Q3 2025 Kimball Electronics Inc Earnings Call
Speaker Change: Good morning, ladies and gentlemen and welcome to the Kimball Electronics 3rd quarter, fiscal 2025 earnings conference call.
Speaker Change: My name is Kevin, I'll be your facilitator for today's call.
Speaker Change: All lines have been placed in a listen only mode to prevent any background noise. After the completion of the prayer remarks from the Kimball Electronics leader 15, there'll be a question and answer session. To ask the question, simply press star in the number one or telephone keypad.
Speaker Change: Today's call, May 7, 2025, is being recorded. A replay of the call will be made available on the Invest Relations page of the Kimball Electronics website. At this time, I'd like to turn the call over to Andy Regrut,
Speaker Change: Thank you and good morning everyone. Welcome to our third quarter conference call. With me here today is Rick Phillips, our Chief Executive Officer, Jana Croom, Chief Financial Officer, and Steve Korn, Chief Operating Officer.
Speaker Change: We issued a press release yesterday afternoon with our results for the third quarter of fiscal 2025 and did March 31, 2025. To a company today's call, a presentation has been posted to the Investor Relations page on our company website.
Speaker Change: 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 in SEC filings, and that actual results can differ materially from the forward-looking statements.
Speaker Change: Our commentary today will be focused on adjusted non-GAAP results, reconciliations of gap to non-GAAP amounts are available in our press release.
Speaker Change: 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 25 and Rick will complete our prepared remarks before taking your questions. I'll now turn the call over to Rick.
Thank you, Andy, and good morning, everyone.
Speaker Change: I am proud of the results for the third quarter and our team's ability to navigate in the environment of uncertainty while focusing on our control.
Speaker Change: Sales in Q3 were in line with expectations and increase sequentially, margins improved, we continued to generate cash from operating activities, and the paydown of debt continued with borrowings
Speaker Change: We have ample liquidity to whether the short-term, unpredictable environment and significant drive power to authentically invest in business longer-term.
Speaker Change: As part of today's release, we are regenerating our guidance for fiscal 2025 with the expectation that we'll be at the top end of the range for sales and operating income.
Speaker Change: We also announced the addition of a new manufacturing facility in Indianapolis focused on the medical industry.
Speaker Change: This is another step of repositioning the company for a return to growth and expanding our presence as a medical CMO, which will occur over time.
Speaker Change: to accelerate this strategy. We're looking to better strategically utilize the cash generated from our EMS operations and redeploy capital to the CMO.
Speaker Change: We remind everyone that the Revenue Cycle of CMO is similar to EMS and as a result, organic revenue growth will take time.
Speaker Change: In our company's history, EMS generates high levels of cash when operating conditions are at historic norms, and this cash will be used to grow the medical simile through organic and potentially inorganic champs.
Speaker Change: The margin profile on higher level assemblies and finished medical devices could be accreted to the returns that are customer with contract manufacturing any MS.
Speaker Change: To keep pace with industry growth, we are looking to continue to elevate our prominence in medical, with an expanded manufacturing footprint, through Jaeson C's, and additional vertical integration of our production capabilities.
Speaker Change: Turning back to the third quarter, net sales total $375 million, a 10% decline year-over-year length, excluding the AT&M business, which was divested earlier this fiscal year.
Speaker Change: From an end-market perspective, sales and medical increased while the other two verticals we serve were down in court.
Dortal with medical.
Speaker Change: Net Sales in Q3 will $115 million up 2% compared to the same period last year and 31% of total company sales.
Speaker Change: It is important to highlight that the increase in the court was driven by not requiring consignment inventory sales to our largest medical customer.
Speaker Change: This transaction was related to obsolete inventory associated with the FDA recall. We estimate the Q3 revenue impact on the medical vertical from the inventory sale was approximately 2% and the revenue impact in total was about 6% [inaudible]
as previously announced.
