KTCC - Earnings call transcript Q1 2025

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Operator

Good day, and welcome to the Key Tronic FY '25 Q1 Investor Call. Today's conference is being recorded. At this time, I'd like to turn the conference over to Tony Voorhees, Chief Financial Officer. Please go ahead.

Anthony Voorhees

Good afternoon, everyone. Chief of Voorhees, Tronic. Tony 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 our is in Larsen, Brett Valley President Officer. headquarters Chief and here

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

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

is Some press in included of today's this release. information

During will this webcast, found discussion. Relations that The with accompany the website. can slides on link our reference the be can be viewed Investor and call, slides also our we

the addition, be section recorded website. slides, this Investor our of of In on a the available call Relations will together with version

certain financial also discuss non-GAAP will measures call. on We this

in information posted press non-GAAP about reconciliations provided and the release, directly our Additional comparable Relations are measures which measures most is section Investor in GAAP the to of these today's website.

of impacted was quarter. Production our first these programs period and the production since been respectively, our in that Mexico we XXXX, XXXX quarter fiscal a have operating improvements fiscal in facilities are Despite programs result quarter lower-than-anticipated of X.X% XXXX. For margins from first XX.X% by total of first period revenue Accumulated improvements fiscal we on revenue of from and quarter. offsetting previous periods. the same and XXXX. we the in increased fiscal the quarter of same prior quarter million. delays the Mexican X.X%, a approximately occur and fiscal approximately XXXX headcount of million of $XXX.X variances by revenue, resumed the improvement These by XX% reductions, of impacted XXXX. the quarter X captured $X chain. Gross in XXXX, the of qualification write-down delays delays of weakening in approximately in built shipments efficiencies inventory was peso the of continued favorable margin fiscal quarter saw the the during up a the have in sequentially second resolved when these first X X.X% to customer-driven reported as Revenue recent into in were fiscal in significant and operating primarily believe $XXX.X XXXX, million of fiscal million of compared adversely of first first design to the supply capitalized capitalized production compared was $X.X costs higher variances Partially of and in

We margins reduction will improving efficiency be expect partially coming the the that in by capitalized from variances. quarters, in the offset reported

fiscal of fiscal to fiscal breakeven fiscal or million $X.X net share period $X.XX $X.XX $X.XX of per XXXX share net period same the $X.X for million was the XXXX. of was the of share or compared XXXX. quarter first or million $X.X quarter first to Our compared income for for same for XXXX Adjusted income the per per

For our in non-GAAP more release. non-GAAP and on earnings these reconciliations the description see measures financial measures,

parts in time, line differently we concerted reflect requires revenue. by a chain first inventory with demand periods. quarter of time component same to inventory million of drive Turning XX% still At levels reducing for inventory to increased that XXXX $XX We're drive the continue ago. our These to balance sheet. same our current approximately inventory the supply fiscal historical reductions or the availability. pleased We levels to state primarily for more by improvements the ended see and worldwide effort than the year our in become in the

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

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

the first total XX% of we a During our a or quarter, ago. liabilities also from by million $XX.X reduced amount combined year

million were reflecting approximately Our days capital current expecting year million. receivable receivables. Total the $X ratio expenditures reductions we're the net to time, $XX X.X:X compared year a XXXX, in at than year of to higher the to to same was rates from $X.X million a accounts be ago, quarter first X.X:X for were days compared ago. sales reductions At and DSOs in XX XX about at for fiscal full

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

million expect $X.XX from overhead weakening $XXX diluted ramping, of $XXX in all peso. range Further share. Mexican net hold factors to to and expect in Taking into per revenue pleased we recent see programs taking the our these the reductions to efficiency XXXX, consideration, income XXXX, into are fiscal new the of improvements of our continued quarter of $X.XX and moving we a second report the to we fiscal continue cost million. For range to

see and U.S. sheet. pipeline growth strong production, Vietnam on in our and focused a to remain We balance have new expect potential improving of our business

