KTCC - Earnings call transcript Q2 2020

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Operator

Good day and welcome to the Q2 Fiscal 2020 Key Tronic Corporation Conference Call. Today's conference is being recorded.

At this time, I would like to turn the conference over to Brett Larsen. Please go ahead, sir.

Brett Larsen

Thank you. everyone. afternoon, Good Larsen, Brett Officer Key of I Chief Tronic. am Financial to I joining thank us like today call. for conference everyone would investor for our

Gates, in headquarters Executive here Spokane our Craig Officer. me Chief President Joining and the is Valley

or that always, predictions. the during course may that performance. company's results make or future of remind regarding Actual statements remember might the other we financial I forward-looking would such call, future materially. As only to projections you events statements like are this events differ Please or

For you the latest information SEC, filed may more X-Ks. factors review our outlined documents with the in XX-K, specifically has and risk quarterly XX-Qs the company the

on that other regarding and note statistical Please information business we financial will discuss historical our and this operations.

in version a release available included today's will be Some press of our call of recorded website. on information and this this is

quarter Today, December we ended XX, XXXX. for our results released the

same million XXXX. of For $XXX million the total reported second revenue the of quarter we of compared to XXXX, year period fiscal $XXX.X fiscal in year

For period the to the of in total XXXX, XXXX. million $XXX.X million year same was fiscal $XXX fiscal revenue compared year first of six months

However, of expect when year first did the compared and in quarter third sequentially increase continue revenue to see a $XX we into to revenue we growth XXXX, the fiscal million quarter.

of or XXXX. per year $X.XX share For income was same XXXX $X.X million of share quarter year fiscal the $X.X second per net for fiscal to million or compared $X.XX period the

fiscal $X.X or for or of share months year per $X.XX six first XXXX, of to income same $X.X the year million period XXXX. the $X.XX For net was share compared fiscal million per

and XXXX factory primarily second their customers, lower This exiting manufacturing ramping our than metal spending in a was fabrication both quarter January, arrangements their result in of earnings anticipated announced new and increased by the for necessitated in previously spending China, Juarez production existing departments. in Juarez. of the was fiscal As

the by with long-term near-term strengthened customers facility under extreme Juarez While pressure. these significant, was performance was financial of the impact relationship the the

of the our of Mexican factory unanticipated losses incurred unfavorable anticipate currency margins. we result expenses, Additionally, peso our labor foreign quarter. strengthening Mexican the impacted portion over We the increase in as unhedged adversely spending a related to the

quarter combined X% new operating our of the the operating in our X.X% X.X% year note XXXX, investments respectively it second and to efficiencies and the the of XXXX. in of in programs have our X% recent completion improvements margins our was metals compared is ramps in lead of new margin were fiscal to several area investments margin resulting through with efficiencies, Nevertheless, these equipment. gross improve For Several significant made in important to was same period that in to the the quarters we made periods. year expect fiscal us coming and metals

of to we did quarter $XX.X Turning levels. assets quarter. levels our third to our inventory quarter including we to second see ramp million revenue strong a the we come net the maintain or a in to from in the In year in programs, financial and continue fiscal contract prior by X.X% the revenue sheet, and inventory, continued the the new position. delays transfer reduction Despite balance sequential see production the with more XXXX, line recognition expect continue

the At Total XX from increased million trade XXXX of expenditures end about in approximately were prior second quarter days. and by quarter, the the million. the $X.X remained of fiscal up $X.X were capital DSOs receivables second the revenue reflecting period,

million to expenditures XXXX. fiscal of SMT our full in equipment in in production year approximately make total facilities. during metal plastic capital capabilities, facilities, invest continue and molding $XX sheet and our improvements as plan well We to as We a the

of our programs of addition Moving into capacity expect XXXX expect Taking largely to increase. more in and fiscal production. experienced XXXX The and $XXX of ramp new balancing $XXX in and third capacity, quarter the new issues workload to have into been the will challenges resolved quarters customer with the third we the move we of these have revenue range we factors recent revenue quarter of fiscal to expect million. million production into that consideration,

