Q4 2025 Methode Electronics Inc Earnings Call

July 10, 2025

So the formal presentation, but anyone should require operator assistance during the conference. Please press star zero on your telephone keypad. Please note. This conference is being recorded.

Speaker Change: I will now turn the conference over to your host Robert Cherry Vice President of Investor Relations you may begin.

Robert Cherry: Thank you operator, good morning, and welcome to medical Electronics fiscal 2025 fourth quarter earnings Conference call for this call. We have prepared a presentation entitled fiscal 2025 fourth quarter financial results.

Robert Cherry: Which can be viewed on the webcast of this call or found at Metro Dot com on the investors page.

Robert Cherry: This conference call contains certain forward looking statements.

Robert Cherry: Which reflect management's expectations regarding future events and operating performance and speak only as of the date hereof.

Robert Cherry: These forward looking statements are subject to the safe Harbor protection provided under the securities laws.

Robert Cherry: Methadone undertakes no duty to update any forward looking statement to conform the statement to actual results or changes in met those expectations on a quarterly basis or otherwise.

Robert Cherry: The forward looking statements in this conference call involve a number of risks and uncertainties.

Robert Cherry: The factors that could cause actual results to differ materially from our expectations are detailed in met those filings with the Securities and Exchange Commission, just as our 10-K and 10-Q reports.

Robert Cherry: On slide four please see an agenda for our call today.

We will begin with a business update then a financial update followed by a Q&A session.

John Gaynor: At this time I'd like to turn the call over to Mr. John Gaynor, President and Chief Executive Officer.

Speaker Change: Thanks, Rob and good morning, everyone.

Speaker Change: For joining us for our fourth quarter earnings Conference call. I'm also joined today by Laura <unk>, Our Chief Financial Officer.

Speaker Change: Let's start with the key messages, please turn to slide five.

Speaker Change: In my first 12 months, we have achieved a great deal even if there is still much more to do.

Speaker Change: We built a strong team and stabilize the organization.

Speaker Change: The way in which the leadership team and I have been talking about our activities and priorities over this first year is all about earning the right with our shareholders our customers and ultimately with more than 7000 people that work for my phone.

Speaker Change: What you will hear on this call and read in the next few slides is the progress that we've made to earn that right.

Speaker Change: The transformation that we're talking about to earn the right to write to future story, we must first get the foundation correct.

Speaker Change: In the fiscal year, we took numerous actions to improve our execution reduce our costs and respond to external challenges like tariffs the market volatility. Unfortunately, the benefits from these actions were largely masked by a number of items that were onetime or historic in nature, such as the fourth quarter inventory write off.

Speaker Change: Regarding market volatility <unk> activity in the fourth quarter slowed in fiscal 'twenty six will be a reset due to program delays, especially vice planters, we do expect fiscal 'twenty seven will be a return to growth.

Speaker Change: Overall, we truly feel that we have put many of the issues of the past year behind us while still maintaining a strict focus on business performance for.

Speaker Change: For instance, we delivered $26 million in free cash flow in the quarter. That's the best quarter that the company has had since Q4 of fiscal 'twenty three.

For the full year, our focus on cash drove a $12 million improvement in tooling recovery and a $22 million reduction in accounts receivable.

Speaker Change: We also set records for the quarter and the full year in data center power product sales with a year, finishing at over $80 million going forward. We expect this level of activity will continue and there will be opportunities for growth.

Speaker Change: The transformation that I spoke about is absolutely progressing and his priorities remain unchanged. However, given the market conditions, we're looking at a somewhat extended timeline for that transformation.

Speaker Change: As we look to fiscal 2026, despite all of the challenges that I have cited the company expects to double its EBITDA as a result of our operational improvements we expect.

Speaker Change: To achieve this even in the face of approximately $100 million and declining sales driven by lower EV demand again, mainly driven by scientists.

Speaker Change: Turning to slide six and our specific results for the quarter, our sales were $257 million, an increase from Q3, but down year over year.

Speaker Change: 17 million.

Speaker Change: And sales increase was from Q3 was driven by record sales for power products in data center applications.

Speaker Change: The lower sales from the prior year were driven by the impact of two large previously disclosed auto program roll offs.

Speaker Change: We have now anniversaried the rollout of the EDI lighting program, but we still have two more quarters of year over year comparison headwinds on the GM Center console program roll off.

Speaker Change: We recorded an adjusted loss from operations of $22 million.

Speaker Change: Net loss 15 million was attributable to unplanned inventory adjustments. These.

Speaker Change: These adjustments were for an increase in excess and obsolete inventory reserves and for discrete inventory revaluation in the quarter.

Speaker Change: The primary driver of these adjustments were reduced delayed or canceled programs that did not have sufficient future demand to support the inventory levels.

Speaker Change: The impact was mostly in North America and included some EV programs.

Speaker Change: Historical warranty and quality issues for existing auto programs contributed approximately $5 million to the loss as well. These historic charges reinforce the actions that we've taken to improve our operations supply chain and product launch capabilities.

Speaker Change: Turning to a true bright spot as I mentioned, we had record sales for power products in data centers for both the quarter and the full year.

Speaker Change: The full year sales exceeded $80 million and we expect a similar year in fiscal 'twenty six with potential for more growth.

Speaker Change: The full year sales were almost double those of fiscal 2024.

Speaker Change: We are achieving this performance based on our existing product technology, utilizing our global footprint to serve the customers.

Speaker Change: What's truly exciting is the opportunity that we have to leverage our power expertise to capture growth that is being driven by the rapid evolution of component designs to enable the vast increases in power density sought by future data center operators.

Speaker Change: It is too early to share any more details on this but it is very promising for the future growth in our power distribution enterprise.

Speaker Change: Turning to EEV activity sales grew year over year for both the quarter and the full year. They were 20% of our consolidated total an increase from 14% and 19% respectively.

Operator: A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone line. Please note, this conference is being recorded.

The change in product launch capabilities.

Speaker Change: While these year over year comparisons improved our EV sales on a sequential basis from Q3 decreased approximately 10%.

Speaker Change: Turning to a true bright spot as I mentioned, we had record sales for power products in Datacenters for both the quarter and the full year.

Robert Cherry: I will now turn the conference over to your host, Robert Cherry, Vice President of Investor Relations. You may begin. Thank you, operator.

Speaker Change: We remain bullish on the long term megatrends in Evs, However, as I mentioned earlier, the near term outlook is soft, particularly in North America.

Speaker Change: For full year sales exceeded $80 million and we expect a similar year in fiscal 2006 with potential for more growth.

John DeGaynor: Good morning, and welcome to Methode Electronics fiscal 2025 fourth quarter earnings conference. For this call, we have prepared a presentation entitled Fiscal 2025 Fourth Quarter Financial Results, which can be viewed on the webcast of this call or found at Methode.com on the Investor This conference call contains certain forward-looking statements. which reflect management's expectations regarding future events and operating and speak only as of the date hereof.

Speaker Change: Weaker market demand is driving lower customer Adi forecast some program launch delays in a couple of program cancellations. This is causing us to projected 10% to 15% decline in EV sales for fiscal 'twenty six a much different picture than just one quarter ago. However, based on our customer Adi forecast.

Speaker Change: The full year sales were almost double those of fiscal 2024.

Speaker Change: We are achieving this performance based on our existing product technology, utilizing our global footprint to serve the customers.

Speaker Change: And third party industry projections, we expect a significant rebound in EV sales in fiscal 'twenty seven.

Speaker Change: It is too early to share any more details on this but it is very promising for the future growth in our power distribution enterprise.

Speaker Change: Our team has been and will continue to be extremely proactive on any exogenous program delays or changes and actions are underway to recover costs and capital investments related to these program delays the outcome and timing of these recoveries is yet to be determined.

John DeGaynor: These forward-looking statements are subject to the safe harbor protection provided under the securities Methode undertakes no duty to update any forward-looking statement to conform the statement to actual results or changes in Methode's expectations on a quarterly basis or otherwise. The four looking statements in this conference call involve a number of risks and uncertainties. The factors that could cause actual results to differ materially from our expectations are detailed in Methode's filings with the Securities and Exchange Commission. such as our 10-K and 10-Q reports.

Speaker Change: Turning to EEV activity sales grew year over year for both the quarter and the full year. They were 20% of our consolidated total an increase from 14 and 19% respectively.

Speaker Change: Both free cash flow and debt reduction are good stories for us.

Speaker Change: While these year over year comparisons improved our EV sales on a sequential basis from Q3 decreased approximately 10%.

Speaker Change: Despite all the external factors the business deliver free cash flow of $26 million in the quarter, which was the second quarter in a row of strong free cash flow.

Speaker Change: We remain bullish on the long term megatrend in Evs, However, as I mentioned earlier, the near term outlook is soft, particularly in North America.

Speaker Change: Our relentless drive to reduce working capital is driving this result.

Speaker Change: In turn we reduced both our debt and net debt levels by $10 million from Q3.

John DeGaynor: On slide four, please see an agenda for our call. We will begin with a business update, then a financial update, followed by a Q&A.

Speaker Change: We also generated more free cash flow than the prior year Q4, despite $20 million less in sales.

John DeGaynor: At this time, I'd like to turn the call over to Mr. John DeGaynor, President and Chief Executive Officer. Thanks, Rob. And good morning, everyone. Thank you for joining us for our 4th Quarter Earnings Conference Call. I'm also joined today by Laura Kowalchik, our Chief Financial Officer.

Speaker Change: This is another clear indicator of an organization, whose operating efficiency is improving.

Speaker Change: Lastly, our primary focus continues to be on improving operational execution and successfully launching the large pipeline of new programs.

Speaker Change: And third party industry projections, we expect a significant rebound in EV sales in fiscal 'twenty seven.

John DeGaynor: Let's start with the key messages. Please turn to slide five. In my first 12 months, we've achieved a great deal, even if there's still much more to do. We built a strong team and stabilized the organization. The way in which the leadership team and I have been talking about our activities and priorities over this first year is all about earning the right with our shareholders, our customers, and ultimately with more than 7,000 people that work for Methode. What you'll hear on this call and read in the next few slides is the progress that we have made to earn that right.

Speaker Change: As we've communicated before we are in the midst of a record two year New program launch window in fiscal 'twenty five we launched 22, new programs, we expect to launch another 30, new programs in fiscal 'twenty six our customers continue to count on us and we plan on continuing to deliver.

Speaker Change: Speaking of new programs for fiscal 'twenty, five we had bookings of over $170 million for new and extended programs about two thirds of the awards were for power distribution solutions, and EV industrial and data center applications.

Speaker Change: Both free cash flow and debt reduction and a good story for us.

Speaker Change: Despite all of the external factors the business deliver free cash flow of $26 million in the quarter, which was the second quarter in a row of strong free cash flow.

Speaker Change: Our relentless drive to reduce working capital is driving this result.

Speaker Change: The motto team has put a lot of hard work and are rebuilding our foundation in fiscal 'twenty, five, which we expect that work to lead to notable performance in financial improvements in fiscal 'twenty six.

John DeGaynor: That's the transformation that we're talking about. To earn the right to write the future story, we must first get the foundation correct. In the fiscal year, we took numerous actions to improve our execution, reduce our costs, and respond to external challenges like tariffs and market volatility. Unfortunately, the benefits from these actions were largely masked by a number of items that were one-time or historic in nature, such as the fourth quarter inventory write-off. Regarding market volatility, EV activity in the fourth quarter slowed, and fiscal 26 will be a reset due to EV program delays, especially by Stellantis.

Speaker Change: In turn we reduced both our debt and net debt levels by $10 million from Q3.

Speaker Change: We also generated more free cash flow than the prior year Q4, despite $20 million less in sales.

Speaker Change: Turning to slide seven.

Speaker Change: As I mentioned earlier, our marketing my one year anniversary as CEO of method.

Speaker Change: This is another clear indicator of an organization, whose operating efficiency is improving.

Speaker Change: Truly proud of what we've accomplished as a team and I want to share some of the reflections on the past year and the road ahead.

Speaker Change: Lastly, our primary focus continues to be on improving operational execution and successfully launching the large pipeline of new programs.

Speaker Change: Transformations are never easy.

Speaker Change: <unk>.

Speaker Change: Shouldn't between transformations in turnarounds quite simply our transformation is about fixing our business in a way that enables it to evolve and positioned for future growth. The turnaround is basically just fixing the business back to some status quo the.

Speaker Change: As we've communicated before we are in the midst of a record two year New program launch window in fiscal 'twenty five we launched 22 new programs.

John DeGaynor: We do expect fiscal 27 will be a return to growth. Overall, we truly feel that we have put many of the issues of the past year behind us while still maintaining a strict focus on business performance. For instance, we delivered $26 million in free cash flow in a quarter. That's the best quarter that the company has had since Q4 of fiscal 23. For the full year, our focus on cash drove a $12 million improvement in tolling recovery and a $22 million reduction in accounts receivable. We also set records for the quarter and the full year in data center power product sales, with the year finishing at over $80 million.

Speaker Change: We expect to launch another 30, new programs in fiscal 'twenty six our customers.

Speaker Change: The meso journey is undoubtedly the transformation.

Speaker Change: <unk> continue to count on Us and we plan on continuing to deliver.

Speaker Change: Like any journey the path is not smooth nor linear.

Speaker Change: The first order of business was stabilizing the base, which included the significant organizational changes that we made in previous quarters and focusing on executing program launches, while selling multi muesli revamping plants and rebuilding the team.

Speaker Change: The motto team has put a lot of hard work and are rebuilding our foundation in fiscal 'twenty, five, which we expect that work to lead to notable performance of financial improvements in fiscal 'twenty six.

Speaker Change: All in the face of numerous external distractions.

Speaker Change: This is plans are always linear on paper, but the real world curves and bends every day.

Speaker Change: Turning to slide seven.

Speaker Change: Past year was no different whether it was tariffs market shifts geopolitics or other factors, we had to maintain discipline and our focus on our objectives, while conditions were constantly changing.

John DeGaynor: Going forward, we expect this level of activity will continue, and there will be opportunities for growth. The transformation that I spoke about is absolutely progressing, and its priorities remain unchanged. However, given the market conditions, we are looking at a somewhat extended timeline for that transformation. As we look to fiscal 2026, despite all of the challenges that I have cited, the company expects to double its EBITDA as a result of our operational improvement. We expect to achieve this even in the face of approximately $100 million in declining sales driven by lower EV demand, again mainly driven by Stellantis.

Speaker Change: As I mentioned earlier, our marketing my one year anniversary as CEO of method two.

Speaker Change: Truly proud of what we've accomplished as a team and I want to share some of the reflections on the past year and the road ahead.

Speaker Change: Transformations are never easy.

