Key Tronic Corporation Announces Results for the First Quarter of Fiscal Year 2024
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.
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 to $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 to $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.
KEYTRONIC CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share amounts)
(Unaudited)
| 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 | |||||
KEYTRONIC CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands)
(Unaudited)
| 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 |
