On Thursday, Methode Electronics (NYSE:MEI) discussed first-quarter financial results during its earnings call. The full transcript is provided below.
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Summary
Methode Electronics reported a 10% year-over-year increase in net sales to $265 million for the first quarter of fiscal 2027, driven mainly by higher volumes in the industrial segment, particularly from data centers.
The company booked new commercial awards amounting to $75 million in annual revenue, largely from commercial vehicle and automotive power applications, which are USMCA-compliant.
Operational improvements in various regions, notably Egypt and Mexico, have led to significant margin improvements despite some challenges in Asia and EMEA.
The company reaffirmed its fiscal 2027 guidance, expecting net sales between $1.025 billion and $1.075 billion, and adjusted EBITDA between $72 million and $82 million.
Methode Electronics is focused on strategic investments in talent and capabilities, particularly in data centers, and is undergoing a shift to a global operating model to optimize manufacturing and supply chain efficiencies.
Full Transcript
OPERATOR
Greetings and welcome to the Methode Electronics first quarter fiscal 2027 results. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star 0 on your telephone keypad. Please note this conference is being recorded. I will now turn the conference over to your host, Joni Constantiello, Managing Director.
You may begin.
Joni Constantiello, Managing Director
Good morning and welcome to Methode Electronics fiscal 2027 first quarter earnings conference call. Our first quarter results, including a press release and presentation, can be found on the Methode Investor Relations website. I am joined today by Jon DeGaynor, President and Chief Executive Officer, and Laura Kowalchik, Chief Financial Officer. Please turn to slide two for our safe harbor statements. This conference call 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 conference call involve a number of risks and uncertainties. We will also be discussing non-GAAP financial information and performance measures which we believe are useful in evaluating the company's operating performance.
Reconciliations for these non-GAAP measures can be found in the conference call materials. 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 10-K and 10-Q. Please turn to slide three and I will now turn the call over to Jon.
Jon DeGaynor, President and CEO
Thank you, Joni, and good morning, everyone. Thank you for joining us for Methode's first quarter fiscal year 2027 earnings conference call. We delivered a strong start to fiscal 2027 with net sales up 10% year over year to $265 million, driven by higher volumes across our industrial portfolio led by data center-related sales. That higher volume drove real profitability benefits while we also saw genuine gains from our operational improvements. However, several items offset that progress.
Some were one-time in nature and others reflected the investments we've made in talent and capabilities to strengthen the company's foundation. Laura will provide more details on this later in the call. On the commercial side, we booked new awards representing $75 million of peak annual revenue, or approximately $400 million of lifetime revenue. These awards were primarily for USMCA-compliant components across Power Products with either new customers or product lines with existing customers.
A good proof point for the commercial momentum we are building. Our operational transformation journey remains on track as we continued to see the impact of cost actions and margin gains across key facilities. While we implement our global operating model, we also continued to strengthen our balance sheet. We amended our credit agreement to extend certain maturities by one year and made net repayments on debt of $10 million while maintaining strong liquidity.
Given all of this, we're reaffirming our fiscal 2027 guidance. I want to emphasize that the progress of our transformation journey will not always move in a straight line, but despite quarter-to-quarter volatility, we remain confident in our ability to drive sustainable improvement. Now I'll walk through some of these items in greater detail, starting with the actions we've taken over the past two years. Turning to slide four, we made significant progress stabilizing and strengthening the foundation of the company.
We upgraded talent, rebuilt leadership teams, resolved legacy overhangs, simplified our portfolio, and strengthened manufacturing execution, delivering real margin and cost improvement inside our facilities. That work is translating into better supply chain execution, shorter lead times, and stronger service levels, which is helping us earn the right to win with our customers. Our focus today is building on what we've already accomplished. There is still work to do, but we are actively working to drive top- and bottom-line growth across the company.
