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]

Financial Performance - Key Tronic reported total revenue of $98.8 million for Q1 FY2026, down 25% from $131.6 million in the same period of FY2025[3]. - The net loss for Q1 FY2026 was $(2.3) million or $(0.21) per share, compared to net income of $1.1 million or $0.10 per share in Q1 FY2025[7]. - Adjusted net loss for Q1 FY2026 was $(1.1) million or $(0.10) per share, compared to adjusted net income of $2.8 million or $0.26 per share in Q1 FY2025[7]. - Total cash flow from operations was approximately $7.6 million in Q1 FY2026, down from $9.9 million in Q1 FY2025[5]. Margins and Debt - Gross margin increased to 8.4% in Q1 FY2026 from 6.2% in the previous quarter, but decreased from 10.1% in Q1 FY2025[6]. - The company reduced its debt by approximately $12.0 million year-over-year[5]. Future Outlook and Growth - Key Tronic anticipates long-term growth through expansion in the US and Vietnam, including a new facility in Springdale, Arkansas[4]. - Key Tronic expects approximately half of its manufacturing to occur in the US and Vietnam facilities by the end of FY2026[8]. - The company won new programs in medical technology and industrial equipment during Q1 FY2026[9]. - Key Tronic will not issue revenue or earnings guidance for Q2 FY2026 due to uncertainties in new program ramps and potential tariffs[10].

[PART I](index=4&type=section&id=PART%20I) Provides an overview of Key Tronic's contract manufacturing business, strategies, global operations, and related factors [Item 1. Business](index=4&type=section&id=Item%201.%20Business) Key Tronic, a contract manufacturer, offers integrated engineering and production services, expanding capacity in the US and Vietnam to meet demand and mitigate tariffs [Background](index=4&type=section&id=Background) [Our Industry and Strategy](index=4&type=section&id=Our%20Industry%20and%20Strategy) [Customers and Marketing](index=5&type=section&id=Customers%20and%20Marketing) [Manufacturing](index=5&type=section&id=Manufacturing) [Research, Development, and Engineering](index=6&type=section&id=Research%2C%20Development%2C%20and%20Engineering) [Competition](index=6&type=section&id=Competition) [Trademarks](index=6&type=section&id=Trademarks) [Employees](index=6&type=section&id=Employees) [Backlog](index=6&type=section&id=Backlog) [Foreign Markets](index=6&type=section&id=Foreign%20Markets) [Governmental Regulation](index=6&type=section&id=Governmental%20Regulation) [Information about Our Executive Officers](index=7&type=section&id=Information%20about%20Our%20Executive%20Officers) [Available Information](index=8&type=section&id=Available%20Information) - Key Tronic shifted from keyboard manufacturing to contract manufacturing, leveraging strengths in design, engineering, and global production capabilities[14](index=14&type=chunk)[15](index=15&type=chunk)[16](index=16&type=chunk) - The company plans to significantly increase production capacity in its Arkansas and Vietnam facilities to benefit from growing customer demand for rebalancing contract manufacturing and mitigate tariff impacts[17](index=17&type=chunk) - Order backlog decreased from **$249.6 million** in June 2024 to **$159.1 million** in June 2025, but is not necessarily indicative of future sales due to potential cancellations or rescheduling[33](index=33&type=chunk) Customer Concentration (Percentage of Total Net Sales) | Customer | 2025 | 2024 | | :--------- | :--- | :--- | | Top 5 Customers | 48% | 34% | | Customer A | 25% | 20% | Full-time Employees | Date | Employees | | :--------- | :-------- | | June 28, 2025 | 3,539 | | June 29, 2024 | 4,122 | [Item 1A. Risk Factors](index=8&type=section&id=Item%201A.