Earnings call transcript: Kimball Electronics Q4 2025 beats earnings expectations

Kimball Electronics reported its fiscal fourth-quarter 2025 earnings, surpassing analyst expectations with an earnings per share (EPS) of $0.34, compared to the forecasted $0.20. This 70% positive surprise was accompanied by actual revenue of $380.5 million, exceeding the forecast of $345.01 million. Following the announcement, Kimball Electronics’ stock surged by 10.49% to $22.49 in premarket trading, reflecting strong investor confidence. According to InvestingPro data, the stock has delivered impressive returns, gaining over 22% in the past six months and trading near its 52-week high. InvestingPro analysis suggests the stock is currently in overbought territory, with 8 additional real-time ProTips available for subscribers.

Key Takeaways

• Kimball Electronics’ EPS exceeded expectations by 70%.
• Revenue surpassed forecasts by 10.29%.
• The stock price increased by 10.49% in premarket trading.
• The company achieved record annual cash flow of $183.9 million.
• Debt was reduced by 50% during the fiscal year.

Company Performance

Kimball Electronics demonstrated robust performance in the fourth quarter of 2025, with net sales reaching $381 million, marking an 8% year-over-year decline when excluding divested businesses. Despite this decline, the company reported its third-highest annual net sales in its 60-year history at $1.487 billion. The company’s focus on cost optimization and operational efficiency is evident, as it reduced selling and administrative expenses by 23% and improved cash conversion days from 100 to 85. InvestingPro metrics reveal a strong financial health score of 2.7 (rated as GOOD), with a current ratio of 2.2 indicating solid liquidity. For detailed analysis and valuation metrics, investors can access the comprehensive Pro Research Report, available exclusively to InvestingPro subscribers.

Financial Highlights

• Revenue: $380.5 million, exceeding forecasts by 10.29%
• Earnings per share: $0.34, 70% above expectations
• Adjusted Operating Income: $61.3 million, representing 4% of net sales
• Cash Generated from Operations: $183.9 million, a record high
• Debt Reduction: 50% during fiscal year

Earnings vs. Forecast

Kimball Electronics significantly outperformed its earnings forecast with a 70% surprise in EPS, achieving $0.34 compared to the expected $0.20. The revenue of $380.5 million also exceeded the forecast by 10.29%. This strong performance highlights the company’s ability to surpass market expectations and reflects positively on its financial management strategies.

Market Reaction

Following the earnings announcement, Kimball Electronics’ stock rose by 10.49% to $22.49 in premarket trading. This increase positions the stock closer to its 52-week high of $24.24, signaling strong investor confidence. The stock’s upward movement contrasts with broader market trends, showcasing Kimball Electronics’ resilience and appeal to investors.

Outlook & Guidance

Looking forward to fiscal 2026, Kimball Electronics projects net sales between $1.35 billion and $1.45 billion, indicating a potential decrease of 2-9% from the previous year. The company expects adjusted operating income to remain steady at 4-4.25% of net sales. InvestingPro analysis shows the company trading at a P/E ratio of 31.55, with analysts forecasting EPS of $1.08 for FY2026. While the company maintains strong free cash flow yields, InvestingPro’s Fair Value assessment suggests the stock may be slightly overvalued at current levels. Subscribers can access detailed valuation models and 10 additional ProTips to make informed investment decisions. Capital expenditures are anticipated to range from $50 million to $60 million. The company aims for modest growth in its medical and industrial segments, continuing its strategic focus on Medical Contract Manufacturing Organization (CMO) initiatives.

Executive Commentary

CEO Rick Phillips emphasized the strategic direction, stating, "We’re approaching our medical CMO strategy with additional steps to position the company growth." CFO Janet Kroome highlighted operational efficiency, saying, "More revenue translates into better capacity utilization, translates into higher margin."

Risks and Challenges

• Supply Chain Issues: Potential disruptions could impact production and delivery timelines.
• Market Saturation: Increased competition in the medical and automotive sectors may pressure margins.
• Macroeconomic Pressures: Economic downturns could affect consumer spending and demand.
• Regulatory Changes: New regulations in the medical device industry could increase compliance costs.
• Currency Fluctuations: Changes in exchange rates could impact international sales and profitability.

