Financial Data and Key Metrics Changes - Net sales for Q2 were $341 million, a 5% decline year-over-year, with a 2% favorable impact from foreign exchange [6][11] - The gross margin rate improved to 8.2%, a 160 basis point increase from 6.6% in the same period last year [11] - 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 [12] Business Line Data and Key Metrics Changes - Medical sales were $96 million, up 15% year-over-year, representing 28% of total company sales [6][10] - Automotive sales totaled $162 million, down 13% year-over-year, accounting for 48% of total sales [8][10] - Industrial sales were $83 million, a 5% decrease year-over-year, making up 24% of total sales [10] Market Data and Key Metrics Changes - Medical vertical growth was driven by increases in Poland and Thailand, while North America remained flat [6][7] - Automotive sales declined primarily in North America due to the transfer of an electronic braking program and tariff pressures [8][9] - Industrial business saw a decline in North America, offset by higher sales in Europe due to a rebound in the smart meter business [10] 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][7] - A rebranding to Kimball Solutions reflects the company's evolution beyond traditional manufacturing services, expanding into design, engineering, and supply chain management [18] - The grand opening of a new medical manufacturing facility in Indianapolis is part of the strategy to enhance capabilities and capacity [5][7] 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 [7] - The company is monitoring the outlook for FY27, particularly in North American automotive and industrial sectors, due to economic concerns and tariff impacts [17] - Management raised guidance for fiscal 2026, expecting net sales to be in the range of $1.4-$1.46 billion, driven by strength in the medical vertical [15][16] Other Important Information - Cash and cash equivalents at the end of Q2 were $77.9 million, with positive cash flow for the eighth consecutive quarter [14] - The company invested $4.3 million in share repurchases during Q2, with a total of $109.5 million returned to shareholders since October 2015 [15] Q&A Session Summary Question: What percentage was Nexteer in December? - Nexteer accounted for 20% of sales in December [23][24] 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 significant growth opportunities anticipated [26] 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 [34] 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 [36][39] Question: How will the new facility impact margins? - In the near term, the new facility will drag margins due to depreciation and additional expenses, but long-term margins are expected to improve [42][43] 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 [46]