MEI - Earnings call 2 2024 | Methode Electronics, Inc.

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Operator

Greetings, and welcome to the Methode Electronics Second Quarter Fiscal 2024 Results Call. [Operator Instructions]. Please note, this conference is being recorded. I will now turn the conference over to your host, Mr. Robert Cherry, Vice President of Investor Relations. begin. may you Sir,

Robert Cherry

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

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

Donald Duda

Ron have and our will Chief your Second on Rob, by Tsoumas, joined Earnings Officer. questions.Let's I'm you we joining Both Conference today X. you, for us for Thank good Quarter then and Fiscal opening XXXX morning, Slide and take Thank will everyone. Ron begin comments I Financial Call.

due quarter of market to roll-offs, Asia impact sales were course, down prior COVID from primarily the China, continued the million. tough year-over-year solid e-bike delayed and UAW due in were softness year in a comp program in the to strike. sales a for $XXX to Sales the Our the

later quarter In were Lights Industrial $XX were of the to the situation the that of the in reporting our we American in All and weakness North European turn goodwill in our segment. our the headwinds mechanics noncash reporting us operations totaling the to Nordic auto financial experience to which the first rules million hit unit, in but inefficiencies in segment.Turning a auto these by through summary the the the related helped recent the Sales in North take that units. impairment.Also American back auto impairment to the to North the quarter, goodwill, we auto the acquisition with our is the required to required led accounting quarter, will manifested call, quarter. operating of auto in Auto review American operational Ron segment. go in continue

freight our current and our As planning ultimately can that paramount were material stress affect we you customer inventory personal had purchases which internal address to and disruptions in I quality, may primarily it inefficiencies to delivery, a labor. environment, unreimbursed want leading led significant generate not to manufacturing this like This negatively poor subsequent both by customers. domino effect deficiencies. premium integrity.In is delivery cost a shortages auto issues, and shortages, to caused and maintain addition maintaining have business. obtaining let to absolutely turn new and in turnover, decisions production to recall, vendor salary spot they In lean operational

been operational am being are and have actively confident see that challenges numerous to We plans to delayed. now expenses largely some launches, program related also now new also being continue increased of corrective are executed. these identified our which action I

remainder the than effects we expected will residual of our now the longer linger to communicated year. are fiscal However, impact previously and

Nordic that fact, with which now cause acquisition, we were control, orders. by It is guidance These for business are lost in approximately In electric are our the to Methode's a modest efforts and as note, under the On expected were on program earnings programs. of performing half overly Lights this remedy programs situation. over positive required adjusted not underway.Moving full year. $XX the is vehicle led are million again quarter, they with time we more last the once fully annual to had pleased a to We the integration of awards. with is reduction optimistic quarter

can As of we the I often awards and and often communicate strong. ebbs flows. order linear remains pipeline rarely potential that is share trend our

OEM's In million business Sales win awards, fact, our XX% activity. bus are smaller performing to competitors we total. have expectations.Turning not in the back In $XX in to were EV to of quarter. to quarter due over the the we near-term to awards EV consolidated bar in regards program won who opportunities annual

be will in which rates be support still very and sales launches. timing take increase to the but dependent well debt, the strong, OEM on For launches. as EV of driven our investment by program an we capital as fiscal working sales an had will activities is In XXXX, quarter, in

While still our has debt is increased, and leverage at a consequently level. reasonable it

flexibility share share resumed our As acquisition quarter, behind acquiring or our the such, is in shares. $X very internal the buyback we capital are Lights for buybacks.With comfortable under million deployment, for investments it's Nordic in we us, with whether

Given the negative quarter, consequently in income cash had low net we flow. the

to Nordic Lights In cash solid several were for the neutral headwinds. free fiscal the business Slide positive be The acquisition year, expected be full net expect lower well. for the With 'XX, performing is X. sales fiscal despite we summary, quarter, will and is complete but now for flow the to income in 'XX.Turning

have continue a launches. executing and to operational efficiency We on focus heavy program improving new

resumed Lastly, we share our program. repurchase

of remainder at fiscal fiscal 'XX Looking and into 'XX. the

vehicles, year fixable been operational headwinds by or centers definitive articulate.Our challenged fiscal also and originally like commercial to data unacceptable, by clearly resolve e-bikes. has roll-offs a taking and but in 'XX The have shortcomings I We forward, program hindered would path to longer been than and auto market anticipated. has

via are vendor engineering.As a addressing pivotal and a of price is fiscal Lastly, pressure year, to improvement of the price substantial such, 'XX value we as cost pricing we've investment the experienced fiscal and reduction year start clean such with and objective which increased cost initiatives transition during 'XX.

with required to As staffing operational mentioned, required investment qualification, requires XXXX lower are like new additional programs this to training facility That investment in resources. guidance. preparation, ensure expenses, fiscal we significant launching that ongoing over items us issues year have costs year, XX and product which this along our the and is

expect the then expect now fiscal in further over quarter. quarter.Turning second For our the third improvement modest quarter, We improvement we fourth to a 'XX.

