Littelfuse (LFUS) 31 Jul 242024 Q2 Earnings call transcript

Good day, everyone, and welcome to the Littelfuse Second Quarter 2024 Earnings Conference Call. Today's call is being recorded. And at this time, I would like to turn the call over to the Head of Investor Relations, David Kelley. Please proceed.

Good morning, and welcome to the Littelfuse Second Quarter 2024 Earnings Conference Call. Dave President and and are Sethna, and today Vice Executive CFO. me Heinzmann, CEO; President Meenal With

Yesterday, we presentation reported website. also a the copy be results Relations A for our our Investor our conference release second webcast earnings available of and call of on slide section is today's on of available our quarter, will and website.

for Please advance to our disclaimers. Slide X

and include involve review could today differ will important forward-looking Form release significant yesterday's update We expectations. and discussions forward-looking about may from no statements. materially XX-Q Our statements cause and obligation any Please risk uncertainties. press detail information. to for to our XX-K this These of our assume actual more results that risk forward-looking

financial non-GAAP measures. the of earnings Relations to refer our A measures of release Investor non-GAAP provided today remarks comparable available our most in these to section website. measure financial GAAP is our the reconciliation in Also,

now Dave. I will over to turn the call

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

Let's highlights X. start on with Slide

our results and model, offering business and second diverse quarter resilient our technology expectations, customer reflecting balanced reach. broad Our exceeded

financial operating a seasoned while significant design-in again navigated global growth strategy. continued saw a environment positions activity model, sheet delivered free cash to safety capacity strong significant Our delivered us to solid sustainability, we proven while our and testament through and secured connectivity across our new results, We enhance business dynamic our and teams solid megatrends. and a long-term flow, balance

allocation M&A, shareholders. of towards capital while thoughtful maintaining will commitment We returning to prioritize our to capital continue

achievements Meenal financial to for the our and first of sales exceeded both results outlook. I color meaningful work, on team half through the our of quarter performance our Our additional and global hard and ranges. earnings guidance provide end XXXX. dedication will their want thank second high

and is our diverse transportation, is deeply end several highlighted core world. X. on deliver our renewable and Slide providing to Sustainability internal broad enhancements solutions highlight incorporated that providing part Report, global investors. our Sustainability who and which we progress our our across into X. energy drive for enabling website. of our to We ultimately our as medical of is set solutions Sustainability an betterment of view across of safety sustainable critical our efforts for and strive available or XXXX rooted markets our daily is history on customers Slide communities, in published actions increasingly on to am I robust from Sustainability Whether the technology, key our businesses. of advancing the proud electrification strategy to growth accomplishments customer external base long-term Littelfuse of Turning as integral employees, Ultimately, recently an our teams,

a markets and believe our highlight We half to into electronics Before activity, end key diving I passive negatively the behind us. that market OEM XXXX is first design and few channel impacted and largely the results XXXX of destocking wanted trends. inventory channel

book-to-bill channel levels one electronic electronics passive passive have above remains as inventory Our normalized.

following typical as destocking rates order a normalized more to return to period. expect We

However, we a been and ultimately cautiousness and ongoing seeing far to destocking thus hesitancy historic of some elongated passive what has inventory into are cycle. signs QX, following electronics from restock customers

year. across in the reductions We're also and half trends seeing expect second lines moderating semiconductor more order inventory the stable our protection product of

which in a our had Finally, on pronounced observed further impact semiconductor exposure. industrial the OEM quarter, more we destocking power

expect will the detail see continued I these As shortly, provide will of through we us which on second we half impact demand, conditions the industrial soft more year.

on Slide starting activity, markets X. with let's to the end our Now turn and electronics design

increasingly in seeing soft, Consumer technologies products, optimistic customers was recovery. appliances nearing and again in although remained initial soft are a electronics led quarter demand by signs AI building applications. quarter, demand Second we markets are of recovery although the

a AI-driven we across Demand the Taiwan, especially center was data upbeat while be robust Taking and quarter. continues second data in global such of to healthy and design-in believe applications back, activity our in exposures. customers encouraging as subset step center regions for are increasingly

Regardless of ongoing to our through-cycle we long-term remain electronic growth and innovation our drive trends, positioned across near-term well exposures. diverse market enable

We medical the innovative from to believe delivered applications. cadence strong this in solutions design wins We is evidenced win safety-critical center ranging by our data quarter. numerous

fuse customer application America. [ in North for secured in data and Specifically, wins, we the for in Asia center liquid quarter, several ] cooling including business

will We also switch that utilize business secured in technology. Asia customer for our center a data

safety-critical and and wins Europe as well for North multi-technology technology America. switch for delivered defibrillator customers medical in Korea a South in for We medical applications as customer

with appliance regions set in in and secured will diverse utilize Asia including multiple our and capabilities. that business we sensor protection Finally, customers technologies, of Europe circuit our