range third to XXXX, Vietnam assumes accelerating quarter an as per For the invest effective the our diluted $X.XX new ramp some in approximately share. we rate of continue expect enabling facility. gross see anticipate to earnings on and XX%. successful to we of margin of fiscal the $X.XX drag tax of This We in

working the with and recent potential production key in affect extended customers our to delays of times Tronic of outbreak to parts like at facilities. that Key closely I and the ascertain its delays and significantly suppliers could results trends employees, note critical coronavirus China, of production each is to would attributable in

prospects our for summary, to growth. encouraged the disruptions future year, are half In while the we in by earnings we remain the disappointed the our of by first

strong our over the well new is we we health and term. to financial business win and expand overall company are profitably longer programs that to continue Our of to the positioned EMS believe

it me. Craig. That's for

Craig Gates

Okay, Brett. thanks

production. We number Vietnam plans our to as a trend of the customers Moving drive transition positive in trade issues American increasing coming U.S. our the over see Vietnam. over and into of accelerate revenue growth earnings and the advantages the longer tariffs and half the facilities very Furthermore, a facilities diminished customers impeding the and their and year our to expanding tensions to third efficiencies continues quarter from periods. potential in China see between first as in and see we of new it of Mexico and fiscal production have China XXXX, term the based uncertainty to existing North

some year, a leeway production their centralization changing health many to to allow delays and this drastically our facilities respond time rapidly the in first half and China associated current landscape. North are the to While of sites control. risk of the of Vietnam our in the of with this during in command out transition the and business facilitated transition This American caused reduces centralized political transfer experiencing by our customers positive

and We Mexico North significantly U.S. the they advanced increasingly efficiencies recent customers overseas for as American positioned the U.S. cost Mexico analyze based in and of production production we're quarters push well the in facilities a our tide both for the appropriately and as of and returning result, total based

Also, we continue to ramp production up our Vietnam. in

While competitive, our to marketplace significant very win competitors EMS businesses, we from continue remains and customers. both existing new

enabled During devices. won fiscal temperature quarter the consumer programs new control we of WiFi second and devices, medical involving signage XXXX,

customer. customer Our lowers impact future more the any broader and of diversified by slowdown potential one base a

our preparing been While we we for coming periods. have carefully expenses, managing are growth in

invest we and XXXX our of expansion in U.S. fiscal continued molding Mexico capabilities facilities, the SMT metal the sheet including in to During plastic have and

few With integrated see real respect sheet very growth North competitors strong we of in programs, size our and electronics and America. to metal-centric

of We less deployed manufacturing made Result labor equipment intensive. X efficiencies been has and annually. innovative effort in and approximately decreased has improved our million also each of manufacturing operating production new has our of facilities, this which expenses

Moving China. provide production Asian well into to Vietnam ramp foot costs, in XX,XXX war we hedge the footprint with to reduce augment lingering continuing square as or new as production future against an uncertainty our additional our and manufacturing quarter, are third trade facility in

in vertical our steady unmatched size. of of of by comparison continues other Our and pipeline footprint be business our new competitors the our to boosted multi-country integration, manufacturing level opportunities excellence, EMS to sites our

factor. OEMs uniquely a integration continue to with Mexico, located terrorists U.S our risk uncertainties face pandemic and an about supply-chain shortages, facilities while landscape, As equipped Vietnam be we're to manufacturing geopolitical offer in uncertain and mitigation increasingly and industry vertical risks

growth expect We quarter remain revenue opportunities in and going our optimistic growth the about forward. third for

Breton presentation. be our now of pleased questions. portion and formal the I answer concludes your to This will

Operator

Instructions] first Tieton Capital. with question [Operator Dezellem And Bill comes our from

William Dezellem

normal I question. would with like start to my

three that of you is also you're to referenced, for those? You have with And the three? production the size you the share what of timing ramp the expecting each at would customers three, us which new

Craig Gates

XX should new the Health million quoted a start building around is about and it's categories. Find, it's X new in products a at million range. care the volume that annually third in June. to the get X pretty is sometime of it middle on because about And also. hard We million one handle one

