Littelfuse (LFUS) 3 Aug 222022 Q2 Earnings call transcript

Good day, everyone, and welcome to the Littelfuse, Inc.

Second Quarter 2022 Conference Call. Today's call is being recorded. All participants will be in listen-only mode. [Operator Instructions] After today’s presentation, there will be an opportunity to ask questions. time, of turn Investor this to call At Head the Relations, Instructions] I the will over [Operator Trisha Tuntland. ma'am. ahead, go Please

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

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

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

an which above delivered strong results, very which start were Let's We with expectations. second X, overview of highlights. provides recent Slide our quarter

operational revenue leverage increases, last year. adjusted our to and our by of customer of from acquisitions. broad double-digit a by Across range Electronics, segments, by products sales Industrial and within capabilities our XX% and Transportation associates. We compared volatile achieved recent of driven and creation outperformance attained growth demand driven strong for Our resources our we pull XX% our persistent and the of was executive expanded earnings continued environment

team's our half safety. strategic the market-leading cash ongoing and structural would sales with of is in end growth global our around Advancing execution across quarterly quarter. and with and to our growth sustainability, capital I the for first Our the breadth connectivity capabilities we deployment within double-digit technologies, earnings C&K. return like the themes of to Later, priorities, shareholders. reflects a to share thank our rationale This testament markets to I to XX%. Consistent we C&K long-term ability XX, C&K the previously on will I our our C&K to by of more excited significantly confidence July customers allocation am for initiatives completed another increased to announced acquisition value welcome Switches. expands talent. organization. have of our strategic on serve our and our our associates great commitment business world the dividend our

Our and we relentlessly global fulfill sustainability and also to the customer our sharing demand shown to overcome ongoing commitment across obstacles initiatives have daily organization, forward advancing our safely. working passion look their success, company. teams report reliable continues continued They to our have deliver to we this particularly our solutions publish sustained people an year. we which skilled is differentiate progress innovative, later of the I'm of highly when to while customers, and our our which proud outcome

performance on Moving our segments. within to

connectivity end distribution X book-to-bill offering strong Average partners of and with normal revenue like delivered strategy. and quarter, channel at segment by profitability, was hovering diverse by enabling upper Products and sustainability, customers' second greater factory inventory our go-to-market telecom range. around our partners. products of Electronics of In infrastructure. weeks particular, all infrastructure, with growth automation, was and data across and energy centers, our driven building efficiency, the demand our applications, sell-through charging the Electronics product electrification Our strength our our vehicles the regions, for continued driven from are Exiting along at combined

are However, pockets there inventory some where remains lean.

Our tough Transportation Products performance a delivered segment in environment. solid

robust backlog, able Carling to of business, by and to Xs products, we vehicle continue grown with high-single number for our fulfill the Tier demand. car lower for our and order unwinding factories. revenue year's outperformance. been was realizing demand our have to passenger our Our our business Notably, compounded Carling to by growth vehicle opportunities production above are strong ongoing expect our passenger at and increases our result, see combined in high-single has we shortages, record And we digits due expectations while drive this as output build electrification, long-term a Within growth declining a build vehicle and and inventory forecasts. last OEM our on vehicle basis, a acquisition. driven ADAS production ongoing have lockdowns portfolio of declined and COVID We initial content commercial market car has Since a global annual electronification business XXXX, impacted China digits. material ability reflects legacy

backlog ahead, Carling our continue to markets and in material with a agriculture construction target and strength handling, show healthy strength groups, we pattern particular product Looking see equipment. across our demand for

Turning Products our to Industrial segment.

enhancing to productivity expand strong and while and cross-sell, record solution multiple Our performance efficiency delivered ability sets operating include revenue profitability. to technologies,

and in success on energy focused demand solar, markets We vehicle and electrical sustainability, such A our electrification. enabling HVAC. support charging customers' across of from robust comes safety, renewables applications storage systems on part as continue to capitalize large infrastructure our to our strategic

computing. data centers are We cloud for general demand seeing also applications robust electronics industrial like and

within our Looking performance and ahead, additional financial fundamentals provide strong our strategic third quarter color Meenal will on the outlook. strong. markets remain underlying

reflect and Slide the and the of team's power which our strength is successes execution Our of strategy ongoing X. both our results on shown

annualized opportunities. transportation strengthen we markets of applications, and and our Since serve Heartland telecom to Controls in sustainability, are on We renewables in of of end deployed organic safety. C&K, XXXX, million sales adding Vehicles, within acquisitions, pleased of diversify which and through acquisition to expand acquisitions, approximately Carling are industrial growth Building $XXX and investing a our serves and and capital organically we've and acquisition complete Technologies structural HVAC, $X the we markets. for and both variety connectivity growth, end early Commercial further themes billion for infrastructure and our Embed the

