Methode Electronics (MEI) 5 Dec 242025 Q2 Earnings call transcript

Greetings, and welcome to the Methode Electronics Second Quarter Fiscal 2025 Results Call. [Operator Instructions] And 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. Sir, the floor is yours.

Thank you, operator. to Fiscal welcome Earnings Second and Call. Conference morning, Methode XXXX Electronics Quarter Good

we a certain viewed have XXXX from in call, any page. This found risks to factors this X, on For prepared the differ Commission, on this and Financial of actual are call results involve protection Investors forward-looking Slide reports. On our a which at webcast methode.com materially Methode's in These and reflect Second statement call actual presentation as provided Results, can for agenda that Securities such or to statements, the our cause be the as the contains of expectations only on management's could the a filings conference in this or forward-looking and Quarter to statement Exchange Fiscal performance results call speak to laws. securities expectations which the quarterly uncertainties. update our Methode's or subject date statements under regarding please forward-looking otherwise. hereof. Methode an The expectations operating conference safe today. number duty conform are future harbor events and no statements entitled the undertakes see call of XX-K with changes and to basis detailed forward-looking XX-Q The

the followed with We turn then to Q&A over a by update, Officer. this Jon business session. At Chief will I'd DeGaynor, financial Executive the to call begin a President Mr. time, like update, and

today Kowalchik, Chief Thank joining I'm quarter you conference us Laura for for Rob, our joined second Thanks, earnings good morning, our call. Financial Officer. everyone. and by

to delivering team record fast have background start Methode. to her has experience. business gotten industry within at Laura We our of transformations an off and has given and impressive are the a She join Methode track successful pleased

for to our X and quarter. Turning Slide the results

million, were pretax and income our $X million. sales adjusted $XXX Our was

from quarter extra our As an the noted earnings release, week. benefited in

year, and into that XX-week quarter. is XXXX fiscal this fell extra a Our week

Power impact data benefited extra and vehicles. from our electric week, in Products of from demand Aside centers sales the the from higher

We Better-than-expected pretax launches. our we track driven demand our in premium discussed income overall automotive particularly program a business. Overall, solid direct our also commercial another market were quarter. the by improvement the sales also particular, the progress a execution. impacting these our along execution The program with of is cost had freight, and fixed growth in In quarter efforts, weakness sales reduction with our strengths Europe in was we reduction of roll-offs overhead improved in drove vehicle reflection were in lighting from result on the that before freight Offsetting expectations. volume, which notable absorption, had operational improved costs, improvement. sign on

a our total, sequential EV XX% the from activity. first quarter in were in to of consolidated the Turning increase quarter. XX% Sales

the launches EV are applications. wave We power experiencing of beginning for a of new program

As XX% continue further, EV such, percentage our over XXXX. should for it to full fiscal we to and the year be expect grow

softening. of year, our softened, automotive the America, are launches Conversely, data our end Helping demand. The program in growth mitigating commercial in some is headwinds several market key are clearly and and on vehicle has EV sales our in While tailwinds weakness but the for are North full us markets. in is the currently clearly us track hurting there centers. particularly that

balance the to Turning sheet.

it focus generating and are cash. an maintaining on managing We acute

were accounts with a full operating comfortably that activities, a with payable experienced our debt we cash compliance timing led reduction issue we While covenants. to net in of sizable quarter all from this

to annual expectations program customer reduction subject on bookings awards. delay conditions. year. On $XX and/or is track quarter the to order over solid our is with of market The front, we with had the due in for another pipeline decisions This and/or million

our before, next to 'XX, the emphasized launch. have be months. have successfully XX pipeline execute XX-plus the we must new In I immediate as have we another fiscal XX launched to large programs programs over in and on priority that in launches. And 'XX, fiscal of is Lastly, program

counting deliver. In and to the us, fruit short, to our bear we results started as better-than-expected evidenced execution that Our customers have we our are the clearly plan by to on efforts believe quarter. improve in

are of Slide awards X. to key annual $XX production. and million sales The wins in the at Turning here represent identified some quarter the full of

the programs these in of from As usual, X be could the to X range launch timing now. of anywhere years

and were these auto distribution awards of in traditional EV, defense. All for power applications products for

can basis, we chart, sufficient solid. see note at we a Overall, you to a award awards level. sales winning is As bookings our been maintain this to our that feel can least current activity on at are be important What's lumpy. annual XX-month has from trailing rate

