Good day, ladies and gentlemen, and welcome to the Methode Electronics First Quarter Fiscal 2022 Results Conference Call. All lines have been placed on a listen only mode and the floor will be open for questions and comments following the presentation. At this time, it is my pleasure to turn the floor over to your host, Robert Cherry, Vice President of Investor Relations. Sir, the floor is yours.
Thank you, operator. Good morning, And welcome to Methode Electronics' fiscal 2022 Q1 earnings conference call. For this call, we have prepared a presentation entitled fiscal 2022 Q1 financial results, which can be viewed on the webcast of this call or found at metho.com on the Investors page. 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. 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 ks and 10 Q reports. At this time, I'd like to turn the call over to Mr. Don Duda, President and Chief Executive Officer.
Thank you, Rob, and good morning, everyone. Thank you for joining us for our fiscal 2022 Q1 earnings conference call. I'm joined today by Ron Zumas, our Chief Financial Officer. Both Ron and I have opening comments and then we will take your questions. Let's begin with the business highlights on Slide 4.
Our sales for the quarter were 288,000,000 Excluding favorable currency translation, our organic growth was up 45% from the prior year. However, it should be noted that our prior year 1st quarter was significantly impacted by the pandemic. In this year's Q1, our team faced customer demand fluctuations and supply chain challenges. These included the ongoing semiconductor chip shortage, pandemic related supply chain disruptions and port congestion, all of which created both sales and margin pressure. Once again, our team worked diligently to mitigate many of these challenges and we were able to deliver results within our guidance ranges for the quarter.
However, these demand fluctuations and supply chain disruptions continue to require remedial actions such as expedited shipping and premium component pricing. As of today, our expectation is that these conditions will last At least until the end of the calendar year, while we have reaffirmed our guidance for the full year, persistent headwinds could cause our performance to be below the midpoint of the ranges as the situation is very fluid and will remain very challenging. The sales growth that we realized in the Q1 was due to increased demand across most of our businesses, but was especially focused in the auto and commercial vehicle markets. We also realized growth in our Dabir business. However, that business is still being hampered by the pandemic, thus limiting our production or product evaluation opportunities in hospital operating rooms and ICUs.
On an order basis, we had solid awards for EV, cloud computing and e bike applications. Focusing on EB, last quarter we reported that sales into EB applications were 13% of consolidated sales. This quarter EV sales were 16% of consolidated sales and we continue to expect that number to be in the mid teens for fiscal 2022. Methode's combination of user interface, LED lighting and power distribution solutions is a winning formula in EV. We are especially seeing growth in our power offerings where we leverage over 40 years of expertise to supply busbars, connectors and battery disconnect units to the EV OEMs.
In the quarter, we further reduced debt, generated positive operating cash flow and continued to return capital to our shareholders. We have ample liquidity, which also allows us to execute our stock buyback program under which we purchased $7,600,000 of shares in the quarter And to pay a dividend which rose from $0.11 to $0.14 per share in the quarter. We continue to allocate capital per our balanced approach. Moving to slide 5. Methode had another solid quarter of business awards.
These awards continue to capitalize in key market trends like Vehicle Electrification and Cloud Computing. The awards identified here represent some of the key businesses business wins in the quarter and represent over 30,000,000 In vehicle electrification, we won awards for power distribution and LED lighting programs. We continue on programs with OEMs globally in both auto and commercial vehicle applications. In non EV automotive, We were awarded programs for power, lighting and traditional switch applications. In cloud computing, we saw demand for our power distribution and transceiver products and data center applications.
Lastly, we continue to participate in the growth of e bikes, which utilizes our proprietary magnetoelastic sensor technology. Building on the prior year, our business awards are delivering on our strategic priority to drive both customer and geographic diversity. Turning to Slide 6. As I have mentioned in recent quarters, our business awards over the last couple of years have put us on track in aggregate to replace the sales from the roll off of our largest Auto program. As such, our customer and program diversity continues to improve.
Our EV as well as our commercial vehicle and cloud computing businesses has helped drive our customer diversification. While GM and Ford have been and are expected to continue to be good customers that have fueled Methode's historical growth, in recent years, we have strategically and systematically broadened our customer base. Our business outside of GM and Ford grew to 2 thirds of our fiscal 2021 total sales. To conclude, despite the ongoing demand fluctuations and supply chain challenges, we are still in a position to deliver strong organic growth for fiscal 2022. At this point, I'll turn the call over to Ron, who will provide more detail on our Q1 financial results.