We worked hard to remediate practices that had atrophied or institute practices, where they didn't exist.

Speaker Change: <unk>.

Speaker Change: Can between transformations and turnarounds quite simply our transformation is about fixing a business in a way that enables it to evolve and position for future growth. The turnaround is basically just fixing the business back to some status quo the.

Speaker Change: We now have better visibility into the business and are driving more global collaboration and efficiency, especially around engineering product management and supply chain.

Speaker Change: The method journey is undoubtedly the transformation.

Speaker Change: The work is showing in many areas, but as exemplified in our improved working capital, especially around AR and inventory.

Speaker Change: Like any journey the path is not smooth nor linear.

John DeGaynor: Turn to slide six, and our specific results for the quarter. Our sales were $257 million, an increase from Q3, but down year over year. $17 million in sales increases from Q3 was driven by record sales for power products and data center applications. The lower sales from the prior year were driven by the impact of two large, previously disclosed, auto program roll-offs. We have now anniversaried the roll-off of the ED Lighting Program, but we still have two more quarters of year-over-year comparison headwinds on the GM Center Council Program roll-off.

Speaker Change: The first order of business was stabilizing the base, which included the significant organizational changes that we made in previous quarters and net.

Speaker Change: As we rebuild our foundation and positions us well to leverage synergies and utilized core competencies to align with market Mega trends like data centers and EV. We can also then optimize our footprint and reevaluate the composition of our portfolio.

Speaker Change: Focusing on executing program launches, while selling multi muesli revamping plants and rebuilding the team.

Speaker Change: All in the face of numerous external distractions.

Speaker Change: While the financial results are not what we want.

Speaker Change: This is plans are always linear on paper, but the real world curves and bends everyday.

Speaker Change: Our team has accomplished much over the past year and our foundation has been light laid for us to drive consistent and improved execution.

Speaker Change: The past year was no different whether it was tariffs market shifts geopolitics or other factors, we had to maintain discipline and our focus on our objectives, while conditions were constantly changing.

Speaker Change: On slide eight I'll spend a little more time, giving you an update on our transformation.

John DeGaynor: we recorded an adjusted loss from operations of $22 million. Of that loss, $15 million was attributable to unplanned inventory adjustments. These adjustments were for an increase in excess and obsolete inventory reserves and for a discrete inventory revaluation in the quarter. The primary driver of these adjustments were reduced, delayed, or canceled programs that did not have sufficient future demand to support the inventory level. The impact was mostly North America and included some EV programs. Historical warranty and quality issues for existing auto programs contributed approximately $5 million to the loss as well.

Speaker Change: At a high level this slide maps out where we're at and where we're going.

Speaker Change: We worked hard to remediate practices that had atrophied or institute practices, where they didn't exist.

Speaker Change: First and foremost we put in the work to improve our fundamentals and recent performance.

Speaker Change: We now have better visibility into the business and are driving more global collaboration and efficiency, especially around engineering product management and supply chain.

Speaker Change: It can be seen in a 100 basis points with a gross margin improvement 9 million worth of SG&A reductions and $12 million worth of tooling recoveries, all fiscal 'twenty five year over year improvements.

Speaker Change: The work is showing in many areas, but as exemplified in our improved working capital, especially around AR and inventory.

Speaker Change: And then there's been a whole series of execution focus improvements like $11 million reduction in freight reduction in scrap and a reduction in head count of over 500 people.

Speaker Change: As we rebuild our foundation and positions us well to leverage synergies and utilized core competencies to align with market Mega trends like data centers and EV.

Speaker Change: All of this complements the execution of customer pricing actions supplier cost reductions.

Speaker Change: <unk> materials sourcing actions.

Speaker Change: We can also then optimize our footprint and reevaluate the composition of our portfolio.

John DeGaynor: These historic charges reinforce the actions that we have taken to improve our operations, supply chain, and product launch capabilities.

Speaker Change: None of these activities could have been done without the reset of nearly all of the executive leadership team the reset and talent lower in the organization as well as bringing in some specific outside help.

Speaker Change: While the financial results are not what we want.

Speaker Change: Our team has accomplished much over the past year and our foundation has been light laid for us to drive consistent and improved execution.

John DeGaynor: Turning to a true bright spot, as I mentioned, we had record sales for power products and data centers for both the quarter and the full year. The full-year sales exceeded $80 million, and we expect a similar year in Fiscal 26, with potential for more growth. The full-year sales were almost double those of Fiscal 2024. We are achieving this performance based on our existing product technology, utilizing our global footprint to serve the customer. What's truly exciting is the opportunity that we have to leverage our power expertise to capture growth that is being driven by the rapid evolution of component designs to enable the vast increases in power density sought by future data center operators.

Speaker Change: However in order for the organization to be a stable long term execution and growth focused organization. It has to have internal capabilities, especially in plant operations engineering and the supply chain.

Speaker Change: On slide eight I want to spend a little more time, giving you an update on our transformation.

Speaker Change: At a high level this slide maps out where we're at and where we're going.

Speaker Change: Talent and solid fundamentals are yielding improved rigor and discipline in the way in which we procure material operate our plants and our launches and in the way in which we develop new products for our from an engineering standpoint.

Speaker Change: First and foremost we put in the work to improve our fundamentals and recent performance.

Speaker Change: It can be seen in 100 basis points with the gross margin improvement 9 million worth of SG&A reductions and $12 million worth of tooling recoveries, all fiscal 'twenty five year over year improvements than.

Speaker Change: What that leads to is a change in culture for a company that's almost 80 years old.

Speaker Change: Theres been a lot of change that method over the decades, while we're trying to bring back as more of a one method approach.

Speaker Change: And then there's been a whole series of execution focus improvements like $11 million reduction in.

Speaker Change: Working much more collaboratively and much more globally, leveraging our best practices to drive new Mercy and cost consciousness down throughout the organization and to really drive a sense of urgency.

John DeGaynor: It is too early to share any more details on this, but it's very promising for the future growth in our power distribution enterprise.

Speaker Change: Reduction in scrap and a reduction in head count of over 500 people.

Speaker Change: All of this complements the execution of customer pricing actions supplier cost reductions and material sourcing actions.

John DeGaynor: Turning to EV activity, sales grew year over year. For both the quarter and the full year, they were 20% of our consolidated total, an increase from 14% and 19% respectively. While these year-over-year comparisons improved, our EV sales on a sequential basis from Q3 decreased approximately 10%. We remain bullish on the long-term mega trend in EVs. However, as I mentioned earlier, the near-term outlook is soft, particularly in North America. Weaker market demand is driving lower customer EDI forecasts, some program launch delays, and a couple program cancellations.

Speaker Change: Turning to slide nine so how do we continue to earn the right from here first we continue our foundational actions to successfully launch programs drive improved operational execution and accelerate lower level team rebuilding.

Speaker Change: None of these activities could have been done without the reset of nearly all of the executive leadership team the reset and talent lowering the organization as well as bringing in some specific outside help however in order for the organization to be a stable long term execution and growth focused organization. It has to have internal capabilities, especially.

Speaker Change: All of which will be enabled by our new global engineering and product management teams.

Speaker Change: We keep refining the organization to harmonize it to market opportunities that includes the right sizing of plants on head count, but also includes footprint consolidations.

Speaker Change: And plant operations engineering, and the supply chain.

Speaker Change: And finally, we take actions to address our structure and capital discipline like reducing our board size from 10 to seven directors.

John DeGaynor: This is causing us to project a 10% to 15% decline in EV sales for fiscal 26, a much different picture than just one quarter ago. However, based on our customer EDI forecasts and third-party industry projections, we expect a significant rebound in EV sales in fiscal 27. Our team has been, and will continue to be, extremely proactive on any exogenous program delays or changes, and actions are underway to recover costs and capital investments related to these program delays.

Speaker Change: Relocating our headquarters to an already owned methane facility.

Speaker Change: But that leads to is a change in culture for a company that's almost 80 years old.

Speaker Change: Reducing our dividend and reviewing our product portfolio. All of these actions support <unk> core business and data centers, EV and lighting, which provided an attractive foundation for value creation in fiscal 'twenty and beyond.

Speaker Change: There's been a lot of change that method over the decades, while we are trying to bring back as more of a one method approach working much more collaboratively and much more globally, leveraging our best practices to drive numerous fee and cost consciousness down throughout the organization and to really drive a sense of urgency.

While the transformation is certainly about improving execution and reducing cost. It is also about driving innovation.

Speaker Change: What drives competitive advantage at the end of the day is the ability for an organization to redeploy the knowledge resources and capital gains from its everyday business and the new products and markets.

John DeGaynor: The outcome and timing of these recoveries is yet to be determined.

John DeGaynor: Both free cash flow and debt reduction are good stories. Despite all the external factors, the business delivered free cash flow of $26 million in the quarter, which was the second quarter in a row of strong free cash flow. Our relentless drive to reduce working capital is driving this result. In turn, we reduced both our debt and net debt levels by $10 million from Q3. We also generated more free cash flow than the prior year Q4, despite $20 million less in sales. This is another clear indicator of an organization whose operating efficiency is improving.

Speaker Change: Methodius systematically taking this proactive approach.

Speaker Change: All of which will be enabled by our new global engineering and product management teams.

Speaker Change: Whether it is digging deeper into the power needs of our data center customers or optimizing our footprint and portfolio for what it's what the customers and the business will need in the future. We are working hard to refine our business model.

Speaker Change: We keep refining the organization to harmonize it to market opportunities that includes the right sizing of plants in head count, but also includes footprint consolidations.

Speaker Change: We will continue to highlight the milestones on this transformation journey, but it does take the passage of time will be fully appreciated in value.

Speaker Change: And finally, we take actions to address our structure and capital discipline like reducing our board size from 10 to seven directors.

Speaker Change: Everything that I've shared with you today gives us confidence to not only provide guidance for fiscal 'twenty six.

Speaker Change: Relocating our headquarters to an already owned method facility.

Speaker Change: Reducing our dividend and reviewing our product portfolio.

John DeGaynor: Lastly, our primary focus continues to be on improving operational execution and successfully launching the large pipeline of new programs. As we've communicated before, we are in the midst of a record two-year new program launch window. In fiscal 25, we launched 22 new programs. We expect to launch another 30 new programs in fiscal 26. Our customers continue to count on us and we plan on continuing to deliver. Speaking of new programs, for Fiscal 25, we had bookings of over $170 million for new and extended programs. About two-thirds of these awards were for power distribution solutions in EV, industrial, and data center applications.

Speaker Change: But to project a doubling of our EBITDA from fiscal 'twenty five.

Speaker Change: All of these actions support <unk> core business and data centers, EV and lighting, which provide an attractive foundation for value creation in fiscal 'twenty six and beyond.

Speaker Change: Laura will share more details on our guidance later in summary.

Speaker Change: We believe that our 2025 actions have positioned method for success in 2026 and beyond at this point I'll turn the call over to Laura who will provide more detail on our fourth quarter and full year financial results.

Speaker Change: While the transformation is certainly about improving execution and reducing cost. It is also about driving innovation.

Speaker Change: John and good morning, everyone. Please turn to slide 11.

Speaker Change: Before I address the financially.

Speaker Change: And relative to U S. Tariffs. Please note that I will be referring to only the tariffs enacted this calendar year and prior to any specific tariffs announcements from this week.

Speaker Change: Methodius systematically taking this proactive approach.

John DeGaynor: The Methode team has put a lot of hard work into rebuilding our foundation in Fiscal 25, which we expect that work to lead to notable performance and financial improvements in Fiscal 26.

Speaker Change: First of all we have had a cross functional team meeting daily on tariffs from day. One this has not only helped us to navigate this situation, but it has also helped to foster team collaboration and drive deeper understanding of how we run our business.

Speaker Change: We will continue to highlight the milestones on this transformation journey, but it does take the passage of time will be fully appreciated in value.

John DeGaynor: Turning to slide seven. As I mentioned earlier, I'm marking my one-year anniversary as CEO of Methode. I'm truly proud of what we have accomplished as a team, and I want to share some of the reflections on the past year and the road ahead.

Speaker Change: Everything that I've shared with you today gives us confidence to not only provide guidance for fiscal 'twenty.

Speaker Change: From an exposure standpoint, our U S sales of imported goods are approximately $265 million, which is our sales that are potentially exposed to U S tariffs.

Speaker Change: Got to projected doubling of our EBITDA from fiscal 'twenty five.

John DeGaynor: Transformations are never easy. I make a distinction between transformations and turnarounds. Quite simply, a transformation is about fixing a business in a way that enables it to evolve and positions it for future growth. A turnaround is basically just fixing the business back to some status quo. The method journey is undoubtedly a transformation.

Speaker Change: Laura will share more details on our guidance later in summary.

Speaker Change: This is approximately 25% of our annual global sales.

Speaker Change: Firmly believe that our 2025 actions have positioned method for success in 2026 and beyond.

Speaker Change: The large majority of those sales come from goods imported from Mexico. Those goods are subject to the U S MCA and over 95% of those are compliant as a result, we are not subject to incremental tariffs on those compliant goods.

Speaker Change: At this point I'll turn the call over to Laura who will provide more detail on our fourth quarter and full year financial results.

Laura: Thank you John and good morning, everyone. Please turn to slide 11.

John DeGaynor: Like any journey, the path is not smooth nor linear. The first order of business was stabilizing the base, which included the significant organizational changes that we made in previous quarters, and that focusing on executing program launches while simultaneously revamping plants and rebuilding the team, all in the face of numerous external distractions. Business plans are always linear on paper, but the real world curves and bends every day. The past year was no different. Whether it was tariffs, market shifts, geopolitics, or other factors, we had to maintain discipline and our focus on our objectives while conditions were constantly changing.

Speaker Change: For everything else, we are targeting 100% mitigation either by passing tariffs through to the customer leveraging our global footprint to reduce the tariffs to the greatest extent possible are making changes to our supply chain to be clear, we've communicated to all of our customers that we expect 100% tariff recovery our mitigation.

Laura: Before I address the financially.

Laura: And relative to U S. Tariffs. Please note that I will be referring to only the tariffs enacted this calendar year and prior to any specific tariffs announcements from this week.

Laura: First of all we have had a cross functional team meeting daily on tariffs from day. One this has not only helped us to navigate this situation, but it has also helped to foster team collaboration and drive deeper understanding of how we run our business.

Speaker Change: And to be even more clear that's 100% tariff recovery our mitigation expectation also applies to any new tariffs.

Speaker Change: The work that the team has done from day, one with foundation all to dealing with potential future circumstances as well. This is a great example of the one method collaboration that John mentioned.

Laura: From an exposure standpoint, our U S sales of imported goods for approximately $265 million, which is our sales that are potentially exposed to U S tariffs.

