On this page of StockholderLetter.com we present the 9/28/2023 shareholder letter from Kimball Electronics, Inc. — ticker symbol KE. Reading current and past KE letters to shareholders can bring important insights into the investment thesis.

 •  9/28/2023 Letter Continued (Full PDF)
 •  9/26/2024 KE Stockholder Letter
 •  9/25/2025 KE Stockholder Letter
 •  More "Electronic Equipment & Products" Category Stockholder Letters
 •  KE Benford's Law Stock Score = 85

KE 9/28/2023 Shareholder/Stockholder Letter Transcript:

THE KIMBALL WAY
2023 Annual Report

Who We Are
Kimball Electronics was founded in 1961 and incorporated in 1998. We deliver a package of value that begins with our core competency of
producing durable electronics and extends to contract manufacturing services for non-electronic components, medical disposables, drug
delivery solutions, precision molded plastics, and production automation, test, and inspection equipment. Our design and manufacturing
expertise coupled with robust processes and procedures help us ensure that we deliver the highest levels of quality and reliability
throughout the entire life cycle of our customers    products. We deliver award-winning service across our global footprint with an operations
platform driven by highly integrated procedures, standardization, and teamwork. Our Customer Relationship Management (   CRM   ) model
is key to providing our customers convenient access to our global footprint and all of our services throughout the entire product life cycle.
Because they operate in industries that demand rigorous engineering controls and that commonly require long product life cycles, our
customers value our track record of quality, financial stability, social responsibility, and commitment to long-term relationships.
We offer our services globally on a contract basis, and we manufacture products to our customers    specifications. Our services
primarily include:
    Production and testing of printed circuit board assemblies
(PCBAs);
    Full box build manufacturing and assembly;
    Final Assembly of medical electronic products;
    Design services and support;
    Supply chain services and support;
    Rapid prototyping and new product introduction support;
    Product design and process validation and qualification;
    Industrialization and automation of manufacturing processes;
    Reliability testing (testing of products under a series of extreme
environmental conditions);
    Aftermarket services;
    Production and assembly of medical devices, medical
disposables including packaging, and other non-electronic
products;
    Drug delivery devices and solutions with and without electronics;
    Class 7 and 8 clean room assembly, cold chain and product
sterilization management;
    Design engineering and production of precision molded plastics;
    Design engineering and manufacturing of automation, test, and
inspection equipment;
    Software design; and
    Complete product life cycle management.
Our Global Presence
Our global footprint supports our
customers    specialized manufacturing
needs. Whether the requirement is
in-region support for an end market,
access to a lower cost market, or
proximity to a customer team, Kimball
Electronics has a solution.
North America
Europe
Asia
Jasper, Indiana
(Manufacturing and
World Headquarters)
Indianapolis, Indiana
Tampa, Florida
San Jose, California
Reynosa, Mexico
Poznan, Poland
Timisoara, Romania
Nanjing, China
Suzhou, China
Trivandrum, India
Chiba, Japan
Laem Chabang, Thailand
Ho Chi Minh City, Vietnam

Financial Highlights
Fiscal Year Ended June 30,
2023
(Amounts in thousands, except per share data)
2022
% Change
Net Sales

1,823,429

1,349,535
35%
Operating Income, as reported (GAAP)

87,729

52,549
67%
SERP
Legal Settlements (Recovery)
701
(1,563)
(212)
(1,384)
Adjusted Operating Income (non-GAAP)

88,218

49,602
78%
Net Income, as reported (GAAP)

55,831

31,253
79%
Adjustments After Measurement Period on GES Acquisition
Legal Settlements (Recovery)
279

(161)
(1,050)
Adjusted Net Income (non-GAAP)

55,949

30,203
85%
Diluted Earnings per Share, as reported (GAAP)

2.22

1.24
79%
Adjustments After Measurement Period on GES Acquisition
Legal Settlements (Recovery)
Adjusted Diluted Earnings per Share (non-GAAP)

