Exchange: NYSE | Sector: Technology | Industry: Hardware Equipment Parts
Q3 2025
Published: Mar 5, 2025
Earnings Highlights
Revenue of $239.90M down 7.6% year-over-year
EPS of $-0.41 decreased by 24.2% from previous year
Gross margin of 17.2%
Net income of -14.40M
""Despite the lower sales volume, we were able to deliver $4 million in higher gross profit than last year due to product mix and improved operational execution."" - Jonathan DeGaynor
Methode Electronics Inc (MEI) Q3 2025 Results: A Strategic Shift Towards Long-term Growth
Executive Summary
In Q3 2025, Methode Electronics Inc (MEI) reported revenues of $239.9 million, marking an 8% decline year-over-year and an 18% decrease sequentially. The decline was primarily attributed to the completion of significant automotive program roll-offs, compounded by a slowdown in electric vehicle (EV) demand and overall weakness in the auto market. Despite revenue reductions, the company managed to improve gross profit by $4 million, showing resilience in operational execution through cost efficiencies. Management heralded an effective turnaround in operational metrics and reaffirmed guidance for organic sales growth exceeding fiscal 2025 levels and targeting profitable growth in fiscal 2026, driven by a mix of new program launches and strategic focus in emerging markets like data centers.
Key Performance Indicators
Revenue
239.90M
QoQ: -18.01% | YoY:-7.55%
Gross Profit
41.30M
17.22% margin
QoQ: -28.67% | YoY:11.62%
Operating Income
-2.20M
QoQ: -123.40% | YoY:26.67%
Net Income
-14.40M
QoQ: -800.00% | YoY:-24.14%
EPS
-0.41
QoQ: -809.09% | YoY:-24.24%
Revenue Trend
Margin Analysis
Key Insights
**Revenue:** $239.9 million (YoY: -8%, QoQ: -18%)
**Gross Profit:** $41.3 million (YoY: +11.6%, QoQ: -28.7%)
**Operating Income:** -$2.2 million (YoY: +26.7%)
**Net Income:** -$14.4 million (YoY: -24.1%, QoQ: -800%)
**Earnings Per Share (EPS):** -$0.41 (YoY: -24.2%, QoQ: -809%)
Financial Highlights
### Key Financial Metrics for Q3 2025
- Revenue: $239.9 million (YoY: -8%, QoQ: -18%)
- Gross Profit: $41.3 million (YoY: +11.6%, QoQ: -28.7%)
- Operating Income: -$2.2 million (YoY: +26.7%)
- Net Income: -$14.4 million (YoY: -24.1%, QoQ: -800%)
- Earnings Per Share (EPS): -$0.41 (YoY: -24.2%, QoQ: -809%)
- Free Cash Flow: $19.6 million (YoY increase: +60.7%)
- Cash Position (End of Quarter): $103.8 million
- Debt: $355.2 million
Income Statement
Metric
Value
YoY Change
QoQ Change
Revenue
239.90M
-7.55%
-18.01%
Gross Profit
41.30M
11.62%
-28.67%
Operating Income
-2.20M
26.67%
-123.40%
Net Income
-14.40M
-24.14%
-800.00%
EPS
-0.41
-24.24%
-809.09%
Key Financial Ratios
currentRatio
2.84
grossProfitMargin
17.2%
operatingProfitMargin
-0.92%
netProfitMargin
-6%
returnOnAssets
-1.1%
returnOnEquity
-2.04%
debtEquityRatio
0.5
operatingCashFlowPerShare
$0.79
freeCashFlowPerShare
$1.47
dividendPayoutRatio
-36.8%
priceToBookRatio
0.57
priceEarningsRatio
-6.98
Net Income vs. Revenue
Expense Breakdown
Management Commentary
### Managing on Strategic Fronts Transformation Progress and Rebuilding Leadership:
Management emphasized their strategic commitment to transforming the company for long-term value, with CEO Jon DeGaynor stating, "Methode is firmly on track to reinvigorate and transform the business for long-term value creation." New EV Program Launches:
Despite current setbacks, management indicated development in filling the void left by legacy programs: "We successfully launched 20 of those programs year-to-date and are working on launching another 33 programs over the next five quarters." Awareness on Market Disruption:
DeGaynor noted, "There's volatility in several of our key end markets," reaffirming the need to adapt quickly and address emerging customer demands.
"Despite the lower sales volume, we were able to deliver $4 million in higher gross profit than last year due to product mix and improved operational execution."
— Jonathan DeGaynor
"We are reaffirming expected net sales to be greater than fiscal '25 and pretax income to be positive and notably greater than fiscal '25."
— Laura Kowalchik
Forward Guidance
### Future Outlook
Management reiterated guidance for fiscal 2026, expecting organic revenue growth driven by the launch of additional EV programs, particularly for Stellantis, and a solid footing in data center operations, projected to contribute 9% of total sales. The company aims to restore profitability on a higher revenue base, forecasting a positive pretax income for the next fiscal year.
Competitive Position
Company
Gross Margin
Operating Margin
Return on Equity
P/E Ratio
MEI Focus
17.22%
-0.92%
-2.04%
-6.98%
SANM
8.34%
4.57%
2.36%
17.80%
BHE
10.10%
4.27%
1.39%
25.98%
OSIS
33.80%
12.70%
10.00%
9.44%
CLS
10.40%
5.46%
5.04%
16.47%
Gross Profit Margin
Operating Profit Margin
Return on Equity
P/E Ratio Comparison
Investment Outlook
Methode Electronics presents a mixed yet cautiously optimistic outlook. While the company faces transitional headwinds from automotive legacy program roll-offs, the strategic pivot towards new technology solutions and operational improvements may provide substantial long-term benefits. Investors should watch for progress on the significant pipeline of new programs and the company’s continued adherence to its debt covenants. As management guides towards profitable growth for fiscal 2026 and maintains a resilient cash position, the stock may present a worthwhile opportunity for long-term investors looking for exposure in the evolving technology sector.
Key Investment Factors
Growth Potential
Methode's strategic refocus on emerging markets, particularly data centers and non-automotive applications, positions it for a growth trajectory, with targeted organic sales growth of high-single digits for fiscal 2026.
Profitability Risk
Significant risks include continued volatility in automotive markets, particularly North America, and reliance on EV program success amidst a softening consumer landscape.
Financial Position
Despite a negative net income, Methode's balance sheet remains robust, with ample cash reserves ($103.8 million) and compliance with debt covenants, reducing its leverage risk.
SWOT Analysis
Strengths
Strong operational execution resulting in cost efficiencies and improved gross profit margins.
Substantial cash reserves providing liquidity and financial flexibility.
Successful new product program launches indicating potential for recovery.
Weaknesses
Significant decline in revenue due to automotive sector weakness.
Negative earnings and reliance on program ramp-ups under uncertain market conditions.
Opportunities
Emerging growth in data center applications presenting new revenue streams.
Potential for high-single digit organic sales growth with new launches in fiscal 2026.
Threats
Continued volatility in the automotive market and evolving EV demand impacting sales.
Regulatory changes and competitive pressure in the technology and automotive sectors.