MEI earnings call analysis

NYSE:MEI Q2 2026 Earnings Call Transcript Generated on 10/9/2026 John | Chief Executive Officer: positioned us for future growth and operational efficiency. We look forward to being closer to our automotive customers and to having almost all of our functions under one roof. Please turn to slide five. Methods power solutions offerings actually go back more than 60 years, and we are using this history and our expertise to bring solutions to our customers. Our data center activity was just over $40 million in fiscal 2024, and last year generated over $80 million in annual sales. We continue to expect to see long-term growth in this area. One of the most exciting aspects for me in this business is the ability to apply core competencies that have been built over decades to current and future products in different end markets. These capabilities can be brought to bear to better address the megatrend-fueled opportunities in the EV and data center spaces. Looking ahead, as we implement more customer-focused solutions like vendor-managed inventory, utilize our global footprint more aggressively, and develop solutions for problems like high voltage and data centers, it provides us with opportunities to differentiate method in ways that we have not in the past. We continue to expect our fiscal 2026 power sales to be in line with fiscal 2025. We also expect a sales acceleration in the future as our data center growth strategy positions us to take a larger share of customer demand. Our power solution offerings are clearly a long-term growth engine for Method. Please turn to slide six. As you think about the transformation of Method, it has been a journey, and the starting point for that 18-month journey was to stabilize the base. It started by fixing launch execution, and we had 50-plus launches between fiscal 2025 and fiscal 2026 to deliver, while improving customer satisfaction and product quality in multiple regions. So we needed to address these fundamental challenges first. A revamp of our most important plans in Mexico and Egypt, both from a leadership and from an execution standpoint, was next. We've changed all but two of the senior leaders, and many of the team members below those leaders in the company. Standing up a new team who are driving a more global approach, diagnosing situations, and pinpointing weaknesses has dramatically helped move things forward. We are nearing the end of this foundation building phase of our transformation journey, and now starting to discuss what the next chapter is as the foundation is corrected. In this next phase, we can start talking about leveraging synergies with credibility. Because without execution as a foundation, we would not have the credibility with customers and shareholders to talk about what's next. Overall, we've been laser focused on improving execution and making Method a more reliable and resilient company and is showing up in our results. I'll now turn it over to Laura for a discussion of our financial results.

Laura | Chief Financial Officer

Thanks, John. And turning to slide seven. First, let me note that fiscal 2026 is a 52-week year and fiscal 2025 was a 53-week fiscal year. The three months ended November 1st, 2025 and November 2nd, 2024 were 13 and 14-week periods respectively. Second quarter net sales were $246.9 million compared to $292.6 million in fiscal 2025 as a decrease of 16% while on a sequential basis, sales increased 3%. The year-over-year decrease in sales reflected lower volume across all segments. Second quarter adjusted net loss was $6.7 million, an $11.9 million change from fiscal 2025, and on a sequential quarter basis, a reduction of adjusted net loss by $1.1 million. Second quarter adjusted EBITDA was $17.6 million, down $9.1 million from the same period last year, and on a sequential quarter basis, adjusted EBITDA increased $1.9 million. Second quarter adjusted diluted loss per share was 19 cents, a 33-cent decrease from the prior year second quarter and a 3-cent improvement from Q1 fiscal 2026. Overall, our improvement efforts to drive expanded margins when we return to sales growth are still underway. Please turn to slide eight, where I will discuss the progress made with our disciplined capital allocation strategy. Net debt was down $29.6 million compared to the same period last year as we continue to drive cash flow and debt reduction. We ended the quarter with $118.5 million in cash, which was up $21.5 million year over year. Operating cash usage in the second quarter was $7.4 million, but we generated $17.7 million in the first half of fiscal 2026. An item to note in the quarter was a $10 million inventory bill to support the transition to vendor-managed inventory for our data center customers. With that said, our operating cash flow performance in the quarter would have been positive without the vendor-managed inventory impact. Second quarter free cash flow was a usage of $11.6 million compared to a usage of $58.4 million in the fiscal second quarter 2025, reflecting a $46.8 million improvement on a year-over-year basis. Turning to slide nine. Again, please note that fiscal 2025 was a 53-week fiscal year and fiscal 2026 is a 52-week fiscal year. For fiscal 2026, we are reaffirming our expectation for sales to be in a range of $900 million to $1 billion and for adjusted EBITDA to be in a range of $70 to $80 million. We expect our second half results to be higher than the first half as we have previously communicated. Q3 results will reflect traditional seasonality with improvement expected in Q4. For fiscal year 2026, We expect free cash flow to be positive compared to an outflow of $15 million in the previous fiscal year. Our fiscal 2026 guidance represents a solid foundation for the method team to further build on. We are pleased with the results here today, and our team is focused on finishing the second half of fiscal 2026 strongly. With that, I will hand it back to John for closing remarks.

John | Chief Executive Officer

Thanks, Laura. Please turn to slide 10. The method team is not standing still. and is working with a high sense of urgency and purpose to drive improved execution. This quarter's results demonstrate that our business is moving decisively in the right direction, yet there is still important work ahead as we rebuild the future of Method. We are aggressively driving financial improvement to strengthen our balance sheet and deliver our fiscal 2026 guidance. At the same time, we are selectively investing in initiatives such as data centers that will position Method for long-term growth. We are transforming Method into a more reliable and resilient company, one that is poised to generate long-term value for our shareholders. And with that, operator, please open the line for questions.

Operator

Thank you. At this time we will be conducting our 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 keys. One moment please while we poll for questions. Thank you. Our first question is coming from Luke Young with Baird.

Your line is live. Luke Young | Analyst, Baird

Good morning. Thanks for taking the questions. John, maybe if we could start with the power business this quarter. Just hoping to square kind of current trends that you're seeing right now between the big drivers there in terms of EV and data center, and then in terms of that Full year expectation, maybe if you could break that out similarly, are you expecting some growth in data center to be offset by EV, or are those trending more similarly, would you say?

Thank you. John | Chief Executive Officer

Thanks, Luke, and good morning. You know, I think it's important to note, as we've talked before, The year-over-year headwind from an EV standpoint, we've already really taken that hit with some of the launches and the things that we've talked about, whether it's delays in certain Stellantis programs or other programs. When you understand overall EV volumes or when you understand our volumes, automotive is, on a year-to-date basis, automotive within Method is 44% of total sales. EVs represent 41% of that in North American EVs is 12% of that. So total revenue year-to-date in North America for EVs is less than $12 million. So when we talk about EVs and we talk about the headwinds of EVs, I think it's important for everybody to understand, as we've said multiple times, that our EV exposure is huge. not just in North America. It's in Europe and it's in Asia, and it's a much greater percentage of our total than in North America. We expected it to be much higher, as we've talked about in previous quarters, but those launches did not come to fruition. So we've already taken that hit. With regard to data centers, as we mentioned to you on the last call and as we talked about at the Baird conference a few weeks ago, We're very optimistic about the opportunity to grow, and the move to vendor-managed inventory gives us an opportunity to take share and to get a lot more clarity with regard to the sales forecast. But as we have said, we will not adjust our guidance from a data center standpoint until that EDI is locked in. So I believe there is tailwind to come in that. It is not something that we can talk about here in Q2. But I'm very confident in the team that Brad Perotti is leading and the work that we're doing to deepen our relationships with the customers. We would not have made this investment in the $10 million of vendor-managed inventory were we to not feel confident that this is a source of growth for us.

