Key Tronic (KTCC) Q4 2025 Earnings Call Transcript

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DATE

Wednesday, August 27, 2025 at 5 p.m. ET

CALL PARTICIPANTS

President and Chief Executive Officer — Brett Larsen

Chief Financial Officer — Tony Voorhees

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RISKS

Management attributed a sharp decline in revenue—$110.5 million versus $126.6 million in the same period of fiscal 2024, and $467.9 million for the fiscal year ended June 28, 2025 versus $566.9 million for the fiscal year ended July 1, 2024—to reduced demand from two large long-standing customers and delays in new program launches due to global tariff uncertainty.

The company reported a net loss (GAAP) of $3.9 million, or $0.36 per share, for Q4 of the fiscal year ended June 28, 2025 and $8.3 million, or $0.77 per share, for the fiscal year ended June 28, 2025. Both figures were wider than the same periods of the prior fiscal year as a result of revenue contraction and $1.1 million in reserved receivables in Q4 of the fiscal year ended June 28, 2025.

Operating margin fell to negative 2.1%, compared to 1.2% in the prior-year quarter (Q4 of the fiscal year ended June 28, 2025 vs Q4 of the fiscal year ended July 1, 2024), and to 0.1% for the full fiscal year ended June 28, 2025, down from 1.2% in the prior fiscal year, primarily due to demand reductions and new program delays.

Management cited supply chain disruptions and volatile tariffs as significant factors negatively affecting program launches and overall financial performance.

TAKEAWAYS

Revenue-- $110.5 million in GAAP revenue for Q4 of the fiscal year ended June 28, 2025 and $467.9 million for the fiscal year ended June 28, 2025, both down substantially due to decreased demand from two major customers and tariff-driven delays.

Net Loss-- Net loss (GAAP) was $3.9 million, or $0.36 per share, for Q4 of the fiscal year ended June 28, 2025 and $8.3 million, or $0.77 per share, for the fiscal year ended June 28, 2025, both wider than prior-year periods due to lower revenue and $1.1 million in receivable reserves.

Gross Margin-- 6.2% in Q4 of the fiscal year ended June 28, 2025, down from 7.2% in the same period of the prior fiscal year; full-year gross margin (GAAP) improved to 7.8% from 7% for the prior fiscal year, attributed to cost-reduction actions and operational efficiencies.

Operating Margin-- Negative 2.1% in Q4 of the fiscal year ended June 28, 2025, compared to 1.2% in the same period of the prior fiscal year, with full-year operating margin at 0.1% for the fiscal year ended June 28, 2025 versus 1.2% for the prior fiscal year, reflecting revenue decline and higher reserves.

Adjusted Net Loss-- $3.8 million, or $0.35 per share (adjusted, non-GAAP), for Q4 of the fiscal year ended June 28, 2025; $5 million, or $0.47 per share (adjusted, non-GAAP), for the fiscal year ended June 28, 2025, each worse than the prior-year periods primarily due to revenue loss and reserved receivables.

Inventory Reduction-- Year-end inventory was down $8 million, or 7%, for the fiscal year ended June 28, 2025 as part of a strategic cost-alignment with lower demand.

Headcount Actions-- Workforce was reduced by approximately 800, mostly in Mexico, with a $2.9 million severance expense for the fiscal year ended June 28, 2025.

Cash from Operations-- Full-year cash flow provided by operations was $18.9 million for the fiscal year ended June 28, 2025, up from $13.8 million in the prior fiscal year, representing two years of positive operational cash flow.

Capital Expenditures-- $4.1 million for the fiscal year ended June 28, 2025, up 3% year-over-year; planned capital expenditures of $8 million in the fiscal year ending June 27, 2026 will target automation and production expansion in Arkansas and Vietnam.

Debt and Liquidity-- Total liabilities were reduced by $32.7 million, or 14%, for the fiscal year ended June 28, 2025; current ratio was 2.5 for the fiscal year ended June 28, 2025, slightly lower than last year's 2.8; accounts receivable DSOs were 86 days, compared to 95 days a year ago.

New Program Wins-- Six new wins in Q4 of the fiscal year ended June 28, 2025, each valued at around $5 million, including three in Mexico; signed a manufacturing services contract with a data processor OEM, projected to reach a $20 million annual run rate by the fiscal year ending June 27, 2026.

