Key Tronic Corporation Announces Results for the Second Quarter of Fiscal Year 2026
Rhea-AI Summary
Key Tronic (Nasdaq: KTCC) reported Q2 fiscal 2026 revenue of $96.3 million and a net loss of $(8.6) million or $(0.79) per share. The company took ~$10.5 million in charges for China and Mexico workforce actions, which reduced margins.
Key Tronic generated $6.3 million of cash from operations, reduced debt year-over-year by $13.4 million, won new programs, and announced a China manufacturing wind-down with projected quarterly savings and capacity shifts to the US and Vietnam. No Q3 guidance was issued.
Positive
- Operating cash flow of approximately $6.3M in Q2
- Year-over-year debt reduction of approximately $13.4M
- Planned China closure expected to save ~$1.2M per quarter
- Mexico workforce reductions expected to yield ~$1.5M per quarter
- New program wins in automotive, pest control, and industrial equipment
- Adjusted gross margin of 7.9% excluding closure charges
Negative
- Total revenue declined to $96.3M from $113.9M year-over-year
- Reported gross margin fell to 0.6% and operating margin to -10.7%
- Recorded charges of approximately $10.5M for severance and inventory write-offs
- Net loss of $(8.6M) or $(0.79) per share in Q2
- Company will not provide Q3 revenue or earnings guidance due to uncertainty
Key Figures
Previous Earnings Reports
| Date | Event | Sentiment | 24h Move | Catalyst |
|---|---|---|---|---|
| Nov 04 | Quarterly results | Negative | +1.2% | Q1 FY2026 revenue decline, net loss, margin changes and cash flow details. |
| Oct 20 | Earnings date set | Neutral | +1.2% | Announcement of Q1 FY2026 reporting date and conference call logistics. |
| Aug 27 | Quarter & year results | Negative | -4.4% | Q4 and FY2025 revenue declines, net losses, and major restructuring actions. |
| Aug 07 | Earnings date & AGM | Neutral | -3.8% | Scheduled Q4/FY2025 release and annual meeting timing for investors. |
| May 06 | Quarterly results | Negative | -4.9% | Q3 FY2025 revenue decline, net loss, margin improvement and expansion plans. |
24h Move is the share-price change in the day after each event; other market factors may also have contributed.
Earnings and related announcements have produced mixed reactions: 1 divergence and 4 aligned moves over the last 5 earnings-tagged events, often around restructuring and margin themes.
Over recent quarters, Key Tronic has reported declining revenue and recurring net losses across multiple earnings releases, while emphasizing restructuring and geographic shifts in manufacturing. Prior updates highlighted revenue drops, margin pressure, and job cuts, alongside expansion of US and Vietnam facilities and program wins. Cash flow from operations has been a recurring positive, helping reduce debt. Today’s Q2 FY2026 results continue that pattern of lower revenue and losses but with further cost actions in China and Mexico and ongoing near-shoring efforts.
Key Terms
non-gaap financial measures financial
AI-generated analysis. How Rhea-AI works. Not financial advice.
Significant Cost Reduction Initiatives in China and Mexico; Continued Program Wins; Positive Cash Flow from Operations
SPOKANE VALLEY, Wash., Feb. 03, 2026 (GLOBE NEWSWIRE) -- Key Tronic Corporation (Nasdaq: KTCC), a provider of electronic manufacturing services (EMS), today announced its results for the quarter ended December 27, 2025.
For the second quarter of fiscal year 2026, Key Tronic reported total revenue of
The Company continued to prepare for anticipated long-term growth by executing its near-shoring and tariff mitigation strategies to reduce costs while maintaining the diversity and flexibility of its key locations and capabilities. During the quarter, Key Tronic initiated a wind-down of its manufacturing operations at its China based facility and instead intends to refocus operations in China on sourcing and procurement activities intended to support its remaining global locations. This initiative is expected to shift more production to the Company’s expanding facilities in the US and Vietnam. The wind-down is expected to be completed by the end of the current fiscal year, and is anticipated to save approximately
Key Tronic also further reduced its workforce in Mexico, which is expected to provide an additional approximate
Total cash flow provided by operations for the second quarter of fiscal year 2026 was approximately
The closure of its China manufacturing facility and workforce reductions in Mexico had an adverse impact on Key Tronic’s margins. Gross margin was
The net loss was
The adjusted net income was
“During the second quarter of fiscal 2026, we continued to provide our customers with options to better manage macroeconomic uncertainties and enhance our potential for profitable long-term growth,” said Brett Larsen, President and CEO. “Due to ongoing geopolitical tensions and tariff uncertainties, we chose to cease manufacturing operations at our China facility while maintaining a strategic sourcing presence, and continue to right-size our Mexico facility, while continuing to build out new production capacity in the US and Vietnam.”
