LFUS - Earnings call transcript Q4 2018

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Operator

Good day, everyone. And welcome to the Littelfuse Fourth Quarter 2018 Earnings Conference Call. Today’s call is being recorded. At this time, I will turn the call over to Head of Investor Relations, Trisha Tuntland. Please go ahead, ma’am.

Trisha Tuntland

morning. Good the XXXX to conference fourth Littelfuse welcome earnings quarter call. And President today and and are me and CFO. Dave President With Vice Heinzmann, CEO; Executive Meenal Sethna, This website. release is quarter in the our and morning, section copy available results of Relations year our a earnings fiscal XXXX, fourth our of Investor we reported and for website. A webcast will call conference also be of today’s available on our

Form risks press forward-looking actual Our These from forward-looking reconciliation that our significant of will release non-GAAP no to involve assume forward-looking today’s review over include GAAP is risks our statements. most to expectations. to Dave. Investor measures and information. measure our turn more these and today comparable results for our will Please the of update section discussion call may this uncertainties. the in important materially website. available XX-Q refer detail in Also, I any release A now our XX-K and statements to obligation We Relations to about differ cause earnings provided today financial of measures. remarks non-GAAP financial the could

Dave Heinzmann

sales softening $XXX Trisha. in Fourth XX% thanks was growth organic Good growth revenue morning of despite us fourth compared joining EPS Littelfuse the an million up and of revenue XX% of to was XX%. quarter grew X% you, exceptional last for X%. with up the in year. Organic XXXX Full quarter XXXX, for revenue had year quarter. year Thank today. growth adjusted and demand

cash returned of generated the These and for a our XX% we results dividends execution reflect our million flow, free strategy. share record shareholders through the free company nearly in $XXX to repurchases. year, and cash strong of the For

and captured of customer global made significant talented for continued leading we expanded markets. largest integrating to in Across our content strategic remain seeing wins During associates our access portfolio benefits the acquisition, IXYS the close serve. grow our our confident company’s us We footprint, combined segments, and Corporation we many team. and that are global year, and relationships technologies, the we target end markets position the progress

into the on to growth years Day our progress made. we results, we At Before ago, we centered talk detail Analyst our updated have about the a and we on two drivers go growth want strategy devices strategy five-year to of long-term the introduced our opportunities fundamental continue electric more These full are trends and serve. electrification across driving greener content and safer, electronification appliances. global Internet-connected the end to connected more increase to the markets will trends automation, vehicles world. of everything These we increasing sophisticated factory further from

XXXX. in power in Continued control centered leverages are communicated areas These and key long-term enablers long-term portfolio growth goals guidance protection, our circuit we growth around secular product trends the sensing. and all for these

of to in Our cash X% topline coupled growth of profitability reinvestment allows balance income organic annual to free target growth net in with Expected and with X% includes X%, to average and metrics growth through strategy, growth business us XX% X% These from earnings annual growth average annual growth revenue earnings exceeded our the that growth. our an into Two of provide of shareholders. to acquisitions a along double-digit averaged capital use excess roadmap generation sustained organic measure our to annual X%, we XX%. years of return progress, clear with has metrics revenue adjusted driving today. we these have of strategic

and shareholders been through has cash of dividends flow and well flow share of to cash those net have free Our two years. income over repurchases XX% returned excess we free in

are We our underway well our five-year have metrics, demonstrated with execution target. achieving solid growth against of and these we each to performance,

trends an remain global Strategic has in part in given growth softer in focus decade. been auto trade global secular the will by growth. and beyond us slower tensions, market growth continued softer China M&A strong go last content slower market enable important driven growth and the expect our We on economic over of XXXX demand. to conditions content The growth

In have In further company the tremendous market. expanding with grew made XXXX, took business part progress in step our year, years, Over we U.S. power the platform strong XXXX, the power serving A into a In Sensor, a strategy. expanding customer our million semiconductor technology needs of company’s strategy focused control acquired acquisition as is IXYS, executing acquisition we annualized past in our and sensors. $XXX million major control. temperature electronics forward our power a that accelerating industrial on of across to history. $XXX our two our growth in we largest revenue, key platform we we acquisition first

innovation In in our addition, continue investment focus to silicon on we including carbide.

by strong we our through important complex which the long-term, remains carbide will believe solve for be customers. Growth acquisition in tool the Over flexibility and key our strength balance enabled us silicon an of problems part of strategy, helping is sheet. our a

opportunities of end or on active continue will be we examine strategic closely potential see building, look vast when playbook, portfolio, opportunities expansion our We geographic at our on M&A potential M&A front. the we with market majority the core across ensure acquisition existing and our of Currently, our consolidation, we to fit M&A aligning platform access. technology business. criteria to Based

our strategic of rate drive strategy, forward. growth will implement We and also segment pipeline actions. the have custom opportunity several portfolio non-strategic X% and with will about growth financial opportunities. we and portfolio. business a XXXX to IXYS for right improve alignment our efficiencies. will Industrial costs XXXX, and the long-term better active In fits exited our and evaluate exited the We we rationalization businesses reduce an few our continue by reduce profile, from within continue actions to These move When overall

lean deployment of overall built continuous system. made advancing foundation In our operational is and our a strategy manufacturer, of we a operating upon our excellence. journey strides XXXX, As strong on great improvement execution the