X. to Turning Slide

global this One Lars the Robert teams in suppliers with moving a in that multinational will of to path Senior are This relies Vice oversee Automotive mindset a of the and Ullrich a company's Global Bosch. my joined Infineon together key CEO business, in years facilitate existed to to historically reinvigoration, me. Lars is learnings dedicated role XX our leader all all of success working reinvigorated. One we for and strategic over have same since made business activities appointed directly global like Automotive be within where returning us taking at and On company's to and business. July the leadership that Methode commercial mindset, We've President, and Methode comes the To December Methode executive direction. mainly on to companies, needed strategic moves. launch reporting X, as couple experience

approach built launch our customers. challenges. customer addition and in the collaborative strategic career, and that clarity a for a has to He face help his delight relationships, reputation us to develop a thinking, be and of excellence leadership and strong operational programs innovative team our he will During to

East. roles And XX-year compared and as Vice ago. steps, Methode One the to Auto European will operations initial of CFO, guide in In steps in crucial we leader our to well and Middle fresh China. is his responsibilities to now management In drive achieve and ability lead makes Idrissi period to has ideal he to addition held promoted also respected be but short CPO we successful in these both Middle addition, experience, as the the This SVP have CEO, months in responsibility and increasing Methode, engineering results his culminating a Sadek President getting of and success. demonstrated our our career the to to his with operations growth. as back Eastern are perspectives Global him Europe El China. Sadek X have roles challenging through of all history, leadership current company's of and operating execution an of of These at just to with strategy

was Turning activity summary, than In and steadily a better vehicle Slide the grew sales. was were expected. and quarter, concern. of to but Data the sales for auto were X. income tailwind, were centers a markets EV pretax total track, on our XX% commercial while market

While debt a timing issue on we covenants. experienced with full we cash, all in were comfortably compliance

Lastly, program solid. awards were

focusing its to next to team several year months, fiscal focus while by on and to business. address year. we the have intensely our decisive Going is execution leadership programs are transform on it while Methode focused positioning fiscal business this to actions new growth executing XX return the our transforming last is profitable forward, costs. Led we Meanwhile, that systematically our taking over built

committed are also resources to compliance processes. steps in compliance We to taking invest our and and

take information. the Regarding We seeking subpoena that a all the cooperating compliance and are has from compliance, Methode documents SEC, fully. disclosed company and seriously received matters has

about this to While committed we are transparency. say matter, can limited we we informed. keep you in We'll what are

quarter team employees. Lastly, with I'll energized Laura, in a income tremendous and confidence clearly over the to second for sales our this and financials. the amount for breakeven. I've quarter, that over with that I can call and more turn to spent talking detail visiting provide we point, demonstrate reaffirming are fiscal our flat our of the year time results XXXX, share adjusted quarter approximately past right meeting this is on heading who raising our pretax plants customers, from direction. At great guidance guidance traveling business to the will is Methode

Thank I turn thanks Slide good morning, remarks. Please his to to Jon for you, excited kind team, very Methode the join am and XX. to everyone. Jon, and

The $XXX.X second to sales $XXX On sequential a XX% net in X%. of million increase were compared the sales basis, an quarter fiscal million from quarter. fiscal increased 'XX, first 'XX

first typical to end quarter prior in as is ending year As fiscal additional being XX-week X, the this company's May XX-week is XXXX, quarter periods. the week Jon additional requires year referenced, second current XX. the to Saturday week period. year year a this fiscal with the The occasionally fiscal but April as year's well order closest XX-week weeks, fiscal in The an fiscal on included year quarter, making it were for XX a

contributed quarter, financial Power Products both and our a year-over-year into applications sequentially. As grew center comparisons. In extra week result, to this sales the data of

