Financial Analysis

COMMITMENTS AND CONTINGENCIES Litigation and Other Matters The Company is party to certain lawsuits or claims in the ordinary course of business. The Company does not believe that these proceedings, individually or in the aggregate, will have a material adverse effect on the financial position, results of operations or cash flow of the Company. Warranties The Company provides warranties on certain product sales. Allowances for estimated warranty costs are recorded during the period of sale. The determination of such allowances requires the Company to make estimates of product return rates and expected costs to repair or to replace the products under warranty. If actual return rates and/or repair and replacement costs differ significantly from management's estimates, adjustments to recognize additional cost of sales may be required in future periods. As of June 28, 2025 and June 29, 2024, the reserve for warranty costs was approximately $26,000 and $164,000 respectively. Leases Please refer to Footnote Leases of the Notes to Consolidated Financial Statements for information regarding lease commitments. Internal Investigation During fiscal year 2021, the Companys Audit Committee completed an internal investigation arising from a notification from an employee regarding certain alleged accounting irregularities. In January 2021, the Company determined that improper accounting resulted in an understatement of cost of goods sold and an overstatement of inventories. Subsequent to th …

CommitmentsAndContingenciesDisclosureTextBlock · excerpt; the full note is in the filing

The following table presents the Companys revenue disaggregated for the twelve months ended June 28, 2025, the twelve months ended June 29, 2024, (in thousands): Revenue Recognition June 28, 2025 June 29, 2024 Over-Time $ 443,294 $ 497,348 Point-in-Time 24,577 69,594 Total $ 467,871 $ 566,942 …

DisaggregationOfRevenueTableTextBlock · excerpt; the full note is in the filing

STOCK-BASED COMPENSATION AND BENEFIT PLANS The Companys 2024 Incentive Plan provides for equity and liability awards to employees and non-employee directors with service and performance vesting conditions in the form of stock options, stock appreciation rights (SARs), restricted stock, restricted stock units, stock awards, stock units, performance shares, performance units, and other stock-based or cash-based awards. The 2024 Incentive Plan replaced the previous 2010 Incentive Plan, which provided for similar awards, and expired on October 24, 2024. At June 28, 2025, 1,596,135 shares were available for grant from the 2024 Incentive Plan. New shares of common stock are issued upon the exercise of SARs or when vesting conditions on restricted stock units are fully satisfied. Compensation cost is recognized on a straight-line basis over the requisite employee service period, which is generally the vesting period, and is recorded as employee compensation expense in cost of goods sold, research, development and engineering, and selling, general and administrative expenses. Share-based compensation is recognized only for those awards that are expected to vest. For SARs awards forfeitures are estimated at the date of grant based on historical experience and future expectations. Due to a lack of historical experience and a different grant pool than SARs, forfeitures for restricted stock units are accounted for prospectively as they occur. Stock Appreciation Rights In addition to serv …

DisclosureOfCompensationRelatedCostsShareBasedPaymentsTextBlock · excerpt; the full note is in the filing

INCOME TAXES Income tax benefit consists of the following: Fiscal Year Ended June 28, 2025 June 29, 2024 (in thousands) Current income tax provision (benefit): United States $ 112 $ 263 Foreign 2,841 1,451 2,953 1,714 Deferred income tax provision (benefit): United States (5,546) (4,322) Foreign (1,050) 208 (6,596) (4,114) Total income tax benefit $ (3,643) $ (2,400) The Company has gross tax credit carryforwards of approximately $11.1 million at June 28, 2025 consisting of federal research and development (R&D) tax credits. Management has reviewed all deferred tax assets for purposes of determining whether a valuation allowance may be required. A valuation allowance against deferred tax assets is required if it is more likely than not that some of the deferred tax assets will not be realized. In spite of the Companys current cumulative loss position before nonrecurring items such as cyber losses and restructuring costs, based upon the Companys historical profitability and forecasted income, management determined that it is more likely than not that the deferred tax assets will be realized. The Companys largest deferred tax assets are federal research and development tax credits, deferred research and development expenses, and interest expense deduction carryforwards. Company forecasts show that the credits will be utilized within the expiration period. Deferred research and development expenses will be deductible in fiscal year 2026 under the One Big Beautiful Bill Act. …

