Littelfuse Q2 2025 Earnings Report

Littelfuse EPS Results

• Actual EPS: $2.85
• Consensus EPS: $2.35
• Beat/Miss: Beat by +$0.50
• One Year Ago EPS: $1.97

Littelfuse Revenue Results

• Actual Revenue: $613.41 million
• Expected Revenue: $571.04 million
• Beat/Miss: Beat by +$42.38 million
• YoY Revenue Growth: +9.80%

Littelfuse Announcement Details

• Quarter: Q2 2025
• Date: 7/30/2025
• Time: Before Market Opens
• Conference Call Date: Wednesday, July 30, 2025
• Conference Call Time: 9:00AM ET

Littelfuse (NASDAQ:LFUS) is a global manufacturer of circuit protection, power control, and sensing technologies. Founded in 1927 and headquartered in Chicago, Illinois, the company develops and produces a broad range of products designed to safeguard electrical and electronic systems across a variety of end markets. Littelfuse’s offerings include fuses, semiconductors, relays, and sensors, all engineered to protect against overcurrent, overvoltage, and thermal events in demanding applications.

The company’s product portfolio is organized into key segments such as Automotive, Industrial & Electronics, and Power & Sensor. In the automotive sector, Littelfuse supplies circuit protection devices, power distribution modules, and advanced sensing solutions for electric vehicles, internal combustion engines, and hybrid powertrains. For industrial and electronics customers, the company provides fuses, polymer positive temperature coefficient (PTC) devices, and surge protection components used in factory automation, telecommunications equipment, and consumer electronics. Littelfuse’s Power & Sensor division focuses on power semiconductors, such as silicon carbide MOSFETs, insulated-gate bipolar transistors (IGBTs), and current and temperature sensors.

With a global footprint spanning manufacturing facilities and technical centers in North America, Europe, Asia, and Latin America, Littelfuse serves customers in over 100 countries. The company’s international operations include production sites in China, Malaysia, Germany, India, and Mexico, as well as regional sales and engineering offices that support local design requirements and regulatory standards. Littelfuse has grown its market presence through a series of strategic acquisitions and partnerships aimed at enhancing its product breadth and accelerating entry into emerging technology areas such as sustainable energy and advanced driver-assistance systems.

Littelfuse is led by President and Chief Executive Officer Allen P. Vernier, who assumed the role in early 2021. Under his leadership, the company continues to focus on innovation, operational excellence, and customer collaboration. Littelfuse’s research and development teams work closely with automotive OEMs, industrial equipment manufacturers, and electronics designers to develop next-generation protection and control solutions that address evolving safety and performance challenges.

Littelfuse Q2 2025 Earnings Call Transcript

Key Takeaways

• Positive Sentiment: Q2 revenue of $613M was up 10% Y/Y (6% organic) with adjusted EPS of $2.85, exceeding the high end of guidance.
• Positive Sentiment: Book-to-bill exceeded 1 for the quarter and bookings ended at the highest run rate since 2022, underpinning confidence in continued growth into Q3.
• Positive Sentiment: Management secured multiple strategic design wins—from next-gen semiconductor protection in enterprise computing and new data center applications to green hydrogen fuses and solar microinverters—highlighting strong secular momentum.
• Positive Sentiment: Operating cash flow of $82M and free cash flow of $73M in Q2 drove a 114% YTD conversion, while net debt/EBITDA remained a low 1.1×, supporting dividends and share buybacks.
• Negative Sentiment: The power semiconductor business stayed weak with a 5% organic sales decline, and Q3 guidance factors in headwinds from tariff timing (~$0.15 EPS), higher stock-based comp, mark-to-market adjustments and an $0.08 FX/commodity drag.

Presentation

[Operator]

Good day, everyone, and welcome to the Littelfuse Second Quarter twenty twenty five Earnings Conference Call. Today's call is being recorded. At this time, I will turn the call over to the Head of Investor Relations, David Kelley. Please proceed.

[David Kelley, Head - IR at Littelfuse]

Good morning, and welcome to the Littelfuse Second Quarter twenty twenty five Earnings Conference Call. With me today are Greg Henderson, President and CEO and Abid Kendallwal, Executive Vice President and CFO. This morning, we reported results for our second quarter, and a copy of our earnings release and slide presentation is available on the Investor Relations section of our website. A webcast of today's conference call will also be available on our website. Please advance to Slide two for our disclaimers.

[David Kelley, Head - IR at Littelfuse]

Our discussions today will include forward looking statements. These forward looking statements may involve significant risks and uncertainties. Please review today's press release and our Forms 10 ks and 10 Q for more detail about important risks that could cause actual results to differ materially from our expectations. We assume no obligation to update any of this forward looking information. Also, our remarks today refer to non GAAP financial measures.

[David Kelley, Head - IR at Littelfuse]

A reconciliation of these non GAAP financial measures to the most comparable GAAP measures is provided on our earnings release available on the Investor Relations section of our website. I will now turn the call over to Greg.

[Greg Henderson, President, CEO & Member of the Board of Directors at Littelfuse]

Thank you, David, and thank you to everyone for joining us today. I want to start this morning with highlights of our second quarter and then provide an update on the progress we made on our strategic priorities. We're in the early process of capitalizing on our new list growth and operational enhancement opportunities. An important milestone in this process was the hiring of our new CFO, Abhi Kandwal, to the quarter. Abhi joins us from IHS Corporation.

