STRATTEC SECURITY CORPORATION Generated $20.7 million in Cash from Operations in Fiscal 2025 Third Quarter

Business Wire

08-05-2025

MILWAUKEE--(BUSINESS WIRE)-- STRATTEC SECURITY CORPORATION (Nasdaq: STRT) ('Company'), a leading provider of smart vehicle access, security and authorization solutions for the global automotive industry, reported financial results for its third quarter of fiscal year 2025, which ended March 30, 2025.
Jennifer Slater, President and CEO of STRATTEC, said, 'We delivered another strong quarter as the actions we are taking to transform STRATTEC into a more predictable, higher performing business are flowing through to our bottom line. During the quarter, we captured margin accretive pricing, benefited from both increased and higher value content on winning platforms and improved operational performance.'
Addressing the evolving state of global trade, Ms. Slater added, 'The tariff situation has created a rapidly changing environment with significant unknowns. Nevertheless, given what we know today with the USMCA exemption, we estimate that the annual impact of tariffs is approximately $9 million to $12 million of incremental costs, prior to any mitigation efforts. We have been moving quickly to implement tariff mitigation actions to reduce the impact on profit margins including shifting sources within our supply chain, passing through costs to customers and changing logistics processes with customers.'
'We have been making measurable change within the organization to drive cost savings which in the short term will help offset these tariff costs as we work through mitigation actions. In the long term, we believe these actions will make STRATTEC a better business. In total, we have reduced our headcount by 12% in the first nine months of fiscal 2025, including recent restructuring actions we have taken in Mexico. We believe there is additional potential for cost savings through modernization and rethinking our manufacturing and assembly processes. We are focused on instilling a culture of operational excellence to create an enterprise that can deliver stronger earnings power,' Ms. Slater concluded.
FY 2025 Third Quarter Financial Summary
(compared with prior-year period, except where otherwise noted)
Net sales were $144.1 million, an increase of $3.3 million, or 2.4%. Sales growth was driven by $2.5 million of price increases, $2.2 million in favorable product mix, and $1.6 million in net new program launches. This more than offset a $3.0 million reduction in sales volumes for existing platforms.
Gross profit increased $8.4 million to $23.1 million, while gross margin expanded 560 basis points. The improvement was due in part to $4.4 million, or 305 basis points, of favorable foreign currency exchange. The remainder of the increase was the result of pricing actions and materials and labor cost improvements which more than offset the $0.8 million increase in tariff expenses as a result of recent changes in U.S. tariff policy.
Engineering, selling and administrative ('ES&A') expenses increased $3.3 million, or 25.9%, to $16.0 million. The increase reflected continued investments in the business, $1.2 million of higher incentive and bonus compensation as a result of better than expected performance and $0.8 million in restructuring charges.
A slight increase in interest expense was more than offset by the $0.4 million increase in interest income on higher cash balances and the $0.2 million improvement in other expense related to foreign currency forward contracts.
Net income attributable to STRATTEC was $5.4 million, or $1.32 per diluted share, compared with $1.5 million, or $0.37 per diluted share, in the prior-year period. On an adjusted basis, net income attributable to STRATTEC 1 grew 315% to $6.1 million. Adjusted diluted earnings per share 1 increased $1.13, or 305%, to $1.50. Adjusted EBITDA 1 for the quarter was $12.9 million compared with $6.2 million in the prior-year period. Expanded gross margin on higher sales more than offset investments in ES&A which led to adjusted EBITDA margin of 8.9%, a 450 basis point improvement over the third quarter of fiscal 2024.
During the third quarter of fiscal 2025, the Company made continued progress on improving its cost structure, by completing the elimination of a production shift in its Milwaukee operations and implementing a restructuring action in its operations in Mexico. The cash cost of the Mexico restructuring actions was $1.6 million, which will result in expected annual savings of $4.5 million. Collectively, restructuring activities implemented in fiscal 2025 are now expected to generate approximately $5 million of annual cost reductions, with savings amounts expected to be phased in and fully realized by the first quarter of fiscal 2026.
Balance Sheet and Liquidity
Increased cash earnings and improved working capital management delivered $20.7 million in cash from operations in the third quarter of fiscal 2025, compared with a use of cash in the prior-year period. Cash from operations for the nine-month period were $41.5 million.
