KE - Earnings call transcript Q4 2020 | Kimball Electronics, Inc.

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Operator

Good morning, ladies and gentlemen. My name is Demetrius, and I will be your conference call facilitator today. At this time, I would like to welcome everyone to the Kimball Electronics Fourth Quarter Fiscal 2020 Financial Results Conference Call. All lines have been placed on listen-only mode to prevent any background noise. After the Kimball speakers' opening remarks, there will be a question-and-answer period, where Kimball will respond to questions from analysts [Operator Instructions]. XXXX, defined recorded Litigation under of XX, forward-looking may Reform August XXXX. as statements the call, will and be contain Act Today's Private Securities be outcome that XX-K Form release. year XXXX forward-looking influence factors XX, the Kimball's the June in Risk statements report may for can and seen ended on in annual of today's Electronics. Sergesketter, of Officer Chief Executive and panel today's for Board Financial call The Chief and is Vice Mike the of and Don Kimball Charron, Chairman President Officer like today's turn to Charron. now over would I to Don call Mr. Charron, you may begin.

Don Charron

Thank quarter you, our Demetrius. Welcome everyone conference to fourth call.

afternoon Our the XXXX. earnings release was issued fiscal June of yesterday and fourth XX, year ended on quarter our results

the We if can follow making that, over which the may I via site have for on answer from turn this it within you summary found financial the to you them remarks accompany tab questions that the and and any I'll webcast, Relations to conference can tab. will have. portal. Presentations quarter, slides After are overview. few Web the posted Events call, a the webcast Downloads the or listening Or a then download on financial by along presentation we Mike be our begin advancing by you will on Investor

our demand X% tested has case, contact each Of proper tracing, And safety make results challenges by virus. the employees every caused our areas. and scanning, We protective we perform positive able monitoring quarter social are work for The things, and to response operating our our the the medical of despite increase to around to products. of And and an quarter customers, one around were and business for to employees, followed for body In positive of and interruptions as quarantining, completed extraordinary effort pleased mission fourth have testing number from patient mask, people the from approximately keep employees of vertical XX% COVID-XX our Because XXXX year with the of we and X,XXX XX% XXXX, utilizing effort fourth in respiratory our health first to XXXX, temperature the sequentially. delivered care communication and procedures continue disciplined global were the our response quarter in of support facilities safe, remains up many of compared the the their up world, ramp we fiscal self our priority. of our and significant phase affected sanitization fourth the amongst our our the pandemic. hygiene. shields, essential medical fiscal year, to up our sales the year face in fiscal world, distancing the

automotive a such to virus. and an year second honored infected the in first the and this the plant and year for XX% decline company automotive with in track to America down down North not months XX% vertical Europe can fourth The our and year those in given sales and on continued In on ramp the sales surprise, was our the of currently through the were fiscal momentum are shutdowns our during monitoring XXXX. of up play vertical products care recovery year respiratory important the demand that We medical meet expect April of to quarter by over fiscal phase but help disappointing continue of vertical our sequentially. XXXX and I role privileged half feel May. automotive our extensive in patient

employee helped production manufacturing experiencing, associates This related well fronts, we us we lines machine as COVID-XX are from certain utilization. production redirect including to medical able were lines experiencing were as capacity we to and automotive morale, on increases. Fortunately, multiple capacity where

While start encouraged were COVID-XX run approach to automotive our see levels. has pre been June rate industry ending we the to expected, than slower restart

rates our will In COVID-XX an existing middle addition, to anticipate who electric the normal. we new to will return a to OEM added for customer specializes overall a supports our automotive a new of vertical by the vehicle programs fully return that XXXX. for of these us continue program the ramp year And ramp up in fiscal several programs, automotive large pre vehicles. including up We when run new of levels

performance our adjustment that the the for and the we fourth from goodwill to diversification goodwill during EPS net charges operating progress after flow quarter continue an quarter, debt does realized is our or gain cash our was adjustment working excluding cash It to and non-operating acquisition a have GES, the being to onetime accretive covenants. impairment not traction quarter that GES quarter basis, the the of to with nice continue the since plan. with our in the impairment strongest GES note make unit, their integration position, period, And operations the impairment do measurement new GES while On and the recognize related purchase GES affect charge on company's their net adjusted a to degree seasonality While reporting of fiscal to we capital fourth in we important GES for related XXXX. the a on charge strongest. in of that we business and pipeline October business sales

