Littelfuse (LFUS) 31 Jan 242023 Q4 Earnings call transcript

Good day, everyone, and welcome to Littelfuse Fourth Quarter 2023 Earnings Conference Call. Today's call is being recorded. At this time, I'll turn the call over to Head of Investor Relations, David Kelly. Please proceed.

Good morning, and welcome to the Littelfuse Fourth Quarter 2023 Earnings Conference Call. Dave President and and are Sethna, and today Vice Executive CFO. me Heinzmann, CEO; President Meenal With

Yesterday, we presentation Slide advance reported website. also a the copy be results disclaimers. Relations X The for our our Investor our conference release for fourth webcast earnings available of our and call of on to slide section is today's on of available our quarter, will and Please website.

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

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

scale was with new customers driving teams as our a Let's X. us progress innovations. and technologies our and secure existing allowed and global drive considerable to business with long-term wins year Slide highlights profitability. as start growth remain for Littelfuse on sustainable meaningful solid on XXXX industry global focused We new and made differentiated

to structural complex and sustainability, growth a helping us enabler customers safety come. of as connectivity solve are positioning including further our We for years challenges themes, leading

challenging performance all cash margin generation, while record navigating macro a We also delivered resilient environment. and

an of we $X.X year, adjusted recorded achieved full the margin of For XX.X%. operating and billion sales

through execute resilient results versus downturns. delivering to more XXXX reflect our profitability prior ability macro cycles, Our

we well-positioned as for of of $XXX pockets delivered in channel end demand allowed the mitigate our inventory in demonstrated cost as records Our strategy cash us of weakness operating execution of generated earnings we the of million share strength adjusted ongoing $XX.XX. Furthermore, million structure we per $XXX flow, resiliency company. to and free reductions portfolio cash both and full business and diversification year the impact and

thank within as XX% engineering have disciplined into structure markets. the and strong global we enhance annual and our we coupled and have growing adjusted sales sustained their we earnings growth profit We strong delivered organic strategy, teams years strategy, annual have our Similarly, target to XX% growth, growth. three performance technical X-year profitability strategy X average XXXX revenue driven leveraged leveraged momentum annual and earnings I expertise Within in our early want X. launched average double-digit our deliver cost growth years, the delivered customers our commitment have in, leading persistent the for Three first on shown sales and three and within as and growth Slides our significantly to effectively that acquisitions end high-growth expansion. with complementary earnings growth by to business. years our averaged and of serving we

in to markets. our Turning current dynamics the served end

to continue quarter. fourth our inventory in channels electronics, the We commercial vehicle destocking distribution see across

In a continue work X. OEM subset book-to-bill seeing to down our levels. also are of electronics We below customers inventory quarter, remained the

stabilize, we and longer-than-typical well levels the growth during a experiencing XXXX, the Though we order to well recovery. in destocking into XXXX. inventory new performance channel but destocking normalized we return expect expect to rates drive are strong to positioned XXXX year, following in We as inventory electronics robust are

devices consumer a quarter. continued we Despite to near-term and appliances demand soft be to turning X, personal be products, headwinds, these continue Slide design the On end-market and demand in to in electronics, leading activity, technology have requirements and as the a stringent market long-term safety the strong in intelligence, more key drivers growth. artificial end-market to track such and and electronics deliver remain Structural automation record enabler meaningful opportunity. electronics execution broad

innovation. As with us introductions continue And key are new we enable our diverse across technology to well our offering. for electronics continued product seeing technology customers design expertise excellent traction and across rely as platforms on as activity robust

circuit closer for design others. data look of solution Taking center, end-market a solutions, customers building among and wins won in activity, at categories we highlighted In broad meaningful quarter, had we a by medical and product building set protection electronics multiple opportunities across Europe. the applications,

business in smart in application a application home multiple win Americas. had meaningful won a also for We the a equipment medical for regions. We

end-market. data and computing switches of back, to and continue will across Finally, for demand evolving the center center multiple we in our applications. Taking strong and electronics in step quarter fuses. technology we well Long believe term, artificial increasingly intelligence products drive across including wins a diverse us delivered use our an reliable technology data offerings position offerings, superior the winning

