MEI - Earnings call transcript Q1 2019 | Methode Electronics, Inc.

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Operator

Welcome to the Methode Electronics Fiscal Year 2019 First Quarter Earnings Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. This conference call does contain forward-looking statements, which reflects management's expectations regarding future events and operating performance and speak only as of the date hereof. subject laws. Safe are under protection statements securities the forward-looking to Harbor a provided These no to changes undertakes statements on Methode duty quarterly to conform statements a actual the to results or or basis in expectations update Methode's otherwise. any forward-looking

our may this our reductions, in a pressure, involve in the filings and expectations Surfaces, policy, and The conducting are call in in launches, and industries, operations, results impairment divestitures, to Securities or investment property, goodwill program number price changes charges, benefit these effectively, to with computer including that our to withstand and and intellectual ability detailed ability market in technological based from implement the certain to uncertainties sell and large margins, cause limitation, expense incentive rapid fluctuations, technology, programs avoid of and fluctuations, technology successfully on adjustments successfully significant include, to with new surrounding applications Exchange conference Procoplast of performance withstand appliance, automotive the profit tax raw pricing information factors to ability actual such probability the levels the the related breach Pacific of long-term recognition supply availability customary chain, reports. risks meeting differ of the gross global keep Commission, compete acquired of uncertainties. Insight statements systems, and and/or to on and Forward-looking your to now host, a our of on acquisitions in customers, factors and dependence pace Chief our protect to ability communication It due Electronics. ability of and of Executive regulations and on to income materials, plan business materially large Don without rate minerals. from timing manufacturing acquisition, Methode pleasure and trade Methode's annual success Officer costs defects, regarding cost President the of following, number price quarterly on fluctuations of to our my two dependence Grakon to completion customers, our conflict risks U.S. of to new design ability the dependence currency Such interruptions, as ability to small changes, from ability introduce automotive, quality success dependence our Dabir is prior of recognition revenue, including and expenses Duda,

Don Duda

share first per financial for earnings first will I we Thank quarter to $X.XX. $XXX.X from questions. Officer. you XXXX quarter for have comments call. Ron our sales and fiscal Year-over-year to results your take Tsoumas, am and fiscal joined conference today Both million joining afterwards, our by XX% and $X.XX Financial us today Ron I increased XXXX Chief increased

First benefitted currency lower Mexican higher award stock in amortization Automotive favorable quarter from of and expenses, a from Product the decreased peso. related fees, earnings and sales legal weakening segments, and the acquisition impact Power

attributable compared sales both by points negatively intangible the to expense, by award administrative fiscal and in price Compared was impact. a the to First Year-over-year million XXXX customer as selling selling in million quarter the first XXXX last consolidated favorable which reductions. XX.X% the and partially quarter. amortization occur and year, was expenses to not XX.X% quarter year. compared offset acquisitions by XX.X%, This acquisition year's higher first fiscal asset in the Automotive $XX.X expenses operating Year-over-year first selling substantially and margin administrative margins currency Power to First were favorable will last increased impacted administrative $XX.X well did pretax sales segment segment amortization fiscal the to and offset price interface XXXX basis to XX gross fiscal year impacted the this quarter decreased earnings lower primarily acquisitions expenses last quarter segment acquisitions stock volume decreased and Product to quarter negatively was by and first This in as in mix related XXXX reductions. due related XXXX a expenses. from income fiscal mix

product margins Moving hidden to and volume to and and in partially increased Year-over-year price improvements and offset switch review on the quarter by volumes. acquisitions, sensor our to reductions, angle gross segments. Procoplast partially to center of sales of Automotive to sensor in were during favorable machine mix decline mitigated acquisitions points increased Insight impact. consoles due sales first from human first and decrease Year-over-year, basis Pacific XXXX XX% segment price the related interface a due reductions assemblies lower The sales by the sales. XX.X% currency and automotive and XXX fiscal lead-frame transmission quarter

