Kimball Electronics, Inc. (NASDAQ:KE) Q2 2019 Earnings Conference Call Transcript

Feb 07, 2019 • 10:00 am ET

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Kimball Electronics, Inc. (NASDAQ:KE) Q2 2019 Earnings Conference Call Transcript

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Presentation
Operator
Operator

Good morning, ladies and gentlemen. My name is Josh, and I will be your conference call facilitator today. At this time, I would like to welcome everyone to the Kimball Electronics Second Quarter Fiscal 2019 Financial Results Conference Call. All lines have been placed on listen-only mode to prevent any background noise. After the Kimball's speakers opening remarks, there will be a question-and-answer period, where Kimball will respond to questions from analysts. (Operator Instructions)

Today's call February 7, 2019, will be recorded and may contain forward-looking statements as defined under the Private Securities Litigation Reform Act of 1995. Risk factors that may influence the outcome of forward-looking statements can be seen in Kimball's annual report on Form 10-K for the year ended June 30, 2018, and in today's release.

The panel for today's call is Don Charron, Chairman of the Board and Chief Executive Officer; and Mike Sergesketter, Vice President and Chief Financial Officer of Kimball Electronics.

I would now like to turn today's call over to Don Charron. Mr. Charron, you may begin.

Executive
Donald D. Charron

Thank you, Josh. Welcome everyone to our second quarter conference call. Our earnings release was issued yesterday afternoon on the results of our second quarter ended December 31, 2018. We have posted a financial summary presentation to accompany this conference call. The presentation can be found on our Investor Relations website within the Events and Presentations tab, or if you are listening via the webcast, you can find it in the Downloads tab on the webcast portal. I will begin by making a few remarks on the overall quarter and then I'll turn it over to Mike for the financial overview. After that, we'll answer any questions that you may have.

We achieved solid year-over-year growth in three of our four end market verticals as the ramp-up of new program launches helped to more than offset continued softness in certain other programs, primarily caused by global macroeconomic conditions, component shortages and trade uncertainties. We made good progress in optimizing our core business and with the acquisition of GES, we took a significant step in our strategy to diversify ourselves into a multifaceted manufacturing solutions provider. We are cautiously optimistic that our goal of 8% organic growth remains in reach for fiscal year 2019, and we expect to meet our 4.5% operating income goal for the second half of fiscal year 2019.

Our Romania operation continued to progress in its ramp-up and improved its impact on consolidated operating income by 30 basis points compared to the prior fiscal year second quarter. Across all of our units, we continue to drive Lean/Six Sigma projects and global supply chain initiatives to improve yield and throughput and improved margins. Margin expansion and capital efficiency will continue to be priorities of focus for us.

The market continues to experience component shortages and we remain focused on doing what's necessary to secure raw materials in this tight supply market, and to maintain the appropriate buffer stocks to minimize disruptions. Our cash conversion days