LFUS - NASDAQ

Good day, and welcome, everyone, to the First Quarter 2025 Littelfuse Earnings Call. Please note, this call is being recorded. And it is now my pleasure to turn it over to the Head of Investor Relations, David Kelley. You may begin.

Good morning, and welcome to the Littelfuse first quarter 2025 earnings conference call. With me today are Greg Henderson, President and CEO; and Meenal Sethna, Executive Vice President and CFO. Yesterday, we reported results for our first quarter, and a copy of our earnings release and slide presentation is available in the Investor Relations section 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 yesterday'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 this morning. It's a pleasure to speak with all of you today, my first earnings call as CEO of Littelfuse. For those of you who are new to Littelfuse, I joined our Board two years ago and previously spent 10 years in Analog Devices where I have the responsibility for the automotive and energy, communications and aerospace businesses. Since taking on my current role in February, I've been getting to know our global teams on a deeper level. I've also spent time connecting with and listening to many of our customers, suppliers and partners. I joined Littelfuse excited about our capabilities, and three months into the role, I am deeply energized by the opportunity ahead. With that, I wanted to start by sharing three key observations. One, we are leaders in developing smart solutions that enable safe and efficient electrical energy transfer. Our customers deeply value our capabilities and our market leadership is a significant asset. Because of this, we have built great brand equity across our products, offering broad multi-technology capabilities for our customers. As our end markets are moving to higher power and higher energy density, our customers are facing increasingly complex safety and efficiency challenges. As a result of this trend, our trusted and essential technologies are more frequently part of our customers' architectures. Let me provide you two examples of the role we play in our customer solutions. First, in the rapidly growing grid storage market, we are a key supplier from the rapid container levels to the power conversion systems sent through the grid. With increasing power demand and the simultaneous push to lower operating costs, grid storage systems require increasingly sophisticated and thoughtful circuit protection strategy. We are a leader in high-speed fuses that are essential to enabling higher voltage trading. We're also a key provider of arc-flash and ground-fault protection within the cabinet and power conversion systems that reduce the risk of catastrophic failure. Finally, our sensor and switch technologies are essential to temperature sensing and the safeguarding of short circuits. A second example is our key role in data center advancements, where we are benefiting from our leading position at the passive electronics and protection supplier with high value and power semiconductor and switching capabilities. Our hyperscaler and infrastructure customers are evolving to higher power and current density solutions, and we are helping them develop safer and more efficient systems. We are innovating with our customers for multiple data center applications, including on the rack and power supply as well as at the power distribution level and for data center cooling. Across these applications, we leverage our leading fuse, switching, sensing and power semiconductor capabilities to provide integrated solutions. Importantly, in the quarter, we delivered key data center design wins for circuit protection and power distribution solutions and for megawatt capable power semiconductor devices for use in grid transfer switches. Now, my second key observation is that we have a highly talented and motivated team and a well-positioned and flexible global operating model, both of which are essential to winning more customers. From my conversations, I have found our teams have a passion to win and they are invested in our technologies, our company and our customers. Our teams are often embedded with our customers, partnering on the design of next-generation solutions. We also have strong manufacturing and operating capabilities across our global footprint. We are often located in region with our customers and our supply chain, and we are well positioned to execute through a complex and evolving tariff and economic environment. Our global teams and operating models are competitive advantages, providing us the opportunity to strengthen our long-term position with customers. Finally, my third observation, our strong profitability and cash generation provides a solid foundation for long-term success. We have a history of resilient and strong profitability, which reflects the unique value proposition of our trusted and essential products. We also benefit from the diverse nature of our end market exposure. Importantly, we are a strong cash generator, while our balance sheet provides us significant flexibility. Our financial strength positions us to continue capitalizing on leading organic and inorganic growth opportunities. Going forward with our customers requiring higher power and energy density solutions, we can further leverage our expanding content opportunities to drive long-term profitability enhancements. Now, I wanted to spend a few minutes highlighting our first quarter results and provide some insights into what we are seeing into the second quarter amid an uncertain environment. First, I am proud of our global teams, who worked hard to deliver strong results that exceeded our expectations. In the quarter, we delivered solid sequential growth in our passive electronics and protection business, while our industrial segment continues to drive strong results. In our transportation segment, our teams work hard to deliver solid margin expansion despite soft end market conditions. In the quarter, we observed improved book-to-bill across all our businesses, with total Littelfuse book-to-bill tracking above 1, reflecting our technology capabilities and our customer position. Our teams executed well through the first quarter, and we entered the second quarter with momentum and a strong backlog. Given growing trade and market uncertainty, we are working closely with our customers and partners to monitor potential demand risk in the second half. We have a history of navigating through challenging and fluid backdrops such as the supply chain shortages that emerged following COVID. We have a flexible operating model, and we have invested to align our footprint closer to our customers and their supply chain. We have built a strong tariff playbook that will help us navigate an uncertain environment. Taking a step back, while we’re focused on executing through the current environment, I’m excited about our long-term opportunities. I am also confident that we are positioning ourselves to deliver best-in-class shareholder value. Before turning the call over to Meenal to provide additional color on our financial performance and outlook, I wanted to address our recent CFO transition plan announcement. On behalf of everyone at Littelfuse, we want to thank Meenal for her many contributions over her 10 years of leadership at the company. Meenal has been a key driver of Littelfuse growth and profitability expansion. And thanks to her guidance, we enter our next phase of growth with the financial strength and flexibility to capitalize on our numerous opportunities. I look forward to partnering with Meenal through the transition phase as our search process for our next CFO is underway. With that, I will hand the call over to Meenal.

