Slide 1: Fourth Quarter Fiscal 2024 Results
Fourth Quarter Fiscal 2024 Results Quarter Ended June 30, 2024 Supplementary Information to the August 14, 2024, Earnings Conference Call & Webcast Kimball Electronics | 1
Slide 2: Safe Harbor Statement
Kimball Electronics (Nasdaq: KE) Safe Harbor Statement Certain statements contained within this supplementary information, including our guidance, and any statements made during our earnings conference call today may be considered forward-looking under the Private Securities Litigation Reform Act of
Slide 3: Today's Speakers
Today’s Speakers • Opening comments • Financial results for the fourth quarter • Guidance for fiscal 2025 • Closing comments Ric Phillips CEO • Q&A Jana Croom CFO Kimball Electronics | 3
Slide 4: Divestiture of Automation, Test, and Measurement
Divestiture of Automation, Test, and Measurement • Transaction finalized on July 31, 2024 • AT&M not a good fit for KE • Focusing on core EMS operations aligns best with strategic priorities and longer- term growth opportunities • Sale represented significant milestone for our Company, and another i
Slide 5: Sharpening our strategic focus
Sharpening our strategic focus • Actively evaluating our mix of revenue and verticals, in light of the recent economic conditions • Strategic growth of the Company • Balanced portfolio, not overly weighted to any particular vertical • Success with new medical wins… focusing on this space • Open to a
Slide 6: Q4 another quarter of "controlling what we can control"
Q4 another quarter of “controlling what we can control” • EMS industry remains challenged for contract manufacturing organizations • Expectations adjusted for continued weakness in end market demand • In the verticals we serve, the pullback has been more significant than originally anticipated… we c
Slide 7: Net sales in the fourth quarter totaled $430 million
Net sales in the fourth quarter totaled $430 million • $5 million, or 1%, increase sequentially over Q3 • Decreased 13% year-over-year • Q4 last year was a record for the Company, we grew +33% • Year-over-year comparison steep • Decline this year occurred in all verticals and * each region of global
Slide 8: Net sales in Automotive were $212 million
Net sales in Automotive were $212 million • Decreased 7% compared to Q4 last year • 49% of total company sales • Decline this quarter was in line with the softness we outlined in May • Full year revenue decreased 2% in this vertical *Percentage of net sales **Percentage decrease compared to Q4 of fi
Slide 9: Long-term growth in Automotive
Long-term growth in Automotive • Heavily concentrated on chassis control applications (steering, braking, suspension ECUs) • Electronic braking is relatively new growth opportunity, started manufacturing these systems in Reynosa a few years ago • In late Q4, the program experienced setback • Tier on
Slide 10: Net sales in Medical were $102 million
Net sales in Medical were $102 million • 17% decrease compared to Q4 last year • 24% of total company sales • Decline driven by lost sales with major customer involved in FDA recall, partially offset by growth with other customers • Annual guidance assumes a net $50 million reduction, or down 10% •
Slide 11: Encouraged by growth prospects…
Encouraged by growth prospects… • Focus on Higher Level Assemblies (HLAs) and Finished Medical Devices 1 • Recently awarded transfer of work 2 • Sole supplier on respiratory care final assembly and HLA business for largest medical customer • Expect transfer to commence in calendar 2025 3 • Productio
Slide 12: Net sales in Industrial were $116 million
Net sales in Industrial were $116 million • Down 19% compared to Q4 last year • 27% of total company sales • AT&M results included in this vertical • Drove ~½ of the decline in Q4 • Lower demand for internal climate control systems • Smart Meters in Europe have been commoditizing *Percentage of net
Slide 13: For fiscal 2024, net sales in Industrial declined 3%
For fiscal 2024, net sales in Industrial declined 3% • Longer-term, return to growth from market rebound for climate control products • Diversification into other sub-verticals within the industrial space • Increased demand for factory automation and green energy • Early stages of exploring off-high
Slide 14: Closing
Closing • Proud of resilience demonstrated by our team in Q4 and fiscal 2024 • Uniquely positioned to capitalize on various opportunities in EMS space • Sharpened strategic focus setting up longer-term growth as operating environment normalizes Ric Phillips CEO Kimball Electronics | 14
Slide 15: Net sales in the fourth quarter were $430 million
Net sales in the fourth quarter were $430 million Net Sales • 13% decrease compared to the (13%) fourth quarter of fiscal 2023 from Q4'23 • Foreign exchange had less than a 1% impact on sales in the quarter Kimball Electronics | 15
Slide 16: The gross margin rate in Q4 was 8.5%
The gross margin rate in Q4 was 8.5% Gross Margin % • 150 bps decline compared to the (150) bps from Q4'23 same period last year • Decrease driven by: • Lower absorption in EMS manufacturing facilities • AT&M • Both a result of declining sales Kimball Electronics | 16
Slide 17: Adjusted selling and administrative expenses
