Matt Dane

Matt Dane asked about the significance and drivers of increased demand from existing customers, the estimated size, timing, and manufacturing locations of three new program wins, and the specifics of Key Tronic's tariff mitigation strategies.

Answer

President and CEO Brett Larsen explained that increased demand primarily came from two longstanding customers due to product maturation and refresh cycles, with a few other customers also showing increased demand. He detailed the estimated revenue and manufacturing locations for the new automotive, pest control, and industrial equipment programs. Larsen further elaborated on tariff mitigation, highlighting the role of Vietnam as a lower-cost Asian alternative to China, the U.S. for specific requirements, and Mexico leveraging the USMCA agreement, offering customers a complex algorithm of solutions based on labor, component sourcing, and total cost.

Matt Dane with Titan Capital Management inquired about the drivers and significance of increased demand from existing customers, details on new program wins including size, ramp timing, and manufacturing locations, and Key Tronic's specific strategies for tariff mitigation and how they present manufacturing options to prospective clients.

Answer

Brett Larsen, President and CEO of Key Tronic, explained that increased demand from existing customers was primarily from two longstanding clients due to product maturation and an end-of-life program, with about six customers showing overall increased demand. He detailed new program wins: an automotive program (Mexico, up to $5M), a pest control program (U.S. & Vietnam, up to $2M), and an industrial equipment program (U.S., $2-$5M). Larsen elaborated on tariff mitigation, highlighting Vietnam's role in replacing China for U.S. tariffs and geopolitical tensions, alongside U.S. and Mexico (USMCA) options. He confirmed that Key Tronic offers customers quotes from all three locations, outlining lead times, prices, and pros/cons for their decision.