Standex International Q3 2026 Earnings Call: Complete Transcript

Standex International (NYSE:SXI) held its third-quarter earnings conference call on Friday. Below is the complete transcript from the call. Benzinga APIs provide real-time access to earnings call transcripts and financial data. Visit https://www.benzinga.com/apis/ to learn more. The full earnings call is available at https://app.webinar.net/ZRb9zKnVBy5 Summary Standex International Corp reported an 8.1% year-on-year sales increase to $224.6 million, with 6.5% organic growth. The company completed the divestiture of Federal Industries, aligning with its strategy to focus on fast-growth markets and new product launches. Electronics and Aerospace and Defense segments are driving growth, with electronics contributing to 70% of sales and 80% of profits. The company's adjusted operating margin rose by 30 basis points to 19.7%, while adjusted earnings per share increased by 13.5% to $2.21. Standex International Corp expects fiscal 2026 revenue to increase by about $100 million compared to 2025, despite the Federal divestiture. The company reported a strong book-to-bill ratio of 1.05, indicating healthy demand and a positive outlook for future quarters. Standex Aerospace and Defense, a renamed segment, is positioning itself as a key partner in space, defense, and aviation sectors. The company has plans for growth investments, including capacity expansions in its electronics segment, to support future demand. Full Transcript OPERATOR Good morning ladies and gentlemen and welcome to the Standex International Corp Fiscal Third Quarter 2026 Financial Results Conference call. At this time, note that all participant lines are in the listen only mode. Following the presentation, we will conduct a question and answer session and if at any time during this call you require immediate assistance, please press star zero for the operator. Also note that this call is being recorded on Friday, May 1, 2026 and I would like to turn the conference over to Christopher Howe, Director of Investor Relations. Please go ahead. Christopher Howe (Director of 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@www.standex.com. Please refer to Standex's safe harbor statement on slide 2. 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 10K 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 EBITDA, which is Earnings before interest and Taxes, adjusted EBIT EBITDA, which is Earnings before Interest, taxes, depreciation and amortization, adjusted EBITDA 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. Adjusted measures exclude the impact of restructuring, purchase accounting, amortization from acquired intangible assets, acquisition related expenses and one time items. 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 Admir Sarsevic. David Dunbar (Chairman, President and Chief Executive Officer) Thank you Chris. Good morning and welcome to our fiscal third quarter 2026 conference call. This quarter provides another strong proof point that our strategy shifting toward faster growing end markets and increasing new product development is working. We delivered top line sales growth of 8% including organic growth of 6.5%. Our sales into fast growing end markets are now above 30% of our total and new products are expected to add 300 basis points of growth to our 2026 sales results. It is also exciting to see how the mix of our businesses has evolved. Today, electronics and our engineering technologies business generate about 70% of sales and nearly 80% of total segment profits, both built around custom engineered solutions for attractive secular markets. That mix shift is what we set out to achieve. Our engineering technology segment has effectively repositioned itself as a vital partner for space, defense and aviation customers, so we are renaming the segment Standex Aerospace and Defense. Looking ahead, demand remains healthy. Company wide book TO bill was 1.05 and electronics delivered 1.14, setting us up well. As we move into the fourth quarter, 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 third quarter 2026 results. Now let's look at the results beginning on Slide 3. In the third quarter, sales increased 8.1% year on year to $224.6 million, including 6.5% organic growth. Electronics grew 6.8% organically. New product sales grew approximately 40% to approximately $18.7 million. Sales in the fast growth markets were approximately $69 million, more than 30% of total sales. We are pleased with the momentum in the business reflected in an overall book to bill ratio of 1.05 and within electronics of 1.14. Adjusted operating margin of 19.7% was up 30 basis points year on year. On March 6th we completed the divestiture of Federal Industries at an enterprise