Hello, everyone. We're gonna get started here. I'm Matt Sheerin, a senior analyst at Stifel. Pleasure to have Littelfuse, one of the largest component suppliers, both semiconductors and passive components. Representing the company is CEO Dave Heinzmann and David Kelley from Investor Relations. Thank you and welcome. Yeah. Thank you. Thanks. So Dave's gonna start off for just a handful of slides to give you a sense of the company and the strategy, and then we'll go into Q&A. David? Sure. Thanks, Matt. And, so some familiar faces, and some new faces, so I thought I'd do just very briefly, a quick, a couple slides to kind of show who we are as a company before we go into questions. So of course, the first slide is all the legal disclaimers to keep me, honest on things. And so as we move forward, this is our attempt at trying to capture the Littelfuse strategy on one page, right? And so this is our five-year strategy going from 2021 through 2025, so we're kind of going into year four here now. And so our strategy is really built around three large structural growth themes of sustainability, connectivity, and safety. If you go back and look at our history, a lot of our history was really around safety and products, but it's evolved much more in those three categories. And those are all areas with applications and markets that are outgrowing the market and that we're over-indexing to, both on an organic and an inorganic standpoint. So we have the opportunity to continue to grow that. We set targets over the cycle, and as much as I'd like to think we are not in a cyclical space, you know, the electronics world is a bit of a cyclical space. So anytime we put strategies together, we talk about through our cycle. And so we expect, you know, our strategy delivers double-digit growth through the cycle, as well as best-in-class profitability and obviously top tier or tier, top tier shareholder returns. If you look at our specific financial targets and what kind of we expect out of the business, you know, from a revenue standpoint, we expect a double-digit, somewhere 5%-7% on average from an organic basis, and another 5%-7% coming from acquisitions that add to our ability to sustain that higher level of organic growth. Earnings, we, of course, always target to have earnings above our top line growth and look to get leverage as we grow, and we've been successful in doing that. We set a range of 17%-19% from an EBIT margin perspective over the cycles. There are gonna be times where we're at a peak of a cycle, and it's gonna be above that. There are gonna be times where maybe at the bottom of a cycle, maybe a bit below that, but that's the average that we expect from the business. It's a great cash-generating business. We've been successful in the last three years, doing better than 100% cash conversion, you know, as we've grown the business. And from an allocation perspective, from a balance sheet, M&A is our first priority, followed by shareholder return with opportunistic shareholder buys. Now, this is kind of a look back because we talk about that cyclicality. The strategy that I've talked about, the five-year strategy, is really a kind of, kind of a continuation of a pretty common strategy we've had for the last 8-10 years. This is just a look back to, yes, there's cyclicality in the business, but if you look at this over time through the cycles, you know, from a top-line perspective, we've been averaging better than 10% growth for 15 years, and we've grown our EPS by more than 18% over that period of time. So we think the markets that we serve, the strategy, the operating model we have, is one that really leverages growth pretty successfully, and we look to continue to go down that path. So hopefully that gives you just a brief snapshot. Okay, that's perfect. Thank you, Dave, for that. So first, let's start off with, you talked about cyclicality, and obviously we're at the bottom of the cycle. You talked about some data points in the last earnings call, where your passive components business is starting to see some more positive book-to-bill, still have work to go in semiconductors. So talk us through the dynamics of the market fundamentals now and how you see that recovering? Sure. Sure, yeah. The electronics portion of our business is obviously the most cyclical portion of the business. We, we rely pretty heavily on distribution, you know, that can tend to exaggerate those cycles, on the ups and the downs. So we very clearly look for these cycles and look for inflection points in the cycles as we kind of look forward. A typical peak to trough for us in a typical electronic cycle is about 4-5 quarters. This cycle has been a bit elongated, and we, we believe that's really related to the fact that EMS customers, as well as end customers, carried a bit heavier inventory out of this cycle than they have in the past. So for the first time, we talked about it in our first quarter earnings, that in the first quarter we actually saw positive book-to-bill in our passives business for the first time in seven quarters. Where we think we've kind of seen the indicators that we've hit that inflection point. We know the distribution in our channel partners is approaching that healthy stage, and while there may be a little bit of excess left at EMS and another quarter or so to kind of bleed off some of that, we think the inflection point on passives is kind of here. The semiconductors a little bit behind that, but there's a little less excess inventory in the semiconductor side of things. That's really more of a reflection of