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Kimball Electronics Reports Q2 Results, Company Updates Outlook for Fiscal Year 2025

1. Q2 2025 sales fell 15% compared to Q2 2024. 2. Net income decreased to $3.4 million from $8.3 million. 3. Restructuring continues with non-core asset divestiture planned. 4. Debt reduced by nearly 40% Y/Y, improving liquidity. 5. Company revised fiscal 2025 guidance downward for sales and income.

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FAQ

Why Bearish?

Strong decline in sales and net income indicates ongoing challenges. Similar past instances have significantly impacted share prices negatively.

How important is it?

The downward revision of guidance and sales decreases are critical factors affecting investor sentiment. Investors often react swiftly to negative earnings reports.

Why Long Term?

Restructuring and strategic shifts will take time to produce results. Historical declines in similar situations have taken multiple quarters to stabilize.

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KE
JASPER, Ind.--(BUSINESS WIRE)--Kimball Electronics, Inc. (Nasdaq: KE) today announced financial results for the second quarter ended December 31, 2024. Three Months Ended Six Months Ended December 31, December 31, (Amounts in Thousands, except EPS) 2024 2023 2024 2023 Net Sales $ 357,392 $ 421,235 $ 731,648 $ 859,316 Operating Income $ 8,230 $ 16,610 $ 17,345 $ 36,100 Adjusted Operating Income (non-GAAP) (1) $ 13,333 $ 19,063 $ 25,923 $ 40,069 Operating Income % 2.3 % 3.9 % 2.4 % 4.2 % Adjusted Operating Income (non-GAAP) % 3.7 % 4.5 % 3.5 % 4.7 % Net Income $ 3,432 $ 8,290 $ 6,586 $ 19,044 Adjusted Net Income (non-GAAP) (1) $ 7,354 $ 9,783 $ 12,881 $ 21,821 Diluted EPS $ 0.14 $ 0.33 $ 0.26 $ 0.75 Adjusted Diluted EPS (non-GAAP) (1) $ 0.29 $ 0.39 $ 0.51 $ 0.86 (1) Beginning in the first quarter of fiscal year 2025, adjusted results exclude stock compensation expense. Prior reported periods have been revised accordingly. A reconciliation of GAAP and non-GAAP financial measures is included below. Commenting on today’s announcement, Richard D. Phillips, Chief Executive Officer, stated, “The results for the second quarter were in line with expectations as we continue to navigate a sustained period of declining customer demand, while focusing on what is controllable. For the fourth consecutive quarter, cash flow generated from operating activities was positive, inventory levels were reduced, and debt was paid down, with borrowings nearly 40% lower than a year ago. Our improved balance sheet provides ample liquidity to weather our current challenges, along with the necessary dry powder to opportunistically and meaningfully invest in growing the business.” Mr. Phillips continued, “The Company is being strategically repositioned for a return to growth with a restructuring plan that includes the divestiture of the non-core assets from the AT&M business, improved facility utilization with the planned closing of our plant in Tampa, and increased focus on the medical CMO. Our efforts in all three vertical markets have been sharpened to target attractive new spaces that align with our capabilities. While we remain optimistic for the future, we acknowledge that the necessary changes won’t happen overnight. As a result, we have revised our expectations for the full fiscal year as we anticipate more time will be needed to stabilize the business and return to our historical growth pattern.” The Company ended the second quarter of fiscal 2025 with cash and cash equivalents of $53.9 million and borrowing capacity available of $226.4 million. Capital expenditures were $6.5 million, and the Company invested $3.0 million to repurchase 160,000 shares of common stock. Net Sales by Vertical Market for Q2 Fiscal 2025:   Three Months Ended Six Months Ended December 31, December 31, (Amounts in Millions) 2024 * 2023 * Percent Change 2024 * 2023 * Percent Change Automotive $ 192.8 54 % $ 200.2 47 % (4 )% $ 381.1 52 % $ 412.7 48 % (8 )% Medical 84.0 23 % 108.1 26 % (22 )% 173.8 24 % 210.5 25 % (17 )% Industrial excluding AT&M (1) 80.6 23 % 100.4 24 % (20 )% 174.6 24 % 213.3 24 % (18 )% Net Sales excluding AT&M (1) $ 357.4 100 % $ 408.7 97 % (13 )% $ 729.5 100 % $ 836.5 97 % (13 )% AT&M (1) — — % 12.5 3 % (100 )% 2.1 — % 22.8 3 % (91 )% Total Net Sales $ 