Speaker Change: Lastly, we are utilizing our global footprint to capture opportunities as a result of our geographic position relative to competitors.

John DeGaynor: We worked hard to remediate practices that had atrophied or institute practices where they didn't exist. We now have better visibility into the business and are driving more global collaboration and efficiency, especially around engineering, product management, and supply chain. The work is showing in many areas, but is exemplified in our improved working capital, especially around AR and inventory. As we rebuild our foundation, it positions us well to leverage synergies and utilize core competencies to align with market megatrends like data centers and EV. We can also then optimize our footprint and re-evaluate the composition of our portfolio.

Laura: This is approximately 25% of our annual global sales.

Laura: The large majority of those sales come from goods imported from Mexico.

Speaker Change: Please turn to slide 12.

Speaker Change: The fourth quarter net sales were $257 1 million compared to $277 3 million in the fiscal 'twenty four a decrease of 7% on.

Laura: Our subject to the U S MCA and over 95% of those are compliant.

Laura: The results, we are not subject to incremental tariffs on those two client goods.

Speaker Change: On a sequential basis sales increased 7% from the fiscal 'twenty five third quarter.

Laura: For everything else, we are targeting 100% mitigation either by passing tariffs through to the customer leveraging our global footprint to reduce the tariffs to the greatest extent possible are making change our supply chain to be clear, we have communicated to all of our customers that we expect 100% tariff recovery our mitigation.

Speaker Change: The quarter saw record sales of power products into data center applications.

Speaker Change: This was the second quarter, where the full impact of the GM Center console rollout was felt but it was also the last quarter to have any impact from a major EV lighting program roll off.

John DeGaynor: while those financial results are not yet what we want.

Laura: And to be even more clear that's 100% tariff recovery our mitigation expectation also applies to any new tariffs.

Speaker Change: We also experienced sales weaknesses and commercial vehicle and off road lighting applications.

John DeGaynor: Our team has accomplished much over the past year and our foundation has been laid for us to drive consistent and improved execution.

Speaker Change: Fourth quarter adjusted loss from operations was $21 6 million a decrease of $11 8 million from fiscal 'twenty four.

Laura: The work that the team has done from day, one with foundational to dealing with potential future circumstances as well. This is a great example of the one method collaboration that John mentioned.

John DeGaynor: On slide 8, I want to spend a little more time giving you an update on our transformation. At a high level, this slide maps out where we are at and where we are going. First and foremost, we've put in the work to improve our fundamentals and reset performance. It can be seen in 100 basis points worth of gross margin improvement, 9 million worth of SG&A reductions, and 12 million worth of tool-in recoveries. All fiscal 25 year-over-year improvements. Then there's been a whole series of execution-focused improvements like an $11 million reduction in freight, a reduction in scrap, and a reduction in headcount of over 500 people.

Speaker Change: A sequential basis adjusted loss from operations declined $20 3 million from the fiscal 'twenty five third quarter.

Laura: Lastly, we are utilizing our global footprint to capture opportunities as a result of our geographic position relative to competitors.

Speaker Change: Please see the appendix for all reconcile reconciliation of our adjusted measures to GAAP.

Laura: Please turn to slide 12.

Speaker Change: In the fourth quarter, the company recorded an excess and obsolete inventory expense of $13 million, mainly in the automotive segment and a discrete inventory reevaluation of $2 2 million.

Laura: The fourth quarter net sales were $257 1 million compared to $277 3 million in fiscal 'twenty four a decrease of 7%.

Speaker Change: As John described the excess in obsolete expenses were related to reduced delayed or canceled programs that impacted future demand projections.

Laura: On a sequential basis sales increased 7% from the fiscal 'twenty five third quarter.

Laura: The quarter saw record sales of power products in the data center applications.

John DeGaynor: All of this complements the execution of customer pricing actions, supplier cost reductions, and this material sourcing act. None of these activities could have been done without the reset of nearly all of the executive leadership team, the reset and talent lower in the organization, as well as bringing in some specific outside help. However, in order for the organization to be a stable, long-term, execution and growth-focused organization, it has to have internal capabilities, especially in plant operations, engineering, and the supply chain. Talent and solid fundamentals are yielding improved rigor and discipline in the way in which we procure material, operate our plants, in our launches, and in the way in which we develop new products from an engineering standpoint.

Speaker Change: The effect of excluding these two impacts totaling $15 2 million in the quarter can be seen on the chart.

Laura: This was the second quarter, where the full impact of the GM Center console rollout was felt but it was also the last quarter to have any impact from a major EV lighting program roll off.

Speaker Change: The lower sales had a $6 $2 million impact on a year over year comparison.

Laura: We also experienced sales weaknesses and commercial vehicle and off road lighting applications.

Speaker Change: Partial offset with a $4 2 million year over year improvement in SMA.

Speaker Change: Overall, the inventory adjustments had a significant impact on the quarter and mass operational improvement.

Laura: Fourth quarter adjusted loss from operations was $21 6 million a decrease of $11 8 million from fiscal 'twenty four.

Speaker Change: Please turn to slide 13.

Speaker Change: Shifting to EBITDA, a non-GAAP financial measure our fourth quarter adjusted EBITDA was a negative $7 1 million down $12 4 million from the same period last year.

Laura: On a sequential basis adjusted loss from operations declined $23 million from the fiscal 'twenty third quarter. Please.

Laura: Please see the appendix for all reconcile reconciliation of our adjusted measures to GAAP.

Speaker Change: On a sequential basis adjusted EBITDA declined $19 4 million from the fiscal 'twenty five third quarter.

Laura: In the fourth quarter, the company recorded an excess and obsolete inventory expense of $13 million, mainly in the automotive segment and a discrete inventory reevaluation of $2 2 million as.

John DeGaynor: What that leads to is a change in culture for a company that's almost 80 years old. There's been a lot of change at Methode over the decades. What we're trying to bring back is more of a one-method approach, working much more collaboratively and much more globally, leveraging our best practices to drive numeracy and cause consciousness down throughout the organization and to really drive a sense of urgency.

Speaker Change: <unk> loss from operations, the inventory adjustments and lower sales drove the year over year decline.

Speaker Change: They were only partially offset by a reduction in SMA and other operational improvements.

Laura: As John described the excess in obsolete expenses were related to reduced delayed or canceled programs that impacted future demand projections.

Please turn to slide 14.

Speaker Change: Fourth quarter adjusted pre tax loss was $28 6 million a decrease of $14 8 million from fiscal 'twenty four.

Laura: The effect of excluding these two impacts totaling $15 2 million in the quarter can be seen on the chart.

John DeGaynor: Turning slide nine. So how do we continue to earn the right from here? First, we continue our foundational actions to successfully launch programs, drive improved operational execution, and accelerate lower-level team rebuilding. all of which will be enabled by our new global engineering and product management team.

Speaker Change: On a sequential basis adjusted pre tax loss declined $21 3 million from the fiscal 'twenty five third quarter again.

Laura: The lower sales had a $6 2 million impact on the year over year comparison, a partial offset with a $4 2 million year over year improvement in SMA.

Speaker Change: The inventory adjustments and lower sales drove the decline year over year, excluding the inventory adjustment impact operational execution improvements minimize the year over year impact despite sales being $20 million lower.

Laura: Overall, the inventory adjustments had a significant impact on the quarter and mass operational improvement.

John DeGaynor: Second, we keep refining the organization to harmonize it to market opportunities. That includes the right sizing of plants and headcount. It also includes footprint consolidation.

Laura: Please turn to slide 13.

Laura: Shifting to EBITDA, a non-GAAP financial measure our fourth quarter adjusted EBITDA was a negative $7 1 million down $12 4 million from the same period last year.

Speaker Change: Historical warranty and quality issues in Europe for existing auto programs contributed $4 5 million to the loss as well.

John DeGaynor: And finally, we take actions to address our structure and capital discipline, like reducing our board size from 10 to 7 directors. relocating our headquarters to an already owned Methode facility. reducing our dividend and reviewing our product portfolio. All of these actions support Methode's core business in data centers, EV, and lighting, which provide an attractive foundation for value creation in fiscal 26 and beyond. Well, the transformation is certainly about improving execution and reducing cost. It is also about driving innovation. What drives competitive advantage, at the end of the day, is the ability for an organization to redeploy the knowledge, resources, and capital it gains from its everyday business into new products and markets.

Speaker Change: Fourth quarter adjusted diluted loss per share was <unk> 77 down 54 from the prior year and down 56 from the fiscal third quarter of 25.

Laura: On a sequential basis adjusted EBITDA declined $19 4 million from the fiscal 'twenty five third quarter.

Laura: As such a loss from operations, the inventory adjustments and lower sales drove the year over year decline.

Speaker Change: Overall, while operational improvement helped minimize the impact our fourth quarter loss was primarily driven by the inventory adjustments.

Laura: They were only partially offset by a reduction in SMA and other operational improvements.

Laura: Please turn to slide 14.

Speaker Change: Turning to slide 13.

Laura: Fourth quarter adjusted pre tax loss was $28 6 million a decrease of $14 8 million from fiscal 'twenty four.

Speaker Change: The fourth quarter as net cash from operating activities was $35 4 million as compared to $24 9 million in fiscal 'twenty four.

Laura: On a sequential basis adjusted pre tax loss declined $21 3 million from the fiscal 'twenty five third quarter.

Speaker Change: Fourth quarter capital expenditure was $9 1 million unchanged from fiscal 'twenty four.

Again, the inventory adjustments and lower sales drove the decline year over year, excluding the inventory adjustment impact operational execution improvements minimize the year over year impact despite sales being $20 million lower.

Speaker Change: Fourth quarter free cash flow, a non-GAAP financial measure was $26 3 million as compared to $15 8 million in fiscal 'twenty four an increase of $10 5 million. This increase was mainly due to the lower working capital.

John DeGaynor: Methode is systematically taking this proactive approach. Whether it is digging deeper into the power needs of our data center customers or optimizing our footprint and portfolio for what the customers and business will need in the future, we are working hard to refine our business model. We will continue to highlight the milestones on this transformation journey, but it does take the passage of time to be fully appreciated and valued.

Speaker Change: This was our second quarter in a row of strong free cash flow.

Laura: Historical warranty and quality issues in Europe for existing auto programs contributed $4 5 million to the loss as well.

Speaker Change: Please turn to slide 16.

Speaker Change: That was down $10 3 million from the third quarter, we ended the quarter with $103 6 million in cash down slightly from the third quarter of fiscal 'twenty five.

Laura: Fourth quarter adjusted diluted loss per share was <unk> 77.

John DeGaynor: Everything that I've shared with you today gives us confidence to not only provide guidance for Fiscal 26, but to project a doubling of our EBITDA from fiscal 25.

Laura: <unk> 54 from the prior year and down 56 from the fiscal third quarter of 25.

Speaker Change: The strong cash generation on the quarter allowed us to pay down debt.

Speaker Change: Net debt and non-GAAP financial measure decreased by $10 1 million from the third quarter to $214 million.

Laura: Overall, while operational improvements helped minimize the impact our fourth quarter loss was primarily driven by the inventory adjustments.

John DeGaynor: Laura will share more details in our guidance later. In summary, I firmly believe that our 2025 actions have positioned Methode for success in 2026 and beyond.

Speaker Change: After the end of the fourth quarter, we entered into an amendment to our credit agreement.

Laura: Please turn to slide 13.

Laura: The fourth quarter as net cash from operating activities was $35 4 million as compared to $24 9 million in fiscal 'twenty four.

Laura Kowalchik: At this point, I'll turn the call over to Laura, who will provide more detail on our fourth quarter and full year financial results. Thank you, John, and good morning, everyone. Please turn to slide 11. Before I address the financial results of- relative to U.S. tariffs. Please note that I will be referring to only the tariffs enacted this calendar year and prior to any specific tariff announcements from this week. First of all, we have had a cross-functional team meeting daily on Terrace from day one. This has not only helped us to navigate the situation, but has also helped to foster team collaboration and drive deeper understanding of how we run our business.

Speaker Change: <unk> reduced the capacity of the facility to $400 million, which is still in excess of our needs.

Speaker Change: <unk> covenant ratios and updated pricing and other details.

Laura: Fourth quarter capital expenditure was $9 1 million unchanged from fiscal 'twenty four.

Speaker Change: Amendment waived any defaults that may have occurred due to noncompliance with covenants for the fourth quarter that werent effect prior to the amendment.

Laura: Fourth quarter free cash flow are non-GAAP financial measure was $26 3 million as compared to $15 8 million in fiscal 'twenty four an increase of $10 5 million. This increase was mainly due to the lower working capital.

Speaker Change: Following the amendment, we were in compliance with all covenants for further information. Please see our 10-K filing.

Speaker Change: Please turn to slide 17.

Laura: This was our second quarter in a row of strong free cash flow.

Speaker Change: The full year of fiscal 'twenty, five net sales were $1 $48 million compared to $1 $115 million in fiscal 'twenty four a decrease of 6%.

Laura: Please turn to slide 16.

Laura: That was down $10 3 million from the third quarter, we ended the quarter with $103 6 million in cash down slightly from the third quarter of fiscal 'twenty five.

Speaker Change: Net sales decline was primarily driven by the GM center console and EV lighting program roll offs that I previously mentioned.

Laura Kowalchik: From an exposure standpoint, our U.S. sales of imported goods are approximately $265 million, which is our sales that are potentially exposed to U.S. tariffs. This is approximately 25% of our annual global sales. The large majority of those sales come from goods imported from Mexico. Those goods are subject to the USMCA, and over 95% of those goods are compliant. As a result, we are not subject to incremental tariffs on those compliant goods. For everything else, we are targeting 100% mitigation, either by passing tariffs through to the customer, leveraging our global footprint to reduce the tariffs to the greatest extent possible, or making changes to our supply chain.

Laura: The strong cash generation in the quarter allowed us to pay down debt.

Speaker Change: Together they are year over year impact was 111 million.

Laura: Net debt and non-GAAP financial measure decreased by $10 1 million from the third quarter to $214 million.

Speaker Change: Partially offsetting those declines was a record year for sales of over $80 million of power products for data centers.

Laura: After the end of the fourth quarter, we entered into an amendment to our credit agreement.

Speaker Change: Adding back the year over year inventory adjustment of $12 2 million operational improvements minimize the impact of the $67 million decline in sales as seen on the chart.

Laura: <unk> reduced the capacity of the facility to $400 million, which is still in excess of our needs.

Speaker Change: Please turn to slide 18.

Laura: <unk> covenant ratios and updated pricing and other details.

Speaker Change: Next I want to provide an update on our sales bridge from fiscal 'twenty four to 26.

Laura: Amendment waived any defaults that may have occurred due to noncompliance with covenants for the fourth quarter that Werent FX prior to the amendment.

