Q4 2021 Vishay Intertechnology Inc Earnings Call
Greetings and welcome to Vishay, Intertechnology fourth quarter and year 2021 earnings call. At this time, all participants are in a listen only mode.
Brief question and answer session will follow the formal presentation.
If anyone should require operator assistance during the conference. Please press star zero on your telephone keypad.
As a reminder, this conference is being recorded it is now my pleasure to introduce your host Peter <unk> head of Investor Relations.
Thank you Sheri good.
Good morning, and welcome to our fourth quarter and year 2021 conference call.
With me today are Doctor Gerald Paul <unk>, President and Chief Executive Officer.
And glory lip come in our executive Vice President and Chief Financial Officer.
As usual, we'll start today's call with the CFO , who will review V shaped fourth quarter and year 2021 financial results.
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, and shaves 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 and 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 fourth quarter and year 2021 financial information.
Containing some of the operational metrics, Dr. Paul will be discussing.
Now I turn the call over to Chief Financial Officer, Laurie that come in.
Thank you Peter and 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.
Nishu reported revenues for Q4 of 843 million.
EPS was <unk> 25 cents for the quarter.
Adjusted EPS for 62 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.
Yesterday, we announced our stockholder return policy, whereby vishay will return at least 70% of annual free cash to stockholders directly in the form of dividends or indirectly in the form of stock repurchases.
For 2022, we intend to return at least 100 million.
Yeah.
As a direct result of a change in tax law in Israel during the fourth quarter. The company made a determination that substantially all unremitted foreign earnings in Israel, I'm no longer permanently reinvested.
The distribution of these foreign earnings to the United States will initially be used to fund the stockholder return policy.
Yeah.
We recorded additional tax expense of $53 million during quarter four as a result of this tax law change in Israel.
Revenues in 2021 3.240 billion up by 29, 5% from prior year.
Gross margin was 27, 4%.
Operating margin was 14, 4%.
There were no reconciling items to arrive at adjusted operating margin.
EPS was $2.05.
Adjusted EPS was $2.32.
EBITDA was 618 million or 19, 1%.
There were no reconciling items to arrive at adjusted EBITDA.
Revenues in the quarter were $843 million.
By three 6% from previous quarter.
And Ah by 26, 4% compared to prior year.
Gross margin was 27, 3%.
Operating margin was 14, 4%.
There were no reconciling items to arrive at adjusted operating margin.
It was 25 cents.
Adjusted EPS was <unk> 62 cents.
EBITDA was 160 million or 18, 9%.
There were no reconciling items to arrive at adjusted EBITDA.
Yeah.
Reconciling versus prior quarter operating income quarter, four 2021 compared to operating income for prior quarter.
Based on 29 million higher sales.
37 million higher sales, excluding ex rate impacts.
Net income decreased by 2 million to.
Two 122 million in Q4 2021 from $124 million in Q3 2021.
The main elements were average selling prices had a positive impact of 11 million, representing a one 3% S. P M. Kris.
Volume increased with a positive impact of 14 million equivalent to a three 2% increase in volume.
Variable costs increased with a negative impact of 4 million, primarily due to increases in logistics and materials and surfaces not completely offset by cost reductions.
Fixed cost increased with a negative impact of 13 million.
Primarily due to higher repairs and maintenance costs R&D expenses and other individually insignificant items.
Inventory impacts had a negative impact of $6 million.
Exchange rates had a negative effect of eight 3 million.
Reconciling versus prior year.
Operating income quarter, four 2021 compared to adjusted operating income in quarter four 2020.
Based on 176 million of higher sales or $187 million, excluding exchange rate impacts.
Adjusted operating income increased by 62 million to $122 million in Q4, 2021 from $60 million in Q4 2020.
The main elements were average selling prices had a positive impact of 28 million, representing a 3.4% S. P increased.
Volume increased with a positive impact of 76 million, representing a 23, 2% increased.
