KEY TRONIC CORP 10-Q

Item 1: Financial Statements KEY TRONIC CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (Unaudited, in thousands) March 28, 2026 June 28, 2025 ASSETS Current assets: Cash and cash equivalents $ 431 $ 1,384 Trade receivables, net of credit losses of $ 4,642 and $ 3,479 84,611 96,142 Contract assets, net of credit losses of $ 547 and $ 0 23,254 17,409 Inventories 85,798 97,321 Other, net of credit losses of $ 0 and $ 1,463 13,885 21,917 Total current assets 207,979 234,173 Property, plant and equipment, net 29,406 27,727 Operating lease right-of-use assets, net 27,810 11,347 Other long-term assets: Deferred income tax asset 29,309 23,397 Other, net of credit losses of $ 500 and $ 500 28,359 19,230 Total other assets 57,668 42,627 Total assets $ 322,863 $ 315,874 LIABILITIES AND SHAREHOLDERS ’ EQUITY Current liabilities: Accounts payable $ 65,840 $ 63,725 Accrued compensation and vacation 5,928 8,157 Current portion of long-term debt 7,257 6,215 Other 22,048 13,894 Total current liabilities 101,073 91,991 Long-term liabilities: Long-term debt, net 92,038 98,936 Operating lease liabilities 21,154 6,859 Deferred income tax liability 10 — Other long-term obligations 5,500 954 Total long-term liabilities 118,702 106,749 Total liabilities 219,775 198,740 Commitments and contingencies (Note 8) Shareholders’ equity: Common stock, no par value—shares authorized 25,000 ; issued and outstanding 10,859 and 10,762 shares, respectively 47,970 47,502 Retained earnings 55,153 68,603 Accumulated other comprehensive income (loss) ( 35 ) 1,029 Total shareholders’ equity 103,088 117,134 Total liabilities and shareholders’ equity $ 322,863 $ 315,874 See accompanying notes to consolidated financial statements. 4 KEY TRONIC CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited, in thousands, except per share amounts) Three Months Ended Nine Months Ended March 28, 2026 March 29, 2025 March 28, 2026 March 29, 2025 Net sales $ 89,571 $ 111,974 $ 284,640 $ 357,385 Cost of sales 82,388 103,367 268,643 327,769 Gross profit 7,183 8,607 15,997 29,616 Research, development and engineering expenses 1,825 2,308 5,748 6,917 Selling, general and administrative expenses 6,233 6,758 21,966 19,835 Gain on insurance proceeds, net of losses ( 637 ) — ( 637 ) — Total operating expenses 7,421 9,066 27,077 26,752 Operating income (loss) ( 238 ) ( 459 ) ( 11,080 ) 2,864 Interest expense, net 2,396 2,581 7,543 9,748 Loss before income taxes ( 2,634 ) ( 3,040 ) ( 18,623 ) ( 6,884 ) Income tax benefit ( 9 ) ( 2,436 ) ( 5,173 ) ( 2,490 ) Net loss $ ( 2,625 ) $ ( 604 ) $ ( 13,450 ) $ ( 4,394 ) Net loss per share — Basic $ ( 0.24 ) $ ( 0.06 ) $ ( 1.24 ) $ ( 0.41 ) Weighted average shares outstanding —Basic 10,859 10,762 10,830 10,762 Net loss per share — Diluted $ ( 0.24 ) $ ( 0.06 ) $ ( 1.24 ) $ ( 0.41 ) Weighted average shares outstanding — Diluted 10,859 10,762 10,830 10,762 See accompanying notes to consolidated financial statements. 5 KEY TRONIC CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS (Unaudited, in thousands) Three Months Ended Nine Months Ended March 28, 2026 March 29, 2025 March 28, 2026 March 29, 2025 Comprehensive income (loss): Net loss $ ( 2,625 ) $ ( 604 ) $ ( 13,450 ) $ ( 4,394 ) Other comprehensive income (loss): Unrealized gain (loss) on hedging instruments, net of tax ( 430 ) 686 ( 1,064 ) ( 110 ) Comprehensive income (loss) $ ( 3,055 ) $ 82 $ ( 14,514 ) $ ( 4,504 ) Other comprehensive loss for the three months ended March 28, 2026 and March 29, 2025, is reflected net of tax expense (benefit) of approximately $( 0.1 ) million and $ 0.2 million, respectively. Other comprehensive loss for the nine months ended March 28, 2026 and March 29, 2025, is reflected net of tax benefit of approximately $( 0.3 ) million and $ 0.0 million, respectively. See accompanying notes to consolidated financial statements. 6 KEY TRONIC CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOW (Unaudited, in thousands) Nine Months Ended March 28, 2026 March 29, 2025 Operating activities: Net loss $ ( 13,450 ) $ ( 4,394 ) Adjustments to reconcile net loss to cash provided by operating activities: Depreciation and amortization 7,130 7,945 Amortization of deferred loan costs 447 1,413 Noncash lease expense 3,139 3,607 Inventory adjustments to net realizable value 2,920 — Provision for warranty — 17 Provision for credit losses 3,836 740 (Gain) loss on disposal of assets ( 1 ) 2 Gain on insurance proceeds, net of losses ( 637 ) — Share-based compensation expense 468 109 Deferred income taxes ( 5,902 ) ( 4,445 ) Changes in operating assets and liabilities: Trade receivables 9,556 19,574 Contract assets 58 2,221 Inventories 8,603 5,769 Other assets ( 2,055 ) ( 7,284 ) Accounts payable 2,115 ( 14,127 ) Accrued compensation and vacation ( 2,229 ) ( 653 ) Other liabilities ( 4,027 ) ( 376 ) Cash provided by operating activities 9,971 10,118 Investing activities: Purchase of property and equipment ( 3,684 ) ( 3,020 ) Cash used in investing activities ( 3,684 ) ( 3,020 ) Financing activities: Payment of financing costs ( 208 ) ( 2,681 ) Repayments of long term debt ( 5,583 ) ( 3,533 ) Borrowings under revolving credit agreement 116,225 347,835 Repayments of revolving credit agreement ( 117,179 ) ( 376,932 ) Principal payments on finance leases ( 937 ) ( 2,071 ) Proceeds from issuance of long-term debt 442 28,000 Cash used in financing activities ( 7,240 ) ( 9,382 ) Net decrease in cash and cash equivalents ( 953 ) ( 2,284 ) Cash and cash equivalents, beginning of period 1,384 4,752 Cash and cash equivalents, end of period $ 431 $ 2,468 Supplemental cash flow information: Interest payments $ 7,215 $ 8,405 Income tax payments, net of refunds $ 1,257 $ 902 Recognition of operating lease liabilities and right-of-use assets $ 22,133 $ 784 Recognition of financing lease liabilities and right-of-use assets $ 8,220 $ — Derecognition of operating lease liabilities and right of use assets $ ( 2,531 ) $ — See accompanying notes to consolidated financial statements. 7 KEY TRONIC CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY (Unaudited, in thousands) Three Months Ended Nine Months Ended March 28, 2026 March 29, 2025 March 28, 2026 March 29, 2025 Total shareholders’ equity, beginning balances $ 106,174 $ 119,487 $ 117,134 $ 123,990 Common stock (shares): Beginning balances 10,859 10,762 10,762 10,762 Restricted stock awards released — — 97 — Ending balances 10,859 10,762 10,859 10,762 Common stock: Beginning balances $ 48,001 $ 47,367 $ 47,502 $ 47,284 Share-based compensation expense ( 31 ) 26 468 109 Ending balances 47,970 47,393 47,970 47,393 Retained Earnings: Beginning balances $ 57,778 $ 73,131 $ 68,603 $ 76,921 Net loss ( 2,625 ) ( 604 ) ( 13,450 ) ( 4,394 ) Ending balances 55,153 72,527 55,153 72,527 Accumulated other comprehensive income (loss): Beginning balances $ 395 $ ( 1,011 ) $ 1,029 $ ( 215 ) Unrealized gain (loss) on hedging instruments, net ( 430 ) 686 ( 1,064 ) ( 110 ) Ending balances ( 35 ) ( 325 ) ( 35 ) ( 325 ) Total shareholders’ equity, ending balances $ 103,088 $ 119,595 $ 103,088 $ 119,595 See accompanying notes to consolidated financial statements. 