MEI - Earnings call transcript Q4 2024 | Methode Electronics, Inc.

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Operator

Good day, and welcome to the Methode Electronics Fourth Quarter Fiscal 2024 Results Conference Call. [Operator Instructions] I would now like to turn the call over to Robert Cherry, Vice President of Investor Relations. Please go ahead.

Robert Cherry

Thank you, operator. Good morning, and welcome to Methode Electronics Fiscal 2024 Fourth Quarter Earnings Conference Call.

found have Results, presentation on which of call we Fourth Fiscal the call, the this Financial on Quarter can or this prepared entitled a XXXX webcast Investors For page. methode.com at be viewed

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

could in involve Securities differ conference call to our statements are risks materially a from forward-looking XX-Q our and Commission, in Exchange this XX-K the actual factors with cause and Methode's filings reports. expectations results of The as that such detailed and number uncertainties. The

Mr. call time, I'd this At Officer. to like Interim turn the Chief Executive over Kevin to Nystrom,

Kevin Nystrom

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

future. for Methode congratulate and the significant quarter, of industry Jon CEO former will experience, strong and be DeGaynor, CEO Before the into news think has to CEO transition. to appointed effective and June the want President we that has Methode next discuss Jon July late team. the reiterate of I our we announced Monday, regarding XX. We leader in Methode him Jon been I welcome [indiscernible] a

quarter. the Returning quarter. Back the to to

X of presentation. Let's go to Slide the

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

Nordic the were the the lies declines impairment, sales [ around our the operational acquisition American year. challenges in in the with of the for increased turnover lower program we've of along ] The communicated essentially After in adjusting through experienced North drove inefficiencies These by past labor operations goodwill costs. Industrial offset segment by volume They sales continued driven the quarter. net higher the beginning same auto are loss and that are this overall fiscal year. operational being launches, and

the it there and investments company the the the from simply and of to for With in timing a is that eventual support launches. the sales higher develop drive to launches, midst matter be record of production the as between only natural inefficiencies of lag Often program number of realization a launches costs.

fixed to also can delays challenges. these contribute program Customer absorption cost

these to are of We some internal which costs, reimburse launch to for range cost numerous actions these and taking from support reductions. looking mitigate customer costs

on We have to keenly have talent efficiencies. launches our cost maximize focused managing also the best

customer are reduction or the healthy. conditions. potential to the due programs subject These $XXX decisions weighted move awards. I that awards interface remains pipeline market are a quarter and user would both spread share orders. and profile were annual strong the and note or EV to of had want I our awards in Next, the sensor program of with towards to also over pipeline delay million I lighting, that to across power, We can program applications. heavily

consolidated XX% year, for sales total of Turning in the the or our back we're EV were XX%. to quarter at activity. Their

programs. EV and lighting several wave in of program EV now previously had new a the program As of we we lighting quarter, off fourth beginning at communicated, had -- sizable are power sizable we EV the roll a

a expect programs, EV of transition we lower we period gap where sales a As there they is rebound. before timing

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

still tailwind EV level look linear. However, year. seeing years, a At the aided our was clearly we it the net That are in long-term reduction several free last of not debt for at year-end, Methode, path out was cash our has may lowest as the X quarter highest be is been as but we by quarters. the flow

at assets, aided was fourth of including the noncore Our the quarter cash position company certain the end sale the by aircraft. of

generation. cash We a sharp are maintaining focus on

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

wins $XXX anywhere some to for in applications in weighted sensors, production. for go solutions awards the for now. associated was awards and of were again are Let's user in X X and launch programs the represent the also X interface, The was quarter EV. other power sales awards commercial key in once EV quarter here these be and were products identified with In full of for timing annual from the by range mainly most the far The years of were million auto e-bikes, and architecture. vehicles. towards It to of Page year areas, we the skateboard These could awards and The of the presentation. by United at programs strongest Asia. awarded traditional our States driven for