this some year ended saw previously off-road modest no lighting and EV the also EV an launch program products for impact last disclosed market in the and the creating sales a That sequentially. The sales the from Europe. in of growth strengths Offsetting those in activity benefited also quarter our lighting of We was roll-off toward in end had applications. year. Asia. weakness was commercial of has headwind vehicle fiscal the our Also program

a $XX.X reconciliation million, sequential million quarter. year-over-year for from adjusted up see adjusted driven income and improved income million appendix sales from the 'XX. the adjusted in was increase The income, First Please $XX basis, fiscal to of adjusted volume. quarter all from both sequentially, measures fiscal by was On higher GAAP. operating from operations $X.X 'XX first the operations a

were Jon track measure. due our to able our served to turn absorption. Shifting to our second freight to a financial reduce our Slide fixed XX. operational overhead costs, with freight full the premium year quarter improvements increased on EBITDA, sales The were improve particularly expectations. Please we addition, that In significantly Overall, also our non-GAAP described. volume to

a adjusted quarter from the was lower benefited to adjusted both year. The million and in $XX.X also EBITDA improved the both first expenses higher It Second basis, from from driven $XX.X last administrative Slide period million up profit. comparisons. Please and XX. On sales was sequential sequentially selling 'XX turn adjusted quarter. and EBITDA EBITDA by $X.X year-over-year same gross fiscal million,

adjusted net the pretax quarter, a from million year pretax basis, improved by income quarter higher Second $X.X and 'XX was income prior $XX.X 'XX. adjusted to adjusted Compared from driven the was $X.X On first the fiscal million, pretax income sales. quarter. million sequential up last fiscal

In benefited addition, freight, expense. offset partially higher by from interest net lower both comparisons being while

per increased quarter. the the the fiscal from adjusted first earnings same earnings share diluted $X.XX 'XX period increased from sequential share to fiscal a last year. adjusted $X.XX quarter On $X.XX Second basis, in per

launch cash, the mainly was Overall, which The due by to was compliance the X our Slide slightly increased to end Slide million year-end. $XXX.X Despite income offset the of earnings, by tax was prior debt of to $XX.X of year $XX.X inventory year-to-date. was down Debt Net due pretax drove tax second was quarter in the cash expense of result This turn quarter. non-GAAP with expense from aforementioned benefits. on adjusted covenants we increase with use EPS tax our million our at treatment second ahead $X.X quarter. Please year-to-date. approximately all up to included quarter of investment adjusted million cash. of in were a various higher program tax to million. the the was $XX XX. ended The the in Elevated measure, adjusted We use debt, primary million. GILTI second foreign a The activity consumption the quarter cash, the full expectations. Turn XX. financial

negative was a to The the period. the of $XX and payments in cash accounts million second 'XX. in first between XX-week as million decrease primarily net related was due a fiscal the negative compared to sizable from as $XX.X payable million The second to quarter a operating quarter's as of $X.X well decrease timing activities

a expenditure decrease was Second $XX.X as million $X.X of 'XX, fiscal in million. quarter slight $XX.X million capital compared to

of mainly fiscal non-GAAP the financial a I was was million due negative as $XX.X 'XX, described. Please $XX.X flow, million. decrease a Slide to to in cash payable decrease turn just This $XX.X timing to a free quarter compared negative accounts measure, issue XX. million that Second

based bottom this at as is and estimates it to subject due the factors Regarding best to a of guidance, is management's change variety of noted forward-looking slide. on

to third to fiscal fiscal with quarter to fiscal For sales 'XX 'XX. the net be expected we expected similar are similar of 'XX, third to be reaffirming quarter

the in We to is approximately is the are with our the the mind raising quarter is This raise of breakeven. quarter. to quarter third historically expected third customer shutdowns. weakest fourth the our quarter loss. Please than a pretax Please our adjusted income due stronger be and quarter mainly third pretax in potentially pretax significantly keep income adjusted be outperformance function note the to holidays quarter having guidance that second in a that

million expense $XX lower million allowance for guidance of run in tax $X.X million. guidance the through quarter will U.S. increase $XX just reduction it tax GM million first industry. primarily related like are end be effective of to million market weakness and higher This The is $XX tax million the seeing addition, also deferred In TX a to our half program, the year and of and since in to others assumes CapEx $XX related fiscal $XX assets, auto to valuation first CapEx of of some rate year. was 'XX the guidance to the The year-to-date. million, in amortization full we $XX the depreciation near-term which is

fiscal to to questions. greater be Looking than 'XX net further comments, income expected be notably my it ahead reaffirming fiscal sales concludes 'XX. That are open pretax positive and than to and fiscal XXXX, up to we greater can and we

