Key Tronic (KTCC) 2027财年第一季度业绩电话会议：亏损扩大之际在手订单增长76%

核心要点

• 2027财年第一季度营收为9870万美元，与上年同期的9880万美元基本持平。供应链融资约束导致约1800万美元的出货延迟，主要影响来自墨西哥和美国的工厂。
• 毛利率从8.4%降至2.5%，反映出劳动力过剩和运营效率低下、约600万美元的零毛利库存销售，以及470万美元的制造成本差异。
• 净亏损从上年同期的230万美元（即每股亏损0.21美元）扩大至750万美元（即每股亏损0.69美元）。调整后净亏损为790万美元，即摊薄后每股亏损0.72美元。
• 积压订单达到2.459亿美元，同比增长76%。管理层表示，这一增长主要反映出基础需求的走强，其中确定采购订单在积压订单中的占比有所提升。
• Key Tronic获得了多个新项目定点，涉及电源管理、可持续废弃物管理、数据中心、建筑及国防科技等领域，预计每年可带来超过6000万美元的潜在收入。
• 公司正在精简美国员工团队，以期将年劳动力成本减少约800万美元。管理层继续预计，在2027财年下半年将实现营收增长并恢复盈利。

关键财务数据

营业业绩中包括与密西西比州工厂屋顶更换相关的320万美元保险理赔款。由于公司为预期的增长做准备，季度末库存同比增加了640万美元，增幅为6.6%。

业务与运营表现

在医疗器械和消费品项目的推动下，越南地区的营收继续增长。Key Tronic在2026财年将其越南生产基地面积扩大了一倍，并将该基地视为其全球网络中日益重要的组成部分。

公司表示，其在美国和越南的投资正吸引客户的兴趣，而其胡阿雷斯园区则在《美墨加协定》（USMCA）框架下提供了缓解关税影响的备选方案。随着裁员、流程变革以及自动化水平的提高，近期在墨西哥的客户拜访、资质审核和报价活动有所增加。

在多个案例中，新获得的业务定点包含了客户提供的融资支持。客户正在资助专用生产设备、预付零部件费用，或以寄售方式提供材料。根据已公布的TP-Link Systems合作协议，TP-Link计划提供绝大部分前期生产资金，并以寄售方式供应零部件。

Key Tronic估计其工厂仅使用了可用制造产能的50%至60%。管理层表示，将积压订单转化为营收的主要瓶颈在于流动性，而非实际产能或需求。

管理层业绩指引

由于新项目产能爬坡时间的不确定性以及资金环境面临挑战，Key Tronic未提供2027财年第二季度的营收或盈利指引。

管理层继续预计2027财年下半年将实现营收增长并恢复盈利，前提是资金约束得到缓解、积压订单转化为出货以及实现成本削减。

美国员工团队重组预计将使每年劳动力成本降低约800万美元。管理层表示，近期已落实了约70%的裁减目标，预计到明年1月前将从现有的劳动力成本基数中完全扣除该笔金额。

2027财年的资本支出预计总计约为700万至1000万美元，重点用于厂房、生产设备和自动化建设。

风险与关注重点

• 供应链融资状况尚未改善，且可能进一步收紧。部分亚洲供应商要求预付现金，同时包括印刷电路板和铜相关产品在内的零部件交货周期有所延长。
• 由于整个供应链的信贷获取难度和流动性压力，第一财季约有1800万美元的出货被推迟。
• 公司1.15亿美元的基于资产的信贷额度已提用约8500万美元。管理层表示，每周的额度使用率通常约为可借借贷能力的90%，具体随应收账款和库存情况而变化。
• 当出货量低于计划时，低产能利用率会导致劳动力过剩和制造费用偏高。
• 地缘政治紧张局势、关税不确定性以及更广泛的市场状况可能导致Key Tronic及其客户和供应商的产品发布延迟。

分析师问答环节要点

管理层表示，Key Tronic正积极寻求以海外资产作为抵押获得额外资金。公司在越南的融资方面已取得一些进展，并正在寻求以墨西哥的资产申请追加贷款。

在谈及积压订单质量时，管理层解释称，由于供应条件收紧，客户正做出更长期的承诺。在2.459亿美元的积压订单中，确定采购订单目前占了较大比例，这比预测订单占比较高时更具实质意义。

