Q4 2020 Vishay Intertechnology Inc Earnings Call
Ladies and gentlemen, thank you for standing by and welcome to the Vishay Intertechnology Q4, 'twenty 'twenty earnings Conference call. At this time, all participants are in a listen only mode.
After the speaker presentation, there will be a question and answer session.
I asked a question during the session you'll need the press star one on your telephone.
Please be advised that today's conference is being recorded if you require any further assistance. Please press star zero I would now like to hand, the conference over to Mr. PD, Peter Henry <unk>. Thank you. Please go ahead Sir.
Thank you Shelby good morning, and welcomed the fish species into technologies fourth quarter and year 'twenty 'twenty conference call.
With me today are Dr. Gerald Paul Vishay is president and Chief Executive Officer, and Lori Lipka men are executive Vice President and Chief Financial Officer.
As usual, we start today's call with the CFO, who will review reshaped fourth quarter and he of 'twenty 'twenty financial results Dr.
Dr. Gerald Paul will then give an overview of our business and discuss operational performance as well as segment results in more detail.
Finally, we'll reserve time for questions and answers.
This call is being webcast from the Investor Relations section of our website at IR Vishay Dot com.
The replay for this call will be publicly available for approximately 30 days.
You should be aware that in today's conference call, we will be making certain forward looking statements that discuss future events and performance.
These statements are subject to risks and uncertainties that could cause actual results to differ from the forward looking statements.
For a discussion of factors that could cause results to differ please see today's press release and V shape form 10-K, and form 10-Q filings with the Securities and Exchange Commission.
In addition, during this call we may refer to adjusted or other financial measures that are not prepared according to generally accepted accounting principles.
We use non-GAAP measures because we believe they provide useful information about the operating performance of our of businesses.
And should be considered by investors in conjunction with GAAP measures that we also provide.
This morning, we filed the form 8-K that outlines the various variables that impact the diluted earnings per share computation.
On the Investor Relations section of our website you can find a presentation of the fourth quarter 'twenty 'twenty financial information.
<unk> some of the operational metrics of Dr. Paul will be discussing.
Now I turn the call over to Chief Financial Officer, Lori lip coming.
Thank you Peter good morning, everyone.
I am sure that most of you have had a chance to review our earnings press release, I will focus on some highlights and key metrics.
Vishay reported revenues for Q4 of $667 million higher than our original expectations, partially due to foreign currency.
EPS was <unk> 26 cents per the quarter.
Adjusted EPS of 28 cents per the quota.
During the quarter, we repurchased $2 6 million principal amount of our convertible debentures due 2041 and recognized the U S GAAP loss on extinguishment.
I will elaborate on these transactions in a few of them.
Yeah.
COVID-19 continues to have an impact from our business, we see strong signs of recovery during Q4.
Similar to the first three quarters of 2020, we have identified certain COVID-19 related charges net of certain subsidies, which are directly attributable to the COVID-19 outbreak.
These items were insignificant to Q2 Q3, and Q4 results that are added back when calculating our non-GAAP adjusted EPS the comparability.
Such measures exclude indirect impacts such as general macroeconomic effects of COVID-19 on our business and higher shipping costs due to reduced shipping capacity.
Revenue was in the quarter were 667 million up by four 2% from previous quarter and up by $9 four per cent compared to prior year.
Gross margin was $22 eight per cent.
Adjusted gross margin, excluding Covid costs was 22 nine per cent.
Operating margin was 9.0% of.
Adjusted operating margin, excluding Covid class eight 9%.
EPS was <unk> 26 cents.
Adjusted EPS was <unk> 28 cents.
EBITDA was $95 2 million or $14 four per cent adjust.
Adjusted EBITDA was $96 2 million from $14 four per cent.
Revenues in 2020 with $2.502 billion down by six 2% from previous year.
Gross margin was 23 three per cent.
Adjusted gross margin, excluding Covid call it was $23 four per cent.
Operating margin was $8 four per cent.
Adjusted operating margin, excluding Covid call was the $8 five per cent.
EPS was <unk> 85 cents.
Adjusted EPS was <unk> 92 cents.
EBITDA was 352 million of 14, 1%.
Adjusted EBITDA was 364 million from $14 six per cent.
Reconciling versus prior quarter adjusted operating income quarter four 2020.
Compared to adjusted operating income for the prior quarter.
Based on $27 million higher sales.
Our 23 million higher excluding exchange rate impacts.
Adjusted operating income decreased by 2 million.
The $60 million in Q4, 2020 from 61 million of in Q3 2020.
The main elements were.
Selling prices had the negative impact of 2 million, representing the zero point of 3% ASP decline.
Volume increased from the positive impact of 10 million equivalent to a 4% increase in volume.
Variable variable costs increased with the negative impact of 4 million, primarily due to increased cost of freight duties and materials in the middle.
Yes.
Fixed cost increase of the negative impact of $5 million, primarily due to the acquisition and higher year end per and maintenance cost.
Inventory impact to the positive effect of 5 million.
Exchange rates had a negative effect of <unk> 4 million.
Yeah.
Yeah.
