Methode Electronics, Inc. (MEI) is a leading global supplier of custom-engineered solutions for user interface, lighting system, and power distribution applications. With a rich history spanning over six decades, the company has evolved from a small regional player to a diversified global force, catering to the ever-changing demands of its customers across a wide array of industries.

Founded in 1946 in Chicago, Illinois, Methode Electronics started its journey as a manufacturer of electrical and electronic components. Over the years, the company has strategically expanded its product portfolio and geographical reach, establishing a strong presence in North America, Europe, the Middle East, and Asia. Today, Methode's solutions can be found in a diverse range of end markets, including automotive, commercial vehicle, aerospace, data centers, industrial equipment, and consumer appliances.

Company History and Growth

The company's growth trajectory has been marked by significant milestones and strategic decisions. In its early years, Methode capitalized on the expanding automotive industry, establishing itself as a key supplier of integrated overhead and center consoles, hidden and ergonomic switches, transmission lead-frames, and other automotive components. This move laid the foundation for Methode's strong presence in the automotive sector.

As the company entered the 2000s, it embarked on a diversification strategy to broaden its customer base and product portfolio. This strategic shift led Methode to enter new markets such as aerospace, commercial vehicles, data centers, and consumer appliances. The company's ability to adapt its technological capabilities to serve these diverse sectors demonstrates its innovation prowess and market agility.

Methode's growth strategy has also included strategic acquisitions to enhance its product offerings and market reach. A notable example is the 2023 acquisition of Nordic Lights, a provider of industrial lighting solutions. This move has further strengthened Methode's position in the industrial lighting segment and expanded its global footprint.

Financials

The company's financial performance has been marked by both periods of growth and challenges. In the fiscal year ended April 27, 2024, Methode reported net sales of $1.11 billion and a net loss of $123.3 million, largely due to a one-time goodwill impairment charge of $56.5 million. However, the company's adjusted EBITDA for the same period stood at $52.4 million, showcasing its underlying operational strength. Annual operating cash flow was $47.5 million, while annual free cash flow was -$2.7 million.

In the most recent quarter (Q3 2025), Methode reported revenue of $239.9 million, representing a 7.6% decrease year-over-year. This decline was primarily due to lower sales volumes in the Automotive segment, partially offset by higher sales volumes in the Industrial segment. Despite the revenue decrease, the company was able to deliver $4 million in higher gross profit than the prior year quarter, attributed to improved product mix and operational execution, including lower scrap and freight costs. The net loss for the quarter was $14.4 million.

Methode's financial ratios present a mixed picture. The company's current ratio of 2.84 and quick ratio of 1.75 indicate a relatively strong liquidity position, while its debt-to-equity ratio of 0.47 suggests a moderately leveraged capital structure. The company's return on assets and return on equity stood at -7.02% and -12.41%, respectively, for the fiscal year ended April 27, 2024, reflecting the impact of the goodwill impairment charge.

Liquidity

As of the most recent quarter, Methode had $103.8 million in cash and $500 million available under its revolving credit facility, which matures in October 2027. This strong liquidity position provides the company with financial flexibility to navigate market challenges and pursue growth opportunities.

The company's geographic revenue breakdown for the fiscal year ended April 27, 2024, was as follows: North America (36%), Europe, the Middle East, and Africa (EMEA) (39%), and Asia (25%). This diversified revenue stream has helped Methode navigate the challenges posed by global economic and geopolitical uncertainties.

Recent Challenges and Strategic Focus

In recent years, Methode has faced headwinds in its Automotive segment, which accounted for 40.7% of its total revenue in the fiscal year ended April 27, 2024. The company has experienced program roll-offs, such as the GM Center Console and major EV lighting programs, which have created revenue volatility. To address these challenges, Methode has been actively diversifying its customer base and product portfolio, with a focus on high-growth areas like data centers and electric vehicles.

The company's transition to newer programs and technologies has been a key area of focus. In the fiscal year ended April 27, 2024, Methode's Industrial segment, which includes power distribution solutions for data centers, accounted for 30.8% of total revenue, showcasing the company's ability to leverage its expertise in power management to capitalize on emerging market trends.

Segment Performance

Automotive Segment: In the three months ended February 1, 2025, the Automotive segment reported net sales of $115.7 million, a 17.2% decrease compared to the prior year period. The decrease was primarily due to lower sales volumes in North America and Asia, partially offset by higher sales volumes in EMEA. The segment's gross profit margin decreased to 2.6% from 3.2% in the prior year period.

Industrial Segment: The Industrial segment reported net sales of $111.9 million in the three months ended February 1, 2025, a 4.5% increase from the prior year period. This growth was primarily driven by higher sales volumes of power distribution products for data centers, partially offset by lower sales volumes for lighting products in the commercial vehicle and off-road equipment markets. The segment's gross profit margin improved to 31.5% from 28.3% in the prior year period.

Interface Segment: In the three months ended February 1, 2025, the Interface segment reported net sales of $12.3 million, a 3.1% decrease from the prior year period. The decrease was primarily due to lower sales volumes of transceivers for servers, partially offset by higher sales volumes for touch panels for appliances. The segment's gross profit margin improved significantly to 23.6% from 17.3% in the prior year period.

Medical Segment: Methode made the decision to discontinue its Dabir Surfaces business, which made up the Medical segment, in the first quarter of fiscal 2024. The company has since sold certain assets of this business and exited the market.

Future Outlook and Leadership

Looking ahead, Methode has revised its guidance for fiscal year 2025 due to slower-than-expected ramp-up of new EV programs and broader automotive market weakness. The company now expects fiscal year 2025 sales to be lower than fiscal year 2024, with fourth-quarter sales projected to be in the range of $240 million to $255 million. Despite the lower sales guidance, Methode's adjusted pretax income guidance for the full year has only been reduced by $9 million, indicating that operational improvements have helped offset some of the sales decline.

For fiscal year 2026, Methode is reaffirming its guidance for net sales to be greater than fiscal year 2025, and pretax income to be positive and notably greater than fiscal year 2025. This guidance reflects the company's confidence in its ability to navigate the current market landscape and deliver sustainable growth.

The company's transformation journey has been further bolstered by the recent appointment of Jon DeGaynor as the President and Chief Executive Officer. DeGaynor, who joined Methode in 2022, has been instrumental in revitalizing the company's executive team, with the addition of several seasoned industry leaders. This new leadership team is focused on driving operational excellence, enhancing customer relationships, and developing a strategic roadmap to position Methode for long-term success.

Conclusion

Despite the challenges faced by the company, Methode's diversified product portfolio, global footprint, and strong technical expertise position it well to capitalize on emerging opportunities in the fast-paced mechatronics industry. The company is navigating a transition from legacy automotive programs to new program launches, which has resulted in some headwinds. However, Methode is projecting organic sales growth in fiscal 2026 as the new program launches ramp up.

The overall industry is seeing trends towards electrification, LED lighting, and growing data center demand, which present opportunities for Methode's product portfolio. Management is focused on improving operational execution, refreshing the executive team, and developing a strategic growth plan to capitalize on these industry trends.

As the company continues to navigate the evolving market landscape, investors will be closely monitoring Methode's ability to execute on its transformation initiatives and deliver sustainable growth and profitability.