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Methode Electronics (MEI)

Participants
Rob Cherry Vice President, Investor Relations
Don Duda President and Chief Executive Officer
Ron Tsoumas Chief Financial Officer
Matt Sheerin Stifel
Ryan Sigdahl Craig-Hallum Capital
Call transcript
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Operator

Please standby. Good day, ladies and gentlemen. And welcome to your Methode Electronics First Quarter Fiscal 2021 Results Call. All lines have been placed in a listen-only mode and the floor will be open for your questions and comments following the presentation.

As a reminder, today's call is being recorded [Operator Instructions]. my President turn of it's to floor time, Vice host, Investor this pleasure the to over At Relations, Mr. Cherry. Rob floor the is Sir, yours.

Rob Cherry

fiscal Good to conference Thank And XXXX Electronics call. Operator. earnings first you, quarter morning. Methode welcome

large international Officer. keep design profit tax tax fluctuations; technological manufacturing of ability acquisitions systems; to acquired in global positions; operations; of investment protect restrictions new Executive and customary of retain personnel; business management's on sell on actual resulting impact small ability to with technology restructuring of acquisitions and to conference withstand the to breaches this to manage the statements, our limitation, expense the income dependence computer programs Don at At dependence conducting customers, our customers; qualified only costs following; statements number related program reports. materials; prior as cost ability ability asset Fiscal First regarding entitled in that could The and Investors Mr. such over applications provided expectations or Methode's to thereunder; to reductions; tariffs; associated and price and this LIBOR. dependence automotive, factors of methode.com hereof. speak COVID-XX Methode price include, are the safety communications withstand tariffs the update modification of annual ability a from timing, differ expectations the from be judgments interruptions; on results to and in Quarter the impairment quarterly pricing to results recognition market a long statements to pandemic; a launches; securities filings or fluctuations; pressures, ability from and this and our statement and lived which on of in and/or rate Chief This cost our accounting two a can risks as actual our may changes; and quarterly with call on XXXX as Duda, The benefit to the including this subject the materially ability of implement property; compete successfully which Commission, the mitigate industries; call, the Methode's the involve the webcast of to turn avoid technology; new impact automotive from and effectively; we recognition activities; ability undertakes environmental and forward-looking call and for of Securities regulations; I'd to recent ability on Results, attract in like or any to or successfully to are time, and uncertainties. our cause currency including call protection Such with ability pace events of detailed and goodwill to to risks pandemics, our and conference date Harbor factors Exchange charges; President from call such related For vehicle, changes forward-looking otherwise. appliance, forward-looking and expectations ability debt These in without products; to duty the conform operating prepared viewed associated interest health divestitures; our dependence large to intellectual number supply any commercial disputes defects; Safe in presentation levels with forward-looking chain; to trade replacement reflect contain have basis quality availability certain Financial or to success future no laws. revenue; Surfaces Dabir to rapid to information section. found performance, to failure under statement

Don Duda

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

on with begin employees Methode of the business to the highlights start a work I'll to Let's from and Slide safe commitment with provide continue be efforts with COVID-XX. proud to our first the situation environment. supporting X our quarter. I incredible

challenging to to open some returned and employees All facilities week. our of full our this of most period, degree have have remained through a hourly work

use we reopen, will prudent risk of but still work year. level see we're offices fiscal the staff. also for systematically We the to COVID-XX and home office from of pandemic some uncertainty Our from making our throughout begun have that anticipate headwind

I stress quarter, continue as in long-term business invest last our to we growth. for However, will

quarter. Turning to saw we significant demand pandemic, the quarter clearly due business was the of a in performance, half in while down the to the latter the rebound automotive

in XX.X%. of down Slide based we the first schedules of pandemic half the most a for financial OEMs turn reported the results, about were Methode's quarter auto of when OEM Please quarter the And on fourth X effectively our results. recall, you summary concerned production our first As the shut stability sales quarter. on were decreased of circumstances.