“As part of our long term strategy, over the past 18 months, we have reduced our total headcount by approximately
“During the second quarter of fiscal 2026, we won new programs in automotive technology, pest control and industrial equipment. While the uncertainty surrounding global tariffs and the macroeconomic outlook has continued to reduce demand from some longstanding customers and delayed some new program ramps in recent quarters, we expect to see our revenue gradually begin to rebound, improved operating efficiencies to take hold and a return to profitability by the end of fiscal 2026.”
The financial data presented for the second quarter of fiscal 2026 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 timing of new program ramps in light of the continued macroeconomic uncertainty, Key Tronic will not be issuing revenue or earnings guidance for the third quarter of fiscal year 2026.
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 800-330-6710 or +1-213-279-1505 (Access Code: 5641933). 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, sourcing 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, earnings, and margins, the Company’s ability to shift its focus in China and build out production capacity in the US and Vietnam and the timing of completion of those facilities, cost savings from headcount reduction and the wind-down of manufacturing operations in China, 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 impact of new governmental legislation and regulation, including tax reform, tariffs and related activities, such as trade negotiations and other risks; 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; 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 (loss), and adjusted net income (loss) 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.
In addition, during this period, we have provided adjusted cost of sales, adjusted gross profit, and adjusted gross margin. These additions supplement adjusted net income (loss) by mapping the portion of the identified adjustments utilized in the calculation of adjusted net income (loss) to relevant financial statement line items for re-calculation of the adjusted metrics presented. We have provided these additional 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.
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 (loss) and adjusted cost of sales to the most directly comparable GAAP measure, which is GAAP net income (loss), and GAAP cost of sales, respectively, as well as the computation of adjusted gross profit, adjusted gross margin, and adjusted net income (loss) per share, diluted.
| KEY TRONIC CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands, except per share amounts) (Unaudited) | |||||||||||||||
| Three Months Ended | Six Months Ended | ||||||||||||||
| December 27, 2025 | December 28, 2024 | December 27, 2025 | December 28, 2024 | ||||||||||||
| Net sales | $ | 96,319 | $ | 113,853 | $ | 195,069 | $ | 245,411 | |||||||
| Cost of sales | 95,759 | 106,147 | 186,255 | 224,402 | |||||||||||
| Gross profit | 560 | 7,706 | 8,814 | 21,009 | |||||||||||
| Research, development and engineering expenses | 1,844 | 2,320 | 3,923 | 4,609 | |||||||||||
| Selling, general and administrative expenses | 8,974 | 6,507 | 15,733 | 13,077 | |||||||||||
| Total operating expenses | 10,818 | 8,827 | 19,656 | 17,686 | |||||||||||
| Operating income (loss) | (10,258 | ) | (1,121 | ) | (10,842 | ) | 3,323 | ||||||||
| Interest expense, net | 2,371 | 3,904 | 5,147 | 7,167 | |||||||||||
| Loss before income taxes | (12,629 | ) | (5,025 | ) | (15,989 | ) | (3,844 | ) | |||||||
| Income tax benefit | (4,059 | ) | (111 | ) | (5,164 | ) | (54 | ) | |||||||
| Net loss | $ | (8,570 | ) | $ | (4,914 | ) | $ | (10,825 | ) | $ | (3,790 | ) | |||
| Net loss per share — Basic | $ | (0.79 | ) | $ | (0.46 | ) | $ | (1.00 | ) | $ | (0.35 | ) | |||
| Weighted average shares outstanding — Basic | 10,859 | 10,762 | 10,815 | 10,762 | |||||||||||
| Net loss per share — Diluted | $ | (0.79 | ) | $ | (0.46 | ) | $ | (1.00 | ) | $ | (0.35 | ) | |||