We continue to make to development, business advance investments organic and expansions, product in presence new initiatives. our digital the capacity sustainability

our presence strong making industrial, across and high-performance XX interconnect and manufacturer We to electromechanical end investments and to X. datacom brings are growth is of are long-term designer on deliver over continue aerospace confident we as for years reflected C&K and returns of and switches transportation, Littelfuse the experience leading profitable a shareholders. markets, global solutions, Slide the will

strategic addition We are priorities. about close very the excited C&K alignment with and our its of

approach value core M&A leverages to for towards Our markets stakeholders. competencies, accelerate positions success our higher our all growth our in through diversification, creating disciplined us presence and geographic expands

X. customer comprehensive Slide and and capabilities our combination solutions companies to high-precision our and C&K base. technical on offering technologies and manufacturing, our to Moving The leadership and significantly and to deliver broad capabilities, actives. our expands miniaturization designing application our engineering of technology enhances a enabling us expertise,

relationships respective integration and strengths. highly and and are India The selective with channels, our expanded Vietnam. in global enable including is partnerships leveraging complementary businesses look underway, we leverage Our OEM us to distribution our capabilities forward and footprints, to

end end we markets on on wins we in of with serve. design Industrial business Slide move the new knowledge are highlights to let's markets our our and Now Within and applications breadth X, generating products.

We sustainability. solution are set focused expanding on

our battery systems. technologies storage large-scale a achieve With With based our the reliability, new second battery delivering and design equipment. we position formation our scale we reputation home-based by on with activity energy a product in multiple and beverage HVAC, standards During cross-selling for drive restaurant into quarter, major and captured equipment electrical chain for customer our business manufacturer, in to relationships systems Within commercial In safety our expanded compliance. and we capabilities. for to designed industrial buildings secured large supplier. applications, opportunities was and kitchens market elevated continue engineering with

industrial shops, their focus diverse and grids. also we quality and on welding product vehicle in power We and business continue sustainability given our repair With this used for are collision safety. drives customers high leading with won elevators to equipment motor content intensifying and expect electric increasing offerings,

our are our expanding wins the on to market of we transportation electrification platforms. Slide end vehicle X, with Turning

increase During quarter, second the positions across vehicle battery new to electric applications products our investments multiple whether within our an electric us vehicle. allowed in or engineering and full hybrid a

protection, and technology battery new our high voltage performance and vehicle Our technical secured early distribution or off-board quality onboard engagement, and management and electric strong business. reputation secured significant power opportunities for several high-voltage portfolio product charging, chargers support in

presence our enabling market. ongoing to and with global the high-growth a vehicles, this playing we look in our transition to role is our applications, expanding forward With company tremendous them end customers' electric

architectures. wide our won and vehicles, For range for Automotive the an functionality of captured products a technical In met complexity customer and strategic long-term With our end comfort we our convenience traditional expanded given passenger business. our quality Vehicles, and our project buses, our and Electronics, telematics, global electric high In existing increasing In us which with applications. reliability solution relationships business, markets. and requirements, we trucks, products. European we Commercial customer infotainment secured unique we with in heavy-duty leadership business stringent won Carling new and

won us. synergies broad pleased battery for business We early of management and see control are with we a our In two- powertrain We sales integration modules. three-wheelers, electric success. range and of systems ahead

and For business applications. us for of with our Carling which capabilities our growth, applications. investments and are transportation seeing opportunities, the growth Embed, With continues within we new for commercial forklift infrastructure, to continued vehicle we portfolios position charging expanded well wins expanded addition including

Slide macro greater XX. trends. favorable markets, requirements connectivity drive continue to on Moving end to Electronics

data included strong quarter, acquisition presence delivery centers in wins based support. on from telecom business global second These and products based a During we the features for applications. also telecom infrastructure product won our on and Carling

portfolio Solutions, systems go-to-market model business security far-reaching our us Building and multi-technology and secure to deep door enabled for bells. smart wins For

drove opportunities C&K. general our of efficiencies with purpose We brands. our appliances Our and expanded collective support market wins on ongoing look building and forward to is with and business robust pipeline various long-term safety acquisition electronics. The towards push industry-leading further in the expanded our of completed engagement and positions new

of continued for successes as serve business a will platform winning combined growth. Our

applications centered to extremely and are sustainability, content We our well within connectivity range electronics safety. wide of the across expand proliferation a positioned of

the our over call the long-term to new business our and our acquisitions, on that expect have from growth We range additional to worked we wins and with business that enhance to new solutions. business build opportunities now new pipeline capabilities growth. diverse Meenal We've organic differentiated will applications. and financial of will been color robust of performance turn coupled of will and outlook. confident activities, a represent with fully and significant all sustain end Our markets am our I provide also secure I hard a

Thanks, Dave. Good morning, everyone, today. and thanks us joining for

the was Slide with up and We sales our of quarter guidance. XX% another up year million, performance, start $XXX XX% XX. exceeding over high and delivered Let's last organically. earnings end Revenue strong

