Keytronic (KTCC) 2026 財年第四季財報電話會議：流動性限制出貨之際營收回升

重點摘要

• Keytronic 公布 2026 財年第四季營收為 1.02 億美元，季增 14%（上一季為 8,960 萬美元），主因舊有與新專案的需求同步改善。越南廠區的生產營收更實現倍數以上的季成長。
• 供應鏈融資與流動性限制導致約 1,000 萬美元的出貨延遲。管理層表示該筆營收並未消失，但也警告流動性緊張持續限制公司滿足客戶需求的能力。
• 第四季毛利率從去年同期的 6.2% 提升至 7.8%，調整後毛利率則達到 8.3%，反映出降低成本與提升營運效率措施的成效。
• 公司在第四季獲得超過 6,000 萬美元的新專案訂單，其中包括墨西哥廠區年價值 4,000 萬至 4,500 萬美元的資料中心專案、500 萬至 1,000 萬美元的營建專案，以及 1,500 萬美元的工業電源管理專案。
• 第四季淨虧損擴大至 3,430 萬美元，或每股虧損 3.16 美元，主要反映 2,840 萬美元的非現金遞延所得稅備抵評價，以及對財務困難客戶的 840 萬美元長期應收帳款沖銷。
• 管理層預計未來幾個季度的營收將有所成長，並期望在 2027 財年恢復獲利，但由於新產品量產時程不確定以及總體經濟環境變數，公司未提供 2027 財年第一季的業績展望。

核心財務數據

業務與營運表現

越南是帶動營收季成長復甦的主要功臣。在醫療器材與消費性專案的推動下，來自該國的營收較前一季翻倍以上。Keytronic 在 2026 財年將越南的製造據點擴大了一倍，並預計該地在其生產網路中將扮演日益重要的角色。

公司已完成中國製造業務的逐步關閉，並將專案移轉至越南。管理層預計此舉將在 2027 財年節省約 400 萬美元。Keytronic 將在中國保留採購組織，以進行在地採購並取得關鍵零件。

在墨西哥，員工人數在過去 27 個月中減少了約 40%。公司還精簡了生產流程、提升自動化程度，並保留華雷斯城園區作為《美墨加協定》(USMCA) 架構下的關稅減緩方案。管理層提到，該據點的客戶造訪、認證審查與報價活動均有所增加。

第四季約有半數的製造活動來自美國與越南。這兩個地區皆有可用產能。Keytronic 還預期，隨著專案進入量產階段，其位於阿肯色州的技術與研究中心將在 2027 財年實現雙位數的營收成長。

管理層展望

管理層預計，在舊有客戶以及於美國、墨西哥與越南推出的新專案帶動下，未來幾個季度營收將實現成長。此外，隨著產量提升、成本降低發揮效益以及固定成本攤提改善，公司預期 Keytronic 將在 2027 財年恢復獲利。

年價值 4,000 萬至 4,500 萬美元的資料中心專案預計將從 2027 財年第二季開始貢獻顯著營收。營建專案可能會在 2027 財年上半年貢獻數百萬美元，而 1,500 萬美元的電源管理專案則預計在 2027 財年第三季或第四季初全面達到產能高峰。

Keytronic 未提供 2027 財年第一季的業績展望，理由是新產品量產時程的不確定性以及持續存在的總體經濟不確定性。

風險與關注事項

• 供應商信用條件趨嚴以及融資墊款率降低正在限制營運資金。部分亞洲供應商目前要求預付貨款，其他付款期限也已縮短。
• 流動性限制導致第四季約 1,000 萬美元的出貨延遲，儘管客戶需求更為強勁，但仍可能繼續限制生產能力。
• 公司正在評估由客戶提供營運資金、客戶資助模具與生產設備、寄售模式，以及以海外資產為擔保的融資專案。
• 全球經濟不確定性、動盪的貿易政策、關稅以及地緣政治緊張局勢，可能會推遲產品上市或影響採購決策。
• 在密西西比廠區生產的一項客戶專案需求已有所放緩，儘管管理層表示該專案早期的供應鏈與量產瓶頸已經解決。
• Keytronic 在完成與退出中國相關的管理與營運要求時，可能會產生額外成本。

