Q1 2024 Littelfuse Inc Earnings Call

Operator: Good day everyone, and welcome to the Littelfuse first quarter 2024 earnings conference call. Today's call is being recorded. At this time, I will turn the call over to the head of investor relations, David Kelly. Please proceed.

Good day, everyone and welcome to the little fused first quarter 2024 earnings Conference call. Today's call is being recorded at this time I will turn the call over to the head of Investor Relations David Kelley. Please proceed.

David Kelly: Good morning, and welcome to the Littelfuse First Quarter 2024 Earnings Conference. With me today are Dave Heinzmann, President and CEO, and Meenal Sethna, Executive Vice President and CFO. Yesterday, we reported results for our first quarter, and a copy of our earnings release and slide presentation is available in the investor relations section on our website. A webcast of today's conference call will also be available on our website. Please advance to slide 2 for our disclaimer.

David Kelly: Good morning, and welcome to the little fused first quarter 2024 earnings conference call.

David Kelly: With me today are Dave Heinzmann, President and CEO, <unk>, <unk> executive Vice President and CFO.

David Kelly: Yesterday, we reported results for our first quarter and a copy of our earnings release and slide presentation.

David Kelly: Is available in the Investor Relations section on our website.

David Kelly: Webcast of today's conference call will also be available on our website. Please advance to slide two far disclaimers.

David Kelly: Our discussions today will include four looking statements that may involve significant risks and uncertainty. Please review yesterday's press release and our forums, 10K and 10Q, for more detail about important risks that could cause actual results 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 measure is provided in our earnings release, available in the investor relations section of our website. I will now turn the call over to Dave.

David Kelly: Our discussions today will include forward looking statements. These forward looking statements may involve significant risks and uncertainties.

David Kelly: These review Yesterdays press release, and our Form 10-K, and 10-Q for more detail about important risks that could cause actual results to differ materially from our expectations.

David Kelly: We assume no obligation to update any of this forward looking information.

David Kelly: Also our remarks today refer to non-GAAP financial measures a reconciliation.

David Kelly: <unk> of these non-GAAP financial measures to the most comparable GAAP measure is provided in our earnings release available on the Investor Relations section of our website.

David Kelly: I will now turn the call over to Dave.

Dave: Thank you David Good morning, and thanks for joining us today, let's start with highlights on slide four the first quarter of 2024 product continuation of several of the themes. We previously discussed and expected to continue into the new year.

David W. Heinzmann: David, good morning, and thanks for joining us today. Let's start with the highlights on slide four.

David W. Heinzmann: The first quarter of 2024 brought a continuation of several of the themes we previously discussed and expected to continue into the new year. We continue to see meaningful new business opportunities and design activity across our diverse set of end markets. Our customers remain committed to advancing sustainability, connectivity, and safety themes, and we are helping them drive innovations across a broad base of applications. Our experienced global team continues to deliver solid execution amid an ongoing challenging macro environment, following a record cash flow year in 2023.

David W. Heinzmann: We continue to see meaningful new business opportunities and design activity across our diverse set of end markets.

David W. Heinzmann: Our customers remain committed to advancing sustainability connectivity and safety themes.

David W. Heinzmann: We're helping them drive innovations across a broad base of applications.

David W. Heinzmann: Our experienced global team continues to deliver solid execution amid an ongoing challenging macro environment.

David W. Heinzmann: Following our record cash flow year in 2023, our strong first quarter cash generation reflects our disciplined operating model.

David W. Heinzmann: Our strong first quarter cash generation reflects our disciplined operating, Finally, our balance sheet and significant financial capacity provide us with the continued flexibility to enhance our long-term prospects. Our first-quarter results reflect a resilient business model, ongoing diversification initiatives, and strong equity. We delivered first quarter sales above and earnings within our prior guidance. I want to thank our global teams for their continued hard work and commitment to serving customers and growing our business.

David W. Heinzmann: Finally, our balance sheet and significant financial capacity provide us with the continued flexibility to enhance our long term positioning.

David W. Heinzmann: Our first quarter results reflect our resilient business model ongoing diversification initiatives and strong execution.

David W. Heinzmann: We delivered first quarter sales above and earnings within our prior guidance range.

Speaker Change: I want to thank our global teams for their continued hard work and commitment to serving customers and growing our business.

David W. Heinzmann: With the dynamic environment we experienced in 2023 continuing into 2024, I wanted to provide a brief update across our business. In the first quarter, we continued to see channel and OAM inventory reduction, and also some areas of increased market weakness across our business. Regarding our electronic segment distribution exposure, while still elevated, we saw consistent channel inventory reductions throughout the quarter, as we have discussed during prior earnings calls. We are in an elongated electronic de-stocking cycle, and we continue to see signs of ongoing inventory reductions at EMS and in customers. However, we see emerging signs that suggest we are potentially nearing an inflection point.

Dave: With a dynamic environment, we experienced in 2023 continuing into 2024 I wanted to provide a brief update across our businesses.

David W. Heinzmann: Our passive electronics business benefited from an uptick in order rates late in the first quarter and entered the second quarter with a more typical backlog and a book-to-bill ratio above 1, relating to our semiconductor exposure within the electronic segment. We are seeing weakening industrial demand and ongoing softness across consumer applications. We expect the softer industrial outlook will impact our semiconductor sales through the next couple of quarters. However, despite near-term trends, our electronics segment remains well-positioned to capitalize on strong, long-term growth drivers, and our portfolio diversification initiatives have driven improved profitability relative to prior trough cycle levels. Moving on, we have the transportation section.

Dave: In the first quarter, we continued to see channel and OEM inventory reductions and also some areas of expanded end market weakness across our businesses.

Regarding our electronics segment distribution exposure, while still elevated we saw consistent channel inventory reductions throughout the quarter.

Dave: As we have discussed prior during prior earnings calls.

We've been in an elongated electronics destocking cycle, and we continue to see signs of ongoing inventory reductions at EMF and <unk> customers.

Dave: However, we see emerging signs that suggest we are potentially nearing an inflection point.

Dave: Our passive electronics business benefited from an uptick in order rates late in the first quarter.

And entered the second quarter with a more typical backlog and a book to bill above one.

Dave: Regarding our semiconductor exposure within the electronics segment, we've seen weakening industrial demand and ongoing softness across consumer applications.

Dave: We expect the softer industrial outlook will impact our semiconductor sales through the next couple of quarters.

Dave: Despite near term trends, our electronics segment remains well positioned to capitalize on strong long term growth drivers and our portfolio diversification initiatives have driven improved profitability relative to prior trough cycle levels.

Dave: Moving on to our transportation segment.

David W. Heinzmann: Our passenger vehicle exposure continues to benefit from our balanced product capabilities and broad technology leadership. We are seeing solid interest in our core product; customers seek to better align with consumer demand for internal combustion and hybrid vehicles. In China, we continue to show solid traction and low voltage applications for high-growth local OEMs. The Chinese auto industry is aggressively delivering vehicle advancement. We are benefiting via strong content for vehicle expansion in the region.

Dave: Passenger vehicle exposure continues to benefit from our balanced product capabilities and broad technology leadership.

Dave: We're seeing solid interest in our core products as customers seek to better align with consumer demand or internal combustion and hybrid vehicles.

Dave: In China, we continue to show solid traction in low voltage applications for high growth local Oems.

Dave: The China auto industry is aggressively delivering vehicle advancements we are benefiting via a strong content per vehicle expansion in the region.

David W. Heinzmann: Globally, we believe customers are aiming to balance near-term consumer preferences with long-term electrification plans, and we continue to generate solid design wins with our high-voltage fuses and current, regardless of powertrain mix. As for our commercial vehicle exposure, we are well positioned to support our global passenger vehicle customers with innovative products that will drive long-term growth.

Dave: Globally, we believe customers are aiming to balance near term consumer preferences with long term electrification plans and we continue to generate solid design wins with our high voltage fuses and currencies.

Dave: Regardless of powertrain mix, we are well positioned to support our global passenger vehicle customers with innovative products that will drive long term growth.

Dave: Regarding our commercial vehicle exposure.

Dave: We're also seeing ongoing distribution channel inventory reductions yet our commercial vehicle initiatives are driving cost improvements while pricing actions are also bearing fruit ultimately benefiting our Q1 results.

David W. Heinzmann: We are also seeing ongoing distribution channel inventory reductions. Yet, our commercial vehicle initiatives are driving cost improvement while pricing actions are also bearing fruit, ultimately benefiting our Q1 results. Taking a step back, we are making solid progress with our previously disclosed transportation segment action, as our product line initiatives and cost structure improvements help to drive sequential margin improvement in the first quarter. Finally, with our industrial segment, we're seeing softer-than-expected in-market demand, which we believe will continue through the next couple of quarters. In the first quarter, we saw incremental in-demand weakness led by MRO and construction, charging infrastructure, and factory automation.

Dave: Taking a step back we're making solid progress with our previously disclosed transportation segment actions as our product line initiatives and cost structure improvements helped to drive sequential margin improvement in the first quarter.

Dave: Finally, with our industrial segment, we're seeing softer than expected end market demand, which we believe will continue through the next couple of quarters in the first quarter, we saw incremental in demand weakness led by MRO and construction charging infrastructure and factory automation applications.

David W. Heinzmann: Demand is mixed for renewable applications, with energy storage strong across all regions, while the solar market softened in the quarter. Yet, industrial safety applications continue to show signs of growth, and we are seeing early indications of dropping residential HVAC demand. Meenal will provide more segment-level details shortly.

Dave: Demand is mixed for a renewable applications with energy storage strong across all regions, while the solar market softened in the quarter.

Dave: Yet in industrial safety applications continue to show signs of growth.

Dave: We're seeing early indications of trough in residential HVAC demand.

