Methode Electronics, Inc.

Hello, ladies and gentlemen, and welcome to the Methode Electronics second quarter fiscal year 2023 results call. At this time, all participants are placed on a listen-only mode, and the floor will be open for questions and comments after the presentation. It is now my pleasure to turn the floor over to your host, Mr. Robert Cherry, Vice President of Investor Relations. Sir, the floor is yours.

Thank you, Operator. Good morning. And welcome to Metho Electronics Fiscal 2023 Second Quarter Earnings Conference Call. For this call, we have prepared a presentation entitled Fiscal 2023 Second Quarter Financial Results, which can be viewed on the webcast of this call or found at metho.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 owner takes no duty to update any forward-looking statement to conform this statement to actual results or changes in Method's expectations on a quarterly basis or otherwise. The forward-looking statements in this call involve a number of risks and uncertainties. The factors that could cause actual results to differ materially from our expectations are detailed in methods filings with the Securities and Exchange Commission, such as our 10-K and 10-Q 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 our fiscal 2023 second 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 a record $316 million. This was achieved despite a significant headwind from foreign exchange, which was partially offset by strong sales in China. Lost sales due to the COVID lockdowns in China in the first quarter were recovered in the second quarter. These China sales recoveries are now behind us. Also helping to offset the foreign exchange headwind were ongoing material spot buy and premium freight cost recovery efforts. Driving our overall sales performance was a record quarter for sales in our industrial segment of over $100 million. The surge in sales was driven by power distribution solutions, both for data center and EV applications, and by commercial lighting. Some of the increase was related to the China lockdown sales shift. That aside, it is clear that we are successfully executing our strategy to grow our industrial sales and better balance the business mix between the automotive and industrial segments. In the quarter, we continue to face ongoing cost increases due to the general inflation in material and labor as well as supply chain challenges, which resulted in remedial actions such as spot buys and expedited shipping. We continue to work relentlessly with our customers to share in the absorption of these increased costs. We are gaining traction in these efforts, but our ability to pass along price increases will lag as a matter of process as long as high inflation continues. On the order front, we had another solid quarter with over $65 million in annual program awards. These programs were driven by power and lighting applications, two of our key growth opportunities. Turning to EV activity, sales in the quarter reached 20% of our consolidated total. This percentage matches our guidance for the full year. Of the total awards in the quarter, Over 80% were in EV applications, with most of them being power distribution solutions. In the quarter, we continued to reduce debt, which is at its lowest level since the Greycon acquisition in 2018. Just after the end of the second quarter, we amended our credit facility, which increased our debt capacity. This gives us additional resources and flexibility to fund inorganic growth. During the quarter, we purchased approximately $20 million of stock. As of the end of the second quarter, we now have approximately $97 million remaining in our buyback authorization. This buyback program remains a key part of our capital allocation strategy. Moving to slide five, Meadowthew had another solid quarter of business awards. The awards identified here represent some of the key wins in the quarter, and represent 66 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, while the majority of the dollar value of these awards are for new programs, some of these awards are for extensions or volume increases on existing programs. At the top of the list are EV programs representing most of the dollar value. The awards are mainly for power products associated with the skateboard architecture, such as bus bars for the battery, inverter, and motor, as well as products such as connectors and distribution units. The awards are also from both traditional automakers as well as EV-focused manufacturers. EV continues to be a solid growth engine for Method. In other areas, we're awarded programs for lighting and power solutions for applications in auto, data center, defense, and energy. Overall, it was a successful quarter for awards that will continue to drive organic sales growth. Furthermore, the pipeline of future awards remains robust. That said, the ongoing inflationary cost environment, geopolitical risk, and now an increased foreign currency headwind has caused us to moderate our near-term outlook. To conclude, Methyl delivered strong sales in the quarter, driven by our efforts in power and lighting solutions. Furthermore, Methyl is expecting another record year for sales and continued growth in EV applications. Lastly, we are reaffirming our 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've taken to grow the business. At this point, I'll turn the call over to Ron, who will provide more detail on our second quarter financial results and outlook for the full year. Ron. Thank you, Don.