管理层将积压订单的增加归因于需求的实质性增长，而不仅仅是客户提前下达采购订单。然而，能否获得营运资金仍是决定这些订单转化为营收速度的关键因素。

公司在错失约1800万美元的计划出货量后，裁员旨在使劳动力和制造费用与近期生产相匹配。管理层表示，当补充资金能够支持更高产量时，可以重新增加直接劳动力。

业绩电话会议完整文字记录

完整财报电话会议逐字稿

管理层陈述

Operator

Good day, and welcome to the Key Tronic FY 2027 Q1 Investor Call.

Today's conference is being recorded. period. [Operator Instructions] At this time, I'd like to turn the call over to Tony Voorhees. Please go ahead.

Anthony Voorhees

Good afternoon, everyone. I am Tony Voorhees, Chief Financial Officer of Key Tronic. I would like to thank everyone for joining us today for our investor conference call. Joining me here at our Spokane, Washington headquarters 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 the future events of 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 measures are provided in today's press release, which is posted to the Investor Relations section of our website.

Our financial performance in Q1 was clearly below where we expect to operate. Revenue remained constrained, margins were pressured, and we reported another quarterly loss. At the same time, customer demand remains strong. Our backlog has grown significantly, and we are taking decisive actions to improve our cost structure and address the constraints that limited our performance during the quarter. We believe those actions, together with the new business we are winning, provide a clear path towards improved financial performance as we move through fiscal 2027.

For the first quarter of fiscal 2027, we reported total revenue of $98.7 million compared to $98.8 million in the same period of fiscal 2026. Revenue for the first quarter of fiscal year 2027 continued to be constrained by tightening credit availability and liquidity pressures across the global supply chain. These supply chain financing constraints delayed approximately $18 million of our shipments during the quarter, mostly involving programs manufactured in Mexico and the U.S. Importantly, we view these delays as primarily a constraint on our ability to convert demand into revenue rather than a lack of customer demand. Our backlog was $245.9 million in the first quarter of fiscal year 2027, up 76% from the same period in fiscal year 2026. Revenue from our Vietnam-based production continued to grow, driven by medical device and consumer products programs.

We're actively working with our customers and suppliers and exploring new sources of capital to support growth and to ease supply chain financing constraints in future periods. Gross margin was 2.5% in the first quarter of fiscal year 2027 compared to 8.4% in the same period of fiscal year 2026. There were several significant pressures on Q1 profitability. Production delays caused by supply chain financing challenges resulted in excess labor costs and operating inefficiencies at our Mexico and U.S. facilities. Gross margin in the first quarter of fiscal 2027 were further reduced by approximately $6 million of inventory sales with no margin contribution and $4.7 million of manufacturing cost variances that were recognized in cost of goods sold rather than reflected in inventory due to U.S. GAAP inventory valuation requirements.

Our operating margin was negative 4.2% in the first quarter of fiscal year 2027 compared to negative 0.6% in the same period of fiscal year 2026. The decline in operating margin for the first quarter of fiscal year 2027 reflects the drop in gross margin as well as by approximately $0.5 million in write-offs of bad debt. These adverse impacts were partially offset by $3.2 million insurance recovery related to a roof replacement in our Mississippi facility. The important point looking forward is that we are actively addressing the cost structure behind these results. We are streamlining our U.S.-based workforce, which is expected to reduce labor costs by approximately $8 million annually. As revenue improves and these cost actions take hold, we expect margins to improve in the coming quarters. The delayed shipments and associated drop in our revenue and margins had a big impact on our bottom line.

Our net loss was $7.5 million or $0.69 per share for the first quarter of fiscal year 2027 compared to a net loss of $2.3 million or $0.21 per share for the same period of fiscal year 2026. Our adjusted net loss was $7.9 million or $0.72 per diluted share for the first quarter of fiscal year 2027 compared to adjusted net loss of $1.1 million or $0.10 per diluted share for the same period of fiscal year 2026.

