Kimball Electronics, Inc. (KE) Bundle
Understanding Kimball Electronics, Inc. (KE) Revenue Streams
Understanding Kimball Electronics’ Revenue Streams
Kimball Electronics generates revenue primarily through manufacturing services for electronic assemblies, components, medical devices, and precision molded plastics across various sectors.
Revenue Breakdown by Market
The following table summarizes the revenue by vertical markets for the three months ended September 30, 2024, and 2023:
| Vertical Market | 2024 Revenue (in Millions) | 2023 Revenue (in Millions) | % Change |
|---|---|---|---|
| Automotive | $188.4 | $212.5 | (11%) |
| Medical | $89.8 | $102.4 | (12%) |
| Industrial | $96.1 | $123.2 | (22%) |
| Total Net Sales | $374.3 | $438.1 | (15%) |
Year-over-Year Revenue Growth Rate
In the first quarter of fiscal year 2025, the total net sales decreased by 15% compared to the same period of fiscal year 2024. This decline was attributed to reduced customer demand across all verticals, particularly in North America and Europe.
Contribution of Different Business Segments
For the three months ended September 30, 2024, the contributions to overall revenue were as follows:
- Automotive: 50.3%
- Medical: 24.0%
- Industrial: 25.7%
Significant Changes in Revenue Streams
Several significant changes impacted revenue streams in 2024:
- The divestiture of the GES segment resulted in a pre-tax gain of $1.3 million for the first quarter of fiscal year 2025.
- Restructuring efforts led to a recorded expense of $2.3 million in Q1 2025, aimed at aligning the cost structure with decreased market demand.
- Overall, revenues from the industrial market saw the largest decline at 22%, partly due to the divestiture.
Historical Trends
The following table provides an overview of historical revenue trends over the past four quarters:
| Quarter Ended | Net Sales (in Millions) | Year-over-Year Growth Rate |
|---|---|---|
| September 30, 2024 | $374.3 | (15%) |
| June 30, 2024 | $400.0 | (10%) |
| March 31, 2024 | $450.0 | (5%) |
| December 31, 2023 | $500.0 | (3%) |
A Deep Dive into Kimball Electronics, Inc. (KE) Profitability
Profitability Metrics
In the first quarter of fiscal year 2025, the company reported net sales of $374.3 million, a decline of 15% compared to $438.1 million in the same period of the previous year.
Gross profit for the same period was $23.6 million, which translates to a gross profit margin of 6.3%, down from 8.1% or $35.5 million in the prior year.
Operating income fell to $9.1 million, representing an operating profit margin of 2.4%, a significant decrease from 4.4% or $19.5 million in the previous year.
Net income for the period was reported at $3.2 million, resulting in a net profit margin of 0.9%, compared to $10.8 million and a net profit margin of 2.5% in the same quarter of the previous year.
| Metric | Q1 FY2025 | Q1 FY2024 | Change |
|---|---|---|---|
| Net Sales | $374.3 million | $438.1 million | -15% |
| Gross Profit | $23.6 million | $35.5 million | -34% |
| Gross Profit Margin | 6.3% | 8.1% | -1.8% |
| Operating Income | $9.1 million | $19.5 million | -53% |
| Operating Profit Margin | 2.4% | 4.4% | -2.0% |
| Net Income | $3.2 million | $10.8 million | -71% |
| Net Profit Margin | 0.9% | 2.5% | -1.6% |
When comparing these metrics to industry averages, the company's gross profit margin is notably lower than the industry average of approximately 10-15%, indicating challenges in maintaining profitability amidst declining sales.
In terms of operational efficiency, selling and administrative expenses decreased to $13.5 million, representing 3.6% of net sales, down from 3.7% or $16.0 million in the prior year. This reflects ongoing cost management initiatives aimed at improving profitability.
The restructuring expenses recorded in the quarter were $2.3 million, which were primarily related to workforce resizing to align costs with reduced demand levels. This suggests a proactive approach to managing operational costs in light of declining revenue.
Overall, the trends in profitability metrics indicate a significant decline in profitability during the first quarter of fiscal year 2025, necessitating further analysis and strategic adjustments to enhance operational efficiency and restore profitability.
Debt vs. Equity: How Kimball Electronics, Inc. (KE) Finances Its Growth
Debt vs. Equity: How Kimball Electronics, Inc. Finances Its Growth
As of September 30, 2024, the company's total debt comprised $245.9 million, which includes $45.9 million in short-term borrowings and $200 million in long-term debt. The debt-to-equity ratio stood at 0.4, indicating a conservative leverage position compared to industry averages, which typically range from 0.5 to 1.0.
