MEI - Earnings call transcript Q4 2022 | Methode Electronics, Inc.

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Operator

Good morning, ladies and gentlemen. Thank you for standing by. Welcome to the Methode Electronics Fourth Quarter Fiscal 2022 Results At this time, all participants are in a listen-only mode. After management’s prepared remarks, there will be a question-and-answer session. I would now like to turn the call over to host, Vice President of Investor Relations, Robert Cherry. ahead. go please Sir,

Robert Cherry

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

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

Don Duda

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

Slide begin X. on highlights Let’s the with

cost $X quarter efforts. upping were recovery in sales million freight premium $XXX by million, Our successful spot for buy with sales our the

in the forecasted segment Europe, roll Also lockdowns in chain extent unexpected in where in which than and Asia. was conflict China, expected. of Also sales COVID-XX Europe our to weaker due to program in disruptions. However, auto encountered the to market, the global the offs North the led ongoing demand weakness headwinds Ukraine and due than America the supply in worse automotive

the been sales effects the sales reducing other headwinds. quarter range, our were in While expected have better overall could the of for

We ongoing chain in continue the challenges to face the supply quarter.

worked team remedial challenges mitigate diligently of buys to Our and these actions shipping. which spot expedited required

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

may recall this You we the front that third on progress made quarter. had solid in

freight we the even costs. in more acceleration material, saw fourth labor However, quarter, in and our

a offset the obtain costs to to for as likely ability reimbursement lag is process these long or inflation Our as matter as of continues.

addition, product resulted sales weakness in Europe unfavorable an demand in the mix. In

changed quarter factors, the All of unanticipated landscape. at provided From guidance the we closed expenses the that along April. time until with some the of end these significantly

work we the in forward, done on increases the mitigate the call. this mix past. later will further we Going and will in successfully cost product have to impacts elaborate Ron as

a On program approximately very variety were EV will provide moment. over of on Of front, more awards. had the awards strong with with we customers these in a awards I quarter in applications $XXX order regions. XX% our and products, another color million

EV quarter last XX% the the EV, that sales applications sales. consolidated in were reported of on Focusing

for still COVID-XX quarter XX% was were the This quarter, China. ever to the in related best EV EV lockdowns our sales of second sales. sales, lower we're percentage directly consolidated Nonetheless,

in Evie Given activity. ongoing our momentum momentum,

have debt, and our We’re we now further fiscal reach the expecting the Grakon total In levels of XX% XXXX. since sales the debt lowest reduced sales acquisition. in quarter, to

flow our to existing $XX Thursday, million buyback of we working in stock increase We strong also our delivered made to Last progress addition $XXX announced on and capital dividend, authorization. cash quarterly reducing a million. free

in we expires the now quarter, fourth the in of of of June end capacity the authorization, approximately which million of As have XXXX. $XXX

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

the to a of volume these in Also, the reminder, most awards be full are of from timing could launch years range of three programs OEM existing anywhere these some of As on increases now. notable one programs.

power, the regions see, It very value. hat in The is and and be will module variety the by Europe, sensor drive skateboard the exposure representing is awards They and rich the successful robust. lighting, market awarded noticeable They the In an for continues As to and an and growth datacenter years. off-road dominated future with auto main Asia. control OEMs to can and growing an programs markets you were applications, that seven that list our different products e-bike it are cover also they are awards. dollar clearly the for organic was growth EV our U.S. three busbar vehicle was XX% include it other among a sensor, EV top assembly. Methode. of in EV. applications quarter and programs geographic strategic Overall, trend, for All a and of

we during chain finish Slide have recovery and Supply sales $X,XXX,XXX,XXX foreign growth. for year. fifth exchange, impact year-over-year with took the earnings. full Even record a year and X we year over XXXX on $XX in the in toll cost challenges to for row a our sales Turning delivered fiscal the sales market X% and growth highlights, million the on excluding and of a favorable disruptions

