Company Overview - STRATTEC is a leader in smart vehicle access, security, and authorization solutions[5] - The company's market capitalization is $222 million, with a recent closing price of $54.34 per share[5] - Institutional ownership is 68%, and insider ownership is 9%[5] Financial Performance - Q3 FY25 sales increased by 2.4% year-over-year, reaching $144.1 million[36, 39] - Adjusted EBITDA for Q3 FY25 was $12.9 million, representing 8.9% of sales, up from $6.2 million (4.4% of sales) in Q3 FY24[34] - Gross margin expanded by 560 basis points in Q3 and 240 basis points year-to-date[46, 47] - The company generated $20.7 million in operational cash flow in Q3, with $41.5 million year-to-date[34] Strategic Initiatives - The company is focused on talent development, performance culture, and infrastructure modernization to drive sustainable performance[14] - STRATTEC is actively managing the tariff environment, with approximately 93% of US imports being USMCA compliant and not subject to additional tariffs[15, 20] - The company has captured $8 million in annualized pricing to start in Q3 FY25[31] Sales Breakdown - TTM revenue is $552.1 million[10] - By customer, OEMs account for 30% of sales, Tier 1 customers account for 23% of sales, and Commercial & Other customers account for 12% of sales[10] - By product, Keys & Locksets account for 25% of sales, Power Access accounts for 25% of sales, and Latches account for 14% of sales[10]

Core Insights - The article emphasizes the importance of investing in growth and momentum stocks that are reasonably priced and have the potential to outperform the market in the long term [1] - It highlights a significant market recovery, noting that the S&P 500 increased by 367% and the Nasdaq by 685% from March 2009 to 2019, following a recommendation to buy at the financial crisis's bottom [1] Group 1 - The focus is on long-term investment strategies in high-quality growth stocks [1] - The use of options as part of the investment strategy is mentioned [1] - The goal is to assist investors in making money through strategic investments [1]

Core Insights - Strattec Security (STRT) is focusing on disciplined capital allocation to create long-term value for shareholders amid uncertain economic conditions [1][3] - For fiscal 2025, Strattec plans to invest $7.5 million in capital expenditures targeting IT infrastructure, productivity enhancements, and product development [2][8] - The investment strategy aims to improve operational efficiency, enhance product offerings, and maintain financial flexibility [3] Company Performance - Strattec's shares have increased by 97.6% over the past year, significantly outperforming the industry average decline of 9.8% [7][8] - The company currently trades at a trailing 12-month price-to-earnings (P/E) ratio of 9.97X, which is below the industry average of 24.90X [10] Market Position - Strattec's investment in new automotive access and security solutions is intended to enhance competitiveness and expand its customer base [2] - The overall transformation strategy through disciplined capital investments is designed to strengthen margins and preserve a solid cash position [3]

Core Insights - Strattec Security Corporation (STRT) has reached a significant support level and is considered a strong stock pick from a technical perspective due to a recent "golden cross" event [1][4] - The "golden cross" indicates a potential bullish breakout, characterized by the 50-day simple moving average crossing above the 200-day simple moving average [2] - STRT shares have increased by 59.4% over the past four weeks, and the company holds a 1 (Strong Buy) rating on the Zacks Rank, suggesting further breakout potential [4] Technical Analysis - A golden cross consists of three stages: a downtrend followed by a bottoming out, the shorter moving average crossing above the longer moving average, and then an upward price movement [3] - This technical pattern is seen as a positive indicator, contrasting with a "death cross," which signals potential bearish movements [3] Earnings Outlook - STRT has experienced one upward revision in earnings estimates over the past 60 days, with no downward revisions, indicating a positive earnings outlook for the current quarter [4][6] - The Zacks Consensus Estimate for STRT has also increased, reinforcing the bullish sentiment around the stock [4][6]

Core Viewpoint - Momentum investing focuses on "buying high and selling higher," contrasting with traditional strategies of "buying low and selling high" [1] Group 1: Momentum Investing Characteristics - Momentum investing can be risky as stocks may lose momentum when their valuations exceed future growth potential, leading to potential losses for investors [2] - Investing in bargain stocks that exhibit recent price momentum can be a safer strategy, utilizing tools like the Zacks Momentum Style Score to identify promising stocks [3] Group 2: Strattec Security (STRT) Analysis - Strattec Security (STRT) has shown significant price momentum with a four-week price change of 59.4%, indicating strong investor interest [4] - STRT has gained 23.8% over the past 12 weeks, demonstrating its ability to deliver positive returns over a longer timeframe [5] - The stock has a beta of 1.39, suggesting it moves 39% more than the market in either direction, indicating fast-paced momentum [5] - STRT has a Momentum Score of B, suggesting it is an opportune time to invest in the stock [6] - STRT has a Zacks Rank 1 (Strong Buy) due to upward trends in earnings estimate revisions, which attract more investors [7] - The stock is trading at a Price-to-Sales ratio of 0.42, indicating it is reasonably valued at 42 cents for each dollar of sales, providing room for growth [7] Group 3: Additional Investment Opportunities - Besides STRT, there are other stocks that meet the criteria of the 'Fast-Paced Momentum at a Bargain' screen, presenting additional investment opportunities [8] - The Zacks Premium Screens offer over 45 different strategies to help identify winning stock picks based on various investing styles [9]