IncomeTaxDisclosureTextBlock · excerpt; the full note is in the filing

LEASES The Company has several commitments under operating and financing leases for warehouses, manufacturing facilities, office buildings, and equipment with initial terms that expire at various dates during the next 1 year to 6 years. The Company has some leases that include an extension clause. Management has considered the likelihood of exercising each extension option included and estimated the duration of the extension option, for those leases management determined to be reasonably certain, in calculating the lease term for measurement of the right of use asset and liability. For operating leases, management assumed a discount rate of 4.07%. The weighted average discount rate is disclosed in the tables below. The components of lease cost were as follows as of June 28, 2025 and June 29, 2024 (in thousands): Year Ended Year Ended Lease cost Classification June 28, 2025 June 29, 2024 Operating lease cost Cost of sales $ 5,135 $ 4,814 Operating lease cost Selling, general and administrative expenses $ 732 $ 734 Financing lease cost Cost of sales $ 3,369 $ 4,865 Financing lease cost Selling, general and administrative expenses $ 171 $ 206 Total lease cost $ 9,407 $ 10,619 Fixed lease cost $ 6,335 $ 6,169 Short-term lease cost 3,072 4,450 Total lease cost $ 9,407 $ 10,619 Amounts reported in the Consolidated Balance Sheet as of June 28, 2025 and June 29, 2024 were (in thousands, except weighted average lease term and discount rate): June 28, 2025 June 29, 2024 Operating Lease …

LesseeOperatingLeasesTextBlock · excerpt; the full note is in the filing

"LONG-TERM DEBT Debt consists of the following: Maturity Date Interest Rate June 28, 2025 June 29, 2024 (in thousands) Asset-based senior secured revolving credit facility (1) December 3, 2029 7.4 % $ 67,900 $ 107,149 Domestic term loan - Callodine (2) December 3, 2029 11.5 % 26,500 Foreign line of credit (3) December 11, 2026 11.8 % 3,253 5,403 Domestic term loan - Balboa (4) September 19, 2030 6% to 8% 3,702 4,535 Foreign term loan - Banorte (5) April 24, 2026 5.5 % 1,000 2,200 Domestic term loan - Bank of America (6) August 14, 2025 4.9 % 1,277 Domestic term loan - Avtech 8 (7) October 31, 2028 13.6 % 278 Domestic term loan - Avtech 9 (8) June 30, 2028 11.7 % 4,996 Total debt 107,629 120,564 Less: current portion of debt (6,215) (3,123) Less: unamortized financing costs (2,478) (1,059) Long-term debt, net $ 98,936 $ 116,382 (1) On December 3, 2024, Key Tronic Corporation (the ""Company"") entered into an asset-based credit agreement (the ""Credit Agreement"") among the Company, certain domestic subsidiaries (as co-borrowers or guarantors), BMO Bank, N.A (the ""Bank""), as administrative agent and swing line lender, BMO Capital Markets as arranger and book runner, and certain financial institutions, as lenders. The Credit Agreement provides for an asset-based senior secured revolving credit facility (the ""Credit Facility"") of up to $115 million, maturing on December 3, 2029. Generally, under the Credit Agreement and at the Companys option: (i) each SOFR Loan shall bear in …

LongTermDebtTextBlock · excerpt; the full note is in the filing

Newly Adopted and Recent Accounting Pronouncements On November 4, 2024 the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2024-03, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures. The ASU requires entities to disclose in the notes to the financial statements specified information about certain costs and expenses. Subsequently, the FASB issued ASU 2025-01 which clarifies the effective date of ASU 2024-03 for public business entities. The ASU applies to the Companys annual reporting period beginning in fiscal year 2028 and interim reporting periods beginning in fiscal year 2029.The Company does not anticipate early adoption of the new disclosure standard. On December 14, 2023, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures. The ASU requires entities to disclose more detailed information relating to their reconciliation of statutory tax rate to effective tax rate, income taxes paid by jurisdiction, pretax income (or loss) from continuing operations, and income tax expense (or benefit). The ASU applies to the Companys annual reporting period beginning in fiscal year 2026. The Company does not anticipate early adoption of the new disclosure standards. In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures (ASU 2023-07), wh …

