Core Insights - Strattec Security (STRT) reported quarterly earnings of $1.50 per share, exceeding the Zacks Consensus Estimate of $0.95 per share, and showing a significant increase from $0.37 per share a year ago, resulting in an earnings surprise of 57.89% [1] - The company achieved revenues of $144.08 million for the quarter ended March 2025, surpassing the Zacks Consensus Estimate by 2.30% and showing growth from $140.77 million year-over-year [2] - Strattec Security has consistently surpassed consensus EPS estimates over the last four quarters, achieving this four times [2] Earnings Outlook - The future performance of Strattec Security's stock will largely depend on management's commentary during the earnings call and the sustainability of the stock's immediate price movement based on the recently released numbers [3][4] - The current consensus EPS estimate for the upcoming quarter is $0.91 on revenues of $142.01 million, and for the current fiscal year, it is $3.67 on revenues of $551.82 million [7] Industry Context - The Automotive - Original Equipment industry, to which Strattec Security belongs, is currently ranked in the bottom 28% of over 250 Zacks industries, indicating potential challenges ahead [8] - Empirical research suggests a strong correlation between near-term stock movements and trends in earnings estimate revisions, which can impact investor sentiment and stock performance [5]

Financial Performance - Net sales for the third quarter were $144.1 million, an increase of $3.3 million, or 2.4%, driven by $2.5 million in price increases and $2.2 million from a favorable product mix [5]. - Net income attributable to STRATTEC was $5.4 million, or $1.32 per diluted share, compared to $1.5 million, or $0.37 per diluted share, in the prior-year period, representing a 260% increase in net income [9]. - Adjusted EBITDA for the quarter was $12.9 million, or 8.9% of sales, compared to $6.2 million, or 4.4%, in the prior-year period, reflecting a 450 basis point improvement [9]. - Gross profit increased by $8.4 million to $23.1 million, with gross margin expanding by 560 basis points to 16.0% [6]. - Net income for the third quarter of fiscal 2025 was $5.7 million, significantly up from $1.1 million in the same quarter of fiscal 2024, marking a year-over-year increase of 407% [27]. - The company reported adjusted net sales of $413 million for fiscal 2025, compared to $537 million for fiscal 2024, showing a decrease of 23.2% [29]. Cash Flow and Liquidity - STRATTEC generated $20.7 million in cash from operations in the third quarter of fiscal 2025, compared to a cash use in the prior-year period [11]. - The company had $62.1 million in cash and cash equivalents as of March 30, 2025, up $19.5 million from the end of the second quarter [12]. - Cash and cash equivalents at the end of the period were $62.1 million, up from $25.4 million at the end of the previous fiscal year, indicating a substantial increase of 144% [27]. - The cash flow from investing activities showed a net cash used of $1.2 million in the third quarter of fiscal 2025, compared to $1.7 million in the same quarter of fiscal 2024 [27]. - STRATTEC's capital expenditures for the period were $1.2 million, reflecting a change in accounts payable of $1.2 million [28]. Cost Management and Restructuring - The company reduced its headcount by 12% in the first nine months of fiscal 2025, contributing to cost savings initiatives [3]. - Restructuring actions in Mexico are expected to generate approximately $5 million in annual cost reductions, with full realization anticipated by the first quarter of fiscal 2026 [10]. - Engineering, selling, and administrative expenses increased by $3.3 million, or 25.9%, to $16.0 million, reflecting investments in the business and higher compensation costs [7]. - The estimated annual impact of tariffs is approximately $9 million to $12 million, prompting the company to implement mitigation actions [3]. Balance Sheet and Equity - STRATTEC SECURITY CORPORATION reported total current assets of $287.2 million as of March 30, 2025, an increase from $253.8 million on June 30, 2024, representing a growth of 13.2% [24]. - Total current liabilities increased to $123.3 million as of March 30, 2025, compared to $118.3 million on June 30, 2024, reflecting a rise of 4.3% [24]. - STRATTEC's retained earnings increased to $261 million as of March 30, 2025, from $250.6 million on June 30, 2024, reflecting a growth of 4.5% [24]. - The company’s total shareholders' equity rose to $234.6 million as of March 30, 2025, compared to $225.6 million on June 30, 2024, an increase of 4% [24]. Other Financial Metrics - Adjusted EBITDA (Non-GAAP) was reported at $8.0 million, representing an increase from previous quarters [30]. - Net income attributable to STRATTEC (GAAP) was $5.2 million, with a diluted earnings per share of $1.05 [31]. - Adjusted net income attributable to STRATTEC (Non-GAAP) was $1.42 million, with adjusted diluted earnings per share of $0.36 [31]. - The company reported a 3.1% adjusted EBITDA as a percentage of adjusted net sales [30]. - Restructuring and similar charges amounted to $265,000, impacting overall financial performance [31]. - Executive transition costs were recorded at $973,000, indicating ongoing changes in management [31]. - Business transformation costs totaled $74,000, reflecting investments in operational improvements [31]. - The weighted average diluted shares outstanding were 4.06 million, showing a slight increase from previous periods [31]. - The company faced a retroactive FY23 one-time pricing recovery net impact of $(641,000) [30].

