STRATTEC Security Reports 2.7% Revenue Growth, Net Income Decline in Q1 Fiscal 2025

STRATTEC Security Corporation reported its financial results for the first quarter of fiscal 2025, ending September 29, 2024. The company achieved net sales of $139.1 million, reflecting a 2.7% increase from $135.4 million in the same period last year. This growth was driven by increased sales to major customers, particularly General Motors and Ford, as well as higher demand for products linked to Hyundai/Kia vehicle models. However, sales to Stellantis declined significantly due to lower vehicle production and expired programs.

Gross profit for the quarter was $18.9 million, slightly up from $18.7 million year-over-year, resulting in a gross profit margin of 13.6%, down from 13.8% in the prior year. The company reported income from operations of $5.1 million, a decrease from $6.1 million in the previous year, primarily due to increased engineering, selling, and administrative expenses, which rose by $1.3 million. Net income for the quarter was $3.7 million, down from $4.5 million in the prior year, with earnings per share decreasing to $0.92 from $1.05.

STRATTEC's cash and cash equivalents increased significantly to $34.4 million, up from $25.4 million at the end of the previous quarter. The company generated $11.3 million in net cash from operating activities, a substantial improvement compared to a net cash outflow of $3.9 million in the same quarter last year. This increase was attributed to reduced working capital requirements and higher sales in the latter half of the quarter.

The company also reported a decrease in pre-production costs by $6.9 million, which contributed positively to its financial position. However, the effective tax rate rose to 28.6% from 23.7% in the prior year, influenced by foreign tax rate differentials and limitations on foreign tax credits.

In terms of strategic developments, STRATTEC continues to manage its credit facilities effectively, maintaining compliance with all financial covenants. The company has a $40 million secured revolving credit facility and a $20 million facility for its subsidiary, ADAC-STRATTEC LLC, both expiring in August 2026. As of September 29, 2024, STRATTEC had no outstanding borrowings under its primary credit facility, while the ADAC-STRATTEC facility had minimal borrowings.

Overall, STRATTEC's performance in the first quarter of fiscal 2025 reflects a mix of growth in sales and challenges in profitability, alongside strategic financial management and operational improvements.