Versus prior year adjusted operating income Q4, 2020 compared to adjusted operating income quarter four 2019.
Based on $58 million higher sales.
Over $44 million, excluding exchange rate impacts.
Adjusted operating income increased by 19 million of <unk>.
$60 million in Q4 2020.
From $41 million from Q4 2019.
The main elements were.
Average selling prices had a negative impact of $19 million, representing a two eight per cent decline.
Volume increased from the positive impact of 27 million, representing 10, 3% increase.
Variable costs decreased with the positive impact of $9 million.
Cost reductions from lower material prices as well as improve manufacturing efficiencies more than offset increases in labor and freight costs as well as metal prices.
Fixed cost decreased with the positive impact of <unk> 2 million, primarily due to mobile lower travel costs, which more than offset completion.
Inventory impacts had a positive effect of <unk> 4 million.
Exchange rates had a negative effect of 5 million.
Yeah.
2020 versus 2019, adjusted operating income for the year 2020 compared to adjusted operating income for the year 2019.
Based on 166 million lower sales of $180 million lower excluding exchange rate impact of.
Adjusted operating income decreased by 73 million.
The 2014, Inc.
2020 from 2000 from 287 from 2019.
Average selling prices had a negative impact of 71 million representing a two eight per cent ASP decline.
Volume decreased from the negative impact of 53 million.
The four 2% decrease.
Variable cost decreased with the positive impact of 32 of them.
Cost reductions and lower material prices as well as improved manufacturing efficiencies more than offset increases in labor and freight costs and the other places.
Fixed costs decreased with the positive impact of $15 million, primarily due to lower travel costs and general belt tightening, it's more than offset wage inflation.
Inventory impacts had a positive effect of $8 million exchange rates had a negative effect of 5 million.
Okay.
Selling general and administrative expenses for the quarter were $92 million, which includes the net benefit of zero point $6 million of subsidies in excess of identified the COVID-19 costs.
Selling general and administrative expenses for 2020 was $371 million, which includes the net benefit of $1 5 million of subsidies in excess of identified the COVID-19 costs.
Yeah.
For Q1 2021, our expectations are approximately $103 million of SG&A expenses.
The increase was primarily due to uneven attribution of stock compensation expense of incentive compensation accruals and wage inflation, which are not completely offset by the impact of our restructuring program.
For the full year of our expectations slightly above 400 million at the.
Exchange rates of cortisol.
This increase year over year is primarily due to the weakening of the U S dollar versus a relevant currencies.
The increased travel cost anticipated in the second half of the year and incentive compensation accruals and wage increases not completely offset by the impact of our restructuring program.
Based on our cost cycle of our SG&A expenses will be at the highest reported level in Q1.
Okay.
Okay.
During the quarter, we were able to repurchase the final 3 million principal amount of our convertible debentures due 2041.
Last Thursday, we completed the redemption of our convertible debentures due 2040.
Of which only 300 K principal amounts outstanding.
These actions to complete the programs we have undertaken over the past three years to retire the convertible debentures. Due 2000, 42041, and 2042, which had certain tax attributes which were no longer efficient after U S tax reform.
We continue to have the series of convertible notes outstanding which are due in 2025.
While we did that'd be purchased any of our convertible notes due 2025 during Q2 quarter four.
During 2020, we opportunistically repurchased 135 million principal amount of the convertible notes due 2025.
The average repurchase price for the note with <unk>.
The 95, 3% of face value.
By reducing our fixed term debt repurchase of the convertible notes provides us with future flexibility to better utilize our revolver and to adjust our debt levels as necessary.
We continue to be authorized by our board of directors to repurchase up to an additional 65 million of convertible notes due 2025 subject to market and business conditions conditions legal requirements and other factors.
Okay.
We had total liquidity of $1 5 billion at quarter end.
Cash and short term investments comprised 778 million and the useful capacity on the credit facility is approximately $730 million.
Our debt at year end is comprised primarily of the convertible notes due 2025.
The principal amount of face value of the converts is $466 million.
The carrying value of $395 million is net of unamortized discounts and debt issuance costs.
There were no amounts outstanding on our revolving credit facility at the end of the year.
However, we did use utilize the revolver from time to time during Q4 to meet short term financing needs.
Expect to continue to do so in the future.
No principal payments are due until 2025 and the revolving credit facility expires in June 2024.
Yeah.
Vishay will early adopt the new accounting standard for convertible debt effective January one 2021.
Pursuant to the new standard of convertible debt will no longer be bifurcated into debt and equity components.
And we will no longer be required to amortize the related debt discount is noncash interest expense.
This means that of reported debt balance will increase to approximately the face value of the converts.
It also means in our U S. GAAP interest expense will decrease to approximate the cash coupon.
We expect interest expense for Q1 to be approximately $4 4 million.
The new standard also requires the application of the if converted method for EPS share count, which would have added 14 million shares to our diluted EPS share count.
In response to this and consistent with our previously stated intention to net share settle.
Amended the indenture for the convertible notes due 2025.
Korean vishay to pay the principal amount of any converted notes in cash with any additional conversion value settled in shares of common stock.
