Kimball Electronics : Third Quarter 2026 Presentation

Published: 2026-05-06 09:20:10 ET KE

Published on 05/06/2026 at 09:20 am EDT

Quarter Ended March 31, 2026

Supplementary Information to the May 6, 2026, Earnings Conference Call & Webcast

Lasting relationships. Global success. Kimball Electronics Confidential

Today's Speakers Agenda

Opening comments

Financial results for the quarter

Guidance for fiscal 2026

Closing comments

Ric Phillips

CEO

Jana Croom

CFO

Q&A

Results For The Third Quarter Were In-line With Expectations

Sales increased sequentially when compared with Q2

Driven by strong growth in our medical market

Margins remain solid

Cash from operations was positive for the ninth consecutive quarter

Expecting Q4 to be a good finish to the year

Affirming Fiscal Year 2026 guidance, estimated at the high end of the Adj OI Margin range

Medical CMO Continues to be Key Part of Our Strategy

Deliberate investments in our capabilities, operating capacity and commercial focus

When volumes ramp, we expect it to become a meaningful driver to both top line growth and margin expansion

Focus on inorganic growth as a possible complement to the strategy

Powerful combination for the future of our company

Lasting relationships. Global success.

Kimball Electronics | 5

Industrial 24% Medical 30%

* Percentage decrease compared to Q3 of fiscal 2025

Automotive 46%

Increase of +3.4% compared to the prior quarter

Medical vertical up +10%

6% decline compared to Q3 last year

All three market verticals were down

Q3 FY25 included $24M of non-recurring inventory sale in the medical market

Normalized for the inventory sale, total sales this quarter grew 1%**

Robust Medical vertical growth of +17%**

3rd consecutive quarter of double-digit medical growth**

Year-to-Date growth of +15%**

**Normalizing large one-time inventory consignment in prior year of $24M

Lasting relationships. Global success.

Kimball Electronics | 6

* Percentage of net sales

** Percentage decrease compared to Q3 of fiscal 2025

30% of our company, reaching nearly one third of our total portfolio

$106M

Medical Net Sales

An important Milestone in our strategic objective to balance the verticals with a higher concentration of medical business

North America represented just under half of sales, with Asia and Europe splitting the remainder

Growth in Q3* due to:

Respiratory care

Imaging systems

Drug Delivery Devices

Blood Separation

Patient Monitoring Systems

*Normalizing large one-time inventory consignment in prior year of $24M

Medical Remains a Compelling Opportunity to Diversify Our Top Line and Leverage Our Core Strengths

Strategic focus on supporting new and existing blue-chip customers in need of manufacturing capacity, keeping pace with the overall market growth with our state-of-the-art manufacturing facility in Indianapolis

Provide capabilities in precision molded plastics, complete device assembly, and cold chain management

Uniquely positions us to produce medical disposables, surgical instruments, and selected drug delivery devices, such as auto-injectors

Our recent new facility underscores our deep commitment to the Medical CMO market

$161M

Automotive Net Sales

Decline primarily in Asia and North America, partially offset by growth in Europe

Ramping new programs in steering and braking systems in Europe, up +20% in this quarter; we expect this strength to continue for the balance of '26

Carefully monitoring electronic steering systems for EVs, particularly in the United States

* Percentage of net sales

** Percentage decrease compared to Q3 of fiscal 2025

$86M

Industrial Net Sales

* Percentage of net sales

** Percentage decrease compared to Q3 of fiscal 2025.

Lower demand for HVAC systems, mainly in North America

Decline in off highway equipment and green energy

Partially offset by higher sales in:

Public safety

Rebound of the smart metering business in Europe

May be impacted near-term by a protracted war in the Middle East

Net Sales in the Third Quarter were $352.9 million

(6%) decrease year-over-year

Foreign exchange +3% favorable impact

On a sequential basis, sales increased +3.4%

Driven by growth in the Medical vertical

Gross Margin in the Third Quarter was 7.9%

• +70 bps improvement compared to 7.2% in Q3 fiscal year 2025

Increase resulting from favorable mix

Offset by:

The ramp up of the medical CMO

A somewhat easier comparison as the inventory sales we experienced in Q3 of FY25 had very little margin

We expect gross margin to remain under some pressure in FY27

Cost of expansion fully ramps in Q4 this year

CMO revenue path of 18-36 months for new programs

Expect impact to abate over time as new business grows, improving margins

Adjusted Selling & Administrative Expense(1)

Second quarter $13 million

• +$1.8 million increase year-over-year

When measured as percent of sales the rate was 3.7% this year compared to 3.0% last year

Higher FY26 expense as we make strategic investments for the future

Business transformation and IT solutions, driving innovation and efficiencies

Business development

(1) Adjusted Selling & Administrative Expense is a Non-GAAP measure - refer to Reconciliation of Non-GAAP Results in the supplementary information.

