Littelfuse, Inc. Aktie

All right. Good morning, everyone. Thanks for joining us this morning for the 2026 Littelfuse Investor Day. We're super excited to have everyone spend the morning with us and through lunchtime here in beautiful New York City.

For those of you that don't know me, my name is David Kelley. I'm the Vice President of Investor Relations here at Littelfuse. We haven't met before. We would love to spend some time with you today. And for those of you on the webcast, by the way, thank you for joining us as well. My e-mail address is on the website, so would love to speak with you as well. A lot of familiar faces and a lot of new faces in the crowd this morning. So looking forward to starting the conversation or for many of you continuing the conversation here.

Before we get rolling, I wanted to pull up the disclaimer slides for you to read here. These are, of course, available on our website where the presentation is also available. They're also filed with a presentation with the SEC as well.

Before I turn it over to our team this morning, I really wanted to start with a quick snapshot and background of Littelfuse. It's an exciting time for us. The company was founded in 1927, so coming off on our 100-year anniversary. And you can see a few of the financial metrics here this morning. I won't get into them. But what really excites us here this morning is the market leader in safe and efficient electrical energy transfer, we're going to talk to you about our markets, our applications and most importantly, our customers. And just really, really excited to have the team walk you through so many of these exciting opportunities and hopefully give you a better sense of the Littelfuse brand and the value and the excitement we have for the next 5 years and the strategy we're going to talk you through here today.

So on that, I'm just going to very briefly cover the agenda before handing it over to the team and give you a little bit of logistics on how the day is going to go this morning. Our CEO, Greg Heckman is, of course, is going to kick us off, walk you through the 5-year strategy, and then you're going to hear 3 of our GMs speak to those markets in that pie chart I was just showing you. So Peter Kim is going to talk about the exciting opportunities that we have in Energy Industrial Infrastructure. And then he's going to hand it over to Deepak Nayar, who's going to speak to computing, Communications and Diversified Industrials and really talk through some of the opportunities in areas like a data center or an aerospace and defense. And then we're going to take a little bit of about, let's call it, a 15-minute break, come back, and Dave Ruppel is going to kick off the second half session and walk you through some of the capabilities and opportunities that we have in the Transportation and Logistics market. Then we're going to hand it over to Karim Hamed, who's going to speak to our Semiconductor Technology business. And what's fascinating about Semiconductor Technologies is they sell into all of our end markets. So we're going to talk you through how we amplify our market opportunities with our semiconductor technology franchise.

Of course, Abhi is going to wrap it all together and speak to the financial model and give you a sense of the playbook now through 2030. And then finally, Greg is going to close this out. Now we are going to have a Q&A session after the full presentation. So plenty of time to answer questions live here in the crowd. By the way, on the webcast as well, I believe there is a chat that you can ask questions. I will be up on stage, and we'll make sure we get through everyone's Q&A, whether you're, again, here in person or joining us via the webcast. Then finally, we'll have a -- what's described here as the leadership luncheon in the room on your left, my right. I would love for you to stick around for an hour or so. We will have product display booths and various team members that can speak to some of the exciting technologies we're working on and again, the value we bring to our customers. A lot of you were speaking this morning about some of these product opportunities. So again, looking forward to having you spending some time with our team.

So thanks again, everyone. We're super excited to have you here with us this morning. And with that, I'll hand it over to our CEO, Greg Henderson.

All right. Thank you. Good morning. It's great to be here in New York City. Thank you all for coming. It was originally supposed to rain today, but as you can see, the sun is out and it's a beautiful day in New York City. So thank you for those of us -- those of you that were able to join us here today and also the people that are online for the webcast.

So I'm really excited to be here to talk about the future and the growth strategy of Littelfuse. And it's really fitting, as David said, that we are here on the 100-year anniversary of the founding of the company, and in 1927, Edward [indiscernible] and his garage outside of Chicago invented the first back-stackingfuse. And that's because he was trying to find a way to protect his electronic equipment from the surges that happened on the early emerging electrical grid. And the reason that's really relevant to us today is that the 1900s was the boom years of the electrical industry from a perspective of energy demand and growth. And actually, if you measured the market growth based on the consumption and generation of electricity, those first 50 years, the 1900s through 1950 was double-digit growth. That was the boom years for the electrical industry. And a lot of companies like Littelfuse were founded around that time around the use and protection and safety of electricity.

But interestingly, around the 1950s, it started to slow down. It was really the energy crisis of the 1970s that fundamentally changed the dynamics of the market. And it shifted the market from being one about increased generation and consumption to one about increased efficiency. And actually, for the last 50 years, we've been in this market trend of efficiency and not generation increase. And if you look at the developed world, the generation and consumption of electricity from like those 1980 and '90 through last year was basically a flat market. It grew maybe 1%. And if you consider the GDP grow 2%, 3%, it was basically shrinking relative to GDP. But companies like Littelfuse did very well in that time because there was a lot of benefits of the efficiency increase. What we could do with the energy we had was significant, and they were able to get benefits from that, and we were able to grow.

But what's really exciting is that we're in a step change now in the market. And market analysts predict that for the next 5 years, it's going to be a 4% to 5% growth market. And so we have this massive tailwind for those of us that are in this electrical industry because the energy demand and consumption is going to go up 4x to 5x what it did over the last 50 years. We still have all the benefits we can get from efficiency improvements along, but that's a fundamental change. And this is driven by the energy demand of the data center and really the electrification of the world. And another key point that's made here is that there's a shift to DC-native demand. And DC-native demand is systems that are designed to take high-voltage DC right from the beginning. The first volume market to go to DC-native demand is EV fast charging. And so when you fast charge your EV, you plug in, that's typically 400, 800-volt DC native system. And you really can't fast charge if you don't do DC native because it's too inefficient to transfer that power without being DC native. And the next volume market to go to DC native is data center. Data centers are going to high-voltage DC. And estimates are that, that DC native demand is going to double over the next 5 years.

So those are great market tailwinds for companies like Littelfuse that are a key part of this ecosystem. And the reason it's relevant to us is because we provide solutions for the safe and efficient transfer of electrical energy across this ecosystem. I like to say we have solutions that go from milliwatts to megawatts. If you take this chart, for example, you go to the bottom left-hand corner, we sell solutions that are about the precise connectivity of power in a wearable medical device so that it has power when you turn it on, but it use literally no power before you turn it on. All the way up to the top right-hand corner, where we sell solutions that are expectation systems for large generators, controlling the power that's put on the grid by a large generator and systems all in between. So we have a broad set of solutions across this ecosystem. Everything that uses energy pretty much has Littelfuse content.

And the way we do that, the way we provide these solutions for the safe and efficient transfer of energy is with a really, really unique and differentiated portfolio. And this is a key part of our value proposition to our customers. We have a very, very unique and differentiated portfolio. And we're the only company who has this complete portfolio across protection and power solutions. It starts on the left-hand side with our overcurrent portfolio. This is the history of the company. This is fuses, which is the history of the company. But as you'll hear later from the leaders today, we do everything from very small surface mount fuses that go on a board to very large fuses that go in industrial equipment or data center power generation and everything in between.

But we have other overcurrent technology as well. We have circuit breakers and actually, you'll hear Karim talk about some of the emerging capabilities of power semiconductors for overcurrent technology. In addition, we have a complete portfolio of overvoltage solutions. So overcurrent is about protecting. If you get a short, you don't want to have a lot of current goes. That's where bad things happen. That's sort of the original history of the company. Over voltage is protecting against voltage surges. And we have two key technologies here. We have a passive technology we call MOVs. It's a ceramic-based technology. But then we also have a key part of our semiconductor business, and you'll hear more about this later today, is our Semiconductor Protection Technology, which provides you very fast protection for surges and is a key part of our strategy as well.

And then importantly, in addition to our core franchise overcurrent overvoltage, we have a lot of solutions about advanced protection and power solutions. And this is a wide array of capabilities from DC contactors, power semiconductors for switching, all the way to very advanced sophisticated system-level products like protective relays on the right-hand side, these are systems that are protecting grid scale power that came from Littelfuse and also from our recent acquisition of Basler. So we have this unique portfolio. It plays across those applications. And so if you look at that, we have identified the markets that we play in and the growth, and we talk about our markets being diversified.

And actually, we -- earlier this year, we organized our go-to-market into three big market organizations, and you're going to hear from the three leaders of these is Energy & Industrial Infrastructure, Computing & Diversified Industrials and Transportation & Logistics. And like I said, across that ecosystem, across these applications, across these markets. And we've identified that the SAM we play in today is about a $22 billion SAM growing to around $30 billion by 2030. That's around a mid-single-digit growth. Our ambition, however, to take the company from $2.5 billion of revenue in 2025 to $4.5 billion of 2030. And that's about double the market growth. And the reason we believe that we can do that, and that's a double-digit growth is because of the position that we have, the focus that we have and the strategy. And in addition to driving revenue growth, we're also going to increase profitability from around $500 million to this $1.1 billion by 2030.

And so now the key of the rest of this presentation for me and the rest of my team is to explain to you how we're going to do that and why we think we can get there. In some case, you might think that's an audacious goal, but we have a lot of confidence. And hopefully, by the end of this presentation, you believe as well, this goal is really going to be achievable by us, and we have confidence that we're going to get there. And the way that we're going to do that is through the strategy. And the good news is if those of you that have been following us, this is not a brand-new strategy. This is something we've been rolling out for the last year, we've been talking about. But our goal today is to really fulsomely reveal that strategy and how it's operating throughout the business. And there are three really simple strategic pillars.

First is, about sharpened focus on growth opportunities. This is about making the right decisions about where we invest. It's taking a market and customer-driven approach, making the right investments in the growth opportunities and how we allocate our capital and our resources to grow. Second is about partnering more closely with our customers. We've done a lot of work. We'll talk more about this about how we go to market, how we partner with our customers. And we have a really, really unique capability because that portfolio we have is really valuable to our customers when they're developing next-generation solutions. And we'll talk about how we're changing the way we partner with our customers for next-generation systems. And then third is about enhancing operational excellence. This is about scaling best across the company. We have examples of great capability that we haven't always scaled uniformly across. And so that's also going to be part of our strategy. And that's about driving profitability and cash flow and consistency so that for these lead customers are developing these solutions, we can meet all their requirements.

So I'm going to dive down a little bit and talk about each of these, and I'm going to start by talking about the strategy. So starting with the first priority, which is about sharpening our focus on growth opportunities. We did a lot of work as we identified the strategy to try to identify where the growth is going to come from in our business. And one of the key benefits we have is that we're a very diversified company. We participate across a lot of markets. For those of you that 5 years ago, everybody was focused on the automotive market, and we are very participated there. That drove a lot of technology that now is driving the data center market and tomorrow is going to drive a different market. So we looked at what markets are going to drive growth. And actually, we have identified a key part of our strategy is to make sure that we're participating as broadly as possible and leveraging our capability. And so we have two key parts of our strategy.

First is about our core markets. These are important markets to us, markets that aren't necessarily growing as fast. Maybe the automotive market, people estimate might be about 1% growth. You heard that from Dave. But even though those markets are growing slower, we still think that we can have a sustained growth in our core markets of mid-single digits. And the reason for that is that we're going to make the right decisions in those markets. So these are markets like industrial automation, markets like automotive that may not be growing as fast as some of the markets like aerospace and defense or data center. But we still think we can grow because we're going to make the right decision. We're focused on the right things in those markets. And also, there are important architectural changes in those markets that are driving growth.

For example, in automotive, there's -- even though EVs might have slowed some, there's still a transition across this market to higher voltage applications. And there's a transition in the vehicle to 48-volt architectures, whether it's an EV or not an EV. And those higher-voltage solutions require unique requirements. We talked about our over-voltage protection portfolio. We're going to design products to do that. So we believe we can grow, and we have a plan to grow mid-single digits in our core markets.

But we've also identified three high-growth markets, and you'll hear the leaders of these markets also tell you about the strategies around those later today. And these three markets are going to drive double-digit growth for Littelfuse. And that's grid and utility infrastructure, data center and aerospace and defense. And you'll hear from Peter and Deepak, our strategies in those markets. And those markets are going to drive double-digit growth. And that combined is going to give us an organic growth in the high single digits. And Abhi is going to give you a lot more detail on the exact model for that when he comes up, but that's going to give us an organic growth in the high single digits.

But as you know, we are a high cash generation company. We have a very good balance sheet. Abhi is going to talk about that more as well. We have a strong opportunity to do acquisitions. And so our strategy for acquisitions is also very, very aligned to our strategy around organic growth. And it's really quite simple. Actually, we have two key things we look for in acquisitions. First, we want to strengthen our capabilities around our core competencies. I showed you that first slide. Our core competence is our unique portfolio. If we have ways we can expand that portfolio to provide more solutions to our customers around safe and efficient energy transfer, that's the first part. And then the second part is we want to increase our exposure to the high-growth markets. So we're looking at how we can increase our exposure to high-growth markets.

Our recent acquisition of Basler is a perfect example of this. On the left-hand side, we added core competencies around protection relays, expectation systems, high-power solutions, for the grid utility that really expand our portfolio. You'll see some examples of that in the product display later. But also 50% of their revenue is in the grid utility and data center market, which is higher than Littelfuse. So it helps increase our exposure. It gets us better access to customers, and that's an example of the kind of acquisitions that we're going to do. So that's priority one, which is about sharpening focus on where to invest, how we deploy our capital, focusing on growth. And between these two, that's going to drive a growth strategy for us of double-digit growth that Abhi is going to talk about in a minute.

But priority two is about getting closer to our customers. And this is actually, I believe, possibly the single most important thing that we're doing that can really drive growth for us. And this is we've made some fundamental shifts in how we're approaching our market and our customers. Historically, the Littelfuse business our -- I showed you our portfolio of technologies. Our sales teams represented our product lines and not our customers. And so we had individual sales teams in those individual product lines trying to sell that portfolio to the customer, even though the customer was providing a solution that actually generally use solutions from across. So we started talking about this last year and actually went live with this model at the beginning of 2026, where we've now realigned our sales force from our direct selling -- where our sales team is now representing our customers and not our products. And actually, those three markets that I talked to you about, the three leaders are going to come up, we have three sales teams, one for each of those markets that represents the customers.

And so this top 2/3 of our revenue, so this direct part of our business is about top 2/3 of our revenue, that's the customers we call on directly. And those top 2/3 are the names that you might expect. They're hyperscalers, chip providers, automotive OEMs, large industrial companies, customers. And it turns out that, that 2/3 of our revenue is about 1,000 customers. So we are calling those 1,000 customers direct. The other thing we've made in this change is not only are we enabling the sales force to represent the complete portfolio of those customers, but we've also got a lot more deliberate about what part of our business we call direct and then what part of our business we leverage our large distribution channel. Left-hand side, 2/3 revenue, about 1,000 customers we call direct.

Then the right-hand side is about 100,000 customers. And this is where we leverage our very, very important channel partners that give us a lot of reach. There's no way we can cover those 100,000 customers. We get a lot of reach. It's a very profitable part of our business. And many of those customers sometimes are emerging customers that if they're starting to be successful, they move into the left-hand side of the chart. That's success for us. And so that bottom 1/3 is profitable. We leverage our distribution partners, and that's part of our growth strategy.

So this strategy is new to Littelfuse, but it's not new to the market. And I can tell you out there visiting customers, the feedback for this is already positive. And we have a very, very high confidence that this is going to help drive significant growth. And the reason for that is that even though this is new for us at scale, it's not completely new to the company. Actually, back in 2020, the company made a decision to take a market leader in vehicle and grid scale electrification, and we applied this model. It decided, okay, this customer is important. This vehicle electrification is really, really important. We're going to put a dedicated team on. They're going to have the capability to sell the complete portfolio. And I can tell you that, that customer has grown 20% CAGR over that time. It went from an important customer to one of our top customers in the top -- of that 1,000 customers on the other side.

But also really more importantly, we are actually in every single one of that customer's platforms, and they use the broadest array of our technology and portfolio. They're using multiple technologies from every single one of those columns I showed you on the first slide. They're probably using the broadest array of our technologies, where our average customer base, it turns out is using maybe 1 or 2 of our technologies as opposed to a broad array. So there's a huge opportunity there.

Secondly, I'll say that last year, because we saw how important data center was, we put this model in place early last year for data center. So in 2025, early in the year, we went to this model for data center because we knew this was important to us. And even just in 2025, we were able to double our design wins in data center versus the year before. So we have confidence this is going to work. It's something we've done before, but not at scale. I can tell you our customers are really excited about this. Many of them are like, well, finally, you show up this way for me. And in the short term, it's about us driving more content. But in medium to long term, it's about partnering with our customers. This drives our R&D strategy. This creates a differentiated opportunity. And you'll hear more about this from the rest of our team on the way we're leveraging that. So that's priority two, how we go to market with our customers.

And then priority three is about scaling operational excellence. So we have really best-in-class capability in this company. We ship millions to billions of parts depending on which part number. We ship a lot of product every year, and we have really, really best-in-class capability. But we haven't necessarily scaled that across the company to the way that we need to and the way that we want to, to get to our $4.5-plus billion revenue. And so we have put in place a program to really try to scale operational excellence. You'll hear more about this from the other leaders and from Abhi later. But it really is three simple things. First, it's about elevating our operational mindset. It's about getting consistent uniform practices across. This is really going to be our operating model. It's about leveraging best practices, standard business reviews, standard factory monitoring in our factories, it's back to basics of safety, quality, delivery, cost and inventory, uniform approach, standard metrics to scale that across and make sure that we have -- when we have best-in-class, we don't just have best-in-class in a few of our factories or businesses, but everywhere across.

Second, we're a lot more disciplined about rigorously analyzing our portfolio. So we're going to look all the way across the portfolio and say, "Hey, we have high standards on what the performance and profitability of the business should be. And in parts of the portfolio that don't quite meet those standards, we're going to rigorously focus on improving them. This is very related as well, I think the priority one, it's about where you focus and how you play and why you win. But we're going to drive optimization of our portfolio and our footprint to make sure that we're maximizing utilization. You're going to hear specific examples of this. Dave is going to talk a little bit about this in the Transportation business. Karim is going to talk about this in our Power Semiconductor business. This is going to drive a lot of profitability. And finally, it's about scaling businesses and processes, especially, for example, using AI. So like many enterprises, we're starting to use AI more inside of our operation. In our operations, for example, we're using AI in our logistics on helping us figure out how to reduce logistics costs, especially in the current world where energy prices and fuel prices and disruptions happen, that's an area. Another area we're using it in our operation is in automated inspection. So we have inside of our factories, we've started using automated inspection.

But the goal here is to take this AI-enabled productivity and scale it more uniformly across the business. So you'll hear more about that later. And Abhi is going to give you some specific information about how we believe this is going to drive performance and cash flow for the company. So those are the three strategic priorities. First is about sharpen focus where we play. Second is about changing the way we partner with our customers, getting closer to our customers, selling our complete solution and our new go-to-market model, and the third one is scaling operational excellence. And we have high confidence that those things are going to drive us to the model. And you'll hear about that from the team today.

But before I hand it off, I just want to zoom back out to the very beginning and tell you why we believe we have a high confidence in the growth strategy. First, we're at this transformational shift in the market. We're at a once in a 50-year change where the electrical generation and consumption is going from 1% growth to 4% to 5% growth. That's a huge tailwind for our business that's going to drive a lot of growth. Secondly, we have a very, very unique capability. I showed you our portfolio. For those of you that are here in the room, you're going to be able to see some of the product displays later. We have a very, very unique capability. You're going to hear the rest of the team talk about that and explain to you why that's differentiated and also how it matters to our customers. And the third one is we have the right strategy. Those three priorities, as I said, we have confidence we're going to get there. And so we have a high confidence in our growth model. And now I'm going to hand it over to the rest of the team. And hopefully, by the end of this presentation, you'll have as much excitement as I do about the opportunity we get.

And so with that, I'm going to hand it over to Peter Kim, who's going to talk to you about our strategy in the Energy & Industrial Infrastructure market.

Good morning. My name is Peter Kim. I'm the Senior Vice President and General Manager of our Energy & Industrial Infrastructure business. I've been with the company for over 20 years, been leading this business for over 7, but I'm even more excited about our strategy team and success going forward. And I'm going to talk about that throughout my presentation.

So throughout my presentation, there are going to be critical things that I'm going to touch base on is about our strategy and success. One is just the macro around energy demand, that's increasing. That increase in demand is driving investments around things like electrification, modernization, renewable. Greg talked about DC-native. All those things create challenges, challenges around how do you create more high-power efficiency safety, reliability. Those challenges create tremendous opportunities for us. Opportunities for us, as Greg mentioned, we have the widest, broadest offering in overcurrent, overvoltage circuit protection, especially in high-power application and switches and modules and system level, combined with our technical expertise, we are best positioned to solve those challenges and grow with our customers long term.

So I'll start out with a snapshot of our markets in our EII markets. This represents about $600 million today. Over the years, we've been really growing around the concentrations around OEM business. Greg talked about our OEM business, direct business, but I want to highlight, it's not just OEM. We work with leading OEMs, global OEMs in our targeted vertical markets. As an example, Panasonic Energy is a leader in battery backup energy for data center infrastructure. Duke Energy is a large-scale utility company, actually came from a Basler acquisition. Our markets are grouped into two areas: industrial and energy infrastructure. In the industrial, there are diverse subverticals, including automation to heavy industry like mining and oil and gas. But the theme across all are the same when I talk about megatrends, higher power, more efficiency, reliability.

Then we get into the Energy infrastructure, even though it's less than 10% of our overall company revenue, it is our fastest-growing vertical market segment. Historically, we've been very successful around battery energy storage system, renewable. And more recently, with the acquisition of Basler, we are now a significant player, even more in the grid utility space. This vertical market represents what we call our HGO, high-growth opportunity for the company. So what I want to talk about is the profile of the growth around these markets. So this represents about $7 billion of market size. And the blended growth rate is we're projecting to be in the market growth rate in the mid- to high single digit.

Our strategy that we laid out, our competitive advantage and our successes and the momentum we're gaining, I am confident we can achieve double-digit growth over the next 5 years. Furthermore, the markets below represent what we call our high-growth opportunities, and this is where we are putting outsized focus and investment to accelerate growth. As an example, the recent Basler acquisition has a direct impact and contribution to our accelerated growth in the grid and data center infrastructure. Our organic investment in high-power applications such as high-power DC circuit protection is a leading technology going into battery energy storage system and renewables. So overall, it's not just about the market dynamic, but our position not only to grow with the market, but far accelerate above the market growth rate makes this really, really exciting.

So how are we going to achieve that? And why do I feel so confident about that? I want to spend a few minutes about my own personal journey engaging with customers over the years. The first is OEM relationship. What does that mean? Years ago, I visited a large automation customer. And at that time, our predominant business -- primary business was a power semiconductor or an industrial drive application, which is very significant for their system. Our engagement over the years, our deep engagement gained credibility where we had access to other opportunities in switchgear, industrial power supply, pulling in the breadth of our overcurrent overvoltage solutions. That's an example of the level of engagement with our customers and opportunities that we're able to achieve over time on greater programs.

The next is tailor solution. We have a building infrastructure customer that are leaders in air handling systems for commercial application. We actually have a very critical solution designed in. It's an electrical mechanical relay. But the customer came to us and said, how do we drive a more accuracy and longer life cycle? Well, we have a semiconductor technology, we have embedded software technology, and there's a new product that we launched called a solid-state relay, and that was designed in that met the customers' need for the future growth. And that's an example of our ability to tailor solution because of our breadth of our capability, but also working with customers to understand what their future trends are.

The last is product performance. And I talked about visiting customers in 5-plus years ago, visiting a utility solar customer. And at that time, the system level at that time was 1,000-volt DC. We're actually leaders in the market on 1,000-volt DC fuse. And at that time, they were trying to pursue how do you drive more power, more energy to 1,500 volt. But that early insight gave us an early stepping stone to innovate a 1,500-volt fuse. Now they're coming to us and saying, "Hey, the market is going to 2,000-volt DC. Well, because of that access and because of our innovation capability, we are leaders in the market and first to market in those type of solutions. Product performance is not just about higher power and the performance of the product, but our engagement with customer and to have that insight and have early innovation and investment to drive growth long term makes us succeed. So overall, combined, this is why I am so convinced we are able to achieve that double-digit growth.

The next few slides, I'm going to talk about the market dynamic and a success story around our Industrial & Energy Infrastructure. So these megatrends around modernization, what does that mean? And what does that equate to in terms of investment? We see in the next 5 years, double in capital expenditure. Where is that investment going? It's going into things like electrification. Why is that important? It drives efficiency. It drives smarter solutions. It drives connected solutions. What's really exciting is it creates a lot of opportunities for us. How? This is more content. This technology trend drives more content, but it's not just about content, our engagement with customers at a solution level, we will collaborate them with them on the breadth of our solution to optimize their system-level solution. That's what helps us pull in the opportunities. That's what makes us sticky. Furthermore, we know how to replicate that through other customers throughout the vertical markets.

I got an exciting success story I want to share, it is a global automation customer, and this is specialized around manufacturing environment. Same thing. They want to drive more efficiency, more power, smarter solutions, but they're faced with several challenges. One is the complexity and speed to market. We have some unique solutions that we designed in that really help drive value and tremendous opportunities for us. Starting with we are one of the few companies in the world that has the breadth in circuit protection to power semiconductor. We have a product, it's called a power stack module that integrates both capabilities for high-power application. That was essential for our customer. Furthermore, we have a protective relay that we designed in. And what a protector relay does, and you'll see that when you go out in the display is that it monitors and detects potential faults in the system. We have a proprietary firmware that can detect sensitive faults accurately without nuisance stripping. What does that all mean? Uptime for our customer system. These are a few innovative examples on how deep we engage with customers to help them on measurable benefits, efficiency, safety, reliability.

For us, we get to work with them on our innovative solutions that are large-scale opportunities also can be replicated to other automation customers.

So I'm going to move on to our Energy Infrastructure business. Again, this is one of our fastest-growing markets for the company. Our HGO, our high-growth opportunity. And when we talk about energy demand, in the next 5 years, cumulatively, there will be trillions of dollars of investment. Where is that money going? Areas like hydrogen power to renewable, renewable to DC native, all driving higher power, but they have to work together to support that energy demand, which is what we call grid flexibility. Our opportunities are significant around high-power applications. I talked about our high-power DC circuit protection as an example. In addition to that, our recent acquisition of Basler, their leading solutions in power systems and services are critical for our utility customers. Those are a few major examples why we are becoming a more significant player in the Energy Infrastructure markets. So a success story that I want to show a very exciting success story is I talked about visiting a solar customer. Well, solar energy, it's a DC energy generation. Distributing that is very complicated.

A battery energy storage system storage and energy, distributes that when the power is needed. And overall, renewable is part of the overall grid network and the grid flexibility. But I want to talk about a leading European-based battery energy storage system customer that we work with. And they're faced with a significant challenge. It's a simple but yet large challenge. How do you get more power into a system in the same footprint, very challenging. We have developed a very unique solution, a high-voltage DC fuse, 1,500-volt DC in the smallest form factor in the world, first to market. Not only that, we coordinated that with our power semiconductor to optimize our customers' system. That helped meet their pursuit, the goal of higher power, but also our solutions is the most flexible where they can go modular solution as they even scale going forward. That type of engagement and credibility is bringing new opportunities.