Thank you, Greg. I appreciate your kind words, and good morning, everyone, and thanks for joining us today. Please turn to Slide 6 to start with details on our first quarter results. Revenue in the quarter was $554 million, up 4% versus last year in total and up 3% organically, exceeding the high end of our guidance range. Sales to Elmos Semiconductor as part of our Dortmund capacity sharing agreement contributed 2% to sales growth, while foreign exchange was a 1% headwind. GAAP operating margins were 12.7%. Adjusted operating margin finished at 14.2% and adjusted EBITDA margins were 20.1%. Adjusted operating margins expanded 320 basis points versus the prior year period, reflecting both strong operational performance and conversion on sales growth. First quarter GAAP diluted earnings was $1.75 and adjusted diluted earnings was $2.19, up 24% versus the prior year period and exceeding the high end of our guidance range. Our first quarter GAAP effective tax rate was 27%, and adjusted effective tax rate was 26%, in line with our expectations. Please turn to Slide 7 for updates on capital allocation. We delivered strong cash generation in the first quarter, and our balance sheet positions us well amid dynamic environment. Operating cash flow was $66 million in the quarter, and we generated $43 million in free cash flow, driving free cash conversion of 98%. We ended the quarter with $619 million of cash on hand and net debt to EBITDA leverage of 1.3 times. Our balance sheet and history of strong cash generation provides significant flexibility, positioning us well to effectively navigate through economic uncertainty. This is the case during COVID and subsequent supply chain disruptions, and we're confident we remain well situated in the current dynamic environment. In the first quarter, we returned $45 million to shareholders, $17 million via our cash dividend and $27 million via share repurchases. We will continue to prioritize our free cash flow for strategic acquisitions, and we'll continue to return capital to our shareholders through our dividend and share buyback. Please turn to Slide 8 for our product segment highlights, starting with the Electronics Products segment. Sales for this segment were up 6% versus last year and up 3% organically. Sales from the Dortmund capacity sharing agreement contributed 4% to growth. Sales across passive products were up 13% organically, while semiconductor products declined 5% in the quarter. Our strong passive product sales growth in the quarter, reflects pockets of end demand recovery and improved orders from channel partners. Within our semiconductor products exposure, we observed continued softness across power semiconductors that more than offset improved demand for our protection products. Operating margins in the quarter were 15.2%, up 220 basis points versus the prior year period, while adjusted EBITDA margin finished at 22.1%. Our teams executed well in the quarter as we delivered strong volume conversion on both our passive and protection products. Moving to our Transportation Products segment on Slide 9. Segment organic sales declined 4% for the quarter. In the passenger car business, sales declined 6% organically. Passenger car sales were negatively impacted by global cargo declines and associated regional mix with particular softness in Europe and North America as well as planned auto sensor pruning actions. We offset these declines in part with growth in China. Commercial vehicle sales for the quarter were down 2% organically and were negatively impacted by continued end market softness. For the segment, operating margins were 11.7% for the quarter, up 220 basis points versus the prior year period, while adjusted EBITDA margins finished at 17.1%. In the quarter, our focus on profitability initiatives again drove solid margin expansion despite soft demand conditions. We are continuing to drive initiatives, including leveraging best practices throughout the company as we continue our margin expansion progress. On Slide 10, Industrial Products segment sales grew 16% organically for the quarter. First quarter sales benefited from strong renewables, data center and HVAC growth as well as favorable pricing. Segment operating margins finished at 15.3% in the quarter, expanding 880 basis points versus prior year levels. Adjusted EBITDA margins were 18.5% in the quarter. We again delivered solid margin performance, driven by execution and strong conversion on volume growth. Please move to Slide 12 for the forecast. During the first quarter, book-to-bill improved across all of our businesses, and we entered the second quarter with a strong backlog. We continue to work closely with our customers and partners to monitor ongoing trade dynamics and potential second half demand shift. We have a strong tariff mitigation playbook that we've been deploying over the past several weeks. We continue to work closely with our customers on various solutions to mitigate tariff impacts by flexing our global footprint, evaluating sourcing and logistics options and implementing pricing actions as necessary. Based on our actions and current policies enacted, we do not expect tariffs to have a material impact to our second quarter earnings. With that in mind, our second quarter guidance incorporates current market conditions, trade policies and foreign exchange rates as of today. We expect second quarter sales in the range of $565 million to $595 million. We're projecting second quarter EPS to be in the range of $2.10 to $2.40, which assumes a tax rate of between 23% and 25%. At current FX and commodity rates, we are expecting a $0.15 benefit to EPS versus the prior year. Our second quarter has historically included higher stock compensation expense due to certain retirement provisions. With some changes in our program, the impact will now be spread evenly across the second and third quarter. In the second quarter, these provisions had an unfavorable $0.10 EPS impact sequentially to Q1 and negative 50 basis point effect on margins. Moving to Slide 13, let me add some additional details on our full year 2025. We continue to expect about a 2% total sales growth stemming from our Dortmund multiyear capacity sharing arrangement. We also continue to expect a neutral impact to EPS. As a reminder, we acquired the Dortmund fab from Elmos Semiconductor in late December. At current rates, we expect foreign exchange and commodities will represent a 1% tailwind to sales and a $0.40 benefit to earnings per share. On other modeling items, we are assuming $58 million in amortization expense and $35 million in interest expense, about two-thirds of which we expect to offset through interest income from our cash investment strategy. We're estimating a full year tax rate of between 23% and 25%. And we also expect to invest $90 million to $95 million in capital expenditures. I want to reinforce that we've navigated complex landscapes over the past several years. We're benefiting from the work we've done over the years to diversify our end markets, broaden our customer mix and align our supply chain closer to our customers. We are well prepared to navigate through uncertain times with our experienced team and a strong balance sheet. In closing, it's been an honor to serve as CFO of Littelfuse over these last 10 years. I would like to thank our talented global teams for their passion and achievements we've driven together. I look forward to working with Greg and the leadership team over the next several months to ensure a smooth transition. And with that, I'll turn it back to Greg.

