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Edited Transcript of MEI earnings conference call or presentation 20-Jun-19 3:00pm GMT

Q4 2019 Methode Electronics Inc Earnings Call

Chicago Jun 24, 2019 (Thomson StreetEvents) -- Edited Transcript of Methode Electronics Inc earnings conference call or presentation Thursday, June 20, 2019 at 3:00:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Donald W. Duda

Methode Electronics, Inc. - President, CEO & Director

* Ronald L.G. Tsoumas

Methode Electronics, Inc. - VP of Corporate Finance & CFO

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Conference Call Participants

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* Christopher Ralph Van Horn

B. Riley FBR, Inc., Research Division - Analyst

* David Jon Leiker

Robert W. Baird & Co. Incorporated, Research Division - Senior Research Analyst

* Ryan Ronald Sigdahl

Craig-Hallum Capital Group LLC, Research Division - Associate Analyst

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Presentation

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Operator [1]

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Welcome to the Methode Electronics Fiscal Year 2019 Fourth Quarter and Full Year Earnings Conference Call. (Operator Instructions) For this quarterly conference call, the company has prepared a PowerPoint presentation entitled Fiscal 2019 Fourth Quarter and Full Year Earnings, which can be found at methode.com in the Investor Relations section. (Operator Instructions) As a reminder, this conference is being recorded.

This conference call does contain forward-looking statements, which reflects management's expectations regarding future events and operating performance and speak only as of the date hereof. These forward-looking statements are subject to safe harbor protection provided under the securities laws.

Methode undertakes no duty to update any forward-looking statements to conform the statements to actual results or changes in Methode's expectations on a quarterly basis or otherwise. Forward-looking statements in this conference call involve a number of risks and uncertainties.

The factors that cause these actual results to differ materially from our expectations are detailed in Methode's filings with the Securities and Exchange Commission such as our annual and quarterly reports. Such factors may include, without limitation, the following: dependence on a small number of large customers, including 2 large automotive customers; dependence on the automotive, appliance, commercial vehicle, computer and communications industries; international trade disputes resulting in tariffs; changes in U.S. trade policy; success of Pacific Insight, Procoplast and Grakon and our ability to implement and profit from new applications of the acquired technology; ability to successfully benefit from acquisitions and divestitures; customary risks related to conducting global operations; significant adjustments to expense based on the probability of meeting certain performance levels and our long-term incentive plan; recognition of goodwill impairment charges; ability to keep pace with rapid technological changes; ability to withstand business interruptions; investment in programs prior to the recognition of revenue; timing, quality and cost of new program launches; ability to withstand price pressure, including pricing reductions; currency fluctuations; ability to successfully market and sell Dabir Surfaces products; dependence on our supply chain; dependence on the availability and price of materials; income tax rate fluctuations; fluctuations in our gross margins; breach of our information technology systems; ability to avoid design or manufacturing defects; ability to compete effectively; ability to protect our intellectual property; debt levels and the effect on operations and liquidity; and cost and expenses due to regulations regarding conflict minerals.

Additionally, this conference call will present both GAAP and non-GAAP financial measures. A reconciliation of these measures is included in today's earnings release, which you can find on our Investor Relations website.

I would now like to turn the call over to Don Duda, President and CEO. Please go ahead, sir.

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Donald W. Duda, Methode Electronics, Inc. - President, CEO & Director [2]

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Thank you, Christine, and good morning, everyone. Thank you for joining us today for our Fiscal 2019 Fourth Quarter and Full Year Financial Results Conference Call. I'm joined today by Ron Tsoumas, our Chief Financial Officer. Both Ron and I have comments. And afterwards, we will take your questions.

To start, I will ask you to turn to Slide 4. In fiscal 2019, we continued on our delivered path to transform the company into a higher-margin business that should command a higher multiple compared to the typical automotive suppliers today. Methode has been focused on this objective for some time, and the acquisition of Grakon solidifies our industrial segment, clearly setting us on a path to diversify into new end markets, expand our customer base and product line offering and reduce our automotive concentration.