Slide Moving on wins on end to transportation and X. design markets

reach. Our vehicle capabilities, and from customer passenger exposure, balanced again, leadership benefited global our broad technology product

customers to core America EV launches pivot as see and North markets. continue combustion in interest delay internal vehicles in our Europe hybrid strong products We to and and

in which delivered experience In support China, OEMs that applications growth. we results low robust strong voltage to local again continue

remain and as passenger vehicle production architectures the on long-term modestly growth electrification decline well vehicle positioned drivers customer next-generation continue to was as global lower modest vehicle hybrid well advancements a we prior global in the diverse base. electronification year versus expect and full we XXXX. passenger across to enable for a quarter year, Second and as We deliver electric

traction broad led activity commercial pricing vehicle with initiatives our by by we and base. bear profitability our continue our Regarding actions pruning to ongoing customer design-in while encouraged our fruit exposure, and remain

market our seeing ag, by conditions soft are driven exposures. construction continued We

demand and quarter. second resilient was truck in bus the than on-road more expected However,

truck led heavy-duty by and and across including and we electronification commercial half Long and positioned Europe electrification second well soft to extending regions, the forward, broad bus material remain innovations construction demand see the we Looking term, continued into vehicle China agriculture, our year. markets. of deliver handling, equipment exposures,

commercial new high-voltage passenger vehicles, passenger a In across secured In markets. secured vehicle Korea. the meaningful quarter, in customer the we opportunity transportation with end and fuse we both business South

for base, in including delivered our also Europe fuse We China. Americas, customer customers low-voltage multiple in global the across and wins

a win within for a for in secured customer as a Korea China. customer system key well as also a management in battery We South

Finally, construction Japan we secured America, switch portfolio business as in secured traction broad the South our several gain with North we to continue in commercial Korea. by during customers meaningful we vehicles, In for wins quarter. highlighted North equipment and business America

truck win a We Mexico. in Brazil bus and win also customer on-road delivered in a for

infrastructure signs mixed saw with for Industrial equipment and market industrial again was robust, second power energy continue led the while weakness HVAC renewable work Demand of Turning X. markets to applications and the down benefiting ongoing and date. and in semiconductor continue activity. applications. storage out from Slide residential to remains demand inventories applications In automation, by show construction growth, modest to orders. we safety charging industrial the recovery, soft further we customers and volume to although quarter, push design solar factory Broadly, at are quarter. And pace a

long-term believe trends exposure. a step forward, where Looking Taking soft conditions demand attractive, growth persist end semiconductor with across we commitments global remains spend, seek increasing back, drive customers innovations. supported automation a efficiency our to will ongoing through strong have impact more requirements, decarbonization. industrial exposures and electrical we infrastructure ongoing pronounced design remain Industrial as to in advancements by year-end activity

had market quarter, we a of America we second In multiple customers business won where product in with variety success the HVAC North categories. across the

We business recent safety meaningful America our North industrial doing continued momentum customer. a with

a turbine In secured and application in renewables, application Asia. for we solar wind business for residential

wins charging the EV in regions. multiple delivered also We across quarter several

supporting America Across We deliver Finally, base for within our solutions continue an design we meter annual to to our broad connectivity sustainability, to win growth on customer. long-term exposures. application safety market double-digit businesses, our well end positioned our we North secured continued our remain revenue evidenced target business by and industrial as deliver in diverse megatrends. innovative smart customer momentum

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

Thanks, quarter in Slide details million, expectations discussed was versus start us today. quarter X%, to line and for the XX year pruning our product in X% $XXX second The results. turn line reduced our actions prior thank sales down Revenue X% you Please joining everyone, Dave. organically. Good the in down to with morning, quarter. with on last and we

margins margins operating adjusted XX.X%. and GAAP XX.X% margins XX.X%. EBITDA at were finished Adjusted operating

exchange to commodity Foreign due and silver had and and inflation largely commodities an point unfavorable driven XX margins, to impact primarily copper by basis exposure.

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

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

than effective tax slightly jurisdictions. rate income across shifts adjusted higher expected due was Our to

for Please capital on turn to updates XX Slide allocation.

cash cash solid inventory was deliver flow, our the year-to-date. cash $XX dollars We've in to we cash continued continue days generated Operating free flow. a and performance. generation year, reduce strong $XX million, in both million conversion We $XX million to XX% contributing flow free this to flow quarter and rate. we Year-to-date, yielding generated cash in

We expect on XXX% on cash free long-term our and for cash debt-to-EBITDA our the ended year, leverage with of to the million full aligned of We conversion with deliver X.Xx. hand goals. flow $XXX quarter targeted net

we'll prioritize we shareholders via buybacks. million share to we to capital to for of million and via will including and thoughtful quarter, of return strength dividend. $XX the $XX Given continue acquisitions, capital share free continue cash shareholders, our In through balance periodic dividend our and to our sheet, million our a returned flow cash the $XX repurchases