Thanks, Meenal. Our team is working hard with the goal to further leverage our strengths and sharpen our strategic playbook. We are focused on executing through a dynamic environment, but we're not losing sight of our strategic priorities. Before opening the call up for questions, I wanted to briefly preview our go-forward strategic priorities. One, we will enhance our focus to better capitalize on future growth opportunities. We will develop a more structured approach to evaluating the secular opportunities across our evolving end markets. We will also better leverage our strong global teams and their insights into the meaningful technology evolutions that are in front of us. Strategic acquisitions will remain an important pillar of our growth strategy, and we will further align our growth goals with opportunities that enhance our long-term technology position. Two, we will provide more complete solutions for a broader set of our customers. While we are doing this in areas today, a couple of which I highlighted earlier, we can further leverage our diverse capabilities across more of our customers. To accomplish this, we are taking a more collaborative approach across our businesses. We are viewed as market leaders, but we can further harness our unique product portfolio position to help more of our customers solve complex challenges around safe and efficient power transfer. And three, we see an opportunity to continue driving operational excellence and enhance long-term profitability as we grow. While we have a history of resilient profitability through cycles, we can better leverage areas of best-in-class practices and apply those across our businesses. We will further optimize our operating structure to support our long-term growth priorities and enhance performance. We will look forward to sharing more about our strategic purposes in coming quarters. In closing, I want to again thank our global teams for their hard work and unwavering commitment to Littelfuse and our customers. Operator, we are ready to begin the Q&A.

