year, when we negotiated agreement to acquire Amran and Amran is actually a U.S. legal entity and Narayan, which is an Indian legal entity, our goal is essentially the same, to ensure common goals and incentives between owners of the business and Standex. So in order to achieve this goal, we acquired 85% of Amran in cash and 15% with Standex shares. And then we also acquired 90% of Narayan in cash, and our plan was to acquire the remaining 10% of Narayan, an Indian entity, with Standex shares.

This acquisition actually of the remaining 10% of Narayan with Standex shares was not possible at the time of acquisition because it was subject of approval by Indian government as Indian nationals have restrictions on owning foreign equity. And since we didn't have this approval at the time of Narayan acquisition, we included in the purchase agreement, an alternative method to acquire the remaining 10% with cash, using the same 12x trailing 12-month EBITDA multiple which is measured at future points in time. So now after 1 year, the India government approval was not obtained. And at this point, this approval is unlikely.

And based on the original purchase agreement, minority owners of Narayan now have the right to sell us 1/3 of their remaining 10% interest in Narayan. And as a result of these 2 facts, per accounting rules we had to record the increased value of remaining 10% of Narayan based on trailing 12 months Narayan EBITDA as of end of fiscal Q2 FY '26 applying the same 12x multiple to frankly represent what it would cost Standex to acquire in cash, the remaining 10% stake of Narayan as of today as per the purchase agreement.

So really, Chris, it just shows the increased value of this business since the acquisition and just frankly, a phenomenal performance that this business has had as part of Standex grid. Hopefully, that helps. I mean I can read you the explanation from the Q, which is even more tactical, but hopefully, this helps clarify.

Christopher Moore: No, it does. That was perfect. Very helpful. All right. So on to the business. So maybe just continue with Amran or Grid. So OEMs such as Schneider Electric, Siemens, GE, all found it more efficient to outsource the low to medium voltage transformers that Grid is providing much of the engineering that they had done in-house. So maybe just a question or 2 here. How would you characterize the competitive environment here? I'm just trying to understand if -- do most of these OEMs have multiple relationships with companies like Amran? Or are you sole sourcing or how does it work now? And what's your expectation moving forward?

David Dunbar: Well, Chris, this is a great example of a customer intimacy market. And the idea of customer intimacy is that as customers design their next generation platforms, they've got their engineers focused on the most critical functionality within that platform, but there are other elements that are very important that must be custom designed and they need partners to do that. So over the years, instrument transformers have moved into that category and Amran Narayan is quickly becoming a valued partner to the global equipment OEMs. If you zoom out and look at the global market for instrument transformers, about 40% of the instrument transformers are made by the electrical equipment OEMs, by the GE, Siemens, by Schneider Eaton.

They are outsourcing more and more of that, but not all of it. The other 60%, there are different suppliers in every region of the world. And I would -- they're not small family shops. These are businesses about the size of Amran and Narayan, but there are a lot of suppliers out there around the regions of the world, and we feel that we stack up well against all of them.

Christopher Moore: Got it. And very helpful. And maybe just the last 1 for me, maybe just bigger picture. India and EU just signed a trade deal? Just wondering any thoughts there?

David Dunbar: Well, yes. Well, first of all, clarity in trade is good. Clarity and consistency, so we can make our investment, make our plans. Now if you think about the Croatia site that we've started up and now ramping up, we're installing machinery now there, that makes that Croatia site even more viable long term because that's there to serve the European market and leverages the India supply chain. So we don't know fully what the implications are, but it can only be good.

Operator: Your next question is from Ross Sparenblek from William Blair.

Ross Sparenblek: On the electronics, can you maybe just help parse out the sales and order growth for the grid business versus the legacy?

Ademir Sarcevic: Yes. I mean, again, our book-to-bill for the electronics in total was over 1 with the Grid business being at about 1.2 book-to-bill and the core business being at about 1.03, 1.04. I think even kind of more of an info is that our orders in the Electronics business have been strong over the past 2 quarters or a few quarters. And as you know, Ross, it takes us a little while to convert some orders into sales. So we are pretty pleased with what we are seeing in the overall order book, both in the core business and especially what we are seeing on the grid business because the demand is very strong.

