Key Tronic's Backlog Plunges 36%, Workforce Cut Amid Diversification Push

TL;DR

**KTCC's plummeting backlog and high customer concentration make it a risky bet, despite strategic capacity expansions.**

AI Summary

KEY TRONIC CORP (KTCC) reported a significant decline in its order backlog for the fiscal year ended June 28, 2025, falling to approximately $159.1 million from $249.6 million on June 29, 2024. This 36.2% reduction indicates potential future revenue challenges. The company also saw a substantial workforce reduction, decreasing from 4,122 full-time employees on June 29, 2024, to 3,539 on June 28, 2025, an approximately 14.1% cut aimed at streamlining operations and optimizing cost structure. Customer concentration remains a key risk, with the five largest customers accounting for 48% of combined total net sales in fiscal year 2025, up from 34% in 2024, and Customer A alone representing 25% of net sales in 2025. KTCC is expanding production capacity in its Arkansas and Vietnam facilities to mitigate tariff impacts and capitalize on growing customer demand for rebalancing contract manufacturing. The company's strategic outlook focuses on diversifying its customer base and leveraging its vertical integration and global footprint across facilities in the United States, Mexico, China, and Vietnam to win new business.

Why It Matters

Key Tronic's substantial 36.2% drop in order backlog to $159.1 million signals potential revenue headwinds for investors, suggesting a challenging period ahead for top-line growth. The increased customer concentration, with the top five customers now representing 48% of net sales, heightens risk, as the loss of even one major client like 'Customer A' (25% of 2025 net sales) could severely impact financial performance. For employees, the 14.1% workforce reduction to 3,539 full-time employees reflects ongoing operational streamlining, potentially impacting morale and job security. The company's strategic investments in Arkansas and Vietnam facilities, alongside efforts to diversify its customer base, are critical for long-term competitiveness against larger contract manufacturers and to mitigate geopolitical risks like tariffs.

Risk Assessment

Risk Level: high — The risk level is high due to a significant 36.2% decrease in order backlog from $249.6 million in June 2024 to $159.1 million in June 2025, indicating potential future revenue decline. Additionally, customer concentration is a major concern, with the five largest customers accounting for 48% of total net sales in fiscal year 2025, up from 34% in 2024, and Customer A alone representing 25% of net sales in 2025.

Analyst Insight

Investors should exercise caution and closely monitor KTCC's ability to secure new programs and diversify its customer base, given the substantial backlog reduction and high customer concentration. Await evidence of successful new program wins and increased revenue from the expanded Arkansas and Vietnam facilities before considering an investment.

Key Numbers

• $159.1 million — Order backlog as of June 28, 2025 (Decreased by 36.2% from $249.6 million on June 29, 2024)
• $249.6 million — Order backlog as of June 29, 2024 (Represents a 36.2% decrease to the current backlog)
• 3,539 — Full-time employees as of June 28, 2025 (Represents a 14.1% reduction from 4,122 employees on June 29, 2024)
• 4,122 — Full-time employees as of June 29, 2024 (Represents the previous year's employee count before a 14.1% reduction)
• 48% — Percentage of net sales from five largest customers in fiscal year 2025 (Increased from 34% in fiscal year 2024, indicating higher customer concentration)
• 34% — Percentage of net sales from five largest customers in fiscal year 2024 (Increased to 48% in fiscal year 2025, showing growing customer concentration)
• 25% — Percentage of net sales from Customer A in fiscal year 2025 (Highlights significant reliance on a single customer)
• $41.3 million — Aggregate market value of common stock held by non-affiliates as of December 28, 2024 (Based on NASDAQ closing price)
• 10,773,774 — Shares of common stock outstanding as of September 8, 2025 (Latest practicable date for shares outstanding)

Key Players & Entities

• KEY TRONIC CORP (company) — registrant
• Brett R. Larsen (person) — President and Chief Executive Officer since July 2024
• Anthony G. Voorhees (person) — Executive Vice President of Administration, Chief Financial Officer, and Treasurer since July 2024
• Philip S. Hochberg (person) — Executive Vice President of Customer Relations and Integration
• NASDAQ (regulator) — stock exchange
• Customer A (company) — largest customer, representing 25% of net sales in 2025
• United States (company) — location of manufacturing facilities
• Mexico (company) — location of manufacturing facilities
• China (company) — location of manufacturing facilities
• Vietnam (company) — location of manufacturing facilities