William Dezellem

to the me to something I reducing remarks cost. your your if mentioned in shift there and kind may shop relative of you metal Let that

installed I reduce would that? around think by that's if heard correct, And you million. equipment that more would $X detail costs I that in some had talk you

Craig Gates

for we metal talked the also overall was $X an very There about And shop. metal. some machines used are expensive, sheet the in new of they're And Well, included cutting a reduction combos million. fast. are but very of that that equipment sizable laser turret new that portion

yourself So a the can they by metal out cut lot quickly of run through lasers the make labor how part. and they

William Dezellem

quarter this relate And to would kind cost shop. with extra the of that had metal in that challenges the the you you

could out cost to that extra of - then actually that highlight the won't you the in shop challenge or will metal think and of this and I equipment the the do in called was the help size future? the what magnitude maybe or

Craig Gates

story, going in for going to little a bit This put a so context of to I'm is it be have to you.

William Dezellem

Thank you.

Craig Gates

three was the We customers shop, in big which new. had completely metal of one

And of move a was built out that classic that out out product business a case was of facility in built which The split an that had a new Mexico. trying we else's had And one the facility before ramping of they in our one Mexico, a One existing never we a company new third to themselves. product. into of really was of China. somebody never Chinese was China had transfer the Chinese

we the specifications ramp it timeframe, were So tried way understood. the as to well that back and found June/July in we requirements starting not

to though So for their the as their startup was their the our understand And market product getting that the and installed their ramp product. customer unfortunately, for requirements requirements started delayed delayed, customer even delayed. and new weren't specifications was production analyze

that well I to new China, we So to start of in we had of trying At the we his customer in time, as finish mean us out Vietnam, of the part had their bringing when between ramp when Mexico. from business could in business actually the same programs squeezed to was build. moving as our out China and got we build competitor

the new move. And then backdrop In lot that had a to was metals customer and/or everyone with this into specifically. of launching. the product driving back particular, third tariffs the all were was of Mexico happening And

The intense intense. to was for So of and of demand for employees tech some product was availability unrelenting. intense. was And the equipment the skilled higher run the competition employees also

our So, time. of we were three that future our of customers some made of been two quite for these had past and decision part part the them

decrease to that hiring same the skilled at expenses, time invest amount operate in equipment allow of overtime, the So, load. to no had the to amounts amount we type large the we're training large as we a that but facility under buy would costs large of us a decided required choice of of labor to of this amount trying

quarter, got we at So done the met when requirements. we when customers' what done we we the had indeed looked had with

They were $X.X happy time, over and continue us the are million hiring $X that bring we quarter current training and us business. not had scrap with But our repeat million should spent the costs, costs QX. and somewhere like in between to in and

online us. So is would rush additional which would to this the customer’s delay not but with it we peak largely equipment to able want of of this by effects and diminished a being like mitigated bought the enough one have fully his business, peak and equipment caused start have it. have the And on we certainly - buy managed is ramp to now was didn't because

William Dezellem

have and XX totally go of easy of And and XX year I math if I $X you $X.XX in or to for million Is not about if partially the I $X heard make offset just and said would with the something extra so of earnings right, you eight to the $X.XX but to quarter top impact that XX. $X that that done have am implies million thinking you cost. versus of myself would like So on right? that, range million

Craig Gates

that's like possible. seems it Well,

the than the rather took You XX. two

say like the yes, So but XX I'd maybe. it's more

William Dezellem

and XX $X.XX your $X.XX versus and the with to add Okay, $.XX end to so eight somewhere closer if take XX we I up range? to

Craig Gates

Yes

William Dezellem

new that So you big the been equipment what with of installed fully you impact and would events? to extra this and it proportion confluence had have had cost been of able offset

Craig Gates

Probably half.

William Dezellem

SkyBell your ring that Did the curious, their the of And holiday then previously benefit about customer for to way or not am to obvious have course talked in SkyBell the you any all ads that's of season. some over relative does really reason? that demand they applicable I

Craig Gates

market when market about the in you that market. think go products schools that market. talk I talking every believe you're a product that And it mature about and is the applicable in new market, creation about business versus benefit a I the add creating

that doorbells. continues think benefits So, strong. demand general the be certainly I ad internet to every SkyBell category of And ring

William Dezellem

I’ll back let someone and back. else in ask about SkyBell. I’ll queue step come

Craig Gates

Okay.