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

Brett Larsen

Thanks, Tony.

operating for take place. to of fiscal to While margins we due not see unavoidable our revenue begin to meet did efficiencies are first expectations programs, our and improved pleased in delays we a few quarter XXXX

programs making weakening quarter starting Our margins. in Mexico, during reduction further Mexican concerted reduce effort The working trimming strengthened nonprofitable reported the of to also and workforce peso to recent a are our pay off. capital

levels. We also revenue line which to now in more continue are inventories, reduce our our much with

these we will profitability. that term, expect longer overall strategic our improve Over changes the

their base, expand onshoring logistics towards and they During and the lighting to manufacturing become traditional We is continued smart as and design these services. may pipeline geopolitical production time, production our drive strategies. customer programs China-U.S. reexamine manufacturers of that overly dual business underscores widely sourcing continue involving the on new to vehicle Over strategy. new OEMs The equipment, pest long-term contract only more control. decision outsourcing problems realize have tensions or also China-based of accepted their contract a onshore manufacturing. Global dependent potential first but trend quarter, continued for strong we to increasingly believe customers commercial and becoming winning not nearshore to product, for logistics the

growth, those opportunities opportunities more becoming for seeing of As we are Mexico. a are increases the trend same clearly wage defined. At a see and continued result, in time, we sustained

in also cost that As customers' have of the it Mexican become It rightsized long-standing, operations our order in competitive. we that become are changes production clear has cost clear has to our base these have for a may We nearshore selecting full nearshoring a vertical looking customers their calculus suite for location of from China manufacturing different business. Mexico operations manufacturing geographic processes. a for to provide believe our remain

fabrication production capabilities assembly consolidated Our contained Mexico metal plastic within include and and printed final circuit paint, all a assembly, campus. board molding, sheet

and our believe engineering China those who to support ease requirements, For sites of their production with due outstanding U.S. offer communications. we struggled flexibility customers flexibility,

role facility a A potential their a customers capital this China-based major our amount Vietnam Da Vietnam. our capacity to migration our coming of a scheduled our and are to of to in modest revenue, of be number continues contributor actively play to facility fiscal manufacturing in to year's years, In facility capability expect add our Vietnam are growing growth. evaluating While expenditures Vietnam significant planned in location. overall additional Nang, we a future

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

in supply basis. for the group procurement which Our the corporation, serves ongoing remains entire chain component on Shanghai, China managing important an

profitable, build programs in our of production success direct programs expansive legacy facility and continues Tronic be Additionally, medium-sized continues be customers. The global found design Chinese new new Key capturing in our and of combination recent footprint Many with proving large to effective our is to to has business. capabilities extremely winning manufacturing it our and extremely design we our completed program of and makes quarters. broad believe capability our challenges knowledge Tronic's wins in design have are in services. continued anticipate of ramped we design design sticky. and the We that business coming on production, Key program-specific deep predicated into number and a engineers China And once increase

problems, invest assist, contract multi-shot of high-volume increased a returning continue North We injection, about of wide will drive well as automated our integration to us We and of PCB well in and set forming, increasingly continue including construction design, expanding assembly, as also a size. We geopolitical assembly complex painting similar believe range logistics chain gas competitors knowledge, manufacturing complicated tensions from heightened expertise believe as our will favorable metal facilities. global and manufacturing America equipment. to the plastic capital, Vietnam apart process the operation of a concern test trend coating, of supply blow this vertical molding to to and cost and

across business customers. quotes development, the with number active see to We a prospective of metrics including the continue improvement associated significant in with increase

weakening continue very and I our strong the will by presentation. While peso. operating our in seeing Tony new the to term. This Vietnam. we facilities Moreover, further manufacturing and and -- into questions. encouraged growth improvements our answer we're profitable we disrupted portion now pipeline temporarily pleased across formal XXXX, the to XXXX potential in our be remain over will first the with in Mexico, and we growth and rebalance for concludes our your and of of delay of as a a profitability fiscal the fiscal the move progress continued efficiencies We U.S. our customer-driven business, quarter potential significant longer

