Khandelwal also discussed a non-cash goodwill impairment charge of $301 million recorded in the fourth quarter related to the IXYS and Dortmund acquisitions . He said the impairment resulted from the company’s annual impairment testing and “reflects weaker sales and profitability than original expectations amid persistent soft market conditions.”Profitability improved as adjusted EBITDA margin was 20.5% , up 480 basis points . Adjusted diluted earnings per share were $2.69 . Khandelwal said the margin perfo ...

Core Thesis - Littelfuse, Inc. is being reexamined for its inclusion in QVI's Real-Time Stock Picks due to concerns over its weakening financial performance despite a strong industry position [2][4]. Company Overview - Littelfuse, Inc. operates in the information technology sector as a small-cap electronics manufacturer, supplying critical components such as fuses, sensors, switches, relays, and power modules across various segments including electronics, transportation, and industrial [2]. - The company was added to QVI's portfolio in 2022 at a cost basis of $199.54 per share, with its stock trading at $253.56 as of December 1st [2]. Financial Performance - Revenue growth has lagged behind the S&P 500 over both one-year and five-year periods, raising concerns about management execution [3]. - Littelfuse's net margin is in the mid-single digits, indicating structurally lower gross margins compared to the broader market [3]. - Returns on equity and invested capital have fallen below acceptable thresholds, with ROIC not exceeding the cost of capital, suggesting inefficiencies in capital deployment [4]. - Owners' earnings have underperformed expectations, showing negative EPS growth over the past year and only low single-digit growth over five years, although free cash flow growth improves long-term owners' earnings [4]. Market Position and Valuation - The company has a century-long operating history and strong customer relationships, which contribute to its narrow moat rating by Morningstar [3]. - QVI maintains a bullish view on the company's value proposition due to the resilience of technology-oriented component suppliers, despite the deteriorating fundamentals [4].

Core Insights - Littelfuse reported strong Q2 2025 earnings, with GAAP revenue of $613.4 million and Non-GAAP EPS of $2.85, both exceeding Wall Street expectations [1][2] - Year-over-year, GAAP revenue grew by 9.8% and Non-GAAP EPS increased by 45%, indicating robust financial performance [1][2] - The company is focusing on strategic priorities such as acquisitions and innovation to drive growth [1][4] Financial Performance - Q2 2025 Non-GAAP EPS was $2.85, surpassing estimates of $2.33 and up from $1.97 in Q2 2024, reflecting a 45% increase [2] - GAAP revenue reached $613.4 million, exceeding estimates of $576.7 million and up from $558.5 million in the previous year, marking a 9.8% increase [2] - GAAP operating margin improved to 15.1%, up from 11.7% year-over-year, indicating enhanced profitability [2] Business Overview - Littelfuse specializes in circuit protection and power management solutions, with a product portfolio that includes fuses, semiconductors, sensors, and relays [3] - The company serves various markets, including industrial, transportation, and consumer electronics, ensuring safety in electrical systems [3] Strategic Focus - The company is pursuing targeted acquisitions and expanding its technology capabilities while focusing on innovation in circuit protection and power semiconductors [4] - Key growth areas include electrification and data center markets, supported by significant R&D investment of $107.8 million in FY2024 [4] Segment Performance - The Electronics segment saw a 9.8% sales increase, with organic growth of 4% and a steady operating margin of 14.9% [5] - The Transportation segment's revenue rose by 6.2%, with operating income climbing 84.3% and margin expanding to 15.6% [6] - The Industrial segment delivered the strongest growth at 17.2%, with operating margin nearly doubling to 19.2% due to demand in renewable energy and data centers [7] Recent Developments - Littelfuse integrated facilities like Dortmund Fab to enhance power semiconductor production and reported a $10.4 million foreign exchange loss [8] - Acquisitions contributed significantly to growth in the Electronics segment, with ongoing integration efforts being crucial for future productivity [8] Future Outlook - Management projects Q3 FY2025 net sales between $610 million and $630 million, with adjusted EPS guidance of $2.65 to $2.85 [11] - The company increased its quarterly dividend to $0.75 per share, reflecting confidence in its financial health [12]