Speaker Change: We are working with this same customer out of our facility in Thailand to launch their respiratory care final assembly and HLA business this summer and we'll continue to see volume growth as the customer restored its place in the market.
Speaker Change: The step of adding a new, larger medically focused manufacturing facility in Indianapolis reflects our commitment to the CMO.
The leased facility represents 300,000 square feet.
Speaker Change: A complement to our capabilities that extend beyond electronics and front circuit board assemblies and include operations such as precision, injected, molded plastics, complete device assembly and cold chain management.
Speaker Change: All of which support the production of medical disposable surgical instruments and selected drug delivery devices such as auto injectors.
Speaker Change: The plan is to transfer existing programs in Indianapolis to the new building over time and sell the buildings we currently operate out of.
Speaker Change: We will have more than enough for space in the new facility for future growth with new and existing customers, including the transfer work.
Thank you.
Speaker Change: Next is Automotive, our largest business with net sales of $173 million, a 14% decrease compared to the third quarter of last year, and 46% of the total company.
Speaker Change: Our automotive business is heavily concentrated in North America and China, but growing in Europe with the launch of the breaking platform in Romania.
for the third consecutive quarter, resulting China was strong. [inaudible]
Speaker Change: Sales in Europe increased modestly as the new electronic breaking program in Romania started to ramp production.
Speaker Change: North America, on the other hand, reported to decline in sales, primarily driven by the electronic breaking program in Renosa as previously discussed.
Speaker Change: We continue to monitor the demand for electronic steering systems for EVs globally, which were
Speaker Change: Finally, Industrial, with net sales of $86 million down 15% year-over-year when excluding AT&M and representing 23% of total company sales.
Speaker Change: The decrease occurred in all regions with the largest decline in Europe , followed by Asia, and a modest decrease in North America.
Speaker Change: Our customers continue to experience market share loss from the commodization of smart meters and reductions in climate control and public safety products.
Speaker Change: We are seeing stability in climate control on the variety. However, we do not anticipate smart meters to be a significant portion of our industrial vertical going forward.
Speaker Change: I'll now turn the call over to Jana to provide more details on the financial results for Q3 and our guidance for the full year. Jana? Thank you and good morning everyone.
Jana: As Rick highlighted a moment ago, net sales in the third quarter were $374.6 million, a 12% decrease year over year, 10% when excluding AT&M.
Jana: Ford Exchange had a 1% unfavorable impact on consolidated sales in Q3.
Jana: On a sequential basis, the top line increased 5% compared to Q2, driven by the $24 million non-recurring confined inventory sale and the medical vertical.
The gross margin rating Q3 was 7.2% [inaudible]
Jana: with nearly half the decrease driven by the consigned inventory sale, which incorporated only a modest markup and the balance of the decline coming from lower absorption, a result of reduced year-over-year sales in our EMS manufacturing facilities.
Jana: On a sequential basis, however, our growth margin rate increased when compared to last quarter, the impact of restructuring.
Jana: Adjusted Selling and Administrative Expense in the third quarter were $11.2 million, a $3.6 million or 24% reduction compared to the $14.8 million recorded in Q3 last year.
Jana: with a decreased primarily resulting from the absence of AT&M this year versus the full quarter of expense and fiscal 2024 and cost reduction efforts.
Jana: When measured as a percentage is failed, adjusted selling and administrative expenses were 3 percent, a 50 basis point improvement compared to 3.5 percent in Q3, a fiscal 2024.
Jana: Adjusted operating income for the third quarter was $15.7 million, a 4.2% of net sales, which compared to last year's Adjusted Results of $18.7 million, or 4.4% of net sales.
Jana: Other income and expense was expense of $4.6 million compared to $6.3 million of expense last year with the rejection being driven by lower interest expense down 50% year-over-year.
Jana: Our higher rate was primarily driven by the limitation of tax deductibility of our inter-six expense, which cannot exceed a certain percentage of domestic ebid.