value of approximately $70 million. This is in line with our portfolio simplification strategy, allowing us to focus our management and capital resources more on fast growth markets and new product launches. We used the proceeds to pay down about $62 million of debt, reducing net leverage to 1.9x. Beginning this quarter we will report under four operating segments electronics, Aerospace and Defense, David Dunbar (Chairman, President and Chief Executive Officer) Scientific and Engraving and Hydraulics. The hydraulics business has been combined with the engraving business under the Engraving and Hydraulics segment. This divestiture continues a decade of deliberate portfolio shaping toward higher growth higher margin businesses. In 2014 we operated 16 businesses. Today we're down to five and following the Amran Orion acquisition, Electronics represents more than half of Standex and the helping drive the performance you see today. Our original fiscal year 2026 sales outlook included a full year contribution from federal industries. Even after the federal divestiture, we still expect fiscal 2026 revenue to increase by about $100 million versus 2025. David Dunbar (Chairman, President and Chief Executive Officer) Supported by Momentum in new products and fast growth markets, especially in electronics and aerospace and defense. I'm pleased with the momentum that we are building in launching new products. We expect to launch more than 15 new products this fiscal year on top of 16 new products last fiscal year. We expect new product sales pro forma for the federal divestiture to grow by $24 million to $64 million, adding nearly 300 basis points of organic growth in the year. David Dunbar (Chairman, President and Chief Executive Officer) Our sales into the fast growing markets David Dunbar (Chairman, President and Chief Executive Officer) such as space, defense and grid are expected to increase to approximately $270 million, constituting about 30% of our total sales. On a sequential basis, we expect slightly 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 on a year on year basis. In fiscal fourth quarter 2026, we expect slightly to moderately higher revenue driven by mid to high single digit organic growth from growing backlog in fast growth markets and increased new product sales partially offset by the revenue impact from the federal divestiture. We expect slightly lower adjusted operating margin as organic growth and realization of productivity actions are more than offset by growth investments in capacity expansions, higher medical costs and increased variable compensation expenses. David Dunbar (Chairman, President and Chief Executive Officer) I will now turn the call over to Admir to discuss our financial performance in greater detail. Admir Sarsevic (Chief Financial Officer and Treasurer) Thank you David and good morning everyone. Let's turn to Slide 4. Third Quarter 2026 Summary On a consolidated basis, total revenue increased approximately 8.1% year on year to $224.6 million. This reflected organic growth of 6.5%, 0.2% benefit from acquisitions and 1.4% benefit from foreign currency. Third quarter 2026 adjusted operating margin increased 30 basis points year on year to 19.7%. Adjusted earnings per share increased 13.5% year on year to $2.21. Net cash provided by operating activities was $9 million in the third quarter of fiscal 2026 compared to 9.6 million a year ago. Capital expenditures were 2.7 million compared to 6.1 million a year ago. As a result, we generated fiscal third quarter free cash flow of 6.3 million compared to 3.5 million a year ago. Admir Sarsevic (Chief Financial Officer and Treasurer) Now please turn to slide 5 and I will begin to discuss our segment performance and outlook beginning with electronics and aerospace and defense. Electronics revenue increased 7.6% year on year to a record $119.7 million driven by organic growth of 6.8% and 0.8% benefit from foreign currency Organic growth was driven by sales into fast growth markets and increased new product sales. Admir Sarsevic (Chief Financial Officer and Treasurer) Adjusted operating margin of 29.3% in fiscal third quarter 2026 decreased 50 basis points year on year due to growth investments partially offset by higher volume pricing initiatives and product mix. Our book to bill in fiscal third quarter was 1.14 with orders of approximately 136 million. This marks the seventh consecutive quarter with book to bill near or above 1. This consistent streak of book to bill around 1 targeted capacity expansion within grid, an acceleration in new product sales as their ability to outgrow. In addition, our monthly orders for over $50 million in both March and April further indicating robust demand and a Runway to a strong fiscal 2027 