Kimball Electronics, Inc. · NASDAQ:KE
Kimball Electronics — Q2 FY2020 Earnings Presentation
33 slides from Kimball Electronics's earnings presentation, Feb 24, 2020
Slide 1: Investor Presentation Second Quarter Fiscal Year 2020
Exhibit 99.1 Investor Presentation Second Quarter Fiscal Year 2020 KIMBALL ELECTRONICS 1
Slide 2: Safe Harbor Statement
KIMBALL ELECTRONICS (Nasdaq: KE) // Safe Harbor Statement Certain statements contained within this presentation may be considered forward-looking under the Private Securities Litigation Reform Act of 1995 and are subject to risks and uncertainties including, but not limited to, successful integratio
Slide 3: Who We Are
KIMBALL ELECTRONICS (Nasdaq: KE) // Who We Are Global manufacturing solutions provider Headquarters: of contract electronics and diversified manufacturing services Jasper, Indiana used in… Automotive, Industrial, Medical & Public Safety Industries Established in 1961 Focused on non-commodity product
Slide 4: Why Invest?
KIMBALL ELECTRONICS (Nasdaq: KE) // Why Invest? Expect high single-digit revenue • Utilization rates increase growth Opportunities Above Average • New customer programs • Focus on secular growth trends to Expand Revenue mature • Positive outsourcing trends Profitability • Contribution from new Growt
Slide 5: What We Do
KIMBALL ELECTRONICS (Nasdaq: KE) // What We Do INDUSTRIAL 22%* PUBLIC SAFETY 6%* • Climate Controls • Thermal Imaging • Automation Controls • Fire Detection • Operator Interface • First Responder • Optical Inspection Electronics • Smart Metering $1.2B • Security FY 2019 OTHER 1%* NET SALES AUTOMOTIV
Slide 6: Our Value Proposition/Competitive Moat
KIMBALL ELECTRONICS (Nasdaq: KE) // Our Value Proposition/Competitive Moat Global consistency - Single instance of SAP supports manufacturing operations globally. Standard lean six sigma practices shared across all facilities. Deep domain expertise - Experienced body of knowledge required for high q
Slide 7: Global Footprint
KIMBALL ELECTRONICS (Nasdaq: KE) // Global Footprint Indianapolis, IN Poznan, Poland San Jose, CA Chiba, Japan Jasper, IN Timisoara, Romania Tampa, FL Nanjing, China Reynosa, Mexico Suzhou, China Trivandrum, India Ho Chi Minh City, Vietnam Laem Chabang, Thailand 1.3 million square feet of owned manu
Slide 8: Sustainable Long-Term Customer Relationships
KIMBALL ELECTRONICS (Nasdaq: KE) // Sustainable Long-Term Customer Relationships 13% More than 10 Years 37 Customers 10% 5-10 Years Typical Program Length 19 Customers Automotive: 5-7 years Medical: 10 years Less than 5 Years Industrial: 3-5 years 21 Customers 77% % of Net Sales FYTD’20 Programs are
Slide 9: Sizable Addressable Market
KIMBALL ELECTRONICS (Nasdaq: KE) // Sizable Addressable Market Total Market Size $471 Billion Industrial Market CAGR CAGR Medical $31 Verticals 2012-2017 2017-2022 Billion Automotive 5.9% 8.3% $19 Medical 5.1% 6.2% Billion Industrial 2.5% 5.9% Total Market 2.7% 7.5% Automotive $14 Billion Focused on
Slide 10: Rapid Change for Traditional Manufacturing
KIMBALL ELECTRONICS (Nasdaq: KE) // Rapid Change for Traditional Manufacturing • Outsourcing is accelerating… – Faster time to market – Allocating resources to points of differentiation – Eco-system is becoming exponentially more complicated – Global worker shortage – Near sourcing •Disruption is co
Slide 11: Megatrends Opportunities: Automotive
KIMBALL ELECTRONICS (Nasdaq: KE) // Megatrends Opportunities Increasing electronic content per vehicle • Automated Driver Assistance Systems (“ADAS”) • Infotainment Systems • Passenger Safety Systems • Mobility/Vehicle Management • Electric Vehicles • Redundant Systems for Self Driving Cars Global A
