Earnings call transcript Q2 2023

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Operator

Good day, and welcome to the Second Quarter Fiscal 2023 Key Tronic Corporation Conference Call. Today's conference is being recorded.

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

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 our is Valley

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

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

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

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

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

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

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

our announced, XXXX impacted starting the quarter is fiscal revenue delayed program currently a million the third second revenue quarter $XX from was a in large quarter. XXXX, of in second this the production of equipment six-week fiscal delay program underway a for This company. for by for but with previously power As and leading increasing by production approximately

components. lead some times supply to key saw production, respect continued limit to chain improvements While the certain gradual global constraints in we of with

the XXXX. X.X% was operating gross a for margin by storm margin X.X% facility, the gross expected compared margin damage well as quarter second and losses in the business margin of preparations quarter the second in was of other of For increased by operating as the an to gross quarter labor and fiscal in impacted interruption XXXX, second operational Arkansas in period our same Mexico. X.X%, and our in of The fiscal and XXXX U.S. both sales was and X.X% adversely margin growth fiscal of related to costs

While profitability increasing revenue, of increases portion will improvement. is limit expected interest quarters in line higher coming our of improve credit that with rates on to wages expected in and a expected

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

the fiscal million damaged Arkansas gain storm included related second results of to share Our of $X.X equipment per or approximately XXXX damage $X.XX quarter at a for insurance -- facility. our proceeds on the in

determining to We are further interruption incurred two the in as a damage. operational the business result proceeds of related past storm the still losses quarters

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

COVID-XX we're among XX from some encouraged receivables days, reflects million respect the from which XX in believe to a to second to supply quarter, our and Turning and the continuing of new days, of total $XXX.X delays customers chain ended DSOs X. current quarter Compared by of prior Despite continued improvement to problems ratio and with working at chain down million we decrease programs, transfer supply disruptions to with the we production $X.X and see our due to issues. the the ramp capital balance X.X sheet.

for and or by prior coming reflecting the growth fiscal end from equipment the our expected the by power $X.X large outdoor in production inventory period, the of X.X% our million of quarters. delayed approximately XXXX, At for second program quarter preparations increased the

customer historical periods, demand worldwide look inventory and much future production. carefully historical balance slowly out we chain further of for future time in our than that attempt levels. turns more the expect planned quarters, in of the we likelihood supply to In parts state see the requires net successfully in bringing the to While in still we improve

for we year were facility. to of expect operations, the Total for increase fiscal second $X.X for the modernize Arkansas also $X to the and in $X.X gain CapEx XXXX on million total quarter be We're should damage million. efficiencies million storm which insurance capital our proceeds expenditures utilizing around our

equipment, plan SMT we continue While eye careful in our growth we keeping and well selectively plastic add facilities prepare capital improvements expenditures, capabilities, make as invest utilizing as molding to for leasing capacity. equipment are on a and efficiency to to production

disruptions will efficiencies, operating from significant limit production XXXX. ongoing growth expecting that and the supply the fiscal continue we are impact to chain global Despite adversely in

we the third per of and quarter $X.XX the report million million, to to the fiscal range expect in $XXX XXXX, range of $X.XX earnings diluted in of revenue For share. to $XXX

increasing improve coming expected interest of While improvement. and to revenue, quarters with rates expected wages in that of a limit profitability will line is portion credit increasing on our expected higher

temporary Mexico, in other While our does chain possibility facilities and disruptions China any significantly factors, potential to of still U.S., periods. of Vietnam are fluctuations operations Customer costs, the coming operating, demand currently closures. future as and and in which remain supply uncertainty could impact the future

of over are demand that pipeline In Key to Tronic. win customer we positioned summary, term. new well expand to programs to increase unprecedented increasingly we sales the continue for business to longer to grow our EMS and profitably prospects new our continue levels continue believe We our and

me. Craig? That's it for

Craig Gates

Brett. Thanks, Okay.