Our supported of be years positive, multiple outlook continues awards. by to strong

including, and of markets number launch further However, the very market be commercial data EV lighting schedules will and inroads rates, a take e-bike, franchise. OEM but on to, limited dependent with center the not our year vehicle rebound and a items, in

factors While control. be particular we of in our the Of concern have market. our environment, ability EV is confidence will to simply that in out some execute

near Our for by outlook and delays EV term, it rate the long take positive moving program but projections. term, remains tempered is very in

order we've that to growth growth reduced over making to 'XX market we Slide we've fiscal direction to doubt business.Turning firmly that no our from to fiscal is walk trends. to to you this and such, our In have next had a from profitable more taken fuel the solutions business we provided fiscal illustrate, 'XX for power from to will years.As we the and program 'XX. X. fiscal we the due sales X that the get have positioned 'XX. the guidance model mainly decisively 'XX in 'XX. granular believe fiscal the market picture guidance, To updated prosper EV to XXXX, of We our that major we EV guidance for are To strategic bridge is into quarter investments ensure one our have to fourth delayed last lighting fiscal in summarize, partially give However, healthy our grow

than been still Our more sizable, probably have next year. now less while this year expected, roll-offs, program

turn reduced program due However, the is midpoint.At to as provide to 'XX. more our these by who us I'll details new million Rob, will to results caused financial most the our on guidance 'XX quarter have fiscal call fiscal drivers on delays million notable second $XX customer approximately Together, point, have lower that launches at into by fiscal over been in 'XX $XXX change details more our this the outlook.

Ronald Tsoumas

Thank X. you, Don, Slide turn and to good everyone.Please morning,

quarter Second $XXX.X X%. fiscal sales compared million to 'XX, net decrease were in a $XXX of million

$X.X from million Nordic the and translation. acquisition currency from Lights This favorable included foreign million quarter $XX.X sales

decreased rollouts, Excluding continuation one quarter automotive and sales one Lights XX.X%. X in North America in and by currency, saw Asia. program key the Nordic of The foreign

delayed year, to market quarter fiscal result and first inventory lower quarter also from of sales continues expected COVID through to China.The as potentially Asia be that the this saw sensors in comp shutdowns from difficult overstocked. a for to That next had sales the were in headwind end into e-bike at Asia as year. year the prior least last benefited fiscal is also that quarter second the of a in We the as

reported the premium adjusted and restructuring the Second also the operations impairment quantitative ongoing down the related which million resulting our our of to value, million Dabir cap drove Lights down a million, for goodwill on automotive impairment quarter Based in lower related less inefficiencies, than event was turn performed and loss a and goodwill $XX.X reporting of Slide factor we $XX.X decrease $X less current Nordic was units the of analysis when from expenses. impairment X. $X.X labor fiscal from operations the was freight and to the our of of value that the million, carrying was quarter, volume at from our higher determined was the due of our end million fair impairment $XX.X costs income second the units.Income a Adjusting charge than $X.X market X The experienced operational to X of in At $XX.X goodwill to non-GAAP in an the value. million.Please million. triggering book event, of mainly exit major was costs acquisition triggering goodwill we 'XX. of from sales income

quarter offset. decreased for expense net diluted was and lower the from costs restructuring EPS earnings inventory related prior share benefit of compared per was higher tax to impacted to sale the impairment adjustments on last interest and the same fiscal of $X.XX. loss a of impairment, $X.XX, the of goodwill quarter accounting $X.XX, in year. The tax A period in Second the the $X.XX fiscal of goodwill the a negative year $X.XX purchase as a positive to Adjusting partial assets income operating expense. in a a by negatively $X.XX

EPS adjusted measure. financial share.Shifting to $X.XX diluted non-GAAP per Our a non-GAAP decreased EBITDA, to

in the goodwill of to million increased the the the by to financial $XX.X quarter capital working same million, fiscal sales $X.X the lower a main debt year. million $XXX.X partially Second positive negatively higher the of the working negative capital We from cash, to decrease. the from by a at related up on impairment, to the to in versus million restructuring $XX.X Slide million our from an EBITDA quarter, to Adjusting $X.X the increase gross operating impacted higher $XX.X million ended increased launches. accounting support million Lights was turn fiscal goodwill EBITDA The debt, XX% $X.X end with drivers costs by to assets in helped contribution new end 'XX. of administrative offset EBITDA mainly last measure, million million for period Slide selling the purchase million the was and impairment, $XX.X and Nordic adjusted and CapEx We program Net last of a higher year. of were decreased expenses. Again, million.Please million and in investments increase and of due inventory quarter, fiscal for $XX.X adjustments $XX.X sale XX. down $XXX.X income both $XXX.X turn and XX. non-GAAP CapEx.Please of loss quarter

decrease due in operating net was activities primarily outflow million to of as of fiscal $X.X cash $XX The an lower million Second in was million of the to 'XX. quarter from compared inflow income an quarter. $XX.X net