Our Carling XX%. acquisition added

margins due over operating revenue margins adjusted reduced XX% points to exchange our weaker XXX were by EBITDA XX%, last Foreign XX.X%, nearly to solidly GAAP EBITDA XX.X%, points and euro. up were basis while margin the margins versus basis year. last X%, year mainly target. above were up XX% Adjusted XXX operating

$X.XX, earnings per diluted up and $X.XX was adjusted EPS GAAP quarter year. XX% last share over diluted Second was

jurisdictions. was XX.X%, across higher we than rate XX.X%, had effective tax adjusted expected slightly effective our is rate tax due earnings GAAP to Our mix while

sales and our strength which to able end to strong across call continued across we diverse headwinds related extended quickly, performance had and lockdowns, out a we're than our China growth impact expected. longer some recovered We offset We We'd by number led markets. the with positioning markets. other of of

to price continued were teams performance. quarter Our continued inflationary the along cost again to margin reflected offset to This, year. improvements, manage is on for remainder our focus in this positive productivity the ongoing pressures. and have expect above-target pricing with of the positive remain We

free of cash We on cash maintaining gives flow We our flow, strong our on flow. $XXX The continue of operating capital We cash spending ample to million generating Slide depth priorities had levels. cash invest us XX. discipline across generated income. scale while for execute growth overall allocation continued our $XX quarter, XXX% a shown million in net and businesses for conversion capacity generation on to in

months, enhance deployed to the in growth. diversifying we've C&K, remains acquisitions organic And XX the focus capabilities reach talented company. first ongoing adding acquisition capital with end Our four and market of $X by on in billion investments teams the across our past our

a XXXX, earnings last inception Our our annual our compounded and dividend in XX% power Board quarterly a of long-term XX% in growth. Since has of grown resulting Directors strategy increase on our cash the basis, approved dividend week. reflecting

$XXX our terms to at balance we've of forma this acquisition facility $XXX past on on few improving pro debt. our the reducing the and additional we Incorporating costs Through target and million investments. credit months, end our the range. of our outstanding took debt-to-EBITDA activity, our low and sheet by mid-July, growth of Over strengthened debt support remains C&K, leverage million

Slide Let's of comparability provide by our enhanced move added inorganic XX. to the We've segment commentary segment by to breadth on EBITDA Electronics. organic investments. Starting with margins given and in

Second XX% XX%, XX% basis nearly both XXX quarter were points over EBITDA organically. last approaching over revenue year. grew Operating margins expanding margins with

cost pursue productivity We continue to price to enhancements. drive and positive

our across performance operating across reflects our averaging of current in combination margins range. the varied the expect We the and Slide sustain will dynamics markets. dynamics our segment mid-XX% On execution transportation XX, market

up volume realization ongoing with both EBITDA price points, from more are margins vehicle across business and points, were were passenger in our auto negatively business. last build auto affected over Organic leverage acquired across On realization. margins Slide with XX.X% and X%, recently of margins offset unwinding X% execution. margins commercial XX.X% pleased year's and XX% basis along we down EBITDA declines. vehicle inventory XX, nearly Industrial XXX sales, negative and by Operating Currency were benefits lower basis expanded outperformance price which Tier XX%. operational Operating Xs XX%, over margins global Our sales organically. impacted organically XXX Carling driven by than about from grew production sales

see we benefited reduced quarter, as logistics to also inverse lockdowns, the in in we QX we'll due the While from the operations. China impact costs resumed

over prioritized our value disruptions markets for of margin the external year-to-date reinforce managing and and basis Our agility. year, customers XX% drive driven with growth XXX have teams We outstanding high with performance XX%. growth sales expansion EPS points growth last adjusted versus risks we and while of

to personal most electronics markets, Industrial, our we including in end XX. and are Moving markets across segment. and as Slide our softness some Demand such seeing but remains areas, Transportation end strong consumer-oriented appliances affecting Electronic Electronics

quarter, growth versus For million, midpoint. sales X% organic at of our we assumes in year $XXX acquisitions. to $XXX the and last XX% the third up million expect growth from range XX% This about

We're points third stronger be in rate. sales to the $X.XX in X% XXX versus headwinds of $X.XX, full the last year With quarter midpoint a XXX of adjusted range we're points quarter approximately for dollar, the basis basis to at the year. down and estimating and projecting assuming EPS tax the XX.X%

the a are in XX%. projecting full to range third XX% A We points tax year key of effective few quarter. our adjusted rate on

our accretive we're which First, last sizable on acquisitions quarters in portfolio dilution versus in margins two stages, EPS. our includes early and months to point integration X.X forecast acquisition, year. XXX our is past With the to of to seeing basis operating acquisitions, about company C&K few new

which normal last operations. is are We a million at for from combination in we run July, quarter rates. run to a forward of also this basis expect in quarter, and Slide recovery point of one about This XXXX company Industrial at point basis XXX back $X.X $XX headwind lockdown rate sales million now and The COVID about and EPS, current sites and We'll in navigated X.X in increases full XX our for and driven shutdown per the about of XXXX assumes of deal million $XX through XXX a additional interest last interest Electronics and assumptions $XX another million amortization China $XX all to impact quarter. year, versus affecting year. XXXX margins expense includes sales issuance, have additional to segments. months forward to of which a C&K our net our million results, debt of to ongoing amortization. estimated of $X.XX million expense With our rate $XX a the

capital with $XXX day. expenditures commitments for maintaining and our XXX% I'd it us our on are on million associates to thank every We comments. year. Dave conversion cash turn to final for And that, in some delivering flow million of back to $XXX everywhere estimate who stakeholders projection count our to and I'll for like our the free

