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Kimball Electronics Inc

Kimball Electronics Reports Q1 Results and Confirms Guidance for Fiscal Year 2025, Company Continues to Sharpen Its Strategic Focus With Closure of Its Manufacturing Facility in Tampa, FL

First Quarter Fiscal 2025 Highlights

  • Net sales totaled $374.3 million
  • Operating income of $9.1 million, or 2.4% of net sales, adjusted operating income of 3.4%
  • Cash generated by operating activities of $45.5 million, borrowings on credit facilities reduced to 2-year low
  • Company continues to sharpen its strategic focus by completing the divestiture of the Automation, Test, and Measurement business and announcing the closure of its manufacturing facility in Tampa, FL

JASPER, Ind.--(BUSINESS WIRE)--Nov. 4, 2024-- Kimball Electronics, Inc. (Nasdaq: KE) today announced financial results for the first quarter ended September 30, 2024.

This press release features multimedia. View the full release here: https://www.businesswire.com/news/home/20241104047813/en/

 

Three Months Ended

 

September 30,

(Amounts in Thousands, except EPS)

 

2024

 

 

 

2023

 

Net Sales

$

374,256

 

 

$

438,081

 

Operating Income

$

9,115

 

 

$

19,490

 

Adjusted Operating Income (non-GAAP) (1)

$

12,590

 

 

$

21,006

 

Operating Income %

 

2.4

%

 

 

4.4

%

Adjusted Operating Income (non-GAAP) %

 

3.4

%

 

 

4.8

%

Net Income

$

3,154

 

 

$

10,754

 

Adjusted Net Income (non-GAAP) (1)

$

5,527

 

 

$

12,038

 

Diluted EPS

$

0.12

 

 

$

0.43

 

Adjusted Diluted EPS (non-GAAP) (1)

$

0.22

 

 

$

0.48

 

(1)

Beginning in the first quarter of fiscal year 2025, adjusted results exclude stock compensation expense. Prior reported periods have been revised accordingly. A reconciliation of GAAP and non-GAAP financial measures is included below.

Commenting on today’s announcement, Richard D. Phillips, Chief Executive Officer, stated, “Q1 represents another chapter of ‘controlling what we can control’ while navigating the challenging operating environment stemming from sustained end market weakness. Our results for the quarter were in line with expectations, considering the difficult comparisons from a record-setting Q1 last year. We continue to adjust costs, improve working capital management, and generate positive cash flow used to pay down debt. We made meaningful progress in the quarter with debt levels at a 2-year low, a result of the cash generated from operating activities and the proceeds from the disposition of the Automation, Test, and Measurement business, with its divestiture closing in July.”

Mr. Phillips continued, “As part of sharpening our strategic focus, we’re also announcing a plan to leverage the capacity in our global footprint and further streamline the operating structure. Production activities on existing customer programs will be transferred out of Tampa, with the majority of the work going to the newly expanded facility in Mexico and Jasper. Operations in Tampa are expected to cease by the end of the fiscal year, and we anticipate the facility closing in Q1 of fiscal 2026. We are grateful to the employees in Tampa and their accomplishments while part of Kimball, including supplying ventilators to those in need during the pandemic. This decision is based on the preferences of our customers, our outlook for US manufacturing, and an objective to improve the Company’s competitive positioning in the market, strengthen the balance sheet, increase liquidity, and improve financial flexibility. We are confirming our guidance for the full fiscal year and look forward to the future.”

The Company ended the first quarter of fiscal 2025 with cash and cash equivalents of $76.6 million and borrowings outstanding on credit facilities of $245.9 million, including $200.0 million classified as long term. As of September 30, 2024, the Company had $186.8 million of borrowing capacity available. Cash generated from operating activities in the first quarter totaled $45.5 million and capital expenditures were $13.5 million, and the Company invested $2.9 million to repurchase 160,000 shares of common stock.

Net Sales by Vertical Market for Q1 Fiscal 2025:

 

Three Months Ended

 

 

 

September 30,

 

 

(Amounts in Millions)

2024

 

*

 

2023

 

*

 

Percent Change

Automotive

$

188.4

 

50%

 

$

212.5

 

49%

 

(11)%

Medical

 

89.8

 

24%

 

 

102.4

 

23%

 

(12)%

Industrial excluding AT&M (1)

 

94.0

 

25%

 

 

112.9

 

26%

 

(17)%

Net Sales excluding AT&M (1)

$

372.2

 

99%

 

$

427.8

 

98%

 

(13)%

AT&M (1)

 

2.1

 

1%

 

 

10.3

 

