KTCC - Earnings call 2 2024 | Key Tronic Corporation

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Operator

Good day, and welcome to the Second Quarter Fiscal 2024 Key Tronic Corporation Conference Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Mr. Brett Larsen. Please go ahead.

Brett Larsen

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

me Executive Spokane our Joining Finance and our our is of in Gates, Controller. Craig Vice Valley President President and Officer; headquarters Chief Corporate Tony Voorhees, and here

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

For this review filed in with information, we financial historical call, X-Ks. Please XX-K, statistical risk has the specifically SEC, factors and our latest will regarding operations. discuss more outlined and you other our may business the quarterly and company on documents information that the XX-Qs the note

in information the XXXX. on version will this this call is of released Some results press we included recorded a December release, XX, of months ended website. Today, our available and be today's our X for

$X.X the we approximately revenues up as for program. XXXX, of and inventory well million, a second growth $XXX.X million XXXX. the fiscal reported from of facilities was driven of fiscal sale production quarter million XXXX increased in second quarter our $XXX.X of discontinued of the XX% of in the total Revenue by Vietnam-based same For period fiscal U.S.-based as from by

XXXX, months fiscal total $XXX million, fiscal XXXX. was of X in XX% first period million of the same For from revenue up the $XXX.X

margin been X.X% largely margin our XXXX increase XXXX. its to reflects in production fiscal and labor and operating and offset of period XXXX, and peso gross increasing in product the to margin Mexico compared favorable of second Mexican the dollar our X.X% for for have The quarter of For costs strengthening gross of stabilization the supply same the labor in gradual operating the periods, quarter margin the our fiscal efficiencies, X.X% gross improved recent in second margin reductions the efficiencies. In an strategic a of chain in the X.X% quarter and relative improved was of U.S. U.S. fiscal mix operating was cost the by and

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

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

the rates increased of and be As by our XXXX discussed, in our and higher both impacted to on in fiscal negatively continues by credit. line U.S. profitability we've labor interest costs Mexico the

inventory second reflect XXXX, our turns quarter increased primarily turns and efforts increased X.Xx second inventory Turning These by in up are assets, the XX% to drive $XX.X of improvements or to products balance fiscal levels year roughly on a ago. reductions. Total of concerted million inventory the fiscal X.X the finished ended to quarter from in component ago. availability inventory which time sheet. contract the reducing from same by XXXX year We approximately a

chain We our differently of revenue. parts than current for are more drive pleased our to continue demand the same historical inventory time, worldwide to the become in line At the see levels supply in we with periods. requires state that still

improved forecasting significantly algorithms. resource modified methodologies, and material their we revamped our have and planning customers Our have

effectively. inventory more equipped we continue cost to future result, should in as a supply disruptions As be even manage for chain the we better

which customers time, DSOs of certain from were continuing XXXX, compared second we from disruptions At accounts quarter delays XX customers despite a around also year XX the $X.X $X the accounts and the capital quarter, from about to issues. Total combined the a of ago. was of During obligations amount increased expenditures for respect overall days in a days and most fiscal leasing CapEx same second reduced receivable debt ago, million. payable, supply million million our we by improvement to $XX be believe year collections reflects to we chain with some total year for expect at

capacity, While on facilities a molding production efficiency and continue as improvements and our Vietnam eye make selectively as SMT careful locations. well particularly equipment to equipment, utilize in to plan for we U.S. and capital prepare we're leasing invest keeping growth expenditures, plastic to our add in capabilities,

For steady second quarter. fiscal the for our programs third to we're XXXX, seeing of relative quarter demand most established

now a leading program with As is resume redesigned product. the previously materially XXXX with company, to power a equipment announced, expected large fiscal in

range third the the quarter to report in million. to million of revenue expect $XXX of For fiscal $XXX we XXXX,

strong half a are period all these consideration, expect is business. share. In of the severance careful the breakeven into continue a a calendar we our improvements, diluted the ramp incur of second of programs potential $X customers facilities. After in income we efficiency to strength of in reductions Vietnam, pressure be muted excess expected have to operations. and peso requirement. a expenses Mexico-based new existing pre-COVID the in other of in rebound levels new Mexico per While million Juarez net to headcount consideration unfortunate, production we we and XXXX, this half severance range growth continued expect an create a under have but clear These payback Among analysis, combined million in overhead to and sales expense factors year. continued pipeline facilities, from to $X.X our Mexico approximately for U.S. considerations, of the our $X.XX to decision and to of expect a Taking amongst in the

we to Craig? our that we win are well new continue and me. to term, positioned longer programs to the business. That's believe increasingly Over for expand it profitably

