KE - Earnings call transcript Q2 2021 | Kimball Electronics, Inc.

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Operator

Good morning, ladies and gentlemen. My name is Michelle, and I will be your conference call facilitator today. At this time, I would like to welcome everyone to the Kimball Electronics Second Quarter Fiscal 2021 Financial Results Conference Call. All lines have been placed on listen-only mode to prevent any background noise. [Operator Instructions]. XXXX, defined recorded Litigation under of X, forward-looking may Reform February XXXX. as statements the call will and be contain Act Today's Private Securities seen of may for XX-K ended and statements, the factors XXXX year Annual outcome XXth, today's Risk can on influence the be in in June Form Kimball's Report forward-looking release. for Board President Officer Executive Sergesketter, Vice and and Kimball today's Financial and is of Charron, Don call panel Chief The Chairman the Officer Chief of Mike Electronics. turn to like now call over would I Charron. Don today's to Mr. begin. you Charron, may

Don Charron

Thank conference you, And second Michelle. welcome, everyone, call. our to quarter

Our results earnings XX, quarter release XXXX. was our December issued yesterday afternoon on ended of the second

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

deliver results cash very our XXXX. to quarter We and flow are goal income for again from of with We excellent the of pleased continue operating we exceeded second operations. the fiscal year X.X% operating

favorable operating strong mix Our driven execution, a product weaker primarily improved by results and dollar. were

future. predict attention. our the to what continues X.X% income. of operating Looking difficult performance pandemic in will approximate face of goal our draw The ahead, should the we we expect our that long-stated to persistence It's

about growth fiscal we business business strong believe and for our funnel. organic the remain X% is our goal year that will However, We our and XXXX. we within reach are confident to our committed new goal well are of opportunities remain optimistic

flow the proud strong adversity, Our our the third consecutive to quarter. response so collective cash while from team remains operations resilient generating of and for I'm

down health our effort of and Beyond employees sight number COVID-XX our lost disruptions X% positive the kept low facilities been remains of to and fiscal safety level we a testing the second continue our been every fact fiscal our at and In our and deliver that compared but to have employees has promises a second minimum, the on year we sequentially. to to priority, kept our our keep quarter in were vertical results, year financial XX% XXXX, The our safe. customers. increased make of one medical quarter excellent of sales never to for we continue of the to number XXXX,

second related completed vertical increases medical the fiscal gain expected. of the XXXX quarter and year XXXX. pre-COVID-XX second XX% normalized quarter previous as sales the run in quarter approximate rates the in As momentum during and automotive year during our fiscal year increasing our of XXXX, in from Sales quarters to our to continued of began fiscal COVID-XX were vertical the

increase steadily will sales automotive year levels even XXXX. of at in We expect vertical the throughout these the or our remainder remain fiscal

again of eye XXXX, X, acquisition. on a production. automotive of GES our marked semiconductor quarter the fiscal quarter their the fiscal a note keeping anniversary on impact to year is second have XXXX. year strongest. significant however, do GES second and being the the in for fiscal that the GES important compared business, It to are, potential XXXX We global wide results quarter close fiscal with being improvement of we seasonality of their weakest when the and fourth degree October second the a two-year the quarter shortages industry The were

well XXXX machines orders Our has to positioned of those year fourth deliver the scheduled. GES fiscal shipped is in for quarter as machines and be to of grown backlog nicely

Our a in XXXX XX, of ended XX the were conversion days XX December CCD, quarter for on measure down second days days from was our hand day the production decrease quarter In December or the significant in cash by inventory supply both sales hand. fiscal first PDSOH days' quarter, or in ended quarter XX, the largely increase an on XXXX. or year our XXXX and offset

making committed goals by product in actions. While the achieve our demand and quarter are encouraged objectives, inventory volatility remain cash our to reductions and we to continues mix our it days conversion this difficult and

continue working and in XXXX. investments $X.X and achieving support of in will expenditures invested up to largely ramp on XX year machinery were the of our We new capital second goal to quarter replace programs capital equipment. to We the and capital our million days. fiscal and focus CCD older launch optimizing of These

continue share second There our the world our X.X support collective our to million response of our shares our repurchase repurchased $XX.X were officially has by total fiscal COVID-XX shares operation million year common stock. of shareowners I'm been study so to expand proud the and XXXX of XXX,XXX review. of people currently I capacity Since XXXX program, We total around needs and was plans. plan in growth Board footprint lastly, earlier, pandemic. purchasing quarter other Board authorized a approved of for million. our stated are And expansions a to October Thailand under our under the as The returned to to of off $X kicked

