On this page of StockholderLetter.com we present the 9/29/2023 shareholder letter from KEY TRONIC CORP — ticker symbol KTCC. Reading current and past KTCC letters to shareholders can bring important insights into the investment thesis.
20 23 ANNUAL REPORT
DEAR DEAR SHAREHOLDERS SHAREHOLDERS 20 20ANNUAL ANNUAL REPORT 23 23 REPORT Fiscal Fiscal 2023 2023 waswas a record-breaking a record-breaking year year for for Keytronic, Keytronic, with with annual annual revenue revenue of $588 of $588 million, million, driven driven by our by our successful successful ramp ramp of new of new programs. programs. Revenue Revenue grew grew 11% 11% andand earnings earnings grew grew 53%53% from from thethe prior prior year year despite despite facing facing many many ongoing ongoing challenges challenges with with supply supply chains chains andand labor labor markets, markets, andand despite despite higher higher interest interest expense expense andand foreign foreign currency currency pressures. pressures. During During thethe year, year, we we continued continued to see to see thethe favorable favorable trend trend of contract of contract manufacturing manufacturing returning returning to North to North America. America. As aAsresult, a result, we we continued continued to expand to expand ourour customer customer base base andand won won new new programs programs involving involving a wide a wide range range of industries: of industries: outdoor outdoor power power equipment, equipment, battery battery management, management, automated automated sprinklers, sprinklers, biometric biometric sensors, sensors, audio audio technology, technology, automation, automation, electric electric vehicles, vehicles, power power distribution, distribution, security security devices, devices, video video andand pinball pinball machines, machines, mining mining safety safety andand productivity, productivity, telecommunications, telecommunications, inventory inventory control, control, clean clean energy energy andand distribution distribution monitoring monitoring equipment. equipment. Global Global logistics logistics problems, problems, thethe warwar in Europe, in Europe, andand China-US China-US geopolitical geopolitical tensions tensions continue continue to drive to drive OEMs OEMs to to examine examine their their traditional traditional outsourcing outsourcing strategies. strategies. WeWe believe believe these these customers customers increasingly increasingly realize realize thatthat being being overly overly dependent dependent on their on their China-based China-based contract contract manufacturers manufacturers is risky is risky andand thethe decision decision to on-shore to on-shore or near or near shore shore production production continues continues to become to become more more widely widely accepted accepted as aassmart a smart long-term long-term strategy. strategy. WeWe continue continue to see to see thatthat Keytronic Keytronic offers offers thethe ideal ideal solution solution for for customers customers as they as they move move to respond to respond to geopoto geopolitical litical pressures. pressures. OurOur facilities facilities in Mexico in Mexico represent represent a campus a campus of 1.1 ofmillion 1.1 million square square feetfeet in Juarez, in Juarez, most most of of which which is contiguously is contiguously located located in nine in nine facilities facilities acquired acquired over over time. time. OurOur three three US-based US-based manufacturing manufacturing sites sites have have alsoalso benefited benefited greatly greatly from from thethe macro-forces macro-forces driving driving business business back back to North to North America. America. At the At the same same time, time, ourour Shanghai Shanghai plant plant hashas added added capabilities capabilities in management, in management, staff staff andand systems systems thatthat allow allow it it to efficiently to efficiently serve serve Chinese Chinese customers customers directly directly andand ourour procurement procurement group group in Shanghai in Shanghai serves serves ourour entire entire corporation corporation with with critical critical components components made made in China. in China. Moreover, Moreover, a growing a growing number number of potential of potential customers customers areare actively actively evaluating evaluating a migration a migration of their of their China-based China-based manufacturing manufacturing to our to our facility facility in Vietnam, in Vietnam, which which we we expect expect to play to play a major a major rolerole in our in our future future growth. growth. TheThe combination combination of our of our global global footprint footprint andand ourour expansive expansive design design capabilities capabilities is proving is proving to be to extremely be extremely effective effective in capturing in capturing new new business. business. Many Many of our of our large large andand medium-sized medium-sized manufacturing manufacturing program program wins wins areare predicated predicated on Keytronic s on Keytronic s deep deep andand broad broad design design services. services. WeWe alsoalso invested invested in vertical in vertical integration integration andand manufacturing manufacturing process process knowledge, knowledge, including including a wide a wide range range of plastic of plastic molding, molding, PCB PCB assembly, assembly, metal metal formforming,ing, painting painting andand coating, coating, complex complex high high volume volume automated automated assembly assembly andand thethe design design construction construction andand operation operation of complicated of complicated testtest equipment. equipment. ThisThis deep deep andand broad broad expertise expertise setssets us apart us apart from from ourour competitors competitors of aofsimilar a similar size. size. WeWe believe believe global global logistics logistics problems problems andand heightened heightened concerns concerns about about supply supply chains chains willwill continue continue to drive to drive thethe favorable favorable trend trend of contract of contract manufacturing manufacturing returning returning to North to North America, America, as well as well as to asour to our expanding expanding Vietnam Vietnam facilities. facilities. Along Along with with ourour record record revenue revenue in fiscal in fiscal 2023, 2023, we we continued continued to see to see improvement improvement across across thethe metrics metrics associated associated with with business business development, development, including including thethe significant significant increase increase in the in the number number of of active active quotes quotes with with prospective prospective customers. customers. WeWe move move intointo fiscal fiscal 2024 2024 with with a strong a strong pipeline pipeline of potential of potential new new business, business, andand we re we re seeing seeing improvement improvement in the in the global global supply supply issues issues andand lower lower labor labor turnover, turnover, which which severely severely limited limited ourour production production in prior in prior periods. periods. While While we we cancan expect expect higher higher interest interest rates rates andand a strong a strong Peso Peso to dampen to dampen ourour profitability profitability in the in the near near term, term, we re we re very very encouraged encouraged by our by our progress progress andand potential potential for for growth growth in fiscal in fiscal 2024 2024 andand beyond. beyond. Finally, Finally, I want I want to thank to thank ourour exceptional exceptional employees employees for for their their dedication dedication andand hard hard work work during during thisthis challengchallenginging time, time, andand ourour shareholders shareholders for for their their continued continued support. support. Sincerely, Sincerely, Craig Craig D. Gates D. Gates President President and and Chief Chief Executive Executive Officer Of cer Officer
 • shareholder letter icon 9/29/2023 Letter Continued (Full PDF)
 • stockholder letter icon 10/28/2024 KTCC Stockholder Letter
 • stockholder letter icon 9/18/2025 KTCC Stockholder Letter
 • stockholder letter icon More "Electronic Equipment & Products" Category Stockholder Letters
 • Benford's Law Stocks icon KTCC Benford's Law Stock Score = 59