Company Overview - Strattec Security Corp. (NASDAQ: STRT) is an underfollowed auto parts supplier specializing in access control systems for vehicles, positioning itself as a significant player in its niche market [1]. Investment Philosophy - The investment approach focuses on value and deep value, emphasizing concentrated portfolios in a few key companies with thorough industry research [1]. - Key sectors of interest include financial services (regional banks and insurance), retail, software/technology, and waste management stocks [1]. Research and Analysis - The company places a strong emphasis on understanding qualitative aspects of investments, integrating these insights into valuations that support investment decisions [1]. - The investment philosophy also involves recognizing knowledge gaps and managing risks to avoid permanent capital losses [1]. Educational Background - The educational background includes a specialization in Accounting and a minor in Economics from Wilfrid Laurier University, with ongoing efforts to obtain a CPA designation [1]. Professional Role - Currently, the company operates in a large Financial Services firm in Toronto, Canada, in a non-investment risk-related role [1].

Company Overview - STRATTEC SECURITY CORPORATION is a leading provider of smart vehicle access, security, and authorization solutions for the global automotive industry [1] - The company has over 110 years of history and has been at the forefront of innovation in vehicle security, transitioning from mechanical to integrated electro-mechanical systems [3] - STRATTEC serves a broad range of customers, including leading automotive OEMs, offering advanced security systems and power access solutions [3] Upcoming Event - The company will present and host investor meetings at the LD Micro Invitational XV in New York, NY on April 10, 2025 [1] - The presentation is scheduled to begin at 9:30 a.m. Eastern Time, with a live audio webcast available for investors [2]

Group 1 - Strattec Security (STRT) is currently outperforming its peers in the Auto-Tires-Trucks sector, with a year-to-date performance increase of 4.3%, while the sector has seen an average decline of 18.9% [4] - The company holds a Zacks Rank of 1 (Strong Buy), indicating strong analyst sentiment and a positive earnings outlook, with a 33% increase in the consensus estimate for full-year earnings over the past quarter [3] - Strattec Security is part of the Automotive - Original Equipment industry, which has an average decline of 3.3% this year, further highlighting STRT's relative strength within this group [5] Group 2 - The Auto-Tires-Trucks group includes 100 companies and is currently ranked 13 in the Zacks Sector Rank, which measures the strength of sector groups based on the average Zacks Rank of individual stocks [2] - Another company in the same sector, Aptiv PLC (APTV), has also shown strong performance with a year-to-date increase of 5.7% and a Zacks Rank of 2 (Buy) [4][5] - Investors in the Auto-Tires-Trucks sector are encouraged to monitor both Strattec Security and Aptiv PLC for their continued solid performance [6]

Automotive parts supplier Strattec Security Corp. (STRT) appears to be trading cheap at the moment from a valuation standpoint. Its forward sales multiple of 0.33 is lower than the industry. The company also has a Value Score of A. Image Source: Zacks Investment ResearchMany investors favor the P/CF ratio because cash flow is harder to manipulate on the income statement, making it a reliable indicator of a company’s financial health. At 4.51, STRT’s P/CF is intriguingly below the industry’s 22.98, as well a ...