%20Risk%20Factors) Key Tronic faces operational, financial, and cybersecurity risks from foreign operations, customer concentration, supply chain, and internal control issues [RISKS RELATED TO OUR BUSINESS AND STRATEGY](index=9&type=section&id=RISKS%20RELATED%20TO%20OUR%20BUSINESS%20AND%20STRATEGY) [TECHNOLOGY RISKS](index=13&type=section&id=TECHNOLOGY%20RISKS) [RISKS RELATED TO CAPITAL AND FINANCING](index=14&type=section&id=RISKS%20RELATED%20TO%20CAPITAL%20AND%20FINANCING) [RISKS RELATED TO OUR CONTROLS AND PROCEDURES AND THE INTERNAL INVESTIGATION](index=15&type=section&id=RISKS%20RELATED%20TO%20OUR%20CONTROLS%20AND%20PROCEDURES%20AND%20THE%20INTERNAL%20INVESTIGATION) [LEGAL AND ACCOUNTING RISKS](index=16&type=section&id=LEGAL%20AND%20ACCOUNTING%20RISKS) [GENERAL RISKS](index=17&type=section&id=GENERAL%20RISKS) - Operations in Mexico, China, and Vietnam are subject to risks including political/economic instability, tariffs, regulatory changes, and potential loss of tax incentives[48](index=48&type=chunk)[52](index=52&type=chunk) - Quarterly results can fluctuate due to volatile customer demand, timing of new programs, and fixed operating expenses, exacerbated by macroeconomic conditions like inflation and supply chain disruptions[50](index=50&type=chunk)[51](index=51&type=chunk)[56](index=56&type=chunk) - A significant portion of sales comes from a small number of customers (**48% from top five in FY2025**), and the loss or reduction of orders from these customers could materially harm the business[59](index=59&type=chunk)[60](index=60&type=chunk) - The company has experienced and expects to continue experiencing cyberattacks, including a previously disclosed incident in Q4 FY2024 that materially impacted financial condition and results of operations[79](index=79&type=chunk)[80](index=80&type=chunk) - The company has previously identified and remediated material weaknesses in internal control over financial reporting related to revenue recognition and new accounting standards, with ongoing risks of recurrence[90](index=90&type=chunk)[91](index=91&type=chunk) [Item 1B. Unresolved Staff Comments](index=17&type=section&id=Item%201B.%20Unresolved%20Staff%20Comments) The company reported no unresolved staff comments from the SEC - There are no unresolved staff comments[105](index=105&type=chunk) [Item 1C. Cybersecurity](index=17&type=section&id=Item%201C.%20Cybersecurity) Key Tronic manages cybersecurity risks via NIST CSF, Board oversight, and management, acknowledging past material impacts from incidents [Risk Management and Strategy](index=17&type=section&id=Risk%20Management%20and%20Strategy) [Governance](index=18&type=section&id=Governance) - Key Tronic's cybersecurity processes are based on the NIST CSF, including third-party monitoring and mandatory employee training[105](index=105&type=chunk) - The Board of Directors oversees risk management, with the Audit Committee specifically responsible for cybersecurity threat oversight, receiving regular updates from management[107](index=107&type=chunk) - Risks from cybersecurity threats, including a previously disclosed incident, have materially affected the company's results of operations and financial condition[107](index=107&type=chunk) [Item 2. Properties](index=19&type=section&id=Item%202.%20Properties) Key Tronic operates over 2.19 million sq ft of ISO-certified manufacturing and sales facilities across four countries Operating Facilities by Location and Square Footage | Location | Approx. Sq. Ft. | Type of Interest | | :------------------------ | :-------------- | :--------------- | | Total USA | 1,059,540 | Leased | | Total Mexico | 899,000 | Mixed (Owned/Leased) | | Total China | 103,000 | Leased | | Total Vietnam | 133,000 | Leased | | **Grand Total** | **2,194,540** | | - All facilities are ISO 9001:2015 and CTPAT certified, with specific sites holding additional certifications like IATF 16949 (automotive), ISO 13485:2016 (medical devices), AS9100D (aviation, space, defense), and ISO 14001:2015 (environmental)[112](index=112&type=chunk)[118](index=118&type=chunk) [Item 3. Legal Proceedings](index=20&type=section&id=Item%203.