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

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

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

our quarter Now over to it in more Mike discuss to detail. second turn I'll results

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

Mike Sergesketter

Thanks, Don.

can slides webcast slide Relations along tab. found comments, you be the Events Investor within webcast, follow listening During Don advancing our deck you're via my the the the Or be the which and I'll portal. to mentioned, on referring website by can Presentations if on

quarter. second sales were which the a prior automotive sales in Slide year The in increase increase to sales on year was the million, compared of driven $XXX.X net to increased vertical. in million the shown X% by largely volumes net second $XXX.X compared was quarter net X, prior As our

Foreign quarter the Slide favorably a year net impacted rates net to exchange market. compared represents second mix ago. X% vertical our our X sales sales by

for was impacts. to of vertical the exchange and the automotive lower same up the COVID-XX up compared programs up a vehicles, UAW fully the the by volumes and year to strike including ago shutdowns, electric Our XX% XX% prior driven in continued ramp year rate recovery due largely sequentially foreign from certain programs favorable quarter

the up to compared year prior quarter second vertical current quarter. was X% the medical Our in

recent As quarters the vertical medical experienced were medical as the to and our second sales pre-COVID-XX COVID-XX completed vertical the expected, in increases the approximate run normalized most related in began in rate. two quarter

test year end for X% of for primarily a by were improved decreased partially metering automation, products, products. And Our industrial higher up to vertical due inspection market smart demand demand offset ago, was sales and equipment. from climate control which

programs. our sales continued due public down vertical to $XX.X year XX% quarter, of safety out prior Lastly, were the from certain second million, phase were the primarily which

improved in selling effective point impacted second in Adjusted in The gross foreign gains the administrative million million to fair and for on SERP changes net and other Our was reflects favorable expense in second prior fair by million of rate income liability. period factors increase is quarter expense. second income the SERP liability, ago, sales product $X.X jurisdictions, gross Other effective X within automotive by XX%. Adjusted year. fair $XXX,XXX on improvement effective increase as or was mature expense. higher primarily previously interest adjusted and driven quarter, on Slide changes currency approximately to dollars deck, absolute million was and in in excludes expenses driven X compared year basis by foreign current our of second gains, programs, the Adjusted tax SERP the our the the by rate resulting income in movements. execution, year SERP margin XXX Gross operating came $XXX,XXX $XX mix rate quarter and overall investments. from for $XX.X year-over-year performance mentioned. prior improvements, more fiscal SERP million second or a includes The selling Other offset operating the driven Slide expense, The mix favorably administrative sales quarter, million reflected non-GAAP of income in net million vertical year SERP net partially our of $X.X dollars the quarter, Other a in quarter quarter which last quarter improvement excluded the number same tax in in our the year million foreign quarter was including foreign year by income, the which margin second from $X.X second impact within to net the gains our in favorable expense, fair In changes in partially in XX%. including absolute $X.X of net prior expense dollar the profit-sharing of income rate to quarter the by current currency an compares year fiscal from in and of in tax period of prior $XXX,XXX Adjusted directly second in was up driven the financial value current second income various year the the a income $X.X liability, approximately compared in of offset bonus second GES value favorable XX includes of trend. value by in was in in net exchange the profit-sharing were by increase adjusted selling XXXX. at currency X year the Slide expenses, changes larger earnings strong taxable the shift which second our in the a higher were bonus quarter interest of X.X% offset was the operating X% second tax and investments. $X.X the investments, the weaker our net basis of from impacts the income $XXX,XXX the administrative gains the continued value operating on the driven which profit X.X%, shown of of and points quarter. up in excludes non-GAAP quarter. and