The Basler acquisition also has a very specific protective relay that's applicable for battery energy storage system, and we're in active discussion and engagement with that new opportunity, and that's how we're growing. This is a significant space, significant customer, enormous opportunity for us, and we are able to also replicate this to other battery energy storage customers. It's a very exciting one for us.

So what I'd like to conclude is this, is the market dynamic where we're targeting in our strategy is very exciting. What's more exciting, it's our success around our strategy to outpace market growth. The challenges to meet modernization, electrification, renewable are all challenging, but those are great opportunities for Littelfuse, and we are best positioned to support that. When we laid our strategy, combined with our competency, competitive advantage, and I share some few examples of our success stories, and we have many of them, prove that our strategy is working. And that's why I am convinced we can execute that double-digit growth over the next 5 years.

I'd like to thank all of you for giving me the opportunity to take the time to share our strategy and the growth. And now I'd like to turn it over to Deepak Nayar.

Thank you, Peter. Good morning, everyone.

I'm Deepak Nayar, and I run the CCDI business. And I've been in Littelfuse for about 20 years. And prior to that, I actually worked for [indiscernible] Electronics and also International Director Power. And I've done R&D, new product development, lots of different functions in the last 15 years, sales and marketing and general management. So in the next 20 minutes, I'm going to give you a background about our business, our growth drivers and how we're going to execute and be successful.

Starting out with some key messages. We are in a very extraordinary phase of growth right now, I would say. Greg talked about the electronification, electrification megatrend, that's driving growth for many different vertical markets that we play in. And within that, aerospace and defense and data center are doing really well. So I'm going to cover those in more great detail. At the same time, the architectures are changing. The system architecture for customers are changing, not incremental, but step function. That means we need more complex solutions for them, and we are working with the customer very closely for that. And then we've also invested pretty heavily in the go-to-market as well as in our NPD, so we can take advantage of the changing landscape right now. So that's a little bit of a background where we are right now.

And then I'm going to give you a background on the business -- snapshot of the business next. So this was about a $1.1 billion business last year, around 45% of the company. And the main segments or markets that we work in are out here. So we have data center, which is a big one I'll talk about, diversified industrials, I'll talk about all of these later on. Consumer electronics. Consumer electronics, things like electric toothbrushes and power tools and things of that nature that fall in this area. Building and industrial control is another very good area that we play in today. Building control, if you look in this building, things like the dimers, anything in this building that has electricity connected to it, we probably have a product in that gadget. So we really have a lot of products in this area as well.

Now we -- 1/3 of our revenue comes from leading customers. These are about 100 customers, let's say. And these customers will be names of this kind here, the leaders in their field. And what happens is that we are very close to these customers. We send our design engineers to work with their design engineers to develop new products. A lot of our new products come from really the leading customers because they set the standard for the rest of the industry. And so what happens is when we develop new products with these guys, we are very tight for them. Those new products eventually work their way into the emerging customers and the broad customer base that we have, 50,000 customers or more. And I'll talk about that later on. So this is a little bit of how we work and what the business looks like.

Now how big is the business and how big is the market? It's about $8 billion available market to us and growing to about $12 billion, and that's about an 8% CAGR. And that's a mixed number. That's a number between some growing at 3%, 4% and then data center growing at much, much more than that. I'll tell you about that. So you mix it all up, it's 8%. But we think -- we know we will actually do double digits. And I'll tell you why we'll beat the market. We'll do low double -- we'll do double digits because we have some really interesting competencies, some core competencies which are very, very good.

Starting out with a very broad portfolio of products. So when I say broad, what I mean is it's wide and deep. Why is all the functionality that we have. We have over voltage, over current, [indiscernible] protection, switching, all kinds of things we have. And within each of those, we can give you a very big, deep different ratings or form factor. You want surface, pond, you want carpet, you want large, small, we can do it all. And so what that does is when my design engineer sits with the customer's design engineer, we can pick up 5 or 6 sockets on the board right away. And that is a real advantage for us. It's a very efficient sales call. It's a real advantage for the customer because he's dealing with one supplier, not 5 or 6 different suppliers. Also, these solutions have to be sometimes coordinated. So the overcurrent and the overvoltage need to work together. So when that is needed, we can provide that combination, which is a lot easier for the customer than him to go find somebody else to do it. So that's a very powerful thing we do. My apologies.

Customer collaboration. So Greg mentioned, we changed our go-to-market model. We've added a lot of resources here, and we are very, very tight with the customers right now. So we are working with them on their next-generation designs. Now below that product portfolio and when we work with customers closely, we have some great technology. And what that technology is things like we're good at automation, we're good at simulation, we're good at material science, metallurgy, element design. So when customers come up with problems for us, we have great solutions based on our technology. We have a lot of IP, a lot of know-how. So what happens is if a customer says he wants a lot of power in a small package, we have to look at what kind of ceramic we use, what kind of filler we use, make sure there's no arcing, make sure the product is safe. And we pull all those resources together to come up with a really good product. And what the name of the game today is more power in a smaller package. And we are very good at that. We are probably the best at that.

And so what happens is when a customer has a problem, we get the first call. We get the first call to go solve the problem. And that is a really good position to be in. So very proud of that actually. So with all of this that we've been doing, we are pretty confident that we can beat that market growth number. Now what I want to do is talk a bit more detail about data center and diversified industrials. I'll start with the data center.

This is an incredible market. I've never seen anything like this in my career in terms of how it's evolving. And if you look at this here, what we've done, this is a typical ecosystem for data center, and we've broken out between different areas. There's a gray zone and a white zone. So the white space is all the electronics that goes inside the data center and the gray space is all the power that comes into the data center. And you know what, we play in all of it. We have products in every one of these buckets that I'm showing you here. So when you guys go outside and look at the booth that we have, we'll show you the examples of everything. The other thing I would say is that we are really good at solving problems. So if you look at the memory module, we are actually selling an 0402 fuse, which is so small, you can barely see it. It's 50 watts and 2 amps. And then we have a fuse out here in the UPS, which is 2,000 amps, is the size of a shoebox and weighs 20 pounds. We can do the entire architecture for protection. No other company can do that.

And so when we work with the hyperscalers, this is what they love about us. So we are very prepared for this market. How big is the market? The investment -- you all heard this news, $6 trillion in the next 5 years, $1 trillion this year alone is being invested in data centers. And a way to look at how that translates to SAM for us is to look at the power consumption. So the power consumption is growing by about 15% CAGR right now. And also, it's evolving to higher power, higher voltages. So that architecture is changing a lot. And so what we are saying is that we will get a lot of content uplift as it happens. The reason for that is if you look at the boards that were designed 3 years back and are in production today, and to what's being going into production now, the power consumption is about 5x what was [indiscernible] same socket, 5x more power. We have developed solutions for those same sockets at 8x to 10x selling price. They are bigger products, but the selling price is 8x to 10x what was from before, power consumption 5x higher. That's an incredible way to do it.

And what I just explained was the first round of uplift because it went from 72-volt to 400 volts. The next round is coming where it's going to go from 400-volts to 800-volts over the next 24 months. And we are working on that with our customers right now, trying to come up with the right solution. So if we do this all right, which you know we will, what does that mean for us? What it means for us is a growth between 25% and 30%. Market does 15%, we are looking at 25% to 30% growth. And this is the most incredible opportunity we've seen in a long time.

So I want to give you an example. We are working with a hyperscaler right now. And what we do very well is that we started working with one portfolio, but we're also working with the entire ecosystem in terms of how they operate. So they have design centers in 4 or 5 locations in the U.S. We have people -- design centers in Asia and ODMs and OEMs in Asia. So we coordinate that whole thing. So when we do a customer collaboration, we are working across the entire ecosystem of the customer. And right now -- and also, we put a focused team on it. So these are big customers, important customers. So we have dedicated key account managers, R&D team and so on, focused on this one customer, supporting them. When we get that call, we are there to support them right away. And so today, this customer, they like us because it has a best-in-class performance. We have a great brand, good reliability. And for us, we are selling 20 different solutions, and this customer will grow 3x over the next 5 years and could be about $100 million customer for us, a single one in the data center world.

So next, I'm going to talk a little bit about the diversified industrial area. So over the last 10 years, we've created a tremendous brand in the industry. People trust our brand. We have one of the best circuit protection providers out there. And with that brand, we've also created tremendous print position. By that, I mean we are on the bill of materials of the customers yesterday, today, tomorrow. We are on the bill of materials as they spin the design, we're always on those bill of materials, they trust us, and that's a brand we've created. So it goes from design to design. Now we work with the leading customers in this area. because once you work with a leading customer, you get a reference design done. The next 30, 40 smaller customers, they follow the same design, and that's the way we've operated.

So -- but -- and a couple of things, I'll talk about aerospace and defense in the next slide, but medical is one area we also focus on as a submarket here. So I want to give you a couple of examples. So in medical, hearing aids, high-end hearing aid, I'm wearing one of those. We have product in that. Second one would be things like insulin pumps. If somebody got diabetes, they need insulin pump, we have product in that. People are getting surgery, now they do a lot of minimally invasive surgery, and they have these instruments in there, which are very powered small instruments, endo-cutter, they are call. We have products in that. And my favorite is the defibrillator, a long word, defibs. So defibs are being made accessible to the rest of the world everywhere because it saves lives. And inside the defib is one of our high-power IGBTs. Without the IGBT, the defib will not work. It's an enabling technology. So I would say our IGBT is the heart of the defib. It's such an interesting product line. So some examples there.

Now what I said was we work with the leading guy, we get the reference designs done, but then we work with our channel partners.

And these channel partners will then take these products with the 50,000 customers that we have around the world. When we do the new product development of the leading customers, we do the same thing. We introduce those through these distribution partners in the rest of the customer base, but that's how it gets proliferated around the world. So they are very, very important to us. And who are these 50,000 customers? If you go to any show, go to the CES, Electronica, Computex or walk through Best Buy, every product in there is a target customer of ours, either we have the customer or we get the customer. But all of this is our customer base. So that's where -- it's such a great product and everybody needs it, our circuit protection products. So that's where these 50,000 customers come from. And it's a nice high-margin business. I mean it's -- these customers will buy $50,000 a year, $25,000, $100,000, but it's on the lower end of our scale. Margins are fantastic. So this is the most profitable part of our business today. The one that we really take care of, we focus on it as well through our distribution partners. So I'm going to talk a little bit about aerospace and defense. Market is growing about 15% today. But if you look at the history over the last 50 years, even when it's not going that high, it's 6%, 7%, 8%. I mean it never goes down very low. And with the geopolitical tensions right now, it's a lot of defense spending happening. So U.S. is going to spend a lot of money. NATO is being pushed to spend a lot of money, so they're spending money now. The U.S. is going to build 300 new ships. Space is getting commercialized in that the low earth orbit satellites, which used to be a few hundred a year, now we have a few thousand a year that are being installed. We have product in all of these. And what's very interesting about this is that the architectures are changing here as well. So these guys also need power-hungry weapon systems, long range, very high power, which means higher DC type applications that Greg had talked about. So what we are doing with data center, the same kind of products can also be used here. So we are basically leveraging our data center expertise also in this ADS market, and it's doing quite well for us. So what we have said is that we do need some targeted investments here, get a thermal portfolio for this market as well as a better customer reach as well. So I want to give you one example here. So we've worked with a rocket maker out of the West Coast. And we started with one product, which was the TVS Dioda products. But as we started working with the customer and we brought a lot more attention to it, got more of an R&D engineer there to talk to them, we eventually start to get a lot more of our products designed in. And also, we work with their ODMs, they are people who make products for them. So having done all of that, it's -- we've become a reliable supplier to the customer after 3 years of work. And having done that, we think -- we know actually on this one, our revenue will probably grow 5x. This could also be a $30 million, $40 million customer for us within 5 years or shorter. Slightly longer as this market goes a bit slower, but we'll get there. So a couple of examples I've shared with you. This is just one example. We do the same thing with other customers as well. Same thing with data center, the hyperscaler I talked about. We are working with all the hyperscalers exactly the same way. So in conclusion, -- it's a great market opportunity. And we have the technology, we have the IP, we have the product. We are ready for it. And I would say I've been in this industry a long time, maybe a very long time when I look around here. I've never seen such an exciting growth opportunity ever until now. It's just tremendous right now. So we're all ready for it. We're going to nail it. So thank you for your time. I'm going to give it to David.

All right. Thank you, Deepak, and thank you, everyone. We're going to take a brief 15-minute break. So we're going to start back up again at 10:15 Eastern Time for those of you listening on the webcast. Just so you know, bathrooms on the left, refreshments and snacks are on the right here. Thanks, everyone.

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All right. Thanks, everyone. Welcome back. We're going to kick off the second half of the presentation. Just a little bit of a background. We walked you through some of the exciting future opportunities in EII, CCDI. Now we're going to follow the flow of electricity to the transportation market. And the gentleman who's going to follow me here, Dave Rupel, is going to walk you through the transportation and logistics opportunities, and we've got a lot of exciting things going on here at Littelfuse. So with that, I'll pass it on to Dave. Thank you.

Thanks, David, and good morning, everyone, and thank you all for being here. As you stated, my name is Dave Rupell. I lead Transportation and Logistics. I joined Littelfuse in 2024. So I'm one of the newer people here in the organization, but I'm very excited to be here. I mean, I think the transformation going on within Littelfuse and the opportunity we have in the transportation and logistics space truly is extraordinary.

Greg mentioned, look, when you look at the surface, 1% growth rate and everyone goes, okay, they're not going to see a lot of vehicle production, maybe not as much opportunity as some of the more dynamic markets that we saw with Peter, that we saw with Deepak. But when you dig a little bit deeper and you see how we can leverage our global leadership position along with the global trends of electrification and functional safety, you'll see that we actually do have a lot of opportunity to outperform market. And when I talk to you about our approach and our change in focus and approach, not only can we grow above market, but we can sustain continued profitability improvement along the way. So I'm going to spend some time talking about how we'll do that.

Two things will come out as we talk about these key messages, focus and being much more proactive. This has been a shift for the transportation and logistics space and business. And it really began by being much more strategic about how we segment our markets, really looking for areas within passenger vehicles, within commercial vehicles that are growing faster than the broader market. So while transportation in total is growing at 1%, when you dig a little bit deeper and you look and you see what's going on with robotics, when you see with material handling, recreational, off-road, many of these are adopting electrification, moving to EV much faster. And even within some of our core spaces and markets like passenger vehicle, the change in features and functionality and functional safety are driving growth in content even if you're not seeing growth in vehicle production. So we are really well positioned to be able to support that. And we've also changed our approach.

You've heard throughout the presentation talking about how we engage with our customers. And we are doing a much better job engaging early, deeply in building technical partnerships with our customers. We're no longer just stepping back and waiting for customers to come to us and say, "Hey, we have this build-to-print opportunity," which we know will be decided largely on price. By getting in early, by really working with our customers, understanding their jobs to be done, the problems that they need help solving as they evolve and introduce their new platforms, we are very well positioned to drive those specifications and take a system-level approach, really looking across their entire architecture to say, how can we bring this broad capable portfolio of Littelfuse to be able to support and solve those problems. And really, we talked about multiple technologies.

You're in a much better position to integrate more components, more parts and integrate them into systems that truly bring value to our customers. So it no longer becomes about price. It becomes about how we can help support our customers and drive overall value within their platforms and their life cycle.

And then finally, a big component of this within transportation and logistics is how can we support this change in approach and do it profitably. We've really made some great strides in driving profitability improvement. And then the way we're doing is coming back to those 2 things I mentioned earlier, much more focus, making sure we're working in the right markets with the right customers, right applications, not trying to be all things for all people, but really coming together and say, where can we deploy resources in a way, reduce our complexity and ensure we generate the highest return on investment that we possibly can. It's about doing more with less, and we're going down that journey. So again, Strategy is simple for T&L. It's about being more strategic about where we play, right markets, right customers, right applications. It's about engaging early, truly understand our customers' needs and how we can help solve them and bring value to them. And then ultimately, proactively designing our organization, our structure, our processes and our approach to be able to serve them effectively and efficiently.

Let's take a step back and kind of look at T&L overall, transportation and logistics. We're approximately 30% of Littelfuse's revenue when you look at 2025 or around $700 million. And again, in passenger vehicle, we're working with the leading global OEMs, Tier 1s, commercial vehicles, OEMs, a number of suppliers across trucking, ag, construction and some of these others. When you think about warehouse automation, robotics, some logistical areas, recreational vehicles, power sports, we have kind of diversified where we're playing, looking for larger growth opportunities beyond this broader horizontal that's only growing at 1%. And I think the most important change in our approach is when you take a look at how our customers are broken down. So you have about 27% that fits in this leading category, 40% in what we call emerging, which is growing customers within our portfolio. But then you have this broad 33% or 1/3 of our customers that represent a high level of complexity, both in the interactions, the transactions, the SKUs.

And one big shift that we've made that I think is really important is Deepak talked about how strong our distribution partners are, and they really are. They've been great for us. And in the past, we were really diverting our focus across this almost equally. That was an issue. And what we've done now is we are leveraging our distribution partners. We are reducing our complexity. We are rationalizing our portfolio through price or through saying, "Hey, we want distribution, you can take these customers on so we can direct the resources that were focused on that bottom 1/3 of the business and redirect them to our leading customers. And that's a big reason why we think we can deliver growth above market. It's because, again, we're getting with these leaders, and we're meeting with them, not just on a transactional level or a procurement level, but getting deep relationships at the technical level, engineer-to-engineer relationships, looking at their future platforms and being highly proactive to ensure we are well positioned to bring the full capability of our portfolio to bear.

So once again, 1%, not that exciting, but we are confident that we can achieve mid-single-digit growth, adopting and utilizing the approach that I just described. That being said, we still think now there's some rounding involved going from $7 billion to $8 billion, but the reality is, once again, through better focus, through better engagement with our customers and through leveraging our resources more effectively, ensuring we're driving productivity, utilizing, as Greg mentioned, AI in areas to automate critical but non-value-added actions, we can ensure that we have the right focus on our customers to be able to deliver that mid-single-digit growth rate. We also have some really great competitive advantages. you step back, we were a leader and are the leader in low-voltage protection products across passenger vehicles, and we do a lot of great things within commercial vehicles around power distribution, around switching. And frankly, our brand is well known across both of those broad markets. And that's great because now as we're shifting our approach to this early engagement, they know that we have a history of reliability and performance. And that opens the door to us to really get more of these deep technical partnerships that lead us to be able to really help support platform growth and growth above market. And then through that collaborative relationship, we can look across not just the products that are made from a transportation perspective, but across all of Littelfuse and say, okay, looking at the system architecture, now we can look at the full portfolio and integrate solutions that can support our customers' needs.

So it's no longer trying to sell components through an indirect channel completely. It's like, okay, we want to be able to help you, tell us your problems, we're going to help you solve them. And then through our deep understanding of our customers' needs, the jobs to be done, our understanding of technology and the evolution of the markets, we're in a great position now to really structure, organize and execute our business in a way that we can sustain this profitability improvement that we've demonstrated over the past several years.

So talking about electrification and functional safety. So let me just spend a moment on that. Some of you are reading articles within automotive that's saying, hey, look, EV is slowing down in Europe and North America. And to some degree, that may be true. But you also see higher rates of adoption, obviously, in China, other parts of the world. But the reality is we are extremely well positioned and electrification comes in many different forms. And I'll give you an example. I go back to -- I'm like Deepak's data, I'm kind of getting older and have been around probably longer than I want to admit. I remember driving my parent's car, there was no electric windows. You would sit there and you crank the window down. You'd have to move the seat up and you'd have to do the back. Yes, someone can relate to what I'm talking about, your HVAC player would blow a fuse about every other time. Some of you may not even know what an HVAC player is. There are no touch screens. The most only place you could get power was from the cigarette lighter. A lot has changed in vehicles. And if you look at passenger vehicles with multiple touch screens and all the different features and functionality, everything is electrified now.

So whether it's an internal combustion vehicle or whether it's a full electric vehicle, they're requiring a higher degree of power, requiring more of our products to be able to support those systems. And that's what's great about it. Regardless of the speed of transition and regardless of the region, we can support it because we have a global footprint, and we have broad capabilities across low, medium and high voltage. So again, really positioned well from an electrification perspective.

So where is functional safety? So functional safety comes in a couple of different forms. Back in the old days, again, if I dropped that HVAC while I was driving, I'd go off the road because there was no lane assist that kept me driving or that would stop before I ran into Derek in front of me. So I mean, these are components of functional safety, but there's other things behind the scenes that we don't even recognize. We can't have something fail within a vehicle like say, a sensor on an accelerator. If that goes bad, you don't want the accelerator to go out of control and then you're doing 150 miles an hour down the freeway or through New York smashing into things. So there's redundancies built in, in these safety systems that we're not even aware of to ensure that we can protect the vehicle, the capabilities, the functions of the vehicle and the passengers. And that's a big component of what functional safety is. And that's where you see this dramatic growth. All of us see this every day in the cars we drive and the vehicles we ride in.

And frankly, when you look on the commercial vehicle space, they're moving even faster adopting electrification, and they're incorporating a lot of these features and functions that were started in passenger car into these commercial vehicles. So once again, these are key drivers for us. And by focusing with those leaders who are emphasizing this and adopting it faster, that's how we can win and outperform the market. And this go-to-market and operational mindset optimization is key.

Again, as we grow, the intention is not to scale headcount and do other things. We're being much more focused, which allows us to deploy resources to things that really matter and that are going to add value either to our customers or to our bottom line. And what this means is more sales and engineering focused on partnering with our customers to provide solutions, but also more productivity programs, value-add, value engineer programs, lean programs, things that ultimately are going to reduce the complexity and eliminate waste within our businesses that allow us to sustain profitability improvement as we grow.

So a lot of opportunities through global electrification and functional safety. And again, I think I want to highlight this again. Key components of our competitive advantages are really the fact that we are leaders, not only in the traditional 12-volt systems, but as these systems are shifting, as Greg mentioned, from 12 to 48 volts or from 400 to 800-volt systems, we have products that span all of that, and we have products that span it globally.

So once again, as we step back and we drive with our -- work with our customers, they're really looking to us to partner. And I'll give an example. I was recently in China meeting with a leading electric vehicle manufacturer. And they said, "Look, you have a great brand. We know it's reliable. We want to buy more from you. But more importantly, we're expanding globally. We're building factories in other regions around the world." And so even though many of their suppliers were local, they said we need someone who we can work with as we move to Europe, as we move to other parts of Asia or North America. And again, that ties back to some of our key competitive advantages.

We have great technical capabilities. We have a broad portfolio. We have it globally, and we have the capability to scale with them. And that's unique to Littelfuse and to our transportation logistics business.

I'm just going to step back and share an example of how this is working because we are already seeing some early successes, and I expect that we'll have continued success around this approach. So leading OEM, well-known brand is basically saying, "Hey, look, we're adopting electrification. We're moving to EV, electric vehicle. We're increasing our content. But look, we've got a problem. We're really concerned." We see a lot of these videos when people first started building these EVs of something called thermal runaway. I'm not going to explain what that is other than you've seen them on YouTube and the news -- on the news where some vehicle is burning off to the side of the road and it's EV and it gets a lot of attention. They say, we can't let that happen to our brand. But here's the issue. We want to launch quick, and we need a solution that fits in the existing design architecture. So again, bringing our full capabilities to bear, we brought the teams together. We engaged on an engineer-to-engineer level and said, we created a very ultra-fast circuit protection device, multiple technology that fit within the existing space, and we did it quickly. So we solve their problem. They're able to launch on time. They have confidence that they have this safety device within their unit to protect their brand. But for us, what was great is through that engagement, we were in the previous vehicle with content, but through really coming and saying, here's how we can help you not only on this, but across multiple types of systems, we increased our content 20x from what it previously was. So this is a great example of how engaging early and on a technical level really supports what we're trying to accomplish strategically. And of course, they see us now as a trusted partner.

We were able to really come in, act fast, provide an innovative solution. And as a result, they're someone who -- they want to continue to work with us in the future on their new and existing platforms.

So I'm going to come back to this. So we talked a lot about the market opportunities, how we will grow within that space. But I think it's really important to say not only are we going to grow, we're going to do it profitably. I've mentioned that several times here, but that's a key component of transportation and logistics. And it really begins on this chart on the right when we talk about reducing complexity. We talked about it at the customer level. 33% of our customers actually -- that 33% generate about 2.6% of our revenue. It's crazy complexity within the business. So again, through redirecting and saying we're going to leverage our distribution partners, we can increase minimum order quantities. We can reduce the complexity across our factories. We rationalize some of those SKUs.

And now that really has allowed us to redeploy our resources to things that add more value and support efficiency and scale. That's a key component to sustained profitability improvement within transportation and logistics. And now as we push forward, we've more than doubled our new business opportunity funnel through this approach, and we have the resources available to essentially prioritize those opportunities and grow.

All right. So I'm going to give one more example of this because this really supports our change in approach and how we go to market. This was traditionally a market and off-road vehicles and a customer that we didn't engage with previously. But we identified them as a leader within this space. We saw this market was growing high single digits and said we need to get involved. So we came to them, we talked to them, explained our capabilities. They were excited about them. And ultimately, they came back and said, "Hey, look, yes, we're adopting EV. We're electrifying. We're also looking to add features and functionality from passenger vehicles because our customers are asking for it. They're spending a lot more time in these vehicles on their weekends. And we don't want the complexity that comes around with like all these different capabilities, switching and how we communicate across these now new system architectures to communicate between like, okay, the driving to the control systems to everything else." And we said, okay, we can help with that. So again, using a multi-technology approach, we came together, worked with them on their system. We created an optimized and configurable system, leveraging multiple components of Littelfuse along with our internal software capabilities.

So again, establishing a [indiscernible] switching platform that ultimately allow them to take this accessory module that would help control the vehicle, and it could be used not only in the platform they were looking to launch today, but in their future platforms. So for them, we were able to support their desire to have accelerated platform launches, reduce the complexity associated with their systems. And from a supply chain perspective, it simplified it for them, one supplier instead of multiple suppliers, one design versus multiple designs. And even from a cash and an inventory perspective, it helped them save there as well. So great value for the customer, but also great value for us because in this particular opportunity, not only did we get into this new program, which is a multimillion dollar per year opportunity, but we started increasing our content from where we started. We said we can do this for you. And we talked about some of the other things we do with digital switching and other areas. And so we're interested in that. So our content continues to grow. And now they're looking to us with their other new platforms and things they're looking to do in the future. We're engaged early, and we are helping to drive specifications across the different types of systems that utilize the things that we build at Littelfuse. So again, really great success, but also a very exciting opportunity as we push forward.

