FY 2018 Fourth Quarter

KEYTRONIC CORPORATION ANNOUNCES RESULTS FOR THE FOURTH QUARTER AND YEAR END OF FISCAL 2018

Expecting Continued Revenue and Earnings Growth in the First Quarter

Spokane Valley, WA– August 7, 2018 — Keytronic Corporation (Nasdaq: KTCC), a provider of electronic manufacturing services (EMS), today announced its results for the quarter ended June 30, 2018.

For the fourth quarter of fiscal year 2018, Keytronic reported total revenue of $117.0 million, up 8% from 108.3 million in the prior quarter and compared to $118.5 million in the same period of fiscal year 2017. For fiscal year 2018, total revenue was $446.3 million, compared to $467.8 million in fiscal year 2017.

For the fourth quarter of fiscal year 2018, the Company had net income of approximately $1.3 million or $0.12 per share, compared to net income of $1.3 million or $0.12 per share for the same period of fiscal year 2017. For fiscal year 2018, net income was $2.1 million or $0.19 per share, compared to net income of $5.6 million or $0.51 per share for fiscal year 2017.

For the fourth quarter of fiscal year 2018, gross margin was 8.0% and operating margin was 1.8%, compared to 8.3% and 2.0%, respectively, in the same period of fiscal 2017.

“For the fourth quarter of fiscal 2018, we saw increasing demand from a number of our longstanding customers and most of our new programs, including Skybell Technologies, continued to ramp,” said Craig Gates, President and Chief Executive Officer. “We also continued to win significant new business from EMS competitors and from existing customers, including new programs involving medical devices, distribution services and electronic signage.  At the same time, our productivity continued to be adversely impacted by industry wide shortages in key components, resulting in delays in delivery and increased costs.”

“While 2018 was a challenging year, we replaced the revenue shortfall caused by a large former customer, significantly diversified our customer base, reduced our debt by $8.0 million for the year and returned to strong sequential growth in the fourth quarter. Moving into the first quarter of fiscal year 2019, although we continue to face industry supply chain issues and increased uncertainty around the tariff situation, we expect growth in revenue and earnings. In preparation, we continue to invest in new equipment and processes to be more productive in our Mexico facilities, and we’re expanding and enhancing our profitable US facilities. We’re optimistic about our opportunities for growth in fiscal 2019 and beyond.”

Business Outlook

For the first quarter of fiscal year 2019, the Company expects to report revenue in the range of $118 million to $122 million, and earnings in the range of $0.12 to $0.17 per diluted share. These expected results assume an effective tax rate of 20% in the quarter.

Conference Call

Keytronic will host a conference call today to discuss its financial results at 2:00 PM Pacific (5:00 PM Eastern). A broadcast of the conference call will be available at www.keytronic.com under “Investor Relations” or by calling 888-220-8474 or +1-323-794-2591 (Access Code: 2593859).  A replay will be available by calling 888-203-1112 or +1-719-457-0820 (Access Code: 2593859).

About Ketronic

Keytronic is a leading contract manufacturer offering value-added design and manufacturing services from its facilities in the United States, Mexico and China. The Company provides its customers full engineering services, materials management, worldwide manufacturing facilities, assembly services, in-house testing, and worldwide distribution. Its customers include some of the world’s leading original equipment manufacturers. For more information about Key Tronic visit: www.keytronic.com

Some of the statements in this press release are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements include all passages containing verbs such as aims, anticipates, believes, estimates, expects, hopes, intends, plans, predicts, projects, targets, or will, similar verbs, or nouns corresponding to such verbs. Forward-looking statements also include other passages that are primarily relevant to expected future events or that can only be fully evaluated by events that will occur in the future. Forward-looking statements in this release include, without limitation, the Company’s statements regarding its expectations with respect to quarterly revenue and earnings during periods of fiscal year 2019, effects of recent tax reform measures, business from new customers and programs, and impacts from legal proceedings and operational streamlining. There are many factors, risks and uncertainties that could cause actual results to differ materially from those predicted or projected in forward-looking statements, including but not limited to the future of the global economic environment and its impact on our customers and suppliers, the availability of parts from the supply chain, the accuracy of customers’ forecasts; success of customers’ programs; timing and effectiveness of ramping of new programs; success of new-product introductions; acquisitions or divestitures of operations or facilities; technology advances; changes in pricing policies by the Company, its competitors, customers or suppliers; impact of tax reform and related activities and the other risks and uncertainties detailed from time to time in the Company’s SEC filings.

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