Key Tronic(US:KTCC)2025-05-06 22:02Financial Data and Key Metrics Changes - For Q3 FY2025, total revenue was $112 million, down from $142.4 million in the same period of FY2024, impacted by global economic disruptions and tariff fluctuations [5] - Gross margins were 7.7% and operating margins were -0.4% in Q3 FY2025, compared to 5.7% and -0.4% respectively in Q3 FY2024, reflecting cost-cutting measures [5] - The net loss for Q3 FY2025 was $600,000 or $0.06 per share, an improvement from a net loss of $2.2 million or $0.20 per share in Q3 FY2024 [6] - For the first nine months of FY2025, net loss was $4.4 million or $0.41 per share, compared to a net loss of $800,000 or $0.07 per share in the same period of FY2024 [8] Business Line Data and Key Metrics Changes - The company reported a reduction in inventory by approximately $16 million or 14% year-over-year, aligning inventory levels with current revenue [9] - Total liabilities were reduced by $34.3 million or 14% from a year ago, indicating improved financial health [10] Market Data and Key Metrics Changes - The company noted that many customers have revamped their forecasting methodologies, which has led to improved materials research planning [10] - Accounts receivable days sales outstanding (DSOs) increased to 92 days from 85 days a year ago, reflecting a decline in net sales [10] Company Strategy and Development Direction - The company is focusing on expanding production capacity in Arkansas and Vietnam, with an investment of over $28 million expected to create over 400 jobs in the US [16] - The strategic expansion aims to mitigate the impact of tariffs and geopolitical tensions, with a strong pipeline of potential new business opportunities [19] - The company is also investing in vertical integration and manufacturing process knowledge to differentiate itself from competitors [20] Management's Comments on Operating Environment and Future Outlook - Management expressed concerns about the uncertainties related to tariffs, which have caused increased costs and reduced demand [12] - Despite these challenges, the company anticipates growth in US and Vietnam production and remains focused on improving profitability [12] - Management decided not to provide revenue or earnings guidance for Q4 FY2025 due to the unpredictable economic climate [12] Other Important Information - Operating cash flows for the first nine months of FY2025 were $10.1 million, up from $6.1 million in the same period of FY2024, reflecting better working capital management [11] - The company is continuing to streamline operations in Mexico to enhance efficiency and competitiveness [18] Q&A Session Summary Question: Can you walk us through the five new business wins and their anticipated dollar amounts? - The first win is a $12 million telecommunications program in Mexico, expected to ramp up in Q2 FY2026 [25] - The second is a $6 million pest control device program in Vietnam [26] - The third is a $7 million energy program in Arkansas, currently in the design stage [27] - The fourth is a consumer product worth $2 to $5 million in Arkansas [28] - The fifth is a design contract starting at $1 million, potentially growing to $5 to $15 million [29] Question: What has changed regarding working with Fortune 500 companies? - The company noted that once it becomes an approved vendor, it opens doors for additional opportunities within the conglomerate [30] Question: What impact is the macro environment having on a previously anticipated $60 million program? - The program is expected to generate income in Q1 FY2026, with a ramp-up period of 12 to 18 months [32][33] Question: Can you clarify the unusual items flagged in the financials? - The severance in Mexico is included in cost of goods sold, while the other adjustments are split between OpEx and cost of goods [39][41] Question: How is the company managing working capital and inventory? - The company manages over 90% of its customers' bill of materials and aims for inventory turns of four [50]