“The Methode transformation is firmly on track. There’s still much more to do, but the trajectory is according to plan. We still expect to double our EBITDA for the full year, even with a $100 million decline in sales driven by lower EV demand.”
— Jonathan DeGaynor, President & CEO
03Detailed Report
MEI
Company MEI
Period
Q1 2026
CurrencyUSD
Report TypeQuarterly Earnings
GeneratedMay 21, 2026
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Executive Summary
Methode Electronics reported a soft start to fiscal 2026 with net sales of $240.5 million in QQ1 2026, down 7% year over year (YoY) and 6% sequentially as the company continues to transition away from legacy programs toward a faster-growing mix. The quarter highlighted the resilience of the Power Solutions and Data Center segments, which helped offset program-transition headwinds and supported a meaningful improvement in profitability metrics. Adjusted EBITDA was $15.7–$16.0 million for the quarter, led by aggressive SG&A reductions and better operating discipline, with the company affirming its goal to double EBITDA for the full year despite a projected $100 million decline in EV-related sales.
Financial discipline is evident in the quarterly free cash flow of $18.0 million and three straight quarters of net debt reduction, with net debt down by $41 million over the last three quarters. Cash generation was supported by a solid $25.1 million operating cash flow and a constructive working capital profile (change in working capital of $23.9 million). The balance sheet remains solid, with $121.1 million in cash and total debt of $347.6 million, yielding a net debt position of $226.5 million.
Management reiterated a compelling longer-term growth trajectory anchored in Power Solutions (a ~30% CAGR over the last three years), Data Center power needs, and EV-related interconnect innovations. The company also highlighted ongoing transformation efforts—stabilizing the base, accelerating program launches (more than 30 in 2026), and enhancing global supply chain and engineering collaboration—to position Methode for sustained margin expansion and higher free cash flow when sales recover. The 2026 guidance calls for $900 million to $1.0 billion in net sales and $70–$80 million in EBITDA, implying a margin near 7.9% at the midpoint and a positive free cash flow profile for the year. Investors should monitor the pace of EV demand recovery, Automotive North America headwinds, tariff dynamics, and the execution of the company’s transformation initiatives as key drivers of the earnings trajectory.
Key Performance Indicators
Revenue
Decreasing
240.50M
QoQ: 0.25% | YoY: -13.27%
Gross Profit
Increasing
43.50M
18.09% margin
QoQ: 5.33% | YoY: 40.32%
Operating Income
Increasing
1.10M
QoQ: 150.00% | YoY: 113.58%
Net Income
Increasing
-10.30M
QoQ: 28.47% | YoY: 82.02%
EPS
Increasing
-0.29
QoQ: 29.27% | YoY: 82.10%
Revenue Trend
Margin Analysis
Financial Highlights
Revenue and profitability snapshot
- QQ1 2026 net sales: $240.5 million, down 7% YoY and 6% sequentially (vs $258.5 million in QQ1 2025; sequential decline associated with transition from legacy programs).
- Gross profit: $43.5 million; gross margin 18.1% (margin at QQ1 2026 reflects the mix shift and cost discipline).
- Operating income: $1.1 million (operating margin ~0.46%), up from the prior-year period as SG&A reductions and operational improvements offset a lower top line.
- EBITDA: $16.0 million; adjusted EBITDA in the quarter: $15.7 million, up about $5.9–$6.0 million YoY.
- Net income: -$10.3 million; EPS: -$0.29 (diluted).
- Free cash flow: $18.0 million (third straight quarter of positive free cash flow).
- Cash flow from operations: $25.1 million; capital expenditures: $7.1 million; free cash flow yield supported by lower working capital and disciplined capex.
- Balance sheet: cash at period end $121.1 million; total debt $347.6 million; net debt $226.5 million; total assets $742.1 million; total stockholders’ equity $688.1 million.
- Liquidity and leverage: Three-quarter net debt reduction of $41 million; cash position robust to fund near-term growth investments and working capital needs.
Guidance and forward outlook
- FY26 revenue guidance: $900 million to $1,000 million (note: 2025 was a 53-week year; 2026 is a typical 52-week year).
- FY26 EBITDA guidance: $70 million to $80 million, with second half anticipated to be higher than the first half.
- EBITDA margin guidance: about 7.9% of net sales (vs 4.1% in the prior year period).
- Free cash flow: expected to be positive for FY26 after a negative $15 million in FY25.
- The company reaffirmed a long-term growth trajectory in Power Solutions and Data Centers, with near-term profitability aided by SG&A reductions and improved operating efficiency.
Key drivers and risk factors moving forward:
- Growth drivers include Power Solutions, Data Center interconnects and high-voltage busbars, and expansion in data center applications beyond current end markets.
- Near-term headwinds include softer EV demand in North America and legacy program transitions in Automotive, particularly in Mexico, offset by strength in EMEA and Asia.
- Risks include tariff exposure and currency fluctuations (notably euro-denominated debt), execution risk in consolidation efforts, and the potential pace of EV and data center capex in customers’ networks.
- Management highlighted the potential for higher RFQs and RFPs driven by the global footprint and USMCA-compliant manufacturing in North America, which could provide a demand tailwind in the quarters ahead.
Income Statement
Metric
Value
YoY Change
QoQ Change
Revenue
240.50M
-13.27%
0.25%
Gross Profit
43.50M
40.32%
5.33%
Operating Income
1.10M
113.58%
150.00%
Net Income
-10.30M
82.02%
28.47%
EPS
-0.29
82.10%
29.27%
Key Financial Ratios
Management Insights Available for Members
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