Kimball Electronics (KE) The Stifel 2024 Cross Sector Insight Conference summary

Business Overview and Strategy

• Focuses on automotive, medical, and industrial verticals, emphasizing high-complexity, non-commodity products and selective program participation with a 75% win rate in targeted bids.

• Global operations span North America, Europe, and Asia, with 14 manufacturing facilities and over 7,900 employees worldwide.

• Customer relationships are long-term, with 77% of revenue from customers over 10 years, supporting multi-year planning and operating efficiency.

• The company is divesting its Automation, Test & Measurement business to concentrate on core EMS operations and has realigned its medical solutions into the EMS vertical.

• Capital allocation prioritizes organic growth, customer relationships, share repurchases, and disciplined M&A.

Financial Performance and Guidance

• Fiscal 2023 revenue reached $1.823 billion, up 35% year-over-year, with a five-year CAGR of 11%.

• Adjusted operating income margin improved by 110 basis points to 4.8%, and ROIC rose to 9.4%.

• Fiscal 2024 guidance: adjusted operating income margin of 4.2% to 4.6% of net sales; net sales expected to decline 4% to 6% versus 2023.

• Capital expenditures for fiscal 2024 are expected at $55–$60 million, down from a previous estimate of $70–$80 million.

• Additional pre-tax restructuring charges of $1–$2 million are anticipated as the company continues streamlining.

Market Conditions and Growth Drivers

• EMS industry faces short-term demand softening and supply chain inventory excess, with headwinds expected to persist into fiscal 2025.

• Automotive segment, driven by vehicle electrification, represents 45% of revenue and grew 41% in fiscal 2023.

• Medical segment, focused on patient monitoring and connected care, accounts for 27% of revenue and grew 26%.

• Industrial segment, supporting clean energy and automation, makes up 26% of revenue and grew 33%.

• Growth in automotive is driven by electronification, such as ADAS and enhanced braking/steering features, with programs typically single-source and lasting 8–10 years.