Methode Electronics (MEI) 22 Jun 232023 Q4 Earnings call transcript

Greetings, and welcome to the Methode Electronics Fourth Quarter and Full Year Fiscal 2023 Results Call.

At this time, all participants are in a listen-only mode and a question-and-answer session will follow the formal presentation. [Operator Instructions] Please note, this conference is being recorded.

I will now turn the conference over to your host, Mr. Robert Cherry, Vice President of Investor Relations. begin. may you Sir,

Good quarter welcome conference and operator. fiscal call. Methode XXXX fourth full morning. you, to And Electronics Thank year earnings

XXXX methode.com viewed on For presentation webcast of Year have we or the Investors Results, Fourth found page. call Fiscal at Financial be this Full the Quarter can prepared which this and on call, entitled a

undertakes forward-looking which and This conference date statements operating regarding conference no performance changes speak future the safe provided in any as involve expectations risks of subject call forward-looking basis harbor statement or statement on hereof. call contains expectations to The laws. a under are These quarterly reflect certain the to a number duty the events conform management’s to uncertainties. forward-looking update Methode’s Methode or the and results only statements, of this to in protection actual otherwise. forward-looking and securities statements

results Executive in Securities our cause I’d from Duda, to and like this could materially that time, Commission, Exchange to XX-Q and filings factors Methode’s XX-K reports. such as At Chief the Mr. over actual Don The to and differ President call our detailed Officer. with turn are expectations the

then Thank you Ron and fiscal I Thank you, and call. will Financial and both joining by your Chief we Officer, and good take morning, fourth Ron us will for today Rob, opening our quarter joined for everyone. questions. XXXX I’m conference earnings Tsoumas, comments, our have

Let’s begin with highlights X. the on slide

power excluding headwind foreign drop spot cost by on our in sales and the They increase solutions. premium for up distribution quarter user solutions buy for growth is recovery. and in a X% the million. our to significant in vehicles. power mainly compared sales to from X%, year, for up to reduce and another reliance were by pivot vehicles strategic from point segment, due prior were The and solutions lighting sales was products material freight data the electric a $XXX healthy driven commercial The lighting exchange higher but Industrial Our a interface

to of we material continued to cycle drag quarter, The to and margins. obtain and ongoing continued efforts increases on price is that subsequent We the be due In inflation significant inflation persistent ongoing a I have cannot face labor, challenge, and increases in in to from which expedited can, year. last enough. shipping improved chain customers supply spot report a stress as reduction buys a over however, constraints cost

in programs industrial order acquisition, electric completion. front, grow The On to had million were strong is awards. franchise and and program very opportunity market $XXX non-auto gain again we more the dominated once These exciting is with an exposure Nordic annual a lighting by which nearing over Lights quarter our programs. vehicle

working the outstanding the process complete, for XX% of be secured squeeze-out have we we information. we are that While legal remaining the process over able through is still provide shares, more to shares. will Once

we consolidated the awards won a million EV activity. annual and a dollar awards, In regards record the Sales quarter. were basis. on back over total our EV to of XX% Turning were in to quarter in $XXX in

of Looking activity OEM in well auto take but rates EV, on strong XXXX, will the very as be be forward again on fiscal dependent timing as roll-offs. will program

In the by in the Lights driven increase Nordic quarter, we entirely had was which debt, an acquisition.

program approximately key of million was in Board purchased announced million the we this $X of a buyback Lights strategy. the to million now total. have $XXX During the purchased focus Nordic shares. acquisition, authorization, capital quarter, allocation our Of $XXX we Prior

our With the return increased to of reduction. debt level, will focus part debt

in a our free we indication generated is on cash attention and of operational anything million model. the $XX on on important in an to business as generating our quarter, performance just but flow slide, cash in Lastly, the which focus

production. Moving here X. annual The represent identified at the $XXX million to full in key in quarter, sales and some slide the of represent wins awards

awards were towards sensitive of interface As associated in were to also for activity a skateboard now. timing quoting reminder, years for United weighted up. picked launch States, where with anywhere The in these range X products commercial heavily for EV programs the we mainly e-bike. most lighting, the In are applications from the and power user has other areas, The vehicles of programs the awards and be EV architecture. of clearly X awarded could solutions

to I our we EV award beginning potential on $XXX fiscal EV XXXX, would like business. the that three future have organic in be a coming activity growth backlog There Since is the year the won step approximately EVs This little our reflect take acts and in driving like of million of years. doubt stream back will over a last years. awards.

