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Kimball Electronics Reports Q4 and Fiscal Year 2022 Results With Record Sales and Strong Operating Margin; Company Guides to Another Record-Setting Year in Fiscal 2023

·12 min read
  • Net sales in the fourth quarter of fiscal 2022 totaled $373.5 million, an all-time quarterly high and up 13% year-over-year, and was adversely impacted by 3% of net sales from foreign currency

  • Operating income of $20.6 million, or 5.5% of net sales

  • Net income of $9.9 million, or $0.40 per diluted share

  • Foreign exchange unfavorably impacted earnings by $0.12 per diluted share in non-operating expense and provision for income taxes

JASPER, Ind., August 04, 2022--(BUSINESS WIRE)--Kimball Electronics, Inc. (Nasdaq: KE) today announced financial results for the fourth quarter and fiscal year ended June 30, 2022.

This press release features multimedia. View the full release here: https://www.businesswire.com/news/home/20220804005845/en/

Three Months Ended

Fiscal Year Ended

June 30,

June 30,

(Amounts in Thousands, except EPS)

2022

2021

2022

2021

Net Sales

$

373,497

$

329,125

$

1,349,535

$

1,291,807

Operating Income

$

20,578

$

17,079

$

52,549

$

65,703

Adjusted Operating Income (non-GAAP) (1)

$

19,419

$

17,972

$

49,602

$

67,404

Operating Income %

5.5

%

5.2

%

3.9

%

5.1

%

Adjusted Operating Income (non-GAAP) %

5.2

%

5.5

%

3.7

%

5.2

%

Net Income

$

9,938

$

14,446

$

31,253

$

56,791

Adjusted Net Income (non-GAAP) (1)

$

9,938

$

14,708

$

30,203

$

56,388

Diluted EPS

$

0.40

$

0.57

$

1.24

$

2.24

Adjusted Diluted EPS (non-GAAP) (1)

$

0.40

$

0.58

$

1.20

$

2.23

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

Donald D. Charron, Chairman and Chief Executive Officer, stated, "I am very pleased with Q4 and full year fiscal 2022 results. For the second consecutive quarter, net sales reached an all-time high for the company, and operating income margin exceeded 5%. These results were in-line with the guidance we provided in May, and required the highest levels of partnership across the value chain, including our global organization, our customers, the OEMs, and our suppliers."

Mr. Charron continued, "In total, fiscal 2022 was very much the bifurcated year we expected, with a strong second half driving annual revenue to record levels. The world continues to experience unprecedented events and circumstances, and the lockdowns associated with China’s zero-tolerance policy on COVID-19 have been a reminder of how unpredictable the current environment can be. Our company is embracing this ever-changing landscape with commitment and resolve, engaging in customer collaboration at levels even higher than our award winning norm. This is contributing to winning new business, and expanding existing programs, that have us poised for growth as we look forward. With a backlog of open orders exceeding $1 billion, our guidance reflects the strength continuing with double-digit sales increases and improving margin rates in fiscal year 2023. We will experience a quarterly step up in performance due to new and existing programs ramping up volumes, steadily improving leverage of our completed facility expansions, and continued easing of global supply chain constraints."

Fiscal Year 2023 Guidance

  • 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

Fourth Quarter Fiscal 2022 Overview

  • Cash flow provided by operating activities of $1.5 million during the fourth quarter of fiscal 2022

  • Cash conversion days ("CCD") for the quarter ended June 30, 2022 were 91 days, up from 64 days in the fourth quarter of fiscal year 2021, 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 $25 million during the quarter

  • Returned $4.2 million to Share Owners during the quarter in the form of common stock repurchases

  • Cash and cash equivalents of $49.9 million and borrowings outstanding on credit facilities of $180.6 million at June 30, 2022, including $145.0 million classified as long term

Net Sales by Vertical Market for Fiscal 2022:

Three Months Ended

Fiscal Year Ended

June 30,

June 30,

(Amounts in Millions)

