Kimball Electronics, Inc. · NASDAQ:KE
Kimball Electronics — Investor Presentation (June 2018)
34 slides from Kimball Electronics's investor presentation, Jun 26, 2018
Slide 1: Investor Presentation June 2018
Investor Presentation June 2018
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 Opportunities to expand growth from focus on end Above Average Opportunities profitability and returns as markets with strong secular Revenue to Expand utilization rates increase and growth opportunities, Profitability
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 OTHER 1% AUTOMOTIVE 44%* MEDICAL 29%* • Electronic Power Steering • Sleep Therapy and
Slide 6: Our Value Proposition
KIMBALL ELECTRONICS (Nasdaq: KE) // Our Value Proposition 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 quality, high reli
Slide 7: Sizable Addressable Market
KIMBALL ELECTRONICS (Nasdaq: KE) // Sizable Addressable Market Total Market Size $425 Billion Industrial Market CAGR* Medical $31 Verticals 2011-2016 Billion Automotive 6.0% $17 Medical 2.3% Billion Industrial 6.7% Total Market 0.6% Automotive $14 Billion Focused on the Fast Growing Market Verticals
Slide 8: 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 •Disruption is coming… – Automati
Slide 9: 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 Global Automotive electronics assembly value to gro
Slide 10: 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 Global Medical electronics assembly value to grow 4.3
Slide 11: 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 11
Slide 12: Creating Shareholder Value: Automotive
KIMBALL ELECTRONICS (Nasdaq: KE) // Creating Shareholder Value (Unaudited) End markets with secular growth - Automotive Kimball Automotive Growth 44% of Revenue* AUTOMOTIVE TTM** Growth CAGR 2014-2017 • Electronic Power Steering • Anti-Lock Brakes 11% 22% • Occupant Safety • Telematics Market Growth
Slide 13: Creating Shareholder Value: Medical
KIMBALL ELECTRONICS (Nasdaq: KE) // Creating Shareholder Value (Unaudited) End markets with secular growth - Medical Kimball Medical Growth 29% of Revenue* CAGR 2014-2017 TTM** Growth MEDICAL • Sleep Therapy and 7% 16% Respiratory Care • Patient Care and Monitoring • In Vitro Diagnostics • Drug Deli
Slide 14: Creating Shareholder Value: Industrial
KIMBALL ELECTRONICS (Nasdaq: KE) // Creating Shareholder Value (Unaudited) End markets with secular growth – Industrial 20% of Revenue* Kimball Industrial Growth INDUSTRIAL CAGR 2014-2017 TTM** Growth • Climate Controls • Automation Controls • LED Lighting 3% 5% • Operator Interface Market Growth Re
Slide 15: Diversified Contract Manufacturing Services investments
KIMBALL ELECTRONICS (Nasdaq: KE) // Creating Shareholder Value Investments that increase customer engagement Diversified Contract Manufacturing Services (DCMS) Offer manufacturing services for non-electronic components, plastics, and metal fabrication in existing markets/customers • Increase custome
Slide 16: Automation, Test & Measurement Systems investments
KIMBALL ELECTRONICS (Nasdaq: KE) // Creating Shareholder Value Investments that increase customer engagement Automation, Test & Measurement Systems (AT&M) Expand capabilities to manufacture, install, and service manufacturing systems • Enable greater strategic customer engagement – Engaged in the de
Slide 17: 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 18: Leveraging existing assets
KIMBALL ELECTRONICS (Nasdaq: KE) // Creating Shareholder Value Leveraging existing assets Greenfield Romania Plant Completed Construction in FY 2016 Expected to Operate Breakeven by FYE 2018 Poznan, Poland Greenfield China Plant Completed Construction in 2005 Indianapolis, IN Reach Target Contributi
Slide 19: Continuously improving efficiencies
KIMBALL ELECTRONICS (Nasdaq: KE) // Creating Shareholder Value Continuously improving efficiencies As new programs mature, volumes ramp and cost efficiencies are gained Mix of new programs has put near term pressure on profitability Program Life-Cycle Initial investments volume ramp and Efficiencies
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) // Revenue Performance Target 8% - Achieving above target growth rates 8% - CAGR Fiscal Year 2014 to Fiscal Year 2017 14% growth during trailing twelve month (TTM) period ended fiscal 3Q18 (March) $1,100 $1,000 $900 $800 $700 $600 $500 $400 $300 In $ millions FY14 FY
Slide 23: 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 $45 4.8% 5.0% 4.3% 4.2% 3.8% 4.5% $40 3.6% 3.5% 4.0% $35 3.5% $3
Slide 24: 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% 6.9% 7.0% 6.9% 6.8% $70 6.3% 7.0% 5.7% $60 6.0% 5.0% $50 4.0% $40 3.0% $30 2.0% $20 1.0% $10 0
Slide 25: ROIC Trends
KIMBALL ELECTRONICS (Nasdaq: KE) // (Unaudited) ROIC Trends Target 12.5% ROIC 2016 Investment in greenfield plant in Romania – Expect improvement from ramping utilization in Romania and maturity of new programs 14.0% $20 12.4% 12.5% 12.0% 10.7% 10.7% 10.4% 10.2% $16 9.6% 9.6% 10.0% 9.0% 9.0% 7.9% 8.