China. commitment In site years was and to Philippines excellent sustained a culture to to the our team facilities drive the turn We over financial our results. Meenal recognized the driving are element our enterprise. Association been recognition the With continue across has testament our additional follows to foundational over AME The provide be efforts by continuous This on and three of making I improvement will Manufacturing Operational color number Excellence. is operations. a the of will of of in Lean progress across a for ongoing XXXX, and introduction, excellence for our our Six our that success. Awards call Sigma to

Meenal Sethna

morning, good Thanks, Dave, and everyone.

across impact X% in year well up demand in Sales to global decline the China. a builds highlights Across as patterns This million, quarter an as on our automotive China, X% across market quarter. unfavorable both auto X% below market. sales weaker market into XX% fourth which our across Within fourth businesses, IXYS down in the Automotive, our with were forecast end saw electronics end due and auto in grew declines Electronics over segments. legacy sell guidance we in Automotive and automotive had some our finished we of saw for notably while on over $XXX of XX% year business quarter expected sales expected Electronics me and production, was start growth Let in down from We X% the had demand our estimated similar organically. reported up softer quarter. basis the XXXX. year products a demand We with our than last last

also euro exchange over to and last RMB. Chinese Foreign growth to the reduced sales weaker our X% year due

of billion operating our sales $X.XX of a growth finished at with organic margins. XX.X% XX%. the at GAAP sales The For to operating and business the adjusted target margins finished for year, were model quarter. sales Organic growth finishing of our margins our impacted X%, leverage X% while associated unfavorably ahead X% expense lower volume reported XX.X% growth. was

than higher we business. our the also related obsolescence charges to During IXYS quarter, expected inventory incurred some

due was EPS For on GAAP to GAAP year, million EPS sales losses. well IXYS foreign of operating below are testament EPS diluted and were $X.XX. after-tax to mainly the to was $XX due quarter charges were acquisition with non-operating the noted the obsolescence inventory XX% XX.X%, diluted for XX.X%. quarter and the volume largely focus exchange associated and within the and lower margin purchase $X.XX accounting guidance, of integration continued a to of Adjusted earlier. our GAAP operating our included targeted Fourth margins Adjusted growth. XX% profitable range charges our business in charges margins

foreign $X.XX mark-to-market charges to an pension guidance. plans that tax offset We adjusted non-operating also to This was costs in incurred to related related partially to our some was favorable equivalent investments unplanned equity unfavorable of rate by EPS. effective and

the GAAP effective rate XX.X% Our for quarter. tax was

holiday to retroactive full the late XXXX. was XX.X% which lower effective of adjusted Our quarter, rate a of tax than the for due receipt tax foreign fourth was expected year the of in

Adjusted the was EPS of increase within year GAAP XX% $X.XX diluted $X.XX, model EPS prior well year. growth. increased business of versus an our year, double and of the For diluted target EPS digits XX% the versus prior

For rate our adjusted effective tax and was tax GAAP XX.X% XX.X%. was the year, our effective rate

Margins also margins by charges performance XX.X% and finished was are periods our the unfavorable decline across Let quarter margin I the XX.X% X.X% by volume business, than business. we IXYS in our obsolescence the for trailed quarter were to full contributed margins year, operating at and me several quarter lower launching in higher highlights segment. and are in segment and and the XX.X% legacy for The IXYS year. provide previously, new also both as the impacted the last mentioned auto technologies the Auto as sensor some fourth we products and year. Margins mentioned respectively. earlier. fourth quarter for inventory for Electronics acquired additional operating the behind year business leverage Electronics unfavorably

dedicating higher profitability production resources short-term. cost are has from along launches, This additional We ensure with inefficiencies. in impacted successful the to

fourth expect reduction took within in the upcoming actions business this we improvements the cost quarters. profitability some During quarter, and

year, XX.X% XX.X% a respectively. quarter for full achieved segment Industrial operating the and margin and Our

incurred fourth the reflects line sales the in the the and basis the of actions improvement move business The the XXXX During from product custom implemented were XXXX in a due and year we improved profitability cost margins business. profitability. point XXX end manufacturing quarter, in to full exit markets impacting down

records. cash operating flow quarter and $XX million flow. percentage in million fund cash $XX enabling million generated and company to on for flow, free $XXX hand. in a the growth both flow with operating over well $XXX of in Free conversion year free million cash in at initiatives was the finished cash net with We flow income cash Looking us XXX%, as cash we cash flow,

leverage. remains to times X.X at million our on in X.X our achieve additional under strategy. cash structure need and Our XXXX on the debt-to-EBITDA during well-positioned gross to repatriated times take well on quarter limiting net ended debt. capital We the $XXX We basis

XXX,XXX approximately the an of $XXX those repurchased we the fourth shares we After quarter, quarter, share. shares at end fourth of purchases million across XX,XXX an totaling the $XX During average per repurchased periods. in additional

remains and when philosophy especially buyback buy believe back shares our we attractive. will opportunistically Our valuation unchanged is we

Our capital on philosophy return our shareholders. our of capital to focus allocation as balances well acquisitions, as

we free $XXX generated Over million years, the have past in flow. two cash

We on opportunities summary, across the have our through track and returned in goals. strategy, years generated pleased meet updated performance. XXXX to continuing dividends and very our beat while invest or we shareholders business. to of cash into financial are In of am XX% growth both repurchases, I our organic with nearly to our Two share all inorganic

driving grow We and cash generation. continue flow profitably to

return to-date shareholders. our ability to market back and deploying meet objectives our trends. remain And our are long-term business to Dave will upon with performance color in more on growth and value to turn our strategy. build We strategically growth that, capital achieve I performance additional it our for We to to confident our

