STRATTEC SECURITY CORPORATION Generated $20.7 million in Cash from Operations in Fiscal 2025 Third Quarter

Business Wire

Thu, May 8, 2025, 2:30 PM 12 min read

Strong cash generation of $20.7 million in fiscal 2025 third quarter, the result of cash earnings and improved working capital velocity
Healthy balance sheet with limited debt and $62 million of cash provides safeguard against near term tariff turmoil and tempering market conditions
Net income attributable to STRATTEC Security Corporation was $5.4 million, or $1.32 per diluted share, compared with $1.5 million, or $0.37 per diluted share, in the year ago quarter
Delivered adjusted EBITDA¹ of $12.9 million, or 8.9% of sales, compared with $6.2 million, or 4.4%, in prior-year period
Further advanced cost reduction efforts with restructuring of Mexico operations in March; bringing total annualized restructuring savings to approximately $5 million including changes in Milwaukee operations in January

MILWAUKEE, May 08, 2025--(BUSINESS WIRE)--STRATTEC SECURITY CORPORATION (Nasdaq: STRT) ("Company"), a leading provider of smart vehicle access, security and authorization solutions for the global automotive industry, reported financial results for its third quarter of fiscal year 2025, which ended March 30, 2025.

Jennifer Slater, President and CEO of STRATTEC, said, "We delivered another strong quarter as the actions we are taking to transform STRATTEC into a more predictable, higher performing business are flowing through to our bottom line. During the quarter, we captured margin accretive pricing, benefited from both increased and higher value content on winning platforms and improved operational performance."

Addressing the evolving state of global trade, Ms. Slater added, "The tariff situation has created a rapidly changing environment with significant unknowns. Nevertheless, given what we know today with the USMCA exemption, we estimate that the annual impact of tariffs is approximately $9 million to $12 million of incremental costs, prior to any mitigation efforts. We have been moving quickly to implement tariff mitigation actions to reduce the impact on profit margins including shifting sources within our supply chain, passing through costs to customers and changing logistics processes with customers."

"We have been making measurable change within the organization to drive cost savings which in the short term will help offset these tariff costs as we work through mitigation actions. In the long term, we believe these actions will make STRATTEC a better business. In total, we have reduced our headcount by 12% in the first nine months of fiscal 2025, including recent restructuring actions we have taken in Mexico. We believe there is additional potential for cost savings through modernization and rethinking our manufacturing and assembly processes. We are focused on instilling a culture of operational excellence to create an enterprise that can deliver stronger earnings power," Ms. Slater concluded.

FY 2025 Third Quarter Financial Summary

(compared with prior-year period, except where otherwise noted)

Net sales were $144.1 million, an increase of $3.3 million, or 2.4%. Sales growth was driven by $2.5 million of price increases, $2.2 million in favorable product mix, and $1.6 million in net new program launches. This more than offset a $3.0 million reduction in sales volumes for existing platforms.

Gross profit increased $8.4 million to $23.1 million, while gross margin expanded 560 basis points. The improvement was due in part to $4.4 million, or 305 basis points, of favorable foreign currency exchange. The remainder of the increase was the result of pricing actions and materials and labor cost improvements which more than offset the $0.8 million increase in tariff expenses as a result of recent changes in U.S. tariff policy.

Engineering, selling and administrative ("ES&A") expenses increased $3.3 million, or 25.9%, to $16.0 million. The increase reflected continued investments in the business, $1.2 million of higher incentive and bonus compensation as a result of better than expected performance and $0.8 million in restructuring charges.

A slight increase in interest expense was more than offset by the $0.4 million increase in interest income on higher cash balances and the $0.2 million improvement in other expense related to foreign currency forward contracts.

