Date post: | 09-Jan-2017 |
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Safe Harbor
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 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, computer and communications industries; (3) investment in programs prior to the recognition of revenue; (4) ability to withstand price pressure, including price concessions; (5) currency fluctuations; (6) timing, quality and cost of new program launches; (7) dependence on our supply chain; (8) dependence on the availability and price of raw materials; (9) customary risks related to conducting global operations; (10) income tax rate fluctuations; (11) fluctuations in our gross margins; (12) the recognition of goodwill impairment charges; (13) ability to keep pace with rapid technological changes; (14) a breach of our information technology systems; (15) ability to compete effectively; (16) ability to successfully benefit from acquisitions and divestitures; (17) ability to avoid design or manufacturing defects; (18) ability to protect our intellectual property; (19) location of a significant amount of cash outside of the U.S.; (20) ability to withstand business interruptions; and (21) costs and expenses due to regulations regarding conflict minerals.
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Slide Title
• Bulleted Outline Indent 1
Indent 2 Indent 3
» Indent 4
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Investment Appeals
• Portfolio of products and solutions in several growing end markets
• Opportunities for expansion into additional end markets• Global engineering, design and manufacturing• Unique patented technologies – strong product development
heritage• Seasoned management team with a track record of growing
revenue and earnings• Strong balance sheet with sufficient liquidity to fund growth
organically and through acquisition• Targeting 5-year compounded EBITDA growth rate of 9-10%• Share repurchase plan up to $100 million ($60 million
purchased through 1/30/16) and quarterly dividend of $0.09
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Core Strategy
Design and engineer products that incorporate Methode’s broad range of field-proven
technologies and utilize our global manufacturing capabilities to deliver unique solutions that provide genuine value for our
customers and higher margins for our shareholders.
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Portfolio of Strong, Global Businesses
Auto-motive
71%
Other1%
Interface18%
Power Products
10%
Segment Sales
North America
57%Europe22%
Asia18%
ROW3%
Manufacturing Location Sales
FY15 Revenue of $881m
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Field-Proven Technologies
Competitive Advantages
Vertical Integration
Global Manufacturing Footprint
Seasoned Launch and Design Teams
• Provide innovative solutions for our customers and competitive advantage to Methode
• Over 290 patents
• Provide innovative solutions for our customers and competitive advantage to Methode
• Over 290 patents
• Provides continuous improvement of manufacturing systems
• Reduces reliance on suppliers• Demonstrated improvement in quality
• Provides continuous improvement of manufacturing systems
• Reduces reliance on suppliers• Demonstrated improvement in quality
• Regional design and engineering capabilities• 3 primary manufacturing campuses• Lean and continuous improvement philosophy• Identical systems used globally
• Successful launch of large programs for General Motors, Ford, Whirlpool and others
• Low defective parts per million• High on-time delivery• Utilizes Methode’s proven manufacturing system
• Successful launch of large programs for General Motors, Ford, Whirlpool and others
• Low defective parts per million• High on-time delivery• Utilizes Methode’s proven manufacturing system
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Strong Long-Term Performance
-50%
0%
50%
100%
150%
200%
1-YearPerfromance
3-YearPerformance
5-YearPerformance
10-YearPerformance
-41%
113%134%
170%
-15%
14% 34% 37%
-3%
31%57% 56%
Methode Electronics Russell 2000 Index S&P 500 Index
Methode’s Stock Has Outperformedthe Russell 2000 and the S&P 500
in 3, 5 and 10 Year Periods*+
*Source S&P Capital IQ+As of 3/23/16
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Strong Financial Results
* In millions+ See Non-GAAP reconciliation on Website
$0
$200
$400
$600
$800
$1,000
$428$465$520
$773
$881
Sales*+
$0.00
$0.50
$1.00
$1.50
$2.00
$2.50
$0.49
$0.22$0.46
$1.62
$2.44
EPS+Non-GAAP
$0
$20
$40
$60
$80
$100
$120
$140
$160
$35$27
$41
$99
$147
EBITDA*+Adjusted
20% CAGR 49% CAGR 43% CAGR
FY11 FY12 FY13 FY14 FY15 FY11 FY12 FY13 FY14 FY15 FY11 FY12 FY13 FY14 FY15
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Fiscal 2015
Strong Financial Results
• Sales, income from operations and EPS highest in Company’s history
• Consolidated gross margin improved 450 basis points over FY14
• Operating margin increased to 14% from 9.7% in FY14*
• Income from operations grew 63.7% to $123.3m*
• EPS of $2.44 compared to $1.62 in FY14*
* See Website for Non-GAAP reconciliation
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Fiscal 2016 Outlook
Fiscal 2016• Guidance – Expect 2nd best year in company history
Sales ─ $790-$800m Operating income ─ $104-$110m EPS ─ $2.06-$2.18 Operating margin ─ 13.2%-13.8%
• Sales and income expected to be lower year over year due to Ford center console program going end of life Price concessions in Automotive Reduced appliance sales Lower Big Data product sales in Power Products Sale of Trace Laboratories
• Strong balance sheet with ~ $247M in net cash and credit availability+
• FY16 free cash flow estimate of $82M-$87M+ As of August 1, 2015
