Strattec Security Q3 2025 Earnings Report

Strattec Security EPS Results

• Actual EPS: $1.50
• Consensus EPS: $0.95
• Beat/Miss: Beat by +$0.55
• One Year Ago EPS: N/A

Strattec Security Revenue Results

• Actual Revenue: $144.08 million
• Expected Revenue: $140.84 million
• Beat/Miss: Beat by +$3.24 million
• YoY Revenue Growth: N/A

Strattec Security Announcement Details

• Quarter: Q3 2025
• Date: 5/8/2025
• Time: After Market Closes
• Conference Call Date: Friday, May 9, 2025
• Conference Call Time: 9:00AM ET

Strattec Security (NASDAQ:STRT) (NASDAQ:STRT) is a global supplier of mechanical and electronic security and access control systems for the automotive industry. The company designs, engineers and manufactures a broad portfolio of products used by original equipment manufacturers (OEMs) and the aftermarket. Its mechanical solutions include door locks, latches, ignition lock cylinders and key blanks, while its electronic offerings encompass keyless entry systems, immobilizers, electronic control modules and smart key fobs.

The company’s product development process spans concept design, prototyping, validation and series production. Strattec’s engineering teams collaborate with automakers on custom security architectures, integrating mechanical hardware with embedded software and remote‐entry technology. In addition to product delivery, the company provides testing, calibration and regulatory compliance support, helping customers meet safety and emissions standards across multiple markets.

Strattec Security traces its roots to the early 1970s and, through steady organic growth and targeted acquisitions, has expanded its footprint to serve vehicle assembly plants and distributors around the world. Major manufacturing and engineering facilities are located in the United States, Mexico and Europe, with sales and technical service offices in key automotive regions of Asia. This global presence enables Strattec to align product programs with just‐in‐time supply chains and regional sourcing requirements.

The company’s executive leadership team includes automotive industry veterans with decades of experience in product development, manufacturing and global supply chain management. Guided by a CEO with extensive supplier‐sector expertise and overseen by an independent board of directors, Strattec emphasizes innovation, quality and long‐term customer partnerships. The firm continues to invest in next‐generation security technologies aimed at enhancing vehicle safety, user convenience and integration with emerging connected‐car platforms.

Strattec Security Q3 2025 Earnings Call Transcript

Key Takeaways

• StratTech generated $21 million in cash from operations in Q3 and holds over $60 million in cash with minimal revolver borrowings, providing strong liquidity for strategic investments.
• Gross margin expanded by 560 basis points year-over-year (280 bps sequentially), driving net income of $1.32 per diluted share (3× last year) and an adjusted EBITDA margin of 9%.
• Restructuring actions in Mexico and Milwaukee are on track to deliver approximately $5 million in annualized savings, underscoring a cultural shift toward cost optimization and margin expansion.
• Potential $9 million–$12 million in annual tariff costs apply to about 6% of sales, but 30% has been mitigated so far and the company is pursuing full recovery via logistics, pricing, and supply-chain adjustments.
• Engineering, selling, and administrative expenses increased due to a $800K restructuring charge, higher incentive and executive transition costs, reflecting investments in the transformation program.

Presentation

[Operator]

Greetings, and welcome to the StratTech Third Quarter Fiscal Year twenty twenty five Financial Results. At this time, all participants are in a listen only mode. A question and answer session will follow the formal presentation. As a reminder, this conference is being recorded. It is now my pleasure to introduce Deborah Pawlowski, Investor Relations for StratTech. Please go ahead.

[Deborah Pawlowski, Founding Partner & Senior Managing Director at Alliance Advisors]

Thank you, and good morning, everyone. We greatly appreciate you joining us for StratTech's third quarter fiscal twenty twenty five financial results conference call. With me on the call are Jennifer Slater, President and CEO, and Matthew Polly, Vice President and Chief Financial Officer. Jen and Matt are going to review our third quarter twenty twenty five financial results and provide an update on the progress being made to transform StratTech. You can find a copy of the press release and the slides that accompany our conversation today on the Investor Relations section of the company's website.

[Deborah Pawlowski, Founding Partner & Senior Managing Director at Alliance Advisors]

If you are reviewing those slides, please turn to slide two for the Safe Harbor statement. As you are aware, we may make some forward looking statements on this call during the formal discussion, as well as during the Q and A session. 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 or at sec.com.

