Q3 2025 Key Tronic Corp Earnings Call
Speaker Change: [music].
Operator: You're holding for today's conference. At this time, there are still many additional participants, and the call should begin shortly. We do thank you for your patience, and please continue to stand by. Please stand by.
You're holding for today's conference at this time there are still many additional participants in the call should begin shortly we do thank you for your patience and please continue to standby.
[music].
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Operator: Good day and welcome to the Keytronic Q3 Fiscal Year 25 Investor Call. Today's conference is being recorded. After the presentation, we will begin the question and answer period.
Speaker Change: Good day and welcome to the key Tronic Q3 fiscal year 'twenty five Investor call. Today's conference is being recorded after the presentation. We will begin the question and answer period at this time I'd like to turn the call over to Tony Voorhees. Please go ahead.
Operator: At this time, I'd like to turn the call over to Tony Voorhees. Please go ahead.
Tony Voorhees: Good afternoon, everyone. I am Tony Voorhees, Chief Financial Officer of Keytronic.
Tony Voorhees: Good afternoon, everyone I am Tony Voorhees, Chief Financial Officer of key Tronic.
Tony Voorhees: I would like to thank everyone for joining us today for our investor conference call.
Speaker Change: I'd like to thank everyone for joining us today for our Investor Conference call.
Tony Voorhees: Joining me here in our Spokane Valley headquarters is Brett Larsen, our President and Chief Executive Officer.
Speaker Change: Joining me here in our Spokane Valley headquarters is Brett Larson, our president and Chief Executive Officer.
Tony Voorhees: As always, I would like to remind you that during the course of this call, we might make projections or other forward-looking statements regarding future events. for the company's future financial performance. Please remember that such statements are only predictions. Actual events or results may differ materially.
Speaker Change: As always I would like to remind you that during the course of this call we might make projections or other forward looking statements regarding future events.
Speaker Change: Or the company's future financial performance.
Speaker Change: Please remember that such statements are only predictions.
Speaker Change: Actual events or results may differ materially.
Tony Voorhees: For more information, you may review the risk factors outlined in the documents the company has filed with the SEC, specifically our latest 10-K and quarterly 10-Qs.
Speaker Change: For more information you May review the risk factors outlined in the documents the company has filed with the SEC specifically our latest 10-K.
Speaker Change: Lee 10-Qs.
Tony Voorhees: Please note that on this call, we will discuss historical, financial, and other statistical information regarding our business and operation. Some of this information is included in today's press release. During this call, we will also reference slides that accompany our discussion. The slides can be viewed with the webcast and the link can be found on our investor relations website. In addition, the slides together with the recorded version of this call will be available on the investor relations section of our website.
Speaker Change: Please note that on this call, we will discuss historical financial and other statistical information.
Speaker Change: Regarding our business and operations. Some of this information is included in today's press release.
Speaker Change: During this call. We will also reference slides that accompany our discussion the slides can be viewed with the webcast and the link can be found on our investor Relations website and.
Speaker Change: In addition to slides together with the recorded version of this call will be available on the Investor Relations section of our website.
Tony Voorhees: We will also discuss certain non-GAAP financial measures on this call. Additional information about these non-GAAP measures and the reconciliations to the most directly comparable GAAP measures are provided in today's press release, which is posted to the Investor Relations section of our website.
Speaker Change: We will also discuss certain non-GAAP financial measures on this call and additional information about these non-GAAP measures and the reconciliations to the most directly comparable comparable GAAP measures are provided in today's press release, which is posted to the Investor Relations section of our website.
Tony Voorhees: For the third quarter of fiscal 2025, we reported total revenue of $112 million. compared to $142.4 million in the same period of fiscal 2024. The revenue for the third quarter of fiscal 2025 was adversely impacted by the worldwide economic disruptions and uncertainty caused by the recent escalation and fluctuations in global tariffs. which resulted in delays, increased costs, and reduced demand for many customers.
Speaker Change: For the third quarter of fiscal 2025, we reported total revenue of $112 million compared to $142 4 million in the same period of fiscal 2024.
Speaker Change: The revenue for the third quarter of fiscal 2025 was adversely impacted by the worldwide economic disruptions and uncertainty caused by the recent escalation and fluctuations in global tariffs, which resulted in delays increased costs and reduced.
Speaker Change: Demand for many customers.
Tony Voorhees: For the first nine months of fiscal 2025, total revenue was $357.4 million, compared to $440.4 million in the same period of fiscal 2024. rose margins were 7.7% and operating margins were a negative 0.4% in the third quarter of fiscal 2025. compared to 5.7% and a negative 0.4% respectively in the same period of fiscal 2024. The year-over-year improvement in gross margins for the third quarter of fiscal 2025 reflects cost cutting and headcount reductions over the past three quarters. The results of the third quarter of fiscal 2025 also included government mandated severance expenses in Mexico during the quarter of approximately $0.8 million.
Speaker Change: For the first nine months of fiscal 2025 total.
Total revenue was $357.4 million compared to $440 4 million in the same period of fiscal 2024.
Speaker Change: Gross margins were seven 7%.
Speaker Change: Operating margins were a negative 0.4% in the third quarter of fiscal 2025.
Speaker Change: Compared to five 7% and a negative 0.4% respectively. In the same period of fiscal 2024.
The year over year improvement in gross margins for the third quarter of fiscal 2025 reflects cost cutting and head count reductions over the past three quarters.
Speaker Change: The results of the third quarter of fiscal 2025 also included government mandated severance expenses in Mexico during the quarter.
Speaker Change: Proximately zero point $8 million.
Tony Voorhees: And approximately $0.7 million in balance sheet adjustments for inventory and estimated collections from customers. In the coming quarters, we anticipate margins to be strengthened by additional cost reductions and improvements in operating efficiency. resulting from our Strategic Cost Savings Initiative. As production volumes increase, and our recent operational adjustments take full effect, we expect to see greater leverage on fixed costs. Enhanced productivity and a more streamlined supply chain, all contributing to stronger financial performance.
Speaker Change: And approximately 0.7 million and balance sheet adjustments for inventory and estimated collections from customers.
Speaker Change: In the coming quarters, we anticipate margins to be strengthened by additional cost reductions and improvements in operating efficiencies.
Speaker Change: Rebuilt, resulting from our strategic cost savings initiatives.
Speaker Change: As production volumes increase and our recent operational adjustments to take full effect, we expect to see greater leverage on fixed costs.
Speaker Change: Enhanced productivity and a more streamlined supply chain, all contributing to stronger financial performance.