Dave Heinzmann

Thanks, Meenal.

full-year up start softness growth. will billion, segment. organic IXYS. led growth $X.X Electronics by year. up versus the in fourth million sales quarter, sales was X% In $XXX Despite fourth last the quarter, the Organic of for year XX% were XX% XX% of addition We with were of some the

slowing of in the seeing order quarter. for As fourth we call on at we end passives started October, mentioned earlier rates the our

their rebalance demand. in Softness progressed response to to flattening inventories December as through distributors began

electronics X.X. below carefully was levels. inventory exited Our the distributor monitor quarter fourth and -- fourth book-to-bill the exiting quarter point-of-sales We data

which products ideal, weeks we fourth broad XX below X.X. distributor softening demand higher typically to the we weeks exited XX As line quarter, our to inventories about for just book-to-bill and see where than the channel is were running and continue is

of half Looking of expect softness continued ahead as the as first we for electronics, the some slowing well economic growth, because inventory year in levels. elevated Chinese

of cloud center, addition year customers Electronics automotive Control secured and to wins front, to from January as Turning design in medical appliances, one a new we the segment, provided to our we electronics will the presence to new product LED broad-based data the continue the our win to content transportation activity see industrial design of across and new business transportation. grow continue IXYS in our portfolio the We infrastructure, From anniversary Electronics year automation throughout building across Sense heavy IXYS The and their portfolio. design and to strong with lighting wide continue and opportunities range devices, growth of marks acquisition. wins leveraging future. the industrial secured we present for applications. great XXXX Protect,

the been company. team work talented that are together to one and as people together in seeing and teams of Cross excellent We Littelfuse progress we working efforts have welcomed processes to our the combine neutral across team. have dedicated systems integration

product non-core customer our underperforming we remain with long-term as took IXYS conducted and strategic synergy XXXX our sales and assets. made bullish the related certain We review opportunities. superior our and on We portfolio portfolio OEMs, have expanded to R&D strong and outstanding decisions of portfolio provide reputation teams With they to in the support. action exit industrial integrated several organization a

$XXX mentioned maximizing expectations of of on earlier, $XXX-million the to in a of potential, business we significant our million. well at business with I XXXX, grew the As $X.XX XXXX in ahead approximately successfully year. focus accretion We acquired start achieved we that

These manufacturing plan. target and yield targets our chain are XXXX. that $XX ahead Our serving supply maximize synergies. million in are multiyear first push that delayed we growth, complex, a synergy year focus some projects will to on customers synergy run additional activities cases, rate of With will some and into

us, business ahead value customers for While there real the is part creating is our IXYS more work of shareholders. the strategic and of

As for end electronification near-term despite segment, driver the I the a wrap -- electrification business. fundamental increasing growth headwind, in we up the serve remains the some long-term markets Electronics

solutions safer, to deliver the need to developing continue technologies more our products, connected customers As be successful. and and greener well-positioned are we customers

Next, of and Automotive as X% will on global were fourth sales down auto our cover decline of down I In production X%. segment. quarter, the million $XXX X% organically a reported

in North offset Asia and was softness Europe. growth than in by America Our more

as full sales reported X% year up decline $XXX year last saw segment global Automotive Our a X% and production. on organically of small million, up in versus auto

China, LCP content be safer, of excess the we in of production more macro ability previously trend global and market. driver our toward Throughout greener car passenger level the softness story. some across great more in progress. in discussed had Our content growth Despite supports significant auto a to connected that to year, design grow have Europe progress our reinforces vehicles that growth the and the headwinds we the and continue about win

circuit cars sensors comfort continued Our wide technologies range combined automotive advancements safety, protection of sophisticated efficiency, convenience. with innovative in today’s to enabled our deliver and

the hybrids systems, full are with future. opportunities As momentum into content well that continues vehicle meaningful for XX-volt well-positioned electrification and EVs

continues Material business traction heavy-duty remains success and a and wins of secured equipment handling we seeing wins construction, the manufacturers. as market. agriculture truck, during growth machinery to vehicle are across have market forklift design end we Our design year good commercial a with gaining new number

ahead to global production. Looking industry are segment, the for there varying forecasts Automotive XXXX predicting external auto

the of down is weakness Our particular expect production current in the low-single first in we year. global XXXX be to digits half with view auto

content As greener Automotive auto years, more vehicle to as we auto our have global production safer, to demonstrated produce industry business connected and for well-positioned in grow is recent vehicles. continues the beyond

XXXX. will our continue believe CVP grow end addition, in we to markets In

in Organic down fourth in complemented strong million Finally, America. quarter and Industrial of was of cover were the for exit North custom our organic to we XXXX. in the Asia X% due the revenue growth XX%, will up the business $XX sales In quarter, growth Europe, solid segment.

across Industrial million, solar we the product For channel. XXXX our with $XXX XX%. up wins versus in distribution for year, saw electronics year. portfolio our projects had storage design XXXX during made of energy data good progress We strong and of the expanding presence organic X% growth the We great center, sales in

activity new also our Industrial play products infrastructure. key as win in generated in within charging products segment, momentum in roles EV growth Electronics for our and segment, electric our design of Automotive has growth driven vehicles that Our has many

in and see to demand mining to and that, continue oil will With gas global I stable turn over the guidance. the We to Meenal industry about markets. call talk

Meenal Sethna

Dave. Thanks,

move on Let’s our to guidance.