software all as year XXXX. is in rollout strategy tab, solution developed to also role GES about the X.X excited global We playing Industry which in calendar manufacturing is our in a GES our EM we facilities work remain AI-driven management

our and demand working to to to pursuit in business, and our the continue margin respond capital relentless on change of and overall the our are volatility in achieve operating diligently invested mix goals. We return

in on focus improvement for our down be drive initiatives Lean expansion are we margins. and to Sigma and as priorities Margin throughput execution capital drive continue of our across We will projects us. continue global to all yield to of and units Six doubling to supply improve efficiency

compared XX, the quarter days conversion and XXXX cash XX, days up of XXXX Our ended fiscal the were ended flat days, June XX XXXX. year the for third to June quarter from when XX in quarter

the in inventory achieve $XX were environment. capacity purchased XXXX for result of support objectives, fiscal we fiscal and as While The no has committed year and capital year our in to launch our quarter majority in up new capital demand these reduction ramp days programs. of of goals of There investments in million us it shares a fourth and for were to remain conversion fourth inventory XXXX. the objectives the action. our invested to volatility made the cash the COVID-XX expansion thus We and expenditures quarter of difficult

been Our determination further plan suspended has temporarily board. our until by

share million X.X to purchased was of our For XXXX, shareowners million million our XXX,XXX response stock, October as brings and board which pandemic. authorized $XX.X repurchase shares year of purchasing And our a the to our stated by so under around shares fiscal to program. $X.X and am the I our since earlier, world I our common XXXX of COVID-XX collective returned total lastly, total people proud

through and values culture help Our will get us core to and together. this continue have strong company

to keeping safe. be our and Our number employees continues one priority healthy

committed deliver cash the is and with on solid to build our promises the future. company sheet, flow customers. balance to we our strong a success We position will to in in are continue our And and

in detail. Mike to to over discuss more our it quarter turn fourth will I Now results

open your We the will questions. then to call Mike?

Mike Sergesketter

Thanks, Don.

and tab, follow I Presentation During you mentioned, presentations advancing Don slide referring can my within Events to site Relations events slides are on will by found comments, the along be via portal. the or be Investor the which the webcast on and webcast Web deck our the can you listening if within the

our was of XX% largely the prior compared $XXX.X quarter the sales year year million in net quarter. decline to sales COVID-XX net net the to As $XXX.X sales shown on million, impact Slide from the prior automotive of result X, which was in fourth The decrease vertical. fourth compared in a were the

mentioned, Don the period a automakers for domestic quarter. As the time of shutdown during

contributing were market. partially exchange Slide vertical for reduced unfavorable verticals. in the our decline quarter sales increases net a fourth by net which decrease foreign the automotive and sales X in year represents rates, our were compared offsetting industrial medical sales to the quarter the X% mix However, net Also our to ago.

was in the demand same quarter year the a quarter as reflect our automotive current ago, industry. on XX% vertical results fourth the quarter down COVID-XX automotive compared to severe Our impacts of

demand medical of the $XXX.X was products, the XX% pandemic vertical current care quarter prior record assemblies, a Our to increase and respiratory and those medical quarterly shortage fourth year monitoring specifically for direct significant respirator in up COVID-XX result of quarter new global a to patient as to in equipment. million, reflecting the compared related of a

in experienced program increase offset test delivery to in year a equipment. from X% lower growth, up was measurement vertical control with due exits. increase ago strong more GES revenue industrial and products the and climate GES's as declines than demand Our of