performance as these orders convert into sales sequentially. Admir Sarsevic (Chief Financial Officer and Treasurer) In fiscal fourth quarter 2026 we expect slightly to moderately high revenue reflecting higher sales into fast growth end markets and increased new product sales. We expect slightly higher adjusted operating margin primarily due to higher revenue partially offset by continued growth investments. On a year on year basis, we expect high single digits organic growth. Admir Sarsevic (Chief Financial Officer and Treasurer) Aerospace and Defense revenue increased 33.7% to 36.6 million driven by organic growth of 20.8%, 12.2% benefit from recent MaxTarlite acquisition and 0.7% benefit from foreign currency. Organic growth was driven by increased project activity in the commercialization of space end market. Adjusted operating margin of 18% decreased 60 basis points year on year primarily due to project mix. Admir Sarsevic (Chief Financial Officer and Treasurer) Sequentially, we expect slightly to moderately 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 and realization of productivity initiatives. On a year on year basis, we expect double digits organic growth. Now please turn to slide 6 for a discussion of the scientific and engraving and hydraulic segments. Admir Sarsevic (Chief Financial Officer and Treasurer) Scientific revenue decreased 1.7% to $18 million primarily due to organic decline from lower demand from academic and research institutions affected by NIH cuts. Adjusted operating margin of 21.9% decreased 70 basis points year on year due to lower sales. Sequentially, we expect slightly higher revenue and similar adjusted operating margin due to product mix. Engraving and Hydraulics revenue increased 2.2% to 44.8 million driven by 4% benefit from foreign currency partially offset by organic decline of 1.8%. The organic decline was driven by general market weakness for hydraulic cylinders. Adjusted operating margin of 14.3% in fiscal third quarter 2026 increased 210 basis points year on year due to higher sales and realization of previously executed restructuring actions. Admir Sarsevic (Chief Financial Officer and Treasurer) In our next fiscal quarter On a sequential basis, we expect slightly lower revenue and similar to slightly higher adjusted operating margin from realization of restructuring actions and productivity initiatives. Next, Please turn to Slide 7 for a summary of Stanix's liquidity statistics and capitalization structure. Our current available Liquidity is approximately $191 million. Admir Sarsevic (Chief Financial Officer and Treasurer) At the end of the third quarter, Standex had net debt of $369.1 million compared to net debt of $470.4 million at the end of fiscal third quarter 2025. Our net leverage ratio currently stands at 1.9. We paid down our debt by approximately $62 million during the fiscal third quarter 2026. In fiscal fourth quarter 2026, we expect interest expense between $6.8 million and $7 million. Tenex's long term debt at the end of fiscal third quarter 2026 was $472.8 million. Cash on cash equivalents totaled $103.7 million. We declared our 247th quarterly consecutive cash dividend of $0.34 per share and approximately 6.3% increase year on year. In fiscal 2026, we expect capital expenditures between $27 million and $30 million. I will now turn the call over to David for concluding remarks. David Dunbar (Chairman, President and Chief Executive Officer) Thank you. Adam Air Please turn to Slide 8. To summarize, I am very pleased to see the continued organic growth in the third quarter with a book to bill ratio of 1.05 when adjusted for the federal divestiture. David Dunbar (Chairman, President and Chief Executive Officer) Organic growth was driven by our electronics and aerospace and defense segments which grew 6.8% and 20.8% respectively. 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. Our acquisition strategy will continue to focus on businesses with accretive margins, exposure to fast growth markets and delivery of custom solutions. With the divestiture of federal industries, we have realigned our company around four operating segments. We expect fiscal 2026 sales to increase approximately $100 million over fiscal 2025 with margin expansion. While we remain on course, we will provide an update to our long term targets on the next earnings call. Considering the changing portfolio composition with the federal industry's divestiture, we will now open the line for questions. OPERATOR Thank you sir. Ladies and gentlemen, if you do have any questions, please press star1 on your telephone keypad. You will then hear a prompt that your hand has been raised and if you should wish to decline from the polling process, please press STAR followed by two and