Luke Young | Analyst, Baird

Yeah, I mean, I appreciate the investment, John. I was just wondering if we could put a finer point on the two Q trends. Just was the power business Similar to what you're expecting for the full year in terms of just being relatively flat and within that, did data center show any growth overall in the second quarter versus 2Q last year?

John | Chief Executive Officer

Data centers are exactly on the guidance that we expected and actually maybe a little bit ahead. But when we talked about when we said what we expected for the full year, the data center revenue for Q2 is exactly in line with that. And the EV business, as I said to you, EV headwinds are primarily in North America, and they're primarily due to delayed or canceled launches, which we've already taken the hit for that. That's why we had $100 million less in revenue guidance in the first place. So we're only 44% exposed to automotive. We're only 36% of that 44% in North America. So SAR-based revenue headwinds for us are relatively limited from an automotive standpoint. And EV-based headwinds in North America are relatively limited as well. So we're on track with what we expected. We're not getting tailwinds from CVs. We're not getting yet tailwinds from ag and industrial headwinds. The data center stuff continues to move forward. We continue to be optimistic about where that will go, but not to the point where I can increase the guidance on that number.

Luke Young | Analyst, Baird

Got it. Just in terms of the guidance, reiterating overall sales in EBITDA and the comment that the second half should be stronger, I certainly appreciate the seasonality in the third quarter from a top line standpoint. Should we think that Second half versus first half strength primarily through the lens of EBITDA. Just wanted to clarify that.

Thank you. John | Chief Executive Officer

Well, I think what you should think about, and Laura can give you a little more detail on sort of the year-over-year improvements, I think what you should think about is the sequential improvements in our two biggest facilities and the progress that we've made in both Egypt and Mexico. And as I said in my prepared remarks, Mexico is behind Egypt with regard to that performance. But Laura, we'll talk a little bit on just where we are today.

Laura | Chief Financial Officer

Yeah, for Egypt, when looking at Egypt, our gross margins have nearly doubled. So we've made reductions in scrap, freight costs. We have upgraded talent there too, both at a leadership team meeting, our leadership team level, and a level below. In Mexico, obviously with the reduction in volume, margins are down. However, we focus on the cost side. there in Mexico with reductions in direct labor, indirect labor, and salary. Material and freight and scrap are also down in Mexico.

John | Chief Executive Officer

So, to answer what a fine point on it, Luke, yeah, you should expect to see it as a conversion on sales will be a lot higher because some of the cost of poor quality, the premium freight, some of the other things as we make improvements in the plants and we get through these launches. So, you start seeing run rate impact of launches and you see the improvements that we're making in the plants. That's why we feel very confident about the second half of the year.

Luke Young | Analyst, Baird

Hopeful. Thank you.

I'll leave it there. Conference Moderator | Investor Relations

Thanks, Luke.

Operator

Thank you. Operator. Our next question is coming from John Fransreb with Siddhoti & Company.

Your line is live. John Fransreb | Analyst, Siddhoti & Company

Good morning, everyone, and thanks for taking the question. Hi, John. I guess... I'm just curious about the guidance. You know, we're more than halfway through with the year. We have a seasonally weak third period coming up. Are you comfortable at the lower end at the guidance or at the upper end based on your current visibility today?

John | Chief Executive Officer

John, because there's so much exogenous volatility, you know, Nexperia is not behind us. We still have, you know, commercial vehicle sales that are turbulent, we still have a whole series of ranges of economic turbulence. It's why we haven't narrowed either the top or the bottom half of our guidance and why we continue to bracket both the revenue guidance and the EBITDA, the adjusted EBITDA guidance the way we do. The predictability and the performance of the business is much better than where it was 12, 18 months ago. But we spend every day still talking about tariffs and every day still talking about the impact of next period and what it can mean from a revenue perspective. And it would be, we believe... a disservice to our shareholders to narrow down those numbers right now until we have a little more clarity on just what's happening from the turbulence in the external market.

John Fransreb | Analyst, Siddhoti & Company

Okay. Fair enough, John. In the quarter, I noticed there was a nice improvement in the industrial operating profit on a sequential basis on a nominal increase in revenue. Is that totally due to data centers, or can you provide some color with all that sequentially?

John | Chief Executive Officer

No, basically it goes back to our plants are getting better. And we've said before that these plants aren't, other than in a very specific situation, they are shared between our industrial activities and our automotive activities. So the plants getting better flows through the P&Ls of the different segments. Our plants are getting better. And that's why we can feel confident about our guidance without it having to be revenue tailwind that drives it. Is Mexico, Egypt first, but Mexico as well. Both of them are getting better. Our plant in Malta is much, much better. The plants in China continue to perform. I want to thank that team. But the two places that were most on fire 18 months ago when I walked in the door were are much, much better, and that gives us the predictability. When we talk about earning the right with shareholders and the predictability that goes along with it, it starts with our plants are much, much better.

John Fransreb | Analyst, Siddhoti & Company

You know, John, there's a point where you voiced concerns about new program rollouts and you want to get beyond that. And you just mentioned, you know, 50 so far in, you know, 25 versus 26. You know, are we beyond the point, you know, given the new personnel that you've hired in multiple levels where that's no longer a significant worry for you at this point?

John | Chief Executive Officer

What I can say is the trend lines from our launches are all also going in the right direction. In many situations, those launches both were happening in Egypt and in Mexico, so were the plants getting better? Some of it was premium freight and other issues with regard to program launches. The ones that were most problematic where we had customers in the building have largely gotten behind us. It doesn't mean that they're all behind us. We still have a couple of challenged launches, a little bit of it, the difference between where I said Mexico and its phasing versus Egypt. But we've got new people plus some outside help that are working with us to continue to stabilize and drive those launches. And so The answer is largely the launch challenges are behind us, but not completely. OK, fair assessment.

John Fransreb | Analyst, Siddhoti & Company

I guess one more question. It appears that you're past the part of stabilizing the business, and you're moving on to the part in the transition process of addressing revenue and cost cutting drivers. Can you kind of like walk us through the roadmap to returning to profitability? What's going to be the biggest drivers here? Is it going to be on the cost cutting, be it product rationalization, or is it going to be really a top line driven story here to get you back in black?

John | Chief Executive Officer

Well, so if you think about our year over year improvement from an EBITDA perspective, if you just took midpoint of our current EBITDA guidance versus last year, And what that means, basically adding from 43 million to midpoint at 75, adding $32 million of EBITDA on $100 million less in sales, that is getting cost for quality and waste out of the plants. We have taken more than 1,000 people out of those two big facilities between Mexico and Egypt. We will continue to refine those, but it's, and the headquarter move is a cost refinement plus a capability increase. We will continue to make cost adjustment activities, but now it's really, okay, let's ramp up these new programs. Let's ramp up the data center activity. Now let's really start to drive revenue. Let's get ourselves positioned as we see commercial vehicle volumes come back into, calendar 2027, what would be our fiscal, you know, the latter part of our fiscal 2026 and into our fiscal 2027, as we start seeing some revenue tailwinds just with stuff that we have because there's headwinds in each of our end markets, we believe that the business is very well positioned for profitability at all levels down the income statement.

John Fransreb | Analyst, Siddhoti & Company

Okay, fair enough. I'll actually get back into Q at this point. Thanks, John.

Operator

Thanks, John. Thank you. Our next question is coming from Gary Prestapino with Barrington Research.

