Shares of Key Tronic Corporation (KTCC) have risen 2% since reporting results for the second quarter of fiscal 2026. This compares with the S&P 500 index’s 3.8% decline over the same time frame. Over the past month, the stock has gained 9.6% compared with the S&P 500’s 1.1% return.Key Tronic’s most recent results cover the second quarter of fiscal 2026, ended Dec. 27, 2025. Revenues declined 15% to $96.3 million from $113.9 million in the year-ago quarter. The company cited reduced demand from a long-standi ...

Key Tronic (NasdaqGM:KTCC) Q2 2026 Earnings call February 03, 2026 05:00 PM ET Company ParticipantsBrett Larsen - President and CEOGeorge Melas - President and Portfolio ManagerTony Voorhees - CFOConference Call ParticipantsMatt Dane - Equity Research AnalystOperatorDay and welcome to the Key Tronic FY 2026 Q2 investor call. Today's conference is being recorded. After the presentation, we will begin the question-and-answer period. At this time, I'd like to turn the call over to Tony Voorhees. Please go ahea ...

Key Tronic (NasdaqGM:KTCC) Q2 2026 Earnings call February 03, 2026 05:00 PM ET Company ParticipantsBrett Larsen - President and CEOGeorge Melas - President and Portfolio ManagerTony Voorhees - CFOConference Call ParticipantsMatt Dane - Equity Research AnalystOperatorday and welcome to the Key Tronic FY 2026 Q2 investor call. Today's conference is being recorded. After the presentation, we will begin the question-and-answer period. At this time, I'd like to turn the call over to Tony Voorhees. Please go ahea ...

Key Tronic (NasdaqGM:KTCC) Q2 2026 Earnings call February 03, 2026 05:00 PM ET Speaker3day and welcome to the Key Tronic FY 2026 Q2 investor call. Today's conference is being recorded. After the presentation, we will begin the question-and-answer period. At this time, I'd like to turn the call over to Tony Voorhees. Please go ahead.Speaker0Good afternoon, everyone. I am Tony Voorhees, Chief Financial Officer of Key Tronic. I'd like to thank everyone for joining us today for our investor conference call. Joi ...

Significant Cost Reduction Initiatives in China and Mexico; Continued Program Wins; Positive Cash Flow from OperationsSPOKANE VALLEY, Wash., Feb. 03, 2026 (GLOBE NEWSWIRE) -- Key Tronic Corporation (Nasdaq: KTCC), a provider of electronic manufacturing services (EMS), today announced its results for the quarter ended December 27, 2025. For the second quarter of fiscal year 2026, Key Tronic reported total revenue of $96.3 million, compared to $113.9 million in the same period of fiscal year 2025. The reporte ...

FOR IMMEDIATE RELEASE CONTACTS: Tony Voorhees Michael Newman Chief Financial Officer Investor Relations Key Tronic Corporation StreetConnect (509)-927-5345 (206) 729-3625 KEY TRONIC CORPORATION ANNOUNCES RESULTS FOR THE SECOND QUARTER OF FISCAL YEAR 2026 Significant Cost Reduction Initiatives in China and Mexico; Continued Program Wins; Positive Cash Flow from Operations Spokane Valley, WA— February 3, 2026 — Key Tronic Corporation (Nasdaq: KTCC), a provider of electronic manufacturing services (EMS), today ...