if you're using A speakerphone. You will need to lift the handset first before pressing any keys. Thank you. Just one moment please for our first question. First we will hear from Chris Moore at CJS Securities. Please go ahead Chris. Chris Moore (Equity Analyst at CJS Securities) Hey, good morning guys. Thanks for taking a couple. Good morning. Good morning. And maybe we can start on the on the defense opportunity you've talked about, you know, providing missile nose cone solutions include nose cones for interceptors, tactile missiles, as well as development hypersonics. Maybe can you just give us a sense of for the scale of that opportunity? You know what what kind of orders look like is there are there long lead times? Just you know, any thoughts there would would be, you know, really helpful. David Dunbar (Chairman, President and Chief Executive Officer) Yeah. The so there we're talking about within engineering technologies we have we serve defense in the magnetics business, in electronics and in engineering technologies. The engineering technologies business provides nose cones out of their Wisconsin facility. And about 15% of the engineering technologies or aerospace and defense segments is defense. Most of that is missiles. There is an opportunity to significantly increase that in the coming years. We have had discussions with customers and actually with Undersecretary of Defense, Department of Defense asking if we are able to ramp and they gave us different scenarios. These upper scenarios really kind of depend on the government procurement process passing orders from multi year commitments to us. We have received some orders so we expect a nice increase in Those sales in 2027, potentially greater if they can unlock the procurement process. Chris Moore (Equity Analyst at CJS Securities) Got it. I appreciate that. Maybe just switch gears to Amaran and Ryan. Just in terms of the Croatian facility, trying to understand where you are in terms of construction and then just in terms of creating the infrastructure for full market penetration there. What's a reasonable time frame and are the competitive dynamics much different in Europe than you see in the U.S. yeah, David Dunbar (Chairman, President and Chief Executive Officer) there's a lot in that question. We had no presence in Croatia with that business before there was no footprint in Europe. We now have the Croatia site. It is operating. We made our first products a few weeks ago. We have customers visiting this month and next to qualify the site. We have external auditors to achieve various certifications, including ISO certifications that we expect in June. So shipments are beginning at a kind of a slow rate. We begin to ramp much more quickly after those June audits are complete. So we're still confident that our longer term expectation of at least 60 million in three to five years is reasonable based on the commitments we have from our current European customers. We are also now building a sales a commercial organization in Europe. So we can understand your third question, which is what about the competitive dynamics there. There is certainly more opportunity than we see. You know, it's a larger market than North America, It's a much larger market than India and we have. So we believe that once we're on the ground with our sales team with the site there, we will be able to answer that third question for you and figure out what we need to do to take that $60 million expectation higher. Just a quick follow up. It's probably we're a couple of years before you're really accelerating in Europe. You know, we ship into Europe from India now, so some of those shipments will begin to come from Europe, will continue to ship from India. So in our FY27, we think upper single digit million shipment number is kind of a reasonable expectation. There is upside to that. How it ramps beyond that I guess we'll have to report in the coming year or so. But there certainly is upside because the market is there and we have the footprint and are building the capacity to grow beyond that. Chris Moore (Equity Analyst at CJS Securities) Fair enough. I'll leave it there. I appreciate it guys. Thanks, Chris. OPERATOR Next question will be from Matt Karanda at Ross Capital Partners. Please go ahead, Matt. Matt Karanda (Equity Analyst at Ross Capital Partners) Hey guys, good morning. Guess I just wanted to start with the electronics segment and the order flow looks like it's up north of 75% year on year. Wanted to hear a little bit about the drivers of the strength in order flow between grid and the core magnetics and sensing solutions business. David Dunbar (Chairman, President and Chief Executive Officer) Yeah. So the growth I'm going to have Ad America, the 75%. I don't