Jana: The holding taxes on local cash repatriation also drove the rate higher, but those funds were used to pay down debt, but increased taxes are offset by lower interest expense.
Jana: As a reminder, the effective tax rate last year was skewed higher by the impact of the impairment and restructuring charges associated with the AT&M business.
Jana: We expect the tax rate around 30% for the full fiscal year.
Jana: Adjusted that income in the third quarter of fiscal 2025 was $6.8 million.
Jana: or 27 cents per diluted share, compared to adjusted net income and key three last year of $9.8 million or 39 cents per diluted share.
Turning now to the balance sheet.
Jana: Cash and Cash Equilibrium at March 31st, 2025, will $51.4 million $1.
Jana: Cashflow generated by operating activities in the quarter with $30.9 million. Our fifth consecutive quarter of positive cashflow.
Jana: Cash Conversion Days were 99 days compared to 110 days in Q3 of fiscal 2024 and 107 days last quarter. The decrease in CCD this quarter compared to Q2 was driven by improvements in DSOs and PDSOH.
Jana: For clarity, our CCD calculation in Q3 excludes the confined inventory sale.
Jana: We are pleased with the progress we have made related to cash conversion and look to continue to significantly improve our cash conversion days as we actively and aggressively manage its compliance. [inaudible]
Jana: Inventory and is the quarter at $296.6 million, which represents a $9.6 million reduction compared to QPU and $100 million or 25% lower than a year ago.
Jana: Please note that the consign immature sales did not contribute to the reduction.
Jana: The inventory that was sold was confined to Kimball and required movement into our possession within immediate sale to our customer in the same month.
Jana: Capital expenditures in the third quarter were $4 million. CapEx will likely be at the low end of the guidance range as we work through the timing of spend related to the transfer of work for the closure of the Tampa facility, the CMO strategy, and other investments.
Jana: Barlin's at March 31st, 2025 were $178.8 million, a $26 million reduction from the second quarter, and down $116 million will 40% from the beginning of the fiscal year.
Jana: Short-term liquidity available, represented its cash and cash equivalence plus the unused portion of our credit facility, total $304.6 million at the end of the third quarter.
Thank you.
Jana: This continues to be a great example of controlling what we can control and setting up our balance for future growth.
Jana: In the third quarter, we invested $3 million to repurchase $175,000 shares.
Jana: a common stock. Since October 2015, under our Board Authorized Share Repurchase Program, a total of $100 million.7 has been returned to our share owners by purchasing 6.5 million shares of common stock.
We have $19.3 million remaining on the Repurchase Program.
Jana: As Rick mentioned, we are reiterating our guidance for fiscal year 2025 when net sales in the range of $1.4 to $1.44 billion. Adjusted operating income is estimated at 3.4 to 3.6 net sales and capital expenditures of $40 to $50 million.
Jana: Based on what we know today, we expect to be at the high end of ranges for sales and adjusted operating income margin.
Jana: Our estimates for the closing of the facility of Tampa have not changed. The total electric cost in the range of $6.5 to $8.5 million. And we fully expect the proceeds from the sale of the property to exceed the electric cost.
I'll now turn the call back over to Rick.
Thanks, Jaeson.
Jana: Before we open the lines for questions, I'd like to share a few thoughts in closing.
Jana: It probably goes about saying that the current tariff environment is filled with uncertainty and unpredictability for many, including our business, our customers, and the end consumer.
Jana: We continue to carefully monitor the situation to understand potential impacts and possible solutions for both the short and longer term.
Jana: Options could include changing final delivery locations, shifting production to different Kimball facilities for simply paying the tariffs.
Jana: There may also be impacts on our supply chain and we are considering alternatives for U.S. manufacturing.
Jana: But the rules and engagement need to be finalized before solutions can be agreed upon and implemented. This uncertainty makes the time and recovery in our core EMS business increasingly more difficult to predict.
Jana: As we look to the future, it's important to recall the recent steps we've taken to reposition the company.
