FISCAL 2019 FOURTH-QUARTER AND FULL-YEAR FINANCIAL RESULTS - - PowerPoint PPT Presentation

FISCAL 2019 FOURTH-QUARTER AND FULL-YEAR FINANCIAL RESULTS

June 19, 2019

Forward-Looking Statements

This presentation contains certain forward-looking statements, which reflect management's expectations regarding future events and

• perating 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 press release 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 as our annual and quarterly reports. 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: (4) changes in U.S. trade policy; (5) success of Pacific Insight, Procoplast and Grakon and/or our ability to implement and profit from new applications of the acquired technology; (6) ability to successfully benefit from acquisitions and divestitures; (7) customary risks related to conducting global operations; (8) significant adjustments to expense based on the probability of meeting certain performance levels in our long-term incentive plan; (9) recognition of goodwill impairment charges; (10) ability to keep pace with rapid technological changes; (11) ability to withstand business interruptions; (12) investment in programs prior to the recognition of revenue; (13) timing, quality and cost of new program launches; (14) ability to withstand price pressure, including pricing reductions; (15) currency fluctuations; (16) ability to successfully market and sell Dabir Surfaces products; (17) dependence on our supply chain; (18) dependence on the availability and price of materials; (19) income tax rate fluctuations; (20) fluctuations in our gross margins; (21) breach of our information technology systems; (22) ability to avoid design or manufacturing defects; (23) ability to compete effectively; (24) ability to protect our intellectual property; (25) debt levels and the effect on operations and liquidity; and (26) costs and expenses due to regulations regarding conflict minerals.

2

Use of Non-GAAP Financial Measures

To supplement the Company's financial statements presented in accordance with generally accepted accounting principles in the United States(“GAAP”), Methode uses certain non- GAAP measures. Reconciliation to the nearest GAAP measures of all non-GAAP measures included in this presentation are provided in the presentation. Methode's definitions of these non-GAAP measures may differ from similarly titled measures used by others. These non-GAAP measures should be considered supplemental to, and not a substitute for, financial information prepared in accordance with GAAP. The Company believes that these non-GAAP measures are useful because they (i) provide both management and investors meaningful supplemental information regarding financial performance by excluding certain expenses that may not be indicative of recurring core business operating results, (ii) permit investors to view Methode's performance using the same tools that management uses to evaluate its past performance, reportable business segments and prospects for future performance and (iii) otherwise provide supplemental information that may be useful to investors in evaluating Methode.

3

FY19 Highlights and Path for Growth

Safety and ADAS

Magneto-elastic sensing RGB LED based ambient and direct lighting Exterior lighting capabilities support Advanced Driver Assistance Systems

Further Penetration of EV Market

Combining expertise in both power distribution and Automotive manufacturing Innovation will bring both increased market penetration and content per vehicle

$1 Billion in Revenue

Despite passenger car and tariff headwinds “One-stop shop” for LED lighting solutions, integrated user interfaces and sensors

Transformation

Grakon acquisition solidifies Industrial segment New end markets Reduce Automotive market concentration

Dabir Development

$1M revenue milestone Surface revenue growth over last year

4

Q4 and FY19 Highlights*

(All Numbers In Millions except percentages)

*See Appendix for reconciliation to GAAP

5

Sales Growth Adjusted Income From Operations Adjusted Gross Margins

FY 18 FY 19 YoY Change FY 18 FY 19 YoY Change FY 18 FY 19 YoY Change Q4

$249.0 $266.0 6.8% $27.6 $34.1 23.6% 24.9% 27.0% 210 bp

Full Year

$908.3 $1000.3 10.1% $119.1 $136.5 14.6% 26.5% 27.5% 100 bp

Q4 Sales Drivers

(Dollars In Millions) 6

FY18 Q4 Sales Reduced Automotive Volumes Effect of Delayed Appliance Program Start and Reduced Data Sales Volumes Sales from Acquisition FY19 Q4 Sales Sales from New Launches Effect of ASC 606 on Sales Effect of Weaker Euro and RMB

Full-Year Sales Drivers

(Dollars In Millions) 7

FY18 Sales Reduced Automotive Volumes Effect of Delayed Appliance Program Start and Reduced Data Sales Volumes Sales from Acquisitions FY19 Sales Sales from New Launches Effect of ASC 606 on Sales Effect of Weaker Euro and RMB Improvement in Power Products and Hetronics Businesses

Medical Segment

Dabir Achieves $1M Revenue in FY19

79 462

50 100 150 200 250 300 350 400 450 500

FY18 FY19

Surfaces Sold

$64,400 $476,784

$0 $100,000 $200,000 $300,000 $400,000 $500,000 $600,000

FY18 FY19

Surfaces Revenue

85 69

10 20 30 40 50 60 70 80 90

FY18 FY19

Average Evaluation Time (days)