Speaker Change: Meaning we will provide more segment level details shortly.

David W. Heinzmann: Now let's turn to our In-Markets and Design Act. Moving to slide six, an electronic design activity. We continue to be a leading technology enabler for a broad base of customers, and we are seeing new product launches gain traction as customer design activities accelerate. In the quarter, we secured a meaningful medical win with our custom power semiconductors for our customer in China. We also run business for multiple appliance customers in China for both fuses and switches. We delivered a semiconductor WIN for a space-related communications application.

Speaker Change: Now, let's turn to our end market and design activity.

Dave: Moving to slide six and electronics design activity, we continue to be a leading technology enabler for our broad base of customers.

Dave: We are seeing new product launches gained traction as customer design activity is accelerating.

Dave: In the quarter, we secured a meaningful medical win with our custom power semiconductors, where a customer in China.

Dave: We also won business, where multiple appliance customers in China for both users and switches.

Dave: We delivered a semiconductor win for our space related communications application.

David W. Heinzmann: We also run business for data server power supplies for a customer in Taiwan. Finally, we delivered a meaningful telecom win in India that will utilize our core circuit protection offerings. Beyond Near-Term Trends

Dave: We also won business where data server power supplies for a customer in Taiwan.

Dave: We delivered a meaningful telecom win in India that will utilize our core circuit protection offering.

Dave: Beyond near term trends structural electronics end market drivers such as artificial intelligence.

David W. Heinzmann: Structural electronics in-market drivers such as artificial intelligence, automation, and technology reliability remain key opportunities, as our customers continue to depend on us for innovative engineering expertise. Turning to slide 7, industrial design activity remains solid across our exposures. Supporting long-term industrial and market growth. In the first quarter, we had success in North America for renewable energy, where we had a meaningful win within an energy storage application with a leading customer. We run business with multiple customers for industrial safety applications in North America, highlighted by commercial. We have also secured WINS for EV infrastructure applications across multiple regions, including level 2 charging winds in North America and Europe, and DC fast charging wind in Asia.

Dave: Automation and technology reliability remained key opportunities as our customers continue to depend on us for innovative engineering expertise.

Dave: Turning to slide seven industrial design activity remains solid across our exposures supporting long term industrial end market growth themes and.

Dave: In the first quarter, we had success in North America, and renewables, where we had a meaningful win within an energy storage application with a leading customer.

Dave: We won business with multiple customers for industrial safety applications in North America highlighted by a commercial kitchen.

Dave: We also secured wins for EV infrastructure applications across multiple regions, including level, two charging wins in North America, and Europe, and DC fast charging wins in Asia.

David W. Heinzmann: Taking a step back, long-term industrial investment remains strong, supported by infrastructure spend, increasing electrical efficiency requirements, and global commitments to decarbonization. We will continue to benefit from deep engineering expertise and product offerings, as well as continued execution, reflected in ongoing strong design wins and broad customer momentum.

Dave: Taking a step back long term industrial investment remains strong supported by infrastructure spend increasing electrical efficiency requirements and global commitments to Decarbonize nation.

Dave: We will continue to benefit from deep engineering expertise and product offerings as well as continued execution reflected in ongoing strong design wins and broad customer momentum.

Dave: Moving to slide eight within transportation or passenger vehicle exposure, we continue to leverage our balanced product capabilities global scale and technology leadership.

Meenal Anil Sethna: Within transportation and our passenger vehicle exposure, we continue to leverage our balanced product capabilities, global scale, and technology leadership as customers adapt to evolving consumer preferences. In the quarter, we secured customer wins for high-voltage fuses across multiple regions, including North America, China, and Korea. We run a multi-technology business for an on-board charging system in Europe. We also run a low voltage fuse business for multiple OEM customers in Europe. Finally, we secured a motor protection Glynn for an electric motor application.

Dave: As customers adapt to evolving consumer preferences.

Dave: In the quarter, we secured customer wins for high voltage viewed as fuses across multiple regions, including North America, China and Korea.

Dave: We won multi technology business for an onboard charging system in Europe.

Dave: We also won low voltage fuse business for multiple OEM customers in Europe.

Dave: Finally, we secured a motor protection win for an electric motor application in Europe.

Meenal Anil Sethna: We remain encouraged by our progress vehicle momentum, supported by our continued solid cadence of design wins across electrification and electronification applications. Additionally, we are seeing customers in North America and Europe adapt to shifting consumer preferences, which could impact the pace of EV adoption. We are confident in our well-rounded, long-term automotive content. Regarding our commercial vehicle exposure, we delivered several wins from various applications and regions in the quarter, including a custom multi-technology opportunity for an electric commercial truck provider in Europe.

Dave: We remain encouraged by our passenger vehicle momentum supported by our continued solid cadence of design wins across electrification and electronic vacation application.

Dave: While we are seeing customers in North America and Europe.

Dave: <unk> to shifting consumer preferences, which could impact the pace of EV adoption, we are confident in our well rounded long term automotive content opportunity.

Dave: Regarding our commercial vehicle exposure, we delivered several wins from various applications and regions in the quarter.

Dave: We secured a custom multi technology opportunity for an electric commercial truck provider in Europe.

Meenal Anil Sethna: We won switching business for an agriculture equipment provider in North America and delivered wins for material handling and mining. Long-term, we believe we are well-positioned to enable ongoing electrification and electronification advancements in material handling, agriculture, and construction equipment, and heavy-duty trucks and buses. Across our businesses, our innovative solutions and technical expertise continue to resonate with our broad customers. I will now turn the call over to Meenal to provide additional color on our financial performance analysis.

Dave: <unk> switching business, where in agriculture equipment provider in North America, and delivered wins for material handling and mining customers.

Dave: Long term, we believe we were well positioned to enable ongoing electrification and electronic vacation advancements and material handling agriculture, and construction equipment and heavy duty truck and bus markets.

Dave: Across our businesses, our innovative solutions and technical expertise.

Dave: Tenure to resonate with our broad customer base.

Dave: I will now turn the call over to Neil to provide additional color on our financial performance and outlook.

Meenal Anil Sethna: Thanks, Dave. Good morning, everyone, and thank you for joining us today. Please turn to slide 10 to start with details on our first quarter results. Revenue in the quarter was $535 million, down 12% versus last year, both in total and organic. The product line pruning actions we discussed last quarter reduced sales by two percent. Gap operating margins were 10.3%, and adjusted operating margins 11%. Adjusting EBITDA margins finished at 17.1 percent; foreign exchange had a 50 basis point unfavorable impact on margins, largely due to cost increases from a stronger Mexican peso.

Neil: Thanks, Dave Good morning, everyone and thank you for joining us today.

Neil: Please turn to slide 10 to chat with details on our first quarter results.

Neil: Revenue in the quarter with $535 million down 12% versus last year, both in total and organic.

Neil: Product line pruning actions, we discussed last quarter, we reduced.

Neil: Sales 2%.

Dave: GAAP operating margins were 10, 3% and adjusted operating margin of 11%.

Dave: Adjusted EBITDA margin finished at 17, 1%.

Dave: Foreign exchange had a 50 basis point unfavorable impact to margins largely due to cost increases from a stronger Mexican peso.

Meenal Anil Sethna: First quarter, GAAP diluted earnings per share was $1.93, and adjusted diluted EPS was $1.76. Our first quarter gap effective tax rate was 13%, and our adjusted effective tax rate was 19.3%. Our adjusted effective tax rate was slightly lower than expected due to some one-time discrete benefits.

Dave: First quarter GAAP diluted earnings per share was $1 93, and adjusted diluted EPS was $1 76.

Dave: Our first quarter GAAP effective tax rate was 13% and adjusted effective rate was 19, 3%.

Dave: Our adjusted effective tax rate was slightly lower than expected due to some one time discrete benefit.

Meenal Anil Sethna: Please turn to slide 11 for updates on our capital allocation. Starting with cash generation, we began the year on a strong footing, generating $57 million in operating cash flow, up 7% versus last year, free cash flow of $42 million, and 86% conversion to net income. We remain on track to achieve our expected 100% free cash flow conversion target for the year. We continued our focus on working capital optimization this quarter, reducing both inventory dollars and days on hand. We ended the quarter with $562 million of cash on hand and net debt to EBITDA leverage of 1.4 times.

Dave: Please turn to slide 11 for updates on our capital allocation Dugan.

Dave: <unk> with cash generation, we began the year on a strong footing generating $57 million in operating cash flow up 7% versus last year.

Dave: Free cash flow of $42 million and 86% conversion to net income.

Dave: We remain on track to achieve our expected, 100% free cash flow conversion target for the year.

Dave: We continued our focus on working capital optimization this quarter, reducing both inventory and days on hand.

Dave: We ended the quarter with $562 million of cash on hand, and net debt to EBITDA leverage of one four times.

Meenal Anil Sethna: We're able to leverage the strength of our balance sheet as we continue to assess opportunities and remain disciplined in our capital allocation strategy. Our goals are unchanged, with an intent to return about 40% of our free cash flow to shareholders and the balance invested in strategic acquisitions. In the quarter, we returned $32 million of capital to shareholders evenly split between our quarterly dividend and share repurchase. During the second quarter, we repurchased an additional $23 million in shares through last Friday. We also announced yesterday that our board approved a new three-year, $300 million stock buyback authorization, effective May 1st.

Dave: We're able to leverage the strength of our balance sheet as we continue to assess opportunities and remain disciplined in our capital allocation strategy.

Dave: Our goals are unchanged with an intent to return about 40% of our free cash flow to shareholders and the balance invested in strategic acquisition.

Dave: In the quarter, we returned $32 million of capital to shareholders evenly split between our quarterly dividend and share repurchases.

Dave: During the second quarter, we've repurchased an additional $23 million and shares through last Friday.