with Slide to delivering solid in growth X and to storage industrials, customers, energy drives. we continue industrial in drive Turning utility momentum

we Although further in residential fourth charging and quarter. the construction infrastructure in softness experienced HVAC,

offerings see momentum industrial demand of industrial sector. broader pockets via efficiency We and wins HVAC softness and exposures, to safety reflected execution into benefit requirements broad end customer electrical certain believe the deep increasing strong industrial the expertise in Despite as well growth commitments and we and decarbonization. see across other spend, global we XXXX, design will continued renewable we in reflecting While to commercial our momentum. product markets, as ongoing in engineering longer-term continue strong ongoing softer we diverse infrastructure expect ramping

driven exposures. customer where in won a utility-level remains application Taking business for multi-technology robust success solutions a in we and solar won our a We customer. by multiple for saw HVAC We renewables, industrial back, North America designing capabilities activity step design our across support.

a fast systems. reliability Level secured across applications superior where DC the wins We and for regions, safety including these high-power of multiple are also our for set quality infrastructure for EV X of chargers broad and critical

North contactors. an and sensors our a had be win multi-technology America in providing we we Finally, temperature industrial will OEM for where

X to innovations. industry vehicle Slide our and passenger product broad to continue Within leverage ongoing to balanced transportation our enable exposure, we technology capabilities and Moving leadership

and seeing are unchanged. new proving our and planned EV a expansion planning, is as strategy transition continued are conservative business which design content we assumed our We and more believe prudent investments, gradual electrification industry momentum go-to-market

Our traditional core to wins products also in continue remain low-voltage deliver we core provider key categories. leading the and product globally, many

broad leadership. and safety continue entrenched adoption, key have continue are we example, our strong including in we an enabler story. we such broad China leadership, telematics such a the offering content of as technology and ADAS. Furthermore, the in-vehicle to automotive demonstrating electronification As active to relationships traction in see well-rounded customer product as and advancements, quarter product a outgrowth technology Factoring

by to Looking ahead, our also ahead we continue win meaningful will current design strong of and pipeline launches, sensor supported cadence. investment ramp

in As previously, reminder, play we confident we date, an customer are technology supported applications. a as in our current our positioning but important vehicle electrical And expertise as key system. battery the management have long-standing also offering by a role category to player the discussed traction sensors as electric in drive our strong within and emerging and

designed strong technology core system technology for key vehicle leadership, application. current we And out an long-time sensors and enabler engineers in further Strategically, that circuit our are by we level. already the systems a partner and customer in our engineering same a those electrical applications protection position round the example our at same as electrical current customer are view will sensors as offering. our adjacent great of Given

current our to as regular to launches sensor part we focus the quarters. are review of in we vehicle sensor As process, transition portfolio coming our portfolio review continuing our passenger expected

strategic on taking Regarding our commercial our view vehicle long-term footprint. we exposure, and business a are

We our expect line XXXX structure commercial will previously we pruning as actions product and our initiatives last reductions. cost disclosed vehicle through continue

we our for a impact more results, segment, Transportation believe commercial including the this XXXX vehicle While our market. positioning full success, pronounced actions in on long-term our remain confident business impact our year our in will position we and will

We ultimately XXXX on customer the provide to lines exit product low-margin Meenal will additional mix. product impact expect optimize results. color to and to our certain

both year product low- multiple look design we our portfolio Taking at the high-voltage regions. and for in a vehicle closer closed with wins passenger all strong across activity, customers

wins EMEA are charging safety-critical onboard centers for solutions and for architecture, fuses, Our in OEMs. for we secured several high-voltage and essential with applications current next-generation

to continue in China the in a securing low-voltage momentum win meaningful also quarter. show We

within wins commercial products and for handling material vehicles, applications switches low-current for and secured high-voltage we applications. equipment Finally, switch and construction

won business broader leveraging and for truck also application, portfolio to heavy-duty solution. We Australia semi-custom technology in switch a our offerings a design strong