slower industrial demand on the semiconductor side. Yeah, I know in some of your semis, like MOSFETs, you've had very long lead times. Correct. There tends to be over-ordering. Is there some overhang from that, or is it mostly just the end demand? Yeah, it's kind of both. It starts with the last couple of years, we had a very large backlog, so we've been working down the backlog over the last two years in our power semiconductor business. As we ended last year, we had cleaned up all the backlog, so now our demand versus end market is matching up. So that already is bringing the revenue down because we're not cleaning up backlog, and then the end markets are a bit soft there. So you kind of have a bit of both playing into that space. Now, the challenge is, we also see behavior by some of our end customers that may lead us right back to where we were again, because some of our power semiconductors have pretty long standard lead time. Yep. We have customers that will approach them. It's like, "Yeah, we don't see you have orders placed, you know, in our lead time. You know, is your demand softened?" "No," but they're not placing orders. You know, and so it likely is going to create the same challenge again if they don't start ordering again pretty soon. Yeah. And your distribution customers, in terms of inventory, I know your biggest distributor, Arrow, has taken a lot of inventory down, and others are behind that. And so in terms of the channel inventories, how far are we from the bottom? We're pretty close to healthy levels in the channel inventories. You know, of course, we have many different technologies and product lines, and it'll vary by product line, but it is an overall perspective. We're pretty close to a healthy level, you know, kind of across the board. Mm-hmm. You know, we have some of the high-service distributors like a Digi-Key or a Mouser, which always carry much higher weeks of inventory. Yep. Theirs are certainly higher, but the broad line guys have brought theirs down to pretty close to normal actually. Another metric that we watch is design wins and design registrations, like new business. And how is that activity, either through distributors or your own, your own sales force? Yeah. So I would say that the design activity continues to be extremely robust, actually. And I think there's been a bit of pent-up demand on that side, because if you think back about two years ago or even three years ago, as there were a lot of semiconductor shortages and other component shortages, a lot of our customers' engineers were spending all their time on re-spec-ing and redo designs to get product that they could actually ship. So they were maybe having a shortage on a particular semiconductor, so they would switch their designs to another semiconductor. Took a lot of engineering resources to do that. That's behind them now, and so those same engineers are back working on new projects and new opportunities. So we've seen the activity pick up pretty nicely. We're seeing a, you know, maybe a slower pickup on that converting to, to sales yet. We were having a discussion with some of our distribution partners that they're seeing that the design registrations and things like that are quite strong. There's still a little bit of a hesitation on launch on some of the products. The conversion is slow. Yeah, so the conversion is a little slow. So we're looking for that to turn, 'cause that'll really be a strong indicator. Yeah. Yeah. Yep. One issue that comes up with investors is concern with China and the fact that the concern that local China OEMs are going to be sourcing more locally versus Western suppliers. And I know you've got exposure there, both in electronics and in your transportation. Obviously, you sell to China OEMs and EVs. Sure. What's your take? Have you seen that? Because you do play a lot of what you do is custom, but you still- you do have some commodity areas in passives and. Mm-hmm. And semis, discretes. Are you seeing any pressures there? I would say, for the most part, we haven't seen it shift too much at all, so it's remained pretty constant. We have one area that I would say has shifted and changed a little bit, and that's in the transportation side. So let's talk about electronics first. Yeah. We very much have a China for China strategy from a manufacturing perspective. China is a fantastic market, a large market for our products. Continues to be pretty robust. There's been an interesting kind of shift in the past. Just recently had a conversation with a guy who runs sales for us in China, and you know, he's trying to adjust because in years past, there was a lot of design activity that was taking place here in North America or in Europe, but it was being produced in China. So. Yep. Design here, transferred to be sold in China, if you will, or Southeast Asia. Yep. Interesting, as Chinese OEMs and multinationals are doing more and more design work in China, he's actually now seeing the opposite of that, where he and his team are getting design wins in China, but it's actually being sold in Southeast Asia or Mexico. Because even Chinese OEMs are moving some of their operations out of China into other parts of the world. So it's been a kind of an interesting dynamic there. We haven't seen a dramatic shift in competitive space in the electronic side. As we switch to the transport side and our passenger cars specifically, with electrification of vehicles, EVs, which China is, of course, continues to go ahead strong with EV adoption. Our core high voltage side on a vehicle, the good