Our focus on operating discipline continues to support a strong balance sheet. Our inventory at the first quarter of fiscal 2027 was up $6.4 million or by 6.6% from a year ago, reflecting our preparation for growth in coming periods. Our current ratio was 1.9:1 compared to 2.4:1 from a year ago. At the same time, accounts receivable DSOs were at 75 days compared to 81 days a year ago, reflecting stronger collection on receivables. Capital expenditures in the first quarter of fiscal 2027 were $1.6 million, and we expect total capital expenditures for the full year of approximately $7 million to $10 million, reflecting investments in facilities and new innovative production equipment and automation. Given the current environment, capital allocation and working capital discipline remain important priorities for us. We intend to be selective with investment while continuing to support the programs and capabilities that we believe will drive future returns.

As we move further into fiscal 2027, there are several reasons we remain positive about the remainder of the fiscal year. First, demand remains strong. Activity with several long-standing customers is improving and new programs are ramping. Our backlog reached $245.9 million, up 76% year-over-year. Second, we continue to win meaningful new business, and our expanded U.S. and Vietnam capacity is generating increased customer interest. Third, our manufacturing footprint is increasingly aligned with where our customers want to produce. Our Vietnam operations continue to grow, while our investments we have made in the United States and Vietnam provide additional capacity as programs ramp. And fourth, the cost actions underway are designed to create greater operating leverage as revenue recovers.

Because the timing of new program ramps remains uncertain, and we continue to operate in a challenging macroeconomic and capital environment, we are not providing revenue or earnings guidance for the second quarter. So while Q1 was a difficult quarter financially, we believe the underlying demand for our capabilities is stronger than the headline results suggest. Our focus is straightforward: convert that demand into revenue, improve margins, strengthen liquidity and return the business to profitability.

With that, I'll turn the call over to Brett.

Brett Larsen

Thanks, Tony. While we continue to see robust customer demand reflected in our growing backlog, the near-term liquidity challenges across the global supply chain have markedly constrained our revenue in recent quarters. Nevertheless, we believe our operational discipline, strengthened manufacturing footprint and long-standing customer relationships have positioned us better than many of our competitors. As a result, we continue to win new business and see new programs continue to ramp.

As part of our long-term strategy to improve competitiveness and better align our manufacturing footprint with evolving customer needs, we are currently streamlining our U.S.-based workforce. As Tony noted, this is expected to reduce labor costs by approximately $8 million annually. As you will recall, we previously undertook a significant transformation of our Mexico operations, reduced headcount, streamlined production processes, increased automation and improved operating efficiencies. These actions have enhanced our cost competitiveness while preserving the strategic advantages of our Juarez campus, which continues to offer customers an attractive tariff mitigation solution under the USMCA framework. These benefits of these actions are now becoming evident in the marketplace. As our cost structure has improved, we have seen a meaningful increase in customer engagement, quoting activity and new business opportunities.

Our Mexico operations have recently experienced a notable increase in customer visits and qualification audits, reflecting growing confidence in our capabilities and competitiveness. At a time when many EMS providers continue to face liquidity and capital constraints, our competitive manufacturing footprint is enabling us to compete for a broader range of programs.

We are encouraged by the progress we have made expanding our manufacturing capabilities in both the United States and Vietnam. These investments are a direct response to evolving customer requirements and position Key Tronic to capitalize on long-term industry trends towards supply chain diversification, tariff mitigation and operational resilience. This investment strengthens our ability to provide U.S. customers with enhanced engineering support, faster collaboration and increased manufacturing flexibility through a U.S.-based solution. Customer interest in our U.S. operations continues to grow, and we expect new programs to continue to ramp and existing customers to expand their engagement with us.

In Vietnam, we completed a significant capacity expansion during fiscal 2026, doubling our manufacturing footprint to support anticipated growth in medical device and other high-value programs. Vietnam has now emerged as an increasingly important part of our global manufacturing strategy, providing customers with a highly competitive combination of quality, cost and regional supply chain. As Tony mentioned, revenues from our Vietnam operations continued to grow sequentially during the first quarter, driven primarily by strong demand in medical devices and consumer-focused programs. We believe Vietnam will be a major contributor to our future growth and an increasingly important differentiator in the marketplace.