Speaker Change: As previously mentioned the GMT one integrated center console program has gone end of life the.

Laura: Following the amendment, we were in compliance with all covenants for further information. Please see our 10-K filing.

Speaker Change: The result, with a significant sales headwind in fiscal 'twenty, five and a slightly lesser one in fiscal 'twenty.

Laura Kowalchik: To be clear, we've communicated to all of our customers that we expect 100% tariff recovery or mitigation. And to be even more clear, this 100% tariff recovery or mitigation expectation also applies to any new tariff. The work that the team has done from day one was foundational to dealing with potential future circumstances as well. This is a great example of the one method collaboration that John mentioned.

Speaker Change: The other major our legacy program roll off we previously communicated was for E Bay lighting.

Laura: Please turn to slide 17.

Laura: The full year of fiscal 'twenty, five net sales were $1 $48 million compared to $1 billion $115 million in fiscal 'twenty four a decrease of 6%.

Speaker Change: That program went end of life at the end of fiscal 'twenty, four and was down only a headwind for us in fiscal 'twenty five.

Speaker Change: Major update on this bridge concerns to the launching of several EV programs for <unk> and.

Laura: Net sales decline was primarily driven by the GM center console and EV lighting program roll offs that I previously mentioned.

Speaker Change: In fiscal 'twenty, five those launches generated $46 million of incremental sales you.

Laura: Together they are year over year impact was $111 million.

Laura Kowalchik: Lastly, we are utilizing our global footprint to capture opportunities as a result of our geographic position relative to competitors.

Speaker Change: You may recall that back in Q1, we project. This to allows us to generate a total of $84 million in fiscal 'twenty five and then another incremental $125 million in fiscal 'twenty.

Laura: Partially offsetting those declines was a record year for sales of over $80 million of power products for data centers.

Laura: Adding back the year over year inventory adjustment of $12 2 million operational improvements minimize the impact of the $67 million decline in sales as seen on the chart.

Laura Kowalchik: Please turn to slide 12. The fourth quarter net sales were $257.1 million, compared to $277.3 million in the fiscal 24, a decrease of 7%. On a sequential basis, sales increased 7% from the fiscal 25 third quarter.

Speaker Change: However, due to severe reductions and delays from still on test. We now expect fiscal 'twenty to see a decrease of $40 million essentially a $200 million swing from our Q1 projections.

Laura: Please turn to slide 18.

Laura: Next I want to provide an update on our sales bridge from fiscal 'twenty four 'twenty.

Speaker Change: We are also seeing EBIT program reductions for fiscal 'twenty from two other major Oems.

Laura: As previously mentioned the GMT one integrated center console program has gone end of life.

Laura Kowalchik: The quarter saw record sales of power products in the data center applications. This was the second quarter where the full impact of the GM center console roll-off was felt, but it was also the last quarter to have any impact from a major EV lighting program roll-off. We also experienced sales weaknesses in commercial vehicle and off-road lighting applications. Fourth quarter adjusted loss from operations was $21.6 million, a decrease of $11.8 million from Fiscal 24. On a sequential basis, adjusted loss from operations declined $20.3 million from the Fiscal 25 third quarter.

John Gaynor: As John mentioned, our team has been proactive on these customer program changes and actions are underway to recover costs and capital investments related to them the magnitude and timing of these recoveries has yet to be determined but it is our intention to maximize our recovery.

Laura: The result, with a significant sales headwind in fiscal 'twenty, five and a slightly lesser one in fiscal 'twenty.

Laura: The other major legacy program roll off we previously communicated was for E Bay lighting.

Laura: That program went end of life at the end of fiscal 'twenty, four and was down only a headwind for us in fiscal 'twenty five.

John Gaynor: While we do expect growth from our fiscal 'twenty six launches with other key customers as well as potential growth from data centers. They are not enough to overcome the drop in demand from still lantus and other EV customers, giving the soft market outlook.

Laura: The major update on this bridge concerns the launching of several EV programs for <unk>.

Laura: In fiscal 'twenty, five those launches generated $46 million of incremental sales you.

John Gaynor: Consequently, we now expect sales for our fiscal 'twenty to be approximately $100 million lower than fiscal 'twenty five rather than the organic growth. We previously expected.

Laura: You may recall that back in Q1, we projected still want us to generate a total of $84 million in fiscal 'twenty five and then another incremental $125 million in fiscal 'twenty.

Laura Kowalchik: please see the appendix for all reconciliation of all adjusted measures to GAP. In the fourth quarter, the company recorded an excess and obsolete inventory expense of $13 million, mainly in the automotive segment, and a discrete inventory revaluation of $2.2 million. As John described, the excess and obsolete expenses were related to reduced, delayed, or canceled programs that impacted future demand projections. The effect of excluding these two impacts, totaling $15.2 million in the quarter, can be seen on the chart. The lower sales had a $6.2 million impact on the year-over-year comparison. A partial offset was a $4.2 million year-over-year improvement in S&A.

John Gaynor: The product that this revised outlook is that we expect fiscal <unk> to see an improved diversity of OEM customers given the forecasted Max.

Laura: However, due to severe reductions and delays from still on test. We now expect fiscal 'twenty to see a decrease of $40 million essentially a 200 million swing from our Q1 projection.

John Gaynor: Please turn to slide 19.

John Gaynor: Regarding forward looking guidance is based on management's best estimates and are subject to change due to a variety of factors as noted on the bottom of the slide.

Laura: We are also seeing EBIT program reductions for fiscal 'twenty from two other major Oems.

Laura: As John mentioned, our team has been proactive on these customer program changes and actions are underway to recover costs and capital investments related to them the magnitude and timing of these recoveries has yet to be determined but it is our intention to maximize our recovery.

John Gaynor: For fiscal 'twenty, we expect sales to be in the range of $900 million to 1 billion. Please note that fiscal 'twenty five was a 53 week fiscal year in fiscal 'twenty will be a typical 52 week fiscal year. So we will have one less week in fiscal 'twenty as compared to the prior year.

Laura: While we do expect growth from our fiscal 'twenty six launches with other key customers as well as potential growth from data centers. They are not enough to overcome the drop in demand from Atlanta, and other EV customers given the soft market outlook.

Laura Kowalchik: Overall, the inventory adjustments had a significant impact on the quarter and masked operational improvements.

John Gaynor: We expect EBITDA to be in the range of $70 million to $80 million and we expect the second half of the year to be higher than the first half as.

Laura Kowalchik: Please turn to slide 13. Shifting to EBITDA, a non-GAAP financial measure, fourth quarter adjusted EBITDA was a negative $7.1 million, down $12.4 million from the same period last year.

John Gaynor: As you can see from the charts on the right of the slide.

John Gaynor: We expect fiscal 2006, EBITDA to be higher than fiscal 'twenty, four and 25%. Despite a significant reduction in sales over that same time period, specifically in fiscal 'twenty.

Laura: Consequently, we now expect sales for our fiscal <unk> to be approximately $100 million lower than fiscal 'twenty five rather than the organic growth. We previously expected.

Laura Kowalchik: On a sequential basis, adjusted EBITDA declined $19.4 million from the fiscal 25 third quarter. As with loss from operations, the inventory adjustments and lower sales drove the year-over-year decline. They were only partially offset by a reduction in S&A and other operational improvements.

Laura: The product that this revised outlook is that we expect fiscal 2000 <unk> to see an improved diversity of OEM customers given the forecasted Max.

John Gaynor: The downward conversion from the lower sales will be offset by operational improvements and we will actually see almost a doubling of EBITDA margin from four 1% to seven 9%.

Laura: Please turn to slide 19.

Laura: Regarding forward looking guidance that is based on management's best estimates and are subject to change due to a variety of factors as noted on the bottom of the slide.

John Gaynor: The fourth quarter guidance assumes the current market outlook based on third party forecast and customer projections.

Laura Kowalchik: Please turn to slide 14. Fourth quarter adjusted pre-tax loss was $28.6 million, a decrease of $14.8 million from Fiscal 24. On a sequential basis, adjusted pre-tax loss declined $21.3 million from the Fiscal 25 third quarter. Again, the inventory adjustments and lower sales drove the decline year-over-year. Excluding the inventory adjustment impacts, operational execution improvements minimized the year-over-year impact despite sales being $20 million lower. Historical warranty and quality issues in Europe for existing auto programs contributed $4.5 million to the loss as well. Fourth quarter adjusted diluted loss per share was $0.77, down $0.54 from the prior year, and down $0.56 from the fiscal third quarter of 2015.

John Gaynor: Current U S tariff policy.

Laura: For fiscal 'twenty.

Laura: We expect sales to be in the range of $900 to 1 billion. Please note that fiscal 'twenty five was a 53 week fiscal year in fiscal 'twenty will be a typical 52 week fiscal year. So we will have one less week in fiscal 'twenty as compared to the prior year.

John Gaynor: Depreciation and amortization of $58 million to $63 million capex of $24 million to $29 million.

John Gaynor: Interest expense of 21% to $23 million in.

John Gaynor: And a tax expense of $17 million to $21 million, most of which is related to a valuation allowance on deferred tax assets and is noncash.

Laura: We expect EBITDA to be in the range of $70 million to $80 million and we expect the second half of the year to be higher than the first half as.

John Gaynor: It is worth noting that our interest expense is expected to be essentially flat year over year. Despite the amended credit facility agreement.

Laura: As you can see from the charts on the right up the slide.

Laura: We expect fiscal 2006 EBITDA to be higher sample fiscal 'twenty, four and 'twenty five despite a significant reduction in sales over that same time period, specifically in fiscal 'twenty. The downward conversion from the lower sales will be offset by operational improvements and we will actually see almost a doubling of EBITDA Maher.

John Gaynor: This is mainly a factor of lower year over year benchmark European interest rates.

John Gaynor: One last note on fiscal 'twenty five back in fiscal 'twenty four we identified three material weaknesses in our internal controls. We are pleased to inform you that all three of these material weaknesses were remediated in fiscal 'twenty five for more details. Please see our 10-K filing.

Laura Kowalchik: Overall, while operational improvements helped minimize the impact, our fourth quarter loss was primarily driven by the inventory adjustment.

Laura: <unk> from four 1% to seven 9%.

Laura: The fourth quarter guidance assumes the current market outlook based on third party forecast and customer projections. The current U S tariff policy.

John Gaynor: So to Echo John we have driven improved operational execution. This past year that was often masked by various external or historical challenges. The result is a solid foundation for the motto team to build on into the future.

Laura Kowalchik: Please turn to slide 15. The fourth quarter's net cash from operating activities was $35.4 million, as compared to $24.9 million in fiscal 24. Fourth quarter capital expenditure was $9.1 million, unchanged from fiscal 24.

Laura: Depreciation and amortization of 58 to 63 million capex of $24 million to $29 million.

John Gaynor: That concludes my comments and we can now open it up to questions.

Laura: Interest expense of $21 million to $23 million.

Speaker Change: Thank you at this time, we will be conducting a question and answer session. If you would like to ask a question. Please press star one on your telephone keypad, a confirmation tone will indicate your line is in the question queue. You May Press Star two if you would like to remove your question from the queue for participants using speaker equipment. It may be necessary to pick up your handset before.

Laura: And a tax expense of $17 million to $21 million, most of which is related to a valuation allowance on deferred tax assets and is noncash.

Laura Kowalchik: Fourth quarter free cash flow, a non-GAAP financial measure, was $26.3 million as compared to $15.8 million in fiscal 24, an increase of $10.5 million. This increase was mainly due to the lower working capital. This was our second quarter in a row of strong free cash flow.

Laura: It is worth noting that our interest expense is expected to be essentially flat year over year. Despite the amended credit facility agreement.

Laura: This is mainly a factor of lower year over year benchmark European interest rates.

Speaker Change: Pressing the star Keys, one moment, please while we poll for questions. Once again. Please press star one if you have a question or comments.

Laura Kowalchik: Please turn to slide 16. Debt was down $10.3 million from the third quarter. We ended the quarter with $103.6 million in cash, down slightly from the third quarter of fiscal 25. The strong cash generation in the quarter allowed us to pay down debt. Net debt, a non-GAAP financial measure, decreased by $10.1 million from the third quarter to $214 million.

Laura: One last note on fiscal 'twenty five.

Laura: In fiscal 'twenty four we identified three material weaknesses in our internal controls. We are pleased to inform you that all three of these material weaknesses were remediated in fiscal 'twenty five for more details. Please see our 10-K filings.

Luke Junk: Our first question comes from Luke junk with Baird.

Speaker Change: Please proceed.

Luke Junk: Good morning, Thanks for taking my questions.

Speaker Change: John hoping to start with.

John: So to Echo John we have driven improved operational execution. This past year that was often masked by various external or historical challenges. The result is a solid foundation for the motto team to build on into the future.

Speaker Change: Certainly the key message. This morning that you expect sales to come down $100 million EBITDA to go in the opposite direction.

Laura Kowalchik: After the end of the fourth quarter, we entered into an amendment to our credit agreement. The amendment reduced the capacity of the facility to $400 million, which is still in excess of our needs. It revised covenant ratios and updated pricing and other details. The amendment waived any defaults that may have occurred due to non-compliance with covenants for the fourth quarter that were in effect prior to the amendment. Following the amendment, we were in compliance with all covenants.

Speaker Change: Rise into fiscal 'twenty six I'm, just trying to understand some of the key earnings levers at a high level given that sales decline I would assume most of the improvement we should be thinking about operationally would be within automotive and I guess, if I look at what's going on in that business exiting this year pretty weak jumping off point.

John: That concludes my comments and we can now open it up to questions.

Speaker Change: Coming out of four key fiscal 'twenty, five even if I back out the inventory charges and warranty quality.

Laura Kowalchik: For further information, please see our 10-K filing.

Laura Kowalchik: Please turn to slide 17. The full year fiscal 25 net sales were $1,048,000,000 compared to $1,115,000,000 in fiscal 24, a decrease of 6 percent. The net sales decline was primarily driven by the GS Center console and EV lighting program roll-offs that I previously mentioned. Together, their year-over-year impact was $111,000,000.

Speaker Change: No youre still launching more programs. So how should we just think about balancing cost saves versus some incremental costs coming in the P&L phone launches. Thank you.

Speaker Change: Pressing the star Keys, one moment, please while we poll for questions. Once again. Please press star one if you have a question or comment.

Speaker Change: Thanks, Luke and good morning, Thanks for your question.

Speaker Change: I think we talked about some of the base performance improvements.

Luke Junk: Our first question comes from Luke junk with Baird.

Speaker Change: During my section.

Speaker Change: Laurent will give you a little more detail on the bridge on the top level.

