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STRATTEC SECURITY CORP (STRT)·Q1 2026 Earnings Summary

Executive Summary

  • Q1 FY2026 revenue and EPS beat: Revenue $152.4M vs S&P Global consensus $144.9M (+5.2% beat), Adjusted EPS $2.22 vs $1.48 (+$0.74), with GAAP diluted EPS $2.07 . Estimates from S&P Global shown with asterisks; values retrieved from S&P Global.*
  • Margin inflection continued: gross margin expanded 370 bps YoY to 17.3% and Adjusted EBITDA margin reached 10.2% on operational improvements, pricing, and Mexico restructuring savings ($1.3M) .
  • Cash generation and balance sheet strength: $11.3M operating cash flow, cash $90.5M, JV revolver borrowings $5.0M; company extended its $40M facility to Oct-2028 at SOFR + 1.50% .
  • Near-term caution: management flagged Q2 impact risks from an aluminum supplier fire and chip supplier restrictions; intends to build finished goods and align costs to mitigate timing effects .
  • Transformation catalysts: ongoing automation (sub-1yr paybacks), additional Mexico restructuring (~$1M annualized savings), sale-leaseback of Milwaukee HQ and lab consolidation to Auburn Hills to enhance customer proximity .

What Went Well and What Went Wrong

  • What Went Well

    • Margin expansion: gross margin to 17.3% (+370 bps YoY) on pricing, higher volume, and $1.3M restructuring savings; Adjusted EBITDA margin rose to 10.2% .
    • Strong liquidity: $11.3M operating cash flow; cash $90.5M; extended $40M revolver to Oct-2028 at SOFR +1.50%, preserving flexibility for organic investments .
    • Management execution and focus: “hard work…to streamline our operations, simplify the organization and improve our profitability…automation projects to further enhance our gross margins” (CEO) .

  • What Went Wrong

    • Cost headwinds persisted: SAE expenses +$2.0M YoY to $15.9M (10.4% of sales) on equity comp, headcount, and transformation costs; partially offset by lower executive transition costs .
    • Tariffs and FX: $0.8M incremental tariff costs and $0.5M unfavorable FX; Mexico labor inflation +$1.1M YoY .
    • Visibility: management cited uncertainty from auto industry supply chain challenges, dynamic tariff environment, and OEM production variability; Q2 likely affected by an aluminum supplier fire and chip restrictions .

Financial Results

MetricQ3 2025Q4 2025Q1 2026
Revenue ($M)$144.1 $152.0 $152.4
Gross Margin (%)16.0% 16.7% 17.3%
GAAP Diluted EPS$1.32 $2.01 $2.07
Adjusted EPS (Non-GAAP)$1.50 $2.06 $2.22
Adjusted EBITDA ($M)$12.87 $12.99 $15.55
Adjusted EBITDA Margin (%)8.9% 8.5% 10.2%
  • Drivers: YoY revenue +$13.3M (+10%): +$4.3M higher demand, +$3.9M pricing, +$3.0M mix/content, +$2.1M new program launches .
  • P&L detail: Interest income +$0.5M; interest expense –$0.1M; Other expense –$0.3M driven by $0.6M restructuring costs, partially offset by $0.3M favorable FX .

KPIs and Balance Sheet

KPIQ3 2025Q4 2025Q1 2026
Operating Cash Flow ($M)$20.7 $30.2 $11.3
Cash & Equivalents ($M)$62.1 (end Q3) $84.6 (end Q4) $90.5 (end Q1)
Borrowings (Company revolver)— (availability referenced) $0 under $40M revolver $0 under $40M revolver; JV revolver $5.0M
Capex ($M)—$3.0 $1.53

Versus S&P Global Consensus (Q1 FY26)

MetricConsensus*Actual
Revenue ($M)$144.9*$152.4
Primary EPS (Adj.)$1.48*$2.22
  • Beat magnitudes: Revenue +$7.5M; EPS +$0.74. Primary EPS “actual” aligns to company’s adjusted EPS . Values retrieved from S&P Global.*

Guidance Changes

MetricPeriodPrevious GuidanceCurrent UpdateChange
RevenueFY2026None issuedNo formal revenue guidance; management expects near-term impact from supplier fire and chip restrictions; overall demand to track N. America production with volatility .—
Gross MarginFY2026LT view: 18–20% possible with scale (prior color) .No numeric guide; continued focus on pricing, volume/mix, and ops improvements .—
Adjusted EBITDA MarginLT“Low-teens” achievable LT (prior color) .Q1 delivered 10.2%; no numeric FY guide .—
CapexFY2026—~ $12.5M (~2% of sales) .New detail
Restructuring SavingsFY2026~$5M annualized actions completed FY25 (prior) .Additional Mexico action ~$1M annualized; expected fully realized in Q3 FY26 .Raised
LiquidityMulti-year$40M revolver to Aug-2026 (prior) .Amended & extended to Oct-2028 at SOFR +1.50% .Extended

No formal numeric guidance for revenue/EPS/margins/tax rate or dividends was provided this quarter .