Dave: We also announced yesterday that our board approved a new three year $300 million stock.

Dave: Buyback authorization effective may <unk>.

Meenal Anil Sethna: We will continue to assess periodic share buybacks, especially when we believe our valuation doesn't reflect our continued confidence in our long-term growth strategies. Please turn to slide 12 for our product segment highlights, starting with the electronics product segment. Fails were down 19% versus last year in total and or gifts.

Dave: We will continue to assess periodic share buybacks, especially when we believe our valuation doesn't reflect our continued confidence in our long term growth strategy.

Dave: Please turn to slide 12 for our product segment highlights starting with the electronics product segment.

Dave: Sales were down 19% versus last year in total and organic.

Meenal Anil Sethna: On an organic basis, sales across passive products were down 10% versus last year, while semiconductor products declined 25%. The increased weakness we saw across industrial markets was a greater headwind for our semiconductor products. Operating margins in the quarter were 13%, while EBITDA margins finished at 19.8%. We remain confident in the margin resiliency of the electronic segment with the work we've done on portfolio diversification, improved execution, and cost-sharing. We expect robust improvements in our segment margins as we return to growth.

Dave: On an organic basis sales across passive products were down 10% versus last year, while semiconductor products declined 25%.

Dave: The increase we saw across industrial markets with a greater headwind, making.

Dave: The conductor products.

Dave: Operating margins in the quarter with 13%, while EBITDA margin finished at 19, 8%.

Dave: We remain confident in the margin resiliency in the electronics segment with the work, we've done and portfolio diversification improved execution and cost structure.

Dave: We expect robust improvements in our segment margins as we return to growth.

Meenal Anil Sethna: Moving to our transportation product segment, on slide 13, segment sales were up 2% and up 3% organically. However, sales were negatively impacted, 6% versus last year, from the pruning actions we've been undertaking. Across our passenger vehicle business, sales grew 12% organically.

Dave: Moving to our transportation products segment on Slide 13 segment sales were up 2% and up 3% organically.

Dave: Sales were negatively impacted 6% versus last year from the pruning actions we've been undertaking.

Dave: Across our passenger vehicle business sales grew 12% organically.

Meenal Anil Sethna: We continue to see strong growth from both content and product launches we supported, especially in China. However, sales for the quarter were down 6% organically due to a combination of continued inventory destocking at distribution partners and our product line pruning. For the segment, operating margins were 9.5%, and EBITDA margins finished at 14.6% in the quarter, expanding margins sequentially by 480 basis points and 380 basis points per second. We've taken a number of concrete actions to drive improved profitability, including a balance of price increases and product pruning, as well as structural cost actions to improve growth margins and reduce operating costs. We are focused on steady improvements as we work our way back to double-digit margins. On slide 14, the industrial product segment was down 13% and 14% organically.

Dave: We continued to see strong growth from both content and product launches, we supported especially in China.

Dave: Within commercial vehicle sales for the quarter were down 6% organically. The combination of continued inventory destocking at distribution partners and our product line pruning actions.

Dave: For the segment operating margins were nine 5% and EBITDA margin finished at 14, 6% in the quarter expanding margins sequentially.

Dave: <unk> hundred 80 basis points, and 380 basis points respectively.

Dave: We've taken a number of concrete actions to drive improved profitability, including a balance of price increases and product pruning as well as structural cost actions to improve gross margins and reduced operating expenses.

Dave: We are focused on steady improvements as we work our way back to double digit margins.

Dave: On slide 14, the industrial products segment was down 13% and 14% organically.

Meenal Anil Sethna: We saw weakness from an expanded set of industrial end markets and continuation of inventory reductions at some OEMs. Operating margins finished at 6.5%, and even down margins were 11.9%, both down versus last year and below our expectations. Volume is a key driver in our typically strong margin profile. We are also in the midst of footprint shifts to improve profitability and add capacity, which will result in some near-term manufacturing costs and constraints. We expect progressive margin recovery in the coming quarters. Please move to slide 15 for the forecast.

Dave: We saw weakness from an expanded set of industrial end markets and continuation of inventory reductions it from Oems.

Dave: Operating margins finished at six 5% and EBITDA margins were 11, 9%, both down versus last year and below our expectations.

Dave: Volume is a key driver in our typically strong margin profile.

Dave: We are also in the midst of footprint shifts to improve profitability and add capacity, which produced some near term manufacturing cost and constraints.

Dave: We expect progressive margin recovery in the coming quarters.

Dave: Please move to slide 15 for the forecast.

Meenal Anil Sethna: Summarizing Dave's earlier comments, we continue to see channel and customer inventory reductions, so we believe we are nearing an inflection point. We're also seeing select areas of expanded industrial markets. And, as reported in the headlines, inflationary trends are continuing.

Speaker Change: Summarizing Dave's earlier comments, we continue to see channel and end customer inventory reduction, but we believe we are nearing an inflection point.

Speaker Change: We're also seeing select areas of expanded industrial market weakness.

Speaker Change: And as reported through the headlines inflationary trends are continuing.

Meenal Anil Sethna: With these assumptions, we expect second quarter sales in the range of $525 to $555 million dollars, equaling 1% sequential growth at the midpoint. By segment, we expect sales across electronics to be flat, and for transportation and industrial to be slightly up. With the recent shifts in the number of currencies, foreign exchange is a net unfavorable impact on us for revenue and earnings. For the second quarter, we project a 1% headwind on sales and a $0.16 negative impact on EPS.

Speaker Change: With these assumptions, we expect second quarter sales in the range of $525 million to $555 million.

Speaker Change: 1% sequential growth at the midpoint.

Speaker Change: By segment, we expect sales of class electronics to be flat and for transportation and industrial to be slightly up.

Speaker Change: With the recent shifts a number of currencies foreign exchange is a net unfavorable impact to extra revenue and earnings.

Speaker Change: For the second quarter, we project, a 1% headwind on sales and a <unk> 16 negative impact to EPS.

Meenal Anil Sethna: We're projecting adjusted EPS to be in the range of $1.65 to $1.85, which assumes a tax rate of approximately 23%. As we've discussed historically, our second quarter guidance also includes higher staff compensation expense versus other quarters due to certain retirement provisions. This has an unfavorable 30 cent impact on EPS and a negative 170 basis point effect on margins in the quarter.

Speaker Change: We're projecting adjusted EPS to be in the range of $1 65 to $1 85, which assumes a tax rate at approximately 23%.

Speaker Change: As we've discussed historically, our second quarter guidance also includes higher stock compensation expense versus other quarters due to certain retirement provisions.

Speaker Change: This is an unfavorable <unk> <unk> impact to EPS.

Speaker Change: At negative 170 basis point effect on margins in the quarter.

Meenal Anil Sethna: Please turn to slide 16 for our full year 2024 expectations. We anticipate a return to sales growth later this year. We expect product line actions to reduce total sales by about 2% and reduce transportation sales growth by about 5%, slightly less than our projections last quarter. And at current rates, we expect foreign exchange to be a headwind of 1% to sales and a $0.50 headwind to EPS. We've made significant progress in improving through-cycle margins within our electronics segment and are on a solid path for improvements in our transportation segment profitability. However, the elongated inventory de-stocking and in-market variability have impacted the timing of our volume recovery.

Speaker Change: Please turn to slide 16 for our full year 2024 expectations.

Speaker Change: We anticipate a return to sales growth later this year.

Speaker Change: We expect product line actions to reduce total sales about 2% and reduced transportation sales growth about 5%.

Speaker Change: Slightly less than our projection last quarter.

Speaker Change: And at current rates, we expect foreign exchange to be a headwind of 1% to sales and a <unk> 50 headwind to EPS.

Speaker Change: We've made significant progress in improving through cycle margins within our electronics segment and are on a solid path for improvements to our transportation segment profitability.

Speaker Change: However, the elongated inventory destocking and end market variability is impacted the timing of our filing in recovery.

Meenal Anil Sethna: With these market undercurrents, we expect company operating margins to finish in the mid-teens for the year, with improvements as the year progresses. Across our segments, we expect electronic operating margins to average in the upper teens and industrial operating margins in the mid-teens. We remain confident in the progress we are making in transportation and expect to exit the year with high single-digit operating margins. On other modeling items, we're assuming $64 million in amortization expense and about $39 million in interest expense. We are estimating a full-year tax rate around 22%, slightly higher than our prior estimate due to shifts in earnings mix by jurisdiction, and we expect to invest about $100 million in capital expenditure.

Speaker Change: With these market undercurrent, we expect company operating margins to finish in the mid teens for the year with improvements as the year progresses.

Speaker Change: Across our segments, we expect electronics operating margins to average in the upper teens and industrial operating margins in the mid teen.

Speaker Change: We remain confident in the progress we are making in transportation and expect to exit the year with high single digit operating margin.

Speaker Change: On other modeling items, we're assuming $64 million and amortization expense and about $39 million in interest expense.

Speaker Change: We are estimating a full year tax rate around 22% slightly higher than our prior estimate due to shifts in earnings mix by jurisdiction.

Speaker Change: And we expect to invest about $100 million and capital expenditures.

Speaker Change: Yes.

Meenal Anil Sethna: We are executing through a difficult macro environment, and we're well positioned as we emerge out of it. Our priorities remain focused on the areas we can control. We are well poised as de-stocking diminishes and markets recover to drive growth and commensurate margins. We're leading sustained profitability improvements across our transportation segment and continuing our path forward to best-in-class profitability and cash generation. Thank you to our Littelfuse colleagues worldwide for their unwavering commitment to steering our company forward every day. And with that, I'll turn it back to Dave for some final comments.

Speaker Change: We are executing through a difficult macro environment, and we're well positioned as we emerge out of it our priorities remain focused on the areas we can control.

