Key Tronic Corporation Announces Results for the Third Quarter of Fiscal Year 2023

Record Revenue During the Quarter and Earnings Up 100%; New Program Wins

SPOKANE VALLEY, Wash., May 02, 2023 (GLOBE NEWSWIRE) -- Key Tronic Corporation (Nasdaq: KTCC), a provider of electronic manufacturing services (EMS), today announced its results for the quarter ended April 1, 2023.

For the third quarter of fiscal year 2023, Keytronic reported total revenue of $164.6 million, up 19% from $138.4 million in the same period of fiscal year 2022. As expected, the significant increase in revenue for the third quarter of fiscal year 2023 included production for a large program with a leading power equipment company, as well as increased demand from a number of other customers. For the first nine months of fiscal year 2023, total revenue was $425.5 million, up 5% from $405.6 million in the same period of fiscal year 2022.

For the third quarter of fiscal year 2023, the Company’s gross margin was 8.7% and operating margin was 3.1%, up from a gross margin of 8.3% and an operating margin of 2.0% in the same period of fiscal year 2022. The gross margin in the third quarter of fiscal year 2023 benefited from increased revenue levels and some stabilization in the supply chain and labor market, but it was adversely impacted by foreign currency fluctuations, specifically the strengthening of the Mexican Peso relative to the US Dollar.

For the third quarter of fiscal year 2023, net income was $2.0 million or $0.18 per share, up 100% from $1.0 million or $0.09 per share for the same period of fiscal year 2022. For the first nine months of fiscal year 2023, net income was $4.1 million or $0.38 per share, up 73% from $2.4 million or $0.22 per share for the same period of fiscal year 2022.

“We’re pleased with the significant growth in our revenue and earnings in the third quarter of fiscal 2023, driven by our successful ramp of new programs, including major contributions from the large power equipment program,” said Craig Gates, President and Chief Executive Officer. “We continue to our expand our customer base and won new programs involving security equipment, video and pinball machines, mining safety and productivity products, and telecommunications devices.”

“During the third quarter of fiscal year 2023, we continued to see the favorable trend of contract manufacturing returning to North America and a growing number of potential customers evaluating a migration of their China-based manufacturing to our facility in Vietnam. We move into the fourth quarter with significant backlog levels and a strong pipeline of potential new business, and we’re seeing improvement in the global supply issues and lower labor turnover, which severely limited our production in prior periods.”

The financial data presented for the third quarter of fiscal year 2023 should be considered preliminary and could be subject to change, as the Company’s independent auditor has not completed their review procedures.

Business Outlook

For the fourth quarter of fiscal 2023, Keytronic expects to report revenue in the range of $150 million to $160 million and earnings in the range of $0.10 to $0.20 per diluted share. These expected results assume an effective tax rate of 20% in the coming quarter.

Conference Call

Keytronic will host a conference call to discuss its financial results at 2:00 PM Pacific (5:00 PM Eastern) today. A broadcast of the conference call will be available at www.keytronic.com under “Investor Relations” or by calling 888-394-8218 or +1-323-994-2093 (Access Code: 9727885). A replay will be available at www.keytronic.com under “Investor Relations”.

About Keytronic

Keytronic is a leading contract manufacturer offering value-added design and manufacturing services from its facilities in the United States, Mexico, China and Vietnam. The Company provides its customers full engineering services, materials management, worldwide manufacturing facilities, assembly services, in-house testing, and worldwide distribution. Its customers include some of the world’s leading original equipment manufacturers. For more information about Keytronic visit: www.keytronic.com. 

