Kimball Electronics Q1 Sales Rise 7% as Medical and Helvoet Drive Growth

Kimball Electronics Inc. (Nasdaq: KE) reported higher fiscal first-quarter sales as organic growth and its Helvoet acquisition lifted revenue across all three market verticals. The company reiterated its fiscal 2027 guidance and said sales are expected near the high end of its $1.535 billion to $1.560 billion range, supported by continued strength in Medical.

Net sales for the quarter ended September 30, 2026, rose 7% year over year and 5% sequentially to $390.8 million. Organic sales increased 3%, Helvoet contributed $12.4 million, and foreign exchange had a 1% favorable effect. Management expects Helvoet’s revenue contribution to increase over the course of the fiscal year.

The gross margin was unchanged from a year earlier at 7.9%. A favorable sales mix was offset by higher component costs and expenses associated with ramping the company’s medical contract development and manufacturing organization facility in Indianapolis. Kimball said the Indianapolis investment is expected to weigh on margins in the near term, with improvement anticipated as production and revenue increase.

Adjusted operating income declined to $17.0 million, or 4.3% of sales, from $17.5 million, or 4.8%, a year earlier. Adjusted EBITDA increased to $27.6 million from $26.7 million. Adjusted selling and administrative expenses rose by $2.6 million to $13.9 million, reflecting personnel and information-technology investments, the addition of Helvoet, and a $2 million customer cost recovery recorded in the prior-year period. Adjusted S&A represented 3.6% of sales, compared with 3.1% a year ago.

Medical Leads Growth

Medical sales increased 14% to $116 million and accounted for 29% of company revenue. Organic growth was 9%, with strength across drug-delivery devices, respiratory care, patient-monitoring systems, surgical instruments and imaging systems. The Helvoet acquisition contributed another 5 percentage points to the vertical’s growth.

Kimball said the integration of Helvoet is proceeding on schedule and within budget, with top-line synergies the initial priority. Management also pointed to rising interest from new and existing customers as the combined capabilities of Helvoet’s Tilburg and Pune operations, the Indianapolis facility and Kimball’s broader manufacturing network become better understood.

The transfer of operations to Indianapolis also remains on schedule and on budget, with production expected to begin in December. The company is expanding the responsibilities of Helvoet CEO Eveline Hogenkamp and her team and using AI-driven data-mining tools to identify medical-market opportunities. Management cautioned that building the Medical CDMO business will take time.

Automotive remained the largest vertical, generating $171 million, or 44% of total sales. Revenue rose 4% year over year, led by steering products, which represented more than 70% of Automotive sales. Results also benefited from the ramp-up of a new program in Poland and early preparations for a production transfer in China. North American activity remained sluggish because of lower electric-vehicle demand.

Industrial sales advanced 5% to $105 million, accounting for 27% of company revenue. Organic growth generated about one-third of the increase, supported by off-highway equipment, factory automation and public-safety products. Climate-control sales declined amid lower North American HVAC demand.

Cash Use and Acquisition-Related Borrowing

Kimball used $19.3 million of cash in operating activities, mainly because it increased inventory to support expected production. Inventory ended the quarter at $312.1 million, up $40 million both sequentially and year over year. Long-term inventory, which is excluded from that total but included in the company’s production days of supply on hand calculation, declined by $13.6 million, resulting in a combined net inventory increase of $26.7 million.

Cash-conversion days were 82, matching the multiyear low reached in the preceding quarter and improving by one day from a year earlier. Production days of supply on hand were 88. Capital expenditures totaled $9 million, while cash and cash equivalents stood at $72.8 million.

Borrowings reached $235.7 million, with the sequential increase driven by the Helvoet acquisition, which closed on the first day of the fiscal year. Available short-term liquidity totaled $270.8 million. The company also spent $3.1 million to repurchase 127,000 shares during the quarter.

Other expense increased to $4.6 million from $3.5 million, primarily because of higher interest expense tied to acquisition-related borrowing. The effective tax rate rose to 66.1% from 8.3%, reflecting withholding taxes on cash repatriated to partially finance the Helvoet transaction. Kimball expects a fiscal 2027 tax rate in the low-30% range, excluding those withholding taxes.

For the full fiscal year, Kimball continues to expect adjusted operating income of 4.4% to 4.7% of net sales and capital expenditures of $50 million to $60 million, alongside its sales forecast of $1.535 billion to $1.560 billion.

The company identified global economic conditions, geopolitical conflicts, raw-material and component availability and costs, tariffs and other trade barriers, foreign-exchange volatility, and its ability to convert business opportunities into customers and revenue as key uncertainties that could affect its outlook.