Littelfuse (NASDAQ:LFUS) Inc. reported its fourth-quarter 2024 earnings, revealing an adjusted diluted EPS of $2.14, which fell short of the forecasted $2.36. Despite this miss, the company's stock price increased by 2.63% in after-hours trading, closing at $235.24. The revenue for the quarter was $530 million, slightly above the expected $523.3 million. According to InvestingPro data, the company currently trades at a P/E ratio of 51.8x, suggesting a premium valuation relative to peers.
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Key Takeaways
- Littelfuse's Q4 EPS was below expectations, but revenue slightly exceeded forecasts.
- The stock rose 2.63% in after-hours trading, indicating positive investor sentiment.
- The company reported strong free cash flow generation of $282 million for the year.
- Littelfuse continues to focus on high-voltage EV applications and electrification technologies.
- CEO Dave Heintzeman announced his retirement after 40 years, with Greg Henderson set to succeed him.
Company Performance
Littelfuse's overall performance in Q4 2024 showed mixed results. While the company's revenue exceeded expectations, the EPS did not meet forecasts. This quarter's revenue was $530 million, a 1% decrease compared to the same period last year. For the full year, sales reached $2.2 billion, down 7% year-over-year. InvestingPro analysis shows the company maintains strong financial health with a current ratio of 3.61 and operates with moderate debt levels. Despite these challenges, the company has maintained a strong position in emerging technology areas such as electric vehicles and industrial safety.
Financial Highlights
- Revenue: $530 million, down 1% year-over-year
- Full Year Sales: $2.2 billion, down 7% year-over-year
- Q4 Adjusted Diluted EPS: $2.14
- Full Year Adjusted Diluted EPS: $8.48
- Free Cash Flow: $282 million for the full year
- Adjusted Operating Margins: 12% for Q4
Earnings vs. Forecast
Littelfuse's Q4 2024 earnings per share of $2.14 missed the forecasted $2.36 by approximately 9.3%. However, the revenue of $530 million slightly exceeded the forecast of $523.3 million. This mixed performance reflects a challenging market environment but also hints at resilience in certain business segments.
Market Reaction
Despite the EPS miss, Littelfuse's stock price rose by 2.63% in after-hours trading, closing at $235.24. In premarket trading, the stock further increased by 2.85% to $245.16. This positive reaction suggests that investors are optimistic about the company's future prospects, particularly in its strategic focus areas such as electrification technologies.
Outlook & Guidance
Looking ahead, Littelfuse provided guidance for Q1 2025, with expected sales between $520 million and $550 million and EPS ranging from $1.70 to $1.80. Wall Street analysts maintain price targets ranging from $260 to $310, suggesting potential upside from current levels. The company anticipates a gradual recovery in the industrial market and expects low single-digit global car builds. The full-year tax rate is projected to be between 23% and 25%.
Executive Commentary
CEO Dave Heintzeman stated, "We're in it for the long haul. We're developing products for high voltage applications," emphasizing the company's commitment to long-term growth in electrification technologies. CFO Daniel/Nina Oeyan added, "We feel good about our trajectory, margin improvement across electronics," highlighting confidence in the company's strategic direction.
Risks and Challenges
- Supply chain disruptions could impact production and delivery timelines.
- Market saturation in key segments may limit growth opportunities.
- Macroeconomic pressures, such as inflation and interest rate hikes, could affect consumer demand.
- Tariff impacts remain a concern, though mitigation strategies are being discussed.
- The transition in leadership may pose short-term challenges as Greg Henderson takes over as CEO.
Q&A
During the earnings call, analysts inquired about the potential impacts of tariffs and the company's strategies to mitigate these risks. There were also questions about margin dynamics in the electronics segment and the company's electrification strategy across vehicle markets. Additionally, the $93 million non-cash impairment charge in the industrial segment was addressed, providing insights into the company's financial health and strategic adjustments.
Full transcript - Littelfuse Inc (LFUS) Q4 2024:
Operator/Moderator: Good day, everyone, and welcome to
Operator/Moderator: the Littelfuse 4th Quarter 2024 Earnings Conference Call.
Operator/Moderator: This call is being recorded.
Operator/Moderator: At this time, I will turn the
Background Voice: call over to the Head of
Operator/Moderator: Investor Relations, David Kelly. Please proceed.
Dave Heintzeman, President and CEO, Littelfuse: Good morning, and welcome to the Littelfuse 4th quarter 2024 earnings conference call. With me today are Dave Heintzeman, President and CEO Nina Orkna, Executive Vice President and CFO and Greg Henderson, AFUE's Board Director and incoming CEO. Yesterday, we reported results for our Q4 and a copy of our earnings release and slide presentation is available in the Investor Relations section of our website. A webcast of today's conference call will also be available to visit our website. Please advance to Slide
Background Voice: 2 of our analyst remarks.
Dave Heintzeman, President and CEO, Littelfuse: Work. Our discussion today will include forward looking statements, and forward looking statements may involve significant risks and uncertainties. Please review yesterday's press release and our Form 10 ks and 10 Q for more details about important risks that could cause actual results to differ materially from our expectations.
