UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ____________________________________________________________ FORM 10-K ____________________________________________________________ ☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED JUNE 28, 2025 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE PERIOD FROM TO Commission File Number 0-11559 _________________________________ ...

Core Insights - Key Tronic Corporation has opened a new manufacturing facility in Springdale, Arkansas, marking a significant milestone in its operational growth and commitment to innovation [1][2][3] - The new facility represents an investment of over $28 million and is expected to create more than 400 jobs over the next five years, increasing the company's U.S. production capacity by approximately 40% [3][4] Company Overview - Key Tronic has a history of over 55 years in manufacturing, with roots in Arkansas dating back to the 1980s [2][5] - The company provides electronic manufacturing services and has facilities in the United States, Mexico, China, and Vietnam, serving leading original equipment manufacturers [5] Facility Details - The new facility is located at 601 W. Apple Blossom Avenue in Springdale and spans 300,000 square feet [3] - It will serve as a hub for advanced manufacturing, process optimization, and workforce development, offering skill-building opportunities for employees [2][3] Economic Impact - The opening of the facility is expected to enhance support for customers and employees, contributing to the local economy and workforce development initiatives in Arkansas [4] - State officials and community leaders have expressed strong support for Key Tronic's investment, highlighting its alignment with Arkansas's mission to attract technology-focused employers [4]

Core Insights - Key Tronic Corporation's shares increased by 5.3% following the release of its fourth-quarter fiscal 2025 results, outperforming the S&P 500's 0.2% growth during the same period [1] - The company reported a significant decline in revenues for both the fourth quarter and the entire fiscal year, with fourth-quarter revenues at $110.5 million, down from $126.6 million year-over-year, and total fiscal 2025 revenues at $467.9 million, a 17% decrease from $566.9 million in fiscal 2024 [2] - The net loss for the fourth quarter widened to $3.9 million, or 36 cents per share, compared to a loss of $2 million, or 18 cents per share, in the prior year, with a total fiscal year net loss of $8.3 million, or 77 cents per share, compared to a loss of $2.8 million, or 26 cents per share, in the previous year [3] Financial Metrics - The gross margin contracted to 6.2% in the fourth quarter from 7.2% a year earlier, but improved to 7.8% for the full year from 7% in fiscal 2024 due to workforce reductions and operational streamlining [4] - Operating margin decreased to 0.1% for the year from 1.2% in the prior year, impacted by credit loss adjustments [4] - Cash flow from operations improved to $8.8 million in the fourth quarter from $7.7 million in the same quarter last year, totaling $18.9 million for fiscal 2025 compared to $13.8 million in fiscal 2024 [5] Management Insights - The CEO described fiscal 2025 as a year of transition and uncertainty, citing tariff-related disruptions and strategic shifts in manufacturing, including expansion in the U.S. and Vietnam [6] - Key Tronic secured program wins in various industries and entered a significant services contract projected to exceed $20 million in annual revenues [7] - The company faced headwinds from reduced demand and tariff fluctuations, with severance expenses of $2.9 million impacting profitability, although operational efficiencies are expected to enhance margins once revenue growth resumes [8] Balance Sheet and Guidance - Adjustments for expected customer collections amounted to $1.1 million in the fourth quarter and $1.8 million for the year, further pressuring reported results [9] - Key Tronic did not provide revenue or earnings guidance for the first quarter of fiscal 2026 due to ongoing uncertainties but expressed confidence in improving gross margins as production volumes increase [10] Developments and Investments - The company is investing in its global footprint, with a new $28 million facility in Arkansas expected to create over 400 jobs, and production capacity in Vietnam being doubled [11] - These expansions aim to offer customers flexible manufacturing options while addressing rising wage pressures through automation and efficiency improvements [11]

Financial Data and Key Metrics Changes - For fiscal year 2025, total revenue was $467.9 million, down from $566.9 million in fiscal year 2024, reflecting a decrease of approximately $100 million [5][6] - Gross margin for fiscal year 2025 was 7.8%, down from 10.1% in fiscal year 2024, while operating margin was negative 2.1% compared to 7.2% in the previous year [5][6] - The net loss for fiscal year 2025 was $8.3 million or $0.77 per share, compared to a net loss of $2.8 million or $0.26 per share in fiscal year 2024 [8][9] - Cash flow from operations was $18.9 million for fiscal year 2025, an increase from $13.8 million in fiscal year 2024 [11] Business Line Data and Key Metrics Changes - The company experienced a significant reduction in demand from two large longstanding customers, which adversely impacted revenue [5][6] - Despite the revenue decline, gross margins improved year over year due to operational efficiencies and cost-saving initiatives [6][7] Market Data and Key Metrics Changes - The company reduced total liabilities by $32.7 million or 14% from the previous year, indicating improved financial health [10] - The current ratio was 2.5:1, down from 2.8:1 a year ago, while accounts receivable days sales outstanding (DSOs) improved to 86 days from 95 days [11] Company Strategy and Development Direction - The company is focusing on expanding its manufacturing capabilities in the U.S. and Vietnam, with plans