Key Tronic (KTCC) Q2 2026 earnings summary

Executive summary

• Q2 FY2026 revenue was $96.3M, down from $113.9M year-over-year, mainly due to reduced demand from longstanding customers, program transitions, and delayed launches; gross margin fell to 0.6% from 6.8% year-over-year.

• Strategic initiatives included winding down China manufacturing, reducing Mexico workforce by 40% over 18 months, and ramping up U.S. and Vietnam operations to mitigate tariffs and improve cost structure.

• Net loss for Q2 FY2026 was $8.6M ($0.79/share), compared to $4.9M ($0.46/share) in Q2 FY2025; adjusted net income was break-even for the quarter.

• Significant cost-saving measures are expected to yield $2.7M in quarterly savings once fully implemented.

• Positive operating cash flow of $6.3M in Q2 FY2026, up from $1.3M year-over-year.

Financial highlights

• Q2 FY2026 revenue: $96.3M (down from $113.9M YoY); six-month revenue: $195.1M (down from $245.4M YoY).

• Gross margin: 0.6% (Q2 FY2026) vs. 6.8% (Q2 FY2025); adjusted gross margin: 7.9% (Q2 FY2026).

• Net loss: $8.6M ($0.79/share) vs. $4.9M ($0.46/share) YoY; six-month net loss: $10.8M ($1.00/share); adjusted net income: break-even.

• Operating cash flow: $6.3M (Q2 FY2026); six-month operating cash flow: $14.0M, up from $11.5M YoY; debt reduced by $13.4M YoY.

• CapEx YTD: $6.5M; full-year CapEx expected at $8–$10M.

Outlook and guidance

• No forward-looking guidance for Q3 FY2026 due to macroeconomic uncertainty and timing of new product ramps.

• Management expects revenue to gradually rebound and a return to profitability by end of FY2026, driven by new programs and cost savings.

• Backlog as of December 27, 2025 was $139.1M, expected to increase with recent program wins.

• Anticipates half of manufacturing to be in US and Vietnam by end of FY2026.

• The company expects to maintain sufficient liquidity for at least the next 12 months.