LFUS - Earnings call transcript Q1 2024

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Operator

Good day, everyone, and welcome to the Littelfuse First Quarter 2024 Earnings Conference Call. Today's call is being recorded. At this time, I will turn the call over to the Head of Investor Relations, David Kelley, please proceed.

David Kelley

Good morning, and welcome to the Littelfuse First Quarter 2024 Earnings Conference Call. With me today are Dave Heinzmann, President and CEO; and Meenal Sethna, Executive Vice President and CFO. Yesterday, we reported results for our first quarter, and a copy of our earnings release and slide presentation is available in the Investor Relations section on our website. A webcast of today's conference call will also be available on our website. X disclaimers. Slide to advance for our Please

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

David Heinzmann

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

with Let's Slide start highlights on X.

the discussed into first of several XXXX brought a year. to continue of continuation it previously themes of the expect The we new quarter and

We across our continue of and design set new activity meaningful end markets. to diverse opportunities business see

connectivity committed customers broad sustainability safety themes, of are Our a advancing helping them applications. across to we and drive remain innovations base and

continues macro global to execution experienced ongoing solid challenging team Our an environment. met deliver

XXXX, Following our quarter disciplined a our operating year record cash cash flow in model. first strong generation reflects

our sheet significant enhance balance positioning. long-term with to financial and flexibility our the Finally, capacity provide continued us

We strong work want serving teams prior results global Our first our commitment to continued execution. and quarter reflect sales our first and delivered their growing hard our initiatives above model, our for thank business I business. customers earnings to diversification quarter resilient range. guidance within and and ongoing

OEM update weakness XXXX, first reductions continuing and and some market in experienced see of a to we continue areas across also In the quarter, environment dynamic our businesses. our end provide XXXX channel I to expanded into inventory across wanted we the With brief businesses.

the quarter. consistent we distribution throughout inventory while still channel segment reductions Electronics our elevated, exposure, saw Regarding

have been continue we EMS calls, electronics discussed we have ongoing and As prior see end and we inventory at during to of elongated earnings an cycle, in signs prior customers. -- destocking reductions

we we an emerging potentially are that However, point. signs see inflection suggest nearing

electronics passive and second a quarter above and the a the late an in more business uptick Our benefited X. quarter. in entered typical rates with first order backlog from book-to-bill

Regarding we exposure softness our ongoing seeing industrial across and semiconductor Electronics consumer applications. within the segment, are demand weakening

quarters. Despite drivers diversification the Electronics will our expect to semiconductor relative through softer initiatives We portfolio industrial segment well of trough capitalize sales and driven outlook near-term our our improved prior have growth long-term the strong next levels. impact positioned profitability remains trends, couple on cycle to

Moving on to Transportation segment. our

our vehicle capabilities product exposure continues broad from technology to leadership. passenger Our balanced benefit and

plans, as solid We and high-growth show Globally, local China, and are wins via advancements, fuses our strong balance ] near-term electrification to aiming design with preferences believe solid [ OEMs. internal products are The vehicles. In in per are consumer expansion China seek demand to we to solid current sense. low with seeing applications hybrid we region. benefiting in interest customers the consumer and we combustion with customers industry in delivering traction long-term for vehicle core is and align aggressively vehicle continue generate to continue we content voltage better our high-voltage auto for

will passenger well customers vehicle Regardless global drive of to our growth. are innovative powertrain mix, long-term we support that with positioned products

benefiting line bearing drive back, structure fruit, as first also are step are we in quarter. yet improvements progress ultimately with actions vehicle improvement solid exposure, reductions, are we seeing product to initiatives margin cost initiatives helped transportation our a making the while distribution results. Taking pricing actions disclosed commercial QX inventory are commercial segment channel sequential previously ongoing also and vehicle our cost our our improvements Regarding driving our

market end incremental softer-than-expected MRO seeing through are we weakness first construction, in-demand segment, we next we and the of led demand, Industrial believe mixed Demand infrastructure In quarter, will the charging with saw quarters. solar shortly. industrial continue safety troughing storage which factory applications. while our automation and is market by strong couple with applications Finally, early regions, show the indications are of across more quarter. Yet in the for level all provide segment softened to signs Meenal demand. we seeing energy applications renewable HVAC residential growth, of continue details and will

markets to and turn let's design our activity. end Now

Moving to activity. electronics Slide and X design

of enabler technology for We be continue to base customers. a a leading broad

semiconductors in win seeing power are accelerate. design new customer launches In our a meaningful product activities quarter, traction with gain customer China. We a as medical the for custom secured we