We remain focused on investing in higher-growth opportunities such as data centers, and we've been pleased with the opportunities we're seeing in this market. But it's not just about data centers. We are also leveraging our capabilities and footprint to grow in other end markets and applications, including automotive and commercial vehicles. Turning to slide 5, the awards we booked this quarter were not in data centers. They came from commercial vehicle and automotive power applications totaling $75 million of peak annual revenue or approximately $400 million of estimated lifetime revenue.
These wins show the breadth of what our power and lighting capabilities, combined with our USMCA-compliant footprint, bring to both new and existing customers. Customers are rethinking their overall supply chains, looking for localized manufacturing to mitigate tariff exposure, shorten lead times, and ensure quality. Our engineering and manufacturing capabilities and our footprint position us well for that shift. This is what earning the right to win looks like in practice.
It's not a single award in a single market, but a broadening set of customers choosing Methode for our capabilities and because we're executing better than we have in the past. That's the commercial momentum we're building on. Turning to slide 6, part of our transformation has been moving from a historically decentralized organization to a global operating model with improved alignment and collaboration across the company. We've taken a number of actions to change how our operations work globally, rebuilding the organization from the ground up.
We installed the Global Head of Operations who's building a team to drive alignment. This includes new leadership in the areas of manufacturing strategy, quality, process engineering, and supply chain planning. We've also continued to upgrade site leadership in Egypt, Malta, Mexico, and China over the last 18 months. The breadth of these changes is being felt across the entire organization. Egypt is the strongest example of what these operational improvements can deliver.
The business drove more than 700 basis points of margin improvement in fiscal 2026, the product of stronger leadership, tighter operational rigor, and greater process discipline, with additional savings expected in fiscal 2027. In Malta, restructuring and operational improvements are driving approximately $5 million in annualized savings, including lower scrap, better quality, and other efficiencies. We are applying that same global playbook and leadership discipline to our Mexico region.
To help understand the challenges in Mexico, this chart shows annual sales generated from the region over the last several years. Revenue dropped more than 50% from fiscal 2023 to fiscal 2026, mainly due to the roll-off of a major OEM user interface program along with delays and cancellations across North American EV programs. Those changes left us with significantly underutilized capacity and a fixed cost base that wasn't appropriately sized for the reduced revenue.
We've taken foundational action to improve both operational and financial performance of this facility. We brought in new leadership, implemented best-practice operating procedures, removed structural cost, and continued to drive alignment between our cost base and current demand. Early results indicate more than 500 basis points of margin improvement year over year at the Mexico facilities. Importantly, that improvement came without significant revenue tailwinds.
We also saw an opportunity across our industrial portfolio by capitalizing on our customers' needs for localized USMCA-compliant production. Historically, our business operated as siloed units with capacity dedicated to serving one segment alone. Now our globalized model, footprint, and manufacturing synergies are helping us meet those requirements. We've begun transferring a portion of our production from Asia to Mexico, repositioning open capacity across the automotive, data center, and commercial vehicle markets, enabling us to take share, win new business, and diversify our demand base.
This also allows us to spread fixed costs more effectively, benefiting margins in both segments. Altogether, Mexico is becoming one platform serving three markets with strong incremental adjusted EBITDA improvement. This is already built into our current guidance, but it gives you a sense of the transformation underway. Importantly, we are not just focused on these three sites. We continue to drive performance improvement and consolidation across our entire footprint.
In China, we will consolidate sites. We will also exit a facility in the UK and at least one in Germany. Turning to slide 7, our power solutions offerings are a fundamental piece of our long-term growth strategy. We are applying more than 60 years of expertise designing and manufacturing complex, high-performance power interconnect solutions, often pushing the limits of thermal and electromagnetic constraints to meet demanding power density, weight, and reliability requirements.
We are partnering closely with our customers to understand and address their needs, whether through supply chain or product design solutions. Our product portfolio and our footprint give us the breadth to serve customers across end markets, which is a meaningful competitive advantage as we look ahead. On data centers specifically, the Mexico repositioning I just described is one example which leverages existing capacity that we can begin dedicating to hyperscaler customers who desire shorter lead times and supply chain stability.