Operator

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

William Dezellem

X the of noted What you size wins those? the the release. with start is Let's press in that

Brett Larsen

Sure.

the around just under. $X First are X million third and is

William Dezellem

circumstances would, Great. let's talk, some then were on and depth you if the more into of delayed. go please, X the programs that And

Brett Larsen

$X have Sure. programs quarter. million Three a to overall did impact the of those roughly

production some successfully resumed essentially of in That a part October. The the in first was product. delay improvements on for qualification production early their

the February a updated design delay up to was middle roughly year third to production this was be then level And likely second is of March week, fortunately, we're fiscal that of next-gen third The back last and And will until frame. ramping our back or time it version. the quarter, of a new quarter that the by historically. third expect as the of

William Dezellem

All right.

business, since So manufacturing never restarted is this actually But programs be ignorance. X not until second that if this I've a why the question fully of a Brett, month, coming quarter they'll from it is run next of the ramped? point

Brett Larsen

is for it -- couple have reasons. It's of required a time. a actually a materials the is lead -- the One longer that

changes in of some required the version of some the Some new updated components.

that of in has of a And -- bit some So up. middle to just rest lead of staff get and full production. production ramping time the longer Right a little is back the

William Dezellem

holidays. [indiscernible]

Brett Larsen

No, of just well. the of this weeks holidays quarter anticipated with couple as

William Dezellem

And to a long dynamics like or leading back then the ramping March, track? until is February that one that to that what are are seems the what on not delay get one

Brett Larsen

There's product. that some demand for particular seasonal

So their making hurt doesn't the And The certain design customer expecting really we're modifications. and current delay is reviewing online to in again, cautiously demand come the February. back cycle. that in that

William Dezellem

next helpful. these and the what programs, you said next the opening each the generation? but tied then in and generation correctly issues And That did understand of that were remarks is qualification I existing the to of were have

Brett Larsen

correct. All is Yes. were. X That

William Dezellem

that with product working was customers tied qualification plants? its Key with the or do Brett, Tronic through something end the And way next-gen to their to

Brett Larsen

timing design we be it's It the No, really was to product. it X gen taking It's their to production. of and more get capability And unfortunately, did and next when on each the see hiccups of can actual in seamless them, of side. we all on that some scheduled particular just those. of

William Dezellem

of none on something that a these a or So do of all your were function misstep didn't side well you essentially?

Brett Larsen

Absolutely not.

X expertise, of that the In I resolution actually fact, all some have those in each in think, helped has providing instances we X. of think I expedited

William Dezellem

capitalized the distracted or been in re-explain conveying. remarks? please may that have your you what follow you referenced would were didn't either I quite Tony, you variance then, And otherwise Great. opening

Anthony Voorhees

You the bet. Thanks question, Yes. for Bill.

come $XXX,XXX inventory. sitting costed about or to as or So ship Those our we our capitalized variances by in through balance those see had off when we those occur the did variances higher quarter. customers, variances write down our we And we'll products of capitalized sell products occurred capitalized during sheet.

kind inventory. as write-down are we that they like or X of opening of will as to in -- come mentioned possibly. that. to And remarks for our quarter so reflect happen there a to off, they continue happens just capitalized another this kind in case, So there, expect, variances we I of that expect see It my

William Dezellem

is effect it's by the through the margin gross net way, the inventory. the variance hurt working capitalized being write-down. Essentially, just essentially, amount So ends your that up you're higher in cost of old-fashioned said

Anthony Voorhees

That's Bill. I have exactly correct, said that. should just

William Dezellem

working quarter X that said through cost or more? for higher you'll be you And another inventory

Anthony Voorhees

Two quarters.