[Operator Instructions] Your first question comes from the line of Luke Junk with Baird. Your line is now open.

Good morning, and thanks for taking the question. Greg, great to talk to you on your first call here. Hoping we could start with the topic of the day in terms of tariffs and specifically, if we can unpack the assumption that's embedded into guidance for the second quarter, hoping specifically to parse out some of the geographic impacts in terms of the price recovery that you're anticipating and then also maybe some of the more durable ways that you're avoiding or working around tariff impacts altogether relative to the tariff playbook that you mentioned as well? Thank you.

Yeah. Thank you, Luke. Good morning. Maybe I'll start by just saying Littelfuse, over the last years, has been focusing on building a flexible and asset-light operating model. And we've had a strategy of moving our manufacturing and our supply chains closer to our customers, and we continue to do that. So we have been diversifying our footprint and doing more local for local manufacturing. And that's been a trend that we've been on, that we will continue. In addition, I would say we've been working with our customers to mitigate tariffs as much as possible, managing ship to locations, managing where we supply things from them. So this is a trend that we will continue with. We expect to continue this trend of diversification and adding resiliency to our supply chain. And then with that, I'll hand over to Meenal, and she can give a little bit more detailed context on the details of how it's affecting our business and our outlook.

Sure. Thanks, Greg. Hey, Luke. So maybe just to add on to what Greg was talking about, right, we -- our first focus is really working closely with our customers. Greg talked about anything we can do around sourcing and product changes, anything we can do around logistics ships that we're making. And over time, we've also been focused on adjustments in the manufacturing footprint because that all helps. We also have a team across the company, multiple functions, multiple businesses that are meeting regularly, as you can imagine, really to review the latest in taking actions based on tariff announcements, customer requests, things like that. In general, with all the work that we've done, we don't expect tariffs to have a material impact to earnings in the second quarter. We've got all that work that we've done. And then when necessary, we're leveraging pricing, so we don’t anticipate an effect to earnings there. And I think the last thing I'll just leave you with, I know there have been some questions about how do our sales shake out in the US and a little bit -- where are our sales coming from? Referring back to last year's information, about $800 million of our sales are in the United States. There's really two big countries where we're sourcing the product from. 15% of our sales are coming out of China. The biggest impact for us is really across our Electronics segment. We're working through all the mitigation actions that I mentioned first, and then we're leveraging pricing where necessary to offset the tariff cost. Another 60% of our products are sourced from Mexico. That's really part of our regional alignment with our customers. For us, over 90% of the product coming out of Mexico is covered either under USMCA or some other mechanisms, et cetera. And so we really have minimal tariffs coming through, and again, leveraging pricing if necessary there.

Got it. And then -- I appreciate all that detail, maybe looking near term in terms of what happened in the first quarter, Greg or Meenal, question could be for both of you, but just hoping to bridge the operating margin sequentially in electronics. Specifically, if we look on an underlying basis, excluding the Dortmund facility, incrementals, very strong sequentially. Just how should we think about that in terms of maybe there was something in the 4Q comp, any outside strength in the first quarter or cost actions that may be more permanent above and beyond just the benefit of volume leverage? Thank you.

