Slide 1: Second Quarter Fiscal 2024 Results
Second Quarter Fiscal 2024 Results Quarter Ended December 31, 2023 Supplementary Information to the February 6, 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: Supplemental disclosures in our press release
Supplemental disclosures in our press release (1) Cash Conversion Days (“CCD”) are calculated as the sum of Days Sales Outstanding plus Contract Asset Days plus Production Days Supply on Hand less Accounts Payable Days and less Advances from Customers Days. CCD, or a similar metric, is used in our i
Slide 4: Today's Speakers
Today’s Speakers • Opening comments • Financial results for the second quarter • Updated guidance for fiscal year 2024 • Closing comments Ric Phillips CEO • Q&A Jana Croom CFO Kimball Electronics | 4
Slide 5: Q2 was hard fought with our team navigating a challenging operating environment
Q2 was hard fought with our team navigating a challenging operating environment • Global macro headwinds have persisted, and the consumer is pulling back • The markets we serve are experiencing demand softening and our customers are changing production schedules and delivery date requirements • Sale
Slide 6: Net sales in Q2 totaled $421 million
Net sales in Q2 totaled $421 million • 4% decrease compared to second quarter of last year • Sales in North America up low double-digits • Offset by declines in Asia and Europe • Thailand impacted by major Medical customer involved in FDA recall • Europe appears to be a region of the world where the
Slide 7: Industrial posted year-over-year growth in the quarter
Industrial posted year-over-year growth in the quarter • Net sales totaled $113 million • 7% increase compared to Q2 last year • 27% of total company sales • Strength this quarter • Charging systems • Climate control • Public safety products *Percentage of net sales **Percentage increase compared to
Slide 8: 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 • Responsible use of natural resources • We specialize in… • Heating & cooling systems • Factory automation • Optical inspection • Electronic locking devices •
Slide 9: Net sales in Automotive totaled $200 million
Net sales in Automotive totaled $200 million • 2% decrease compared to Q2 last year • 47% of total company sales • Decline this quarter: • Weakening demand in Europe • Partially offset by incremental strength in China *Percentage of net sales **Percentage decrease compared to Q2 of fiscal year 2023
Slide 10: Strong runway for growth in the Automotive vertical
Strong runway for growth in the Automotive vertical • Industry trend toward incorporating electronic content to vehicles • Steering • Braking systems • Proven expertise manufacturing safety critical products • Meet stringent regulatory requirements of the industry • Most of our Automotive business i
Slide 11: As expected, net sales in Medical declined in Q2
As expected, net sales in Medical declined in Q2 • Net sales totaled $108 million • 14% decrease compared to Q2 last year • 26% of total company sales • Annual guidance reflects $100 million reduction in sales with a major medical customer • Partially offset by growth in other programs *Percentage o
Slide 12: Growth opportunities in Medical will continue to emerge
Growth opportunities in Medical will continue to emerge • Industry megatrends • Population aging • Access & affordability to healthcare increasing 1 • Medical devices getting smaller in size and requiring 2 higher levels of precision & accuracy • Drug delivery systems becoming more prevalent • Our m
Slide 13: Summary
Summary • Solid quarter in difficult operating environment • Updated outlook for fiscal year 2024 Ric Phillips CEO Kimball Electronics | 13
Slide 14: Net sales in Q2 were $421.2 million
Net sales in Q2 were $421.2 million Net Sales • 4% decrease compared to the second quarter of fiscal 2023 (4%) from Q2'23 • Foreign exchange had a 1% favorable impact on consolidated sales year-over-year Kimball Electronics | 14
Slide 15: The gross margin rate in Q2 was 8.2%
The gross margin rate in Q2 was 8.2% Gross Margin % • 40 basis point improvement +40 bps compared to the same period last from Q2'23 year • Increase predominately driven by • Favorable product mix • Lower material costs compared to 12-months ago when global component part shortages were impacting EM
Slide 16: Adjusted selling and administrative expenses
