Methode Electronics(US:MEI)2024-09-05 11:15markdown [Fiscal 2025 First Quarter Financial Results](index=1&type=section&id=Fiscal%202025%20First%20Quarter%20Financial%20Results) [Highlights and Management Commentary](index=1&type=section&id=Highlights%20and%20Management%20Commentary) Methode Electronics reported Q1 FY2025 net sales of $258.5 million, an adjusted pre-tax loss better than anticipated, and improved operating cash flow Fiscal First Quarter 2025 Key Metrics | Metric | Value ($ million) | | :--- | :--- | | Net Sales | $258.5 | | Pre-tax Loss | $13.1 | | Adjusted Pre-tax Loss | $9.1 | | Net Loss | $18.3 | | Diluted Loss Per Share | $0.52 | | Adjusted Net Loss | $10.9 | | Adjusted Diluted Loss Per Share | $0.31 | | Net Cash Provided by Operating Activities | $10.9 | - Management stated that while sales were in line with expectations, the adjusted pre-tax loss was better than anticipated. The company is navigating a challenging transition from legacy programs to new program launches[3](index=3&type=chunk) - The company affirmed its guidance for fiscal years 2025 and 2026 and highlighted an acute focus on its balance sheet and cash generation, noting a **$16.5 million YoY improvement** in net cash from operations[1](index=1&type=chunk)[3](index=3&type=chunk) - Laura Kowalchik was appointed as the new Chief Financial Officer (CFO), effective October 1, 2024[1](index=1&type=chunk)[2](index=2&type=chunk) [Consolidated Financial Performance](index=2&type=section&id=Consolidated%20Financial%20Performance) Consolidated net sales for Q1 FY2025 decreased to $258.5 million, resulting in an operating loss, with net debt increasing to $184.7 million Consolidated Financial Results (Q1 FY25 vs Q1 FY24) | Metric | Q1 FY2025 ($ million) | Q1 FY2024 ($ million) | | :--- | :--- | :--- | | Net Sales | $258.5 | $289.7 | | (Loss) Income from Operations | ($7.5) | $3.8 | | Adjusted (Loss) Income from Operations | ($4.7) | $5.3 | | Net (Loss) Income | ($18.3) | $0.9 | | Diluted (Loss) EPS | ($0.52) | $0.02 | | EBITDA | $5.8 | $17.8 | | Adjusted EBITDA | $9.8 | $19.3 | Debt Position | Metric | July 27, 2024 ($ million) | End of FY2024 ($ million) | | :--- | :--- | :--- | | Total Debt | $296.0 | $330.9 | | Net Debt | $184.7 | $169.4 | Cash Flow Performance (Q1 FY25 vs Q1 FY24) | Metric | Q1 FY2025 ($ million) | Q1 FY2024 ($ million) | | :--- | :--- | :--- | | Net Cash from Operating Activities | $10.9 | ($5.6) | | Free Cash Flow | ($2.7) | ($19.4) | - The company purchased and retired **136,000 shares** for **$1.6 million** during the quarter. The 2021 buyback authorization expired on June 14, 2024[7](index=7&type=chunk) [Segment Performance](index=2&type=section&id=Segment%20Performance) All three business segments experienced year-over-year declines in net sales and operating income due to program roll-offs, lower demand, and legal fees [Automotive](index=2&type=section&id=Automotive) Automotive Segment Results (Q1 FY25 vs Q1 FY24) | Metric | Q1 FY2025 ($ million) | Q1 FY2024 ($ million) | | :--- | :--- | :--- | | Net Sales | $134.8 | $158.3 | | (Loss) from Operations | ($5.7) | ($2.8) | | Operating Margin | (4.2%) | (1.8%) | - The **14.8% decrease** in net sales was primarily driven by lower volume in Asia related to a previously disclosed EV lighting program roll-off, partially offset by higher volume in Europe from program ramp-ups[8](index=8&type=chunk) [Industrial](index=3&type=section&id=Industrial) Industrial Segment Results (Q1 FY25 vs Q1 FY24) | Metric | Q1 FY2025 ($ million) | Q1 FY2024 ($ million) | | :--- | :--- | :--- | | Net Sales | $111.5 | $115.4 | | Income from Operations | $16.9 | $24.2 | | Operating Margin | 15.2% | 21.0% | - The sales decrease was mainly due to lower demand for lighting products in commercial vehicle and off-road equipment markets. The decline in operating income was primarily due to legal fees related to litigation and lower net sales[9](index=9&type=chunk) [Interface](index=3&type=section&id=Interface) Interface Segment Results (Q1 FY25 vs Q1 FY24) | Metric | Q1 FY2025 ($ million) | Q1 FY2024 ($ million) | | :--- | :--- | :--- | | Net Sales | $12.2 | $15.2 | | Income from Operations | $1.9 | $2.9 | | Operating Margin | 15.6% | 19.1% | - The decrease in both net sales and operating income was mainly attributed to lower sales volume of touch panels for appliances and transceivers for servers[10](index=10&type=chunk) [Fiscal Year 2025 and 2026 Guidance](index=3&type=section&id=Fiscal%20Year%202025%20and%202026%20Guidance) The company affirmed its full-year guidance, expecting fiscal 2025 net sales similar to prior year with adjusted pre-tax income approaching breakeven, and notably greater results in fiscal 2026 - **Fiscal 2025 Guidance:** Net sales are expected to be similar to fiscal 2024, and adjusted pre-tax income is anticipated to be approaching breakeven. The second half of the fiscal year is expected to be significantly stronger than the first half[11](index=11&type=chunk) - **Fiscal 2026 Guidance:** Net sales are expected to be greater than