Earnings Call Transcript - LFUS Q2 2021

Operator, Operator

Good day and thank you for standing by. Welcome to the Littelfuse Second Quarter 2021 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. Please be advised that today’s conference is being recorded. I would now like to hand the conference over to your speaker today, Trisha Tuntland, Head of Investor Relations. Please go ahead.

Trisha Tuntland, Head of Investor Relations

Good morning. And welcome to the Littelfuse second quarter 2021 earnings conference call. With me today are Dave Heinzmann, President and CEO; and Meenal Sethna, Executive Vice President and CFO. This morning we reported results for our second quarter and a copy of our earnings release and slide presentation is available in the Investor Relations section of our website. A webcast of today's conference call will also be available on our website. Please advance to slide two for our disclaimers. Our discussion 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 Dave.

Dave Heinzmann, President and CEO

Thank you, Trisha. Good morning and thanks for joining us today. Let's start with slide four. I am pleased to share that we continue to demonstrate strong execution within a highly dynamic environment. Building on our strength over the past several quarters, we are focused on supporting our customers while navigating a complex global supply chain environment and continuing our efforts to mitigate the impact of higher input costs on our business. Through exceptional teamwork and strong business fundamentals, we achieved second quarter sales of $523 million, representing record revenues for us. Despite facing significant input cost headwinds, we delivered adjusted operating margins of 19.5% and record adjusted EPS of $3.41. Meenal will provide additional color on our strong financial performance. During the quarter, we saw ongoing strong demand across most of our electronics, transportation, and industrial end markets. The slope of the global demand recovery has caused unprecedented conditions across the supply chains of both Littelfuse and our customers. While we do not see our distribution partners building inventory, we are seeing evidence of some OEMs attempting to build inventory where possible, while extended shipping times added to inventory levels. As we work to manage our business, we are adding capacity, driving productivity improvements, working through material and component shortages, and managing logistics constraints. I'm extremely proud of our global teams and their daily focus on execution to meet stakeholder commitments while continuing to deliver on the strategic initiatives within our five-year strategy. Moving on to performance within our segments. During the second quarter, our Electronics Product segment experienced strong demand in all regions. Our revenue growth was driven by our operational execution and strength across a broad range of applications, including data center and communications infrastructure, factory, building and home automation, and continued demand for consumer electronics. As we manage through supply chain disruptions, our lead times have increased for most of our products. As a result, exiting the second quarter, our electronics book-to-bill remained well above 1.0 and weeks of inventory for our products at our channel partners continue to be lean. Moving on to our Automotive Product segment. We are operating with a noisy landscape, plagued by ongoing material and component shortages at our customers. Our performance during the second quarter reflects the hard work of our global teams to meet demand and we had content gains higher than our expected long-term forecast rate, driven by growth of electric vehicles and a favorable mix of higher-end vehicles. Additionally, the well-known supply chain dynamic of unfinished cars may be clouding global vehicle build and our short-term content growth. While our order patterns remain healthy, we see some risk of future demand due to ongoing supply shortages at both passenger car and commercial vehicle OEMs, resulting in additional shutdowns. Longer-term, we expect the growth of our automotive segment to continue outpacing global vehicle build with our expanding content opportunities. Turning to our Industrial Products segment, a number of our core markets showed strength during the second quarter including HVAC, renewables, energy storage, and general industrials. While mining is showing initial signs of recovery, non-residential construction and North America oil and gas markets remain sluggish. Going forward, we expect continued solid demand across several of our industrial end markets. Now let's move on to key design wins in the end markets we serve. In industrial end markets on slide 5, our integration of Hartland Controls is going very well. We are capitalizing on strong HVAC demand and we're seeing our combined businesses unlock other opportunities across industrial applications. We are seeing ongoing design activity across the HVAC market and won new business in North America for refrigerated storage applications. Our focus on industrial automation continues to be the key driver for design wins. During the second quarter in North America, we had a design win for a manufacturer of factory automation equipment and a win for a warehouse conveyor system. In Japan, we had a design win for an industrial motor drive application. Renewable energy and energy storage systems continue to drive new business. We had key design wins for solar applications in the US and an energy storage system in China. Within our transportation end markets on slide 6, design activity continues at a robust pace as our technical expertise and close customer relationships help drive dozens of key design wins in the second quarter. In our traditional passenger vehicle business, we won new business for a line of utility vans with our high-current fuse modules as we continue to expand our presence in this product application with global customers. The growth in electric vehicles and the ongoing electronification of transportation continues to be a driver of new business as we make investments across our overall e-mobility strategies. We secured key design wins for battery management system applications with a manufacturer in North America and had a position sensor win with a manufacturer's new electrically powered heavy-duty truck line. We secured a win for a power conversion application with a European EV manufacturer. And in Korea, we secured a design win for high-voltage protection. In China, we had a design win for an EV charging infrastructure application. We continue to generate new business for automotive electronics during the quarter gaining new design wins across the Americas and Asia, ranging from powertrain systems to navigation. Material handling remains a good pipeline of design win opportunities for our commercial vehicle business. We had two key design wins in the quarter in Europe where we leveraged our technical support and showcased our strong execution capability to deliver a complex product solution to meet the customer's tight delivery window. We also had wins for conventional heavy-duty truck applications in both China and North America. Across electronics end markets on slide 7, we are leveraging our leadership and differentiated global access and reach. Our design win activity remains strong and we continue to secure a broad range of new business opportunities. With new cloud and video streaming services continuing to come on board, a good source of design activity remains the data center applications, where we secured key wins in the quarter in the US, Taiwan, and Southeast Asia. We also secured design wins in China for battery protection and charging applications for notebook computers. And we had a win in Japan for an electric bicycle application. Our new business opportunity pipeline includes a broad range of high-growth industrial, transportation, and electronics applications that will support and sustain our long-term growth strategy. And I'm confident in our forward focus and capabilities to secure these prospects. I will now turn the call over to Meenal to provide additional color on our financial performance and outlook.