Variable costs increased with a negative impact of $5 million, primarily due to increases in cost of materials and services metals labor logistics, not completely offset by manufacturing efficiencies and cost reduction efforts.
Fixed cost increase for the negative impact of 25 million.
Primarily due to annual wage increases and higher incentive compensation as well as general inflation.
Inventory impacts had a negative impact of 2 million.
Exchange rates had a negative effect of 8 million.
Reconciling the full year 2021 versus 2020.
Operating income for the year 2021, compared to adjusted operating income for the year 2020 based on 739 million higher sales were $704 million, excluding exchange rate impacts adjusted operating income increased by $254 million.
Two 468 million in 2021 to.
$214 million in 2020.
The main elements were.
Average selling prices had a positive impact of 32 million, representing 1.0% S. P M. Kris.
Volume increased with a positive impact of 307 million, representing a 26, 2% increase.
Variable costs remained on the same level as 2020.
Primarily due to increased manufacturing efficiencies and cost reduction efforts, which offset higher metal prices customs and duties labor cost.
Wilson services and logistics.
Fixed costs increased with a negative impact of 68 million.
Primarily due to annual wage increases higher incentive compensation as well as general inflation.
Inventory impacts had a positive impact of 12 million.
Exchange rates had a negative effect of $29 million.
Selling general and administrative expenses for the quarter were $108 million.
Higher than expected due to individually insignificant items.
Selling general and administrative expenses for the year were $420 million.
Yeah.
For Q1 2022, our expectations are approximately $112 million of SG&A expenses.
The increase is primarily due to wage inflation and uneven attribution of stock compensation expense.
For the full year 2022, our expectations are 445 million SG&A expenses.
Based on our cost cycle, our SG&A expenses are expected to be at the highest quarterly level in quarter one.
The debt shown on the face of the balance sheet at quarter end is comprised of the convertible notes due in 2025 net of debt issuance cost.
There were no amounts outstanding on our revolving credit facility at the end of the quarter.
However, we did use a revolver from time to time during quarter four 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 a total liquidity of $1 7 billion at quarter end.
Cash and short term investments comprised $921 million.
And there were no amounts outstanding on our $750 million credit facility.
Total shares outstanding at quarter end for $145 million.
The expected share count for EPS purposes for the first quarter 2022, it's approximately 146 million.
Excluding any impact of share repurchases.
The full year effective tax rate in the U S. GAAP basis was approximately 31%, which mathematically yields a rate of 68% for quarter four.
The fourth quarter and year to date GAAP rates include additional tax expense of $53 million as a direct result of an Israeli tax law change.
The year to date GAAP rate also includes a tax benefit of $5 7 million due to the reversal of deferred tax valuation allowances in certain jurisdictions.
And benefits of $8 3 million due to changes in tax regulations recorded it in earlier quarters.
Our normalized effective tax rate, which excludes the unusual tax items was approximately 22% for the year and 21% for quarter four.
We expect our normalized effective tax rate for full year 2022 to be between 22 and 24%.
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.
Cash flows from operations for the quarter was 147 million.
Capital expenditures for the quarter were 100 million.
Free cash for the quarter was 46 million.
For the full year cash from operations was 457 million.
Capital expenditures were $218 million.
Split approximately.
For expansion $141 million.
For cost reduction 12 million.
For maintenance of business $65 million.
Free cash generation for the trailing 12 months period was $240 million.
The full year period includes 15 million cash taxes paid for the 2021 installment after U S tax reform transition tax.
Vishay has consistently generated in excess of 100 million cash flows from operations in each of the past now 27 years.
And greater than 200 million for the past 20 years.
Backlog at the end of quarter four was at 2.307 billion or 8.2 months of sales.
Inventories increased quarter over quarter by $8 million, excluding exchange rate impacts.
Days of inventory outstanding were 79 days.
Days of sales outstanding for the quarter were 42 days.
Days of payables outstanding for the quarter were 35 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.
Despite ongoing pandemic related issues.
And then increased inflation rate 2021 will be she has become one of its most successful years ever.