Speaker Change: Sharing we are well poised as destocking diminishes and markets recover to drive growth and commensurate margin expansion.

Speaker Change: We're leading sustained profitability improvements across our transportation segment and continuing our path forward to best in class profitability and cash generation.

Speaker Change: Thank you to our loyalties colleagues worldwide for their unwavering commitment and steering our company forward every day.

Speaker Change: And with that I'll turn it back to Dave for some final comments.

David W. Heinzmann: Thanks, Neil while the first quarter brought a continuation of many of the themes. We have discussed last year, we believe our results and customer momentum continue to support our long term growth strategy.

David W. Heinzmann: Meenal, while the first quarter brought a continuation of many of the themes we discussed last year, we believe our results and customer momentum continue to support our long-term growth strategy. Our increasingly diversified business model and agile teams have improved profit resiliency while positioning us for meaningful long-term earnings expansion. Our continued design-win momentum reflects our robust technology offerings across broad end markets and the strength of our customer relationships. Our strong cash generation and balance sheet position us to further capitalize on growth opportunities while we remain confident that we will return to growth during 2024.

David W. Heinzmann: Our increasingly diversified business model and agile teams to improve the profit resiliency, while positioning us for meaningful long term earnings expansion.

David W. Heinzmann: Our continued design win momentum reflects our robust technology offerings across broad end markets and the strength of our customer relationships.

Speaker Change: Our strong cash generation and balance sheet position us to further capitalize on growth opportunities. While we are remaining confident that we will return to growth during 2024.

David W. Heinzmann: We are also confident that we will continue to execute through cycles, drive long-term double-digit revenue growth, and leverage earnings expansion and Deliver a Talk to Your Shareholder about it. I want to again thank our global Littelfuse team for their hard work and commitment to our customers and suppliers. And with that, I will now turn the call back to the operator for Q&A.

Speaker Change: We are also confident that we will continue to execute through cycles drive long term double digit revenue growth and leveraged earnings expansion and deliver top tier shareholder value.

Speaker Change: I want to again, thank our global little fuse team for their hard work and commitment to our customers and supplier partners.

Speaker Change: And with that I will now turn the call back to the operator for Q&A.

Operator: Thank you. We will now begin the question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad to raise your hand and join the queue. If you would like to withdraw your question, simply press star 1 again. If you are called upon to ask your question and you are listening via loudspeaker on your device, please pick up your handset and ensure that your phone is not on mute when asking your question. Your first question comes from the line of Luke Junk from Baird. Your line is open.

Speaker Change: Thank you we will now begin the question and answer session. If you'd like to ask a question. Please press star one on your telephone keypad to raise your hand and joined the queue. If you would like to withdraw your question simply press Star. One again, if you are called upon to ask your question and you are listening via loud speaker on your device. Please pickup your handset and ensure.

Speaker Change: That your phone is not on mute when asking your question. Your first question comes from the line of Luke junk from Baird. Your line is open.

Luke L. Junk: Morning Dave Meenal, thanks for taking the question. Dave, I'm hoping we could start with just your view that inventory destocking on the passive side is close to inflecting, and really, what I'm hoping to tease out is your view of underlying point of sale demand and, regardless of timing, ultimately, what kind of feedback you're getting from distributors and customers relative to the level of, you know, real demand, if you will, once you finally clear these channel dynamics. Thank you. Thanks.

Luke L. Junk: Good morning, Dave Thanks for taking the question.

Luke L. Junk: Dave I was hoping we could start with just your view that inventory destocking and the passive side is close to inflicting and really what I'm, hoping to tease out what is your view of underlying point of sales demand and just kind of regardless of timing ultimately what kind of feedback youre getting from distributors and customers relative.

Luke L. Junk: Some level of real demand if you will once you finally clear these channel dynamics. Thank you.

David W. Heinzmann: Thanks Luke, thanks for the question. You know, certainly it's been a kind of messy several quarters as the corrections have been driving through the electronic side of the business. And, you know, the positive sign we see is that our book-to-bill is above one for the first time in seven quarters for our passives products, so that's a good positive indicator. Now, POS numbers are not, you know, dramatically increasing yet, as we still think there's a little bit of time for EMS customer inventories to kind of work their way down, which is dampening the POS at the distributor level But, as we've kind of walked through these types of cycles in the past, these are certainly kind of early indicators for us that things are about to turn on that side.

Speaker Change: Thanks, Thanks, Luke Thanks for the question.

David W. Heinzmann: Yes, certainly it's been a.

David W. Heinzmann: Kind of a <unk>.

Speaker Change: <unk> several quarters as the as.

David W. Heinzmann: As corrections have been driving through the electronic side of the business.

David W. Heinzmann: And.

David W. Heinzmann: The positive sign we see.

David W. Heinzmann: Is that our book to Bill was above one for the first time in seven quarters for our passive products. So that's a good positive indicator now Pos numbers or not.

David W. Heinzmann: Dramatically, increasing yet as we still think theres, a little bit of time for <unk> customer inventories to kind of work their way down which is dampening the Pos at the distributor level.

David W. Heinzmann: But.

David W. Heinzmann: As we've kind of walked through these types of cycles in the past and these are certainly the kind of the early indicators for us that things are about to turn on that side. Okay.

Meenal Anil Sethna: That's helpful; thank you. And then my follow-up would be for Meenal, in transportation, just hoping you can help us bridge from the mid-single-digit level that the business was at from a margin standpoint last year to this quarter's nine and a half, and specifically just trying to tease out anything that was maybe unique to the first quarter, and would you expect margins to sustain at this level, or maybe dip some and come back to the high single digit Sure.

Speaker Change: That's helpful. Thank you and then.

Speaker Change: A follow up would be for <unk> and transportation just hoping you can help us bridge from the mid single digit level that the business was at from a margin standpoint last year to this quarter's 95 spin.

Speaker Change: Specifically, just trying to tease out anything that was maybe unique to the first quarter and would you expect margins to sustain at this level or maybe dip some can come back to the high single digits exiting 2024.

Meenal Anil Sethna: Sure, thanks, Luke. Yeah, happy to talk about our transportation margins. So, you know, as I mentioned last quarter, we have put a lot of effort, as you saw in the first quarter results, really into improving the transportation margins. They've been running below our expectations.

Speaker Change: Sure. Thanks, Luke, Yes, happy to talk about our transportation margins. So.

Speaker Change: As I mentioned last quarter, we have put a lot of effort.

Speaker Change: You saw in the first quarter results really on improving the transportation margins they've been running below our expectations I'd say some of the key actions.

Meenal Anil Sethna: I'd say some of the key actions over the past several quarters, one is cost reductions that we put in place that are really bearing fruit, as you can see through the margin improvement. Really breaking down some of our product lines and working with customers, looking at our profitability, and then talking with customers about the value that we're bringing. And either that drives improved pricing for us, which we did in several areas, and we believe that's gonna be pretty sticky.

Speaker Change: Over the past several quarters, one is cost reductions that we had put in place that are really bearing fruit as you can see the margin improvement.

Speaker Change: Really breaking down some of our product line activities and working with customers looking at our profitability and in talking with customers about the value that we're bringing in either that drive improved pricing for us, which we which we did in several areas and we believe that's going to be pretty sticky.

Meenal Anil Sethna: In other cases, you know, we've exited some product lines, and overall, that includes the margin profile as well. And then, along the way, we're working on what I call the rooftop productions, not just, you know, looking at our manufacturing supply chain, but also some administrative sites that we're getting out of as well. And that falls into that cost category.

Speaker Change: In other cases, we've exited some product lines and overall that.

Meenal Anil Sethna: Lucid margin profile as well and then along the way we're working on what I call. The rooftop reductions not just looking at our manufacturing supply chain, but also some administrative sites that we're getting out of as well that falls into that cost category. So as I look ahead with all of that to 20 for some of that Youll see continuations of all that activity bearing.

Meenal Anil Sethna: So, as I look ahead with all of that to twenty-four, some of that you'll see continuations of all that activity bearing fruit, and I would say with, you know, volume and mix shifts across our commercial vehicle and on the automotive side of the business. We expect that high single digits to continue, but it may not necessarily look linear as we go through 24. But our expectation is still at this margin level overall.

Speaker Change: Fruit, and let's say with volume and mix shifts across our commercial vehicle and on the automotive side of the business. We expect that high single digit to continue but it may not necessarily look linear as we as we go through 'twenty four but our expectation is to build this margin level overall.

Luke L. Junk: Got it. Thank you for the detail. I'll leave it there.

Speaker Change: Got it thank you for the detail I'll leave it there.

David W. Heinzmann: Thanks for your questions, Luke.

Speaker Change: Thanks for your questions Luc.

Operator: Your next question comes from the line of Matt Sheerin from Stiefel. Your line is open.

Speaker Change: Your next question comes from the line of Matt Sheerin from Stifel. Your line is open.

Matthew John Sheerin: Yes, thank you. Good morning, everyone.

Matthew John Sheerin: Yes. Thank you good morning, everyone. Just a question on the margin targets.

Matthew John Sheerin: Just a question, Meenal, on the margin targets for the full year, particularly electronics margins in the high teens from the low 20s now. So that would imply pretty significant expansion, particularly in Q3, Q4. And I know you're expecting year-over-year growth, I suppose, by Q4 of this year. But what's going to drive the margins given that demand is still weak? And I would imagine that you're seeing, and maybe you can comment just on the pricing environment, that you're at least seeing the normal price downs or cost downs from customers.

Matthew John Sheerin: For the full year, particularly electronics margins for the high teens from the low Twenty's now so that would imply pretty significant expansion, particularly Q3 Q4.

Matthew John Sheerin: And I know you were expecting a year over year growth I suppose by Q4 of this year, but what's going to drive the margins.

