Kimball Electronics, Inc. · NASDAQ:KE
Kimball Electronics — Investor Presentation (May 2019)
36 slides from Kimball Electronics's investor presentation, May 28, 2019
Slide 1: Investor Presentation Third Quarter Fiscal Year 2019
Exhibit 99.1 Investor Presentation Third Quarter Fiscal Year 2019
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 contract manufacturer Headquarters: of electronic components used in… Jasper, Indiana Automotive, Industrial, Medical & Public Safety Industries Established in 1961 Focused on non-commodity products and components that require … Nasdaq: KE comple
Slide 4: Why Invest?
KIMBALL ELECTRONICS (Nasdaq: KE) // Why Invest? Expect high single-digit revenue • Utilization rates increase growth Opportunities Above Average to Expand • New customer programs • Focus on secular growth trends mature Revenue • Positive outsourcing trends Profitability Growth • Contribution from ne
Slide 5: What We Do
KIMBALL ELECTRONICS (Nasdaq: KE) // What We Do PUBLIC SAFETY 6%* INDUSTRIAL 20%* • Thermal Imaging • Climate Controls • Fire Detection • Automation Controls • Defense • LED Lighting • Security • Operator Interface $1.1B OTHER 1%* FY 2018 NET SALES AUTOMOTIVE 44%* MEDICAL 29%* • Electronic Power Stee
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 Poznan, Poland Indianapolis, IN San Jose, CA Chiba, Japan Timisoara, Romania Nanjing, China Jasper, IN Tampa, FL Suzhou, China Reynosa, Mexico 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 15% More than 10 Years 30 Customers Typical Program Length 9% 5-10 Years Automotive: 5-7 years 18 Customers Medical: 10 years Industrial: 3-5 years 76% Less than 5 Years 29 Customers % of Net Sales FYTD’19 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 • Advanced Driver Assistance Systems (“ADAS”) • Infotainment Systems • Passenger Safety Systems • Mobility/Vehicle Management • Electric Vehicles • Redundant Systems for Self Driving Cars Global Au
Slide 12: Megatrends Opportunities: Healthcare and Connected Devices
KIMBALL ELECTRONICS (Nasdaq: KE) // Megatrends Opportunities Healthcare Growth Internet Connected Devices • Aging Population • Internet of Things • Increasing Access to Care • Smart Metering • Remote Patient Monitoring • Energy Efficient Lighting • Decreasing Device Size • Connected Drug Delivery Gl
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 (Unaudited) End Markets with Secular Growth - Automotive Kimball Automotive Growth 44% of Revenue* AUTOMOTIVE CAGR 2014-2018 3QFY19 TTM Growth • Electronic Power Steering • Anti-Lock Brakes 14% 2% • Occupant Safety • Telematics Market Gr
Slide 15: End Markets with Secular Growth - Medical
KIMBALL ELECTRONICS (Nasdaq: KE) // Creating Shareholder Value (Unaudited) End Markets with Secular Growth - Medical Kimball Medical Growth 29% of Revenue* CAGR 2014-2018 3QFY19 TTM Growth MEDICAL • Sleep Therapy and 11% 20% Respiratory Care • Patient Care and Monitoring • In Vitro Diagnostics • Dru
Slide 16: End Markets with Secular Growth - Industrial
KIMBALL ELECTRONICS (Nasdaq: KE) // Creating Shareholder Value (Unaudited) End Markets with Secular Growth – Industrial 20% of Revenue* Kimball Industrial Growth INDUSTRIAL CAGR 2014-2018 3QFY19 TTM Growth • Climate Controls • Automation Controls • LED Lighting 3% 15% • Operator Interface Market Gro
Slide 17: Multifaceted Manufacturing Solutions Company
KIMBALL ELECTRONICS (Nasdaq: KE) // Creating Shareholder Value Multifaceted Manufacturing Solutions Company Organic Growth Electronics Manufacturing Outsourced Manufacturing Services Services M&A Investments that Increase Customer Engagement Diversified Add manufacturing services for non-electronic
Slide 18: Acquisition Strategy
KIMBALL ELECTRONICS (Nasdaq: KE) // Creating Shareholder Value Acquisition Strategy Primary Focus: Key Criteria To establish a global market leadership • New capabilities position as a premier AT&M provider • Alignment with four end-market strategy Secondary Focus: • New customer relationships and m
Slide 19: 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 Progr
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 Growth Operating Margin ROIC KIMBALL ELECTRONICS 21
Slide 22: Revenue Performance
KIMBALL ELECTRONICS (Nasdaq: KE) // (Unaudited) Revenue Performance Target 8% - Achieving above target growth rates 10% - CAGR FY2014 to FY2018 10% Growth TTM 3QFY19 (ended Mar. 31, 2019) $1,200 $1,100 $1,000 $900 $800 $700 $600 $500 $400 $300 FY16 FY17 FY18 TTM TTM 3Q18 3Q19 In $ millions KIMBALL E
Slide 23: Revenue Mix by Vertical Market
KIMBALL ELECTRONICS (Nasdaq: KE) // (Unaudited) Revenue Mix by Vertical Market 100% 2% 2% 1% 1% 6% 5% 7% 7% 90% 20% 22% 80% 22% 22% 70% 60% 29% 32% 30% 28% 50% 40% 30% 44% 20% 39% 41% 40% 10% 0% FY16 FY17 FY18 Q3FY19 Automotive Medical Industrial Public Safety Other KIMBALL ELECTRONICS 23
Slide 24: Profitability Trends: Adjusted Operating Income/Margin
KIMBALL ELECTRONICS (Nasdaq: KE) // Profitability Trends (Unaudited) Adjusted Operating Income/Margin* Target 4.5% Operating Margin Expect improvement from ramping utilization of greenfield plant in Romania and maturity of new programs $50 4.2% 3.9% 4.5% 3.8% 3.8% 3.5% 4.0% $40 3.5% 3.0% $30 2.5% 2.
