KEY TRONIC CORP
Key Highlights
- Landed new contracts in pest control, personal protection gear, and automotive tech.
- Announced a major consignment deal with a data processing company targeting $20M+ future sales.
- Opened a Mexico factory to reduce costs and avoid tariffs.
Financial Analysis
KEY TRONIC CORP Annual Report Summary - Plain English Edition
Hey there! Let’s break down how Key Tronic Corp did this past year and whether it’s worth your attention as a potential investment.
1. What They Do (And How It Went)
Key Tronic makes electronic parts like keyboards, circuit boards, and sensors for industries like healthcare, automotive, and industrial equipment. They’re a behind-the-scenes supplier for bigger brands, with factories in the U.S., Mexico, China, and Vietnam.
New this year:
- Landed contracts in pest control, personal protection gear, and automotive tech.
- Announced a major consignment deal with a data processing company (details below).
- Revenue recognition methods:
- Finished products: Revenue at shipment.
- Engineering services: Revenue as projects progress.
- Scrap sales: Revenue at sale/shipment.
The company didn’t provide specifics about the consignment deal’s timeline or financial impact beyond mentioning a 2026 target.
2. Money Talk: Growth or Slowdown?
- Revenue: Dropped 17.5% to $467.9 million (from $566.9M last year).
- Profit/Loss: Swung to an $8.3M loss (from a $15M profit last year).
- Why the drop?
- Tariffs froze customer orders.
- Lost $48M in scrap/component sales as old programs ended.
- Costs:
- R&D spending up 10% to $9.2M.
- Admin/marketing costs up 6% to $26.7M.
Takeaway: Sales shrank, costs rose, and profits vanished.
3. Big Wins vs. Tough Spots
Wins:
- New projects in air purification, medical tech, and utility inspection gear.
- Opened a Mexico factory to cut costs and avoid tariffs.
- Consignment deal could add $20M+ in future sales (but no guarantees).
Challenges:
- Top 5 clients make up 48% of sales (one client alone is 25%).
- Lost $48M in scrap sales.
- 30% of manufacturing in China—tariffs or shutdowns could hurt.
4. Financial Health Check
- Cash: Only $25M left in their credit line (down from $40M).
- Debt: $98.9M (down 15% from last year).
- Taxes: Planning to bring $2.9M back from China eventually (no details on timing).
- Inventory Risks: Wrote down $3.5M in unpaid bills (up 21% from last year).
5. Risks to Watch
- Tariff Troubles: Trade wars could delay projects.
- Customer Concentration: Losing one big client = 25% revenue gone.
- Consignment Gamble: If the new deal stumbles, growth plans suffer.
- Rising Costs: R&D and admin costs grew despite layoffs.
6. What’s Next?
- Betting on the consignment deal to boost 2026 sales.
- Shifting manufacturing closer to customers (“near-shoring”) to avoid tariffs.
- Warning: The company calls its forecasts “best guesses,” not promises.
The Bottom Line for Investors
The bad news: Key Tronic had a rough year with sales down 17.5%, a swing to losses, and heavy reliance on a few big clients. Supply chain chaos and tariffs hit hard.
The hopeful signs: They’re cutting debt, automating factories ($4.2M invested), and diversifying into new industries like medical tech. The consignment deal could be a lifeline—if it works.
Key questions to ask:
- Will tariffs ease or get worse?
- Can they reduce dependence on their top 5 clients?
- Will the consignment deal deliver $20M+ as hoped?
High risk, potential reward: This looks like a turnaround bet. Only consider if you’re comfortable with volatility and uncertainty.
Not financial advice. Do your own research or consult a pro before investing.
Transparency note: Key Tronic provided limited details about some initiatives (like the consignment deal’s specifics), which investors should factor into their analysis.
Risk Factors
- Top 5 clients account for 48% of sales (one client alone represents 25%).
- 30% of manufacturing in China exposes operations to tariff and shutdown risks.
- Reliance on the consignment deal's uncertain success for future growth.
Why This Matters
The latest 10-K for Key Tronic Corp is a critical read for investors, highlighting a significant financial downturn with a 17.5% revenue drop and a swing to an $8.3 million loss. This performance signals deep operational challenges, exacerbated by tariffs and the conclusion of old programs. Crucially, the company's heavy reliance on a few major clients—with nearly half of its sales coming from just five customers—exposes it to substantial revenue risk should any of these relationships falter.
However, the report also outlines strategic pivots that could define its future. The opening of a Mexico factory aims to mitigate tariff impacts and reduce costs, while new contracts in diverse sectors like medical tech and automotive suggest diversification efforts. The proposed consignment deal, though vague on specifics, is presented as a potential multi-million dollar lifeline. For investors, this filing frames Key Tronic as a high-stakes turnaround play, where the success of these new initiatives is paramount to reversing its current trajectory.
What Usually Happens Next
Following this 10-K, investors should keenly observe Key Tronic's upcoming quarterly earnings reports (10-Qs) for concrete updates on the pivotal consignment deal. Specifics regarding its implementation timeline, the actual financial impact, and progress towards the targeted $20M+ in sales will be critical. Any further details or firm commitments from the data processing company would significantly de-risk this potential growth driver.
Beyond the consignment deal, attention should be paid to the operational performance of the new Mexico factory and its impact on cost structures and tariff exposure. Investors will also look for signs of successful client diversification, aiming to reduce the company's heavy reliance on its top customers. Management's commentary during future earnings calls will be vital for assessing their confidence in achieving forecasts and outlining clear strategies for improving profitability and managing rising operational costs. The broader trade policy environment will also remain a key external factor to monitor.
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Document Information
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September 18, 2025 at 08:57 AM
This AI-generated analysis is for informational purposes only and does not constitute financial or investment advice. Always consult with qualified professionals and conduct your own research before making investment decisions.