Sure. Thanks, Luke. Yeah, in general, when we look at the sequential versus the fourth quarter for electronics, I want to say there wasn't anything out of the ordinary coming through there. We've always talked about the fact that for the electronics segment that return to growth is really important for us. We get very, very strong operating leverage when we do have a return to growth. And we saw -- as you saw in the prepared remarks, both in our passive electronics business as well as the protection side of our semiconductor business, we saw some nice sequential growth Q4 to Q1. And really that's -- I'd say, that's the biggest driver. In terms of other areas around whether it's manufacturing, supply chain, we've been doing well around managing all of this. The tariff noise that's going on, we have had in general across the company, been looking at cost structures, and we have done some work around taking out costs as well. But I would say the big part is really that seeing that nice sequential growth.

Got it. And then last question from me, maybe a slightly bigger picture, Greg, but maybe on the data center piece and some of the incremental opportunities, especially tied to AI-related awards, maybe if you could just update us on some idea of just materiality in terms of data center exposure across the business? You mentioned in -- I think Meenal mentioned in industrial, but I suspect there's some meaningful exposure within electronics as well. And then in terms of the AI-related engagements right now, just materiality and who you're working with, should we assume you're working with some of the bigger hyperscalers and whatnot? Thank you.

Yeah. I think one of the key focuses I have had, as I mentioned, was over the last months was to get out and visit customers and try to understand kind of how they see us and how we're positioned. And this data center is one that I've learned we have a really strong position with our customers. And I think the trend I talked about -- the big picture trend that I talked about, where architectures are moving to higher voltage and higher current is happening in the data center space. And I think the challenge is when you go to this higher voltage, higher current architectures, the protection becomes a much bigger deal. And it's a much more challenging problem to protect the equipment, to protect people. If you go above 48-volt architectures in the data center, for example, you can have arcs and so now you have fire. And I think one of the interesting things that's happening in data center is that we've been participating in this electrification trend, and we're participating in this trend to go to higher voltage and higher current. The first place we really did was in the automotive market, which all went to 400-volt and 800-volt architectures. Now we're working with the leaders in the data center space that are looking at taking these automotive architectures into the data center. And so that's a significant change and it provides a big content opportunity for us. So that's in the core safety and protection, but we also participate in other parts of the business, you mentioned HVAC, for example. In our Industrial business, HVAC business has been strong and actually a big driver for that has been in data center. So it's an important part of our business. It's growing. We will continue to focus on it more. And as these mega trends go, it's going to even play more towards our strengths.

Got it. I appreciate all the color. I'll leave it there for now. Thank you.

Thanks for your questions, Luke.

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

Thanks. Good morning, everyone. Meenal, it has been great working with you, and we'll talk to you next week at our conference. And, Greg, looking forward to working with you. Just a quick one on the tariff issue. Is pricing -- are you taking a list price approach or a surcharge approach?

It varies, actually. We're doing both depending on the customers, what we typically do, but that the answer is it depends on the customers.

Okay. And then on the power semis, are you seeing any rays of light? Or is it pretty static? Or is it actually weakening a bit more and masked by protection recovery?

Yeah. Thanks, Chris. Maybe I'll just take a kind of an answer on the power semiconductor business. And one of the things that, again, I was very focused on as I've come here is trying to better understand the value proposition in our semiconductor business, what our position is, our value proposition and where we play. And so I've been out meeting with our customers. And I think one of the things that I have learned and I think is really important when we talk about this Littelfuse capability on safe and efficient energy transfer, our semiconductor business fits right there. And actually, for semiconductors, especially as you go to higher voltage, higher current, Littelfuse is more differentiated. So for very important applications, which are doing high energy transfer, we have a good position in. And for example, in our medical business, we are the market leader in the power stages that transfer energy in the defibrillator. And so this is transferring the energy from the storage to your part, basically, and whether that could be the defibrillator that's in your college gym or the defibrillator that's in the operating room, we're more the market leader in that. And that -- our customers value us there because this is a very high energy density application that needs to be done in a very safe and precisely. So I would say our power semiconductor business has an important place in the market, and the trends moving to higher voltage and higher current are important. That said, I think we look at our market position, and I think there's areas of opportunity for us, both on strategy and execution, and we're focused on that from our overall strategy process. So we will be talking more over the coming months about how we see the semiconductor and where we're going to drive growth and opportunity in that business.

