[Management View]
Key Tronic Corporation reported significant declines in revenue and earnings for the fiscal year ended June 28, 2025, primarily due to reduced demand from two major customers and tariff-related delays in new program launches. Management emphasized improved operational efficiencies and inventory strategies to mitigate the impact of revenue shortfalls. Strategic investments in new capacity, including over $28 million committed to Arkansas and expanded Vietnam operations, aim to capitalize on onshoring, tariff mitigation, and medical device growth opportunities.

[Outlook]
The company anticipates new facilities in the US and Vietnam will come online during the fiscal year ending June 27, 2026, enhancing its ability to meet customer demand and mitigate tariff impacts. While official guidance was withheld due to market uncertainty, management highlighted a robust pipeline, new program wins, and strengthened global facilities.

[Financial Performance]
Revenue for Q4 2025 was $110.5 million, down from $126.6 million in Q4 2024. The fiscal year revenue was $467.9 million, compared to $566.9 million in fiscal 2024. Net loss widened to $3.9 million for Q4 2025 and $8.3 million for the fiscal year, primarily due to revenue contraction and reserved receivables. Operating margin fell to negative 2.1% in Q4 2025, compared to 1.2% in Q4 2024.

[Q&A Highlights]
Question 1: Can you give us the range of sizes of the six new wins and how we should be thinking about those ramping?
Answer: The new wins are predominantly around the $5 million program size, with three in Mexico. The data processing contract could exceed $20 million, using a consigned materials model.

Question 2: How are you thinking about the Vietnam medical device manufacturing capability?
Answer: Vietnam's certification for medical device production is expected to attract new opportunities. The facility will start a program in fiscal 2026, enhancing its capabilities.

Question 3: What more can you tell us about the increase in new program bids?
Answer: Cost reductions and strategic investments have made us more competitive, opening opportunities for US manufacturing amid tariff and geopolitical tensions.

Question 4: Is there a significant reduction in receivables, and what explains it?
Answer: The reduction is primarily due to decreased revenue and improved collection efforts, with some bad debt reserves impacting results.

Question 5: Can you explain the potential size of the manufacturing services contract with the data processor OEM?
Answer: The $20 million program is significant due to its consigned materials model, offering strong incremental margin improvement.

Question 6: How do you see your Mexico operations in fiscal 2026?
Answer: Recent program wins are expected to drive growth, leveraging cost-competitive structures and USMCA tariff mitigation.

Question 7: Any thoughts on gross margin in fiscal 2026 and longer term?
Answer: We aim to improve gross margins, targeting 15-20% incremental margins as we grow revenue across locations.

[Sentiment Analysis]
Analysts expressed interest in strategic initiatives and new program wins, with a positive tone towards the company's efforts in cost reduction and capacity expansion. Management maintained a cautiously optimistic outlook, emphasizing strategic investments and operational improvements.

[Quarterly Comparison]
| Metric | Q4 2025 | Q4 2024 | FY 2025 | FY 2024 |
|-------------------------|---------|---------|---------|---------|
| Revenue ($ million) | 110.5 | 126.6 | 467.9 | 566.9 |
| Net Loss ($ million) | 3.9 | 2.0 | 8.3 | 2.8 |
| Operating Margin (%) | -2.1 | 1.2 | 0.1 | 1.2 |
| Gross Margin (%) | 6.2 | 7.2 | 7.8 | 7.0 |

[Risks and Concerns]
Key risks include ongoing tariff uncertainties, supply chain disruptions, and reduced demand from major customers. These factors have delayed new program launches and impacted financial performance.

[Final Takeaway]
Key Tronic Corporation faces challenges from reduced demand and tariff-related delays, impacting revenue and profitability. However, strategic investments in new facilities and cost-reduction initiatives position the company to capitalize on emerging opportunities in onshoring and medical device manufacturing. While market uncertainties persist, the company's strengthened global footprint and competitive cost structure offer potential for future growth and improved margins.