Core Points - Methode Electronics, Inc. has appointed Karen Keegans as the new Chief Human Resources Officer (CHRO), effective February 3, 2025, succeeding Andrea Barry who held the position since 2017 [1][3] - Karen Keegans brings over 30 years of leadership experience in human resources, having served as CHRO for several Fortune 500 companies including Rockwell Automation, Pentair, and Praxair [2][4] - The appointment is part of Methode's strategy to transform the business and align its culture and talent with business objectives, aiming to regain a leadership position in the industry [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 [5] - The company designs, engineers, and produces mechatronic products for original equipment manufacturers (OEMs), focusing on user interface, lighting systems, power distribution, and sensor applications [5] - Methode's solutions serve various end markets, including transportation (automotive, commercial vehicle, aerospace), cloud computing infrastructure, construction equipment, and consumer appliances, managed through segments such as Automotive, Industrial, and Interface [6]

Core Viewpoint - Methode Electronics, Inc. has declared a quarterly dividend of $0.14 per share, payable on January 31, 2025, to stockholders of record as of January 17, 2025 [1]. 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 [2]. - The company designs, engineers, and produces mechatronic products for OEMs, utilizing a broad range of technologies for user interface, lighting systems, power distribution, and sensor applications [2]. Market Segments - The solutions provided by Methode Electronics 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].

Financial Data and Key Metrics - Q2 2025 sales were $293 million, with adjusted pretax income of $9 million, benefiting from an extra week in the fiscal year [8] - Sales increased by 2% year-over-year to $292.6 million, with a 13% sequential increase from Q1 2025 [24] - Adjusted income from operations was $14.3 million, up $8.3 million year-over-year and $19 million sequentially [26] - Adjusted EBITDA was $26.7 million, up $5.5 million year-over-year and $16.9 million sequentially [27] - Adjusted pretax income was $6.2 million, up $3.8 million year-over-year and $15.3 million sequentially [28] - Adjusted diluted EPS increased to $0.14 from $0.06 year-over-year and $0.45 sequentially [29] - Net cash from operating activities was negative $48 million, primarily due to a timing issue with accounts payable [32] Business Line Performance - EV sales accounted for 20% of total sales, up from 18% in Q1 2025, with expectations to exceed 20% for the full fiscal year [11] - Power Products sales into data centers grew both year-over-year and sequentially, contributing to overall sales growth [25] - Lighting business faced headwinds due to weak demand in the commercial vehicle market [8][25] Market Performance - Data center market showed strong growth, with sales up 50% year-over-year, representing 3%-5% of total sales [42] - EV market softened in North America, but new program launches helped mitigate the impact [11] - Commercial vehicle market weakness continued to affect the lighting business [8][25] Company Strategy and Industry Competition - The company is focused on executing over 30 program launches in fiscal 2025 and 20-plus in fiscal 2026, primarily in EV, traditional auto, and defense sectors [13][14] - A "One Methode" mindset is being reinvigorated to align global teams, with key executive appointments to strengthen leadership [15][16][17] - The company is investing in compliance resources and processes following an SEC subpoena [20] Management Commentary on Operating Environment and Future Outlook - Management highlighted tailwinds from data center growth and headwinds from automotive and commercial vehicle demand [11][18] - The company expects flat sales for fiscal 2025 but raised adjusted pretax income guidance to approximately breakeven [20] - Q3 is historically the weakest quarter due to holidays and customer shutdowns, with potential for a pretax loss [34] Other Important Information - The company ended the quarter with $97 million in cash, down $64.5 million, due to elevated program launch activity and inventory investment [31] - Free cash flow was negative $58.4 million, primarily due to the accounts payable timing issue [32] - The company is reaffirming fiscal 2026 guidance for higher sales and positive pretax income compared to fiscal 2025 [34] Q&A Session Summary Question: Impact of the extra week on revenue and operating results - The extra week contributed approximately $20 million in revenue and corresponding operating results [38] Question: Cost control measures beyond freight cost reduction - Overhead thinning and improved scrap activities contributed to operating income improvement [40] Question: New orders related to EV market - The majority of new orders were related to EV and power programs [41] Question: Data center market growth - Data center sales grew 50% year-over-year, representing 3%-5% of total sales, with above-average margins [42] Question: Pretax income outlook for Q3 - Q3 is expected to be challenging due to seasonal factors, but no one-off positive impacts were noted in Q2 [47] Question: Program launch status and geographic risks - Many launches are in final development or ramp-up phases, with potential delays in EV program starts, particularly in Europe and North America [49] Question: Stellantis program updates - Stellantis remains a key customer, with some timing shifts in EV launches, but the company is not overly exposed to Stellantis or the EV market [51] Question: Data center segment breakdown and AI impact - Data center growth is driven by both AI and core data center demand, with opportunities to expand capabilities in this space [53] Question: Interest expense and inventory reserve reversal - Interest expense is expected to remain at $6.2 million per quarter, with a $0.5 million inventory reserve reversal in the Interface segment [59][60] Question: Premium freight cost normalization - Premium freight costs are not yet normalized, with a $7 million reduction quarter-over-quarter, and further improvements expected [61] Question: New business sources beyond Stellantis - New business is balanced between European, North American, and Japanese OEMs, with launches split between Europe and North America [63] Question: EV market projections and sales determination - The company uses customer data, third-party forecasts, and internal expertise to validate EV sales projections, considering regional market penetration [66][67] Question: Commercial vehicle market assumptions - Commercial vehicle market assumptions remain unchanged, with a focus on deepening customer relationships [70] Question: Operations improvement in Mexico - Operations in Mexico have transitioned from fixing issues to improving processes, with significant premium freight cost reductions [73] Question: CapEx reduction and timing changes - CapEx reduction is due to both lower required spending and timing changes based on customer program needs [74] Question: Cash outflow reversal expectations - The company expects to reverse some of the cash outflow in the next two quarters, approaching neutral cash flow by year-end [75]