Adjusted selling and administrative expenses (1) • $17.3 million in Q2 of fiscal 2024 compared to $16.4 million in the second quarter of last year • Increase driven by $2 million allowance for credit losses • Customer associated with this charge is not in bankruptcy • As percentage of sales, adjuste
Slide 17: 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 of this presentation. Kimball Electronics | 17
Slide 18: Other income & expense and the effective tax rate
Other income & expense and the effective tax rate • Other income & expense was expense of $5.3 million, compared to expense of $3.3 million last year • The increase is a result of higher interest expense year-over-year • Product of our elevated debt levels and the current interest rate environment •
Slide 19: 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 of this presentation. Kimball Electronics | 19
Slide 20: Balance sheet
Balance sheet • Cash and cash equivalents were $39.9 million at December 31, 2023 • Cash flow used by operating activities in the second quarter of fiscal 2024 was $30.7 million • Cash conversion days were 117 days, compared to 97 days in the second quarter last year, and 103 days last quarter • Cus
Slide 21: Inventory ended the quarter at $455.7 million
Inventory ended the quarter at $455.7 million • Compared to $487.5 million at the end of Q2 last year • Compared to $482.2 million last quarter • Expect this number to continue to decline as we work with customers to “right-size” inventory to match demand Kimball Electronics | 21
Slide 22: Capital expenditures in Q2 were $13.2 million
Capital expenditures in Q2 were $13.2 million • Supporting organic growth • Maintenance requirements • Investments in automation and efficiency (1) Capital Expenditures include purchases of capitalized software. Kimball Electronics | 22
Slide 23: Borrowings
Borrowings • Borrowings on credit facilities at December 31, 2023, were $321.8 million • Compared to $273.5 million dollars a year ago • Borrowings at the end of Q1 were $296.7 million • Short-term liquidity available totaled $105.7 million at the end of the second quarter Kimball Electronics | 23
Slide 24: Short-term credit facility
Short-term credit facility • On January 5, 2024, we amended our short-term credit facility to provide additional domestic liquidity for investments needed to meet working capital and other operating needs • Increases borrowing limit to $100 million, from $50 million • Changes maturity date to Januar
Slide 25: Share repurchases
Share repurchases • No shares were repurchased in the second 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 f
Slide 26: Updating guidance for fiscal year 2024
Updating guidance for fiscal year 2024 • Net sales expected to decline 2% - 4% compared to fiscal 2023 • Previous estimate was flat with prior year • Operating income estimated to be in the range of 4.2% to 4.6% of net sales • Previous guidance was flat with prior year • The outlook for capital expe
Slide 27: CIRCUITS ASSEMBLY Service Excellence Awards
CIRCUITS ASSEMBLY Service Excellence Awards • In November, we achieved the Highest Overall Customer Ratings in the categories of: • Dependability and timely delivery • Technology • Value for price • Manufacturing quality • Awards based solely on direct customer input • Very proud of our team’s consi
Slide 28: Questions
Questions Kimball Electronics | 28
Slide 29: Appendix
Appendix Kimball Electronics | 29
Slide 30: Reconciliation of Non-GAAP Results
Reconciliation of Non-GAAP Results (Unaudited, Amounts in Thousands, Except Per Share Data) Q3'22 Q4'22 Q1'23 Q2'23 Q3'23 Q4'23 Q1'24 Q2'24 Net Sales Growth (vs. same quarter in prior year) 19 % 13 % 39 % 39 % 32 % 33 % 8 % (4) % Foreign Currency Exchange Impact (2) % (3) % (5) % (5) % (2) % — % 1 %
Slide 31: Net Sales in Automotive
Net Sales in Automotive (1) (2%) from Q2'23 (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 restated to conform to current period presentation Kimball Electronics | 31
Slide 32: Net Sales in Medical
Net Sales in Medical (1) (14%) from Q2'23 (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 restated to conform to current period presentation Kimball Electronics | 32
Slide 33: Net Sales in Industrial
Net Sales in Industrial (1) (2) +7% from Q2'23 (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 repor