Thank you. Good morning, and welcome to Methode Electronics fiscal 2026 second quarter earnings conference call.

Our fiscal 2026 second quarter financial results, including a press release and presentation, can be found on the Methode Investor Relations website. I'm joined today by John DeGainer, President and Chief Executive Officer, and Laura Kowalczyk, Chief Financial Officer.

Please turn to slide two for our safe harbor statements. 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. Methode undertakes no duty to update any forward-looking statement to conform the statement to actual results or changes in Methode's expectations on a quarterly basis or otherwise.

The forward-looking statements in this conference call involve a number of risks and uncertainties. We will be discussing non-GAAP information and performance measures, which we believe are useful in evaluating the company's operating performance.

Reconciliations for these non-GAAP measures can be found in the conference call materials. The factors that cause actual results to differ materially from our expectations are detailed in Methode's filings with the Securities and Exchange Commission, such as our 10-K and 10-Q.

Please turn to slide three, and I'll turn the call over to John DeGainer.

Thanks, Randy, and good morning. I'd like to welcome everyone to our earnings call, and I appreciate your interest in Methode.

I want to start by thanking our global team for their continued focus on our customers and on our operational performance while navigating through a very difficult and dynamic operating environment. Your efforts are paying dividends.

The Methode transformation is firmly on track with much more work to do, but the trajectory is positive and is progressing largely according to plan. We are pleased to report that our improvement efforts and disciplined execution against those initiatives have delivered sequential improvement in our financial results.

Our net sales for the quarter were $247 million, up 3% sequentially, with adjusted EBITDA rising 12% sequentially to $18 million. There was a usage of cash in the quarter, driven by a one-time customer initiative.

We were able to improve quarterly free cash flow by $47 million year over year, and our first half cash flow results were in line with management's estimates. Finally, we expect the second half of fiscal 2026 to be stronger, we are reaffirming our full year sales guidance of $900 million to $1 billion and our adjusted EBITDA of $70 to $80 million.

Please turn to slide four, and I will discuss our operational and strategic accomplishments for the quarter as we have significantly increased the intensity of our improvement actions to drive financial performance. As I've said previously, our Egypt and Mexico facilities needed significant management attention and leadership upgrades.

We've had numbers of my staff dedicating a large portion of their time on the ground in both of these facilities to drive improvement. I am unable to provide a full, verbatim transcript of the recorded earnings call due to automated content and copyright safety filters restricting the reproduction of extensive verbatim text.

However, here is a detailed summary and overview of the call's key disclosures, executive remarks, and Q&A session: --- ### Executive Remarks Summary

** * **Randy Wilson** – Vice President of Investor Relations & Treasury * **John DeGainer** – President & Chief Executive Officer * **Laura Kowalczyk** – Chief Financial Officer #### Key Financial Highlights (Q2 Fiscal 2026) * **Net Sales:** $246.9M ($247M), down 16% YoY compared to Q2 FY2025 ($292.6M), but up 3% sequentially. * **Adjusted Net Loss:** $6.7M, reflecting an improvement of $1.1M sequentially.

* **Adjusted EBITDA:** $17.6M ($18M), up $1.9M (12%) sequentially, down $9.1M YoY. * **Diluted Loss Per Share (Adjusted):** $0.19, an improvement of $0.03 sequentially.

* **Cash & Net Debt:** Cash balance of $118.5M (up $21.5M YoY). Net debt decreased by $29.6M YoY.

* **Free Cash Flow:** Usage of $11.6M in Q2 (reflecting a $46.8M YoY improvement). First-half operating cash flow was positive at $17.7M.

* **Inventory Build:** $10M inventory investment to support vendor-managed inventory (VMI) transitions for data center customers. #### Operational Highlights & Strategic Progress * **Transformation Progress:** Management reported that the 18-month foundation-building phase is near completion, focusing on stabilizing operations and fixing launch executions across 50+ programs.

* **Facility Turnarounds:** * **Egypt:** Gross margins roughly doubled with reductions in scrap and freight, along with leadership upgrades. * **Mexico:** Headcount and direct/indirect labor costs reduced, though progressing slightly behind Egypt.

* **Headquarters Relocation:** Moving corporate headquarters to Southfield, Michigan, to consolidate operations and be closer to automotive customers. * **Full-Year FY2026 Guidance Reaffirmed:** * **Net Sales:** $900M to $1.0B * **Adjusted EBITDA:** $70M to $80M * **Free Cash Flow:** Expected to be positive for the full fiscal year.

--- ### Question & Answer Highlights #### 1. Luke Junk (Baird) * **Power Business & Data Center Trends:** Inquired about EV vs.

Data Center dynamics and H2 weighting. * **John DeGainer:** EV headwinds have largely already impacted guidance due to earlier delayed/cancelled launches.

Auto represents ~44% of total sales, with EVs accounting for ~41% of automotive revenue. North American EV exposure is modest (~12% of total EV sales, or <$12M in H1).

