KE Kimball Electronics Inc

• Net sales totaled $421.2 million, a 4% decrease compared to the second quarter of fiscal 2023; foreign currency had a 1% favorable impact on net sales year-over-year
• Operating income of $16.6 million, or 3.9% of net sales, compared to $17.5 million or 4.0% of net sales, in the same period last year
• Adjusted operating income of $17.1 million, or 4.1% of net sales, compared to $17.8 million, or 4.1% of net sales, in the same period last year
• Net income of $8.3 million, or $0.33 per diluted share, compared to $10.7 million, or $0.43 per diluted share, in the second quarter of fiscal 2023

Kimball Electronics, Inc. (Nasdaq: KE) today announced financial results for the second quarter of fiscal 2024.

This press release features multimedia. View the full release here: https://www.businesswire.com/news/home/20240205258456/en/

 

 

 

 

 

 

 

 

Three Months Ended

 

Six Months Ended

 

December 31,

 

December 31,

(Amounts in Thousands, except EPS)

2023

 

2022

 

2023

 

2022

Net Sales

$

421,235

 

 

$

436,696

 

 

$

859,316

 

 

$

842,585

 

Operating Income

$

16,610

 

 

$

17,489

 

 

$

36,100

 

 

$

31,060

 

Adjusted Operating Income (non-GAAP) (1)

$

17,094

 

 

$

17,829

 

 

$

36,407

 

 

$

31,165

 

Operating Income %

 

3.9

%

 

 

4.0

%

 

 

4.2

%

 

 

3.7

%

Adjusted Operating Income (non-GAAP) %

 

4.1

%

 

 

4.1

%

 

 

4.2

%

 

 

3.7

%

Net Income

$

8,290

 

 

$

10,720

 

 

$

19,044

 

 

$

20,229

 

Adjusted Net Income (non-GAAP) (1)

$

8,290

 

 

$

10,999

 

 

$

19,044

 

 

$

20,508

 

Diluted EPS

$

0.33

 

 

$

0.43

 

 

$

0.75

 

 

$

0.81

 

Adjusted Diluted EPS (non-GAAP) (1)

$

0.33

 

 

$

0.44

 

 

$

0.75

 

 

$

0.82

 

(1) A reconciliation of GAAP and non-GAAP financial measures is included below.

Richard D. Phillips, Chief Executive Officer, stated, “As we expected, the second quarter of fiscal 2024 was hard fought, with our team navigating a challenging operating environment. Global macro headwinds have persisted, and the consumer is pulling back. The markets we serve are experiencing demand softening, and our customers are changing production schedules and delivery date requirements. Sales in Q2 declined compared to the same period last year, with manufacturing output in the quarter being reduced to meet the lower demand. Margins, on the other hand, remained stable, thanks in part to proactive measures taken to align our cost structure with slowing sales. We expect industry-wide pressures for the remainder of fiscal 2024, and we have updated our guidance for sales and operating income for the full year to reflect these trends.”

Mr. Phillips continued, “Based on what we know today, it seems likely the macro environment will remain challenging for some time. Despite this near-term choppiness, we did not change our guidance for capital expenditures in fiscal 2024 as we continue to invest in long-term growth opportunities. With a strong funnel of new business supported by favorable industry megatrends, we’re deploying a balanced capital allocation strategy focused on organic growth, global expansion, and long-lasting customer relationships.”

The Company ended the second quarter of fiscal 2024 with cash and cash equivalents of $39.9 million and borrowings outstanding on credit facilities of $321.8 million, including $235.0 million classified as long term, and $65.8 million of borrowing capacity available. Cash flow used from operating activities in the second quarter of fiscal 2024 was $30.7 million and capital expenditures were $13.2 million.

