KEY TRONIC CORP Q3 FY2025 earnings call

• Tariffs have significantly impacted business and customers; ongoing capacity buildup in Arkansas and Vietnam; streamlining Mexico operations with headcount reductions.
• Expanding production footprint in strategic locations to serve customers better; US clean tech expansion in Arkansas with over $28M investment and expected 400+ jobs in 5 years; Vietnam facility expansion to more than double capacity.
• Won new programs in various sectors; strong pipeline of new business; design capabilities key to capturing programs; investment in vertical integration and manufacturing processes.

For the third quarter of fiscal 2025, total revenue was $112 million compared to $142.4 million in the same period of fiscal 2024. First nine months of fiscal 2025 total revenue was $357.4 million compared to $440.4 million in the same period of fiscal 2024. Gross margins were 7.7% in Q3 2025 vs 5.7% in Q3 2024. Net loss was $0.6 million or $0.06 per share in Q3 2025 vs a net loss of $2.2 million or $0.21 per share in Q3 2024. Adjusted net loss was $0.6 million or $0.05 cents per share in Q3 2025 vs adjusted net loss of $2.2 million or $0.20 per share in Q3 2024.

• Decided not to provide revenue or earnings guidance for the fourth quarter of fiscal 2025.
• Expect growth in US and Vietnam production, strong pipeline of new business, and focus on improving profitability.

• Significant tariffs on China and potential tariffs on Mexico and Vietnam create uncertainties in costs and margin performance.
• Rapid tariff changes impact production across all facilities, especially Chinese components.

Q: Please walk us through the five new business wins and share dollar amounts?

A: A $12M telecommunications program in Mexico, $6M pest control in Vietnam, $7M energy in Arkansas, $2M-$5M consumer product in Arkansas, and a $1M design contract with potential to grow.

Q: You mentioned Fortune 500 companies, what's different?

A: Getting foot in door opens doors to additional opportunities within conglomerates.

Q: Impact of macroenvironment on $60M prospect?

A: Not impacted, moved to new location, to start generating income in Q1 2026, expected to reach $60M in 12-18 months.

Q: Severance in Mexico and $0.7M mix?

A: Severance in Mexico is COGS; $0.7M is ~$400k OpEx and $300k COGS.

Q: Gross margin potential as revenue grows?

A: Reductions made will further improve gross margin; incremental revenue above fixed costs will boost margin, expecting to exceed 10% gross margin.

Q: Working capital progress and inventory turns?

A: Predominantly manage 90%+ of BOM; expect incremental improvement in working capital, aiming for 4 turns.

Q: Credit agreement and recession concerns?

A: Refinanced debt, ample availability, cash less of a concern; expect growth even in potential recession.

Q: Hesitancy in customers due to recession?

A: Hesitancy in business decisions, some balancing, expecting growth despite potential recession.