XXXX, of million we've of shareholders. capital half returned the $XX Through first to

approved Our rate. Directors dividend, quarterly to increase our $X.XX equating X% annual of Board an in cash

annual testament in we long-term dividend disciplined cash maximize on long-term We've value. XX% grown shareholder to our a and capital a allocation earnings inception, to We'll since strategy our generation as remain power. strive our basis compounded

Slide last segment. segment XX across versus Sales year, while Products Passive product were down down X% starting highlights, were Electronics semiconductor XX% XX% XX%. products and declined products with to turn versus Please our last Sales the year organically. for

continued by moderating the similar across we're Passive impacted semiconductor protection weakness starting to quarter. markets, particularly and ongoing our in semiconductor were The industrial trends The inventory saw product see products impacted sales our products. in declines, power we but

Margins portfolio quarter margins and the efforts diversification XXX while and reflecting at margins improved basis Operating strong finished XX.X%, in XXX our were sequentially execution. points EBITDA XX.X%.

confident the team's to to cycle and drive expansion. proud of Electronics resiliency through our margin ability We're of in Products extended this are the segment continued destocking

Sales year were down were versus our organically. impacted Moving Products segment Segment commercial pruning negatively within X% X% to undertaking, been last largely our on and actions vehicle from Slide Transportation we've sales X% XX. business. down

China passenger product We in saw Europe Across X% offsets partial sales sensor due across organically. continued business, pruning. ongoing line vehicle our strength and weaker to trends grew some with

end were momentum. pricing in were Within Commercial ongoing vehicles, for down sales pruning as continued part the X% actions favorable by organically softness market quarter and offset

as initiatives margins operating quarter. pruning the as actions margins X% and fruit well segment, We in structural in our EBITDA cost the as believe bearing were XX.X% For margins were line pricing our are with at expectations. finished and

organically. Industrial Slide were Products segment On XX, and sales X% X% down

end exposures We conditions some continue broad market our OEMs. as well to at as a inventory across and soft reductions diverse continuation industrial of see

also HVAC points volume strong However, residential XX.X% in we margins growth safety early quarter. recovery again finished footprint EBITDA noted improvements capacity Operating following in benefited XXX solid, of These basis margins and positive while additions observed at first and from represented XXX the actions execution were sequentially, our industrial quarter. reflecting signs XX%. of we and the

the customers. some the are forecast. largely Summarizing order to from while comments, electronics seeing is Dave's we Please inventory for ongoing patterns we destocking believe cautious XX us, turn earlier behind Slide Passive

products inventory commodity headwinds. also continued we across to and some persistent expect ongoing We semiconductor our and expect market weakness destocking, due softness

$X.XX well to tax third of headwinds about in a rate incorporates tax product This assumptions, rate X% and With year. last $XXX range the year. to versus about in of expect largely rates relative commodity versus of as flat the Across to pruning from quarter. headwind segments, from We're to range million XX%. second includes prior as projecting be expect a sales a we the FX we quarter FX $X.XX third million. includes to This in $X.XX EPS the expected and and quarter sales be these our higher $XXX

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

year, actions pruning total our line reduce product about X% about the For transportation reduce sales year. expect sales and we full last growth X% to versus

increasing $X.XX and to but EPS current movements currency expect we mitigating about year. X% to seeing are be a of At rates, those costs. to for sales headwind commodity the We

reflecting our Electronics industrial resiliency also initiatives. cycles. through margin solid delivered the traction transportation of demonstrated and We've segment structural and We execution margins segment operational

more expect do end we and a margin cautious reflecting across and ramp, gradual our patterns continued channels. market However, subdued demand customers order

for the in finish undercurrents, of XX% to With to year. margins we company full operating these the market expect XX% range

our in industrial low the in operating margins Across segments, we expect the margins teens. to and electronics average operating mid-teens

transportation operating to to margins. continue single-digit with year high expect the exit We

assuming we're to in interest strategies. interest amortization in items, from modeling X/X which million investment of $XX we expect cash other expense, On expense million $XX and our through about income offset

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

execute our and to well diverse support to through and customer remain positioned continue well We base dynamic a market broad exposures. environment

We improvements. in our a across are reflecting offering, relationships profitability customer confident base positioning, technology diverse our global and strong ongoing

our best-in-class and our stakeholders. profitability driving cash continue forward value and will creation We path generation, for

forward worldwide day. in our Littelfuse to every unwavering you colleagues our Thank steering their company in commitment

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

Thanks, Meenal.

an dynamic through execution strong our reflect results quarter second ongoing environment. solid Our

relentless our innovative focus bolster providing second our also and believe on customers, quarter diversification our performance. efforts to We solutions portfolio

half with but end considerable sheet as continue us thoughtful balance disciplined strong attractive provide we Our generation and prioritize acquisitions markets. in cash flexibility to first

for We team stakeholders. XXXX. for path supplier to half again double-digit the our will work value remain to on their cycles and expansion, persistent we Littelfuse are to commitment creation I top-tier through our translate customers hard confident continued we first to of annual our want growth believe partners and and the global which leveraged thank earnings revenue through

