Kimball Electronics Reports Q2 Results, Updates Outlook for Fiscal Year 2025

Kimball Electronics, Inc. (Nasdaq: KE) recently announced its financial results for the second quarter of fiscal year 2025, ended December 31, 2024. The company reported net sales of $357.4 million, operating income of $8.2 million (2.3% of net sales), and adjusted operating income of 3.7%. The company also generated $29.5 million in operating cash flow, marking the fourth consecutive quarter of positive cash flow. Kimball Electronics' Chief Executive Officer, Richard D. Phillips, commented on the results, stating, "The results for the second quarter were in line with expectations as we continue to navigate a sustained period of declining customer demand, while focusing on what is controllable. For the fourth consecutive quarter, cash flow generated from operating activities was positive, inventory levels were reduced, and debt was paid down, with borrowings nearly 40% lower than a year ago. Our improved balance sheet provides ample liquidity to weather our current challenges, along with the necessary dry powder to opportunistically and meaningfully invest in growing the business."

The company's vertical market analysis revealed varying degrees of pressure:
- Automotive remained resilient with only a 4% decline, now representing 54% of revenue.
- Medical segment faced steeper challenges with a 22% decline.
- Industrial segment (excluding AT&M) decreased 20%.

Kimball Electronics' strategic restructuring plan includes the divestiture of the non-core assets from the AT&M business, improved facility utilization with the planned closing of its plant in Tampa, and increased focus on the medical CMO. The company's efforts in all three vertical markets have been sharpened to target attractive new spaces that align with its capabilities. While the company remains optimistic for the future, it acknowledges that the necessary changes won't happen overnight. As a result, Kimball Electronics has revised its expectations for the full fiscal year, anticipating more time will be needed to stabilize the business and return to its historical growth pattern.

The company ended the second quarter of fiscal 2025 with cash and cash equivalents of $53.9 million and borrowing capacity available of $226.4 million. Capital expenditures were $6.5 million, and the company invested $3.0 million to repurchase 160,000 shares of common stock. Kimball Electronics' guidance for fiscal year 2025 reflects a change in its adjusted operating income calculation, which now excludes stock compensation expense.



In conclusion, Kimball Electronics' Q2 results reflect broader industry trends and market conditions, particularly the sustained period of declining customer demand. The company's focus on operational efficiency and strategic repositioning, including the divestiture of the AT&M business and the planned closure of its Tampa facility, demonstrates its commitment to building a more resilient business model. While the reduced guidance signals near-term challenges, the company's strong cash flow generation and improved balance sheet provide ample liquidity to weather current challenges and invest in growing the business. Kimball Electronics' strategic initiatives and focus on core competencies position the company for long-term growth.