baird 2018 global industrial conference - amazon s3 · large automotive customers; (2) dependence...
TRANSCRIPT
Baird’s 2019 Global Industrial Conference November 5, 2019
Don Duda, CEORon Tsoumas, CFOMark Shermetaro, VP Corporate Development
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
Automotive69%
Industrial26%
Medical Device
Interface5%
10-year
revenue
growth CAGR
of 8.9%
10-year
EBITDA
growth CAGR
of 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%
Europe23%
Asia9%
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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
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
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.
Methode Outperformed the MarketAutomotive 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
Strong Product Development Heritage
ICS WithTouch
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 outside surgical environment
Controller
Interconnect
Dabir Surgical System Dabir Gen2 Controller
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Global Manufacturing Footprint
LONTZEN,BELGIUM
SHANGHAI, CHINA
195,000 Sq Ft566 Employees
FRESNILLO, MEXICO
120,000 Sq Ft930 Workers
NASR, EGYPT121,000 Sq FT
530 Employees
MRIEHEL, MALTA
299,000 Sq Ft1,330 Employees
MONTERREY, MEXICO287,000 Sq Ft
1,180 Employeesand
128,000 Sq Ft830 Employees
DONGGUAN, CHINA
197,000 Sq Ft950 Employees
CHICAGO, ILONTARIO,CANADA
35,000 Sq Ft110 Employees
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In CHICAGO:
Harwood Heights – Dabir40,000 Sq Ft
55 Employees
Rol l ing Meadows – PSG52,000 Sq Ft
140 Employees
OKLAHOMA CITY,OK
155,000 Sq Ft110 Employees
Global Sales and Engineering Centers
*CHICAGO, IL*
SEATTLE ,WASHINGTON
SAN JOSE,CALIFORNIA
DETROIT, MICHIGAN
NELSON, CANADA
OKLAHOMA CITY, OK
BURNLE Y, 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
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 7/1916
Sensing Technology Organic Product Growth
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
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FY2020 Guidance
$3.25-$3.55EPS
$150.3-164.3MPre-Tax Income
18-21%Income Tax Rate
$1.13-1.17BRevenue
$51-$54MDepreciation and Amortization
$122-$136MFree Cash Flow
$48-$54MCapEx
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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