Speaker Change: Please proceed.

Luke: Good morning, Thanks for taking my questions.

Laura Kowalchik: Partially offsetting those declines was a record year for sales of over $80 million of power products for data centers. Adding back the year-over-year inventory adjustment of $12.2 million, operational improvements minimize the impact of the $67 million decline in sales as seen on the chart.

Speaker Change: We've done we've done a lot to improve how we launch and so I think the incremental costs. If you will for these new launches.

Speaker Change: John hoping to start with.

Speaker Change: Certainly the the key message. This morning that you expect sales to come down $100 million EBITDA to go in the opposite direction.

Speaker Change: Of that less concern about the.

Speaker Change: The challenge that we have is.

Speaker Change: Rise into fiscal 'twenty six I'm, just trying to understand some of the key earnings levers at a high level given that sales decline I would assume most of the improvement we should be thinking about operationally would be within automotive and then I guess, if I look at what's going on in that business exiting this year pretty weak jumping off point.

Speaker Change: Our reaction our ability to react.

Laura Kowalchik: Please turn to slide 18. Next, I want to provide an update on our sales bridge from fiscal 24 to 26. As previously mentioned, the GMT-1 Integrated Center Console Program has gone end-of-life. The result was a significant sales headwind in Fiscal 25 and a slightly lesser one in Fiscal 26. The other major legacy program roll-off we previously communicated was for EV lighting. That program went end-of-life at the end of fiscal 24 and was thus only a headwind for us in fiscal 25.

Speaker Change: In such short order to a fairly significant drop.

Speaker Change: Demand on the EV side mix makes the revenue hole, a little more stock, but if you think about the one off expenses that would give you confidence in.

Speaker Change: Coming out of four key fiscal 'twenty five even if I back out the inventory.

Speaker Change: And why 2026 would be so much better and we've talked about the warranty reserve and while we talked about $15 million in the quarter full year is 22 million, we had $12 million worth of quality and warranty issues in fiscal 2025, we had $9 million with large partners and $5 million.

Speaker Change: Tori charges and warranty quality expand.

Speaker Change: Youre still launching more programs. So how should we just think about balancing cost saves versus some incremental costs coming in the P&L for launches. Thank you.

Speaker Change: Thanks, Luke and good morning, Thanks for your question.

Laura Kowalchik: The major update on this bridge concerns the launching of several EV programs for Scalampus. In Fiscal 25, those launches generated $46 million of incremental sales. You may recall that back in Q1, we projected Stellantis to generate a total of $84 million in Fiscal 25, and then another incremental $125 million in Fiscal 26. However, due to severe reductions and delays from Stellantis, we now expect Fiscal 26 to see a decrease of $40 million, essentially a $200 million swing from our Q1 projection.

Speaker Change: <unk> expenses in the other $3 million worth of restructuring all of those things.

Speaker Change: I think we talked about some of the base performance improvements.

Speaker Change: Our either eliminated or improve.

Speaker Change: During my section Laurent will give you a little more detail on the bridge on the top level.

Speaker Change: Improved year over year.

Speaker Change: As a basis for our guidance. So there is.

Speaker Change: We've done a lot to improve how we launch and so I think the incremental costs. If you will for these new launches.

Speaker Change: There are one off things that are eliminated and there is expectations of performance based on what we see in our plants and what we see in our supply chain and what we see in our launch execution that gives us the basis for why we believe we can we can on lower sales double our EBITDA.

Speaker Change: Of that less concern about the challenge that we have is.

Speaker Change: Our reaction our ability to react.

Speaker Change: In such short order to a fairly significant drop.

Laura Kowalchik: We have also seen EV program reductions for Fiscal 26 from two other major OEMs. As John mentioned, our team has been proactive on these customer program changes and actions are underway to recover costs and capital investments related to them. The magnitude and timing of these recoveries is yet to be determined, but it is our intention to maximize our recovery. While we do expect growth from our fiscal 26 launches with other key customers, as well as potential growth from data centers, they are not enough to overcome the drop in demand from Stellantis and other EV customers, giving the soft market outlook.

Speaker Change: Thanks for that John all helpful commentary, especially all those individual expense items.

Speaker Change: On the EV side mix makes the revenue hole, a little more stock, but if you think about the one off expenses that would give you confidence in why 2026 should be so much better and we've talked about the warranty reserve and while we talked about $15 million in the quarter full year is 22 million, we had $12 million or quality and warranty issues.

Speaker Change: Second question just in terms of the launch activity into fiscal 'twenty 630 and launches.

Speaker Change: How should we think about those in terms of the percentage that are EV platform, specifically and then on the EV side of the house.

Speaker Change: In fiscal 2025, we had $9 billion with knowledge partners and $5 million of legal expenses in the $3 billion worth of restructuring.

Speaker Change: How how can we conceive the materiality of those launches and maybe given the stellar in this experience this year and I know you mentioned other EV program delays and whatnot, just how you attenuate it for that.

Speaker Change: All of those things.

Speaker Change: Are either eliminated or <unk>.

Speaker Change: Improved year over year.

Laura Kowalchik: Consequently, we now expect sales for our Fiscal 26 to be approximately $100 million lower than Fiscal 25, rather than the organic growth we previously expected.

Speaker Change: As a basis for our guidance. So there is.

Speaker Change: Potential risks either timing or volume as you put together the guidance.

Speaker Change: There are one off things that are eliminated and there is expectations of performance based on what we see in our plants and what we see in our supply chain and what we see in our launch execution and give us the basis for why we believe we can we can on lower sales double our EBITDA.

Speaker Change: Well so.

Speaker Change: As we've said each time, we have used third party third party as a basis for how we give our guidance. So we tried to tie back.

Laura Kowalchik: A byproduct of this revised outlook is that we expect Fiscal 26 to see an improved diversity of OEM customers, given the forecasted mix.

Speaker Change: Incentive check.

Laura Kowalchik: Please turn to slide 19. Regarding forward-looking guidance, it is based on management's best estimates and is subject to change due to a variety of factors, as noted on the bottom of the slide. For Fiscal 26, we expect sales to be in the range of $900 million to $1 billion.

Speaker Change: Our customers told us with third party evaluations and Thats whats in the guidance.

Speaker Change: <unk>.

Speaker Change: As we said EV EV.

Speaker Change: Okay.

Speaker Change: Thanks for that John all helpful commentary, especially all those individual expense items.

Speaker Change: As a percent of sales was 20% this year and will actually.

Speaker Change: The challenge that we have is.

Speaker Change: Second question just in terms of the launch activity into fiscal 'twenty 630 launches how.

Speaker Change: In past.

Speaker Change: Orders, we've talked about it being an expansion year over year now we're talking about it being relatively flat based on some of the.

Laura Kowalchik: Please note that Fiscal 25 was a 53-week fiscal year, and Fiscal 26 will be a typical 52-week fiscal year, so we will have one less week in Fiscal 26 as compared to the prior year. We expect EBITDA to be in the range of $70 to $80 million and we expect the second half of the year to be higher than the first half. As you can see from the charts on the right of this slide, we expect Fiscal 26 EBITDA to be higher than both Fiscal 24 and 25, despite a significant reduction in sales over that same time period.

Speaker Change: How should we think about those in terms of the percentage that are EV platform, specifically and then on the EV side of the house.

Speaker Change: Some of the program delays or cancellations, what we have however, as we have other areas, where we're driving growth and we have the ability to use our footprint.

Speaker Change: How how can we can see the materiality of those launches and maybe given the stellar in this experience this year and I know you mentioned other EV program delays and whatnot, just how you attenuate it for that.

Speaker Change: Some of the tariff challenges have highlighted.

Speaker Change: Actually the power of our global footprint to deliver on power products in and we're taking advantage of that and we will continue to take advantage of that on the datacenter side from a power side. So some of the investment that was made for EV programs, particularly in our North American footprint, we're actually going to put to work.

Speaker Change: Potential risks either timing or volume as you put together the guidance.

Speaker Change: Well so.

Laura Kowalchik: Specifically, in Fiscal 26, the downward conversion from the lower sales will be offset by operational improvements and we'll actually see almost a doubling of EBITDA margin from 4.1% to 7.9%. The fourth quarter guidance assumes the current market outlook based on third-party forecasts and customer projections, the current U.S. tariff policy, depreciation and amortization of $58 to $63 million, CapEx of $24 to $29 million, interest expense of $21 to $23 million, and a tax expense of $17 to $21 million, most of which is related to a valuation allowance on deferred tax assets and is non-cash. It is worth noting that our interest expense is expected to be essentially flat year-over-year despite the amended credit facility agreement.

Speaker Change: As we've said each time, we have used third party third party as a basis for how we gave our guidance. So we tried to tie back and central check what our customers told us with third party evaluations and that's within the guidance.

Speaker Change:

Speaker Change: The capabilities there, we're going to put to work to support our data center customers. So.

Speaker Change: The attenuation that we've done is there's been a series of head count reductions and cost reductions that have been taken against the EV programs, where there had been delays or where there have been.

Speaker Change: <unk>.

Speaker Change: As we said.

Speaker Change: EV as.

Speaker Change: As a percent of sales was 20% this year and we will actually.

Speaker Change: Cancellations were going back to customers as we talked about that's the second piece of the attenuation in the third side as finding other ways to utilize our engineering capability and our and our fixed assets to support other pieces other markets that we've touched on that's particularly on the datacenter side.

Speaker Change: The challenge that we have is.

Speaker Change: In past.

Speaker Change: Quarters, we've talked about it being an expansion year over year now we're talking about it being relatively flat based on some of the.

Speaker Change: Some of the program delays or cancellations, what we have however, as we have other areas, where we're driving growth and we have the ability to use our footprint.

Speaker Change: Just to be clear I totally get what you're saying in terms of checking customers J Jill.

Speaker Change: Some of the tariff challenges have highlighted.

Speaker Change: With third party data in terms of EV launches should we think that you are then hair cutting that further as well or are you mainly.

Speaker Change: Actually the power of our global footprint to deliver on power products.

Laura Kowalchik: This is mainly a factor of lower year-over-year benchmark European interest rates.

Speaker Change: And we're taking advantage of that and we'll continue to take advantage of that on the datacenter side from a power side. So some of the investment that was made for EV programs, particularly in our North American footprint. We're also going to put to work.

Speaker Change: Relying on.

Speaker Change: No.

Speaker Change: When we say since checking it we're trying to take multiple.

Laura Kowalchik: One last note on Fiscal 25. Back in Fiscal 24, we identified three material weaknesses in our internal controls. We are pleased to inform you that all three of these material weaknesses were remediated in Fiscal 25.

Turning to take multiple sources of data.

Speaker Change: And B.

Speaker Change: Conservative as possible without.

The capabilities that we're going to put to work to support our datacenter customers.

Speaker Change: I'm not a big fan of hair cutting it on top.

Speaker Change: <unk>.

Laura Kowalchik: For more details, please see our 10-K filing. So, to echo John, we have driven improved operational execution this past year that was often masked by various external or historical challenges. The result is a solid foundation for the Methode team to build on into the future.

Speaker Change: Jos.

Speaker Change: Then it comes down to our judgment as opposed to a.

Speaker Change: A compilation of expert judgment.

Speaker Change: So we look at it and try to use the best sources of data that we can get it.

Speaker Change: Cancellations were going back to customers as we talked about that's the second piece of the Etame attenuation in the third side as finding other ways to utilize our engineering capability on our and our fixed assets to support other pieces other markets that we've touched on that's particularly on the datacenter side.

And make an evaluation from there, but we don't.

Speaker Change: Unless we have better information.

Operator: That concludes my comments, and we can open it up to questions. Thank you.

Speaker Change: That's where communications with customers and other things unless we have validated better information, we don't just take haircuts.

Operator: At this time, we will be conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star key.

Speaker Change: Understood.

Speaker Change: Just to be clear I totally get what you're saying in terms of checking customers schedules with third.

Speaker Change: One for me just on the <unk>.

Speaker Change: <unk> you Laura can you help us understand the leverage waiver I think thats in effect until the.

Speaker Change: Third party data in terms of EV launches should we think that you are then hair cutting that further as well or are you mainly kind of relying on that.

Speaker Change: Yes.

Speaker Change: July early August next year, I know discuss qualitatively in the 10-K, but it didnt see any any specific Sam.

Operator: One moment, please, while we poll for questions. Once again, please press star 1 if you have a question or a comment.

Speaker Change: No.

Speaker Change: When we say since checking it we're trying to take multiple we're trying to take multiple sources of data.

Speaker Change: Yes, as far as our leverage.

Speaker Change: Covenant for relapsed <unk>.

Speaker Change: And B can.

Speaker Change: Sure.

Luke Junk: Next question comes from Luke Junk with Baird. Good morning. Thanks for taking the questions. John, hoping to start with, you know, certainly the key message this morning, that you expect sales to come down 100 million, but EBITDA to go in the opposite direction and rise into fiscal 26. I'm just trying to understand some of the key earnings levers at a high level given that sales decline. I would assume most of the improvement we should be thinking about operationally would be within automotive. And I guess if I look at what's going on in that business, exiting this year, you know, pretty weak jumping off point coming out of 4Q fiscal 25.

Speaker Change: <unk> was possible without.

Speaker Change: We feel confident that.

Speaker Change: We will meet those covenants over the next year.

Speaker Change: I'm not a big fan of hair cutting yet on top because.

Speaker Change: What specifically is the covenant level Mark can you say.

Speaker Change: Then it comes down to our judgment as opposed to a.

Speaker Change: A compilation of expert judgment.

Speaker Change: Okay.

Speaker Change: Yes.

Speaker Change: It is starting at four to five for Q4 of fiscal year 'twenty five and then at that point.

Speaker Change: So we look at it and try to use the best sources of data that we can get it.

Speaker Change: And make an evaluation from there, but we don't.

Speaker Change: That was before the amendment after the amendment is that four to five in Q1, and then goes up after that.

Speaker Change: Unless we have better information.

Speaker Change: That's where communications with customers and other things unless we have validated better information, we don't just take haircuts.

Speaker Change: Okay, I can take that offline I'll leave it there. Thank you.

Speaker Change: Understood.

Gary: The next question comes from Gary <unk> with Barrington. Please proceed.

Speaker Change: And for me just on the <unk>.

Balance sheet, Laura can you help us understand the leverage waiver I think that is in effect until the.

John DeGaynor: Even if I back out the inventory charges and warranty quality expense, you know, New Year's still launching more programs. So how should we just, you know, think about balancing cost saves versus some incremental costs coming in the P&L for launches? Thanks, Luke, and by the way, good morning. Thanks for your question. I think we talked about some of the base performance improvements during my section. Laura will give you a little more detail on the bridge on the top level. We've done a lot to improve how we launch, and so I think the incremental costs, if you will, for these new launches, I've got less concern about.