We multiple won win We for business application. delivered for a switches. and communications fuses both for space-related semiconductor China also appliance in customers a

We also customer Taiwan. power supplies business in for won data server for a

we win Finally, circuit in India will core our telecom that meaningful utilize delivered offering. protection a

on structural market and continue Beyond as us engineering automation innovative intelligence, remain artificial technology opportunities near-term such as trends, depend our customers electronics end for drivers key expertise. to reliability

America safety America, design supporting X. remains energy Slide solid long-term a activity won an by we to had North quarter, business our kitchens. industrial the commercial Industrial customers Where renewables. success storage application with a across multiple had applications In We within themes. and win growth in end-market in exposures, we Turning with for highlighted North leading first industrial customer. meaningful

Europe by in X for charging electrical including strong, and Level efficiency wins supported infrastructure America in applications increasing step fast requirements investment infrastructure remains DC a EV industrial commitments Asia. Taking long-term to also global and decarbonization. multiple back, North charging We regions, spend, and secured wins across win

in continued offerings as customer will from as and momentum. execution to benefit We and continue expertise design deep broad engineering reflected wins ongoing strong product well

charging passenger onboard an system the across America, and leadership our balanced technology our for to evolving capabilities, X. wins business We scale global to consumer and Moving exposure, leverage won including in product Within customers to China vehicle quarter, and regions, we multi-technology customer transportation adapt high-voltage secured multiple Slide as fuses Europe. North we Korea. continue preferences. In for

for Europe. We customers fuse also business won low-voltage multiple in OEM

electrification motor motor by a encouraged applications. electric wins of and electronification protection by an application Finally, our or cadence remain Europe. We solid passive in we across continued our momentum, supported vehicle design win secured

customers While shifting to are impact in opportunity. which North we the in automotive adoption, we seeing and pace Europe could our America content adapt consumer confident well-rounded of preferences, EV are long-term

commercial North we wins provider wins an bus switching Regarding we businesses, provider and for for our opportunity applications base. custom from truck for in and truck our agriculture customer technical broad regions won delivered continue material customers. Long to secured Across innovative multi-technology several believe vehicle and material handling And electronification electric and advancements We resonate various quarter. were electrification exposure, commercial our construction mining equipment markets. expertise delivered business and the in our in well America. agriculture a solutions We in Europe. to handling and term, heavy-duty and ongoing we enable positioned with equipment an

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

Meenal Sethna

operating we versus both sales last margins year, operating thank the morning, Good margins product results. for million, today. finished XX.X%. Dave. last Please turn was quarter down details organic. to and and everyone, actions our XX first at XX.X%, The EBITDA Thanks, X%. GAAP XX% were in line you XX%. Adjusted margins adjusted Revenue discussed total us reduced quarter Slide to with $XXX in joining on quarter and start pruning

a a increases unfavorable peso. largely stronger exchange Foreign XX point basis impact margins, Mexican to due had from to cost

and per quarter adjusted diluted First earnings share $X.XX. $X.XX EPS was diluted was GAAP

and was effective was rate Our tax first rate quarter effective GAAP XX% adjusted XX.X%.

the last effective began Our allocation. to onetime cash turn benefits. Please we slightly Slide year strong with generating generation, updates $XX lower was on some than free capital tax XX Free target conversion versus due million up a footing, the adjusted cash to income. rate for flow Starting year. discrete expected conversion on and for to in our on to operating XXX% expected year. $XX track flow, our million flow achieve cash We was X% cash remain net XX%

days We and We're inventory strength continued the quarter, cash working capital as X.Xx. net of remain with hand. EBITDA ended able we debt continue on strategy. assess of both disciplined hand sheet quarter of our focus to the and $XXX this our to optimization to million on We reducing leverage on leverage in opportunities allocation balance and capital our dollars

goals acquisitions. In quarterly invested flow the free of Our split unchanged returned million evenly $XX an our with and cash of repurchases. share strategic we shareholders dividend shareholders, balance to and between our are quarter, return to XX% about the capital in intent to

shares During the second last Friday. additional in quarter, through we've million $XX repurchased an

