MEI - Earnings call transcript Q3 2022 | Methode Electronics, Inc.

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Operator

Good morning, ladies and gentlemen, and welcome to the Methode Electronics Q3 Results [Operator Instructions]. It is now my pleasure to turn the floor over to your host, Robert Cherry, Vice President of Investor Relations of Method Electronics. Sir, the floor is yours.

Robert Cherry

Thank you, operator. Good morning, and welcome to Methode Electronics Fiscal 2022 third quarter earnings conference call.

found have results, presentation on which of call we third Fiscal the call, the this financial on quarter can or this prepared entitled a XXXX webcast Investors For page. methode.com at be viewed which contains events regarding performance speak statements, operating the of management's only expectations This conference as forward-looking date reflect call and certain future and hereof. to provided under laws. These protection forward-looking the harbor statements the safe are subject securities or duty to statement update any in to a statements on the results otherwise. no forward-looking to conform quarterly actual undertakes changes or expectations Methode's Methode basis in number statements uncertainties. forward-looking this risks The conference call a of involve and The XX-Q factors Securities could actual reports. the as and detailed are materially results to such that our expectations from with cause Methode's Exchange and filings XX-K in Commission, differ our time, over to this I'd call Mr. the turn to like At Duda, Executive and Chief President Don Officer.

Don Duda

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

with the on Let's begin Slide highlights X.

cost for efforts. $XXX the quarter to our helping by million, sales were premium freight million, $X successful Our sales were recovery

trends controls. the products and products. growth and particular, lighting lighting in Europe saw strength power segments growth from chain across remote our segment demand leading particularly our segment, but we to auto commercial and commerce In benefit Industrial encountered However, particularly e OEM the the all ongoing European continue Automotive vehicle, These product supply the various due headwinds In vehicle automation. disruptions, in saw to in and shortage, semiconductor production categories, slowdowns. our electrification, radio to macro electric busbars,

sales again a our such, trend we our sales, expect to continue. As automotive industrial outgrew

and these the action pricing. shipping, face challenges as such mentioned, diligently mitigate expedited the to have supply to chain I our team premium which in challenges, required quarter. continue They ongoing component worked As remedial

in share increased the the to customers particularly with our freight. with relentlessly premium costs, these absorption worked have We of

operation we've these into taken addition, an to facility to existing consolidate challenges. another In in the response proactive steps logistical

this on supply customer confident call. action later details drive service will more this are We help risk, reduce the margin restructuring chain expansion. and provide in improve will Rob ultimately some

moment. On quarter And with new on awards, new program million a EV very EV our majority front, the over of for awards, a products. in $XXX the more application. order were of with XX% strong I color awards, were new a provide of will power approximately distribution for large these awards

sales. sales XX% Last EV we that Focusing were on EV. of applications into reported quarter consolidated

This quarter EV sales grew record for to XX% a of consolidated sales, Methode.

to year, fiscal our be guidance. expect EV date Given up teens will in now percentage high sales, previous for year the from that we the our with performance mid-teen full

by leverage be continues to EV power we to where XX Our fueled growth to continue distribution, OEMs. EV years to quarter, activity our the over our further return capital and activity to reduce power of various we In debt products expertise shareholders. - in supply

in Grakon cash $XXX now lowest authorization quarter. announced our it executed net to utilize was stock a March. While we the our of level $XX buyback have share as debt increase an We've we since over available debt million down since did buyback last the execute of the million portion a the $XX in was acquisition, to million

sales identified very wins a at some Moving production. strong the awards key of and represent represent business the million quarter in in awards. here The over annual to full $XXX of Slide X. Methode had business quarter,

from of As to full launch a reminder, the one these could years now. range be programs some anywhere the of timing in three

battery with representing is awards, the focus program. those and several power within products the by EV EV list As a three you were of programs, can main unit And quarters dollar disconnect busbar dominated the programs, see, value.