At March 30, 2025, the Company had $62.1 million in cash and cash equivalents, up $19.5 million from the end of the second quarter of fiscal 2025. The Company had no borrowings outstanding under its $40 million revolving credit agreement, while our joint venture had $13.0 million outstanding under its $20 million revolving credit agreement.
Third Quarter Fiscal Year 2025 Webcast and Conference Call
The Company will host a conference call and webcast tomorrow, Friday, May 9, 2025, at 9:00 am Eastern Time to review the financial and operating results for the period ended March 30, 2025, and provide an update on its transformation progress. A question-and-answer session will follow.
You can access the call by phoning [phone] or find the webcast and accompanying slide presentation at investors.strattec.com.
A telephonic replay will be available from 12:00 p.m. ET on the day of the call through Friday, May 23, 2025. To listen to the archived call, dial [phone] and enter a replay PIN 13752650. The webcast replay will be available on the Investor Relations section of the Company's website where a transcript will be posted once available.
About STRATTEC
STRATTEC is a leading global provider of advanced automotive access, security & authorization and select user interface solutions. With a history spanning over 110 years, STRATTEC has consistently been at the forefront of innovation in vehicle security, transitioning from mechanical to integrated electro-mechanical systems. The Company serves a broad range of customers, including leading automotive OEMs, offering power access solutions and advanced security systems that include door handles, lift gates, latches, and key fobs.
For more information on STRATTEC and its solutions, visit www.strattec.com.
Safe Harbor Statement
Certain statements contained in this release contain 'forward-looking statements' within the meaning of the Private Securities Litigation Reform Act of 1995. These statements may be identified by the use of forward-looking words or phrases such as 'anticipate,' 'believe,' 'could,' 'expect,' 'intend,' 'may,' 'planned,' 'potential,' 'should,' 'will,' and 'would.' Such forward-looking statements are inherently subject to many uncertainties in the Company's operations and business environment. These uncertainties include general economic conditions, in particular, relating to the automotive industry, consumer demand for the Company's and its customers' products, competitive and technological developments, customer purchasing actions, changes in warranty provisions and customer product recall policies, work stoppages at the Company or at the location of its key customers as a result of labor disputes, foreign currency fluctuations, uncertainties stemming from U.S. trade policies, tariffs and reactions to the same from foreign countries, matters adversely impacting the timing and availability of component parts and raw materials needed for the production of the Company's products and the products of its customers and fluctuations in costs of operation. Shareholders, potential investors and other readers are urged to consider these factors carefully in evaluating the forward-looking statements and are cautioned not to place undue reliance on such forward-looking statements. The forward-looking statements made herein are only made as of the date of this press release and the Company undertakes no obligation to publicly update such forward-looking statements to reflect subsequent events or circumstances occurring after the date of this release. In addition, such uncertainties and other operational matters are discussed further in the Company's quarterly and annual filings with the Securities and Exchange Commission.
Use of Non-GAAP Financial Metrics and Additional Financial Information
In addition to reporting financial results in accordance with generally accepted accounting principles, or GAAP, STRATTEC provides Adjusted Non-GAAP information as additional information for its operating results. References to Adjusted Non-GAAP information are to non-GAAP financial measures. These measures are not required by, in accordance with, or an alternative for, GAAP and may be different from similarly titled non-GAAP financial measures used by other companies. STRATTEC's management uses these measures to make strategic decisions, establish budget plans and forecasts, identify trends affecting STRATTEC's business, and evaluate performance. Management believes that providing these non-GAAP financial measures to investors, as a supplement to GAAP financial measures, will help investors evaluate STRATTEC's core operating and financial performance and business trends consistent with how management evaluates such performance and trends. Investors are encouraged to review the related GAAP financial measures and the reconciliation of these non-GAAP financial measures to their most directly comparable GAAP financial measures.