In an environment where geopolitical tensions, tariff uncertainty and supply chain risk continues to influence decision-making, we believe Key Tronic is exceptionally well positioned to benefit from customers seeking to nearshore production, diversify manufacturing locations and reduce overall supply chain risk.

During the first quarter of fiscal 2027, we secured new program awards in utilities power management, sustainable waste management data centers, construction and defense technology. Together, these awards represent more than $60 million in potential annual revenue. We also recently announced plans to partner with TP-Link Systems, a global leader in networking and smart home solutions to assemble its next-generation technologies in the United States. These wins reflect growing recognition of Key Tronic's ability to deliver high-quality manufacturing at a globally competitive cost.

As liquidity and capital constraints continue to affect the entire EMS industry, customers are increasingly looking for stable, operationally disciplined partners that can support long-term growth. Many of these programs incorporate partnership models in which customers share the upfront investment, helping us balance ramp-up capital requirements, accelerate growth and improve returns on invested capital. TP-Link Systems is one such good example of this approach. The customer is providing most of the upfront capital needed for production and plans to supply components on a consignment basis. Our strong pipeline of potential new business also underscores the continued trend towards onshoring and dual sourcing of contract manufacturing.

As we look beyond the significant transformation initiatives and operational improvements, we believe Key Tronic is emerging as a stronger, more competitive company with several distinct advantages that position us well for sustained growth. The combination of our optimized global manufacturing footprint, robust engineering capabilities and vertically integrated manufacturing expertise continues to resonate with both existing and prospective customers and is increasingly translating into new business opportunities.

First, we have significantly enhanced the flexibility, competitiveness and resilience of our global manufacturing network. Through the actions we have taken to optimize operations in China and Mexico, while expanding capacity in the United States and Vietnam, we now offer customers a broader range of manufacturing solutions aligned with evolving supply chain strategies. As geopolitical tensions, trade policy uncertainty and tariff considerations continue to influence sourcing decisions, we believe OEMs will increasingly seek manufacturing partners capable of providing geographic flexibility, supply chain resilience and cost-effective production alternatives. Our investments over the past several years have positioned us exceptionally well to capitalize on these trends.

Second, our engineering and design services remain one of the most powerful differentiators in our business model. Many of the programs we win belong long before production with customers engaging our engineering teams to help develop, optimize and prepare products for manufacturing. Once a program has progressed from design through commercialization and into production, our deep understanding of the product, the manufacturing process and customer requirements create substantial value and fosters long-term customer relationships. As a result, these programs tend to be highly durable and generate opportunities for future expansion. Given the increasing complexity of many of the products we support, we continue to invest in expanding the capabilities of our engineering organization and expect our design service businesses to remain an important driver of future growth.

Third, we continue to differentiate ourselves through the broad range of vertically integrated manufacturing capabilities and decades of process expertise. These capabilities span across plastic technologies, including injection, blow, gas assist and multi-shot molding as well as printed circuit board assembly, metal fabrication, painting and coating, automated high-volume assembly and the design, construction and operation of sophisticated test systems. By providing customers with a highly integrated manufacturing solution under one roof, we help reduce supply chain complexity, lower total landed costs, improve quality and accelerate the time to market. We believe this combination of technical expertise and manufacturing breadth remains difficult to replicate and will continue to distinguish Key Tronic from many of our competitors. Most importantly, these competitive advantages are becoming increasingly meaningful in today's EMS market.

While many providers, including Key Tronic, continue to face liquidity constraints, limited capital availability and operational challenges, Key Tronic has strengthened its competitive position through disciplined execution, strategic investment and operational transformation. As customer demand continues to shift towards partners that can provide engineering expertise, manufacturing flexibility and global supply chain solutions, we believe we are well positioned to capture additional market share, secure strategic programs and drive profitable long-term growth for our shareholders. While we continue to face near-term liquidity challenges, our growing backlog, program wins and pipeline of new business opportunities underscores our fundamentally strong competitive position. While we must navigate the ongoing near-term liquidity challenges, we continue to expect revenue growth and a return to profitability in the second half of fiscal 2027.