Operator/Moderator: We
Dave Heintzeman, President and CEO, Littelfuse: assume no obligation to update any of this forward looking information. Also, our remarks today refer to non GAAP financial measures. A reconciliation of these non GAAP financial measures to the most comparable GAAP measure is provided in our earnings release available on the Investor Relations section of our website. I will now turn the call over to Dave. Thank you, David.
Good morning and thanks for joining us today. Let's start with highlights on Slide 4. In the Q4, our performance and results came in as we expected, both sales and earnings were within our prior guided range. The consistency of our performance reflects our global team's strong operational execution and unwavering focus in our diverse and broad customer base. We delivered solid quarterly results in a mixed environment across our end markets.
For full year 2024, we continue to deliver design win momentum and drive new product innovations alongside our global customers, while navigating the shopping environment. We believe our steadfastness of our customers positions us to deliver continued long term growth to year growth. We exited the year with the electronic consumption cycle behind us and signs of distribution of inventory replenishment are surging. Notably, our Electronics segment book to bill is at its highest level since the Q2 of 2022. The cashless business book to bill is below 1, while Power Supply Sector remains below 1, we observed improved order rates in the quarter relative to levels seen earlier in the year.
Disorder rates are gradually improving. We continue to see broader design wins during the process of technology offering and end market exposures. We remain confident in our content trajectory and key enablers capability, productivity and safety megabits. We also strove for improved operational performance in 2024. We delivered meaningful profitability and success across our businesses, driving solid second half margin expansion.
Into 2025, we continue to align our cost structure to reflect the current business and market conditions, accomplishing our customers to reach customer growth through their margin expansion. Finally, we generated strong free cash flow conversion in 2024, while our balance sheet at the end of the year is well positioned to support our long term growth strategy.
Background Voice: Taking a
Dave Heintzeman, President and CEO, Littelfuse: step back, we are confident our actions in 2024 will support growth and solid earnings expansion in 2025 as well as meaningful long term momentum beyond the New Year. I want to thank our global teams for their focused efforts and persistent hard work in the Q4 and throughout 2024. Now let's turn to our in market design activity, starting with the Electronics on Slide 6. Electronics market trends improved through the Q4. At a center remained a strong growth driver in terms of AI applications.
Medical (TASE:PMCN) demand was mixed. Demand for consumer products, appliances and building technologies remained subdued. And as the quarter progressed, we observed some emerging signs of stabilization, particularly in North America and Asia regions. Broadly, electronics end market and sign in activity remains healthy. We delivered another strong win rate across a broad set of applications in the quarter.
Of note, we saw strong practice opportunities and conversion in China, driving meaningful order expansion
Background Voice: in the region in the Q4
Dave Heintzeman, President and CEO, Littelfuse: and full year 2024. In North America, we continue to observe some ongoing decline wins and quarter conversion delays. There were pickup in order trends late in the quarter with a margin. Turning to our electronics end market design wins in the quarter. We secured a meaningful data center for a cooling application in North America and an infrastructure application in Japan.
We secured Adacom, server and compute wins in North America, China and Taiwan. We also delivered global wins for appliance applications that utilize our broad technology capabilities. Similarly, we secured business for multiple building technology and operation applications in regions including North America, China, Taiwan and India. Finally, we delivered meaningful wins for our federal applications Finally, we delivered
Background Voice: meaningfulness for medical applications in North America and Europe in the quarter.
Dave Heintzeman, President and CEO, Littelfuse: Turning on to transportation end markets and design wins on Slide 7. Starting with our passenger car exposure, we benefited from our global positioning and balanced and challenging timing, which helped to offset slightly lower global car builds in the quarter and ongoing pruning actions associated with the sensor growth. We delivered solid growth in China as we leveraged our technology expertise, experienced lower teens and strong purchases of local OEMs. Outside of China, solid demand for our low voltage products partially offset weaker North American and European production volumes in EV sales. In 2020, we believe our exposure to multiple secular drug drivers and ongoing innovations with our global brands position us to offset likely continued soft global power build trends.
Turning our commercial vehicle exposure. Our soft underlying market continued in the 4th quarter. We delivered solid volume expansion and continue to drive favorable pricing. Into 2025, we see some initial albeit early signs for improvement in certain commercial vehicle markets, led by construction and heavy duty truck, and recovery likely weighted to the back half of the year. Given our strong content offering and continued traction with customers, we remain confident in commercial vehicle positioning and are excited about long term opportunities across our product exposures.
In the quarter, we secured solid new transportation business
Background Voice: in the off road passenger
Dave Heintzeman, President and CEO, Littelfuse: and commercial vehicle end markets.
Operator/Moderator: In the passenger vehicles, we
Dave Heintzeman, President and CEO, Littelfuse: secured several meaningful high voltage opportunities with customers in South Korea, China and Europe. We also delivered multiple local diffuse wins in cities in North America, Europe, South Korea and China, which demonstrates the global scale of our business. Finally, we secured ZDoS application opportunities to customers in China and Europe. A commercial vehicle in markets, we secured several construction and agriculture equipment wins to customers in North America and Europe. We also delivered multiple recreational and specialty vehicle wins in the quarter.
Turning to Slide 8, industrial markets and design activity. In the Q4, we observed recent in demand trends across our broad industrial exposure. We have created a percent annual drawn HDAC in industrial safety application. However, we observed key soft industrial deployment, battery automation and charging infrastructure trends. We continue to see more pronounced profits across our industrial more meaningful exposure to weaker European and Asian industrial.