We divested the nine core AT&M business.
Jana: We are in the process of closing our camp up facility to streamline our network, thus improving our global capacity utilization.
Jana: We drove significant inventory and cash flow improvements, and we announced a lease signing for a new facility fully dedicated to the CMO.
Jana: With a strong balance sheet, we're focused on returning to growth through emerging medical technologies, high-level assemblies, and a variety of drug-device combinations.
Jana: We look to elevate our prominence as a medical CMO with expanded manufacturing capabilities in the United States, New Adjacencies, and additional vertical integration in medical device production.
Jana: I'm optimistic we're getting closer to that return to growth and that we've taken the right steps to re-position the company for the future.
Operator, we'd now like to open your lives for questions.
Speaker Change: Certainly, we're not picking up the question and answer session. If you'd like to be placed in the question, please press star one on your telephone keypad.
Jana: A confirmation tone will indicate your line is in the question cue.
Speaker Change: You may press star 2 if you'd like to move your question from the queue. For participants using speaker equipment it may be necessary to pick up her handset before pressing star 1. One moment please, will we pull for questions.
Speaker Change: Our first question today is coming from Michael Crawford from B. Riley Securities. Your line is not live [inaudible]
Mike Crawford: Thank you, could you give us some more details about this strategy with this new larger facility
Mike Crawford: in the addition of Quimini, Mike Byer Labor, and I guess the second part of that is...
Mike Crawford: Facility that you would transfer over time, be worth if you were to be able to sell that.
Speaker Change: Sure, I can start that mic, and thanks for joining us today. Yeah, we're really excited about the facility. It gives us...
Speaker Change: First of all, a lot more space, frankly, to expand and grow in the medical CMO compared to what we have currently in Annapolis. It also is a brand new facility. It has different characteristics in terms of ceiling heights and layout.
Speaker Change: The clean and green capability that we're going to build, that just is a game changer for us in terms of...
Speaker Change: of Plain Air. We did, as mentioned, and as you asked, do this as a lease, which is not our typical approach. We typically own our facilities and we did this intentionally and frankly creatively in terms of the lease terms.
Speaker Change: to give us time and space to fill it over time. So the ability to grow is there, the ability to expand over time is there, but we're also not overburdened with large costs upfront, particularly given that at the least and given the terms of the lease.
Speaker Change: Again, my thought just adds to that a little bit, so the terms of the leaves just to give you a little insight.
Speaker Change: While we're doing the build out and we scold improvement, we actually don't start paying rent on the facility, so all of that is done, which was important so that we weren't to you going having an expense drag on our income statement while we were getting the facility up and running. [inaudible]
in terms of additional labor costs, etc.
Speaker Change: Right now we're not anticipating that we're going to have additional labor costs until we start to have the additional revenue and all those corresponding things coming along with that. And so right now it's really just the end of the day.
Speaker Change: Probably six or seven months from that and once we have the least hold improvements in place that will start experiencing the rent and some depreciation costs associated with the equipment that we've got to put in place.
Speaker Change: But this structure in terms of creating released amounts of burden on both the balance sheet and the income statement while committing to the growth opportunity.
Speaker Change: I feel really good about the way that we did this [inaudible]
Speaker Change: Great potential value in the sale of the existing facility.
I think it's too early to tell like, you know, Mike [inaudible]
I believe it's too early to tell, we're probably...
Speaker Change: The transition from the current facility and new facility will probably take two to three years.
Speaker Change: Due to the FDA qualifications and validations of some of the products in the current facility, but we will provide more details as we go forward.
Speaker Change: But we're not an anticipate, like significant proceeds from the sale of the current assets.
Speaker Change: Okay, thank you just one more for me. It's nice to see that the upcheck after five quarters of the decline in open orders or backlog.
You know, roughly by vertical, how does that break out?
Speaker Change: Yeah, if I look at the vertical, the greatest increase was in medical from a dollar standpoint followed by industrial and automotive were very similar.
in that increase.