Adjusted Operating Income in the Third Quarter of 4.2%(1)

$14.8 million, or 4.2% of net sales

Compares to last year's adjusted result of $15.7 million, or 4.2% of net sales

Adjusted Operating Income is a Non-GAAP measure - refer to Reconciliation of Non-GAAP Results in the supplementary information.

Other Income / Expense

Expense of $3.0 million, compared to $4.6M of expense last year

Interest expense drove the decrease, down nearly 30% year-over-year

Effective Tax Rate

34.9%, compared to 46.6% last year

Q3 of last year was driven by the limitation of the tax deductibility of our interest expense

Cannot exceed a certain percentage of domestic EBIT

For the full year of fiscal 2026, we continue to expect an effective tax rate of approx. 30%

Adjusted Net Income and Adjusted Diluted EPS (1)

(1) Adjusted Net Income and Adjusted Diluted EPS are Non-GAAP measures - refer to Reconciliation of Non-GAAP Results in the supplementary information.

Our Balance Sheet Remains Strong

Cash and cash equivalents at March 31, 2026, were $82.5 million

Cash generated by operating activities in the quarter was $14.9 million, our ninth consecutive quarter of positive cash flow

Cash conversion days were 90, 1-day improvement compared to last quarter, and a 9-day* improvement compared to Q3 of fiscal 2025

Continued focus on actively managing the components

* CCD calculation for Q3FY25 excludes consigned inventory sale

Inventory Ended the Quarter at $273.3 million

Reduction of $8.4M compared to Q2, and down $23.3 million - or 8% -from a year ago

Capital Expenditures for the Quarter $14.4 million (1)

(1) Capital Expenditures include purchases of capitalized software.

Spend on leasehold improvements in the new facility in Indianapolis

Balanced by spend to support new programs in Europe

Expecting capex for fiscal year 2026 to be in the guidance range of $50-$60M

Borrowings at March 31, 2026, were $163 million

Up $8.8 million from the second quarter

Down $15.8 million, or ~9%, from a year ago

Short-term liquidity totaled $358.5 million at the end of the third quarter

In April, we renewed our $300M revolver

Maintaining strong balance sheet to support the future growth of the business

Share Repurchases

Invested $4.0 million to repurchase 165,000 shares

Since October 2015, under our Board authorized share repurchase program:

A total of $113.5 million returned to Share Owners by repurchasing 7 million shares of common stock

$6.5 million remaining on the repurchase program

Affirming FY26 Guidance,

Expect Adjusted OI Margin Range at the High End of the Range

FY26 Guidance

Sales

$1.40-$1.46B

Adj OI Margin

4.2%-4.5%

Capital Investments

$50-$60M

Expecting a good finish to Q4:

Sales $370-$380M

Adj OI margin 4.4%-4.6%

Expecting a Good Finish to the Fiscal Year

Expecting another sequential increase in sales in Q4

Medical Vertical continues to outpace the other two verticals

Monitoring impacts of the war in Iran

Higher freight and raw materials costs

Higher energy prices

Consumer sentiment

Looking Ahead

Evaluate strategic opportunities, that could accelerate the expansion of our medical CMO business

Strong inorganic growth potential

Established medical manufacturers - outside the US - seeking domestic market entry and scaled US production

Adding complementary capabilities such as micro-molding, advance precision injection and high-automation engineering expertise

Benefiting from cost-efficient operations in lower-cost geographies

Broadening our capabilities, deepen customer relationships and position us as a differentiated medical manufacturing partner creates a powerful combination that will drive profitable growth in the future

We believe this is a powerful combination for the future

Questions

For more information, please contact:

Vice President, Investor Relations, Strategic Development, and Treasurer

812-827-4151

[email protected]

Appendix

Reconciliation of non-GAAP results

(Unaudited, Amounts in Thousands, Except Per Share Data)

Q3'25

Q4'25

Q1'26

Q2'26

Q3'26

Net Sales Growth (vs. same quarter in prior year)

(12) %

(2) %

(5) %

(6) %

Foreign Currency Exchange Impact

(1) %

1 %

2 %

3 %

Constant Currency Growth

(11) %

(13) %

(3) %

(7) %

(9) %

Selling & Administrative Expenses, as reported

$ 13,154

$ 13,163

$ 13,090

$ 14,862

$ 15,214

Less: Stock Compensation Expense

1,955

1,991

1,563

2,217

2,256

Less: SERP

329

225

(76)

