Strattec Security Corporation

Fourth quarter net sales were $151.8 million, essentially flat year over year, and better than expected versus the company’s earlier view that sales would be down 3% to 4%. Fourth quarter gross profit was $23.6 million versus $25.4 million a year ago, with gross margin of 15.6%; on a constant-currency basis, margin improved due to lower tariff costs, pricing and restructuring savings, partly offset by higher cost of quality. Fourth quarter adjusted diluted EPS was $2.06, unchanged from the prior year period, while adjusted EBITDA was $12.5 million versus $13 million. For fiscal 2026, net sales were $579.4 million versus $565.1 million, gross profit was $95.4 million versus $84.6 million, gross margin was 16.5% (up 150 bps), EPS was $5 (up 9%), adjusted EBITDA was $50.5 million (up 15%), and adjusted EBITDA margin was 8.7%. Looking to fiscal 2027, the company expects softer industry production, including about a 2% decline in North American production and nearly 6% lower production at its three largest customers; it also expects typical second-quarter seasonality, an effective tax rate of about 24% to 25%, normalized operating cash flow of about $10 million per quarter, and about $12 million of capital expenditures.

Jennifer Slater framed fiscal 2026 as evidence that the transformation is working and said the company is becoming more resilient and higher performing despite a difficult automotive backdrop. She emphasized a new growth model built around earlier customer engagement and three product pillars: Permission, Motion and Hold. Her tone was constructive but realistic, repeatedly noting that Strattec still has more work to do as it pursues future programs and navigates a challenging market.

Matthew Pauli focused on the math behind the improvement and the remaining headwinds. He noted gross profit rose to $95.4 million for the year, gross margin expanded to 16.5%, adjusted EBITDA increased 15% to $50.5 million, and cash from operations totaled $46.3 million for the year, with $9.7 million in the fourth quarter. He also said the company returned $7.4 million to shareholders through buybacks in Q4, has a new $40 million repurchase authorization, expects about $12 million of capex in fiscal 2027, and sees FX as a meaningful headwind, estimating that a 5% move in the dollar versus the peso could affect annual manufacturing costs by about $4 million before hedging.

Analysts pressed on the timing of the expected production decline, and management said the projected softness is fairly consistent throughout fiscal 2027 rather than concentrated in one half, aside from normal second-quarter seasonality. Questions also focused on whether the restructuring work was mostly done, with management saying there is still margin opportunity through automation, supply-chain improvements and continued cost discipline, and that the long-term gross margin target remains 18% to 20% if the peso returns to its 5-year average. Management also said canceled EV-program headwinds were largely flushed out in fiscal 2026, tariff recoveries should be essentially neutral because of customer reimbursement clauses, and a dividend is not currently being considered; instead, capital priorities are investment in the business, share repurchases and evaluating M&A that adds scale, diversification and fits the product pillars.