What changed in this filing

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Item 2. Management’s Discussion and Analysis

2025-11-06 compared with 2025-05-07 · 90 added, 128 removed, 138 unchanged (61% of the section changed)

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We provide electronics manufacturing services (“EMS”), including engineering and supply chain support, to customers in the automotive, medical, and industrial end markets.

Our core competency is producing durable electronics.

We further offer contract manufacturing organization (“CMO”) solutions which include operations such as precision molded plastics, complete device assembly, and cold chain management, which support the production of medical disposables and selected drug delivery devices such as auto-injectors.

We further produce higher level and final assemblies and offer contract manufacturing organization (“CMO”) solutions which include the production of medical disposables and drug delivery devices, from precision molded plastics and cold chain management to drug integration.

Our manufacturing services, including engineering and supply chain support, utilize common production and support capabilities globally.

We are well recognized by our customers and the industry for our excellent quality, reliability, and innovative service.

CIRCUITS ASSEMBLY, a leading brand and technical publication for electronics manufacturers worldwide, has recognized us for the past 13 consecutive years for rankings in Highest Overall Customer Ratings in their Service Excellence Awards.

Most recently, we were recognized by our customers for highest ratings in service excellence in seven categories:

dependability/timely delivery, manufacturing quality, responsiveness, technology, value for the price, flexibility, and overall satisfaction.

We have participated in the CIRCUITS ASSEMBLY Service Excellence Awards for the past twelve consecutive years, winning awards for excellence each year of participation and recently receiving top honors in all seven award categories.

CIRCUITS ASSEMBLY is a leading brand and technical publication for electronics manufacturers worldwide.

The contract manufacturing services industry is very competitive.

As a mid-sized player, we can expect to be challenged by the agility and flexibility of the smaller, regional players, and we can expect to be challenged by the scale and price competitiveness of the larger, global players.

We enjoy a unique market position between these extremes which allows us to compete with the larger scale players for high-volume projects, but also maintain our competitive position in the generally

lower volume durable electronics market space.

We enjoy a unique market position between these extremes which allows us to compete with the larger scale players for high-volume projects but also maintain our competitive position in the generally lower volume durable electronics market space.

We expect to continue to effectively operate in this market space;

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The Worldwide Manufacturing Services Market - 2025 Edition , a comprehensive study on the worldwide EMS market published by New Venture Research (“NVR”), provided worldwide forecast trends through 2029.

NVR projects the worldwide assembly market for electronics products to grow at a compound annual growth rate (“CAGR”) of 4.6% over the next five years, with the EMS industry projected to grow at a CAGR of 4.6%.

NVR projects the worldwide assembly market for electronics products to grow at a compound annual growth rate (“CAGR”) of 6.3% over the next five years.

We continue to monitor the current economic and industry conditions for uncertainties that may pose a threat to our future growth or cause disruption in business strategy, execution, and timing in the markets in which we compete.

Net sales in the third quarter of the current fiscal year decreased 12% compared to the prior fiscal year third quarter, most significantly in our automotive and industrial end market verticals.

The decrease in sales to customers in the automotive markets were largely driven by the loss of a major automotive program that was unrelated to Kimball.

The increase in sales to customers in the medical markets were favorably impacted by $24M in non-recurring consignment inventory sales to a customer for completed programs.

The decrease in sales to customers in the industrial market were related to the sale of GES and declines in smart metering and public safety.

We expect consolidated net sales to continue to lag when compared to fiscal year 2024, which we expect to continue through calendar year 2025, most significantly with the loss of a major automotive program by our customer that was unrelated to any issues with our workmanship, quality, or ability to produce the product, the expected consolidated net sales decrease from the divestiture of our GES business, and the adjacent impacts with our major medical customer with the FDA recall.

Beginning in February 2025, the U.S.

implemented tariffs on a variety of countries and commodities.

In response, certain countries have imposed, or are considering, retaliatory tariffs on U.S.

The global tariff landscape is evolving at a rapid pace, with changes impacting businesses and markets around the world.

While these increased tariffs have and may continue to impact end customer demand, we expect that we will recover the tariff costs by passing them on to our customers.

If we are unable to fully recover these costs, our results of operations and cash flows could be adversely impacted.

