Q2 2021 Vishay Intertechnology Inc Earnings Call
Yeah.
Ladies and gentlemen, thank you for standing by and welcome to the Vishay Q2, 2021earnings conference call. At this time all participants are in a listen only mode. After the speaker's presentation there'll be a question and answer session to ask a question. During the session you will need to press star 1 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 turn the conference over to your Speaker today, Peter Henry C. Thank you. Please go ahead Sir.
Thank you Ashley.
Good morning, and welcome to Vishay Intertechnology second quarter 2021 conference call.
With me today Arent Doctor Gerald Paul Reshaped, President and Chief Executive Officer, and Lori lip coming our executive Vice President and Chief Financial Officer.
As usual, we'll start today's call with the CFO, who will review Vishay second quarter 2021 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 Dot 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 centuries shapes and 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 businesses.
It should be considered by investors in conjunction with GAAP measures that we also provide.
On the Investor Relations section of our website you can find a presentation of the second quarter 2021 financial information containing some of the operational metrics Dr. Paul will be discussing.
Now I turn the call over to Chief Financial Officer, Lori lift come in.
Thank you Peter good morning, everyone.
I am sure that most of you have had a chance to review our earnings press release.
I'll focus on some highlights and key metrics.
Vishay reported revenues for Q2 of 819 million a quarterly record.
EPS of 64 cents for the quarter.
Adjusted EPS was <unk> 61 cents for the quarter.
The only reconciling items between GAAP EPS and adjusted EPS are tax related.
There were no reconciling items impacting gross or operating margins.
Revenues in the quarter were 18.819 million up by 7.1% from previous quarter.
And up by 48 per cent compared to prior year.
Gross margin was 28 per cent operating margin was 15.3 per cent.
There were no reconciling items to arrive at adjusted operating margin.
EPS was <unk> 64 cents.
Adjusted EPS was <unk> 61 cents.
EBITDA was 163 million or $19.9 per cent.
There were no reconciling items to arrive at adjusted EBITDA.
Reconciling versus prior quarter.
Operating income quarter to 2021 compared to operating income from prior quarter.
Based on 54 million higher sales or 55 million higher excluding exchange rate impacts.
Operating income increased by 28 million.
2.125 million in Q2.2021 from 97 million in Q1.2021.
The main elements were.
Average selling prices had a positive impact of 8 million.
Representing 1 point O S P increase.
The volume increased with a positive impact of 22 million.
Equivalent to a 6.1 per cent increase in volume.
Variable costs remained flat in total cost reductions and volume related efficiencies offset increases in materials services and metal prices.
Fixed costs remained flat in total in line with our guidance.
Reconciling versus prior year.
Operating income quarter, 2.2021 compared to adjusted operating income in quarter 2.2020.
Based on 237 million higher sales or.
Our $215 million, excluding exchange rate impacts adjusted operating income increased by 84 million.
2.125 million in Q2.2021.
From 42 million in Q2.2020.
The main elements were.
Average selling prices had a negative impact of 2 million, representing a 0.3 per cent S. Peter time.
Volume increased with a positive impact of 101 million.
Representing a $36.4 per cent increase.
Variable cost decreased with a positive impact of $6 million.
Primarily due to volume related increased manufacturing efficiencies and cost reduction efforts, which more than offset higher metal prices annual wage increases and higher tariffs.
Fixed costs increased with a negative impact of 19 million.
Primarily due to annual wage increases and higher incentive compensation, partially offset by our restructuring programs.
Inventory impacts had a positive impact of $5 million.
Exchange rates had a negative impact of 6 million.
Selling general and administrative expenses for the quarter were 104 million in line with expectations.
For quarter, 3.2021, our expectations are approximately $104 million of SG&A expenses.
For the full year expectations are approximately 420 million at the exchange rates of quarter 2.
The debt shown on the face of the balance sheet at quarter end is comprised of the convertible notes due 2025 net of debt issuance costs.
There were no amounts outstanding on our revolving credit facility at the end of the quarter.
However, we did use the revolver from time to time during Q2 to meet short term financing needs and 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.
We had total liquidity of $1.6 billion at quarter end.
Cash and short term investments comprised 856 million.
And there were no amounts outstanding on our $750 million credit facility.
Yeah.
Total shares outstanding at quarter end were $145 million.
The expected share count for EPS purposes for the third quarter 2021 is approximately $145.5 million.
Our convertible debt repurchase activity over the past 3 years together with the adoption of the new convertible debt standard significantly reduces the variability of our EPS share count.