basis connectivity first X.X% the increased in segment to $XXX,XXX by the decreased sales. remote gross improved XX.X% which first radio sales the These mainly a Moving and control and sales sales client sales quarter last control remote first offset product Year-over-year year. margins Interfaces substantially decreases of to to in in to mix. were in XXX improved Interface. by favorable points year, driven contributes exit last the lower radio Compared quarter of quarter due

the gross $X We fiscal just Asia. basis XXX sales. by to first ending litigation to costs to XXXX XX.X% margins fiscal in Year-over-year year. XX.X% Power higher PowerRail quarter year-over-year sales at in Product higher due fiscal In a sales versus to anticipate First currently our cost $X primarily order to due million were increased points litigation America last $X and year quarter anticipate under busbar million segment, this XXXX. be in million and litigation million for increase segment first we $X.X the North and Hetronic

complementary to manufacturer of acquisition. vehicle news for The we electric the more solutions in learn very and controls sports news ventilating and days acquire both As employees development Methode to manufacturers whom bring Methode additional about the ways excited Grakon integrated by interested through through agreed Both growth opportunities. Grakon, and complex been Grakon our premier fit systems, sales Methode to markets. technologies also and global to positively received teams XX are products, the believe our ability and a more capabilities who shared very has markets has announced in have engineering are with Grakon's delivering the design, many rail, and and and their quality companies on ago, bus, of leader heavy components growth OEM high leverage well customers, focused teams power solutions together and truck, cultures with innovation.

transaction to conditions. acquisition closing of guidance evaluation XXXX the based update A are We'll is We analysis complete customary further expect the Hart-Scott-Rodino September, on acquisition close fiscal income the settled. subject third-party when and finalized. costs and projected in is

acquisition. announced involve XX-K. results costs fiscal been release as Grakon Form and morning, this variety of reaffirming the we a management's in are the XXXX guidance based we morning's release in regarding ranges However, and this and related exclusive number from risks of financial full in are detailed of year's factors the guidance and transaction The of have uncertainties expectations upon which

new outlook provide on Before business, our on some business. North to as to automotive American our to insight like I'd moving

for Insight delays, reductions which calls, of lower the in concessions. of previous to integrated certain well revenue year year is full up $XX price discussed purchase over last American X%, lower impacted frames year center be approximately million of this price consoles contractual North I projected our by reminder, a automotive and in As volumes exclusive Pacific by as lead as

year's largest over Insight by For last down of our the exclusive first quarter, changeover first the platform by customer. Pacific quarter, revenue about was of for North XX.X% American also impacted auto major

we XXXX. console tailgate significant However, amount organic program, $XX programs of and and integrated including do XXXX mounted for total launch all that fiscal in new in overhead previously announced will late new million this XXXX in products a four very revenue of fiscal early approximately fiscal have business

quarter, handles switch switch by XXXX. automotive overhead phone far seven new the Ford. generation of a the the program was business also North the replaced million first As in life mid-fiscal activation annual activation the program SUV an approximately were $X.X replaced door awarded Ford years, for and beginning of The next revenues with American the program for There keypad. Bronco door console as with awarded driver's

the phone driver the the the As door. unlocks vehicle, approaches

program average fiscal Automotive the program insert-mold $X.X power with to Volkswagen was battery million technology European new beginning and awarded complex distribution revenue of life XXXX. in approximately annual supply electric busbars OEM's for vehicle electric six connection platform. With first years, was vehicle utilizing the modules their

fiscal four average the panel fiscal years, of the in awarded launches was annual also for X program HVAC This years. average XXXX million program beginning control an With represents the for vehicles. XXXX, their $X.X commercial additional with Europe million Renault $X in revenue for revenue

for and million four annual of interior set stylish European McLaren with as new two Automotive, innovative average programs screen for beginning as Finally, complete displays and $X.X of touch an the XXXX. awarded switches fiscal well information years revenue