[Operator Instructions] John coming Sidoti is & Company. first question Franzreb Our with from

the could but line, only if extra impact on perhaps operating the wondering you results. was week, quantify top the not I on of

look So that would operating then it what from have at worth million with that. the along it John, have follow-on results would -- approximately we the a $XX that week revenue. of extra is And go it's -- with

there quarter anything impacted down. a reduction had results it. cost operating income? Okay. Was impact freight positive what the in on that Those costs? Got control drops else the beyond And second measures

thinning Yes. scrap of seeing in seeing We're And we're we our overheads. as improvement said, also activities.

So driving driving execution-driven that that really the execution-focused the are it activities is are performance -- performance. activities

versus of enough. new how And to Okay. market programs million orders, other the $XX in EV in directly markets? Fair the much related that new was

on programs we've of are or EV all the our programs, launches power Well, about. majority in as talked on

the areas, we as those all So are -- in of the said. awards

one And of market, the quantify kind all that last to get Fair kind back center impact it is data improvement regards enough. question, other any that kind up in or queue. you way In of year-over-year I'll puts in the into context? what and can of

are opportunities going space And trying really in the centers about X% So It's of roughly sales. that that we X% margin X% seeing see to and we're data excited expand we're to X%. we're about beyond us, total what year-over-year XX% improvement. is to the that above-average and our business that for forward

next is with coming Our question from Junk Luke Baird.

income outsized circle shared. the the week quarter to that I Laura, of wanted impacts into an we have I temporary impact the walk else think that back terms should that have accounting just inventory beyond from to if the that you be we in should may in I'm wondering the for current pretax reserve. third Jon? Any anything that the extra things bottom about either, line things appreciate, just quarter. there's been

wants one-off it, week, she There add And I'll to were take things extra positive first color Jon. QX. if than in not there -- can. other were Laura the not piece. it's Luke, performance the to

think regard QX our really as QX, we talk lightest about So to revenue about the to -- quarter. with and it's it as comes down we perspectives

challenging be is quarter the world, the So confident we are of to something that the base the we of one-off but we're Methode. something holiday QX just need progress special investors performance a feel else the periods within our about that we with because else business, of transparent around or because where and not making,

comment you'd Okay. just XX-plus launch you're other now? be right In where a from this anticipating Wondering able stand words, if year. Then switching launches here. we to standpoint gears

to versus of just what remains right those Just if could maybe us And weighting geographically of the execute? remind you of to are how and in risk the Europe slipping already to any motion many launches specifically?

on program mainly these launch programs. -- split their relatively of standpoint, those So are in development of The is or on see what where we I it certain and may floor. phase. start exactly in the not do start from launches when It's -- a the ramp-ups. see they're -- We're they equally. capital ramp-up are mean, is America delay EMEA, many The EV final customers, they and we but do them North cancellations, programs, phase particularly between is

working customers but exactly regard standpoint there. got uses when we we're we to on transparency of some with making cash, of with do they sure and our So of and what the here our we've from talked customers do how to pipeline our about support also the what that start we do manage inventory of

obviously, able launch make be but possible. relative important I as really well, Stellantis, there don't if if Any to any great customer year. specific a would you're comments to know this color

as us. be us. one The for So we've of customer important timing publicized talked the And taking their by up, that's largest and customer launches. customers, about, very $XXX ramped them our Stellantis, see revenue an as with we they're to is EV -- a over been programs they'll for time get their will, regard if some -- we shifts, do that some million you

not see But is total it's Methode. what -- news. XX% of not we are one, we're EV new at So programs