Our U S. GAAP tax rate year to date was approximately 19%, which mathematically yields a rate of 20 per cent for Q2.
We recorded benefits of $3.9 million for the quarter and $8.3 million year to date due to changes in tax regulations.
Our normalized effective tax rate, which excludes the unusual tax items was approximately 24 per cent for the quarter and 23 per cent for the year to date periods.
We expect our normalized effective tax rate for the full year 2021 to be between 22 per cent 24 per cent.
Our consolidated effective tax rate is based on an assumed level and mix of income among our various taxing jurisdictions a shift in income could result in significantly different results.
Also a significant change in U S tax laws or regulations could result in significantly different results.
Yeah.
Cash from operations for the quarter was $117 million.
Capital expenditures for the quarter were $32 million.
Free cash for the quarter was $85 million.
For the trailing 12 months cash from operations was $365 million.
Capital expenditures were $135 million.
Split approximately for expansion $86 million.
For cost reduction 9 million from maintenance of business $40 million.
Free cash generation for the trailing 12 month period was $230 million.
The trailing 12 month period includes 30 million cash taxes paid for both the 2020 and 2021 installment of the U S tax reform transition tax.
The 2020 installment was paid in Q3.2020, whereas the 2021 installment was paid in Q2.
Yeah.
Vishay has consistently generated in excess of 100 million cash flows from operations in each of the past 26 years.
And greater than 200 million for the past 19 years.
Backlog at the end of Q2 was $2 billion 50.
Or 7.5 months of sales.
Inventories increased quarter over quarter by $31 million, excluding exchange rate impacts.
Days of inventory outstanding were 76 days.
Days sales outstanding for the quarter were 43 days.
Days payables outstanding for the quarter were 33 days, resulting in a cash conversion cycle of 86 days.
Now I will turn the call over to our Chief Executive Officer, Dr. Gerald Paul.
Thank you Julien good morning, everybody.
Also in the second quarter, the steep up to and of our business visible since October of last year continued.
We keep ramping up critical manufacturing capacities, increasing revenues and profits further.
Quite excellent plant efficiencies the impact of price increases.
Our traditional discipline and fixed cost to support the financial results.
Vishay in the second quarter achieved a gross margin of 28 per cent of sales and operating margin of 15.3% of sales.
<unk> per share of Thunder point, 64, and adjusted earnings per share of total appointed 61.
We in the second quarter generated 85 million of free cash and we too expect another solid year of cash generation.
The economic environment for the electronics business continues to be exceptional with sales and backlogs at an historical high.
Virtually all markets.
Currently I in excellent shape and supply chains continue to be rather depleted.
Despite all the efforts to expand manufacturing capacities quickly.
Lead times for many product lines have stretched out rapidly and massively.
Price pressure presently is very low and selected price increases are being implemented passion, we require to offset increased costs from the metals and transportation.
Commenting on the regions we.
We see a continued strong performance in Asia, and India Americas.
Europe is somewhat lagging due to temporary supply problems in the automotive sector caused by a lack of Ics.
The industrial segment drives demand in all the regions.
Distribution in all hemispheres continues to be extremely hungry for product.
Talking about distribution global distribution continues to get overwhelmed with orders of you see a record high since at least 15 years.
P U S. In the second quarter was 5% over prior quarter and a remarkable 45 per cent over prior year.
After massive increases in the first quarter P. O S increased further in all regions.
By 3% in the Americas by.
By 6% and Asia and by 5 percentage Europe.
Our global distribution inventory has stabilized on very low partially critically low levels.
Inventory turns of Copel distribution increased to quite extreme 4.4 from 4.3 in prior quarter.
In the Americas 2.1.
After 1.9 in Q1 and 1.4 in prior year.
In Asia 7.4 turns after 6.7 in Q1 and 4.1 in prior year.
4.6 turns in Europe. After a 4 point for Q1 and 3 point all in prior year.
Talking about the various industry segments, we serve.
Total motive continues strong globally with Oems continuing to struggle for replenishing vehicle inventory.
The increase of electronic content clearly accelerates.
There are some temporary supply supply problems.
Leading to some artificial slowdown of the industry.
Still expect previously forecasted growth of 10% versus prior year in terms of vehicles.
Yeah.
We see and the exceptional growth of the industrial sectors, which indicates an ongoing broad global upturn.
Factory automation and accelerated residential development governmental investments in power generation and transmission systems.
As well as alternative energy systems are driving the demand.
Markets for computer and peripheral equipment are holding up well.