[Deborah Pawlowski, Founding Partner & Senior Managing Director at Alliance Advisors]

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 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. So with that, if you would please turn to slide three, I will turn it over to Jim to begin.

[Jennifer Slater, President, CEO & Director at STRATTEC SECURITY CORPORATION]

Thank you, Deb, and welcome, everyone. I'm pleased to share our third quarter fiscal 'twenty five results and provide an update on the transformation of StratTech. Once again, we delivered solid performance with meaningful progress on both financial and strategic fronts. Let me begin with a few highlights from the quarter. We generated nearly $21,000,000 in cash from operations in the third quarter, bringing our year to date total to $41,500,000 This strong cash generation reflects the significantly improved earnings power of the business and our disciplined approach to working capital management.

[Jennifer Slater, President, CEO & Director at STRATTEC SECURITY CORPORATION]

With over $60,000,000 in cash and limited borrowings on our revolver, we're operating from a position of strength, one that gives us considerable flexibility to navigate today's increasingly dynamic market conditions while executing on our long term strategic priorities. The actions we have been taking to improve the business, including taking out costs and capturing price, were demonstrated by meaningful margin expansion. Year over year gross margin expanded five sixty basis points and sequentially margin expanded two eighty basis points. This improvement more than covered the investments we are making in talent within the organization and as a result, we posted net income of $1.32 per diluted share, a more than threefold increase from last year's third quarter. Adjusted EBITDA was $12,900,000 or 9% of sales, up from 4.4% in the prior year period.

[Jennifer Slater, President, CEO & Director at STRATTEC SECURITY CORPORATION]

This continued margin expansion gives us confidence that StratTech is on the right path, but we believe there is more work to be done. Turning to our strategic transformation efforts, please turn to slide four. Our teams remain focused on strengthening Stratex operational and financial position. We took another step forward by implementing a restructuring of our Mexico operations in March. Combined with earlier actions in Milwaukee, total annualized savings from fiscal twenty five restructuring activities now total approximately $5,000,000 Importantly, these actions reflect a broader cultural shift, one where cost optimization and margin expansion are priorities for the organization.

[Jennifer Slater, President, CEO & Director at STRATTEC SECURITY CORPORATION]

We are also taking proactive steps to manage through the evolving tariff risk. While the situation remains fluid, it's also important to note that over 90% of our U. S. Sales volume is USMCA compliant and therefore should not have any impact to our business. We estimate the annualized impact of recently announced U.

[Jennifer Slater, President, CEO & Director at STRATTEC SECURITY CORPORATION]

S. Tariffs to be 9,000,000 to $12,000,000 in added costs before mitigation. That said, we've moved quickly. We're actively adjusting logistic routes, engaging in pricing discussions with customers, and shifting sources in our supply chain. Matt will cover this topic in more detail during his section of the presentation.

[Jennifer Slater, President, CEO & Director at STRATTEC SECURITY CORPORATION]

Our strong balance sheet and internal momentum give us confidence that we can absorb and adapt these changes while continuing to drive performance. Let's turn to Slide five to discuss our sales results. The modest improvement in sales year over year was a result of favorable pricing actions, improved product mix and net new program launches. I'm especially pleased with the continued success we're seeing in placing higher value content on existing customer programs. A clear indication that our commercial and engineering investments are paying off.

[Jennifer Slater, President, CEO & Director at STRATTEC SECURITY CORPORATION]

In summary, the work we began early in fiscal twenty five is now showing up clearly in our results, in margins, in cash flow, and in our ability to control our destiny. While macro uncertainty remains, including tariffs and industry volume pressures, we've built a more agile, focused organization that is positioned to deliver through cycles. With that, I'll turn it over to Matt to walk through the financials in more detail.

[Matthew Pauli, SVP & CFO at STRATTEC SECURITY CORPORATION]

Thanks, Jen, and good morning, everyone. Let's begin with Slide six. Our gross profit for the quarter rose significantly to $23,100,000 up from $14,700,000 in the prior year period. Gross margin expanded by five sixty basis points to 16%, driven by a $4,400,000 benefit from a stronger U. S.