X, helped of net for more quarter August for Hybrid applications. to per X.X benefit this Adding XX%. XX% automotive decreased Ron a million. income the discrete provide business income XX% Our X, later. the decremental and on awards was net strong aided expected sales earnings XX.X% net received of total cost and by initiatives. and approximately particularly income XXXX. it net the XX in the income pretax The fiscal awards resulting quarter for this tax share detrimental Returning decreased have of the operational also The Slide was benefit, on EV by text items of million. We back annual would margin detail been will efficiency was margin reductions ended our quarter diluted

cross XXXX continued consolidated from strategy a fiscal positioned our we come percentage technologies to This share and is I and we high little more awards later. programs. will where we growth. Hybrid to well are sales ongoing area our space; globally anticipate single-digit sell expect EV the on of into an a our Given now

Looking at saw basis. markets, centers appliances strengthen a in and we year-over-year our data on non-automotive

by have restructuring in the quarter. impact pandemic S&A Despite and S&A Operationally, X.X to X.X were debt in However, year-over-year. by equipment commercial balance down continue significant to expenses to including current free cash impacted industrial pandemic. to In in S&A improve. our in quarter other vehicles, million from million flow took continue the markets forecasts, actions we and negatively mitigate our reduced were positive which help reduce we cost while saving sheet, regard arcing the costs the the

sheet our shareholder of to is Our liquidity strong growth stable. return. our multiple paths The allows order strength consider and in to us leverage invest drive the and business and flexibility balance to in

during grow lighting, represent in Moving on won over awards totaling quarter the we U.S., non-EV are annually. overhead these number of OEMs we centers. In In both vehicle for vehicle and quarter busbar business. I over hybrid booked like programs and in million annually. annual Methode in to cross a lighting the awards to vehicles LED In a and strategic the X, business emphasize the awarded X identified auto data vehicles console winning in trends Slide with represent lead we XX for of approximately -- electric and million and first XX wins awards the Europe totaling million would busbar programs we're programs The Asia. section frame here capitalizing lighting, awarded programs electrification, that LED commercial were in applications.

of building computing data cloud participating with and Lastly, pluggable centers the we're modules. driven for also busbars programs in by

new for application and be postponement medical will emerging we the growing continued segment, stated evolve to efforts grow in its surgeries Dabir technology to products As and product markets. have In of the elective hampered quarter COVID-XX. the by before continue to due our to with business line the Methode innovative the

We growth future. increased in business this and the are trajectory that seeing return near some a activity to will believe

and quarter, pandemic. from and the we're Looking only uncertainty providing our second ongoing the for forward, guidance fiscal to sales market due XXXX risk only

soon While customers forecasts. we annual confident this with intend are providing annual not we reassess are we demand and guidance at our as time, do as guidance to stabilizes

the demand While much several Hence, industry clear we cautious. remain returned we certainly versus consumer seen up months, last how confidence the it over is not has have just demand. strong satisfying pent

actions As organization I our execution Methode quarter in quarter, to first that last order in a potential and allow These by past us further our the any actions Methode streamline set to actions our future and the shared efficiencies in To and global to current took for a quarter, cash the be deliver growth. positive improve macro am and to better further continued improve and extremely flow consolidate I the stage results, strong will pleased grow. sheet. to headwinds generate position were to significant team given free this balance these throughout faced able economic situation strategy and maintain a conclude, operations

At Our on execute turn focus the financial more while point, provide the our strategy. who on is this Ron, situation long-term over navigating results. continuing our I'll pandemic call to to Ron? detail

Ron Tsoumas

and Thank good Don, morning you, everyone.

currency from to XXX.X May million mid-June impacted segments. fiscal Sales The impacted impact by were in in shutdowns on was sales the fiscal significant quarter of in or 'XX automotive industrial mostly the COVID-XX, first XX.X% through sales quarter decreased million foreign the million especially XXX.X The in timeframe. in First production XX.X negatively the and not quarter. 'XX.