5 Chi base station equipment continues to show promising growth in telecom.
Military spending continues reasonably strong commercial aerospace showing first signs of recovery.
The medical sector stabilized on a high level and consumer market sectors continued to show growth driven by high rates of home construction trades.
Traditional TV and gaming.
Coming to the business development for Vishay.
Due to high orders in backlog since based on the continued increase of manufacturing capacities Q.
Q2 sales excluding exchange impacts came in at a record and above the midpoint of our guidance.
We achieved sales of 819 million versus 7 and 65 million in prior quarter and $582 million in prior year.
Excluding exchange rate effects sales in Q2 were up by 55 million or by 7% versus prior quarter and up by 215 billion or 36% versus prior year.
Book to Bill in the second quarter remained on a very high level of 1 point 38 after 1.6 to 7 in prior quarter.
1 point 41 for distribution after 1 point to 89 in quarter 1.
1 point 34 for Oems after 1 point 41.
1 point 41 for semiconductor yourself, the 1 point 86 in Q1.
1 point 35 for Passives after 1.5, all in quarter 1.
1 point 33 for the Americas. After 1 point 42 in the first quarter.
1 point to 29 for Asia. After 1 point 86 in Q1.
1 point 54 for Europe. After 1 point 62 in Q1.
Backlog in the second quarter climbed to another record high of 7.5 months after 6.8 months in Q1.
8.4 months in semis after 7.7 months.
In quarter, 1 and 6.7 months in passives after 5.9 months last quarter.
There is practically no price decline in fact, there are some increases quarter over quarter.
We said, we'd prior quarter, we saw a price increase of 1 point or per cent and versus prior year, a slight loss of 0.3 per cent.
Semi is these numbers for an increase of 1.5% versus prior quarter.
And a slight decrease of 0.7% versus prior year for passives price increases plus 0.4% versus prior quarter and plus 0.1 per cent.
The prior year.
Some highlights of operations.
Thanks to continued excellent plant efficiencies and despite still hydrants petition in metal costs.
Contributive margin in the second quarter improved further.
Returning to traditional levels.
SG&A costs in the second quarter came in at 1 O 4 million according to expectations when excluding exchange rate effects.
Manufacturing fixed costs in the second quarter came in at 141 billion.
And according to expectation without ex rate effects.
Total employment at the end of the second quarter was 22000 and 502% up from prior quarter.
It's 22016.
Excluding exchange rate impacts inventories in the quarter increased by $31 million 11 million in raw materials, and 20 million in van process and finished goods.
Inventory turns in the second quarter remained at a very high level of 4.8.
Capital spending in Q2 was 32 million versus 25 million in prior year 20 million for expansion to.
<unk> 2 million for cost reduction and 10 billion for the maintenance of business.
In view of the.
Extremely high market demand to be accelerating midterm expansion programs noticeably.
Now expect for the year 'twenty, 1 capex of approximately $250 million.
We generated in the second quarter cash from operations of $365 million on a trailing 12 months basis.
We generated in the second quarter free cash of 230 million again on a trailing 12 months basis.
Despite increased Capex. We also for the current year expect the solid generation of free cash quite in line with our tradition.
Let me come to our product lines and a start as always with assist us with.
With resistors, we enjoy a very strong position in the auto industrial military and medical market segments.
We offer virtually all resistor technologies and a globally known as a reliable and high quality supplier of the broadest product range.
Bj's traditional and historically growing business history covered completely from the pandemic running at record levels now.
Sales in the quarter book 195 million.
Up by 8 million or 4% versus prior quarter and up by 47 billion or 32% versus prior year, all excluding exchange rate impacts.
Book to Bill ratio in the second quarter continued strong at 1 point thirty-nine after 1.5 all in prior quarter.
Backlog increased further to 6.6 months from 5.6 months in prior quarter.
Due to higher volume and quite excellent efficiencies in the plants crossmatching into second quarter increased further to 30% of sales from 29% in prior quarter.
Inventory turns in the quarter remained.
At a very high level of 5.1, selling prices are increasing plus <unk>, 5% versus prior quarter and plus 0.6% versus prior year.
We are in process to race critical manufacturing capacities for resistor chips and for power via bounce substantially opening also a new production site in China, and we do expect a very successful year 40 systems.
Coming to inductors.
This business consists of power inductors and magnetics since she is this is our fastest growing business.
We have in passives and represents 1 of the greatest success stories of Vishay.
Exploiting the growing need for inductors in general Vishay developed a platform of robust insufficient power inductors and leads the market technically.