centric. but remains the earlier, also healthy, very award mentioned I EV As is pipeline

the of in auto quarter, to and a major operational volume X lower inefficiencies from our of Page drove segment under and and sales goodwill impairment, roll-offs e-bike sales The presentation. the markets. summary, program loss. EV pressure market were go net for auto Let's In the headwinds

program cash flow we quarter new for awards. the best However, reported year of the free and

lowest Lastly, quarterly we the debt year. fiscal the level of delivered

focused profitability forward, fully are improvement. we on Going

logistics of costs, on to low-margin and focused the our and sales We're particularly costs. reduce strong also We initiatives administrative areas noncritical programs. are managing program of in improving assets and undertaking monetizing launches sourcing, backlog

XXXX. beyond put, of profitability XXXX repositioning will reduce business be company's continue cash to These fiscal plans the will the on in goal foundational a increase of and growth transition. long-term working net with year flow carry debt. Simply all the We actions also our will capital, to reduce our the efforts leadership returning are to and company our and

Ron, has his I would of call been efforts who to tomorrow his in for the a him a to tireless valuable to thank detail quarter is call. is contributor more on fourth to over turn retire. results, Methode. as and provide Ron service be Methode XX company. for this like will his the Now over long history and earnings We wish best Ron last his before for in and and Ron family remembered the recognize, retiring years pillar this I Ron, financial will

With that, Ron, I'll hand you. it over to

Ronald Tsoumas

good to net quarter sales $XXX.X to X%. million $XXX.X turn X. Slide and Kevin, you, million Please in a everyone. Fourth 'XX, were Thank of morning, decrease compared fiscal

million and acquisition This quarter's $XX.X million sales translation. the of Nordic currency foreign unfavorable from included Lights $X.X

one Nordic in currency, program Excluding and North automotive foreign fourth America one key fully roll-offs, by Asia. and the in decreased XX%. sales quarter. The Lights X in Asia rolled one of The saw quarter continuation in the off

and persistent also weakness to the market The e-bike e-bike demand. EV market softness We in some had overstocked. in continues be

triggering from costs American loss our year, which labor was 'XX. we inventory, the from at experienced cap volume. higher was Income quarter fiscal were when the impairment the million fourth automotive our operational income impairment, with second to the expense, lower of our mainly in inefficiencies, $X.X Fourth down than fiscal is production North other quarter, down increased in million, past sales our end which goodwill ongoing a events quarter goodwill less business, book operations Similar drove the of to value. market combined of $XX.X

American analysis goodwill auto goodwill quantitative current our determined performed a on reporting $XX.X goodwill, There carrying was we no Based of less this unit, on a reporting than the million. this, of the is we and units our with in impairment in value resulting reporting North the unit. remaining at reporting value, unit that

company benefit costs assets reductions, of of tax $X.XX ] our gain Adjusting $X.XX per costs The goodwill partially million, goodwill lower $XX.X Adjusting million the Slide adjusted impairment EPS period partial was driven positive head of a share share loss a for million. goodwill the non-GAAP X. to impacted operating a and per negative on restructuring on the offset. $X.XX compared share, was turn operations was fiscal decreased $X.X were the of non-GAAP prior was the $X.XX $X.X and mainly for [ negatively by a the restructuring quarter diluted assets per count aircraft. larger negative by sale adjusted decreased from the interest $X.XX to impairment A of to net diluted from of year. The gain sale income, EPS $X.XX expense. of year impairment share per Fourth share. in the of Please to our higher driven a same and by last sale per which earnings

$XX to positive Shifting was the measure, lower selling by lower expense a Fourth million sales $XX.X negatively a gross EBITDA Selling lower million the for of $X.X decrease. EBITDA a expenses. year. the Nordic non-GAAP restructuring by EBITDA, Lights for million, was period of and profit, in versus and same $X.X to million. gain quarter of in Adjusting $X.X offset impacted acquisition the financial assets primarily partially last the administrative costs which of fiscal million million year, of impairment was sale lower $XX.X $X.X million due the prior costs accounted the on of goodwill negative