Podly deserves solid order rate momentum late in the quarter and into 2025, we see an improving year of likely gradual industrial recovery. Importantly, our industrial safety growth drivers remain intact, and we see continued strong momentum headlined for renewables, automation and industrial safety. Regarding our design wins in the 4th quarter, we secured meaningful renewable opportunities, including for a solar application in North America and for a solar and energy storage application in China. We also secured several commercial ECAC wins in the quarter but our teams continue to leverage core residential ACDC to drive new market expansion. In Japan, we secured a win for a rail fraction drive application that utilized our semiconductor capability.
Finally, we delivered a variety of wins across heavy industrial markets, including construction, mining and oil and gas in the quarter. Across our businesses, we continue to partner with our broad customer base to drive innovative solutions to our diverse and integrated solutions. We will remain focused on operational execution as described to deliver leading performance in 2025. I will now turn the call over to Daniel to provide additional color on our financial performance and outlook.
Operator/Moderator: Thanks, Dave. Good morning, everyone, and thank you for joining us today. Please turn to Slide 10 to start with details
Background Voice: on our
Operator/Moderator: Q4 results. Revenue in the quarter was $530,000,000 down 1% versus last year in total and flat organically. The product line pruning actions we discussed reduced sales about 2%, in line with our expectations in the prior quarter. GAAP operating margins were negative 6.9 percent and include $93,000,000 of non cash goodwill and intangible impairment charges. The charges are primarily related to the impairment of certain assets affected by ongoing DTV charging For the quarter, adjusted operating margins finished at 12% and adjusted Q down margins were 18.1%.
The 4th quarter GAAP diluted loss per share was $1.57 and adjusted diluted earnings of $2.14 Our 4th term GAAP effective tax rate was negative and adjusted effective tax rate was 13.0 I'll now turn to Slide 11, our full year performance. We finished the year with sales of $2,200,000,000 down 7% in total and organically versus last year. GAAP operating margins were finished at 12.9 percent and adjusted EBITDA margins were 18.9%. We have changed in commodities and a 36% unfavorable tax margin. We drove improvements in our cost structure in 2024 and
Operator/Moderator: are pleased
Background Voice: with our results in margin
Operator/Moderator: trajectory with our second half operating margin expanded 2 20 basis points from the first half of the year. Finally, full year GAAP diluted EPS of $4.51 and adjusted diluted EPS of $8.48 Our full year GAAP effective tax rate was 31% and adjusted effective rate was 21%. Please turn to Slide 12 for updates on capital allocations. We delivered strong cash generation in 2024. In the quarter, operating cash flow was $161,000,000 and we generated 145,000,000 in free cash flow.
For the full year, operating cash flow was $368,000,000 and we generated $282,000,000 in free cash flow, driving cash conversion well over 100%. Our strong performance also reflects our ongoing focus on working capital and industry. In fiscal 2025, we continue to target 100% free cash flow conversion, applying for our long term goals. We ended the quarter with $725,000,000 of cash on hand,
Background Voice: which is a long term goal for a
Operator/Moderator: long period of time. Our balance sheet remains strong, with continued flexibility and capital deployment. We continue to prioritize our free cash flow for thoughtful acquisitions and we'll continue to return capital to our shareholders through our dividend and periodic share repurchase. For the full year 2024, we returned $108,000,000 of capital to shareholders, including $67,000,000 of cash dividends and $41,000,000 through opportunistic share repurchases. We'll remain disciplined to our capital allocation strategy as we strive to maximize broadband shareholder value.
Slide 13 are our product segment highlights starting with the Electronics product segment. Sales for the segment were down 4% organically and 12% for the quarter and year respectively. Versus prior year, sales across asset products were up 9% organically for the quarter and down 1% for the year, and sales and metro products declined 13% to 20% for the quarter on year. Our solid tax and product sales growth in the quarter led to stabilizing demand trends to improve orders and channel prices. Within our semiconductor products exposure, we are stabilizing demand for our protection products and continued to profit the cost of our spending sector.
Operating margins for the quarter were 12.3%, while EBITDA margins ended above 19%, both in line with our expectations. We finished the year with operating margins of 14.2 percent and EBITDA margins of nearly 21%. We saw our transportation product segment on Slide 14, 7% quarter and the year with declines across global car sales and commercial vehicle end markets. Segment sales were negatively impacted 6% versus last year for the quarter, 5% a year including actions taken on the sales. In the passenger vehicle business, sales declined 4% organically in the quarter and came in 2% for the year.
4th quarter sales were negatively impacted by planned auto business or product cycle and ongoing global car build designs and hurdles offset by growth in China. Our vehicle sales in the quarter were up 4% organically and down 1% per year. In the Q4, we delivered volume growth and favorable pricing despite continued end market weakness, more than half of the impact from coming quarters. For the segment, operating margins were 9% over 10% in the quarter year respectively, while EBITDA margins finished at 14.5% in the quarter and 15.6% for the year. Foreign exchange and commodities a headwind for the full year, unfavorably impacting margins on a constant basis.