Operator

Instructions]. [Operator

question Hughes Mike next Our Capital. with from comes SGF

Michael Hughes

facility First to I you said on Chinese in does for revenue. X% of this at was think your X% the stand responsible China, June generating quarter, about point? Where the that

Brett Larsen

X% X% closer to to down It's now.

Michael Hughes

Okay, X% to said at was when it of you it basically the X% a up I and June bit facility losing back Is in was money little level, breakeven. this point? think

Brett Larsen

to breakeven. be No it tends

Michael Hughes

do a Is few quarters decline? continue percentage to it going where you envision now? And that to from

Brett Larsen

the new opportunities workforce aggressively to are be occupied with to capacity. and continue keep in at current China to We looking there able enough

transferred that that X% building as they to norm today being to is current the Some of are speak. we X%

Michael Hughes

keeping open because that is that function interest have there? And you your facility purchasing in your

Brett Larsen

Yes.

Craig Gates

Yes.

Brett Larsen

will Regardless function remain. the purchasing

Michael Hughes

So is that purchase from not? actually can I product think function facility independent wholly the in is the or manufacturing

Brett Larsen

Yes.

Michael Hughes

Okay.

Brett Larsen

support fact, facilities. we of our In all global

Michael Hughes

then I And on Okay. September quarter, number December? the some the revenue, you that into did Vietnam sequentially think ramp in had facility,

Brett Larsen

yet. not invest continue need and Vietnam. meaningful to It continue to We did, to accelerate in but

Michael Hughes

factors main gating What are there? the

Craig Gates

what's you into listings. going on one context right different of going That again, is for its and Vietnam customer. in now hundreds for products Vietnam of out product coming that's So another has customer China the

us be about they the Vietnam. decision pull that ago partner, customer So wanted they that nine that cool months part into to the made is wanted to our

majority moving from be their China the business vast of will Vietnam. they to So

ramped in a it's various process deliberate the listings has production them down of that ramp to we But up in as and those be China Vietnam.

one a listings. call We do have on of run to each go and through those

it of your not first they the also people do you call We're relying those him to only match what we So upon go product we here that are ship set Do want? and a of when our out hiring is say, to customer runs. pace qualification with we here Vietnam.

So With we the at one it's going this want. an along process. orderly scheduled and that's customer pace

Vietnam the So qualified our a disaster get in speed in we seeing a customer. people them the mismatch China place. we're new with is limited in costs goes disaster in and in create nor fast having not which seeing big in listings big in Vietnam by costs how that can of are a each it by But we

Michael Hughes

producing And one it it's for that just you're plan? the one producing customer that's that it

Craig Gates

Correct.

Michael Hughes

for you do couple over where next Are to principal envision going add And this quarters? of to that be going the facility? you customer customers or is that the

Craig Gates

be tours on that they're intention make with tour two going going virus facility we their There with customers. next for there months on do in over customers what were The products the been and scheduled delayed. the - what's to is will adding their with four prospective the those to tours decisions have

more interest day customers has been kind of with Vietnam, announced high is now. the sure ramp suspended intent certainly we in So, and from it. right a very state we're for of But to the animation the

they’ll building. customers had the empty We tour

there bit until I’m quite growth be of So confident on everybody sick. a done it's a be being and business just Vietnam going in gets will hold to

Michael Hughes

did facility of money the December put - And bit that a in quarter?

