View all news

Kimball Electronics Reports Q3 Results With Record Sales and Strong Operating Margin; Company Expects a Strong Pace to Carry Through the Fourth Quarter

05/05/2022
  • Net sales in the third quarter of fiscal 2022 totaled $368.1 million, an all-time quarterly high and up 19% year-over-year.
  • Operating income of $20.3 million or 5.5% of net sales, an 80 basis point improvement compared to the third quarter of fiscal 2021.
  • Net income of $13.6 million, or $0.54 per diluted share, a 30% improvement compared to $10.5 million, or $0.41 per diluted share in Q3 last year.

Kimball Electronics, Inc. (Nasdaq: KE) today announced financial results for the third quarter ended March 31, 2022.

 

Three Months Ended

 

Nine Months Ended

 

March 31,

 

March 31,

(Amounts in Thousands, except EPS)

2022

 

2021

 

2022

 

2021

Net Sales

$

368,057

 

 

$

310,329

 

 

$

976,038

 

 

$

962,682

 

Operating Income

$

20,277

 

 

$

14,638

 

 

$

31,971

 

 

$

48,624

 

Adjusted Operating Income (non-GAAP) (1)

$

19,558

 

 

$

14,426

 

 

$

30,183

 

 

$

49,432

 

Operating Income %

 

5.5

%

 

 

4.7

%

 

 

3.3

%

 

 

5.1

%

Adjusted Operating Income (non-GAAP) %

 

5.3

%

 

 

4.6

%

 

 

3.1

%

 

 

5.1

%

Net Income

$

13,638

 

 

$

10,472

 

 

$

21,315

 

 

$

42,345

 

Adjusted Net Income (non-GAAP) (1)

$

13,638

 

 

$

9,933

 

 

$

20,265

 

 

$

41,680

 

Diluted EPS

$

0.54

 

 

$

0.41

 

 

$

0.84

 

 

$

1.67

 

Adjusted Diluted EPS (non-GAAP) (1)

$

0.54

 

 

$

0.39

 

 

$

0.80

 

 

$

1.65

 

(1) A reconciliation of GAAP and non-GAAP financial measures is included below.

Donald D. Charron, Chairman and Chief Executive Officer, stated, “I am very pleased with the results in Q3. Sales exceeded our all-time high in a quarter by 10%, operating margin was 5.5% of net sales, which is significantly better than the first half of the fiscal year and 80 basis points higher than a year ago, and diluted EPS increased by more than 30% year-over-year. With our backlog of open orders at record levels, and manufacturing facilities running at higher utilization and expanding capacity, we are ideally positioned to maintain strength and momentum in this bifurcated year, and we expect a strong pace to carry through the fourth quarter. I continue to be extremely impressed with our team, and how we’ve managed the global supply chain issues stemming from the pandemic and component parts shortages.”

Mr. Charron continued, “The challenges in Q3, however, were compounded by the devastation in Ukraine. We have Ukrainian associates in our U.S. and European operations, and facilities located in nearby Poland and Romania. Our number one priority has been the health and safety of our associates, and supporting their families directly affected by the conflict. We are also closely monitoring the impact of China’s zero tolerance policy related to COVID-19. Several cities experienced shutdowns recently due to a rise in COVID cases. If shutdowns continue to occur in major cities across China, there may be temporary disruptions in both the supply chain and demand as our customers balance manufacturing delays. We’ve updated our guidance for net sales to reflect the uncertainty from these developments; however, we are reiterating our guidance for operating income margin for fiscal year 2022.”

Third Quarter Fiscal 2022 Overview

  • Net sales increased 19% compared to the third quarter of fiscal year 2021. Foreign currency had a 2% unfavorable impact on net sales in the quarter compared to the same period a year ago.
  • Cash flow used for operating activities of $28.2 million during the third quarter of fiscal 2022, driven by an increase in accounts receivable as a result of the strong sales in the quarter.
  • Cash conversion days (“CCD”) for the quarter ended March 31, 2022 were 83 days, up from 66 days in the third quarter of fiscal year 2021, driven by an increase in inventory. CCD is calculated as the sum of days sales outstanding plus contract asset days plus production days supply on hand less accounts payable days.
  • Investments in capital expenditures were $22.3 million during the quarter.
  • Returned $4.9 million to Share Owners during the quarter in the form of common stock repurchases.
  • Cash and cash equivalents of $35.6 million and borrowings outstanding on credit facilities of $137.1 million at March 31, 2022, including $95.0 million classified as long term.

