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    MEI
    Earnings call· May 2026(Q4 FY26)

    METHODE ELECTRONICS Q4 FY26 earnings call MEI

    Jun 25, 2026 Source

    Executive summary

    Methode Electronics Q4 FY26 — Strong Operational Execution and Data Center Growth Drive Improved Profitability

    Methode Electronics concluded FY26 with significant operational improvements and a strategic pivot towards higher-growth opportunities, particularly in data centers. The company successfully navigated EV program delays and market softness by focusing on cost management, customer recoveries, and portfolio optimization. This foundational work positions Methode for continued margin expansion and cash generation, shifting its focus from 'fix it' to 'growth' in FY27.

    Highlights

    5

    • Adjusted EBITDA increased 60% to $68 million for FY26, driven by stronger operational performance and customer recoveries.

    • Generated $15.6 million in free cash flow for FY26, reversing a $15.2 million outflow in the prior year.

    • Data center-related sales are expected to increase approximately 60% to $130 million in FY27 from $80 million in FY26.

    • Fourth quarter net sales increased 15.9% to $298.1 million, primarily due to customer recoveries and industrial segment strength.

    • Net debt reduced by 13% to $185 million from fiscal '25.

    Concerns

    4

    • Full-year net sales decreased 3% to approximately $1 billion, impacted by EV program delays, commercial vehicle softness, and program roll-offs.

    • North American automotive segment continues to be impacted by under absorption and customer schedule volatility.

    • Interface segment net sales declined 47% to $27.2 million due to planned program roll-offs and divestiture.

    • Fiscal '26 adjusted net loss was $37.5 million, though an improvement from $39.7 million in FY25.

    Guidance & targets

    12
    CategoryTargetConfidence
    Fiscal 2027 Net Sales
    $1.025 billion to $1.075 billion
    high materiality
    High
    Fiscal 2027 Adjusted EBITDA
    $72 million to $82 million
    high materiality
    High
    Fiscal 2027 Adjusted EBITDA Margin
    7% to 7.6%
    high materiality
    High
    Fiscal 2027 Capital Expenditures
    $25 million to $30 million
    medium materiality
    High
    Fiscal 2027 Free Cash Flow
    Comparable to fiscal '26
    medium materiality
    High
    Fiscal 2027 Interest Expense
    $20 million to $22 million
    low materiality
    High
    Fiscal 2027 Income Tax Expense
    $24 million to $26 million
    low materiality
    High
    Fiscal 2027 Depreciation and Amortization Expense
    $58 million to $62 million
    low materiality
    High
    Fiscal 2027 Data Center Sales
    $130 million
    high materiality
    High
    Fiscal 2027 Net Sales Growth (ex-portfolio refinement & recoveries)
    Approximately 8%
    high materiality
    High
    Fiscal 2027 Adjusted EBITDA Growth (ex-portfolio refinement & recoveries)
    Approximately 82%
    high materiality
    High
    Fiscal 2027 North American Automotive Revenue
    Close to $200 million
    medium materiality
    Medium

    Segment performance

    3
    SegmentRevenueYoYQoQMargin
    Automotive
    Decrease primarily driven by program roll-offs and EV program delays in North America, partially offset by customer recovery agreements and $18 million of favorable foreign exchange. Operating loss improved by $18 million, reflecting benefits of customer recovery agreements, operational improvements, and greater commercial discipline. North American automotive impacted by under absorption and customer skill volatility.
    		$467.7 million-8.1%—-$30.1 million operating loss
    Industrial
    Approximately half of the sales increase was attributable to favorable foreign exchange. Results driven by continued momentum in data center power distribution and strong demand for off-road lighting solutions, partially offset by softness in commercial vehicle markets. Operating income grew 27%.
    		$524.3 million8%—$114.6 million operating income
    Interface
    Decline primarily reflected the planned roll-off of a major appliance program and the divestiture of the dataMate business as part of ongoing portfolio optimization efforts. Operating income decreased 51%.
    		$27.2 million-47%—$5 million operating income

    Operational metrics

    26
    Net Sales
    $298.1 million15.9% YoY increase
    Q4 FY26

    Fourth quarter net sales.