Electronics, impacting the As Dave book-to-bill continuing XXXX, and of trade economy. we mainly Across environment the Automotive X.X our beginning environment with segments. impacts see mentioned, in the and muted to demand continues run global slower below into China our Electronics

rebalancing the by and expect largely the channel North We across continuation inventory America our Asia. also of partners,

production we of into demand lower global while to continue the the Given the point this we growth end assumption products sources greater to external a to Automotive sell global slowed auto a year. auto year. with has the of market half a is car in growth half indications, decline expect for all first through first the X% current market, slight year decline for production the across The our XXXX, X%

for and factors, year. we reflects to $XXX X% decline first of reported X% of midpoint sales in these the the a Given the organic $XXX quarter XXXX million. the versus anticipate prior decline sales of The sales million guidance

to have benefit first quarter due share several year, basis, last items versus rate higher EPS tax tax below rate mark-to-market per be We a XX% the $X.XX to XX% quarter the to a a and dilution of share of from adjusted operating range last year-over-year on quarter in in income we the drag of year. this a EPS diluted the an first adjusted $X. for guidance earnings in On assumes $X.XX expect to quarter. The range effective

we over which to-date. forecast diluted A first during first are currently chain on comments the we manufacturing for are We years. XXXX activities our bought that have in few quarters. mentioned primarily had that the the and infrastructure beyond, coming in detail and quarter, activities shares started past supply to this various several acquisitions shares will back in additional We and incorporates undertaking few we $XX estimating million on we quarter more IXYS area related the work

We started in the With our related purchased gross product it portfolio some footprint of we optimizing ON long products. transfer, term, efficiency automotive pressures, to We in transfer near in product manufacturing the XXXX. midst for leading to just profit sizable are the gross but in manufacturing the margins any manufacturing transition late that suboptimizes term. also the

we of planned majority we XXXX, in While have businesses. containment across the Recognizing cost infrastructure measures near-term activities initiatives the multiple be Electronics for our cost implemented have activities these will market challenging typical end beyond our segments. short-term our reduction dynamics,

stabilizing the performance. back lead financial dynamics the to will improved expect year end in We market of half

We needed. eye a our keep will will to spending on the as continue other and and dynamics close adjust activities market we

For both additional years, year, update. few for full a a tailwind past favorable model the have revenue few the profit. financial and providing Currencies been to

of With a for are expecting XXXX. an revenue impact currencies, bottomline neutral and unfavorable impact now the basket in we shifts to our

the We the in the approximately interest for expense of $XX of million expense year amortization are are range estimating year. and for projecting to we $XX million $XX million

within vary is to the to discrete of XXXX be Our rate due XX%, to may tax full certain rate tax year XX% timing projected range the individual items. quarters but

organic we flow million well growth the the capital as repatriation continue for strong our see free XXXX track IXYS we During opportunities, and expect of in cash further cash months. across as record activity to additional system. will $XX to million in investment to in continue will the coming level details spend integration With $XX activities This we provide XXXX, expenditure. of support our generation, we both expect to

of for And for well-positioned initiatives final ongoing growth turn capital are over shareholders. comments. return as some our to Dave as that, We with capital well will it back I to deploy to

Dave Heinzmann

Thanks, we business summary, year across Meenal. In our and XXXX progress a was segments. significant great made

our to continue We execute strategy.

volatile we continued today’s softness expect environment, of in the macro see Looking to XXXX. ahead first with half

across our connected remain of safer, increased greener I just business that thank However, and portfolio. XXXX confident our the On the Littelfuse call that, provide in momentum more as world associates will note, a our we in their growth XXXX will to we I and continued additional and shareholders. around We that sound. wanted in our create towards commitment for the fundamentals forward beyond, to opportunities content open for their With the value globe for customers questions. contributions and look remain

Operator

first you. question [Operator from Oppenheimer. Thank And our Christopher from comes Instructions] Glynn

Your line now is open.

Christopher Glynn

Thanks.

Meenal Sethna

morning, Good Chris.

Christopher Glynn

Hi. Good morning.

IXYS Just if expand specific a the to talking a synergies, make integration, about as or Electronics little like do full not expect some small would deferral for the the Electronics progress, the bit sounds but answer? in complexion you margins a you with profitability, year XXXX otherwise it

Meenal Sethna

less the coming XXXX to we through down, be a past synergies, are mentioning little past with where in think much say, I around seen that for have I time, market overall to general the comparison price had say tailwinds yes, say, as depends Electronics been have at. how I currencies secondly, I we One our I improvement we on settles been it margins being would and looking will IXYS Electronics the So we we’d think transitory. date think margins, today, couple the in just currencies but continue than more due few same erosion of years think have you and we see will that mentioned typically some have neutral if sit more I’d positive that years. would in seen I the we about at

when I’d year-over-year expect in in ‘XX. in, significant where So margins say, I net-net, see versus all have any we those to factor you wouldn’t increase been

Christopher Glynn

in auto, talked you the to a have target. switching about operating mid-teens past And margin Okay.

