Key Tronic Corporation reports 47.0% EBITDA decline in 2018 and 1.6 pp EBITDA Margin decline from 3.6% to 2.0%
08/07/2018 • About Key Tronic Corporation (
$KTCC) • By InTwits
Key Tronic Corporation reported FY2018 financial results today. Here are the key drivers of the company's long term financial model:
- Key Tronic Corporation has low CAPEX intensity: 5 year average CAPEX/Revenue was 2.1%. At the same time it's in pair with industry average of 7.6%
- CAPEX is quite volatile: $5m in FY2018, $9m in FY2017, $13m in FY2016, $9m in FY2015, $8m in FY2014
- The company has potentially unprofitable business model: ROIC is 0.7%
- It operates with medium-size leverage: Net Debt/EBITDA is 3.9x while industry average is 3.9x
Below you can find a comprehensive analysis of the key data driving the company's performance and the stock price.
Revenue and profitability
Key Tronic Corporation's Revenue decreased on 4.6%. Annual revenue decline showed slowdown in FY18Q4 - revenue decreased slightly on 1.3%. During FY2014-FY2018 Revenue growth topped in FY2015 at 42.1% and was decelerating since that time. Having declining revenue the company managed to increase EBITDA margin. EBITDA Margin surged on 10.9 pp from -15.1% to -4.2% in FY2018.
Gross Margin decreased slightly on 0.53 pp from 8.2% to 7.7% in FY2018. SG&A as a % of Revenue showed almost no change in FY2018.
Net Income margin decreased slightly on 1.5 pp from 1.2% to -0.30% in FY2018.
Investments (CAPEX, working capital and M&A)
In FY2018 the company had CAPEX/Revenue of 1.0%. The company showed small CAPEX/Revenue decline of 1.0 pp from 2.0% in FY2015 to 1.0% in FY2018. For the last three years the average CAPEX/Revenue was 1.9%. Battling declining revenue Key Tronic Corporation invested a large share of EBITDA (50.9%) to CAPEX but that didn't help at least in this year.
Return on investment
The company operates at low but positive ROIC (0.7%) and negative ROE (-1.1%). ROIC decreased on 5.8 pp from 6.5% to 0.75% in FY2018. ROE decreased on 6.2 pp from 5.1% to -1.1% in FY2018.
Leverage (Debt)
Company's Net Debt / EBITDA is 3.9x and Debt / EBITDA is 3.9x. Net Debt / EBITDA jumped on 1.4x from 2.5x to 3.9x in FY2018. Debt dropped on 18.5% while cash decreased on 8.0%.
Key Tronic Corporation has short term refinancing risk: cash is only 5.9% of short term debt.
Management team
Key Tronic Corporation's CEO Craig D Gates is a founder and has spent 10 years with the company. Brett R Larsen is a Key Tronic Corporation's CFO. Brett R Larsen has spent 4 years at the company.