Net income attributable to STRATTEC was $5.4 million, or $1.32 per diluted share, compared with $1.5 million, or $0.37 per diluted share, in the prior-year period. On an adjusted basis, net income attributable to STRATTEC¹ grew 315% to $6.1 million. Adjusted diluted earnings per share¹ increased $1.13, or 305%, to $1.50. Adjusted EBITDA¹ for the quarter was $12.9 million compared with $6.2 million in the prior-year period. Expanded gross margin on higher sales more than offset investments in ES&A which led to adjusted EBITDA margin of 8.9%, a 450 basis point improvement over the third quarter of fiscal 2024.

Restructuring and Business Transformation Progress

During the third quarter of fiscal 2025, the Company made continued progress on improving its cost structure, by completing the elimination of a production shift in its Milwaukee operations and implementing a restructuring action in its operations in Mexico. The cash cost of the Mexico restructuring actions was $1.6 million, which will result in expected annual savings of $4.5 million. Collectively, restructuring activities implemented in fiscal 2025 are now expected to generate approximately $5 million of annual cost reductions, with savings amounts expected to be phased in and fully realized by the first quarter of fiscal 2026.

Balance Sheet and Liquidity

Increased cash earnings and improved working capital management delivered $20.7 million in cash from operations in the third quarter of fiscal 2025, compared with a use of cash in the prior-year period. Cash from operations for the nine-month period were $41.5 million.

At March 30, 2025, the Company had $62.1 million in cash and cash equivalents, up $19.5 million from the end of the second quarter of fiscal 2025. The Company had no borrowings outstanding under its $40 million revolving credit agreement, while our joint venture had $13.0 million outstanding under its $20 million revolving credit agreement.

Third Quarter Fiscal Year 2025 Webcast and Conference Call

The Company will host a conference call and webcast tomorrow, Friday, May 9, 2025, at 9:00 am Eastern Time to review the financial and operating results for the period ended March 30, 2025, and provide an update on its transformation progress. A question-and-answer session will follow.

You can access the call by phoning (201) 689-8470 or find the webcast and accompanying slide presentation at investors.strattec.com.

A telephonic replay will be available from 12:00 p.m. ET on the day of the call through Friday, May 23, 2025. To listen to the archived call, dial (412) 317-6671 and enter a replay PIN 13752650. The webcast replay will be available on the Investor Relations section of the Company’s website where a transcript will be posted once available.

^{________________________________
1} Refer to "Use of Non-GAAP Financial Metrics and Additional Financial Information" as well as accompanying reconciliations to GAAP

About STRATTEC

STRATTEC is a leading global provider of advanced automotive access, security & authorization and select user interface solutions. With a history spanning over 110 years, STRATTEC has consistently been at the forefront of innovation in vehicle security, transitioning from mechanical to integrated electro-mechanical systems. The Company serves a broad range of customers, including leading automotive OEMs, offering power access solutions and advanced security systems that include door handles, lift gates, latches, and key fobs.

For more information on STRATTEC and its solutions, visit www.strattec.com.

Safe Harbor Statement

Certain statements contained in this release contain "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. These statements may be identified by the use of forward-looking words or phrases such as "anticipate," "believe," "could," "expect," "intend," "may," "planned," "potential," "should," "will," and "would." Such forward-looking statements are inherently subject to many uncertainties in the Company’s operations and business environment. These uncertainties include general economic conditions, in particular, relating to the automotive industry, consumer demand for the Company’s and its customers’ products, competitive and technological developments, customer purchasing actions, changes in warranty provisions and customer product recall policies, work stoppages at the Company or at the location of its key customers as a result of labor disputes, foreign currency fluctuations, uncertainties stemming from U.S. trade policies, tariffs and reactions to the same from foreign countries, matters adversely impacting the timing and availability of component parts and raw materials needed for the production of the Company’s products and the products of its customers and fluctuations in costs of operation. Shareholders, potential investors and other readers are urged to consider these factors carefully in evaluating the forward-looking statements and are cautioned not to place undue reliance on such forward-looking statements. The forward-looking statements made herein are only made as of the date of this press release and the Company undertakes no obligation to publicly update such forward-looking statements to reflect subsequent events or circumstances occurring after the date of this release. In addition, such uncertainties and other operational matters are discussed further in the Company’s quarterly and annual filings with the Securities and Exchange Commission.