William Dezellem

something remarks, Shanghai Chinese business that really Brett, rather deal mentioned of Shanghai competitors? have a the for Tronic opening than about. China facility And plant. then the the I Chinese in you thought would But of prompts it that Chinese in And never Key why myriad your one I think question a is customer choose great

Brett Larsen

point. good a That's

do each pretty we of how think locations. our in I to similar offer a we global good solution

operation size the We bit have we quite are. a for expertise technical of of

the that Chinese type product. for and experienced we've for of different in facility, in these that's products hey, similarly and think can customer. the products Chinese I is very now And to they're past, If through a of you more those legacy as built offer they're shows Shanghai well at we all to versed we've in local industries the are all in something that building for were looking built look that OEMs different provide, types very

William Dezellem

a additional couple please. then questions, And of

guidance resumed it, program are either So I'll end second of out I'm the October, another the out that seems of guidance this started up if bit from Why this up that of It have started or for conservative week bottom just flat start one and the yet being revenue that fiscal all, or isn't guidance the quarter. you going lower that hitting you're a understanding. that or you're you The in in will, first or is guidance, higher? revenue, quarter's of of the something to not your now-ish. with that coming bucket, there's that call some, catch-up --

Brett Larsen

question, Bill. good a That's

that second our as will Christmas typically week completely then you little the think know a due look the just -- of I most our Thanksgiving. lower to and for facilities in be are and in sales half at of week quarter, our over I we closed shipments holidays.

production the So to light time of during X.X part is just quarter. it about to be quarter. able of do available the then weeks we'll that's we're say compared amount in third I'd the what

much out. direct that So a shipments in get has relationship how on we can

William Dezellem

And then macro question. one additional

would have different up when out heard activity at suggest about seeing opposite different versus customers, of economic and there? seen What broad We various at constant. things things what's have staying base that points you you data companies from picking are activity look your pretty happening levels levels

Brett Larsen

demand. I Bill, say would that it's say actually a on we're whole, would some us for I well. as mix in recovery seeing the

quarter for this downs, then XX% and you was be actual that I If up and the quarter, of and product our net the that think year. again this in to QX Mexico. mentioned ups QX flat expecting we uptick We're of sequentially in legacy first in production an

more But that optimistic little interesting after uptick cautiously things to very is shifting actually now, I slight It'd this up positive. for demand think election end net. on So where the be see a cycle. a

Operator

question And George our with Management. will come Melas next MKH from

George Melas

it So it? reduce Tom, Or see variance did that just about, it congratulations margin? nice digits. did to the on I want to you're it margin. talking gross in It's the understand gross improve that really double

Anthony Voorhees

good $XXX,XXX question. quarter. George, margin by Yes, gross That about the for our reduced

actually been without off even capitalized writing So would gross margin better that have variance.

George Melas

smaller at from a related end it slightly looking you're peers the over of at And feat. a your quite margin some the peers, in gross of is operating remarkable of that of I sort and the scale X.X% seems high your margin, because think an sort that peers, I the I below of think but perspective, lot And of best your is to decade. terms that's a scale. in margin EBIT of So you was

that's and -- So the despite variance.

trying It or quite high that's high is how of debt but understand you sheet still you to can so. refi maybe improving, in have debt next remarkable. fairly the expense. the particular, now and improve And balance think seems balance sheet So and your year interest a in that you level

Anthony Voorhees

question, George. great a That's

I that. you think nailed

I capital. in drive improvements going think to working we're continue to

that about quarter-over-quarter You've ago. months decline months guess XX seen I now a it's in started XX inventory ago.

Our expectation mentioned, will success. as continue to Tony be to profit. The a managed, capital to our that's cost our of critical detriment having significant is

is paying a of well. us amount we're the that as quarter-to-quarter mentioned, for you on As interest frustrating cost

We are feel liquidity. of amount more debt. this with to some that continue still busily debt some to of and We drive looking uncomfortable refinance portion

George Melas

terms in next the the just quarter, of same the that at variance for guidance is roughly the have capitalized And in you -- magnitude?