Net sales in the first quarter of the current fiscal year decreased 2% compared to the prior fiscal year first quarter, most significantly in our automotive end market vertical.

We have a strong focus on cost control balanced with managing the future growth prospects of our business.

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In addition, a long-standing component of our profit-sharing incentive bonus plan is its link to our financial performance, which results in varying amounts of compensation expense as profits change.

We completed the divestiture of our GES business on July 31, 2024 and undertook restructuring efforts beginning in fiscal year 2024 to align our cost structure with reduced end-market demand levels.

In addition, on November 4, 2024, the Company announced that its Board of Directors has approved a plan to cease operations at our Tampa facility, expected to be completed by the end of the fiscal year.

In fiscal year 2025, the Company announced that its Board of Directors had approved a plan to cease operations at our Tampa facility, which was completed by the end of the fiscal year 2025.

The decision was another important step towards sharpening our strategic focus, while leveraging our global footprint and streamlining the operating structure.

Production activities on existing customer programs will be transferred out of Tampa, with the majority of the work going to our plants in North America, primarily our newly expanded facility in Mexico and Jasper.

We continue to maintain a strong balance sheet, which included a current ratio of 2.1, a debt-to-equity ratio of 0.3, and Share Owners’ equity of $548 million at March 31, 2025.

Production activities on existing customer programs were transferred out of Tampa, with the majority of the work going to our plants in North America, primarily our newly expanded facility in Mexico and Jasper.

As we continue to monitor the progression of tariffs and the geopolitical economic environment, additional restructuring efforts may be necessary.

We continue to work with our customers to optimize our global footprint.

We continue to maintain a strong balance sheet, which included a current ratio of 2.2, a debt-to-equity ratio of 0.2, and Share Owners’ equity of $577 million at September 30, 2025.

Refer to the Future Liquidity section of Liquidity and Capital Resources below for further discussion of our liquidity.

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While variation in the size of program awards makes it difficult to directly correlate this data to our sales trends, we believe it does provide useful information regarding our customer loyalty and new business growth.

Nine Months Ended

Three Months Ended

Customer Service Years 2025 2024

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# of Customers 53 60

Our total number of customers declined by seven from September 30, 2024 to September 30, 2025 all of which accounted for less than 1% of our consolidated net sales in the first quarter of fiscal year 2025.

A detailed discussion of risk factors and uncertainties that could have an effect on our performance are located within the “Risk Factors” section of our Annual Report on Form 10-K for the year ended June 30, 2025.

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Selling and Administrative Expenses 13.0 3.5 % 13.5 3.6 % (3) %

Other General Income — — % (0.9) (0.2) % 100 %

Restructuring Expense 1.4 0.4 % 2.3 0.6 %

Goodwill Impairment — — % 5.8 1.4 % (100) %

Asset Impairment (Gain on Disposal)

— — % 16.6 3.9 % (100) %

Operating Income (Loss)

Gain on Disposal (0.1) — % (1.3) (0.3) %

Operating Income

14.5 4.0 % 9.1 2.4 % 59 %

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$ 10.1 $ 3.2 220 %

Net Income (Loss)

$ 3.8 $ (6.1) 163 %

Diluted Earnings per Share $ 0.40 $ 0.12 233 %

Open Orders $ 593 $ 594 — %

For the Nine Months Ended

(Amounts in Millions, Except for Per Share Data) 2025 as a % of Net Sales 2024 as a % of Net Sales % Change

Net Sales $ 1,106.3 $ 1,284.4 (14) %

Gross Profit $ 73.9 6.7 % $ 103.5 8.1 % (29) %

Selling and Administrative Expenses 37.1 3.4 % 50.7 4.0 % (27) %

Other General Income — — % (0.9) (0.1) % 100 %

Restructuring Expense 9.0 0.8 % 1.6 0.1 % 456 %

Goodwill Impairment — — % 5.8 0.5 % (100) %

Asset Impairment (Gain on Disposal) (1.3) (0.1) % 16.6 1.3 % (108) %

Operating Income 29.1 2.6 % 29.7 2.3 % (2) %

Other Income (Expense) (15.6) (17.9)

