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Kimball Electronics Reports Q2 Results With Record Sales and Expanding Operating Margin; Company Raises Outlook for Top-line Growth in Fiscal Year 2023

  • Net sales in the second quarter of fiscal 2023 totaled $436.7 million, an all-time quarterly high and up 39% year-over-year; foreign currency had a 5% unfavorable impact on net sales compared to the second quarter of fiscal 2022
  • Operating income of $17.5 million, or 4.0% of net sales, compared to operating income of $6.9 million, or 2.2% of net sales in the same period last year
  • Net income of $10.7 million, or $0.43 per diluted share, compared to net income of $5.1 million, or $0.20 per diluted share, in the second quarter of fiscal 2022

Kimball Electronics, Inc. (Nasdaq: KE) today announced financial results for the second quarter ended December 31, 2022.

This press release features multimedia. View the full release here: https://www.businesswire.com/news/home/20230206005480/en/

 

Three Months Ended

 

Six Months Ended

 

December 31,

 

December 31,

(Amounts in Thousands, except EPS)

2022

 

2021

 

2022

 

2021

Net Sales

$

436,696

 

 

$

315,264

 

 

$

842,585

 

 

$

607,981

 

Operating Income

$

17,489

 

 

$

6,914

 

 

$

31,060

 

 

$

11,694

 

Adjusted Operating Income (non-GAAP) (1)

$

17,829

 

 

$

7,316

 

 

$

31,165

 

 

$

10,625

 

Operating Income %

 

4.0

%

 

 

2.2

%

 

 

3.7

%

 

 

1.9

%

Adjusted Operating Income (non-GAAP) %

 

4.1

%

 

 

2.3

%

 

 

3.7

%

 

 

1.7

%

Net Income

$

10,720

 

 

$

5,113

 

 

$

20,229

 

 

$

7,677

 

Adjusted Net Income (non-GAAP) (1)

$

10,999

 

 

$

5,113

 

 

$

20,508

 

 

$

6,627

 

Diluted EPS

$

0.43

 

 

$

0.20

 

 

$

0.81

 

 

$

0.30

 

Adjusted Diluted EPS (non-GAAP) (1)

$

0.44

 

 

$

0.20

 

 

$

0.82

 

 

$

0.26

 

 

(1) A reconciliation of GAAP and non-GAAP financial measures is included below.

Donald D. Charron, Chairman and Chief Executive Officer, stated, “I am very pleased with our results in Q2. For the fourth consecutive quarter, net sales were at an all-time high for the Company, and operating margin expanded both sequentially and compared to the same period last year. Our team continues to ramp-up production on new and existing programs, leverage our facility expansions in Thailand and Mexico, and begin to work down the backlog of open orders resulting from pandemic-related global supply chain disruptions and component part shortages. We expect improvement in sales and margin to continue for the balance of the year, as part of a stair-stepped fiscal 2023, and we are raising our outlook for full year sales, and expect operating margin to be in the mid-to-upper end of the guidance range.”

Mr. Charron continued, “As previously announced, I will be retiring at the end of February, so this will be my last earnings release as Chairman and CEO of Kimball Electronics. It is with immense gratitude and pride that I say farewell, and thank you. I have been very fortunate throughout my career, and I’m confident our global enterprise, exceptional leadership team, and impressive incoming CEO, Ric Phillips, will build on our legacy of award-winning service to customers, the communities where we operate, and Share Owners. I have never been more excited about the future of Kimball Electronics.”

As part of today’s announcement, the Company raised its guidance for net sales in fiscal 2023 to a range of $1.7 - $1.8 billion, a 26% - 33% increase compared to the prior year. As a reminder, the original guidance for net sales was in the range of $1.6 - $1.7 billion. Operating margin is expected to be at the mid-to-upper end of the guidance range of 4.6% - 5.2% of net sales, and capital expenditures are expected to be in the range of $80 - $100 million.

