KE earnings call transcript, November 4, 2026

Good morning, ladies and gentlemen, and welcome to the Kimball Electronics First Quarter Fiscal 2027 Earnings Conference Call. My name is Ina, and I will be the facilitator for today's call. All lines have been paced in lesson-only mode to prevent any background noise. After the completion of the prepared remarks from the Kimball Electronics Leadership

Team, there will be a question-and-answer period. To ask a question, simply press star, then the number 1 on your telephone keypad. Today's call, November 5, 2026, is being recorded. A replay of the call will be available on the Investor Relations page of the Kimball Electronics website. At this time, I would like to turn the call over to Mr. Andrew Rugrit, Vice President, Investor Relations, Strategic Development, and Treasurer. Mr. Rugrit, you may begin.

Thank you, and good morning, everyone. Welcome to our first quarter conference call. With me here today is Rick Phillips, our Chief Executive Officer, and Janet Kroon, Chief Financial Officer. We issued a press release yesterday afternoon with our results for the first quarter of fiscal 2027 and it's September 30, 2026. To accompany today's call, presentation has been posted to the Investor Relations page on our company website. Before we get started, I'd like to remind you that we will be making... forward-looking statements that involve risk and uncertainty and are subject to our safe harbor provisions as stated in our press release and SEC filings. And that actual results can differ materially from the forward-looking statements. Our commentary today will be focused on adjusted non-GAAP results, reconciliations of GAAP to non-GAAP results. GAAP amounts are available in our press release. This morning, Rick will start the call with a few opening comments. Jana will review the financial results for the quarter and guidance for fiscal 2027. And Rick will complete our prepared remarks before taking your questions. I'll now turn the call over to Rick.

Thank you, Andy, and good morning. Everyone, I'm encouraged by our first quarter results and solid start to fiscal 2027. Sales increased both sequentially and year over year. Margins were healthy and cash conversion days were once again at a multi-year low. The top line benefited from organic sales growth. and the contribution from health wet polymer technologies, our recent tuck in acquisition in the medical CDMO. The organic growth was in line with expectations and driven by a high single digit increase in medical sales. This growth aligns with our strategic focus to balance the portfolio across the verticals. Our excitement for the overall fit and growth opportunities of Helboit are higher now than ever. With the backdrop of a strong balance sheet, we're investing in medical growth by integrating Helboit, ramping operations in Indianapolis, leveraging our capabilities as a full service provider, and unlocking synergies across the global footprint. Fiscal 2027 marks an important milestone in our journey, and we are reiterating our guidance for the year with sales expected at the high end of the range, driven by continued strength in medical. Turning now to first quarter results. Net sales for the total company were $391 million, a 5% increase on a sequential basis and up 7% when compared to Q1 of fiscal 2026. The year-over-year increase occurred in all verticals, with approximately 40% of total sales in North America.

Thank you, and good morning, everyone. As Rick highlighted, net sales in Q1 were $390.8 million, up 7% compared to last year, with 3% organic growth. And $12.4 million of revenue from Hellboot, which was very close to our expectations. We expect the top line of Hellboot to ramp over the course of the fiscal year. Foreign exchange had a 1% favorable impact on consolidated sales. The gross margin rate... ...were 7.9%, flat to last year, with favorable mix offset by higher material component costs and the ramp of our medical CDMO facility in Indianapolis. As we have called out in previous quarters, we expect this investment to continue to weigh on margins in the near term, but we'll improve... as production increases and revenue builds. Adjusted selling and administrative expenses were $13.9 million, a $2.6 million increase year-over-year. We continue to make investments in future growth initiatives, which include personnel costs, IT... ...infrastructure, and the addition of health use. As a reminder, in Q1 last year, we had a one-time $2 million cost recovery from a customer associated with the termination of a program. When measured as a percentage of sales, this year's rate was 3.6% versus 3.6% versus 3.6%. In Q1, fiscal 26. Adjusted earnings before interest, taxes, depreciation, and amortization totaled $27.6 million in Q1 versus $26.7 million a year ago. And adjusted operating income was $7 million.

