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Kimball Electronics, Inc. announced financial results for the third quarter ended March 31, 2022.
Donald D. Charron, Chairman and Chief Executive Officer, stated, “I am very pleased with the results in Q3. Sales exceeded our all-time high in a quarter by 10%, operating margin was 5.5% of net sales, which is significantly better than the first half of the fiscal year and 80 basis points higher than a year ago, and diluted EPS increased by more than 30% year-over-year. With our backlog of open orders at record levels, and manufacturing facilities running at higher utilization and expanding capacity, we are ideally positioned to maintain strength and momentum in this bifurcated year, and we expect a strong pace to carry through the fourth quarter. I continue to be extremely impressed with our team, and how we’ve managed the global supply chain issues stemming from the pandemic and component parts shortages.”
Charron continued, “The challenges in Q3, however, were compounded by the devastation in Ukraine. We have Ukrainian associates in our U.S. and European operations, and facilities located in nearby Poland and Romania. Our number one priority has been the health and safety of our associates, and supporting their families directly affected by the conflict. We are also closely monitoring the impact of China’s zero tolerance policy related to COVID-19. Several cities experienced shutdowns recently due to a rise in COVID cases. If shutdowns continue to occur in major cities across China, there may be temporary disruptions in both the supply chain and demand as our customers balance manufacturing delays. We’ve updated our guidance for net sales to reflect the uncertainty from these developments; however, we are reiterating our guidance for operating income margin for fiscal year 2022.”
- Third Quarter Fiscal 2022 Overview
- Net sales increased 19% compared to the third quarter of fiscal year 2021. Foreign currency had a 2% unfavorable impact on net sales in the quarter compared to the same period a year ago.
- Cash flow used for operating activities of $28.2 million during the third quarter of fiscal 2022, driven by an increase in accounts receivable as a result of the strong sales in the quarter.
- Cash conversion days (“CCD”) for the quarter ended March 31, 2022 were 83 days, up from 66 days in the third quarter of fiscal year 2021, driven by an increase in inventory. CCD is calculated as the sum of days sales outstanding plus contract asset days plus production days supply on hand less accounts payable days.
- Investments in capital expenditures were $22.3 million during the quarter.
- Returned $4.9 million to Share Owners during the quarter in the form of common stock repurchases.
- Cash and cash equivalents of $35.6 million and borrowings outstanding on credit facilities of $137.1 million at March 31, 2022, including $95.0 million classified as long term.
Fiscal Year 2022 Guidance
The company is updating its guidance for fiscal year 2022 with net sales estimated to be in the range of $1.345 - $1.365 billion, a 4% - 6% increase year-over-year. The company’s previous guidance for net sales was approximately $1.4 billion. The company is reiterating its guidance for operating income margin, which is expected to be in the range of 3.75% - 4.25%, and capital expenditures, which are expected to be in the range of $70 - $80 million.
Charron continued, “We are very pleased with how the company is positioned. Q3 results were excellent. While supply chain disruptions from the pandemic continue to normalize and improve, the recent wave of lockdowns in China add a level of unpredictability that did not exist a few months ago. We expect the fourth quarter to be robust with net sales in the range of $370 to $390 million, and operating margin once again above 5%. Our record level of open orders, and recent facility expansions, support our growth objectives as we look toward the $2 billion annual revenue milestone. Finally, our hearts and thoughts are with all people both inside and outside the Kimball Electronics family impacted by the tragic turn of events in Ukraine.”