Tony Voorhees: That said, the significant tariffs on China and potential tariffs on Mexico and Vietnam create significant uncertainties about costs and our margin performance in coming quarters. Our net loss was $0.6 million or $0.06 per share for the third quarter of fiscal 2025 compared to a net loss of $2.2 million or $0.21 per share for the same period of fiscal 2024. For the first nine months of fiscal 2025, our net loss was $4.4 million, or $0.41 per share, compared to a net loss of $0.8 million, or $0.07 per share for the same period of fiscal 2024. The increase in year-to-date net loss is primarily related to the large reduction in revenue, partially offset by the reduction in costs made during the fiscal year.
Speaker Change: That said the significant tariffs on China and potential tariffs on Mexico, and Vietnam create significant uncertainties about costs and our margin performance in coming quarters.
Speaker Change: Our net loss was.
Speaker Change: 0.6 million or six cents per share for the third quarter of fiscal 2025 compared to a net loss of $2 2 million or 21 cents per share for the same period of fiscal 2024.
Speaker Change: For the first nine months of fiscal 2025, our net loss was $4 $4 million or 41 per share compared to a net loss of 0.8 million or seven cents per share for the same period of fiscal 2024.
Speaker Change: The increase in year to date net loss is primarily related to the large reduction in revenue, partially offset by the reduction in costs made during the fiscal year.
Tony Voorhees: Our adjusted net loss was $0.6 million, or $0.05 per share, for the third quarter of fiscal 2025, compared to adjusted net loss of $2.2 million, or $0.20 per share, for the same period of fiscal 2024. The adjusted net loss was $3.5 million, or $0.32 per share, for the first nine months of fiscal 2025, compared to adjusted net loss of $1 million, or $0.09 per share, for the same period of fiscal 2024.
Speaker Change: Our adjusted net loss was zero point $6 million or <unk> per share for the third quarter of fiscal 2025.
Speaker Change: Compared to adjusted net loss of $2 2 million or <unk> 20 per share for the same period of fiscal 2024.
Speaker Change: The adjusted net loss was $3 5 million or 32 cents per share for the first nine months of fiscal 2025 compared to it just had net loss of $1 million or nine cents per share for the same period of fiscal 2024.
Tony Voorhees: See non-GAAP financial measures in our earnings release and the appendix to the slide deck for additional information about adjusted net loss and adjusted net loss per share.
Speaker Change: See non-GAAP finance financial measures in our earnings release, and the appendix to the slide deck for additional information about adjusted net loss and adjusted net loss per share.
Tony Voorhees: Turning to the balance sheet, we ended the third quarter of fiscal 2025 by reducing inventory by approximately $16 million or 14% from the same time a year ago. These improvements in inventory levels primarily reflect our strategic initiatives aimed at inventory reduction. We're pleased to see our inventory levels continue to become more in line with our current revenue. At the same time, the state of the worldwide supply chain still requires that we drive demand for parts differently than in historical periods. Many of our customers have revamped their forecasting methodologies. And we have significantly modified and improved our materials research planning algorithm.
Speaker Change: Turning to the balance sheet, we ended the third quarter of fiscal 2025 by reducing inventory by approximately $16 million or 14% from the same time a year ago. These.
Speaker Change: These improvements in inventory levels, primarily reflect our strategic initiatives aimed at inventory reductions.
Speaker Change: We're pleased to see our inventory levels continue to become more in line with our current revenue.
Speaker Change: At the same time the state of the worldwide supply chain still requires that we drive demand for parts differently than in historical periods.
Speaker Change: Many of our customers have revamped their forecasting methodologies.
Speaker Change: And we have significantly modified and improved our materials research planning algorithms.
Tony Voorhees: As a result, we should be better equipped for future disruptions in the supply chain. and more able to react to changes that may occur with current and future tariff implications as we continue to manage inventory more cost effectively.
Speaker Change: As a result, we should be better equipped for future disruptions in the supply chain.
Speaker Change: And more able to react to changes that may occur with current and future tariff implications as we continued to manage inventory more cost effectively.
Tony Voorhees: During the third quarter, we also reduced our total liabilities by a combined amount of $34.3 million, or 14% from a year ago. Our current ratio has remained relatively flat and was 2.7 to 1. compared to 2.8 to 1 from a year ago. At the same time, our accounts receivable DSOs were at 92 days compared to 85 days a year ago, reflecting reductions in net sales at higher rates than reductions in receivables.
Speaker Change: During the third quarter, we also reduced our total liabilities by a combined amount of $34.3 million or 14% from a year ago.
Speaker Change: Our current ratio has remained relatively flat and was two seven to one.
Speaker Change: Paired to two eight to one from a year ago.
Speaker Change: At the same time, our accounts receivable Dsos were at 92 days compared to 85 days, a year ago, reflecting reductions in net sales at higher rates than reductions in receivables.
Tony Voorhees: Operating cash flows were $10.1 million for the first nine months of fiscal year 2025, up from $6.1 million for the same period in fiscal 2024. This reflects our ongoing efforts to manage working capital. Total capital expenditures to date in fiscal year 2025 are about $3 million, and we are expecting CapEx for the full year to be approximately $6 to $8 million. A significant part of this year and early next year's capital expenditures will be related to our planned expansions in Arkansas and Vietnam. While we're keeping a careful eye on capital expenditures, we plan to continue to invest selectively in our production equipment, SMT equipment, and plastic molding capabilities.
Speaker Change: Operating cash flows were $10 $1 million for the first nine months of fiscal year 2025.
Speaker Change: Up from $6 1 million for the same period in fiscal 2024. This reflects our ongoing efforts to manage working capital.
Speaker Change: Total capital expenditures to date in fiscal year, 2025, or about $3 million and we are expecting capex for the full year to be approximately $6 million to $8 million.
Speaker Change: A significant part of this year and early next years capital expenditures will be related to our planned expansions in Arkansas and Vietnam.
Speaker Change: Well, we're keeping a careful eye on capital expenditures, we plan to continue to invest selectively in our production equipment.
Speaker Change: Equipment and plastic molding capabilities.
Tony Voorhees: Utilize leasing facilities as well as make efficiency improvements to prepare for gross and add capacity, particularly in our Vietnam and U.S. locations.
Speaker Change: Utilized leasing facilities as well as making efficiency improvements to prepare for growth and add capacity.
Speaker Change: Particularly in our Vietnam and U S locations.
Tony Voorhees: Moving further into fiscal 2025, we are pleased to continue to see our new programs ramping and cost and efficiency improvements from our recent overhead reductions taking hold. At the same time, we face great uncertainties related to tariffs, which we believe are causing increased costs. production disruptions, and reduced demand for many customers.
Speaker Change: Moving further into fiscal 2025, we are pleased to continue to see our new programs ramping and cost and efficiency improvements from our recent overhead reductions taking hold.
