Executive Summary
Key Tronic Corporation reported a modestly lower revenue line in Q1 FY2025, with revenue of $131.6 million, down 6.4% year over year and 1.3% quarter over quarter. Management attributed the year-over-year revenue decline to customer-driven design and qualification delays on three programs, which temporarily trimmed revenue by approximately $9 million; two programs have since resumed shipments in Q2. Despite the revenue headwinds, the company delivered meaningful margin improvements driven by headcount reductions, a weaker Mexican peso, and supply chain improvements, culminating in gross margin of 10.1% and operating margin of 3.4% for the quarter. This margin expansion occurred even after a roughly $0.8 million write-down of capitalized variances, reflecting higher production costs embedded in older inventory. Net income reached $1.12 million ($0.10 per share), with adjusted net income of $1.2 million ($0.11 per share).
The balance sheet shows aggressive working-capital discipline: inventory declined by about $31 million (24%), current ratio improved to 2.6x, and total liabilities were cut by roughly $29.7 million (11%) year over year. Cash flow remained constructive, with operating cash flow of $9.95 million and free cash flow of $9.57 million in the quarter, supporting a modest cash balance of $6.56 million and a net debt position of approximately $106.18 million. Management signaled prudent capital allocation and reiterated a continued focus on returning capital efficiently, including potential debt refinancing to address the elevated cost of capital.
Looking ahead, management guided to Q2 revenue of $130–$140 million and net income of $0.05–$0.15 per diluted share, reflecting a pragmatic view of near-term seasonality and the continued ramp of new programs. The company intends to continue expanding capacity and capabilities in Vietnam and the United States, while selectively investing in production equipment and vertical capabilities. The long-run outlook remains constructive as global logistics constraints, nearshoring/onsourcing themes, and a diversified global footprint support a more favorable competitive position versus traditional China-centric outsourcing. Investors should monitor program ramp timing, currency hedges, balance-sheet refinancing progress, and the evolution of the Vietnam capacity contribution to growth.
Key Performance Indicators
QoQ: 3 698.29% | YoY:872.87%
QoQ: 156.62% | YoY:150.61%
QoQ: 155.56% | YoY:147.62%
Key Insights
Revenue: $131.56 million in Q1 2025, down 6.38% YoY and down 1.26% QoQ.
Gross Profit: $13.30 million, gross margin 10.11%, up 64.62% YoY and 45.02% QoQ.
Operating Income: $4.44 million, operating margin 3.38%, up 872.87% YoY and 3,698.29% QoQ.
Net Income: $1.12 million, net margin 0.85%, up 150.61% YoY and 156.62% QoQ.
EPS: $0.10, diluted $0.10, YoY EPS up 147.62% and QoQ up 155.56%.
EBITDA: $4.44 million, EBITDA margin ~3.38%.
Cash Flow: Net cash provided by operating activities $9.95 mil...
Financial Highlights
Revenue: $131.56 million in Q1 2025, down 6.38% YoY and down 1.26% QoQ.
Gross Profit: $13.30 million, gross margin 10.11%, up 64.62% YoY and 45.02% QoQ.
Operating Income: $4.44 million, operating margin 3.38%, up 872.87% YoY and 3,698.29% QoQ.
Net Income: $1.12 million, net margin 0.85%, up 150.61% YoY and 156.62% QoQ.
EPS: $0.10, diluted $0.10, YoY EPS up 147.62% and QoQ up 155.56%.
EBITDA: $4.44 million, EBITDA margin ~3.38%.
Cash Flow: Net cash provided by operating activities $9.95 million; free cash flow $9.57 million; capex $0.38 million; cash at end of period $6.56 million.
Balance Sheet: Total assets $355.93 million; total liabilities $231.59 million; total stockholders’ equity $124.34 million. Debt: total debt $112.73 million; net debt $106.18 million. Current assets total $288.28 million with current liabilities $112.15 million; current ratio 2.6x. DSO 92 days; inventory $95.85 million; cash & cash equivalents $6.56 million.