Methode Electronics, Inc. Earnings Presentation Second Quarter Fiscal 2025 December 5, 2024 2 Forward-Looking Statements This presentation forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 that reflect, when made, our current views with respect to current events and financial performance. Such forward-looking statements are subject to many risks, uncertainties and factors relating to our operations and business environment, which may cause our actual resul ...

Core Viewpoint - Methode (MEI) reported quarterly earnings of $0.14 per share, significantly exceeding the Zacks Consensus Estimate of a loss of $0.17 per share, and showing an improvement from earnings of $0.06 per share a year ago [1][3] Financial Performance - The earnings surprise for the quarter was 182.35%, compared to a previous expectation of a loss of $0.28 per share, where the actual loss was $0.31, resulting in a surprise of -10.71% [2] - Methode's revenues for the quarter ended October 2024 were $292.6 million, surpassing the Zacks Consensus Estimate by 10.47%, and showing an increase from $288 million in the same quarter last year [3] - Over the last four quarters, Methode has exceeded consensus revenue estimates two times [3] Stock Performance - Methode shares have declined approximately 48.9% since the beginning of the year, contrasting with the S&P 500's gain of 27.6% [5] - The current Zacks Rank for Methode is 4 (Sell), indicating expectations of underperformance in the near future [8] Earnings Outlook - The consensus EPS estimate for the upcoming quarter is -$0.10 on revenues of $260.55 million, and for the current fiscal year, it is -$0.47 on revenues of $1.07 billion [9] - The trend of estimate revisions for Methode has been unfavorable leading up to the earnings release [8] Industry Context - The Electronics - Connectors industry, to which Methode belongs, is currently ranked in the top 32% of over 250 Zacks industries, suggesting a favorable industry outlook [10]

Financial Performance - Net sales for the second quarter of fiscal 2025 were $292.6 million, an increase from $288.0 million in the same quarter of fiscal 2024, driven by higher volume for power distribution products[5]. - Pre-tax income was $1.6 million, with adjusted pre-tax income at $6.2 million, compared to a loss of $51.3 million in the same quarter of fiscal 2024[3][6]. - The net loss was $1.6 million, or $0.05 per diluted share, significantly improved from a net loss of $55.3 million, or $1.55 per diluted share, in the same quarter of fiscal 2024[7]. - Adjusted net income was $5.2 million, or $0.14 per diluted share, up from $2.4 million, or $0.06 per diluted share, in the same quarter of fiscal 2024[7]. - EBITDA for the quarter was $22.1 million, compared to a negative $36.7 million in the same quarter of fiscal 2024, with adjusted EBITDA at $26.7 million[8]. - Gross profit for the quarter was $57.9 million, compared to $52.3 million in the same quarter last year, reflecting a gross margin improvement[29]. - The company reported a net loss of $1.6 million for the quarter, a significant improvement from a net loss of $55.3 million in the prior year[29]. - Free cash flow for the three months ended November 2, 2024, was $(58.4) million, compared to $(11.3) million for the same period last year[35]. - The company reported a diluted loss per share of $(1.55) for the three months ended November 2, 2024[40]. - Pre-tax loss income for the three months ended November 2, 2024, was $(55.5) million[40]. Segment Performance - The Automotive segment reported net sales of $145.5 million, down 5.7% from $154.3 million, primarily due to lower volume in Asia[11]. - The Industrial segment's net sales increased by 9.1% to $131.4 million, driven by higher demand for power distribution products for data centers[12]. - The Interface segment's net sales rose to $15.7 million, up from $11.7 million, attributed to higher volume of transceivers and touch panels[13]. Guidance and Future Plans - The company raised its adjusted pre-tax income guidance for fiscal 2025 to approximately breakeven, while reaffirming net sales expectations similar to fiscal 2024[14]. - The company plans to continue focusing on cost reduction initiatives to improve profitability moving forward[34]. - The company plans to focus on market expansion and new product development in the upcoming quarters[39]. Balance Sheet and Cash Flow - Cash and cash equivalents decreased to $97.0 million as of November 2, 2024, down from $161.5 million at the end of the previous reporting period[31]. - Total assets decreased to $1,375.1 million from $1,403.5 million, indicating a reduction in overall asset base[31]. - Total liabilities remained relatively stable at $636.8 million compared to $637.5 million in the previous period[31]. - The company incurred $42.6 million in selling and administrative expenses for the quarter, up from $40.9 million in the same quarter last year[29]. - The company’s long-term debt increased to $340.4 million from $330.7 million, indicating a rise in financial leverage[31]. - Net debt as of November 2, 2024, was $243.6 million, up from $169.4 million at the end of the previous year[37]. - Total debt increased to $340.6 million, while cash and cash equivalents decreased to $(97.0) million[37]. - The company incurred transformation costs of $4.8 million for the three months ended November 2, 2024[36]. - Goodwill impairment charges were $56.5 million for the three months ended October 28, 2023[36].

