Methode's Q1 2026 Earnings Call: Contradictions Emerge on EV Growth, Appliance Roll-Offs, Automotive Performance, and Stellantis Impact

The above is the analysis of the conflicting points in this earnings call

Date of Call: None provided

Financials Results

• Revenue: $240.5M, down 7% YOY and down 6% sequentially
• EPS: $-0.22 adjusted diluted EPS, improved by $0.09 YOY and by $0.55 sequentially

Guidance:

• FY26 net sales expected at $900M–$1.0B (52-week year; FY25 had 53 weeks).
• FY26 adjusted EBITDA expected at $70–$80M; second half higher than first half.
• EBITDA margin targeted ~7.9% vs 4.1% prior.
• FY26 free cash flow expected positive (vs -$15M in FY25).
• Assumptions: D&A $58–$63M; CapEx $24–$29M; interest $21–$23M; tax expense $17–$21M (incl. $10–$15M valuation allowance).
• Guidance assumes current market outlook, customer projections, and current U.S. tariff policy.

Business Commentary:

* Transformational Progress and Financial Performance: - Methode Electronics reported a $9 million increase in operating income and adjusted EBITDA of $16 million, up $6 million year over year. - This was a result of the company's strategic focus on reducing SG&A expenses and operational improvements.

• Data Center Sales Growth:
• Sales in the data center segment grew by 12% year over year.

• The growth is attributed to increased power density requirements in data centers, leveraging Methode's power expertise.

• EV Sales and Market Outlook:

• EV sales accounted for 19% of consolidated total sales for the quarter, with a slight decrease from the previous year.

• The decline is due to soft demand in North America, primarily caused by delays in new program launches, particularly with Stellantis.

• Automotive Segment Challenges and Strategic Focus:

• The automotive segment experienced a net negative impact from legacy program transitions, particularly in North America.
• Methode is focusing on supporting stability in EMEA, Asia, and Mexico, with expectations for EV volumes to stabilize and grow in fiscal 2027.

Sentiment Analysis:

• “We are confidently affirming our guidance… expects to double its EBITDA for the full year… even with a $100 million decline in sales driven by lower EV demand.” Sales were $240.5M (down 7% YOY), and adjusted diluted loss per share was $0.22. “Third quarter in a row of strong free cash flow” and net debt reduced by $41M over three quarters. Data center sales up 12% YOY, but automotive in North America remains challenged.

Q&A:

• Question from Luke Junk (Baird): How will the automotive segment contribute to EBITDA doubling, and what’s the longer-term outlook?
  Response: Auto strength in EMEA and stable Asia offset North America headwinds from program roll-offs and EV delays (Stellantis). Expect EV volumes to recover in FY27 and data center additions in Mexico to aid leverage and margins.

• Question from Luke Junk (Baird): Strategy for Asia post legacy roll-off and its role in EV opportunity?
  Response: Asia leads EV power product development and serves as launch/validation hub; despite roll-offs, operations/engineering are strong and support global growth credibility.

• Question from Luke Junk (Baird): Status of interface business and appliance program roll-off impacts?
  Response: Impacts match prior bridge; roll-offs in user interface/Whirlpool are visible, with offsets from new program ramps and data center activity.

• Question from John Franzreb (Sidoti): Any change in tariff expectations?
  Response: No change; about $1M timing impact in the quarter. Costs largely passed to customers. USMCA-compliant footprint is generating new RFQs.

• Question from John Franzreb (Sidoti): Progress on restructuring actions and what to expect in FY26?
  Response: HQ/facility consolidation on track for mid-year completion; ~500 headcount reductions executed; ongoing structural cost actions continue, though not material near term.

• Question from John Franzreb (Sidoti): Outlook for Class 8 truck and construction end markets?
  Response: Near-term softness persists; rebound expected in 2026. Improved execution is driving more RFQs and emerging power opportunities, with revenue impact later.

• Question from Gary Prestopino (Barrington Research): Has the FY26 sales bridge changed from Q4?
  Response: No; use the prior bridge (e.g., Stellantis ~$40M decline, ~$48M from other launches) for modeling.

• Question from Gary Prestopino (Barrington Research): Are data center bus bars mainly new construction, and can this become a larger business?
  Response: Primarily new construction using current tech (in guidance). Share gains from responsiveness/global footprint plus higher-voltage solutions offer incremental upside not in guidance.

• Question from Gary Prestopino (Barrington Research): EV regional mix and where growth will come this year?
  Response: FY25 EV revenue ~$220M: 55% EMEA, 16% Asia, 30% North America. FY26 EV growth will be mainly outside the U.S. given Stellantis reductions.