With magnetics, we are very well positioned in specialty businesses demonstrating steady growth.
Sales of inductors in the second quarter were 86 million.
Up by 2 million or 3% versus prior quarter.
And up by $19 million or 29% versus prior year or excluding exchange rate effects.
Book to Bill day, showing to second quarter increased to 1 point to 21. After 1 point 13 in prior quarter backlog grew to 5.1 months from 4.5 in Q1.
Gross margin reached a quite excellent level of 34% of sales after 33% in the first quarter.
Inventory turns normalized to a level of 4.7 down from 5.1 in the first quarter.
We see a reduced price price pressure, we see price increases of 0.8 per cent versus prior quarter and a decline of 2.2% versus prior year.
We are accelerating our next steps of capacity expansion for power inductors in order to get ahead of the demand curve.
Capacitors.
Our business with capacitors is based on a broad range of technologies with a strong position in American and European market niches.
We enjoy increasing opportunities in the fields of power transmission and of electrical cash, namely in Asia, especially in China.
Sales in the second quarter were $120 million, 13% above prior quarter and 36% above prior year without exchange rate effects.
Book to Bill of issued a second quarter remained at a high level of 1 point 37. After 1 point 73 in prior quarter backlog increased to a record level of 7.7 months from several important 4 months in Q1.
Gross margin.
In the quarter improved further to 24% of sales coming from 23% in Q1.
Inventory turns in the quarter remained at 3.9 cents.
<unk> prices are increasing plus 0.2% versus prior quarter, plus 1% versus prior year.
We also expect a good year for capacitors driven by large governmental projects in China by a solid mill business and they're very friendly business environment in general.
Opto products.
Vishay <unk> business with Opto products consists of infrared emitters receivers sensors and couplers.
The business in 2020 experienced a significant recovery from disappointing results.
In prior years also in October we see a strong acceleration of demand sales in the quarter was 76 million.
3% below prior quarter, but 47% above prior year.
Exchange rate impacts.
Book to Bill in the second quarter remained at a very high level of 1 point 69. After 1 point 66 in the first quarter.
Backlog continued to grow to an extreme high of 9.3 months. After 7 months in Q1, partially due to COVID-19 related restrictions of manufacturing capacities in Malaysia. This is the only place we incurred such restrictions.
Gross margin in the second quarter have remained at an excellent level of 32% of sales after 33% into first quarter. I think we can say that up to spec to its historical profitability level.
We see more normal inventory turns of 5.8 in the quarter after 6.4.
In Q1.
Also in the case of up to selling price is that going up plus 1.7% in prior quarter and plus 1.5% versus prior year.
And we are in process to modernize and expand the Heilbronn fab in Germany.
Diodes.
Diodes for Vishay represents a broad commodity business, where we are the largest supplier worldwide.
Vishay offers virtually all technologies as well as the most complete product portfolio.
The business has a very strong position in the automotive and industrial market segments and keeps growing steadily and profitably since years.
The business has started to exceed pre pandemic levels.
Sales in the quarter per $175 million.
Up by 18 million or by 11% versus prior quarter and up by 47 billion or 36% versus prior year without exchange rate effects.
There is a continued strong book to Bill ratio of 1 point 45 in the quarter. After 1 point to 85 in the first quarter.
Backlog climbed to an extreme high of 8.9 months from 7.9 months in prior quarter gross margin continued to improve to now 24 per cent of sales as compared to 22% in Q1.
Inventory turns were at 4.7 after 4.8 in prior quarter.
Also for diodes, selling prices, increasing by 1.7% versus prior quarter and 5.2% versus prior year.
We decided for a substantial expansion of our in house fab capacity in Taipei, introducing at the same time the 8 inch technology relevant also net of course for cost reduction.
As expected diodes with a return to normal volumes has reached a pre pandemic profitability levels.
Most fits.
Vishay is 1 of the market leaders in most fit transistors.
It's most fits we enjoy a strong and growing market positioning, particularly in automotive.
Which in view of an increase use of most fits in automotive will provide a successful future.
Demand has reached extreme levels and increases further.
Sales in the quarter per 168 million.
Our record level, 10% above prior quarter, and 39% above prior year, excluding exchange rate effects.
Book to Bill ratio for most fits in the quarter was 1 point 26. After 1 point 97 in the first quarter.
Backlog remained.
At an extreme level of 7.9 months as compared to 7.8 in Q1.
