Key Tronic Corporation (Nasdaq: KTCC), a provider of electronic manufacturing services (EMS), today announced its results for the quarter ended April 1, 2023.

For the third quarter of fiscal year 2023, Keytronic reported total revenue of $164.6 million, up 19% from $138.4 million in the same period of fiscal year 2022. As expected, the significant increase in revenue for the third quarter of fiscal year 2023 included production for a large program with a leading power equipment company, as well as increased demand from a number of other customers. For the first nine months of fiscal year 2023, total revenue was $425.5 million, up 5% from $405.6 million in the same period of fiscal year 2022.

For the third quarter of fiscal year 2023, the Company’s gross margin was 8.7% and operating margin was 3.1%, up from a gross margin of 8.3% and an operating margin of 2.0% in the same period of fiscal year 2022. The gross margin in the third quarter of fiscal year 2023 benefited from increased revenue levels and some stabilization in the supply chain and labor market, but it was adversely impacted by foreign currency fluctuations, specifically the strengthening of the Mexican Peso relative to the US Dollar.

For the third quarter of fiscal year 2023, net income was $2.0 million or $0.18 per share, up 100% from $1.0 million or $0.09 per share for the same period of fiscal year 2022. For the first nine months of fiscal year 2023, net income was $4.1 million or $0.38 per share, up 73% from $2.4 million or $0.22 per share for the same period of fiscal year 2022.

“We’re pleased with the significant growth in our revenue and earnings in the third quarter of fiscal 2023, driven by our successful ramp of new programs, including major contributions from the large power equipment program,” said Craig Gates, President and Chief Executive Officer. “We continue to our expand our customer base and won new programs involving security equipment, video and pinball machines, mining safety and productivity products, and telecommunications devices.”

“During the third quarter of fiscal year 2023, we continued to see the favorable trend of contract manufacturing returning to North America and a growing number of potential customers evaluating a migration of their China-based manufacturing to our facility in Vietnam. We move into the fourth quarter with significant backlog levels and a strong pipeline of potential new business, and we’re seeing improvement in the global supply issues and lower labor turnover, which severely limited our production in prior periods.”

The financial data presented for the third quarter of fiscal year 2023 should be considered preliminary and could be subject to change, as the Company’s independent auditor has not completed their review procedures.

Business Outlook

For the fourth quarter of fiscal 2023, Keytronic expects to report revenue in the range of $150 million to $160 million and earnings in the range of $0.10 to $0.20 per diluted share. These expected results assume an effective tax rate of 20% in the coming quarter.

Conference Call

Keytronic will host a conference call to discuss its financial results at 2:00 PM Pacific (5:00 PM Eastern) today. A broadcast of the conference call will be available at www.keytronic.com under “Investor Relations” or by calling 888-394-8218 or +1-323-994-2093 (Access Code: 9727885). A replay will be available at www.keytronic.com under “Investor Relations”.

About Keytronic

Keytronic is a leading contract manufacturer offering value-added design and manufacturing services from its facilities in the United States, Mexico, China and Vietnam. The Company provides its customers full engineering services, materials management, worldwide manufacturing facilities, assembly services, in-house testing, and worldwide distribution. Its customers include some of the world’s leading original equipment manufacturers. For more information about Keytronic visit: www.keytronic.com. 

Forward-Looking Statements

Some of the statements in this press release are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements include, but are not limited to those including such words as aims, anticipates, believes, continues, estimates, expects, hopes, intends, plans, predicts, projects, targets, or will, similar verbs, or nouns corresponding to such verbs, which may be forward looking. Forward-looking statements also include other passages that are relevant to expected future events, performances, and actions or that can only be fully evaluated by events that will occur in the future. Forward-looking statements in this release include, without limitation, the Company’s statements regarding its expectations with respect to financial conditions and results, including revenue and earnings during periods of fiscal year 2023, risks of manufacturing supply chain and operational disruptions, demand for certain products and the effectiveness of some of our programs, business from new customers and programs, improvement of supply chain delivery and impacts from operational streamlining. There are many factors, risks and uncertainties that could cause actual results to differ materially from those predicted or projected in forward-looking statements, including but not limited to: the future of the global economic environment and its impact on our customers and suppliers; the availability of components from the supply chain; the availability of a healthy workforce; the accuracy of suppliers’ and customers’ forecasts; development and success of customers’ programs and products; timing and effectiveness of ramping of new programs; success of new-product introductions; the risk of legal proceedings or governmental investigations relating to the subject of the internal investigation by the Company’s Audit Committee and related or other unrelated matters; acquisitions or divestitures of operations or facilities; technology advances; changes in pricing policies by the Company, its competitors, customers or suppliers; impact of new governmental legislation and regulation, including tax reform, tariffs and related activities, such trade negotiations and other risks; and other factors, risks, and uncertainties detailed from time to time in the Company’s SEC filings.

