Q3 2025 Littelfuse Inc Earnings Call

Speaker #1: Good day everyone , and welcome to the Littelfuse third Quarter 2020 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 .

Operator: Good day, everyone, and welcome to the Littelfuse Third Quarter 2025 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.

Speaker #1: Please proceed .

Speaker #2: Good morning and welcome to the Littelfuse Third Quarter 2020 Earnings Conference call . With me today are Greg Henderson , president and CEO .

David Kelly: Good morning and welcome to the Littelfuse Third Quarter 2025 Earnings Conference Call. With me today are Greg Henderson, President and CEO, and Avi Kandelwal, Executive Vice President and CFO. This morning, we reported results for our third quarter, and a copy of our earnings release and slide presentation is available in the Investor Relations section of our website. A webcast of today's conference call will also be available on our website. Please advance to slide two for our disclaimers. Our discussions today will include forward-looking statements. These forward-looking statements may involve significant risks and uncertainties. Please review today's press release and our Forms 10-K and 10-Q 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.

Speaker #2: And Abhi Khandwala, Executive Vice President and CFO. This morning, we reported results for our third quarter, and a copy of our earnings release and slide presentation is available in the Investor Relations section of our website.

Speaker #2: A webcast of today's conference call will also be available on our website . Please advance to slide two for our disclaimers . Our discussions today will include forward looking statements .

Speaker #2: These forward looking statements may involve significant risks and uncertainties . Please review today's 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 .

Speaker #2: 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 .

David Kelly: 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 Greg.

Speaker #2: Is provided in our earnings release available in the Investor Relations section of our website . I will now turn the call over to Greg .

Speaker #2: Thank you . David , and thank you to everyone joining us today . I wanted to start this morning with highlights on our third quarter .

Greg Henderson: Thank you, David, and thank you to everyone joining us today. I wanted to start this morning with highlights on our third quarter and then provide an update on the progress we're making on our strategic priorities. As part of that progress, we're excited to announce the acquisition of Basler Electric. I will speak more about the acquisition and how it fits into our long-term strategy in a few moments, but we look forward to welcoming the Basler team to Littelfuse. Turning to our third quarter, we delivered revenue growth of 10% relative to the prior year, driven by strong electronics segment growth. We delivered industrial segment growth despite mixed underlying market demand. Finally, our transportation segment navigated well through a softer commercial vehicle market in the third quarter. Overall, our third quarter earnings results exceeded the high end of our guidance range, reflecting our team's commitment to operational execution.

Speaker #2: And then provide an update on the progress we're making on our strategic priorities . As part of that progress , we're excited to announce the acquisition of Basler Electric .

Speaker #2: I will speak more about the acquisition and how it fits into our long term strategy . In a few moments , but we look forward to welcoming the Bachelor team to Littelfuse .

Speaker #2: Turning to our third quarter , we delivered revenue growth of 10% relative to the prior year , driven by strong electronics segment growth .

Speaker #2: We delivered industrial segment growth despite mixed underlying market demand . Finally , our transportation segment navigated well through a softer commercial vehicle market in the third quarter .

Speaker #2: Overall , our third quarter earnings results exceeded the high end of our guidance range , reflecting our team's commitment to operational execution . Looking forward , we expect solid fourth quarter revenue and earnings growth versus the prior year , supported by our third quarter bookings , which were up more than 20% versus the third quarter of 2020 .

Greg Henderson: Looking forward, we expect solid fourth quarter revenue and earnings growth versus the prior year, supported by our third quarter bookings, which were up more than 20% versus the third quarter of 2024. Avi will discuss specific results and our outlook in more detail shortly, but I want to thank our global team for their persistent hard work and efforts. Now, I want to share the progress we're making on our first strategic priority, which is to enhance our focus on future growth opportunities around the safe and efficient transfer of electrical energy. I wanted to start with the acquisition of Basler Electric. Basler provides essential and innovative electrical control and protection solutions for high-growth power generation and distribution markets. They are market leaders in grid and utility infrastructure and add significant new capabilities to Littelfuse in the areas of high-voltage excitation and very high energy protection.

Speaker #2: For Abby will discuss specific results and our outlook in more detail shortly . But I want to thank our global teams for their persistent hard work and efforts .

Speaker #2: Now I want to share the progress we're making on our first strategic priority , which is to enhance our focus on future growth opportunities around the safe and efficient transfer of electrical energy .

Speaker #2: I wanted to start with the acquisition of Basler Electric. Basler provides essential and innovative electrical control and protection solutions for high-growth power generation and distribution markets.

Speaker #2: They are market leaders in grid and utility infrastructure and add significant new capabilities to fuse in the areas of high voltage excitation and very high energy protection .

Speaker #2: In addition , as data centers have such significant power generation demand , Basler has key exposure to local data center power solutions . Basler has a long history of selling complete solutions to a deeply embedded industrial customer base .

Greg Henderson: In addition, as data centers have such significant power generation demand, Basler has key exposure to local data center power solutions. Basler has a long history of selling complete solutions to a deeply embedded industrial customer base. They complement our industrial segment portfolio, and their addition will broaden our OEM exposure, particularly in grid and utility infrastructure, where Basler is a key partner to industry-leading innovators. We are confident the addition of Basler will deliver long-term value for Littelfuse. Looking forward, strategic acquisitions will continue to be a key priority for us, supported by our strong balance sheet and cash generation. In addition to the acquisition and across Littelfuse, we continue to see meaningful traction in our new business pipeline. Our teams are executing well, converting our growing funnel to future revenue opportunities. Supporting this, our design wins are tracking up double digits year to date.

Speaker #2: They complement our industrial segment portfolio and their addition will broaden our OEM exposure , particularly in grid and utility infrastructure , where Batchelor is a key partner to industry leading innovators .

Speaker #2: We are confident the addition of Bassil will deliver long term value for Littelfuse . Looking forward , strategic acquisitions will continue to be a key priority for us , supported by our strong balance sheet and cash generation .

Speaker #2: In addition to the acquisition and across Littelfuse , we continue to see meaningful traction in our new business pipeline . Our teams are executing well , converting our growing funnel to future revenue opportunities .

