Key Tronic(KTCC) - 2025 Q4 - Annual Results

Press Release Overview Announcement of Results 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] Financial Performance Highlights (FY2025 & Q4 FY2025) Revenue Analysis 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] Gross and Operating Margins 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] - Full fiscal year operating margin decline was primarily due to $1.8 million in credit loss adjustments[6] Net Loss and EPS (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] Adjusted Net Loss and EPS (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 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] Strategic Initiatives and Operational Updates Cost Reduction and Efficiency Measures 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] - These measures improved competitiveness for new program bids and are part of ongoing efforts to streamline international and domestic operations[4][10] Manufacturing Footprint Expansion and Tariff Mitigation 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] - 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][10] New Program Wins and Customer Contracts 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] - 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] Management Commentary CEO's Perspective on FY2025 Challenges and Future Growth 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] - 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] - 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] Business Outlook Q1 FY2026 Guidance 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] Additional Information About Key Tronic 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] - 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] Conference Call Information 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] - Broadcast and replay available at www.keytronic.com under 'Investor Relations' or via phone[12] Forward-Looking Statements 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] - Key risks include global economic environment, governmental legislation (tariffs), supply chain availability, customer forecasts, new program timing, and legal proceedings[14] Non-GAAP Financial Measures Explanation 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] - These measures aim to provide greater transparency into core operations and facilitate performance comparisons by excluding certain items[15] Consolidated Financial Statements Consolidated Statements of Operations 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 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 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) |