Ron?
Thank you, Don, and good morning, everyone. Please turn to Slide 8. 1st quarter sales were $287,800,000 in fiscal year 2022 compared to $190,900,000 in fiscal year 2021, an increase of $96,900,000 or 50.8%. The year over year quarterly comparisons include a favorable foreign currency impact on sales of $10,300,000 in the current quarter. The increase was mainly due to lower sales in the prior year quarter from the impact of the COVID-nineteen pandemic and to higher sales of electric and hybrid electric vehicles, which amounted to 16% of sales in the Q1 of fiscal year 2022, which was in line with our previous communication that electric vehicles and hybrid electric vehicle sales would comprise mid teens of our fiscal year 2022 consolidated sales.
In addition, stronger commercial vehicle sales contributed to the robust sales growth. First quarter net income increased $8,400,000 to $29,100,000 or $0.76 per share diluted from $20,700,000 or $0.54 per diluted share in the same period last year. Net income benefited from increased sales and favorable currency translation, partially offset by higher income tax expense, higher costs from supply chain disruption, higher selling and administrative expenses and lower other income. Please turn to Slide 9. 1st quarter gross margins were higher in fiscal year 2022 as compared to fiscal year 2021 mainly due to increased sales, partially offset by higher material costs, higher logistic costs, including freight and supply chain shortages.
Fiscal year 2022 Q1 margins were 24.9% as compared to 23.6 percent in the Q1 of fiscal year 2021. The negative impact of the supply disruption and higher logistics Costs including freight on the Q1 of fiscal year 2022 gross margin was nearly 300 basis points. These higher costs that were experienced in the Q1 are expected to continue further in fiscal year 2022. In addition, We anticipate a degree of cost inflation in the remainder of the current fiscal year. 1st quarter selling and administrative expenses and the fiscal 2021 Q1.
The fiscal year 2022 Q1 percentage decrease was attributable to increase sales related to the negative impact of COVID-nineteen pandemic on fiscal 2021 sales, partially offset by higher stock based and performance based compensation expenses. The Q1 fiscal year 2022 selling and administrative expenses Percentage was in line with our historical norm, which should yield an efficient flow through from gross margin to operating income. Please turn to Slide 10. In addition to the gross margin in selling and administrative items mentioned above, Two other non operational items significantly impacted net income in the Q1 of fiscal year 2022 as compared to the comparable quarter last fiscal year. First, income tax expense in the Q1 of fiscal year 2022 was $5,700,000 or 16.4 percent as compared to a net tax benefit of $5,100,000 in the Q1 of fiscal year 2021.
The effective tax rate was lower in the Q1 of fiscal year 2021 due to discrete tax benefits of $7,800,000 in the quarter or $0.20 per diluted share. Without the discrete tax benefits, the effective rate would have been 17.2%. The year over year tax expense increase was $10,800,000 2nd, other income net was lower by 1.6 $1,000,000 mainly due to lower international government assistance between the comparable quarters. Shifting to EBITDA, a non GAAP financial measure, fiscal year 2022 Q1 EBITDA was 48,500,000 versus $29,300,000 in the same period last fiscal year. EBITDA was positively impacted by higher operating income, partially offset by lower other income.
Please turn to Slide 11. Free cash flow, a non GAAP financial measure is defined as net cash provided from operating activities minus CapEx. For fiscal year 2022 Q1, free cash was a negative $6,200,000 as compared to a positive $4,800,000 in the Q1 of fiscal year 2021. The decrease was mainly due to negative working capital changes, especially inventory, resulting from difficult logistics and higher capital expenditures. While we experienced negative free cash flow in the Q1 of fiscal year 2022, we expect improvement the remainder of the fiscal year.