Income Statement
| Metric |
Value |
YoY Change |
QoQ Change |
| Revenue |
131.56M |
-6.38% |
-1.26% |
| Gross Profit |
13.30M |
64.62% |
45.02% |
| Operating Income |
4.44M |
872.87% |
3 698.29% |
| Net Income |
1.12M |
150.61% |
156.62% |
| EPS |
0.10 |
147.62% |
155.56% |
Management Commentary
Key themes from management commentary on the earnings call provide color to the numbers above. Strategy and market positioning emphasized the ongoing shift toward onshoring/nearshoring and the role of Vietnam as a growth vector: 'the continued trend towards onshoring and dual sourcing of contract manufacturing' (Brett Larsen). Operational discipline and capital management were highlighted, including a stronger emphasis on ROIC and disciplined program selection: 'return on invested capital is top of mind' (Brett Larsen). Balance sheet improvement and working capital efficiency were underscored, including a large inventory reduction and debt actions: 'inventory reduced by approximately $31 million' and 'we reduced our total liabilities by a combined amount of $29.7 million' (Tony Voorhees).
Management attributed margin expansion to efficiency and cost controls, aided by peso weakness, while noting a temporary headwind from capitalized-variance write-downs: 'gross margin was 10.1% and operating margins were 3.4%... offset by a write-down of approximately $0.8 million of capitalized variances' (Tony Voorhees). The call also highlighted program timing risk: three customer-driven delays caused about $9 million of near-term revenue impact, with two programs already resumed and the third targeted for February/March: 'three programs... impacted revenue by approximately $9 million' and 'the second was a new updated version... back ramping' (Tony Voorhees/Brett Larsen).
Guidance and outlook discussions stressed near-term conservatism given the holiday season and ramp constraints, alongside an optimistic view of the longer-term growth pipeline: 'For the second quarter of fiscal 2025, we expect revenue in the range of $130 million to $140 million' and 'we expect to see growth in our U.S. and Vietnam production... strong pipeline of potential new business' (Tony Voorhees/Brett Larsen). The management team also commented on market dynamics—nearshoring, reshoring, and the China-to-Asia realignment—as supportive trends for KTCC's diversified footprint and design capabilities.
"For the first quarter of fiscal 2025, we reported total revenue of $131.6 million compared to $150.1 million in the same period of fiscal 2024. Revenue in the first quarter of fiscal 2025 was adversely impacted by customer-driven design and qualification delays of three programs that we believe impacted revenue by approximately $9 million."
— Tony Voorhees
"While we did not meet revenue expectations in our first quarter of fiscal 2025 due to unavoidable delays for a few programs, we are pleased to see our improved operating efficiencies and margins begin to take place."
— Brett Larsen
Forward Guidance
KTCC maintains a constructive near-term outlook anchored by a modest revenue recovery in Q2 (guidance: $130–$140 million) and improving operating efficiency that is expected to offset capitalized-variance headwinds over the next couple of quarters. Management attributes the Q1 margin expansion to headcount reductions, favorable peso movements, and supply-chain improvements, with a further tailwind from a continued weakening peso. The company plans selective CapEx growth, particularly to add capacity and capability in Danang, Vietnam, and U.S. facilities to capture the growing onshoring/nearshoring demand and to support a strengthening design-led business model.
Key factors investors should monitor include:
- Ramp timing and revenue contribution from new programs, especially the onshore and nearshore initiatives in the U.S. and Vietnam; the two resumed programs and the one delayed to February/March 2025 are pivotal.
- Currency exposure and hedging program for the peso; management indicated ~50% hedging for the remainder of fiscal 2025, which could support margin stability if peso volatility persists.
- Working capital dynamics, inventory levels, and days-sales-outstanding progression, given the sizable prior-year inventory reductions and ongoing efforts to align stock with demand.
- Progress on debt refinancing to reduce the cost of capital and strengthen liquidity; management acknowledged the need to address elevated debt and its impact on profitability.
- The contribution of Vietnam capacity to future growth as a major growth vector, with expectations that Vietnam could reach the 10% revenue level by early next fiscal year.
- The cadence of design-engineering expansion and the stickiness of design-led program wins that can sustain margin and profitability as KTCC shifts toward higher-value, engineering-intensive contracts.