Use of Non-GAAP Financial Metrics and Additional Financial Information

In addition to reporting financial results in accordance with generally accepted accounting principles, or GAAP, STRATTEC provides Adjusted Non-GAAP information as additional information for its operating results. References to Adjusted Non-GAAP information are to non-GAAP financial measures. These measures are not required by, in accordance with, or an alternative for, GAAP and may be different from similarly titled non-GAAP financial measures used by other companies. STRATTEC’s management uses these measures to make strategic decisions, establish budget plans and forecasts, identify trends affecting STRATTEC’s business, and evaluate performance. Management believes that providing these non-GAAP financial measures to investors, as a supplement to GAAP financial measures, will help investors evaluate STRATTEC’s core operating and financial performance and business trends consistent with how management evaluates such performance and trends. Investors are encouraged to review the related GAAP financial measures and the reconciliation of these non-GAAP financial measures to their most directly comparable GAAP financial measures.

FINANCIAL TABLES FOLLOW

STRATTEC SECURITY CORPORATION Condensed Results of Operations (In thousands, except per share amounts) (Unaudited)

	Three Months Ended						Nine Months Ended
	March 30, 2025			March 31, 2024			March 30, 2025			March 31, 2024
Net sales	$	144,082		$	140,773		$	413,053		$	394,711
Cost of goods sold		120,977			126,089			353,876			347,810
Gross profit		23,105			14,684			59,177			46,901
Gross margin		16.0	%		10.4	%		14.3	%		11.9	%
Engineering, selling and administrative expenses		16,020			12,725			44,895			38,778
Income from operations		7,085			1,959			14,282			8,123
Operating margin		4.9	%		1.4	%		3.5	%		2.1	%
Interest expense		(243	)		(222	)		(795	)		(661	)
Investment income		529			143			1,286			337
Other (expense) income, net		(16	)		(208	)		(369	)		759
Income before provision for income taxes and non-controlling interest		7,355			1,672			14,404			8,558
Provision for income taxes		1,644			546			3,547			2,197
Net income		5,711			1,126			10,857			6,361
Net income (loss) attributable to non-controlling interest		315			(380	)		439			(332	)
Net income attributable to STRATTEC SECURITY CORPORATION	$	5,396		$	1,506		$	10,418		$	6,693

Earnings per share attributable to STRATTEC SECURITY CORPORATION:
Basic	$	1.34		$	0.38		$	2.59		$	1.69
Diluted	$	1.32		$	0.37		$	2.56		$	1.67

Weighted Average shares outstanding:
Basic		4,039			3,988			4,026			3,971
Diluted		4,085			4,017			4,067			3,996

STRATTEC SECURITY CORPORATION Condensed Balance Sheet (In thousands, except share amounts) (Unaudited)

	March 30, 2025			June 30, 2024
ASSETS
Current Assets:
Cash and cash equivalents	$	62,106		$	25,410
Receivables, net		109,160			99,297
Inventories:
Finished products		14,563			19,833
Work in process		12,228			15,461
Purchased materials		48,800			46,355
Inventories, net		75,591			81,649
Pre-production costs		9,740			22,173
Value-added tax recoverable		22,342			19,684
Other current assets		8,276			5,601
Total current assets		287,215			253,814
Deferred income taxes		17,084			17,593
Other long-term assets		5,277			6,698
Net property, plant and equipment		77,816			86,184
	$	387,392		$	364,289
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current Liabilities:
Accounts payable	$	72,582		$	54,911
Accrued Liabilities:
Payroll and benefits		19,431			28,953
Value-added tax payable		10,844			9,970
Environmental		1,390			1,390
Warranty		10,745			10,695
Other current liabilities		8,312			12,369
Total current liabilities		123,304			118,288
Borrowings under credit facilities		13,000			13,000
Postemployment obligations		12,076			2,429
Other long-term liabilities		4,411			4,957
Shareholders’ Equity:
Common stock, authorized 18,000,000 shares, $.01 par value, 7,635,883 issued shares at March 30, 2025 and 7,586,920 issued shares at June 30, 2024		76			76
Capital in excess of par value		102,888			101,024
Retained earnings		261,030			250,612
Accumulated other comprehensive loss		(17,836	)		(15,689	)
Less: treasury stock, at cost (3,596,918 shares at March 30, 2025 and 3,598,126 shares at June 30, 2024)		(135,459	)		(135,478	)
Total STRATTEC SECURITY CORPORATION shareholders’ equity		210,699			200,545
Non-controlling interest		23,902			25,070
Total shareholders’ equity		234,601			225,615
	$	387,392		$	364,289