Facility Investments-- Over $28 million planned for the new Arkansas plant and R&D center, expected to create more than 400 jobs over five years.

Vietnam Expansion-- Facility capacity available to double; certified for medical device production, with new programs set to begin in the fiscal year ending June 27, 2026.

SUMMARY

Key Tronic Corporation(NASDAQ:KTCC) reported significant revenue and earnings declines for the fiscal year ended June 28, 2025, driven by shrinking orders from two major customers and tariff-related delays for new programs. Management highlighted improved operational efficiencies and inventory strategies that partly mitigated the impact of the top-line shortfall. The company accelerated cost reduction through an 800-person workforce decrease and $2.9 million in severance for the fiscal year ended June 28, 2025, with positive trends in working capital metrics and operational cash flow. Substantial strategic investments in new capacity—over $28 million committed to Arkansas and expanded Vietnam operations—position the business to benefit from onshoring, tariff mitigation, and medical device growth opportunities, as the company anticipates these new facilities in the US and Vietnam will come online during the fiscal year ending June 27, 2026. Management emphasized a robust pipeline, new program wins, and strengthened global facilities, but withheld official guidance due to ongoing market uncertainty.

Voorhees stated the company’s manufacturing services agreement with a data processor OEM uses a consigned materials model. The $20 million revenue is expected to reach an annual run rate by the fiscal year ending June 27, 2026.

Larsen said the Arkansas facility will serve as a flagship R&D and production site, with projected workforce growth of more than 400 jobs over the next five years as part of a multi-region expansion plan.

The Vietnam operation received certification for medical device manufacturing and expects initial program launches in the coming year, expanding the company’s sector reach.

Mexico remains critical in the company’s tariff mitigation strategy under USMCA; recent cost cuts in the region are expected to improve long-term competitiveness and open additional program opportunities.

INDUSTRY GLOSSARY

Consigned Materials Model: An arrangement in which the customer owns and supplies the materials for manufacturing, while the contract manufacturer provides assembly and related services; reduces the manufacturer's working capital and cost of goods sold exposure.

USMCA: United States-Mexico-Canada Agreement, a trade pact affecting tariff arrangements and supply chain options for goods produced in North America.

Full Conference Call Transcript

Tony Voorhees: Good afternoon, everyone. I am Tony Voorhees, Chief Financial Officer of Key Tronic Corporation. I would like to thank everyone for joining us today for our investor conference call. We are excited to be calling in from our new Springvale, Arkansas facility this week. Joining me here is Brett Larsen, our President and Chief Executive Officer. 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 or the company's future financial performance. Please remember that such statements are only predictions. Actual events or results may differ materially.

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. Please note that on this call, we will discuss historical financial and other statistical information regarding our business and operations. 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 a recorded version of this call will be available on the Investor Relations section of our website.

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 measure are provided in today's press release, which is posted to the Investor Relations section of our website.

For the 2025, we reported total revenue of $110.5 million compared to $126.6 million in the same period of fiscal 2024. The revenue for 2025 was adversely impacted by decreased demand from two large long-standing customers. In addition, the recent escalation and fluctuations in global tariffs caused uncertainty that contributed to delays in new program launches as customers stalled orders. For the full fiscal year 2025, total revenue was $467.9 million, compared to $566.9 million in fiscal year 2024. Our gross margin was 6.2% and operating margin was negative 2.1% in 2025 compared to 7.2% and 1.2%, respectively, in the same period of fiscal 2024.

These decreases largely relate to continued reductions in demand from two large long-standing customers during the period. Gross margin and operating margin for the full fiscal year 2025 were 7.8% and 0.1%, compared to 7% and 1.2% for the full year fiscal 2024. Despite the revenue reduction of approximately $100 million in fiscal year 2025, we were still able to increase gross margins year over year. This is largely related to operational efficiency gains, reductions in workforce, and other cost-saving initiatives over the last two years.

In order to better align costs with current customer demand and boost automation, we cut approximately 300 more jobs during the fourth quarter of fiscal year 2025, for a total headcount reduction during fiscal year 2025 of approximately 800. The negative impact of severance expense on our income statement was approximately $100,000 during 2025 and $2.9 million for the entire fiscal year 2025. As top-line growth returns, we anticipate margins to be strengthened by improvements in our operating efficiencies and the continued and increasing benefits of our strategic cost-saving initiatives. We also believe the cost-saving initiatives have allowed us to be more competitive in quoting new program opportunities.