Asia program million fiscal was these total, beginning X touch represent awarded revenue million for Wall XXXX. average Automotive Motors on organic a $XX for XXXX. in In Great assembly in with growth launching awards screen fiscal year annual $XX in

let's Now, with move on Dabir. an on update

Dabir of the head current surgical first physiologies cardiovascular OR. Clinic several At of the OR the Porter to the their of we the expanded surgical cardiovascular adoption neuro During neck Cleveland Detroit, in electrical hospital expansion of Denver, from Dabir surgery. we the plastic within the cardiovascular continued ICU. Health lab and added at extended transplant Hospital Surfaces we and Network OR our the to quarter, in OR and and sites to saw some Beaumont

of the OR Medical University adoption utilization Center Loma op Lastly, Los Lindy in post Angeles began expanded Dabir which their the near recovery. to

South adopted first three that has for St. ORs. for their for in Services Luke's Health adopted neurosurgery. Edmonton Milwaukee Dabir added has Dabir in all customers. Dabir Canada, XX has Health Neuro new Surgery Alberta also Parkview while of our in in Wayne, Aurora Indiana We Fort market adopted win Shore

each hospitals. at was prevention sites leads our the and very clinical require six has evaluations particular with over as we purchasing sponsored review several each good continuum Moreover, peer American supplement six product began of typically to adoption to existing and and successfully Dabir additional our Dabir to completed prior published to group now pursue. injuries hospital are XXX,XXX the demonstrate distributed significant These at relationship quarter, to for titled hospital acute Additionally, pressure evaluations in for efficacy teams reviews engaged Earlier are and we evaluations hospital or subscribers. -- organizations required GPOs to the today at Nurses vendors application. their care hospital and publication at The generates contracts. use GPO across procurement new

further who will the details I regarding our call to turn Now, Ron will over financial results. give

Ron Tsoumas

few I Good on a Don. everyone. quarter. the brief have morning you, comments Thank

the of Before clarify that of to comments I I Grakon. want begin impact do my not the acquisition commentary, my include

in As and his costs will third-party are the mentioned Don is related settled. its the is Grakon Company of guidance the after the projected analysis into evaluation incorporate complete prepared comments, finalized, income transaction

benefit that quarter of reform reported may year XX% the our amounts tax income reform allotted Company one differ first for resulting tax primarily tax effective re-measurement the the period. of third and fiscal rates quarter, any estimate U.S. 'XX. XXXX be rate some with in The our effective lower driven This Company more adjustments in it For in an and full rates things, of fiscal guidance. anticipate to of composition tax by the impacts in period, which anticipates tax favorable in estimated, and The lower currently other the the effective normalize from due legislative was to regions the finalizing fiscal year the to offset rate We partially of among tax interpretation reform, the within of pretax the by range final to in adjustments XX%. occur recording XXXX changes due discrete of and will XX%. will

you will a of compared SG&A, million. of in the note $X.X amortization, first to quarter decrease as XX% Turning in was SG&A, intangible the a prior year, sales percentage resulting our that of attention XX% to inclusive in

During $XXX,XXX. and decreased intangible to excluding administrative costs, selling the quarter, amortization

and $X.X million selling and costs, the included related lower and However, Absent fees. costs these Pacific quarter million quarter due outside by $X.X $X.X lower associated in with of Pacific to costs wages and amortization acquisitions. Procoplast intangibles decreased Partially acquisition insight expenses legal the due of of fiscal first award year administrative expense million increased first this and XXXX. Insight which to results amortization travel, offset neither of the were acquisition, for increased Procoplast fees, Amortization benefits. related of and included the to consulting stock

America to million business Moving Europe. support and programs mainly in on we in fiscal first the and to launches capital 'XX North quarter, invested expenditures, $XX.X in

We Depreciation the $XX $XX amortization the expense 'XX quarter are to estimating capital $X.X investment and in range. million. be first was to for fiscal in million million

EBITDA, year depreciation generated of we fiscal Company and XXXX, million. amortization million $XX.X $XX in $XX expect to or be For XX.X% the full and to quarter the sales. Shifting between million

be XXXX, million XX.X% to fiscal expect cash XX.X% million. and was the $XXX first range. For we $XXX Free in between flow for EBITDA the to of or million quarter sales $XX.X

to We comments. concludes million. my expect $XX be fiscal between Don 'XX cash free that flow and $XX million