news is when you have an EV, the low-voltage system still exists on the vehicle, and we're the No. 1 player in China, in that space from a market share perspective. We continue to be the No. 1 player, and we really haven't seen the dynamics shift there, where it has been a bit of a shift is on the high-voltage systems on EV in China, specifically. With the Chinese OEMs, they've kind of determined the EV drive systems and battery systems are that core technology. So on the high-voltage side, on the vehicle, we have more, there's a preference towards Chinese competitors for that. Therefore, on the high-voltage side, we have seen, we have a lower market share, and we expect to have a lower market share with Chinese OEMs on the EV side. Mm-hmm. Is there an attempt to gain share back there, or is that just. We win business with Chinese OEMs, 'cause at the end of the day, they need the best products. Yeah. Still, you know, and they're advancing things, and we win business. But where they can, they are giving business to Chinese-backed company that's been backed by central government and a couple of our competitor, or not our competitors, a couple of the OEMs. Yeah. I'd just add where many of the local Chinese OEMs have global aspirations and certainly see more of an export market out of China. So that's an intriguing opportunity. That might be an opportunity to try to reach back in for share as they set up operations. Yeah. Maybe in Mexico or in Eastern Europe. Could you remind us how big China is for your transportation business? So, you know, from a perspective of passenger cars specifically, our number one region is Europe, followed by North America and Asia. In Asia, really, China is the largest player, because just the sheer number of vehicles are being produced in China. So it's, you know, it is approaching the size of our US. Uh-huh. Business. Mm-hmm. Yeah, 'cause I know that, your long-term content within cars has been going up with, fuses, but also you're in other parts of the vehicle too. You've got sensors, etc. But does that, the content sort of cap out in China now because of that, because of the dynamic of the OEMs, local OEMs? Well, it's been kind of interesting because, you know, on the low-voltage side, which we continue to be a leader and don't see a lot of, you know, changes in the competitive tensions there, the level of sophistication on Chinese OEM vehicles is growing pretty dramatically. So, if you get into a Li Auto, and I had a chance to drive a Li Auto, which is a new company, EV in China. First of all, fantastic $100,000 car, you know? So the content in Chinese OEMs for the low-voltage side continues to grow really nicely. So even if you look at our last couple of quarters, you'll see some of the biggest drivers we've had of growth in passenger car came out of Chinese OEMs. So the offset there, you know, we continue to see low voltage, actually, content continue to grow very nicely, and we are winning high voltage, just not at the same rate. So, we think there's still content expansion for us in China. Got it. Okay. Another question, last question on electronics before we move to the other sectors, and that's on your operating margin. Mm-hmm. Through the cycle you had, you were in, I think, the mid-30s in terms of operating margin, well above your target is, I think, around high teens, low 20s. Yeah. And you have the pricing obviously benefits, huge demand, and then now margins are down to the low teens, below your target. But as you said, there's cyclicality through the business. So how should we think about the margin recovery in sync with the revenue recovery? Sure. You know, I think first of all, what's important is to recognize over the last several years, we've been, we know our electronics business is cyclical. We've been working to try to manage this in a way and diversify our customer base within the electronics, you know, segment, to get a healthier mix overall. So that when we do go through the cycle, when we hit the bottom of a cycle, we raise the floor on where the margin profile is. So if you look at our first quarter, our EBIT margins in the electronics segment were about 13%. If you look at the last cycle when we hit the bottom, and they were running a little over 8%. So we've successfully moved up the floor on that. Still, it's still a painful place to be when you're at 13, you know, and you'd like to be operating up at 20. You referenced a couple of years ago where, you know, in my career, it's certainly been the strongest opportunistic pricing opportunity that's existed in the electronic space. Costs were certainly well up, but we were able to pass that along very effectively. So that drove margins pretty high in the peak, and demands were really strong as well. But as you know, Matt, you know, the incrementals on our electronics business, particularly the passives business, are quite strong. So as soon as we start seeing a return to growth and some expansion of revenue, the drop through there will be quite meaningful, and you'll see that, you know, pick back up pretty rapidly. Great. And does that factor in a return to a more normal price erosion or cost downs from customers? Ab-absolutely. Yeah. We're kind of across our segments, we're seeing kind of normal pricing behaviors. And in the electronics world, for us, normal is a 3%-5% price erosion every year. That's kind of the normal. It's been that way for decades, and we do see that, and that's kind of been the return. There's been a lot of questions and a lot of thought that, you know, with lower demands, boy, prices