Provision (Benefit) for Income Taxes

3.1 (1.2) 352 %

Net Income $ 10.4 $ 13.0 (20) %

Diluted Earnings per Share $ 0.41 $ 0.51 (20) %

Net Sales by Vertical Market Three Months Ended Nine Months Ended

March 31 March 31

(Amounts in Millions) 2025 2024 % Change 2025 2024 % Change

Net Sales by Vertical Market Three Months Ended

(Amounts in Millions) 2025 2024 % Change

Automotive $ 164.4 $ 181.8 (10) %

Medical 101.6 89.8 13 %

Industrial 86.3 110.0 (22) % 263.1 346.2 (24) %

Total Net Sales $ 374.6 $ 425.0 (12) % $ 1,106.3 $ 1,284.4 (14) %

Third quarter fiscal year 2025 consolidated net sales decreased 12% compared to the third quarter of fiscal year 2024, and the year-to-date fiscal year 2025 consolidated net sales also decreased 14% compared to the year-to-date period of fiscal year 2024.

Foreign currency fluctuations had an unfavorable 1% impact on net sales in the current quarter compared to the third quarter of fiscal year 2024, and the impact was less than 1% in the current year-to-date period compared to the year-to-date period of fiscal year 2024.

The non-recurring consignment sale discussed below had a favorable impact on consolidated net sales of 6% and 2% in the current year third quarter and year-to-date period, respectively.

By end market vertical, our market verticals fluctuated as follows:

• In the automotive end market vertical, for both the quarter over quarter and year-to-date periods, improvement in demand in China helped to partially offset lower demand in North America and Europe and the loss of a major automotive program that was unrelated to Kimball.

• Sales to the medical end market vertical, for both the quarter over quarter and year-to-date periods, were favorably impacted by $24M in non-recurring consignment inventory sales to a customer for completed programs, which had a favorable impact on sales to the medical end market vertical of 22% in the current year third quarter and 7% in the current year-to-date period.

Excluding these sales, the decrease was driven by adjacent impacts with our major medical customer with the FDA recall and the wind down of other programs.

• In the industrial end market vertical, the sale of GES accounts for approximately one-third of the decline quarter over quarter and approximately half of the decline in the year-to-date period.

We also experienced declines in our smart metering programs, where our customers are experiencing continued market share declines from commoditization, and declines in public safety.

Sales to Nexteer Automotive, Philips, ZF, and HL Mando accounted for the following portions of our net sales:

Three Months Ended Nine Months Ended

March 31 March 31

99.6 102.7 (3) %

Total Net Sales $ 365.6 $ 374.3 (2) %

Beginning in the first quarter of fiscal year 2026, sales to certain customers previously included in the automotive vertical, specifically those customers more aligned with commercial vehicle applications versus passenger vehicles, are now reflected in the industrial vertical to better reflect the nature of the programs.

Prior periods have been recast to conform to current period presentation.

For the three months ended September 30, 2024, $6.6 million of the industrial net sales were previously categorized as automotive.

First quarter fiscal year 2026 consolidated net sales decreased 2% compared to the first quarter of fiscal year 2025.

Foreign currency fluctuations had a favorable 1% impact on net sales in the current quarter compared to the first quarter of fiscal year 2025.

• In the automotive end market vertical, sales to customers decreased 10% during the first quarter of fiscal year 2026 compared to the first quarter of fiscal year 2025, driven by the loss of a major automotive program that was unrelated to Kimball.

• Sales to the medical end market vertical increased 13% during the first quarter of fiscal year 2026 compared to the first quarter of fiscal year 2025.

The increase was driven by a step-up in sales with our largest medical customer.

• In the industrial end market vertical, sales to customers were relatively flat decreasing 3% during the first quarter of fiscal year 2026 compared to the first quarter of fiscal year 2025.

Sales to Nexteer Automotive, Philips, and ZF accounted for the following portions of our net sales:

Three Months Ended

Nexteer Automotive 19% 18%

Philips 11% *

ZF * 12% 11% 12%

HL Mando * * * 10%

* amount is less than 10% of total

Gross profit as a percent of net sales in the third quarter of fiscal year 2025 declined when compared to the third quarter of fiscal year 2024 as well as in the first nine months of the fiscal year as we experienced lost absorption on lower revenue.

