Kimball Electronics Reports Q4 2026 Results: Full Earnings Call Transcript

Kimball Electronics (NASDAQ: KE ) released fourth-quarter financial results and hosted an earnings call on Thursday. Read the complete transcript below. This content is powered APIs. For comprehensive financial data and transcripts, visit Access the full call at Summary Kimball Electronics reported Q4 sales of $372 million, a 2% decline year-over-year but a 5% sequential increase, with strong cash flow used to reduce debt.

The company is making strategic investments in the medical CDMO space, including a new facility in Indianapolis and the acquisition of Helvoet Polymer Technologies. Guidance for fiscal 2027 anticipates 7% to 9% sales growth, driven by organic growth and contributions from Helvoet, with Medical expected to comprise over one-third of total sales. 1 million, down from the previous year, impacted by higher expenses for growth initiatives and a high effective tax rate due to international tax resolutions. Management highlighted a focus on leveraging cash flow and a strong balance sheet for strategic investments, share repurchases, and potential future acquisitions.

Full Transcript Sherry, Operator Good morning, ladies and gentlemen, and welcome to Kimball Electronics' fourth quarter fiscal 2026 earnings conference call. My name is Sherry and I will be the facilitator for today's call. All lines have been placed in listen-only mode to prevent any background noise. After the completion of prepared remarks from the Kimball Electronics leadership team, there will be a question-and-answer period.

To ask a question, simply press star and the number one on your telephone keypad. Today's call, August 13, 2026, is being recorded. A replay of the call will be available on the investor relations page of the Kimball Electronics website. At this time, I would like to turn the call over to Andy Regrut, Vice President, Investor Relations, Strategic Development and Treasurer.

Mr. Regrut, you may begin. Andy Regrut, Vice President, Investor Relations Thank you and good morning, everyone. Welcome to our fourth quarter conference call.

With me here today is Rick Phillips, our Chief Executive Officer, and Jana Croom, Chief Financial Officer. We issued a press release yesterday afternoon with our results for the fourth quarter and full fiscal year ended June 30, 2026. To accompany today's call, a presentation has been posted to the investor relations page on our company website. Before we get started, I'd like to remind you that we will be making forward-looking statements that involve risk and uncertainty and are subject to our safe harbor provisions as stated in our press release and SEC filings, and that actual results can differ materially from the forward-looking statements.

Our commentary today will be focused on adjusted non-GAAP results. Reconciliations of GAAP to non-GAAP amounts are available in our press release this morning. Rick will start the call with a few opening comments. Jana will review the financial results for the quarter and guidance for fiscal 2027, and Rick will complete our prepared remarks before taking your questions.

I'll now turn the call over to Rick. Rick Phillips, Chief Executive Officer Thank you, Andy, and good morning, everyone. I'm proud of our results in the fourth quarter and very good finish to fiscal 2026. Sales in Q4 were in line with expectations, adjusted operating income was better than estimates, and we generated strong cash from operations, which was used to pay down debt to its lowest level in over four years.

Our balance sheet continued to strengthen and we are actively leveraging it to make strategic investments in growth in the medical CDMO space, such as the build-out of our new medical facility in Indianapolis and the acquisition of Helvoet Polymer Technologies. Our guidance for fiscal 2027 is highlighted by organic sales growth and the accretive impact from Helvoet. We are expecting Medical to continue to outpace the other two verticals and represent more than one-third of total company sales in the fiscal year, which is in line with our objective to balance the portfolio across the markets we serve.

Turning now to the fourth quarter, net sales for the company were $372 million, a 2% decline compared to Q4 last year, but a 5% sequential increase with all three vertical markets posting gains over Q3. Geographically, sales in the fourth quarter were more evenly distributed around the world versus prior periods, with approximately 40% in North America and 30% in both Asia and Europe.

Once again this quarter, our Medical business was the headliner, growing both year over year and sequentially and completing a fiscal year where the growth occurred in all four quarters and the total exceeded 10% versus a normalized fiscal '25 when adjusting for the consigned inventory sale last year in Q4. Medical sales were $109 million, a 1% increase compared to the same period a year ago and 29% of the total company. Approximately 30% of these sales occurred in both Asia and Europe, with the same year-over-year increases in each region. North America was down mid-single digits, which is below our run rate for most of the fiscal year.

