Key Tronic(US:KTCC)2025-11-04 23:00Financial Data and Key Metrics Changes - For Q1 fiscal year 2026, total revenue was reported at $98.8 million, a decrease from $131.6 million in the same period of fiscal year 2025 [3][4] - Gross margin improved sequentially to 8.4% from 6.2% in the previous quarter, but decreased from 10.1% year-over-year [4][5] - The company reported a net loss of $2.3 million, or $0.21 per share, compared to net income of $1.1 million, or $0.10 per share, in the same period last year [6][8] - Adjusted net loss was $1.1 million, or $0.10 per share, compared to adjusted net income of $2.8 million, or $0.26 per share, for the same period of fiscal year 2025 [6] Business Line Data and Key Metrics Changes - The consigned materials program has begun to ramp, which is expected to lower reported revenue compared to traditional turnkey programs, while gross margin is projected to improve [4][5] - The company won new programs in medical technology and industrial equipment during the quarter, with the medical program valued at approximately $5 million and two industrial programs combined at around $6 million [20][14] Market Data and Key Metrics Changes - Demand from longstanding customers has reduced total revenues compared to last year's first quarter results, influenced by global tariff uncertainties and macroeconomic conditions [11][12] - The Vietnam facility has doubled its manufacturing capacity, now capable of supporting anticipated future medical device manufacturing [12][13] Company Strategy and Development Direction - The company is focused on expanding production capacity in the U.S. and Vietnam to mitigate tariff impacts and meet customer demand for rebalancing contract manufacturing [11][12] - Strategic initiatives include enhancing materials resource planning algorithms and aligning inventory with current revenue [7][8] - The company anticipates that by the end of fiscal 2026, approximately half of its manufacturing will occur in the U.S. and Vietnam [13] Management's Comments on Operating Environment and Future Outlook - Management noted that uncertainties surrounding global tariffs and the macroeconomic outlook continue to delay new program launches [11][12] - The company expects to see growth in U.S. and Vietnam production, with a strong pipeline of potential new business [10][18] - Management refrained from providing forward-looking guidance for Q2 fiscal year 2026 due to uncertainties in timing for new product ramps [10] Other Important Information - Total cash flow from operations for Q1 fiscal year 2026 was approximately $7.6 million, down from $9.9 million in the same period of fiscal year 2025 [9] - The company reduced total liabilities by $21.8 million, or 9%, from a year ago, while accounts receivable days sales outstanding (DSOs) improved to 81 days from 92 days [8][9] Q&A Session Summary Question: What was the size of the new programs won this quarter? - The medical program was roughly about $5 million, and the two industrial programs combined are around $6 million [20] Question: Will the medical production capabilities be in Vietnam? - The intent is to have production for medical devices in Vietnam later this fiscal year, as certification has been received [21][22] Question: What revenue was generated from the consigned program this quarter? - The consigned program generated just over $1 million in revenue during the first quarter, with expectations to exceed $20 million annually [26] Question: What factors will influence the success of the consigned program? - The success depends on the customer's supply chain capabilities and timely provision of components [27][30] Question: What is the current status of the utility product program? - The utility product program experienced a delay but is ramping nicely in the second quarter [34] Question: What is the situation regarding excess capacity in Mexico? - The company has excess capacity in Mexico but expects to fill it with increased activity in the latter half of the fiscal year [40][41] Question: How is the relationship with the bank lender? - The relationship with the bank is solid, with cash generation and debt reduction being positive indicators [94]