%20Legal%20Proceedings) Management anticipates no material adverse effect from ordinary course lawsuits on financial position, results, or cash flow - The company is party to certain lawsuits or claims in the ordinary course of business[113](index=113&type=chunk) - Management does not believe these proceedings, individually or in aggregate, will have a material adverse effect on financial position, results of operations, or cash flow[113](index=113&type=chunk) [Item 4. Mine Safety Disclosures](index=20&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to Key Tronic Corporation - Not Applicable[114](index=114&type=chunk) [PART II](index=21&type=section&id=PART%20II) Details Key Tronic's market for common equity, financial performance, market risks, and financial statements [Item 5. Market for the Registrant's Common Equity, Related Stockholder Matters, and Issuer Purchases of Equity Securities](index=21&type=section&id=Item%205.%20Market%20for%20the%20Registrant%27s%20Common%20Equity%2C%20Related%20Stockholder%20Matters%2C%20and%20Issuer%20Purchases%20of%20Equity%20Securities) Key Tronic's common stock trades on NASDAQ, with 532 shareholders, and dividend payments are restricted by credit agreements [Market Information](index=21&type=section&id=Market%20Information) [Holders and Dividends](index=21&type=section&id=Holders%20and%20Dividends) [Performance Graph](index=21&type=section&id=Performance%20Graph) - Common stock is traded on the NASDAQ Global Market under the symbol 'KTCC'[115](index=115&type=chunk) - As of June 28, 2025, there were **532 shareholders** of common stock[116](index=116&type=chunk) - The company is restricted from declaring or paying dividends without Bank of Montreal's prior written consent and does not anticipate paying dividends in the foreseeable future[116](index=116&type=chunk) Common Stock High and Low Sales Prices | Quarter | 2025 High | 2025 Low | 2024 High | 2024 Low | | :-------------- | :-------- | :------- | :-------- | :------- | | First Quarter | $6.00 | $3.70 | $6.24 | $4.32 | | Second Quarter | $6.03 | $3.99 | $4.50 | $3.72 | | Third Quarter | $4.28 | $2.56 | $5.14 | $4.04 | | Fourth Quarter | $3.13 | $2.26 | $4.85 | $3.69 | [Item 6: [RESERVED]](index=21&type=section&id=Item%206%3A%20%5BRESERVED%5D) This item is reserved and contains no information [Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=21&type=section&id=Item%207.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Key Tronic's FY2025 net sales decreased 17.5% to $467.9 million, resulting in an $8.3 million net loss, despite improved gross margin [Overview](index=22&type=section&id=Overview) [Executive Summary](index=22&type=section&id=Executive%20Summary) [RESULTS OF OPERATIONS (Comparison of the Fiscal Year Ended June 28, 2025 with the Fiscal Year Ended June 29, 2024)](index=23&type=section&id=RESULTS%20OF%20OPERATIONS) [Net Sales](index=23&type=section&id=Net%20Sales) [Cost of Sales](index=24&type=section&id=Cost%20of%20Sales) [Gross Profit](index=24&type=section&id=Gross%20Profit) [Research, Development and Engineering](index=24&type=section&id=Research%2C%20Development%20and%20Engineering) [Selling, General and Administrative](index=24&type=section&id=Selling%2C%20General%20and%20Administrative) [Interest Expense](index=25&type=section&id=Interest%20Expense) [Income Tax Provision](index=25&type=section&id=Income%20Tax%20Provision) [Non-GAAP Financial Measures](index=25&type=section&id=Non-GAAP%20Financial%20Measures) [International Subsidiaries](index=26&type=section&id=International%20Subsidiaries) [RESULTS OF OPERATIONS (Comparison of the Fiscal Year Ended June 29, 2024 with the Fiscal Year Ended July 1, 2023)](index=26&type=section&id=RESULTS%20OF%20OPERATIONS%20%28Comparison%20of%20the%20Fiscal%20Year%20Ended%20June%2029%2C%202024%20with%20the%20Fiscal%20Year%20Ended%20July%201%2C%202023%29) [Capital Resources and Liquidity](index=26&type=section&id=Capital%20Resources%20and%20Liquidity) [Operating Cash Flow](index=26&type=section&id=Operating%20Cash%20Flow) [Investing Cash Flow](index=26&type=section&id=Investing%20Cash%20Flow) [Financing Cash Flow](index=27&type=section&id=Financing%20Cash%20Flow) [Off-Balance Sheet Arrangements and Contractual