Our to $X.X adjusted EBITDA million. decreased $XX.X million

end the new ended Net from covenants prior third year-end, million year-end sale quarter lowest and but the cash, up Debt $XX the aircraft of the by its The the was quarter. fiscal at all of the from was debt investments XX. sequential since $XXX.X $XXX.X mainly $XX.X at both year a $XX.X Slide The in with from million a were to sales notable financial increase to down of compliance from $X.X up third of it launches. million from 'XX. program and to debt to the and the was due of increase. end turn million Please of million million working end increased fourth last our $XX.X fiscal support in We slightly We with higher driver from prior and CapEx, was the quarter capital was quarter. the third down the was measure the non-GAAP million level quarter. company but debt, up

from the we added debt the $XXX covenant XX and that proactively $XXX facility next entered with However, confidence the an credit covenants us lenders. of million remain with we ratios compliant our the our of end agreement quarter, with further lowered over amendment raised into to facility will credit The million amendment size This amendment months. additional terms. gives certain the our at

filing. For our information, see XX-K please further

million $X.X Please in compared first flow, fiscal X non-GAAP free due net $XX.X cash due primarily $XX.X was million decrease 'XX. to operating we compared million 'XX, the million. measure activities flow Fourth expenditure third as compared quarter. cash Fourth quarter flow $XX fiscal quarter's XX. and negative as financial in of million million Slide year, to million. $XX a as net fiscal $XX.X reduced The This to lower decrease, turn of to quarter cash positive decrease having of a in returned the the in again, capital million 'XX, $XX.X of was was was to another the in free to net to in million fourth After was from Fourth quarters $X.X free decrease income. primarily $XX.X cash income quarters.

XX. Slide to turn Please

$X,XXX.X the Fiscal of 'XX X% fiscal to full million, sales net Moving from 'XX. decrease were year a results.

programs positive roll-off currency, lower negative assets, [indiscernible] higher to in for Fiscal Adjusting goodwill and X million interest Lights EBITDA, 'XX. $X.XX our higher net versus from impacted in of to 'XX EPS adjusted of the XX%. Excluding decreased expenses. the a was costs, negative accounting non-GAAP million. purchase XX. was EBITDA lower earnings by negatively efficiencies, goodwill EPS EBITDA the sales adjustments foreign a XX% restructuring a regions. $X.XX negatively restructuring sales adjustment by overall goodwill fiscal impairments, to our and the sale fiscal of gross This financial and decreased $XX.X costs, 'XX impacted on automotive costs, $XXX.X operational volume. and negative acquisition automotive segment was in per purchase for share assets, measure, weakness by accounting was sales lower Slide sale Adjusting expense fiscal year gain X impairments, all million a diluted $X.XX. Please key Nordic The a SG&A 'XX. a impacted decreased and adjusted diluted Shifting non-GAAP decreased gain $XX.X by EBITDA and to positive turn profit, on costs, to the acquisition net impairments,

program compared fiscal million fiscal primarily ] [ $XX.X lower by to activities 'XX, net net free million Slide cash as million the million we due a Please $XX.X cash half $X.X turn new due 'XX. million support negative increase decrease $XX required income. returned $X.X cash of to to net was investments in financial first 'XX, in Fiscal income. cash as a million. The decrease launches. 'XX second flow, $XXX.X was The positive a million $XX.X After CapEx decrease an XX. was in increase in the as driven the million. from $XX.X to negative million 'XX flow was to 'XX was reduced $XX.X compared to free year, Fiscal fiscal in operating compared non-GAAP year Fiscal measure of was a to primarily of positive flow This to half. having of