We are also rotating engineering and commercial resources toward data centers to support that growth and bring customers innovative solutions that address AI-driven demand for power density, helping enable a more efficient future. Built on safe deployment of 800-volt DC rack architectures in vehicle electrification, we are leveraging our capabilities to drive growth with other customers in hybridization, including the new business awards I mentioned earlier.
We continue to ramp up EV programs in EMEA and we're expanding our commercial and engineering activity in Asia Pacific. In MilAero, we're restructuring our commercial organization to better align with broader market dynamics and growth opportunities. Our transformation is a multi-year effort. Progress won't always be linear, but I'm confident we have the right strategy and the right team in place to deliver on the commitments we're making to our employees, our customers, and our shareholders.
We are proud of what we've accomplished so far and we know there is more work ahead. Before I turn the call over to Laura to review the financials, I wanted to share that we will be hosting an Investor Day on December 17 at the New York Stock Exchange. This half-day event will include presentations from our Chief Strategy Officer and our Head of Mobility and will also include product demonstrations. We will send out more information soon, but look forward to seeing you there.
With that, I'll turn the call over to Laura to review our first quarter financial results in more detail.
Laura Kowalchik, Chief Financial Officer
Thank you, John, and good morning, everyone. Please turn to Slide 8. As a reminder, unless otherwise noted, all year-over-year comparisons are for the same period in the prior year. First quarter net sales were $265.4 million, up 10.4%. The increase primarily reflected higher volumes and mix in the industrial segment, partially offset by lower sales in the interface segment related to portfolio refinements. First quarter gross profit increased to $47.7 million from $43.5 million.
The increase was primarily driven by higher industrial segment net sales and mix, and operational improvements across both segments. This was partially offset by higher material and freight inflation as well as premium freight costs related to the moving of a portion of production from Asia to Mexico. Selling and administrative expenses were $45.9 million in the first quarter compared to $36.6 million. The increase was primarily driven by investments in talent and capabilities and higher professional fees.
Income tax expense was $4.1 million in the first quarter compared to $4.2 million. First quarter adjusted net loss was $7.7 million, or $0.22 per diluted share, compared to an adjusted net loss of $7.8 million, or $0.22 per diluted share. First quarter adjusted EBITDA was $13.7 million compared to $15.7 million. As John mentioned earlier, the underlying profitability was offset by expenses that were one-time in nature, including a $3.8 million impact from portfolio refinements and $2.3 million in premium freight related to the transfer of production from Asia to Mexico, along with the recovery actions where there is a lag effect before the recovery comes through. Taken together, these expenses were a $6.7 million headwind on adjusted EBITDA. Importantly, the underlying ongoing drivers of the business, including volume, mix, and operational execution, represented a positive $4.7 million impact on a net basis, reflecting genuine underlying progress. Turning to our segment results on Slide 9, first quarter Automotive segment net sales were $105.7 million, a decrease of 0.4%. Lower volumes in EMEA and Asia were mostly offset by higher sales in North America.
Automotive segment operating loss narrowed to $11.7 million, representing a 6% improvement from the prior year, reflecting lower inventory adjustments and lower scrap, partially offset by higher material cost inflation. We expect to see continued improvement, specifically related to Mexico, as we transition available capacity and related fixed costs to our industrial business. The industrial segment continued to deliver strong performance. First quarter fiscal 2027 net sales increased 27% to $156.8 million, driven by continued momentum in data center power distribution and strong demand for off-road lighting solutions.
Additionally, during the quarter we recognized $2.2 million in recoveries from commercial vehicle lighting customers. Industrial segment operating income expanded 19% to $31.6 million, driven by higher volumes and mix, customer recoveries, and operational improvements, partially offset by higher material and freight inflation, increased expedited freight expense, and investments in talent and capabilities. The interface segment net sales declined 73% to $2.9 million.