Obligations](index=27&type=section&id=Off-Balance%20Sheet%20Arrangements%20and%20Contractual%20Obligations) [Critical Accounting Policies and Estimates](index=28&type=section&id=Critical%20Accounting%20Policies%20and%20Estimates) [Revenue](index=28&type=section&id=Revenue) [Inactive, Obsolete, and Surplus Inventory Valuation](index=28&type=section&id=Inactive%2C%20Obsolete%2C%20and%20Surplus%20Inventory%20Valuation) [Allowance for Credit Losses](index=29&type=section&id=Allowance%20for%20Credit%20Losses) [Income Taxes](index=29&type=section&id=Income%20Taxes) [New and Future Accounting Pronouncements](index=29&type=section&id=New%20and%20Future%20Accounting%20Pronouncements) - Net sales decreased by **$99.1 million**, with approximately **$48 million** attributed to reduced scrap and component sales from end-of-life programs in FY2024, alongside global economic disruptions and tariff-related delays in new programs[123](index=123&type=chunk)[133](index=133&type=chunk) - The company secured new programs in pest control, personal protection, air purification, automotive, medical technology, and utilities inspection equipment, including a large data processing OEM contract expected to exceed **$20 million** in annual revenue[122](index=122&type=chunk) - Headcount was reduced by approximately **600 employees** in FY2025 to align costs with demand and boost automation, improving competitiveness for new program bids[124](index=124&type=chunk) Key Financial Highlights (FY2025 vs. FY2024) | Metric | FY2025 (in thousands) | FY2024 (in thousands) | Change ($) | Change (%) | | :---------------------------------- | :-------------------- | :-------------------- | :--------- | :--------- | | Net Sales | $467,871 | $566,942 | $(99,071) | -17.5% | | Gross Profit | $36,427 | $39,879 | $(3,452) | -8.7% | | Gross Profit % of Net Sales | 7.8% | 7.0% | +0.8 pts | | | Operating Income | $562 | $6,758 | $(6,196) | -91.7% | | Operating Income % of Net Sales | 0.1% | 1.2% | -1.1 pts | | | Net Loss | $(8,318) | $(2,787) | $(5,531) | +198.5% | | Net Loss Per Share (Diluted) | $(0.77) | $(0.26) | $(0.51) | +196.2% | Revenue by Industry Sector (Percentage of Total Revenue) | Industry | FY2025 | FY2024 | | :----------- | :----- | :----- | | Industrial | 52% | 46% | | Consumer | 38% | 45% | | Communication | 6% | 4% | | Medical | 3% | 3% | | Gaming | — | 1% | | Transportation | 1% | 1% | | **Total** | **100%** | **100%** | Adjusted Net Loss (Non-GAAP) | Metric | FY2025 (in thousands) | FY2024 (in thousands) | | :---------------------------------- | :-------------------- | :-------------------- | | GAAP net loss | $(8,318) | $(2,787) | | Cybersecurity expenses | — | $2,340 | | Severance expenses | $2,908 | $1,743 | | Gain on insurance proceeds (net of losses) | — | $(431) | | Stock-based compensation expense | $218 | $(444) | | Write-off of unamortized loan fees | $1,012 | — | | Income tax effect of non-GAAP adjustments | $(828) | $(642) | | **Adjusted net loss** | **$(5,008)** | **$(221)** | | **Adjusted net loss per share — Diluted** | **$(0.47)** | **$(0.02)** | [Item 7A. Quantitative and Qualitative Disclosures about Market Risk](index=30&type=section&id=Item%207A.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) Key Tronic faces interest rate risk on debt and foreign currency exchange risk, using Mexican Peso forward contracts for hedging [Interest Rate Risk](index=30&type=section&id=Interest%20Rate%20Risk) [Foreign Currency Exchange Risk](index=30&type=section&id=Foreign%20Currency%20Exchange%20Risk) - The company is exposed to interest rate risk from its asset-based senior secured revolving credit facility and line of credit, which fluctuate with SOFR and Iterbancaria de Equilibrio Interest Rate, respectively[173](index=173&type=chunk) - Foreign currency exchange risk arises from operations in Mexico, China, and Vietnam, with transactions in Mexican Peso, Chinese Renminbi, and Vietnamese Dong[175](index=175&type=chunk) - Key Tronic uses Mexican Peso forward contracts to hedge foreign currency fluctuations, with **$12.9 million** in outstanding contracts as of June 28, 2025[175](index=175&type=chunk) [Item 8. Financial Statements and Supplementary Data](index=31&type=section&id=Item%208.