NewAccountingPronouncementsPolicyPolicyTextBlock · excerpt; the full note is in the filing

REVENUE Revenue Recognition The Company specializes in services ranging from product manufacturing to engineering and tooling services. The first step in its process for revenue recognition is to identify the contract with a customer. A contract is defined as an agreement between two or more parties that creates enforceable rights and obligations. A contract can be written, oral, or implied. The Company generally enters into manufacturing service agreements (MSA) with its customers that outlines the terms of the business relationship between the customer and the Company. This includes matters such as warranty, indemnification, transfer of title and risk of loss, liability for excess and obsolete inventory, pricing, payment terms, etc. The Company will also bid on a program-by-program basis for customers in which an executed MSA may not be in place. In these instances, as well as when we have an MSA in place, we receive customer purchase orders for specific quantities and timing of products. As a result, the Company considers its contract with a customer to be the combination of the MSA and the purchase order. The transaction price is fixed and set forth in each purchase order. In the Company's normal course of business, there are no variable pricing components, or material amounts refunded to customers in the form of refunds or rebates. The Company assesses whether control of the product or services promised under the contract is transferred to the customer at a point in time …

RevenueFromContractWithCustomerTextBlock · excerpt; the full note is in the filing

SEGMENT INFORMATION AND ENTERPRISE-WIDE DISCLOSURES Operating segments are defined in ASC Topic 280, Segment Reporting as components of an enterprise for which separate financial information is available that is evaluated regularly by the chief operating decision maker, or decision making group, in deciding how to allocate resources and in assessing performance. The Companys chief operating decision maker is its Chief Executive Officer. As of June 28, 2025, the Company operates and internally manages a single operating segment, Electronics Manufacturing Services, as this is the only discrete financial information that is regularly reviewed by the chief operating decision maker. This segment provides integrated electronic and mechanical engineering, assembly, sourcing and procurement, logistics, and new product testing for our customers. The chief operating decision maker assesses performance and determines resource allocation for the Companys single reportable segment based on consolidated net income/loss and total assets/liabilities. The accounting policies of the single reportable segment are the same as those described in the summary of significant accounting policies. Significant segment measures include gross profit which is primarily composed of materials spend and labor costs, which are further presented below. Products and Services Of the revenues for the years ended June 28, 2025, and June 29, 2024 contract manufacturing sales and services were $467.9 million and $56 …

SegmentReportingDisclosureTextBlock · excerpt; the full note is in the filing

SIGNIFICANT ACCOUNTING POLICIES Business Key Tronic Corporation and subsidiaries (the Company) is engaged in contract manufacturing for original equipment manufacturers (OEMs). The Companys headquarters are located in Spokane Valley, Washington with manufacturing operations in Oakdale, Minnesota; Fayetteville, Arkansas; Corinth, Mississippi; and foreign manufacturing operations in Juarez, Mexico; Shanghai, China; and Da Nang, Vietnam. Liquidity Historically, due to the timing between the procurement of raw materials, production cycle and payment from our customers, we have financed operations and met our capital expenditure requirements primarily through cash flows provided by operations and borrowings under our credit facilities. We generated operating income and net loss of $0.6 million and $(8.3) million respectively, during the 12-month period ended June 28, 2025 and have positive working capital of $142.2 million as of June 28, 2025. Due to the timing between the procurement of raw materials, production cycle and payment from our customers, we have relied on borrowings on our credit facilities to fund operations during fiscal year 2025. Based on current projections, we anticipate generating cash from operations as revenue increases in the first half of fiscal year 2026. As of June 28, 2025, we have $25.0 million of additional borrowing capacity on our credit facility, which matures on December 3, 2029. If we are unable to meet projected operating results or extend our bo …