Loss from operations was $800,000 compared to income from operations of $3 million. The decline primarily reflected the divestiture of the Datamate business as part of our ongoing portfolio optimization efforts as well as the planned roll-off of a major appliance program. Turning to Slide 10, we ended the quarter with $116.2 million in cash and cash equivalents compared to $139 million at the end of fiscal 2026. Total debt was $310.5 million at quarter end, down $14.5 million from the end of fiscal 2026, reflecting $10 million of net repayments and $4.5 million of favorable currency impact.
Net debt increased from $185.4 million at the end of fiscal 2023 to $194.3 million in the first quarter due to the decrease in cash and cash equivalents. As you probably saw in our earnings release, subsequent to quarter end we completed an amendment that extends the maturity date of certain revolving loans by 12 months through October 2028. As part of that extension, we reduced our revolving credit facility from $400 million to $375 million at closing.
Capital expenditures were $3.1 million, down from $7.1 million. Free cash flow was an outflow of $10.9 million in the quarter compared to an inflow of $18 million. The free cash outflow in the quarter was largely driven by higher working capital levels, primarily reflecting a planned inventory build to support the transition of production from Asia to Mexico. This was partially offset by customer recoveries. Turning to Slide 11, our capital allocation framework continues to guide how we deploy capital with clear priorities, including strengthening our balance sheet, funding core operations, selectively reinvesting in high-return growth opportunities, and returning capital to shareholders. We remain focused on reducing leverage while directing capital towards the highest-return opportunities across the business. Turning to fiscal 2027 guidance on Slide 12, we are affirming the fiscal 2027 guidance we provided last quarter, which continues to reflect our current market outlook, including third-party industry forecasts, customer production schedules, current U.S. tariff policies, and bank forecasts for currency.
We continue to expect net sales in the range of $1.025 billion to $1.075 billion and adjusted EBITDA between $72 million and $82 million, representing an adjusted EBITDA margin of approximately 7% to 7.6%. We continue to expect free cash flow comparable to fiscal 2026. All other elements of our fiscal 2027 guidance remain unchanged. This guidance reflects our expectations for data center growth, ongoing operational improvement in Mexico, improving commercial vehicle demand, and further cost savings and operational improvements across the business.
We've included the fiscal 2027 guidance bridge we shared last quarter in the appendix section of the slide presentation. This bridges our fiscal 2026 result to the midpoint of our fiscal 2027 guidance for both net sales and adjusted EBITDA, which we are affirming. With that, I will turn the call back to the operator for questions.
OPERATOR
Certainly. At this time we will be conducting a question-and-answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment, please, while we poll for questions.
Your first question for today is from Luke Young with Baird.
Luke Young, Analyst at Baird
Good morning. Thanks for taking the questions. Wanted to start on the margin progression going through the year. Specifically, your comment that you expect to see some improvement in auto margins as you transfer capacity and some fixed costs into the industrial segment. John or Laura, can you just put some guardrails around the materiality there? And I would assume that's primarily a gross margin-related consideration. Thank you.
Jon DeGaynor, President and CEO
Good morning, Luke, and thanks for the question.
Laura Kowalchik, Chief Financial Officer
Yeah, Luke, so as we mentioned, we did see in Mexico a 500 basis point improvement already year over year. We do expect that to continue as we make more operational improvements and the production transfers, and then the fixed costs there.
Luke Young, Analyst at Baird
Yeah. Would you say is the production transfer the bigger factor there or just—I'm just trying to size kind of the buckets. Yeah.
Laura Kowalchik, Chief Financial Officer
The base performance improvement in Mexico is. The production transfers will help, but the biggest thing is performance within the plant: reduction in premium freight, scrap, and direct labor.
Luke Young, Analyst at Baird
And then second, just be great to get your perspective, John, on the investments in talent and capabilities in your EBITDA bridge. I know you've been reinvesting some dollars from an engineering standpoint and flowing it to the highest growth opportunities. Can we just maybe reconcile your interest in those incremental dollars and sort of the underlying support that we maybe can't see from the reallocation?