In fiscal 2019, Methode equips $1 billion of revenue for the first time in our history, despite the decline in global passion to car production and tariff-induced headwinds as well as the introduction of the new European emission and testing standards, all of which reduced our automotive sales by $47 million for the fiscal year compared to fiscal 2018. Through our acquisitions and continued investment in technologies and vertical integration, we have positioned Methode to become a one-stop shop for LED lighting solutions, integrated user interfaces and sensors. Today, these complementary products, technology and manufacturing capabilities will allow us to capitalize important trends in both the automotive and industrial segments, safety, autonomous and electrification.

OEMs are talking less about discrete functionality and more about feedback control, and this is where our sensor solutions can bring innovation and unique custom solutions. For instance, our magnetoelastic sensing technology, already deployed to provide pedal assist on e-bikes, steering assist on sport and recreation vehicles, clutch plate position and active roll control for automobiles can also be utilized to measure and manage trailer weight and towing dynamics to improve safety for both automobiles and commercial vehicles.

Additionally, lighting has become one of the most critical elements for automotive and commercial vehicle OEMs to innovate and differentiate their vehicles to attract customers and drivers.

Pacific Insight's innovation in technology and RGB LED-based ambient and direct lighting has expanded Methode's presence within the interior, providing enhanced functionality, styling and safety. Grakon's exterior lighting capabilities support Advanced Driver Assistant Systems. These new opportunities in interior and exterior lighting provide opportunity for marketer gains across Methode.

Finally, our expertise in both power distribution and automotive manufacturing allows us to meet the electric vehicle OEMs' high voltage power requirements, which are validated to automotive requirements. Combining these 2 expertise from a single supplier provides brand-differentiating ideas and system-critical best-in-class solutions for the customer. Our innovative solutions to the EV market provide a tremendous opportunity for growth through both increased market penetration and content per vehicle.

Next, I'd like to take a moment to update you on our Grakon integration efforts. As we've talked about in the past, one of the synergies in the acquisition was to present Grakon customers the breadth of Methode's technologies and solutions as their customers have been requesting to see Methode's capabilities since the acquisition closed. We just concluded the first of 2 of a number of planned tech days with Grakon's commercial vehicle OEM customers. Through functioning product demos, we illustrated a broad range of Methode's HMI, lighting, power distribution and sensor capabilities. Our tech day events were visited by management, engineering, purchasing and their design studios. We also demonstrated our expertise in forward lighting and some of the potential applications of our magnetoelastic sensor technology. The Methode, Grakon team will continue with 3 additional on-site tech days over the summer.

Finally, on this slide, and I will discuss more in a few minutes, Dabir passed the milestone of $1 million in revenue, and we continue to make significant progress on both number of Dabir Surfaces sold and lowering the average evaluation time.

Looking at the financials on Slide 5. Consolidated sales improved year-over-year 6.8% in the quarter and 10.1% for the year. In the fourth quarter of this year, non-GAAP adjusted income from operations increased 23.6% over last year. For the year, non-GAAP adjusted income from operations improved 14.6% over last year. These figures exclude expenses for initiatives to reduce cost and improve profitability and acquisition-related cost in the applicable periods.

Non-GAAP adjusted consolidated gross margins improved year-over-year 210 basis points in the fourth quarter and 100 basis points for the year. This excludes expenses for initiatives to reduce costs and improve profitability as well as acquisition-related purchase accounting adjustments in the applicable periods.

Next, I'll be referring to Slide 6 to look at the key drivers to our sales performance in this year versus last year. For the fourth quarter, Grakon and organic growth contributed $55 million in sales more than offsetting reduced vehicle production volumes at our customers impacted by the shift away from passenger cars. Fourth quarter sales were also negatively impacted by the continued late start of a major appliance program and reduced data program volumes in the interface segment as well as an unfavorable currency impact.

Looking at the full year sales on Slide 7. Acquisitions and organic growth, including new launches, contributed $196 million of sales, again, more than offsetting the global auto slowdown and production headwinds as well as pricing reductions and the adoption of a new accounting standard regarding revenue recognition, which affected the accounting of tooling sales.

Consolidative sales were also negatively impacted by the late start of the major appliance program and reduced data program volumes Interface segment as well as currency headwinds.