Q&A

During the earnings call, analysts inquired about the company’s sole-source medical customer relationship and potential industrial adjacencies. Executives confirmed the strength of their medical partnerships and discussed strategies to navigate global tariff challenges while optimizing working capital.

Full transcript - Kimball Electronics (KE) Q4 2025:

Daryl, Conference Call Facilitator: Good morning, ladies and gentlemen. Welcome to the Kimball Electronics Fourth Quarter Fiscal twenty twenty five Earnings Conference Call. My name is Daryl, and I will be the facilitator for today’s call. All lines have been placed in a listen 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.

Today’s call, 08/14/2025, 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 Andy Regra, Treasurer and Investor Relations Officer. Mr. Regra, you may begin.

Andy Regra, Treasurer and Investor Relations Officer, Kimball Electronics: Thank you and good morning everyone. Welcome to our fourth quarter conference call. With me here today is Rick Phillips, our Chief Executive Officer and Janet Kroome, Chief Financial Officer. We issued a press release yesterday afternoon with our results for the fourth quarter and full fiscal year ended 06/30/2025. To accompany today’s call, a 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 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 twenty twenty six and Rick will complete our prepared remarks before taking your questions. I’ll now turn the call over to Rick.

Rick Phillips, Chief Executive Officer, Kimball Electronics: Thanks Andy and good morning everyone. I’m encouraged by the results for the fourth quarter and the solid finish to the fiscal year. Q4 came in better than expectations as sales increased sequentially, margins continued to improve and working capital management drove our sixth consecutive quarter of positive cash flow, which was used to pay down debt. Our balance sheet is now in a position of competitive strength with ample liquidity to weather an unpredictable environment while providing dry powder for opportunistic investments. In total, fiscal twenty twenty five was a year of controlling what we could control.

I am proud of our team as we made significant progress positioning the company for a return to profitable growth with noteworthy accomplishments including a record number of wins for future business, a meaningful increase in the number of green customer scorecards, quality ratings at a fifteen year high, adjusting the cost structure and aligning the portfolio to demand trends and intensifying our focus as a medical CMO. The new 300,000 square foot medical facility in Indianapolis, which we announced last quarter is an important milestone in this strategy. It provides the space needed to expand our production capabilities beyond traditional printed electronics and circuit board encompassing cold chain management, complete device assembly and precision molded plastics. Our current manufacturing includes medical disposables, single use surgical instruments and selected drug delivery devices such as auto injectors. Additionally, we’re looking to expand applications in areas such as cardiology, orthopedics, minimally invasive surgery and surgical instruments and packaging.

The medical market presents a compelling opportunity to diversify revenue and leverage our core strengths as a trusted partner in a complex and regulated industry. We expect fiscal twenty twenty six to be another step forward in this journey and we anticipate positive top line growth for the company overall margins. Turning now to the fourth quarter. Net sales for the company were $381,000,000 an 8% decline compared to Q4 last year when excluding the automation test and measurement business that was divested. For the second consecutive quarter, our medical business grew year over year, while the other two verticals we serve reported declines.

Sequentially, however, the top line increased 2% compared to Q3. Remember the third quarter included a $24,000,000 non recurring consigned inventory sale in the medical vertical. So the sequential sales for recurring business are even more encouraging than what’s at the surface. Sales in Medical were $107,000,000 up 5% compared to the same period last year and 28% of total company revenue. The increase in Q4 was driven by a step up in sales with our largest medical customer, a welcomed reprieve after a long period of decline during the FDA recall.

We expect the growth with this customer to continue as we were selected as the sole supplier for the respiratory care final assembly and higher level assemblies business with most of the production occurring in our facility in Thailand. Similar opportunities are possible as the population ages, access and affordability to healthcare increases, medical devices get smaller in size and require higher levels of precision and accuracy and connected drug delivery systems become more common as consumer adoption increases. In general, HLAs and finished medical devices are great business for us as the cost of sales is lower and the revenue potential is higher than what is customary with contract manufacturing and EMS. And this business increases our stickiness with customers. Next is automotive with net sales of 184,000,000 a 13% decrease compared to the fourth quarter of last year and 48% of the total company.