Second Quarter Fiscal 2023 Overview

  • Cash flow used by operating activities of $11.7 million during the second quarter of fiscal 2023
  • Cash conversion days (“CCD”) for the quarter ended December 31, 2022 were 103 days, up from 99 days in the first quarter of fiscal year 2023; CCD is calculated as the sum of days sales outstanding plus contract asset days plus production days supply on hand less accounts payable days
  • Investments in capital expenditures were $22.7 million during the quarter
  • Cash and cash equivalents of $26.3 million and borrowings outstanding on credit facilities of $273.5 million at December 31, 2022, including $235.0 million classified as long term

Net Sales by Vertical Market for Q2 Fiscal 2023:

 

 

Three Months Ended

 

 

 

Six Months Ended

 

 

 

December 31,

 

 

 

December 31,

 

 

(Amounts in Millions)

2022

 

*

 

2021

 

*

 

Percent

Change

 

2022

 

*

 

2021

 

*

 

Percent

Change

Automotive

$

200.0

 

46%

 

$

139.0

 

44%

 

44%

 

$

384.5

 

46%

 

$

268.4

 

44%

 

43%

Medical

 

124.7

 

29%

 

 

89.8

 

29%

 

39%

 

 

239.5

 

28%

 

 

174.8

 

29%

 

37%

Industrial (1)

 

105.0

 

24%

 

 

82.6

 

26%

 

27%

 

 

205.9

 

24%

 

 

157.6

 

26%

 

31%

Other

 

7.0

 

1%

 

 

3.9

 

1%

 

77%

 

 

12.7

 

2%

 

 

7.2

 

1%

 

76%

Total Net Sales

$

436.7

 

 

 

$

315.3

 

 

 

39%

 

$

842.6

 

 

 

$

608.0

 

 

 

39%

 

 

 

 

 

 

 

 

 

 

 

* As a percent of Total Net Sales

(1) Beginning in fiscal year 2023, Public Safety was combined with Industrial; all prior periods have been recast to conform to current period presentation

 

Automotive includes electronic power steering, body controls, automated driver assist systems, and electronic braking systems

Medical includes sleep therapy and respiratory care, image guided therapy, in vitro diagnostics, drug delivery, AED, and patient monitoring

Industrial includes climate controls, automation controls, optical inspection, smart metering, and public safety

Forward-Looking Statements

Certain statements contained within this release are considered forward-looking, including our fiscal year 2023 guidance, under the Private Securities Litigation Reform Act of 1995. The statements may be identified by the use of words such as “expect,” “should,” “goal,” “predict,” “will,” “future,” “optimistic,” “confident,” and “believe.” Undue reliance should not be placed on these forward-looking statements. These statements are based on current expectations of future events and thus are inherently subject to uncertainty. If underlying assumptions prove inaccurate or known or unknown risks or uncertainties materialize, actual results could vary materially from our expectations and projections. These forward-looking statements are subject to risks and uncertainties including, without limitation, global economic conditions, geopolitical environment and conflicts such as the war in Ukraine, global health emergencies including the COVID-19 pandemic, availability or cost of raw materials and components, foreign exchange rate fluctuations, and our ability to convert new business opportunities into customers and revenue. Additional cautionary statements regarding other risk factors that could have an effect on the future performance of the company are contained in its Annual Report on Form 10-K for the year ended June 30, 2022.

Non-GAAP Financial Measures

This press release contains non-GAAP financial measures. The non-GAAP financial measures contained herein include adjusted operating income, adjusted net income, adjusted diluted EPS, and ROIC. Reconciliations of the reported GAAP numbers to these non-GAAP financial measures are included in the Reconciliation of Non-GAAP Financial Measures section below. Management believes these measures are useful and allow investors to meaningfully trend, analyze, and benchmark the performance of the company’s core operations. The company’s non-GAAP financial measures are not necessarily comparable to non-GAAP information used by other companies.

About Kimball Electronics, Inc.

Kimball Electronics is a multifaceted manufacturing solutions provider of electronics and diversified contract manufacturing services to customers around the world. From our operations in the United States, China, India, Japan, Mexico, Poland, Romania, Thailand, and Vietnam, our teams are proud to provide manufacturing services for a variety of industries. Recognized for a reputation of excellence, we are committed to a high-performance culture that values personal and organizational commitment to quality, reliability, value, speed, and ethical behavior. Kimball Electronics, Inc. (Nasdaq: KE) is headquartered in Jasper, Indiana.

To learn more about Kimball Electronics, visit: www.kimballelectronics.com.

Conference Call / Webcast

 

 

 

Date:

 

February 7, 2023

Time:

 

10:00 AM Eastern Time

Live Webcast:

 

investors.kimballelectronics.com/events-and-presentations/events

Dial-In #:

 

844-200-6205 (other locations - 929-526-1599)

Conference ID:

 

914955

For those unable to participate in the live webcast, the call will be archived at investors.kimballelectronics.com.

