Key Tronic(US:KTCC) ZACKSยท2025-08-28 16:46Core Insights - Key Tronic Corporation's shares increased by 5.3% following the release of its fourth-quarter fiscal 2025 results, outperforming the S&P 500's 0.2% growth during the same period [1] - The company reported a significant decline in revenues for both the fourth quarter and the entire fiscal year, with fourth-quarter revenues at $110.5 million, down from $126.6 million year-over-year, and total fiscal 2025 revenues at $467.9 million, a 17% decrease from $566.9 million in fiscal 2024 [2] - The net loss for the fourth quarter widened to $3.9 million, or 36 cents per share, compared to a loss of $2 million, or 18 cents per share, in the prior year, with a total fiscal year net loss of $8.3 million, or 77 cents per share, compared to a loss of $2.8 million, or 26 cents per share, in the previous year [3] Financial Metrics - The gross margin contracted to 6.2% in the fourth quarter from 7.2% a year earlier, but improved to 7.8% for the full year from 7% in fiscal 2024 due to workforce reductions and operational streamlining [4] - Operating margin decreased to 0.1% for the year from 1.2% in the prior year, impacted by credit loss adjustments [4] - Cash flow from operations improved to $8.8 million in the fourth quarter from $7.7 million in the same quarter last year, totaling $18.9 million for fiscal 2025 compared to $13.8 million in fiscal 2024 [5] Management Insights - The CEO described fiscal 2025 as a year of transition and uncertainty, citing tariff-related disruptions and strategic shifts in manufacturing, including expansion in the U.S. and Vietnam [6] - Key Tronic secured program wins in various industries and entered a significant services contract projected to exceed $20 million in annual revenues [7] - The company faced headwinds from reduced demand and tariff fluctuations, with severance expenses of $2.9 million impacting profitability, although operational efficiencies are expected to enhance margins once revenue growth resumes [8] Balance Sheet and Guidance - Adjustments for expected customer collections amounted to $1.1 million in the fourth quarter and $1.8 million for the year, further pressuring reported results [9] - Key Tronic did not provide revenue or earnings guidance for the first quarter of fiscal 2026 due to ongoing uncertainties but expressed confidence in improving gross margins as production volumes increase [10] Developments and Investments - The company is investing in its global footprint, with a new $28 million facility in Arkansas expected to create over 400 jobs, and production capacity in Vietnam being doubled [11] - These expansions aim to offer customers flexible manufacturing options while addressing rising wage pressures through automation and efficiency improvements [11]