Meenal Sethna, Executive Vice President and CFO

Thanks, Dave. Good morning everyone, and thanks for joining us today. Given the strength of all comps versus a weak second quarter of 2020, my comments today will focus on sequential performance. So let's start with slide 9. Sales in the quarter were $523 million, growing 13% sequentially and up 11%, excluding the Hartland acquisition. GAAP operating margins were 18.4%, while adjusted operating margins were 19.5%, up 240 basis points sequentially. Operating leverage was a highlight this quarter, with 38% incremental margins over the first quarter, as adjusted operating income grew 28%. Second quarter GAAP diluted earnings per share was $3.30, and adjusted diluted EPS was $3.41, up 28% sequentially. While underlying demand trends remain strong and are driving a robust topline trajectory, the operating environment remains challenging. Our teams continue to navigate supply chain-related complications and disruptions every day. We continue to see increases in input costs, especially commodities, other materials, and freight rates. While I noted last quarter that these headwinds were pressuring margins by 250 to 300 basis points, we're now seeing an impact closer to 350 to 400 basis points. We initiated pricing actions late last year to help mitigate these costs. The speed and rate at which we can offset costs is dependent on our go-to-market strategy for each business. Price realization has been quicker in areas where we are heavily in distribution like our electronics segment. In our automotive segment, we sell mainly directly to customers, and given the nature of how contracts are structured, pricing actions take longer. Our industrial segment drives a blend of both strategies. Given this mix, we expect price to offset about half of our current cost headwinds. We generated $76 million in operating cash flow and $58 million in free cash flow in the quarter. Year-to-date, we've generated $94 million in free cash flow. We've invested about $70 million in working capital from sales growth year-to-date, including giving our business teams latitude to hold some extra inventory of critical materials and parts to support customers. We expect a free cash flow conversion of around 100% of net income for the year, which assumes $80 million in capital expenditures. We also announced a 10% increase in our quarterly dividend rate to $0.53. This aligns with our multi-year capital allocation objective of 20% of free cash flow returned to our shareholders via dividends. Since its inception over a decade ago, we've grown our dividend 12% on a compounded annual basis. Moving on to our segments on slide 10. All grew sales sequentially and finished the quarter with double-digit operating margins. Our teams have done a commendable job driving productivity improvements, which have continued to elevate our capacity. Starting with electronics, sales were $325 million, growing 14% sequentially, with operating margins of 22.8% in the quarter, up 340 basis points. This business served over 100,000 end customers and margins benefited from volume and content growth across a broad range of favorable electronics, transportation, and industrial end markets. Automotive sales were $133 million in the quarter, up 4%, with operating margins finishing at 14.4%, down 140 basis points sequentially. Beyond the well-telegraphed demand across both passenger and commercial vehicle markets, we benefited from higher passenger vehicle content growth from mix. Operating margins in this segment are most exposed to commodity price increases due to product composition and content with lower price realization offsets due to customer structure. Our teams have done a terrific job managing through volatile demand and supply chain patterns to drive operating margins in our targeted range. Sales for the industrial segment of $65 million grew 33% sequentially, with operating margins of 12.9%, up 570 basis points. Key highlights included improved benefits from manufacturing footprint optimization and strong performance from the Hartland acquisition. We remain on a solid path towards our target of high-teens margins for the segment. Turning to our third quarter outlook on slide 11, demand remains healthy. At the same time, the markets are pretty fluid. We factored in currently known supplier and customer supply chain impacts and assumed no new material disruptions from COVID. We expect third quarter sales in the range of $510 million to $524 million, down 1% sequentially at the midpoint. We expect electronics and industrial segment sales sequentially flat to slightly up with a modest sequential decline in auto. Demand across all of our end markets remains very healthy, and we're continuing to meet customer requirements. But across the automotive landscape, we've seen a number of OEMs noting shortages of critical components from other suppliers, which we expect to curtail their third quarter production levels. We project third quarter adjusted EPS to be in the range of $3.07 to $3.23, down 8% sequentially at the midpoint. This assumes an adjusted effective tax rate of 16% for the quarter. The forecast includes $0.15 of unfavorable sequential comps on non-operating items including tax rate and nonrecurring investment gains, as well as the effect of increasing input cost headwinds. Factoring in what we know today, we expect fourth quarter sales to be seasonally down from the third quarter but better than typical seasonality. We're projecting full year adjusted operating margins in our targeted range of 17% to 19%. And we have updated our adjusted effective tax rate projection to 16% to 17% for the full year 2021. Our teams are executing on the drivers we can control and our full year outlook reflects the strength of our portfolio. And with that, I'll turn it back to Dave for some final comments.