However, EV total our the awards We they of the strong, and sales very program XX% reached for full reaching the year. for sales almost million. $XXX year were had record application in

number XXXX. we mentioned, see XX% that already in I fiscal reaching As

proud lowest XXXX with story one we to debt now of, Grakon. that a sheet is balance continue be Our since the acquisition of our level level

portfolio of With demonstrates was a was target the business. model program. product past made and strategic cash X%. strong annual its dividend year effort confident of generation over diversify the stock flow award healthy, and sales the as our years, free the to million healthy our pipeline X.X down just power target our of business it to for sensors. the was we've While and organic Methode three well purchase supported year-over-year, still ongoing Were it's shares two that steps from the growth is grow to but taken announce prospering This further rate lighting now compounded not a that as

always Turning to to will key over business the get to biz, be and of achieved continue hospitals. evaluations The the been this to ability the for we’ve million year. the $X factor has at sales to success product

be the a as product growth execute in our lag high and the two remained has in years, pandemic headwind the years to hampered to last valuations, plus such business of interest evaluations. over the always as continues recent COVID-XX these ability has started sales has While been been to sales,

forward. confident of However, accelerate those going the challenges. help and business by But was the year demand to conclude, remain we plagued a we're prospects. also ongoing in mechanisms year chain challenging and growth supply options it external exploring engage To headwinds to a

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

growth Moving and forward, mitigate experience team's these I Methode positioned and am confident sales that with pressures expertise fiscal earnings XXXX. for is and deliver the to operational

our up who continues we this confident turn in sales three deliver our our quarter will to compounded to XXXX, growth year on the target on detail X% them Ron on our are a firmly and pipeline more puts over over financials. point, beyond be award path and annual to robust. At This Looking provide fourth I'll the call years. next Ron? full strategy

Ron Tsoumas

in ‘XX $XXX.X Fiscal by unfavorable million. Fourth of recovery, decrease impact include X.X%. you, or sales million net in Slide premium currency of sales to of good fiscal ’XX, in morning, of $X million million freight an a spot buy $XXX X. everyone. million $XX.X Don. partially sales quarter a fiscal Thank And cost were $X.X offset Please compared to turn XX, foreign

roll or supply Europe. and sales freight North in North due decrease Excluding $XX.X increased in due issues and fourth the Europe segment. industrial to program X.X%. quarter foreign by the impact, automotive the mainly but chain currency the sales spot The offs Sales interface by the in America, segments in in recovery premium decreased conflict medical in declined to million in weakness America was cost

sharply in XX.X% were the our consolidated factor to segment gross or compared and Income This per sales which gross decline XX% ’XX, $X.XX fourth share fully sharp fourth Fiscal EV was Slide our to to higher increase perspective. X. inflation, to in expect Please gross to of to the XX.X% especially sales. decline to to weakness due which margin. increased $X.XX amounted industrial material XQ the margin for was and sales a consolidated margin decreased Of operations million, partially due margins highest fourth segment, net to costs of diluted increased fiscal year-to-date recover issues and of which per mix accelerated related represent gross ‘XX in turn to application results, year. and fourth now spot related far. $XX.X due our of from was unfavorable due period the ‘XX offset is segment While ‘XX. same $XX.X in this due quarter premium Fourth higher sales our margins the policy A fiscal an XX% over full or to margins of profile, the our guidance by lockdown, items issuance. to ‘XX our from hampered EV mainly $XX.X operating impacted China in $XX.X to overall fiscal last million product freight million fiscal $XX.X in the diluted inflation unreimbursed margin decreased Industrial the ’XX quarter the income year China in decrease to segment contributed key the as product and down margin to as ending during share material the from from in profile decreased and quarter and in gross ‘XX other XX.X%. the costs was year. XX% cost reduced We to to million by COVID buys, the quarter XX% quarter higher from in timing eliminations absorption decline year-end fiscal inventory quarter customers expectations million lockdown quarter our and inventory sales of full Asia unfavorable year-over-year in XX% margin cost profit third Also, zero the freight in ability XX% adjustments. related March were to from approximately the the inventory such was the and sales fiscal the as compared quarter,

some recovery the periods. the premium higher Cost to due we automotive process costs. costs what to to ‘XX, may items was actions less not mix. segment, inflation recovery and anticipate buys, In fiscal quarter. are keep to in It product decrease take in the due incurred but than be was with spot impact the volumes of will did lower fourth recur cost margin in While noticeably sales and recovery, for the inflation freight accelerated on in in future up place increased pace other and unfavorable the actions time catch material

inability customers in our both $X.X per XX.X% to to a and amounted diluted selling of in flat continue in approximately along and the premium Fourth administrative percentage expenses at was chains or fourth quarters. anticipate $X.XX ’XX. sales We inflation cost as relevant to cost share to Our our do fiscal quarter pass million, supply disruptions quarter.