[Greg Henderson, President, CEO & Member of the Board of Directors at Littelfuse]

He brings more than two decades of financial and operational leadership. He has significant experience in driving strategic growth, both organic and acquisitions as well as in scaling operations. Avi has already had a significant impact in his first month at Littelfuse. I look forward to continuing our partnership as we focus on scaling our business for long term growth, enhanced profitability and best in class shareholder returns. In the second quarter, we demonstrated broad based strength across our businesses, delivering revenue growth of 10% relative to the prior year.

[Greg Henderson, President, CEO & Member of the Board of Directors at Littelfuse]

Our performance reflects our leadership position in safe and efficient electrical energy transfer, the ongoing meaningful technology evolutions in front of us and the fact that our customers deeply value our trusted and essential capabilities. Across our segments, we observed continued momentum in the second quarter. Our Electronics segment benefited from improved demand for passive electronics and protection products. In our Transportation segment, we delivered broad based growth, while our strong Industrial segment performance reflects our unique market and customer positioning. Our end markets continue to move to higher power and higher energy density, and we are leveraging our market leadership and unique product portfolio to help our customers solve increasingly complex challenges.

[Greg Henderson, President, CEO & Member of the Board of Directors at Littelfuse]

Supporting this, our second quarter book to bill again tracked above one, while our bookings exited the quarter at the highest run rate since the 2022. We expect our solid growth performance to continue into the third quarter. Our second quarter earnings results also exceeded the high end of our prior guidance range, reflecting strong execution. Avi will discuss specific results in more detail shortly, but I want to thank our teams for their hard work and dedication. With that, I wanted to update everyone on the specific progress we're making on each of our strategic priorities that I highlighted last quarter.

[Greg Henderson, President, CEO & Member of the Board of Directors at Littelfuse]

Our first strategic priority is to enhance our focus to better capitalize on future growth opportunities. Our teams are sharpening their focus on higher voltage and higher energy density applications as our customers are pushing for higher power next gen solutions. This evolution is leading to complex safety and efficiency challenges, and our products are increasingly important to solving these challenges at the architecture level. Importantly, this transition is happening across all of our end markets, and we are seeing the benefits of our heightened focus on these expanding opportunities real time. Let me provide you with an example in enterprise computing, where the industry is transitioning from five volt to higher power 48 volt capabilities for single cable combined power and connectivity getter bases.

[Greg Henderson, President, CEO & Member of the Board of Directors at Littelfuse]

This evolution requires more advanced and unique safety and protection solutions while meeting the increasingly demanding data rate and electromagnetic compatibility requirements. In the second quarter, we worked with a market leader to develop a next gen semiconductor protection solution. Our solution supports higher power and data rates at faster charging speeds and will begin shipping in the third quarter. Broadly, heightened focus on the secular trends across our end markets will continue to drive expanded new business opportunities. We are seeing meaningful traction in our pipeline, and year to date, our new business opportunity funnel is up double digits.

[Greg Henderson, President, CEO & Member of the Board of Directors at Littelfuse]

Our second strategic priority is to provide more complete solutions for a broader set of our customers. Customers deeply value our capabilities and our scale is a significant advantage. Yet we can further harness our unique and market leading product portfolio to help more of our customers solve complex challenges around safe and efficient power transfer. To support this opportunity, we are further aligning our technology capabilities and our sales structure to better serve our customers with our full product portfolio. We are also leveraging our collaborative product development, engineering and testing processes to better support our broad customers as they drive ongoing product innovations. As an example, last quarter we discussed the meaningful role we play in data center advancements. We are seeing an accelerating pipeline opportunity as we have been expanding our go to market strategy.

[Greg Henderson, President, CEO & Member of the Board of Directors at Littelfuse]

I am pleased to announce several new data center design wins in the second quarter, with market leaders ranging from global digital infrastructure provider to a leading compute platform player. Our second quarter wins range from liquid cooling to onboard and power distribution applications and position us well for continued strong data center sales growth. Last quarter, we also discussed our opportunities in the rapidly growing grid storage market. Today, I wanted to discuss the broader sustainable grid ecosystem where we are building momentum globally. In the second quarter, we won a design with a leading player in green hydrogen where we will provide high speed, high voltage industrial fuses.

[Greg Henderson, President, CEO & Member of the Board of Directors at Littelfuse]

Our solution enables pairing to the grid and plays a critical role in reliable renewable energy transfer. We also worked with a solar supplier to develop a next gen microinverter. Our solution enables compatibility with higher power solar panels and a clean battery integration. Broadly, observed strong renewables and grid storage sales growth in the second quarter, and we see continued momentum as these markets transition to higher power solutions. Turning to our third strategic priority.

[Greg Henderson, President, CEO & Member of the Board of Directors at Littelfuse]

We see an opportunity to drive further operational excellence while enhancing long term profitability as we grow. We can better leverage areas of best in class operating practices and apply those across our businesses. We can also further optimize our operating structure to support our growth opportunities and enhance long term performance. In the second quarter, we established a new global operations team that will focus on driving best in class operational capabilities across our global sites. Led by this team, we are in the process of establishing and driving best practices with a heightened emphasis on safety, quality, delivery, cost and inventory. While this is a long journey, we have begun applying this enhanced focus to some of our North American factories. We saw early benefits of these efforts in the quarter reflected in our second quarter transportation operational performance. Taking a step back, we delivered a strong second quarter and we are well positioned to drive continued growth into the third quarter. We are seeing the benefits of our flexible operating model and global footprint that is closely aligned to our customers and their supply chains. We will continue to work closely with our customers and partners through an evolving environment to deliver on the meaningful opportunities in front of us. Finally, while we have made significant progress to date, we remain focused on our strategic priorities as we aim to position and ultimately scale our company with the goal of delivering long term best in class performance. With that, I will hand the call over to Habib.