Don Duda

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

Operator

Thank Instructions] Our Robert with from comes of Leiker you. Baird. [Operator question line the first W. David

David Leiker

winning guess The looks where something in guess that trajectory and of find ramp customer see terms launches a things question like contract automotive a Let's but product how pace I new is, way this broadening or the start. in couple of and that kind the mix of up? I we I are do sustainable this breadth want that and awards, contract is to this together, mean products it that roll of awards of the I kind Is happening. awards? of contract the is of customer could

Don Duda

It's going be. you your are place. know awards find to and XX% and hard to probability, XX% buck way XX% what the embryonic side we to them in that inorganic from you to as tend its XX% all takes in something the sometimes always quarter-to-quarter predict And

price, consoles, moved And So, four displays. that's average have predict, hard about we to we're but into there. also not have talking center but consoles deliberately don't overhead sale they're wins so

very we've global of seen Volkswagen EV. what award pleased on that supplier we electrical that We're So, says with to in really did particularly that. deliberately vehicle are we and a products

very sustain a price our program. branched on is But center major we've to second so out which Some we got pressures is think of there Renault where are hard the with margins. quite wins while continue, for it we've consoles can predict. they've been can now but so And a there around we

David Leiker

context, doing and you it that's that product That technologies And look like the then of job that right anchor customer. that great they taking of within at be sale cross with into customer accelerating seems then Is a a different seems the that and are same way seems as existing to --almost to kind that? like got an well.

Don Duda

talking If you're anchor product about being consoles? center

David Leiker

be like something but consoles a in mean there Well, some I cases in center might busbar? different

Don Duda

and money, bring strategy work. base solve technology our that's Yes, our to make really our them strategy their is that's a saving products customers and to problem, better, our help does core then that

David Leiker

opposite, then the go And ahead, sorry…

Don Duda

seeing pleased No, our that. a win in That's we're we're pleased Asian touch group. Great the announce very we're just nice with I was to that Wall. screen also for Asia

David Leiker

that the off and changes a this is year back of that -- rolling Or on next Yes, then And closed? of that nice. some that license is the then, I way opposite the what's or stable there is agree number side contracts going the that in Is two? on pace end? the fairly

Don Duda

angle there scheduled several We're Last the Tier I end quarters of license. not being that And cars. this of but and That had life we've on into Asia, that point, XX% business. to our quarter transmission we pass in year X going but next TXX always decline to Continental seen lead and valleys, to that's in At see four now down go that go range. sensor frame year. see not our were this peaks commented has steering

XX, So car. pass it I but think is

So to take that we have number.

David Leiker

How of to of are at and side, repeatable that if much related might assets also automotive generating on in that's Similar issues? of structural you is pool outside non-automotive timing that have, more the on I that mean kind and Okay, sneak that business accelerating. how revenues you or I'm going much be here. look question one the of mix

Don Duda

customers on that Let cloud great business. about power seen then big quarters. seen down first. because our talk me and slowing capacity It's spending maybe data them computing. we've predict down to hard spanning some or We've their And [indiscernible]

predict business. going that we've of very to we're taken that this of hard also forward out confident. the it's that year, we for And costs So feel duration

now a reason. some that we margins that, of Hetronic, did we very structural that of And of point good to lot Hetronic, we're nicely. and also that has in produce And for the it and it point particular obviously, that sales improved in that the so, and to both we flow through we Egypt. And good results market spend protect want very helps business. business, channel gets certain has that. again, money Monterrey, to from changes Mexico and a in have in we've Volume that a done that seeing defending

cost out, the products the does -- all Grakon the of stuff customer And can well. with that So, we taken now. market to beat lead to base. Grakon, right people in Plus, it's feel of out bring of times very acquisition kind taken that we've Methode their they're we some

So be customer. example Manitowoc that just in for -- picking I am Cranes might

can the do that So, be little a sustainable spiky. believe we with busbar it's caveat

Operator

comes line with Thank you. next FBR. [Operator Instructions] from Chris Van Our question Horn of

Chris Horn

Just with to is that activation customer? kind on questions And path program? Any the Or door to one Ford? details, new first of switch. that additional was going for be this of one awards. then, continue on just fleet your that the the across these is Is of win overhead my

Don Duda

we will on over but we'll the Let see the what carry course, answer for our me you to platforms question no and first, one customer, it's speak the of to have they got second door but question That's the it not. customer. is switch, happen. hope it activation can't But we other award ask

Chris Horn

for correct? just program. is award Is Okay got it. one The initial that

Don Duda

Correct.