David Dunbar: I just -- there's 3 big pieces of our electronics business, the grid business continues to grow kind of as it has in the last few years. Our switches and sensor business with reed switches and relays is growing upper-single digits and the magnetics business, which is primarily North American business, is less than that. So our core electronics business, mid-single digit growth.

Ademir Sarcevic: Yes, correct. Yes, yes.

David Dunbar: And then that grid business.

Ademir Sarcevic: So yes, in the quarter, right, that's a good point. In the quarter, Ross, the grid business kind of got that organic growth rate because we lapsed the year, got the organic growth rate for the whole total segment over 10% with the core growing at about mid-single digits organically.

Ross Sparenblek: Okay. So I mean you get the sense on the legacy side that you're starting to hit an inflection here. That's how it seemed to indicate. But I mean we kind of think through the end markets and the drivers, I mean, is there anything really to call up there? I mean I know EVs was a story for a bit. You won some new content, Aerospace and Defense, just what's helping sustain that legacy?

David Dunbar: Yes. On the legacy side, it's -- right, it's primarily the switches and the relays, Asia is very strong. There's a lot of economic activity in Asia, we're seeing a pickup in Europe. North America is still flat. So if you look at the geographies. The end markets, our relay business is growing with test and measurement, sales relays into test and measurement equipment, and that's tied to electrification, grid and data centers. Those are kind of things that stick out.

Ross Sparenblek: Yes. Okay. And then can you maybe help us bridge the second half walk to the $270 million of fast growth sales, but we comped over the Amran acquisition and kind of my math, it seems like the biggest 2 bucks are probably commercial space and grid, and then we also have capacity coming online there, too, that might be inhibiting that the next quarter or two, on the grain side?

David Dunbar: Well, yes. So last year, our sales in fast growth of $184 million and that included a partial year of the grid business. This year, we're saying $270 million plus, and that's a full year of the grid business. Within that, our sales into defense in North America are up $15 million to $20 million, space about $10 million. EV is about $5 million, and the rest is the grid growth, which is primarily the Amran Narayan acquisition, but there's some sales into grid from our legacy magnetics.

Ross Sparenblek: Okay. I mean that's kind of what you're baking in for the year, that's what you've already seen in the first half.

David Dunbar: No, we're seeing that. Yes, yes.

Ross Sparenblek: Okay. I'm just trying to understand there's going to be a bigger mix shift towards the grid since it is higher margin or what the timing look like there?

David Dunbar: Well, it is higher margin. But...

Ademir Sarcevic: Yes. No, no, you're right. The grid business has higher margins. So just 1 thing, Ross, that's important is we're also investing in growth and capacity expansion in grid. So there's going to be some cost to set up our Croatia site to expand in Mexico to get the -- to get the Houston, Texas capacity expansion. So we do expect the margins kind of to continue to be very strong, but there's some investments we need to make now to continue to sustain this exceptional growth, frankly, on the grid side.

Operator: Your next question is from Matthew Koranda from ROTH Capital Partners.

Matt Koranda: Maybe just continuing on the electronics chain of questioning here. Maybe could you just run us through the state of play with the capacity expansion projects you have for Amran Narayan between Houston, Mexico, Croatia, just the status there and how that sort of informs the segment profit guidance that you've laid out for us?

David Dunbar: Yes. Let me first kind of zoom out and talk about capacity expansion. Since we acquired the business, we've increased the capacity about 50%, and that's largely through the addition of additional ships, with work on lean, a little bit of automation. Now we're bringing on new sites. The Croatia site is now ramping up. We're moving machinery into our Mexico plant. So now if you zoom out over 5 years, let's say within 3 to 5 years, we'll more than double the capacity with the addition of the Croatia site, the expansion in New Mexico. We will move into a larger site in Houston. That should be up and running in about 18 months, expansion in India.

And then just continued automation and lean work, we'll more than double the capacity in 3 to 5 years.

Matt Koranda: Okay. Got it. Helpful on the capacity side. Just wondering, maybe Ademir can chime in on how that creates a little bit of a near-term drag on segment profitability. Just wanted to understand how that informs the guidance.

Ademir Sarcevic: Yes, yes. No, for sure, Matt. So initially, obviously, to get -- for example, to get the Croatia site up and running, you have the set up the site, you have to hire a general manager, you have to hire people, sales and marketing, production, et cetera. So there is some cost that's going to be incurred before we get to ramp up the production. So we don't expect electronics margins to decline in subsequent quarters. But I would probably tell you that I wouldn't expect them to increase in subsequent quarters as well.