We anticipate continuing our proven history of consistently generating reliable cash flows, which allow for ample funding of future organic growth, inorganic growth and return of capital to shareholders. In the Q1 of fiscal year 2022, we invested Approximately $15,900,000 in CapEx as compared to $11,600,000 in the Q1 of fiscal year 2021. The higher Q1 CapEx is in line with our expectation that CapEx in fiscal year 2022 would be higher than the investment in the prior year estimated to be in the range of $53,000,000 to $57,000,000 We have a strong balance sheet and we'll continue utilizing By continuing investment in our businesses to grow them organically in the future. In addition, we continue to actively pursue opportunities for inorganic growth and have a measured return of capital to the shareholders. In the Q1 of fiscal year 2022, we reduced gross debt by $4,700,000 Since our acquisition of Grakon in September 2018, we reduced gross debt by nearly $123,000,000 Regarding capital allocation, we recently announced 2 initiatives.
1st, on March 31, we announced a $100,000,000 share repurchase program, which we executed 7 point $6,000,000 of repurchases during the Q1 of fiscal year 2022. Since the authorization's approval, We have purchased $15,100,000 worth of shares at an average price of $46.45 In addition, We increased our quarterly dividend from $0.11 to $0.14 per quarterly share, an increase of 27%. We ended the Q1 with $207,900,000 in cash. Please turn to Slide 12. As Don mentioned in his remarks, we have reaffirmed our previously issued guidance and earnings per share annual guidance.
Guidance is based on management's best estimates. External events and the related potential impact on our financial results remain an ongoing challenge. While we have reaffirmed our guidance for the full year, persistent headwinds could cause our performance to be below the midpoint of the ranges as the situation is fluid and will likely remain very challenging. The revenue range for the full fiscal year 2022 is between $1,175,000,000 to 1,235,000,000 Diluted earnings per share range is between $3.35 to $3.75 per share. The range is due to the uncertainty from the supply chain disruption for semiconductors and other materials on both Methode and its customers.
From a sales perspective, lower sales could result from display disruption to us and or our customers, which could result in lesser demand for our products or our ability to meet customer demand. Continued supply chain disruption would also negatively impact Gross margins due to additional costs incurred from premium freight, factory inefficiencies and to a lesser extent, Tariffs and other logistic factors including port congestion. Higher cost for materials, freight and labor are a constant and dynamic battle and we are uncertain as to when things will stabilize. Don, that concludes my comments.
Ron, thank you very much. Ken, I believe we're ready to take questions.
Certainly. Thank you. I'm sorry. Our first question comes from Matt Sheerin from Stifel. Go ahead, Matt.
Yes. Thank you. Good morning, everyone. Just a couple of questions for me. First regarding your guidance for the fiscal year, it sounds like you're reaffirming that, but A little bit more cautious due to some of the headwinds that you see on the supply side.
So are you seeing Less visibility into demand because of those issues. Are things getting worse than they were? Just want to Sort of understand why you've signed a little bit more cautious relative to last quarter.
I think What I can point to is GM's announcement this morning on additional plant shutdowns. We were anticipating some of that And that's really what causes us to say we're going to see enough fluctuation here and uncertainty that if that were to continue, we would be Off the midpoint of our guidance ranges. We still remain confident in the range. It's just as you mentioned, The uncertainty causes us to be perhaps more cautious than we were at the beginning of the fiscal year. I think that's fair to say.
Yes, understood. In terms of how you see sort of the fiscal year playing out, I think typically you're up a little bit in the October quarter sequentially, But would it be more flattish just because of those near term headwinds? Obviously, GM is not the only one we're hearing about shutdown. IHS It's been cutting its numbers every month it seems. So I mean, are you expecting things to sort of stall here before they pick up again?
I think the word is lumpy. I think we're going to see some good months As some of the supply chain issues abate, some of the Alternate materials that everyone is working on come into play, but I don't I think we can look at the business historically and say on October or February is going to be better based on history. If you look at the dealer lots, they're empty. So The moment they can build cars, we're going to get business. So that happened in December, which is usually a slower month.
Then we'll see an uptick in the end of the December timeframe. It's the unpredictability that is going to make The foreseeable future, the revenues, I hate to use the word, but lumpy.
Yes. Okay. And just lastly, regarding the gross margin Wins that you're not the only one seeing. Are you having any success talking to your customers about passing some of those costs along?
We're having some success, but I would say it's limited. Ultimately, We're pretty persistent. We'll have some success in that. But as In the past, it could take us 6 to 8 months to come to an agreement with the customer on that. It took that on tariffs.
