Kimball Electronics Reports Q4 and Full Year Fiscal 2023 Results With Record Sales and Operating Income; Company Provides Guidance for Fiscal 2024
Kimball Electronics, Inc. (Nasdaq: KE) today announced financial results for the fourth quarter and fiscal year ended June 30, 2023.
This press release features multimedia. View the full release here: https://www.businesswire.com/news/home/20230816530676/en/
Three Months Ended
Fiscal Year Ended
June 30,
June 30,
(Amounts in Thousands, except EPS)
2023
2022
2023
2022
Net Sales
$
496,141
$
373,497
$
1,823,429
$
1,349,535
Operating Income
$
31,449
$
20,578
$
87,729
$
52,549
Adjusted Operating Income (non-GAAP) (1)
$
31,480
$
19,419
$
88,218
$
49,602
Operating Income %
6.3
%
5.5
%
4.8
%
3.9
%
Adjusted Operating Income (non-GAAP) %
6.3
%
5.2
%
4.8
%
3.7
%
Net Income
$
19,202
$
9,938
$
55,831
$
31,253
Adjusted Net Income (non-GAAP) (1)
$
19,041
$
9,938
$
55,949
$
30,203
Diluted EPS
$
0.76
$
0.40
$
2.22
$
1.24
Adjusted Diluted EPS (non-GAAP) (1)
$
0.76
$
0.40
$
2.23
$
1.20
(1) A reconciliation of GAAP and non-GAAP financial measures is included below.
Richard D. Phillips, Chief Executive Officer, stated, “I am very pleased with the results we reported for the fourth quarter and fiscal year 2023. Q4 was our sixth consecutive quarter with record sales, and operating income and EPS were at all-time highs for the Company. The strong finish to the fiscal year drove net sales above the guidance we provided in May, and contributed to better than expected cash flow generation in the quarter. This performance was achieved with the highest levels of teamwork from our global organization, and many others in the value chain. I would like to thank our employees, our customers and our vendor partners for their passion, commitment, and support.”
Mr. Phillips continued, “In total, fiscal 2023 was an excellent year for Kimball Electronics, highlighted by record top-line growth, margin expansion, a 79% increase in net income, and improved return on invested capital. Each of our three vertical end markets reported strong results, with the sales volume to 48% of our customers reaching all-time highs. The team supported new product introductions at a rate four times above the historic norm, and we continued to leverage our facility expansions in Thailand and Mexico, while navigating a challenging macro environment. While we continue to see a strong pipeline for future growth, fiscal 2024 is tempered by slower sales with a large medical customer. Longer term we are excited by the prospects of our funnel of new business, and the relationship with this customer in particular.”
Fiscal Year 2023 Highlights:
Net sales for fiscal year 2023 totaled $1,823.4 million, representing constant currency growth of 38% year-over-year when excluding the impact of foreign currency, which had a 3% unfavorable impact on net sales. Operating income of $87.7 million, or 4.8% of net sales, an improvement compared to $52.5 million, or 3.9% of net sales, in fiscal 2022. Net income of $55.8 million, or $2.22 per diluted share, a significant increase compared to net income of $31.3 million, or $1.24 per diluted share, in fiscal 2022. Capital expenditures of $90.7 million, supporting facility expansions in Thailand, Mexico, and Poland. Return on invested capital of 9.4%, a 220-basis point improvement compared to fiscal 2022; ROIC is a non-GAAP financial measure, see reconciliation of non-GAAP financial measures.The Company ended fiscal 2023 with cash and cash equivalents of $43.0 million and borrowings outstanding on credit facilities of $281.5 million, including $235 million classified as long term, and $106.1 million of borrowing capacity available.