David Dunbar: Yes. I guess a good way to say that is we are adding resource, project management resource, expertise in bringing up these new sites because it is so important. And we are doing that with the growth. We're paying for that through the business and increasing margin, margin would be higher right now if we didn't make those investments, but it would compromise the capacity growth.

Ademir Sarcevic: That's right.

Matt Koranda: Okay. That makes total sense. Okay. And then on ETG, I think you guys mentioned maybe there was some organic growth that was held back by customer timing issues and guessing just based on the guidance that, that slides into the third quarter, but maybe just talk a little bit about some of the puts and takes there.

David Dunbar: Yes, absolutely. For long-time followers of Standex, this comes up pretty regularly in that business. And whether the customer, whether it's aviation space or defense, these are large shipments, they sometimes carry over from 1 quarter to the next, and it's really just a matter of timing. There's -- maybe they couldn't get in -- there's a lot of reasons that could happen, they couldn't schedule a final inspection. But these things slip from 1 quarter to the next all the time. The backlog remains healthy and growing. Yes, no.

Ademir Sarcevic: Yes, Matt. I mean it could be -- yes, and really for ETG business, you kind of got to look at it over a 12-month period, to normalize for some of these ebbs and flows. But David is right, it could be a change in production on the customer side, change in timing when they need a product, it obviously affects when we work on the product, et cetera, et cetera. But over kind of 4 quarters, it all equalizes out. But you're right, we do at some of the shifts from Q2 to happen this quarter.

Matt Koranda: Understood. Okay. Maybe just 1 more if I could sneak 1 in. On the sort of the M&A front, just given where leverage is, it's coming down to a healthy place. It looks like line of sight is to under 2 at some point in the near future. Where are you focusing your efforts now just given sort of the balance sheet looks like it's in order to maybe get larger stuff done potentially? Just curious how -- where your head is at on that?

David Dunbar: Yes. We are -- we've had extensive discussions about this recently. We're obviously looking for opportunities in grid and building up a funnel of opportunities in grid, a, to help even accelerate the capacity expansion. Based on earlier questions, there are other companies out there that make instrument transformers, so we can expand the instrument transformer business. Our grid customers are asking us to expand the products we sell them. So we have some ideas from our customers, like Schneider and Eaton about companies we could look at. So we're building up that pipeline.

In our legacy electronics business, we know that every time we work with a customer and we customize a switch, relay or a sensor, there are other products that we could work on if we had a broader offering in that components and modules area. So you think about expanding our sensor and switch business into other related technologies, we're building up a pipeline there. So don't be surprised if in the future, you see us building that business out, so we can offer a broader customer set. I guess the final area, we're just -- we feel pleased we have so many great end markets to look at. Space, the space market is becoming a bigger and bigger opportunity.

It is not just putting satellites in orbit anymore. If you look at the long-term plan some people have for space, there's going to be a lot going on up there with different kinds of vehicles requiring different pieces of equipment. So we're also building up a funnel in kind of emerging capabilities in the space market.

Matt Koranda: Okay. Sounds like a target rich environment, I'll leave it there.

David Dunbar: Yes, yes.

Operator: Your next question is from Gary Prestopino from Barrington Research.

Gary Prestopino: David, your new product sales to date, how many products have you introduced? I think you did 4 this quarter? What is it to date?

David Dunbar: Yes. So today, once you do 4, 5, we're 9 to date.

Gary Prestopino: Okay. So you're going to do greater than 15 this year, right?

David Dunbar: Yes, Yes.

Gary Prestopino: Are there any new products that you put out that you would have considered more wildly successful than you initially thought as you were developing them?

David Dunbar: Well, I tell you, a lot of our sales in the commercialization of space are new products, and these are -- every year, we seem to take up our expectations of those. So the Engineering Technologies business with the Spincraft business have been very successful with their new products.

Gary Prestopino: Okay. So that's where the new products are really hitting. Okay. And then are you at liberty to say if your fast growth markets are going to do $270 million of sales this year, I would assume a lot of that jump year-over-year is due to what you're doing in the grid. So what percentage of your sales are going to the grid right now or out of that $270 million, what percentage of your sales would be the grid?