| Weighted average shares outstanding — Diluted | 10,859 | 10,762 | 10,815 | 10,762 | |||||||||||
| KEY TRONIC CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (In thousands) (Unaudited) | |||||||
| December 27, 2025 | June 28, 2025 | ||||||
| ASSETS | |||||||
| Current assets: | |||||||
| Cash and cash equivalents | $ | 788 | $ | 1,384 | |||
| Trade receivables, net of credit losses of | 83,332 | 96,142 | |||||
| Contract assets, net of credit losses of | 19,872 | 17,409 | |||||
| Inventories, net | 88,440 | 97,321 | |||||
| Other, net of credit losses of | 15,031 | 21,917 | |||||
| Total current assets | 207,463 | 234,173 | |||||
| Property, plant and equipment, net | 33,799 | 27,727 | |||||
| Operating lease right-of-use assets, net | 29,193 | 11,347 | |||||
| Other assets: | |||||||
| Deferred income tax asset | 29,774 | 23,397 | |||||
| Other, net of credit losses of | 25,038 | 19,230 | |||||
| Total other assets | 54,812 | 42,627 | |||||
| Total assets | $ | 325,267 | $ | 315,874 | |||
| LIABILITIES AND SHAREHOLDERS’EQUITY | |||||||
| Current liabilities: | |||||||
| Accounts payable | $ | 62,465 | $ | 63,725 | |||
| Accrued compensation and vacation | 10,140 | 8,157 | |||||
| Current portion of long-term debt | 7,518 | 6,215 | |||||
| Other | 21,982 | 13,894 | |||||
| Total current liabilities | 102,105 | 91,991 | |||||
| Long-term liabilities: | |||||||
| Long-term debt, net | 90,168 | 98,936 | |||||
| Operating lease liabilities | 22,356 | 6,859 | |||||
| Deferred income tax liability | 20 | — | |||||
| Other long-term obligations | 4,444 | 954 | |||||
| Total long-term liabilities | 116,988 | 106,749 | |||||
| Total liabilities | 219,093 | 198,740 | |||||
| Shareholders’ equity: | |||||||
| Common stock, no par value—shares authorized 25,000; issued and outstanding 10,859 and 10,762 shares, respectively | 48,001 | 47,502 | |||||
| Retained earnings | 57,778 | 68,603 | |||||
| Accumulated other comprehensive income | 395 | 1,029 | |||||
| Total shareholders’ equity | 106,174 | 117,134 | |||||
| Total liabilities and shareholders’ equity | $ | 325,267 | $ | 315,874 | |||
| 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 27, 2025 | December 28, 2024 | December 27, 2025 | December 28, 2024 | ||||||||||||
| GAAP net loss | $ | (8,570 | ) | $ | (4,914 | ) | (10,825 | ) | $ | (3,790 | ) | ||||
| Severance expenses | 4,293 | 12 | 5,506 | 2,039 | |||||||||||
| China manufacturing wind-down | 6,168 | — | 6,168 | — | |||||||||||
| Stock-based compensation expense | 278 | 16 | 499 | 83 | |||||||||||
| Write-off of unamortized loan fees | — | 1,012 | — | 1,012 | |||||||||||
| Income tax effect of non-GAAP adjustments (1) | (2,148 | ) | (208 | ) | (2,435 | ) | (627 | ) | |||||||
| Adjusted net income (loss) | $ | 21 | $ | (4,082 | ) | $ | (1,087 | ) | $ | (1,283 | ) | ||||
| Adjusted net income (loss) per share — non-GAAP Diluted | $ | 0.00 | $ | (0.38 | ) | $ | (0.10 | ) | $ | (0.12 | ) | ||||
| Weighted average shares outstanding — Diluted | 10,946 | 10,762 | 10,815 | 10,762 | |||||||||||
| GAAP cost of sales | $ | 95,759 | $ | 106,147 | $ | 186,255 | $ | 224,402 | |||||||
| Severance expenses | 4,293 | 12 | 5,506 | 2,039 | |||||||||||
| China manufacturing wind-down | 2,775 | — | 2,775 | — | |||||||||||
| Adjusted cost of sales | $ | 88,691 | $ | 106,135 | $ | 177,974 | $ | 222,363 | |||||||
| Total gross profit adjustments | $ | 7,068 | $ | 12 | $ | 8,281 | $ | 2,039 | |||||||
| GAAP gross profit | $ | 560 | $ | 7,706 | $ | 8,814 | $ | 21,009 | |||||||
| Total gross profit adjustments | 7,068 | 12 | 8,281 | 2,039 | |||||||||||
| Adjusted gross profit | $ | 7,628 | $ | 7,718 | $ | 17,095 | $ | 23,048 | |||||||
| GAAP net sales | $ | 96,319 | $ | 113,853 | $ | 195,069 | $ | 245,411 | |||||||
| Adjusted gross margin | 7.9 | % | 6.8 | % | 8.8 | % | 9.4 | % | |||||||
| (1) Income tax effects are calculated using an effective tax rate of | |||||||||||||||
| CONTACTS: | Tony Voorhees | Michael Newman |
| Chief Financial Officer | Investor Relations | |
| Key Tronic Corporation | StreetConnect | |
| (509)-927-5345 | (206) 729-3625 | |