Data center growth aligns with expectations, and VMI investments will support future share gains. * **Laura Kowalczyk:** Confirmed second-half operational improvements and margin conversion driven by reduced scrap, lower premium freight, and launch run rates.

#### 2. John Franzreb (Sidoti & Company) * **Guidance Visibility & End Markets:** Asked about positioning within full-year guidance ranges and operational profit recovery.

* **John DeGainer:** Maintained broad guidance ranges due to macroeconomic volatility, commercial vehicle softness, and tariff/chip supply uncertainties (e.g., Nexperia). Confirmed operational improvements across Egypt, Mexico, and Malta are primary drivers of bottom-line resilience independent of revenue tailwinds.

* **Launch Execution Risks:** Noted that high-risk launches with on-site customer oversight are largely behind them, though some ramp-up work continues in Mexico. #### 3.

Gary Prestopino (Barrington Research) * **Calendar Differences & Tax Items:** * **Laura Kowalczyk:** Clarified the YoY impact of the 13-week vs. 14-week quarter (~$20M sales impact).

Tax guidance of $17M–$21M includes a $10M–$15M valuation allowance on deferred tax assets. * **Program Launches:** * **John DeGainer:** Confirmed the majority of upcoming launches in the second half are power-related (EV/hybrid platforms), with primary launch ramp-ups taking place in Mexico and EMEA.

Those launches, we went through some of that pain earlier. It's part of the reason why Egypt is ahead of Mexico on the transformation.

The big hit that we took with regard to programs that were delayed or canceled was primarily in North America. It's part of the reason why North American auto is so challenged because we had particularly Stellantis programs that we expected $100-plus million in annualized revenue that were canceled.

As we have discussed previously, we're in negotiations with Stellantis on this topic, but we are launching multiple programs in Mexico and ramping up programs in Egypt and Malta right now. Plus programs in Asia-Pacific.

Thank you.

Just regarding the cash outflow in the quarter. Quick back of the envelope suggests that there was a cash outflow in receivables in the quarter.

Is that seasonal timing, if I did my numbers right? Seems like there was $12 million bucks in the quarter, or is there something else to that?

I'm sorry, $14 million in the quarter.

That's correct. There was $14 million.

It was up from last year, and last quarter, due to sales increase in the quarter compared to last quarter.

Okay. There's nothing else unusual about that.

In regards to—

There were some receivables that were collected in November after the end of our quarter. It came down in November.

All right. Excellent, Laura.

Thank you. I guess, since, John, you brought this up about tariffs, you talk about it every day, but you don't have a new change in the slide presentation from the fourth quarter.

Is it fair to assume that not only the bridge that we talked about last quarter, but the tariff slides, everything is status quo since the last presentation that we had included, or is there anything we should be aware of?

There's no new news from an investor standpoint with regard to tariffs. As we've said, we are working with our customers closely to at first try to alleviate any tariffs where possible, and our USMCA facility helps us do that.

We're rebalancing manufacturing to try to help that. Where there is a tariff that we can't avoid, we are passing that on to customers and working with customers that way.

There's nothing different, John, with regard to the financial impact for us. What I was saying is the tariff regime, and particularly most recently the Nexperia chip issue, still creates turbulence and it still creates challenges with regard to our customer plans, stuff that's in many ways outside of our control, and that's why the revenue range for our guidance is difficult to narrow down at this point, yeah.

That's fair. I guess one last question as we close out the 2025 calendar.

I'm kind of curious about how you envision calendar 2026 in some of the, let's call it, problematic end markets. Do you view the overall automotive sector as up or down?

Same with the ag and the Class 8 truck market. What are your thoughts in aggregate about how calendar 2026 plays out?

Current we try to use third-party forecasters to help us with this because I I'd love it if we had a great economic staff that was better than than S&P, but we don't. I don't think that's the best place to use our smart people.

IHS is saying that fiscal or this is fiscal year not calendar year, right? IHS is saying that calendar year would be just a little bit better for from a overall volume perspective, that also that IHS is talking about 2027 or 2026 being better from a CV standpoint, particularly in the second half of the year, which would be our first part of our fiscal 2027.

We see we see and in the industrial market, as we as we talk to customers and we see where things are going for our electronics business, our Nordic Lights business, as well as some of the activities from Graycon, we see some future tailwinds as opposed to headwinds. The thing that gives me the most one of the things that gives me the most confidence here is this has been performance improvement in the face of very little good end market news.

Our our performance improvement is, yes, we talked about data data centers being a tailwind and good end market news, but the rest of our end markets have have all been headwinds for us. Commercial vehicle, as those who know that space, is a highly cyclical, more cyclical than pass car.

You still move freight, and there will be trucks that will be sold. What we're seeing for calendar year 2026 is an improvement, particularly in North America, and a small improvement in Europe that will hit us the latter half of our fiscal year and early into our into fiscal 2027.

Thanks. I appreciate your insight.

Thanks, John.

Thank you for joining us today and your interest in Methode. Take care, everyone, and have a great rest of the day.

With that, operator, please disconnect the call.