分析師問答亮點

管理層表示，在成本降低、客戶造訪與認證活動增加，以及從競業 EMS 廠商手中搶下市占率的支撐下，銷售管道較去年同期顯著改善。

第四季最大的獲獎專案是與現有資料中心客戶的合作擴展。Keytronic 預計該專案將在墨西哥增加每年 4,000 萬至 4,500 萬美元的產值，這既反映了終端市場需求的成長，也反映了在客戶多重供貨來源中獲得更高的份額。

為了在不承擔全部前期資本需求的前提下支援成長，Keytronic 正就客戶提供營運資金或資助模具與生產設備的架構進行談判。管理層表示，其在密西西比州現有的寄售專案證明了這種模式是切實可行的，儘管並非適用於所有客戶。

管理層澄清，延遲出貨主要涉及等待零件的產品。前提是公司獲得足夠的流動性來採購零件並完成生產，預計相關營收將遞延至未來幾個季度而非消失。

法說會完整逐字稿

完整財報電話會議逐字稿

管理層陳述

Operator

You're holding for today's conference. We are still many additional participants and the call should begin shortly. Thank you for your patience and please continue to stand by. Please stand by. Good day and welcome to the Keytronic FY2026 Q4 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.

Anthony Voorhees

Good afternoon, everyone. I am Tony Voorhees, Chief Financial Officer of Keytronic. I'd like to thank everyone for joining us today for our investor conference call. Joining me here at our Spokane, Washington headquarters is Brett Larson, 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 a link can be found on our Investor Relations website. In addition, the slides together with a recorded version of this call will be available in 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 reconciliation to the most directly comparable GAAP measures are provided in today's press release, which is posted in the investor relations section of our website.

For the fourth quarter of fiscal year 2026, we reported total revenue of $102 million, compared to $89.6 million in the prior quarter and $110.5 million in the same period of fiscal 2025. THE 14% SEQUENTIAL INCREASE IN REVENUE IN THE FOURTH QUARTER OF FISCAL YEAR 2026 WAS DRIVEN BY STRONG DEMAND FROM BOTH LEGACY AND NEW PROGRAMS. NOTABLY, REVENUE FROM OUR VIETNAM-BASED PRODUCTION MORE THAN DOUBLED SEQUENTIALLY, DRIVEN BY MEDALS DEVICE AND consumer products programs. While customer demand rebounded significantly in the fourth quarter of fiscal year 2026, our production was constrained by tightening credit availability and liquidity pressures across the global supply chain. These constraints have affected the entire electronics manufacturing services industry as suppliers, customers, and manufacturers navigate ongoing macroeconomic uncertainty. While not immune to these challenges, our operational discipline, strength in manufacturing footprint, and longstanding customer relationships have positioned us ahead of our competitors. As a result, we continue to win new business and gain market share in several target markets, exhibited by over $60 million in new program awards in the fourth quarter of fiscal 2026.

Supply chain financing constraints forced us to delay approximately 10 million of shipments during the quarter, but underlying customer demand remains strong. are actively working with our customers and suppliers while evaluating additional sources of capital to propel growth and alleviate these constraints in future periods. For the full fiscal 2026, our total revenue was $386.7 million compared to $467.9 million in fiscal 2025. largely reflecting during the first three quarters of the year, reduced demand from certain legacy and end-of-life programs, as well as uncertain global economic conditions. Moving into fiscal 2027, we are experiencing increased activity from both legacy customers and new program wins, along with a stronger new sales funnel activity, leading us to expect revenue growth in coming quarters of fiscal 2027. Gross margin was 7.8% in the fourth quarter of fiscal 2026, up from 6.2% in the same period of fiscal 2025. Adjusted gross margin was 8.3% for the fourth quarter of fiscal year 2026, up from 6.2% in the same period of fiscal year 2025. Our gross margin improvements in the fourth quarter of fiscal 2026, despite the aforementioned challenges, demonstrated the operating efficiencies gained from our cost-cutting initiatives over the past two years. These margin gains highlight our resilience, commitment, and success. success in improving operating efficiency.