This is similar the this result in a similar impact on the diluted share count to that which was achieved under the old standard when assuming net share settlement.
Total shares outstanding at quarter end were $145 million the expected share count for EPS purposes for the first quarter 2021 is approximately $145 million.
For a full explanation of the EPS share count and variables that impact the calculation, especially after the adoption of the new convertible debt standard. Please refer to the 8-K, we filed this morning and our annual report on form 10-K, which will be filed in a few weeks.
Yeah.
Our global cost reduction programs that were announced in mid 2019 have now been fully implemented with lower cost of approximately $15 million annually.
The full year effective tax rate on a GAAP basis was approximately 22%.
The full year normalized tax rate was approximately <unk> 21 per cent.
For the quarters mathematically yields the tax rate of approximately 19% per GAAP and approximately 11% normalized.
Our year to date GAAP tax rate includes the unusual tax benefit related to the settlement of some of the convertible debentures from Q1, and Q4 and an adjustment to uncertain tax positions of $4 million in Q4.
Our year to date normalized rate excludes the unusual tax items.
Well as the tax effects of the pretax loss and extinguishment of debt.
The identified Covid call in the Q2 restructuring charge.
Our effective tax rate for the full year was lower than we expected at the end of Q3 due to changes in certain processes and business practices as we continue to a depth of our financial and capital structure and the response to U S tax reform.
We expect our normalized effective tax rate for 2021 to be between 22 and 24 per cent.
Our consolidated effective tax rate is based on an assumed level of mix of income.
Among our various taxing jurisdictions.
Shifting the income could result in significantly different results.
Also a significant change in tax laws or regulations could result in significantly different results.
Yeah.
Cash from operations for the quarter was $126 million.
Capital expenditures for the quarter with 53 million per.
Free cash for the quarter was $73 million.
For the year cash from operations was $315 million.
Couple of expenditures were $124 million.
But approximately for expansion $83 million for.
The cost reduction of 9 million from maintenance of business $32 million pre.
Free cash generation for the year was $192 million.
Okay.
The year included $16 million cash taxes paid related to cash repatriation plus $15 million cash taxes paid for the current year installment of the U S tax reform transition tax.
Vishay has consistently generated in excess of 100 million cash flow from operations of each of the past 26 years and greater than $200 million for the last 19 years.
Okay.
Yeah.
Backlog at the end of quarter four was the $1.240 billion or five six months of sales.
Inventories increased quarter over quarter by 1 million, including an exchange rate impact.
The use of inventory outstanding were 79 days.
Days sales outstanding for the quarter were 45 day.
These with payables outstanding for the quarter were 31 day.
The resulting in a cash conversion cycle of 94 days.
Now I will turn the call over to our Chief Executive Officer, Dr. Gerald Paul.
Thank you Lori and good morning, everybody.
The year 2024 of Rishi and its business partners has been overshadowed by a completely new experience of global consumers.
During the year.
All of those pieces of the pandemic impacting our business in very different ways.
From numerous plant shutdowns, mainly in the Asia in the temporary shortages of supply.
The early part of the year.
Oh, the drastic negative reactions of many customers in particular in the automotive segment in the second quarter.
Two of an extremely steep and broad recovery of orders since October.
Vishay managed to attempt to of fast changing economic environment fairly built keeping up the efficiencies minimizing fixed costs controlling inventories income.
Thanks.
Vishay in 2020 achieved a gross margin of 23 points of the percent of sales.
Versus 25, 2% in 2019.
And the adjusted gross margin of 23, 4% of sales versus.
The 25, 2%.
Operating margin of eight 4% of sales versus.
Nine 8% in 2019.
And the adjusted operating margin of eight 5% versus 10, 7% in 2019.
Earnings per share of <unk> 85 cents versus $1 19 in 2019.
The adjusted earnings per share of nine.
The two cents versus $1 26 in 2019.
The generation of free cash also in 2020 remains on the cloud accidents.
The accident the Liberals.
In 2020 generated free cash of $49 2 million, which includes takes the faithful casualty pits aviation of $16 million.
The fourth quarter, while benefiting from an extend the region's economic recovery.
Suffered from higher than expected freight costs in the Midland prices.
Additionally, the U S dollar weakened versus practically all the currencies in which we just incurred of course, but the chief no sales.
Vishay in the fourth quarter achieved gross margin of 22, 8% of sales.
23, 7% in Q3 of <unk>.
Adjusted gross margin of 22, 9% versus 23, 7% in Q3.
Trading margin of nine 1%.
Percentage of sales versus nine 6% in the sales.
Florida.
Adjusted operating margin of eight 9% versus nine 6% in Q3.
Earnings per share of 26 cents.
The strength you said he sends in quarter three and the adjusted earnings per share of 20 agents versus 25 cents in Q3.
Currently the economic and vitamins for electronics in general can be expressed as friendly to blooming the pump.
Even the races consumption in several of the much six months.
Moody's came back to the full extent.
Yeah.
Economics of some economic recovery was already.
<unk> seen in the.
Third quarter.
<unk> developed quite drastically in the course of the fourth quarter in particular of distribution contributed and continues to do so also driven by some exciting is concerning potentially upcoming shortages of supply.
