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]

Financial Performance - Revenue increased by $33 million, reaching $1441 million in Q3 FY25[6, 21] - Adjusted EBITDA was $129 million, representing 89% of sales, up from $62 million or 44% of sales in Q3 FY24[6] - Net income attributable to STRATTEC increased by 258% in Q3 FY25[44] - Adjusted diluted earnings per share grew by 305% to $150 in Q3 FY25[44] - Gross margin expanded by 560 basis points in Q3 FY25[28] Cash Flow and Capitalization - Generated $207 million in operational cash flow in Q3 FY25[6] - Year-to-date cash from operations totaled $415 million[6] - Cash and cash equivalents stood at $621 million[16, 45] Operational Efficiency and Cost Management - Implemented restructuring actions in Milwaukee and Mexico, expected to yield approximately $5 million in annual savings[9, 16] - Achieved a 12% headcount reduction year-to-date, improving operational leverage[9, 16] - Estimated annual tariff impact of $9 million to $12 million before mitigation, excluding USMCA compliant sales[17, 35]

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].