KE - Earnings call 3 2023 | Kimball Electronics, Inc.

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Operator

Good morning, ladies and gentlemen, and welcome to the Kimball Electronics Third Quarter Fiscal 2023 Earnings Conference Call. My name is Dacey, and I'll be facilitating your call today. [Operator Instructions] At this time, I would like to turn the call over to your host, Andy Regrut, Vice President of Investor Relations, to begin.

So Mr. Regrut, Please go ahead.

Andrew Regrut

morning, good and you, everyone. Thank third Welcome call. conference to our quarter yesterday our is Officer; Officer. We With results release fiscal today quarter Phillips, the issued with Chief third for press Financial me here XXXX. Chief Ric Executive of our Croom, and a afternoon Jana page today's Relations a the call, website. company accompany has been our To to posted presentation Investor on

press subject a harbor will involve the over Before XXXX, All on adjusted complete results for results. be focused making will as remarks non-GAAP we that GAAP non-GAAP risk and opening uncertainty our Reconciliations and you few for call and we of press get Safe guidance will forward-looking Ric. can is started, to that now turn review morning SEC our the remind call I'd start release. This materially to the with amounts and fiscal in the stated filings, Ric to Jana in statements. before questions. I'll are comments, will available statements from today the and provisions actual like financial that taking our differ your prepared to release quarter commentary Ric forward-looking our results are and

Richard Phillips

all-time high. new facility we improved for expansions our revenue path margin Mexico. operating future on the XX fast-paced visits my Throughout and introductions, morning, you onboarding have of and Thailand am customer leverage everyone. programs assure last Andy, activities. Electronics Thanks, this for good been a and growth as and meetings, as very I'm first pleased our filled record investor team facility even CEO with opportunity journey, an and company. a the days quarter, that I up for more fifth reached I in to The results after QX. consecutive ramp with the quarter with and existing Kimball been excited of and can unprecedented about has share strong We've

finish the in year, and mid end are solid XX% at quarter, $XXX our the operating a forecasting million, low outlook end and to our to the margin the QX quarter our high adjusted updating are We expected a previous fiscal for and better year the sales fourth with in XX% was compared period than sales same in last QX. best range. Net of increase which were guidance in

business, estimate the all them was of While the increases, of markets XX% XX% gradual products with $XXX largest improve, and conditions the represents by X the QX. sequential the set constrained sales. and a reported chain X modest from automotive growth are the of were in vertical, vertical supply We Similar this for fiscal of short our to record QX only X% that increases This total robust the million. also X% year, an compared step-up increase quarter, and to sales year It recovery highs. Net line is double-digit in continue in shortages. all last approximately company component quarters the needed supply top global availability parts QX first in in produce. we remains to part

for steering, our to over and the the Approximately During markets balance an vertical fixed, combustion the increasing power the slowdown. Electronic for and and internal of the we rate the to of the of electronic includes support. in strategic updating also if demand agnostic trucks other Mexico, positioning produced. technology such and planning adding continue industry them as XX% same, roughly of quarter, the increases physical economic global innovative the resides content is complexity it in in production hybrid could The ECU to or ECU the the operating to the technologies is features of for during expanded steering support our we advanced engines review, which a OEM's size system lane our to to self-parking unit even added and applications vehicles electric a period. our manufacturing is the company process our consumer customers. a the in an The the braking of vehicle steering applications present each growth of Reynosa, next-generation value Xx motors, the meaningful it Because as opportunities meaning to business is have at autonomous generate control during in are such the company, or type electronic been increasing popularity, megatrends the that plan, X turn support at we softens is within and vertical being and growth increases systems the driving, a wheels are for and architecture the functionality example. Within cars in automotive in identified this leverages rate review departure automotive tailwind column.

highly and industry validation the management In is change with automotive regulated systems. certifications, addition, protocols stringent

the XX X So results continue insights can is length generate these us that confidence automotive give often and source business positioning span that this combination in to with program within to of our years cycles growth life single company. will sticky meaningful in awards. for The

for added meaningful an our an access and mega population, trends, increasing systems higher sales. assemblies. same year the also quarter electronic XX% compared total prior now and the more sales third medical increase with last $XXX XX% device Turning the growth the was strategic including sizes X% identified and growth was of Similar record care, compared affordability OEMs in industry overall decreasing to level to in a to to health QX were fourth to a with drug by the aging Net connected step-up versus to company by It result delivery This quarter XX% automotive, of consecutive opportunities trend outsource medical, year. period a or fueled content, market. million, QX. medical and vertical plan

