Earnings call transcript Q2 2023

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Operator

Good day, everyone, and welcome to the Littelfuse Second Quarter 2023 Earnings Conference Call. Today's call is being recorded.

At this time, I'd like to turn the call over to Head of Investor Relations, Trisha Tuntland. Please proceed.

Trisha Tuntland

Good morning and welcome to the Littelfuse second quarter 2023 earnings conference call. Dave President and and are Sethna, and today Vice Executive CFO. me Heinzmann, CEO; President Meenal With Yesterday, we presentation reported website. a the copy results Relations for our our Investor release second earnings and of slide section is in of available our quarter and

webcast will be our conference available two for call to Please advance slide today's our of on A also website. disclaimers.

and forward-looking Please XX-Q may involve our and uncertainties. review Our important press could statements Forms more risks discussions from significant cause to for forward-looking expectations. XX-K today detail about actual statements. These will differ and yesterday's include our release that risks materially results

measures We assume GAAP measure the provided Also, non-GAAP information. refer section most in no forward-looking is to available website. release our our Relations to financial obligation financial Investor measures. of of in to this remarks of reconciliation the today any comparable our A earnings update non-GAAP these

call Dave. now to turn will the I over

David Heinzmann

thanks you, and Thank us Good today. Trisha. morning for joining

with four. start on slide highlights Let's

results ongoing While an teams our within our fundamentals second quarter strong operating driven were below solid results, delivered expectations, environment. by global dynamic our our financial

in Design to connectivity in our end and and applications we remain continue robust, high-growth investments significant sustainability, new safety strategic markets. quite in secured activities business advance and

deliver strength to the strong our of am our long-term business our confident reflects continue Our model. on performance date and the execution overall position I and growth technologies with XXXX in resiliency to us capabilities of strategy. our to diverse

additional financial outlook. remarkable contributions. extend Together, unwavering and for gratitude will associates our strategy provide to their within our and I global have my color want performance to performance teams achieved our significant dedication and on Meenal our

wafer in acquire in into agreement long-term to fab Germany element growth Elmos important for acquisition is June, a we from our entered semiconductors. a As This announced Semiconductor. located strategy power in an Dortmund, purchase XXX-millimeter

customers in meet portfolio and and increasing demands expanding our of us our to growing of Key conversion applications. the to capabilities our enable success technologies high-growth to power sustained internal

This storage, industrial business our will infrastructure. and opportunities renewables, like energy motor strategic automation, power charging expand supplies, in investment off-board long-term drives, end markets e-mobility

The skilled technology manufacturing extensive wafer and Dortmund a experience an and fab footprint, operation. adding processing XXX-millimeter high-quality efficient complement current will highly our team, development

We the teams combined on shown will am and with to are which strategy five. for growth, future our prospects position excited about our consistent confident capabilities, us long-term profitable continue with slide I

our and sustainability. highlights. our six our report, Slide of and to on the which available a overview we provides way. We conduct Moving is We where recently XXXX published on we to sustainable communities investors thoughtful our customers, an employees, business responsibility to live believe XXXX have in website. our work

ongoing to of make efforts an success instrumental teams role and diversity as am in who a the we the our culture will day, to continuous improvement embraces every on create and I journey, which the our company. everywhere, sustained advancement proud of global of solutions help continue that progress growth play

a achievements We and ESG committed of the robust of our long-term value are proud strategy. to remain

we dynamics wins, business the customer into I design start would to market seeing. are get with we like and Before

across diversified, broad. vehicle passenger Taking growth company's We a markets, are and remains double-digit Where markets. our exposure step achieved back, strong across are we highly market content end seeing we product into industrial selling outgrowth portfolio. balanced our

safety. on with connectivity, enabling and differentiated applications robust our Design around are sustainability, capabilities intensifying new and activity and business remains capturing we focus

wins for with rate the is business execution accelerating positions future. content which new the Our and us of product customers, the leading expanding well

of markets. many our across healthy end remains demand market End

intelligence computing power infrastructure. their electrification support charging demand creation medical, to We are and seeing and value artificial applications safety, by strategic high-end supplies, automation positioning our driven within industrial of and strong and renewables, cloud vehicles specialty

and down levels, more commercial stable vehicle inventory continue a their continue see we electronics, to this destocking through levels the demand. parts expect across as adjust We lead-times of inventory year coming With customers POS our current to our to businesses.

markets Given transitory that taking end many that our will place. continue a help destocking to are of is in growth this moderate the trajectory,

our leverage to our to management year-to-date businesses. I'm trends of business performance the as inventory particularly navigate end we strong successfully across and proud continue fundamentals markets our varying sound