So just in close, again, our strategy is simple, but I think we're executing well and it's effective. It's being more focused around being in the right markets with the right customers and in the right applications, moving away from a reactive approach on build-to-print cost-sensitive types of opportunities to really engaging early with our customers, understanding their problems and then helping to solve them in a way that brings value so that we can not only win those but win them profitably and continue to sustain the profitability improvement you've seen over the last several years. And then finally, by understanding our customers' needs, evolving technologies and evolving markets, we are well positioned to align our business, again, efficiently and effectively to be able to serve their needs. So really excited about the opportunity we have in T&L. We're beginning to demonstrate some of the potential that's there, and I'm confident that we will execute in a way that delivers sustained improvement growth and in top line and in profitability as we move forward. And with that, I'm going to turn it over to Karim, again, who's going to build upon how when we think about electrification, higher power density, how he and his strategy are going to support potential growth across Littelfuse. So...

Good morning, everyone. Thank you for joining our Investor Day. My name is Karim Hamed, and I lead our semiconductor business. I'm among the new faces here, only 8 months in the role, but I bring over 20-plus years experience in semiconductor. I've had over my semiconductor career, a lot of roles from design, business development, product line management and most recently, leading a multibillion-dollar business. I recognize there is some confusion among the investor community about our semiconductor business and how it fits within the overall Littelfuse strategy. So I'm very actually excited to be here today to unpack this story and explain to you how it fits with the overall strategy and provide clarity.

I'm going to go through the product portfolio. I'm going to show you guys how it fits with the overall capability that we discussed. I'm more exciting, I'm going to present our new update semiconductor strategy, one that I'm personally very passionate about because I truly believe it's going to bring significant value to our shareholders and our customers.

Okay. With that brief introduction, let's dive in. As I go through my presentation, there is 3 key messages I want to take away from my presentation, very simple ones. First, our semiconductor business is well aligned with all the secular growth trends from -- talked about from data center, from energy grid modernization and battery energy storage. As these markets grow, with significant tailwind for our business, and we're very confident we're going to capture this growth. Second, the portfolio is well aligned with the overall liquid fuse portfolio. This creates a very good value proposition for our customers and give us a strategic advantage. And third, we're executing a strategy, a new updated strategy that we are confident it's not only going to provide top line growth, but will drive significant improvement in our profitability. Simple, and I will go -- as I go through my slides, hopefully, it will be more clear.

Okay. So what's our semiconductor business? So in 2025, we generated roughly around $670 million in revenue, serving over 40,000 customers across all the 3 end markets that my colleagues have presented from EII, CCDI and transportation and logistics. This revenue is roughly split equally between 2 major product lines. One is protection, one is power semiconductor. Just for context, the protection is -- think about it as solution that's used to safeguard against transient and electrical f, while the power semiconductor is think about it as solution that's used for energy transfer and energy conversion. Greg presented this slide earlier on about our key capabilities and semiconductor play an important role in all 3 of them. If I stay positive with the overvoltage protection, our TVS diodes, high-power TVS diodes, d arrays is a key element of this portfolio. If you think about our overcurrent, we within semiconductor develop overcurrent protection modules, but we also provide power semiconductors to the EII team, Peter and his team to do for the high-power solid date relays. And then for the advanced protection and power solution, you see that picture here of our high-power stack that's actually demonstrated outside for those of you here in the room, you can see it that's used in the infrastructure and the data center infrastructure. So hopefully, this can help explain the whole -- how the breadth of the portfolio and how it fits with the overall [indiscernible].

As highlighted, our semiconductor business is well aligned with all these secular growth trends from grid, data center, industrial. Think about it, all these systems require advanced system protection and efficient energy transfer, and that drives demand for our semiconductor technology. But what actually excites us the most, excites me personally the most is the technology evolution of actually these markets is playing very well to our strengths and key capabilities, which will allow us to not only participate but outgrow the market.

To give you an example, the move towards 800 volts and above DC, Greg mentioned native DC 800 volts and above in data center, creates a significant opportunity for our protection business. Currently, our overvoltage protection, a high-power TBS is being deployed or used by a lot of our data center customers. We have enjoyed significant growth, and we continue to enjoy significant growth in the 12 volts and 48-volt systems. But as the system moves to 800 volts and above, this represents an opportunity for us to double 2x the dollar content per protection system.

Similarly, if you look at it from a better energy storage, moving to 1,500-volt systems provide a significant opportunity for our power semiconductor, where we have unique technology capability that allow us to not only participate but actually grow our share. We think these 2 things combined, you have a very healthy SAM. And by the way, we are very rational about our SAM that we have a very healthy SAM that we can go and grow and capture, and we're highly confident we're going to capture this SAM over $6 billion.

Right. So as I mentioned, we have 2 product lines: protection, power. Each of them has their own unique strategy. Starting with protection, I would say it's one of the most successful profitable franchises in Littelfuse, truly. We are a market leader and our strategy here is how -- and we're very confident about that how do we maintain this momentum and continue to drive this, build on this momentum and outgrow the market. We're going to do that by participating and capturing the opportunity in high growth and capture the opportunity in front of us in the high-growth areas. We're going to also penetrate into new markets like aerospace and defense, like industrial, which historically hasn't been a focus for us. That's we're well positioned to capture. And third, we're going to build on our domain expertise and system and develop a higher-value product. I'll give an example in this later on in my slides.

Switching to power, and the strategy you hear Greg about talking about sharpening our focus, sharpening our focus. We sharpen our focus in high-value applications in our target market, target customers where we have a clear right to win based on our technology capability and build our customer. This sharpening focus will allow us to rationalize our portfolio and then optimize our manufacturing footprint accordingly. And this strategy will drive us to not only drive our top line growth, but also improve our profitability in power semiconductor.

These 2 might seem like 2 separate islands, power and protection, but no, they are highly correlated, and I'm going to bring that as an example later in my slides.

Okay. So I will now dive a little bit deeper into our power strategies. I'm going to start with protection. As I said, our protection franchise, we are a market leader. And we don't take this slide and say we are a market leader. We are truly a market leader and our solution is the go-to standard for overvoltage semiconductor protection. Not only we provide reliable and reliability and efficiency in the system by protecting it, but we also provide overall system cost advantage to our customers. And this is something very important because because of our own proprietary technology, we enable power system designers to use lower voltage devices, lower cost and help them overall reduce the system cost, right? So this unique position, as I said, we are, we're a market leader, is actually reflected in our financials in this portfolio, where over the last 5 years, we have grown over double-digit CAGR and with profitability that's above corporate average.

So how do we move from here? So as I said, our strategy is to maintain this momentum, build on our position and continue to grow and actually outgrow the market. We're going to capture opportunities in our high-growth areas. I talked about data center, better energy storage, but we can also penetrate into newer markets that I said historically hasn't been a focus like aerospace and defense, like industrial. But more important, I would say, how we efficiently deploy our R&D to drive unique capabilities. And when I say leverage our domain expertise in protection and create solutions that solve a customer problem, like we just [indiscernible] a solution for the sake of solution, but solve a customer problem but allow us to capture the value at the system level. And I'm going to give an example about that in my next slide. So -- but again, with this too, with this strategy, we are very confident that we'll be able to maintain the momentum in our protection business.

Okay. So here's an example that puts the strategy -- bring the strategy to life with our protection. And actually, it's a good example as well because it shows the correlation between power and semiconductors, as I mentioned earlier on. We talked about the move to high-voltage DC systems in data center and battery energy storage. Customers are realizing significant efficiency gains. Going to high voltage enables less conversion stages, lower losses, smaller cable that all translate into benefits -- system level cost benefits. But with these benefits, there are significant challenges. And the challenge is, as you can imagine, going high voltage, high current that you have risk of [indiscernible] flashes, which could be at these voltage could be catastrophic. So the system designer need an efficient way to -- and a reliable, safe way to protect high system level of protection. And also, this needs to be electronically resettable so you can minimize your downtime and maintenance costs. This is where Laserfuse stands out.

So we have here in the picture shown on this slide, one of our technology capability we're currently developing, which is an [indiscernible] protection module. And this function -- this module includes over 5 functionality from sensing, course protection, sensing, remote monitoring, functional safety. And the beauty about this, it actually integrates technology from all over Littelfuse. So we have power technology, power semiconductor module. It has gate drivers. It has sensing. It has our own proprietary software. So we actually leverage technology from across the company to solve a customer challenge and a customer problem. And the feedback from the customer has been amazing so far. We have very exciting about this. Customers are waiting for us to bring this to market, and we're very confident we're going to have a significant market share growth with this one.

But what's it like this is a great value for our customer, but for Littelfuse, it's a great value for us, too, because selling this allow us to capture more than 10x the value if we will sell in video components, right? So higher value capture, solving a customer problem that we can reflect in our -- the good return for Littelfuse as well.

So turning to power semiconductor, an area that historically hasn't performed to the level that we want to perform in terms of profitability and growth. And hence, we are going through an intentional significant transformation in our power semiconductor business. So we're executing right now in a focused, highly actionable strategy to drive top line profitable growth. And at the core of this strategy, as I mentioned earlier, is focus, focus in high-value applications in our target markets where we have clear right to win. And when I say clear right to win, meaning that we have the technology stack from die, from packaging, from other things, we have the customer access, and we have the market share. We talked about hear from all my colleagues today about the go-to-market and how we are changing and revamping that, that's actually very helpful to us as well, but we have the right to win in these markets. So we're going to focus there.

This focus will allow us to rationalize our portfolio, basically intentionally deemphasizing low value so we can put our resources in what really matters. Then we can take this and say how we optimize our manufacturing capability. And again, we want to have a hybrid manufacturing model where we can rely in our own internal capability and external partners as well. But our own internal capability, we're going to mostly focus on, I would say, differentiated technology that we want to maintain in-house.

So the outcome of this strategy is we become a more reliable partner to our customers. I can tell you, I've been here a short time, 8 months, but I visited a lot of customers. And this is what the customer is telling us. They really value our technology. They really like what we are offering, but they want us to give us more. So a few weeks ago, I was at a customer, I said like, hey, in these high-power, high applications, I can -- everything you can produce, I can take now. So we are getting the message, right? So we need -- so this strategy will really focus -- resonate with our customers. So -- and once we are doing well with our customers and we do better service, that will drive our top line growth and as I said, profitably. So we're very confident and very excited about our power strategy.

Similar to protection, I just want to give you guys how an example bring this strategy to life. We talked about data centers a lot today, but like as you can imagine, with all our lighting data centers, like data center has to have continuous operation and the power supply has to be uninterrupted. The power supply going to these IT racks need to be solid. And of course, you don't have primary source, they have primary and second resource. And if something happens in the primary source, it automatically seamlessly transfer the second resource. But we're not talking about switching like a power supply and a charger phone. These are megawatts. So it's transfer this safely and efficiently is not an easy engineering task. It's actually very critical task. And the subsystem that's used to do this is what we call a static transfer switch. But at the heart of the transfer switch is our high-power stack module, right? This is compact. And again, it's shown in the picture here, and it's hard -- and actually, it's demonstrated outside. It's hard to see it as a compact, but when you take the subsystem, it is actually compact.

And what here is this is we can transfer megawatts of power within 2 to 3 milliseconds, which is a unique to enable this uninterrupted operation of the power supply data center. We are almost in every participating where every customer our technology is there. We see this as a growing opportunity over $400 million that we are well positioned to capture. So this is an example of where we want to focus our power semiconductor, high-value, mission-critical. We have the right technology stack, we have the right customer access, and we're going to do more of this moving forward.

So in closing, I want to reinforce my message, as I said earlier, simple messages. Number one, I think our semiconductor business is well aligned with secular growth trends, and we're very confident we're going to capture this opportunity. Two, the technology is really actually complementary to the overall Littelfuse portfolio. That creates a really value position for our customers. And finally, we are actually executing on a focused, highly action strategy to drive our top line and our bottom and our profitability. So we're very excited. We're very confident about the path forward. We're very excited about the opportunity ahead of us.

And with that, I'll turn it over to Abhi, who will go through our financial model and how all these strategies presented today reflect in our outlook. Thank you so much for your time and attention.

Thanks, Karim, and good morning, everyone. First of all, thank you for being here today and listening to our strategy and our 5-year road map. For folks who don't know me, I'm Abhi. I joined Littelfuse in June of 2025. Prior to this, I was the CFO of IDEX Corporation, and before that, a company called Multicolor Corporation, a private equity firm.

I'm super excited to be here. More importantly, when I joined Littelfuse, I was excited about our long-term future. But as I stand here today, I'm even more excited as we unveil our 5-year strategy.

So before we get into the financial model, and I give you the nuts and bolts of where we are and where we're going to go, why don't we start at the highest level and kind of think about the 3 things that we're really focused on. So number one, for us, it's about accelerating top line growth, organic growth by focusing on markets that are attractive, that secular tailwind that teams talked about today. Deepak, Peter, they talked about data center, grid and utility, aerospace and defense. These are markets that we are really excited about and that we are double downing on to accelerate our organic growth. Second, balance sheet. We have a really strong balance sheet, and we are focused on disciplined capital deployment to both organic and inorganic opportunity so that we can create long-term value for our shareholders, for our employees, for our customers. And three, as we scale the company, it's about elevating our operational performance. This is really important, right? We're $2.5 billion, we aspire to be $4.5 billion that Greg laid out. So for us, it is about scaling the company operationally through a standard set of KPIs across the company, across our businesses, so we can hold our teams accountable, we can drive profitability that's sustainable, dependable and is consistent through the next 5 years.

So you put these 3 things together, what you create is an enterprise with an earnings profile that's more resilient, more dependable and more stable through cycles.

Now let me walk you through our 3 segments and -- our 3 external reporting segments. So if you look on the left side of the slide, we have 3 reportable segments: electronics, industrial, transportation. Electronics makes up about half of the company's revenue, transportation at 30% and industrial 15%. On the right, what you see is the diversity of end markets that our teams talked about today, the diversity of technology, the diversification of this portfolio is what's on the right. Now keep in mind, all 3 segments serve these end markets. So it's not that these end markets are tied to one segment, every single segment plays a big role in serving these end markets, okay?

And what's important to point out here is the diversity of these end markets because what that gives us is the ability to protect ourselves from any volatility in one particular sector. That's what's really important here. It's the diversity of markets, the diversity of technology, the diversity of customer base that we serve with the business that we own today. Now let me walk you through the value creation playbook that will drive long-term shareholder value.

Look, our long-term value creation is all about best-in-class performance through cycles, okay? That's how I think about it. It's about building a more resilient, more profitable company regardless of the cycles we go through. So if you kind of think about the value creation playbook, there's really 3 pieces to it. And I'm going to cover these pieces in details as we go through this presentation. But the highest level, it's about organic growth. It's about driving organic growth of 7% to 9% with the core businesses that we own, coupled with the high-growth opportunities that we're really focused on.

This is really important because, again, we have great businesses. We have a great brand. Our teams are focused on the right opportunities. And we believe if we do this well, we can grow this company organically 7% to 9%, okay?

From an inorganic standpoint, what we're focused on is deploying capital to about 6% to 8% top line growth. And this is really, again, as Greg had laid out earlier today, this is nothing different. It's all about focusing on the core markets that have secular tailwind that we're excited about and how do we ensure we go deploy capital to those end markets so that we can bolster our organic growth with inorganic growth, okay? And then third, it's about margin expansion. This is an important part of it. So if you think about where we are exiting 2025, we're at 21% EBITDA. Our goal over the next 5 years is to get to 24% to 26% EBITDA or 25% EBITDA, which, again, is a 400 basis points improvement, okay? How are we thinking about it is, again, it goes back to what I said, which is deploying an operating playbook that is consistent, that we standardize across the company with a set of KPIs that really can help us drive profitability that's sustainable over the long term, okay? Now we do these 3 things, what this translates into, and this is really important, is a $25 EPS. And just for context, 2025 was $10.68. So it's more than doubling our EPS over the next 5 years by doing these 3 things. This is what I'm excited about, okay? So as we think about this growth playbook, let's take these pieces and dig deeper. So starting with our top line. There are 3 core pieces, the core business, the high-growth opportunities that the team talked about and then strategic M&A. So taking one bit at a time. So core, it's about outgrowing the underlying markets where we believe we have a right to win. We have a great product portfolio, coupled with our go-to-market, gives us the confidence and the conviction that we can grow this business above market. Two, investing in these high-growth opportunities, high-growth markets that the team has talked about today is going to really help us drive 7% to 9% organic growth.

From an M&A standpoint, I know I touched on it, but it's all about expanding our solution set, partnering deeper with our customers and aligning our M&A strategy to these end markets that have secular tailwinds that we believe are going to outperform our end markets and investing in these companies, okay? So that's how we think about our top line.

Now what this translates into over the next 5 years is a CAGR of 14%. And I'm going to tell you, so in a couple of slides, I'm going to walk you through the organic line. But if you think about the organic growth of 7% to 9%, now this does include some portfolio rationalization. So at the highest level, if you think about our core business, coupled with NGOs, we're laying out a target of 10 basis -- 8% to 10% on the top line. But Greg and the team walked you through our SAM and the growth rate tied to our SAM. That's a 6% growth rate. So at the low end of this guidance, that's a 200 basis point higher than market and the high end of the range is 400 basis point market outperformance. That's a critical piece of this. This is us driving above-market performance by 200 to 400 basis points over the next 5 years. That's super critical here. Operational execution. This is something that Greg and I have talked a lot about over the last year, whether it's an earnings call, whether we go with various investors, conferences. So when I think about operational execution, it's about how do you scale this company from $2.5 billion to $4.5 billion. And when we scale this company, how do we ensure that when we grow, we can deliver operationally, okay? You heard from Dave and Kim today. Dave talked about simplification. Dave talked about focus. Dave talked about, hey, I'm going to take complexity and redirect it to things that matter to things that will help grow this company. That's a piece of operational excellence. Karim talked a lot about power semi. We have talked about power semi as part of our earnings call and the work that we're doing around it. When you think about power semi, what we're thinking about is product rationalization, footprint optimization. Those 2 pieces are critical for us to drive margin expansion. And us as an organization, us as a team, we are really focused on making sure we execute on those 2 things, okay? Second, capital discipline and deploying capital in an effective way to organic and inorganic opportunity is going to be a big part of margin expansion. And then lastly, look, we all talk about AI. Early days, but we're in the process of working through where can we use AI to drive efficiency and enhance productivity as we go through the next 5 years. So again, this is a big part of our strategic priority over the next 5 years. Again, none of this is a surprise. We've talked about this, but the teams are really focused on making sure we do this well so that when we scale, we can deliver for our customers, our shareholders and our employees.

So look, switching gears for a second. We talked about growth. We talked about deploying capital, operational execution. None of this can happen without cash. Cash is really important in the situation. So if you think about Littelfuse and think about the hallmark of Littelfuse, our free cash flow generation is one of the things that we take a lot of pride in. If I look at '21 to '25, our free cash flow conversion was north of 100%.

As I think about our priority, we continue to make sure we deploy that free cash flow. One of the priorities for us in the next 5 years is to really work on working capital and continue to ensure we're rightsizing our working capital, so we don't block our cash, okay? So if you kind of think about the next 5 years and think about where we're headed, our target is to deliver $600 million of free cash flow in 2030. And over the next 5 years, convert cash north of 100% like we have done historically, okay? That's kind of how we're thinking about it. And this is important again because if you think about M&A, think about operational execution, think about organic growth, all of these things need funding.

So making sure we do this and do this really well is going to be super critical as you think through the next 5 years. I thought I'd show you a snapshot of where we are. Sitting here on March 30, our cash was $482 million. Our leverage was 1 turn. And don't forget, we just bought Baxter in December, and we paid $350 million for it. Despite that, our leverage is 1. This, again, speaks to the power of the business, the power of the portfolio and the free cash flow that we generate, okay? As we think about our planning cycle, as we think about M&A, I'll kind of first take you back in time.

We've had periods where we have done a decent chunk of M&A, but we're still being within the target of 1 to 2.5x. And as I think about the next 5 years, and I lay out the M&A strategy, we're going to continue to remain disciplined and be within that 1 to 2.5x. And again, this speaks to the cash generation and our ability to generate cash to ensure we can stay in that range. So how are we thinking about capital deployment? I told you about the importance of M&A, I told you about the importance of organic growth and the need to fund organic growth.

So as you think about the 5 years, what this model has contemplated is us deploying our cash 70% towards M&A. And when I say M&A, it has to be disciplined M&A tied to our strategy, tied to the end markets that we are focused on, has to generate double-digit returns by year 5, has to be margin accretive. We're going to apply some filters and we're going to stay disciplined. But if you think about where we're going to spend our capital, 70% towards M&A, the other 30% is split 50-50, 50% towards organic investments, the other 15% towards opportunistic share repurchase, coupled with our consistent dividend payout that we have done historically. That's how we're going to spend our capital, okay? With such a critical part of this deployment being allocated to our M&A, let's spend a little more time talking about financial filters.

So Greg laid out our strategic focus on M&A. He talked about the kind of businesses that we're going to go buy. Brett talked about, hey, it's going to be in markets that we're excited about that have secular tailwind. I'm going to take it a step further. So if you think about the financial printers that we're talking about, just to make sure everybody is on the same page, it's going to be disciplined. It's going to be M&A that supports our organic trajectory that I just laid out of 7% to 9%. It's going to be margin accretive. It has to generate double-digit returns by year 5. And I say double-digit returns, return on invested capital, cash and cash returns. And that's how we're going to look at every opportunity.

So if you think about Basler, it's a great example of what we're going to go do. So start -- just to give the teams an update on Basler. We bought Basler in December of 2025. We paid $350 million for Basler. Now kind of let's break it apart. It gives us exposure to data center, utility and grid markets that we laid out today was a primary focus area for us. It gives us capabilities broader than what Littelfuse has. It gave us deeper partnership with the key customers that we care about. If I think about our performance in Q1, we exceeded the performance in Q1 than what we had guided, okay?

And then for the full year, as I think about our performance, we had said our accretion is going to be $0.10 to $0.15. Sitting here today, given our Q1 performance, we're going to be on the top end of that $0.15. Really excited about Basler, really excited about the business. done a great work of integrating the business in the near term. And this is a great example of the strategy and the kind of M&A that we're looking at that we're excited about. So when you stack these successes together, organic operational excellence, disciplined M&A, it leads us to our targets for 2030.

So again, today, we are a $2.5 billion company. Our aspiration is to be $4.5 billion by 2030, $1.1 billion in EBITDA. So just for perspective, again, I know people -- Greg talked about it. Today, we are $0.5 billion EBITDA. Our aspiration is to get to $1.1 billion. And then more importantly, as I said, to fund organic growth, M&A, we need cash. Our focus is to generate $600 million of free cash flow by 2030.

Now you can think of this as financial targets. I view this as a transformation journey that we are on and the excitement around it that the teams have is what gives me so much excitement to stand here. These are not just financial filters. These are not just financial numbers. This is a different littittlefuse, and we're in the early days of transformation, and this is what I'm excited about. So taking a minute and breaking out the annual revenue growth bridge. So like I said, we're $2.5 billion today, $2.4 billion.

Core plus SGOs are about 8% to 10% is what we laid out for growth. And again, this is about go-to-market, focusing on geos and accelerating our organic growth. We've laid out 1% to 2% walkaway revenue tied to the work that Deepak is -- Karim is doing, Dave Ruffle is doing. So if you put the 2 pieces together, we're laying out a target of 7% to 9% organic. But I'm going to bring this back up again. So if you just focus on the core plus GOs and not look at the optimization/walkaway, right, our markets are going to do about 6%.

So at the low end, that's 200 basis points more growth than market at the high end, it is 400 basis points. That's an important piece I want to leave the team with because, again, this goes to our focus on geos, the go-to-market model that we've initiated, right? This is why we feel so confident and have the conviction to go do this. And then inorganic of 6% to 8%. What this translates into, though, is electronics growing at high single digits, transportation and mid-single digits; and then lastly, industrial at double-digit growth, okay?

Now let me walk you through what this means in terms of EBITDA and the pieces of EBITDA. So again, I mentioned we are a $0.5 billion EBITDA company. We've also talked about conversion on top line for us is about 30% to 35%. So when you take the organic growth and you think about what that's going to do on EBITDA, that's about a $400 million contribution to EBITDA. I just shared with you on the other page, we're going to lose about 1 point to 2 points of CAGR over the next 5 years. But what we're laying out is a $50 million positive EBITDA impact driven by footprint rationalization by looking at products and rationalizing them, making sure we are focused on things that we are core to us, okay?

So again, down 1% to 2% over the next 5 years as we think about rationalizing our portfolio, optimizing our footprint, but it's going to turn into a $50 million positive EBITDA for us over the next 5 years, okay? And then lastly, M&A of $200 million, which then gets us to our aspiration of $1.1 billion. So to sum it all up, Littelfuse is a leader in mission-critical technologies, well positioned to capitalize on the global electrification trend.

Disciplined capital allocation is going to be a key, and we are laser-focused on making sure we invest in things that will deliver returns, increase our profitability, support our organic growth and give the returns that are double digit in year 5, okay? We have the right strategy, the right team. You met the team today and strong momentum. I want to thank you all for taking the time today and being here. And I hope you're as excited as I am hearing the team today about our 5-year strategy.

With that, I'll bring Greg back on stage.

All right. Thank you. Well, look, I really appreciate all the time here. Hopefully, now you see through the whole story and through the team from our market views, from our technology products and ultimately, the financial model that Abhi laid out, why we're excited. And I'm just going to go back and really just zoom back right to the beginning and just kind of really quickly anchor, again, why I believe we have a great strategy, why this is not just an ambition, but it's a plan, and we have a high confidence in getting there.

It's just those 3 things at the beginning. First, we're in a transformational shift in the market. Electrical generation and consumption is in a significant pivot. That's a tailwind for us. In addition, there's this transition to high voltage DC. You heard that throughout the presentations in all of the markets why that matters, and that's a content lift for us. Second, we have a very, very unique portfolio. You heard a lot of examples about that. You saw the solutions across our technology portfolio, examples of overturn, over voltage, power system solutions and across all of our markets.

And third, we have a very good strategy. It's a simple strategy. Dave pointed to that as well. Our strategy is simple. It's straightforward. It's clear. It's about focus, customer partnership and then bringing the right technology to market and optimizing our portfolio. So we have a high confidence in this plan. Hopefully, you all see the same thing and that you'll join us in this journey.

And with that, I'm going to hand it back to David, and we're going to switch to a Q&A session.

All right. Thanks, everyone. We're going to now transition to the Q&A portion of the event. If you'll bear with us for just one moment, we're going to bring all the presenters back up. We've got some seats coming up on the stage here. The format of the event is we're going to take both live, of course, and webcast via the portal Q&A. So if you joined us via the webcast, feel free to submit your questions. I will be monitoring those and happy to address everyone's questions this morning. So bear with us for one moment, and we'll get rolling.

All right. Thanks, everyone. So we're going to kick it off live in the room here. And again, we'll switch back and forth to webcast portal as well. So a question here from the front. If you don't mind stating by the way, your name, your firm and looking forward to answering your questions.