8 KEY TRONIC CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) 1. Basis of Presentation The consolidated financial statements included herein have been prepared by Key Tronic Corporation and subsidiaries (the “Company”) pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). Certain information and footnote disclosures normally included in our annual consolidated financial statements have been condensed or omitted. The year-end condensed consolidated balance sheet information was derived from audited financial statements, but does not include all disclosures required by accounting principles generally accepted in the United States of America. The financial statements reflect all normal and recurring adjustments which, in the opinion of management, are necessary for a fair presentation of the financial position, results of operations and cash flows for the interim periods presented. The preparation of financial statements in accordance with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the reported amounts of revenues and expenses during the reporting period. The results of operations for the periods presented are not necessarily indicative of the results to be expected for the full year. The accompanying unaudited condensed consolidated financial statements should be read in conjunction with the financial statements and notes included in the Company’s Annual Report on Form 10-K for the fiscal year ended June 28, 2025. The Company’s reporting period is a 52/53 week fiscal year ending on the Saturday closest to June 30. The three month period ended March 28, 2026 and March 29, 2025, were both 13 week periods. Fiscal year 2026 will end on June 27, 2026, which is a 52 week year. Fiscal year 2025, which ended on June 28, 2025, was also a 52 week year. Management’s Assessment of Liquidity Historically, due to the timing between the procurement of raw materials, production cycle and payment from our customers, we have financed operations and met our capital expenditure requirements primarily through cash flows provided by operations and borrowings under our credit facilities. We generated cash from operations of $ 10.0 million and $ 10.1 million, respectively, during the nine-month periods ended March 28, 2026, and March 29, 2025, respectively, and have positive working capital of $ 106.9 million as of March 28, 2026. Based on current projections, we anticipate continuing to generate cash from operations as revenue is expected to increase throughout fiscal year 2026 along with further gross margin improvements. On December 3, 2024, we entered into an asset-based credit agreement with BMO Bank, N.A that provides for an asset-based senior secured revolving credit facility of up to $ 115 million, maturing on December 3, 2029. On December 3, 2024, we also entered into a $ 28 million term loan credit agreement with Callodine Commercial Finance, LLC. As of March 28, 2026, approximately $ 20.2 million was available under the asset-based senior secured revolving credit facility. Finally, $ 0.4 million of cash was on hand. We believe that projected cash from operations and funds available under our asset-based revolving credit facility will be sufficient to meet our working and fixed capital requirements for at least the next 12 months. 2. Significant Accounting Policies Allowance for Credit Losses The Company evaluates the collectability of accounts receivable, contract assets, and other recoverable costs and records an allowance for credit losses, which reduces these assets to an amount that management reasonably estimates will be collected. A specific allowance is recorded against receivables considered to be impaired based on the Company’s knowledge of the financial condition of the customer, and a general allowance is calculated and applied to remaining assets based on the Company's historical collection experience. In determining the amount of the allowance, the Company considers several factors including the aging of the receivables, the current business environment and historical experience. After all attempts to collect a receivable have failed, the receivable is written off against the allowance. Leases Lease assets and liabilities are initially recognized based on the present value of lease payments over the lease term calculated using the Company’s incremental borrowing rate, unless the implicit rate is readily determinable. Our incremental borrowing rate represents the rate of interest that we would have to pay to borrow on a collateralized basis over a similar term in a similar economic environment. Lease assets also include any lease prepayments. Lease terms include options to extend or terminate the lease when it is reasonably certain that those options will be exercised. Leases are classified as finance or operating, with classification affecting the pattern and classification of expense recognition in the consolidated statements of operations. For further information, please refer to Note 11. “Leases.” 9 Revenue Recognition The first step in its process for revenue recognition is to identify the contract with a customer. A contract is defined as an agreement between two or more parties that creates enforceable rights and obligations. A contract can be written, oral, or implied. The Company generally enters into manufacturing service agreements (“MSA”) with its customers that outlines the terms of the business relationship between the customer and the Company. This includes matters such as warranty, indemnification, transfer of title and risk of loss, liability for excess and obsolete inventory, pricing, and payment terms. The Company will also bid on a program-by-program basis for customers in which an executed MSA may not be in place. In these instances, as well as when we have an MSA in place, we receive customer purchase orders for specific quantities and timing of products. As a result, the Company considers its contract with a customer to be the combination of the MSA and the purchase order. The transaction price is fixed and set forth in each purchase order. In the Company's normal course of business, there are no variable pricing components, or material amounts refunded to customers in the form of refunds or rebates. The Company assesses whether control of the product or services promised under the contract is transferred to the customer at a point in time (shipment) or over time (as we manufacture the product). The Company is first required to evaluate whether its contracts meet the criteria for 'over-time' or 'point-in-time' recognition. The Company has determined that for the majority of its contracts the Company is manufacturing products for which there is no alternative use due to the unique nature of the customer-specific product, IP and other contract restrictions. The Company has an enforceable right to payment including a reasonable profit for performance completed to date with respect to these contracts. As a result, revenue is recognized under these contracts 'over-time' based on the input cost-to-cost method as it better depicts the transfer of control. This input method is based on the ratio of costs incurred to date as compared to the total estimated costs at completion of the performance obligation. For all other contracts that do not meet these criteria, such as manufacturing contracts for which the terms do not provide an enforceable right to payment for performance completed to date, the Company recognizes revenue when it has transferred control of the related manufactured products which generally occurs upon shipment to the customer. Revenue from engineering services is recognized over time as costs related to the services are incurred, which approximates proportional performance of the service. This method is used because management considers it to be the best available measure of progress on the contracts. Revenue from scrap and excess inventory sales is recognized at the point-in-time of scrap at the customers’ direction, or, if applicable, shipment of the material to the customer. Earnings Per Common Share Basic earnings per common share (“EPS”) is computed by dividing net income (loss) by the weighted average number of common shares outstanding during the period. Diluted EPS is computed by dividing net income (loss) by the combination of other potentially dilutive