[ph] of those life large than the of and model platforms, non-EV brake awarded councils, awards, first refreshes. applications, programs, programs leverage over the program are automotive OEM traditional German parking These bars, was In the have their EV switch will skateboard multiple for a we method as part several investment ICE programs a Hat One HVAC or which including significant win for expected EV established user and busbar OEM. of Top electric switches. with interface a automotive, longer are to were overhead vehicle,

quarter for years. motorsport future was very a for awards conclude, growth company. a headwinds, We organic DPU organic for to and also we growth will And demand are micro chain XXXX. successful challenges, drive telecommunications supply a worldwide Overall, by despite expecting team. a a strong programs To fiscal deliver for executed that headlamp well it was it won quarter some in ongoing and new still

this this beyond be quarter quarter long-term continues path more point, over the past will turn this by Methode's our and a who to Looking as evidenced fiscal our award At to deliver pipelines year, Ron? I'll to provide detail Ron, third on strong, call financials. on results. puts

Ron Tsoumas

slide Please And you, turn morning, Thank good X. Don. to everyone.

freight $XXX.X on in million. $XXX.X by year decrease of includes recovery, $X a fiscal 'XX sales X.X%. Third 'XX, $X.X exchange year-over-year $X.X comparison partially of The unfavorable million sales offset year were in quarter fiscal impact million million an of currency million net cost or to as premium compared

fright electric than XX% hybrid amounted 'XX in electric decrease the to in due teens products, sales and $XX our cost full of sales high by electric by impact, lower year of which 'XX electric the sales percentage our communication that higher previous vehicles consolidated consolidated sales. would fiscal to comprise currency higher fiscal quarter represent teens quarter, offset hybrid partially sales recovery now We sales decrease was year foreign third is mid decreased premium electric expect a our the hybrid in Excluding mainly Europe. This vehicles sales to sales of sales. the and vehicle X.X%. automotive the which of or sales was million and and The

higher to and from contributed Income administrative sales and gross selling and vehicle mainly addition, the product due In lower growth. segment marginally decreased industrial expenses. commercial marginally to operations $X.X million, by margins, stronger power

decreased income $X.X net $X.XX same X. million the $XX.X in $XX.X million diluted per or $X.XX period share turn share from year. last per to quarter to slide diluted or Third Please million

XX.X% in year offset of margins XX.X% volume, fiscal as gross due mix, were compared fiscal quarter higher in quarter recovery. cost sales Fiscal premium 'XX Third the to margins product compared third lower unfavorable partially freight to 'XX. fiscal lower 'XX year restructuring 'XX, costs, year third quarter were as to by

fiscal and a and in third In inflation 'XX. of addition, degree current into a fiscal the of Year percentage XX% remainder percentage as of 'XX selling third 'XX 'XX sales year expenses The Fiscal as mainly minor compared XX.X% cost was in our the increase do attributable increased administrative quarter restructuring this third quarter quarter. year anticipate fiscal we year year costs. to to to fiscal

other negatively premium administrative historical to selling, line turn unfavorable with income. partially percentage decreased to was Slide costs, offset was expense. X. selling flow impacted administrative recovery, yield from cost higher tax Please sales, higher quarter by This from income should gross Net norm, expenses and and in lower margin which income efficient higher operating and product freight restructuring our through expenses, an mix

fiscal impacted administrative and SGA third one gross net quarter In in of 'XX. mentioned, addition previously year the and - items the income other selling to margin significantly items non-operational

partially The due and of million, effective by amounts 'XX. XX% quarter third income XX.X% discrete As increased XX%. the previous same international between EBITDA, negatively mentioned, quarters million from in a 'XX, the product ended in reduced fiscal of and higher to last debt was in to compared million in securing other year due quarter in up restructuring year income. net XX% EBITDA and third the third success year. The $X as of was full the fiscal cash. operating lower in period income, exchange lower the rate foreign third the $XXX.X XX.X% 'XX mainly by to than to non-GAAP unfavorable year the premium financial quarter government tax is estimate the the a offset fiscal and includes of year recoveries impact million by quarter $X.X and cost turn Please freight losses $XX.X we XX. higher mix, of assistance items third In 'XX to XX% Fiscal with was million mainly comparable gross $XX.X quarter of impacted year quarter measure. costs fiscal million range lower 'XX EBITDA was recorded of to $X.X versus Slide year by other and re-measurements. Shifting between of

inventory to chain months working million increased million share first 'XX, nine fiscal financial due million, capital related purchases mainly of non-GAAP increased challenges. $XX.X the $XX.X During a measure supply net unfavorable debt, nearly by and year especially to due changes, to related the by of $XX the which