[Matthew Pauli, SVP & CFO at STRATTEC SECURITY CORPORATION]

Dollar, strategic pricing actions and continued operational improvements in material and labor cost efficiencies. These gains more than offset $800,000 of additional tariff expenses stemming from recent changes in U. S. Trade policy. Given the timing of restructuring actions that Jen explained earlier, our quarterly results include a partial period benefit from the restructuring actions of about 200,000 We anticipate these actions to be completed in the fourth quarter.

[Matthew Pauli, SVP & CFO at STRATTEC SECURITY CORPORATION]

The savings will phase in and be at full run rate in the first quarter of fiscal twenty twenty six. Year to date gross margin improved by two forty basis points, reflecting these same drivers, pricing discipline, cost optimization and FX, partially offset by elevated labor costs in Mexico and ongoing tariff headwinds. Let's turn to slide seven and delve a little more into the tariff situation and why we think we are in a fairly good position. Our current tariff exposure remains manageable. Approximately 65% of our products are imported into The U.

[Matthew Pauli, SVP & CFO at STRATTEC SECURITY CORPORATION]

S. From our Mexico assembly operations and of that volume over 90% is USMCA compliant. Therefore, only about 6% of consolidated sales or $30,000,000 is currently subject to the recent tariffs. As Jen mentioned, we estimate that the potential tariff related costs are 9,000,000 to $12,000,000 annually before any mitigation actions. We have currently mitigated about 30% of the tariff impact and are in the process of pursuing commercial recoveries for the balance.

[Matthew Pauli, SVP & CFO at STRATTEC SECURITY CORPORATION]

While confident in the recovery of the remainder, we are working through the process and timing with our customers. We've taken swift and coordinated steps to manage this additional cost. Internally, we've launched a dedicated tariff task force, added trade compliance expertise and are reassessing our global supply chain and current logistics processes. Turning to Slide eight, engineering, selling and administrative expenses were $16,000,000 up $3,300,000 from the prior year, representing 11.1% of sales. This increase reflects deliberate investments in our transformation initiatives, including an $800,000 restructuring charge and $400,000 of additional salaries as we add talent to our organization.

[Matthew Pauli, SVP & CFO at STRATTEC SECURITY CORPORATION]

The quarter and year to date comparisons are also impacted by higher incentive and bonus expense of $1,200,000 and $2,800,000 respectively. This is a result of improved year over year financial results. In addition, on a year to date basis, our administrative expenses include $2,100,000 in executive transition costs, up from $1,100,000 a year ago as we realigned our leadership structure. Let's move to slide nine where we summarize our profitability. Net income attributable to StratTech was $5,400,000 for the quarter or $1.32 per diluted share compared with $1,500,000 or $0.37 per share in the third quarter last year.

[Matthew Pauli, SVP & CFO at STRATTEC SECURITY CORPORATION]

On an adjusted basis, earnings per share increased 305% to $1.5 Adjusted EBITDA rose sharply to $12,900,000 representing an adjusted EBITDA margin of 8.9%, up four fifty basis points. Our results demonstrate the team's commitment to delivering sustainable margin improvement. Now turning to slide 10, which highlights our cash flow, balance sheet and capital priorities. Operating cash flow was strong at $20,700,000 a meaningful turnaround from a use of cash in the same period last year. This improvement reflects enhanced profitability and disciplined working capital management.

[Matthew Pauli, SVP & CFO at STRATTEC SECURITY CORPORATION]

During the quarter, we saw a $6,000,000 reduction in inventory levels and also extended our accounts payable to more closely align with our customer payment terms. Year to date operating cash flow reached $41,500,000 Our cash position at the end of the quarter was $62,100,000 with approximately $47,000,000 available under our revolving credit facilities. We believe we have ample liquidity and financial flexibility to invest in organic initiatives and manage the current market conditions. Year to date capital expenditures totaled $4,200,000 consistent with our focus on new product programs, productivity enhancements and IT infrastructure upgrades. Our capital priorities as we advance through the transformation of the business are internally focused on operational efficiencies, leveraging productivity tools and IT investments and driving organic growth through better market positioning, branding and commercial processes.

[Matthew Pauli, SVP & CFO at STRATTEC SECURITY CORPORATION]

We are also being conservative with our cash through these rather uncertain times. In summary, we are pleased with the solid financial progress this quarter and the momentum we are building through our strategic execution. With that, operator, we're ready to open the line for questions.