David Dunbar: Yes. I kind of ran through those numbers earlier to another question. And it's just over half of that is into the grid, 50%, 52% or something like that. And that was the run rate we saw these last couple of quarters because we've got Amran Narayan fully in our numbers. And the rest, as I mentioned before, defense and space are the biggest pieces with a little bit of EV and renewable energy.

Gary Prestopino: Okay. And then just lastly, in terms of the Amran acquisition, is there any more residual carryover from -- that would impact the next 2 quarters in terms of -- from the acquisition such as it would impact the income statement as it did this quarter?

Ademir Sarcevic: Gary, are you talking about this noncontrolling interest adjustment?

Gary Prestopino: Yes. Yes, the noncontrolling.

Ademir Sarcevic: Yes, we will have -- I mean, obviously, it will not be this sizable because this was the annual true-up based on the 2 factors that kind of led us to have to book it this time. But yes, I mean, it will have to be adjusted on a quarterly basis going forward because the trailing 12-month EBITDA for which the multiple is applied is going to change.

David Dunbar: Yes. I'm going to say a word about that. We are delighted that we had to make that large an adjustment because that means that business is doing great. And this incentive, this 10% of that Indian remaining in the hands of the owners really completely aligns our incentives. I mean I'm delighted at the cultural integration and the cooperation we're getting from the teams. And so this is an accounting and a technical matter, but it's playing out the way we had hoped.

Gary Prestopino: No, I understand that, but what I'm just trying to get at is because they still own 10%, we're going to have this going forward for the next couple of quarters? I mean does this ever end?

Ademir Sarcevic: Well, it would obviously end when the 10% is executed and either sold, even we repurchased the 10% then. But as long as -- I'm sorry.

Gary Prestopino: Go ahead, I'm sorry. No, no, go ahead. I'm sorry.

Ademir Sarcevic: No, no. At the point when those 10% shares transferred back to us, and we purchase them, obviously, then this would go away. But as long as there is some portion of the minority interest that's owned by the prior owners in India, there will be minority interest that has to stay on the balance sheet and a liability that we would have to pay for the remaining part at some point. Actually, in the contract, we have put and call options the way that this agreement was structured by which, for the first 3 years, the owners have the right to essentially sell us their shares and then we get the right to repurchase starting in year 4.

Operator: Your next question is from Michael Shlisky from D.A. Davidson.

Michael Shlisky: I want to follow up on your last answer there. I'm also just trying to make sure I get my hands around this. Does the eventual sale of the shares or purchase of the shares has to be approved by the Indian government? And could that be an issue? And will you be just consistently revaluating this every quarter until they approve it?

Ademir Sarcevic: Yes. So to come back to the original agreement we had, we actually -- the original objective was to purchase 10% of the Indian entity in Narayan with Standex shares. And the India government needs to approve an Indian national to own equity of a foreign company. So if you're buying it with shares, there needs to be a government approval. If you're paying it with cash, obviously, there is no government approval that's needed. That's a pretty straightforward transaction.

David Dunbar: And that's what we're doing.

Ademir Sarcevic: And that's, I think, where we're going to end up at some point in time over the next few years.

Michael Shlisky: No approvals. Got it. I know it's not your biggest segment, but I did notice the substantial margin decline in Specialty Solutions. I was wondering if you could maybe share what was behind that? I know you mentioned one of the Engineering Technologies Group, but how about that one?

Ademir Sarcevic: Yes, it's been just a very, very difficult end market in North America, Mike, in terms of where the Specialty Solutions is playing and it's all North America. And we do expect this quarter to get better. We are seeing some order intake improvement in both businesses that make up the Specialty Solutions segment and we do expect those margins to improve this quarter as the general market conditions improve. But it's market driven.

Michael Shlisky: Okay. Okay. And similarly, I wanted to touch on the Engraving business as well, a little bit of a nice comeback coming here after a very long period of waiting. Can you just talk a little bit about what the pipeline of business looks like in Engraving? Does it go beyond a couple of quarters here?

David Dunbar: Yes. I mean we -- like we've said in the last few quarters, we think that in North America and Europe, that activity bottomed out, and we were in the kind of in the trough in the last year. We do see that North America is still kind of at similar levels. Europe is starting to pick up. We anticipate programs will be launched in America that will lead to work for us later in the summer and the fall. So we do see a pickup in that general -- in our traditional business there. And another thing we're quite excited about is the increase in our new product sales for the year is actually out of the Engraving business.

