Yahoo Finance Key Tronic Corp (KTCC) (Q3 2024) Earnings Call Transcript Highlights: Navigating Challenges ...
Total Revenue (Q3 Fiscal 2024): $140.5 million, down from $164.6 million in Q3 Fiscal 2023.
Net Loss (Q3 Fiscal 2024): $2.2 million or $0.21 per share, compared to net income of $2 million or $0.18 per share in Q3 Fiscal 2023.
Gross Margin (Q3 Fiscal 2024): 5.8%, decreased from 8.7% in Q3 Fiscal 2023.
Operating Margin (Q3 Fiscal 2024): Loss of 0.4%, down from a gain of 3.1% in Q3 Fiscal 2023.
Inventory Reduction: Reduced by approximately $39 million or 22% from the previous year.
Debt Reduction: Reduced accounts payable, leasing obligations, and overall debt by $57.1 million from a year ago.
Current Ratio: 2.8 times, improved from 2.2 a year ago.
Accounts Receivable DSOs: 83 days, increased from 79 days a year ago.
Total Capital Expenditures (Q3 Fiscal 2024): $0.7 million, with an expected annual total of $5 million.
Revenue Forecast (Q4 Fiscal 2024): Expected to be between $135 million and $145 million.
Net Income Forecast (Q4 Fiscal 2024): Expected to be between $0.03 to $0.1 per diluted share.
Release Date: May 07, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
Key Tronic Corp reported a significant reduction in inventory by approximately $39 million, reflecting improved component availability and effective inventory management.
The company successfully amended its asset-based revolving credit facility, providing financial covenant relief for the next 12 months and addressing its breach of the fixed charge coverage ratio covenant.
Despite challenges, Key Tronic Corp secured new customer programs potentially worth up to $33 million across various sectors, indicating strong business development and customer diversification.
Revenue for the first nine months of fiscal 2024 showed an increase to $433.7 million from $425.5 million in the same period last year, demonstrating resilience and capacity for growth.
Key Tronic Corp is making strategic adjustments in its operations, including workforce reductions aimed at saving more than $10 million annually, which could lead to improved profitability.
Negative Points
Key Tronic Corp experienced a decrease in revenue for the third quarter of fiscal 2024, reporting $140.5 million compared to $164.6 million in the same period last year, partly due to severe weather impacts and softening demand in Mexico.
The company reported a net loss of $2.2 million for the third quarter of fiscal 2024, a significant downturn from a net income of $2 million in the corresponding period of the previous year.
Higher labor costs, increased interest expenses, and the strengthening of the Mexican peso adversely affected the company's margins and profitability during the quarter.
Operational disruptions, including temporary facility closures due to severe weather, led to a loss of contribution margin estimated at $1 million.
Accounts receivable days sales outstanding (DSO) increased to 83 days from 79 days a year ago, indicating potential issues in cash flow and collection times from customers.
Q & A Highlights
Q: Thank you, Craig, you preempted my first question, but I did miss the energy management. What was the size of that one? A: (Craig Gates, President & CEO) That was up to $20 million.
Q: Would you please walk through each of these and highlight may be important to them important aspects to them, whether they're existing customers or whether they are new customers, what was what, if anything was unique about these wins that are the highlights, the competitive advantage that you all have or something else. A: (Craig Gates, President & CEO) The first one is a new customer who needed to significantly increase their outsourcing in Mexico, and they played a significant role in helping us upgrade our metal coating capability because they have a very high-end requirement for withstanding salt spray tests.
Q: And the softening demand that's referenced in the press release and then possibly, Brett, in your opening remarks, you referenced that that has maybe even turned to a rebound. Would you pull all of that together for us, please? A: (Craig Gates, President & CEO) The softening was somewhat of a COVID hangover. For a couple of our large customers, it was due to too much inventory built during COVID-driven false demand signals. As they've drawn their inventory down, their forecast and orders are rebounding to normal throughput levels.
Q: A severance came late in the quarter, as you pointed out, why was that because this is something if I recall that we talked about on the last call. And so I would have expected it maybe to happen sooner. A: (Craig Gates, President & CEO) When you affect people's lives, especially those who have been with us for some time, you want to be absolutely sure you're doing the right thing. It took us a little longer than we thought to get it done, but we are confident that we have done it in a caring and professional manner.
Q: Is this a single program or is this up to $20 million? A: (Craig Gates, President & CEO) It's already more than one program and there are many more to come.
Q: The other three. A: (Craig Gates, President & CEO) The other three are pretty much run-of-the-mill in terms of standard reasons why they chose Key Tronic. The consumer audio is a customer in house today. This was just a new program. The other two are new customers and new programs for Key Tronic.
Q: And then let me jump to the severance, if I may. A severance came late in the quarter, as you pointed out, why was that because this is something if I recall that we talked about on the last call. And so I would have expected it maybe to happen sooner. A: (Craig Gates, President & CEO) Well, when you affect people's lives and many these people have been with us for quite some time. You want to be absolutely sure you're doing the right thing and you're doing it with the right people so it took us a little longer than we thought we get it done, but we are confident that we have done it in a caring and professional manner.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
This article first appeared on GuruFocus.