The decline in Q4 was driven by the electronic braking program that as previously announced is no longer being produced in Reynosa as a result of commercial agreement by the OEM to transfer to another source. This impact was partially offset by the ramp up of a similar but separate braking program in Romania. In addition, we continue to carefully monitor the demand for electronic steering systems for EVs which were lower in the quarter. Finally, Industrial with net sales of $90,000,000 down 12% year over year when excluding AT and M and representing 24% of total company sales. We see early signs of stability with Climate Control Systems, but this was offset by broad based declines segments in North America and Europe.

Asia was approximately flat in Q4. I’ll now ask Janna to provide more detail on the financial results for Q4 and our guidance for fiscal twenty twenty Jana?

Janet Kroome, Chief Financial Officer, Kimball Electronics: Thank you and good morning everyone. As Rick detailed, net sales in the fourth quarter were $380,500,000 a 12% decrease year over year, down 8% when excluding AT and M. Foreign exchange had a 1% favorable impact on consolidated sales in Q4. The gross margin rate in Q4 was 8%, a 50 basis point decrease compared to 8.5% in the same period of fiscal twenty twenty four with lower absorption and outcome from reduced year over year sales driving the decline in rate. However, representing significant sequential improvement over the course of the fiscal year.

Adjusted selling and administrative expenses in the fourth quarter were $10,800,000 a $3,200,000 or 23% reduction compared to the $14,000,000 we reported in Q4 last year. The decrease occurred from our cost reduction efforts, reduced bonus expense and not having AT and M in our portfolio this year versus a full quarter of expense in fiscal twenty twenty four. When measured as a percentage of sales, adjusted selling and administrative expenses were 2.8%, a 40 basis point improvement compared to 3.2 in 2024. This is consistent with our commitment to control what we can control. All four quarters in the year were at an adjusted SG and A rate of 3% of sales or lower.

Adjusted operating income for the fourth quarter was $19,600,000 or 5.2% of net sales, which compares to last year’s adjusted results of $22,700,000 or 5.3% of net sales. The third consecutive quarter of growth in absolute dollars and as a percentage of net sales. Other income and expense was expense of $3,800,000 compared to $6,100,000 of expense last year with interest expense which was down nearly 50% year over year responsible for the change. The effective tax rate in the fourth quarter was 48.3 compared to 44% in 2024. As you may recall, last year’s rate was skewed higher by the impacts of a domestic valuation allowance and the impairment and restructuring charges associated with AT and M.

We ended the year with an effective tax rate of 35% driven by the inclusion of GILTI income, which is subject to U. S. Taxation despite being earned by our foreign subsidiaries and withholding tax related to cash repatriation from our foreign subsidiary, which is offset by lower interest expense on our borrowings. In fiscal twenty twenty six, we expect a tax rate in the low 30%. Adjusted net income in the 2025 was $8,400,000 or $0.34 per diluted share compared to adjusted net income in Q4 last year of $9,700,000 or $0.38 per diluted share.

Turning now to the balance sheet. Cash and cash equivalents at 06/30/2025 were $88,800,000 Cash generated by operating activities in the quarter was $78,100,000 our sixth consecutive quarter of positive cash flow. Cash conversion days were eighty five days compared to one hundred days in 2024 and ninety nine days last quarter. This represents our lowest CCD in three years with the decrease this quarter compared to Q3 driven by all components of the calculation with PDSOH showing We see additional opportunity to drive higher levels of cash from our EMS operations, while continuing to reduce CCD with new working capital initiatives that will be rolled out in FY twenty six. Inventory ended the quarter at $273,500,000 a $23,100,000 reduction compared to Q3 and $64,600,000 or 19% lower than a year ago.

