MEI - Earnings call 3 2024 | Methode Electronics, Inc.

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Operator

Greetings. Welcome to the Methode Electronics Third Quarter Fiscal 2024 Results Conference Call. [Operator Instructions] Please note, this conference is being recorded. I will now turn the conference over to your host, Robert Cherry, Vice President of Investor Relations.

You may begin.

Robert Cherry

operator. you, Thank welcome Earnings and Electronics' XXXX fiscal Good Call. to Quarter Conference Third morning, Methode

For have be call, at quarter webcast this we this methode.com financial XXXX entitled of page. results, third on Fiscal the which or can call viewed Investors the prepared on found a presentation

harbor hereof. statements, provided to laws. to to This performance the or protection as securities only otherwise. update any and forward-looking on statement management's These statements regarding results subject which date are duty the forward-looking conference safe call contains future expectations the undertakes speak no of reflect or expectations under Methode actual quarterly Methode's certain forward-looking conform events operating changes basis a the statement in and to

in At in and a Exchange materially The filings and over uncertainties. actual Commission, this Securities risks and reports. could involve detailed factors and differ the Avi turn results introduce to conference to the I'd are Chief our of Methode's call Mr. call The Avula, such expectations number XX-K like that Officer. and cause with President to XX-Q this Executive our forward-looking from as time, statements

Avi Avula

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

would best during to outstanding Methode with this that humbled be and in Don for to contributions we thank history. wish its retirement. CEO him transition his discuss I and to his also his honored and in very for take Before I'm Methode's the truly to like quarter, support to to like I you my the opportunity Duda would third share XX-year

transition so Methode brief new ahead. far possibilities observations. excited the and some share provide overview I energized a will journey also in the I'm begun, initial A by of chapter has for and the and

month, auto I met of the customer the I've of only major performance on operating all while units. facilities, number First, our the a been with many business visited just review a employees, a for visited and have Methode's of over to opportunity our job for with

talent I impressed of company the our organization have been relationships. our with engineering the and in strong across breadth depth customer and the capability

to our the and foundation strong foundation is Our a to innovation legacy commitment of unwavering even company forward and organization. rich course building for success that charting with excellence. I greater an towards on look

I to with forward months, the my business. and the meeting coming to investors about analysts background look views In share and more on

Let's on Slide begin X.

regions. quarter down entirely the and EV was Industrial $XXX decrease with quarter program the softness reporting due $XX Sales along all in million, year-over-year. by X the market. to The demand The in weakness acquisition in across of for the some were sales were our Nordic Lights roll-offs continued our primarily million of was e-bike in decline segment. which the segment auto Our were helped

operational the quarters inefficiencies to communicated experienced American drove loss in continued are year. net in the quarter. first you with auto lower The and the in we this and our same the the sales, along that challenges essentially second fiscal North operational These operations of

these to of We customer program numerous absorption launches, costs lack increased driven to our new related due costs also a program to of by continue are see some delays.

internal actions range launch mitigate taking reductions. reimbursement which customer are cost from these to We costs, to

the and potential can with million healthy. a modest had pipeline our share sensor I interface, awards We awards. of user in annual across quarter orders. that to over programs are Moving power These program $XX spread lighting, applications. remain

due may that note towards be customer to weighted and/or consequently are decisions of or and EV delay programs would the conditions. market reduction the profile I subject However, to

Turning our of at consolidated to and total, Sales in year-to-date XX%. EV are XX% back were quarter the activity.

sizable EV the at be have wave timing consequence EV in power this also of they period we new the a sales process of programs. we we communicated, previously lighting programs. lower As transition of program a The while beginning EV before rolling gap rebound of as the off, will of are

All outlook is softening EV taking backdrop of near-term the of this place a the with in market.

tailwind sequentially be EV certainly quarter, linear. long-term return the is a Methode, a will flat second not our That aided debt by leveling quarter. to In free cash off from but clearly flow. the path the for was was positive

we for maintain improvement the quarter cash plenty net the flow, right a on in step on focus generation. in sharp with There was still is direction. but cash challenged were a we room income, While of it

our we shares continued in the in buyback program. acquiring quarter, $X share automated our purchase Lastly, via million

The position, Turning in lower inefficiencies operational program to auto segment sales and drove share persistent the from Slide and for flow a a quarter, and We were the markets. roll-offs program. center volume free X. returned we continued our EV, our positive data net headwinds In sales pressure under e-bike and summary cash loss. auto market in to purchase

have forward, situation the operational with evolving we considered our challenges, appointment my the position. and market the CEO Going to recent headwinds carefully

to generation guidance and and the all to forward cash future. Consequently, planning on we for near decided path on company. the executing intend to focus for our profitability restoring suspend We

noncritical review head and We assets. including undertake and take of dispose intensive count quick an actions to reduce and costs, non-revenue-generating to will hard

free on capital, reducing working be cash will We increasing particularly flow. and inventory laser-focused

an an and outside and to We operations reduction all business activity. merger cost have delayed engaged review consultant our acquisition have

a In operating addition, review processes. rigorous procedures and will of key perform we

the will but an of portfolio. expeditious, entire thorough we review perform Lastly,

on to company take effectiveness, in foundation fourth actions is then for strategic Methode we cost on but review focused stage The we for journey. and pivot quarter the an potential heavily and will -- near-term quickly earnings. then next the confident to path be business We the to is our reduction will will undertake I'm the and that strong its operational when greater the report evident. business success update share of