Craig D. Gates

Brett. Thanks, Okay.

improvements levels sheet. improvements pleased During on our of continue programs U.S. other We're many in see and the the second efficiencies, profitable. we in balance XXXX, to our inventory facilities, quarter and ramp remain made new produced to fiscal operating Vietnam we also and

third continue the XXXX, fiscal we manufacturing North favorable the quarter trend into contract of of to see America. returning to Moving

become won base programs China-U.S. believe products, aerospace. Global their realize tensions on to increasingly long-term to and customers these OEMs have As not nearshore examine is widely We contract decision devices and overly their our a more logistics the as traditional to a geopolitical time, in security result, becoming drive military China-based also they smart new we design problems strategy. accepted strategies. outsourcing continue dependent but production and for logistics manufacturers product to continue customer onshore or for involving services. Over only expand medical

clearly time. At the opportunities seeing U.S.-Mexico and over sustained same growth, see continued Mexican we continued becoming we trend particularly in are those the border. and time, result, a increases As for Mexican more along a a wages, wage strong opportunities of are defined peso

a has different customers they it cost selecting changes calculus these the for clear China. have become are are location back long-standing As become for base Mexican of that also business a and bringing and that clear geographic production has from

For engineering production China sites. can flexibility cost support Mexico those decreasing we U.S. of and customers to to are the challenging requirements and with they to level enjoy flexibility, differential believe high-quality motion the whose flexibility, U.S. customers will one remain for and There, our due be who our struggled communications support, the endeavor ultimate of plants between needs, probably a they limited our their and ease commodity choose our but model communication. Meanwhile, reconfiguring Therefore, engineering adapted facilities Mexico had the more China slow provider. sites service of lower-cost, we those means Mexico to answer.

production of increased Over XXXX, XX%. facilities XX production in the of revenue XX% revenue. about has months, the In approximately our past from QX U.S. U.S. represented our total

a role be production contributor over number facility XX% Moreover, migration to Vietnam facility to evaluating in in there increased a actively approximately manufacturing In our to of are revenue Vietnam Vietnam. a China-based coming a continues our the our our years, our at customers growth. by play of [indiscernible] facility modest we months. XX While their past potential the expect growing has about X%, to major

take While and manufacturers, have remains China to with China companies many from mitigation China. their be slowed components steps fact must the has that risk sourced growth decided many

Tronic's ramped it and and our wins which Shanghai, program predicated effective large manufacturing the challenges remains our entire design design knowledge are new believe extremely design production, Many capturing the for broad capabilities that an sticky. supply Key managing and services. serves completed extremely expansive is we of corporation component in to footprint our chain medium-sized deep group procurement on into combination our important business. global makes of we proving program-specific Our have on ongoing business once design be basis. The a And of in China and

design construction us manufacturing and equipment. assembly, high-volume wide including our in size. knowledge, operation below plastic This complicated metal multi-shot complex of similar as also of process from may a integration painting competitors assist We set and molding, invested range apart assembly automated the vertical expertise coating, injection well as PCB and gas forming, test and a of

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

shop In fact, provide. We our to America logistics most to of supply contract well to heightened North will concerns believe trend onboarded capabilities of take problems, as continue political we manufacturing drive global Vietnam of the favorable China-U.S. about facilities. the we advantage and have chains tensions the expanding one-stop new customers returning as

new across the metrics associated second increase business strong a move in prospective of the XXXX with development, into improvement We significant of a potential customers. We active with continue see the fiscal with quotes to including number pipeline business. half