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

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

above and X.X well. book-to-bill if side? as side. quarter on the a in with that, seeing of any Dave, And on semis? just are And driver much maybe between you AI Maybe Passive could how delineating we sequential within progress mentioned semi start in all the Passive the electronics is you

be that might Just orders. curious how impacting

Sure. Luke. Thanks,

so And about over overall we've book-to-bill talked electronics being at X.X.

the a we're semiconductor X, of there. is above delineation Passives. seeing portion little there between of And the bit slightly and So a it

talked of order about kind in also We've cautiousness patterns.

above if quarter. you our look So X at last we Passives were business,

above slightly a seeing We pickup of placing by And not reasonably continue we the to typically in And so our are book-to-bill be cautiousness really see. the I orders. that's X much driven we're OEM think quarter. customers -- stable, but as this as would

sell-through healthy. remains So and it remains healthy

However, we're just yet. seeing not that pick up

as better Industrial time. we've as business particular in think we of side, industrial for because it about, our semiconductor, semiconductor we've the On talked invested kind semiconductor power creates intentionally side the balance into soft. the over space is

semi the been have portion or the book-to-bill X So industrial the of power below business. in in

However, stabilize. seen begin actually those through we've July rates order to

So they're approaching X again, even in the power semi side.

in keep to before so in times if about power pick that But that longer, really just be mind we to sales you that's X, think starting months above we to X, if going are lead book-to-bills X out up are even semi the there. reach see

kind kind why into see of that that's next really, talk So we expecting year. about, of to going

consumption a participate and build And we don't AI from data been then third more centers a And see, the power data strong that be pretty and seen orders during that and in centers data second across uptick get specific of is the technology center the of we data We we've broadly data get we out technologies to into our the pickup business shift, the pretty linear AI robust, space. a general centers in in centers quarter. question. in the into several have space second the quarter while your part different related there.

as mentioned business hoping range portion terms maybe maybe the or in dynamics the of there? of Got customers those the something inflect the of passive prepared or the more in distribution, and touch of it. of [ just Also kind thinking that's beyond that channel Dave? one in to late we fourth distributed quarter, on I'm ] semiconductor seeing well, you in remarks given end inventory XQ likely Could and both you're what see protective

Yes.

of more protection think that I automotive portion if little has like passives higher our business. semiconductor business, slightly a index a business It electronics a you our will. as higher behaves to

protection later the actually, is, by quarters. Passives our did business correction of saw into we couple went what So a than semiconductor mode

to And direction to point behind other passives, or portion X typically an correction, semiconductor inflection quarter begin of the our coming the follow and we've in to is, that. a a we what seen tends when see protection

exactly turning a So the we passives but that when side, it's or our back it's probably quarter difficult to X behind up see protection say in business.

if in that's if would first. that then a ] assume drive one [ mid-teens XX% could half the what be unpack could the the margin-related the And in back would looking risk, final related that end, year sneak XX% at it. but I electronics in the Can versus above this just step-up question at Got a the is margins, will, that And in it full you year? high just XX% and incremental operating for to the the midpoint, Meenal, at I applying mostly exiting question. half be second pushing sort you of ultimately, upside guidance

trying reconcile where in quarter seems midpoint, picking a I guess even strip what [ I'm that [EBITDA] pretty out ] the stepping like more some the margin we down flat standpoint sequentially. third from at really the with incentive guide if up maybe you're to comp conservatism

Sure. going which the it floor. lot margin for stepping in around. have overall, just work that really We on to foundation we've improving has general, done about back execution, portfolio past continue talked the a several expected look would diversification, I in of to done that, years that's to margins and say, floor,

heard commentary things to going, With we're where look are and sales. that the really predict cycle and you Dave's some out on in, trying on we're of

done, all it's work the back. coming we've given foundational us, really the volumes For now

the various operational in side. places, where more with to based year guide full so segment, XX% margins. little view to XX% really general bit that recovery range up think the ended That's on, as full the on And the we is we about the across improvement which year for given Transportation we've starting on see

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

Yes.

regarding the quick guidance. Another question

again. a and given, despite the customers, quarters net next auto And around For for growth typically, should very you we seen product numbers the your expectations year-over-year patterns And couple S&P we've get Electronics the cautious say, a of pruning, auto sequentially. year-over-year are that? business, year that that then from electronics in expecting the you recently? sequentially, growth as And of business given is cut that down in order thoughts expect

that one in. take I'll Matt. to Sure, Meenal jump free and feel

the quarter, which So growth expect at current our we return fourth is look of to in if begin kind absolutely. we things the to to of view when turn, see

If at calendarization a normal environment, you the sequentially electronics in normal in fourth would look down and we see quarter.

the position. Passive inventory we seeing our Weeks pre-COVID products back inventory to However, are for of levels. are