357.4 100 % $ 421.2 100 % (15 )% $ 731.6 100 % $ 859.3 100 % (15 )% * As a percent of Total Net Sales (1) Sales from our Automation, Test, and Measurement business (AT&M), which was divested effective July 31, 2024, were previously included in the Industrial vertical – 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, and public safety Company Guidance for Fiscal Year 2025: Net sales in the range of $1.40 - $1.44 billion, compared to the previous guidance of $1.44 - $1.54 billion Adjusted operating income of 3.4% - 3.6% of net sales, compared to the previous guidance of 4.0% - 4.5% of net sales(a) The estimate for capital expenditures remains unchanged at $40 - $50 million (a) Fiscal year 2025 guidance reflects a change in our adjusted operating income calculation beginning in fiscal year 2025, which excludes stock compensation expense. This change better aligns our presentation with others in our industry. A reconciliation of GAAP and non-GAAP financial measures is included below. Forward-Looking Statements Certain statements contained within this release are considered forward-looking, including our 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, 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, 2024. Non-GAAP Financial Measures This press release contains non-GAAP financial measures. The non-GAAP financial measures contained herein include constant currency growth, net sales excluding Automation, Test & Measurement, adjusted selling and administrative expenses, 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 global, multifaceted manufacturing solutions provider of electronics and diversified contract manufacturing services to customers around the world. From our operations in the United States, China, Mexico, Poland, Romania, and Thailand, 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. Lasting relationships. Global success. Financial highlights for the second quarter and year-to-date period ended December 31, 2024 are as follows: Condensed Consolidated Statements of Income (Unaudited) Three Months Ended (Amounts in Thousands, except Per Share Data) December 31, 2024 December 31, 2023 Net Sales $ 357,392 100.0 % $ 421,235 100.0 % Cost of Sales 333,965 93.4 % 386,802 91.8 % Gross Profit 23,427 6.6 % 34,433 8.2 % Selling and Administrative Expenses 10,526 3.0 % 17,823 4.3 % Restructuring Expense 4,671 1.3 % — — % Operating Income 8,230 2.3 % 16,610 3.9 % Interest Income 253 0.1 % 101 — % Interest Expense (4,241 ) (1.2 )% (6,137 ) (1.5 )% Non-Operating Income (Expense), net (768 ) (0.2 )% 702 0.3 % Other Income (Expense), net (4,756 ) (1.3 )% (5,334 ) (1.2 )% Income Before Taxes on Income 3,474 1.0 % 11,276 2.7 % Provision for Income Taxes 42 — % 2,986 0.7 % Net Income $ 3,432 1.0 % $ 8,290 2.0 % Earnings Per Share of Common Stock: Basic $ 0.14 $ 0.33 Diluted $ 0.14 $ 0.33 Average Number of Shares Outstanding: Basic 24,870 25,094 Diluted 24,968 25,211 (Unaudited) Six Months Ended (Amounts in Thousands, except Per Share Data) December 31, 2024 December 31, 2023 Net Sales $ 731,648 100.0 % $ 859,316 100.0 % Cost of Sales 684,621 93.6 % 789,341 91.9 % Gross Profit 47,027 6.4 % 69,975 8.1 % Selling and Administrative Expenses 23,953 3.2 % 33,875 3.9 % Restructuring Expense 6,993 1.0 % — — % Gain on Disposal (1,264 ) (0.2 )% — — % Operating Income 17,345 2.4 % 36,100 4.2 % Interest Income 475 0.1 % 400 — % Interest Expense (9,033 ) (1.2 )% (11,584 ) (1.3 )% Non-Operating Income (Expense), net (2,429 ) (0.4 )% (429 ) (0.1 )% Other Income (Expense), net (10,987 ) (1.5 )% (11,613 ) (1.4 )% Income Before Taxes on Income 6,358 0.9 % 24,487 2.8 % Provision (Benefit) for Income Taxes (228 ) 0.0 % 5,443 0.6 % Net Income $ 6,586 0.9 % $ 19,044 2.2 % Earnings Per Share of Common Stock: Basic $ 0.26 $ 0.76 Diluted $ 0.26 $ 0.75 Average Number of Shares Outstanding: Basic 24,924 25,067 Diluted 25,098 25,240 Condensed Consolidated Statements of Cash Flows Six Months Ended (Unaudited) December 31, (Amounts in Thousands) 2024 2023 Net Cash Flow provided by (used for) Operating Activities $ 74,932 $ (17,922 ) Net Cash Flow used for Investing Activities (1,214 ) (24,365 ) Net Cash Flow (used for) provided by Financing Activities (97,255 ) 38,859 Effect of Exchange Rate Change on Cash, Cash Equivalents, and Restricted Cash (722 ) 368 Net Decrease in Cash, Cash Equivalents, and