Kimball Electronics Reports Q1 Results with Record Sales and Improving Year-Over-Year Operating Margin; Company Affirms Guidance for Fiscal 2023 with Full Year Expected at the High-End of the Range for Sales and Operating Margin

Kimball Electronics, Inc. announced financial results for the first quarter ended September 30, 2022.

  • Net sales in the first quarter of fiscal 2023 totaled $405.9 million, an all-time quarterly high and up 39% year-over-year; foreign currency had a 5% unfavorable impact on net sales compared to the first quarter of fiscal 2022
  • Operating income of $13.6 million, or 3.3% of net sales, compared to operating income of $4.8 million, or 1.6% of net sales in the same period last year
  • Net income of $9.5 million, or $0.38 per diluted share, compared to net income of $2.6 million, or $0.10 per diluted share, in the first quarter of fiscal 2022

JASPER, Ind.--(BUSINESS WIRE)-- Kimball Electronics, Inc. (Nasdaq: KE) today announced financial results for the first quarter ended September 30, 2022.

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Three Months Ended

September 30,

(Amounts in Thousands, except EPS)

2022

2021

Net Sales

$

405,889

$

292,717

Operating Income

$

13,571

$

4,780

Adjusted Operating Income (non-GAAP) (1)

$

13,336

$

3,309

Operating Income %

3.3

%

1.6

%

Adjusted Operating Income (non-GAAP) %

3.3

%

1.1

%

Net Income

$

9,509

$

2,564

Adjusted Net Income (non-GAAP) (1)

$

9,509

$

1,514

Diluted EPS

$

0.38

$

0.10

Adjusted Diluted EPS (non-GAAP) (1)

$

0.38

$

0.06

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

Donald D. Charron, Chairman and Chief Executive Officer, stated, “I am pleased with our results in Q1 and the strong start to the new fiscal year. For the third consecutive quarter, net sales surged to a record-breaking level, setting another all-time high for our company, and operating margin improved compared to the same period last year. This was in line with our estimates as we ramp-up production on new and existing programs, and leverage our facility expansions in Thailand and Mexico. These investments, however, increased fixed costs that were not fully absorbed when comparing the operating margin rate to Q4 of fiscal 2022. New customers and product start-ups generally cause margin dilution early in the life cycle, which are recovered as the program matures. As a result, we expect sequential quarterly increases in a stair stepped fiscal 2023, and we are affirming our guidance for the full year with results expected at the high end of the range for sales and operating margin.”

As part of today’s announcement, the Company is affirming its guidance for fiscal year 2023.

  • Net sales in the range of $1.6 - $1.7 billion, a 19% - 26% increase year-over-year
  • Operating income in the range of 4.6% - 5.2% of net sales
  • Capital expenditures in the range of $80 - $100 million, supporting the facility expansion in Poland, new product introductions, and the addition of equipment with leading-edge technologies and capabilities

First Quarter Fiscal 2023 Overview

  • Cash flow used by operating activities of $60.2 million during the first quarter of fiscal 2023
  • Cash conversion days (“CCD”) for the quarter ended September 30, 2022 were 99 days, up from 91 days in the fourth quarter of fiscal year 2022, driven by an increase in inventory; CCD is calculated as the sum of days sales outstanding plus contract asset days plus production days supply on hand less accounts payable days
  • Investments in capital expenditures were $19.5 million during the quarter
  • Cash and cash equivalents of $19.7 million and borrowings outstanding on credit facilities of $232.5 million at September 30, 2022, including $180.0 million classified as long term

Net Sales by Vertical Market for Q1 Fiscal 2023:

Three Months Ended

September 30,

(Amounts in Millions)

2022

*

2021

*

Percent Change

Automotive

$

184.5

46

%

$

129.4

44

%

43

%

Medical

114.8

28

%

85.0

29

%

35

%

Industrial (1)

100.9

25

%

75.0

26

%

35

%

Other

5.7

1

%

3.3

1

%

75

%

Total Net Sales

$

405.9

$

292.7

39

%

* As a percent of Total Net Sales

(1) Beginning in fiscal year 2023, Public Safety was combined with Industrial; 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, smart metering, and public safety

Forward-Looking Statements

Certain statements contained within this release are considered forward-looking, including our fiscal year 2023 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 including the COVID-19 pandemic, 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, 2022.