The third quarter decline as a percent of sales was also partially driven by gross profit dilution from the non-recurring consignment inventory sale.

Selling and administrative expenses decreased both as a percent of net sales and in absolute dollars in the third quarter of fiscal year 2025 when compared to the third quarter of fiscal year 2024 as well as in the first nine months of the fiscal year, driven by cost reduction efforts, the classification of factoring fees, and the benefit from lower allowance for credit losses.

Selling and administrative expenses for the first nine months of fiscal year 2025 also experienced lower profit-sharing bonus expense and stock compensation expense driven by the decline in financial results.

In the three and nine months ended March 31, 2025, we recorded pre-tax restructuring expense of $2.0 million and $9.0 million, respectively, for employee-related costs as we undertook restructuring efforts to align our cost structure with reduced end market demand levels and incurred costs related to the Tampa closure in the second quarter.

In the three and nine months ended March 31, 2024, we recorded pre-tax restructuring expense of $1.6 million for employee-related costs for cost structure alignment.

We completed the divestiture of GES on July 31, 2024 and recorded a gain on disposal of $1.3 million during the first quarter of fiscal year 2025.

See Note 3 - Sale of GES of Notes to Condensed Consolidated Financial Statements for more information.

In the three and nine months ended March 31, 2024, we recorded pre-tax goodwill impairment charges of $5.8 million and pre-tax asset impairment charges of $16.6 million when we made the decision to divest GES and classified the disposal group as held for sale in the third quarter of fiscal year 2024.

Gross profit as a percent of net sales in the first quarter of fiscal year 2026 improved when compared to the first quarter of fiscal year 2025.

The improvement was a result of efficiencies driven by our efforts to align our cost structure with reduced end market demand levels, including the Tampa closure, resizing our workforce, and taking specific cost actions.

Selling and administrative expenses decreased moderately both as a percent of net sales and in absolute dollars in the first quarter of fiscal year 2026 when compared to the first quarter of fiscal year 2025.

In the first quarter of fiscal year 2026, following a customer termination of a program, an agreement was reached for the customer to compensate us for incurred costs, resulting in recognition of a $2.0 million recovery recorded in selling and administrative expenses.

This was partially offset by increased profit-sharing bonus expense driven by improved performance.

In the three months ended September 30, 2025, we recorded pre-tax restructuring expense of $1.4 million for employee-related costs as we undertook restructuring efforts to align our cost structure with reduced end market demand levels and incurred costs related to the Tampa closure.

In the three months ended September 30, 2024, we recorded pre-tax restructuring expense of $2.3 million for employee-related costs for cost structure alignment.

Other Income (Expense) consisted of the following:

Three Months Ended Nine Months Ended

March 31 March 31

Three Months Ended

(Amounts in Thousands) 2025 2024

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Other income (expense), net $ (3,455) $ (6,231)

Interest expense has decreased in the three and nine months ended March 31, 2025 compared to the three and nine months ended March 31, 2024 due to lower borrowings on credit facilities and lower interest rates.

Interest expense has decreased in the three months ended September 30, 2025 compared to the three months ended September 30, 2024 due to lower borrowings on credit facilities and lower interest rates.

Foreign currency/derivative gains (losses) result from net foreign currency exchange rate movements during the periods.

The revaluation to fair value of the SERP investments recorded in Other Income (Expense) is offset by the revaluation of the SERP liability recorded in Selling and Administrative Expenses, and thus there is no effect on net income.

Prior to fiscal year 2025, factoring fees were recorded in Selling and Administrative Expenses on our Condensed Consolidated Statements of Income.

Our provision (benefit) for income taxes for the nine months ended March 31, 2025 and March 31, 2024 was $3.1 million, or 23.0% of income before taxes on income, and $(1.2) million, or (10.5)% of income before taxes on income, respectively.

The tax benefit in the nine months ended March 31, 2024 was lower than normal primarily due to the sale of GES in that year.

Open orders were down 23% as of March 31, 2025 compared to March 31, 2024.