%20Financial%20Statements%20and%20Supplementary%20Data) This section presents Key Tronic's audited financial statements, including an unqualified auditor's opinion and a critical audit matter on revenue recognition estimates [Report of Independent Registered Public Accounting Firm](index=31&type=section&id=Report%20of%20Independent%20Registered%20Public%20Accounting%20Firm) [Critical Audit Matter](index=31&type=section&id=Critical%20Audit%20Matter) [Consolidated Balance Sheets](index=33&type=section&id=Consolidated%20Balance%20Sheets) [Consolidated Statements of Operations](index=34&type=section&id=Consolidated%20Statements%20of%20Operations) [Consolidated Statements of Comprehensive Loss](index=35&type=section&id=Consolidated%20Statements%20of%20Comprehensive%20Loss) [Consolidated Statements of Cash Flows](index=36&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) [Consolidated Statements of Shareholders' Equity](index=37&type=section&id=Consolidated%20Statements%20of%20Shareholders%27%20Equity) [NOTES TO CONSOLIDATED FINANCIAL STATEMENTS](index=38&type=section&id=NOTES%20TO%20CONSOLIDATED%20FINANCIAL%20STATEMENTS) [1. Significant Accounting Policies](index=38&type=section&id=1.%20Significant%20Accounting%20Policies) [2. Inventories](index=42&type=section&id=2.%20Inventories) [3. Property, Plant and Equipment](index=42&type=section&id=3.%20Property%2C%20Plant%20and%20Equipment) [4. Long-Term Debt](index=43&type=section&id=4.%20Long-Term%20Debt) [5. Income Taxes](index=45&type=section&id=5.%20Income%20Taxes) [6. Earnings Per Share](index=49&type=section&id=6.%20Earnings%20Per%20Share) [7. Stock-Based Compensation and Benefit Plans](index=49&type=section&id=7.%20Stock-Based%20Compensation%20and%20Benefit%20Plans) [Stock Appreciation Rights](index=49&type=section&id=Stock%20Appreciation%20Rights) [Restricted Stock Units](index=50&type=section&id=Restricted%20Stock%20Units) [8. Commitments and Contingencies](index=50&type=section&id=8.%20Commitments%20and%20Contingencies) [Litigation and Other Matters](index=50&type=section&id=Litigation%20and%20Other%20Matters) [Warranties](index=50&type=section&id=Warranties) [Leases](index=51&type=section&id=Leases) [Internal Investigation](index=51&type=section&id=Internal%20Investigation) [Indemnification Rights](index=51&type=section&id=Indemnification%20Rights) [9. Derivative Financial Instruments](index=51&type=section&id=9.%20Derivative%20Financial%20Instruments) [10. Fair Value Measurements](index=52&type=section&id=10.%20Fair%20Value%20Measurements) [11. Segment Information and Enterprise-Wide Disclosures](index=53&type=section&id=11.%20Segment%20Information%20and%20Enterprise-Wide%20Disclosures) [Products and Services](index=53&type=section&id=Products%20and%20Services) [Geographic Areas](index=53&type=section&id=Geographic%20Areas) [Significant Customers](index=54&type=section&id=Significant%20Customers) [Significant Segment Measures](index=54&type=section&id=Significant%20Segment%20Measures) [12. Revenue](index=54&type=section&id=12.%20Revenue) [Revenue Recognition](index=54&type=section&id=Revenue%20Recognition) [Contract Balances](index=55&type=section&id=Contract%20Balances) [Disaggregation of Revenue](index=56&type=section&id=Disaggregation%20of%20Revenue) [13. Leases](index=56&type=section&id=13.