Brett Larsen

did. It

Michael Hughes

will And the in loss that quarter? be larger March

Brett Larsen

will It be

Michael Hughes

Materially

Brett Larsen

or two this penny was last a quarter. worst it Probably than

Michael Hughes

gets is don't third there asked I think where to in came fourth I And this on penny $X.XX. there's I issues. this then had saying the you math earnings with in been quarter you it or up that Mexico a quarter row question a two the the would hadn't Bill think through he maybe $X.XX. ask in this again. I'll you're if just I last and And Vietnam know or quarter, ran And have issues the what have been about

put So, is guidance in the in for current you've past there guidance the March quarters? the few more for conservatism the quarter then

Craig Gates

We're just hope by getting I there's haven't squeaked I sick conservative. barely more so

thing we that so. the guidance after have hoping quarters issued that in we've one got we when the on doesn't been didn't us We're already plan the coronavirus happen, staring you the four last say, damn but As another. face

Michael Hughes

Sure

Craig Gates

be damn after or will fifth this the another. one So thing

Michael Hughes

Right, are on then in the that question million just that so the last right talked number rather. - March you kind saying quarter you and from clear me, starting of $X about one I’m

it $XXX,XXX to is to a I'm about not correctly? You'll start save think quarter or how understanding that that

Craig Gates

started actually We of this the quarter. to save beginning that in current

So October our expenses. but by and other it timeframe, got swarmed out overtime

happens some get look we’re QX we as that's, in at from also. help expecting So what to that

Michael Hughes

And last I Do that think couple that $XX next number last months? said over last it the I you have was new the million customer revenue one you to What's you've quarters. handy XX expected provided metric that's ramp the have over quarter?

Craig Gates

gotten recalculate and because I I'm again it didn't happy it. bigger it's about

than I it, rather improved to has it but So calculate forgot diminished.

Michael Hughes

businesses or the is success such at just any bidding And higher that out yet margins that is it hasn't competitive happened? landscape

Craig Gates

there a is what pressure of want I say little would you less you general, little - and EBIT a less do bit in an know that? bit is

Michael Hughes

No.

Craig Gates

No, okay.

Michael Hughes

reserve Somewhat like auction? a

Craig Gates

doing Yes there the thing. same

So on. an time see right We we something marketplace hear as next a and business goes this have many, many the that by of relocated XX% from having lot are year. I'd less their China and will make people of boards EBIT our say to of like proclamations feel that there's going now CEOs

are that but running a a little it a buyer’s of a was to ago. here than like less and differenXt year all a makes again, it And not more it It's market. days bit bank, the of bit little seller's we're and little a is market, happy

Operator

next And Melas Management. with George question comes MKH from our

George Melas

corollary question a that I just to have asked. just a maybe few that And one questions was of sort question hey.

revenue are months, much of going topline? you a of out do XX XX your of next new to how anticipate the [indiscernible] revenue you flow have million sense If so in

Brett Larsen

We we that about we even it, one have make talk to can't a make it. sense away another. damn we you've quarter well Because are quarter of longer don't anytime seen but a out a predictions than thing try after predictions

stay to about the happen So from going what's we in talking next year. away

George Melas

is of give historically, a sort or expect us look know meaningfully can sense But for do industry? than if you that I is you million historically less mean, of no I you attrition what be historical you at XX that is rate or you probably to it something is your is sort an there that is that pattern there normal real - - and think

Craig Gates

at history the the put you and a if look attrition you they company, of doesn't word. happen rates, it the on good do to If industry because if to tend that's lumps, lumpily averages try any really

George Melas

Yes.

Craig Gates

have customer say can times I significantly me leaving big And that guys been yes, when we're say diminishing? we asked concerned question, of have risks do we tell a there you you see the or couple. what I there a all then and a same about see been would me times near in significant anything don't And that asked call I you risk. when have question that's I

who look us. we we when competitive significant a risk big out right see had of has customer leaving So now, no

risks right succeeding, sure threat. or are companies. I competitive failing going as million of But XX say any young with some business see to can't plus what's pieces customers that don't at of of that do risk I piece significant of business of see big happen for that and that's changing But marketplaces now, them. new are we is

George Melas

forward. I for is question was there also a them. SG&A three interest wondering sequentially The particular quick just down runway I'll Three sort I'm down good them, same or you can and was The just $XXX,XXX expense answer going was in that? a to benefits of that's Brett, bit quite sequentially. - numbers if then think any - of and regarding in scale maybe there need And questions so

and that And how pay cost that flow sold then of in does coming the quarters? do strengthening the much so primarily to you what expect of goods impact was and

Brett Larsen

SG&A, quarter. million, Great, quarter. the back to in roughly a there did anticipate similar $XXX,XXX. slightly far lot that I under give sequentially uptick credence so during we was through to the no looks it offsets went X% slight wouldn't that like I first really as one-time for of or Roughly $X down as just think I as about SG&A. about would a levels was

George Melas

Okay.