Financial and operational results
FY ended 06/30/2018
Key Tronic Corporation ($KTCC) key annual financial indicators| mln. $ | 2014 | 2015 | 2016 | 2017 | 2018 | 2018/2017 |
|---|
P&L
|
|---|
| Revenue | 305.4 | 434.0 | 485.0 | 467.8 | 446.3 | -4.6% |
| Gross Profit | 26.9 | 33.3 | 38.8 | 38.3 | 34.2 | -10.8% |
| SG&A | 12.0 | 20.9 | 22.0 | 22.4 | 22.3 | -0.1% |
| EBITDA | 13.1 | 12.6 | 16.6 | 16.8 | 8.9 | -47.0% |
| Net Income | 7.6 | 4.3 | 6.5 | 5.6 | -1.3 | -123.6% |
Balance Sheet
|
|---|
| Cash | 5.8 | 0.4 | 1.0 | 0.4 | 0.3 | -8.0% |
| Short Term Debt | 7.9 | 5.0 | 5.0 | 5.8 | 5.8 | 0.0% |
| Long Term Debt | 0.0 | 37.9 | 39.3 | 37.1 | 29.2 | -21.4% |
Cash flow
|
|---|
| Capex | 7.8 | 8.8 | 13.3 | 9.3 | 4.5 | -51.4% |
Ratios
|
|---|
| Revenue growth | -15.4% | 42.1% | 11.7% | -3.5% | -4.6% | |
| EBITDA growth | -36.1% | -4.3% | 32.0% | 1.2% | -47.0% | |
|
|---|
| Gross Margin | 8.8% | 7.7% | 8.0% | 8.2% | 7.7% | -0.5% |
| EBITDA Margin | 4.3% | 2.9% | 3.4% | 3.6% | 2.0% | -1.6% |
| SG&A, % of revenue | 3.9% | 4.8% | 4.5% | 4.8% | 5.0% | 0.2% |
| Net Income Margin | 2.5% | 1.0% | 1.3% | 1.2% | -0.3% | -1.5% |
| CAPEX, % of revenue | 2.5% | 2.0% | 2.7% | 2.0% | 1.0% | -1.0% |
|
|---|
| ROIC | 9.2% | 5.4% | 7.5% | 6.5% | 0.7% | -5.8% |
| ROE | 7.7% | 4.2% | 6.3% | 5.1% | -1.1% | -6.2% |
| Net Debt/EBITDA | 0.2x | 3.4x | 2.6x | 2.5x | 3.9x | 1.4x |
Key Tronic Corporation ($KTCC) key quoterly financial indicators
| mln. $ | FY18Q1 | FY18Q2 | FY18Q3 | FY18Q4 | | YoY change |
|---|
P&L
|
|---|
| Revenue | 109 | 112 | 108 | 117 | | -6.8% | -5.7% | -4.6% | -1.3% |
| EBITDA | 3 | 4 | 3 | -1 | | -29.1% | -17.9% | -26.6% | -112.7% |
| Net Income | 0 | -0 | 1 | -2 | | -75.9% | -114.7% | -33.0% | -262.9% |
Balance Sheet
|
|---|
| Cash | 1 | 0 | 0 | 0 | | 255.3% | -64.8% | -67.3% | -8.0% |
| Short Term Debt | 6 | 6 | 6 | 6 | | 16.8% | 0.0% | 0.0% | 0.0% |
| Long Term Debt | 35 | 31 | 29 | 29 | | -17.9% | -22.5% | -23.6% | -21.4% |
Ratios
|
|---|
| Gross Margin | 7.2% | 7.9% | 7.5% | 8.0% | | -1.1% | -0.2% | -0.5% | -0.3% |
| EBITDA Margin | 2.9% | 3.2% | 2.5% | -0.5% | | -0.9% | -0.5% | -0.8% | -4.1% |
| Net Income Margin | 0.4% | -0.2% | 0.6% | -1.9% | | -1.1% | -1.5% | -0.3% | -3.0% |
Peers in Electronic Manufacturing Servi
Below we provide Key Tronic Corporation benchmarking against other companies in Electronic Manufacturing Servi industry for the last 5 years. We show data for the top-5 companies by key financial metric together with the median value for all the companies in the industry.