Speaker #2: Supporting this , our design wins are tracking up double digits year to date . As an example of our momentum in the quarter , we delivered a Multi-technology design win for a market leader in a 400 volt battery charging application .

Greg Henderson: As an example of our momentum, in the quarter, we delivered a multi-technology design win for a market leader in a 400-volt battery charging application. This charging solution brings best-in-class safety and protection while delivering an optimized form factor and efficiency. Our solution utilizes our market-leading capabilities of passive and semiconductor overvoltage protection, electromechanical overcurrent protection, and our power semiconductor technologies. Combined, our solution enables a more precise and efficient current flow while protecting against potential surges from the power grid. Importantly, this multi-year partnership will start production with revenue contributions in 2026. Our second strategic priority is to provide more complete solutions for a broader set of our customers and to increase our engagement with our key customers and market leaders. To accomplish this, in the third quarter, we formally realigned our sales structure to better serve our broad customer base with our market-leading technologies.

Speaker #2: This charging brings best in class safety and protection , while delivering an optimized form factor and efficiency . Our solution utilizes our market leading capabilities of passive solution overvoltage protection , electromechanical overcurrent protection , and our power semiconductor technologies combined .

Speaker #2: Our solution enables a more precise and efficient current flow while protecting against potential surges from the power grid . Importantly , this multi-year partnership will start production with revenue contribution in 2026 .

Speaker #2: Our second strategic priority is to provide more complete solutions for a broader set of our customers and to increase our engagement with our key customers and market leaders .

Speaker #2: To accomplish this , in the third quarter , we formally realigned our sales structure to better serve our broad customer base with our market leading technologies .

Speaker #2: As part of this realignment , we established three market facing sales organizations , with leaders who bring extensive experience and leadership across our evolving end markets .

Greg Henderson: As part of this realignment, we established three market-facing sales organizations with leaders who bring extensive experience and leadership across our evolving end markets. Our sales leaders will be supported by a realigned sales force that is now market-facing, customer-centric, and reinvigorated to engage our customers more frequently and with our complete technology portfolio. We see two key advantages to this realignment, which is a shift from our historical approach where Littelfuse sales teams were siloed in product-centric roles. One, we can now work more closely with our customers to help better understand and solve their technology challenges with our full product portfolio. Two, we can collaborate more meaningfully with our customers on their future technology roadmaps, which will better inform and ultimately shape our R&D efforts. We believe our sales evolution will enhance our visibility to our end market technology advancements and strengthen our long-term market leadership.

Speaker #2: Our sales leaders will be supported by a realigned sales force that is now market facing customer centric and reinvigorated to engage our customers more frequently .

Speaker #2: And with our complete technology portfolio . We see two key advantages to this realignment , which is a shift from our historical approach , where Littelfuse sales teams were siloed in product centric roles .

Speaker #2: One , we can now work more closely with our customers to help better understand and solve their technology challenges with our full product portfolio .

Speaker #2: Two we can collaborate more meaningful with our customers on their future technology roadmaps , which will better inform and ultimately shape our R&D efforts .

Greg Henderson: While we are in the early innings of our go-to-market evolution, we are beginning to see signs of increased traction with customers. This is best exemplified by our data center go-to-market strategy, where we're early to apply our new sales model. Our data center revenue continues to grow significantly, while year to date, our data center design wins are up more than 50% versus the prior year. We are capturing multi-technology wins with leading hyperscaler, cloud, and infrastructure customers. We are also deeply engaged with market leaders that are building gigawatt-scale AI factories, and we are leveraging strong global collaboration and customer relationships through the data center ecosystem. Further, as we are more strategically focused on the leading customers in the data center market, we are sharpening our R&D efforts and building a strong pipeline around new products.

Greg Henderson: Turning to our third strategic priority, we are focused on driving operational excellence as we grow. Today, I wanted to highlight our power semiconductor opportunity. Enhancing our long-term growth and profitability positioning in this area is a leading priority for our team. Our power semiconductor capabilities are critical to the safe and efficient transfer of electrical energy. Importantly, when combined with our market-leading protection offering, our semiconductor technologies can provide us a unique value proposition. Our long-term goal is to deepen our engagement with power semiconductor customers, better utilize our footprint, and ultimately drive improved long-term execution. As part of this initiative, in the third quarter, we announced the hiring of Dr. Karim Hamed as the new leader of our semiconductor business.

Greg Henderson: Karim most recently served at Analog Devices and brings a wealth of semiconductor industry, technology, and operational experience, and we're excited to have him as part of our leadership team. Taking a step back, we delivered a strong third quarter and are well positioned to drive further momentum through year-end. We will continue to execute on our three strategic priorities as we aim to scale our company with the goal of delivering long-term best-in-class performance and returns. With that, I will hand the call over to Avi.

David Kelly: Thank you, Greg, and to everyone joining. I want to start by echoing Greg's sentiment as we're excited to announce the Basler acquisition. Today, I will provide some details on the acquisition, including financial metrics and the transaction timeline. I will walk you through our third quarter results, followed by our fourth quarter outlook, and we will end the call with Q&A. If you turn to slide seven, Basler has demonstrated their leadership in controlling, regulating, and protecting mission-critical equipment for evolving power applications over the last 83 years. Their technologies and market position provide a distinct competitive advantage, while their footprint is highly complementary to Littelfuse. The all-cash transaction is valued at approximately $350 million. When adjusted for the present value of expected tax benefits, approximately $30 million, the net transaction value is roughly $320 million. This represents a 13.5 times multiple for forecasted full-year 2025 EBITDA.

David Kelly: At closing, we anticipate our net leverage will be 1.4 times versus our current level of 0.9 times. We expect Basler will be accretive to adjusted EPS in 2026, while we target double-digit returns in year five post-close. We expect to close the transaction by the end of the fourth quarter of 2025 and look forward to welcoming the Basler team to Littelfuse. With that, please turn to slide eight for details on our third quarter. As Greg mentioned, we delivered strong results with revenue at the high end of the guidance range, while adjusted EPS exceeded the guidance range. Going forward, comparisons I will discuss will be relative to the prior year unless stated otherwise. Revenue in the quarter was $625 million, up 10% in total and up 7% organically. The Dortmund acquisition contributed 2% to sales growth, while FX was a 1% tailwind.