    Net Sales
    $1 billion2.8% YoY decrease
    FY26

    Full year net sales.

    Gross Profit
    $72.2 millionfrom $19.6 million in Q4 FY25
    Q4 FY26

    Fourth quarter gross profit.

    Gross Profit
    $202.2 millionfrom $163.4 million in FY25
    FY26

    Full year gross profit.

    Selling and Administrative Expenses
    $55.6 millionfrom $37.4 million in Q4 FY25
    Q4 FY26

    Fourth quarter selling and administrative expenses, includes $2M transaction costs and $1M impairment.

    Selling and Administrative Expenses
    $170.3 millionfrom $163.9 million in FY25
    FY26

    Full year selling and administrative expenses.

    Income Tax Expense
    $12.3 millionfrom $2.1 million benefit in Q4 FY25
    Q4 FY26

    Fourth quarter income tax expense.

    Income Tax Expense
    $25 millionfrom $12.5 million in FY25
    FY26

    Full year income tax expense, driven by non-deductible items and higher foreign taxes.

    Adjusted EBITDA
    $26.9 millionfrom -$7.1 million loss in Q4 FY25
    Q4 FY26

    Fourth quarter adjusted EBITDA.

    Adjusted EBITDA
    $68.2 million60% YoY increase
    FY26

    Full year adjusted EBITDA.

    Adjusted Net Loss
    $10.4 millionfrom -$27.4 million loss in Q4 FY25
    Q4 FY26

    Fourth quarter adjusted net loss.

    Adjusted EPS
    $0.30from -$0.77 in Q4 FY25
    Q4 FY26

    Fourth quarter adjusted diluted EPS.

    Adjusted Net Loss
    $37.5 millionfrom -$39.7 million loss in FY25
    FY26

    Full year adjusted net loss.

    Adjusted EPS
    $1.07from -$1.12 in FY25
    FY26

    Full year adjusted diluted EPS.

    Capital Expenditures
    $22 million46% YoY decrease
    FY26

    Full year capital expenditures.

    Cash and Equivalents Balance
    $140 million
    FY26 end

    Cash balance at fiscal year-end.

    Net Debt
    $185 million13% reduction from FY25
    FY26 end

    Net debt at fiscal year-end.

    Customer Recoveries (Total Negotiated)
    $45 million
    FY26

    Total customer recoveries negotiated for EV program delays and cancellations.

    Customer Recoveries (Recognized Revenue)
    $23 million
    FY26

    Portion of customer recoveries recognized as revenue in FY26.

    Customer Recoveries (Contribution to Earnings)
    $19 million
    FY26

    Portion of customer recoveries contributing to FY26 earnings.

    Customer Recoveries (Cash Payments)
    $7 million
    FY27-FY29 (per year)

    Expected annual cash payments from customer recoveries.

    Data Center Sales
    $80 million
    FY26

    Data center-related sales for fiscal 2026.

    North American Automotive Revenue
    $182 million
    FY26

    North American automotive business revenue in fiscal 2026.

    Commercial Vehicle Revenue
    10%
    FY26

    Commercial vehicle revenue as a percentage of total sales.

    Egypt Margin Improvement
    >700 bps
    FY26

    Margin improvement in Egypt operations.

    Malta Restructuring Savings
    $5 million
    Annual

    Expected annual savings from restructuring initiatives in Malta.

    Industry KPIs

    9
    MetricValueDetails
    M a contribution$11 million gainUSD
    Segment revenue growthAutomotive: $467.7 million; Industrial: $524.3 million; Interface: $27.2 millionUSD
    Ai data center content revenue$80 millionUSD
    Design wins product cycle ramps2 new programscount
    Order visibility backlog policy—
    Supply demand imbalance lead times—
    Capacity expansion internal sourcing—
    End market revenue mix organic growthAutomotive: $467.7 million; Industrial: $524.3 million; Interface: $27.2 millionUSD
    Operating margin incremental leverage>700 bpsbps

    Deals & partnerships

    2
    dataMatedivestiture$11 million gain

    Divestiture of dataMate business, aligning the company around long-term growth priorities.

