Executive Summary

Q4 FY2025 revenue declined to $110.5M and GAAP diluted EPS was $(0.36), reflecting reduced demand from two longstanding customers, tariff-driven program delays, and a $1.1M credit loss reserve; gross margin was 6.2% and operating margin was approximately −2.1% .
Management did not issue Q1 FY2026 guidance due to uncertainty around timing of new program ramps amid tariff volatility; FY2025 operational streamlining cut ~800 jobs, with ~300 in Q4, and cash from operations improved (Q4: $8.8M; FY: $18.9M) aiding debt reduction .
Strategic expansion: grand opening of the new Springdale, Arkansas facility (flagship US R&D/manufacturing) and added Vietnam capacity; management targets ~50% of manufacturing in US and Vietnam by end of FY2026 .
New wins: multiple programs across pest control, personal protection, air purification, automotive, medical tech, utilities inspection; notable consigned manufacturing services contract with a data processing OEM expected to ramp in FY2026 and eventually exceed $20M annual revenue, implying attractive incremental margins .

What Went Well and What Went Wrong

What Went Well

Operational efficiency gains lifted full-year gross margin to 7.8% despite ~$100M YoY revenue decline; workforce reductions (~800 FY25; ~300 in Q4) improved competitiveness in new program bids .
Strategic footprint expansion: Arkansas facility opened (300k sq ft; $28M investment; 400 jobs planned), and Vietnam capacity additions; management expects ~50% of manufacturing in US/Vietnam by FY2026 .
Pipeline momentum: wins across pest control, personal protection, air purification, automotive, medical tech, utilities inspection; plus a consigned services program with a data processing OEM that could exceed $20M annual revenue at scale, enhancing margins: “We have never had a consigned program at this scale...” (B. Larsen) .

What Went Wrong

Top-line pressure: Q4 revenue fell to $110.5M vs $126.6M YoY; net loss widened to $(3.9)M and EPS to $(0.36) due to demand reductions and tariff-related program delays .
Tariff uncertainty and credit reserves: management recorded ~$1.1M Q4 and $1.8M FY credit loss adjustments, and withheld forward guidance for Q1 FY2026 amid continued tariff volatility .
Margin compression in quarter: gross margin 6.2% (vs 7.2% YoY) and operating margin ~−2.1% (vs ~0.1% YoY), with severance costs and lower revenue contributing; interest expense remained elevated .

Financial Results

Sequential Performance (Quarterly)

Metric	Q2 FY2025	Q3 FY2025	Q4 FY2025
Revenue ($USD Millions)	$113.9	$112.0	$110.5
Diluted EPS ($USD)	$(0.46)	$(0.06)	$(0.36)
Gross Margin (%)	6.8%	7.7%	6.2%
Operating Margin (%)	(1.0)%	(0.4)%	(2.1)%
Operating Income ($USD Millions)	$(1.121)	$(0.459)	$(2.302)

Year-over-Year (Q4)

Metric	Q4 FY2024	Q4 FY2025
Revenue ($USD Millions)	$126.6	$110.5
Diluted EPS ($USD)	$(0.18)	$(0.36)
Gross Margin (%)	7.2%	6.2%
Operating Income ($USD Millions)	$0.116	$(2.302)

Estimates vs. Actuals (Q4 FY2025)

Metric	Consensus (S&P Global)*	Actual	Surprise
Revenue ($USD Millions)	N/A*	$110.5	N/A*
Diluted EPS ($USD)	N/A*	$(0.36)	N/A*
*Values retrieved from S&P Global.

KPIs and Balance Sheet (Quarter Ends)

KPI	Q2 FY2025	Q3 FY2025	Q4 FY2025
Cash and Equivalents ($USD Millions)	$4.244	$2.468	$1.384
Trade Receivables, net ($USD Millions)	$113.132	$112.333	$96.142
Inventories, net ($USD Millions)	$100.709	$99.330	$97.321
Accounts Payable ($USD Millions)	$63.585	$65.267	$63.725
Current Portion of LT Debt ($USD Millions)	$5.063	$5.078	$6.215
Long-Term Debt, net ($USD Millions)	$106.020	$108.516	$98.936
Operating Cash Flow ($USD Millions)	—	—	$8.8 (quarter)
DSO (days)	99	92	86

Note: No segment breakdown disclosed in the releases; KTCC reports consolidated results .

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
Revenue/Earnings	Q1 FY2026	No guidance (Q4 FY2025 release)	No guidance	Maintained
CapEx	FY2026	—	~$8M planned	Initiated
Manufacturing Mix Target	FY2026	—	~50% of manufacturing in US/Vietnam by YE FY2026	New strategic target

Management withheld specific guidance ranges on revenue, margins, OpEx, OI&E, and tax rate due to tariff uncertainty .