2%

 

(80)%

Total Net Sales

$

374.3

 

 

 

$

438.1

 

 

 

(15)%

 

 

 

 

 

 

 

 

 

 

* As a percent of Total Net Sales

 

 

(1) Sales from our Automation, Test, and Measurement business (AT&M), which was divested effective July 31, 2024, were previously included in the Industrial vertical

– Automotive includes electronic power steering, body controls, automated driver assist systems, and electronic braking systems

– Medical includes sleep therapy and respiratory care, image guided therapy, in vitro diagnostics, drug delivery, AED, and patient monitoring

– Industrial includes climate controls, automation controls, and public safety

Company guidance for fiscal year 2025:

  • Net sales in the range of $1.440 - $1.540 billion, an 8% to 14% decline year-over-year when excluding net sales from Automation, Test, and Measurement
  • Adjusted operating income of 4.0% - 4.5% of net sales(a)
  • Capital expenditures of $40 - $50 million

(a)

Fiscal year 2025 guidance reflects a change in our adjusted operating income calculation beginning in fiscal year 2025, which excludes stock compensation expense. This change better aligns our presentation with others in our industry. A reconciliation of GAAP and non-GAAP financial measures is included below.

Forward-Looking Statements

Certain statements contained within this release are considered forward-looking, including our guidance, under the Private Securities Litigation Reform Act of 1995. The statements may be identified by the use of words such as “expect,” “should,” “goal,” “predict,” “will,” “future,” “optimistic,” “confident,” and “believe.” Undue reliance should not be placed on these forward-looking statements. These statements are based on current expectations of future events and thus are inherently subject to uncertainty. If underlying assumptions prove inaccurate or known or unknown risks or uncertainties materialize, actual results could vary materially from our expectations and projections. These forward-looking statements are subject to risks and uncertainties including, without limitation, global economic conditions, geopolitical environment and conflicts such as the war in Ukraine, global health emergencies, availability or cost of raw materials and components, foreign exchange rate fluctuations, and our ability to convert new business opportunities into customers and revenue. Additional cautionary statements regarding other risk factors that could have an effect on the future performance of the company are contained in its Annual Report on Form 10-K for the year ended June 30, 2024.

Non-GAAP Financial Measures

This press release contains non-GAAP financial measures. The non-GAAP financial measures contained herein include constant currency growth, net sales excluding Automation, Test & Measurement, adjusted selling and administrative expenses, adjusted operating income, adjusted net income, adjusted diluted EPS, and ROIC. Reconciliations of the reported GAAP numbers to these non-GAAP financial measures are included in the Reconciliation of Non-GAAP Financial Measures section below. Management believes these measures are useful and allow investors to meaningfully trend, analyze, and benchmark the performance of the company’s core operations. The company’s non-GAAP financial measures are not necessarily comparable to non-GAAP information used by other companies.

About Kimball Electronics, Inc.

Kimball Electronics is a global, multifaceted manufacturing solutions provider of electronics and diversified contract manufacturing services to customers around the world. From our operations in the United States, China, Mexico, Poland, Romania, and Thailand, our teams are proud to provide manufacturing services for a variety of industries. Recognized for a reputation of excellence, we are committed to a high-performance culture that values personal and organizational commitment to quality, reliability, value, speed, and ethical behavior. Kimball Electronics, Inc. (Nasdaq: KE) is headquartered in Jasper, Indiana.

To learn more about Kimball Electronics, visit www.kimballelectronics.com.

Conference Call / Webcast

 

 

 

Date:

 

November 5, 2024

Time:

 

10:00 AM Eastern Time

Live Webcast:

 

investors.kimballelectronics.com/events-and-presentations/events

Dial-In #:

 

877-407-8293 (or 201-689-8349)

For those unable to participate in the live webcast, the call will be archived at investors.kimballelectronics.com.

Lasting relationships. Global success.

Financial highlights for the first quarter ended September 30, 2024 are as follows:

Condensed Consolidated Statements of Income

(Unaudited)

Three Months Ended

(Amounts in Thousands, except Per Share Data)

September 30, 2024

 

September 30, 2023

Net Sales

$

374,256

 

 

100.0

%

 

$

438,081

 

 

100.0

%

Cost of Sales

 

350,656

 

 

93.7

%

 

 

402,539

 

 

91.9

%

Gross Profit

 

23,600

 

 

6.3

%

 

 

35,542

 

 

8.1

%

Selling and Administrative Expenses

 

13,427

 

 

3.6

%

 

 

16,052

 

 

3.7

%

Restructuring Expense

 