Your line is live. Gary Prestapino | Analyst, Barrington Research

Hey, good morning, everyone. Good morning, Gary. A couple of housekeeping questions here. Laura, this was the quarter where it was 12 versus 13 weeks last year. Is that correct? That's correct. Okay, so on a lifelike basis, can you give us some idea of what the sales were down?

Laura | Chief Financial Officer

Yeah, the sales were about roughly $20 million.

Gary Prestapino | Analyst, Barrington Research

So $20 million that was incrementally added by that one week?

Laura | Chief Financial Officer

For last year, yes.

Gary Prestapino | Analyst, Barrington Research

Okay. Thank you very much. And then... I noticed you didn't report the percentage of your sales to EV and hybrid applications, which you had done in the past. Are you not reporting that anymore? Can you share that with us?

John | Chief Executive Officer

Well, I don't know that we gave that specific detail, but let me give it to you. So in the first half, so I don't have it by the quarter, but I have it by the half. EVs are 41, so automotive... is 44% of our total sales are $217 million in the first half. EVs are 41% of that. Now, for full transparency, that's not just power. That's anything that goes into an EV. Then you take that 41% of the 44% and split it. 71% of that, 41% is in Europe, 18% of the 41% is in Asia, and 12% of the 41% is in North America. So in the first half of fiscal 2026 for Method, our sales on the EV side in North America were $11.5 million. So when we talk about EV penetration in North America and what it means for a headwind, it's already been baked into our guidance. The stack charts that we talk about with regard to Stellantis and some of the other programs, we already took the hit.

Gary Prestapino | Analyst, Barrington Research

Right. I understand that. I'm just trying to square with what you guys have recorded in the past. And I'll work through that. That includes EV and hybrid, right?

John | Chief Executive Officer

No, this is just based on platform specific, it's EV stuff. As we talk about business wins and where there are opportunities for power going forward, those would be both in EVs and hybrid vehicles. And we talk about that separately. But these are for EV-based platforms.

Gary Prestapino | Analyst, Barrington Research

Okay. And then in your guidance, the tax expense of $17 to $21 million, is that all cash taxes were? Could you give us some idea of what the cash taxes will be?

Laura | Chief Financial Officer

No, some of that, as it's noted on the slide, it does include a $10 to $15 million valuation allowance on deferred tax assets.

So that's expense. Gary Prestapino | Analyst, Barrington Research

so I backed that out of your range then to get an idea of what cash taxes could be. Okay. All right. And then John, I want to talk about, um, your program launches. Like I went through my reports over the last quarter, 30 program launches you're anticipating this year. Um, you say you've taken all the hits from the reduction in the EV programs. So in the back half of the year, number one is how many programs are expected to be launched? And are these programs all dealing with ICE applications? Give us some idea of where those programs are. Is it all auto? Is it across all of the different segments like industrial or whatever?

John | Chief Executive Officer

So I don't have the split by region, but the majority of the programs that are launching are power-based programs. And so there, Gary, it would be either EV or hybrid. And we have a couple of examples where it's both. The new launches are primarily in Mexico right now versus in EMEA. Those launches, we went through some of that pain earlier. It's part of the reason why Egypt is ahead of Mexico in the transformation. And the big hit that we took with regard to programs that were delayed or canceled was primarily in North America. That's part of the reason why North American auto was so challenged, because we had particularly Salientis programs that we expected, you know, $100-plus million in annualized revenue that were canceled. So as we have discussed previously, we're in negotiations with Salientis on this topic, but we are launching multiple programs in Mexico, and ramping up programs in Egypt and Malta right now, plus programs in Asia Pacific.

Operator

Thank you. Thank you. We have another question from John Fransreb with Sedotian Company.

Your line is live. John Fransreb | Analyst, Siddhoti & Company

Yeah, just regarding the cash outflow in the quarter, A quick back of the envelope suggests that there was a cash outflow in the receivables in the quarter. Is that like seasonal timing? If I did the numbers right, it seems like it was $12 million in the quarter. Or is there something else to that? I'm sorry, $14 million in the quarter.

Laura | Chief Financial Officer

Yeah, that's correct. There was $14 million. It was up from last year, and that's due in last quarter due to the sales increase. in the quarter compared to last quarter.

John Fransreb | Analyst, Siddhoti & Company

Okay. Okay. So there's nothing, nothing else.

All right. Unusual about that. Laura | Chief Financial Officer

And there were some receivables that were collected in November after the end of our, after the end of our quarter. So it came down in November.

John Fransreb | Analyst, Siddhoti & Company

Excellent. Well, thank you. And I guess in regards to, since John, you brought this up about tariffs, you talk about it every day. But you don't have a new change in the slide presentation from the fourth quarter. So is it fair to assume that not only the bridge that we talked about last quarter, but the tariff slides, everything is status quo since the last presentation that we had included? Or is there anything we should be aware of?

John | Chief Executive Officer

There's no new news from an investor standpoint with regard to tariffs. As we've said, we are working with our customers closely to first try to alleviate any tariffs where possible, and our USMCA facility helps us do that. We're moving, we're rebalancing manufacturing to try to help that, but where there is a tariff that we can't avoid, we are passing that on to customers and working with customers that way. So there's nothing different, John, with regard to the financial impact for us. More what I was saying is the tariff regime, and particularly most recently the next period chip issue, still creates turbulence and it still it still creates um challenges with regard to our customer plans stuff that's in many ways outside of our control and that's why the revenue range for our guidance is difficult to narrow down at this point yet okay no that's fair and i guess one last question as we close out the calendar 2025 calendar John Fransreb | Analyst, Siddhoti & Company: I'm kind of curious about how you envision calendar 2026 in some of the what's called problematic end markets. Do you view the overall automotive sector as, you know, up or down? Same with the ag and the class A truck market. What are your thoughts in aggregate about how calendar 2026 plays out?

John | Chief Executive Officer

So concurrent, we try to use third-party forecasters to help us with this because I'd love it if we had a great economic staff that was better than S&P, but we don't. And I don't think that's the best place to use our smart people. IHS is saying that fiscal, or this is fiscal year, not calendar year, right? IHS is saying that calendar year would be just a little bit better from an overall volumes perspective. that also that IHS is talking about 2027 or 2026 being better from a CV standpoint, particularly in the second half of the year, which would be our first part of our fiscal 2027. So we see in the industrial market as we talk to customers and we see where things are going, for our electronics business, our nautical lights business, as well as some of the activities from Greycon, we see some future tailwinds as opposed to headwinds. So, you know, the thing that gives me the most, one of the things that gives me the most confidence here is this has been performance improvement in the face of very little good end market news. Our performance improvement is Yes, we talked about data centers being a tailwind and good end market news, but the rest of our end markets have all been headwinds for us. And commercial vehicle, as those who know that space, is a highly cyclical, more cyclical than past car, and we still move freight, and there will be trucks that will be sold. And so what we're seeing for commercial Calendar year 26 is an improvement, particularly in North America, and a small improvement in Europe that will hit us the latter half of our fiscal year and early into fiscal 2027.

John Fransreb | Analyst, Siddhoti & Company

Thanks. I appreciate your insight. Thanks, John.

Operator

Thank you. And that concludes our Q&A session. I will now hand the conference back over to Mr. Randy Wilson for closing remarks.

Please go ahead. Randy Wilson | Investor Relations

Thank you for joining us today and your interest in method. Take care, everyone, and have a great rest of the day. And with that, operator, please disconnect the call.