$X.X Second keeping and million of $XX.X line quarter was as of mainly new a million was The guidance. function in program million. increase capital to increase expenditure support to compared investments $X.X in with fiscal was launches our an 'XX,

in This net a non-GAAP million. a cash $XX.X of CapEx.Please a was $X as decrease, million was free to increased million compared turn flow, quarter a negative again, financial decrease income to Slide Second 'XX, and measure to primarily positive fiscal XX. reduced $XX.X

due change quarter management's our on best it second to to a as to noted of subject based third the is Net quarter. the Regarding for estimates slide. our is should be forward-looking and sales in variety guidance, a similar factors of bottom

However, second a the quarter. to the expected longer the the we operational share in third and into adjusted second result, than over quarter modestly likely earnings estimated.As be carry the fourth previously only efficiencies third quarter will diluted experienced in will had the is per higher quarter quarter. than the This

overhead operations from the to $X,XXX to X%, reduction full due sales million. million $X.XX $X,XXX expenses, It to expected of fiscal tax tax million with any This Dabir a minimum goodwill and the income still Nordic impact for XX% to due as X $XX to improvement the impairment sales increase to efficiencies Methode between be adoption American ahead the operating expected no guidance.The fiscal to per further to earnings CapEx for midpoint down estimated net fiscal the $X.XX or continued customer is assumes The half $XX a the and for to from the expected due new 'XX been of reduction down impairment, to mainly 'XX $X,XXX $X,XXX XX% is no over is is and year $XX drop negative 'XX, fiscal year 'XX to lower million assumes what $X.XX related and primarily the significant Lights fiscal depreciation The and X into rate XX% million million to income on range related in the fiscal $X discrete percentage its impact for amortization 'XX the XX% from of those tax fiscal The $X.XX share year the million, is to and a Automotive.Adjusting benefits of 'XX down assumes still to is XX% an fiscal rate initiative.Don, delays expected acquisition, largely delivered from the benefits the a of on changes and positive million is previous fiscal concludes margin net unchanged $X.XX 'XX.The $X.XX to million second range from represents range discrete anticipated fiscal related program of of the income in down sales tax previous $XX the to to of items.Looking have from range absorption. North diluted diluted share. adjusted exit net a is full from $XXX 'XX.The per guidance with to expected range no net comments. million now $X.XX.This There the Turning X% goodwill with expenses. in to is $XXX by $X,XXX $X.XX, of the now the par in $X,XXX million. per now of Pillar costs earnings operational of or share is XX%. range that a to year, the expected current negative the $X.XX to global range $X.XX, from EV tax rate to million, my sales is at predominantly tax

Donald Duda

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

Operator

At [Operator this conducting sir. session. be a you, question-and-answer time, Instructions]. will Thank we

Luke first Junk Our Baird. from is coming with question

Luke Junk

in inefficiencies ongoing start the to North hoping Don with America.

Of to the last quarter. course, surface they came

what now the additional should With You bridge be expectation changed some desired previously. actions prior effect? of line. year in anything just actions in the the on to were guidance the headwinds second the we maybe the you put today, bottom put the hoping where Just lift finer seeing point fiscal especially you and in old and Are your corrective moving place understand a that seeing lower to half? half the guidance optimistic not having us help or from back the the expectation in news, overly to implied

Donald Duda

us that, longer year, corrective but fiscal they and optimistic. overly and to on you is It made prior existed by inventory various probably go it these areas. give in the said, certain issues more actions. very numbers To were through this part was high I taking As routings to masked color

various changes brought our we do mismatch expert all, properly. normally the We it the certain knowledge is a to And but the at find turnover due it out of and As down to lost lot that it's is amount we a analogies you and Dongguan, They're was us COVID. engineering of pound longer it as sometimes use lean we rocks that's here got at inventory do we you us I when much lien to Monterrey, said, of manufacture fixable, the recorded was to try salary China, said our lower the product correct. operations, pound with shipped And there personnel boulders. the took longer were between systems. end a of that in probably taking

a with dealing X probably weeks really also the there lead if but seeing leftover, to routings, anything on we been is lead past, should had know at some and we changes COVID a Ron this months. the system. we're have that-- system much stress time in it's don't it And in is seen changing I something not saw in have So tremendous times schedule, when that puts X and we and the MRP that Also, closer

Ronald Tsoumas

from thank operational Not an perspective, you.