Net Sales by Vertical Market for Q3 Fiscal 2022:

 

Three Months Ended

 

 

 

March 31,

 

 

(Amounts in Millions)

2022

 

*

 

2021

 

*

 

Percent Change

Automotive

$

161.5

 

44

%

 

$

139.6

 

45

%

 

16

%

Medical

 

102.9

 

28

%

 

 

85.4

 

28

%

 

20

%

Industrial

 

84.4

 

23

%

 

 

69.2

 

22

%

 

22

%

Public Safety

 

13.8

 

4

%

 

 

13.5

 

4

%

 

2

%

Other

 

5.5

 

1

%

 

 

2.6

 

1

%

 

115

%

Total Net Sales

$

368.1

 

 

 

$

310.3

 

 

 

19

%

 

* As a percent of Total Net Sales

 

Automotive includes electronic power steering, body controls, automated driver assist systems, and electronic braking systems

Medical includes sleep therapy and respiratory care, image guided therapy, in vitro diagnostics, drug delivery, AED, and patient monitoring

Industrial includes climate controls, automation controls, optical inspection, and smart metering

Public Safety includes thermal imaging, first responder electronics, and security

Fiscal Year 2022 Guidance

The company is updating its guidance for fiscal year 2022 with net sales estimated to be in the range of $1.345 - $1.365 billion, a 4% - 6% increase year-over-year. The company’s previous guidance for net sales was approximately $1.4 billion. The company is reiterating its guidance for operating income margin, which is expected to be in the range of 3.75% - 4.25%, and capital expenditures, which are expected to be in the range of $70 - $80 million.

Mr. Charron continued, “We are very pleased with how the company is positioned. Q3 results were excellent. While supply chain disruptions from the pandemic continue to normalize and improve, the recent wave of lockdowns in China add a level of unpredictability that did not exist a few months ago. We expect the fourth quarter to be robust with net sales in the range of $370 to $390 million, and operating margin once again above 5%. Our record level of open orders, and recent facility expansions, support our growth objectives as we look toward the $2 billion annual revenue milestone. Finally, our hearts and thoughts are with all people both inside and outside the Kimball Electronics family impacted by the tragic turn of events in Ukraine.”

Forward-Looking Statements

Certain statements contained within this release are considered forward-looking, including our fiscal year 2022 guidance, under the Private Securities Litigation Reform Act of 1995. The statements may be identified by the use of words such as “expect,” “should,” “goal,” “predict,” “will,” “future,” “optimistic,” “confident,” and “believe.” Undue reliance should not be placed on these forward-looking statements. These statements are based on current expectations of future events and thus are inherently subject to uncertainty. If underlying assumptions prove inaccurate or known or unknown risks or uncertainties materialize, actual results could vary materially from our expectations and projections. These forward-looking statements are subject to risks and uncertainties including, without limitation, global economic conditions, geopolitical environment and conflicts such as the war in Ukraine, global health emergencies including the COVID-19 pandemic, availability or cost of raw materials and components, foreign exchange rate fluctuations, and our ability to convert new business opportunities into customers and revenue. Additional cautionary statements regarding other risk factors that could have an effect on the future performance of the company are contained in its Annual Report on Form 10-K for the year ended June 30, 2021.

Non-GAAP Financial Measures

This press release contains non-GAAP financial measures. The non-GAAP financial measures contained herein include adjusted operating income, adjusted net income, adjusted diluted EPS, and ROIC. Reconciliations of the reported GAAP numbers to these non-GAAP financial measures are included in the Reconciliation of Non-GAAP Financial Measures section below. Management believes these measures are useful and allow investors to meaningfully trend, analyze, and benchmark the performance of the company’s core operations. The company’s non-GAAP financial measures are not necessarily comparable to non-GAAP information used by other companies.

About Kimball Electronics, Inc.

Kimball Electronics is a multifaceted manufacturing solutions provider of electronics and diversified contract manufacturing services to customers around the world. From our operations in the United States, China, India, Japan, Mexico, Poland, Romania, Thailand, and Vietnam, our teams are proud to provide manufacturing services for a variety of industries. Recognized for a reputation of excellence, we are committed to a high-performance culture that values personal and organizational commitment to quality, reliability, value, speed, and ethical behavior. Kimball Electronics, Inc. (Nasdaq: KE) is headquartered in Jasper, Indiana.

To learn more about Kimball Electronics, visit: www.kimballelectronics.com.

Conference Call / Webcast

 

 

 

Date:

 

May 6, 2022

Time:

 

10:00 AM Eastern Time

Live Webcast:

 

investors.kimballelectronics.com/events-and-presentations/events

Dial-In #:

 

844-200-6205 (other locations - 929-526-1599)

Conference ID:

 

250193

For those unable to participate in the live webcast, the call will be archived at investors.kimballelectronics.com.