Dave Heinzmann, President and CEO

Thanks, Meenal. In summary on slide 12, halfway through the year, we have delivered strong performance within an ongoing dynamic market environment. We expect a strong second half supported by our order backlog and bookings. We continue to closely monitor supply chain bottlenecks and COVID-related challenges, including across our suppliers and customers. While these factors could introduce instability to the remainder of the year, we've proven our sound business fundamentals enable us to effectively grow during these challenging times. We have a strong track record, and I am confident our company is well-positioned for continued profitable growth as we deliver on our long-term strategy. I will now turn the call back to the operator for Q&A.

Operator, Operator

Thank you. And our first question comes from the line of Luke Junk with Baird. Your line is open. Please go ahead.

Luke Junk, Analyst

Thanks and good morning, Dave and Meenal. First question I want to ask about the overall tightness we're seeing around the electronic supply chain right now, especially some of the capacity that you're able to bring to bear on that front. And what I'm wondering is, is there an opportunity to take pricing more strategically in your electronics business right now? And in general, maybe if we could talk about what the interplay looks like right now with your distribution customers especially?

Dave Heinzmann, President and CEO

Sure, Luke. The current environment is quite dynamic, with numerous supply constraints throughout the electronics sector. Historically, we've aimed to maintain sufficient capacity to respond to spikes in demand. Our goal is to consistently outperform our competitors during these opportune moments, which allows us to enhance our revenue. While we may benefit from constraints temporarily, we often manage to gain and retain market share by providing superior service compared to competitors. This creates a balance between our pricing strategies and opportunities for growth. On the electronics front, our input costs have risen significantly, and we are working to pass these increases onto our customers, with reasonable success. This dynamic illustrates the ongoing relationship between long-term opportunities and immediate pricing requirements.

Luke Junk, Analyst

Okay. Thanks. And then switching gears to the auto side. Wondering how you see the auto content store is setting up for the second half of the year in terms of enjoying higher content on say more expensive vehicles. Curious, if you see sustained power in terms of what OEMs can produce or ultimately want to produce of course? And how that might ramp as chip production eventually comes back online for Littelfuse?