Due to a combination of higher volume better prices and even better efficiencies gross margin in the quarter increased noticeably to <unk> 28 per cent of sales up from 24% in prior quarter.
Inventory turns in the quarter increased further to 5 pointed all from 4.7 in Q1.
V C.
Decreasing price pressure, we have indeed increases of price decrease every prior quarter of 1.2% and -2.5% versus price here.
Much lower than normal.
Most of its remain key for Vishay is growth going forward.
Let me summarize.
Our industry and also vishay continues to operate in a quite excellent economic environment.
There is an unstoppable global trend towards electronic vacation it makes our future promising.
We are exploiting the present high demand to the best we can.
But beyond this we expect a mid term acceleration of the electronic vacation to be able to buy it.
We are preparing ourselves in terms of fate of available machine capacities and will provide the capital required.
While enjoying higher growth we will definitely.
Keep our feet on the ground in terms of fixed costs as we always did so in the past.
But we do plan to increase further our technical presence in the markets and we will increase critical R&D of sources.
We will do our utmost to remain the same fear and service oriented supply are close to our customers to be unknown for them.
The results for the third quarter look promising.
We guide to a sales range between 810, and 850 million at a gross margin of 28.3% plus or -50 basis points.
Thank you very much return to call Peter.
Thank you Dr. Paul we'll now open the call to questions Ashley Please take the first question.
And your first question comes from Karl Ackerman with Cowen.
Yes, thank you very much.
I appreciate the question.
From Paul.
Paul.
For you first.
1 of your peers last week at an analyst day articulate if they want to emphasize this great products that can expand your Tam.
I think in excess of $500 million.
Now your third quarter outlook include some initial benefit from that opportunity and if not what sort of engagements have you had that might allow you to gain a stronger foothold as your industry here a day emphasizes areas of overlap per year.
So first of all we live in times, when the market opportunities to not really determined to sales level at the moment. It is indeed, the manufacturing capability that determines the sales level.
This is really the case at the moment is not always so but in this phase of our of our business. That's clearly the case, so really its manufacturing that determines the level of course, we are.
Broad line as you know and we are also proud to to be in practically all the relevant market sectors present, and I think I said it we are going to increase further our take me good representation. There. So we're going to add engineers in the field, which we have done through a couple of times, it's not new but we want to increase further in order to participate.
And all these various programs.
In all these industry segments, but we are very very presented in automotive, especially I think we are very close to the pulse of the industry and I think we have well positioned so whatever happens with benefit vishay.
I appreciate that.
And from my follow up question, you indicated that you would be spending a little bit more on capacity expansion.
I think rightfully so given backlog.
As extending closer to 9 months for at least your diodes in opto products.
At the same time, you've got nearly a record level of cash on the balance sheet. I also believe the last call. You had indicated you would be firming up your.
Our capital allocation strategy around this time frame and so I was hoping you might address that today.
Yeah.
Whether you know how are you thinking about.
Share buybacks and or perhaps dividend just give me the record amount of.
Cash that you have today as well as what appears to be a very strong outlook.
For the third quarter, but.
The interim periods well thank you.
Well first of all it is not the answer to your question really but just to lay the groundwork this higher capex, which we are showing this year, it's very likely to continue for a few years is a bit of effect. So we have to spend more capital exploiting to chances, which we I think undoubtedly if in the future undoubtedly concerning.
What you said, what we want to to resolve the cash produced which still will be left over from that snow Christian and.
And you are not mistaken via indeed, I admit zophar discussion how to return more to shareholders is a bit of a final decision has not been taken in which way we are going to do it but the board in particular will deal with that in a very foreseeable future cannot say more at this point in time.
Thank you.
Your next question comes from reported by the <unk> with Bank of America.
Hi, Thank you for taking my questions.
My first question is on gross margins.
Can you help us quantify the 150 basis points of improvement that you saw in the second quarter, how much of that was.
Volumes, how much of that was mix or FX or commodity costs.
If you can just help us quantify like what are the different.
<unk> that you've had that helped with the 150 basis points.
As a matter of fact with the biggest impact in our cases over volume as a med is principally the case on top of that.
I think fee also hit additional efficiency gains.
Helped to offset costs, which are high at the moment in metals and crew further.
And in the auto transportation reach out a high level. These are the nature of the day.
Major issues.
I think this is basically the prices of course helped if veeva increasing some prices.
You know our industries to industry of price decline in a way in a cost reduction must be faster than that which normally is we're at least compensating that as soon as the price declined the pressure of price decline mitigates. It. This is the time wherever you can see that is announced and then of course the earth.