Brett Larsen

dollars I were Interest $X.X going hoping our expense decrease to carry that course to a will level to of that of quarter that the the of would But that has this carrying of amount fact up on we're some is expense. million debt inventory of direct in interest we're continue the relationship going to we quarter, of less the drive that roughly I'm during that able tied due expect forward. again have average to inventory

George Melas

Okay.

Craig Gates

don't not Year. you of really kind so phone the because back the ask it. but say didn't going Now Chinese to on least this I happen want George, hears We call is at China I question, what's everybody from to is know New

parts So see been have dock. the the left of dock that should shipments we already boats have missed that and have left not

be part, whatever quite build. because could the build one or troublesome world to can't get is this As it us, I we the everybody guess world SkyBell’s trying the in in for we're all else we if including can't

So of suppliers we a the with parts come going a bit these quite than are how we're today more going online. based upon back during are normally of and happen fast situation to Chinese to all calls unknown what's in

George Melas

costs maybe base exposure. higher portion unhedged labor you just on or you the then - the say? on Brett due that Can of And to your mentioned

Brett Larsen

Sure.

George Melas

much was continue? have I the base if to we are mean, How that that does going - levels these

Brett Larsen

our So to last risk. peso Mexican that had It happens of hedge expenses try we of two-thirds majority hedged. so roughly this a those we quarter,

similarly looking So this we Mexican for X% about having third, our quarter. and more to impact to having on $X.XX those roughly by earnings. remaining pesos ended a that ended up third spend up We're

has The year. the not really calendar from first the moved peso of Mexican

$XXX,XXX - during as on well. that So, would drag the roughly during a expect, this - quarter I earnings quarter of $XXX,XXX,

Operator

Dezellem [Operator from Bill with question next Instructions] comes Tieton Our Capital.

William Dezellem

go of reference have you didn't And made remarks $XX you been sounded Brett like million important, fully said mentioned you was is with that? follow. thought that mentioned to something opening you the a happening would and I it I tell something inventory. could you your that significance back number in what and it us but it what

Brett Larsen

sequentially, to inventory amount reduce by assets $XX.X Sure we're able contract million. the and of

are to last revenue standards that to So able contract the new we’re of on recently recognize Really, were goods essentially assets this if you look we during capital just inventory, invested X.X% at capital that million the in, that reduce were by as Key year. that due passed working Tronic recognition that the quarter. able to fact really has finished XX.X or revenue working

William Dezellem

So but inventory asset revenue reduction I'm mentioned that ASC does the play? following into contract where reduction, recognition, then XXX you come

Brett Larsen

So that that is what asset. causes contract

a is inventory you still asset really have contract you’ve possession So as that recognized revenue. in essentially the It future your of receivable. is, amount that

William Dezellem

And what? so that I and on contract a implication you reduce, reduce the here, apologize slow for asset pony being if but is revenue if you

Brett Larsen

decrement a to revenue. It's

William Dezellem

So down make if sequentially? Brett would you for this easy me how contract assets went much

Brett Larsen

million. $X

William Dezellem

assets $X would million So otherwise had flat? been revenue was that your you your it implies I contract than correctly lower that understanding that have that been - am

Brett Larsen

is correct. that Yes,

William Dezellem

hold on XXX having of So, revenue, you instead means here would had million XXX closer million to revenue? have so that

Brett Larsen

correct. is That

William Dezellem

we And earnings that is revenue would typical income extra that have revenue? and that have been $X in margin of million normal statement would that to apply on that had should you a your meaning

Brett Larsen

that because essentially built. the be to more what than shipped of fact careful there product have we we I

going you're $X absorption get not that to the the So absorption, million. manufacturing on

William Dezellem

Okay.

Brett Larsen

say I'd margin, gross X% X% incremental. typical the of probably portion The Yes.