see this 75% math. We had a great book to bill 1.14 on growing sales. We're seeing strong order flow in our core switches business, which for us is a good indication that general industry certainly in Asia is picking up. You know that in the quarter we were sales were up over 20% in switches. Relays are strong. Our sales in the grid were up about 20% with a book to bill about 1.1 or something. So we see very strong order flow there. And it's kind of a tale of Admir Sarsevic (Chief Financial Officer and Treasurer) two cities in the industrial world. Space, defense, grid, aviation, those businesses are all growing double digits. General industry in North America and Europe is still fairly slow. And as I said before, general industry in Asia looks like it has really picked up. Yeah. And if I can just add to that, Matt, as we said in our prepared remarks, we had two consecutive months of orders over $50 million for electronics, which, which has never happened before. And you know, some of that is clearly the strength we have seen and continue to see in the grid space and some of these fast growth end markets. But also it's to David's point's indication that the general industrial markets are stabilizing and we are kind of turning the corner now. It takes us, you know, a little time to convert those orders into sales, but it makes us pretty, pretty bullish about what we're going to see in FY27 in terms of, in terms of in a top line performance, again, assuming there is no significant macroeconomic or geopolitical challenges. Matt Karanda (Equity Analyst at Ross Capital Partners) That's helpful guys, thank you. And then I guess for my second question, wanted to ask a portfolio question. It seems like now that you're under two turns of leverage, you got plenty of capacity to deploy incremental dollars to M and A. Just wanted to hear the latest on the funnel and how you guys are thinking about add ons to kind of the core segments as you sort of have more capacity at this point in time. David Dunbar (Chairman, President and Chief Executive Officer) Yeah, Matt, we like the position we're in now. We are delighted with the integration of the Ameren Orion or the grid business and how that continues to perform. And with a leverage under two now, you know, we built, we're building sizable powder and if you look at the makeup of our business now, 70% of our sales come from engineered components in engineering technologies and electronics. And those are the businesses that serve these fast growing markets with customized products. So that's the universe where we will explore opportunities. And in our funnel we always have a number of kind of family owned businesses that are similar to or privately owned businesses similar to acquisitions we made, you know, over the decades at Standex with the grid acquisition that has also opened up opportunities for us to look at related products to solve bigger problems and become an even more important partner to our customers. So in a switchgear, in addition to the instrument transformer, there are other products that support the metering and the electrical quality measures of, you know, of the switchgear itself. On the electronic side, there are a lot of opportunities around components and modules. I think we've mentioned in the past every time a customer works with us with say for a reed switch based sensor, a switch or a relay, they are also working with other suppliers on other other components for that same product that are customized to some extent, whether it's capacitors or filters or something like this. So that really opens the, opens the aperture for us to explore wider opportunities. OPERATOR So for that, you know, we're in discussions with a number of third parties to help us identify targets. So we have an existing Funnel. We're working at expanding the funnel with these new opportunities as we fully explore opportunities to expand these engineered components businesses. Next question will be from Ross Barenblack at William Blair. Please. Go ahead, Ross. Could you unmute your line? Ross Barenblack (Equity Analyst at William Blair) Yeah, I was on mute there. Good morning, gentlemen. Morning. Hey, Ross. Maybe just a level set on the Top line guide. Are we taking out the first three quarters of federal kind of 25 million or are we leaving that in there? Just taking the fourth quarter. David Dunbar (Chairman, President and Chief Executive Officer) Oh, the federal is out and the fourth quarter guy. Yeah. Ross Barenblack (Equity Analyst at William Blair) So just the fourth. Okay. And then you guys said grid was up 20% year over year. So that implies what, like a 160 run rate? Pretty healthy. And so then you guys said what a book to build of 1.1. So. That means core organic growth