Chris Glynn, Oppenheimer. Just wanted to start off on the capital allocation, the organic or the inorganic strategy. Curious if you see that being a pretty steady flow of small and mediums or a couple of chunky ones, if there are like corporate orphans or are you looking at more private type companies? And any openness to merger scale opportunities?

I'll start. Listen, thanks, Chris. I think first, I mean, what's important is that the acquisition aligns to our strategy. And for us, I think it's the 2 pieces. It's the technology capability and then the market over. And we want to overweight in the markets that we think are high-growth markets, aerospace and defense, grid utility and data center. So I think that's the key. I think we're very open-minded as to what we want to buy.

We do have a significant percent of revenue, and Abhi can repeat that on the model, a significant percent of revenue to our $4.5 billion, which comes from M&A. So we want to buy significant things, but we're very open-minded. So we have a lot of opportunities we're looking at. We're constantly looking at opportunities. We're open to public, private. Whatever fits the model for what we are looking at is the key, I would say.

And we presented Bachelor as kind of a key model of what we want to do, the kinds of things we want to do. It fits well. It has the market overlap, it has the technology capability. It has the financial model. And so we're open, I would say, to whatever makes the most impact to accelerate us to the strategy.

Yes. Look, just to add to what Greg said, again, Greg covered the strategic part. It's got to be a strategic fit. It's got to be in markets we care about. And I'll just complement by saying and it's got to hit the financial metrics that are super important to go hit this plan, which is around, hey, double-digit returns by year 5. Is it margin accretive? And does it support our organic revenue aspirations. So we're going to balance the 2. To Greg's point, we're indifferent, whether it's public, private. It's got to be the right company that fits the profile.

Question upfront here.

Luke Junk with Baird. Hoping you could speak to system selling and co-engineering that relationship, how it's evolved across both CCDI and EEI. Dave talked a lot about it in his presentation. Hoping we could just bring it to life more in both of those segments. And specifically within CCDI, we can maybe speak to the 2 to 4x high-voltage DC content opportunity. It seems like system sales and co-engineering relationships are pretty key to driving that. Just maybe some examples to put more.

Thanks, Luke. Maybe I'll start and then I hand to Deepak to give you more context in the CCI and especially in the data center market. I think the good news is that system sale is not like it's not something that's completely new at Littelfuse, and we actually had been doing it in some areas very well. Actually, Peter mentioned in the EIM market, for example, in solar, we were very early on system-level solutions first to the 1,500 volts. And I think that's the key is it's about partnering with key OEMs and knowing where the technology trends are and then taking our technology and developing that.

So it's not something that's completely new, but we're doing it more at scale, and we're also doing it more to be able to come in and say, okay, we have this complete portfolio. How do we offer that solution for you? And I think that's the fundamental difference. I've met with a lot of these customers myself, and the customers are thrilled that we're showing up this way now. And as was mentioned in the presentation, they have a lot of unique challenges around these high-voltage systems.

They're focused on the different problem, which is computing and getting the power in and out the protection or whatever is very important, but it's not their primary focus, and it's something they really need to go. So I would say that's the high level. And I'm going to let Deepak maybe give you a little bit more examples about how that partnership is working in the data center.

Yes. It's -- we're expanding our system engineering capability. We had it, but we're adding a lot more people in the Bay Area and ampitus office, but that's closest to our customers there, all the hyperscalers. So we've added that capability, added more people there and a very focused teams, I would say. So we have teams of system engineers, FAEs, sales guys and great relationship with the hyperscalers and all of them actually. So what's going on is very quick feedback of what they want, and we go work the solution with them. It takes time, longer-term solution, but we are on top of all of those right now.

David Williams from Needham. Thanks for all the really great color today. It's great to hear. You set some really nice, I think, growth trends or growth expectations here, but it feels like maybe there's a little conservatism there, just kind of given what we're seeing across all of your markets. We've got this inflection, obviously, data center performing very well. How do you think about maybe the upside opportunities? Do you feel like there's more upside opportunity than maybe downside risk to your expectations that you've laid out today?

Maybe I'll start. I think -- look, I think the key here is that we're -- I mean, one thing that's really powerful about Littelfuse is that we're a very, very diversified company, right? We operate across a lot of markets, and we're very diversified. That, I think, is actually a strength, but it also blends our overall growth rate. If you look at the markets that are the high-growth markets like grid utility, like data center and actually, we did put up on the slide that in data center, for example, we're expecting growth of 25% to 30%.

And again, that's based on assumptions about power consumption. It's based on assumptions about how fast technologies evolve and how much they deploy. And these things are moving all the time. So there's kind of the core market assumptions behind that, that you guys are chasing as well as we're chasing. I think the way we look at this, what I think is important is that we have a leadership position across the markets and across all those markets. We have a leadership position. We're well positioned with the technology, and our focus is on getting share and design in, and we're focused on getting the share and design in, in the high-growth opportunities.

And then from there, the market kind of goes as it goes. So you can say maybe our model is conservative, maybe our model is aggressive. Our focus is trying to win share and outgrow the markets. I think Abhi outlined the kind of the numbers we're thinking outgrow the markets. And is it possible that we will grow more? Sure. And is it possible the markets will grow faster? Sure. Is it possible we'll take more share? I hope so. But also, we want to put together a plan that we think is credible that we can commit to and achieve, and that's basically what we're looking at.

Abhi, I don't know if you have.

No, I just -- I think I'll bring it back to, if you look at the markets that we laid out, we're expecting that SAM to grow 6% at the high end is a 400 basis point outperformance versus market. Take a step forward, think about organic growth, forget inorganic for a second, that 8%, the GOs are going to grow 20-plus percent in that 8%, right? So that's what we said, that's what we're focused on. To Greg's point, the range of outcomes can matter because the macro work can change. But that said, we feel pretty comfortable and confident about the plan that we laid out today.

Maybe a couple of questions from the webcast here, and then we'll happy to kick it back to the live room afterwards. A question on your go-to-market strategy and the focus on customer segmentation. How should we measure whether that's working or not? What KPIs or proof points are you tracking to validate the success of this strategy?

Yes. Thanks. I think the key on the go-to-market is really about focusing on those 1,000-ish customers are where we call direct and then the broad tail at 3 of the revenue is where we go indirect, right? On the direct part of the customer, the ultimate success of our improved go-to-market is accelerated revenue growth. Now that takes some time because you got to partner with the customer, you got to get designed in. But that's the ultimate success. So the ultimate success we're looking at is accelerated revenue growth.

But obviously, there's metrics that we look at along the way to try to see what our success is. First, our earliest indication is growth in our pipeline, right? So we look at the pipeline growth that we're getting. We're looking at increases in the pipeline. So how much opportunities are being identified. But then we have a disciplined process of tracking that pipeline through to our design wins. We talk about design wins. We have a lot of discipline about defining what a design win means.

And in most of our markets, actually, that relates to actually -- you're on the platform and actually you're getting some revenue in early prototypes that tells you that it's a design win. And actually, we talked about in our previous earnings call, and it was on the slide today that in data center, where we were early to go to this new model, we doubled our design wins last year, basically in 2025. And those design wins, that's like I said, we're on the platform and we got some revenue in early prototypes. So that's, I think, the second key metric that we look at.

And then the third key metric that we look at is really about our cross- technology sales. So I mentioned the example in my presentation with this e-mobility customer that uses a very, very broad scale of our technology. Most of our customers use significantly less than that. And so there's a lot of opportunity for us to just -- if you got a couple more technologies on those platforms, Deepak talked about multiple designs on a board, that is a huge growth lever as well.

And so we also are going to be tracking how many technologies we're able to sell into individual opportunities and individual customers. So those are the metrics that we're going to track internally, and those are the early indicators that ultimately are going to show up in the revenue growth.

Maybe one more here from the webcast, and this is specific to transportation and logistics. You've spoken to these high-growth opportunities across your markets. T&L is only one without one, with some of the slowing EV adoption we're seeing, can you walk us through your content outgrowth story and what gives you confidence in your ability to outgrow these markets?

Yes, that's a great question. And early in the presentation, I talked about that even though the full transition to EV may be slowing across Europe and North America, the increase in features and functions across vehicle platforms continue to grow. So that's the way that we're really capitalizing on that. So electrification continues across the broader market. So our ability now to engage early on a more system architecture level allows us to pull more of the Littelfuse portfolio into these opportunities.

And again, regardless of the speed of transition to internal combustion to full EV, we are well positioned across all those platforms. We're a leader in internal combustion, and we are well engaged across medium and high-voltage systems into full electrification to be able to drive our products and grow well above market. And our global scale and technical capabilities truly differentiate us because as our partners are moving across different regions, expanding their businesses, we're right there with them.

So that's why we have the confidence that we can really well outperform from 1% perhaps vehicle growth rate to mid-single digits growth.

I'll just add, I think the work that Dave has done and his team and across the company, I think in our last earnings call, we announced actually we had a pretty solid revenue growth in our transportation market, even though the market was slow, and that was really because of work that's been done in the team about customer partnership, and we were able to get share on existing running platforms. And what's exciting about as well, just a perfect example of where we got share.

We actually got share based on the kind of core overcurrent portfolio that comes from Dave's product line, but also the semiconductor protection portfolio that came from Trains product line, leveraging our customer partnerships and go-to-market. That's a perfect example of where we did in the last quarter that we announced, we're able to outgrow market. And I think that's why we have confidence that the model that they put together that we've put together, we can outgrow market. And I think that's the real thing that we try to pay attention to is relative performance in the markets and focusing on the high-growth areas of those markets.

Great. Thank you. A couple more flowing through the webcast, but we do want to take some time for back live in the room if anybody has any questions. Of course, if not, I can continue with the webcast. Go ahead.

Chris Glynn, Oppenheimer again. Just wanted to dive into the repeated kind of mentioning of the more than doubling the design wins in data center last year. Curious on a few things, the degree to which that is the market in 2025 versus in 2024 as opposed to where your go-to-market was in '25 for potency versus where it was in 2024? And how many players you see in terms of being really competitive for market share in those design wins? Is it 2 or 3? Is it they go to 5 vendors or they go to little Fuse plus a smaller supplemental?

Yes. Look, I think I'll start. And then again, maybe Deepak can give again a little bit of color on kind of the -- some of the maybe more solution areas that we get in here. But I think, look, attribution is always very hard, right, to say, okay, you attribute this exact outcome to this exact thing. It's very, very hard to have exact attribution. But I can tell you, number one, market is improving. But number two, we are seeing progress. I mean I get feedback from our customers. I've met with these customers directly. We get feedback from our customers that they really, really value this approach. I also get feedback from our customers that they really value Littelfuse in this space, especially the hyperscalers.

I mean I think -- and Deepak can talk a little bit more about this. We are a trusted brand, right? So I think the key there is that we've simplified the model of how we're approaching these customers. And instead of bringing multiple different sales teams to sell different things and where we were still able to win the share, by the way, we're able to say, "Hey, can we just work on your next-generation platform problem. So we definitely accelerated our own luck last year in those design wins.

Obviously, some of it is market acceleration, too, but we definitely accelerated that. And we see momentum. I think the other thing to understand about this go-to-market change is that it's early, right? You early start, you build that relationship with your customer, then you start to build the next-generation platform.

The real value proposition is that down the road, like Karim was talking about, we can integrate a number of different technologies into a higher-level solution that might be 5x the price. So I think that's the way to think about it. I don't know, , you want to give any more color to this.

I mean the only thing I'll say is that data center is big news today, but we've been working in data center for a long time. So even 4 years back, 5 years back, we were working with the same guys. It become much bigger now. So we have deep relationships from 5 years back, and we've been on their design. We've been working to design new products for them. And that's been the advantage we have anybody else in the market. So it's not totally new to us. We've been in there.

And I guess to your last question, right, it's a competitive space. You asked about competition. Obviously, everybody wants to win this share. And we have competition. Everybody has competition, but we feel very confident in our ability to win based on our portfolio. And I think we'll leave you again with that unique portfolio. We have a very unique portfolio across the technologies, which allows us to have a different kind of conversation than some of our...

I think, Greg, remember I said, we give a full portfolio. We have a 2 device, and we have a 2,000 am device. You don't have much of a competitor who can do all of that. So when you guys go outside and look at the booths, you can see the products we deliver. I don't need anybody else who can do that. And so customers like to work with us for that reason.

Again, I ask the question that's probably on the top of a lot of the 25% to 30% plus data center CAGR through 2030, realizing we're looking out 5 years now, further out probably a little less certain how you think about near to medium-term opportunity in data center relative to that CAGR and then how timing of the hight opportunities 400 volt and 800 volt even through...

So I'll start and then maybe Abhi can give a little more color. I think what's important is that we put 2030 targets out there today, right? And it's hard to really predict the exact timing of this thing. And actually, we have assumptions on our 2030 targets, which is based on the assumption you saw there on how much power is deployed and how fast these things go, and it's changing every day. And I will tell you the architecture evolutions as well are going to happen, but the exact timing of when any one hyperscaler or any one data center deployment goes to anyone, we're actually -- we don't know either.

So we make some assumptions about that. What's key from my perspective is that we're designed in those platforms. and we're working with the customers, but there's a lot of features and factors that they have to get right to be able to make sure that they can deploy that system, everything from these 800-volt systems, a whole set of different UL certifications.

Our products are UL certified, but their products are also UL certified, and there's a lot of supply chain they have to work out. So it moves around a little bit, and we learn, we're going to follow that. I think the key is that we will ride that market. I can't be the one to predict that. And so the timing is a little hard to tell. But we are confident on our 2030 targets and that it will be sustained growth.

Yes, that's what I was just going to say, look, I think what Greg just said is the conviction and the confidence that we have winning in this market. Is every single year going to be between 25% and 30%? That's hard to tell. But we do believe exiting 2030, it's going to be a 25 -- somewhere in the 25% to 30% CAGR. That's how we're thinking about it.

Maybe one from the -- actually, I have a couple from the webcast here. First one, a question for the EII market. You talked a lot about solution selling opportunities. In light of the Bassor acquisition, how do you think about the largest opportunities to bundle those capabilities to create differentiated solutions versus selling historical discrete components?

I mean it starts with our HEO, our strategic markets, talked about grid infrastructure, renewable in those areas. The go-to-market allows us to sell the basket of solutions at a system level. B is an example where they have a leading presence in the grid utility. And with that, they're able to pull in or we're able to pull in a broader solution around the circle protection as an example. Those are immediate opportunities that we're uncovering. And another direction is that Baer has also a unique solution or expanded solutions that they were not able to penetrate in the past in our other markets. So we're able to take that to our other markets within EII.

Great. A couple of data center questions. I'm going to try and summarize these together, not surprisingly. Can you help us walk through the 800-volt versus low-voltage DC architecture opportunity in terms of content, whether that's per rack or dollars per megawatt? How do you think about that transition and what it means for Littelfuse.

So again, I'll start and maybe Deepak can add more kind of detailed color. I think it's very hard for us as well, and we get asked this question all the time, dollars per megawatt and exactly how much more content, and that's why we put that 2 to 4x. We're confident that it's more, right? And there's a lot of moving things in these 800-volt architectures, right?

So there's a lot of moving targets in the 800-volt architecture exactly are they going to transfer straight from grid medium voltage to 400-volt AC and then they get us this sidecar thing. It goes from 400-volt DC to DC from 40-volt DC to 2,000-volt DC -- or do they go to 1,000-volt DC and some people are at plus 800 and some people are at plus or minus 400 and that's changing a lot. So it's hard to say.

I think the most important thing is we're participating across the ecosystem with the chip providers, with the hyperscalers with also the infrastructure suppliers that don't want to underemphasize that, that gray space, and you'll see that everything from backup power generation to those large 2,000-volt fuses that go right at the input of the building. And we're participating in the architectures, and we're well represented and designed in. And so we estimate 2 to 4, and it could be more on the higher end if more of the higher voltage content goes closer and it will be lower if it's less.

And then there's some other emerging architectures, for example, about solid-state transformers, which really is very disruptive. And now basically, you're taking the whole medium voltage transformer that sits outside, which is this massive and massive -- I mean it takes a crane to install, which is wire wound copper and steel, which we don't participate in, and you replace it with a solid-state solution. And we're talking to lots of people that are doing solid-state transformers. And it's a bunch of power semiconductors and a lot of semiconductor and protection. And when is that or is that going to make it into the data center market exactly, we don't know.

ut we're there. We're participating. We're working with those people. And if and when it happens, it's good for us. So I think that's the way to understand. It's a little hard to predict this, and I know you would like to predict it better, too. But for us, what we want to do is be in the right place, be with the customers, cover the ecosystem, get designed in, and then we're confident that as these evolutions go, we go.

Looking in the room here. I've got a couple on the webcast related to semiconductor technologies, but if anybody else has anything in the room, we can come back to it. So maybe I'll start with the first one on semiconductors. Can you talk about the integration of the semiconductor technology road map with the needs of your markets? And could you give us some proof points, examples of what semiconductors brings to the table that amplifies the other segment opportunities?

Right. I can start. So as I highlighted in my presentation, the semiconductor play an important role in all the capabilities we have within Littelfuse. So an example we saw about like our solid-state relays that goes into the EI market. We provide the power modules that go into this. Deepak mentioned in the -- in his presentation about the defibrillators and how our high-power IGBT is a part of the defibrillators. That's how -- another market.

Dave in transportation, I think our TVS, our protection, overvoltage protection semiconductor is a big piece of the transportation business. I think it really is integrated across all the 3. I think we look at semiconductor as an enabling technology that can -- across all these 3 end markets. right? This is how we view it as a semiconductor, and this will continue to work very closely with the go-to-market teams with the leaders of the 3 markets to make sure that we provide the differentiated enabling technologies that allow us to win in the marketplace.

And this I think is an important one, too. So people ask about competition. And we have competition everywhere. We have competition in our power business. But we talk about our unique portfolio and we talk about our overvoltage protection. We actually have 2 main technologies in over voltage. We have a lot of products, but 2 main things. One of them is an MOV. It's a ceramic-based technology, and this is designed for very, very high surge applications, very high power, high surge applications, but it is a downside that it's kind of slow.

But then you have the semiconductor protection technology, which is fast and high speed. That's what Tin is talking about. And we actually have both of those technolog, and we compete with people in both but we are the ones that have both. And maybe Corinne can talk a little bit about how we see some leverage of that across our market.

And that is a great example, Greg, because as I said in my presentation today, and again, I'm not going to go too technical, but like because of our semiconductor technology, we have very sharp clamping, so basically, we can really protect fast and quick and a very sharp. And that's a very high value for our customers, for systems.

And we have products where we're able to integrate both of those technologies together. That's also a unique opportunity that we have and how we're able to leverage the VA portfolio.

Great. And the follow-up is on actually protection semiconductors question being, you highlighted a priority to deploy R&D towards higher value, higher ASP solutions, 5 to 10x versus current products. Could you just provide some more color and detail on some of these specific areas, whether it's markets or technologies that you're prioritizing?

Yes. So as I said like in my presentation, like, hey, we see a big opportunity for us going to this high-voltage DC application, right? As I said, like this is a big transformation again. It's for a reason, customers are achieving significant gains, but the protection problem becomes a more challenging problem because it has to be ultrafast, it's very high power and it has to integrate multiple functionalities. And this is where I think this is where I say like we're going to deploy our R&D resources because we have like really deep domain expertise as a company in how to develop protection solutions and how to get the UL certification, how to do all of these things.

This is actually very valuable. And when you deploy all of this and leverage all of our technology, we're not going to do it for the sake of integrating. We're doing it when we solve a customer problem, right? This is a key thing. As Greg highlighted, like customers want to deploy data, like they think this is a significant gain, but protection, they want someone to partner with someone to provide a solution.

And this is where I feel like where we're going to deploy our R&D resources, we're going to leverage our domain expertise, and we can capture value because integrating for day, we're not going to capture value. That's how we capture value. That's how we deploy it, markets like data center, markets like grid, energy, transportation, high power...

Maybe just a little different style question here. But you talked, I think, multiple times today about software and firmware. I just kind of wondering what you can do if there's maybe a broader application of software strategy that you can deploy and if there's value in that and kind of how you think about that in terms of a potential M&A down the road for driving more value across your product portfolio?

Yes. Look, I think software is a core competency of our products. We're not a software company, but software is a core competency of our products. We're really a product company that sells system-level products and more and more system-level products are requiring software. And I would say the first place that happened was really in the industrial business, and you'll see some of those. So we have relays. We have ground fault protection relays, and these are solutions that have embedded devices that have software.

With the addition of Basler, Basler has a big business on protection relays and actually the protection and control and like protection and control, which is used. The Basler systems are used for data center backup generation. The Basser systems are used for also -- most of my data center and also excitation systems, which is for large-scale generation has a lot of embedded software.

Dave mentioned the embedded software inside of the automotive business. So we basically have embedded [indiscernible] software. So instead of now having a bunch of mechanical switches, it's a bunch of software-controlled, digitally controlled switches and the power control is now digitally controlled, and that was part of the value proposition that makes that platform flexible. So it's a competency of our company. We don't sell stand-alone software.

Some of our -- we have some service opportunities. But I think you should think about the fact that embedded software is a core part of our products. And as we do more and more system products across our markets, we will end up doing more and more software as part of them. That's the way to think about it.

I've got a couple of financial questions. Maybe I'll do one on the webcast, and we'll get to Chris. The first one is on the financial model, this idea of a more resilient Littelfuse. Can you talk a bit more some of the structural changes you've made that reduce and can reduce that potential earnings volatility? What's the last part? The structural changes you've made that can reduce your potential earnings volatility.

Yes. I think, look, as I kind of think about a more resilient company moving forward, I think it comes down to the macro is going to do what it's going to do. It's the renewed focus on growth, the focus on end markets, is sharpening our focus, as Greg has laid out, is what gives us more conviction in terms of being able to create a company that's going to be more resilient, more financially stable as we move forward, regardless of what the macro does, right? So that's one.

I'd say the second thing that we've spent a lot of time talking about, which is an important part of this whole earnings profile, is operational excellence is scaling the operations. It's really making sure our businesses are running with a standard set of KPIs, so we can hold people accountable and ensure that our margin profile is sustainable and repeatable as we think about the 5 years, right?

And then lastly, I'd say, David, to answer this question, the last one I'd make is it goes back to the M&A strategy, right? If M&A is going to be a big part of our strategy, I know Baxter is one example, and it's near term, but what we want to do is buy companies like Baxter that fit the strategy and then be able to integrate them and make sure, right, we deliver on the financial commitments that we made. So those are the things that we're focused on. Some, of course, are, to your point, structural or different, but a part of this is just really being focused on things that matter and spending our time where it matters.

I just want to elaborate on that. So yes, look, I think one of the key things about our strategy now is spend a lot more time kind of thinking a company-wide market-driven strategy. I think that's a key thing to understand a company-wide market and we identified what's the high-growth opportunities. You heard them talked about and aerospace and defense is one of those high-growth opportunities, which, by the way, we've participated for a long time and Deepak gave the example. We participated for a long time, but it hasn't had the amount of strategic focus.

One other thing to understand is that -- and this is a unique capability we have that we're doing a lot better. Every one of these high-growth opportunities actually has a leader inside the company because Avi made this point, all of our segments sell across our markets. Actually, all of our segments sell having opportunities and high-growth opportunities. And so that's the magic we have is we have that unique portfolio across all of our business. So it's a focus area for us now. That's for sure. We're putting a little bit more disciplined focus on that, and it starts with what the customer architectures are and going from there.

So it is something that we are focused on probably more than the past. That's the first thing. And the second thing is those 3 high-growth opportunities are the market focus for M&A, aerospace and defense, data center and grid utility. So you're right that we also plan to lean into M&A in those areas. And maybe Deepak can talk a little more about how we've been doing it for a long time, but also some of the increased focus.

About the...

Aerospace and defense.

Sorry? Aerospace and defense. Yes, so we've been working with the accounts there for the last 4, 5 years, I would say, but really building upon it more now. And what we found is that our portfolio actually -- with the new go-to-market, we're really trying to pull the whole portfolio into that. We do have an existing number in the few hundred million dollar range, I think somewhere in that range that we're doing today. But a lot more focused on what the target -- the target M&A targets would be for us that we are working on right now. So I'm working with Abhi to help on that.

Thank you. We've got about 5 to 6 more minutes left. I see a question in the front here.

Yes. Maybe just a financial question would be. On the optimization efforts, you outlined low single-digit offset to the organic growth targets and then $50 million of EBITDA opportunity. Can we maybe just unpack that in terms of where that's coming from? I would assume it's transportation, it's probably the power semi portfolio and just the staging of that. Should we expect to see these impacts nearer term? Or should it be pretty spread out over the next 5 years?

Yes. So as I said, the $50 million, that you see in the EBITDA bridge is our best view of where we are today. It is fair to say and confirm what you just said, which is a portion of that is tied to the work that Karim is doing around power semi and that Gabe is talking about in terms of -- but for us, this is not a onetime exercise. We're done and we move on. This is -- we're going to do this annually to ensure that we constantly look at our footprint, constantly look at our product portfolio and ensure wherever there is things that are not core to us, we're working through it, okay? So that's step one.

As you think about the timing and the cadence of how this is going to work, a chunk of this $50 million is tied to footprint rationalization. And as you know, and I know, it takes a little longer than a quarter to do this. So I would say as you -- as we think about this $50 million, it's fair to say over the next -- and as we make progress through the year, we'll keep the teams updated through our quarterly earnings calls.

But I'd say this is more 12 to 18 to 24 months as we kind of solidify our strategy, solidify what footprint makes sense, what doesn't, that's going to come through over the P&L. And we'll be fully transparent in terms of quarter-by-quarter, how much are we recognized.

I did have one related margin question and follow-up here from the webcast. Just in light of the 2030 adjusted EBITDA margin target, 24% to 26%, excuse me. How do you think about the cadence from where you are today to that target and some of the drivers of that? And how do we think about the performance through potential cycles?

Yes. So first of all, when I think about cadence and think about where we are, we just announced Q1 earnings. So if you think about the company, we grew margins 280 basis points on a year-over-year basis. So every single segment demonstrated margin improvement on a year-over-year basis, okay? So as I kind of think about where we are and the work we're doing is starting to show up in the P&L. what are the factors that are assumed in this financial model to get us from 21% exiting '25 to 24% to 26%, A couple of different things. First of all, look, we all know when our top line grows, we see volume leverage that flows through to the bottom line. So that's one piece of what's baked into the EBITDA expansion.

Number two is the operational execution that we've been talking about is the work that we're talking about in terms of rightsizing our footprint. The work we're talking about driving standard KPIs, really scaling up our operational execution that's baked into it. Third, the $50 million that you saw in there that Luke just asked about in terms of, hey, you're losing 1 point to 2 points of growth. However, you're seeing $50 million of EBITDA improvement. That's a portion of that. So that's how we're thinking about it.

It's volume leverage, it's continued operational execution and it's rationalizing our footprint, rationalizing our products where it makes sense to improve our profitability as we move forward. Look, through cycles, I mean, usually, our conversion rate as we see organic growth is 30% to 35%. And what we're going to do is work really hard towards ensuring on a -- in a world where we are going down organically when the macro is where it is, we're going to work for the same thing and rightsize our businesses to align for the volume that we see.