KTCC 9/29/2023 Shareholder/Stockholder Letter Transcript:

20
23
ANNUAL
REPORT

DEAR
DEAR
SHAREHOLDERS
SHAREHOLDERS
20
20ANNUAL
ANNUAL
REPORT
23
23 REPORT
Fiscal
Fiscal
2023
2023
waswas
a record-breaking
a record-breaking
year
year
for for
Keytronic,
Keytronic,
with
with
annual
annual
revenue
revenue
of $588
of $588
million,
million,
driven
driven
by our
by our
successful
successful
ramp
ramp
of new
of new
programs.
programs.
Revenue
Revenue
grew
grew
11% 11%
andand
earnings
earnings
grew
grew
53%53%
from
from
thethe
prior
prior
year
year
    despite
    despite
facing
facing
many
many
ongoing
ongoing
challenges
challenges
with
with
supply
supply
chains
chains
andand
labor
labor
markets,
markets,
andand
despite
despite
higher
higher
interest
interest
expense
expense
andand
foreign
foreign
currency
currency
pressures.
pressures.
During
During
thethe
year,
year,
we we
continued
continued
to see
to see
thethe
favorable
favorable
trend
trend
of contract
of contract
manufacturing
manufacturing
returning
returning
to North
to North
America.
America.
As aAsresult,
a result,
we we
continued
continued
to expand
to expand
ourour
customer
customer
base
base
andand
won
won
new
new
programs
programs
involving
involving
a wide
a wide
range
range
of industries:
of industries:
outdoor
outdoor
power
power
equipment,
equipment,
battery
battery
management,
management,
automated
automated
sprinklers,
sprinklers,
biometric
biometric
sensors,
sensors,
audio
audio
technology,
technology,
automation,
automation,
electric
electric
vehicles,
vehicles,
power
power
distribution,
distribution,
security
security
devices,
devices,
video
video
andand
pinball
pinball
machines,
machines,
mining
mining
safety
safety
andand
productivity,
productivity,
telecommunications,
telecommunications,
inventory
inventory
control,
control,
clean
clean
energy
energy
andand
distribution
distribution
monitoring
monitoring
equipment.
equipment.
Global
Global
logistics
logistics
problems,
problems,
thethe
warwar
in Europe,
in Europe,
andand
China-US
China-US
geopolitical
geopolitical
tensions
tensions
continue
continue
to drive
to drive
OEMs
OEMs
to to
examine
examine
their
their
traditional
traditional
outsourcing
outsourcing
strategies.
strategies.
WeWe
believe
believe
these
these
customers
customers
increasingly
increasingly
realize
realize
thatthat
being
being
overly
overly
dependent
dependent
on their
on their
China-based
China-based
contract
contract
manufacturers
manufacturers
is risky
is risky
andand
thethe
decision
decision
to on-shore
to on-shore
or near
or near
shore
shore
production
production
continues
continues
to become
to become
more
more
widely
widely
accepted
accepted
as aassmart
a smart
long-term
long-term
strategy.
strategy.
WeWe
continue
continue
to see
to see
thatthat
Keytronic
Keytronic
offers
offers
thethe
ideal
ideal
solution
solution
for for
customers
customers
as they
as they
move
move
to respond
to respond
to geopoto geopolitical
litical
pressures.
pressures.
OurOur
facilities
facilities
in Mexico
in Mexico
represent
represent
a campus
a campus
of 1.1
ofmillion
1.1 million
square
square
feetfeet
in Juarez,
in Juarez,
most
most
of of
which
which
is contiguously
is contiguously
located
located
in nine
in nine
facilities
facilities
acquired
acquired
over
over
time.
time.
OurOur
three
three
US-based
US-based
manufacturing
manufacturing
sites
sites
have
have
alsoalso
benefited
benefited
greatly
greatly
from
from
thethe
macro-forces
macro-forces
driving
driving
business
business
back
back
to North
to North
America.
America.
At the
At the
same
same
time,
time,
ourour
Shanghai
Shanghai
plant
plant
hashas
added
added
capabilities
capabilities
in management,
in management,
staff
staff
andand
systems
systems
thatthat
allow
allow
it it
to efficiently
to efficiently
serve
serve
Chinese
Chinese
customers
customers
directly
directly
andand
ourour
procurement
procurement
group
group
in Shanghai
in Shanghai
serves
serves
ourour
entire
entire
corporation
corporation
with
with
critical
critical
