Littelfuse(LFUS) - 2025 Q4 - Earnings Call Transcript

Financial Data and Key Metrics Changes - The company reported fourth quarter revenue of $594 million, representing a 12% year-over-year increase and a 7% organic growth, with the acquisition of Basler contributing 3% to sales growth and foreign exchange providing a 2% tailwind [14] - Adjusted EBITDA margin improved to 20.5%, up 480 basis points, reflecting operational leverage [14] - Fourth quarter adjusted diluted earnings were $2.69, with operating cash flow of $139 million and free cash flow of $120 million [14] Business Line Data and Key Metrics Changes - The electronics product segment saw sales increase by 21%, driven by strong organic sales in passive products and growth in protection semiconductor products, with an adjusted EBITDA margin of 23.7% [16] - The transportation product segment experienced a 1% increase in sales year-over-year, but a 1% decline organically, with adjusted EBITDA at 16% [17] - The industrial products segment reported a 4% increase in sales, but a 1% organic decline, with adjusted EBITDA margin at 16.2% [18] Market Data and Key Metrics Changes - The company noted double-digit revenue growth in data center, grid and utility infrastructure, and renewables markets, while automotive grew mid-single digits despite declining global vehicle production [5] - The company anticipates a strong backlog and significant momentum entering 2026, with first quarter sales expected to be in the range of $625 million to $645 million, assuming 7% organic growth at the midpoint [19] Company Strategy and Development Direction - The acquisition of Basler Electric is expected to enhance high-power capabilities and expand the company's position in key growth markets, including grid and utility infrastructure and data centers [4] - The company is focusing on enhancing operational excellence and optimizing its semiconductor business, particularly in high-value and high-growth applications [11] - The company plans to host an Investor Day on May 14th to provide a detailed review of its strategy and long-term financial goals [4] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about broad-based industrial recovery into 2026, with strong momentum in diversified industrial segments and industrial automation [28] - The company is focused on maintaining price-cost neutrality amid metals inflation, with strategies in place to manage supply chain costs and pass through higher costs to customers [33][35] - Management highlighted the importance of deeper customer conversations and the potential for significant growth in the data center market due to evolving architectures [24] Other Important Information - A non-cash goodwill impairment charge of $301 million was recorded for the IXYS and Dortmund acquisitions, reflecting weaker sales and profitability than originally expected [15] - The company expects the Basler acquisition to contribute between $130 million and $135 million in revenue and 10-15 cents of adjusted earnings in 2026 [13] Q&A Session Summary Question: What are the key incremental drivers in the data center market? - Management noted that design wins in the data center market more than doubled in 2025, with significant opportunities arising from higher voltage systems [23][24] Question: Can you elaborate on the broader industrial recovery? - Management indicated that bookings in Q4 were up 20%, reflecting strong momentum across the industrial market, particularly in diversified industrial segments [31] Question: How is the company managing metals inflation? - Management stated that they are focused on supply chain opportunities and pricing strategies to maintain price-cost neutrality, factoring current commodity prices into their guidance [33][35] Question: What is the cultural fit and integration process with Basler? - Management expressed excitement about Basler's technical capabilities and established go-to-market position in the utility industry, viewing it as a growth synergy [50][51]