So of inventory normalized are very of sorts weeks channel. the they in

year, as to we'll the begin stable do back is POS the that begin that show growth. in fact some And see of we inventory to impact, the of end that burn reasonably lack

we normal kind So growth perhaps the calendarization we of think offsets that that there. see

in automotive for opportunities the build have the on outgrowth the of still half year be to creates side, while will back growth compared us the that year, we down previous area. in that to And car likely drive

So year. with pieces, end the corner we're the return back a see that growth to turn confident to feel do those we kind of to the begin of and going in

back given I the add that margins now really going to we've that answered volumes And drive will that, done, the the Sure. question we work that feel back it's first related question your all us, to to on I'll for coming margins. on right, really

strong out very, as come incrementals. that we tends back growth coming historically, cycles, seen coming growth to very back And at have of

of sales and third as fourth with maybe this, market think little going with we're an to atypical atypical margin also would recovers, quarter that recovery, on the a be margin the as improve. that sales start seeing into I So bit pattern -- the

in able silver. talk seen point, environment, And when general? typically did That's we know significant your some about demand just the increases helpful. difficult? how related pricing margin at But and Okay. costs past, headwinds in about input we've to that along. tough you've some think And been to, for more commentary, the in like pass those I is you given copper them should costs And

Yes.

So segment. I in our metal in and general, heavier Transportation I've the metals, about when that's mentioned much weighted we towards talk past pricing, think that,

some So yes, seeing are costs higher we input there.

back exactly where many is back. not pricing, do say to the may yes, that. we be Yes, a there. also do but contracts there working quarter is, is we're clauses have even aligned What pass doing our pass but quarter, We've been all, et of The independently. included copper a include timing going not would on other cetera, working on pricing we're metals I dynamic the with

metals beyond as So well metals we've been vehicle on pricing. in on as commercial increases, cost automotive in Working side. and the the both the side

about transportation -- progression the of part in the balance that's the we margin So I'll say segment. our as think

your line And Oppenheimer. with question Christopher next the of Glynn comes from

got I couple strong lift Had on just And there. had a really industrial. a there. better what sequential curious,

I the were revenues think pretty above significant expectations. proportion

Yes.

specifically generally, a industrial kind and reporting at looking different think are in segment, soft, we're kind have are industrial broad-based. I And for saw of of there you're we that we the the mix where softness that pockets is markets sure. markets serving of

EV So soft. continues example as to charging be an

renewables, has soft strong but been in quite Within between bit history is us that the energy been has types a of installation, solar storage driver strong. really a mix for a of which it's

So there. we've directions both in moving got kind of pieces

we financial of midst out. also performance we in in Keeping were about factory mind the a from there, into where that quarter moving in the a we're building first talked new

almost that, all noise transition, behind a behind some between bulk going China fair in that. us of and we us third that that also you're with creates we of costs second into the went when associated got quarter. always, to as into from it the transitioned quarter and operations of Mexico We've the So certainly amount

business. of of the performance to uplift that the kind So helped line bottom Industrial

of kind the designs first building there? a emphasis how some that? designs. bit new then put because on on recovery, new of is you more actually kind could on put And color much HVAC you of initial inventory Okay. signs Are And the market little anyone, OEMs,

did. we Yes,

have that, your And our documented, area a well in North America, HVAC, an perspective. from been heavier to we exposure so been course, ] to over residentially has inventory our And in there's side of reports, [ HVAC. where particularly including customers' in

as that channels. seen take inventory from their As we've they're us, customers into through they've our of rate in kind pushing the pushed of field, some improving

from So of kind are there of to starting have stabilize. us their early signs their takes inventories uptick as begun

really focus design-in perspective, there. had robust with many product there many on technologies, of of HVAC our a areas a improve From across activity industrial lot position we good particularly customers, our where we to need

So we saw and are a active. there, activity teams the lot of design-in very

play So for we in think HVAC. out will industrial the long term, well that to us exposure

And your of with comes Saree line next question Jefferies. from Boroditsky the

on Grant for Saree. is This Smith

lot Passives. what what more patterns talked You kind just you could orders? are to elaborate was would increase their maybe of a these order on and cautious confidence telling of restocking customers the a hoping I the bit increasing and about you But in start

Yes.

at of certainly to carried And in our with bit that customers down. more partners, that than Our excess they order the years, the distribution what OEMs, working visibility we're comes discussions end considering we're lot of is and been are think distribution inventory they've bit cycle. last in end a and a from patterns customers the where seeing are our some burn challenging a be seeing couple the of muted, EMS that to fact they're I over from partners,

burning their these in cost excess pretty progress inventories. of meaningful down days. are inventory high They've Carrying made

that. as lead our think are saying, pretty they'll at have times times pushed. I look are And sense shrunk, is hey, being Capacities short. lead not so And they're

the for going are support pretty hold off a get So bit I'm in are, little orders if little drop I that odds and to high. later, a

just their order on kind to So I they're pretty it playing think cautious patterns them. place of

more These our cautiousness. of drive off cautious problem pattern is But general since on that typical it's in we very And situations some in coming there's they've is that, massive -- being a excessive end market, a which in constraints sense in capacity are there don't the the future, kind been general that's Electronics. inventories that of just carrying. the of kind

you the in a attractive as Can And kind on does going far M&A sense. those valuations. focus the the of expand on you And there maybe out markets look markets. end Makes it. M&A Got as thoughtful bit environment mentioned little just and what pipeline like and end forward?

