Key Tronic Corporation Q4 FY2025 earnings call

• Tony mentioned total revenue for 2025 was $467.9 million vs $566.9 million in 2024, impacted by reduced demand from large customers and tariff uncertainties. Gross margin and operating margin decreased but improved year over year due to cost-saving initiatives. Headcount reduced by ~800, with severance expense of $100,000 in Q4 and $2.9 million for the year. - Brett discussed fiscal 2025 was a year of transition, rightsizing cost structure, investing in new facilities in US and Vietnam, mitigating tariff impacts by adjusting manufacturing footprint, winning new programs in various sectors, and expecting growth in US and Vietnam production with a strong pipeline of new business.

For fiscal year 2025, total revenue was $467.9 million. Gross margin was 7.8%, operating margin was 0.1%. Net loss was $8.3 million or $0.77 per share. Inventory was reduced by approximately $8 million or 7% from the previous year. Total liabilities were reduced by $32.7 million or 14%. Cash flow provided by operations was $18.9 million. Capital expenditures in fiscal year 2025 were about $4.1 million, and planned for $8 million in 2026.

Will not provide forward-looking guidance due to uncertainty in timing of new product ramping in fiscal 2026. Plan to spend about $8 million in capital expenditures in fiscal 2026 on new production equipment and automation.

• Uncertainty from global tariffs causing delays in new program launches. - Wage increases in Mexico impacting cost competitiveness. - Variability in geopolitical tensions affecting contract manufacturing strategies.

Q: Curious about the range of sizes of six new wins in the quarter and ramping.

A: Predominantly around $5 million program size, three in Mexico, others in US; data processing could exceed $20 million.

Q: Question on DSO, receivables decline.

A: Large driver is reduction in revenue, no factoring, better collections and some bad debt reserved.

Q: About bad debt write-off in fourth quarter.

A: $1.1 million reserved in Q4, impacted SG&A.

Q: Potential size of manufactured services contract with data processor OEM.

A: Could be $20 million, strong margin improvement as it's a consigned materials contract.

Q: Thoughts on gross margin in fiscal 2026.

A: Expect gross margins to improve, aiming for 15-20% incremental margin as revenue increases