Kimball Electronics, Inc. · NASDAQ:KE
Kimball Electronics — Q1 FY2021 Earnings Presentation
31 slides from Kimball Electronics's earnings presentation, Nov 17, 2020
Slide 1: Investor Presentation First Quarter Fiscal Year 2021
Exhibit 99.1 Investor Presentation First Quarter Fiscal Year 2021 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 mature Revenue • Positive outsourcing trends Profitability • Contribution from new Growt
Slide 5: What We Do
KIMBALL ELECTRONICS (Nasdaq: KE) // What We Do INDUSTRIAL 23%* PUBLIC SAFETY 5%* • Climate Controls • Thermal Imaging • Automation Controls • Fire Detection • Operator Interface • First Responder • Optical Inspection Electronics • Smart Metering $1.2B • Security FY 2020 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 10% More than 10 Years 30 Customers 11% 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 79% % of Net Sales 1QFY’21 Programs are
Slide 9: Megatrends Opportunities
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 10: Megatrend Opportunities Healthcare Growth
KIMBALL ELECTRONICS (Nasdaq: KE) // Megatrend Opportunities Healthcare Growth • Aging Population • Affordability/Increasing Access to Care • Connected Care to Improve Patient Outcomes • Decreasing Device Size • Connected Drug Delivery Global Medical electronics assembly value to grow 6.2% through 20
Slide 11: Rapid Change for Traditional Manufacturing: Industry 4.0
KIMBALL ELECTRONICS (Nasdaq: KE) // Rapid Change for Traditional Manufacturing Industry 4.0 Strategy for Success Our Industry 4.0 strategy is to leverage a digital framework focused on meeting customer requirements and enhancing competitiveness by accelerating continuous improvement, sharing best pr
Slide 12: 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 12
Slide 13: End Markets with Secular Growth - Automotive
KIMBALL ELECTRONICS (Nasdaq: KE) // Creating Shareholder Value End Markets with Secular Growth - Automotive Kimball Automotive Growth 38% of Revenue* AUTOMOTIVE CAGR 2015-2020 FY20 vs FY19 • Electronic Power Steering 9% (4)% • Body Controls • Occupant Safety • Automated Driver Assist Systems Market
Slide 14: End Markets with Secular Growth - Medical
KIMBALL ELECTRONICS (Nasdaq: KE) // Creating Shareholder Value End Markets with Secular Growth - Medical Kimball Medical Growth 33% of Revenue* CAGR 2015-2020 FY20 vs FY19 Growth MEDICAL • Sleep Therapy and 10% 8% Respiratory Care • Medical Imaging and Guided Therapy • In Vitro Diagnostics • Drug De
Slide 15: End Markets with Secular Growth - Industrial
KIMBALL ELECTRONICS (Nasdaq: KE) // Creating Shareholder Value End Markets with Secular Growth – Industrial Kimball Industrial Growth 23% of Revenue* INDUSTRIAL CAGR 2015-2020 FY20 vs FY19 Growth • Climate Controls • Automation Controls 6% 6% • Operator Interface • Optical Inspection • Smart Meterin
Slide 16: 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 17: Developing Into A 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 18: Financial Review
KIMBALL ELECTRONICS (Nasdaq: KE) // Financial Review Revenue Growth, Margin Expansion, and Strong Financial Profile KIMBALL ELECTRONICS 18
Slide 19: Financial Targets
KIMBALL ELECTRONICS (Nasdaq: KE) // Financial Targets 8% 4.5% 12.5% Revenue Operating Operating Growth Margin ROIC KIMBALL ELECTRONICS 19
Slide 20: Revenue Performance
