LITTELFUSE INC /DE Q1 FY2025 earnings call

Greg Henderson introduced himself as the new CEO, highlighting key observations such as being leaders in smart solutions for electrical energy transfer, having a talented team and flexible global operating model, and strong profitability and cash generation. Meenal Sethna discussed first quarter results: revenue was $554 million, up 4% yoy and 3% organically. GAAP operating margin was 12.7%, adjusted operating margin was 14.2%, and adjusted EBITDA margin was 20.1%. Strong cash generation in the first quarter with operating cash flow of $66 million and free cash flow of $43 million. Capital allocation included returning $45 million to shareholders. Strategic priorities mentioned were enhancing focus on growth opportunities, providing more complete solutions for customers, and driving operational excellence.

Electronics Products: Sales were up 6% versus last year and up 3% organically. Passive products sales were up 13% organically, while semiconductor products declined 5% in the quarter. Operating margins in the quarter were 15.2%, up 220 basis points versus the prior year period. Transportation Products: Segment organic sales declined 4% for the quarter. Passenger car sales declined 6% organically, and commercial vehicle sales were down 2% organically. Operating margins for the segment were 11.7% for the quarter, up 220 basis points versus the prior year period. Industrial Products: Segment sales grew 16% organically for the quarter. Segment operating margins finished at 15.3% in the quarter, expanding 880 basis points versus prior year levels.

Second quarter guidance: sales in the range of $565 million to $595 million, EPS in the range of $2.10 to $2.40. Full year 2025 expected about 2% total sales growth from Dortmund capacity sharing, neutral impact to EPS, foreign exchange and commodities expected to be a 1% tailwind to sales and $0.40 benefit to earnings per share.

Tariffs and trade uncertainty, potential demand risk in the second half, macroeconomic uncertainties affecting segments like automotive and personal electronics.

Q: Good morning, and thanks for taking the question. Greg, great to talk to you on your first call here. Hoping we could start with the topic of the day in terms of tariffs and specifically, if we can unpack the assumption that's embedded into guidance for the second quarter, hoping specifically to parse out some of the geographic impacts in terms of the price recovery that you're anticipating and then also maybe some of the more durable ways that you're avoiding or working around tariff impacts altogether relative to the tariff playbook that you mentioned as well?

A: Yeah. Thank you, Luke. Good morning. Maybe I'll start by just saying Littelfuse, over the last years, has been focusing on building a flexible and asset-light operating model. And we've had a strategy of moving our manufacturing and our supply chains closer to our customers, and we continue to do that. So we have been diversifying our footprint and doing more local for local manufacturing. And that's been a trend that we've been on, that we will continue. In addition, I would say we've been working with our customers to mitigate tariffs as much as possible, managing ship to locations, managing where we supply things from them. So this is a trend that we will continue with. We expect to continue this trend of diversification and adding resiliency to our supply chain. And then with that, I'll hand over to Meenal, and she can give a little bit more detailed context on the details of how it's affecting our business and our outlook.

Q: Thanks. Good morning, everyone. Meenal, it has been great working with you, and we'll talk to you next week at our conference. And, Greg, looking forward to working with you. Just a quick one on the tariff issue. Is pricing -- are you taking a list price approach or a surcharge approach?

A: It varies, actually. We're doing both depending on the customers, what we typically do, but that the answer is it depends on the customers.

Q: Hey, good morning. Thanks for taking my questions and, Greg, great to hear from you here on your first call. And certainly, Meenal, we will miss hearing from you each quarter, but thanks for the time. I guess, Greg, maybe first from your business that you had over the last month or so. Just curious if you have any color on what you're hearing from your customers in terms of their thoughts on the tariffs and their demand outlook and maybe how they're positioned and just how they're seeing the environment maybe?

A: Yeah. Thank you, David. Yeah, I think, obviously, it's a very dynamic time, right? So -- and we're -- one of our key focuses is try to have as much conversations with our customers as we can. Just a little bit of context to kind of our business and our customers, just a little bit of context. We had a very strong book-to-bill in the first quarter. So, we have -- across all of our businesses, we had positive book-to-bill in the first quarter and we ended the second quarter with very strong backlog. That said, talking to our customers, there's a lot of, I would call it, anxiety, especially as it relates to the second half demand risk. And some submarkets like automotive and personal electronics probably maybe have a little more anxiety than others. So that said, I think we're confident in our 2Q guide. We continue to talk to our customers. And Meenal mentioned, there's a lot of things we can do to mitigate the impacts and we're focused on those. The bigger question goes to kind of second half macro issues that we're all facing together. And our focus is just managing, stay close to our customers, understand what they need and focus and we control, which is our execution and being flexible and resilient in the time.

Q: Hey, thanks for having me back. Just wanted to follow up on the topic of book-to-bill. You emphasized a couple of times very strong positive for all three segments. Curious if April showed continuity there and -- or any falloff, and if it didn't show a falloff, why do you think that is in light of the obvious kind of gating items that might face your customer base, at least in some areas?

A: So, Chris, maybe I'll just take a step back, I know we've had a lot of comments on book-to-bill Q1 going into Q2, and then we also added in some comments about we're keeping an eye out on the second half. We feel good about our momentum from the first quarter, good book-to-bill, really good momentum going into the second quarter. And I think I said this already, but strong confidence in our ability to deliver on our second quarter. We've even put in a little moderation in there just for some of the unknowns that are out there, which is another reason we feel really good. When we look ahead, Greg even mentioned that we're working closely with our customers. There's a little bit of noise going on everywhere. You read all the same headlines that we're reading. And so we're keeping an eye out on things, both ourselves, but then talking to customers every day. And areas like automotive, a little bit of unknown. They're out there on a daily basis on the personal electronics side, et cetera. So our focus is going to be we're going to continue monitoring. We're going to work closely with our customers. We're going to focus on what we can control. You asked me earlier about our margin expansion and how things are going in transportation. We're focused on margin expansion across all of our segments. And those are the things that we can focus on, we can control. We can adjust costs as necessary, we'll pivot as necessary on that.