Earnings call transcript Q2 2023

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Operator

Greetings, and welcome to the Vishay Second Quarter 2023 Earnings Conference Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded.

It is now my pleasure to introduce your host Peter Henrici, Investor Relations. Mr. you Thank Henrici.

begin. You may

Peter Henrici

and Devin. second Good today to you, Executive and Joel Financial our Officer. morning XXXX earnings Intertechnology's Officer; Chief quarter and joined our Vishay Lori conference Lipcaman, Smejkal, Chief Thank President welcome by call. by I'm

reported can our is website our and morning the accessed earnings This A call our broadcast website. second at copy live web of we This is Relations available section quarter. through our of being over release be in results for the Investor ir.vishay.com.

addition, recorded In website. and be available today's our on will call is being via replay

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events risks to differ conference could You we statements making results will and should and cause statements actual forward-looking be the future forward-looking performance. subject are uncertainties aware be These in that to today's statements. call, certain from discuss that that

to today's XX-Q Vishay's For cause factors that of could results the with filings XX-K see differ, Commission. Form and Securities a please Exchange and release and discussion press Form

We press on on conference call non-GAAP release GAAP our are and information this various measures. and including in

which in We presentation our press as reconciliation have posted GAAP in when measures. a as will measures well GAAP on GAAP included non-GAAP release and and with should find businesses you our we non-GAAP full by and we information ir.vishay.com, useful our believe believe in the We operating use conjunction performance of because about be results. non-GAAP they comparing the provide useful investors considered

Officer, to and Executive Smejkal. the Joel over turn call President I Now Chief

Joel Smejkal

near-term for will happy you answer expansion. that of we growth financial implementing business review with remarks my any we'd and through to be the on back then of After Lori for I'll initiatives a X improve the take customer-facing aspects the our to set Then Peter. Thanks, everyone. top-line quarter and on give Good to results. come margin as of the trends demand all we're second stage morning, progress a report highlights I'll you our faster the start questions. slide

to let's slide go So X.

solid of of the For delivered top-side of range near in Vishay increased driven also both automotive. guidance the guidance growth and Revenue top-side the $X.XX range. and year-over-year second with million quarter, our US$XXX.X EPS a of near quarter-over-quarter results our by revenue

hybrid end Looking at first the products along X% the our all bottlenecks versus support revenue, for versus which year. vehicles, in legacy for increased flow electronic features, sustained seeing that quarter XX% revenue automotive order last total and mix, regions with XX% programs improved Automotive, by EV have of demand accounted for markets. second content, first as quarter eased. We're and ADAS chain supply the grew

revenue, flat inventory are the representing and now the quarter-over-quarter their Industrial, pandemic many rearview XX% that was total normalizing below and mirror. as are customers of year chain supply constraints last of the X% positions in

globally. in addition, area sluggish grid infrastructure country's is strong in the Nevertheless, In we expected. to is activity of design see China taking economic EV and longer demand we recovery the electric than the continue as charging the

defense, weapon quarter aviation commercial our orders one the with of versus and versus States. growing and government along XX% grew end first increased aerospace strong in from quarter In second rapidly spending revenue on year United the the Europe on last XX% markets, systems

at implantable we devices, medical the diagnostic during was on versus and Based the year-over-year. book-to-bill equipment we the to revenue especially market sequentially but and strong demand up quarter, in of the expect X.X quarter. end quarter and for increase end promising another customers, mix, medical for saw first third timing was to quarter from orders due Vishay, Revenue down the X% XX%

and ongoing sold market other segments products to price first demand. in pressure consumer quarter, the versus due the to weak on some Asia some revenue in Finally, X% distribution declined customers

In terms share many reengaging sales, of after lost due we're to to capacity PLS of years on with distributors we channel XXXX constraints. regain focused

more engaging also we're maximizing one. closely activity volume-based as all the channels profitability supporting in design customers EMS of This We're while at business centers. with way their well EMS each as

to defense quarter, due quarter the distribution improved During and quarter second allocated to of automotive, X% delivery grew revenue industrial to compared X% down last the and compared first the year was to products aerospace customers.

softer in at weeks computing Asia. telecom and quarter XX quarter, regions. increased weighed end last down was which decreased most Distribution in versus by weeks XX demand X%, POS inventory for