Directors our Officer. recent While will the our remain Chief progress very strong our we're will and over plan June announced margin, and leadership We that our growth of me for recently across interest potential remain Vietnam. wage I XX. in to rebalance Board. succeed rates dampen am very manufacturing to future, expect I to succession term. In by our member a facilities encouraged preparation in beginning our Mexico, term. as and higher in a profitability we and Moreover, the named continue growth we pleased our seeing Brett Executive of U.S. President gross Board increases, for near our long the some improvement the and peso

We Brett our our Treasurer the he the of years. over Administration, are and have most Chief President of roles past formulating Key years. and and been responsibilities as Executive has the fortunate assumed XXXX XX has joined Officer worked management Tronic Vice and has Brett member team, closely ever-increasing He served and in since XXXX. very a Financial I that critical strategies over and executing

of the addition, Tony for Brett with will concludes confident since portion many continue to has will Tony Chief formal heights. This Officer served Brett, and Administration, Vice XXXX with I President Key various am outstanding pleased Tony worked your roles Financial years. financial Tony in presentation. to will be closely team to be Tronic I their now In to us and of management Executive our answer and has promoted take questions. Treasurer. new and Brett,

Operator

question Instructions] comes [Operator Tieton from the first Bill line Your Dezellem of Capital. with

William Dezellem

all First to of you all, and X for congratulations retiring promotions. of

each my discuss in then program details of So you first let's please? interesting them, of Would start the any normal X and with question. size wins around terms

Craig D. Gates

that's million $XX Yes. are customer. between to and million is and don't devices million. aerospace existing with an medical The military million, The around products $XX and million $X to million around, I know, $X $X security $XX a are year,

the military customers. medical new devices both and the So are

William Dezellem

of if and/or it's qualifications that and a too I you next required. level not thing and know door of So plane to many excess off products have a wonder blows maybe it's point sometimes aerospace mean, very are the military we high excess. then

did anything So or HVAC some my or question than go of would qualification product level of you normal through be security those nature? product for higher is,

Craig D. Gates

Yes.

William Dezellem

that And like expand further? to would you on

Craig D. Gates

Okay. out time And we some There customer. be in would that. ground first to never guess, program contractual turned far unfounded. that of were significant our with since are was, military line we this requirements two the that One reach the concerned be really so I that aerospace is can aspects of out common quite a

with fact, going we're contractual though relationship we apart, as way case, make as actual that our capabilities far seems some customers. even this goes. And capabilities our through manufacturing aerospace qualification we we if a to So did other equipment, going in be is to there. by and period manufacturing far get customers to significant determine it then serve that able to then customer specialized And indeed work as to military analysis well as the and go qualification and continue that could long in new of started prospective like us a and

William Dezellem

opportunity of give a business is for you size a over if that a this the is coming And customer program Craig, that is successful? the would significant this amount of years

Craig D. Gates

big Yes. of the one It's guys.

William Dezellem

uncertainty the fair which that many you on believe I were with a interjected believe nothing point, the environment the of say amount but that some macro I shouldn't call, panicking it you a into your you in there many, that pointed were was At was and you or wrong then of what the seeing last that conference you seeing And Great. customers, pullback I were -- said you demand. in was over, arrow way. said directionally, that

This would now then? talk you'll than we please? have points, stable, quarter, I'm around that you is those hear and And various correctly you did did a perspective demand kind different hoping so of

Craig D. Gates

Okay.

economy We're the still There overall. and are would about This still but ups not directions down. a there's the quarter, we say has of consistent confused downs, demand the that stabilized.

still I the horizontal up us down arrows that forecast of those other a was, of an why than or their are inventory. to they is inventory COVID-driven their again. that part it burned off behind Our And up, one a as now as confused. been, division tightening increasing one customers so X But think had we and some recession have that, say couple divisions of or has they X/X orders customers, their saying rather our feared of has are increasing they them what are the customers been There is while gotten larger and forecast. seems almost to oncoming hacked

a contradict time a don't good, everybody out. There's right the are lot last lot quite says puts though a the staying balancing the that in data it, post-COVID. great have retirement, what are than seem we are of unemployment where even market used tighter the says data Wage the data and it's a So -- was That jobs, switched has taken got the I seem over that a now, unemployment says to we're about that There's pause X.X they back separation. coming to to think say bit low. quarters. the looks that is increases though we It's of people their data great at actual just can now -- like don't that that office stabilized. would is even people, it's job a right not people very who to that to data the takes

us to to happen we So going handle it's what's have very hard a for next. say on

William Dezellem

those is presume and And pauses, to wage correct? referring Mexico, you're I U.S., the that not talking to

Craig D. Gates

Correct. Yes.