%20Leases) - Baker Tilly US, LLP issued an unqualified opinion on the consolidated financial statements for the years ended June 28, 2025, and June 29, 2024[177](index=177&type=chunk) - A critical audit matter involved auditing revenue recognized over time on manufacturing contracts, specifically management's estimates for total estimated costs at completion of performance obligations[182](index=182&type=chunk)[183](index=183&type=chunk) Consolidated Balance Sheet Highlights (in thousands) | Metric | June 28, 2025 | June 29, 2024 | | :-------------------------- | :------------ | :------------ | | Total Current Assets | $234,173 | $288,399 | | Total Assets | $315,874 | $355,343 | | Total Current Liabilities | $91,991 | $104,176 | | Total Liabilities | $198,740 | $231,353 | | Total Shareholders' Equity | $117,134 | $123,990 | Consolidated Statements of Operations Highlights (in thousands) | Metric | FY2025 | FY2024 | | :---------------------------------- | :------- | :------- | | Net sales | $467,871 | $566,942 | | Gross profit | $36,427 | $39,879 | | Operating income | $562 | $6,758 | | Loss before income taxes | $(11,961) | $(5,187) | | Net loss | $(8,318) | $(2,787) | | Net loss per share — Basic | $(0.77) | $(0.26) | Consolidated Statements of Cash Flows Highlights (in thousands) | Activity | FY2025 | FY2024 | | :---------------------------------- | :------- | :------- | | Cash provided by operating activities | $18,929 | $13,776 | | Cash used in investing activities | $(4,199) | $(2,108) | | Cash used in financing activities | $(18,098) | $(10,519) | | Net increase (decrease) in cash | $(3,368) | $1,149 | | Cash and cash equivalents, end of period | $1,384 | $4,752 | [Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure](index=57&type=section&id=Item%209.%20Changes%20in%20and%20Disagreements%20with%20Accountants%20on%20Accounting%20and%20Financial%20Disclosure) Key Tronic reported no changes in or disagreements with accountants on accounting and financial disclosure matters - There were no changes in or disagreements with accountants on accounting and financial disclosure[309](index=309&type=chunk) [Item 9A. Controls and Procedures](index=58&type=section&id=Item%209A.%20Controls%20and%20Procedures) Management assessed disclosure controls and internal control over financial reporting as effective, having remediated prior material weaknesses [Evaluation of Disclosure Controls and Procedures](index=58&type=section&id=Evaluation%20of%20Disclosure%20Controls%20and%20Procedures) [Management's Report on Internal Control over Financial Reporting](index=58&type=section&id=Management%27s%20Report%20on%20Internal%20Control%20over%20Financial%20Reporting) [Remediation Update](index=58&type=section&id=Remediation%20Update) [Changes in Internal Control over Financial Reporting](index=60&type=section&id=Changes%20in%20Internal%20Control%20over%20Financial%20Reporting) - As of June 28, 2025, the company's disclosure controls and procedures were deemed effective[311](index=311&type=chunk) - Management concluded that internal control over financial reporting was effective as of June 28, 2025, based on the COSO framework[314](index=314&type=chunk) - Material weaknesses identified as of June 29, 2024, related to revenue recognition for material price variances and the adoption of new accounting standards, have been remediated during fiscal year 2025[315](index=315&type=chunk)[317](index=317&type=chunk)[318](index=318&type=chunk) - Remediation actions included training, enhanced closing process documentation, and hiring technical accounting finance staff[320](index=320&type=chunk) [Item 9B. Other Information](index=61&type=section&id=Item%209B.%20Other%20Information) No directors or officers adopted or terminated Rule 10b5-1 or non-Rule 10b5-1 trading arrangements in FY2025 - No directors or officers adopted or terminated Rule 10b5-1 or non-Rule 10b5-1 trading arrangements during fiscal year 2025[321](index=321&type=chunk) [Item 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS](index=61&type=section&id=Item%209C.%20DISCLOSURE%20REGARDING%20FOREIGN%20JURISDICTIONS%20THAT%20PREVENT%20INSPECTIONS) This item is not applicable to Key Tronic Corporation - Not applicable[322](index=322&type=chunk) [PART III](index=61&type=section&id=PART%20III) Covers Key Tronic's corporate governance, executive compensation, security ownership, related party transactions, and accounting fees [Item 10. Directors, Executive Officers and Corporate Governance](index=61&type=section&id=Item%2010.