Thank you. I'll jump back into the queue.
Bye.
Speaker Change: Thank you. Next question is coming from Jason Schmidt from Lake Street Capital. Your line is now live.
Jason Schmidt: Thanks for taking my questions. Congrats on the strong March quarter. I'm just looking at the results here. Do you think any orders were pulled into March just given the backdrop? I'm just looking at the backdrop.
Speaker Change: It's a great question, Jaeson, and frankly, we talked to our customers about that all the time. I would say uncertain. We haven't gotten strong indications that there's a lot of pull forward ahead of the tariffs necessarily, but we certainly are well aware that that could be a possibility. So we don't have a great read on it, and we continue to talk to customers daily to get their take. Thank you.
Speaker Change: Gotcha. And then just looking at sort of a first month of Q4 curious what you're seeing from kind of a quoting activity and booking standpoint.
In general, Jason.
We're seeing a good threat. Again, we're…
Speaker Change: We're cautious about it and only recognize the uncertainty of the environment.
Speaker Change: But we're seeing pockets of strength relative to where we've been and we take a good look at our funnel on a very regular basis and I will say that our funnel is very healthy.
Speaker Change: Perfect. And then last one for me, and I'll jump back into Q. I apologize if I missed this, but how should we think about
Opex trending the rest of this calendar year.
Speaker Change: What do you say off-extraining, do you mean the expense piece, the growth margin, the operating income margin?
Really just for the selling in an administrative expenses.
Speaker Change: Yeah, and so this is something that we did want to touch on and we were going to touch on in Q4, S-T-N-A-
this year is low as a percentage of sales.
Speaker Change: Right. And so we did that because we knew that this was going to be a challenging year in an environment. And so there was a lot of Phillips tightening. There was a fair amount of cost that we pushed out. [inaudible]
Speaker Change: But in FY26, as you're thinking about it for modeling purposes, we are not going to be able to hold S-G-N-A-3% of next sales.
There are some investments we're going to have to make. [inaudible]
Speaker Change: to prepare the business for this return to growth. And so I would encourage you with your thinking about that. That 3% level is it's not a norm that we can hold and grow the business and prepare for the future. Thank you.
Okay, that's really helpful. Thanks a lot, guys.
Thanks, Jay.
Speaker Change: Thank you. As a reminder, that's far one to be placed into question Q.
Speaker Change: Our next question is coming from Derek Soderberg from Chancellor of Australia. Your line is now live.
Yeah, hey, thanks for taking the questions.
Hey, hey, Jada.
Up.
Sorry, I think you kind of broke up there. Um.
Speaker Change: But so Jana just kind of continuing the conversation on us taking a modeling approach you're looking forward. I think just in the short term it looks like we're going to have a step down in gross margin operating income.
Speaker Change: Percentage. I'm guessing that's tariffs. I think the math works out to maybe 2% operating.
Speaker Change: Income Margin for the last quarter here, is that right? And he just kind of talked about the short-term moves in gross margin operating income things like that and that how we should think about those pieces for next, next fiscal year, thanks.
Speaker Change: That so I know that we got it to the high end of an O.I. range 34 to 36 [inaudible] I'm sorry, I'm sorry, I'm sorry,
Speaker Change: Next quarter is not going to be a 2% OHI margin quarter. We actually think next quarter is shaking up to be fairly similar to Q3, but we did not increase our estimates for OHI margin because
Speaker Change: You know, you're only going to lead away from who knows what, and so it's...
Speaker Change: It just made sense to stay conservative and reserved and we'll see how the quarter shakes out, but I would model an expectation similar to what we did this quarter. Thank you very much.
Thank you.
Speaker Change: The restructuring impacts are taking hold in and are pleased with the progress very hard, hard thought that the organization has made.