the announced up. programs In program production a pleased Production the essence, now for and base new on back that program. large We're that delay by simply and ramp program ramping from rapidly XXXX quarter equipment customer revenue of the the is our expanding in track second with power for pushed fiscal of previously six-week successful quarter. from despite

of supply second the created over see sprinklers that outdoor U.S. move Currently trend the involving new We to support awarded our to certain automated the returning the the improvement will issues favorable over for power next severely record management, production XX% and in limited won have We backlog growth battery manufacturing North periods. seeing year. technology. backlog During sensor we're contract quarter the business sites biometric continue recent year of we components new XXXX, fiscal global and into in America. quarter with third has that fiscal in equipment, programs

logistic war the not China-U.S. in only strategy. smart problems, is services. for OEMs overly but contract becoming on continue realize We logistics geopolitical long-term believe increasingly they customers design to time, more as China-based their tensions traditional Global manufacturers or strategies. Over nearshore a and onshore Europe, product decision the their widely dependent accepted for also outsourcing production to examine had become drive these to

opportunities we see a continued for As growth. result,

calls, for in Tronic As customers prior Key they respond geopolitical the we've move offer discussed built to pressures. we ideal to as solution to

of represent a most which X.X in is million square Mexico time. of Our feet (ph) located [contiguously] over Juarez, acquired facilities in facilities in campus nine

U.S.-based have levels forces business macro from Vietnam greatly allowing America. manufacturing driving increase restrictions government sites is and of there facility back North COVID-related the travel us benefited Vietnam Our Moreover, potential customers. the also plant the our with tour new abatement production in to three to continues and to

our managing systems serves supply the without group of business in crippled plant Chinese ground added Shanghai directly. customers and entire procurement which replaced capabilities issues corporation, the that many boots to in that to it the China. Vietnam serve in Our management our has that on staff Shanghai, important and allow for competitors the moved Shanghai we has is

believe design predicated The broad and manufacturing deep production, global program-specific we proving on is our we footprint expansive program completed services. and combination of ramped design Tronic's Key and business. are in design a a have And, effective of extremely that challenges extremely knowledge and makes our new of wins design to it business into once our sticky. medium-size Many capabilities capturing large- be our

metal invested complex and range manufacturing automated and volume forming, assist, complicated well molding, a including as design vertical test of as and injection in PCB also blow, integration painting We coating, and construction assembly, operation knowledge, multi-shot, equipment. process high plastic the gas of wide assembly,

a from set may expertise size. our us competitors of similar This apart

is one-stop portion the transition of to a much our Key value looking than manufacturer their expected As a to change. a the find make each leave customer less will in group to a together result, Tronic, limited to shopping cobbling of which providers contract risky facilities

American headwinds fiscal these supply and from present facilities. but some the show respect multiple do signs price further components. the some at to price the increasing global recent uncertainty chain our business of offset for XXXX, stabilization same with are particularly continue time, to commodity challenges, North the Moving by into wages abating, gradually At reductions

well tensions Vietnam We that trend favorable the contract will America, believe we facilities. political of our manufacturing to North we with development. our continue indicates are fact to backlogs logistics as growing concerns returning supply for records problems, to and Along heightened and China-U.S. see global drive of improvement setting expanding The record as expect and all see backlog business in the record in a with associated revenue metrics quarter third revenue, dramatic the we momentum. level assurance

a over example, past has For active of number the prospective quotes with year, increased eightfold. customers

of the terms selective increase to revenue and people we implications for powerful on. favorable parameters to in more be customers able mix bring the and more our well demand negotiate than obvious have particular, business unique In as skills, past, location unprecedented This pricing potential. in in beyond has new growth we the as been much

the performance on short should profound. in shift effect manifest this While be long-term not in leverage will term, our its

with fiscal combine unique attributes growth Key positioned drive in As the industrialization the the the beyond. the Mexico, global for of effects should demographics American accelerating of to the of economy and U.S. be implacable uniquely of and North significant XXXX re-industrialization Tronic

