Kimball Electronics, Inc.

Fourth-quarter net sales were $371.6 million, down 2% year over year; foreign exchange was a 1% tailwind. Gross margin was 8.9%, up 90 basis points from 8.0% a year ago, and adjusted operating income was $18.1 million, or 4.9% of sales, versus $19.6 million, or 5.2%, last year. Net income was $8.5 million, or $0.35 per diluted share; the adjusted result was a loss of $163,000, or $(0.01) per diluted share, due to the tax rate. For the full year, sales were $1.431 billion and adjusted operating income was $65.7 million, or 4.6% of sales. Fiscal 2027 revenue is expected to be $1.535 billion to $1.56 billion, up 7% to 9%, with $60 million from Helvoet and organic sales growth of 3% to 5%; adjusted operating income margin is guided to 4.4% to 4.7%, capex to $50 million to $60 million, and the tax rate to the low 30s.

Ric Phillips emphasized that the quarter capped a solid fiscal 2026 finish, with sales in line with expectations, operating income ahead of estimates, and strong cash flow used to reduce debt. He framed the strategy as a deliberate shift toward medical CDMO, highlighting the new Indianapolis facility and Helvoet acquisition as key investments in growth and portfolio balance. His tone was upbeat and constructive, saying the base business is stabilizing and that the company is excited about future revenue synergies and medical’s growing share.

Jana Croom highlighted the quarter’s 8.9% gross margin, $14.8 million of adjusted S&A, and $18.1 million of adjusted operating income, noting that higher S&A reflected growth investments while gross margin benefited from mix. She stressed balance sheet strength: $88.9 million of cash, $42.4 million of operating cash flow in Q4, $271.9 million of inventory, $116.6 million of borrowings, and $411.3 million of total short-term liquidity. She also said capital allocation will remain balanced among organic investment, share repurchases, and maintaining dry powder for acquisitions, while warning that working capital may face some pressure in fiscal 2027.

Analysts focused on the medical growth outlook, Helvoet’s contribution, the Indianapolis ramp, automotive stabilization, cash conversion days, and leverage. Management said medical growth is broad-based across respiratory care, surgical devices, diagnostics, imaging, and drug delivery, but the Indianapolis facility will mostly be a transfer of work in the near term, so it should not drive much incremental growth in fiscal 2027. On Helvoet, management said the integration is going well, customer interest is strong, and the main near-term drag on the $60 million revenue outlook is currency translation, not customer or integration problems. On leverage, Jana said around 1.5x to 2x debt/EBITDA feels appropriate, with willingness to go above 3x briefly for the right deal, but she also said another acquisition is unlikely this fiscal year while Helvoet is absorbed.