Kimball Electronics — Q1 Fiscal 2027 Earnings Summary

Financial Performance:

• Net sales reached $390.8 million, representing a 7% year-over-year increase and a 5% sequential increase compared to Q1 fiscal 2026.
• Year-over-year organic sales growth was 3%.
• Operating income was $12.4 million (3.2% of net sales), down from $14.5 million (4.0% of net sales) in the prior year period.
• Adjusted operating income was $17.0 million, resulting in an adjusted operating income margin of 4.3% of net sales.
• Net income was $2.6 million, compared to $10.1 million in the prior year.
• Adjusted net income was $6.1 million.
• Diluted EPS was $0.11, compared to $0.40 in the prior year.
• Adjusted diluted EPS was $0.25.
• Cash Conversion Days (CCD) were 82, matching the multiyear low from the previous quarter.
• Total debt was $235.7 million, consisting of $39.7 million in current portion of long-term debt and $195.7 million in long-term debt.
• Cash and cash equivalents were $72.8 million, with a borrowing capacity of $198.0 million.
• Net cash flow used for operating activities was $19.3 million, compared to $8.1 million provided in the prior year.
• Net cash flow used for investing activities was $109.7 million.
• Net cash flow provided by financing activities was $114.0 million.
• Gross profit was $30.9 million (7.9% of net sales), consistent with the 7.9% margin in the prior year.
• Selling and administrative expenses were $18.1 million (4.6% of net sales), compared to $13.1 million (3.5% of net sales) in the prior year.
• Restructuring expense was $0.4 million, down from $1.4 million in the prior year.

Guidance and Future Outlook:

• The company reiterated guidance for fiscal 2027 with net sales expected at the high end of the range, between $1,535 million and $1,560 million.
• Adjusted operating income guidance for fiscal 2027 is 4.4% to 4.7% of net sales.
• Capital expenditures guidance for fiscal 2027 is $50 million to $60 million.
• Future growth is expected to be driven by continued strength in the Medical vertical.
• Management anticipates unlocking synergies across the global footprint and ramping operations in Indianapolis following the Helvoet acquisition.

Business Segments and Product Lines:

• Medical vertical sales increased 14% year-over-year to $115.7 million, with 9% organic growth.
• Industrial vertical sales increased 5% year-over-year to $104.6 million.
• Automotive vertical sales increased 4% year-over-year to $170.5 million.
• The Helvoet Polymer Technologies acquisition contributed to top-line growth; Helvoet generated $12.4 million in net sales during the quarter.
• Medical vertical includes sleep & oxygen therapy, defibrillation (AEDs), surgical systems, in vitro diagnostics, imaging systems, drug delivery/auto-injectors, patient monitoring, and microfluidics.
• Automotive vertical includes chassis control (steering and braking) and body controls.
• Industrial vertical includes climate controls, off-highway/commercial equipment, IoT & factory automation, energy, and public safety.

Market and Competitive Landscape:

• The company reported a high single-digit increase in Medical sales, aligning with its strategic focus to balance the portfolio across verticals.
• Open orders totaled $690 million at the end of the quarter, up from $643 million in the prior quarter and $593 million in the prior year period.
• The company operates in the United States, China, India, Mexico, The Netherlands, Poland, Romania, and Thailand.

Risks and Challenges:

• Forward-looking statements are subject to risks including global economic conditions, geopolitical environment, conflicts such as war, and global health emergencies.
• Risks include availability or cost of raw materials and components, tariffs, other trade barriers, and foreign exchange rate fluctuations.
• Uncertainty exists regarding the ability to convert new business opportunities into customers and revenue.

Management Commentary and Tone:

• CEO Richard D. Phillips expressed encouragement regarding the first-quarter results and the solid start to fiscal 2027.
• Management noted that sales increased both sequentially and year-over-year, margins were healthy, and cash conversion days were at a multiyear low.
• Phillips stated excitement for the fit and growth opportunities of Helvoet is "higher now than ever."
• The company is investing in medical growth by integrating Helvoet and leveraging its capabilities as a full-service provider.

Other Key Points:

• The company invested $3.1 million to repurchase 127,000 shares of common stock during the quarter.
• Goodwill increased from $6.2 million to $50.5 million, and Other Intangible Assets increased from $1.9 million to $25.5 million, reflecting the Helvoet acquisition.
• Inventories increased to $312.1 million from $271.9 million in the prior quarter.
• Contract assets increased to $83.0 million from $70.5 million in the prior quarter.
• The conference call and webcast were scheduled for November 5, 2026.