William Dezellem

that we that's and we impact X% that million somewhere And divide million if that’s on pennies of of affect tax XXX,XXX in if basically quarter? $X shares, neighborhood. by couple take another the So XX.X

Brett Larsen

Yes.

William Dezellem

then or implementation here special ASC initial XXX that And need the we're time? with of deal something to there going out evens is with that going something of is to – about that forward now kind

Brett Larsen

Unfortunately, at that's every to quarter. probably going have to look some something we're each and

William Dezellem

Okay.

Brett Larsen

quarter. goods recognized it the on amount based level So hand the the of have does finished the of at that end you on revenue impact of

William Dezellem

it's Understood, include okay or finished only does and it WIP? goods

Brett Larsen

It WIP. include does

William Dezellem

does include And materials? it raw

Brett Larsen

does It not.

you quarter have and purchase under customer substantially end before for that completed a your WIP revenue. ASC new have record order So, recognition, that XXX you goods revenue the the finished

William Dezellem

Okay.

you into you So saying agreement, other come handshake order play? goods, but then just had may you a if WIP not purchase have that – it whether a purchase you or inventory, it building you're order, have but finished a you're be if not said so some sort order, or do does for it of a contractual purchase not

Brett Larsen

That is correct.

William Dezellem

the Okay, so wisdom of debate won't here. accountants the I

me I you to shift may to of the questioning top of had line named potential new because from XX that Let you're one manufacturers. to this customers calling XX about if new that any the now the that being you survey? of benefit announcement are one a relative where metal yet quarter seen Have one you top according simply they know

Brett Larsen

No.

William Dezellem

release, it but nice press business So for benefit? makes no a

Brett Larsen

can’t no You say have you business benefit.

it read this tell do did they You can it who called you somebody read tell that just they was us it I – they – sure do of it percent didn't because I it. can't you with XXX that because degrees nor

William Dezellem

back of ago? talked earlier into how business Fair you prospect lastly, of next the one further pipeline that questioners point, in characterize you. I'd year to the XX months. one okay versus thank pipeline, about amount the would then prospect go And the like ramping today

Brett Larsen

a adding as pressures, about say and of for started place on to out I'd up ago. pipeline the comments the year all with pricing to along people the my come in are a Vietnam availability in we on improvement additional that competitive put China. to expenses pipeline to The and half prospect of strengthen, sales continues pressures

William Dezellem

are Craig, of sort increasing magnitude that terms here looking what of at in you pipeline?

Craig Gates

probably probability of year Well, than the it's it open number started ago. It's pretty quotes hard to trying keeps getting say bigger. weight to to a give all and number, XX% magnitude a bigger you that was XX%,

William Dezellem

you Thank not having good luck hiccup here. cause a and Great. coronavirus with the both

Operator

comes Mike question SGF next with from Our Hughes Capital.

Michael Hughes

for just just you and to between and speak few Question Thanks markets versus break your it today they how taking then on you and up Could look kind forecasts. demand industrial? consumer my a for follow-ups. ago customers of maybe quarters

Craig Gates

try. I'll

market. And care is looking they're of fulfill get for because if parts massive we if we our can heavily the a upside, in health that. So larger know right we don't consumer do one now are to don't customers can know which the we

and if weeks customers neutral out look I'm given use to and a I you what, not calls try going are that negative metric get - to to going industrial from At look week. the what's time, phone at of on. customers. I as week, a get the know you positive at or couple any classify Our give that this. figure you I'm a going week actually our we I

A orders, year about cut cancel was ago Everybody just was ramps, week down flow out, every trying called to back. negative. inventory business try to push this delay orders, their who time,

three a the past people looking of say in positive or of terms than for to how get months, scale up XX a positive I'd more. it For better probably calls of seen a I've pull at neutral. of stuff slight two a speed in, it out the it's been incoming

Michael Hughes

you their So the customer reasonable coronavirus because issue? given not just fulfill in issue you healthcare able aren't the that referenced might place or curious, have the the expectations to and be capacity just what's of you or