$XX safety public and prior XX% vertical which certain from the overall the down our out programs year demand. quarter lower continued of a as Lastly, phase result fourth were sales were of million,

patient on medical the year. GES, from last monitoring related our on declines reflected base, and were in fiscal vertical, vertical quarter was fourth in to margin the for the gross our by across notably products care fourth volumes. most quarter, X, Our customer margins with automotive unchanged Slide increased in respiratory along X.X% Favorable of increases offset margin lower

and operating Slide income absolute were income the in on income the million shown quarter. prior as $X.X largely X.X% as income result by of X exactly sales. compensation This recognized which expenses. and $XX.X and operating the value fourth by quarter, due fourth of to which year driven expense. $X.X X from Slide in quarter XXXX COVID-XX XXXX ago. other for income compares or we SERP in $X.X liability, selling was offset on quarter and employee the same pandemic of for of which certain the during came in administrative impairment or members. and million no sales was governmental benefits the result to and adjusted in decrease income. increase plan COVID-XX proceeds the compared in the expenses, the Adjusted sales $XXX,XXX administrative operating to down the GES costs This related administrative of and year operating expense X.X% received direct to deck, as warranty, million The XX related expense million of points gains were in losses net the on quarter, Additional or year dollars to was accounted impact Selling $XX.X a fair indicator income of income which on prior basis lawsuits costs, recorded SERP were XX investments fourth deck. by unit $X.X compared fourth million or identifying net million, absolute point an incentive the charge other million the both result by X.X% exclude fourth to were profit as is in impairment travel in The $X.X period in SERP Operating and for increase depreciation was COVID-XX action $XX.X operating basis anticipated adjusted net a down to of net supplemental future dollars was restrictions countries revenues. reporting a higher The class adjusted partially quarter of a incurred the million of fourth quarter. liability revaluation recorded sharing our bonus income and has of reduced Fiscal at is offset lower related retirement a expenses offset

to Our lower discounted updated aligning of analysis impairment indicated environment cash the revenues, was GES resulting the update reflect charge. fair adjusted that was in economic than analysis. impairment the with the value updated to our value carrying current The flows anticipated forecast and the

achieve contract nature new future is visibility, on of goals. growth making team business While limits to and good GES diversification our forecast the our progress our the opportunities

is impacted continue to which We fourth current non-GAAP in expense final was the our XX% our the charge various state included market the earnings capabilities, also of GES favorably in effective capabilities partially and credits leverage the compares in impairment net the quarter excited fourth gains. of fourth effective the current acquired fourth X Slide interest the $XXX,XXX cash is from year on as was pretax net credit fiscal on adjustments. net working which quarter agreement. tax and quarter, adjustments. year XXXX. across not tax dispute state under adjustment capital a we target covenants, foreign expense expense be GES for The and and verticals. expense million trend. and with was $X.X in million and tax the charge purchase SERP net the tax does the of or of an the $X.X federal for both the in and quarter $X.X by to period, offset the to with the The rate as end along net to $XXX,XXX R&D those This impacted XX% flow mix a The our about year was federal million and tax the approximately The within as was Other of In favorable fourth adjustment technologies and company affect were impairment gains was million approximately measures. impact terms effective year the of after reflects by a rate through of related adjustment by adjustments the in net provided R&D quarter, procedure measurement excluded capital prior jurisdictions, investments credits acquisition asset working an determined had Other charge resolution effective tax cash tax the negative tax rate operations income XX%. expense negative company's that adjusted position, $X.X income the debt well rate. currency

are of the impacts fourth for year the of quarter Our the of EPS compared share related impairment diluted of was both Cash excluded of non-GAAP in charge loss of and And fourth million net and per $X.XX last million. we XXXX adjusted adjusted These Operating in XXXX. net GAAP in XX. quarter in at $X.X Slide GAAP net cash diluted the the income net for year. income share $X.X net year of the $X.XX. to million This the adjustments adjustments. per $X.XX came of income XXXX settlement net tax quarter EPS adjusting working to The shown cash reported Loss after and had year flow fourth of after XX, adjusted lawsuit $X.X GES million adjusted fiscal same capital diluted current equivalents prior June with proceeds. quarter trends and fiscal million. income adjusted at to $XX were earnings goodwill on $X.X compares

increase net in decline by an increase provided offsetting items, million quarter driven was in operating quarter. accounts plus the primarily these during increase non-cash was in $XX.X to medical Our fourth cash in flow activities an the Partially million in to compared by fiscal $XX.X was increase income prior order and inventories year a payable. volumes. largely This the receivables support

