Financial Data and Key Metrics Changes - Net sales for Q2 were $341 million, a 5% decline compared to Q2 last year [6][12] - Gross margin rate improved to 8.2%, a 160 basis point increase from 6.6% in the same period last year [12] - Adjusted operating income was $15.3 million, or 4.5% of net sales, compared to $13.3 million, or 3.7% of net sales last year [13] - Adjusted net income was $6.9 million, or $0.28 per diluted share, compared to $7.4 million, or $0.29 per diluted share last year [15] Business Line Data and Key Metrics Changes - Medical sales were $96 million, up 15% year-over-year, representing 28% of total company sales [6][8] - Automotive sales totaled $162 million, down 13% year-over-year, accounting for 48% of total sales [9] - Industrial sales were $83 million, a 5% decrease compared to Q2 last year, representing 24% of total sales [11] Market Data and Key Metrics Changes - Medical vertical growth was driven by increases in Poland and Thailand, while North America remained flat [7][8] - Automotive sales decline was primarily due to lower sales in North America and China, with some offset from growth in Poland and Romania [9][10] - Industrial business decline was concentrated in North America, with some recovery in Europe [11] Company Strategy and Development Direction - The company is focusing on the medical vertical as a key growth area, leveraging its capabilities in a highly regulated industry [5][8] - A rebranding to Kimball Solutions reflects the company's evolution beyond traditional manufacturing services, expanding into design, engineering, and supply chain management [20] - The grand opening of a new medical manufacturing facility in Indianapolis is part of the strategy to enhance capabilities and capacity [5][8] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the medical vertical's growth potential, driven by megatrends such as an aging population and increasing healthcare access [8] - The company raised its guidance for fiscal 2026, expecting net sales between $1.4 billion and $1.46 billion, driven by strength in the medical vertical and automotive programs [17][18] - Management is monitoring the outlook for FY27, particularly in North America automotive and industrial sectors, due to economic concerns and tariff impacts [19] Other Important Information - Cash and cash equivalents at the end of Q2 were $77.9 million, with cash generated from operations at $6.9 million [15][16] - The company invested $4.3 million in share repurchases during Q2, with a total of $109.5 million returned to shareholders since October 2015 [17] - The effective tax rate for Q2 was 47.9%, significantly higher than the previous year due to adjustments related to the sale of the Tampa facility [15] Q&A Session Summary Question: What percentage was Nexteer in December? - Nexteer accounted for 20% of sales in December [25][26] Question: What is the capacity and ramp expectations for the new facility in Indianapolis? - The new facility is 300,000 sq ft, significantly larger than the current footprint, with substantial growth opportunities [28] Question: How should we think about growth in the automotive piece for Q3 and Q4? - Q3 automotive is expected to be flat to slightly up as the company anniversaries the end of the EB100 program [37] Question: What are the win rates and sizes of new programs? - Win rates remain consistent, with larger programs expected from lift and shift opportunities and CMO discussions [39][40] Question: How will the new facility impact margins? - The new facility is expected to drag margins in the near term due to depreciation and additional expenses, but long-term margins are expected to improve [44][45] Question: How do you see cash cycle days play out in the coming quarters? - Cash conversion days are expected to decrease in Q3 from elevated levels in Q2 [49] Question: What are the opportunities in the medical space for acquisitions? - The company is interested in in vitro diagnostics and cardiology as potential areas for expansion [58]