Operating margin was negative 3.6% in the fourth quarter of fiscal 2026, down from negative 2.1% in the same period of fiscal 2025. The operating margin for the fourth quarter of fiscal 2026 was adversely impacted by an $8.4 million write-off of long-term receivables for distressed customers, along with the related legal costs incurred in pursuing recovery, partially offset by benefit from a $5.3 $3 million insurance recovery related to a roof replacement in our Mississippi-based facility. In line with our long-term strategic plan, we continue to prepare for anticipated long-term growth by executing our nearshoring and tariff mitigation strategies to reduce costs while maintaining the diversity and flexibility of our key locations and capabilities. During the quarter, we completed our wind down of our manufacturing operations in China, shifting more production to our expanding facilities in the US and Vietnam. The China wind down is expected to save approximately $4 million in fiscal 2027. As top line growth returns, we anticipate margins to be strengthened by the improvements in our operating efficiencies and the positive impact of our strategic cost savings initiatives. We also believe the recent cost savings initiatives have made us more competitive when quoting new programs 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 $34.3 million, or $3.16 per share, for the fourth quarter of fiscal 2026, compared to a net loss of $3.9 million, or $0.36 per share, for the same period of fiscal 2025. During the fourth quarter of fiscal 2026, we recorded a $28.4 million non-cash charge to establish a valuation allowance against certain deferred tax assets. The accounting adjustment was driven primarily by the cumulative loss of U.S. taxable income over the last four years. While management remains confident in our expected return to profitability and the future expected utilization of certain tax benefits, the valuation allowance was based on the relative weighting of historical results. The adjustment has no impact on cash flows, debt covenant compliance, or our underlying operating performance. Additionally, as discussed earlier, approximately $8.4 million of distressed customer-related long-term receivables were written off. in connection with customers that are no longer contributing program revenues.

The reduction in revenue during fiscal 2026 also had a significant impact on our bottom line. For the full year, 2026, our net loss was $47.8 million or $4.41 per share compared to a net loss of $8.3 million or $0.77 per share for fiscal 2025. Our adjusted net loss for 2026 was $2.9 million or $0.26 per diluted share, compared to an adjusted net loss of $3.8 million or $0.35 per diluted share for the same period of fiscal 2025. For the full fiscal year, 2026, our adjusted net loss was $3.7 million, or $0.34 per diluted share, compared to adjusted net loss of $5 million, or $0.47 per diluted share, for fiscal 2025. Our focus on operating discipline continues to support a strong balance sheet. Our inventory at the end of fiscal 2026 is down 1.5 million, or 2% from a year ago. Our current ratio was 2.1 to 1 compared to 2.6 to 1 a year ago.

At the same time, our accounts receivable DSOs were at 75 days compared to 86 days a year ago, reflecting stronger collection on receivables. Capital expenditures in the fourth quarter of fiscal 2026 were $2.7 million, and total capital expenditures for the full year were approximately $6.4 million. reflecting our investments in new innovative production equipment and automation. 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, utilize leasing facilities, and make efficiency improvements to prepare for growth and added capacity. As we move into fiscal 2027, we expect global economic uncertainty and volatile trade policies. Nevertheless, we are increasingly encouraged by the demand trends we're seeing as we enter the first quarter. We believe our customers are adjusting to the volatility as the new normal. Activity with several long-standing customers is improving, new programs are ramping, and our expanded U.S. and Vietnam capacity is generating increased customer interest.

Our improved operating efficiency makes us more competitive, resulting in a stronger pipeline of potential new business, and we remain focused on further improving our profitability. Our production backlog has grown, and we believe that we are increasingly well-positioned to win new programs and profitably expand our business. Due to uncertainty of timing of new product ramps in light of continued macroeconomic uncertainty, we are not providing forward-looking guidance for the first quarter of fiscal 2027.

Brett Larsen

me Brett thanks Tony over the past year we have taken decisive actions to strengthen keytronics competitive position and create a more efficient global manufacturing footprint we successfully exited manufacturing operations in China right-sized our Mexico facility and expanded production capacity in both the United States and Vietnam These initiatives have improved our cost structure, enhanced supply chain flexibility, and enabled us to provide customers with attractive manufacturing options. ongoing macroeconomic and geopolitical uncertainties. Our improved operating efficiency has made us more competitive and we expect our revenue to gradually begin to rebound and see a return to profitability in fiscal year 2027. As part of the long-term strategy to improve competitiveness and better align our manufacturing footprint with evolving customer needs, we completed the wind-down of our China manufacturing operations and successfully transferred production programs to Vietnam. This action reflects both the increasing cost pressure associated with China-based manufacturing and the ongoing geopolitical and tariff uncertainties affecting global supply chains. We expect these initiatives to generate approximately $4 million in annualized savings during fiscal 2027. Importantly, we will maintain a focused sourcing organization still within China to support local procurement activities and ensure access to critical components. We've also undertaken a significant transformation of our Mexico operations.