Our remain global generation. growth, focused teams long-term cash driving on profitability, and

business to cost electronics to actively and We continue advancing end manage long-term optimization demonstrating transportation strategic and the markets to ability strategic our also we costs industrial, balance to align short-term conditions across initiatives serve, investments. while our

am our our growth execution global deliver with financial consistent I that ahead, confident Looking results strategy. will long-term best-in-class

design business on quarter. to second Now, let's wins during the move

the for end leading seven, renewables industrial safety. sustainability expanding products. reliable on and is slide ongoing requirement markets empowering our for For critical on technologies The our greater focus are

quarter, leveraged and our technical the deep During in customer expertise storage solar to and significant business for systems. combiner secure we relationships battery boxes

our support electrification. portfolio, breadth and to of we also business investments infrastructure that product Given new the government-funded initiatives opportunities see substantial related

construction with solutions for a major a automotive We our the project, of plant, won several for manufacturer. business battery

high-power with retailers. won and energy kitchens knowledge product us with capture their customers Our in application systems. our business industrial additional Within solutions leading performance major safety, business commercial management for

our relationships and also our grew in on business industrial HVAC motor customer and expansive We offerings. based drives

our than safety, with meet Our customers well to position which long-term differentiated of and will themes sustainability growth. capabilities drive global continue structural their requirements us the to partner to increasing

Turning eight. markets to end slide on transportation our

We the safety. see product to and sustainability, continue ongoing greater opportunities connectivity, content push meaningful by towards driven

vehicles, robust, business given the opportunity the pipeline In to is of platforms. complexity increasing electrification new related passenger our

high-voltage our the features chargers distribution. wins high-voltage delivered During support differentiated quarter, and product and technical onboard for power

systems seeing applications. management products, intensifying battery sensor electrical our we drive and design are activity for For

captured in significant multinational designs leveraging unmatched with capabilities business by technologies innovative proprietary presence applications. business and a won our automotive solutions grow technical low-voltage manufacturer. to our Our and We conventional

design for within as business and detection and electronification, cameras safety, relates Within expertise applications. portfolio broad it our in-cabin to hands-on won

in three-wheelers. distribution equipment battery vehicle commercial in and power innovative capabilities and management electrification, within and for modules Across construction applications business significant systems secured high-voltage design our solutions two

electrification we our markets content vehicle product solutions, applications. components support, power with with to of transportation semiconductors, with range charging engineering we continue of fuses. In our broad infrastructure local global continue and our electronic increase efforts agricultural to significant business With broader the expansion in secured applications. EV equipment accelerate our commercial

from Solutions business opportunity Automation pipeline. new portfolio our expand our further Western

to Given more charging make global stations widespread in our the accessible comprehensive participate the to and well intention with infrastructure extremely worldwide. positioned on we're proliferation of a technologies scale,

robust end structural customers and In to on across markets, activities, sustainability. growth to in safety, design electronics on Moving engage meeting connectivity focus very future nine. the needs continue of we themes slide

We are applications, an for life-saving won including superior some devices business multiple and reach demand support global accelerating wearable across defibrillator device. implantable global for and Our design a medical a reliable our products. in

portfolio are driving for including infrastructure. requirements for C&K communications our centers, data Connectivity Switch wins across

We become prevalent high-performance expect platforms. more machine opportunities these to for and learning as next-generation for computing AI requirements like expands

good cross-selling Littelfuse to success with seeing products customers. C&K are We

power drive to for and continues LED lighting. in wins Sustainability supplies tools power

Our to remain and on to our pipeline strong, positioned will across expand electronics support applications teams which of diverse with content business new opportunities connectivity sustainability, continue global focus customers, safety. and our are a

geographies, design have business spectrum continue end array win applications wide capabilities highlighting and and our spans we secured generate the momentum footprint. We of global and a of wins markets, new to robust

with collaborations teams, closely product been next-generation customers' in our instrumental design-in our have development expediting engineering Through activities. engaging and

will we new activities, confident are and sustained. further trajectory these from complemented stemming acquisitions, growth our long-term strategic organic business by growth that our fortified be the With

I the color additional to call Meenal will and to performance now financial over on turn provide outlook. our

Meenal Sethna

our down start margins turn X% Thanks and with million, nearly versus operating today. slide and last margins us Dave. X% morning everyone Please growth. all organically thank to operating XX XX% were X% margins you EBITDA Good Revenue results. year. and second down were added to XX.X%. Adjusted of XX%. of Acquisitions $XXX for joining quarter GAAP were was

half EBITDA to just of first the this margin For we've drive results adjusted targeted year, our continuing operating ranges. delivered margins in and of of XX% shy margins XX.X%,

Our focus and strong performance markets our of and margin operational expansion distributors continued customers end on both portfolio excellence. and diversification efforts across partnerships reflects our with technologies,

lower non-operating some earnings a in expenses. projected Adjusted quarter per slightly partially Second combination lower than by was diluted unfavorable items, sales from the to reductions $X.XX. due of EPS, expected, operating GAAP adjusted diluted EPS drop-through and $X.XX offset than finished share

effective the The GAAP than reduced rate rate Our by $X.XX. EPS projected. was tax of XX%. non-operating tax was was higher higher The which combination tax XX.X%, adjusted effective and investments rate unfavorability from

in cash we $XX Year-to-date, Operating the flow million, generated $XXX generated cash $XX flow, quarter and free cash free XX% we rate. was million conversion in flow. yielding a million in

contributing the through performance. half levels cash year, reduced first We to our flow the of solid inventory

cash flow free drive and half in our typical expect rate generation a per We the to conversion both second seasonal patterns. higher as cash

