Kimball Electronics Reports Q3 Results With Record Sales and Strong Operating Margin; Company Expects a Strong Pace to Carry Through the Fourth Quarter
Kimball Electronics, Inc. (Nasdaq: KE) today announced financial results for the third quarter ended March 31, 2022.
This press release features multimedia. View the full release here: https://www.businesswire.com/news/home/20220505006007/en/
|
Three Months Ended |
|
Nine Months Ended |
|||||||||||||
|
March 31, |
|
March 31, |
|||||||||||||
(Amounts in Thousands, except EPS) |
2022 |
|
2021 |
|
2022 |
|
2021 |
|||||||||
Net Sales |
$ |
368,057 |
|
|
$ |
310,329 |
|
|
$ |
976,038 |
|
|
$ |
962,682 |
|
|
Operating Income |
$ |
20,277 |
|
|
$ |
14,638 |
|
|
$ |
31,971 |
|
|
$ |
48,624 |
|
|
Adjusted Operating Income (non-GAAP) (1) |
$ |
19,558 |
|
|
$ |
14,426 |
|
|
$ |
30,183 |
|
|
$ |
49,432 |
|
|
Operating Income % |
|
5.5 |
% |
|
|
4.7 |
% |
|
|
3.3 |
% |
|
|
5.1 |
% |
|
Adjusted Operating Income (non-GAAP) % |
|
5.3 |
% |
|
|
4.6 |
% |
|
|
3.1 |
% |
|
|
5.1 |
% |
|
Net Income |
$ |
13,638 |
|
|
$ |
10,472 |
|
|
$ |
21,315 |
|
|
$ |
42,345 |
|
|
Adjusted Net Income (non-GAAP) (1) |
$ |
13,638 |
|
|
$ |
9,933 |
|
|
$ |
20,265 |
|
|
$ |
41,680 |
|
|
Diluted EPS |
$ |
0.54 |
|
|
$ |
0.41 |
|
|
$ |
0.84 |
|
|
$ |
1.67 |
|
|
Adjusted Diluted EPS (non-GAAP) (1) |
$ |
0.54 |
|
|
$ |
0.39 |
|
|
$ |
0.80 |
|
|
$ |
1.65 |
|
|
(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 the results in Q3. Sales exceeded our all-time high in a quarter by 10%, operating margin was 5.5% of net sales, which is significantly better than the first half of the fiscal year and 80 basis points higher than a year ago, and diluted EPS increased by more than 30% year-over-year. With our backlog of open orders at record levels, and manufacturing facilities running at higher utilization and expanding capacity, we are ideally positioned to maintain strength and momentum in this bifurcated year, and we expect a strong pace to carry through the fourth quarter. I continue to be extremely impressed with our team, and how we’ve managed the global supply chain issues stemming from the pandemic and component parts shortages.”
Mr. Charron continued, “The challenges in Q3, however, were compounded by the devastation in Ukraine. We have Ukrainian associates in our U.S. and European operations, and facilities located in nearby Poland and Romania. Our number one priority has been the health and safety of our associates, and supporting their families directly affected by the conflict. We are also closely monitoring the impact of China’s zero tolerance policy related to COVID-19. Several cities experienced shutdowns recently due to a rise in COVID cases. If shutdowns continue to occur in major cities across China, there may be temporary disruptions in both the supply chain and demand as our customers balance manufacturing delays. We’ve updated our guidance for net sales to reflect the uncertainty from these developments; however, we are reiterating our guidance for operating income margin for fiscal year 2022.”
Third Quarter Fiscal 2022 Overview
- Net sales increased 19% compared to the third quarter of fiscal year 2021. Foreign currency had a 2% unfavorable impact on net sales in the quarter compared to the same period a year ago.
- Cash flow used for operating activities of $28.2 million during the third quarter of fiscal 2022, driven by an increase in accounts receivable as a result of the strong sales in the quarter.
- Cash conversion days (“CCD”) for the quarter ended March 31, 2022 were 83 days, up from 66 days in the third quarter of fiscal year 2021, driven by an increase in inventory. 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 $22.3 million during the quarter.
- Returned $4.9 million to Share Owners during the quarter in the form of common stock repurchases.
- Cash and cash equivalents of $35.6 million and borrowings outstanding on credit facilities of $137.1 million at March 31, 2022, including $95.0 million classified as long term.
