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Key Tronic Shares Decline 12% After Reporting Weak Q1 Earnings
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Shares of Key Tronic Corporation (KTCC - Free Report) have lost 12.2% since reporting results for the first quarter of fiscal 2026. This compares to the S&P 500 index’s 1.3% decline over the same time frame. Over the past month, the stock has fallen 50.4% against the S&P 500’s 15.5% growth.
For the first quarter of fiscal 2026, Key Tronic reported revenues of $98.8 million, a 24.9% decrease from $131.6 million in the year-ago period. The company posted a net loss of $2.3 million, or 21 cents per share, against net income of $1.1 million, or 10 cents per share, in the prior-year quarter.
On a non-GAAP basis, the adjusted net loss was $1.1 million, or 10 cents per share versus an adjusted profit of $2.8 million, or 26 cents per share, a year earlier. The decline reflected weaker demand from a longstanding customer, delays in program launches, and a $1.6-million provision for inventory and receivables following a customer bankruptcy.
Key Tronic Corporation Price, Consensus and EPS Surprise
The gross margin stood at 8.4%, narrowing from 10.1% a year earlier but improving from 6.2% in the prior quarter. Management attributed the sequential improvement to operational efficiencies from workforce reductions, while the year-over-year decline stemmed from reduced revenues and the customer bankruptcy charges. The operating margin turned negative at (0.6%), down from 3.4% last year. Total operating expenses were virtually flat at $8.8 million despite the steep drop in sales, reflecting steady selling, general and administrative spending. Cash flow from operations was $7.6 million compared with $9.9 million in the same period last year. The company’s debt decreased $12 million year over year, supported by consistent cash generation. The balance sheet remained solid with a current ratio of 2.4:1, though trade receivables fell to $80.1 million from $96.1 million at the end of June, mainly reflecting lower sales and tighter collections.
Management Commentary
President and CEO Brett Larsen said ongoing uncertainty around global tariffs and the macroeconomic environment continued to delay new program ramps. To address this, Key Tronic is expanding its manufacturing presence in the United States and Vietnam, while rightsizing its Mexico operations. Management expects approximately half of total manufacturing to occur in the United States and Vietnam by the end of fiscal 2026.
In the quarter, Key Tronic secured new programs in medical technology and industrial equipment, signaling diversification across end markets. Larsen noted that cost-reduction efforts were “taking hold,” driving sequential margin improvements. The company anticipates a gradual improvement in operating efficiency and a return to profitability by the end of fiscal 2026.
CFO Tony Voorhees highlighted strong collections performance, with days sales outstanding improving to 81 days from 92 a year earlier. Capital expenditure totaled $3.2 million for the quarter, with full-year CapEx expected to be $8 million, primarily for automation and advanced production equipment. Voorhees added that inventory levels remained aligned with revenue expectations as the company enhanced its materials resource planning systems.
Factors Influencing Results
The earnings decline was mainly led by lower customer demand, delayed program launches and tariff-related uncertainties. A significant customer’s bankruptcy led to the $1.6-million provision — $600,000 for inventory and $1 million for receivables write-offs. Management also cited a mix shift toward consigned-material programs. One such program, initiated in the quarter at the Corinth, MS, facility, generated just more than $1 million in revenues and is projected to exceed $20 million annually once fully ramped.
Additionally, non-recurring engineering revenues related to tooling, setup and design services contributed $1-$1.5 million in gross profit in the quarter, temporarily boosting margins. Management expects sustained improvement in the gross margin to depend on higher volumes and ongoing cost reductions.
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Management expressed confidence that revenue growth will resume as recently won programs ramp up in the United States, Mexico and Vietnam. Larsen emphasized that a return to profitability hinges on three factors — the full ramp of the new consigned program, the utility metering system program and improved utilization at the Mexico plant.
While revenue growth for the second quarter is expected to be unchanged sequentially, management projected ongoing efficiency initiatives and a favorable mix shift to bolster margins. Over the long term, the company anticipates benefiting from the global shift toward nearshoring and supply-chain diversification, which may enhance the demand for its manufacturing capabilities.
Other Developments
Key Tronic opened a manufacturing facility in Springdale, AR, enhancing its U.S. footprint and technological capabilities. This site is expected to achieve double-digit growth in the second half of fiscal 2026. In Vietnam, the company doubled manufacturing capacity and obtained certification to produce medical devices, with initial production slated to begin later in the fiscal year.
These expansions are designed to strengthen tariff mitigation strategies and capture growing demand for localized manufacturing. Management reiterated its commitment to maintaining a “solid and healthy” relationship with its lending bank, supported by steady cash generation and increased revolver availability.
