Key Tronic Corporation Announces Results For the Second Quarter of Fiscal Year 2025
New Program Wins; Cost Reduction Initiatives; Expansion Plans in US and Vietnam
SPOKANE VALLEY, Wash., Feb. 04, 2025 (GLOBE NEWSWIRE) — Key Tronic Corporation (Nasdaq: KTCC), a provider of electronic manufacturing services (EMS), today announced its results for the quarter ended December 28, 2024. These results are in line with the updated guidance provided on January 24, 2025.
For the second quarter of fiscal year 2025, Key Tronic reported total revenue of $113.9 million, compared to $147.8 million in the same period of fiscal year 2024. The lower than anticipated revenue and earnings for the second quarter of fiscal year 2025 are primarily due to unexpected shortages for specific components managed by a large customer, lower-than-expected production during the holiday season, and reduced demand from certain customers which together lowered revenue by approximately $15 million from initial guidance for the quarter. For the first six months of fiscal year 2025, total revenue was $245.4 million, compared to $298.0 million in the same period of fiscal year 2024.
Gross margins were 6.8% and operating margins were (1.0)% in the second quarter of fiscal year 2025, compared to 8.0% and 2.7%, respectively, in the same period of fiscal year 2024. The decline in margins for the second quarter of fiscal year 2025 primarily reflects the reduction of revenue. As previously announced, interest expense also included approximately $1.0 million in write-offs of unamortized loan fees related to refinancing the Company’s debt with a new lender.
The net loss was $(4.9) million or $(0.46) per share for the second quarter of fiscal year 2025, compared to net income of $1.1 million or $0.10 per share for the same period of fiscal year 2024. For the first six months of fiscal year 2025, the net loss was $(3.8) million or $(0.35) per share, compared to net income of $1.4 million or $0.13 per share for the same period of fiscal year 2024.
The adjusted net loss was $(4.1) million or $(0.38) per share for the second quarter of fiscal year 2025, compared to adjusted net income of $1.1 million or $0.10 per share for the same period of fiscal year 2024. The adjusted net loss was $(2.9) million or $(0.27) per share for first six months of fiscal year 2025, compared to adjusted net income of $1.2 million or $0.11 per share for the same period of fiscal year 2024. See “Non-GAAP Financial Measures,” below for additional information about adjusted net income and adjusted net income per share.
“As we announced today, we’re planning to significantly increase production capacity in Arkansas and Vietnam in order to continue to benefit from the growing customer demand for rebalancing their contract manufacturing. We believe these initiatives should help mitigate the adverse impact and uncertainties surrounding the recently announced tariffs on goods manufactured in China and Mexico,” said Brett Larsen, President and CEO.
“We are disappointed with the unexpected decline in revenue in the second quarter of fiscal 2025, however, we expect our revenue and earnings to improve in the third quarter of fiscal year 2025 as strategic initiatives undertaken in previous quarters come to fruition. We’re actively streamlining our international and domestic operations, with further headcount reductions to enhance efficiency, building on similar actions a year ago. We’re also pleased to see our inventory levels being more in line with current revenue levels and expect that these strategic changes will improve our overall profitability in the longer term.”
“At the same time, we continued to win new programs, such as aerospace systems and an energy resiliency technology program, which was recently announced. Once fully ramped, the latter program could generate annual revenue for us in excess of $60 million. We also closed on a long-term debt refinancing agreement during the quarter that expands available capital for growth. We believe Key Tronic remains well positioned for increased growth and profitability in coming periods.”
The financial data presented for the second quarter of fiscal 2025 should be considered preliminary and could be subject to change, as the Company’s independent auditor has not completed their review procedures.
Business Outlook
Due to uncertainty in the economic and political environments related to the impact of recently announced potential tariffs, Key Tronic will not be issuing revenue or earnings guidance for the third quarter of fiscal year 2025.
Conference Call
Key Tronic will host a conference call to discuss its financial results at 2:00 PM Pacific (5:00 PM Eastern) today. A broadcast of the conference call will be available at www.keytronic.com under “Investor Relations” or by calling 888-394-8218 or +1-313-209-4906 (Access Code: 2254355). The Company will also reference accompanying slides that can be viewed with the webcast at www.keytronic.com under “Investor Relations”. A replay will be available at www.keytronic.com under “Investor Relations”.