Dave Heinzmann, President and CEO

Yes, it's a great question, and one we ask ourselves and our customers quite often and where we're at on that. Clearly, the current mix of customers that we're serving and the vehicles they're producing first and foremost we're putting number one priority on electrification, which we think will be an ongoing trend. So we don't see that shift, and we see that continuing to be a positive influence for us in the second half and beyond. With regard to traditional vehicles and their focus on like in North America trucks and SUVs, higher-end vehicles in Europe and even in Asia, yes certainly, that's been a positive influence on our outgrowth of the market for sure. We see that probably continuing through most of the back half of the year. However, at some point in time the mix will shift back in North America. There have not been a lot of fleet cars that have been selling. They're certainly not US manufactured fleet cars and sedans that tend to have a little lower content. So at some point there will be a balance that kind of comes back in order there. But we don't see that today happening in the back half of the year.

Luke Junk, Analyst

Great. thanks for the color. I’ll leave it there.

Trisha Tuntland, Head of Investor Relations

Great. Thanks, Luke. Appreciate your questions. We’ll take our next caller, please.

Operator, Operator

Our next question comes from the line of Matt Sheerin with Stifel. Your line is open. Please go ahead.

Matt Sheerin, Analyst

Hi, good morning, everyone. Dave, regarding your comments about channel inventory still being low but some signs of OEM inventory growth, can you share your thoughts on what the inventory levels look like for your major customers? Additionally, do you have any insights on whether distribution customers are starting to build up their inventory, and is that a concern we should anticipate in the next two to three quarters?

Dave Heinzmann, President and CEO

Thanks, Matt. We have a strong understanding of our distribution partners and their product sell-through. While they want to increase their inventory levels of our products, they haven't been able to do so because their sales have been very strong. As mentioned earlier, inventory levels at our distribution partners remain low and haven't improved. Therefore, we don't consider this a concern. We do observe that some OEMs are trying to build their inventory, with varying degrees of success. Our visibility in that area is limited. However, when we look at public companies we supply, we notice that their raw material and work-in-progress inventory levels are increasing. This suggests that there is some inventory buildup among those OEMs. Additionally, due to the long supply chains and shipping durations for components globally, there is likely some excess inventory in transit. Nevertheless, we are not currently seeing this issue with our distribution partners.

Matt Sheerin, Analyst

Okay. Thank you. And then on automotive you talked about the pricing dynamics obviously being different than electronics with the distribution channel. At what point do you start to see those prices go up? Is that sort of annual contracts which would be the beginning of next year? Or are there any riders and contracts that enable you to increase prices near-term?

Dave Heinzmann, President and CEO

Yes. So in the automotive OEM space, we do have a small amount of our contracts that have riders for some metals, but it's a relatively small amount of the business. The bulk of our business in the auto side, we tend to have long-term multiyear contracts that inherently we negotiate even what price downs will be two years from now, etc. So those multiyear contracts, we're not able to successfully pass through a price increase today in those. However, we're continually renegotiating long-term contracts with different customers. And what we find is certainly when we're negotiating contracts today we get much more favorable conditions. So the reality is it will impact us over time even over the next couple of years, where there will be some favorability that comes from that. We do have some cases where we're not – don't have long-term contracts. And in those cases we have already passed through pricing increases where we can and even sometimes surcharges on freight and things like that. So it's a mix but it just takes a lot longer with these long-term contracts on the auto side.

Matt Sheerin, Analyst

Got it. Okay. Thank you.

Trisha Tuntland, Head of Investor Relations

Thanks, Matt. Appreciate your questions. We’ll take our next caller, please.

Operator, Operator

And our next question comes from the line of David Kelley with Jefferies. Your line is open. Please go ahead.

Meenal Sethna, Executive Vice President and CFO

Good morning, David.

Dave Heinzmann, President and CEO

Hi.

David Kelley, Analyst

Hi. Good morning, Dave, Meenal and Trisha. Maybe a couple of questions from my end. I wanted to start with the auto outgrowth discussion. And I think you referenced maybe tracking a bit higher given some of the choppiness of the OEM builds. And just based on what we're hearing through earnings to date, clearly strong component demand, some inventory replenishment in the channel. So my first question is do you – A, are you seeing that trend? B, do you see that continuing into the second half of the year, given what still feels like very lean dealer inventory levels and still early auto industry recovery?