Okay. And in terms of -- thank you for that. In terms of the macro backdrop you're seeing right now, would you describe it as static or...

Are you asking the macro backdrop specific to semiconductors?

Yeah, the power semiconductors.

Yeah. Look, I think that our power semiconductor business is like our other businesses, and actually there are pockets that we're doing well. So for example, we talked about -- in the script, we talked about doing these power transfer switches for data centers. So there's pockets that are doing well, like data center. There're some other pockets like industrial automation that have been a little softer. So I would say that's the -- outside of the current macro, larger question about the overall macro outlook, that's what we've been seeing in some of that.

Okay. Great. And then on the capital allocation, curious how your acquisition pipeline is looking now? And in the current environment, does that give you personally any pause on making capital allocation decisions for deals?

Yeah, I think first, just starting, right, we have a very strong balance sheet which gives us a lot of flexibility. So that's really a good thing and that's the strength that we have in the company. So we have a strong balance sheet. We continue to evaluate opportunities all the time. But as I mentioned in the script, I think one of the key focuses we have is to work on our strategy, and so we're trying to sharpen our strategic focus on why Littelfuse, where we play and there have a very market-driven strategy working with our customers, understanding the market, understanding where the mega trends are going and where we want to go. So our focus right now is on building that strategy. And then as we develop that strategy and really focus on where we want to go, where we want to invest and how we want to drive growth, that will have both organic and inorganic elements. So we anticipate that M&A is going to be -- continue to be an important part of the strategy, and you will hear more about that as we roll the strategy over the coming months.

That's great color. Thank you. And last one for me. Meenal, I just wanted to ask about transportation margins, sustainability here in the low doubles. It's been a little bit lumpy. Fourth quarter was a little lighter and then boom, we're back up in the first quarter. And I think a good chunk of the $0.40 FX and commodities tailwind for this year does reside in transportation, so that may come to bear around your answer.

Yeah. So I'm just stepping back, right? We're really pleased with the progressive improvements we've made despite some of the challenges from a growth perspective with some of the markets. We've made really good strides in profitability, a lot of work done there. We talked about over the past several calls, the biggest focus areas have been pricing, focused a lot on pricing, a lot of footprint or rooftop reduction that we were focused on, especially in the CV part of the business, and even just some of the benefits that we're seeing from the pruning and other cost reduction activity that we've had. I think going forward, that remains the focus for us for 2025 is the continued margin expansion. I think some of that, one, we think as we look further out sales growth opportunities and what we can do to better leverage our combined on the CV side, our legacy portfolio and the Carling portfolio across customers the additional content growth on EV, I'd say that's one. Just a number of the operational -- I'll call it operational excellence opportunities, we've done some work there, but one of the things that we're focused on even more now is we see best practices across the company. How do we leverage those best practices that we see, say, in a couple of factories in Asia and think about them in North America or something in Europe that we do there. So we're spending more time on that. We think there's another round of improvements that are coming through there as well. So those are some of the biggest areas we're looking at. Yes, there are some benefits from FX, but I would say the counter to that right now is also commodity prices are spiking up a bit. So it's a balance that we continue to monitor there.

Great. Thank you.

Your next question comes from the line of David Williams with Benchmark. Your line is now open.

Hey, good morning. Thanks for taking my questions and, Greg, great to hear from you here on your first call. And certainly, Meenal, we will miss hearing from you each quarter, but thanks for the time.

Thank you.

I guess, Greg, maybe first from your business that you had over the last month or so. Just curious if you have any color on what you're hearing from your customers in terms of their thoughts on the tariffs and their demand outlook and maybe how they're positioned and just how they're seeing the environment maybe?

