Key Tronic (KTCC) Q4 2024 earnings summary

Executive summary

• Fiscal 2024 began with strong revenue growth but was impacted by severe weather and a cybersecurity incident, disrupting production for about six weeks and causing $2.3 million in extra costs and $15 million in unfulfilled Q4 revenue, most expected to be recovered in FY25.

• Despite disruptions, workforce reductions in Mexico are expected to save over $10 million annually, and new program wins have expanded the customer base across multiple industries.

• The company is strategically rebalancing manufacturing across Mexico, the U.S., and Vietnam, with a focus on operational efficiency and profitability.

• Adjusted net income for Q4 FY24 was $1.1 million ($0.10/share), up from $1.0 million ($0.09/share) year-over-year; full-year adjusted net income was $3.4 million ($0.31/share), up from $2.2 million ($0.20/share) in 2023.

• Net income for Q4 FY24 was breakeven, compared to $1.1 million ($0.10/share) in Q4 2023; full-year net loss was $0.8 million ($0.07/share), versus $5.2 million net income ($0.47/share) in 2023.

Financial highlights

• Q4 2024 revenue was $126.7 million, down from $162.6 million in Q4 2023; full-year revenue was $559.4 million, down from $588.1 million in 2023.

• Q4 2024 gross margin improved to 9% (from 8.5% in Q4 2023), and operating margin was 2.2% (down from 2.6%).

• Q4 cost of sales was $114.4 million, down from $148.7 million year-over-year; full-year cost of sales was $517.4 million, down from $540.7 million.

• Q4 operating income was $2.7 million, down from $4.2 million year-over-year.

• Inventory reduced by $29 million (21%) year-over-year; total liabilities reduced by $56.1 million.

Outlook and guidance

• Q1 2025 revenue expected between $140 million and $150 million, with net income guidance of $0.10–$0.20 per diluted share, assuming a 20% tax rate.

• Most unfulfilled Q4 FY24 orders from the cyber incident are expected to be fulfilled in FY25.

• Anticipates continued growth in U.S. and Vietnam production, with a strong pipeline of new business and improved cost efficiencies.

• Anticipates continued cost savings from workforce reductions in Mexico, estimated at over $10 million annually.

• Sees gradual rebound in Mexico production and increased utilization of US and Vietnam facilities.