Matthew John Sheerin: Given that demand is still weak and I would imagine that youre seeing and maybe you can comment just on the pricing environment that you are at least seeing a normal.

Matthew John Sheerin: Price Downs, our cost downs from customers.

Meenal Anil Sethna: Sure, why don't I try to address your question specifically on electronics, because I think that's where we were going more. It may be just taking a step back as a reminder, you know. We talked about the fact that all of our margin targets are through, through the cycle targets, right? And so in the past few years, we've seen margins in electronics, you know, above that 20% range. This year, we're talking about something a little bit lighter.

Matthew John Sheerin: Sure.

Meenal: Why don't I I'll try to address your questions specific on electronics, because I think Thats, where were you were going more and maybe just taking a step back as a reminder, we talked about the fact that all of our margin targets are through through the cycle targets right and so the past few years, we've seen margins in electronics.

Speaker Change: Above that 20% range. This year, we're talking about something a little bit lighter last year, we raised our overall through cycle margin target to that 20% plus range. So that is really a testament of all the work we've done really around portfolio diversification all the cost reductions all the execution.

Meenal Anil Sethna: Last year, we raised our overall through-cycle margin target to that 20% plus range. So that is really a testament to all the work we've done around the portfolio, diversification, all the cost reductions, all the execution. For this year, you know, what you're seeing in the first quarter and going into the second quarter guidance is really the de-stocking that Dave talked about in the earlier question that continues on the passive product side and select areas of our semiconductor side.

Meenal Anil Sethna: For this year, what youre seeing in the first quarter and going into the second quarter Guide is really the destocking that Dave talked about in the earlier question that continues on the passive product side in select areas of our semiconductor side, but then on top of that now the.

Meenal Anil Sethna: But then on top of that, now the enhanced industrial market weakness that we're seeing that really impacts a lot of our power semiconductor pieces as well. So de-stocking, market weakness, that's sort of where we are in this first, second quarter range. You heard Dave's comments just a few minutes ago about how we see inflection points, we see some good signs in the market, and that gives us some positive signs of growth coming forward.

Speaker Change: Enhanced industrial market weakness that we're seeing that really impacts a lot of our power semiconductor pieces as well so destocking market weakness that sort of where we are in this first second quarter range.

Speaker Change: You heard Dave comment just a few minutes ago about we see inflection points, we see some good signs in the market and that's what gives us some.

Meenal Anil Sethna: Some positive signs on growth coming forward and then our incremental margins coming out of either this recovery period tend to be pretty strong. So that's that's what we're really basing our margin for the Huron again lower than the average, but when you look at through cycle average.

Meenal Anil Sethna: And then our incremental margins coming out of these recovery periods tend to be pretty strong. So that's, that's what we're really basing our margin for the year on, again, lower than the average. But when you look at a through cycle average for the last three, four years, we

Speaker Change: Three four years, we still expect to be in that 20% range.

Matthew John Sheerin: Okay, thank you for that. Could you talk about the pricing trends that you're seeing and also could you talk about the inventory levels within distribution and versus where it was versus expectations?

Speaker Change: Okay. Thank you for that and could you talk about the pricing trends that youre seeing and also could you talk about the <unk>.

Speaker Change: Inventory levels within distribution and versus where it was in expectations.

David W. Heinzmann: Sure, I'll take that, Matt. From a pricing standpoint, I think we start out by kind of creating the basis point that the pricing that was gained in the last few years has continued to be pretty sticky. So we really haven't seen that erode or swing back because costs continue to be elevated, right? But from a normal month-to-month, quarter-to-quarter sort of outlook, what we've seen is really a pretty return to normal types of pricing activity.

Speaker Change: Sure I'll take that Matt, yes from a pricing standpoint.

David W. Heinzmann: We start out with kind of creating the basis points.

David W. Heinzmann: The pricing that was gained in the last few years has continued to be pretty sticky. So we really haven't seen that erode or swing back because costs continue to be elevated right.

David W. Heinzmann: But from a normal month to month quarter to quarter sort of outlook, what we've seen is really.

Speaker Change: Return to normal types of pricing activities.

David W. Heinzmann: You know, and often there's a worry that as you have a little slower period, there's going to be higher levels of pricing pressure. While we've seen that in a couple of small pockets, in general, we've seen more normal sorts of pricing pressure across the board. From an inventory perspective, if you look at our electronics channel partners and channel distribution levels, we're beginning to get to healthier levels there, where we would say we're probably 85% of the way through the inventory burns that need to take place there, so there's still a little more to go.

David W. Heinzmann: And often there is a worry that as you have little slower periods that theres going to be higher levels of pricing pressure, while we've seen it in a couple of small pockets in general we've seen more normal sorts of pricing pressures across the business on that.

Speaker Change: Inventory perspective.

David W. Heinzmann: Look at our electronics channel partners and channel distribution levels.

David W. Heinzmann: We're beginning to get to healthier levels there.

David W. Heinzmann: Where are we would say, we're probably 85% of the way through the inventory burns that needs to take place. There. So there is still a little more to go.

David W. Heinzmann: But keeping in mind the big opportunity for us as even if in-market demand remains fairly muted, when we reach that inflection point of getting down to the inventory levels that are appropriate, we'll get gains in sales driven by that. And we also think there are some positive signs on the demand side in the broader electronics part of the business. Industrials are a little softer in impact, as Meenal said, on the power semi side, but we're beginning to approach a healthier position on the inventory.

David W. Heinzmann: But keeping in mind, yes.

Speaker Change: A big opportunity for us as even if end market demand remains fairly muted.

Meenal Anil Sethna: When we reached that inflection point of getting down to the inventory levels that are appropriate we will get gains in sales driven by that and we also think there are some positive signs on the demand side and the broader electronics part of the business industrials are a little softer that impact because as <unk> said the power semi.

David W. Heinzmann: Side, but.

David W. Heinzmann: We're beginning to approach a healthier position on the inventory.

Matthew John Sheerin: Got it. Okay. All right. Thank you very much.

Speaker Change: Got it okay, alright, thank you very much.

David W. Heinzmann: Thanks for your questions, Matt.

Speaker Change: Thanks for your questions Matt.

Operator: Your next question comes from the line of Joshua Buchalter from Cowan. Your line is open.

Matthew John Sheerin: Your next question comes from the line of Joshua <unk> from Cowen Your line is open.

Joshua Louis Buchalter: Hey guys, thanks for taking my question. Maybe following up on the previous one, so it sounds like you moved from 70 to 85 percent of the way through inventory digestion. Do you expect the vast majority of the remaining 15 to be wrapped up by the June quarter? And if so, I know it's generalizing across your total business, but maybe you could remind us, like, if you were to ship to end demand in the back half of the year, maybe help us with what normal seasonality would look like?

Joshua Louis Buchalter: Hey, guys. Thanks for taking my question.

Joshua Louis Buchalter: Maybe following up on the previous one so it sounds like you're you move from $70 to 85% of the way through the inventory digestion do you expect the vast majority of the remaining 15 to be wrapped up.

Joshua Louis Buchalter: Thank you.

Joshua Louis Buchalter: By the June quarter, and if so I know, it's generalizing across your total business, but maybe you can remind us again, if you were to ship to and demand in the back half of the year, maybe help us with what normal seasonality would look like thank you.

Joshua Louis Buchalter: Well.

David W. Heinzmann: I'm not sure what normal seasonality is anymore with the amount of disruptions that we've seen in the last several years. But what I would say is, it's always a little challenging to pick exactly when you hit that inflection point, you know, and it's really by product line, by distributor, where we have some product lines that are already there.

Speaker Change: I'm not sure what normal seasonality is anymore with the amount of disruptions that we've seen in the last several years.

David W. Heinzmann: But what I would say is it's always a little challenging to pick exactly when you hit that inflection point.

David W. Heinzmann: And it's really by product line by distributor, where we have some product lines that are there already there are kind of targeting Tory levels and are quite healthy and others that there is still a little farther to go but we think the bulk of the channel Destocking.

David W. Heinzmann: They're kind of target inventory levels and are quite healthy, and others that they're still a little farther to go. But we think the bulk of the channel destock is going to happen. We will work through it in the next quarter. You know, that's kind of the math as it works out. And what we've been seeing, the burn rates, you know, on our inventory position, we think we'll probably head into the back end of the year in our passes with a pretty, pretty healthy inventory position.

David W. Heinzmann: We will work through in the next quarter.

David W. Heinzmann: That's kind of the math as it has.

David W. Heinzmann: Works out and what we've been seeing the burn rates on our inventory position. We think we'll we'll probably head into the back end of the year and our passive products that are pretty pretty healthy inventory position.

David W. Heinzmann: So the challenge then becomes what's normalized, you know, from a calendarization standpoint. Because we'll have both impacts, normal calendarization, and typically, the third quarter is a little stronger than the fourth quarter. Second and third quarters are kind of similar. That would be normal calendarization, but you throw in destocking on top of that. So you'll still, we would expect, you know, if all things play out, that we'll start to see some things turning in the back half of the year. Because that, that end of destocking or slowing of destocking will help. You know, drive that, and they could actually produce better than normal seasonality in the back half.

David W. Heinzmann: So the challenge then becomes what's normalized.

David W. Heinzmann: From a calendar as Asian.

David W. Heinzmann: Because we will have both impacts normal calendars Asian.

David W. Heinzmann: And typically third quarter is a little stronger than fourth quarter second and third quarter are kind of similar that would be normal calendar <unk>, but you throw on top of that Destocking ends.

David W. Heinzmann: So youll still we would expect all things play out that will start to see some things turning in the back half of the year.

David W. Heinzmann: Because of that.

David W. Heinzmann: End of Destocking or slowing of Destocking will help.