We've got about 2 minutes left. So if there's any one last question in the room here, it's all yours, Mike.

Yes. Maybe I'll repeat that one because I don't think it picked up on the microphone. Thanks, Mike. The question was regarding the transportation and logistics market, our positioning in China and with those local OEMs in case you couldn't hear it on the webcast.

Yes. Great question, Mike. What I will tell you is we are engaged with the leading OEMs. Obviously, there is a significant number of players in China, but we are engaged with the leading OEMs, many of which are looking to expand on a more broad global and geographical basis. And that's kind of one of the real differentiators we have is we have a global footprint to support that expansion. So they trust our brand. They like our brand, the reliability of it, the performance of it, our ability to bring in a larger portion of our large portfolio to bear on solutions, but also the fact that we span across low, medium and high voltage. And as they move into other territories, we're right there with them to support that.

And one other thing I'll say, which is true actually in transportation and across our business, we -- China is an important region. We also manufacture in China. And our strategy is more and more to try to be in region manufacturing. So we bring a lot of our products actually for the transportation business are manufactured in China, for example, and some of those same products are also manufactured elsewhere globally for other customers. So that's another way we support China and global customers that actually all want in-region manufacturing.

That's a really great point. I'll just build on what Greg said. We have local sales, product management, engineering teams and manufacturing to support. And to Greg's point, as they move, we have manufacturing capabilities there to help.

Great. Thanks, everyone. This concludes the Q&A section of the presentation. Thanks, everyone, for spending the time with us this morning. Now very briefly, I just want to remind you that we do have lunch and product displays to my right of these double doors. So we hope you're willing to spend the next hour with us and happy to walk you through many of the technologies and opportunities that we discussed with you today. Thanks, everyone.

Thank you.

Good day, everyone, and welcome to the Littelfuse First Quarter 2026 Earnings Conference Call. Today's call is being recorded.

At this time, I will turn the call over to the Vice President of Investor Relations, David Kelley. Please proceed.

Good morning, and welcome to the Littelfuse First Quarter 2026 Earnings Conference Call. With me today are Greg Henderson, President and CEO; and Abhi Khandelwal, Executive Vice President and CFO. This morning, we reported results for our first 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 2 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 details 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 Greg.

Thank you, David, and thank you to everyone for joining us today. This morning, I'll start with highlights from our first quarter and then provide an update on the progress we're making on our strategic priorities. We delivered a strong start to the year, with first quarter results exceeding our expectations. Net sales were $657 million, up 19% year-over-year, 9% organically, and we delivered meaningful margin expansion across our segments.

Our teams executed well as we capitalized on broad-based demand strength across several key markets. We continue to benefit from our leadership position in safe and efficient electrical energy transfer as our markets and applications transition toward higher power and higher energy density architectures. Our strategic focus and customer-centric go-to-market model are enabling us to engage earlier and more deeply with our customers. Importantly, we are seeing early tangible benefits from our sales force realignment as we solve our customers' increasingly complex challenges with our full technology portfolio.

Taking a closer look at our performance by end market in the quarter, we delivered strong double-digit growth in data centers and grid utility infrastructure, where demand continues to be fueled by the broader electrification megatrend. Across our diversified industrial market, we drove meaningful revenue growth supported by broad-based demand and strong channel execution.

In construction and industrial equipment markets, we're seeing mixed demand trends as strength in construction and industrial automation was partially offset by continued soft residential HVAC demand.

Finally, in passenger vehicles, sales were up high single digits, reflecting content expansion and share gains amid a soft global production environment, while commercial vehicle sales expanded mid-single digits, driven by solid execution.

We exited the first quarter with a book-to-bill well above 1.0, while bookings were again up more than 20% versus the prior year. We expect continued growth momentum and focused execution in the second quarter. I want to recognize our global teams for delivering a strong start to the year and for positioning the company well going forward.

Now let's shift to our strategic priorities, starting with our sharpened growth focus. A key pillar of this strategy is our expansion within the grid and utility infrastructure market. Having closed the Basler acquisition this past December, we have already begun to see the transformative impact of this integration. Basler significantly strengthens our position in high-power applications, and I'm pleased to report that Basler outpaced our initial expectations during its first full quarter as part of the Littelfuse portfolio.

We are seeing an acceleration in demand for high-power protection and excitation systems driven by the critical need for grid modernization to support the global build-out of data center infrastructure. As an example of our momentum in the quarter, we secured a strategic design win with a market leader for data center power system solutions. This customer chose our protection, automation and control capabilities for a new 800-volt system deployment due to our advanced feature set and differentiated high-voltage DC solution. Our integrated system ensures comprehensive high-power protection while enhancing system reliability and reducing architectural complexity for the customer.

We also secured a significant design win with a leading U.S. grid infrastructure utility for our high-power excitation systems in the quarter. With shipments slated to begin in 2027, this win provides meaningful long-term visibility into Basler's growth trajectory.

While we are in the early stages, the potential for Basler and Littelfuse revenue synergies is increasingly clear. The complementary nature of Basler technologies and our protection capabilities allows us to move up the value chain, offering more comprehensive and higher power solutions to our customers.

Now turning to our second strategic priority, which is to partner more closely with our customers to help better understand and solve their technology challenges. As we mentioned in our 4Q call, we went live with a new go-to-market model at the beginning of 2026, where our sales teams are realigned to our customers and enable to sell our complete portfolio. Today, I wanted to update you on recent progress we're making in our transportation market.

In transportation, we are a market leader for low, medium and high-voltage overcurrent and overvoltage solutions. And even though the end market is growing slowly, the rising complexity of electronic architectures is driving unique requirements for our advanced protection solutions. By partnering closely with our lead global OEM customers and demonstrating very high reliability solutions and predictable delivery, we have been able to increase our share in a number of key overcurrent and overvoltage protection platforms. In the first quarter, these share gains led to our high single-digit growth.

In addition, due to our collaboration on next-generation platforms, we've been meaningfully expanding our pipeline and are on track for double-digit design win growth in the transportation and logistics market in 2026.

Now turning to our third strategic priority, enhancing operational excellence. As we continue to scale best practices across the organization and take a more programmatic approach to measuring execution, we are seeing clear evidence that these efforts are delivering tangible results. By applying consistent operational and financial discipline across the company, we are driving meaningful margin expansion across the portfolio.

Transportation is a good example of how this discipline is translating into results. With targeted productivity initiatives and improved execution across our footprint, we're driving solid profitability expansion despite mixed underlying market conditions. The results are reflected in a strong 200 basis point increase in transportation margins for the quarter.

Turning to our Semiconductor Products business. We see meaningful long-term profitability enhancement opportunities. This starts with Protection, a model franchise within Littelfuse with a demonstrated track record of execution and operating discipline. Once again in the quarter, Protection delivered significant revenue growth and attractive profitability as we capitalize on accelerating customer demand.

In power semiconductors, we are applying the same disciplined approach. As we outlined last quarter, we are increasing our focus on higher growth, higher-value applications while rationalizing lower-value products and optimizing our footprint. We are seeing signs of improving power semiconductor demand, but we are balancing that momentum with continued portfolio actions as we work toward long-term structural profitability improvement. We remain early in this process. And as we finalize our path forward, we will continue to update you on our regular progress.

Across Littelfuse, operational excellence remains a key pillar of our long-term strategy. As we execute on this framework, we believe we are positioning Littelfuse for sustainable and scalable long-term margin expansion. We look forward to detailing our full financial playbook at our Investor Day next week.

Taking a step back, we are encouraged by our momentum as we move into the second quarter, supported by strong backlog, high customer engagement and disciplined execution. We look forward to sharing additional details on our strategy, long-term growth drivers and financial objectives at our Investor Day on May 14 in New York.

With that, I'll turn the call over to Abhi to walk through the financials in more detail.

Thank you, Greg, and good morning, everyone. Today, I will walk you through our first quarter results, followed by our second quarter outlook.

Please turn to Slide 8 for details on our first quarter performance. All comparisons are versus the prior year unless noted otherwise. Net sales in the first quarter were $657 million, up 19% and 9% organically. The Basler acquisition contributed 6% to sales growth, while foreign exchange was a 3% tailwind. Adjusted EBITDA margin finished at 22.9%, up 280 basis points, reflecting strong volume leverage, favorable mix and operational execution. Adjusted diluted earnings per share were $3.31, up 51% versus the prior year.

We generated solid cash flow in the quarter. Operating cash flow was $80 million and free cash flow was $66 million, up 55% year-over-year. We ended the quarter with strong liquidity, a net leverage ratio of approximately 1x and returned $19 million to shareholders through our dividend.

Please turn to Slide 10 for our segment highlights, starting with the Electronics Products segment. Sales for the quarter increased 18% year-over-year with organic growth of 15%. Passive products again delivered strong growth, up 22% organically. Semiconductor products grew 8% organically, driven by strong demand for protection semiconductors. Across the Electronics Products segment, we benefited from increased data center and diversified industrial demand.

Adjusted EBITDA margin for the Electronics segment was 25.1%, up 300 basis points, reflecting strong volume leverage and execution. Into the second quarter, we expect to deliver on broad-based demand strength and continued execution as we balance power semiconductor product rationalization.

Moving to our Transportation Products segment on Slide 11. Sales increased 5% year-over-year. Organic growth was 1%, driven by strength in passenger vehicle content expansion, share gains and pricing that drove passenger vehicle organic sales of plus 4%. This was partially offset by lower commercial vehicle volumes due to the impact of the marine business exit. Excluding the marine exit, commercial vehicle sales were flat versus the prior year.

Adjusted EBITDA margin increased 200 basis points to 19.1%, reflecting disciplined execution and productivity initiatives. Our teams remain focused on driving operational excellence, and we expect continued progress on our transportation profitability initiatives through 2026.

Turning to Slide 12. Industrial segment sales increased 45% year-over-year. Organic growth was up 5%, supported by strong grid and utility infrastructure and data center demand, which was partially offset by soft residential HVAC volumes. The Basler acquisition contributed 39% of growth, outpacing our expectations. Adjusted EBITDA margin increased 340 basis points to 21.9%, driven by volume leverage and mix. We will continue to execute on our favorable industrial positioning in evolving markets to drive growth and profitability expansion.

Turning to our outlook for the second quarter on Slide 13. We expect continued solid demand across several of our key markets supported by strong backlog and customer traction. Based on current market conditions, we expect second quarter net sales in the range of $690 million to $710 million. This represents 14% growth versus the prior year. We expect 8% organic growth and a contribution of 6% to growth from the Basler acquisition. We also expect second quarter adjusted diluted EPS to be in the range of $3.65 to $3.85 with an adjusted effective tax rate of 21% to 22%. We look forward to sharing our full strategy with you next week at our Investor Day in New York.

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

[Operator Instructions] We'll go first to Christopher Glynn at Oppenheimer.

Congrats on the really strong results and across the board progression. I did want to drill into the electronics growth a little bit. The data center side is a continuing transparent story. I just want to double-click on the comment about increasing diversified industrial demand. We could go in a couple of layers on there in terms of new design wins flowing in specific end markets driving traction?

Thanks, Chris. I'll start just by saying, yes, we had very strong performance across our Electronics segment. And if you drill down to kind of our market base view, we -- as we said, we had very good performance in the quarter in data center. Pipeline was up meaningfully again as well. So we had strong performance in data center, and we have strong growth in the pipeline. In the industrial market, we have significant momentum as well. We mentioned this in the call that I think last quarter, we mentioned that we're starting to see broadening. If you go back to last year, really, it was largely about data center. We're seeing broadening across the industrial segments. And actually, all of our industrial segments with the exception of HVAC are doing well. We did see very strong performance in the diversified industrials.

And just as a reminder, our Diversified Industrial segment includes things like aerospace and defense and medical. So we have good strong strength across the portfolio.

And Chris, just to add to, our book-to-bill in the quarter was well above 1 as well. So again, supports what Greg is talking about, which is broad-based demand and broad-based momentum, supported by a book-to-bill.

Yes. Great. And Greg, I did want to ask a little further on book-to-bill. I know you're not quantifying them discretely each quarter, but curious if the book-to-bill or the absolute orders expanded sequentially, if that kind of trend through the back half is continuing or if there's a characterization of the overall orders growth? Any kind of metrics help there or directional or quantitative would be great.

Yes, absolutely, Chris. Good question. So look, I think -- as I think about the order momentum and kind of think about Q4 to Q1, we saw sequential improvement. And even within Q1, as I kind of look at the progression of the quarter, we saw sequential improvement as we went through the quarter. So again, book-to-bill north of 1, we saw bookings higher than 20% on a year-over-year basis. So continued momentum across the board. And sequentially, we saw improvement as well.

Okay. That covers a lot of ground. And then just I was curious, I think I heard in the prepared comments, Greg, you speak quickly. Did I hear do you expect for commercial vehicle double-digit design wins are expected this year?

I guess I'll let Abhi speak to the exact number. But I think just -- we would say across transportation, what I would start to say is across the transportation business, we have good momentum. There's not a lot of -- as you know, production is kind of soft, but we had good performance. And I would say 2 ways. One, we are seeing content and share gains across transportation business, both passenger and commercial vehicles. And also, we see good momentum in our pipeline. So I think we see strong growth. I'll let Abhi speak to the exact numbers that we quoted.

Yes. So Chris, your statement is absolutely correct. Greg just stated that in his current prepared remarks.

We'll move next to Luke Junk at Baird.

Greg, maybe if we could start -- I want to start data center, but maybe go off of where we usually talk about this in that certainly, the growth has been quite visible in your passives business, but hoping we can maybe double-click on the protection portfolio, where it seems like we're seeing some benefits that are pretty material this quarter and in the data center piece of industrial from a segment standpoint as well?

Yes. Okay. So I'll start with data center and then maybe we can try -- and I'm not sure if you're asking about -- can I just clarify, are you asking about industrial segment revenues or are you asking about protection in industrial market?

Yes. So protection within the context of the Electronics segment and then industrial data center-related opportunities and what we're seeing right now from a segment standpoint?

Yes. Yes. Look, I think one of the good things about our position in data center is that we participate -- actually, all of our segments participate in the data center market, and we're seeing good strength across. So that includes our passive electronics portfolio. That includes our semiconductor portfolio, actually, both our protection semiconductors and our power semiconductor. And it includes our industrial portfolio, circuit high-power fuses and actually in our Transportation segment, we have circuit breakers, for example. So we have a lot across our portfolios that participate in data center.

We have strong growth kind of in, I would call it, on-rack solutions, which tend to be more of the onboard solutions. tends to be more of the electronics content, both semiconductor and passives, but we also have strong growth in the infrastructure. I mentioned the design win that we had in the quarter from actually Basler. That's part of their control and protection related solutions, which goes into data center infrastructure. So -- and we also have power semiconductor design wins in the infrastructure that go into transfer switches and UPS solutions.

So we are actually really seeing broad-based strength in the data center from all of our segments and really across that ecosystem, we talk about solutions that go from grid to chip.

And look, just to build on what Greg just said, so if you kind of think about data center, we grew strong double digits within the quarter, and it was one of the leading market contributor to Littelfuse's growth in the quarter. And two, I'd say you would expect similar performance again from us tied to our data center end market in the second quarter as well.

Okay. That's helpful. In terms of the design award activity so far this year, especially in data center, hoping we could get some color there as well. I think in total in '25, those design awards more than doubled year-over-year, just early momentum factor here in the beginning of '26 and maybe even the mix of those opportunities. I know some of this is fast-moving things that you could maybe turn on later this year as well as longer-dated things that we may be tied to future architectures and whatnot?

Yes. Thanks, Luke. So first, just to reiterate what you said, right? We had mentioned this last call in 2025, our design wins were up more than doubled last year, and we were pleased with that, and we attribute some of that to also to our new go-to-market model, which we put in place for data center last year, and now we're scaling across the company. What we can say is that our pipeline is up meaningfully in Q1. This continues to be the fastest growth market for us. In Q1, it was also the fastest growth market. So we continue to see momentum. And like I said before, we continue to see that momentum broadly from solutions that go on rack all the way through the infrastructure.

Got it. And maybe switching gears, Abhi, just hoping you could walk us through some of the margin dynamics this quarter. So some pretty strong breadth across each of the segments from a margin percentage. That's despite the fact that you're dealing with higher commodity costs coming into the quarter, copper, precious metals, those sorts of things. So can we talk about some of the offsets, be it operational or getting price recoveries into the channel and really building to an incremental margin that was quite a bit better than the 25% that you had guided to underlying?

Absolutely, we would love to. So look, first of all, if I start at the highest level, our flow-through in the quarter was about 38%. So if you kind of think about what we've been talking about, we've been saying, hey, look, long term, if you think about Littelfuse, you should be expecting a 30% to 35% flow-through for the business or for the enterprise. So for the quarter, we came in at 38%. If you look at the guide that we laid out for Q2, it's at 31%. So again, in the range of 30% to 35%. So that's at the highest level.

Now if you kind of think about the question around commodities and where we are. So look, we are seeing pressure from the commodities, the things that you mentioned, silver, copper, and it's no different than what we talked about last year. Our teams are working diligently to offset those commodity or inflationary pressures that we're seeing, whether it's through supply chain savings, whether it's through driving incremental productivity, whether it's through pricing or surcharges, right? So yes, we're seeing inflation, but our teams are focused on it, and our goal is to be price cost neutral, just like we were in 2025.

We'll take our next question from David Williams at Needham.

Congratulations on the really strong performance here. I guess maybe first, Abhi, if you kind of think about the margin that pass-through that you just talked about, kind of given where your guidance is, it looks like about 25%, 26% of that top line is falling directly through to the bottom line. Do you think that, that's kind of a pace that we can continue as you kind of move through this cycle? Or do you think you could get better than that from a top line to bottom line kind of pass-through?

Well, look, I'll go back to the highest level again. I think if I think about our flow-through, right, it's hard to call a quarter versus the other quarter because look, things happen within a quarter, we make investments within a quarter. I'd say long term, as we continue to grow the business, continue to put organic growth in the books, a 30% to 35% flow-through on an annual basis is how I would think about it. Now quarter-to-quarter, you could have noise, just like I just said, right? Q1 was 38%. Q2, our guide contemplates a 31% flow-through. But long term, think of it as a 30% to 35% flow-through business.

Okay. Great. Certainly appreciate the color there. And then maybe on the data center and not to beat this horse, but just kind of curious, as you think about the different areas that you play in across the data center, what do you think the magnitude of that looks like? Is there a way to size that TAM? Or how should we think about maybe Littelfuse exposure across the entire data center footprint?

Yes. Look, I think like I was saying, we participate broadly across the data center. And I think what I'll say on this one is that we have our Investor Day next week, and we're giving a lot more color at that time on all of our markets and specifically focused on the high-growth markets that we've talked about, data center being one. So we're going to provide more color on the SAM and our opportunities in data center in our Investor Day next week.

Okay. Great. And just one last one, if I could. And again, this may be an Investor Day question. But if you kind of think about the electronics margin, do you think you could ultimately get back to where you were maybe in that '22 time frame in that lower 30% range? And maybe what would it take? Is it a volume dynamic? Or do you think that's kind of a mix of the portfolio, rationalization, volume and the self-help that you're putting in?

Look, I mean, here's what I talked about the electronics margin profile. I will -- I guess I'll not commit to where we were in 2022 and pick a number and say, yes, I can get to that number. But there's a couple of things that are going on in the Electronics segment. First of all, as I kind of think about the Electronics segment, there's really 2 pieces, right? Passives is, I'd say, a big part of the segment. And if I think about where passives is, we love the business, we love the margin profile. And honestly, it's all about growth for us. Then if I kind of look at the other part of the Electronics segment, it's really the semiconductor business unit.

Semiconductor business unit is 2 pieces. The protection franchise is one of the most profitable franchise. It's growing double digits, has a great margin profile. Where we do have an opportunity is on the power semiconductor side that we talked about the last quarter. And what we're working through is product rationalization, footprint optimization. So as we do that work, and again, that work can be done overnight. That kind of stuff takes a lot longer because you're talking about factory consolidation and whatnot. I think what you will -- what you should expect is margin improvement in the Electronics segment over the mid- to long term as we make that work come through.

[Operator Instructions] And we'll go to Christopher Glynn at Oppenheimer?

So you got your hands full. You got an Investor Day, a lot of material coming up. You're working on the power semis portfolio, working on the go-to-market strategies and integrating Basler. So curious, how is the acquisition pipeline? Is it something that may be better to think about another day to continue pursuing attractive deals? Or just curious, it's kind of a bandwidth question, I guess.

Well, first, yes, maybe I'll just start. I think, look, we have -- maybe on the one hand, it looks like we have a lot going on. But on the other hand, we have a very clear strategy. We have our 3 priorities. We're focused on those, and we have a really excellent team. So I'm confident that we can -- we have a lot of focus now on the things we care about and what we're focusing on. And I think that's going well.

So to the specifics of acquisition, I think our growth strategy is going to continue to be organic and inorganic and not to be a broken record, but we're going to talk more about the details of our model and thinking about how we're thinking about acquisitions a little bit in Investor Day. But I will tell you that we continue to have an active pipeline. We continue to be disciplined about it, and we want to focus on doing acquisitions that align to our strategy, and we are going to give more details on that next week. But I think you should expect to continue to see us doing acquisitions.

I also will say, like we said, I think the integration of Basler is going extremely well. We're very pleased with that. We have -- we're building a playbook around acquisition integration. And it's going very well. We see that momentum that we talked about. So we're very pleased that we can support that and others as they come.

Yes. And look, we've got ample capacity for acquisitions given our balance sheet and where we are. Our net leverage is 1x. So again, to Greg's point, it's a big part of our strategic imperative. It's a big part of our focus area. We're going to lay out clear targets next week in terms of what we expect to do over the next 5 years, and our balance sheet supports it.

Okay. And then just one more kind of a little housekeeping, then I'll hold my horses until next week's Investor Day. But the residential HVAC market, anything interesting going on sequentially in terms of stocking regulatory transitions? And should we assume the second half comparison there is pretty accommodating?

I mean, look, I think that this market tends to have kind of cycles, right? That's the way that this market goes, and we have a reasonable exposure in our Industrial segment. That's why we see some of this affecting us. There is some regular seasonality to this, right? So some of that is seasonality and then there's some of the timing of the seasonality. So I would say -- what I will say is that medium to long term in this space, we expect to continue to see good performance and growth like we do, but there's sometimes noise in the short term.

And that concludes our Q&A session. I will now turn the conference back over to CEO, Greg Henderson, for closing remarks.

Well, thank you. I just want to close with, first off, thanking our team. We had a very strong start to 2026. We see continued momentum across the market and see the breadth of that momentum. And we feel good about our start to the year and our momentum into the second quarter. And like we said many times today, we look forward to seeing many of you next week in New York for our Investor Day. So thank you very much.

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

Good day, everyone, and welcome to the Littelfuse fourth quarter 2025 earnings conference call. Today's call is being recorded. At this time, I will turn the call over to Head of Investor Relations, David Kelley. Please proceed.

Good morning, and welcome to the Littelfuse fourth quarter 2025 earnings conference call. With me today are Greg Henderson, President and CEO; and Abhi Khandelwal, Executive Vice President and CFO. This morning, we reported results for our fourth quarter, and a copy of our earnings release and slide presentation is available on the Investor Relations section of our website. The webcast of today's conference call will also be available on our website. Please advance to Slide 2 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. 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.

Thank you, David, and thank you to everyone for joining us today. This morning, I will provide highlights on our fourth quarter and then an update on the progress we're making on our strategic priorities. But I wanted to start by highlighting 2 recent exciting developments. First, we closed the acquisition of Basler Electric in December. Basler strengthens our high-power capabilities and expands our position in key growth markets, including grid and utility infrastructure and data center. I got the opportunity to meet their leadership and technical teams last month, and this left me even more excited about Basler's market and technology positioning, scalability and long-term growth opportunities with Littelfuse. Second, we are excited to announce that we'll host an Investor Day on May 14 in New York, where we'll provide a detailed review of our strategy and long-term financial goals.

I look forward to sharing more about Littelfuse and our opportunities at this event. Now turning to our fourth quarter. We delivered strong performance with year-over-year revenue growth of 12%. Across our businesses, we continue to drive momentum in our high-growth markets. We delivered double-digit revenue growth in data center, grid and utility infrastructure and renewables markets. Automotive grew mid-single digits despite decline in global vehicle production in the quarter. Finally, we're seeing emerging signs of broad-based industrial recovery into 2026. In the fourth quarter, our teams also delivered on our operational excellence priority, which culminated in our earnings results exceeding the high end of our guidance range. Throughout 2025, we remain focused on executing our strategic priorities and we exited the year with a robust backlog and considerable momentum. Entering 2026, we are well positioned to drive strong performance. We expect to deliver double-digit first quarter revenue growth and significant earnings expansion supported by our fourth quarter bookings up more than 20% versus the prior year.

Abhi will discuss specific results and our outlook in more detail shortly, but I wanted to thank our global teams for their persistent hard work and efforts. Now I want to share the progress we're making as we enhance our focus on future growth opportunities. Our end markets require increasingly higher power and higher energy density solutions from Littelfuse. We are seeing broad-based momentum reflected in our 2025 design wins, which were up double digit relative to the prior year. Today, I wanted to specifically highlight our grid and utility infrastructure opportunity. If you turn to Slide 6, our position in this high-growth market was significantly bolstered by the closing of our Basler Electric acquisition this past December with approximately $3 trillion expected to be invested in grid modernization through 2030.

The market is demanding more advanced and higher power protection and expectation systems. With the strategic timing of the acquisition, we are well positioned to help our expanding grid and utility customer base to navigate the challenges of higher voltages and increasingly complex system requirements. Basler enhances our core high-power protection capabilities and equips us to sell more complete solutions. We believe our complementary portfolio, coupled with our deeply embedded relationships positions us for double-digit growth and strong profitability within this market. An example of our expanding reach this quarter, Base was selected as a design partner for a next-generation control system solution for a leading player in the high-power industrial and data center backup generator market.

Now turning to our second strategic priority, which is to work more closely with our customers to help better understand and solve their technology challenges. Our new go-to-market evolution is live, and we're seeing the early signs of success following our sales force realignment, which is now market-facing, customer-centric and focused on solving our customers' most complex challenges with our complete technology portfolio. As an example, we continue to drive significant progress in the data set market, where we were early to adapt our new sales model.

Our 2025 data center design wins more than doubled relative to the prior year. As you can see on Slide 7, we have a comprehensive data center technology portfolio, and we are capturing meaningful wins with leading hyperscaler, cloud and infrastructure customers. The data center market is undergoing a significant architectural shift to high power systems. As shown on Slide 8, we believe our content opportunity on these next-generation architectures will be significantly more than double current levels. Importantly, we also have meaningful growth opportunities across the data center infrastructure ecosystem and the acquisition of Basler further expands our high-power data center infrastructure capabilities.