Adjusted selling and administrative expenses (1) • $15.8 million in the fourth quarter • $2.4 million decline compared to Q4 last year +10 bps • Decrease resulting from efforts from Q4'23 to manage costs in period of declining sales • As percentage of sales: • Adjusted S&A expenses were 3.6% • 10 bp
Slide 18: Adjusted operating income
Adjusted operating income (1) (1) Adjusted Operating Income is a Non-GAAP measure – refer to Reconciliation of Non-GAAP Results on the final slide of this supplementary information. Kimball Electronics | 18
Slide 19: Other income & expense and the effective tax rate
Other income & expense and the effective tax rate • Other income & expense was expense of $6.1 million, compared to expense of $4.9 million last year • The increase resulting from impacts from foreign currency translation • Interest expense was down slightly • The effective tax rate was 44% in the f
Slide 20: Adjusted net income and adjusted diluted EPS
Adjusted net income and adjusted diluted EPS (1) (1) Adjusted Net Income and Adjusted Diluted EPS are Non-GAAP measures – refer to Reconciliation of Non-GAAP Results in the supplementary information. Kimball Electronics | 20
Slide 21: Balance sheet
Balance sheet • Cash and cash equivalents were $78.0 million at June 30, 2024 • Cash flow from operating activities in the quarter was $48.5 million • Cash conversion days were 100 days, compared to 94 days in the fourth quarter last year, and 110 days last quarter • Continue to focus on improving c
Slide 22: Inventory ended the quarter at $338 million
Inventory ended the quarter at $338 million • $112 million reduction (25%) compared to Q4 last year ($112) million from Q4'23 • $58 million lower than Q3 • Expect additional declines with “right-sizing” inventory to match current demand Kimball Electronics | 22
Slide 23: Capital expenditures in Q4 were $9.1 million
Capital expenditures in Q4 were $9.1 million Capital Expenditures and Depreciation & Amortization • Fiscal 2024 CapEx equaled $47 million • Below guidance range • Balanced approach to long- term needs and current economic environment (1) Capital Expenditures include purchases of capitalized software
Slide 24: Borrowings
Borrowings • Borrowings on credit facilities at June 30, 2024, were $294.8 million • Compared to $281.5 million a year ago • Borrowings at the end of Q3 were $319.6 million • Short-term liquidity available totaled $220.1 million at the end of the fourth quarter Kimball Electronics | 24
Slide 25: Share repurchases
Share repurchases • Invested $3 million to repurchase 136,000 shares • Since October 2015, under our Board authorized share repurchase program: • A total of $91.8 million returned to Share Owners by repurchasing 6 million shares of common stock • $8.2 million remaining on the program for deployment
Slide 26: Fiscal year 2024 in total
Fiscal year 2024 in total • Net sales totaling $1.715 billion, the second highest year in Company history • Adjusted operating income of 4.3% of net sales • Inventory down 25% year-over-year • Cash flow from operating activities of approximately $73 million Kimball Electronics | 26
Slide 27: Guidance for fiscal year 2025
Guidance for fiscal year 2025 • Net sales in the range of $1.440 - $1.540 billion • 8% - 14% decrease compared to fiscal 2024, excluding AT&M • Adjusted operating income of 4.0% - 4.5% of net sales • Beginning in fiscal 2025, we will conform with the industry practice of excluding stock compensation
Slide 28: Fiscal 2025 – "controlling what we can control"
Fiscal 2025 – “controlling what we can control” • Short-term – cost structure, margin levels, working capital management, and capital expenditures • Over longer period of time – extending beyond these measures and focused on growing the top line • Recent pressure on demand trends has been more signi
Slide 29: Questions
Questions Kimball Electronics | 29
Slide 30: Appendix
Appendix Kimball Electronics | 30
Slide 31: Reconciliation of Non-GAAP Results
Reconciliation of Non-GAAP Results (Unaudited, Amounts in Thousands, Except Per Share Data) Q1'23 Q2'23 Q3'23 Q4'23 Q1'24 Q2'24 Q3'24 Q4'24 Net Sales Growth (vs. same quarter in prior year) 39 % 39 % 32 % 33 % 8 % (4) % (12) % (13) % Foreign Currency Exchange Impact (5) % (5) % (2) % — % 1 % 1 % — %
Slide 32: Reconciliation of Non-GAAP Results continued…
Reconciliation of Non-GAAP Results continued… (Unaudited, Amounts in Thousands, Except Per Share Data) Q1'23 Q2'23 Q3'23 Q4'23 Q1'24 Q2'24 Q3'24 Q4'24 Operating Income (GAAP) (TTM) $ 61,340 $ 71,915 $ 76,858 $ 87,729 $ 93,648 $ 92,769 $ 61,118 $ 49,277 Add: Goodwill Impairment (TTM) — — — — — — 5,82
Slide 33: Net Sales in Automotive
Net Sales in Automotive (1) (7%) from Q4'23 (1) Beginning in fiscal year 2024, miscellaneous sales previously reported in Other are now reported in the respective three end Kimball Electronics | 33 market verticals; all prior periods have been recast to conform to current period presentation
Slide 34: Net Sales in Medical
Net Sales in Medical (1) (17%) from Q4'23 (1) Beginning in fiscal year 2024, miscellaneous sales previously reported in Other are now reported in the respective three end Kimball Electronics | 34 market verticals; all prior periods have been recast to conform to current period presentation
Slide 35: Net Sales in Industrial
Net Sales in Industrial (1) (19%) from Q4'23 (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. Kimball Electronics | 35