third and systems, in vertical vitro XX% and clean" last in million, equipment, high our We assembly as previous care, III XX% sales. of to XX%. natural diagnostics, are strategically and this surgical and production. Net which delivery gas a products year, $XXX monitoring increase a sales that focus electricity. was higher-level topping of drug energy, supports with as including the II safety, record, quarterly better company and we support systems, total the all market by in industrial quarter resources, & the devices growth Industrial, positioned water, This respiratory totaled imaging a efficiency, and patient over Class to "green Class areas on consumption promote such carbon neutrality refer

ones value brands dramatically commercial heating the Europe, EV new systems, and we the major meaningful supporting and residential support particularly of electric and and reduce We that length a growth through are emerging drivers, smart well to impacts. decarbonization process. most supercharging for products positioned strategically reduce and a charging mega cooling within recharge metering, in positioned time for required automation incentives chain market vehicles We stations, to as see that of in legislation trend are the environmental factory

outlook financials turn markets summary, fiscal in we in year. in the close good to sales Jana the to Jana? the and So QX good XXXX. I'll vertical very review fiscal to a out look quarter call for more detail and over outline the now record-setting all as momentum with X

Jana Croom

Ric, Thanks, everyone. good and morning,

highlighted, a million, last QX quarter XX% year. increase Ric over As sales net $XXX.X in the were third

by impacted sales negatively Foreign in X% the quarter. exchange

been $X.X XX% or X.X% was were basis compared in net last year-over-year. income OI interest would percentage at with been have QX our a this versus that newly rate selling by which gross third X.X% fiscal underabsorption million year, versus point was compared support to the of basis we debt $XX.X The XXX interest levels $XX.X record quarter XX expense year-over-year. to which from elevated expanded On sales, of expense QX facilities. Other a point QX decline fiscal decrease year administrative expenses quarter $XX.X of QX expenses million environment. net change represents compared tax to and basis $X.X administrative historical efficiencies the quarter, quarter of was income and of our recently and results in last was year's QX last million outcome in space. Adjusted flat continue at per operational margin rate When the result X.X%, growth, sales, the XX%-plus resulting third The $XX.X X.X%, net resources to at $XX.X rate driven representing million to in measured XXXX, So year. Adjusted stronger. year's receivable current rate a step-up income million third expanded handset fees. compares a were increase year facilities of or strides line as with as effective of resulting however, increase the the last income primarily share, the last semi-cap XXXX for sales, $X.XX expense third million in accounts equaled million in adjusted in was rates, XXXX, third share a XX the so however, the quarter $XX.X million operating the adjusted top of make with sequential and factoring our have $X.XX improvement and third and diluted or rate. Net second expense wage added in selling higher inflation or from the and basis, compared softness quarter even in a per diluted margin of from point to this to and in quarter fiscal of a QX

were last Please with calculation. peers consistent shortages. have XX starting the was Now first the in time. $XX parts turning sheet. to positive cash to operating and relief in note periods the equivalents by of were is we've days been cash working days Cash days million, see customer norms. March QX. recast in to include million. conversion and XX started This compared Cash some to to change. We're that in flow our generated advances XX, flow year in XXXX, quarter our Prior for compensate third capital days XX Cash for needed activities our modification at industry of quarter balance $XX.X and CCD

quarter. the roughly Our last continue a up Inventory impacted, adversely cash to results $XXX.X was last and million million, but quarter. CCD $XXX.X increases from ended although sequential compared been be there days at quarter to ago, in versus flow significant flat year a improvement driver have and

dollars adding new March of XXXX, XX, across needed and million product our credit Mexico footprint. Borrowings compared end the were capital facility million in anticipated, million XX on $XXX terms at for absolute the introductions chain at leveling completing easing. Capital million, the inventory largely of in challenges in that Poland, indication is is off CCD expansion $XX.X quarter the improvement in third of an were expenditures As support our supply are $XXX.X equipment March and $XXX.X and in in entire facility to QX. at

liquidity Our shares the plus and credit third of short-term equivalents available were in unused million totaled as amount March XX, the our XXXX. at of facility cash no represented cash $XXX.X There repurchased common our stock. fiscal by a $XX.X been XXXX. XXXX, million share under of purchasing Board-authorized shares X.X our repurchase Since total returned million quarter of October to shareowners our has program,

have $XX.X We repurchase program. the on remaining million

would noted, facilities net million XX% in be expected we The of at outlook at a driven Ric at expenditures in X.X% the range margin slowdown XX semi-cap other due operating be billion low range from XXX driven that XXXX, to underabsorption by in temporary year-over-year. Adjusted Similar to to end is capital to the high space. we the have mid the of expected expected and X.X our decrease for to guidance X.X% of range space USD sales and softness our income by updating been net impact income to are which recently As to our to guidance represent companies, USD of is to expanded with are a increase the environment. and sales point fiscal USD macroeconomic USD operating primarily are our billion, seeing X.X that a million. handset of

reduce our as look a XX-K, than QX weeks earnings the line keeping practice. filing earnings will gap couple release, the the This consistent normal and is in later the Finally, we forward time of results of mid-August, report between which next our to overall we with industry reporting will while our release change averages.