Vishay like electronics in general throughout the year enjoyed quite excellent market conditions in virtually all market segments worldwide.
Driving to maximize production output, we continued to expand critical manufacturing capacities there.
Finding at the same time ambitious targets and missions for supporting future accelerated growth.
For the year I think we achieved strong results gross margin of 27.4% of sales versus 23.3% in 2020 adjusted gross much and also a 27, 4% versus 23, 4% last year.
Operating margin of 14, 4% of sales versus eight 4% in 2020.
Adjusted operating much and also a 14.4% of sales versus eight 5% in 2020.
Earnings per share of $2 five versus 85 cents in 2020 adjusted earnings per share of $2 32 versus 92 cents in 2020.
The generation of free cash also in 2021 remained on a quite excellent level.
<unk> in 2020 different generated free cash of 240 million, despite our high rate of Capex.
Yeah.
The fourth quarter shows a continuation of our strong financial performance in prior quarters. However, it's a flat gross margin.
Vishay in the fourth quarter achieved a gross margin of 27.3% of sales versus 27, 7% in the third quarter.
On an operating margin of 14, 4% of sales versus 15, 2% in the third quarter.
Earnings per share of 25 cents versus 67 cents in the third quarter.
Adjusted earnings per share of 62 cents versus 63 cents in the third quarter.
Vishay in Q4 generated 46 million of free cash.
Yeah.
Let me talk about the economic environment.
2021 in our industry will be remembered as a fairly unique here of a strong recovery or do you have may I say boom here.
Correct rise by record orders record backlogs and lead times and very low inventory levels in the supply chain.
Virtually all market segments globally, we are flourishing except for the automotive sector that suffered from shortages of supply which for sure will be temporary.
Sales of the component manufacturers in 2021, more or less we are limited by their manufacturing capacities shortages of supply continue to exist.
Increased inflationary pressures on the cost commanded broad price increases.
The widely accepted by the markets.
All regions remain exceptionally strong showing a continued robust demand.
In all regions remains close or above all time high is.
Continuing to grow further.
Global distribution remains confident concerning their short and midterm business outlook in view of very high backlogs and ongoing and the strong U S.
In the year 2021.
Soft global distribution was 32% above prior year running at record levels.
P O S. In the fourth quarter was on the level of prior quarter and 30% above prior year.
Especially the U S and Asia is it's an all time record high.
Global inventory in the fourth quarter increased by $40 million versus prior quarter and by 49 million versus prior year.
There is an impact of price increases during the year, indicating a lower increase in terms of pieces.
Inventory turns of global distribution in the fourth quarter, it's a still high level of 3.9.
Slightly down from 4.2 in prior quarter in the Americas. Two two turns after two point to us in quarter, three and 1.6 in prior year.
In Asia 5.3 towns after 6.1 tons in quarter, three and five point O in prior year.
In Europe full 0.3 turns after 4.5 turns and city point too.
In prior year.
Coming to the industrial segments.
After several quarters of relatively weak performance automotive market seemingly started to recover in the fourth quarter.
Customer supply in particular with IC devices has started to improve.
Also in light of vehicle inventory clothing.
Remaining globally depleted, we expect a strong year 2021 in automotive.
The industrial segment.
Continued to provide solid growth, reflecting increased electrification across a wide range of applications.
Industrial automation robotics continues to accelerate.
We also see a continued recovery in oil and gas markets.
Computing markets performed well driven by a strong service sector.
In the Telecom segment, five chi starts to gain momentum globally.
D. A M. S business continues to develop positively also supported by our beginning recovery of the commercial avionic sector.
Yeah conditioning, TV and gaming sectors keep supporting the consumer sector.
Medical remains positive with a recovery of traditional applications.
Due to an exceptionally strong performance in particular with our Chinese plants versus original expectations.
The fourth quarter sales, excluding ex rate impacts came in above the midpoint of our guidance.
We achieved sales of 843 million versus 814 billion in prior quarter and 667 billion in prior year.