Net Sales by Vertical Market for Q3 Fiscal 2022:
|
Three Months Ended |
|
|
|||||||||||
|
March 31, |
|
|
|||||||||||
(Amounts in Millions) |
2022 |
|
* |
|
2021 |
|
* |
|
Percent Change |
|||||
Automotive |
$ |
161.5 |
|
44 |
% |
|
$ |
139.6 |
|
45 |
% |
|
16 |
% |
Medical |
|
102.9 |
|
28 |
% |
|
|
85.4 |
|
28 |
% |
|
20 |
% |
Industrial |
|
84.4 |
|
23 |
% |
|
|
69.2 |
|
22 |
% |
|
22 |
% |
Public Safety |
|
13.8 |
|
4 |
% |
|
|
13.5 |
|
4 |
% |
|
2 |
% |
Other |
|
5.5 |
|
1 |
% |
|
|
2.6 |
|
1 |
% |
|
115 |
% |
Total Net Sales |
$ |
368.1 |
|
|
|
$ |
310.3 |
|
|
|
19 |
% |
||
|
||||||||||||||
* As a percent of Total Net Sales |
||||||||||||||
|
||||||||||||||
– 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 smart metering |
||||||||||||||
– Public Safety includes thermal imaging, first responder electronics, and security |
Fiscal Year 2022 Guidance
The company is updating its guidance for fiscal year 2022 with net sales estimated to be in the range of $1.345 - $1.365 billion, a 4% - 6% increase year-over-year. The company’s previous guidance for net sales was approximately $1.4 billion. The company is reiterating its guidance for operating income margin, which is expected to be in the range of 3.75% - 4.25%, and capital expenditures, which are expected to be in the range of $70 - $80 million.
Mr. Charron continued, “We are very pleased with how the company is positioned. Q3 results were excellent. While supply chain disruptions from the pandemic continue to normalize and improve, the recent wave of lockdowns in China add a level of unpredictability that did not exist a few months ago. We expect the fourth quarter to be robust with net sales in the range of $370 to $390 million, and operating margin once again above 5%. Our record level of open orders, and recent facility expansions, support our growth objectives as we look toward the $2 billion annual revenue milestone. Finally, our hearts and thoughts are with all people both inside and outside the Kimball Electronics family impacted by the tragic turn of events in Ukraine.”
Forward-Looking Statements
Certain statements contained within this release are considered forward-looking, including our fiscal year 2022 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, 2021.
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: |
|
May 6, 2022 |
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: |
|
250193 |
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 third quarter and year-to-date period ended March 31, 2022 are as follows:
Condensed Consolidated Statements of Income |
|||||||||||||
(Unaudited) |
Three Months Ended |
||||||||||||
(Amounts in Thousands, except Per Share Data) |
March 31, 2022 |
|
March 31, 2021 |
||||||||||
Net Sales |
$ |
368,057 |
|
|
100.0 |
% |
|
$ |
310,329 |
|
|
100.0 |
% |
Cost of Sales |
|
334,113 |
|
|
90.8 |
% |
|
|
284,323 |
|
|
91.6 |
% |
Gross Profit |
|
33,944 |
|
|
9.2 |
% |
|
|
26,006 |
|
|
8.4 |
% |
Selling and Administrative Expenses |
|
13,667 |
|
|
3.7 |
% |
|
|
11,744 |
|
|
3.8 |
% |
Other General Expense (Income) |
|
— |
|
|
— |
% |
|
|
(376 |
) |
|
(0.1 |
) % |
Operating Income |