Speaker Change: Hey, good morning, everyone.

Speaker Change: Good morning, John.

Speaker Change: Yes.

Speaker Change: July early August next year, I know discuss qualitatively in the 10-K about it and see any any specific channel.

Speaker Change: A lot here all right. So first of all what I wanted to ask is.

Speaker Change: And I think I know the answer to this question you didn't back out these inventory charges and adjusted EBITDA. So that $7 million that you did in the adjusted EBITDA, you would add back that $15 million to get kind of a recurring.

Speaker Change: Yes, as far as the leverage.

Speaker Change: Covenant for relaxed.

Speaker Change: Next year.

Speaker Change: We are confident that we.

Speaker Change: <unk>, yes.

Speaker Change: We will meet those covenants over the next year.

Speaker Change: We did not adjust those out here it is.

Speaker Change: What specifically is the covenant Marvell Mark can you say.

Speaker Change: You did not adjust those out because of what why I mean, it's a nonrecurring charge I just wanted to get an idea of what what the thought process there or is it something that you can't adjust that out.

Speaker Change: Yes.

Speaker Change: I think.

Speaker Change: Yes.

Speaker Change: It is starting at $4 25 for Q4 of fiscal year 'twenty five.

John DeGaynor: The challenge that we have is... our reaction, our ability to react in such short order to a fairly significant drop in demand on the ED side makes the revenue hole a little more stark. But if you think about the one-off expenses that would give you confidence in why 2026 should be so much better. We talked about the warranty reserve, and while we talked about $15 million in the quarter, full year is $22 million. We had $12 worth of quality and warranty issues in fiscal 2025. We had $9 million with Alex Partners, and $5 million worth of legal expenses, and another $3 million worth of restructuring.

Speaker Change: Yes, well so.

Speaker Change: At $4 75.

Speaker Change: I'm not.

Speaker Change: <unk>.

Speaker Change: That was before the amendment after the amendment is that.

Speaker Change: Okay.

Speaker Change: I'm not the best accounting person, but based on our judgment. It's an it's an operational issue and so that we don't we don't back those things out that's why we tried to that's why we tried to make it very clear to you and all of our shareholders that these are onetime events, even if we didn't adjust them out.

Speaker Change: Four to five in Q1, and then it goes up after that.

Speaker Change: Okay, I can take that offline I'll leave it there. Thank you.

Gary: The next question comes from Gary <unk> with Barrington. Please proceed.

Gary: Hey, good morning, everyone.

Speaker Change: Okay, That's fine and then you.

Speaker Change: We went very quickly through all the one time items in fiscal 'twenty five so could we just take that slowly we had $15 2 million of inventory what else did you have there I think you cited before so.

Speaker Change: Good morning, John.

Speaker Change: A lot here all right. So first of all what I wanted to ask is.

Speaker Change: I know the answer this question you didn't back out these inventory charges and adjusted EBITDA. So that $7 million that you did in adjusted EBITDA, you would add back that $15 million to get kind of a recurring.

Speaker Change: So the 52 is just in the quarter.

Speaker Change: The total the total inventory reserve in fiscal $2025 $22 million.

John DeGaynor: All of those things are either eliminated or improved year-over-year as a basis for our guidance. So there is... There are one off things that are eliminated, and there is expectations of performance based on what we see in the plants and what we see in our supply chain, and what we see in our launch execution to give us the basis for why we believe we can, we can on lower sales, double our EBIT .

Speaker Change: Number one yes.

Speaker Change: And we had $12 million or so $22 million of them of inventory reserves.

Speaker Change: We did not adjust those out here.

Speaker Change: You did not adjust those out because of what what I mean.

Speaker Change: Excuse me 22 million worth of inventory reserves $12 million worth of warranty and quality charges $9 million for Alex partners.

Speaker Change: It's a nonrecurring charge I just wanted to get an idea of what.

Speaker Change: What's the thought process there or is it something you can adjust that out.

Speaker Change: $5 million worth of legal expenses and $3 million of restructuring charges.

Speaker Change: Well so.

Speaker Change: But I'm not.

Speaker Change: Okay, and $3 million restructuring alright.

Speaker Change: I'm not the best accounting person, but based on our judgment is it's an operational issue and so that we don't back we don't back those things out that's why we've tried to that's why we've tried to make it very clear to you and all of our shareholders that these are onetime events, even if we didnt adjustable.

Speaker Change: Okay, that's fine.

Speaker Change: And then.

Speaker Change: I know you've kind of answered this.

Luke Junk: Thanks for that, John.

Speaker Change: Yes. This question, but I wanted to get an understanding of these 30, New awards that you've got in 'twenty five.

Luke Junk: All helpful commentary, especially all those individual expense items. Second question, just in terms of the launch activity into Fiscal 26, 30 launches, how should we think about those in terms of the percentage that are EV platforms specifically and then on the EV side of the house, just how can we conceive the materiality of those launches and maybe, you know, given the Stellantis experience this year, and I know you mentioned other EV program delays and whatnot, just how you attenuate for that, you know, potential risk, either timing or volume as you put together the guidance. Well, so, as we've said each time, we have used third-party as a basis for how we give our guidance.

Speaker Change: How much of those are.

Speaker Change: Dealing with the EV market itself.

Speaker Change: Okay. That's fine and then you went very quickly through all the onetime items.

Speaker Change: Okay.

Speaker Change: It's in our 10-K from a detail standpoint, but I believe it's about it's about 50% of the total.

Speaker Change: <unk> 25, so could we just take that slowly you had $15 2 million of inventory what else did you have there I think you cited before so.

Speaker Change: What we've talked about.

Speaker Change: The 52 is just in the quarter.

Speaker Change: And we talked about in the conversation that from a bookings standpoint, our bookings are about two thirds power products be that.

Speaker Change: The total of the total inventory reserve in fiscal 2025% to $22 million.

Speaker Change: Across the board. So yes, it's still is overweight from an <unk> standpoint about 50%.

Speaker Change: And we had $12 million or so $22 million of them of inventory reserves.

Speaker Change: But I'm really I'm actually really pleased on where we are with regard to our split of bookings and the opportunities for growth in data centers. I think it is important to note. We think about 2024 versus 2025, a doubling of our datacenter revenue in the opportunities that we talk about briefly with regard to 2025 versus 2026.

Speaker Change: Excuse me 22 million worth of inventory reserves $12 million worth of warranty and quality charges $9 million for Alex partners.

Speaker Change: $5 million worth of legal expenses and $3 million of restructuring charges.

John DeGaynor: So we tried to tie back and sense-check what our customers told us with third-party evaluations, and that's what's in the guidance. As we said, EV as a percent of sales is 20% this year, and we'll actually, the challenge that we have is in past We've talked about it being an expansion year over year, now we're talking about it being relatively flat based on some of the program delays or cancellations. What we have, however, is we have other areas where we're driving growth, and we have the ability to use our footprint. Some of the tariff challenges have highlighted, actually, the power of our global footprint to deliver on power products, and we're taking advantage of that, and we'll continue to take advantage of that on the data center side from a power side.

Speaker Change: Okay, and $3 million restructuring right.

Speaker Change: Okay, that's fine.

Speaker Change: I think it gives us the ability to better balance the business than where we were 12 months ago.

Speaker Change: And then.

Speaker Change: I know you've kind of answered this.

Speaker Change: Yes. This question, but I wanted to get an understanding of these 30, New awards that you've got 25.

Speaker Change: Are these new EV awards still what's the Lantus.

Speaker Change: How much of those are.

Speaker Change: No.

Speaker Change: Dealing with the EV market itself.

Speaker Change: As we've talked about we've got we've got launches around the World Asia Europe as well as a couple of programs in North America with other customers, but if you look at the bridge that Laura has I believe its on slide 18.

Speaker Change: Okay.

Speaker Change: It's in our 10-K from a detail standpoint that I believe it's about it's about 50% of the total.

Speaker Change: What we've talked about.

Speaker Change: And we talked about in the conversation that from a bookings standpoint, our bookings are about two thirds power products be that occur.

Speaker Change: Right.

Speaker Change: That shows you that we have had to haircut. The majority of the launches in North America, not just the Atlantis launches. The <unk> launch is the biggest impact but there are other launches that are.

Speaker Change: Across the board. So yes, it's still is overweight from an <unk> standpoint about 50%.

Speaker Change: But I'm really I'm actually really pleased on where we are with regard to our split of bookings and the opportunities for growth in data centers. I think is important to note. We think about 2024 versus 2025, a doubling of our datacenter revenue in the opportunities that we talk about briefly with regard to 2025 versus 2026.

Speaker Change: That had been delayed with other customers. So we're having conversations with all of our customers with regard to how do we offset what we.

John DeGaynor: So some of the investment that was made for EV programs, particularly in our North American footprint, we're actually going to put to work. The capabilities there we're going to put to work to support our data center customers. So the attenuation that we've done is there's been a series of headcount reductions and cost reductions that have been taken against the EV programs where there have been delays or where there have been cancellations. We are going back to customers as we talked about. That's the second piece of the attenuation. And the third side is finding other ways to utilize our engineering capability and our fixed assets to support other markets that we touch and that's particularly on the data centers.

Speaker Change: What we've done for these launches.

Speaker Change: Okay, and Thats, what I wanted to go back to this bridge because a lot of numbers here, but.

Speaker Change: I just wanted to get an idea of this Atlanta, so as of fiscal Q1, 'twenty five thought you were going to get $84 million of <unk>.

Speaker Change: I think it gives us the ability to better balance the business than where we were 12 months ago.

This revenue.

Speaker Change: Or are these new EV awards still what's the Lantus.

Speaker Change: As of Q4 that actually materialize to $46 million is that correct.

Speaker Change: No.

Speaker Change: Correct.

Speaker Change: Okay. So then if we go to the next slide you have a $125 million of silliness revenue.

Speaker Change: In that number and that was what you figured you would I'm trying to understand going forward. So the slide here. So it looks like to me excuse me John I don't want to it looks like you almost had.

John DeGaynor: Just to be clear, I totally get what you're saying in terms of checking customer schedules with third-party data in terms of EV launches. Should we think that you're then haircutting that further as well, or are you mainly kind of relying on that third-party data? No, I mean, when we say sense-checking it, we're trying to take multiple sources of data and be as conservative as possible without – I'm not a big fan of haircutting it on top because then it comes down to our judgment as opposed to a compilation of expert judgment. So we look at it, try to use the best sources of data that we can get and make an evaluation from there, but we don't, unless we have better information, that's where communications with customers and other things, unless we have validated better information, we don't just take.

Speaker Change: Alright.

Speaker Change: That shows you that we have had to haircut. The majority of the launches in North America not just this Atlantis launches the <unk> launch is the biggest impact.

Speaker Change: $165 million reduction in what you expected from the Atlantis.

Speaker Change: That's exactly exactly that's actually more than that.

Speaker Change: But there are other launches that are that have been delayed with other customers. So we're having conversations with all of our customers with regard to how do we offset what we.

Speaker Change: Roughly $200 million, so the way to think about it Gary.

Speaker Change: And it's.

Speaker Change: What we've done for these launches.

Speaker Change: The way to think about this for all the investors.

Speaker Change: Okay, and Thats, what I wanted to go back to this bridge because a lot of numbers here, but.

Speaker Change: This isn't this wasn't something that was foreseeable because if you look at what the customer was talking about as well as IHS.

Speaker Change: I just wanted to get an idea of the Atlanta. So as of fiscal Q1 'twenty. Five you thought you were going to get $84 million.

Speaker Change: In.

Speaker Change: In January of 2025, knowing about tuck in fiscal <unk> Im talking calendar January 2025.

Speaker Change: <unk> revenue.

Speaker Change: As of Q4 that actually materialized at $46 million is that correct.

Speaker Change: The volumes for those programs.

Speaker Change: We're between large and frame the two big still answers programs were combined 169000 vehicles in may.

Speaker Change: Correct.

Speaker Change: Okay. So then if we go to the next slide you have a $125 million of silliness revenue.

Speaker Change: Of 2025. This is for 2025 and it goes back to it goes back to the bridge.

Speaker Change: In that number and that was what you figured you would I'm trying to understand going so decide here. So it looks like to me John I don't want to it looks like you almost had.

Laura Kowalchik: Last question for me just on the balance sheet, Laura, can you help us understand the leverage waiver?

Speaker Change: So in January was 169000 vehicles in May this is for 2025 and May It was 58000 vehicles and in July it dropped to 15000 vehicles. So we had a huge drop quarter over quarter over quarter, which is why Q4, why why Q4 headset.

Laura Kowalchik: I think that's in effect until the late July, early August next year, and it was discussed qualitatively in the 10-K, but I didn't see any specifics yet. Yeah, as far as the leverage, our covenants were relaxed through next year, and we feel confident that we will meet those covenants over the next year.

Speaker Change: 165 million dollar reduction than what you expected from Atlanta.

Speaker Change: That's exactly.

Speaker Change: It's actually more than months.

Speaker Change: It's roughly $200 million so the way to think about it Gary.

Speaker Change: Revenue Hall, and also what drove some of the inventory because we had built a pipeline we.

Speaker Change: And it's.

Speaker Change: The way to think about this for all the investors is.

We built our plants and we built a pipeline to respond to.

Speaker Change: This isn't this wasn't something that was foreseeable because if you look at what the customer was talking about as well as IHS.

Speaker Change: When you when you have long lead time items like copper.

Laura Kowalchik: Yeah, and what specifically is the Covenant level, Laura, can you say? Yeah, it's it is starting at 4.25 for Q4 of fiscal year 25 and then as at 3.75. That was before the amendment. After the amendment, it is at 4.25 and 2.1 and then goes up after that.

Speaker Change: We bought the pipeline based on what the customers have told us and what IHS said.

Speaker Change: In.

Speaker Change: In January of 2025, knowing about tuck in fiscal <unk> Im talking calendar January 2025.

Speaker Change: You take those same numbers for fiscal 2026 in January 1st So for fiscal 2000, excuse me calendar year fiscal 2026 in January 2025 that number was 259000 between the two programs and May drop to 176000 and in July it dropped to 63.

The volumes for those programs.

Speaker Change: We're between large and frame the two big still answers programs were combined of 169000 vehicles in may.

Laura Kowalchik: I can take that off, fine. I'll leave it there. Thank you.

Speaker Change: Of 2025. This is for 2025 and it goes back it goes back to the bridge.

Speaker Change: <unk> thousand.

Gary Prestopino: The next question comes from Gary Prestopino with Barrington, please proceed.

Speaker Change: So we have been reacting within a quarter.