Slide 26: Growing Book Value
KIMBALL ELECTRONICS (Nasdaq: KE) // (Unaudited) Growing Book Value Growth in Tangible Book Value Per Share/ $14 Adjusted Earnings Per Share* $13 $12 $1.01 $1.12 $11 $0.77 EPS $10 $0.97 Book Value $9 $8 $7 $6 FY15 FY16 FY17 YTD 3Q18 * Adjusted Earnings Per share and Tangible Book Value are Non-GAAP t
Slide 27: Strong Balance Sheet
KIMBALL ELECTRONICS (Nasdaq: KE) // (Unaudited) Strong Balance Sheet As of 3/31/2018 $44M in cash No long-term debt $50M credit facility, with option to increase to $75 million 1.2 million square feet of owned manufacturing space Consistent Working Capital management DSO – 60 to 65 days Inventory Tu
Slide 28: Capital Allocation
KIMBALL ELECTRONICS (Nasdaq: KE) // (Unaudited) Capital Allocation Reinvest in the business - Capex spending of $30+ million/year primary fuel for organic growth Acquisitions - $10+ million of opportunistic acquisitions over past three years. Going forward M&A will play an important role in strategi
Slide 29: Why Invest?
KIMBALL ELECTRONICS (Nasdaq: KE) // Why Invest? Expect high single-digit revenue Opportunities to expand growth from focus on end Above Average Opportunities profitability and returns as markets with strong secular Revenue to Expand utilization rates increase and growth opportunities, Profitability
Slide 30: Questions
QUESTIONS KIMBALL ELECTRONICS 30
Slide 31: Reconciliation of Non-GAAP Results
KIMBALL ELECTRONICS (Nasdaq: KE) // (Unaudited) Reconciliation of Non-GAAP Results (In Millions) FY14 FY15 FY16 FY17 TTM 3Q17 TTM 3Q18 Revenue, as reported $ 742 $ 819 $ 842 $ 931 $ 910 $ 1,037 Operating Income, as reported $ 29.930 $ 36.355 $ 29.722 $ 43.057 $ 43.392 $ 39.449 Add: Spin-off Expenses
Slide 32: Reconciliation of Non-GAAP Results
KIMBALL ELECTRONICS (Nasdaq: KE) // (Unaudited) Reconciliation of Non-GAAP Results (In Millions, except per share data) FY15 FY16 FY17 YTD 3Q18 Shareholders Equity, as reported $ 312.449 $ 324.369 $ 342.272 $ 357.118 Goodwill & Intangibles $ 7.073 $ 10.784 $ 10.772 $ 10.724 Tangible Book Value $ 305
Slide 33: Reconciliation of Non-GAAP Results
KIMBALL ELECTRONICS (Nasdaq: KE) // (Unaudited) Reconciliation of Non-GAAP Results (In Thousands) 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 Operating Income, As Reported (YTD) $ 27,305 $ 36,355 $ 6,921 $ 13,854 $ 20,932 $ 29,722 Add: Spin-off Expenses (YTD) 2,571 2,594 137 137 137 137 Less: Lawsuit Proceeds (YT
Slide 34: Reconciliation of Non-GAAP Results
KIMBALL ELECTRONICS (Nasdaq: KE) // (Unaudited) Reconciliation of Non-GAAP Results (In Thousands) 1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 3Q18 Operating Income, As Reported (YTD) $ 12,822 $ 25,063 $ 34,602 $ 43,057 $ 9,590 $ 19,783 $ 30,994 Add: Spin-off Expenses (YTD) - - - - - - - Less: Lawsuit Proceeds (YT
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