Key Tronic(KTCC) - 2025 Q3 - Quarterly Results

Q3 FY2025 Financial Performance and Corporate Strategy Financial Highlights Key Tronic's Q3 FY2025 revenue declined to $112.0 million, but net loss narrowed to $(0.6) million, gross margin improved, and operating cash flow remained positive Q3 & YTD FY2025 Key Financial Results | Metric | Q3 FY2025 ($ millions) | Q3 FY2024 ($ millions) | YTD FY2025 ($ millions) | YTD FY2024 ($ millions) | | :--- | :--- | :--- | :--- | :--- | | Revenue | $112.0M | $142.4M | $357.4M | $440.4M | | Net Loss | $(0.6)M | $(2.2)M | $(4.4)M | $(0.8)M | | Net Loss per Share | $(0.06) | $(0.21) | $(0.41) | $(0.07) | Q3 FY2025 vs Q3 FY2024 Margin Comparison | Margin | Q3 FY2025 (%) | Q3 FY2024 (%) | | :--- | :--- | :--- | | Gross Margin | 7.7% | 5.7% | | Operating Margin | (0.4)% | (0.4)% | - The year-over-year improvement in gross margin was driven by cost-cutting and headcount reductions in both international and domestic operations[5] - The company generated positive cash flow from operations, totaling $10.1 million for the first nine months of fiscal 2025, an increase from $6.1 million in the same period of fiscal 2024[4] Operational and Strategic Developments Key Tronic's operations were impacted by tariff disruptions, prompting cost reductions and new manufacturing expansions in Arkansas and Vietnam, expected by H1 FY2026, alongside securing new programs - Revenue was adversely impacted by worldwide economic disruptions and uncertainty from escalating and fluctuating global tariffs, leading to delays and reduced customer demand[3][8] - The company is building new production capacity in Arkansas and Vietnam, expected to be operational in the first half of fiscal 2026, to help customers mitigate tariff impacts on goods from China[8][9] - Strategic initiatives include streamlining operations and reducing headcount to lower the cost structure and enhance competitiveness[5][9] - Key Tronic has won new programs in telecommunications, pest control, energy storage, medical technology, and temperature-controlled shipping solutions[9] Business Outlook Key Tronic will not provide Q4 FY2025 financial guidance due to significant economic and political uncertainty, particularly concerning potential tariffs - The company will not provide financial guidance for Q4 FY2025 due to uncertainty related to potential tariffs[10] Financial Statements Consolidated Statements of Operations In Q3 FY2025, net sales decreased to $112.0 million, resulting in an operating loss of $0.5 million and a net loss of $0.6 million, with similar trends for the nine-month period Consolidated Statements of Operations (In thousands) | | Three Months Ended (in thousands) | Nine Months Ended (in thousands) | | :--- | :--- | :--- | | | Mar 29, 2025 | Mar 30, 2024 | Mar 29, 2025 | Mar 30, 2024 | | Net sales | $111,974 | $142,427 | $357,385 | $440,386 | | Gross profit | $8,607 | $8,081 | $29,616 | $30,706 | | Operating income (loss) | $(459) | $(575) | $2,864 | $6,641 | | Net Loss | $(604) | $(2,221) | $(4,394) | $(802) | | Net loss per share — Diluted | $(0.06) | $(0.21) | $(0.41) | $(0.07) | Consolidated Balance Sheets As of March 29, 2025, Key Tronic's total assets decreased to $328.6 million, total liabilities to $209.0 million, and shareholders' equity slightly reduced to $119.6 million Consolidated Balance Sheet Highlights (In thousands) | | March 29, 2025 (in thousands) | June 29, 2024 (in thousands) | | :--- | :--- | :--- | | Total current assets | $252,816 | $288,399 | | Total assets | $328,557 | $355,343 | | Total current liabilities | $92,788 | $104,176 | | Long-term debt, net | $108,516 | $116,383 | | Total liabilities | $208,962 | $231,353 | | Total shareholders' equity | $119,595 | $123,990 | Reconciliation of GAAP to Non-GAAP Measures Key Tronic provides non-GAAP financial measures for transparency, with Q3 FY2025 GAAP net loss of $(0.6) million adjusted to a non-GAAP net loss of $(0.6) million, or $(0.05) per share - The company uses non-GAAP financial measures, such as adjusted net loss and adjusted net loss per share, to supplement its GAAP financial statements and provide greater transparency on core operations[14] GAAP to Non-GAAP Reconciliation (In thousands) | | Three Months Ended (in thousands) | Nine Months Ended (in thousands) | | :--- | :--- | :--- | | | Mar 29, 2025 | Mar 30, 2024 | Mar 29, 2025 | Mar 30, 2024 | | GAAP net loss | $(604) | $(2,221) | $(4,394) | $(802) | | Stock-based compensation | $26 | $52 | $109 | $163 | | Write-off of unamortized loan fees | — | — | $1,012 | — | | Adjusted net loss (Non-GAAP) | $(583) | $(2,179) | $(3,497) | $(1,016) | | Adjusted net loss per share (Non-GAAP) | $(0.05) | $(0.20) | $(0.32) | $(0.09) |