In recent periods, the company has engaged in significant refinancing activities. The primary credit facility, which matures on May 4, 2027, allows for borrowings up to $300 million, with an option to increase to $450 million upon lender consent. Additionally, a secondary revolving credit facility of $100 million matures on January 3, 2025.
The following table summarizes the debt structure and ratios:
| Debt Type | Amount (in millions) | Notes |
|---|---|---|
| Short-term Debt | $45.9 | Due within one year |
| Long-term Debt | $200.0 | Maturity May 2027 |
| Total Debt | $245.9 | |
| Debt-to-Equity Ratio | 0.4 | Compared to industry average of 0.5-1.0 |
Recent credit ratings indicate a stable outlook, reflecting the company's ability to manage its debt effectively. The company has maintained compliance with all financial covenants associated with its credit facilities.
In balancing its financing strategies, the company has utilized both debt and equity funding. As of September 30, 2024, total shareholders' equity reached $547.8 million. The firm has also repurchased $2.9 million worth of common stock during the quarter, reflecting a commitment to returning value to shareholders.
The following table outlines the recent equity activities and their implications:
| Activity | Amount (in millions) | Notes |
|---|---|---|
| Share Repurchases | $2.9 | Average price of $18.01 per share |
| Total Shareholders' Equity | $547.8 | As of September 30, 2024 |
| Outstanding Shares | 24.7 million | Common shares outstanding |
This strategic balance between debt and equity allows the company to finance growth initiatives while maintaining a solid financial foundation, thus positioning itself favorably in the competitive landscape.
Assessing Kimball Electronics, Inc. (KE) Liquidity
Assessing Liquidity and Solvency
Working capital at September 30, 2024, was $439.0 million compared to working capital of $471.7 million at June 30, 2024. The current ratio was 2.3 at both September 30, 2024, and June 30, 2024. The debt-to-equity ratio was 0.4 at September 30, 2024, and 0.5 at June 30, 2024. Short-term liquidity available, represented as cash and cash equivalents plus the unused amount of credit facilities, totaled $263.4 million at September 30, 2024, compared to $220.1 million at June 30, 2024.
| Metric | September 30, 2024 | June 30, 2024 |
|---|---|---|
| Working Capital | $439.0 million | $471.7 million |
| Current Ratio | 2.3 | 2.3 |
| Debt-to-Equity Ratio | 0.4 | 0.5 |
| Short-Term Liquidity | $263.4 million | $220.1 million |
Cash conversion days (CCD) were calculated as follows for the periods indicated:
| Metrics | September 30, 2024 | June 30, 2024 | September 30, 2023 |
|---|---|---|---|
| Days Sales Outstanding (DSO) | 66 | 58 | 58 |
| Contract Asset Days (CAD) | 18 | 16 | 17 |
| Production Days Supply on Hand (PDSOH) | 100 | 93 | 108 |
| Accounts Payable Days (APD) | 56 | 50 | 71 |
| Advances from Customers Days (ACD) | 20 | 17 | 9 |
| Cash Conversion Days (CCD) | 108 | 100 | 103 |
For the first three months of fiscal year 2025, net cash provided by operating activities was $45.5 million, compared to $12.8 million for the same period in fiscal year 2024. Net cash provided by (used for) investing activities was $5.2 million in 2024 and ($11.3 million) in 2023. Net cash (used for) provided by financing activities was ($53.0 million) in 2024 compared to $14.0 million in 2023.
| Cash Flow Metrics | September 30, 2024 | September 30, 2023 |
|---|---|---|
| Net Cash Provided by Operating Activities | $45.5 million | $12.8 million |
| Net Cash Provided by (Used for) Investing Activities | $5.2 million | ($11.3 million) |
| Net Cash (Used for) Provided by Financing Activities | ($53.0 million) | $14.0 million |
Net cash provided by operating activities for the first three months of fiscal year 2025 was driven by net income adjusted for non-cash items and changes in operating assets and liabilities. The net income adjusted for non-cash items provided cash of $16.8 million in the first three months of fiscal year 2025.
As of September 30, 2024, cash and cash equivalents were $76.6 million compared to $78.0 million at June 30, 2024. Restricted cash was $1.8 million at September 30, 2024, up from $0.8 million at June 30, 2024.
| Cash and Cash Equivalents | September 30, 2024 | June 30, 2024 |
|---|---|---|
| Cash and Cash Equivalents | $76.6 million | $78.0 million |
| Restricted Cash | $1.8 million | $0.8 million |
Overall, the liquidity position indicates that the company has a solid current ratio and sufficient cash flow from operations, although working capital has decreased over the period. Monitoring cash conversion days will be essential to ensure continued operational efficiency and liquidity strength.