fiscal 2025, and pre-tax income is projected to be positive and notably greater than in fiscal 2025[11](index=11&type=chunk) - The guidance is subject to various factors, including the success of new program launches, EV program take rates, cost recovery actions, inflation, and global economic instability[11](index=11&type=chunk) [Financial Statements and Reconciliations](index=6&type=section&id=Financial%20Statements%20and%20Reconciliations) [Consolidated Statements of Operations](index=6&type=section&id=Consolidated%20Statements%20of%20Operations) The unaudited Q1 FY2025 statement of operations shows a net loss of $18.3 million, or $0.52 per share, primarily due to lower gross profit and increased expenses Consolidated Statements of Operations Highlights (in millions, except per-share data) | Line Item | Q1 FY2025 ($ million) | Q1 FY2024 ($ million) | | :--- | :--- | :--- | | Net sales | $258.5 | $289.7 | | Gross profit | $44.6 | $54.0 | | (Loss) income from operations | ($7.5) | $3.8 | | Pre-tax (loss) income | ($13.1) | $1.0 | | Net (loss) income | ($18.3) | $0.9 | | Diluted (loss) income per share | ($0.52) | $0.02 | [Consolidated Balance Sheets](index=7&type=section&id=Consolidated%20Balance%20Sheets) As of July 27, 2024, total assets were $1,377.9 million, with cash decreasing and inventories increasing, while total debt decreased to $296.0 million Key Balance Sheet Items (in millions) | Account | July 27, 2024 ($ million) | April 27, 2024 ($ million) | | :--- | :--- | :--- | | Cash and cash equivalents | $111.3 | $161.5 | | Inventories | $219.9 | $186.2 | | Total current assets | $611.8 | $637.7 | | Total assets | $1,377.9 | $1,403.5 | | Long-term debt | $295.8 | $330.7 | | Total liabilities | $633.5 | $637.5 | | Total shareholders' equity | $744.4 | $766.0 | [Consolidated Statements of Cash Flows](index=9&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) Net cash from operating activities significantly improved to $10.9 million in Q1 FY2025, while financing activities used $48.2 million, resulting in an overall cash decrease of $50.2 million Consolidated Cash Flow Highlights (in millions) | Cash Flow Activity | Q1 FY2025 ($ million) | Q1 FY2024 ($ million) | | :--- | :--- | :--- | | Net cash provided by (used in) operating activities | $10.9 | ($5.6) | | Net cash used in investing activities | ($13.6) | ($13.8) | | Net cash (used in) provided by financing activities | ($48.2) | $12.5 | | Decrease in cash and cash equivalents | ($50.2) | ($9.1) | [Reconciliation of Non-GAAP Measures](index=10&type=section&id=Reconciliation%20of%20Non-GAAP%20Measures) This section reconciles non-GAAP measures, showing Q1 FY2025 Adjusted EBITDA at $9.8 million, improved free cash flow at -$2.7 million, and an adjusted net loss of $10.9 million EBITDA and Adjusted EBITDA Reconciliation (in millions) | Metric | Q1 FY2025 ($ million) | Q1 FY2024 ($ million) | | :--- | :--- | :--- | | Net (loss) income | ($18.3) | $0.9 | | EBITDA | $5.8 | $17.8 | | Adjustments (Transformation, Restructuring, etc.) | $4.0 | $1.5 | | Adjusted EBITDA | $9.8 | $19.3 | Free Cash Flow and Net Debt (in millions) | Metric | Q1 FY2025 ($ million) | Q1 FY2024 ($ million) | | :--- | :--- | :--- | | Free Cash Flow | ($2.7) | ($19.4) | | Net Debt | $184.7 | N/A | Reconciliation of Net (Loss) Income (in millions) | Metric | Q1 FY2025 ($ million) | Q1 FY2024 ($ million) | | :--- | :--- | :--- | | GAAP Net (Loss) Income | ($18.3) | $0.9 | | Adjustments | $7.4 | $1.1 | | Non-GAAP Net (Loss) Income (Adjusted) | ($10.9) | $2.0 | [Disclosures and Company Information](index=3&type=section&id=Disclosures%20and%20Company%20Information) [Forward-Looking Statements](index=4&type=section&id=Forward-Looking%20Statements) This section outlines cautionary forward-looking statements, detailing numerous risks and uncertainties that could materially impact actual results, including industry dependence and supply chain issues - The company's performance is subject to significant risks, including but not limited to: - Dependence on the automotive, commercial vehicle, and construction industries - Timing, quality, and cost of new program launches - Changes in electric vehicle (EV) demand - Dependence on a small number of large customers - Supply chain availability and material pricing - Global economic instability and currency fluctuations[15](index=15&type=chunk)[16](index=16&type=chunk) [About Methode Electronics, Inc.](index=3&type=section&id=About%20Methode%20Electronics%2C%20Inc.) Methode Electronics, Inc. is a global supplier of custom-engineered mechatronic products for OEMs, serving diverse markets through its Automotive, Industrial, and Interface segments - Methode is a global supplier of custom-engineered solutions for user interface, LED lighting, power distribution, and sensor applications[13](index=13&type=chunk) - The company operates in three segments: Automotive, Industrial, and Interface, serving end markets such as transportation, cloud computing infrastructure, and consumer appliances[13](index=13&type=chunk)