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Automotive Solutions
Integrated Center Console
54%
Other1%
Hidden Switches14%
Ergonomic Switches
16%
Transmission9%
Steering Angle Sensor
6%
FY15 Revenue of $628m
GM Yukon Integrated Center Console
Transmission Lead Frame
Transmission Sensor
FCA Floor Console Multi-Media Interface
McLaren ICP
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Integrated Center Console
Automotive Milestones
• Ford - 2011-2015 MKX, Edge, Explorer and 2013-2017 Taurus, Flex, MKS, MKT
• General Motors - 2014-2019 Tahoe, Yukon, Silverado, Sierra, Suburban, Yukon XL and 2015-2021 Canyon, Colorado
• Renault – Launching FY16• General Motors - 2 programs launching
FY17 and 1 launching in FY18• Fiat - Launching FY18• Aston Martin - Launching FY17• North American OEM - next generation
of existing program with this customer
Transmission Solutions• Lead Frame
Integrated power and signal distribution backbone for transmission controller
Customers - General Motors, Ford, Volkswagen
• Clutch Plate Position Sensor First deployment of patented
Magneto-elastic technology in transmission
Deployed in new generation of fuel efficient, dual-clutch transmissions
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Torque Sensor for Active Role Stabilization
Automotive Milestones
• Schaeffler/BMW selected Methode’s torque sensor to measure “roll” in vehicles during cornering
• Replaces existing hydraulic systems to give better vehicle handling, greener
• Precision sensor designed for safety applications
• Schaeffler plans to introduce to other customers
• Estimated award life of 10 years• Initial launch on BMW 7-series
Hidden and Ergonomic Switches
• Hidden switch global market share of 18%
• Hidden switch European Union market share of 35%
• Fully automated production• Vertically integrated plants
Molding Decorative finishes Stamping
• ~40 million switches produced annually
• Launched the first volumes of the Integrated Tail gate module
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Interface Solutions
Consumer Touch Panels
39%
Industrial Solutions
23%
Data Center Infrastructure
Solutions35%
Other3%
FY15 Revenue of $162m
Touch Control Panels for Whirlpool Washer & Dryer
Hetronic RadioRemote Control
Food Service Equipment
AC6000
Agricultural Tractors
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Consumer Touch Panels
Interface Milestones
• TouchSensor’s user interfaces found on over 30% of commercial/industrial solid-state touch interfaces in North America
• Integrate touch, LED’s, displays and decorative fascia into one sub-assembly
• Discrete key designs as well as high-resolution LCD touchscreens• Found on the following brands
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Interface Milestones
Industrial User Interfaces• Radio Remote Control Solutions• Custom engineered control solutions for industrial machinery and
equipment – to provide safety and improved efficiency• Pioneering data capture solutions for next generation of radio remote
control systems – more info for the user• Integration of HMI wireless and wired controls with sensor, hydraulic &
pneumatic components to expand applications• Proven expertise with over 300,000 global installations for:
Tower, crawler, all-terrain cranes Concrete pumps, material spreaders Material handling Drilling rigs Locomotives & railway support “Explosion proof” applications
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Data Center Infrastructure Solutions
Interface Milestones
• Supporting data and telecommunications industries Data Center Infrastructure
Management (DCIM) enabled cabinet (sensors and centralized data collection)
Fiber optic and copper cable assemblies
Intelligent power distribution, assurance & management devices
Largest customers – Hitachi Data Systems, Rackspace
• Lithium Ion Uninterruptable Power Supply – AC6000 Line interactive 6kw Uninterruptible
Power Supply (UPS) Utilizes years of research in battery
management systems Highest power density per UPS
footprint providing 6kw in 2 rack units
Enables peak shaving UL certification received Have sold over 30 units since
product launch in July 2015
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Bus Bars49%
Other4%
PowerRail35%
Power Cabling7%
Thermal Mgmt5%
Power Products Solutions
FY15 Revenue of $86m
Electric Vehicle Coupler Connector
Bus Bar
PowerRail
SmartPower Stack™
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Bus Bars and Thermal
Management
Power Products Milestones
• Integrated bus bar assemblies
• Fusion lug termination systems
• Patented, high-density power contact and connector systems
EV Bus Bar Assemblies
• Nissan Leaf North America and
Europe Connect lithium-ion
battery cells Each vehicle
requires 48 battery modules
Three Methode assemblies utilized on each battery module
• Tesla S
PowerRail®
• Patented power-distribution system provides flexibility with multiple quick connect interconnect points
• Easily customized in lengths, number of rails, connect and disconnect options
• Adds flexibility and redundancy with easy hot pluggable add-ons
• Currently shipping to “Big Data” customer
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Methode’s Evolution
• SmartCenter Stack• Transmission Torque
Measurement• HighPerTouch™
• Digital Printing On Glass• Lean Touch™
• 10G Transceiver Modules• Bypass Switch• Radio Remote Control with
Video Feedback• Dabir Surfaces
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Smart Center Stack
Methode’s Evolution
• One complete system - Integrated center stack, Video screen, Capacitive touch screen, Wired/wireless cell phone connection, Audio, Tactile knobs/buttons
• Operator’s cell phone acts as media server and duplicates phone functionality through vehicle touchscreen
