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Overall Financial and Balance Sheet Performance

• Q4 FY26 adjusted operating income came in above analyst estimates, and the company generated 10 consecutive quarters of positive operating cash flow
• Debt was reduced to $116.6 million at quarter-end, the lowest level in over four years, representing a 21% year-over-year decrease; total short-term liquidity (cash plus unused credit capacity) reached $411.3 million
• Gross margin improved 90 basis points year-over-year to 8.9%, driven by favorable product mix, partially offset by incremental ramp-up costs for the new Indianapolis medical CDMO facility
• Cash conversion days improved to 82, the best reading in 17 quarters, driven primarily by improvements in days sales outstanding
• Full-year FY26 total net sales hit $1.431 billion, with adjusted operating income of $65.7 million (4.6% of net sales) and operating cash flow of $72.3 million

Strategic Growth Initiatives

• The company is executing a strategic goal to rebalance its portfolio toward higher-growth medical end markets, with medical expected to exceed one-third of total sales in FY27
• The acquisition of Helvyt Polymer Technologies closed on July 1, 2026 (the start of FY27), and integration is progressing on schedule; top-line synergy opportunities have been stronger than expected, with strong customer interest in the combined company's expanded geographic footprint
• The new Indianapolis medical CDMO facility is on track: production equipment is now installed, process qualification is scheduled to begin in fall 2026, early production will start at the end of calendar 2026, and full transition will be completed within 18 months
• The company has updated its branding to position medical as a full-service CDMO (adding the 'D' to reflect end-to-end development and manufacturing capabilities)
• Management continues to evaluate additional tuck-in acquisitions that align with its medical CDMO growth strategy

Capital Allocation

• The board of directors increased the authorized share repurchase program by $20 million in May 2026, leaving $24.4 million available for repurchases; a total of $115.6 million has been returned to shareholders since 2015
• Full-year FY26 capital expenditures totaled $51.7 million, in line with prior estimates, mostly focused on the Indianapolis facility build-out and new program support in Europe

• Total fiscal 2027 net sales are projected to be in the range of $1.535 to $1.56 billion, representing a 7% to 9% year-over-year increase, with 3% to 5% organic growth and $60 million in expected revenue from the Helvyt acquisition
• By segment: medical organic growth is projected to be in the high single-digit to low double-digit range; industrial organic growth is expected to match the company average; automotive is projected to be flattish year-over-year
• FY27 adjusted operating margin is projected to be between 4.4% and 4.7%; the dilutive impact of the Indianapolis facility ramp-up is expected to be fully offset by the accretive impact of the Helvyt acquisition
• Capital expenditures for FY27 are expected to be in the range of $50 to $60 million, including capital investments for Helvyt synergy projects
• The effective tax rate for FY27 is expected to be in the low 30%
• Revenue is expected to be fairly evenly distributed across all four quarters of FY27
• Gross margin is expected to be approximately 8.5% to hit the projected adjusted operating margin range

Kimball Electronics reported total Q4 FY26 net sales of $371.6 million, a 2% year-over-year decline, with the following segment performance:

1. Medical: Q4 net sales of $109 million, a 1% year-over-year increase, contributing 29% of total company sales. Full-year 2026 medical sales grew over 10% year-over-year after adjusting for a one-time 2025 consigned inventory sale.
2. Automotive: Q4 net sales of $170 million, a 3% year-over-year decline, contributing 46% of total company sales. Full-year 2026 automotive sales declined 7% year-over-year, with successive 3% declines in the second half of FY26 indicating a stabilizing trend. Steering programs account for approximately 70% of total automotive sales.
3. Industrial: Q4 net sales of $93 million, a 5% year-over-year decline, contributing 25% of total company sales.

• EV demand in North America is lower than originally projected, which has pressured automotive segment sales
• China's automotive market is highly competitive, with strong pressure from local competitors
• Ongoing supply chain disruptions (including component shortages) are expected to create working capital pressure in FY27, with cash conversion days projected to increase by a few days
• The new Indianapolis medical facility will continue to incur fixed costs (depreciation, utilities, overhead) while it ramps up, creating a margin drag until revenue generation ramps sufficiently, which is not expected to be fully complete until FY28
• Forward-looking statements are subject to inherent uncertainties that could cause actual results to differ materially from projections

Q: The analyst asks for more detail on the medical segment's Q4 performance, specifically strength in Asia/Europe and the North America slowdown, plus drivers of expected 2027 medical growth and the incremental contribution from the Indianapolis ramp. / A: Management confirms the year-over-year North America slowdown is entirely due to easy 2025 comparisons from two one-time customer inventory build events; adjusted for these, medical grew ~10% year-over-year in line with the full-year trend. 2027 medical growth will be broad-based across product categories including respiratory care, surgical devices, IVD, and drug delivery, building on 2026 momentum. The Indianapolis ramp will not contribute meaningful incremental growth in FY27, as early production will mostly be transferred from the existing campus rather than new programs, and synergies from Helvyt's combined footprint will drive growth over time.

Q: With leverage now around 1x EBITDA, what is the target capital structure and what are the company's capital allocation priorities going forward? / A: Management notes a leverage range of 1.5x to 2x EBITDA is ideal for the business, and the company will maintain dry powder for additional inorganic opportunities aligned with the CDMO strategy, even willing to temporarily go above 3x for the right acquisition. The company will continue the current pace of share repurchases (attractive at current valuations), fund planned organic CapEx, and use operating cash flow to pay down acquisition-related debt to preserve capacity for future deals. Management does not expect another acquisition to close in FY27, as the team focuses on integrating Helvyt.

Q: Automotive sales declined in FY26 and are projected to be flattish in FY27; when does management expect the segment to return to year-over-year growth, and what are the key regional dynamics? / A: The segment has stabilized after successive 3% declines in the second half of FY26, with declines driven by lower-than-expected volume on existing EV programs (not lost business). New steering and braking programs in Eastern Europe are growing and will continue to ramp, while China's business remains competitive though the company has retained strong customer relationships and won next-generation programs. A return to growth is dependent on overall market demand recovery, which appears to be emerging.

Q: Post-Helvyt acquisition closing, have there been any positive or negative surprises in integration or customer performance? / A: Management reports integration is progressing exactly as underwritten, with all functional and leadership teams engaged and on track with the master integration plan. On balance, outcomes have been positive: customer retention has been strong, as customers have been reassured the existing Helvyt footprint will remain, and top-line synergy opportunities have been more encouraging than expected. Multiple cross-selling and new customer opportunities are already being developed, with planned capital investments for these opportunities already included in the FY27 CapEx guidance.