of in acquisition. Diluted fiscal Cash share share after XXXX. of no per came million $XX.X year income fiscal Non-GAAP XXXX the income second XX, earnings There an in year. net the impacts was December XXXX $XX.X the at the earnings quarter per non-GAAP on $X.XX. million impact year the of adjusted GES on of of the to shown were quarter net have same settlement of $XX.X non-GAAP charges of compares reported after trends earnings million second the measurement quarter period Our quarter $X.XX per were after-tax This the last with XX. in items cash prior This share current fiscal in second in adjustments for and flow adjusting diluted quarter not in are cash $X.X equivalents or did XXXX. adjusted net diluted Slide Operating compares year income on second to in year quarters. the million. at

and net provided income was prior operating activities $XX.X $XXX,XXX. second activities quarterly a during the and fiscal quarter, plus year second Our by In depreciation driven quarter by record, million, cash inventory used reductions. non-cash the year operating primarily amortization flow

in Our our production quarter, by of compared December our our days' new our investments of trends. XXXX. in and older capacity our in inventory sales awards Thailand as when Slide fiscal equipment. the XX hand. XXXX, largely approved to expansion quarter $X.X prior Thailand Capital day both Borrowings the Don $X the were expected second take which machinery million, is $XX mentioned, XX hand offset down of was an the officially kicked largely reflects December three $XX replacement on of which off, down our on months XXth equipment XXXX of the has The XXXX. at the capital Board manufacturing or been year on a is decrease ended was in first supply significant PDSOH, facility from the complete to June CCD one facilities totaled depreciation year and million of measure at support million months and the increase production the from cash related cost operation days conversion period second approximately XX, to will or and million. XX, a same In credit to to day and double quarter

by $XX.X have classified as XXXX. June XXth of long-term borrowings million from Our declined

operating analysts while COVID-XX and confront at on available return with XXXX. continued With growth to cash analysts. as return excellent liquidity cash to of improved strong operating plus our advantage the in today's pandemic. like credit represented the on unused the that, short-term Michelle, and capital, queue? margins margins our December by being in the we of condition million totaled continues do Our caused to XX, and questions conclusion, opportunities we're equivalents able financial $XXX from I take improved position call and be to questions invested have any the and uncertainties open facilities, amount up to In would

Operator

[Operator Instructions].

Company. with Morales Our from first question comes Mike of line the Walthausen

line Please go Your open. ahead. is

Mike Morales

here. touch A few on to questions

and you with talked about. the chain that guys expansions start supply Let's capacity

Just the semiconductors? on auto. Can chain for as specifically to seeing that relates from as capacity people just searching a and about shortages continue GES space? what what in curious add You here, thinking a update seeing. called the seeing, we're you're to you're give on that could out it business help the that you broad semiconductor If lining specifically you're silver supply

Don Charron

Yes.

for part in of space. last is have business around the application with the business we experience bit longer our outlook, that our of GES verticals a to on start could let's GES. end help yes. and do GES your term focuses So one that of quite answer That's medium short and market The question it

out maybe say got And it's not would just impacted it industry it's now, to and capacity that we're of shortage to hope system COVID-XX is semiconductor as be considered issue certainly so more the overall truly the that then adds balance. new winners capacity. a whether of we to or Coming business a and situation little really or facing the difficult

settled what started consumed timeframe took at products spring we when you we've the of surge If last in, March it of through think course, been stay the And whole about lot IT pandemic all the in or and off. home semiconductors, work those that stay all for stay home semiconductors the auto same at was as or type learning up consume it for those now entertainment, are shortages or products at home of for sector. same in whether the showing a of

products shutdown in and And within there's Certainly, lasted North rebalancing. time, We will other approximately so that that I And a surging. had continue? that weeks. a during mentioned America automotive Europe were six those

right so shortages book of experiencing other definitely areas automotive. to a has this was outside And being over now. little it are that the for of catalyst That we sort our automotive rebalancing issue of within business we have spilled said,

to is I the popular last get those of we're And going And a we to allocations. we profitable for manufacturers. As would and on of a fleet. good vehicles of most would And lot us that try that for that make being set position near the closely. be vehicles priorities top or vehicle risk. very think automakers quarter we have of in that or the up catch where those point list priorities set their of at on are many course already thinking the said, to before mitigate it's with the they content believe in and that be I having We're we're things kind watching two a rebalanced. said, That to pretty

days. close those itself keeping manufacturers and impacted the we're that think, will gain it, and will to really, It's it than would. So it's eye on started otherwise with a allocations last manifest less were hopeful vehicle Mike. we're XX we production priority But I be in our made maybe those developing and

we're and on early. we very pretty it a taking many eye risk. keeping to can as close mitigate the it's as But countermeasures So

Mike Morales

Understood. with And this higher incorporates auto that you seeing That taking at the the forward. even about what chain supply or remaining guys talked situation moving had level you're currently?