We numbers. distributor ensure part greater partners to a of quantity inventory includes are collaborating of our of each them high-running with the at each

OEM for and as quarter-over-quarter they supply inventory, strong segments primarily X% automotive Americas. than chains particularly grew as which EMS healthier continue replenish to customers XX% revenue weak the computing industrial year-over-year, Americas in particularly X% reflecting in demand continued Asia, pull, grew for Asia. telecom quarter-over-quarter market in improved our automotive and in offset and markets in the primarily allowed and demand more consumer,

review returns. connectivity, visible decisions, and over a our the the want We're to becoming customers drive putting the mobility revenue our value and first. right growth act of to our for for day. seize together, our created commitment dedicated the every forward We're business-minded on and of I by making excellence megatrends faster sustainability opportunities to call turning higher pushing to to results, a Lori of is Before Their thank to embracing employees financial change. organization and

Lori, I'll for it now the you pass financial over results. to

Lori Lipcaman

X.X% start results the you, for our increases review on MOSFET I business a partially growth a will $XXX.X X. Slide Thank Good reportable offset volume pricing, in second was By volume reflecting increased morning, by million. Revenues Compared by first pricing. of the reduction higher lower volume X.X% to increase and quarter by and Joel. were by revenues quarter inductors driven second my everyone. revenue gains segment, slightly pricing. in X.X% offset quarter,

Vishay quarter X.X end million of book-to-bill compared comprised X.XX second at quarter lead as grew of was of quarter year, consolidated was the down to increase dividends X.X total Compared million. backlog million We reflecting of coming At X.X% times of volume $XX.X for increase all shareholders, at repurchases X.X% the X.X% the revenues for pricing. segments. months a to last quarter and and product to in $XX.X end, prior of and months stock returned a continue $XX.X end

absorption logistics Gross guidance. freight margin costs $XXX.X inventory, the statement slide The a compared and million on income next inflationary lower the in for to costs. profit margin decreased quarter labor for fixed highlights. XX.X% our and first was presents and quarter, partially lower by flat of first line XX.X% with to offset on material cost based gross Compared

quarter decreased due $XX.X million million our the guidance. $XX.X annual income million $XXX.X gross incentive were the versus in first primarily expenses SG&A Operating with SG&A operating $X.X higher line higher compensation. on expenses salary the Adjusted lower year general to equity versus reflecting decreased quarter increases, inflation million prior income first than and profit.

was on for margin and an second quarter XX.X% the XXXX. $XXX.X adjusted of compared million quarter XX.X% margin XX.X% of for for first basis to an the XX.X%. EBITDA Operating EBITDA was

rate per first per tax for our quarter. GAAP period, XX.X% and was $X.XX effective those to both share rate EPS compared year-to-date quarter the effective was for $X.XX the periods. for share the normalized Our tax same as

of the for book-to-bill convenience, your the and presentation, of a ratios revenue reportable each in gross included our segments. For margin we body chart depicting business have

Inventory slide days, end DPOs and XX the $XXX.X days. than to one first were day metrics. quarter at higher represent million flat Turning X, were XX at cash unchanged conversion days essentially cycle compared was for bringing the days. the the quarter of DSOs conversion $XXX.X XX to Inventory first end XX cycle of to for days cash the as million QX. quarter outstanding compared XXX second to were days quarter

expansion you transition X can the tax. of the flow from invested for last primarily Total year, an with million for of compared to million quarter and $XX.X the $XXX.X quarter the annual reflecting million of operations lower second CapEx was than the quarter total the $XX.X slide that On of million XX.X%. increase cash see installment was $XX.X first capacity

On tax. the compared CapEx XX-month first the to period for compared installment last same a year. million basis, higher Free was transition CapEx of due X.X% trailing the X.X% in $XX.X flow the the to was of $XX.X cash quarter quarter of annual for million for revenue total to

