Key Tronic Swings to Loss as Sales Plunge 25%

TL;DR

**KTCC's latest quarter is a red flag; sales are down a quarter and they're losing money, so stay away until they show a turnaround.**

AI Summary

KEY TRONIC CORP (KTCC) reported a significant decline in financial performance for the three months ended September 27, 2025, with net sales decreasing by 25% to $98.75 million from $131.56 million in the prior year. The company swung to a net loss of $2.26 million, or $0.21 per diluted share, compared to a net income of $1.12 million, or $0.10 per diluted share, in the same period last year. Gross profit fell sharply to $8.25 million from $13.30 million, while operating income turned into a loss of $0.58 million from a gain of $4.44 million. Despite the losses, KTCC generated $7.60 million in cash from operating activities, down from $9.95 million year-over-year, and maintained positive working capital of $127.2 million. The company secured new credit facilities in December 2024, including a $115 million revolving credit facility and a $28 million term loan, with $20.9 million available under the revolving facility as of September 27, 2025.

Why It Matters

This filing reveals a challenging quarter for Key Tronic, with a substantial drop in revenue and a shift to a net loss, which could signal weakening demand or increased competitive pressures in the electronics manufacturing services sector. For investors, the negative earnings per share and reduced cash from operations are concerning, potentially impacting future stock performance and dividend prospects. Employees might face job insecurity if the downturn persists, while customers could see impacts on supply chain stability. The broader market may view this as an indicator of softening in the manufacturing sector, especially given the global economic uncertainties.

Risk Assessment

Risk Level: high — The company reported a net loss of $2.26 million for the quarter ended September 27, 2025, a significant decline from a net income of $1.12 million in the prior year. Net sales decreased by 25% from $131.56 million to $98.75 million, indicating substantial operational headwinds and potential market share loss.

Analyst Insight

Investors should exercise caution and consider reducing exposure to KTCC given the sharp decline in sales and the swing to a net loss. Monitor future filings closely for signs of revenue stabilization and a return to profitability before considering any new investment.

Financial Highlights

revenue

$98.75M

operating Margin

-0.59%

total Assets

$324.56M

total Debt

$100.77M

net Income

$(2.26)M

eps

$(0.21)

gross Margin

8.36%

cash Position

$1.12M

revenue Growth

-25.0%

Key Numbers

• $98.75M — Net Sales (Decreased 25% from $131.56M year-over-year)
• $(2.26)M — Net Income (Loss) (Swung from $1.12M income to a loss year-over-year)
• $(0.21) — Diluted EPS (Decreased from $0.10 year-over-year)
• $8.25M — Gross Profit (Decreased from $13.30M year-over-year)
• $(0.58)M — Operating Income (Loss) (Swung from $4.44M income to a loss year-over-year)
• $7.60M — Cash from Operating Activities (Decreased from $9.95M year-over-year)
• $127.2M — Working Capital (Positive as of September 27, 2025)
• $115M — Revolving Credit Facility (New facility entered into on December 3, 2024)
• $20.9M — Available Revolving Credit (As of September 27, 2025)
• 10,859,269 — Shares Outstanding (As of November 6, 2025)

Key Players & Entities

• KEY TRONIC CORP (company) — registrant
• BMO Bank, N.A (company) — asset-based credit agreement provider
• Callodine Commercial Finance, LLC (company) — term loan credit agreement provider
• Banorte Financial Group (company) — line of credit provider
• SEC (regulator) — Securities and Exchange Commission
• FASB (regulator) — Financial Accounting Standards Board
• $98.75 million (dollar_amount) — net sales for Q1 2026
• $131.56 million (dollar_amount) — net sales for Q1 2025
• $2.26 million (dollar_amount) — net loss for Q1 2026
• $1.12 million (dollar_amount) — net income for Q1 2025

FAQ

Risk Factors

• Deterioration in Financial Performance [high — financial]: The company experienced a significant decline in financial performance for the three months ended September 27, 2025. Net sales decreased by 25% to $98.75 million from $131.56 million year-over-year. This led to a swing from net income of $1.12 million to a net loss of $2.26 million, with diluted EPS falling to $(0.21) from $0.10.
• Reduced Profitability Margins [high — financial]: Gross profit declined sharply to $8.25 million from $13.30 million, indicating a significant reduction in gross margin. Operating income also turned into a loss of $0.58 million from a gain of $4.44 million, highlighting operational challenges in maintaining profitability.
• Decreased Cash Flow from Operations [medium — financial]: Cash generated from operating activities decreased to $7.60 million from $9.95 million year-over-year. While still positive, this reduction in cash generation could impact the company's ability to fund operations and investments.
• Reliance on Credit Facilities [medium — financial]: The company has secured new credit facilities, including a $115 million revolving credit facility and a $28 million term loan. As of September 27, 2025, $20.9 million was available under the revolving facility, indicating ongoing reliance on debt financing.
• Inventory Management [low — operational]: Inventories remained relatively stable at $97.57 million as of September 27, 2025, compared to $97.32 million at the end of the prior fiscal year. While not a significant increase, managing inventory levels effectively is crucial given the decline in sales.
• Customer Demand Fluctuations [high — market]: The substantial decrease in net sales suggests potential volatility in customer demand or order volumes. The company's performance is sensitive to the purchasing decisions of its clients in the electronics manufacturing services sector.