As production volumes increase and our 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. Our net loss was $3.9 million or $0.36 per share for 2025, compared to a net loss of $2 million or $0.18 per share for the same period of fiscal year 2024. For the full fiscal year 2025, our net loss was $8.3 million or $0.77 per share compared to a net loss of $2.8 million or $0.26 per share for fiscal year 2024.

The increase in year-over-year net loss primarily related to the large reductions in revenue as well as adjustments for estimated collections from customers of approximately $1.1 million for 2025, and $1.8 million for the full year of fiscal year 2025. Our adjusted net loss was $3.8 million or $0.35 per share for 2025, compared to an adjusted net loss of $700,000 or $0.06 per share for the same period of fiscal year 2024. The adjusted net loss was $5 million or $0.47 per share for the full fiscal year 2025 compared to an adjusted net loss of $200,000 or $0.02 per share for the same period of fiscal year 2024.

The non-GAAP financial measures below for additional information about adjusted net loss and adjusted net loss per share.

Turning to the balance sheet, we ended fiscal 2025 by reducing inventory by approximately $8 million or 7% from the same time a year ago. These improvements in inventory levels primarily reflect our strategic initiatives designed to better align our inventory 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 made significant enhancements to our materials resource planning algorithms.

As a result, we are now more prepared to address potential future disruptions in the supply chain and more able to respond to evolving tariff implications as we continue to manage inventory more cost-effectively. For fiscal 2025, we also reduced our total liabilities by a combined amount of $32.7 million or 14% from a year ago. Our current ratio was 2.5 to 1 compared to 2.8 to 1 from a year ago. At the same time, accounts receivable DSOs were at 86 days compared to 95 days a year ago, reflecting stronger collection on receivables.

For the full fiscal year 2025, cash flow provided by operations was $18.9 million, up from $13.8 million for fiscal 2024. This represents two fiscal years in a row of positive cash from operations. Total capital expenditures in fiscal year 2025 are about $4.1 million, an increase of approximately 3% from a year ago. In addition, we entered into financing arrangements which will provide up to $9 million in available funding to be used in our planned expansions in Arkansas and Vietnam. While we are keeping a careful eye on capital expenditures, we plan to continue to invest selectively in our production equipment, SMT equipment, and plastic molding capabilities.

Utilize leasing facilities as well as make efficiency improvements to prepare for growth and add capacity. We expect to spend about $8 million in capital expenditures during fiscal year 2026, largely on new innovative production equipment and automation. As we move into fiscal year 2026, we are pleased to continue to see our new programs ramping and cost and efficiency improvements from our recent overhead reductions take hold. We expect to see growth in our US and Vietnam production, have a strong pipeline of potential new business, and remain focused on improving our profitability. Over the longer term, we believe that we are increasingly well-positioned to win new programs and profitably expand our business.

We will not be providing forward-looking guidance due to the uncertainty of timing of new products ramping over fiscal year 2026. That's it for me, Brett.

Brett Larsen: Thanks, Tony. Fiscal 2025 was a year of transition and uncertainty. We anticipated a reduction of demand from two long-standing customers. We had fully expected to fill that void with recently won new programs. However, with the uncertainty of recent variant tariffs, most of these launches were delayed into fiscal 2026. The reduction in overall revenue had a significant impact on our bottom line financial results. Nevertheless, during the fiscal year, we were able to rightsize our cost structure in Mexico and introduce new production efficiencies in automation that have allowed us to become more cost-competitive.

Additionally, we transitioned our manufacturing footprint by investing in a new facility here in the US and investing in new production equipment in Vietnam that increases our capacity and capability. The sudden increases and decreases in tariffs have unfortunately impacted new program launches across all of our facilities. We are doing our best to work with suppliers and our customers on options for manufacturing their products from different locations in best mitigating the impact of tariffs. Our changes made to our manufacturing footprint and our cost reductions enable us to offer improved mitigation options, particularly when our customers consider the varying implications of current and future potential tariffs. We are moving full speed ahead with adding capacity in key regions.

In the US, we are expanding our clean tech cutting-edge manufacturing operations here in Arkansas. We expect to invest more than $28 million in our new flagship manufacturing and research and development location here in Arkansas, which we fully believe should create over 400 new jobs over the next five years. We are delighted to be enhancing 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. Our US-based production provides customers with outstanding flexibility, engineering support, and ease of communications. In Vietnam, we have ample space in our current facility to double our manufacturing capacity.