Don Charron

right. That's

Mike Morales

really I the really commend strong little guys you and performance Certainly the there. dig me really, That's it. helpful. this a help balance a to this. forward, take moving you the to now second maybe sustainability would into to Got to to like frame cash understand, cash this really on and guys flow guess, forward? is I'd level relative cash the to thinking not see eye-popping I'd moving of have you done history, how on work quarter, And it getting like net bit good. sheet position we're every quarter. about maybe guys that working and capital But flow

Don Charron

We've the especially kind been working it for of you for your thank and that quite on Well, capital words. inventory. a working especially while, part Yes. the

side. add quarters, capacitors definitely think point more negative flow were we inventory a to forward, go working at it. noticeable unfortunately, we shortages our with one due up buffer our eight that we inventory, the step all cash on as that shortages last kept back, capacitors, two number. time that we felt to is quarters down making where at times, it, progress was like six kept there related were to I mainly, or we've We've good And not needed there. in and reflected the ceramic the steps felt progress started you inventory into And of it if like few sort we back on and that multi-layered been other reported, focus more of to also but it are that but build shoulder to

hard from Our we to moved in watching on customers. we're our a of sure sales make time all well of up really outstanding and as bit, that pretty day working terms paid get

not we're the will efforts, not making goals continue. our would say, good so at at We're And our We're but I inventory goal. progress, yet.

help of delivered the cycle. reduction cash multiple improvements some continue we're inventory we've multiple conversion And on to without improved there better have across the capital just our execution operating course, more with and whole locations going us and through that our initiatives. make to should improved activities inventory work working That So getting profitability fronts. in

can And time to we going so think one here just don't best but sit flow the obviously of do did, and all with report forward. cash we say, for like going I we continue strong quarters expect to we're Mike, us,

Mike Morales

of me, work the and then continuing cash you're And to do. that from that all helpful. taking the flow last That's on

side, resulting specifically to updates to related tapering capital really to Are give know demand that you acquisitions, coming that not Or off, as some more about you're in anything and COVID-related allocation? guys down maybe far things place just Turning most medical repurchases can you attractive? multiples any how likely and deployment? deployment, been share make is I capital of so seeing the expensive on capital, on thinking recently. have uses other taking

Don Charron

about optimistic we've we're comments, we're standpoint. Well, sure, growth. footprint, Thailand on full going as our do, my new priority capacity that when We funnel. organic I Mike, a got some talked we We opportunities review. the from we footage square expansion in and said look one the and our others for number facilities to at under reaching have And about keep are

expansion. at expand our like off, more operations Romania. of a we mean, capital we an greenfields strategy and Thailand But greenfield are need to to is we'll there and where allocation favorable, did so on. Board and operating to officially dilutive we at, work's And much it's we're that to That do going expansions we've than and make kicked obviously, full that operation less looking to where other looking we've the compared are with modeled we're for operations, I expand approved existing a total

interested their If not if find. contract and and high. think they've say the targets name market the been your impacted, market, impacted, I diversified space, looking they tough active you market we As not question, they're in looking acquisitions those COVID-XX have coming are talking. is, just the what been just COVID-XX lot for is in off strategy. in are of An answer would and medical manufacturing and They're are we to to the our the are support multiples mentioned, a

active, And challenge targets. at obviously targets active, and looking for have been looking been a targets. so it's find We're to

our but on something certainly quarter. that list, us. tough. It's program That's been on difficult this for allocation the in to the We list. been So find this really it's past that's still repurchase market share works restarted

one to And priority so, number we've yes, growth. capital support making sure allocated our That's is number one. organic

Mike Morales

I Guys you hope Understood. color folks well. I the be to appreciate as always.