2,322

 

 

0.6

%

 

 

—

 

 

—

%

Gain on Disposal

 

(1,264

)

 

(0.3

)%

 

 

—

 

 

—

%

Operating Income

 

9,115

 

 

2.4

%

 

 

19,490

 

 

4.4

%

Interest Income

 

222

 

 

0.1

%

 

 

299

 

 

0.1

%

Interest Expense

 

(4,792

)

 

(1.3

)%

 

 

(5,447

)

 

(1.2

)%

Non-Operating Income (Expense), net

 

(1,661

)

 

(0.4

)%

 

 

(1,131

)

 

(0.3

)%

Other Income (Expense), net

 

(6,231

)

 

(1.6

)%

 

 

(6,279

)

 

(1.4

)%

Income Before Taxes on Income

 

2,884

 

 

0.8

%

 

 

13,211

 

 

3.0

%

Provision for Income Taxes

 

(270

)

 

—

%

 

 

2,457

 

 

0.5

%

Net Income

$

3,154

 

 

0.8

%

 

$

10,754

 

 

2.5

%

 

 

 

 

 

 

 

 

Earnings Per Share of Common Stock:

 

 

 

 

 

 

 

Basic

$

0.13

 

 

 

 

$

0.43

 

 

 

Diluted

$

0.12

 

 

 

 

$

0.43

 

 

 

Average Number of Shares Outstanding:

 

 

 

 

 

 

 

Basic

 

24,979

 

 

 

 

 

25,041

 

 

 

Diluted

 

25,235

 

 

 

 

 

25,238

 

 

 

Condensed Consolidated Statements of Cash Flows

Three Months Ended

(Unaudited)

September 30,

(Amounts in Thousands)

 

2024

 

 

 

2023

 

Net Cash Flow provided by Operating Activities

$

45,474

 

 

$

12,801

 

Net Cash Flow provided by (used for) Investing Activities

 

5,226

 

 

 

(11,302

)

Net Cash Flow (used for) provided by Financing Activities

 

(52,954

)

 

 

13,985

 

Effect of Exchange Rate Change on Cash, Cash Equivalents, and Restricted Cash

 

1,830

 

 

 

(549

)

Net (Decrease) Increase in Cash, Cash Equivalents, and Restricted Cash

 

(424

)

 

 

14,935

 

Cash, Cash Equivalents, and Restricted Cash at Beginning of Period

 

78,779

 

 

 

43,864

 

Cash, Cash Equivalents, and Restricted Cash at End of Period

$

78,355

 

 

$

58,799

 

 

(Unaudited)

 

 

Condensed Consolidated Balance Sheets

September 30,
2024

 

June 30,
2024

(Amounts in Thousands)

ASSETS

 

 

 

Cash and cash equivalents

$

76,564

 

 

$

77,965

 

Receivables, net

 

264,036

 

 

 

282,336

 

Contract assets

 

74,326

 

 

 

76,320

 

Inventories

 

335,272

 

 

 

338,116

 

Prepaid expenses and other current assets

 

32,496

 

 

 

44,682

 

Assets held for sale

 

—

 

 

 

27,587

 

Property and Equipment, net

 

275,674

 

 

 

269,659

 

Goodwill

 

6,191

 

 

 

6,191

 

Other Intangible Assets, net

 

2,880

 

 

 

2,994

 

Other Assets, net

 

81,617

 

 

 

82,069

 

Total Assets

$

1,149,056

 

 

$

1,207,919

 

 

 

 

 

LIABILITIES AND SHARE OWNERS’ EQUITY

 

 

 

Current portion of borrowings under credit facilities

$

45,915

 

 

$

59,837

 

Accounts payable

 

216,704

 

 

 

213,551

 

Advances from customers

 

35,616

 

 

 

30,151

 

Accrued expenses

 

45,492

 

 

 

63,189

 

Liabilities held for sale

 

—

 

 

 

8,594

 

Long-term debt under credit facilities, less current portion

 

200,000

 

 

 

235,000

 

Long-term income taxes payable

 

—

 

 

 

3,255

 

Other long-term liabilities

 

57,571

 

 

 

53,881

 

Share Owners’ Equity

 

547,758

 

 

 

540,461

 

Total Liabilities and Share Owners’ Equity

$

1,149,056

 

$

1,207,919

Other Financial Metrics

(Unaudited)

(Amounts in Millions, except CCD)

 

At or For the

 

Three Months Ended

 

September 30,

 

June 30,

 

September 30,

 

2024

 

2024

 

2023

Depreciation and Amortization

$

9.2

 

 

$

9.5

 

 

$

9.0

Cash Conversion Days (CCD) (1)

 

108

 

 

 

100

 

 

 

103

Open Orders (2)

$

594

 

$

714

 

$

907

(1)

Cash Conversion Days (“CCD”) are calculated as the sum of Days Sales Outstanding plus Contract Asset Days plus Production Days Supply on Hand less Accounts Payable Days and less Advances from Customers Days. CCD, or a similar metric, is used in our industry and by our management to measure the efficiency of managing working capital.