To illustrate our momentum, we secured a significant design win for a static transfer switch with a leading data center infrastructure provider. This solution leverages our high-power semiconductor and packaging technology, which enables increased power density of approximately 20%. Improved efficiency and simplified integration into the customers' equipment. This win is for a 2-megawatt UPS bypass and power distribution unit application that enables uninterrupted power to data center racks. Shipments are slated to begin in the first half of 20 representing continued momentum and growth in high-power data center solutions. Turning to our third strategic priority, enhancing operational excellence.

Today, I want to highlight our semiconductor business opportunities. This business is core to our technology differentiation. Our market-leading protection and complementary power semiconductor products are critical to our mission of enabling a safe and efficient transfer of electrical energy. Last quarter, we shared that we made a change in semiconductor leadership. I would like to provide an update on the strategic progress we're making in optimizing our power semiconductor products, which accounts for roughly half of our semiconductor business. First, we have made a decision to sharpen our focus on high-value and high-growth applications.

We have differentiated technology and strong customer relationships in high-power markets such as data center, battery energy storage, grid and utility infrastructure. We have started the process of rationalizing our portfolio to reduce exposure to lower-value product families and are aligning our manufacturing strategy accordingly. As part of this initiative, we are reviewing our power semiconductor manufacturing footprint to ensure it is optimized and residual. We believe these actions will significantly improve the strategic focus and profitability of the business and position us to deliver next-generation technologies that will drive growth in our targeted markets.

We look forward to providing further updates on these initiatives and sharing our formal strategic and financial road map at our May Investor Day. Taking a step back, we closed 2025 with considerable momentum reflected in our fourth quarter performance. We closed the Basler acquisition and drove robust backlog through customer and market traction throughout year-end. Into 2026, we are focused on executing our 3 strategic priorities and believe we are positioning Littelfuse today for meaningful long-term scale and leading shareholder performance. With that, I'll hand the call over to Abhi.

Thank you, Greg, and to everyone joining us. Today, I will start with an update on the Basler acquisition. Then, I will walk you through our fourth quarter results, followed by our first quarter outlook. We'll then be happy to take your questions. As Greg mentioned previously, we're excited to close the acquisition and look forward to executing on the meaningful revenue synergies and opportunities that the combination of Basler and Littlefuse deliver. We anticipate the acquisition will contribute between $130 million and $135 million in revenue and $0.10 to $0.15 of adjusted earnings in 2026. We also expect Basler to deliver a high teens adjusted EBITDA margin for the year. With that, please turn to Slide 10 for details on our fourth quarter. Going forward, comparisons I will discuss will be relative to the prior year, unless stated otherwise.

We delivered strong results as revenue in the quarter was $594 million, up 12% and up 7% organic. The Dortmund and Bass acquisition contributed 3% to sales growth, while FX was a 2% tailwind. Adjusted EBITDA margin finished at 20.5%, up 480 basis points, reflecting meaningful operational leverage, while fourth quarter adjusted diluted earnings were $2.69. We also delivered meaningful cash generation in the fourth quarter. Operating cash flow was $139 million, and we generated $120 million in free cash flow. We ended the quarter with $563 million of cash on hand and net debt-to-EBITDA leverage of 1.2x. In the quarter, we returned $19 million to shareholders via our dividend. Now before we go into further details on our results and outlook, I wanted to discuss the noncash goodwill impairment charge that we recorded in the fourth quarter.

The impairment charge of $301 million as per the IXYS and Dortmund acquisitions, and is the result of our annual impairment testing of our reporting units. It reflects weaker sales and profitability, then original expectations amid persistent soft market conditions. As Greg mentioned, we have an opportunity to enhance our power semiconductors focus on applications in markets where we have strong market share, brand power and technology expertise. With a sharpened strategy, power semis will better complement our market-leading protection capabilities and ultimately drive improved performance over the long term. Please turn to Slide 12 for brief highlights on our full year 2025 performance.

We delivered strong revenue growth of 9%, while adjusted EBITDA margin expanded 260 basis points to 20.9%, reflecting the focused execution of our strategic priorities. We also delivered robust cash flow for the year, with free cash flow expanding 26%, showcasing the strength of our operating model. We continue to target free cash flow conversion of more than 100% in 2026. Please turn to Slide 13 for our segment highlights starting with the Electronics Products segment. Sales for the quarter were up 21%, led by strong passive products organic sales as well as growth contributions from protection semiconductor products.

Adjusted EBITDA margin of 23.7% was up 370 basis points, reflecting favorable year-over-year passive and protection volume leverage. For the full year, sales increased 13%, while adjusted EBITDA margin expanded 190 basis points driven by solid volume leverage. Moving to our Transportation Products segment on Slide 14. Fourth quarter sales increased 1% year-over-year, but declined 1% organically. Passenger vehicle organic sales growth was more than offset by softer commercial vehicle volumes. Adjusted EBITDA was 16% reflecting our team's focus on driving margin expansion in a continued soft transportation market environment. For the full year, our focus on operational execution led to solid margin expansion and we remain confident in our ability to drive long-term transportation profitability and assets despite continued soft market conditions into 2026.

Turning to Slide 15. Industrial Products segment sales increased plus 4% but declined 1% organically for the quarter as improved energy storage, utility and grid infrastructure, renewables and data center demand was more than offset by lower HVAC demand. Fourth quarter adjusted EBITDA margin was 16.2%. For the full year, our Industrial segment delivered revenue growth of plus 10%, reflecting our secular growth positioning. Solid full year 2025 adjusted EBITDA margin expansion reflects favorable volume leverage, while we continue to invest in long-term growth. Please move to Slide 16 for our first quarter outlook. We entered 2026 with a strong backlog and significant momentum.

With that in mind, our first quarter 2026 guidance incorporates current market conditions, trade policies, commodity prices, and FX rates as of today. We expect first quarter sales in the range of $625 million to $645 million, which assumes 7% organic growth at the midpoint and 5 points of growth from our Basler acquisition. We are projecting first quarter EPS to be in the range of $2.70 to $2.90, which assumes 25% flow-through at the midpoint as well as a $0.03 contribution from the Basler acquisition. Turning to Slide 18. We want to provide you with a view on our key market exposures and underlying growth assumptions for 2026. We look forward to sharing our full strategy with you at our May 14 Investor Day in New York. With that, operator, please open the call for Q&A.

[Operator Instructions] Our first question comes from the line of Luke Junk with Baird.

Greg, maybe if we could start with data center. Obviously, it's emerged as a big part of the story over the past year. Just hoping you can help us think through some of the key incremental drivers has been moved through not only in the first quarter, but through '26 in terms of share gain opportunity flowing through that 2x backlog growth that you cited for the full year and maybe even initial tailwinds from those higher voltage socket starting to launch. You mentioned the award in the script that first half '26 shipments are starting there. Just how should we kind of scale in the opportunity as we go through this year. .

Yes. Thank you, Luke, for the question. We continue to see good progress in the data center market. I think I emphasized that data center is 1 of the early markets where we focused on our sales realignment putting a dedicated team focused on our customers, selling our complete technology portfolio, we're already seeing traction. As I mentioned, our design wins were up significantly, more than doubled in 2025, and we continue to see momentum. And I think the good news, as is shown on the chart, as the customers are moving to higher voltage systems, there are architectures on higher voltage in D.C. high-voltage systems. There's a lot more opportunity for us, and we're part of those conversations with our customers now on architecting that. So we can't give a quantitative number exactly because the architectures are evolving, but it's at least twice the opportunity for us as we go to the high voltage systems and in some cases, significantly more than that.

So we have momentum. I mentioned the design win on the static transfers, which we have momentum across the business. Also, Basler has good position in data center for backup power generation solutions. And so as we mentioned, it's not just in the rack and the white space, but actually more and more solutions that we offer in the gray space as well. So we have good momentum. We continue to see growth in design wins. We will continue to see growth in revenue. And I'd just say that the thing I'm most excited about is we're having deeper conversations with our customers, talking about more of our technology portfolio talking about next-generation architectures around the head linkage solutions.

And Luke, just to build up on what Greg said. So again, to reemphasize our design wins were 2x 2024 and '25. Data center really grew strong double digits in the quarter and was a material contributor to our growth story in Q4. We expect it to be a leading market contributor growth in '26. And then more importantly, as I think about our data center exposure, it's double digits as a percentage of revenue, inclusive of Basler as I think about our data center exposure.

Very helpful. And then, Greg, switching gears to Industrial. You mentioned in the script that you're seeing signs of a more broad-based recovery in industrial into '26. Just hoping you could double-click on that in terms of some of the maybe more specific things that you're seeing? Or obviously, such as a few parts of the business maybe flow through to some specific business impact.

Yes. Thank you, Luke. Yes, I would say that if you look at the bookings we had in 4Q and the momentum we feel we're seeing a broader based a broader-based momentum, I'd call it, in our broader industrial markets, especially like our diversified industrial segments and Industrial Automation segments. The 1 market where I would say we still continue to see softness is in the residential HVAC, where we have a reasonable exposure on our industrial business. So that one continues soft. But broadly, the market is improving. And I would say the good news is that we see that broad momentum across the business. It's strong in our industrial products and our passive electronics and also our semiconductor protection. The book-to-bill in the quarter was above 1. And we're seeing growth in not just book-to-bill but also in POS through to our end customers.

Yes. And just look, last 1 I'll make is if we think about the bookings were up 20%. We saw similar numbers in Q3. So it points to, again, strong momentum exiting '25 and coming into 2026 to Greg's point.

Yes. And then maybe for my last question, obviously, there's a lot of metals inflation out there right now. Can you just remind us how you buy things like copper and silver in terms of buying at spot rates versus indexing mechanisms to pass through those higher costs to different customer types, some distribution little more straight forward versus some other customers and maybe put a finer point on what you're assuming in the first quarter guidance specifically.

Absolutely look. So we're seeing pressure on the metal side, right? Our exposure is primarily to copper and ruthenium. But given the volatility in the silver and gold prices, we're also seeing an impact from that, right? So they kind of think about what our teams are focused on. Firstly, they're focused on supply chain opportunities and really looking at ultimate ways to procure that same material for cheaper pricing. Two, it's around how do we go price that and take that inflation and price it along to our customers, either through pricing or surcharges. What I will tell you is while we're getting impacted, just like 2025, right? If you think about the price cost tied to tariff, our teams did a great job managing that. That's what we're focused on. That's what we plan to go do this year. Now there might be some timing between quarters just given the timing of inflation versus when you get your price. But that said, our goal is to be price cost neutral. We have factored the impact of current commodity prices in our Q1 guidance. I feel reasonably comfortable about where we are in the Q1 guide.

Just maybe in terms of the first quarter guidance, the assumption that you're price cost neutral in the first quarter guide? Or should we think of that as a full year comment?

I think it's a full year comment. But like I said, there will be timing Luke, throughout the year as we go through it, depending on how the commodity pricing moves versus when we recognize the pricing on it. So that's a full year comment, not a Q1 comment. .

Your next question comes from the line of Christopher Glynn with Oppenheimer.

And congrats on the deal and the data center momentum there. Yes, it's a lot of questions upfront about migration to the higher voltage architectures. Obviously, you get some constructive comments there, net of some product categories that will diminish. So that's great. Still a question remaining. So curious about what you're seeing in terms of opportunities like partnerships or consortiums into that space versus standard application design. And I'm just wondering if there's anything to talk about in that respect.

I think -- yes, thank you, Chris. I think the thing to understand is that we have increased focus on the data center market, and we're wanting to play across the ecosystem. So we're partnering and talking to the hyperscalers. We're partnering and talking to the chip providers that build the architectures. We're very active in the ODM and design ecosystem in Asia and Taiwan that supports the design ecosystem. And so what's important about our strategy now is that we have a dedicated sales focus on the data center customers and increased focus. And I think what's important is that we participate in all parts of that. From the chip designers that are building architectures to the hyperscalers that are designing architectures and power to the ODM in Asia, and we're covering all of that, and we're participating in all of that.

And our view is that we get our products architected and designed in throughout the cycle, and we're touching all those phases. So we're very active, we're also very active in platforms like Open Compute, for example, to make sure we understand where the architectures are going, where the standards are going. One other thing I will emphasize that when you go to high-voltage architectures, many of these high-voltage architectures, once you go to 400 or 800 volts, products that didn't use to need to be UL certified, for example, now need to be UL certified. We need new standards. We're active in the standard body and the UL certification process for some of the standard setting processes for these high-power applications that ultimately are going to go into data center. So we're participating across the ecosystem. That's actually how we think we're going to win, and we're increasingly investing in that.

Great. And then on the power semis, you kind of blew through some of the target markets focused there. So I'd like to just revisit that. And Also, what kind of attrition might we anticipate in kind of related earnings power? How should we contemplate that element ahead of the kind of breakout in May?

Yes. Thank you, Chris. I'll try to give a little bit more color. So again, just to anchor on our semiconductor business, which is in our electronics segment, about half the business is our protection semiconductor business. This is actually a model franchise for us. We have very good market position, strong share, good customer value. So that's about half the revenue. And then the other half is our complementary power semi business, which is core to our strategy. And I think where we're focused here though is that there's elements of the power semi business where we have high value -- we see high growth markets. We have meaningful share. We're important to our customers. And actually, those tend to be the higher energy density, high power segments like data center, battery energy storage, grid and utility customers. And so those are the areas where we're going to continue to focus where we have high value, where we have market position that's giving us differentiated solutions.

There are, however, parts of our power semi portfolio whereas lower value or a little bit more commoditized, I would say, where we don't have as much value. And so we're undergoing an effort to rationalize the portfolio and double down on the areas where we believe we can win. And as part of that, we will also be optimizing our manufacturing footprint. So what I think we're telling you is that this is a work in progress. We're telling you where we are. We look forward to giving you continued updates as we progress this between now and Investor Day in May. So we will continue to give updates as we make progress. But I think the strategic focus is to continue to -- just like we're doing broadly for the company, sharpen our focus on where we play and why we win.

Yes, Chris, just to build on Greg's commentary, I think the way to think about it from a financial standpoint is as we go through the year, as we make progress, we'll incorporate any changes to our guide. That's point number one. Point number two, again, to Greg's point, our semiconductor business unit is made of 2 things really, right? It's protection and its power. Protection is a model franchise. So what this also does give us an ability to go do is as we rationalize our portfolio, optimize our footprint, get our semi business at that model level profitability, right? That's what we're focused on. Again, more to come on this. But to Greg's point, our efforts are underway. And as we make progress through the year, we'll keep you up to date. And then more importantly, have a vision and a road map by Investor Day so the team understands what is it that we're going after.

Perfect. And then if I could sneak 1 in on Basler. Just curious about how you're seeing the cultural fit anything kind of edgy on the integration, probably some differences in go-to-market and specification process with a little bit more of a systems and solution orientation to their portfolio. .

Yes. Thank you, Chris. Yes. Look, we are very excited to have Basler as part of Littelfuse. As I mentioned, I got the -- we did the due diligence, but that was kind of a limited process. So I got the opportunity to meet with the team shortly after close in December. What we really like and actually I left even more excited about is that couple of things. One, Basler is a highly technical organization. They have a great engineering capability. They're market leaders in protection solution expectation systems and probably punch above their weight based on the size of the company, for the capabilities that they have.

Two, though, you mentioned go-to-market, we really like about Basler is that they have market position and establish go-to-market in the utility industry. If you look at Littelfuse's legacy portfolio, we have technology that really plays in grid utility in some subsegments of that like battery storage and solar, we've done really well. But other subsegments that may be more core utility grid space, we have underparticipated mainly because of focus, but 1 of the key areas is that we didn't have the channel. So we're actually really excited about Basler and the capabilities they bring. They have complementary products. They're a system-level provider. They provide complete solutions. So many of the places we're going Basler is.

And our goal is to leverage their go-to-market and customer understanding to help us bring more of the Littelfuse portfolio into that space. So just like we're doing other places, we're leveraging that. We're very pleased to have the Basler engineering and go-to-market team as part of Littelfuse, and we see that as a growth synergy out of this acquisition.

[Operator Instructions] And our next question comes from David Williams with Benchmark.

Congratulations on the progress here. It's really great to see. And obviously, the tone has changed and much more enthusiastic. So congratulations there. Maybe the first question is, Greg, as you kind of think about over the last 90 days, what has changed or shifted? What do you think has become maybe more positive -- and is it simply because of the self-help, the strategy you've implemented? Or do you feel like the markets are also helping in that regard?

Yes. So 2 things. First, I think we're on a multiyear journey. And I think that from the Littelfuse perspective, we are continually making progress. So we've been making progress throughout '25. We anticipate we're going to continue to make progress through '26. And so for us, I would say it's a multiyear journey. And we are seeing results of our progress, we expect to continue that. In addition to that, I would say we continue to see market momentum. So if you go back to 2025, I think the market momentum was maybe more narrow in data center and grid utility solar, battery storage, energy around data center, the market momentum was a little more narrow. We actually are seeing a little bit broader market momentum. We talked about the broader industrial market momentum. So I would say it's both, right? We are making progress on our strategy. It's a journey, it's step by step, we're making progress. But also, we're seeing some market momentum that is adding to that.

Yes. David, just to build on what Greg said, I think a couple of things I'll add to it. First of all, as you see our results for '25, right? We talked a lot about operational execution. While we have more to go do there. You see that itself out in our margin expansion across all 3 segments, whether it's transportation, industrial or electronics. I think the whole conversation we just had around power semi and that focus really gives us an opportunity to optimize our profitability and continue to move that profitability to optimal levels. So I think to Greg's point, I think there's a little bit of focus that we're driving that helps us optimize our portfolio further and then Greg talked to market momentum.

Okay. Great. And maybe secondly, just as we think about for the full year and margins and maybe even on the top line, what do you think is a reasonable place to kind of think about where growth could be this year, just given all the positive dynamics that we see here reasonable to assume double-digit growth for the full year, you think?

Yes. So look, we don't definitely guide full year, but I'll tell you, I think I come back to -- if you look at our Q1 guide, right, I mean, at the midpoint, it's a 7% organic, 15% growth year-over-year where -- going to contribute about 5% in the quarter and an EPS guide that the midpoint is a 28% growth on a 7% top line growth. So again, points to the strong momentum exiting '25 coming into '26. As I think about the markets, as Greg mentioned, we're seeing broad-based industrial strength, right, with the exception of their TSC market. It's not just data center anymore. It's a little more broad-based. So in general, we feel really good about where we are for 2026 and the momentum that we're seeing as we go along the year. Of course, we'll keep the team up to date on our progress. But sitting here today, we feel really good about our momentum in '26.

I have no further questions in queue. I will now hand the call back over to CEO, Greg Henderson for closing remarks.

All right. Well, thank you all for joining us today. I just want to close by first thanking our global teams. As we mentioned, we had a strong Q4 and good progress to our goals in '25. And we're confident in our momentum into '26 as Abhi just said. So thank you for joining us. We look forward to seeing many of you in person as you join us at our Investor Day May 14 in New York. So thank you very much.

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.

Good morning, and welcome to the Littelfuse Third Quarter 2025 Earnings Conference Call. With me today are Greg Henderson, President and CEO; and Abhi Khandelwal, 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 on 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 2 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. A reconciliation of these non-GAAP financial measures to the most comparable GAAP measure is provided on our earnings release available on the Investor Relations section of our website. I will now turn the call over to Greg.

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 in 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.

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. Abhi 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.

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 expectation and very high energy protection.

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.

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 multiyear partnership will start production with revenue contribution 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. As part of this realignment, we established 3 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 2 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 meaningful with our customers on their future technology road maps, 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. While we're 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.

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. 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 3 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 Abhi.

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 time line. Then 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 7, Basler has demonstrated the 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 of approximately $30 million, the net transaction value is roughly $320 million.

This represents a 13.5x multiple for forecasted full year 2025 EBITDA. At closing, we anticipate our net leverage will be 1.4x versus our current level of 0.9x. We expect Basler will be accretive to adjusted earnings per share in 2026, while we target double-digit returns in year 5 post close. We expect to close the transaction by end of the fourth quarter 2025 and look forward to welcoming the Basler team to Littelfuse.

With that, please turn to Slide 8 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.

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 0.9x. In the quarter, we returned $19 million to shareholders via our cash dividend. Please turn to Slide 10 for our segment highlights. Starting with the Electronics Products segment. Sales for the segment were up 18% versus last year and up 12% organically. The Dortmund acquisition contributed 4%, while FX contributed 2 points 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 Products 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. 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 Products 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. 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 the 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.

We expect fourth quarter sales in the range of $570 million to $590 million, which assumes 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 $2.60, which assumes a 60% flow-through at 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, 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 million to $85 million in capital expenditures.

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

[Operator Instructions] And your first question comes from the line of Luke Junk with Baird.

Maybe an apologies, I missed part of the prepared remarks. Maybe if we could start with power semi. I think, Abhi, you mentioned that it did see some growth sequentially despite still being soft year-over-year. Can maybe you just speak to book-to-bill there, 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 margins as well?

Yes. Thank you, Luke. This is Greg. Maybe I'll start and then hand it to Abhi to give a little bit more color. But just kind of zooming out on power semi, and we talked about this before, I think our view on the power semi 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.

And actually, Basler also is a customer of Littelfuse today and actually has a lot of semiconductor content in their solutions for protection relays and in their expectation system. So semiconductors is an important part of our business. But I think as we've said before, we have had some issues internally from kind of an execution perspective. So we talk about our strategic priorities as a company on sharpening our focus 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 we're working on sharpening the strategy, improving our execution. And so this is going to take some time, but we are on the journey. And maybe I'll give it -- hand it to Abhi to give a little bit more specific color.

Yes. 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 semi 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.

Very helpful. 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 2Q and 3Q this year? Just want to make sure I understand the impact.

Yes, absolutely. I can walk you through it, Luke. So there's 2 things here. It's not just stock comp. It's also the impact of variable comp. So if you kind of think about our last year performance and where we ended the year, our teams didn't get paid. So this is a reset back to paying a target. That's majority of the $0.40 headwind. And then a small portion of that is just the year-over-year impact of stock comp.

Got it. So if we -- just to put it in different words as we think into then into 2026 that especially the variable comp piece 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, '26 versus '25 will be normalized. But given our performance in '24, like I said, we didn't pay the variable comp piece of it. And so you saw a good guide in the P&L. And this year, you're just seeing it being reset back to target. So if you -- just to kind of build on that story then as you kind of 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.

Very helpful. And then lastly, and 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 2 and then your progress getting designed into sockets on future architectures as well.

Yes. Thanks, Luke. I think we continue to be excited about our momentum in data center. We continue to make progress. And 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. And I would say that data center is -- our growth in the quarter, 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. 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. We're working more closely with hyperscalers, with cloud computing companies and starting to work more on our long-term R&D road map around that as well.

So I think this is something that is -- the message I would say is it's delivering growth now. And we do believe that with our enhanced focus, it's going to continue over time.

Your next question comes from the line of Christopher Glynn with Oppenheimer.

Just want to build on the last question on the data center comment. I think I heard up over 50% and up maybe double just on the last question. about the design wins. So I just want to clarify that. And 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 in to revenue kind of lead time is like? And maybe if we could clarify what the current scope of the data center business is for Littelfuse?

Yes. Maybe I'll start with a little clarification. Thank you, Chris, and then I'll hand to Abhi for a little bit more. But just to clarify, right, 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. So 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. So basically, design wins this year -- design wins year-to-date year-on-year versus a year ago.

And we track design wins as when things -- the timing of that varies a little bit, right? So the timing of that varies, so it's a little bit hard to predict just based on that one number. But I would say that data center is one of the faster markets. If you compare to some of our markets like automotive, or industrial, which take longer to go from design win to revenue, data center is probably not surprising, is a relatively faster market. That's what I'll say. And maybe I'll hand to Abhi to give a little bit more color on the relative impact of data center.

Yes. So Chris, thanks for your question. I think the best way to think about the data center growth is if you kind of look at Electronics segment performance. It's a good reflection of our data center exposure, and 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.

Okay. Great. Appreciate that. I'm sure we'll get a further deep dive in February. And then it sounds like the overall company is seeing some good momentum in new business opportunities. How is that funnel looking besides data center? I'm curious, at least especially for industrial, where first half, you had really outsized outgrowth and 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 curious about the kind of scalability for industrial and NBO funnel there as it pertains to maybe extending the outgrowth that you saw year-to-date.

Yes. Thank you, Chris. Yes, 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 continues to see strong demand. That said, as you note, we do have softer 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 in the quarter. But if you zoom out from 8 quarters of growth, and this continues to be a significant investment area and growth driver. You mentioned the Basler Electric is an acquisition as well that brings significant kind of industrial exposure and it will be part of our industrial business.

And then just to add to Greg's commentary, 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. So that's another positive sign of growth in that segment.

[Operator Instructions] And your next question comes from the line of David Williams with Benchmark.

Congratulations on the continued progress here. You talked about realigning 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 deeply with your customers and what that means. But is there a way to kind of quantify what your expectations are and how we can kind of gauge that success?

Yes. 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. And we had kind of these individual product organizations that had 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 electrical energy, we often are selling to the same person at the customer, give lots of examples actually in the script, right?

The example I gave on the battery charging application had passive overvoltage protection, semiconductor overvoltage protection, power semiconductor solution and passive circuit protection that comes from at least probably 3 of our business units. And so in the past, we would have had 3 different sales teams trying to call on that customer for that solution if they actually even all call on that customer.

So 2 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. So in some cases, we're more cases than not, we were missing opportunity because we weren't bringing the full portfolio. But other cases, we're also stepping on ourselves in front of the customer because we have multiple people.

So we've realigned to have the -- this is kind of the fundamental change. The sales team is representing our customer, not our products. And 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. 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 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. 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.

Fantastic color. And then maybe secondly, just on the tariff side, I know you 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 the growth is being tempered by tariffs or any delays? Just any color maybe around the impact of that tariff.

Yes, absolutely. I can take that, David. So when I talk about the impact of tariff, what I'm really talking about is if you kind of go back and think about our 2Q call, we had some tariff timing in the quarter where we saw the benefit of -- where we saw the pricing, but the cost hadn't quite flushed through the P&L. That was about a $6 million tailwind in Q2 that was going to be a headwind in Q3. So when I talked 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 the guidance for Q4, what we have baked in is a neutral price tariff impact for the quarter.

Yes. And I'd also say, 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 are trying more and more manufacturing close to our customers. So there is some impact, as Abhi 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.

Your next question comes from the line of, again, Christopher Glynn with Oppenheimer.

Just on Transportation, I wanted to just ask about the difference between the passenger vehicle fuses up 4% and the sensors down 18% organic. Is the sensors side still engaged in attrition exits product pruning there?

Yes. Maybe I'll start, and then Abhi can give a little bit more color on the transportation business. But actually, if you zoom out actually in our core passenger products, we have actually had a reasonable quarter given the kind of passenger car builds and so forth. We had a reasonable quarter. But we do continue to have, I would say, lower revenue and profitability of the sensor products.