Over the past 27 months, we have reduced head count by approximately 40%. 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 current USMCA framework. The benefit 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. In particular, our Mexico operations have recently experienced a notable increase in customer visit 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 strength in financial position and more competitive manufacturing footprint are enabling us to capture market share. compete for a broader range of programs. We are encouraged by the progress we have made in expanding our manufacturing capabilities in both the United States and Vietnam.

These investments are a direct response to evolving customer requirements and position Keytronic to capitalize on long-term industry trends towards supply chain diversification, risk mitigation and operational resilience. As many of you, as many of you will recall, we've opened our new technology and research and development center in Arkansas during the first quarter of fiscal 2026. This investment strengthens our ability to provide customers with enhanced engineering support, faster collaboration, increased manufacturing flexibility through a US-based solution. Customer interest in our Arkansas operations continue to grow, and we expect the facility to deliver double-digit revenue growth during fiscal 2027 as new programs ramp and existing customers 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 emerged as an increasingly important part of our global manufacturing strategy. providing customers with a highly competitive combination of quality costs and a regional supply chain. As Tony mentioned, revenues from our Vietnam operations have more than doubled sequentially during the fourth quarter. primarily by strong demand and medical device and consumer focused programs.

We believe Vietnam will be a major contributor to our future growth and an increasingly important differentiator in the marketplace. During the fourth quarter of fiscal 2026, approximately half of our manufacturing activity was generated from our U.S. and Vietnam facilities. both of which have substantial available capacity to support future customer wins. These investments have created a more balanced and resilient manufacturing network that provides customers with attractive alternatives as they assess and then reassess global sourcing strategies. In an environment where geopolitical tension, tariff uncertainty, and supply chain risk continue to influence decision makers, we believe Keytronic is exceptionally well positioned to benefit from customers seeking to near shore production, diversify manufacturing locations, and reduce overall supply chain risk. Most importantly, these investments are already translating into increased customer engagement, expanding quoting activity, and new program opportunities. Combined with the significant cost reduction and efficiency initiatives implemented across our global operations, we believe our enhanced manufacturing footprint is enabling us to gain market share and compete more effectively for larger and more strategic programs. We remain confident that these actions have established a strong foundation for sustainable growth and improved profitability in the years ahead.

During fiscal 2026, we won new programs in medical devices, industrial equipment, automotive, pest control, construction, data centers, and power management. Our improved operating efficiency has also made us more competitive, increasing our sales pipeline, particularly in such steady growth sectors. as utilities and data center equipment. During the fourth quarter of fiscal 2026 alone, We secured more than $60 million in new program awards. These wins reflect increasing customer recognition of Keytronics' ability to deliver high-quality manufacturing solutions with a globally competitive cost structure. In an environment when liquidity and capital constraints are affecting much of the EMS industry, Customers are increasingly seeking financially stable, operationally disciplined partners capable of supporting long-term growth. Many of these new programs feature innovative partnership models that provide a more balanced approach to ramp up capital requirements. allowing customers to participate in the upfront investment while enabling Keytronic to accelerate growth and improve returns on invested capital. Our strong pipeline of potential new business also underscores the continued trend towards onshoring and a dual sourcing of contract manufacturing.

As we look beyond the significant transformative initiatives and the operational improvements implemented over the past few years, we believe Keytronic is emerging as a stronger, more competitive company with several distinct advantages that position us for well-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 these actions, we have taken to optimize operations in China and Mexico while expanding capacity in the U.S. 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 that OEMs will increase 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 begin long before production, with customers engaging our engineering teams to help develop, optimize, and prepare products for manufacturing. Once a person, our deep understanding of the product, manufacturing processes, and customer requirements creates a 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 these products we support, we continue to invest in expanding the capabilities of our engineering organization and expect our design service business to remain an important driver of future growth. Third, we continue to differentiate ourselves through the broad range of vertically integrated manufacturing capabilities. decades of process expertise. These capabilities span advanced 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 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 Keytronic from many of our customers. Most importantly, these competitive advantages are becoming increasingly meaningful in today's EMS market. While many providers continue to face liquidity constraints, limited capital availability, and operational challenges, Keytronic 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, managing manufacturing flexibility and global supply chain solutions, we believe we are well positioned to capture additional market share, secure new strategic programs, and drive profitable long-term growth for our shareholders. While the global market uncertainties have created some delays to new product launches for us, our suppliers, and our customers, we believe geopolitical 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. We're expecting revenue growth in the coming quarters from both legacy customers and new programs launching in the US, Mexico and Vietnam.