$XX.XX. as of minus of non-GAAP purchased to repurchase million have defined XX the allocation, on from year Free $XX.X capital price Slide Regarding share a million CapEx. flow, an quarter is Since financial purchases Please activities turn at authorizations average million XX. program, $XXX XXXX, which announced March worth shares have we provided fiscal approval, operating executed the cash we of net measure third cash during 'XX. $XX.X we a

and to logistics receivable, which 'XX. For quarter $XX.X mainly fiscal as the flow changes, a to The $XX.X fiscal especially negative quarter as third third from the inventory million 'XX year to fiscal free cash million, difficult year the favorable the compared capital was third had fiscal in accounts compared of impact 'XX year year working from in third due 'XX. resulting quarter significantly quarter of was of decrease

generating history CapEx with of flows, to a remains for as or of compared higher in guidance 'XX. was that the future $X.X in growth key 'XX third now range, addition, slow million. year the for year $X.X quarter to of cash and consistently an the $XX of of organic vertical proven current which inorganic in investment projects, the the expectation concerted decrease do our We ample quarter simply capital million The our year. any allow 'XX year outflows estimate capital $XX is the fiscal growth, integration higher fiscal cash fiscal effort continuing We return of to to to anticipate is timing to and CapEx line million of than opposed a the In allocation $XX from million would be Investing in be shareholders. million organic which our prior result reduce to approved CapEx in capital prior fiscal growth of perspective. strategy than $XX funding priority investment. of reliable is lower in The as future cadence the million CapEx

We we'll to organically. investments in our have continuing utilize a it by strong and them balance businesses sheet grow

capital to slide of continue Please In return assertively to turn addition, and we to shareholders. for inorganic opportunities growth pursue measured XX.

guidance, future items and from from impact best Regarding headwinds is such management's logistic external based ongoing the other estimate, events the on results, can negative an potentially chip related our impact as it ongoing challenges headwinds they remain challenge. and - these the shortage,

cost which revenue full The to corporate unchanged. will phrase success labor $X.XX headwinds incurred the earnings due us year stabilize. and of dynamic from $X.X largely While EPS current The $X.XX from and $X.XX $X revenue we $X.XX non-product constant my to premium $X.XX. range costs, concludes we cost from recoveries, our of recouping likely annual due fiscal year. to range increased that are three remain between as guidance, these guidance had billion, remains our be recoveries, tightened of mentioned range to previously expect of when we million months a issued range midpoint certain $X.XX now battle. the comments. has for and to will amounted Higher been billion, fully in with experienced billion share material, previously to quarter. fiscal costs 'XX diluted We sales. freight some the The the in up increased billion things which are And revenue Don, remaining $X.XX for to mainly for prior a the is the per third to

Don Duda

to ready take Thank you very questions. we're Matt, much,

Operator

question coming Howe is [Operator Your Instructions] from Certainly. Research. from Barrington first Chris

live. is line Your

Chris Howe

Good morning, everyone.

Don Duda

morning. Good

Chris Howe

Starting the questions two taking questions. for Thanks first here. off,

With about anticipate how that the as we're little wins, out the years. the potential into new these the kind of potential new XX% business wins of going this wins, EV imagine I as several here? in new you future over and for next the at the move additional to of stages initial approximately should a talk far would applications business greater the business wins detail EV we only Can further bit from you or just the you these increase application of as maturation mentioned market.

