Cost Reduction Initiatives; Tariff Disruptions; Reduced Demand
SPOKANE VALLEY, Wash. (GLOBE NEWSWIRE) — Key Tronic Corporation (Nasdaq: KTCC), a provider of electronic manufacturing services (EMS), today announced its results for the quarter ended June 28, 2025.
For the fourth quarter of fiscal year 2025, Key Tronic reported total revenue of $110.5 million, compared to $126.6 million in the same period of fiscal year 2024. For the full fiscal year 2025, total revenue was $467.9 million, compared to $566.9 million for the full fiscal year 2024. The revenue for the fourth quarter and full fiscal year 2025 was adversely impacted by reduced demand from two longstanding customers and delays to new program launches as customers stalled orders due to the recent escalation and fluctuations in global tariffs.
Key Tronic expects long-term growth and profitability despite revenue trends in fiscal year 2025. In order to better align costs with current customer demand and boost automation, the Company cut approximately 300 jobs during the fourth quarter of fiscal year 2025, for a total headcount reduction during fiscal year 2025 of approximately 800. These measures have improved competitiveness for new program bids, which have increased recently. To support its near-shoring and tariff mitigation strategies, Key Tronic is also expanding its manufacturing footprint, with a new US facility and added capacity in Vietnam.
Total cash flow provided by operations for the fourth quarter of fiscal year 2025 was $8.8 million compared to $7.7 million for the same period of fiscal year 2024. For the full fiscal year 2025, cash flow provided by operations was $18.9 million compared to $13.8 million for full fiscal year 2024. The increase in cash from operations has allowed the Company to continue to reduce its debt during the fiscal year.
Gross margin was 6.2% in the fourth quarter of fiscal year 2025, compared to 7.2% in the same period of fiscal year 2024. This decrease is largely related to reduced revenue during the period and severance expenses of $0.1 million for the fourth quarter of fiscal year 2025. For the full fiscal year, gross margin was 7.8% compared to 7.0% for the full fiscal year 2024. The year-over-year increase in gross margin is largely related to operational efficiencies gained from the reductions in workforce offset by $2.9 million of severance expenses for the full fiscal year 2025. The Company’s gross margin is expected to improve further with expected revenue increases during the upcoming fiscal year 2026. Operating margin for the full fiscal year 2025 was 0.1%, down from 1.2% for the full fiscal year 2024, reflecting $1.8 million in credit loss adjustments.
The net loss was $(3.9) million or $(0.36) per share for the fourth quarter of fiscal year 2025, compared to a net loss of $(2.0) million or $(0.18) per share for the same period of fiscal year 2024. For the full fiscal year 2025, the net loss was $(8.3) million or $(0.77) per share, compared to a net loss of $(2.8) million or $(0.26) per share for full fiscal year 2024. The increase in net losses for the fourth quarter and full year of fiscal 2025 primarily related to the large reductions in revenue and increased severance expense, as well as the $1.1 million and $1.8 million in adjustments for estimated collections from customers for those respective periods.
The adjusted net loss was $(3.8) million or $(0.35) per share for the fourth quarter of fiscal year 2025, compared to adjusted net loss of $(0.7) million or $(0.06) per share for the same period of fiscal year 2024. The adjusted net loss was $(5.0) million or $(0.47) per share for the full fiscal year 2025, compared to $(0.2) million or $(0.02) per share for the full fiscal year 2024. See “Non-GAAP Financial Measures,” below for additional information about adjusted net loss and adjusted net loss per share.
“During fiscal 2025, the unprecedented uncertainty in tariffs significantly delayed new program ramps from many of our customers,” said Brett Larsen, President and CEO. “To provide our customers with options to manage current tariffs and future tariff changes, we’re continuing to build out new production capacity in the US and Vietnam and right-size our Mexico facility to remain cost competitive. These enhancements are expected to be fully operational in the first half of fiscal 2026 and enable us to benefit from our customers’ rebalancing their contract manufacturing to these locations. By the end of fiscal 2026, we expect approximately half of our manufacturing to take place in our US and Vietnam facilities.”
“During the fourth quarter of fiscal 2025, we continued to win new programs in pest control, personal protection, air purification, automotive, medical technology and utilities inspection equipment. We’re also excited to announce a new manufacturing services contract with a large data processing OEM that will consign its material and components for new production in our Corinth, Mississippi manufacturing facility. We have never had a consigned program at this scale, which has the potential to ramp significantly during fiscal year 2026 and is estimated to eventually exceed $20 million in annual revenue.”
“At the same time, we have continued to streamline our international and domestic operations, with further headcount reductions to reduce costs and enhance efficiency, building on similar initiatives throughout the year and enabling us to remain cost competitive. We believe Key Tronic remains well positioned for increased growth and profitability over the longer term.”
The financial data presented for the fourth quarter and full year of fiscal 2025 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 uncertainty of potential tariffs, Key Tronic will not be issuing revenue or earnings guidance for the first 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 888-394-8218 or +1-313-209-4906 (Access Code: 9022820). 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”.