At financial call results. quarter will on who this our over the third turn point, to provide I'll detail Ron, more

Ronald Tsoumas

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

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

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

currency, and Lights key net decreased and the roll-offs, The Nordic X X Excluding in by XX.X%. program foreign auto America Asia. of sales quarter in saw North continuation X

and show signs markets. of softness in also The new e-bike for weakness an center the recovery e-bike data did center be us. EV position. in and We demand some persistent continues The market to market overstock had in data

auto in from drove through down of volume in inefficiencies, was Income income ongoing operations lower was labor inventory quarter and operational down freight which fiscal Third and scrap 'XX. expenses $XX.X loss million North from costs. and million, the sales adjustments, mainly higher the $X are American and

Red from shipping We also in adjusted to of due the excluded in Sea. saw The loss the constraints restructuring higher $XXX,XXX costs. operations costs Europe

Please Slide to turn X.

Third GAAP prior quarter a diluted rounded a lower EPS higher adjusted the earnings to offset. negative tax for per Lower was same this quarter. year. compared and $X.XX fiscal period expense EPS operating income from expense. to negatively fiscal share partial The last year to the net number The $X.XX positive same was impacted the interest decreased in by the

their laser-focused are reductions related and cost cash impacts. on We

Shifting to EBITDA, a non-GAAP financial measure.

million lower EBITDA $X.X versus lower Nordic EBITDA the profit volume, million was same selling negatively which higher in accounted and the year. $XX.X last was Third fiscal impacted Lights, by of expenses. quarter expenses for administrative sales million and and period gross primarily of due The increase. $X.X was to higher administrative selling the acquisition

stock-based lower incentive-based Excluding expense due Nordic by expense, compensation decreased professional offset expense. Lights, and selling million, to higher compensation salary administrative primarily partially and $X.X fees,

The of Slide $XXX,XXX excluded turn adjusted to costs. EBITDA Please restructuring XX.

We down from quarter. increase launches. $XX.X million quarter cash, was higher to the second last sales ended second the the up year-to-date, end fiscal up due it both is from and but in debt quarter. working million mainly new $XXX,XXX down year-to-date with $XXX,XXX from capital support gross the million CapEx, investments was While $XXX.X $XX.X of the to year, and The program

saw $XX.X quarter. year-to-date by [ a the cash Net levels measure down Overall, from $XXX.X and we to million stabilization debt the debt, ] million $X.X second a quarter. but million, financial non-GAAP was in increased in

quarters. ratio waived next to quarter, due any may the The an with X we for credit covenant amendment that debt-to-EBITDA amendment. that was occurred entered leverage the quarter quarter our revises leverage the have third default and prior our into the agreement amendment the amendment lenders. noncompliance to ratio end third with third the in to our The effect the the of After for covenant

with were amendment, we covenant. the Following in our leverage ratio compliance

which X-K For please both XX-Q, further see were our information, filed today. and

XX. Please turn Slide to

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

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

CapEx. measure in Third, was 'XX, million as $XX.X flow, to quarter. in increased cash free free cash to the we year, net in the reduced again, financial due a fourth primarily fiscal to This flow $XX.X having non-GAAP of was X of negative third returned the $XX.X cash quarter After decrease flow and free million first compared a income positive million. decrease, quarters

now open for questions. it comments, my can That concludes and up we

Operator

from is Junk with [Operator Instructions] for first today Baird. Luke Your question

Luke Junk

one month I line organization if just called when know thinking so can hoping that terms December both start, the were and would either any to higher stands to and or similar in inefficiencies or I'm you quarter but sequentially auto or guidance. right the that pretty then you're providing Ron, distorted extent trends guidance into headwinds, segment? not out where sequentially That the First moderation just were you in modestly for basis. run gave suggest especially speak you operational a Avi now, January. the materially the to of deterioration on rate EPS what expecting in top you things to there's EV seem

Avi Avula

me and view well. can then let I Ron Luke, start my let as with in jump

market from some softness primarily auto we As we've businesses of and softness demand because was short-term shared customers. the our really, rate go as slowdowns where it. are that our some the worldwide, we EV across into seeing that's mainly in And coming