Speaker Change: At the same time, we face great uncertainties related to tariffs, which we believe are causing increased costs.
Speaker Change: Veteran disruptions and reduced demand for many customers.
Tony Voorhees: Although we expect the new tariffs to increase costs for both Keytronic and our customers, the current economic and political climates are too unpredictable to provide an accurate estimate at this time.
Speaker Change: Although we expect the new terrorists to increased costs for both key tronic and our customers. The current economic and political climates are too unpredictable to provide an accurate estimate at this time.
Tony Voorhees: After careful consideration of all relevant factors, we have decided not to provide revenue or earnings guidance for the fourth quarter of fiscal 2025. We expect to see growth in our U.S. and Vietnam production. have a strong pipeline of potential new business and remain focused on improving profitability. Over the longer term, we believe that we are increasingly well positioned to win new programs and profitably expand our business.
Speaker Change: After careful consideration of all relevant factors, we have decided not to provide revenue or earnings guidance for the fourth quarter of fiscal 2025.
Speaker Change: We expect to see growth in our U S and Vietnam production.
Speaker Change: Have a strong pipeline of potential new business and remain focused on improving profitability.
Speaker Change: Over the longer term, we believe that we are increasingly well positioned to win new programs and profitably expand our business.
Brett Larsen: That's it for me, Brett. Thanks, Tony. The rapid unprecedented increases and decreases in tariffs have significantly impacted both our business and our customers.
Bret: That's it for me Bret Thanks, Tony.
Bret: The rapid unprecedented increases and decreases in tariffs have significantly impacted both our business and our customers.
Brett Larsen: As previously announced, we're underway with the build-up of new production capacity in both Arkansas and Vietnam. At the same time, we have continued to streamline our Mexico operations with further headcount reductions to enhance efficiency. building on similar actions in recent periods. The sudden increases and decreases in tariffs have unfortunately impacted production across all of our facilities. especially the tariffs on Chinese components. Clearly, these global tariff wars are outside of our control and will similarly impact all other manufacturers as well. We are doing our best to work with suppliers and with our customers on options for manufacturing their products from different locations.
Bret: As previously announced we're underway with the buildup of new production capacity in both Arkansas and Vietnam at.
Bret: At the same time, we have continued to streamline our Mexico operations with further head count reductions to enhance efficiency.
Bret: Building on similar actions in recent periods.
Bret: The sudden increases or decreases in tariffs have unfortunately impacted production across all of our facilities, especially.
Bret: Especially the tariffs on Chinese components.
Bret: Clearly these global tariff wars are outside of our control.
Bret: Similarly impact all other manufacturers as well.
Bret: We are doing our best to work with suppliers and with our customers on options for manufacturing their products from different locations.
Brett Larsen: To manage this process efficiently, we have been proactively expanding our production footprint in strategic locations to better serve our customers and improve flexibility offered to our customers. in choosing which locations to build their product. Our expanding footprint enables us to offer improved mitigation options, particularly when our customers consider the varying implications of current and future potential tariffs.
Bret: To manage this process efficiently, we have been proactively expanding our production footprint in strategic locations to better serve our customers and their crude flexibility offered to our customers in choosing which locations to build their products.
Bret: Our expanding footprint enables us to offer improved mitigation options, particularly when our customers considering consider there's varying implications of current and future potential tariffs.
Brett Larsen: We're excited to announce plans to add, as previously discussed, additional capacity in key regions. In the U.S., we're expanding our clean tech, cutting-edge manufacturing operations in Arkansas. We expect to invest more than $28 million in our new flagship manufacturing and research and development location, which we believe should create over 400 new jobs in the next five years. We're delighted to be enhancing also our operations in a region where we have maintained a long-standing presence in a strong team and can benefit from a business-friendly environment. Our U.S.-based production provides customers with outstanding flexibility, engineering support, and ease of communication.
Bret: We're excited to have announced plans to adapt to add as previously discussed additional capacity in key in key regions.
Bret: In the U S. We're expanding our clean tech cutting edge manufacturing operations in Arkansas, we.
Bret: We expect to invest more than $28 million and our new flagship manufacturing and research and development location, which we believe should create over 400, new jobs in the next five years.
Bret: We're delighted to be enhancing also our operations in a region, where we have maintained a long standing presence and a strong team and can benefit from a business friendly environment.
Bret: Our U S based production provides customers with outstanding flexibility engineering support and ease of communication.
Brett Larsen: In Vietnam, we have ample space in our current facility to more than double our manufacturing capacity. Our Vietnam-based production offers the high quality, low cost choice that was associated with China and Mexico in the past. In coming years, we expect our Vietnam facility to play a major role in our growth. We anticipate that these new facilities in the U.S. and Vietnam will come online during fiscal 2026 and enable us to benefit from customer demand for rebalancing their contract manufacturing and mitigate the severe impact and uncertainties surrounding the tariffs on goods and critical components manufactured in China and in other locations.
Bret: In Vietnam, we have ample space in our current facility to more than double our manufacturing capacity.
Bret: Our Vietnam based production offers the high quality low cost choice that was associated with China and Mexico in the past.
The coming years, we expect our Vietnam facility to play a major role in our growth.
Bret: We anticipate that these new facilities in the U S and Vietnam, where cup will come online during fiscal 2026 and enable us to benefit from customer demand for rebalancing their contract manufacturing.
Bret: Mitigate.
Bret: The severe impact and uncertainties surrounding the tariffs on goods and critical components Mac manufactured in China and in other locations.
Brett Larsen: Our customers are very excited about our plans to increase our production capabilities in the U.S. and in Vietnam. These initiatives reflect both the long-standing trends to move more of their production away from China, as well as de-risk the potential adverse impact of tariff increases and geopolitical tensions.
Bret: Our customers are very excited about our plans to increase our production capabilities in the U S and then Vietnam.
Bret: These initiatives reflect both the once long standing trends to move more of their production away from China as well as de risk the potential adverse impact of tariff increases and geopolitical tension.
Brett Larsen: At the same time, we're seeing a sustained trend of wage increases in Mexico. As it has become clear that these changes in the base cost of Mexican production are long standing. We have continued to streamline our operations in order to be more cost competitive in the market. Our improved cost structure in Mexico is anticipated to lead to new programs and growth over the longer term.
Bret: At the same time, we're seeing a sustained trend of wage increases in Mexico.
Bret: As it has become clear that these changes in the base cost of Mexican production, our long long standing.
Bret: We have continued to streamline our operations in order to be more cost competitive in the market.
Bret: Our improved cost structure in Mexico is anticipated to lead to new programs and growth over the longer term.