a press details issue normal, weeks X per advance will we of the the approximately in with exit. release As

back Ric. turn So I'll the now to call over that, with

Richard Phillips

the Thanks, fiscal with you that for and are can outlook results financial Jana. for QX hope the pleased I sense the very we year.

the learnings by sights. growth the is a are also with encouraged focus billion We in plan to the on road EMS, strategic within annual from $X within heavy revenue our

resulting from with milestone are wins reach increased and that Our facility recent work validated the we positioned that new to strategically capacity program expansions.

this the with will We over celebrate fiscal summer ribbon to production the in the in ceremony up in Poland cutting to expansion additional completion ramp begin and expect of Poznan, a XXXX. space

the to report our forward our people team working support excellent We of including the our ESG Kimball have Poised #X disclosure overall Electronics report for ESG for the provide report customers, at my communities from role. I company to are that This into achievements look Morningstar the also for to this committed research how of excellent rated -- work ratings with firm, would transitioning and together employees, the quarter, among and titled on while our electronics risk. service other remains I I great quality and for received like our and Impact year data a new proud long-term leading manufacturers an communities Sustainalytics, we calendar our life in our Make publishing to create serve the questions. many to to XXXX. would company and thank our for of and customers outstanding enhance us the operate growth our ESG lines the the to value shareholders. Dacey, creating for now where our shareowners. culture, to like to short- highlights open team for and and I company our

Operator

[Operator Street Lake is first question Capital. from Jaeson from Instructions] Our Schmidt today

Jaeson Schmidt

Congrats really results. on solid some

that of start you decommits to year cancellations robust with your with any sort I seeing issues here. remained But want know that's or over Just past the backlog. pretty are number? within

Jana Croom

Jana. Jaeson, it's

cancellations. or when supply remember, the And not remains state good. and were that forward, we so so backlog far, And to started, parts our seeing for seen forecast, right, decommits decommitts. unlikely and NPIs our non-cancelable times robust, the future non-returnable, of we it's material and lead the you chain XX-week shortage coming that continue that going And So NCNR, we though through. material have and monitor fairly see so was for

Jaeson Schmidt

the Okay. of revenue mix with current pretty sticking kind No, to is backlog, that's backlog And just the great to similar hear. within mix?

Jana Croom

In terms automotive, verticals, medical, industrial? of the

Jaeson Schmidt

Yes.

Jana Croom

consistent. fairly it's Yes,

Jaeson Schmidt

that by back Okay. And shortages, more within space was obviously, normalized [indiscernible] then But looking at you think that space, cetera. do et you're labor to business? environment the medical elective a surgery, impacted

Jana Croom

there's But while. a I demand consistent think surgical opportunity I still The more point X has medical. yet were been a pent-up still from there in million the perform data saw that procedures had like pandemic. that been last for to

replacements, back And so we keep knee these cetera, to thinking when are et have are done. all people hip replacements, going

I'm that through, so to when that's not And is sure going ultimately there. demand the push but the demonstrates certainly data

Jaeson Schmidt

last in one And me, and the jump then I'll just queue. for the back

that EV You be near the an big guess, how highlighted you you just charging think longer as that mean, term segment. industrial curious -- of and think stations how can in term opportunity I well? I here within

Richard Phillips

positioned some of We're on Ric. Jaeson, early pretty about customers. this good stations. But is for the in discussions to relates it a that. driver large We've anticipate we a stage we as opportunities. bullish for some talking fairly in will We're supercharging that, think and It's industrial. quite on number that been conversations potential be with those those, of us we're well

Jana Croom

in [ Jaeson, And ] it's in to important it's industrial, know automotive. not it's

Operator

comes Our Anja Sidoti. next question Soderstrom today from from

Unknown Analyst

you how when see is Stephan participate is and of Soderstrom. on ] [ you semi-cap and a in part to for do This what contributes Guillaume revenue question it My Anja much comeback? first on do

Jana Croom

What we of it's seeing the of in handset I And other our vertical. and softness what softness wrapped how many can contributes -- consumer test measurement terms with vertical. keeping tell It commercial is the is in don't space. disclose have companies we're automated much our is industrial and said the industrial to so that in is So it within medical. you portion

the back expect We But in period of just to of the a global soft to think it time. recession. related reasonable softness is come I the landing

And monitor so carefully companies. to continuing it to other we're similar very

Unknown Analyst

how business And GES is the doing?