booked a Bill is probably 1.15, up nearly 20%. We're definitely seeing some momentum. David Dunbar (Chairman, President and Chief Executive Officer) You got your math right. Yep. That's all I get paid for. Can you just go to any updates on India and the progress you've seen with rolling out Lean there and driving that capacity? Ross Barenblack (Equity Analyst at William Blair) Well, I tell you, we had just David Dunbar (Chairman, President and Chief Executive Officer) a few weeks ago. Vinit's here with us today. He was in India a few weeks ago with a very large team for a global grid capacity expansion Kaizen. So we have an extensive plan to Ross Barenblack (Equity Analyst at William Blair) look at global demand, a roll up from customers around the world by product family. David Dunbar (Chairman, President and Chief Executive Officer) We have a site in Texas, a site in India, site in Croatia. Now we're producing in Mexico on our Mexico site and are looking at our global capacity expansion. Ross Barenblack (Equity Analyst at William Blair) So we do have assumptions that within David Dunbar (Chairman, President and Chief Executive Officer) India simply with Lean, there is another call it 15 +% capacity expansion from lean, Ross Barenblack (Equity Analyst at William Blair) which fuels us in addition to Mexico and Croatia through this year. David Dunbar (Chairman, President and Chief Executive Officer) As you know, we have the Texas site coming on next year. But your question was about India. Ross Barenblack (Equity Analyst at William Blair) So we have a good handle on the initial. David Dunbar (Chairman, President and Chief Executive Officer) There's unexploited lean opportunities that are 15 plus percent capacity. Ross Barenblack (Equity Analyst at William Blair) Okay. And maybe if I could squeeze one more. Can you just remind us really quick of the growth investments within electronics? Just the size and the cadence. A couple million bucks. So, you know, if you kind of break it down by parts, Ross, you know, most of our gross investments are coming in the grid business. Obviously there's some investments we put into Croatia that probably it's about, call it 30, 40 basis points if you think about from kind of a margin standpoint of impact right now because obviously you're not shipping as products yet out of Croatia. And then as David mentioned, and as you know, we're expanding capacity in Houston and Mexico. So you have to hire some people and get some of that rolling before we can, before those sites operational. So, you know, there's probably another, I would probably tell you, you know, 50, 60 basis points of those investments as well, you know, kind of the, on a, from a run rate basis standpoint. David Dunbar (Chairman, President and Chief Executive Officer) Okay, so there's no two, three, two issues though. There was some, you know, one off stipulation regarding grid. I didn't fully dig into the details. It just seems like given the growth demand, those margins should have been maybe a little bit higher as standards. Electronics. Ross Barenblack (Equity Analyst at William Blair) Yeah, look, we think we're going to David Dunbar (Chairman, President and Chief Executive Officer) continue to expand margins in electronics, you know, especially, you know, as you kind of think about what are growing is our fast growth end markets where we are most profitable. So we do expect we're gonna, you know, clip that 30% in our adjusted operating margin in the near future. All right, well, thanks a lot, guys. Ross Barenblack (Equity Analyst at William Blair) Thanks, Ross. OPERATOR Next question will be from Mike Slisky at DA Davidson. Please. Go ahead, Mike. Mike Slisky (Equity Analyst at DA Davidson) Yes, hi, good morning. Thanks for taking that question. David Dunbar (Chairman, President and Chief Executive Officer) Morning, Mike. Mike Slisky (Equity Analyst at DA Davidson) Speaking of operating margins, just looking at the results, pretty clear that engraving and hydraulics are now kind of the lowest of the of the four, I guess those kind of two different businesses. Can you comment on your plans for those businesses? If you're, you know, always trying to hone it a little bit better and a little bit higher, you know, year after year, is there a potential that those are next to go? I'd say after federal. David Dunbar (Chairman, President and Chief Executive Officer) Well, you know, in their, as you know, they're strong businesses in their sectors. Mike Slisky (Equity Analyst at DA Davidson) They're not burning platforms in that sense. It's kind of a question of timing to find the best opportunities for those businesses. David Dunbar (Chairman, President and Chief Executive Officer) Within engraving, we have, we