Operator

Thank you. Ladies and gentlemen, this concludes today's call. You may disconnect your lines at this time and have a wonderful day. And we thank you for your participation. jsPDF 3.0.3 D:20261009125706-00'00'

NYSE:MEI Q1 2026 Earnings Call Transcript Generated on 6/6/2026 Operator | Conference Operator: Good day, everyone, and welcome to the Method Electronics First Quarter Fiscal 2026 results. At this time, all participants are on a listen-only mode, and we will open the floor for your questions and comments after the presentation. It is now my pleasure to turn the floor over to your host, Rob Cherry, Vice President, Investor Relations. Sir, the floor is yours.

Rob Cherry | Vice President, Investor Relations

Thank you, Operator. Good morning, and welcome to Method Electronics Fiscal 2026 First Quarter Earnings Conference Call. For this call, we have prepared a presentation entitled Fiscal 2026 First Quarter Financial Results, which can be viewed on the webcast of this call or found at metho.com on the Investors page. This conference call contains certain forward-looking statements, which reflect management's expectations regarding future events and operating performance and speak only as of the date hereof. These forward-looking statements are subject to the safe harbor protection provided under the securities laws. Method undertakes no duty to update any forward-looking statement to conform the statement to actual results or changes in Method's expectations on a quarterly basis or otherwise. The forward-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 Method's filings with the Securities and Exchange Commission, such as our 10 and 10 reports. 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. At this time, I'd like to turn the call over to Mr. John DeGainer, President and Chief Executive Officer.

John DeGainer | President and Chief Executive Officer

John DeGainer Thanks, Rob, and good morning, everyone. Thank you for joining us for our first quarter earnings conference call. I'm also joined today by Laura Kowalczyk, our Chief Financial Officer. Let's start with the key messages. Please turn to slide five. I'm happy to report that the method transformation is firmly on track. There's still much more to do, but the trajectory is according to plan. We had another good quarter for data center power product sales with growth over the prior year. Our income from operations was up $9 million from the prior year. This was the result of reduction in SG&A costs and operational improvements that we have been sharing with you. This is clear evidence of methods starting to earn the right, as we like to say. Another example of execution improvement is the third straight quarter of strong free cash flow and net debt reduction. Our management team is maintaining a key focus on both the income statement and the balance sheet. As we look to the remainder of fiscal 26, we are confidently affirming our guidance. Despite all the various headwinds that we are facing, the company still expects to double its EBITDA for the full year, even with a $100 million decline in sales driven by lower EV demand. The ability to affirm this profit growth is a direct result of the significant and tireless efforts of the Method team. They've put a lot of work into our transformation, and the progress is tangible. Turning to slide six and our results for the quarter, our sales were $241 million, down $18 million year-over-year as we continue to navigate the transition and programs that we have previously communicated. We remain on track to launch over 30 new programs this year, with most of the launches scheduled for the remainder of the year. In addition, the ongoing strength of our power products activity was able to partially offset the program transition headwind. We recorded a $9 million increase in operating income driven by the SG&A reductions and operational improvements that I previously mentioned. At the adjusted EBITDA level, we delivered $16 million, up $6 million year over year. All of this is further evidence of the actions that we have taken to improve our operations, supply chain, and product launch capabilities. In these three key areas, our performance in EMEA, particularly in Egypt, has notably improved. while we continue to see solid ongoing performance in Asia. Both free cash flow and debt reduction continue to be good stories for us. The business delivered free cash flow of $18 million in the quarter, which was the third quarter in a row of strong free cash flow. In turn, we reduced our net debt level, also for the third quarter in a row, and we have now reduced it by $41 million over the three quarters. These results provide more evidence of an organization whose operating efficiency is improving. Turning to EV activity, sales were down slightly year over year, but we were up on a percentage basis. For the quarter, they were 19% of our consolidated total, an increase from 18% last year. On a sequential basis, they were down from 20%. We do remain bullish on the long-term megatrend in EVs. the near-term outlook remains soft, mostly in North America, which is partially being offset by the strength in Europe and Asia. Based on customer EDI forecasts and third-party industry projections, we still expect a significant overall rebound in EV sales in fiscal 27. Turning to data centers, sales growth was a solid 12% year-over-year. As a reminder, we did have record sales in the fourth quarter of 25, So, not surprisingly, our sales were lower sequentially. However, we still expect fiscal 26 sales to be similar to fiscal 25 with some upside potential. As I mentioned last quarter, we are achieving this performance based on our existing product technologies. We also have an opportunity to leverage our power expertise, developed over decades and honed by our EV activity, to capture even more growth. The opportunity is being driven by vast increases in power density sought by data center operators for future installations. Again, it's too early to share any more details on this, but it is very promising for future growth in our power solutions enterprise. Turning to slide seven, I want to spend a little more time on our power solutions enterprise. Power products are in methods DNA. Our experience goes back many years. to the time when we supplied bus bars and connectors on the Apollo lunar landers and on the original IBM mainframe computers. Now, those years of experience and expertise are being leveraged on today's power distribution needs in electric vehicle, data center, and military and aerospace applications. As you can see from the chart on this slide, those applications have helped drive our power solution sales to a healthy 30 percent compound annual growth rate over the last three years. Going forward, we see even more opportunities for sales growth. For data centers, the need for higher voltage bus bars is driving further product innovation. In EVs, we are starting to supply interconnect boards for a more efficient power architecture. Lastly, for military and aerospace applications, we are supplying advanced products to meet the growing needs of defense equipment manufacturers. In all these cases, we are bringing our one-method mindset to bear and drawing on our global creativity to drive innovation by listening to customers' needs and bringing them solutions like cutting-edge high-voltage power products. Our power history and DNA are providing method with a competitive differentiation in the marketplace. In regard to our forecast for fiscal 26 power sales, given our guidance for flat data centers and decline in EV, our sales will moderate this year before re-accelerating next year. Power Solutions are clearly a long-term growth engine for Method, and we are actively investing in this area. Turning to slide eight, I'll give a brief update on where Method is on its transformation journey. As I have said before, transformations are never easy, and 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. The method journey is undoubtedly a transformation. Like any journey, the path is not linear. The first order of business was stabilizing the base, which included the significant organizational changes that we made in previous quarters. It meant focusing on executing program launches while simultaneously revamping plans and installing a new team, all in the face of numerous external distractions. We have 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. We are now better positioned to leverage synergies and utilize core competencies to align with market megatrends like data centers and EVs. Our improvements are creating opportunities in other areas as well. We have seen a notable uptick in RFQs and RFPs, which is being driven by our ability to leverage our global footprint and respond to market changes. As a result, we are seeing potential future sales growth from takeover business. This takeover business is in both auto and non-auto markets, and it will likely result in even more customer diversity for Method. While the financial results are not yet where we want them, our team has accomplished much since the beginning of our transformation journey, and a foundation has been laid for us to drive consistent and improved execution. At this point, I'll turn the call over to Laura, who will provide more detail on our first quarter financial results and guidance.