Excluding ex rate effects.
In the fourth quarter.
Up by 37 billion or about 5% versus prior quarter and up by 187 billion or 28% versus prior year.
Sales in the year 2021, well three.
Three point 24 billion versus two point 50 billion in 2020, an increase of 28% excluding ex rate effects.
Yeah.
Book to Bill in the quarter, despite very high backlogs remains above parity one point all nine after one point and 26 in prior quarter.
1.26 for distribution after 129 in the third quarter.
One point in 15 for Oems after 123.
1.8 for semiconductors after 127 in the third quarter.
One point 11 for the Passives after one point 26 in Q3.
One point 10 for the Americas After one city in Q3.
One point all for Asia after 114.
One point to 21 for Europe after one point 41.
We continue to see a broad continuation of an excellent economic environment.
Whereby Europe based on automotive is catching up.
Backlogs in the fourth quarter remained on record levels of 8.2 months of the 8.3 months in the third quarter.
Eight nine months in semiconductors. After also eight nine months in the third quarter.
7.5 months in Passives after 7.6 months in Q3.
We continue to raise prices in a broad way plus 1.3% versus prior quarter and plus 3.4% versus prior year.
For centuries, we raised by 1.7% versus prior quarter and by 5% versus prior year for the passives, 0.8% versus prior quarter and one 7% up.
The prior year.
Some highlights so far operations.
Despite the continued good level of efficiencies and despite price increases the contributive margin in 2021 remains on the level of probably a year, which has been somewhat below the long term average.
We continue to suffer from substantially increased transportation costs and metal prices, but also from higher wages and general infill the inflation globally.
We expect to return to historical level of variable margin percent in the course of this year.
SG&A costs in the fourth quarter came in at one of them.
8 billion above expectations, when excluding ex rate impacts mainly due to higher R&D costs in several individually immaterial items.
SG&A costs for the year 2021, we're at 420 billion 37 billion or 10% above prior year at constant exchange rates, mainly due to higher incentive compensation and wage inflation.
Manufacturing fixed costs in the quarter came in at 142 million according to expectations when excluding exchange rate impacts.
Due to substantially higher manufacturing activity.
Affecting fixed cost for the year 2021 increased to 559 million.
A 39 million or 6% above prior year at constant exchange rates.
Due to a higher manufacturing output.
Total employment at the end of 2021 increased to 22825, 6% up from prior year.
Excluding exchange rate impacts inventories in the quarter increased by 8 million by 7 billion in raw materials and by 1 million in whip in finished goods.
Inventory turns into fourth quarter remained at satisfactory 4.5.
Excluding exchange rate impacts inventories in the year 2021 increased by 19 9 million.
Raw materials increased by 39 million in drip and finished goods by 60 million.
Inventory turns for the entire year 2021 are at a very satisfactory level of $4 seven up from four point for the entire year.
Capital spending.
In 2021 was $218 million versus 124 million in prior year.
141 billion for expansion 12 million for cost reduction and 65 million for the maintenance of business yeah.
We are preparing ourselves for an accelerating growth in years to come.
For the year 2022, we expect Capex of approximately 325 million a sharp increase due to our project of building a 12 inch most of its fifth adjacent to our existing eight inch fab.
Yeah.
Yeah.
We in the year 2021.
Generated cash from operations, So 457 billion compared to 315 billion cash from operations in 2020, which include 16 billion cash taxes for casualty Pitri Asian.
We in 2021 generated free cash of 240 billion compared to a free cash generation of 192 million in 2020, which includes also 16 million cash taxes for casualty Pepsi Asian.
Vishay also in a year of high Capex has continued to live up to its reputation as an excellent and reliable producer of free.
Cash.
Let me go through our product lines and that start as always with the assist us.
With resistors, we enjoy a very strong position in the auto industrial military and medical market segments.
Virtually all of this is the technology center globally, known as a reliable high quality supplier of the broadest product range.
Vishay has traditionally and historically growing business has returned to record levels.
