Methode (MEI) Reported 10.4% Sales Growth and $400M of Lifetime Program Awards. When Will Growth Restore Operating Profit?

Methode Electronics, Inc. (NYSE: MEI ) reported fiscal first-quarter 2027 net sales of $265.4 million, up 10.4% from $240.5 million a year earlier. The increase primarily reflected higher Industrial segment volumes and mix, including organic data-center growth and higher on-highway and off-highway lighting volumes with customer recoveries.

Gross profit rose to $47.7 million from $43.5 million, while gross margin was nearly unchanged at 18.0%. Selling and administrative expenses increased 25.4% to $45.9 million on higher employee costs and professional fees. Methode Electronics, Inc. (NYSE:MEI) recorded a $3.9 million operating loss, compared with $1.1 million of operating income in the prior-year quarter.

Methode Electronics, Inc. (NYSE:MEI) also reported new non-data-center program awards representing approximately $75 million of peak annual revenue and $400 million of lifetime revenue. These company-reported award metrics are not recognized revenue or guaranteed volumes.

Industrial segment sales increased 27.0% to $156.8 million, while segment operating income rose 19.2% to $31.6 million. Data-center and lighting volumes indicate that growth extended across several applications. The lifetime awards also broaden visibility beyond the current data-center cycle, and successful launches could improve fixed-cost absorption. Automotive operating loss narrowed to $11.7 million from $12.5 million.

Methode Electronics, Inc. (NYSE:MEI) made $10.1 million of net repayments on outstanding borrowings. After quarter-end, Methode Electronics, Inc. (NYSE:MEI) extended the maturity date of certain revolving loans through October 29, 2028, while reducing aggregate revolving commitments to $375 million.

Fiscal 2027 guidance remains $1.025 billion to $1.075 billion of sales and $72 million to $82 million of company-defined non-GAAP adjusted EBITDA. This measure adds taxes, net interest expense, depreciation, and intangible amortization to net income, then adjusts for items including restructuring and impairment charges, transaction and strategic costs, debt-issuance write-offs, and gains on non-core assets.

Adjusted EBITDA declined to $13.7 million from $15.7 million despite the sales increase, and adjusted EBITDA margin fell to 5.2% from 6.5%. Reaching the full-year guidance requires $58.3 million to $68.3 million over the final three quarters, or an average of approximately $19.4 million to $22.8 million per quarter.

Industrial gross margin fell to 29.3% from 32.1% because of higher materials and freight costs. Automotive remained unprofitable, while Interface recorded a $0.8 million operating loss following the dataMate divestiture and program roll-offs. Management said adjusted EBITDA would have grown without the divestiture effect but did not quantify the bridge.