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

results. XX% Please quarter year. everyone, morning, and XX us joining fourth Year. at adjusted Good EPS margins to last our operating with quarter GAAP EBITDA today. Sales was turn Revenue XX% adjusted GAAP to were per Dave. $XXX foreign Happy XX.X%. for finished was in the and exchange. diluted versus share Thank $X.XX. down after Fourth margins you start diluted margins and Thanks, $X.XX Adjusted Slide for adjusting quarter million, earnings New XX.X% down were was XX.X%.

turn XX.X%. were down adjusted $X.XX finished organically. margins XX.X% were of at billion, year down full year last sales Slide Let's XX% X% to margins margins for operating year with operating finished and XX EBITDA the performance. We and versus XX.X%. GAAP Adjusted

and an FX XX% [ Excluding finished basis of EBITDA at XX would margins OI ] respectively. and headwind points, XX%, have about

our the basis the points prior cycle. were of in with resiliency XXX our company down this pleased very margins We're year, than which stronger performance

been have in achieving diluted while Our upper $XX.XX correction portfolio EPS managing adjusted of and and finished execution operating was our target foundational a margin diluted cycle. GAAP at diversification $XX.XX. strength teens through EPS

GAAP effective XX% year effective full was tax adjusted and was XX.X%. Our rate rate

than the shift quarter reflected earnings higher-than-anticipated XXX our basis full year jurisdictions. about in rate is points mix across projected year higher for greater true-up The finished rate. Our tax due rate fourth to full in

we for operating cash and million year, cash, $XXX flow to records the flow for cash the Turning company. of free million an of generated both $XXX

our conversion XXX%, from income of was Our higher proactively working sales net flow we managed free declines capital XXX% to target cash our as than aligned decrease. significantly

Our cash we cash flow conversion going generate generation to strength the continues free to our XXX% of model, and business approximately forward. expect validate

towards the and X.Xx. million We quarterly We including $XXX million $XX over of the returned XXX-millimeter the year million ended During in of year, a $XXX fab. debt-to-EBITDA million. payment in via down cash allocated $XXX dividend net hand we debt our cash to with acquisitions, and on about of leverage shareholders strategic repaid

our to return with ability coupled and generation sheet, capital gives the model, us to allocate growth shareholders. balance strong for cash both Our

organically full starting through with consumer-facing soft, a across weakness markets and markets. broad an inventory set channel markets, of areas ongoing industrial to on decline the XX. partners. signs Automotive we move at our quarter segment of highlights strong. fourth continued respectively. for year, down for and destocking quarter Let's the Slide year, Sales with the and Channel XX% were XX% and Electronics quarter Across of increasing weeks end in remained end remain saw

margins Operating and We well our while structure. disciplined from in with XX% and XX% quarter over operating margin above We target. EBITDA the the diversification, execution margins over demonstrated at margins the EBITDA XX.X%. finished improved operating XX%, segment continued portfolio finished XX%, year were across cost resiliency segment broader the margins positioned

segment our X% sales Segment Transportation partners. for declined continued quarter continued launches both the and UAW Moving Vehicles, vehicle tempered down XX% XX. In passenger in on Growth at the was down for led grew China, quarter, the XX% sales and from X% for year. quarter the distribution year Commercial year. Within were organically product supported, by destocking to business, Slide and in earlier sales the quarter for the by the the our in strike organic X% especially we the the organically as impacts quarter. inventory in extended

operating segment, the year. and the margin margins while quarter EBITDA respectively, at For for and XX.X% and quarter X% the finished were XX.X% in X.X% in the year,

improved has business we've footprint passenger Profitability the across completed. optimization, which through vehicle largely

improvement have product initiatives sensor will extended low-margin exit and review our our a some of We margin portfolio existing auto to lines.

investments also increasing of a pipeline sensor our design product coming With wins, offerings. for current in of We resources are launches we growing expanding the advance quarters. are solid in

our commercial are vehicle strategic across we review the business. Dave As extending portfolio noted,