Capital expenditures in the fourth quarter were $9,600,000 For the full year, CapEx was $33,700,000 primarily to support new product introductions and maintenance needs. Borrowings at 06/30/2025 were $147,500,000 a $31,300,000 reduction from the third quarter and down $147,300,000 or 50% from the beginning of the fiscal year. Short term liquidity available represented as cash and cash equivalents plus the unused portion of our credit facilities totaled $380,500,000 at the end of the fourth quarter. We invested $3,000,000 in Q4 to repurchase 162,000 shares. Since October 2015, under our Board authorized share repurchase program, a total of $103,700,000 has been returned to our shareholders by purchasing 6,600,000.0 shares of common stock.

We have $16,300,000 remaining on the share repurchase program. As Rick mentioned, fiscal twenty twenty five was a year of controlling what we could control and I am proud of our team’s resilience and discipline. We made substantial progress adjusting our cost structure to demand trends throughout the year. We improved our balance sheet with working capital initiatives and aligned the portfolio for future growth expectations. We ended fiscal twenty twenty five with net sales totaling $1,487,000,000 the third highest annual revenue total in the 60 history of the company.

Adjusted operating income of $61,300,000 or 4% of net sales, inventory down nearly 20% year over year, cash generated by operating activities of $183,900,000 a record result for annual cash flow. DCD at our lowest level in three years and debt paid down 50% in the fiscal year and at its lowest level in three years and $12,000,000 invested to repurchase 653,000 shares of common stock. Fiscal twenty twenty six will be a year of transition with net sales in the range of $1,350,000,000 to $1,450,000,000 a 2% to 9% decrease compared to fiscal twenty twenty five adjusted operating income in the range of 4% to 4.25 of net sales compared to 4.1% of net sales in fiscal twenty twenty five and capital expenditures in the range of 50,000,000 to $60,000,000 To put our sales guidance in perspective, two important events occurred in fiscal twenty twenty five that have been normalized when planning for fiscal twenty twenty six. The loss of the breaking program in Reynoso will have a $60,000,000 unfavorable impact in the year. In addition, we do not expect another large consigned inventory sale similar to Q3 to occur again.

Without these two items, our top line guide is approximately flat year over year. We expect modest growth in our medical and industrial businesses, but it will be offset by a decline in automotive. Margins are estimated to be in line with FY 2025 as we repurpose some of the benefit of the Tampa closure to focus on growing the CMO and our core EMS business. It’s important to note that when top line growth returns enhancements to our cost structure should support margin improvement. Capital expenditures will be heavily weighted towards our new facility in Indianapolis, approximately $30,000,000 with the balance supporting growth automation and maintenance.

I’ll now turn the call back over to Rick.

Rick Phillips, Chief Executive Officer, Kimball Electronics: Thanks, Jana. Before we open the lines for questions, I’d like to share a few thoughts in closing. Our company has always focused on high complexity, high reliability programs, whether it’s braking and steering systems in vehicles, motor controls for HVAC systems or diagnostic and therapeutic equipment in the medical field. The emphasis on quality and reliability is deeply embedded in how we operate across all verticals. Internally, we reference a five nines reliability standard, 99.999% as a reflection of the performance and consistency we strive for.

The medical CMO aligns well with this objective and our expertise in a highly regulated, highly engineered complex manufacturing environment. We’re approaching our medical CMO strategy with additional steps to position the company growth. As Jana mentioned, we expect to continue to generate positive cash flow and we will deploy that capital toward growing the CMO. As we evaluate the medical CMO space, we see opportunity for higher EBITDA EBITDA margins. Our strategy is to pursue growth with blue chip customers with long product life cycles and a high degree of visibility.

Evaluate It’s not just about adding capabilities, it’s about building a scalable platform that supports the work we already do well, creates opportunities for vertical integration and positions us to take on more of the complex programs that align with our strengths. Drug delivery has been a key area of focus for us. Our capabilities are well established and with the new Indianapolis facility, we believe we’re well positioned to meet current and future customer needs, but we’re also committed to pursuing inorganic options to augment this space where it makes strategic sense. Throughout this journey, we will stay true to our guiding principles and continue to be collaborative and team oriented, set high long term aspirations, not unrealistic goals but attainable targets that require stretching, communicate openly and proactively and remain accountable to our company, to our customers, to each other and to our shareholders. In closing, I’d like to thank the entire Kimball team for their hard work, focus and dedication as we build tomorrow together.