Net Sales by Vertical Market for Q2 Fiscal 2024:

 

Three Months Ended

 

 

 

Six Months Ended

 

 

 

December 31,

 

 

 

December 31,

 

 

(Amounts in Millions)

 

2023

 

*

 

 

2022

 

*

 

Percent Change

 

 

2023

 

*

 

 

2022

 

*

 

Percent Change

Automotive (1)

$

200.2

 

47

%

 

$

205.2

 

47

%

 

(2

)%

 

$

412.7

 

48

%

 

$

393.4

 

47

%

 

5

%

Medical (1)

 

108.1

 

26

%

 

 

125.6

 

29

%

 

(14

)%

 

 

210.5

 

25

%

 

 

241.6

 

28

%

 

(13

)%

Industrial (1)

 

112.9

 

27

%

 

 

105.9

 

24

%

 

7

%

 

 

236.1

 

27

%

 

 

207.6

 

25

%

 

14

%

Total Net Sales

$

421.2

 

 

 

$

436.7

 

 

 

(4

)%

 

$

859.3

 

 

 

$

842.6

 

 

 

2

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

* As a percent of Total Net Sales

 

 

 

 

 

 

 

 

 

 

 

 

(1) Beginning in fiscal year 2024, miscellaneous sales previously reported in Other are now reported in the respective three end market verticals; all

prior periods have been recast to conform to current period presentation

– 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, optical inspection, and public safety

Guidance for Fiscal Year 2024

The Company updated its guidance for fiscal year 2024 with net sales expected to decline 2% to 4%, compared to fiscal year 2023. As a reminder, the previous guidance was an estimate of net sales flat with the prior year. Operating income is now expected to be in the range of 4.2% to 4.6% of net sales, compared to the prior estimate of flat with fiscal 2023. The guidance for capital expenditures did not change with a range of $70 to $80 million.

Commenting on today’s update, Jana T. Croom, Chief Financial Officer, stated, “It is important to highlight that our second quarter results included an atypical charge in selling and administrative expenses. We recorded a $2 million allowance for credit losses associated with a customer who is not in bankruptcy, but their ability to pay an outstanding balance was deemed questionable. This item negatively impacted our operating income by approximately 40 basis points in the quarter.”

Ms. Croom continued, “We remain focused on working capital management, and while inventory levels did improve in Q2, we still have an opportunity to drive down cash conversion days with better management of receivables and payables which will support a return to free cash flow generation in future quarters.”

Forward-Looking Statements

Certain statements contained within this release are considered forward-looking, including our fiscal year 2024 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, 2023.

Non-GAAP Financial Measures

This press release contains non-GAAP financial measures. The non-GAAP financial measures contained herein include constant currency growth, 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 multifaceted manufacturing solutions provider of electronics and diversified contract manufacturing services to customers around the world. From our operations in the United States, China, India, Japan, Mexico, Poland, Romania, Thailand, and Vietnam, 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:

 

February 6, 2024

Time:

 

10:00 AM Eastern Time

Live Webcast:

 

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

Dial-In #:

 

404-975-4839 (other locations - 833-470-1428)

Conference ID:

 

626792

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 second quarter and year-to-date period ended December 31, 2023 are as follows:

Condensed Consolidated Statements of Income

(Unaudited)

Three Months Ended

(Amounts in Thousands, except Per Share Data)

December 31, 2023

 

December 31, 2022

Net Sales

$

421,235

 

 

100.0

%

 

$

436,696

 

 

100.0

%

Cost of Sales

 

386,802

 

 

91.8

%

 

 

402,505

 

 

92.2

%

Gross Profit

 

34,433

 

 

8.2

%

 

 

34,191

 

 

7.8

%

Selling and Administrative Expenses

 

17,823

 

 

4.3

%

 

 

16,702

 

 

3.8

%

Operating Income

 

16,610

 

 

3.9

%

 

 

17,489

 

 

4.0

%

Interest Income

 

101

 

 

—

%

 

 

26

 

 

—

%

Interest Expense

 

(6,137

)

 

(1.5

)%

 

 

(4,048

)

 

(0.9

)%

Non-Operating Income (Expense), net

 

702

 

 

0.3

%

 

 

726

 

 

0.2

%

Other Income (Expense), net

 

(5,334

)

 

(1.2

)%

 

 

(3,296

)

 

(0.7

)%

Income Before Taxes on Income

 

11,276

 

 

2.7

%

 

 

14,193

 

 

3.3

%

Provision for Income Taxes

 

2,986

 

 

0.7

%

 

 

3,473

 

 

0.8

%

Net Income

$

8,290

 

 

2.0

%

 

$

10,720

 

 

2.5

%

 

 

 

 

 

 

 

 

Earnings Per Share of Common Stock:

 

 

 

 

 

 

 