We're mix. broader reduction actions. this to our longer-term lead structural our expanding also and product customer expect pruning to cost across We activities, and both near-term line portfolio

these over extend segment-wide expect We activities several quarters. to

progressive For X% profile long-term XXXX, vehicle for vehicle mid-teens and these we and pruning investments heavier commercial positive toward expect drive growth X%, target commercial to the on sensor by reduce expect We portfolio weighted remain the actions sales expansion. products. growth and margin and transportation to the profitability segment auto to segment margin

quarter as were with XX, organically the markets, construction softer segment weakness expected end the than markets excess the Slide the for residential with Operating basis and basis Sales Industrial led the a XX.X% HVAC as prior sales EBITDA over in decline margins the year. over quarter, in ongoing the in MRO signs year. OEMs X% points But On expanding grew points. quarter XX.X% market expanding and inventory. quarter. both were well to the of year, organic at Adjusted for working down X% finished weakness XX% the pockets industrial XX% over growing across slower expanding of along for in year, some and margins XXX XXX over over

signs to excess of on we've some Let's broader still turn industrial stabilized, have macro see seeing the We're environment. XXXX. improvement. across from not the markets, We Many inventory also levels softness of XX. electronics forecast markets working seen a of set Slide significant moderated but down more end customers a including

XX% cars. Inflationary have in energy car but of as commercial with and transportation million flat see at And XXXX electronics moderated both we range segments sales sales growth half quarter million. XX%. slight sales $X.XX, We expect current expect range levels at to adjusted Transportation project to decline expect with 'XX this and a vehicle the which of million $X.XX midpoint, the of rebalancing this some increases range continuing XX% areas, year. segment. continued inventory partners, of rate includes tax the dynamics. to the the both in At into We trends be a XX expect channel With backdrop, we well first EPS about the in build across costs in in first the we to be wages $XXX over that's as electronics industrial distribution costs of last we $XXX to our year. to decline and in geopolitical versus

XX full for expectations. to turn XXXX our Slide year Please

the expect sales FX expected about We sales, At rates, tempered growth X% $X.XX year on year, portfolio actions. to but current Transportation about impact has exchange X% return during is based earnings. to headwind to segment to but the full that to be materially foreign to a our not expect

with improve operating company By operating transportation expect industrial upper Electronics progressively variability margins by across We teens margins the to and continue the above averaging to year margins teens the single-digit continue to upper margins in XX%, averaging in to quarters. we expect year-end. for operating segment, high

expect In $XX $XXX to million addition, expenditures. amortization about $XXX in in million to expense And we're invest in assuming $XX million million and expense. capital interest we

tax full We rate year are XX%. estimating a of around

to headwind global forward. ongoing maintain tax tax the low legislation, With on we in our the expect tax range rate a rates, XX% going

impact We are cycles. than and cash continuing the financial XXXX to operating environment, we profitability enhance and our to much model evaluate opportunities market as stronger was to distinctly mitigate our these slower continue rate past performance improved generation increases. Despite from the our capabilities. macro We

I'd company. final turn And it back of as growth, on Our we to improvements like Dave employees some areas the generation. and our our we contributions can for cash comments. readiness that, recognize with profitability Transportation for progress the a within driving focus XXXX to control, to partners made continued our return and segment continuing and trajectory will have for their profitability priorities and best-in-class I'll

Meenal. XX, Slide for Littelfuse, generated our model. year record of summary We cash an exemplary a was flow Thanks, and well resilient our In margin executed XXXX on as solid resilient by our end our evidenced design presence outpaced leadership We our markets. levels expanded attractive customer our believe robust in relationships, downturns. and we saw which continued performance, strengthened activity prior profitability broadened in high-growth business and

environment. during remain dynamic return into XXXX. outpacing our we expect confident recent new targets. year, continued into we continued that will execution underlying years overshadowing macro strong while most variability growth And Three to the we we strategy, our X-year is are growth And macro a our

have capacity the strong also to significant a value technology will balance and model, stakeholders. M&A strong and focus. well-positioned structure markets sheet a be strategic capital and financial long-term drive across deployment continue business our We diversified We will our very end cost top-tier offerings for continued believe

well team responsible thank recently We for to of the for And the to that about Q&A. I and most one want achievable team our honor an work customer supplier that, the were Newsweek, unwavering would global hard now companies as to our by Littelfuse operator will of recognized again not partners. commitment strong supplier our partnerships. our I be Again, turn with and back customers their as as call America's

