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Key Tronic Posts Year-over-Year Revenue Up 8% in Q1 Fiscal Year 2024
November 1, 2023 | Key Tronic Corp.Estimated reading time: 2 minutes
Key Tronic Corporation, a provider of electronic manufacturing services (EMS), announced its results for the quarter ended September 30, 2023. These results are in line with the preliminary results announced on October 24, 2023.
For the first quarter of fiscal year 2024, Keytronic reported total revenue of $147.8 million, up 8% from $137.3 million in the same period of fiscal year 2023. 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. For the first quarter of fiscal 2024, net income was $0.3 million or $0.03 per share, compared to $1.2 million or $0.11 per share for the same period of fiscal 2023.
The year-over-year decline in earnings was primarily a result of 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. The workforce reduction reflects softening demand for a number of different programs and is expected to reduce operating expenses by more than $5 million annually. Keytronic 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.
“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. “As previously announced, the large program with a leading power equipment company is now expected to resume materially in fiscal 2025 rather than 2024, with a redesigned product.”
“At the same time, we continued to expand our customer base during the first quarter and won new programs involving security equipment, sporting goods, environmental solutions, and industrial control systems. We’re also seeing some gradual improvement in our gross margins and have continued to reduce our inventories to be more in line with current revenue levels, as well as reducing our accounts payable, leasing obligations and overall debt in the quarter.”
“In the second half of fiscal year 2024, we expect increased demand for many of our Mexico-based programs. 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.”
The financial data presented for first quarter of fiscal year 2024 should be considered preliminary and could be subject to change, as the Company’s independent auditor has not completed their review procedures.
Business Outlook
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.
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