Slide 25: Profitability Trends: Adjusted EBITDA/Margin
KIMBALL ELECTRONICS (Nasdaq: KE) // Profitability Trends (Unaudited) Adjusted EBITDA/Margin* Expect improvement from ramping utilization of greenfield plant in Romania and maturity of new programs $80 8.0% 7.0% 6.7% 6.8% 6.2% $70 7.0% 5.7% $60 6.0% 5.0% $50 4.0% $40 3.0% $30 2.0% $20 1.0% $10 0.0% F
Slide 26: Capital Expenditures and D&A
KIMBALL ELECTRONICS (Nasdaq: KE) // (Unaudited) Capital Expenditures and D&A Significant capex spending to fuel multi-year organic growth and expansion in ROIC • DCMS • Romanian Plant FY2015 to FY2017 - $40 million+ investment in excess of D&A spent on Growth 14.0 12.0 10.0 8.0 6.0 4.0 2.0 4Q16 1Q17
Slide 27: Target ROIC 12.5%
KIMBALL ELECTRONICS (Nasdaq: KE) // (Unaudited) Target ROIC 12.5% Significant capex spending to fuel multi-year organic growth and expansion in ROIC • DCMS • Romanian Plant FY2015 to FY2017 - $40 million+ investment in excess of D&A spent on Growth 14.0% 12.0% 10.3% 10.1% 10.0% 10.0% 8.9% 9.0% 8.0%
Slide 28: Capital Allocation
KIMBALL ELECTRONICS (Nasdaq: KE) // (Unaudited) Capital Allocation Reinvest in the business – Significant capex spending of approximately $30 million/year to multi-year organic growth and expansion in ROIC Acquisitions - $50+ million of acquisitions over past four years. Going forward M&A will play
Slide 29: Strong Balance Sheet
KIMBALL ELECTRONICS (Nasdaq: KE) // (Unaudited) Strong Balance Sheet Ample Liquidity for Growth $47M in Cash* $107 million in total liquidity* $150M credit facility, with option to increase to $225 million 1.3 million square feet of owned manufacturing space Consistent Working Capital Management** D
Slide 30: Growing Book Value
KIMBALL ELECTRONICS (Nasdaq: KE) // (Unaudited) Growing Book Value Growth in Tangible Book Value Per Share/ Adjusted Earnings Per Share* $13 $12 $1.28 $1.12 $11 EPS $0.77 Book Value $10 $0.97 $9 $8 $7 $6 FY15 FY16 FY17 FY18 * Adjusted Earnings Per Share and Tangible Book Value are Non-GAAP terms. A
Slide 31: Why Invest?
KIMBALL ELECTRONICS (Nasdaq: KE) // Why Invest? Expect high single-digit revenue • Utilization rates increase growth Opportunities Above Average to Expand • New customer programs • Focus on secular growth trends mature Revenue • Positive outsourcing trends Profitability Growth • Contribution from ne
Slide 32: Questions
QUESTIONS KIMBALL ELECTRONICS 32
Slide 33: Reconciliation of Non-GAAP Results
KIMBALL ELECTRONICS (Nasdaq: KE) // (Unaudited) Reconciliation of Non-GAAP Results (In Millions) FY16 FY17 FY18 TTM 3Q18 TTM 3Q19 Revenue, as reported $ 842 $ 931 $ 1,072 $ 1,037 $ 1,140 Operating Income (GAAP) $ 29.518 $ 42.780 $ 42.038 $ 39.177 $ 43.007 Add: Spin-off Expenses 0.137 - - - - Less: L
Slide 34: Reconciliation of Non-GAAP Results
KIMBALL ELECTRONICS (Nasdaq: KE) // (Unaudited) Reconciliation of Non-GAAP Results (In Millions, except per share data) FY16 FY17 FY18 Shareholders Equity, as reported $ 324.369 $ 342.272 $ 355.527 Goodwill & Intangibles $ 10.784 $ 10.772 $ 10.566 Tangible Book Value $ 313.585 $ 331.500 $ 344.961 Av
Slide 35: Reconciliation of Non-GAAP Results
KIMBALL ELECTRONICS (Nasdaq: KE) // (Unaudited) Reconciliation of Non-GAAP Results (In Thousands) 1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 3Q18 4Q18 1Q19 2Q19 3Q19 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 Less: Lawsuit Proc
Slide 36: Reconciliation of Non-GAAP Results
KIMBALL ELECTRONICS (Nasdaq: KE) // (Unaudited) Reconciliation of Non-GAAP Results (In Thousands) FY16 FY17 FY18 TTM 3Q18 TTM 3Q19 Operating Income (GAAP) $ 29,518 $ 42,780 $ 42,038 $ 39,177 $ 43,007 Add: Spin-off Expenses $ 137 $ - $ - $ - $ - Less: Lawsuit Proceeds $ - $ 4,005 $ - $ - $ 92 Adjuste
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