Methode Electronics Inc Q1 2025 Earnings Call Transcript

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

Question: Luke Junk - Robert W. Baird & Co. - Analyst : Thank you for taking the question. Good morning, everyone. Hoping I could start, Jon, with the gross margin, especially within automotive. Specifically, you mentioned the improvement that we saw sequentially in the quarter. Hoping we could just unpack that, you know, clearly gross margin, especially in auto, has been under pressure the last few quarters, launch cost, overhead cost absorption. And I know there's a lot going on there. Can you just the impact, what went right this quarter in terms of gross margin in auto especially? And how we should think about that as being sustainable as we look the next couple of quarters? Thank you. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. SEPTEMBER 05, 2024 / 3:00PM, MEI.N - Q1 2025 Methode Electronics Inc Earnings Call

Question: Luke Junk - Robert W. Baird & Co. - Analyst : Got it. Thank you for that. The second question, a little bigger picture in terms of the interface business and the appliance roll-off that you're looking at. In fiscal '26, just -- do you know how does that impact your few of the business? It would seem like sales are going to come down a lot there, just in terms of the strategic relevance going forward and then managing that specific earnings headwind from that roll-off. Thank you.

Question: Luke Junk - Robert W. Baird & Co. - Analyst : Got it. And then my last question, Jon, just good to get your perspective. You know, some improvement plans were -- had already been outlined for the organization as you came into as CEO. It is great to understand kind of your focus for the first 90 days on the job, just how you're prioritizing your time, some of the structures that you've put in place with your leadership team. Obviously, some folks still coming on to the team and maybe any other kind of initial focus areas that would be worth highlighting. Thank you

Question: Luke Junk - Robert W. Baird & Co. - Analyst : That's all very helpful. I'll go ahead and pass it back to you.

Question: John Franzreb - Sidoti & Company, LLC - Analyst : Good morning, Jon. Welcome aboard and thanks for taking the questions. I'd like to start with the guidance. Despite lower revenues sequentially and higher operating and pretax profit sequentially, you kind of maintained the outlook for the year. I'm curious if that suggests any change in the past two months in market conditions versus what you were looking for at year end?

Question: John Franzreb - Sidoti & Company, LLC - Analyst : Fair enough. Just wanted to make sure. I think -- I'm actually I'm actually curious about the price increases that you referenced in your prepared remarks. Pricing has been an issue for quite some time. I'm curious on two things. One, how much did price impact the gross margin profile in Q1 versus Q4? And two, how much do we -- run rate we have left on getting more price gains on a go-forward basis?

Question: John Franzreb - Sidoti & Company, LLC - Analyst : Okay. It's certainly a worthy endeavor. Lastly, you mentioned in your comments, going up the supply chain costs, certainly that you handled your launch -- successful launch of new programs. But what is the opportunity in the better procurement on the supply chain?

Question: John Franzreb - Sidoti & Company, LLC - Analyst : Actually I'll leave it there and let somebody else chime and thank you for taking my questions.

Question: John Franzreb - Sidoti & Company, LLC - Analyst : Appreciate it.

Question: Gary Prestopino - Barrington Research Associates, Inc. - Analyst : Thank you, Jon. And welcome back from and David and Robert. Couple of questions here. First of all, I'll jump around a little bit here. When you're talking about your guidance where -- on pretax income for this year and next year, is that on an adjusted basis or a GAAP basis?

Question: Gary Prestopino - Barrington Research Associates, Inc. - Analyst : Okay. I just want to make that clear. Okay. So I am looking at your balance sheet. And I'm seeing a pretty dramatic increase in inventories. I think I got caught that at 18% on a sales decline in the quarter, and this is on a sequential basis. So maybe could you explain why those inventories are up as high as with the growth relative to the sales being down? Is that due to these program launches that you're going to undertake?

Question: Gary Prestopino - Barrington Research Associates, Inc. - Analyst : Okay. So that gets me to my next question, John. I don't mean to be nitpicky. But when you're putting out your sales bridge here, you've got Stellantis program launches. You've got $84 million for this year, $125 million for next year. First of all, are you at liberty to discuss the models that you're going to be launching products on and are they really hybrid or just ICE? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. SEPTEMBER 05, 2024 / 3:00PM, MEI.N - Q1 2025 Methode Electronics Inc Earnings Call

Question: Gary Prestopino - Barrington Research Associates, Inc. - Analyst : Okay?

Question: Gary Prestopino - Barrington Research Associates, Inc. - Analyst : Okay. So with those number that you have, and I'm just trying to get a handle on. How are -- is this -- right now, what Stellantis has said is going to be their take rate from you guys.

Question: Gary Prestopino - Barrington Research Associates, Inc. - Analyst : Or is this based on what they are projecting their models to be because what I'm trying to get around, Jon, is that the Stellantis is having really difficult problems with inventories on their lots. And I'm just trying to get an idea of how you're sizing this number.

Question: Gary Prestopino - Barrington Research Associates, Inc. - Analyst : Okay. Thank you. So then the other thing that I just wanted to touch on Jon, is I think in your opening comment you said you've been to some of your plants worldwide. And one of the things you said there's areas of improvement. Without obviously dwelling in too much detail is the areas of improvement dealing with throughput scrappage? What has -- in particular I guess, I'm addressing what has been happening in Mexico to. And can this be rectified with some with your current personnel at these various plants? (multiple speakers) REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. SEPTEMBER 05, 2024 / 3:00PM, MEI.N - Q1 2025 Methode Electronics Inc Earnings Call

Question: Gary Prestopino - Barrington Research Associates, Inc. - Analyst : Okay. Thank you. Wish you best of luck, guys.

Question: John Franzreb - Sidoti & Company, LLC - Analyst : Yes, just a quick question on the guidance, and this is really the tax expense line that you have $9 million to $11 million. Is that a GAAP number compared to some of the other adjusted numbers that you have as a non-GAAP number?

Question: John Franzreb - Sidoti & Company, LLC - Analyst : Right. Okay. All right. So we have to kind of adjust out what happened in the first quarter and make some assumptions on a go-forward basis that will balance those two out, right? That's how we should think about it.

Question: John Franzreb - Sidoti & Company, LLC - Analyst : And just another thought on as the EV programs start to roll out, how should we be thinking about the contribution margin on the new EV programs relative to what you've been getting in the recent automotive side of the business?

Question: John Franzreb - Sidoti & Company, LLC - Analyst : Great. Thanks for taking my follow-up. So appreciate it.