Please turn XX. to Slide

change to management's is and the of bottom variety best based the a is slide. at to due noted as subject it guidance, Regarding forward-looking estimates factors of on

sales we and for half pretax adjusted to to The half, be depreciation $XX and the similar adjusted For the quarter second fourth 'XX first of quarter 'XX fiscal first of fiscal between be income fiscal 'XX net and approaching fiscal the negative significantly assumes being 'XX pretax the stronger 'XX, fiscal The amortization similarly of is year $XX to to expected be than guidance breakeven. of to expect income fiscal 'XX. million million. with

'XX, Looking positive be fiscal further fiscal fiscal and be we greater ahead to net to notably income sales pretax greater to than 'XX 'XX. and than expect

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

Operator

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

Luke Junk

quarter? to to in just of full maybe were kind year approaching and aggregate thinking of first out 'XX expectation that trying clarification you gates versus be income point on quarter fiscal the the to breakeven. view about fiscal similar Should for 'XX we the square a First, coming be pretax the of for fourth just the in where basically

Ronald Tsoumas

Yes.

in do half, especially year, of expected are this at as the full with quarter like gradual So have that breakeven fiscal to then 'XX, the we quarter, in launches for the approach expect second Luke, first that where stronger launch be quarter the experienced we much be the but will and time. improvement in we in fourth fourth

Luke Junk

Got it.

talk sales sunsets launches those just up of you you relative roughly 'XX, then in fiscal then in be launches guardrails just that the that have imply fourth take from end from standpoint launches. make any to And helpful. to the Like just That's you're top Okay. customers risk pushouts the timing place hearing the going for in remaining Can from over what internally about you're and rates smoothly that to that to operational go risk to flat in outlook you those of in volumes, an product with just able stepping would quarter. sure said, get especially Methode's or of that terms view?

Ronald Tsoumas

and X start fiscal approximately expect 'XX fiscal we So programs Luke, range a those in $XX with million major final had roll-off $XXX million rolled of first. programs why for we the we don't We 'XX. that in described, approximately roll-offs off the the

launches programs it's new know these the rolled into important 'XX there. providing will we of the nice the pretty X we get end be path a 'XX, fiscal have that to in And that these off of basically fully will all much pipeline So largest at as fill [indiscernible].

particular in but sure in perspective, pricing make our working So can for lower customer some our you're we account we're customers with to seeing end adjustments EV operational we're in slowdown to those the terms maximize right, of demand, volumes. that

time, programs, we're real initiating to and our things won't the want thing costs, cost we're see I second of costs but half with until logistic year. we work doing those other meaningful sourcing reduction particular the and take now, benefits in add leg probably the several The is

Luke Junk

down just Got items quarter, sequentially that you it. If cash bit well. in quite for just in fourth come I . year on saw we flow or And high-level sheet-related CapEx for I guess could guardrails year? ask the really, more a balance just flow can CapEx expectations then in cash coming as serve the the any coming

Ronald Tsoumas

'XX we in same CapEx Yes, will in 'XX. or to range higher be the than I fiscal fiscal see think

we As to continue awards a all 'XX, that we thereafter different. fiscal is expect CapEx little to we in won, continue these significant to bit have

we the that In breakeven 'XX, as progress we cash carry about fiscal asset the we approach better. we the 'XX net lot of in in to flow non-core items have would some capital we'll as income some fiscal on additional had into expect of in be that loss 'XX, fiscal from or to talked terms sales would initiatives such fourth we some working saw and be 'XX. relative quarter then get we -- we and reduced of have started And success a fiscal on

We will opportunities look continue those at as well. to

of sum So those -- items the all flow 'XX. our cash of should the impact fiscal in

Luke Junk

to And then allocation repurchase, little of and just surprising down in maintaining as return capital was relative quarter lastly, pay CapEx, that's well. dividend required was that just just Thinking prioritization the I the ask then beyond which the repurchase a on debt can on if share especially go-forward the and I guess a maybe some there basis business. new for obviously, priorities