Jana Croom

specifics. business. don't We So to softening. talk we of seeing But our not is we are business about certain doing the well, give pieces tend but specifically

Unknown Analyst

demand demand think? the for much you how up is inventory of guess last one versus the ] is real I [ me catching auto

Jana Croom

online technology. fairly significant a steering had had large program in next-generation related business to fairly also we Reynosa relative some next-generation braking. We've to Well, come in that

asking -- to the of automotive is backlog? going if the if in push-through still is demand expect a that. is automotive over roll you're that related I what we see So as anticipate the I strong. don't to demand The we very

Richard Phillips

agree Stephan of [ with And Jana's element that, the ], I completely other comments.

electronic that into seeing element are the cars. content we increased going is other The

side driven our a that's tailwind content units. each increases directly there's of So We're the unit. more completely nice number because not on going because us for into it's and seeing by

Jana Croom

trying correlation to terms and us hard the it's one. volume, between a a if one not because So do to it OEMs be to absolutely of to you're is get in going

Operator

next Our from Gabelli is today Susanto from question Hendi Funds.

Hendi Susanto

is first about question My the expansion. facility

Electronics Poland. is and Thailand expanding So Kimball facilities in Mexico,

it how first completion, long is my my will follow-up for is the facilities, they segments utilization Following that of question. how then long us take remind can -- And ramping high what That's up rates? address? those towards before may you each

Jana Croom

a great question. that's Yes,

I'll -- color. January So XXXX. give and in some of came you additional online Thailand

the up almost been it's of came XXXX. months. Mexico online in for So XX summer

year. a anniversaried on yet summer. And not ribbon this it's cut we the Poland, will So

all of All verticals. produce our of facilities X our

terms we don't a that And facility have in so of is single unique a composition. vertical

Is portfolio. a a XX product to expect a expect be OI at to X We on rest terms that and with But margin absorption would of in, variety to depending to generally to it related keeping in XX of the and ramp-up new helpful? take of quarters for rate aspects X months facility roughly timing the introductions. we the

Hendi Susanto

there the that let's gross margin high pressure -- more and no is see implies will margin that, you margin from think while be Yes, you then utilization have are so is fair? that ramp-up, say, pressure like rate once reached, ramping, okay, some I we'll the also

Jana Croom

Correct.

of the of footprint so that information in total terms Kimball And Mexico significant capacity most flagship in being now the we the K. provide with and

And terms again, we're not so that efficiency of to it's even quarters But needs in it where in just operational be and utilization. facility Mexico. X getting to

are some we the it the anticipated but and be time, going to us anniversaried that some History we is it that would year. so with take we progress facility where tells know And that would take time. it once pleased

Hendi Susanto

to the ask I and environment in What Yes. negotiation? want pricing the snapshot of latest Okay. And is the negotiation and pricing Jana, then, about pricing light inflation. current also of

Jana Croom

Yes.

And that is information so at one providing non-manufactured of the looking to things everyone revenue. we're on

our can you margin is know customers that our keep chain of So and Relative that specifically material we is customers cetera, find inflation, expectation the in that. on, that with orders, and what efficiencies, I terms pricing, know making is tell you related there non-standard those to supply like I in terms in strides great no passing efficient we et cost of to more be from freight ways things although costs, associated there wage are operational with always line. to costs things

partnership really And us a savings. drive the customer to between so and becomes that

Hendi Susanto

like what what to see. electronic as I wheels, colors in I your Xx forgot as essentially unit like more like growth, whether don't like Xx And provide growth? like the then electronic main then opportunity know, Ric And you in trucks else I mentioned Can that of let's that much can Ric and terms is that else -- capture that I steering unit referring to, products provide what exactly. say, cars refers contents believe Xx, brakes. can like

Richard Phillips

Sure.

possible electronics that the being to So limited seeing, more what for the that's electronic added size units are control that. given we're

like lane include So departure, things capability. this self-parking would

additional build electronic We content. ECU to have into that

sophisticated, more so those value. add and more costly more items And become

have included so those that some adding not within in allows And in that been we're -- creating increase our to past, same the technologies of the ECU the to ECU. value giving customers them and in we're would us

Hendi Susanto

Okay.