Financial Performance - Net sales increased by $4.6 million, or 1.6%, to $292.6 million for the three months ended November 2, 2024, compared to $288.0 million for the same period in 2023[103]. - Net sales decreased by $26.6 million, or 4.6%, to $551.1 million for the six months ended November 2, 2024, compared to $577.7 million for the same period in 2023[103]. - Net loss decreased to $1.6 million in the three months ended November 2, 2024, from $55.3 million in the same period of 2023[113]. - The company reported a net loss of $19.9 million in the six months ended November 2, 2024, compared to a net loss of $54.4 million in the same period last year[128]. Profitability Metrics - Gross profit margin improved to 19.8% of net sales for the three months ended November 2, 2024, compared to 18.2% for the same period in 2023[105]. - Gross profit for the automotive segment increased by $2.6 million, or 22.4%, to $14.2 million in the three months ended November 2, 2024, with gross profit margins rising to 9.8%[115]. - Industrial segment gross profit increased by $0.1 million, or 0.3%, to $38.0 million in the three months ended November 2, 2024, with gross profit margins decreasing to 28.9%[118]. - Gross profit for the Interface segment rose by $3.3 million, or 173.7%, to $5.2 million in the three months ended November 2, 2024, with gross profit margins increasing to 33.1%[121]. Expenses and Costs - Selling and administrative expenses increased by $1.7 million, or 4.2%, to $42.6 million for the three months ended November 2, 2024, compared to $40.9 million for the same period in 2023[106]. - Interest expense, net rose to $6.2 million for the three months ended November 2, 2024, compared to $4.4 million for the same period in 2023, due to higher borrowings and interest rates[110]. - Other expense, net was $1.6 million for the three months ended November 2, 2024, compared to other income of $0.2 million for the same period in 2023, primarily due to a net foreign exchange loss[111]. - Cost of products sold decreased by $1.0 million, or 0.4%, to $234.7 million for the three months ended November 2, 2024, compared to $235.7 million for the same period in 2023[104]. Segment Performance - Automotive segment net sales decreased by $8.8 million, or 5.7%, to $145.5 million in the three months ended November 2, 2024, compared to $154.3 million in the same period of 2023[115]. - Industrial segment net sales increased by $11.0 million, or 9.1%, to $131.4 million in the three months ended November 2, 2024, compared to $120.4 million in the same period of 2023[118]. - Interface segment net sales increased by $4.0 million, or 34.2%, to $15.7 million in the three months ended November 2, 2024, compared to $11.7 million in the same period last year[121]. - Automotive segment income from operations was $0.7 million in the three months ended November 2, 2024, compared to a loss of $61.5 million in the same period of 2023[118]. Taxation - Income tax expense was $3.2 million with a 200.0% effective tax rate for the three months ended November 2, 2024, compared to an income tax benefit of $0.2 million (0.4% effective tax rate) for the same period in 2023[112]. - The effective tax rate for the three months ended November 2, 2024, was higher than the U.S. federal statutory tax rate of 21% due to an increase in valuation allowance for U.S. deferred tax assets[112]. Cash Flow and Financing - Net cash used in operating activities was $37.1 million in the six months ended November 2, 2024, compared to $6.2 million in the same period last year[129]. - Capital expenditures were $24.0 million in the six months ended November 2, 2024, compared to $24.5 million in the same period last year[130]. - The company had net cash used in financing activities of $8.1 million in the six months ended November 2, 2024, compared to net cash provided of $1.9 million in the same period last year[131]. - As of November 2, 2024, the company had $97.0 million in cash and cash equivalents, with $49.8 million held in subsidiaries outside the U.S.[124]. Business Challenges - The company continues to face challenges from global supply chain disruptions, including potential increases in material and logistics costs[99]. - The adoption of electric vehicles (EVs) has been slower than anticipated, impacting the company's financial condition and results of operations[97]. - The company is exposed to market risks from foreign currency exchange, interest rates, and commodity prices, which could affect operating results, financial position, and cash flows[134]. - There has been no significant change in the company's exposure to market risk during the six months ended November 2, 2024[134]. Strategic Decisions - The company initiated the discontinuation of the Dabir business, which accounted for all of the Medical segment's financial results, and sold certain assets of this business[121]. - The Amended Credit Agreement provides for a secured multicurrency revolving credit facility of $500 million, with compliance maintained as of November 2, 2024[128]. - The company has no off-balance sheet arrangements as defined under SEC rules[133].