Kevin Nystrom

to Well, makes quarter-by-quarter. the -- we've the that that's repurchase a run program. almost we decision the dividend, I pre-existing entirety think was a part program. up pretty the share And of With of regard Board

predict going quarterly So it's payments forward. for hard to dividend us

Ronald Tsoumas

those balance things the But had nature be lines. . will That Yes. And a arrangement. more be protecting the we'll on that priority, #X type along mentioned, repurchases far and Luke, than [indiscernible] sheet, sheet. and or the of balance of as an we Kevin anything share deleveraging

Operator

Boroditsky Your with from next Saree question Jefferies. is coming

Saree Boroditsky

I -- we are XXXX, what's adoption? that about will how to for see assumption think be as really EV we X-year curve understand, expected? guidance. the how appreciate to just do you if than I a underlying return the slower growth impact So in And want

Ronald Tsoumas

There's in projected But growth we There . the of in EV space. having is the sensitization we projections definitely 'XX to that expect going growth is and some outlooks outlined. that certainly said the be. what are the a still definitely the going lot are on that,

Saree Boroditsky

talked up just of your this guidance Could then what's the second fiscal much about related a talk drivers underlying key in in implying Obviously, And increase? market the control? how about step you XXXX. Understood. you versus the is half

Kevin Nystrom

-- that new A we the from about new end we're we're some lot is of And growth by to those the of -- year, being of launched. some programs the talked programs. starting see

Your question control. Yes, go under our projections for soft implied, numbers. into doing haircuts into our market efficiently. we of adjustments it we're is currently launches it Ron to And and make as some sure the are putting those best EV our or those

Ronald Tsoumas

thing launch think cadence of add it the 'XX by that are fiscal cost only is and a some and of it the driven, sales initiated going they on, them also of take I'll The not the other may is to but it those, driven us. into -- opportunities go third as take that reductions They will the time lot fourth quarter, when we've takes -- quarter but procurement sometimes about and for we time.

more as cost third cadence and is also the the opposed first savings fourth quarters. and towards second . So to quarter the weighted

Saree Boroditsky

that perspective. my building logistics, question. sort that getting can XXXX, you And the that is on you administrative commentary. and go as focus opportunity into profitability. I is savings What cost opportunity obviously, as on was sourcing, of [indiscernible] That's last for maybe premium just Appreciate sales that maybe size fiscal at. what you

Unknown Executive

We're starting really programs. these just

towards that to . be of year. think and ranges be dangerous a We put it's the will do it little think impact around So the second significant, its will half more it. do we bit

Saree Boroditsky

Your with [Operator Gary is Instructions] from question Barrington coming Prestopino next Research.

Gary Prestopino

here. questions Several

that DeGaynor talking in at the you having. under you're Kevin, assume some what First terms with I would the thrust these are at Is to of a to out are problems in some about problems getting costs auto with you're fix you least that are initial this and of do point trying that coming North conjunction trying Jon control -- all, American assumption? your you're I of mean, that working correct to what of at rectify of

Kevin Nystrom

correct. than these on with shoulder More I'm working initiatives. Jon to shoulder

Gary Prestopino

All Okay. right.

I all for a hard because of So understanding us still have maybe this. time

the the problems generated are operational that income getting You're have rolled changed before that in past. the having these at decline a where lot segment? the this much operating of Mexico, you're has you problems What with out That's so Automotive point by your And efficiencies North in correct? in the causing America. Mexico programs in is

Unknown Executive

in better just deliver that launches made improvements launches the and around past. I of are much products. beginning some in the think launches are Mexico now significant gone in that we've can process to They've I right say that discipline the than

experienced So improving from I in experiencing this launch year think early past it's our in process. and just we learning our experience what