These are focused on cross section, pricing and prudent initiatives drove by more than 30 basis points of operating margin expansion for the year. We believe these actions position us well for continued margin growth into 2025. On Slide 16, Industrial Products segment sales increased 12% organically for the quarter, declined 1% for the year, indicating well to a number of weak industrial candidates. 4th quarter sales benefited from strong HVAC growth, solid data center momentum and continued industrial safety expansion. Segment operating margins finished at 17.1% in the quarter, expanding 4 100 and 40 basis points versus prior year level, while full year margins finished at 13.9%.
Adjusted EBITDA margins were $20,800,000 in the quarter and full year margin finished over 18% for the year. We delivered strong margin expansion in the quarter, led to continued solid execution with strong conversion and volume growth. Our improved industrial segment margins throughout 2024 also reflect our operational execution and solid volume growth. We expect continued growth and margin momentum into 2025. Please move to Slide 18 to the forecast.
As we start 2025, we continue to see a mixed macro environment. In electronics, we expect the past and product recovery and ongoing soft semiconductor sales in the 1st quarter. We expect ongoing industrial segment momentum, while we see a mix of underlying transportation backdrop during the year. We expect the low single digit global car build up timing with signs of modest commercial vehicle market recovery projecting later in the year. With these assumptions, we expect 1st quarter sales in the range of 520 dollars to $550,000,000 This includes about a 2% headwind in our FX versus the prior year.
We're projecting 1st quarter EPS to be in the range of $1.70 to $1.80 which includes a tax rate of 26%. Essentially, the higher tax rate represents a $0.32 headwind to earnings and benefited from our retroactive tax holiday expansion in the 4th quarter. At current FX and commodity rates, we are adjusting to normal $0.01 benefit from U. S. We are expecting normal to invest in EPS since the prior year.
Please turn to Slide 17 for additional full year 2025. We expect solid earnings expansion reflecting more well positioning, recent cost scaling actions and ongoing focus on operational execution. At current rates, we expect effective commodities will represent a 1 point headwind to sales with $0.02 benefit to EPS. Also, as we announced in December, we completed our acquisition The acquisition also includes a multi year capacity sharing arrangement with OMA. For 2025, we expect about a 2% total sales growth through volumes of the OMA off and industrial EPS impacts from this range.
On other model items, we're producing $59,000,000 in amortization expense and $35,000,000 in interest expense, up 2 thirds of which we expect to offset through interest income from our cash investment strategy. We are estimating a full year tax rate of between 23% to 25%. As a reminder, ongoing Pillar 2 tax legislation made headwinds on tax rates, and we continue to evaluate opportunities to improve our rate. We also expect to invest 90 dollars to $95,000,000 in capital expenditures. As we turn the page to the New Year, building our ongoing momentum with customers on design wins and product innovation positions
Background Voice: us well for over the Our
Operator/Moderator: focused execution and cost savings actions have enhanced our operating model, positioning us for solid earnings expansion in 2025 amidst the dynamic environment. Our strong cash generation focus and our well positioned balance sheet helps us give us both flexibility and confidence as we gain and deliver long term top tier growth and earnings.
Background Voice: In closing,
Operator/Moderator: I would like to recognize our employees and partners for their meaningful contributions and unwavering commitment to Littleton. I would also like to thank Dave for his outstanding leadership
Background Voice: of Littleton. It's been a pleasure working with him for the last
Operator/Moderator: decade and I'm grateful for our strong partnership. I wish you well in retirement.
Background Voice: I have
Operator/Moderator: to know Greg over his nearly 2 years of her board and I look forward to partnering with him as we enter the next phase of the little news growth journey and we're excited for the meaningful opportunities that lie ahead. And with that, I'll turn it back to Dave for some final comments.
Dave Heintzeman, President and CEO, Littelfuse: Thanks, Meenal. In summary, while we navigated a difficult environment in 2024, our unwavering focus on our customers and our persistent push for operational enhancements have positioned us to deliver solid growth and earnings expansion in 2025. With a diversified business model and broad category offering, we are confident in our ability to drive long term top tier value for our shareholders. Finally, I just want to say a few words as I will start wrapping up a 40 year of career with Littelfuse. It's been an amazing journey with a truly exceptional company.
I want to thank the Board for their continuous effort over the years, and I also want to thank all the Littelfuse employees who work tirelessly to deliver on our long
Background Voice: term strategy.
Dave Heintzeman, President and CEO, Littelfuse: It's been an honor to lead you all and I am confident that you are positioning the company, meaning the long term success. I'm also grateful to be leading the company in such a journey. Greg and I have worked closely together over the last couple of years to bring the Ideal Sales rep to the leadership of Craft Records leading this company into the next stage of growth. And with that, I'm going to turn it over to Greg, who is going to say a few words. Thank you, Dave.
On behalf of Littelfuse, I want to thank you for your leadership and congratulate you on an impressive 4 year career in the company. For the Littelfuse employees listening on the call, I look forward to working with you all as we begin the next chapter of our Littelfuse growth story. From the talent and investor community, I'm excited to meet many of you in the coming months. And with that, I'll turn the call back to you, Zeke. Thanks, Greg.
Operator, we are ready to start the Q and A.
Operator/Moderator: Thank you. We will now begin the question and answer session. And our first question comes from the line
Operator/Moderator: of Luke Chalkindar. Your line is open.