William Dezellem

Would what more about use let's opening way Mexico please? that detail you to near doing had are And term, So Mexico. please looking the you how restructuring? expand for are with your it, longer the on then, remarks, you as you thinking term a in in segue than in really

Craig D. Gates

Okay.

are long worked X those I hard hope self-explanatory. I Bill, boy, So and on they paragraphs.

William Dezellem

more They bunch actually of a questions, actually so. were and whole they created

Craig D. Gates

that we'll Okay. way? me Why those off questions, few don't maybe you of ask a kick

William Dezellem

right. All

trigger or point the longer made to decision? opposed waiting now X now as time make months the was is that the and from what So to you decide

Craig D. Gates

pesos at we quotes more wanted And we in But to company dug we bid. we hard everything looking products and hard started that people a they're we that price. And ever in It's the we it had the grew into separating those relation loss where to is time hard COVID, look component into take -- wages competitors. to selling personal the time always decided coming and a with versus on upside look a trust And which were win downside avoid pure to that into else of China cost the interrelationships was product the against started the did increasing decision, at or mix hard, we that, more a where the a a and had after one with goes on it, we just trying thing. downside and it downsides, needed were and China. to we downsides. choices service kind interesting making just all seeing really, really are We they on the our the at now their out an that but that that of It's hard go. to to it's paying to dig a of to company, the pay level, it belong attention we in really willing of didn't did people or before a between doing China. And split are time a

product product get that happy still a either needs to deal folks the style the made for day-to-day that growth it's changes pay it's to And getting massive they it of to. back, that I went delta there are to though or customers that have say, then to in those sites. And happy, customers possible that wasn't came wanted in in that's between China When or, and states. it service Even they the only -- are with to company require well disadvantages. time. decision on out don't product isn't have see U.S. to now and the made it to to went business and to be the who who we China gone have it's the our where that sold say the of not why have would and because it to getting customers So an willing in had extra Mexico shouldn't changes production. all really it been states, the And customer when the those China of forecast back, immature China, are instantaneous demand that service come when who all was it

$X range. with has $X used just that U.S. see I million the the So million the to for revenue, to where as And anybody were sites business that a it is new and as volume opportunities that, the we I now. let's volume to that, say than guess, bigger point in same know but isn't increased hurdle

So we've those $XX Mexico seen the Mexico. in a price higher $XX because service smaller but U.S. our the so only. bigger competing year, our out than people shift programs, recognize last programs the In a sites, are longer at site that value hurdle we're the making we ones, into no of wanting it level for in provide states put where now is the sites into of million to states were that our can programs, they that much to the million

other the that the in to higher. On who to in China, out the rate the And say that meant say means has Mexico, gotten want are type hand, willing hurdle people they deal China. of to of used to stay to people service therefore, want Mexico stay in Mexico to the who got I with

XX,XXX that for prices. leaves willing services that and had would who up us of call of not willing over costs prices quickly would happen move way a folks pay That Mexico make and the the need them lines border our commodity-type they're I against that So happen week." to employees ranks who happy, Mexico. customers for And pay clear, the and the through need example, Mexico service make And to a to the and more. And be is the in those across competing other you're lot of that I we I but now that people all customer service parts changed say, salaried you aren't it pay over willing and type know we widgets would around to and U.S. and out for with levels those customer in employees. next wanted in that put facility month. are I place extra would next time. had get And we the if and train monitor would get hustle who switch, "Hey,

willing out pay So customers Does without we Mexico because of migrated. take before to anymore. facility cost that can of they're it that lot a added for sense? harming make means who They've this not there service the were our

William Dezellem

it make sense. believe I does

sounds it the which hearing the higher pay they're level price, U.S. that that or Mexico try but for to the me taking sure to cost like, built in The who service, a those man's level a the -- the had which are cost willing Let close? you because you're I'm not correctly, changeovers of structure needing Vietnam, Mexican higher and cost a has on to be extra the that And or customers in you willing U.S. to somewhat lowest price lowest service to with went changeovers to out are make place of super Mexico if now allow is higher land. And hearing to cost. make higher left that I'm the that hearing extra Am no probably run It therefore, cost demand model the the of that an going lower correctly, less the customers play will you service pay back are who along really in programs big and Vietnam. will want taking service I low adjustment.