Financial Data and Key Metrics Changes - The company generated nearly $21 million in cash from operations in Q3, bringing the year-to-date total to $41.5 million, reflecting improved earnings power and disciplined working capital management [6][21] - Net income was $5.4 million for the quarter, or $1.32 per diluted share, compared to $1.5 million or $0.37 per share in the same quarter last year, marking a more than threefold increase [8][20] - Adjusted EBITDA rose to $12.9 million, representing 9% of sales, up from 4.4% in the prior year period [8][20] Business Line Data and Key Metrics Changes - Gross profit for the quarter increased to $23.1 million, up from $14.7 million in the prior year, with gross margin expanding by 560 basis points to 16% [14] - The modest improvement in sales year-over-year was attributed to favorable pricing actions, improved product mix, and new program launches [12] Market Data and Key Metrics Changes - Approximately 65% of the company's products are imported into the U.S. from Mexico, with over 90% of that volume being USMCA compliant, minimizing tariff impacts [16][17] - The estimated annualized impact of recently announced U.S. tariffs is between $9 million to $12 million in added costs before mitigation [10][17] Company Strategy and Development Direction - The company is focused on strengthening its operational and financial position through restructuring efforts, with total annualized savings from restructuring activities now totaling approximately $5 million [9] - The company is taking proactive steps to manage tariff risks, including adjusting logistics routes and engaging in pricing discussions with customers [10][11] Management Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to absorb and adapt to changes while continuing to drive performance, despite macro uncertainties [13] - The company is monitoring automotive production and the impacts of tariff exposure on sales, ensuring preparedness for any material impacts [30] Other Important Information - Operating cash flow was strong at $20.7 million, a significant turnaround from the previous year, with a cash position of $62.1 million at the end of the quarter [21][22] - Capital expenditures for the year are projected to be around $7.5 million, with a focus on equipment upgrades and IT infrastructure [37] Q&A Session Summary Question: What was the absolute number of the impact of tariffs in the third quarter? - The incremental impact of tariffs in Q3 was $800,000, primarily for the month of March [29] Question: What kind of operating environment are you assuming with your customer base for the balance of the year? - The company is monitoring automotive production and tariff impacts, ensuring preparedness for any material impacts on production [30] Question: What is the mix of price realization versus labor cost savings from headcount reduction? - The price benefit in the quarter was about $2.5 million, with the remainder coming from labor cost savings [31] Question: How much will the 12% headcount reduction save on an annualized basis? - The full restructuring for both Milwaukee and Mexico is expected to save about $5 million annually, with $200,000 seen in the current quarter [34] Question: What will the CapEx budget look like for the balance of this year? - The CapEx budget for the rest of the year is projected to be around $2 million to $3 million, with a total of approximately $7.5 million for the full year [37] Question: Any thoughts about reinstituting the dividend? - The company is managing through near-term uncertainties and is considering internal and external capital allocation but is not ready to reinstate the dividend yet [38]