We yesterday X. $XXX May Board new announced X-year a also our authorization that buyback approved million effective stock

with were our will total We cost versus when semiconductor across continued down were declined we diversification, finished an resiliency starting EBITDA our We with portfolio increased segment done to a turn down XX% basis, with versus across remain and buybacks. execution to strategy. Please greater last products XX% were Sales last at segment. quarter we organic in our On Electronics Especially the work the passive growth margin valuation continue long-term products. Operating margins reflect sales structure. on our product headwind in assess believe Slide the year XX% we've Products weakness the The products markets Electronics XX.X%. for while year, saw margins doesn't in across XX in while confidence highlights, semiconductor the organic. periodic confident XX%. segment in industrial improved our share and

to improvements our segment robust margins expect in return We we as growth.

been last Sales Moving X% year Segment X% were the segment and sales organically. actions Transportation XX. Vehicle we've our Products up grew sales undertaking. Across our impacted business, XX% Passenger X% Slide were on to up pruning from versus negatively organically.

organically. destocking continue product product content down the we X% distribution Vehicles, inventory in launches sales supported, at a actions. quarter from partners strong especially and see We of and pruning combination continued for our to Commercial line both growth were China. Within

points and XX.X% segment, taken points, pruning. margins XXX actions We've XXX For including of and the at margins sequentially, increases product basis basis concrete EBITDA number quarter, to X.X%, drive operating margins profitability, improved and a in of the price respectively. balance a expanding were finished

well actions and As reduce gross as expenses. cost margins operating to improve structural

at margins. On focused weakness Operating profile. We at industrial XX.X%, finished and an improvements way we of continuation margins double-digit down are expectations. Volume below both segment some of a as margins is work driver on organically. our our last our strong XX% to reductions and EBITDA Slide versus inventory were XX% expanded steady typically was back the and XX, markets and Industrial set saw margin in down from end X.X% Products year key We OEMs.

shifts profitability produced which to of in the near-term constraints. improve also footprint and are and some capacity, add manufacturing midst costs We

Slide forecast. margin Summarizing trends as inventory expanded are weakness. nearing headlines, we select market coming continue industrial customer we expect believe We're inflection reported quarters. Please the the And in We reductions, inflationary and end channel see point. for are of comments, progressive to areas earlier an move the continuing. recovery we to Dave's XX also seeing though through

growth sequential at expect With midpoint. we these of be transportation $XXX the be assumptions, to and we slightly By second up. sales segment, to the electronics in across X% flat to range million, $XXX sales quarter industrial million expect for and equaling

us number shifts is of exchange With unfavorable the to recent net a impact revenue and a for earnings. foreign in currencies,

For a the to sales to be in and project tax $X.XX EPS. a approximately second which of We're X% headwind projecting impact adjusted rate $X.XX, the assumes XX%. EPS to range quarter, negative on $X.XX we a of

versus margins quarter we've our to second in also higher point expense unfavorable provisions. quarter. basis due other quarters retirement discussed XXX a certain effect historically, includes negative to on EPS guidance has an $X.XX impact and As the stock This compensation

for our sales later growth anticipate return this expectations. to XXXX year. to Slide year a XX We turn Please full

to reduced expect X%, to last path foreign are through-cycle improving and We and in total within X% on significant about less X% projection sales line be growth Transportation our margins segment current our EPS. about solid segment sales rates, headwind of for at to made and to expect a product headwind $X.XX improvements our exchange We've we transportation actions slightly to progress quarter. And a a reduce Electronics than profitability. sales

has inventory of destocking elongated the recovery. variability timing the market volume our However, impacted and end

operating in the With our expect company under expect we the the year these Across with in segments, mid-teens electronic the progress in operating mid-teens. upper-teens the to in with are in margins making remain market margins operating transportation the currents, high finish industrial exit we progresses. we year to year and operating for improvements and We expect as to the margins average margins. confident single-digit