Lasting relationships. Global success.

Financial highlights for the second quarter and year-to-date period ended December 31, 2022 are as follows:

Condensed Consolidated Statements of Income

(Unaudited)

Three Months Ended

(Amounts in Thousands, except Per Share Data)

December 31, 2022

 

December 31, 2021

Net Sales

$

436,696

 

 

100.0

%

 

$

315,264

 

 

100.0

%

Cost of Sales

 

402,505

 

 

92.2

%

 

 

294,427

 

 

93.4

%

Gross Profit

 

34,191

 

 

7.8

%

 

 

20,837

 

 

6.6

%

Selling and Administrative Expenses

 

16,702

 

 

3.8

%

 

 

13,923

 

 

4.4

%

Operating Income

 

17,489

 

 

4.0

%

 

 

6,914

 

 

2.2

%

Other Income (Expense), net

 

(3,296

)

 

(0.7

) %

 

 

(209

)

 

(0.1

) %

Income Before Taxes on Income

 

14,193

 

 

3.3

%

 

 

6,705

 

 

2.1

%

Provision for Income Taxes

 

3,473

 

 

0.8

%

 

 

1,592

 

 

0.5

%

Net Income

$

10,720

 

 

2.5

%

 

$

5,113

 

 

1.6

%

 

 

 

 

 

 

 

 

Earnings Per Share of Common Stock:

 

 

 

 

 

 

 

Basic

$

0.43

 

 

 

 

$

0.20

 

 

 

Diluted

$

0.43

 

 

 

 

$

0.20

 

 

 

 

 

 

 

 

 

 

 

Average Number of Shares Outstanding:

 

 

 

 

 

 

 

Basic

 

24,881

 

 

 

 

 

25,238

 

 

 

Diluted

 

25,000

 

 

 

 

 

25,282

 

 

 

 

 

 

 

 

 

 

 

(Unaudited)

Six Months Ended

(Amounts in Thousands, except Per Share Data)

December 31, 2022

 

December 31, 2021

Net Sales

$

842,585

 

 

100.0

%

 

$

607,981

 

 

100.0

%

Cost of Sales

 

779,073

 

 

92.5

%

 

 

571,544

 

 

94.0

%

Gross Profit

 

63,512

 

 

7.5

%

 

 

36,437

 

 

6.0

%

Selling and Administrative Expenses

 

32,452

 

 

3.8

%

 

 

26,127

 

 

4.3

%

Other General Expense (Income)

 

 

 

%

 

 

(1,384

)

 

(0.2

) %

Operating Income

 

31,060

 

 

3.7

%

 

 

11,694

 

 

1.9

%

Other Income (Expense), net

 

(4,699

)

 

(0.6

) %

 

 

(1,458

)

 

(0.2

) %

Income Before Taxes on Income

 

26,361

 

 

3.1

%

 

 

10,236

 

 

1.7

%

Provision for Income Taxes

 

6,132

 

 

0.7

%

 

 

2,559

 

 

0.4

%

Net Income

$

20,229

 

 

2.4

%

 

$

7,677

 

 

1.3

%

 

 

 

 

 

 

 

 

Earnings Per Share of Common Stock:

 

 

 

 

 

 

 

Basic

$

0.81

 

 

 

 

$

0.30

 

 

 

Diluted

$

0.81

 

 

 

 

$

0.30

 

 

 

 

 

 

 

 

 

 

 

Average Number of Shares Outstanding:

 

 

 

 

 

 

 

Basic

 

24,854

 

 

 

 

 

25,201

 

 

 

Diluted

 

24,985

 

 

 

 

 

25,283

 

 

 

Condensed Consolidated Statements of Cash Flows

Six Months Ended

(Unaudited)

December 31,

(Amounts in Thousands)

2022

 

2021

Net Cash Flow used for Operating Activities

$

(71,921

)

 

$

(56,463

)

Net Cash Flow used for Investing Activities

 

(41,886

)

 

 

(27,805

)

Net Cash Flow provided by Financing Activities

 

91,435

 

 

 

35,465

 

Effect of Exchange Rate Change on Cash and Cash Equivalents

 

(593

)

 

 

(901

)

Net Decrease in Cash, Cash Equivalents, and Restricted Cash

 

(22,965

)

 

 

(49,704

)

Cash, Cash Equivalents, and Restricted Cash at Beginning of Period

 