to invest over $28 million in a new facility in Arkansas [16][18] - The strategy includes transitioning manufacturing to mitigate tariff impacts and enhance competitiveness, particularly in light of geopolitical tensions [15][21] - The company aims to increase its manufacturing footprint in Vietnam, anticipating that it will play a major role in future growth [17][18] Management's Comments on Operating Environment and Future Outlook - Management acknowledged the challenges posed by fluctuating tariffs and reduced demand but expressed optimism about future growth opportunities and operational improvements [13][24] - The company is not providing forward-looking guidance due to uncertainties regarding new product launches [13] - Management emphasized the importance of cost reductions and operational efficiencies in positioning the company for future profitability [24] Other Important Information - The company reduced its workforce by approximately 800 employees, or roughly 30%, primarily in Mexico, to align costs with current demand [6][19] - A new manufacturing services contract with a data processing equipment OEM is expected to generate significant revenue, potentially exceeding $20 million annually [20][46] Q&A Session Summary Question: What is the range of sizes for the new wins in the quarter? - The new wins were predominantly around the $5 million program size, with one data processing contract potentially exceeding $20 million [27] Question: How is the Vietnam medical device manufacturing capability being developed? - The company is certified to build medical products in Vietnam and expects to start a program in fiscal year 2026, anticipating additional opportunities [30] Question: What is driving the increase in new program bids? - The increase is attributed to improved cost competitiveness and pent-up demand for U.S. manufacturing amid tariff uncertainties [32][34] Question: Can you explain the reduction in accounts receivable? - The reduction is primarily due to decreased revenue and improved collection efforts, with no factoring involved [38][39] Question: What is the expected revenue from the new manufacturing services contract? - The expectation is to reach a $20 million annual run rate by fiscal year 2026, with the contract currently ramping up [52][56] Question: How do you see the Mexico operations evolving in fiscal year 2026? - The company anticipates growth in Mexico due to recent program wins and the favorable USMCA agreement for tariff mitigation [55] Question: What are the expectations for gross margin in fiscal year 2026? - The goal is to improve gross margins, potentially reaching 15% to 20% as revenue increases [58][60]

Financial Data and Key Metrics Changes - For Q4 2025, total revenue was $110.5 million, down from $126.6 million in Q4 2024, primarily due to decreased demand from two large customers [5] - Full fiscal year 2025 revenue was $467.9 million, compared to $566.9 million in fiscal year 2024, reflecting a significant decline [5] - Gross margin for Q4 2025 was 6.2%, and operating margin was negative 2.1%, compared to 7.2% and 1.0% respectively in Q4 2024 [5] - The net loss for Q4 2025 was $3.9 million or $0.36 per share, compared to a net loss of $2.0 million or $0.18 per share in Q4 2024 [8] - For the full fiscal year 2025, the net loss was $8.3 million or $0.77 per share, compared to a net loss of $2.8 million or $0.26 per share in fiscal year 2024 [8] Business Line Data and Key Metrics Changes - The company cut approximately 300 jobs in 2025, totaling an 800 headcount reduction for the fiscal year, to align costs with current demand [6] - Despite revenue reduction, gross margins increased year over year due to operational efficiencies and cost-saving initiatives [6] Market Data and Key Metrics Changes - The company reduced inventory by approximately $8 million or 7% year over year, reflecting strategic initiatives to align inventory with current revenue [10] - Total liabilities were reduced by $32.7 million or 14% from the previous year [10] Company Strategy and Development Direction - The company is focusing on expanding its manufacturing footprint in the U.S. and Vietnam, with plans to invest over $28 million in a new facility in Arkansas [17] - The strategy includes enhancing production capabilities and mitigating tariff impacts by diversifying manufacturing locations [19] - The company anticipates that by the end of fiscal 2026, approximately half of its manufacturing will occur in the U.S. and Vietnam [19] Management's Comments on Operating Environment and Future Outlook - Management acknowledged a challenging year due to reduced demand and tariff uncertainties but expressed optimism about future growth driven by new programs and operational efficiencies [13][26] - The company is not providing forward-looking guidance due to uncertainties in product ramp-up timing [13] Other Important Information - Cash flow from operations was $18.9 million for fiscal year 2025, up from $13.8 million in fiscal year 2024, indicating two consecutive years of positive cash flow [11] - The company is investing selectively in production equipment and automation to prepare for growth [12] Q&A Session Summary Question: What is the range of sizes for the new wins in the quarter? - The new wins were predominantly around $5 million, with potential for a data processing contract to exceed $20 million [29] Question: How is the Vietnam medical device manufacturing capability being developed? - The company is certified to build medical products in Vietnam and expects to start a program in fiscal 2026, anticipating additional opportunities [32] Question: What is driving the increase in new program bids? - Cost reductions and improved global footprint have opened up opportunities, alongside pent-up demand for U.S. manufacturing [36][37] Question: Can you explain the reduction in accounts receivable? - The reduction was primarily due to decreased revenue and improved collection efforts, with no factoring involved [41][42] Question: What is the potential size of the manufacturing services contract with the data processor OEM? - The contract is expected to generate $20 million in revenue, which is significant due to its potential margin improvement [48][49] Question: How do you see Mexico operations growing in fiscal 2026? - Recent program wins are expected to drive growth in Mexico, leveraging the USMCA agreement for tariff mitigation [56] Question: What are the expectations for gross margin in fiscal 2026? - The company aims to improve gross margins and expects incremental gross margins of 15% to 20% as revenue increases [59][61]