STRATTEC SECURITY CORPORATION
Condensed Balance Sheet
(In thousands, except share amounts)
(Unaudited)
March 30,
2025 June 30,
2024
ASSETS
Current Assets:
Cash and cash equivalents
$
62,106
$
25,410
Receivables, net
109,160
99,297
Inventories:
Finished products
14,563
19,833
Work in process
12,228
15,461
Purchased materials
48,800
46,355
Inventories, net
75,591
81,649
Pre-production costs
9,740
22,173
Value-added tax recoverable
22,342
19,684
Other current assets
8,276
5,601
Total current assets
287,215
253,814
Deferred income taxes
17,084
17,593
Other long-term assets
5,277
6,698
Net property, plant and equipment
77,816
86,184
$
387,392
$
364,289
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable
$
72,582
$
54,911
Accrued Liabilities:
Payroll and benefits
19,431
28,953
Value-added tax payable
10,844
9,970
Environmental
1,390
1,390
Warranty
10,745
10,695
Other current liabilities
8,312
12,369
Total current liabilities
123,304
118,288
Borrowings under credit facilities
13,000
13,000
Postemployment obligations
12,076
2,429
Other long-term liabilities
4,411
4,957
Shareholders' Equity:
Common stock, authorized 18,000,000 shares, $.01 par value, 7,635,883 issued shares at March 30, 2025 and 7,586,920 issued shares at June 30, 2024
76
76
Capital in excess of par value
102,888
101,024
Retained earnings
261,030
250,612
Accumulated other comprehensive loss
(17,836
)
(15,689
)
Less: treasury stock, at cost (3,596,918 shares at March 30, 2025 and 3,598,126 shares at June 30, 2024)
(135,459
)
(135,478
)
Total STRATTEC SECURITY CORPORATION shareholders' equity
210,699
200,545
Non-controlling interest
23,902
25,070
Total shareholders' equity
234,601
225,615
$
387,392
$
364,289
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STRATTEC SECURITY CORPORATION
Condensed Cash Flow Statement
(In Thousands)
(Unaudited)
Three Months Ended Nine Months Ended
March 31,
2024 March 30,
2025 March 31,
2024
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income
$
5,711
$
1,126
$
10,857
$
6,361
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation
3,746
4,059
10,952
12,774
Foreign currency transaction loss (gain)
141
475
(1,052
)
126
Unrealized (gain) loss on peso forward contracts
(705
)
222
231
(604
)
Stock-based compensation expense
760
240
1,839
1,224
Loss on settlement of postemployment obligation
—
—
283
—
Change in operating assets and liabilities:
Receivables
(17,616
)
(26,685
)
(10,237
)
(7,507
)
Inventories
5,920
10,827
6,058
(1,015
)
Prepaid and other assets
(1,850
)
(4,494
)
5,994
(16,898
)
Accounts payable
20,720
9,339
16,730
(7,102
)
Accrued liabilities
3,632
4,337
(948
)
4,747
Other, net
261
245
794
671
Net cash provided by (used in) operating activities
20,720
(309
)
41,501
(7,223
)
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of interest in joint ventures
—
—
—
2,000
Purchase of property, plant and equipment
(1,170
)
(1,672
)
(4,160
)
(6,065
)
Net cash used in investing activities
(1,170
)
(1,672
)
(4,160
)
(4,065
)
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings under credit facilities
—
—
3,000
2,000
Repayment of borrowings under credit facilities
—
—
(3,000
)
(2,000
)
Employee stock purchases
16
18
44
55
Net cash provided by financing activities
16
18
44
55
Foreign currency impact on cash
(85
)
(18
)
(689
)
256
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
19,481
(1,981
)
36,696
(10,977
)
CASH AND CASH EQUIVALENTS
Beginning of period
42,625
11,575
25,410
20,571
End of period
$
62,106
$
9,594