49,851

 

 

 

106,442

 

Cash, Cash Equivalents, and Restricted Cash at End of Period

$

26,886

 

 

$

56,738

 

(Unaudited)

 

 

Condensed Consolidated Balance Sheets

December 31,

2022

 

June 30,

2022

(Amounts in Thousands)

ASSETS

 

 

 

Cash and cash equivalents

$

26,251

 

$

49,851

Receivables, net

 

265,153

 

 

222,857

Contract assets

 

74,861

 

 

64,080

Inventories

 

487,527

 

 

395,630

Prepaid expenses and other current assets

 

34,505

 

 

28,665

Property and Equipment, net

 

238,862

 

 

206,835

Goodwill

 

12,011

 

 

12,011

Other Intangible Assets, net

 

13,882

 

 

14,707

Other Assets

 

42,265

 

 

41,131

Total Assets

$

1,195,317

 

$

1,035,767

 

 

 

 

LIABILITIES AND SHARE OWNERS EQUITY

 

 

 

Current portion of borrowings under credit facilities

$

38,534

 

$

35,580

Accounts payable

 

337,733

 

 

308,617

Accrued expenses

 

76,495

 

 

64,545

Long-term debt under credit facilities, less current portion

 

235,000

 

 

145,000

Long-term income taxes payable

 

5,859

 

 

7,812

Other long-term liabilities

 

20,548

 

 

20,242

Share Owners’ Equity

 

481,148

 

 

453,971

Total Liabilities and Share Owners’ Equity

$

1,195,317

 

$

1,035,767

Reconciliation of Non-GAAP Financial Measures

(Unaudited)

(Amounts in Thousands, except Per Share Data)

 

 

 

 

 

 

 

 

 

Three Months Ended

 

Six Months Ended

 

December 31,

 

December 31,

 

2022

 

2021

 

2022

 

2021

Operating Income, as reported

$

17,489

 

$

6,914

 

$

31,060

 

 

$

11,694

 

SERP

 

340

 

 

402

 

 

105

 

 

 

315

 

Legal Settlements (Recovery)

 

 

 

 

 

 

 

 

(1,384

)

Adjusted Operating Income

$

17,829

 

$

7,316

 

$

31,165

 

 

$

10,625

 

 

 

 

 

 

 

 

 

Net Income, as reported

$

10,720

 

$

5,113

 

$

20,229

 

 

$

7,677

 

Adjustments After Measurement Period on GES Acquisition

 

279

 

 

 

 

279

 

 

 

 

Legal Settlements (Recovery), After-Tax

 

 

 

 

 

 

 

 

(1,050

)

Adjusted Net Income

$

10,999

 

$

5,113

 

$

20,508

 

 

$

6,627

 

 

 

 

 

 

 

 

 

Diluted Earnings per Share, as reported

$

0.43

 

$

0.20

 

$

0.81

 

 

$

0.30

 

Adjustments After Measurement Period on GES Acquisition

 

0.01

 

 

 

 

0.01

 

 

 

 

Legal Settlements (Recovery)

 

 

 

 

 

 

 

 

(0.04

)

Adjusted Diluted Earnings per Share

$

0.44

 

$

0.20

 

$

0.82

 

 

$

0.26

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Twelve Months Ended

 

 

 

 

 

December 31,

 

 

 

 

 

2022

 

2021

Operating Income

 

 

 

 

$

71,915

 

 

$

43,411

 

SERP

 

 

 

 

 

(1,773

)

 

 

1,027

 

Legal Recovery

 

 

 

 

 

 

 

 

(1,415

)

Adjusted Operating Income (non-GAAP)

 

 

 

 

$

70,142

 

 

$

43,023

 

Tax Effect

 

 

 

 

 

18,856

 

 

 

9,530

 

After-tax Adjusted Operating Income

 

 

 

 

$

51,286

 

 

$

33,493

 

Average Invested Capital (1)

 

 

 

 

$

605,772

 

 

$

424,854

 

ROIC

 

 

 

 

 

8.5

%

 

 

7.9

%

 

(1) Average invested capital is computed using Share Owners’ equity plus current and non-current debt less cash and cash equivalents averaged for the last five quarters.

 

Kimball Electronics reports Q2 results with record sales and expanding operating margin. Company raises outlook for top-line growth in fiscal 2023 and expects operating margin to be at the mid-to-upper end of the guidance range.

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