Methode Electronics, Inc.

Greetings. Welcome to the Method Electronics Third Quarter Fiscal 2024 Results Conference Call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. Please note this conference is being recorded. I will now turn the conference over to your host, Robert Cherry, Vice President of Investor Relations. You may begin.

Thank you, Operator. Good morning, and welcome to Metho Electronics' Fiscal 2024 Third Quarter Earnings Conference Call. For this call, we have prepared a presentation entitled Fiscal 2024 Third 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. Methodona takes 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 10-K and 10-Q reports. At this time, I'd like to introduce and turn the call over to Mr. Avi Avula, President and Chief Executive Officer.

Thank you, Rob, and good morning, everyone. Thank you for joining us for our fiscal 2024 third quarter earnings conference call. I'm joined today by Ron Sumas, our Chief Financial Officer. Both Ron and I have opening comments, and then we will take your questions. Before we discuss the quarter, I would like to share with you that I'm truly honored and humbled to be Method's third CEO in its 77-year history. I would also like to take this opportunity to thank Don Duda for his outstanding contributions to Method and for his support during my transition, and to wish him the very best in his retirement. A new chapter in the journey for Method has begun, and I'm excited and energized by the possibilities ahead. I will provide a brief overview of the transition so far and also share some initial observations. First, while I've only been on the job for just over a month, I visited a number of our facilities, met with many of our employees, visited with a major auto customer, and had the opportunity to review the operating performance for all of Method's business units. I have been impressed with the talent in our organization, the depth and breadth of engineering capability across the company, and our strong customer relationships. Our company foundation is strong with a rich legacy of innovation and an unwavering commitment to excellence. I look forward to building on that foundation and charting a course towards even greater success for the organization. In the coming months, I look forward to meeting with investors and analysts to share more about my background and views on the business. Let's begin on slide five. Our sales for the quarter were $260 million, which were down 21 million year-over-year. The decline was entirely in our auto segment across all three of our reporting regions. The decrease was primarily due to program roll-offs and EV demand weakness, along with some continued softness in the e-bike market. Sales in the quarter were helped by the acquisition of Nordic Lights in the industrial segment. The lower sales along with the continued operational inefficiencies in our North American auto operations drove the net loss in the quarter. These are essentially the same operational challenges that we experienced and communicated to you in the first and second quarters of this fiscal year. We also continue to see increased costs related to our numerous new program launches. Some of these costs are driven by a lack of absorption due to customer program delays. We are taking actions to mitigate these launch costs which range from customer reimbursement to internal cost reductions. Moving to orders, we had a modest quarter with over $20 million in annual program awards. These programs are spread across our user interface, lighting, power, and sensor applications. I can share that the pipeline of potential awards remains healthy. However, I would note that the profile of the programs are weighted towards EV, and consequently may be subject to reduction or delay due to customer decisions and or market conditions. Turning back to EV activity, sales in the quarter were 19 percent of our consolidated total, and year-to-date are at 20 percent. As previously communicated, we have a sizable EV lighting program in the process of rolling off, while we are also at the beginning of a wave of new EV power programs. The consequence of this timing gap will be a period of lower EV sales before they rebound as we transition programs. All of this is taking place with the backdrop of a softening near-term outlook in the EV market. EV is clearly a long-term tailwind for Method, but the path will certainly not be linear. In the quarter, our debt was flat sequentially from the second quarter. That leveling off was aided by return to positive free cash flow. While we were challenged in the quarter with net income, we still maintain a sharp focus on cash generation. There is plenty of room for improvement on cash flow, but it was a step in the right direction. Lastly, we continued our share buyback in the quarter, acquiring $3 million in shares via our automated purchase program. Turning to slide six, in summary for the quarter, sales were under pressure from auto program roll-offs and market headwinds in the EV, e-bike, and data center markets. The low sales volume and persistent operational inefficiencies in our auto segment drove a net loss. We returned to a positive free cash flow position, and we continued our share purchase program. Going forward, we have carefully considered the situation with our operational challenges, the evolving market headwinds, and my recent appointment to the CEO position. Consequently, we decided to suspend all guidance for the near future. We intend to focus on planning and executing on our path forward to restoring profitability and cash generation for the company. We will undertake an intensive review and take quick actions to reduce hard costs, including headcount, and to dispose non-critical and non-revenue-generating assets. We will be laser-focused on reducing working capital, particularly inventory, and increasing free cash flow. We have an engaged and outside cost reduction consultant to review our business operations and have delayed all merger and acquisition activity. In addition, we will perform a rigorous review of key operating procedures and processes. Lastly, we will perform an expeditious but thorough review of the entire portfolio. We will then undertake, share an update on our business review and when we report fourth quarter earnings. I'm confident that the foundation of the business is strong and the potential for greater success is evident. The near-term path for the company will be heavily focused on cost reduction and operational effectiveness. But we will then quickly pivot to strategic actions to take Method to the next stage in its journey. At this point, I'll turn the call over to Ron, who will provide more detail on our third quarter financial results. Thank you, Avi, and good morning, everyone.