are really gonna drop off pretty dramatically. We have not seen that much. There's a couple small pockets in China on a couple product lines, but other than that, it's really kind of a return to normal. Okay, great. So let's turn to the transportation business, which is obviously a big business for you. You've got three subsegments: passenger car, sensors, and commercial vehicles. Commercial vehicles is now a big chunk of that because of acquisitions you've done. Your margins are depressed in that space. So can you talk about what you're seeing across those three subsegments? Yeah. We, so we really kind of manage it as primarily two. Okay. Between commercial vehicle. Yeah. And passenger car. We lump sensors into the passenger car world because that's where the bulk of the revenues are. So let's first talk about commercial vehicle. The commercial vehicle business, Transportation is about a 50/50 split between commercial vehicle and pass car. We doubled the size of our commercial vehicle business three years ago with a sizable acquisition called Carling Technologies. That was a business that had a huge backlog when we bought it. So year one, we were concentrating on cleaning up the backlog and serving customers that were screaming. And so we had a 22% growth from the prior owners last year on our first year of ownership, so that was really strong. The unfortunate thing is, you get all that backlog cleaned up, and then, the customers realize, well, most of it went into inventory. So they began to kind of pull that down. So that's lessened the revenue there, and it dampened and certainly hurt profitability. So we've got a lot of work on the integration activity we've been doing there. We've talked about, openly about, that we expect this year, you know, a headwind in our transport segment of, you know, 500 basis points on revenue, really primarily driven out of product line and customer rationalization out of that business. So we see that headwind, but we will expect an uptick in the profitability there. You saw in the first quarter, we saw a nice step up overall in transport, and commercial vehicle got up into the high single digits, which is a nice step in the right direction and needs to work its way back up to mid-teens. We think over the next couple of years, we can do that on a commercial vehicle with. We still have some plant moves we're doing right now, and then, of course, these product line and customer rationalizations to get there. Now, on the passenger car side, that also has had kinda tougher margins in the last year or so. We made the strategic choice that when costs were going up dramatically, we have, in the passenger car world, we have multiyear contracts. There's always the opportunity to break the contract and renegotiate pricing and raise prices, and, you know, we've done that in some cases. But usually, what happens with the OEMs and the tier ones is you can do that just as long as you do an open book on your costs and show exactly where the changes are. We've made the decision that we'd prefer not to do open book with our customers there. So we've said we'll address it with our contracts as they renew. So that means you have a delay, you know, on getting your pricing in, but we've been able to start to get that with contracts as we renew them. So we've also seen passenger car improve, you know, meaningfully there. The sensor side of it, you know, we stepped in sensors a few years ago. There was a couple segments that are end applications, particularly in Asia, in transmission sensing, where margins degraded pretty rapidly because of competition. We've been pulling back from that and stepping back from that, and we've been launching organically some sensors that are used in hybrids, plug-in hybrids and EVs and current sensing capability. And so our spend on R&D has been pretty high as we've organically been developing that and winning new business there. Just literally in the last month, started shipping to our first customers there, and that'll start ramping over the next couple of years. So that'll continue to drive improvements there also in the margin profiles there. Transport overall, we were kinda in the 9% range, and it'll probably bounce around a little bit around that range, but we should exit the year in the double digits and continue to see the journey back to 15. Yeah. And how, how are you feeling about production outlook for auto, which is obviously, which is flattish, basically? Yeah. But the content story. And for you, is there a big difference, or does it matter whether it's hybrid, EV, or ICE, in terms of content? For us, yeah, the low-voltage systems on ICE, you know, we average about, globally, about $5 of content per ICE vehicle. Our overall average is about $7, and that's because of the electrification that pulls that up as that's been, you know, beginning to roll out. It's a continuum, really, and it's on the high-voltage side, it's really, our content depends on the voltage level. So the higher the voltage level, the higher the content. So if you have a high-end EV that's got an 800-volt system in it, it's gonna have higher content. That may be, that could be as high as $40 of content, whereas, you know, a hybrid or a plug-in hybrid is gonna be somewhere in a continuum, depending on the voltage level that they're operating at. Yep. Okay. Okay, good. And then, last but not least, there, your industrial segment, which has, in my mind, changed pretty dramatically in terms of the end markets. Yeah. Like today versus 10 years ago. Correct. Where you really