Luke Chalkindar, Analyst: Good morning. Thanks for taking questions. Dave, just to start with congratulations on your 40 year career at Little Fuze and upcoming retirement absolutely well deserved.
Dave Heintzeman, President and CEO, Littelfuse: Thanks. The
Background Voice: rest of
Dave Heintzeman, President and CEO, Littelfuse: the quarter itself to start with here would be great.
Luke Chalkindar, Analyst: If we could just put a final point on the milling passives this quarter, it sounded pretty positive based on your comments, Dave. Plus maybe just what you're hearing from
Dave Heintzeman, President and CEO, Littelfuse: Yes, sure. Olivia, I think, in general, it's taking a look at overall electronics and what we would say is, fundamentally, the inventory production is largely maintenance at this point. We stated that in the prepared remarks. Home controls for the first time in early 2020 2. We're now above 1 in electronics as a whole.
Our actives and our protection bills are firmly above 1. And while the power semiconductor portion of our business is a little more challenged with kind of the heavy industrial focus, particularly in Europe and China, so it's still a low one, but it's improved nicely over the last quarter. And through the course of the quarter, while we saw end of the year above 1, we also saw continued momentum improvement going into through January. So we remain pretty positive about the procedural direction there, because some of the correction cycles Conversations with our distribution partners range all over the map from individual kind of partners they're serving and things like that. I think what they're seeing generally is fairly stable book to bills, stable, I think, book to bills with a bit more positivity coming in North America and in Asia.
Europe continues to still be pretty sluggish. Europe that are starting in China, so North America and Asia.
Luke Chalkindar, Analyst: Okay. That's helpful. And then Keith, if we
Dave Heintzeman, President and CEO, Littelfuse: could double check
Luke Chalkindar, Analyst: on those signs of cost recovery relative to Power Semi and what has been weakness? Is there any more pressure in terms of market? Should we assume that it's from a geographic standpoint also weighted to North America and Asia, Dave?
Dave Heintzeman, President and CEO, Littelfuse: If you look at industrial more broadly, you have an hour
Background Voice: supply, which you talked about
Dave Heintzeman, President and CEO, Littelfuse: very industrial heavy there, where I think stabilization moving there more than North America and Asia, where we're seeing that kind of stabilized. As I stated earlier, Europe continues to be off there. A lot of machine automation and things like that that are going on in Europe or global support, that continues to be a little sluggish there. On the other industrial portion in our industrial segment itself, yes, a very solid quarter there and we've been able to achieve this project where we serve individual areas. And so we continue to see strength in safety applications, a really nice growth area for us.
We see in the ACAC space, we have been showing improvement there and we're hoping progress and moving from more residential business to commercial business there, getting nice design wins and growth in that area. So we're seeing those in places,
Background Voice: in particular applications and
Dave Heintzeman, President and CEO, Littelfuse: markets like regions where we see a stronger momentum and that's starting to show up.
Operator/Moderator: Okay. And
Luke Chalkindar, Analyst: then, do you know with transportation margin showing some really significant strength in the Q3, you're looking at sequentially here in '14% while finishing the year above the level you were expecting. Can you just help us understand what's in the margin profile in the back half of the year as we sit in the 2025? I guess, I'm just trying
Dave Heintzeman, President and CEO, Littelfuse: to tease out what sort of
Luke Chalkindar, Analyst: base we should use to build our 25 months position in the transportation segment.
Operator/Moderator: Sure. Thanks, Luke. So I'd say, one, we're really pleased with the progress that we made through second indication in the start of the year that mid single digit range and have worked our way up with since we talked about a number of actions that we've been undertaking to really get to the point we're at finishing the double digit for the year. I would say going into 2025, we feel continue to feel very confident about the margin expansion. This work that we've done in Q4 and continue to do in 2025 are pushing off some footprint work, some other cost reductions that we're taking.
So we feel good and we feel those actions will mitigate some of the headwinds that you hear swirling around, around the declining car bills that we're expecting for the year and a little bit of the volatility around foreign exchange commodity spend. And as we feel good for continued margin expansion relative to 2025 management, we have been taking or continuing to take.
Luke Chalkindar, Analyst: And then if I could just sneak in a last question, this is more just modeling. Historically speaking incentive comp has had a heavier impact just seasonally in the Q2, just on how you look for it, should we expect
Dave Heintzeman, President and CEO, Littelfuse: that to be
Luke Chalkindar, Analyst: done this year?
Operator/Moderator: Great question. The incentive comp will be a little bit more of a run rate when we think about Q2 as opposed to that, the outside spike that we've had. And we get into a little bit more around that. It's too wide. We'll give you a little bit more color on that.
But I would expect it would be a little bit more expansive than what you've seen in historically.
Dave Heintzeman, President and CEO, Littelfuse: Thanks for the questions, Luke.
Background Voice: And our next question comes from
Operator/Moderator: the line of Saree Boroditsky with Jefferies. Your line is open.
Saree Boroditsky, Analyst, Jefferies: Hi, good morning. Congratulations, Dave, your retirement and Greg in the new role. We look forward to working with you. I just wanted to kind of go through the guidance for 1Q. I think it implies margins are roughly flat sequentially.