[Abhi Khandelwal, EVP & CFO at IDEX]

Thank you, Greg, and to everyone joining us today. I'm excited to have joined this great organization as we scale our business with the next growth phase of low fees. One month into the role, I've been working with Greg and our leadership team as we build on our strategic product. I see opportunities to enhance the secular growth momentum, further optimize our portfolio and strengthen our talent as we drive leading long term returns. With that, please turn to Slide seven to start with details on our second quarter results.

[Abhi Khandelwal, EVP & CFO at IDEX]

As Greg mentioned, we exceeded the high end of our guidance range for revenue and adjusted EPS. Going forward, comparisons I will discuss will be relative to the prior year unless stated otherwise. Revenue in the quarter was $613,000,000 up 10% in total and up 6% organic. The Dortmund acquisition contributed 2% to sales growth while FX was a 1% tailwind. Adjusted EBITDA margin finished at 21.4%, up two eighty basis points.

[Abhi Khandelwal, EVP & CFO at IDEX]

Our solid margin expansion reflects strong conversion on higher sales growth, improved operational performance, as well as the benefit due to timing of tariff collections and payments. Second quarter adjusted diluted earnings was $2.85 up 45% and exceeded the high end of our guidance range. This reflects solid sales growth across our segments as well as margin expansion across our Transportation and Industrial segments. Please note, our second quarter adjusted effective tax rate was 23%, in line with our expectations. Please turn to Slide eight for updates on capital allocation.

[Abhi Khandelwal, EVP & CFO at IDEX]

We delivered strong cash generation in the second quarter. Operating cash flow was $82,000,000 and we generated $73,000,000 in free cash flow. Year to date, we have generated $150,000,000 of free cash flow yielding a strong 114 percent conversion rate. We ended the quarter with $685,000,000 of cash in hand and net debt to EBITDA leverage of 1.1 times. In the quarter, we returned $17,000,000 to shareholders via our cash dividend.

[Abhi Khandelwal, EVP & CFO at IDEX]

We will continue to prioritize our cash flow for organic investments and strategic acquisitions. We will also continue to return capital to our shareholders through our dividend as well as strategic share buyback. Please turn to Slide nine for our segment highlights. Starting with the Electronics Products segment, sales for the segment were up 10% versus last year and up 4% organically. The door print acquisition contributed 4% while FX contributed 1.2 growth. Sales across passive products were up 14% organically while semiconductor products declined 5% in the quarter. Our strong passive product sales growth in the quarter reflects improved orders from channel partners and increased demand from OEM customers. Within our semiconductor products exposure, we observed continued soft power semiconductor demand that offset improved protection product volumes. Adjusted EBITDA margin of 31.6% was flat versus the prior year.

[Abhi Khandelwal, EVP & CFO at IDEX]

Favorable year over year volume leverage on our passive and protection product sales growth was offset by lower power semiconductor volumes. Moving to our Transportation Products segment on Slide 10. Segment sales increased plus 6% as organic sales increased 4% for the quarter, while FX contributed two points to growth. In the passenger car business, sales increased 3% organic. Passenger car sales increased across North America, Europe and China as we benefited from share gains and growth in global car builds.

[Abhi Khandelwal, EVP & CFO at IDEX]

Commercial vehicle sales for the quarter increased 5% organically and benefited from market share gains despite ongoing soft end market conditions. For the segment, adjusted EBITDA margin of 20.5% was up six ten basis points. In the quarter, we benefited from volume leverage, while our focus on profitability initiatives continued to drive improved operational performance. On Slide 11, Industrial Products segment sales grew 17% organically for the quarter. Second quarter sales benefited from strong grid storage, renewable, data center, industrial safety and HVAC growth.

[Abhi Khandelwal, EVP & CFO at IDEX]

Adjusted EBITDA margin was 22.1% in the quarter, up six ten basis points. Our strong margin performance reflects improved volume leverage and solid operational execution. Please move to Slide 12 for the forecast. We entered the third quarter with a strong backlog and remain well positioned to deliver continued growth as we focus on driving operational excellence. With that in mind, our third quarter guidance incorporates current market conditions, trade policies and FX rates as of today.

[Abhi Khandelwal, EVP & CFO at IDEX]

We expect third quarter sales in the range of $610,000,000 to $630,000,000 which assumes 6% organic growth at the midpoint and two points of growth stemming from our Dortmund acquisition. We are projecting third quarter EPS to be in the range of $2.65 to $2.85 which assumes a 38% flow through at the midpoint. Third quarter guidance also assumes an unfavorable impact from stock and variable comp of $0.31 and a $02 headwind from a prior year favorable mark to market and a higher adjusted effective tax rate. At current FX and commodity rates, we're expecting an $08 headwind to EPS versus the prior year. Moving to Slide 14, let me add some additional details on our full year 2025.

