Methode Electronics (MEI) Q4 FY26 earnings call: guidance and Q&A

Clarification on what products Methode sells into the data center business and if future technologies are included in the FY27 guidance.

Methode currently sells busbars into the hyperscaler data center market. The FY27 guidance is based solely on current busbar business, and future technologies like 800-volt DC rack architectures are not yet included in the revenue guide.

“the results of fiscal 2026 and the guide for fiscal '27 are based on our current busbar business into the hyperscaler. When we reference the future technology in the 800-volt architecture, none of that is in our guide.”

asked by Gary Prestopino · answered by Jonathan DeGaynor

Inquiry about the origin of the customer recoveries, specifically if they relate to older agreements or recent volume shortfalls, and if further recoveries are expected in FY27.

The recoveries stem from EV programs won years ago where anticipated revenue did not materialize due to market changes. The recovery activity is largely complete, with only smaller, less material discussions ongoing. The remaining $25 million of the $45 million negotiated will be realized through future production and tooling reimbursements over 3-4 years.

“The recovery activity is largely done. There are a couple of customers that we continue to talk to, but those programs are much smaller and the recovery activities are much smaller.”

asked by Gary Prestopino · answered by Jonathan DeGaynor

Question on how much of the customer recoveries were recognized in Q4 FY26 and their impact on gross margin, specifically if they had no associated COGS.

All $22 million of the recognized customer recovery sales were in Q4 FY26. There was a small amount of associated COGS, resulting in $19 million flowing through to earnings.

“there was 22 -- all of the $22 million of sales was recognized in the fourth quarter. And there is a little amount of COGS. So there's $19 million flowing through down to the earnings to the bottom line.”

asked by John Franzreb · answered by Laura Kowalchik

Inquiry about Methode's order book for commercial vehicles given strong industry trends, its revenue contribution in FY26, and if this business helps Mexico's profitability.

Methode's guidance incorporates the positive trends in the commercial vehicle market. Commercial vehicles represented 10% of total revenue in FY26 and are a higher contribution margin business. While historically not made in Mexico, business is being moved there, leveraging Mexico's capabilities for USMCA footprint and supporting its improved performance.

“The capability that we have within our Mexico facilities it's not just an automotive facility. It is supporting other end markets. It's supporting our data center localization that's supporting our commercial vehicle localization.”

asked by John Franzreb · answered by Jonathan DeGaynor

Question on key actions planned for FY27 to move the automotive business, particularly Mexico, back towards breakeven, considering the impact of customer recoveries.

Methode is driving operational performance and cost reduction in Egypt and Mexico. The North American automotive business, which was $182 million in FY26, is expected to recover to close to $200 million in FY27. Mexico's facilities are being diversified to support commercial vehicle and data center localization, and new business wins, leveraging available capacity.

“We see that coming back to close to $200 million in fiscal 2027 and continuing to grow. So -- the way in which we look at this is the automotive business overall, which is 46% of our total is good business.”

asked by Luke Junk · answered by Jonathan DeGaynor

Understanding the basis for the 60% growth guidance in data centers, including order visibility, new program ramps, and the number of customers involved.

The 60% growth guidance is based on customer EDI and a 52-week relationship, providing high confidence. It includes two new program ramps with an 18-24 month cycle. The guidance is based on the current customer base, which now includes multiple customers, not just a single one as historically.

“It is 2 new programs. And so there's -- there are program changes throughout that. And these programs move in an 18- to 24-month cycle. ... what's in our guide is the current customer base. We are talking to additional customers. We expect to see that expand. But what is in our guide is our current base with the launches that we know right now and the EDI that we have from the customers.”

asked by Luke Junk · answered by Jonathan DeGaynor

Request for an update on the plan for the Interface segment going forward.

The Interface business will become a de minimis part of the company, less than $5 million in FY27. Methode does not see it as a growth area and will not be focusing time or resources there, instead prioritizing higher-growth opportunities in commercial vehicles, off-highway lighting, user interfaces, and data centers.

“Really that interface business becomes a smaller piece of the company overall. It's de minimis, in fiscal '20 it's less than $5 million than fiscal '27. And we don't see it as a place where when we talk about return on effort, that it is something that we could get to growth.”

asked by John Franzreb · answered by Jonathan DeGaynor

Confirmation on whether the company expects continued debt reduction in fiscal 2027.

Yes, continued debt reduction is a definite focus of the company's capital allocation strategy.

“Yes. That's definitely a focus of our capital allocation.”

asked by John Franzreb · answered by Laura Kowalchik