Key Tronic Corporation

Third-quarter fiscal 2026 revenue was $89.6 million, down from $112.0 million in the same quarter last year. Gross margin was 8.0% versus 7.7% year over year; adjusted gross margin was 8.5% versus 8.4%. Operating margin was negative 0.3% versus negative 0.4%. Net loss was $2.6 million, or $0.24 per share, versus a net loss of $0.6 million, or $0.06 per share; adjusted net loss was $2.8 million, or $0.26 per share, versus adjusted net income of $0.1 million, or $0.01 per share. For the first nine months, revenue was $284.6 million versus $357.4 million, and net loss was $13.5 million, or $1.24 per share, versus $4.4 million, or $0.41 per share. Cash flow from operations for the first nine months was approximately $10.0 million, debt was reduced by approximately $14.3 million year over year, inventory was down $13.5 million, and CapEx through nine months was approximately $3.7 million; full-year CapEx is expected to be around $5 million to $8 million. Management said it is not providing Q4 forward-looking guidance, but expects Q4 revenue to grow sequentially and expects a return to profitability in Q4.

Brett Larsen said the company is becoming more competitive as it rebalances manufacturing away from China and expands in the U.S. and Vietnam, while also right-sizing Mexico. He emphasized that improved operating efficiency, design capability, and a stronger quoting pipeline should help convert customer interest into new wins, especially as tariff uncertainty pushes OEMs toward nearshoring and dual sourcing. His tone was constructive and optimistic, especially around new programs, expanded capacity, and expected revenue recovery in coming quarters.

Tony Voorhees focused on the quarter’s lower revenue, margin improvement, balance sheet strength, and restructuring benefits. He highlighted that inventory fell $13.5 million year over year, DSOs improved to 85 days from 92, operating cash flow was approximately $10.0 million for the first nine months, and debt declined by about $14.3 million year over year. He said the China winddown should save approximately $1.2 million per quarter once completed, and CapEx should remain modest at roughly $5 million to $8 million for the full year, mainly for equipment, automation, and selective capacity investments.

Analysts pressed on the size, timing, and location of the four new program wins; management said they span automotive technology, industrial tooling, pest control, and industrial power management, with launches ranging from immediate to fiscal 2027 and manufacturing across Juarez, Spokane, and Arkansas. Questions also focused on tariffs and sales-cycle delays; Brett said tariff uncertainty is still lengthening decisions, but customers are increasingly moving from a 'wait and see' posture to awarding programs as inventories are reduced. On the Mississippi data-processing customer, management said the program has been flat for two quarters and is now running at about 50% of initial expectations, though more SKUs could be added later. When asked about profitability in Q4, management confirmed it expects to be in the black but declined to quantify the revenue level needed.