The decrease in open orders from March 31, 2024 is primarily driven by reduced orders due to cancellation of a major automotive program, other automotive customer demand reductions, and industrial customer demand reductions.

Our provision (benefit) for income taxes for the three months ended September 30, 2025 and September 30, 2024 was $0.9 million, or 8.3% of income before taxes on income, and $(0.3) million, or (9.4)% of income before taxes on income, respectively.

The low tax rate in the three months ended September 30, 2025 was driven by the new U.S.

tax legislation resulting in a partial release of the valuation allowance against the business interest limitation deferred tax asset.

The tax benefit in the three months ended September 30, 2024 was the result of an interest recovery on a prior period tax audit.

Open orders were flat as of September 30, 2025 compared to September 30, 2024.

Open orders at a point in time may not be indicative of future sales trends due to the contract nature of our business.

Our open orders depend on the lead times from our customers, which have reduced since March 31, 2024 when parts were more constrained, which also contributed to the decline in open orders.

Liquidity and Capital Resources

Working capital at March 31, 2025 was $376.3 million compared to working capital of $471.7 million at June 30, 2024.

The current ratio was 2.1 at March 31, 2025 and 2.3 June 30, 2024.

The debt-to-equity ratio was 0.3 at March 31, 2025 and 0.5 at June 30, 2024.

Our short-term liquidity available, represented as cash and cash equivalents plus the unused amount of our credit facilities, some of which are uncommitted, totaled $304.6 million at March 31, 2025 and $220.1 million at June 30, 2024.

Working capital at September 30, 2025 was $378.5 million compared to working capital of $381.0 million at June 30, 2025.

The current ratio was 2.2 at September 30, 2025 and 2.2 at June 30, 2025.

The debt-to-equity ratio was 0.2 at September 30, 2025 and 0.3 at June 30, 2025.

Our short-term liquidity available, represented as cash and cash equivalents plus the unused amount of our credit facilities, some of which are uncommitted, totaled $370.0 million at September 30, 2025 and $373.5 million at June 30, 2025.

Cash Conversion Days (“CCD”) are calculated as the sum of Days Sales Outstanding (“DSO”) plus Contract Asset Days (“CAD”) plus Production Days Supply on Hand (“PDSOH”) less Accounts Payable Days (“APD”) and less Advances from Customers Days (“ACD”).

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Three Months Ended

March 31, 2025 December 31, 2024 March 31, 2024

September 30, 2025 June 30, 2025 September 30, 2024

Days Sales Outstanding 54 56 66

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We define Days Sales Outstanding as the average of monthly trade accounts and notes receivable divided by an average day’s net sales, Contract Asset Days as the average monthly contract assets divided by an average day’s net sales, Production Days Supply on Hand as the average of monthly gross inventory divided by an average day’s cost of sales, Accounts Payable Days as the average of monthly accounts payable divided by an average day’s cost of sales, and Advances from Customers Days as the average of monthly customer deposits divided by an average day’s cost of sales.

Over the past several quarters, we have supported our customers through strategic inventory builds to mitigate parts shortages, which adversely impacted our PDSOH and CCD metrics.

We have experienced customers push out deliveries and sales declines, which have negatively impacted our cash conversion days and working capital.

We expect our CCD metrics to improve as we align our working capital with the lower sales levels.

The following table reflects the major categories of cash flows for the first nine months of fiscal years 2025 and 2024.

Nine Months Ended

Over the past several quarters, we have improved our CCD metrics by better aligning our working capital with the lower sales levels.

The following table reflects the major categories of cash flows for the first three months of fiscal years 2026 and 2025.

Three Months Ended

(Amounts in Millions) 2025 2024

Net cash provided by operating activities $ 8.1 $ 45.5

Net cash used for investing activities $ (5.2) $ (37.7)

Net cash (used for) provided by financing activities $ (126.6) $ 36.6

Net cash (used for) provided by investing activities $ (6.2) $ 5.2

Net cash used for financing activities $ (14.0) $ (53.0)

Cash Flows from Operating Activities

Net cash provided by operating activities for the first nine months of fiscal year 2025 was driven by net income adjusted for non-cash items and changes in operating assets and liabilities.