of and XXXX the a Turning for $X,XXX the year. and for sales in growth sixth row to We slide delivered X sale finished with our fiscal million highlights. full a record year

and sales we exchange a other X% with growth. cost foreign to we a our Those well customers. on cost the challenges Material, recovery, continue toll Clearly, cost earnings. disappointed efforts initiatives year recovery were as year-over-year manufacturing efforts overall and improve manufacturing our took Excluding as efficiencies. labor during had inflation in

with achieve applications. over bookings we reaching the XXXX. EV very with gives along were awards fiscal initiatives, $XXX me guidance program strong, supports the our confidence XX% that strength expansion over for The will aforementioned our in However, margin of million that

EV year. our into full sales total reached for they sales and record XX% the applications, of had We

Our well ongoing year was quarter by and headwinds. free cash cost ongoing challenging It a shares program. up year-over-year in XX% a was of $XX plagued our the inflation of generation support dividend as purchase of flow as million

organic growth year. sales for the our However, still team worldwide delivered

X. to Moving slide

expecting you XXXX. then I of slowdown a ramp-up slight this. sales for Looking fiscal forward, are drivers of and to XXXX the we significant fiscal sales basic walk through want in in a

fiscal headwind can you sales program net of the from is in As XXXX. see launches program and a the slide, roll-offs

headwinds net launches result program is and in roll-offs and fiscal The fiscal XXXX, markets. slowdown this a our will all tailwind. slight data becomes Lights sales of add in expect Nordic center commercial a program While the of sales, In e-bike net we vehicle, XXXX. to the

expect data also is e-bike XXXX. fiscal in from result sales fiscal XX% an a rate We XXXX commercial organic centers to and markets. from The net growth vehicles, tailwind strength

award the With past for that and the positioned pipeline Methode fiscal prosper guidance our and strategic and portfolio the three is that further lighting to model power the demonstrates years transition, strong healthy product is business business. from to grow we’ve the to XXXX its the made taken solutions, steps this effort in has

lastly, XXXX. had executed XX%. EV of our of We cash We In growth segment generated sales of X. slide number Methode we record a record with sales We Lights. applications. Nordic to in in acquisition flow. Turning summary, delivered Industrial achieved in free the successes fiscal strong And the

fiscal Turning lower to expect in to organic we sales markets, to program Due our roll-offs outlook. the the have key in and weakness XXXX. expected

addition, to organically in staffing. In to but significant fiscal not for with activity, making enable multiple we years include of XX% be only along will program, the launching will tooling awards, new XXXX. and strong XX over the increased XXXX replace investments grow investments programs. fiscal sunsetting business This significant These to us

to Ron? quarter full over At Ron, more this fourth the financial and call year as detail on our I’ll results turn as details our provide who outlook. point, more well will on

morning, and Don, good you, everyone. Thank

were an in Fourth turn $XXX.X million Please XX. quarter ‘XX, fiscal $XXX.X of X.X%. sales compared net slide to million increase to

a This automotive was unfavorable quarter’s impact currency million buy large the year and the sales of impact. America. freight and spot premium program impacting had $X.X roll-off Also comparison favorable $X.X recovery million prior cost North in quarter’s