The global market uncertainties continue to create some delays to new product launches for us, our suppliers and our customers. However, we believe geopolitical tensions and heightened concerns about tariff 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. Significant improvements in our operating efficiencies are also creating a stronger pipeline of potential new business. Over the long term, we remain very encouraged with our cost reductions, increased customer-supported capital and transformation of our global footprint have made us more competitive and increased our potential profitable growth.

This concludes the formal portion of our presentation. Tony and I will now be pleased to answer your questions.

Operator

[Operator Instructions] And our first question will come from Bill Dezellem with Tieton.

分析师问答

William Dezellem

Let me start with the industry financing issues. Since the last conference call, how would you characterize any change that has taken place over that time period?

Brett Larsen

Specifically to financing, can you restate that, Bill?

William Dezellem

Yes. No, that's exactly right, Brett. Just how the financing environment for the industry may -- and Key Tronic may have changed over the last few weeks since the last call.

Brett Larsen

Yes. I think just in broad brush, Bill, I would state that things haven't improved. And in fact, they may have got even a little tighter. We have seen some of our suppliers in Asia requiring cash upfront. I've seen some availability of parts being extended, particularly in like PCBs and copper and such. So I would say, if anything, there's a little more stress in the financing of our supply chain, which resulted in lackluster results in our Q1, and we've got to regroup and try to figure out how to best mitigate that and come up with some more unique capital opportunities.

William Dezellem

That's helpful. And then relative to the six new wins, first of all, thank you for putting in the dollar amount of $60 million. And congratulations on $60 million. That's a big number. I guess two things relative to these. Would you walk through kind of the story behind those wins and why Key Tronic was chosen? And then secondarily, for each of them, how is the financing looking like it's going to line up? And how are these customers working with you or partnering with you in light of the tight financing?

Brett Larsen

Sure. Probably just to start out with, I think there is distress in the market, particularly in North American manufacturing. And I think that has helped us grow recent new wins, and I'll just start with the first of the power management new program. That was one that we've been chasing for about six to nine months. That particular customer is very concerned about their contract manufacturer and the health that they're in and was looking as well to be able to outsource this to a lower-cost region. So that's a pickup in Juarez.

As far as financing for that one, that's predominantly a PCB, which should be pretty much financed by days payable, pretty quick turning, low SKU count, and that customer is providing the capital for its specific production equipment. So I think that's a good win for Key Tronic moving forward. I think the next was sustainable waste management ability. And that too has a bit of an uplift in production equipment, and that customer as well has signed the purchase orders to be able to give us the capital to go out and get that production equipment. That one is a little more mechanical. It has sheet metal to it, a little more mechanically aligned. And I think that one as well really will -- the materials are pretty easy to get quick turnover. That one, again, is a good thing.

Next one is the data centers, and those are existing customers. And those are helping provide some of the parts. So they're actually drop shipping some of the components to us and/or helping pay for the materials in order for us to ramp. They're unique in the fact that they have the supply chain capability. They already have some relationships with some of the supply that we're getting those parts from. And so it's an easy win for us to ask for some support as they are ramping to provide some of those components on a consigned basis. Very little to no increase in production equipment. We can easily digest that data center work into existing capital. That too is in Juarez, but also with some incremental business in Mississippi and Minnesota.

Construction, that one is highly engineer-based. They too are paying for the parts upfront. That's more of a consigned basic type relationship. That one is actually being built in downstairs in Spokane until it can launch into full production, and we'll move it into Arkansas.

Last one is this defense technology. We've been chasing this one for quite some time, and this too is a consigned material whereby they are seeking a contract manufacturer that can do ITAR-specific military grade spec, and that's a great win for us in Minnesota. That's kind of just a quick snapshot of our sales funnel. And we're battling through making sure that we use capital in a very strategic sense. We are finding success in still adding on additional backlog and new programs by asking for some support from those customers on the front end.