Speaker Change: That's super helpful. Appreciate the clarity on that. And then as my follow up, just on the Indianapolis facility, Rick, just curious why you feel like this was the right time to make this move. Can you just touch on? And then as my follow up, just curious why you feel like this was the right time to make this move.
The Demand Environment Medical, and then-
Speaker Change: You know, beyond sort of this more inorganic move, does this at all change the approach to inorganic growth from here? Can you just kind of talk about, you know, you've got this facility now? Does that at all change your approach in an inorganic growth and medical space?
Speaker Change: Great question. As you know from prior quarters, the medical CMO has been a space that we're excited about. We of course play in today. We think we can play in a much larger way. Quite honestly, while our Indianapolis facility currently that we have is performing very well operationally. We're going to play in a much larger way. We're going to play in a much larger way.
Um...
We care [inaudible]
Speaker Change: Get new big business in the medical CMO without a different facility. And so we made that investment. We're very encouraged by the conversations that we've been having over time with major players there. And yes, we continue to look hard at potential inorganic opportunities as well. So all of this is. That's fine.
Speaker Change: is based on our belief that this is first of all a very attractive space, secondly a space that we have some really. [inaudible]
Speaker Change: Differentiated Capabilities in with our ability to handle drug with what we already do with injectors etc. So this is an area of growth for us for sure in the future and we want to do invest behind it.
Speaker Change: And then just, can you kind of touch on the cash conversion here? Where do you think that's going to be trending here? And then finally, just on buybacks.
Speaker Change: Sounds like you've got about 20 million left. Do you feel like you you guys are in a position to continue to, you know, reperture shares here. Thanks
Speaker Change: So I'll start with a share of researches, and then I'll work my way backwards in your question. So yes, we expect to continue our share of research program. And so. Thank you.
Speaker Change: Expect for that to continue on and we'll report on that in the borders. That's the easy one.
in terms of CCD cell out.
Speaker Change: You know, I look at where we were and this is a huge partnership between operations and finding that's right so moving down from you know an exercise of 110 days. [inaudible]
Speaker Change: to where we're at currently and rightfully proud of the progress that we've made, but definitely still more to go. We feel like there's work that we can do in PDSLH.
Speaker Change: There's work that we can do in DSO and AP Day's charity and pretend to lean a little beyond that to give the cash conversion days down and so we still think that there's a fair amount of room to go there in terms of our cash conversion. So we're going to have a fair amount of cash conversion.
Sounds great. Really appreciate it. Thanks
Speaker Change: Thank you. Next question today is coming from Anja Soderstrom, from Sodorying Khappi, Irvine is our life.
Anya Soderstrom: Hi, thank you for taking my questions. Most of them have been addressed already, but when are you going to lapse the steering program fall off in the auto?
Where'd he go?
Let's follow Steve's question.
Anya Soderstrom: Anja, the program is the breaking program in Mexico and that will follow off completely with the exception of some small service work at the end of this quarter.
Anya Soderstrom: Okay, and then you're ramping from other programs, right? So we should start seeing an increase. Yeah, Rick mentioned there's a new breaking program that launched this quarter in Romania.
Anya Soderstrom: and looks to be very solid going forward. And we have other programs that we're launching but that major breaking program that Rick referred to.
Anya Soderstrom: significantly less than it was a year ago and will continue to trend down and be complete by the end of this quarter.
Speaker Change: Okay, thank you. And then we do closing the Tampa facility and moving some of that production to other facilities, and now you're opening another facility and going to move. How is that affect your growth margin going forward and when do you expect that to sort of normalize?
Yeah, with the NAMBA closure.
We'll go ahead, Jana.
Go ahead, Steve. I'll chime in after.
Speaker Change: With the with the Tampa closure, you know, we're still on target to have that wrapped up by the end of June . Our team has done a great job supporting our customers.
Speaker Change: and our employees really applaud that team, and our Jasper team, and our other teams are on the globe than have taken on that.