I’ve never been more excited about the future of the company. Thank you for your support. Daryl, we would now like to open the lines for questions.

Daryl, Conference Call Facilitator: Thank Our first questions come from the line of Mike Crawford with B. Riley Securities. Please proceed with your questions.

Mike Crawford, Analyst, B. Riley Securities: Thank you. Can you remind us the timing of when the new facility in Indianapolis will be ready and the potential revenue capacity of that building?

Rick Phillips, Chief Executive Officer, Kimball Electronics: Yes, Mike. Thanks for joining us. So we are planning the grand opening that facility in November. We’re obviously working on, it was completely empty new building. So we’re working on that.

At that point, we will start to get equipment in there and get ready to produce. That facility is at 300,000 square feet has a lot of capacity for growth. In addition to that, the way that that space is configured, we could expand further from there as needed. But we could handle hundreds of millions of dollars business in that facility depending on the size of programs that ramp up.

Janet Kroome, Chief Financial Officer, Kimball Electronics: Well in excess of $05,000,000,000

Mike Crawford, Analyst, B. Riley Securities: Okay. Great. And I’m pleased to hear your capital allocation focus on the Medical CMO. What about some other directions you’ve been considering the past year like industrial adjacencies?

Rick Phillips, Chief Executive Officer, Kimball Electronics: Yes. So we continue to, Mike to try to take a really sharp strategic lens to where we’re focused. We have been in some interesting discussions in industrial to your point, which would get us beyond areas that we’re currently in. We don’t have anything to announce on that front at this point. In automotive, we continue, as you know, to feel that the steering and braking that we’ve been focused on is a great fit for us and gives us great potential moving forward.

So we do think it’s a combination, obviously a big ramp up in the medical CMO, but we see opportunities across all of our verticals.

Mike Crawford, Analyst, B. Riley Securities: Okay. Thank you. And then just one last one for me. It’s nice to hear your sole source for Philips in Thailand and I guess that you don’t really have that many tariff issues with them given their problems in The U. S.

But what about tariffs in general for your global footprint? Thank you.

Rick Phillips, Chief Executive Officer, Kimball Electronics: Yes. Just a couple of comments on that. I mean, one reminder is that for the majority of our business, we are not typically the importer of record, which provides us a little bit of protection. We also have mindset and approach with our customers that the tariffs are a pass through. So if they hit us they hit others.

The other thing that we’ve done is just take some no regrets moves given how uncertain the tariff environment is. So we talk to our customers and are clear on the pass through approach that we expect. We talk to customers proactively about, as you well know, we have a global network. And if you want to leverage it in a different way based on your strategy and how tariffs are affecting you, we’re happy to talk about leveraging all of our And we also work to qualify alternative sources of supply in different countries just to provide flexibility depending on which directions those go. So that’s been our approach.

And like everyone else, we wake up in the morning and see what changed, but we’re trying to be flexible and take that approach.

Mike Crawford, Analyst, B. Riley Securities: Great. Thank you.

Daryl, Conference Call Facilitator: Thank you. Our next questions come from the line of Derek Sauterberg with Cantor Fitzgerald. Please proceed with your questions.

Derek Sauterberg, Analyst, Cantor Fitzgerald: Yes. Hey, everyone. Congrats on the results. Thanks for taking the questions. I want to start with the large medical customer.

You’re going be the sole supplier with final assembly, higher level assembly with that customer. Can you remind us what you were doing for the respiratory program the last time? Was it a similar type of arrangement? I was wondering if you can comment on sort of the margin profile change of that program.

Janet Kroome, Chief Financial Officer, Kimball Electronics: So there’s not really a margin profile change from what we were producing with them before. We’re just starting to produce for them again, which is a really good sign. It’s been a great customer. We were doing higher level full and final assembly for them prior. And there have not really been material changes, really any changes to the contract terms.