question first line from Your Junk of the Instructions] comes Baird. Luke [Operator with

if how For to that all your clues terms new then -- growth, during maybe starting on turn you also as Dave, be would just XXXX? you, return square just continue perspective just from your return And with made there? to can inventory hoping working lower. passive in -- figures they've updated any areas of then portfolio might you double-click fastest you could the to progress into the expect distributor helpful of partners any to your And of it growth that, that

kind Luke, through passives got for different our several our what started some technologies, kind little say at different distribution. semiconductor heavy a earlier say auto some products little the a And of correction flow or business, than heavily earlier. correction than I of Thanks, protection kind a protection our Sure. later semiconductor that through had also of the got the their started others, would exposure. peak semiconductor of it's distribution, a -- I although and question. we others, hit a business stages Within little would obviously, is we've

expect further. to that's one elongate that So don't necessarily we

our of in been progress over-inventory inventory a channels. excess a distribution good way through estimate we'd will So of on in kind of XX% hard kind you, our the mix, I tell made you of of kind distribution What the give the making And month-over-month -- it's in situation. it's read it's it. to we've maybe range steady

market really an it to growth a order What get we requires of more So to stable sorts return return of inventory not is does to then end to to that and position turn require uptick. kind rates the levels. normal

it's to downturn a of hard elongated place that bit has kind because the than little think as probably customers that. far timing, end the As more a carried customers and EMS the typical. been a And I little inventory

that's So cycle. this kind down of elongated

So hard little is the when. to say a visibility challenging,

into for our where we be normal destocking that and growth settles while will will inventory return the the at its out and certainly XXXX, well range operating the of a that kind it's tailwind point hit continues However, to belief create us. that

And in then your that discussed to could just question business progressive then and path order growth portfolio expectation going and in of you some reduction was drivers exiting I'm for rank margins just for margins overhead a this And for hoping maybe again improvement between the follow-up, Meenal. high at price pruning transportation ultimately, importance looking a forward. help year. today I of business we additional recovery, on the single-digit the that the any volume that us

Luke. Thanks, Sure.

me break up we've let pleased about to also front, and well. better The So made worked you commercial That's been what going I it on that will team number made really been pricing the car we're that. vehicle automotive there. completed, as making on. it scale the we've right? of footprint adjustments on the two really had and really on And footprint align to down time both smaller with automotive a through of largely into that have the business. tell to Our I'd come I Transportation do, really we seeing progress were benefits is a an segment for and to builds some parts, business talking

a so we've good there. that been that's made And adjustment

looking low noncore business, we're some a actions parts low bit specifically some the our little sensor about growth. around margin, around talked that Dave automotive at taking portfolio, additional of

to continuing I'd transportation term long a that's to line, 'XX. are into headwind start setting, the of a in So we we segment come for to sales but help of that's sales And perspective. little year right bit the going little we're see do. about margin as also say general, But current really bit to a pay that A and that's later expansion will this something now, investing headwind from that back with overall. the

say good I'd So in progress automotive.

right? vehicle I'd recovery, and are a front, we're that key to much down all know on pretty working we the Sales With about been have actions, definitely than commercial destocking after, normal On is to say more going go on. here, the that. Volume we talking trend your more we've point, line.

more across areas to normalized administrative work to rates, footprint back good as more go and we're get both reductions, run operating more there. recovery at. There's looking also margin that's see we when this we'll and some So that cost as underway, well is

So back we maybe of, our with say as headwind we're combination working a help and a tuning be portfolio margin step acquired just -- that that. will probably going I'd to when our I of deeper newly a expansion. legacy some And the through past Carling, taking talked couple on here, sales years on about business that's in

than we up same the do, So working we'll are we've our we we way I'd and take, inflation time, at confidence way, to and need say, that. we the is on need longer that know to some step taking have and little FX, we overall, in got businesses it we to that there. these markets But these get through a might headwinds like what by taking get other the through, but