Don Duda

would Yes, I agree that. with

awards, short even launch till get now. from the as a full EV major full XX as at The launch. months the XX You get are they'll months XX least as ones XX, out months maybe the know, I to said, you

running launches you you'll awards, - Just really mean because our know, on of of And these you programs, cycle there. they our at doesn't it platforms. the rate. over as launch of you're run ICE other potential, unusual usual to see nothing full launch the And [ph] that carry you the right,

you know, you million maybe a annually go So, XX, launch. into as through turn $XX the might XX

are or we're words do occurring. program the skateboard, little the exciting to territory we four of which all is programs, think like are on will A contracts a years, A us. lead more our predict length I we some that. the can know, where uncharted lot that longer. anticipate go, of anticipate XX hard it of think five So the some years It's the is for you color. plus, in long of But will how even frame program transmission the I on be those them

nothing see little deal because with as majority are rather the refresh, I easier against which with would the not on of the much awards, in also with there's volumes it's like than an there. it's particularly also the skateboard say more we it ones OEMs, revenues predict And start So going - future like we larger established with would awards – ups to automaker. with, to the established competence but a the

Chris Howe

And very think going semies year we're go Perfect, I the semiconductor situation next about situation, you to fiscal think still [ph] that helpful. the it's undergoing into 'XX.

about past and out. of year seeing kind fiscal half challenge, how a we directional think of When on challenges that you fiscal versus we second that at think also in of Europe, is half 'XX, in out basis, playing you're first this that the As and perhaps plays look the the 'XX? do how

Don Duda

If you about it, years. little the two the be it the a and two take longer before about what happening depending takes the terms capacity, little on add to of shortage approach by on may into suppliers. be years that might that capacity year was in light a We're a addition

a be calendar of maybe going So an issue. conservative this it I at is, the duration that's way to year, looking of think

kind really have people sufficiently, certainly half, - 'XX second look be it'll well. start that's going a this is it look how it, capacity going to to And been better of this fiscal get be at - the at we looking predicted guidance. to we added Now has will until with is us. how may our that - And in that's at as but we're

Ron Tsoumas

uncertainty would it's serve, well of I we our still navigated to how and lot dependent say that not the so that Yeah, to on ship they the only search. we buys customers. can still a securing have OEMs But components, us we're

better job cost into have year. continue. success know, you that the of a than and getting sharing in recovering done is, first did we costs and we the more it we out in quarter So we a second of and to thing expect arrangement One spiked

navigating for So our best negative the demand going - and a of we're impact uncertainty customers can. the on obviously we of certainly But our the impact lot how so to it's product. ultimately, as

Chris Howe

takes follow half second my to thesis, We'll going that a some half. your lot that puts the out there. second run of But this plays can point the plays with to means and there know, 'XX. like of the QX opinion, QX, on course? year it's just typical not tell in see of out. typically early see you industrial Or too comments but that a companies should going how its typically up weaker. how you your with Any half the Yeah, first are Okay. the in fiscal as and seasonality at is strongest quarter, business be

Don Duda

what looking so uncertainty, organically well, year. they But the - audit as like supply that. on it that here, in really happen - And as as to Bob issues But running see second very we be past, I one two years, And I we're you it's then impact starts are thing are that we're look agree, really strongest. to quarter the that half generally can else, paper it's at our on good. have we're that was tough. we of has there's mentioned forward, theory. look much [ph] to fourth can fairly but predictable, But can everybody chain the hard think generally far the - against

but else, I hard to to or that, it's very know. it's say, like what anyone June just [indiscernible] July don't answer like we So

Chris Howe

my give Thanks. hop back Thanks others I'll a to taking call. queue in for the chance.

Operator

you. Thank

question from Franzreb next Your Company. John Sidoti coming is from &

line live. Your is

John Franzreb

days the the on everyone. and Good a having despite was February the for And like off I recovery to calendar the a and the the questions. the it's of industrial in start for truck Class basis had about third looking tell how quarter morning, the you What A taking January XXXX. of of is thanks seasonality and in business, quarter. with market good balance up sequentially year-over-year kind

Don Duda

I we look we have way vehicles, the been second up. that's year us think sales tailwind last or that's the good. definite commercial for half been The the - go numbers as the of into a ACT mile at has vehicles,

on So about third And we're that. question that the certainly very quarter no that. helped positive

we'll as But by Chris, we looking degree spot, shortages, what affected forward. said that to so general, Now, that's and what see to on, bright see. have to a in degree, as negatively I to

