Littelfuse(US:LFUS)2024-04-30 21:04Executive Summary & Business Outlook Q1 2024 Performance Highlights Littelfuse reported solid first-quarter results for 2024, with sales exceeding and earnings aligning with guidance. The company's diversified end markets, robust technology, and portfolio optimization helped mitigate ongoing inventory destocking. Despite a 12% decline in net sales, strong cash generation was noted - Global team delivered solid first quarter results, with sales above and earnings in-line with expectations, supported by diversified end market exposures, robust technology offering, and portfolio optimization initiatives.1 | Metric | Q1 2024 | Q1 2023 (YoY Change) | | :-------------------------- | :------ | :-------------------- | | Net sales | $535 million | Down 12% (12% organically) | | GAAP diluted EPS | $1.93 | - | | Adjusted diluted EPS | $1.76 | - | | Cash flow from operations | $57 million | - | | Free cash flow | $42 million | - | Q2 2024 Financial Guidance For the second quarter of 2024, Littelfuse anticipates net sales between $525 million and $555 million, adjusted diluted EPS in the range of $1.65 to $1.85, and an adjusted effective tax rate of approximately 23% | Metric | Q2 2024 Guidance | | :------------------------ | :------------------- | | Net sales | $525 - $555 million | | Adjusted diluted EPS | $1.65 - $1.85 | | Adjusted effective tax rate | Approximately 23% | Dividend and Share Repurchase Authorization The Board of Directors approved a new stock repurchase authorization of up to $300 million, effective from May 1, 2024, to April 30, 2027. Additionally, a cash dividend of $0.65 per share will be paid on June 6, 2024 - Board of Directors approved a new stock repurchase authorization for up to $300 million of common stock, valid from May 1, 2024, to April 30, 2027.8 - A cash dividend of $0.65 per share will be paid on June 6, 2024, to shareholders of record as of May 23, 2024.8 Company Overview Littelfuse, Inc. is a diversified, industrial technology manufacturing company with approximately 17,000 global associates across more than 20 countries, serving over 100,000 end customers in industrial, transportation, and electronics markets - Littelfuse, Inc. is a diversified, industrial technology manufacturing company empowering a sustainable, connected, and safer world.6 - The company operates in over 20 countries with approximately 17,000 global associates, serving over 100,000 end customers in industrial, transportation, and electronics end markets.6 Forward-Looking Statements & Non-GAAP Measures The press release includes forward-looking statements, which are subject to various risks and uncertainties detailed in SEC filings. It also utilizes non-GAAP financial measures, such as adjusted EPS and free cash flow, which the company believes provide useful information for understanding core operational performance and credit position by excluding items not directly related to fundamental business operations - Statements in the press release that are not historical facts constitute 'forward-looking statements' subject to risks and uncertainties that could cause actual results to differ materially.7 - The company uses non-GAAP financial measures (e.g., organic net sales, adjusted operating income, adjusted diluted EPS, free cash flow) to provide useful information to investors regarding operational performance and credit position, enhancing understanding of core financial performance and facilitating historical comparisons.1012 Condensed Consolidated Financial Statements Condensed Consolidated Balance Sheets As of March 30, 2024, total assets decreased slightly to $3,943.5 million from $3,995.3 million at December 30, 2023. Current assets saw an increase, while long-term assets like property, plant, and equipment, intangible assets, and goodwill experienced declines. Total liabilities increased, primarily driven by a significant rise in the current portion of long-term debt | (in thousands) | March 30, 2024 | December 30, 2023 | | :------------------------------------------ | :------------- | :---------------- | | ASSETS | | | | Cash and cash equivalents | $562,153 | $555,513 | | Total current assets | $1,444,111 | $1,408,600 | | Net property, plant, and equipment | $479,435 | $493,153 | | Intangible assets, net | $584,631 | $606,136 | | Goodwill | $1,294,737 | $1,309,998 | | Total assets | $3,943,461 | $3,995,275 | | LIABILITIES AND EQUITY | | | | Current portion of long-term debt | $65,824 | $14,020 | | Total current liabilities | $404,972 | $375,494 | | Long-term debt, less current portion | $800,849 | $857,915 | | Total equity | $2,471,293 | $2,480,481 | | Total liabilities and equity | $3,943,461 | $3,995,275 | Condensed Consolidated Statements of Net Income For the three months ended March 30, 2024, net sales decreased by 12.2% year-over-year to $535.4 million. This led to a significant decline in gross profit and operating income, ultimately resulting in a 45.4% reduction in net income to $48.5 million and diluted EPS falling from $3.54 to $1.93 | (in thousands, except per share data) | March 30, 2024 | April 1, 2023 | YoY Change (%) | | :------------------------------------ | :------------- | :------------ | :------------- | | Net sales | $535,385 | $609,782 | (12.2)% | | Cost of sales | $347,577 | $364,825 | (4.8)% | | Gross profit | $187,808 | $244,957 | (23.3)% | | Total operating expenses | $132,856 | $134,316 | (1.1)% | | Operating income | $54,952 | $110,641 | (50.3)% | | Income before income taxes | $55,704 | $108,903 | (48.8)% | | Income taxes | $7,252 | $20,158 | (64.0)% | | Net income | $48,452 | $88,745 | (45.4)% | | Diluted EPS | $1.93 | $3.54 | (45.5)% | Condensed Consolidated Statements of Cash Flows Net cash provided by operating activities increased to $57.2 million in Q1 2024, up from $53.4 million in Q1 2023, primarily due to inventory adjustments. Net cash used in investing activities significantly decreased to $8.5 million, as there were no major acquisitions in Q1 2024 compared to the prior year. Net cash used in financing activities increased to $33.5 million, driven by common stock repurchases | (in thousands) | March 30, 2024 | April 1, 2023 | | :------------------------------------------ | :------------- | :------------ | | Net cash provided by operating activities | $57,150 | $53,407 | | Net cash used in investing activities | $(8,483) | $(183,188) | | Net cash used in financing activities | $(33,520) | $(12,204) | | Increase (decrease) in cash, cash equivalents, and restricted cash | $6,597 | $(137,414) | | Cash, cash equivalents, and restricted cash at end of period | $563,720 | $427,525 | Segment Performance Analysis Net Sales and Operating Income by Segment In Q1 2024, total net sales declined by 12.2% year-over-year. The Electronics segment experienced an 18.8% sales decline and a 58.1% drop in operating income. The Industrial segment also saw a 12.6% sales decrease and a 72.0% decline in operating income. In contrast, the Transportation segment demonstrated resilience with a 2.2% increase in sales and an 89.9% surge in operating income | Net sales (in thousands) | 2024 | 2023 | % (Decline) / Growth | | :----------------------- | :--- | :--- | :------------------- | | Electronics | $291,105 | $358,593 | (18.8)% | | Transportation | $170,367 | $166,641 | 2.2 % | | Industrial | $73,913 | $84,548 | (12.6)% | | Total net sales | $535,385 | $609,782 | (12.2)% | | Operating income (in thousands) | 2024 | 2023 | % (Decline) / Growth | | :------------------------------ | :--- | :--- | :------------------- | | Electronics | $37,803 | $90,162 | (58.1)% | | Transportation | $16,206 | $8,532 | 89.9 % | | Industrial | $4,796 | $17,141 | (72.0)% | | Total operating income | $54,952 | $110,641 | (50.3)% | | Operating Margin | 2024 | 2023 | % (Decline)/Growth | | :--------------- | :--- | :--- | :----------------- | | Electronics | 13.0 % | 25.1 % | (12.1)% | | Transportation | 9.5 % | 5.1 % | 4.4 % | | Industrial | 6.5 % | 20.3 % | (13.8)% | Supplemental Financial Information (Non-GAAP Reconciliations) Non-GAAP EPS Reconciliation For Q1 2024, adjusted diluted EPS was $1.76, which is lower than the GAAP diluted EPS of $1.93. This difference is primarily due to a negative $0.17 impact from non-GAAP adjustments, including a non-operating foreign exchange gain and income tax adjustments | Non-GAAP EPS reconciliation | Q1-24 | Q1-23 | | :-------------------------- | :---- | :---- | | GAAP