Littelfuse, Inc.

Good day, everyone, and welcome to the Little Fuse 4th Quarter 2021 Earnings Conference Call. Today's call is being recorded. At this time, I will turn the call over to the Head of Investor Relations, Tricia Tuntland. Please proceed.

Good morning, and welcome to the Little Fuse 4th Quarter 2021 Earnings Conference Call. With me today are Dave Heinzman, President and CEO, and Mino Sethna, Executive Vice President and CFO. Yesterday, we reported results for our fourth quarter. Any 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 on our website. Please advance to slide two for our disclaimers. Our discussions today will include forward-looking statements. These forward-looking statements may involve significant risks and uncertainties. Please review yesterday's press release and our Forms 10-K 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. A reconciliation of these non-GAAP financial measures to the most comparable GAAP measure is provided in our earnings release available in the Investor Relations section of our website. I will now turn the call over to Dave.

Thank you, Tricia. Good morning and thanks for joining us today. Let's start with slide four. Continuing our momentum from prior quarters, our global teams delivered another quarter of strong performance to finish the year. We achieved record fourth quarter sales of $553 million, up 38% versus last year, an adjusted EPS of $3.16, an increase of 42% year-over-year. We finished 2021 with record annual revenue of $2.1 billion, up 44% compared to prior year, and recorded adjusted EPS of $13.19, an increase of 106% year-over-year. Our teams achieved outstanding results driven by superior execution and demand creation across the industrial, transportation, and electronics end markets we serve. I'd like to thank all of our associates around the world for their unwavering commitment and hard work to significantly grow our company by winning new business and meeting customer demand during these challenging times. 2021 was truly an exceptional year for Little Juice. MENA will provide additional color on our strong financial results. Our results and successes during the year reflect both the strength of our team's execution and the power of our strategy, which is shown on slide five. Over the last decade, we have positioned our company within the long-term structural growth themes of sustainability, connectivity, and safety. The ever-increasing complexity of applications surrounding these themes continues to drive greater demand for our reliable products, and in turn, a higher level of product content. During 2021, we advanced our strategic business initiatives, driving content and share gains in high-growth markets, both organically and through acquisitions. We completed two strategic acquisitions during the year, adding approximately $300 million in annualized sales. One year into our five-year growth strategy, we are well on our way to delivering sustained double-digit revenue growth, best-in-class profitability, and top-tier shareholder returns. Moving on to performance within our segments. During 2021, our electronics product segment drove strong growth across all regions. Revenue was up 39% and 37% organically compared to 2020. Our performance was driven by new business and our seamless execution to keep operations up and running and capacity additions coming online to support customer demand. Globally, we saw strength across a broad range of applications and in markets, including data center, telecom infrastructure, factory and building automation, appliances, and automotive electronics driven by EV applications. We did see significant cost increases related to materials and freight, but were able to mitigate much of the impact with our discipline pricing strategy and productivity improvements. Distribution partners have slowly built inventory, and levels are now appropriately matched to end market demand. We also have seen electronics-in customers and contract manufacturers build inventory. However, bookings remain strong across all regions, and exiting the fourth quarter, our electronics book-to-bill remained above 1%. We expect ongoing healthy in-market demand driven by the amplified themes of electronification, energy efficiency, automation, and connectivity. Moving forward, we are renaming our automotive product segment and will refer to it as our transportation product segment. The term transportation represents a more comprehensive description of our broad range of products and the applications and in-markets we serve. The Carling Technologies acquisition, which we have discussed with you before, has meaningfully increased our presence in commercial vehicles, which now represents about half our segment revenue. We achieved strong growth in the full year of 2021, despite the challenging supply chain environment that impacted the passenger and commercial vehicle markets. Our transportation businesses also experienced significant metals and freight cost headwinds, We've been taking pricing actions to mitigate the cost increases and are implementing additional pricing actions, as well as continuing to drive productivity improvements across the business. Thanks to the execution by our global teams, revenue from our passenger vehicle business grew 25% versus 2020. Our global car bill was largely flat. Our significant growth above market was driven by continued content growth in electric vehicles. the favorable mix of higher-end vehicles, market share gains, and some inventory build at OEMs and Tier 1s, which we have commented on through 2021. Revenue for our commercial vehicle business grew 58% versus 2020. Demand for our commercial vehicle products is driven by strength in material handling, heavy-duty truck and bus, construction and agriculture equipment markets, as well as some inventory build at our customers. Our completion of the Carling Technologies acquisition on November 30th contributed $15 million to our full-year revenue. It is a pleasure to welcome the Carling employees to the Littlefuse team, and we look forward to their contributions as we continue to execute our long-term growth strategy. Turning to slide six, a combination of our companies significantly expands our technologies and capabilities, enabling critical scale in the commercial vehicle space. Carling manufactures market-leading electromechanical and electronic switching and circuit breaker technologies. They also strengthen our engineering, design, and test capabilities. The addition of Carling more than doubles the size of our commercial vehicle business and our complimentary customers, channels, and products will accelerate our growth in strategic markets, including heavy-duty truck and bus, material handling equipment, construction equipment, and agriculture machinery. Carling has a strong global presence in these markets, as well as in the telecom infrastructure and marine markets. The integration of Carling is off to a strong start. Our combined teams are working closely together. We are already seeing opportunities for joint new product design as well as sales synergies. We look forward to leveraging our respective strengths. Looking ahead, our overall transportation bookings are healthy in all regions. We see a number of ongoing content growth opportunities across the end markets we serve. and expect to continue to perform above the market for the year. That said, ongoing chip and other component shortages at our customers, as well as the timing of customer inventory burns, can cause quarter-to-quarter variations. We expect our commercial vehicle strategic markets to