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

Operator

Bill [Operator Capital. comes ahead. from Tieton go Instructions] first Our you. with question Thank Please Dezellem

Bill Dezellem

you. Thank

delays what Tronic Let's if have customer revenues had those sooner? Walk you anything to that there? coming us in start, the could power done led happened to and that could, Key through, that if influence equipment would, with the preannouncement. the And we if what

Craig Gates

would not design the brand was new program development were joint thereof. I'm about can, brand like be can in you board. it happened sure that say There shared as as on the only I what there. Bill, and we that I all a delays a general, new product across Well, specific in

was In packaging. final delay fact, the the for the artwork

So, it's programs we program, you product. mentioned in annoying. off piece million. another on the But was XX pretty before just involving of equipment, awarded outdoor got And hand, has a that new were we we design of me, same other another fact, And $XX business weeks which ask us power six about customer it done. months on the out

Bill Dezellem

helpful. That's quite piece And that next of business. congratulations on

Craig Gates

Yes, thank you.

Bill Dezellem

never for just extreme seems them, since to us packaging, the in six-week with of through but -- sounds that? lot, I've me. like delay position That been walk so a doing of Continuing artwork kind

Craig Gates

a for actually that our business, customer product more retail It we is would a common it manufacturing in hope are customer. you than is selling where a to

know, say to are, the agreement artistic that to and packaging, of for very, joint retail and acceptance. critical or customer. -- as a in I a So, is joint that artistic And happen knowing agreement the has we rest artwork. between you my probably And engineers And and very unfortunately sales how product no have our fortunately between customers' people. customer a our it's few it's has happen quite market

that are, fairly against produced. the common and our approved for packaging artwork we So, or to wall, either backs and get with trying actually done packaging it's

right new the again, is to time In demand a a upside product, fact, ability market. for we're and now yet in customer's looking into our different with increased a packaging big get delay the at

Bill Dezellem

Fascinating. Thank you.

does equipment customer, like? this and December so, October, was perspective trend help taking the in have the of place, month And what then of revenue power that's to that month in November, level of then the a just line us What look with January? the

Craig Gates

Bill, easy, zero, January... zero, And Pretty zero. then,

Bill Dezellem

Yes.

Craig Gates

What?

Bill Dezellem

Go At more of ahead. month least one January.

Craig Gates

Yes. was I'm on zero. lot comment in than but not was it going what January, more a it to

Bill Dezellem

production the of are you be customer? this for will about to what able And talk peak level

Craig Gates

No.

Bill Dezellem

January, is that run rate December, probably at in coming And were full that will in not the so months? they be zero given higher even

Craig Gates

five-eighth after three at really of of run we're full required rate production. about right weeks Yes, about our now

Bill Dezellem

business? think stated right anticipated the like? customer that of run that that And that release you $XX That's new million. original mind, piece piece piece if be an press annual of you I they of then, helpful. excluding in business rate would I'm originally, still looking just have the had this about Is Okay. business that a I won, is but you this of

Craig Gates

in number run be This expect this that original next middle rate. it at run annualized we than period rate. far as somewhat should of to that beginning as a for be But the piece towards to business, less the fiscal up an first year, of

Bill Dezellem

allude Would did whatever other you new the size? talk would wins then, product have through And you. of size. three discussion in asked And about the Thank be to you helpful. fact four quite That's you Okay. terms the and I on the wins that that these the then, helpful.

Craig Gates

three were (ph) around each. The other million] [$X

Bill Dezellem

Okay.