Dave Heinzmann, President and CEO

Yes. It's a good question, David. The automotive outgrowth, it is a difficult picture to really get a crisp view on as a component supplier. And the challenges of that can be everything from lack of visibility to Tier 1 inventory levels, OEM inventory levels of modules and subassemblies that our products are in. And even today, now partially finished vehicles that are sitting out there in storage that are not showing up as car builds, but obviously have our content in it because we've been able to supply. All those things add to the complexity of having a perfect picture of what's going on any kind of inventory builds and things. We know that our current outgrowth is well beyond our long-term expectation on the business, again driven by very strong EV demands as well as this positive mix of very highly-optioned vehicles that have higher content from us. As I stated earlier, we don't see that mix shifting dramatically in the next couple of quarters. At some point it will, as there's a balance on the types of vehicles that are being produced and sold. But it's not a near-term sort of issue on it. And clearly, there is some evidence of over time where inventories have gone up with our automotive customers. We get more anecdotal sort of evidence for that. So for instance we have some – like sensor assemblies that we sell directly to the auto assembly factories. In that case we do returnable containers. Well when you run out of returnable containers, there's an excess level of inventory at that OEM of those modules. We have visibility to certain Tier 1s at certain locations, where we know inventory levels are elevated because as we work to make sure we're supplying everybody, we sometimes need to have those tough discussions to make sure we're not shipping to somebody who already has plenty of inventory when somebody else has a need. So there certainly is evidence of that but it's very difficult to kind of come down and come up with a specific number.

David Kelley, Analyst

Okay. That's very helpful, Dave, and it makes sense. Looking at the automotive guidance, Meenal noted that revenues are expected to decline sequentially. There seems to be a view that light vehicle production will increase from the second quarter to the third quarter. In light of your guidance, does it reflect uncertainty in the channel? Or is your caution more about underlying light vehicle production assumptions due to ongoing shortages?

Dave Heinzmann, President and CEO

It's likely influenced more by our perspective on light vehicle production in the third quarter. We observe that projections from LMC and IHS are being regularly lowered. Therefore, we anticipate that passenger vehicle production in the third quarter will be fairly flat compared to the second quarter, with more downside risk than upside. Additionally, when considering our automotive segment, there is significant end market demand for commercial vehicles. However, due to a heavier shutdown in the third quarter related to supply issues with components that are not ours, our specific mix of customers is affected more than in the second quarter. This has led us to adopt a more cautious outlook from an automotive perspective.

David Kelley, Analyst

Okay, I understand. That's helpful. Thank you for mentioning the commercial vehicle exposure. I have just one last quick question. Did you provide the contribution of the commercial vehicle growth for the quarter? I'm just curious about its significance.

Dave Heinzmann, President and CEO

Yes. No, we didn't specifically call that out in the prepared remarks on that. Obviously, commercial vehicle demand is quite strong and our commercial vehicle business is up very nicely during the quarter, but we didn't call out specifically in the prepared remarks. So quite strong year-over-year comparisons and even sequentially up, but we do see some challenges from second quarter to third quarter there because we did have some specific large customers that we see them having higher shutdowns because of shortages.

Meenal Sethna, Executive Vice President and CFO

And I would just add David in the second quarter our passenger vehicle growth for both parts of the business and commercial vehicle growth was pretty consistent in the overall segment not much difference between the two.

David Kelley, Analyst

Okay. Great. Thanks, Dave and thanks Meenal. I appreciate it. I’ll pass it along.

Meenal Sethna, Executive Vice President and CFO

Thanks for your questions David. And we’ll take our next question please.

Operator, Operator

Our next question comes from the line of Nik Todorov with Longbow Research. Your line is open. Please go ahead.

Meenal Sethna, Executive Vice President and CFO

Good morning, Nik.

Nik Todorov, Analyst

Yes. Thanks. Hi. Good morning everyone and congrats on great results in the quarter, really impressive. I just want to ask on the margins. Clearly much better than expected fall-through in the June quarter, but we're kind of seeing you kind of given away that in the September quarter with a similar fall-through on the downside. Just trying to understand the dynamic between the segment margins. It looks like in electronics you guys have a good ability to pass through those price increases the fleet inflation increases. But if we start thinking about what margins could be down sequentially, should we start thinking about in automotive and industrial particularly? And I'm just trying to understand because you had such a strong June quarter margins and now you're starting to give away. Essentially are you saying that you're seeing more acceleration in inflation costs and input cost headwinds?