FAQ

Risk Factors

• Customer Concentration [high — market]: The company faces significant risk due to customer concentration, with the five largest customers accounting for 48% of net sales in fiscal year 2025, up from 34% in 2024. Customer A alone represented 25% of net sales in 2025, highlighting a substantial reliance on a few key clients.
• Declining Order Backlog [high — market]: The order backlog decreased by 36.2% to approximately $159.1 million as of June 28, 2025, from $249.6 million on June 29, 2024. This significant reduction indicates potential future revenue challenges and a slowdown in demand.
• Workforce Reduction [medium — operational]: Key Tronic Corp. reduced its workforce by approximately 14.1%, from 4,122 full-time employees on June 29, 2024, to 3,539 on June 28, 2025. While aimed at streamlining operations and optimizing costs, this reduction could impact operational capacity and employee morale.
• Tariff Impacts [medium — market]: The company is expanding production capacity in Arkansas and Vietnam to mitigate tariff impacts. This suggests ongoing exposure to trade policies and potential cost increases or supply chain disruptions related to tariffs.
• Reliance on International Manufacturing [medium — operational]: The company relies on a global footprint with facilities in the United States, Mexico, China, and Vietnam. Disruptions in any of these regions, such as geopolitical instability, natural disasters, or labor issues, could significantly impact operations and production.

Industry Context

The contract manufacturing industry is characterized by intense competition and a focus on cost efficiency, quality, and responsiveness. Companies like Key Tronic leverage global footprints and vertical integration to serve diverse industries. Trends include supply chain rebalancing, demand for advanced manufacturing capabilities, and increasing pressure to manage geopolitical and tariff-related risks.

Regulatory Implications

While no specific regulatory issues are detailed in the provided text, companies in the manufacturing sector are subject to various regulations concerning labor, environmental standards, and trade compliance. Changes in international trade policies and tariffs can directly impact operational costs and supply chain stability.

What Investors Should Do

1. Monitor order backlog trends closely.
2. Assess the impact of customer concentration.
3. Evaluate the effectiveness of cost-saving measures.
4. Track diversification efforts.

Key Dates

• 2025-06-28: Order backlog reported as $159.1 million — Represents a 36.2% decrease from the prior year, signaling potential future revenue headwinds.
• 2025-06-28: Full-time employees reported as 3,539 — Indicates a 14.1% reduction in workforce, reflecting cost optimization efforts.
• 2025-06-28: Five largest customers accounted for 48% of net sales — Increased customer concentration risk compared to 34% in the prior year.
• 2025-06-28: Customer A accounted for 25% of net sales — Highlights significant reliance on a single major customer.
• 2024-06-29: Order backlog reported as $249.6 million — Represents the prior year's backlog, showing a substantial decrease to the current period.
• 2024-06-29: Full-time employees reported as 4,122 — Represents the prior year's employee count before a significant reduction.

Glossary

Order Backlog

The total value of orders that have been received by a company but not yet fulfilled or shipped to customers. (A key indicator of future revenue. A declining backlog suggests potential revenue shortfalls.)

Contract Manufacturing

A manufacturing arrangement where a company outsources the production of its goods to another company that specializes in manufacturing. (This is Key Tronic's primary business model, and its success depends on efficient and cost-effective production for clients.)

Vertical Integration

A strategy where a company owns or controls its suppliers, distributors, or retail locations to control each stage of the production distribution process. (Key Tronic highlights this as a competitive advantage, allowing for greater control over costs and quality.)

Customer Concentration

A situation where a company derives a significant portion of its revenue from a small number of customers. (A major risk factor for Key Tronic, as the loss of a large customer could severely impact revenue.)

Year-Over-Year Comparison

Key Tronic Corp. has experienced a significant downturn in its order backlog, which fell by 36.2% year-over-year, indicating a potential slowdown in future revenue. This is accompanied by a substantial workforce reduction of 14.1%, suggesting efforts to streamline operations and manage costs in response to market conditions. A concerning trend is the increased customer concentration, with the top five customers now representing 48% of net sales, up from 34% in the prior year, amplifying the risk associated with customer dependency.

Key Financial Figures

• $159.1 m — er backlog was valued at approximatel y $159.1 million, compared to approximately $249.6
• $249.6 million — 59.1 million, compared to approximately $249.6 million on June 29, 2024. The amount of backlog

Filing Documents

• ktcc-20250628.htm (10-K) — 1163KB
• keytronic-rsugrant2024plan.htm (EX-10.4) — 40KB
• q42024exhibit21ng1.htm (EX-21.1) — 7KB
• q42025exhibit231.htm (EX-23.1) — 2KB
• q42025exhibit311ng.htm (EX-31.1) — 10KB
• q42025exhibit312.htm (EX-31.2) — 10KB
• q42025exhibit321ng.htm (EX-32.1) — 5KB
• q42025exhibit322ng.htm (EX-32.2) — 5KB
• ktcc-insidertradingpolicya.htm (EX-97.1) — 31KB
• 0000719733-25-000086.txt ( ) — 7613KB
• ktcc-20250628.xsd (EX-101.SCH) — 47KB
• ktcc-20250628_cal.xml (EX-101.CAL) — 95KB
• ktcc-20250628_def.xml (EX-101.DEF) — 206KB
• ktcc-20250628_lab.xml (EX-101.LAB) — 685KB
• ktcc-20250628_pre.xml (EX-101.PRE) — 479KB
• ktcc-20250628_htm.xml (XML) — 1006KB

