Key Tronic Corporation — First Quarter Fiscal 2027 Earnings Summary

Financial Performance:

• Total revenue for the quarter ended September 26, 2026, was $98.7 million, compared to $98.8 million in the same period of fiscal 2026.
• Gross margin was 2.5% in Q1 FY2027, down from 8.4% in Q1 FY2026; adjusted gross margin was 4.2%, down from 9.6%.
• Operating margin was (4.2)% in Q1 FY2027, compared to (0.6)% in Q1 FY2026.
• Net loss was $(7.5) million, or $(0.69) per share, compared to a net loss of $(2.3) million, or $(0.21) per share, in the prior year period.
• Adjusted net loss was $(7.9) million, or $(0.72) per diluted share, compared to an adjusted net loss of $(1.1) million, or $(0.10) per diluted share, in the prior year period.
• Gross profit was reduced by approximately $6 million in inventory sales with no margin contribution and $4.7 million in manufacturing cost variances recognized in cost of goods sold.
• Operating loss included approximately $0.5 million in bad debt write-offs, partially offset by a $3.2 million insurance recovery related to roof replacement at the Mississippi facility.
• Cash and cash equivalents increased to $1.644 million as of September 26, 2026, from $584,000 as of June 27, 2026.
• Total debt (current and long-term) increased to $108.8 million as of September 26, 2026, from $106.2 million as of June 27, 2026.
• Trade receivables, net of credit losses, decreased to $78.2 million from $83.7 million in the prior quarter.

Guidance and Future Outlook:

• Key Tronic will not issue revenue or earnings guidance for the second quarter of fiscal 2027 due to uncertainty in new program ramp timing, macroeconomic uncertainty, and current capital constraints.
• Management expects revenue growth and a return to profitability in the second half of fiscal 2027.
• The company anticipates margin growth in coming quarters as revenue rebounds.
• Workforce streamlining in the US is expected to reduce labor costs by approximately $8 million annually upon completion.

Business Segments and Product Lines:

• Revenue from Vietnam-based production continued to grow, driven by medical device and consumer products programs.
• New program wins totaling more than $60 million in potential annual revenue were secured in utilities power management, sustainable waste management, data centers, construction, and defense technology.
• A partnership was announced with TP-Link Systems to partner on the US assembly of its next-generation technologies.
• Approximately $18 million of shipments were delayed during the quarter due to supply chain financing constraints, primarily involving programs manufactured in Mexico and the US.

Market and Competitive Landscape:

• Customer demand remains strong, evidenced by a backlog of $245.9 million in Q1 FY2027, up 76% from the same period in fiscal 2026.
• Management states the company is positioned better than many competitors due to operational discipline, a strengthened manufacturing footprint, and long-standing customer relationships.
• Backlog consists of purchase orders for products expected to be shipped within approximately the next twelve months, subject to change due to design modifications or customer forecast changes.

Risks and Challenges:

• Revenue was constrained by tightening credit availability and liquidity pressures across the global supply chain.
• Production delays caused by supply chain financing challenges led to excess labor costs and operating inefficiencies at Mexico and US facilities.
• Increased material costs contributed to the decline in gross margin.
• The financial data presented is preliminary and subject to change as the independent auditor has not completed review procedures.
• Forward-looking statements note risks including global economic environment, government legislation, supply chain availability, cybersecurity incidents, and legal proceedings related to financial statement restatements.

Management Commentary and Tone:

• Brett Larsen, President and CEO, acknowledged strong customer demand and a growing backlog but highlighted that near-term liquidity challenges across the global supply chain significantly constrained revenue.
• Management expressed confidence that operational discipline and a strengthened manufacturing footprint will enable the company to keep winning business and ramping up new programs.
• The tone reflects a focus on navigating near-term liquidity challenges while maintaining a long-term view of growth and profitability.

Other Key Points:

• A conference call was scheduled for November 3, 2026, at 2:00 PM Pacific time to discuss results.
• The company is actively working with customers and suppliers and exploring new sources of capital to support growth and ease supply chain financing constraints.
• The company operates manufacturing facilities in the United States, Mexico, and Vietnam.
• Non-GAAP financial measures, including adjusted net loss and adjusted gross margin, were provided to supplement GAAP results.