adjacencies? will units, may growth, not will say, wondering in content e-brake of at does ASP it So ASP in for -- whether let's like And increase steering say, wheels the see Xx it say, control that okay, the content time, like like the Ric, let's let's I'm then same say, product higher think expansion include, I electronic estimate? part is Xx into the let's like you

Richard Phillips

way. we're that more Yes, particularly the a seeing included. we're would would seeing, be absolutely braking EV, I say, in sophisticated also become systems Again, in similar

Hendi Susanto

potential… then And Okay. any

Jana Croom

of So for to things of all braking the storage, and back and the that you life to how battery do of one number between you're send charging. is inertia take battery go the the to of able from that battery miles the power prolong the

And neat we're the limited evolve. a again, space really really, seeing that But it's the technology you car. have so on

do you increase quality. this so in we limited space, figure And and the capability and how provide so increase out higher have engineering to technology,

Hendi Susanto

timeline it or Yes. either And insight will or the then XXXX XXXX, appreciated? any be may late time insight into like into like the be any early line

Jana Croom

technology we expect So we are sure. coming and experiencing it of the that the automotive years, now for onset in through over vertical to come

Operator

question next Singular Furst Our from Instructions] Research. [Operator is Mac from

Mac Furst

And is thank on the appreciated. quarter. Research. Mac Congratulations hard work, your very much This for Singular you Furst,

Jana Croom

Our operations team amazing an job. does

Mac Furst

X So I questions. have

me one. Let with question start number

ECB fail, think Federal with well, Kimball is Specifically, States, a of a I continue opinion, indicator. in is indicator. So the Reserve recession? in And in you changes institute which leading to possible banks, think leading which How what increase also is case would positioned I and continuing regional at interest rates, least a to the the for recession? United your a

Jana Croom

really good for management I never but of is, as we our strategic great be that prepared part we to expect, process planning about We forecast. strategic year and actually part every tell includes our you hygiene. risk analyses a the financial outcomes that's have that process just Mac, over good do planning you can just and completed feel scenario question. What of you

I that came the number just weather in that balance we got of have numbers whatever in strong. that jobs protections terms today, have. Having to room on storm said actually ample having out and may However, our sure still make said liquidity solid that, think is place customers can our and very that, sheet we we service

some high, positive so great out going anticipating really And aren't debt doom economic our CCD, which an coming And so and is flow was improve to downturn, gloom indication we our rates improvement of but continue monitor feel profile. and to may certainly, whatever have just get we be facility We confident able it. we place, would short-lived happen we in with that it And cash can Kimball, right? we would it free horrific plans our have are that fine of through place. to in in see be and to credit

Mac Furst

Question number X.

past, supply quarters about you in So spoke global chain disruptions.

spoke any? shortages. bit kind are of very today, little said you You Can easing. on you supply, that a what that, is still color the short parts And about if provide situation in specifically more parts

Jana Croom

So specific roughly that sales we parts produce because what we can said we is the But XX% don't last able weren't were I of quarter, talk working through tell you parts. we to shortage.

increase. This roughly only improvement not It quarter-over-quarter. inventory CCD flat was levels our had and quarter, did it X% in was an and we

a really meaningful days, shortage conversion our behind parts working see would the and XXXX, way. cash in out we in you that what through And we you'll indicated by that quarters. as this message transcript, so take and bore was for if go that QX. fiscal to me, inventory back the And and us, you is as in And which And backlog. supply people the we expected hear be of were should we indication the the strong challenges chain end a would that over consistent largely a asked as have quarter improvement

Richard Phillips

And it over -- months, that's important Jana to a a the internally we've what out. normal or on improve. And that things few a and next steadily -- as months. over does what's ship back Mac, your to maybe the very that's seen one to a between just from we're it question trajectory would to monthly closely the that we the for directly related add And is levels very to we And us. track difference standpoint get last how basis, orders said, we X that, of metric receive the X demand on

parts chain is battle easing. really we're that, it it's So sure it's have our day but certainly a by still folks an every the encouraged albeit supply make we issue, we need, to fight that still that

Operator

[Operator any questions, hand Instructions] We like so have closing the to remarks. no to team for management I'd back further

Andrew Regrut

That concludes please today. our instructions. Thanks mind, very with much. call the close if don't Dacey, call replay you

Operator

course. Thank everyone, for today's joining you. Of Thanks, call.

of call, again, the made or available to any the missed of website. you the to call would listen telephone shortly like page has a the will it replay portion company's on If be after IR concluded

You day. have may now disconnect your a lines, lovely and

Jana Croom

Thank you.

Richard Phillips

Thank you.

Kimball Electronics (KE) 5 May 232023 Q3 Earnings call transcript