income increased and to costs Partially operations a unfavorable $XX.X acquisition cost ‘XX, inflation, The X.X%. $XX.X of from applications to adjusted solutions Excluding non-GAAP the million in from higher quarter. sales ‘XX. year-over-year increased to million reorganization in XX% for in was in quarter related the $X.X mainly quarter in the currency decreased million, by of Adjusting cost costs, translation. million EV product and foreign acquisition the currency impacts, due $X.X by of factors was Fourth driven and vehicles from power strength fiscal our $XX.X from solutions sales and X.X% $X.X foreign XX.X% the million foreign sales those costs volume. of commercial to were offsetting in million income subsidiary operations recovery lighting EV. fiscal material

and $X.XX net cost decreased diluted subsidiary acquisition ‘XX. our currency $X.X the million XX.X% fiscal diluted net to per from per for material of negatively diluted $X.XX our to share foreign unfavorable reorganization turn quarter benefit XX.X% translation. EPS decreased per last non-GAAP adjusted XX. same EPS of in share per and from impacted slide Fourth cost, earnings to was fiscal diluted share in period the The $X.XX Please acquisition inflation cost million, of share related the the per diluted $X $X.XX share the year. to foreign from Adjusting

last million million EBITDA sales non-GAAP decrease. of decrease. to financial costs $XX.X to material year, $XX.X in of was foreign million X.X% the same $X.X million impacted the quarter the fiscal Shifting acquisition versus a a from Adjusting million Higher period negatively unfavorable partially and a in million for of EBITDA $XX.X to costs EBITDA costs foreign adjusted fiscal volumes costs, was by helped acquisition EBITDA, translation. currency increased inflation, related to XX.X% offset subsidiary, Fourth measure. and $XX.X $X.X reorganization ‘XX. the our

the to year, million XX. $XXX with year turn debt due million the cash, by $XX slide Please ended $XX.X to the Lights down We full gross million We Nordic year. increased full for for acquisition. the in mainly

shares bringing the to During $XX.X bought $X.X for back the we million. million, total quarter, year-to-date

non-GAAP $XX.X $XXX.X the was fiscal at $XXX.X main driver from a financial full end acquisition. ‘XX. Lights debt, million in Nordic measure, increase to the million of by the the Again, the Net year increased million of

was debt trailing XX-month EBITDA approximately Our to ratio X.X.

approximately XX-month X. ratio trailing to EBITDA debt net was Our

We a continue perspective, capital initiatives. flexibility allocation Company debt from for which to capacity, growth inorganic solid offers especially have the

primarily activities Please The Fourth to million $XX quarter. as of $X was improvements operating healthy to in capital ‘XX. working was fiscal compared cash from $XX in turn a quarter due XX. increase to the million slide million net

as million was lower a keeping of spending the of compared our ‘XX, the this expenditure to year spending increase was in million. quarter level fiscal guidance. of $X.X a quarter prior an level capital million with $X.X in increase quarter The wasn’t as mainly function Fourth $XX.X

primarily $X.X non-GAAP to fiscal due capital was compared free $XX.X million cash ‘XX, This was quarter million to increase, measure, improvements. as a financial $XX.X working of flow, Fourth again, an increase million. in

have continue grow businesses to continue for inorganic organically growth. sheet, pursuing and in investing balance by to opportunities a and We by will utilize we it our to strong

recovery Fiscal $X,XXX.X impact. This unfavorable to year’s foreign cost ‘XX, record increase X.X%. sales a currency in XX. fiscal of record slide and of net sales. premium This row buy year to a spot in turn impact sales sixth million million favorable $X,XXX.X Please and $XX.X was our million an were ‘XX had million compared $XX.X freight

currency foreign roll-off the year-over-year impacting the sales Industrial the The year was product in was year Negatively were the applications North strength by year. recovery of America. impacts, by Excluding X.X%. sales the EV and driven large XX% cost program a automotive in our increased in segment. of