have some Mike Slisky (Equity Analyst at DA Davidson) pretty interesting growth initiatives going on. We talked about making these specialized parts functional textures. David Dunbar (Chairman, President and Chief Executive Officer) Those are ramping up. Mike Slisky (Equity Analyst at DA Davidson) So the businesses themselves are fundamentally sound. David Dunbar (Chairman, President and Chief Executive Officer) We have some profit improvement projects in both of them. And you look at our history where we've invested in, Mike Slisky (Equity Analyst at DA Davidson) in acquisitions, we love the engineered components businesses. You will likely see more of that. David Dunbar (Chairman, President and Chief Executive Officer) And we have some very good businesses that, you know, hydraulics and engraving, they could be, could be fit somewhere else. we continue to monitor, monitor the situation and we'll make, make the right Mike Slisky (Equity Analyst at DA Davidson) decision at the right time. David Dunbar (Chairman, President and Chief Executive Officer) Okay. Okay. In aerospace, given the organic growth you've seen now, and we've got quite a few opportunities ahead of you, do you see any to expand capacity there on a greenfield basis? Mike Slisky (Equity Analyst at DA Davidson) In the aerospace and defense segment, is that your Question, Mike. David Dunbar (Chairman, President and Chief Executive Officer) Not from a greenfield standpoint. Mike Slisky (Equity Analyst at DA Davidson) At least not in a near term. You know, we have a bit of a capacity in our sites, but obviously, you know, as the business continues to grow, at some point we might have to look at additional space, but no immediate plans as of right now. We feel we can service what's coming our way in the near term. David Dunbar (Chairman, President and Chief Executive Officer) Yeah, I guess the one caveat to that is we mentioned the missile programs. If these missile orders do appear for some of these higher scenarios, then we will expand footprint. Mike Slisky (Equity Analyst at DA Davidson) That's correct. David Dunbar (Chairman, President and Chief Executive Officer) Okay, got it, got it. Mike Slisky (Equity Analyst at DA Davidson) But we would only do that with the long term. David Dunbar (Chairman, President and Chief Executive Officer) I'm sorry, but we would only do Mike Slisky (Equity Analyst at DA Davidson) that with a long term commitment from David Dunbar (Chairman, President and Chief Executive Officer) the customer, and we'd certainly communicate that in a future quarter. I imagine you'd have an ROIC hurdle to meet there and it wouldn't be any different than you would for Amran or anything else. Mike Slisky (Equity Analyst at DA Davidson) Right, right, exactly. David Dunbar (Chairman, President and Chief Executive Officer) Great. And then it sounds like you're not looking to give us too much guidance yet on fiscal 2027, but can you at least on the new product menu for 2027, do you have as many rolling out next year as you have this year? Given what's in the pipeline, can you at least expect a halfway decent year from that part of the growth plan? Mike Slisky (Equity Analyst at DA Davidson) Yeah, if you just step back and take our general gross growth model, we think we've got these fast growth markets that continue to grow upper teens, 20% David Dunbar (Chairman, President and Chief Executive Officer) a year, that's like six, six points Mike Slisky (Equity Analyst at DA Davidson) of growth from that, our new products, we still expect that to add 300 basis points of growth. David Dunbar (Chairman, President and Chief Executive Officer) And then whatever happens with general industries Mike Slisky (Equity Analyst at DA Davidson) may be a tailwind to that. David Dunbar (Chairman, President and Chief Executive Officer) So just as a high level, I would be thinking in that zone for 2027 and the need here. So in terms of numbers of products Mike Slisky (Equity Analyst at DA Davidson) in 2027, kind of in line with. David Dunbar (Chairman, President and Chief Executive Officer) Yeah, yeah, definitely, Mike. Mike Slisky (Equity Analyst at DA Davidson) I think we think the momentum will continue. David Dunbar (Chairman, President and Chief Executive Officer) Actually, it might even increase because as Mike Slisky (Equity Analyst at DA Davidson) we are adding, our funnel is increasing internally of new product, I guess. David Dunbar (Chairman, President and Chief Executive Officer) Outstanding. I'll leave it there. Thank you. Mike Slisky (Equity Analyst at DA Davidson) Thanks, Mike. OPERATOR Ladies and gentlemen, a reminder to please press Star one should you have any questions. Thank you. Next we will hear from Gary Presto Pino at Barrington. Please