Executive Summary
In Q3 2024, Methode Electronics Inc reported revenue of $259.5 million, a decrease of 7% year-over-year, primarily driven by weakness in the Automotive segment due to program roll-offs and reduced electric vehicle (EV) demand. The company faced operational inefficiencies leading to a net loss of $11.6 million and a diluted EPS of $-0.33. Despite these challenges, Methode returned to positive free cash flow of $12.2 million, while actively engaging in share repurchases totaling $3 million. With a new CEO at the helm, the company is focused on operational improvements and cost reductions, leading to a suspension of forward guidance until profitability is restored.
Key Performance Indicators
QoQ: -29.25% | YoY:-42.99%
QoQ: 94.15% | YoY:-110.99%
QoQ: 79.02% | YoY:-158.29%
QoQ: 78.71% | YoY:-158.93%
Key Insights
**Revenue Performance**: $259.5 million, down from $280.1 million in Q3 2023 (-7%).
**Net Income**: -$11.6 million; EPS of -$0.33 vs $0.54 in Q3 2023.
**Gross Profit Margin**: 14.3% (down from 23.2% YoY), reflecting increased operational inefficiencies.
**EBITDA**: $9.4 million, drastically lower than $36.1 million YoY.
**Cash Position**: $122.9 million, with a net cash provided by operating activities of $28.8 million, down from $55.7 million YoY.
**Current Ratio**: 2.74, indicating good s...
Financial Highlights
Revenue Performance: $259.5 million, down from $280.1 million in Q3 2023 (-7%).
Net Income: -$11.6 million; EPS of -$0.33 vs $0.54 in Q3 2023.
Gross Profit Margin: 14.3% (down from 23.2% YoY), reflecting increased operational inefficiencies.
EBITDA: $9.4 million, drastically lower than $36.1 million YoY.
Cash Position: $122.9 million, with a net cash provided by operating activities of $28.8 million, down from $55.7 million YoY.
Current Ratio: 2.74, indicating good short-term liquidity.
Total Liabilities: $656.5 million; Long-term debt stable at $351 million.
Management attributed the revenue decline to ongoing challenges in their Automotive segment, primarily the result of program transitions and weaker market conditions, notably in the EV space. Measures to enhance cost control and operational efficiencies were highlighted as critical for future recovery.
Income Statement
| Metric |
Value |
YoY Change |
QoQ Change |
| Revenue |
259.50M |
-7.35% |
-9.90% |
| Gross Profit |
37.00M |
-42.99% |
-29.25% |
| Operating Income |
-3.00M |
-110.99% |
94.15% |
| Net Income |
-11.60M |
-158.29% |
79.02% |
| EPS |
-0.33 |
-158.93% |
78.71% |
Key Financial Ratios
operatingProfitMargin
-1.16%
operatingCashFlowPerShare
$0.82
freeCashFlowPerShare
$0.35
dividendPayoutRatio
-42.2%
Management Commentary
Operational Challenges:
"The decline was primarily due to program roll-offs and EV demand weakness... We also continue to see increased costs related to our numerous new program launches." (Avi Avula, CEO)
Focus on Cash Flow:
"While we were challenged in the quarter with net income, we still maintain a sharp focus on cash generation... This is a step in the right direction." (Avi Avula, CEO)
Forward Strategy:
"We will undertake an intensive review and take quick actions to reduce hard costs, including head count and to dispose of non-critical and non-revenue-generating assets." (Avi Avula, CEO)
The management’s comments reflect a commitment to turnaround strategies, emphasizing operational efficiency and cash generation as projected priorities moving forward.
"Our company foundation is strong with a rich legacy of innovation and an unwavering commitment to excellence."
— Avi Avula, CEO
"We are laser-focused on cost reductions and their related cash impacts."
— Ron Tsoumas, CFO
Forward Guidance
Methode Electronics has suspended all near-term guidance, responding to the ongoing operational challenges exacerbated by weakened consumer demand for EVs and cyclical softness in their automotive-related functions. The management is directing focus toward executing cost-cutting strategies and improving working capital, especially reducing excess inventory. Given the ongoing reassessment of business operations, including potential restructuring, investors should monitor future updates closely, particularly concerning cash generation and operational turnaround plans.