Net cash provided by operating activities for the first nine months of the prior year was driven by net income adjusted for non-cash items, partially offset by changes in operating assets and liabilities.

Net income adjusted for non-cash items provided cash of $40.0 million in the first nine months of fiscal year 2025, while changes in operating assets and liabilities provided $65.9 million of cash in the first nine months of fiscal year 2025, largely due

to a decrease of accounts receivable, which provided cash of $32.5 million, and a decrease of inventory, which provided cash of $39.9 million.

Partially offsetting cash provided by accounts receivable and inventory was a decrease in accrued expenses and taxes payable, which used cash of $19.7 million primarily driven by timing of profit-sharing incentive bonus and income tax payments.

Net income adjusted for non-cash items provided cash of $60.0 million in the first nine months of fiscal year 2024.

Partially offsetting this was cash used of $35.3 million from changes in operating assets and liabilities in the first nine months of fiscal year 2024, largely due to a decrease in accounts payable, which used cash of $71.2 million driven by decreased inventory purchases due to lower sales, and a decrease in accrued expenses and taxes payable, which used $11.5 million primarily driven by timing of income tax and profit-sharing incentive bonus payments.

Partially offsetting cash used by accounts payable and accrued expenses and taxes payable was an increase in advances from customers, which provided cash of $32.2 million.

Net cash provided by operating activities for the first three months of fiscal year 2026 was driven by net income adjusted for non-cash items, partially offset by changes in operating assets and liabilities.

Net cash provided by operating activities for the first three months of the prior year was driven by net income adjusted for non-cash items and changes in operating assets and liabilities.

Net income adjusted for non-cash items provided cash of $18.0 million in the first three months of fiscal year 2026, while changes in operating assets and liabilities used $9.9 million of cash in the first three months of fiscal year 2026, largely due to a decrease in advances from customers, which used cash of $10.7 million.

Net income adjusted for non-cash items generated cash of $16.8 million in the first three months of fiscal year 2025, while changes in operating assets and liabilities provided $28.7 million of cash in the first three months of fiscal year 2025, largely due to a decrease of accounts receivable, which provided cash of $20.1 million primarily resulting from decreased sales volumes compared to the three months ended June 30, 2024, and an increase in advances from customers, which provided cash of $8.7 million.

Partially offsetting cash provided by accounts receivable and advances from customers was a decrease in accrued expenses and taxes payable, which used cash of $22.5 million primarily driven by timing of profit-sharing incentive bonus and income tax payments.

Cash Flows from Investing Activities

Net cash used by investing activities of $5.2 million in the first nine months of fiscal year 2025 was largely due to capital investments of $24.0 million primarily to support new business awards and replacement of older machinery and equipment, partially offset by the $18.5 million of proceeds from the sale of GES.

Net cash used by investing activities of $6.2 million in the first three months of fiscal year 2026 was largely due to capital investments of $10.6 million.

The capital investments were primarily for the new medical facility in Indianapolis as well as to support new business awards and replacement of older machinery and equipment.

Net cash provided by investing activities of $5.2 million in the first three months of fiscal year 2025 was largely due to the $18.5 million of proceeds from the sale of GES, partially offset by capital investments of $13.5 million primarily to support new business awards and replacement of older machinery and equipment.

See Note 3 - Sale of GES of Notes to Consolidated Financial Statements for more information on the divestiture of GES.

Net cash used for investing activities in the first nine months of fiscal year 2024 included $37.9 million cash used for capital investments.

The capital investments were primarily to support new business awards, facility expansions, and replacement of older machinery and equipment.

Cash Flows from Financing Activities

For the first nine months of fiscal year 2025, net cash used for financing activities of $126.6 million resulted largely from net payments on our credit facilities of $116.1 million.

For the first nine months of fiscal year 2024, net cash provided by financing activities of $36.6 million resulted largely from net borrowings on our credit facilities of $38.2 million primarily for working capital purposes and capital expenditures.

For the first three months of fiscal year 2026, net cash used for financing activities of $14.0 million resulted largely from net payments on our credit facilities of $9.6 million.

For the first three months of fiscal year 2025, net cash used for financing activities of $53.0 million resulted largely from net payments on our credit facilities of $49.1 million.