weighted average common shares and the weighted average number of common shares outstanding during the period using the treasury stock method. The computation assumes the proceeds from the exercise of equity awards were used to repurchase common shares at the average market price during the period. The computation of diluted EPS does not assume conversion, exercise, or contingent issuance of common stock equivalent shares that would have an anti-dilutive effect on EPS. Derivative Instruments and Hedging Activities The Company has entered into foreign currency forward contracts which are accounted for as cash flow hedges in accordance with ASC 815, Derivatives and Hedging. The effective portion of the gain or loss on the derivative is reported as a component of accumulated other comprehensive income (“AOCI”) and is reclassified into earnings in the same period in which the underlying hedged transaction affects earnings. The derivative’s effectiveness represents the change in fair value of the hedge that offsets the change in fair value of the hedged item. The Company uses derivatives to manage the variability of foreign currency fluctuations of expenses in our Mexico facilities. The foreign currency forward contracts have terms that are matched to the underlying transactions being hedged. As a result, these transactions fully offset the hedged risk and no ineffectiveness has been recorded. The Company’s foreign currency forward contracts potentially expose the Company to credit risk to the extent the counterparty may be unable to meet the terms of the agreement. The Company minimizes such risk by utilizing a counterparty with a strong credit rating. The Company’s counterparty to the foreign currency forward contracts is a major banking institution. This institution does not require collateral for the contracts, and the Company believes that the risk of the counterparty failing to meet their contractual obligations is remote. The Company does not enter into derivative instruments for trading or speculative purposes. 10 Income Taxes We generally compute our interim income tax provision through the use of an estimated tax rate (“ETR”) applied to year-to-date operating results and specific events that are discretely recognized as they occur. In determining the estimated annual ETR, we analyze various factors, including projections of our annual earnings, taxing jurisdictions in which the earnings will be generated, the impact of state and local income taxes, our ability to use tax credits and available tax planning alternatives. In the current quarter and for the full fiscal year 2026, we have departed from the ETR approach with respect to China, as the decision to end manufacturing operations has caused a change in judgment regarding the realizability of our deferred tax assets in China, resulting in projected zero ETR in China for fiscal year 2026. Discrete items, including the effect of changes in tax laws, tax rates, and certain circumstances with respect to valuation allowances or other unusual or non-recurring tax adjustments, are reflected in the period in which they occur as an addition to, or reduction from, the income tax provision, rather than included in the estimated annual ETR.. Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the estimated future tax consequences and benefits attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases, as well as tax credit and net operating loss carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which temporary differences and carryforwards are expected to be recovered or settled. The effect on deferred tax assets and liabilities for a change in tax rates is recognized in the period that includes the enactment date. Valuation allowances are established when necessary to reduce deferred tax assets to the amount that is more likely than not to be realized. We utilize a two-step approach to recognizing and measuring uncertain tax positions. The first step is to evaluate the tax position for recognition by determining if the weight of available evidence indicates it is more likely than not that the position will be sustained on audit, including resolution of related appeals or litigation processes, if any. The second step is to measure the tax benefit as the largest amount which is more than 50% likely of being realized upon ultimate settlement. We consider many factors when evaluating and estimating our tax positions and tax benefits, which may require periodic adjustments based on new assessments and changes in estimates and which may not accurately forecast actual outcomes. Our policy is to recognize interest and penalties related to the underpayment of income taxes as a component of income tax expense. The tax years 2005 through the present remain open to examination by the major U.S. taxing jurisdictions to which we are subject. Refer to Note 5 for further discussions. Recently Issued Accounting Standards On November 4, 2024 the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2024-03, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures. The ASU requires entities to disclose in the notes to the financial statements specified information about certain costs and expenses. The ASU applies to the Company’s annual reporting period beginning in fiscal year 2028 and interim reporting periods beginning in fiscal year 2029. The Company does not anticipate early adoption of the new disclosure standard. On December 14, 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures. The ASU requires entities to disclose more detailed information relating to their reconciliation of statutory tax rate to effective tax rate, income taxes paid by jurisdiction, pretax income (or loss) from continuing operations, and income tax expense (or benefit). The ASU applies to the Company’s annual reporting period beginning in fiscal year 2026, and the Company is currently assessing the impact of the disclosure requirement on its consolidated financial statements. On September 18, 2025, the FASB issued ASU 2025-06, Intangibles-Goodwill and Other-Internal-Use Software (Subtopic 350-40): Targeted Improvements to the Accounting for Internal-Use Software. This update was made to modernize the accounting for software costs. The ASU is effective for all entities for annual reporting periods beginning after December 15, 2027, and interim reporting periods within those annual reporting periods. Early adoption is permitted. The Company is currently evaluating the guidance and its impact to the financial statements. On November 25, 2025, the FASB issued ASU 2025-09, Derivatives and Hedging (Topic 815), Hedge Accounting Improvements. This update was made to clarify certain aspects of the guidance on hedge accounting and to address several incremental hedge accounting issues arising from the global reference rate reform initiative. The ASU is effective for public business entities for annual reporting periods beginning after December 15, 2026, and interim reporting periods within those annual reporting periods. Early adoption is permitted. The Company is currently assessing the impact of the requirements on its consolidated financial statements. On December 4, 2025, the FASB issued ASU 2025-10, Government Grants (Topic 832), Accounting for Government Grants Received by Business Entities. The FASB is issuing this Update to improve generally accepted accounting principles (GAAP) by establishing authoritative guidance on the accounting for government grants received by business entities. The ASU is effective for public business entities for annual reporting periods beginning after December 15, 2029, and interim reporting 11 periods within those annual reporting periods. Early adoption is permitted. The Company