we say and at Sure. we our time, M&A our would a that funnel using way in our to that is very deploy the that work. and that to active work What we And continue capabilities thoughtfully we I look we M&A have markets serve. can very we continue diversify funnel clearly, aggressively over capital to

our X So increased the exposure X last M&A been you've intentional. example, market. or that seen the over industrial has years where That's our an as to

to of are margin going So our create define we and we where business balance the the our for at that look in help can company. we plays that things as And that and are businesses balance megatrends a to be supportive ultimately, profiles will a look and we attractive long the into good across offset We industries that see around. it term attractive.

those trends kind that are those search over to these the look are in of we those -- what drive with And So term. long things the our going areas. criterias growth create are to

continue that to to build out industrial area us. of certainly, an So our going attractiveness things markets. are That's for

turn While to over to going commercial of that profitability be attractive we're an time still still work is business, doing we our some around to be. the think vehicle place

area will kind spaces. enable to us at support the come an end of into want into we At an We to that day, bolt-on consolidation outsized occasionally. M&A potential always opportunities attractive do the to along organic look continue that of growth model

start and how along, be out that look solid expect strong. coming pretty much haven't seen that's much. multiples would As hope pretty to as we and would say, far I multiples continue off, like as there, The dropping what we that so as multiples

too got second back but we acquisition. some to get on far we the screen order other want meet And may step make pushing thoughtful us area going it of for profile about an of that is, be are from the if sure the we'll we've So out return profile, it. criteria, that's and we're the to the return

question Josh from And comes TD Cowen. line with your the of Buchalter next

a Maybe want bigger with start I to one. picture

isn't So came quarter look the believe, it I quarter back, you where a upside your versus if of a function high inventory of it sounds above was the bit cautious. more at got I the think commentary was you this quarter, end, on then third I to cleared. within but If guidance, in that second the clearly the and surprised step

big you're is how tepid. end Now to it's shipping given I'd just closer scale. seeing demand, and end demand but just the breadth business to picture, your -- curious hear environment you're be

Josh. Thanks, Sure. Yes.

So a the quarter more about I leads and to in a we orders to positivity patterns dropping anticipated in in in our little side little talked the that. late. often bit very cautiousness second people we ability and electronics to the execute than ordering had order

visibility sometimes our and chance kind our And that. that reduces see to of

the upside been the some where saw we dropped positive and and late So a side, electronics well. kind orders that's in in of side on as industrial

a into where light we're a down quarter is semiconductor are our side selling in Electronics offset types our light However, to markets inventories industrial the to they particularly while particularly third Those and ought broader Passives of to products on the industrial things in kind are industrial seeing the bit and come of power and of that our the products, applications. of cautiousness be markets, softer. have that

they're and that up some markets. destocking inventories bringing business softer are we channel on the of portion to down And their match these to so as seeing therefore, OEM

have a pushouts on yes, the delays of bit of end their we've that there and from in semiconductor we've customers a the think seen kind markets as But I centric actually stabilization industrial power business, seen soft. So been offset our -- order bit electronics.

So quarter coming a in bit that's is from. the cautiousness, little the where maybe third

on area, the in see so I on and automotive a to David, of cetera. car also little some add the coming a more et transportation one Maybe down there's of would in also, of right? more, side, side, especially automotive side, a on North guide through especially America, little bit IHS the the builds caution Starting bit down Western little bit Europe, a

look the back I CapEx, got Maybe could the of hit meaningfully to at one through step the million, of Maybe all some your the pretty for appreciate Dave, there. walk up year. of they shape I If you in there. priorities spending the half the you $XXX Meenal. color

of or year? more And a couple the level Should repurchases down it's think we to correspondingly of from back expect current you to the that until in see then the of half excited you the something about also, maintain M&A? you're can the repurchase get last been strategic step perspective in you do valuation good quarters. Or

Sure.

the And closely. organic that to reinvest building we're first question the talked organic about want your lot sure we great we on and monitor growth, that a we on the news focusing it us So cash that back business. make generate we -- and Dave as want for capacity we the growth. relates And is CapEx, in to the to

same picking At way, same businesses they if closely. investments. that markets may And quarters, maybe approach $XXX if we but of in when we're year, manage look CapEx are seeing we'll the for to we're as a be number, prudent up not see to what and the that our not the -- cash we're end find they quite we capital. as the time, get that's and a at million, our you And our not us how capacity things delay the out few there, watch more but to trying spending trying may not it's the