[Abhi Khandelwal, EVP & CFO at IDEX]

We continue to expect 2% total sales growth stemming from our Dortmund acquisition with a neutral impact to EPS. At current rates, we expect FX and commodities will represent a 1% tailwind to sales and a $04 benefit to EPS. On other modeling items, we are assuming $58,000,000 in amortization expense and $35,000,000 in interest expense, about two third of which we expect to offset from interest income from our cash investment strategies. We're estimating a full year tax rate between 2325%. We also expect to spend 9,000,000 to $95,000,000 in capital expenditures.

[Abhi Khandelwal, EVP & CFO at IDEX]

In closing, our second quarter results reflect a unique technology positioning, flexible operating model and solid execution. As we look forward, we have a strong business model and balance sheet and we will maintain our financial discipline and focus on shareholder returns. We will continue to build on our strategic priorities to scale our business and drive long term value. With that, operator, please open the call for Q and A.

[Operator]

Thank you. Your first question comes from Luke Junk of Baird. Your line is open.

[Luke Junk, Senior Research Analyst at Robert W. Baird & Co]

Good morning. Thanks for taking the questions. Gregor, Avi, maybe to start, if you could just help us to put the margin upside in both Transportation and Industrial just in context relative to history, both recent history and some of the longer term targets that have been out there. Transportation in particular, the company's had a long held 15 margin target. You're right there this quarter.

[Luke Junk, Senior Research Analyst at Robert W. Baird & Co]

Just how should we square current trends with what the historical context has been for that business operating wise? And then, Abhi, I think you mentioned some tariff timing impacts to margins, if you could just clarify what that was? Thank you.

[Greg Henderson, President, CEO & Member of the Board of Directors at Littelfuse]

Sure. Thanks, Luke. Good morning. This is Greg. I'll just start just maybe I'll take them one at a time.

[Greg Henderson, President, CEO & Member of the Board of Directors at Littelfuse]

So starting with our Transportation segment. I think as we mentioned in the prepared remarks, one of the key areas that we're focusing on is scaling our operational excellence. And actually, we've been working on focusing on that inside of our transportation business. So strategically, we kind of have two initiatives in transportation. One is that we're strategically focused on diversifying our portfolio, so diversifying our market exposure.

[Greg Henderson, President, CEO & Member of the Board of Directors at Littelfuse]

So we have a strong exposure, as you know, to passenger car, maybe traditional transportation like heavy trucks. But we have a strategy to try to diversify. So we're winning new designs in more diversified areas, things like agriculture and other customers that we don't penetrate today. But also, we have a focus on scaling our operational excellence. And so this is one of the areas that it's still in early innings for us, but we're working on optimizing our factory performance, taking some of our best in class capabilities and scaling them across our factories.

[Greg Henderson, President, CEO & Member of the Board of Directors at Littelfuse]

And we saw meaningful improvement in our transportation margin in the quarter because of that, and Bobby can give some more color to that. In Industrial, I would say that we continue to have positive revenue growth and margin, and I would say a lot of the performance in Industrial is related to the markets we're playing in. So we're continuing to play and focus on energy storage, data center, industrial safety, that's strong growth in HVAC. So in our industrial business, I would say that our top line growth and our focus on high value markets is also driving the performance there. And maybe I'll hand to obviously get more color on that.

[Abhi Khandelwal, EVP & CFO at IDEX]

Yes. So first of pleasure to meet pleasure to talk to you and look forward to our partnership here. But starting with Transportation, building on what Greg said, there's a couple of things up for now. First of all, if you look at the performance in the quarter and look at four percent organic growth, I think what that the margin reflects is the power of leverage operating leverage. So you see that play subpar in the quarter.

[Abhi Khandelwal, EVP & CFO at IDEX]

Secondly, as Greg mentioned, look, we've done a lot of work around operational execution. We continue to focus on that. That's one of our strategic priorities. So as we move forward, right, we will continue to build on that. Now keep in mind, transportation is margins are not gonna be linear because their sales, you know, that that move over time by quarter by quarter given seasonality.

[Abhi Khandelwal, EVP & CFO at IDEX]

But I do expect over over the longer haul transportation as a segment has more margin upside. We'll work the details out as we go to the back half of the year and solidify our strategy. Talking about industrial, look, we're really, really pleased with the performance that we saw in the quarter, both on the top line and bottom line. Again, this is pretty much the same story, which is around organic growth, translating into powerful operating leverage, which is seeped itself out in the margin line. Look, transportation exited the quarter sorry, less than the quarter at about 19% off margin, right?

[Abhi Khandelwal, EVP & CFO at IDEX]

Now keep in mind, one of the things to consider here is as we start to see our organic growth at 17%, some of the margin drop through, we're going invest back in the business to continue to fuel growth as we move forward. But again, we're pretty pleased with our performance. You can see the work that we're doing around our third strategic priority on operational execution really builds up on the quarter across company.

[Luke Junk, Senior Research Analyst at Robert W. Baird & Co]

Thank you for that. And be great to meet you in this context as well. Just on the tariff timing impacts, yes, could you just clarify what you mentioned in the script as well?