Non-GAAP Financial Measures

This press release contains non-GAAP financial measures. The non-GAAP financial measures contained herein include 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:

November 8, 2022

Time:

10:00 AM Eastern Time

Live Webcast:

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

Dial-In #:

844-200-6205 (other locations - 929-526-1599)

Conference ID:

924286

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, 2022 are as follows:

Condensed Consolidated Statements of Income

(Unaudited)

Three Months Ended

(Amounts in Thousands, except Per Share Data)

September 30, 2022

September 30, 2021

Net Sales

$

405,889

100.0

%

$

292,717

100.0

%

Cost of Sales

376,568

92.8

%

277,117

94.7

%

Gross Profit

29,321

7.2

%

15,600

5.3

%

Selling and Administrative Expenses

15,750

3.9

%

12,204

4.2

%

Other General Expense (Income)

%

(1,384

)

(0.5

)%

Operating Income

13,571

3.3

%

4,780

1.6

%

Other Income (Expense), net

(1,403

)

(0.3

)%

(1,249

)

(0.4

)%

Income Before Taxes on Income

12,168

3.0

%

3,531

1.2

%

Provision for Income Taxes

2,659

0.7

%

967

0.3

%

Net Income

$

9,509

2.3

%

$

2,564

0.9

%

Earnings Per Share of Common Stock:

Basic

$

0.38

$

0.10

Diluted

$

0.38

$

0.10

Average Number of Shares Outstanding:

Basic

24,826

25,145

Diluted

24,955

25,301

Condensed Consolidated Statements of Cash Flows

Three Months Ended

(Unaudited)

September 30,

(Amounts in Thousands)

2022

2021

Net Cash Flow used for Operating Activities

$

(60,194

)

$

(8,187

)

Net Cash Flow used for Investing Activities

(19,320

)

(12,868

)

Net Cash Flow provided by Financing Activities

50,769

4,965

Effect of Exchange Rate Change on Cash and Cash Equivalents

(1,391

)

(1,028

)

Net Decrease in Cash and Cash Equivalents

(30,136

)

(17,118

)

Cash and Cash Equivalents at Beginning of Period

49,851

106,442

Cash and Cash Equivalents at End of Period

$

19,715

$

89,324

(Unaudited)

Condensed Consolidated Balance Sheets

September 30,
2022

June 30,
2022

(Amounts in Thousands)

ASSETS

Cash and cash equivalents

$

19,715

$

49,851

Receivables, net

253,823

222,857

Contract assets

68,314

64,080

Inventories

449,528

395,630

Prepaid expenses and other current assets

28,637

28,665

Property and Equipment, net

215,469

206,835

Goodwill

12,011

12,011

Other Intangible Assets, net

13,792

14,707

Other Assets

40,474

41,131

Total Assets

$

1,101,763

$

1,035,767

LIABILITIES AND SHARE OWNERS EQUITY

Current portion of borrowings under credit facilities

$

52,505

$

35,580

Accounts payable

322,199

308,617

Accrued expenses

65,258

64,545

Long-term debt under credit facilities, less current portion

180,000

145,000

Long-term income taxes payable

5,859

7,812

Other long-term liabilities

19,697

20,242

Share Owners’ Equity

456,245

453,971

Total Liabilities and Share Owners’ Equity

$

1,101,763

$

1,035,767

Reconciliation of Non-GAAP Financial Measures

(Unaudited)

(Amounts in Thousands, except Per Share Data)

Three Months Ended

September 30,

2022

2021

Operating Income, as reported

$

13,571

$

4,780

SERP

(235

)

(87

)

Legal Settlements (Recovery)

(1,384

)

Adjusted Operating Income

$

13,336

$

3,309

Net Income, as reported

$

9,509

$

2,564

Legal Settlements (Recovery), After-Tax

(1,050

)

Adjusted Net Income

$

9,509

$

1,514

Diluted Earnings per Share, as reported

$

0.38

$

0.10

Legal Settlements (Recovery)

(0.04

)

Adjusted Diluted Earnings per Share

$

0.38

$

0.06

Twelve Months Ended

September 30,

2022

2021

Operating Income

$

61,340

$

52,676

SERP

(1,711

)

1,436

Legal Recovery

(1,415

)

Adjusted Operating Income (non-GAAP)

$

59,629

$

52,697

Tax Effect

16,356

11,017

After-tax Adjusted Operating Income

$

43,273

$

41,680

Average Invested Capital (1)

$

544,711

$

414,121

ROIC

7.9

%

10.1

%

(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/20221107005903/en/

Contacts

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

Source: Kimball Electronics, Inc.

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