XX, safety. customers' strong year-to-date to and In we global resources themes capital drive applications, enable to capitalize Thanks, the Slide remain to sustainability, reflects Meenal. growth of further future and and opportunities our we which With results. hard current well work and extremely team's on within summary, commitment delivered connectivity structural deployment performance, very of unwavering our have our positioned on global ongoing

volatile continue Q&A. a world, to growth will we with all associates and now our can ongoing our the value call excellence and investments back talent for will for drive the focus of I control We deliver to confident within the turn around operational to that, operator And I'm on market. our performance for what stakeholders.

Thank you.

will We Nik from Research. Todorov begin session. first go ahead. question-and-answer Our the comes now of Instructions] Please [Operator Longbow question today

Thank Good strong everyone you. to organic another execution. of the I would first results question, Maybe morning, congrats quarter and on and like zoom on a outlook. Hi.

I -- me? multiple think about can you hear you talked

can. we Yes,

Yes.

I'm sorry.

puts you talked of in to year-over-year in takes, the I'd understand multiple XQ. think X% and I and but just kind organic about like of zoom outlook

called quarters. recent you are a of inventory impacting of seeing And any X about of automotive? relative bets that? talk signs slowdown out So outside adjustments what in Maybe what to you Tier the some

-- it's let Meenal. Nik, So me start with

organic. I'll made you acquisitions. Let on with as number and X% Really you we've starting of me year-over-year overall, start sales growth a -- just with frame know, give XX% that significant a

taken well, And frame lastly, as in as One that that's was partial that's were operate an hampering remarks. production fact talked line for to we organic off quarter. that's inventory shutdown, in COVID, got but so of the third at about top had talked as a operations for the is on fact then we the the But in little July, softness headwinds. where of sell our about off in us. that we out and were electronics, additional bit also organic. sales we've the shutdowns to to Embedded say, year-over-year were in we general? able you talked quarter, or color in And the the sell a two about seeing also second X% kind third our able of basis. on a overall growth cetera, et with -- couple coming back we quarter X% we've that about that's the build of of also bit. X% also markets, to that small bit some XX% a we've in about that little hampering acquisition related to consumer-oriented our personal appliances we're end And but continue And items I a in so a COVID we And well is bubble, FX in up, from prepared now in organic X%, wanted we that what also hampering able got Electronics I'd inventory, the portion, and just then little a call

Nik, you're what's position on going kind asking of Yeah. about and the inventory so there.

our continues sort electronics First the small in about a would of Very portion it strong, POS in say, all, end very Meenal talked to to robust. markets I Electronics POS, quite be of except continue space. the distribution strong so of be for, as side personal partners from

the area. kind level our that So talk XX We for And But partners about overall in And our broad to that inventory. to of continues we're with about prepared portion in of is our demand electronics. in what's talked very normal upper XX tablets, that as range white the distribution we've an robust. appliances, remarks, normal overall, inventory of be small normal somewhere weeks I think line distributors, range. the often in weeks goods,

well are still there some we have position pockets However, where also channel. still as the lean inventory in

Very helpful. it. Got

have stood gross of out. Second question the really I margin XX.X% is,

in think I to think model, going I record XXXX. go back my if it's I back a

price you talk some you Meenal, puts impacting being can maybe think So takes and talked positive. the about to about I cost of that?

the be I think previously the half. first anticipated case you in that to

seems continue the going behind the going year. second it's be reasons Now that to that's levels? the full like and these -- sustainability to it talk gross some of a through of margin the you Maybe at to can

Yeah. Nik.

we rearticulating our very our that So I really teams few again, lot a Automation. our not we're the also fact general, -- where fact job talking tremendous sense, to been that like have in continuing back job execution, you lean these about spending fact providing customers chain that challenges, is where out, of simultaneously, I'll costs years. have we that, that's wells I where call generally stands around done this talked seen automation of right, we hear we a makes that really in cost supply and productivity through come around done about our times that heavily just strong we're have those from. and tremendous And really head up, pricing that we've gone able on, making to about Those have talked we're very actions the value been to where and past do They've the and about and the the folks where lot really very the teams through operational inflationary and really navigate -- price we're a capital sure has shined. all but activities, really value of that, initiatives. them our base payback robust really this, prudent we continue pick those a while capital-intensive, include

our really you're results. through in shine So that seeing

Got guys. you, it. Thank

the Appreciate Thanks, Nik, questions.

