Kimball Electronics ReportsQ3 Results; Company Announces Renewed Strategic Focus, Including Expected Divestiture of Automation, Test & Measurement Business
JASPER, Ind.–(BUSINESS WIRE)– Kimball Electronics, Inc. (Nasdaq: KE) today announced financial results for the third quarter of fiscal 2024 with net sales totaling $425.0 million and a net loss of $6.1 million, or $0.24 per share. This result includes the impairment of the Automation, Test & Measurement business, which the Company expects to divest, along with restructuring expense, partially offset by the recovery of a legal settlement. A detailed reconciliation is provided later in this release.
- Excluding these items, adjusted net income in the third quarter of fiscal 2024 totaled $8.4 million, or $0.34 per diluted share, and adjusted operating income equaled $17.0 million, or 4.0% of net sales.
- Cash flow from operating activities in the quarter was $42.6 million driven by inventory reductions.
- Company sharpens strategic focus on EMS operations and aligns cost structure to short-term demand trends.
- Guidance for adjusted operating income in fiscal 2024 reiterated, while the estimate for net sales was updated, in response to the challenging operating environment, and capital expenditures strategically reduced.
- Resumption of share repurchases approved by the Board of Directors.
|
|
Three Months Ended |
|
Nine Months Ended |
||||||||||||
|
|
March 31, |
|
March 31, |
||||||||||||
|
(Amounts in Thousands, except EPS) |
2024 |
|
2023 |
|
2024 |
|
2023 |
||||||||
|
Net Sales |
$ |
425,036 |
|
|
$ |
484,703 |
|
|
$ |
1,284,352 |
|
|
$ |
1,327,288 |
|
|
Operating Income |
$ |
(6,431 |
) |
|
$ |
25,220 |
|
|
$ |
29,669 |
|
|
$ |
56,280 |
|
|
Adjusted Operating Income (non-GAAP) (1) |
$ |
16,960 |
|
|
$ |
25,573 |
|
|
$ |
53,367 |
|
|
$ |
56,738 |
|
|
Operating Income % |
|
(1.5 |
)% |
|
|
5.2 |
% |
|
|
2.3 |
% |
|
|
4.2 |
% |
|
Adjusted Operating Income (non-GAAP) % |
|
4.0 |
% |
|
|
5.3 |
% |
|
|
4.2 |
% |
|
|
4.3 |
% |
|
Net Income (Loss) |
$ |
(6,076 |
) |
|
$ |
16,400 |
|
|
$ |
12,968 |
|
|
$ |
36,629 |
|
|
Adjusted Net Income (non-GAAP) (1) |
$ |
8,441 |
|
|
$ |
16,400 |
|
|
$ |
27,485 |
|
|
$ |
36,908 |
|
|
Diluted EPS |
$ |
(0.24 |
) |
|
$ |
0.65 |
|
|
$ |
0.51 |
|
|
$ |
1.46 |
|
|
Adjusted Diluted EPS (non-GAAP) (1) |
$ |
0.34 |
|
|
$ |
0.65 |
|
|
$ |
1.09 |
|
|
$ |
1.47 |
|
|
(1) A reconciliation of GAAP and non-GAAP financial measures is included below. |
|||||||||||||||
Commenting on today’s announcement, Richard D. Phillips, Chief Executive Officer, stated, “As we anticipated, the operating environment has remained challenged for the EMS industry, and our sales in the third quarter declined as expected. During this period of end market softness, we have focused on ‘controlling what we can control,’ proactively aligning our cost structure with short-term demand trends, maintaining competitiveness with stable operating margins, and focusing on working capital improvements.”
Mr. Phillips continued, “We’re taking meaningful steps to sharpen our strategic focus and further position the Company for profitable growth, and stronger performance moving forward. With the expected divestiture of the Automation, Test & Measurement business, our team can increase focus and support on our core EMS operations. While we suspect the macro headwinds will persist in fiscal 2025, we’re continuing to make investments in long-term growth opportunities supported by a robust funnel for new business in the next 18-24 months, while deploying a capital allocation strategy that balances growth, lasting customer relationships, and returning cash to Share Owners with opportunistic share repurchases.”
The Company ended the third quarter of fiscal 2024 with cash and cash equivalents of $65.2 million and borrowings outstanding on credit facilities of $319.6 million, including $235.0 million classified as long term, and $117.4 million of borrowing capacity available. Capital expenditures were $13.4 million in Q3.
Net Sales by Vertical Market for Q3 Fiscal 2024:
|
|
Three Months Ended |
|
|
|
Nine Months Ended |
|
|
||||||||||||||||||||||||||
|
|
March 31, |
|
|
|
March 31, |
|
|
||||||||||||||||||||||||||
|
(Amounts in Millions) |
2024 |
|
* |
|
2023 |
|
* |
|
Percent Change |
|
2024 |
|
* |
|
2023 |
|
* |
|
Percent Change |
||||||||||||||
|
Automotive (1) |
$ |
202.0 |
|
47 |
% |
|
$ |
221.9 |
|
46 |
% |
|
(9 |
)% |
|
$ |
614.7 |
|
48 |
% |
|
$ |
615.3 |
|
46 |
% |
|
— |
% |
||||
|
Medical (1) |
|
113.0 |
|
|
27 |
% |
|
|
135.5 |
|
|
28 |
% |
|
(17 |
)% |
|
|
323.5 |
|
|
25 |
% |
|
|
377.1 |
|
|
29 |
% |
|
(14 |
)% |
|
Industrial (1) |
|
110.0 |
|
|
26 |
% |
|
|
127.3 |
|
|
26 |
% |
|
(14 |
)% |
|
|
346.2 |
|
|
27 |
% |
|
|
334.9 |
|
|
25 |
% |
|
3 |
% |
|
Total Net Sales |
$ |
425.0 |
|
|
|
|
$ |
484.7 |
|
|
|
|
(12 |
)% |
|
$ |
1,284.4 |
|
|
|
|
$ |
1,327.3 |
|
|
|
|
(3 |
)% |
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
* As a percent of Total Net Sales |
|||||||||||||||||||||||||||||||||
|
(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 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, and public safety |
|||||||||||||||||||||||||||||||||
Guidance for Fiscal Year 2024
The Company reiterated its guidance for adjusted operating income in fiscal year 2024 of 4.2% to 4.6% of net sales. In response to the current economic environment, net sales are now expected to decline 4% to 6%, compared to the previous estimate of a 2% to 4% decrease. Capital expenditures are estimated to be in the range of $55 to $60 million, compared to the previous guidance of $70 to $80 million.
