Key Tronic Corporation — Fourth Quarter and Fiscal Year 2026 Earnings Summary

Financial Performance

• Q4 2026 total revenue was $102.0 million, a 14% sequential increase from $89.6 million in Q3 2026, but down from $110.5 million in Q4 2025.
• Full fiscal year 2026 revenue was $386.7 million, down from $467.9 million in fiscal 2025.
• Q4 2026 gross margin was 7.8%, up from 6.2% in Q4 2025; full year 2026 gross margin was 6.2% compared to 7.8% in fiscal 2025.
• Adjusted gross margin for Q4 2026 was 8.3%, up from 6.2% in Q4 2025; full year 2026 adjusted gross margin was 8.6% compared to 8.4% in fiscal 2025.
• Q4 2026 operating margin was (3.6)%, down from (2.1)% in Q4 2025; full year 2026 operating margin was (3.8)% compared to 0.1% in fiscal 2025.
• Q4 2026 net loss was $(34.3) million ($(3.16) per share), compared to a net loss of $(3.9) million ($(0.36) per share) in Q4 2025; full year 2026 net loss was $(47.8) million ($(4.41) per share) compared to $(8.3) million ($(0.77) per share) in fiscal 2025.
• Q4 2026 adjusted net loss was $(2.9) million ($(0.26) per share), compared to $(3.8) million ($(0.35) per share) in Q4 2025; full year 2026 adjusted net loss was $(3.7) million ($(0.34) per share) compared to $(5.0) million ($(0.47) per share) in fiscal 2025.
• Q4 2026 included an $8.4 million write-off of long-term receivables and related legal costs, and a $28.4 million non-cash charge for a valuation allowance against deferred tax assets.
• Q4 2026 included a $5.3 million insurance recovery related to roof replacement at the Mississippi facility.
• Cash and cash equivalents were $0.6 million as of June 27, 2026, down from $1.4 million as of June 28, 2025.
• Total debt (current and long-term) was $106.2 million as of June 27, 2026, compared to $105.2 million as of June 28, 2025.
• Trade receivables, net of credit losses, were $83.7 million as of June 27, 2026, down from $96.1 million as of June 28, 2025.

Guidance and Future Outlook

• The Company expects continued revenue growth and a return to profitability in fiscal 2027.
• New program wins and sales funnel activity are expected to drive revenue growth in coming quarters of fiscal 2027.
• The wind-down of manufacturing in China is anticipated to save approximately $4.0 million in fiscal 2027.
• Key Tronic will not issue revenue or earnings guidance for the first quarter of fiscal 2027 due to uncertainty in new program ramp timing and macroeconomic conditions.
• The Company anticipates recently awarded programs will ramp into production over the coming quarters.

Business Segments and Product Lines

• Vietnam-based production revenue more than doubled sequentially in Q4 2026, driven by medical device and consumer products programs.
• Approximately half of manufacturing occurred in US and Vietnam facilities during Q4 2026, with significant capacity available for future growth.
• The Company secured over $60 million in new program awards in Q4 2026 in the data center, construction, and industrial power management markets.
• New program awards feature innovative partnership models allowing customers to participate in upfront investment.
• The Company completed the wind-down of manufacturing operations in China, shifting production to US and Vietnam facilities.
• The Mexico facility was right-sized during the period.

Market and Competitive Landscape

• The EMS industry is facing tightening credit availability and liquidity pressures across the global supply chain.
• Supply chain financing constraints delayed approximately $10 million of shipments during Q4 2026.
• Customers are increasingly seeking financially stable, operationally disciplined partners capable of supporting long-term growth amid liquidity constraints.
• The Company believes its operational discipline, strengthened manufacturing footprint, and customer relationships position it better than many competitors.
• The Company is actively working with customers and suppliers and evaluating additional capital sources to alleviate temporary constraints.

Risks and Challenges

• Macroeconomic uncertainty and global supply chain liquidity pressures continue to impact the business.
• Distressed customers resulted in an $8.4 million write-off of long-term receivables.
• The Company recorded a $28.4 million non-cash charge for a valuation allowance against deferred tax assets due to cumulative losses of US taxable income.
• Future results depend on the successful ramping of new programs and the timing of customer demand.
• Risks include potential impacts from legal proceedings related to financial statement restatements, cybersecurity incidents, and internal investigations.

Management Commentary and Tone

• President and CEO Brett Larsen stated the Company has taken decisive actions to strengthen its competitive position and create a more efficient global manufacturing footprint.
• Management highlighted that strategic restructuring and cost reduction initiatives are translating into new business opportunities and market share gains.
• Management expressed confidence in the expected return to profitability in fiscal 2027 despite near-term liquidity challenges.
• The tone reflects resilience and commitment to improving operating efficiency, noting that margin gains were achieved despite adverse supply chain challenges.

Other Key Points

• Financial data presented is preliminary and subject to change as the independent auditor has not completed audit procedures.
• A conference call was hosted on August 27, 2026, to discuss results.
• The Company continues to execute near-shoring and tariff mitigation strategies to reduce costs.
• The Company's manufacturing footprint now includes facilities in the United States, Mexico, and Vietnam.
• The Company reported a $5.3 million insurance recovery from a roof replacement at its Mississippi facility.