million in about $XX items, in million modeling expense. assuming we're and $XX interest expense amortization Another

expenditures. our higher We mix million due prior jurisdiction, by rate estimating of full XX%, capital invest around tax estimate expect slightly to about in we shifts and than a are earnings $XXX in to year

we are environment, we're We difficult out and as executing through macro emerge of positioned a it. well

leading drive Our priorities and growth and the and margin control. on remain our sustained to areas forward well improvements can We're worldwide focused in segment it for are Ensuring expansion. best-in-class commensurate to the our with profitability comments. and poised we destocking steering colleagues some recover continuing their we transportation our markets diminishes across commitment that, path forward day. And you final our generation. Thank back Dave I'll company Littelfuse unwavering turn cash to and to profitability every as

David Heinzmann

Thanks, Meenal.

first last and results discussed continuation we While of our year, to quarter momentum strategy. customer brought many continue the growth have a believe the themes our of support we long-term

Our improved earnings meaningful positioning long-term the agile teams increasingly diversified us and resiliency for business model while expansion. profit

continued Our our robust broad markets strength momentum customer our relationships. reflects design technology and across win the offerings end of

further growth Our return balance confident during XXXX. we capitalize and strong to that generation on while growth to position are cash opportunities remaining will sheet us we

shareholder drive double-digit we also revenue through are leveraged growth long-term We value. execute top-tier to expansion confident that cycles, and earnings will deliver and continue

and Littelfuse supplier back to turn Q&A. our our thank the for again I commitment work operator with to call want partners. And to will that, hard team now for and their customers the I global

Operator

Instructions]. [Operator

first Your Baird. line Luke comes of from question the from Junk

Luke Junk

real with underlying and What sales Dave, point in you from getting timing side of of view inventory to could clear of you're the demand kind out tease feedback demand? channel regardless inflecting. And distributors relative these I'm is to to we hoping and once of view of dynamics? hoping passive will, just customers finally start that If of your just really what ultimately. you your kind is close destocking level

David Heinzmann

business. electronic the for positive above of as our X. Thanks, of been the Certainly, we Luke. it's the is the through been messy have kind Thanks several that see And side sign is quarters a driving a book-to-bill corrections question.

For time passive products. our the X first in for quarters

a that's So good positive indicator.

things numbers which POS the of the past, as at to dramatically little are not we we've there's on dampening about side. as kind these these time EMS, bit walked customer certainly down are of the is But of for that cycles way are level. types the early Now yet to increasing still indicators turn inventories think distributor of work of for through kind kind in a us that POS their

Luke Junk

then And be my helpful. in would That's Transportation. follow-up for Meenal

you that this can year standpoint level margin X.X%. from from bridge us the is was hoping Just at last mid-single-digit quarter a help to business the

was to XXXX? And some digits sustain specifically, just the margins that maybe to high trying expect this maybe single quarter? dip unique and to tease come to or out you would at anything back the And first exiting level

Meenal Sethna

transportation happy Yes, Luke. Thanks, Sure. our to talk about margins.

you well we're working -- cost well. we're profile in along areas, see of line is fruit and and and as which be our that place margin of the other profitability product with then that's a not margin and improved that chain, in I our that So several to quarter transportation mentioned lot really call really several drives into on getting us, quarter, bearing bringing the lines key we at last One, running we're margins. category. administrative some the you as They've over falls sticky. In some we about what saw working also the as customers exited improvement. past product the we've just our cost and our way, I'd the did going the sites that either I overall, but we looking have effort, believe are Really of out rooftop that manufacturing And supply the pricing had for reductions, put and that cases, value includes -- looking pretty in that that we reductions down activities as breaking quarters. as below say can with some put talking at customers results, first then really some expectations. of the on improving actions been through

see activity all look across vehicle to with as that the shifts So side of all that volume 'XX, automotive say ahead some would fruit. of you'll of I continuations I with our that bearing business. on the and And commercial of mix and

as not that margin high it level necessarily overall. may still look we expect 'XX, linear but through We is but this go our digits continue, to expectation single