[Abhi Khandelwal, EVP & CFO at IDEX]

Yes, absolutely. Look, what I said in the script is something that basically comes down to the timing of the realization of price versus when we incurred the cost in the quarter. So what really that means is if you think about it sequentially, right, in q two, we had about a $0.15 benefit or tailwind that will become a headwind in Q2. So really all it is, is timing between the quarters in terms of the timing of price realization versus cost that we incur on the P and L. So that's what

[Abhi Khandelwal, EVP & CFO at IDEX]

I meant by that. There's about a $0.15 good guide in Q2 that's going to reverse itself on Q3 and be a bad guide sequentially.

[Luke Junk, Senior Research Analyst at Robert W. Baird & Co]

Okay. Understood. That's helpful. Thank you. Second, maybe just a little bigger picture, Greg, but really strong results within Industrial quarter.

[Luke Junk, Senior Research Analyst at Robert W. Baird & Co]

Historically, this has been a smaller just because of the size of the business, some uneven segment for the company historically. As you come into the company, is your perception of the business different? I guess I'm thinking especially your priority around aligning the company's technology capabilities and sales structures. Could that have sort of outsized impact on the industrial segment specifically, Greg?

[Greg Henderson, President, CEO & Member of the Board of Directors at Littelfuse]

Yeah. I think what I what I was saying, I think we're actually really excited about the industrial segment. When we think about our bigger picture strategy of focusing on safe and efficient transfer of electrical energy and about our customers' transition to higher power, high voltage, high current. This plays really well. This is a big megatrend in that industrial sector.

[Greg Henderson, President, CEO & Member of the Board of Directors at Littelfuse]

And actually, I think we focused in our industrial segment on some of these markets that are maybe leading in this transition, and then we built technology. So for example, solar, grid storage, these are some of the areas that are leading in this transition. We built technology. Actually, now some of the technology from our Industrial business is now a big part of our data center solutions. So as we talked about data center, some of the data center customers actually, we sell to two sides of that.

[Greg Henderson, President, CEO & Member of the Board of Directors at Littelfuse]

We sell to what we would call maybe industrial infrastructure customers that make that do maybe the grid side, bringing the power into the data center, doing the cooling for the data center, that's part of our industrial business. But also products for our industrial business are playing straight to the hyperscalers directly that are going to the next generation high voltage architecture. So broadly, we feel that industrial is a growth sector for us. You heard, obviously, that it's actually it's a high growth, but also a good margin, but we're going to continue to invest in this. So industrial segment is one that aligns well to our strategy, and we will continue to see, in my opinion, both top line and bottom line positive outcomes from those meetings.

[Luke Junk, Senior Research Analyst at Robert W. Baird & Co]

Got it. And then jumping off on that on the data center piece specifically, Greg, maybe a multipart question side. Can you remind us from a, electronic standpoint where where data center exposure is? And I think historically for the company in total, it's been a good exposure, but not necessarily one of the company's largest kind of just where is that today? I get the sense that it's growing.

[Luke Junk, Senior Research Analyst at Robert W. Baird & Co]

And as you lean into new engagements and opportunities on next gen, higher power type applications, sounds like some of those things are maybe coming to fruition earlier than expected. Can you just help us understand magnitude of that tailwind? Yes.

[Greg Henderson, President, CEO & Member of the Board of Directors at Littelfuse]

I mean, I think data center, consider as inside of our Electronics segment. And the products in our Electronics segment are also having strong traction in data center. We mentioned design wins we had this time in liquid cooling, but also in onboard. And so we have a lot of products from our Electronics segment that are onboard power protection products and actually our semiconductor protection products actually going to data center onboard. And I think actually interestingly, like one of the trends that's happening in this, you you all hear about data center market and the data centers gigawatts of power, etcetera.

[Greg Henderson, President, CEO & Member of the Board of Directors at Littelfuse]

But every step of the chain in the data center is going to higher energy density. And so our solutions, a lot of our electronics products are about they tend to be slightly smaller than, say, the industrial products. But again, you're trying to put more energy into a small area and still have that protection. So we have some surface maps, some, for example, our mount fuses, our overvoltage devices, our semiconductor protection devices are playing well in that in that space. Was the second half of the question, Luke?

[Luke Junk, Senior Research Analyst at Robert W. Baird & Co]

Yeah. So just maybe sizing the data center exposure. Like I said, I think it's been a good exposure historically, but not one of the largest, but it feels like that's growing right now.

[Greg Henderson, President, CEO & Member of the Board of Directors at Littelfuse]

Yeah. Yeah. I think what

[Greg Henderson, President, CEO & Member of the Board of Directors at Littelfuse]

I would say is that, data center is materially important to Littelfuse, but I also think it's gonna be more important as time goes on. So I think the thing to understand about this, we talked about our second strategic priority about selling more of our complete solutions, and this is really about also how we align our go to market so that we're more leveraging our broad capabilities. Interestingly, I talked about some of our industrial products selling straight into data center. So the go to market for our data center is right now focusing in our electronics segment, but we're trying to better scale that go to market. So data center is a key kind of early area where we're focusing the scaling of go to market to bring more of our portfolio to our customers.

[Greg Henderson, President, CEO & Member of the Board of Directors at Littelfuse]

And so this is an area where we're building pipeline. We have good design wins, but we also have growing pipeline. And so we will continue to see momentum in that area.

[Luke Junk, Senior Research Analyst at Robert W. Baird & Co]

All very helpful. I'll leave it there. Thank you.

