Kimball Electronics(KE) - 2024 Q4 - Annual Results

Financial Performance Summary A comprehensive overview of Kimball Electronics' financial performance for the fourth quarter and full fiscal year 2024, including key revenue, profitability, and cash flow metrics Fourth Quarter Fiscal 2024 Performance In the fourth quarter of fiscal 2024, Kimball Electronics reported net sales of $430.2 million, a 13% decrease year-over-year. GAAP operating income was $19.6 million, with an adjusted operating income of $20.9 million. The company generated strong cash flow from operations totaling $48.5 million, driven by significant inventory reductions, and repurchased $3 million worth of common stock Q4 Fiscal 2024 Key Financial Metrics (GAAP vs. Non-GAAP) | Metric | Q4 2024 | Q4 2023 | Change | | :--- | :--- | :--- | :--- | | Net Sales | $430.2M | $496.1M | -13.3% | | Operating Income (GAAP) | $19.6M | $31.4M | -37.7% | | Adjusted Operating Income (Non-GAAP) | $20.9M | $31.5M | -33.5% | | Net Income (GAAP) | $7.5M | $19.2M | -60.7% | | Adjusted Net Income (Non-GAAP) | $8.4M | $19.0M | -55.8% | | Diluted EPS (GAAP) | $0.30 | $0.76 | -60.5% | | Adjusted Diluted EPS (Non-GAAP) | $0.33 | $0.76 | -56.6% | - Generated $48.5 million in cash flow from operating activities, primarily driven by reductions in inventory[1] - The company invested $3 million to repurchase 136,000 shares of common stock during the fourth quarter[4] Full Fiscal Year 2024 Performance For the full fiscal year 2024, net sales reached $1.71 billion, the second-highest in the company's history, though down 6% from the prior year. Adjusted operating income was $74.3 million. A key achievement was a $112 million (25%) year-over-year reduction in inventory, which contributed to generating $73 million in cash flow from operations Full Fiscal Year 2024 Key Financial Metrics (GAAP vs. Non-GAAP) | Metric | FY 2024 | FY 2023 | Change | | :--- | :--- | :--- | :--- | | Net Sales | $1,714.5M | $1,823.4M | -6.0% | | Operating Income (GAAP) | $49.3M | $87.7M | -43.8% | | Adjusted Operating Income (Non-GAAP) | $74.3M | $88.2M | -15.8% | | Net Income (GAAP) | $20.5M | $55.8M | -63.3% | | Adjusted Net Income (Non-GAAP) | $35.8M | $55.9M | -35.9% | | Diluted EPS (GAAP) | $0.81 | $2.22 | -63.5% | | Adjusted Diluted EPS (Non-GAAP) | $1.42 | $2.23 | -36.3% | - Achieved a significant inventory reduction of $112 million, a 25% decrease year-over-year[4] - Cash flow from operating activities for the full year was $73 million[4] Management Commentary and Strategic Updates This section outlines management's perspective on the challenging market, strategic responses, and future outlook, including the AT&M divestiture and new program wins CEO & CFO Commentary Management acknowledged a challenging operating environment in the EMS industry due to continued weakness in end-market demand. The company has responded by adjusting its cost structure and improving working capital. A key strategic milestone was the completion of the divestiture of the Automation, Test and Measurement (AT&M) business, which has strengthened the balance sheet. Looking ahead, management expects macro headwinds to persist but is optimistic about new program wins impacting fiscal 2026 - The company is focused on 'controlling what we can control' amidst a challenged EMS industry environment with weaker than anticipated end-market demand[3] - Completed the divestiture of the Automation, Test and Measurement (AT&M) business, a significant milestone to sharpen strategic focus and strengthen the balance sheet[3] - Recent new program wins are expected to start impacting results in fiscal 2026[3] - The CFO expects macro headwinds to persist in fiscal 2025 and will focus on cost controls, a capital allocation strategy for long-term growth, and opportunistic share repurchases[4] Financial Results by Vertical Market This section details the sales performance across the company's Automotive, Medical, and Industrial vertical markets for Q4 and the full fiscal year 2024 Performance by Vertical All three of the company's vertical markets experienced year-over-year sales declines in both the fourth quarter and the full fiscal year 2024. For the full year, Automotive sales decreased by 2%, Medical by 15%, and Industrial by 3%. The Automotive segment remains the largest, contributing 48% of total net sales for the fiscal year Net Sales by Vertical Market (in Millions) | Vertical | Q4 2024 Sales | Q4 2023 Sales | Q4 % Change | FY 2024 Sales | FY 2023 Sales | FY % Change | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Automotive | $211.7 | $228.5 | (7)% | $826.4 | $843.8 | (2)% | | Medical | $102.2 | $123.6 | (17)% | $425.7 | $500.7 | (15)% | | Industrial | $116.3 | $144.0 | (19)% | $462.4 | $478.9 | (3)% | | Total Net Sales | $430.2 | $496.1 | (13)% | $1,714.5 | $1,823.4 | (6)% | Fiscal Year 2025 Guidance This section provides the company's financial outlook for fiscal year 2025, including projections for net sales, adjusted operating income margin, and capital expenditures Outlook for Fiscal Year 2025 For fiscal year 2025, Kimball Electronics anticipates net sales to be in the range of $1.440 to $1.540 billion, which reflects an 8% to 14% decline after excluding sales from the