need to years. what’s extent of in target qualify next what at it to gear to those maybe Just of terms plausible in get or in and the wondering least takes that what couple

Meenal Sethna

Yeah.

definitely is hampered across I’d about, and initiatives the near-term about that is range businesses, higher Automotive business. talking one. we than think the margins we in say -- that some have do started I the mentioned in back we see to talk margins Having the volume that’s have that, I equipment, the more we et we pickup say would the of target been have the cost taken comments that that as cetera, our unchanged, business. we my fixed of platforms some have of our footprint our at some have about of reduction which mid-teens. in because still different So, business. the include of looking lower Automotive different for I in other customized and for -- But our business, cost volume see we some our the in need in will actions said sensor mentioned we we are some activities seeing, secondly, Automotive manufacturing some also levels

the those term. that and at the we are in both pieces looking short So are some longer

Christopher Glynn

Okay. And of allocation, capital can share is we little just burst that of looking the back, purchase kind this significant most track. then, lastly,

biases Just actionable the forward, wondering there the the today? and what how going authorization looks think what’s funnel do you deal

Meenal Sethna

Sure.

a and buyback a about let share Dave pipeline talk me talk comment now. will on more I bit Let little maybe little right -- the

the our April under that just share stage we this XXX,XXX is X XXth maybe repurchased year little To-date, shares. through effective million So authorization, a authorization for setting shares. here, of over which is

we well. in could we theory about buy got that shares So as XXX,XXX have

few past at been. are with place fluctuations of it’s that but talked the put quarter, about that in lot our always program back pieces us not in a every opportunistically. the more opportunistic quarters things a been buying set company say that we amount A, has I have have we We looking a where we regular would market the the for the are that philosophy

was bit we additional generation for have that then, we balance price the the take we feel as we shares looked the one the go also we at shares So share they a We we balancing on thought back would our all value been a cash our seen were we things funnel, we that have back that XXXs that buyback pretty opportunity the XXXs issued we was say we I price about felt to low really to we our have acquisitions quite of when shares the buybacks. dipped ago, with the deal And and IXYS that it as looking sheet, also could the Sundays based have debt to on didn’t had a undervalued. share year average cash on buy low it about that great taken so that mentioned I shares. on in strong of was secondly, at point where bought even with the had and that

Dave Heinzmann

acquisition the is what as would can be On I Chris, I front, -- say always lumpy. acquisitions

we that. to we technologies and continues across looking to that the quite so really great strategic make and on deal return markets businesses of sure funnel and Our meet and optionality by healthy our a Certainly, continue lot are that there. be at, we looking threshold activity they are a for first of followed the financial

coming years. be months we certainly, will doing more the So, in and acquisitions expect that

pretty continue full we a to be call. So

Christopher Glynn

you. Thank

Meenal Sethna

Thank you, Chris.

next We our will please. take question,

Operator

our And Stifel. Matt from comes Sheerin next you. Thank from question

Your is line now open.

Matt Sheerin

Yes. Thanks.

Meenal Sethna

morning, Good Matt.

Matt Sheerin

everyone. morning, Good Hi.

overall Just like -- at, year about in to earlier and go Dave your I if here, think the obviously, looking least your Electronics regarding just at year, outlook sounds lower business the look it some you this for a forward to starting two-quarter a talked is growth correction. question in for going you to comments through base at

this margins, you some guess confident talked of that about more both the and that And headwinds I year, then and -- so same back be EPS, in loaded? will are you thing because businesses? grow we the for I is, then end of And mean, both businesses can question you still obviously

Dave Heinzmann

for flattening, the world. their -- of our see kind and channel clearly partners are over end kind we their there last in spectacular is Typical of bumpy year we of little part that’s to markets the Sure. inventory first certainly the years. really Great seen take going work And little Matt. electronics inventory Yeah. the in have with kind No. the us, That’s And like the of that the at to way be kind half to a a bottom markets range and seeing declining of the really of end quarters question, of would early of them our year a the growth not driving our is expectation of channel bit instead through. are is to couple demand but couple they flattening correct position. in their to going of

do in drag on there’s -- car electronics. will lot on and we that build, view So a it views growth our expect this. of Global

If customers. you our market we We to this. than peers. to at more data, look favorable our it’s talked the talked But

decline of place think probably outlook better X% half for worse and the work X% that around year. build planning a I the is of our us that’s actually to a in first car certainly to of than global in

we both first does half the certainly in of side we see the improving business to and not half end market back feel and translate the back the expect demands in growth what little some market. profitability improvement from year there’s as of to we the But margins bad of in in as the half do confident be today, of So, EPS year the additional some the certainly of seeing business, we EPS long but end in growth expect are the to degrade well news performance. as on our that the that a year bumpy unless and the

Matt Sheerin

the On -- expect IXYS? are the you this sounds business some still and incremental capacity Do to accretion in like from you of the pushing see have out IXYS, year it activities restructuring plans. though

Dave Heinzmann

end we of synergies. out laid XXXX said are synergy of from out of million the In be -- at laid run plans IXYS we rate actually at we end Yeah. synergies, of at $XX And actions, we’d XXXX. kind we a the on the

plan. timing our of ahead are We

better the to us XXXX, and to those through opportunity and was accretion when that, it’s us out, XXXX. dramatically. that However, return not quarters. will for in we And It’s had the for than really take in a out That shareholders strategic of course we in optimize made demand it decisions advantage XXXX. couple strong through the pushing out say which I really on long-term certainly decisions of the to better fell push our we to and flow pushing planned made of

the of improve plus $XX the business, confident XXXX. expect and course certainly, in million highly We will IXYS out are through that synergies still accretion getting continue in in of and

Matt Sheerin

commentary just And was X. regarding below your said it Great. last Okay. book-to-bill quick, you

the last I think you was? Electronics. what number Could was in tell X.XX quarter us it

Dave Heinzmann

Yeah.