Core Insights - Key Tronic Corporation reported a decline in revenue for both the fourth quarter and full fiscal year 2025, attributed to reduced demand from longstanding customers and delays in new program launches due to tariff fluctuations [2][3] - The company is implementing cost reduction initiatives, including a significant workforce reduction, to align costs with current demand and enhance competitiveness [3][5] - Despite the challenges, Key Tronic anticipates long-term growth and profitability, supported by new manufacturing contracts and expansion of production capacity in the US and Vietnam [8][9] Financial Performance - For Q4 FY 2025, total revenue was $110.5 million, down from $126.6 million in Q4 FY 2024; for the full year, revenue decreased to $467.9 million from $566.9 million [2] - The net loss for Q4 FY 2025 was $(3.9) million or $(0.36) per share, compared to a net loss of $(2.0) million or $(0.18) per share in Q4 FY 2024; the full year net loss was $(8.3) million or $(0.77) per share, compared to $(2.8) million or $(0.26) per share in FY 2024 [6][7] - Cash flow from operations increased to $8.8 million in Q4 FY 2025 from $7.7 million in Q4 FY 2024, and for the full year, it rose to $18.9 million from $13.8 million [4] Operational Changes - The company reduced its workforce by approximately 300 jobs in Q4 FY 2025, totaling around 800 job cuts for the fiscal year, aimed at improving operational efficiency [3] - Key Tronic is expanding its manufacturing footprint with new facilities in the US and increased capacity in Vietnam to mitigate tariff impacts and enhance competitiveness [3][8] - The gross margin for Q4 FY 2025 was 6.2%, down from 7.2% in Q4 FY 2024, while the full year gross margin improved to 7.8% from 7.0% in FY 2024, reflecting operational efficiencies despite severance costs [5] Business Outlook - The company will not provide revenue or earnings guidance for Q1 FY 2026 due to uncertainties surrounding new program ramps and potential tariffs [10] - Key Tronic is optimistic about future growth, particularly with new contracts in various sectors, including pest control and medical technology, which are expected to contribute significantly to revenue in FY 2026 [9]

[Press Release Overview](index=1&type=section&id=Press%20Release%20Overview) [Announcement of Results](index=1&type=section&id=Announcement%20of%20Results) Key Tronic Corporation announced its financial results for the fourth quarter and full fiscal year ended June 28, 2025, highlighting a challenging period marked by reduced demand and tariff disruptions - Key Tronic Corporation (Nasdaq: KTCC) announced its financial results for the fourth quarter and full fiscal year ended June 28, 2025[2](index=2&type=chunk) [Financial Performance Highlights (FY2025 & Q4 FY2025)](index=1&type=section&id=Financial%20Performance%20Highlights%20(FY2025%20%26%20Q4%20FY2025)) [Revenue Analysis](index=1&type=section&id=Revenue%20Analysis) Key Tronic experienced a significant decline in revenue for both the fourth quarter and the full fiscal year 2025, primarily due to reduced demand from key customers and delays in new program launches caused by global tariff fluctuations Revenue Performance (FY2025 vs. FY2024) | Period | FY2025 Revenue (Millions) | FY2024 Revenue (Millions) | YoY Change (%) | | :---------------- | :------------------------ | :------------------------ | :------------- | | Fourth Quarter | $110.5 | $126.6 | -12.7% | | Full Fiscal Year | $467.9 | $566.9 | -17.5% | - Revenue was adversely impacted by reduced demand from two longstanding customers and delays to new program launches due to escalating global tariffs[3](index=3&type=chunk) [Gross and Operating Margins](index=1&type=section&id=Gross%20and%20Operating%20Margins) Gross margin decreased in Q4 FY2025 but improved for the full fiscal year due to operational efficiencies from workforce reductions, despite severance expenses. Operating margin declined significantly for the full year, impacted by credit loss adjustments Margin Performance (FY2025 vs. FY2024) | Metric | Q4 FY2025 (%) | Q4 FY2024 (%) | FY2025 (%) | FY2024 (%) | | :-------------- | :-------- | :-------- | :----- | :----- | | Gross Margin | 6.2% | 7.2% | 7.8% | 7.0% | | Operating Margin| N/A | N/A | 0.1% | 1.2% | - Q4 gross margin decrease was related to reduced revenue and **$0.1 million** in severance expenses. Full fiscal year gross margin increase was due to operational efficiencies from workforce reductions, offset by **$2.9 million** in severance expenses[6](index=6&type=chunk) - Full fiscal year operating margin decline was primarily due to **$1.8 million** in credit loss adjustments[6](index=6&type=chunk) [Net Loss and EPS (GAAP)](index=1&type=section&id=Net%20Loss%20and%20EPS%20(GAAP)) The company reported increased net losses and diluted EPS losses for both the fourth quarter and the full fiscal year 2025, primarily driven by substantial revenue reductions, higher severance expenses, and adjustments for estimated customer collections GAAP Net Loss and EPS (FY2025 vs. FY2024) | Metric | Q4 FY2025 (Millions)| Q4 FY2024 (Millions)| FY2025 (Millions)| FY2024 (Millions)| | :----------------- | :-------- | :-------- | :----- | :----- | | Net Loss | $(3.9) | $(2.0) | $(8.3) | $(2.8) | | EPS (Diluted) | $(0.36) | $(0.18) | $(0.77)| $(0.26)| - Increased