Can you just talk through the puts and takes on margin performance and how margins should progress through the year, especially if we do see some volume recovery?
Operator/Moderator: Sure. So you're thinking more on the sequential perspective, just a little more color as we think through the year. What I would say is that we always talk about for us, one of the biggest factors that we think about margins recovery and typically in around volume, strong volume, strong conversion rate on that. We're not waiting for that, right? We're definitely working on continuing to drive growth.
We've done a lot of work in terms of, as I mentioned earlier, just around pricing, cost adjustments, other cost reductions and some footprint work. So I would expect that we'll see as we work through 2025, we'll continue to see margin expansion going forward during the year.
Saree Boroditsky, Analyst, Jefferies: Appreciate the color. And one of the markets you talked about seeing the benefit this quarter was HVAC. Do you the customers have talked about some pre build there? So do you expect that to lead to higher profit and demand in the Q1? And how does that
Operator/Moderator: impact industrial growth among you? Thank you.
Dave Heintzeman, President and CEO, Littelfuse: Sure. Yes. Obviously, with the refrigerant change requirements coming and things like that, there's some concerns whether is there a pre bill going on in preparation for that? Again, these results when you read from the OEMs and the distributor service. We've seen good improvement there.
But I think as I don't believe we're going to have a fair pocket for a couple of reasons. One is, we've also been pivoting a lot of energy towards taking the technologies that we're selling into the residential space into the industrial space as well. So we've been nice pace, the time wins into the industrial HVAC space, which we think if there is any kind of bubble or slowdown in the residential, we can backfill that with industrial growth there. So in general, we feel continued to have a lot of
Operator/Moderator: it. Perfect. Thanks for the questions.
Dave Heintzeman, President and CEO, Littelfuse: Thank you, Terry. Appreciate it.
Background Voice: Next (LON:NXT) question from Chris
Operator/Moderator: Fording with Oppenheimer. Your line is open.
Chris Fording, Analyst, Oppenheimer: Thanks. Good morning and wishing you the best for a great retirement. I wanted to ask about you talked about cost scaling actions, sounds like a little different characterization than straight cost restructuring. Does that refer to positioning the assets for very high conversion margins
Dave Heintzeman, President and CEO, Littelfuse: as growth returns, is that what the
Chris Fording, Analyst, Oppenheimer: cost scaling actions refers to?
Operator/Moderator: Yes. Chris, it's Daniel. So I'd say a couple of things. This one is, as we've been talking about where we are in terms of our growth trajectory right now, we're definitely 20, 25,
Operator/Moderator: and to see that
Operator/Moderator: we see growth. But in the meantime, where we are today, we're really just I'll call it, rightsizing our cost structure to align to the pace our business stays to where we are today. Some of that are cost reductions. We've also spent a lot of time around discretionary cost reductions. We've been talking about definitely different parts of the business.
We've been doing a lot of what we call different work, whether that's relating to manufacturing, supply chain, so we've been trying to optimize that and we normally do. So it's really for us it's a combination of all, but my reference to the ceiling is more aligning our cost structure and the current state of it.
Dave Heintzeman, President and CEO, Littelfuse: Okay.
Chris Fording, Analyst, Oppenheimer: And then commercial vehicle, you've been growing the last couple of quarters now in down markets and I believe with some concentration of overall pruning actions that the company falling within CV. I know you talked about price there. Is that really a full delta versus market or is content have good momentum on CV even sharing this broad based wall in global CV markets?
Dave Heintzeman, President and CEO, Littelfuse: Yes. And Chris, I think both have an impact. Clearly, we've been working to kind of look at customers and product applications and products that investment pruning on and revenue naturally, if you take that approach, you'll have some of that retentions to kind of drive those activities. So that's certainly positive. Often you find when you're doing that, that customers figure out
Background Voice: and are willing to pay higher prices
Dave Heintzeman, President and CEO, Littelfuse: than that. That's certainly a benefit. We've also seen a fairly decent business in commercial vehicles. So our ability to gain share, get into new applications, and feel that better positive for us will continue to be an opportunity for us, particularly as we focus on kind of high growth applications and margin profile on technologies and products
Background Voice: that we
David Williams, Analyst, Benchmark Company: have to deliver.
Dave Heintzeman, President and CEO, Littelfuse: So I think it's actually actually a little I think we're now performing in the market because of our performance from customers, engaging with customers and supporting them and also from earning
Chris Fording, Analyst, Oppenheimer: Great. Thanks. And then could you give us a little bit more detail on the impairment, what acquisition that might have been related to or did it cut across?
Operator/Moderator: Yes, Chris. It's Nina Oeyan. So the impairments that we took the and I think we noted in our prepared slides, it was a $93,000,000 impairment, covering both some goodwill and intangible assets. It's Almost all related to certain assets within our industrial segment. And we've been talking about for a while that we've seen some downturns in the industrial markets, particularly we think this in the EV infrastructure space, all of our industrial segment.
If you look at the projections, target projections are projections, we don't see substantial near term recovery coming. So as part of the normal accounting assessment you have to go through when you come to some of those conclusions, we went through our forecasting and basically took a non cash charge in the 4th quarter, the incoming goals and how all the math works there.