It was in the quarter were 190 million up by 11 billion up by 6%.
From prior quarter, and up by 32 million or by 20% versus prior year, excluding exchange rate impacts.
Sales in the year 2021 of 753 million were up by 134 million or by 22% versus prior quarter.
Including 18 million coming from our acquisition a T. P. All these numbers in comparison exclude again ex rate impacts.
Book to Bill ratio in the fourth quarter was one point 14 after 126 in prior quarter.
Backlog remained at seven eight months a record level.
Gross margin in the quarter was at 29% of sales up from 27% of sales in Q3.
Gross margin for the years 'twenty 'twenty. One was also a 29% of sales up from 25% in 2021 mainly due to substantially higher volume.
Inventory turns in the quarter remained on a satisfactory level of 4.5.
Inventory turns for the food here at <unk>.
4.8.
Selling prices continued to increase.
By <unk>, 6% versus prior quarter and by 1.3% versus prior year.
We are continuously raising critical manufacturing capacities, mainly 40 system chips and for power via rounds.
We continue to broaden our business specialty resistance by targeted acquisitions like ATP and recently berries industries.
A T P. In the meantime has been integrated successfully.
In ductless.
The business consists of power inductors and mechanics.
Be exploit our continuously growing needs for inductors in general Vishay developed a platform for robust and efficient power inductors and leads the market technically.
It's magnetics, we are very well positioned in many specialty businesses demonstrating also in this field steady growth.
Sales of inductors in the fourth quarter were 82 million slightly down by 3 million or by 3% versus prior quarter, but up by 7 billion are up by 9% versus prior year, excluding exchange rate effects.
Sales in the year 2021 of $336 million were up versus prior year by 40 billion well by 14% excluding exchange rate impacts.
Book to Bill in the fourth quarter was at one point and 13 after 111 in prior quarter.
Low case increased two six months from 5.4 months in prior quarter.
Gross margin.
In the fourth quarter was at 29% of sales down versus prior quarter at 32% of sales, mostly due to temporarily lower volume and also due to higher logistics costs.
Gross margin for the year was at quite excellent 32% of sales virtually on the level as the prior year.
Inventory turns in the quarter 4.6, as compared to 4.8 for the whole year.
Some price increases also at inductors, plus supported 1% versus prior quarter, plus <unk>, 5% versus prior year, we continuously expand our manufacturing capacities for power inductors and remain open for acquisitions in particular in the field of specialty businesses.
Coming to capacitors.
Our business with capacitors is based.
On a broad range of technologies with a strong position in American and European market niches.
We also enjoy increasing opportunities in the fields of powered since submission and of electric cars, namely in Asia.
Sales in the fourth quarter, we're at 129 million.
13% above prior quarter and 45% above prior year.
Switching excludes again exchange rate impacts.
Year over year capacitor sales increased by 130 million or by 28% excluding exchange rate impacts.
The book to Bill ratio in the fourth quarter was one point or four after one point 37 in prior quarter.
The third quarter, we had received large orders for power capacitors.
Backlog decreased slightly to a still extraordinarily high level of 8.1 month from eight nine months in the third quarter.
Gross margin in the quarter was at 22% of sales from 21% in prior quarter, mostly due to higher volume into more normal product mix.
Gross margin for the year 2021 .
Was it 22% of sales up from 19%.
In 2020, mostly due to increased volume.
Inventory turns in the quarter increased to $3 seven as compared also to three seven for the whole year.
Continued price increases a one 6% up versus prior quarter and 3.1% up versus prior year, we remain confident for capacitors for the midterm in light of increasing design wins.
Opto products Vishal <unk> business with Opto products consists of infrared emitters receivers sensors and couplers.
Also in up to we continue to see a strong acceleration of demand sales in the quarter was 78 million, 3% above prior quarter and 17% above prior year.
Without exchange rate impacts.
Year over year sales with Opto products went up by 80, 262, excuse me 62 million or by 26% when excluding exchange rate impacts.
