Littelfuse, Inc. Q4 FY2025 earnings call

Management Statement and Operational Highlights

• Recent Developments: Closed acquisition of Basler Electric in December, which strengthens high-power capabilities and expands positioning in key growth markets. Announced an investor day on May 14 in New York to review strategy and long-term financial goals.
• Fourth Quarter Performance: Delivered 12% year-over-year revenue growth, with double-digit growth in data center, grid and utility infrastructure, and renewables markets. Automotive grew mid-single digits despite declining global vehicle production. Earnings exceeded the high end of guidance range due to operational excellence.
• Strategic Priorities:
  • Enhanced high-power capabilities via Basler acquisition, bolstering grid and utility infrastructure and data center positioning.
  • Implemented new go-to-market evolution focused on customer-centric solutions, seeing early success in data center market with design wins doubling in 2025.
  • Optimizing power semiconductor business by sharpening focus on high-value and high-growth applications, rationalizing portfolio and reviewing manufacturing footprint.

Segment Performance

• Electronics Product Segment: Fourth-quarter sales were up 21%, led by strong passive products organic sales and growth from protection semiconductor products. Adjusted EBITDA margin finished at 23.7%, up 170 basis points. For the full year, sales increased 13% while adjusted EBITDA margin expanded 190 basis points driven by solid volume leverage.
• Transportation Product Segment: Fourth-quarter sales increased 1% year-over-year but declined 1% organically. Adjusted EBITDA was 16%. For the full year, focus on operational execution led to solid margin expansion.
• Industrial Product Segment: Fourth-quarter sales increased 4% but declined 1% organically as improved energy storage, utility and grid infrastructure, renewables, and data center demand was more than offset by lower HVAC demand. Fourth-quarter adjusted EBITDA margin was 16.2%. For the full year, industrial segment delivered revenue growth of 10% reflecting secular growth positioning, with adjusted EBITDA margin expansion due to favorable volume leverage.

Guidance

• First-Quarter 2026: Expect sales in the range of $625 million to $645 million, assuming 7% organic growth at the midpoint and 5 points of growth from Basler acquisition. Projected EPS in the range of $2.70 to $2.90, assuming 25% flow-through at the midpoint and a 3-cent contribution from Basler acquisition.
• Basler Acquisition: Anticipates Basler will contribute between $130 million and $135 million in revenue and 10 to 15 cents of adjusted earnings in 2026, with a high-teens adjusted EBITDA margin.

Risks

• Goodwill Impairment: Recorded a non-cash goodwill impairment charge of $301 million for the IXYS and Dortmund acquisitions due to weaker sales and profitability than original expectations amid soft market conditions.
• Commodity Price Volatility: Pressure on metal costs (copper, ruthenium, etc.) with efforts to manage supply chain and pricing, though teams are focused on being price cost neutral and have factored impacts into guidance.

Question and Answer

Q: Luke Junk asked about data center growth, incremental drivers, industrial recovery, and metals inflation.

A: Greg Henderson and Abhishek Khandelwal responded on data center design wins doubling, broader industrial momentum with residential HVAC softness, and efforts to manage metal cost impacts by focusing on supply chain and pricing.

Q: Christopher Glynn inquired about data center partnerships, power semis rationalization, and Basler cultural fit.

A: Greg Henderson and Abhishek Khandelwal discussed data center ecosystem partnerships, power semi portfolio rationalization, and positive cultural fit of Basler with Littelfuse's go-to-market and engineering capabilities.

Q: David Williams asked about changes and positive shifts in the last 90 days.

A: Greg Henderson and Abhishek Khandelwal noted progress on strategic priorities, margin expansion across segments, and broad-based industrial momentum contributing to positive shifts.