Via for realized reduced price pressure across the board and lead times in general are stretching out.
All of the regions enjoyed growth in the quarter.
Led by automotive from distribution in Europe.
There is a strong continued broad performance in Asia.
And the growth is also in the Americas to be seen despite the weakness of oil and gas and commercial avionics.
Global distribution.
Honestly, it's very confident concerning the short and midterm business outlook and the.
This growing nervousness concerning the availability of components in particular of semiconductors.
In the year 2020.
<unk> of global distribution was 3% below 2019, mainly due to a very weak second quarter.
Inc quarter, four 2020 of the other hand was 4% over prior quarter and 9% over prior year.
If you wish in quarter four was strong in particular in Asia with 9% above prior quarter base in Europe and in the manner.
The ways remains virtually on the levels of <unk>.
Got it.
Distribution of inventories in the fourth quarter. It came down again by 24 million.
Inventory turns of global distribution increased to three one from two point to eat and price.
Water.
In the Americas, one six turns of the one five from Q3 and one four in prior year.
In the Asia price point all of the four three in Q3 and three points of the prior year in Europe, three two to three points of <unk>.
In Q3 and $2 eight.
Yeah.
What can be stated used it.
<unk> distribution has very low inventory levels of currency.
Coming to the industry segments continued strong orders come from automotive OEM.
Oems attempt to recoup the volume lost during the second quarter closures.
Production volumes of light vehicles out of Peru.
Coaching pre corona levels, but the electronic content.
Growth and continues to do so.
Advanced driver assist systems 48 volt hybrid systems autonomous driving and in particular, the electric vehicle charging program boost of the volume.
Industrial continues to provide the mutual growth opportunities. Despite the persistent weakness of the oil and gas sector.
The industrial automation.
Power generation and transmission systems, it's been this.
Increase the residential development propel growth.
The market for computers and related products remains remarkably strong driven by continued demand for tools to support global work from home strength.
The a M. S sector continues to be burdened by an extremely weak market for commercial avionics really means.
For the Telecom V for the midterm continue to expect the major upstream in the context of the introduction of five G. More short term for T systems will continue to grow.
Current team restrictions favor of consumer products in general and medical continues to show steep of growth.
Let me comment on our business in the fourth quarter each of the.
Mostly due to a higher demand from distribution Q4 sales excluding exchange impacts came in slightly above the upper end of our guidance.
We achieved sales of six on the $67 million.
The $640 million in prior quarter, and 610 million Inc.
Yeah.
Excluding exchange rate effects sales.
In the fourth quarter.
23 million or by 4% versus the prior quarter.
And up versus prior year by 44 million whereby of 7%.
Sales in the year 2020, the two.
254, 2 billion versus $2 668 billion in 2019 of decrease of 7% excluding exchange rate effects.
The book to Bill the ratio in the fourth quarter.
The jumped really to 144 from point of 19, nine and Q3, mainly driven by each of these procedures.
Yeah.
Eight 189 book to Bill for distribution of.
The <unk> 99 in Q3.
<unk> 96 for Oems after one one in Q3.
161 for semiconductors off the <unk> 98.
1007 for passage of the one point, though.
115 for the Americas after <unk> 92 in Q3.
175 for Asia. After one point of all four in Q3 and find the Li 127 for Europe After 1.1.
<unk>.
Backlog in the fourth quarter climbed to an extreme high of $5 six months after four points of the in quarter three six months and semi soft of 4.3 the third.
Water and five two months in passives after four four.
Is further decrease in price pressure.
0.3% price has found vs.
And two 8% down.
<unk> per year.
In semi as there's less price pressure due to the current high demand.
Minus <unk>, 2% the prices versus prior quarter of minus three nine versus prior year.
Passive price decline is from normal levels of point 5000 versus prior quarter.
The minus one 7% versus prior year.
Some comments from operations.
In 2020, we were not completely able to offset the enrolment of negative impacts on the contributive margin by cost reduction and sort of innovation. Despite good manufacturing efficiencies.
During the year, we suffered from increasing transportation costs, increasing middle classes.
And in particular in the fourth quarter from the impact of the weakening U S dollar.
Adjusted SG&A costs in the fourth quarter, two minutes of 93 million 2 million below expectations.
When excluding exchange exchange of defects.
Adjusted SG&A costs for the year 2020.
373 million 15 million DAU of 4% below prior year at constant exchange rates, mainly due to the strengthening.
In general Bill tightening.
Manufacturing fixed costs in the fourth quarter, keeping net 133 million in line with expectations when excluding ex rate the effects manufacturing fixed costs for the year 2020, with 513 million flat versus prior year at constant exchange.
Thanks.
Total employment at the end of 2020 was 21555, 4% down from prior year.
Excluding exchange impacts inventories in the quarter remains virtually flat.
Inventory turns into the fourth quarter improved to 4.6 from four four in prior quarter.
In the year 2020 inventories were flat versus prior year.
Inventory turns for the entire year 2020.
It's a very satisfactory level of four point city no change to prior year.
Capital spending in 2020 was 124 million versus the 157 million in prior year 83 million for expansion 9 billion for cost reduction.