This apparent slowdown in the growth trajectory is more of a function of the comparison from a year ago than production this year. In the fourth quarter of fiscal '25, we were supporting our customers with inventory builds for facility closures and transfers of work. Both were one-time events. From a product category perspective, the growth was driven by demand for surgical devices, in vitro diagnostics, patient monitoring, drug delivery.

Next is Automotive, with net sales in Q4 of $170 million, down 3% compared to the same period last year and 46% of the total. Our business in the fourth quarter was roughly divided a third, a third, and a third between North America, Asia, and Europe, with Poland and Romania reporting mid-single digit increases as a result of new steering and braking programs. China was up low single digits and North America was down, driven largely by lower EV demand. Offsetting these increases, steering programs continue to be the largest concentration of work, accounting for approximately 70% of total Automotive sales.

For the full year, our Automotive business was down 7% year over year, so successive 3% declines in the back half of fiscal '26 suggest a stabilizing trend in this vertical. Finally, sales in Industrial totaled $93 million, a 5% decrease compared to Q4 last year and 25% of the total company. Once again this quarter, our Industrial business was heavily concentrated in North America, where the majority of the decline occurred from lower demand for HVAC systems. This was partially offset by higher sales of smart meters in Europe, which continue to recover from prior year declines.

I'll now turn the call over to Jana for more detail on our financial results and guidance for fiscal 2027. Jana Croom, Chief Financial Officer Thank you, Rick, and good morning, everyone. 6 million, a 2% decrease year over year. Foreign exchange had a 1% favorable impact on consolidated sales in Q4.

9%, a 90 basis point improvement compared to 8% in Q4 of fiscal 2025, with the increase resulting from favorable mix partially offset by incremental costs associated with the ramp-up of our medical CDMO facility in Indianapolis. 8 million, a $4 million increase year over year with higher expense from investments for future growth initiatives, including personnel costs and IT infrastructure. 8% in the same period last year. 2% of net sales.

8 million of expense last year. Once again this quarter, interest expense drove the decrease, down nearly 30% year over year as a result of a combination of lower average debt levels and lower borrowing rates. 3% last year, with this year's rate adversely impacted by the resolution of two long-standing dividend withholding matters with tax authorities at international locations. 5% and we're expecting the rate in fiscal '27 to be in the low 30s.

35 per diluted share. 01 per diluted share. 9 million. 4 million, our tenth consecutive quarter of positive cash.

Cash conversion days were 82, an eight-day improvement compared to last quarter and three days better than the fourth quarter of fiscal '25. This is our best CCD in 17 quarters, with all components posting good results, but DSO accounting for the most significant improvement versus prior periods. 6 million lower than a year ago. 5 million, much of the spend once again this quarter on leasehold improvements in the new facility in Indianapolis, plus investments to support new programs in Europe.

7 million in CapEx, which was in line with our estimates. 9 million, or 21%, from a year ago. 3 million at the end of the fourth quarter. As a reminder, the acquisition of Helvoet occurred on July 1, the beginning of fiscal '27, so the financing activities on that transaction are not reflected in the June 30 balances.

1 million in Q4 to repurchase 83,000 shares. 1 million shares of common stock. In May, our Board of Directors unanimously increased the share repurchase program by $20 million. 4 million available on the program.

As we expected, fiscal 2026 was a year of transition and I am impressed with our team's resilience and ability to deliver results in a challenging environment. 431 billion, with Medical up over 10% after normalizing last year for the consigned inventory sale. 6% of net sales. 9 million to repurchase 447,000 shares of common stock.

As a CFO who takes great pride in the condition of our balance sheet, we exited the fiscal year in a position of strength, with plenty of dry powder in the form of borrowing capacity and available cash to strategically invest. As Rick highlighted, our guidance for fiscal 2027 projects a return to growth, and we will be leveraging our balance sheet to support those efforts. 56 billion, a 7% to 9% increase compared to fiscal 2026, with organic sales growth of 3% to 5% and revenue from Helvoet of $60 million.

From a vertical market perspective, organic growth in Medical is expected in the high single- to low double-digit range, Industrial in line with the company average, and Automotive will likely be flattish for the year. Revenue should be fairly evenly distributed over the fiscal year. 7% of net sales, and capital expenditures are expected to be in the range of $50 million to $60 million for FY27. The dilutive impact of the ramp of our new facility in Indianapolis is roughly offset by the accretive benefit from our acquisition of Helvoet.