Credit Facilities

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This facility is maintained for working capital and general corporate purposes of the Company.

The Company terminated its 364-day multi-currency revolving credit facility (the “secondary credit facility”), which previously allowed for borrowings up to $100 million and had a maturity date of January 3, 2025.

We were in compliance with the financial covenants of the primary credit facility during the period ended March 31, 2025.

Through the amendment of the primary credit facility, including adding a $100 million term loan borrowing, we were able to maintain our same total borrowing capacity even with the termination of the secondary credit facility.

Additionally, we were able to secure our primary credit facility’s interest rate pricing for the $100 million term loan for five years, which is beyond the duration of our current primary credit facility.

We were in compliance with the financial covenants of the primary credit facility during the period ended September 30, 2025.

We also maintain foreign credit facilities for working capital and general corporate purposes at specific foreign locations rather than utilizing funding from intercompany sources.

These foreign credit facilities can be canceled at any time by either the bank or us and generally include renewal clauses.

As of March 31, 2025, we maintained foreign credit facilities at our Thailand operation, our China operation, our Netherlands subsidiary, and our Poland operation.

As of September 30, 2025, we maintained foreign credit facilities at our Thailand operation, our Netherlands subsidiary, and our Poland operation.

See Note 8 - Credit Facilities of Notes to Consolidated Financial Statements for more information on our credit facilities, including the terms of the credit facilities such as interest, commitment fees, and debt covenants.

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These arrangements in all cases do not contain recourse provisions which would obligate us in the event of our customers’ failure to pay.

Receivables are considered sold when they are transferred beyond the reach of Kimball Electronics and its creditors, the purchaser has the right to pledge or exchange the receivables, and we have

surrendered control over the transferred receivables.

In the nine months ended March 31, 2025 and 2024, we sold, without recourse, $236.2 million and $317.0 million of accounts receivable, respectively.

Receivables are considered sold when they are transferred beyond the reach of Kimball Electronics and its creditors, the purchaser has the right to pledge or exchange the receivables, and we have surrendered control over the transferred receivables.

In the three months ended September 30, 2025 and 2024, we sold, without recourse, $71.2 million and $87.3 million of accounts receivable, respectively.

During the fourth quarter of fiscal year 2025, we entered into an accounts receivable factoring program with a financial institution for certain domestic receivables.

We sell our entire interest in certain receivables for 100% of face value, less a discount.

We are required to remit amounts collected as a servicer under the Receivables Purchase Agreement (the “RPA”) on a weekly basis to the financial institution that purchased the receivables.

Our risks with respect to receivables we service include commercial disputes regarding such receivables and no greater than 5% of sold and outstanding receivables in the event of customer insolvency.

In the three months ended September 30, 2025, under this program, we sold $28.6 million of receivables.

See Note 1 - Business Description and Summary of Significant Accounting Policies of Notes to Condensed Consolidated Financial Statements for more information regarding the factoring arrangements.

Future Liquidity

We believe our principal sources of liquidity from available funds on hand, cash generated from operations, and the availability of borrowing under our credit facilities, will be sufficient to meet our working capital and other operating needs for at least the next 12 months.

The unused borrowings in USD equivalent under all of our credit facilities totaled $253.2 million at March 31, 2025.

Additionally, accounts receivable factoring arrangements could provide flexible access to cash as needed.

As of September 30, 2025, following several quarters of strong cash generated from operating activities and debt reduction, we are in a much improved liquidity position with $75.7 million in cash and unused borrowings in USD equivalent under all of our credit facilities of $294.3 million.

Additionally, considering expected future sources of liquidity from cash generated from operations and proceeds from the sale of the Tampa facility, we are positioned to meet our working capital and other operating needs for at least the next twelve months.

We expect to continue to prudently invest in capital expenditures, including for capacity expansions and potential acquisitions, that would help us continue our growth as a multifaceted manufacturing solutions company.

At March 31, 2025, our capital expenditure commitments were approximately $17 million, consisting primarily of capital related to new program wins.

At September 30, 2025, our capital expenditure commitments were approximately $29.0 million, consisting primarily of leasehold improvements on our new medical facility and capital related to new program wins.

We anticipate our available liquidity will be sufficient to fund these capital expenditures.