[Abhi Khandelwal, EVP & CFO at IDEX]

Thanks, Glenn. Thanks, Glenn. Thanks, Glenn.

[Operator]

Next question comes from Christopher Glynn of Oppenheimer. Your line is open.

[Christopher Glynn, Equity Analyst - Industrials at Oppenheimer Holdings]

Yes, thanks. Just would like to dive into the passenger vehicle share gains kind of point in time. I don't think you called it out last quarter. Obviously, you slipped the positive organic. But is this kind of a midstream activity that's just kind of hitting past the starting line presently?

[Greg Henderson, President, CEO & Member of the Board of Directors at Littelfuse]

Yes. Thanks, Chris. I think when we look at passenger vehicle, I think the thing that I'll say is that we have a very strong market position and good exposure globally. And so we participate in the North American market, in the China market and the European market, and we participate strongly actually in EV and also traditionalized vehicles as well. So we have a pretty good market exposure.

[Greg Henderson, President, CEO & Member of the Board of Directors at Littelfuse]

And I would say, so we have good strong exposure on share. As we talked about before, that on average, EVs tend to have higher content. So therefore, when they have higher content, we tend to have more dollar share that goes with that, but we have good share across. And so I would say, my perspective, the share gains here is really about kind of where our market exposure is and how our position is, and that's going go up and down. But I would also say, just emphasizing, I think, our when we talk about our Transportation segment, passenger vehicle is an important part of that, but I think you'll continue to see our strategy is to try to continue to diversify.

[Greg Henderson, President, CEO & Member of the Board of Directors at Littelfuse]

Password vehicle is an important part of our Transportation segment, but our strategy is to continue to diversify with some key design wins in the quarter in areas like agriculture that is diversifying out from our traditional customer base, and we consider those to be high growth and SAM opportunities for us.

[Christopher Glynn, Equity Analyst - Industrials at Oppenheimer Holdings]

Okay. Great. And then we just talked about the share gain in transportation. Industrial, you have good market targeting and penetration. Electronics is a little bigger, more diversified.

[Christopher Glynn, Equity Analyst - Industrials at Oppenheimer Holdings]

It's tougher to discern how it ties into better capitalizing on future growth and more complete solutions. You've talked about BMS and medical in the past. Just wondering how the kind of momentum is playing behind the scenes there overall at electronics relative to the kind of more visible at the two smaller segments?

[Greg Henderson, President, CEO & Member of the Board of Directors at Littelfuse]

Yeah. I think what's what's important to understand about this strategy, and I think, you know, from my perspective, we're a little we're in the early innings of the strategy right now. But what's important is that in all of our segments, electronics and industrials and transportation, we're trying to get more disciplined and deliberate about, okay, what are the growth drivers in the segment? What are the parts of the market that are growing? Where do we want to focus? So and then how do what's our position there? So we're focused on these areas where they're focused on transition, a higher voltage, higher current. I gave an example actually in the script that comes from electronics segment, which is actually in enterprise computing.

[Greg Henderson, President, CEO & Member of the Board of Directors at Littelfuse]

And actually, that example, what's interesting about that to me is we talk about transition high voltage on high current, and we've talked in the past about data center going to 400 or 800 volts, and people think all very high voltage. But actually, this enterprise computing market for this application of connectivity is transitioning from five volt to 48 volt. Now 48 volt is not high in the context of 800 volt. But in the context of the application, it's a high voltage, and we've actually developed completely new solutions around semiconductor protection because it's a very demanding requirement in terms of power density and electromagnetic compatibility. So that's a good example.

[Greg Henderson, President, CEO & Member of the Board of Directors at Littelfuse]

And so what we're trying to do is find where in these markets and in the subsegments, whether it be building automation in electronics or medical or aerospace and defense, where do we have opportunities where we can leverage those megatrends on electrification with our technology. And so you'll be hearing more about that as we build out the strategy over the next quarters.

[Christopher Glynn, Equity Analyst - Industrials at Oppenheimer Holdings]

Okay. And then last for me, was just curious, the electronics margin slightly down sequentially on 9% sequential sales growth. I don't know if stock and variable comp plays in there. It looks like that's a 21% year over year drag in the third quarter. Maybe we could level set the context of that third quarter timing as well as the Electronics sequential margins.

[Abhi Khandelwal, EVP & CFO at IDEX]

Yes. So Chris, this is Navid. So what I'll say is this. I mean if you look at the Electronics margin profile, what you see in there in the second quarter is really strong drop through in our Passive Products and our Protection business within our semiconductor product business, which is partially getting offset by deleveraging of power semi business and the acquisition of Dortmund. Now all that said, what we are seeing is improved orders in our power semi.

[Abhi Khandelwal, EVP & CFO at IDEX]

So as we start to see the volume recover over time, what you see is rescaling and solid margin performance coming out of the electronic segment. But just sort of clear one more time on the electronic side, we did see strong drop to our passive products protection business within our semiconductor product business, which got offset by power saving. On the q three question, what I'll tell you is, I I think if you look at our guide for q three and look at what we have laid out from a true operational execution standpoint, what you're seeing is year over year, flow through of 38% on EBITDA conversion, which is getting offset by two things, really. Number one is stock convertible comp. And within that, there's two pieces. If you recall, on the stock based compensation for retirement eligible employees, instead of taking the hit all in q two, q two, we spread it between q two and q three. So part of the impact in that 21 that you see on the page is tied to that.