As Greg mentioned, we delivered strong results with revenue at the high end of the guidance range, while adjusted EPS exceeded the guidance message.

Going forward comparisons, I will discuss will be relative to the prior year unless stated otherwise.

Revenue in the quarter, was 625 million up, 10% in total and up 7% over again.

The Dortmund acquisition contributed 2% to sales growth.

While FX was the 1% Tailwind.

David Kelly: Adjusted EBITDA margin finished at 21.5%, down 20 basis points, as solid volume expansion and operational leverage were offset by the impact of higher stock and variable compensation. Third quarter adjusted diluted earnings was $2.95, up 9%. We also delivered strong cash generation in the third quarter. Operating cash flow was $147 million, and we generated $131 million in free cash flow. Year to date, we have generated $246 million of free cash flow, and our conversion rate is tracking at 145%, well above our long-term target of 100%. We ended the quarter with $815 million of cash on hand and net debt to EBITDA leverage of 0.9 times. In the quarter, we returned $19 million to shareholders via our cash dividend. Please turn to slide 10 for our segment highlights.

Adjusted ibitta margin finished at 21.5%.

Down 20 basis points at solid volume expansion and operational. Leverage were offset by the impact of higher stock and variable compensation.

Third quarter, adjusted elated, earnings was 2.95 up 9%.

We also delivered strong cash generation in the third quarter.

Operating cash flow was 147 million.

And we generated $131 million in free cash flow.

The year to date, we have generated $246 million of free cash flow, and our conversion rate is tracking at 145%.

Well, above our long-term Target of 100%.

We ended the quarter with 815 million of cash on hand.

And net debt to ebita leverage of 0.9 times.

In the quarter, we returned 19 million dollars to shareholders.

Via our cash debit.

David Kelly: Starting with the electronics product segment, sales for the segment were up 18% versus last year and up 12% organically. The Dortmund acquisition contributed 4%, while FX contributed 2% to growth. Sales across passive products were up 19% organically, while semiconductor products increased 5% in the quarter. Within our semiconductor products exposure, protection product sales were strong, while we observed soft power semiconductor demand. Sequentially, we delivered modest power semiconductor growth. Adjusted EBITDA margin of 24% was up 140 basis points, reflecting favorable year-over-year passive and protection volume leverage, partially offset by lower power semiconductor volumes and higher stock and variable compensation. Moving to our transportation product segment on slide 11, segment sales were flat year-over-year, as organic sales decreased 2% for the quarter, but were offset by favorable FX contribution of 2% to growth.

Please turn to slide 10 for our segment highlights.

Starting with the electronic product segment.

Sales for the segment. We're up 18% versus last year and up, 12% organically.

the Dortmund acquisition contributed 4% while FX contributed 2 points to grow

Sales across passive products increased 19% organically.

While semiconductor products increased 5% of the quarter.

Within our semiconductor products, exposure protection product sales were strong.

While we observed soft power, semiconductor demand.

Sequentially. We delivered modest power, semiconductor growth.

Adjusted ebit margin of 24% was up, 140% points.

Reflecting favorable year-over-year, passive and protection, volume Leverage.

Partially offset by lower power, semiconductor volumes, and higher stock and variable compensation.

Moving to our transportation product segment on slide 11.

Segments sales were flat year-over-year.

And organic sales decreased 2% for the quarter.

David Kelly: In the passenger car business, sales were flat organically, reflecting stable passenger car product demand offset by sensor declines. Commercial vehicle sales for the quarter decreased 3% organically, as we observed softer end market demand across on-highway, off-road, and agriculture markets. For the segment, adjusted EBITDA margin of 16.8% was down 220 basis points. Our transportation segment margins were negatively impacted by lower volume, higher stock and variable comp, and unfavorable tariff timing. We remain pleased with our transportation segment margin trajectory through a dynamic end market backdrop. Year to date, our adjusted EBITDA margin of 18.2% is up 220 basis points. On slide 12, industrial product segment sales grew 4% organically for the quarter. Third quarter sales benefited from solid energy storage, renewables, and data center growth. However, we observed softer HVAC demand and continued soft construction volume in the quarter.

But we're offset by a favorable effects contribution of 2% to growth.

In the passenger car business sales were flat organically.

Reflecting stable passenger car power demand, offset by sensor decline.

Commercial vehicle sales for the quarter, decreased, 3%, organically as The observed softer, and market demand across on Highway off-road and agriculture markets.

For the segment adjusted ebita margin of 16.8% was down 220 bits.

Our transportation segment margins were negatively impacted by lower volume.

Higher stock and variable comp and unfavorable tariff timing.

We remain pleased with our transportation segment. Margin trajectory through a dynamic and Market backdrop.

Year to date our adjusted Evita margin of 18.2% is up 220 basis points.

On slide 12.

Industrial product segment. Sales grew 4% organically for the quarter.

Third quarter sales benefited from solid energy storage, renewables, and data center growth.

David Kelly: Third quarter adjusted EBITDA margin was 20.7%, down 310 basis points, driven by unfavorable mix and higher stock and variable compensation. While margins tracked lower in the quarter, we're pleased with a solid year-to-date margin performance, which is up 290 basis points. We will continue to balance profitability with long-term growth investments and remain confident in our long-term industrial segment growth trajectory. Please move to slide 13 for the forecast. We entered the fourth quarter with a strong backlog and expect solid growth versus the prior year. We expect typical seasonality, given mixed conditions across transportation and industrial end markets. With that in mind, our fourth quarter guidance incorporates current market conditions, trade policies, and FX rates as of today.

However, we observed softer HBAC demand and continued soft construction volume in the quarter.

Third quarter adjusted Evita margin was 20.7%, down 310 basis points.

Driven by an unfavorable mix and higher stock and variable compensation.

While margins track lower in the quarter, we're pleased with the solid year. That margin performance which is up to 290 basis points.

We will continue to balance profitability with long-term growth Investments and remain confident in our long-term industrial segment. Growth trajectory

Please move to cite 13 for the forecast.

