Sentiment Analysis of the earnings transcript to help figure out if there are any bullish or bearish sentiments that could be gathered from it. We're doing ML and AI based analysis on the earnings call to get some more insights.
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| Statement |
|---|
| We like the places that we're playing and so we think the organic growth opportunities are really robust |
| The gross margin rate in Q2 was 8.2%, a 40 basis point improvement compared to the same period last year, with the increase being driven by a favorable product mix and lower material costs compared to 12 months ago when we were dealing with global shortages impacting the electronics industry |
| We do see a really healthy funnel as Jana mentioned, and as we look forward in the out years, the lead time on wins, I mean, we see some really nice wins |
| From a geographical perspective, the top line was strong in North America, up low double digits, with particularly good results in our Industrial vertical market offset by declines in Asia and Europe |
| We continue to see wins coming in, and we're really optimistic about Medical long term |
| We are winning together the Kimball way and I'm excited about what's ahead for our company |
| For us, that's actually going exceptionally well |
| Longer term, we continue to see a strong runway for growth in the Automotive vertical, driven by the industry trend toward incorporating more electric content to vehicles, specifically in steering and braking systems |
| They consistently recognize the Kimball team, our culture and the common set of priorities that have allowed us to continuously improve and keep our promises |
| We're proud, as you know, of our North American manufacturing network, and we have customers that want to talk to us about it all the time |
| Our proven expertise manufacturing safety critical products that meet the stringent regulatory requirements of the industry ideally positions us to support further advancements in these systems |
| So in summary, a solid quarter in a difficult operating environment and an updated outlook for fiscal 2024 |
| I am very proud of our team's consistent focus on building long-term relationships with our customers, regardless of whether they are new or customers we've worked with for a decade or more |
| In November, we achieved the highest overall customer ratings in the categories of dependability and timely delivery, technology, value for the price and manufacturing quality |
| So that's really great |
| Jana Croom [Multiple Speakers] North America, but in China, those sales have been really strong |
| And in China, we also had some nice pockets of strength in the Automotive business |
| In addition to a focus on inventory, we are also looking to significantly improve our cash conversion days as we more actively and aggressively manage its components |
| We've seen -- we see and we like the strength in North America around those areas |
| If you can just maybe shed light anything else that's growing pretty good, you're seeing pretty good interest on orders |
| I think we've said before, we continue to have a great relationship with that customer |
| Before we open the lines for questions, I'd like to recognize our team for once again being honored by CIRCUITS ASSEMBLY Service Excellence Awards |
| It's going well for us |
| We've got some new product and program launches that we're going to see there that are encouraging and exciting, offset by just some inventory that we've got to work through and softening in Europe |
| With a strong funnel of new business supported by favorable industry megatrends, we're deploying a balanced capital allocation strategy focused on driving organic growth, global expansion and long-lasting customer relationships |
| Automotive, North America steering and braking, going really well |
| We have our first child born yesterday afternoon, a baby boy and mom is doing well |
| It's really interesting because we've had a solid ramp of new program launches in NPIs, where we're seeing some of the softening come through our existing programs that have been in place for years where we're seeing decommits, cancels and some push outs |
| One vertical market, Industrial, posted year-over-year growth in the quarter with net sales totaling $113 million, a 7% increase compared to Q2 last year and 27% of total company sales |
| And -- that's good |
| Statement |
|---|
| Based on what we know today, it seems likely the macro environment will remain challenging for some time |
| As Ric highlighted, net sales in Q2 were $421.2 million, a 4% decrease compared to the second quarter of fiscal 2023 |
| Global macro headwinds, including pressure from elevated levels of inflation, higher interest rates and geopolitical uncertainties have persisted and the consumer is pulling back |
| Finally, Medical with net sales of $108 million, a 14% decrease compared to Q2 last year and 26% of total company sales |
| The decline this quarter was driven by weakening demand in Europe, partially offset by incremental strength in China |
| Net sales totaled $421 million, a 4% decrease compared to the second quarter of last year |
| Sales in Q2 declined compared to the same period last year with manufacturing output in the quarter being reduced to meet the lower demand as our customers work through elevated inventory levels |
| The markets we serve are experiencing demand softening and our customers are changing production schedules and delivery date requirements |
| I will tell you, Europe across the board is just really tough right now |
| Automotive is really a mixed bag, because what we're seeing is softening in the European market |
| Industrial, we are seeing significant weakness in Europe, particularly related to the smart metering product line, it is being offset by growth that we're seeing in North America, specifically related to charging stations and also some benefit that we're seeing come through in the HVAC market |
| Is that mainly the reason for the weakness there? Or do you also see a broad economical weakness? Jana Croom It broader economical weakness, the broader economical weakness is just exacerbating the inventory challenge |
| And Jana, you were talking about the weakness in Europe, and you mentioned the inventory adjustments there |
| Next is Automotive, where Q2 sales totaled $200 million, a 2% decrease compared to the second quarter of fiscal 2023 and 47% of total company sales |
| While Europe appears to be a region of the world where the general economic slowdown is more significant compared to other areas of the globe |
| And so it's strange to us because one of our peers highlighted Medical has a softening vertical for them |
| The decline in Asia occurred in Thailand, which was heavily impacted by our major Medical customer that is involved in an FDA recall |
| I understand, obviously, the fiscal 2024 guide accounts for the $100 million reduction in sales related to that FDA recall of a major Medical customer |
| In the prepared remarks you mentioned some geopolitical uncertainty |
| Can you talk a bit about where the incremental weakness is coming from by end market that's sort of leading to the revision in the outlook? I would imagine you are feeling some of the impact of the UAE strike |
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