Operator

Your line the of Stifel. Sheerin next from question from Matt comes

Matthew Sheerin

margins Just high year, from XXs margin a the for now. the targets the electronics question, teens Meenal, particularly for full the on low

can I year. and QX, that would And is imagine just that So seeing you on of margins imply demand given environment pretty a that from growth, still downs weak? I I you're QX, comment customers? maybe And drive cost normal downs the seeing price pricing particularly expecting you're But the this at least QX. you're or know by significant what's going that expansion, year-over-year would to suppose,

Meenal Sethna

Sure. are Why I'll back, lighter. Last And electronics our reminder, fact the XX% that electronics the year, target overall to we've taking we a don't -- range. step cycle raised right? just our about targets, in all as to maybe range. we're This through year, targets talking that's past I think through you where the I XX%-plus few more. address your margin a about so talked because going that margins cycle on something specific that above seen And were of a try years, margin bit we question little

that diversification, all really done of all cost the around the really testament So the is we've work reductions, execution. portfolio all a

of For side the that well. our areas is of the second earlier in a going the semiconductor product seeing in industrial that that our as the now, the select we're side. the seeing first passive weakness this semiconductor quarter question lot of impacts then really quarter market on that what Dave guide talked year, top you're power continues enhanced But on pieces destocking and about that really in into

in sort weakness, market destocking, the where we range. first, quarter second of are that's So

what signs good coming in forward. signs our You out points. minutes tend us these see the we recovery periods then few market, ago comment to coming a strong. margins just And be about of inflection growth pretty positive that's incremental some some and heard gives We Dave's on see

So margin but be really the X what percent the basing than X, on. Again, years, that's to for that through a average cycle we're when the you year in our for range. average, expect at look still lower we XX-plus

Matthew Sheerin

seeing? Okay. it trends the talk And about that within about you're pricing you the and and could inventory also, you where talk was expectations? could And distribution levels versus

David Heinzmann

a gained with has that, of pricing sticky. start the standpoint, -- years pretty few was points the we be that Sure. that last kind take to basis out Matt. I'll in continued the From creating pricing

swing of back that to is normal to be worry periods quarter-to-quarter So pressure. pretty activities. types or seen as of you from what we've be outlook, going that we often, there's that really sort really to continue levels a a haven't seen because there's costs elevated, month-to-month, a pricing higher erode of little normal right? But slower a return have And pricing

get to of channel channel healthier seen couple to that. From business normal that in inventory XX% pricing the levels. we've beginning partners we've the we there. at distribution of perspective, pressures way the there. an While across levels you pockets, would and to say general, place electronics need We're our small of through it sorts a probably on we're in burns seen where more if take look inventory

said, the to position a to we'll are And and impacts, But there's reach that approach the But keeping softer, fairly the positive that. as a we inventory. appropriate, down signs we're we side. beginning also of demand gains are the mind, muted power point get remains the semi us part little go. side business. think the healthier market on if electronics little by broader inventory of still Industrials demand Meenal on driven sales in a levels to there some getting So in that that are is more end inflection opportunity even the big for when

Operator

the line Cowen. Your from of next Buchalter from comes Joshua question

Joshua Buchalter

previous one. Maybe following up the on

to XX% it the be Do way And expect inventory like of up with what you you digestion. the business, of it's half if demand wrapped look XX% could of quarter? majority June to remind through vast the to so, to remaining XX% like? us the in So, back moved your you from sounds but the by us, I the like, know total you maybe end would ship generalizing across maybe normal were the help year, seasonality if

David Heinzmann

seasonality that product the to normal work would others several they're is farther that levels what with our math hit always They're But will you of and channel distributor, it's back when where we've that quite the product some disruptions Well, are and on anymore seeing burn as been the have seen passive year little I'm end and bulk challenging the next and say healthy into point not inflection already. line, kind sure exactly last by it lines a inventory kind the quarter. has we've that the worked we pick in still inventory of the little that what destocking, there healthy by inventory of position, probably position. I a is, to out amount in years. think are think we what it's the our go. But products really through in we'll rates the we That's we pretty of head are target of

calendarization. So have than impact quarter. And a is quarter stronger little the calendarization, normal challenge third because both what's fourth a then typically, becomes from normalized we'll

quarter Second similar. will destocking normal throw kind calendarization. But and are third top of you That on ends. be that of

would end that the the some of will year destocking produce the actually in out, So back expect, of normal half half and back seasonality in year. of better because of start drive could you'll we'll destocking to we -- see that than help or things if all turning that things the still slowing play