Top companies by Revenue growth, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| RF Industries, Ltd. ($RFIL) | | 41.9% | -7.8% | -24.0% | 118.4% |
| Alpine 4 Technologies Ltd ($ALPP) | | | 35,893.8% | 5.8% | 71.5% |
| Kemet Corporation ($KEM) | | -1.3% | -10.7% | 3.1% | 58.4% |
| SMTC Corporation ($SMTX) | | -3.5% | -23.9% | -17.1% | 55.2% |
| Deswell Industries, Inc. ($DSWL) | | -7.0% | 17.1% | -0.1% | 36.3% |
| |
|---|
| Median (27 companies) | | 2.6% | 1.2% | 3.0% | 9.8% |
|---|
| Key Tronic Corporation ($KTCC) | | 42.1% | 11.7% | -3.5% | -4.6% |
Top companies by Gross margin, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Neonode Inc. ($NEON) | 68.2% | 66.0% | 86.9% | 77.1% | 89.2% |
| Andrea Electronics Corp ($ANDR) | 83.8% | 99.1% | 88.5% | 96.2% | 70.4% |
| Data I/O Corporation ($DAIO) | 53.9% | 52.4% | 55.0% | 58.9% | 59.4% |
| IPG Photonics Corporation ($IPGP) | 54.1% | 54.6% | 54.9% | 56.6% | 54.8% |
| CTS Corporation ($CTS) | 32.2% | 33.2% | 35.4% | 33.2% | 35.1% |
| |
|---|
| Median (27 companies) | 14.7% | 19.4% | 22.2% | 15.8% | 15.2% |
|---|
| Key Tronic Corporation ($KTCC) | 8.8% | 7.7% | 8.0% | 8.2% | 7.7% |
Top companies by EBITDA margin, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| IPG Photonics Corporation ($IPGP) | 41.5% | 42.4% | 41.8% | 44.7% | 40.9% |
| TE Connectivity Ltd. ($TEL) | 19.7% | 19.3% | 20.9% | 20.4% | 21.4% |
| CTS Corporation ($CTS) | 14.7% | 9.0% | 20.7% | 14.0% | 17.8% |
| Methode Electronics, Inc. ($MEI) | 12.6% | 15.4% | 16.5% | 16.5% | 16.1% |
| RF Industries, Ltd. ($RFIL) | 12.4% | 6.7% | -12.1% | 3.1% | 15.9% |
| |
|---|
| Median (27 companies) | 4.8% | 5.8% | 5.4% | 5.0% | 4.8% |
|---|
| Key Tronic Corporation ($KTCC) | 4.3% | 2.9% | 3.4% | 3.6% | 2.0% |
Top companies by CAPEX/Revenue, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Maxwell Technologies, Inc. ($MXWL) | 3.7% | 2.5% | 4.9% | 6.6% | 11.3% |
| IPG Photonics Corporation ($IPGP) | 11.5% | 7.8% | 12.6% | 9.0% | 11.0% |
| eMagin Corporation ($EMAN) | 5.8% | 4.7% | 6.7% | 6.2% | 8.8% |
| TE Connectivity Ltd. ($TEL) | 5.3% | 4.9% | 5.3% | 5.6% | 6.7% |
| CTS Corporation ($CTS) | 3.2% | 2.5% | 5.2% | 4.3% | 6.1% |
| |
|---|
| Median (27 companies) | 2.7% | 2.4% | 2.8% | 3.4% | 2.5% |
|---|
| Key Tronic Corporation ($KTCC) | 2.5% | 2.0% | 2.7% | 2.0% | 1.0% |
Top companies by ROIC, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| RF Industries, Ltd. ($RFIL) | 8.5% | 4.6% | -18.7% | 0.9% | 29.2% |
| IPG Photonics Corporation ($IPGP) | 27.0% | 27.8% | 25.1% | 29.9% | 22.9% |
| Methode Electronics, Inc. ($MEI) | 19.7% | 26.1% | 22.7% | 20.8% | 19.2% |
| TE Connectivity Ltd. ($TEL) | 17.3% | 15.1% | 15.9% | 16.2% | 18.4% |
| Kemet Corporation ($KEM) | -2.8% | 3.8% | 6.2% | 6.9% | 16.9% |
| |
|---|
| Median (29 companies) | 4.4% | 4.9% | 6.2% | 4.2% | 6.7% |
|---|
| Key Tronic Corporation ($KTCC) | 9.2% | 5.4% | 7.5% | 6.5% | 0.7% |
Top companies by Net Debt / EBITDA
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Alpine 4 Technologies Ltd ($ALPP) | | | | 34.1x | 65.7x |
| SigmaTron International, Inc. ($SGMA) | 2.7x | 4.1x | 2.4x | 3.4x | 16.0x |
| SMTC Corporation ($SMTX) | 3.5x | 1.8x | 1.0x | | 11.3x |
| IEC Electronics Corp. ($IEC) | 7.1x | 14.0x | 2.0x | 5.6x | 4.9x |
| Nortech Systems Incorporated ($NSYS) | 3.8x | 8.2x | 4.6x | 10.9x | 3.8x |
| |
|---|
| Median (22 companies) | -0.5x | -0.9x | -0.0x | -0.1x | -0.2x |
|---|
| Key Tronic Corporation ($KTCC) | 0.2x | 3.4x | 2.6x | 2.5x | 3.9x |