Slide 12: Megatrends Opportunities: Healthcare and Industrial
KIMBALL ELECTRONICS (Nasdaq: KE) // Megatrends Opportunities Healthcare Growth Automation and Industry 4.0 • Aging Population • Internet of Things • Affordability/Increasing Access to • Smart Metering Care • Connected Care to Improve Patient Outcomes • Decreasing Device Size • Connected Drug Deliver
Slide 13: Creating Shareholder Value
KIMBALL ELECTRONICS (Nasdaq: KE) // Creating Shareholder Value Target end markets with strong secular growth Make investments that enable greater strategic customer engagement and enhance return profile Leveraging existing assets & continuously improving efficiencies KIMBALL ELECTRONICS 13
Slide 14: End Markets with Secular Growth - Automotive
KIMBALL ELECTRONICS (Nasdaq: KE) // Creating Shareholder Value End Markets with Secular Growth - Automotive Kimball Automotive Growth 42% of Revenue* AUTOMOTIVE CAGR 2015-2019 FYTD20 vs FYTD19 Growth • Electronic Power Steering 12% 19% • Body Controls • Occupant Safety • Automated Driver Assist Syst
Slide 15: End Markets with Secular Growth - Medical
KIMBALL ELECTRONICS (Nasdaq: KE) // Creating Shareholder Value End Markets with Secular Growth - Medical Kimball Medical Growth 30% of Revenue* CAGR 2015-2019 FYTD20 vs FYTD19 Growth MEDICAL • Sleep Therapy and 11% 11% Respiratory Care • Medical Imaging and Guided Therapy • In Vitro Diagnostics • Dr
Slide 16: End Markets with Secular Growth - Industrial
KIMBALL ELECTRONICS (Nasdaq: KE) // Creating Shareholder Value End Markets with Secular Growth – Industrial Kimball Industrial Growth 21% of Revenue* INDUSTRIAL CAGR 2015-2019 FYTD20 vs FYTD19 Growth • Climate Controls • Automation Controls 6% 10% • Operator Interface • Optical Inspection • Smart Me
Slide 17: ROIC Measured Over Multiple Years
KIMBALL ELECTRONICS (Nasdaq: KE) // Creating Shareholder Value ROIC Measured Over Multiple Years As new programs mature, volumes ramp, and cost efficiencies are gained Increased launch activity in recent years has put near term pressure on profitability/returns ROIC measured over multiple years Prog
Slide 18: Our Strategy: Multifaceted Manufacturing Solutions Provider
KIMBALL ELECTRONICS (Nasdaq: KE) // Creating Shareholder Value Our Strategy: Developing Into A Multifaceted Manufacturing Solutions Provider Organic Growth Electronics Manufacturing Outsourced Manufacturing Services Services M&A Investments that Increase Customer Engagement Diversified Add manufactu
Slide 19: Acquisition Strategy
KIMBALL ELECTRONICS (Nasdaq: KE) // Creating Shareholder Value Acquisition Strategy Strategy Focus: Key Criteria • To establish a global market leadership • New capabilities position as a premier AT&M provider • New customer relationships and minimum • Medical focused Diversified Contract customer o
Slide 20: Financial Review
KIMBALL ELECTRONICS (Nasdaq: KE) // Financial Review Revenue Growth, Margin Expansion, and Strong Financial Profile KIMBALL ELECTRONICS 20
Slide 21: Financial Targets
KIMBALL ELECTRONICS (Nasdaq: KE) // Financial Targets 8% 4.5% 12.5% Revenue Operating Operating Growth Margin ROIC KIMBALL ELECTRONICS 21
Slide 22: Revenue Performance
KIMBALL ELECTRONICS (Nasdaq: KE) // Revenue Performance REVENUE PERFORMANCE REVENUE BY VERTICAL MARKET Target 8% - Achieving above target growth rates 100% 2% 2% 1% 1% 2% 7% 7% 6% 6% 5% $1,500 90% 20% 22% 21% $1,300 $1,253 80% 22% 22% $1,182 $1,110 70% $1,100 $1,072 60% 29% $931 31% 30% 30% 28% $900
Slide 23: Profitability Trends
