Key Tronic Corporation Announces Results for the First Quarter of Fiscal Year 2024
Key Tronic Corporation reports 8% YoY revenue growth for Q1 FY2024, reaching $147.8 million. Net income declines to $0.3 million due to severance costs and softening demand. The company reduces workforce by over 100 employees, expecting to save over $5 million annually. Keytronic wins new programs in various sectors and plans for increased demand in Mexico-based programs in H2 FY2024.
10/31/2023 - 04:02 PM
Year-over-Year Revenue Up 8% ; New Program Wins
SPOKANE VALLEY, Wash., Oct. 31, 2023 (GLOBE NEWSWIRE) -- Key Tronic Corporation (Nasdaq: KTCC), a provider of electronic manufacturing services (EMS), today announced its results for the quarter ended September 30, 2023. These results are in line with the preliminary results announced on October 24, 2023.
For the first quarter of fiscal year 2024, Keytronic reported total revenue of $147.8 million , up 8% from $137.3 million in the same period of fiscal year 2023. The Company’s gross margin for the first quarter of 2024 was 7.4% and operating margin was 2.2% , compared to a gross margin of 7.6% and an operating margin of 2.4% in the same period of fiscal 2023. For the first quarter of fiscal 2024, net income was $0.3 million or $0.03 per share, compared to $1.2 million or $0.11 per share for the same period of fiscal 2023.
The year-over-year decline in earnings was primarily a result of unanticipated severance costs of $0.6 million , or approximately $0.04 t o $0.05 per diluted share, as the Company reduced its workforce by over 100 employees in Mexico and the US. The workforce reduction reflects softening demand for a number of different programs and is expected to reduce operating expenses by more than $5 million annually. Keytronic also continued to be adversely impacted by high interest expense and the strength of the Mexican Peso, although the Mexican Peso has weakened during the second quarter.
“During first quarter of fiscal year 2024, we continued to ramp many new programs produced in our US facilities and remained profitable, despite a softening of customer demand for our Mexico-based programs,” said Craig Gates, President and Chief Executive Officer. “As previously announced, the large program with a leading power equipment company is now expected to resume materially in fiscal 2025 rather than 2024, with a redesigned product.”
“At the same time, we continued to expand our customer base during the first quarter and won new programs involving security equipment, sporting goods, environmental solutions, and industrial control systems. We’re also seeing some gradual improvement in our gross margins and have continued to reduce our inventories to be more in line with current revenue levels, as well as reducing our accounts payable, leasing obligations and overall debt in the quarter.”
“In the second half of fiscal year 2024, we expect increased demand for many of our Mexico-based programs. Overall, we continue to see the favorable trend of contract manufacturing returning to North America, as well as a growing number of potential customers evaluating a migration of their China-based manufacturing to our facility in Vietnam.”
The financial data presented for first quarter of fiscal year 2024 should be considered preliminary and could be subject to change, as the Company’s independent auditor has not completed their review procedures.
Business Outlook
For the second quarter of fiscal 2024, Keytronic expects to report revenue in the range of $135 million to $145 million and earnings in the range of $0.05 t o $0.10 per diluted share. These expected results assume an effective tax rate of 20% in the coming quarter.
Conference Call
Keytronic 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 888-254-3590 or +1-323-794-2551 (Access Code: 5128668). A replay will be available at www.keytronic.com under “Investor Relations”.
About Keytronic
Keytronic 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 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 Keytronic 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, or will, 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, demand for certain products and the effectiveness of some of our programs, business from customers and programs, and impacts from operational streamlining. 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 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 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.
Three Months Ended September 30, 2023 October 1, 2022 Net sales $ 147,763 $ 137,262 Cost of sales 136,901 126,884 Gross profit 10,862 10,378 Research, development and engineering expenses 2,241 2,296 Selling, general and administrative expenses 5,784 5,656 Gain on insurance proceeds, net of losses (431 ) (934 ) Total operating expenses 7,594 7,018 Operating income 3,268 3,360 Interest expense, net 3,011 1,887 Income before income taxes 257 1,473 Income tax (benefit) provision (78 ) 322 Net income $ 335 $ 1,151 Net income per share — Basic $ 0.03 $ 0.11 Weighted average shares outstanding — Basic 10,762 10,762 Net income per share — Diluted $ 0.03 $ 0.11 Weighted average shares outstanding — Diluted 11,003 10,832
September 30, 2023 July 1, 2023 ASSETS Current assets: Cash and cash equivalents 3,574 3,603 Trade receivables, net of allowance for doubtful accounts of $23 and $23 141,442 150,600 Contract assets 32,903 29,925 Inventories, net 126,778 137,911 Other 22,930 27,510 Total current assets 327,627 349,549 Property, plant and equipment, net 28,085 28,870 Operating lease right-of-use assets, net 15,928 16,202 Other assets: Deferred income tax asset 13,205 12,254 Other 7,500 11,397 Total other assets 20,705 23,651 Total assets 392,345 418,272 LIABILITIES AND SHAREHOLDERS ’ EQUITY Current liabilities: Accounts payable 101,638 115,899 Accrued compensation and vacation 11,860 13,351 Current portion of debt, net 6,196 7,849 Other 13,330 14,867 Total current liabilities 133,024 151,966 Long-term liabilities: Term loans 6,272 6,726 Revolving loan 109,517 114,805 Operating lease liabilities 10,939 10,317 Deferred income tax liability 324 274 Other long-term obligations 1,201 3,567 Total long-term liabilities 128,253 135,689 Total liabilities 261,277 287,655 Shareholders’ equity: Common stock, no par value—shares authorized 25,000; issued and outstanding 10,762 and 10,762 shares, respectively 47,786 47,728 Retained earnings 83,321 82,986 Accumulated other comprehensive income (loss) (39 ) (97 ) Total shareholders’ equity 131,068 130,617 Total liabilities and shareholders’ equity 392,345 418,272
CONTACTS: Brett Larsen Michael Newman Chief Financial Officer Investor Relations Key Tronic Corporation StreetConnect (509) 927-5500 (206) 729-3625
What are the key financial highlights of Key Tronic Corporation's Q1 FY2024 results?
Key Tronic Corporation reported total revenue of $147.8 million, an 8% increase compared to the same period last year. The net income for the quarter was $0.3 million, down from $1.2 million in Q1 FY2023.
What contributed to the decline in Key Tronic Corporation's earnings in Q1 FY2024?
The decline in earnings was primarily due to unanticipated severance costs of $0.6 million, resulting from a workforce reduction of over 100 employees in Mexico and the US. Softening demand for certain programs also impacted earnings.
How much is Key Tronic Corporation expected to save from the workforce reduction?
Key Tronic Corporation expects to reduce operating expenses by more than $5 million annually as a result of the workforce reduction.
What new programs did Key Tronic Corporation win in Q1 FY2024?
Key Tronic Corporation won new programs in the security equipment, sporting goods, environmental solutions, and industrial control systems sectors.
What is Key Tronic Corporation's business outlook for Q2 FY2024?
Key Tronic Corporation expects to report revenue in the range of $135 million to $145 million and earnings in the range of $0.05 to $0.10 per diluted share for Q2 FY2024.
When is Key Tronic Corporation's conference call to discuss its financial results?
Key Tronic Corporation's conference call to discuss its financial results will be held at 2:00 PM Pacific (5:00 PM Eastern) today.