Basic

$

0.33

 

 

 

 

$

0.43

 

 

 

Diluted

$

0.33

 

 

 

 

$

0.43

 

 

 

Average Number of Shares Outstanding:

 

 

 

 

 

 

 

Basic

 

25,094

 

 

 

 

 

24,881

 

 

 

Diluted

 

25,211

 

 

 

 

 

25,000

 

 

 

 

 

 

 

 

 

 

 

(Unaudited)

Six Months Ended

(Amounts in Thousands, except Per Share Data)

December 31, 2023

 

December 31, 2022

Net Sales

$

859,316

 

 

100.0

%

 

$

842,585

 

 

100.0

%

Cost of Sales

 

789,341

 

 

91.9

%

 

 

779,073

 

 

92.5

%

Gross Profit

 

69,975

 

 

8.1

%

 

 

63,512

 

 

7.5

%

Selling and Administrative Expenses

 

33,875

 

 

3.9

%

 

 

32,452

 

 

3.8

%

Operating Income

 

36,100

 

 

4.2

%

 

 

31,060

 

 

3.7

%

Interest Income

 

400

 

 

—

%

 

 

43

 

 

—

%

Interest Expense

 

(11,584

)

 

(1.3

)%

 

 

(5,968

)

 

(0.7

)%

Non-Operating Income (Expense), net

 

(429

)

 

(0.1

)%

 

 

1,226

 

 

0.1

%

Other Income (Expense), net

 

(11,613

)

 

(1.4

)%

 

 

(4,699

)

 

(0.6

)%

Income Before Taxes on Income

 

24,487

 

 

2.8

%

 

 

26,361

 

 

3.1

%

Provision for Income Taxes

 

5,443

 

 

0.6

%

 

 

6,132

 

 

0.7

%

Net Income

$

19,044

 

 

2.2

%

 

$

20,229

 

 

2.4

%

 

 

 

 

 

 

 

 

Earnings Per Share of Common Stock:

 

 

 

 

 

 

 

Basic

$

0.76

 

 

 

 

$

0.81

 

 

 

Diluted

$

0.75

 

 

 

 

$

0.81

 

 

 

 

 

 

 

 

 

 

 

Average Number of Shares Outstanding:

 

 

 

 

 

 

 

Basic

 

25,067

 

 

 

 

 

24,854

 

 

 

Diluted

 

25,240

 

 

 

 

 

24,985

 

 

 

  Condensed Consolidated Statements of Cash Flows

Six Months Ended

(Unaudited)

December 31,

(Amounts in Thousands)

2023

 

2022

Net Cash Flow used for Operating Activities

$

(17,922

)

 

$

(71,921

)

Net Cash Flow used for Investing Activities

 

(24,365

)

 

 

(41,886

)

Net Cash Flow provided by Financing Activities

 

38,859

 

 

 

91,435

 

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

 

368

 

 

 

(593

)

Net Decrease in Cash, Cash Equivalents, and Restricted Cash

 

(3,060

)

 

 

(22,965

)

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

 

43,864

 

 

 

49,851

 

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

$

40,804

 

 

$

26,886

 

 

(Unaudited)

 

 

Condensed Consolidated Balance Sheets

December 31,

2023

 

June 30,

2023

(Amounts in Thousands)

ASSETS

 

 

 

Cash and cash equivalents

$

39,947

 

$

42,955

Receivables, net

 

309,702

 

 

308,167

Contract assets

 

81,891

 

 

78,798

Inventories

 

455,736

 

 

450,319

Prepaid expenses and other current assets

 

43,226

 

 

49,188

Property and Equipment, net

 

275,984

 

 

267,684

Goodwill

 

12,011

 

 

12,011

Other Intangible Assets, net

 

10,993

 

 

12,335

Other Assets

 

47,544

 

 

38,262

Total Assets

$

1,277,034

 

$

1,259,719

 

 

 

 

LIABILITIES AND SHARE OWNERS’ EQUITY

 

 

 

Current portion of borrowings under credit facilities

$

86,765

 

$

46,454

Accounts payable

 

279,909

 

 

322,274

Advances from customers

 

42,717

 

 

33,905

Accrued expenses

 

63,448

 

 

72,515

Long-term debt under credit facilities, less current portion

 

235,000

 