Now let's move on with an update on Dabir on Slide 8. As we look back on this past year, Dabir revenue increased fourfold to $1 million in fiscal 2019. Additionally, our number of paying customers doubled from 8 to 16, growing to 20 already this fiscal year. We also moved from Dabir being predominantly utilized in the cardiovascular operating in the last fiscal year to being adopted in other areas of the hospital networks, such as general surgery, transplant, ICU, plastics, neurology and electrophysiology. Additionally, as this slide shows, our overall evaluation period has been reduced from 85 days to an average of 69 days due to product awareness and better acceptance in the marketplace.

Even as we continue to add new customers this fiscal year, we will be focused on expanding within our current customer base as we go from the operating room to other departments and from a single hospital to the entire hospital system.

Finally, the key internal measure we used to judge Dabir's progress is a number of surfaces sold, which has increased year-over-year 5x, from 79 in fiscal 2018 to 462 in fiscal 2019. Excluding controller sales and leases, revenue attributed to surfaces alone has grown from $64,000 in fiscal 2018 to over $476,000 in fiscal '19. As we noted in the release this morning, we anticipate revenues of $3 million to $5 million this year for Dabir.

At this point, I'll turn the call over to Ron, who will provide more detail on financial results and review guidance.

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Ronald L.G. Tsoumas, Methode Electronics, Inc. - VP of Corporate Finance & CFO [3]

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Thank you, Don, and good morning, everyone. On a GAAP basis, fourth quarter net income decreased $14.2 million to $22.6 million or $0.60 per share, from $36.8 million or $0.98 per share for the same period last year.

For fiscal '19, GAAP net income increased $34.4 million to $91.6 million or $2.43 per share from $57.2 million or $1.52 per share in fiscal '18.

As you'll recall, in fiscal '18, we incurred $53.7 million of tax expense related to U.S. tax reform. For the fourth quarter, tax expense increased $13.5 million or $0.36 per share, mainly due to a decrease in investment tax credits of $8.9 million this fiscal year and a tax benefit of $3.1 million in the fourth quarter of fiscal 2018 related to U.S. tax reform. This resulted in an effective tax rate of 24.9% in the fourth quarter.

For the full year, tax expense decreased by $54.6 million, mainly as a result of lower tax expense of $58.5 million from last year partially offset by lower investment tax credits of $7.8 million year-over-year in this fiscal year. The net impact of these 2 factors was a benefit to fiscal 2019 net income of $50.7 million or $1.35 per share. This resulted in an effective tax rate of 11.6% from fiscal '19. Lower-than-anticipated investment tax credits for the year had the effect of increasing our effective tax rate from the guidance range of 9% to 11%, which we provided throughout the year.

Negatively impacted fourth quarter and full year GAAP net income was increased intangible asset amortization, stock-based compensation and interest expenses, reduced passenger car demand and production globally and currency rate fluctuations. Full year GAAP net income was also negatively impacted by increased acquisition-related costs, initiatives to reduce cost and improve profitability, net tariff expense and lower international government grants. Fourth quarter and full year GAAP net income benefited from results from Grakon and lower SG&A expenses, excluding Grakon, while the full year benefited from results from acquisitions and lower legal expenses.

Moving to Slide 9. In the fourth quarter, automotive and currency headwinds provided -- proved to be greater than anticipated. Additionally, sales at the very lower end of our guidance range were a key contributor to lower results. But the lower year-over-year investment tax credits, I just discussed, were nearly as impactful. Tariff mitigation efforts and currency headwinds also negatively impacted our results.

Moving to Slide 10. Non-GAAP adjusted gross margins improved 100 basis points year-over-year in fiscal 2019 and exclude expenses for initiatives to reduce costs and improve profitability and purchase accounting adjustments related to the inventory. Gross margins were negatively impacted by an unfavorable sales mix and customer pricing reductions in the automotive segment as well as significantly reduced sales in the Interface segment partially offset by a favorable sales mix in the industrial segment.

Non-GAAP selling and administrative expenses as a percentage of sales decreased 40 basis points in fiscal 2019 and exclude acquisition-related costs, expenses for initiatives to reduce overall costs and improve operational profitability and long-term incentive plan accrual adjustments in the applicable periods. A main contributor to the improvement was lower legal expenses of $5.1 million.