Industry Context

Key Tronic Corporation operates in the highly competitive electronics manufacturing services (EMS) industry. This sector is characterized by global supply chain complexities, technological advancements, and price pressures. Companies like Key Tronic provide manufacturing, assembly, and testing services for a wide range of electronic products. The industry is sensitive to macroeconomic conditions and shifts in demand from original equipment manufacturers (OEMs).

Regulatory Implications

As a publicly traded company, Key Tronic must comply with SEC regulations, including timely and accurate financial reporting under GAAP. Any misstatements or failures in internal controls could lead to investigations, fines, and reputational damage. The company's operations are also subject to various environmental, health, and safety regulations in the jurisdictions where it operates.

What Investors Should Do

1. Monitor customer order trends and backlog
2. Analyze gross and operating margin trends
3. Evaluate the impact of new credit facilities
4. Assess inventory management effectiveness

Key Dates

• 2025-09-27: End of Q1 Fiscal Year 2026 — Reporting period for the current 10-Q, showing a significant decline in sales and a swing to net loss.
• 2024-12-03: Entered into new credit facilities — Secured a $115 million revolving credit facility and a $28 million term loan, providing liquidity and financial flexibility.
• 2025-06-28: End of Fiscal Year 2025 — Prior fiscal year-end balance sheet provides a comparison point for current assets, liabilities, and equity.
• 2024-09-28: End of Q1 Fiscal Year 2025 — Prior year comparable period, showing strong sales and profitability, highlighting the current period's downturn.

Glossary

Contract assets

Represents the entity's right to consideration in exchange for goods or services that have been transferred to a customer. It arises when the entity has a right to payment that is conditional on something other than the passage of time. (An increase in contract assets suggests a shift in revenue recognition timing or customer payment terms, potentially impacting short-term cash flow.)

Operating lease right-of-use assets

An asset representing the lessee's right to use an underlying asset for the lease term. (The significant increase in these assets from $11.35M to $25.99M indicates new or expanded leasing arrangements, impacting the balance sheet and future lease payments.)

Deferred income tax asset

An asset representing future tax benefits arising from deductible temporary differences, net operating loss carryforwards, or tax credits. (An increase in deferred tax assets can indicate future tax benefits, but also requires careful monitoring of the company's ability to utilize them.)

Working capital

The difference between current assets and current liabilities, representing a company's short-term financial health and operational efficiency. (Positive working capital of $127.2 million indicates the company has sufficient current assets to cover its short-term liabilities, despite the recent performance decline.)

Diluted EPS

Earnings per share calculated by dividing net income by the total number of diluted shares outstanding, including the effect of all dilutive potential common shares. (The negative diluted EPS of $(0.21) reflects the company's net loss for the period.)

Year-Over-Year Comparison

Compared to the prior year's comparable period (three months ended September 28, 2024), Key Tronic Corp. has seen a substantial downturn. Net sales plummeted by 25% from $131.56 million to $98.75 million. This revenue decline directly impacted profitability, causing a swing from a net income of $1.12 million to a net loss of $2.26 million. Consequently, diluted EPS fell from $0.10 to $(0.21). Gross profit decreased by 37.9% from $13.30 million to $8.25 million, and operating income shifted from a positive $4.44 million to a loss of $0.58 million. While cash from operations decreased from $9.95 million to $7.60 million, working capital remained positive at $127.2 million.

Filing Documents

• ktcc-20250927.htm (10-Q) — 773KB
• q12026exhibit311.htm (EX-31.1) — 10KB
• q12026exhibit312.htm (EX-31.2) — 10KB
• q12026exhibit321.htm (EX-32.1) — 5KB
• q12026exhibit322.htm (EX-32.2) — 5KB
• 0000719733-25-000104.txt ( ) — 5477KB
• ktcc-20250927.xsd (EX-101.SCH) — 34KB
• ktcc-20250927_cal.xml (EX-101.CAL) — 67KB
• ktcc-20250927_def.xml (EX-101.DEF) — 148KB
• ktcc-20250927_lab.xml (EX-101.LAB) — 545KB
• ktcc-20250927_pre.xml (EX-101.PRE) — 362KB
• ktcc-20250927_htm.xml (XML) — 703KB

FINANCIAL INFORMATION

PART I. FINANCIAL INFORMATION:

Financial Statements (Unaudited)