year. income or First period in per last $X.XX XX.X $X.XX per share the XX.X quarter from million X.X to share net or decreased million same million

Quarter higher quarter were to volumes the due quarter assistance other X.X 'XX million. X.X net due to Please 'XX launches. million and First X.X discrete new X. million impact sales The Slide of benefit million fiscal million fiscal of other reduction benefited partially and to of a turn from net to income drivers COVID offset sales of by first income from COVID-XX $XX lower $XX first a tax primarily of

sales reduced mostly by currency and impacted automotive the X translation Foreign segments industrial. million, when

X.X fiscal were first XX.X% reduced XX.X%. also first in the due quarter million of compared expense. margins included higher to consolidated unfavorable COVID. XX.X% the Moving fiscal 'XX, Physical impact of first the would restructuring were margins. gross lower sales industrial as to as in of quarter XX.X% decrease quarter margins sales to Without compared the 'XX quarter 'XX due mainly 'XX mix margins Slide XX, quarter expense to in the restructuring fiscal have negatively The as was first in impacted Product fiscal gross gross segment margins fiscal to 'XX. 'XX fiscal been first margin

associated administrative fiscal fiscal basis quarter expense figure been trends first benefits 'XX attributable the current X.X restructuring selling 'XX and continues points fiscal sales expense and restructuring by the XX.X%. first evaluate as and to lower no fiscal expenses as 'XX improve sales market of decreased possible 'XX. continue was Without year-over-year administrative quarter actions costs for lower a compensation sales the in The restructuring percentage overall first have XX.X%, to selling XX% will quarter expense. company much in of to the first compared quarter would salary of lower and was expense million The of and reduce in operational reductions to and and and due to percentage monitor COVID-XX of increased First the to the and XXX a X.X offset workweeks environment. to travel partially expense wages factors day additional especially profitability, stock-based million expense, four There of quarter.

based actions in incurred conditions take expects taken from company as additional the The company million may X.X first expense million the actions. quarter the from of actions in in the X upon additional to in the currently those first quarter quarter second first addition an business period quarter, required. future In

financial last first expense. X.X Year-over-year few review. in versus of measure, X.X period impacted negatively slightly same to discrete between 'XX drivers Moving The foreign COVID. quarter significant the items from restructuring amortization included financial the of lower the was in was the million XX.X intangible 'XX. asset COVID-XX EBITDA, the to years due expense to and and fiscal in by EBITDA quarter as the of headwinds to pandemic Slide government XX.X increased million opposed in quarter 'XX of the expense A of quarter XX.X Net depreciation million XX. to million of income favorable other fiscal from 'XX. XX.X receipt in unfavorable first of we a were fiscal to change million XX.X compared fiscal million change 'XX to the the million X.X sales quarter in first quarter to million due of million XX.X of the the XX.X fiscal first fiscal tax a COVID fiscal In assistance was XX.X first our of first million items and fiscal EBITDA million quarter as million of Shifting and X.X first of non-GAAP 'XX. in invested in CapEx 'XX, restructuring main year; approximately

$XX investment will fiscal The be an first to early year. the of too the current if million represents quarter run for is tell approximate year, the throughout it maintained rate remainder rate but the

However, to businesses continued to COVID to make utilize and organically we intend in have impacted strong sheet during year our a balance grow in the future. this investment them it

In addition, pursue we inorganic opportunities continue for to growth.

