Financial Data and Key Metrics Changes - For Q1 fiscal 2020, total revenue was reported at $105.3 million, flat sequentially compared to $106 million in the prior quarter, but down from $127.5 million in Q1 fiscal 2019 [6] - Gross margin improved to 8.8% from 7.5% in the same period of fiscal 2019, while operating margin increased to 2.4% from 2% [8] - Net income for the quarter was $1.6 million or $0.14 per share, comparable to the same period of fiscal 2019 [8] Business Line Data and Key Metrics Changes - The company faced production delays due to increased demand for sheet metals, which impacted revenue despite strong demand from customers [7] - Inventory levels increased by approximately 17% sequentially due to production delays [9] - Capital expenditures for Q1 fiscal 2020 were approximately $3.1 million, with a plan for $10 million in total capital expenditures for fiscal 2020 [10][11] Market Data and Key Metrics Changes - The company expects revenue for Q2 fiscal 2020 to be in the range of $117 million to $122 million, indicating a recovery from the previous quarter [12] - The new Vietnam facility began production in September, with expectations of some drag on gross margin due to ongoing investments [13] Company Strategy and Development Direction - The company is focusing on expanding its production capabilities in North America and Vietnam, driven by customer transitions from China due to tariff concerns [16][18] - The company is well-positioned to capture new EMS programs and expand its business profitably over the long term [14][24] - Investments in facilities and innovative manufacturing equipment have improved efficiencies and reduced labor intensity [21][22] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about future growth despite the revenue shortfall in Q1, citing strong financial health and a robust pipeline of new business opportunities [14][25] - The ongoing tariff situation has created both challenges and opportunities, with customers increasingly looking to transition production to the company's facilities in North America and Vietnam [15][19] Other Important Information - The company reported a decrease in trade receivables by $2.2 million year-over-year, with days sales outstanding (DSOs) at about 55 days [10] - The company is experiencing a competitive marketplace but continues to win significant new business from both existing and new customers [20] Q&A Session Summary Question: What is the value of the new wins in terms of annual revenues? - Management indicated that the first two wins should exceed $10 million each, while the second two are around $5 million each [28] Question: When did the company realize the revenue shortfall? - Management noted that it is difficult to pinpoint the exact moment, as revenue realization often occurs at the end of the quarter [44] Question: How much of the revenue shortfall was lost versus pushed to the right? - Management estimated that two-thirds of the shortfall was pushed to the right and one-third was lost [50] Question: Were any customers lost due to the revenue shortfall? - Management confirmed that no customers were lost; the shortfall was due to their sales not meeting expectations [54] Question: What is the outlook for the new Vietnam facility? - Management expects the Vietnam facility to be a drag on earnings for the next two to three quarters before becoming profitable [65] Question: How many customers were impacted by the revenue shortfall? - Three customers were impacted, with one being a new customer transitioning from China [88][90]
Key Tronic(KTCC) - 2020 Q1 - Earnings Call Transcript