our in X.Xx with We very and ending leverage. Our consistent capital disciplined capital quarter remains remain strong, allocation. structure net both debt-to-EBITDA the

while We capital continue inorganic and opportunities, our to to ensuring ongoing of organic prioritize growth return driving shareholders. and returns

equating cash power. annual an trajectory a of Directors basis Board Our dividend a cash inception, our testament grown to quarterly X% a generation in approved and long-term $X.XX annual to rate. earnings XX% increase compounded on dividend since We've our our

acquisition. XX% across Electronics and sales Operating The nearly X% our C&K were and turn XX. to year-over-year delta results were second XX.X%. margins the quarter slide Moving please at margins segments, our down ended EBITDA being down to organically. XX%

we across underlying destocking our trajectory, our inventory drivers impacted see has portfolio. transitory to growth growth While near-term continue

laid themes. also and quarter, we've time, over across our electrification maintained market margin industrial, in the we we've medical, continued Along the performance In and positive a groundwork with momentum environment. renewable challenging operational applications, strong auto

overall transportation across Turning the X%, end driver realized basis. outgrowth were breadth a We on XX, an trends our business our on we saw X% segment vehicle and growing sales divergent portfolio. passenger slide down of across organic X% double-digit markets content automotive with to the down the significant of

XX% on organic business was an vehicle commercial Our basis. down

saw EBITDA across expectations. operating finished we XX%, continued, inventory X% just destocking at customers. growth Segment margins under and market end While below higher-than-expected our our

and expected commercial deleverage business sales vehicle down slowed volume improvement. our margin across Weaker related our

product expand taking are scope operating of reduce and shifts, the further, costs optimize footprint our profitability. and to customer actions We

the committed We We on driving an mid-teens integration target. are dilution to Carling our segment to remain also margin initiatives the acquisition. from our margin trajectory overcome margin improved on progressing

and segment sales on were up XX% industrial X% up organically. our slide Across XX,

We over higher margins EBITDA deliver continue wins continue were and newer XX.X% Operating at growth to to and customers. of value while broad we drive our to finished set a markets, XX%. margins across demonstrating the end

on Turning slide forecast to XX. the

many across growth see end markets. to our of continue We

overshadowed the However, this this year, by volume transportation sales affecting destocking and margins through deleverage. electronics within both inventory be expect to and we with

$XXX With versus transportation. the this the sales expect third million sales project a in XX% sales and growth backdrop, offset of million. At year. we down be last decline quarter $XXX segment, By to by industrial, to sequential expect we across electronics range we across midpoint,

be EPS the to a XX.X% range rate. $X.XX assumes of adjusted which expect $X.XX, We in to tax

current At no the exchange color. Slide XXXX impact material on to rates, impact we unfavorable foreign EPS expect additional XX and includes some full year $X.XX sales.

million $XX expect $XX interest and We at in in million interest amortization expense expense rates. current

a XX% million to million. are full to earnings jurisdictions. due capital of year the than And of higher reducing our We projections $XXX to XX%, previous mix expect rate range to we shifts across expenditures tax in $XXX modestly

Dave referenced fab. the future the Semiconductor Dortmund our of announcement acquisition on

As not in is expect the impact or to this year transaction results. close financial to do early we fiscal XXXX, material XXXX expected our our a XXXX have

Over the organic higher-growth strong our increased leveraging pivot investments markets portfolio, continuing diversified years, to secular we've and themes. to while

is and certain us across markets destocking. expansion interim weather helping portfolio cycling the Our transitory

for trajectory focused in elevating our generation and our forward business year. the the in second half, teens margin our We continuing driving cash high remain operating the on

We're us for extend work all our my on and I'd positions dedication. growth gratitude execution our to confident unwavering of strategy. like that to members long-term their to hard team deliver our ongoing

success. been have our efforts continuing instrumental Your to in drive

turn for that, comments. I'll Dave with to some back And it final

David Heinzmann

the Littelfuse have its Thanks growth year-to-date proven summary, our dynamic strategy. XX, results. slide in has strength Meenal. this on while In environment supporting resilience business The model we of achieved strong

This in over double-digit years. consistent sales growth the XX and XX achieved the is earnings five, and past evident

improved high-growth profitability. end Our diversified and technologies significantly and business expansion our markets, our into geographies has

confident ahead sustained value have enabling us about deliver and investment stakeholders for to navigate long-term environments. have us through excited playbook, We our and ever-changing experienced remain to diversification, ability in the our strategic opportunities Our all through continued of execution, teams we for effectively refined growth.

turn the the now And Q&A. for that, will I to operator back call with

Operator

Instructions] Thank you. [Operator

We'll take Baird. from our with Luke first question Junk

now open. line is Your

Trisha Tuntland

Good morning Luke.