Elmos are of the we XXXX. And would Semiconductor from beginning we year over The I taking Dortmund other located thing, in in fab is, that fab call as agreement to in advance spending as had say doing an of signed it last we the some it's Germany. recall, you fab acquire

building that $XXX making for investments million capacity some we're in advance. out that we're that includes So

That's part. first the

terms The as questions general. of second in in philosophy allocation. is our say part your been, I capital around buyback always think share would about we has What

double-digit acquisitions. I it's a space. you how quarter. What growth of we just again this prioritizing and about we've since over acquisition for thoughtful we've XXXX, consider just a for dividend, means had we as about lot the organic investing, increased past got there the on dividend the growth. making look the Then that around First, us that years, time in organic talked that investments right growth, talking Dave as spent

not like in that And shares. market looking cases funnel balance that tends share comes in into the make the it share us, buyback back the recognizing really when year share incorporated to the we the back determinations in view of buying event. prices. of was for we the And on is that first close our we holding buybacks. in horizon, what's That's be is the a some what's more we And really feel to at half M&A. look periodic those the time, and strategy that. when not at growth And at That took with or pretty same we

run share continuous periodic and it. more not about we're little we're So a a buyback, bit of

question next comes of Williams from your with the The line Benchmark. David And

I where a kind the of I talked help about. ask lot earlier. ongoing. what you just are contribution, guess, you of is us that's understand about that's just are the to of liquid build-out data centers that curious wanted else seeing magnitude think I data AI of if or type of maybe understand being the kind But -- you applications cooling today? around And applications and just a first, that way could cooling understand that? maybe -- around center talked help about and where how when overall, But built many think you out there about to you

data of itself. aspects in data One center system X it. for center kind and involved get is a infrastructure building the we power From the perspective, Yes. of

then and got -- of And center for in that architecture show of approach us. types So up you've creates building. you different within That slightly systems industrial power our sell typically that, products That and owner segment these get opportunities data every within backup has and into and things. a distribution technologies that. power the to

of the But are we'll primarily now in used there. business even but even then are sold kind We'll electronic can the spaces. shows in see that semiconductor it content that rack servers level, components have into some getting And more of in rack that the see that circuit we've protection, And up our application. those themselves, we'll moved at be being level. that into switches, then start you some switches

in I center shift that plane back there's where space others semiconductor concerns the but like that's and both pretty some on latency technology with on technology our side the that, shift. of whereas, a know volume increase or drives data side, the big things the So there's kind of

build-out creation us, there. the center drives more For data up our really by it's the that volume business that drives

a maybe, that's And talked your great a perspective the over are you year. anything all geographic you there. days XX XX half some just maybe wins maybe the or Certainly, perspective, of lot design secondly, from over last, color changed from about demand regions. even a But then Okay. to design-in across last even seeing

Just kind fairly stable, activities the design if staying curious, are of geographically.

Yes.

general, Europe, pattern improve in been Europe order say we're modest the bit. beginning patterns and anything, I think tough and I several things, improvements which see if from has of seeing for revenue would that a is Asia us an in a down we're of quarters, I kind what and from think a perspective, kind last over meaningfully. order space to

business most continues be most be shift bigger America to and our our and the softer. being North is Europe has the that solid case. probably that's stable to So continued

more the and it's ship the to perspective, if from design regions we activity first design all, design regional So line and where revenue a orders related. that's does is. bought. of where regionally, think up, perspective, not really where actually you It's about sometimes From a with

pretty not any seeing shift varies activity electronics board. meaningful shift But that of sure been consistent by automotive that's versus haven't I'm we design We're like in there. across a and that. heavy the kind seeing It seen things solid, noticeable. we're

with the question Kerwin Morningstar. of William next your And comes line from

some weakness softness of commercial Maybe transportation. also from sounds that positive and offsetting to there like China, agriculture. the start, Europe in seeing I It maybe some was you're but hoping in if the there's you could elaborate on some

Just end of softness, about how eventually product and thinking wondering, if part unpack the of then a that could that you for rebound you kind geographically, by business? are

of construction seen, and market from has been for a bit the resilient more certainly, been correction and Yes, weakest has we're William. agriculture bit our a where for challenged, us, actually, positive where and there. truck and heavy than that's spot see, a Thanks, is we specifically anticipated, softest. it's a Con the us been seeing perspective, Ag, we've and for exposure China probably that we on-road certainly, Europe us. Actually,

foreseeable in future. So much that kind we pattern don't see that of We shifting now. the too see

to continue We look for it.

back us customer as of in pulled opportunity the we've our the our improvement for some worked organic content kind to technologies pruning there, has for and done kind vehicle good we've The meaningful rebalance think commercial of which portfolio space, growth, us still will. side. we and commercial is our our in if base But you of into vehicle there's in designing news

a So after opportunity the are wins for there. be going go think we activities markets there's challenging, to while think and meaningful continue we to to bit us design

competitive competition landscape and with that one or that's rising seeing evolve position you how transportation high-voltage how and you're about as if longer-term the longer through market commercial good And talk Terrific. there? your car then rises feel and across Curious maybe with Okay. here pass vehicles, just a you could tie-in one. both a electric defending

Sure.