2022

*

2021

*

Percent
Change

2022

*

2021

*

Percent
Change

Automotive

$

152.4

41

%

$

141.7

43

%

7

%

$

582.2

43

%

$

551.5

43

%

6

%

Medical

114.0

30

%

85.1

26

%

34

%

391.7

29

%

384.8

30

%

2

%

Industrial

88.0

24

%

86.7

26

%

2

%

308.1

23

%

293.7

23

%

5

%

Public Safety

14.4

4

%

10.8

3

%

33

%

50.1

4

%

48.1

3

%

4

%

Other

4.7

1

%

4.8

2

%

(1

) %

17.4

1

%

13.7

1

%

27

%

Total Net Sales

$

373.5

$

329.1

13

%

$

1,349.5

$

1,291.8

4

%

* As a percent of Total Net Sales

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 smart metering

Public Safety includes thermal imaging, first responder electronics, and security

Fiscal Year 2022 Overview:

  • Net sales for fiscal year 2022 totaled $1,349.5 million, an all-time annual high and up 4% year-over-year, and foreign currency had a 1% unfavorable impact on net sales compared to fiscal year 2021

  • Cash flow used for operating activities of $83.2 million, primarily driven by an increase in inventory

  • Capital expenditures were $75 million, supporting facility expansions in Thailand, Mexico, and Poland

  • Returned $9.1 million to Share Owners in the form of common stock repurchases

  • Return on invested capital of 7.2%; ROIC is a non-GAAP financial measure, see reconciliation of non-GAAP financial measures

Jana T. Croom, Chief Financial Officer, stated, "Fiscal 2022 was a good year for our company with record results on the top line, and a strong funnel of new business increasing our backlog of open orders. We executed a capital deployment strategy that included investing in future growth with expansions at multiple facilities, returning cash to Share Owners in the form of stock repurchases, and supporting our customers with strategic inventory builds to mitigate parts shortages, even though the increases adversely impacted certain financial metrics including cash flow, CCD, and ROIC. We fully expect improvement in these areas as conditions normalize in the global supply chain."

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, 2021.

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:

August 5, 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:

335447

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 fourth quarter and fiscal year ended June 30, 2022 are as follows:

Condensed Consolidated Statements of Income

(Unaudited)

Three Months Ended

(Amounts in Thousands, except Per Share Data)

June 30, 2022

June 30, 2021

Net Sales

$

373,497

100.0

%

$

329,125

100.0

%

Cost of Sales

339,276

90.8

%

297,344

90.3

%

Gross Profit

34,221

9.2

%

31,781

9.7

%

Selling and Administrative Expenses

13,643

3.7

%

14,357

4.4

%

Other General Expense (Income)

%

345

0.1

%

Operating Income

20,578

5.5

%

17,079

5.2

%

Other Income (Expense), net

(5,257

)

(1.4

)%

446

0.1

%

Income Before Taxes on Income

15,321

4.1

%

17,525

5.3

%

Provision for Income Taxes

5,383

1.4

%

3,079

0.9

%

Net Income

$

9,938

2.7

%

$

14,446

4.4

%

Earnings Per Share of Common Stock:

Basic

$

0.40

$

0.58

Diluted

$

0.40

$

0.57

Average Number of Shares Outstanding:

Basic

24,885

25,049

Diluted

24,989

25,232

(Unaudited)

Fiscal Year Ended

(Amounts in Thousands, except Per Share Data)

June 30, 2022

June 30, 2021

Net Sales

$

1,349,535

100.0

%

$

1,291,807

100.0

%

Cost of Sales

1,244,933

92.2

%

1,173,772

90.9

%

Gross Profit

104,602

7.8

%

118,035

9.1

%

Selling and Administrative Expenses

53,437

4.0

%

52,704

4.0

%

Other General Expense (Income)

(1,384

)

(0.1

)%

(372

)

%

Operating Income

52,549

3.9

%

65,703

5.1

%

Other Income (Expense), net

(8,818

)