Core Viewpoint - Methode Electronics Inc. is under investigation for potential claims related to a class action complaint alleging breaches of fiduciary duties by its board of directors, following significant operational challenges and failures in strategic execution during a critical transition period [1][2]. Group 1: Operational Challenges - Methode Electronics lost highly skilled employees during the COVID-19 pandemic, which impacted its transition from a low mix, high volume production model to a high mix, low production model at its Monterrey facility [2]. - The company's efforts to diversify its product offerings, particularly in the electric vehicle (EV) sector, faced numerous issues including production planning deficiencies, inventory shortages, and vendor problems, leading to poor execution of strategic plans [2]. - Manufacturing systems at the Monterrey facility experienced logistical defects such as improper system coding, shipping errors, and quality control failures, which hindered operational efficiency [2]. Group 2: Financial Implications - Methode Electronics fell significantly behind on launching new EV programs, which delayed revenue generation from these initiatives [2]. - The company is not on track to meet its 2023 diluted earnings-per-share guidance or achieve the projected 6% organic sales compound annual growth rate over three years, indicating that these estimates lacked a reasonable factual basis [2].

Core Viewpoint - Methode (MEI) is anticipated to report a year-over-year decline in earnings due to lower revenues, with a consensus outlook indicating a quarterly loss of $0.17 per share, reflecting a significant decrease of 383.3% compared to the previous year [1][3]. Revenue Expectations - Revenues for the upcoming quarter are projected to be $264.86 million, which represents an 8% decline from the same quarter last year [4]. Estimate Revisions - The consensus EPS estimate has been revised downwards by 11.77% over the last 30 days, indicating a reassessment by analysts regarding the company's earnings prospects [5]. Earnings Surprise Prediction - The Zacks Earnings ESP model shows a positive Earnings ESP of +5.88% for Methode, suggesting that analysts have recently become more optimistic about the company's earnings [11][12]. Historical Performance - Methode has not been able to meet consensus EPS estimates in any of the last four quarters, with the most recent quarter showing a surprise miss of -10.71% [13][14]. Stock Movement Potential - The stock may experience upward movement if the actual earnings exceed expectations in the upcoming report, scheduled for December 5, while a miss could lead to a decline [2]. Overall Assessment - Despite a positive Earnings ESP, the company holds a Zacks Rank of 4, making it challenging to predict a definitive earnings beat [12][17].

Company Overview - Methode Electronics, Inc. is a leading global supplier of custom-engineered solutions for user interface, LED lighting systems, and power distribution applications [5] - The company operates in various end markets including transportation, cloud computing infrastructure, construction equipment, and consumer appliances [6] - Methode Electronics has sales, engineering, and manufacturing locations across North America, Europe, the Middle East, and Asia [5] Upcoming Financial Results - The company will release its second quarter fiscal 2025 results for the period ended November 2, 2024, on December 5, 2024, before the market opens [1] - A conference call and webcast will be held to review financial and operational highlights, led by President and CEO Jon DeGaynor and CFO Laura Kowalchik at 10:00 a.m. CST [2] Participation Details - To participate in the conference call, interested parties should dial 888-506-0062 (domestic) or 973-528-0011 (international) at least five minutes prior to the start [3] - A simultaneous webcast will be accessible through the company's website on the Investors page [3] Replay Information - A replay of the teleconference will be available shortly after the call through December 19, 2024, by dialing 877-481-4010 with passcode 51622 [4] - A webcast replay will also be available on the company's website on the Investors page [4]