does not expect any material changes to its consolidated financial statements as a result of this update. On December 8, 2025, the FASB issued ASU 2025-11, Interim Reporting (Topic 270), Narrow-Scope Improvements. This update is intended to improving the navigability of the required interim disclosures and clarifying when that guidance is applicable. The amendments also provide additional guidance on what disclosures should be provided in interim reporting periods. The ASU is effective for interim reporting periods within annual reporting periods beginning after December 15, 2027 for public business entities. Early adoption is permitted. The Company is currently assessing the impact of the requirements on its consolidated financial statements. On December 17, 2025 the FASB issued ASU 2025-12, Codification Improvements. This evergreen project facilitates Codification updates for a broad range of Topics arising from technical corrections, unintended application of the Codification, clarifications, and other minor improvements. The resulting amendments are collectively referred to as Codification improvements. The amendments in this Update are effective for all entities for annual reporting periods beginning after December 15, 2026, and interim reporting periods within those annual reporting periods. The types of issues considered through this project are improvements that are not expected to have a significant effect on current accounting practice or result in significant costs to most entities, and the Company is currently assessing the impact of the requirements on its consolidated financial statements. 3. Inventories Inventories as of March 28, 2026 are $ 85.8 million compared to $ 97.3 million as of June 28, 2025. The components of inventories consist of the following (in thousands): March 28, 2026 June 28, 2025 (in thousands) Raw materials and supplies $ 65,271 $ 75,429 Work-in-process 20,527 21,892 Inventories $ 85,798 $ 97,321 4. Long-Term Debt Maturity Date Interest Rate March 28, 2026 June 28, 2025 (in thousands) Asset-based senior secured revolving credit facility (1) December 3, 2029 6.8 % $ 66,325 $ 67,900 Domestic term loan - Callodine (2) December 3, 2029 10.8 % 24,250 26,500 Foreign line of credit (3) December 11, 2026 10.0 % 1,086 3,253 Domestic term loan - Balboa (4) September 19, 2029 6 % to 8 % 3,038 3,702 Foreign term loan - Banorte (5) April 24, 2026 5.5 % 100 1,000 Domestic term loan - Avtech 8 (6) December 16, 2028 13.6 % 658 278 Domestic term loan - Avtech 9 (7) June 30, 2028 11.7 % 4,020 4,996 Foreign term loan - Banorte (3) September 7, 2030 11.0 % 2,057 — Total debt 101,534 107,629 Less: current portion of debt ( 7,257 ) ( 6,215 ) Less: unamortized financing costs ( 2,239 ) ( 2,478 ) Long-term debt, net $ 92,038 $ 98,936 (1) On December 3, 2024, the Company entered into an asset-based credit agreement (the "Credit Agreement") among the Company, certain domestic subsidiaries (as co-borrowers or guarantors), BMO Bank, N.A (the "Bank"), as administrative agent and swing line lender, BMO Capital Markets as arranger and book runner, and certain financial institutions, as lenders. The Credit Agreement provides for an asset-based senior secured revolving credit facility (the "Credit Facility") of up to $ 115 million, maturing on December 3, 2029. Generally, under the Credit Agreement and at the Company’s option: (i) each SOFR Loan shall bear interest at a rate per annum equal to Adjusted Term SOFR (Term SOFR plus 0.10 %, subject to a floor of 0.00 %) plus an applicable margin of 2.50 % to 3.00 %, depending on the availability of borrowing amounts under the Credit Agreement; and (ii) each Base Rate Loan, Swing Line Loan or other Obligation shall bear interest at a rate per annum equal to the Base Rate (subject to a floor of 1.00 %) plus an 12 applicable margin of 1.50 % to 2.00 %, depending on the availability of borrowing amounts under the Credit Agreement. As of March 28, 2026, the applicable margin was 2.75 % for SOFR Loans and 1.75 % for Base Rate Loans. If there is an event of default under the Credit Agreement, all loans and other obligations may bear interest at a rate of an additional 2.00 % on the otherwise applicable interest rates. In addition to the applicable interest rates, the Company is required to pay a fee of 0.2 % per annum on the unused portion of the Credit Facility, monthly in arrears. Availability on the line of credit is generally determined based on eligible inventory and accounts receivable balances. On May 13, 2025, the Company entered into a first amendment and limited waiver to the Credit Agreement. The amendment waived an existing event of cross-default created by an event of default under the Term Loan as defined and discussed in footnote (2) below. The amendment also adds an additional reporting requirement. Proceeds from the Credit Facility and the Term Loan discussed below were used to pay-off the Company's prior loan and security agreement, as amended, with Bank of America, N.A. in the amount of $ 99.7 million, as well as its outstanding equipment term loan, and financing costs related to the Credit Agreement. The Term Loan may also be used to pay-off certain other existing debt, to issue letters of credit, and for other business purposes, including working capital needs. As of March 28, 2026, the Company had an outstanding balance under the asset-based revolving credit facility of $ 66.3 million, $ 0.7 million in outstanding letters of credit and $ 20.2 million available for future borrowings. As of June 28, 2025, the Company had an outstanding balance under the Credit Facility of $ 67.9 million, $ 0.4 million in outstanding letters of credit and $ 25.0 million available for future borrowings. (2) On December 3, 2024, the Company entered into a $ 28 million term loan (the "Term Loan") credit agreement among the Company, certain domestic subsidiaries (as co-borrowers or guarantors), Callodine Commercial Finance, LLC (“Callodine”), as administrative agent, and certain financial institutions, as term loan lenders. The Term Loan requires quarterly repayments of principal in the amount of $ 0.75 million. The remainder will be payable at maturity which is the earlier of December 3, 2029 or the maturity of the Credit Agreement described above. The Term Loan bears interest at Adjusted Term SOFR (Term SOFR plus 0.15 %, subject to a floor of 3.50 %) plus an applicable margin of 7.00 %. If there is an event of default under the Term Loan, all loans and other obligations may bear interest at a rate of an additional 2.00 % on the otherwise applicable interest rate. On May 13, 2025, the Company entered into a first amendment and limited waiver to the Term Loan. The amendment waived an existing event of default relating to non-compliance with minimum required earnings before interest, depreciation, amortization, and other adjustments for the period ending March 29, 2025. The amendment adds an additional reporting requirement, and requires minimum earnings before interest, taxes, depreciation, amortization, and other adjustments only if average daily availability for the applicable fiscal quarter is less than 12.5 % of the combined borrowing base. (3) On December 11, 2023, the Company entered into a loan agreement in Mexican peso with Banorte Financial Group. The agreement provides for a three-year secured line of credit up to MXN 100 million, subject to the Company’s borrowing base, maturing on December 11, 2026. On October 2, 2025, the company refinanced its loan agreement with Banorte Financial Group. The refinanced agreement separated the existing MXN 100 million line of credit into two separate debt instruments. The first instrument allows for a line of credit of up to MXN 20 