We entered the fourth quarter with a strong backlog and expect solid growth versus the prior year.

We expect typical seasonality given mixed conditions across transportation and Industrial and markets.

David Kelly: We expect fourth quarter sales in the range of $570 to $590 million, which is 5% organic growth at the midpoint and two points of growth stemming from our Dortmund acquisition. We are projecting fourth quarter EPS to be in the range of $2.40 to $2.60, which assumes a 60% flow to the midpoint. Fourth quarter guidance also assumes an unfavorable impact from stock and variable compensation of $0.40 and a $0.15 headwind from a higher adjusted effective tax rate. Moving to slide 15, for the full year 2025, we're assuming $59 million in amortization expense and $34 million in interest expense, two-thirds of which we expect to offset through interest income from our cash investment strategies. We're estimating a full-year tax rate of 23% to 25% and expect to spend $80 to $85 million in capital expenditures. With that, operator, please open the call for Q&A.

With that, in mind, our fourth quarter guidance, in corporate current market conditions, trade policies and FX ways as of today.

We expect affordable sales in the range of $570 million to $590 million.

Which is used 5% organic growth at the midpoint and 2 points of growth stemming from our Dortmund, acquisition.

We are projecting fourth quarter EPS to be in the range of 2.40 to 2.50.

Which assumes a 60% flow throughout the midpoint.

Fourth quarter guidance, also assumes an unfavorable impact from stock and wearable compensation of 40 cents.

And a $0.15 headwind from a higher adjusted effective tax rate.

Moving to cite 15 for the full year 2025. We're assuming 59 million in amortization expense and 34 million in interest expense.

2/3 of which we expect to offset through interest income.

From our cash investment strategies.

We're estimating a full-year tax rate of 23% to 25%.

And expect to spend $80 to $85 million in capital expenditures.

With that operator, please open the call for Q&A.

Operator: We will now begin the question and answer session. If you would like to ask a question at this time, simply press star followed by the number one on your telephone keypad. To withdraw your question, press star one again. Your first question comes from the line of Luke Junk with Baird. Luke, please go ahead.

We will now begin the question and answer session. If you would like to ask a question at this time, please press star followed by the number 1 on your telephone keypad. And to withdraw, your question, press star 1 again.

[Analyst 1]: Good morning. Thanks for taking the questions. Maybe, and apologies, I missed part of the prepared remarks. Maybe if we could start with power semiconductor business? I think Avi mentioned that it did see some growth sequentially despite still being soft year over year. Can you just speak to book to bill there, kind of the outlook into the fourth quarter in power semiconductor business and some of the puts and takes from a demand standpoint, and then how you'd expect any improvement to flow to margins as well. Thank you.

And your first question comes from the line of Loukia with Beard. Look, please go ahead. Uh, good morning, thanks for taking questions. Um, maybe, uh, an apology, I missed part of the prepared remarks. Maybe if we could start with Power. Send me, I think it was mentioned that it...

Did see some growth sequentially despite still being soft. Do you rear? Can maybe you just speak to book to build their um kind of the Outlook into the fourth quarter in power semi and some of the puts and takes from a demand standpoint and then how you'd expect any Improvement to flow to flow to margins as well. Thank you.

Greg Henderson: Yeah, thank you, Luke. This is Greg. Maybe I'll start and then hand it to Avi to give a little bit more color. Just kind of zooming out on PowerSemi, and we've talked about this before. I think our view on the PowerSemi business is that it is strategically important from a strategic perspective as part of our overall portfolio and part of our safe and efficient transfer of energy. Actually, in the example I gave on the battery charging solution in the script, that is a protection solution, and it uses our semiconductor protection, our passive protection, but actually also uses power semiconductors as part of the overall customer solution. Actually, Basler also is a customer of Littelfuse today and actually has a lot of semiconductor content in their solutions for protective relays and in their excitation system. Semiconductors is an important part of our business.

Yeah, thank you, Luke. This is uh, Greg. Maybe I'll start and then hand it to to, to Abby to give a little bit more color. But, you know, just kind of zooming out on power semi and we talked about this before. I think, you know, our view on the power steering business is that it is strategically important from a strategic perspective, um, as part of our overall portfolio and part of our safe and efficient transfer of energy. Actually, in the, the example I gave on the uh on the battery charging solution in the script, that is a protection solution. And it uses our semiconductor protection, our passive protection, but actually also uses power semiconductors as part of the overall customer solution.

Greg Henderson: I think, as we've said before, we have had some issues internally from kind of an execution perspective. We talk about our strategic priorities as a company on sharpening our focus and improving our go-to-market and improving our operational performance. All three of those apply to our semiconductor business as well. We're working on sharpening the strategy, improving our execution. This is going to take some time, but we're on the journey. Maybe I'll give it a hand to Avi to give a little bit more specific color.

David Kelly: Yeah, no, I think Greg covered it, but I think if you kind of think about my prepared remarks, Luke, and what I mentioned, if I think about our Q3 performance in our power semiconductor business, Q2 to Q3, we saw sequential improvement, right? Year over year, we're still down, but as you kind of think about our performance in Q3 versus Q2, we did see improvement in the quarter.

Um, and actually Bachelor also as a as a customer of a little fuse today and actually has a lot of semiconductor content in their solutions for protection relays and, uh, in their excitation system. So semiconductors is an important part of our business. But I think as we've said before, uh, we have had some issues, uh, internally from kind of an execution perspective. So um, if we talk about our strategic priorities as a company on sharpening our focus and uh and improving our go to market and improving our operational performance and actually all 3 of those apply to our semiconductor business as well. So, you know, we're we're working on sharpening, the strategy, improving our execution. Um, and so this is going to take some time. But, uh, we we're on the journey and maybe I'll give it a hand to Toby to give a little bit more specific color. Yeah, no, I think Greg covered it, but I think if you kind of think about my prepared remarks look and what I mentioned, um if I think about a Q3 performance in our power semi business, Q2 to Q3 we saw sequential Improvement, right? Year-over-year. We're still down but

Versus Q2 with the Improvement in the in the core.