 
KEY TRONIC CORPORATION AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF INCOME(In thousands, except per share amounts)(Unaudited)
       
  Three Months Ended   Nine Months Ended
  April 1, 2023   April 2, 2022   April 1, 2023   April 2, 2022
Net sales $ 164,553     $ 138,391     $ 425,524     $ 405,609  
Cost of sales   150,277       126,883       391,950       374,155  
Gross profit   14,276       11,508       33,574       31,454  
Research, development and engineering expenses   2,580       2,526       7,162       7,473  
Selling, general and administrative expenses   6,961       6,193       18,353       17,447  
Gain on insurance proceeds, net of losses   (396 )         (4,040 )    
Total operating expenses   9,145       8,719       21,475       24,920  
Operating income   5,131       2,789       12,099       6,534  
Interest expense, net   2,688       1,551       7,081       3,638  
Income before income taxes   2,443       1,238       5,018       2,896  
Income tax provision   467       231       924       487  
Net income $ 1,976     $ 1,007     $ 4,094     $ 2,409  
Net income per share — Basic $ 0.18     $ 0.09     $ 0.38     $ 0.22  
Weighted average shares outstanding — Basic   10,762       10,762       10,762       10,762  
Net income per share — Diluted $ 0.18     $ 0.09     $ 0.38     $ 0.22  
Weighted average shares outstanding — Diluted   10,865       11,062       10,892       11,059  
                               

 
KEY TRONIC CORPORATION AND SUBSIDIARIESCONSOLIDATED BALANCE SHEETS(In thousands)(Unaudited)
         
    April 1, 2023   July 2, 2022
ASSETS        
Current assets:        
Cash and cash equivalents   $ 37     $ 1,707  
Trade receivables, net of allowance for doubtful accounts of $44 and $275     151,927       135,876  
Contract assets     29,899       21,974  
Inventories, net     154,315       155,741  
Other     24,095       24,710  
Total current assets     360,273       340,008  
Property, plant and equipment, net     27,147       26,012  
Operating lease right-of-use assets, net     17,471       16,731  
Other assets:        
Deferred income tax asset     11,801       10,055  
Other     15,006       14,117  
Total other assets     26,807       24,172  
Total assets   $ 431,698     $ 406,923  
LIABILITIES AND SHAREHOLDERSEQUITY        
Current liabilities:        
Accounts payable   $ 132,050     $ 121,393  
Accrued compensation and vacation     10,646       11,836  
Current portion of debt, net     5,780       7,402  
Other     12,774       23,036  
Total current liabilities     161,250       163,667  
Long-term liabilities:        
Term loans     3,958       5,716  
Revolving loan     116,254       94,577  
Operating lease liabilities     12,081       12,023  
Deferred income tax liability     175       64  
Other long-term obligations     8,560       5,998  
Total long-term liabilities     141,028       118,378  
Total liabilities     302,278       282,045  
Shareholders’ equity:        
Common stock, no par value—shares authorized 25,000; issued and outstanding 10,762 and 10,762 shares, respectively     47,651       47,474  
Retained earnings     81,924       77,829  
Accumulated other comprehensive income (loss)     (155 )     (425 )
Total shareholders’ equity     129,420       124,878  
Total liabilities and shareholders’ equity   $ 431,698     $ 406,923  
                 
         
CONTACTS:   Brett Larsen   Michael Newman
    Chief Financial Officer   Investor Relations
    Key Tronic Corporation   StreetConnect
    (509) 927-5500   (206) 729-3625
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