sort of skewed toward, like, mining and other areas, and now you're across, you know, in terms of infrastructure. So could you talk about the end markets that you're serving there and the opportunities? Yeah, so if you go back in a, you know, a few years ago, the bulk of our industrial segment was focusing on non-U.S. non-residential construction, MRO, mining, oil and gas sort of stuff, having North America-centric business. Through acquisitions and organic investments we've made over the last several years, we've really shifted that business. We still have business in those spaces, but we've grown the businesses into more traditional and broad-based industrial players. So, HVAC applications, renewable energy is a, is a high area, and that's both on generation and energy storage, which energy storage continues to be booming. We've also seen, we've introduced some new technologies into industrial safety. That has been an additional market for us as well that we've expanded. So where we used to be almost a complete distribution business there, now it's about 50/50 distribution and direct OEM sort of customer base there. Mm-hmm. And is there an opportunity within the data center and hyperscale in terms of the infrastructure and power? Sure. management and power requirements? Yeah, data centers in general for us are continue to be an opportunity, obviously, and, and as AI and general compute grows, that's an opportunity for us. And it falls in, in two areas. One is in the industrial segment, where that's really in the infrastructure of the building, so backup generators, power distribution in the building, switchgear applications, those sorts of things, and cooling systems. Those are gonna be more industrial products. And then when you get in the racks and on the servers, on the UPSs and the power supplies, then you're gonna get out of our electronics segment that shows up there, so kind of both sides of it, you know, play out. Okay. I want to see if there's any questions from the audience. Anyone have anything? No? Okay. So we talked about your three segments. In your commentary, Dave, you talked about M&A being a big part of your growth story, and you've done many acquisitions, and you really broadened your product portfolio, where 10, 15 years ago, it was really all circuit protection, and then now it's across different skill sets within a circuit board. So what's the. And in terms of M&A, you know, sort of what's next? Are there any sort of product areas where you think you need to fill voids, and you do acquisitions there, synergy opportunities? What are you looking at these days? Yeah. The last few years in our acquisitions have been really targeted at changing the balance of our customer base and applications that we serve. So I continue to see that to be an opportunity. Industrial has been, you know, and it shows up in our industrial segment or actually in our electronic segment as well, from an in-market exposure. Increasing our exposure to broader-based industrials has been a focus for us. We continue to see that as a nice opportunity for us to continue to build out. We target high-growth applications and markets, and we'll over-index to those on our organic investments and our M&A investments. Those are spaces we like. Actually, even though we have some cleanup work to do on Carling, we continue to like the commercial vehicle space in the long term. We think that's a pretty healthy place to be. I would tell you, passenger car is tougher. You know, return profiles in the passenger car world are harder. There can be technology plays for us that may bring unique capabilities there, but we balance often, you know, the end-market dynamics. How do we continue to shrink, you know, the amplitude of the volatility in our electronics business with exposure into industrials and things like that? I think you're gonna see us look at those types of things. Mm-hmm. And I know a year ago, when I asked questions about M&A and opportunities, the answer was valuations are still relatively high. Has that changed as the market has changed here? It's not changed as much as it needs to, I would say. You know, our prototypical target tends to be a private company, often family-owned or maybe individually owned. And I will tell you, emotionally, they still will anchor to multiples and price points from two or three years ago, 'cause that's the high water mark, and that's where they always compare to. So you've got to get over that emotional hurdle, you know, sometimes to get a more realistic. Look, the cost of money is more expensive today than it was two or three years ago. You know, the markets aren't as high growth right now as they were two or three years ago. So there are still, you know, owners that are struggling a little bit to come off of that as their anchor point, but, yeah, they're moving. Okay. Sure. Okay, we have a few minutes, a few seconds left. Anything else, any questions that are coming up in your one-on-ones that are worth bringing up? Anything we didn't mention? No, I don't think so. I think the critical thing is, you know, we're not gonna magically change our business out of a cyclical industry. You know, so cyclicality is gonna be a reality that we deal with. We've made improvements there, and you'll see us continue to find ways to try to maybe dampen the amplitude there, increase the flow more of our performance during the bottom end of a cycle, and we think we're well positioned to do that. Yeah. Okay. Okay, very good. Thank you, Dave. Thank you, David, appreciate it. Thank you. Thanks, Matt.