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Key Tronic Shares Decline 12% After Reporting Weak Q1 Earnings
Shares of Key Tronic Corporation (KTCC - Free Report) have lost 12.2% since reporting results for the first quarter of fiscal 2026. This compares to the S&P 500 index’s 1.3% decline over the same time frame. Over the past month, the stock has fallen 50.4% against the S&P 500’s 15.5% growth.
For the first quarter of fiscal 2026, Key Tronic reported revenues of $98.8 million, a 24.9% decrease from $131.6 million in the year-ago period. The company posted a net loss of $2.3 million, or 21 cents per share, against net income of $1.1 million, or 10 cents per share, in the prior-year quarter.
On a non-GAAP basis, the adjusted net loss was $1.1 million, or 10 cents per share versus an adjusted profit of $2.8 million, or 26 cents per share, a year earlier. The decline reflected weaker demand from a longstanding customer, delays in program launches, and a $1.6-million provision for inventory and receivables following a customer bankruptcy.
Key Tronic Corporation Price, Consensus and EPS Surprise
Key Tronic Corporation price-consensus-eps-surprise-chart | Key Tronic Corporation Quote
Other Key Business Metrics
The gross margin stood at 8.4%, narrowing from 10.1% a year earlier but improving from 6.2% in the prior quarter. Management attributed the sequential improvement to operational efficiencies from workforce reductions, while the year-over-year decline stemmed from reduced revenues and the customer bankruptcy charges.
The operating margin turned negative at (0.6%), down from 3.4% last year. Total operating expenses were virtually flat at $8.8 million despite the steep drop in sales, reflecting steady selling, general and administrative spending.
Cash flow from operations was $7.6 million compared with $9.9 million in the same period last year. The company’s debt decreased $12 million year over year, supported by consistent cash generation. The balance sheet remained solid with a current ratio of 2.4:1, though trade receivables fell to $80.1 million from $96.1 million at the end of June, mainly reflecting lower sales and tighter collections.
Management Commentary
President and CEO Brett Larsen said ongoing uncertainty around global tariffs and the macroeconomic environment continued to delay new program ramps. To address this, Key Tronic is expanding its manufacturing presence in the United States and Vietnam, while rightsizing its Mexico operations. Management expects approximately half of total manufacturing to occur in the United States and Vietnam by the end of fiscal 2026.
In the quarter, Key Tronic secured new programs in medical technology and industrial equipment, signaling diversification across end markets. Larsen noted that cost-reduction efforts were “taking hold,” driving sequential margin improvements. The company anticipates a gradual improvement in operating efficiency and a return to profitability by the end of fiscal 2026.
CFO Tony Voorhees highlighted strong collections performance, with days sales outstanding improving to 81 days from 92 a year earlier. Capital expenditure totaled $3.2 million for the quarter, with full-year CapEx expected to be $8 million, primarily for automation and advanced production equipment. Voorhees added that inventory levels remained aligned with revenue expectations as the company enhanced its materials resource planning systems.
Factors Influencing Results
The earnings decline was mainly led by lower customer demand, delayed program launches and tariff-related uncertainties. A significant customer’s bankruptcy led to the $1.6-million provision — $600,000 for inventory and $1 million for receivables write-offs. Management also cited a mix shift toward consigned-material programs. One such program, initiated in the quarter at the Corinth, MS, facility, generated just more than $1 million in revenues and is projected to exceed $20 million annually once fully ramped.
Additionally, non-recurring engineering revenues related to tooling, setup and design services contributed $1-$1.5 million in gross profit in the quarter, temporarily boosting margins. Management expects sustained improvement in the gross margin to depend on higher volumes and ongoing cost reductions.
View
Management expressed confidence that revenue growth will resume as recently won programs ramp up in the United States, Mexico and Vietnam. Larsen emphasized that a return to profitability hinges on three factors — the full ramp of the new consigned program, the utility metering system program and improved utilization at the Mexico plant.
While revenue growth for the second quarter is expected to be unchanged sequentially, management projected ongoing efficiency initiatives and a favorable mix shift to bolster margins. Over the long term, the company anticipates benefiting from the global shift toward nearshoring and supply-chain diversification, which may enhance the demand for its manufacturing capabilities.
Other Developments
Key Tronic opened a manufacturing facility in Springdale, AR, enhancing its U.S. footprint and technological capabilities. This site is expected to achieve double-digit growth in the second half of fiscal 2026. In Vietnam, the company doubled manufacturing capacity and obtained certification to produce medical devices, with initial production slated to begin later in the fiscal year.
These expansions are designed to strengthen tariff mitigation strategies and capture growing demand for localized manufacturing. Management reiterated its commitment to maintaining a “solid and healthy” relationship with its lending bank, supported by steady cash generation and increased revolver availability.