So the 2 million for maintenance of business.
Some acceleration piece of your previous expectations of programs had been required in view of the sharply sharply increasing orders.
For 2021, we expect to increase capex of about $175 million.
Prior to feel strong about two months.
Concerning cash flow generated to be generated in 2020 cash from operations of 315 million, including 16 billion cash taxes for cash at <unk> com.
Two $296 million cash from operations in 2019, including city of 8 million cash taxes for cash repatriation.
We generated in 2020 free cash of $192 million, including $16 million cash taxes for cash repatriation compared to a free cash generation of $140 million in 2019, including 38 million cash taxes for cash.
The penetration.
I think we can see the D. C. Also in the year of unprecedented economic destabilization has continued to live up to its reputation as an accident.
The reliable producer.
Free cash.
Let me go through our main product lines, the most of that.
This always with the assistance.
With resistors, we enjoy a very strong position in the auto industrial Mil and medical market segments.
Of virtually all of the system technologies.
V shape traditionally and historically growing business in the second quarter had suffered substantially from the weakness, especially in automotive, but now is in process of of fast recovery.
Sales from the fourth quarter of the 161 million.
Up by 15 million of about 10% versus prior quarter and other.
Up by 8 million of 5% versus prior year Paul.
Excluding exchange rate impacts.
Sales in 2020 of 606 million.
The down by 56 million of about 8% versus the prior year again, excluding exchange rate impacts.
Book to Bill in the fourth quarter of 40 systems was $1 24.
After the one point or six in prior quarter.
And backfill for the assistance increased from 4.5 months to four nine months.
Due to higher volume gross margin in the quarter increased to 26% of sales from 24%.
The quarter.
Gross margin for the year 2020 was at 25 per cent of sales down from 28% in 2019 due to the low volume.
Inventory turns in the fourth quarter at four five.
Inventory turns for the full year.
Good levels of.
The 4.1.
Low price decline for the sisters minus <unk>, 1% versus prior quarter and minus 2% versus prior year.
The acquisition of ATP is in process to be integrated and we do expect the successful year 2021 based on more volume.
And an even higher focus on specialty from us.
Coming to inductors.
The business consists of power inductors and picnics.
Since the year, so of fast growing business with inductors. The represents one of the greatest success stories of Rishi.
Exploiting the growing need for inductors agenda.
<unk> developed a platform of robust and efficient power inductors and leads the market technically.
Because the magnetics, we are very well positioned in specialty businesses demonstrating steady growth.
Sales of inductors in Q4 of its $75 million down by $4 million was 6% versus prior quarter and down by 2 million of 3% versus the prior year, excluding exchange rate impacts.
Sales in 2020.
Of 294 million were slightly down versus prior year by 6 million of about.
2%.
Excluding exchange rate impacts.
The temporary slowdown of automotive in 2020 also had the impact on the growth of industrials.
Yeah.
Book to Bill in the.
Quarter four for Inductors was one point of three after <unk> 96 in prior quarter.
The backlog is at 4.6 months of the full three months and kind of quarter.
Gross margin in the quarter was it 30 per cent of sales down versus prior quarter, which was at 34% of sales.
But this has been the range.
Exchange rates and higher transportation costs, but the performance in the fourth quarter two of degree.
Gross margin for the year of 2020 force at excellent 32% of sales virtually all of the same level as in prior year.
Inventory turns in the quarter at the very.
I live in the 5.2 as compared to 4.6 for the whole year, we planned for some inventory additions for supporting the service.
There is some price pressure.
Predominantly at the power inductors minus one 7% versus prior quarter and minus three 6% versus prior year.
We continuously expand our manufacturing capacities for power inductors and the BT.
We do expect to return to traditional growth rates in 2021 and ongoing financial success.
The lives.
Coming to the passengers.
Our business with capacitors is based on a broad range of technologies with a strong position in the American and European market niches, we enjoy increasing opportunities in the fields of power transmission and of electric cars, namely in Asia, especially in China.
Sales in Q4 of our $92 million, 2% below prior quarter and 6% below prior year, which excludes exchange of defense.
Year over year capacity the sales decreased from 423 million from 2019 to 362 million in 2020 will by 15% at constant exchange rates.
This was strongly impacted by delays of governmental projects and by a non the repetition of the specific 2019 program.
Two things came together.
The ability of issue in quarter four it was 154 of.
The point of 95.
Previous quarter. The received now of large order of large orders for power capacitors from China.
The backlog increased substantially to $6 two months from 4.4 months in Q3.
Gross margin of the quarter was at 18% of sales down from 20%, mostly due to a less favorable mix.
Gross margin for the year 2020 was at 19% of sales down from 22% in 2019 due to low volume.
Inventory turns in the core the increase to 3.8 as compared to three six for the whole year.
As for the stable.
Minus 2% versus prior quarter of plus 4% versus price.
Yes.
We do expect increased volume and better profitability in 2021.
Opto products.
Vishay is <unk> business with Opto products consists of infrared emitters receivers sensors and couplers as well as of Leds for automotive applications.
