Kimball Electronics, Inc. Q2 FY2025 earnings call

• Results for the second quarter were in line with expectations while navigating declining customer demand. Cash inventory levels were reduced for the fourth consecutive quarter, debt was paid down with borrowings nearly 40% lower than a year ago. • The company is strategically repositioning, including divestiture of non-core assets from AT and M, closing Tampa plant, and focusing on medical CMO. • Automotive: Net sales down 4%, China results strong, ramping up new braking program in Romania. • Medical: Net sales down 22%, but longer-term prospects with higher-level assemblies and finished medical devices; selected as sole supplier for respiratory care final assembly and HLA business. • Industrial: Decreases in North America, Europe, and Asia due to smart metering commoditization, climate controls, public safety. • Balance sheet: Cash and cash equivalents $53.9 million at Dec 31, 2024; share repurchase program updated with $20 million increase.

For the second quarter, net sales totaled $357 million, a 13% decrease. Automotive: Net sales were $193 million, a 4% decrease compared to the second quarter of last year, representing 54% of total company sales. Medical: Net sales in Q2 were $84 million, a 22% decrease compared to the same period last year, and 23% of total company sales. Industrial: Net sales were $81 million, down 20% year over year when excluding AT and M, and 23% of total company sales.

• Revised net sales for fiscal 2025 expected to be in the range of $1.4 to $1.44 billion (previously $1.44 to $1.554 billion). • Adjusted operating income estimated at 3.4% to 3.6% of net sales (previously 4% to 4.5% of net sales). • Capital expenditures unchanged at $40 million to $50 million. • Exit costs for Tampa facility closing estimated at $6.5 million to $8.5 million, proceeds from property sale expected to exceed exit costs.

• Tariffs on goods from China, Mexico, Canada; impact on supply chains and production relocation decisions. • Sustained customer demand weakness, longer time needed to stabilize business. • Inflationary pressures on costs like insurance, healthcare affecting selling and administrative expenses.

Q: Question on tariffs, inventory, Jasper utilization A: Steve Korn and others answered about tariffs, stating analysis for customers on tariffs, inventory trending to reduce further, Jasper utilization around 65% with space for potential additional work Q: Question on winning winnables, bid pipeline, win rates A: Jana Croom mentioned working on disclosing funnel and win rates, expecting to roll out in coming quarters Q: Question on revised guidance, broad-based softness A: Jana Croom said broad-based softness, autos holding in well due to Asia strength, medical and industrial still waiting to stabilize Q: Question on restructuring, OpEx rationalization A: Jana Croom discussed SG&A target of 3.5% of net sales, challenges with inflationary costs affecting discretionary cuts Q: Question on medical vertical organization changes A: Ric Phillips said structural change to combine drug delivery business with core EMS medical vertical to leverage capabilities Q: Question on industrial smart metering commoditization A: Steve Korn said smart metering business was ~2-3% of revenue, at bottom, but other industrial opportunities for growth Q: Question on competitive environment, outsourcing trend A: Steve Korn said some automotive customers moving product to Kimball, competitive environment as always, but some opportunities with Mexico and tariffs Q: Question on China automotive exposure, confidence A: Steve Korn said 50-50 foreign vs local in China, confident in China operations supporting local market Q: Question on braking program in Romania, tariff negotiation, tariff impact on production A: Steve Korn discussed braking program launch in January for European ICE vehicles, tariff negotiation processes with customers, and timeframes for production relocation to Thailand