• Cash from Operations: $11.3 million, increasing cash balance to $34 million.
• Revenue: $139.1 million, up 2.7% year over year.
• Net Sales Increase: 9.1% excluding one-time retroactive pricing impact.
• Gross Margin: 13.6%, benefiting from ongoing price improvement and favorable mix.
• Gross Profit: $18.9 million, up from $18.7 million in the previous year.
• Foreign Exchange Benefit: 190 basis points favorable impact on gross margin.
• Engineering, Selling, and Administrative Expenses: $13.9 million, up $1.3 million from the previous year.
• Net Income: $3.7 million or 92 per diluted share.
• Operating Cash Flow Increase: $15.2 million versus last year's first quarter.
• Capital Expenditures: Approximately $15 million anticipated for fiscal 2025.

Release Date: November 04, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Strattec Security Corp (NASDAQ:STRT) generated $11.3 million in cash from operations, significantly increasing their cash balance to $34 million.
• Revenue increased by 2.7% year over year, with net sales rising by 9.1% when excluding one-time retroactive pricing impacts.
• The company experienced a 19% increase in sales to Ford, attributed to new latch content on all F series pickups.
• Gross margin for the quarter was 13.6%, benefiting from ongoing price improvements and a favorable sales mix.
• Strattec Security Corp (NASDAQ:STRT) is focusing on developing a winning product portfolio and driving operational efficiencies to strengthen profitability and drive sustainable growth.

Negative Points

• The company faces variability in performance due to macroeconomic conditions and automotive industry headwinds.
• Higher manufacturing costs in Mexico were driven by a 20% government-mandated minimum wage increase.
• There was $400,000 in elevated freight costs related to expedited shipping, impacting overall costs.
• Sales of legacy keys and lock sets continue to decline, indicating a shift in product demand.
• The company is in the early stages of rethinking its operational footprint, indicating potential future disruptions as changes are implemented.

Q & A Highlights

Q: Jennifer, what are your impressions of the company after being on board for a couple of months? A: Jennifer L Slater, President and CEO: The company has a strong history in the automotive industry, a solid product portfolio, and good people. We are focusing on building upon these strengths to drive improvement.

Q: Is the 13.6% gross margin sustainable, considering the variability of FX impacts? A: Jennifer L Slater, President and CEO: Our profitability is subject to variability due to volume, sales, and customer/product mix. While some products have higher margins, factors like FX variability and seasonal production affect our business.

Q: How do you see the operating environment in 2025 compared to 2024 in terms of unit volumes? A: Jennifer L Slater, President and CEO: The operating environment is variable, influenced by automotive production and platform presence. We are powertrain agnostic, so platform matters more than the type of vehicle (internal combustion vs. electric).

Q: Can you explain the process of reducing the pre-tooling balance and its future outlook? A: Jennifer L Slater, President and CEO: We aligned the organization on the importance of recovering tooling costs and defined accountability. This alignment has shown progress and highlights further opportunities for performance improvement.

Q: Has your pricing caught up with inflation and input costs? A: Jennifer L Slater, President and CEO: We made good progress in pricing last year, and the industry is normalizing. We continue to seek pricing opportunities, though they will be less significant than last year.

Q: What growth opportunities do you see in power tailgates for pickup trucks? A: Jennifer L Slater, President and CEO: We are defining our strategy to identify growth opportunities within our product portfolio, aiming to expand our customer base and explore new markets in the transportation and automotive sectors.

Q: What are the prospects for a stock buyback or reinstating the dividend, given the cash balance? A: Jennifer L Slater, President and CEO: We aim to ensure business stability in a cyclical industry. As our long-term strategy unfolds, we will better understand the cash-generating potential and optimal uses of cash.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.