$XX.X returns for repurchases. price million of quarterly during share our the consisting $XX.XX second average Stockholder an $XX.X per per quarter for quarter. at the to of X.X shares for and million quarter $XX.X million repurchased share We dividend amounted million –

quarter our at end of investments including was liquidity $X.X credit revolving million. cash Total on $XXX and short-term availability billion, billion of and facility $X.X

to time on from use to financing needs. calls, the meet time past As short-term mentioned earnings we revolver

for X our slide to guidance. Turning

We still range of For the margin third return margin in of points. the full and million to gross profit are minus plus year $XXX basis normal XX.X% between in Gross XX million be or or $XXX the expected seasonality. be is of range XXXX, points. to a be basis revenues plus XX reflecting expected to XX% profit to expect quarter minus

expected million the higher-than-expected are current the be and marketing to additional accruals refined expenses year $XXX for rates $X minus $X the at quarter reflecting $XXX expenses, incentive of exchange million minus plus million SG&A for or and long-term million plan analysis plus data. between full or

For XXXX, we expect of approximately tax XX.X%. rate a normalized effective

flow least XXXX to return million. at with least of our $XXX remain In we cash the repurchase. return to policy our dividends XX% and Finally, expect stock to for free shareholders committed we stockholder in of distributing accordance at form

Joel. Now, I'll turn the to call back

Joel Smejkal

Thank you, Lori.

XXXX. for of our XX, Let's turn a for slide to initiatives key near-term review

company reminder, talked quarter to mobility mega for sustainability. phase we're I returns, laying first of fourth that foundation call, the and growth the and when you improved positioning a next the are focused detailed full the As in revenue on, I initiatives advantage the of on trends and the connectivity, take to accelerated

the from one and responsive a strong about anticipates company needs, customer from Vishay's dedicated to company that more to disciplines talented creating P&L-driven building company. workforce. on about And organization, that business-minded and customers, is meets fulfills changing cash to operational customer a orders, a one the talked also Vishay I of a driven that and being flow importance

the am and We business-minded urgency. pleased Vishay on placing to our of beginning at focus started in forward a the a having sense priority of the we to-date January I a push of customer our of with mindset everyone shifting and in do. first think progress at everything media

to Our and changes growth. dedicated our are are teams supercharging the embracing

at mega These internally with in and capacity in exponential support which for serve end-market making plans externally the the trends. segments, highest lines, lines, multiple and and demand product product beginning return the growth best consistent channels market by our XX future of our business increasing us year. near coming position and key driven higher We're the progress applications of the

investment To XXXX $XXX approximately in investing expanding to as million are investing between This year be come for late-XXXX the is online ready on and be expected staging two-thirds and committed is phase, XXXX. about billion XXXX, a in which to to capacity are XXXX expansion and $X.X next we spent we projects. of

of we The end this incremental capacity By annualized coming capacity invested of year landed particularly had second year and we is the the in an online of quarter, X% Capacitors, nearly incremental increase XXXX. this for last from through Volume and customer Power the Inductors, and capacity will complete as at compared annualized the we Resistors site first quarter. capacity qualifications. available the to end be

second ground in continued During XX-inch and Itzehoe, our on construction quarter. and the meet customers. during Taiwan fab Germany, We quarter demand to MOSFET Automotive for growing new we Italy broke in Industrial the the advance on to Germany located the fabs

other for at located also Laguna Power in facilities located We install or continued in two Metal the Juarez equipment, Mexico. new One Inductors. resistors Strip in Power La our and to

our We years. product these two this the double three for next to will over lines expect investment capacity

in planning qualified shipping Juarez new our La At products and Vishay At other half third facility, have lines quarter in expect in to first the Facility qualify product business we second XXXX. this Laguna, bringing this facility, year begin of are and to to a at of also segments. Inductor we we're establish shipments quarter. campus, our some planning We the resistors together the first expect from

expansions, capacity internal identifying continuing to foundries. semiconductor to addition we're additional In work on

completing our demand our in new automotive, is from Germany and MOSFET facility support while to in we distribution to XXXX. growing customers are in our parallel, increase industrial Our top capacity priority

our at During XX-inch platform first MOSFET second partner. qualified new commercial foundry we quarter, the a

also increase to We wafer of our reached agreement with supply two existing an partners. foundry

customers. our with an on increase capacity foundry XX% our by for we up and XXXX, annualized automotive agreement even industrial expanded working XX% capacity a customers capacity in for XXXX. also more As in to automotive another to negotiating We're will support result, our

and assembly demand quarter, products. third automotive our to the expand where Malaysia During only we started the increased manufacturing the site, also we We segments. Krubong, here have to are industrial market currently in expand address Opto low-cost