About Key Tronic
Key Tronic is a leading contract manufacturer offering value-added design and manufacturing services from its facilities in the United States, Mexico, China and Vietnam. The Company provides its customers with full engineering services, materials management, worldwide manufacturing facilities, assembly services, in-house testing, and worldwide distribution. Its customers include some of the world’s leading original equipment manufacturers. For more information about Key Tronic visit: www.keytronic.com
Forward-Looking Statements
Some of the statements in this press release are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements include, but are not limited to those including such words as aims, anticipates, believes, continues, estimates, expects, hopes, intends, plans, predicts, projects, targets, will, or would, similar verbs, or nouns corresponding to such verbs, which may be forward looking. Forward-looking statements also include other passages that are relevant to expected future events, performances, and actions or that can only be fully evaluated by events that will occur in the future. Forward-looking statements in this release include, without limitation, the Company’s statements regarding its expectations with respect to financial conditions and results, including revenue and earnings, cost savings from headcount reduction and the Mexican Peso exchange rate, demand for certain products and the effectiveness of some of its programs, business from customers and programs, and impacts from operational streamlining and efficiencies, including reductions in inventories. There are many factors, risks and uncertainties that could cause actual results to differ materially from those predicted or projected in forward-looking statements, including but not limited to: the future of the global economic environment and its impact on our customers and suppliers; the success and timing of our expansion plans; the availability of components from the supply chain; the availability of a healthy workforce; the accuracy of suppliers’ and customers’ forecasts; development and success of customers’ programs and products; timing and effectiveness of ramping of new programs; success of new-product introductions; the risk of legal proceedings or governmental investigations relating to the previously reported financial statement restatements and related material weaknesses, the May 2024 cybersecurity incident and the subject of the internal investigation by the Company’s Audit Committee and related or other unrelated matters; acquisitions or divestitures of operations or facilities; technology advances; changes in pricing policies by the Company, its competitors, customers or suppliers; impact of new governmental legislation and regulation, including tax reform, tariffs and related activities, such trade negotiations and other risks; and other factors, risks, and uncertainties detailed from time to time in the Company’s SEC filings.
Non-GAAP Financial Measures
To supplement our consolidated financial statements, which are prepared in accordance with generally accepted accounting principles in the United States (GAAP), we use certain non-GAAP financial measures, adjusted net income and adjusted net income per share, diluted. We provide these non-GAAP financial measures because we believe they provide greater transparency related to our core operations and represent supplemental information used by management in its financial and operational decision making. We exclude (or include) certain items in our non-GAAP financial measures as we believe the net result is a measure of our core business. We believe this facilitates operating performance comparisons from period to period by eliminating potential differences caused by the existence and timing of certain income and expense items that would not otherwise be apparent on a GAAP basis. Non-GAAP performance measures should be considered in addition to, and not as a substitute for, results prepared in accordance with GAAP. We strongly encourage investors and shareholders to review our financial statements and publicly-filed reports in their entirety and not to rely on any single financial measure. Our non-GAAP financial measures may be different from those reported by other companies. See the table below entitled “Reconciliation of GAAP to non-GAAP measures” for reconciliations of adjusted net income to the most directly comparable GAAP measure, which is GAAP net income, and the computation of adjusted net income per share, diluted.
| CONTACTS: | Tony Voorhees | Michael Newman | ||
| Chief Financial Officer | Investor Relations | |||
| Key Tronic Corporation | StreetConnect | |||
| (509)-927-5345 | (206) 729-3625 | |||