Luke Junk

be I'm guidance Meenal. signaling third if down the underpinning question specifically wondering you should help a is probably animate quarter can overall? This electronics, what's in for you're the for sequentially it just

we further be passive But I'm possibly? weakening if the passive? that should in wondering the at weakening you. just just sharp that sequentially be implied here, thinking Or of semiconductor seems portions and profile we business, this decline also the to look about is of semi Thank

Meenal Sethna

Yes. Thanks Luke.

been the all the talking sequential primarily going bulk the is So, destocking QX what on QX of of seeing we're because quarter, really electronics, that's the about some it destocking, of through you the quarter the within and been to see -- passive transitory coming we've of size, side. course,

are of sequential terms have little a bit really more so the and et through down. cetera going like And distribution, we semiconductors that seeing also in we're passive where that's

And the prepared we're continued well. about also talked and segment, vehicle on expecting remarks of in our then, we business the side of commercial course, continuation as some the within the destocking there Transportation

Luke Junk

Got it.

David Heinzmann

the on applications. actually growth continue to kind of that's we really in that on power focused semi seeing Actually, side, business enjoy industrial

two, see So, we continue good between in to side. the strength in the balancing power kind pretty of the the

Luke Junk

Dave. think, probably I question, zoom picture the basis and out electronics second what's My combined around you, Dave. be view just in could was after vehicle a you this passenger of quarter, hoping Carry better overall for helpful. That's the segment? give thinking And auto between or a transportation it. I on best Got would us and

that versus car what about think might that underlying growth the the can just Thank know pass comments and trend maybe made the I you. I we better in that see seeing, you're business animate you've for and transportation? content

David Heinzmann

spot the very Luke. to car remains positive Happy -- for passenger a Sure. overall, It's us. business

X% portion we A this see of that applications in outside in segment in actually we the prepared in double-digit talked deal come transportation, segment, great electrified reported this And car. about outgrowth. passenger while pass As in stated continue growth of We've the reporting to products in our from before. we a specifically show of the remarks, growth car. our

double-digit. So, with that, saw it we actually

the to we've see over three seen we last outgrowth. years, So, continue double-digit --

Our robust quite design wins continue to there. be

commercial you focused destocking at side. segment of to the challenge vehicle the the really when really, the kind look challenge of transportation on So within

Luke Junk

in that. Thank applications. sensor could and you sensor increased more think in question. it. Dave, And applications, you just I look remarks, Got mentioned you be in if transportation drive-related management if and one some business right I battery curious now? your at could specifically you I'd for, then for just sneak in prepared your said what's demand And

the something what I think portfolio? primer little it key that just that are some it and may is by at is within opportunities you. be a would be get -- you're great around more quick Thank to investors, sensor a of looking the

David Heinzmann

the passenger Historically, in sensing side also That's that been car of the to and sensor for of our in was cabin the Yes. for within related the thing. type core. safety sensors business portfolio our position speed solar cabins applications -- applications and comfort in and

vehicles and on to Over also transition focused or on so, the focus electrify. last been electrical year heavily we do half we've systems as a the how

launched applications current we used So, applications. and developed electric organically sensors drive of have within types are battery that extensively management and

multinationals design those have early nice wins launched have some over the some with meaningful with for us there time. we And will and that traction days had in be

Trisha Tuntland

Appreciate take please. next caller Luke. your Thank our We'll you. questions

Operator

go Benchmark. Williams we'll David to Next, with

open. now is line Your

Trisha Tuntland

Good morning David.

David Williams

Good and me in letting sneak here. for morning question thanks a

rebalancing, feels time. this So, guess, four think Dave, has we kind I in about inventory if ongoing the And electronics at of some it or segment, for like least been quarters last you've several guess the normalized consumption I been we of quarters? question maybe the given to here the over that should rate just think so about so, kind run how my shipping is, last the over

David Heinzmann

challenges a history, years products, you great not is our supply chain deal customer obviously, start back what at of -- the issues. in electronics over to a with I last very product But anymore massive me of through if the normal Yes. we look our distribution but broad backdrop, let with the base. I'm ship and COVID-related handful sure

place. as model a that to demands That comes or takes and certainly correction a down increase soften, times does there's availability inventory lead create to swing demand then times as in out, shorten begin then go and lead starts

would us a be cycle four sort what from peak a to trough of Historically, of there kind normal be for would there. about to five-quarter kind of of

seeing last year we big our And where so peaks side kind of business. were time really is the within electronics this about of certainly, the

by So, we're through the over going partners cycle. channel We've actions last been our that going quarters. couple clearly through of destocking

it Still really pockets to way through see softness we the strength. We that kind The of saw continues that where to robust, that see working year. certainly and year consumer-facing design-in this of is through in get good of to we're quite products, to through of bulk for sorts peak expect normal be to. our We this cycle. we to but of trough kind continue kind need go good news that activity we underlying

David Williams

about for be, as for the of Okay, at think three we you whatever guidance, come basis. rebound maybe see revenue current and normalized on play? about you, Thanks should the be Meenal. to about forward the that one the midpoint really sales the times color. How topline, to And great. going benefits a seems deteriorating but we of start the do then strategy begin leverage profitability At leverage, think that the least how the the may again, into of to percentage

Meenal Sethna

lot and I Yes. and one question No, really going coming at electronics, a of happening margins which, earlier we're look ones. strongest as talked we to where has our about fact when sequentially, great the destocking what's is back take you of the the through seeing know, maybe today. transitory a