Return on Invested Capital
0.01


(0.04)
2.23

9.4%
1.20
86%
7.2%
31%
Cash Flow from (used for) Operations

(13,804)

(83,178)
83%
Capital Expenditures

90,688

74,714
21%
Share Owners    Equity

523,994

453,971
15%
Diversi   ed Portfolio of End Markets and Market Services

45%

27%

26%
2%*
Other
Automotive +41%**
    Electronic Power Steering
    Body Controls
    Automated Driver Assist Systems
    Electronic Braking Systems
Medical +26%**
    Sleep Therapy and Respiratory Care
    Image Guided Therapy
    In Vitro Diagnostics
    Drug Delivery
    AED
    Patient Monitoring
Industrial +33%**
    Climate Controls
    Automation Controls
    Optical Inspection
    Smart Metering
    Public Safety
*Percentage of net sales
**Percentage increases compared to fiscal year 2022
Kimball Electronics 2023 Annual Report | 1

WINNING TOGETHER THE KIMBALL WAY | LETTER
WINNING TOGETHER THE KIMBALL WAY | LETTER
For me,    Winning Together    is the fun of business.
It is working on a great team, with a great culture,
and a common set of priorities.
Our Environmental, Social, and Governance disclosures also
received high marks once again this year, with Morningstar
Sustainalytics, a leading ESG research    rm, rating us #1 among
electronics manufacturers for ESG risk. In addition, we received
a Prime rating from ISS ESG, which places us among the top
10% in our industry.
Richard D. Phillips
Chief Executive O   cer
Photography courtesy of Nasdaq, Inc.
To Our Share Owners
I feel very fortunate, and humble, to be writing to you today
as CEO of Kimball Electronics. The Company has a rich
history of excellence and a strong culture focused on longterm relationships, and I am thrilled to be part of it. Fiscal
year 2023 was an excellent year with record sales, margin
expansion, a 79% increase in net income, and improved
return on invested capital, all while navigating a challenging
macro environment.
The top-line growth was shared across the three end market verticals we support, with
each posting robust double-digit increases in the year. We believe this momentum
will carry forward, fueled in part by industry megatrends, even if consumer demand
softens during a global economic slowdown. The strength was distributed across our
customer base with nearly half of them reaching new highs in annual sales volume with
us. Consistent with our focus on building long-term relationships, 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 our historic norm, and we received
multiple customer service awards     four in China alone. For the ninth consecutive
year, we were recognized by CIRCUITS ASSEMBLY magazine in multiple categories for
Service Excellence.
2 | Kimball Electronics 2023 Annual Report
Fiscal year 2023 also marked the end of an era with the
retirement, and subsequent untimely passing, of former
Chairman and CEO Don Charron. Under Don   s leadership
spanning 24 years, Kimball Electronics grew from a division
of its parent company to a publicly-traded, global enterprise
with revenues rapidly approaching the $2 billion threshold.
All of us in the Kimball Electronics family are deeply saddened
by this turn of events and mourning his loss. Our thoughts
and prayers go to the entire Charron family. We are grateful
to have known and worked with Don. He will be missed. As
dif   cult as it may be to celebrate, I am still very proud of the
Company   s achievements in the year, and I am even more
excited now about what lies ahead with the next chapter of
pro   table growth.
Winning Together     The Kimball Way
When    rst looking for a new professional opportunity, I was
attracted to Kimball Electronics for three reasons:
    The culture
The people are outstanding with a level of commitment,
passion, and love for the Company. The business opportunity
is tremendous. You can see it in our performance, and we
have great momentum to go to even better places than where
we are today.
For me,    Winning Together    is the fun of business. It is
working on a great team, with a great culture, and a common
set of priorities. It   s understanding that if we   re not getting
better tomorrow, someone will pass us up. That continuous
improvement mindset is a great trait and a core belief of our
Company. So what does it mean to    Win The Kimball Way   ?
It means:
    Staying true to our Guiding Principles,
    Being collaborative and team-oriented,
    Setting high aspirations    not unrealistic goals, but attainable
targets that require stretching,
    Maintaining our strategic priorities,
    Communicating openly and proactively, and
    Being accountable to our Company, to our customers, to each
other, and to our Share Owners.
It is what you can expect from me, and it is a priority for our
team. I am proud to be a member of Kimball Electronics, and
thank you for your support.
    The people
    The opportunity for value creation
Fast forward to today, and all of them are better than what
I expected. Our Company lives its culture every day. It is
re   ected in our annual Guiding Principles survey with employee
engagement scores well above industry norms. We also hear
from our customers that our culture differentiates Kimball
from its peers. In my career, I   ve seen a lot of companies,
and I can tell you this one upholds its principles better than
any other that I have known. It   s impressive, with consistency
at each location, and it   s an incredibly strong foundation.
We invite you to stay informed by visiting our website at
www.kimballelectronics.com as we continue to build lasting
relationships for global success.
For more detailed insights into the past year, we encourage
you to read the following Form 10-K.
Richard D. Phillips
Chief Executive Of   cer
Kimball Electronics 2023 Annual Report | 3