$XXX.X due to a ‘XX $X.X acquisition million $X.X and mainly to of offset from $XX.X sales Fiscal operations $XXX.X operations in $XX.X acquisition to XX.X% non-GAAP of were foreign subsidiary our higher cost inflation, million, related fiscal in of cost income to ‘XX, costs for which million by income ‘XX. decreased million million from partially XX.X% the from adjusted the million reorganization volumes. decreased material fiscal Adjusting from and

the The diluted reorganization decreased the share a diluted Please the per for benefit a which partially Adjusting to to XX.X% decreased reorganization from to $X.XX related cost costs subsidiary per the inflation, material net was million, related of earnings last acquisition subsidiary. $X.X diluted $X.XX negatively net of EPS fiscal share non-GAAP $X.XX of impacted ‘XX. ‘XX slide in adjusted from and and $X acquisition from tax to Fiscal cost were benefit XX.X% million by offset turn a of our foreign EPS foreign $X.XX year. XX. fiscal to

[$XXX.X] partially full costs related offset Shifting impacted million and an the (sic) decrease. $X.X inflation, adjusted acquisition our Adjusting million $XXX.X by year volume. EBITDA $XXX.X in for of reorganization cost million negatively XX.X% of ‘XX. the subsidiary, and costs was costs $XXX.X million fiscal of million the last from by to the XX.X% which acquisition higher EBITDA. EBITDA decreased was $X.X sales million to material a fiscal year, to foreign $XXX.X EBITDA The were million versus

within to slide $XX.X to net function from $X of prior was $XXX.X million fiscal this spending an due cash Please level ‘XX. $XX mainly increase turn $XX a Capital million of increase in million a as capital compared was million healthy operating as the compared fiscal to activities was to a was year spending in in primarily Fiscal million. working low of increase expenditure ‘XX, as The XX. was ‘XX million guidance. of $XX improvements. the year The level

in to primarily as increase ‘XX This in both, was an compared ‘XX increased in working the $XX.X million capability $XX fiscal and We again due and ‘XX, fiscal capital Free expect in increase ‘XX. launches fiscal of to was to increase improvements. fiscal significant CapEx increase million $XX.X capacity cash million. for flow

to XX. turn slide Please

Regarding forward-looking this is best estimate change to a guidance, factors of slide. noted management’s it on due subject and based to on is a variety

share $X,XXX sales million. in price ongoing is in will diluted to fiscal material be with we for increases range While $X.XX. $X,XXX expected still expected ‘XX. the we per have expect us range cost some this to is earnings offset experienced The success ‘XX The to fiscal net $X.XX inflation, million headwind

year fiscal or the million. Lights with the rate million to XX% between XX% to $XX benefits range Nordic amortization in of million depreciation $XX includes tax in It assumes assumes and the no ‘XX of acquisition, assumes tax million and and $XX guidance $XX income This discrete CapEx an expenses. range

first cadence year EPS the will ‘XX. quarter with anticipate minimal fees legal due uneven the anticipated fourth from to weakest, ‘XX EPS largely the quarterly sequential fiscal being contingent somewhat to fiscal We quarter The related be lawsuit. of growth Medtronic the

range net from between sales of guidance Looking The million. fiscal further organic the fiscal ahead $X,XXX the to million expected the range midpoint midpoint year range range. expected ‘XX to sales and represents ‘XX, XX% no year net of is growth discrete as of this The $X,XXX XX% The expenses. ‘XX fiscal is fiscal percentage benefits XX% income rate in to XX%, tax year tax from a sales is expected operations income XX%. be net or ‘XX with between to

that comments. concludes my Don,

are ready much. we take questions. thank Ron, you Operator, very to

question-and-answer Sidoti & question we session. this Our Company. At Instructions] from be you. [Operator time, a will coming Thank conducting is first Franzreb with John

may You proceed.

with start a like I’d quick to clarifications. couple of

P&L, it foremost, it’s Nordic from the part and fourth mention if contribution any the is in curious looks because quarter. didn’t revenue of I too, like the sheet. of Nordic First I’m any balance hear of part