will take please. next We our caller,

Our of go next from question Sheerin is Stifel. Please ahead. Matt

Matt. morning, Good

Yes. Hi. morning. Good

guidance. your another Just question regarding

have be see inventories overall -- starting down adjustments? you it in a follow-up. a I of Asia levels of Electronics providing like and at Are sequentially. with seeing normal But And some that are talked within book-to-bill about revenue the It down you you're as to addition you issues to high guiding the -- sounds Electronics Thanks. exclude expecting C&K, sequentially? looks you you at are like headwind. If the end,

Yeah.

to sales, very sequential. just would go my are year-over-year of So to comments I back some similar which on

of Sales You're about C&K that Matt. acquisition, so. months or right, growth X.X coming the from

So euro, Dave's in some I two seen I'll But that's bit that the around, bit side, not last headwinds that of the a headwind. continue on articulated quarter. the where a another shutdown And mentioned the weaker then embedded especially versus currencies, we've that's quarter FX there. flip even the a were in have call it COVID also because pieces other little we of to now expecting partial China third

And bit there's so the quarter. in that's hampering little in a that softness of bit consumer-oriented third And those just markets. a

markets remain a softness. revenue overall, take peak we're say, a So look at point two of we've a we're enter we're to And but also that end seeing over terms past pretty from years. at level where strong, we come growth I where would when the in to starting

a to So to see strong, temper bit. you're past is the it but going continues six, the off we've quarters be growth -- eight it's much grown over that little -- so

of we small which about appliances, really Matt, mentioned see. And on POS our a Electronics remarks, little softened the than customer electronics in those of base particularly of the a prepared strong side, broader demand that market still space, the we kind we thing, the in electronics that other pockets kind be continues small talked that or from personal in mentioned a where but is, has that lot bit, Asia, to Meenal

there. shifts major not expecting we're some So

business? is of... us your XX% segment than remind Electronics Less is personal you what of percentage the Could electronics

Certainly company, within Electronics, it's XX%. well as less a than below Overall, Yeah. XX%.

but business. it's So certainly an not it's majority aspect, of the important the

about But actually QX, markets And about back QX, think offsets some down. reasons come your like of think you. QX? over those how could of margins are in operating be because on margins, of see that you your margins this year? going would looks gross down back into But quarter backing -- the I about. it should last for gross sort you margin of some are below Thank Okay. It XX% and typically, the then into improve and we looks the to the talked know as expect margin. we

Yeah.

and QX about then think I'll we So talk bit a QX. can about little

have margin, always a we And So as lot some have the over acquisitions integration we've gross made second, just said, I a if right, quarters. past now which an margins for is OI we've pretty of plan. few significant

We those little margin to to that's we're owning after. a in lot also where going acquisitions, going comes and have because tend bit affect value But that's gross the dilutive, early drivers that our they creation margin tenure of of from. be value

about that's think about when that XXX basis dilution. of points terms margin So you in

think I on exchange, also a margin. has is secondly right? direct That impact gross foreign

rates -- -- that that will going. don't So where know are

can't that fourth So of answer the impact on the quarter.

So I'd the I expect acquisition two would probably still say there. those the biggest are will ones. dilution be

think into FX we get to seen. As quarter, I be fourth remains the

about margins in Electronics. Okay. just the Meenal, Thank you. talked you And one quick one. last in your comments, opening operating

sort target I the Was a that. I a is think been going the has that target your think forward, longer-term term? of below mid-XXs. or near-term in said longer you target

Yeah. Great question, Matt.

that the offset the talking we've before, mid-XXs what pressures with you've in averaging really about current time that inflationary with by got was So -- to really about this able at current been seen the I talked where dynamics. pricing. not unique dynamics, And this I'm we've

to So realization we've in seen the current We maintain some current coupled are able cycle. this the environment, XX% that. those of be we'd think average price very the through dynamics, strong coming with that from volumes

cycle. the Through

right. Okay. very All much. Thanks

Thanks, Matt. Appreciate questions. the

take please. will our next We caller,

ahead. is from go The Baird. Please Luke caller Junk next

Luke. Good morning,

from transportation-related the me morning. for you questions this Thank questions. morning. Two Good taking

the the in to I this growth. First, unpack start hoping all quarter. digits And want transportation we just with can mid-single growth down

dynamics? or the impacts the or that that from quarter segment for half either additional third year-over-year anything else mean should would it of remainder second standpoint? either what year? Specifically, Would the anticipate potentially into baking is in any the growth be Or from there you we a sequentially channel