Craig D. Gates

Yes.

William Dezellem

leads that here so my guess I dominating and So apologies long. additional for X questions, to

to you just guess, So would do this all, revenue of how are up? in you Mexico, will wouldn't that coming yet foresee strange accelerate quickly that then given for growth then making a been And in of that Mexico to back weren't anticipate of able and filling I little with positioned your restructuring have you you changes correctly? Vietnam man's secondarily, because otherwise thirdly, the put place that you land? does no that bit first win And now, a X/X it's Mexico

Craig D. Gates

So we the question exactly expect. is the and most is important what third that

will we that as programs already the been completely have We model actually in pricing new the hit. place, we've put if these by time we as seen which had

a it Juarez. provide an doesn't basic the basis. on the into time be impetus rather have will is of extra cost services that to than structure compete to that by mean the that customers that some commodity optional have they And the be doing use on baked pay able you that to But will we want. that's for this able main So Juarez won't

decision Mexico our more is sell a now. price is to evaluated guy decision on people standing do used important voice, battle, are free. makeup the the out it to to customers have shock interested makes -- that when they typically, do customers only. then from China of in decision with whereas the that's people past, I got as with person get. have in only the switch make come sticker ready and has -- than down to has split they don't it. than live person the the they the it. service the the in be to that's it. But want coming as the for to price are trying a and is move, years, the level an you of has people is And of to focused in can over people of it's and it and ordered Mexico the changed they're who's it level decision the that baked like the the coming that only the So that have on was who we're to folks price to that mainly comes And that a China the makeup for it uphill on in should We and enough there And price changed who we'll as have China pay And better over are focused the or the making anybody didn't if much a as else's of louder decision. Because the live shared service say, that to can years price back from interested more China it's

drive attractiveness or change. think Vietnam interconnected are we're don't on in the I don't why to the States. stand the think because own they going I that much pretty that's or United the their right. change So it's making any much X

William Dezellem

to this enviable you maker, upfront can put then on it being done need does is the come, have a to position they on to accomplish able told, lower job what for speaking, And both is costs", if have they loosely you that, basically the your operator to when line you'll And you you're win care decision you of "I you something come the say, you you're Craig, not in they'll win and able because sides? them price? get that ability. so yet the the and don't charge kind can where and

Craig D. Gates

the intent. certainly That's

William Dezellem

queue. inland, one when I'll where facility an of relative back a near, still can you you're costs the additional see in you doing question, thinking place dispersion? you and or And say additional additional cost, lower non-border inland, a where or within I'm Do step and and somewhere yet -- an geography I for else the are Or accomplishes labor all the I mean from nearness have that you Mexico? here do geographic believe what need Mexico

Craig D. Gates

further position the to have hours And by And in further that to much have the we kept hand deeper pay as shipping offset salary Mexico. say, the an opportunities on increase in who of disadvantage into Mexico. is after see inland, and getting receive disadvantage analysis and deeper people engineers continue ringing Well, Mexico in the mainly deeper direct labor any wages Mexico. X years, time delta you you to eye to into time over going get border then the offsetting want by to you within across we've out XX work salaries, offsetting you is the last that of and

factors we any So hand, at various control time as change Juarez of that pat staying as that our now, but don't change. could are right on we

to Juarez answer right us. at right change is we're decision. So now, But for the looking it prepared after appears that our pretty it hard,

William Dezellem

that. the that to And is told on might primarily my And the would that hourly I primarily renege labor? restructuring question. this salaried you or doing, laying you're relative that off be I you're last labor to say, labor

Craig D. Gates

you it do a here's is? think quiz, So which

William Dezellem

labor would be just guess you I thought is more it how what about salaried I I'm heard thinking would I say.

