Executive Summary
Key Tronic Corporation reported Q2 FY2025 revenue of $113.9 million, down 13% QoQ and 9% YoY, with gross margins of 6.8% and an operating loss of $1.12 million. Net loss for the quarter was $4.9 million, or $0.46 per share, driven by lower-than-expected volumes and a one-time financing impact, including approximately $1.0 million in write-offs related to refinanced debt. Management attributed the revenue decline to a targeted component shortage affecting a large customer and softer demand from certain programs, with shortages resolved only later in the quarter. The company refrained from providing Q3 guidance amid tariff-related cost uncertainties on goods manufactured in China and Mexico, while signaling that margins should improve as volumes recover and fixed-cost leverage increases. Management highlighted ongoing cost-reduction initiatives, stronger inventory discipline (inventory down ~19% YoY by $23 million), and a shift toward expanded US and Vietnam production to capitalize on nearshoring trends. A notable development is the aerospace/energy resiliency program win, which could exceed $60 million in annual revenue once fully ramped, starting in H2 2025. In parallel, KTCC finalized a new asset-based financing arrangement up to $115 million, borrowing $76 million by quarter-end, intended to enhance liquidity and reduce financing costs over time. The combination of near-term headwinds, strategic capacity expansions in Arkansas and Vietnam, and a robust project pipeline presents a constructive longer-term growth trajectory, albeit with meaningful execution risks tied to market tariffs and supply chain volatility.
Key Performance Indicators
QoQ: -13.46% | YoY:-9.42%
QoQ: -42.07% | YoY:-31.96%
QoQ: -125.23% | YoY:-141.47%
QoQ: -537.19% | YoY:-13 381.08%
QoQ: -560.00% | YoY:-13 629.41%
Key Insights
Revenue: $113.853 million (Q2'25) vs $147.8 million (Q2'24); YoY revenue change: -9.42%; QoQ revenue change: -13.46%. Gross profit: $7.706 million; gross margin: 6.77%. Operating income: -$1.121 million; operating margin: -0.98%. EBITDA: $1.404 million; EBITDA margin: 1.23%. Net income: -$4.914 million; net margin: -4.32%. EPS: -0.46; diluted EPS: -0.46. Cash flow from operations: $1.59 million; free cash flow: $1.146 million. Capex (2Q'25): ~$0.8 million; guided FY Capex: $8â$1...
Financial Highlights
Revenue: $113.853 million (Q2'25) vs $147.8 million (Q2'24); YoY revenue change: -9.42%; QoQ revenue change: -13.46%. Gross profit: $7.706 million; gross margin: 6.77%. Operating income: -$1.121 million; operating margin: -0.98%. EBITDA: $1.404 million; EBITDA margin: 1.23%. Net income: -$4.914 million; net margin: -4.32%. EPS: -0.46; diluted EPS: -0.46. Cash flow from operations: $1.59 million; free cash flow: $1.146 million. Capex (2Q'25): ~$0.8 million; guided FY Capex: $8â$10 million. Working capital: AR $132.024 million, inventory $100.709 million, accounts payable $63.585 million. Current assets: $261.136 million; total assets: $327.829 million. Total liabilities: $208.342 million; long-term debt: $114.449 million; net debt: $115.268 million. Current ratio: 2.78x; quick ratio: 1.711x; cash ratio: 0.045x. DSO: ~99â104 days; DIO: ~85 days; CCC: ~136 days.
Income Statement
| Metric |
Value |
YoY Change |
QoQ Change |
| Revenue |
113.85M |
-9.42% |
-13.46% |
| Gross Profit |
7.71M |
-31.96% |
-42.07% |
| Operating Income |
-1.12M |
-141.47% |
-125.23% |
| Net Income |
-4.91M |
-13 381.08% |
-537.19% |
| EPS |
-0.46 |
-13 629.41% |
-560.00% |
Key Financial Ratios
operatingProfitMargin
-0.99%
operatingCashFlowPerShare
$0.15
freeCashFlowPerShare
$0.11
Management Commentary
Key management insights from the investor call: 1) Revenue and margin outlook: Management acknowledged the revenue decline was due to unexpected component shortages and lower production during the holiday period, with shortages resolved late in the quarter and expectations of revenue recovery as production volumes rise. 2) Near-term catalysts: The aerospace program is a ~$5 million initial order with potential to grow, and the energy resiliency program is expected to ramp in H2 2025 with potential annual revenue exceeding $60 million. 3) Tariff and policy risk: Management highlighted tariffs on China and Mexico as a meaningful uncertainty for costs and margins, leading to a lack of explicit Q3 guidance. 4) Capacity and onshoring strategy: KTCC plans to expand US (Arkansas) and Vietnam footprint to capture nearshoring demand, with Arkansas lease expansion and a doubling of Vietnam capacity planned by September 2025. 5) Financing and liquidity: A new asset-based facility provides up to $115 million of available credit; $76 million drawn by quarter-end, expected to lower interest expense and improve liquidity over time. 6) Operational improvements: Ongoing cost savings program, overhead reductions, and more disciplined materials planning to align inventory with revenue as supply chains normalize.
The aerospace opportunity is going to start out at a $5 million program Bill, but there is potential for that to grow over time. The other is ... expected to begin ramping in the latter half of this calendar year.
â Brett Larsen
Taking all these factors into consideration, we will not be issuing revenue or earnings guidance for the third quarter of fiscal 2025.
â Tony Voorhees
Forward Guidance
Management elected not to provide revenue or earnings guidance for Q3 FY2025 due to ongoing tariff-related uncertainty and potential shifts in customer demand as manufacturers reassess supply chains. They assert intended outcomes include: (1) growth in US and Vietnam production, (2) a strong pipeline of new business, and (3) profitability improvements through higher production volumes, operating efficiencies, and fixed-cost leverage. The near-term risk overlay includes potential tariff cost pass-through to customers, logistics disruptions, and competitive dynamics among contract manufacturers. Key monitoring factors for investors: (a) progression and ramp timing of aerospace and energy resiliency programs, (b) realization of savings from overhead reductions and supply-chain optimization, (c) capacity expansion execution in Arkansas and Vietnam, (d) changes in customer demand driven by tariffs, and (e) dynamics of the new financing facility and its impact on financing costs and liquidity.