STRATTEC SECURITY CORPORATION Condensed Cash Flow Statement (In Thousands) (Unaudited)

	Three Months Ended						Nine Months Ended
	March 30, 2025			March 31, 2024			March 30, 2025			March 31, 2024
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	5,711		$	1,126		$	10,857		$	6,361
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation		3,746			4,059			10,952			12,774
Foreign currency transaction loss (gain)		141			475			(1,052	)		126
Unrealized (gain) loss on peso forward contracts		(705	)		222			231			(604	)
Stock-based compensation expense		760			240			1,839			1,224
Loss on settlement of postemployment obligation		—			—			283			—
Change in operating assets and liabilities:
Receivables		(17,616	)		(26,685	)		(10,237	)		(7,507	)
Inventories		5,920			10,827			6,058			(1,015	)
Prepaid and other assets		(1,850	)		(4,494	)		5,994			(16,898	)
Accounts payable		20,720			9,339			16,730			(7,102	)
Accrued liabilities		3,632			4,337			(948	)		4,747
Other, net		261			245			794			671
Net cash provided by (used in) operating activities		20,720			(309	)		41,501			(7,223	)
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of interest in joint ventures		—			—			—			2,000
Purchase of property, plant and equipment		(1,170	)		(1,672	)		(4,160	)		(6,065	)
Net cash used in investing activities		(1,170	)		(1,672	)		(4,160	)		(4,065	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings under credit facilities		—			—			3,000			2,000
Repayment of borrowings under credit facilities		—			—			(3,000	)		(2,000	)
Employee stock purchases		16			18			44			55
Net cash provided by financing activities		16			18			44			55
Foreign currency impact on cash		(85	)		(18	)		(689	)		256
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS		19,481			(1,981	)		36,696			(10,977	)

CASH AND CASH EQUIVALENTS
Beginning of period		42,625			11,575			25,410			20,571
End of period	$	62,106		$	9,594		$	62,106		$	9,594
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for:
Income taxes	$	596		$	1,731		$	9,135		$	3,177
Interest	$	172		$	219		$	731		$	659
Non-cash investing activities:
Change in capital expenditures in accounts payable	$	1,176		$	(89	)	$	726		$	(264	)

STRATTEC SECURITY CORPORATION Reconciliation of GAAP to Non-GAAP Financial Measures (in thousands, except per share amounts)

	Fiscal 2024															Fiscal 2025
	Q1			Q2			Q3			Q4			Total			Q1			Q2			Q3			Q4		Total
ADJUSTED NET SALES:
Net Sales (GAAP)		135,406			118,532			140,773			143,055		$	537,766			139,052			129,919			144,082			-	$	413,053
Adjustments:																							-
Retroactive FY23 one-time pricing recovery		(7,950	)		(1,551	)		(397	)		175			(9,723	)		-			-			-			-		-
Adjusted Sales (Non-GAAP)		127,456			116,981			140,376			143,230			528,043			139,052			129,919			144,082			-		413,053