Lasting relationships. Global success.

Financial highlights for the third quarter and year-to-date period ended March 31, 2022 are as follows:

Condensed Consolidated Statements of Income

 

(Unaudited)

Three Months Ended

(Amounts in Thousands, except Per Share Data)

March 31, 2022

 

March 31, 2021

Net Sales

$

368,057

 

 

100.0

%

 

$

310,329

 

 

100.0

%

Cost of Sales

 

334,113

 

 

90.8

%

 

 

284,323

 

 

91.6

%

Gross Profit

 

33,944

 

 

9.2

%

 

 

26,006

 

 

8.4

%

Selling and Administrative Expenses

 

13,667

 

 

3.7

%

 

 

11,744

 

 

3.8

%

Other General Expense (Income)

 

 

 

%

 

 

(376

)

 

(0.1

) %

Operating Income

 

20,277

 

 

5.5

%

 

 

14,638

 

 

4.7

%

Other Income (Expense), net

 

(2,103

)

 

(0.6

) %

 

 

(641

)

 

(0.2

) %

Income Before Taxes on Income

 

18,174

 

 

4.9

%

 

 

13,997

 

 

4.5

%

Provision for Income Taxes

 

4,536

 

 

1.2

%

 

 

3,525

 

 

1.1

%

Net Income

$

13,638

 

 

3.7

%

 

$

10,472

 

 

3.4

%

 

 

 

 

 

 

 

 

Earnings Per Share of Common Stock:

 

 

 

 

 

 

 

Basic

$

0.54

 

 

 

 

$

0.42

 

 

 

Diluted

$

0.54

 

 

 

 

$

0.41

 

 

 

 

 

 

 

 

 

 

 

Average Number of Shares Outstanding:

 

 

 

 

 

 

 

Basic

 

25,175

 

 

 

 

 

25,049

 

 

 

Diluted

 

25,272

 

 

 

 

 

25,217

 

 

 

 

(Unaudited)

Nine Months Ended

(Amounts in Thousands, except Per Share Data)

March 31, 2022

 

March 31, 2021

Net Sales

$

976,038

 

 

100.0

%

 

$

962,682

 

 

100.0

%

Cost of Sales

 

905,657

 

 

92.8

%

 

 

876,428

 

 

91.0

%

Gross Profit

 

70,381

 

 

7.2

%

 

 

86,254

 

 

9.0

%

Selling and Administrative Expenses

 

39,794

 

 

4.0

%

 

 

38,347

 

 

4.0

%

Other General Expense (Income)

 

(1,384

)

 

(0.1

) %

 

 

(717

)

 

(0.1

) %

Operating Income

 

31,971

 

 

3.3

%

 

 

48,624

 

 

5.1

%

Other Income (Expense), net

 

(3,561

)

 

(0.4

) %

 

 

3,905

 

 

0.4

%

Income Before Taxes on Income

 

28,410

 

 

2.9

%

 

 

52,529

 

 

5.5

%

Provision for Income Taxes

 

7,095

 

 

0.7

%

 

 

10,184

 

 

1.1

%

Net Income

$

21,315

 

 

2.2

%

 

$

42,345

 

 

4.4

%

 

 

 

 

 

 

 

 

Earnings Per Share of Common Stock:

 

 

 

 

 

 

 

Basic

$

0.84

 

 

 

 

$

1.68

 

 

 

Diluted

$

0.84

 

 

 

 

$

1.67

 

 

 

 

 

 

 

 

 

 

 

Average Number of Shares Outstanding:

 

 

 

 

 

 

 

Basic

 

25,192

 

 

 

 

 

25,101

 

 

 

Diluted

 

25,291

 

 

 

 

 

25,288

 

 

 

Condensed Consolidated Statements of Cash Flows

Nine Months Ended

(Unaudited)

March 31,

(Amounts in Thousands)

2022

 

2021

Net Cash Flow (used for) provided by Operating Activities

$

(84,665

)

 

$

103,755

 

Net Cash Flow used for Investing Activities

 

(50,023

)

 

 

(22,972

)

Net Cash Flow provided by (used for) Financing Activities

 

64,856

 

 

 

(58,729

)

Effect of Exchange Rate Change on Cash and Cash Equivalents

 

(1,007

)

 

 

2,607

 

Net (Decrease) Increase in Cash and Cash Equivalents

 

(70,839

)

 

 

24,661

 

Cash and Cash Equivalents at Beginning of Period

 

106,442

 

 

