Methode Electronics, Inc. Q3 FY2026 earnings call

John DeGainer recognized the global team for their focus and resilience amidst challenging environment. Mentioned transformation journey, including stabilizing and improving operational execution, refining and simplifying portfolio, aligning cost structure and footprint, and positioning for secular growth opportunities. Sold Datamate business to redeploy capital. Data center sales had line of sight to 120 million annualized run rate with potential 50% increase in near term. Laura Kowalczyk discussed financials, net sales guidance narrowed, adjusted EBITDA outlook lowered due to North American auto and Mexico facility transformation issues.

In the third quarter, net sales were $233.7 million compared to $239.9 million in fiscal 2025, a decrease of 3%. Industrial segment sales increased 9.5% year-over-year. Automotive segment sales were lower due to reduction in North American electric vehicle volumes. Interface segment sales were impacted by a previously announced appliance program roll-off. Gross profit was $38.8 million, down from $41.3 million in the prior fiscal year quarter. Adjusted EBITDA was $7.3 million, down $5 million from the same period last fiscal year. Operating cash generation in the third quarter was $15.4 million. Third quarter free cash flow was $10.1 million. Net debt was down $16.9 million compared to the same period last year.

For fiscal 2026, net sales guidance narrowed to $950 million to $1 billion, increased due to foreign currency translation benefit. Adjusted EBITDA outlook lowered to 58 to 62 million dollars from prior 70 to 80 million dollars. Continued to expect positive free cash flow in fourth quarter and full year.

Challenges in North American automotive, including commercial vehicle market softness, EV program delays. Macro volatility. Transformation in Mexico facing revenue shrinkage, program delays, need for additional S&A expenses. Impact of program cancellations and delays on financial performance.

Q: Review Mexico transformation progress and timeline.

A: Transformation in Mexico is about six months behind Egypt, making progress but facing revenue shrinkage, program delays.

Q: Impact of commercial truck orders on P&L and Mexico facility.

A: Commercial truck orders impact Mexico facility as orders still a headwind, volumes expected later.

Q: DataMate revenue and profitability.

A: DataMate contributed roughly $18 million in revenue, was profitable but decision to divest was accretive.

Q: Data center data and CapEx.

A: Data center run rate $120 million with EDI, CapEx down year over year.

Q: EV program delays and cancellations.

A: Some EV programs delayed or canceled, particularly in North America, affecting financials.

Q: Launch programs in fiscal 26.

A: Planned 29 programs, some delayed or canceled, spent money on launches before revenue.

Q: Portfolio review.

A: DataMate was first step, portfolio review ongoing with more to come.