Adjusted S&A Expense

$ 11,190

$ 10,843

$ 11,302

$ 12,560

$ 13,034

Operating Income, as reported

$ 11,716

$ 16,474

$ 14,454

$ 10,767

$ 11,755

Add: Stock Compensation Expense

1,955

1,991

1,563

2,217

2,256

Add: SERP

329

225

(76)

Add: Restructuring Expense

2,026

1,971

1,416

1,817

850

Add: Asset Impairment (Gain on Disposal)

(1,127)

(124)

422

(4)

Adjusted Operating Income

$ 15,706

$ 19,638

$ 17,534

$ 15,308

$ 14,781

Net Income, as reported

$ 3,817

$ 6,581

$ 10,086

$ 3,637

$ 5,719

Add: Stock Compensation Expense, After-Tax

1,483

1,510

1,185

1,681

1,711

Add: Restructuring Expense, After-Tax

1,537

1,474

1,073

1,287

606

Add: Asset Impairment (Gain on Disposal), After-Tax

(1,127)

(94)

320

(3)

Adjusted Net Income

$ 6,837

$ 8,438

$ 12,250

$ 6,925

$ 8,033

Diluted Earnings per Share, as reported

$ 0.15

$ 0.26

$ 0.40

$ 0.15

$ 0.23

Add: Stock Compensation Expense

$ 0.06

$ 0.05

$ 0.07

Add:Restructuring Expense

$ 0.06

$ 0.04

$ 0.05

$ 0.03

Add: Asset Impairment (Gain on Disposal)

$ -

$ (0.04)

$ -

$ 0.01

$ -

Adjusted Diluted Earnings per Share

$ 0.27

$ 0.34

$ 0.49

$ 0.28

$ 0.33

Reconciliation of non-GAAP results continued….

(Unaudited, Amounts in Thousands, Except Per Share Data)

Q3'25

Q4'25

Q1'26

Q2'26

Q3'26

Operating Income (GAAP) (TTM)

$ 48,669

$ 45,535

$ 50,874

$ 53,411

$ 53,450

Add: Asset Impairment (Gain on Disposal) (TTM)

(788)

(2,391)

(1,251)

(829)

(833)

Add: Restructuring Expense (TTM)

9,783

10,990

10,084

7,230

6,054

Add: SERP (TTM)

381

614

494

648

563

Add: Stock Compensation Expense (TTM)

6,278

6,519

6,010

7,726

8,027

Adj. Operating Income (non-GAAP) (TTM)

$ 64,323

$ 61,267

$ 66,211

$ 68,186

$ 67,261

Tax Effect (TTM)

20,174

24,508

23,511

23,836

20,770

After-Tax Adj. Operating Income (TTM)

$ 44,149 $ 36,759 $ 42,700 $ 44,350 $ 46,491

Average Invested Capital (1)

$ 726,208 $ 693,144 $ 669,471 $ 657,074 $ 650,994

ROIC

6.1 % 5.3 % 6.4 % 6.7 % 7.1 %

Average Invested Capital is computed using the Share Owners equity plus current and non-current debt less cash and cash equivalents averaged for the last five quarters.

15%

17%

25% 10%

(8)%

Net Sales Growth, Medical

Impact of Non-recurring Consignment Inventory Sales (1)

Adjusted Net Sales Growth, Medical

(2)%

7% 2%

(4)%

(6) %

Net Sales Growth, Consolidated

Impact of Non-recurring Consignment Inventory Sales (1)

Adjusted Net Sales Growth, Consolidated

Ended March 31, Ended March 31,

2026 2026

Nine Months

Three Months

Q3'25 included a non-recurring consignment inventory sale of $24 million to a customer for completed programs.

Net Sales in Automotive (1)

(1) Beginning in the first quarter of fiscal year 2026, sales to customers related to commercial transportation, previously included in the automotive vertical, are now reflected in the industrial vertical. Prior periods have been recast to conform to current period presentation.

Net Sales in Medical (1)

(1) Q3'25 includes $24 million of non-recurring consignment inventory sales.

Net Sales in Industrial (1)

Lasting relationships. Global success. Kimball Electronics

Disclaimer

Kimball Electronics Inc. published this content on May 06, 2026, and is solely responsible for the information contained herein. Distributed via Public Technologies (PUBT), unedited and unaltered, on May 06, 2026 at 13:17 UTC.