Craig D. Gates

Perfect. That's exactly right.

We communicating. are

William Dezellem

able you you to suspect so because fixed that you people? really of of portion actually, or that need there, it happen? fixed some the some when essentially a cost that off those say historically "I if longer salaried And salaried laying will been the customer workforce, making are respond cost this how you, to since were in part quickly", of be with I them was do no who

Craig D. Gates

proposition it them the laying quite And few need already giving We're what as we are that a pay a to of we're total who create the off. willing of were much than that who So seen away business customers all we've not part a and workload less for year of off. laying ago.

a do scale, because the to cases on So in is it for smaller have that getting to we still customers have and it free for scale smaller many it pay previously. just versus capability now

William Dezellem

Well, sounds little at And la to buffet more like an a a do that carte probably simply the because on all restaurant eat is tend to going the a learnings. us a of difference we the congratulations this little buffet can. we it between like and bit bit

Craig D. Gates

there it come That's is who learning, the changed but a China Part as what of people marketplace true were part is before. have in of statement. of out it has

the So to much it it's reacting and learning so not as change analysis of is it.

Operator

of comes the [Operator MKH George from Instructions] Your line Melas next Management. question with

George Melas

earlier discussions interesting very very, with a was Bill. That

no some So questions oriented. at you, thank have you inventory that million The Bill. more numbers sales, much Thank margin? that was for $X.X in that. I are gross

Craig D. Gates

was gross of were it, for no the that. transportation but we There few fees to and a recycling charge margin on able

you those dilution margin much gross X. that offset actual wasn't there the in So when

George Melas

if instead you those gross sales, your X.X% was of no that gross your see on had to trying profit -- was really margin margin I Because if X.X%.

inventory those margin? that if roughly the have been So what exclude you gross would sales

Brett Larsen

Roughly X.X%. about X.X%,

George Melas

at development sort -- X.X%. SG&A up, Looking your level explain but there the it's of flattish are at lowest years can is be expected it some X those numbers? in product your OpEx, the I you Is been some think but charges, sequentially, to was help

Craig D. Gates

We've look real taken serious course, a at, positions. of salaried

our sharp a other see costs The that have We I to would there anticipate a to that some but able substantial. been have increase nothing will changes operating reduce really our benefits we've is expenses. we taken slight there that pencil in well. prospectively to been OpEx, as payroll some

George Melas

up just a coming and relative will little being So see development bit? essentially, there SG&A you the flat product

Craig D. Gates

Correct.

George Melas

a try look $X.XX, would million. net $X.X the if roughly the midpoint, charges. call million back of wanted adjusted then implies profit back million, a to the to OpEx net income. $XX which an $X.X in of guidance add interest of And of And million. gross I implies I including million, I If a roughly understand let's I charges at the $X.X add that $X.X to, implies million, to Now of X that what income if EBIT to million to and to of of million, think expense I tax $X that I get the guess, implies $X XX%, $X And $X.XX if a you rate gross the $X say XX%. and of margin of we million, have guidance

maybe got if numbers to just the trying I'm So I where right, see off? or I'm

Craig D. Gates

are going gross One, the layoffs we expecting No, that of increase the transpire. are in of in because cost to an margin because quarter. this actual reductions

year. a half less take to going was a it mentioned we than roughly So

cost So roughly is payroll severance in XX% of decreases, the those offset of quarter. XX% the by reductions costs

we interest I continue million inventory My next expect as our continue And that of It again, roughly OpEx Additionally, quarter. be $X down. guess. for expectation than a that won't something to is this decrease will probably is to to think $X drive your good we be debt million. less

George Melas

of that that's well north implies then But X%? margin the gross

Craig D. Gates

our That's expectation.

