Key Tronic Announces Results for Q2 of Fiscal Year 2022

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Key Tronic Corporation, a provider of electronic manufacturing services (EMS), announced its results for the quarter ended January 1, 2022.

For the second quarter of fiscal year 2022, Keytronic reported total revenue of $134.5 million, up 5% from $128.3 million in the same period of fiscal year 2021. Revenue for the second quarter of fiscal year 2022 related to customer one-time reimbursements for tooling, equipment and other expenses increased approximately $10 million when compared to the previous year. For the first six months of fiscal year 2022, total revenue was $267.2 million, compared to $251.5 million in the same period of fiscal year 2021.

During second quarter of fiscal year 2022, the global supply chain, pandemic and transportation issues continued to disrupt production, including intermittent parts supply, factory downtime and overtime expenses. In addition, the Company had a seasonal closure for two weeks at the end of December, and revenue attributed to customer reimbursements did not contribute to its gross margin. Legal costs related specifically to the SEC’s review of last year’s whistleblower complaint totaled approximately $0.7 million during the quarter. For the second quarter of fiscal year 2022, the Company’s gross margin was 7.3% and operating margin was 1.2%, compared to a gross margin of 8.3% and an operating margin of 2.1% in the same period of fiscal year 2021.

For the second quarter of fiscal year 2022, net income was $0.6 million or $0.05 per share, compared to $1.6 million or $0.14 per share for the same period of fiscal year 2021. For the first six months of fiscal year 2022, net income was $1.4 million or $0.13 per share, compared to $3.3 million or $0.30 per share for the same period of fiscal year 2021.

“We’re pleased with the successful ramp of new programs and our expanding customer base in the second quarter of fiscal 2022, despite the continued headwinds from the global supply chain and COVID-19 challenges,” said Craig Gates, President and Chief Executive Officer. “During the second quarter of fiscal 2022, we continued to see the favorable trend of contract manufacturing returning to North America, with a significant increase in production across our US-based facilities.”

“During the second quarter of fiscal year 2022, we won new programs involving industrial robots, lighting control, disinfection, food production and energy management systems. We also announced a significant new program win with one of the world’s leading power equipment companies, for which we expect to begin manufacturing in the first quarter of fiscal year 2023 and, once fully ramped, could contribute approximately $80 million in annual revenue.”

“While we expect one of our largest customers to reduce demand in coming periods, those reductions will be more than offset by ramps from new customers. Nevertheless, the global supply chain and COVID-19 crises continue to present uncertainty and multiple business challenges, including industry-wide electronic component shortages, workforce disruptions and higher labor costs, which will adversely impact results.”

Business Outlook

For the third quarter of fiscal year 2022, Keytronic expects to report revenue in the range of $130 million to $140 million, and earnings in the range of $0.05 to $0.10 per diluted share. These expected results assume an effective tax rate of 25% in the coming quarter. Despite growing customer demand and backlog, we expect that the ongoing disruptions from the global supply chain and COVID-19 issues will continue to significantly limit production and adversely impact operating efficiencies.