-- pretty variable to strong and So, call variable I'd be the that margin, upswing. tends incremental it,

see tend decline bit XX% we of higher I'd that over when see so And say, a this mark. we environment, than a normal, destocking to

see, sure our we cost really some quickly and what that's that coming But our knowing operations we that. of to of making part that's As that you're through structure we're of sizing really mitigate to where of adjusting manage seeing some that what through. degradation do, we and that, part react

David Williams

that. so then real Thanks Great. for one can, much I if quick. And more,

talked expectation about what Dave, around And you little anything color customer on the what maybe process the Can the profitability and product optimization. there? Just, you be? is a should us give

Meenal Sethna

Yes, sure.

that of portfolio. is absolutely of things this acquisitions standard this with about when every pretty into about we talk So, this coming do And do. normally the idea something and integration, is we especially we acquisition talk we

dive call So, whole in, a geographies, of between products, but to transportation, lot both of C&K, customers, a mix, it, like deep bunch is which the we'll I do really specific areas the a things. understanding Carling, even work the into

have where in X, we going Recall last year, working It customers. lot were on. we normally would time of all that a done significant spending year backlog really pretty with a was

last that So, our year. was priority really

we in environment, focus we're make where now, we current are through Given that the shifting especially sure go our really to assessment.

just And seen make where on sure that would and path priority the right of in legacy that. right we portfolio, move parts price/cost the we on still say, I are opportunity an equation even that there's our we've us around, to for think focus also,

So, really the through quarters. few to next in what that's going we're be going

Trisha Tuntland

your David. We'll Appreciate caller please. next our questions take

Operator

Thank you.

we'll King. CL with Next, Silver to go David

open. is line Your

Trisha Tuntland

Good morning David.

David Silver

hey, good Yes, morning.

of couple to areas on. a touch just So,

companies, the First And at one would the be, my roughly expectations year and a the than lockdowns of I revenues. guess, number China, their of compared from of less your the whatnot to development right? for been has or XX% rebound think expected. I beginning So,

first or this China in out? and year whatnot developed if half think two and two quarter over your you. of I your minute was could a that you a maybe take Thank expectations how or and you characterize operations just the wondering have

David Heinzmann

think, lockdown lockdown of that of pretty And to certainly, a that or expectation, an the David, years be I two in as there'd overall. happy environment strong was demand rebound take I'm out after Sure came China there that. three

seeing has in say an would bouncing and there back the of strength the on car broader portion of I China kind car of pass demand. in back in while improvement lot not China, a build passenger are in a we China bit bounce And been the certainly a

laptops, and customer down. cetera, et in like a appliances, of general that From of on Greater tablets, that in our certainly lot focused small also standpoint, is in is we market, have course, base China Asia consumer-oriented

we seen that And for some time. have

that back seen bounce yet. haven't We

clearly, that. So, going alone drag China I of don't in our into a bit say But expectations I think remains we're a the would from year.

David Silver

like second of recent Okay, great. the commentary then would as some incremental it characterized maybe acquisitions. think just maybe integration question, And on I I

in talked So, -- kind you've next Transportation I integration, in let's I steps and in a the area. think of points the slide the say, deck your with auto comments, the and at C&K couple about electronics of Carling believe, in segment, in of or

take incremental you historical gone has I perspective, kind minute a from at in maybe in that was of you. date? of could particular, and slide a the success? how where could a highlight integration met couple just the to if wondering maybe then if out you you Has had you greatest that it discuss expectations And integration moves points? deck Thank called the

David Heinzmann

first. you two can you'd if I'll Carling, C&K Sure. the let's and coming Meenal, add like. take and that, take a look Carling color at and we if back bigger step ones, But overall, the the

As last Meenal and going in the is had very year. overall, we talked Carling a minutes, strong couple about last year just of well, the acquisition

up over was where significant If you cleaned were our year And ownership, prior amounts of the we full first XX% up really backlog. previous of ownership. the year a under that year remember, we

seeing one Clearly, of challenged rebalancing that of with of now plan of our say that kind kind both customers would bit cleanup. backlog. a out inventory we And year that a So, are then the well pause of because from also, integration chain ahead building and of supply we're not was there. challenge that driving it's of

embracing and customers it's going the we there well. I can. as the is one those to overall, challenge focus best serving you those Clearly, sure So, year make you're to think customers

of profitability of way ongoing the of line lifting Meenal kind midst talked some customer now. of traditional in footprint as on at our lot about a looking going with that's work well and heavy we're Now that as product deep

on we'll for that the business. the believe very our we overall, much plan be integration So couple next over of of years, that

good feel that. about we So

solid. similar with channel. we sort of C&K taking it. there, was customers to But the that's through that case, side, see On quite feels year place go in that had Last destocking also, some the particularly

As that was leverage that you our of the is ability C&K us the remember, our points with channel. leverage for one fact to

So taking there that's destocking is there. place

core seeing base. taking good really we're momentum However, products customer Littelfuse C&K and the to

seeing you of to good we're opportunity. a that. cross-selling So opportunity And good there, And recall as lot we really synergies. good there and see big we're momentum beginning is our feel about sales there,

few a there overall, for going actions on, going inventory sort is dwells integration this right, So, on quite year. But the overall, well.

