Kimball Electronics Reports Q4 and Fiscal Year 2022 Results With Record Sales and Strong Operating Margin; Company Guides to Another Record-Setting Year in Fiscal 2023

Kimball Electronics, Inc. (Nasdaq: KE) today announced financial results for the fourth quarter and fiscal year ended June 30, 2022.

(1) A reconciliation of GAAP and non-GAAP financial measures is included below.

Donald D. Charron, Chairman and Chief Executive Officer, stated, "I am very pleased with Q4 and full year fiscal 2022 results. For the second consecutive quarter, net sales reached an all-time high for the company, and operating income margin exceeded 5%. These results were in-line with the guidance we provided in May, and required the highest levels of partnership across the value chain, including our global organization, our customers, the OEMs, and our suppliers."

Mr. Charron continued, "In total, fiscal 2022 was very much the bifurcated year we expected, with a strong second half driving annual revenue to record levels. The world continues to experience unprecedented events and circumstances, and the lockdowns associated with China's zero-tolerance policy on COVID-19 have been a reminder of how unpredictable the current environment can be. Our company is embracing this ever-changing landscape with commitment and resolve, engaging in customer collaboration at levels even higher than our award winning norm. This is contributing to winning new business, and expanding existing programs, that have us poised for growth as we look forward. With a backlog of open orders exceeding $1 billion, our guidance reflects the strength continuing with double-digit sales increases and improving margin rates in fiscal year 2023. We will experience a quarterly step up in performance due to new and existing programs ramping up volumes, steadily improving leverage of our completed facility expansions, and continued easing of global supply chain constraints."

Fiscal Year 2023 Guidance

• Net sales in the range of $1.6 - $1.7 billion, a 19% - 26% increase year-over-year
• Operating income in the range of 4.6% - 5.2% of net sales
• Capital expenditures in the range of $80 - $100 million, supporting the facility expansion in Poland, new product introductions, and the addition of equipment with leading-edge technologies and capabilities

Fourth Quarter Fiscal 2022 Overview

• Cash flow provided by operating activities of $1.5 million during the fourth quarter of fiscal 2022
• Cash conversion days ("CCD") for the quarter ended June 30, 2022 were 91 days, up from 64 days in the fourth 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 $25 million during the quarter
• Returned $4.2 million to Share Owners during the quarter in the form of common stock repurchases
• Cash and cash equivalents of $49.9 million and borrowings outstanding on credit facilities of $180.6 million at June 30, 2022, including $145.0 million classified as long term

Net Sales by Vertical Market for Fiscal 2022:

Fiscal Year 2022 Overview:

• Net sales for fiscal year 2022 totaled $1,349.5 million, an all-time annual high and up 4% year-over-year, and foreign currency had a 1% unfavorable impact on net sales compared to fiscal year 2021
• Cash flow used for operating activities of $83.2 million, primarily driven by an increase in inventory
• Capital expenditures were $75 million, supporting facility expansions in Thailand, Mexico, and Poland
• Returned $9.1 million to Share Owners in the form of common stock repurchases
• Return on invested capital of 7.2%; ROIC is a non-GAAP financial measure, see reconciliation of non-GAAP financial measures

Jana T. Croom, Chief Financial Officer, stated, "Fiscal 2022 was a good year for our company with record results on the top line, and a strong funnel of new business increasing our backlog of open orders. We executed a capital deployment strategy that included investing in future growth with expansions at multiple facilities, returning cash to Share Owners in the form of stock repurchases, and supporting our customers with strategic inventory builds to mitigate parts shortages, even though the increases adversely impacted certain financial metrics including cash flow, CCD, and ROIC. We fully expect improvement in these areas as conditions normalize in the global supply chain."

Forward-Looking Statements

Certain statements contained within this release are considered forward-looking, including our fiscal year 2023 guidance, under the Private Securities Litigation Reform Act of 1995. The statements may be identified by the use of words such as "expect," "should," "goal," "predict," "will," "future," "optimistic," "confident," and "believe." Undue reliance should not be placed on these forward-looking statements. These statements are based on current expectations of future events and thus are inherently subject to uncertainty. If underlying assumptions prove inaccurate or known or unknown risks or uncertainties materialize, actual results could vary materially from our expectations and projections. These forward-looking statements are subject to risks and uncertainties including, without limitation, global economic conditions, geopolitical environment and conflicts such as the war in Ukraine, global health emergencies including the COVID-19 pandemic, availability or cost of raw materials and components, foreign exchange rate fluctuations, and our ability to convert new business opportunities into customers and revenue. Additional cautionary statements regarding other risk factors that could have an effect on the future performance of the company are contained in its Annual Report on Form 10-K for the year ended June 30, 2021.

Non-GAAP Financial Measures

This press release contains non-GAAP financial measures. The non-GAAP financial measures contained herein include adjusted operating income, adjusted net income, adjusted diluted EPS, and ROIC. Reconciliations of the reported GAAP numbers to these non-GAAP financial measures are included in the Reconciliation of Non-GAAP Financial Measures section below. Management believes these measures are useful and allow investors to meaningfully trend, analyze, and benchmark the performance of the company's core operations. The company's non-GAAP financial measures are not necessarily comparable to non-GAAP information used by other companies.

About Kimball Electronics, Inc.

Kimball Electronics is a multifaceted manufacturing solutions provider of electronics and diversified contract manufacturing services to customers around the world. From our operations in the United States, China, India, Japan, Mexico, Poland, Romania, Thailand, and Vietnam, our teams are proud to provide manufacturing services for a variety of industries. Recognized for a reputation of excellence, we are committed to a high-performance culture that values personal and organizational commitment to quality, reliability, value, speed, and ethical behavior. Kimball Electronics, Inc. (Nasdaq: KE) is headquartered in Jasper, Indiana.

To learn more about Kimball Electronics, visit: www.kimballelectronics.com.

For those unable to participate in the live webcast, the call will be archived at investors.kimballelectronics.com.

Lasting relationships. Global success.

Financial highlights for the fourth quarter and fiscal year ended June 30, 2022 are as follows:

(1) Average invested capital is computed using Share Owners' equity plus current and non-current debt less cash and cash equivalents averaged for the last five quarters.