Thanks, Janet.

Thank you. Ladies and gentlemen, we will now start the questions.

Yeah. Thank you. And your next question comes from the line of breath from T. Capital and Marcus. Please go ahead.

Hey, guys. Good morning. Thank you so much for taking the questions. I wanted to just ask again about, you know, the new U.S. medical facility. Sounds like. So production may start pretty soon. But I was just curious if you could discuss how, you know, the efforts towards filling some of the capacity with, you know, existing and, you know, new programs is going. And if there's any just general metrics or data points that could help us think about, like, the pacing to fill that capacity.

Yeah, thanks, Brent. I appreciate you joining the call today and a good question. Obviously, a big focus for us. We're excited, you know, as I mentioned on the call, to expect production to start here before the end of the calendar year. You know, I can tell you, you know, the level of activity in terms of taking customers through the facility, new and existing. The efforts with Helvoet in terms of revenue synergies that will leverage that facility are really exciting. And, you know, we know it takes time. You know, when you win a program in that space, it takes a while to ramp. But we're obviously going to have some immediate production in there because we'll be moving over. It's in our current Indianapolis facility. But the focus is really on driving incremental growth from new and existing customers and leveraging that space. And we feel good about that. You know, we'll be continuing to report on it and feel like we have some good momentum. But we do recognize, you know, as I said on the call, that it will take time to ramp. All right, great. And then maybe just more broadly for FY27, you know, you maintained most of the key guidance metrics, but, you know, are pointing to the higher end of the sales range from last quarter. So maybe if you could just touch on, you know, what modestly improved incrementally relative to the initial guidance that gives, you know, more confidence in the high end this year.

Thank you so much.

Hey, Brett, that was a great question. So what is improving for us is clearly core medical is coming in really strong. So in terms of the acquisition, Helboot is tracking pretty much as we expected to, right? So in terms of that. $60 million of revenue and contribution range. Core medical is coming in stronger. Automotive is coming in a little bit stronger, but some of that is inflationary pressure as we look at the forecast. And so the challenge. We're still working through margin because, as you know, we'll get revenue that won't have margin associated with it on the autos and industrial side if inflation progresses and continues to be aggressive. Right now, we're still monitoring that. And so we're not. Ready to give an update on adjusted OI margin. Right now, we're just saying we expect it to hold. And when we give Q2 update, that's typically when we update all of our guidance ranges. And we'll do that at that time because we'll have a better understanding of the impact it's going to have on the full. All right. Perfect.

Thanks again.

Thank you. Once again, should you have a question, please press star followed by the one on your telephone keypad. And your next question comes on the line of Luke Fingerson from Lake Street Capital. Please go ahead.

Hey guys, Luke Fingerson on for Max Michaelis. Just one question from me. Open order grew 16% year over year to $690 million. Can you give any color on the growth from medical?

So what I will say... And reiterate, thanks for the question, Luke, is the growth is across all geographies and all programs. And so it is North America, Europe, and Asia focused and not specific to any program or any single customer. So that, you know, 9% in growth may actually be the lowest in terms of core medical growth that we see over the course of the fiscal year. We're looking at double-digit growth, you know, just really driving it. You're starting to see it in terms of the open orders numbers. Again, you know, we're monitoring automotive and industrial, but what we have been saying for the last, you know, year and a half, two years, is that we were focusing on balancing the portfolio thoughtfully over time with a focus on growing medical, and you're really seeing that come to fruition. Now, it represented in the growth numbers and in the, as you indicated, the open order numbers for future.

Thank you.

There are no further questions at this time.

A replay will be available. You can also dial in at 877-660-6853 or 201-612-7415. Again, you can dial 877. 877-660-6853 or 201-612-7415. The access ID is 13763075.

Thank you for participating.

You may all disconnect.