components
components
made
made
in China.
in China.
Moreover,
Moreover,
a growing
a growing
number
number
of potential
of potential
customers
customers
areare
actively
actively
evaluating
evaluating
a migration
a migration
of their
of their
China-based
China-based
manufacturing
manufacturing
to our
to our
facility
facility
in Vietnam,
in Vietnam,
which
which
we we
expect
expect
to play
to play
a major
a major
rolerole
in our
in our
future
future
growth.
growth.
TheThe
combination
combination
of our
of our
global
global
footprint
footprint
andand
ourour
expansive
expansive
design
design
capabilities
capabilities
is proving
is proving
to be
to extremely
be extremely
effective
effective
in capturing
in capturing
new
new
business.
business.
Many
Many
of our
of our
large
large
andand
medium-sized
medium-sized
manufacturing
manufacturing
program
program
wins
wins
areare
predicated
predicated
on Keytronic   s
on Keytronic   s
deep
deep
andand
broad
broad
design
design
services.
services.
WeWe
alsoalso
invested
invested
in vertical
in vertical
integration
integration
andand
manufacturing
manufacturing
process
process
knowledge,
knowledge,
including
including
a wide
a wide
range
range
of plastic
of plastic
molding,
molding,
PCB
PCB
assembly,
assembly,
metal
metal
formforming,ing,
painting
painting
andand
coating,
coating,
complex
complex
high
high
volume
volume
automated
automated
assembly
assembly
andand
thethe
design
design
construction
construction
andand
operation
operation
of complicated
of complicated
testtest
equipment.
equipment.
ThisThis
deep
deep
andand
broad
broad
expertise
expertise
setssets
us apart
us apart
from
from
ourour
competitors
competitors
of aofsimilar
a similar
size.
size.
WeWe
believe
believe
global
global
logistics
logistics
problems
problems
andand
heightened
heightened
concerns
concerns
about
about
supply
supply
chains
chains
willwill
continue
continue
to drive
to drive
thethe
favorable
favorable
trend
trend
of contract
of contract
manufacturing
manufacturing
returning
returning
to North
to North
America,
America,
as well
as well
as to
asour
to our
expanding
expanding
Vietnam
Vietnam
facilities.
facilities.
Along
Along
with
with
ourour
record
record
revenue
revenue
in fiscal
in fiscal
2023,
2023,
we we
continued
continued
to see
to see
improvement
improvement
across
across
thethe
metrics
metrics
associated
associated
with
with
business
business
development,
development,
including
including
thethe
significant
significant
increase
increase
in the
in the
number
number
of of
active
active
quotes
quotes
with
with
prospective
prospective
customers.
customers.
WeWe
move
move
intointo
fiscal
fiscal
2024
2024
with
with
a strong
a strong
pipeline
pipeline
of potential
of potential
new
new
business,
business,
andand
we   re
we   re
seeing
seeing
improvement
improvement
in the
in the
global
global
supply
supply
issues
issues
andand
lower
lower
labor
labor
turnover,
turnover,
which
which
severely
severely
limited
limited
ourour
production
production
in prior
in prior
periods.
periods.
While
While
we we
cancan
expect
expect
higher
higher
interest
interest
rates
rates
andand
a strong
a strong
Peso
Peso
to dampen
to dampen
ourour
profitability
profitability
in the
in the
near
near
term,
term,
we   re
we   re
very
very
encouraged
encouraged
by our
by our
progress
progress
andand
potential
potential
for for
growth
growth
in fiscal
in fiscal
2024
2024
andand
beyond.
beyond.
Finally,
Finally,
I want
I want
to thank
to thank
ourour
exceptional
exceptional
employees
employees
for for
their
their
dedication
dedication
andand
hard
hard
work
work
during
during
thisthis
challengchallenginging
time,
time,
andand
ourour
shareholders
shareholders
for for
their
their
continued
continued
support.
support.
Sincerely,
Sincerely,
Craig
Craig
D. Gates
D. Gates
President
President
and and
Chief
Chief
Executive
Executive
Officer
Of   cer
Officer



shareholder letter icon 9/29/2023 Letter Continued (Full PDF)
 

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