8

Bridge FY19 Guidance to FY 19 Results

(All Numbers In Millions, Except Per Share Amounts)

Pre-Tax Income EPS

9

FY19 Guidance Midpoint FY19 Actual Sales at Lower End of Guidance Range Tariff Mitigation Efforts and Currency Headwinds FY19 Guidance Midpoint FY19 Actual Sales at Lower End of Guidance Range Impact of Lower Investment Tax Credit Tariff Mitigation Efforts and Currency Headwinds

$2.59

Q4 and Full-Year FY19 Financial Results*

24.9% 27.0% 26.5% 27.5%

Q4 FY18 Q4 FY19 FY 18 FY 19

Adjusted Gross Margins 13.0% 11.5% 12.7% 12.3%

Q4 FY18 Q4 FY19 FY 18 FY 19

Adjusted S&A

• Excludes
• Initiatives to reduce

costs and improve profitability

*See Appendix for reconciliation to GAAP

• Excludes
• Acquisition-related

costs

• Initiatives to reduce

costs and improve profitability

10

• Excludes
• Initiatives to reduce

costs and improve profitability

• Purchase accounting

adjustments

• Excludes
• Acquisition-related

costs

• Initiatives to reduce

costs and improve profitability

• Long-term incentive

plan accrual adjustments

Q4 and Full-Year FY19 Financial Results

(Dollars In Millions) $39.5 $46.1 $152.8 $155.2

Q4 FY18 Q4 FY19 FY18 FY19

EBITDA

*See Appendix for reconciliation to GAAP

$39.5 $47.2 $153.6 $184.9

Q4 FY18 Q4 FY19 FY18 FY19

Adjusted EBITDA

• Excludes
• Initiatives to reduce

costs and improve

• perational

profitability

• Acquisition-related

costs

• Long-term incentive

plan accrual adjustments

11

• Excludes
• Initiatives to reduce

costs and improve

• perational

profitability

• Acquisition-related

costs

Debt to TTM EBITDA 1.66X

Free Cash Flow and Balance Sheet

(Dollars In Millions)

FY19 FCF $85.1M

12 Months April 28, 2018 12 Months April 27, 2019 Net Income $57.2 $91.6 Depreciation and Amortization 28.1 43.3 CapEx (47.7) (49.8) FCF $37.6 $85.1 12

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

13

Determining Projected FY20 EBITDA

(Dollars In Millions) 14

FY19 EBITDA FY19 Acquisition and Restructuring Costs Effect of Reduced Passenger Car Production EBITDA of New Automotive and Laundry Launches EBITDA of Additional Grakon Revenues

(From Additional 4 1/2 Months of Ownership)

Benefit of Initiatives to Reduce Costs FY20 EBITDA Projection

Decreased from $24M estimate at end of Q3 FY19 due to increased tariffs on imported Chinese goods Launches:

• New Ford Integrated

Tailgate Module and Overhead Consoles programs

• Laundry platform
• New E-bike programs

Non-GAAP Financial Measures

To supplement the Company's financial statements presented in accordance with generally accepted accounting principles in the United States (“GAAP”), Methode uses Adjusted Net Income, Adjusted Earnings Per Share, Adjusted Income from Operations, Adjusted Gross Profit , Adjusted Gross Margins As a Percentage of Sales, Adjusted Selling and Administrative Expenses, Adjusted Selling and Administrative Expenses as a Percentage of Sales, EBITDA, Adjusted EBITDA, and Free Cash Flow as non-GAAP measures. Reconciliation to the nearest GAAP measures of all non-GAAP measures included in this presentation can be found in this appendix. Methode's definitions of these non-GAAP measures may differ from similarly titled measures used by others. These non-GAAP measures should be considered supplemental to, and not a substitute for, financial information prepared in accordance with GAAP. The Company believes that these non-GAAP measures are useful because they (i) provide both management and investors meaningful supplemental information regarding financial performance by excluding certain expenses that may not be indicative of recurring core business operating results, (ii) permit investors to view Methode's performance using the same tools that management uses to evaluate its past performance, reportable business segments and prospects for future performance and (iii) otherwise provide supplemental information that may be useful to investors in evaluating Methode. Adjusted Net Income and Adjusted Earnings Per Share excludes from Net Income and Earning s Per Share, respectively, expenses for initiatives to reduce overall costs and improve operational profitability, acquisition-related costs (including purchase accounting adjustments), long-term incentive plan accrual adjustments and the transition tax and the impact of revaluing deferred taxes due to the change in the federal tax rate from U.S. Tax Reform in the applicable periods. Adjusted Income from Operations excludes from Income from Operations initiatives to reduce overall costs and improve operational profitability and acquisition-related costs in the applicable periods. Adjusted Gross Profit and Adjusted Gross Margins as a percentage of sales exclude from gross margins as a percentage of sales expense for initiatives to reduce overall costs and improve

• perational profitability and acquisition-related purchase accounting adjustments in the applicable periods.