[Operator]

Thank you. We'll now be conducting a question and answer If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up the handset before pressing the star keys. Our first question is from John Franzreb with Sidoti.

[John Franzreb, Senior Equity Analyst at Sidoti & Company]

Good morning, everyone, and congratulations on a great quarter. Jen, I got a marvel at how well you've negotiated this tariff environment. I'm kind of curious on two things. One, what was the absolute number of the impact of tariffs in the third quarter? And two, when you talk about the moves that you're making to mitigate some of your remaining exposure, that 9,000,000 to $12,000,000 how much do you think you could bring that down through logistics or suppliers and things like that?

[Jennifer Slater, President, CEO & Director at STRATTEC SECURITY CORPORATION]

Thanks, John. It's a great question. I'll talk a little bit about how we manage the process. I'll let Matt give you the exact number in Q3. So we really started with what we could control quickest.

[Jennifer Slater, President, CEO & Director at STRATTEC SECURITY CORPORATION]

We implemented some kind of no regrets move on logistics, where we were shipping across the border to The U. S. Just to ship back into other countries. So we've changed our logistics routes to ship direct to the customers. The second thing, obviously, we've continued to talk through our customers on commercial recovery.

[Jennifer Slater, President, CEO & Director at STRATTEC SECURITY CORPORATION]

And then what takes a little bit longer is on the supply chain and moves from a procurement standpoint for sourcing. We feel confident that we can mitigate the full tariff exposure through all three of those things. And we're working with our customers now on the process of recovery, which we expect to get full recovery.

[Matthew Pauli, SVP & CFO at STRATTEC SECURITY CORPORATION]

A financial perspective, in the third quarter, it was an incremental $800,000 of tariffs, which is primarily all the month of March.

[John Franzreb, Senior Equity Analyst at Sidoti & Company]

Got it. And when you what kind of operating environment are you actually assuming with your customer base for the balance of the year? Any kind of material changes than you were thinking about, say, three months ago?

[Jennifer Slater, President, CEO & Director at STRATTEC SECURITY CORPORATION]

I think we're continuing to monitor automotive production and impacts of what tariff exposure has on our customers that will impact sales. And we're making sure that we're prepared for any material impacts on production and getting our cost structure right.

[John Franzreb, Senior Equity Analyst at Sidoti & Company]

Speaking of the cost structure, dollars 4,000,000 benefit from price and labor. What's the mix of price that you're able to realize versus the labor cost savings from the headcount reduction?

[Matthew Pauli, SVP & CFO at STRATTEC SECURITY CORPORATION]

Yes, it's about $2,500,000 of price in the quarter. So I think we talked about it last quarter, where we had, a customer extend program and we were able to go in and kind of requote and get the pricing there. So, the pricing benefited us both on the key and lockset product line as well as our power access product line.

[John Franzreb, Senior Equity Analyst at Sidoti & Company]

Got it.

[Jennifer Slater, President, CEO & Director at STRATTEC SECURITY CORPORATION]

And then on the restructuring savings, John, we haven't seen the full value of that yet in our results. We expect to see that as we go forward.

[John Franzreb, Senior Equity Analyst at Sidoti & Company]

Any sense that how much 12% headcount reduction comes in on an annualized basis in savings?

[Matthew Pauli, SVP & CFO at STRATTEC SECURITY CORPORATION]

Well, full restructuring for both Milwaukee and Mexico is about $5,000,000 on an annual basis. We only saw about $200,000 in the current quarter, and a lot of the actions in Mexico were at the end of the quarter. So we'll see that ramp up, and be at the full run rate in the first quarter of twenty twenty six.

[John Franzreb, Senior Equity Analyst at Sidoti & Company]

Okay. And I guess one last question. Cash is building two parts to that. One, what's the CapEx budget going to look like for the balance of this year and maybe some thoughts into next? It seems like there's equipment upgrade going on.

[John Franzreb, Senior Equity Analyst at Sidoti & Company]

And secondly, it's been a while. Any thoughts about reinstituting the dividend?

[Jennifer Slater, President, CEO & Director at STRATTEC SECURITY CORPORATION]

Yes, I think first I'll just answer that. We feel fortunate that we've had the cash balances. We continue to navigate through the tariff environment and any near term production challenges. Our efforts really have been internally focused as we look at modernizing our operations and looking for where we have organic growth opportunities. I'll let Matt kind of talk through where we are from a rest of the year projection.