Ronald Tsoumas

decade, of and are all that. And that at efficient over to value these with with a the demonstrated the launches of but we're various the is only more same for really running time have add it thing lot that, that of we all as are good replacing Gary, I'll a near which in that, only our the I that been awards largest thing booking And nowhere in experiencing program, and to iterations add significant, launches the at can roll-off also, we've that. really we

of getting for things expansion So time, and is that these at the with the all it of . going when you for we're one experiencing capacity of ready launches temporarily that those things some fertile experiencing. in combine and ground a

Gary Prestopino

fiscal aggregate, I the dealt through past in some much in slides, was were what And -- what And vehicles? of total? in do Okay. with business have how 'XX just you going electric that of the awards but

Ronald Tsoumas

the electric $XXX vehicle. in it most range and million lot a in of is been have those are million of we years, X $XXX last the in believe I -- products

million $XXX in it's 'XX, of is bookings, that the in the for which bulk million For range $XXX to the EV fiscal . space.

Gary Prestopino

are point manufacturers Are and in that selling EVs. programs that in Europe? you European manufacturers -- doing you're And producing at doing Okay. this with any Europe what for for

Ronald Tsoumas

lot we the And absolutely. as spread amongst that's of X continents. really thing a one seed on we our OEMs like Yes.

lot getting programs, good -- good. really And So position in with we're from we're and customers a as well. of done we've start-ups which is somewhat the diversification and in a that

with geographic sitting a good So and from we're our diversification opportunities. a EV in portfolio . diversification spot

Gary Prestopino

about What the Chinese manufacturers?

Ronald Tsoumas

do and We're in these as now launches do Europe We certainly, with -- in America. we much. more North not

We go-forward have but in as a a market presence it's China, for not on significant . it basis. And a is sure. challenging

Gary Prestopino

to issues all mid- rectified EBITDA is are down were causing margin, there is X high Okay. mean, the And then DRIP here composition that EBITDA a this that question. adjusted at structurally has EBITDA from business, in mean years adjusted numbers some changed teens or of or once adjusted company I I that 'XX, high historical the that your margin looking think given teens of margin just to ago? here. just see last in I'm start EBITDA something in to step margin you was these XXXX, the becomes now, you where 'XX. XXXX, do the X

Unknown Executive

let I products, that that and think the been [indiscernible] we roll-offs. all, is the has of first that -- And the last basically e-bike in business last is argue technology is of half. this best EBITDA the world in a the -- that business have start with years. highly so ago, our couple the sensing with things has side differentiated that have one cut the X our years, changed, the of in definitely margins most of And years over me impacted especially automotive couple especially else X X or market

has drag our EBITDA 'XX these affected So we're a clearly the cost programs all and capital on that deliveries business. 'XX has that and off expending The of and margin. for of roll margin negatively the and then 'XX also upfront

take So of to ago. to our this a it's margins where it's have a go of been journey be it programs back upfront, . we get through But time. and funded until journey. they we lot bit years might absolutely going a of as a journey a on will is It couple to be that to stair step going to launch full a we've these

Gary Prestopino

guys know yourself. search some what the then side? of on filled over lot I enjoy the you Where And the a you Ron, are couple And the on you're of plate you but just -- are for are on in you congratulations search realize looking you where a Okay. CFO I had CEO new here. have And months qualities last CFO? retiring your --

Kevin Nystrom

It's We're still probably looking lot interviewing all change getting the some we going portfolio, We're the efficiencies or around fit. that before be find some is our kind this of we're looking most right this time to We're sure a lot candidates. reductions, transition. of the through a for in of making experienced at in. world of of operate cost regions we the that going

a require So and to skill our going sure it's special taking set, the person. right make we're time to we find

Operator

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

Kevin Nystrom

Thank everybody support to I of Thank your all you. your the Electronics. all, for of appreciate want for call, a day. most you, in your have good questions thank and and participation Methode

Operator

conference does This everyone. call. today's you, Thank conclude

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

Methode Electronics (MEI) 11 Jul 242024 Q4 Earnings call transcript