George Melas

be to quarters? more compared improvement really nice would that a recent just So

Craig D. Gates

we where Yes. of out money We've heading money Mexico, out like situation of we America. Mexico, make then position out looks in been money lose lose make to we're sites. we in we're the a of America, and make a going all where in money we money towards And

don't So we surprise. and another that get fruition to hopefully, comes

George Melas

I a peso, just the digits math, double doing the up bit mean, was it's not sequentially… just year-over-year. down It's And little I Mexican and

Craig D. Gates

We will do have hedge in -- fund QX. help that us

George Melas

You have you I point, some had Because hedging, at right? some hedge. stopped think

Craig D. Gates

months Yes. quarter. into through hedges some take will entered We few that us ago the March a

George Melas

to it's So of hedge, hedging do you and maybe expensive. How and would hard philosophy. a think talked It's Brett about little it? bit about guys sort your -- just

Craig D. Gates

In ideal an word…

George Melas

sorry. I'm

Craig D. Gates

liquidity of roughly years have ample hedged ideal and Mexican in world expenses. XX% an we No, with X would

George Melas

Yes.

Brett Larsen

more future. We're the occurred wish would did I made in few far to of have the but we difficult a the of months a contracts, advantage peso take from blip ago. project it's that. softening that We

Craig D. Gates

out figure what going out hedge. to peso figure can't the the we do. to When We figure Mexican going Yes. is is can't to economy out what we can't do, then what

Brett Larsen

Sure.

will do have third So this we enter more place. we continue we'll us some That to monitor during in dollar can. if and help hedges quarter, contracts to and the peso the into

George Melas

customer on last quarter, of Is much being XX% that the right case? perspective, about just still XX% now one -- category. pretty And just we a from concentration in talked the the customer

Brett Larsen

still is That correct.

XX%. one We customer have about

George Melas

excited congratulations. wish you and Brett, about very your best. all I'm promotion the And

Brett Larsen

you. Thank

Operator

the Your Bricoleur Bob comes Poole line next from Capital. question with of

Robert Poole

maybe It in up. except in direction, term like pointed course, of near and referring all are right margins I'm pipeline Congratulations. to up arrows, which for inventories the And are here great. the looks is revenues very things down, like

Brett I timing we that's So would but of great. spoken haven't spoken ask with before, And the you, about all Craig, to that, I've retirement. your

sun under appears anything, through you and aside. a up the would care You've step bit the you what, then talk storm, all of to like you choose your coming about about as comment if at that Can transition? priorities to leadership? and gone Brett, new And little the your time timing if is you is it put the as that

Craig D. Gates

I've old, trailer XX. X I've enough. been And I since corp. I'm was Well, years working my with dad started had

I then I I was sure earlier quite thought was actually make I COVID was to could came to thinking when feel stay everything proud did I think leaving to of bit a how and I everything and needed along, sure to leave. about retiring and else -- make So

hoped as So as But as in a this been say, has last I year glide down. as much inventory it major driving the we've you be. would slope victory had not

we've think there. proven is say, in the -- to I by there there what's sites. peso the even happen I as in previous had we're Mexico, arrow growing and a wage increases you in And up major our victory going think is down issues the U.S. with big wins

old, that timing my fact fast. in XX they on town, the years So X old strictly get I'm I live is got that and really grandkids based

going no Board. and the team as company in the So it's here. to the issue confident got Brett we said, with very There's we've on is to be headed. And staying I'm where me quit. put time for I'm together

the not it's defeat. be I into So like bushes in to got running

Robert Poole

it's And goal. nice inventory with of turn you to a leave Brett Xx

Craig D. Gates

is. It Yes.

Brett Larsen

have that, his have remind of during occurred I'll tenure. to him that

Craig D. Gates

Yes.

Brett Larsen

that the and a value lot still we're will sea I headed. support the I had anticipate provide on that comforting remain any the know would to that direction he much would It's of I reiterate this well-planned think technical Board a to. real was in transition. Craig so not changes

things we a are costs, Craig we've of extremely And and management team mentioned, interest As with inflationary Key at with yet peso, very of the strong that been a still including market, profitability but the we improve. drive to impressed lot Tronic. pressure, hit expect has considerable to in continue amount

this a really is So well-planned transition.