Shifting to EBITDA on Slide 11. The company generated $155 million of EBITDA in fiscal 2019 or 15.5% of sales versus $153 million or 16.8% of sales in the same period last year. However, adjusting for expenses for initiatives to reduce overall costs and improve operational profitability, acquisition-related costs and long-term incentive plan accrual adjustments in the applicable periods, adjusted EBITDA improved year-over-year to $185 million or 18.5% of sales in fiscal '19 versus $154 million or 16.9% of sales in fiscal '18.

A few other financial items to review. Year-over-year intangible asset amortization expense in fiscal '19 increased $10.5 million or 187.5% to $16.1 million, primarily due to amortization expense related to our Pacific Insight, Procoplast and Grakon acquisitions. In fiscal 2019, we invested approximately $50 million in CapEx, mainly to support programs and launches in North America and Europe. Expense for depreciation and amortization for fiscal 2019 was $43.3 million.

Let's move to Slide 12. Free cash flow for fiscal 2019 was $85.1 million. Our debt-to-EBITDA ratio, which is used for our bank covenants, is approximately 1.7.

Moving to Slide 13. I'll finish up my remarks with guidance. As a reminder, the guidance ranges for fiscal 2020 are based upon management's expectation regarding a variety of factors and involve a number of risks and uncertainties, which have been detailed in this morning's release and the Form 10-K.

As we announced this morning, we anticipate fiscal 2020 sales to be in the range of $1.13 billion to $1.17 billion, pretax income in the range of $150.3 million to $164.3 million and earnings per share in the range of $3.25 per share to $3.55 per share. Although we normally do not give quarterly guidance, we anticipate sales for the first quarter will likely be lower than the other 3 quarters due to the fact that the majority of our new automotive and e-bike program launches will not be at full production volumes. Additionally, the delayed laundry care program is anticipated to launch in our third quarter.

We estimate that our effective tax rate will be in the range of 18% to 21% in fiscal 2020. The higher tax rate is due to new provisions under the U.S. tax reform, mainly guilty, and the mix of earnings from our businesses.

For fiscal 2020, we are anticipating capital investment to be in the $48 million to $54 million range and depreciation and amortization to be between $51 million and $54 million.

Finally, we expect fiscal 2020 free cash flow to be between $122 million and $136 million.

In conclusion, please move to Slide 14 to take a look at our key drivers of our anticipated EBITDA performance for fiscal 2020. Looking at fiscal '19 EBITDA of $155 million and getting the EBITDA from new automotive and laundry program launches of about $19 million, adding EBITDA from a full year of Grakon, which adds another $19 million, subtracting the impact of the loss of EBITDA from reduced passenger car reductions, which we estimate to be about $12 million, adding the benefit of initiatives to reduce costs and improve profitability of about $11 million and adding onetime cost we incurred in fiscal 2019 for acquisitions and restructuring for about $29 million. Don, that concludes my comments.

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Donald W. Duda, Methode Electronics, Inc. - President, CEO & Director [4]

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Ron, thank you very much. Christine, we are ready to take questions.

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Questions and Answers

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Operator [1]

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(Operator Instructions) Our first question comes from the line of Chris Van Horn with B. Riley FBR.

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Christopher Ralph Van Horn, B. Riley FBR, Inc., Research Division - Analyst [2]

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I was wondering if you could get a little bit of detail of what you're assuming for automotive production. Are you using either LMC or IHS as kind of a benchmark? Or we've heard from some other suppliers that they might be kind of handicapping that either direction based on what they see from their mix in terms of how they're thinking about production rates.

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Donald W. Duda, Methode Electronics, Inc. - President, CEO & Director [3]

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We use LMC. And probably the correct term, we do handicap that up and down based on our knowledge of the customers' demand. But we for the most part use that. And then we'll -- occasionally, we will double-check with IHS if we see a number that doesn't look great to us. But generally it's -- we're looking at LMC.

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Christopher Ralph Van Horn, B. Riley FBR, Inc., Research Division - Analyst [4]

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Okay. Got it. And then so it seems like you've got some visibility into the back half of your fiscal '20 as you mentioned in the comments in terms of -- is that you see program launches for you on the automotive side or is there a macro event that you're seeing? What's kind of driving that comment?

