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KE

Kimball Electronics, Inc. (KE)·Q4 2025 Earnings Summary

Executive Summary

  • Q4 2025 net sales were $380.5M (+2% q/q; -12% y/y) with adjusted operating income at 5.2% of sales and adjusted diluted EPS of $0.34; GAAP diluted EPS was $0.26 .
  • Results were better than internal expectations, driven by sequential sales growth, margin improvement, and strong cash generation; CCD fell to 85 days (lowest in 3 years), and debt was reduced by $31.3M q/q .
  • FY 2026 guidance: net sales $1.35–$1.45B (down 2%–9% y/y), adjusted operating income 4.0%–4.25% of sales, CapEx $50–$60M; automotive expected to decline due to a full-year impact from the Reynosa braking program loss (~$60M headwind), partly offset by medical and industrial growth .
  • Versus S&P Global consensus, Q4 revenue beat by ~$47.3M* ($380.5M actual vs $333.2M*), and adjusted EPS beat by ~$0.16* ($0.34 actual vs $0.185*); EBITDA also exceeded consensus (actual $28.7M* vs $18.2M*) ; values retrieved from S&P Global*.

What Went Well and What Went Wrong

What Went Well

  • “Q4 came in better than expected, as sales increased sequentially, margins improved, and working capital management drove our sixth consecutive quarter of positive cash flow” — CEO Rick Phillips .
  • Medical vertical sales rose 5% y/y to $107.2M (28% of total), supported by a step-up with the largest medical customer and sole-source selection for respiratory care HLAs and final assembly (Thailand) .
  • Working capital and liquidity strengthened: CCD improved to 85, inventory fell $23.1M q/q to $273.5M, cash from operations was $78.1M, and borrowings dropped to $147.5M .

What Went Wrong

  • Total net sales declined 12% y/y, with automotive down 13% and industrial down 12% y/y; gross margin decreased to 8.0% (-50 bps y/y) due to lower absorption from reduced sales .
  • Elevated tax rate in Q4 (48.3%) due to GILTI and withholding taxes on repatriation, partially offset by lower interest expense; FY25 effective tax rate landed at 35% .
  • Ongoing headwinds in automotive from the loss of the Reynosa braking program and softer EV steering demand; industrial faced broad-based declines in NA and Europe, with Asia flat .

Financial Results

MetricQ2 2025Q3 2025Q4 2025
Revenue ($USD Millions)$357.4 $374.6 $380.5
Gross Margin %6.6% 7.2% 8.0%
Operating Margin % (GAAP)2.3% 3.1% 4.3%
Adjusted Operating Margin %3.7% 4.2% 5.2%
Diluted EPS (GAAP)$0.14 $0.15 $0.26
Adjusted Diluted EPS (non-GAAP)$0.29 $0.27 $0.34
Q4 2025 Segment Net SalesAmount ($USD Millions)Mix (%)y/y Change
Automotive$183.7 48% -13%
Medical$107.2 28% +5%
Industrial (ex-AT&M)$89.6 24% -12%
Total Net Sales$380.5 100% -12%
Key KPIsQ2 2025Q3 2025Q4 2025
Cash Conversion Days (CCD)107 99 85
Open Orders ($USD Millions)$564 $642 $702
Inventory ($USD Millions)$306.2 $296.6 $273.5
Cash from Operations ($USD Millions)$29.5 $30.9 $78.1
Borrowings ($USD Millions, credit facilities)$205.0 $178.8 $147.5
CapEx ($USD Millions)$6.5 $4.0 $9.6
Actual vs S&P Global Consensus (Quarter)Q3 2025Q4 2025
Revenue Actual ($USD Millions)$374.6 $380.5
Revenue Consensus Mean ($USD Millions)$338.1*$333.2*
EPS Actual (Adjusted Diluted) ($USD)$0.27 $0.34
Primary EPS Consensus Mean ($USD)$0.19*$0.185*
EBITDA Actual ($USD Millions)$22.845*$28.713*
EBITDA Consensus Mean ($USD Millions)$20.499*$18.212*

Values retrieved from S&P Global*.

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Net SalesFY 2025 (as of Q3)$1.40–$1.44B N/AMaintained (reiterated)
Adjusted Operating Income MarginFY 2025 (as of Q3)3.4%–3.6% N/AMaintained (reiterated)
CapExFY 2025 (as of Q3)$40–$50M N/AMaintained
Net SalesFY 2026 (as of Q4)N/A$1.35–$1.45B New
Adjusted Operating Income MarginFY 2026 (as of Q4)N/A4.0%–4.25% of sales New
CapExFY 2026 (as of Q4)N/A$50–$60M New
Tax RateFY 2026 (as of Q4)~30% FY25 outlook Low 30% Maintained/clarified
Automotive SegmentFY 2026N/ADecline due to Reynosa braking program loss (~$60M impact) Lowered
SG&A (Adjusted, % of sales)FY 2026~3% in FY25 quarterly prints ~3.5% targeted going forward Raised (investment to support growth)