The business in 2020 experienced the significant recovery from disappointing results at prior year that had been burdened by major corrections in the supply chain.
Currently we see a really sharp increase in demand.
Sales in the quarter of 68 million.
5% above prior quarter and 29% above prior year.
From exchange rates.
Year over year sales with Opto products went up from 223 million to 237 million.
Or by 5%.
Excluding the exchange rate effects.
Book to Bill in the fourth quarter was $1 46 of the point 97 in prior quarter.
The backlog increased substantially to five point of nine months after four six in Brazil.
The Florida.
Gross margin in the quarter came in at satisfactory 28 per cent of sales of the 33% in the third quarter of which had been the spike.
Gross margin for the year 2020 recovered to a level of <unk> 28 per cent of sales as compared to 24% in prior year, which hit the.
Primarily due to low volume.
Very influenced really high inventory turns of six point, though to put us in Q4 as compared to $5 five in the year 2020.
Prices were fairly stable in fact, one 2% up versus prior quarter.
Line is one 1% versus price.
We remain confident the opto products going forward, but will contribute noticeably to our growth and we are in process to modernize and expand our heightened growth fifth the in Germany.
Coming to the diodes.
Diodes for Vishay represents a broad commodity business, where we are.
Not just the supplier worldwide Vishay offers virtually all technologies as well as the most complete product portfolio the.
The business because of very strong position in the automotive and industrial market segments and keeps growing steadily and profitably since years.
Diodes for the few quarters had suffered from two high inventory levels in the supply chain and from the weakness of its main markets.
The other businesses into the face of strong recovery, we currently see a fairly dramatic upturn in the months.
Sales in the quarter of $139 million.
Up by 15 million of about 12% versus the prior quarter and up by 14 million of 11% versus prior year.
Students exchange of defects.
Year over year sales with diodes decreased from 557 billion to FIFO 3 million of day.
Your line of 10% at constant exchange.
Book to Bill of ratio in Q4 client.
Climbed the proxy to 165.
After the one point or five in the third quarter.
Backlog increased to $6 two months from four seven months.
The quarter gross margin in the quarter improved to <unk> 18 per cent of sales as compared to 17% of the fifth quarter.
Gross margin in the year 2000, the Trinity was at 18% of sales down from 20%.
The down from 20% the prior year due to.
Abstention the lower volume.
Inventory turns increased to four eight as compared to 4.4 for the whole year.
We see a reduced price pressure stable price plus point to really versus prior quarter of minus three seven percentage versus prior year.
We expect profitability of diodes to return to more historic because Davis with increasing volume.
Most of it.
Vishay is one of the market leaders in MOSFET transistors.
As most of its we enjoy a strong and growing market positioning of automotive.
Which in view of an increased use of most of its in automotive will provide the successful future.
We currently experience like in diodes of quite dramatic increase in demand sales.
In the quarter of 132 million, 2% below prior quarter, but 12% above prior year income.
Instant exchange rates.
Year over year of sales because most of its decreased slightly from 549 to 541 billion by 2% excluding exchange rate impacts.
Book to Bill.
Weighted up sharply.
Two 164 in the.
The quarter after <unk> 93.
Yeah.
Backlog climbed to five seven months.
As compared to $3 seven months into third quarter.
Gross margin in the quarter was the 22% of sales no change from prior quarters.
Gross margin in the year 2020 came in the 23 per cent of sales the reduction from 25% in 2019 due to a combination of higher metal prices and the inventory reduction.
Inventory turns in the quarter were $4 three as compared to 4.0 for the entirety of.
Price decline of three.
Relative to enormous.
Minus one 2% versus prior quarter of minus five 6%.
Versus prior year, but given the high market demand, we expect prices to stabilize going forward.
Most fits in terms of the remain key for <unk> growth.
Going forward.
Let me summarize.
I think there is no need to emphasize the 2020 has been the year of unprecedented challenges for the people globally.
The economy in channel.
Italy also for Vishay.
Nevertheless, the full of being should be highlighted.
Electronic components continue see of success story also during difficult times.
Vishay.
Is the remarkably stable enterprise.
Three X quickly and professionally to changes.
It has a viable business model.
And pursues its strange of cheese also during times of Cvs challenges.
We remain excited about the fairly overwhelming opportunities electronics increasingly really enjoy in the future.
Vishay is pea pit.
To participate to the full of students.
Fortunately concerning to but concerning the pandemic there is.
Light at the.
End of the tunnel and the three despite still existing obstacles expects the strong year 2021.
For the first quarter.
At quarter of what exchange rates guide to a sales range between seven 5 million and $745 million at the gross margin of 25 per cent of sales plus minus 60 basis points.
Thanks for your patience.
Thank you Dr. Paul.
We will now open the call to questions Shelby. Please take the first question.
Absolutely as a reminder, if you'd like to ask a question. Please press star one.
First question is from Karl Ackerman of Cowen.
Yes.
Good thank.
Thank you, everyone and thanks, Paul and Lori Peter.
My first question is on inventory could you characterize the health of channel inventory given one of the strongest book to Bill metrics you've had on record I guess are you discounting the 200 million plus in excess of bookings above your revenue guide given signs of double ordering or is your outlook based simply on what you can share.