We are also putting the finishing touches on a major production capability in Vietnam that will support future medical device manufacturing. Our Vietnam-based production offers the high quality, low-cost choice that was often 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 these new facilities in the US and Vietnam will come online during 2026 and enable us to benefit from customer demand for rebalancing their contract manufacturing to mitigate the severe impact and uncertainties surrounding the tariffs on goods and critical components. By 2026, we expect to have approximately half of our manufacturing take place in our US and Vietnam facilities.

These initiatives reflect both the long-standing trends to nearshore and move more of their production away from China as well as de-risk the potential adverse impact of tariff increases and geopolitical tensions. Our Mexico facility also offers a unique solution for tariff mitigation under the existing USMCA tariff agreement. But there is a sustained trend of continued wage increases in Mexico. And as it has become clear that these changes in the base cost of Mexican production are long-standing, we have streamlined our operations, increased efficiencies, and invested in automation in order to become more cost-competitive in the market.

During fiscal 2025, we reduced our total headcount by approximately 800 individuals, or roughly 30% during the year, which was mostly done in Mexico. Our improved cost structure in Mexico is anticipated to lead to new programs and growth over the longer term. During fiscal 2025, we continued to win new programs in manufacturing equipment, vehicle lighting, aerospace systems, energy resiliency, telecommunications, pest control, energy storage, medical technology, temperature-controlled shipping, personal protection equipment, air purification, automotive, and utilities inspection equipment. In addition, we executed a manufacturing contract with a data processing equipment OEM, which will consign its materials to our Corinth, Mississippi manufacturing facility.

The consigned materials model is new for us at this scale, and if successful, will considerably improve our profitability in the coming quarters. It has the potential to ramp significantly during fiscal year 2026 and is estimated to grow eventually to over $20 million in annual revenue. Despite 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. We expect that the global tariff wars and geopolitical tensions will drive OEMs to reexamine their traditional outsourcing strategies. Over time, the decision to onshore production is becoming more widely accepted as a smart long-term strategy.

We believe our manufacturing footprint and cost competitiveness will allow us to take advantage of these opportunities. The combination of our flexible global footprint and our expansive design capabilities continues to be extremely effective in capturing new business. Many of our manufacturing program wins are predicated upon Key Tronic Corporation's deep and broad design services. And once we have completed a design and ramped it into production, we believe our knowledge of a 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 the coming quarters.

We also continue to invest in vertical integration and manufacturing process knowledge, including a wide range of plastic molding, injection, blow, gas assist, multishot, as well as PCB assembly, metal forming, painting, coating, complex high-volume automated assembly, and the design, construction, and operation of complicated test equipment. We believe that this expertise will increasingly set us apart from our competitors of similar size. While the global tariff policies are creating delays to new product launches for us, our suppliers, and our customers, we believe due to political tensions and heightened concerns about tariffs and supply chains, will continue to drive the favorable trend of contract manufacturing returning to North America as well as to our expanding Vietnam facilities.

These tariff challenges were a significant factor in replacing reduced demand in both long-standing and recently awarded programs, which hammered our growth and profitability in fiscal 2025. Nevertheless, we continue to rebalance our manufacturing across our facilities in the US, Mexico, and Vietnam. We will move forward with a strong pipeline of potential new business, and we are seeing significant improvements in our operating efficiencies. Over the long term, we remain very encouraged by our cost reductions made over the past two years to become more cost-competitive, our increasing cash flow generated from operations, enhanced global manufacturing footprint, and the innovations from our design engineering. All these initiatives have increased our potential for future profitable growth.

In closing, I want to emphasize that this was a challenging year for our industry and for Key Tronic Corporation specifically. In these circumstances, the execution of our strategy was made possible not only by our investments in plants and equipment but even more so because of the skills, local knowledge, and talents of our people. I want to thank our exceptional employees for their dedication and hard work during this past year. This concludes the formal portion of our presentation. Tony and I will now be pleased to answer your questions.

Operator: Thank you. If you would like to signal with questions, please press 1. If you are joining us today using a speakerphone, please make sure your mute function is turned off to allow your signal to reach our equipment. Again, please press 1 if you would like to signal with questions. And our first question will come from Matt Dane with Titan Capital Management.

