Kimball Electronics (KE) Q4 2024 earnings summary

Executive summary

• Q4 net sales were $430.2 million, down 13% year-over-year, with declines across all verticals and regions; FY24 net sales reached $1.715 billion, the second highest in company history.

• Divested the Automation, Test, and Measurement (AT&M) business on July 31, 2024, to sharpen strategic focus and improve liquidity.

• Inventory reduced by $112 million (25%) year-over-year, supporting positive free cash flow and improved balance sheet.

• Operating environment remained challenging, with broad-based end-market demand weakness and cost containment efforts.

Financial highlights

• Q4 gross margin was 8.5%, down 150 basis points year-over-year due to lower absorption and weaker AT&M performance.

• Adjusted operating income for Q4 was $20.9 million (4.9% of sales), down from $31.5 million (6.3%) last year; FY24 adjusted operating income was $74.3 million (4.3% margin).

• Adjusted net income for Q4 was $8.4 million ($0.33 per diluted share), compared to $19 million ($0.76) last year.

• Cash and equivalents at quarter-end were $78 million; operating cash flow for Q4 was $48.5 million.

• Borrowings on credit facility were $294.8 million at quarter-end, with $142.1 million in available credit.

Outlook and guidance

• Fiscal 2025 net sales expected between $1.44 billion and $1.54 billion, an 8%-14% decrease from 2024, excluding AT&M.

• Adjusted operating income margin guidance is 4%-4.5% of net sales, with Q1 expected below the full-year range.

• Capital expenditures projected at $40-$50 million, split between growth and maintenance.

• Revenue mix and segment trends from Q4 expected to continue into Q1; medical declines to moderate as FDA recall impact anniversaries.

• Guidance methodology for adjusted operating income will exclude stock compensation expense starting FY25.