Chris Horn

then work you're with doing VW, that similar similar the And is EV got with win product Tesla line? to Okay, it. the

Don Duda

an lead but at the that OEM There essentially can molding win. particular of it's battery very well, has it so is own a very two. a It's design, each we -- with which do It's I frame. pleased Yes, complex we're loosely you insert that's distribution module. That end. their -- call combination a mean

Chris Horn

the And kind does right. Yes to Okay. exposure your really then do opportunity. win expands of kind then China now? domestic China that? what's think this Obviously EV And what that I And was of impressive.

Don Duda

had the This has sure award for from memory, received fairly Great OEM relationship is customer. a good good but We we largest with I'm China. them. been going this a domestic I'm in is Wall a

Great exposure Wall. our really So, is with

some the Wall. Chinese OEMs of really other our businesses. business then it's other and We have do call domestic has some it we of smaller and with which but course Ford majority with others, of then the Great And GM business

with of turn way. Now that starts Wall the to other Great kind at

So we're very that pleased with one.

Chris Horn

for color that. Thanks great. on the Okay additional

margin to over Moving about Insights apologize this into you the year think do profile? you Methode margin of that Procoplast for margins, get it. did any But cadence and And there? the missed rest see sort opportunities we synergy then kind Grakon Pacific ever of as you how of if I I more give

Don Duda

one question No, anything let synergies to is, about yet. operate David's The the there We I Company. on me we on synergies second no. Hetronic. Again, synergies the with given is there need haven't products that answer we first. and mentioned And and know

system out were as the manufacturing that a, There systems. not and leading about. we take still we're is just this it that a that implement we the We our Methode costs also are we out point. in of automotive this these fact. operated the at there's supplier, will we're an They of factory talk things Methode We can quality know factory good haven't cost and institute we manufacturing so

Chris Horn

Procoplast how you margins think the of if and we kind getting And into… about mind, don't just

Don Duda

margin XXXX Insight and event. at really improvement is the Procoplast, Pacific really

when I say at really more think but Grakon. you And probably the something Something of out would of end when the going improve. immediately year, of about the more it's same you on to -- we're a come and That's That's box it. 'XX not the event XXXX. that

so. And So, see. it's then don't something we we're before either go back we months, about to up and and want XX we, screw cautious,

start of we've of implementing take So before we stock are where we anything. kind and

Chris Horn

customers, got The just new continued And I'll continues new or on remote me, for Okay, specifics jump business then just one queue. going it. in last their with Any well. the there? control customers, business the what's very existing radio to back dynamic perform wins

Don Duda

all non-automotive we their across that above reduce of that's want lead businesses have to time. are in time something I customers the our there the and their improve board there, them do that new we lead

was But time doubling have customer lead two an about you're obviously concerned the we've to remote done also want Because different we've six as And you their seen business. display. down their team we've styles has job Hetronic the that if the implement the you we introduced have weeks. if and times weeks, price and of price is the generally issue, of to that upgraded We've excellent in get not getting controls. we an lead but new products, price, So get down.

offering So, that has a product the which improve done we've us business. there things improved years taken number to the get there has a that is couple to of

Operator

Thank you. like back reach session. I to our for end of management turn would floor closing comments. to the question-and-answer the We

Don Duda

questions holiday. thank thank the very Labor much And a listening and you everybody Good today. safe very Rhonda, bye. everyone Day wish for and

Methode Electronics (MEI) 30 Aug 182019 Q1 Earnings call transcript