[Abhi Khandelwal, EVP & CFO at IDEX]

Second piece is the AIP. So if you recall last year, given where the company's performance were, we had to lower the bonus accrual. So this year, what you see in here is the bonus being included at a 100% on a target, and so that's why year over year, you see an impact. And then the other bucket is nothing more than two things. There was a mark to mark mark to market good guy last year that won't repeat this year, and then there's the differential in tax rate that's playing a bit of a role on a year over year basis.

[Abhi Khandelwal, EVP & CFO at IDEX]

But, again, true operational performance is really strong if you look at it on a year over year basis at 38% conversion on the EBITDA line.

[Christopher Glynn, Equity Analyst - Industrials at Oppenheimer Holdings]

Great. Thanks for all that.

[Abhi Khandelwal, EVP & CFO at IDEX]

Thanks for your questions, Chris.

[Operator]

The next question comes from Saree Boroditsky with Jefferies. Your line is open.

[Saree Boroditsky, SVP - Multi-Industrials at Jefferies & Company Inc]

Hi, thanks for taking the questions. I think we've talked a lot on the call about kind of this focus on growth opportunities. And I know it's early days, but I was curious if you had any thoughts on what this could add to the top line? And then are these opportunities accretive to margins? Or do they need higher investments?

[Greg Henderson, President, CEO & Member of the Board of Directors at Littelfuse]

Yes. I'm sorry. I'll just start. I mean I think it's big picture, we believe that we have significant opportunity to grow and scale the company. And so I think we're focusing our strategy.

[Greg Henderson, President, CEO & Member of the Board of Directors at Littelfuse]

We're focusing around the safe and efficient transfer of electricity. In all three of our markets, we see opportunity there. So big picture, we believe we're top line growth. We're building our long term models now that we're to be rolling out as we go forward. So we'll be able to talk more in future quarters about kind of the details of our growth model.

[Greg Henderson, President, CEO & Member of the Board of Directors at Littelfuse]

I think early indicators that I could say, we've mentioned in the call that we have double digit growth opportunity pipeline. I do believe that we're seeing traction already from a customer engagement perspective on how we're aligning our go to market. So we're building these long term models as we go, and we'll be talking about that more in future quarters. But we do believe that we will be driving top line growth. But we also want to drive bottom line growth as well.

[Greg Henderson, President, CEO & Member of the Board of Directors at Littelfuse]

So that's part of the second half. We do believe we have untapped opportunity from an operational perspective. That's part of our scaling operational excellence. We saw some early results from that as well. So we believe that we can grow both top line and bottom line.

[Greg Henderson, President, CEO & Member of the Board of Directors at Littelfuse]

Obviously, the top line will require some investments, but that's kind of the scale, I would say.

[Greg Henderson, President, CEO & Member of the Board of Directors at Littelfuse]

And Abhi, you're a long day here, and then you can give your views to how you see that as well.

[Abhi Khandelwal, EVP & CFO at IDEX]

Yes. Absolutely. Look, so first of all, thanks for the question. Pleasure to meet you. Yes.

[Abhi Khandelwal, EVP & CFO at IDEX]

I'll tell you that Greg, we'll have a strategic priority. What's really exciting about the journey that we're on is a couple of things. First of all, as we sharpen our focus and go after opportunities that's really gonna help us grow our top line, that's the work we're doing right now. And as Greg mentioned, we're review that in the fall. But in classic fashion, if you kinda think about our portfolio and think about our business model, right, when you see organic growth, just the way you saw it in q two, when you start to move that organic needle, what that translates into is bottom line margin expansion and bottom line growth.

[Abhi Khandelwal, EVP & CFO at IDEX]

Right? And that's what we're really excited about. But but but I think Greg's point in his page three on the on the slide deck around focusing and and capitalizing on future growth opportunities, really providing more broader solutions for our customer. And and following that with operation of the users, I'm really excited about it. I think that will translate into top line growth, bottom line growth over the longer haul.

[Abhi Khandelwal, EVP & CFO at IDEX]

And as and to Greg's point, in February, we plan to lay that out as part of our three year target in terms of what we believe the organic, the inorganic piece is gonna convert into over the next three years and what that means from the bottom line standpoint.

[Saree Boroditsky, SVP - Multi-Industrials at Jefferies & Company Inc]

I look forward to to having those targets. Maybe just sticking on the subject, you know, you talked in the beginning about some higher voltage solutions, data centers. Maybe just, any sense of the competitive environment there and maybe your market share today versus what you think it can be.

[Greg Henderson, President, CEO & Member of the Board of Directors at Littelfuse]

Yes. Thanks, Harry. Well, I mean, listen, we feel very comfortable with our technology position. And in general, I would say, our position is that as the markets move to these higher voltage, higher current, higher power, we are more differentiated. I've met with some of these customers, even the data center customers myself, and they really value Littelfuse's capability there.

[Greg Henderson, President, CEO & Member of the Board of Directors at Littelfuse]

And I think there's a big part of our capability and brand that that plays for our strength there because we have experience and people know, okay, they can count on Littlefuse working in that model. Of course, we have competition. We have competition in all of the markets and places that we play. But I would say, in general, we feel good about our technology and capability. And in general, as we move to these higher energy density applications, our products are more differentiated and also the problems that the customers are more challenging. And so therefore, we are a bigger part of the solution. So in general, that's a good trend for us and for our market position.