Earnings Call Themes & Trends

TopicQ2 2025 (Prior-2)Q3 2025 (Prior-1)Q4 2025 (Current)Trend
Medical CMO strategyRepositioning: divest non-core AT&M, Tampa closure; sharpened focus on medical CMO Announced 300k sq ft Indianapolis facility; reiterated top-end FY25 guide; medical revenue included $24M consigned sale impact Sole-source win for respiratory HLAs/final assembly; Indy opening planned Nov; automation and margin accretion expected Accelerating execution
Tariffs/macroGlobal uncertainties noted in safe harbor and outlook Monitoring tariff environment; potential mitigation via production shifts and pass-through Tariff approach: not importer of record in many cases; pass-through mindset; qualify alt. supply sources Proactive mitigation
Working capital/CCD4th consecutive quarter of positive CFO; inventory reduction; debt paydown CCD improved to 99; strong CFO; borrowings cut CCD 85 (3-year low); CFO $78.1M; further initiatives planned Improving structurally
Automotive programsAT&M divested; demand softness; updated FY25 outlook Reynosa braking program decline; Romania braking ramp; EV steering demand soft FY26 headwind ~$60M from Reynosa braking loss; Romania ramp continues Mixed: legacy decline, EU ramp
Cost structure/OpExRestructuring actions; CapEx $6.5M; updated FY25 margins Adjusted SG&A ~3% of sales; restructuring benefits; CapEx tracking low end SG&A to ~3.5% to support growth; FY26 adj OI margin 4.0%–4.25% Investment phase
Industrial trendsBroad y/y declines; smart meters commoditization Broad declines; stability emerging in climate control Early stability in climate control; Asia flat; NA/EU declines Stabilizing pockets

Management Commentary

  • CEO: “Q4 came in better than expected, as sales increased sequentially, margins improved, and working capital management drove our sixth consecutive quarter of positive cash flow… Our balance sheet is now in a position of competitive strength” .
  • CFO: “Fiscal 2026 will be a year of transition… modest top line growth in medical and industrial… offset by a decline in automotive… CapEx will be heavily weighted toward our new facility in Indianapolis” .
  • CEO on medical CMO: “The medical market presents a compelling opportunity… we anticipate positive top line growth… our strategy is to pursue growth with blue chip customers with long product life cycles and a high degree of visibility” .
  • CFO on SG&A: “All four quarters… were at an adjusted SG&A rate of 3% of sales or lower… [but] we are not going to be able to hold SG&A to 3%; model ~3.5% as we invest for growth” .

Q&A Highlights

  • Indianapolis medical facility timing and capacity: grand opening planned in November; 300k sq ft with capacity for “hundreds of millions of dollars” of business; lease structured to avoid rent during build-out; CapEx and automation to support margin accretion .
  • Tariffs: KE often not importer of record; expects pass-through to customers; leveraging global footprint and qualifying alternate supply sources to maintain flexibility .
  • Sole-source medical award: KE will be sole supplier for respiratory care HLAs/final assembly, largely in Thailand; favorable to stickiness and margins; no second supplier .
  • Working capital: CCD targeted toward ~75 days over time; initiatives include AR factoring, supplier financing, better inventory turns with customers, and improved visibility to volumes .
  • Automotive: Reynosa braking program falls off by end of Q4; Romania braking program ramping; EV steering demand monitored; FY26 ~$60M headwind from the loss .

Estimates Context

  • Q4 2025 actual revenue of $380.5M vs S&P Global consensus $333.2M* — significant beat; Q4 adjusted EPS $0.34 vs consensus $0.185* — significant beat; Q4 EBITDA $28.7M* vs consensus $18.2M* — beat . Values retrieved from S&P Global*.
  • Q3 2025 actual revenue of $374.6M vs S&P Global consensus $338.1M*; adjusted EPS $0.27 vs $0.19* — beat . Values retrieved from S&P Global*.
  • Implication: Street models likely need to raise near-term revenue/EPS for the core EMS/medical mix and incorporate FY26 segment headwinds and higher SG&A ratio to support growth .

Key Takeaways for Investors

  • Sequential improvement with a robust Q4 cash generation, lower CCD, and reduced borrowings strengthens balance sheet resilience into FY26 .
  • Medical CMO strategy is gaining tangible traction (sole-source award, Indy facility); management expects segment to be margin-accretive as automation scales .
  • Automotive remains a drag near term due to the Reynosa program loss; watch Romania braking ramp and EV steering demand for stabilization signals .
  • FY26 guide embeds ~flat underlying sales absent one-time impacts; adjusted OI margin guided at 4.0%–4.25% and SG&A trending to ~3.5% to fund growth .
  • Non-GAAP adjustments meaningfully affect EPS; adjusted diluted EPS excludes stock comp, SERP, restructuring, and asset impairment/gains; track reconciliations for true run-rate profitability .
  • Near-term estimate revisions likely positive for medical and margin trajectory; medium-term thesis hinges on execution at Indy, medical wins scaling, and EMS demand normalization .

Values retrieved from S&P Global*.

Citations:

  • Q4 2025 8-K earnings release and exhibits ; Supporting press release ; Date announcement .
  • Q4 2025 earnings call transcript .
  • Q3 2025 8-K and call ; –.
  • Q2 2025 8-K .