Financial Data and Key Metrics Changes - The company generated nearly $21 million in cash from operations in Q3, bringing the year-to-date total to $41.5 million, reflecting improved earnings power and disciplined working capital management [5][6] - Net income was $5.4 million for the quarter, or $1.32 per diluted share, compared to $1.5 million or $0.37 per share in the same quarter last year, marking a more than threefold increase [6][9] - Adjusted EBITDA rose to $12.9 million, representing 9% of sales, up from 4.4% in the prior year period [6][9] Business Line Data and Key Metrics Changes - Gross profit for the quarter increased to $23.1 million, up from $14.7 million in the prior year, with gross margin expanding by 560 basis points to 16% [12] - The modest improvement in sales year-over-year was attributed to favorable pricing actions, improved product mix, and new program launches [10] Market Data and Key Metrics Changes - Approximately 65% of the company's products are imported from Mexico, with over 90% of that volume being USMCA compliant, minimizing tariff impacts [15] - The estimated annualized impact of recently announced U.S. tariffs is between $9 million to $12 million in added costs before mitigation [9][15] Company Strategy and Development Direction - The company is focused on strengthening its operational and financial position through restructuring efforts, with total annualized savings from restructuring activities now totaling approximately $5 million [7] - The company is taking proactive steps to manage tariff risks and has implemented changes in logistics and pricing discussions with customers [9][10] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to absorb and adapt to changes while continuing to drive performance, despite macro uncertainties [11] - The company is monitoring automotive production and the impacts of tariff exposure on customers to prepare for any material impacts on production [28] Other Important Information - Operating cash flow was strong at $20.7 million, a significant turnaround from the previous year, with a cash position of $62.1 million at the end of the quarter [18][19] - Capital expenditures for the year are projected to be around $7.5 million, with a focus on equipment upgrades and IT infrastructure [35] Q&A Session Summary Question: What was the absolute number of the impact of tariffs in the third quarter? - The incremental impact of tariffs in Q3 was $800,000, primarily for the month of March [27] Question: What kind of operating environment are you assuming with your customer base for the balance of the year? - The company is monitoring automotive production and ensuring preparedness for any material impacts on production [28] Question: What is the mix of price realization versus labor cost savings from headcount reduction? - The pricing benefit in the quarter was about $2.5 million, with restructuring savings expected to ramp up in future quarters [29][32] Question: What will the CapEx budget look like for the balance of this year? - The CapEx for the last quarter is expected to be around $2 million to $3 million, with a full-year projection of approximately $7.5 million [35] Question: Any thoughts about reinstituting the dividend? - The company is managing through near-term uncertainties and is considering internal and external capital allocation but is not ready to reinstate the dividend yet [36]

Financial Data and Key Metrics Changes - The company generated nearly $21 million in cash from operations in Q3, bringing the year-to-date total to $41.5 million, reflecting improved earnings power and disciplined working capital management [5][6] - Net income was $5.4 million for the quarter, or $1.32 per diluted share, compared to $1.5 million or $0.37 per share in the same quarter last year, marking a more than threefold increase [6][9] - Adjusted EBITDA rose to $12.9 million, representing 9% of sales, up from 4.4% in the prior year period [6][9] Business Line Data and Key Metrics Changes - Gross profit for the quarter increased to $23.1 million, up from $14.7 million in the prior year, with gross margin expanding by 560 basis points to 16% [12] - The company experienced a $4.4 million benefit from a stronger U.S. dollar and strategic pricing actions, which offset $800,000 in additional tariff expenses [12][13] Market Data and Key Metrics Changes - Approximately 65% of products are imported into the U.S. from Mexico, with over 90% of that volume being USMCA compliant, limiting tariff exposure [15] - The estimated annualized impact of recently announced U.S. tariffs is between $9 million to $12 million in added costs before mitigation [9][15] Company Strategy and Development Direction - The company is focused on strengthening its operational and financial position through restructuring efforts, with total annualized savings from restructuring activities now totaling approximately $5 million [7] - The company is actively managing tariff risks by adjusting logistics routes, engaging in pricing discussions, and shifting supply chain sources [9][10] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to absorb and adapt to changes while continuing to drive performance despite macro uncertainties [11] - The company is monitoring automotive production and the impacts of tariff exposure on customers to prepare for any material impacts on production [28] Other Important Information - Operating cash flow was strong at $20.7 million, a significant turnaround from the previous year, with a cash position of $62.1 million at the end of the quarter [18][19] - Capital expenditures for the year are projected to be around $7.5 million, with a focus on equipment upgrades and IT infrastructure [35] Q&A Session Summary Question: What was the absolute number of the impact of tariffs in the third quarter? - The incremental impact of tariffs in Q3 was $800,000, primarily for the month of March [27] Question: What kind of operating environment are you assuming with your customer base for the balance of the year? - The company is monitoring automotive production and tariff impacts, ensuring preparedness for any material impacts on production [28] Question: What is the mix of price realization versus labor cost savings from headcount reduction? - The pricing benefit in the quarter was about $2.5 million, with the remainder attributed to labor cost savings [29] Question: How much annualized savings comes from the 12% headcount reduction? - The full restructuring for both Milwaukee and Mexico is expected to yield about $5 million in annual savings, with $200,000 realized in the current quarter [32] Question: What will the CapEx budget look like for the balance of this year? - The CapEx budget for the rest of the year is projected to be around $2 million to $3 million, with a total of approximately $7.5 million for the full year [35] Question: Any thoughts about reinstituting the dividend? - The company is managing through near-term uncertainties and is considering internal and external capital allocation but is not ready to reinstate the dividend yet [36]