Meenal Sethna, Executive Vice President and CFO

Yes, there are two parts to that question, Nik. First, regarding pricing, we see that in distribution-heavy sectors like electronics, pricing realization is happening more quickly and helping to counter some of our cost challenges. Dave mentioned that in the automotive sector, the process takes longer due to the long-term customer contracts in place. As for input costs, I previously noted a 250 to 300 basis point headwind about 90 days ago, which has now increased by an additional 50 to 100 basis points across all segments. So, we are managing those costs, and pricing adjustments are coming more swiftly in electronics, which might contribute to some short-term margin shifts.

Nik Todorov, Analyst

Okay, understood. You are clearly outperforming your peers in the automotive sector. If I take the midpoint of your guidance, I assume electronics and industrial will remain flat, while automotive will decline. For the full year, your automotive sales could increase by nearly 30%. Can you break that down in relation to market growth? How much of that increase is due to content growth and perhaps other factors?

Dave Heinzmann, President and CEO

Yes. Obviously, your math is not wildly off on where things are at from what we currently see of car builds and things like that. So, it's quite robust growth in the auto side. I think there are probably a couple of things that allow us to maybe perform and grow a little stronger than others. One is our ability to supply. I think we were probably in a better position than most to be able to flex up our manufacturing. Again, strategically, we tend to make sure we can do that best we possibly can. It doesn't mean there aren’t shortages. Yes, we’re dealing with we are. But I think our ability to respond demand to the demand has been pretty strong. So, I think that is helpful. And then I think the other thing for us is perhaps this vehicle mix shift to the highly optioned higher-end vehicles might have a higher impact on us than it does maybe some other suppliers that you're looking at. So, I think that's a shift that pulls it up electrification trends, highly optioned vehicles, those are all very, very positives for us as well.

Nik Todorov, Analyst

Got it. Thanks guys. Good luck.

Trisha Tuntland, Head of Investor Relations

Thanks for your questions Nik.

Operator, Operator

Thank you. And our next question comes from the line of Karl Ackerman with Cowen. Your line is open, please go ahead.

Trisha Tuntland, Head of Investor Relations

Good morning Karl.

Unidentified Analyst, Analyst

Hey, good morning guys. This is Eddie for Karl. My question is last quarter you referenced that bookings have extended well beyond what you referred to as normal. And I'm wondering whether you've seen bookings begin to moderate. If so, could you describe briefly what areas of the market may have seen some moderation? And I have a follow-up please.

Dave Heinzmann, President and CEO

Sure. Good question. We certainly talk about in electronics what our book-to-bills look like and what our bookings track to. And we are not quoting a particular book-to-bill ratio because quite frankly with extended lead times now orders patterns are going and orders that are extending out further than normal, it's not a real meaningful number. Very strong bookings that we have in the business particularly in electronics but across the board. And yes, if anything, they're stronger today slightly than what they were a quarter ago, but that's really related to how far out people are booking rather than near-term necessarily. So, bookings continue to be quite robust for us.

Unidentified Analyst, Analyst

Okay. Great. Great. And my follow-up is what percent of your outlook for third quarter is locked in today? In other words, what portion of your outlook requires book and ship business? And how does that compare to last year? Thank you.

Dave Heinzmann, President and CEO

Yes, the environment varies across different parts of the business. In our automotive passenger car segment, we have scheduling agreements where we receive ship releases for the week or day, rather than locked-in bookings. However, in the electronics and industrial sectors, we encounter lead times and do have solid bookings. In these areas, we see significantly higher than usual completed bookings for the quarter. Therefore, we don't need many more bookings to achieve our third-quarter targets, as we've already secured strong demand.

Trisha Tuntland, Head of Investor Relations

Appreciate your questions Eddie. We'll take our next caller please.

Operator, Operator

Our next question comes from the line of David Silver with CL King. Your line is open, please go ahead.

Trisha Tuntland, Head of Investor Relations

Good morning David.

