Shares of Key Tronic Corporation KTCC have gained 5.3% since reporting results for the fourth quarter of fiscal 2025. This compares with the S&P 500 index’s 0.2% growth over the same time frame. Over the past month, the stock has declined 0.3% against the S&P 500’s 1.7% rally.
For the fourth quarter of fiscal 2025, Key Tronic reported revenues of $110.5 million, down from $126.6 million in the same period a year ago. For fiscal 2025, revenues were $467.9 million, declining 17% from $566.9 million in fiscal 2024.
The net loss widened to $3.9 million, or 36 cents per share, in the quarter under review versus a net loss of $2 million, or 18 cents per share, in the prior-year period. For the fiscal year, the company incurred a net loss of $8.3 million, or 77 cents per share, compared with a net loss of $2.8 million, or 26 cents per share, last year. On an adjusted basis, the quarterly net loss stood at $3.8 million, or 35 cents per share, compared with a loss of $0.7 million, or 6 cents per share, a year ago.
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 contracted to 6.2% in the fiscal fourth quarter from 7.2% a year earlier, largely reflecting reduced revenues and severance expenses. However, on a full-year basis, the gross margin improved to 7.8% from 7% in fiscal 2024, as workforce reductions and operational streamlining began to offset higher costs. The operating margin slipped to 0.1% for the year from 1.2% in the prior year, affected by credit loss adjustments.
The cash flow provided by operations improved to $8.8 million in the fiscal fourth quarter from $7.7 million in the year-ago quarter. For fiscal 2025, the cash flow totaled $18.9 million compared with $13.8 million in fiscal 2024. The company also reduced total liabilities by $32.7 million, or 14%, over the year, while improving days sales outstanding to 86 from 95, signaling better collections.
Management Commentary
President and CEO Brett Larsen described fiscal 2025 as a year of transition and uncertainty, with tariff-related disruptions delaying program launches. Management emphasized strategic shifts in manufacturing, including expanding U.S. and Vietnam operations, while rightsizing the Mexico facility to remain competitive. By fiscal 2026, the company expects roughly half of its manufacturing to be based in the United States and Vietnam.
Larsen highlighted program wins across industries such as pest control, medical technology, automotive, and air purification. Notably, Key Tronic entered a services contract with a large data processing OEM at its Mississippi plant. The program, which involves consigned materials, is projected to exceed $20 million in annual revenues once fully ramped.
Factors Influencing the Results
The primary headwinds were reduced demand from two long-standing customers and uncertainty caused by tariff fluctuations, which led many clients to delay orders. Additionally, severance expenses of $2.9 million for the year weighed on profitability, though these were offset by cost savings from a reduced workforce of approximately 800 employees. The company underscored that operational efficiencies, automation, and streamlined supply chains have positioned it better for margin expansion once revenue growth resumes.
On the balance sheet, adjustments of $1.1 million in the fiscal fourth quarter and $1.8 million for the year were recorded to account for expected customer collections. These provisions further pressured reported results.
Guidance
Key Tronic refrained from issuing revenue or earnings guidance for the first quarter of fiscal 2026, citing continued uncertainty over tariffs and the timing of customer program ramps. However, management expressed confidence in improving the gross margin as production volumes increase, targeting a long-term gross margin recovery toward double-digit levels once capacity in the United States and Vietnam comes online.
Other Developments
The company continued investing in its global footprint. A new flagship facility in Arkansas, expected to cost $28 million and create more than 400 jobs in the next five years, is under development. In Vietnam, production capacity is being doubled, with new capabilities in medical device manufacturing slated for fiscal 2026. These expansions aim to provide customers with flexible, tariff-mitigated manufacturing options. Meanwhile, automation and efficiency improvements at the Mexico plant are designed to offset rising wage pressures.
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This article originally published on Zacks Investment Research (zacks.com).