Anthony Voorhees

would slight around Roughly, a $X yes. say million, -- I yes.

George Melas

had let and And but issues, I that I little power get And customer revenue Great. I you in had that think And right, I resume Is there believe. this this with hope you this the still few design customer that the that quarters. is large -- or customer very on about likelihood customer? -- ask last me you for from very no you production basically, table? some generation had a

Brett Larsen

looking substantial power Good in question, a provider, discussions particular product quarters. next least at are season. had them. X have that we with George. not customer We It's revenue some still more any at for from and potentially in They equipment requesting are

next next period. So summer and will be fall season

still is still So And with I table. on relationship the it's strong the them. think

up their good total whether product for the we a redesigned that Now offering. just with determining came fit it's would be

George Melas

were in you product redesign? very so the And involved

Brett Larsen

absolutely. Yes,

George Melas

from to able you produce assume were It a pretax much then and a if it per almost one taxing X of had that it's say, of a extra would kind and margin one, gross like to final sort let's of And falls $X.XX that and that line. million similar seems been at calculation? programs $X $X the pretax Great. those then sort it you income but and right delayed, maybe million share. Is in XX%, have roughly added that, hypothetical, pretty

Brett Larsen

yes, George. On paper, Yes.

George Melas

And what in different reality? would be

Brett Larsen

yes. think, I No,

the incremental another would of on least worth margin I think to margin. $X business at million $X million of equated have

So yes.

George Melas

being the assuming on now, final it a remains it. level on margin? peso the it is where And so margin, it gross is my sustainable just Is -- gross then question of focused

Brett Larsen

X% time our been continue And think so. definitely the We'd want and drive I remember. helped. that I can that to profitability. has always first yes, has like we peso to for say The exceeded just XX%. Yes, efficiency We that to goal to that

see for on hedged You'll some peso. at our some fiscal We're sheet contracts. we balance the have the forward high that into rest or of XX% about low-cost entered year fairly

expectation is to my yes, some other continue will gross doesn't as healthy So remain margin event long unforeseen as that, happen. that

George Melas

so that's years hedged. ago, you somewhat And you remember -- were many

rolling years You hedges. had X these

you hedges reentered point opportunity. so into the this And you some at because saw

Brett Larsen

weakened the And the practice weakness in our price a make in some so costs when our continued our and and we've peso moving Yes. hedges, be that's we of production of to We to possible, budget saw included our And more advantage business opportunity. customers. at time, is do in take June, able making part to that's sure but that, the we accurately to even point more to forward so. started saw

George Melas

really the on have line. keeps the to improving time a would sheet and forward big then when bottom a look impact balance I

Operator

Tieton And our Capital. from come Dezellem with next Bill question will

William Dezellem

questions. X have follow-up I

will the quarter? to the P&L future be it quarter? if operations in those Mexican restructuring, are has benefit relative And the activities through the now a Or First, flowed complete? fiscal in first fully so,

Brett Larsen

cost great that still stuck Bill. That's a is complex question, capitalized a Part in of It's variances. one.

paying. XXX% in actual paying are we're seeing the or we're wages wages that labor that we're now, improvement our yes, So the while that

However, on through higher write cost inventory sheet some that. is of the stuck still balance the we as

plus So margin a be achieve say were costs, -- because think yes, To why I is done. gross in think production that Bill, to of quarter we that's don't I of this done, are we're actual we'll able ever force. part those reductions XX% those definitely big

gain? continue product And continue efficiencies we reductions long-winded this able a that say through in to to and monitor We'll going of we're were that to that is I -- to ways those done, load to we year always additional That answer, compare to the that impact there's in there reductions So to earlier but that for we're question. our that think headcounts be fully overall done. able don't wage reduction. some think there that timeliness we're did fact continue we required? more in customers, we're more I building seeing think But look your Mexico. the be limited may Is to for to some calendar hopefully down can the was go address to with efficient. not to I no current yes,

William Dezellem

and bit, -- to Well, may it clear, identified, that though cutting put a QX, at But it? the a beginning helpful. on of the on the to there that very it be finer cost just more you or look even be you come it was expanded done as activities originally which did, was that had you fiscal

Brett Larsen

is That That is correct. correct.