$
62,106
$
9,594
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for:
Income taxes
$
596
$
1,731
$
9,135
$
3,177
Interest
$
172
$
219
$
731
$
659
Non-cash investing activities:
Change in capital expenditures in accounts payable
$
1,176
$
(89
)
$
726
$
(264
)
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STRATTEC SECURITY CORPORATION
Reconciliation of GAAP to Non-GAAP Financial Measures
(in thousands, except per share amounts)
Fiscal 2024 Fiscal 2025
Q1 Q2 Q3 Q4 Total Q1 Q2 Q3 Q4 Total
ADJUSTED NET SALES:
Net Sales (GAAP)
135,406
118,532
140,773
143,055
$
537,766
139,052
129,919
144,082
-
$
413,053
Adjustments:
-
Retroactive FY23 one-time pricing recovery
(7,950
)
(1,551
)
(397
)
175
(9,723
)
-
-
-
-
-
Adjusted Sales (Non-GAAP)
127,456
116,981
140,376
143,230
528,043
139,052
129,919
144,082
-
413,053
ADJUSTED EBITDA:
Net income attributable to STRATTEC (GAAP)
$
4,165
$
1,022
$
1,506
$
9,620
$
16,313
$
3,703
$
1,319
$
5,396
$
-
$
10,418
Net income (loss) attributable to non-controlling interest
290
(242
)
(380
)
447
115
45
79
315
-
439
Provision for income tax
1,387
264
546
1,578
3,775
1,498
405
1,644
-
3,547
Other (income) expense, net
131
(1,098
)
208
(1,958
)
(2,717
)
(129
)
482
16
-
369
Investment and interest income
(87
)
(107
)
(143
)
(235
)
(572
)
(349
)
(408
)
(529
)
-
(1,286
)
Interest expense
220
219
222
239
900
295
257
243
-
795
Income from operations
6,106
58
1,959
9,691
17,814
5,063
2,134
7,085
-
14,282
Adjustments:
Depreciation
4,385
4,330
4,059
3,773
$
16,547
3,662
3,544
3,746
-
$
10,952
Non-cash stock-based compensation
505
479
240
243
1,467
188
891
760
-
1,839
Restructuring and similar charges
-
-
-
-
-
-
265
809
-
1,074
Retroactive FY23 one-time pricing recovery, net
(7,078
)
(641
)
(298
)
24
(7,993
)
-
-
-
-
-
Executive transition costs
-
774
211
73
1,058
941
921
214
-
2,076
Business transformation costs
-
-
-
-
-
74
215
259
-
548
(2,188
)
4,942
4,212
4,113
11,079
4,865
5,836
5,788
-
16,489
Adjusted EBITDA (Non-GAAP)
$
3,918
$
5,000
$
6,171
$
13,804
$
28,893
$
9,928
$
7,970
$
12,873
$
-
$
30,771
Adjusted EBITDA as a % of Adjusted Net Sales
3.1
%
4.3
%
4.4
%
9.6
%
5.5
%
7.1
%
6.1
%
8.9
%
7.4
%
ADJUSTED NET INCOME AND EARNINGS/(LOSS) PER SHARE:
Net income attributable to STRATTEC (GAAP)
$
4,165
$
1,022
$
1,506
$
9,620
$
16,313
$
3,703
$
1,319
$
5,396
$
-
$
10,418
Adjustments:
Restructuring and similar charges
265
3
-
63
331
-
265
809
-
1,074
Retroactive FY23 one-time pricing recovery, net
(7,078
)
(641
)
(298
)
24
(7,993
)
-
-
-
-
-
Executive transition costs
-
973
211
73
1,257
1,224
1,225
214
-
2,663
Business transformation costs
-
-
-
-
-
74
215
259
-
548
Non-controlling interest impact on above adjustments
1,014
181
55
22
1,272
-
-
(160
)
-
(160
)
Tax effect on above adjustments
1,305
(116
)
7
(41
)
1,155
(292
)
(384
)
(376
)
-
(1,052
)
(4,494
)
400
(25
)
141
(3,978
)
1,006
1,321
746
-
3,073
Adjusted Net Income/(Loss) attributable to STRATTEC (Non-GAAP)
$
(329
)
$
1,422
$
1,481
$
9,761
$
12,335
$
4,709
$
2,640
$
6,142
$
-
$
13,491
Weighted Average Basic Shares Outstanding
3,948
3,976
3,988
3,988
3,975
4,005
4,035
4,039
-
4,026
Weighted Average Diluted Shares Outstanding
3,974
3,998
4,017
4,027
4,004
4,046
4,070
4,085
-
4,067
Diluted earnings per share (GAAP)
$
1.05
$
0.26
$
0.37
$
2.39
$
4.07
$
0.92
$
0.32
$
1.32
$
-
$
2.56
Adjusted dilutive earnings/(loss) per share (Non-GAAP)
$
(0.08
)
$
0.36
$
0.37
$
2.42
$
3.08
$
1.16
$
0.65
$
1.50
$
-
$
3.32
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