Kimball Electronics Reports Q3 Results With Record Revenue and Expanding Operating Margin; Company Updates Outlook for Fiscal Year 2023 With Sales Expected at the High-End and Adjusted Operating Margin in the Mid-to-Low End of Its Guidance Range

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In this article:

  • Net sales in the third quarter of fiscal 2023 totaled $484.7 million, an all-time quarterly high and up 32% year-over-year; foreign currency had a 2% unfavorable impact on net sales compared to the third quarter of fiscal 2022

  • Operating income of $25.2 million, or 5.2% of net sales, compared to $20.3 million, or 5.5% of net sales, in the same period last year

  • Adjusted operating income of $25.6 million, or 5.3% of net sales, compared to $19.6 million, or 5.3% of net sales, in the same period last year

  • Net income of $16.4 million, or $0.65 per diluted share, compared to net income of $13.6 million, or $0.54 per diluted share, in the third quarter of fiscal 2022

JASPER, Ind., May 04, 2023--(BUSINESS WIRE)--Kimball Electronics, Inc. (Nasdaq: KE) today announced financial results for the third quarter ended March 31, 2023.

This press release features multimedia. View the full release here: https://www.businesswire.com/news/home/20230504005856/en/

Three Months Ended

Nine Months Ended

March 31,

March 31,

(Amounts in Thousands, except EPS)

2023

2022

2023

2022

Net Sales

$

484,703

$

368,057

$

1,327,288

$

976,038

Operating Income

$

25,220

$

20,277

$

56,280

$

31,971

Adjusted Operating Income (non-GAAP) (1)

$

25,573

$

19,558

$

56,738

$

30,183

Operating Income %

5.2

%

5.5

%

4.2

%

3.3

%

Adjusted Operating Income (non-GAAP) %

5.3

%

5.3

%

4.3

%

3.1

%

Net Income

$

16,400

$

13,638

$

36,629

$

21,315

Adjusted Net Income (non-GAAP) (1)

$

16,400

$

13,638

$

36,908

$

20,265

Diluted EPS

$

0.65

$

0.54

$

1.46

$

0.84

Adjusted Diluted EPS (non-GAAP) (1)

$

0.65

$

0.54

$

1.47

$

0.80

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

Richard D. Phillips, Chief Executive Officer, stated, "I am very pleased with my first quarter as CEO of Kimball Electronics, and the opportunity to share strong results for Q3. The Company has been on a path of unprecedented growth, and for the fifth consecutive quarter, revenue reached an all-time record high. Throughout this journey, operating margin has improved as we ramp-up new and existing programs, and leverage our recent facility expansions in Thailand and Mexico. While the macro environment remains challenging, we are forecasting a solid finish in the fourth quarter, and we are updating our outlook for fiscal year 2023, with sales expected at the high-end and adjusted operating margin in the mid-to-low end of our guidance range."

Mr. Phillips continued, "We also have been updating our Strategic Plan, which includes a review of the positioning, and growth opportunities, within the vertical markets we support. The learnings from this review are encouraging and the path to $2 billion in annual revenue is within our sights. After a fast-paced onboarding, I’m even more excited about our future."

As a reminder, the Company’s guidance for fiscal year 2023 includes net sales in the range of $1.7 - $1.8 billion, a 26% - 33% increase compared to the prior year; adjusted operating income in the range of 4.6% - 5.2% of net sales; and capital expenditures of $80 - $100 million.

Third Quarter Fiscal 2023 Overview

  • Cash flow from operating activities of $14.0 million during the third quarter of fiscal 2023

  • Cash conversion days ("CCD") for the quarter ended March 31, 2023 were 92 days, down from 97 days in the second quarter of fiscal year 2023; CCD is calculated as the sum of days sales outstanding plus contract asset days plus production days supply on hand less accounts payable days and advances from customers days

  • Investments in capital expenditures were $24.7 million during the quarter

  • Cash and cash equivalents of $30.4 million and borrowings outstanding on credit facilities of $289.4 million at March 31, 2023, including $235.0 million classified as long term, and $98.1 million borrowing capacity available

Net Sales by Vertical Market for Q3 Fiscal 2023:

Three Months Ended

Nine Months Ended

March 31,

March 31,

(Amounts in Millions)

2023

*

2022

*

Percent
Change

2023

*

2022

*

Percent
Change

Automotive

$

216.0

45%

$

161.5

44%

34%

$

600.5

45%

$

429.8

44%

40%

Medical

134.0

28%

102.9

28%

30%

373.5

28%

277.7

29%

34%

Industrial (1)

126.9

26%

98.2

27%

29%

332.8

25%

255.8

26%

30%

Other

7.8

1%

5.5

1%

42%

20.5

2%

12.7

1%

61%

Total Net Sales

$

484.7

$

368.1

32%

$

1,327.3

$

976.0

36%

* 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:

May 5, 2023

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:

308984

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, 2023 are as follows:

Condensed Consolidated Statements of Income

(Unaudited)

Three Months Ended

(Amounts in Thousands, except Per Share Data)

March 31, 2023

March 31, 2022

Net Sales

$

484,703

100.0

%

$

368,057

100.0

%

Cost of Sales

441,731

91.1

%

334,113

90.8

%

Gross Profit

42,972

8.9

%

33,944

9.2

%

Selling and Administrative Expenses

17,752

3.7

%

13,667

3.7

%

Operating Income

25,220

5.2

%

20,277

5.5

%

Other Income (Expense), net

(3,344

)