Jon DeGaynor, President and CEO
Yeah. So thanks for the question, Luke. I'll give some top-level thoughts and I'll let Laura give some additional detail. I think it's important in that part of what you're seeing is the sequential impact because we're looking at it on a quarter-over-quarter basis. In first quarter 2026 versus first quarter 2027 fiscal, there's a little bit of a timing impact. So if you would look at the comparison, or run-rate comparison, of the executive teams, it's actually not a significant change.
As a matter of fact, it's a reduction from the structure in the past. But as we've added talent and we have a timing impact, that's why you see this change on a year-over-year basis. Although part of it is also variable comp.
Laura Kowalchik, Chief Financial Officer
Yeah. And these costs reflect the leadership changes we've made over the past 12 months to strengthen our foundation and position us to capture the growth ahead. You know, we've upgraded talent, we're building out a global organization, we're bringing in new global leadership across operations, manufacturing strategy, and supply chain. We also need some of the ongoing external support to help us get through this transformation.
Jon DeGaynor, President and CEO
And I think, Luke, another thing to keep in mind is we've talked about rotation of investment to support data centers from some of our existing business. There's also some new talent that has to be brought in there to help us from an engineering perspective. And honestly, there is some spend as we think about it from a global planning and a global strategic activity that we're spending from an SG&A standpoint. But it's what is allowing us to drive the performance and reduce some of the other costs and better serve our customers.
So I'd rather spend it with talent that helps us drive the growth than in premium freight and scrap.
Luke Young, Analyst at Baird
Speaking of data center, in the slides you mentioned that there was just a bit of a timing benefit in data center sales this quarter. Can you size that or maybe more importantly just explain what's going on there?
Laura Kowalchik, Chief Financial Officer
Yeah, there were some pull-aheads. So we're not expecting the full year to change, but we did have pull-aheads come up into Q1 from later in the year.
Jon DeGaynor, President and CEO
We're still reaffirming that. We're still reaffirming the number that we gave you from a year over year at 103.
Luke Young, Analyst at Baird
And then last question for you, John. Just curious to get an update on how you're thinking about some of the pillar franchises within the company, especially some of the areas we don't discuss as much, such as lighting or Hetronic, and just where we are in the life cycle of this transformation journey that you're on. Are we at a stage where you're starting to think about any portfolio actions, or just what your thinking is there right now would be helpful.
Jon DeGaynor, President and CEO
Thanks for the question, Luke. The Nordic Lights — let's talk first from a lighting standpoint. The Nordic Lights franchise and the Nordic Lights business has been pretty much underappreciated, but an extremely successful acquisition and an extremely successful business. The team has done a great job of supporting customers around the world and we continue to grow there, and we're seeing pretty significant growth on the scale of that business on a year-over-year basis.
What we've done with regard to creating the global structures is actually the things that the customer does not see. The commonality from a supply chain perspective and commonality from an engineering perspective gives us the opportunity — for example, the leader in engineering who came from Nordic Lights is now the lighting leader around the world. So we're using some of the Nordic Lights capabilities to help drive growth in other pieces within Methode Electronics.
Grakon, as we have talked to you before, has been challenged twofold: one with regard to some past strategic decisions and then also with regard to commercial vehicle volumes, particularly in North America. We're seeing those commercial vehicle volumes start to come back, and we've also got some initial business wins on the Grakon side. And honestly, one of the bookings that we had in the 75 million was a commercial vehicle win on the power side that actually was built upon the relationships that the Grakon team had with our commercial vehicle OEMs.
So what you're seeing is the lighting business continues to grow. We continue to build synergies behind the scenes on the back-office side — engineering, operations, supply chain — while deepening our focus on each of our individual customers. So whether it's Nordic Lights or the Grakon brand, I'm really confident in where that's going and how that can continue to grow. With regard to Hetronic, it's a team that's continued to actually drive growth there.
We've got some exciting new things with a couple of our customers there also. So both Hetronic and the lighting — the controls business within Hetronic and the lighting business — we don't talk about it as much, but we see growth on both sides. With regard to the portfolio, we're constantly looking at what we can do to refine the portfolio that fits with our strategic direction and also may give us some opportunities to further accelerate our balance sheet cleanup.
