Methode Electronics, Inc.

Please stand by. Good day, ladies and gentlemen, and welcome to your Method Electronics first quarter fiscal 2021 results conference call. All lines have been placed in a listen-only mode, and the floor will be open for your questions and comments following the presentation. As a reminder, today's call is being recorded. If you should require assistance throughout the conference, please press star, then zero. At this time, it is my pleasure to turn the floor over to your host, Vice President of Investor Relations, Mr. Robert Cherry. Sir, the floor is yours.

Thank you, Operator. Good morning, and welcome to Metho Electronics Fiscal 2021 First Quarter Earnings Conference Call. For this call, we have prepared a presentation entitled Fiscal 2021 First Quarter Financial Results. which can be viewed on the webcast of this call or found at metho.com in the Investors section. 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 annual and quarterly reports. Such factors may include, without limitation, the following. Impact from pandemics, such as the COVID-19 pandemic. Dependence on the automotive, appliance, commercial vehicle, computer, and communications industries. Dependence on a small number of large customers, including two large automotive customers. Recognition of goodwill and long-lived asset impairment charges Costs associated with restructuring activities International trade disputes resulting in tariffs and our ability to mitigate tariffs Timing, quality, cost of new program launches Ability to withstand price pressure, including pricing reductions Failure to attract and retain qualified personnel Ability to successfully market and sell the bare surface products Currency fluctuations Customary risks related to conducting global operations Costs associated with environmental, health, and safety regulations Ability to withstand business interruptions Ability to successfully benefit from acquisitions and divestitures Investment in programs prior to the recognition of revenue Dependence on the availability and price of materials Dependence on our supply chain Judgments related to accounting for tax positions Income tax rate fluctuations Ability to keep pace with rapid technological changes Breaches to our information technology systems Ability to avoid design or manufacturing defects Ability to compete effectively Ability to protect our intellectual property Success of recent acquisitions and or our ability to implement and profit from new applications of the acquired technology. Ability to manage our debt levels and any restrictions there under. And impact to interest expense from the replacement or modification of LIBOR. At this time, I'd like to turn the call over to Mr. Don Duda, President and Chief Executive Officer.

Thank you, Rob. Good morning everyone and thank you for joining us today for our fiscal 2021 first quarter earnings conference call. I'm joined today by Ron Zumis, our Chief Financial Officer. Both Ron and I have opening comments and afterwards we will take your questions. Let's begin on slide four with the business highlights from the first quarter. I'll start with the situation with COVID-19. I continue to be proud of our employees' incredible commitment to method and to supporting our efforts to provide a safe work environment. All of our facilities have remained open to some degree through this challenging period, and most of our hourly employees have returned to a full work week. Our offices have systematically begun to reopen, but we are also still making prudent use of work from home for our office staff. We anticipate that we will see some level of headwind risk and uncertainty from the COVID-19 pandemic throughout the fiscal year. However, as I stressed last quarter, we will continue to invest in our business for long-term growth. Turning to the business performance, while the quarter was clearly down due to the pandemic, we saw a significant rebound in automotive demand in the latter half of the quarter. As you recall, most of the auto OEMs were effectively shut down in the first half of the quarter, and when we reported our fourth quarter results, we were concerned about the stability of OEM production schedules based on the pandemic circumstances. Please turn to slide five for a summary of our financial results. Method's first quarter sales decreased 29.3%, our net income decreased 26.9%, and our diluted earnings per share decreased 28% for the fiscal quarter ended August 1st of 2020. The resulting decremental net income margin of 10% was helped by cost reductions and operational efficiency initiatives. The net income in the quarter was also aided by discrete tax benefit of $7.8 million. Adding back the discrete tax benefit, the decremental net income margin would have been 19%. Ron will provide more detail on this tax item later. Returning to the automotive business on slide six, it was a particularly strong quarter for awards in EV and hybrid applications. We received awards with total annual expected sales of approximately 30 million. Given our ongoing strategy to cross-sell our technologies into the space, We now expect a high single-digit percentage of our fiscal 2021 consolidated sales to come from EV and hybrid programs. This is an area where we are globally well positioned and we anticipate continued growth. I will share more on new awards a little later. Looking at our non-automotive markets, we saw strength in data centers and appliances on a year-over-year basis. However, other markets were negatively impacted by the pandemic, including industrial equipment and commercial vehicles, which, while down, are seeing forecasts improve. Operationally, we took significant S&A cost-saving actions in the quarter to help mitigate the impact from the pandemic. Despite incurring $1.5 million in S&A restructuring costs, S&A expenses were reduced by $5.8 million year over year. In regard to our balance sheet, We continue to have positive free cash flow and continue to reduce our debt in the quarter. Our liquidity is strong and our leverage stable. The strength and flexibility of our balance sheet allows us to consider multiple paths to invest in the business in order to drive growth and shareholder return. Moving to slide seven. During the first quarter, Method booked a number of awards capitalizing on the strategic trends in vehicle electrification, LED Lighting, and Data Centers. The awards identified here represent a cross-section of the business wins in the quarter and represent over $36 million in annual business. In Electric Vehicles, we won awards for lighting, overhead council, and bus bar programs totaling over $22 million annually. In Hybrid Vehicles, we were awarded lead frame and bus bar programs totaling approximately $9 million annually. I would like to emphasize that these that we are winning programs with OEMs in the U.S., Europe, and Asia. In non-EV LED lighting, we were awarded programs for both auto and commercial vehicle applications. Lastly, we're also participating in the growth of data centers driven by cloud computing with programs for bus bars and pluggable modules. As we have stated before, Method will continue to evolve its business with innovative new technology and products for emerging Applications and Growing Markets. In the medical segment, our efforts to grow the DeBeer product line in the quarter continue to be hampered by the postponement of elective surgeries due to COVID-19. We are seeing some increased activity and believe that this business will return to a growth trajectory in the near future. Looking forward, we're only providing sales guidance and only for our fiscal 2021 second quarter do the market risk and uncertainty from the ongoing pandemic. While we are not providing annual guidance at this time, we do intend to reassess annual guidance as soon as demand stabilizes and we are confident with our customers' forecasts. While we have certainly seen strong demand over the last several months, it is not clear how much consumer confidence has returned versus the industry just satisfying pent-up demand. Hence, we remain cautious. As I shared last quarter, Metho took actions in the first quarter to consolidate operations and further streamline our organization in order to improve efficiencies and set the stage for continued growth. These actions and any potential future actions will allow us to further improve our execution and be in a better position to grow. To conclude, given the current global macroeconomic situation and the significant headwinds faced by Metho throughout this past quarter, I am extremely pleased that our strategy and team were able to deliver these results, generate positive free cash flow, and maintain a strong balance sheet. Our focus is on navigating the pandemic situation while continuing to execute our long-term strategy. At this point, I'll turn the call over to Ron, who will provide more detail on our financial results. Ron?