William Dezellem

going not couple to you the piece things past variances. because about in of heard I've to I'm talk the try here capitalized So together a

beginning you in I'm place of at cost the thinking so had the the reductions significant And quarter. about that

a inventory. producing at cost And lower product you're was so ultimately, than in what

a because and were flow-through essentially you said a we that's not the that then at another is done higher reason restructuring for way, or the beginning quarter, these the completed and out that have that have capitalized at of experienced in now variances past. so done quarter, with of you've the was but that the And you cut inventory call phenomenon you cost a costs the of that beginning the had that

that's longer. this forward call out then it new carry why quarter bit a we'll and so it's And a

Brett Larsen

Yes.

there current that because write-down had that your to similar or quarter. one very inventory the cost not discussed the have wouldn't that this would variance prior it or the that's the magnitude correct supposition this capitalized capitalized be why reasons the we cost your done think of cost? you reductions restructuring of been variance, old I And inventory a is of it

Brett Larsen

That is correct.

William Dezellem

And quite And that's but love get And time going now I'm I'm future one what real focus a to just entering a to ago, at perspective some question. then additional return mindset. all on And you on would had, wondering point, or had into to your please. one on go that, back degree capital. current

Brett Larsen

even Yes, looking XXX%. We're Yes, that That of every employed not the is that just what program. and that's is at at highly margins looking not Key is good -- looking at capital we're Tronic. the goal. much also that What definitely at. from for We're particular amount we're capital just looking is Each our generated fit of shipments it And scrutinized. program how on is is program? revenue. a top line

what we some put programs. a program. return potential off is is on new same funnel invested would say quote And finer I opportunities some that of So we've also based capital KPI the even certain that true trimming into filter have on of the done that in coming sales

that's of of think mind. is what years definitely So driven that's I -- us X cost the A capital get or ago. exponentially is to yes, was top just it there X lot of

Operator

with go to George Management. MKH We'll Melas

George Melas

that But were of the A be said sort on They quarter. in rest to Vietnam. Is a CapEx think that first Vietnam, money? slated for normal year. have the like there capital you low of that spend success-based putting of you are chunk Or more -- spending will you question very you where you if is for revenue? big They quick seem CapEx. customers a of the are new I ahead ahead is going of -- customers, more to on based this

Brett Larsen

Vietnam and a customer That's of George, additional to there capacity it's for future. the question. some see incredible are in to the where invest and We're is worth what just is going China, could had ahead Nang us out think at that taking Mexico, both. some a We've I geopolitical that excited customer in headed go that there, just tension We a success Da strategically the actually opportunity what require. bit be costs build greenfield in in great little and we're in Vietnam facility. beyond to seeing of

immediately of the CapEx by investing very, will going be Absolutely not. customers visiting. We're that amount some and to Nang will extra potential have show So Da utilized it that new very to in customer? capacity, we're well

William Dezellem

revenue 'XX? those And levels less of fiscal gather, Vietnam, you I expect to is but end by of do now, reach than the XX% it

Brett Larsen

say they'll like I easily fiscal think I'd yes. revenue. By XX% early of next to total year, be

Operator

And I'll that turn you conference back over does the to question-and-answer additional conclude remarks. the session. any now for

Brett Larsen

you next quarter. joining speaking conference to and again I Thank you look We appreciate today. forward call to Tony you. our

Operator

conclude We does participation. That you. conference. excellent Thank you today's thank day. do for your an Have

Key Tronic (KTCC) 5 Nov 242025 Q1 Earnings call transcript