Nothing to talk about right now, but that is how we think about it here.
Luke Young, Analyst at Baird
I'll leave it there. Thank you.
OPERATOR
Your next question is from John Franjev with Sidoti and Company.
John Franjev, Analyst at Sidoti & Company
Good morning, Jon. Laura, thanks for taking the questions. I guess I'd like to pick up where you just left off. When you talked about the new order being about 75 million annualized at peak and 400 over the life duration, it sounds like a lot of that's coming from the commercial vehicle market. I'm curious about a couple things. Does that peak run rate — is that something you'll probably hit within the next 12 to 18 months? And how much of that reflects the strong order book we've seen in CV?
And you kind of just touched on some new market penetration also. I'm kind of curious if we can deconstruct that.
Jon DeGaynor, President and CEO
Yeah, so thanks, John. So primarily, the 75 million — less than a third is commercial vehicle. The majority of it is new business wins with new automotive customers for electrification, but more for hybridization. So we have talked in previous earnings calls about opportunities that are being presented to us by new customers who are relooking at their overall supply chain and their footprint — and, if you will, their supplier footprint — and that's where the majority of those booking wins come.
The commercial vehicle award is for a power product, not on the EV side, but using some of our power technology for one of the commercial vehicle OEMs. So the answer is, nothing that we talked about in the 75 million is just tied to additional sales. It's not about a rising tide lifting all boats. These are new awards. Now, in answer to your second question with regard to when we would start to see the volumes: the majority of these launches are late next fiscal year or after.
As you're well aware, in automotive or commercial vehicle programs, there is a lead time between the point when you get an award and when it starts to ramp up. It's the end of next fiscal year where we start to see that. But we're already spending engineering and working with the customers to get those programs developed at this point. So we feel really good about the commercial momentum we have and what this signals for growth beyond our data center growth that we talk so much about.
John Franjev, Analyst at Sidoti & Company
Got it. Thank you for that. And on the automotive side, I'm getting some mixed messages out there, so I'm curious to hear your thoughts. Are there any changes in your production assumptions for your customer base? I guess in your case, if we take it by geography, that would be the best way to look at it for me.
Jon DeGaynor, President and CEO
Well, so as we talked about in the script, we're seeing some revenue tailwinds in North America, and that comes down to — and because we're not represented across the entire [market]. As we said before, John, we're not a SAAR-based — you can't just calculate our progress one way or the other based on SAAR because we're not across all of the end customers. But with our customer mix in some of our products, we're seeing some tailwinds with regard to SUVs and pickup trucks that are selling more in North America; in EMEA and particularly Asia, are the revenues down a little bit? Yeah. And particularly in China with a couple of our customers, we've got some headwinds there. So overall automotive revenue — North America is up, China is down, and EMEA has got a little bit of headwinds as well.
John Franjev, Analyst at Sidoti & Company
Okay, thank you for that. And one last question — to maintain the capex guidance, you came out of the gate with only $3 million, which suggests a big pickup in spending. Can you talk us through where the spending is going and the timing of it?
Laura Kowalchik, Chief Financial Officer
We spend — it's roughly half and half between maintenance capital and new business and new capital. And so some of that is just the timing of programs and the timing of when we are adding equipment. As we've said in the calls, we're doing a great deal of reutilizing existing capital as we're supporting transfers, whether it's with the data center transfers or some of the other things. But there will be new investments that are put in place on the plant floor in order to support growth in multiple of our end markets.
And yeah, we're comfortable with where we are from a capex forecast at this point.
John Franjev, Analyst at Sidoti & Company
Okay, thank you. I'll get back into queue.
Laura Kowalchik, Chief Financial Officer
Thanks, John.
OPERATOR
Your next question for today is from Ryan Sigdal with Craig-Hallum Capital Group.