SignificantAccountingPoliciesTextBlock · excerpt; the full note is in the filing

Commitments and Contingencies Litigation and Other Matters The Company is party to certain lawsuits or claims in the ordinary course of business. The Company does not believe that these proceedings, individually or in the aggregate, will have a material adverse effect on the financial position, results of operations or cash flow of the Company. Warranties The Company provides warranties on certain product sales. Allowances for estimated warranty costs are recorded during the period of sale. The determination of such allowances requires the Company to make estimates of product return rates and expected costs to repair or to replace the products under warranty. If actual return rates and/or repair and replacement costs differ significantly from managements estimates, adjustments to recognize additional cost of sales may be required in future periods. The Companys warranty reserve was approximately $25,300 as of December 27, 2025 and $26,000 as of June 28, 2025. …

CommitmentsAndContingenciesDisclosureTextBlock · excerpt; the full note is in the filing

The following table presents the Companys revenue disaggregated for the three and six months ended December 27, 2025 and December 28, 2024 (in thousands): Revenue Recognition Three Months Ended Six Months Ended December 27, 2025 December 28, 2024 December 27, 2025 December 28, 2024 Over-Time $ 91,303 $ 110,500 $ 186,387 $ 233,082 Point-in-Time 5,016 3,353 8,682 12,329 Total $ 96,319 $ 113,853 $ 195,069 $ 245,411 …

DisaggregationOfRevenueTableTextBlock · excerpt; the full note is in the filing

Stock-Based Compensation and Benefit Plans The Companys 2024 Incentive Plan provides for equity and liability awards to employees and non-employee directors with service and performance vesting conditions in the form of stock options, stock appreciation rights (SARs), restricted stock, restricted stock units, stock awards, stock units, performance shares, performance units, and other stock-based or cash-based awards. At December 27, 2025, 1,056,448 shares were available for grant. Compensation cost is recognized on a straight-line basis over the requisite employee service period, which is generally the vesting period, and is recorded as employee compensation expense in cost of goods sales, research, development and engineering, and selling, general and administrative expenses. Share-based compensation is recognized only for those awards that are expected to vest. For SARs awards, forfeitures are estimated at the date of grant based on historical experience and future expectations. Due to a lack of historical experience and a different grant pool than SARs, forfeitures for restricted stock units are accounted for prospectively as they occur. Stock Appreciation Rights In addition to service conditions, SARs contain a performance condition. The additional performance condition is based upon the achievement of Return on Invested Capital (ROIC) goals relative to a peer group. All awards with performance conditions are evaluated quarterly to determine the likelihood that performanc …

DisclosureOfCompensationRelatedCostsShareBasedPaymentsTextBlock · excerpt; the full note is in the filing

Income Taxes Currently, all unremitted foreign earnings are expected to remain permanently reinvested for planned fixed assets purchases and improvements in foreign locations. Repatriations of cash will generally be tax-free in the U.S. However, withholding taxes in China may still apply to any such future repatriations. Currently, management estimates no future repatriations of cash from China that would result in withholding tax. Withholding taxes would not apply to future repatriations from Mexico or Vietnam. The Company has available approximately $11.4 million of gross federal research and development tax credits as of December 27, 2025 expiring in various fiscal years from 2033 to 2046. ASC 740 requires the Company to recognize in its financial statements uncertainties in tax positions taken that may not be sustained upon examination by the taxing authorities. Accordingly, as of December 27, 2025, the Company has recorded $2.9 million of unrecognized tax benefits associated with these federal tax credits, resulting in a net deferred tax benefit of approximately $8.5 million. Management has reviewed all deferred tax assets for purposes of determining whether a valuation allowance may be required. A valuation allowance against deferred tax assets is required if it is more likely than not that some of the deferred tax assets will not be realized. In spite of the Companys current cumulative loss position before nonrecurring items such as cyber losses and restructuring costs …