Speaker Change: It's gone very well and we continue to just be right on target to close that [inaudible]
with how we expected it to be closed. [inaudible]
Speaker Change: We do expect some gross margin improvement there with that. And then, you know, the indie facility is all contained with Indianapolis and just that facility. So, there will be a small impact to gross margin but we don't see a major impact there with what we're doing.
and that move from one's facility to the next.
And the other thing I'll remind everybody else is…
Speaker Change: As our customers and our supply chain, and we are dealing with the impact of terrorists, both none known and unknown [inaudible]
Consumer Sensitivity on Price
Speaker Change: It's paramount on everybody's mind and we're doing our best to hold our margin as best we can.
Speaker Change: But there are some activities out there, and we're not immune, and nobody else is either, and we're doing everything that we can to hold it. I mean, Steve and tough negotiations on a regular basis.
Speaker Change: And so we do expect some impact benefits from the Tampa closure, but we are also experiencing pressure that we're navigating.
Speaker Change: Okay, thank you. And then just one last slide. So, CapExpend and investments in automation and efficiencies, where do you still have a lot of room there to make improvements there, and that could sort of help your utilization and margins.
Speaker Change: Yeah, we've continued to make investments in automation, you know, we're both in our warehouses and on our production floors and we continue to see opportunities there, you know, and we've been on that journey now for four plus years and we are continuing on that journey.
Okay, thank you, that was all for me.
Speaker Change: Thank you. Next question today is coming from Hendi Susanto from Gabelli Fundroline is our life.
Hendy Susanto: Good morning, Rick, Jana, and Steve. I would like to ask about automotive first, so
Hendy Susanto: Manufacturing footprint in China, like, can you compare and contrast how different it is in terms of...
Speaker Change: Let's say that 70% of your auto-business is steering wheel, is that the case in China also and then also, like if you look at the high level, what the revenue composition of China looks like, how different or how similar it is.
I would say China is a little higher percentage on steering.
Speaker Change: Hendi, comparatively speaking, it is probably closer to 80 percent in steering in China across a number of...
Speaker Change: Tier I customers and OEMs, both the domestic Chinese OEMs as well as the foreign OEMs.
Speaker Change: Yeah, and then may I also ask about the breaking program like, would you be able to disclose like how many customers you are working with or and then like how many platforms in terms of design are worked?
Speaker Change: Yeah, we're working with two or three different customers in breaking.
Speaker Change: I can't share much more than that on platforms but we continue to have very good opportunities and breaking and that's typically the number of customers at some of our key customers across the globe today.
Speaker Change: and you know the same customer that we had the business with in Mexico was the customer in Romania.
And then me, I know what type of vehicles.
Speaker Change: They're both ICE vehicles and EVs, so we have both breaking on both.
Um...
Speaker Change: Yeah, and then my next question is about the self-straining industrial, the declines in smart metering, climate controls, and public safety products. Have we reached the bottom yet?
Speaker Change: I believe we've reached the bottom or we believe we've reached the bottom in climate controls.
from What We're Seein'
Speaker Change: Smart Metering as we had in our release. We don't see that as a significant part of our industrial moving forward. And also in the public safety, we believe we've reached the bottom of that also.
Speaker Change: And then in order to see, I'd say like, gross returning in industrial, what are the top low hanging fruits?
Speaker Change: The top low-anging fruit is our current customers. We're seeing opportunities there with both new programs and current programs.
as industrial continues to come back.
Speaker Change: We have some new awards and some new verticals that we're also seeing some opportunities that are maybe 12 to 15 months out so we're seeing those opportunities for you guys.
Speaker Change: as well as some charging opportunities with a couple of customers that we're seeing as well.
Speaker Change: I have not announced any awards yet, but we are in a very good position with those customers.
Thank you.
And Jana, I would like to understand this better, the consign inventory sale impact.
Speaker Change: You mentioned the impact was 22% and 6% is like I would like to verify my understanding about those two different numbers 32% on
Speaker Change: There was 20 to 13 of them, Malaco, Vertical, Specifically, and 6% of total sales. Okay, yeah, okay, grant.