Book to Bill in the fourth quarter was at one point in 'twenty one after one point 36 in prior quarter.
Backlog remained at a quite extreme level of 10.4 months after pinpoint at nine months in the third quarter.
Gross margin in the quarter for Opto products came in at 34% of sales on the level of prior quarter.
Gross margin for the year 2021 increased to excellent 33% of sales as compared to 28% of sales in 2021 and 2020, mostly due.
To a much higher volume.
Most of Opto products, we continue to raise selling prices there.
Up by one 9% versus prior quarter and by 4.6% versus prior year.
We are in process to start production in our in our modernized and expanded Heilbronn wafer fab.
And I said it before up to products continued to be a relevant factor for vishay scuttles expectations going forward.
Coming to diodes.
Iot 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 there.
Business in choice, a very strong position in the automotive and industrial market segments and keeps growing steadily and profitably since years.
Sales in the quarter were 192 million.
Up by 8 million or 5% versus prior quarter, and up by 55 million or 40% versus prior year, which excludes exchange rate effects.
Year over year increased sharply by 201 billion were up by 40% excluding exchange impacts vis a vis prior year and reached a record level of $709 million.
The book to Bill ratio in the fourth quarter was at one point in 10 of the one point 31 in prior quarter.
Backlog remained at a very high level of eight eight months virtually on the level of prior quarter gross margin in the quarter was 24% of sales as compared to 25% in the third quarter.
Impacted by higher logistics costs and the reduction of inventories.
Gross margin in the year 2021 was at 24% of sales up from 18% in prior year.
Mostly due to substantially higher volume.
Inventory turns in the fourth quarter were $4 seven as compared to also four seven for the whole year.
We continue to raise is P for the diodes, plus 0.1, 0.19th excuse me plus one 9% versus prior quarter and plus six 5% versus prior year.
Our large and growing business with diodes remains to be one of the most important elements of our growth plans.
Finally, most fits.
Vichy is one of the market leaders in most fits in system.
It's most fats, we enjoy a strong and growing market positioning, particularly in automotive.
Which in view of an increasing use of most of it will provide the very successful future for this line.
Demand over the year has reached extreme levels and is expected to increase rapidly further than they used to come.
Sales this quarter were 171 million.
2% below prior quarter, but 32% above prior year, excluding exchange rate impacts.
Year over year sales with most of its increased steeply over prior year by 163 million or by 32% to 668 million or this excludes exchange rate impacts.
Actually sales in 2021, and most fits in particular has just been limited by manufacturing capacity.
Yeah.
Yeah.
Book to Bill ratio in the quarter was at one point or one after 119 in the third quarter backlog remains on a very high level of 8.2 months gross margin in the quarter was at 30% of sales after 31% of sales in the third quarter.
Driven by volume gross margin the year 2021 came in at 28% of sales a substantial increase from 23% in prior quarter.
Inventory turns in the quarter at five point, though as compare to also five point for the entire year.
Also for the most fits we continued to implement price increases.
Plus one 5% versus prior quarter and plus three 5%.
The prior year.
Most of it three main keep a vicious grows our plan going forward.
We intend to keep a proper balance between in house manufacturing of wafers and purchases from foundries. This in mind, we decided to build a 12 inch wafer fab in Italy, where Germany adjacent to our existing eight inch fab, increasing our in house wafer capacity by 70 per.
Sent within three to four years.
Let me summarize.
Looking back 2021 has developed into one of the best years of the history of Vishay, Despite an ongoing influence of the pandemic and accelerating inflation.
Our success for sure has been supported by a globally high demand, but it's not been the result of a specific shortage where has it been achieved by inflating the supply chain with inventory.
I believe that 2021 has clearly demonstrated the strength and growth potential of electronics in general, but also the advantage for a broad lineup like vishay, who can exploit upturns in a broad demand in it.
Right now we continue to be financially more than stable, a very well established in most markets globally and that used to react quickly and professionally to the market changes if they may okay.