Item 1. Financial Statements (Unaudited): 4 Condensed Consolidated Balance Sheets 4 Condensed Consolidated Statements of Operations 5 Condensed Consolidated Statements of Comprehensive Income (Loss) 6 Condensed Consolidated Statements of Cash Flows 7 Condensed Consolidated Statements of Shareholders' Equity 8 Notes to Condensed Consolidated Financial Statements 8

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

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 21

Quantitative and Qualitative Disclosures about Market Risk

Item 3. Quantitative and Qualitative Disclosures about Market Risk 37

Controls and Procedures

Item 4. Controls and Procedures 37

OTHER INFORMATION

PART II. OTHER INFORMATION:

Legal Proceedings

Item 1. Legal Proceedings 37

Risk Factors

Item 1A. Risk Factors 37

Unregistered Sales of Equity Securities and Use of Proceeds*

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds*

Defaults upon Senior Securities*

Item 3. Defaults upon Senior Securities*

Mine Safety Disclosures*

Item 4. Mine Safety Disclosures*

Other Information

Item 5. Other Information 38

Exhibits

Item 6. Exhibits 38

Signatures

Signatures 39 * Items are not applicable "We," "us," "our," "Company," and "Key Tronic," unless the context otherwise requires, means Key Tronic Corporation and its subsidiaries.

: FINANCIAL INFORMATION

PART I: FINANCIAL INFORMATION

: Financial Statements

Item 1: Financial Statements KEY TRONIC CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (Unaudited, in thousands) September 27, 2025 June 28, 2025 ASSETS Current assets: Cash and cash equivalents $ 1,123 $ 1,384 Trade receivables, net of credit losses of $ 4,257 and $ 3,479 80,065 96,142 Contract assets, net of credit losses of $ 1,380 and $ 0 22,263 17,409 Inventories 97,572 97,321 Other, net of credit losses of $ 0 and $ 1,463 17,823 21,917 Total current assets 218,846 234,173 Property, plant and equipment, net 31,681 27,727 Operating lease right-of-use assets, net 25,996 11,347 Other long-term assets: Deferred income tax asset 24,715 23,397 Other, net of credit losses of $ 500 and $ 500 23,325 19,230 Total other assets 48,040 42,627 Total assets $ 324,563 $ 315,874 LIABILITIES AND SHAREHOLDERS ' EQUITY Current liabilities: Accounts payable $ 61,073 $ 63,725 Accrued compensation and vacation 6,853 8,157 Current portion of long-term debt 5,972 6,215 Other 17,747 13,894 Total current liabilities 91,645 91,991 Long-term liabilities: Long-term debt, net 94,797 98,936 Operating lease liabilities 20,348 6,859 Deferred income tax liability 4 — Other long-term obligations 2,969 954 Total long-term liabilities 118,118 106,749 Total liabilities 209,763 198,740 Commitments and contingencies (Note 8) Shareholders' equity: Common stock, no par value—shares authorized 25,000 ; issued and outstanding 10,859 and 10,762 shares, respectively 47,723 47,502 Retained earnings 66,348 68,603 Accumulated other comprehensive loss 729 1,029 Total shareholders' equity 114,800 117,134 Total liabilities and shareholders' equity $ 324,563 $ 315,874 See accompanying notes to consolidated financial statements. 4 KEY TRONIC CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited, in thousands, except per share amounts) Three Months Ended September 27, 2025 September 28, 2024 Net sales $ 98,750 $ 131,558 Cos

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) 1. Basis of Presentation The consolidated financial statements included herein have been prepared by Key Tronic Corporation and subsidiaries (the "Company") pursuant to the rules and regulations of the Securities and Exchange Commission ("SEC"). Certain information and footnote disclosures normally included in our annual consolidated financial statements have been condensed or omitted. The year-end condensed consolidated balance sheet information was derived from audited financial statements, but does not include all disclosures required by accounting principles generally accepted in the United States of America. The financial statements reflect all normal and recurring adjustments which, in the opinion of management, are necessary for a fair presentation of the financial position, results of operations and cash flows for the interim periods presented. The preparation of financial statements in accordance with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the reported amounts of revenues and expenses during the reporting period. The results of operations for the periods presented are not necessarily indicative of the results to be expected for the full year. The accompanying unaudited condensed consolidated financial statements should be read in conjunction with the financial statements and notes included in the Company's Annual Report on Form 10-K for the fiscal year ended June 28, 2025. The Company's reporting period is a 52/53 week fiscal year ending on the Saturday closest to June 30. The three month period ended September 27, 2025 and September 28, 2024, were both 13 week periods. Fiscal year 2026 will end on June 27, 2026, which is a 52 week year. Fiscal year 2025 which ended on June 28, 2025, was also a 52 week year. Management's Assessment of Liquidity Historically, due to the timing bet

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View this 10-Q filing on SEC EDGAR