Craig Gates

facilities. Those really the the the three into headed of amazing representative winning -- last have year. pretty the what's the And would be those pretty rate are what Midwestern right Midwestern a in those sites are the at Midwest -- over word, been

that they're years. that's pretty said X.X years, they to over stable had going we be been for XX% growth, last astounding basically When since X the

I've going that's was extent actually to a delayed, to. happening As happening you, it It to we always little a but larger everything now happen. told expected we thought was than bit it's

the in size hooked amazing in been just $XX the So, $X over fun. the constituted is That Midwest really, cleaned. folks and to and me. million come It's then to uniquely to be these And gapped transom an million programs run they continue in and just the programs -- really range. rate are to

Bill Dezellem

even -- a exciting it's and are presumably externally than of butter margin talk piece to smaller them large And large business? though customer, these call about ones, presumably maybe I'll bread for ones, a us higher more

Craig Gates

you in overall with stickier pretty to be predict program design reliably also, going typically something margin, run went it. and develop can that a that quicker volume, U.S. lower that's is facilities Yes, there's to unless higher the

Bill Dezellem

taken like this? years with don't I the essentially time accelerated facilities, flat to the than should through than facilities place take What lead And from here. I -- to But change to you. talk of that's this or for Midwest to would Thank U.S. What the I more more changed up number a going want growth. you to happened?

Craig Gates

rock. overseas. in we the the you more and the gone is in with business the smaller command was has opinion so narrative, years as given increased, and of of tires. friction that now get a outsourced by to now are that be too Asia coming staying and pieces Asia of size of different as had grow U.S., Asian business company Business to from business us. to as as the has more dig than under business it's continues And are automatically be aren't will much risky. business become risky leaders when Well, of we business And up, as stuff have attention won, the friction and people to It's is corporate it's the general more more ago piece of with supply overseas edicts the that just People kicking just Asian to more the need -- agreed doing been piece prices -- out to to that acknowledged. automatically it leaders out just said have of generally five because successful every their uncertainty went we that more of

Bill Dezellem

were up quotes hear did said you you. eightfold year your ago? Thank from we that And correctly one

Brett Larsen

Yes.

Craig Gates

through have all ago, passed really it's And our even and been were of five this we a to quote and it's that but Yes, and to somebody me four, around are that in five now -- one we years single-line we've going six all have to had fun. real now opportunities, you know, through we doing four them opportunities order for fathom revenue sit probably big while like grow. over -- the agonize or -- of -- of ago, of process, them land four what we as been out years for to as are maybe we'd we've hard leaks of got bucket you five, the quotes replace it's pages and them screening that's used it's just

Bill Dezellem

Thank an Great. much. someone I'll very you else give opportunity.

Operator

Our with comes Associates. next ahead. question Grodsky go from Sheldon Please Grodsky

Sheldon Grodsky

Well, afternoon, good everyone.

the is still what's fully First is question I'm it up and is going repaired running, ask it the facility, or to status? being Arkansas or

Craig Gates

the are to a in the else. last It's is forklift machine arrive the just the everybody's more the probably bit getting the and up driving that's Manager of had trailer. it out running, off but down than trucks it and and and VP snowstorm weather and General We there home, XX% today anything

Sheldon Grodsky

Okay. Well...

Brett Larsen

[indiscernible]

Craig Gates

and good -- that and a to it's we'd I like had continue so last XX% couple yes, ramp. they two of But, weeks, expect say, to weeks, it's

Sheldon Grodsky

may the more Okay. situation, And as neutral far money it there as as be insurance or in from do that from coming you get here? be determined, expect things to

Craig Gates

be to No, in. think more some there's I going coming

company world the was in been surprise. good today, policy been pleasant very insurance and which the it been very in written forthright well live They've -- people. has was and a we Our has a honorable,

Sheldon Grodsky

sorry. So, anyway I'm yes, --

Craig Gates

the So, flesh five we we for replacement. is but in as fast. we in that some about the the have to narrative, times that policy just bones, that the put equipment replaced stuff aged, those there cool was on is thing the And was as said got now

that has capacity very And on facility. Arkansas of a massive that cost out and impact so,

Sheldon Grodsky

Okay.

on this know but can probably forward can meet than least you medium don't a demand actually time. or tell? growth more what for saying, short of you're term cycle how we as Are short you're to far at I Key to phrase period the based a you Tronic in as Now question, looking seeing major relatively in

Craig Gates

through Just a the we if seems very what's are from macro various rate us happening relevant, forward. going we analyze at the I growth for of sense nice and world as be I've certainly a metrics in as should gone it think and looking that

Sheldon Grodsky

always and the that company something in your the bottom-line. following for been I've gets to getting Well, of time long way seems a it

that of you of potential real out keep just finally to get sense every can we're quarter do I on what here. and hoping break going So, that some

to luck operate. hasn't you place wish the been an good that and I easy world So,

and floor easier you gets the able someone little So, take are bit you the question. a right cetera. et it with let's let I'll to contracts, for pick else hope

Craig Gates

Okay. Thank you.