David W. Heinzmann: Drive that and actually could produce better than normal seasonality in the back half of the year.

Joshua Louis Buchalter: Got it. Thank you for all the color, Dave.

Speaker Change: Got it thank you for all the color Dave.

David W. Heinzmann: And then on the second quarter guidance, it looks like a decent.

Joshua Louis Buchalter: 100, 200 basis points of operating margin expansion back of the envelope based on a 1% revenue growth maybe you could help us understand the drivers across opex or is it gross margin whether mix volume or pricing. Thank.

Speaker Change: Thank you.

Joshua Louis Buchalter: Yes.

Speaker Change: I would say.

Joshua Louis Buchalter: Margins overall as sales pick up a little bit and again there has been cost work that we continue to do when we see.

Joshua Louis Buchalter: Businesses that are in decline for whether that's discretionary spend some clockwork.

Joshua Louis Buchalter: Little bit of margin recovery and things that we've done. So I think those are positive as we think about the second quarter. The other things I wanted to mentioned that are also in the slides and prepared comments with the fact, a with foreign exchange as we've seen strengthening dollar.

Meenal Anil Sethna: And then on the second quarter guidance, you know, it looks like a decent 100, 200 basis points of operating margin expansion back the envelope based on 1% revenue growth. Maybe you could help us understand the drivers across OPEX, or is it gross margin, whether mixed volume or pricing? Thank you.

Meenal Anil Sethna: Yeah, I would say margins overall as sales pick up a little bit, and again, there's been cost work that we continue to do when we see businesses that are in decline. So whether that's discretionary expense, some cost work, a little bit of margin recovery on things that we've done. So I think those are positive as we think about the second quarter.

Meenal Anil Sethna: The other things I wanted to mention that are also, you know, in the slides and prepared comments are the fact that A, you know, with foreign exchange, we've seen the strengthening dollar in the mix of currencies that we have. FX is a headwind for us on the margin, about 90 basis points for the second quarter. And then, you know, I think those who have been with us historically know that we have this bit of a second quarter phenomenon in our stock compensation, where just because of the provisions in some of our stock grants, there's a little bit of what I call a bullet vest that happens in the second quarter.

Meenal Anil Sethna: And the mix of currencies that we have FX as a headwind for us on the margin about 90 basis points for the second quarter.

Meenal Anil Sethna: And then.

Meenal Anil Sethna: Those who have been with US historically now that we have this bit of a second quarter phenomenon on our stock compensation were just because of the provisions in some of our stock grants.

Meenal Anil Sethna: Little bit of a what I call a bullet vested that happens in the second quarter and so while it's not an outsized cost. It's just that we have to recognize at all in the second quarter versus taking it over a longer period. So that's about that's about 30% impact in the second quarter, if youre just looking at sequential.

Meenal Anil Sethna: And so while it's not an outsized cost, it's just that we have to recognize it all in the second quarter versus taking it over a longer period. So that's about, you know, that's about a 30 cent impact in the second quarter if you're just looking at sequential. Quantal Pieces, that's a little bit of Hitler.

Meenal Anil Sethna: Pieces, that's a little bit of a hit there too.

Joshua Louis Buchalter: Got it. Thank you, Meenal.

Speaker Change: Got it thank you Neil.

David W. Heinzmann: Thanks for your questions, Josh.

Meenal: Thanks for your questions Josh.

Operator: Your next question comes from the line of Christopher Glynn from Oppenheimer. Your line is open.

David W. Heinzmann: Your next question comes from the line of Christopher Glynn from Oppenheimer. Your line is open.

Christopher D. Glynn: Thanks. Good morning, everybody. Good morning.

Christopher D. Glynn: Thanks, Good morning, everybody.

Christopher D. Glynn: Morning add a question I had a question about the.

Christopher D. Glynn: Pruning so.

Christopher D. Glynn: I had a question about the pruning. You know, you took it down, I think, from six to eight to a 5% impact. Is that related to market dynamics and market timing and customer service considerations? I'm just curious about the narrower scope there. And if this is a couple-year process, or this is predominantly a 2024 adjustment?

Christopher D. Glynn: You took it down I think from six to eight to a 5% impact.

Christopher D. Glynn: Is that related to market dynamics and market timing and customer service.

Christopher D. Glynn: <unk>, so just curious about the narrower scope there.

Christopher D. Glynn: And if.

Christopher D. Glynn: This is a couple of year process or this is predominantly a 2020 for adjustment.

Meenal Anil Sethna: Yeah, no, great question, Chris. So, you know, on the pruning side, if I take a step back, where for us, the pruning is really taking a look at more granular pieces of the portfolio, really understanding the customers, the product, and the profitability on both of those pieces. So, for us, it's really trying to ultimately balance profitability and return on where we can as much as possible. We prefer to retain customers.

Speaker Change: Yeah, No great question Crystal.

Meenal Anil Sethna: Pruning side, if I, if I take a step back we're really for us. The pruning is really taking a look at more granular pieces of the portfolio really understanding the customers the products and the profitability on both of those pieces. So for us, it's really trying to ultimately balance the profitability.

Meenal Anil Sethna: In return.

Meenal Anil Sethna: Where we can as much as possible we prefer to retain customers. We prefer to continue doing business with the customers, but it has.

Meenal Anil Sethna: We prefer to continue doing business with customers, but it has to incorporate the value that we bring at a, you know, expectation of profitability and return. So, in this specific case where we've brought down the numbers a little bit, as we've gone back to a number of customers and even internally looked at ways to improve profitability, we found that, hey, maybe we have to prune a little bit less. And, you know, Dave talked about some of our pricing being sticky.

Meenal Anil Sethna: I have to incorporate the value that we bring at a expectation.

Meenal Anil Sethna: <unk> of our profitability and returns so in this specific case, where we brought down the numbers a little bit as we've gone back to a number of customers and even internally looked at ways to improve profitability. We found that hey, maybe we have to prune a little bit less and Dave talked about some of our pricing being being sticky in the case of our transportation segment, we have price up.

Meenal Anil Sethna: You know, in the case of our transportation segment, we have priced up this quarter, and we went back to a number of customers again around price, and we expect that to stick. So, that's really what's driving a little bit of that trend where there is less pruning. And I would say, yes, this will go through this year, but I would also say this is not a one and done thing either. This is something that we constantly look at.

Meenal Anil Sethna: This quarter and we went back to the number of customers again around price and.

Meenal Anil Sethna: And we expect that to stick. So that's really what's what's really driving a little bit of that trend, where it's less pruning and I would say, yes. It will go through this year, but I would also say this is not a one and done either this is something that we constantly look at we don't all we.

Meenal Anil Sethna: We don't always talk about it as much. This is just because we're going through a bigger effort in the transportation segment right now, but this is something that we look at continuously. I just don't expect it to continue at this level as we go into 25.

Meenal Anil Sethna: Talk about it as much. This is just because we're going through a bigger effort through the transportation segment right now, but this is something that we look at continuously I just don't expect it to continue at this level as we go into 'twenty five.

Christopher D. Glynn: Okay, so good chance it's not a talking point next year beyond a discussion of how you run the business in theory. Correct.

Speaker Change: Okay. So good chance it's not.

Christopher D. Glynn: Talking point next year beyond.

Christopher D. Glynn: Discussion of how are you.

Christopher D. Glynn: We run the business in theory.

Christopher D. Glynn: And then, yeah, I just want to go back to Matt's questions about the electronics and industrial margins implied steep second half ramp to get to, you know, the upper teens for the full year result for electronics and, you know, the mid teens for industrial. Is that just really all volume related, I guess? I don't know about how mix and absorption are factoring into that equation, but the first and second quarter guide, it does look like a steep ramp. So we want to kind of understand the model a little bit better.

Christopher D. Glynn: Correct.

Christopher D. Glynn: Okay and then.

Speaker Change: Just wanted to go back to Matt <unk> questions about the.

Christopher D. Glynn: Electronics, and industrial margins implied steep second half ramp to get to.

Christopher D. Glynn: Upper teens for the full year result for electronics.

Christopher D. Glynn: Mid mid teens and industrial is that it.

Christopher D. Glynn: Really all volume related I guess.

Christopher D. Glynn: I don't know about how mix and absorption are factoring into that equation.

Christopher D. Glynn: The first and second quarter guide it does look like a steep ramp so we want to kind of understand the model a little bit better.

Meenal Anil Sethna: Sure. So yes, on both electronics and industrial, a little bit different for both. On the electronics side, we're definitely counting on some volume improvements, right? And I won't reiterate everything Dave talked about, but we see the signs that the de-stocking will end, and as we, you know, start to replenish inventory, that drives some growth there. So that's part of it. But there are also some cost things that we're continuing to look at, especially as we consider the semiconductor part of the business, where we've seen some market weakening there. So those are really the two drivers as we think about electronics.

Christopher D. Glynn: Sure.

Speaker Change: Yes on both electronics industrial a little bit different for both on the electronics side. It's definitely we're counting on definitely a some volume improvements, Brian and I will reiterate everything Dave talked about we see the signs right, where the Destocking will end and as we.

Meenal Anil Sethna: Start to replenish inventory that drive some growth there. So that's part of it. There's also some costs things also that we're continuing to look at especially as we consider the semiconductor part of the business, where we've seen some the market we're seeing there so.

Meenal Anil Sethna: So those are related to the two drivers as we think about electronics. So I feel good about the margin the margin trajectory and just basically the work that we've done over the past several years on an electronics.

Meenal Anil Sethna: So I feel good about the margin, the margin trajectory, and just basically the work that we've done over the past several years on electronics and with industrial. Yes, on some volume, we're counting a little bit on that, but I would also say there's some more internal work that's going on. You know, that's really the business where we've had, over the past few years, some very strong organic and also inorganic growth. So there's a lot of work we're doing behind the scenes around footprint to make sure we're getting closer to customers, getting the cost structure right, and also adding capacity as well.