net losses were primarily related to large reductions in revenue, increased severance expense, and **$1.1 million** (Q4) and **$1.8 million** (FY) in adjustments for estimated collections from customers[7](index=7&type=chunk) [Adjusted Net Loss and EPS (Non-GAAP)](index=1&type=section&id=Adjusted%20Net%20Loss%20and%20EPS%20(Non-GAAP)) Key Tronic's adjusted net loss and adjusted diluted EPS also increased significantly for both the fourth quarter and the full fiscal year 2025, reflecting a more severe loss when excluding certain non-GAAP adjustments Adjusted Net Loss and EPS (Non-GAAP) (FY2025 vs. FY2024) | Metric | Q4 FY2025 (Millions)| Q4 FY2024 (Millions)| FY2025 (Millions)| FY2024 (Millions)| | :------------------------- | :-------- | :-------- | :----- | :----- | | Adjusted Net Loss | $(3.8) | $(0.7) | $(5.0) | $(0.2) | | Adjusted EPS (Diluted) | $(0.35) | $(0.06) | $(0.47)| $(0.02)| [Cash Flow from Operations](index=1&type=section&id=Cash%20Flow%20from%20Operations) Cash flow provided by operations improved for both the fourth quarter and the full fiscal year 2025, enabling the company to continue reducing its debt Cash Flow from Operations (FY2025 vs. FY2024) | Period | FY2025 Cash Flow (Millions) | FY2024 Cash Flow (Millions) | YoY Change (Millions) | | :--------------- | :-------------------------- | :-------------------------- | :-------------------- | | Fourth Quarter | $8.8 | $7.7 | +$1.1 | | Full Fiscal Year | $18.9 | $13.8 | +$5.1 | - The increase in cash from operations allowed the Company to continue reducing its debt during the fiscal year[5](index=5&type=chunk) [Strategic Initiatives and Operational Updates](index=1&type=section&id=Strategic%20Initiatives%20and%20Operational%20Updates) [Cost Reduction and Efficiency Measures](index=1&type=section&id=Cost%20Reduction%20and%20Efficiency%20Measures) Key Tronic implemented significant cost reduction initiatives, including substantial headcount reductions and increased automation, to align costs with demand and enhance competitiveness - Approximately **300 jobs** were cut in Q4 FY2025, totaling about **800 headcount reductions** for the full fiscal year 2025[4](index=4&type=chunk) - These measures improved competitiveness for new program bids and are part of ongoing efforts to streamline international and domestic operations[4](index=4&type=chunk)[10](index=10&type=chunk) [Manufacturing Footprint Expansion and Tariff Mitigation](index=1&type=section&id=Manufacturing%20Footprint%20Expansion%20and%20Tariff%20Mitigation) To counter tariff disruptions and support near-shoring, Key Tronic is expanding its manufacturing capacity with a new US facility and added capacity in Vietnam, aiming for these facilities to handle approximately half of its manufacturing by the end of fiscal year 2026 - Expanding manufacturing footprint with a new US facility and added capacity in Vietnam to support near-shoring and tariff mitigation strategies[4](index=4&type=chunk) - These enhancements are expected to be fully operational in the first half of fiscal 2026, with approximately **half of manufacturing** anticipated in US and Vietnam facilities by the end of fiscal 2026[9](index=9&type=chunk)[10](index=10&type=chunk) [New Program Wins and Customer Contracts](index=2&type=section&id=New%20Program%20Wins%20and%20Customer%20Contracts) Despite challenges, Key Tronic secured new programs across diverse sectors and announced a significant new consigned manufacturing services contract with a large data processing OEM, which has substantial revenue potential - Won new programs in pest control, personal protection, air purification, automotive, medical technology, and utilities inspection equipment[10](index=10&type=chunk) - Announced a new manufacturing services contract with a large data processing OEM for a consigned program in Corinth, Mississippi, estimated to eventually exceed **$20 million** in annual revenue[10](index=10&type=chunk) [Management Commentary](index=1&type=section&id=Management%20Commentary) [CEO's Perspective on FY2025 Challenges and Future Growth](index=1&type=section&id=CEO's%20Perspective%20on%20FY2025%20Challenges%20and%20Future%20Growth) CEO Brett Larsen acknowledged the significant impact of tariff uncertainty on new program delays in FY2025. He emphasized strategic investments in US and Vietnam production capacity and ongoing operational streamlining to manage tariffs, enhance competitiveness, and position the company for long-term growth and profitability - CEO Brett Larsen stated that unprecedented tariff uncertainty significantly delayed new program ramps from customers during fiscal 2025[9](index=9&type=chunk) - The company is building new production capacity in the US and Vietnam and right-sizing its Mexico facility to manage tariffs and remain cost-competitive[9](index=9&type=chunk) - Despite challenges, the CEO believes Key Tronic is well-positioned for increased growth and profitability over the longer term, supported by new program wins and operational efficiencies[10](index=10&type=chunk) [Business Outlook](index=2&type=section&id=Business%20Outlook) [Q1 FY2026 Guidance](index=2&type=section&id=Q1%20FY2026%20Guidance) Due to continued uncertainty regarding potential tariffs and the timing of new program ramps, Key Tronic will not be issuing revenue or earnings guidance for the first quarter of fiscal year 2026 - Key Tronic will not be issuing revenue or earnings guidance for the first quarter of fiscal year 2026 due to uncertainty in the timing of new program ramps and potential tariffs[11](index=11&type=chunk) [Additional Information](index=2&type=section&id=Additional%20Information) [About Key Tronic](index=2&type=section&id=About%20Key%20Tronic) Key Tronic is a leading contract manufacturer providing comprehensive electronic manufacturing services, including design, materials management, assembly, testing, and distribution, from facilities in the US, Mexico, China, and Vietnam - Key Tronic is a leading contract