Laura Kowalczyk | Chief Financial Officer

Thank you, John, and good morning, everyone. Before I begin, I would like to address the cause of our delay in reporting first quarter earnings. Shortly before our original reporting date, we discovered an inadvertent miscalculation of dividend equivalents. This caused us to exceed our restricted payments basket for the first quarter as per our credit agreement. The amount was not material, but was in excess of what the agreement allowed. We subsequently needed time to obtain a waiver from our banks, which we could not disclose until the matter was resolved. The waiver was successfully obtained. Please turn to slide 10. The first quarter net sales were $240.5 million compared to $258.5 million in fiscal 25, a decrease of 7%. On a sequential basis, sales decreased 6%. The quarter saw continued growth in the sale of power products, including data center applications. In the automotive segment, sales were weaker in North America as we continue to experience a net negative impact from the transition from legacy programs to new ones. We also experience continued sales weakness in commercial vehicle lighting applications. First quarter adjusted income from operations was $2 million, an increase of $6.7 million from fiscal 25. On a sequential basis, adjusted income from operations increased $23.6 million from the fiscal 25 fourth quarter. Please see the appendix for reconciliation of all adjusted measures to GAAP. On a year-over-year basis, gross profit was relatively flat, despite the $18 million in lower sales. The main driver of the improved operating income was a $9.6 million reduction in S&A related to lower professional fees and compensation expenses. In the sequential comparison, The fourth quarter of fiscal 25 included an excess and obsolete inventory expense and discrete inventory adjustments of $15.2 million. Overall, despite the $18 million sales headwind, METHO delivered operating income growth both over the prior year and sequentially. Please turn to slide 11. Shifting to EBITDA, a non-GAAP financial measure, First quarter adjusted EBITDA was $15.7 million, up $5.9 million from the same period last year. On a sequential basis, adjusted EBITDA increased $22.8 million from the fiscal 25 fourth quarter. As with operating income, EBITDA increased despite the sales headwinds, driven mainly by a reduction in S&A and other operational improvements. Please turn to slide 12. First quarter adjusted pre-tax loss was $5.1 million, an improvement of $4 million from fiscal 25. On a sequential basis, adjusted pre-tax loss improved $23.5 million from the fiscal 25 fourth quarter. Again, the pre-tax loss improved despite a 7% sales headwind year over year and was driven mainly by a reduction in S&A and other operational improvements. First quarter adjusted diluted loss per share was 22 cents, a 9-cent improvement from the prior year and a 55-cent improvement from the fiscal 25 fourth quarter. Overall, our cost reduction efforts clearly bore fruit this quarter and set method up for improved margins when we return to sales growth. Please turn to slide 13. The first quarter's net cash from operating activities was $25.1 million, up from $10.9 million in fiscal 25. First quarter capital expenditures were $7.1 million, down from $13.6 million in fiscal 25. The lower CapEx was according to plan, as much of the program launch investments are behind us, and we are becoming more efficient in our spending on the new launches. First quarter free cash flow, a non-GAAP financial measure, was $18 million, as compared to negative $2.7 million in fiscal 25, an increase of $20.7 million. This increase was mainly due to the lower working capital and lower capital expenditures. This was our third quarter in a row of strong free cash flow. Please turn to slide 14. Just like free cash flow, we had our third quarter in a row of reduced net debt, a key focus of the method management team. Total debt was up $5.8 million from the fourth quarter. The increase was mostly driven by foreign exchange, as the majority of our debt is based in euros. We ended the quarter with $121.1 million in cash, up $17.5 million from the fourth quarter. Net debt, a non-GAAP financial measure, decreased by $11.7 million from the fourth quarter to $202.3 million. We have now reduced net debt by $41 million over the last three quarters. Please turn to slide 15. Regarding forward-looking guidance, it is based on management's best estimate and is subject to change due to a variety of factors as noted at the bottom of this slide. For fiscal 26, we are affirming our expectation for sales to be in a range of $900 million to $1 billion. 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 compared to the prior year. We are also affirming our expectation for 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. As a percentage of net sales, we expect almost a doubling of EBITDA margin from 4.1% to 7.9%. In regard to free cash flow, as previously noted, we had a strong start to the year. For the full fiscal year 26, we expect free cash flow to be positive versus the negative $15 million in the previous fiscal year. The fiscal 26 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, of which $10 to $15 million is for valuation allowance on deferred tax assets. Our practice has been to non-gap the valuation allowance for our adjusted earnings calculation. So to echo John, this guidance represents a solid foundation for the method team to further build on. That concludes my comments, and we can open it up to questions.

Operator | Conference Operator

Certainly. Everyone at this time will be conducting a question and answer session. If you have any questions or comments, please press star 1 on your phone at this time. We do ask that while posing your question, please pick up your handset, if you're listening on speakerphone, to provide optimum sound quality. Once again, if you have any questions or comments, please press star 1 on your phone. Your first question is coming from Luke Young from Baird.

Your line is live. Luke Young | Analyst, Baird

Good morning. Thanks for taking the questions. John, maybe starting with automotive, you know, clearly most challenging results relative to method overall still. I know there's a lot of countervailing factors there. Just hoping to better understand relative to the overall outlook for EBITDA to double this year, how you see the automotive segment contributing to that incrementally, especially beyond some of the non-repeating operating items that were in the P&L last year. And then, you know, even beyond this year, if we zoom out maybe a couple years, just kind of what you envisioned for that business at a high level on the operating side of the house.

Thank you. John DeGainer | President and Chief Executive Officer

And Luke, thanks for your question. I think it's important that we separate out by region. That's why we specifically talked about the performance in EMEA and the transformation in Egypt. We have automotive business around the world, and our business in EMEA has significantly improved on a year-over-year basis. Part of the challenge that we have in North America, as you well know, is the transition of some of the historic programs rolling off that specifically hit us in Mexico. So the automotive business globally, I would say the performance activities are significant. impacted disproportionately in North America due to just the roll-off of that program and the subsequent delay in the EV programs, particularly with regard to Stellantis, as we've mentioned to you. So we have a bit of a tremendous amount of progress in EMEA. We have stability and good performance in Asia, and we have challenges both from an execution standpoint, as we talked about our Q4 call, but also from a revenue headwind perspective in North America. The second part of your question, where do I see it going forward, as we talked about, we expect to see the volumes start to stabilize and grow in fiscal 27 from an EV standpoint. That will create tailwinds for our Mexican facilities and basically for our North American business. And then you also see some of the data center activity that we're putting into Mexico that will help it. So I see leverage from all of our segments in our facilities, and that will help the business going forward.

Luke Young | Analyst, Baird

Thanks so much, John. And maybe a related question just in terms of Asia. So I know there's been a program roll-off impacting that business and automotive as well if we look at the sales base. Following that role, I'm fairly limited on a quarterly basis right now, just maybe at a high level strategically how you're thinking about Asia, and clearly relative to EV is one of the trends that you're most focused on, probably the most opportunity-rich region, China especially.

Thank you. John DeGainer | President and Chief Executive Officer

Our Asia team really in many ways is leading our activity from development of new product for EV applications. The battery interconnects and some of the other advanced activities are being led out of, from a manufacturing perspective, out of Asia. So they become our, in many situations, our launch facility and our first and our first product development and product validation location. So, yes, true, we had headwinds for the roll-off of one customer's programs, but I see a lot of progress there. It's a very well-run organization from an operational and from an engineering perspective, as well as from a working capital side, and they give us credibility with customers both on the power side and on the... both on the data center and on the EV power side, and give us a chance to grow around the world.

Luke Young | Analyst, Baird

Got it. And then maybe just a quick one on the interface business. I know that in the bridge you had given us for the current fiscal year, there was an appliance program roll-off reflected in that bridge. Are we seeing that in the first quarter results yet? And to what extent there might be any offsets from the transceiver business that we're seeing in the P&L right now?