David Silver

Okay, great. Thank much. you very

Trisha Tuntland

David. We'll next your questions. take the Thanks caller please. Appreciate

Operator

TD Next we'll go Cowen. with to Joshua Buchalter

open. Your line is

Trisha Tuntland

Good morning Josh.

Joshua Buchalter

morning. destocking. for Question wanted my picture a guess ask the Thanks taking Dave. I on for questions. I big to

quarter. can inventory disaggregate understand that, books levels second you are at down of bit good go. where more channel? But there's the If things help Your on we went a clearly, books? to And on in in now us sort where the are

sort in year the guess, up the to wrapped us to by be way Thank end the need where comfortable of can I of that half year? you. any back quantify if they for you of be And the

David Heinzmann

Sure. Yes.

more that certainly have you've to and inventories, is opportunities first for through the the the us. year, work we and there. We half of both on-book seen go of One course decline have

ongoing. to as continue We'll inventory work now as balanced companies are have that. there lot so position working that's pull supply ability the clearly, back and to on And of to a on support the do of out like chains business, kind through

of half our see is have bleed we'll and through the a we trough as in that and four view we're kind earlier, to the peak halfway we cleanup to it From as five And year. typical now it. of I seen is ongoing, to that expect mentioned sort that's through destocking cycle. And of back of quarter past, kind the kind go of channel

Joshua Buchalter

And you pricing you down Thank about running for Has you. your coming on they input period to And feeling margins. ask pass been were XXXX, through to about side? Thank destocking? on continue where wanted obviously of I as volumes change as inflationary this They're in in the there ability go still down. costs are to extended how XXXX, above maybe any come Meenal. you. one the environment but

Meenal Sethna

Thanks, Yes. Josh.

as part target I'll We our had about question. just back January talked step company have in maybe this is back margins year. the for and this So, the overall -- of we overall

to the I the for teens, we XX% to committed to high talked that. year, and continue remain about XX% average

we've part going around the that the lot integration year, on. of time as going about a Dave spent work foundation a of through As we're that's talked lot laying the

On so we -- others. the out, and cost seen decreases price, places, we've price/cost side, some in in some the we've maintained balance increases far,

around we side. continue So neutral price/cost to remain the

So, I think we compared margin last in to was XX.X% running the XXXX, the last cycle were cycle, XXXX, which our range. intent, XX%,

have to we work with we done to range. good and the margins feel So, continue all target do keep the in higher that

Joshua Buchalter

color. the all Appreciate you. Thank

Trisha Tuntland

Appreciate your Josh. Thanks question.

Operator

go Next, we'll to William with Kerwin [Operator Morningstar. Instructions]

open. is line Your

Trisha Tuntland

Will. morning Good

William Kerwin

of and have all already lot the you thank been question. asked. main for my A morning Good questions

some longer a quarter. Industrial peers growth here. So, Definitely I seeing a some switch I'll much Haven't think performance. about in the the segment, some term little nice weaker where too been talked have place

doing well seeing particularly incremental any most you there you're you then out as industrial term And the for So, would long weakness? if this out of also, the year just curious exciting call what market? what's

David Heinzmann

Yes, as that energy in of we're from you mixed if There market. an is will. bag out strength of industrial end strength it, continue pieces different market, end to see We between continuing that we particular overall seeing some and through see kind positive of quite also applications are there. We kind well safety energy of strong. be storage applications industrial to play renewable quite of that see types

we've types and automation really residential And is kind be bit is softness it quarters HVAC, down of bit we last talked see bit maybe softer. the bounces particularly applications, of of about a weakness of where but bit off. may there area be industrial tends The a little that in couple to a in HVAC of a

support We're drive the see types in the a as also to to and crosses over to beginning kind of is with higher and there push applications data AI of electronics installations communications between invest centers and needs. compute industrial

supplies both in of we power of have play But see servers well there. the those on the have lot There's content themselves and data there, servers. power on lots more a systems activity, also the for infrastructure us. and the we're again, of the as which to beginning industrial We for centers there,

William Kerwin

but That's for then we've your the me, it's a while one if since semiconductor. part know for business, it's And I small a think of color. Awesome. silicon been may. carbide more great heard I your about business I

update there? just if So, any there's wondering

David Heinzmann

No this Sure. the of drive applications significant invested of is we're is players, that. obviously, billions focused. our real our attention particularly That is market. semiconductor where dollars not And applications for amount or we've talked in change and EV not core being the update traction getting from support there's past. about That a where from what to large

our industrial-focused an design-in We do see part things have we do there types a and carbide silicon charging offering some area energy, just off-board of have of an as us. that's And But that broader activities and It's investment outsized of our we like a semiconductor portfolio. part renewable as more power offering applications business. not things. for

William Kerwin

Thank you.

Trisha Tuntland

questions. Yes, caller Will. you, our your please. We'll appreciate next take Thank

Operator

with Glynn Christopher to Oppenheimer. go we'll Next,

Your line is open

Trisha Tuntland

Good morning Chris.