Financial Performance - Key Tronic reported net sales of $98.8 million for Q1 fiscal 2026, a decrease of 24.9% from $131.6 million in Q1 fiscal 2025[104]. - The decline in net sales was primarily due to a reduction in demand of approximately $23 million from two longstanding customers and $7 million from delays in new program launches[118]. - Gross margin improved to 8.4% in Q1 fiscal 2026 from 6.2% in the previous quarter, but decreased from 10.1% in the same period of fiscal 2025[105]. - The company experienced a net loss of $2.3 million or $(0.21) per diluted share in Q1 fiscal 2026, compared to net income of $1.1 million or $0.10 per diluted share in Q1 fiscal 2025[108]. - For the three months ended September 27, 2025, the GAAP net loss was $2.255 million compared to a net income of $1.124 million for the same period in 2024[127]. - Adjusted net loss for the same period was $1.109 million, with an adjusted net loss per share of $0.10, down from an adjusted net income of $2.799 million and $0.26 per share in the prior year[127]. Cash Flow and Capital Expenditures - Total cash provided by operating activities was $7.6 million for the three months ended September 27, 2025[110]. - Net cash provided by operating activities was $7.6 million for the three months ended September 27, 2025, compared to $9.9 million for the same period in 2024[129]. - Cash used in investing activities increased to $3.2 million in the latest quarter from $0.4 million in the prior year, primarily for purchasing equipment[133]. - Cash used in financing activities was $4.7 million for the three months ended September 27, 2025, a decrease from $7.8 million in the same period of the previous year[135]. - The company expects capital expenditures to be approximately $8-$10 million for the fiscal year, with funding from internal resources and credit facilities[134]. - The company anticipates that projected cash from operations and available funds will be sufficient to meet working and fixed capital requirements for at least the next 12 months[137]. Customer and Market Dynamics - The concentration of net sales from the top three customers decreased to 30.4% in Q1 fiscal 2026 from 37.5% in the same period of the prior fiscal year[106]. - The order backlog decreased to approximately $139.9 million as of September 27, 2025, down from $210.8 million a year earlier, attributed to softening demand[128]. - Key Tronic anticipates that a new consigned materials program could grow to potentially exceed $20 million in annual revenue during fiscal 2026[118]. Operational Challenges - The company is restructuring its Juarez facility to focus on higher volume manufacturing, with significant headcount reductions already implemented[109]. - The company experienced financial impacts in Q1 of fiscal 2026 due to inventory and receivable write-offs linked to a customer bankruptcy[155]. - The company relies on a limited number of suppliers for critical components, and supply shortages have been observed in certain electronic components, potentially affecting operations[157]. - Changes in customer production timing and demand schedules complicate production scheduling and resource allocation, potentially leading to excess inventory[166]. Regulatory and Compliance Issues - The effective income tax rate increased to 32.9% for Q1 fiscal 2026 from 4.8% in Q1 fiscal 2025, primarily due to federal research and development tax credits[124]. - The company is subject to various environmental regulations, and non-compliance could lead to significant expenses and operational disruptions[168]. - The company has restrictive covenants with financial institutions, including minimum earnings requirements, which have not always been met, potentially leading to unfavorable amendments to credit arrangements[180]. - The company is subject to increased legal, financial, and accounting costs due to compliance with the Sarbanes-Oxley Act and the Dodd-Frank Act, which may impact its results of operations[199]. Financial Risks - The company is exposed to interest rate risk, particularly under its revolving line of credit and term loans, which could adversely affect its financial condition if significant changes occur[184]. - Fluctuations in foreign currency exchange rates, particularly involving the Mexican Peso, Chinese RMB, and Vietnamese Dong, could significantly impact operating costs and financial results[160]. - Increased energy prices, particularly petroleum-based components, could raise raw material and transportation costs, impacting profitability[173]. - The company has identified material weaknesses in its internal controls over financial reporting, which could impact its ability to report financial results accurately and timely[188]. - The company completed a remediation plan to address identified material weaknesses, but there is no assurance that similar issues will not arise in the future[189]. Cybersecurity and Legal Matters - The company has faced cybersecurity incidents, including unauthorized access to IT systems, which materially affected financial condition and operations in Q4 of fiscal year 2024[175]. - The company incurred significant expenses related to legal, accounting, and other professional services due to an internal investigation into accounting irregularities, which could continue to affect its financial condition[193]. Debt and Financing - The company has outstanding borrowings of $64.5 million under its asset-based senior secured revolving credit facility, $3.33 million under its asset-based secured line of credit facility, and $9.6 million on its equipment financing facilities as of September 27, 2025[204]. - The company has entered into a Credit Facility of up to $115 million, maturing on December 3, 2029, to support its financing needs[136]. - The company may face complications with acquisitions that could require additional equity or debt financing, potentially affecting its credit ratings[202]. Stock Performance - The company's stock price has been volatile, subject to fluctuations due to various factors, including its thinly traded nature and variations in quarterly operating results[186].