manufacturer offering value-added design and manufacturing services[13](index=13&type=chunk) - Services include full engineering, materials management, worldwide manufacturing, assembly, in-house testing, and global distribution from facilities in the United States, Mexico, China, and Vietnam[13](index=13&type=chunk) [Conference Call Information](index=2&type=section&id=Conference%20Call%20Information) Key Tronic hosted a conference call on August 27, 2025, to discuss its financial results, with details provided for live access and replay via webcast and phone - A conference call was hosted on August 27, 2025, at 2:00 PM Pacific (5:00 PM Eastern) to discuss financial results[12](index=12&type=chunk) - Broadcast and replay available at www.keytronic.com under 'Investor Relations' or via phone[12](index=12&type=chunk) [Forward-Looking Statements](index=2&type=section&id=Forward-Looking%20Statements) This section provides a standard disclaimer regarding forward-looking statements, outlining the nature of such statements and the various factors, risks, and uncertainties that could cause actual results to differ materially from projections - The press release contains forward-looking statements subject to risks and uncertainties that could cause actual results to differ materially[14](index=14&type=chunk) - Key risks include global economic environment, governmental legislation (tariffs), supply chain availability, customer forecasts, new program timing, and legal proceedings[14](index=14&type=chunk) [Non-GAAP Financial Measures Explanation](index=3&type=section&id=Non-GAAP%20Financial%20Measures%20Explanation) Key Tronic uses non-GAAP financial measures, specifically adjusted net loss and adjusted net loss per share, to provide greater transparency into core operations and facilitate period-to-period performance comparisons by excluding certain income and expense items - Non-GAAP financial measures, adjusted net loss and adjusted net loss per share, are used to supplement GAAP results[15](index=15&type=chunk) - These measures aim to provide greater transparency into core operations and facilitate performance comparisons by excluding certain items[15](index=15&type=chunk) [Consolidated Financial Statements](index=4&type=section&id=Consolidated%20Financial%20Statements) [Consolidated Statements of Operations](index=4&type=section&id=Consolidated%20Statements%20of%20Operations) The Consolidated Statements of Operations show a decline in net sales and a shift from operating income to operating loss for the fourth quarter, and a significant reduction in operating income for the full fiscal year 2025, leading to increased net losses Consolidated Statements of Operations (Selected Data, In thousands) | Metric | Three Months Ended June 28, 2025 (Thousands) | Three Months Ended June 29, 2024 (Thousands) | Twelve Months Ended June 28, 2025 (Thousands) | Twelve Months Ended June 29, 2024 (Thousands) | | :--------------------------- | :------------------------------- | :------------------------------- | :-------------------------------- | :-------------------------------- | | Net sales | $110,486 | $126,556 | $467,871 | $566,942 | | Gross profit | $6,811 | $9,172 | $36,427 | $39,879 | | Total operating expenses | $9,113 | $9,056 | $35,865 | $33,121 | | Operating income (loss) | $(2,302) | $116 | $562 | $6,758 | | Net Loss | $(3,924) | $(1,986) | $(8,318) | $(2,787) | | Net loss per share — Basic | $(0.36) | $(0.18) | $(0.77) | $(0.26) | [Consolidated Balance Sheets](index=5&type=section&id=Consolidated%20Balance%20Sheets) The Consolidated Balance Sheets as of June 28, 2025, show a decrease in total assets, primarily driven by reductions in current assets like trade receivables and inventories. Total liabilities also decreased, with a notable reduction in long-term debt Consolidated Balance Sheets (Selected Data, In thousands) | Account | June 28, 2025 (Thousands) | June 29, 2024 (Thousands) | | :--------------------------- | :------------ | :------------ | | Cash and cash equivalents | $1,384 | $4,752 | | Trade receivables, net | $96,142 | $132,559 | | Inventories, net | $97,321 | $105,099 | | Total current assets | $234,173 | $288,399 | | Total assets | $315,874 | $355,343 | | Accounts payable | $63,725 | $79,394 | | Current portion of long-term debt | $6,215 | $3,123 | | Long-term debt, net | $98,936 | $116,383 | | Total liabilities | $198,740 | $231,353 | | Total shareholders' equity | $117,134 | $123,990 | [Reconciliation of GAAP to Non-GAAP Measures](index=6&type=section&id=Reconciliation%20of%20GAAP%20to%20Non-GAAP%20Measures) This section provides a reconciliation of GAAP net loss to adjusted net loss, detailing adjustments for items such as cybersecurity expenses, severance expenses, stock-based compensation, and write-off of unamortized loan fees, to arrive at the non-GAAP adjusted figures Reconciliation of GAAP to Non-GAAP Measures (Selected Data, In thousands) | Adjustment Item | Three Months Ended June 28, 2025 (Thousands) | Three Months Ended June 29, 2024 (Thousands) | Twelve Months Ended June 28, 2025 (Thousands) | Twelve Months Ended June 29, 2024 (Thousands) | | :------------------------------- | :------------------------------- | :------------------------------- | :-------------------------------- | :-------------------------------- | | GAAP net loss | $(3,924) | $(1,986) | $(8,318) | $(2,787) | | Cybersecurity expenses | — | $2,340 | — | $2,340 | | Severance expenses | $51 | $(108) | $2,908 | $1,743 | | Stock-based compensation expense | $109 | $(607) | $218 | $(444) | | Write-off of unamortized loan fees | — | — | $1,012 | — | | Income tax effect of non-GAAP adjustments | $(32) | $(325) | $(828) | $(642) | | Adjusted net loss | $(3,796) | $(686) | $(5,008) | $(221) | | Adjusted net loss per share — non GAAP Diluted | $(0.35) | $(0.06) | $(0.47) | $(0.02) |