Speaker Change: So in January it was 169000 vehicles in May this is for 2025 and May It was 58000 vehicles and in July it dropped to 15000 vehicles. So we had a huge drop quarter over quarter over quarter, which is why Q4, why Q4 has such a.

To huge drops both in the quarter and in the following fiscal year, which is why our ability to adjust and overcome that just not possible within a quarter. So what we're trying to do with.

Gary Prestopino: Good morning, everyone. A lot here. All right. So first of all, what I want to ask and I think I know the answer to this question. You didn't back out these inventory charges in adjusted EBITDA. So that $7 million that you did in adjusted EBITDA, you would add back that $15 million to get kind of a recurring number on EBITDA? We did not address those outbreaks. Did you not adjust those out? Because of what? Why? I mean, it's a it's a non-recurring charge. I just want to get an idea of what, what the thought process there is.

Speaker Change: Conversations with our customers, we're trying to work with them.

Speaker Change: Not just with Atlanta has worked with all of our customers and at the same time be able to use our capability to use our engineering use are our operations use our supply chain to support growth in other areas.

Speaker Change: Revenue Hall, and also what drove some of the inventory because we had built the pipeline.

Speaker Change: We built our plants and we built a pipeline to respond to.

Speaker Change: When you when you have long lead time items like copper.

Speaker Change: So the if.

Speaker Change: If you think about slide 18 and 19.

Speaker Change: We've got the pipeline based on what the customers have told us and what IHS said.

Speaker Change: And say they've had a huge hole punched in the revenue from those perspective.

Laura Kowalchik: It's something with you can't adjust that out. Well, so I'm not the I'm not the best accounting person, but based on our judgment, it's an operational issue and so that we don't back those things out. That's why we tried to make it very clear to you and all of our shareholders that these are one-time events, even if we didn't adjust them all.

Speaker Change: You take those same numbers for fiscal 2026 in January 1st So fiscal 'twenty excuse me calendar year fiscal 2026 in January 2025 that number was 259000 between the two programs and May drop to 176000 and in July it dropped to 63.

Speaker Change: But the performance on a year over year basis, you have negative downward conversion that you should expect in any company. When you take a $100 million with the revenue or the better part of $100 million with revenue out and on top of the downward conversion we're driving.

Speaker Change: What 30 $32 million worth of EBITDA improvement in our in our midpoint of our guidance.

Speaker Change: <unk> thousand.

Speaker Change: So we have been reacting within a quarter.

Speaker Change: To huge drops both in the quarter and in the following fiscal year, which is why our ability to adjust and overcome that just not possible within a quarter. So what we're trying to do with.

Gary Prestopino: Okay, that's fine.

Speaker Change: So I mean.

Gary Prestopino: And then you went very quickly through all the one-time items in fiscal 25. So could we just take that slowly? You had $15.2 million of inventory. What else did you have there? I think you cited four. So the $15.2 is just in the quarter. Right. The total inventory reserve in fiscal 2025 is $22 million. and we had $12 million worth, so $22 million of inventory reserves. $22 million worth of inventory reserves, $12 million worth of warranty and quality charges, $9 million for Alex Park. $5 million worth of legal expenses and $3 million of restructuring.

Speaker Change: And the numbers that you are citing for this year.

Speaker Change: I guess, it's very easy to assume there is negative growth from Atlanta in other words.

Speaker Change: Yes big time.

Speaker Change: Conversations with our customers, we're trying to work with them.

Speaker Change: That's what that's what slide 18, if you look at the top of Slide 18 is what we knew when we when I first started talking to you.

Speaker Change: Not just with <unk> Atlantis worked with all of our customers and at the same time be able to use our capabilities user engineering use are our operations use our supply chain to support growth in other areas.

Speaker Change: In Q1.

Speaker Change: That's what we knew at the time.

Speaker Change: Mhm.

Speaker Change: So.

Speaker Change: Okay, now and then I don't think its Don.

Speaker Change: If you think about slide 18 and 19.

Speaker Change: The bottom of the slide shows you what we know now.

Speaker Change: And say they've had a huge hole punched in the revenue from those perspective, but.

Speaker Change: Okay, I, just want to clear that up alright, and then.

Speaker Change: Just one more quick question.

Speaker Change: The performance on a year over year basis, you have negative downward conversion that you should expect in any company. When you take a $100 million with the revenue outlook or the better part of a $100 million worth of revenue and on top of the downward conversion we're driving.

Speaker Change: I saw the report that you are paying a <unk> dividends. So it was 14 so.

John DeGaynor: Okay, that's fine. And then if I know Luke Cunningham. ask this question, but I want to get an understanding of these 30 new awards that you got in 25. How much of those are? dealing with the EV market itself. It's in our 10K from a detailed standpoint, but I believe it's about 50% of the total. What we talked about, and we talked about in the conversation, that from our bookings standpoint, our bookings are about two-thirds power products, be that across the board. So, yes, it still is overweight from an EV standpoint, about 50%, but I'm actually really pleased on where we are with regard to our split of bookings and the opportunities for growth in data centers.

Speaker Change: Safe to assume you've cut the dividend and it was that having to do with some of the.

Speaker Change: Issues, you had to get some amend.

Speaker Change: While 30 $32 million worth of EBITDA improvement in our in our midpoint of our guidance.

Speaker Change: Amendment changes will leverage covenant changes or whatever because the cash flow is still pretty strong.

Speaker Change: So I mean.

Speaker Change: Yes, so actually but Gary if you look at it based on the dividend has historically been firstly the dividend policy is set by the board.

Speaker Change: And the numbers that you're citing for this year Youre I guess, it's very easy to assume there is negative growth from Atlanta in other words.

Speaker Change: Let's just talk about it if you look at it.

Speaker Change: Yes big time.

Speaker Change: Absolutely that's what that's what slide 18, if you look at the top of Slide 18 is what we knew when we when I first started talking to you.

Speaker Change: This change in the dividend still puts us where the yield the dividend yield very much in line with our peers that that initial dividend on a per share basis was set back when the stock was much higher so so the new dividend rate. One is in line with our peers. It gives us back some flexibility from a working capital.

Speaker Change: Mhm.

Speaker Change: In Q1.

Speaker Change: That's what we knew at the time.

Speaker Change: Yeah.

Speaker Change: Okay, now and then I don't think <unk> done.

Speaker Change: The bottom of the slide shows you what we know now.

Speaker Change: With perspective, and yes of course, it did consider what we had to do from a governance perspective.

John DeGaynor: I think it's important to note, we think about 2024 versus 2025, a doubling of our data center revenue, and the opportunities that we talk about briefly with regard to 2025 versus 2026, I think it gives us the ability to better balance the business than where we were 12 months ago. Are these new EV awards still with Stellantis?

Speaker Change: Okay. Okay, I just wanted to clear that up alright, and then I don't know.

Speaker Change: That's fine I, just want to make sure I was on the right track there. Thank you.

Speaker Change: Just one more quick question.

Speaker Change: Of course.

Speaker Change: I saw the report that you are paying a <unk> <unk> dividend. So it was 14.

Speaker Change: Our next question comes from John <unk> with Sidoti. Please proceed.

Speaker Change: No.

Speaker Change: Safe to assume you've cut the dividend and it was that having to do with some of the.

Speaker Change: Good morning, everyone and thanks for taking the questions.

Speaker Change: Hey, good morning, gentlemen, just we'll just stick with with slide 18 here and.

Speaker Change: Issues, you had to get some.

Speaker Change: <unk> changes will leverage covenant changes or whatever because the cash flow was still pretty strong.

John DeGaynor: No. As we talked about, we've got launches around the world, Asia, Europe, as well as a couple of programs in North America with other customers. But if you look at the bridge that Laura has, I believe it's on slide 18. Right. That shows you that we have had to haircut the majority of the launches in North America, not just the Stellantis launches. The Stellantis launch is the biggest impact, but there are other launches that have been delayed with other customers. So we're having conversations with all of our customers with regard to how do we offset what we've done for these launches.

Speaker Change: I wanted to ask I wanted to focus on that $48 million net other loss launches in pricing and market I guess my biggest curiosities how much of that.

Speaker Change: Yes so.

Gary: Actually but Gary if you look at it.

Gary: The dividend has historically been firstly the dividend policy is set by the board, but let's just talk about it if you look at it.

Speaker Change: $48 million.

Speaker Change: Has pricing benefits.

Speaker Change: Yes.

This change in the dividend still puts us where the yield the dividend yield very much in line with our peers.

Speaker Change: Oh.

Speaker Change: As far as versus versus its new programs is just price price price.

Gary: That initial dividend on a per share basis was set back when the stock was much higher so the new dividend rate.

Speaker Change: Yes on the right hand side of the economy.

Speaker Change: $8 million down from $1 seven.

Speaker Change: One is in line with our peers. It gives us back some flexibility from a working capital perspective, and yes of course it did consider what we had to do from a governance perspective, Okay. That's fine I just want to make sure I was on the right track there. Thank you.

Speaker Change: I'm just curious how much was pricing because I figure that's going to be one of the hardest things to execute.

Speaker Change: Yes, no no no. It's not that this is this is as we said to you. We've had other programs that have either been delayed or canceled.

Gary Prestopino: Okay, and that's what I wanted to go back to this bridge because a lot of numbers here, but I just want to get an idea of the Stellantis. So as of fiscal Q125, you thought you were going to get $84 million of Stellantis revenue. As of Q4, that actually materialized to $46 million. Is that correct? Correct. Okay, so then if we go to the next slide, you have 125 million of Stellantis. Revenue. in that number, and that was what you figured you would... I'm trying to understand going from side to side here. So it looks like to me, excuse me, John, I don't want to, looks like you almost had a $165 million reduction in what you expected from Stellantis.

Gary: Of course.

Our next question comes from John <unk> with Sidoti. Please proceed Jon.

Speaker Change: The downdraft between the 107 and the <unk> 48 is due to delays or cancellations pricing.

Jon: Good morning, everyone and thanks for taking the questions.

Speaker Change: Pricing is incremental plus.

Speaker Change: Datacenters as incremental plus.

Speaker Change: Hey, good morning, gentlemen.

Speaker Change: So so the.

Speaker Change: Stick with slide 18 here and.

Speaker Change: Okay.

Speaker Change: You have to look at it is the combination of the Atlantis plus the other delays it's basically at <unk>.

Speaker Change: I wanted to I wanted to focus on that $48 million net other loss marches in pricing and market I guess my biggest curiosities how much of that.

Speaker Change: Theres been punched in our revenue plan based on North largely North American EBIT program delays or cancellations.

Speaker Change: $48 million.

Speaker Change: Has pricing benefits.

Speaker Change: Yes.

Speaker Change: Not not price and I didn't get.

Speaker Change: Oh.

Speaker Change: Okay, right, which brings me to my other question with so much of a revenue coming out of the automotive side of the business does that suggest that there is.

Speaker Change: As far as versus versus its new programs is just price price price.

Speaker Change: Assuming growth in the industrial side.

Speaker Change: Yes on the right hand side of the economy.

Speaker Change: $8 million down from $1 seven.

John DeGaynor: That's exactly right. It's actually more than that. It's roughly $200 million. So the way to think about it, Gary, is... The way the way to think about this for all the investors is This isn't, this wasn't something that was foreseeable because if you look at what the customer was talking about as well as IHS. in January of 2025. Now I'm not talking fiscal, now I'm talking calendar. January 2025. and the volumes for those programs. were, between LARGE and FRAME, the two big Stellantis programs, were combined, 169,000 vehicles. In May... of 2025. This is for 2025.

Speaker Change: Business in the coming year.

Speaker Change: I'm just curious how much was pricing because I figure that's going to be one of the hardest things to execute.

Speaker Change: Yes, it does that not only does it assume growth, but what you'll see is you'll see it you see that ultimately this business is going to be about 50% automotive and 50% are other.

Speaker Change: Yes, no no no. It's not that this is this is as we said to you. We've had other programs that have either been delayed or canceled.

Speaker Change: The.

Speaker Change: And we're excited about opportunities to grow our lighting business.

Speaker Change: The downdraft between the 107 and <unk> 48 is due to delays or cancellations pricing.

Speaker Change: The industrial activities as well as the data center.

Speaker Change: Pricing is incremental plus.

Speaker Change: Work.

Speaker Change: Both both on base, Okay does that activity as well as future data center activity.

Data centers as incremental plus.

Speaker Change: So so the.

Speaker Change: Okay.

Speaker Change: Okay. So thats largely come from data center, given what's going on.

Speaker Change: You have to look at it is the combination of the Atlantis plus the other delays it's basically.

Speaker Change: In the truck market.

Speaker Change: Yes, well, so lighting lighting would be your datacenters and lighting.

Speaker Change: Our whole theres been punched in our revenue plan based on largely North American EBIT program delays or cancellations.

Speaker Change: For things other than trucks off highway lighting as well.

John DeGaynor: It goes back to the bridge. So, in January, it was 169,000 vehicles. In May, this is for 2025, in May, it was 58,000 vehicles, and in July, it dropped to 15,000 vehicles. So, we had a huge drop quarter over quarter, which is why Q4 had such a revenue pull and also what drove some of the inventory because we had built a pipeline. We built our plants and we built our pipeline to respond to when you have long lead time items like copper. We built a pipeline based on what the customers had told us and what IHS said.

Speaker Change: Not price and I didn't get.

Speaker Change: Okay, right, which brings me to my other question with so much of a revenue coming out of the automotive side of the business.

Speaker Change: Since you since you brought that up I am curious how Nordic lights is performing relative to expectations, maybe just summarize 2025.

Speaker Change: That suggests that.

Speaker Change: We are assuming growth in the industrial side.

Speaker Change: I'm very proud of the team at Nordic lights.

Speaker Change: Business in the coming year.

Speaker Change: Yeah, It does and not only does it assume growth, but what you'll see is you'll see it you see that ultimately this business is going to be about 50% automotive and 50% are other.

Anthony and the team they're doing a fantastic job.

Speaker Change: A challenging market.

Speaker Change: The base market.

Speaker Change: No.

Speaker Change: <unk>.

Speaker Change: The equipment suppliers arent arent well.

Speaker Change: The.

Speaker Change: Blowing the doors off but Nordic lights is performing well and the team there has.

Speaker Change: <unk>.

Speaker Change: And we're excited about opportunities to grow our lighting business.

Speaker Change: Has been a good addition, and as we talked about briefly with some of the engineering and program management team program management changes the team at Nordic life is actually contributing more broadly within broader method.

Speaker Change: The industrial activities as well as the data center.

Speaker Change: Work.

