Kimball Electronics, Inc. (NASDAQ:KE) Q3 2019 Earnings Conference Call Transcript

May 08, 2019 • 10:00 am ET

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Kimball Electronics, Inc. (NASDAQ:KE) Q3 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 Third Quarter Fiscal 2019 Financial Results Conference Call. All lines have been placed on listen-only mode to prevent any background noise. After Kimball speakers' opening remarks, there will be a question-and-answer period, where Kimball will respond to questions from analysts. (Operator instructions)

Today's call, May 8, 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, and welcome, everyone, to our third quarter conference call. Our earnings release was issued yesterday afternoon on the results of our third quarter ended March 31, 2019. 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 & 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 I'll turn it over to Mike for the financial overview. After that, we'll answer any questions that you may have.

We delivered record sales, operating income, net income and diluted EPS in our third quarter. Strong double-digit organic growth in our Medical and Industrial end market verticals helped us exceed our 8% organic growth goal and set a new quarterly sales record. New program launches and ramp-ups more than offset continued softness in certain other programs primarily caused by global macroeconomic conditions and trade uncertainties.

We made excellent progress optimizing our business as we were successful expanding our operating margin by 70 basis points when compared to the third quarter of fiscal year 2018, helping us exceed our goal of 4.5% operating income. Our acquisition integration work with GES continues as we remain focused on our strategy to become a multi-faceted manufacturing solutions company. We have good momentum, and we are cautiously optimistic that we can begin to consistently achieve our goals of 8% organic growth and 4.5% operating income.

The Romania operation continue to progress in its ramp-up and improved its impact on consolidated operating income percent by 40 basis points when compared to the prior fiscal year third quarter while also achieving another milestone of generating net income for the quarter. Across all our units, we continue to drive Lean Six Sigma projects and global supply chain initiatives to improve yield and throughput and improve