If somewhere as that order little They distribution. book-to-bill is us XX% really particularly to booked last scheduling the is also you many do crisp to as in business. versus the IXYS standard opposed which with become such, that’s getting shifted by They has higher range driven quarter, orders our a scheduling a less I fact that do Electronics little a One for of remember times direct of base customer agreements. ways has a also electronics, mix about and customers automotive data They now in our agreements orders, things. bit booking. talked don’t few different

they way, and the of then add things through had distribution those our who we it. during the the complexity our kind has placing they strategies larger by and So And of one to quarter ordering partners three were of a couple changed how -- orders. changed have fourth course also particularly times their

week the bill day, So our within over all to quarter was book week the map. fourth day from to to

So what is our I view between best we’d it’s X. think say X.X and is that of

below. But it’s certainly it’s terrible. So not

will We number why the a very really volatility. into not kind of quarter helpful because going didn’t see number quote first was and normally that’s the we because a of mathematical

Matt Sheerin

Fair enough.

a Okay. Well, thanks lot.

Dave Heinzmann

Sure.

Meenal Sethna

your questions, Matt. Thanks for

We will next please. take our caller,

Operator

Cross question you. Thank next our from And Steven Research. comes from Fox

Your now open. line is

Steven Fox

Hi.

Meenal Sethna

Good morning, Steven,

Steven Fox

off. few A morning. start questions inventory Good

it much charge, inventory how First in of the obsolescence margins all, did you disclose gross quarter? the would

Meenal Sethna

impact but electronics I overall margins, for it a didn’t point quarter. specifically the XX-basis about for was

Steven Fox

going obsolescence charges, the it that And be or others? balance IXYS sheet think does up have cleaned you about you forward other could do possible what say

Meenal Sethna

were would some did quarter, some say there so around some in I some inventory transitions. things were there few that a on. related fourth the some you and heard going of exits, we that to Dave’s exits business earlier obsolescence of comments So charges were One in work these

of little see you we we we but that various that had. do, a talk it end to an in a every and And obsolescence demand third, any specifically, IXYS -- higher line especially but of with did we don’t we we expecting of some product in actually there some so inventory it. Secondly, product do line was XXXX, transfer and certain transfers about part single the that that, started we time seeing few were demand sold on took -- by charge. XXXX, sell bit were that, as of worked slowdown to we We that the the obsolescence inventory and XXXX, we

it the as say patterns infrastructure that manufacturing continue to happened issues of again of There some with demand go have done. There to be us. these to but a and/or set most are and more in may changes. bit little related might quarter we supply I’d chain some think that the I be is fourth of behind

Steven Fox

sorry, helpful. I just question. That’s more am inventory And one, one then

gross channel, what’s your inventories Dave, with about were this versus quarters also the high have you impact your had in gone half some that just do which sales What big and, do are manage on in what of up with the point. to being row margins, you would going what look one you down. If your for natural on But now first I do two and that think your about be total favor distributors while or have like inventories in like distributor a think how inventories forward of picture inventories more I talking at in terms your you gone and a going not could. if you to have we

Meenal Sethna

Yeah.

comments general. some So in maybe just on inventory

quarter really back quarter, I the opportunities about to up changes that’s inventory have infrastructure pattern need our And and happens were expect absolutely you after a As slowdown, left fourth talked within thought, plans you the we start and say some changes. our extra definitely in which What would the said happened and with the said of is we magnitude some that we come we slowdown that are that. fourth demand the this where that, really the a Having we IXYS to meet slowed will also undertake see to see by some for space us we ordering and to really when of have supply around end look the at a some take these little a that’s locations split of to that in. the level. even lot really, sites, we than some that more chain number of go what inventory we’d set say, with were externally the of if really internally because order of scheduling higher manufacturing, unfortunately we are what in sales drives manufacturing of the inventory surprised we down, there

of say I profit that to take we will business. on say that synergies, list to the the So, in drive of sales, million cost the but are outside would will time it to synergies go other absolutely similar $XX our that, what I’d on through some cash it’s expecting

Steven Fox

I on lastly great been a content I That’s Great. from Street. by obviously, detail. standpoint And production lot appreciate that. the slowdown the a mean, auto has Wall discussed just then side,

or you and us about qualified If the above biggest can that? you give plus you are quantified how auto think at the what stuff, be for segment, the look like of if content production how outperforming either your electronics going, would average is drivers you auto sort much number

Dave Heinzmann

of in long I business, term X% for range What would in growth and quarters applications. chain, in supply Tier of is western believe Tier can so a increase we X. to I is way, the and be directly the to within growth sell organic Automotive But right the X% the because That’s the In obviously in of car not in at increase today X% standpoint. What plus little in laid on organic environment that expect is it’s and of car is not we assuming that, the a expect in often that our there’s China more Asia, range in or through content so mix perfect America we overall out so sort we of what instance, an there and Europe, those a X%, like build about X inventory from actually build of a sell a we structure channel that this time. say that kind across in things point happen Yeah. based to distributor world. content a the than in North

things maybe channel and when carry drop that a heavier that is so inventories off, And way. work they little inventory there through

and but see So see, still not pretty it’s quarter-to-quarter, that the content we that’s good feel still story. that we range perfect about

Steven Fox

Thank helpful. so very That’s you much. Great.