Brett Larsen

Thank you.

Operator

with ahead. Management. go from comes next Our question Please George MKH Melas

George Melas

Hi, Craig. Brett. Hi, you. Thank

Craig Gates

Hey, George.

George Melas

I callers. of two Sort on want the previous to follow-up

sort those has can sort you're percent could then, between an is kind impact to have order X of make grow margins Can and how on into think sort have to of margins there reach maybe that. X.X% idea quoting on But I'm of to know I on always And the saying future, that? want X% about maybe love your guess margin? that I'm makes that. growth you I it I'd better. wondering and that in business the I you that be thinking but sort where go. and some choose an to customers balance margins very think would And strong, you margins. pricing, look is And you idea on discussion don't about to of a of elaborate sense, or if terms,

Craig Gates

of job happen. what Well, I'll predicting a now just a until try that five, do ahead were to a trying I better is what's from we our is that years six explaining of happening the going we time time ago, to about was ago, to actually manufacturer became in say, year contract

even Trump the And lessened commentary much so on so, the our no badness already Trump, COVID or happen we accelerated goodness very it at but the what certainly And further. of manufacturing to days, Presidency knew then, sped of of then going it was up contract realization time. and over the beginning

And the the customer doing so between now that it say, you you're the final now drop and needed with the we're call in because a to fact margin desperately before So customer difference be the not to would risky, sitting other we trying that we deal, to that there these sitting to let's bullets but old "Well, higher we by the sweating room, negotiations than would show happen. is be would a point overseas and is difference the -- days, need your X.X the close guys." deal that's that pre-realization a

we where act as they were on see not would get day. and us we perceptive good they And we see would And on through driven so, how that or were we don't point, and this away. anymore. as we act -- it could though to through If where would depending us how was going this good acting down have really we to at margins the even we're it, our were. business basically want to point walk lose At care we

the start road a And is our the maybe away. interested, When today, prescribed predictable need car, or situation and like But this buyer high or thanks. you're to different. interchange year and days of we bit prospective it's terms buying -- we'll for and you no is pay just of between and a they too XXX you, a need say, hold a down starts quite customers can payable just inventory used not seller. then the walk very we down road of, when we We're yes,

of hard George business, it from the for behavioral walking there's the we analyzing because potential we're do we growth, through to piece sure that and rule and for make there to as the customer a to negotiating, operational says there's by see quoting have going an but margin, better. margin, it's don't tell that, we're the is can that's And of me also that exhibited X% standpoint. there's any business not attractiveness to the for you the go hard I gross going as patterns only what fast well, you tell anything under it's And we

of semi to there's of as considering a win factors a position negotiating we're we than we're have this position negotiating. desperation strength But gob that So, rather from of deal. we're that a

it's that. to I get and at into better. a that going give you So, can you I, so tell you going get plug to would just nice that would equation, I least I I know but like could you better, believe number it's your can't

George Melas

and then, not being is one-stop becoming of two, a sort but shop that that it product in it component, to you're capability? whole put And because able -- retailer. box, really And your the that goes interesting you're by, your do of product, patching sort right? A, delay because about whole really for the then going to driven means packaging the a talking in that in packaging, just artwork, it's directly design a you some to And Okay.

finished So, it's product. a

Craig Gates

Yes.

