Kimball Electronics, Inc. Q2 FY2026 earnings call

• Q2 sales were in line with expectations, with Medical vertical having strong double-digit year-over-year growth. - Margins improved compared to the same period last year and cash from operations was positive for the eighth consecutive quarter. - Focus as a Medical CMO continues to gain momentum, leveraging unique capabilities. - Recently rebranded to Kimball Solutions and opened a new medical manufacturing facility in Indianapolis. - Medical vertical strategy to outpace other verticals by balancing portfolio. - Automotive sales decline due to North America and China, but growth in Poland and Romania. - Industrial sales decline in North America but rebound in Europe due to smart meter business in Europe.

Medical: Sales in Q2 were $96 million, up 15% compared to the same period last year and 28% of total company sales. Automotive: Sales of $162 million, down 13% compared to the second quarter of last year and 48% of the total company. Industrial: Sales totaled $83 million, a 5% decrease compared to Q2 last year and 24% of total company sales.

• Raised net sales guidance for fiscal 2026 to $1.4 billion to $1.46 billion from previous $1.35 billion to $1.45 billion. - Adjusted operating income expected to be 4.2% to 4.5% of net sales vs prior 4.0% to 4.25%. - Capital expenditures guidance remains $50 million to $60 million for the fiscal year.

• Tariffs and economic concerns impacting North America automotive and industrial. - Competitive landscape in program bidding affecting margin and program acceptance.

Q: Starting with Automotive, what's the percentage of Nexteer in December?

A: 20% Q: Capacity and ramp expectations for Indianapolis facility?

A: The new facility in Indianapolis is 300,000 square feet under roof, with significant opportunity for growth but exact revenue impact depends on work volume Q: Impact of new Indianapolis facility on margin?

A: Near term drag due to depreciation and additional expenses from opening, but long-term margin accretive Q: Cash cycle days and outlook?

A: Cash conversion days expected to improve, Q3 to come down from Q2; focus on working capital and inventory reductions Q: Automotive EPP and second steering design opportunities?

A: EPP program is about 2/3 size of old braking program; ADAS is a strategic area to pursue Q: Inorganic opportunities in Medical?

A: In vitro diagnostics and cardiology are areas of interest for potential acquisitions