[Analyst 1]: Very helpful. Thank you. Just a quick one on the $0.40 stock comp. Is that an outsized impact in the fourth quarter? I know typically stock comp, from a seasonal standpoint, tends to be weighted. I think you said Q2 and Q3 this year. Just want to make sure I understand the greatest impact.

David Kelly: Yeah, absolutely. I can walk you through it, Luke. There are two things here. It's not just stock comp. It's also the impact of variable comp. If you kind of think about our last year performance and where we ended the year, our teams didn't get paid. This is a reset back to paying at target. That's the majority of the $0.40 headwind. A small portion of that is just the year-over-year impact of stock comp.

[Analyst 1]: Got it. If we just put it in different words, as we think into this, into 2026, that especially the variable comp, you should kind of normalize. Is that the right way to think about it?

Very helpful. Thank you. Um, just a quick 1 on the um, the 40 cents stock comp is that uh, an outside impact on the fourth quarter. I know typically stock cam from a seasonal standpoint tends to be weighted. I think you said 2k and 3Q this year, just want to make sure I understand that for impact. Yeah, absolutely. I'd love it though. It look. Um, so there's 2 things here. It's not all. It's not just stock comp. It's also the impact of um, wearable comps. If you kind of think about our last year performance and where, you know, where we ended up the year, our teams didn't get paid. So this is a reset back to paying a Target that's majority of the of the 40 Cent headwind and then a small portion of that is just the year-over-year impact of stock cam.

David Kelly: That is absolutely correct. If you think about 2026, on a year-over-year basis, 2026 versus 2025 will be normalized. Given our performance in 2024, like I said, we didn't pay the variable comp piece of it, and you saw a good guy in the P&L. This year you're just seeing it being reset back to target. Just to kind of build on that story, as you think about our Q4 guide, at the midpoint, what you're really seeing is an EBITDA conversion of 60% on our top line growth on a year-over-year basis.

Got it. So if we just put it in a different way, it says we think into, then into this, into 2026, that especially the variable account, you should kind of normalize. Is that the right way to think about it?

That is absolutely correct. If you think about 2026 on a year-over-year basis is 26 versus 25 would be normalized but given a performance and 24. Like I said, we didn't pay the um the verbal comp piece of it. And so you saw a good guy on the piano and this year you were just seeing it being reset back to Target. So if you, you know, just to kind of build on that story then as you kind of, think about a Q4 guide at the midpoint where you're really seeing is a, is a version of 60% on our Topline growth on a year-over-year basis.

[Analyst 1]: Very helpful. Thank you. Lastly, apologies if I missed any comments on this, but Greg, just be curious to get your kind of incremental update on your efforts in data center, both near-term opportunities hitting, maybe things that can move quicker over the next quarter or two, and your progress getting designed into sockets on future architectures as well. Thank you.

Greg Henderson: Yeah, thanks, Luke. I think we continue to be excited about our momentum in data center, and we continue to make progress. Actually, we talked about in the call this sales realignment that we did across the business. We actually did this a little bit earlier in data center, and we are making progress. Design wins are up more than twice year to date. I would say that data center is, you know, our growth in the quarter. Data center was a meaningful driver of overall growth in the quarter. We are continuing, we have meaningful revenue now from data center based on activities that we've had in the past. We have improvement on our go-to-market strategy. Our design wins are up, and with our improved focus from a go-to-market perspective, we're getting closer to our customers.

Very helpful. Thank you. And then, lastly, um, and apologies if I missed any comments on this. Um, but Greg, just curious to get your kind of incremental update on your efforts in data center, both near-term opportunities hitting, you know, maybe things that can move quicker over the next quarter or two, and then your progress getting designed into sockets on future architectures as well. Thank you.

Yeah, thanks uh, Luca. I think um, we continue to be uh excited about our momentum and data center and we continue to make progress and actually we talked about in the call. Um, this sales realignment that we did across the business, we actually did this a little bit earlier and data center. Um, and we're and we are making progress. Uh design wins are up more than 12 to twice year to date and I would say that data center is uh you know our growth in the quarter um data center was a meaningful driver of overall growth in the quarter. So we are continuing we have meaningful Revenue now from data center based on activities that we've had in the past

Greg Henderson: We're working more closely with hyperscalers, with cloud computing companies, and starting to work more on our long-term R&D roadmap around that as well. I think this is something that is the message I would say is it's delivering growth now. We do believe that with our enhanced focus, it's going to continue over time.

We have Improvement on our go to market strategy. Uh, we, our design wins are up and with our improved, Focus From A go to market perspective, we're getting closer to our customers. We're working more closely with hyperscalers with cloud computing companies and, um, starting to work more on our long term R&D roadmap around that as well. So I think this is something that is the message I would say is that delivering growth now. Um, and we do believe that

With our enhanced Focus, it's going to continue over time.

[Analyst 1]: Great. I will leave it there. Thank you for all the color.

Greg Henderson: Thanks, Luke.

Great, I will leave it there. Thank you for all the color.

Thanks l.

Operator: Your next question comes from the line of Christopher Glynn with Oppenheimer. Christopher, please go ahead.

You're next question comes from the line of Christopher glean with Oppenheimer. Christopher, please go ahead.

[Analyst 2]: Thanks. Yeah, good morning all. Just want to build on the last question on the data center comment. I think I heard up over 50% and up maybe doubled just on the last question about the design wins. I just want to clarify that. Is that like an account of the design win instances or a dollar value? Just trying to think of what that might imply for growth, what the design end-to-revenue kind of lead time is like. Maybe if we could clarify what the current scope of the data center business is for Littelfuse.

Uh thanks. Yeah good morning all just want to uh build on last question on the data center coming. I think I heard up over 50% and up uh maybe doubled just on the last question about the design wind so just want to clarify that and is that like a a count of the design win instances or a dollar value? Just trying to think of um,

You know what, that might imply for growth. Uh what? What the the design in to revenue kind of lead time is like,

Greg Henderson: Yeah, maybe I'll start with a little clarification. Thank you, Chris. I'll hand to Avi for a little bit more. Just to clarify, I think that what we are saying now in the quarter, data center was a meaningful driver of our overall growth. I think that's the first thing I want to say. That's kind of revenue in the quarter. Design wins being up, it's design wins that are up more 2X on a year-on-year basis. Basically, design wins this year, year to date, year on year versus a year ago. We track design wins as when things, the timing of that varies a little bit, right? The timing of that varies. It's a little bit hard to predict just based on that one number. I would say that data center is one of the faster markets.