WINNING TOGETHER THE KIMBALL WAY | AUTOMOTIVE
WINNING TOGETHER THE KIMBALL WAY | AUTOMOTIVE
41%
Incomparable Expertise in Manufacturing
Automotive Electronics
YEAR-OVERYEAR NET
SALES
INCREASE
IN THE
AUTOMOTIVE
MARKET
VERTICAL
Recognizing the paramount signi   cance of safety, reliability, and dependability,
we collaborate closely with our esteemed automotive customers at the forefront
of the market, guaranteeing the utmost levels of manufacturing excellence.
Since we began manufacturing for the Automotive market in 1985, vehicle
technologies have undergone remarkable transformations. Yet amidst these
changes, Kimball Electronics remains unwavering in its capacity to deliver
unparalleled quality and reliability in automotive electronics manufacturing.
This demands experience and a profound understanding of the craft. Our
enduring commitment to provide unwavering support to industry pacesetters in
automotive technology is a commitment poised to extend for decades to come.
Automotive Market
Automotive was our fastest growing market vertical in    scal year 2023,
with net sales exceeding $820 million, a year-over-year increase of 41%.
This market represents 45% of our total company sales, with strength
in electronic power steering and electronic braking, including redundant
safety controls for self-driving applications.
$820M
NET SALES IN
THE AUTOMOTIVE
MARKET
Electronics Manufacturing for Critical Automotive Systems
Amid the expanding acceptance of
Advanced Driver Assistance Systems
(ADAS) and the concurrent rise in
consumer con   dence, Kimball Electronics
steadfastly maintains its role as a premier
EMS provider within the Automotive
market. By assisting our customers in
the production of essential electronic
systems, Kimball Electronics plays a
pivotal role in propelling the evolution
of ADAS to greater heights.
1 STEERING
Electronic Power Steering (EPS) controls
transform driving by replacing hydraulic
systems with advanced electronics
that optimize steering for better
maneuverability and responsiveness,
ensuring smooth operation at different
speeds while reducing driver fatigue.
4 | Kimball Electronics 2023 Annual Report
A majority of our revenue for the Automotive
market is in the critical areas of electronic
power steering and electronic braking
systems which are critical to autonomous
functions and vehicle safety.
2 BRAKING
Electronic braking controls are an
essential component of vehicle dynamics
control and performance by using
sensors, algorithms, and actuators to
optimize braking precision. This pivotal
technology enhances braking ef   ciency,
ensuring safer driving and improved
road safety.
3 SENSORING & SAFETY CONTROL
Automotive sensors and safety controls
expertly fuse technology for enhanced
road safety. Using cameras, radars,
and ultrasonic devices, they vigilantly
oversee surroundings and vehicle
dynamics. Teamed with advanced safety
controls, they trigger timely actions    
auto braking, lane alerts   averting
collisions and reducing risks. This
ensures a secure driving environment
for everyone.
1
3
2
Kimball Electronics 2023 Annual Report | 5



 9/28/2023 Letter Continued (Full PDF)