Slide 1: Third Quarter Fiscal 2024 Results
Third Quarter Fiscal 2024 Results Quarter Ended March 31, 2024 Supplementary Information to the May 8, 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 fiscal year 2024 guidance, and any statements made during our earnings conference call today may be considered forward-looking under the Private Securities Litigat
Slide 3: Today's Speakers
Today’s Speakers • Opening comments • Financial results for the third quarter • Guidance for fiscal 2024 • Closing comments Ric Phillips CEO • Q&A Jana Croom CFO Kimball Electronics | 3
Slide 4: 1st year at Kimball Electronics…
1st year at Kimball Electronics… • Good journey already, excited about the future for the Company • Drawn to the Kimball opportunity for a number of reasons • Outstanding company culture • Opportunity to build on a strong foundation to achieve significant value creation • Experiences so far have con
Slide 5: Update on our strategic direction and structure
Update on our strategic direction and structure • Divesting our Automation, Test & Measurement business • Increasing the focus and support on our core EMS business • Realigning our Medical solutions business unit into our EMS medical vertical • Elevated two key executives to enterprise-wide operatio
Slide 6: Operating environment remained challenged for EMS
Operating environment remained challenged for EMS • Expect macro headwinds to persist in fiscal 2025 • During this period of end market softness, we are taking action by: • Proactively aligning our cost structure with short-term demand trends • Remaining competitive with stable operating margins • F
Slide 7: Net sales in Q3 totaled $425 million
Net sales in Q3 totaled $425 million • 12% decrease compared to Q3 of last year • Decline shared across the 3 vertical markets • Softness in each region of our global footprint • Sequentially, sales increased $4 million, or nearly 1% • Difficult “comps” – growth in Q3 last year was 32% • 2-year stac
Slide 8: Net sales in Automotive totaled $202 million
Net sales in Automotive totaled $202 million • Down 9% compared to Q3 last year • 47% of total company sales • Decrease this quarter: • Continued weak demand in Europe • Incremental softness in North America • Decline in China • Compared to last quarter, North America and Europe both posted sequenti
Slide 9: Long-term growth in Automotive
Long-term growth in Automotive • Increase in the rate at which electronic content is being added to vehicles – steering & braking • Content leverages advanced technologies and expanded operating systems • Align with core manufacturing capabilities • Proven expertise in safety critical products • Arc
Slide 10: Net sales in Medical were $113 million
Net sales in Medical were $113 million • 17% decrease compared to Q3 last year • 27% 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 • $100 million
Slide 11: Strategically positioned to support growth driven by industry megatrends
Strategically positioned to support growth driven by industry megatrends • Aging population • Increasing access & affordability to healthcare 1 2 • Decreasing device sizes, combined with the need for higher levels of precision 3 • Increasing drug delivery systems 4 • Industry-wide trend to outsource
Slide 12: Net sales in Industrial were $110 million
Net sales in Industrial were $110 million • 14% decrease compared to Q3 last year • 26% of total company sales • AT&M results included in this vertical • Drove half of the decline in Q3 • Lower demand for internal climate control systems • Smart Meters in Europe have been commoditizing *Percentage o
Slide 13: We refer to Industrial as "green & clean"
We refer to Industrial as “green & clean” • Our products reduce environmental impacts • Promote energy efficiency, safety, carbon neutrality • Better consumption of natural resources • Meaningful growth drivers from megatrend in legislation and incentives supporting decarbonization • Strategically p
Slide 14: Summary
Summary • Quarter filled with a number of important developments • Insights on financial results • Review guidance Ric Phillips CEO Kimball Electronics | 14
Slide 15: Q3 results include…
Q3 results include… • Impairment associated with the AT&M business • Restructuring expenses in support of sharpening strategic focus • All in, activity totaled $14.5 million, or $0.58 per share: After-tax $ EPS Goodwill & asset impairment $14.0 $0.56 Restructuring expense $1.2 $0.05 Recovery of lega
Slide 16: Net sales in Q3 were $425 million
Net sales in Q3 were $425 million Net Sales • 12% decrease compared to the third quarter of fiscal 2023 (12%) from Q3'23 • AT&M contributed over 100 bps to the decline • Foreign exchange did not impact consolidated sales year-over-year Kimball Electronics | 16
Slide 17: The gross margin rate in Q3 was 7.9%
The gross margin rate in Q3 was 7.9% Gross Margin % • 100 bps decline compared to the same period last year (100) bps from Q3'23 • Decrease driven by: • Lower absorption in EMS manufacturing facilities • AT&M • Both a result of declining sales Kimball Electronics | 17
Slide 18: Adjusted selling and administrative expenses