Uh, and maybe if we could clarify what the current scope of of the data center business is for little fuse.

Yeah, maybe I'll start with a little clarification. Thank you, Chris. And then I had to Abby for a little bit more but just to clarify, right? I think that what we are saying now in the quarter, uh, data center was a meaningful driver of our overall growth. I think that's the first thing I want to say. So that's kind of Revenue in the quarter. Uh, design wins being up, its design wins that are up more 2x on a year-on-year basis. So, basically design wins this year, you're on, you know, in the design wins year to date year on year versus a year ago.

Greg Henderson: If you compare to some of our markets like automotive or industrial, which take longer to go from design win to revenue, data center, as is probably not surprising, is a relatively faster market. That's what I'll say. Maybe I'll hand to Avi to give a little bit more color on the relative impact of data center.

David Kelly: Yeah, Chris, thanks for the question. I think the best way to think about the data center growth is if you kind of look at our electronics segment performance. You know, it's a good reflection of our data center exposure. That's where you see the real growth in terms of the segment being up 18%, 12% organic, passive products being up 19% organically, right? Now, we haven't quantified the exact impact of data centers for us as a total company, but I would say it's high single digits.

Attend to Abby to give a little bit more color on the relative, um, well, relative impact of data center. Yeah, so, so, Chris. Thanks for your question. Um, I I think the best way to think about the data center growth is we kind of look at Electronics, electronic segment performance. You know, it's a it's a good reflection of our data center exposure and and that's where you see, you know, the real growth in terms of, you know, the segment being up, 18, 12%, organic passive products being up, 19% organically right now. We haven't Quantified the exact impact of data centers for us as a total company. But I would say it's it's high single digits.

[Analyst 2]: Okay, great. Appreciate that. I'm sure we'll get a further deep dive in February. It sounds like the overall company is seeing some good momentum in new business opportunities. How's that funnel looking besides data center? I'm curious, at least, especially for industrial where, you know, first half you had really outsized outgrowth and, you know, that moderated a bit. I don't know if there's some noise in any channels or just a real noisy quarter for Resy HVAC, which is well known. I'm curious about the kind of scalability for industrial and the NBO funnel there, you know, as it pertains to maybe expanding the outgrowth that you saw year to date.

Greg Henderson: Yeah, thank you, Chris. I think let me just start by if we zoom out to the industrial segment, I mean, we had solid growth in the quarter and actually have had many quarters of solid industrial growth. In the quarter, growth was driven by markets that continue to see strong demand and do well: energy storage, renewables, data center infrastructure, and actually some of our industrial business plays into data center infrastructure that continue to see strong demand. That said, as you note, we do have a softer residential HVAC demand and the construction MRO continues to be soft. That's kind of where there's a mixed performance. We do have exposure there, which has made maybe a little bit more muted performance on the industrial in the quarter. If you zoom out from eight quarters of growth, this continues to be a significant investment area and growth driver.

Okay, great. Appreciate that. I'm sure we'll get a a further deep dive in temporary. And then, um, you know, it it sounds like the overall company is seeing some good momentum and, uh, new business opportunities house house. That funnel looking, uh, besides Data Center and curious at least, uh, especially for industrial where, you know, first half you had really outside out growth and, uh, you know, that moderated a bit. I don't know if there's some noise in any channels or just a real noisy quarter for resi HVAC, which is well known. But um, curious about the kind of scalability for industrial and the and and funnel there, uh, you know, as pertains to maybe extending the outgrowth that you saw a year to date.

Greg Henderson: We mentioned that Basler Electric is an acquisition as well that brings significant kind of industrial exposure and will be part of our industrial business.

David Kelly: To add to Greg Henderson's comment, just one last point I'd point out is if you kind of look at the year-to-date performance for the segment, we're up 12% year to date. That's another positive sign of growth in that segment.

Yeah, thank you, Chris. Um, yeah. I think, uh, let me just start by if we zoom out to the industrial segment, I mean, we had solid growth in the quarter, um, and actually, uh, have had, you know, many quarters of solid industrial growth in the quarter. Growth was driven by markets that continue to see strong demand and do well, energy storage and Renewables data center infrastructure and actually some of our industrial business plays into this and infrastructure that continuously strong demand that said, as you note we do have uh, software residential HVAC demand and the construction mro continues to be soft. So that's kind of where there's a mixed performance and that's we do have exposure there which has made maybe a little bit more muted performance on the industrial and the quarter. But if you zoom out from, you know, 8 quarters of growth and this continues to be a significant investment area and growth driver, we mentioned the bachelor electric is a is an acquisition as well. That brings significant kind of industrial exposure and then we'll be part of our industrial business and

And then just to just to have to, um, get commentary. Just 1. Last point to point out, is if you kind of look at the year to date performance for the segment, we're up, 12% year to date. So that's another, you know, positive um, sign of growth in that in that segment.

Greg Henderson: Appreciate that. Thanks, Chris.

David Kelly: Thank you.

Appreciate that. Thanks guys.

Thank you.

Operator: If you would like to ask a question, simply press star followed by the number one on your telephone keypad. Your next question comes from the line of David Williams with Benchmark. David, please go ahead.

Again, if you would like to ask a question simply press star, followed by the number 1 on your telephone keypad.

[Analyst 3]: Hey, good morning. Thanks for letting me ask the questions, and congratulations on the continued progress here.

And your next question comes from the line of David Williams with Benchmark. David, please, go ahead.

David Kelly: Thank you, David Kelly.

Hey, good morning. Thanks for letting me. Ask a question and congratulations on the continued progress here.

[Analyst 3]: Greg, you talked about realigning your sales force and breaking down some of the silos. I'm just kind of curious if you could provide a little more color there. I mean, you talked about being able to engage more deeply with your customers and what that means. Is there a way to kind of quantify what your expectations are and how we can kind of gauge that success?

Thank you, David.