Significant improvements in our operating efficiencies are creating a stronger pipeline of potential new business. Over the long term, we remain encouraged by our cost reductions made over the past two years to become more market competitive. increasing cash flow generated from operations, enhanced global manufacturing footprint, and the innovations from our design engineering. All of these initiatives have increased our potential for profitable growth. In closing, I want to emphasize that this was a challenging year for our industry and for Keytronic. In these circumstances, the execution of our strategy was only made possible by our investments in plants and equipment. 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 transformational year. This concludes the formal portion of our presentation and Tony and I will now be pleased to answer your questions.

Operator

Thank you. If you would like to signal with questions, please press star 1 on your touchtone 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 is star one if you would like to signal with questions. And the first question comes from Matt Dean with Titan Capital Management.

分析師問答

Matthew Dhane

Great, thank you. I wanted to start out covering the 60 million on your business wins that you had in the fourth quarter here. It looks like it was among three different customers. Was curious, what is the size of the largest wind as well as the smallest wind or each of the three winds? And then what additional details can you tell us around those winds?.

Brett Larsen

Yes, I'd be happy to do that, Matt. The first one, the data center program, is with an existing customer. That's a substantial win for a Mexico location. That'll be 40 to $45 million per year increase in production in our Mexico facility. The next is a construction support product that came out of our design and engineering group now has reached commercialization and going into production. That'll be that'll actually start out of our Spokane office and migrate to our technology center in Arkansas in fiscal 2027. That's about a probably a five to 10. million opportunity.

Last is the industrial power management market. That too is a new customer for us. And that is scheduled to be built in Arkansas as well. And that's going to be about a $15 million program when fully ramped.

Matthew Dhane

Great. I should have also asked timing of these wins. When do you expect each of the three to contribute real revenues? If you could cover that too, that'd be helpful, Chris.

Brett Larsen

substantial revenue in our in our second quarter of fiscal 2027. I think the construction will be a little bit of a slower burn. Probably have a couple of million dollars in the first six months of fiscal year 2027. And then the power management, I would say. will be fully ramped by our third, possibly the start of our fourth quarter of fiscal 2027.

Matthew Dhane

Okay, that's great. I appreciate that additional help there. You also referenced a strong pipeline of opportunities. Unlike Mexico, you're seeing a lot of activities there. I was just hoping you could add a little bit more color there and sort of reference how the pipeline is today compared to how it was maybe a year ago. ago just try to i guess give a give us a better sense of how much of a step up you are seeing.

Brett Larsen

Yes, we mentioned repeatedly within the script is that we're really seeing. increasing sales opportunities. And it's a mix of new programs, like for example, this construction equipment that is, that it's a new market entrance, We're actually seeing a lot as well of changes within the EMS to where we're gaining some market share on some of our competition. We're seeing that that sales funnel, I would say is improved drastically from where we were a year ago. We set out to really become far more market competitive in our costing structure. and really have seen success from that. And so far, it's resulting in far more customer visits, qualifications, and now...

Matthew Dhane

a ramp in actual program wins. OK, I appreciate that. One other thing I did want to cover before I turn the floor over, you referenced both in your script as well as in the press release that you have an innovative partnership model that you're starting to introduce and sounds like a number of customers are signing on to. I was hoping to get a little bit more color on that. It sounds like there's some capital contributions.