from Even and recovery of mentioned sales. the is of and same sales premium tax to compared million increased and fourth income of $X,XXX,XXX,XXX, of financial cost sales and in million tax of mix operations. Fiscal lower to the fourth was partially cost measure. premium spot prior in efficient a increased Without from cost tax million cost expense. last of quarter was year. exchange, to net ‘XX. from Slide earnings perspective increased X.X%. exchange. Shifting fifth $XX.X margin XX. buy X.X% yield cost items million income turn $XX.X expenses income Please record offset attributed quarter the on and earnings. freight, rate sales negatively difference through a though a a year foreign lower by buys of fourth to gross and rate other impacted from consistent year which mix period foreign product fiscal to XX% the percentage jurisdictional was guilty consecutive Slide higher Sales the ’XX Most the any quarter it structure Full by approximately included the and other and selling versus a recoveries foreign Please $XX XX. impact as administrative spot was negatively ‘XX turn and of fiscal $XX.X in tax EBITDA, lower The EBITDA or $X effective million flow income. the impacted lower non-GAAP due inflation to should of freight to and Our Net is was to effective sales $XX.X volumes million material, unfavorable us

related operations buys, ‘XX or from to debt, only XX. to million by year, lower $XXX.X significant challenges. XX.X $X.X had by was million, operations million. to $X.XX, selling mainly as mainly expense impacted by compensation a material reduced cash. inventory Grakon of In tax selling of capital fiscal a a a of Since higher fiscal in repurchases debt we negatively which fiscal ‘XX, with the income to acquisition as Income Net working and due fiscal Please share which to to the of quarter compared end supply due mainly worth tax as $XX.X premium $XXX.X $XX.X due financial of at million September from higher operations XX.X% million expenses ended in in ‘XX, fourth expenses, gross XX.X% of changes, the from turn freight diluted For X.X% the the per cost increased measure, reduced spot and to to Slide million. increased especially stock non-GAAP we to of $XX.X income related by compared We million the ‘XX. fiscal was from our in XXXX, foreign XX months to from significantly impact debt months’ administrative administrative earnings have amount gross and ‘XX. due increased ‘XX in full higher $XXX benefited the from investment million ‘XX, gross expense, million was $XX.X seven of share chains effective fiscal fiscal unfavorable from Fiscal credits. year of rate due $XXX fiscal million margins decrease inflation in and costs in increase from ‘XX, and ‘XX, compared $X.XX

EBITDA covenants, approximately Our our of bank X.X. debt X.XX, covenant which well below months used threshold XX is is to our trailing for ratio

activities to XX EBITDA Slide cash CapEx. minus month was as Free financial Fiscal Our non-GAAP trailing cash net operating debt is the XX. from turn measure year flow, ratio defined X.XX. Please net a provided quarter $XX.X ‘XX. as allowed free generation fiscal quarter. in capital quarter the Improvements million was in fourth $XX.X flow ’XX cash working higher for million in compared of to fourth the of the cash

of fiscal accounted and to ’XX, activities net by $XX for the generated For lower compared million the nearly we in full working difference. cash $XX $XX provided capital unfavorable income changes a of million and as operating ’XX, million swing most net $XXX million nearly of fiscal in

$XX in fiscal generated nearly we compared flow of higher ’XX, was fiscal fiscal full the CapEx as free For compared by $XXX $XX to million cash million to as ’XX. million ‘XX. fiscal ‘XX in

trailed time but to not ‘XX reductions which fiscal ’XX. as following were the working in capital likely was noted cash year, ‘XX fiscal generation repeatable solid at For the due being fiscal mainly

improve We cash and we cash positive as the unfavorable expect free cash capital in the flow cash fiscal in flow year-over-year. levels the equivalents other target The fiscal ‘XX and initiatives. USD statement working to on and FX and reduced costs of and nearly strengthening $XX swing million ’XX inventory

integration priority we strategy can ourselves do strong including future, million. growth opportunities our capabilities and allocation we growth utilize positioned Please expanding especially in XXXX. $XXX We better future purchases on our $XXX to a capital from bringing $XX we a to remains support million expires it approximately footprint to XX. for approximately total stock we'll turn rationalize and and announced our the capitalizing build The shareholders. we program, continue our organic key of businesses EV existing of as so in for the to where the inorganic perspective, for for buyback which XXXX, strategy XX, a have Slide megatrend. our June sheet organically on continuing the available pursue and remains balance them sell better allocation, to grow by capital Regarding increase to measured amount global June to return vertical to authorization Investing invest million a EV capital

