Kimball Electronics Reports Q4 and Full Year Fiscal 2023 Results With Record Sales and Operating Income; Company Provides Guidance for Fiscal 2024

Fourth Quarter Fiscal 2023 Highlights

• Net sales totaled $496.1 million, a 33% increase compared to Q4 fiscal 2022, and completing a fiscal year with top-line growth of 35%.
• Operating income of $31.4 million, or 6.3% of net sales, a record high for the Company. For fiscal year 2023, operating income was 4.8% of net sales.
• Net income of $19.2 million, or $0.76 per diluted share. In fiscal year 2023, the Company earned $2.22 per diluted share, a 79% increase compared to the prior year.
• Cash flow generated from operating activities of $44.1 million in Q4.
• Company provides guidance for fiscal 2024 with expected top-line growth of 4%-7% and operating income in the range of 4.7%-5.2% of net sales.

Kimball Electronics, Inc. (NASDAQ:KE) today announced financial results for the fourth quarter and fiscal year ended June 30, 2023.

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Richard D. Phillips, Chief Executive Officer, stated, "I am very pleased with the results we reported for the fourth quarter and fiscal year 2023. Q4 was our sixth consecutive quarter with record sales, and operating income and EPS were at all-time highs for the Company. The strong finish to the fiscal year drove net sales above the guidance we provided in May, and contributed to better than expected cash flow generation in the quarter. This performance was achieved with the highest levels of teamwork from our global organization, and many others in the value chain. I would like to thank our employees, our customers and our vendor partners for their passion, commitment, and support."

Mr. Phillips continued, "In total, fiscal 2023 was an excellent year for Kimball Electronics, highlighted by record top-line growth, margin expansion, a 79% increase in net income, and improved return on invested capital. Each of our three vertical end markets reported strong results, with the sales volume to 48% of our customers reaching all-time highs. The team supported new product introductions at a rate four times above the historic norm, and we continued to leverage our facility expansions in Thailand and Mexico, while navigating a challenging macro environment. While we continue to see a strong pipeline for future growth, fiscal 2024 is tempered by slower sales with a large medical customer. Longer term we are excited by the prospects of our funnel of new business, and the relationship with this customer in particular."

Fiscal Year 2023 Highlights:

• Net sales for fiscal year 2023 totaled $1,823.4 million, representing constant currency growth of 38% year-over-year when excluding the impact of foreign currency, which had a 3% unfavorable impact on net sales.
• Operating income of $87.7 million, or 4.8% of net sales, an improvement compared to $52.5 million, or 3.9% of net sales, in fiscal 2022.
• Net income of $55.8 million, or $2.22 per diluted share, a significant increase compared to net income of $31.3 million, or $1.24 per diluted share, in fiscal 2022.
• Capital expenditures of $90.7 million, supporting facility expansions in Thailand, Mexico, and Poland.
• Return on invested capital of 9.4%, a 220-basis point improvement compared to fiscal 2022; ROIC is a non-GAAP financial measure, see reconciliation of non-GAAP financial measures.

The Company ended fiscal 2023 with cash and cash equivalents of $43.0 million and borrowings outstanding on credit facilities of $281.5 million, including $235 million classified as long term, and $106.1 million of borrowing capacity available.

Net Sales by Vertical Market for Fiscal 2023:

Fiscal Year 2024 Guidance:

• Net sales in the range of $1.9 - $1.95 billion, a 4% - 7% increase year-over-year.
• Operating income in the range of 4.7% - 5.2% of net sales.
• Capital expenditures of $70 - $80 million.

Commenting on today's announcement, Jana T. Croom, Chief Financial Officer, stated, "Our outlook for fiscal 2024 reflects a capital allocation strategy focused on organic growth. We have a solid funnel of new business opportunities and additional capacity from our recent facility expansions, which I'm pleased to announce now includes Poland. We will be ramping-up operations in Poznan throughout the fiscal year. In addition, inventory should normalize as global supply chain disruptions continue to ease, and the resulting cash flow generated will be directed toward reducing our leverage ratio."

Forward-Looking Statements

Certain statements contained within this release are considered forward-looking, including our fiscal year 2024 guidance, under the Private Securities Litigation Reform Act of 1995. The statements may be identified by the use of words such as "expect," "should," "goal," "predict," "will," "future," "optimistic," "confident," and "believe." Undue reliance should not be placed on these forward-looking statements. These statements are based on current expectations of future events and thus are inherently subject to uncertainty. If underlying assumptions prove inaccurate or known or unknown risks or uncertainties materialize, actual results could vary materially from our expectations and projections. These forward-looking statements are subject to risks and uncertainties including, without limitation, global economic conditions, geopolitical environment and conflicts such as the war in Ukraine, global health emergencies including the COVID-19 pandemic, availability or cost of raw materials and components, foreign exchange rate fluctuations, and our ability to convert new business opportunities into customers and revenue. Additional cautionary statements regarding other risk factors that could have an effect on the future performance of the company are contained in its Annual Report on Form 10-K for the year ended June 30, 2022.

Non-GAAP Financial Measures

This press release contains non-GAAP financial measures. The non-GAAP financial measures contained herein include constant currency growth, adjusted operating income, adjusted net income, adjusted diluted EPS, and ROIC. Reconciliations of the reported GAAP numbers to these non-GAAP financial measures are included in the Reconciliation of Non-GAAP Financial Measures section below. Management believes these measures are useful and allow investors to meaningfully trend, analyze, and benchmark the performance of the company's core operations. The company's non-GAAP financial measures are not necessarily comparable to non-GAAP information used by other companies.

About Kimball Electronics, Inc.

Kimball Electronics is a multifaceted manufacturing solutions provider of electronics and diversified contract manufacturing services to customers around the world. From our operations in the United States, China, India, Japan, Mexico, Poland, Romania, Thailand, and Vietnam, our teams are proud to provide manufacturing services for a variety of industries. Recognized for a reputation of excellence, we are committed to a high-performance culture that values personal and organizational commitment to quality, reliability, value, speed, and ethical behavior. Kimball Electronics, Inc. (NASDAQ:KE) is headquartered in Jasper, Indiana.

To learn more about Kimball Electronics, visit: www.kimballelectronics.com.

For those unable to participate in the live webcast, the call will be archived at investors.kimballelectronics.com.

Lasting relationships. Global success.

Financial highlights for the fourth quarter and fiscal year ended June 30, 2023 are as follows:

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