[Saree Boroditsky, SVP - Multi-Industrials at Jefferies & Company Inc]

Thanks for the questions. Congrats on the quarter.

[Abhi Khandelwal, EVP & CFO at IDEX]

Thank you.

[Operator]

Your next question comes from David William with Benchmark. Your line is open.

[David Williams, Equity Research Analyst at The Benchmark Company LLC]

Hey, good morning. Thanks for letting me ask the question and congrats on the really solid execution here.

[Abhi Khandelwal, EVP & CFO at IDEX]

Thank you, David.

[David Williams, Equity Research Analyst at The Benchmark Company LLC]

I guess maybe first is just kind of thinking about the power semi segment and you've talked about the orders improving there. But do you think we can see that leverage really return and begin to see some real impact from the power semi side?

[Greg Henderson, President, CEO & Member of the Board of Directors at Littelfuse]

Yes. Thanks, David. Just to start, just kind of maybe zoom on, and I heard this, and Avi referred to this a little bit in his remarks earlier. We zoom out and look at our semiconductor business. About 50% of our semiconductor business is our semiconductor protection business.

[Greg Henderson, President, CEO & Member of the Board of Directors at Littelfuse]

That was actually the example we gave on the call here under Enterprise Computing. And so that business has actually been doing very well, very strong, and actually been following our kind of path in Latrans business. The other half of our semiconductor business is our power semiconductor business. The market from the power semiconductor business has been soft, as you know. And so we've had a soft market position.

[Greg Henderson, President, CEO & Member of the Board of Directors at Littelfuse]

We also will be transparent that we've had some of our own execution challenges in the power semiconductor business. But I would say the good news is that we are starting to see areas of improvement in power semiconductor. Two things. First, I would say that in general, our market position in PowerSymbi, when you get to higher power energy density solutions, we just like we are in our passive business, we are more differentiated. We have more value to our customers.

[Greg Henderson, President, CEO & Member of the Board of Directors at Littelfuse]

But also from a market perspective, we're starting to see signs of stabilization, orders have been improving. And so we do expect positive momentum sequentially in the power semiconductor business. And that's areas where we're going to continue as well to focus on improving our execution and things that we can talk about more in future quarters.

[David Williams, Equity Research Analyst at The Benchmark Company LLC]

Great. And then secondly, just on the visibility and maybe how you see the in demand here. Do you feel like what we're seeing in terms of the improvement across your segments, does this feel like an inflection maybe on the in demand side? Or do you think there's some tariff, maybe uncertainty that's pulling things forward? Anything that you see that's maybe outside of just that normal inflection in demand that you think is driving this?

[Greg Henderson, President, CEO & Member of the Board of Directors at Littelfuse]

I mean, Mike, I think what we said in the call, right, we had solid momentum in the quarter, strong backlog and bookings. And we are, I would say, our perspective, seeing improved stability in our end markets. We're still in a dynamic macro environment, but one thing I think we would say is that if we compare this to maybe three to six months ago, we have more we have better visibility. So we feel better about our kind of medium to near term visibility than we did three to six months ago, given that out the environment that we're in.

[Abhi Khandelwal, EVP & CFO at IDEX]

Yes, Devin. As I I mean, look at it, even if I take a step back and kind of think about our Q3 guide, I mean, the if you look at it on a year over year basis, we are talking about a 9% reported, 6% organic. So again, if you just look at Q3 performance, back to your question, we are expecting a pretty nice 6% organic for the quarter on a year over year basis. And all three segments, as I think about all three segments, 2Q to 3Q, I expect electronics and industrial to go up sequentially. Now transportation season is down two to three due to shutdown.

[Abhi Khandelwal, EVP & CFO at IDEX]

And then on a year over year basis, as I kind of look at our performance, that's a part of this guide across all three segments, you should expect growth.

[David Williams, Equity Research Analyst at The Benchmark Company LLC]

Thanks so much.

[Abhi Khandelwal, EVP & CFO at IDEX]

Thanks for your questions, David.

[Operator]

This concludes the question and answer session. I'll turn the call to Greg Henderson for closing remarks.

[Greg Henderson, President, CEO & Member of the Board of Directors at Littelfuse]

Okay. Thank you all. I just want

[Abhi Khandelwal, EVP & CFO at IDEX]

to close. Thank you. I appreciate all of you coming

[Greg Henderson, President, CEO & Member of the Board of Directors at Littelfuse]

and asking questions and support of Littelfuse. It's early innings here for us in our strategy, but we are really excited about the future we're building in this safe and efficient energy transfer. And I look forward to future quarters where we can update you on the progress on our strategy. So thank you very much.

[Operator]

This concludes today's conference call. Thank you for joining. You may now disconnect.

Participants

Executives

• David Kelley, Head - IR
• Greg Henderson, President, CEO & Member of the Board of Directors

Analysts

• Abhi Khandelwal, EVP & CFO at IDEX
• Luke Junk, Senior Research Analyst at Robert W. Baird & Co
• Christopher Glynn, Equity Analyst - Industrials at Oppenheimer Holdings
• Saree Boroditsky, SVP - Multi-Industrials at Jefferies & Company Inc
• David Williams, Equity Research Analyst at The Benchmark Company LLC