Robert Poole

things reported. see was million quarterly In there possibly any in conference year. I making the quarter a than we're call, Mexico just severance some type reported? Was unusual expense in to the to about in going severance $X last expecting changes you quarter potentially talked just you or save the some

Brett Larsen

material. Nothing

expect severance, I think amount a we small level in there the but QX. to that not was of

Robert Poole

severance that the it year $X.X and million. tie sort tie savings Mexico? And $X about talk the then would be months talk reasonable end being when into in X about you upper of you Does range to a million of the

Brett Larsen

Yes, it does. roughly

Robert Poole

is And the savings that it's the of savings? the day? have of if or just a question give the to is the severance mean savings, smaller, how you does the end is And at much smaller severance

Brett Larsen

determination to soon I still be Mexico. started and ascertain pipeline final the also it's those of down the how new all in a to trying will things, of -- combination think programs We're make Bob. trying what positions

So but of will there's -- there we do some couple a of severance, a still roughly unknowns return be there, is whatever quarters.

high So you savings expect million to annually. at yes, level, have would of the $X some

Robert Poole

last consistent and for George's Well, for kind table of the of set time you're back It delivering you've with calculations to in getting if the been the profitability guys correct they you that like and are going the achieve. profitability some quarter. for that are to hopefully, envelope, saying do this Craig, looks eye-popping with was maybe there out quarter, thanks my for it your

congratulations have retirement. that happy and So a for

Operator

the Next with question comes line of Tieton Capital. Dezellem Bill from

William Dezellem

positioning them Craig, congratulations and thank like for aside. you also which unusual, when are the and well then to bit little and is things doing would on I say leaving stepping something a upswing

into have the then I the leave at So and top after often, a think they or just crumble leave opposite spectrum. the CEOs that

done. well So

Craig D. Gates

Thank you.

William Dezellem

you the really the Vietnam in Mexico-Vietnam going see situation, do back going Coming or into future to be from the production Mexico to moving or from success is to phenomenon business customers that new Vietnam facility?

Craig D. Gates

we of growing quarter, a because had more Vietnam But deal a growing, be not critical Vietnam. on the out it's more last Well, first a $XXX had, if see faster with complicated little is answer. you're big unhappy started was it we "Well, bit a but much was, we would we million in don't missed mass old I was but that customer fight we doing it year. in business, the when to used which in battle what this this deal

it up customers the in site part putting growing block $XX here." million So new and getting I be it growing mass way serve think of can that that of We're be my comfortable be something of end I'm on a buying rather required discussion, quite than a the taking So a look significant decision of is what than and be don't much June. expect would thing done easier at critical make to should stumbling rather feel would would And and new." the into critical their that a to made is mass trying larger that there's growth I known of already that's the not problem. We one to to sell it a "Oh, paper in a Vietnam portion running business and with. probably Vietnam, by somebody to move sell do before go, our with we expect part to give us business I'm but that Asia they

William Dezellem

common that or like It greenfield be contract firms seems the of that Vietnam to a problem. massive it that starting are in is Vietnam just are business? wanting movement would this how go winning to Craig, manufacturers a other --

Craig D. Gates

So locations. I'm Vietnam in other winning not who's what sure

speak I to So can't that.

William Dezellem

want equates to And of to not to is point think which the I misreading the make quarter super million earnings $X.XX $X.XX. I reduction of $X $X.XX I'm sure to guidance just earnings $X.XX at this of obvious. includes that headcount rate tax your then that the one clarification severance, million of super, to that for XX% $X.X

that Is So includes to $X.XX the cost. $X.XX to of correct? $X.XX $X.XX

Craig D. Gates

if you're law And out how complicated what wondering a states. if bit guys they to wondering if Mexico labor doing quite or polite the come Yes. you're ask can't Yes. figure in severance cost the The is. hell and that but what the is these you're convoluted are than here in too it, more

on many process iterative an will cost. determining how who how it it's and So much

just working way So a complex situation. our feckless. We're pretty we're not through

Operator

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

Craig D. Gates

you forward next look and questions. me to Brett and last for And time Tony, and your quarter appreciate first We speaking and Bye. for you. I time. Thank the Tony time again to the

Operator

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

Key Tronic (KTCC) 6 Feb 242024 Q2 Earnings call transcript