%20Directors%2C%20Executive%20Officers%20and%20Corporate%20Governance) Information on directors, executive officers, and corporate governance is incorporated by reference from the 2025 Proxy Statement - Information on directors, executive officers, and corporate governance is incorporated by reference from the 2025 Proxy Statement and Item 1 of Part 1[324](index=324&type=chunk)[325](index=325&type=chunk) - The Board of Directors has adopted a written Code of Conduct applicable to directors and employees, available on the company's website[327](index=327&type=chunk) [Item 11. Executive Compensation](index=61&type=section&id=Item%2011.%20Executive%20Compensation) Executive compensation information is incorporated by reference from the 2025 Proxy Statement - Executive compensation information is incorporated by reference from the 2025 Proxy Statement[328](index=328&type=chunk) [Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters](index=61&type=section&id=Item%2012.%20Security%20Ownership%20of%20Certain%20Beneficial%20Owners%20and%20Management%20and%20Related%20Stockholder%20Matters) Security ownership and equity compensation plan information is incorporated by reference from the 2025 Proxy Statement - Security ownership and equity compensation plan information is incorporated by reference from the 2025 Proxy Statement[329](index=329&type=chunk) [Item 13. Certain Relationships and Related Transactions, and Director Independence](index=62&type=section&id=Item%2013.%20Certain%20Relationships%20and%20Related%20Transactions%2C%20and%20Director%20Independence) Information on related person transactions and director independence is incorporated by reference from the 2025 Proxy Statement - Information on related person transactions and director independence is incorporated by reference from the 2025 Proxy Statement[330](index=330&type=chunk) [Item 14. Principal Accounting Fees and Services](index=62&type=section&id=Item%2014.%20Principal%20Accounting%20Fees%20and%20Services) Principal accounting fees and services information is incorporated by reference from the 2025 Proxy Statement - Principal accounting fees and services information is incorporated by reference from the 2025 Proxy Statement[331](index=331&type=chunk) - Baker Tilly US, LLP is the independent registered public accounting firm[331](index=331&type=chunk) [PART IV](index=62&type=section&id=PART%20IV) Details Key Tronic's financial statements, exhibits, and the absence of a Form 10-K summary [Item 15. Exhibits and Financial Statement Schedule](index=62&type=section&id=Item%2015.%20Exhibits%20and%20Financial%20Statement%20Schedule) This section lists financial statements and a detailed schedule of exhibits, including corporate governance and loan agreements [FINANCIAL STATEMENTS](index=62&type=section&id=FINANCIAL%20STATEMENTS) [EXHIBITS](index=63&type=section&id=EXHIBITS) - The section includes a list of financial statements and a detailed schedule of exhibits[333](index=333&type=chunk)[334](index=334&type=chunk) - Exhibits cover corporate governance documents, compensation plans, employment contracts, and various loan and security agreements[334](index=334&type=chunk)[335](index=335&type=chunk)[336](index=336&type=chunk) - XBRL interactive data files are included, with specific taxonomy extension documents[336](index=336&type=chunk) [Item 16. Form 10-K Summary](index=66&type=section&id=Item%2016.%20Form%2010-K%20Summary) No Form 10-K Summary was provided - No Form 10-K Summary was provided[337](index=337&type=chunk) [SIGNATURES](index=67&type=section&id=SIGNATURES) Official declarations and attestations by Key Tronic Corporation's executive officers and directors [Signatures](index=67&type=section&id=Signatures) The report was signed by Key Tronic's President/CEO and EVP/CFO/Treasurer, along with Directors, on September 16, 2025 - The report was signed by Brett R. Larsen (President and CEO) and Anthony G. Voorhees (EVP, CFO, and Treasurer) on September 16, 2025[339](index=339&type=chunk)

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)