KIMBALL ELECTRONICS (Nasdaq: KE) // Revenue Performance REVENUE PERFORMANCE REVENUE BY VERTICAL MARKET Target 8% - Achieving above target growth rates 100% 2% 1% 1% 1% 2% 1% 5% 4% 7% 6% 6% 5% 90% 21% 20% 22% 23% 21% 80% 22% 70% 60% 29% 28% 31% 33% 32% 38% 50% 40% 30% 41% 44% 40% 20% 38% 40% 36% 10%
Slide 21: Profitability Trends
KIMBALL ELECTRONICS (Nasdaq: KE) // Profitability Trends ADJUSTED OPERATING INCOME/MARGIN* ADJUSTED EBITDA/MARGIN** Target 4.5% Operating Margin $80 10.0% $45 4.0% 3.6% 6.0% 6.7% 6.0% 6.0% 8.7% 9.0% 4.3% 3.4% 5.4% $70 $40 7.0% 8.0% 5.0% $35 $60 7.0% $30 4.0% 5.5% $50 6.0% $25 5.0% 3.5% 3.0% $20 $40
Slide 22: 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 (IN MILLIONS) (IN $6 $4 $2 1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 3Q18 4Q18 1Q19 2Q19 3Q19 4Q19 1Q20 2Q20 3Q20 4Q20 1Q21 D
Slide 23: Capital Allocation
KIMBALL ELECTRONICS (Nasdaq: KE) // Capital Allocation Reinvest in the business – Significant $100 capex spending of approximately $30 $90 million/year to fuel multi-year organic growth and expansion in ROIC $80 $70 Acquisitions – $50+ million of $60 acquisitions over past five years. Going forward
Slide 24: Target ROIC
KIMBALL ELECTRONICS (Nasdaq: KE) // Target ROIC 12.5% 12% 10.6% 10.3% 10% 9.0% 8.8% 8.7% 8% 7.1% 6% 4% 2% 0% FY17 FY18 FY19 FY20 Q1FY20 Q1FY21 * ROIC is a Non-GAAP term. A reconciliation is provided in the appendix of this presentation. Prior periods have been revised to reflect adjusted operating i
Slide 25: Consistent Working Capital Management and Ample Liquidity for Growth
Kimball Electronics (Nasdaq: KE) Consistent Working Capital Management and Ample Liquidity for Growth 50-55 DAYS SALES OUTSTANDING** 73-81 $73M CASH AND EQUIVALENTS* DAYS CASH CONVERSION CYCLE** $159M IN TOTAL LIQUIDITY* * As of September 30, 2020 ** Range as reported for quarters ending September 3
Slide 26: 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 mature Revenue • Positive outsourcing trends Profitability • Contribution from new Growt
Slide 27: Questions
Questions KIMBALL ELECTRONICS 27
Slide 28: Reconciliation of Non-GAAP Results
KIMBALL ELECTRONICS (Nasdaq: KE) // Reconciliation of Non-GAAP Results (In Millions) FY17 FY18 FY19 FY20 Q1FY20 Q1FY21 Revenue, as reported $ 931 $ 1,072 $ 1,182 $ 1,201 $ 313 $ 332 Operating Income (GAAP) $ 42.780 $ 42.038 $ 42.060 $ 31.996 11.115 17.807 Add: SERP 1.006 0.712 0.327 0.848 (0.022) 0.
Slide 29: Reconciliation of Non-GAAP Results
KIMBALL ELECTRONICS (Nasdaq: KE) // Reconciliation of Non-GAAP Results (In Millions, except per share data) FY17 FY18 FY19 FY20 Shareholders Equity, as reported $ 342.272 $ 355.527 $ 369.854 $ 379.365 Goodwill & Intangibles $ 10.772 $ 10.566 $ 40.292 $ 31.354 Tangible Book Value $ 331.500 $ 344.961
Slide 30: Reconciliation of Non-GAAP Results
KIMBALL ELECTRONICS (Nasdaq: KE) // Reconciliation of Non-GAAP Results (In Thousands) 1Q18 2Q18 3Q18 4Q18 1Q19 2Q19 3Q19 4Q19 1Q20 2Q20 3Q20 4Q20 1Q21 Operating Income (GAAP) (TTM) $ 39,568 $ 37,515 $ 39,177 $ 42,038 $ 39,547 $ 39,640 $ 43,007 $ 42,060 $ 46,143 $ 44,615 $ 40,706 $ 31,996 $ 38,688 Ad
Slide 31: Reconciliation of Non-GAAP Results
KIMBALL ELECTRONICS (Nasdaq: KE) // Reconciliation of Non-GAAP Results Q1FY20 Q1FY21 (In Thousands) FY17 FY18 FY19 FY20 (TTM) (TTM) Operating Income (GAAP) $ 42,780 $ 42,038 $ 42,060 $ 31,996 $ 46,143 $ 38,688 Add: SERP $ 1,006 $ 712 $ 327 $ 848 $ 186 $ 1,420 Add: Goodwill Impairment $ - $ - $ - $ 7
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