So, just kind of that? walk through you me can

Yes.

we closing the of -- And to the fiscal on had not correct. did fiscal opening and profit report prior it’s You’re related ‘XX. Lights Yes. to The due absolutely will its activity but -- very in Nordic loss have the in balance sheet, we late right ‘XX year. any it end to fiscal

Okay. right. All

there So, be incremental to part should board to that that not part on to going you legal will fees cash have any bring mentioned we you’re that you’re debt going was other that continue about or incur of from be QX? QX worried that Nordic. of Are to expenses

quarter. to through a from that first expense contingent ruling, mentioned legal the next could have week we that perspective, Supreme comes fee the the legal related We Court matter if in that

And might cash if flows little and a first debt think I everything -- we on a to not even depending from anything, bit. going, delever further quarter. how would the any take we in expect on

obviously fixed we are fixed -- have something has gone of be variable rate will swaps interest some and interest Yes. -- that rates expiring. borrowing Interest to cost up,

So, an interest to in expense fiscal significantly higher we compared expect increase higher do interest ‘XX -- as expense fiscal debt, ‘XX. in

your your embedded in XXXX? expected interest is What guidance for expense fiscal

there. the somewhere -- range, about $XX around It’s in millionish

gears real switch just then, And Perfect. Okay. quick.

a roll-offs. much XXXX guidance, for On of the a program just roll-off about how impact some secondly, we’ve to fiscal you’re fourth you here. Two impact when talking mentioned the the that the time. plural. program XXXX questions been quarter? clarify, that the It’s in was program roll-offs, talking quite it’s American in North One, And about

So through, program top in the been one on what’s number we’ve to the going of that incremental from that new addition roll-offs?

So, we program expect million. the would roll-offs $XXX in around total,

Yes, agree. I

is And the it how XXXX? over we’ve one incurring much of that -- in been is the from left that

space program So, the in program, another balance it there’s that. another that $XXX a approximately, be of take would from lot would of then EV million. And the that

for. what That’s was I looking Perfect.

You queue a taking Thank into lot I’ll you. for time, know guys. back follow-ups. what, been of I’ve get

John. Thanks,

you. Thank

Prestopino coming Research. Barrington is Gary with question from next Our

You may proceed.

revolves is there? a North that there’s terms fiscal of kind roll-off, question what My program over ‘XX American fiscal in -- ‘XX, there with residual some -- is the questioner but this or into plural going of last was, in around again, roll-offs

in and in In about the talked ‘XX, their headwinds tailwind, roll-off round million business in -- increased fiscal I our becomes ‘XX, numbers, roll-offs about a of with $XXX ‘XX, in ‘XX. even

get fiscal some still fiscal in is trying at is I but American in understand guess, residual Right. that, over or roll-off let -- I’m ‘XX. the there to ‘XX, me is ask just North I you,

That be extend on ‘XX. new business get It depends programs. on programs their they But have in much additional too longer. we into of depends seen can’t launch There little -- really a could the that. customer. some I

that there could of some So be in ‘XX.

what I would end in of that off in but will ‘XX, will fiscal the roll-off ‘XX. rolling some program ‘XX, other the be in that’s carryover preponderance the in of is Gary, the and done ‘XX I There rolling ‘XX, think the say, off preponderance started ‘XX. the in about one is too, be fiscal by

into upside. -- I that at is launch. a Yes. huge It’s And timing just of don’t extending look customer’s the is the XX

rough depreciation I that break getting the of that Thank And That’s D&A for at. you of what then, Okay. how fiscal answer. down numbers ‘XX, some give was you range amortization? Can there? in kind for and terms between does us

the million guess, level, part. in D rest I the and high $XXish part A at the a in

our out, end first with QX detail, and to from level launches? QX, are is associated of are are ask I things you. or then, of -- all less And accelerate you Okay. you launches. that new in the these want upfront start and expenses of upfront product Could revenues And -- expenses then then we to it’s expense the terms are us help with the in -- -- great all, out back you new got the model please? these we you’ve ‘XX? of loaded of maybe start front some fiscal expenses generating also that, that half just then, programs as in less new Could Thank product what