We’re just starting up again, which feels really, really great.

Derek Sauterberg, Analyst, Cantor Fitzgerald: And Janet, you say that program was coming out of Thailand, your Thailand facility?

Janet Kroome, Chief Financial Officer, Kimball Electronics: Yes, it’s coming out of our Thailand facility.

Derek Sauterberg, Analyst, Cantor Fitzgerald: Got it. Got it. Okay.

Janet Kroome, Chief Financial Officer, Kimball Electronics: The Actually, let me restate that because what I just said was not entirely correct. We had started off the relationship doing printed circuit board assemblies. We had moved into doing some full and final assembly for them, but they had their own footprint in The U. S. We will be doing full and final assembly for all of their manufacturing now.

They won’t be doing any of it. It will all be supported by us. And there’s not a second supplier. It’s Kimball solely.

Derek Sauterberg, Analyst, Cantor Fitzgerald: Got it. Got it. That’s great to hear. And then Jana, while I have debt levels here pretty low. I actually wanted to discuss the cash conversion days improving quite a bit here.

Is there sort of a structural new low for you guys as a company? It sounds like there’s some room to improve that. What sort of changing are these sort of initiatives you’re taking as a company that’s improving this? Is the industry kind of changing? What can you talk about some of those initiatives?

And I guess how much room you have to continue to improve that number? Thanks.

Janet Kroome, Chief Financial Officer, Kimball Electronics: Yes, that’s a great question. I don’t know so much that the industry is changing as much as things are a pendulum, right? And so you had just in time inventory and then COVID hit. And then everybody said, we want you to carry a ton of inventory. And we said, well, that’s fine, but you’ve got to give us carrying costs

And what you’re seeing is more of a return to normal, right? So sixty five days is too tight, but one hundred days is too wide. We’re sitting at eighty five days now with goal to get down more towards seventy five ish days. And there are a variety of things that you can do. You can offer AR factoring programs.

You can offer supplier financing programs. It’s really about controlling AR and AP days as you think about what that means for your DSO. PDSOH is much more a function of working with the customer on inventory turns. How much safety stock do we really need to have, getting better controls over longer line of sight around production and volume levels fifteen, eighteen, twenty four months out, which you know has been something that I do believe the industry in total has been challenged yet. And so just really getting better about that discipline and partnership with your entire supply chain.

Derek Sauterberg, Analyst, Cantor Fitzgerald: Got it. That’s super helpful. Thanks, Jana. Thanks, everyone.

Daryl, Conference Call Facilitator: Thank you. Our next questions come from the line of Anja Sodershomme with Sidoti and Company. Please proceed with your questions.

Anja Sodershomme, Analyst, Sidoti and Company: Hi. Congratulations on the nice progress here. Thank you for taking my questions. So in terms of the margin improvement, is that mainly going to be driven by the operating margin then or?

Janet Kroome, Chief Financial Officer, Kimball Electronics: Well, it’s so gross margin, you’re going to see improvement and that’s a result of a lot of the restructuring that we’ve done, capacity utilization efforts, the shutdown Tampa. We’ve got controls on the SG and A side and a real discipline there too. There’s going to be some investment that we make in order to grow and I alluded to that on the Q3 call, investments around IT innovation that we need to make, investments in business development that are just going to help shore us up for future growth. But as we have more revenue, similar to the question we got about HLA and final finished assembly, more revenue translates into better capacity utilization, translates into higher margin, right? And so that is what you should see once we sort of get past FY 2026, is that really opening up in a more material way as we begin to grow again.

Anja Sodershomme, Analyst, Sidoti and Company: Okay. And you still expect adjusted SG and A to be around 3% of revenue?

Janet Kroome, Chief Financial Officer, Kimball Electronics: 3.5%. This is our history. Yes, 3.5. So it won’t sustainably stay at three. I think I alluded to that on 3Q call.

Anja Sodershomme, Analyst, Sidoti and Company: Okay. Thank you. And then also in terms of you shifting a little bit more focus on to the Medical segment, what kind of changes are you making to sort of sales organization and go to market strategy?