Yeah. Thank you, David. Yeah, I think, obviously, it's a very dynamic time, right? So -- and we're -- one of our key focuses is try to have as much conversations with our customers as we can. Just a little bit of context to kind of our business and our customers, just a little bit of context. We had a very strong book-to-bill in the first quarter. So, we have -- across all of our businesses, we had positive book-to-bill in the first quarter and we ended the second quarter with very strong backlog. That said, talking to our customers, there's a lot of, I would call it, anxiety, especially as it relates to the second half demand risk. And some submarkets like automotive and personal electronics probably maybe have a little more anxiety than others. So that said, I think we're confident in our 2Q guide. We continue to talk to our customers. And Meenal mentioned, there's a lot of things we can do to mitigate the impacts and we're focused on those. The bigger question goes to kind of second half macro issues that we're all facing together. And our focus is just managing, stay close to our customers, understand what they need and focus and we control, which is our execution and being flexible and resilient in the time.

Great color there. Thank you. And then maybe just on the complete solutions side that you mentioned in the script there, we know that's a big value add. But as you kind of think about the opportunity there, is this something you think you can really deploy across the business? Or are there specific areas maybe that you're looking towards maybe first on this complete solution? And then what do you think that benefit could be once you get that strategy really in place?

Yeah, thanks. I think, again, based on my observations and meeting with our teams and our customers, I mean, I've been really energized that one of the things I wanted to understand was that -- as I came in off the board was really understand how our customers see us and the value proposition we provide. And the exciting thing for me is that I learned that we -- our customers see us as more critical to their solution than I expected, and that we're really a partner in the next-generation architecture, and that's really powerful. And I gave a couple of examples of that in the script in terms of the grid storage and the data center. So we have areas where we're really doing that well. We're very partnered with our customers. And actually, in those cases where we're doing it best, we're able to also bring a breadth of technologies from across our company to those customers. But I would say I see that there's opportunity to scale that. So I gave two examples in the data center and the grid storage, but I think we have opportunity to scale that broader, and do a better job of bringing our breadth of our capability more deeply and closer to our customers. And as we mentioned, I think our business units are going to work to operate a little bit more collaboratively across to make sure we do that. So that's something that we're focused on strategically. We see the opportunity, my leadership and my team and I see that opportunity. And so this is something that we will be talking about more over the coming months as we roll out our strategy.

Just one quick last one, if I may. On the passives, are you seeing that any constraints there or lead times expanding? Just curious how the passives business is positioned in terms of inventory and the demand trends there?

Yeah. So, maybe I'll start and then Meenal can kind of give a little bit more color. Like I said, we had a very strong 1Q, we had very strong book-to-bill. We entered across all the segments, including the electronic segments and the passive business. We entered 2Q with a strong backlog. So I think from that perspective, we feel good about that. Meenal, you have some other color there?

And I'll add on as we look ahead to Q2, we put up a really good second quarter guide. We feel very, very confident in achieving that. And a good part of that will be the continuation on electronics return to growth.

Thank you.

Thanks for your question, David.

[Operator Instructions] The next question comes from the line of David Silver with CL King. Your line is now open.

Yeah, hi, thank you. Greg, I noted in your comments early on, you did mention you were speaking to customers. And then at the end of your comments, you talked about collaboration. And this question kind of touches on that. But this is more of a, I guess, a longer-term question, but your business wins come from like maybe a multiyear or longer-term collaboration with key customers. And I'm just wondering, in the current environment, beyond the immediate tactical issues with tariffs, but there is, in my opinion, an extra layer of uncertainty now. And I'm just wondering, with your longer-term projects that -- where you're collaborating most intensely with key customers, has there been any change in your customers' attitudes? In other words, are they pausing certain programs? Are they rethinking them at all in the current tariff and maybe trade policy environment? Might they be mirroring, I think, what you said, which is expanding their footprint and kind of developing resilience and who they source or their supply chains? So from a collaborative R&D and product development perspective, has there been any change that you're hearing about from your customers?