Meenal Anil Sethna: With industrial.

Meenal Anil Sethna: Yes on some volume accounting a little bit on that but I would also say there is more some more internal work that's going on.

Meenal Anil Sethna: That's really the business, where we've had over the past few years.

Meenal Anil Sethna: Some very strong organic and also in organic growth. So there is a lot of work we're doing behind the scenes around footprint to make sure we're getting closer to customers getting the cost structure right and in also adding capacity as well some of what you saw in the first quarter was we're in the midst of a couple of these actions right now and so.

Meenal Anil Sethna: Some of what you saw in the first quarter was we're in the midst of a couple of these actions right now, and so there were some manufacturing constraints and also some costs that we recognized. I expect that to improve in the next few quarters, and that's what's also helping to drive profitability.

Meenal Anil Sethna: There were some manufacturing constraints also some costs that we recognized I expect that to improve in the next few quarters and that's also helping to drive the profitability.

Christopher D. Glynn: Got it. That makes sense. Thanks. Thanks for the answer.

Speaker Change: Got it that makes sense.

Speaker Change: Thanks, Thanks for the answers.

Christopher D. Glynn: Thanks for your questions, Chris.

Speaker Change: Thanks for your questions Chris.

Operator: Your next question comes from the line of Suri Boroditsky from Jeffreys. Your line is open.

Christopher D. Glynn: Your next question comes from the line of Surya <unk> from Jefferies. Your line is open.

Saree Emily Boroditsky: Hi, thanks for taking my question. Just building on what you were just talking about, you mentioned some manufacturing issues impacting the first quarter margin in industrials. Could you just size that impact for us so we can think about the recovery in margins there?

Saree Emily Boroditsky: Hi, Thanks for taking my question.

Saree Emily Boroditsky: Just building.

Saree Emily Boroditsky: Are you just talking about you mentioned some manufacturing issues impacting the first quarter margin in industrial could you size that impact for us. So we can take about the recovery in margins there.

Meenal Anil Sethna: Yeah, I mean, I would think about it as I mentioned two things. One, I would say just some additional costs we incurred, but also just some capacity constraints as we were, you know, without getting into the weeds, you know, doing some things about moving equipment around. So, you know, from a growth perspective, I'd say we were probably looking at a couple points of growth on the top line, which, of course, drops into the margin, and then just, you know, maybe a point or so on cost. So again, as we work through that, I expect we still have a little bit of activity here in the second quarter, but we absolutely expect it to get better.

Saree Emily Boroditsky: Yeah.

Speaker Change: I would think about it as I mentioned two things one I would say just some additional costs, we incurred but also just some capacity constraints that we were.

Meenal Anil Sethna: Without getting into the weeds on moving equipment around so I'd say from a growth perspective.

Meenal Anil Sethna: Say, we were probably looking at it a couple of points of growth on the top line, which of course are dropped into the margin and then just maybe a point or so on costs. So again as we work through that I expect we still have a little bit of activity here in the second quarter, but we absolutely expect it to get better.

Saree Emily Boroditsky: That's helpful. And speaking of industrials, you talked about some weakened industrial markets, and you provided some great detail on that. Maybe just think about, as you think about the improving signs of de-stocking, how do we actually think about the overall end market demand and how that impacts sales as we think about the remainder of the year?

Meenal Anil Sethna: Okay.

Meenal Anil Sethna: That's helpful. Sam Industrials, you talked about some weakened industrial markets you provided some great detail on there.

Saree Emily Boroditsky: Maybe just think about.

Saree Emily Boroditsky: As you think about the improving signs of Destocking, how do we actually think about the overall end market demand and how that impacts sales how to think about the remainder of the year.

David W. Heinzmann: Yeah, specific to the industrial kind of softening, I would say that kind of impacts two different parts of our business. Within the electronics segment, our power semiconductor business is heavily indexed to broad-based industrials. There, we clearly saw softening demand, and our current view is that's... We can expect that to probably continue for the next couple of quarters in that side of it.

Speaker Change: Yes specific to the <unk>.

David W. Heinzmann: Just curious kind of softening I would say that kind of impacts to different parts of our business within the electronics segment, our power semiconductor business is heavily indexed to broad based industrials.

David W. Heinzmann: There, we clearly saw softening demand and our current view is that.

David W. Heinzmann: We can expect that to probably continue for the next couple of quarters.

David W. Heinzmann: That side of it and then it also shows up in our industrial segment, where we saw and we talked a little bit about it in the prepared remarks kind of mixed signals.

David W. Heinzmann: And then it also shows up in our industrial segment, where we saw, and we talked a little bit about in the prepared remarks, kind of a mix of signals, there were some broad-based areas that were slower, but other areas that had strength. So on the renewable energy side of things, where we tend to the big driver for us, there are two categories. One is energy storage, and the other is a kind of grid-level sort of solar installations and wind energy.

David W. Heinzmann: Signals there were some broad based areas that were slower but other areas have had strength. So unlike renewable energy side of things, where we tend to the big driver for US. There is in two categories. One is energy storage and the other is kind of grid level sort of solar in.

David W. Heinzmann: Deletions and wind energy.

David W. Heinzmann: And grid-level solar has slowed, and we've seen that be slower, but the energy storage side continues to be really robust. So our best view right now is that industrial space, you know, probably remains at this slower pace or perhaps a couple quarters before we start seeing that come back, you know, a little.

David W. Heinzmann: The grid levels solar has slowed and we've seen that be slower.

David W. Heinzmann: But the energy storage side continues to be continued really robust. So our best view right now is that industrial space.

David W. Heinzmann: Probably remains at the slower pace or perhaps a couple of quarters before we start seeing that come back.

David W. Heinzmann: Although stronger.

Saree Emily Boroditsky: I appreciate all the color there. Thank you.

Speaker Change: I appreciate all the color there. Thank you.

David W. Heinzmann: Thanks for your questions, Terry.

Speaker Change: Thanks for your question sorry.

Operator: Your next question comes from a line David Williams from Benchmark. Your line is open.

David W. Heinzmann: Your next question comes from the line of David Williams from Benchmark. Your line is open.

David Neil Williams: Hey, good morning, and thanks for taking my question. I guess, first, David, is there a way to think about the level you're undershipping relative to, say, consumption? And maybe you can speak to how you're feeling about your level of visibility there across maybe the full supply chain. I think in the past, you've mentioned that EMS inventory was still elevated, but it was challenging to get a good view there, or at least some better granularity, but you mentioned you feel like that's getting better. So just anything that could help there around those two things.

David Neil Williams: Hey, good morning, and thanks for taking my questions.

David Neil Williams: I guess first if any is there a way to think about that the level you are under shipping relative to maybe in consumption and maybe if you can speak to how you're feeling about your level of visibility there across the full supply chain I think in the past you've mentioned that you Miss inventory was still elevated but it was challenging.

David Neil Williams: Get a good view there.

David Neil Williams: Some better granularity, but you mentioned you feel like that's getting better so just anything that could help their round around listings. Thank you.

David W. Heinzmann: sure yeah and we've talked about how in the electronic side of our business that been a bit of a elongated cycle so it's the peak to trough has been a little longer than we have typically seen before and we really think that based on our analysis and the work we do with customers is that it was really driven out of the fact that in customers EMS OEMs you know, bulked up a little more on inventory in this past cycle than historically they have because of all the disruptions that were taking place. So that's what's kind of elongated it.

David Neil Williams: Sure.

David Neil Williams: We've talked about how in the electronics side of our business that it's been a bit of a elongated cycle.

David W. Heinzmann: The peak to trough has been a little longer than we've typically seen before and we really think that.

David W. Heinzmann: Just on our analysis and the work we do with customers is that.

David W. Heinzmann: It was really driven out of the fact that in customers EMS Oems.

David W. Heinzmann: Bulked up a little more on inventory and this past cycle than historically, they had because of all the disruptions that were taking place. So that's what's kind of a long dated so right now as we tried to get a better handle on the in customers' inventories we.

David W. Heinzmann: So right now, as we try to get a better handle on the end customers' inventories, we have discussions with them, and we have discussions with our distribution partners to kind of get a sense of what they're seeing on demand and, you know, what they're seeing from, for example, EMS customers. What the general sense is we're getting at this point in time is that it's getting closer to working its way out. So maybe in the next quarter or so, when that access at the end ends, customers will begin to get to a more normal level.

David W. Heinzmann: We have discussions with them, we have discussions with our distribution partners to kind of get a sense of what they're seeing on demand and.

David W. Heinzmann: What theyre seeing from as example, EMS customers with.

David W. Heinzmann: But the general sense is we're getting at this point in time is that it's getting closer to working its way out so maybe in the next quarter or so that that access at that and customers begin to get to a more normal level.

David W. Heinzmann: And we have full visibility, of course, to our distribution partners in the channel, so that mix of it gives us a little more confidence that we think things will get back to a bit normal, a bit more of a normal, sell-in to sell-out sort of mode as we head into the back half.

David W. Heinzmann: And we have full visibility of course to our distribution partners in the channel so that mix of it that's what gives us a little more confidence that we think things will get back to normal but more of a normal.

David W. Heinzmann: Sell in to sell out startup mode as we head into the back half of the year.

David Neil Williams: Okay, thanks, and how about any thoughts on what level of undershipment is relative to demand?

Speaker Change: Great, Thanks, and how about any any thoughts on what level of under shipment relative to demand.

