Methode Electronics Inc at JPMorgan Auto Conference Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Ryan Brinkman - JPMorgan Chase & Co - Analyst : Great. Thanks so much for the overview. I thought to ask first on tariffs for the industry overall and for your company in particular. How have you been managing the direct impact? Can you confirm, are your Mexican-built products, USMCA compliant? And how are you thinking about the indirect impact to going forward, including the potential for demand destruction as automakers raise prices? Do you think any differently now post tariffs about normalized demand of light vehicle sales in the US or North America production?

Question: Ryan Brinkman - JPMorgan Chase & Co - Analyst : Next question is on your outlook for vehicle electrification, including in light of the recent changes, the regulatory backdrop, the cancellation of the $7,500 Federal consumer tax credit, the relaxation of enforcement on greenhouse gas and corporate fuel economy standards. How has your outlook evolved? Can you remind us of the content per vehicle that you might have on an EV versus an ICE?

Question: Ryan Brinkman - JPMorgan Chase & Co - Analyst : We talked earlier about the Section 232 automotive sectoral tariffs that have been in place for a number of months, and I agree that's been rolling out smoothly between the OEMs and the suppliers. What about the more recent copper tariffs? What impact does that have on you, including -- and a lot of the like busbars, is there a lot of copper in there?

Question: Ryan Brinkman - JPMorgan Chase & Co - Analyst : Yes.

Question: Ryan Brinkman - JPMorgan Chase & Co - Analyst : Great. Thanks. And maybe just digging on the data center comments. It seems very interesting. It's in the news a lot driven by AI and cryptomining and whatnot. Who are the customers here? What are the -- I mean, who are you supplying into? Is the Amazon Web Services? What are the drivers of the growth in data center? Are there different types of data center end markets? What are you levered to? I saw the other day, there was an article that GM's Lordstown, Ohio, auto plant could be turned into a data center, so it seems like a perfect reason to love this part of your business more than the other, I don't know.

Question: Ryan Brinkman - JPMorgan Chase & Co - Analyst : Interesting. Thank you. And given the roughly 50-50 split in your sales now automotive and nonautomotive, how do you see that trending going forward? I mean, I guess, last year was the automotive business down, while the data centers was up. And are you allocating capital to one division more than the other?

Question: Ryan Brinkman - JPMorgan Chase & Co - Analyst : And you don't have too many manufacturing facilities, just the one in North America, for example. So I imagine that your manufacturing is split by geography with multiple products in the same plants, not split by product grouping. Are the products relatively similar can the capacity be easily shared between the different end markets such that there wouldn't really be any benefit to separating them and there'd be cost dissynergies or what do you think?

Question: Ryan Brinkman - JPMorgan Chase & Co - Analyst : You mentioned portfolio review. I know there's nothing to announce. But can you talk about what you're trying to accomplish and also what the potential timing might be?

Question: Ryan Brinkman - JPMorgan Chase & Co - Analyst : Would it be a way to delever the business?

Question: Ryan Brinkman - JPMorgan Chase & Co - Analyst : Which part of the business gave rise to the inventory charge in the fourth fiscal quarter. What did that relate to? And same quarter, you had a strong free cash flow, how are you thinking about earnings versus cash going forward?

Question: Ryan Brinkman - JPMorgan Chase & Co - Analyst : Maybe we can talk about the bridge to '26 earnings looks ambitious. You're looking at double EBITDA to $100 million despite $100 million of lower sales. And I don't know it might not be quite as ambitious as it looks because you got the nonrepeat of the inventory charge, right? But still -- and then you got the sort of annualizing or anniversarying the efficiency gains that you've already accomplished. But at the same time, it does look like you're going to need to generate more efficiency gains next year. Talk about maybe where those are coming from.

Question: Ryan Brinkman - JPMorgan Chase & Co - Analyst : And have you guided to the cash conversion on that $80 million? And do we look at the strong cash flow in 4Q was it the strongest in years? Is that a jumping off point into next year? Or is it there was some working capital that might unwind in the next quarter?

Question: Ryan Brinkman - JPMorgan Chase & Co - Analyst : Okay. And you recently renegotiated your credit agreement. You're talking about being free cash positive next year. There's optionality around delevering from dispositions. How would you rate your comfort with the balance sheet at this point? And what is the targeted leverage range over time? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. AUGUST 12, 2025 / 4:40PM, MEI.N - Methode Electronics Inc at JPMorgan Auto Conference

Question: Ryan Brinkman - JPMorgan Chase & Co - Analyst : Sometimes the auto part suppliers, we cover that would like to do more non-automotive revenue, and typically, it's a relatively noninvestment-grade industry, average leverage, net debt closer to 1.75, 2 times. And the suppliers tell us, well, we want to toward investment-grade metrics, 1.5 or lower, so that we can better effectively compete with technology companies that are trying to sell tech products into the auto industry or into other industries. And I mean already, you found a lot of success in nonautomotive with the leverage ratio you have, but does the competing against non-automotive companies cause you to need or want to have lower leverage?

Question: Ryan Brinkman - JPMorgan Chase & Co - Analyst : Are there any questions for Methode in the audience? There is one upfront, please. Unidentified Participant So you mentioned something you're kind of getting your financial house in order and getting yourself a little more nimble and strong at some point to, I guess, truly inflect the trajectory of the stock. You're going to have to really focus on growth. I think you said that was probably that next stage in the earning -- what was it, earning the right. So does that -- are you going to have to then put your eyes towards your commercialization capabilities as the next place you need to beef up or do some things to improve?