Adjusted Selling and Administrative Expenses and Adjusted Selling and Administrative Expenses as a Percentage of Sales exclude from selling and administrative expenses as a percentage of sales acquisition-related costs, initiatives to reduce overall costs and improve operational profitability and long-term incentive plan accrual adjustments in the applicable periods. EBITDA excludes from net income income tax expense, interest expense, net, amortization of intangibles and depreciation. Adjusted EBITDA excludes from EBITDA expenses for initiatives to reduce overall costs and improve operational profitability, acquisition-related costs (including purchase accounting adjustments) and long-term incentive plan accrual adjustments. Free Cash Flow is defined as net income plus depreciation and amortization of intangibles less capital expenditures.

Appendix

15

Appendix

METHODE ELECTRONICS, INC. AND SUBSIDIARIES

($ in millions, except per share data)

Reconciliation of Non-GAAP Financial Measures for the Three Months Ended April 27, 2019 16

Acquisition-Related Costs U.S. GAAP (As Reported) Expense for Initiatives to Reduce Overall Costs and Improve Operational Profitability Purchase Accounting Adjustments Related to Inventory Severance Other Long-term Incentive Plan Accrual Adjustment due to change in Fiscal 2020 EBITDA estimate Transition tax and the impact of revaluing deferred taxes due to the change in the federal tax rate from U.S. Tax Reform Non-U.S. GAAP Financial Measures

Gross Profit $ 70.6 $ 0.1 $ — $ — $ — $ — $ — $ 70.7 Gross Margin (% of sales) 26.5% 0.5 % —% —% — % —% —% 27.0% Selling and Administrative Expenses $ 32.6 $ (0.9) $ — $ — $ (0.1) $ — $ — $ 31.6 Selling and Administrative Expenses (% of sales) 12.3% (0.5 )% —% —% (0.3 )% —% —% 11.5% Income from Operations $ 33.0 $ 1.0 $ — $ — $ 0.1 $ — $ — $ 34.1 Net Income $ 22.6 $ 0.8 $ — $ — $ 0.1 $ — $ — $ 23.5 Diluted Earnings per Share $ 0.60 $ 0.02 $ — $ — $ — $ — $ — $ 0.62

Appendix

METHODE ELECTRONICS, INC. AND SUBSIDIARIES

($ in millions, except per share data)

Reconciliation of Non-GAAP Financial Measures for the Three Months Ended April 28, 2018 17

Acquisition-Related Costs U.S. GAAP (As Reported) Expense for Initiatives to Reduce Overall Costs and Improve Operational Profitability Purchase Accounting Adjustments Related to Inventory Severance Other Long-term Incentive Plan Accrual Adjustment due to change in Fiscal 2020 EBITDA estimate Transition tax and the impact of revaluing deferred taxes due to the change in the federal tax rate from U.S. Tax Reform Non-U.S. GAAP Financial Measures

Gross Profit $ 61.9 $ — $ — $ — $ — $ — $ — $ 61.9 Gross Margin (% of sales) 24.9% —% —% —% —% —% —% 24.9% Selling and Administrative Expenses $ 32.4 $ — $ — $ — $ — $ — $ — $ 32.4 Selling and Administrative Expenses (% of sales) 13.0% —% —% —% —% —% —% 13.0% Income from Operations $ 27.6 $ — $ — $ — $ — $ — $ — $ 27.6 Net Income $ 36.8 $ — $ — $ — $ — $ — $ (3.1) $ 33.7 Diluted Earnings per Share $ 0.98 $ — $ — $ — $ — $ — $ (0.08) $ 0.90

Appendix

METHODE ELECTRONICS, INC. AND SUBSIDIARIES

($ in millions, except per share data)

Reconciliation of Non-GAAP Financial Measures for the Twelve Months Ended April 27, 2019 18

Acquisition-Related Costs U.S. GAAP (As Reported) Expense for Initiatives to Reduce Overall Costs and Improve Operational Profitability Purchase Accounting Adjustments Related to Inventory Severance Other Long-term Incentive Plan Accrual Adjustment due to change in Fiscal 2020 EBITDA estimate Transition tax and the impact of revaluing deferred taxes due to the change in the federal tax rate from U.S. Tax Reform Non-U.S. GAAP Financial Measures