Dave Heintzeman, President and CEO, Littelfuse: Great. Thank you. Thanks for the questions, Chris.
Background Voice: Our next question is
Operator/Moderator: from David Williams with The Benchmark Company. Your line is open.
Dave Heintzeman, President and CEO, Littelfuse: Hey, good morning. Can you take the question and get back
Background Voice: to retirement
Dave Heintzeman, President and CEO, Littelfuse: to you. So, it's about 40 years, you should take time and really enjoy that. So, I guess, I wanted to ask, since it hasn't been ready, but what's the impact of tariffs to your business, just kind of given China and of course the discussions around EV, anything with the administration that gives you concerns or thoughts around that, please? Great question, David. And certainly, the volatility that potential tariffs and geopolitical actions took place, certainly an area that gets our attention.
We spent a fair amount of time looking at scenario planning and things. However, I would say, the tariff situation itself, first of all, we're going to wait and see how it plays out exactly. But it's not new. In 2017, we went through these sorts of issues. Over the last several years, we've worked really hard to make sure our manufacturing footprint is aligned with regions where the primary source of our customers are.
So we try to align closer to customers over that time. So we've gotten better with that in the last few years. Comparatives do come.
Background Voice: We have a historical experience
Dave Heintzeman, President and CEO, Littelfuse: on that where we engage with our customers and try to work through solutions where the customer goes, customer sometimes supply chains can be a little complex and there's movements between the customer and ourselves to address those things and reduce the impact of tariffs and where we can do that, we absolutely do those things. That's all being done kind of business unit level, right, where they're dealing with individual customers. And at the end of the day, if we get to the points where we can't follow the decisions with customers, then we will pass those costs along to customers in
Background Voice: a pricing fashion.
Dave Heintzeman, President and CEO, Littelfuse: So we while it certainly has an impact to us, we're fairly confident in how we will work through it in the past and minimize the impact on the business off the line and continue to do that. Okay. Thanks so much for the color there. And then just on the 5 year strategy update, I know you guys were going through that and we scheduled maybe to get some color around the Analyst Day. But just curious as to how you're thinking about that having gone through the top of your strategy, business long term and maybe Greg if you're able to chime in there, I would love to hear your comments.
But any color just around that strategy going forward beyond the Q1? Thank you. Yes. So I think it's a good question. And obviously, as we postponed the Investor Day, we just felt it was best suited to give Greg the opportunity to get his feet on the ground, really understand the business significantly.
So you think it was best necessary to have him come in and not share with you where we are at on our current 5 year strategy and where we're headed. So, I think it was prudent to give a little bit of space to do that and if Greg is trying to learn a little bit more from the inside as opposed to forward level on that. Greg, do you have a couple comments? Yes. Thanks, Jim.
Thanks
Background Voice: for taking the question.
Dave Heintzeman, President and CEO, Littelfuse: So for Dan, I'm really very excited to be here. And I think as Dave mentioned, I think it was a great way for us to end my company. Coming from the Board, I've been working with Dave and been able to meet the leadership team over the over the last year and a half. So from my perspective, the Lillipuse is a great franchise. We have strong global working position.
We have great development and I'm excited to get more of that next phase. So we will be continuing to meet you, talk to you, roll out more of that as we go forward. Congratulations on the move there and looking forward
Background Voice: to working with
Dave Heintzeman, President and CEO, Littelfuse: you as well. Thank you all. Excellent question, David.
Operator/Moderator: Our next question is from the line of William Turpin with BoenningStar. Your line is open.
Dave Heintzeman, President and CEO, Littelfuse: Hi, thanks everyone. And Dave, I wanted to echo all the congratulations on a your career and a warm welcome to Greg coming in very soon. Just to add one more on margin, specifically for the Electromic segment. I think that came in a little bit below where the expectations were coming into the Q4. So just curious what was going on there?
Is that more of a penny dynamic or asset dynamic? And how you expect that segment to
Operator/Moderator: Sure. Thanks. It's a great question. So here's what I would say. When we take a look at our electronic segments over the years and ask when we go, we talked about those through these market cycles that are exacerbated in the distribution, inventory cycle we go through.
So prior down cycles, we've seen our margins drop into the mid teens, which are down at the lowest points in terms of volume. In this particular case, we've gone through this balance cycle, which has gone a little longer than anyone was expecting. The excess inventory that we've seen, not just in distribution channels, in ETSs and OEMs, and then just this elongation of timing has really had a bit of a further effect on margin for us. I'm confident as we look ahead to 2025 when we start to see recovery, we're talking about taxes and our protection. Some of the contract bills now are trending well over 1 that from a 2025 perspective, volume for us really drives margin recovery and we've proven the incremental margins that come out of that.
So I feel good about our trajectory, margin improvement across electronics and we'll see them uplift as we go through here.
Dave Heintzeman, President and CEO, Littelfuse: Okay, perfect. Thanks, Neil. And maybe a longer term one for me as a follow-up. I'm just curious in the electric vehicle space, how you're seeing the dynamics over the next 5 years as OEMs move to higher drivetrains and knowing that that provides a good amount of content uplift for you? And even if there are maybe some short term fits and starts here with EV programs,
Operator/Moderator: Are you seeing that momentum continue
Dave Heintzeman, President and CEO, Littelfuse: in terms of rising from, I mean, 4 100 volts, 4 800 volts, etcetera? And then maybe just in Q1, have your vehicle electrification to whether that's ag equipment, semis, etcetera? Sure. Electrification of vehicles certainly got a lot of attention, hasn't been able to get over this last couple of years. I think our position is that electrification will happen, right?