[Matthew Pauli, SVP & CFO at STRATTEC SECURITY CORPORATION]

Yes. From a CapEx standpoint, on a go forward basis, think about it around $10,000,000 We'll be definitely less than that this fiscal year, so probably maybe 2,000,000 to $3,000,000 here in the back half or the last quarter of the year. We've We will be making some equipment upgrades. There are also the last bit of IT infrastructure upgrades. But that's how I think about CapEx, roughly around $7,500,000 this year for the full year.

[John Franzreb, Senior Equity Analyst at Sidoti & Company]

Any thoughts on the dividend?

[Jennifer Slater, President, CEO & Director at STRATTEC SECURITY CORPORATION]

Yes. I think we're just managing through near term first, John. But we are always considering our internal and external capital allocation. We're just not there with some of the uncertainty in the environment.

[John Franzreb, Senior Equity Analyst at Sidoti & Company]

Okay. Fair enough. I'll get back into queue. Thank you.

[Jennifer Slater, President, CEO & Director at STRATTEC SECURITY CORPORATION]

Thanks, John.

[Operator]

Our next question is from Ethan Starr, Private Investor.

[Analyst]

Good morning and congratulations on a great quarter.

[Matthew Pauli, SVP & CFO at STRATTEC SECURITY CORPORATION]

Morning.

[Analyst]

I'm wondering if you have any comments at this juncture on the potential possible sale of your Milwaukee building facility.

[Jennifer Slater, President, CEO & Director at STRATTEC SECURITY CORPORATION]

Good morning, Ethan. Thanks for the question. We're really pleased with the progress that we're making on the potential sale of the facility. We're not yet ready to make any announcements on where we are, but we are really pleased with the progress.

[Analyst]

Okay, great. And I know you're really focused internally and stuff, but I'm wondering if you're perhaps looking into ways that StratTech can expand its offerings to potentially adjacent industries other than automotive.

[Jennifer Slater, President, CEO & Director at STRATTEC SECURITY CORPORATION]

That's a great question Ethan. I think we have a lot of opportunity still within automotive and transportation. Our first focus is understanding what addressable opportunities do we have in the markets we serve today. Once we get through that, we'll look at what other opportunities do we have in adjacent markets.

[Analyst]

Okay, thank you very much.

[Jennifer Slater, President, CEO & Director at STRATTEC SECURITY CORPORATION]

Thank you, Ethan.

[Operator]

Thank you. There are no further questions at this time. There is actually one follow-up. Our next question is from John Franzreb with Sidoti.

[John Franzreb, Senior Equity Analyst at Sidoti & Company]

Just two questions, I guess. One, I'm curious if you saw any pull forward in demand as maybe some of the customers wanted to get ahead of tariffs. And two, can you just kind of share with us how April and May are proceeding relative to what you saw in the first quarter?

[Jennifer Slater, President, CEO & Director at STRATTEC SECURITY CORPORATION]

Sure. We have seen some inventory buildup in the past from our customers. But what I would tell you is that our customers have done a really nice job to make sure that they're giving us some stable demand signals. So we don't see any fluctuation major fluctuations up and down from what we're planning through the quarter.

[John Franzreb, Senior Equity Analyst at Sidoti & Company]

Okay. Fair enough. Thank you for taking the follow-up.

[Jennifer Slater, President, CEO & Director at STRATTEC SECURITY CORPORATION]

Thanks, John.

[Operator]

There are no further questions at this time. I'd like to hand the floor back over to Deb Pawlowski for any closing comments.

[Deborah Pawlowski, Founding Partner & Senior Managing Director at Alliance Advisors]

Thank you, and thank you everyone for joining us today. If you have any questions or need any follow-up, I can be reached at (716) 843-3908, and my email is on the news release. Have a great day.

[Operator]

This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation.

Participants

Analysts

• Deborah Pawlowski, Founding Partner & Senior Managing Director at Alliance Advisors
• Jennifer Slater, President, CEO & Director at STRATTEC SECURITY CORPORATION
• Matthew Pauli, SVP & CFO at STRATTEC SECURITY CORPORATION
• John Franzreb, Senior Equity Analyst at Sidoti & Company
• Analyst