Part I: Financial Information [Financial Statements (Unaudited)](index=4&type=section&id=Item%201.%20Financial%20Statements%20(Unaudited)) Key Tronic Corporation's unaudited condensed consolidated financial statements for the period ended March 29, 2025, are presented, covering Balance Sheets, Operations, and Cash Flows [Condensed Consolidated Financial Statements](index=4&type=section&id=Condensed%20Consolidated%20Financial%20Statements) The company reported a net loss of **$0.6 million** for Q3 and **$4.4 million** for the nine months ended March 29, 2025, with total assets decreasing to **$328.6 million** Condensed Consolidated Balance Sheet Data (in millions) | | March 29, 2025 | June 29, 2024 | | :--- | :--- | :--- | | **Total current assets** | $252.8 | $288.4 | | **Total assets** | $328.6 | $355.3 | | **Total current liabilities** | $92.8 | $104.2 | | **Total liabilities** | $209.0 | $231.4 | | **Total shareholders' equity** | $119.6 | $124.0 | Condensed Consolidated Statement of Operations Data (in millions) | | Three Months Ended Mar 29, 2025 | Nine Months Ended Mar 29, 2025 | | :--- | :--- | :--- | | **Net sales** | $112.0 | $357.4 | | **Gross profit** | $8.6 | $29.6 | | **Operating income (loss)** | $(0.5) | $2.9 | | **Net loss** | $(0.6) | $(4.4) | | **Net loss per share — Diluted** | $(0.06) | $(0.41) | Condensed Consolidated Statement of Cash Flows Data (in millions) | | Nine Months Ended Mar 29, 2025 | Nine Months Ended Mar 30, 2024 | | :--- | :--- | :--- | | **Cash provided by operating activities** | $10.1 | $6.1 | | **Cash used in investing activities** | $(3.0) | $(1.0) | | **Cash used in financing activities** | $(9.4) | $(3.4) | | **Net (decrease) increase in cash** | $(2.3) | $1.7 | [Notes to Condensed Consolidated Financial Statements](index=9&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) Notes detail accounting policies, new credit facilities including a **$115 million** revolving facility, and a tax holiday in Vietnam, significantly reducing the tax rate - Liquidity is supported by **$10.1 million** cash from operations for the nine months ended March 29, 2025, and new credit facilities, including a **$115 million** asset-based revolving credit facility and a **$28 million** term loan secured on December 3, 2024[24](index=24&type=chunk)[25](index=25&type=chunk) - Revenue is primarily recognized 'over-time' using a cost-to-cost input method for customer-specific products with enforceable payment rights[30](index=30&type=chunk) Long-Term Debt Composition (in millions) | Debt Instrument | March 29, 2025 | | :--- | :--- | | Asset-based senior secured revolving credit facility | $79.5 | | Domestic term loan - Callodine | $27.3 | | Foreign line of credit | $4.0 | | Other term loans | $5.2 | | **Total debt** | **$115.9** | - The company benefits from a **0%** tax rate in Vietnam for four years starting fiscal 2021, followed by reduced rates[60](index=60&type=chunk) - On May 13, 2025, the company obtained waivers for non-compliance with financial covenants related to its Term Loan and Credit Agreement for the period ending March 29, 2025[49](index=49&type=chunk)[55](index=55&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A)](index=21&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses a **21.4%** YoY quarterly revenue decline to **$112.0 million**, improved gross margin to **7.7%**, and strategic production shifts to mitigate tariff risks and capture onshoring trends [Executive Summary](index=22&type=section&id=Executive%20Summary) Q3 FY2025 saw new program wins, a **21.4%** YoY revenue decline to **$112.0 million**, but gross margin improved to **7.7%** due to cost-cutting and strategic facility restructuring - New programs were won in telecommunications, pest control, energy storage, medical technology, and temperature-controlled shipping solutions[100](index=100&type=chunk) Q3 FY2025 vs Q3 FY2024 Performance | Metric | Q3 FY2025 | Q3 FY2024 | | :--- | :--- | :--- | | Net Sales | $112.0M | $142.4M | | Gross Margin | 7.7% | 5.7% | | Net Loss | $(0.6)M | $(2.2)M | | Diluted EPS | $(0.06) | $(0.21) | - The company is restructuring its Juarez facility for higher volume manufacturing and expanding Arkansas and Vietnam capacities to leverage onshoring and mitigate tariffs[106](index=106&type=chunk) [Results of Operations](index=24&type=section&id=RESULTS%20OF%20OPERATIONS) Q3 net sales decreased **21.4%** YoY to **$112.0 million** with gross margin improving to **7.7%**, while nine-month net sales fell **18.8%** to **$357.4 million** with gross margin at **8.3%** Comparison of Three Months Ended (in millions) | | Mar 29, 2025 | Mar 30, 2024 | Change | | :--- | :--- | :--- | :--- | | Net sales | $112.0 | $142.4 | $(30.5) | | Gross profit | $8.6 | $8.1 | $0.5 | | Gross Margin | 7.7% | 5.7% | +2.0 ppt | | Net loss | $(0.6) | $(2.2) | $1.6 | - The quarterly net sales decrease was primarily due to worldwide economic disruptions, global tariffs, and reduced customer demand[115](index=115&type=chunk) Comparison of Nine Months Ended (in millions) | | Mar 29, 2025 | Mar 30, 2024 | Change | | :--- | :--- | :--- | :--- | | Net sales | $357.4 | $440.4 | $(83.0) | | Gross profit | $29.6 | $30.7 | $(1.1) | | Gross Margin | 8.3% | 7.0% | +1.3 ppt | | Net loss | $(4.4) | $(0.8) | $(3.6) | - The nine-month net sales decrease was driven by economic disruptions, component shortages, and a **~$44 million** decrease in excess inventory and scrap sales due to program endings[128](index=128&type=chunk) [Capital Resources and Liquidity](index=28&type=section&id=CAPITAL%20RESOURCES%20AND%20LIQUIDITY) The company generated **$10.1 million** in operating cash flow for the nine months ended March 29, 2025, supported by new **$115 million** revolving credit and **$28 million** term loan facilities - Net cash provided by operating activities was **$10.1 million** for the nine months ended March 29, 2025, up from **$6.1 million** in the prior year period[140](index=140&type=chunk) - Operating cash flow increased primarily due to a **$19.6 million** decrease in accounts receivable and a **$5.8 million** decrease in