John DeGaynor: You take those same numbers for fiscal 2026, in January, for fiscal 20, excuse me, calendar year fiscal 2026, in January 2025, that number was 259,000 between the two programs. In May, it dropped to 176,000. And in July, it dropped to 63,000. So we have been reacting within order. to huge drops both in the quarter and in the following fiscal year, which is why our ability to adjust and overcome that is just not passable within a quarter. So what we're trying to do, we're having conversations with the customers, we're trying to work with them, and it's not just with Stellantis, work with all of our customers, and at the same time, be able to use our capabilities, use our engineering, use our operations, use our supply chain to support growth in other areas.

Speaker Change: Both both on base, Okay does that activity as well as future data center activity.

Speaker Change: Okay. So that's largely come from data center, given what's going on in the.

Speaker Change: I'm pleased with it.

Speaker Change: Good good to hear.

Speaker Change: Truck market.

Speaker Change: Question about slide nine.

Speaker Change: Yeah, well, so lighting lighting would be your datacenters and lighting for things other than trucks off highway lighting as well.

Speaker Change: To move forward with 18.

Speaker Change: It seems like the answer it sounded to me it sounds to me as if there's still more to come.

Speaker Change: 1026 priorities, including for the plant consolidation.

Speaker Change: Since you since you brought that up I am curious how Nordic lights is performing relative to expectations, maybe just summarize 2025.

Speaker Change: SG&A right sizing.

Speaker Change: Portfolio review and things of that nature.

Speaker Change: I'm very proud of the team at Nordic lights onto you and the team they're doing a fantastic job.

Speaker Change: Can you give us a sense of.

Speaker Change: Some of the timing of those projects when do you expect to execute to realize them.

In a challenging market.

Speaker Change: The organ materialize in 2026.

Speaker Change: The base market.

Speaker Change: Kind of.

Speaker Change: <unk>.

Speaker Change: More color would be appreciated.

Speaker Change: The equipment suppliers arent.

Speaker Change: Well the program launches and our operational execution and the team rebuilding that first one those foundational actions those are ongoing and of course, we expect some impact in 2026.

Speaker Change: Blowing the doors off but Nordic lights is performing well and the team. There has been a good addition, and as we talked about briefly with some of the engineering and program management team program management changes.

John DeGaynor: So if you think about slide 18 and 19. and say they've had a huge hole punched in the revenue from Methode's perspective, but the performance on a year-over-year basis, you have negative downward conversion that you should expect in any company when you take $100 million with the revenue out, or the better part of $100 million with the revenue out. And on top of the downward conversion, we're driving $32 million worth of improvement in our midpoint of our guidance. So, I mean, in the numbers that you're citing for this year, I guess it's very easy to assume there's negative growth from Stellantis, in other words.

Speaker Change: Plant in SG&A right sizing we are in the process. We're in the process of that right now.

Speaker Change: Team at Nordic life is actually contributing more broadly within broader method.

Speaker Change: None of them are large enough where they would be.

Speaker Change: Payable announcements, but we're moving forward with those activities in each of our in each of our sites and in each of our regions to size of business based on.

Speaker Change: I'm pleased with it.

Speaker Change: Good good to hear.

Speaker Change: A question about slide nine.

Speaker Change: To move forward through <unk>.

Speaker Change: It seems like the answer it sounded to me it sounds to me as if there's still more to come right through.

Speaker Change: Based on what product development, we need and where we're going aligning our portfolio more to come on that but I expect.

Speaker Change: I would expect activity to happen within the fiscal year and addressing the business structure of the board size reduction and that will happen. After the annual meeting in the next in the forthcoming months the headquarters relocation.

Speaker Change: <unk> thousand six priorities, including for the plant consolidation.

Speaker Change: SG&A right sizing.

Speaker Change: Portfolio review and things of that nature.

Speaker Change: Can you give us a sense of.

John DeGaynor: Oh, yes. Big time. That's what slide 18, if you look at, the top of slide 18 is what we knew when I first started talking to you. Mm-hmm. Right here. Q1. That's what we knew at the time. Okay.

Speaker Change: Some of the timing of those projects when do you expect to execute to realize them.

Speaker Change: We expect to have done within the fiscal 2020.

Speaker Change: We've talked to you about the dividend adjustment and as I've just said the portfolio review. So yes. These are all things that we're actively working on in fiscal 2026.

The organ materialize in 2026.

Speaker Change: Kind of.

Speaker Change: More color would be appreciated.

Okay.

Speaker Change: Most of my other questions were answered.

John DeGaynor: Now, and then I don't want... And then I don't want... The bottom of the slide shows you what we know now.

Speaker Change: Thank you I'll get back into queue.

Sean: Thanks, Sean.

Speaker Change: We have a follow up question coming from Gary <unk> with Barrington. Please proceed.

Speaker Change: Plant in SG&A right sizing we are in the process of we're in the process of that right now none of them are large enough where they would be.

John DeGaynor: Okay, okay, I just want to clear that up. All right.

Gary: Yes, I just wanted to kind of ask.

Gary Prestopino: And then I don't just one more quick question. Um, you know, I saw the report that you paying a seven cent dividend, so it was 14. So safe to assume you you've cut the dividend. And it was that having to do with some of the issues you had to get with some amendment changes or leverage covenant changes or whatever, because the cash flow was still pretty strong. Yeah, so actually, but but Gary, if you look at it based, you know, the dividend has historically been set first, the dividend policy is set by the board. But right, let's just let's just talk about it.

Speaker Change: Just for our purposes.

Speaker Change: Payable announcements, but we're moving forward with those activities in each of our in each of our sites and in each of our regions to size of business based on.

Speaker Change: <unk> modeling and I don't want to get too specific but.

Gary: <unk>.

Gary: On a sequential basis I mean, how are we looking at the sales.

Speaker Change: Based on what product development, we need and where we're going aligning our portfolio more to come on that but I expect.

Gary: Plotting out quarter to quarter to quarter to quarter sequentially as.

Speaker Change: I expect activity to happen within the fiscal year and addressing the business structure of the board size reduction and that will happen after the annual meeting.

Gary: Should we expect the same seasonality that we saw a couple of years ago or is there something here.

Gary: Youre going to.

Speaker Change: In the forthcoming months the headquarters relocation, we expect to have done within fiscal 2026.

Gary: Just kind of puts out we're just constantly gets better as we go along in the year.

Gary Prestopino: If you look at it. This change in the dividend still puts us with a yield, a dividend yield, very much in line with our peers. That initial dividend on a per share basis was set back when the stock was much higher. So the new dividend rate, one, is in line with our peers. It gives us back some flexibility from a working capital perspective. And yes, of course, it did consider what we had to do from a covenants perspective.

Gary: Okay.

Speaker Change: We've talked to you about the dividend adjustment and as I've just said the portfolio review. So yes. These are all things that we're actively working on in fiscal 2026.

Gary: They were checking our notes but.

Gary: Typically with the launches and the ramp up of timing that's why we've talked about the improvement second half versus first half.

Speaker Change: Okay.

Speaker Change: Most of my other questions were answered.

Gary: We don't typically we don't typically provide quarterly revenue guidance.

Ill get back into queue.

Speaker Change: Thanks, Sean.

Speaker Change: We have a follow up question coming from Gary <unk> with Barrington. Please proceed.

Gary: But.

Speaker Change: Yes, you would expect to see.

Gary Prestopino: Okay, that's fine. I just wanted to make sure I was on the right track there. Thank you.

Gary: Hey.

Gary: Yes, I just wanted to kind of ask just just for our purposes of modeling and I don't want to get too specific.

Gary: Okay.

Gary: There is a level of seasonality, particularly in Q3, because of our Q3 being with holidays, but a fairly significant step up.

John Franzreb: Our next question comes from John Franzreb with Sidoti. Please proceed. Good morning, everyone, and thanks for taking the questions.

Speaker Change: But.

On a sequential basis I mean, how are we looking at the sales.

Gary: In Q4 versus versus Q1.

Gary: Okay.

Speaker Change: Plotting out quarter to quarter to quarter to quarter sequentially is.

Gary: The answer would be that probably sequentially, we're going to continue to see increases as we go along here and.

John Franzreb: We'll just stick with slide 18 here. And I guess I want to focus on that $48 million and that other launches and pricing and market. I guess my biggest curiosity is how much of that $48 million has pricing benefits? Oh. I mean, as far as versus its new programs, it's just price to price. Yeah, on the right-hand side of the column, it's $48 million down from $107 million. I'm just curious how much he's pricing because I figure that's going to be one of the hardest things to execute. Yeah, no, no, it's not that. This is, this is, as we said to you, we've had other programs that have either been delayed or canceled.

Speaker Change: Okay.

Speaker Change: Should we expect the same seasonality that we saw a couple of years ago or is.

Gary: Back half of the year is where youre really going to show.

Okay.

There is something here.

Gary: That's fine thank you.

Speaker Change: Youre going to.

Gary: Thank you.

Speaker Change: Just kind of puts out we're just constantly gets better as we go along in the year.

Gary: We have reached the end of the question and answer session and I will now turn the call over to John <unk> for closing remarks.

Speaker Change: Okay.

John Gaynor: I want to thank everybody for your attendance today.

Speaker Change: Yes.

Speaker Change: Checking our notes.

Speaker Change: Typically with the launches and the ramp up of timing, that's why we've talked about the improvement.

Speaker Change: I'll just conclude by saying, we're really proud of what we've achieved in 2025, and we know that we have a lot more to do in 2026, and we look forward to speaking with you in the next earnings call to describe that progress. So thank you all.

Speaker Change: Half versus first half.

Speaker Change: Alright.

Speaker Change: We don't typically provide quarterly revenue guidance.

Speaker Change: But yeah.

Speaker Change: Yes.

Speaker Change: Would expect to see.

Speaker Change: This concludes today's conference and you may disconnect. Your lines at this time. Thank you for your participation.

Speaker Change: Hey.

Speaker Change: Okay.

Speaker Change: There is a level of seasonality, particularly in Q3, because of our Q3 being with holidays, but a fairly significant step up.

John DeGaynor: So, the downdraft between the 107 and the 48 is due to delays or cancellations. Pricing is incremental plus. Data centers is incremental plus. So what you have to look at is the combination of this Atlantis plus the other delays. It's basically a hole that's been punched in our revenue plan based on largely North American EB program delays or cancellations. Not, not President DeGaynor.

Speaker Change: In Q4 versus versus Q1.

Speaker Change: Okay.

Speaker Change: No.

Speaker Change: The answer would be that probably sequentially, we're going to continue to see increases as we go along.

Speaker Change: Back half of the year is where youre really going to.

Speaker Change: Okay.

Speaker Change: That's fine thank you.

Speaker Change: Thank you.

Speaker Change: Sure.

Speaker Change: We have reached the end of the question and answer session and I will now turn the call over to John <unk> for closing remarks.

John DeGaynor: Okay, right, which brings me to my other question. With so much of the revenue coming out of the automotive side of the business, does that suggest that you're assuming growth in the industrial side of the business in the coming year? Yeah, it does. And not only does it assume growth, but what you'll see is, you see it, you see that ultimately, this business is going to be about 50% automotive and 50% other And, you know, we're excited about opportunities to grow our lighting business and the industrial activities as well as the data center work. both on base data center activity as well as future data center activity.

I want to thank everybody for your attendance today.

Speaker Change: <unk> concluded by saying, we're really proud of what we've achieved in 2025, and we know that we have.

Speaker Change: Lot more to do in 2026, and we look forward to speaking with you in the next earnings call to describe that progress. So thank you all.

Speaker Change: This concludes today's conference and you may disconnect. Your lines at this time. Thank you for your participation.

John DeGaynor: Okay, so that's logic come from data center given what's going on in the truck market. Yeah, well, so lighting, lighting would be data centers and lighting for things other than trucks, not off highway lighting as well.

John DeGaynor: Um, you know, since you brought that up, I am curious how Nordic Lights is performing relative to expectations, maybe to summarize 2025. I'm very proud of the team at Nordic Lights. Antti and the team there do a fantastic job in a challenging market. The base market, the equipment suppliers aren't blowing the doors off, but Nordic Lights is performing well, and the team there has been a good addition, and as we talked about briefly with some of the engineering and program management team, program management changes, the team at Nordic Lights is actually contributing more broadly within broader methods.

John DeGaynor: I'm pleased to...

John DeGaynor: Good, good to hear.

John Franzreb: Question about slide nine, so we can move forward from 18. It seems like this sounded to me, it sounded to me as if there's still more to come, right? The 2026 priorities, including further plant consolidation, SGA rightsizing. you know, portfolio review, things of that nature.

John DeGaynor: Can you give us a sense of some of the timing of those projects, when do you expect to execute or realize them, are they all going to materialize in 2026, any kind of... More color would be appreciated. Well, the program launches and the operational execution and the team rebuilding, that first one, those foundational actions, those are ongoing. And of course, we expect them to impact in 2026. Plant and SG&A rightsizing, we're in the process of that right now. None of them are large enough where they would be 8K-able announcements, but we're moving forward with those activities in each of our sites and each of our regions to size the business based on what product development we need and where we're going.

John DeGaynor: Aligning the portfolio, more to come on that, but I expect activity to happen within the fiscal year. And addressing the business structure, the board size reduction, that will happen after the annual meeting in the next forthcoming months. The headquarters relocation, we expect to have done within fiscal 2026. We talked to you about the dividend adjustment and, as I just said, the portfolio review. So, yes, these are all things that we're actively working on in fiscal 2026.

John Franzreb: Okay, most of my other questions were answered. Thank you. I'll get back to you.

Gary Prestopino: Thanks, John. We have a follow-up question coming from Gary Prestopino with Barrington. Please proceed. Yeah, I just wanted to kind of ask, just just for our purposes of modeling, and I don't want to get too specific. but on a sequential basis, I mean, how are we looking at? Plotting out quarter to quarter to quarter to quarter. Yeah, we're checking our notes. But typically, with the launches and the ramp up of timing, that's why we've talked about the improvement, second half versus first half, right?

Gary Prestopino: We don't typically, we don't typically provide quarterly revenue guidance. But Yes, you would expect to see a There is a level of seasonality, particularly in Q3, because of our Q3 being with holidays, but a fairly significant step up in Q4 versus Q1. Okay, so the answer would be that probably sequentially, we're going to continue to see increases as we go along, and back after the year as well. Okay. That's fine. Thank you.

John DeGaynor: We have reached the end of the question and answer session, and I will now turn the call over to John DeGaynor for a closing remark. I want to thank everybody for your attendance today. I'll just conclude it by saying we're really proud of what we've achieved in 2025, and we know that we have a lot more to do in 2026, and we look forward to speaking with you in the next earnings call to describe that progress. So thank you all.

Operator: This concludes today's conference and you may disconnect your lines at this time. Thank you for your participation.

Q4 2025 Methode Electronics Inc Earnings Call

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