In March 2025, we executed a lease for a facility in Indiana to expand our medical CMO footprint, but the term for the lease has not yet commenced.

The new lease is expected to commence in the fourth quarter of the current fiscal year, with an initial lease term of ten years and annual base rent of $1.8 million, increasing 3% each year.

We expect to continue our restructuring efforts, including the closure of our Tampa facility.

We expect these restructuring efforts to be predominantly cash expenditures to be incurred over the remainder of fiscal year 2025.

We estimate additional pre-tax restructuring charges between $3 million to $4.5 million.

Once Tampa’s operations have ceased, we expect to sell the building and land, with the proceeds from the sale anticipated to exceed the exit costs.

Now that Tampa’s operations have ceased, we expect to sell the building and land, with the proceeds from the sale anticipated to exceed the combined amount of the total expected restructuring costs and the carrying value of the Assets Held for Sale.

We have purchase obligations that arise in the normal course of business for items such as raw materials, services, and software acquisitions/license commitments.

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In turn, material authorization agreements with customers cover a portion of the exposure for material that we must purchase prior to having a firm order.

At March 31, 2025, our foreign operations held cash totaling $47.4 million.

At September 30, 2025, our foreign operations held cash totaling $75.2 million.

Most of our accumulated unremitted foreign earnings have been invested in active non-U.S.

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Determination of the amount of any potential future unrecognized deferred tax liability on such unremitted earnings is not practicable and is recorded in the period when any foreign earnings are determined to be no longer permanently reinvested.

During fiscal year 2025, the Company changed its indefinite reinvestment assertion for our subsidiary in China, and has recorded a deferred tax liability on their earnings for the applicable withholding taxes.

The Company continues to assert permanent reinvestment of foreign earnings in all other foreign jurisdictions as well as for earnings prior to fiscal year 2025 for China.

The Company asserts permanent reinvestment of foreign earnings in all our foreign jurisdictions with the exception of earnings from our China operation beginning in 2025 and thereafter.

The Company’s Repurchase Plan allows the repurchase of up to $120 million of our common stock.

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The Company expects to finance the purchases with existing liquidity.

The Company has repurchased $100.7 million of common stock under the Repurchase Plan through March 31, 2025.

Our ability to generate cash from operations to meet our liquidity obligations could be adversely affected in the future by factors such as general economic and market conditions, lack of availability of raw material components in the supply chain, a decline in demand for our services, loss of key contract customers, unsuccessful integration of acquisitions and new operations, global health emergencies, and the related uncertainties around the financial impact, and other unforeseen circumstances.

The Company has repurchased $105.2 million of common stock under the Repurchase Plan through September 30, 2025.

global health emergencies, and the related uncertainties around the financial impact, and other unforeseen circumstances.

In particular, should demand for our customers’ products and, in turn, our services decrease significantly over the next 12 months, the available cash provided by operations could be adversely impacted.

Additional cautionary statements regarding our risk factors are contained in our Annual Report on Form 10-K for the year ended June 30, 2025.

During the third quarter of fiscal year 2025, no level 1 or level 2 financial instruments were affected by a lack of market liquidity.

During the first quarter of fiscal year 2026, no level 1 or level 2 financial instruments were affected by a lack of market liquidity.

For level 1 financial assets, readily available market pricing was used to value the financial instruments.

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Off-Balance Sheet Arrangements

As of March 31, 2025, we do not have any material off-balance sheet arrangements.

As of September 30, 2025, we do not have any material off-balance sheet arrangements.

Critical Accounting Policies and Estimates

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Management uses its best judgment in the assumptions used to value these estimates, which are based on current facts and circumstances, prior experience, and other assumptions that are believed to be reasonable.

There have been no material changes to our critical accounting policies since our Annual Report on Form 10-K for the year ended June 30, 2024.

There have been no material changes to our critical accounting policies and estimates since our Annual Report on Form 10-K for the year ended June 30, 2025.

For further information regarding our critical accounting policies, refer to “Note 1 - Business Description and Summary of Significant Accounting Policies” of Notes to Consolidated Financial Statements and “Critical Accounting Policies” in the section entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the year ended June 30, 2025.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis