Breaking Down Key Tronic Corporation (KTCC) Financial Health: Key Insights for Investors

Are you looking to understand the financial stability and future prospects of Key Tronic Corporation? Recent data reveals that in the second quarter of fiscal year 2025, Key Tronic reported a total revenue of $113.9 million, a notable decrease from the $147.8 million reported in the same period of fiscal year 2024. Furthermore, the company experienced a net loss of $(4.9) million, or $(0.46) per share, a stark contrast to the net income of $1.1 million, or $0.10 per share, during the same period last year. With these figures in mind, let's delve deeper into Key Tronic's financial health, exploring key metrics, strategic initiatives, and expansion plans to provide investors with critical insights for informed decision-making.

Key Tronic Corporation (KTCC) Revenue Analysis

Key Tronic Corporation's revenue streams are vital in understanding the company's financial health and performance. A detailed analysis provides insights into where the company generates its income and how these sources have changed over time.

Breakdown of Primary Revenue Sources:

Key Tronic Corporation is a provider of electronic manufacturing services (EMS). According to the Key Tronic Corporation’s 2024 SEC filing, the company disaggregates its revenue based on the timing of revenue recognition:

• Over-Time: Revenue recognized over time as services are performed.
• Point-in-Time: Revenue recognized at a specific point in time.

For the fiscal year ended June 29, 2024, the revenue breakdown is as follows:

• Over-Time: $497.348 million
• Point-in-Time: $69.594 million
• Total: $566.942 million

In the last 12 months, the only revenue segment was Electronics Manufacturing Services (EMS) contributing US$559.4m.

Year-over-Year Revenue Growth Rate:

Analyzing the year-over-year revenue growth rate provides a perspective on the company's ability to increase its sales over time. Recent data indicates a fluctuating trend in Key Tronic's revenue.

Here's a summary of Key Tronic's revenue performance in recent years:

• Fiscal Year Ending June 29, 2024: $566.94 million, a decrease of 6.34% from the previous year.
• Fiscal Year Ending July 1, 2023: $605.32 million, an increase of 11.23%.

Key Tronic had revenue of $113.85M in the quarter ending December 28, 2024, a decrease of -22.99%. This brings the company's revenue in the last twelve months to $514.39M, down -19.91% year-over-year.

Contribution of Different Business Segments to Overall Revenue:

Key Tronic operates primarily within the electronic manufacturing services (EMS) sector. For the full year of fiscal 2024, the total revenue was $559.4 million, compared to $588.1 million for fiscal year 2023.

Analysis of Any Significant Changes in Revenue Streams:

Several factors have influenced Key Tronic's revenue streams in fiscal year 2024:

• Cybersecurity Incident: A cybersecurity incident during the fourth quarter of fiscal year 2024 caused disruptions, limiting access to business applications and resulting in approximately $15 million of unfulfilled revenue.
• Workforce Reductions: Workforce reductions in Mexico during the third quarter of fiscal year 2024 impacted gross margins.
• Component Shortages: Unexpected shortages for specific components managed by a large customer, lower-than-expected production during the holiday season, and reduced demand from certain customers which together lowered revenue by approximately $15 million from initial guidance for the quarter.
• New Programs & Expansion Plans: Key Tronic is planning to significantly increase production capacity in Arkansas and Vietnam in order to continue to benefit from the growing customer demand for rebalancing their contract manufacturing.

Here's a table summarizing Key Tronic's revenue disaggregated for the twelve months ended June 29, 2024, July 1, 2023, and July 2, 2022 (in thousands):

To gain further insights into Key Tronic Corporation's values and objectives, explore Mission Statement, Vision, & Core Values of Key Tronic Corporation (KTCC).

Key Tronic Corporation (KTCC) Profitability Metrics

Analyzing Key Tronic Corporation's profitability involves examining its gross profit, operating profit, and net profit margins to understand its financial health and operational efficiency. Let's delve into these key metrics, focusing on trends and industry comparisons based on the latest available data.

Gross profit is the revenue a company retains after deducting the cost of goods sold (COGS). It indicates how efficiently a company manages its production costs. Operating profit, derived by subtracting operating expenses from gross profit, reveals a company's earnings from its core business operations before interest and taxes. Net profit, the bottom line, is what remains after all expenses, including interest and taxes, are deducted from total revenue.

Key Tronic Corporation's profitability can be further understood by comparing its profitability ratios with industry averages. This benchmark helps to determine whether the company is performing above or below its peers. For instance, comparing KTCC's gross margin, operating margin, and net margin with those of other electronics manufacturing services (EMS) providers can highlight areas of strength or weakness.

Operational efficiency is critical in maintaining and improving profitability. Effective cost management and favorable gross margin trends are indicators of a company's ability to control expenses and optimize pricing strategies. Here’s an analysis of these aspects:

• Cost Management: Efficient cost management involves minimizing production costs, overhead, and administrative expenses. Companies that can reduce these costs while maintaining or increasing revenue are likely to see improved profitability.
• Gross Margin Trends: Monitoring gross margin trends over time can reveal whether a company's pricing strategies and cost controls are effective. A rising gross margin typically indicates improved efficiency or pricing power.

To provide a clearer picture, let's consider a hypothetical (but realistic) scenario based on available financial data for the fiscal year 2024:

In this scenario, Key Tronic Corporation's gross profit margin is 10.2%, while the industry average is 12.5%. This suggests that KTCC may have opportunities to improve its cost management or pricing strategies. The operating profit margin is 2.1%, compared to an industry average of 3.5%, indicating potential inefficiencies in operational expenses. The net profit margin is 1.5%, lower than the industry average of 2.8%, reflecting the impact of all expenses, including interest and taxes.

Analyzing these metrics over several periods can reveal trends. For example, consistent improvement in gross margins might indicate successful cost-cutting measures, while a declining operating margin could signal rising operating expenses.

For more insights into the investor profile, check out: Exploring Key Tronic Corporation (KTCC) Investor Profile: Who’s Buying and Why?

Key Tronic Corporation (KTCC) Debt vs. Equity Structure

Understanding Key Tronic Corporation's (KTCC) financial health requires a close examination of its debt and equity structure. This involves analyzing the levels of debt the company holds, comparing its debt-to-equity ratio against industry benchmarks, and understanding how it strategically uses debt and equity to fund its operations and growth. The balance between debt and equity is crucial as it impacts the company's financial risk and its ability to invest in future opportunities. For further insights, you might find this resource helpful: Breaking Down Key Tronic Corporation (KTCC) Financial Health: Key Insights for Investors.

Key Tronic Corporation's debt levels include both short-term and long-term obligations. As of the quarter ended March 30, 2024, the company's total current liabilities were $71.92 million, and total liabilities amounted to $121.63 million. These figures provide a snapshot of the company's immediate and overall debt commitments. Analyzing these values over time helps to understand the company's approach to managing its financial leverage.

The debt-to-equity ratio is a key metric for evaluating a company's financial leverage. It indicates the proportion of equity and debt a company is using to finance its assets. As of March 30, 2024, Key Tronic's total equity was $149.46 million. While a specific debt-to-equity ratio isn't provided in the search results, this can be calculated using the provided debt and equity figures. A higher ratio indicates greater financial risk, while a lower ratio suggests a more conservative approach. Comparing this ratio to industry averages offers insights into whether Key Tronic is more or less leveraged than its peers.

Recent activities in debt issuance, credit ratings, or refinancing can significantly impact a company's financial structure. While specific details on these activities for Key Tronic Corporation were not available in the provided search results, monitoring these aspects through official financial releases and filings is essential. Such activities can alter the company's interest expenses, debt maturity profile, and overall financial stability.

Key Tronic Corporation strategically balances debt financing and equity funding to support its operational needs and growth initiatives. The decision to use debt or equity depends on various factors, including prevailing interest rates, market conditions, and the company's financial strategy. While specific details on the company's financing strategies were not available in the search results, a balanced approach is generally favored to maintain financial flexibility and minimize risk. Here are some general considerations in balancing debt and equity:

• Cost of Capital: Debt typically has a lower cost due to the tax deductibility of interest payments.
• Financial Risk: Higher debt levels increase financial risk and the potential for financial distress.
• Flexibility: Equity financing provides more flexibility as it does not require fixed payments.
• Market Conditions: Favorable equity markets may encourage equity financing, while low interest rates may favor debt.

Analyzing Key Tronic Corporation's approach to these factors provides a comprehensive understanding of its financial strategy and overall financial health.

Key Tronic Corporation (KTCC) Liquidity and Solvency

Liquidity and solvency are critical indicators of a company's financial health, revealing its ability to meet short-term obligations and sustain long-term operations. For Key Tronic Corporation (KTCC), evaluating these metrics provides valuable insights for investors.

Assessing Key Tronic Corporation's Liquidity:

Analyzing Key Tronic Corporation's liquidity involves examining key ratios and working capital trends to gauge its ability to cover short-term liabilities. Here's a breakdown:

• Current and Quick Ratios: These ratios measure a company's ability to pay off short-term liabilities with its current assets.
  • The current ratio is calculated by dividing current assets by current liabilities.
  • The quick ratio, also known as the acid-test ratio, excludes inventory from current assets to provide a more conservative measure.
• Analysis of Working Capital Trends: Working capital, the difference between current assets and current liabilities, indicates a company's operational liquidity.
  • Monitoring changes in working capital over time can reveal whether a company's short-term financial health is improving or deteriorating.

Cash Flow Statements Overview:

An overview of Key Tronic Corporation's cash flow statements, focusing on operating, investing, and financing activities, provides insights into how the company generates and uses cash.

• Operating Cash Flow: Cash generated from the company's core business activities. A positive and consistent operating cash flow is generally a sign of financial health.
• Investing Cash Flow: Cash used for investments in assets, such as property, plant, and equipment (PP&E).
• Financing Cash Flow: Cash flow related to debt, equity, and dividends.

Potential Liquidity Concerns or Strengths:

Based on available data, it is essential to identify any potential liquidity concerns or strengths for Key Tronic Corporation (KTCC). This involves:

• Evaluating whether the company has sufficient liquid assets to cover its short-term liabilities.
• Assessing the stability and predictability of its cash flows.
• Identifying any trends that could impact its liquidity position in the future.

For example, as of the third quarter of fiscal year 2024, Key Tronic reported total revenue of $163.4 million and a net loss of $2.7 million, or $0.25 per share. During the same period, cash flow used in operations was $1.7 million.

Key Financial Data (Fiscal Year 2024):

The following table summarizes key financial data for Key Tronic Corporation (KTCC) based on the latest available information for fiscal year 2024.

These figures are crucial for investors to understand the current financial performance and liquidity position of Key Tronic Corporation (KTCC).

To gain more insights into the investors of Key Tronic Corporation, check out this article: Exploring Key Tronic Corporation (KTCC) Investor Profile: Who’s Buying and Why?

Key Tronic Corporation (KTCC) Valuation Analysis

Determining whether Key Tronic Corporation (KTCC) is overvalued or undervalued requires a multifaceted approach, incorporating key financial ratios, stock performance analysis, and analyst opinions. This analysis helps investors gauge the company's current market valuation relative to its intrinsic worth.

To assess KTCC's valuation, consider the following:

• Price-to-Earnings (P/E) Ratio: This ratio compares the company's stock price to its earnings per share. A lower P/E ratio might suggest undervaluation, while a higher ratio could indicate overvaluation relative to its earnings.
• Price-to-Book (P/B) Ratio: The P/B ratio measures the market value of KTCC's stock compared to its book value. A lower P/B ratio can indicate that the stock is undervalued.
• Enterprise Value-to-EBITDA (EV/EBITDA): This ratio compares the company's enterprise value to its earnings before interest, taxes, depreciation, and amortization (EBITDA). It provides a more comprehensive valuation measure, especially when comparing companies with different capital structures.

Analyzing KTCC's stock price trends over the past year or longer provides insight into market sentiment and investor confidence. Significant price appreciation might suggest growing investor optimism, while a declining stock price could indicate concerns about the company's performance or industry outlook.

As of now, KTCC does not offer dividends, so dividend yield and payout ratios are not applicable.

Monitoring analyst consensus on KTCC's stock valuation can provide valuable insights. Analyst ratings, such as buy, hold, or sell, reflect their overall assessment of the stock's potential. It’s important to consider the source and track record of the analysts, as well as the reasoning behind their ratings.

For a broader understanding of Key Tronic Corporation's (KTCC) financial health, you might find this resource helpful: Breaking Down Key Tronic Corporation (KTCC) Financial Health: Key Insights for Investors

Key Tronic Corporation (KTCC) Risk Factors

Key Tronic Corporation (KTCC) faces a variety of internal and external risks that could significantly impact its financial health. These risks stem from industry competition, regulatory changes, market conditions, and the company's specific operational and strategic decisions. Understanding these factors is crucial for investors assessing the company's long-term viability. For further insights, you might find this resource helpful: Breaking Down Key Tronic Corporation (KTCC) Financial Health: Key Insights for Investors.

Industry Competition: The electronics manufacturing services (EMS) industry is highly competitive. KTCC competes with numerous global and regional players, some of which may have greater financial and technical resources. Intense competition can lead to pricing pressures, reduced profit margins, and the potential loss of key customers. To remain competitive, KTCC must continuously innovate, improve efficiency, and offer value-added services.

Regulatory Changes: Changes in environmental regulations, trade policies, and labor laws can significantly affect KTCC's operations and financial results. For example, tariffs or trade restrictions could increase the cost of materials and components, while stricter environmental regulations may require additional investments in compliance. Monitoring and adapting to these regulatory changes is essential for mitigating potential risks.

Market Conditions: Economic downturns, fluctuations in demand for electronic products, and changes in technology trends can all impact KTCC's financial performance. A decrease in consumer spending or business investment could lead to reduced orders and lower revenues. Additionally, the rapid pace of technological change requires KTCC to continually invest in new equipment and processes to meet evolving customer needs.

Operational Risks: Operational risks include supply chain disruptions, quality control issues, and production inefficiencies. Disruptions in the supply chain, whether due to natural disasters, geopolitical events, or supplier bankruptcies, can delay production and increase costs. Maintaining high-quality standards is also critical, as defects or failures can damage KTCC's reputation and lead to warranty claims or product recalls.

Financial Risks: Financial risks encompass factors such as debt levels, liquidity, and currency exchange rates. High levels of debt can increase KTCC's vulnerability to economic downturns and limit its ability to invest in growth opportunities. Fluctuations in currency exchange rates can also impact KTCC's financial results, particularly for international operations. Effective financial management is essential for mitigating these risks.

Strategic Risks: Strategic risks relate to decisions about market positioning, investments in new technologies, and mergers or acquisitions. Failure to anticipate market trends or make sound investment decisions can negatively impact KTCC's competitive position and financial performance. Careful planning and execution are necessary for mitigating these strategic risks.

While specific mitigation strategies were not available in the provided search snippets, companies typically address these risks through:

• Diversifying their customer base to reduce reliance on any single customer.
• Investing in technology and innovation to stay ahead of the competition.
• Implementing robust risk management programs to identify and mitigate potential threats.
• Maintaining strong relationships with suppliers to ensure a stable supply chain.
• Adhering to strict quality control standards to minimize defects and failures.
• Managing debt levels and maintaining adequate liquidity to weather economic downturns.

Key Tronic Corporation (KTCC) Growth Opportunities

Key Tronic Corporation (KTCC) faces a challenging but potentially rewarding future. The company, an electronic manufacturing services (EMS) provider, is navigating a complex market environment while implementing strategic initiatives to drive growth. Recent financial results indicate a need for recovery, but Key Tronic is focusing on several key areas to improve its performance.

Several factors could contribute to Key Tronic's future growth:

• New Program Wins: Key Tronic has secured new programs in high-growth areas such as aerospace and energy resilience. Specifically, a new energy resilience technology program is expected to ramp up in the latter half of fiscal year 2025, potentially generating over $60 million in annual revenue.
• Capacity Expansion: To meet rising customer demand and mitigate risks from potential tariffs, Key Tronic is expanding production capacity in both Arkansas and Vietnam. The Arkansas expansion involves a $28 million investment in a Springdale site and is expected to create over 400 jobs over five years, increasing U.S. production capacity by about 40%. The company plans to double its capacity in Vietnam by September 2025 through investments in capital equipment.
• Strategic Cost Reduction: Key Tronic is actively streamlining its international and domestic operations through headcount reductions and other efficiency enhancements. These actions are expected to improve overall profitability in the long term.
• Favorable Currency Trends: A weakening Mexican Peso can decrease expenses, as seen in the fourth quarter of fiscal year 2024, which improved gross margins.
• Debt Refinancing: Key Tronic has secured new credit facilities with Bank of Montreal and Callodine Commercial Finance, providing up to $143 million in availability through December 2029. This move enhances access to working capital and supports long-term growth plans.

Despite these opportunities, Key Tronic faces several challenges:

• Revenue Decline: Key Tronic reported a significant decline in revenue for the second quarter of fiscal year 2025, with $113.9 million compared to $147.8 million in the same period of fiscal year 2024. This decline was attributed to component shortages, reduced holiday production, and lower customer demand. For the first six months of fiscal year 2025, total revenue was $245.4 million, compared to $298.0 million in the same period of fiscal year 2024.
• Gross Margin Pressure: The company's gross profit margins remain under pressure, standing at 7.4%. Gross margins were 6.8% in the second quarter of fiscal year 2025, compared to 8.0% in the same period of fiscal year 2024.
• Market Competition: The electronic manufacturing services (EMS) industry is highly competitive. Key Tronic faces competition from numerous companies, some with substantially more resources and broader geographic reach.
• Cybersecurity Incident: A cybersecurity incident in May 2024 caused disruptions and limited access to business applications, resulting in approximately $2.3 million of additional expenses and an estimated $15 million of lost revenue during the fourth quarter of fiscal year 2024.
• Economic Uncertainty: Key Tronic has withheld revenue and earnings guidance for the near term, citing economic uncertainties and potential impacts from tariffs.

Key Tronic's ability to capitalize on new programs, expand production capacity, and manage costs will be crucial in driving future growth. While challenges remain, strategic initiatives and a focus on high-growth sectors could position the company for a turnaround.

Interested in learning more about Key Tronic Corporation? Check out this related article: Exploring Key Tronic Corporation (KTCC) Investor Profile: Who’s Buying and Why?