We're overly programs, overly comfortable balance pretty we're OEs. on with EV to So Stellantis. the we're not exposed different not to our and exposed

closely. customer we do us. good an close stay with Stellantis about very We in feel important them, So going, business contact watch is to where and is that we it but

understand driving more Industrial is items. really terms year-over-year are data AI-related would One, Interface? Got that it. clarifying And can in that's any seeing you the in impacts improvement? couple the Or X% core of data versus growth, lastly, us this you the then just strong to on center you just within X% say business? exposure, help center, segment a And then of maybe overall

we're total. fairly and growth. a is is just it exploring time to of of portion bit And space. this expand spend data now, year-over-year going can on, a use actually relatively capabilities the our center we as see is both significant quite small said, AI and we're where It we we what fully and do to more right additional So a overall growth, opportunities are what

question [Operator Research. Barrington Gary Instructions] Our with coming is from Prestopino next

a million couple million. was rate that Interest almost number? the of any like up the is there to Welcome, remainder Was expenses in onetime run expense nitpicky. Laura. expense interest going looked at Or questions, year? A for the $X.X $X.X sequentially, initially little be of that per quarter it

be that rate. it debt as obviously, does go the But decrease, some. run Gary, should will down

Okay. was it then -- an And about inventory you for in if could reversal -- quantify reserve something Could Interface. that -- a mentioned us? you you reversal

reduction inventory $X.X segment million. in reserve approximately the The Yes. was Interface

Okay.

So $XXX,XXX. Great.

more So positive could, a you was of costs here news. improve freight are mentioned is how premium freight the quarter now premium that could share freight Or where the point premium maybe you feel one is costs Have substantially, you if of much great still to down? room your metric? down normalized? was And reached which there aspects are that you you

the in reduction we're freight, The teams, and from both freight -- Both team Gary, down million quarter-over-quarter. period. their see that some work to the freight $X premium million fiscal premium a how to premium try going to business will sequentially. in we continue were from but in the job but in a had America drive North done answer, and as there. around The Egypt working to and additional I a down. in some very in we've has to past, to with Mexico drive in -- we've we're premium improvement -- we is got continued that I execute. improvement down I'm freight scrap the apologize. and in-depth regard of It's sorry, the the drive both particularly we're expect particularly not getting from a in stabilized There So world, improvement normalized would of both move the quarter, misspoke. to worth I at additional a perspective, and Mexico no, Mexico with And $X scrap continuing perspective, pretty team, on in we drive will XXXX. And to EMEA workshops and good regard where from a said scrap

of Okay. That's launches, want first from? talk where with program Stellantis. could to particularly about about all, OEMs? maybe is talk this What all just good some of Stellantis, of some coming new news. beyond you these I business But

North until point European the that able launches this again, I name -- we're or in primarily The detail American around market to split -- production, program between OEMs. to well balanced you and are from as much I'm nameplates regional customer Japanese the try started make stuff launches That's names. as as teams are North if you hasn't But to American we to the give and to market, I well. the the -- the you know, a not between, as will, But that you So yet. different Gary, it's it's different OEMs, is mentioned those that as you. at world production mentioned OEMs go the allowed with to that companies working sure European

Okay.

ask me question. let So a

the put this the other some is we're you to to their And projections they levels see They a me going to dealing follow the And what that are what on year. slippage the Let particular I them on then do are EV down projections telling the OEM can as companies companies based we their EV the together OEM least on to -- go they Jon. production those what through obviously, in of with that think market. come starting at put way, be. market. question

in purchased because me they just the are? into coming so in out insight that to Or many it are past. appears you could really of sales on So go EVs you quickly be? some getting a from I OEM levels as think not they there's are numbers their been production the through maybe -- us maybe taking market, how had but the raw the just -- that going your as could what sequence what you you're are give to determining they're mean potential you

Yes.

how think on focused as Europe and is penetration so press said China. about me let in in EV in selling that first. get It's the easy American the in we've we So North are into this the talk recognizing about because just to past, while we so customers U.S., focused

X%. think electric Europe, So about And penetration XX%. the it's when it's vehicle In about China, XX%. in in it's XX%, market you U.S.,

So those take rates market the changes -- are penetration the and region. on depending

launches So as about we in talk as and North we're market. -- North number solely Europe we're in exposed American the That's part not both to not America, one.