Thank you, that's very helpful.
Um, um,
And then with regard to the time back closing, [inaudible]
Speaker Change: So the estimated exit cost is 6.5 to 8.5. How much has incurred, like let's say like year to date and when will the remainder, will the remainder be entirely in the fourth quarter?
Office of the current fiscal year.
Speaker Change: So, here today I actually have the restructuring in front of me right now [inaudible]
We've done.
Speaker Change: about $3.5 to $4 million. The bulk of the closing, again, with our goal of being closed, [inaudible]
Speaker Change: Okay, so there's like maybe like between three and four million laughs [inaudible]
Speaker Change: Yeah, I said, there's about three and a half million of expense left, perhaps more than that. And we'll, we'll incur.
Speaker Change: I would say probably 90% of that. Next quarter, there may be a tale into Q1 of
2026.
just depending on...
Speaker Change: You know, the process and the transfer of work, I will say, and I ask these comments, our Tampa team has been absolutely amazing.
Speaker Change: They have just done an incredible job with this. We're going to take care of our customers and make sure that we do it right. And so if that leads over a little bit to Q1, it will. We're going to take care of our customers and make sure that we do it right.
Speaker Change: Okay, yeah. And then one last question, I think with regard to let's say ongoing.
Speaker Change: Trans of Infantry Digestion in certain spots whether it is in industrial or automotive and now we have uncertainty Like, can you highlight
Wear Infantry Correction
Speaker Change: It's better today compared to three months ago, and when do you see areas where customers may do inventory rebuild?
Speaker Change: The Infantry Digestion that has been ongoing for a while versus when customers may rebuild their inventories.
Speaker Change: Hendi, as we've shared, our inventory has come down to $100 million over the last 12 months.
Speaker Change: We continue to see a positive trend moving forward as we...
Speaker Change: Burn Down, RXS Inventory, and it's really across all of our verticals.
maybe a little stronger in industrial...
Speaker Change: Medical, but we had a significant amount of LTSA or long-term supply agreement inventory that we took from suppliers that is now burning down at a very good rate.
We continue to see that going forward
Speaker Change: We're not seeing a significant build up of inventory at our customers today.
Speaker Change: So, we'll monitor that very closely, as Jana mentioned, the environment obviously is very difficult to read with the tariffs and things that are happening, but from what we see we will continue to see that inventory come down over the next 12 months.
Speaker Change: Thank you, Rick. I think I would like to clarify what I meant was on the customer side, what you are seeing on the customer side, I guess, what you said, like, uh...
is mimicking like who? Like. [inaudible]
Speaker Change: I'm looking for these stockings done in terms of what we have seen in some of the articles. Do you feel like we're past that? Is that what you're asking? Yes, yes, on the customer's side. Yeah.
Speaker Change: I believe we're past that. What we're seeing today from our customers is...
Speaker Change: They're sharing is there's not a significant amount of inventory in their channels, but you know it's hard to see we don't have complete visibility to that.
Thank you so much.
Thank you. Thank you.
Speaker Change: Thank you. Next question, today's a follow-up from Michael Crawford from B. Riley, your line is now live.
Mike Crawford: Thank you. I just wanted to go back to your guidance to talk about being at the high end.
Mike Crawford: of Viewer Guidance. I mean, that implies, like just, I don't know, 335 million of revenue in June quarter versus what I think Jenny said it was a 23 million dollar.
Mike Crawford: Consigned inventory sale because that 22% and 6% come to a site with different numbers, 1 is 25 million, 1 is 22 million but
I'm sorry.
It's $24 million of confined inventory sales. Okay.
Speaker Change: So, what would it take for you to exceed that $335 million that it would take to get over the high end of your guidance?
Speaker Change: The man continues to be strong and will be higher and will beat it.
Okay, thank you.
all of you. Bye bye.
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