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Shares of Key Tronic Corporation KTCC have gained 3.3% since the company reported its earnings for the second quarter of fiscal 2025, outperforming the S&P 500 index’s 0.8% growth during the same period. However, the stock has fallen 13.3% over the past month, underperforming the S&P 500’s 2.6% growth. These mixed movements reflect investor sentiment amid challenges highlighted in the company's quarterly report.
Financial Performance Overview
Key Tronic recorded a second-quarter fiscal 2025 loss of 46 cents per share against earnings of 10 cents per share for the same period a year earlier.
The company’s total quarterly revenues of $113.9 million declined 22.9% from $147.8 million in the prior-year quarter.
KTCC attributed this drop to component shortages affecting a large number of customers, reduced production during the holiday season and declining demand from certain customers. Collectively, these issues lowered revenues by approximately $15 million from initial expectations.
Key Tronic Corporation Price, Consensus and EPS Surprise
Key Tronic Corporation price-consensus-eps-surprise-chart | Key Tronic Corporation Quote
Key Business Metrics
Inventory levels decreased by $23 million or 19% year over year in the second quarter of fiscal 2025, reflecting efforts to optimize inventory amid improved component availability.
The gross margin fell year over year to 6.8% from 8% and the operating margin was -1% against 2.7% in the second quarter of fiscal 2024. These declines were primarily due to lower revenue levels and fixed cost absorption.
Costs
Total operating expenses increased slightly to $8.8 million in the second quarter of fiscal 2025 from $7.8 million in the prior-year quarter, driven by higher research and development costs, which rose to $2.3 million from $1.8 million in the second quarter of fiscal 2024. Selling, general and administrative expenses were $6.5 million in the second quarter of fiscal 2025.
Cost of sales as a percentage of revenues increased to 93.2% from 92.0% in the second quarter of fiscal 2024, indicating increased pressure on production costs relative to declining sales.
Cash & Debt Position
As of Dec. 28, 2024, Key Tronic’s cash and cash equivalents stood at $4.2 million, a slight decrease from $4.8 million as of June 29, 2024. This reduction reflects lower operational cash flow amid declining revenues and increased expenses.
The company’s long-term debt was $106 million at the end of the second quarter of fiscal 2025, down from $116.4 million as of June 29, 2024, following the refinancing of its debt under a new $115-million asset-based financing agreement. This refinancing provides increased financial flexibility, though interest expenses, including a $1-million write-off for unamortized loan fees, weighed on the quarterly results.