Christopher Glynn

win or way was intrigued rate or Dave, more you. any Thanks. otherwise? Meenal, oriented Trish. of your that, design-in activity. it actual Is Good around opportunities? accelerating comment I there of quantify rates proliferation to ratios business by new morning Dave, Is Thank wins, your to maybe

David Heinzmann

of across a our all activity obviously, kind of we -- as I think design track metric businesses. key it's Yes, and

have which We're operations up an get look design-in of up, side. last about kind awful of Well, redesigns customers' design the that, like better activity our that engineers a the and So, couple new kind engineers the activities, we're time do. years, back very But back that on engaged general electronics running their engineers are and keep I we where seeing on to made think sources but if things that. of those there. activity in lot free seeing lot overall, wanted backed of spent some to of you to of that's they the particularly over statements

of renewable applications. things for power So, and in increases in types energy, activities design and design conversion wins like

industrial the of side quite things, on So, robust.

pass design year actually of design design doing that we bit We quarter we're bit the there, robust car actually we year wins on what share wins year and wins. car had we're on a pass last this in a where Also side, were year. we're ahead but last of ahead every a don't overall in

So, we good activity. about feel the

us for the we're of the internally really easy it's challenge and activities And focused people get sometimes are and term, in to but the the of reality of our seeing kind near progress bulk on long-term is towards turn good our gains, there. the

Christopher Glynn

And then a Great. follow-up.

little a is kind closing indication in know I investment rate out, but acquisition, run small, Dortmund of scale the way even large? medium, the terms any of on or On like generic

David Heinzmann

being maybe that's we're obviously, yet. really atypical an it an supporting semiconductor for conversion, for in an acquisition closed power So, ways, it's industrial And accelerating in hasn't focused area activities sorts on renewable where a of that applications, our energy, areas. some us the acquisition and these power

over some they designs and within application sharing move during period. developing Elmos in upon of agreed of with capacity some activity porting facilities, products begin their so And the to a few we that our as that new out have launch transition fab years the we'll other of that products next we

impact to be will the power meaningful over a it next business semi years. several our So,

sort -- that portion company, it's I power solidifying a investment business. focused a on more of semi say really would As our of that it's small of really

Christopher Glynn

Great. Thanks that. for

Trisha Tuntland

Appreciate caller next your take questions Chris. We'll please. our

Operator

Thank you.

with Next, we'll go Sheerin Stifel. to Matt

Your now open. line is

Trisha Tuntland

Good morning Matt.

Matt Sheerin

have questions. morning Good thanks. do I everyone. Yes, few follow-up a

give could Dave, electronics, book-to-bill within your the idea correction inventory look of and inventory what an like like? the partners at days the looks on us what distribution Just you

David Heinzmann

kind our mid-teens line and distributors, in us And both high would us across normal for service of broad let's with be of kind distributors for average start that weeks on And normal inventory. days. Yes. of

And kind so that's of normal.

Right that. That's less be say we're in three now, seeing quarters were I'd ago, on inventory to we'd of four couple than and we month-by-month a weeks that reductions level. running heavy

kind it's So, believe of I there. as going expected,

positive. will that be our through I a working we're So and think way that,

Matt Sheerin

do starting what look sell-in? Are there the as to you sell-out your know well? Is or -- POS like that relative point-of-sale soften to numbers

David Heinzmann

of is Yes, well, there's it, that's areas in hanging pockets the of applications softer. there are pockets and where there So there's where really right? POS

how is we going our view of upon see what based So kind things POS are current levels. as of

underlying POS good. remains pretty So,

watch of to kind carefully. continue So that we

Matt Sheerin

Okay. Thank imagine? book-to-bill still you. is your And negative, I

David Heinzmann

of destocking and couple place. things. a that's One Our this combination, of right, a below inventory is that's book-to-bill is X, taking

products worked almost as times is, all lead lead-times. other we've The pre-COVID our on back, moved to our normalized of way -- have are now of levels kind

that orders. So, every time back, those drops we pull

things, that certainly, so running of one. those it's kind And two below between --

Matt Sheerin

it. Got

questions, to XX% revenue backing sort lower plans EPS were? Meenal. just there an margin you on based standpoint, to a and going operating of couple range gross it looks with sort here Or be From modeling OpEx you your on It of going of steady And low is in looks hold sequentially. are to like like margin the guide, in based where reduce are costs? Okay. any

Meenal Sethna

Yes, great question.

earlier for So, still what of from just high say I quarter. margin to about back talked course, individual of we margins in circling year. we committed would teens we're guide, stepping that the questions, don't But back, the operating range an one to

At the might at end, we right? lower be even may same time, Some quarters, the end higher some that. below on be have may the or

we be a to know balance going that there's So, there.

businesses where structure whether lot now, even cost In especially we looking it's as at things the or in transitory think look just actions interim we a right the at absolutely taking we're discussion terms we're businesses. or cost, doing, on that costs we're of can of costs about that destocking, variable the

about I cost the side. product we're at that. customer talked across business. that especially absolutely, got the work Dave line We've the and in do bit about little transportation both a talked structure side, the we've also So We're looking at profitability. electronics looking And to integration. and Carling on around

on business that different of for also we cost make things are to say our sure up continue number invest we is a the for I'd this that tighten in the structure today. because So, going But environment transitory. in know we to future the