KEY TRONIC CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
(Unaudited)
| Three Months Ended | Six Months Ended | ||||||||||||||
| December 28, 2024 | December 30, 2023 | December 28, 2024 | December 30, 2023 | ||||||||||||
| Net sales | $ | 113,853 | $ | 147,847 | $ | 245,411 | $ | 297,959 | |||||||
| Cost of sales | 106,147 | 136,084 | 224,402 | 275,334 | |||||||||||
| Gross profit | 7,706 | 11,763 | 21,009 | 22,625 | |||||||||||
| Research, development and engineering expenses | 2,320 | 1,758 | 4,609 | 3,999 | |||||||||||
| Selling, general and administrative expenses | 6,507 | 6,057 | 13,077 | 11,841 | |||||||||||
| Gain on insurance proceeds, net of losses | — | — | — | (431 | ) | ||||||||||
| Total operating expenses | 8,827 | 7,815 | 17,686 | 15,409 | |||||||||||
| Operating income (loss) | (1,121 | ) | 3,948 | 3,323 | 7,216 | ||||||||||
| Interest expense, net | 3,904 | 2,961 | 7,167 | 5,972 | |||||||||||
| Income (loss) before income taxes | (5,025 | ) | 987 | (3,844 | ) | 1,244 | |||||||||
| Income tax benefit | (111 | ) | (97 | ) | (54 | ) | (175 | ) | |||||||
| Net income (loss) | $ | (4,914 | ) | $ | 1,084 | $ | (3,790 | ) | $ | 1,419 | |||||
| Net income (loss) per share — Basic | $ | (0.46 | ) | $ | 0.10 | $ | (0.35 | ) | $ | 0.13 | |||||
| Weighted average shares outstanding — Basic | 10,762 | 10,762 | 10,762 | 10,762 | |||||||||||
| Net income (loss) per share — Diluted | $ | (0.46 | ) | $ | 0.10 | $ | (0.35 | ) | $ | 0.13 | |||||
| Weighted average shares outstanding — Diluted | 10,762 | 10,889 | 10,762 | 10,889 | |||||||||||
KEY TRONIC CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands)
(Unaudited)
| December 28, 2024 | June 29, 2024 | |||||||
| ASSETS | ||||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | 4,244 | $ | 4,752 | ||||
| Trade receivables, net of credit losses of $2,931 and $2,918 | 113,132 | 132,559 | ||||||
| Contract assets | 18,892 | 21,250 | ||||||
| Inventories, net | 100,709 | 105,099 | ||||||
| Other, net of credit losses of $1,496 and $1,679 | 24,159 | 24,739 | ||||||
| Total current assets | 261,136 | 288,399 | ||||||
| Property, plant and equipment, net | 27,123 | 28,806 | ||||||
| Operating lease right-of-use assets, net | 13,829 | 15,416 | ||||||
| Other assets: | ||||||||
| Deferred income tax asset | 19,287 | 17,376 | ||||||
| Other | 6,454 | 5,346 | ||||||
| Total other assets | 25,741 | 22,722 | ||||||
| Total assets | $ | 327,829 | $ | 355,343 | ||||
| LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||||
| Current liabilities: | ||||||||
| Accounts payable | $ | 63,585 | $ | 79,394 | ||||
| Accrued compensation and vacation | 6,218 | 6,510 | ||||||
| Current portion of long-term debt | 5,063 | 3,123 | ||||||
| Other | 18,904 | 15,149 | ||||||
| Total current liabilities | 93,770 | 104,176 | ||||||
| Long-term liabilities: | ||||||||
| Long-term debt, net | 106,020 | 116,383 | ||||||
| Operating lease liabilities | 8,429 | 10,312 | ||||||
| Deferred income tax liability | 9 | 263 | ||||||
| Other long-term obligations | 114 | 219 | ||||||
| Total long-term liabilities | 114,572 | 127,177 | ||||||
| Total liabilities | 208,342 | 231,353 | ||||||
| Shareholders’ equity: | ||||||||
| Common stock, no par value—shares authorized 25,000; issued and outstanding 10,762 and 10,762 shares, respectively | 47,367 | 47,284 | ||||||
| Retained earnings | 73,131 | 76,921 | ||||||
| Accumulated other comprehensive loss | (1,011 | ) | (215 | ) | ||||
| Total shareholders’ equity | 119,487 | 123,990 | ||||||
| Total liabilities and shareholders’ equity | $ | 327,829 | $ | 355,343 | ||||
KEY TRONIC CORPORATION AND SUBSIDIARIES
Reconciliation of GAAP to non-GAAP measures
(In thousands, except per share amounts)
(Unaudited)
| Three Months Ended | Six Months Ended | ||||||||||||||
| December 28, 2024 | December 30, 2023 | December 28, 2024 | December 30, 2023 | ||||||||||||
| GAAP net income (loss) | $ | (4,914 | ) | $ | 1,084 | $ | (3,790 | ) | $ | 1,419 | |||||
| Gain on insurance proceeds (net of losses) | — | — | — | (431 | ) | ||||||||||
| Stock-based compensation expense | 16 | 53 | 83 | 112 | |||||||||||
| Write-off of unamortized loan fees | 1,012 | — | 1,012 | — | |||||||||||
| Income tax effect of non-GAAP adjustments (1) | (206 | ) | (11 | ) | (219 | ) | 64 | ||||||||
| Adjusted net income (loss): | $ | (4,092 | ) | $ | 1,126 | $ | (2,914 | ) | $ | 1,164 | |||||
| Adjusted net income (loss) per share — non-GAAP Diluted | $ | (0.38 | ) | $ | 0.10 | $ | (0.27 | ) | $ | 0.11 | |||||
| Weighted average shares outstanding — Diluted | 10,762 | 10,889 | 10,762 | 10,889 | |||||||||||
| (1) Income tax effects are calculated using an effective tax rate of 20%, which approximates the statutory GAAP tax rate for the presented periods. | |||||||||||||||
