Littelfuse(US:LFUS)2021-07-28 19:27Financial Data and Key Metrics Changes - The company reported record revenues of $523 million for Q2 2021, representing a 13% sequential growth and an 11% increase excluding the Hartland acquisition [23][7] - Adjusted operating margins were 19.5%, up 240 basis points sequentially, while GAAP operating margins were 18.4% [24] - Adjusted diluted EPS was $3.41, reflecting a 28% sequential increase [24][25] - Operating cash flow for the quarter was $76 million, with free cash flow at $58 million [27] Performance by Business Segment - Electronics Product Segment: Sales reached $325 million, growing 14% sequentially, with operating margins of 22.8%, up 340 basis points [30] - Automotive Product Segment: Sales were $133 million, up 4%, with operating margins at 14.4%, down 140 basis points sequentially [30] - Industrial Products Segment: Sales grew 33% sequentially to $65 million, with operating margins of 12.9%, up 570 basis points [32] Market Data and Key Metrics Changes - Strong demand was noted across electronics, transportation, and industrial end markets, with ongoing supply chain disruptions affecting lead times [8][10] - The automotive segment is experiencing content gains driven by electric vehicles and a favorable mix of higher-end vehicles, despite ongoing material shortages [12][14] Company Strategy and Industry Competition - The company is focused on adding capacity, driving productivity improvements, and managing supply chain constraints while executing its five-year strategy [9][10] - The management emphasized the importance of maintaining strong customer relationships and leveraging technical expertise to secure design wins across various markets [17][21] Management's Comments on Operating Environment and Future Outlook - Management acknowledged the challenges posed by rising input costs, which are now impacting margins by 350 to 400 basis points [25] - The outlook for Q3 2021 anticipates sales in the range of $510 million to $524 million, with expectations of a modest decline in automotive sales due to supply chain issues [33][34] - The company expects full-year adjusted operating margins to remain in the targeted range of 17% to 19% [36] Other Important Information - A 10% increase in the quarterly dividend rate to $0.53 was announced, aligning with the company's capital allocation objectives [28] - The company continues to navigate supply chain-related complications and has initiated pricing actions to mitigate cost increases [25][26] Q&A Session Summary Question: Overall tightness in the electronic supply chain and pricing strategy - Management noted that while there are supply constraints, they are working to pass along increased costs to customers and have had reasonable success in doing so [42][45] Question: Automotive content growth and production capabilities - Management expects continued growth in automotive content driven by electrification trends and higher-end vehicle production, although there may be a shift back to lower-content vehicles in the future [46][48] Question: Channel inventory levels and distribution dynamics - Distribution partners are unable to build inventory due to robust sell-through, while some OEMs are attempting to build inventory [53][55] Question: Pricing dynamics in automotive contracts - Most automotive contracts are long-term, making it challenging to pass through price increases quickly, but negotiations for new contracts are yielding more favorable conditions [58][60] Question: Automotive outgrowth and inventory trends - Management indicated that automotive outgrowth is currently above long-term expectations, driven by strong demand for electric vehicles and higher-optioned vehicles [68][69] Question: Stock split considerations - The company has discussed the potential for a stock split with the Board, but it is not currently a priority as the investor base is primarily long-term [112][113]