We expect this combination of assets to drive significant revenue synergies as we execute our CDMO strategy over time. This outlook reflects the efforts and contributions from all areas of the company, and I am grateful for the collaboration and our return to profitable growth. I'll now turn the call back over to Rick. Rick Phillips, Chief Executive Officer Thanks, Jana.

Before we open the lines for questions, I'd like to share a few thoughts. In closing, we are thrilled to see our base business stabilize and a return to organic sales growth which, as Jana highlighted, will be led by our medical vertical. I noted in my opening comments our guidance implies Medical will approach 35% of the total company in fiscal '27, and Helvoet, the newest member of the Kimball family, is an important contributor. Since the deal announcement in early July, the integration efforts have gone very well with our number one priority focused on unlocking top-line synergies.

Customer interest around the acquisition has been strong, with many customers wanting more information about Helvoet operations in Tilburg and Pune, as well as new requests to tour our facility in Indianapolis, which we welcome as the team there continues to make good progress moving out of the existing campus. Production equipment is now being installed in the new facility, and the qualification of certain manufacturing processes is expected to start in the fall. If all goes according to plan, early production will commence at the end of this calendar year and the move will be completed in the next 18 months.

The addition of Helvoet has given us reason to reconsider how we talk about our medical business, in particular, the co-development work that both organizations do. You may have noticed that we're now incorporating the letter D in our reference to the medical CDMO business. This is reflective of our go-to-market strategy as a full-service provider in Kimball Solutions and will be used going forward. Looking ahead, we continue to evaluate strategic opportunities that could accelerate the expansion of this business, including the lift and shift of active.

As to this strategy, with expertise in precision manufacturing and automation, exposure to highly attractive medical end markets, a presence or expanded presence in a new geography, and a well-run operation with an excellent management team, we believe this strategy will be powerful in driving value creation. Our strategic journey continues to build, and so does my excitement for the future of the company. Operator, we would now like to open the lines for questions. Sherry, Operator Thank you, ladies and gentlemen.

Analysts may ask questions at this time by simply pressing star one on your dial pad. You may remove yourself from the queue by pressing star two on the dial pad. We ask that if you are using a speakerphone, please pick up your handset before asking your question. One moment, please, for our first question.

Our first question is from Brett Fishman with KeyBanc Capital Markets. Please proceed. Brett Fishman, Analyst at KeyBanc Capital Markets Hey guys, good morning. Thank you so much for taking the questions and good to be on the call today.

Just wanted to start off by asking if you could provide a little bit more color on what you saw in the medical segment this quarter, particularly in Asia and Europe, which seemed a little bit stronger, and then it sounded like North America. The biggest impact was comps. But if there's anything else to call out in that geography as well? Rick Phillips, Chief Executive Officer I think with that adjustment, Brett, and thanks for joining the call.

Good to have you. It really was a continuation of the trend that we've been seeing throughout the year. As you know, Helvoet will now be included in the results, and of course it wasn't at all in the prior year with the July 1st close, but we saw a pretty consistent double-digit increase over the course of each of the quarters. And again, with that adjustment that you mentioned, Q4 looked pretty similar.

Jana Croom, Chief Financial Officer Yeah. So to give you some technical color, in Q4 of '25 we had two one-time builds for customers. One was related to a transfer of work and one was related to a facility closure where they needed to build up inventory in support of that. And so if you adjust for those things, a normalized quarter-over-quarter FY26/FY25 is closer to 10%.

Brett Fishman, Analyst at KeyBanc Capital Markets All right, great. And then maybe just following up on that, it sounds like a key part of the return to positive organic growth in FY27 is continued performance in the medical segment with high single-digit to low double-digit organic growth expected. I was hoping you could just walk through kind of the key drivers and components of that level of growth expected in Medical, particularly how much you think could come from the early ramp of the new facility in Indy, or if there's any other incremental contributors compared to FY26. Rick Phillips, Chief Executive Officer Sure.

And Brett, we're really pleased as we look across the product categories within Medical and look at our expectations for the coming year. We see growth in most categories: respiratory care, surgical devices, in vitro diagnostics, imaging, drug delivery. So we're really pleased to see that. And I think the Indy impact is definitely going to take time.

As you heard on the call, if all goes according to plan, we'll begin to see production by the end of the calendar year.