Financial Performance - Net sales for the three months ended March 30, 2025, were $144.1 million, a 2.3% increase from $140.8 million for the same period in 2024[13] - Gross profit for the three months ended March 30, 2025, was $23.1 million, compared to $14.7 million for the same period in 2024, representing a significant increase of 57.5%[13] - Net income attributable to STRATTEC SECURITY CORPORATION for the three months ended March 30, 2025, was $5.4 million, up from $1.5 million in the same period in 2024, reflecting a growth of 258.5%[13] - The company reported a comprehensive income of $5.7 million for the three months ended March 30, 2025, compared to $2.2 million for the same period in 2024, an increase of 156.5%[13] - Earnings per share attributable to STRATTEC SECURITY CORPORATION for the three months ended March 30, 2025, were $1.34, compared to $0.38 for the same period in 2024, representing a growth of 252.6%[13] - Net income for the nine months ended March 30, 2025, was $10,857 million, compared to $6,361 million for the same period in 2024, representing a 70.5% increase[17] - Revenue for the nine months ended March 30, 2025, was $413,053 million, an increase of 4.6% from $394,711 million in the same period of 2024[26] - Gross profit for the nine months ended March 30, 2025, was $59.2 million, compared to $46.9 million for the same period in 2024, reflecting a significant increase of 26.3%[13] Cash and Liquidity - Cash and cash equivalents rose to $62.1 million as of March 30, 2025, compared to $25.4 million as of June 30, 2024, indicating a growth of 144.4%[15] - The company reported a total cash and cash equivalents of $62,106 million at the end of the period, significantly up from $9,594 million at the end of March 31, 2024[17] - Net cash provided by operating activities was $41,501 million for the nine months ended March 30, 2025, compared to a net cash used of $7,223 million in the prior year[17] - The company had no borrowings outstanding under the $40.0 million STRATTEC revolving credit agreement as of March 30, 2025, indicating strong liquidity management[78] - The company believes that the combination of the revolving credit line, existing cash, and anticipated operating cash flows will be sufficient to meet future operating and capital expenditure needs[78] Expenses and Costs - Engineering, selling, and administrative expenses increased to $16.0 million for the three months ended March 30, 2025, compared to $12.7 million for the same period in 2024, reflecting a rise of 25.5%[13] - The company incurred restructuring costs of $0.8 million and $1.1 million for the three and nine months ended March 30, 2025, respectively[34] - The company’s depreciation expense for the nine months ended March 30, 2025, was $10,952 million, down from $12,774 million in the same period of 2024[17] - The company incurred warranty payments of $485,000 during the three months ended March 30, 2025[39] - The company estimates an annual impact of $9-$12 million increase in cost of goods sold due to additional tariffs[56] Shareholders' Equity and Liabilities - The company’s total shareholders' equity increased to $234.6 million as of March 30, 2025, compared to $225.6 million as of June 30, 2024, reflecting a growth of 4.4%[15] - The company’s total liabilities increased to $123.3 million as of March 30, 2025, from $118.3 million as of June 30, 2024, an increase of 4.2%[15] - The warranty reserve balance at the end of the period was $10,745,000, with a provision charged to expense of $284,000 for the three months ended March 30, 2025[39] - The restructuring reserve balance at the end of the period was $578,000, with a restructuring charge of $809,000 for the three months ended March 30, 2025[35] Operational Insights - The company is focusing on improving profitability and sustainable sales growth through upgraded systems, processes, and enhanced productivity in manufacturing operations[54] - The company is reviewing its product portfolio to optimize its cost structure and enhance working capital management[54] - North American light vehicle production is expected to decline by approximately 6-8% in fiscal 2026, with a recovery anticipated in fiscal 2027 and 2028[55] - The company achieved a year-to-date sales growth of 5%, driven by new program launches, pricing actions, and increased volumes[55] Compliance and Governance - The Company maintained compliance with all financial covenants as of March 30, 2025[36] - The company was in compliance with all covenants under its credit facilities as of March 30, 2025[78]

Q3 FY2025 Financial Results Conference Call May 9, 2025 Nasdaq: STRT Jennifer Slater President and CEO Matthew Pauli Senior Vice President and CFO www.strattec.com Safe Harbor Statement Safe Harbor Statement Certain statements contained in this presentation contain "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. These statements may be identified by the use of forward-looking words or phrases such as "anticipate," "believe," "could," "expect," "intend ...