LITTELFUSE INC /DE Q4 FY2024 earnings call

Management Statement and Operational Highlights

• Highlights: Fourth quarter performance within prior guided range, global team execution, design win momentum. Electronics end markets mixed but improved, with data center as a growth driver. Transportation end markets saw wins in passenger and commercial vehicles. Industrial markets had strong HVAC, renewables, and safety applications.
• End Markets: Electronics market trends mixed but improved, with data center growth and emerging stabilization in regions. Transportation end markets benefited from global positioning and technology offerings. Industrial markets saw momentum in safety, HVAC, and renewables applications.

Segment Performance

• Electronics Products Segment: Sales down 4% organically and 12% for the quarter and year, respectively. Passive Products up 9% organically in the quarter and down 1% for the year; semiconductor products declined 13% and 20% for the quarter and year. Operating margins in the quarter were 12.3%, EBITDA margin above 19%, with year-end segment operating margins of 14.2% and EBITDA margins of nearly 21%.
• Transportation Products Segment: Segment organic sales declined 1% for the quarter and year. Passenger vehicle sales declined 4% organically in the quarter and were flat for the year; commercial vehicles sales were up 4% organically in the quarter and down 1% for the year. Operating margins were 9% for the quarter and over 10% for the year, with EBITDA margins of 14.5% in the quarter and 15.6% for the year.
• Industrial Products Segment: Sales increased 12% organically for the quarter and declined 1% for the year. Segment operating margins finished at 17.1% in the quarter, expanding 440 basis points versus prior year levels, while full year margins finished at 13.9%. Adjusted EBITDA margins were 20.8% in the quarter, while full year margins finished over 18% for the year.

Guidance

• First quarter 2025 sales expected in the range of $520 million to $550 million, including about a 2% headwind from FX versus the prior year. EPS projected in the range of $1.70 to $1.90. Full year 2025 expects solid earnings expansion, with FX and commodities having a 1% headwind to sales but a $0.22 benefit to EPS. Completed acquisition of Dortmund semiconductor fab, expecting about a 2% total sales growth from volumes sold to Elmos, neutral EPS impact. Expect to invest $90 million to $95 million in capital expenditures and a full year tax rate of between 23% to 25%.

Risks

• Geopolitical risks, including potential tariffs, which are monitored through scenario planning. Impact of ongoing weak EV charging infrastructure trends leading to goodwill and intangible impairment charges. Ongoing Pillar Two tax legislation posing a headwind on tax rates.

Question and Answer

Q: Luke Junk on book-to-bill for Passives and industrial recovery A: Dave Heinzmann stated book-to-bills for electronics are above 1, Passives and protection above 1, with power semiconductors improving. Industrial recovery has stabilization in North America and Asia, with strength in safety applications, HVAC, and commercial focus.

Q: Saree Boroditsky on margin performance and HVAC demand A: Meenal Sethna said margins will continue to expand through 2025 with cost adjustments and pricing. Dave Heinzmann noted no air pocket in HVAC demand due to pivoting to industrial HVAC design wins.

Q: Christopher Glynn on cost scaling actions A: Meenal Sethna explained cost scaling actions involve rightsizing cost structure, including cost reductions, discretionary cost reductions, and footprint work to align with current business state.

Q: David Williams on tariffs and 5-year strategy A: Dave Heinzmann discussed monitoring tariffs and scenario planning. Greg Henderson expressed excitement about continuing Littelfuse's growth phase and rolling out 5-year strategy details later.

Q: William Kerwin on Electronics segment margins and EV dynamics A: Meenal Sethna said Electronics segment margins were affected by inventory cycles, but expected recovery in 2025 with volume driving margin improvement. Dave Heinzmann talked about EV electrification as a long-term content driver, with opportunities in high-voltage and commercial electrification.

Q: David Silver on long-term changes and challenges A: Dave Heinzmann highlighted aligning strategy with long-term megatrends and diversification as key, noting geopolitical challenges but confidence in the team's ability to navigate.