million, subject to the Company’s borrowing base, maturing on December 11, 2026. The second component is a MXN 40 million term loan, requiring monthly payments of MXN 678 thousand through maturity on September 7, 2030. The agreement is subject to certain financial covenants which are reviewed on an annual basis. No proceeds were received as a result of the refinanced agreement. The credit facility bears interest at Iterbancario de Equilibrio Interest Rate plus 2.75 %, and as of March 28, 2026, was 10.0 %. As of March 28, 2026, the Company had an outstanding balance under the revolving credit facility of MXN 19 million ($ 1.1 million USD) and MXN 1 million ($ 0.0 million USD) was available for future borrowings. (4) On September 19, 2023, the Company entered into a $ 1.1 million equipment financing agreement with Ameris Bank dba Balboa Capital ("Balboa Capital"). Combining with other equipment financing agreements entered in the third quarter of fiscal year 2023, a total of $ 5.5 million relates to the Company’s existing manufacturing equipment that bears an interest rate range of 6 % - 8 % and matures in the first quarter of fiscal 2030. Under these loan agreements, equal monthly payments of $ 94,000 commenced in the fourth quarter of fiscal year 2024 and will continue through the maturity of the equipment financing facility in the first quarter of fiscal 2030. (5) On November 24, 2020, the Company entered into a $ 6.0 million equipment financing facility related to the Company’s existing manufacturing equipment that bears interest at 5.52 % and matures on April 24, 2026. Under this loan agreement, equal monthly payments of $ 100,000 commenced on May 24, 2021 and will continue through the maturity of the equipment financing facility on April 24, 2026. (6) On May 1, 2025, the Company entered into a $ 4.0 million equipment financing facility related to new manufacturing equipment that bears interest at 13.6 % and matures on October 31, 2028. On December 16, 2025, the equipment financing facility was amended and restated to reduce the financing proceeds to $ 0.7 million and equal quarterly payments of $ 69,022 . The equipment financing facility will mature on December 16, 2028. 13 (7) On March 6, 2025, the Company entered into a $ 5.0 million equipment financing facility related to the Company’s existing manufacturing equipment that bears interest at 11.71 % and matures on June 30, 2028. Under this loan agreement, equal quarterly payments of $ 464,361 commenced on July 15, 2025 and will continue through the maturity of the equipment financing facility on June 30, 2028. Debt maturities as of March 28, 2026 for the next five years are as follows (in thousands): Fiscal Years Ending Amount 2026 (1) $ 1,593 2027 7,224 2028 6,920 2029 4,343 2030 81,339 Thereafter 115 Total debt 101,534 Unamortized debt issuance costs ( 2,239 ) Long-term debt, net of debt issuance costs $ 99,295 (1) Represents scheduled payments for the remaining three-month period ending June 27, 2026. The Company must comply with certain financial covenants, including average and daily availability and, if triggered, earnings before interest, taxes, depreciation, amortization and other adjustments and a fixed charge coverage ratio covenant will apply. The Credit Agreement requires the Company to grant certain inspection rights to BMO Bank, N.A., limit or restrict the Company’s cash management; limit or restrict the ability of the Company to incur additional liens, make acquisitions or investments, incur additional indebtedness, engage in mergers, consolidations, liquidations, dissolutions, or dispositions, pay dividends or other restricted payments, prepay certain indebtedness, engage in transactions with affiliates, and use proceeds. As of March 28, 2026, the Company was in compliance with all applicable financial covenants. 5. Income Taxes Currently, all unremitted foreign earnings are expected to remain permanently reinvested for planned fixed assets purchases and improvements in foreign locations. Repatriations of cash will generally be tax-free in the U.S. However, withholding taxes in China may still apply to any such future repatriations. Currently, management estimates no future repatriations of cash from China that would result in withholding tax. Withholding taxes would not apply to future repatriations from Mexico or Vietnam. The Company has available approximately $ 11.8 million of gross federal research and development tax credits as of March 28, 2026 expiring in various fiscal years from 2033 to 2046. ASC 740 requires the Company to recognize in its financial statements uncertainties in tax positions taken that may not be sustained upon examination by the taxing authorities. Accordingly, as of March 28, 2026, the Company has recorded $ 3.0 million of unrecognized tax benefits associated with these federal tax credits, resulting in a net deferred tax benefit of approximately $ 8.8 million. Management has reviewed all deferred tax assets for purposes of determining whether a valuation allowance may be required. A valuation allowance against deferred tax assets is required if it is more likely than not that some of the deferred tax assets will not be realized. In spite of the Company’s current cumulative loss position before nonrecurring items such as cyber losses and restructuring costs, based upon the Company’s historical profitability and forecasted income, management determined that it is more likely than not that the deferred tax assets will be realized, except for deferred tax assets in China, discussed below. The Company’s largest deferred tax assets are federal research and development tax credits, deferred research and development expenses, and interest expense deduction carryforwards. Company forecasts show that the credits will be utilized within the expiration period. Deferred research and development expenses are deductible in fiscal year 2026 under the One Big Beautiful Bill Act. Interest expense deduction carryforwards, which never expire and carry forward indefinitely, are projected to be utilized in future periods as profitability increases and interest expense decreases. Profitability is forecasted in the coming years due to the nonrecurrence of significant expense items in recent years such as cyber losses and restructuring costs, the future cost benefits associated with the restructuring costs, and significant income and increased margins from multiple new customers. The Company has closely monitored the realizability of deferred tax assets, tracking book income, permanent differences, and nonrecurring items while projecting future utilization of deferred tax assets, and will continue to do so as future actual results are compared to forecasted results. The Company’s decision to end manufacturing operations in China has resulted in loss carryforwards that more likely than not will not be realized in the carryforward period. Therefore, the Company has placed a full valuation allowance on the net deferred tax asset in China as of March 28, 2026. 14 The Company evaluated tax law changes and regulatory guidance issued through the fiscal quarter. After the end of fiscal year 2025, on July 4, 2025, the One Big Beautiful Bill Act (“OBBBA”) was enacted, which includes several tax related provisions that will impact the Company beginning in fiscal year 2026. The Company expects these tax law changes may mitigate federal income taxes payable, but it is not expected to materially impact the Company’s overall tax position and effective tax rate in fiscal year 2026 or beyond. On January 27, 2021, the Company received official notice from the Vietnamese tax authorities, confirming tax benefits awarded (the “tax holiday”) related to the Company’s principal product line in Vietnam. The tax rate related to this product line will be zero percent for four years beginning with fiscal year 2021, then five percent for nine years, then ten percent for one year (as opposed to the normal twenty percent each year). The Company’s Advance Pricing Agreement for intercompany transfer pricing has expired, and our Mexico subsidiary is now subject to the Mexico safe harbor transfer pricing regulations. As a result, we generally expect our current tax liability in Mexico to increase. Overall, we do not expect the application of the safe harbor transfer pricing regulations to have a material impact on our consolidated tax position. 