Sure. XXXX. It’s we’ll incur fiscal throughout is prototyping it that equipment, starting it and we’re to is continue incur to costs people,

into the be As we will of costs start get into end those the launches. ‘XX, product absorbed to

guidance, and -- the into is factored The XX% We’ve equipment are So, will hiring. standpoint. procuring from equipment. plant been probably we’ve starting been we or we -- complete an

year, will that the launching a we the it at be end significant year. amount, will That’s continue throughout So, the lower costs. and but a then to absorb start not will of volume the

All didn’t EBITDA right. know guidance, in almost And you you a your fiscal as margin of XX% I a looks this had it point adjusted like give but ‘XX.

that Given of where you range, handy? fiscal for EBITDA range adjusted calculation given the see do us margin you’ve what you if have ‘XX, that

fiscal an as sales. of range, margin a comparable our terms percentage percentage would EBITDA somewhat fiscal i.e., in it be ‘XX the of Well, to from year, this

be saying? what you’re So, comparable it’d FYXX, is to

Yes.

Instructions] from [Operator you next Sheerin Matt proceed. coming question is Our you. Thank with may Stifel. Sir,

the up I looks XXXX? that that half that’s headwind. in of data to be of in picking Is yet for at your your centers. that have in like hyperscale terms having build of of customers the It visibility off? back to couple continue work And are fiscal inventory will you any the commentary a terms due to your One, questions. quick outlook a

And what second you you a that other in programs? change pre-announcement you. your Thank more Could in technology program due then, that may of by on impact preliminary about technology to talked how you about changes a EV that an customer. of specific ago, earnings sunsetting a weeks be release, question, the your and couple

of which understand give don’t the I but of are business, thinking there’s that that strategic one probably it. as can’t -- it is -- are customers. you of do can’t cars I -- we because not other I detail top there our to this, course, well. can it hat product exactly But on not to tell customer. in because Okay. does on as on ICE lose of don’t the more you -- customer, EVs. terms I sell not I on answer that hat, one want impact cars It that volatility top that I is product, passenger is on the -- the

Does I do the to I it yes, of understand -- say, it long business, into does to can’t we business we any that. to I have with. respectful would the and with So, have be customer the concern like apologize, customers I it, the me detail more term? but I contract to really continue No. go than

an improve maybe we The of -- over it the year, don’t tail Do other don’t I so. the question, expect more I of end to inventory inventory. towards think that --

it We know vehicles XX%. they’re haven’t -- market And our ACT when asked on. data look put the but people always I that alone, spot I centers, down about at into Could commercial not you has the and numbers. but aren’t -- market always

in that’s face on. headwind not ‘XX. a up. going it they in ‘XX, spot definite and we’re And back We’re But going direction a have to

just And into anytime not center, data on visibility it. just picking Got you’re that getting soon? up so

kind over We No. we we mean, set know and -- the us we know they’re inventory. of told they customer, know usage their when I

have here’s expect they’ve to business And in quarters. last can for you’re three much what all visibility down down. next quarters. -- work we to that’s that that. we’re they not have in So have guiding much pretty and why can And that that’s And the the until going taken model, inventory, we that you they if three

enough. Fair

Okay. Thanks very much.

Thank you.

a is I quick A on million. will -- just about D&A be make Gary’s want question. instead $XX million of of clarification part $XX The to

answer. I $XX $XX is the million think said I correct million.

Ron. Thanks,

you. Thank

of turn call the back will closing Duda for session, Mr. reached I over any have the end our to we question-and-answer As remarks.

Thank you.

for and very Good for thank and a We day. wish enjoyable questions and their safe everyone listening everyone will summer.

And conference, we this today’s Thank thank concludes disconnect participation. This at you your you. you time. and may lines for your