Thank you. John DeGainer | President and Chief Executive Officer

The reason we didn't put that bridge in there is the situation is consistent with what we have said in previous quarters. So the roll off as we talked about in the fiscal year and how they're going to move year over year is consistent from one quarter to the other. So, yes, you're seeing the impact of the roll-offs both from the user interface as well as from the Whirlpool business. And then we see the ramp-up of some of the new programs as well as the backfill with some of the data center activity.

Understood. Luke Young | Analyst, Baird

I'll leave it there for now.

Thank you. Operator | Conference Operator

Thanks, Luke. Thanks for the questions. Thank you. Your next question is coming from John Fangereb from Sedati.

Your line is live. John Fangereb | Analyst, Sedati

Good morning, everyone, and thanks for taking the questions. I'm curious, last quarter you provided a slide that kind of really took a deep dive into the tariff outlook. Has there been any change in your tariff expectations, be it positive or negative?

John DeGainer | President and Chief Executive Officer

There has been no change, John. We had, what, $1 million worth of impact. That's more of a timing thing than it is anything else in the quarter. But we have been pretty consistent in our approach with regard to tariffs. We're not going to bear the extra cost. We've worked with the customers on this. And so there has been no change different than what we said in the previous quarters, and we feel pretty confident to the greatest extent we can be confident with the changes in Washington, we feel pretty confident based on what we see right now as to where we're at and the relationships that we have with customers through this. The other thing that I would say is, and I mentioned it a little bit in the additional RFQs, the current tariff regime is actually creating opportunities for us because our facilities, our ability to, they're USMCA compliant, and our ability to deliver into North America with 97-plus percent USMCA compliance. So it's creating opportunities and RFQs that we didn't see six or nine months ago with customers that are new to us.

John Fangereb | Analyst, Sedati

That's good to hear. And in terms of restructuring actions, can you talk a little bit about how far along are you in this process, John? You just got the low-hanging fruit at this point, and, you know, maybe some more color. What kind of, what would you expect maybe in fiscal 2026?

John DeGainer | President and Chief Executive Officer

Well, I mean, we've talked about the transformation of the leadership team, and in the last quarter, we talked about the move of the consolidation of the headquarters facility. We're on track with regard to that and believe we'll have everything completed by the middle of this fiscal year from the headquarters consolidation and the facility consolidation. We continue to look at what we can do around the world with regard to reduction of whether it's engineering activities or whether it's warehouse activities or other facilities to take structural cost out. But there isn't anything at this point of a level of materiality. So we reduced headcount probably by 500 people. And we continue to refine that. And part of the transformation that, excuse me, part of the improvement that underlies the EBITDA growth and the performance growth is just ed count reductions in our different facilities, be it in Mexico or in Egypt in particular.

John Fangereb | Analyst, Sedati

Got it, got it. And just, I guess, when you look at the end markets, you know, the class A truck, the ag and construction haven't been particularly favorable. I'm just curious about your thoughts on how those end markets play out in the year ahead based on what your customers are telling you.

John DeGainer | President and Chief Executive Officer

So, you know, we continue to get indications from our customers as well as from forecasting services like ACT that The commercial vehicle space is still bound by 5%. We do expect it to rebound in 26, and we're starting to see we haven't seen that come through an EDI yet. What we are seeing is as our lighting business has worked very hard to improve our relationships with customers, we're seeing additional RFQs. We're also seeing interest. On the power side, from a commercial vehicle standpoint, that doesn't have near-term revenue impact, but it does have future impact. And it goes to, John, what we've talked about with earning the right with customers from the standpoint of us being viewed as a trusted partner beyond just lighting. So both on the commercial vehicle side and on the ag and construction side, we still see softness in the end markets. but we are gaining business based on the improved execution of the organization.

John Fangereb | Analyst, Sedati

Got it. With that, I'll get back to you. Thank you for taking questions.

John DeGainer | President and Chief Executive Officer

Thanks, John.

Operator | Conference Operator

Thank you. Your next question is coming from Gary Pristapino from Barrington.

Your line is live. Gary Pristapino | Analyst, Barrington

Thank you. John, Laura, Rob, how are you? Good morning. We're well. Hope you're well also. Yes, I am. Okay, a couple of questions here. First of all, when you reported Q4, you gave us a sales bridge for sales guidance for this year. Has anything changed dramatically in that bridge? I mean, are we still looking at a 40 million reduction in Stellantis programs, and then about 48 million of other program launches positive on the sales side?

John DeGainer | President and Chief Executive Officer

And that's the reason why we didn't put the bridge back in again, Gary, is there's nothing changed. So as you think about how you model it, just go back and get that as the basis.

Okay. Gary Pristapino | Analyst, Barrington

I just wanted to make sure there. A couple of questions here surrounding bus bars for data centers. Okay. Is this mostly a new construction market, what you guys are supplying? Or is there a repair and replace component of this market for these bus bars for data centers?

John DeGainer | President and Chief Executive Officer

This is primarily new construction. And everything that we've talked about with regard to our guidance is what we would refer to as sort of current technology. We're working with them on future advanced activities. None of that is in our guidance. We're excited about those opportunities, but it's a little bit too soon to talk about from a revenue perspective. But everything that we're talking about here is sort of current product technology and is new construction with multiple end customers.

Gary Pristapino | Analyst, Barrington

Right, because the gist of my question is that, yeah, it's new construction. I mean, who knows how long this is going to go on with growth and data centers. But I guess I'm getting what I'm leading to is, are the plans, can this business get to be fairly substantial relative to the whole pie? It looks like from the chart on page seven, it looks like EVs maybe about 60% of the sales, data centers maybe about 35% of fiscal 25 sales. I mean, is there a way you can make it bigger or are you just range-bound by the fact that it's a new construction market?

John DeGainer | President and Chief Executive Officer

No, we're not range-bound because, remember, we have a relatively de minimis share of the total. So what we've done, and we talked about it in previous calls, to be more responsive to our customers and offer them utilizing our global footprint in a more efficient and effective way than what we've done in the past has allowed us to grow, share on the current data center product. That's where you see the growth between fiscal 24 and fiscal 25. That also is giving us opportunities with expansion because we weren't on every one of their designs for the current data centers. But in addition to that, And so that's what we talk about is in our current guidance. In addition to that, then, as they look at putting higher voltages into their data centers and bringing high voltage closer to the rack, we are working to try to help them with that. And that's growth on top of what you see here. So the chart on slide seven is historical. And yes, it is power activities, not just for data centers, but for Mill Aero as well as EV. But what you heard me say earlier is now we're starting to talk about commercial vehicles. We're starting to talk about utilizing those core competencies in other other pieces of our end markets and with our existing customers, as well as what's the next product families with our existing customers like the data center customers. So we expect this as an opportunity for growth. That's what I mentioned in my script.

Gary Pristapino | Analyst, Barrington

Okay. And then I want to also ask about the EV side of the business here. Can you give us an idea of the percentage of your EB sales that are, or products for EBs, I should say, that are outside the U.S., which would be mainly China and Europe, I suppose?