|
20,277 |
|
|
5.5 |
% |
|
|
14,638 |
|
|
4.7 |
% |
Other Income (Expense), net |
|
(2,103 |
) |
|
(0.6 |
) % |
|
|
(641 |
) |
|
(0.2 |
) % |
Income Before Taxes on Income |
|
18,174 |
|
|
4.9 |
% |
|
|
13,997 |
|
|
4.5 |
% |
Provision for Income Taxes |
|
4,536 |
|
|
1.2 |
% |
|
|
3,525 |
|
|
1.1 |
% |
Net Income |
$ |
13,638 |
|
|
3.7 |
% |
|
$ |
10,472 |
|
|
3.4 |
% |
|
|
|
|
|
|
|
|
||||||
Earnings Per Share of Common Stock: |
|
|
|
|
|
|
|
||||||
Basic |
$ |
0.54 |
|
|
|
|
$ |
0.42 |
|
|
|
||
Diluted |
$ |
0.54 |
|
|
|
|
$ |
0.41 |
|
|
|
||
|
|
|
|
|
|
|
|
||||||
Average Number of Shares Outstanding: |
|
|
|
|
|
|
|
||||||
Basic |
|
25,175 |
|
|
|
|
|
25,049 |
|
|
|
||
Diluted |
|
25,272 |
|
|
|
|
|
25,217 |
|
|
|
|
|||||||||||||
(Unaudited) |
Nine Months Ended |
||||||||||||
(Amounts in Thousands, except Per Share Data) |
March 31, 2022 |
|
March 31, 2021 |
||||||||||
Net Sales |
$ |
976,038 |
|
|
100.0 |
% |
|
$ |
962,682 |
|
|
100.0 |
% |
Cost of Sales |
|
905,657 |
|
|
92.8 |
% |
|
|
876,428 |
|
|
91.0 |
% |
Gross Profit |
|
70,381 |
|
|
7.2 |
% |
|
|
86,254 |
|
|
9.0 |
% |
Selling and Administrative Expenses |
|
39,794 |
|
|
4.0 |
% |
|
|
38,347 |
|
|
4.0 |
% |
Other General Expense (Income) |
|
(1,384 |
) |
|
(0.1 |
) % |
|
|
(717 |
) |
|
(0.1 |
) % |
Operating Income |
|
31,971 |
|
|
3.3 |
% |
|
|
48,624 |
|
|
5.1 |
% |
Other Income (Expense), net |
|
(3,561 |
) |
|
(0.4 |
) % |
|
|
3,905 |
|
|
0.4 |
% |
Income Before Taxes on Income |
|
28,410 |
|
|
2.9 |
% |
|
|
52,529 |
|
|
5.5 |
% |
Provision for Income Taxes |
|
7,095 |
|
|
0.7 |
% |
|
|
10,184 |
|
|
1.1 |
% |
Net Income |
$ |
21,315 |
|
|
2.2 |
% |
|
$ |
42,345 |
|
|
4.4 |
% |
|
|
|
|
|
|
|
|
||||||
Earnings Per Share of Common Stock: |
|
|
|
|
|
|
|
||||||
Basic |
$ |
0.84 |
|
|
|
|
$ |
1.68 |
|
|
|
||
Diluted |
$ |
0.84 |
|
|
|
|
$ |
1.67 |
|
|
|
||
|
|
|
|
|
|
|
|
||||||
Average Number of Shares Outstanding: |
|
|
|
|
|
|
|
||||||
Basic |
|
25,192 |
|
|
|
|
|
25,101 |
|
|
|
||
Diluted |
|
25,291 |
|
|
|
|
|
25,288 |
|
|
|
Condensed Consolidated Statements of Cash Flows |
Nine Months Ended |
|||||||
(Unaudited) |
March 31, |
|||||||
(Amounts in Thousands) |
2022 |
|
2021 |
|||||
Net Cash Flow (used for) provided by Operating Activities |
$ |
(84,665 |
) |
|
$ |
103,755 |
|
|
Net Cash Flow used for Investing Activities |
|
(50,023 |
) |
|
|
(22,972 |
) |
|
Net Cash Flow provided by (used for) Financing Activities |
|
64,856 |
|
|
|
(58,729 |
) |
|
Effect of Exchange Rate Change on Cash and Cash Equivalents |
|
(1,007 |
) |
|
|
2,607 |
|
|
Net (Decrease) Increase in Cash and Cash Equivalents |
|
(70,839 |
) |
|
|
24,661 |
|
|
Cash and Cash Equivalents at Beginning of Period |
|
106,442 |
|
|
|
64,990 |
|
|
Cash and Cash Equivalents at End of Period |
$ |
35,603 |
|
|
$ |
89,651 |
|
|
(Unaudited) |
|
|
|||
Condensed Consolidated Balance Sheets |
March 31,
|
|
June 30,
|
|||
(Amounts in Thousands) |
||||||
ASSETS |
|
|
|
|||
Cash and cash equivalents |
$ |
35,603 |
|
$ |
106,442 |
|
Receivables, net |
|
224,216 |
|
|
203,382 |
|
Contract assets |
|
63,761 |
|
|
45,863 |
|
Inventories |
|
338,375 |
|
|
200,386 |
|