At the moment debt.
The letter of the Meadowbank.
You know that for quite some time inventory of distribution because of concern of Utica whatsoever, and the direct would be worked down inventory levels of distribution over the time span of nearly a year.
In the meantime, I must say really in the Asia inventories low very low.
No.
And the people for more of them can I exclude the booking not really not safety, but the book to Bill is quite overwhelming 1.6, and really issues. It really rebase our guidance on what we can ship.
Understood I appreciate that I guess theres a follow up.
The last time, you exceeded $700 million of revenue you were able to generate gross margins in the high Twenty's I guess, what would prevent you from achieving that range over the next few quarters given the several cost realignment initiatives you've enacted in the 2018 and then I guess in addition to that are you able to achieve 800.
Or more of revenue of quarter based upon your existing manufacturing capacity.
You know in the context of your and and I guess, how that the <unk>.
Frames your view of for Capex for 2021, Thank you.
Eight of the first of all of the <unk> not achievable.
It depends of course on the product mix as you can imagine.
Got it.
But it isn't the normal mix, it's achievable secondly data of a few factors, which at the moment.
Hum a burden vis vis the times you were referring to.
Number one of this is by far the strongest the U S dollar became relatively weak not not the only vis vis the euro vis vis the euro it doesn't matter because we have a natural hedge free of cost in euro and V of sales in Europe. So it balances kind of but we are producing in many countries in the world in practically all of them.
Came stronger because of either U S. Dollar. This was also the reason why the incremental performance in quarter four was not as perfect as I would have liked it to see.
But as a matter of fact piece of things, we cannot really influence, but it plays the pic roles. Furthermore, transportation costs.
As COVID-19 related to low Christian transportation costs went through the roof and of course, the if you normalize again as soon as the situation of around Corona average normalized and of course the is pricing.
There has been plastics line since the time line.
I believe there was some price pressure, even on the way, especially price pressure, which I believe.
Now in the position to correct a little.
Did I answer your questions.
Yes, you did thank you.
Yes.
Your next question is from route Blue box <unk> of Bank of America.
Hi, Thanks for taking my questions.
For the first question I just wanted to follow up on the margin comments, Dr. Paul and <unk>. The gross margin came in below your guidance I think you mentioned three things the freight duties in metals.
And the guidance for the next quarter of the fiscal <unk> was 25% gross margin at the midpoint. So that's 210 basis points of sequential improvement can you help us understand what are the factors that are going into the sequential improvement how much of that is.
The volume growth how much of that is.
Your expectation of freight costs going down in metals costs. So just help us understand where.
Where the 210 basis points.
It will be achieved.
Group of we do not speculate of the U S. Dollar so it'd be really didn't assume any change do you think it's a matter of fact it is not from the year. We also did not expect transportation costs to come down significantly somewhat yes, somewhat but I believe Ah.
What what really can be stated is the combination of a couple of things.
We believe we have reasons to believe that certain purchasing will become more attractive and of course for the most part of its higher volume, which plays to the volume is the key to the improvement.
Got it.
From my second question can you talk about uses of cash so you've had hundreds of over 100 million of free cash flow over many years, how do you see your spend on buybacks versus dividend.
Versus the M&A at this point in the cycle. So can you can you talk a little bit about use of the uses of cash at this point.
Well first of all of this of course of up to our board to decide which direction. We go but I would suspect that we keep our ISO put in M&A.
And so we'll put foreseeably behalf to put more money into equipment going forward as it looks.
B b pay dividend whatever the HIPAA so the dividend.
Terms of increase of northern pieces of those might be.
Is the decision of the board, but in reality I have some of them. So we keep our eyes open at M&A.
Yeah.
Got it and then sorry for the last question. If I can ask I think you guided higher capex for fiscal 'twenty, one that $175 million.
Which are the areas that you're investing that capex in and do you of any concern that you and if if your competitors are also adding Capex then at some point the other.
Industry can have excess supply versus demand at least in the medium medium term.
So your thoughts on the industry Capex as well as where your own capex is happening.
Really it's the oscillating system.
Since all of the times and looking back there was always the time when the industry had invested somewhat too much but this was always always the used at the very short time after but I think in our case the situations and you can hardly be wrong.
We will put it into most of it we will put it into diodes in opto and especially in doctors' offices in our case, we get from any product lines, the likelihood of being completely wrong in the short term, it's very little.
And so it goes into the main product line speed, we have shown growth over the years.
Okay. Thank you.
Your next question is from Matt Sheerin of Stifel.
Yes. Thank you Dr. Paul I'd like to ask.
Another question regarding the book to Bill ratios, which as you've acknowledged very high in some areas and that tends to spook investors and we're seeing your stock trade down I think the concern that we may be at peak levels and at some point youre going to see a correction.
Whats different and why should we not be concerned and.
In terms of the booking and backlog are you seeing some orders being placed four one.
One to two quarters out, which which is one reason why the book to Bill of it is inflated.
I believe that we have.
Watching bowls, we are watching the shippable backlog and via of watching the the total backlog by nature.