Ron Tsoumas

know, expect, the you know, we And, - improve. No, is pretty something would the fourth everything ACT, quarter that's we you to unless follow good. looking no, and happens,

Don Duda

out of congestion we the restructuring, our move that of port did there Mexican consolidated logistics and and we things the Seattle, about center. talked in logistics one And

So of of a did one to volatility to to that'll our a certainly we some best in to sort able while the service reduce we through. and to quarter. customers take But did that that the [ph] inventory step better,

Ron Tsoumas

next we we And be go the - fiscal would first that. of system, year, through the quarter of imagine quarter before it'll I results see the first of year

John Franzreb

recovery it. release, seems But little on I the I zero just the have like perusing here. a grasp mechanism a help working, seemed it's to profitability. impact got costs. whole free when then Q, on impact was clarity better it, how get press in a can the like Got an And the so of Please profile. the it it gross margin me is this did understand It concept

Don Duda

Sure, either we previously we we we're in from negatively position in - share, costs. any to a as what before contract was before, that quarter cost do the we were getting – third incurred And now compared impacted that significantly the to up that freight, in improvement premium first recovery where or million the a and by for costs $XX that. occurred second quarter was in when we're

get So cost we're going to to do agree we continue sharing. up straight before things to

negative other continue any premium we have we're costs. any freight try And or that impact. previously to recover don't to So to going

one year. the product quarter, And that matter, see this For we're first basis quarter. in could next know, success. this happen starting happen some But non million, points, And in to first the two first negligible, the was did. that spike quarters. to million could to success quarter right. And we are case was in And, of of quote, was the significant going that that two it in you But each XXX we to it quarters, those $X sales. so. the just important $X thought we out as, in are that mechanisms continue pretty do It of

be, know, basis. that that's - we've we're you made an thinking forward and go should impact, kind on how of a we about So

John Franzreb

line line. a Got those recovery income and is a actually should it. and numbers? I it helpful. on COVID how less one I grant one's gets number? That question One's million $X.X a Are two there? were was there forward? $X.X that And items one, think going the about is - mean, there million? what other Or How there

Don Duda

assets of any some government related, exchange whether COVID Yeah, so have the other related all or other opportunity whether is secure that one the all know line we the And assistance, you from of that income accounts, funds. re-measurement to and accounts it's those our and financial foreign other financial payable it's consists to assets.

parts, but main keep two in the we income other line. that government are those all assistance So

John Franzreb

quarter? still government you since receiving systems that fourth Is your guidance? the part Are of

Don Duda

to an in fourth - that our always success So - has that secure guidance. in the been any company contemplated in quarter, will the that's we we thing try to for continue ongoing an and all

John Franzreb

for Got you it. All Thank taking my right. questions.

Okay. guys. queue, I’ll questions. get taking the back for into Thanks

Don Duda

Thank you.

Operator

Baird. next you. question from Stephen Thank from Instructions] Your is Nick [Operator coming

line Your is live.

Nick Stephen

Hey, taking everyone. questions. Thanks my for

and factors XXXX and assumed So is and that us low just a XQ? guidance into range respectively quarter, considering swing at my could ends the the the your [indiscernible] month guidance XQ the is takes first also updated one guidance, and walk puts is so through see main fiscal already far end, for of what you do you high the

Don Duda

having you to and and in that’s that a some products million fact frankly product a compared so, standpoint, and cadence the the recovery of bit hit decrease as of things in are $XX XQ know, from puts of recovery, had and recovery to and some you European the third amount in the takes the nature. guidance our auto the So sensor of we quarter, of of the

range the $XX million, right. So would the that we cadence and – the know amount the of

the that and So from that those range. tightened standpoint a we are puts up to takes and product main contemplated getting

Nick Stephen

Perfect. Thanks.

Operator

you. Duda, for Thank the now go back ahead. Q&A conference concludes I hand President our remarks. Methode would of Don That and closing Please CEO Electronics session.

Don Duda

for and weekend. the coming Thank thank We'll listening enjoy much. you. everyone Matt, thank you very today

Methode Electronics (MEI) 3 Mar 222022 Q3 Earnings call transcript