Kimball Electronics, Inc. (Nasdaq: KE) today announced financial
results for the third quarter of fiscal 2024 with net sales
totaling $425.0 million and a net loss of $6.1 million, or $0.24
per share. This result includes the impairment of the Automation,
Test & Measurement business, which the Company expects to
divest, along with restructuring expense, partially offset by the
recovery of a legal settlement. A detailed reconciliation is
provided later in this release.
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- Excluding these items, adjusted net income in the third quarter
of fiscal 2024 totaled $8.4 million, or $0.34 per diluted share,
and adjusted operating income equaled $17.0 million, or 4.0% of net
sales.
- Cash flow from operating activities in the quarter was $42.6
million driven by inventory reductions.
- Company sharpens strategic focus on EMS operations and aligns
cost structure to short-term demand trends.
- Guidance for adjusted operating income in fiscal 2024
reiterated, while the estimate for net sales was updated, in
response to the challenging operating environment, and capital
expenditures strategically reduced.
- Resumption of share repurchases approved by the Board of
Directors.
Three Months Ended
Nine Months Ended
March 31,
March 31,
(Amounts in Thousands, except EPS)
2024
2023
2024
2023
Net Sales
$
425,036
$
484,703
$
1,284,352
$
1,327,288
Operating Income
$
(6,431
)
$
25,220
$
29,669
$
56,280
Adjusted Operating Income (non-GAAP)
(1)
$
16,960
$
25,573
$
53,367
$
56,738
Operating Income %
(1.5
)%
5.2
%
2.3
%
4.2
%
Adjusted Operating Income (non-GAAP) %
4.0
%
5.3
%
4.2
%
4.3
%
Net Income (Loss)
$
(6,076
)
$
16,400
$
12,968
$
36,629
Adjusted Net Income (non-GAAP) (1)
$
8,441
$
16,400
$
27,485
$
36,908
Diluted EPS
$
(0.24
)
$
0.65
$
0.51
$
1.46
Adjusted Diluted EPS (non-GAAP) (1)
$
0.34
$
0.65
$
1.09
$
1.47
(1) A reconciliation of GAAP and non-GAAP
financial measures is included below.
Commenting on today’s announcement, Richard D. Phillips, Chief
Executive Officer, stated, “As we anticipated, the operating
environment has remained challenged for the EMS industry, and our
sales in the third quarter declined as expected. During this period
of end market softness, we have focused on ‘controlling what we can
control,’ proactively aligning our cost structure with short-term
demand trends, maintaining competitiveness with stable operating
margins, and focusing on working capital improvements.”
Mr. Phillips continued, “We’re taking meaningful steps to
sharpen our strategic focus and further position the Company for
profitable growth, and stronger performance moving forward. With
the expected divestiture of the Automation, Test & Measurement
business, our team can increase focus and support on our core EMS
operations. While we suspect the macro headwinds will persist in
fiscal 2025, we’re continuing to make investments in long-term
growth opportunities supported by a robust funnel for new business
in the next 18-24 months, while deploying a capital allocation
strategy that balances growth, lasting customer relationships, and
returning cash to Share Owners with opportunistic share
repurchases.”
The Company ended the third quarter of fiscal 2024 with cash and
cash equivalents of $65.2 million and borrowings outstanding on
credit facilities of $319.6 million, including $235.0 million
classified as long term, and $117.4 million of borrowing capacity
available. Capital expenditures were $13.4 million in Q3.
Net Sales by Vertical Market for Q3 Fiscal 2024:
Three Months Ended
Nine Months Ended
March 31,
March 31,
(Amounts in Millions)
2024
*
2023
*
Percent Change
2024
*
2023
*
Percent Change
Automotive (1)
$
202.0
47
%
$
221.9
46
%
(9
)%
$
614.7
48
%
$
615.3
46
%
—
%
Medical (1)
113.0
27
%
135.5
28
%
(17
)%
323.5
25
%
377.1
29
%
(14
)%
Industrial (1)
110.0
26
%
127.3
26
%
(14
)%
346.2
27
%
334.9
25
%
3
%
Total Net Sales
$
425.0
$
484.7
(12
)%
$
1,284.4
$
1,327.3
(3
)%
* 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 reiterated its guidance for adjusted operating
income in fiscal year 2024 of 4.2% to 4.6% of net sales. In
response to the current economic environment, net sales are now
expected to decline 4% to 6%, compared to the previous estimate of
a 2% to 4% decrease. Capital expenditures are estimated to be in
the range of $55 to $60 million, compared to the previous guidance
of $70 to $80 million.