Matt Dane: Good afternoon, guys. I was curious looking at the new wins in the quarter. Can you give us the range of sizes of those six new wins and how we should be thinking about those ramping?

Tony Voorhees: Yes. For the quarter, those were predominantly around the $5 million program size. Three of them in Mexico. The others are in the US. You know? And then, of course, the data processing could exceed $20 million, and that's more of a service consigned materials contract.

Matt Dane: Okay. Great. Good to know. I also wanted to talk about the Vietnam medical device manufacturing capability that you folks are getting set up over there. How are you thinking about that? I know you called out that you want a medical device. It sounds like that's either for the US or Mexico where you will be manufacturing that. But the go-forward opportunity, are you talking with potential customers around that? And what attracted you to build out that capacity over there?

Tony Voorhees: Yeah. Absolutely. That's a great question. So we have always wanted to grow Vietnam. I think it was hampered largely after we took it and started that in Da Nang. Right around 2019, 2020. I think we were hindered by COVID for a number of years and being able to market and sell that. That has drastically changed. And I think now being certified to build medical products there, and actually now having a program slated to start there in fiscal 2026, I think that will just have our Vietnam shop show even better and more capable. And we are expecting additional new opportunities there in Vietnam from that.

Matt Dane: Great. And final question if I could ask here. You folks on the call and in the release talked about how you have seen an increase in new program bids recently. I was hoping for a little bit of additional color here. Is it just pent-up demand? People cannot continue to sit around and wait for 100% tariff clarity? Do they feel like they have enough clarity on tariffs? Is this something you are doing to drive this increase in bidding activity? Just yeah, what more can you tell us around that?

Tony Voorhees: Sure. Probably two points. Probably the foremost is us becoming more cost-competitive. I think the cost reductions we have done over the last two years have enabled us to provide what we have mentioned as commodity pricing for certain customers that require low cost. That has definitely opened up our opportunities to close out on quotes that we may have lost historically. I think the other is the impact of investing in key locations. Our new Arkansas facility, we are extremely excited about. We have had a number of customers come and visit it. There is quite a bit of pent-up demand for US manufacturing, particularly in light of the varying tariffs and geopolitical tensions that are going on.

That has definitely impacted recent quote opportunities as well. So I think it's kind of the combination of all. It's both the cost reductions but then improving our actual global footprint to provide our customers with more options for tariff mitigation.

Matt Dane: Great. Appreciate the color.

Tony Voorhees: Thank you.

Operator: Once again, if you would like to signal with questions, please press 1 on your touch-tone telephone. Again, that is 1 if you would like to ask questions. And our next question will come from George Melas with MKH Management.

George Melas: Thank you, operator. Hi, guys. Two questions. Hi, Brett. Question on the DSO. Somehow, I probably calculated somewhat differently than you guys, but it seems that receivables came down by $16 million sequentially. And I am just wondering whether that's possible or whether there's something, some factoring or some other factor that sort of explained that decline in your receivables.

Tony Voorhees: Yeah. Good question, George. Appreciate it. This is Tony. So, the large driver of that reduction in AR is primarily due to the reduction in revenue over the quarter. There is no factoring. I think we did a better job of collections during the year. There was also, unfortunately, some write-offs, some bad debt that occurred during the year. But there was no factoring.

George Melas: Okay. Great. Regarding the write-off in the bad debt, was there a significant amount of that in the fourth quarter?

Tony Voorhees: Yeah. There was $1.1 million in the fourth quarter. We did not write it off. We just reserved for it. So but that did negatively impact our result.

George Melas: Okay. And that flowed all through to cost of goods sold, I guess, then?

Tony Voorhees: It's down in SG&A, actually.

George Melas: Okay. Great. And that reduced the net receivables that you had.

Tony Voorhees: Correct.

George Melas: Great. It's still an impressive reduction in the DSO. Do you think that could come down further? Is it just better collection, or is it somewhat different terms in your contracts with your customers?

Tony Voorhees: Yeah. I would say it's primarily collection efforts, George. We have done a better job of collecting recently from our customers. You know, we have really worked hard at building those relationships and making sure we have a path to a contact that can help us out when we need it.