And that's.
Urgency.
And the expectations the shippers of backlog went up into the same for them that means really people want of onto the product I believe passionately of course, it's a catch up situation.
Really it's sort of nervousness to.
Get products.
And there are limitations on the market certain of the lead times of along these days.
I can as I said I can of course, not exclude completed the stopping of ordering in such situations is always top of ordering.
But it doesn't effect I believe our sales expectation for the year, which is good.
And do you have any outlook of visibility beyond Q1, where youre looking at above.
Bob the seasonal growth are you expecting the.
June quarter, which is typically used up for you to be up again or is it too early to tell.
Normally we should say its too early to tell but I'm quite convinced that the second quarter the above the first quarter.
Okay. That's helpful and just on the cost side, you talked about some of those headwinds.
And offsetting that with with volume growth.
Guiding to typical margin contribution.
Could you talk about the the pricing environment, you said Isps.
Or basically it's more stable, but you seem to be end of a pretty strong position here in terms of leverage, particularly the distribution channels. So should we expect that to help margins as you get through the year as well of the Asp's, yes. Indeed in June.
Named it the radio of course, we are never breaking contracts of course, not but in the distribution channel I could imagine that there can be some price increases.
<unk> already impacting starting to impact the second quarter.
Yeah.
Okay and then.
Someone asked about your capacity.
The ability right now and I know you talked about lead times stretched out but.
But if there is upside demand in the next two quarters, particularly in MOSFET and diode where things seem to be pretty tight I mean, do you have capacity in place to meet that upside.
And how big the upside is but upside for sure of.
The combination of own resources in foundries I think we are.
Well positioned.
Okay. Thank you very much from here.
Your next question is from David Williams of loop capital.
Hey, good morning, and thanks for letting me ask the question.
I wanted to just kind of get back into the the inductor segment and just kind of think about the the strength that you had there and with your capacity that you have another areas. How do you think about the the capacity there and have you been constrained at all just given that that demand.
Well do.
You hit the exactly the point, where we have to extend the rate we have to accelerate the expansion.
We are expanding.
Many years and it's never enough Ironically, it's never enough and we are going to try to do something special also force, especially at these power can pass of the line.
The always sold out since many years and the never can catch up at this time I think we will if especially if it.
It's a big success.
Yes, that's the kinds of things.
From that.
Very good.
And then maybe regionally you kind of thinking about the North America, and maybe the Americas region overall, but it's been fairly soft it but just kind of curious if youre seeing strength anywhere or maybe any bright spots that you are looking forward to maybe in terms of growth for 2021.
I think automotive has come out of all of his come around.
Medical is steady military is strong so I do not it's the miracles like Europe by the way is not as booming as Asia you see at the moment the Asia drives to the the show at the moment, but I would say America assets for us at least based on our customers' his enough strong sports.
We are also confident with the U S.
Okay, Great and then maybe just one last one day, if you're if we're thinking about lead times on orders how have they stretched I guess in terms of what are you seeing now are people putting in the order for six to 12 months of are you, saying just longer in terms of weeks or maybe just anything of the magnitude of the the stretch Emily Pennsylvania on the <unk>.
Product languishing.
But you have product lines of its north of 2025 from.
For the people did come.
Due to us now.
You may even find some day diet 30 weeks, but this is not the roof, but the tablets.
Right.
Thanks, So much certainly I appreciate the time.
Your final question is from Harlan sur of J P. Morgan.
Hi, Good morning, Dr. Paul Thanks for taking my question and on the.
The gross margin yeah, it looks like the Contributive margin for Q4 and implied in Q1 guidance is.
It was 43% so it's below your target of 45% of that if we look at.
Back at the 2017 2018 timeframe.
We're driving about 46% contributed margin so given some of the positive dynamics that you've talked about do you see the team getting back to a 45% contributive margin beyond Q1.
Assuming a continued strong demand environment, but of course.
The 45% is our normal level of performance and the couple of things as I tried to explain that came together in the quarter for some of them are really COVID-19 related some of them is currency related there's not much to be done, but I would expect that especially also in the combination of some of them.
Pricing measures Oh.
Our target is definitely to come back to the 45.
Got it okay. Thank you book to Bill strong in Q4 of <unk>.
Somebody mentioned June quarter is typically seasonally stronger for the team. So first question is are you still seeing positive book to bill trends. So far here in Q1, and what end markets are you seeing the most of strength.
10 of these like it's like quarter four is a continuation of quarter four.
So it's the same thing, it's really high book to Bill.
Where does it come from automotive is strong.
I think distribution is a is.
The major part of it distributions from each of part of it the Indonesia, If you look at the inventory levels.
I understand that they order.
Thank you Dr. Paul.
There are no other questions in queue do you all have any closing remarks.
No.
This concludes our fourth quarter conference call. Thank you for your interest in Vishay Intertechnology.
Ladies and gentlemen, this concludes today's conference call. Thank you for your participation you may now disconnect.
Okay.
Okay.
Throughput is the long ago.
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True.
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Thanks, Paul.
Thanks, Paul.
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Net income.
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Thanks, Paul.
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Okay.