Methode Electronics reported a soft start to fiscal 2026 with net sales of $240.5 million in QQ1 2026, down 7% year over year (YoY) and 6% sequentially as the company continues to transition away from legacy programs toward a faster-growing mix. The quarter highlighted the resilience of the Power Solutions and Data Center segments, which helped offset program-transition headwinds and supported a meaningful improvement in profitability metrics. Adjusted EBITDA was $15.7–$16.0 million for the quarter, led by aggressive SG&A reductions and better operating discipline, with the company affirming its goal to double EBITDA for the full year despite a projected $100 million decline in EV-related sales.
Financial discipline is evident in the quarterly free cash flow of $18.0 million and three straight quarters of net debt reduction, with net debt down by $41 million over the last three quarters. Cash generation was supported by a solid $25.1 million operating cash flow and a constructive working capital profile (change in working capital of $23.9 million). The balance sheet remains solid, with $121.1 million in cash and total debt of $347.6 million, yielding a net debt position of $226.5 million.
Management reiterated a compelling longer-term growth trajectory anchored in Power Solutions (a ~30% CAGR over the last three years), Data Center power needs, and EV-related interconnect innovations. The company also highlighted ongoing transformation efforts—stabilizing the base, accelerating program launches (more than 30 in 2026), and enhancing global supply chain and engineering collaboration—to position Methode for sustained margin expansion and higher free cash flow when sales recover. The 2026 guidance calls for $900 million to $1.0 billion in net sales and $70–$80 million in EBITDA, implying a margin near 7.9% at the midpoint and a positive free cash flow profile for the year. Investors should monitor the pace of EV demand recovery, Automotive North America headwinds, tariff dynamics, and the execution of the company’s transformation initiatives as key drivers of the earnings trajectory.