Ryan Sigdal, Analyst at Craig-Hallum Capital Group
Hey, good morning, Jon. Laura, I want to dig into the costs a little bit more. So you had 5.9 million recurring talent and capabilities — I presume that is a recurring cost going forward, but maybe help us level set if that's the right assumption to continue to assume, or if that needs to increase. And then did you call out $6.7 million of one-time costs — is that right, or are those kind of double counting between those buckets?
Laura Kowalchik, Chief Financial Officer
Yeah, thanks, Ryan. For the investment in the talent and capabilities, yes, we do expect that to continue this fiscal year. Going out into further years, though, we will not need as much support externally — that's included in that number. But throughout the rest of this fiscal year, we do see that continuing. As far as the one-time-in-nature costs, those were related to the divestiture in Q4, so we're not going to continue to have that through this fiscal year — that decreases there.
And then the premium freight — that was related to the production transfer, and there were execution issues with that from Asia to Mexico, and those issues have been resolved. So we do not see that continuing going into the rest of the fiscal year, just seeing probably minimal premium freight going forward.
Ryan Sigdal, Analyst at Craig-Hallum Capital Group
How much specifically was that premium freight and execution issues?
Laura Kowalchik, Chief Financial Officer
If you look at slide 8 referenced there, it's 2.3 million.
Ryan Sigdal, Analyst at Craig-Hallum Capital Group
And then just the talent and capabilities I guess. Curious if you're willing to comment on how much of that is data centers and then give an update on the design work with your hyperscaler customers specifically on 800 volt architecture where you're at any incremental details. Just curious if you're willing and able to share anything more at this point.
Jon DeGaynor, President and CEO
So Ryan, thanks for the question. Let's start first with when you look at investment in talent. As I said, it's not at the it's a change in talent at the senior team, but it's not a change in expense at the senior team. Where you see the additional expenses is we've added commercial leadership from a data center standpoint, we're adding additional engineering there. We added. We mentioned that we're adding commercial leadership in our mil-aero areas.
We've done some things with regard to manufacturing strategy, a global head of quality, actually improving our overall strategy team. Those are all investments, shall we say a couple layers down from me that really help to build a much more robust both planning and execution structure within the organization that, as we've talked together, making sure that when we talk about performance for Methode that there's a level of confidence going forward we understand what underlies it.
So that's where that investment comes in, it's investment in capabilities across the organization to make us much more sustainable quarter over quarter, year over year with regard to our performance. Any comment from a data center specifically? I mean from a. From a. Are we spending more engineering on. Are we spending more money on engineering for data centers as well as outside help? Yes. Are we breaking that out specifically? We are not.
Ryan Sigdal, Analyst at Craig-Hallum Capital Group
Fair enough. Automotive it's been in decline obviously for program roll offs and reasons we've talked about for many years. You mentioned some crosswinds, some headwinds in Asia and Europe, maybe some tailwinds in North America, but maybe level set today, I guess directionally. Do you think that business segment from a revenue standpoint is stable and flat this year? Is it up and then kind of what gives you that confidence visibility from a stabilization and potentially return to growth given the new awards you announced today are kind of out two years from here.
Jon DeGaynor, President and CEO
Yeah. So from from a revenue perspective, it's why we're able to reaffirm guidance. What we see right now from a SAAR perspective and what we see right now with the equivalent of S&P in EMEA and in Asia gives us a level of confidence that what we say from a revenue perspective, we're flat. Yes, there's some mix between the regions. From a performance perspective, as we said, we expect Egypt and Malta to continue to improve on a year over year basis.
We have 500 basis points worth of performance improvement in Mexico. We expect to see that continue to improve and we've got business and facility refinement in broader Europe and in Asia that will allow us to continue to drive profitability there. So the performance that we see on a year over year basis from an automotive and from an overall Methode standpoint isn't based on revenue tailwinds. It's really based on what we've done to take structural cost out and continue to take structural cost out.
And the team around the world is absolutely focused on what do we do to drive that performance in each of the regions. So the answer to the question is we feel confident that we can continue to drive performance. Will there be some fits and starts as we go here? And it's part of why we've had to make the investment in talent that we've made and why we will still have some external support to help us through this. But we do feel good about where the profitability profile is and how we can drive more performance.
