Methode Electronics (NYSE:MEI) Conference September 18, 2025 01:45 PM ET Speaker0Good afternoon, everyone. My name is John Franzreb. I'm an analyst here at Sidoti and Company. Our next presentation for the day is Methode Electronics, ticker MEI. For those who not familiar with the name, Methode is the manufacturer of components and systems to the automotive and industrial marketplace.We are fortunate to have with us today CEO, John DeGainer CFO, Laura Kolchik treasurer, Randy Wilson and vice president, inve ...

Core Insights - Methode Electronics has shown significant transformation and positive developments in its latest Q1 2026 results [1] Company Overview - The company is focused on uncovering high-upside opportunities in overlooked sectors, particularly small-caps, energy, commodities, and special situations [1] - The investment strategy employed is based on the CAN SLIM framework, emphasizing fundamental momentum indicators such as EPS, ROE, and revenue [1] Analytical Approach - The analysis incorporates econometric tools like GARCH and Granger causality to assess risk, volatility, and macroeconomic influences on market cycles [1] - A multi-faceted approach is taken to build conviction across technicals, fundamentals, and catalysts, rather than relying on a single signal [1] Personal Investment Management - The management of personal capital has been ongoing since 2020, with advisory services provided under MiFID II regulations [1] - The educational background includes a bachelor's degree in Business Administration and Economics, with a master's in Finance currently being pursued [1]

Company Overview - Methode Electronics, Inc. is a leading global supplier of custom-engineered solutions with a focus on user interface, lighting, and power distribution applications [2] - The company operates sales, engineering, and manufacturing locations across North America, Europe, the Middle East, and Asia [2] Product and Market Segments - Methode designs, engineers, and produces mechatronic products for OEMs, utilizing a broad range of technologies [2] - The company's solutions are utilized in various end markets, including transportation (automotive, commercial vehicle, e-bike, aerospace, bus, and rail), cloud computing infrastructure, construction equipment, and consumer appliances [3] - The business is managed on a segment basis, with key segments being Automotive, Industrial, and Interface [3] Upcoming Events - Methode Electronics will present at the Sidoti Small Cap Virtual Conference on September 18th at 1:45 p.m. EDT, with a simultaneous webcast available on the company's website [1]

Leadership Updates - Methode Electronics, Inc. has appointed Stacie Schulz as Chief Accounting Officer, who will report to CFO Laura Kowalchik, bringing extensive experience in technical accounting and SEC reporting [1] - Randy Wilson has taken on the role of Vice President of Global Treasury & Investor Relations, combining both functions, and has 20 years of expertise in corporate treasury and investor relations [2] - Rob Cherry, the previous Vice President of Investor Relations, will be leaving the organization, with the company expressing gratitude for his contributions [3] Company Overview - Methode Electronics, Inc. is a leading global supplier of custom-engineered solutions with operations in North America, Europe, the Middle East, and Asia, focusing on mechatronic products for OEMs [4] - The company serves various end markets, including transportation, cloud computing infrastructure, construction equipment, and consumer appliances, and is managed on a segment basis: Automotive, Industrial, and Interface [5]