(2)

Open Orders are the aggregate sales price of production pursuant to unfulfilled customer orders. Our declining open orders are primarily due to the cancellation of a major automotive program and other demand reductions, as well as reduced lead times on customer orders as compared to September 30, 2023, when parts were more constrained.

Select Financial Results of Automation, Test and Measurement

(Unaudited)

(Amounts in Millions)

 

Three Months Ended

 

September 30,

 

 

2024

 

 

 

2023

 

Net Sales

$

2.1

 

 

$

10.3

 

Operating Income (Loss) (1)

$

0.8

 

$

(0.2

)

(1)

Includes gain on sale of $1.3 million following the close of the sale on July 31, 2024 for the three months ended September 30, 2024. Each period also includes allocated corporate overhead expenses.

Reconciliation of Non-GAAP Financial Measures

 

 

 

(Unaudited, Amounts in Thousands, except Per Share Data)

 

 

 

 

Three Months Ended

 

September 30,

 

 

2024

 

 

 

2023

 

Net Sales Growth (vs. same period in prior year)

 

(15

)%

 

 

8

%

Foreign Currency Exchange Impact

 

—

%

 

 

1

%

Constant Currency Growth

 

(15

)%

 

 

7

%

 

 

 

 

Selling and Administrative Expenses, as reported

$

13,427

 

 

$

16,052

 

Stock Compensation Expense

 

(2,072

)

 

 

(1,693

)

SERP

 

(345

)

 

 

177

 

Adjusted Selling and Administrative Expenses

$

11,010

 

 

$

14,536

 

 

 

 

 

Operating Income (Loss), as reported

$

9,115

 

 

$

19,490

 

Stock Compensation Expense

 

2,072

 

 

 

1,693

 

SERP

 

345

 

 

 

(177

)

Restructuring Expense

 

2,322

 

 

 

—

 

Gain on Disposal

 

(1,264

)

 

 

—

 

Adjusted Operating Income

$

12,590

 

 

$

21,006

 

 

 

 

 

Net Income (Loss), as reported

$

3,154

 

 

$

10,754

 

Stock Compensation Expense, After-Tax

 

1,571

 

 

 

1,284

 

Restructuring Expense, After-Tax

 

1,761

 

 

 

—

 

Gain on Disposal, After-Tax

 

(959

)

 

 

—

 

Adjusted Net Income

$

5,527

 

 

$

12,038

 

 

 

 

 

Diluted Earnings per Share, as reported

$

0.12

 

 

$

0.43

 

Stock Compensation Expense

 

0.06

 

 

 

0.05

 

Restructuring Expense

 

0.07

 

 

 

—

 

Gain on Disposal

 

(0.03

)

 

 

—

 

Adjusted Diluted Earnings per Share

$

0.22

 

 

$

0.48

 

 

 

 

 

 

Twelve Months Ended

 

September 30,

 

 

2024

 

 

 

2023

 

Operating Income

$

38,902

 

 

$

93,648

 

Goodwill Impairment

 

5,820

 

 

 

—

 

Stock Compensation Expense

 

7,564

 

 

 

6,975

 

SERP

 

1,202

 

 

 

759

 

Legal Recovery

 

(892

)

 

 

(212

)

Restructuring Expense

 

4,708

 

 

 

—

 

Asset Impairment and Gain on Disposal

 

15,776

 

 

 

—

 

Adjusted Operating Income (non-GAAP)

$

73,080

 

 

$

101,170

 

Tax Effect

 

16,285

 

 

 

24,625

 

After-tax Adjusted Operating Income

$

56,795

 

 

$

76,545

 

Average Invested Capital (1)

$

773,016

 

 

$

738,096

 

ROIC

 

7.3

%

 

 

10.4

%

(1)

Average invested capital is computed using Share Owners’ equity plus current and non-current debt less cash and cash equivalents averaged for the last five quarters.

 

Andrew D. Regrut
Treasurer and Investor Relations Officer
812.827.4151
Investor.Relations@kimballelectronics.com

Source: Kimball Electronics, Inc.