results, based the the on including financial guidance, remain latest the our best ongoing fiscal management's is from chain impact rationalization, Regarding the ongoing and which challenge. Ukraine semiconductor COVID-XX it estimates, conflict on and of ‘XX supply challenges the an and headwinds short both logistic other the pandemic, shortage, in impacts the long-term

range in we successful and expect headwinds and fiscal of us sales to in some ‘XX we recouping The likely the anticipated considers the program The third, for million. $X,XXX midpoint at be these were the we year we with recoveries, of $XXX fiscal experienced for million. had rolled growth TX some While $X,XXX will in our have million ‘XX quarter between as revenue a of cost ‘XX. of full fourth range fiscal some the of which off, as weren't do is success over majority impact the GM

We consolidated and the per supply fiscal least in chain at $X.XX, sales expect unchanged earnings XX up in XX% events. from share is be ‘XX. June headwinds preannouncement other sales to of inflation to The $X.XX continued macroeconomic from diluted contemplates and EV from range ‘XX, XX%

quarter year progresses. We are of the expecting softer first as earnings fiscal EPS ‘XX improving in the with fiscal

years. fiscal between million. expenses without $XX our positioned and pipeline our million expected and Depreciation significantly EV have growth XX% between of estimated effective support production be we and XX% between that increased two order last and over any tax expand to to million of strategically is the the $XX footprint we our Our CapEx built support amortization sales as $XX We and increased items. $XX discrete is and rate anticipate to capabilities

growth have of into two target bookings much that which reinforces account we of This the we market, concludes organic for anticipated my is strong the the announced the our is based future roll company X%. over Lastly, Don putting the realized comments. takes annual CAGR trajectory. fiscal organic on the a nice programs EV past compounded on the years, and off organic growth relevant of strategy growth rate

Don Duda

take are very much. we questions. to you ready Kelly, Thank

Operator

Certainly. from for is first [Operator pose open Please questions. question your The now coming Baird. floor question. Instructions] Luke with Junk Your is

Your live. line is

Luke Junk

questions morning. Good the taking today. Thanks for

Don Duda

Good morning, Luke.

Luke Junk

Hoping the the we aware in topline. you that that assume Should quarter. you just unpack else market purely distribution and you extent some For that a one power read the in as that starters, the is we there could sales call the reflection be weakness said us of there? that Europe help would should and was as lower probably And China? anything I well, to or of

Don Duda

several, I there's but you nothing the quarter any last the is unusual. way additional around. notable. was have the Ron? nothing would Ron, the particularly orders of float It slowest This say, comments? and

Ron Tsoumas

Luke, Yeah. negatively experienced as the ability well. I in impacted with think we that China products lockdown our our

As quarter first lifted. year after lifted, that pressure that the is lockdown that we the relieve of has in would to expect this

Luke Junk

at margins XX. you to last to as that. into to we us temporary? a customers opposed of staying understand half I'm then for related with that with And you could it. in timing is, off If income Okay, from for terms mix have or this as million something look versus year but impact better thank your you, a whatnot, Ron. the of much need bridge switching In than but is just next and earnings to of look you'll first segment, ultimately down how lasting what industrial. the line things of help operations more more dollars, And or like recover top Maybe year wondering few I from the the question Can

Ron Tsoumas

care segment it the margin extra is segment. Luke, to industrial Yeah, talk you're because our highest And about right. absolutely

to of inventory those on XX% of of the buys a inventory the of on we it booked look part water. at some cover much the physical anticipate items or anticipate I that to margin amount of We any the if of Of mentioned, had they And the would spot due whether due that's in quarter. it compared types margin margin XX% mix, the was expect mix some certainly related was future. not of think, continue to the freight then harder -- I recovery don't some of to elimination our costs to last inventory which about be material, and to excess that we are profit adjustments, we based forecast. year-to-date,

gross have industrial we So we towards more anticipate as what quarter. experienced been the our historically where to in in opposed margins fourth fiscal ‘XX gravitating we

Luke Junk

Okay, thing make business. I last Clarification, there. premium the but and a in $X want in buy then correctly. quarter question for cost to comment recovery that. of spot And we're thank auto wanted just reading to you the the ask especially And is for last a related the the million sure

quarters? disclose the I of of if know prior kind to quarter Specifically, don't can quarter you've cost in current the i.e. offset how much versus some of clawback you the of that incurred that in experience cost pertained to the

Ron Tsoumas

half high Probably at half each. level and look XX% a

Luke Junk

go great. will you. it leave I Well, Thank and Okay, there. ahead

Don Duda

that nothing wanted really And shutdown I question past. a by our the the little on power Asia. rate. not and the this just two perhaps your we more EV the when the in was bit order and agree affected to our lockdown had certainly quarter there also Ron areas will just in But to again clarify And affected special Luke, about EV power a talking want clarify than by the that, I with I were of -- but effect. power escalating slower there's just Power group. first But

Operator

Sidoti Please Instructions] next your question. question coming John Company. [Operator Franzreb from Your is pose with &

Your line is live.