William Dezellem

Great. Thank you for that level of detail. I really appreciate it. And kind of taking this a step further, historically, you all have been cautious that movement in backlog is not particularly something that the Street should be looking at. But your backlog was up, I think you pointed out 76% versus a year ago, 20% versus the June quarter, so just in three months. And in addition to that, you know that we keep track of the trailing four quarters of the new wins announced. And if you go back to March, you'd had $88 million of new wins over the prior four quarters. And now with the $60 million quarter, we're up to closer to $150 million. So is this all now something that we should be considering to be meaningful? And if so, how do we look at this meaningfulness in light of the financing challenges?

Brett Larsen

So I think, Bill, we've always cautioned looking at that just because there's timing differences of when you receive a customer's PO. But that much of an increase of backlog is entirely indicative of incredibly strong demand. And I think you've also mentioned that we are also accelerating on new program wins. So while we caution you to use backlog as a real measurable instrument as to the health of Key Tronic, I think that much of a change in backlog, you have to take a look at and really say, there is incredible pent-up demand for production. And coupled with the recent wins, but then also the missed revenue that we had last quarter, our customers still need that. And of course, we're trying to now move that into this quarter.

So all of those things combined, I think, really share kind of where we're at is incredibly capital that is truly the filter, there's plenty of demand. We have got to solve some of the capital side and then really take advantage of this burgeoning demand from existing and new customer wins.

Anthony Voorhees

And I'd just add to that, Bill, this is Tony. That backlog is generally comprised of purchase orders and forecast. But what we're seeing now is that we're seeing much more in purchase orders from our customers is making a larger portion of that backlog. So that's why we feel a little more comfortable in that number and the direction it's heading. It's more meaningful to us. Part of the tightening --

Brett Larsen

Just real quick, Bill, part of the tightening of the supply chain has forced us and our customers to make longer-term commitments. So we're getting more months, more days worth of actual purchase orders to go out and drive that very specific component. So that as well, as Tony mentioned, is a larger percentage of that backlog now consists of hard purchase orders.

William Dezellem

So one additional question, and I'll go requeue up is kind of to that point of purchase orders being made earlier versus just a brute force increase in demand. How much of the backlog increase do you think has come from purchase orders simply being placed sooner versus what proportion is truly just a meaningful increase in demand?

Brett Larsen

I would say it's more meaningful of a true increase in demand. I think the backlog is stronger in its qualitative value because of the peak because of the -- more of that is consists of POs. Whereas quantitatively, our customers have always given us a 6- to 12-month forecast. It's just we weren't really clear to how much of that would convert into orders. So qualitatively, I think it even improves the look at the backlog because we've got actual orders rather than just a forecast.

Operator

[Operator Instructions] And our next question will come from Sheldon Grodsky with Grodsky Associates.

Sheldon Grodsky

Are you at your absolute credit limit with your banks at this point?

Brett Larsen

We are not at our credit limit currently. We disclosed that in our earnings release and in our Q. We have $115 million line of credit, and we are borrowed to about 85 of that. So there is room on the line of credit. It's just an asset-based facility. So depending upon AR and inventory primarily kind of tells us where we can be borrowed to. Does that answer your question, Sheldon?

Sheldon Grodsky

Well, I'm not sure if it answers the question. If you have the extra availability, why can't you use it? Is it in the wrong place? Or I'm not sure I fully understand why you're so capital constrained if you have availability.

Brett Larsen

Yes. Sheldon, just to clarify, so we have increased capacity on our line of credit. But of course, that is -- it's all based off of assets and the asset-based lending under the existing group. So while there is additional capital available, it's only if we can increase our inventory or our receivables. So on a week-by-week basis, we're using predominantly 90% of our lending availability. But what Tony is mentioning, as we grow in revenue, we're able to take advantage of that through additional capacity. So week-to-week availability, we're using pretty much as much as we can use comfortably, but there is more capacity as we're able to bring on some more revenue. Does that help, Sheldon?

