Methode Electronics(MEI) - 2025 Q1 - Earnings Call Transcript

Financial Data and Key Metrics Changes - First quarter net sales were $258.5 million, a decrease of 11$289.7 million in fiscal 2024, and a sequential decrease of 7% from the previous quarter [21] - Adjusted loss from operations was $4.7 million, down$10 million from fiscal 2024, with a sequential improvement of $5.1 million [22] - Adjusted EBITDA for the first quarter was$9.8 million, down $9.5 million year-over-year but improved by$4.5 million sequentially [23] - Adjusted pretax loss was $9.1 million, down$11.6 million from fiscal 2024, with a sequential improvement of $4.7 million [24] - Adjusted diluted loss per share decreased to negative$0.31 from positive $0.06 in the same period last fiscal year [25] - Cash from operations improved by over$16 million, with a reduction in working capital by $9 million [14][27] Business Line Data and Key Metrics Changes - Sales from the EV segment accounted for 18$80 million in annual program awards, although the pipeline of potential bookings is subject to reduction or delay due to market conditions [14] Company Strategy and Development Direction - The company is undergoing a transformation to position itself for long-term value creation, focusing on executing a large pipeline of new programs and improving operational metrics [8][19] - The new CEO emphasized the importance of resetting performance, building capabilities, and shifting the company culture to drive future success [11] Management's Comments on Operating Environment and Future Outlook - Management affirmed guidance for flat sales in fiscal 2025, followed by profitable organic sales growth in fiscal 2026, despite headwinds in several key markets [10][19] - The CEO highlighted the need for operational improvements and the importance of executing new program launches effectively [36] Other Important Information - The company is in compliance with all debt covenants and has reduced debt by $34.9 million from the prior year [26] - The new CFO, Laura Kowalchik, is expected to bring a strong track record of successful business transformations [10] Q&A Session Summary Question: Can you unpack the gross margin improvement in automotive? - Management noted operational improvements, price increases passed to customers, and cost reductions contributed to the sequential improvement in gross margin [30] Question: How does the appliance roll-off impact the business? - The interface business is critical, and while there are challenges, new appliance programs are being launched alongside existing ones [32] Question: What are the initial focus areas for the new CEO? - The CEO's priorities include ensuring successful program launches, supporting customers, and driving a holistic financial improvement approach [34][35] Question: How does the company view market conditions for guidance? - Management remains cautious and is affirming guidance based on current market conditions and performance [40][41] Question: What is the impact of price increases on gross margin? - Management indicated that price increases have positively impacted gross margins, but specific details on quarter-by-quarter impact were not provided [43] Question: What is the opportunity for better procurement on the supply chain? - The company is focusing on total supply chain costs, including procurement, scheduling, and inventory management to optimize costs [45] Question: What is the status of Stellantis program launches? - The upcoming launches are primarily EV programs, and while there are challenges, the company is confident in the projected sales growth [52][55]