6. Earnings Per Share Basic earnings per share (“EPS”) is calculated by dividing net loss (the numerator) by the weighted-average number of common shares outstanding (the denominator) during the period. Diluted EPS is computed by including both the weighted-average number of shares outstanding and any dilutive common share equivalents in the denominator. The following table presents a reconciliation of the denominator and the number of antidilutive common share awards that were not included in the diluted earnings per share calculation. These antidilutive securities occur when equity awards outstanding have an option price greater than the average market price for the period: Three Months Ended Nine Months Ended (in thousands, except per share information) March 28, 2026 March 29, 2025 March 28, 2026 March 29, 2025 Net loss $ ( 2,625 ) $ ( 604 ) $ ( 13,450 ) $ ( 4,394 ) Weighted average shares outstanding—basic 10,859 10,762 10,830 10,762 Effect of dilutive common stock awards — — — — Weighted average shares outstanding—diluted $ 10,859 $ 10,762 $ 10,830 $ 10,762 Net loss per share—basic $ ( 0.24 ) $ ( 0.06 ) $ ( 1.24 ) $ ( 0.41 ) Net loss per share—diluted $ ( 0.24 ) $ ( 0.06 ) $ ( 1.24 ) $ ( 0.41 ) Antidilutive shares not included in diluted earnings per share 182 13 122 2 7. Stock-Based Compensation and Benefit Plans The Company’s 2024 Incentive Plan provides for equity and liability awards to employees and non-employee directors with service and performance vesting conditions in the form of stock options, stock appreciation rights (“SARs”), restricted stock, restricted stock units, stock awards, stock units, performance shares, performance units, and other stock-based or cash-based awards. At March 28, 2026, 1,056,448 shares were available for grant. Compensation cost is recognized on a straight-line basis over the requisite employee service period, which is generally the vesting period, and is recorded as employee compensation expense in cost of goods sales, research, development and engineering, and selling, general and administrative expenses. Share-based compensation is recognized only for those awards that are expected to vest. For SARs awards, forfeitures are estimated at the date of grant based on historical experience and future expectations. Due to a lack of historical experience and a different grant pool than SARs, forfeitures for restricted stock units are accounted for prospectively as they occur. Stock Appreciation Rights In addition to service conditions, SARs contain a performance condition. The additional performance condition is based upon the achievement of Return on Invested Capital (“ROIC”) goals relative to a peer group. All awards with performance conditions are evaluated quarterly to determine the likelihood that performance metrics will be achieved during the performance period. These awards are charged to compensation expense over the requisite service period based on the number of shares expected to vest. If the performance and service conditions are attained, then the SARs cliff vest after the completion of the three-year period from date of grant and expire five years from date of grant. 15 SARs Aggregate Intrinsic Value (in thousands) Weighted Average Exercise Price Weighted Average Remaining Contractual Life (in years) Outstanding, June 30, 2024 387,500 $ — $ 5.78 1.8 SARs forfeited ( 136,250 ) $ 7.17 SARs expired ( 115,000 ) $ 4.93 Outstanding, March 29, 2025 136,250 $ — $ 5.10 2.3 Outstanding, June 28, 2025 136,250 — $ 5.10 2.1 SARs forfeited ( 136,250 ) $ 5.10 Outstanding, March 28, 2026 — $ — $ — — Exercisable, March 28, 2026 — $ — $ — — The Black-Scholes option valuation model is used by the Company for estimating the fair value of SARs. Option valuation models require the input of highly subjective assumptions, particularly for the expected term and expected stock price volatility. Changes in these assumptions can materially affect the fair value estimates. There were no SARs granted during the three or nine-months ended March 28, 2026 and March 29, 2025. Share-based compensation expense is recognized only for those awards that are expected to vest, with forfeitures estimated at the date of grant based on the Company’s historical experience and future expectations. This forfeiture rate will be revised, if necessary, in subsequent periods if actual forfeitures differ from the amount estimated. No SARs expense was recognized during the three months ended March 28, 2026 or March 29, 2025. No SARs expense was recognized during the nine months ended March 28, 2026 and $( 139,000 ) was recognized during the nine months ended March 29, 2025. There were no SARs exercised during the three or nine month periods ended March 28, 2026 or March 29, 2025. Restricted Stock Units The Company grants restricted stock units that have a performance condition and/or a service condition. Restricted stock units with only a service condition generally vest in equal annual installments over a maximum of three years . Certain restricted stock units are granted with a performance condition. The final number of shares issued will be determined annually based on the achievement of annual financial targets. Forfeitures for restricted stock units are accounted for prospectively as they occur. The fair value of restricted stock units is the market close price on the date of grant. The following table is a summary of restricted stock unit activity: Number of Restricted Stock Units Weighted Average Grant Date Fair Value Aggregate Intrinsic Value (in thousands) Outstanding, June 30, 2024 — Granted 329,457 $ 4.52 Outstanding, March 29, 2025 329,457 $ 4.52 Outstanding, June 28, 2025 281,577 $ 4.52 Granted 552,375 $ 2.79 Released ( 97,398 ) $ 4.52 $ 285 Forfeited ( 12,688 ) $ 3.28 Outstanding, March 28, 2026 723,866 $ 3.18 Vested but not released, March 28,2026 — 16 Total restricted stock unit expense recognized during the three months ended March 28, 2026 and March 29, 2025 was approximately $( 31,000 ) and $ 26,000 . Total restricted stock unit expense recognized during the nine months ended March 28, 2026 and March 29, 2025 was approximately $ 468,000 and $ 250,000 . As of March 28, 2026 total unrecognized compensation expense on restricted stock units was $ 1.5 million, which is expected to be recognized over a weighted average period of approximately 1.9 years. 8. Commitments and Contingencies Litigation and Other Matters The Company is party to certain lawsuits or claims in the ordinary course of business. The Company does not believe that these proceedings, individually or in the aggregate, will have a material adverse effect on the financial position, results of operations or cash flow of the Company. Warranties The Company provides warranties on certain product sales. Allowances for estimated warranty costs are recorded during the period of sale. The determination of such allowances requires the Company to make estimates of product return rates and expected costs to repair or to replace the products under warranty. If actual return rates and/or repair and replacement costs differ significantly from management’s estimates, adjustments to recognize additional cost of sales may be required in future periods. The Company’s warranty reserve was approximately $ 25,300 as of March 28, 2026 and $ 26,000 as of June 28, 2025. 