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 which is not really a strategic focus of ours, the core passenger business actually did do pretty well, considering kind of the stable car build and some of the kind of EV slowness that we all see in the market.

Okay. Great. And then just back to the power semis and Dr. Hamed joining. So 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. But 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 the -- what you visualize there to kind of bring that up to the standards you envision?

Yes. Look, I mean, if you look in 3Q, for example, right, if you look at the performance of our Electronics segment as reported, right, the passive products were 19% semiconductor products were 5%, right? And that semiconductor products is really because the power semis is not performing as well. Our protection semi is actually doing pretty well. So we -- I mean, we have some areas there where we're underperformed. It's really -- like I said before, I think for us, power semis is a microcosm of some of the bigger strategy that we have at Littelfuse, right?

The 3 strategic priorities: one, sharpen focus. So where we play and why we win. And 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, et cetera. So that's, I would say, the first thing that we focus on 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. One 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 selling the semiconductor products. So we have opportunity with the sales realignment to improve our semiconductor position to customers. But then it also comes to about execution.

We mentioned in the remarks actually about, in Abhi's remarks about using our footprint more effectively. And so this is something that we're going to be focused on as well is optimizing our operational performance in power semiconductors. We believe that ultimately is going to drive both growth and profitability. So 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 optical energy.

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

Okay. Great. Thank you. I just -- in closing, I have 2 things really. First, I want to just thank our global teams. We did have good performance. And secondly, I'm really excited about Basler. And so I'm really excited to welcome the Basler team and the Basler business and taking significant growth opportunities for us in data center and grid and utilities. And finally, thank you all for joining our call, and we look forward to talking to you more and seeing many of you at the Baird Industrial Conference in Chicago in a couple of weeks.

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

Hi. My name is Saree Boroditsky. I cover multi-industrials here at Jefferies, including Littelfuse. We're really excited to have them here with us today. Abhi Khandelwal recently joined as CFO following some time at IDEX. A lot to talk about. So as I mentioned, we'll just jump in. This is a fireside chat. So if you have questions, you can feel free to interrupt me at any time.

So thank you for joining us today. You settled into the CFO role in mid-June. What are you most excited about when taking this new role? What are some of your initial observations about Littelfuse's financial strength and some challenges that you see?

Well, thank you. And first of all of pleasure meeting all of you. I think I know some of you, but we'll get to know you over time. Well, look, first, I'm really excited to be here. And as I kind of think about where we are, we're really well positioned to be a leader in safe and efficient transfer of electrical energy. So what got me here is a couple of things. As you've probably heard Greg talk about it, first of all, what we're really working through is sharpening our strategy. And what that implies is where do we win, what gives us the right to win. So we're in the process of doing that work. So as Greg and I spent some time talking about, that's one exciting piece of it.

Secondly, as you kind of think about the brand, think about what we do, we have a broad set of capabilities. And so what we're trying to do is position our commercial organization to go to market differently. What that implies is rather than selling in silos, how do we go sell our company as a portfolio to our customers and help them solve their problems.

And then lastly, it's around operational execution. So if you think about where we are, there's pockets of company that's very well run in terms of operational execution and there are pockets that have an opportunity for improvement. So I'll tell you, if you think about our Asian facilities, they're very well run operationally. However, there are pockets of opportunity across our Mexican footprint. So we took a gentleman who ran our Asian facility and made them the VP of Operations. So what they're in the process of doing is deploying best practices from Asia into Mexico so that we can start to improve profitability.

So going back to your other question on opportunity and challenges, I think the opportunity I just told you, challenges I talked about from a Mexico standpoint, how we're driving improvement. So what really excites me is -- sharpen your focus, you kind of work with your commercial team to go to market in a way where you're solving customer problems. And then we have the balance sheet to go deploy and really help us take the company from where it is to the next phase of this journey.

So as you mentioned, you kind of announced 3 new strategic priorities, the first of which is to better capitalize on some growth. Can you just talk through that opportunity, especially within the higher voltage and energy dense applications? And what can this add to growth going forward?

Do you want to start?

Yes. Maybe. I'll start, Saree. And good morning, everyone, and good to see everybody and a lot of familiar faces in the crowd. But I think, Greg, as you laid out on the last couple of earnings calls, we have a pretty broad and diverse exposure. But if you think across our vertical end markets, there is this pervasive trend of whether it's higher power or higher energy density and certain end markets are certainly moving at a pretty accelerated pace of this kind of trend adoption and evolution.

So a couple of examples. You've heard us talk about electrification in Automotive or the data center trends and everything around the data center ecosystem. So really kind of sharpening our focus on where these pervasive trends are, where is the higher voltage, where do we have the right to play, where are we winning with customers. And then with our scale and technology leadership kind of going more aggressively after those opportunities.

Yes. And I think you guys talked about that new business opportunity funnel up double digits in the quarter. Kind of what does that funnel represent? Is it near term? Is it long term? How do you guys define that opportunity?

I mean, look, I'd tell you, it's both, right? Some things are pretty near-term quick wins in terms of how our teams are approaching our customers. In fact, I'll give you a specific example. As Greg spent some time with our customers, it was pretty clear that, for example, 2 salespeople are calling on the same customer, right? So they were a little confused. And now one of the opportunities we have is instead of being inward focused, how do we change our focus and be more outward focused to think about what is the problem that the customer is trying to solve. We have a broad set of capabilities, a broad set of -- a pretty broad portfolio that actually fits into a lot of what they're trying to do.

So part of this is changing the way we go to market, honestly. And it's a combination, Saree, to your point, it's -- some of these are short term, some of these are longer cycle as you get [indiscernible] in, it's a longer cycle play. But again, I come back to our bookings. If you think about bookings exiting Q2, it's been the highest since first half of 2022, and you're starting to see the wins of some of that play itself out.

You jumped ahead to my next question, but you did talk about aligning the sales focus a little bit more. Is this something your customers ask for? And does selling complete solutions come at higher margins or higher growth? How does that work?

Well, I just gave you the example of Greg talking to a customer, a couple of customers who said, hey, it would be better one person call and kind of sold the whole portfolio. So part of this is customer-driven. And part of this is frankly driven by the fact that if you look at our portfolio and we kind of go spend time with the different leaders, it's pretty clear. As their sales team are selling their products, there's an opportunity to go get bigger wallet share. So it's a combination. Some of this is customer driven. Some of this is our own desire to go sell the portfolio versus each of the silos selling the individual product.

Does it come with higher margin? I'd say this. I think, first of all, I keep anchoring back to what we do, which is safe and efficient transfer of electricity. What that implies is there's got to be value creation. There's got to be a value proposition. I mean if you think about us, we're a small part of the overall solution. So the cost of failure is pretty high. So that's a big part of it.

And then it ties back to our third strategic imperative, which is operational execution. As you start to improve your footprint or operational execution, when the top line starts to grow, the business levers really nicely at 30%, 35% long term and you start to see margin expansion.

One opportunity you've talked to about this go-to-market strategy has been data centers, data centers. So maybe just kind of describe that opportunity, how are you scaling that go-to-market opportunity and bringing more of your portfolio to that market?

Yes. Maybe I'll start, Saree, and then hand it over to Abhi. If you think about our data center exposure today, we've talked about being a pretty meaningful growth driver. It's not double digits as a percentage of sales, but still driving some nice volume expansion across our segments. So interestingly, we touch on whether it's Electronics segment, you think more on the rack or Industrial segment, think more data center infrastructure.

But really for electrical energy, and you're seeing a lot of these data center architectures that have historically been lower voltage, 12, 48 volts kind of moving to those higher voltage architectures that presents a pretty meaningful opportunity for us across those business segments and then tie it back to that second opportunity that Abhi pointed to, which is if we think about selling that product suite, whether it's an Electronics segment or an Industrial segment or Transportation segment product to those customers at a kind of funneled approach with a direct sales force, that's the opportunity to get into those next gen architectures with the customers, which, by the way, we're already working with today, right?

We're working with the leaders on the hyperscaler side or on the infrastructure side, most of the names that come to mind, we have the relationship. So as we get more cohesive in our sales approach, it's an opportunity to further leverage that growth.

I mean I think just building on what you said, David, I think this is -- this example in particular, is a great example because all 3 segments touch that end market. And so if you go in with the United front in terms of, hey, here's the entire gamut of products that we offer. I think you have a real opportunity to increase your wallet share. And that's kind of what we're excited about. This is the one place where we actually piloted this. And if you think about the wins that we talked about on our second quarter call, it was all tied to this part of the business.

And just because you obviously go through distribution. Just how does this sales process through the distribution channel as well?

Step back, if you think about the Littelfuse business today, about, let's call it, 60% using round numbers of our revenues flow through the distribution channel. But what's interesting about that number is a lot of it is, let's call it, directed to distributors, meaning that you're already working with the OEM customer, whether that's a big Automotive or Industrial or broader Transportation or data center customer. So I think bridging back to the data center example, oftentimes, we're working direct with the hyperscaler with the infrastructure provider. It could end up flowing through distribution because back to Abhi's point, we tend to be a pretty small percentage of the bill of materials when all is said and done. But the direct engineering relationship is there and frankly, has already been there. And that's kind of the ethos and the strength of the Littelfuse model is that engineering relationship.

So you referenced the opportunity for the Mexico factory footprint. Your third priority, obviously, is focused on operational excellence. You established a new global operations team in the second quarter. Just some early learnings of this team, what KPIs are they focused on? And then what's the margin opportunity there?

Yes. So look, I'll start with the last question because we get that a lot, and I've gotten that a lot, especially given my background on 80/20 and operational execution. Here's what I'll tell you, we're not ready to kind of talk about what the end answer looks like in terms of margin profile. What I am committed to though, is we're going to do an Investor Day in February. And as part of it, what we plan to do is lay out the financial projection for the next 3 years, along with our margin opportunity.

But if you kind of take a step back and think about where we are, so what we did, as I mentioned, is we appointed a gentleman who was our lead for the manufacturing facilities in Asia to be the Head of Global Operations for Littelfuse. What they're focused on, as I said, is specific pockets of the company where there's real margin opportunity. They're focused on lean. They're focused on flow. They're focused on supply chain integration where, hey, 5 factories are buying the same component. Is there a real opportunity to go drive cost out in terms of being able to leverage the buy, right? So it's basic blocking and tackling, but we do believe there's real opportunity.

If you look at our Q2 performance, right, and kind of go through by segment, I think without answering the margin question, I do think there's a little color I can give you. If you think about Industrial performance, right, they exited the quarter at about 19% really good margin profile. They had a nice growth for the quarter. So one of the things I'll tell you about Industrial segment, for example, is we continue to plan to invest in that business. So at a 19%, 20% kind of margin profile, we're really happy with the performance.

Transportation has some work to do. Part of the Mexico facilities are tied to our Transportation segment. So as we start to see that get better, you'll start to see improvement in our Transportation segment. And then look, Electronics is an interesting one because if I kind of think about the passive and the protection piece of the business, they're doing really well in Electronics. What's dragging the performance down for that segment is really the pressure that we see in the power semi business.

Now that said, exiting Q2, as we talked about, we're starting to see an inflection in our orders. And so as the volume starts to come back, you're going to start to see the Electronics business margin improve as well. So net-net, I'll tell you, there's margin opportunity for the 2 segments that I laid out, Transportation, Electronics and overall Littelfuse. And as we do Investor Day, we'll start to quantify that more and what that means in terms of goals over the next 3 years.

You mentioned Electronics margins, so I'll skip a little bit ahead. What's the right way to think about through-cycle margins for Electronics? And how do we think about the margin contribution from operating leverage for some of the strategic initiatives you spoke about earlier? And just how do you think about managing costs for a business that such cyclicality?

Yes. So I'll kick it off and David, you can jump in. But I think first thing for us, if you kind of think about Electronics segment, think about '21, '22, I'd say they were pretty abnormal years. I mean the growth rates were 20-plus percent for 2 years. And so what you then saw is an elongated correction, if you will, inventory destocking and correction of those 2 years of growth. So at the average, we were about 21% EBIT margins is what we saw. Now where we are today is nowhere close to 21%. We're in the 15% kind of range. But again, as I point back to the power semi piece, power semi is a big part of the drag in the Electronics segment. As we mentioned, Q3 to Q2, we should see improvement in our power semi business, and that business starts to come back. Our margins are going to start to uptick in the Electronics segment.

From a -- I'd say, from an operational flow-through standpoint, long term, I'd say the portfolio is about a 30% to 35% flow-through on incremental sales. It can be higher in the early days simply because as you start to see revenue come back, you're not going to go invest dollars and cents. But long term, we're going to invest back in the business to continue that top line momentum. So that's how I would think about it. David, anything from you?

Yes. And I would just add to that point back to that leverage of 30%, 35% historically, our Electronics segment, we really see strong kind of incremental conversion on volume growth and feel confident in the ability to execute on some nice volume momentum. And Abhi spoke to some of the book-to-bill strength we're seeing. So you have confidence in our teams in Electronics to deliver on that expansion.

I'll just pause if you have any questions, raise your hand. Okay. So given your background deploying capital at IDEX, just how do you plan to approach capital deployment here at Littelfuse? How do you think about internal investments needed versus acquisitions, returning cash to shareholders?

Yes, yes. So look, first things first. as I said, we're in a very interesting time, very exciting times in terms of really honing in on our strategy, honing in on where we want to play, what gives us the right to win. So that is a big part of the work we're doing right now. And as we start to think about that, I mean, look, from a capital deployment strategy, our balance sheet is pretty well positioned. We deploy or we generate free cash flow north of 100%. Quarter-to-date, we're at 114% conversion. So as I think about our capital deployment strategy moving forward, look, we're going to continue to fund the organic investments, right? That's a no-brainer. The payback is pretty low. is typically a pretty good payback. And so we'll do that.

M&A is a big part of our strategy. And as you think about the work that we're talking about doing and the work that we want to share with the broader teams in doing Investor Day, M&A is going to be a big part of it. So we're going to continue to deploy capital. And then lastly, I'd say, look, dividend is going to be a part of how we return share back to cash holders, coupled with strategic share buybacks. So nothing earth shadowing in terms of how we're going to do this. But for us, right now, what we're really excited about is really honing in on where we want to play and what gives us the right to win.

Maybe we'll get a preview of the Investor Day here. What criteria are you focused on when evaluating some of your M&A targets? How do think about some white spaces?

Yes. So again, we will deploy capital in the areas that we believe are strategic to us. That said, when I think about our criteria, think about our metrics that we care about, I mean, look, at the end of the day, what we're focused on is the ROIC double digit in 3 to 5 years. Part of this is going to come down to the acquisition. And what I mean by that is certain acquisitions, if they are a fixer up or and all it is, you go take out a bunch of costs, you get there faster. But long term, over 3 to 5 years, our goal is to be double-digit ROIC. That's how we're thinking about return on capital, return on our M&A capital deployment.

Leverage is pretty low currently, I think under 1x net debt to EBITDA. Like how do you think about the optimal balance sheet?

Well, look, I think for the right M&A, we'll go as high as 2.5. Now the good news is even if we push it slightly higher, we generate enough cash that we'll pay it down. But ideally, 2.5 is the ceiling, and that's where we would want to be. To your point, we're way below 2.5. So we have ample capital to go deploy. And the good news is our cash flow is pretty robust. So as we deploy capital, we'll continue to delever as we forward.

It's a good position to be in.

It's a great position to be. I'd rather have this problem.

Yes. How do you think about the pricing opportunity here at Littelfuse? Is there opportunity to increase price within the businesses? And just like what's your philosophy on price in general?

Well, look, I'll start again by coming back to what we do around safe and efficient transfer of -- or safe and efficient electric transfer. I think that is the core to who we are. It's pretty -- the work that we do is pretty critical. The cost of failure is super high. So as you kind of think about exiting Q2, what we talked about, just given the world we're in, we said we're price/cost neutral is our goal. But at the end of day, it comes down to, hey, what value are we creating? What problem are we trying to solve? So we stay on top of it. Our philosophy is we're going to be neutral to slightly positive as we move forward. But at the end of the day, again, the advantage or the place that I love that we are at is we're a small part of the overall solution and the cost of failure is pretty high.

You mentioned some recovery on the power semi side, I think, into the next quarter. But can you just talk about the normal electronic cycle and how you're thinking about growth across the product lines? And is there anything about this upcoming cycle that's different from the past?

Maybe I'll start with that one, Saree. And I think I'd almost flip the last question on its head and say the last 3 to 4 years have been very different in '21 and '22 in Electronics, a pretty robust and unique growth cycle, terms golden screws, right, unique pricing environment. A lot of interesting things going on at the time. And then the flip side of that, '23 and '24, pretty what we call elongated down cycle, right? Because I think depending on when exactly you stop and start your stopwatch, maybe 8 quarters of an inventory correction in Electronics. Historically, a normal correction in Electronics has been 4 to 5 quarters. So certainly a bit unique going into what's been a stronger recovery in passive Electronics for the last couple of quarters. So we don't know exactly what the future holds other than it's been a unique past 4 to 5 years.

I will say on the power semi side, things turned a bit later versus passives. And we've seen the same thing happen in the recovery. Passives, again, end of Q4 last year, we started to see some pretty nice momentum, have had strong book-to-bill, strong order flows, improved visibility in that business. And in power semis, we talked about on the earnings call, starting to see some improvement there as well and feel good about the sequential momentum into the back half of the year for our power semis business.

Maybe switching gears to Transportation. I mean, it performed better than expected at least that we expected with strength in commercial vehicles despite what appears to be a pretty weak market. So just talk about your positioning across auto and commercial vehicle and just how we think about market outperformance going forward?

You want to start?

Yes. I think historically, you've heard us talk quite a bit about mid-single digits above production in our auto business. I do think what Greg has spoken quite a bit about the Transportation segment is a pretty diversified set of vertical end markets and a lot of meaningful opportunities to build Automotive into commercial vehicles, into areas like material handling and logistics. We're, again, back to this idea of safe and efficient electrical energy transfer. It's pervasive of any vertical market that's "own wheels" when all is said and done.

So I do think, yes, Automotive, it's been more mid-single digits. Many of you have heard us talk about high-voltage electrification is a nice trend for us, electronification. But broader than that, we see some pretty meaningful opportunities. And you heard us talk about on our earnings call, some of the commercial vehicle growth that we've seen in the last couple of quarters despite what we would consider some continued soft underlying commercial vehicle end market trends.

This is -- I think to build on what David said, this is one area where you can truly see a couple of things play out. First of all, I think this is not a story of market. This is a story of focus. This is a story of how are we aligning our commercial organization to really go understand our customer needs. And two, if you kind of think about the margin performance in Q2 and the work that the teams have done, this is early days, but you really start to see the operational improvements start to play itself out in the Transportation segment, especially given the margin improvement that we saw on a year-over-year basis.

EV was kind of one of the things that people were very focused on, let's say, even a year ago. Just how are you thinking about that demand as we potentially enter a weaker EV market, at least in North America?

Yes. Fair question. I think a couple of things that really position us relatively well from whatever the EV market ends up looking like. One, if you think about our auto exposure today -- and by the way, we talked about our Transportation segment, which is mentioned as Automotive and commercial vehicle markets. Automotive all in is maybe 20% of Littelfuse revenues. But it's a global business. And we're a scaled supplier and partner to OEMs, whether in North America, Europe or in China as well.

So I think to your point, one of the trends that we've seen, it's pervasive throughout the market is continued strength in China from an EV growth standpoint and softer trends in North America and Europe. But what has helped us is having those global relationships and a pretty diverse customer base with all said and done. And then the last thing I would add is automotive electrification is trend. electronification tends to benefit us as well. If you think about things, let's call them, in the cockpit, the infotainment system, again, more electrical energy transfer really brings higher value opportunities for us when all said and done.

Transportation, I think you guys mentioned achieved mid-teens margin in the quarter. Is this a good steady assumption? How should we think about the puts and takes there? Is there opportunity to expand margins maybe to reach Electronics and Industrial levels at some point?

So there is opportunity on the Transportation segment. What you see, again, as I mentioned, is early work tied to our operational execution. But I will tell you, again, without putting a number to it, there's definitely room for margin enhancement. The other thing you're seeing in our Transportation segment is the work that we are doing to simplify our business. So what we're trying to also do in the Transportation segment is look at the tail of customers, look at the tail of customers that we serve and for customers that are complexity, but really no profitability. It's a large list of customers, but a very small amount of top line. We've simplified that business, walked away from some business, quite frankly, so that we can improve profitability and a profitable growth. So more to come on that, but I do believe there is room for further improvement in margin on the Transportation segment.

Sounds very 80-20. Maybe I should pause on end market stuff and talk what's the 80/20 opportunity here? And how do you think about applying that?

Yes. So look, the Transportation piece, especially the commercial vehicle part of the Transportation segment is run by a gentleman who's very well versed in 80/20. I've actually worked with him in a prior life. So we've done some work there. And again, early days. There's definitely opportunity. The size and the magnitude of it, we're still working through. But that's one place you really start to see the margin enhancement driven by not just top line leverage and the operational execution, but also simplifying the business, applying some 80/20 work.

And then on -- maybe turning to Industrial markets. You've seen some robust growth there this year. Is that all related to end market demand? Are you benefiting from any restock there? And just how is the growth across some of your high-value markets such as energy storage?

Yes. So I'd say Industrial is a great example of broad-based strength with the exception of construction and MRO. I think what you're seeing in Industrial is a couple of things. First of all, it is end markets. But part of this is about the work that we're also doing in terms of higher energy, higher density and the focus that we put on it. It's this whole go-to-market conversation that we just had. But I mean, I think if you look at the performance for the segment for Q2, we're up about 19% top line, 17% top line and had really robust margins at 19%. Our goal is to continue to invest in the Industrial segment, continue to move the organic needle forward. So I think pretty excited about where we are with that.

Yes. And I would just add, the Industrial segment, we're pretty diverse in our exposure. But again, back to that hitting on the same things, but safe and efficient transfer electrical energy, whether it's grid storage or example of -- we talk about Industrial safety, right? Some of the increasing regulatory requirements around electrical energy transfer in a commercial kitchen, right? Think about a fryer and a fast food restaurant. I mean these are really meaningful kind of growth trends for our business. So our Industrial segment with some of the new product innovations they've had and kind of expanding and kind of developing these next gen architectures with the customer base has been a good trend for us.

One thing I was noticing as I went through my model to prepare for this is just kind of the uneven margin performance across the quarters within Industrial. How do you think about the current target for high teens? And is there a way to reduce this variability? Or is it just part of the model?

Well, that is actually one of the biggest things that we talk about internally is the variability in the margins. to your point, we saw 19%. Now I will tell you, it's not linear. There are certain quarters that are lower than others, just given seasonality, so you might see a little bit of variability. But this kind of comes back to really honing in on the operational execution piece and making sure we stay on top of it. So even as the volume starts to come down, we're delevering at a much slower pace than what we've typically seen. So the operational execution piece is a big piece of how we're focused on making sure our margins are not as volatile as they have been.

As you look in the business into 2026 and beyond, what are 2 or 3 key metrics that you're most focused on just to ensure the durable earnings growth?

Organic growth, efficient allocation of capital and then this operational execution piece. And the organic growth ties back to the 2 strategic priorities we've been talking about. Those are the things that we're laser-focused on because I think what we're trying to -- again, what we're trying to focus on is your earlier question, which is how do we have a model that is not so volatile that earnings go up, earnings go down. We're trying to manage that by, again, focusing really on the go-to-market and making sure we maximize the wallet share.

One of the questions that we're super curious on we're asking everyone is just as AI continues to improve operational efficiency and expand capabilities, like how do you see that impacting growth or potentially margin expansion as in the near term and then over the long term?

Yes. Maybe I'll start there and maybe work backwards, right? So a couple of examples that Greg has spoken to as you think about -- and Abhi mentioned this earlier, our Asian manufacturing footprint for really efficient kind of well-run, we'd call best practices that we're trying to deploy, by the way, throughout the global Littelfuse footprint. AI is an area where we've built some capabilities in those factories. So the idea of kind of reducing kind of lost times or defect detection improvements are a couple of areas that we've really seen some enhancements from the margin side. Again, I'd say it's today a little bit concentrated, but opportunities to kind of deploy that throughout the footprint as a broader -- within that broader realm of operational execution and excellence opportunities.

And I know we're running up the clock. So lastly, if you could just sum up, what do you think, especially coming from a new position or maybe coming from the side of the fence the other day, what do you think investors might be overlooking at Littelfuse? And looking ahead, is there an aspect of the business or strategy that you feel deserves more attention?

Yes, a couple of things. Look, I'll anchor back to the first question you started with. I think as we solidify our strategy and solidify where we're headed and kind of lay out the details, a couple of things. First of all, I think we do have a pretty diverse set of end markets we touch. And we need to do a better job, honestly, of articulating where we play. Like the data center is a great example. We've been a part of that end market, but we've never been able to articulate clearly and we'll start to do that.

So I think as we -- again, as we sharpen our strategy, really hone in on go-to-market and drive operational execution, you should start to see that both on our top line and bottom line. We will, again, clearly articulate our 3-year financial goals as part of the Investor Day. But all that said, coupled with the balance sheet that we have, we're really excited about where we're headed. And we expect to provide a lot more details and clarity around our end markets and our financial commitments as part of the Investor Day.

David, do you want to add anything? [indiscernible]

Yes. And I'd say just excited to have Greg and Abhi on board. And I think if you think about the balance sheet of the company, the cash generation that Abhi pointed to, just a really, really strong foundation to support the strategic initiatives and look forward to sharing more in the coming months and quarters.

It sounds like an exciting February. Thank you so much for joining us.

Thanks for having us here.

Thank you so much.

Good day, everyone, and welcome to the Littelfuse Second 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.

Good morning, and welcome to the Litter Second Quarter 2025 Earnings Conference Call. With me today are Greg Henderson, President and CEO; and Abhi Khandelwal, Executive Vice President and CFO, and -- this morning, we reported results for our second quarter, and a copy of our earnings release and slide presentation is available on 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 2 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 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 measures is provided in our earnings release available in the Investor Relations section of our website.

I will now turn the call over to Greg.

Thank you, David, and thank you to everyone for joining us today. I want to start this morning with highlights of our second quarter and then provide an update on the progress we're making on our strategic priorities. We're in the early process of capitalizing on our numerous growth and operational enhancement opportunities. An important milestone in this process was the hiring of our new CFO, Abhi Khandelwal, to the quarter. Avi joins us from IDEX Corporation, and he brings more than 2 decades of financial and operational leadership. He has significant experience in driving strategic growth, both organic and acquisitions as well as in scaling operations. Abhi has already had a significant impact in his first month at Lote. I look forward to continuing our partnership as we focus on scaling our business for long-term growth, enhanced profitability and best-in-class shareholder returns.

In the second quarter, we demonstrated broad-based strength across our businesses, delivering revenue growth of 10% relative to the prior year. Our performance reflects our leadership position in safe and efficient electrical energy transfer, the ongoing meaningful technology evolutions in front of us and the fact that our customers deeply value our trusted and essential capabilities. Across our segments, we observed continued momentum in the second quarter. Our Electronics segment benefited from improved demand for passive electronics and protection products.