campus a diodes this our space La MOSFETs Phase be requirements. establish and also increase by Laguna, third in Krubong origin while to Malaysia country of customers' X and in Like quarter of XX% plan the back going Mexico, the will expand of addressing our to our floor we with are XXXX. expansion end completed will manufacturing of

products To looking capacity support of create return our some we subcontractors externally to even in qualify been higher products. further, incremental growth have and also for higher commodity

we I these started resistors shipping As one have in qualified and mentioned first the have quarter, for non-automotive products. subcontractor

the During started qualification products that we also second of same automotive quarter, subcontractor. some with

continuing to developing and number qualified other still year-end. XX have We're to of and more them partnerships sizes agreements by signed engage with with of in than expect various subcontractors a

the of subcontractors example, this products an year. end As inductor new we're qualifying by for many

to carbide. a development, carbide resources support customers. We're We're we've and continuing fill to to engage product add GaN gaps technical our FAEs and continued to to silicon silicon technology coverage and on onboard priority placing in market

As of technology the year, on in continuing samples the X,XXX-volt to of fourth of the quarter fourth into our XXX-volt track planner and last to third them planner the also our carbide the of of trench technology release available have development We're silicon acquisition XXXX-volt quarter. advance to the technology. quarter for customers MaxPower, in and production technology were MOSFETs development

working in have investing to and that talent, been passives. Vishay addition fully this and broad discrete to semiconductors leverage CapEx portfolio we In our of year heavily introduce Solutions more engineering

passives. a As and Vishay semiconductors reminder,

power populate circuit of components As and many a for greater board reminder, XX% Vishay passives the applications. semiconductors on than can the

we building for months, reference evaluate. a engineers designs past automotive of have to the For been number customer

we quarter released one of This them.

test. The catalog sensor. are intelligent battery high-voltage to through one distributors first available a is These boards customer our for engineers

designs in resettable the DC additional a circuit also including to a XX-volt XX-volt We converter. have DC bidirectional breaker; queue XX-volt

inverters vehicle a onboard designed customer. continue with traction We low-speed work Tier electric marketplace. We to X also charger work on together for

program key organizational our for risk the profitability X,XXX employees performance May. accelerate align short-term Lastly, long-term incentive by Meeting, cultural of a is redesigned XXXX employees at incentive also long-term our program and to approved institute interest. and shareholder company growth also we Annual and our our growth. X,XXX change, to plan new incentive plan for revising We're at incentive Vishay. to shareholders This objectives XXXX this reward new taking was past our to Having

ourselves have a the XXXX. recap for goals turn Slide to for Let's XX of we set for

pace and next number evaluation to and of of In key terms in of each a to signed of where the end growth developing to by facility. agreements capacity qualified expanding of capacity, Vishay's build product strategies with we for year XX are subcontractors have We're adding on this our and incremental manufacturing them. our have go-to-market lines to support completed

making have of the track planner MOSFETs samples to and in the of development progress the on planner are XXXX-volt XXX-volt technology. We're technology available

on with revenue and you capital. return invested an Finally, targets we profitability remain and sharing and year business plan holding for to in committed XXXX our Analyst growth, early Day three

to With start to Q&A that, the I'll operator turn the the session. call back

Operator

Bank comes first Ruplu America. of Thank from Bhattacharya line your you. with with the proceed Please question. of question Instructions] [Operator Our

Ruplu Bhattacharya

taking thanks for call. Joel my the for you've one about initiatives channel of is details the Thanks management. enhancing questions the Hi. all and talked on

you what of And of give that what do things doing have Vishay well? Over can couple customers, you areas So some the to feedback terms as on over need since in months, the other well plan what what us channel enhancing partners -- terms thoughts you you've is last distribution in of of how your improvement? management? spoken to gotten as taken you you've your that as are

still the drivers as EVs comes that the And change similarly, a direct automotive you'll do the of two markets your you a the from years? industrial, But about the end And distribution. versus do mix secular through driving engines, have your are that more a that as more part that or as of large OEMs? think related combustion renewable get your over becomes next of revenue through distribution direct you going relationship, greater and you traditional be about you Tier can you Xs, that, today you with or to industrial growth of energy XX% think think mix couple in that think relationship can revenues do auto

Joel Smejkal

the the Ruplu, the will I'll I for question Okay. answer, thanks address question. in – second first.