The we of as -- as about prepared saw down of in billable where remarks, globally kind portion we down Sure, in in car market X%. the revenues Luke. talked a our passenger transportation car the

the of for a customers take step mid-teens that about stop, for world. to have build in had talked inventory kind pass to OEM if us, inventory car our at and And portion of look years their two being the first back We build that you last two the running outgrowth customers for years year, we've being we that pushed some by remind of position. and their were of last all,

year So was some of last the build. level revenue growth inventory

inventory if third year. look think So quarter, it's two kind One have combination we well, of at versus an we last of build don't things. is, our I year in a this

automatically to comparative get unwind. top So inventory. And in we that, quarter we're inventory some not did some decline the building year-over-year on of see then because

bulk of down in the that pass of kind of driven car the by of kind was side inventory revenues positioning. our that really So portion

So long-term strongly kind the to to outgrowth we feel X% of very overachieving have X% still in that strategy. continue our about likely we

Okay. Meenal Great color. question a maybe for I appreciate the transportation. on that, Dave. margins then And

Just hoping the also at some through level. where sequentially -- bridge. quarter the we more mid-teens margin it commentary look we the could hoping gave was first so on you could versus towards walk margin year-over-year was I the

that in should reported sort in of first the want in just number there nature of that we would have profile? changed second then understand quarter the to in -- hamper else the was that quarter? margin the comparably aware if first And what anything to you Just anything sequentially, onetime be might

we're the exchange unwind leverage I'd that's on it from some call negative that impacting that newer volume sequential, that I'll is margins say from that's are, the the going the talked definitely of whether the from say year-over-year we Dave Look, hampered Yeah. inventory some I where well. its as some seeing the also they're foreign margins. about also. -- would of really of drivers or issue

multiple business transportation are nature. would selling a quite around customers tough. vehicle with Our And commercial component parts currencies. multiple world, in is the I really I We're and in of stronger still that's the the global our business, inflationary even there little X dollar, prices say operate Tier impacted say, we where And definitely would us. costs

different. than longer value job where you it while customers the price the where is tremendous would base done -- around that a really still recognized, that's realization pushing team so is customer And taking versus ensure really versus has to our with OEM on

Okay. go the Great. for there. I’ll Thank you ahead leave and it color.

your Appreciate questions. Luke. Thanks,

We will please. take next caller,

is Cowen. Buchalter caller ahead. Please Josh next go of Our

Josh. morning, Good

Thanks my morning. taking question Good Hey. congrats. and for

Thank you.

bringing, about is I wanted lot us margins, I on relative last the in pricing of but realization sustainability of Is forward? know, rates -- and to the couple about hoping guess these normalizing don't talked of long you bigger the talk a you're asked to I I'm [Technical the customers Difficulty] levels a despite the power. sort the from was we've of you've reflection the term just this I a of quarters? picture sustainability discuss that value ask inventories above the to gross products your of, any going there of

your what I what were few I had the little that, Sure. a past but sustainability heard? very Josh, some profile took quarters, bit, strong you're up comment breaking asking is away you that we've about and from is of for margin the

Thank normalizing. of sort customers your at right. inventory your of you. That's light In Yeah.

Yeah.

step cycle. on the company averaging talked a ago. the about XX% back So a about Day to XX going margin XX% months We've about Investor high-teens, what talking in always through profile across target to back even from our been the take that we've and I'll

provide where definitely So internal is profiles through talk the gone teens. an still we're to down that. sure we'll at I to elevated a we've and probably That's are swings. again, to be the back to keep that of about and why cycles these the coming But which markets going of includes see margins. that we we would stronger doing, go and we means say, understand quarters some different execution making through, try in different stand work where the up customers see some definitely going we've than we're lot businesses just margin operational there times, margin movements value that we can average in have high company that driven a knowing terms by I

what or that congrats try number a you. sort to wins you weakness the any potential then going? EV-related segment's sort we digestion and insulate out could the content again. as drivers. providing revenue now you that called contextualize different help can of way and levels that Thanks continued help Any Thank understand to from us And Understood. unit of in deck, of how

EV into what in that Industrial designed in in through about kind battery of the electronics comes question exactly out eMobility business our really as EVs. electronics understand systems, market But systems, in becomes certainly as of that standpoint products of A are and our we well. portion in complex wins EVs when products wins, of to about BMS end being Trying the from support in think that applications segment. management, kind a Transportation also wins serving. we battery charging a Yeah. of a driving and protection and are of Even that's driven design we're show -- from the talking sell heavily off-board we're around systems, broader markets the portion management big the battery our Products, see of

an sense, broader exactly is the say of eMobility. the kind to of business, to transition I in certainly, what bulk outgrowth our of transportation dial But kind it's outgrowth the that So from a coming from is. hard standpoint, from in would

vehicle a So hybrid on our systems Because the and that that opportunity that in or products in the the grows our electric a and XX-volt remembering story part. for continue for vehicle content content most dramatically XX-volt us. fully drives

tend for opportunity to So additive content really, the high-voltage to be systems us. the

growth So driver it's in biggest certainly the passenger car of our applications.

you for questions. Josh you, Thank

of from Jefferies. [Operator ahead. Instructions] comes go question next Please Kelley Our David

