Kimball Electronics, Inc.

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, February 6th, 2024, 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 Regret, Vice President, Investor Relations. Mr. Regret, you may begin.

Thank you operator and good morning everyone welcome to our second quarter conference call with me here today is rick Phillips our chief executive officer and Jana crew chief financial officer. We issued a press release yesterday afternoon with our results for the second quarter of fiscal 2024 to accompany today's call a presentation has been posted to the investor relations page on our company websites. 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 filings, and that actual results can differ materially from the forward-looking statements. Reconciliations of GAAP and non-GAAP amounts are available in our press release. One other housekeeping item to mention, starting this quarter, we have added a page of other financial metrics to the press release, which includes depreciation and amortization, stock-based compensation, cash conversion days, and open orders for the relevant periods. These additional disclosures are in line with our commitment to providing you with enhanced transparency into our business operations and key performance metrics. This morning, Rick will start the call with a few opening comments. Jana will review the financial results for the quarter and updated guidance for fiscal 2024. And Rick will complete our prepared remarks before taking your questions. I'll now turn the call over to Rick.

Thanks Andy, and good morning everyone. As we expected, the second quarter of fiscal 2024 was hard fought with our team navigating a challenging operating environment. Global macro headwinds, including pressure from elevated levels of inflation, higher interest rates, and geopolitical uncertainties have persisted and the consumer is pulling back. The markets we serve are experiencing demand softening, and our customers are changing production schedules and delivery date requirements. Sales in Q2 declined compared to the same period last year with manufacturing output in the quarter being reduced to meet the lower demand as our customers work through elevated inventory levels. Margins, on the other hand, remain stable thanks in part to proactive measures taken to align our cost structure with slowing sales. We expect industry-wide pressures for the remainder of fiscal 2024 and have updated our guidance for sales and operating income for the full year to align with these trends. Based on what we know today, it seems likely the macro environment will remain challenging for some time. Despite this near-term choppiness, we did not change our guidance for capital expenditures in fiscal 2024 as we continue to invest in long-term growth opportunities. With a strong funnel of new business supported by favorable industry megatrends, we're deploying a balanced capital allocation strategy focused on driving organic growth, global expansion, and long-lasting customer relationships. Turning back to the results for the second quarter, net sales totaled $421 million, a 4% decrease compared to the second quarter of last year. From a geographical perspective, The top line was strong in North America, up low double digits, with particularly good results in our industrial vertical market, offset by declines in Asia and Europe. The decline in Asia occurred in Thailand, which was heavily impacted by our major medical customer that is involved in an FDA recall, while Europe appears to be a region of the world where the general economic slowdown is more significant compared to other areas of the globe. One vertical market, industrial, posted year-over-year growth in the quarter, with net sales totaling $113 million, a 7% increase compared to Q2 last year, and 27% of total company sales. The strength this quarter was concentrated in charging systems, climate control, and public safety products. We frequently refer to our industrial business as green and clean And in some respects, we're our own best customer. With products that reduce environmental impacts, promote energy efficiency, safety, carbon neutrality, and the responsible use of natural resources, we specialize in heating and cooling systems, factory automation, optical inspection, electronic locking devices, and charging stations. Next is automotive, where Q2 sales totaled $200 million. a 2% decrease compared to the second quarter of fiscal 2023, and 47% of total company sales. The decline this quarter was driven by weakening demand in Europe, partially offset by incremental strength in China. Longer term, we continue to see a strong runway for growth in the automotive vertical, driven by the industry trend toward incorporating more electronic content to vehicles specifically in steering and braking systems. Our proven expertise manufacturing safety critical products that meet the stringent regulatory requirements of the industry ideally positions us to support further advancements in these systems. As a reminder, most of our automotive business is currently in steering and braking, and it doesn't matter what's under the hood, whether it be an internal combustion engine, electric motor, or a hybrid of the two. Essentially, the architectures are the same for these vehicles, which is important as consumer preferences and adoption rates evolve and the industry transitions toward EVs. Finally, medical, with net sales of $108 million, a 14% decrease compared to Q2 last year, and 26% of total company sales. This result was in line with our expectations. As I alluded to earlier, Our annual guidance reflects a $100 million reduction in sales with a major customer in this vertical, partially offset by growth in other programs. We expect these growth opportunities to continue to emerge as the population ages, access and affordability to healthcare increases, medical devices get smaller in size and require higher levels of precision and accuracy, and connected drug delivery systems become more common. Our manufacturing capabilities extend beyond electronics and printed circuit board assemblies and include, but are not limited to, operations involving precision injected molded plastics, complete device assembly for drug delivery systems, and sterilization and cold chain management. The business development team focuses on leveraging these capabilities with higher level assemblies, or HLAs, which as a category represent an opportunity for more value added content. So in summary, a solid quarter in a difficult operating environment and an updated outlook for fiscal 2024. I'll now turn the call over to Jana to provide more details on the financial results for Q2 and review our guidance for the full year. Jana?