Executive Summary
Strattec Security Corporation delivered a fiscally modest Q1 2025, driven by continued pricing benefits and favorable product mix but tempered by currency volatility and manufacturing cost pressures as the company undergoes a broader transformation. Total net sales for the quarter were $139.1 million, up 2.7% year over year, with underlying growth of 9.1% excluding the one-time retroactive pricing in the prior year. Gross margin registered 13.6%, supported by ongoing price improvements, a more favorable mix, and roughly 190 basis points of foreign exchange benefit, offset by higher Mexican manufacturing costs from a 20% minimum wage increase and elevated freight. Net income was $3.7 million ($0.92 per diluted share), and operating income was $5.06 million, underscoring a profit profile that remains sensitive to volume swings in a cyclical auto industry.
The quarter also underscored the company’s deliberate transformation agenda. Management outlined a three-pillar plan: (1) rebuild a winning product portfolio anchored on profitability and growth; (2) drive operating efficiencies and modernize the supply chain and processes; (3) recruit and empower the team to execute the strategy. Notably, STRATTEC announced leadership appointments (Linda Redmann as Chief People Officer and Chey Becker-Varto as Chief Commercial Officer) to accelerate talent development, customer relationship management, and portfolio management. On the commercial front, ongoing growth was supported by Ford F-Series latch content and Hyundai/Kia power-door sales, with a shift away from legacy keys toward higher-margin, newer technology offerings (e.g., digital key fob integration).
Looking forward, management signaled continued FX tailwinds at current rates, with expectations to lap price benefits from the prior year in the subsequent quarters. The company projected approximately $15 million in capital expenditures for fiscal 2025 to support new product initiatives and productivity improvements. While the near-term path remains exposed to automotive demand and platform timing, the strategic emphasis on portfolio optimization, cost discipline, and a strengthened organizational structure provides a constructive outlook for profitability and long-term content on next-generation platforms.
Key Performance Indicators
QoQ: -47.76% | YoY:-17.08%
QoQ: -61.51% | YoY:-11.09%
QoQ: -61.83% | YoY:-13.21%
Key Insights
Revenue: $139.1 million, up 2.7% YoY; ex-pricing impact, underlying growth 9.1% YoY.
Gross margin: 13.6% (FX-driven ~190 bps benefit; 1Q23–1Q24 had pricing tailwinds that distorted YoY comparisons).
Operating income: $5.063 million; operating margin 3.64%.
Net income: $3.703 million; net margin 2.66%.
EPS (diluted): $0.92; weighted-average shares ~4.005 million.
Cash flow: Operating cash flow $11.337 million; free cash flow $9.264 million; cash balance ending period $34.403 million.
Balance sh...
Financial Highlights
Revenue: $139.1 million, up 2.7% YoY; ex-pricing impact, underlying growth 9.1% YoY.
Gross margin: 13.6% (FX-driven ~190 bps benefit; 1Q23–1Q24 had pricing tailwinds that distorted YoY comparisons).
Operating income: $5.063 million; operating margin 3.64%.
Net income: $3.703 million; net margin 2.66%.
EPS (diluted): $0.92; weighted-average shares ~4.005 million.
Cash flow: Operating cash flow $11.337 million; free cash flow $9.264 million; cash balance ending period $34.403 million.
Balance sheet: Total assets $366.867 million; total liabilities $139.807 million; total stockholders’ equity $203.034 million; long-term debt $13.0 million; cash net of debt shows a net cash position (net debt) of about -$21.403 million.
Liquidity/ratios: Current ratio 2.18; Quick ratio 1.48; DSO ~79.5 days; DIO ~62.8 days; CCC ~142.3 days; gross margin 13.6%; operating margin 3.64%; pretax margin 3.77%; net margin 2.66%.