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

be Meenal, It XX% like so like the a XX% revenue your operating going electronics below And right. talked in A year. you be math or did segment. the XX-plus back operating the question down, I on margin margins if about to QX to would year-over-year. is getting looks Looks for percent

an environment than may pricing come to more when what some see those volume, we as pressure volume of going other that's hit. So exactly to are when in volumes to return know the margins, start are What we getting the other particularly growth, don't drivers back? which drivers

Sure.

on time. take step would I a So back

chain as had in a past that foundational, efficiencies of the talked operational well done a about to was done work we just work part IXYS all years, acquisition, of had we've that key work, some supply volume very We and had. that plays we the the lot in So really that lot right? few the relation

really offset the For inflation us, pricing have The was to cost on seen. right? pricing the we side, meant that

in So cost we keeping the inflation or make and/or side. staying were some up ahead to a the that was but pricing it change strategy in long-term cases sure in market the that necessarily, wasn't changes on really

the sustainable have So The and every we et stop Dave with the that we'll some earlier about us. sales floor right? at an done, to all volume things come for of the inventory and efficiencies, tends back, see cetera, in start to to from from pretty talked dollar we'll incremental destocking question starts point recoveries. see be strong some those

our be that spend a manage we margin So will we of challenging this I time, continue cost and during times. big the always during say do as to market part our structure recovery. also discretionary

are quarters at the still that expect level. range, year may we while have be XX% not to that the at So I

changed quarter just last And has that Dave, in back us, in so? what materially is? electronics. to book-to-bill rates And the the you or tell the order Could

Yes.

the X We still. been partners we bring have haven't to inventory below change ours. quarter third the seen of of work fourth at not as really really much January. -- to kind down to kind remains there's quarter from And too stable It's to that reasonably it of end continuing level of well it distribution

love we'd the level not at. reasonably stable above So to at been it's it's it, where although see X, certainly it's

just may. And if one question, last I

a your rate. been part Just big of regarding your growth And that's strategy? obviously, M&A

of this improve on very you're business, margins it to focused successful sounds correction. But trying like across sort here been dealing generally You've with there. the

business you we maybe going or be are than that there's to the assume do So that? to acquisitions on opportunities, more if will focused you're attractive

the believe time gum walk We chew same No. this. and Yes. can at we on

to continues be So actually, us. for area M&A focused

strong. is Our quite balance sheet

We think good can diversify the kind where current looked to a value technology opportunities with funnel niches of markets of add our as we the we're we've customers. targeting of we kind have and end

evaluate announced haven't to We last Yes, quarters. those. had the we couple acquisitions of continue in we've

lumpy. a However, can they be little

to So we that. drive continue

and way to organic see sustain over that time. our grow to a continue pattern continue We the is growth long to

we're So busy see making that than while managing still we focused space. past, the are and effectively for We M&A we we're which in a execution to we downturn be the as that more clearly in on us, continue have and quite sure demonstrating. key opportunity through

Your next with the the Company. from question comes of Benchmark line Williams David

auto, anything out I if first guess seeing So geographic also from the industrial, in divergences about standpoint just but geographically. talk the stands industrial you're maybe maybe if demand that you could

Sure. expected I from outperformed at strong standpoint, what say, big the if would difference really fourth we a quite where look of quarter the in transportation, quarter and area was maybe in the fourth there. is China geographic we

the America, and us a the of both with of for With high North strong we anticipated, lot have where would launch strike softer content there. I fourth of particularly, overall although really applications, were we lot a GM, but a low-voltage for car new little in build whole quarter, vehicles, opportunities we than high say performance voltage saw was okay, the there. UAW

maybe mix So saw hurt of we the that's bit there. us little kind But a that overall, transportation. in

the and in Europe Other market units what continue residential may side, a and cross field America distribution. there with softness is at generally I in North everything particular right target we would which we transportation. in softness have kind kind a you inventory reports to And I China in On our content America the North heavier growth but probably broad-based in say that Asia. We industrial see of see lot industrial And we is of in of industrial. is think excess HVAC, with that the seen Chinese now. softness than saw that, market in of

was in the fourth like quarter. residential down North Some XX% in of the America HVAC

So there. on weighed certainly, that a us bit

it's like the running But inventory been to and inventory? in are certain segments. come seems seeing, guess, maybe been just the back normalized I you or destocking levels? is Or has areas heavier just across terms through maybe of of are a in segments then EV where the And kind seeing you just lean commentary more rolling your

