Core Insights - Strattec Security reported a strong second quarter for fiscal 2026, with significant improvements in profitability and cash generation despite challenges in the automotive industry [4] - The company experienced a 6% increase in sales to $137.5 million, driven by pricing strategies, favorable product mix, and tariff recoveries [3][6] - Gross margin expanded by 330 basis points to 16.5%, with net income nearly quadrupling year-over-year to approximately $5.0 million, or $1.21 per diluted share [3][6] Financial Performance - Quarterly sales reached $137.5 million, with management noting disciplined pricing actions contributing approximately $3.1 million [2][6] - Gross margin improved to 16.5%, reflecting a 330 basis point increase from the previous year, while year-to-date gross margin expanded to 16.9% [3][7] - Operating cash flow for Q2 was $13.9 million, up 48% year-over-year, with total cash at $99 million and total debt reduced to $2.5 million [13][15] Cost Management and Restructuring - The company achieved $1.7 million in restructuring savings during the quarter, contributing to margin improvements [1][6] - Operating expenses increased to $17.9 million, or 13% of sales, but were partially offset by lower executive transition expenses [10] - A voluntary retirement program is expected to generate $3.4 million in annualized savings, with benefits expected to phase in over the next quarters [12] Market Outlook and Strategic Focus - Strattec anticipates a slight sequential sales improvement in Q3 but forecasts a 3%–4% decline in sales for the second half of the fiscal year [15] - The company is focusing on power access products and digital key technology, with new customer wins expected to take time due to the long automotive sales cycle [19][20] - Management addressed supply chain disruptions, indicating minimal impact on sales from recent challenges [16] Investment and Growth Initiatives - Capital expenditures for the quarter were $2.6 million, primarily for new product programs and equipment [14] - The company is evaluating mergers and acquisitions as a potential growth lever while maintaining flexibility amid market uncertainties [18]