Methode Electronics, Inc.

Good morning, ladies and gentlemen. Thank you for standing by. Welcome to the Method Electronics fourth quarter fiscal 2022 results. At this time, all participants on the listen-only mode. After management's prepared remarks, there will be a question and answer session. I would now like to turn the call over to the host, Vice President of Investor Relations, Robert Cherry. Sir, please go ahead.

Thank you, Operator. Good morning. And welcome to MetaElectronics Fiscal 2022 Fourth Quarter Earnings Conference Call. For this call, we have prepared a presentation entitled Fiscal 2022 Fourth Quarter Financial Results, which can be reviewed on this webcast or found at meto.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 10K and 10Q reports. At this time, I'd like to turn the call over to Mr. Don Duda, President and Chief Executive Officer.

Thank you, Rob, and good morning, everyone. Thank you for joining us for a fiscal 2022 fourth quarter earnings conference call. I'm joined today by Ron Zumis, our Chief Financial Officer. Both Ron and I will have opening comments, and then we will take your questions. Let's begin with the highlights on slide four. Our sales for the quarter were $289 million. Helping our sales by $7 million were successful spot buy and premium freight cost recovery efforts. However, our automotive segment encountered demand headwinds in North America and Europe due to program roll-offs and the ongoing global supply chain disruptions. Also in Europe, the extent of the weakness in the auto market due to the conflict in Ukraine was worse than expected. Also unexpected were the COVID-19 lockdowns in China, which led to weaker than forecasted sales in Asia. While the overall sales for the quarter were in our expected range, sales could have been better, reducing the effects of other headwinds. We continue to face the ongoing supply chain challenges in the quarter. Our team worked diligently to mitigate these challenges, which required remedial actions such as spot buys and expedited shipping. We have worked relentlessly with our customers to share in the absorption of these increased costs. You may recall that we had made solid progress on this front in the third quarter. However, in the fourth quarter, we saw even more acceleration in our material, labor, and freight costs. Our ability to obtain reimbursement for or to offset these costs is likely to lag as a matter of process as long as inflation continues. In addition, the demand weakness in Europe resulted in unfavorable product sales mix. All of these factors, along with some unanticipated expenses, significantly changed the landscape from the time that we provided guidance until the quarter closed at the end of April. Going forward, We will work to mitigate the cost increases and product mix impacts as we have successfully done in the past. Ron will elaborate further on this later in the call. On the order front, we had another very strong quarter with over $100 million in program awards. Of these awards, approximately 90% were EV applications with a variety of products, customers, and regions. I will provide more color on awards in a moment. Focusing on EV, last quarter we reported that sales into EV applications were 19% of the consolidated sales. This quarter, EV sales were 70% of consolidated sales. The lower percentage was directly related to the COVID-19 lockdowns in China. Nonetheless, it was still our second best quarter ever for EV sales. Given the ongoing momentum in our EV activity, we are expecting sales to reach 20% of our total sales in fiscal 2023. In the quarter, we further reduced debt and now have the lowest debt level since the Greycon acquisition. We also made progress on reducing working capital and delivered strong free cash flow of $34 million. Last Thursday, in addition to our quarterly dividend, we announced a $100 million increase to our existing stock buyback authorization. As of the end of the fourth quarter, we now have approximately $129 million of capacity in the authorization, which expires in June of 2024. Moving to slide five. Methode had another very strong quarter of business awards. The awards identified here represent some of the key wins in the quarter and represent over $100 million in annual sales at full production. As a reminder, the full launch timing of most of these programs could be anywhere in the range of one to three years from now. Also, some of these awards are notable volume increases on existing OEM programs. As you can see, the list is dominated by EV programs representing 90% of the dollar value What's also clearly noticeable is the rich variety among the awards. They include power, lighting, and sensor products. They cover the top hat and skateboard of an EV. They are with seven different auto OEMs and they are in our three main geographic regions, Europe, the US, and Asia. The EV market growth trend and our exposure to it continues to be robust. In other applications, We're awarded programs for an e-bike sensor, an off-road vehicle control module, and a data center bus bar assembly. All strategic and growing markets and applications for method. Overall, it was a very successful quarter for awards that will drive organic growth in future years. Turning to slide six and our fiscal 2022 highlights, we delivered sales growth for the fifth year in a row. and finished with record sales of $1,164,000,000 for the full year. Even excluding $22 million in cost recovery and a favorable impact from foreign exchange, we had over 4% year-over-year sales growth. Supply chain challenges and the market disruptions during the year took a toll on earnings. However, program awards were very strong, reaching almost $300 million. We had record sales into EV applications for the year, and they reached 70% of our total sales for the full year. As I already mentioned, we see that number reaching 20% in fiscal 2023. Our balance sheet story is one that we continue to be proud of, with our debt level now at the lowest level since the 2018 acquisition of Greycon. While our free cash flow generation was down year over year, It was still healthy and supported the purchase of over 1.4 million shares of stock, as well as our ongoing dividend program. With a strong award pipeline for the past two years and the effort Method has made to diversify its product portfolio further into lighting, power, and sensors, we're now confident to announce a three-year organic sales compounded annual growth rate target of 6%. This target demonstrates that our business model is not just healthy, but is prospering from the strategic steps that we have taken to grow the business. Turning to De Beard, it achieved over 4 million sales for the year. The key factor to the success of this business has always been and will continue to be the ability to conduct product evaluations at hospitals. While the interest in the product has remained high in recent years, the COVID-19 pandemic has been a headwind over the last two-plus years, to our ability to execute these evaluations. As such, the sales growth of the business has been stunted and continues to be hampered as sales always lag evaluations. However, we remain confident in those prospects, but we're also exploring options to engage external mechanisms to help accelerate the growth of the business going forward. To conclude, it was a challenging year, and a year plagued by ongoing demand headwinds and supply chain challenges. However, our worldwide team still delivered organic sales growth through the year. Moving forward, I am confident with the team's experience and operational expertise that Method is positioned to mitigate these pressures and deliver sales and earnings growth for fiscal 2023. Looking beyond 2023, We are confident in our strategy, and our award pipeline continues to be robust. This firmly puts Method on a path to deliver on our 6% compounded annual sales growth target over the next three years. At this point, I'll turn the call over to Ron, who will provide more detail on our fourth quarter and full year finish. Ron?