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:
May 8, 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:
889032
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 third quarter and year-to-date
period ended March 31, 2024 are as follows:
Condensed Consolidated Statements of
Income
(Unaudited)
Three Months Ended
(Amounts in Thousands, except Per Share
Data)
March 31, 2024
March 31, 2023
Net Sales
$
425,036
100.0
%
$
484,703
100.0
%
Cost of Sales
391,492
92.1
%
441,731
91.1
%
Gross Profit
33,544
7.9
%
42,972
8.9
%
Selling and Administrative Expenses
16,861
3.9
%
17,752
3.7
%
Other General Expense (Income)
(892
)
(0.2
)%
—
—
%
Restructuring Expense
1,622
0.4
%
—
—
%
Goodwill Impairment
5,820
1.4
%
—
—
%
Asset Impairment
16,564
3.9
%
—
—
%
Operating Income (Loss)
(6,431
)
(1.5
)%
25,220
5.2
%
Interest Income
83
—
%
45
—
%
Interest Expense
(5,875
)
(1.4
)%
(4,822
)
(1.0
)%
Non-Operating Income (Expense), net
(530
)
(0.1
)%
1,433
0.3
%
Other Income (Expense), net
(6,322
)
(1.5
)%
(3,344
)
(0.7
)%
Income Before Taxes on Income
(12,753
)
(3.0
)%
21,876
4.5
%
Provision for Income Taxes
(6,677
)
(1.6
)%
5,476
1.1
%
Net Income (Loss)
$
(6,076
)
(1.4
)%
$
16,400
3.4
%
Earnings Per Share of Common Stock:
Basic
$
(0.24
)
$
0.66
Diluted
$
(0.24
)
$
0.65
Average Number of Shares Outstanding:
Basic
25,118
24,898
Diluted
25,118
25,067
(Unaudited)
Nine Months Ended
(Amounts in Thousands, except Per Share
Data)
March 31, 2024
March 31, 2023
Net Sales
$
1,284,352
100.0
%
$
1,327,288
100.0
%
Cost of Sales
1,180,833
91.9
%
1,220,804
92.0
%
Gross Profit
103,519
8.1
%
106,484
8.0
%
Selling and Administrative Expenses
50,736
4.0
%
50,204
3.8
%
Other General Expense (Income)
(892
)
(0.1
)%
—
—
%
Restructuring Expense
1,622
0.1
%
—
—
%
Goodwill Impairment
5,820
0.5
%
—
—
%
Asset Impairment
16,564
1.3
%
—
—
%
Operating Income
29,669
2.3
%
56,280
4.2
%
Interest Income
483
—
%
88
—
%
Interest Expense
(17,459
)
(1.4
)%
(10,790
)
(0.8
)%
Non-Operating Income (Expense), net
(959
)
—
%
2,659
0.2
%
Other Income (Expense), net
(17,935
)
(1.4
)%
(8,043
)
(0.6
)%
Income Before Taxes on Income
11,734
0.9
%
48,237
3.6
%
Provision for Income Taxes
(1,234
)
(0.1
)%
11,608
0.8
%
Net Income
$
12,968
1.0
%
$
36,629
2.8
%
Earnings Per Share of Common Stock:
Basic
$
0.52
$
1.47
Diluted
$
0.51
$
1.46
Average Number of Shares Outstanding:
Basic
25,084
24,868
Diluted
25,263
25,031
Condensed Consolidated Statements of
Cash Flows
Nine Months Ended
(Unaudited)
March 31,
(Amounts in Thousands)
2024
2023
Net Cash Flow provided by (used for)
Operating Activities
$
24,717
$
(57,885
)
Net Cash Flow used for Investing
Activities
(37,702
)
(66,497
)
Net Cash Flow provided by Financing
Activities
36,571
107,148
Effect of Exchange Rate Change on Cash,
Cash Equivalents, and Restricted Cash
(113
)
(294
)
Net Increase (Decrease) in Cash, Cash
Equivalents, and Restricted Cash
23,473
(17,528
)
Cash, Cash Equivalents, and Restricted
Cash at Beginning of Period
43,864
49,851
Cash, Cash Equivalents, and Restricted
Cash at End of Period
$
67,337
$
32,323
(Unaudited)
Condensed Consolidated Balance
Sheets
March 31, 2024
June 30, 2023
(Amounts in Thousands)
ASSETS
Cash and cash equivalents
$
65,208
$
42,955
Receivables, net
277,894
308,167
Contract assets
76,073
78,798
Inventories
396,199
450,319
Prepaid expenses and other current
assets
43,018
49,188
Assets held for sale
29,619
—
Property and Equipment, net
273,823
267,684
Goodwill
6,191
12,011
Other Intangible Assets, net
3,197
12,335
Other Assets
89,606
38,262
Total Assets
$
1,260,828
$
1,259,719
LIABILITIES AND SHARE OWNERS’
EQUITY
Current portion of borrowings under credit
facilities
$
84,618
$
46,454
Accounts payable
248,174
322,274
Advances from customers
36,099
33,905
Accrued expenses
59,621
72,515
Liabilities held for sale
9,369
—
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
45,631
19,718
Share Owners’ Equity
539,061
523,994
Total Liabilities and Share Owners’
Equity
$
1,260,828
$
1,259,719
Other Financial Metrics
(Unaudited)
(Amounts in Millions, except CCD)
At or For the
Three Months Ended
Nine Months Ended
March 31,
March 31,
2024
2023
2024
2023
Depreciation and Amortization
$
10.5
$
8.2
$
28.5
$
23.8
Stock-Based Compensation
$
1.8
$
2.0
$
5.4
$
5.4
Cash Conversion Days (CCD) (1)
110
92
Open Orders (2)
$
831
$
882
(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.
