Kimball Electronics (NASDAQ:KE) reported higher sales in the first quarter of fiscal 2027, led by growth in its medical business and revenue from its recent acquisition of Helvoet Polymer Technologies. The company reiterated its full-year guidance and said it expects sales to land at the high end of its projected range.
Net sales for the quarter ended Sept. 30 rose 7% from a year earlier to $390.8 million, including 3% organic growth and $12.4 million from Helvoet. Foreign exchange added 1% to consolidated sales, Chief Financial Officer Jana Croom said.
Adjusted net income fell to $6.1 million, or $0.25 per diluted share, from $12.3 million, or $0.49 per share, a year earlier. Croom said the difference in effective tax rates between the periods accounted for approximately $0.12 per share of the decline.
Medical Growth Supports Outlook
Medical sales rose 14% year over year to $116 million, representing 29% of company revenue. Organic medical sales grew 9%, with gains across products including drug delivery devices, respiratory care products and patient monitoring systems, Chief Executive Officer Ric Phillips said.
Industrial sales increased 5% to $105 million, while automotive sales rose 4% to $171 million. Phillips said a new steering program in Poland and preparations for a production transfer in China supported automotive growth, although North American demand remained sluggish, largely because of lower electric vehicle demand.
Kimball reiterated its fiscal 2027 sales guidance of $1.535 billion to $1.560 billion and said it expects to reach the high end of that range. The company also maintained its forecast for adjusted operating income of 4.4% to 4.7% of sales and capital expenditures of $50 million to $60 million.
Croom said core medical sales were stronger than expected, while Helvoet was tracking close to the company’s expectations for approximately $60 million in revenue contribution. Automotive was also coming in somewhat stronger, she said, though some of that increase reflected inflationary pressure.
The CFO cautioned that higher component costs could lift revenue without adding margin in the automotive and industrial businesses. Kimball was monitoring those pressures and was not ready to update its adjusted operating margin forecast, she said.
Margins and Taxes Weigh on Earnings
Gross margin held steady at 7.9%, as a favorable sales mix offset higher material component costs and expenses related to ramping a medical contract development and manufacturing facility in Indianapolis. Adjusted operating income declined to $17 million, or 4.3% of sales, from $17.5 million, or 4.8% of sales, a year earlier.
Croom said memory and other electronic components were tight, with the greatest pressure in automotive and industrial operations. Medical products, which include more full assembly and injection-molded plastics, were also experiencing inflation but not to the same degree as memory components, she said.
The effective tax rate rose to 66.1% from 8.3% a year earlier. Croom said withholding taxes associated with repatriating cash to help fund the Helvoet acquisition lifted the latest rate, while tax benefits had reduced the prior-year rate. Excluding the withholding-tax impact, the company expects a rate in the low 30s for the fiscal year.
Helvoet Integration and Indianapolis Ramp
Helvoet, which closed on the first day of the fiscal year, is being integrated on schedule and on budget, Phillips said. The company is prioritizing revenue opportunities across the combined businesses and has expanded the responsibilities of Helvoet CEO Eveline Hogenkamp and her team in business development.
Phillips said production at the new Indianapolis medical facility is expected to start in December. Existing production will be transferred there, while the company seeks additional programs from new and existing customers. He cautioned that new medical programs take time to ramp.
Croom said the first quarter’s 9% organic medical growth could be the lowest rate of the fiscal year, adding that the company was looking for double-digit growth in the business. In a question, Lake Street Capital analyst Luke Fingerson said open orders had risen 16% year over year to $690 million; Croom said medical growth was beginning to show in those orders.
Cash Use and Proposed Rebrand
Kimball used $19.3 million in operating cash during the quarter as it built inventory to support future production. Croom said the buildup was primarily driven by growth rather than component inflation. Cash and equivalents stood at $72.8 million at quarter-end, while borrowings totaled $235.7 million.
Phillips also said shareholders would consider a proposal to rename the company Kimball Solutions at the upcoming annual meeting. If approved, the rebrand would take effect at the end of the fiscal year.
About Kimball Electronics (NASDAQ:KE)
Kimball Electronics, Inc is a contract manufacturing and engineering services company that helps original equipment manufacturers design, develop and produce electronic and electrical products. The company provides services spanning product design and development, prototyping, testing, manufacturing, supply chain management and aftermarket support.
Kimball Electronics serves customers in the automotive, medical and industrial markets. Its manufacturing capabilities support products and systems such as automotive electronics, medical devices and equipment, industrial controls, power-management products and other complex electronic assemblies.
