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CALL PARTICIPANTS
President and Chief Executive Officer — Jennifer Slater
Vice President and Chief Financial Officer — Matthew Pauley
Investor Relations Advisor — Deborah Pawlowski
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RISKS
Jennifer Slater said, “an aluminum supplier had a fire in its facility, which will impact production levels for some of our major customers during our second quarter and potentially into our third fiscal quarter.”
Ongoing international trade restrictions on a semiconductor chip supplier have caused shortages. Jennifer Slater noted, “we do not know the full impact of how our OEM customers will respond as the industry looks for alternative sources.”
Jennifer Slater said, “there’s too much uncertainty to say what the full impact of those will be for the full year for us.”
TAKEAWAYS
Revenue Growth — Revenue increased nearly 10% attributed to higher sales volume, pricing actions, and cost reduction measures.
Gross Profit Margin — Gross margin expanded 370 basis points to 17.3%, with gross profit up $7.4 million, or approximately 40%.
Adjusted EBITDA Margin — Adjusted EBITDA was $15.6 million, representing a margin of 10.2%.
Restructuring Savings — $1.3 million in restructuring savings were realized in the quarter, with an additional restructuring action expected to yield approximately $1 million in annualized savings fully realized by the third fiscal quarter.
Operating Cash Flow — Normalized operating cash flow reached $11.3 million, consistent with the prior-year first quarter.
Liquidity Position — Cash on hand was over $90 million, complemented by $53 million in available revolving credit and an amended $40 million facility extending maturity to October 2028.
Capital Expenditures — Quarterly capital expenditures were $1.5 million, about 1% of sales, with full-year CapEx budgeted at $12.5 million, or 2% of sales.
Automation Initiatives — Initial automation projects in Mexican operations showed less than a one-year payback, with broader margin impact expected in the second half of the fiscal year.
Facility and Footprint Optimization — Management plans a sale leaseback of the Milwaukee facility, consolidation of the test lab in Auburn Hills, Michigan, and relocation of corporate offices to enable better process flow and productivity.
Strategic Outlook — Management is assessing M&A opportunities at an early stage and stated, “acquisitions could be a part of our longer-term future growth.”
SUMMARY
Management directly cited temporary production setbacks from an aluminum supplier fire and a semiconductor chip shortage as factors likely to pressure results in upcoming quarters, but said the full-year impact remains uncertain. Leadership disclosed that cost reduction and automation are driving tangible results, including expansion in both gross and EBITDA margins, and said further automation paybacks should appear in the second half. Capital structure changes included expanding the maturity of a $40 million revolving credit facility to 2028 and maintaining a sizable cash cushion to support ongoing transformation and potential M&A. The company announced a facility consolidation—including a Milwaukee sale leaseback and moving corporate and test operations closer to customers—to further align its footprint and organizational focus.
Management confirmed that selling, administrative, and engineering expenses increased by $2 million to $15.9 million, mainly due to ongoing transformation investments.
The business expects increased capital spending in coming quarters as modernization proceeds, but management stated, “the cost of automation has come down over the years, so it’s not a significant investment from a CapEx standpoint.”
Company leadership said customer base expansion remains a priority, with specific mention of targeting North American OEMs for its power access and digital key products, though no new contracts were disclosed.
The company reported preparing inventory builds to mitigate near-term customer disruptions and reduce expedite costs as OEMs recover from supply chain impacts.
INDUSTRY GLOSSARY
Adjusted EBITDA: Earnings before interest, taxes, depreciation, and amortization, adjusted for items such as restructuring charges and other non-recurring expenses specific to Strattec Security Corporation’s reporting practices.
Sale leaseback: A real estate transaction where Strattec Security Corporation sells its facility but immediately leases it back from the buyer, allowing continued operational use while freeing capital.
OEM: Original Equipment Manufacturer, referring to companies that produce vehicles or components purchased by Strattec Security Corporation’s direct customers in the automotive sector.
CapEx: Capital Expenditures, referring to investments in property, plant, equipment, or automation as reported by Strattec Security Corporation.
Full Conference Call Transcript
Deborah Pawlowski: Thank you, and good morning, everyone. We greatly appreciate you joining us for Strattec Security Corporation’s first quarter fiscal 2026 financial results conference call. Joining me on the call this morning are Jennifer Slater, President and CEO, and Matthew Pauley, Vice President and Chief Financial Officer. Jen and Matt will review our financial results, the progress being made to transform Strattec Security Corporation, and our outlook. You can find a copy of the news release and the slides that accompany our conversation today on the Investor Relations section of the company’s website. If you are reviewing these slides, please turn to slide two for the Safe Harbor statement.
As you are aware, we may make forward-looking statements on this call during the formal discussion as well as during the Q&A. These statements apply to future events that are subject to risks and uncertainties as well as other factors that could cause actual results to differ materially from what is stated on today’s call. These risks and uncertainties and other factors are discussed in the earnings release as well as with other documents filed by the company with the Securities and Exchange Commission. You can find these documents on our website as well. I want to also point out that during today’s call, we will discuss some non-GAAP measures which we believe will be useful in evaluating our performance.
You should not consider the presentation of this additional information in isolation or as a substitute for results prepared in accordance with GAAP. We have provided reconciliations of non-GAAP to comparable GAAP measures in the tables accompanying the earnings release and slides. With that, let me turn it over to Jen who will be referencing slides three through five.
Jennifer Slater: Thank you, Deb, and welcome, everyone. We started fiscal 2026 in a solid position, and our financial results are a direct testament to the actions we have been taking to transform the underlying operations of Strattec Security Corporation to improve our earnings profile. The progress reflects the significant effort by our team and the magnitude of change we have been implementing. Revenue grew nearly 10% in the quarter, while gross profit margin expanded 370 basis points and EBITDA margin expanded 310 basis points to 10.2%. Margin improvements are a result of higher sales, pricing actions, and cost reduction activities.
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