Adjusted selling and administrative expenses (1) • $16.6 million in Q3 • $0.8 million decline compared to Q3 last year +30 bps from Q3'23 • Decrease resulting from lower bonus expense • As percentage of sales: • Adjusted S&A expenses were 3.9% • 30 bps increase versus Q3 of last year (1) Adjusted Se
Slide 19: Adjusted operating income
Adjusted operating income (1) (1) Adjusted Operating Income is a Non-GAAP measure – refer to Reconciliation of Non-GAAP Results in the supplementary information. Kimball Electronics | 19
Slide 20: Other income & expense and the effective tax rate
Other income & expense and the effective tax rate • Other income & expense was expense of $6.3 million, compared to expense of $3.3 million last year • The increase is a result of… • Higher interest expense year-over-year, a product of our elevated debt levels and the current interest rate environme
Slide 21: 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 | 21
Slide 22: Balance sheet
Balance sheet • Cash and cash equivalents were $65.2 million at March 31, 2024 • Cash flow from operating activities in the third quarter of fiscal 2024 was $42.6 million • Cash conversion days were 110 days, compared to 92 days in the third quarter last year, and 117 days last quarter • Decrease in
Slide 23: Inventory ended the quarter at $396.2 million
Inventory ended the quarter at $396.2 million • $92 million reduction compared to Q3 last year ($92) million from Q3'23 • Expect additional declines with “right-sizing” inventory to match current demand Kimball Electronics | 23
Slide 24: Capital expenditures in Q3 were $13.4 million
Capital expenditures in Q3 were $13.4 million Capital Expenditures and Depreciation & Amortization • Supporting future growth • Maintenance requirements • Investments in automation and efficiency Note: Capital Expenditures include purchases of capitalized software. Kimball Electronics | 24
Slide 25: Borrowings
Borrowings • Borrowings on credit facilities at March 31, 2024, were $319.6 million • Compared to $289.4 million a year ago • Borrowings at the end of Q2 were $321.8 million • Short-term liquidity available totaled $182.6 million at the end of the third quarter Kimball Electronics | 25
Slide 26: Share repurchases
Share repurchases • No shares were repurchased in the third quarter of fiscal 2024 • Since October 2015, under our Board authorized share repurchase program: • A total of $88.8 million returned to Share Owners by repurchasing 5.8 million shares of common stock • $11.2 million remaining on program fo
Slide 27: Guidance for fiscal year 2024
Guidance for fiscal year 2024 • Reiterating our guidance for adjusted operating income • Range of 4.2% to 4.6% of net sales • Updated guidance for net sales • Expected to decline 4% to 6% compared to fiscal 2023 • Previous estimate was a decline of 2% to 4% • Updated guidance for capital expenditure
Slide 28: 2023 Guiding Principles Report
2023 Guiding Principles Report • Recently published our annual ESG disclosures • “How We Are Winning Together, The Kimball Way” • Reflects deep roots of sustainability in our culture • Highlights numerous recognitions and accomplishments from calendar 2023 • Demonstrates our dedication to the Guidin
Slide 29: Positioning the Company for long-term value creation
Positioning the Company for long-term value creation • Uncertainty as to when consumer demand will return to “normalized” cycles • Work to stabilize and improve operating income margin • Divestiture of AT&M business will increase our focus on EMS operations • Consolidating EMS and Medical Solutions
Slide 30: Questions
Questions Kimball Electronics | 30
Slide 31: Appendix
Appendix Kimball Electronics | 31
Slide 32: Reconciliation of Non-GAAP Results
Reconciliation of Non-GAAP Results (Unaudited, Amounts in Thousands, Except Per Share Data) Q4'22 Q1'23 Q2'23 Q3'23 Q4'23 Q1'24 Q2'24 Q3'24 Net Sales Growth (vs. same quarter in prior year) 13 % 39 % 39 % 32 % 33 % 8 % (4) % (12) % Foreign Currency Exchange Impact (3) % (5) % (5) % (2) % — % 1 % 1 %
Slide 33: Reconciliation of Non-GAAP Results continued…
Reconciliation of Non-GAAP Results continued… (Unaudited, Amounts in Thousands, Except Per Share Data) Q4'22 Q1'23 Q2'23 Q3'23 Q4'23 Q1'24 Q2'24 Q3'24 Operating Income (GAAP) (TTM) $ 52,549 $ 61,340 $ 71,915 $ 76,858 $ 87,729 $ 93,648 $ 92,769 $ 61,118 Add: Goodwill Impairment (TTM) — — — — — — — 5,
Slide 34: Net Sales in Automotive
Net Sales in Automotive (1) (9%) from Q3'23 (1) Beginning in fiscal year 2024, miscellaneous sales previously reported in Other are now reported in the respective three end market verticals; all prior Kimball Electronics | 34 periods have been recast to conform to current period presentation
Slide 35: Net Sales in Medical
Net Sales in Medical (1) (17%) from Q3'23 (1) Beginning in fiscal year 2024, miscellaneous sales previously reported in Other are now reported in the respective three end Kimball Electronics | 35 market verticals; all prior periods have been recast to conform to current period presentation
Slide 36: Net Sales in Industrial
Net Sales in Industrial (1) (2) (14%) from Q3'23 (1) Beginning in fiscal year 2023, Public Safety was combined with Industrial; all prior periods have been recast to conform to current period presentation (2) Beginning in fiscal year 2024, miscellaneous sales previously reported in Other are now rep