Yes.

inventories say partners in kind think normal in level. things, side remain of industrial I the inventory our the general, would channel I in at on of space,

concerning HVAC, There of in And like we are into really So the our side where some a OEMs that course, areas have any business, in use transportation of distribution. distribution space. don't we little heavy. residential sell our industrial don't we significant piece, automotive are the

vehicle of over that's we're So channel it inventory that's down, seeing that electronics. been our relationship. direct as coming been Commercial a of in a partners, where has is space and course, more

little distribution As And inventory. burn end also I were because excess kind inventory. the spoke burning the customers partners of the into we're a well bit they earlier, about with challenge -- our POS is of are watching

So that's -- partners. dampening impact distribution our with kind put of with POS the on a our customer

So clearly, a well exactly into turn the it's watching it destocking and return POS their what where kept we'll will balance course, challenging on have then it's watch. an it and see something at inventory that when comes, our continue the be But growth. inventory. speed position burning we're little always get is, we, at eye and to inventory coming. between but That's of we're to And that and when to

Cowen. [Operator question Joshua Instructions] comes next Our from with TD Buchalter

demand look think a as that leverage utilization rates And and kind your you're -- we guess, you POS as in? Is what we inventory depressed It internally keeping could within of of go right through. some flat give can and electronics well, as destocking, burns I sounds factory like are as just right fair extended the like through how the and kicks now rates assumption? segments loadings them utilization on about are back as this now metrics any other --

operate than rates, product certainly, Utilization vary locations. we'd to at. and factory of course, Sure. And are utilization rates lower lines by like

to how we the there cost fixed it factory. right, will we be a when technology, that begin is as drop-through on So volume see heavy return see in nice the and varies to by do return, the

a So able our it's costs a Other and cases, in of flex to some we're our areas, to for overhang more not major it's pretty little balance aggressively orders, challenging. us. flow-through and

later it's how And healthy. so that. and by that's year, begin as come manage a drop-through business technology, very back balance volumes really clearly, it's should we be -- to But this the yes, by unit,

and the as gross realignment? impact can us on sensor revenue thank or of you go potential for on product give Meenal, the OpEx review. And the margins operating color the portfolio maybe through you Anything for savings you

Yes.

continue transportation gross what improvement coming So of general, We levels OpEx 'XX. will out it's I gross I OpEx we'll restructurings. I'd see OpEx through and see some we It still these tend an as be to volume working profit. is as the that segment. profit improvement has overall in on We'll well. improve level we're because come improved in about dollars probably both we're for areas see more say would as margin the to areas particular to talking progressive with of footprint with see go of been through volume, strong. well, in be about lower taking that be talked margin as going that little we pronounced back remnant gross improved Couple say, a actions incremental different pricing Dave pretty that

profit. I think benefit you'll to the pronounced see coming gross of more

in this for and it's it. bit the normal recognize and kind in think This us of a more of a it's passenger growth we've automotive kind this is car the in of of important piece to sensor doing pruning, I of done headwind we're past. And on what Yes. automotive

shifted resources standpoint, expense current However, from we've sensing. to an

design And sensing pruning sensor really to so resources nice XXXX balances out investing XXXX. of the will taking side in commercial than vehicle we're sensing is know, things. ahead the And in revenue, it in on be we've clearly you that cadence where going through and side current in is there. think address kind further the shifting the of case, But that the as we space heavier space. Revenues win side and start in is of our kind in of our and space both passenger fixed of and investment variable in late much will kick current costs car had important, I off course, that. current Also, to the

comes Your Silver with next of CL question from the David line King.

if acquisition. and lot switch a I element pruning maybe maybe maybe think extend for that I on thoroughly thinking And C&K the I about in going I was your guess couple you Carling talked ask of could I I'm that's back, vetted recent you wondering, and pruning maybe the are at would just to the sensor mean, thinking you up But guess side. been? there areas acquisitions worked general, looking And how just kind have going was the of to a would do say in outdated been through. somewhat you or has set stage, this portfolios what what say the those you've XXXX?

