Kimball Electronics (NASDAQ:KE) used an appearance at KeyBanc’s sixth annual Healthcare Forum to outline how the contract manufacturer is shifting more of its portfolio toward medical end markets, while also providing an update on recent performance and a new Indianapolis facility designed to support expanded medical-device manufacturing.
Company background and footprint
Chief Financial Officer Jana Croom said Kimball has operated for more than 65 years, tracing its origins to organ building before the business ultimately separated into furniture and electronics operations. Kimball Electronics became an independent publicly traded company 11 years ago after spinning out of Kimball International.
- Automotive, focused primarily on steering and braking
- Industrial, described as “green and clean,” including climate controls and off-highway applications
- Medical, spanning electronics manufacturing services as well as contract manufacturing of finished medical devices, including plastics molding
Andy Regrut, head of investor relations, said Kimball operates globally across North America, Asia, and Europe, with facilities generally designed as clean, well-lit environments for printed circuit board assembly. He noted that China has a heavier concentration of automotive work and Thailand has a heavier concentration of medical work.
Why the company is leaning further into medical
Croom said Kimball made a strategic decision about two years ago to intentionally shift more of the business toward healthcare. She cited the ability to combine the company’s electronics manufacturing with plastics molding and drug-delivery capabilities, which she said can increase “stickiness” in customer supply chains.
She also described the margin profile in contract manufacturing and development manufacturing (CMO/CDMO) as attractive. Management said the strategy is being pursued through organic investment in facilities and an “inorganic or tuck-in” acquisition approach to add adjacent capabilities.
Regrut highlighted capabilities at the company’s Indianapolis medical campus that include handling drug product as part of assembling drug-delivery systems (while not manufacturing the drug itself). Croom added that the site includes cold-chain capability and Class 7 and Class 8 cleanrooms.
Differentiation: from electronics to finished devices
In discussing competitive positioning, management emphasized the company’s ability to provide full and final assembly for medical customers—delivering finished, labeled products rather than only subassemblies. Croom said Kimball partners with customers on “design for manufacturing” and scaling products for volume production, positioning the company as a manufacturing-focused counterpart to customers that prioritize R&D and intellectual property development.
Regrut offered an example of an auto-injector produced in Indianapolis that incorporates electronics manufactured elsewhere in Kimball’s footprint. He said the device includes audio prompts that guide the user through administration steps, which management framed as valuable in high-stress situations. The executives also pointed to broader device trends toward smaller, more portable diagnostic and therapeutic products, increasing the need for manufacturing expertise in compact, content-dense designs.
Recent results, segment trends, and raised outlook
Addressing results for the quarter ended Dec. 31, Croom said the medical segment’s growth was broad-based—across geographies and spanning both the CMO and electronics manufacturing services businesses—rather than driven by a single customer or program. She described the performance as evidence that the medical strategy launched two years ago is “coming to fruition,” and said the company expects growth to continue.
In automotive, Croom attributed declines to the loss of a single large program, which she said was due to a commercial agreement between an OEM and the Tier 1 supplier rather than any quality issue at Kimball. She said the company has now “anniversaried” that loss and guided to a flattening in automotive in the third quarter, with the potential for a small increase.
In industrial, she said the company has seen softening in climate controls tied to residential and commercial HVAC electronics, which she noted can be influenced by housing and real estate market conditions. She said Kimball is monitoring the market and expects the industrial segment to flatten and rebound over time.
Croom also discussed the company’s decision to raise its full-year outlook, pointing to improved gross margin performance. She said management has focused on “control what you can control,” including rightsizing operations, managing working capital and inventory, and reducing debt levels and interest expense. Regrut added that actions taken in prior years—including divesting a non-core Automation, Test, and Measurement asset and closing the Tampa manufacturing facility and relocating work within the footprint—were aimed at improving the cost structure so that margins can expand as volumes return.
Indianapolis expansion, customer concentration, M&A, and margin goals
Management detailed a newly opened, “state-of-the-art” facility in Indianapolis intended to support the medical strategy. Croom said the building totals 300,000 square feet and includes an option for an additional 200,000 square feet. She said the scale and visible “white space” are important when engaging with large pharmaceutical and medtech customers looking for capacity and long-term growth support. Regrut said the facility could double or triple the company’s controlled manufacturing and cleanroom space, as well as expand plastic injection molding capacity.
On customer concentration, Croom said Philips is one of Kimball’s top three customers and represents more than 10% of revenue, but that figure is spread across 11 different Philips divisions. She said roughly 70% of company revenue comes from customers that have been with Kimball for 10 years or more, and the company aims to add about five new customers per year to refresh and grow the portfolio.
On acquisitions, Croom said Regrut also leads corporate development, and the company is evaluating opportunities that add geographies, adjacencies, and capabilities that fit with its existing portfolio. Regrut cited micro molding as an example of a capability Kimball would like to add and said the company evaluates targets by aligning desired manufacturing capabilities with attractive end markets and customer opportunities.
Finally, management addressed long-term profitability potential. Croom said Kimball’s goal remains 5% adjusted operating income margin, and she described moving beyond that level—potentially into the 6% to 7% range over time—as an opportunity tied to the continued medical mix shift. She cautioned that the company would still be a contract manufacturer and that reaching higher margins would take time, but said moving from the current 4% to 4.5% adjusted operating income margin to roughly 6.5% would represent a significant increase in profitability and, alongside top-line growth, could meaningfully expand shareholder value.
About Kimball Electronics (NASDAQ:KE)
Kimball Electronics, Inc is a global electronic manufacturing services (EMS) provider headquartered in Jasper, Tennessee. The company offers end-to-end product design and manufacturing solutions, serving original equipment manufacturers (OEMs) across a range of industries. With a focus on precision electronics and complex assemblies, Kimball Electronics leverages advanced engineering capabilities, quality systems and lean production methods to support customers from product concept through full-scale production.
The company’s core offerings include printed circuit board assembly (PCBA), system integration, tooling and test fixture development, and aftermarket services.