Earnings Call Themes & Trends

Topic	Previous Mentions (Q2 & Q3)	Current Period (Q4)	Trend
Tariffs/Macro	Rapid tariff changes disrupted demand; paused guidance; customers “freaked out” over potential Mexico tariffs; evaluating mitigation via US/Vietnam	Continued uncertainty; no Q1 FY26 guidance; delays in new program launches	Ongoing headwind; cautious stance
Supply Chain	Specific component shortages resolved; improved MRP algorithms; inventory turns targeted; ABL facility provides liquidity	AR DSOs improved to 86 days; continued inventory alignment; stronger collections; $1.1M credit reserve in Q4	Operational discipline improving
Footprint Expansion	Announced major expansions in Arkansas and Vietnam; Vietnam capacity to double; lease executed	Arkansas facility opened; Vietnam capability build-out continues; target ~50% US/Vietnam by FY2026	Accelerating execution
New Programs	Wins in aerospace, energy resiliency ($60M potential), pest control; increased quoting activity	Additional wins across categories; $20M consigned services program to ramp in FY2026	Pipeline building
Mexico Operations	Rightsizing due to wage increases; severance; still critical under USMCA for tariff mitigation	Expect growth with recent wins; subassemblies feeding US/Vietnam; cost structure now competitive	Stabilizing and repositioned
Margin Outlook	Gross margin could exceed 10% with revenue recovery; incremental GM >10% with fixed cost leverage	Incremental GM potential 15%–20% on added revenue; target double-digit gross margins over time	Positive slope contingent on ramps

Management Commentary

“Unprecedented uncertainty in tariffs significantly delayed new program ramps... We’re continuing to build out new production capacity in the US and Vietnam... By the end of fiscal 2026, we expect approximately half of our manufacturing to take place in our US and Vietnam facilities.” — Brett Larsen, CEO .
“We continued to win new programs... excited to announce a new manufacturing services contract with a large data processing OEM... estimated to eventually exceed $20 million in annual revenue.” — Brett Larsen, CEO .
“As top line growth returns, we anticipate margins to be strengthened by improvements in our operating efficiencies... We will not be providing forward looking guidance due to uncertainty of timing of new products ramping.” — Tony Voorhees, CFO .

Q&A Highlights

New program sizes and locations: six wins around ~$5M each; three in Mexico; others in US; data processing OEM consigned program could exceed $20M and carry strong incremental margins due to lower material content .
Vietnam medical capability: building medical device manufacturing; certification and initial program slated to start in FY2026; expansion expected to attract additional customers .
Working capital and AR: Receivables down largely due to revenue reduction; no factoring; $1.1M reserve booked in Q4; DSOs improving via enhanced collection .
Mexico trajectory: Expect growth with recent wins; leveraging USMCA to mitigate tariffs; subassembly production to support US/Vietnam; cost structure improved after rightsizing .
Margin cadence: Target double-digit gross margins with revenue recovery; incremental gross margin on added revenue estimated at 15%–20% across locations .

Estimates Context

S&P Global consensus for Q4 FY2025 appears unavailable for KTCC (EPS and revenue), indicating limited sell-side coverage; comparisons to estimates cannot be made reliably. Values retrieved from S&P Global*.
Given unavailable consensus, focus shifts to trajectory: sequential revenue drift ($113.9M → $112.0M → $110.5M) and gross margin compression (6.8% → 7.7% → 6.2%), alongside improving collections and OCF .
*Values retrieved from S&P Global.

Key Takeaways for Investors

Near-term visibility remains limited: management withheld Q1 FY2026 guidance due to tariff uncertainty; monitor policy developments and timing of program ramps as primary stock catalysts .
Cost actions gaining traction: ~800 FY25 headcount reductions and operational efficiencies lifted full-year gross margin to 7.8% despite revenue decline; sequential DSOs fell to 86 days, OCF improved, and net debt trended down .
Strategic footprint is a differentiator: Arkansas ramp and Vietnam build-out position KTCC to capture onshoring/dual-sourcing and mitigate tariff risk; ~50% US/Vietnam mix by FY2026 could structurally improve margins and win rates .
Pipeline quality improving: diversified wins across industries plus a $20M consigned services program with attractive margin characteristics; watch for FY2026 ramp milestones and revenue run-rate progression by YE FY2026 .
Margin recovery hinges on volume: management targets double-digit gross margins with added revenue and cites 15%–20% incremental GM on growth; execution against ramp timelines is key for thesis validation .
Balance sheet flexibility: ABL financing and improved OCF support capex (~$8M FY2026) and footprint investments; continued debt reduction benefits equity value through lower interest burden .
Actionable: Track tariff headlines, customer ramp updates, AR/inventory trends, and Arkansas/Vietnam capacity milestones; absence of guidance suggests higher event-driven volatility, with program ramp confirmations as upside catalysts .

KEY TRONIC CORP (KTCC)·Q4 2025 Earnings Summary