Kimball Electronics, Inc.

Good morning, ladies and gentlemen. Welcome to the Kimball Electronics second quarter fiscal 2025 earnings conference call. My name is Daryl, 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 then the number one on your telephone keypad. Today's call, February 5th, 2025, 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, Treasurer and Investor Relations Officer. Mr. Regret, you may begin.

Thank you, and good morning, everyone. Welcome to our second quarter conference call. With me here today is Rick Phillips, our Chief Executive Officer, Steve Korn, Chief Operating Officer, and Janet Kroon, Chief Financial Officer. We issued a press release yesterday afternoon with our results for the second quarter of fiscal 2025 ended December 31st, 2024. To accompany today's call, 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 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. Our commentary today will be 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 2025. 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. Results for the second quarter were in line with expectations as we continue to navigate a sustained period of declining customer demand while focusing on what is controllable. For the fourth consecutive quarter, cash flow generated from operating activities was positive, inventory levels were reduced, and debt was paid down with borrowings nearly 40% lower than a year ago. Our improved balance sheet provides ample liquidity to weather our current challenges, along with the necessary dry powder to opportunistically and meaningfully invest in growing the business. The company is being strategically repositioned for a return to growth, with a restructuring plan that includes the divestiture of the non-core assets from the AT&M business, improved facility utilization with the planned closing of our plant in Tampa, and increased focus on the medical CMO. Our efforts in all three vertical markets have been sharpened to target attractive new spaces that align with our capabilities. While we remain optimistic for the future, we acknowledge that the necessary changes won't happen overnight. As a result, we have revised our expectations for the full fiscal year as we anticipate more time will be needed to stabilize the business and return to our historical growth pattern. Net sales in the second quarter totaled $357 million. a 13% decline year-over-year when excluding AT&M, with an increase in Asia offset by double-digit declines in North America and Europe. From an end-market perspective, each of the three verticals we serve were down in the quarter. Starting with automotive, net sales were $193 million, a 4% decrease compared to the second quarter of last year and representing 54% of total company sales. Our automotive business is heavily concentrated in North America and China. And for the second consecutive quarter, results in China were strong, with monthly production rates reaching record high levels in support of our largest customer. This strength, however, was offset in North America, where volumes continue to soften from overstocking, lower demand, and end-of-life production. In addition, we continue to support the wind-down of the electronic braking program in Renosa, where our customer, a Tier 1 supplier, is no longer producing the system for the OEM. Operating activities associated with this program are scheduled to conclude in short order, which is in line with our original expectations. Sales in the automotive vertical were also down year over year in Europe as that market continues to experience challenges. On the positive side, we're in the process of ramping up the new braking program in Romania, where we saw our first shipments in January. Next is medical. With net sales in Q2 of 84 million, 22% decrease compared to the same period last year and 23% of total company. The decline in the quarter predominantly occurred in North America and Asia related to a program that is going end of life in Thailand and continued revenue decline as a result of adjacent impacts of an FDA recall related to our largest medical customer. If you recall, the bulk of revenue loss for this customer occurred in FY24, However, we are still seeing declines related to our production of parts and repair kits for existing machines. As part of a return to growth, we're encouraged by the longer-term prospects in this vertical with our focus on higher-level assemblies and finished medical devices. As we mentioned last quarter, we were recently selected as the sole supplier of the respiratory care final assembly and HLA business for our largest medical customer. and we are working toward the launch of this program in late fiscal 2026. Our manufacturing capabilities as a CMO extend beyond electronics and printed circuit board assemblies and include operations such as precision injected molded plastics, complete device assembly, and cold chain management, all of which support the production of selected drug delivery devices such as auto injectors. These capabilities are a differentiator in an overall very attractive market. and we expect similar 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 as consumer adoption increases. To keep pace with the industry growth, we are looking to elevate our prominence as a CMO with an expanded manufacturing footprint through adjacencies and additional vertical integration of our production capabilities. Finally, industrial, with net sales of $81 million, down 20% year over year when excluding AT&M, and representing 23% of total company sales. The decrease occurred in North America and Europe. Sales in Asia were slightly lower, with declines in smart metering programs where our customers are experiencing continued market share loss from commoditization, and moderate reductions in climate controls and public safety. I'll now turn the call over to Jana to provide more details on the financial results for Q2 and our updated guidance for the full year. Jana?