Brett Larsen: During the third quarter of fiscal 2025, we continued to win new programs in telecommunications, pest control, energy storage, medical technology, and temperature controlled shipping solutions. Despite the many uncertainties and disruptions in global markets, our strong pipeline of potential new business underscores the continued trend towards on-shoring and dual sourcing of contract manufacturing. We expect that global tariff wars and geopolitical tensions will continue to drive OEMs to re-examine their traditional outsourcing strategies.
During the third quarter of fiscal 2025, we continued to win new programs in telecommunications pest control.
Bret: Energy storage medical technology and temperature controlled shipping solutions.
Bret: Spite, the many uncertainties and disruptions in global markets, our strong pipeline of potential new business underscores the continued trend towards onshoring and dual sourcing of contract manufacturing.
Bret: We expect we expect the global tariff wars and geopolitical tensions will continue to drive Oems to reexamine their traditional outsourcing strategies.
Brett Larsen: Over time, the decision to onshore production is becoming more widely accepted as a smart, long-term strategy. The combination of our flexible global footprint and our expansive design capabilities continues to be extremely effective in capturing new programs. Many of our large and medium-sized manufacturing program WINS are predicated on Keytronic's deep and broad design services. And once we have completed a design and ramped it into production, we believe our knowledge of the program's specific design challenges makes that business extremely sticky. We anticipate a continued increase in the number and capability of our design engineers in coming quarters.
Bret: Over over time, the decision to onshore production is becoming more widely accepted as a smart long term strategy.
Bret: The combination of our flexible global footprint and our expansive design capabilities continues to be extremely effective in cap and capturing new programs.
Bret: Many of our large and medium sized manufacturing program wins are predicated on key tronic deep and broad design services.
Bret: And once we have completed the design and ramped into production. We believe our knowledge of the program specific design challenges makes that business extremely sticky.
Bret: We anticipate a continued increase in the number and capability of our design engineers in coming quarters.
Brett Larsen: We also continue to invest in vertical integration and manufacturing process knowledge, including a wide range of plastic molding, injection, blow, gas assist, multi-shot, as well as PCB assembly, metal forming, painting and coating, complex, high volume, automated assembly, and the design, construction, and operation of complicated test tubes. We believe this expertise will increasingly set us apart from our competitors of similar size. While the global tariff policies are creating major logistical challenges for us, our suppliers, and our customers, we believe geopolitical tensions and heightened concern about tariff and supply chains will continue to drive the favorable trend of contract manufacturing returning to North America.
Bret: We also continue to invest in vertical integration.
Bret: In manufacturing process knowledge, including a wide range of plastic molding injection blow gas assist multi shot as well as PCB assembly metal forming painting in Cali com.
Bret: Complex high volume automated assembly and the design construction and operation of complicated test equipment.
Bret: We believe this expertise will increasingly set us apart from our competitors of similar size.
Bret: While the global tariff policies are creating major logistical challenges for us our suppliers and our customers. We believe geopolitical tensions and heightened concerned about tariff and supply chains will continue to drive the favorable trend of contract manufacturing returning to North America as.
Brett Larsen: as well as to our expanding Vietnam facility. We believe these tariff challenges were a significant factor in component delays and reduced demand for many of our customers, which hammered our growth and profitability in the third quarter of fiscal 2025. and continue to disrupt their business even in the fourth quarter. Nevertheless, we continue to rebalance our manufacturing across our facilities in the U.S. and Vietnam.
Bret: Well as to our expanding Vietnam facilities.
Bret: We believe these tariff challenges were a significant factor in component delays and reduced demand for many of our customers, which hampered our growth and profitability in the third quarter of fiscal 2025.
Bret: Continued to disrupt their business even in the fourth quarter.
Bret: Nevertheless, we continue to rebalance our manufacturing across our facilities in the U S and Vietnam.
Brett Larsen: We are, however, excited to see the results of right sizing our operations and the increased generation of cash flow over recent quarters. We're moving forward with a strong pipeline of potential new business and we're seeing significant improvements in our operating efficiency. Over the long term, we remain very encouraged by our cost reductions made over the past 18 months. to become more market competitive. are increasing cash flow generated from operations, enhanced global manufacturing footprint, and the innovation from our design engineering team. All of these initiatives have increased our potential for profitable growth.
Bret: We are however excited to see the results of right sizing our operations and the increased generation of cash flow over recent quarters.
Bret: We're moving forward with a strong pipeline of potential new business.
Bret: We're seeing significant improvements in our operating efficiencies.
Bret: Over the long term, we remain very encouraged by our cost reductions made over the past 18 months.
Bret: They become more market competitive our increasing cash flow generated from operations enhance enhanced global manufacturing footprint and.
Bret: And the innovation from our design engineering team.
Bret: All of these initiatives have increased our potential for profitable growth.
Tony Voorhees: This concludes the formal portion of our presentation. Tony and I will now be pleased to answer your questions. Thank you.
Bret: This concludes the formal portion of our presentation, Tony and I will now be pleased to answer your questions.
Speaker Change: Thank you if you would like to signal with questions. Please press star one on your Touchtone telephone.
Operator: If you would like to signal with questions, please press star 1 on your touch tone telephone. If you're joining us today using a speakerphone, please make sure your mute function is turned off to allow your signal to reach our equipment. Again, that will be star 1 if you would like to signal with questions.
Speaker Change: If you're joining us today, you say speaker phone. Please make sure mute function is turned off to allow your signal to reach our equipment.
Hey, good that will be star one if you would like to signal with questions.
Bill Dezellem: The first question will come from Bill Dezellem with Titan Capital. Thank you. First of all, let me apologize. I am traveling and so if I'm not asking questions as I might, that's my excuse.
Speaker Change: Your first question will come from Bill <unk> with Titan capital.
Bill: Thank you first of all let me apologize I am traveling and so if I'm not asking questions as I might Uh Huh. That's my excuse first of all would you. Please walk us through that five.
Brett Larsen: First of all, would you please walk us through the five new business wins that you discussed and share the dollar amount that you anticipate each to be, number one. And then number two, if there are any interesting insights that any of those program wins will provide us or that are informative, share those with us if you can, please. No, absolutely. Bill, probably the first one is a 12 million dollar telecommunications program that will be manufactured down in our Mexico facility. It is the first of what we're hoping is many programs from a fairly large conglomerate.
Bill: New business wins that you discussed.
Bill: And share the dollar amount that you asked.
Bill: Each to be.
Bill: Number one and then number two are there any interesting insights any of those program wins.
Bill: <unk> will provide us or is it are informative.
Bill: I share those with US if you can please.
No absolutely that's a.
Bill: Bill are probably the first one is a $12 million telecommunications.