ADJUSTED EBITDA:
Net income attributable to STRATTEC (GAAP)	$	4,165		$	1,022		$	1,506		$	9,620		$	16,313		$	3,703		$	1,319		$	5,396		$	-	$	10,418
Net income (loss) attributable to non-controlling interest		290			(242	)		(380	)		447			115			45			79			315			-		439
Provision for income tax		1,387			264			546			1,578			3,775			1,498			405			1,644			-		3,547
Other (income) expense, net		131			(1,098	)		208			(1,958	)		(2,717	)		(129	)		482			16			-		369
Investment and interest income		(87	)		(107	)		(143	)		(235	)		(572	)		(349	)		(408	)		(529	)		-		(1,286	)
Interest expense		220			219			222			239			900			295			257			243			-		795
Income from operations		6,106			58			1,959			9,691			17,814			5,063			2,134			7,085			-		14,282

Adjustments:
Depreciation		4,385			4,330			4,059			3,773		$	16,547			3,662			3,544			3,746			-	$	10,952
Non-cash stock-based compensation		505			479			240			243			1,467			188			891			760			-		1,839
Restructuring and similar charges		-			-			-			-			-			-			265			809			-		1,074
Retroactive FY23 one-time pricing recovery, net		(7,078	)		(641	)		(298	)		24			(7,993	)		-			-			-			-		-
Executive transition costs		-			774			211			73			1,058			941			921			214			-		2,076
Business transformation costs		-			-			-			-			-			74			215			259			-		548
		(2,188	)		4,942			4,212			4,113			11,079			4,865			5,836			5,788			-		16,489
Adjusted EBITDA (Non-GAAP)	$	3,918		$	5,000		$	6,171		$	13,804		$	28,893		$	9,928		$	7,970		$	12,873		$	-	$	30,771

Adjusted EBITDA as a % of Adjusted Net Sales		3.1	%		4.3	%		4.4	%		9.6	%		5.5	%		7.1	%		6.1	%		8.9	%				7.4	%


ADJUSTED NET INCOME AND EARNINGS/(LOSS) PER SHARE:
Net income attributable to STRATTEC (GAAP)	$	4,165		$	1,022		$	1,506		$	9,620		$	16,313		$	3,703		$	1,319		$	5,396		$	-	$	10,418
Adjustments:
Restructuring and similar charges		265			3			-			63			331			-			265			809			-		1,074
Retroactive FY23 one-time pricing recovery, net		(7,078	)		(641	)		(298	)		24			(7,993	)		-			-			-			-		-
Executive transition costs		-			973			211			73			1,257			1,224			1,225			214			-		2,663
Business transformation costs		-			-			-			-			-			74			215			259			-		548
Non-controlling interest impact on above adjustments		1,014			181			55			22			1,272			-			-			(160	)		-		(160	)
Tax effect on above adjustments		1,305			(116	)		7			(41	)		1,155			(292	)		(384	)		(376	)		-		(1,052	)
		(4,494	)		400			(25	)		141			(3,978	)		1,006			1,321			746			-		3,073
Adjusted Net Income/(Loss) attributable to STRATTEC (Non-GAAP)	$	(329	)	$	1,422		$	1,481		$	9,761		$	12,335		$	4,709		$	2,640		$	6,142		$	-	$	13,491

Weighted Average Basic Shares Outstanding		3,948			3,976			3,988			3,988			3,975			4,005			4,035			4,039			-		4,026
Weighted Average Diluted Shares Outstanding		3,974			3,998			4,017			4,027			4,004			4,046			4,070			4,085			-		4,067

Diluted earnings per share (GAAP)	$	1.05		$	0.26		$	0.37		$	2.39		$	4.07		$	0.92		$	0.32		$	1.32		$	-	$	2.56
Adjusted dilutive earnings/(loss) per share (Non-GAAP)	$	(0.08	)	$	0.36		$	0.37		$	2.42		$	3.08		$	1.16		$	0.65		$	1.50		$	-	$	3.32

View source version on businesswire.com: https://www.businesswire.com/news/home/20250508729800/en/

Contacts

Deborah K. Pawlowski
Alliance Advisors IR
Phone: 716-843-3908
Email: dpawlowski@allianceadvisors.com

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