go ahead, Gary. David Dunbar (Chairman, President and Chief Executive Officer) Good morning, everyone. In your new segment breakdown, the other category is that Legacy Federal before the divestiture, what exactly is in there? Gary Presto Pino (Equity Analyst at Barrington) Yeah, that's legacy. That's all it is. That's all it is. Okay, so with the sale of Federal, was the corporate expense associated with Federal. Does that come out of the equation, I noticed, like your corporate expense was about 8.6 million this quarter or step down from last quarter, which was abnormally high. But as we're modeling, what kind of number should we be looking at for that corporate expense number? David Dunbar (Chairman, President and Chief Executive Officer) Yeah, Gary, I mean, we don't really Gary Presto Pino (Equity Analyst at Barrington) allocate a lot of corporate costs, so there's no corporate cost that would go away with federal. I mean, what's really driving the reduction in the corporate. Corporate costs for this quarter is, you know, some of it is we got slightly lower medical costs versus some of the prior quarters. There was some, you know, adjustment to the. To the bonus payouts, and that's basically it. But we do assume that, you know, going forward, kind of, you know, nine to $10 million run rate is probably the right number. David Dunbar (Chairman, President and Chief Executive Officer) Okay. And then just in terms of your tax rate, because I noticed it was down, I think, this quarter. And obviously a lot of moving parts with the numbers, with the sale of federal. But for Q4, is it looking like it'll be about 24%? Gary Presto Pino (Equity Analyst at Barrington) Yeah, 24 to 25 is kind of what I would. What I would tell you is a good estimate. David Dunbar (Chairman, President and Chief Executive Officer) Okay, and then just last question. In terms of what's your growth in electronics? I mean, can you. Is it all across the board and grid replacement of grid data centers or where are you starting to see the. Where are you starting to see abnormal growth? Gary Presto Pino (Equity Analyst at Barrington) Did you say abnormal growth? Right. David Dunbar (Chairman, President and Chief Executive Officer) Yeah. You know, growth excess of what you. What you were thinking terms. Gary Presto Pino (Equity Analyst at Barrington) Yeah. So the growth driver, certainly a grid defense. David Dunbar (Chairman, President and Chief Executive Officer) There is a defense component in electronics, and I mentioned it earlier, our sales of bare switches, reed switches, was up Gary Presto Pino (Equity Analyst at Barrington) 20% year on year. So those go everywhere. David Dunbar (Chairman, President and Chief Executive Officer) So a sign of kind of general Gary Presto Pino (Equity Analyst at Barrington) industry strength, primarily in Asia. David Dunbar (Chairman, President and Chief Executive Officer) And our relay sales are strong, driven by kind of test and measurement equipment, Gary Presto Pino (Equity Analyst at Barrington) similar drivers to the grid serving data centers and the equipment that go into data centers. David Dunbar (Chairman, President and Chief Executive Officer) Now, another way to look at it, we have three businesses in there, as you know. We've got what we used to call magnetics. Gary Presto Pino (Equity Analyst at Barrington) Our edge business, which is really a North American business that was. That was down in the quarter, year David Dunbar (Chairman, President and Chief Executive Officer) on year, largely due to some execution issues. Their book to Bill was very strong. The SST business, which is where the Gary Presto Pino (Equity Analyst at Barrington) switches and sensors are, was upper single digits. David Dunbar (Chairman, President and Chief Executive Officer) That includes the switch business I talked Gary Presto Pino (Equity Analyst at Barrington) about before, and then grid, of course, which we talked about. David Dunbar (Chairman, President and Chief Executive Officer) So kind of that triangulates into your. Gary Presto Pino (Equity Analyst at Barrington) Your growth question from a couple different angles. David Dunbar (Chairman, President and Chief Executive Officer) Okay, thank you. OPERATOR And at this time, Mr. Dunbar, we have no other questions registered. Please proceed, sir. David Dunbar (Chairman, President and Chief Executive Officer) All right. Thank you. Appreciate everybody connecting today on this call. We always enjoy reporting on our progress at Standex. Thank you also to our employees and shareholders for your continued support and contributions. I look forward to speaking with you again in our fiscal fourth quarter call. 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