Bill: Program that will be manufactured down in our Mexico facility.
Bill: It is the first of what were hoping as many programs from a fairly large conglomerate. This will be the first order from them.
Brett Larsen: This will be the first order from them. We're hoping to ramp that towards the second quarter of fiscal 2026. and be in full production by this time next year. The second one was, as well, a fairly large Fortune 500 company that is allowing us to start building some pest control devices. We've been chasing this one for quite some time, excited about this opportunity. It's about a $6 million opportunity that will be in Vietnam. I'm hoping that we actually land some additional programs from this customer at other of our Keytronic facilities as well. The third is in energy, combined right now, it's about a $7 million program to be placed in our new facility down in Arkansas.
Bill: We're hoping to wrap that towards the second quarter of fiscal 2026 and be in full production by this time next year.
Bill: Second one was as well a fairly large a fortune 500 company that is allowing us to start building some pest control devices.
Bill: We've been chasing this one for quite some time excited about this opportunity. It's about a 6 million dollar opportunity that will be in Vietnam.
Bill: I'm, hoping that we actually lend some additional programs from this customer.
Bill: At other of our key tronic facilities as well the third is our in it in energy combined right now it's about a $7 million program to be placed in a new facility down in Arkansas.
Brett Larsen: It's in currently the development design stage, not expecting any meaningful production for at least six months on this one, but excited about the opportunity for this and definitely is helping near shore some of their intent to manufacture in the U.S. And then the, where am I at? So that would be the third. The fourth is a consumer product, roughly $2 to $5 million, that as well as in Arkansas. And then the fifth is kind of unique, is that's actually, that's a design contract which is starting out to our design and engineering folks roughly around a million dollar contract.
Bill: It's in currently the development design stage.
Bill: Not not seeing not not expecting any meaningful production for at least six months on this one.
Bill: I'm very excited about the opportunity for this and definitely.
Bill: He is helping.
Bill: Near shore some of their intent to manufacture in the U S.
Bill: And then the the the where my head so that would be the third the fourth is a a consumer product.
Bill: Roughly $2 million to $5 million that that as well as in Arkansas and then the fifth is kind of unique is that it's actually.
Bill: That's a design.
Bill: Contract, which is starting out to our design and engineering folks roughly around a million dollar contract.
Brett Larsen: But once that goes into production, that could be easily a $5 to $15 million program, which will definitely disrupt a little bit of the market that they're hoping to penetrate. Well capitalized, and I think that's a good demonstration that, you know, our design team continues to be a sales channel for future production.
But once that goes into production that could be easily a $5 million to $15 million program, which will definitely disrupt a little better than market that they're that they're hoping to penetrate well capitalized.
Bill: And I think that's a good demonstration that you know our design team continues to be.
Bill: Our sales channel for future production.
That's very helpful. Thank you.
Brett Larsen: You mentioned a couple of Fortune 500 companies. That's a little bit unusual compared to what we are accustomed to hearing. Maybe you're just sharing something different or maybe that is unique. If it is unique, would you walk through what maybe has changed? Yeah, Bill, I'm not sure if that's unique, you know, some, some, we, we deal with with a variety of different sized divisions and, and companies within fortune 500 conglomerates. What's great, though, is once you get your foot in the door, once you become a known supplier or an approved vendor, it really does open the door for a lot of cultivating, not only within that division, but but other sister companies, as long as you're able to perform and, and do well.
Bill: And you mentioned a couple of fortunate 500 companies.
Bill: That's a little bit unusual compared to what we are.
Bill: Accustomed to hearing now maybe you're just sharing something different or maybe that is unique it is.
Bill: A unique would you walk through kind of what what maybe has changed.
Bill: Yeah, I'm not sure if that's unique some some.
Bill: We we deal with with a variety of different size divisions in and companies within Fortune 500 conglomerates.
Bill: That's great though is once you get your foot in the door once you become.
Bill: A known supplier or an approved vendor.
Bill: It really does open the door for a lot of cultivating are.
Bill: Not only within that division, but other sister companies as long as Youre able to perform.
Bill: And do well.
Bill Dezellem: So those are, those are very exciting for us, because those, those really kind of are an open door to additional opportunities down the road. Great, thank you.
Bill: So those are those are very exciting for us because those those really kind of our open door to additional opportunities down the road.
Bill: Great. Thank you.
Bill Dezellem: And then, given the uncertainty in the macro environment, would you please discuss, I believe it was a $60 million prospect that you had, sorry, it was a win that you had, not a prospect, that you had in the past that you anticipated would be ramping at some point in the coming quarters? What impact, if any, the The macro environment of volatility is or is not having on that. That's a unique, that's a unique program. I think it's, it is not going to have an impact on that. I think one of the reasons They chose to go with Keytronic with not only our design capabilities, but then also our global manufacturing footprint.
Bill: And then given the uncertainty in the macro environment.
Bill: Would you please.
Bill: Discuss I believe it was a $60 million.
Speaker Change: Ross back that you that you had sorry. It was a win that you had not a prospect.
Bill: That you had in the past.
Speaker Change: That you anticipated would be ramping.
Bill: At some point in the.
Speaker Change: In the coming quarters.
Speaker Change: What impact if any.
Speaker Change:
Speaker Change: Yeah.
Speaker Change: The macro environment the volatility it is or is not happening on that.
Speaker Change: Yes.
Speaker Change: That's a unique that's a unique program I think it's a it is not going to have an impact on that.
Speaker Change: One of the reasons they chose to go with key tronic was not only our design capabilities, but then also our global manufacturing footprint.
Brett Larsen: So initially, we were planning to build it in one location. With the uncertainties of tariffs, we've now moved to a new location. That is actually going to start generating income in our first quarter of fiscal 26. It'll be a ramp, but I'm still expecting that at some point to still approach that $60 million. They've recently received a fairly large award from a very well-known utility, and I think that'll just continue to grow. I think that's a bright spot, and we're expecting that to have some revenue in our first quarter of fiscal 2016. And when would you expect that to be ramped to its full 60 million?
Speaker Change: So initially we were planning to build it in one location with the uncertainties of tariffs, we've now moved to a new location.
Speaker Change: That is actually going to start generating income in our first quarter of fiscal 'twenty six it'll.
Speaker Change: It'll be a ramp, but I'm still expecting that at some point to still approach that $60 million.
Speaker Change: They've recently.
Speaker Change: <unk> are fairly large.
Speaker Change: Award from <unk>.
Speaker Change: Very well known utility and I think that'll just continue to grow.
Speaker Change: I think that's that's a bright spot and.
Speaker Change: We're expecting that to have some revenue in our first quarter of fiscal 'twenty six.