George Melas

capabilities So, two the the those of have key in of you that real advantages that you marketplace queue in system? the sort have are

Craig Gates

example, of macroeconomic you give to embodiment that business, the And watching overall perfect enjoying. of that of we're probably the our we Yes. one predicted that an process business piece new we're of pieces and is and

going So to give this and two an I probably, you this but for do time to is I'm take it, I'll I just can example -- than minutes. going apologize, it in less

So, product welding and a a ago, required forming XX and copied XX a China in their then years product forming. manufacturing ago, his also complex a guy competitors him, kinds moved and a all China. to product to vacuum town moved pretty that of number in town a invented new process, and years that of hydro And

So, type China the location preeminent world's that town in became of of manufacturing that product.

uncertain XX more time they ocean than by to by ship their they as then, that quicker company the that the offset and really business make three a competitors market increase turn. and by, or and slight much in needed increase over to having order time service the in was a than realized price went in have here, could years, a two weeks margin in less last And the lot

back manufacturing us to so, to that they Mexico. bring chose And

factory our of it the So, it's town back went States, to in to now in a Mexico. West China, left the come and Coast

not be customers manufacture. the want what's other amazingly exactly ability cases, And going to in whatever [indiscernible]. engineering going is find big the an industries. guy In are, on that's it that that, lost cases, reverse and engineered I knowledge in design we just lost they've the the Chinese to now. on you reverse ability fact, to manufacture. call different circle who to that In But have many lost our right So, they've and some only of

overshot we of I the so seconds, the re-industrialization -- a XX perfect about U.S. And two and and just the Mexico, industrialization as example. talked minute that's So, the that minutes that. was of

George Melas

Craig, but was nobody track, that's keeping I think great.

Okay.

me because little in, fiscal What we margins. is you or a think say, fall perspective and you fluctuated, What your short. Let goal? to slightly it goal above a but I push X%, were margins on -- gunning are for be more we bit in like from margin the would that let's X% would gross 'XX? What always trying they've

Craig Gates

know, hope -- a for your you, I something if don't it than I going it's not give goes always number I'm that. that. keep better I if equation better what can't. wrong. wrong, be what goes forward than nothing look But telling to I I'm George. because From I seeing, should you from

George Melas

much how Okay. XX% much from would growth perspective, growth? sort growth of difficult XX% much And I a a manage? then, lot. Is is How is too growth growth very be to number? a good mean,

Craig Gates

in year. And don't take plus to site be any in you next the a getting see Well, if with There I XX% terms issue. which manage don't to that growth in see significant but problems the an an of may doing the within be, as Midwestern entity, half they used going managing to it, there's be I problems operations that. they parts, are going

George Melas

Okay.

Craig Gates

different. -- every There of is business piece are

it highly point bring to in. is of intensive Some IQ

moving assembly is competitor to just it a PCB us. slam of Some dunk a simple our from

those go answer certainly is factors past So, into but know, all I more done we've the my of, possible. in a don't than lot what

George Melas

Okay. Great.

for Okay. precise very those guidelines. Thanks

Craig Gates

good. we'll that be just Yes. there, X.XXX%, so in plug

George Melas

Thank very much. Exactly. you

Craig Gates

Bye. Okay.

Brett Larsen

Thanks, George.

Operator

go with question Our comes next Please ahead. from Tieton Capital. Bill Dezellem

Bill Dezellem

Thank you.

business. power you of So, piece you mentioned $XX had the that awarded another million had company equipment outdoor

business you awarded -- done that you produced for led of before had any any? current program give had to you the before you actually that they them, Given them what presumably have to, more want to

Craig Gates

get of while over to started to trying week. business people had over the were year fact, in quoting process the for We've now. design Well, wasn't nine we them had a it in they've a design in current our and this for factory months. But last been done. we've interacting We been We've new with year. for piece on still their just in awarded factory over until people us

[indiscernible] of first awarded So, until first of door. off it back wasn't chunk the they go product really the chunk saw

Bill Dezellem

Congratulations.

does bit about help. let's then, Okay. That a Vietnam. little talk And

customers customers like You factory. prognosis the can the mentioned and that had look now factory? tour does filling that prospective for go or What

Craig Gates

that hopeful looks looked point the very we at, It have close to to land the availability factory.