Net Sales by Vertical Market for Fiscal 2023:
Three Months Ended
Fiscal Year Ended
June 30,
June 30,
(Amounts in Millions)
2023
*
2022
*
Percent
Change
2023
*
2022
*
Percent
Change
Automotive
$
219.6
44
%
$
152.4
41
%
44
%
$
820.1
45
%
$
582.2
43
%
41
%
Medical
120.5
24
%
114.0
30
%
6
%
494.0
27
%
391.7
29
%
26
%
Industrial (1)
141.8
29
%
102.4
28
%
38
%
474.6
26
%
358.2
27
%
33
%
Other
14.2
3
%
4.7
1
%
202
%
34.7
2
%
17.4
1
%
99
%
Total Net Sales
$
496.1
$
373.5
33
%
$
1,823.4
$
1,349.5
35
%
* 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
Fiscal Year 2024 Guidance:
Net sales in the range of $1.9 - $1.95 billion, a 4% - 7% increase year-over-year. Operating income in the range of 4.7% - 5.2% of net sales. Capital expenditures of $70 - $80 million.Commenting on today’s announcement, Jana T. Croom, Chief Financial Officer, stated, “Our outlook for fiscal 2024 reflects a capital allocation strategy focused on organic growth. We have a solid funnel of new business opportunities and additional capacity from our recent facility expansions, which I’m pleased to announce now includes Poland. We will be ramping-up operations in Poznan throughout the fiscal year. In addition, inventory should normalize as global supply chain disruptions continue to ease, and the resulting cash flow generated will be directed toward reducing our leverage ratio.”
Forward-Looking Statements
Certain statements contained within this release are considered forward-looking, including our fiscal year 2024 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 constant currency growth, 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:
August 17, 2023
Time:
10:00 AM Eastern Time
Live Webcast:
investors.kimballelectronics.com/events-and-presentations/events
Dial-In #:
404-975-4839 (other locations - 833-470-1428)
Conference ID:
941287
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 fourth quarter and fiscal year ended June 30, 2023 are as follows:
Condensed Consolidated Statements of Income
(Unaudited)
Three Months Ended
(Amounts in Thousands, except Per Share Data)
June 30, 2023
June 30, 2022
Net Sales
$
496,141
100.0
%
$
373,497
100.0
%
Cost of Sales
446,460
90.0
%
339,276
90.8
%
Gross Profit
49,681
10.0
%
34,221
9.2
%
Selling and Administrative Expenses
18,444
3.7
%
13,643
3.7
%
Other General Expense (Income)
(212
)
—
%
—
—
%
Operating Income
31,449
6.3
%
20,578
5.5
%
Interest Income
65
—
%
15
—
%
Interest Expense
(5,473
)
(1.1
)%
(1,118
)
(0.3
)%
Non-Operating Income (Expense), net
466
0.1
%
(4,154
)
(1.1
)%
Other Income (Expense), net
(4,942
)
(1.0
)%
(5,257
)
(1.4
)%
26,507
5.3
%
15,321
4.1
%
Provision for Income Taxes
7,305
1.4
%
5,383
1.4
%
Net Income
$
19,202
3.9
%
$
9,938
2.7
%
Earnings Per Share of Common Stock:
Basic
$
0.77
$
0.40
Diluted
$
0.76
$
0.40
Average Number of Shares Outstanding:
Basic
25,009
24,885
Diluted
25,161
24,989
(Unaudited)
Fiscal Year Ended
(Amounts in Thousands, except Per Share Data)
June 30, 2023
June 30, 2022
Net Sales
$
1,823,429
100.0
%
$
1,349,535
100.0
%
Cost of Sales
1,667,264
91.4
%
1,244,933
92.2
%
Gross Profit
156,165
8.6
%
104,602
7.8
%
Selling and Administrative Expenses
68,648
3.8
%
53,437
4.0
%
Other General Expense (Income)
(212
)
—
%
(1,384
)
(0.1
)%
Operating Income
87,729
4.8
%
52,549
3.9
%
Interest Income
153
—
%
81
—
%
Interest Expense
(16,263
)
(0.9
)%
(2,655
)
(0.2
)%
Non-Operating Income (Expense), net
3,125
0.2
%
(6,244
)
(0.5
)%
Other Income (Expense), net
(12,985
)
(0.7
)%
(8,818
