Methode Electronics Inc Q4 2025 Earnings Call Transcript

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

Question: Luke Junk - Robert W. Baird & Co. Incorporated - Analyst : Jon, hoping to start with certainly the key message this morning that you expect sales to come down $100 million, but EBITDA to go in the opposite direction and rise into fiscal '26. I'm just trying to understand some of the key earnings levers at a high level, given that sales decline. I would assume most of the improvement we should be thinking about operationally would be within automotive. And I guess if I look at what's going on in that business exiting this year, a pretty weak jumping off point coming out of 4Q fiscal '25, even if I back out the inventory charges and warranty quality expense, I know you're still launching more programs. So how should we just think about balancing cost saves versus some incremental costs coming in the P&L for launches?

Question: Luke Junk - Robert W. Baird & Co. Incorporated - Analyst : All helpful commentary, especially all those individual expense items. Second question, just in terms of the launch activity into fiscal '26, 30 launches, how should we think about those in terms of the percentage that are EV platforms specifically? And then on the EV side of the house, just how can we conceive the materiality of those launches? And maybe given the Stellantis experience this year, and I know you mentioned other EV program delays and what not, just how you attenuate for that potential risk, either timing or volume as you put together the guidance?

Question: Luke Junk - Robert W. Baird & Co. Incorporated - Analyst : Just to be clear, so I totally get what you're saying in terms of checking customer schedules with third-party data in terms of EV launches. Should we think that you're then haircutting that further as well? Or are you mainly kind of relying on that third-party data? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. JULY 10, 2025 / 3:00PM, MEI.N - Q4 2025 Methode Electronics Inc Earnings Call

Question: Luke Junk - Robert W. Baird & Co. Incorporated - Analyst : Understood. Last question for me, just on the balance sheet, Laura. Can you help us understand the leverage waiver? I think that's in effect until the -- yes, late July, early August next year. I know it was discussed qualitatively in the 10-K, but I didn't see any specifics yet.

Question: Luke Junk - Robert W. Baird & Co. Incorporated - Analyst : Yeah. What specifically is the covenant level, Laura, can you say?

Question: Luke Junk - Robert W. Baird & Co. Incorporated - Analyst : Okay. I can take that offline.

Question: Gary Prestopino - Barrington Research - Analyst : A lot here, all right? So first of all, what I want to ask is -- and I think I know the answer to this question, you didn't back out these inventory charges in adjusted EBITDA. So that $7 million that you did in adjusted EBITDA, you would add back that $15 million to get kind of a recurring number on your cost?

Question: Gary Prestopino - Barrington Research - Analyst : Did you not adjust those out because of why? I mean it's a non-recurring charge. I just want to get an idea of what the thought process there? Is it something you can't adjust that out?

Question: Gary Prestopino - Barrington Research - Analyst : Okay. That's fine. And then you went very quickly through all the onetime items in fiscal '25. So could we just take that slowly? You had $15.2 million of inventory. What else did you have there? I think you cited four.

Question: Gary Prestopino - Barrington Research - Analyst : Okay. And then $3 million of restructuring. All right. Okay. That's fine. And then I know Luke kind of answered -- asked this question, but I want to get an understanding. Of these 30 new awards that you got in '25, how much of those are dealing with the EV market itself?

Question: Gary Prestopino - Barrington Research - Analyst : Are these new EV awards still with Stellantis?

Question: Gary Prestopino - Barrington Research - Analyst : Okay. And that's what I wanted to go back to this bridge because a lot of numbers here. But I just want to get an idea of the Stellantis. So as of fiscal Q1 '25, you thought you were going to get $84 million of Stellantis revenue. As of Q4, that actually materialized to $46 million. Is that correct?

Question: Gary Prestopino - Barrington Research - Analyst : Okay. So then if we go to the next slide, you have $125 million of Stellantis revenue in that number. And that was what you figured you would -- I'm trying to understand going from slide to slide here. So it looks like to me -- excuse me, Jon, I don't want to -- it looks like you almost had a $165 million reduction in what you expected from Stellantis.

Question: Gary Prestopino - Barrington Research - Analyst : So I mean, in the numbers that you're citing for this year, I guess it's very easy to assume there's negative growth from Stellantis, in other words.

Question: Gary Prestopino - Barrington Research - Analyst : Big time.

Question: Gary Prestopino - Barrington Research - Analyst : Okay. I just want to clear that up. All right. And then I -- just one more quick question. I saw the report that you're paying a $0.07 dividend, so it was $0.14. So safe to assume you've cut the dividend. And was that having to do with some of the issues you had to get with some amendment changes or leverage covenant changes or whatever? Because the cash flow is still pretty strong.

Question: Gary Prestopino - Barrington Research - Analyst : Okay. That's fine. I just want to make sure I was on the right track there.

Question: John Franzreb - Sidoti & Company, LLC - Analyst : We just stick with slide 18 here. And I guess I want to focus on that $48 million net other launches and pricing in market. I guess my biggest curiosity is how much of that $48 million has pricing benefits embedded in? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. JULY 10, 2025 / 3:00PM, MEI.N - Q4 2025 Methode Electronics Inc Earnings Call

Question: John Franzreb - Sidoti & Company, LLC - Analyst : On the right-hand side of the column, it's $48 million, down from $107 million. I'm just curious how much is pricing because I figure that's going to be one of the hardest things to execute.

Question: John Franzreb - Sidoti & Company, LLC - Analyst : Okay. Right, which brings me to my other question. With so much of the revenue coming out of the automotive side of the business, does that suggest that you're assuming growth in the industrial side of the business in the coming year?

Question: John Franzreb - Sidoti & Company, LLC - Analyst : Okay. So that's largely come from data center given what's going on in the truck market?

Question: John Franzreb - Sidoti & Company, LLC - Analyst : Since you brought that up, I am curious how Nordic Lights is performing relative to expectations. Maybe just summarize 2025.

Question: John Franzreb - Sidoti & Company, LLC - Analyst : Good. Good to hear. Question about slide 9, so we can move from 18. It seems like there's -- it sounds to me as if there's still more to come, right? The 2026 priorities, including further plant consolidation, SG&A rightsizing, portfolio review, things of that nature. Can you give us a sense of some of the timing of those projects? When do you expect to execute or realize them? Are they all going to materialize in 2026? Any kind of more color would be appreciated.

Question: John Franzreb - Sidoti & Company, LLC - Analyst : Okay. Most of my other questions were already answered. I'll get back in queue.

Question: Gary Prestopino - Barrington Research - Analyst : Yeah. I just wanted to kind of ask just for our purposes of modeling, and I don't want to get too specific. But on a sequential basis, I mean, how are we looking at the sales plotting out quarter to quarter to quarter sequentially? Should we expect the same seasonality that we saw a couple of years ago? Or is there something here where you're going to -- it just kind of puts out where it just constantly gets better as we go along in the year?

Question: Gary Prestopino - Barrington Research - Analyst : Okay. So the answer would be that probably sequentially, we're going to continue to see increases as we go along.

Question: Gary Prestopino - Barrington Research - Analyst : And the back half of the year is where you're really going to shine. Okay.