John DeGainer | President and Chief Executive Officer

So we look at fiscal 2025, and that's probably the best way to look at it so you don't get into one quarter versus another quarter. And remember that we sell things beyond just bus bars into EBs. In fiscal 2025, for our total, if you will, EV sales split, roughly $220 million of fiscal 2025 revenue went to EV products, as we said, the 20%. Fifty-five percent of that was in EMEA, 16% of that was in Asia, and 30% in North America. Okay. When we say to you that our exposure isn't just a North American exposure to EVs, it's that that's the basis for the data. Certainly, we had expected, and go back to the sales bridge that was the start of your question, we had expected significant growth in North America EV, particularly with Stellantis and a few other customers. That's where we see some of the headwinds in North America, but the overall split is pretty balanced between the regions.

Okay. Gary Pristapino | Analyst, Barrington

So in terms of what you're looking for this year, just particularly with the bus bars to the EV market, it's safe to assume the majority of any growth is going to be coming from outside the U.S. just because of the Stellantis program reductions.

John DeGainer | President and Chief Executive Officer

Okay. All right. Thank you. Yep. Thanks, Gary.

Operator | Conference Operator

Thank you. That concludes our Q&A session. I'll now hand the conference back to CEO John DeGainer for closing remarks.

Please go ahead. John DeGainer | President and Chief Executive Officer

I want to thank all of you for joining us and for your interest in Method and for your questions. We look forward to updating you on our progress in future calls, and have a great day.

Operator | Conference Operator

Thank you. Everyone, this concludes today's event. You may disconnect at this time and have a wonderful day. Thank you for your participation. jsPDF 3.0.3 D:20260606090237-00'00'

NYSE:MEI Q4 2025 Earnings Call Transcript Generated on 6/6/2026 Operator | Conference Operator: your host, Robert Cherry, Vice President of Investor Relations.

You may begin. Robert Cherry | Vice President of Investor Relations

Thank you, Operator. Good morning, and welcome to Methyl Electronics' Fiscal 2025 Fourth Quarter Earnings Conference Call. 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 Methyl.com on the Investors page. This conference call contains certain forward-looking statements. which reflect management's expectations regarding future events and operating performance and speak only as of the date hereof. These forward-looking statements are subject to the safe harbor protection provided under the securities laws. The method undertakes no duty to update any forward-looking statement to conform the statement to actual results or changes in method's expectations on a quarterly basis or otherwise. The forward-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 and met those filings with the Securities and Exchange Commission, such as our 10-K and 10-Q reports. 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. At this time, I'd like to turn the call over to Mr. John DeGainer, President and Chief Executive Officer.

John DeGainer | President and Chief Executive Officer

Thanks, Rob, and good morning, everyone. Thank you for joining us for our fourth quarter earnings conference call. I'm also joined today by Laura Pawlczyk, our Chief Financial Officer. 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've 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 Method. 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. 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. 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 tooling 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. 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 improvements. 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. 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. $17 million in sales increase was 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 EV lighting program, but we still have two more quarters of year-over-year comparison headwinds on the GM Center Council program roll-off. We recorded 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 levels. The impact was mostly in North America and included some in EV programs. 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 have taken to improve our operations, supply chain, and product launch capabilities. 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 customers. 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. 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. 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 megatrend 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. This is causing us to project a 10 to 15 percent 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. The outcome and timing of these recoveries is yet to be determined. Both free cash flow and debt reduction are good stories for us. 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. 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 the awards were for power distribution solutions in EV, industrial, and data center applications. The method 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. Turning to slide seven. As I mentioned earlier, I'm marking my one-year anniversary as CEO of Method. 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. 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. 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 plans 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. 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 reevaluate the composition of our portfolio. While the financial results are not yet what we want, our team has accomplished much over the past year. and our foundation has been laid for us to drive consistent and improved execution. On slide eight, 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 and recoveries, all fiscal 25 year-over-year improvements. Then there's been a whole series of execution-focused improvements, like $11 million reduction in freight, reduction in scrap, and a reduction in headcount of over 500 people. All of this complements the execution of customer pricing actions, supplier cost reductions, and material sourcing actions. None of these activities could have been done without the reset of nearly all of the executive leadership teams. 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 for our from an engineering standpoint. 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 Method 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 cost consciousness down throughout the organization and to really drive a sense of urgency. Turning to slide nine. So how do we continue to earn the right from here? 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 teams. 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 consolidations. 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 and data centers, EV, and lighting, which provide an attractive foundation for value creation in fiscal 26 and beyond. While 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. Method 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 it's what the customers and the 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. 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 will share more details on our guidance later. In summary, I firmly believe that our 2025 actions have positioned Methode 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.

Laura Pawlczyk | Chief Financial Officer

Thank you, John, and good morning, everyone. Please turn to slide 11. Before I address the financial 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. 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 the situation, but has also helped to foster team collaboration and drive deeper understanding of how we run our business. 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. To be clear, we've communicated to all of our customers that we expect 100 percent tariff recovery or mitigation. And to be even more clear, this 100 percent tariff recovery or mitigation expectation also applies to any new tariffs. 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. Lastly, we are utilizing our global footprint to capture opportunities as a result of our geographic position relative to competitors. 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. 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. Please see the appendix for all reconciliation of all adjusted measures to GAAP. 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. Overall, the inventory adjustments had a significant impact on the quarter and masked operational improvements. 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. 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. 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 minimize 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 77 cents, down 54 cents from the prior year and down 56 cents from the fiscal third quarter of 25. Overall, while operational improvements helped minimize the impact, our fourth quarter loss was primarily driven by the inventory adjustments. 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. 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. 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. 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 default that may have occurred due to noncompliance with covenants for the fourth quarter that were in effect prior to the amendment. Following the amendment, we were in compliance with all covenants. For further information, please see our 10-K filing. 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%. The net sales decline was primarily driven by the GA Center console and EV lighting program roll-offs that I previously mentioned. Together, their year-over-year impact was 111 million. 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. 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. The major update on this bridge concerns the launching of several EV programs for Stellantis. 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. 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. 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. A byproduct of this revised outlook is that we expect fiscal 26 to see an improved diversity of OEM customers given the forecasted mix. 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. 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. 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 percent to 7.9 percent. 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. This is mainly a factor of lower year-over-year benchmark European interest rates. 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. 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 method team to build on into the future. That concludes my comments, and we can open it up to questions.

Operator | Conference Operator

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 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 keys. One moment, please, while we poll for questions. Once again, please press star one if you have a question or a comment. Our first question comes from Luke Junk with Baird.

Please proceed. Luke Junk | Analyst, 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 four key fiscal 25. Even if I back out the inventory charges and warranty quality, expense? You know, I know you're 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 from launches?

Thank you. John DeGainer | President and Chief Executive Officer

Thanks, Luke. And by the way, good morning. Thanks for your question. You know, 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 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. 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 EV 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 million worth of quality and warranty issues. In fiscal 2025, we had $9 million with knowledge partners and $5 million with legal expenses and another $3 million worth of restructuring. All of those things are either eliminated or improved year over year as a basis for our guidance. So 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, and give us the basis for why we believe we can, on lower sales, double our EBITDA.

Luke Junk | Analyst, Baird

Thanks for that, John.

Luke Junk | Analyst, Baird

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 our EV platform 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?

John DeGainer | President and Chief Executive Officer

Well, so as we've said each time, we have used third-party as a basis for how we give our guidance. 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, EB as a percent of sales is 20% this year, and we'll actually – the challenge that we have is in past years, 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 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 will continue to take advantage of that. on the data center 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 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 center side.

Luke Junk | Analyst, Baird

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?

John DeGainer | President and Chief Executive Officer

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 haircuts.