(0.7

)%

(2,103

)

(0.6

)%

Income Before Taxes on Income

21,876

4.5

%

18,174

4.9

%

Provision for Income Taxes

5,476

1.1

%

4,536

1.2

%

Net Income

$

16,400

3.4

%

$

13,638

3.7

%

Earnings Per Share of Common Stock:

Basic

$

0.66

$

0.54

Diluted

$

0.65

$

0.54

Average Number of Shares Outstanding:

Basic

24,898

25,175

Diluted

25,067

25,272

(Unaudited)

Nine Months Ended

(Amounts in Thousands, except Per Share Data)

March 31, 2023

March 31, 2022

Net Sales

$

1,327,288

100.0

%

$

976,038

100.0

%

Cost of Sales

1,220,804

92.0

%

905,657

92.8

%

Gross Profit

106,484

8.0

%

70,381

7.2

%

Selling and Administrative Expenses

50,204

3.8

%

39,794

4.0

%

Other General Expense (Income)

—

—

%

(1,384

)

(0.1

)%

Operating Income

56,280

4.2

%

31,971

3.3

%

Other Income (Expense), net

(8,043

)

(0.6

)%

(3,561

)

(0.4

)%

Income Before Taxes on Income

48,237

3.6

%

28,410

2.9

%

Provision for Income Taxes

11,608

0.8

%

7,095

0.7

%

Net Income

$

36,629

2.8

%

$

21,315

2.2

%

Earnings Per Share of Common Stock:

Basic

$

1.47

$

0.84

Diluted

$

1.46

$

0.84

Average Number of Shares Outstanding:

Basic

24,868

25,192

Diluted

25,031

25,291

Condensed Consolidated Statements of Cash Flows

Nine Months Ended

(Unaudited)

March 31,

(Amounts in Thousands)

2023

2022

Net Cash Flow used for Operating Activities

$

(57,885

)

$

(84,665

)

Net Cash Flow used for Investing Activities

(66,497

)

(50,023

)

Net Cash Flow provided by Financing Activities

107,148

64,856

Effect of Exchange Rate Change on Cash and Cash Equivalents

(294

)

(1,007

)

Net Decrease in Cash, Cash Equivalents, and Restricted Cash

(17,528

)

(70,839

)

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

49,851

106,442

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

$

32,323

$

35,603

(Unaudited)

Condensed Consolidated Balance Sheets

March 31,
2023

June 30,
2022

(Amounts in Thousands)

ASSETS

Cash and cash equivalents

$

30,445

$

49,851

Receivables, net

299,329

222,857

Contract assets

75,690

64,080

Inventories

488,170

395,630

Prepaid expenses and other current assets

54,053

28,665

Property and Equipment, net

258,058

206,835

Goodwill

12,011

12,011

Other Intangible Assets, net

13,210

14,707

Other Assets

37,975

41,131

Total Assets

$

1,268,941

$

1,035,767

LIABILITIES AND SHARE OWNERS’ EQUITY

Current portion of borrowings under credit facilities

$

54,420

$

35,580

Accounts payable

361,547

308,617

Accrued expenses

89,961

64,545

Long-term debt under credit facilities, less current portion

235,000

145,000

Long-term income taxes payable

5,859

7,812

Other long-term liabilities

18,968

20,242

Share Owners’ Equity

503,186

453,971

Total Liabilities and Share Owners’ Equity

$

1,268,941

$

1,035,767

Reconciliation of Non-GAAP Financial Measures

(Unaudited)

(Amounts in Thousands, except Per Share Data)

Three Months Ended

Nine Months Ended

March 31,

March 31,

2023

2022

2023

2022

Operating Income, as reported

$

25,220

$

20,277

$

56,280

$

31,971

SERP

353

(719

)

458

(404

)

Legal Settlements (Recovery)

—

—

—

(1,384

)

Adjusted Operating Income

$

25,573

$

19,558

$

56,738

$

30,183

Net Income, as reported

$

16,400

$

13,638

$

36,629

$

21,315

Adjustments After Measurement Period on GES Acquisition

—

—

279

—

Legal Settlements (Recovery), After-Tax

—

—

—

(1,050

)

Adjusted Net Income

$

16,400

$

13,638

$

36,908

$

20,265

Diluted Earnings per Share, as reported

$

0.65

$

0.54

$

1.46

$

0.84

Adjustments After Measurement Period on GES Acquisition

—

—

0.01

—

Legal Settlements (Recovery)

—

—

—

(0.04

)

Adjusted Diluted Earnings per Share

$

0.65

$

0.54

$

1.47

$

0.80

Twelve Months Ended

March 31,

2023

2022

Operating Income

$

76,858

$

49,050

SERP

(701

)

144

Legal Recovery

—

(1,039

)

Adjusted Operating Income (non-GAAP)

$

76,157

$

48,155

Tax Effect

20,375

10,774

After-tax Adjusted Operating Income

$

55,782

$

37,381

Average Invested Capital (1)

$

659,911

$

453,479

ROIC

8.5

%

8.2

%

(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/20230504005856/en/

Contacts

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

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