Rick Phillips, Chief Executive Officer, Kimball Electronics: Yes. No, it’s a great question, Anya, and thanks for joining. Yes, we so we’re making hires in business development as one straightforward path. As you know, we brought our Medical businesses together a year or so ago and in doing so really leverages our strong and experienced leaders across the entirety now of that medical vertical. And we’ve also undertaken a pretty comprehensive marketing plan, particularly to support the CMO efforts as we now have capability to do things at scale and at a technology level that we weren’t able to do before.

So yes, we are making big investments as you can imagine with that new facility on the sales side to put effort around that to drive that business over time.

Anja Sodershomme, Analyst, Sidoti and Company: And would you go more heavily into that? Has that changed your sort of competitive guys you compete against? Or is it still the same?

Rick Phillips, Chief Executive Officer, Kimball Electronics: It could have some changes there. What is a great differentiator for us relative to traditional competitors is we have the FDA experience and we have the capability to actually handle the drug. So that from what our customers tell us, that’s a big advantage that allows us to be more sticky with them, allows us to play a bigger role in what they’re doing as well.

Anja Sodershomme, Analyst, Sidoti and Company: Okay. Thank you. And then I’m just curious within Indiana, the new facility there, Will there be a lot of automation there? And how is that sort of affecting the margins?

Rick Phillips, Chief Executive Officer, Kimball Electronics: There will absolutely be a lot of automation there. We expect that, that CMO segment will be accretive to our margins over time just because of the characteristics of the space. So there’ll certainly be significant investments in equipment and automation, but we still think that that space sets us up for margin accretion.

Anja Sodershomme, Analyst, Sidoti and Company: Okay. Thank you. That was all for me.

Daryl, Conference Call Facilitator: Thank you. Our next questions come from the line of Jason Schmitt with Lake Street Capital Markets. Please proceed with your questions.

Jason Schmitt, Analyst, Lake Street Capital Markets: Hey, Thanks for taking my questions. Looking at that Medical segment, obviously, the customer you called out should be a driver here, but are there other pockets of strength that you’re expecting in that segment for this year?

Rick Phillips, Chief Executive Officer, Kimball Electronics: Yes, yes. We’ve actually introduced a number of customers, some we’ve talked about in the past and some we haven’t. But that we are definitely seeing incremental growth over time in Medical beyond that customer. In fact, most of the new customers that we’ve introduced over the last two years have been in that Medical segment. So we do see opportunity to expand.

We think our capabilities fit well. The shift that we’ve had over time to full assembly gives us more opportunities and we’ve really demonstrated capability there.

Jason Schmitt, Analyst, Lake Street Capital Markets: Okay. That’s really helpful. And maybe not even looking at fiscal twenty twenty six, but longer term, when you think about sort of driving growth in this business, how are you thinking about prioritizing sort of new customers versus expanding the number of programs at existing customers or really just kind of hoping that the demand profile of the programs you’ve already won just improves?

Rick Phillips, Chief Executive Officer, Kimball Electronics: Great question. I’d say all the above. I mean, we the quickest return to growth is the programs that we already won a couple of years ago where the demand has been softer than originally projected comes back. We can’t control that, but it certainly can be a short term driver. But beyond that, we are aggressively hunting new business.

We are working very closely. And I feel like our customer relationships across the board are as good as they’ve ever been with existing customers and new programs coming to us. So we think it will be a combination of all those things. The area where you’ll probably see the biggest new customer introduction will be the medical space.

Jason Schmitt, Analyst, Lake Street Capital Markets: Okay. That’s really helpful. I’ll jump back into queue. Thanks guys.

Daryl, Conference Call Facilitator: Thank you. We have reached the end of our question and answer session. And with that, ladies and gentlemen, this does now conclude today’s conference call. The telephone replay will be available approximately three hours after the conclusion of this event. You can access the replay by dialing (877) 660-6853 or (201) 612-7415.

The replay will be available until 08/28/2025, using access ID 1375551. Thanks again for your participation. You may disconnect at this time. Enjoy the rest of your day.

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