David. morning, Good

if If either Trisha. maybe kind X? customer on believe a single and that on Level specific to And Maybe comment. could Dave, charging. business I win, offboard noted been was or accumulating and Meenal of point. significant you up and morning, that's Hey. maybe that I just you was new it you've multiple Good fast last Dave, charging wins elaborate hoping following

past, David, talked right, doubles. our the be in as about to singles we've business of business a tends and

aren't drive forward. that business singular the wins So massive there

different car commercial if offboard also the side, multiple about customers had serve with vehicle side. we've we think So many that passenger the but wins charging, in we

from And everything our that think protection. current about voltage so over in side electronics high kind of to systems control

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helpful. a just us opportunity and kind in of remind ramp can content as follow-up, That's it. Got Level opportunities? the Okay. X And you you see dollar the of charging fast

right, systems the as these aware, by vary of Yeah. end you're customer. designs It's wildly --

and can to to But charging, DC you So a but the definition addition fast the think of particularly if dollars pinpoint industrial-type singular in you of the to all power it's I about story relatively kind But way couple that. think charging, is applications fuses. X Level to got up be Level semiconductors there. of content that when right? quite space, content a power difficult of -- you've think go a of you X dollars to small, charging, semiconductors, a it in in It's hundreds about

in. that fall, ground have of can sorts ground can get designed check You relays

fleet-based or So DC of consumer-oriented charging. really whether fast charging it's it's whether varies sorts dramatically on kind of

of different of there lots and So content. opportunities lots

segments. follow-up that, maybe Industrials us And COVID the shutdown. little impacts wanted back Okay. rearview A, running? that you give and bit just to a then, up July then, and you. B, to Thank Meenal, of could the if confirm on Electronics color Got it. And on maybe and mirror the a in is quick

there? I think impact cross there's some

Yeah.

plans any a yes, in operate. little bubble, the able Let cost seen a deal created course, quarter did bit kind good shutdowns to had It to third a to lockdowns level. most kind on our we've of Shanghai, teams and part, of kind color The impacted of continue then with outside at is follow that give build of But for of place details reasonable bubble. operator, can production with that, we're a you the added and me of But as running up it, to us. you that Meenal out on keep able have quickly be news an it.

The plus inventory Fortunately, to only heavily particularly boats that on you coming the the as lasted behind side to built but industrial everything from. in a about that's interesting Think the customers that is we where also business, about carry fact side little being from QX things in carryover, electronics. Industrial America, serve North of bit and if our particularly are here three the us. in will, weeks, in

shutdowns of months second of to in we quarter, to it were than the had two inventory, So we operations, stuff arrives. out in continue more though out some on boat, right, even sell the continue to sell that's as of able

by of you revenue has kind third quarter the into couple in more that created over of whole, shutdown, third months If now get impact if of really the and into third you our quarter. quarter will, a a of bleeds

around of quarter everything just of the on me the about attention call with transitory again, third the little right you while just sales wanted more And questions bubble with to third an a And dampening margins, impact that's have you we unrelated we'll Dave I I -- think of that, at EPS little does -- the let thing on that. it then of to quarter. the That OI sales And bring because the other And issue when see your to all operating bit. have $X.XX about, sequentially. impact just part a where about of Yes. a inventory add lower the because and side we to strategy and what on details is talked means little basis. saw unrelated -- our expense that see acquisitions us on hitting on financial OI just capital debt additional the that on additional a couple production on the a in done. taken builds interest where sequential debt that I'll it's the margins, what of for EPS, a a transitory were And operating as bit a we've we in of deployment in also that

of everybody just as to aware well. that So I wanted make

Okay. everyone. Great. Thanks

questions. your for you Thank

caller, next please. our take will We

The go comes King. David from Silver CL ahead. next question Please of

morning, Good David.

Thank morning. Good you. Yeah.

timing lack other of into Thank of shortages more run the I next might two other shortage your persisted persistence on a if outside? And it I of Is generation. next creeping all at parts automotive -- supply generation of I'm chip Transportation production. in about issues? kind customer the to now either the under of And of kind in one generation the for timetables to going and terms customer any confidence So segment, maybe the has bigger at In a thinking or picture part chip touch ability infrastructure mentioned of but just electronics couple this quite other major been or context, of right -- had that development the have I impacted others. the focused the have that of a full know wondering the of the the the inability hood current now. not been some you. I'm while. the of but of focused way their or But just to shortage guess customers that by questions, get persistent a in shortages the products, persistence maybe are and and there's bit But efforts EV words, chain and your development reliability little

Sure. Yes.