Oh, I find interesting and independents allows us to invest in a substantial way in critical manufacturing capacities by supporting the development of new processes and products.
We remain committed to shareholder value and pursue long term strategies independently of the economic environment yesterday, we announced a structured and ongoing stock buyback program in parallel to the dividend payouts.
We are confident for 2022 expecting also a strong recovery of the car industry.
For the first quarter, we it's the fourth quarter for exchange rates guide to a sales range between 820 and $860 million at a gross margin of 27.3% plus or minus 50 basis points.
Thank you for your attention.
Thank you Dr. Paul.
We will now open the call to questions Sherry. Please take the first question.
Thank you yeah, if he would like to ask a question. Please press star one on your telephone keypad, a confirmation tone will indicate your line is in a class C. Kill you May press star two if he like to remove your question from the queue.
And for participants using speaker equipment, it may be necessary to pick up the handset before pressing the star he is.
Our first question is from Brett Blue, but a chair with Bank of America. Please proceed.
Good morning, Thank you for taking my questions.
Dr. Paul in the fourth quarter, you had strong revenues our revenues came at the high end of guidance. It looks like gross margin was at the lower end of guidance can you just talk about that 40 basis points of sequential decline in margins what were some of the factors how much was mix how much was FX.
And how do you see margins going forward.
Rupert if he of course by nature of things ticked into that and it's clear that the by far the biggest impact is logistics costs, which were also higher than we expected them to be this is the lion's share it's not the efficiencies they were quite good stable throughout the year, it's inflationary impacts.
Wages and as I said, mainly logistics costs, we do expect a but we are not completely milestone that we do expect logistics costs to become better in the course of this year with a retreat.
Traffic getting more normal.
And nobody seems to be respect to these logistics costs do you think that you'll be able to pass them onto your customers or as.
It looks like they are going to remain high over the next couple of quarters from what we can tell is that something you can pass on.
Well, we do so principally U S fee raise prices you raised prices since quarters, and we will continue to do so.
So it would be.
Would more offset that and I guess as I said logistics costs. It depends on the change of air traffic.
Hopefully it will not last a full year, we expect some kind of an improvement in the core.
So if the second half.
Okay and can I ask you about a longer term focused question right now the backlog is running very high let's say you know most product lines, you've mentioned about eight months of backlog.
But you know what was that backlog pre COVID-19 and and as things normalize where do you think that backlog normalizes tool I mean do you think it remains high at 488 months or you do you think as we go through 2022 that normalizes back down and where does it work.
Where do you think it ends up in.
If you really look back to two.
History at the normal backlog was three to four months to say it frankly. This is that was the average for a long period of time than since the year 2017, it started to grow but at the moment its record high and this is of course not normal b to expect that the backlog will come down as we go with a normalized state.
Whether it will ever return to three months that is the question I believe theres more skepticism around concerning.
Lower inventories supply problems et cetera, So I couldn't imagine going forward you will not go back to this three months, which were indeed historically the case, so there will be a reduction but not not to historical difference I believe.
Okay, maybe just the last one if I can ask a yesterday you announced the shareholder return policy.
How does M&A further M&A fit into that any thoughts on on further acquisitions are you considering a tiny and in which area either passes are active so any thoughts there would be appreciated.
First of all I think to have to say that acquisitions are not in competition not in competition with this program.
<unk> continued to look quake physicians into the same way.
And are we no change we will concentrate on specialty businesses as we go.
So this is Dan so I guess with you.
Okay Alright, thank you for all the details appreciate it.
Our next question is from Karl Ackerman with Cowen and company. Please proceed.
Thank you.
Two questions. Please.
Dr. Paul I don't think you.
Grown SG&A above revenue.
Revenue growth since 2013, so with SG&A up roughly 6% for 'twenty, two and based on your commentary.
Contribution margins should improve.
It appears you're relatively optimistic about too much way too.
Clearly backlog remains elevated over eight months, but are there market share opportunities or end market growth opportunities you would call out that anchors or expectations for 'twenty two.
