Kimball Electronics, Inc.

Good morning, ladies and gentlemen, and welcome to the Kimball Electronics Fourth Quarter Fiscal 2021 Earnings Conference Call. My name is Adrienne, and I will be your facilitator for today's call. All lines have been placed on a listen-only mode to prevent any background noise. After this completion of the prepared remarks from the Kimball Electronic Leadership Team, there will be a question and answer period. To ask a question, simply press star and then the number one on your telephone keypad. Questions will be taken in the order they are received. Today's call, August 5th, 2021, is being recorded. A replay of the call will be available on the Investor Relations page of the Kimball Electronic website. At this time, I would now like to turn the call over to Andy Ruggert, Head of Investor Relations. Mr. Ruggert, you may begin.

Thank you, operator, and good morning, everyone. Welcome to our fourth quarter conference call. With me here today is Don Sharon, our chairman and CEO, and Jana Kroon, vice president, chief financial officer. We issued a press release yesterday afternoon with the results of our fourth quarter and full fiscal year ended June 30th, 2021. To accompany today's call, a presentation has been posted to the investor relations page on our company website, within the Events and Presentations tab. Before we get started, I would like to remind you that on today's call we will be making forward-looking statements that involve risk and uncertainty and are subject to our Safe Harbor provisions as stated in our press release and SEC filings, and that actual results can differ materially from forward-looking statements. All commentary today is focused on adjusted, non-GAAP results. For the fourth quarter of fiscal 2021, This excludes a one-time after-tax expense totaling $0.3 million or one cent per diluted chair associated with non-operating items. Reconciliations of GAAP to non-GAAP amounts are available in our press release. This morning, Don will start the call with a few opening comments. Jana will review the financial results for the quarter and the full year fiscal 2021 and guidance for fiscal 2022. And Don will complete our prepared remarks before taking your questions. I'll now turn the call over to Don.

Thanks, Andy, and good morning, everyone. I'm very pleased with our operating results for the fourth quarter and the strong finish to a record-setting fiscal year 2021. Our team remains laser-focused on fulfilling the commitments made to our customers as we work through the ongoing challenges caused by the pandemic and the global park shortage. Despite the headwinds, we delivered strong top-line growth, excellent margin expansion, and impressive earnings growth with operating income exceeding our goal of 4.5% for the fourth consecutive quarter and adjusted Q4 EPS increasing 71% over the same period last year. For the full fiscal year, 2021 was a record year for our company with many financial metrics, including net sales, margin rates, earnings, cash flow from operating activities, and return on invested capital reaching all-time highs. Our team has demonstrated remarkable resilience throughout these unprecedented times, and we are well-positioned to carry the momentum from 2021 into fiscal year 2022. As a result of the ongoing semiconductor shortage, a portion of our shippable backlog continues to shift out ahead of us. which will likely result in two very different halves in fiscal year 2022. Our full year guidance, which Jana will discuss in a few moments, contemplates this bifurcation as we expect the material supply to steadily catch up with customer demand throughout the first half of fiscal year 2022, thus enabling us to shift the majority of the surplus backlog in the second half of the fiscal year and into fiscal year 2023. We expect that catching up on the backlog combined with strong organic growth from new and existing programs will provide significant year-over-year growth. Beyond the record-setting results for fiscal year 2021 and the bullish outlook for fiscal year 2022, we have never lost sight of the fact that the health and safety of our employees remains our number one priority. Our protocols are minimize disruptions to the business, and allowed us to maintain excellent customer support as reflected in our top line growth during this period of uncertainty. Net sales in Q4 increased 15% compared to the same period last year. This was a stronger finish to fiscal year 2021 than what we discussed 90 days ago on our last earnings call. The growth was concentrated in our automotive and industrial vertical markets. Automotive was up 92% in Q4 as compared to a year ago as the industry returns to more normalized levels of volume after the shutdown a year ago due to the pandemic. The business continues to benefit from two industry-wide megatrends. First, the demand for vehicles is red hot as communities reopen from the pandemic and consumers, many who have cash in their pockets, leave their homes and take to the road to reengage with society. OEMs have been responding to this surge in demand by ramping up production to keep pace. At most degree, there is not a foreseeable end in sight. The second megatrend is the continued growth in electronic content per vehicle. Cars and trucks are being designed with advanced technologies and expanded operating systems. Advancements including electronic steering, automated driver assistance, passenger safety systems, vehicle mobility management, electronic braking, and redundant systems for self-driving cars. These are all good examples of this megatrend and represent continued growth opportunities for our business. Moreover, the applications and architecture for these systems are largely the same for both electric vehicles and vehicles driven by internal combustion engines. And the stringent production standards in the automotive industry for these systems align well with our core manufacturing competencies. Often making chemoelectronics, a supplier choice. There's an inherent stickiness in these long-term relationships when we win a program and it produces an ongoing stream of orders that allows for operating efficiency. You can see this dynamic in our customer base, which gives us confidence in the growth potential of this vertical market in the years to come. Sales in the industrial vertical increased 17% in the fourth quarter compared to the same period last year, with the strength resulting from automation tests and inspection sales and higher-end climate control products. We expect this strength to continue in fiscal year 2022. The medical vertical market was down 31% in Q4 as a result of strong prior year sales related to the COVID-19 pandemic. and lower levels of elective procedures this year. We are starting to see this trend reverse as more of the population is vaccinated, and physicians, offices, and hospitals are able to resume elective procedures and activities. Longer term, we believe the megatrends in the healthcare industry, such as the world's aging population, increasing access and affordability to care, decreasing device sizes, and connected drug delivery systems are an excellent setup for future growth. in this vertical market. And finally, sales and public safety were 10.8 million, down 10% from the prior year. This is yet another temporary impact of the COVID-19 pandemic, as the reduction in sales is primarily related to commercial and hotel smart locking systems. We anticipate this market will return to normal over time as people resume travel. I am so proud of our team and their efforts to deal with the challenges throughout the year. we have been working diligently to find solutions to minimize or even negate the global parts shortage. This is a great example of how our strong company culture is creating quality for life. I'll now turn the call over to Jana to discuss our results in more detail and lay out our guidance for fiscal year 2022. Jana?