Meenal Sethna

Thank you for Steven. questions, your

caller, will We take next our please.

Operator

Shawn Harrison Research. Thank you. Longbow And our from from next question comes

now is line Your open.

Meenal Sethna

Shawn. morning, Good

Shawn Harrison

good everybody. chilly A to morning

Dave Heinzmann

Yes.

Meenal Sethna

the five of in They the are like the five office three today. people --

Shawn Harrison

CVP you Just in What just business rough the clarification versus of the circuit of is percentages guess exited I on sensing auto the right a is now traditional mix right now? business XXXX. versus your auto protection kind

Dave Heinzmann

car XX% the shared Yeah. don’t sensor the it’s Kind we of each CVP, split segment, report we to rough on the Automotive those circuit business, on in past kind as as kind that protection percentages, of XX% well between our independently piece have between then of but to that, two. closer revenues half and passenger of XX% in the about those

Shawn Harrison

on the good you of then buying. But Okay. just and trend be seeing the Electronics are pure activity in New that system and a Year business given the some is January accelerated you here base has seeing a to a in trends is pulled the side, in New I month demand Perfect. make kind or inventory are the never holidays I know am Chinese out guessing still continued being Year? stabilization to the of on

Dave Heinzmann

south electronics slowness say the Yeah. Chinese I things there’s What the that. like say and What of New early Chinese in because and Year of would I the electronics around in little course, year space, would looking a always of is pull-in kind fundamental would that into normally noise there Chinese we are market, Year. into for Year. a some would that the periods for typically of have shutdown Chinese see New be smaller we in heading New Certainly, they certainly of than didn’t lot factories the longer

coming are Chinese demand. side, Europe the demand huge we certainly there. but particularly North maybe stabilized, see rest flattened, market order this of of in don’t the kind impacting rebalancing has there in the America and We negative in-market with rates point that our and distribution see It Overall, drag world, in time. I of say, growth inventory. kind don’t that is into some at Clearly, news being partners negative of is hanging the so us. from would in-market So

Shawn Harrison

of then the is business additional And CapEx or growth in-house into bringing Meenal maybe on and XXXX, Great. the [inaudible] where the some associated IXYS in XXXX? Okay. migration is that the going of with most CapEx

Meenal Sethna

I’d of Yeah. things. a say couple

of about these the ready I’d manufacturing it we infrastructure relates the XXXX chain we did relates specifically spending supply get XXXX lot related. starting activities of then IXYS, had it say in. to for to everything actually as to So [inaudible] everything start as would I in IXYS business, pieces, say, XXXX, the of bulk the and talked some to we definitely, as a moving

though have are were some more maybe little We a just two years got still we even are seeing than slowed even activities bit, And general, there. growth has we flattened we at down, elevated in then, ago. levels

that in we adding to at. volume relating So in the cases, some capacity still levels are we new are

in as less that in Automotive We for but have as well seen both Electronics, general in those. across

Shawn Harrison

past going the months months, XX months I EV helping. the may, to been Industrial what’s growth charging in has XX continue months. we to look Okay. highlighted you to Then is if business. for But business, next which ahead know fantastic that rate the growth I that infrastructure for over if XX the the me last XX

the the applications right specific are that can consider forecasting are business. when of the we there now growth that majority So, driving

Dave Heinzmann

Yeah.

non-traditional are through more a some kind we Industrial drive see creates beyond return they side stuff little in growth driving been think maybe stable. the to -- as continue a Industrial through the focus distribution reasonable our is partners the oil that a heavier mining have to electronics on has so partners the driver. that report there. growth It’s I and drivers and industry, our growth a and have as broadening ways and That that. distribution electronics that opportunity our levels relatively What’s we actually that and stable. begun become of good gas, the We like growth to really fundamental segment to of

still been historically, business, we that see some to driver. seen this small of Asia. Europe centric by growth continue and numbers, drivers being Also expanding We big and good have strongest of very into has growth products these our a a the North America

good growth continues Industrial I will in to in growth driver be segment. pretty and to a those continue So be areas think good

Shawn Harrison

Thanks so much.

Meenal Sethna

you, Shawn. Thank

We will next take question, please. our

Operator

Thank you. comes Sidoti from And Company. Franzreb John from our next question &

Your now open. line is

John Franzreb

Good morning.

Meenal Sethna

Hi, John.