diluted EPS | $1.93 | $3.54 | | EPS impact of Non-GAAP adjustments | $(0.17) | $0.10 | | Adjusted diluted EPS | $1.76 | $3.64 | Adjusted Operating Margin and Adjusted EBITDA Reconciliation In Q1 2024, adjusted operating income was $58.8 million, resulting in an adjusted operating margin of 11.0%. Adjusted EBITDA stood at $91.3 million, with an adjusted EBITDA margin of 17.1%. Both adjusted metrics reflect a decline compared to Q1 2023 | Metric | Q1-24 | Q1-23 | | :------------------------ | :---- | :---- | | GAAP operating income | $55.0 | $110.6 | | Non-GAAP adjustments to operating income | $3.8 | $5.2 | | Adjusted operating income | $58.8 | $115.8 | | Amortization of intangibles | $15.8 | $16.9 | | Depreciation expenses | $16.7 | $17.6 | | Adjusted EBITDA | $91.3 | $150.3 | | Margin | Q1-24 | Q1-23 | | :------------------ | :---- | :---- | | Operating margin | 10.3 % | 18.1 % | | Adjusted operating margin | 11.0 % | 19.0 % | | Adjusted EBITDA margin | 17.1 % | 24.6 % | Adjusted EBITDA by Segment For Q1 2024, the Electronics segment reported Adjusted EBITDA of $57.6 million (19.8% margin), Transportation $24.9 million (14.6% margin), and Industrial $8.8 million (11.9% margin). All segments experienced a decrease in Adjusted EBITDA compared to Q1 2023 | Adjusted EBITDA (in millions) | Q1-24 | Q1-23 | | :---------------------------- | :---- | :---- | | Electronics | $57.6 | $110.0 | | Transportation | $24.9 | $19.8 | | Industrial | $8.8 | $20.5 | | Adjusted EBITDA Margin | Q1-24 | Q1-23 | | :--------------------- | :---- | :---- | | Electronics | 19.8 % | 30.7 % | | Transportation | 14.6 % | 11.9 % | | Industrial | 11.9 % | 24.3 % | Net Sales Reconciliation The overall 12% net sales decline in Q1 2024 compared to Q1 2023 was primarily organic. The Electronics segment saw a 19% organic net sales decline, and Industrial a 14% decline, while the Transportation segment achieved 3% organic net sales growth | Net sales (decline) growth (Q1-24 vs. Q1-23) | Electronics | Transportation | Industrial | Total | | :------------------------------------------ | :---------- | :------------- | :--------- | :---- | | Net sales (decline) growth | (19)% | 2 % | (13)% | (12)% | | Less: Acquisitions | — % | — % | 1 % | — % | | Less: FX impact | — % | (1)% | — % | — % | | Organic net sales (decline) growth | (19)% | 3 % | (14)% | (12)% | Income Tax Reconciliation The adjusted effective tax rate for Q1 2024 was 19.3%, a slight increase from 18.8% in Q1 2023. Adjusted income taxes for the quarter amounted to $10.6 million | Income tax reconciliation | Q1-24 | Q1-23 | | :------------------------ | :---- | :---- | | Income taxes | $7.3 | $20.2 | | Effective rate | 13.0 % | 18.5 % | | Non-GAAP adjustments - income taxes | $3.3 | $0.9 | | Adjusted income taxes | $10.6 | $21.1 | | Adjusted effective rate | 19.3 % | 18.8 % | Free Cash Flow Reconciliation Free cash flow significantly increased to $41.6 million in Q1 2024 from $27.7 million in Q1 2023. This improvement was driven by higher net cash provided by operating activities and reduced purchases of property, plant, and equipment | Free cash flow reconciliation | Q1-24 | Q1-23 | | :---------------------------- | :---- | :---- | | Net cash provided by operating activities | $57.1 | $53.4 | | Less: Purchases of property, plant and equipment | $(15.5) | $(25.7) | | Free cash flow | $41.6 | $27.7 | Consolidated Debt and Leverage Ratio As of March 30, 2024, consolidated total debt was $866.7 million, with net debt reported at $712.9 million. The consolidated net leverage ratio stood at 1.4x, which is well below the credit agreement's covenant limit of 3.50:1.00 | Consolidated Total Debt | As of March 30, 2024 | | :---------------------- | :------------------- | | Consolidated Total Debt | $866.7 | | Net debt | $712.9 | | Consolidated EBITDA | Twelve Months Ended March 30, 2024 | | :------------------ | :--------------------------------- | | Net Income | $219.1 | | Interest expense | $39.8 | | Income taxes | $56.2 | | Depreciation | $70.7 | | Amortization | $64.8 | | Consolidated EBITDA | $501.0 | - Consolidated Net Leverage Ratio was 1.4x, significantly below the Credit Agreement's covenant limit of 3.50:1.00.31