Core View - Key Tronic Corporation's shares have declined significantly, losing 12.2% since the first quarter of fiscal 2026 results, compared to a 1.3% decline in the S&P 500 index during the same period [1] - The company reported a substantial revenue drop of 24.9% year-over-year, leading to a net loss, contrasting with a profit in the previous year [2][3] Financial Performance - Revenues for the first quarter of fiscal 2026 were $98.8 million, down from $131.6 million a year ago [2] - The net loss was $2.3 million, or 21 cents per share, compared to a net income of $1.1 million, or 10 cents per share, in the prior-year quarter [2] - On a non-GAAP basis, the adjusted net loss was $1.1 million, or 10 cents per share, versus an adjusted profit of $2.8 million, or 26 cents per share, a year earlier [3] - Gross margin decreased to 8.4% from 10.1% a year earlier but improved from 6.2% in the prior quarter [4] - Operating margin turned negative at (0.6%), down from 3.4% last year [5] - Cash flow from operations was $7.6 million, down from $9.9 million in the same period last year [6] Operational Insights - Management noted that the decline in earnings was primarily due to weaker customer demand, delays in program launches, and a significant customer's bankruptcy, which led to a $1.6 million provision [10] - The company is expanding its manufacturing presence in the U.S. and Vietnam while rightsizing operations in Mexico to address ongoing uncertainties [7] - Key Tronic secured new programs in medical technology and industrial equipment, indicating diversification across end markets [8] Future Outlook - Management expects a gradual improvement in operating efficiency and a return to profitability by the end of fiscal 2026, contingent on the ramp-up of new programs [8][12] - Revenue growth for the second quarter is projected to remain unchanged sequentially, but ongoing efficiency initiatives are expected to bolster margins [13] - The company anticipates benefiting from the global shift toward nearshoring and supply-chain diversification [13] Strategic Developments - Key Tronic opened a new manufacturing facility in Springdale, AR, aimed at enhancing its U.S. footprint and technological capabilities [14] - In Vietnam, the company doubled its manufacturing capacity and obtained certification to produce medical devices, with initial production expected later in the fiscal year [14] - These expansions are part of a strategy to strengthen tariff mitigation and capture growing demand for localized manufacturing [15]