Yes. I think the key thing is we incur them and there's going to be a degree of latency between any type of recovery. It will be a little bit mismatch. But As Don mentioned, we're persistent in working with our partners as best we can.
And it's a cycle. As we bid new business, we're taking all that into account as I'm sure as our competitors are too. So that will eventually get passed on, Just there's a lag.
Okay. All right. Thanks so much.
Thank you.
And our next question comes from Lou Cheung from Barrick. Go ahead.
Good morning, everyone. Thanks for taking the question. I'll start with the question probably for Ron. Recently, you've given us guidance for the next Quarter, I would appreciate why you didn't do that today. Obviously, the GM announcement went out this morning.
But I was hoping you could maybe walk through Any key factors sequentially that might help to bridge from the fiscal Q1 to what you're thinking might be likely internally for the Q2 just at a high level?
Yes, notwithstanding any
GM items that would result from today's announcement this morning. Yes, I think we've got a good strong backlog in terms of visibility to our commercial vehicle business, Vehicle electrification continues to go well. So we do have some other Areas that have firmed up relative to where we are in the Q1. So we clearly would expect the Q2 to have some momentum relative to the Q1.
Okay. And then We chose not to but generally, Methode doesn't give quarterly guidance. We felt that there was enough uncertainty going into a new fiscal year and the Q1 that we Wanted to level set things, which we did. And then of course on the call here, we gave comments to what pressures we're seeing In the Q2 and the balance of the year.
Okay. Appreciate that. Next question I had, You called out a 300 basis point headwind to gross margin around these various supply chain and This quarter that's up versus I think it's a 200 basis points last quarter. Just wanted to dig into that a little bit further in terms of where you saw changes in terms of increased pressure there and maybe if you could also expand on how that sets up going forward based on what you know right now?
Clearly, there's a logistics standpoint that really hurt. The port congestion, we manufacture A good amount of our Grakon products in China that have to be shipped in containers. And so our air freight continues to meet the customer demands, continues to escalate relative to where we were in the Q1. We're also seeing a lot of spot buy increases in terms of pricing, enable to Compure components and to secure them, I'm seeing some significant material cost inflation as well. So Those are the major things that are going and you can see, Luke, the other thing I'll add to that besides the 300 basis points, As you saw our inventory increase a lot during the 3 months as well.
So It really has got exacerbated in the Q1 and we hope to see some improvement in that. But port congestion is a real problem, getting our goods out of our facilities in China and getting them to the rest of the world.
And then what? We've increased our surveillance on counterfeit Components. We've had a we've always had a system in place for that, and we're more comfortable when the components Directly from the manufacturer, but as Ron was mentioning, spot buys, sometimes with your distribution and we've increased our surveillance because that Represents a heightened concern when you're not going directly to the factory all the time. And so there's a cost associated with that. Okay.
Thanks for taking that.
And then, yes, my last question, Bigger picture 1 and what I'm wondering if there's any updates in the last 3 to 6 months, let's say, on some of the emerging opportunities that you're pursuing, I'm thinking areas that you've mentioned in the past like charging ports, other areas around power in general, to load sensors, cameras, those sorts
I don't know if we have anything to update other than what we've mentioned in the awards. We continue to pursue the charge ports. That's a big focus for us. But As of today, we don't have any awards that I can announce, but that is an area that we Clearly focused on.
And Luke, we're still seeing very robust RFQ opportunities for Our, bus, power and power products regarding vehicle electrification. Those opportunities To quote and to win business are still very robust, so they might not show up as a booking for another 6, 9 or 12 months, but.
Yes. And I think we remain all cautious. We are excited about the newer OEMs We're on lighting on those and as that ramps up, we'll definitely benefit We were a little cautious in our forecasting, but that is an area that we do expect to see Upside from it at some point. I'm not going to predict exactly when, but it's certainly in our planning.
Okay. Well, yes, thanks for the color this morning. I'll go ahead and leave it there.
Thanks, Luke.
And it appears we have no further questions at this time. I would now like to turn it back over to management. I'll go ahead, Don Duda. The floor is back to you.
All right. Kath, thank you very much. And we thank everybody for listening today and wish everyone a very pleasant and safe Labor Day holiday. Good day.
Thank you. This does conclude today's conference. We thank you for your participation. You may disconnect your lines at this time and have a wonderful