inventory[141](index=141&type=chunk) - On December 3, 2024, the company secured a new **$115 million** asset-based revolving credit facility and a **$28 million** term loan, expected to provide sufficient liquidity for the next 12 months[147](index=147&type=chunk)[148](index=148&type=chunk) [Backlog](index=28&type=section&id=BACKLOG) Order backlog decreased to **$138.1 million** as of March 29, 2025, from **$275.8 million** a year prior, primarily due to softer demand for Mexico-based programs Order Backlog Comparison | Date | Backlog Amount | | :--- | :--- | | March 29, 2025 | $138.1 million | | March 30, 2024 | $275.8 million | - Backlog decreased due to softer demand for Mexico-based programs, partially offset by higher U.S. demand, with future increases expected from recent program wins[139](index=139&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=38&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company faces market risks from fluctuating interest rates on its SOFR-linked debt and foreign currency exchange rates from operations in Mexico, China, and Vietnam - Interest rate risk arises from the asset-based senior secured revolving credit facility, which fluctuates with SOFR rates[212](index=212&type=chunk) - Foreign currency exchange risk stems from operations in Mexico, China, and Vietnam, partially hedged by Mexican Peso forward contracts[214](index=214&type=chunk) - As of March 29, 2025, **$20.9 million** in foreign currency forward contracts were outstanding to manage Mexican Peso exposure[214](index=214&type=chunk) [Controls and Procedures](index=38&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that disclosure controls and procedures were ineffective as of March 29, 2025, due to un-remediated material weaknesses in internal control over financial reporting - The CEO and CFO concluded that disclosure controls and procedures were not effective as of March 29, 2025[217](index=217&type=chunk) - Ineffectiveness stems from material weaknesses in internal control over financial reporting related to revenue recognition and new accounting standard adoption, as previously disclosed[196](index=196&type=chunk)[217](index=217&type=chunk) - Remediation efforts, including staff training and enhanced procedures, are underway, but material weaknesses are not yet fully resolved[219](index=219&type=chunk)[220](index=220&type=chunk) Part II: Other Information [Legal Proceedings](index=39&type=section&id=Item%201.%20Legal%20Proceedings) The company is involved in ordinary course legal proceedings, which management does not expect to have a material adverse effect on its financial position or results - The company is party to certain lawsuits or claims arising in the ordinary course of business[222](index=222&type=chunk) - Management does not expect these legal proceedings to materially adversely affect the company's financial condition or results[222](index=222&type=chunk) [Risk Factors](index=30&type=section&id=Item%201A.%20Risk%20Factors) This section details significant risks including customer and supplier dependency, foreign currency fluctuations, cyberattacks, debt covenant non-compliance, and material weaknesses in internal controls - **Business Risks:** The company faces risks from international operations, dependency on a small number of customers for sales, and reliance on limited critical component suppliers[152](index=152&type=chunk)[161](index=161&type=chunk)[165](index=165&type=chunk) - **Technology Risks:** The company is dependent on digital technologies and subject to cyberattacks, with a previously disclosed material incident in May 2024 and ongoing threats[184](index=184&type=chunk)[185](index=185&type=chunk) - **Financial Risks:** Restrictive debt covenants, past non-compliance, potential accelerated debt repayment, and interest rate risk on variable-rate debt pose significant financial risks[189](index=189&type=chunk)[190](index=190&type=chunk)[193](index=193&type=chunk) - **Control & Legal Risks:** Material weaknesses in internal control over financial reporting, if un-remediated, could lead to inaccurate reporting, delisting, regulatory action, and loss of investor confidence[196](index=196&type=chunk)[197](index=197&type=chunk)[198](index=198&type=chunk) - **Trade Policy Risks:** Majority of manufacturing outside the U.S. (China, Mexico) exposes the company to tariffs and U.S. trade policy changes, potentially increasing costs and reducing revenue[181](index=181&type=chunk)[182](index=182&type=chunk)[183](index=183&type=chunk) [Other Information](index=39&type=section&id=Item%205.%20Other%20Information) Recent events include a **10%** voluntary salary reduction for executive leadership and Board, and waivers obtained for non-compliance with debt covenants for the quarter ended March 29, 2025 - On May 12, 2025, executive leadership and the Board agreed to a voluntary **10%** temporary reduction in base salaries and cash retainers for cost reduction[226](index=226&type=chunk) - On May 13, 2025, the company amended its Term Loan and Credit Agreement to waive a default related to non-compliance with minimum earnings covenants for the period ending March 29, 2025[227](index=227&type=chunk)[228](index=228&type=chunk)

