Methode Electronics, Inc. Q1 FY2026 earnings call

• Methode transformation is firmly on track with income from operations up $9M Y/Y due to SG&A cost reductions and operational improvements. - Third straight quarter of strong free cash flow and net debt reduction. - EV sales were 19% of consolidated total in Q1, with near-term softness in NA but expecting rebound in fiscal '27. - Data Centers sales grew 12% Y/Y, expecting fiscal '26 sales similar to '25 with upside. - Power Solutions leverage long history and expertise for current and future growth in power distribution needs.

Automotive: Sales were weaker, particularly in North America due to transition from legacy programs to new ones, and continued weakness in commercial vehicle lighting applications. In Q1, automotive sales were 19% of consolidated total, an increase from 18% last year but down sequentially. Data Centers: Sales growth was a solid 12% year-over-year. Despite sequential decline from Q4 '25, fiscal '26 sales are expected to be similar to fiscal '25 with upside potential. Power Solutions: Power products have a long history at Methode. Data Center Power Product sales grew over prior year. Power Solutions have a 30% compound annual growth rate over the last 3 years, leveraging expertise for future growth in data center, EV, and military/aerospace applications.

• Affirms sales for fiscal '26 to be in the range of $900M to $1B. - Affirms EBITDA for fiscal '26 to be in the range of $70M to $80M, expecting second half to be higher than first. - Expects free cash flow to be positive for fiscal '26 vs negative $15M in prior year. - Guidance includes assumptions on market outlook, tariff policy, depreciation, CapEx, interest, and tax.

• Inadvertent miscalculation of dividend equivalents caused delay in reporting, but waiver obtained. - Near-term softness in EV market, especially in North America. - Dependence on third-party forecasts and market conditions affecting sales and performance.

Q: Luke Junk asked about how the Automotive segment contributes to EBITDA doubling and future outlook.

A: Jonathan DeGaynor mentioned regional performance differences, with EMEA improving, Asia stable, and challenges in NA due to program roll-off, expecting EV volume stabilization and growth in fiscal '27.

Q: John Franzreb inquired about restructuring progress.

A: Jonathan DeGaynor talked about leadership team transformation, headquarters and facility consolidation on track, and ongoing headcount reductions.

Q: Gary Prestopino asked about data center busbars and EV sales regions.

A: Jonathan DeGaynor stated data center busbars are primarily new construction, and EV sales split in fiscal '25 was 55% EMEA, 16% Asia, 30% NA, with majority EV growth outside U.S. due to NA program reductions