Risk Factors

Item 1A. Risk Factors 8

Unresolved Staff Comments

Item 1B. Unresolved Staff Comments 17

Cybersecurity

Item 1C. Cybersecurity 16

Properties

Item 2. Properties 19

Legal Proceedings

Item 3. Legal Proceedings 20

Mine Safety Disclosures

Item 4. Mine Safety Disclosures 20 PART II Item 5. Market for the Registrant's Common Equity, Related Stockholder Matters, and Issuer Purchases of Equity Securities 20

[Reserved]

Item 6. [Reserved] 21

Management's Discussion and Analysis of Financial Condition and Results of Operations

Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations 21

Quantitative and Qualitative Disclosures about Market Risk

Item 7A. Quantitative and Qualitative Disclosures about Market Risk 29

Financial Statements and Supplementary Data

Item 8. Financial Statements and Supplementary Data 30

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 56

Controls and Procedures

Item 9A. Controls and Procedures 57

Other Information

Item 9B. Other Information 59 PART III

Directors, Executive Officers and Corporate Governance

Item 10. Directors, Executive Officers and Corporate Governance 59

Executive Compensation

Item 11. Executive Compensation 59

Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters 59

Certain Relationships and Related Transactions, and Director Independence

Item 13. Certain Relationships and Related Transactions, and Director Independence 60

Principal Accounting Fees and Services

Item 14. Principal Accounting Fees and Services 60 PART IV

Exhibits and Financial Statement Schedule

Item 15. Exhibits and Financial Statement Schedule 60

Form 10-K Summary

Item 16. Form 10-K Summary 64

FORWARD-LOOKING STATEMENTS

FORWARD-LOOKING STATEMENTS References in this report to "the Company," "Key Tronic," "we," "our," or "us" mean Key Tronic Corporation together with its subsidiaries, except where the context otherwise requires. This Annual Report on Form 10-K contains forward-looking statements in addition to historical information. Forward-looking statements include, but are not limited to those including such words as aims, anticipates, believes, continues, could, 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 are subject to certain risks and uncertainties that could cause actual results to differ materially from those reflected in the forward-looking statements. Risks and uncertainties that might cause such differences include, but are not limited to those outlined in"Risk Factors." Readers are cautioned not to place undue reliance on forward-looking statements, which reflect management's opinions only as of the date hereof. The Company undertakes no obligation to update forward-looking statements to reflect developments or information obtained after the date hereof and disclaims any obligation to do so. Readers should carefully review the risk factors described in periodic reports the Company files from time to time with the Securities and Exchange Commission, including Quarterly Reports on Form 10-Q and Current Reports on Form 8-K. PART I

BUSINESS

Item 1. BUSINESS Background Key Tronic Corporation was organized in 1969, as a Washington corporation that locally manufactured computer keyboards. The ability to design, build and deliver a quality product led us to become a leading independent manufacturer of keyboards for computers in the United States. Our fully integrated design, tooling, and automated manufacturing capabilities enabled us to rapidly respond to customers' needs for keyboards in production quantities worldwide. We supported our sales growth through the development and purchase of international manufacturing facilities. As the computer keyboard market matured with increasing competition from other international providers, we determined that our business could no longer solely rely on keyboard sales. After assessing market conditions and our strengths and capabilities, we shifted our focus from keyboard manufacturing to contract manufacturing for a wide range of products. Our unique strategic attributes are based on our core strengths of innovative design and engineering expertise in electronics, mechanical engineering, sheet metal fabrication and stamping, and precision plastics combined with high-quality, low cost production, and assembly on an international basis while providing exceptional customer service. These strengths have made our company a strong competitor in the contract manufacturing market. Our Industry and Strategy The expansion of the contract manufacturing industry and our acquisitions have allowed us to continue to expand our customer base and the industries that we serve. The increase in new programs represents a growing portion of our revenue and a promising foundation for our future. In keeping with our long-term strategic objectives, we have been successfully building a more diversified customer portfolio, spanning a wider range of industries. We currently offer our customers the following services: integrated electronic and mechanical engineering, precision plastic mo

RISK FACTORS

Item 1A. RISK FACTORS There are risks and uncertainties that could affect our business. These risks and uncertainties include but are not limited to, the risk factors described below, in Item 7A: "Quantitative and Qualitative Disclosures about Market Risk" and elsewhere in this Annual Report on Form 10-K. 8 RISKS AND UNCERTAINTIES THAT MAY AFFECT FUTURE RESULTS The following risks and uncertainties could affect our actual results and could cause results to differ materially from past results or those contemplated by our forward-looking statements. When used herein, the words "e

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