Core Viewpoint - Key Tronic Corporation is facing significant challenges in the third quarter of fiscal 2025, with a notable decline in revenues due to global tariff volatility and reduced customer demand, while simultaneously making strides in operational efficiency and securing new contracts for future growth [1][2][9][12]. Revenue & Earnings Overview - Total revenues for the third quarter of fiscal 2025 were reported at $112 million, a decrease of 21.3% from $142.4 million in the same quarter last year [2] - The gross margin improved to 7.7% from 5.7% year over year, attributed to cost-cutting measures and workforce reductions [2] - The company reported a net loss of $0.6 million or 6 cents per share, an improvement from a net loss of $2.2 million or 21 cents per share in the prior year [3] Operational Performance & Business Metrics - Operating cash flow for the first nine months of fiscal 2025 was $10.1 million, up from $6.1 million in the same period last year [4] - Inventory levels decreased by 14% or $16 million year over year, aligning with current revenue levels [4] - Total liabilities were reduced by 14% or $34.3 million compared to the same quarter last year [4] Capital Expenditure - Capital expenditure for the first nine months of fiscal 2025 was approximately $3 million, with expectations for the full year between $6 million and $8 million, primarily for capacity expansions in Arkansas and Vietnam [5] Management Commentary - Management highlighted that global tariff volatility, especially concerning components from China, has caused customer hesitancy [6] - The company is optimistic about long-term growth, focusing on operational streamlining and cost reductions [6] Business Wins - Key Tronic secured five significant contracts in the quarter, including a $12 million telecommunications program in Mexico and a $6 million pest-control device contract in Vietnam [7] - A $1 million design contract with potential production value up to $15 million emphasizes the importance of the company's design capabilities [7] Future Developments - A previously disclosed $60 million program is on track, with ramp-up expected to begin in the first quarter of fiscal 2026 [8] - The company plans to invest over $28 million in a new manufacturing and R&D facility in Arkansas, projected to create over 400 jobs [11] - Expansion plans in Vietnam aim to more than double the current manufacturing footprint, providing alternatives to Chinese manufacturing [11] Summary - Despite facing near-term challenges such as falling revenues and macroeconomic uncertainties, Key Tronic is strengthening its cost base, expanding its operational footprint, and diversifying its customer portfolio, which may lead to a return to profitability in the long term [12]

Financial Data and Key Metrics Changes - For Q3 FY2025, total revenue was $112 million, down from $142.4 million in the same period of FY2024, impacted by global economic disruptions and tariff fluctuations [5] - Gross margins were 7.7% and operating margins were -0.4% in Q3 FY2025, compared to 5.7% and -0.4% respectively in Q3 FY2024, reflecting cost-cutting measures [5] - The net loss for Q3 FY2025 was $600,000 or $0.06 per share, an improvement from a net loss of $2.2 million or $0.20 per share in Q3 FY2024 [6] - For the first nine months of FY2025, net loss was $4.4 million or $0.41 per share, compared to a net loss of $800,000 or $0.07 per share in the same period of FY2024 [8] Business Line Data and Key Metrics Changes - The company reported a reduction in inventory by approximately $16 million or 14% year-over-year, aligning inventory levels with current revenue [9] - Total liabilities were reduced by $34.3 million or 14% from a year ago, indicating improved financial health [10] Market Data and Key Metrics Changes - The company noted that many customers have revamped their forecasting methodologies, which has led to improved materials research planning [10] - Accounts receivable days sales outstanding (DSOs) increased to 92 days from 85 days a year ago, reflecting a decline in net sales [10] Company Strategy and Development Direction - The company is focusing on expanding production capacity in Arkansas and Vietnam, with an investment of over $28 million expected to create over 400 jobs in the US [16] - The strategic expansion aims to mitigate the impact of tariffs and geopolitical tensions, with a strong pipeline of potential new business opportunities [19] - The company is also investing in vertical integration and manufacturing process knowledge to differentiate itself from competitors [20] Management's Comments on Operating Environment and Future Outlook - Management expressed concerns about the uncertainties related to tariffs, which have caused increased costs and reduced demand [12] - Despite these challenges, the company anticipates growth in US and Vietnam production and remains focused on improving profitability [12] - Management decided not to provide revenue or earnings guidance for Q4 FY2025 due to the unpredictable economic climate [12] Other Important Information - Operating cash flows for the first nine months of FY2025 were $10.1 million, up from $6.1 million in the same period of FY2024, reflecting better working capital management [11] - The company is continuing to streamline operations in Mexico to enhance efficiency and competitiveness [18] Q&A Session Summary Question: Can you walk us through the five new business wins and their anticipated dollar amounts? - The first win is a $12 million telecommunications program in Mexico, expected to ramp up in Q2 FY2026 [25] - The second is a $6 million pest control device program in Vietnam [26] - The third is a $7 million energy program in Arkansas, currently in the design stage [27] - The fourth is a consumer product worth $2 to $5 million in Arkansas [28] - The fifth is a design contract starting at $1 million, potentially growing to $5 to $15 million [29] Question: What has changed regarding working with Fortune 500 companies? - The company noted that once it becomes an approved vendor, it opens doors for additional opportunities within the conglomerate [30] Question: What impact is the macro environment having on a previously anticipated $60 million program? - The program is expected to generate income in Q1 FY2026, with a ramp-up period of 12 to 18 months [32][33] Question: Can you clarify the unusual items flagged in the financials? - The severance in Mexico is included in cost of goods sold, while the other adjustments are split between OpEx and cost of goods [39][41] Question: How is the company managing working capital and inventory? - The company manages over 90% of its customers' bill of materials and aims for inventory turns of four [50]