(0.7

)%

4,351

0.3

%

Income Before Taxes on Income

43,731

3.2

%

70,054

5.4

%

Provision for Income Taxes

12,478

0.9

%

13,263

1.0

%

Net Income

$

31,253

2.3

%

$

56,791

4.4

%

Earnings Per Share of Common Stock:

Basic

$

1.24

$

2.26

Diluted

$

1.24

$

2.24

Average Number of Shares Outstanding:

Basic

25,115

25,088

Diluted

25,221

25,284

Condensed Consolidated Statements of Cash Flows

Fiscal Year Ended

(Unaudited)

June 30,

(Amounts in Thousands)

2022

2021

Net Cash Flow (used for) provided by Operating Activities

$

(83,178

)

$

130,095

Net Cash Flow used for Investing Activities

(74,798

)

(38,796

)

Net Cash Flow provided by (used for) Financing Activities

103,741

(53,078

)

Effect of Exchange Rate Change on Cash and Cash Equivalents

(2,356

)

3,231

Net (Decrease) Increase in Cash and Cash Equivalents

(56,591

)

41,452

Cash and Cash Equivalents at Beginning of Period

106,442

64,990

Cash and Cash Equivalents at End of Period

$

49,851

$

106,442

(Unaudited)

Condensed Consolidated Balance Sheets

June 30,
2022

June 30,
2021

(Amounts in Thousands)

ASSETS

Cash and cash equivalents

$

49,851

$

106,442

Receivables, net

222,857

203,382

Contract assets

64,080

45,863

Inventories

395,630

200,386

Prepaid expenses and other current assets

28,665

27,320

Property and Equipment, net

206,835

163,251

Goodwill

12,011

12,011

Other Intangible Assets, net

14,707

17,008

Other Assets

41,131

38,398

Total Assets

$

1,035,767

$

814,061

LIABILITIES AND SHARE OWNERS EQUITY

Current portion of borrowings under credit facilities

$

35,580

$

26,214

Accounts payable

308,617

216,544

Accrued expenses

64,545

58,016

Long-term debt under credit facilities, less current portion

145,000

40,000

Long-term income taxes payable

7,812

8,854

Other

20,242

22,461

Share Owners’ Equity

453,971

441,972

Total Liabilities and Share Owners’ Equity

$

1,035,767

$

814,061

Reconciliation of Non-GAAP Financial Measures

(Unaudited)

(Amounts in Thousands, except Per Share Data)

Three Months Ended

Fiscal Year Ended

June 30,

June 30,

2022

2021

2022

2021

Operating Income, as reported

$

20,578

$

17,079

$

52,549

$

65,703

SERP

(1,159

)

548

(1,563

)

2,073

Legal Settlements (Recovery)

345

(1,384

)

(372

)

Adjusted Operating Income

$

19,419

$

17,972

$

49,602

$

67,404

Net Income, as reported

$

9,938

$

14,446

$

31,253

$

56,791

Adjustments After Measurement Period on GES Acquisition

(121

)

Legal Settlements (Recovery), After-Tax

262

(1,050

)

(282

)

Adjusted Net Income

$

9,938

$

14,708

$

30,203

$

56,388

Diluted Earnings per Share, as reported

$

0.40

$

0.57

$

1.24

$

2.24

Adjustments After Measurement Period on GES Acquisition

Legal Settlements (Recovery)

0.01

(0.04

)

(0.01

)

Adjusted Diluted Earnings per Share

$

0.40

$

0.58

$

1.20

$

2.23

Operating Income

$

52,549

$

65,703

SERP

(1,563

)

2,073

Legal Recovery

(1,384

)

(372

)

Adjusted Operating Income (non-GAAP)

$

49,602

$

67,404

Tax Effect

14,417

12,844

After-tax Adjusted Operating Income

$

35,185

$

54,560

Average Invested Capital (1)

$

491,252

$

415,999

ROIC

7.2

%

13.1

%

(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/20220804005845/en/

Contacts

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