Speaker Change: Okay.
Speaker Change: And when would you expect that to be ramped to its full a full $60 million.
Bill Dezellem: How did I know you were going to ask that, Bill? My expectation is that it's going to take probably 12 to 18 months to get there. Great. Thank you. I appreciate the comments. Thanks, Bill.
Bill: How did I know youre going to ask Bill.
Speaker Change:
Speaker Change: My expectation is that it's going to take probably 12 to 18 months to get there.
Speaker Change: Great.
Speaker Change: Thank you I appreciate.
Speaker Change: The comments.
Speaker Change: Thanks Bill.
Operator: As a reminder, if you would like to signal with questions, please press star 1 on your touchtone telephone. Again, that is star 1 if you would like to signal with questions.
Speaker Change: As a reminder, if you would like to signal with questions. Please press star one on your Touchtone telephone again that is star one if you would like to signal with questions.
George Melas: Our next question will come from George Melas with MKH Mansion. Hello Brett. Hi Tony. Hey, George.
Speaker Change: Our next question will come from George Melas with N K H management.
Brad: Hello, Brad Hi, Tony.
Tony Voorhees: Hey, George.
George Melas: Um Good question about the two unusual items that you guys flagged out. The severance in Mexico, is that, is that in cost of goods sold? It is. Okay. And the other 0.7, it seems to be partly costal, but sold partly op-ex. Would that be right as well? And what would be the mix? I would say it's about $400,000 in OPEX, $300,000 in cost of goods. So then if we sort of do an adjusted. gross profit, we have to add back roughly 1.1 million. So you get to roughly $9.7 million and an adjusted gross margin of roughly 8.6, I believe, 8.6, 8.7.
Brad:
Speaker Change: Good question about the two unusual items that you guys right now.
Speaker Change: This separate entity in Mexico is that is that in cost of goods sold.
Speaker Change: Yes.
Speaker Change: Okay.
Speaker Change: And the other point, Kevin it seems to be partly cost of goods sold parts of your Opex would that'd be right, there as well and what would be the mix.
Speaker Change: I would say, it's about 400000 in the Opex 300000 in cost of goods.
Okay.
Speaker Change: So then if we sort of do an adjusted.
Speaker Change: Gross profit we have to add back was the $1 1 million.
You get to roughly.
Speaker Change: $97 million and then the adjusted gross margin of roughly eight six I believe it was six eight points travel.
Speaker Change: And.
George Melas: That's on.
Speaker Change: That's on.
George Melas: a fairly, you know, a significantly drop in revenue over the last few years. So where could your gross margin go? a YouGrow fan. let's say get back to 140 million. George, I think that is as well part, you know, the silver lining of seeing some reductions in revenue while it's hammered our profitability. During this fiscal year, I think the reductions that have been made to date and are currently being made. Will only further improve Anticipated improvements in gross margin. Another way, as you mentioned, you know, with incremental revenue. Once you have your fixed costs covered, once you've hit the break-even point and you're adding additional revenue above and beyond that, you should have an incremental margin well above the 10%.
Speaker Change: Our family.
Speaker Change: Difficultly drop in revenue over the last few years sure.
Speaker Change: <unk> gross margin go.
Speaker Change: As you grow and.
Let's say get back $240 million.
Speaker Change: George I think that as well part you know the silver lining of seeing some reductions in revenue while its hammering our profitability.
Speaker Change: During this fiscal year I think the reductions that have been made to date.
Speaker Change: And are currently being made.
Speaker Change: Will only.
Speaker Change:
Speaker Change: Further improve.
Speaker Change: Anticipated improvements in gross margin.
Speaker Change: Another way as you've mentioned.
Speaker Change: Incremental revenue.
Speaker Change: Once you have your fixed costs covered.
Speaker Change: Once you have hitting once you hit the breakeven point and you're adding additional revenue above and beyond that you should have it.
Speaker Change: And incremental margin well above the 10%.
George Melas: It's tough for me at this point to project what that could be. But I will say that, you know, what we've done over the last 18 months. has enabled us. to with some growth, if we're able to actually achieve some revenue growth as we hope and expect, not hope, we anticipate and are driving towards. That'll have a robust impact gross margin. And my expectation is that we should exceed 10% gross margin at some point. And what's the revenue required to exceed 10% in your view? You know, and that's, that's, that's largely dependent on a whole litany of factors.
Speaker Change: It's tough for me at this point to project what that could be.
Speaker Change: I will say that.
Speaker Change: What we've done over the last 18 months.
Speaker Change: Has enabled us.
Speaker Change: Two with some with some growth if we're able to actually achieve some revenue growth as we hope and expect not hope, we anticipate and are driving towards.
Speaker Change: That will have a robust impact gross margin and <unk>.
Speaker Change: Our expectation is that we should exceed 10% gross margin at some point.
And.
Speaker Change: And what the revenue required to exceed.
Speaker Change: Is that your view.
Speaker Change: And that's that's that's largely dependent on Ah.
Speaker Change: A whole litany of factors.
George Melas: It's tough to just give you a dollar amount with the uncertainty and tariffs. You know, I will be required to get some pricing decreases. There's just a whole litany of things, but if all things were the same, you know, another $20 million of revenue, at least on paper, would generate somewhere near 10% gross margin. Overall, then the entire operation is at 10%. Yeah, yeah, okay.
Speaker Change: Tough to just give you a dollar amount.
Speaker Change: With the <unk>.
Speaker Change: Uncertainty and tariffs.
Speaker Change: You know our won't be required some some pricing.
Creases Theres, just a whole litany of things, but if if all things were the same.
Speaker Change: Now another $20 million of of revenue at least on paper would generate somewhere near 10% gross margin.
Speaker Change: Yeah.
Speaker Change: Overall, I thought they'd be.
Speaker Change: The entire operation we've had 10%.
Speaker Change: Yeah.
Speaker Change: Yeah Okay.
George Melas: Okay, good to know. Is there a way to look at the revenue and the revenue change? and try to put that in various buckets. We use demand from existing customers, churn new revenue from new customers. Is there a way to sort of like? break that down and is that a useful exercise maybe? I don't know. I think it is. Is there any way you can, you know, add some color to that? Yeah I guess I guess there has definitely been a step function in Reduction in demand from existing customers. Um, but kind of offsetting a portion of that have been new program wins, and that's the case each and every quarter.
Speaker Change: Okay good to know.
Speaker Change: Hum.
Speaker Change: Is there.
Speaker Change: Is there a way to look at the revenue and the revenue change.
Speaker Change: And tried to put that in there was bucket.
Speaker Change: Reduced demand from Stewart from existing customers sure.