Financial Data and Key Metrics Changes - First quarter net sales were $240.5 million, a decrease of 7% compared to $258.5 million in fiscal 2025, and a sequential decrease of 6% [15][20] - Adjusted income from operations was $2 million, an increase of $6.7 million year-over-year, and up $23.6 million sequentially [16] - First quarter adjusted EBITDA was $15.7 million, up $5.9 million from the same period last year, and increased $22.8 million sequentially [17] - First quarter free cash flow was $18 million, compared to -$2.7 million in fiscal 2025, marking an increase of $20.7 million [18][19] - Net debt decreased by $11.7 million from the fourth quarter to $202.3 million, with a total reduction of $41 million over the last three quarters [19] Business Line Data and Key Metrics Changes - Sales in the automotive segment were weaker in North America due to the transition from legacy programs to new ones, impacting overall performance [16][25] - Data center sales grew by 12% year-over-year, although sequential sales were lower due to record sales in the previous quarter [8][15] - EV sales represented 19% of consolidated total sales, an increase from 18% last year, but down from 20% sequentially [7] Market Data and Key Metrics Changes - The automotive business in EMEA showed significant improvement year-over-year, while North America faced challenges due to program roll-offs [25] - The company remains optimistic about long-term EV trends, expecting a rebound in EV sales in fiscal 2027 despite current softness in North America [7][8] Company Strategy and Development Direction - The company is focused on launching over 30 new programs this year, with most launches scheduled for the remainder of the year [6] - Methode is leveraging its historical expertise in power solutions to drive innovation in data centers, EVs, and military applications [9][10] - The transformation journey is aimed at stabilizing the business and positioning it for future growth, with improvements in operational efficiency and working capital [11][12] Management's Comments on Operating Environment and Future Outlook - Management affirmed guidance for fiscal 2026, expecting sales in the range of $900 million to $1 billion and EBITDA between $70 million and $80 million [20][21] - The company anticipates a doubling of EBITDA margin from 4.1% to 7.9% despite a reduction in sales [21] - Management expressed confidence in the ongoing transformation efforts and the potential for future sales growth from new business opportunities [14][13] Other Important Information - The company experienced a delay in reporting first quarter earnings due to a miscalculation of dividend equivalents, which required obtaining a waiver from banks [15] - The first quarter's capital expenditures were $7.1 million, down from $13.6 million in fiscal 2025, reflecting improved efficiency in spending [18] Q&A Session Summary Question: Automotive segment contribution to EBITDA growth - Management highlighted the need to separate performance by region, noting improvements in EMEA and challenges in North America due to program transitions [25] Question: Strategic outlook for Asia - The Asia team is leading product development for EV applications, with expectations for growth despite legacy program roll-offs [29] Question: Impact of tariffs - Management confirmed no significant changes in tariff expectations, with current tariffs creating new opportunities due to USMCA compliance [39] Question: Restructuring actions progress - Management indicated ongoing consolidation efforts and headcount reductions, with a focus on structural cost reductions [40][41] Question: End market outlook for commercial vehicles - Management expects a rebound in the commercial vehicle space in 2026, with improved relationships leading to additional RFQs [42][44] Question: Sales guidance for Stellantis programs - Management confirmed no changes in the sales bridge, maintaining expectations for program impacts [52] Question: Data center bus bars market - Management clarified that the bus bars supplied are primarily for new construction, with potential for growth in this area [53][55] Question: EV sales distribution by region - In fiscal 2025, 55% of EV sales were in EMEA, 16% in Asia, and 30% in North America, indicating a diverse market exposure [58]