Brett Larsen

for customers and or just yes what what exactly can you add some more details around that what you're doing and and why it's it's gaining the traction it is you bet matt i think you know you look at you look at where we're at is i think there is a tightening in the capital structure we are seeing some tightening within the supply chain Some of our commercial terms have tightened. I would also say that some of the advance rates that we're seeing even from our lending partners have also tightened a bit. With that, coupled with wanting to grow the business, We really are liquidity constrained. So we are actually working with our customers many of who have ample capital Then it's just a negotiation with them of whether, you know, the discount that we can provide is accretive to their cost of capital. And can we collectively come to a better arrangement whereby they may front end some working capital, maybe they help provide some of the tooling of production equipment on the front end of a ramp, which is often, particularly for contract manufacturing, very front end loaded. We mentioned about, what was it, Tony, about 18 months ago, this new consigned model down in Mississippi. That has fared well. We are looking at quoting some potential other consigned opportunities, but also working with some of our longstanding customers of, hey, if we collectively share some of the working capital constraints and work through those together, is there a better solution that we can work collectively than forcing us as the contract manufacturer to basically front-end load that capital until that program can run?.

Matthew Dhane

Okay. I appreciate that help and that insight. Yes, no, all the best, guys. Appreciate the help.

Operator

Thanks, Matt. And our next question will come from Sheldon Grodzki with Grodzki Associates.

Sheldon Grodsky

Good afternoon, gentlemen. I for one am a bit disappointed here. paragraph you guys mentioned that you're actively working with your customers while evaluating additional sources of capital to support growth. I don't know if you've already touched upon that in your last answer, but what additional sources of capital are you looking at?.

Brett Larsen

Yes, we did to some degree the former question. We asked on how we're working with our customers to help provide some of that capital. You know, is capital really cash? You know, what is, what's some addition of liquidity that we can put into the company as we expect double-digit growth into fiscal 2027? You know, we're actively, as mentioned, working with our customers to help share that capital load. We're also working with various financing activities. You know, is there some additional unencumbered assets that we can use as collateral? for debt structure and those types of things. As we look at the future, that really is a constraint of ours is being able to procure parts on time in a increasingly difficult situation.

Sheldon Grodsky

supply chain. What do you have that is unencumbered at this point?.

Anthony Voorhees

All of our foreign assets. All the foreign assets? So anything domestically? Most of our domestic would be tied up, I think, in our current lending group. Tony, is there anything in the U.S.? I'm unclear. Yes, there's not much in the U.S., but there is ample opportunity to receive some type of benefit from those foreign assets. So we're looking at opportunities there.

Operator

there as well. Thank you. And as a reminder, if you would like to signal with questions, please press star 1. Again, star 1 if you would like to signal with questions. The next question comes from George Melis with MKH Management.

George Melas

Thank you. Hi, Brett. Hi, Tony. Hey, George. Just to say thank you. Tony, I just want to make sure I get my adjusted numbers correct. I see your adjusted EBIT if I adjust it for the AR write-off, the insurance recovery and the restructuring was roughly flat, break even. Is that roughly right?.

Anthony Voorhees

Our adjusted, yes, it's pretty close. Our adjusted figures, not just EBITDA, we're looking at our adjusted gross margin and our adjusted net income was about a $2.7 million loss. Okay, okay. So I think adding in some of those EBITDA figures, you could get there pretty quickly.

George Melas

Okay, I'll do that. Brett, what does that mean, the supply chain financing constraint that you encountered? I don't, can you provide a little bit of color on that?.

Brett Larsen

Yes, no, that's a good question, George. You know, what we're seeing in the market is that suppliers are cracking down on the number of days that they'll extend to us in payables. Um, you know, I, we're, we're, we're seeing that, um, There's far less flexibility within the market. And on an incredibly capital-intensive market, industry, any tweak of that dial has considerable pressure on us to make sure that we can look out and get the parts that we need on time in order to fulfill increased customer demand. You know, if you look at our DPOs, they definitely have dropped year over year. Some of our custom parts that we get in Asia, we used to get terms on. now being forced to pay in advance to even some of our domestic supply where there's some capital constraint. And they're requiring that we adhere to their credit terms.

And oftentimes, even those credit terms.

George Melas

are reducing from what they were historically. OK, great. I understand now. And that $10 million in delayed shipment, is that products that you have almost finished and you're missing some parts and you can't ship them?.

Brett Larsen

Is that sort of capture that? It is, it is. You know, it's not lost revenue. It shifts into a future quarter, but I would also say in this quarter, we have more customer demand than what we're going going to be able to execute to based on based on liquidity constraints. Hence now we are looking to be a little more creative and possibly capital sharing with a few of our strategic customers in order to continue on the path that we expect of incremental sales growth quarter over quarter.