Income Statement
| Metric |
Value |
YoY Change |
QoQ Change |
| Revenue |
139.05M |
2.69% |
-2.80% |
| Gross Profit |
18.92M |
1.07% |
1.91% |
| Operating Income |
5.06M |
-17.08% |
-47.76% |
| Net Income |
3.70M |
-11.09% |
-61.51% |
| EPS |
0.92 |
-13.21% |
-61.83% |
Key Financial Ratios
operatingProfitMargin
3.64%
operatingCashFlowPerShare
$2.83
freeCashFlowPerShare
$2.31
Management Commentary
Key takeaways from the management call:
- Strategy and transformation: Jennifer Slater emphasized market-driven product roadmaps, modernization of supply chain and processes, and a renewed focus on accountability and data visibility across the organization. She flagged ongoing work to define areas with the greatest profitability and returns, and to align teams around clear expectations. Quote: "We are in the process of doing deep dives across all areas of the business to better understand why we have historically had so much variability in our performance and what systems, tools, and operating model we need to provide more consistent profitable results." (Theme: Strategy/Transformation)
- Portfolio and pricing: Slater noted a shift toward higher-margin content on new platforms and continued price realization, while acknowledging FX volatility as a headwind and the need to normalize pricing after last year's retroactive pricing benefit. Quote: "We did make good progress in our pricing last year... the industry is getting back to a more normalized view of pricing." (Theme: Pricing/Margins)
- Operational improvements and cost structure: Dennis Bowe highlighted FX benefits, ongoing price contributions, and a trend of lower raw material costs, offset by higher manufacturing costs in Mexico due to wage increases and elevated freight costs. He also cautioned that FX volatility could impact the December quarter. Quote: "Adjusted gross margin expanded 450 basis points... about 40% of that margin expansion was related to favorable foreign exchange." (Theme: Cost/FX)
- Leadership and culture: Slater announced two senior hires to support transformation—Linda Redmann as Chief People Officer and Chey Becker-Varto as Chief Commercial Officer—reflecting emphasis on talent management, customer relationship management, and portfolio management. (Theme: Leadership/People)
- Market dynamics and product opportunities: The company credited Ford F-Series content and Hyundai/Kia power-door sales for near-term strength, while signaling continued investment in digital key technology and other growth areas. (Theme: Market Conditions/Product Opportunities)
- Capital allocation and liquidity: Management indicated a disciplined approach to capital deployment, with an eye toward cash generation stability and potential future uses of cash, including strategic investments; a small-cap buyback or dividend was not contemplated at this time. (Theme: Capital Allocation)
"We are in the process of doing deep dives across all areas of the business to better understand why we have historically had so much variability in our performance and what systems, tools, and operating model we need to provide more consistent profitable results."
— Jennifer Slater
"The reduction in our preproduction tooling balance is a prime example of this at work."
— Jennifer Slater
Forward Guidance
Management commentary underscores a transformational path with no explicit top-line or margin targets beyond qualitative guidance. Key forward-looking considerations include:
- FX exposure: Management expects continued FX tailwinds at current rates to support margins in the near term, though currency volatility remains a risk.
- Pricing trajectory: Pricing benefits from previous years are to be lapped, suggesting future margin expansion may be more dependent on volume mix, platform content, and cost discipline rather than sizable pricing inflows.
- Portfolio optimization: The roadmap emphasizes profitability-focused investments, modernized supply chain, and a market-driven product portfolio to capture higher-margin content on next-generation platforms.
- Operating leverage: ES&A investments and fixed-cost structure imply that incremental volume on higher-margin content could meaningfully improve margins if volume stabilizes.
- Investment cadence: Capex guidance of about $15 million for 2025 indicates continued investment in new products and productivity initiatives that could lift long-term returns if programs ramp as expected.
Key factors investors should monitor: automotive production levels and platform launches (especially Ford F-Series and other key platforms), pricing realization and FX trajectories, progression of supply-chain and tooling initiatives (reductions in preproduction tooling, Lean operating model), and the evolution of cash generation versus working capital needs in a cyclical industry.