Tier working directly automotive We with many Xs. are

is this with be important very need So, because where road for to technology their us maps with we products. and in going line, new they're

will they prefer discussion. the connected direct to continue forward the business be manufacturer, European new automotives the Asian the and very needs, automotive, new technology with components automotive, to a lot hybrid direct, of there's The closely as the are to manufacturer accounts. vehicles. in move in US of the So They be technology automotive because driving and were electric we

yet, Solutions discovered. to are be

manufacturers contacts the technology So to be in necessity. continue of a these the close OEM,

So, we'll continue that.

Jumping the Yes, had distributors. or about Vishay. is of of the of it We more back, products. of visiting part to greater question, distributor where channel. from was XX% from away Vishay that. multiple Vishay distribution going. They're growth the somewhat excited have your first about have did conversations. required total the did our but I've done sales, We've as We leaders

they we and capacity sufficient we of distribution. and direction for to the bill the about of about materials. Vishay, organizing about channel talk see So excited They're have on talk it. capacity Vishay many of business-minded

more product demand. Vishay find supply cross So, the customer valuable distributor their the of support another to to can they have supplier, because having or if even end makes the don't

be business. reasonably to EMS of more prevalent Same to us grow EMS for story. time is in opportunity Vishay's Vishay. our of see can like line, They'd is the they same. I've materials. Vishay met, buy number with on leaders. bill a lead the If

growth we're at you're EMS. through to the of business going through sufficient support the But accelerated have that, to capacity the business We business be capacity, as support is direct to well to going all OEMs. business support all the There's where to to support the covering have some channels. distribution, the right. So, as OEM need

Ruplu Bhattacharya

there. the you Thank Okay. for details

can next organic in EVs the over the growth from comes much trends if two, happening How to you For do growth look ask, my do follow-up, needing that years as for of I Vishay, at in and the out you are think in secular versus three the M&A? and growth you industrial. look

uses your see thoughts and us can in Thanks. the M&A? of side How further give do semiconductor And more versus the or reducing that side do buybacks? maybe prioritize on share And you capital versus passive return you you on cash? debt

Joel Smejkal

With we Okay. as as products, need for expand our of as we a number technologies semiconductors there have discussions to the with well have in portfolio. these technology right Vishay OEMs, But the our passives. is discrete

We to of we're be M&A plan. better needs a growth list have looking inorganic targets us M&A be will a that portfolio. of part with product broader supplier It at. help a our to greater

plan semiconductors, quarter with -- silicon is in to we MaxPower of This of quarter the M&A and in did be a technology as part fourth carbide will forward. yes, be XXXX. greater be going the will last So our in going also growth passives. It

maybe passives and the equal When right semis to in the is but growth times vehicle, is that. amount of or XX passives times, those numbers. semis talked we seven often about of electric as look the growth alongside at The vehicle electric is

grows and Vishay offer to grow We own hybrid of also the EV, strength the it can qualification can electronic the and grow passives subcon a our will to even under is We being recipe as this semis through the manufacturer. M&A. through further. Product content do able through So Vishay to vehicle,

Ruplu Bhattacharya

the rank cash terms cash of you via delevering would versus buyback? use how returning order just M&A to shareholders in of So prioritizing versus like,

Joel Smejkal

to shareholders. of capital a still dividend We're M&A in still level allocation a We to the meet the is have for same buybacks we requirements will very The at stay share abreast. the important. that company. technology our still That's cash We is priority. need that priority.

higher a a be in it priority So, M&A. priority will

Ruplu Bhattacharya

Okay. Thank it. the details. you for Appreciate all

Joel Smejkal

very much. you, thank Ruplu,

Operator

Smejkal no are questions over back time. to comments. There you. floor Thank like I'd to this Joel for further the closing at turn

Joel Smejkal

for you making the In full we today. attending All capacity, to right. committed closing, make necessary joining ready resources and Vishay you next very Thank in to innovation call much. advantage investments all and of to us the take the giving connectivity third November. today. phase of are for Thank I update the report progress and early making much quarter results for and we in next the forward market of the you sustainability. when megatrends attending our Thank good mobility you, growth look very to customer-facing We're

Operator

This concludes today's teleconference.

you a may at lines your participation your Thank time. disconnect You wonderful have and day. this for

Vishay Intertechnology (VSH) 9 Aug 232023 Q2 Earnings call transcript