Financial Data and Key Metrics Changes - The company generated $9.4 million in cash from operations in Q2 2025, totaling approximately $21 million for the first half of the fiscal year, a significant improvement compared to the cash used in the first half of fiscal 2024 [9] - Revenue increased by nearly 10% year-over-year, despite the previous year's second quarter benefiting from $4 million in retroactive pricing [10] - Adjusted EBITDA for the quarter was $8 million, up 60% compared to the same period last year, with an adjusted EBITDA margin expanding 180 basis points to 6.1% [26] - Net income for Q2 was up 29% to $1.3 million or $0.32 per diluted share, while adjusted non-GAAP net income was $2.6 million or $0.65 per diluted share, an 81% increase from the prior year [24][27] Business Line Data and Key Metrics Changes - Sales of power access products grew 27% year-over-year, driven by new programs and higher value content, while engineered latches increased by 20% [17][18] - The mature product line of keys and locksets continued to decline, indicating a shift in demand towards higher value products [18] Market Data and Key Metrics Changes - Approximately 70% of sales are shipped to the U.S., with the remaining 30% sold to OEMs globally, highlighting the company's reliance on the U.S. market [22] - The company is actively managing the impact of tariffs and is in discussions with customers and suppliers to mitigate potential risks [13][14] Company Strategy and Development Direction - The company is focused on stabilizing the business, optimizing costs, and evaluating its product portfolio as part of its transformation strategy [10] - Efforts to improve operational excellence in Milwaukee operations are expected to yield $1.2 million in annualized savings [11] - The company is also exploring organic growth initiatives and operational efficiencies to enhance its financial structure [64] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the progress made in transforming the company but acknowledged that there is still significant work to be done [33] - The ongoing tariff situation is viewed as a challenge, but management is confident in the actions being taken to advance the company through operational excellence and commercial initiatives [30][63] Other Important Information - The Milwaukee facility has been listed for sale, and the company is evaluating its manufacturing operations to identify further cost reduction opportunities [12] - Free cash flow increased by $12.5 million compared to the previous year's second quarter, attributed to improved operating performance and reduced net working capital [28] Q&A Session Summary Question: Assessment of progress in company evaluation - Management feels positive about the progress but acknowledges that it is still early in the process [33] Question: Examples of higher value products contributing to top line - Growth in power access products, particularly power sliding doors and power lift gates, has been significant [35] Question: Background on $8 million in new pricing - The pricing reflects negotiations with customers regarding contract extensions and support [37] Question: Stability of tooling benefits - Significant progress has been made, but the pace of reduction in tooling costs is expected to level out [40] Question: Impact of wage increases in Mexico - The last impact of the 20% wage increase was seen in Q2, with a lesser merit increase expected moving forward [50] Question: Status of real estate listing - The facility was listed in January, and initial interest has been positive [54] Question: Run rate EBITDA power - Management indicated that the current run rate may not be sustainable due to historical pricing impacts [59] Question: Sales trends with Stellantis - Sales to Stellantis were down about 10% year-over-year, but no significant changes in platforms were noted [79]

Q2 FY2025 Financial Results February 7, 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," "may," " ...

Group 1 - The core investment strategy focuses on long-only investment, evaluating companies from an operational and buy-and-hold perspective, rather than market-driven dynamics [1] - The articles emphasize understanding the long-term earnings power of companies and the competitive dynamics within their industries [1] - The majority of recommendations will be holds, indicating a cautious approach to market conditions, with only a small fraction of companies deemed suitable for purchase at any given time [1] Group 2 - The articles aim to provide important information for future investors and introduce a healthy skepticism towards a generally bullish market [1] - There is a clear distinction made between the author's opinions and professional investment advice, highlighting the need for readers to conduct their own due diligence [2][3]

Financial Performance - Net sales for the second quarter of fiscal 2025 were $129.9 million, an increase of $11.4 million (9.6%) compared to the prior year[58]. - Gross profit for the second quarter of fiscal 2025 was $17.2 million, with a gross profit margin improvement from 11.4% to 13.2% year-over-year[59]. - Net sales in the first half of fiscal 2025 reached $269.0 million, an increase of $15.1 million (5.9%) compared to the prior year period[65]. - The company delivered 6% sales growth over the first six months of fiscal 2025, driven by new program launches and increased volumes[56]. - Ford Motor Company net sales grew 18% in the second quarter of fiscal 2025, attributed to increased volume of key & lockset products[60]. - Hyundai Motor Group net sales increased 21% in the second quarter of fiscal 2025 due to higher demand for power access solutions[60]. Cost and Expenses - Material costs increased by $10.0 million year-over-year in the first half of fiscal 2025 due to higher production levels[67]. - Engineering, selling, and administrative expenses for the first half of fiscal 2025 were $28.9 million, compared to $26.1 million in the prior year[68]. Tax and Compliance - The effective income tax rate for the second quarter of fiscal 2025 was 22.5%, down from 25.3% in the prior year[64]. - The company was in compliance with all covenants under its credit facilities as of December 29, 2024[75]. Cash Flow and Liquidity - As of December 29, 2024, the company had $42.6 million in cash and cash equivalents, with $40.1 million held domestically[72]. - Cash provided by operating activities for the first half of fiscal 2025 was $20.8 million, a significant increase from a cash use of $6.9 million in the prior year period[72]. - The company believes its cash on hand and anticipated operating cash flows will be adequate to meet future funding requirements[75]. Investment and Capital Expenditures - Net cash used in investing activities was $3.0 million in the first half of fiscal 2025, compared to $2.4 million in the prior year[73]. - Capital expenditures for new product programs and equipment upgrades were $3.0 million in the current year, down from $4.4 million in the prior year[73]. Working Capital - Primary working capital as a percentage of sales (PWC %) was 24% as of December 29, 2024, compared to 22% as of June 30, 2024[76]. - Accounts receivable, net was $92 million with a PWC % of 18% as of December 29, 2024[76]. - Inventory, net was $82 million with a PWC % of 16% as of December 29, 2024[76]. Strategic Focus - The company is focused on improving its cost structure and driving cash flow through enhanced asset and working capital utilization[56]. - The company had no borrowings outstanding under the $40 million STRATTEC revolving credit agreement as of December 29, 2024[75].