Yes.

portfolio and managing at So I that. if think look pruning we

in what going fortunate phase we biggest kind the say year big an is ownership I see we talked and There necessary it's significant through of commercial pruning there, that talked we that address that sort about normal would area to first there of of see don't in the the had lot we're areas part do of and pruning vehicle Carling, First vehicle, in of And we've every of And in pruning of pruning way the We earnest working on to really it's we probably a small. through so in a there. we supporting The over cleaning we're is and going started right? And our Again, pretty little there that sensors actions talking to about we're sensor and coming put the but last that this kind and which up I was recognize bigger it's year the that huge year that. It's think the carrying heavy focused very Carling. backlog doing process. a optimization couple were do that is, bit in thing of a it's don't price actively commercial of it, needing in is to automotive quarters ongoing year. through of were and C&K. a been is the we backlog, of pruning that burner while destocking that has that's into of the all, part back space We pruning a C&K, is amount pruning but up, activity not Carling. of important a ago about there. this significant. is those automotive customers

of I But even it's more whether of portfolio add I I you're hearing acquisitions our or couple take value And about overall. us pruning steps David, part creation, with of what would management businesses legacy say if talk this a would back, today. is

acquisition So don't You make, everything diligence. we right? with every see during

creation a these dives line. it's we'll deep customers a regions, the look process, go look we'll at as product value in part at through, do we'll the take You but of profitabilities take and don't products selling, we're

frankly, that. with some a we're things good we'll the Some, with strategic and do going with different not may company, stick where have

hear sure into So our bit it us highlight maybe grows to because reason it's feel you it go that a -- different not time just is our and understand make more the the the It's about lower with talking anything that of it growth, as and to that XXXX be And going segment right? periods pruning. should we portfolio. we to where Transportation the so in only you return it wanted we there's to than little will of wrong be, that today because we material we looks when underlying sales, be

a the follow-up talk it is and understand time. I pruning a is throat ongoing sore you to about probably today. have choose certainly And And question, selective. process I I apologize, little more an all when

you're recall little been you're do of EV the that kind their insight of I rethinking development of more you major I the involved a working globally. aware their spend every of into operation virtually an of spend development On of potentially companies programs guess, well direction number emerging and gives bit kind that maybe there's in, the so directly. you're EV kind And with and trajectory But headlines progress. that of of as a

say -- think scale be perspective, calling you for traditional a Transportation that customers? your programs either approach development the up to I the rather vehicles this X would But today out Segment. major electronics there from would segment a in shift just or maybe EV to, ago, direction your worth is been that the the fine end I developments your has in and EV comparing in guess, in point? say, for, what than mean, Has let's months you attitude or more the your

Sure.

on going and can certainly, rates in win both I and So you adoption press cadence to days in around EV applications what's What lots continues electrification robust. be quite that there. of auto space is these tell the electronification our

wins overall. In of win XXXX in and were we up in the fact, spaces versus that XX% achieved rates the our value XXXX those

EVs would view we've always a of perhaps a So evolve. quickly taken bit little while more prudent of how

a the the out been maybe maybe have slope So press we broader lighter projections in been. what or what's the have modeled always than bit to growth

driven swing followed of in EV wildly robust. kind Asia, been at extremely rate Europe. down continue adoption what at slowed it's have be expectations of that, big than the rate. spaces, certainly bulk to it's rates while EV really So not Asia, In by the some adoption And different the been the of out up adoption

So we been but America, rates slowing, here particularly of view, North relatively where I maybe it in adoption see kind a little outsized gets of think have bit slow.

at with the I we're focused the would engineering is in continue very, working vehicles. electrification and on the you groups what electronification very So tell OEMs be to

cadence be quite continues robust, wins space in robust. cycles our So win to those of be to design continue the the and

in So slightly in slope we're a not overly slower adoption concerned with EVs. maybe rate

to the management over for turn now remarks. call will closing I

concludes joining today. That our session. and your again for in Have for us Thank interest joining day. a Littelfuse. Thanks, everyone, you for Q&A great

that Thank gentlemen, for today's joining. all you and call. concludes Ladies

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