Littelfuse, Inc.

today are Greg Henderson, President and CEO, and Abhi Kendawal, Executive Vice President and CFO. This morning, we report a result for our second quarter, and a copy of our earnings release and slide presentation is available in the investor relations section of our website. A webcast of today's conference call will also be available 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 risk and uncertainty. Please review today's press release and our forms 10-K and 10-Q for more detail about important risk that could cause an actual result 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 measures is provided on our earnings release available in the investor relations section of our website. I will now turn the call over to Greg.

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 newest growth and operational enhancement opportunities. An important milestone in this process was the hiring of our new CFO, Abhi Khandewal, to the quarter. Abhi joins us from IH Corporation, and 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 Lone Tooth. 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. 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. Supporting this, our second quarter book-to-bill again tracked above 1, while our bookings exited the quarter at the highest run rate since the first half of 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. 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 markets, and we're 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 5-volt to higher-power 48-volt capabilities for single-cable combined power connectivity interfaces. 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, our 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. 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 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 expand our go-to-market strategy. I'm pleased to announce several new data center design wins in the second quarter, with market leaders ranging from a 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 continuing 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 want to design with a leading player in green hydrogen, where we will provide high-speed, high-voltage industrial fuses. Our solution enables pairing to the grid and plays a critical role in reliable renewable energy transfer. We also work with a solar supplier to develop a next-gen micro-inverter. Our solution enables compatibility with higher-power solar panels and increased battery integration. Broadly, we observed strong renewables and good 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, 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're 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 quarters 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 to 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 Avi.

Thank you, Greg, and to everyone joining us today. I'm excited to join this great organization as we scale our business with the next growth phase of Lilfeus. One month into the role, I'll be 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 immediate long-term returns. With that, please turn to slide 7 to start with details on our second quarter results. As Greg mentioned, we exceeded the height 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 million, up 10% in total and up 6% organic. The Dortmund acquisition contributed 2% to sales growth, while FX was a 1% tailgate. Adjusted EBITDA margin finished at 21.4%, up 280 basis points. 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. The second quarter adjusted diluted earnings was $2.85, up 45%, and exceeded the high NOPA guidance reach. This reflects solid sales growth across segments, as well as margin expansion across 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 in capital allocation. We delivered strong cash generation in the second quarter. Operating cash flow was 82 million, and we generated $73 million in free cash flow. Year to date, We have generated $150 million of free cash flow, yielding a strong 114% conversion rate. We ended the quarter with $685 million of cash in hand and net debt to EBITDA leverage of 1.1 times. In the quarter, we returned $70 million to shareholders via our cash dividend. We will continue to prioritize our cash flow for organic investments and strategic acquisitions. We will also continue to return capital to our shareholders to our dividend as well as strategic share about that. Please turn to slide nine for our segment highlights. Starting with the electronics product segment, sales for the segment were up 10% versus last year and up 4% organically. The Dortmund acquisition contributed 4%, while FX contributed 1.2 growth. Sales across passive products were up 14% organically, while semiconductor products declined 5% before. 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 expulsion, we observed continued soft power semiconductor demand that offset improved protection product volumes. Adjusted EBITDA margin of 21.6% was flat versus the prior year. 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 product segment on slide 10. Tagging sales increased plus 6%, as organic sales increased 4% for the quarter, while FX contributed 2 points to growth. In the passenger car business, sales increased 3% organically. Passenger car sales increased across North America, Europe, and China, as we benefited from shared gains and growth in global car sales. 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 30.5% was up 610 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 product segment sales grew 17% organically for the quarter. Second quarter sales benefited from strong grid storage, renewable, data center, industrial safety, and HVAC growth. Adjusted EBITDA margin was 22.1% in the quarter of 610 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. We expect third quarter sales in the range of 610 to 630 million, which assumes 6% organic growth at the midpoint and two points of growth stemming from our growth and 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 $0.12 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 $0.08 headwind to EPS versus the prior year. Moving to slide 14, let me add some additional details on our full year 2025. 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 to represent a 1% tailwind to sales and a 14 cent benefit to EPS. On other modeling items, we're assuming $58 million in amortization expense and $35 million in interest expense, about two-thirds of which We expect to offset from interest income from our cash investment strategies. We're estimating a full-year tax rate between 23 and 25%. We also expect to spend $9 to $95 million in capital expenditures. 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, Hopper, please open the call for Q&A.