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Donald W. Duda, Methode Electronics, Inc. - President, CEO & Director [5]

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I think for the most part, we take a conservative approach to worldwide auto. And again, handicapping LMC, and maybe we handicap it more than negative than positive, but we do have a visibility to launches. We know when the launches will come. We know what the ramp up is -- the variable there is, do they launch at the volumes that we've predicted. And then also we talked about -- Ron talked about the delay in the laundry program that's going to launch in October. So as we showed it on the 1 chart, those launches contribute to our income and EBITDA for the year, although, again, more in the second, third and fourth quarter than in the first quarter. We've also built in a decline in Class 8 sales in second half of the year.

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Christopher Ralph Van Horn, B. Riley FBR, Inc., Research Division - Analyst [6]

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Okay. Got is. Very helpful. Thanks for that color. And then obviously tariff. You're assuming some tariffs in your guidance here. Maybe you could highlight what are your mitigation efforts there, if at all, or do you intend to pass along some of that to the end customer? How do you see the tariff playing out assuming it actually happens?

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Ronald L.G. Tsoumas, Methode Electronics, Inc. - VP of Corporate Finance & CFO [7]

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Well, from a -- Chinese tariffs were there. We've built in 25%, and that equates to about $8.5 million. We have -- we are sharing some of the expenses with our customers, and we've provided them a mitigation plan, some of which is just shipping into Mexico, for Mexican production versus shipping into the U.S. and then transferring to Mexico. And then some of it is using our other plants for manufacturing. And when we are in the, I would say, the trial period of various shipments and gets fairly complicated from a tariff standpoint on what constitutes material transformation. So we've communicated with our customers, here's what we can do for you, here's the time frame and if we can do it [center] that $8.5 million will be reduced obviously if the China and the U.S. come to terms that will help also.

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Christopher Ralph Van Horn, B. Riley FBR, Inc., Research Division - Analyst [8]

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Okay. Got it. And then last for me, just on capital deployment. Obviously, you're generating some decent free cash here. And just a query, I know you paid dividend, but have you considered buybacks and anything else you're considering from a capital deployment standpoint?

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Donald W. Duda, Methode Electronics, Inc. - President, CEO & Director [9]

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I think we always do look at our various options and discuss that with the Board. Our preference right now is to pay down debt. And we have the capability of doing that. So that was probably the #1 deployment. I don't rule out another acquisition if one came about. But right now, the main use is -- obviously our capital use is to support our businesses and our program launches, but -- and the dividend, but we're focusing on debt reduction.

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Operator [10]

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Our next question comes from the line of Steve Dyer with Craig-Hallum.

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Ryan Ronald Sigdahl, Craig-Hallum Capital Group LLC, Research Division - Associate Analyst [11]

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Ryan Sigdhal on for Steve. To start, what does revenue guidance imply for organic growth? And then secondly, given the challenging automotive environment, what gives you the confidence to significantly outperform that? I know the EBITDA bridge shows new awards and whatnot, but a little more color there would be helpful.

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Donald W. Duda, Methode Electronics, Inc. - President, CEO & Director [12]

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Sure. I mean, the bridge shows $19 million of organic growth and that's what we're anticipating. But to the question, what gives us confidence in, let's call it a legacy auto business. I mean, we do have the benefit of releases from the customer. We know what the launch schedules are. Could there be a further decline in Europe? Yes. I mean, when you're looking out, you're fairly confident in your first 3 months, the second 3 months gets a little fussier. And then in the second half of the year, it could be up or it could be down. So I don't know if we can add any more color than that. We tend to be conservative, but we saw in our fourth quarter that our European revenues were down further than we thought they would be.

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Ronald L.G. Tsoumas, Methode Electronics, Inc. - VP of Corporate Finance & CFO [13]

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And that's been baked into the forecast for this year.

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Donald W. Duda, Methode Electronics, Inc. - President, CEO & Director [14]

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Yes. And if I -- if you're a revenue guy and I am, I can take the fourth quarter and you take out all the noise and you multiple it by 4, it is okay, that proceeds were not there completely, but we're getting there. And then I also have the benefit of looking at the first quarter. So based on that, we're confident in the numbers that we put out in guidance.

