Release Date: December 05, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Methode Electronics Inc (MEI, Financial) reported a 2% increase in net sales for the second quarter, reaching $292.6 million compared to the previous year.
- The company experienced a significant reduction in freight costs, particularly premium freight, contributing to improved operational execution.
- Sales from electric vehicle (EV) applications increased to 20% of the consolidated total, indicating growth in this segment.
- The data center market showed strong performance, with sales growing by approximately 50% year-over-year.
- Methode Electronics Inc (MEI) secured over $50 million in annual program awards during the quarter, aligning with their expectations for the year.
Negative Points
- The company faced a sizable reduction in net cash from operating activities, reporting a negative $48 million due to timing issues with accounts payable.
- There was a noted weakness in the automotive and commercial vehicle markets, impacting overall demand.
- The EV market in North America has softened, although program launches are helping to mitigate this impact.
- Methode Electronics Inc (MEI) experienced a decrease in free cash flow, reporting a negative $58.4 million compared to the previous year.
- The company is dealing with a subpoena from the SEC, which could pose compliance challenges and potential risks.
Q & A Highlights
Q: Can you quantify the impact of the extra week on the top line and operating results?
A: The extra week contributed approximately $20 million in revenue, with corresponding impacts on operating results. - Jon DeGaynor, President and CEO
Q: What cost control measures impacted the second-quarter results beyond the reduction in freight costs?
A: We saw improvements in overheads and scrap activities, driven by execution-focused activities. - Jon DeGaynor, President and CEO
Q: Of the $50 million in new orders, how much was related to new programs in the EV market?
A: The majority of our launches are in EV or power programs, so all awards are in those areas. - Jon DeGaynor, President and CEO
Q: Can you comment on the improvement in the data center market and its impact year-over-year?
A: Data centers account for roughly 3% to 5% of our total sales, with about a 50% year-over-year improvement. This segment has above-average margins, and we are excited about future opportunities. - Jon DeGaynor, President and CEO
Q: Are there any changes in your commercial vehicle assumptions for the coming year?
A: We rely on external forecasters like ACT, and 2024 is expected to be a decline year-over-year, with 2025 still down. We are focusing on strengthening customer relationships. - Jon DeGaynor, President and CEO
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