Joshua Buchalter

or looks like decent operating XXX, pricing? a on then back points it help the basis envelope And Maybe on quarter us drivers gross expansion revenue guidance, you growth. the understand the X% XXX of could across it. margin? Or of mix, Whether second based it is OpEx? volume Got margin

Meenal Sethna

overall little a businesses and margins again, a continue that work in cost say pick there's are when we that as we sales decline. bit, would do see been up I Yes. to

of discretionary spend, So bit that's work cost done. little whether recovery that on a we've some margin things

we the are quarter. those think second as So positive about I think

the XX the slides headwind the the have, as for and for also us of exchange, wanted seen a about a, basis currencies to mix points we I other is with strengthening dollar margin, The fact, quarter. And then we in bit second just where that have a with been our quarter. quarter of little I on of the happens of I have because of think call those know provisions some our stock bullet for us FX prepared compensation the that that in a grants, who mention this vest second phenomenon a and historically the a we've comments what stock there's foreign second that are in bit things on

while It's it it's a outsized recognize not we so the in have versus And an quarter all cost. it just longer to that second over taking period.

a So there, second That's that's $X.XX sequential impact a just about in at you're if looking little the of pieces. too. bit quarter, hit

Operator

Your comes the Christopher of line from from Oppenheimer. Glynn next question

Christopher Glynn

had about pruning. I the a question

I is or impact. there. if it narrower X% about Is from that scope you -- the predominantly considerations? curious couple took think, and just a to market process dynamics Or adjustment? X% And service down, and year XXXX this this related X% a So to timing is to market of customer a

Meenal Sethna

Yes. No, Chris. great question,

where on portfolio, both customers, pruning the if understanding on a take granular really, and of really pieces the pruning for taking is a back, the I at the of the products pieces. So us, step side, the those look more profitability really

an doing return bring value return. business with and possible, prefer we it ultimately we customers. balance much as to really customers, where So as incorporate at can trying that the expectation but to of We the to it's we for continue the to has prefer a and profitability profitability us, in retain

and case talked back number some this again to a we've stick. sticky. we profitability, little even So up found expect numbers that, the a to specific about quarter. bit less, Transportation our at in to gone where number around brought as ways to case price improve internally pruned and In this looked we price, the back bit, we had went we customers a And a of that maybe and hey, pricing segment, we being little Dave customers have of down our of of we

that's So trend driving of little pruning. what's a that less really where really bit it's

This through level I now. And look continue going this as a don't I would expect constantly would this because right I this either, say, through is we not we about go we at this look at. the much. segment continuously. something is don't go through one a this 'XX. say We But is we're yes, that done will it and as year. that bigger always it this talk to transportation effort But into is at just something just also

Christopher Glynn

Okay.

So chance business a point discussion year you run good a not next it's talking theory? beyond of in the how

Meenal Sethna

Correct.

Christopher Glynn

And want half steep and year industrial for Matt's for to result electronics back electronics about mid-teens questions to the Okay. to just for I implied the then go full second industrial. margins to ramp get upper teens and

look first like steep guess, and really quarter it I and that just a guide, know how the Is related? I ramp. factoring about does volume don't all But mix absorption are into second equation. that

bit to kind of So understand a better. model want we the little

Meenal Sethna

Sure.

and So a you electronics different little asked both industrial, both. bit on for

talked some And and as there. won't destocking where inventory end. replenish counting side, volume right, to signs, will the electronics improvements, we about. see I -- Dave that growth drives reiterate we're a, start definitely the the on On some right, definitely, we But everything

So that's part of it.

that continuing to seen market there. some we're we've things especially the the semiconductor some also consider There's look cost part at, as weakening also business we of where