IncomeTaxDisclosureTextBlock · excerpt; the full note is in the filing

Leases The Company has several commitments under operating and financing leases for warehouses, manufacturing facilities, office buildings, and equipment with initial terms that expire at various dates during the next 1 year to 10 years. The Company has some leases that include an extension clause. Management has considered the likelihood of exercising each extension option included and estimated the duration of the extension option, for those leases management determined to be reasonably certain, in calculating the lease term for measurement of the right of use asset and liability. For operating leases, discount rates assumed range from 4.0% to 9.5% . The weighted average discount rate is disclosed in the tables below. The components of lease cost for the three months and six months ended December 27, 2025 and December 28, 2024 were (in thousands): Three Months Ended Six Months Ended December 27, 2025 December 28, 2024 December 27, 2025 December 28, 2024 Lease cost Classification Operating lease cost Cost of sales $ 1,539 $ 1,261 $ 3,226 $ 2,600 Operating lease cost Selling, general and administrative expenses $ 183 $ 182 $ 366 $ 366 Financing lease cost Cost of sales $ 156 $ 866 $ 306 $ 2,172 Financing lease cost Selling, general and administrative expenses $ 16 $ 45 $ 23 $ 98 Total lease cost $ 1,894 $ 2,354 $ 3,921 $ 5,236 Fixed lease cost $ 1,489 $ 1,283 $ 3,082 $ 3,857 Short-term lease cost 405 1,071 $ 839 $ 1,379 Total lease cost $ 1,894 $ 2,354 $ 3,921 $ 5,236 Amounts …

LesseeOperatingLeasesTextBlock · excerpt; the full note is in the filing

"Long-Term Debt Maturity Date Interest Rate December 27, 2025 June 28, 2025 (in thousands) Asset-based senior secured revolving credit facility (1) December 3, 2029 7.0% $ 63,000 $ 67,900 Domestic term loan - Callodine (2) December 3, 2029 10.9% 25,000 26,500 Foreign line of credit (3) December 11, 2026 10.4% 1,115 3,253 Domestic term loan - Balboa (4) September 19, 2029 6% to 8% 3,264 3,702 Foreign term loan - Banorte (5) April 24, 2026 5.5% 400 1,000 Domestic term loan - Avtech 8 (6) December 16, 2028 13.6% 711 278 Domestic term loan - Avtech 9 (7) June 30, 2028 11.7% 4,355 4,996 Foreign term loan - Banorte (3) September 7, 2030 11.0% 2,155 Total debt 100,000 107,629 Less: current portion of debt (7,518) (6,215) Less: unamortized financing costs (2,314) (2,478) Long-term debt, net $ 90,168 $ 98,936 (1) On December 3, 2024, the Company entered into an asset-based credit agreement (the ""Credit Agreement"") among the Company, certain domestic subsidiaries (as co-borrowers or guarantors), BMO Bank, N.A (the ""Bank""), as administrative agent and swing line lender, BMO Capital Markets as arranger and book runner, and certain financial institutions, as lenders. The Credit Agreement provides for an asset-based senior secured revolving credit facility (the ""Credit Facility"") of up to $115 million, maturing on December 3, 2029. Generally, under the Credit Agreement and at the Companys option: (i) each SOFR Loan shall bear interest at a rate per annum equal to Adjusted Term SOFR ( …

LongTermDebtTextBlock · excerpt; the full note is in the filing

Recently Issued Accounting Standards On November 4, 2024 the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2024-03, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures. The ASU requires entities to disclose in the notes to the financial statements specified information about certain costs and expenses. The ASU applies to the Companys annual reporting period beginning in fiscal year 2028 and interim reporting periods beginning in fiscal year 2029. The Company does not anticipate early adoption of the new disclosure standard. On December 14, 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures. The ASU requires entities to disclose more detailed information relating to their reconciliation of statutory tax rate to effective tax rate, income taxes paid by jurisdiction, pretax income (or loss) from continuing operations, and income tax expense (or benefit). The ASU applies to the Companys annual reporting period beginning in fiscal year 2026, and the Company is currently assessing the impact of the disclosure requirement on its consolidated financial statements. On September 18, 2025, the FASB issued ASU 2025-06, Intangibles-Goodwill and Other-Internal-Use Software (Subtopic 350-40): Targeted Improvements to the Accounting for Internal-Use Software. This update was made to modernize the accounting for software costs. The ASU is effective for all entities for an …