9. Derivative Financial Instruments A significant portion of our operations are in foreign locations, which results in transactions occurring in currencies other than the U.S. Dollar. As a part of our risk management strategy, we use Mexican Peso forward contracts to hedge foreign currency fluctuations for a portion of our Mexican Peso denominated expenses. As of March 28, 2026, the Company had outstanding foreign currency forward contracts with a total notional amount of $ 19.5 million that mature through the third quarter of fiscal year 2027. During the three months ended March 28, 2026, the Company entered into $ 11.7 million of foreign currency forward contracts and settled $ 6.6 million of such contracts. During the same period of the previous year, the Company did not enter into foreign currency forward contracts and settled $ 8.1 million of such contracts. During the nine months ended March 28, 2026, the Company entered into $ 27.0 million of foreign currency forward contracts and settled $ 20.4 million of such contracts. During the same periods of the previous year, the Company entered into $ 29.0 million of foreign currency forward contracts and settled $ 20.6 million of contracts. Changes in the fair value of the forward contracts are recognized as a component of OCI and will be recognized in cost of sales when the hedged item affects earnings. The amount of net loss expected to be reclassified into earnings in the next 12 months is approximately $ 35,000 . The following table summarizes the fair value of the derivative instruments in the Consolidated Balance Sheets as of March 28, 2026 and June 28, 2025 (in thousands): Fair Value Derivatives designated as hedging instruments under Subtopic 815-20 Balance Sheet Location March 28, 2026 June 28, 2025 Foreign currency forward contracts Other current assets $ 56 $ 1,330 17 The following tables summarize the gain (loss) on derivative instruments, net of tax, on the Consolidated Statements of Operations for the three months ended March 28, 2026 and March 29, 2025, respectively (in thousands): Derivatives Designated as Hedging Instruments Classification of Gain (Loss) Reclassified from Accumulated OCI into Income (Effective Portion) AOCI Balance as of December 27, 2025 Effective Portion Recorded In AOCI Effective Portion Reclassified From AOCI Into Income AOCI Balance as of March 28, 2026 Forward contracts Cost of sales $ ( 395 ) $ 794 $ ( 364 ) $ 35 Total $ ( 395 ) $ 794 $ ( 364 ) $ 35 Derivatives Designated as Hedging Instruments Classification of Gain (Loss) Reclassified from Accumulated OCI into Income (Effective Portion) AOCI Balance as of December 28, 2024 Effective Portion Recorded In AOCI Effective Portion Reclassified From AOCI Into Income AOCI Balance as of March 29, 2025 Forward contracts Cost of sales $ 1,011 $ ( 1,274 ) $ 588 $ 325 Total $ 1,011 $ ( 1,274 ) $ 588 $ 325 The following tables summarize the gain (loss) on derivative instruments, net of tax, on the Consolidated Statements of Operations for the nine months ended March 28, 2026 and March 29, 2025, respectively (in thousands): Derivatives Designated as Hedging Instruments Classification of Gain (Loss) Reclassified from Accumulated OCI into Income (Effective Portion) AOCI Balance as of June 28, 2025 Effective Portion Recorded In AOCI Effective Portion Reclassified From AOCI Into Income AOCI Balance as of March 28, 2026 Forward contracts Cost of sales ( 1,029 ) 3,217 ( 2,153 ) 35 $ ( 1,029 ) 3,217 ( 2,153 ) 35 Derivatives Designated as Hedging Instruments Classification of Gain (Loss) Reclassified from Accumulated OCI into Income (Effective Portion) AOCI Balance as of June 29, 2024 Effective Portion Recorded In AOCI Effective Portion Reclassified From AOCI Into Income AOCI Balance as of March 29, 2025 Forward contracts Cost of sales 215 ( 1,276 ) 1,386 325 Total $ 215 ( 1,276 ) 1,386 325 As of March 28, 2026, the Company does not have any foreign exchange contracts with credit-risk-related contingent features. The Company is subject to the risk of fluctuating interest rates from our lines of credit and foreign currency risk resulting from our China and Vietnam operations. The Company does not currently manage these risk exposures by using derivative instruments. 18 10. Revenue Revenue Recognition The Company specializes in services ranging from product manufacturing to engineering and tooling services. The first step in its process for revenue recognition is to identify the contract with a customer. A contract is defined as an agreement between two or more parties that creates enforceable rights and obligations. A contract can be written, oral, or implied. The Company generally enters into manufacturing service agreements (“MSA”) with its customers that outline the terms of the business relationship between the customer and the Company. This includes matters such as warranty, indemnification, transfer of title and risk of loss, liability for excess and obsolete inventory, pricing, payment terms, etc. The Company will also bid on a program-by-program basis for customers in which an executed MSA may not be in place. In these instances, as well as when we have an MSA in place, we receive customer purchase orders for specific quantities and timing of products. As a result, the Company considers its contract with a customer to be the combination of the MSA and the purchase order. The transaction price is fixed and set forth in each purchase order. In the Company's normal course of business, there are no variable pricing components, or material amounts refunded to customers in the form of refunds or rebates. The Company assesses whether control of the product or services promised under the contract is transferred to the customer at a point in time (shipment) or over time (as we manufacture the product). The Company is first required to evaluate whether its contracts meet the criteria for 'over-time' or 'point-in-time' recognition. The Company has determined that for the majority of its contracts the Company is manufacturing products for which there is no alternative use due to the unique nature of the customer-specific product, IP and other contract restrictions. The Company has an enforceable right to payment including a reasonable profit for performance completed to date with respect to these contracts. As a result, revenue is recognized under these contracts 'over-time' based on the input cost-to-cost method as it better depicts the transfer of control. This input method is based on the ratio of costs incurred to date as compared to the total estimated costs at completion of the performance obligation. For all other contracts that do not meet these criteria, such as manufacturing contracts for which the terms do not provide an enforceable right to payment for performance completed to date, the Company recognizes revenue when it has transferred control of the related manufactured products, which generally occurs upon shipment to the customer. Revenue from engineering services is recognized over time as costs related to the services are incurred, which approximates proportional performance of the services. This method is used because management considers it to be the best available measure of progress on the contracts. Revenue from scrap and excess inventory sales is recognized at the point-in-time of scrap at the customers’ direction, or, if applicable, shipment of the material to the customer. The Company’s sales arrangements do not contain any significant financing component for its customers. The Company generally provides a warranty for workmanship on its manufacturing contracts. Although we offer warranties on our products, our warranties are considered to be assurance-type in nature and do not cover anything beyond ensuring that the product is functioning as intended. Based on the guidance in ASC 606, assurance-type warranties do not represent separate performance obligations; therefore, the primary performance obligation in the majority of our contracts is the delivery of a specific good through the purchase order submitted by our customer. The Company elected not to disclose information about remaining performance obligations for current contract assets as they are part of contracts that have expected durations of one year or less. The Company has elected to expense costs to obtain contracts as incurred as these costs are immaterial to the financial statements. During the first nine months of fiscal year 2026, no revenues were recognized from performance obligations satisfied or partially satisfied in previous periods. 