You might remember in the summer, we talked about a new win they had making these differentiated parts using kind of some proprietary knowledge we have of the soft trim process. So we're producing these parts. That is a new product for us. And the $8 million increase in new products is almost -- is largely from that business. So we think there's a pickup from that, we'll see in the -- late this quarter and into Q4.

Ademir Sarcevic: But we are still -- we are still cautious about the overall market in Engraving, the auto market.

Operator: Your next question is from Ross Sparenblek from William Blair.

Ross Sparenblek: Just quickly on the capacity. I mean you've spoken there were $60 million roughly in Croatia. But can you maybe just remind us of where that stood when you acquired the asset on a dollar basis?

David Dunbar: Zero. It was -- there were only -- the Croatia was just a request from customers to install the capacity.

Ross Sparenblek: I mean, the capacity of Amran. I mean, you weren't [indiscernible] move to expand there.

David Dunbar: Yes. So the capacity at the time of acquisition was basically in line with the sales. It was about $100 million. We have increased that capacity of that -- of the existing capacity about 50%. And then we've got these other sites coming online.

Ross Sparenblek: And then just want to clarify, we think through doubling that, are we doubling it off the original base or where we stand today?

David Dunbar: No, no, no, no. No, in fact, we're more than doubling it with -- based on -- they're at $150 million now, we will more than double that in the next 3 to 5 with Croatia, Mexico, Houston, new expansion in India, and lean and automation.

Ross Sparenblek: Okay. And then just on Amran and just kind of a qualitative and the competitive landscape. Can you say elaborate on the right to win there? Is it the scale, the relationships? Or is it just kind of the prototyping and technical capabilities?

David Dunbar: I didn't understand the question, Amran.

Ross Sparenblek: Sorry. Yes, on Amran, on the grid business. I mean we're expanding globally. There's a lot -- it's a fragmented market, regional players. I mean what truly is kind of the right to win there for that business?

David Dunbar: Well, customers are asking us to expand. They have earned a privileged position with the largest electrical equipment OEMs through great service levels. When we announced the acquisition and in previous quarters, we've explained, they have an advantage, the way their business model works, they can turn around prototypes faster. They can deliver faster than internal teams and a lot of our customers and from our competitors. They have a great track record for quality. And they've got a great supply chain in India that gives them a cost advantage as well. So they win on a lot of fronts, all the expansion plans we're talking about are really at the request of customers.

We don't have to go prospecting for business. Customers are very open with us about their long-term plans, what they want us to do. So this is a very collaborative effort to expand this capacity.

Ross Sparenblek: Okay. And then maybe just 1 final 1 here. Do we think like the delta of the mid- to high-single, can you put a finer point on those ranges and what could go wrong, what could go right? I know you guys have better visibility in some markets than others, but it feels like the cyclical pieces are pretty -- pretty much a trough at this point.

Ademir Sarcevic: Yes. I mean, I think, yes. I mean, that's right. I mean, we feel from a kind of an overall economic environment and when the global markets, we feel we are -- we bottomed out for sure, and now we are starting to recover and see some increased demand.

David Dunbar: In terms of what can go wrong, the reason -- back in August, we said that there's a lot of positive energy in the company because we feel we're reaching an inflection point where the new products and the fast-growth markets are overcoming weakness in some other general industry markets. North America is still pretty weak. You heard about it in Specialty. That's kind of a weaker spot in our legacy electronics business. So in terms of what could go wrong, if we don't see a pickup in North America, that would be kind of a...

Ademir Sarcevic: Yes, definitely.

Ross Sparenblek: Okay. So more macro related, it's not timing of -- or any watch items regarding like the A350 or SpaceX or something like that.

David Dunbar: No, no.

Ademir Sarcevic: No.

Operator: There are no further questions at this time. I will now hand the call back over to David Dunbar for the closing remarks.

David Dunbar: I want to thank everybody for joining us for the call. We enjoy reporting on our progress at Standex. Thank you also to our employees and shareholders for your continued support and contributions. I'm excited about the company's potential in fiscal year 2026 and look forward to speaking with you again in our fiscal third quarter 2026 call.

Operator: Thank you. Ladies and gentlemen, the conference has now ended. Thank you all for joining. You may all disconnect your lines.