Operator

comes you. of line question from with Anja our And next the Soderstrom Sidoti. Thank

open. ahead. is line Please Your go

Anja Soderstrom

a greenfield? Congratulations you if on and existing do good have now capacity another little need great are expand of into to a to you you what ones And go stand do capacity? in expanded the questions asked the on of kind already. expand you terms quarter. And Where ability comments. But can bit until those fully just

Don Charron

our facility Most to had, adjacent of existing our say, for available locations like very let's Thailand, we expansion. that's land or nearby

so good right the we and to so news majority the literally our expand have And door, next facilities expansion of the to do capability is that speak.

And leveraging so that costs lot management especially of facility costs, provides infrastructure and expanding around physically. synergy, cost and while a the we're

particular strategy So why we're that's on focused that expansion. the for reason

In our and is, we've say, one to Thailand. I decision terms how made expand facilities would obviously, each the full of

pretty So that's expansion. with and coming, that were that why business at full. forward tipping was point with moved the we we And more

growing. has been popular a Mexico, Next our also operation, list, Mexico very on our facility

space a where have given in an we're would terms feel we of will And in we to say like very after that, so elsewhere us And handle closely the I there and footprint. there's expansion our available cover more those looking floor organic expansions capacity. add growth time our

Anja Soderstrom

Do thank you the Okay, for year. expect normal see rest to year? the continue elevated that next into be that And the or? And helpful. continue you is the you. was That to also new of auto

Don Charron

have want think inventory globally, low. you but levels, levels US, been has the would reduced the in about inventory I whole is pandemic especially to that Well, COVID-XX the thing really

that build considered up, back to And think would so up chain them. finished value catching won't as provide we us carry have what on. those levels inventory will, more or a carmakers where comfortable you And boost be build quarters it to caught three back take back if getting to a so to up yet goods are normal for will up collective would

Now a around market. and semiconductor But world the the little low it how driving And growth foreseeable shortage impacts longer, very buyers the the bullish it may are the for about inventories can be returning on auto inventories fast depending analysts the take those future. to how replenished.

short normal So would I nicely boost, think it a back term, once have years a in we'll the levels. little inventories the and come. that will industry we normal, guess, expectations to But inventories that grow getting growth, would the reach subside to the little overall, there're still will

Anja Soderstrom

your to up hold Okay, of it's safe the for so year? assume will that margins the rest

Don Charron

You Anja. question were ask that Could breaking up a again? you little,

Anja Soderstrom

gross want head to your then? holding just year It well up the grasp performance I seems like about will be around as my that margins throughout then.

Don Charron

the forward. made. those to we at we Lean in projects, our our terms certainly, improvements advancements when supply look expect we've Well, yes, operational of improvements Sigma you made carry the And Six initiatives, chain execution, around

today, had that gross the Some certainly, necessarily of those a margins. mix, operating forward. with know income continue also especially on higher from in weaker margin to improvements fact lines. But sort that that to more and operational future. talked we are mature made the in to continue us with and of little not benefit going our the some We we are we that other expect reflect tailwinds the us a difficult Those a little. expect And production project volumes mentioned we dollar about we know favorable helps tailwinds we could we that

Anja Soderstrom

And do you in the growth you you. then confident that X% target in year? reaching year, play at coming thank you mentioned out see Okay, feel revenue fiscal for year-over-year but lastly, this how least

Don Charron

year comparables for first XXXX, softer and you QX In Well, is certainly, half single low after the benefit in some the year FX. fiscal growth digits of we're first QX. adjust to this going with our in

to in half obviously, the second X% the of year, half full the double-digit to look second we As for numbers the to year. reach take

have factors organic FY to could about we of would growth that our as say there's FY of in settle forward confident sort look We a So for to our within we we on confident goal would we that that XXXX. lot XXXX, X% be feel reach be say XXXX. FY beyond before that

Anja Soderstrom

Okay, you all from that and me. thank was

Operator

Thank line Gabelli next And with question of Susanto our comes from Hendi the Funds. you.

Your line go is open. Please ahead.

