On October 31, 2023, Key Tronic Corp (KTCC, Financial), a leading provider of electronic manufacturing services (EMS), released its earnings report for the first quarter of fiscal year 2024. The company reported a year-over-year revenue increase of 8%, with total revenue reaching $147.8 million, up from $137.3 million in the same period of fiscal year 2023.
Financial Performance
The company's gross margin for the first quarter of 2024 was 7.4% and operating margin was 2.2%, compared to a gross margin of 7.6% and an operating margin of 2.4% in the same period of fiscal 2023. Net income for Q1 2024 was $0.3 million or $0.03 per share, compared to $1.2 million or $0.11 per share for the same period in fiscal 2023.
The decline in earnings was primarily due to unanticipated severance costs of $0.6 million, or approximately $0.04 to $0.05 per diluted share, as the company reduced its workforce by over 100 employees in Mexico and the US. This workforce reduction reflects softening demand for a number of different programs and is expected to reduce operating expenses by more than $5 million annually.
Company Challenges and Outlook
Key Tronic Corp (KTCC, Financial) also continued to be adversely impacted by high interest expense and the strength of the Mexican Peso, although the Mexican Peso has weakened during the second quarter. Despite these challenges, the company remained profitable and continued to expand its customer base during the first quarter, winning new programs involving security equipment, sporting goods, environmental solutions, and industrial control systems.
Looking ahead, for the second quarter of fiscal 2024, Keytronic expects to report revenue in the range of $135 million to $145 million and earnings in the range of $0.05 to $0.10 per diluted share. These expected results assume an effective tax rate of 20% in the coming quarter.
CEO Commentary
“During first quarter of fiscal year 2024, we continued to ramp many new programs produced in our US facilities and remained profitable, despite a softening of customer demand for our Mexico-based programs,” said Craig Gates, President and Chief Executive Officer. “Overall, we continue to see the favorable trend of contract manufacturing returning to North America, as well as a growing number of potential customers evaluating a migration of their China-based manufacturing to our facility in Vietnam.”
Explore the complete 8-K earnings release (here) from Key Tronic Corp for further details.