remain healthy. For the first quarter, we expect car build to be flat sequentially and modestly down year-over-year. For the full year, we expect car builds of approximately 80 million cars. Turning to our industrial product segment, we achieved revenue growth of 124% and 27% organically compared to 2020. Our performance was an outcome of our global team's ability to serve our customers and win new business to drive organic growth. demand for our broad range of products was driven by renewable energy led by solar and energy storage systems, HVAC, and data centers. Our performance also includes a meaningful revenue contribution of approximately $100 million from our successful acquisition of Heartland Controls. We are seeing early successes driven by our combined capabilities and complementary product portfolios. In 2022, we expect our strategic markets, renewables, EV infrastructure, HVAC, and general industrials to remain strong. This sustained growth will be driven by a more sustainable ecosystem. For example, solar and wind energy and energy storage systems that enable lower carbon emissions, the ongoing proliferation of electric vehicles and charging stations. more efficient climate control units, increasing requirements for electrical safety, and the rising demand for factory and process automation. Now let's move on to highlights and design wins in the end markets we serve. We are building forward momentum with our investments for best-in-class growth. We are advancing our customer-driven innovation, digital presence, and e-mobility resources and capabilities. 2021 proved to be a year of significant new business opportunities and design inactivity, as our engineering teams continued to work closely and effectively with our customers in a hybrid work environment. Our joint collaboration drove significant new business growth. Within our industrial end markets, on slide 7, sustainability and safety are key drivers of our growth strategy. Throughout 2021, we captured new business across our regions for a broad range of renewable energy applications and for energy storage systems. In addition, the continued focus on more efficient HVAC systems proved a major source of our design wins. We benefited from the integration of Heartland Control's acquisition. We have already seen successes leveraging Heartland products with Littlefuse customers beyond HVAC. For instance, selling into general industrial applications related to food and beverage safety and selling little-fused products to heartland customers. We also secured several new business wins given the emphasis on Industry 4.0 and a push towards industrial automation and energy efficiency for industrial applications. Furthermore, our ability to deliver innovative products to meet tighter safety requirements for general industrial and food and beverage applications drove many new design wins during the year. Turning towards transportation and markets on slide 8, we continue to expand our e-mobility investments to broaden our capabilities and high-voltage product offering. The ongoing electronification and electrification of applications drove significant design activity at business winds during 2021. Across all of our regions, the traditional vehicle manufacturers to newer EV-only entrants, we saw a pipeline of opportunities and numerous e-mobility-related design wins. Battery management systems for EVs were a major source of wins during the year, and we saw design wins for EV battery conditioning. With the growth in e-mobility and robust design activity, we remain well positioned for on-vehicle charging and EV charging infrastructure applications and saw a wide range of wins throughout the year. Additionally, we are seeing EV-related design wins in the commercial vehicle space. We had numerous design wins for manufacturers of electric trucks and buses and secured design wins in the agriculture equipment space. We continued to build on our solid customer relationships and material handling space and had several wins in this high-growth market. With the addition of Carling products, we were also better positioned to accelerate design wins and growth in our strategic commercial vehicle markets. The continued electronification of vehicles, both within traditional passenger vehicles and EVs, are driving increased needs for automotive electronics. which remains a great source of design wins. In 2021, we saw wins across a wide range of applications, from vehicle lighting to infotainment and navigation systems to components used in window, door, and seat motor applications. ADOT's applications also drove additional business wins in vehicle cameras and dashboard systems. On slide 9, during 2021, we saw a robust pipeline of diverse design lens across a spectrum of electronics applications, largely driven by the need for ongoing greater connectivity as design engineers qualify new products. Our differentiated, far-reaching go-to-market strategy enables us to secure new business wins from appliances, building and home automation, to battery management systems within tablets and notebook computers, to 5G infrastructure. Data centers and cloud storage also continue to be a major source for design activity as online gaming and streaming services drove demand. In addition, to better serve our strategic partners, we accelerated advancements in our digital presence, giving evolving user expectations and hybrid work environments. This multi-year journey will further differentiate our go-to-market strategy and help us better serve our customers. Our pipeline of new business opportunities and health is healthy across the hydro, industrial, transportation, and electronics end markets we serve. We are confident in our ability to secure these opportunities based on our innovative, reliable products, engineering and technical capabilities, and customer responsiveness. The organic growth from these efforts, coupled with strategic acquisitions to enhance and sustain our organic growth, positions us well to continue expanding our market presence. Finally, on slide 10, I would like to highlight our commitment to sustainability. Our first annual sustainability report, published in October, communicates our progress. Environmentally, our core products empower the sustainability megatrend by enabling our customers' applications focused on a more sustainable, connected, and safer world. We also have goals related to our continued efforts focused on our own footprint, such as our goal to achieve greenhouse gas reduction of 38% by 2035. And we continue to invest in programs to further our energy conservation initiatives. Socially, we have a number of programs addressing human capital management and the health and well-being of our global associates, such as our Zero Injury Workplace Goal. We also have goals to expand gender and minority representations and have launched various development programs to improve our female leadership position and initiatives to attract diverse talent. From a government's perspective, we continue to refresh our board composition with members who bring fresh perspectives and help ensure continued diversity on our board, supported by longer-serving directors who bring continuity and experience to our business and the end markets we serve. In addition, we have very strong global ethics and compliance policies and programs. We are focused on the long-term value of a robust ESG strategy for our business and for all stakeholders, and look forward to continuing to share our progress. I will now turn the call over to Meenal to provide additional color on our financial performance and outlook.