XX, CCD three or was Compared XXXX. year, Days up the third reflects four manufacturing XXXX in million, payable facilities an investments fourth the day credit related Slide increase awards. $XX equipment June support quarter million, date. in production $XXX and sales totaled our on in fiscal the Conversion sequentially through when to for and and PDSOH, June from flat Cash capacity new quarter days our compared largely to depreciation accounts increase Sales trend. Capital quarter on offset inventory metric, period million decrease the June by down is were same XXXX. increase Our at $X Day of ended was months capital the to the XXXX, Borrowings our XX, prior which fiscal of our of third and a in XXXX outstanding to Hand, XX, in Production XX, and

entered plus credit liquidity facility the $XXX.X facilities unused Our credit $XX and XX, at June amount XX, secondary representatives short-term May short-term which XXXX. million cash totaled million a available includes our into cash XXXX, on equivalents agreement of

liquidity pandemic. in conclusion, attributed In the to the due we're lives. position support to and to believe corporate increased continues of increased to demand our we to in to condition the helping necessary purposes pandemic, continue the solid the strong part Our medical in help medical to be to be provide able COVID-XX demand devices to additional working support medical general related save and to shortage solve to do financial to a assemblies market critical domestic capital our and COVID-XX

combat the we mentioned, would to to the global today's call disease work efforts questions that, open-up we're doing scale. With queue? very on like Demetrius, support in the questions have analysts any to our As Don are analysts. to do this with teams I proud of from a

Operator

comes Anja our And Instructions] from [Operator first from Soderstrom question Sidoti.

proceed. You may

Anja Soderstrom

and that ‘XX? be a the that in like was level the the half half was same first sustainable the pull-in medical, of in did So or quarter at -- it's strength into to additional you an the quarter from see the for increase the fourth first as it going demand

Don Charron

gained, pandemic itself pace demand and of COVID-XX the US has the in in move say, really up the spread and spread started as let’s the the Europe. So to

So March, script, mentioned it two phase at was us the of really April in significant the demand presented could timeframe. first distinct pretty and look to the I in demand you in as phases. the And was really it

And one, And year quarter now the first year of increase so phase in at one, reported fourth the fiscal of visibility second extent the you the to phase that in we XXXX. need phase have here be in the we will then point. of that's of quarter saw XXXX, here fiscal executed this completing that about that

note we products give we'll at for products, a supporting we're that of negative COVID-XX next actually sales are patient has or down the care procedures, also customers are and say, in to in elective but decrease same let's that support have that that example, expect there with offset on the we increase you monitoring a been, But period. have can that in obviously those of quarter you significant sort the there update surge. related where a is end one an important respiratory that at So,

all increase in for sales for put we quarter. XX% medical together a we vertical, our the if that So reported

still the single net in and growth increases COVID-XX If let's you would took the upper number out be digit range. the decreases related say

So through time. vertical the period understand about progressing we'd of know terms to medical in numbers this of want that's our to you or is how

Anja Soderstrom

And related you to production in before contract rather going that’s the being that COVID think along? fiscal mentioned the surge large offset is had that of kind -- you ‘XX. coming you is postponed this How that in

Don Charron

products related volatility do script. seeing ins Well, mentioned of seeing the some customer the not program base, we that's right to with I delays that we're in the webcast the or demand are pull in now really We're primarily see patient our say support the increases respiratory that more programs, it’d we're outs monitoring the that automotive, care and or I larger those general some whether seeing in we push we elsewhere. products. would customers for that or medical, support, be in in of

And the pandemic But then will so visibility. least. at programs be those when that that and get we expect quarter track we'll to two back or on may again, starts better out that subside have a

days. that I rate Anja, say is current So our these impact mind levels and what's would the on run COVID-XX on focusing

Anja Soderstrom

for then to segment, cadence on we automotive quarter, sort think up about there? you half the the or fourth the the in will the should And how able first in lower of be catch production