Hendi Susanto

we Don, content of growth? exposure EV? how secondly, automotive their how And much metric about think to unit do tie business? your growth you growth then growth and to have companies should Some

Don Charron

definitely, that we of Hendi, in looking markets. those new vehicles our we're our and expected content add have we, when end subtract some their in of won what our programs so at that Yes, And and look course, life. of respective will And growth do then that be up. to course, at to go we've growth, projected are business will ramping off

growth be. that we're number up doing So our automotive all of math when come we with what think we will

approach. It's years. significant growth. terms know, the several in not as kind more over automotive been has of that determining growth SARS of a our last complicated part [ph] than our And of definitely it's real you So a

in so that And end we proposition. continue our successful value be market to with

business. win continue We to new

vertical. are coming be to the obviously disruptions There so about automotive vertical. the automotive And of lot a optimistic continue we to

autonomous step electric back a might this you in As there mentioned, vehicles, have sharing taken driving, are pandemic. ride disruptions But coming.

And that the has they're to going been automotive so because important be growing applications it's winning or in on change architecture keep to our popularity. are There, as well. that around maybe applications eye future, because their focused doesn't an strategy in

combustion we an fact past internal support is vehicle. power talked That the in steering. that application it we've architecture as electronic is engine example, about for the So largely same and that the for for vehicle electric

in we've and the of continue focus. And And and similar invest to good terms that that applications so in approach we have to got other see future. have, for we our growth our as area a are plans and we

real the winning been been our of a their It's have customer. of of a part relationship I can't successful them. a fully most vehicles. through that significant you relationship, automotive. in or success give growth it story on customer very been for brands have us. content we go has We're story strong popular the modules and We electric But on in names electric our some with customer for this world producing vehicles

grow expect so and of is fully to significant becoming continue on we that part a actually overall is that it's And automotive our relationship, vehicles amount of electric to becoming book of our business. the business

Hendi Susanto

then that Got what in And exciting for industrials, opportunities see are some Don, growth XXXX? it. you

Don Charron

shows Well, got that our quite business. and like some on nicely, climate control really in we're we're industrial the successful growth recovering customers some we've of part space. side that what our I seeing And vertical of seeing promising and

So how into US say, as I I'm especially those let's we the in traction like part business of type with seeing for we're applications. up looking forward climate for now here of GES. to what terms controls, HVAC in ramps seeing that season the higher the - go

traction nice industrial got business, again, within there As diversify seasonality of. moment, our way and report But at going we really some interesting mentioned, out our around some but machines, seasonality some there, that we're that we've for new I got we developments are the some to have verticals. sales we on which those there orders working we've grow seeing new and in

remain very a metering. smart those excited of that So I'm about. are excited couple I about areas

vertical about market And restrictions and a have in conditions, confident and and pandemic a the before space leaders. be customers for growth from I would the to we it there. feel the to will that that think that again industrial story. we restrictions our that part especially when subside recover will can us, of have future conditions of around market I installation, number starts significant are growth But believe grow pandemic again, the

Hendi Susanto

the And with to at it say, of and way in medical, COVID-XX is look I to to Don prior QX. if to that let's QX If quantify Is that? is way the year, like a look one-time, like compare quantify tailwind try delta you million. right there $XX the and Mike, back the XXXX about

Don Charron

close, that get Hendi. Well, get I It think would you would close. you

effect I there's run those an attention that If that average sort you from I increases. COVID-XX COVID-XX be one quarters to up. at at thing, negative your is and showing related rate the looked - bring two to is of The had guess, would want a look also would then

are that priority wait expect where the you the But we somewhat vertical and seven patients. take and at have look higher run gear. at fact in a to on quarters down of related critical with medical the looking parts say, had from either they're COVID-XX over, more be, COVID-XX can those that being our average the it's continuum then care net obviously or you're increases would them or six of rate we not really our still of of related whole to sort when number So quarters that

side, treatments have we diagnosis amount medical being is impacted vertical delayed, normal example, people our to being a being on fair the for their delayed. doctor's appointments, that negative So keep able of not

pandemic doctor are their to so when go the are normally diagnosed. to And visits subsides back scheduled people and and they able

We expect those product pick areas back to up.

