Kimball Electronics, Inc.

Good morning ladies and gentlemen and welcome to the Kimbell Electronics first quarter fiscal 2023 earnings conference call. My name is Darius Nall and I'll be the facilitator for today's call. All lines have been placed in a listen only mode to prevent any background noise. After the completion of the prepared remarks from the Kimbell Electronics leadership team there will be a question and answer period. To ask a question simply press star and the number one on your telephone keypad. Today's call, November 8th, 2022, is being recorded. A replay of the call will be available on the Investor Relations page of the Kimball Electronics website. At this time, I would like to turn the call over to Andy Regrud, Vice President, Investor Relations. Mr. Regrud, you may begin.

Thank you, Darius, and good morning, everyone. Welcome to our first quarter conference call. With me here today is Don Sharon, our Chairman and CEO, and Janet Croom, Chief Financial Officer. We issued a press release yesterday afternoon with our results for the first quarter of fiscal 2023. To accompany today's call, a presentation has been posted to the investor relations page of our company website. Before we get started, I'd like to remind you that 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 filing. and that actual results can differ materially from the forward-looking statements. All commentary today is focused on adjusted non-GAAP results. Reconciliations of GAAP to non-GAAP amounts are available in our press release. One additional housekeeping item, as a reminder, starting in Q1, we have combined the reporting of results for our industrial and public safety vertical markets. Reclassified amounts for prior periods are available in our press release and FCC filings. This morning, Don will start the call with a few opening comments. Jana will review the financial results for the quarter and guidance for fiscal 2023. 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 pleased with our results in Q1 and a strong start to the new fiscal year. For the third consecutive quarter, net sales surged to a record-breaking level, setting another all-time high for our company, and operating margin improved compared to the same period last year. This was in line with our estimates as we ramp up production on new and existing programs and leverage our facility expansions in Thailand and Mexico. These investments, however, increased fixed costs that were not fully absorbed when comparing the operating margin rate to Q4 of fiscal year 2022. New customers and product startups generally cause margin dilution early in the lifecycle, which are recovered as the program matures. We expect sequential quarterly increases in a stair-stepped fiscal year 2023, and we are affirming our guidance for the full year with results expected at the high end of the range for sales and operating margin. Today's operating environment remains challenging. filled with uncertainty from geopolitical events, the pandemic, global supply chain disruptions, parts shortages, inflation, and a looming economic downturn. Our team continues to navigate these unprecedented circumstances by focusing on what we can either control or at least positively influence. For us, this starts with the health and safety of our people, and not just their physical well-being. Mental health is as important as ever. In terms of the global supply chain, I'm encouraged to report there are signs of a gradual recovery from the pandemic, but the progress is slow with only modest improvements occurring at a measured pace. Addressing part shortages has become a constant priority as we look to better align production forecasts with material availability and manufacturing capacity. When it comes to microchips, it's important to note that not all of them are created equal, so to speak. and the higher grade chips needed in the applications we support are still in short supply. And as costs rise, we are leveraging productivity improvements and partnering with our customers to maintain competitiveness. For the first quarter, net sales were $406 million, a 39% increase compared to Q1 last year, and 9% better than Q4. Not only was this a record high for our company, It was the first time we eclipsed the $400 million mark threshold in a quarter. All three vertical end markets we served reported large increases with automotive posting a record high of $185 million. This represents a 43% increase compared to Q1 last year and 46% of total company sales in the quarter. It is also a 21% sequential step up from Q4. We continue to see growth opportunities in this vertical market, particularly as applications such as advanced driver assistance systems are more widely adopted. Our support will enable further advances in areas such as battery management, electronic steering, electronic braking, motor controls, and redundant safety systems. With over 37 years of experience producing high quality electronic assemblies, that meet the stringent regulatory requirements of the automotive industry, we are ideally positioned to assist as the electrification of vehicles evolves. Net sales in medical were $115 million, a 35% increase compared to Q1 last year, and 28% of total company sales. This is the second consecutive quarter for this business to post gains in excess of 30%. versus the same period in the prior year. Our medical customers also have stringent standards for their products, so our capabilities are uniquely tailored to meet the requirements and challenges of the medical market. Since 1999, we have manufactured millions of medical electronics, drug delivery systems, and single-use medical devices. Our launch of Kimbell Medical Solutions highlights our full service of capabilities so that when customers consider the whole package of value, it's clear our offering extends beyond electronics. Net sales in our industrial vertical totaled $101 million, a 35% increase over the recast at first quarter of last year, and 25% of total company sales. As a reminder, public safety is now included in our industrial vertical results. In this dynamic and evolving market, we collaborate with our customers on products that support smart cities, energy efficiency and energy management, as well as industrial devices and applications focused on public safety. Recent advances in electronics and mobile technology, combined with lifestyle changes coming out of the pandemic, are producing growth opportunities for our unique manufacturing capabilities. So in summary, a very good quarter with record-setting sales and momentum that will continue throughout fiscal year 2023. I'll now turn the call over to Jana to provide more detail on the financial results for Q1 and our guidance for the full year. Jana?