Gross Profit $ 265.8 $ 2.8 $ 5.6 $ — $ — $ — $ — $ 274.2 Gross Margin (% of sales) 26.6% 0.3 % 0.6% — % — % — % —% 27.5% Selling and Administrative Expenses $ 142.9 $ (4.1) $ — $ (1.5) $ (8.3) $ (7.4) $ — $ 121.6 Selling and Administrative Expenses (% of sales) 14.3% (0.4 )% —% (0.1 )% (0.8 )% (0.7 )% —% 12.3% Income from Operations $ 106.8 $ 6.9 $ 5.6 $ 1.5 $ 8.3 $ 7.4 $ — $ 136.5 Net Income $ 91.6 $ 5.7 $ 4.7 $ 1.2 $ 6.9 $ 6.2 $ (4.8) $ 111.5 Diluted Earnings per Share $ 2.43 $ 0.15 $ 0.13 $ 0.03 $ 0.18 $ 0.17 $ (0.13) $ 2.96

Appendix

METHODE ELECTRONICS, INC. AND SUBSIDIARIES

($ in millions, except per share data)

Reconciliation of Non-GAAP Financial Measures for the Twelve Months Ended April 28, 2018 19

Acquisition-Related Costs U.S. GAAP (As Reported) Expense for Initiatives to Reduce Overall Costs and Improve Operational Profitability Purchase Accounting Adjustments Related to Inventory Severance Other Long-term Incentive Plan Accrual Adjustment due to change in Fiscal 2020 EBITDA estimate Transition tax and the impact of revaluing deferred taxes due to the change in the federal tax rate from U.S. Tax Reform Non-U.S. GAAP Financial Measures

Gross Profit $ 239.6 $ — $ 0.8 $ — $ — $ — $ — $ 240.4 Gross Margin (% of sales) 26.4% —% 0.1% —% — % —% —% 26.5% Selling and Administrative Expenses $ 115.7 $ — $ — $ — $ (6.0) $ 6.0 $ — $ 115.7 Selling and Administrative Expenses (% of sales) 12.7% —% —% —% (0.7 )% 0.7% —% 12.7% Income from Operations $ 118.3 $ — $ 0.8 $ — $ 6.0 $ (6.0) $ — $ 119.1 Net Income $ 57.2 $ — $ 0.7 $ — $ 5.0 $ (5.0) $ 53.7 $ 111.6 Diluted Earnings per Share $ 1.52 $ — $ 0.02 $ — $ 0.13 $ (0.13) $ 1.43 $ 2.97

Appendix

METHODE ELECTRONICS, INC. AND SUBSIDIARIES

($ in millions)

Reconciliation of EBITDA and Adjusted EBITDA to Net Income 20

Three Months Ended Fiscal Year Ended April 27, 2019 April 28, 2018 April 27, 2019 April 28, 2018

Net Income $ 22.6 $ 36.8 $ 91.6 $ 57.2 Income Tax Expense (Benefit) 7.5 (6.0) 12.0 66.6 Interest Expense, Net 3.3 0.6 8.3 0.9 Amortization of Intangibles 5.0 1.9 16.1 5.6 Depreciation 7.7 6.2 27.2 22.5 EBITDA 46.1 39.5 155.2 152.8 Expense for Initiatives to Reduce Overall Costs and Improve Operational Profitability 1.0 — 6.9 — Acquisition-related Costs - Purchase Accounting Adjustments Related to Inventory — — 5.6 0.8 Acquisition-related Costs - Severance — — 1.5 — Acquisition-related Costs - Other 0.1 — 8.3 6.0 Long-term Incentive Plan Accrual Adjustment due to change in Fiscal 2020 EBITDA estimate — — 7.4 (6.0) Adjusted EBITDA $ 47.2 $ 39.5 $ 184.9 $ 153.6

Appendix

METHODE ELECTRONICS, INC. AND SUBSIDIARIES

($ in millions)

Reconciliation of Free Cash Flow to Net Income 21

Three Months Ended Fiscal Year Ended April 27, 2019 April 28, 2018 April 27, 2019 April 28, 2018

Net Income $ 22.6 $ 36.8 $ 91.6 $ 57.2 Amortization of Intangibles 5.0 1.9 16.1 5.6 Depreciation 7.7 6.2 27.2 22.5 Purchases of Property, Plant and Equipment (12.8) (13.0) (49.8) (47.7) Free Cash Flow $ 22.5 $ 31.9 $ 85.1 $ 37.6