Restricted Cash (24,259 ) (3,060 ) Cash, Cash Equivalents, and Restricted Cash at Beginning of Period 78,779 43,864 Cash, Cash Equivalents, and Restricted Cash at End of Period $ 54,520 $ 40,804 (Unaudited) Condensed Consolidated Balance Sheets December 31, 2024 June 30, 2024 (Amounts in Thousands) ASSETS Cash and cash equivalents $ 53,865 $ 77,965 Receivables, net 235,166 282,336 Contract assets 81,957 76,320 Inventories 306,242 338,116 Prepaid expenses and other current assets 31,550 44,682 Assets held for sale — 27,587 Property and Equipment, net 271,251 269,659 Goodwill 6,191 6,191 Other Intangible Assets, net 2,716 2,994 Other Assets, net 85,498 82,069 Total Assets $ 1,074,436 $ 1,207,919 LIABILITIES AND SHARE OWNERS’ EQUITY Current portion of long-term debt $ 24,900 $ 59,837 Accounts payable 204,690 213,551 Advances from customers 39,340 30,151 Accrued expenses 42,291 63,189 Liabilities held for sale — 8,594 Long-term debt, less current portion 179,601 235,000 Long-term income taxes payable — 3,255 Other long-term liabilities 46,138 53,881 Share Owners’ Equity 537,476 540,461 Total Liabilities and Share Owners’ Equity $ 1,074,436 $ 1,207,919 Other Financial Metrics (Unaudited) (Amounts in Millions, except CCD) At or For the Three Months Ended December 31, September 30, December 31, 2024 2024 2023 Depreciation and Amortization $ 9.1 $ 9.2 $ 9.1 Cash Conversion Days (CCD) (1) 107 108 117 Open Orders (2) $ 564 $ 594 $ 836 (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 industry and by our management to measure the efficiency of managing working capital. (2) Open Orders are the aggregate sales price of production pursuant to unfulfilled customer orders. Our declining open orders are primarily due to the cancellation of a major automotive program and other demand reductions, as well as reduced lead times on customer orders as compared to December 31, 2023, when parts were more constrained. Select Financial Results of Automation, Test and Measurement (Unaudited) (Amounts in Millions)   Three Months Ended Six Months Ended December 31, December 31, 2024 2023 2024 2023 Net Sales $ — $ 12.5 $ 2.1 $ 22.8 Operating Income (Loss) (1) $ — $ 1.4 $ 0.8 $ 1.2 (1) Includes gain on sale of $1.3 million following the close of the sale on July 31, 2024 for the six months ended December 31, 2024. Each period also includes allocated corporate overhead expenses. Reconciliation of Non-GAAP Financial Measures (Unaudited, Amounts in Thousands, except Per Share Data)   Three Months Ended Six Months Ended December 31, December 31, 2024 2023 2024 2023 Net Sales Growth (vs. same period in prior year) (15 )% (4 )% (15 )% 2 % Foreign Currency Exchange Impact — % 1 % — % 1 % Constant Currency Growth (15 )% (5 )% (15 )% 1 % Selling and Administrative Expenses, as reported $ 10,526 $ 17,823 $ 23,953 $ 33,875 Stock Compensation Expense (501 ) (1,969 ) (2,573 ) (3,662 ) SERP 69 (484 ) (276 ) (307 ) Adjusted Selling and Administrative Expenses $ 10,094 $ 15,370 $ 21,104 $ 29,906 Operating Income, as reported $ 8,230 $ 16,610 $ 17,345 $ 36,100 Stock Compensation Expense 501 1,969 2,573 3,662 SERP (69 ) 484 276 307 Restructuring Expense 4,671 — 6,993 — Gain on Disposal — — (1,264 ) — Adjusted Operating Income $ 13,333 $ 19,063 $ 25,923 $ 40,069 Net Income, as reported $ 3,432 $ 8,290 $ 6,586 $ 19,044 Stock Compensation Expense, After-Tax 380 1,493 1,951 2,777 Restructuring Expense, After-Tax 3,542 — 5,303 — Gain on Disposal, After-Tax — — (959 ) — Adjusted Net Income $ 7,354 $ 9,783 $ 12,881 $ 21,821 Diluted Earnings per Share, as reported $ 0.14 $ 0.33 $ 0.26 $ 0.75 Stock Compensation Expense 0.01 0.06 0.07 0.11 Restructuring Expense 0.14 — 0.21 — Gain on Disposal — — (0.03 ) — Adjusted Diluted Earnings per Share $ 0.29 $ 0.39 $ 0.51 $ 0.86 Twelve Months Ended December 31, 2024 2023 Operating Income $ 30,522 $ 92,769 Goodwill Impairment 5,820 — Stock Compensation Expense 6,096 7,219 SERP 649 903 Legal Recovery (892 ) (212 ) Restructuring Expense 9,379 — Asset Impairment and Gain on Disposal 15,776 — Adjusted Operating Income (non-GAAP) $ 67,350 $ 100,679 Tax Effect 17,019 24,954 After-tax Adjusted Operating Income $ 50,331 $ 75,725 Average Invested Capital (1) $ 756,966 $ 770,051 ROIC 6.6 % 9.8 % (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.

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