Cost reduction wins, so to speak in and did you see a better performance overall, so I believe it's the volume it's the prices and deficiencies.
Yes, thanks, thanks for that that make sense Paul.
I just have a couple of quick follow ups.
On a in this wants to 1 of the 1 of the prior questions I think you said capex.
Should also remained high in the next couple of years, given you want to add capacity and take advantage of that so I think you guided to 150 million for fiscal 'twenty 1.
Should we expect the same level in in our fiscal 'twenty 2.
You are I would say on our base business as a matter of fact, we would be we would expect it to build the same day, we have not finalized any budget in this case, but I would suspect if you didn't do any special projects on top of everything I believe the 250, so could guess for Vishay next year also.
And if I look at this year, so far you've done about 60 million of Capex and so the $250 million for the full year. Like you said is an acceleration in <unk> and <unk> how should we when do you think that Capex comes in.
When do you think that'll be coupled that capacity.
First of all this is over is a disease that during the year. The capex really is more towards the end of the year. If you know day effect itself. It's the same every year, but I'm pretty sure that we are going to spend this since I think from turning capacity. We are adding capacity I think people go into the new year for all V C.
It was a 5% higher capacity and we will go a year later.
Into the year 'twenty, 3 day, with a 15% to 18% higher capacity.
Okay. That's helpful. I appreciate that and just from my last question. If I can ask about price increases, it's encouraging and after many quarters you've had sequential price increase.
This quarter do you think that can sustain in the September and December quarters. Do you think price has been desk, yes P to P clearly too.
I would suspect that what type of what happened in Q2 will also happen in Q3 again.
And is that everyone wants to cost increases or is that just because you know the end market demand is higher or both.
At the possibility of course comes comes from the from a demand, but also it's driven and required partially by higher costs in particular on the metals and also in transportation as a matter of fact, okay. Thank you for all the details appreciate it. Thank you.
But again for any questions. Please press Star then the number 1 and your telephone keypad and.
And your next question comes from Matt Sheerin with Stifel.
Yes. Thank you good morning, everyone. Dr. Paul I wanted to ask about the the strong distribution sales both in <unk> and the point of sale and sell through in distribution. I guess 1 question is it looks like distribution inventories are still lean, but do you have a sense of the distribute distributor.
<unk> inventories, whether there and they're starting to build inventory or that's flushing through in terms of their end products.
Well you know very well met we don't have a reporting there. So it's it's our impression that fast inventory is very lean as you indicated.
So lean as I personally cannot really remember having seen it like that.
Concerning the end customers I can only give you our impression of course, we are discussing that instead of hidden inventory build somewhere and really we don't see it we don't see it as a matter of fact in automotive and particularly if you have 50% of everything through consignment stocks and into temptation.
Built in house inventories their force is much lower.
But even in the other product line to be or not under the impression that inventory builds at the Williams as a matter of fact at this point.
Okay, and then I saw that your automotive segment was down roughly 5% sequentially.
In line with some of your peers.
Is that just a function of the issues you talked about it in terms of production and as you look Inc.
And to the rest of the year do you see that picking up in sort of June marked the bottom. If you will and do you expect revenue there to pick up.
Well, it's exactly concerns us too so we had some discussions with the large customers and as a matter of fact, let me reconfirm. It is clearly it only.
The lack of Ics, which they have.
It's a matter of fact, the demand forecast is there the lead times are long and they really wait for a better supply in Ics is so it's as simple as that and we do expect it to all these costs that are on order will be will have to be built in as soon as this is.
Shortages over when this will be I don't know, we expected it to be already better in the second quarter and of course of the second quarter third quarter, but obviously, it's another delay.
I would suspect this will drag into quarter 4 at least.
Okay, and just lastly concerning your commentary about book to bills in backlog it looks like backlog and most of your product areas are at record highs yet your book to Bill is coming in a little bit is that just a function of the higher sales levels that you're adding or is there anything to read into that.
Thank the lead times have come to a point that is quite useless to put on top of it.
Orders with a book to creating a book to bill of closer to 1.5% to 2 it's just a normal nobody effect of really fluid capacities I believe.
The business is as hot as it was it was kind of misleading hidden away.
Okay very good thank you.
And again that is star 1 for any questions.
At this time there are no further questions.
Yeah.
Thank you for joining us on today's call and for your interest in Vishay Intertechnology.
This concludes our second quarter 2021 call.
That concludes today's conference. Thank you for your participation you may now disconnect.