Ronald Tsoumas

definitely where softer. up, Yes. were ended to Luke, when we we we guidance sales from our gave where were

other were certainly some the to operational Avi foreign well And exchange the we of contributed inefficiencies and We higher-than-expected nature. As of EV things and fees. pretax. delta center space some the with that in professional that mentioned, encumbered had as data and losses

Luke Junk

then second, bigger picture a you, just Got question it. Avi. And for

your the in in middle help you're job organization of, place Can first prepared the that gave comments. XX your a days high-level us understand just now. right you With perspective challenging you on the some in

your time any structures your now. already prioritizing leadership you're want with worth be Just how right What or to in place would understand anything better team mentioning. you've put if that else

Avi Avula

our is before share on also Yes. while we priorities there I back we current got strategic have why profitability we can when I've we our want of to where Luke, you this assess embark our to can are. I've are. that business time And and still sites, actions we have good about. taking My yet path the and of taken all to where to just because more I a been journey. here an long-term we idea the to guidance I've see some And all we sense come and month recover are a are pulled

future my for that's take term, we view the company today and to have is long it on a foundation based future. build the the the into But and

Luke Junk

then like breathing the and with some compliance room, covenants balance just Ron, fiscal that updated you me looks 'XX. would through on sheet, the last for the question of middle maintaining And it be give

Just cash. just some be contemplating other it perspective great be right? Is maybe of to and on that seems that like Any get that the calculation considerations?. you some might ratio, even repatriating

Ronald Tsoumas

fourth The quarter second an lending perspective. X.X Yes, quarters. [ and quarter. of sales [ the go was third And and our the underperformed the agreement goes compared ] reached X in ] And from negotiations from ] goes with then down to EPS results quarter to we and in [ the those group. fiscal into first quarter compliance year our to X.XX quarter we in were we next to each third guidance covenant -- of standard EBITDA entered

when revert in you [ would was we we as mentioned, then our agreement that the in And quarter next X.XX the in the facility year, XXXX. ] of October third of standard back to amended correctly

that Luke part cash correctly nature, As down that things are mentioned, Avi can debt, of multiple actions mentioned, on the performance is increase as you which we equation. because of lever EBITDA the net taking those to the that levers generation other and our to is repatriation of we both and take pull a

Operator

Your with Prestopino next question is Barrington from Gary Research.

Gary Prestopino

situation had your and you of could you're you like welcome electronics the with quick here and industrial maybe in to Hey, capacity, organization of time? Avi, kind around professional your only show. then to in DuPont's experience in business. turn I Methode have us you your getting tell it and But profitability have over some with the faced been the that rightsize drive at fashion, a experience,

Avi Avula

and Gary, a not as declining different for I I to meet restructure put and revenue, a that in you. inorganically. trajectory, came for with both nice growth question. to organically onto businesses in opportunity reposition was Thank businesses we into but it you significant but were CEO that had then before, growth DuPont. I an

lot that on for to and growth the can a company. of there I learning from from future elsewhere bring there's And learning bring

Gary Prestopino

Okay.

you you obviously that when passed characteristics and the able and -- DuPont, Methode turn at of weren't it the around? had were industrial kind of was but kind as of electronics a somewhat this to running now CEO, does were were you the division, So an area same business, you and you're

Avi Avula

better but say we to both a also where there's where the they're I bottom there declining where Yes. the line the turnaround put trajectory, to on to and similar, would trends, in that from here, line exactly not top on company learnings we are bring lived performance. do both

Operator

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

John Franzreb

it so Q&A. Is corrected? I'm is, late, the is performing? have One, Or sorry couple issue? I a how fixed? it the still joined as missed that facility of that the here far But guardrails I'm will might some curious And as if about in been an of when is Monterrey I ongoing be things.

Avi Avula

where cost and look be we continue well. aggressively productivity challenges working operational inventory the as our are to site, in all John, Monterrey at to actions, including effectiveness

Some more of been we than have thought earlier. these challenging issues may

taking it's review get time So back. us some and to

forward. I think go that's our key we focus as

Ronald Tsoumas

experienced right the continue inefficiencies than on We've we more getting thought, they previously -- view. Yes. but had the time and right and taking the

John Franzreb

at [ biggest is this [ or what Remind on ] Is the ]? me me issue point. remind it LED

Ronald Tsoumas

some incoming shipment It's -- freight, that where isn't those sometimes inbound the vetted been purchases, leading inventory outgoing we've are freight, programs planning to short things that -- spot issues high to -- labor issues, fully to connected of turnover, premium and collectively are leading led the freight, expedited our shortages, so have short significant shipping launching all a experiencing. at and planning of amount the same inefficiencies time and

Operator

to the for reached call I of and the have remarks. the now question-and-answer will end We over Avi session, turn closing

Avi Avula

say you want participation. thank to you. to just for all I your Thank

Operator

participation. your today's concludes Thank conference, you lines Thank may you. time. at disconnect for This you your and this

Methode Electronics (MEI) 7 Mar 242024 Q3 Earnings call transcript