Kimball Electronics, Inc.

fiscal 2023 earnings conference call. My name is Carla and I will 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 Kimball 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, August 17th, 2023, 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 Rieger, Vice President, Investor Relations. Mr. Rieger, you may begin.

Thank you, and good morning, everyone. Welcome to our fourth quarter conference call. With me here today is Rick Phillips, our Chief Executive Officer, and Jana Kroon, Chief Financial Officer. We issued a press release yesterday afternoon with our results for the fourth quarter and full fiscal year ended June 30th, 2023. To accompany today's call, a presentation has been posted to the investor relations page on our company website. Before we get started, I'd like to remind you that we will be making forward-looking statements that involve risks and uncertainties 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. This morning, Rick will start the call with a few opening comments. Jana will review the financial results for the quarter and guidance for fiscal 2024. And Rick will complete our prepared remarks before taking your questions. I'll now turn the call over to Rick.

Thank you, and good morning, everyone. As previously communicated in a press release earlier this week, Don Sharon, the longtime chairman and CEO of Kimball Electronics, recently passed away. As you might imagine, all of us in the Kimball family are deeply saddened by this news and mourning his loss. In the short time that I knew Don, it was clear to me that he was a strong believer in doing the right thing and inspiring others to be a better version of themselves. Don's contributions to the company and the EMS industry in general are countless. His achievements are impressive and his humility and generosity unparalleled. Don's legacy, after 24 years of dedicated service, is a corporate culture unlike any other. And I believe I speak for the entire Kimbell Electronics team in saying that we are grateful for the opportunity to have known and worked with Don. Our thoughts and prayers are with the entire Sharon family. As difficult as it may be, we do need to focus on the task at hand, which is discussing our results from the quarter, the fiscal year, and the outlook for the business. I am confident it is what Don would have wanted us to do. So with that, I am very pleased with the results we reported for the fourth quarter and fiscal year 2023. q4 was our sixth consecutive quarter with record sales and operating income and eps were at all-time highs for the company the strong finish to the fiscal year drove net sales above the guidance we provided in may and contributed to better than expected cash flow generation in the quarter This performance was achieved with the highest levels of teamwork from our global organization and many others in the value chain. I would like to thank our employees, our customers, and our vendor partners for their passion, commitment, and support. In total, fiscal 2023 was an excellent year for Kimball Electronics, highlighted by record sales, margin expansion, a 79% increase in net income, and improved return on invested capital. Each of our three vertical end markets reported strong results, and we believe the momentum will continue, fueled in part by industry megatrends, even if consumer demand softens during a global economic slowdown. Approximately 48% of our customers reached an all-time high in sales volume with us for the year. And similar to prior years, 77% of the revenue was with customers we've worked with for a decade or more. The team supported new product introductions at a rate four times above the historic norm, and we continued to leverage our facility expansions in Thailand and Mexico, all while navigating a challenging macro environment. During the year, we received multiple customer service awards, four in China alone. And for the ninth consecutive year, we were recognized by Circuits Assembly in multiple categories for service excellence. Our ESG disclosures once again received high marks with the most recent coming from ISS with a prime rating, which places us among the top 10% in our industry. I am very proud of these accomplishments and all of our achievements in fiscal 2023. We continue to see a strong pipeline for future growth, and we are excited by the prospects of our longer term funnel of new business opportunities. Turning back to the fourth quarter, net sales totaled $496 million, a 33% increase compared to the same period last year. Conditions in the global supply chain continue to improve gradually, with component parts needed for our production requirements slowly increasing in availability. In fact, for the first time in a couple of years, part shortages did not materially impact sales. Starting with automotive, our largest business, net sales total $220 million in the fourth quarter and all time best. This represents a 44% increase compared to Q4 of fiscal 2022 and 44% of total company sales. It also completes a record year with total annual revenue topping $820 million, a 41% increase over the prior year. Approximately 70% of our automotive business supports electronic power steering, with the balance in other applications such as regenerative braking. In Q4, and for that matter the full fiscal year, braking systems manufactured in our facility in Reynoso, Mexico were a major contributor to the overall increase in automotive. We expect growth in this vertical market to continue, fueled by the industry megatrend of adding electronic content to vehicles. Our experience in chassis control aligns very well with this trend, especially as features that assist drivers in vehicle movement, such as lane departure and self-parking, increase in popularity and adoption. These features leverage advanced technologies and expanded operating systems. And as more of them are added to the ECU or electronic control unit in the steering column, the complexity of the manufacturing process and value-added contribution increases, which is good for us. As we have said many times, the steering architecture for electric motors, internal combustion engines, or a hybrid of the two is roughly the same, so our support is agnostic to the type of vehicles produced. Also, this business is sticky. Automotive is an industry that is highly regulated with stringent certifications and validation protocols, making it expensive and time-consuming to change the supply chain once production has commenced. And programs are often single-source awards that can span 8 to 10 years in length. Next is medical, with net sales in the fourth quarter of $121 million, a 6% increase compared to Q4 last year, and 24% of total companies. The results this quarter were adversely impacted by a decline in sales with a major customer who is remediating an FDA recall that is not related to our work with them. For fiscal 2023 in total, sales in the medical vertical market grew 26% to a record $494 million, with the increase driven by applications supporting sleep therapy and respiratory care, image guided therapy, in vitro diagnostics, drug delivery systems, AED, and patient monitoring equipment. Longer term, the industry megatrends in medical continue to support future growth, especially as the population ages and accessibility and affordability to healthcare increases. Also, the movement towards smaller medical device sizes with high levels of precision and accuracy and connected drug delivery systems fit very well with our expertise. Our new business development efforts are heavily focused on medical, as OEMs look to outsource higher-level assemblies, or HLAs. HLAs as a category represent an opportunity for us to add more value-added content. For instance, our facility in Mexico is now producing a pediatric flow meter for React Health. This is an example of how we can bring value and speed to the market with only nine months needed from start to first shipment. Finally, net sales in the industrial vertical market totaled $142 million, a 38% increase over the fourth quarter last year, and 29% of total company sales. This topped our previous best from last quarter by 12%. It also completes a year where sales in this business were nearly $475 million or 33% above fiscal 2023. Our position in industrial is an excellent setup for future growth with consumer trends raising awareness on the consumption of natural resources and encouraging the conservation of water, gas, and electricity. This mega trend is supported by legislation and incentives focused on decarbonization. We are strategically aligned with products that reduce environmental impacts and promote energy efficiency, safety, and carbon neutrality. This includes most major brands of residential and commercial heating and cooling systems, smart metering, factory automation, and EV supercharging stations. So in summary, an excellent quarter, a record-setting year, and solid momentum headed into fiscal 2024. I'll now turn the call over to Jana to review the Q4 financials in more detail and outline our guidance for the coming year. Jana?