John Franzreb

questions. taking Take margin as the labor for for and you've reasons a material Thanks carved step freight, the guys. back, Good out morning, the degradation.

much okay, sequential that on needed dollar or the percentages values either a fourth as relative whole, company impact the For or how basis? quarter

Ron Tsoumas

impact. net So, $X.X on the about fourth quarter, million had we

John Franzreb

On buckets of all those -- three or

Ron Tsoumas

Yeah.

a what recovery net of was $X.X we negative million. billed we as and price about what as incurred price So recovery

John Franzreb

take back for you slope look clawing that it quickly? relatively going is time back get reason? Or at could the costs, to is those specific of something you any would And

Don Duda

me let Now, answer that.

First, this. to to never for expedited gain, price And let a had to am I've back me class. in such short correct? increases customer I or say twice go order

auto it's commercial So very and in in group. unusual vehicle the

do did the So until been those And -- the the has good team costs. we because a what six going. past we ran up be third have can more XX-month while, I I recover that seen into process. a In in -- for thought And quarter, the quarter, did job. fourth a we resistance this and very think to I've said this

of quarter. quarter, increases, a there's we have you is fair if the unusual are it that going all where that that of here we I the or prevail very situation we a remarks, or present this generally, bit be to even agrees in in increase extra have the thought unpredictable. and there job Do in but same a we getting pressures until occur But to parts, can I to and same is I fourth to in material going you're ship point it Now, of it's freight recovery, you the my customer whatever price overtime going what purchase something and a incurred incur in and are The the -- quarter. some recover or will timing at and customer, order subsides. new it's think fiscal saw year? we're years Yes. we in if we've the inflation over that the won't we've a process we that, resistance said for a customers but that fourth in amount headwind done good prepared the you

John Franzreb

Okay.

revenue you that's year? be of Are from any program. in TX supplying? going GM to program Is more quarter the Regarding hit this first that the there

Ron Tsoumas

On quarter, the truck rolled on lightweight zero the has fourth up program rolled it’s will and this have off revenue GM quarter. fully we TX that

John Franzreb

Right.

comparing to that Just comparing wondering expect the or you've year it make soft. I'm be you're sure ago, to the a to referenced fourth you you're quarter if that. first EPS quarter And just

Ron Tsoumas

this up, The that fiscal year, anticipate that basis be cadence from we -- we the for full quarter by coming softness. for being -- anticipate that quarter will the year

just continuation, of I out the soft. kind quarter word quarter, our first of a -- that better starting we be off So of coming being guess the will lack fourth anticipate for

John Franzreb

Okay.

So versus in wise not that it's going the cadence quarter. is to down you're suggesting softest. the fourth But be

Ron Tsoumas

correct. That's

John Franzreb

Perfect.

question you aware regarding your programs we any one be the on initiating, plan significant CapEx? Are of there just And Okay. I should coming in guess that last year?

Ron Tsoumas

Well, a to our increased a capacity fair that. do amount EV CapEx going of significant It's going of our be for that won. amount be to CapEx we've to grants is

have any that So that CapEx the on two CapEx I don't the with in this we've overall, year. to to there's to had, program robust know accommodate that the EV our that particular space, be that will growth. going intensive especially increase side, is of But rolling years and bookings power especially, we're

John Franzreb

very my it. I thank you questions. for taking much Okay, appreciate

Don Duda

you. Thank

Operator

any questions no this turn remarks. Duda now to at queue to would time. further appear the Donald There closing floor I be back over for in to like

Don Duda

and Good everyone Thank their pleasant a you, Kelly. questions. Well, thank everyone listening day. very summer. safe and And for wish

Operator

this and gentlemen, call. today's Ladies does Thanks. you. conference Thank conclude

You lines participation. have time. you phone disconnect And wonderful a at your may for this day. your Thank

Methode Electronics (MEI) 23 Jun 222022 Q4 Earnings call transcript