Yeah. Thanks, David. Yeah, I think when we talk to our customers about the kind of like, I call it, current environment and tariffs and the kind of macro uncertainty, I think their focus is a lot with us on kind of what I would call short-term management of that, how do we navigate the tariff environment? And so that's a lot more short-term. If we talk about the longer-term strategic investments and R&D priorities, we really haven't seen significant changes to that, and we're not seeing significant changes to that. And I think the mega trends that we talk about as growth drivers on electrification and on the markets transitioning to higher voltage, higher power, higher current are continuing and we're continuing to focus on that architecting with our customers. I think it helps as well that we're a global company with a global footprint, so we can do those developments and support those customers globally. That really helps. And I guess, finally, and this kind of thing, what I've seen in the past as well is that in these difficult times, how you execute the difficult times is often based on your strategy, your investment. So right now, we see our customers continuing to focus on their strategic goals for their long-term growth drivers. And so we haven't really seen any significant changes in that.

Okay. Thank you. And then I do have a question about your repurchase activity -- share repurchase activity this quarter. So at $27 million, Meenal, I think that is the largest one quarter buyback spend in several years. And I'm just wondering how you might characterize that? In other words, I know it's always an option, but would you say the first quarter level of activity is a reflection of, I don't know, offsetting share dilution or something like that -- sorry, offsetting the dilutive impact of share issuance? Or is it more opportunistic from the perspective of the level of your share price? So just characterizing the first quarter share buyback activity, and what we might take away from that given your meaningful cash balance? Thank you.

Sure. Thanks, David. Why don't I -- I'll take a step back and just talk a little bit more about capital allocation. Greg answered the question on -- a lot of questions on are we continuing on M&A. And what you heard Greg talk about, first of all, was our priority is growth, right? We are continuing to invest for organic growth. We're going to continue looking at M&A. We're going to sharpen that -- our funnel on M&A as we work through the strategy over the next few months. And that's pretty consistent with how we've talked about capital allocation for four years now. We look at return of capital to shareholders through our dividend. It's the next priority that we go through. We expect to continue that. We've got our dividend update coming up in the second quarter. So you'll hear more from us on that. And then lastly is your question around share buyback, that's always been for us, periodic. It's always been, I call it, the third part of our capital allocation strategy. I would say, in addition to the first quarter, we did also buy back some shares in the fourth quarter. And our -- in general, our philosophy has always been periodic. It varies on are there other things that we're doing with our cash? What does the market look like right now? Have we bought back largely for dilution, and we did buy back a pretty good chunk in the past six months. So that's something we're continuing to evaluate. No change at this time to the capital allocation strategy.

Okay. Thank you very much.

Thanks for your question, David.

There is a follow-up question from the line of Christopher Glynn with Oppenheimer. Your line is now open.

Hey, thanks for having me back. Just wanted to follow up on the topic of book-to-bill. You emphasized a couple of times very strong positive for all three segments. Curious if April showed continuity there and -- or any falloff, and if it didn't show a falloff, why do you think that is in light of the obvious kind of gating items that might face your customer base, at least in some areas?

So, Chris, maybe I'll just take a step back, I know we've had a lot of comments on book-to-bill Q1 going into Q2, and then we also added in some comments about we're keeping an eye out on the second half. We feel good about our momentum from the first quarter, good book-to-bill, really good momentum going into the second quarter. And I think I said this already, but strong confidence in our ability to deliver on our second quarter. We've even put in a little moderation in there just for some of the unknowns that are out there, which is another reason we feel really good. When we look ahead, Greg even mentioned that we're working closely with our customers. There's a little bit of noise going on everywhere. You read all the same headlines that we're reading. And so we're keeping an eye out on things, both ourselves, but then talking to customers every day. And areas like automotive, a little bit of unknown. They're out there on a daily basis on the personal electronics side, et cetera. So our focus is going to be we're going to continue monitoring. We're going to work closely with our customers. We're going to focus on what we can control. You asked me earlier about our margin expansion and how things are going in transportation. We're focused on margin expansion across all of our segments. And those are the things that we can focus on, we can control. We can adjust costs as necessary, we'll pivot as necessary on that.

Thanks, Meenal.

Thanks for the follow-up, Chris.

Thank you. At this time, there are no further questions. Mr. Kelly, I turn the call back over to you.

Thanks, everyone. That does conclude our Q&A session today. For reference, we will be attending the Oppenheimer Industrial Growth Conference on May 5, as well as Baird's Global Consumer Technology and Services Conference on June 3. We look forward to seeing many of you at those events. Have a great day, everyone.