And do regard press with and volumes Secondly, to we others we we data, don't as just look take IHS the are are what have do the or us, do you them need we we inventory it's a ] ramp-up, to the have plans. but do telling global timing, to the CapEx Certainly, as conversations of what our what the well we read Global with sense sensitize customer well -- customers will, volumes to try the the saying. do as and as to what consideration, at is to in OE we what they then Insights us. experts sources as as our or if that the overall to give use expert check [ therefore, plans whether

that scaling as So is and matter data taking, expertise capital make our then customers appropriately. with inventories with validate covering to try that's data how that own sure we're the we sensitize well as approach or to the we're the subject third-party that we're customer Gary, and our we work

with John a Sidoti question & We Franzreb Company. from have

your I'm is in Yes. year just any months versus X in curious, the commercial vehicle coming there ago? assumptions changes

spending are decline customers we And the deepen a commercial the West and still sure forecasters And for XXXX the question. here. of seeking commercial we're Like ACT John, is as of had out seeing And down. and just external ago. to chance really seeing toward on EV is -- we're same side XXXX regard thanks we with be positivity is the seeing toward you a for that vehicle. customers, doing rely Europe changed our calendar headed visiting lot side. said robust -- couple customers are a make in so on holidays like to is we what done the we're is have over fiscal to couple at couple end some the The what that the the year-over-year, the -- Europe it be Coast But hasn't what weeks which of be the if reinvigorate, a trying to our time, as us would XXXX, materially vehicle there time of year. customers last with have we quarter. we're the relationships and in the middle of year relationships to our possible. We had of of to the on visit we'll I'm all facilities a in we CV before I to weeks will,

customers peak we with the car very a they're forward pass growing the important So cycles space, it's look the over for but CV what than business see we are pass us, base than car to space. dramatic, trough, cycle more and Their to is cyclical and got time. CV a different customer little in our

much of touched Where that operations fixing few Okay. you that Is Monterrey? And in Mexico in of is us? So how to kind seconds process we behind talk through what's more Can going go? on you ago. are on a there there?

help fix job reduction that was The good premium has in I freight Mexico. reduction there. to continuing is between way set uncontrolled improve. guess difference a Fix of where fix activities a I is an with there's leadership relatively imply the really on from of a that a is So a you of global go would team But what more controlled would to and our done some say million. improve And majority twice of very team -- to the tenure. to you we I quarter-over-quarter in progress place set majority to it's specific The and that There's I've The a -- freight down my Mexico, the improve. outside standpoint. been drive in of -- had there one improvement premium into basis the said activities. long been of I've team $X organization getting there from

problems So an it's you down opportunities more about uncontrolled of that sense less Does if to controlled set will, you, there. John? about, make and

start. question. a it's Yes, I one enough. other Fair get And it.

that Your change or to the that lower this in spending reduction CapEx represent in just spending, next required spending year year? does a timing from the of

you, we as we customer programs Some look to customer -- as EV I at of look we needs. both, or as look at at said

where you look with And operations. and my capital capital So haven't part originally in one what do is to a talk part a being that were at of make what we a assumption all we of haven't investments my And driven this, we've background-- but areas, of SMT productivity lot -- I the to our these where for we initial planned. was couple of them, had a of lot chance about efficiency. opportunities is we've done of and programs needed lot background and

So some on of go. it others based reduction is where other capital customer timing are and spend -- -- of is change reduction it actually capital programs

we All a the right. fiscal to in kind recapture And year? Will outflow the Or inflows the that year? I to cash able end be was cash sizable will net The guess it quarter. by one everybody be cash bother here. last outflow of with of question

Yes.

approaching in reverse outflow cash neutral. the quarters, to We of are X looking we be certainly to and certainly some expect next that

time, As hand the DeGaynor we any comments. this for on to call closing have to further Mr. questions no back at over lines like the would I

the QX joined on for your your us all thank again, once And you the call you today. to interest call. and you, Thanks forward look everybody your We questions. Yes. to our company. on updating for we Thank interest appreciate operator, in who and

time, this does thank today's may your Thank at participation. and you. and we conclude for this gentlemen, lines you call, you your disconnect and Ladies