David W. Heinzmann: You know, that's the it's a complex equation on that, and it really comes down to looking at what the inventory burn is every month. You know, and then the harder one to get a handle on is the piece that lowers the POS at our distribution partner. So I wish I could give you a bit crisper answer on that. We are going to be doing a challenging one to kind of put our arms around at this point because while we can tell you exactly what it is on the inventory burn at our distribution partners, we can't get that pure visibility at the OEM customer or EMS customer. So it's a little more challenging to give you great visibility on that, and it's hard for us to have fantastic visibility as well.

David Neil Williams: Yes.

Speaker Change: It's a complex.

David W. Heinzmann: Equation on that and it really comes down to looking at what the inventory burn is every month.

David W. Heinzmann: And then the harder one to get a handle on is the piece that lower.

David W. Heinzmann: At our distribution partners.

David W. Heinzmann: So I wish I could give you a bit crisper answer on that that's a challenging one to kind of put our arms around at this point because we while we can tell you exactly what it is on the inventory burn at our distribution partners.

David W. Heinzmann: We can't get that pure visibility.

David W. Heinzmann: OEM customer EMS customers.

David W. Heinzmann: It's a little more challenging to give you great visibility on that and it's hard for us to have fantastic visibility as well.

David Neil Williams: That's fair. Thanks for the color there.

Speaker Change: Okay. That's fair thanks for the color there and then just lastly here I think last quarter, you had pointed to maybe the semi inventory being cleaned up.

David W. Heinzmann: And then just lastly here, I think last quarter you had pointed to maybe the semi-inventory being cleaned up coming out of the fourth quarter, but it seems like now maybe it's more of a demand issue. And if you're looking across that, is that still kind of a fair way to think about it, that it's demand driven? Is inventory clean, or is there still some excess you're cleaning up and maybe a little softer in demand? Thank you. Yeah, with

David W. Heinzmann: Coming out of the fourth quarter, but it seems like now maybe it's more of a demand issue and if youre looking across that is that still is kind of a fair way to think about it that it's demand driven inventory is clean or is there still some excess just cleaning up and maybe a little softer in demand. Thank you.

David W. Heinzmann: Yeah, within the semiconductor piece of our business, we have two pieces. We have our protection semiconductor business, which behaves a lot more like our passes, and there's still some excess inventory in the channels to work our way through. On the power semiconductor side of things, we really were talking probably more about backlog at our site as opposed to excess inventory, because there has not been a lot of excess inventory on the power semiconductor side of things. We have cleaned up a lot of that backlog, and we're back to more normal sorts of lead times on the power semiconductor side, which itself brings down our shipping levels.

Speaker Change: Yeah within the within the semiconductor piece of our business. We have two pieces, we have our protection semiconductor business.

David W. Heinzmann: Which behaves a lot more like our passes and there's still some excess inventory in the channels to work our way through on the power semiconductor side of things, we really we're talking probably more about backlog at our sites as opposed to excess inventory because there has not been a lot of excess inventory on the power.

David W. Heinzmann: <unk> side of things, we have cleaned up a lot of that backlog and we're back to more normal sorts of lead times on the power semiconductor side, which itself brings down then our shipping levels.

David W. Heinzmann: And then, in addition to that, we would see that there is softness in the industrial market. We're seeing that with a kind of broad-based industrial side of things where we're seeing that softness. We're not alone in that. I think a lot of our peers are seeing that as well right now, and that's, you know, think about things like industrial automation and areas like that where they're seeing some of that slowness at this point. So we have both the lack of backlog cleanup to drive demand, as well as a little slower demand there, but not so much an inventory overhang.

David W. Heinzmann: And then in addition to that we would see that there is softness in the industrial markets.

David W. Heinzmann: And we're seeing that with kind of a kind of broad based industrial side of things, there, where we're seeing that softness.

David W. Heinzmann: Not alone in that and I think a lot of our peers are seeing that as well right now.

David W. Heinzmann: Think about things of.

David W. Heinzmann: Industrial automation and areas like that where they are seeing some of that slowness at this point in time. So we've got both the lack of.

David W. Heinzmann: Backlog cleanup to drive as well as a little slower demand there, but not so much an inventory overhang in that site.

David Neil Williams: Great. Thanks so much for the color. I appreciate it.

Speaker Change: Great. Thanks, so much for the color I appreciate it.

David W. Heinzmann: Thanks for your questions, David.

Speaker Change: Thanks for your questions David.

Operator: Your next question is a follow-up to the line from Christopher Glynn from Oppenheimer. Your line is open.

David W. Heinzmann: Your next question is a follow up from the line of Christopher Glynn from Oppenheimer. Your line is open.

Christopher D. Glynn: Yeah, thanks. I just want to ask about a comment you made about HVAC signs of a bottom there. I think that's primarily the Heartland acquisition. But, you know, what are the signs, what is that?

Christopher D. Glynn: Yes. Thanks, just wanted to ask you about.

Christopher D. Glynn: Comment you made about HVAC signs of a bottom there.

Christopher D. Glynn: That's primarily the Heartland acquisition, but.

Christopher D. Glynn: Are the signs what is that is that like.

David W. Heinzmann: Is that like a much more pressured 1Q than you expected? So almost by default, it's a bottom? Or what's the contour behind that?

Christopher D. Glynn: Much more pressured <unk> than you expected so almost by default, that's a bottom or what.

David W. Heinzmann: What's kind of the contour behind that climate.

David W. Heinzmann: Yeah, I think the comments behind that are really, and they're primarily driven out of the view of the residential HVAC space, which is a heavier piece of that Heartland Controls business, where, as you're aware, the inventory of our HVAC customers' inventory in the channel with their distribution, things like that, has been pretty elevated, which has certainly dampened demand for that. It feels like signals we're getting from some of our customers that, you know, they're beginning to clean up some of that inventory.

David W. Heinzmann: Yes, I think the.

David W. Heinzmann: The comments behind that are really in there primarily driven out of the view of residential HVAC space, which is a heavier piece of that heartland controls business, where.

David W. Heinzmann: As you are aware the inventory of our HVAC customers inventory in the channel with their distribution and things like that has been pretty elevated which is certainly dampened demand on that it feels like signals, we're getting from some of our customers that.

David W. Heinzmann: They are beginning to clean up some of that inventory and so there is.

David W. Heinzmann: A bit of view of positive trend on inventory are on demand orders on us from that side.

David W. Heinzmann: And so there's, you know, a bit of a positive trend on inventory or on demand orders for us from that side. It's not, you know, snapping back. That's not what I'm talking about, but it feels like it's kind of found the bottom a little bit there.

David W. Heinzmann: Snapping back that's not what I'm talking about but it feels like it's kind of found the bottom a little bit there.

Christopher D. Glynn: Okay, and then wondering if we could put any more color on the electronics book to bill being greater than one, was it, you know, materially so, and it is, are the bookings kind of projecting normal lead times as opposed to the different behaviors in 21 and 22?

David W. Heinzmann: Okay.

David W. Heinzmann: And then wondering if you could put any more color on the electronics book to bill being greater than one was it materially so and.

Christopher D. Glynn: Is are the bookings kind of projecting normal lead times.

Christopher D. Glynn: As opposed to the different behaviors in 'twenty, one and 'twenty two.

David W. Heinzmann: Sure, yeah, yeah, absolutely. They're the reflective of normal. You know, our lead times are quite normal across our electronics business at this point in time, so they're reflective of that. And when we talk about the book to bill being above one, that's specific to the passives part of the business. The power semi-business is below one, but the passive side of it, yeah, it's about 1.1, which is actually a pretty nice, you know, step.

Speaker Change: Sure Yes.

Speaker Change: Absolutely there the reflective of normal lead times.

David W. Heinzmann: Our lead times are quite normal across our electronics business at this point in time, so they are reflective of that and.

David W. Heinzmann: And when we talk about the book to Bill being above one that's specific to the passive as part of the business the power semi business is below.

David W. Heinzmann: But the passive side of it yes, it's about $1, one which is actually a pretty nice step.

David W. Heinzmann: And again, this is the first time we've seen a positive book-to-bill ratio in seven quarters. You know, so we, you know, we find, we look at that as a signal that, you know, the bottom has been found, and we're about to get to the end of inventory burn. And we really are starting to see more short cycle orders, which is also another sign for us when you get short cycle orders.

David W. Heinzmann: And again first time, we've seen a positive book to bill there in seven quarters.

David W. Heinzmann: So.

David W. Heinzmann: We find we look at that as a signal of that.

David W. Heinzmann: The bottom has been found in and we're about to get to the end of the inventory burn and we really are starting to see more short cycle orders.

David W. Heinzmann: Which is also another sign for us when you get short cycle orders coming in.

Christopher D. Glynn: Great. Thank you, Dave. Thanks for your follow-up, Chris.

Speaker Change: Great. Thank you Dave.

Christopher D. Glynn: Sure.

Speaker Change: Thanks for your follow up Chris.

David Kelly: That concludes our question and answer session. I will now turn the call back over to David Kelly for some final closing remarks.

Christopher D. Glynn: That concludes our question and answer session I will now turn the call back over to David Kelley for some final closing remarks.

David Kelly: Thanks everyone. We look forward to speaking with you at the May 6th Oppenheimer Virtual Industrials Growth Conference, the June 4th Stiefel Cross-Sector Insight Conference in Boston, and also the June 5th Baird Global Consumer Technology and Services Conference in New York. Have a wonderful day. Thank you.

David Kelly: Thanks, everyone. We look forward to also speaking with you at the May six Oppenheimer virtual Industrials growth conference. The June 4th Stifel Cross sector Insight conference in Boston and also the Baird Global consumer Technology and services Conference in New York have a wonder.

Speaker Change: A wonderful day. Thank you.

Operator: This concludes today's conference call. Thank you for your participation. You may now disconnect.

Speaker Change: This concludes today's conference call. Thank you for your participation you may now disconnect.

Operator: Okay.

Operator: Okay.

Operator: Yeah.