Forward-Looking Statements

Some of the statements in this press release are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements include, but are not limited to those including such words as aims, anticipates, believes, continues, estimates, expects, hopes, intends, plans, predicts, projects, targets, or will, similar verbs, or nouns corresponding to such verbs, which may be forward looking. Forward-looking statements also include other passages that are relevant to expected future events, performances, and actions or that can only be fully evaluated by events that will occur in the future. Forward-looking statements in this release include, without limitation, the Company’s statements regarding its expectations with respect to financial conditions and results, including revenue and earnings during periods of fiscal year 2023, risks of manufacturing supply chain and operational disruptions, demand for certain products and the effectiveness of some of our programs, business from new customers and programs, improvement of supply chain delivery and impacts from operational streamlining. There are many factors, risks and uncertainties that could cause actual results to differ materially from those predicted or projected in forward-looking statements, including but not limited to: the future of the global economic environment and its impact on our customers and suppliers; the availability of components from the supply chain; the availability of a healthy workforce; the accuracy of suppliers’ and customers’ forecasts; development and success of customers’ programs and products; timing and effectiveness of ramping of new programs; success of new-product introductions; the risk of legal proceedings or governmental investigations relating to the subject of the internal investigation by the Company’s Audit Committee and related or other unrelated matters; acquisitions or divestitures of operations or facilities; technology advances; changes in pricing policies by the Company, its competitors, customers or suppliers; impact of new governmental legislation and regulation, including tax reform, tariffs and related activities, such trade negotiations and other risks; and other factors, risks, and uncertainties detailed from time to time in the Company’s SEC filings.

KEY TRONIC CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (In thousands, except per share amounts) (Unaudited)
	Three Months Ended								Nine Months Ended
	April 1, 2023				April 2, 2022				April 1, 2023				April 2, 2022
Net sales	$	164,553			$	138,391			$	425,524			$	405,609
Cost of sales		150,277				126,883				391,950				374,155
Gross profit		14,276				11,508				33,574				31,454
Research, development and engineering expenses		2,580				2,526				7,162				7,473
Selling, general and administrative expenses		6,961				6,193				18,353				17,447
Gain on insurance proceeds, net of losses		(396	)							(4,040	)
Total operating expenses		9,145				8,719				21,475				24,920
Operating income		5,131				2,789				12,099				6,534
Interest expense, net		2,688				1,551				7,081				3,638
Income before income taxes		2,443				1,238				5,018				2,896
Income tax provision		467				231				924				487
Net income	$	1,976			$	1,007			$	4,094			$	2,409
Net income per share — Basic	$	0.18			$	0.09			$	0.38			$	0.22
Weighted average shares outstanding — Basic		10,762				10,762				10,762				10,762
Net income per share — Diluted	$	0.18			$	0.09			$	0.38			$	0.22
Weighted average shares outstanding — Diluted		10,865				11,062				10,892				11,059

KEY TRONIC CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (In thousands) (Unaudited)
		April 1, 2023				July 2, 2022
ASSETS
Current assets:
Cash and cash equivalents		$	37			$	1,707
Trade receivables, net of allowance for doubtful accounts of $44 and $275			151,927				135,876
Contract assets			29,899				21,974
Inventories, net			154,315				155,741
Other			24,095				24,710
Total current assets			360,273				340,008
Property, plant and equipment, net			27,147				26,012
Operating lease right-of-use assets, net			17,471				16,731
Other assets:
Deferred income tax asset			11,801				10,055
Other			15,006				14,117
Total other assets			26,807				24,172
Total assets		$	431,698			$	406,923
LIABILITIES AND SHAREHOLDERS’EQUITY
Current liabilities:
Accounts payable		$	132,050			$	121,393
Accrued compensation and vacation			10,646				11,836
Current portion of debt, net			5,780				7,402
Other			12,774				23,036
Total current liabilities			161,250				163,667
Long-term liabilities:
Term loans			3,958				5,716
Revolving loan			116,254				94,577
Operating lease liabilities			12,081				12,023
Deferred income tax liability			175				64
Other long-term obligations			8,560				5,998
Total long-term liabilities			141,028				118,378
Total liabilities			302,278				282,045
Shareholders’ equity:
Common stock, no par value—shares authorized 25,000; issued and outstanding 10,762 and 10,762 shares, respectively			47,651				47,474
Retained earnings			81,924				77,829
Accumulated other comprehensive income (loss)			(155	)			(425	)
Total shareholders’ equity			129,420				124,878
Total liabilities and shareholders’ equity		$	431,698			$	406,923

CONTACTS:		Brett Larsen		Michael Newman
		Chief Financial Officer		Investor Relations
		Key Tronic Corporation		StreetConnect
		(509) 927-5500		(206) 729-3625