Kimball Electronics (KE) Q1 2025 earnings summary

Executive summary

• Q1 FY2025 net sales were $374.3 million, down 15% year-over-year, with declines across all verticals due to end-market weakness and tough comparisons.

• Strategic restructuring included divesting AT&M/GES and integrating medical CMO into core EMS, sharpening focus and streamlining operations.

• Announced closure of Tampa facility, with production shifting to Mexico and Jasper, to drive efficiency and invest in core business growth.

• Results aligned with expectations, with continued focus on cost control, working capital management, and positive cash flow generation.

• Net income was $3.2 million (down 71% year-over-year); adjusted net income was $5.5 million; adjusted diluted EPS was $0.22.

Financial highlights

• Q1 net sales were $374.3 million, down 15% year-over-year; excluding AT&M/GES, the decrease was 13%.

• Gross margin was 6.3%, down from 8.1% year-over-year, due to lower absorption from declining sales.

• Adjusted operating income was $12.6 million (3.4% of sales), down from $21 million (4.8%) last year.

• Cash flow from operations was $45.5 million, up from $12.8 million year-over-year, marking the third consecutive quarter of positive cash flow.

• Inventory reduced by $147 million year-over-year, ending at $335.3 million.

Outlook and guidance

• FY2025 guidance confirmed: net sales of $1.44–$1.54 billion, adjusted operating income margin of 4–4.5%, and capex of $40–$50 million.

• Q2 revenue expected to decline similarly to Q1, with margin improvement anticipated as restructuring progresses.

• Additional restructuring charges of $10–$14 million are anticipated over the next 12 months, including $8–$11 million for the Tampa exit.

• Gross margin expected to improve gradually, with more significant gains in the back half of the year.

• Guidance confirmed despite challenging market conditions.