David Silver, Analyst

Yes, hey, good morning. Thank you. I joined the call a couple of minutes late. So, this first question is going to be very naive founding. But I was just wondering if you did kind of a walk or connected the dots between your second quarter guidance, 90 days ago as part of your first quarter conference call and the results you reported today. And in particular I mean I'm thinking on the revenue side. And I'm just wondering, I recall Dave I think you mentioned that lead times were expanding I think moderately or lengthening moderately during the first quarter call. And I did hear you mention they seem to be lengthening again. So maybe if you could just talk about maybe the better than 10% increase in your revenues this quarter relative to your guidance 90 days earlier and how much was price, how much was volume? Were there some rush orders or you mentioned maybe customers building inventory? Just how do you think about that double-digit increase versus your guidance on the revenue side? Thank you.

Meenal Sethna, Executive Vice President and CFO

Sure, David. I’ll address the first part of your question regarding Q2 and the changes we observed over the last 90 days. Initially, we noted strong demand in most of our end markets, which was encouraging. In fact, it was somewhat stronger than we had anticipated. This combined with our ability to be more flexible than others has played a significant role. We aim to build extra capacity to accommodate peaks in demand. Additionally, our teams globally in manufacturing and supply chain have made impressive strides in enhancing productivity and efficiency, which has helped us increase our capacity to fulfill orders. So, the overall combination of demand, market conditions, our preparedness for such times, and the outstanding performance of our teams are what contributed to our strong Q2.

Dave Heinzmann, President and CEO

And with regard to lead times, clearly our lead times on most of our products are extended as we deal with shortages from our suppliers and shortages exist in there things like resins some of our products. We're putting semiconductors within them and things like that. So, we deal with some of the same shortages that others do. So those things impact our lead time. But maybe one of the largest impacts to us is logistics lead times. It just takes a long time to get products around the world today much longer than it typically does. So you may have heard me a quarter ago talking about actually our extended lead times, the bulk of it was actually increases in our logistics times and that clearly has not gotten better. Logistics patterns continue to be challenged. And so therefore it takes extra weeks to get products around the world. So that contributes to it along with these other types of shortages and capacity constraints. So yes, our lead times have continued to extend a bit.

David Silver, Analyst

Okay. Thank you for that. My next question is probably something I haven't asked anybody on a conference call in about 10 years. But your stock is up a little bit today on very low volume. And I'm looking at your stock price in absolute terms well into triple digits, your daily trading volume well into double digits. So this is a question about a stock split. So many companies choose to time a stock split with when a dividend increase occurs and that was this quarter a very hefty dividend hike. I'm just wondering internally or when it's reviewed with the Board Dave what is your philosophy about the potential for a stock split to maybe improve liquidity and maybe on a day like today giving some incremental buyers a little bit more comfort about their ability to get in and get out of your stock without unduly affecting the price? Thank you.

Dave Heinzmann, President and CEO

So I'll weigh in and Meenal can join in with comments if she'd like on that. Certainly it's a conversation we've had with our Board of Directors over time and it's a regular thing we will visit and discuss bring in outside advisers to help us analyze whether that's helpful for us or not. So we do that. The bulk of our investor base tends to be long-term investors. Those are the types of investors that we like and target as well and that's quite consistent with the base that we have. And in that case, we don't get a lot of pressure on this. We need to get in and out quickly. So, they're willing to do that over time because they're not looking to do move in and then back out right away. So therefore, we haven't seen it as a major strategic need for us on how our stock price behaves. We'll continue to look at it and evaluate. And if the timing is right at some point, we might do that but it's certainly not a priority for us at this point in time.

Meenal Sethna, Executive Vice President and CFO

Yes. I will add a few more comments regarding the conversations we have had with various third parties, including buy-side and sell-side participants. The general feedback we receive is largely positive, particularly from our long-term investors. Their perspective is that they are comfortable entering the stock when needed, and we appreciate that our strategy discourages short-term investors. Additionally, we have a significant institutional investor base with very few retail shareholders. Retail investors may seek a lower stock price, but institutional investors do not see this as an issue.

David Silver, Analyst

Okay. Great. Thank you very much.

Trisha Tuntland, Head of Investor Relations

That concludes our Q&A session. Thank you for joining us on today's call and your interest in Littelfuse. We look forward to talking with you again soon. Have a great day.

Operator, Operator

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