Well, it really still and Foreseeably Ah. It's the whole sales is determined by manufacturing capacities and of course, everybody expect longer term a cooling down of the economy, we cannot see it or backlog continues to go up so I dare to say our sales and we are optimistic on that is.
Our product offering and establish capacities and we to increase capacities, we have programs there.
If you want to highlight the product line, which is in particular.
Hot if you want to say it like that it's the most of it it continues to be the most fits.
And everybody wants to increase it does increase manufacturing capacity, but with good reasons the application of most of its increase.
I appreciate that.
Some of your peers quantify the benefit from automotive restocking in calendar 'twenty one it suggests that the inventory.
Benefit may not carry over into 2022.
Nevertheless, though I think at least half of your automotive business is on consignment that better aligns our supply with market demand.
But I'm wondering if your automotive customers have indicated your products are now balanced at a high level or whether your automotive products remain very tight and have seen lead times extended.
Its the latter its the letter yeah, we see a lot of Escalations continue to see a lot of escalations for higher shipments from our large automotive customers and most of it is for sure is in that sense. The most problematic, we do not see a cooling down and I I think it will.
It'll be the opposite automotive based on the pent up supply situations, which they're going to have is going to increase that the months. This year. So will be more of a problem to assist them and then to manage a low demand.
Thank you.
As a reminder, the star one on your telephone keypad.
Your question. Our next question is from Matt Sheerin with Stifel. Please proceed.
Oh, yes, thank you and good morning, I just wanted to follow up on Karl's questions. One regarding your outlook for the year Dr. Paul like you said it sounds like you've got confidence is really up to your ability to increase your capacity.
So do you have any any outlook in terms of what we should be thinking about growth rates for vishay. This year.
That would be expected, we said it before our higher sales than in 2021, we expect higher sales.
We had put a number to it its at least 5% up.
And what about your ability.
To meet that demand.
And I know you've got the Capex I know, there's a lag there of at least 12 months horizon some products. So.
If you look at the capacity and Youre your price increases.
It's 4% or five.
5% growth sounds conservative.
Well price increases together with.
But capacity increases exist, but you say, yes, you said pricing our capacity increases come step by step and in the first quarter. A few people still see negative impacts of the COVID-19 pandemic, especially in our plants in China, which make the start a little slow by nature.
Okay.
And then it sounded like you know your distribution inventory levels are still a fairly lean.
But we're hearing from some of your peers that other sectors like Oems in MFS are starting to build inventory and see some imbalance of parts or are you seeing any signs of that yet.
There's no report as you know, it's only our impression concerning we I think a good indication is the number of Escalations, which we see and as a matter of fact, we are still very much under pressure that customers call us and want our improved volumes and also shorter lead times. So my impression I think it would be naive to <unk>.
Say that inventories at Oems would not have gone up but I believe they're still overall testing shortages for very many product lines, especially for most of it but maybe even the semi conductor discrete semiconductors in general my impression is not that the customers built into inventory.
Yes.
Okay and just.
Lastly, a question for Laurie regarding.
That onetime tax issue in Israel.
Was that is that a catch up.
<unk> came in and it doesn't look like you're guiding I guess, 23% tax rate going forward. So there's no impact going forward on that.
And so maybe I start for the $53 million was that are charged to the P&L and it will be paid out over a period of time because it was.
Previously.
Untaxed income to some extent and then that being a Christian withholding tax repatriation to the U S.
But the repatriation of the U S will be over a period of.
Several years, eventually and therefore, it will be cash out but not immediately.
We're still guiding to the 22% to 24% tax rate at this point in time.
Okay. Thank you.
Uh huh.
We have reached the end of our question and answer as I said I would like to turn the conference back over to management for closing comments.
Thank you for attending.
Today's call and for your interest in Vishay Intertechnology. This concludes our fourth quarter and here in 2021 earnings call.
Yeah.
Thank you you may disconnect your lines at this time and thank you for your participation.
Okay.
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Okay.
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