So about X the electronics. as think drivers we those are really

a the margin counting basically bit on good and the done some the strong more there's say also would some past Industrial, little volume, feel that over about business we're on the trajectory So that's we've just on several I yes, years electronics. With I work on. internal years, going we've few and inorganic organic also really where growth. had but That's that, work past some very over the

work well. the doing footprint right closer there's to around we're customers, So as getting and adding we're also scenes capacity cost make a behind to of structure sure lot getting the

in of now. first a couple midst we're saw these of you quarter what actions the right in the of Some was

so drive helping And we the I what's there quarters, manufacturing few in to recognize constraints, and were that some expect also to the that's improve costs also profitability. some next that

Operator

line the of from Our Jefferies. Saree next Boroditsky comes question from

Saree Boroditsky

what talking Just about. just building on you're

impacting for Could margins that You you can manufacturing us quarter the size think just mentioned issues first there? some Industrials. in so impact in recovery we margin the about

Meenal Sethna

would I it I X out on we equipment also moving we Yes. constraints the as I incurred, were around. costs as mentioned capacity into One, think but mean, getting say some things. just weeds, some just about things I some would additional

perspective, drops on And or course, I'd line, on we the of a at So I'd into probably just looking margin. of cost. were points couple a point the growth top of a so say from say growth maybe which, then

again, as I we we absolutely better. bit quarter, have the activity So little to get but we that, here in expect it expect still work second through a of

Saree Boroditsky

It you there. helpful. we Maybe overall the you provided we you think remainder year? some just think as industrial and think and how as on about That's about as actually improving market end do some signs weaker about demand Industrial, how great destocking, of the detail impacts that sales talked seems the about, think the of markets about

David Heinzmann

of parts business. impacts X would that the to of different of industrial, Specific kind kind softening, I our Yes. say,

probably were up broad-based is mixed kind Within shows where demand. about clearly strength. it the also had saw heavily segment, and it our side but there of that the next Electronics then some segment, couple prepared bit slower, areas quarters. talked broad-based And that we that to indexed continue industrial And our expect where that saw signals little other our the it. is a areas in current industrials. remarks, in softening view of we business Power that we to of can semiconductor In we for There,

level driver is of things, is for in in renewable kind where other grid and storage X the So -- the tend is slower. energy side But there like we've has energy. continuing One really grid the we be and big of continues slowed, energy categories. and energy of wind installations us side seen level And sort solar that solar to the storage robust. be

start a remains we the view our that perhaps for a that industrial back space best before pace So now quarters right seeing of stronger. little slower couple is probably at come

Operator

Our next of Williams line question comes from from David Benchmark. the

David Williams

how consumption. you're across way And feeling to the can you're you about supply about to is a there visibility under-shipping level the to your full guess chain. I of maybe there think maybe first, speak maybe level relative in

still you've get good mentioned there. better inventory some Or getting I feel least think was it at elevated, the view like granularity, you that you to challenging that's EMS, but but past, in was better. mentioned a

around that those anything two? help could just there So

David Heinzmann

talked Sure. our how And long-gated business the a of a been in that, of we've side electronics it's about cycle. bit

up So it's more of on a that we we really the driven EMS, historically, than been and is on this end the have based have place. in is the analysis than little that seen that out the customers has typically and we past really of work do because they that our inventory customers, peak before, to little bulked trough were all cycle with OEMs, fact think longer disruptions a taking

that's of elongated. kind So what's

end a to handle we as better now, right So get customers' on try the inventories.

We have them. with discussions

is, point sense We the way that customers. What partners have in is this what our of discussions seeing from, general we're to closer sense example, at and an they're it's EMS out. distribution they're kind demand on a with getting as working to its getting what seeing time get of

end our so course, level. the have next in partners in distribution that, or that the channel. a visibility, get to we quarter So more at began maybe full customers of normal to to access the And

a we as what more back out year. confidence to a a mix gives normal of head that's it. will sort we a of bit the into -- normal little the things sell-in bit So sell a back of us That's more think to of get mode half that

David Williams

on -- thoughts under-shipment relative the And Okay. about -- demand? level of to how any what

