Bairds 2019 Global Industrial Conference November 5, 2019 Don Duda, - - PowerPoint PPT Presentation

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Bairds 2019 Global Industrial Conference November 5, 2019 Don Duda, - - PowerPoint PPT Presentation

Bairds 2019 Global Industrial Conference November 5, 2019 Don Duda, CEO Ron Tsoumas, CFO Mark Shermetaro, VP Corporate Development This presentation contains certain forward-looking statements, which reflect management's expectations


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Baird’s 2019 Global Industrial Conference

November 5, 2019

Don Duda, CEO Ron Tsoumas, CFO Mark Shermetaro, VP Corporate Development

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This presentation 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 presentation involve a number of risks and uncertainties. The factors that could cause actual results to differ materially from our expectations are detailed in Methode's filings with the Securities and Exchange Commission. Such factors may include, without limitation, the following: (1) dependence on a small number of large customers, including two large automotive customers; (2) dependence on the automotive, appliance, commercial vehicle, computer and communications industries; (3) international trade disputes resulting in tariffs and our ability to mitigate tariffs: (4) timing, quality and cost of new program launches; (5) ability to withstand price pressure, including pricing reductions; (6) ability to successfully market and sell Dabir Surfaces products; (7) currency fluctuations; (8) customary risks related to conducting global operations; (9) ability to withstand business interruptions; (10) recognition of goodwill impairment charges; (11) ability to successfully benefit from acquisitions and divestitures; (12) investment in programs prior to the recognition of revenue; (13) dependence on the availability and price of materials; (14) fluctuations in our gross margins; (15) dependence on our supply chain; (16) income tax rate fluctuations; (17) ability to keep pace with rapid technological changes; (18) breach of our information technology systems; (19) ability to avoid design or manufacturing defects; (20) ability to compete effectively; (21) ability to protect our intellectual property; (22) success of Grakon and/or our ability to implement and profit from new applications of the acquired technology; (23) significant adjustments to expense based on the probability of meeting certain performance levels in our long-term incentive plan; and (24) costs and expenses due to regulations regarding conflict minerals.

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Methode is …

788 patents 450+ global engineers 6,200+ employees $1+ Billion Sales

Automotive 69% Industrial 26% Medical Device Interface 5%

10-year revenue growth CAGR

  • f 8.9%

10-year EBITDA growth CAGR

  • f 21.4%

Leading developer and manufacturer of custom- engineered solutions and application-specific products utilizing the latest technologies for the Automotive, Industrial and Medical markets.

North America 68% Europe 23% Asia 9%

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Automotive Industrial Medical Interface

TECHNOLOGY ENGINEERING MANUFACTURING

Methode’s reporting segments are…

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Leading, Patented Technology Solutions

Assembly Decorating Electronics Metal Plastic Testing

AUTOMOTIVE INTERIOR

Headlamp Switches Steering Wheel Switches Window Switches Touchpads Rear Seat Controls Overhead Consoles Touchscreens Center-stacks Center Console Switches Smart Knobs Rotary Position Sensor

AUTOMOTIVE EXTERIOR

Gesture/Touch Tailgate Emblem Integrated Tailgate Module Advanced Illumination In-glass Messaging Keyless Entry Handle-free Door Solution Side Mirror Projection Anti-roll Stability Sensor Smart Towing Sensor Transmission Position Sensor

LIGHTING

Sill Plates Flood Lighting Ambient Lighting Material Illumination Reading / Dome Lamps Seat Illumination Full Color Spectrum Holographic Lighting

ELECTRIC VEHICLE

Intelligent Battery Connection Battery Bus Bar Connections Battery Disconnect Unit PowerBud Connectors Insert Molded Bus-bar/Carriers Powder Coated Bus Bar Flexible Bus Bar Laminated Bus Bar J1772 Charging Connector

COMPLEX INSERT MOLDED

Transmission Controller (Lead Frame) Engine Control Units Ignition Switch Anti-Lock Braking Assemblies Pedal Assemblies Door Latch Actuator Horn Contact Unit Transmission Solenoid Connector

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Growing Content Per Vehicle

Electric SUV

  • Numerous interior lamps

$228

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Ford Explorer

  • Integrated Center Panel
  • Ignition Switch
  • Brake Switch
  • IP Switches
  • Overhead Console
  • Ambient Lighting

$75

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Growing Content Per Vehicle

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For a major EV manufacturer, we have engineered LED lighting and power solutions on their first platform, and since then moved across all their platforms with content ranging from approximately $160 to $300 dollars per vehicle.

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Methode Outperformed the Market

Automotive Industry Volumes Versus Methode’s Automotive Sales

  • 10.1%
  • 2.2%
  • 6.6%
  • 18.7%

8.0% 17.1%

  • 0.6%
  • 17.5%
  • 25%
  • 20%
  • 15%
  • 10%
  • 5%

0% 5% 10% 15% 20%

CY Q2 19 MEI Q1 FY20* Global NA Europe China

*Excludes impact of currency

+ Source, Ward’s, JD Power, ACEA

  • Grakon auto sales in NA
  • Strong mix of products for SUVs and

pickup trucks in NA

  • 6 launches - 3 in NA, 3 in Europe
  • Limited exposure to domestic Chinese

automotive OEMs

  • Methode Asia affected by passenger

car slowdown and price downs

  • New product launches during FY 20

should further help offset headwinds

+

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Headlamp / Fog / DRL Lighting Rear Lighting RGB Ambient Lighting Interior Task Lighting Storage Lighting Safety Lighting Signal / Marker Lighting Work / Task Lighting Lighting Control Modules Wireless Control and Feedback Wireless Video Feedback Rf Proximity Detection Integrated Controller and Remote Control For Locomotives Rf E-stop Weight Sensor (Magneto-elastic) Electromechanical and Remote Control Retrofit Kits Batteries and Chargers Accessories (Straps, Belts, Vests, Etc.) Bus Bar Solutions Power Connectors Power Assemblies Power Cable Solutions Thermal Solutions PowerBud Connectors Open Compute Connector PowerRail