Donald Duda

a And the occurred probably the and don't we some week second there lag of all underestimated just the in it's in of the Again, some quarter. you shipments fixable, that in the in was of get invoiced there's time. carried over that next quarter premium invoicing, probably for first amount

Luke Junk

is point new put you're sound in I'm right? necessarily terms a corrective issue these finer that, that more a put the of is hearing that actions it to problems needing you there's place Don. of are more actions And But new like into that then actions, or it's doesn't just not scope on to it's continuing. found maybe What

Donald Duda

really that That's but what it time any actions. wouldn't us cause factor nothing of our anything a correct. new, change to It's change we uncovered

Luke Junk

your incorporated piece for expectation how much absolute delay just you a the is rates my the anecdotes and don't in that that into can the help out to in take program expectations from new fiscal 'XX And new there's terms of timing of in to 'XX hoping of this partially tease guidance? then this reductions latter just terms that is I rates. of EV fiscal I'm mentioned updated you follow-up, that's 'XX how understand versus for conservatism hoping slipped take You for know on in what any understand just us volumes thank to had if you. guidance, share 'XX level specifically,

Donald Duda

what along We had and vice into what that with a plus as our closer X program delays dive there'll from really is be additional LMC we the I'm contributed giving 'XX, that we to revisions and change. deep knew forecasting. out overlay sure our hearing that of We're presidents or do to get about. various guidance. forecast, And with months our customers the from And long-term we're X expectations IHS and

Some of up. that could go

some that competitors have the is are some the us some still we there One opportunities. difficulties are upside that X,XXX servicing are smaller where opportunities on of having are reasons presenting that the as of

But From problem? trade there's No. standpoint, and EV a to over exuberance, adjust we're market a is the will the but market. year us some the even collapsing use want a some the until be in accruing. in a will forecast dive fully forecasting going sorts to be I of general, what's year. major that the don't better we the into guidance see But believe the the level. the my for there probably or So forecast just deep industry 'XX in 'XX fluctuations good really over adoption or that word really out and is I by it's did

Operator

Instructions]. [Operator

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

Gary Prestopino

is and your vehicles mile there between split delivery my refresh programs, passenger Are memory? EV commercial like cars? the Could vehicles regular what you last

Donald Duda

I the that the for in largest don't XX are the higher to vehicle world. said that I want mile, too, just Amazons or what but range. the like something that probably our I've probably revised it's it's maybe last XX-XX, last of we've definitely effective mile On slightly cost program, before, they know in than say I that.

last and do we So largest that our program, of mile. emphasis place on is part that

Gary Prestopino

say passenger But XX-XX mile? it's you last to about

Donald Duda

Yes.

Gary Prestopino

into you how test by happened to getting this phrase what exactly, could briefly convention your goodwill very it? just again, just then had And value write-down. to and you your that Is or And fell a value caused explain actual that market book? your write-down book simply below accounting

Ronald Tsoumas

day the That's projections amounts was day business and those goodwill, last cap price, correct, Gary. book company. trigger the that the rerun less market came all at units. the back to And we units our of impairment the reporting valuation stock the of At up value the quarter closing on and and than our of that performed with go have the X

Donald Duda

for test annually And this each just ones annual when do the we test quarter. is between this test, annual about impairment year in what the and particular happened events there's between we this in do in triggering

Gary Prestopino

the value trigger just your wasn't was anything the was book. really of your a the or performance below accounting auto, went of the conventions it by market It divisions. trigger So about

Ronald Tsoumas

to not that higher was and back and whether the event than bring and the of all the we has for taken value impairment the present projections to the value is to a the excess year triggering X then of fair is projections and the recast in businesses a assess compared value recast used of $XX then Correct. or the carrying discounted that in There flows current million. the for value, fiscal cash and all this, forward going the and out we then part triggering models and was the of as develop

Gary Prestopino

your on capital had for really this the that be, businesses Doing spending like does particularly this an with basis, outlook would impairment your impairment change the a what long-term hit?

Donald Duda

ahead. Go

Ronald Tsoumas

North new cash the of going The doesn't mean you're those necessarily interject. more past and in to [ that lot our impairment programs. acquisitions that and of resulted the business. investment to First you not Capex reinvest flows occurred we of Don, Obviously, in can from America support that all, doing Auto are a performance about ]

that it in the is was looking. that created So part of backward goodwill was forward-looking, the impairment

Operator

would Mr. closing questions Duda line have. this any time, As you we further the back like on hand currently comments for to at no it may to have over I

Donald Duda

Thank you listening everyone much. everyone and very holiday good wish I enjoyable thank day. very for will and for their safe and a questions season,

Operator

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

Methode Electronics (MEI) 7 Dec 232024 Q2 Earnings call transcript