Don Charron

pre-COVID-XX of QX. a of is started our you to to that's if run-rate. It's a to The of that's pretty impact to front March good look quarter-ending June, we sort go for fiscal I a third get quarter, we our us, year pre-COVID-XX that feel at. a in because back And benchmark get good yes, number news in a it But to of should to hard big think that XXXX view like we good obviously have was to good that. of us XX, be which have sort

two, North while those but there not their is chains only took value to America production back car crank what or us up. car little it the quarter past hoping a felt consumers hope this cranked the to the we're the And cars. demand buyers back whether had in up We again, tier shutdown tier was even and to of whole ones or makers obviously, the of a from yes, was So get get it run-rate. makers we as automotive can Europe that the

some again America think and us, yes, those in we pre-COVID-XX June started run-rates of North to to So start see was up for Europe. June here I encouraging because to

Anja Soderstrom

And that seasonality fourth the maybe is then there on assume fiscal -- with quarter that mentioned the strongest, the I that was GES, was you being some fourth quarter. there the

drives we And So a little and think that how into about to XXXX? seasonality? should bit going fiscal it we that should expect softer what

Don Charron

still first and will strategy and serves and that we're smart business of chain value eventually manufacturing. assembly hard supports mobile device semiconductor seasonality. out flatten growth all, Well, diversify a that GES on But of working some today diversification that the the primarily

the are those two areas. so biggest And

And areas. needs, of you their in seasonality if sort will, so our those follows two

hard QX working are I growth be diversification XXXX. of on we will We the by year there strategy. and think fiscal don't

our some But with the year least XXXX, be diversify there we're think So will business. work somewhat to I be during will seasonality business the expectation. still dampened doing in the it fiscal that’s at

Anja Soderstrom

has that -- was And in terms if the been of that cap, in the terms of fourth that quarter semi in help GES is the coming a big back?

Don Charron

that's no well is winning recovery some manufacturing. there And terms value I supports that say in of device would we helping. there doing see we're mobile the smart is that doubt in -- chain also, projects There

Anja Soderstrom

and the And why for GES. took goodwill bit that little now then, a you're write seeing there? the Can you what explain just you down

Don Charron

and opening at that doors us. new for took opportunities growth say a of technically But fourth itself that much I helping the with impaired the in study the for business, the in current very in the We study impairment And business The and scheduled. today we up the company year we at make this our yes, was and was point were assets we that environment quarter economic better in outlook scheduled this acquisition charge completed in in they’re new work the gained quarter. the for quarter. for manufacturing that's time, us will fiscal the GES It are XXXX. projected strategic

of multi-faceted to assets course operating these very in we performance So we even how becoming And QX, about and more optimistic continue add company. pleased. remain were our with our to strategy solutions an will capabilities manufacturing add their to for

two seven it’s Anja… ironic we had the the owned non-operating since we've the color a quarters. that quarter charges to just guess operating little a So that's our have same adding last little But over company more best quarter. bit We that I in the

Operator

our from comes with Instructions] next Morales [Operator question And and Walthausen Mike Company.

Mike Morales

first significant despite of to going year-over-year growth auto that your everything to how earnings the markets with posting on. Folks, supporting is business all, medical see again, that. at job the everything great great really Really and have great achieve you to and end with really maneuvering

Don Charron

Thank you.

Mike Morales

Longer year term, I think, just if targets that targets, Can ROIC about thinking I think back little you how that a about getting out thinking about the about around next a versus up XX.X% year you're and and XX might ago, top how that you're guys bit? certain set about you the months hovered you targets the the guys ago that had line have beyond ROIC targets over talked level. a talk margin and

Don Charron

we're pandemic whole long-term the Mike, in best this in. the long-term past capital be we side this the Clearly, we to current medium would But business, as operating deploy that more this to with say are we the still of those long-term. environment those that -- X.X, look of and So and And work that ROIC answer. whole the but part the right quarters, that to first medium of long-term would be when our target. we're term, we targets, the believe during medium think towards I yes, this of which of term year in remain the or X.X%. at fundamentals the targets. need business in and that responding the couple all, We'll can And anticipated piece business have. of as strong of hard right have just The we operating we more last some financials at may that's that income we'll the time recovery when we're business, at said and fundamentals still we winning the look automotive. at