Sheldon Grodsky

It may help. I'm just looking at the numbers over the last several quarters, and it's not pretty reading. Are you exploring any other kind of credit agreement with banks to give you more breathing room? Or you just think you're going to be stuck in this suffocating capital shortage situation for a while?

Brett Larsen

No, we are aggressively pursuing other capital. One of those, as we mentioned on the last call, is seeking some lending from our international assets. So in Mexico and Vietnam, we are seeking some additional financing. And we've already seen some success in Vietnam and pursuing some additional lending on assets down in Mexico. So we truly anticipate in the coming quarter or quarters that there'll be some additional financing availability from other sources.

Operator

And the next question comes from Bill Dezellem with Tieton.

William Dezellem

Great. Actually, I'll follow up on that last question. Would you please walk us through the path to revenue growth and positive earnings in light of what you're looking at for additional capital and how that road map looks?

Brett Larsen

Yes. Just in broad brush that Key Tronic has plenty of capacity. I look at each of one of our facilities, kind of a unique -- we're only using 50% or 60% of our actual manufacturing capacity. And when I mentioned that, that really is production equipment and then also footprint. We've got ample opportunity to take advantage of these -- of new demand and increased existing demand from existing customers. It all is capital constrained right now. And at the moment, we're able to open up some additional capital, the contribution margin associated with additional revenue dollars is quite substantial.

So part of what we're trying to do and part of the earnings release mentioned that we're doing some cost reductions, so we actually ended up taking some headcount as well out of our cost set in order to fully balance, okay, it's always a balancing act of how much truly revenue are we going to be able to generate in a quarter and then balance that with your headcount and your manufacturing overhead. This past quarter, we missed. So we're taking a more conservative look at this quarter and saying, let's go ahead and reduce our headcount and overall cost structure while we're also trying to grow in these new capital opportunities, let's make sure that we are in balance with what we're actually building today and then possibly bring in some more direct labor at the point in time we get new capital. That's a long-winded way to say that we really have a volume issue. That's really what's driving horrible results is that we're so far underutilized of the actual production capacity that we have able to use.

William Dezellem

And relative to that streamlining of the U.S. workforce, you may have just answered this question, but I'm going to try to come at it from a slightly different angle. With the backlog up as much as it is, it almost seems in conflict that you would be reducing the U.S. workforce, unless, of course, all that business was headed to Vietnam or Mexico or elsewhere. Would you just kind of talk through the metrics and the thought process that you all are working through to solve that riddle of backlog growth versus employment levels in the U.S. specifically?

Brett Larsen

Yes. Again, it's a delicate balance. At the point in time, we're not generating cash. The very worst thing is to have somebody sit idle. So we're balancing how much do we expect in actual revenue in this quarter based off of some incremental capital gains based off of being able to get the parts timely. And hey, we missed the boat this last quarter. We had too much in manufacturing overhead and even direct labor for the amount of product that we were able to build. That's probably the most delicate and most difficult thing to be able to pinpoint on a quarter-by-quarter basis is to make sure that your labor costs line up with the actual production you're able to achieve. Because we missed $18 million of revenue, we've got to align our cost set for what we expect in this quarter, but then grow that over time as we're solving the capital constraint.

William Dezellem

That is helpful. And when will those cuts be complete? And the spirit of that question is that an $8 million cost improvement is something in the neighborhood of $0.70 to $0.75. And so just trying to understand when that -- $0.70, $0.75 annually. And so when that will be fully felt? Is that fully felt here in this quarter? Or is it some future quarter?

Brett Larsen

It's not fully baked in yet, Bill. I would say about 70% of it is baked in here just a few weeks ago. And we will build in the remaining amount here over periods five and six. So by January, all $8 million of that cost will be out of current labor.

Operator

[Operator Instructions] The next question comes from Sheldon Grodsky with Grodsky Associates.

Sheldon Grodsky

I am going to pass on that question.

Operator

And that does conclude the question-and-answer session. I'll now turn the conference back over to the speakers.

Brett Larsen

As always, Tony and I appreciate participating in earnings calls. We thank you for your participation today, and we look forward to speaking to you again in next quarter. Thank you.

Operator

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