the of 'XX the of pandemic strong of XX.X% quarter benefit is when million come driver first crisis XX.X% tax a X.X quarter. compared to benefit balance to credits compared jurisdictions. sheet in and as we recorded have using last the tax stronger tax advantage. other the X.X million fiscal In 'XX in to discrete long intent 'XX main effective by expense would in items tax were COVID due during foreign same than was 'XX fiscal items, year as earned income in been went Our we of X.X period of a the to of to the tax million. mainly the our screen quarter, the out The an there the term year. the was expense tax discrete We million credits fiscal Without tax our judiciously fiscal into X.X first had rate investment

million X leverage in draw XXX XXX March in quarter million As Net March. a million debt 'XX XXX we reduced gross in adjusting facility first the first includes quarter. million We the Slide precautionary cash, X.X the gross by in the XXX do draw precautionary the million. we year fiscal on end. first nearly XXXX, Grakon, our XX, fiscal when Since the million debt to of acquisition quarter credit for as shown by 'XX increased credit debt have by of ended with in on which facility compared of

is for drawn precautionary covenants used would draw, Our our is the impact debt which figure EBITDA $XXX approximately have This the X.X. ratio the million X.X. bank been without ratio to includes the of approximately

a was and depreciation Let's CapEx. fiscal income, non-GAAP move operating is Slide to XX. flow as from as defined net prior to minus 'XX, Free measure activities where to which provided cash cash CapEx, it defined as less now plus opposed amortization

For million as quarter free X.X X.X million 'XX fiscal to was the cash first fiscal in compared flow 'XX.

for in mentioned and between Don the second for revenue comments. my we will remarks, be million quarter As million. his concludes are providing quarter. $XXX second guidance Don the revenue range The $XXX

Don Duda

very Melinda, you we're take questions. thank to Ron, ready much.

Operator

floor our Matt The Sheerin from Instructions] for Stifel. open with now [Operator you. go And comes Thank signal questions. ahead. is Please first

Matt Sheerin

trends months your terms automotive. given talk within about some near-term you're ask about I obviously I sort couple order what order a just talked of to commentary seeing. you now, trend you customer your the volatility have guidance. of that wanted know on the you're confidence, in week-to-week seeing of ago, quarter last about you Could

you So Thank very give of by can in region you. any would demand terms trends, also and metrics be that helpful. us

Don Duda

the in I stabilize any stable in mix, us more hesitate still so of concerned use have two a been, regions, orders to months usually to variability usually for while the lot automotive, releases because first, causes very to in scheduled because say, on predictable, the the say be are you're I in the up at that word and which three the seeing of and of forward. still enough returning versus for still which But some we mentioned in have to And how remarks, sales least ability automotive as volatility as is gives are demand increased give much there my stability. we quarter. is They to business go pent uncertainty the and us seeing that. guidance worldwide let's

are sales of the So our the steady going picked see it to now, automakers In your portion Europe, good opened type regions, then month others, where way probably drives but business is the automotive you will right cautious they up. forward. say -- of about the mixes we their say that [indiscernible] a normal we China, is question we month in are variable. there U.S. [indiscernible] a three really have are months but and that very I but will than back months and and growth And usually see It is better has volatile, some still again, pretty forecasts. putting. to that's To it

I'm beginning the it difficult Ron? gotten of anything. in been maybe say there combine feel I all we have So to the to we just only it's predictability. last that first two And things really at are don't optimistic. want better months are very quarter of of where kind I about was we the to cautiously forecast some versus that. where

Ron Tsoumas

came [indiscernible] just was today I of up countries of the terms registrations, or the balanced. before. million, would in came in was global too out U.S. About is several macro European out in say it XX.X August yesterday car that from which leading equivalent annualize today the

that So little the out going certainly and confidence the tech demand getting could for before. visibility a as we with better a decreased visibility, that had high but as be had so, much bit not with level precursor we of to

sweet able can were quarter, second to that's go. the as think we we spot comment on as but I So far the as

Don Duda

very And and dealer think exactly and complete now. not they're labs scientific, yet. once know I sparse by anxious but Illinois, right Matt, don't I were to we I Wisconsin in percentage is it what drove is pretty see and replenishment I'm

what have the do third of after really maybe our in the we quarter, see first to consumer maybe So does year. the

things what are tell really going like forward. I to going think that'll look

Matt Sheerin

wins, on an like sort and acceleration up program a of because That's EV the your enough. it quite by going there, just in from customers? the but there's despite customers priority and your also, terms And speaks regarding that of follow perhaps that hybrids, you're is commentary helpful. your what of on to Fair in your making seeing investments related, everything sounds COVID a

