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Key Tronic Corporation, a provider of electronic manufacturing services (EMS), announced its results for the quarter ended March 28, 2026.
For the third quarter of fiscal year 2026, Key Tronic reported total revenue of $89.6 million, compared to $112.0 million in the same period of fiscal year 2025. Year-over-year decreases in revenue were largely attributable to lower demand from a legacy customer and an end-of-life program transition. Revenue for the third quarter of fiscal year 2026 was also adversely impacted by Winter Storm Fern in the South which caused temporary site closures due to facility damage that the Company expects will be largely covered by insurance. For the first nine months of fiscal year 2026, total revenue was $284.6 million, compared to $357.4 million in the same period of fiscal year 2025, largely reflecting reduced demand from certain legacy and end-of-life programs, as well as continued uncertainties in the global economy throughout the year. The Company is expecting revenue growth on increased demand from legacy customers and new program launches in its fourth quarter of 2026.
Key Tronic achieved notable progress in the third quarter of fiscal year 2026, successfully strengthening its margins even as revenue was $22.4 million lower than in the same period of the last fiscal year. This marks a clear testament to the effectiveness of the Company’s cost-cutting strategies over the past two years, leading to greater operational efficiency. Gross margin improved to 8.0% and operating margin improved to (0.3)% in the third quarter of fiscal year 2026, up from 7.7% and (0.4)%, respectively, in the same period of fiscal year 2025. Adjusted gross margin improved to 8.5% for the third quarter of fiscal year 2026 up from 8.4% in the same period of fiscal year 2025 (see “Non-GAAP Financial Measures,” below for additional information about adjusted gross margin). These margin gains highlight the Company’s resilience and commitment to improvement, and with revenue expected to rebound, Key Tronic anticipates continued strong margin growth in the coming quarters.
The Company continued to prepare for anticipated long-term growth by executing its near-shoring and tariff mitigation strategies to reduce costs while maintaining the diversity and flexibility of its key locations and capabilities. Key Tronic believes that these cost reductions have enabled the Company to become more competitive on recent quoting opportunities. During the quarter, Key Tronic continued to wind down its manufacturing operations in China, shifting more production to the Company’s expanding facilities in the US and Vietnam. The wind-down of manufacturing in China is expected to be completed by the end of the current fiscal year and anticipated to save approximately $1.2 million per quarter following completion.
Year-to-date cash flow provided by operations for the first nine months of fiscal year 2026 was approximately $10.0 million, as compared to $10.1 million for the same period of fiscal year 2025. The Company’s continuing ability to generate cash from operations has allowed it to reduce its debt year-over-year by approximately $14.3 million.
The net loss was $(2.6) million or $(0.24) per share for the third quarter of fiscal year 2026, compared to net loss of $(0.6) million or $(0.06) per share for the same period of fiscal year 2025. For the first nine months of fiscal year 2026, the net loss was $(13.5) million or $(1.24) per share, compared to $(4.4) million or $(0.41) per share for the same period of fiscal year 2025.
The adjusted net loss was $(2.8) million or $(0.26) per diluted share for the third quarter of fiscal year 2026, compared to adjusted net income of $0.1 million or $0.01 per diluted share for the same period of fiscal year 2025. For the first nine months of fiscal year 2026, the adjusted net loss was $(3.9) million or $(0.36) per diluted share, compared to adjusted net loss of $(1.2) million or $(0.11) per diluted share for the same period of fiscal year 2025. See “Non-GAAP Financial Measures,” below for additional information about adjusted net income (loss) and adjusted net income (loss) per share.
“Despite reduced demand from certain longstanding customers and the shutdowns caused by Winter Storm Fern in the third quarter, we’re encouraged by the improvements in our operating efficiencies, and by the gradual rebound in demand from several longstanding customers and the continued growth of new programs that we’re seeing in the fourth quarter,” said Brett Larsen, President and CEO. “We continue to provide our customers with options to better manage macroeconomic uncertainties and enhance our potential for profitable long-term growth, as we cease manufacturing operations in China, continue to right-size our Mexico facility and build out new production capacity in the US and Vietnam. We continue to expect approximately half of our manufacturing to take place in our US and Vietnam facilities during the fourth quarter of fiscal 2026.”
“During the third quarter of fiscal 2026, we won new programs in automotive technology, industrial tooling, pest control and industrial power management. Our improved operating efficiency has also made us more competitive, increasing our sales pipeline, particularly in such steady growth sectors as utilities and data center equipment. Our production backlog of customer demand has increased and we continue to expect our revenue to gradually begin to rebound and see a return to profitability in the fourth quarter of fiscal 2026.”
The financial data presented for the third quarter of fiscal 2026 should be considered preliminary and could be subject to change, as the Company’s independent auditor has not completed their review procedures.
Business Outlook
Due to uncertainty in the timing of new program ramps and continued macroeconomic uncertainty, Key Tronic will not be issuing revenue or earnings guidance for the fourth quarter of fiscal year 2026.