    Harwood Heights facilitydivestiture$5 million cash proceeds

    Sale of Harwood Heights, Illinois facility.

    Risks & headwinds

    6
    EV program delays and cancellationsPast fiscal years, impacting FY26

    Approximately $45 million in customer recoveries negotiated to offset impact

    Mitigation: Negotiated customer recoveries, portfolio optimization, focus on operational execution

    Customer production volatilityOngoing

    Unquantified

    Mitigation: Improved operational execution, strengthened supply chain discipline

    Commercial vehicle end market softnessFY26

    Offset by strength in data center and off-road lighting

    Mitigation: Leveraging capabilities across end markets, expected improvement in FY27

    Ongoing supply chain and tariff-related complexitiesOngoing

    Unquantified

    Mitigation: Improved supply chain discipline, operational rigor

    North American automotive under absorptionFY26, expected improvement in FY27

    FY26 revenue as low as $182 million

    Mitigation: Leveraging available capacity in Mexico for new business wins across broader end markets, customer recoveries

    Mexico operations impact from EV program delays and under absorptionFY26, expected improvement in FY27

    Unquantified

    Mitigation: Strengthened leadership, improved execution, cost reduction actions, new business coming into facilities

    Q&A highlights

    8

    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

    2 min read6 chapters

    Detailed Narrative

    01

    Operational Transformation & Leadership

    Methode has undergone a significant transformation over the past two years, rebuilding leadership teams (8 of 10 executive positions changed) and relocating headquarters to Southfield, Michigan. This has led to a more rigorous operating cadence, strengthened financial rigor, and improved manufacturing execution. Notably, operations in Egypt delivered over 700 basis points of margin improvement during fiscal 2026, demonstrating the impact of upgraded leadership and process discipline.

    02

    Strategic Portfolio Optimization

    The company has focused on simplifying its portfolio and directing resources towards higher-growth opportunities. This included the divestiture of the dataMate business, generating an $11 million gain, and the sale of the Harwood Heights, Illinois facility for approximately $5 million in cash proceeds. These actions align the company around its long-term growth priorities, particularly emphasizing the data center business while de-emphasizing the Interface segment due to limited growth potential.

    03

    Customer Recoveries & Commercial Discipline

    Methode successfully negotiated approximately $45 million in customer recoveries related to EV program delays and cancellations. Of this, $23 million was recognized as revenue in fiscal 2026, contributing approximately $19 million to earnings. The company expects to receive cash payments of $7 million per year in fiscal '27 through '29 for this portion, with the remaining $25 million to be realized through future production volumes and tooling-related reimbursements over the next 3 to 4 years.

    04

    Data Center Business Expansion

    Leveraging over 60 years of expertise in designing and manufacturing complex power interconnect solutions, Methode is significantly expanding its data center business. The company is moving beyond a 'build to print' manufacturer role by engaging directly with hyperscale customers to address needs for shortened lead times, supply chain stability, and creative solutions for AI-driven power density. Data center sales are projected to grow 60% to $130 million in fiscal 2027 from $80 million in fiscal 2026, driven by new programs and multiple customer relationships.

    05

    Mexico Operations Improvement

    Mexico operations continue to be a focus for transformation efforts. While impacted by EV program delays, customer schedule changes, and under absorption, the company has strengthened leadership and improved execution. The Mexico facilities are now being leveraged to support new business wins across broader end markets, including data center localization and commercial vehicle localization, positioning the business for improved performance in fiscal 2027.

    06

    Shift to Growth Focus

    After two years dedicated to operational improvements and addressing legacy issues, Methode is shifting its strategic focus from 'fix it' to 'growth' in fiscal 2027. The company's energy is now directed towards winning new business, investing in strategic growth opportunities, and building on the stronger foundation established through disciplined cost management and enhanced operational performance. This pivot aims to drive sustainable margin expansion and cash generation going forward⏳.

    AI-generated summary of the company’s earnings call. Not investment advice.