George Melas

Okay. So they may be talking about that, talking about your Mississippi customer who, as you said several times and again on this call, is on a different model, more consignment model. I think there were some delays in production or in ramp. Has some of those delays been or constraints been lifted? And how is that going? It's hard for you to talk about one particular customer, but maybe give us a bit of a sense.

Brett Larsen

Yes, for that particular Mississippi customer, I would say that it's now, it's no longer supply chain delays, it's no longer ramp. It's now the actual market demand is down a bit for that particular customer. We'll see what happens in coming quarters, but. You know it's it's it. recent months, the demand for that product we build on their behalf just out in the market has seen some softening. Okay. But through that, George, I think we have learned that we can be successful as well on a consigned type program. It was new for us. It was a bit of a test in the water for something that large. And actually became a a a great program for our facility down in Mississippi that had the excess capacity.

So we will likely pursue other opportunities as they come. You know, it's not a solution for all potential customers. They need to have a robust supply chain capability within their own organization. and that doesn't exist for every customer, but there's some opportunity there.

George Melas

Okay, great. With the restructuring and the changes that you've done in the last year or two, are you going after, are you signing customers? QUALITATEDLY DIFFERENT. I MEAN, IS THE WORK THAT YOU HAVE HISTORICALLY BEEN VERY, VERY STRONG IN BEING ABLE TO DESIGN AND THEN PRODUCE, ADDING A LOT OF VALUE AT THE END OF the get-go on the design stuff are you still very much focused on those kind of customers or are you able to have a broader range of targets right now.

Brett Larsen

George, I would say more broader range. You know, I think our design and engineering services group still is a differentiator for us. And we'll continue to do that. And a couple of our largest customers were developed from that type of a relationship. We're not just focused on that. There's other existing product strategies streams that we're seeing that we're actually taking from competitors. We're growing in some market share of existing programs.

You know, and with a more robust sales funnel, you also turn the filter a little tighter of what actually ends up being you know you know, being what we accept. So I also think that qualitatively, we can be a little more, you know, cautious on making sure that that's a good customer for us on the longer term.

George Melas

Okay. And the data center customer that you referenced in relationship to the first question, was that a win from another EMS provider?.

Brett Larsen

I would say that's both that they're seeing increased demand, but I also know that they have multiple sources and that we're seeing an increase in the market share of even that business we have with them.

Unknown Speaker

Okay. And then just maybe one final question for me. You talk about a $4 million saving as you exit China manufacturing. Is that versus a fiscal 26 number, or is that versus a run rate for the June quarter?.

Brett Larsen

I would say that's representative of the run rate for the first three quarters of fiscal 26. The ramp down of China started The, you know, the latter part of Q3 first part of Q4, it took us a quarter to close.

Unknown Speaker

Okay. And so were there any China related costs in China manufacturing related costs.

Anthony Voorhees

in the June quarter other than restructuring? Very little, Tony. Yes, there was a little bit, George. And that is provided in that non-GAAP table. We excluded those. And we expect, again, probably a few more just as we finalize everything in China. You know, getting out of China can be challenging. There's a lot of red tape to get out of there with regards to getting the materials gone, the equipment, putting the facilities in, back in order and and we saw the little bit of work to do there so there might be a few additional costs in future quarter and I would George I would say total revenue for.

Brett Larsen

China production in Q4 was minimal. It might have been a million or two of just wrapping up the final program.

Anthony Voorhees

Yes, that's correct. We were actually done manufacturing in China in period 11.

Unknown Speaker

Yes. In when? When did you say that, Tony? That was May, May of this year. May, okay.

Unknown Speaker

Okay, great. Okay, thanks very much for taking my questions.

Operator

And the next question comes from Ben Castle. actually that car no longer has a question it looks like and.

Brett Larsen

We do not have any further questions. I'll go ahead and hand the call back over to you. Great. Thank you again for participating in today's conference call.

Operator

Tony and I look forward to speaking to you again next quarter. Thank you. Thank you. And that does conclude the question and answer session. That does conclude today's conference. We do thank you for your participation and have an excellent day.

This live transcript is auto-generated without human intervention or review.

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