You, you talked about realigning, your your sales force and breaking down some of the silos and just kind of curious if you could provide a little more color there. I mean, you talked about be able to engage more details with your customers and and what that means. But is there a way to kind of quantify what your expectations are and and how we can kind of gauge that uh gauge that success?

Greg Henderson: Yeah, I mean, I think it's hard at this point to quantify, but maybe I'll help explain, right? I think historically, our sales organization was basically aligned with our products. We had kind of these individual product organizations that had the individual sales teams, and the sales teams were representing our products. Even though, as we've talked about, largely our products are largely about the safe and efficient transfer of electrical energy. We often are selling to the same person as the customer. I give lots of examples actually in the script, right? The example I gave on the battery charging application had the passive overvoltage protection, semiconductor overvoltage protection, power semiconductor solution, and passive circuit protection. That comes from at least probably three of our business units.

Yeah, I mean I think you know, it's it's hard at this point to to quantify but I maybe I'll help explain. Right. I think historically, our sales organization uh, was basically aligned with our products and we had kind of these individual product organizations that had the individual sales teams and the sales teams were representing our products even though, as we've talked about largely, our products are largely about the safe and efficient Cuts electrical energy. We often are selling to the same person of the customer and get lots of examples actually in the scripts, right? The example, I gave on the battery charging application, had the passive overall voltage protection semiconductor over voltage, protection power semiconductor solution and

Greg Henderson: In the past, we would have had three different sales teams trying to call on that customer for that solution if they actually even all called on that customer. Two things happened. One, we would miss opportunity because we would be selling a part of our solution as opposed to being able to sell the complete portfolio. In some cases, or more cases than not, we were missing opportunity because we weren't bringing the full portfolio. Other cases, we're also stepping on ourselves in front of the customer because we have multiple people. We've realigned to have the, this is kind of the fundamental change. The sales team is representing our customer, not our products. We do believe that this is going to bring progress to us. We did this early on some of our e-mobility business and actually also in our data center business.

Greg Henderson: We already see progress from where we had done that early. We've now done this across the sales force. This is a change. It does, you know, you have to, we're in the process of that reorganization. It is a change that's going to take some time, but we believe it's going to bring significant benefits because it puts us, as I said, first and foremost, we get to sell the portfolio we have more effectively. Secondly, it drives our R&D strategy to be more about where the markets are going and making sure that we're developing the right products for where our lead customers are going. This is really about focusing on aligning with those market leaders to make sure we're in the right position.

Progress to us. We did this early on in some of our e-mobility business and actually also in our data center business. We already see progress from where we had done that early. We've now done this across the sales force, so this is a change. It does, you know, you have to um, we're in the process of that reorganization. It is a change that's going to take some time, but we believe it's going to bring significant benefits because it puts us, as I said, first and foremost, we get to sell the portfolio we have more effectively.

But secondly it drives our R&D strategy to be more about where the markets are going and making sure that we're developing the right products for where our lead customers are going. And this is really about focusing on aligning with those Market leaders to make sure we're in the right position.

[Analyst 3]: Fantastic color. Thanks so much for that. Maybe secondly, just on the tariff side, I know you'd mentioned it in the script. It seemed like it was a modest headwind, but are you seeing anything developing there in terms of, do you think that growth is being tempered by tariffs or any delays? Just any color maybe around the impact of that tariff.

David Kelly: Yeah, absolutely. I can take that, David. When I talk about the impact of tariff, what I'm really talking about is if you kind of go back and think about a Q2 call, we had some tariff timing in the quarter where we saw the benefit of, or where we saw the pricing, but the cost hadn't quite flushed with the P&L. That was about a $6 million tailwind in Q2. That was going to be a headwind in Q3. When I talk about timing of tariffs, that's what I'm referring to. About $3 million of that hit our transportation segment. If you kind of think about where we are today and the guidance for Q4, what we have baked in is a neutral price tariff impact for the quarter.

Seemed like it was a modest headwind. But, uh, are you seeing anything developing there in terms of of, do you think that the growth is being tempered by Tara? So, we're any delays? Just any color, maybe around the the impact of, of that tariff? Yeah, absolutely. I can take that David. So when I talk about the impact of tariff, what I'm really talking about is, if you're going to go back, go back night as and think about a 2 few call. We had some tariff timing in the quarter, where we saw the benefit of of, where we saw the pricing, but the cost hadn't quite flushed to the p&l that was about a 6 million dollar, uh, Tailwind in Q2 that was going to be a headwind in Q3. So when I talk about,

Timing of tariffs, that's what I'm referring to and about 3 million of that. Hit our transportation segment, okay? So that's that. Now, if you kind of think about where we are today and and and, and and the guidance for Q4 we have baked in is a neutral price tariff impact for the quarter.

Greg Henderson: Yeah, I also say, you know, I think, look, there's still noise that can happen, but I think the market dynamics of this have largely stabilized. We've talked before that we have a diversified manufacturing footprint. We try more and more manufacturing close to our customers. You know, there is some impact, as Avi mentioned, but broadly speaking, we feel like this is somewhat stabilized in our customer base, and we don't see a major impact from it.

yeah, and also say you know I think look there's

Still noise that can happen. But I think the market dynamics of this have largely stabilized. We've talked before that we have a diversified manufacturing footprint; we try to move more and more manufacturing close to our customers. So, you know, there is some impact, as I mentioned, but broadly speaking, we feel like this has somewhat stabilized in our customer base. Um, and we don't see a major impact from it.

[Analyst 3]: Thanks again. Certainly appreciate it.

Thanks again, certainly appreciate it.

Operator: Your next question comes from the line of, again, Christopher Glynn with Oppenheimer. Christopher, please go ahead.

Your next question comes from the line of again. Christopher, Glenn with oppenheim Christopher, please go ahead.

[Analyst 2]: Yeah, thanks. Just on transportation, wanted to just ask about the difference between the passenger vehicle fuses up 4% and the sensors down 18% organic. Is the sensor side still engaged in attrition exits, product pruning there?

Um, yeah, thanks, uh, just on Transportation wanted to, uh, just just asked about the difference between the passenger vehicle fuses up, 4% in the sensors down. 18% organic is, is the sensor said still engaged in attrition exits, uh, product training there.