 

235,000

Long-term income taxes payable

 

3,255

 

 

5,859

Other long-term liabilities

 

18,951

 

 

19,718

Share Owners’ Equity

 

546,989

 

 

523,994

Total Liabilities and Share Owners’ Equity

$

1,277,034

 

$

1,259,719

 

Other Financial Metrics

(Unaudited)

(Amounts in Millions, except CCD)

 

At or For the

 

 

 

 

 

Three Months Ended

 

Six Months Ended

 

December 31,

 

December 31,

 

2023

 

2022

 

2023

 

2022

Depreciation and Amortization

$

9.1

 

$

8.0

 

$

18.1

 

$

15.6

Stock-Based Compensation

$

2.0

 

$

1.7

 

$

3.7

 

$

3.4

Cash Conversion Days (CCD) (1)

 

117

 

 

97

 

 

 

 

Open Orders (2)

$

836

 

$

1,037

 

 

 

 

(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.

 

Reconciliation of Non-GAAP Financial Measures

(Unaudited)

(Amounts in Thousands, except Per Share Data)

 

Three Months Ended

 

Six Months Ended

 

December 31,

 

December 31,

 

2023

 

2022

 

2023

 

2022

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

 

(4

)%

 

 

39

%

 

 

2

%

 

 

39

%

Foreign Currency Exchange Impact

 

1

%

 

 

(5

)%

 

 

1

%

 

 

(5

)%

Constant Currency Growth

 

(5

)%

 

 

44

%

 

 

1

%

 

 

44

%

 

 

 

 

 

 

 

 

Selling and Administrative Expenses, as reported

$

17,823

 

 

$

16,702

 

 

$

33,875

 

 

$

32,452

 

SERP

 

(484

)

 

 

(340

)

 

 

(307

)

 

 

(105

)

Adjusted Selling and Administrative Expenses

$

17,339

 

 

$

16,362

 

 

$

33,568

 

 

$

32,347

 

 

 

 

 

 

 

 

 

Operating Income, as reported

$

16,610

 

 

$

17,489

 

 

$

36,100

 

 

$

31,060

 

SERP

 

484

 

 

 

340

 

 

 

307

 

 

 

105

 

Adjusted Operating Income

$

17,094

 

 

$

17,829

 

 

$

36,407

 

 

$

31,165

 

 

 

 

 

 

 

 

 

Net Income, as reported

$

8,290

 

 

$

10,720

 

 

$

19,044

 

 

$

20,229

 

Adjustments After Measurement Period on GES Acquisition

 

—

 

 

 

279

 

 

 

—

 

 

 

279

 

Adjusted Net Income

$

8,290

 

 

$

10,999

 

 

$

19,044

 

 

$

20,508

 

 

 

 

 

 

 

 

 

Diluted Earnings per Share, as reported

$

0.33

 

 

$

0.43

 

 

$

0.75

 

 

$

0.81

 

Adjustments After Measurement Period on GES Acquisition

 

—

 

 

 

0.01

 

 

 

—

 

 

 

0.01

 

Adjusted Diluted Earnings per Share

$

0.33

 

 

$

0.44

 

 

$

0.75

 

 

$

0.82

 

 

 

 

 

 

 

 

 

 

 

 

Twelve Months Ended

 

 

 

December 31,

 

 

 

 

 

2023

 

2022

Operating Income

 

 

 

 

$

92,769

 

 

$

71,915

 

SERP

 

 

 

 

 

903

 

 

 

(1,773

)

Legal Recovery

 

 

 

 

 

(212

)

 

 

—

 

Adjusted Operating Income (non-GAAP)

 

 

 

 

$

93,460

 

 

$

70,142

 

Tax Effect

 

 

 

 

 

23,204

 

 

 

18,856

 

After-tax Adjusted Operating Income

 

 

 

 

$

70,256

 

 

$

51,286

 

Average Invested Capital (1)

 

 

 

 

$

770,051

 

 

$

605,772

 

ROIC

 

 

 

 

 

9.1

%

 

 

8.5

%

 

(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.

 

View source version on businesswire.com: https://www.businesswire.com/news/home/20240205258456/en/

Andrew D. Regrut Vice President, Investor Relations 812.827.4151 Investor.Relations@kimballelectronics.com