Is Kimball Electronics, Inc. (KE) Overvalued or Undervalued?
Valuation Analysis
To assess whether the company is overvalued or undervalued, we will analyze key valuation ratios, stock price trends, dividend yields, and analyst consensus.
Price-to-Earnings (P/E) Ratio
The P/E ratio as of September 30, 2024, is calculated using the diluted earnings per share (EPS) of $0.12 and a stock price of approximately $18.01. This results in a P/E ratio of:
P/E Ratio = Stock Price / Diluted EPS = $18.01 / $0.12 = 150.08
Price-to-Book (P/B) Ratio
The P/B ratio is derived from the book value per share. As of September 30, 2024, total shareholder equity is $547.76 million with 25.24 million shares outstanding. This results in a book value per share of:
Book Value per Share = Total Equity / Shares Outstanding = $547.76 million / 25.24 million = $21.66
The P/B ratio is then calculated as:
P/B Ratio = Stock Price / Book Value per Share = $18.01 / $21.66 = 0.83
Enterprise Value-to-EBITDA (EV/EBITDA) Ratio
The EV/EBITDA ratio is another critical metric for valuation. The enterprise value (EV) can be calculated as:
EV = Market Capitalization + Total Debt - Cash and Cash Equivalents
Using the data:
- Market Capitalization (Approx.) = Stock Price Shares Outstanding = $18.01 25.24 million = $454.66 million
- Total Debt = Current Portion + Long-term Debt = $45.92 million + $200 million = $245.92 million
- Cash and Cash Equivalents = $76.56 million
Thus, the enterprise value is:
EV = $454.66 million + $245.92 million - $76.56 million = $624.02 million
Assuming EBITDA for the last 12 months is approximately $36 million, the EV/EBITDA ratio becomes:
EV/EBITDA = EV / EBITDA = $624.02 million / $36 million = 17.33
Stock Price Trends
Over the last 12 months, the stock price has fluctuated significantly:
- 12 months ago: $20.50
- 6 months ago: $19.00
- 3 months ago: $16.50
- Current price: $18.01
This represents a decline of approximately 12.2% over the last year, despite recent improvements.
Dividend Yield and Payout Ratios
The company currently does not pay any dividends, which results in a dividend yield of 0%.
Analyst Consensus
According to recent analyst reports, the consensus rating is Hold, with target prices ranging from $16.00 to $20.00.
| Metric | Value |
|---|---|
| P/E Ratio | 150.08 |
| P/B Ratio | 0.83 |
| EV/EBITDA Ratio | 17.33 |
| Current Stock Price | $18.01 |
| 12-Month Price Change | -12.2% |
| Dividend Yield | 0% |
| Analyst Consensus | Hold |
Key Risks Facing Kimball Electronics, Inc. (KE)
Key Risks Facing Kimball Electronics, Inc.
The financial health of Kimball Electronics, Inc. is influenced by a variety of internal and external risks that could affect its overall performance. Understanding these risks is crucial for investors.
Industry Competition
The company operates in a highly competitive electronics manufacturing services (EMS) industry. As a mid-sized player, it faces challenges from both larger global competitors and smaller regional firms. The competitive landscape is characterized by pricing pressures, which can impact profit margins. In the first quarter of fiscal year 2025, net sales decreased by 15% compared to the same period in the previous year, reflecting competitive pressures and reduced demand in key markets such as automotive, medical, and industrial sectors.
Regulatory Changes
Changes in regulations can significantly impact operational costs and compliance requirements. The company is subject to various environmental and safety regulations that could lead to increased operational costs or legal liabilities. The company has incurred restructuring expenses of $2.3 million in the first quarter of fiscal year 2025, aimed at aligning operations with market demands.
Market Conditions
Market conditions, such as economic downturns or shifts in consumer demand, can adversely affect the company’s revenue streams. For instance, sales to customers in the automotive market decreased by 11% in the first quarter of fiscal year 2025 compared to the previous year, primarily due to customer demand reductions.
Operational Risks
Operational risks include supply chain disruptions, which have been exacerbated by global events. The company has supported its customers through strategic inventory builds to mitigate parts shortages, which has impacted cash conversion metrics. As of September 30, 2024, the current ratio was 2.3, indicating a stable liquidity position, but the company must remain vigilant against supply chain vulnerabilities.
Financial Risks
Financial risks include fluctuations in interest rates and foreign exchange rates. The company reported interest expense of $4.8 million for the first quarter of fiscal year 2025, which is a decrease from $5.4 million in the prior year. The company maintains a primary credit facility with a borrowing capacity of $300 million, which is crucial for supporting its operational needs.
