Electronics manufacturing services firm Keytronic has revealed that a recent ransomware attack has resulted in additional expenses and lost revenue totaling over $15 million. The financial impact of this Keytronic cyberattack was disclosed in a preliminary U.S. Securities and Exchange Commission (SEC) financial report for the fourth quarter of fiscal 2024.
“Due to this event, the Company incurred approximately $2.3 million of additional expenses and believes that it lost approximately $15 million of revenue during the fourth quarter. Most of these orders are recoverable and are expected to be fulfilled in fiscal year 2025. Partially offsetting these additional expenses was an insurance gain in the amount of $0.7 million that was also recorded during the quarter,” reads the SEC financial Report.
Financial Impact of the Keytronic Cyberattack
The ransomware attack, detected on May 6, 2024, significantly disrupted Keytronic’s operations at its Mexico and U.S. sites. The company’s financial report details the severe impact on their bottom line:
- Additional Expenses: Keytronic incurred approximately $2.3 million in additional expenses due to the attack. These costs included deploying new IT infrastructure and engaging cybersecurity experts to mitigate the incident.
- Lost Revenue: The company estimates a loss of around $15 million in revenue during the fourth quarter. Despite this setback, most of these orders are expected to be recoverable and fulfilled in fiscal year 2025.
- Insurance Gain: Partially offsetting these expenses was an insurance gain of $0.7 million recorded during the quarter.
As a result of these disruptions, Keytronic anticipates reporting approximately $125 million in revenue for the fourth quarter of fiscal 2024, with a net loss of around $0.00 per share, both falling short of previous guidance.
Operational Resumption and Future Outlook
Keytronic remains optimistic about its recovery and future performance. Production has resumed across its facilities, and the company is beginning to see operational efficiencies from headcount reductions announced in the third quarter of fiscal 2024. Additionally, a favorable weakening of the Mexican Peso to the US dollar by approximately 10% in June is expected to positively impact the company’s financial performance.
For the first quarter of fiscal year 2025, Keytronic projects:
- Revenue: Between $140 million and $150 million.
- Earnings: Between $0.10 and $0.20 per diluted share.
“For the first quarter of 2025, the Company expects to report revenue in the range of $140 million to $150 million and earnings in the range of $0.10 to $0.20 per diluted share,” reads Filling.
These estimates reflect a positive outlook as the company recovers from the ransomware attack and capitalizes on new programs while aligning inventories with current revenue levels.
Keytronic Cyber Incident Details and Response
The Keytronic cybersecurity incident on May 6, 2024, caused substantial disruptions, limiting access to business applications essential for operations and corporate functions, including financial and operating reporting systems.
Keytronic is a leading contract manufacturer providing value-added design and manufacturing services from its facilities in the United States, Mexico, China, and Vietnam. The company offers a comprehensive range of services, including full engineering support, materials management, manufacturing, assembly, in-house testing, and worldwide distribution. Keytronic’s clientele includes some of the world’s leading original equipment manufacturers.
Despite these challenges, Keytronic ensured continued wage payments in accordance with statutory requirements. The company swiftly deployed new IT infrastructure and engaged cybersecurity experts to remediate the incident, demonstrating a robust response to the attack.
Looking Ahead
The revenue and earnings estimates for the fourth quarter of fiscal 2024 and the first quarter of fiscal 2025, along with the finalization of financial results for the fourth quarter of 2024, are subject to the completion of the company’s ongoing quarterly close and review procedures. Keytronic plans to report its complete results and host its earnings conference call for the fourth quarter of fiscal 2024 on August 13, 2024.
While the financial impact has been significant, Keytronic’s swift response and strategic adjustments position the company for a strong recovery.