Financial Data and Key Metrics Changes - For Q1 fiscal year 2026, total revenue was reported at $98.8 million, a decrease from $131.6 million in the same period of fiscal year 2025 [3][4] - Gross margin improved sequentially to 8.4% from 6.2% in the previous quarter, but decreased from 10.1% year-over-year [4][5] - The company reported a net loss of $2.3 million, or $0.21 per share, compared to net income of $1.1 million, or $0.10 per share, in the same period last year [6][8] - Adjusted net loss was $1.1 million, or $0.10 per share, compared to adjusted net income of $2.8 million, or $0.26 per share, for the same period of fiscal year 2025 [6] Business Line Data and Key Metrics Changes - The consigned materials program has begun to ramp, which is expected to lower reported revenue compared to traditional turnkey programs, while gross margin is projected to improve [4][5] - The company won new programs in medical technology and industrial equipment during the quarter, with the medical program valued at approximately $5 million and two industrial programs combined at around $6 million [20][14] Market Data and Key Metrics Changes - Demand from longstanding customers has reduced total revenues compared to last year's first quarter results, influenced by global tariff uncertainties and macroeconomic conditions [11][12] - The Vietnam facility has doubled its manufacturing capacity, now capable of supporting anticipated future medical device manufacturing [12][13] Company Strategy and Development Direction - The company is focused on expanding production capacity in the U.S. and Vietnam to mitigate tariff impacts and meet customer demand for rebalancing contract manufacturing [11][12] - Strategic initiatives include enhancing materials resource planning algorithms and aligning inventory with current revenue [7][8] - The company anticipates that by the end of fiscal 2026, approximately half of its manufacturing will occur in the U.S. and Vietnam [13] Management's Comments on Operating Environment and Future Outlook - Management noted that uncertainties surrounding global tariffs and the macroeconomic outlook continue to delay new program launches [11][12] - The company expects to see growth in U.S. and Vietnam production, with a strong pipeline of potential new business [10][18] - Management refrained from providing forward-looking guidance for Q2 fiscal year 2026 due to uncertainties in timing for new product ramps [10] Other Important Information - Total cash flow from operations for Q1 fiscal year 2026 was approximately $7.6 million, down from $9.9 million in the same period of fiscal year 2025 [9] - The company reduced total liabilities by $21.8 million, or 9%, from a year ago, while accounts receivable days sales outstanding (DSOs) improved to 81 days from 92 days [8][9] Q&A Session Summary Question: What was the size of the new programs won this quarter? - The medical program was roughly about $5 million, and the two industrial programs combined are around $6 million [20] Question: Will the medical production capabilities be in Vietnam? - The intent is to have production for medical devices in Vietnam later this fiscal year, as certification has been received [21][22] Question: What revenue was generated from the consigned program this quarter? - The consigned program generated just over $1 million in revenue during the first quarter, with expectations to exceed $20 million annually [26] Question: What factors will influence the success of the consigned program? - The success depends on the customer's supply chain capabilities and timely provision of components [27][30] Question: What is the current status of the utility product program? - The utility product program experienced a delay but is ramping nicely in the second quarter [34] Question: What is the situation regarding excess capacity in Mexico? - The company has excess capacity in Mexico but expects to fill it with increased activity in the latter half of the fiscal year [40][41] Question: How is the relationship with the bank lender? - The relationship with the bank is solid, with cash generation and debt reduction being positive indicators [94]

Core Insights - Key Tronic Corporation reported total revenue of $98.8 million for the first quarter of fiscal year 2026, a decrease from $131.6 million in the same period of fiscal year 2025, primarily due to reduced demand from a longstanding customer and delays in new program launches [2][6] - The company achieved a gross margin of 8.4% in the first quarter of fiscal year 2026, up from 6.2% in the previous quarter, but down from 10.1% in the same period of fiscal year 2025, attributed to operational efficiencies and a customer bankruptcy impacting revenue [5][6] - Key Tronic continues to expand its manufacturing capabilities in the US and Vietnam, including a new facility in Springdale, Arkansas, as part of its near-shoring and tariff mitigation strategies [3][7] Financial Performance - Total cash flow from operations for the first quarter of fiscal year 2026 was approximately $7.6 million, down from $9.9 million in the same period of fiscal year 2025, enabling the company to reduce its debt by approximately $12.0 million year-over-year [4] - The net loss for the first quarter of fiscal year 2026 was $(2.3) million or $(0.21) per share, compared to net income of $1.1 million or $0.10 per share for the same period of fiscal year 2025 [6][16] - Adjusted net loss for the first quarter of fiscal year 2026 was $(1.1) million or $(0.10) per share, compared to adjusted net income of $2.8 million or $0.26 per share for the same period of fiscal year 2025 [6][21] Business Outlook - The company will not issue revenue or earnings guidance for the second quarter of fiscal year 2026 due to uncertainties surrounding new program ramps and potential tariffs [9] - Key Tronic anticipates long-term growth driven by the diversity and flexibility of its strategic locations and capabilities, with expectations of approximately half of its manufacturing occurring in the US and Vietnam by the end of fiscal 2026 [3][7] - New program wins in medical technology and industrial equipment were reported, with expectations for gradual improvements in operating efficiencies as revenue rebounds [8]