divested AT&M business. The company guides for an adjusted operating income margin of 4.0% to 4.5% and capital expenditures between $40 and $50 million. The adjusted operating income guidance uses a new calculation method that excludes stock compensation expense Fiscal Year 2025 Guidance | Metric | Guidance Range | | :--- | :--- | | Net Sales | $1.440 - $1.540 billion | | Adjusted Operating Income | 4.0% - 4.5% of net sales | | Capital Expenditures | $40 - $50 million | - The net sales guidance represents an 8% to 14% year-over-year decline when excluding net sales from the divested Automation, Test and Measurement business[4] - Beginning in fiscal 2025, the adjusted operating income calculation will exclude stock compensation expense to better align with industry presentation. Under this new method, the comparable FY2024 adjusted operating income margin would have been 4.8%[4] Detailed Financial Statements This section presents the consolidated statements of income, balance sheets, and cash flows, providing a comprehensive view of the company's financial position and performance Consolidated Statements of Income The consolidated income statement reflects a year-over-year decline in revenue and profitability for both Q4 and the full fiscal year 2024. Gross profit for FY2024 was $140.3 million, down from $156.2 million in FY2023. Operating income for the full year fell to $49.3 million from $87.7 million, significantly impacted by asset and goodwill impairment charges totaling $22.9 million related to the AT&M divestiture Q4 Income Statement Highlights (in Thousands) | Metric | Q4 2024 | Q4 2023 | | :--- | :--- | :--- | | Net Sales | $430,158 | $496,141 | | Gross Profit | $36,738 | $49,681 | | Operating Income | $19,608 | $31,449 | | Net Income | $7,543 | $19,202 | Full Year Income Statement Highlights (in Thousands) | Metric | FY 2024 | FY 2023 | | :--- | :--- | :--- | | Net Sales | $1,714,510 | $1,823,429 | | Gross Profit | $140,257 | $156,165 | | Operating Income | $49,277 | $87,729 | | Net Income | $20,511 | $55,831 | - FY2024 operating income was impacted by a $5.8 million goodwill impairment and a $17.0 million asset impairment[10] Consolidated Balance Sheets As of June 30, 2024, the company's balance sheet showed total assets of $1.21 billion. Key changes from the prior year include a significant 25% reduction in inventories to $338.1 million and an increase in cash and cash equivalents to $78.0 million. Total liabilities decreased to $667.4 million from $735.7 million, contributing to an increase in total share owners' equity Condensed Consolidated Balance Sheet Highlights (in Thousands) | Metric | June 30, 2024 | June 30, 2023 | | :--- | :--- | :--- | | Cash and cash equivalents | $77,965 | $42,955 | | Inventories | $338,116 | $450,319 | | Total Assets | $1,207,919 | $1,259,719 | | Total Liabilities | $667,458 | $735,725 | | Total Share Owners' Equity | $540,461 | $523,994 | - The balance sheet reflects assets held for sale of $27.6 million and liabilities held for sale of $8.6 million related to the divested business[12] Consolidated Cash Flow Statements For fiscal year 2024, Kimball Electronics generated $73.2 million in cash from operating activities, a significant positive shift from the $13.8 million used in operations in fiscal 2023. Cash used for investing activities decreased to $46.5 million. The company ended the year with a net increase in cash of $34.9 million, boosting the final cash balance to $78.8 million Fiscal Year Cash Flow Summary (in Thousands) | Metric | FY 2024 | FY 2023 | | :--- | :--- | :--- | | Net Cash Flow from Operating Activities | $73,217 | $(13,804) | | Net Cash Flow used for Investing Activities | $(46,521) | $(90,467) | | Net Cash Flow from Financing Activities | $8,974 | $99,179 | | Net Increase (Decrease) in Cash | $34,915 | $(5,987) | | Cash at End of Period | $78,779 | $43,864 | Non-GAAP Financial Measures Reconciliation This section provides detailed reconciliations of non-GAAP financial measures to their most directly comparable GAAP counterparts, ensuring transparency in reported adjusted figures Reconciliation Details The company provides reconciliations for non-GAAP measures to their closest GAAP counterparts. For fiscal year 2024, GAAP operating income of $49.3 million was adjusted for items including asset impairment ($17.0M), goodwill impairment ($5.8M), and restructuring expenses ($2.4M) to arrive at an adjusted operating income of $74.3 million. Similarly, GAAP diluted EPS of $0.81 was adjusted for these and other items to reach an adjusted diluted EPS of $1.42 FY 2024 Reconciliation of GAAP to Non-GAAP Operating Income (in Thousands) | Description | Amount | | :--- | :--- | | Operating Income (GAAP) | $49,277 | | Goodwill Impairment | $5,820 | | Asset Impairment | $17,040 | | Restructuring Expense | $2,386 | | Other Adjustments (SERP, Legal) | $(212) | | Adjusted Operating Income (Non-GAAP) | $74,311 | FY 2024 Reconciliation of GAAP to Non-GAAP Diluted EPS | Description | Amount | | :--- | :--- | | Diluted EPS (GAAP) | $0.81 | | Goodwill Impairment | $0.18 | | Asset Impairment | $0.39 | | Restructuring Expense | $0.07 | | Legal Settlements (Recovery) | $(0.03) | | Adjusted Diluted EPS (Non-GAAP) | $1.42 |