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Ryan Ronald Sigdahl, Craig-Hallum Capital Group LLC, Research Division - Associate Analyst [15]

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And then as it relates to GM's truck and SUV platform, transitioning from K2 to the T1, any thoughts here, I guess, based on what you're seeing from current forecast on? Is that a flattish-type production this year or you think that can grow?

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Donald W. Duda, Methode Electronics, Inc. - President, CEO & Director [16]

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In an area that I really have to be careful because now I'm talking for the customer and we can't do that. So I would refer you to what GM has put out. I really can't go any further than that.

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Ryan Ronald Sigdahl, Craig-Hallum Capital Group LLC, Research Division - Associate Analyst [17]

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Fair enough. As it relates to EBITDA, the bridge on Slide 14 is very helpful. So appreciate that. By my math based on the other guidance, that implies kind of the midpoint of guidance assumptions. Is it $221 million?

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Donald W. Duda, Methode Electronics, Inc. - President, CEO & Director [18]

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Yes. That's correct. Yes.

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Ryan Ronald Sigdahl, Craig-Hallum Capital Group LLC, Research Division - Associate Analyst [19]

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Okay. If I recall correctly for accrual accounting for the long-term incentives, it requires at least 75% confidence in achieving that. Is that correct? And then does that kind of imply the midpoint is on -- fairly on the conservative side, I guess, based on that 75% confidence level?

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Ronald L.G. Tsoumas, Methode Electronics, Inc. - VP of Corporate Finance & CFO [20]

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Yes, it's actually -- good question. It's 70% confidence level that Don and I have to attest to, to the target number of $221 million. And for the accrual purposes for the accounting rules, that's where the plan is capped at. And that's what we accrue too on the long-term incentive accruals. So that's why we just maintained it.

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Operator [21]

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(Operator Instructions) Our next question comes from the line of David Leiker from Robert W. Baird.

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David Jon Leiker, Robert W. Baird & Co. Incorporated, Research Division - Senior Research Analyst [22]

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I want to start with a comment you made about the quarterly pattern, and thanks for sharing it. If what I heard is correct, you're saying your Q1 revenues are going to be the lowest revenue number for the year, is that right?

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Donald W. Duda, Methode Electronics, Inc. - President, CEO & Director [23]

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That's correct. Launches.

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David Jon Leiker, Robert W. Baird & Co. Incorporated, Research Division - Senior Research Analyst [24]

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Yes, launches are also going to benefit from Grakon where...

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Donald W. Duda, Methode Electronics, Inc. - President, CEO & Director [25]

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I'm sorry, David, go ahead.

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David Jon Leiker, Robert W. Baird & Co. Incorporated, Research Division - Senior Research Analyst [26]

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Grakon is going to be added into that number versus last year as well, though?

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Donald W. Duda, Methode Electronics, Inc. - President, CEO & Director [27]

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Sure. Absolutely.

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David Jon Leiker, Robert W. Baird & Co. Incorporated, Research Division - Senior Research Analyst [28]

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Okay. Well, I cut you off. What you said?

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Donald W. Duda, Methode Electronics, Inc. - President, CEO & Director [29]

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Q1 tends to be one of our slowest quarters.

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David Jon Leiker, Robert W. Baird & Co. Incorporated, Research Division - Senior Research Analyst [30]

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Right. Okay. I just wanted to make sure I heard that correctly. And then as we look at the laundry program, is this the timing of this? It's been -- seems to be a little bit of a moving tire. How confident are you that that's going to hit when you're thinking it's going to start to hit?

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Ronald L.G. Tsoumas, Methode Electronics, Inc. - VP of Corporate Finance & CFO [31]

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That's a very good question because it's been delayed in the past. We're starting to see a movement towards launch. There's -- you start to see releases and meaningful footprints to the customer hitting their projected launch day, which I think is October. So that doesn't mean it doesn't change, but we're starting to see positive signs, let's put it that way.

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David Jon Leiker, Robert W. Baird & Co. Incorporated, Research Division - Senior Research Analyst [32]

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And you're at a play right now where you're ready to go, they just have to say start shipping, right?