NewAccountingPronouncementsPolicyPolicyTextBlock · excerpt; the full note is in the filing

Revenue Revenue Recognition The Company specializes in services ranging from product manufacturing to engineering and tooling services. The first step in its process for revenue recognition is to identify the contract with a customer. A contract is defined as an agreement between two or more parties that creates enforceable rights and obligations. A contract can be written, oral, or implied. The Company generally enters into manufacturing service agreements (MSA) with its customers that outline the terms of the business relationship between the customer and the Company. This includes matters such as warranty, indemnification, transfer of title and risk of loss, liability for excess and obsolete inventory, pricing, payment terms, etc. The Company will also bid on a program-by-program basis for customers in which an executed MSA may not be in place. In these instances, as well as when we have an MSA in place, we receive customer purchase orders for specific quantities and timing of products. As a result, the Company considers its contract with a customer to be the combination of the MSA and the purchase order. The transaction price is fixed and set forth in each purchase order. In the Company's normal course of business, there are no variable pricing components, or material amounts refunded to customers in the form of refunds or rebates. The Company assesses whether control of the product or services promised under the contract is transferred to the customer at a point in time …

RevenueFromContractWithCustomerTextBlock · excerpt; the full note is in the filing

Segment Information Operating segments are defined in ASC Topic 280, Segment Reporting as components of an enterprise for which separate financial information is available that is evaluated regularly by the chief operating decision maker, or decision making group, in deciding how to allocate resources and in assessing performance. The Companys chief operating decision maker is its Chief Executive Officer. As of December 27, 2025, the Company operates and internally manages a single operating segment, Electronics Manufacturing Services, as this is the only discrete financial information that is regularly reviewed by the chief operating decision maker. This segment provides integrated electronic and mechanical engineering, assembly, sourcing and procurement, logistics, and new product testing for our customers. The chief operating decision maker assesses performance and determines resource allocation for the Companys single reportable segment based on consolidated net income/loss and total assets/liabilities. The accounting policies of the single reportable segment are the same as those described in the summary of significant accounting policies. Significant segment measures include gross profit which is primarily composed of materials spend and labor costs, which are further presented below. Significant Segment Measures In accordance with the adoption of ASU 2023-07 in 2025, the Company determined that significant segment measures included gross profit which is primarily compo …

SegmentReportingDisclosureTextBlock · excerpt; the full note is in the filing

Significant Accounting Policies Allowance for Credit Losses The Company evaluates the collectability of accounts receivable, contract assets, and other recoverable costs and records an allowance for credit losses, which reduces these assets to an amount that management reasonably estimates will be collected. A specific allowance is recorded against receivables considered to be impaired based on the Companys knowledge of the financial condition of the customer, and a general allowance is calculated and applied to remaining assets based on the Company's historical collection experience. In determining the amount of the allowance, the Company considers several factors including the aging of the receivables, the current business environment and historical experience. After all attempts to collect a receivable have failed, the receivable is written off against the allowance. Leases Lease assets and liabilities are initially recognized based on the present value of lease payments over the lease term calculated using the Companys incremental borrowing rate, unless the implicit rate is readily determinable. Our incremental borrowing rate represents the rate of interest that we would have to pay to borrow on a collateralized basis over a similar term in a similar economic environment. Lease assets also include any lease prepayments. Lease terms include options to extend or terminate the lease when it is reasonably certain that those options will be exercised. Leases are classified as …

SignificantAccountingPoliciesTextBlock · excerpt; the full note is in the filing