Earnings Call Themes & Trends

TopicQ3 FY2025 (Prev-2)Q4 FY2025 (Prev-1)Q1 FY2026 (Current)Trend
Tariffs & recoveryEstimated $9–$12M annual impact before mitigation; >90% USMCA-compliant; pursuing recoveries/logistics/sourcing .Estimated $5–$7M increase prior to mitigation; progress on recoveries .$0.8M tariff cost headwind in Q1; recovery timing still lags costs .Improving mitigation; lingering drag
Supply chain/macrosFocus on discipline; inventories and payables aligned; cautious backdrop .NA production softening; lull in customer launch cycle .Aluminum supplier fire and chip restrictions to impact Q2; build FG inventory to prepare rebound .Near-term headwind
Pricing powerStrategic pricing contributing to margin gains .$8M in annualized pricing executed FY25 .Pricing a key driver of GM expansion in Q1 .Sustained
Restructuring/ops$5M annualized savings; Mexico/Milwaukee actions .Continued savings; leadership additions in ops/supply chain .Additional Mexico action ~$1M annualized; automation rolling out .Incremental actions
Automation——Sub-1yr ROI; more visible in 2H FY26 .Building
Portfolio/customer mixHigher-value content; customer diversification in focus .Focus on digital key & power access; broaden customer base .Engaging new NA OEMs; expanding relationships .Broadening
Footprint/real estateConsidering sale of Milwaukee facility .No update; not rushed given cash .Sale-leaseback path chosen; lab to Auburn Hills; new corporate offices planned .Executing

Management Commentary

  • CEO Jennifer Slater: “Our first quarter results demonstrate the hard work of the team…to streamline our operations, simplify the organization and improve our profitability…we have started various automation projects to further enhance our gross margins” .
  • CEO on macro: “Uncertainty…is prevalent…given recent industry wide supply chain challenges, a dynamic tariff environment and the resulting changes in OEM production levels” .
  • CFO Matthew Pauli on profitability: “Adjusted EBITDA was $15.6 million, representing an adjusted EBITDA margin of 10.2%...Over the long term, we believe the business model would suggest low teen EBITDA margins” .
  • CEO on near-term disruptions: Supplier fire and chip trade restrictions will impact Q2, with production recovery taking months; company will build finished goods and align costs .

Q&A Highlights

  • Automation ROI and timing: Sub-1 year paybacks; benefits expected to start showing in 2H FY2026 .
  • Capex outlook: FY2026 capex ~ $12.5M (~2% of sales); not capital-intensive despite modernization .
  • Mexico restructuring: Additional action expected to deliver ~$1M annualized savings, fully realized by Q3 FY2026 .
  • Real estate/footprint: Decision to pursue sale-leaseback of Milwaukee HQ; lab consolidation to Auburn Hills to improve collaboration and productivity; new corporate offices planned .
  • Liquidity and optionality: Strong cash and extended revolver provide flexibility; M&A being explored at early stage .

Estimates Context

  • Q1 FY2026 beat S&P Global consensus: Revenue $152.4M vs $144.9M*; Primary EPS (aligned to adjusted EPS) $2.22 vs $1.48* . Values retrieved from S&P Global.*
  • Forward S&P Global consensus (as context, subject to change): Q2 FY2026 revenue $132.3M*, EPS $0.93*; Q3 $145.4M*, $1.47*; Q4 $146.9M*, $0.78*. Given management’s Q2 disruption commentary, near-term estimates may face timing risk . Values retrieved from S&P Global.*

Key Takeaways for Investors

  • Quality beat: Revenue and EPS exceeded consensus on broad-based price, mix, and cost actions; Adjusted EBITDA margin crossed 10% for the first time, validating transformation trajectory .
  • Durable levers: Pricing discipline, restructuring, and early automation should support margin resilience even as volumes fluctuate .
  • Near-term volatility: Q2 likely affected by supplier fire and chip restrictions; management plans inventory buffering and cost alignment, implying potential timing shifts rather than demand loss .
  • Balance sheet optionality: $90.5M cash and extended revolver (SOFR +1.50% to 2028) underpin organic initiatives and provide M&A flexibility .
  • Structural portfolio moves: Sale-leaseback and lab relocation can improve asset productivity and customer proximity; Mexico restructuring compounds savings into Q3 .
  • LT earnings power: Management reiterates low-teens EBITDA margin potential with scale; Q1 progress (10.2%) narrows the gap, but macro and tariffs remain variables .
  • Trading lens: Stock likely to react to evidence of sustained double-digit EBITDA margin and signs that Q2 production issues are transitory; watch for automation benefits and tariff recovery pacing in 2H FY2026 .

Footnotes:

  • Non-GAAP: Adjusted EPS and Adjusted EBITDA are company-defined; see reconciliations in exhibits .
  • Estimates: Asterisked values (*) are S&P Global consensus; Values retrieved from S&P Global.