It's going to happen over time We have at a slower rate than we had hoped maybe a couple of years ago. We've always had a bit more conservative view at the adoption rate than maybe what the market has viewed. So We're in it for the long haul. We're developing products for high voltage applications. So we're in a good position there.
Background Voice: For us, content, the
Dave Heintzeman, President and CEO, Littelfuse: higher the voltage, the higher the content
Background Voice: for us.
Dave Heintzeman, President and CEO, Littelfuse: Because voltages go from 400 to 800 to beyond, those are all positive content opportunities for us. In the Q4, 94% of the EV growth was in China, and the rest of the market was relatively flat. We're positioned well in China. We have strong relationships with OEMs. And while the high voltage side, we have more competition there, we continue to win low voltage side in the electronics applications, the Chinese OEM.
So even if we don't get all the high voltage in China, which we do win, so it's not a clean rate we win in other parts of the world. The constant growth in EVs in China will continue to be a good story for us in the long term. I think we're well positioned for that over time. And that's kind of we're committed to supporting that as it happens. On the commercial side, it's a lot more variety of approaches that are taking place.
And electrification in the commercial side can be everything from electrifying hydraulic mechanisms, let's say, construction and agriculture equipment, which is not necessarily a full EV,
Background Voice: but electrification
Dave Heintzeman, President and CEO, Littelfuse: of the movement systems and vehicles have great content for us and create opportunity for us moving from hydraulic to electrical. And certainly, I think truck,
Background Voice: last mile applications,
Dave Heintzeman, President and CEO, Littelfuse: great opportunity there. We're well positioned there and we're seeing nice opportunities. So we're in it for the long haul. I think over the next 5 years, it will continue to be a confident driver for us. We're hitting the exact pace of it.
We remain agile and we'll respond to that at the market call. Great. Thank you so much. Thanks for the questions, Will.
Operator/Moderator: We have a question from David Silver with CLP. Your line is open.
David Williams, Analyst, Benchmark Company: Hi. Thank you. First of all, congratulations to Dave on a long successful career and also to Craig. I just would have a
Chris Fording, Analyst, Oppenheimer: big question, I'll call it kind
David Williams, Analyst, Benchmark Company: of a look back or look forward type of question.
Dave Heintzeman, President and CEO, Littelfuse: First, as a sell
David Williams, Analyst, Benchmark Company: side analyst, I know we're often guilty of a very narrow or short term purchase. Dave, you've been with the company in a very long time and grown up with it, I guess. I was just wondering if you could look back maybe 3
Dave Heintzeman, President and CEO, Littelfuse: to 5 years, maybe from
David Williams, Analyst, Benchmark Company: the beginning of the pandemic just a point in time. I was wondering if you might be able to call out 1 or 2 of the longer term or more structural changes that you have implemented that you would say really position your company well here and now looking ahead? And then secondarily, I do wonder if you could maybe point out 1 or 2 of your challenges or opportunities that you think will SKUs needs to adapt to or succeed at in order for it to reach its long term growth goals?
Dave Heintzeman, President and CEO, Littelfuse: Thanks, David. And yes, I have kind of grown up in the business. I walk into the doors as little as when I was 20 years old. So I have spent my career at the company and have learned from a fairly early stage in different applications and products and marketing services have evolved over the years. If you look at the last 3 to 5 years, and it's been a pretty interesting 3 to 5 years on dynamic situations, geopolitical situations, things like that, it's been fairly nice.
But what I would say is, the piece for us has been identifying, even prior to 3 to 5 years ago, what are the long term positive megatrends that are going to drive opportunities for the shareholders, not in the next 3 years, but in the next 10 to 20 years, making sure we're aligning our strategy to innovate and play a role for our customers, to support our customers
Background Voice: as we
Dave Heintzeman, President and CEO, Littelfuse: go on that journey. And that is really important for us. Our investments have been in those areas. Our focus has been in those areas. They've served us well.
Looking forward, the reality is those trends, these things are stronger today than they were 5 years ago or 10 years ago when we identified them. So we I think we need to be well positioned to participate in these long term trends, You're question on challenges or whatever. And I think geopolitical situations create more challenges, but we have a really strong team level views, strong experience, you're not overly dependent on a singular application or a singular market. We become more diversified over time. I think that will actually serve us well.
We run a global business, The diversification, the pricing we have and the strength of capabilities in our products and our team will serve us well and our
David Williams, Analyst, Benchmark Company: us. Okay, great. Congratulations again.
Dave Heintzeman, President and CEO, Littelfuse: That's all for me. Thank you.
Operator/Moderator: That concludes the question and
Operator/Moderator: answer session. I would like to turn the
Operator/Moderator: call back over to Mr. Ali for closing remarks.
Dave Heintzeman, President and CEO, Littelfuse: Yes. Thank you, and thanks, everyone, for your questions today. That does conclude the Q and A. I hope everyone has a great day. Thank you.
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