• Single source for all HMI functions• Earliest deployment FY18
Transmission Torque Measurement
• Patented Magneto-elastic technology
• Outputs instantaneous and precise torque measurement
• Allows automakers ability to measure real-time torque vs. elaborate algorithms that only estimate torque
• Currently being prototyped and tested with several automotive OEMs
• Earliest deployment FY19
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Digital Printing on Glass• Replaces traditional screen printing
of decorative flat glass or plastic on user interface panels
• Utilizes 6-color, ultra-violet curable inks dispensed via large-scale, digital printer
• Superior resolution and graphic options
• Leans out supply chain and costly inventory
• Vertically integrated and in production today
Lean Touch ®
• Digital printing of graphics andcircuits via Methode Nano-particle conductive ink
• Replaces conventional printed circuit board
• Reduces inventory, lead-time and tooling (print on demand)
• Deployment late FY17
Methode’s Evolution
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HighPerTouch™
• Provides significantly enhanced touch performance, enabling systems to sense touch… Through thicker substrates, about
8 times what a smartphone senses through
Through air gaps, which provide design freedom
Through thick gloves, key for many automotive and industrial applications
With water immunity, such as in automotive door handles
10G Copper Transceiver Modules
• Transceivers in data communications networks allow flexibility when connecting switches to other networking equipment
• More cost effective than optical counterparts
• Meets/exceeds industry low power requirement
• Launching FY17• Largest customer - Cisco
Methode’s Evolution
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Bypass Switch
• Patented “fast close switchgear” delivering safe and reliable circuit protection for high voltage, high current power management Initial application was off-shore
wind farm to on-shore power grid
Smaller, lighter and more flexible in design than current market alternatives
10,000+ in service today offering vital protection to power grid converter stations
Radio Remote Controlwith Video
• Full-color, transmissive 4.3 inch display and/or 8 inch “touch” displays integrated with Remote Controls
• Customized remote control GUI and software to meet customer application
• Extended transmission distance via integrated repeater grid network
• Multiple command & control frequency capability
• Separate video feedback channel• Supports up to 4 live, simultaneous
wireless video camera feeds• Video playback and recording option
Methode’s Evolution
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Dabir Surfaces• New technology aimed at pressure ulcer prevention
Prevention, care & treatment is an $11 billion/ year spend in U.S. Of that $11 billion, nearly $2 billion is attributed to Hospital Acquired Pressure
Ulcers which are no longer covered by Medicaid & Medicare
• Pressure Ulcers Caused by prolonged pressure, skin shear, excess moisture and heat Dabir technology addresses all the above in an easy to use, semi-disposable
overlay
• Licensed and owned IP combined with Methode’s Manufacturing expertise Existing technology portfolio TouchSensor user interface Encrypted wireless communication
Methode’s Evolution
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Dabir Surfaces• Provides
Alternating Micropressure support and tissue relief Adjustable cycle speed and firmness control Reduced skin shear during operation Optional low-air-loss Microclimate control Enhanced infection control as a semi-disposable overlay
• Overlay Features Placed between mattress and cover linen Multi-patient use with standard cleaning 200 hour product life for Surgical 2,160 hour product life for MedSurg Bed Wireless electronic intelligence X-ray translucent
Methode’s Evolution
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Dabir Surfaces
Methode’s Evolution
• Application Potential Long-duration surgical procedures
Recovery & long-term care settings (Nursing Homes, Home Care)
Any patient group which is either immobilized or at-risk for pressure ulcer formation
• Currently concentrating on long-duration surgical procedures Controlled launch at beta hospital
As of January 2016 – 1,000+ procedures from 4-20 hours duration
No adverse tissue effects or quality concerns
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Dabir Surfaces
Methode’s Evolution
• Commercialization FDA Device Class II – 510k exempt registration complete
Direct regional sales network, national medical representatives and partners
• FY15 second-quarter introductory sales
• Continue to develop product and IP
• Clinical Research Dialysis – completed outpatient dialysis comfort study with 20% improvement
Pressure mapping and limited MRI perfusion study performed at Cleveland Clinic with good results
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Summary
• Will continue to follow a balanced strategy of investing in our business, maintaining a strong and flexible financial position and returning cash to shareholders Continue to invest in core businesses to grow, defend and improve our competitive
position
Continue to invest in engineering and launch management to provide customer solutions and near-flawless execution
Maintain strong and flexible balance sheet with ample liquidity to support continued growth organically and through acquisitions
• Investing approximately 3-4% of net sales in R&D
• Leverage global footprint, vertical integration and continuous manufacturing systems improvement
• Targeting 5-year compounded EBITDA growth rate of 9-10%