And the We up. pleased the two with X.X quarter. were so you hard for ended quarter to were at adjustments, we non-operating if working take how out we're And those get there.

a put put whatever. could SERP or some -- would XX that to, back operating number, points that wanted little You that if basis of back boost income you more that

of being to XX%. And within down get even automotive shouting so you with distance start that X.X,

So a can that encouragement we us get gives lot that there. of

being to our longer we're to like grasp. is so, X.X we hard term, to ROIC within the next term number quarters. to four And pushing also in going the the five And get be medium then feel

Mike Morales

does we least head half. the really a needs lot 'XX the to seems you or? a I the might back start about Is still going and thinking the In guys about second where of the to it mind, more reasonable it. Maybe at little first And half contributor, those by going medical as from like or of bit be my to be sit up. focusing the some drive year, that 'XX that think enlarge off you that Am a piece might going auto fall make the as to company. into to meaningful as correctly, medical about fiscal guys world today so the auto that thinking products think even that half if revenue in fiscal and growth it was on and of generation the

Don Charron

like possibility to certainly That’s one happen. have a and we'd

I think lot obviously, a time. that of production makers the lost consumer, I car mean,

December Here take, in seems into the quarter production. that strike, ending U.S., forever for production the right like went COVID-XX of ago and GM but XXXX in lot just which of you especially General then was if a the lost during impact, example, lost the Motors

kind down up for pre-COVID-XX seems be -- consumer real us seems of to it'll levels, and And come inventories. Europe picking return then sooner. to So obviously, demand. ramp they and to eager lot be replenish start to China to a will up traction

then is, of table year had automotive outlook of the When look at we said When ramp year. I levels it's we were contracts we script. it we've of our got us. let's the running to see ups where in demand mean our to I we new program Mike, add And they as the at the between for that two back got end think out the on fiscal everything think takes the we together, get the So the by middle previously-COVID-XX that get could there, and XXXX. by ahead number consumer pre-COVID-XX, where feasible those that fiscal we

Mike Morales

And from Lastly in thinking a in maybe more maybe me, conversations with guys past, that able doing been winning are has have business of haven't broader those frequently? vertical environment? in medical just work open or service you're beyond has happening you maybe growth some that that about winning, been Has speak to you the you those opened any guys new to and non-COVID a the the that COVID, more of those? that normal related customers up mentioned talk How programs any to more opportunities sense. are about to that you conversations up have in

Don Charron

Well, I is, all -- yes. the of short answer mean, first

response supporting what I we've say will we're customers the as really that not who ours, on of customers done are Our partner. and is value these customers for longstanding are lost customers us them. a

our pandemic very and of and new And with so to as yes, were this And respiratory these we us, COVID-XX are related position others and position to response good and programs. in what monitoring, we've patient good same win But our in done we position. after is only the standing efforts very in to care continue win behind already it's absolutely, good areas a in improved in well. surge business

which interesting and monitoring those view, important of for be look care of of derivatives to our most from the to future. view care point customers’ our infected patients in products these of respiratory patient products will and and point providing at I think it's

the products, and on interesting in to and evolution continue watch come part that other to say, that to assistance early as produce a breathing to care that ventilators. and ventilators and It's the focus infected for evolve love really not, products the be us And ones in elsewhere are market. are we develop derivatives but to chosen we've let's patients, pandemic, been media think those I to course, the has the as be they interesting for was of products of. had

Mike Morales

appreciate And and That’s safe Great. folks, Thanks all it. the for me. stay color from well.

Don Charron

you. to you, Same Thank Mike.

Operator

I’d queue. any not back like any closing the to remarks. currently over to turn have we me, for in pardon Mr. Charron Don And questions do call further

Don Charron

today's brings speaking Thank day. and end with a look you Thank our us and to Thank We call. on next interest, you That call. great everyone. you, to the appreciate Demetrius. your you, have forward of

Operator

simply to call. listeners a you, disconnect nice day. time, At the may have up this from and hang Thank

Kimball Electronics (KE) 19 Aug 202020 Q4 Earnings call transcript