Key Tronic Corporation Announces Results for the Second Quarter of Fiscal Year 2023
Expected Increase in Revenue and Earnings; New Program Wins; Preparing for Growth in Coming Quarters
SPOKANE VALLEY, Wash.,– Key Tronic Corporation (Nasdaq: KTCC), a provider of electronic manufacturing services (EMS), today announced its results for the quarter ended December 31, 2022.
For the second quarter of fiscal year 2023, Key Tronic reported total revenue of $123.7 million, compared to $134.5 million in the same period of fiscal year 2022. For the first six months of fiscal year 2023, total revenue was $261.0 million, compared to $267.2 million in the same period of fiscal year 2022.
As previously announced, revenue for the second quarter of fiscal year 2023 was impacted by a six-week delay in starting production for a large program with a leading power equipment company. This delayed revenue by approximately $20 million from the second quarter of fiscal 2023, but production for this program is currently underway and increasing in the third quarter.
For the second quarter of fiscal year 2023, the Company’s gross margin was 7.2% and operating margin was 2.9%, compared to a gross margin of 7.3% and an operating margin of 1.2% in the same period of fiscal year 2022. The gross margin in the second quarter of fiscal year 2023 was adversely impacted by business interruption and other operational losses related to storm damage to the Company’s Arkansas facility, as well as by preparations for expected sales growth in the second quarter and increased labor costs in both the US and Mexico. While profitability is expected to improve in coming quarters with expected increases in revenue, higher interest rates on our line of credit and increasing wages will limit a portion of that expected improvement.
For the second quarter of fiscal year 2023, net income was $1.0 million or $0.09 per share, compared to $0.6 million or $0.05 per share for the same period of fiscal year 2022. The Company’s results for the second quarter of fiscal year 2023 include a gain on insurance proceeds of $2.7 million or approximately $0.19 per share related to equipment damaged in the storm at the Company’s Arkansas facility. The Company is still determining further business interruption proceeds related to the operational losses incurred in the past two quarters as a result of the storm damage. For the first six months of fiscal year 2023, net income was $2.1 million or $0.20 per share, compared to $1.4 million or $0.13 per share for the same period of fiscal year 2022.
“We’re pleased with the successful ramp of new programs and our expanding customer base in the second quarter of fiscal 2023, despite the six-week delay for the large, previously announced power equipment program,” said Craig Gates, President and Chief Executive Officer. “Production for that program is now back on track and rapidly ramping up.”
“During the second quarter of fiscal year 2023, we continued to see the favorable trend of contract manufacturing returning to North America. We won new programs involving outdoor power equipment, battery management, automated sprinklers and biometric sensor technology. We move into the third quarter with record backlog and we’re seeing improvement in the global supply issues for certain components that have severely limited our production in recent periods.”
The financial data presented for the second quarter of fiscal year 2023 should be considered preliminary and could be subject to change, as the Company’s independent auditor has not completed their review procedures.
For the third quarter of fiscal 2023, Key Tronic expects to report revenue in the range of $160 million to $170 million and earnings in the range of $0.15 to $0.25 per diluted share. These expected results assume an effective tax rate of 25% in the coming quarter.
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 888-204-4368 or +1-323-994-2093 (Access Code: 5318438). A replay will be available at www.keytronic.com under “Investor Relations”.