KIMBALL ELECTRONICS (Nasdaq: KE) // Profitability Trends ADJUSTED OPERATING INCOME/MARGIN* ADJUSTED EBIDTA/MARGIN** Target 4.5% Operating Margin $50 4.5% 4.2% 3.9% 3.5% $90 8.0% $45 4.0% 7.0% 6.7% 3.5% 3.5% 3.6% $80 6.1% 6.0% 7.0% $40 3.5% 6.0% $70 5.7% 6.0% $35 3.0% $30 $60 5.0% 2.5% $25 $50 4.0% 2
Slide 24: Capital Expenditures and Depreciation & Amortization
KIMBALL ELECTRONICS (Nasdaq: KE) // Capital Expenditures and Depreciation & Amortization Significant capex spending to fuel multi-year organic growth and expansion in ROIC $14 $12 $10 $8 $6 $4 $2 1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 3Q18 4Q18 1Q19 2Q19 3Q19 4Q19 1Q20 2Q20 IN $ MILLIONS D&A Total Capex (Una
Slide 25: Target ROIC
KIMBALL ELECTRONICS (Nasdaq: KE) // Target ROIC 12.5% 12% 10.3% 10.1% 10% 8.9% 8.7% 8.9% 8.2% 8% 6% 4% 2% 0% FY16 FY17 FY18 FY19 TTM 2Q19 TTM 2Q20 * ROIC is a Non-GAAP term. A reconciliation is provided in the appendix of this presentation. Prior period amounts have been restated to reflect the retr
Slide 26: Capital Allocation
KIMBALL ELECTRONICS (Nasdaq: KE) // Capital Allocation Reinvest in the business – Significant capex spending of $100 approximately $30 million/year to $90 multi-year organic growth and expansion in ROIC $80 $70 Acquisitions – $50+ million of $60 acquisitions over past four years. Going forward M&A w
Slide 27: Strong Balance Sheet
KIMBALL ELECTRONICS (Nasdaq: KE) // Strong Balance Sheet 50-59 73-76 DAYS SALES OUTSTANDING $52M 5X-6X IN CASH* DAYS CASH CONVERSION CYCLE PER YEAR $120M INVENTORY TURNS IN TOTAL LIQUIDITY* * As of December 31, 2019 (Unaudited) ** Range as reported for quarters ending December 31, 2018 and December
Slide 28: Why Invest?
KIMBALL ELECTRONICS (Nasdaq: KE) // Why Invest? Expect high single-digit revenue • Utilization rates increase growth Opportunities Above Average • New customer programs • Focus on secular growth trends to Expand Revenue mature • Positive outsourcing trends Profitability • Contribution from new Growt
Slide 29: Questions
Questions KIMBALL ELECTRONICS 29
Slide 30: Reconciliation of Non-GAAP Results (In Millions)
KIMBALL ELECTRONICS (Nasdaq: KE) // Reconciliation of Non-GAAP Results (In Millions) FY16 FY17 FY18 FY19 TTM 2Q19 TTM 2Q20 Revenue, as reported $ 842 $ 931 $ 1,072 $ 1,182 $ 1,110 $ 1,253 Operating Income (GAAP) $ 29.518 $ 42.780 $ 42.038 $ 42.060 $ 39.640 $ 44.615 Add: Spin-off Expenses 0.137 - - -
Slide 31: Reconciliation of Non-GAAP Results (In Millions, except per share data)
KIMBALL ELECTRONICS (Nasdaq: KE) // Reconciliation of Non-GAAP Results (In Millions, except per share data) FY16 FY17 FY18 FY19 Shareholders Equity, as reported $ 324.369 $ 342.272 $ 355.527 $ 369.854 Goodwill & Intangibles $ 10.784 $ 10.772 $ 10.566 $ 40.292 Tangible Book Value $ 313.585 $ 331.500
Slide 32: Reconciliation of Non-GAAP Results (In Thousands)
KIMBALL ELECTRONICS (Nasdaq: KE) // Reconciliation of Non-GAAP Results (In Thousands) 1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 3Q18 4Q18 1Q19 2Q19 3Q19 4Q19 1Q20 2Q20 Operating Income (GAAP) (TTM) $ 35,381 $ 40,671 $ 43,115 $ 42,780 $ 39,568 $ 37,515 $ 39,177 $ 42,038 $ 39,547 $ 39,640 $ 43,007 $ 42,060 $ 46,1
Slide 33: Reconciliation of Non-GAAP Results (In Thousands)
KIMBALL ELECTRONICS (Nasdaq: KE) // Reconciliation of Non-GAAP Results (In Thousands) FY16 FY17 FY18 FY19 TTM 2Q19 TTM 2Q20 Operating Income (GAAP) $ 29,518 $ 42,780 $ 42,038 $ 42,060 $ 39,640 $ 44,615 Add: Spin-off Expenses $ 137 $ - $ - $ - $ - $ - Less: Lawsuit Proceeds $ - $ 4,005 $ - $ 307 $ 92
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