)
(0.7
)%
74,744
4.1
%
43,731
3.2
%
Provision for Income Taxes
18,913
1.0
%
12,478
0.9
%
Net Income
$
55,831
3.1
%
$
31,253
2.3
%
Earnings Per Share of Common Stock:
Basic
$
2.24
$
1.24
Diluted
$
2.22
$
1.24
Average Number of Shares Outstanding:
Basic
24,904
25,115
Diluted
25,076
25,221
Condensed Consolidated Statements of Cash Flows
Fiscal Year Ended
(Unaudited)
June 30,
(Amounts in Thousands)
2023
2022
Net Cash Flow used for Operating Activities
$
(13,804
)
$
(83,178
)
Net Cash Flow used for Investing Activities
(90,467
)
(74,798
)
Net Cash Flow provided by Financing Activities
99,179
103,741
Effect of Exchange Rate Change on Cash, Cash Equivalents, and Restricted Cash
(895
)
(2,356
)
Net Decrease in Cash, Cash Equivalents, and Restricted Cash
(5,987
)
(56,591
)
Cash, Cash Equivalents, and Restricted Cash at Beginning of Period
49,851
106,442
Cash, Cash Equivalents, and Restricted Cash at End of Period
$
43,864
$
49,851
(Unaudited)
Condensed Consolidated Balance Sheets
June 30,
2023
June 30,
2022
(Amounts in Thousands)
ASSETS
Cash and cash equivalents
$
42,955
$
49,851
Receivables, net
308,167
222,857
Contract assets
78,798
64,080
Inventories
450,319
395,630
Prepaid expenses and other current assets
49,188
28,665
Property and Equipment, net
267,684
206,835
12,011
12,011
Other Intangible Assets, net
12,335
14,707
Other Assets
38,262
41,131
Total Assets
$
1,259,719
$
1,035,767
LIABILITIES AND SHARE OWNERS’ EQUITY
Current portion of borrowings under credit facilities
$
46,454
$
35,580
Accounts payable
322,274
300,224
Advances from customers (1)
33,905
25,942
Accrued expenses
72,515
46,996
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
19,718
20,242
Share Owners’ Equity
523,994
453,971
Total Liabilities and Share Owners’ Equity
$
1,259,719
$
1,035,767
(1)
Beginning in fiscal year 2023, the Company changed its presentation that such inventory-related payments from customers are classified as Advances from customers on the Condensed Consolidated Balance Sheets. Prior year periods have been recast to conform to the current year presentation.
Reconciliation of Non-GAAP Financial Measures
(Unaudited)
(Amounts in Thousands, except Per Share Data)
Three Months Ended
Fiscal Year Ended
June 30,
June 30,
2023
2022
2023
2022
Net Sales Growth (vs. same period in prior year)
33
%
13
%
35
%
4
%
Foreign Currency Exchange Impact
—
%
(3
)%
(3
)%
(1
)%
Constant Currency Growth
33
%
16
%
38
%
5
%
Operating Income, as reported
$
31,449
$
20,578
$
87,729
$
52,549
SERP
243
(1,159
)
701
(1,563
)
Legal Settlements (Recovery)
(212
)
—
(212
)
(1,384
)
Adjusted Operating Income
$
31,480
$
19,419
$
88,218
$
49,602
Net Income, as reported
$
19,202
$
9,938
$
55,831
$
31,253
Adjustments After Measurement Period on GES Acquisition
—
—
279
—
Legal Settlements (Recovery), After-Tax
(161
)
—
(161
)
(1,050
)
Adjusted Net Income
$
19,041
$
9,938
$
55,949
$
30,203
Diluted Earnings per Share, as reported
$
0.76
$
0.40
$
2.22
$
1.24
Adjustments After Measurement Period on GES Acquisition
—
—
0.01
—
Legal Settlements (Recovery)
—
—
—
(0.04
)
Adjusted Diluted Earnings per Share
$
0.76
$
0.40
$
2.23
$
1.20
Operating Income
$
87,729
$
52,549
SERP
701
(1,563
)
Legal Recovery
(212
)
(1,384
)
Adjusted Operating Income (non-GAAP)
$
88,218
$
49,602
Tax Effect
22,235
14,417
After-tax Adjusted Operating Income
$
65,983
$
35,185
Average Invested Capital (1)
$
701,364
$
491,252
ROIC
9.4
%
7.2
%
(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/20230816530676/en/