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Ronald L.G. Tsoumas, Methode Electronics, Inc. - VP of Corporate Finance & CFO [33]

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Absolutely.

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David Jon Leiker, Robert W. Baird & Co. Incorporated, Research Division - Senior Research Analyst [34]

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Okay. And then you also dropped in there on interface a commentary about some of your legacy data products. You talked a little bit about what's going on there, what's the size of that, what's the runoff or impact of that.

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Donald W. Duda, Methode Electronics, Inc. - President, CEO & Director [35]

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It's 1 gig transitions, which have been under tremendous price pressure for 3, 4, 5 years, if not longer. Ultimately, that will wind down, and we're seeing slower sales than we thought maybe for a year ago. 10 gig is improving, but not enough to offset the 1 gig product. So it's noteworthy, it's not going to make or break the year, but it was just worthy for commentary.

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David Jon Leiker, Robert W. Baird & Co. Incorporated, Research Division - Senior Research Analyst [36]

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Can you give us some sense of scale of how large that is for you right now?

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Donald W. Duda, Methode Electronics, Inc. - President, CEO & Director [37]

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The 2 combine about $15 million in sales annually.

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David Jon Leiker, Robert W. Baird & Co. Incorporated, Research Division - Senior Research Analyst [38]

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The 1 and the 10 combined?

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Donald W. Duda, Methode Electronics, Inc. - President, CEO & Director [39]

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Yes.

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Donald W. Duda, Methode Electronics, Inc. - President, CEO & Director [40]

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But it could go to $12 million or $10 million.

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David Jon Leiker, Robert W. Baird & Co. Incorporated, Research Division - Senior Research Analyst [41]

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Okay. And then when we look at your sensor business, how large is that today in terms of the revenue contribution for you, when you take the whole portfolio of sensors?

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Donald W. Duda, Methode Electronics, Inc. - President, CEO & Director [42]

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$40 million, going to in '22...

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Unidentified Company Representative, [43]

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$80 million.

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Donald W. Duda, Methode Electronics, Inc. - President, CEO & Director [44]

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$80-some million -- $85 million.

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Ronald L.G. Tsoumas, Methode Electronics, Inc. - VP of Corporate Finance & CFO [45]

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Yes. $85 million.

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Donald W. Duda, Methode Electronics, Inc. - President, CEO & Director [46]

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And we anticipate actually will go higher to $100 million.

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Ronald L.G. Tsoumas, Methode Electronics, Inc. - VP of Corporate Finance & CFO [47]

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Yes.

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David Jon Leiker, Robert W. Baird & Co. Incorporated, Research Division - Senior Research Analyst [48]

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Okay. And then you didn't make any comments about any new contract wins or anything. Any color you can offer there?

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Donald W. Duda, Methode Electronics, Inc. - President, CEO & Director [49]

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It's been relatively slow, and we kind of anticipated that. We had some very good bookings early in '19. And I don't want to say that the automakers are in reuse mode. But that's potentially why we've seen less large -- excuse me, we had bookings, but not enough that we wanted to comment on. We've had lows like this before. And one thing I'll comment on is, our move in the lighting and our EV business has really allowed us to expand our vehicle content. I often say, we don't really measure ourselves by what the SAAR is doing. And we measure by what program is done and what our content is. I'll give you 2 examples. I can't name the customers. But if we were just looking at HMI business, we've been -- and the 1 customer would be in about the $60 per vehicle content. And you start to add EV and lighting to that, then we're over $122 million in booked business. That's the European customer. We've got another European customer very similar, going from $26 per car to $96. So our expansion in lighting and then our prominence in EVs is definitely helping us with our dollar content per vehicle. But again, nothing to speak of this quarter.

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Operator [50]

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Thank you. It appears we have no further questions at this time. I would now like to turn the floor back over to Mr. Duda for closing comments.

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Donald W. Duda, Methode Electronics, Inc. - President, CEO & Director [51]

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Christine, thank you very much, and we'll ask -- we'll thank everyone for participating today. Have a good day.

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Operator [52]

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Ladies and gentlemen, this does conclude today's teleconference. You may disconnect your lines at this time. Thank you for your participation, and have a wonderful day.