Methode Electronics NYSE: MEI executives outlined an ongoing operational turnaround, portfolio alignment steps, and fiscal 2026 financial guidance during a conference presentation hosted by Oppenheimer. President and CEO Jon DeGaynor and CFO Laura Kowalchik discussed actions taken over the past 22 months to stabilize manufacturing performance, restructure the organization, and focus investment on areas tied to what management called core engineering and manufacturing competencies.
Management describes a multi-phase transformation
DeGaynor said Methode, which will mark its 80th anniversary in July, has been working through a transformation aimed at “earn[ing] the right” with customers, shareholders, and employees “to write the next chapter” of the company’s history. He described initial efforts as focused on “fixing our launches” in North America and EMEA and revamping plants in Egypt and Mexico, alongside building out the executive team.
According to DeGaynor, the company has replaced “seven of the 10 leaders” on his staff and changed “over 50% of the top 100” employees as it moved away from a regional structure to a more globally organized approach for operations, supply chain, and engineering. He said subsequent phases have emphasized working capital improvements—addressing accounts receivable, accounts payable, and inventory management—and globalizing engineering and product management activities.
Looking forward, DeGaynor said the company is shifting “from fix it to grow it,” including efforts to leverage capabilities in power products tied to data centers and vehicle electrification, consolidate the company’s footprint, and review its portfolio. He added that Methode has relocated its corporate headquarters to Southfield, Michigan, resetting finance and HR teams in the process.
Portfolio actions include sale of dataMate and facility exit
DeGaynor said Methode completed the sale of its dataMate business during the quarter and also sold its Harwood Heights facility. In response to an analyst question, he described dataMate as “a good business” but “relatively small,” with “less than $20 million in revenue and right around $3 million in EBITDA.” He said management did not view the return on leadership and capital effort required to grow the business as attractive relative to other opportunities, and the sale enabled the company to exit the Harwood Heights site.
DeGaynor said the company’s portfolio review is centered on where Methode can apply common engineering and manufacturing capabilities globally and where it can create long-term shareholder value. In areas where the company lacks global leverage or key engineering competencies, he said the company “may not be the best owner” and “we’ll take action.”
Data center power growth focus centers on busbars and customer partnerships
DeGaynor highlighted power solutions as an example of the company’s cross-market strategy, referencing applications spanning data centers, vehicle electrification, and military and aerospace. He said the company sees an opportunity to drive a “25% CAGR” across those areas by leveraging power distribution experience.
In Q&A, he said Methode is “primarily providing today busbars into AI-driven data centers,” with hyperscalers as the end customers, even when sales flow through contract manufacturers. He said the company is working to deepen relationships and improve its position, including a commitment to vendor-managed inventory in fiscal 2026 to support growth and build trust.
He also described work with customers to bring higher-voltage concepts into data center applications, referencing “800 volt EV architecture,” while emphasizing that advanced technology initiatives and prototypes are not included in the company’s guidance for fiscal 2026 or what it has discussed regarding fiscal 2027.
On capital needs, DeGaynor said investment requirements to support data center and other power opportunities are “fairly limited,” with incremental capital potentially needed after prototyping higher-voltage products, but not “a significant level of capital investment.”
Fiscal Q3 results: lower sales, wider adjusted loss, positive cash generation
Kowalchik reported third-quarter net sales of approximately $234 million, compared with $240 million in the prior-year period. She attributed the year-over-year decline to lower automotive volumes tied to reduced North American EV volumes and lower Interface segment sales due to a previously announced appliance program roll-off. Those factors were partially offset by higher Industrial segment volumes—“particularly for off-road lighting and power products”—and positive foreign currency translation.
On a year-to-date basis through the third quarter, net sales were $721 million versus $791 million a year earlier, Kowalchik said.
- Gross profit: $39 million in Q3, down from $41 million; $130 million year-to-date versus about $144 million last year.
- Selling and administrative expense: up $1.4 million to $39 million in Q3; down $12 million year-to-date versus the prior year.
- Adjusted EBITDA: $7 million in Q3 versus $5 million a year earlier; $41 million year-to-date versus $49 million last year.
- Adjusted net loss: $13 million in Q3 versus a $0.21 per-share adjusted loss a year earlier; adjusted loss per diluted share was $0.37 in Q3. Year-to-date adjusted net loss was approximately $28 million versus $13 million last year, with a year-to-date adjusted loss per diluted share of $0.78.
Regarding cash and leverage, Kowalchik said Methode ended the quarter with about $134 million in cash, up $30 million from the end of fiscal 2025. Operating cash generation in the third quarter was $15.4 million, and free cash flow was $10 million, compared with about $20 million in the prior-year quarter. Year-to-date free cash flow was $16.5 million, she said, and net debt was down roughly $17 million compared with the same period last year.
Guidance and key operating themes: FX benefit, Mexico progress, and EV exposure
Kowalchik reiterated fiscal 2026 guidance of net sales between $950 million and $1 billion and adjusted EBITDA of $58 million to $62 million. She noted fiscal 2025 was a 53-week year while fiscal 2026 is a 52-week year, and said the guidance does not reflect the sale of the dataMate business or the Harwood Heights facility closure. She added that foreign exchange is expected to provide an approximately $30 million benefit to net sales.
Management also said it expects positive free cash flow for fiscal 2026, compared with an outflow of $15 million in the prior fiscal year.
In the Q&A, DeGaynor addressed Mexico operations, saying the facility is “about six months behind Egypt” in turnaround progress and that senior leaders are spending significant time there. He said revenue headwinds—stemming from roll-offs and EV program delays or cancellations—have complicated Mexico’s improvement trajectory compared with Egypt, which had revenue tailwinds. He also said the fiscal 2026 EBITDA outlook already includes “significant improvement.”
On EV exposure, DeGaynor said Automotive represents about 45% of company sales and EVs are about 20% of Automotive, with North American EV exposure “very, very small at this point.” He said Methode has submitted cancellation claims with two major OEMs tied to the biggest program cancellations, but that none of those claims are included in guidance or financials. As the company quotes new business, DeGaynor said it will take “a very special program” to quote new EV business in North America, with the focus “primarily hybrids and ICE,” which he characterized as a “permanent shift” for the region, while continuing to quote EV-related business in EMEA and Asia Pacific.
About Methode Electronics NYSE: MEI
Methode Electronics, Inc is a Chicago-based global manufacturer of custom-engineered electronic and electromechanical components and assemblies. Founded in 1946, Methode specializes in providing solutions that integrate electrical connectors, sensors, switches, human-machine interface devices and power distribution modules. The company's product portfolio addresses complex application requirements across a broad range of end markets, including automotive, industrial, energy, healthcare and data/telecommunications.
In its automotive segment, Methode develops advanced connector systems, circuit protection devices and thermal management solutions for internal combustion, hybrid and electric vehicles.
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