So and look at back let take me a that. step

So dealing there. been in with ongoing Transportation issues customers and elsewhere have clearly, and our shortages

Because history, -- around they they to from certainly customers designs. impact design-in would manufacturers you things, focus our is it does What how careful the aren't as sources in so of really products. use about by capacity primary that there activity. semiconductor multiple in their of because axis It seen I was and there. eMobility more from been they're design of new activities cetera., developing and would it they like transportation didn't that approach are choose, et while being of matter impact what about products them, impacted like specifically a their very sometimes types has and that One we've their their the chips, how reinvested strong a standpoint And kind on much a say. maybe legacy have but for approach and that, is, asked electrification. Two

eMobility is right? little finite an have like altered that's on has on legacy derailed products of been say. new redesigns that But they've see going overall efforts that for qualifying a kind areas, primary say engineering you So activity, done and will, what in been have focus I say bit, the been a just would work is by development their whatever, them. alternate it So things for I'd it arching that, impact I lot long-term I fact instead you as kind how resources. if cost has would certainly doing the Research don't those of of an that improvements on areas. or certainly working in impact. has of to

about okay feel we So it.

next the I the thinking opportunity. about the And you're and question on guess, be next Great. funnel, maybe just would Okay. M&A

to that highlight standards, and step move those their C&K some So funnel just is next very following success adjusted met did concluding looking part your I'm still seller some That's of capability done price? your they deals. looking the the at Thank sheet, the adjust maybe didn't opinion. But uncertainty kind asking you it getting my opinion see and discipline or active there on you. It's a you -- my opportunity? of was you maybe your last acquisition maybe the to your number just wondering, do of ahead, balance of still standards, forward Carling the maybe C&K they in deal a

funnel activity continues is Sure, robust. David. our to be say would What I

to and and lot that a look. optionality a evaluate we of of areas continue lot there's So

a and there. driven Meenal financial the where by where business So .So it the within by of leverage as prepared kind remains of comments, comfortable a our portions robust lower end units. capacity of dramatically talked we business busy the people and our and and of our capacity the standpoint, business. they're in at leverage are of to a From the range unit, activities of From digestion at they're about still how varies the from focused acquisitions tend internally, they have owned perspective.

just closed. course, of business, electronics our in C&K So

Other year years So in of forward. made ago, they've it days was early they're that an X.X areas through pretty maybe where a kind of of early ago, kind those they've integration. talked of engaged pretty stages and we it, moving the got consumed acquisition

for standpoint, continues capacity opportunity. also like. a do areas industrial continue It's opportunities that So human that. look attractive space from vehicle Commercial us be a the look always capital, reminder. think The also capacity to well. to that we an to are us available continue to of for at consolidation there's a kind look have from we we are to as area Those that we

look activity So will to robust, for to funnel we opportunities. the be and continue

color. I you. appreciate the Thank

Thanks.

your for question, Thanks David.

next our question. take will We

question The from Please with go is next ahead. Baird. Luke Junk

an seeing Just terms customers, follow-up electronics for at Then All well? some customers. you're what could in inventory a on at just perspective of past on user market as including you. right. the end that Thanks distributor the of the in the part follow-up updated discussion EMS you of quick customers. for And channel, me. hoping your commented Dave, you've Thank give taking also

and Sure. you been at inventories for their Certainly, yes, who public if you have are sure. their look guys data, have EMS elevated follow presented and

very of Pricing dollars grown the inventory absolute years. dramatically very customers. look for also of heavy Now EMS are, what portion tend couple end last those understanding semiconductors other be of has or at the when elevated particularly investments inventory you to on semiconductors over a

base, a they volume Also one So by there biggest clearly the other some shortages has So inventory increase wait they costs, level perspective, cost driver. build as for of of that, right? up elevation in well probably dollar an it's driven that been from as just component, components.

in elevated end some areas. inventories to customers be continue So at

activity not of remains there seen fact that have We supply or that trying lot pull chain. because of from in kind simple the to the down adjust back dramatically is a of customers volatility

partners going of customers, to So if coming at still as to Europe? that's now reflected actions a out Is well, things? is there those the it's really if that kind problem, seeing of there. gas really volatility, bigger of stage. disrupt the China. fact supply out of continues that whether this at inventories Europe we very right? we strong. And high address see taken is, and down reflected distribution, because not one the distribution about elevated our levels So are talk through it's very remain a issues to talk flows in And to big POS what they We're in What lot that

at So seeing evidence we're not that point. this

strong other mean, ourselves Yes. companies I our sheet. their got take And Luke, that now, I and many a I of companies peer lot balance we inventory add, mean as managing strategy would carrying of part you've right are right?

are chosen some center to of can and sure elevated we We that and to front make customers. levels on carry inventory service absolutely

the think -- customer I end-customer -- we're looking thing that's So that the our in that vast And and continues all main remain demand vary market customer is of sales. at majority strong. to

real some are those signs. So positive

all Thank you. That’s Great. Okay. had. I

look interest in talking Littelfuse. We a your call you soon. question, seeing and and to again Have you Thank forward Thankyou. Luke. us the for joining Appreciate on CL during Jefferies King and day. with you today's conferences great the

has now conference presentation. The for concluded. today's you attending Thank

disconnect. may now You