Craig Gates

its and Its coronavirus issues. parts to parts due the

us that is standing situation the ironic this all biggest world's the the demand. of the from may coronavirus demand fulfilling kind it's driven has So coronavirus

Michael Hughes

be driven like a thermometer get that like it. or the might the coronavirus and can't something for So something parts you by

Craig Gates

a healthcare Same consumer of kind boat. item. Any

Michael Hughes

that's side, speak been been there if in same there can you the as Mexico last running name, wondering just still by individual And few I'm place. over any but it's then the changes business. just on ramped you've years not to the operational operations the

Craig Gates

it chain now. of has We had Christmas orchestrated site began VP the been on at the at so there and retired that of person beginning we for almost Ops, years Christmas, The two our quarter. had

company guy new is and VP but stepping the taking around on into Ops that it's been XX for years, of job. a So role for

Michael Hughes

Okay. And who fulfill position? will his

Craig Gates

He had promoted. two are tenants both new that getting

Michael Hughes

just for for the have last do flow question and cash then the quarter? you And number CapEx you, operating

Brett Larsen

I Yes, do.

a for $X quarter, operations. year-to-date provided Just second. cash CapEx of $X the one roughly got was million from million -

Michael Hughes

to let's but you're ramps the $XXX say And you capacity few wherewithal still that not actually it the revolver million here I revenue over out putting us quarters, the on the revolver on what's there ramps say if have the finance growth? let's know level. Do next

Brett Larsen

were actually to quarter. the We the increase during revolver able

of we amount So, the have capital feel we’ll available. in that confident

Michael Hughes

where from say can you and But went to? it

Brett Larsen

$XX the million in to resolver. $XX million

Michael Hughes

seeing that what you're pipeline drove or decision? in what was response that And to your

Brett Larsen

expectation the additional some investments. revenue some growth With require we’ll of

Michael Hughes

On side? the CapEx

Brett Larsen

capital No, on working the side.

Operator

Our next Management. with question comes from MKH George Melas

George Melas

Craig declined there clearly were I'm your you pretty just looking a your look it ago. are or surprised? and at or And there fabrication? there there the versus the as specific you And part no have decline revenue the of areas that, metal much year-to-date Are you've real shop across is or that there very business board was of identifiable at sort are grown metal pattern? year

Craig Gates

And a two mainly market accordingly. due was to of business. share large in It customers, both of their our as have lost went we their production, whom were part down revenue

George Melas

much sort performance there, - impacting that of it's very their So their is you?

Craig Gates

October the there factor across - had across the wanting before softness at versus then timeframe across pretty people Gates and those we about Well, push through out. those general delays were across two everything positive two May there - our and is identifiable anyway to then the much board negative I board the customers is because business talked of the that during the as but -

their time spend got some are because a of and of of the to room that about distributor got terms is contract be dollars I calls That largest manufacturers found what I world October are Economist visited of the revenue but who electronic recognizes we discussion turned leading into to coming our indicator. billions round Like in kind of really interesting said the year. one a of per Head he interesting in. into And components with

patterns. of of we he factor doing. data modeling that pretty interested he does were was was their the the beginning And a gathering matching on upturn order and he an So lot see And based. all in analysis to October, kind the broad seeing of Gates of was both economic

in every analysis with his positive, neutral. kind of And month. is we see, now negative his come or so, analysis giving is calls And matching what up as the he me

George Melas

Craig call now from we the that Can Index Gates' on?

Craig Gates

my sure, not I'm I associated it. name want

we it something else. maybe call So should

George Melas

the Larsen it we'll call Okay, Brett index.

of way areas fabrication competitive on a like side, it or business you're areas the ground the other I'm are more the getting sort of you’re and seems of in not or you? in other so deemphasizing metal shedding losing you’re but Okay, business not

Brett Larsen

No.

Craig Gates

No.

Brett Larsen

all. at Not

Operator

in Gentlemen, there the time. are queue no further questions this at

Craig Gates

you for talking thank forward we with look Well, everybody Okay. and to today joining us end. next quarter

Operator

This concludes for you Thank your today's call. participation.

You may now disconnect.

Key Tronic (KTCC) 4 Feb 202020 Q2 Earnings call transcript