Bill Dezellem

everything land that have availability like contiguous? since and near convenient been look where Juarez I that factory, does to as the as And in labor area? Is not literally it facilities of what is

Craig Gates

So far, yes.

Bill Dezellem

And what expansion considering? are of currently level you

Craig Gates

considering get close be currently good other think to up what's a not by folks. would gobbled and it have We're to We're of anything. beginning how going understanding to it's just wise fast

Bill Dezellem

And labor What... factor, then, what about Craig? the

Craig Gates

still we're good looks Labor the region in in.

very of tighter, the where so regions at we're are looks far. other good getting but Some

Bill Dezellem

Okay. speaking That's And of labor... helpful. Thanks. then,

Craig Gates

Hey, going Bill, the people hired same maybe in Juarez. we're we've months, the X,XXX labor, last to In speaking two of place.

Bill Dezellem

And to people to that how some would left amount Because of whole about great of you hiring but those and just us does have a the presumably those are do? normal that compare talk resignation concept, replacing who that.

Craig Gates

I'd number normal hundred. say would couple the over maybe of be a period that

Bill Dezellem

was what that And period again?

Craig Gates

Couple months. of

Bill Dezellem

you said. I thought

a hiring run XXX of rate people month, and XXX. now you'd be normal hiring So, you're

Craig Gates

Yes.

Bill Dezellem

-- okay. might That

there? kind which of in that accelerating, answer is pressure or start Mexico of wage what's my decelerating your view to what's might happening So, next question,

Craig Gates

pressure feels it is wage the to Well, out. if us flattening as

Bill Dezellem

what attribute that to? do And you

Craig Gates

factors many to Too mention.

Bill Dezellem

surprised as are mitigating? time wage you're or bit times you would the you And a sounds positive. in trying sensing people five labor to are mean a normally that I Okay. period pressures that you're of as that pressures pretty as hire many

Craig Gates

about compared age time And across of kind ourselves whole at we that basically the globe. rest the the I'm to and the are the uniquely situation aren't fact with if that you demographic enthralled and some States into spend to oblivion. Mexico looking world, of the positioned Well,

would world. raise generally of by rest availability to to though even so, in prices in the good people law that States Mexico be are professional of the start And Mexico, looking they their I the continues expect may in younger to who compared and the life

Bill Dezellem

Right. Yes.

coming thank growth. look Well, it, you. Appreciate quarters seeing forward Okay. Thank to and the you.

Craig Gates

Yes.

Brett Larsen

Thanks, Bill.

Operator

with from Associates. Sheldon ahead. Our go next comes question Grodsky Grodsky Please

Sheldon Grodsky

I and going in your you questions Okay. backlog an that contracts XX% at these two all years? Well, unit all business, volumes in units is hand the increase as and bidding XX%. answers if we much like say, do not mentioned about -- rate you we're -- It rapidly. I do or growing not how different think could you and to but unit me increase How activity sounds listen is tempting volume? XXX%? your know Are had are the extraordinary in you much think you're up could talking you've in this next you're you talking let's

Craig Gates

have pieces have business of want to that dismissive Because per are can't your and for face, other board but $X.XX the reality answer don't business I pieces that question, circuit we of sensor. we in printed we that Sheldon, $X,XXX a be I it. of are

you talk answer. it's to -- impossible unit ask -- volume, when about even when So, just I about me for it's

getting now almost we of availability that used square given and to There the dollar to is availability to is And which that unobtainium equipment footage of. continues have equipment, The replicate faster get expenditure. faster better. a be lines of for

see growth, unemployment down, kind efforts to question to the an inflation big $X The you of four million see we our happen or and our coming add a ability improvement to lines is and Fed to the as the big going what's SMT for investor else piece. three drive more question that's of in is, in or us of do over commodity then availability and to everything the swamping do we recession a