John Franzreb

seems one Are or the It side you remarks said of ability emerge your that step past years, besides like in has to of pressures. maybe the to pressures the any you that been lines benefits pricing in product in markets? your some in see prepared currency also pricing starting

Dave Heinzmann

their their in strong product to running that out space. needs. but Yeah. other rate into Purchasing keep and for their the not and What -- and I would very challenges people components supply to with things say maybe the is, XXXX particular price getting growth were leading in fill mainly door getting getting yeah, into our on products XXXX, focused like operations and

not on pricing. So as were focused they

yeah, probably lessen that the saw pressure so, in pricing we that XXXX. And

lower not not pressure seen comments pricing a yet our is that particularly increase pressure can we saying really pricing expect I maintained. have long time We period of in net over But here XXXX. sure think

have expectation seen yet, changing we So but our haven’t had in a will in headwind the more we it really being than is a little of faster, a year. be last

John Franzreb

current how us what expectations give given In some can to of are business? Great. during semi perform Got the IXYS, business downturns for regards kind that environment and that on it. you other your content

Dave Heinzmann

Yeah.

fundamentally XX% being the the I of new maybe industrial our of are Because players business more in of from electronics, that power base the base, side. that industrial like part a semiconductor as that right little of per that bit customer direct, and different our we it’s larger the -- more business first than range traditional think, more customer and of electronics all, market, there learning distribution. things are XX%

impact less as but I has will a volatile think, our electronics been, well. traditional business little are cycles they certainly, maybe than

Meenal Sethna

Thank John. you,

question take will We next our please.

Operator

CL next George you King. question from from our Godfrey Thank comes and

now is line Your open.

Meenal Sethna

Good morning, George.

George Godfrey

morning, Good morning, Dave. Good morning, Meenal. Dave. Good

doing some coming to time or deal From well as for more integration quarters. Meenal, I and organizational IXYS and this you does months doing about couple mentioned along? point Just comfortable at in feel that the standpoint, a -- an wanted could as sized get acquisitions. need you you to questions. further the ask Dave, the infrastructure, of a deals you would

Dave Heinzmann

Yeah. strategic are What similar another to have say the on we opportunity right would is size at I take absolutely We prepared IXYS. financial right and found to return. the acquisition

with those had Board and have We our internally. discussions

work the a There’s right to willing activity that. be there still amount But, done. We do would IXYS. the be is of significant have to we certainly, if opportunity digested in

Meenal Sethna

or we that. in we where can these when we I it’s as business of we of George, the -- the add we And we have bulk see acquisitions, will where to would successful functions be or think some work of look the different and the and integration those additional a add resources to we sure done parts parts flex what make organization have

George Godfrey

increase million, business And running pushed but understand I to the synergies Got of come some now $XXX quantified it. on synergies, reflective $XX out mention that have that you ever is $XX the still versus that I synergy or revenue you target, as million million. synergies going are are gets think the they of to annualized $XXX XXXX. those of those revenue don’t some Is well? that did million

Dave Heinzmann

right, we synergies some come opportunities. around, return did taken that those customers on in our I a still is But revenue to as some synergies. have amount? long-term play that that there’s revenue the build certainly and our IXYS some been certainly say Were financial us. would core are We us. Yeah. not really Sure, model and there’s from other way into for of

to there. revenue space. I bulk a will coming quarters to automotive particularly years. come Those are two-year process those longer to come three-year taking of get think in That’s term the their and synergies products into clearly and the

George Godfrey

Got my last then it. And question…

Meenal Sethna

for question… George you, your Thank

George Godfrey

Okay.

Meenal Sethna

ahead. Go

Okay. Thank you.

Operator

And question Vruwink from from Baird. Joe last comes our Thank you.

Your line is now open.

Meenal Sethna

Good morning, Joe.

Joe Vruwink

of reflected market which means a your you growth squeezing It in and organic thanks channels. are weigh there’s pretty the end me not of distributors geographies If like is and seems that production compare by tried two selling mentioned lot in growth through Automotive morning organic the what last doing, and growth. look to has just in. markets some quarters for Good Thanks. Hi. your region various last I you I are the what two end above-market quarters. well growth Dave, at that

just am in little math be inventories some are QX or in destocking bit A, So if maybe restocking snapback wondering, really from you are there do better were this do is would seeing the B, various maybe model to China, back QX. inventories is then, auto what markets, reflecting your we go a and my and growth and content we I on? instance, that Automotive above predicated and get market think pursuing think is correct, high shape stimulus, your business for is you will do

Dave Heinzmann

Yeah.

I little view our than think of is different maybe math a the yours.

car about segment. build was and that so had X% So X% that down organically of quarter, you if revenues you expansion, in a the at fourth a about look about will, our if like the decline X%, in would in Automotive we show

So a China And muted there. inventory it the expansion shows was because of probably some that position. bit little

automotive it kind The difficult electronics. of other shows it’s as to is elsewhere peel aspect up out, that because

ends vehicle vehicles. in-market as up Electronics that’s in stuff, So safety rolling autonomous as even driving the electronics the driver It there segment. through course content of electrification investments, of our increase the driven well by

it a growth doesn’t driver. get out so And as called

I last quarters. in of couple So do seen we think the have

content and money quite growth be story. things Probably for some yesterday think restocking? our inventory inventory that’s in and will growth snap stimulus a in have been. But made the in they that not, increase to place the cargo automotive of kind know support seen little at back, think level put they they would the do eager more have do what reflect we things automotive show government it We just see comments to to big booming If above an I probably that. so has regional if I I will have the and comment. been because were central back long because If cautious, snap local of kind the Chinese around

Joe Vruwink

Okay. Thank Got you. it. Great.

Meenal Sethna

soon. you us today’s your on Appreciate and Joe. We joining forward interest a in great look talking Thank to again Have call for with you your questions, Littlefuse. day.

Littelfuse (LFUS) 30 Jan 192018 Q4 Earnings call transcript