Financial Data and Key Metrics Changes - First quarter net sales were $240.5 million, a decrease of 7% compared to $258.5 million in fiscal 2025, and a sequential decrease of 6% [15] - Adjusted income from operations was $2 million, an increase of $6.7 million year-over-year, and up $23.6 million sequentially [16] - First quarter adjusted EBITDA was $15.7 million, up $5.9 million from the same period last year, and increased $22.8 million sequentially [17] - First quarter free cash flow was $18 million, compared to negative $2.7 million in fiscal 2025, marking an increase of $20.7 million [18] - Net debt decreased by $11.7 million from the fourth quarter to $202.3 million, with a total reduction of $41 million over the last three quarters [19] Business Line Data and Key Metrics Changes - Data center power product sales grew by 12% year-over-year, although sequential sales were lower due to record sales in the previous quarter [8] - EV sales represented 19% of consolidated total sales, an increase from 18% last year, but down from 20% sequentially [7] - The automotive segment experienced weaker sales in North America due to the transition from legacy programs to new ones [16] Market Data and Key Metrics Changes - The company remains optimistic about the long-term megatrend in EVs, expecting a significant rebound in EV sales in fiscal 2027 [8] - The performance in EMEA, particularly in Egypt, has improved significantly, while solid performance continues in Asia [6] Company Strategy and Development Direction - The company is focused on a transformation journey aimed at stabilizing the business and positioning for future growth, with significant organizational changes already implemented [11] - The power solutions segment is seen as a long-term growth engine, with ongoing investments in this area [10] - The company is leveraging its historical expertise in power distribution to capture growth opportunities in data centers, EVs, and military applications [9] Management's Comments on Operating Environment and Future Outlook - Management affirmed guidance for fiscal 2026, expecting to double EBITDA despite a projected $100 million decline in sales due to lower EV demand [5] - The company is confident in its ability to navigate various headwinds and maintain operational improvements [4] - Management highlighted the importance of customer relationships and operational efficiency in driving future growth [39] Other Important Information - The company experienced a delay in reporting first quarter earnings due to a miscalculation of dividend equivalents, which required a waiver from banks [15] - The fiscal 2026 guidance assumes a typical 52-week fiscal year, with expected sales in the range of $900 million to $1 billion [20] Q&A Session Summary Question: How does the automotive segment contribute to EBITDA growth? - Management noted that performance varies by region, with improvements in EMEA and challenges in North America due to program transitions [25] Question: What is the outlook for the Asia market? - The Asia team is leading product development for EV applications, and despite some headwinds, progress is being made [29] Question: What is the status of tariff expectations? - There has been no change in tariff expectations, and the current regime is creating new opportunities for the company [37][39] Question: How far along is the restructuring process? - The company is on track with headquarters consolidation and has reduced headcount by approximately 500 people [40][41] Question: What is the outlook for the commercial vehicle market? - Management expects a rebound in the commercial vehicle space in 2026, with ongoing interest from customers [42] Question: What is the expected growth in the EV market? - The majority of growth is anticipated to come from outside the U.S., particularly in Europe and China [60]

Financial Data and Key Metrics Changes - First quarter net sales were $240.5 million, a decrease of 7% compared to $258.5 million in fiscal 2025, and a sequential decrease of 6% [17][18] - Adjusted income from operations increased by $6.7 million year-over-year to $2 million, and increased by $23.6 million sequentially [18] - First quarter adjusted EBITDA was $15.7 million, up $5.9 million from the same period last year, and increased by $22.8 million sequentially [19] - First quarter free cash flow was $18 million, a significant increase from negative $2.7 million in fiscal 2025 [20][21] - Net debt decreased by $11.7 million from the fourth quarter to $202.3 million, with a total reduction of $41 million over the last three quarters [21] Business Line Data and Key Metrics Changes - Data center power product sales grew by 12% year-over-year, although sequential sales were lower due to record sales in the previous quarter [10][17] - Automotive segment sales were weaker in North America, impacted by the transition from legacy programs to new ones [18] - EV sales represented 19% of consolidated total sales, an increase from 18% last year, but down from 20% sequentially [9] Market Data and Key Metrics Changes - The company remains optimistic about the long-term megatrend in EVs, despite a soft near-term outlook primarily in North America [9][10] - The EMEA market, particularly Egypt, has shown notable improvement, while solid performance continues in Asia [7][12] Company Strategy and Development Direction - The company is focused on a transformation journey aimed at stabilizing the business and positioning for future growth, with significant organizational changes already implemented [13][14] - The power solutions segment is viewed as a long-term growth engine, with ongoing investments in this area [12] - The company plans to launch over 30 new programs this year, with most launches scheduled for the remainder of the year [6][7] Management's Comments on Operating Environment and Future Outlook - Management is confident in affirming guidance for fiscal 2026, expecting to double EBITDA despite a projected $100 million decline in sales due to lower EV demand [6][22] - The company anticipates a rebound in EV sales in fiscal 2027 based on customer forecasts and industry projections [10] Other Important Information - The company experienced a delay in reporting first quarter earnings due to an inadvertent miscalculation of dividend equivalents, which required obtaining a waiver from banks [17] - The fiscal 2026 guidance includes expectations for sales in the range of $900 million to $1 billion and EBITDA between $70 to $80 million [22][23] Q&A Session Summary Question: Automotive segment performance and EBITDA contribution - Management noted that the automotive business in EMEA has improved, while North America faces challenges due to program transitions, but expects stabilization and growth in fiscal 2027 [27][28] Question: Strategic outlook for Asia - The Asia team is leading product development for EV applications, and despite some headwinds, progress is being made in operational and engineering aspects [30][31] Question: Impact of tariff expectations - There has been no significant change in tariff expectations, and the current tariff regime is creating new opportunities for the company [40][41] Question: Restructuring actions progress - The company is on track with headquarters consolidation and has reduced headcount by approximately 500 people as part of the transformation [42][44] Question: End market outlook for commercial vehicles - Management expects a rebound in the commercial vehicle space in 2026, with ongoing interest from customers despite current softness in the market [45][47] Question: Sales guidance and program roll-offs - The sales guidance remains unchanged, with expected reductions in Stellantis programs and positive contributions from new program launches [54] Question: Data center bus bars market - The data center bus bars market is primarily focused on new construction, with opportunities for growth as the company expands its share [55][57] Question: EV sales distribution by region - In fiscal 2025, 55% of EV sales were in EMEA, 16% in Asia, and 30% in North America, indicating a diversified exposure to the EV market [60][61]