Select Financial Results of Automation,
Test & Measurement
(Unaudited)
(Amounts in Millions)
Three Months Ended
Nine Months Ended
March 31,
March 31,
2024
2023
2024
2023
Net Sales
$
8.1
$
16.8
$
30.9
$
40.6
Operating Income (Loss) (1)
$
(25.4
)
$
1.6
$
(24.3
)
$
0.1
(1)
Includes goodwill impairment of $5.8
million and asset impairment of $16.6 million for the three and
nine months ended March 31, 2024. Also includes allocated corporate
overhead expenses.
Reconciliation of Non-GAAP Financial
Measures
(Unaudited)
(Amounts in Thousands, except Per Share
Data)
Three Months Ended
Nine Months Ended
March 31,
March 31,
2024
2023
2024
2023
Net Sales Growth (vs. same period in prior
year)
(12
)%
32
%
(3
)%
36
%
Foreign Currency Exchange Impact
—
%
(2
)%
—
%
(4
)%
Constant Currency Growth
(12
)%
34
%
(3
)%
40
%
Selling and Administrative Expenses, as
reported
$
16,861
$
17,752
$
50,736
$
50,204
SERP
(277
)
(353
)
(584
)
(458
)
Adjusted Selling and Administrative
Expenses
$
16,584
$
17,399
$
50,152
$
49,746
Operating Income (Loss), as reported
$
(6,431
)
$
25,220
$
29,669
$
56,280
SERP
277
353
584
458
Legal Settlements (Recovery)
(892
)
—
(892
)
—
Restructuring Expense
1,622
—
1,622
—
Goodwill Impairment
5,820
—
5,820
—
Asset Impairment
16,564
—
16,564
—
Adjusted Operating Income
$
16,960
$
25,573
$
53,367
$
56,738
Net Income (Loss), as reported
$
(6,076
)
$
16,400
$
12,968
$
36,629
Adjustments After Measurement Period on
GES Acquisition
—
—
—
279
Legal Settlements (Recovery),
After-Tax
(676
)
—
(676
)
—
Restructuring Expense, After-Tax
1,230
—
1,230
—
Goodwill Impairment, After-Tax
4,414
—
4,414
—
Asset Impairment, After-Tax
9,549
—
9,549
—
Adjusted Net Income
$
8,441
$
16,400
$
27,485
$
36,908
Diluted Earnings per Share, as
reported
$
(0.24
)
$
0.65
$
0.51
$
1.46
Adjustments After Measurement Period on
GES Acquisition
—
—
—
0.01
Legal Settlements (Recovery)
(0.03
)
—
(0.03
)
—
Restructuring Expense
0.05
—
0.05
—
Goodwill Impairment
0.18
—
0.18
—
Asset Impairment
0.38
—
0.38
—
Adjusted Diluted Earnings per Share
$
0.34
$
0.65
$
1.09
$
1.47
Twelve Months Ended
March 31,
2024
2023
Operating Income
$
61,118
$
76,858
Goodwill Impairment
5,820
—
SERP
827
(701
)
Legal Recovery
(1,104
)
—
Restructuring Expense
1,622
—
Asset Impairment
16,564
—
Adjusted Operating Income (non-GAAP)
$
84,847
$
76,157
Tax Effect
19,947
20,375
After-tax Adjusted Operating Income
$
64,900
$
55,782
Average Invested Capital (1)
$
783,059
$
659,911
ROIC
8.3
%
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/20240507684308/en/
Andrew D. Regrut Vice President, Investor Relations 812.827.4151
Investor.Relations@kimballelectronics.com
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