-- is We've EV OEMs Western days. the dynamic our So these pretty car And have seen great seen, we've good particularly certainly, space space. that. as design-in a the we -- EV the with space activity pass in

We continue to see that.

lot of those a of they're hybrids, programs hybrids, shifting as out However, are focus to pushed getting plug-in things. types

we The balance of regardless have that good news our powertrain. a is, technologies of good serve the

the the bit. what and I there is, that's We kind tough. landscape, landscape a That From China, or of -- competitive last for volumes has But a high-voltage shifting X.X years side the would competitive and we're is on opportunity been launches that, specifically, seeing that have a content West where say things good bit it's pulled back in on about there. we've little in the little talked seen so.

there. be So challenging to continues that

EV, Competition-wise, on seen tougher. on that of world the the not we rest get have

players maybe fact, a space. seen pull we've that few back bit In a little from

So we've the competition. world, stable the be if EV will, to seen Western that on pretty on you

lot of a where of has energy over there's it's electrification, around good. mile very that vehicle, map. customer different a vehicles Each and of to sorts commercial last view be there On continues the all kind

progress, but On really yet the construction volumes electrification. in taking there's off and agriculture, aren't

So bag. of it's bit a a mixed

comes line your the David with And CLK. Silver from next question of

ask a about of bit. to wafer was it certainly, touched the couple little But status a things. of Germany. wanted I was on in the just purchase question And wondering, really Meenal, I The fab

supposed I think be to a with approvals this the where was final end for the announcement, regulatory there time and year. were line of closing original targeted then

if that's mean, shouldn't facility, on using with I sector transportation thing markets. the so And the say now. more to And or the end was that, in in My still turmoil. -- track. turmoil transportation of right was that transportation-oriented I all the wafers is, understanding wondering Uncertainty, I'm point, for owner first then the there maybe the legacy

you're years about your And the your then a thinking from I'm use about perspective, capacity and change in and is early it's maybe asset. allocation that the you year been longer use wondering there in announced. about term, the just since your any best would highest was of deal how thinking

give to some that. Happy color Sure. on

of supporting to year, part and year uses of take business. But we'll track. automotive the its do things ownership that. of at this applications next of the beginning that, where everything that fab. of of key expect the correct, the on contract, close That's like you're kind all, and is of and nature fab end We First their on Elmos,

seller The and oriented product up We for they fab in begin there's for the could not export X-year different it with a manner this continue produce fabs, is of them we out this our X-, us, that takes a take products fab play this them that. and like into during where a over automotive. industrial industrial, which down same did, to out long-term support more of reason to But this years begin that to fab that time, multiyear, us. we ramp we agreement we'll as to frame. fab the as do to time towards they begin for contract acquired candidly But will it's ramp

side. long-term the products play So the us, fairly loaded fab a really with a transition, for heavy goal application through try keep for industrial it's semiconductor on is well the to focus power to and the our

follow-up will we question from Matt Stifel. Sheerin a take with And

had a sequentially stock OpEx. just that up the of question, was regarding modeling comp, Meenal, which I because seasonal. I know is quick

in about So we QX? QX, how in think OpEx should

at say look the can it I trends would that we've Yes. you continued had.

as, the think or it, second the Think talked of $XX million long-term in it call that about I I quarter $X.XX. let's rounded, the incentive fact cetera. about was so et

so. in or of you an it it So ]. million think R&D, the SG&A, rate like something there, about for expect upper would for to back I a from sort I'd normalized can about think put $XX in the say, into, run it mid-XX what is and [ range

David We will from with Benchmark. take Williams a follow-up question

I have follow-up real quick.

Just that automotive is How as margin impact still industrial think about for the from to load but a or margin typically wanted you the manufacturing fab that X transition over you to as either Meenal, ask should as and X about quite operating fab load there you're there's thinking the margin, David gross a years, time? or products, products large your on -- we the you're others. differential over making maybe

question. Great Sure.

that we your almost as out, performing will to our service, a have mentioned that a we've arrangement foundry Dave margin that, what than really will the really are. modest margin we're typical with like So worked a is point, lower partner we be

the not fab really to point. mentioned, Dave that's the as -- and was, goal the really, So level main been load

that like the margin of arrangement. dilutive, a but will that's sort have will look it's we So

So what margin. does XXXX, overall to the segment get talking we'll and on into that that further as details provide we about some

back concludes question-and-answer remarks. Kelley will turn now closing over for conference to session. Mr. our I that David And the

great Industrials Abbie. September Thank of Semiconductor, the in at their with Yes. as day. XX speaking ISI Networking & you, Conference the August has We well everyone a Evercore We York. New forward Conference Jefferies Hardware Chicago look as everyone IT hope rest to in X

Thanks again.

gentlemen, this thank participation. concludes and you call, we for and your today's Ladies

disconnect. You now may