Speaker Change: New revenue from new.
Speaker Change: Customers.
Speaker Change: As a way to sort of like.
Speaker Change: Break that down in.
Speaker Change: Is that a useful exercise.
Speaker Change: I don't know I think it is.
Speaker Change: Is there any way.
Speaker Change: To add some color to that.
Speaker Change: Yeah, I guess I guess, there has definitely been a step function in.
Speaker Change: Reduction in demand from existing customers.
Speaker Change:
Speaker Change: But.
Speaker Change: Kind of offsetting a portion of that have been new program wins and Thats the case, each and every quarter.
George Melas: But it seems like within the last Well, my. There's been a significant reduction in existing customers well beyond what we've seen historically. So, of course, internally, we analyze that and try to determine what are we doing wrong? Or is this just some bad circumstances of macroeconomic environment? You know, it's across the board. There's a few that we probably should have done a better job earlier on to ensure that we get the incumbent or the new generation of that device or program. Some of it was end of life and really the demand has continued to decrease over time.
Speaker Change: But it seems like within the last.
Speaker Change: 12 months.
Speaker Change: There has been a significant reduction in existing customers.
Speaker Change: Well beyond what we've seen historically.
Speaker Change: So of course internally, we analyze that and try to determine what are we doing wrong or is this just some bad circumstances of macro economic environment.
Speaker Change: You know and it's across the board there is a few that we probably should have.
Speaker Change: Done a better job earlier on to ensure that we'd get the.
Speaker Change: Incumbent or the new generation of that device or program. Some of it was end of life and really the demand has continued to decrease over time.
George Melas: There's a few in there that we've actually asked for us to no longer manufacture because they were difficult to work with. And we. We saw some risk, some financial risk. So it's a whole number of items, but I will tell you, the last 12 months, definitely, we've seen more historical reduction of existing program revenue than what we typically see.
Speaker Change: There's a few in there that we've actually.
Speaker Change: Asked two to four for for us to no longer manufacture because they were difficult to work with.
Speaker Change: And we are.
We saw some risk some financial risk.
Speaker Change: It's a whole.
Speaker Change: Number of.
Speaker Change: But I will tell you the last 12 months definitely we've seen more historical reduction of existing program revenue than what we typically see.
George Melas: brain. And as you look at that, it doesn't feel like it's something that you have done or something you have missed in particular. I feel like it's more reduction among your customer base. You know, the biggest point that I think we gleaned out of that is we needed to make sure that we were competitive from a cost structure in the market. That also has driven us to be far more efficient, reduce some head counts and make sure that we remain market competitive, particularly down in Mexico. I think that was something we definitely learned from this.
Speaker Change: Great and as you look at that it doesn't feel like it's something that you'll have to diagnose something you missed in particular.
Speaker Change: At Gmail reduction among your customer base or.
Speaker Change: The biggest point that I think we gleaned out of that is we needed to make sure that we were competitive from a cost structure in the market.
Speaker Change: That also has driven us to be far more efficient reduce some head counts and make sure that we remain market competitive, particularly down in Mexico.
Speaker Change: I think that was something we definitely learned from from this.
Speaker Change: And the others.
George Melas: And the others, you know, were equally driving, you know, some more U.S. manufacturing capabilities. similarly in Vietnam. and I think as well. making sure that we're a part of the design function of our customers. That definitely makes that business far stickier.
Speaker Change: We're equally.
Speaker Change: Driving.
Speaker Change: Some more U S manufacturing capabilities.
Speaker Change: Similarly in Vietnam.
Speaker Change: And I think as well.
Speaker Change: Making sure that we're a part of the design function of our customers that definitely makes sense is this far stickier.
George Melas: And you know, if if you're helping them with designs, you're seeing the next generation well before they may be out quoting that out of the market with other Yeah, interesting.
Speaker Change: And.
Speaker Change: If you are helping them with designs youre seeing the next generation.
Speaker Change: Well before they may be out quoting that out in the market with other CMS.
Speaker Change: Yeah interesting, Okay, and then maybe a final question on on working capital you guys have done a lot of progress this year.
George Melas: And then maybe a final question on working capital. You guys have done a lot of progress this year. But it seems like there's still a lot of progress that could be done. And if you look at inventory and AR. Is there, do you expect? I mean I think hopefully you will have some revenue growth so that will have an impact on both of that. But how much better can you perform there, and maybe on the inventory. What percentage of the bombs of your customers do you manage or is managed by your customer and does that make a real big difference?
Speaker Change: It seems like there's still a lot of progress that couldn't be done.
Speaker Change: Okay.
Speaker Change: You look at inventory.
Speaker Change: Yeah.
Speaker Change: And E R.
Speaker Change: And is there do you expect I mean.
Speaker Change: I think hopefully you will have some rich on revenue growth. So that will have an impact on both.
Speaker Change: Some of that.
Speaker Change: But how much how much.
Speaker Change: Pedro can you perform there and maybe on the inventory.
Speaker Change: What percentage of the bombs of your customers do you manage.
Speaker Change: It's managed by your customer and does that make a real big difference.
Speaker Change: Predominantly all of our customers building materials managed by key tronic.
Brett Larsen: Predominantly all of our customers build materials managed by Key Tron. There are a few components here and there, some custom. mechanical or something sometimes, then we'll get that consigned by our customers. But I would say. Over 90% of the bill of material is managed by Key Tron. Now, do we anticipate some incremental improvement in working capital? Yes. That will be largely dependent as well on how quickly we are able to ramp revenue in the, you know, in a positive direction. But I think the goal to have inventory at four terms. is something that we're continuing to drive toward.
Speaker Change: Or a few components here or are there some custom.
Speaker Change: Mechanical or something sometimes we'll get that consigned by our customers, but I would say.
Speaker Change: Over 90% of the bill of materials manage by key tronic.
Speaker Change: Okay now do we anticipate some incremental improvement in working capital yes.
Speaker Change:
Speaker Change: That will be largely dependent as well on how quickly we are able to ramp revenue in knee.
Speaker Change: You know in a positive direction.
Speaker Change:
Speaker Change: But I think the goal to have inventory at four turns.
Speaker Change: It's something that we're continuing to drive towards.
Brett Larsen: And what is the turn? How do you calculate the turn right now? Tony, you know what the specific terms are, but roughly you should have an inventory at any given point between raw materials, whip, and finished goods of about a quarter's worth of revenue. Right.
And what is determining how do you calculate the turn right now.
Speaker Change: How many of you know what the specific turns out but roughly you should have.
Speaker Change: In inventory.
Speaker Change: At any given point between raw materials width and finished goods.
Speaker Change: Of about a quarters worth of revenue.
