Key Tronic Corporation, a provider of electronic manufacturing services (EMS), announced its results for the quarter ended September 26, 2026.
For the first quarter of fiscal year 2027, Key Tronic reported total revenue of $98.7 million, compared to $98.8 million in the same period of fiscal year 2026. Revenue for the first quarter of fiscal year 2027 continued to be constrained by tightening credit availability and liquidity pressures across the global supply chain. These supply chain financing constraints delayed approximately $18 million of the Company’s shipments during the quarter, mostly involving programs manufactured in Mexico and the US. Revenue from Key Tronic’s Vietnam-based production continued to grow, driven by medical device and consumer products programs.
The Company is actively working with its customers and suppliers, and exploring new sources of capital, to support growth and to ease supply chain financing constraints in future periods. At the same time, customer demand has continued to grow strongly, particularly for US-based production. Key Tronic’s backlog was $245.9 million in the first quarter of fiscal year 2027, up 76% from the same period in fiscal year 2026. Order backlog consists of purchase orders received for products expected to be shipped approximately within the next twelve months, although shipment dates are subject to change due to design modifications, customer forecast changes, or other customer requirements. The amount of backlog is not necessarily indicative of future sales but can be indicative of trends in expected future sales revenue.
Gross margin was 2.5% in the first quarter of fiscal year 2027, compared to 8.4% in the same period of fiscal year 2026. Adjusted gross margin was 4.2% for the first quarter of fiscal year 2027, compared to 9.6% in the same period of fiscal year 2026 (see “Non-GAAP Financial Measures,” below for additional information about adjusted gross margin).
The sharp decline in gross margin in the first quarter of fiscal year 2027 reflects production delays caused by supply chain financing challenges and increased material costs, resulting in excess labor costs and operating inefficiencies at the Company’s Mexico and US facilities. Gross profit in the first quarter of fiscal 2027 was further reduced by approximately $6 million of inventory sales with no margin contribution and $4.7 million of manufacturing cost variances that were recognized in cost of goods sold rather than reflected in inventory due to U.S. GAAP inventory valuation requirements.
Operating margin was (4.2)% in the first quarter of fiscal year 2027, compared to (0.6)% in the same period of fiscal year 2026. The decline in operating margin for the first quarter of fiscal 2027 reflects the drop in gross margin as well as approximately $0.5 million in write-offs of bad debt. These adverse impacts were partially offset by a $3.2 million insurance recovery related to a roof replacement at the Company’s Mississippi facility.
The Company is also in the process of streamlining its US-based workforce, which is expected to reduce labor costs by approximately $8 million annually when completed. With revenue expected to rebound, Key Tronic anticipates margin growth in coming quarters.
The Company’s net loss was $(7.5) million or $(0.69) per share for the first quarter of fiscal year 2027, compared to net loss of $(2.3) million or $(0.21) per share for the same period of fiscal year 2026. The adjusted net loss was $(7.9) million or $(0.72) per diluted share for the first quarter of fiscal year 2027, compared to adjusted net loss of $(1.1) million or $(0.10) per diluted share for the same period of fiscal year 2026. See “Non-GAAP Financial Measures,” below for additional information about adjusted net loss and adjusted net loss per share.
“Customer demand remains strong, as our growing backlog demonstrates, but near-term liquidity challenges across the global supply chain have significantly constrained revenue in recent quarters,” said Brett Larsen, President and CEO. “Despite these challenges, we believe our operational discipline, strengthened manufacturing footprint, and long-standing customer relationships position us better than many competitors, enabling us to keep winning business and ramping up new programs.”
“In the first quarter of fiscal 2027, we won new programs in utilities power management, sustainable waste management, data centers, construction, and defense technology, representing more than $60 million in potential annual revenue. We also recently announced plans by TP-Link Systems, a global leader in networking and smart home solutions, to partner with us on US assembly of its next-generation technologies.”
“Our growing backlog, program wins and new business pipeline reflect our strong competitive position. While we first must navigate the ongoing near-term liquidity challenges, we expect revenue growth and a return to profitability in the second half of fiscal 2027.”
The financial data presented for the first quarter of fiscal year 2027 should be considered preliminary and could be subject to change, as the Company’s independent auditor has not completed their review procedures.
Business Outlook
Due to uncertainty in the timing of new program ramps, continued macroeconomic uncertainty, and current capital constraints, Key Tronic will not be issuing revenue or earnings guidance for the second quarter of fiscal year 2027.
