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Key Tronic Corporation, a provider of electronic manufacturing services (EMS), announced its results for the quarter ended October 1, 2022.
For the first quarter of fiscal year 2023, Key Tronic reported total revenue of $137.3 million, up 9% from the previous quarter and up 3% from $132.8 million in the same period of fiscal year 2022. During the first quarter of fiscal year 2023, the Company ramped up new programs from both longstanding and new customers. While constraints in the global supply chain continued to limit production, the Company saw some gradual improvements with respect to lead times of certain key components.
During the first quarter of fiscal year 2023, the results were impacted by storm damage to the Company’s facilities in Arkansas, which reduced revenue and gross profit. Key Tronic has received initial insurance proceeds to repair the plant and replace equipment, which should be completed by the second half of fiscal year 2023, and these initial coverage amounts, net of equipment book value loss, are included in reported gain on insurance claims during the quarter.
For the first quarter of fiscal year 2023, the Company’s gross margin was 7.6% and operating margin was 2.4%, compared to a gross margin of 7.6% and an operating margin of 1.6% in the same period of fiscal year 2022. The gross margin in the first quarter of fiscal year 2023 was adversely impacted by the storm damage to the Arkansas facility, preparations for expected sales growth in the second quarter and increased labor costs in both the US and Mexico. While profitability is expected to improve in coming quarters with increasing expected revenue, higher interest rates on our line of credit and increasing wages will limit a portion of that expected improvement.
For the first quarter of fiscal year 2023, net income was $1.2 million or $0.11 per share, up 41% from $0.8 million or $0.07 per share for the same period of fiscal year 2022.
“We’re pleased with our growing revenue and earnings during the first quarter, driven by the successful ramp of new programs and our expanding customer base,” said Craig Gates, President and Chief Executive Officer. “During the first quarter of fiscal year 2023, we won new programs involving audio, automation, electric vehicle and power distribution equipment. We’re also preparing for a significant ramp in production in our Mexico facility for the previously announced program with a leading outdoor power equipment company during the second quarter.”
“Moving further into fiscal 2023, the headwinds from the global supply chain continue to present uncertainty and multiple business challenges but do show some signs of gradually abating, particularly with respect to the recent price reductions for commodity components. At the same time, these price reductions are offset by increasing wages at our North American facilities.”
“Global logistics problems, China-US political tensions and heightened assurance of supply concerns continue to drive the favorable trend of contract manufacturing returning to North America, as well as to expanding our Vietnam facilities. We see the potential for significant growth in fiscal 2023 and beyond.”
The financial data presented for the first quarter of fiscal year 2023, should be considered preliminary and could be subject to change, as the Company’s independent auditor has not completed their audit.
For the second quarter of fiscal year 2023, Keytronic expects to report revenue in the range of $140 million to $150 million, and earnings in the range of $0.13 to $0.18 per diluted share. These expected results assume an effective tax rate of 25% in the coming quarter.