Financial Performance - Net sales were $241 million in Q1 Fiscal Year 2026[12] - Adjusted EBITDA was $16 million in Q1 Fiscal Year 2026, up $6 million year-over-year[12] - Adjusted Pre-Tax Loss was $(5) million in Q1 Fiscal Year 2026[12] - Adjusted EPS was $(0.22) in Q1 Fiscal Year 2026[12] - Free Cash Flow was $18 million in Q1 Fiscal Year 2026[12] - Net debt was $202 million in Q1 Fiscal Year 2026, down $41 million since FY25 Q2[12] - Income from Operations increased by $9 million year-over-year, despite an $18 million decrease in sales[9, 12] Sales and Growth - xEV applications accounted for 19% of total Q1 consolidated net sales[12] - Data Center sales increased by 12% year-over-year[12] - Power Solutions sales have experienced a Compound Annual Growth Rate (CAGR) of 30% since Fiscal Year 2022[15] Guidance and Outlook - Fiscal Year 2026 guidance is affirmed, with sales expected to range from $900 million to $1 billion and EBITDA expected to range from $70 million to $80 million[11, 39]

Core Insights - Methode Electronics (NYSE:MEI) experienced a 10% increase in premarket trading after surpassing quarterly profit and revenue estimates [2] Financial Performance - The automotive segment reported net sales of $106.1 million for the quarter, a decline from $134.8 million in the same quarter of fiscal 2025, primarily attributed to lower volume [2]

Core Insights - Methode Electronics, Inc. (MEI) reported a first-quarter fiscal 2026 EPS of -$0.29, which was better than the estimated EPS of -$0.40, indicating a smaller loss than expected [2][6] - The company achieved revenue of $240.5 million, exceeding the estimated revenue of approximately $229.9 million, suggesting stronger sales performance [3][6] - Despite revenue growth, MEI has a negative P/E ratio of approximately -4.20, reflecting ongoing financial challenges [3][6] Financial Metrics - The company's price-to-sales ratio is about 0.25, indicating that the market values its sales at a quarter of its current market price [4] - The enterprise value to sales ratio is approximately 0.48, reflecting the company's valuation relative to its sales [4] - MEI's debt-to-equity ratio is approximately 0.50, indicating a moderate level of debt compared to equity [5] - The current ratio is about 2.40, showing that the company has more than twice the current assets compared to its current liabilities, suggesting good short-term financial health [5]