David Heinzmann

complex distribution looking inventory And one handle to harder at on the get burn lower is Yes, POS to piece the is what that And at that's -- really on month. that. the every down a comes partners. it's it equation our then a

partners, So I of while put burn we crisper wish EMS this you I customers. bit we get because that inventory point that. could OEM our It's give is around what can't you arms a at on at or we at to kind can challenging customer the one pure our distribution it visibility on exactly the tell -- a answer

give to for challenging us well. you more little visibility visibility that. it's on fantastic a it's And to So great as fine have

David Williams

then That's fair. lastly just And here.

a it's being quarter. seems issue. up maybe it And of up about demand the a it fourth you still you're coming pointed thinking semi fair looking out more Or is maybe quarter, think maybe last demand there that to I the it's still had now But in if some of like a cleaned clean? as think way and to kind that, is driven that inventory you're demand? is of excess across little inventory softer

David Heinzmann

Yes.

we X pieces. business, Within the piece semiconductor our have of

lot our to Semiconductor the still more inventory excess our channels which We business. our and a in like through. there's way behaves have some Passives work protection

probably things, side were the excess opposed semiconductor on the things. our inventory On about power backlog inventory there excess has at really talking sites lot not semiconductor been of power as we of a because to side of more

with have itself that to our the in that, sorts things back industrial We're softness is levels. And and markets. cleaned alone we brings lot seeing we're kind the there softness. lead where backlog, down not a then that of that then a power side that side, seeing broad-based that. to shipping times in up we're which would more see in We of normal on there, We're industrial addition of of semiconductor

in that I think in well as think peers of our areas of some at things about right seeing seeing where that point industrial -- And a they're time. like that's slowness are this of lot automation that, now.

in inventory as backlog demand So overhang we've not lack an cleanup side. so slower got the but both drive much little as a of to there, well that

Operator

Glynn next Your from Christopher a the is line Oppenheimer. follow-up of from question

Christopher Glynn

comment HVAC about you made I there. signs a just wanted about on to the ask bottom

bottom? XQ kind is behind the that? by that more the pressured Is I think what signs you almost acquisition, a like expected? -- default, So but that much what's the contour the Or of comment? that's it's than are Hartland primarily

David Heinzmann

Yes.

has distribution, It feels which our in they're beginning behind aware, a think of primarily that piece getting HVAC inventory Controls we're are which pretty inventory the elevated, things Hartland been of that. that heavier their the that HVAC I the has inventory. comments residential where, like with customers' -- some really is some from and clean as of the business, our the that driven you're channel out of view they're certainly of to of space, dampened up signals demand like customers on

That's a demand that back. bottom on but -- side. view there's found It's of about, positive or of from a so of trend there. not inventory the little it not bit us kind talking snapping And bit I'm feels what orders on on like it's

Christopher Glynn

of lead Okay. more are the normal opposed the Was 'XX? as then X? bookings greater behaviors so? to 'XX times in And you book-to-bill projecting and wondering And put color than it if electronics the being on materially kind different any

David Heinzmann

Sure. Yes. of Yes. lead reflective Absolutely, times. normal they're

Our are times in this time. lead quite electronics point at our normal across business

business. that. part of it's So specific the about that's step. they're book-to-bill talk yes, And we of above being passive X.X, But below side power X. to is which business semi nice about the is pretty reflective of X, it, the when the a The actually passive

So first time book-to-bill it's positive quarters. -- again, X seen a and we've there in

sign the the another about look we inventory orders, are get also starting to us when So that to bottom coming short you short-cycle as for signal get in. see burn. is been really find cycle of which orders -- has at we're to end more we a we And the and found that

Operator

over will back concludes question-and-answer closing call now Kelley final some That session. remarks. to turn the David our for I

David Kelley

Conference. X Boston Stifel and look wonderful Conference Insight at [ you. Cross in to Sector day. X, with New Thank Thanks, Baird May in the speaking Virtual June and a Oppenheimer Technology We ] X June Have forward Services everyone. the you also York. Global The also Industrials Growth Consumer Conference

Operator

concludes This participation. your call. you conference today's Thank for

may now disconnect. You

Littelfuse (LFUS) 1 May 242024 Q1 Earnings call transcript