19 Contract Balances A contract asset is recognized when the Company has recognized revenue, but has not issued an invoice for payment. Current contract assets are classified separately on the condensed consolidated balance sheet and transferred to receivables when the right to payment becomes unconditional. The following table summarizes the activity in the Company’s contract assets during the nine months ended March 28, 2026 (in thousands): Contract Assets Beginning balance, June 28, 2025 $ 17,409 Revenue recognized 272,214 Amounts collected or invoiced ( 266,369 ) Ending balance, March 28, 2026 $ 23,254 The Company also has long term contract assets of approximately $ 10.3 million at March 28, 2026, and $ 10.4 at June 28, 2025, classified under Other long-term assets in the condensed consolidated balance sheet. No revenue was recognized, and approximately $ 75,606 was collected or invoiced related to these balances during the period. The remaining performance obligations related to these amounts are tied to the manufacturing of electronic products. Disaggregation of Revenue The following table presents the Company’s revenue disaggregated for the three and nine months ended March 28, 2026 and March 29, 2025 (in thousands): Revenue Recognition Three Months Ended Nine Months Ended March 28, 2026 March 29, 2025 March 28, 2026 March 29, 2025 Over-Time $ 85,827 $ 106,396 $ 272,214 $ 339,478 Point-in-Time 3,744 5,578 12,426 17,907 Total $ 89,571 $ 111,974 $ 284,640 $ 357,385 11. Leases The Company has several commitments under operating and financing leases for warehouses, manufacturing facilities, office buildings, and equipment with initial terms that expire at various dates during the next 1 year to 10 years. The Company has some leases that include an extension clause. Management has considered the likelihood of exercising each extension option included and estimated the duration of the extension option, for those leases management determined to be reasonably certain, in calculating the lease term for measurement of the right of use asset and liability. For operating leases, discount rates assumed range from 4.0 % to 9.5 % . The weighted average discount rate is disclosed in the tables below. The components of lease cost for the three months and nine months ended March 28, 2026 and March 29, 2025 were (in thousands): 20 Three Months Ended Nine Months Ended March 28, 2026 March 29, 2025 March 28, 2026 March 29, 2025 Lease cost Classification Operating lease cost Cost of sales $ 1,478 $ 654 $ 4,704 $ 2,827 Operating lease cost Selling, general and administrative expenses $ 194 $ 33 $ 561 $ 132 Financing lease cost Cost of sales $ 629 $ 1,268 $ 935 $ 3,868 Financing lease cost Selling, general and administrative expenses $ 21 $ 183 $ 45 $ 549 Total lease cost $ 2,322 $ 2,138 $ 6,245 $ 7,376 Fixed lease cost $ 2,133 $ 1,078 $ 5,216 $ 4,936 Short-term lease cost 189 1,060 $ 1,029 $ 2,440 Total lease cost $ 2,322 $ 2,138 $ 6,245 $ 7,376 Amounts reported in the Consolidated Balance Sheet as of March 28, 2026 and June 28, 2025 were (in thousands, except weighted average lease term and discount rate): March 28, 2026 June 28, 2025 Operating Leases: Operating lease right of use assets $ 27,810 $ 11,347 Operating lease liabilities (1) $ 27,810 $ 11,347 Weighted-average remaining lease term (in years) Operating leases 7.08 3.29 Weighted-average discount rate Operating leases 7.88 % 4.07 % Financing Leases (2) : Financing lease right of use assets $ 10,428 $ 2,244 Financing lease liabilities $ 8,402 $ 1,912 Weighted-average remaining lease term (in years) Financing leases 2.70 2.35 Weighted-average discount rate Financing leases 8.47 % 10.11 % (1) The current portion of the total operating lease liabilities of $ 6.7 million is classified under Other Current Liabilities resulting in $ 21.2 million classified under Operating Lease Liabilities in the Long-term Liabilities section of the condensed consolidated balance sheet. (2) The total finance lease right of use assets of $ 10.4 million is classified under Other Long-term Assets. The current portion of the total finance lease liabilities of $ 3.8 million is classified under Other Current Liabilities , resulting in $ 4.6 million classified in Other Long-term Liabilities section of the condensed consolidated balance sheet. 21 Future lease payments under non-cancellable leases as of March 28, 2026 are as follows (in thousands): Fiscal Years Ending Operating Leases Finance Leases 2026 (1) $ 1,713 $ 957 2027 6,489 3,639 2028 5,866 3,075 2029 4,468 1,529 2030 3,963 50 Thereafter 14,314 — Total undiscounted lease payments $ 36,813 $ 9,250 Less: present value discount ( 9,003 ) ( 848 ) Total lease liabilities $ 27,810 $ 8,402 (1) Represents estimated lease payments for the remaining nine-month period ending June 27, 2026. 12. Segment Information Operating segments are defined in ASC Topic 280, Segment Reporting as components of an enterprise for which separate financial information is available that is evaluated regularly by the chief operating decision maker, or decision making group, in deciding how to allocate resources and in assessing performance. The Company’s chief operating decision maker is its Chief Executive Officer. As of March 28, 2026, the Company operates and internally manages a single operating segment, Electronics Manufacturing Services, as this is the only discrete financial information that is regularly reviewed by the chief operating decision maker. This segment provides integrated electronic and mechanical engineering, assembly, sourcing and procurement, logistics, and new product testing for our customers. The chief operating decision maker assesses performance and determines resource allocation for the Company’s single reportable segment based on consolidated net income/loss and total assets/liabilities. The accounting policies of the single reportable segment are the same as those described in the summary of significant accounting policies. Significant segment measures include gross profit which is primarily composed of materials spend and labor costs, which are further presented below. Significant Segment Measures In accordance with the adoption of ASU 2023-07 in 2025, the Company determined that significant segment measures included gross profit, which is primarily composed of materials and labor costs as follows (in thousands): Three Months Ended Nine Months Ended March 28, 2026 March 29, 2025 March 28, 2026 March 29, 2025 Materials $ 47,032 $ 65,338 $ 154,068 $ 211,956 Labor costs 26,529 27,605 80,843 84,265 Other 8,827 10,424 33,732 31,548 Total Cost of sales $ 82,388 $ 103,367 $ 268,643 $ 327,769