FLUID LEVEL SENSING

Sump Pump Switch Bilge Pump Switch Sewage Level Switch RV Tank Level and Monitor Marine High Water Alarm Battery Electrolyte Level Sensor

Leading, Patented Technology Solutions

Assembly Decorating Electronics Metal Plastic Testing

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Strong Product Development Heritage

ICS With Touch Controls ICS With Touchscreen Multimedia Controller Overhead Console Integrated Tailgate Module Pressure Injury Prevention Overlay

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Leading, Patented Technology Solutions…

  • Innovative technology for pressure injury prevention
  • Clinically shown to reduce pressure injuries in surgical cases
  • Converts standard hospital or home bed to “specialty” bed
  • Suitable for use across the continuum of care
  • Improves patient comfort and is well accepted by clinical staff
  • New Dabir Gen2 (compact) system delivers greater flexibility
  • utside surgical environment

Controller Interconnect

Dabir Surgical System Dabir Gen2 Controller

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Global Manufacturing Footprint

LONTZEN, BELGIUM SHANGHAI, CHINA 195,000 Sq Ft 566 Employees FRESNILLO, MEXICO 120,000 Sq Ft 930 Workers NASR, EGYPT 121,000 Sq FT 530 Employees MRIEHEL, MALTA 299,000 Sq Ft 1,330 Employees MONTERREY, MEXICO 287,000 Sq Ft 1,180 Employees and 128,000 Sq Ft 830 Employees DONGGUAN, CHINA 197,000 Sq Ft 950 Employees CHICAGO, IL ONTARIO, CANADA 35,000 Sq Ft 110 Employees

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In CHICAGO:

Harwood Heights – Dabir 40,000 Sq Ft 55 Employees Rolling Meadows – PSG 52,000 Sq Ft 140 Employees OKLAHOMA CITY,OK 155,000 Sq Ft 110 Employees

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Global Sales and Engineering Centers

*CHICAGO, IL* SEATTLE, WASHINGTON SAN JOSE, CALIFORNIA DETROIT, MICHIGAN NELSON, CANADA OKLAHOMA CITY, OK BURNLEY, U.K. MRIEHEL, MALTA GAU-ALGESHEIM & MUNICH, GERMANY BEIRUT, LEBANON SHANGHAI, CHINA BANGALORE, INDIA TOKYO, JAPAN SHENZEN, CHINA

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* In CHICAGO, IL: HARWOOD HEIGHTS ROLLING MEADOWS

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An Enviable Customer List

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AUTOMOTIVE INDUSTRIAL MEDICAL INTERFACE

>

LED lighting

>

EV / HEV – Power management

>

Infotainment

>

ADAS / Autonomous (need of sensors)

>

LED lighting

>

Instrumentation

>

Power distribution / Renewables

>

Commercial Vehicle driver shortage

>

ADAS / Autonomous (need of sensors)

>

Driver and worker safety

>

IoT

>

Never events (reduce pressure injuries, etc.)

>

Patient quality – hospital rating systems

>

Wellness

>

Affordable Care Act – pay for outcomes vs. treatment

>

Tele-medicine / homecare

>

Flexible/ configurable user interfaces

>

Kiosks

>

Digital Bandwidth demand (IoT, 5G)

>

Product design – brand differentiation

Growth Drivers By Segment

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FY 2018 FY 2019 FY 2020 (est.) FY 2021 (est.) FY 2022 (est.)

*Booked business as of 7/19

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Sensing Technology Organic Product Growth

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Capital Deployment Focused on Value Creation

Fund the Business

Acquisitions $553M 58% Cap Ex $143M 15%

Return to Shareholders

Share Repurchase $ 72M 7% Dividends $ 58M 6% Product Development $135M 14%

$961 Million Allocated Fiscal Years 2016-2019

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Strong Cash Flow and Balance Sheet

* Millions ± Adjusted, Net Income + Depreciation + Amortization - CapEx ** Estimate

$88 $123 $84 $85 $130 $0 $50 $100 $150 FY2016 FY2017 FY2018 FY 2019 FY 2020**

Free Cash Flow*±

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Continued Value Creation

Grow Organically and Inorganically

Leverage existing technologies to grow organically, increasing $ content/vehicle faster than volumes are dropping Invest in innovation which will integrate our technologies into new products Seek acquisitions in Industrial and opportunistically in Medical Device and Automotive

Strong Financial Management

Optimize capital allocation Expand margins and ROIC - SGA efficiency, footprint rationalization and other initiatives Seek to maintain effective tax rate via leverage of global manufacturing footprint Focus on debt repayment 19

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FY2020 Guidance $3.25-$3.55

EPS

$150.3-164.3M

Pre-Tax Income

18-21%

Income Tax Rate

$1.13-1.17B

Revenue

$51-$54M

Depreciation and Amortization

$122-$136M

Free Cash Flow

$48-$54M

CapEx 20

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Investment Appeals

Patented Technology Solutions Strong Product Development Heritage Organic Product Growth Substantial Free Cash Flow Generation Strong Balance Sheet Capital Deployment Focused on Value Creation Broad Customer Base Global Lean- Manufacturing and Engineering Footprint Highly Vertically Integrated

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Thank you