Speaker Change: Right.
George Melas: Okay, great. Thank you.
Speaker Change: Okay, great. Thank you.
Sheldon Grotsky: And our next question will come from Sheldon Grotsky with Grotsky Associates.
Sheldon Grodsky: And our next question will come from Sheldon Grodsky with Grodsky associates.
Sheldon Grotsky: Hello everybody. It's quite a struggle here. for the last couple of years.
Speaker Change: Hello, everybody.
Speaker Change: That's been quite I'm struggling here.
Speaker Change: Key tronic for last couple of years, but let me ask.
Sheldon Grotsky: Let me ask a quick question. I'm in the camp. slipping into a recession. Uh, you have a... this time. Are you concerned? Do you have leeway under the credit agreement? to have disappointing quarters, do you think, or are there hair-trigger provisions that might early default.
Speaker Change: A quick question.
Speaker Change: I'm in the camp of.
Investors, who think that we might be.
Speaker Change: Slipping into a recession.
Speaker Change: Tom.
Speaker Change: You have a new credit agreement that you've been doing a major expansion.
Speaker Change: At this time are you concerned, though do you do have leeway.
Speaker Change: Credit agreement, if you continue to have disappointed quarters.
Speaker Change: Do you think are or the hair trigger provisions that might put you into early before.
Speaker Change: Well washes.
Brett Larsen: Sheldon, with that, I'm glad that we were able to refinance. some new debt a few quarters ago. It is largely dependent on availability, not necessarily the profitability of the company. Right now there's there's ample availability. We're continuing to drive debt down. We're expecting that as well over time. Cash is far less of a concern right now than it was say a year ago. We've got a good, strong relationship with the new debtors and have a line of sight of continuing to provide for all of the expected CAP Act. And so, so no, that, that, that is not, while it's always a concern, definitely not the.
Speaker Change: So then with with that I'm glad that we were able to refinance.
Speaker Change: Some new debt a few quarters ago. It is largely dependent on availability and not necessarily the profitability of the company.
Speaker Change: Right now, there's there's ample availability.
Speaker Change: We're continuing to drive that down.
Speaker Change: We're expecting that as well over time.
Speaker Change: Cash is far less of a concern right now than it was say a year ago.
Speaker Change: We've got a good strong relationship with with the new.
Speaker Change: Debtors and have.
Speaker Change: Our line of sight of continuing to pay.
Speaker Change: Provide for all of the expected Capex.
Speaker Change: And so so no that is not while it's always a concern that's definitely not the cause.
Brett Larsen: the same level of concern that where we were a year ago.
Speaker Change: The same level of concern that where we were a year ago.
Okay.
Speaker Change: Yes.
Sheldon Grotsky: Obviously, you've had clients and revenues recently for a variety of reasons. Effectively, you're already in a recession. going based on the gross numbers, the top line. up from that or just it's so crazy that... You can't tell very much of anything from your customers. And I understand.
Speaker Change: Obviously you've had.
Speaker Change: The decline in revenues recently.
Speaker Change: For a variety of reasons.
Speaker Change: I mean, effectively you you're already in a recession.
Speaker Change: Just going based on the gross number the top line.
Speaker Change: Does it feel like things are.
Speaker Change: Up from that or just so crazy.
Speaker Change: Uh huh.
Speaker Change: You can tell very much of anything from your customers anymore I understand.
Brett Larsen: Thank you. You use the term in the press release that We're talking about paralysis, or hesitancy and business paralysis in many of our customers. Is that getting better or worse now? Do you have a sense of people who could live with that? Yeah, Sheldon, I, you know, there definitely is a hesitancy to to make business decisions in uncertainty, in uncertainty. We've definitely seen that over the past few months. There appears at this point to be somewhat of a balancing of that. And is this chaos now the new normal? I don't know. But I will tell you, we have definitely seen within the last few months some hesitancy to move forward on projects that should have already been started.
Speaker Change: If you use the term in the.
Speaker Change: Uh huh.
Speaker Change: Press release.
Speaker Change: That's where it was.
Speaker Change: Sure.
Speaker Change: So you were talking about paralysis or hesitancy in business paralysis in many of our customers' businesses.
Speaker Change: Is that getting better or worse now.
Speaker Change: I mean do you have a sense.
Speaker Change: Good luck with it.
Speaker Change: Yeah, So the night.
Speaker Change: There definitely is a hasnt hesitancy to make business decisions in uncertainty and uncertainty.
Speaker Change: We've definitely seen that over the you know the.
Speaker Change: The past few months.
Speaker Change: There appears at this point to be somewhat of a balancing of that is.
Speaker Change: Is this chaos now now that the new normal I don't know, but.
Speaker Change: But I will tell you they're there we have definitely seen within the last few months. Some some hesitancy to move forward on projects that should have already been started.
Brett Larsen: and even some new business programs that we would have anticipated to have already building some production. And equally, we're trying to manage and look at our customers' inventory. I see some going up, I see some coming down. You know, um...
Speaker Change: And even some new business programs that we would have anticipated to have already building some production.
Speaker Change: And equally we are trying to manage and look at our customers' inventories.
Speaker Change: I see some going up I see some coming down.
No.
Speaker Change:
Brett Larsen: For a large part, I think We have developed ourselves to be able to survive on far less revenue and we can continue to do that as necessary, but I'm expecting actually some growth. even in light of a potential recession in Nexus. Let's hope you're right. and others.
Speaker Change: For a large part.
Speaker Change: I think.
Speaker Change: We have developed ourselves to be able to survive on far less revenue and.
Speaker Change: And we can continue to do that as necessary, but I'm expecting actually some some growth.
Speaker Change: Even in light of a potential recession in next fiscal.
Speaker Change: Okay.
Speaker Change: Let's hope you're right.
Speaker Change: Okay, I'll, let someone else get on.
Sheldon Grotsky: Thank you.
Brett Larsen: And that does conclude the question and answer session.
Speaker Change: And that does conclude the question and answer session I'll now turn the conference back over to Mr. Larson for any additional or closing remarks.
Brett Larsen: I'll now turn the conference back over to Mr. Larsen for any additional or closing remarks. We appreciate the time today and Tony and I look forward to discussing next quarter's results a quarter from now. Thank you.
Speaker Change: We appreciate the time today, and Tony and I look forward to discussing next quarter's results.
Speaker Change: A quarter from now thank you.
Speaker Change: Thank you that does conclude today's conference. We do thank you for your participation and have an excellent day.
Operator: That does conclude today's conference. We do thank you for your participation.
Operator: Have an excellent day.
Speaker Change: Okay.
Speaker Change: Okay.
Speaker Change: Yeah.
Speaker Change: [music].