George Melas: Okay. Very good. And then help me understand a little bit better the potential size of that manufactured services contract that you singled out with the data processor OEM. You say it could be $20 million. But given the fact that they would consign the parts, how does that compare with some other contracts that you may have? From a size perspective? Because the $20 million would not include, my understanding, does not include the parts flowing through your P&L. Is that correct?

Tony Voorhees: Yep. Absolutely. And I think that's one of the reasons we wanted to make mention of it. While it is only a $20 million program, it's a strong $20 million program. But that's just for the manufacturing services that we would provide. So, you know, this is probably, we have done other consigned material contracts but nothing to this scale. And so, while it's $20 million additional revenue to Key Tronic Corporation, it should have a strong incremental improvement in margin. You know? Because there's far less material content to it. So, you know, is that $20 million win really the equivalent of an $80 to $100 million program that's turnkey?

George Melas: Exactly. Okay. And that contract was signed in June?

Tony Voorhees: It was. It was in the fourth quarter. And we are ramping that as we speak in our Corinth facility.

George Melas: Okay. And is it going to be just in the Mississippi facility, or will it be in other places as well? Because it seems like a potentially large contract.

Tony Voorhees: It is. It's currently scheduled for Mississippi. But with this new Arkansas facility, we have got plenty of capacity here as well. If it continues to grow, we may need to dual source it. But at this point, it's scheduled just to be within the plan.

George Melas: Okay. Thank you, Brett. And in fiscal 2026, what would you expect in terms of revenue from that contract? You know, let me ask you. First of all, maybe the year and the run rate as you end the year. I'll make it more complicated, Brett. I'm sorry.

Tony Voorhees: Yeah. I know. You're not going to let me get away with that. Right. You know what? With all ramps, it always takes longer than you hope. Our expectation is we'll be at the $20 million per year run rate by 2026. But there's still, you know, there's still a lot of unknowns between now and then. But that's what we're trying to project to be at that level as we exit the fiscal year.

George Melas: Okay. So it means that it would have largely ramped to the $20 million run rate by June 2026. So that's good.

Tony Voorhees: Okay.

George Melas: Great. And in Mexico, you are adding three new programs, six programs, three of which are in Mexico. How do you see your Mexico operations in fiscal 2026? Do you see them growing or sort of flattening? How do you see that part of the operation?

Tony Voorhees: I think with these recent program wins, we will see some growth in Mexico. You know, we found that we were not always cost-competitive. And I think we've made the correct reductions and changes to the cost structure down there. And the other thing is right now under the USMCA agreement, it really is a perfect way to mitigate tariffs for US-consumed goods. So I think they're going to continue to get opportunities down there. You know? And as you're fully aware, that's where predominantly a lot of our vertical manufacturing needs exist.

So even if it's not a full box build down in Mexico, I could see us building subassemblies, either sheet metal or molded components, that would then be shipped into a Vietnam or US location. So it's still going to be very much a critical operation facility for our success in the future.

George Melas: Okay. Great. And then maybe a last question. Any thoughts about your gross margin in fiscal 2026 and maybe longer term? Is there any sort of thinking that it is impaired, or do you think it can come back to the nines and maybe even double-digit at some point?

Tony Voorhees: That's always our goal. That's always our strategy to get there on paper. It looks like we can get there. There's just a lot of things that need to happen. So we definitely are not happy with the results of this past fiscal year, and that includes gross margins. We're expecting those to improve. And I think now more than ever, with the increased capacity that we have in Mexico, in the US, and in Vietnam now, it's incumbent on us to really grow our top line and utilize some of that capacity in order to get to reasonable gross margin.

George Melas: Okay. So from an incremental gross margin, as you add revenue, what do you think that could be?

Tony Voorhees: It can be 15 to 20%.

George Melas: Okay. And that would hold in all three locations.

Tony Voorhees: Yeah. Broad brush. Yes.

George Melas: Okay. Great. Thank you very much. Good luck in the New Year.

Tony Voorhees: Of course.

Operator: And once again, if you would like to signal with questions, please press 1 on your touch-tone telephone. Again, that is 1, and we'll pause for just a moment. And that does conclude the question and answer session. I'll now hand the conference back over to you for any additional or closing remarks.

Tony Voorhees: Thank you again for participating in today's conference call. Tony and I look forward to speaking to you again next quarter.

Operator: Thank you. That does conclude today's conference. We do thank you for your participation. Have an excellent day.

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