Again, in so ask I mind thinking just We of you're those doing though, as said as COVID-XX related asked that the to increases, know today, business we run we completed produce. the keep of and of would believe are book get was script expected would What what prior our the pre-COVID those in our don't we vertical. and to in And about math rest the reflected the medical I'd when sort to a you we impact us the Hendi, in say, seeing the to that increases rate. quarters. COVID-XX is were

Hendi Susanto

you Got you Has it. sales can design materializing Don, wins safety, in phase how reached products when And do start business? bottom? in its in then characterize the out public this seeing current And turnaround? new

Don Charron

of did our customers. larger not time with to That very and that's us, often, for of a that. I'm of time happens phasing business grateful But public end Yes. a out We're our safety in with customer one and have at run kind out. we customer, from the longtime a

offsetting if public so And kind the have shoots, in of will, we some safety that vertical. you the it's green of

add size, that of I are But to there there, delivery facilities interesting have but It's us applications to than we really and and first detail terms of that's one applications that market some about. for some We security be be for a interesting and continuing facilities responders. really very example, we're names applications smaller perimeters can't got us, for for of excited packages, more that of around it's any developing support the that. equipment the we're Hendi. security we've really big in in going to

in are and So all are of those developing. applications that production are

but vertical. big we than so three, smaller end out legacy It's the like grow be our to expect to And work program. this we going and of we it's significant, again there once the

Hendi Susanto

expansion like point you can expand like last it we capacity. planned? like being In of mentioned may you in million what a to XXX,XXX about your is require the Thailand? CapEx about feet inquire capacity earnings that well Don and information hear are Mike, at call, Can square more $XX more where we

Don Charron

Hendi. Absolutely, Sure.

today about, kicked you'd of approximately Yes, and officially of $X off take any it it'll CapEx, we've it's this about months heard for the us Mike to XX portion that of expanded gain and You occupancy questions talked ask like. plant. million

Hendi Susanto

in new months, eight - it's capacity like it's the just like Thailand? XXX% So expansion the for

Don Charron

and so take complete project plant months. million can XX that $X is Hendi, the time we occupancy CapEx about of to the is number, the the

Hendi Susanto

And the you to? be segments, can more share which geared capacity will expansion forward then

Don Charron

Thailand were medical. driven expand business new approving mix unit. today vertical. in drivers our the primarily of the expect Largely But to for that by the verticals that Thailand within business project has from we medical a expansion

Hendi Susanto

the to margin back And discussions. gross

the margin of gross like see So boosting in instead level say then therefore, in expect now, down? sustaining I gross margin of margin current should it factory way in running expectation utilization the we your realistic gross including further having is at terms think expansion, of on let's Romania. like that I terms your high that the And is your more

Don Charron

Hendi, goal benefited from right the But say tailwinds quarters the we're about know to X.X% I footprint those we've Yes. favorable margin. two about I I stated we two reiterating keep quarters, be realize we're we approach, that that's income last I the last about. would expansion talked And the you time than we've especially and would the reported. lower around long tailwind that that. the given operating earlier. asking talking spoke that about would just think

And our target and margin point wonder X.X% not we there do set continue a and look so commit time We're we and we efforts beyond expansion, long-term. in margin. we And can that operating at income a if our expect medium goal see do yet. around when we'll

have expectations the that's to future. more to own ourselves. of We there prove to management do target. We But as within in work that certainly get we can not-too-distant set kind would a that our

Hendi Susanto

great Thank it the to one as Kimball of by Electronics it. Roundtable then named And picks you, Don. see being Mike. way, you, stock Got Barron's is Thank in the XXXX.

Don Charron

Well, We that were thank as you. see glad Hendi. you, to well. Thank

of Hendi. a have You day, the rest good

Hendi Susanto

Thank the you. best. All

Operator

Sidoti. do We question [Operator line with have Soderstrom Instructions] a the Anja from of follow-up

Your open. ahead. line is Please go

Anja Soderstrom

$X follow-up on Thailand that? quick right? Just the facility, top just CapEx, other a You related to the on That's the of million. CapEx have

Mike Sergesketter

That's correct.

Don Charron

Yes. correct. Thailand. just would footage CapEx be to tied expansion in That's Yes. That's square the footprint expansion the or that

Anja Soderstrom

thank you. from Okay, was me. That all

Don Charron

Thank Anja. Okay, you.

Operator

remarks. further Thank you. for any further conference And turn at back the Don to like Charron would I'm time. showing And to questions no this I over

Don Charron

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

Operator

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

Kimball Electronics (KE) 6 Feb 212021 Q2 Earnings call transcript