 

64,990

 

Cash and Cash Equivalents at End of Period

$

35,603

 

 

$

89,651

 

 

(Unaudited)

 

 

Condensed Consolidated Balance Sheets

March 31,
2022

 

June 30,
2021

(Amounts in Thousands)

ASSETS

 

 

 

Cash and cash equivalents

$

35,603

 

$

106,442

Receivables, net

 

224,216

 

 

203,382

Contract assets

 

63,761

 

 

45,863

Inventories

 

338,375

 

 

200,386

Prepaid expenses and other current assets

 

31,302

 

 

27,320

Property and Equipment, net

 

191,370

 

 

163,251

Goodwill

 

12,011

 

 

12,011

Other Intangible Assets, net

 

15,117

 

 

17,008

Other Assets

 

41,665

 

 

38,398

Total Assets

$

953,420

 

$

814,061

 

 

 

 

LIABILITIES AND SHARE OWNERS EQUITY

 

 

 

Current portion of borrowings under credit facilities

$

42,096

 

$

26,214

Accounts payable

 

275,799

 

 

216,544

Accrued expenses

 

58,733

 

 

58,016

Long-term debt under credit facilities, less current portion

 

95,000

 

 

40,000

Long-term income taxes payable

 

7,812

 

 

8,854

Other

 

20,246

 

 

22,461

Share Owners’ Equity

 

453,734

 

 

441,972

Total Liabilities and Share Owners’ Equity

$

953,420

 

$

814,061

Reconciliation of Non-GAAP Financial Measures

(Unaudited)

(Amounts in Thousands, except Per Share Data)

 

 

 

 

 

 

 

 

 

Three Months Ended

 

Nine Months Ended

 

March 31,

 

March 31,

 

2022

 

2021

 

2022

 

2021

Operating Income, as reported

$

20,277

 

 

$

14,638

 

 

$

31,971

 

 

$

48,624

 

SERP

 

(719

)

 

 

164

 

 

 

(404

)

 

 

1,525

 

Legal Recovery

 

 

 

 

(376

)

 

 

(1,384

)

 

 

(717

)

Adjusted Operating Income

$

19,558

 

 

$

14,426

 

 

$

30,183

 

 

$

49,432

 

 

 

 

 

 

 

 

 

Net Income, as reported

$

13,638

 

 

$

10,472

 

 

$

21,315

 

 

$

42,345

 

Adjustments After Measurement Period on GES Acquisition

 

 

 

 

(254

)

 

 

 

 

 

(121

)

Legal Recovery, After-Tax

 

 

 

 

(285

)

 

 

(1,050

)

 

 

(544

)

Adjusted Net Income

$

13,638

 

 

$

9,933

 

 

$

20,265

 

 

$

41,680

 

 

 

 

 

 

 

 

 

Diluted Earnings per Share, as reported

$

0.54

 

 

$

0.41

 

 

$

0.84

 

 

$

1.67

 

Adjustments After Measurement Period on GES Acquisition

 

 

 

 

(0.01

)

 

 

 

 

 

 

Legal Recovery

 

 

 

 

(0.01

)

 

 

(0.04

)

 

 

(0.02

)

Adjusted Diluted Earnings per Share

$

0.54

 

 

$

0.39

 

 

$

0.80

 

 

$

1.65

 

 

 

 

 

 

 

 

 

 

 

 

Twelve Months Ended

 

 

 

March 31,

 

 

 

 

 

2022

 

2021

Operating Income

 

 

 

 

$

49,050

 

 

$

50,233

 

Goodwill Impairment

 

 

 

 

 

 

 

 

7,925

 

SERP

 

 

 

 

 

144

 

 

 

2,807

 

Legal Recovery

 

 

 

 

 

(1,039

)

 

 

(717

)

Adjusted Operating Income (non-GAAP)

 

 

 

 

$

48,155

 

 

$

60,248

 

Tax Effect

 

 

 

 

 

10,774

 

 

 

11,786

 

After-tax Adjusted Operating Income

 

 

 

 

$

37,381

 

 

$

48,462

 

Average Invested Capital (1)

 

 

 

 

$

453,479

 

 

$

423,545

 

ROIC

 

 

 

 

 

8.2

%

 

 

11.4

%

 

(1) Average invested capital is computed using Share Owners’ equity plus current and non-current debt less cash and cash equivalents averaged for the last five quarters.

 

Andrew D. Regrut
Vice President, Investor Relations
812.827.4151
Investor.Relations@kimballelectronics.com

Source: Kimball Electronics, Inc.

Multimedia Files:

Categories: Press Releases
View all news