Ryan Sigdal, Analyst at Craig-Hallum Capital Group
Thanks John. Laura. Good luck guys.
Jon DeGaynor, President and CEO
Thank you.
OPERATOR
As a reminder, if you would like to ask a question, please press Star one. Your next question for today is from Gary Prestopino with Barrington.
Gary Prestopino, Analyst at Barrington
Hi, good morning John and Laura. John, I wanted to ask you on these new awards, particularly in hybrid electric vehicle market, are the bulk of these awards dealing with actual hybrid vehicles or how is it split in regard to pure EVs versus hybrids? And where are these new awards coming from? Are they domestic, US, foreign? Are they in or are they in Europe?
Jon DeGaynor, President and CEO
So they're all hybrid awards. Let me be clear with that. They're not EV awards. Secondly, they are to be manufactured in, for all of these awards, they are to be manufactured in North America, so manufactured in Mexico. Other than the commercial vehicle award that we talked about, all of those awards are with new customers to Methode. So Gary, it's directly consistent with what we've said, that our footprint and our capabilities with the supply chain, the global turbulence from a supply chain standpoint, the global turbulence from a tariff standpoint, our capabilities are creating opportunities for us.
And these awards are a demonstration that those capabilities are being brought into fruition with tangible awards. Okay.
Gary Prestopino, Analyst at Barrington
All right. And then I think this question was asked, but I don't know whether you really answered it, at least to my satisfaction. In the data center area, you're working on this 800 volt capability, right? Is that 800 volt architecture out in the market now or is that something that we're going to see in a year or two?
Jon DeGaynor, President and CEO
So it is not out in the market now. Okay, we. And it's what and it's why, Gary, we have been very clear to say, yes, we're spending engineering on it. Yes, we are working with our partners on development activities, but none of it is in our guidance because it is not on the market and we do not have any business awards. So all of the growth that we talk about from a revenue perspective in fiscal 2027 is with the current architectures. We are spending money on the advanced development and the future activities with regard to 800 volt, but none of that's in our revenue forecast.
And we believe that. And we believe that we're in a strong position with the leaders in the space. So no, nothing's out in the market and we do believe we're well positioned there.
Gary Prestopino, Analyst at Barrington
Yeah, I guess the question I would have is when does this actually come to market?
Jon DeGaynor, President and CEO
Well, the first thing we have to, the first thing that has to happen is the demonstration that it is that it's viable and, very importantly, that it's safe with current architectures. The voltages at the racks are safe for the people around the rack. At 800 volts with the sort of voltage and current that we're talking about, that is no longer the case. So what we're working on and the solutions that we are working on, we talk about bringing automotive-related safety activities into the data center side, is making sure that an 800 volt high-current architecture can be done safely.
So we have to demonstrate that first and that's. And we expect that later this fiscal year we'll have proof of concept and demonstrate that. And then that should turn into customer awards.
Gary Prestopino, Analyst at Barrington
And then are you concerned at all about, you know, some of what's going on with the data center pushback? You know, various states are putting a moratorium on them and all that. I mean, give us your thoughts on that and what's going on in the market.
Jon DeGaynor, President and CEO
So there was an interesting, there's an interesting op-ed in the Wall Street Journal yesterday and a couple, couple of things right on the headlines talking about the fact that, yes, it's a little bit of a political football, but that this is the right thing for the U.S. economy. So we watch it, we monitor it. We do believe that some of the pushback actually will drive additional efficiency in the architectures. So if the 800 volt architecture will ultimately drive efficiency in the data center, and the way in which these things are done will.
There's a lag in what the world and what the press understands with regard to data centers. What we're working on is the future state. But some of that pushback due to the lag is pushing innovation. So are we watching it? We're not seeing any softness from a revenue forecast standpoint. And we do see that as we're working on advanced development, we're aligned with where those opportunities should go in the future.
Gary Prestopino, Analyst at Barrington
Okay, thank you.
OPERATOR
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