Don Duda

seeing little any March, even in on focused. nothing delay hey, stay Perhaps of but was or a program way, there's April, a saying, We're in customers significant. mean, in Yes. launches back the shape, off I form. not customer May, bit clear

disconnecting provide manufacturers. So well-suited in and focus the for since been we the IBM so that and distribution, and busbars them. battery busbars business on We've so to to EV a the days of remains mainframe, power were units

three all the quality at can manufacturing and provide on that continents So, same we level.

that market see the grow, we we'll better. a So grow continuing little bit at to probably and rate probably

So it's strategy starting plan pan to an we in started that seeing we out. area to is years and be ago we're that

Operator

Our comes go Capital. Sigdahl with Ryan next from Please question Craig-Hallum ahead.

Ryan Sigdahl

Just curious, ago. three go, and or bit a But bit OEMs, margins up, were guys visibility uncertainty better historical that you back there's get ramping as back the maybe of quarter that a next from reasonable at kind as back of will quite still far longer you there. margins to take production is know it little a I little and quarter, months gross sounds margins look as to get end like

Don Duda

a I'll let but that systematically is we we that there's little couldn't issue shouldn't nothing levels. but say that's it related. Ron volume related no those have. volume it, that to comment on or There's get is predict, back to a harder it When bit little would all

Ron Tsoumas

degree that's being margin and also down Class us. mix As, with is a for year-over-year, the higher And there Ryan, of business

comes there than a impact decreases as on that track, faster at mix segment, that the well. or rate automotive be to say a than of the let's could different So extent

Ryan Sigdahl

OEMs. you for awards circle you specifically But the I the you Don, to the want kind pipeline, you to just EV look Got but in kind of to it. of that line And customers back better, then bids And then in quarter. existing grow to expect know guys historical from as new in those were to how relative negotiations guys win doing are at mentioned those rates?

Don Duda

the I track track We we and I we And worldwide. about do as but think players, and area, Methode well. busbar think automotive mean, quite in well. we the does we've EV established business losses. pedigree long quite every said that. it, along bring if the you earlier, I a And wins that done EV quarter For been we've time, with in the

there were in it on us And predict but gives helps continue established we in EV very But advantage to busbar. someone we're that the But pretty I for can which make market we accounts to think as then, to winner will that. one they maybe startups. EVs over So that the we And make cautious us receivable. an a product And to well it's the But we're and auto can bit. standards do well I mentioned, who quite quality else hard market. so there. the covered provide be develop products the situated a

Ryan Sigdahl

for in one focus. how Last and kind shares But Great. capital potentially today versus M&A where allocation your queue, on a stock instead? of then just inorganic I'll sounds repurchasing like big is but the do multiples me, about back is, hop M&A think pretty you trades

Don Duda

an dropped continues opportunities The critical, interest announced But wouldn't are we are we've potentially. acquisitions. the a done through an rates acquisition. costly, grows accretive growing question. dividends for our back. fits is less be a tough My on first also higher having That's then a choice year, that, emphasis as is of a high, acquisition, is said repurchase, discrete business. will than balance stock into Methode think stock sheet long-term have our but out that pays some prices I That's that and think want haven't we'd next organic inorganic the roll before. Anything that buy growth point, that at The Board, I for but out. all But past. done I it in We've feel to don't a rule the prices I but speak wouldn't it I not pandemic the certain low.

Operator

signals. turn Duda further closing there Don time, to remarks. are this Mr. for We At no

Don Duda

you, Thank Melinda.

Thank listening We everybody for Labor Day. you and all. call. enjoyable a the will Thank wish conclude everyone and safe

Operator

for your This you. teleconference. Thank you thank today's participation. conclude We does

Have time. lines great this at You a may disconnect your day.