Key Tronic Corporation reported its financial results for the first quarter of fiscal year 2025, ending September 28, 2024. The company experienced a decline in net sales, which totaled $131.6 million, down 12.4% from $150.1 million in the same period last year. This decrease was primarily attributed to design and qualification delays affecting three programs at U.S. production sites, which impacted sales by approximately $9 million.

Despite the drop in revenue, Key Tronic improved its profitability metrics. Gross profit for the quarter was $13.3 million, representing a gross margin of 10.1%, an increase from 7.2% in the prior year. This improvement was driven by restructuring benefits and a weakening Mexican Peso. Operating income also rose to $4.4 million, or 3.4% of net sales, compared to $3.3 million, or 2.2% of net sales, in the previous year. Net income for the quarter was $1.1 million, significantly higher than the $335,000 reported in the same quarter last year, resulting in a net income per share of $0.10, up from $0.03.

The company’s cash flow from operating activities increased to $9.9 million, compared to $5.6 million in the prior year, aided by a $9 million decrease in inventory. As of September 28, 2024, Key Tronic held $6.6 million in cash and cash equivalents, up from $3.6 million at the end of the same quarter last year.

Key Tronic's total assets as of September 28, 2024, were $355.9 million, slightly up from $355.3 million at the end of the previous quarter. Long-term debt decreased to $109.7 million from $116.4 million, while total shareholders' equity rose to $124.3 million from $124.0 million.

The company continues to face challenges, including fluctuations in customer demand and supply chain disruptions, particularly in electronic components. Additionally, Key Tronic is navigating a competitive landscape with pressure from lower-priced competitors. The company has also been impacted by a cybersecurity incident that occurred in the previous fiscal year, which has led to ongoing costs related to mitigation efforts.

Management anticipates a revenue increase in the second quarter of fiscal year 2025, supported by new programs related to manufacturing production equipment, vehicle lighting, and commercial pest control. The company is also focusing on enhancing production capacity and capabilities across its facilities to attract new business.