Luke Junk | Analyst, Baird

Understood. Last question for me, just on the balance sheet, Laura, can you help us understand the leverage waiver? I think that's in effect until the late July, early August next year. I know it was discussed qualitatively in the 10-K, but I didn't see any specifics yet.

Laura Pawlczyk | Chief Financial Officer

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.

Luke Junk | Analyst, Baird

Yeah, what specifically is the covenant level, Laura, can you say?

Laura Pawlczyk | Chief Financial Officer

Yeah, it is starting at 4.25 for Q4 of fiscal year 25, and then it's at 3.75. That was before the amendment. After the amendment, it is at 4.25 in Q1, and then goes up after that.

Luke Junk | Analyst, Baird

Okay, I can take that off. I'll leave it there.

Thank you. Operator | Conference Operator

The next question comes from Gary Prestopino with Barrington.

Please proceed. Gary Prestopino | Analyst, Barrington

Good morning, everyone. A lot here, all right? So first of all, what I want to ask is, 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?

Yes. John DeGainer | President and Chief Executive Officer

We did not adjust those out, Gary.

Gary Prestopino | Analyst, Barrington

Did you not adjust those out because of why? I mean, it's a non-recurring charge. I just want to get an idea of what the thought process there is. Is it something you can't adjust that out?

John DeGainer | President and Chief Executive Officer

Well, so... I'm not the best accounting person, but based on our judgment, it's an operational issue, and so 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 out.

Gary Prestopino | Analyst, Barrington

Okay, that's fine. 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.

John DeGainer | President and Chief Executive Officer

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. Excuse me. $22 million worth of inventory reserves. $12 million worth of warranty and quality charges. $9 million for Alex Partners. $5 million worth of legal expenses and $3 million of restructuring charges.

Gary Prestopino | Analyst, Barrington

Okay, and $3 million restructuring. All right. Okay, that's fine. And then I know Luke kind of asked this question, but I want to get an understanding. Of these 30 new awards that you got in 2025, how much of those are dealing with the EV market itself?

John DeGainer | President and Chief Executive Officer

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 booking 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 really concerned 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'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.

Gary Prestopino | Analyst, Barrington

Are these new EV awards still with Stellantis?

John DeGainer | President and Chief Executive Officer

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.

Gary Prestopino | Analyst, Barrington

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?

John Frenzreb | Analyst, Sedoti

Correct.

Gary Prestopino | Analyst, Barrington

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. It looks like you almost had a – $165 million reduction in what you expected from Stellantis?

John DeGainer | President and Chief Executive Officer

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 to think about this for all the investors is this wasn't something that was foreseeable because if you look at what the customer was talking about as well as IHS in... In January of 2025, now I'm not talking fiscal, now I'm talking calendar, January 2025, 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, 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 hole 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. You take those same numbers for fiscal 2026, in January, so 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 a quarter 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. So if you think about slide 18 and 19 and say they've had a huge hole punched in the revenue from Methos' 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 worth of revenue out or the better part of $100 million worth of revenue out. And on top of the downward conversion, we're driving, what, $32 million worth of EBITDA improvement in our midpoint of our guidance.

Gary Prestopino | Analyst, Barrington

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. Oh, yes.

Big time. John DeGainer | President and Chief Executive Officer

Absolutely. 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. Q1. That's what we knew at the time. Mm-hmm. Okay. Now, based on The bottom of the slide shows you what we know now.

Gary Prestopino | Analyst, Barrington

Okay. Okay. I just want to clear that up. All right. And then I don't, just one more quick question. You know, I saw the report that you're paying a seven cent dividend. So it was 14. So safe to assume you've, 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 cashflow was still pretty strong.

John DeGainer | President and Chief Executive Officer

Yeah, so actually, but Gary, if you look at it based on the dividend has historically been set first, the dividend policy is set by the board. But let's just talk about it. 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 Prestopino | Analyst, Barrington

Okay. That's fine. I just wanted to make sure I was on the right track there.

Thank you. Of course. Operator | Conference Operator

Our next question comes from John Frenzreb with Sedoti. Please proceed, John.

John Frenzreb | Analyst, Sedoti

Good morning, everyone, and thanks for taking the questions. 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 embedded in it?

John DeGainer | President and Chief Executive Officer

You mean as far as versus its new programs is just price to price?

John Frenzreb | Analyst, Sedoti

Yeah, on the right-hand side of the column, it's $48 million down from $107 million. I'm just curious how much is pricing because I figure that's going to be one of the hardest things to execute.

John DeGainer | President and Chief Executive Officer

Yeah, no, no, no. It's not that. This is, as we said to you, we've had other programs that have either been delayed or canceled. So the downdraft between the $107 million and the 48 is due to delays or cancellations. Pricing is incremental plus. Data centers is incremental plus. So the, what you have to look at is the combination of the Solantis plus the other delays. It's basically a hole that's been punched in our revenue plan based on largely North American EV program delays or cancellations. Not pricing that we didn't get.

John Frenzreb | Analyst, Sedoti

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 you're assuming growth in the industrial side of the business in the coming year?

John DeGainer | President and Chief Executive Officer

Yeah. It does. And not only does it assume growth, but what you'll see is you see that ultimately this business is going to be about 50% automotive and 50% other. And And, you know, we're excited about opportunities to grow our lighting business, the industrial activities, as well as the data center work, both on base data center activity as well as future data center activity.

John Frenzreb | Analyst, Sedoti

Okay, so that's largely coming from data center given what's going on in the truck market.

Yeah. Yeah. John DeGainer | President and Chief Executive Officer

Well, so lighting would be data centers and lighting for things other than trucks, not off-highway lighting as well.

John Frenzreb | Analyst, Sedoti

You know, since you brought that up, I am curious how Nordic Lights is performing relative to expectations, maybe to summarize 2025.

John DeGainer | President and Chief Executive Officer

I'm very proud of the team at Nordic Lights. Auntie 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 method.

I'm pleased with it. John Frenzreb | Analyst, Sedoti

Good. Good to hear. Question about slide nine, so we can move off from 18. It seems like there's sounded to me it sounded to me as if there's still more to come right uh the 2026 priorities including further plant consolidation sga right sizing um you know portfolio review things of that nature uh 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 you know are they all going to materialize in 2026 any kind of You know, more color would be appreciated.

John DeGainer | President and Chief Executive Officer

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 a capable 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. 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 Frenzreb | Analyst, Sedoti

Okay. Most of the other questions were already answered. Thank you.

I'll get back to you. Operator | Conference Operator

Thanks, John. We have a follow-up question coming from Gary Prestapino with Barrington.

Please proceed. Gary Prestopino | Analyst, Barrington

Yeah, I just wanted to kind of ask, 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 the sales plotting out quarter to quarter to quarter sequentially? Is should we expect the same seasonality that we saw a couple of years ago, or is there something here where, you know, you're going to, it just kind of puts out where it just constantly gets better as we go along in the year?

John DeGainer | President and Chief Executive Officer

Gary, 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. 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.

Gary Prestopino | Analyst, Barrington

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, you're really going to shine.

Okay. That's fine. Thank you. Operator | Conference Operator

Thank you. We have reached the end of the question and answer session, and I will now turn the call over to John DeGainer for closing remarks.

John DeGainer | President and Chief Executive Officer

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 | Conference Operator

This concludes today's conference, and you may disconnect your lines at this time. Thank you for your participation. jsPDF 3.0.3 D:20260606090238-00'00'