Sheldon Grodsky

COVID general What you've macro Again, constraint? -- the side? and be between few supply on What it Or on the just do the do side? you the be from think chain craziness with the years growth? Would the think Would constraint just aside dealing been difficulties. would what a be major economical, macro your the you would design on the aside in marketing economy, manufacturing biggest it side? be from of

Craig Gates

I foolish providing absorb dumb service you think level or or our it while guys don't to into to what appreciation a or competitor but our to it's up for -- from I a incredibly you don't design new that, think to and a has factory that to anything, of not expects continuing it's customer the I constraint think complex. you're new an have factory, major because point not that and this I start the demands. think would have be don't to move appreciation happen program an at programs I'm -- saying had say you a move

I buy I nine-month guys a billion think with shared know you period. I that components we if X don't over -- in

happening, So, incoming our has every get a one to get system, to used and and get way price, to has through through documented timely to by a of our been into period, has laid those components has the whatever delivered has right to has inspection, engineers. purchased out be our and purchased delays at to be in be are at that has

is process that taxing incredibly and time consuming. So

mold we different. than it's a stampers? we of constraint we placement rather feet? enough have machines? Do enough we And soft business can Do have So, have enough piece dramatically do each machines? Do a, square enough be have

have China China You bill do been that have it so to have been just him, doesn't anymore, he's can suppliers anymore. any on of because even who long a he's his in his material customer engineers doesn't counting for

even what's talk and there's ordered. a about really components of design. can nobody to we important Doesn't have not pipeline So, about what's the important

leaving. So, take who a the depending months with and supplier components it to he's year on times, here, bad could get relationship got lead to nine has a

us the ability so, very that and assume pipeline is And minimal. into just step for POs to

long-winded percentage. I guess can't So, but answer, give simple just a it's why very I you a that's

Sheldon Grodsky

I Okay. you. against hold it won't

Craig Gates

my trying I'm best.

Brett Larsen

Thank you.

Operator

Please go comes from ahead. Capital. Tieton with question Dezellem next Bill Our

Bill Dezellem

thought I you. to But Thank Craig, done. bait. was take going the I'm I

have economic economic the insights you weakening environment referenced environment. versus do or not? of You What indicators

Craig Gates

are try far our I get read to from I predicting as what to hands then compare people what all on customers. stuff the that we're as seeing and my I can

slowdown indication whatsoever push see of We have of out any to a orders. yet broad-based or

have We upside we forecast cut. people cut forecast "Oh coming now." been God, need with, prevalent than leaving back and people more who seen has it cutting their their That

circuit which We better is component availability a We a better in do previously, availability, is said inflation be in SMT still people of sucks. componentry, I to We but do still coming better equipment, want one said indicator. leading the it We integrated that it see less see and a manufacturer with just to that it's a came component highest not goes a negotiated take about that increase, our in it. today it. a it. on buy products, as see It's We about people a got see a costs. term, relative or other on volume leave X% of

coming. read are right now, hear see from talking of I a people slowdown to everything as about be that it. I So, with But seems broad-based and in conflict that don't

as coming. Because the a any forcing right on extra during on of we a So, make. to everything world very COVID, we've recession due become pony to we've learned (ph) become being is result we're fact that now, upsides our we for or customers hardcore [comforts] cautious thinks the up the

So, we order our I but don't that's than book and purchase book. economist from the from know, am, more I you're what our see

Bill Dezellem

you. Thank Appreciate insight. the

Craig Gates

data. Less But, and insight more anyway.

Bill Dezellem

Appreciate the data.

Craig Gates

Yes.

Operator

This today's will turn or the Mr. additional any call Gates remarks. does question-and-answer back for conclude to session. I closing

Craig Gates

all Okay. to quarter. in Thanks next look and Brett call. to again forward participating you everybody conference for I to talking today's

Operator

and Thank you you may today's participation, for your disconnect. call. concludes This now

Key Tronic (KTCC) 31 Jan 232023 Q2 Earnings call transcript