Key Tronic Corporation Announces Results for the Second Quarter of Fiscal Year 2026

Core Insights - Key Tronic Corporation reported a decline in total revenue for the second quarter of fiscal year 2026, amounting to $96.3 million, down from $113.9 million in the same period of fiscal year 2025, primarily due to reduced demand from a longstanding customer and delays in new program launches [2][3] - The company is implementing significant cost reduction initiatives, including the wind-down of its manufacturing operations in China and workforce reductions in Mexico, which are expected to yield approximately $1.2 million and $1.5 million in quarterly savings, respectively [3][4] - Despite the challenges, Key Tronic generated positive cash flow from operations of approximately $6.3 million in the second quarter of fiscal year 2026, compared to $1.5 million in the same period of fiscal year 2025, allowing for a year-over-year debt reduction of approximately $13.4 million [5] Financial Performance - The gross margin for the second quarter of fiscal year 2026 was reported at 0.6%, with an operating margin of (10.7)%, compared to 6.8% and (1.0)% in the same period of fiscal year 2025; however, the adjusted gross margin improved to 7.9% from 6.8% year-over-year [6] - The net loss for the second quarter was $(8.6) million or $(0.79) per share, compared to a net loss of $(4.9) million or $(0.46) per share in the same period of fiscal year 2025 [7] - Adjusted net income for the second quarter was reported at $0.0 million or $0.00 per share, an improvement from an adjusted net loss of $(4.1) million or $(0.38) per share in the same period of fiscal year 2025 [8] Strategic Initiatives - Key Tronic is focusing on near-shoring and tariff mitigation strategies to enhance operational efficiency and reduce costs while maintaining flexibility in its manufacturing capabilities [3][10] - The company has reduced its workforce in Mexico by approximately 40% over the past 18 months and is transitioning production to its facilities in the US and Vietnam, with expectations that half of its manufacturing will occur in these locations by the end of fiscal 2026 [10] - New program wins in sectors such as automotive technology, pest control, and industrial equipment have been achieved, although demand from some longstanding customers remains uncertain due to geopolitical tensions and tariff issues [10][11]