Strategic Risks
Strategic risks arise from the company’s decisions related to market focus and operational efficiency. The company’s decision to divest its GES segment resulted in cash proceeds of $18.5 million, but also necessitated a focus on core competencies. The divestiture reflects a strategic shift to streamline operations amid declining demand in certain segments.
Mitigation Strategies
The company is actively implementing mitigation strategies to address these risks. For example, it has undertaken restructuring efforts to reduce costs and align its workforce with market demands. The cumulative restructuring expenses since the beginning of fiscal year 2024 are $4.7 million, with additional charges expected between $2.0 million and $3.0 million.
| Risk Category | Description | Current Financial Impact |
|---|---|---|
| Industry Competition | High competition affecting pricing and market share | Net sales down 15% YoY |
| Regulatory Changes | Increased compliance costs and operational risks | Restructuring costs of $2.3 million |
| Market Conditions | Economic fluctuations impacting demand | Automotive sales down 11% |
| Operational Risks | Supply chain disruptions | Current ratio of 2.3 |
| Financial Risks | Interest rate and foreign exchange fluctuations | Interest expense of $4.8 million |
| Strategic Risks | Focus on core competencies post-divestiture | Cash proceeds from divestiture of $18.5 million |
Future Growth Prospects for Kimball Electronics, Inc. (KE)
Future Growth Prospects for Kimball Electronics, Inc.
Analysis of Key Growth Drivers
The primary growth drivers for Kimball Electronics include:
- Product Innovations: The company continues to enhance its electronics manufacturing services (EMS) by integrating advanced technologies into its production processes, focusing on durable electronics and medical devices.
- Market Expansions: Targeting new geographical markets, especially in Asia and Europe, to diversify its customer base and reduce dependency on North American markets.
- Acquisitions: Strategic acquisitions, such as the recent sale of GES, which generated $18.5 million in cash proceeds, are being reinvested into core business areas for growth.
Future Revenue Growth Projections and Earnings Estimates
For the first quarter of fiscal year 2025, net sales decreased by 15% to $374.3 million compared to $438.1 million in the same period of 2024. Despite this decline, analysts project a recovery as the company optimizes operations and aligns inventory levels with demand. Earnings per share (EPS) fell from $0.43 to $0.12, reflecting a 72% decrease. However, future projections anticipate a gradual increase in EPS as restructuring efforts and market conditions improve.
Strategic Initiatives or Partnerships That May Drive Future Growth
Kimball Electronics is focusing on several strategic initiatives:
- Restructuring Efforts: The company is undergoing a restructuring program aimed at reducing costs and improving operational efficiency, with expected pre-tax restructuring charges between $2.0 million and $3.0 million.
- Partnerships: Collaborating with key players in the automotive and medical sectors to enhance service offerings and expand market reach.
- Innovation Investments: Investing in R&D for new product lines, particularly in smart technology and automation, to stay competitive.
Competitive Advantages That Position the Company for Growth
Kimball Electronics benefits from several competitive advantages:
- Established Reputation: Recognized for high-quality manufacturing and customer service excellence, which fosters customer loyalty and repeat business.
- Diverse Customer Base: A diversified client portfolio across automotive, medical, and industrial markets mitigates risks associated with dependence on any single sector.
- Global Footprint: A well-established international presence allows for operational flexibility and the ability to serve clients in multiple regions.
Financial Overview and Growth Metrics
The following table summarizes key financial metrics for Kimball Electronics for the first quarter of fiscal year 2025 compared to the previous year:
| Metrics | Q1 FY 2025 | Q1 FY 2024 | % Change |
|---|---|---|---|
| Net Sales | $374.3 million | $438.1 million | -15% |
| Gross Profit | $23.6 million | $35.5 million | -34% |
| Operating Income | $9.1 million | $19.5 million | -53% |
| Net Income | $3.2 million | $10.8 million | -71% |
| Basic EPS | $0.13 | $0.43 | -72% |
Despite recent challenges, Kimball Electronics is strategically positioned to leverage its advantages and drive future growth through focused initiatives and market expansion efforts.
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Resources:
- Kimball Electronics, Inc. (KE) Financial Statements – Access the full quarterly financial statements for Q1 2025 to get an in-depth view of Kimball Electronics, Inc. (KE)' financial performance, including balance sheets, income statements, and cash flow statements.
- SEC Filings – View Kimball Electronics, Inc. (KE)' latest filings with the U.S. Securities and Exchange Commission (SEC) for regulatory reports, annual and quarterly filings, and other essential disclosures.