Greg Henderson: Yeah, maybe I'll start, and then Avi can give a little bit more color on the transportation business. If you zoom out, in our core passenger products, we actually had a reasonable quarter given the kind of passenger car builds and so forth. We had a reasonable quarter. We do continue to have lower revenue and profitability in the sensor product. We talked before in the past about the fact that that was a business that we were kind of realigning. We continue on that journey. If you put aside that sensor product, which is not really a strategic focus of ours, the core passenger business actually did do pretty well, considering the stable car build and some of the EV slowness that we all see in the market.

Yeah. Maybe I'll start and then I'll be can give a little bit more color on the transportation business. But actually, if you zoom out actually in our core passenger,

Products. Um, we actually have actually had a reasonable quarter, given the kind of uh kind of passenger car builds and so forth. We had a reasonable quarter, um, but we do continue to have, I would say uh, lower Revenue uh, and and profitability in the sense of product. So we talked before in the past, about the fact that that was a business that we were kind of realigning, we continue on that Journey. So, I would say that if you put aside that sensor product, which is not really a strategic focus of ours, the core passenger business actually did do pretty well. Uh, considering kind of the stable car build. And some of the kind of easy slowness that we all see in the market,

[Analyst 2]: Okay, great. Just back to the power semiconductor business and Dr. Karim Hamed joining. It sounds like you think you can get a lot more juice out of the power semiconductor strategy there. I guess relative to benchmarking some of the other areas of the business, perhaps. Could you comment on that as well as go into what the focus markets are? Is it a middle market strategy and the scope of what you visualize there to bring that up to the standards you envision?

Okay, um, great. And then, um, just back to the power semis in Dr. Hameed, joining. Um, so it sounds like you think you can get a lot more juice out of the power semi conductor uh, strategy there. Um, I guess it's relative to benchmarking some of the other areas of the business perhaps but um, could you, you know, comment on that as well as go into, you know what the focus markets are? Is it a middle Market strategy and the the scope of the um you know what you visualize their to uh

Greg Henderson: Yeah, look, I mean, if you look in Q3, for example, right? If you look at the performance of our electronic segment as reported, right? The passive products were 19%, semiconductor products were 5%, right? That semiconductor products is really because the PowerSemi is not performing as well. Our protection semis are actually doing pretty well. We have some areas there where we underperformed. It's really, you know, like I said before, I think for us, PowerSemi is a microcosm of some of the bigger strategy that we have at Littelfuse, right? The three strategic priorities: one, sharpen focus. Where we play and why we win. Again, we want to focus on the high-growth markets. We want to focus on high-energy density and growth markets, things like data center, grid, utility, etc. That's, I would say, the first thing that we focus on.

Kind of adds up to the standards you envision.

Yeah, look, I mean, if you look at Q3, for example, right? If you look at the performance of our electronic segment as reported, right? The passive products were 19%, semiconductor processor 5%, right? And that semiconductor products is really because the power semis are not performing as well. The protection semi is actually doing pretty well. So we, I mean, we have some areas there where we're underperforming. It's really, you know, like I said before, I think for us,

Greg Henderson: Other areas where we have strong performance, for example, like the medical market in our power semiconductor business. First, it's about increasing that focus. Secondly, it's about making sure we're focused on the customers. One of the sales realignment benefits we get actually is that we actually have a big pipeline for power semiconductors, but some of our sales teams that were representing the other businesses at those customers weren't selling the semiconductor product. We have opportunity with the sales realignment to improve our semiconductor position to customers. It also comes to execution. We mentioned in the remarks actually about, you know, in Avi's remarks about using our footprint more effectively. This is something that we're going to be focused on as well as optimizing our operational performance in power semiconductors. We believe that ultimately is going to drive both growth and profitability.

Greg Henderson: It's kind of a microcosm of the bigger picture, but where we want to focus is where we have differentiated value and also where it fits into this broader strategy around safe and efficient transfer of electrical energy.

Or other areas where we have strong performance, for example, like the medical Market in our power semiconductor business. So first, it's about increasing that Focus. Secondly, it's about making sure we're focused on the customers. 1 of the sales realignment benefits we get actually is that we actually have a big pipeline for power semiconductors, but again, some of our sales teams that were representing the other businesses at those customers weren't weren't selling the semiconductor products so we have opportunity with the Salesforce alignments to improve our semiconductor position to customers. But then it also comes to about execution. Uh, Abby mention we mentioned in the remarks actually about, you know, obvious remarks about using our footprint more effectively. Um, and so this is something that we're going to be focused on as well is is optimizing our operational performance in power semiconductors. We believe that ultimately is going to drive both growth and profitability. So um, it's kind of a microcosm of the bigger picture but where we want to focus is where we have differentiated value and also where it fits into this broader strategy around, safe and efficient trans server, electrical energy,

David Kelly: Great. Thanks for the color.

Great, thanks for the caller.

Operator: There's no further question at this time. I will now turn the call back over to Greg Henderson for closing remarks, Greg.

There's no further questions at this time. I will now turn the call back over to Greg Henderson for closing remarks.

Greg Henderson: Okay, great. Thank you. In closing, I have two things really. First, I want to just thank our global teams. We did have good performance. I am really excited about Basler Electric. I am really excited to welcome the Basler Electric team and the Basler Electric business and taking significant growth opportunities for us in data center and grid and utility infrastructure. Finally, thank you all for joining our call. We look forward to talking to you more and seeing many of you at the Barrett Industrial Conference in Chicago in a couple of weeks.

Okay, great, thank you. I I just in closing I have 2 things really. First, I want to just thank our Global teams. Uh, you know, we did have good performance. Uh and secondly I really excited about Bachelor and uh so it's really excited to welcome the bachelor team and the bachelor business and taking significant growth opportunities for us in Data Center and grid and utilities. And finally, uh, thank you all for joining our call. And uh, we look forward to talking to you more and seeing many of you at the Barrett industrial conference in Chicago, in a couple of weeks.

Operator: This concludes today's conference call. You may now disconnect.

Thank you for the conference call. You may now disconnect.