Matt Sheerin

the usually I to than and for down specific it that. know But guidance inventory thing. expect for that of seasonally, give kind year. don't same Thanks appreciate that and I correction is And you I perhaps transportation then Okay. would your with electronics more sequentially, this be business

of margins look bottom, QX would and to they you when in down expect like of margins from So, how be expect and revenue? QX kind of terms in QX in terms to

Meenal Sethna

the gave QX QX to that really be A Yes, at down, of destocking. right? lot guide the bit we on coming transportation because With sequentially this of the talking point, about we we visibility you little right, have, really that also electronics, side. the a expect build

comment what even tough to pinpoint Dave After a anymore. to it's go that, about earlier I'll made back normal the

through about not But or say I we're So a prepared again, going comments, we really offering talked view would this there. sequential have year. destocking enough in our

Matt Sheerin

in synergies margins, going Okay. and Thank of just And automotive that quarters. to level acquisitions the the like from looks but matter are costs or it Is just lastly, the teams, you. out which transportation get to getting there. while to and or committed a on really the also volumes it mid many take still lowest you're getting it's

the timing what's So, of that?

Meenal Sethna

Yes.

past and color more QX forward So, bit on maybe the a for. just little

we of business definitely some saw QX, expecting. in the commercial side the the were vehicle absolutely, in of than destocking So, we higher comments, that the

our in in see you it margins. saw it the sales, You

of point was that say margin impact. couple probably hundred I'd basis a

at had out that been out trended we right would just would -- we have destocking, a margins take where So, been have flat definitely to there, the able we expected.

manufacturing a the strengthening Mexico is in hampered sudden XXX points. last unexpected a saw a that maybe quarter, margins pretty and the big Mexican because I'd for also bit, us a hub basis us, such we for peso pretty peso also say footprint,

that of a So, bit was little color. a

absolute outside projection of trajectory. in expected I'd have say seen we those, would margin that

the about We're activities which related it's Carling. across that's XXs really mentioned the range. it million work car as Dave build we're includes build been doing, talked to at at looking of look, four also that automotive I now the business, costs. or that we're XX So looking earlier, We're in footprint upper some years of lower

on, back we're with bit. talked And scaling So, that automotive footprint about of that then business. profitability and have for newer product the also that line parts looking we maybe working that little especially the customer at we're the I a also

margin that to positively we're So, Yes, committed continue mid-teens forward, range higher, I destocking, we given think to maybe that combination committed that, but expect transportation. moving all us margin than bit the a longer we're were absolutely little the we that. trajectory will take and of moving it expecting for still to

David Heinzmann

this the take a the the the believe in of important back in the at take it's profile think a year, year still for business we to of step right? I look teens. performance which margin overall, high Matt, And be to overall course through

we're previous the of a range. that our we've in strategy take the cycles, versus when business that That previous XX%, with debt execution in improved we cycles, been the the When at in meaningfully end been across XX.X% has businesses. we've look of to the really markets mix serving, diversify

the by corporate time is drag we've years, of last couple overall margins. about And acquisitions way, which XXX-point -- the some that's over a at sizable on made

So, seeing acquisitions. even these sizable while that digesting overall improvement

the in generally, So moving execute the we're of ability cycle. off think, I to bottom through the side

Matt Sheerin

Got it.

Appreciate that. it. all for Thanks Okay.

Trisha Tuntland

We'll Thanks please. Matt your take next caller questions. for our

Operator

Williams David with to Benchmark. go we'll Next,

Trisha Tuntland

David. back Welcome

David Williams

of thanks on it me just like and I to maybe this as down inventory internal last want capital the comfortable, your right on just just quarter do ask thinking Thanks. where quarter. a getting bit that ask levels It letting working inventories? internal thinking Hey where about quickly Meenal, But for your you're cycle. number be looks and about think kind question. that peak another size you're you should that cash come

Meenal Sethna

Yes.

So, that there's a around have inventories. lot teams been our doing of work

the we Our expect even the back closer we continue get time, XXX lower would days. XXX-day over mark days about that over to that I XXX, in to and work right as somewhere time. now down, are

as our chain. -- where as really were we supply pre-pandemic we adjusting think adjust That's we about our

some also would that think is right? other acquisitions, add of thing I with the I comes

our DSO, and synergies day whether sales, working part from the around focus capital come also of level. management, big inventory Typically, a that's really

the and work as acquisition. So, areas like Carling all the the C&K relates that doing to it that's we're

So, absolutely, more progress on go to we're making good that. and

David Williams

Thank Okay. you.

Trisha Tuntland

talking forward Have Thank Appreciate Littelfuse. with and That us David. look you concludes wonderful Q&A on soon. your to you interest joining We in day. again question, a your follow-up today's for our call session.

Littelfuse (LFUS) 2 Aug 232023 Q2 Earnings call transcript