Prepaid expenses and other current assets |
|
31,302 |
|
|
27,320 |
|
Property and Equipment, net |
|
191,370 |
|
|
163,251 |
|
Goodwill |
|
12,011 |
|
|
12,011 |
|
Other Intangible Assets, net |
|
15,117 |
|
|
17,008 |
|
Other Assets |
|
41,665 |
|
|
38,398 |
|
Total Assets |
$ |
953,420 |
|
$ |
814,061 |
|
|
|
|
|
|||
LIABILITIES AND SHARE OWNERS’ EQUITY |
|
|
|
|||
Current portion of borrowings under credit facilities |
$ |
42,096 |
|
$ |
26,214 |
|
Accounts payable |
|
275,799 |
|
|
216,544 |
|
Accrued expenses |
|
58,733 |
|
|
58,016 |
|
Long-term debt under credit facilities, less current portion |
|
95,000 |
|
|
40,000 |
|
Long-term income taxes payable |
|
7,812 |
|
|
8,854 |
|
Other |
|
20,246 |
|
|
22,461 |
|
Share Owners’ Equity |
|
453,734 |
|
|
441,972 |
|
Total Liabilities and Share Owners’ Equity |
$ |
953,420 |
|
$ |
814,061 |
Reconciliation of Non-GAAP Financial Measures |
|||||||||||||||
(Unaudited) |
|||||||||||||||
(Amounts in Thousands, except Per Share Data) |
|||||||||||||||
|
|
|
|
|
|
|
|
||||||||
|
Three Months Ended |
|
Nine Months Ended |
||||||||||||
|
March 31, |
|
March 31, |
||||||||||||
|
2022 |
|
2021 |
|
2022 |
|
2021 |
||||||||
Operating Income, as reported |
$ |
20,277 |
|
|
$ |
14,638 |
|
|
$ |
31,971 |
|
|
$ |
48,624 |
|
SERP |
|
(719 |
) |
|
|
164 |
|
|
|
(404 |
) |
|
|
1,525 |
|
Legal Recovery |
|
— |
|
|
|
(376 |
) |
|
|
(1,384 |
) |
|
|
(717 |
) |
Adjusted Operating Income |
$ |
19,558 |
|
|
$ |
14,426 |
|
|
$ |
30,183 |
|
|
$ |
49,432 |
|
|
|
|
|
|
|
|
|
||||||||
Net Income, as reported |
$ |
13,638 |
|
|
$ |
10,472 |
|
|
$ |
21,315 |
|
|
$ |
42,345 |
|
Adjustments After Measurement Period on GES Acquisition |
|
— |
|
|
|
(254 |
) |
|
|
— |
|
|
|
(121 |
) |
Legal Recovery, After-Tax |
|
— |
|
|
|
(285 |
) |
|
|
(1,050 |
) |
|
|
(544 |
) |
Adjusted Net Income |
$ |
13,638 |
|
|
$ |
9,933 |
|
|
$ |
20,265 |
|
|
$ |
41,680 |
|
|
|
|
|
|
|
|
|
||||||||
Diluted Earnings per Share, as reported |
$ |
0.54 |
|
|
$ |
0.41 |
|
|
$ |
0.84 |
|
|
$ |
1.67 |
|
Adjustments After Measurement Period on GES Acquisition |
|
— |
|
|
|
(0.01 |
) |
|
|
— |
|
|
|
— |
|
Legal Recovery |
|
— |
|
|
|
(0.01 |
) |
|
|
(0.04 |
) |
|
|
(0.02 |
) |
Adjusted Diluted Earnings per Share |
$ |
0.54 |
|
|
$ |
0.39 |
|
|
$ |
0.80 |
|
|
$ |
1.65 |
|
|
|
|
|
|
|
|
|
||||||||
|
|
|
Twelve Months Ended |
||||||||||||
|
|
|
March 31, |
||||||||||||
|
|
|
|
|
2022 |
|
2021 |
||||||||
Operating Income |
|
|
|
|
$ |
49,050 |
|
|
$ |
50,233 |
|
||||
Goodwill Impairment |
|
|
|
|
|
— |
|
|
|
7,925 |
|
||||
SERP |
|
|
|
|
|
144 |
|
|
|
2,807 |
|
||||
Legal Recovery |
|
|
|
|
|
(1,039 |
) |
|
|
(717 |
) |
||||
Adjusted Operating Income (non-GAAP) |
|
|
|
|
$ |
48,155 |
|
|
$ |
60,248 |
|
||||
Tax Effect |
|
|
|
|
|
10,774 |
|
|
|
11,786 |
|
||||
After-tax Adjusted Operating Income |
|
|
|
|
$ |
37,381 |
|
|
$ |
48,462 |
|
||||
Average Invested Capital (1) |
|
|
|
|
$ |
453,479 |
|
|
$ |
423,545 |
|
||||
ROIC |
|
|
|
|
|
8.2 |
% |
|
|
11.4 |
% |
||||
(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. |
View source version on businesswire.com: https://www.businesswire.com/news/home/20220505006007/en/