In our Transportation segment, we delivered broad-based growth, while our strong Industrial segment performance reflects our unique market and customer positioning. Our end markets continue to move to higher power and higher energy density, and we are leveraging our market leadership and unique product portfolio to help our customers solve increasingly complex challenges.

Supporting this, our second quarter book-to-bill again tracked above 1, while our bookings exited the quarter at the highest run rate since the first half of 2022. We expect our solid growth performance to continue into the third quarter. Our second quarter earnings results also exceeded the high end of our prior guidance range, reflecting strong execution. Abhi will discuss specific results in more detail shortly, but I want to thank our teams for their hard work and dedication.

With that, I wanted to update everyone on the specific progress we're making on each of our strategic priorities that I highlighted last quarter. Our first strategic priority is to enhance our focus to better capitalize on future growth opportunities. Our teams are sharpening their focus on higher voltage and higher energy density applications as our customers are pushing for higher power next-gen solutions.

This evolution is leading to complex safety and efficiency challenges, and our products are increasingly important to solving these challenges at the architecture level. Importantly, this transition is happening across all of our end markets, and we are seeing the benefits of our heightened focus on these expanding opportunities real time.

Let me provide you with an example in enterprise computing, where the industry is transitioning from 5-volt to higher power 48-volt capabilities for single cable combined power connectivity interfaces. This evolution requires more advanced and unique safety and protection solutions while meeting the increasingly demanding data rate and electromagnetic compatibility requirements.

In the second quarter, we worked with a market leader to develop a next-gen semiconductor protection solution. Our solution supports higher power and data rates at faster charging speeds and will begin shipping in the third quarter.

Broadly, our heightened focus on the secular trends across our end markets will continue to drive expanded new business opportunities. We are seeing meaningful traction in our pipeline and year-to-date, our new business opportunity funnel is up double digits. Our second strategic priority is to provide more complete solutions for a broader set of our customers. Customers deeply value our capabilities and our scale is a significant advantage, yet we can further harness our unique and market-leading product portfolio to help more of our customers solve complex challenges around safe and efficient power transfer.

To support this opportunity, we are further aligning our technology capabilities and our sales structure to better serve our customers with our full product portfolio. We are also leveraging our collaborative product development, engineering and testing processes to better support our broad customers as they drive ongoing product innovations. As an example, last quarter, we discussed the meaningful role we play in data center advancements. We are seeing an accelerating pipeline of opportunity as we have been expanding our go-to-market strategy.

I'm pleased to announce several new data center design wins in the second quarter with market leaders ranging from a global digital infrastructure provider to a leading compute platform player. Our second quarter wins range from liquid cooling to one Ford and power distribution applications and position us well for continued strong data center sales growth.

Last quarter, we also discussed our opportunities in the rapidly growing grid storage market. Today, I wanted to discuss the broader sustainable grid ecosystem where we are building momentum globally. In the second quarter, we won a design with a leading player in green hydrogen, where we will provide high-speed, high-voltage industrial fuses. Our solution enables pairing to the grid and plays a critical role in reliable renewable energy transfer. We also work with a solar supplier to develop a next-gen microinverter.

Our solution enables compatibility with higher power solar panels and improved battery integration. Broadly, we observed strong renewables and grid storage sales growth in the second quarter, and we see continued momentum as these markets transition to higher power solutions.

Turning to our third strategic priority. We see an opportunity to drive further operational excellence while enhancing long-term profitability as we grow. We can better leverage areas of best-in-class operating practices and apply those across our businesses. We can also further optimize our operating structure to support our growth opportunities and enhance long-term performance.

In the second quarter, we established a new global operations team that will focus on driving best-in-class operational capabilities across our global sites. Led by this team, we are in the process of establishing and driving best practices with a heightened emphasis on safety, quality, delivery, cost and inventory. While this is a long journey, we have begun applying this enhanced focus to some of our North American factories.

We saw early benefits of these efforts in the quarter, reflected in our second quarter transportation operational performance. Taking a step back, we delivered a strong second quarter, and we are well positioned to drive continued growth into the third quarter. We are seeing the benefits of our flexible operating model and global footprint that is closely aligned to our customers and their supply chains.

We will continue to work closely with our customers and partners through an evolving environment to deliver on the meaningful opportunities in front of us. Finally, while we have made significant progress to date, we remain focused on our strategic priorities as we aim to position and ultimately scale our company with the goal of delivering long-term best-in-class performance.

With that, I will hand the call over to Abhi.

Thank you, Greg, and thank you everyone joining us today. I'm excited to have joined this great organization as we scale our business for the next growth phase of Littelfuse. One month into the role, I've been working with Greg and our leadership team as we build on our strategic priorities. I see opportunities to enhance our secular growth momentum, further optimize our portfolio and strengthen our talent as we drive immediate long-term returns.

With that, please turn to Slide 7 to start with details on our second quarter results. As Greg mentioned, we exceeded the high end of our guidance range for revenue and adjusted EPS. Going forward, comparisons I will discuss will be relative to the prior year, unless stated otherwise. Revenue in the quarter was $613 million, up 10% in total and up 6% organic. The [ Dortmund ] acquisition contributed 2% to sales growth, while FX was a 1% tailwind. Adjusted EBITDA margin finished at 21.4%, up 280 basis points.

Our solid margin expansion reflects strong conversion on higher sales growth, improved operational performance as well as the benefit due to the timing of tariff collections and payments. Second quarter adjusted diluted earnings was $2.85, up 45% and exceeded the high end of our guidance range. This reflects solid sales growth across our segments as well as margin expansion across our Transportation and Industrial segments. Please note, our second quarter adjusted effective tax rate was 23%, in line with our expectations.

Please turn to Slide 8 for updates on capital allocation. We delivered strong cash generation in the second quarter. Operating cash flow was $82 million, and we generated $73 million in free cash flow. Year-to-date, we have generated $150 million of free cash flow, yielding a strong 114% conversion rate. We ended the quarter with $685 million of cash in hand and net debt-to-EBITDA leverage of 1.1x.

In the quarter, we returned $17 million to shareholders via our cash dividend. We will continue to prioritize our cash flow for organic investments and strategic acquisitions. And we'll also continue to return capital to our shareholders through our dividend as well as strategic share buybacks.

Please turn to Slide 9 for our segment highlights. Starting with the Electronics Products segment. Sales for the segment were up 10% versus last year and up 4% organically. The Dorman acquisition contributed 4%, while FX contributed 1 point to growth. Sales across passive products were up 14% organically, while semiconductor products declined 5% in the quarter.

Our strong passive product sales growth in the quarter reflects improved orders from channel partners and increased demand from OEM customers. Within our semiconductor products exposure, we observed continued soft power semiconductor demand that offset improved protection product volumes. Adjusted EBITDA margin of 21.6% was flat versus the prior year. Favorable year-over-year volume leverage on our passive and protection product sales growth was offset by lower power semiconductor volumes.

Moving to our Transportation Products segment on Slide 10. Segment sales increased plus 6% as organic sales increased 4% for the quarter, while FX contributed 2 points to growth. In the passenger car business, sales increased 3% organic. Passenger car sales increased across North America, Europe and China as we benefited from share gains and growth in global car builds. Commercial vehicle sales for the quarter increased 5% organically and benefited from market share gains despite ongoing soft end market conditions.

For the segment, adjusted EBITDA margin of 20.5% was up 610 basis points. In the quarter, we benefited from volume leverage, while our focus on profitability initiatives continued to drive improved operational performance.

On Slide 11, Industrial Products segment sales grew 17% organically for the quarter. Second quarter sales benefited from strong grid storage, renewable, data center, industrial safety and HVAC growth. Adjusted EBITDA margin was 22.1% in the quarter, up 610 basis points. Our strong margin performance reflects improved volume leverage and solid operational execution.

Please move to Slide 12 for the forecast. We entered the third quarter with a strong backlog and remain well positioned to deliver continued growth as we focus on driving operational excellence. With that in mind, our third quarter guidance incorporates current market conditions, trade policies and FX rates as of today.

We expect third quarter sales in the range of $610 million to $630 million, which assumes 6% organic growth at the midpoint and 2 points of growth stemming from our Dortmund acquisition. We are projecting third quarter EPS to be in the range of $2.65 to $2.85, which assumes a 38% flow-through at the midpoint. Third quarter guidance also assumes an unfavorable impact from stock and variable comp of $0.21 and a $0.12 headwind from a prior year favorable mark-to-market and a higher adjusted effective tax rate. At current FX and commodity rates, we're expecting an $0.08 headwind to EPS versus the prior year.

Moving to Slide 14. Let me add some additional details on our full year 2025. We continue to expect 2% total sales growth stemming from our Dortmund acquisition with a neutral impact to EPS. At current rates, we expect FX and commodities will represent a 1% tailwind to sales and a $0.14 benefit to EPS.

On other modeling items, we are assuming $58 million in amortization expense and $35 million in interest expense, about 2/3 of which we expect to offset from interest income from our cash and investment strategies. We're estimating a full year tax rate between 23% and 25%. We also expect to spend $90 million to $95 million in capital expenditures.

In closing, our second quarter results reflect our unique technology positioning, flexible operating model and solid execution. As we look forward, we have a strong business model and balance sheet, and we will maintain our financial discipline and focus on shareholder returns. We will continue to build on our strategic priorities to scale our business and drive long-term value.

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

[Operator Instructions]. Your first question comes from Luke Junk of Baird.

Greg or Abhi, maybe to start, if you could just help us to put the margin upside in both Transportation and Industrial, just in context relative to history, both recent history and some of the longer-term targets that have been out there. Transportation, in particular, the company has had a long-held 15% margin target. You're right there this quarter. Just how should we square current trends with what the historical context has been for that business operating wise? And then, Abhi, I think you mentioned some tariff timing impacts to margins. If you could just clarify what that was.

Sure. Thanks, Luke. This is Greg. I'll just start, just maybe I'll take them one at a time. So starting with our Transportation segment. I think as we mentioned in the prepared remarks, One of the key areas that we're focusing on is scaling our operational excellence. And actually, we've been working on focusing on that inside of our transportation business.

So strategically, we kind of have 2 initiatives in transportation. One is that we're strategically focused on diversifying our portfolio, so diversifying our market exposure. So we have a strong exposure, as you know, the passenger car, maybe traditional transportation like heavy trucks. But we have a strategy to try to diversify. So we're winning new designs in more diversified areas, things like agriculture and other customers that we don't penetrate today.

But also we have a focus on scaling our operational excellence. And so this is one of the areas that it's still in early innings for us, but we're working on optimizing our factory performance, taking some of our best-in-class capabilities and scaling them across our factories. And we saw meaningful improvement in our transportation margin in the quarter because of that, and Abhi can give some more color to that.

In Industrial, I would say that we continue to have positive revenue growth and margin. And I would say a lot of the performance in industrial is related to the markets we're playing in. So we're continuing to play in focus of energy storage, data center, industrial safety, we had strong growth in HVAC. So in our industrial business, I would say that our top line growth and our focus on high-value markets is also driving the performance there. And maybe I'll hand to Abhi if you have more color on that.

Yes. So, first of all, pleasure to talk to you and look forward to our partnership here. But let's start with transportation, building on what Greg said, there's a couple of things I'll point out. First of all, if you look at the performance in the quarter and look at 4% organic growth, I think what that the margin reflects is the power of leverage -- operating leverage. So you see that play itself out in the quarter.

Secondly, as Greg mentioned, look, we've done a lot of work around operational execution. We continue to focus on that. That's one of our strategic priorities. So as we move forward, right, we will continue to build on that. Now keep in mind, transportation is -- margins are not going to be linear because there's sales that move over time quarter-by-quarter given seasonality. But I do expect over the longer haul, transportation as a segment has more margin upside. We'll work the details out as we go through the back half of the year and solidify our strategy.

Talking about Industrial, look, we're really, really pleased with the performance that we saw in the quarter, both on the top line and the bottom line. Again, this is pretty much the same story, which is around organic growth translating into powerful operating leverage, which you see for itself out in the margin line. look, transportation exited the quarter -- or sorry, exited the quarter at about 19% op margin, right.

Now keep in mind, one of the things to consider here is as we start to see our organic growth at 17%, some of the margin drop-through, we're going to invest back in the business to continue to fuel growth as we move forward. But again, we're pretty pleased with the performance. You can see the work that we're doing around our third strategic priority on operational execution really play itself out in the quarter across the company.

Thank you for that and Abhi, great to meet you in this context as well. Just on the tariff timing impacts, yes, could you just clarify what you mentioned in the script as well?

Yes, absolutely. Look, what I said in the script is something that basically comes down to the timing of the realization of price versus when we incurred the cost in the quarter. So what really that means is if you think about it sequentially, right, in Q2, we had about a $0.15 benefit or tailwind that will become a headwind in Q3.

So really, all it is timing between the quarters in terms of the timing of price realization versus cost that we incur on the P&L. So that's what I meant by that. There's about a $0.15 good guide in Q2. That's going to reverse itself out in Q3 and be a bad guide sequentially.

Okay. Understood. That's helpful. Second, maybe just a little bigger picture, Greg, but really strong results within Industrial quarter. Historically, this has been a smaller just because of the size of the business, somewhat an even segment for the company historically. As you come into the company, is your perception of the business different? I guess I'm thinking, especially your priority around aligning the company's technology capabilities and sales structures. Could that have a sort of outsized impact on the Industrial segment specifically, Greg?

Yes. I think what I'd say is I think we're actually really excited about the industrial segment. When we think about our bigger picture strategy of focusing on safe and efficient transfer electrical energy and about our customers' transition to higher power, high-voltage high current, this plays really well. This is a big megatrend in that industrial sector.

And actually, I think we focused in our Industrial segment on some of these markets that are maybe leading in this transition. And then we built technology. So for example, solar, grid storage, these are some of the areas that are leading in this transition. We built technology.

Actually, now some of the technology from our industrial business is now a big part of our data center solutions. So as we talked about data center, some of the data center customers, and actually, we sell to 2 sides of that. We sell to what we would call maybe industrial infrastructure customers that make that do maybe the grid side, bringing the power into the data center, doing the cooling for the data center, that's part of our industrial business, but also products for our industrial business are playing straight to the hyperscalers directly that are going to the next-generation high-voltage architecture.

So broadly, we feel that industrial is a growth sector for us. You heard obviously that it's actually -- it's a high growth but also a good margin, but we're going to continue to invest in this. So industrial segment is one that aligns well to our strategy, and we will continue to see, in my opinion, both top line and bottom line positive outcomes from this.

Got it. And then jumping off on that on the data center piece specifically, Greg, maybe a multipart question here. You touched on some of the infrastructure side. Can you remind us from an electronics standpoint, where data center exposure is? And I think historically, for the company in total, it's been a good exposure, but not necessarily one of the company's largest -- kind of just where is that today? I get the sense that it's growing.

And as you lean into new engagements and opportunities on next-gen, higher power type applications, it sounds like some of those things are maybe coming to fruition earlier than expected. Can you just help us understand magnitude of that tailwind?

Yes. I mean I think data center, we consider as inside of our Electronics segment and the products in our Electronics segment are also having strong traction in data center. We mentioned design wins we had this time in liquid cooling, but also in onboard. And so we have a lot of products from our electronics segment that are onboard power protection products and actually our semiconductor protection products actually going to data center onboard.

And I think actually, interestingly, like one of the trends that's happening in this -- you all hear about data center market and the data centers gigawatts of power, et cetera. But every step of the chain in the data center is going to higher energy density. And so our solutions, a lot of our electronics products are about -- they tend to be slightly smaller than, say, the industrial products.

But again, you're trying to put more energy into a small area and still have that protection. So we have some surface map, for example, our surface fuses, our low-voltage devices, our semiconductor protection devices are playing well in that space. What was the second half of the question, Luke?

Yes. So just maybe sizing the data center exposure, like I said, it's been a good exposure historically, but not only the largest, but it feels like that's growing right now.

Yes. I think what I would say is that data center is materially important to Littelfuse, but I also think it's going to be more important as time goes on. So I think the thing to understand about this, we talked about our second strategic priority about selling more of our complete solutions. And this is really about also how we align our go-to-market so that we're more leveraging our broad capabilities.

Interestingly, I talked about some of our industrial products selling straight into data center. So the go-to-market for our data center is right now focusing in our electronics segment, but we're trying to better scale that go-to-market. So data center is a key kind of early area where we're focusing the scaling of go-to-market to bring more of our portfolio to our customers. And so this is an area where we're building pipeline. We have good design wins, but we also have growing pipeline. And so we will continue to see momentum in that...

The next question comes from Christopher Glynn of Oppenheimer.

Yes. Just would like to dive into the passenger vehicle share gains kind of point in time. I don't think you called it out last quarter. Obviously, you flipped to positive organic. But is this kind of a midstream activity that's just kind of hitting past the starting line presently?

Yes. Thanks, Chris. I think look, when we look at passenger vehicle, I think the thing that I'll say is that we have a very strong market position and good exposure globally. And so we participate in the North American market, in the China market and in the European market. And we participate strongly actually in EV and also traditional ICE vehicles as well. So we have a pretty good market exposure.

And I would say so we have good strong exposure and share. And we talked about before that on average, EVs tend to have higher content. So therefore, when they have higher content, we tend to have more dollar share that goes with that, but we have good share across. So I would say, from my perspective, the share gains here is really about kind of where our market exposure is and how our position is. And that's going to go up and down.

But I would also say just emphasizing, I think, our -- when we talk about our transportation segment, passenger vehicle is an important part of that. But I think you'll continue to see our strategy is to try to continue to diversify passenger vehicle is an important part of our Transportation segment. But our strategy is to continue to diversify with some key design wins in the quarter in areas like agriculture that is diversifying out from our traditional customer base, and we consider those to be high growth and SAM opportunities for us.

Okay. Great. And then we just talked about the share gain in transportation. Industrial, you have good market targeting and penetration. Electronics is a little bigger, more diversified. It's tougher to discern how it ties into better capitalizing on future growth and more complete solutions. You've talked about BMS and medical in the past. Just wondering how the kind of momentum is playing behind the scenes there overall at electronics relative to the kind of more visible at the 2 smaller segments.

Yes. I think what's important to understand about this strategy, and I think from my perspective, we're -- we're in the early innings of this strategy right now. But what's important is that in all of our segments in Electronics and industrials and transportation, we're trying to get more disciplined and deliberate about, okay, what are the growth drivers in the segment? What are the parts of the market that are growing, where do we want to focus? So -- and then how -- what's our position there.

So we're focused on these areas where they're focused on transition to higher voltage, higher current. I gave an example actually in the script that comes from the electronics segment, which is actually in enterprise computing. And actually, that example, what's interesting about that to me is we talk about transition to high voltage on high current, and we've talked in the past about data center going to 400 or 800 volts and people think all very high voltage.

But actually, this enterprise computing market for this application of connectivity is transitioning from 5-volt to 48 volt. Now 48-volt is not high in the context of 800-volt. But in the context of the application, it's a high voltage, and we've actually developed completely new solutions around semiconductor protection because it's a very demanding requirement in terms of power density and electromagnetic compatibility. So that's a good example.

And so what we're trying to do is find where in these markets and in the subsegments, whether it be building automation and electronics or medical or aerospace and defense, where do we have opportunities where we can leverage those megatrends on electrification with our technology. And so you'll be hearing more about that as we build out the strategy over the next quarters.

Okay. And then last for me. I was just curious, the electronics margin slightly down sequentially on 9% sequential sales growth. I don't know if stock and variable comp plays in there. It looks like that's a 21% year-over-year drag in the third quarter. Maybe we could level set the context of that third quarter timing as well as the electronics sequential margins.

Yes. So Chris, this is Abhi. So what I'll say is this. I mean if you look at the Electronics margin profile, what you're seeing in there in the second quarter is really strong drop-through in our passive products and our protection business within our semiconductor product business, right, which is partially getting offset by deleverage of power semi business. and the acquisition of Dortmund.

Now all that said, what we are seeing is improved orders in our power semi. So as we start to see the volume recover over time, what you see is rescaling and solid margin performance coming out of the Electronics segment. But just to clear one more time on the electronics side, we did see strong drop-through on passive products protection business within our semiconductor product business, which got offset by power semi.

On the Q3 question, what I'll tell you is, I think if you look at our guide for Q3 and look at what we've laid out from a true operational execution standpoint, what you're seeing is year-over-year a flow-through of 38% on EBITDA conversion, which is getting offset by 2 things really. Number one is stock and variable comp. And within that, there's 2 pieces. If you recall, on the stock-based compensation for retirement-eligible employees, instead of taking the hit all in Q2, we spread it between Q2 and Q3. So part of the impact in that $0.21 that you see on the page is tied to that.

Second piece is the AIP. So if you recall last year, given where the company's performance were, we had to lower the bonus accrual. So this year, what you see in here is the bonus being accrued at 100% on a target. And so that's why year-over-year, you see an impact.

And then the other bucket is nothing more than 2 things. There was a mark-to-market good guy last year that won't repeat this year. And then there's the differential in tax rate that's playing a bit of a role on a year-over-year basis. But again, true operational performance is really strong if you look at it on a year-over-year basis, a 38% conversion on the EBITDA line.

Next question comes from Saree Boroditsky with Jefferies.

I think you talked a lot on the call about kind of the focus on growth opportunities. And I know it's early days, but I was just curious if you had any thoughts on what this could add to the top line? And then are these opportunities accretive to margins? Or do they need higher investments?

Thanks, Saree, I'll just start. I mean I think it's -- we Big picture, we believe that we have significant opportunity to grow and scale the company. So I think we're focusing our strategy. We're focusing around the safe and efficient transfer of energy in all 3 of our markets, we see opportunity there.

So big picture, we believe we have top line growth. We're building our long-term models now that we're going to be rolling out as we go forward. So we'll be able to talk more in future quarters about kind of the details of our growth model. But I think early indicators that I can say, we've mentioned in the call that we have double-digit growth in pipeline. I do believe that we're seeing traction already from a customer engagement perspective on how we're aligning our go-to-market.

So we're building these long-term models as we go, and we'll be talking about that more in future quarters, but we do believe that we will be driving top line growth -- but we also want to drive bottom line growth as well. So that's part of the second half. We do believe we have untapped opportunity from an operational perspective. That's part of our scaling operational excellence.

We saw some early results on that as well. So we believe that we can grow both top line and bottom line. Obviously, the top line will require some investments, but that's kind of the scale, I would say. And I mean, you're Abhi give your views to how you see that as well.

Yes, absolutely. I mean look, first of all, thanks for the question. Pleasure to meet you. I guess I'll tell you, the strategic priorities. What's really exciting about the journey that we are on is a couple of things.

First of all, as we sharpen our focus and go after opportunities that's really going to help us grow our top line, that's the work we're doing right now. And as I mentioned, we're going to repeat that in the fall. But in plastic fashion, if you kind of think about our portfolio and think about our business model, right? When you see organic growth, just the way we saw in Q2, when you start to move the organic needle, what that translates into is bottom line margin expansion and bottom line growth, right? And that's what we're really excited about.

But I think Greg's point in his Page 3 on the slide deck around focusing and capitalizing on future growth opportunities, really providing more broader solutions for our customer and following that with operational execution is what I'm really excited about. And I think that will translate into top line growth, bottom line growth over the longer haul. And to Greg's point, in February of next year, we plan to lay that out as part of our 3-year target in terms of what we believe the organic, the inorganic piece is going to convert into over the next 3 years and what that means from a bottom line standpoint.

I look forward to having those targets. Maybe just sticking on the subject, you talked in the beginning about some higher voltage solutions, data centers. Maybe just any sense of the competitive environment there and maybe your market share today versus what you think it can be?

Yes. Thanks, Saree. Well, I mean, listen, we feel very comfortable with our technology position. And in general, I would say, our position is that as the markets move to these higher voltage, higher current, higher power, we are more differentiated. I've met with some of these customers, even the data center customers myself. And they really value Littelfuse's capability there.

And I think there's a big part of our capability and brand that plays to our strength there because we have experience and people know, okay, they can count on Littelfuse working in that model. Of course, we have competition. We have competition in all the markets and places that we play.

But I would say, in general, we feel good about our technology and capability. And in general, as we move to these higher energy density applications, our products are more differentiated and also the problems that the customers are more challenging. And so therefore, we are a bigger part of the solution. So in general, that's a good trend for us and for ours.

[Operator Instructions]. Your next question comes from David Williams with The Benchmark.

Congrats on the really solid execution here. I guess maybe first is just kind of thinking about the power semi segment, and you've talked about the orders improving there. But when do you think we can see that leverage really return and begin to see some real impact from the power semi side?

Yes. Thanks, David. Just to start, just kind of maybe zoom on and hear and Abhi referred to this a little bit in his remarks earlier. we zoom out and look at our semiconductor business, about 50% of our semiconductor business is our semiconductor protection business. That was actually the example we gave on the call here enterprise computing. And so that business has actually been doing very well, very strong and actually been following our kind of path and electronics business.

The other half of our semiconductor business is our power semiconductor business. The market for the power semiconductor business has been soft, as you know. And so we've had a soft market position. We also will be transparent that we've had some of our own execution challenges in the power semiconductor business. But I would say the good news is that we are starting to see areas of improvement in power semi.

And 2 things. First, I would say that in general, our market position in power semi, when you get the higher energy density solutions, just like we are in our passive business, we are more differentiated and we have more value to our customers. But also from a market perspective, we're starting to see signs of stabilization or is it been improving. And so we do expect positive momentum sequentially in the power semiconductor business. And that's areas where we are going to continue as well to focus on improving our execution and things that we can talk about more in future homes.

Great. And then secondly, just on the visibility and maybe how you see the end demand here. Do you feel like what we're seeing in terms of the improvement across your segments, does this feel like an inflection maybe on the end demand side? Or do you think there's some tariff maybe uncertainty that's pulling things forward? Anything that you see that's maybe outside of just that normal inflection in demand that you think is driving this?

I mean, like, I think what we said on the call, right, we had solid momentum in the quarter, strong backlog and bookings. And we are, I would say, from our perspective, seeing improved stability in our end markets. We're still in a dynamic macro environment. But one thing I think we would say is that if we compare this to maybe 3 to 6 months ago, we have more -- we have better visibility. So we feel better about our kind of medium- to near-term visibility than we did 3 to 6 months ago, given that the environment that we're in.

Yes, David, and I mean, even if I take a step back and kind of think about our Q3 guide, I mean if you look at it on a year-over-year basis, we are talking about a 9% reported 6% organic. So again, if you just look at Q3 performance, back to your question, we are expecting a pretty nice 6% organic for the quarter on a year-over-year basis.

And all 3 segments, as I think about all 3 segments, 2Q to 3Q, I expect Electronics and Industrial to go up sequentially. Now Transportation seasonally is down 2 to 3 due to shutdowns. And then on a year-over-year basis, as I kind of look at our performance, that's a part of this guide across all 3 segments, you should expect growth.

This concludes the question-and-answer session. I'll turn the call to Greg Henderson for closing remarks.