Key Tronic Reports 21.4% Revenue Decline in Q3 Fiscal Year 2025

Key Tronic Corporation reported a significant decline in financial performance for the third quarter of fiscal year 2025, with net sales of $112.0 million, down 21.4% from $142.4 million in the same period last year. The decrease in revenue was attributed to global economic disruptions, including fluctuations in tariffs, which led to delays and reduced demand from customers. Despite the drop in sales, the company managed to improve its gross margin to 7.7%, up from 5.7% in the prior year, primarily due to cost reductions and strategic headcount adjustments.

For the nine months ending March 29, 2025, Key Tronic's net sales totaled $357.4 million, an 18.8% decrease compared to $440.4 million for the same period in fiscal year 2024. The decline was influenced by various factors, including supply chain issues, reduced demand from long-standing programs, and a significant drop in excess inventory sales. The company reported a net loss of $4.4 million for the nine-month period, compared to a loss of $0.8 million in the previous year.

Operationally, Key Tronic's order backlog decreased to approximately $138.1 million as of March 29, 2025, down from $275.8 million a year earlier. This reduction was linked to softening demand for programs based in Mexico, although there was an increase in demand for U.S.-based facilities. The company anticipates that recent program wins will help increase backlog in the coming periods. As of the latest report, Key Tronic had 10,761,871 shares of common stock outstanding.

In terms of strategic developments, Key Tronic has been restructuring its operations to adapt to changing market conditions. The company is focusing on higher volume manufacturing at its Juarez facility while migrating lower volume products to other sites. This restructuring has already led to significant headcount reductions and is expected to continue into the next fiscal year. Additionally, the company has entered into amendments to its credit agreements to address compliance issues and maintain liquidity, with $79.5 million in borrowings under its asset-based revolving credit facility as of March 29, 2025.

Looking ahead, Key Tronic's management remains cautiously optimistic about future growth opportunities, particularly as contract manufacturing trends return to North America. The company plans to expand production capacity in its Arkansas and Vietnam facilities to meet increasing customer demand and mitigate the impact of tariffs. However, ongoing challenges such as rising wages in Mexico and geopolitical tensions may continue to affect the company's competitive positioning. Key Tronic believes that its current liquidity, bolstered by cash flows from operations and available credit, will be sufficient to support its operational needs for at least the next 12 months.