Q1 2022 Vishay Intertechnology Inc Earnings Call
At this time all participants are in a listen only mode.
A 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 I would now like to turn the conference over to your host.
Mr. Peter Henry sheet, Senior Vice President corporate Communications.
Thank you and.
Oh, what these are.
Thank you Hemant.
And while I'll come to say into technologies first quarter 2022 conference call.
With me today are Dr. Gerald Paul <unk>, President and Chief Executive Officer.
Laurie lip coming our executive Vice President and Chief Financial Officer.
As usual, we'll start today's call with the CFO , who will review <unk> first quarter 2022 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 adopt vishay dotcom.
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 reshape 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 first quarter 2022 financial information containing some of the operational metrics Dr. Paul will be discussing.
Now I turn the call over to Chief Financial Officer, Laurie, let's 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 will focus on some highlights and key metrics.
Nishu reported revenues for Q1 of 854 million a quarterly record.
EPS was <unk> 71 cents for the quarter.
There were no reconciling items between GAAP and adjusted for Q1 2022.
As we announced in February did she has adopted a stockholder return policy, which calls for us to 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.
Considering we did not purchase any shares for the first two weeks of the quarter, we are off to a solid start.
During quarter, one we repurchased 517000 shares common stock for approximately $9 $9 million, we paid $14 $5 million for our quarterly dividends.
So a total stockholder return of $24.4 million.
Revenues in the quarter were 854 million.
1.3% from previous quarter.
By 11, 7% compared to prior year.
Gross margin was 33%.
Operating margin was 17, 1%.
There were no reconciling items to arrive at adjusted operating margin.
E P S for 71 cents.
Reconciling items between GAAP and adjusted EPS for Q1 2022.
EBITDA was 181 million or 21, 2%.
There were no reconciling items to arrive at adjusted EBITDA.
Reconciling versus prior quarter.
Premium income Q1, 2022 compared to operating income for prior quarter.
Just on $11 million higher sales or $16 million higher sales excluding exchange rate impacts.
Operating income increased by 24 million.
146 million in Q1 2022.
From 122 million in Q4 2021.
The main elements were average selling prices had a positive impact of $20 million, representing a 2.4% S. P increase.
Volume decreased with a positive impact of 5 million equivalent to a 0.5 per cent decrease the P&L benefited from a favorable product mix mainly in MOSFET.
Variable costs increased with a negative impact of 2 million.
Fixed costs increased with a negative impact of 8 million primarily due to inflation.
Inventory impacts had a positive impact of 11 million in exchange rates had a negative effect of $2 million.
Yeah.
Reconciling versus prior year.
Operating income Q1, 2022 compared to operating income in Q1 2021.
Based on 89 million higher sales or $109 million, excluding exchange rate impacts.
Operating income increased by 49 million.
Two 146 million in Q1 2022.
97 million in Q1 2021.
You may now elements, where.
Average selling prices had a positive impact of $48 million.
Representing a 6.0% E S P N Kris.
Volume increased with a positive impact of 41 million, representing a seven 6% increase.
Variable costs increased with a negative impact of $19 million, primarily due to increases in cost of materials and services labor silicon and logistics not completely offset by manufacturing efficiencies and cost reduction efforts.
Discuss increased with a negative impact of $17 million, primarily due to annual wage increases as well as general inflation.
Inventory impacts had a positive impact of 4 million.
Exchange rates had a negative effect of $8 million.
Yeah.
Selling general and administrative expenses for the quarter were $113 million.
Based on our cost cycle, our SG&A expenses are expected to be at the highest quarterly level in Q1 due to uneven attribution of stock compensation expense in Q1 of each year.
For Q2 2022, our expectations are approximately 111 million of SG&A expenses.
For the full year 2022, our expectations are $445 million of SG&A expenses at current exchange rates.
Okay.
The debt shown on the face of our balance sheet at quarter end is comprised of 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 quarter, one 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 at 1.6 billon billion at quarter end.
Cash and short term investments comprised $886 million and there are no amounts outstanding on our $750 million credit facility.
Total shares outstanding at quarter end were 145 million.
The expected share count for EPS purposes for the second quarter 2022 is approximately $145 million, excluding any impact of share repurchases.
Our U S. GAAP tax rate for Q1 was approximately 24% there were no special tax items recorded during Q1.
We expect our normalized effective tax rate for full year 2022 to be between 23 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 from operations for the quarter was $34 million.
Capital expenditures for the quarter were $36 million.
Free cash for the quarter was negative $2 million.
For the trailing 12 months cash from operations was 433 million.
Capital expenditures were $226 million.
Split approximately for expansion 144 million.
For cost reduction 14 million.
For maintenance of business $68 million.
Free cash generation for the trailing 12 months period was $209 million.
The trailing 12 months period includes $15 million cash taxes paid for the 2021 installment.
S tax reform transition tax.
He she has consistently generated in excess of 100 million cash flows from operations in each of the past 27 years and greater than 200 million for the past 20 years.
Yeah.
Backlog at the end of quarter, one was that 2.417 billion or 8.5 months of sales.
Inventories increased quarter over quarter by $70 million, excluding exchange rate impacts.
Days of inventory outstanding were 87 days.
Days of sales outstanding for the quarter were 43 days.
Days of payables outstanding for the quarter were 37 days, resulting in a cash conversion cycle of 93 days.
Now I will turn the call over to our Chief Executive Officer, Dr. Gerald Paul.
Thank you Lori and good morning, everybody.
Despite the ongoing pandemic related issues, and then accelerating inflation rate the first quarter for Vishay has been one of its most successful quarters ever.
We continue to enjoy quite unique economic conditions.
We keep maximizing production output in our plants and continue to expand critical manufacturing capacities.
I think we achieved quite excellent results for the first quarter gross margin of 30.3% of sales versus 27, 3% in quarter four operating margin of 17.1% of sales versus 14, 4% of sales in.
Quarter four earnings per share of 71. Since this is a 25 since in quarter four and adjusted earnings per share also 71 cents in the quarter versus 62 since our in quarter four.
Free cash in the quarter was negative <unk> 2 million for the year, we on the other hand expect again, a solid generation of free cash.
As said before we continue to operate under fairly brilliant economic conditions characterized by record orders still growing backlogs and lead times and low inventory levels in the supply chain.
Practically all market segments globally to very well.
Also the automotive sector starts to recover from quite extreme shortages of supply.
But more slowly than anticipated.
The sales volume principally keeps being determined by manufacturing capacities increasingly impacted by logistics issues.
Major shortages of supply continued tweaks just.
In view of increased inflationary pressures on their costs manufacturers continue to raise selling prices in the markets for the most part are in acceptance.
All regions remained exceptionally strong there's no decline visible at this point.
In all regions at or above all time highs in order levels remain high.
Talking about distribution global distribution is in excellent shape their business outlook is fairly strong in view of record backlogs and consistently growing P O S.
P O S. In the quarter was 18% above prior year, which has been one of the best years ever.
All regions run at all time record levels.
Global inventories in the first quarter remained at the level of the fourth quarter and is 19% to 83 million above prior year.
There is an impact of price increases during last year, indicating a lower increase in terms of pieces.
Inventory turns of global distribution in the first quarter.
At a record level of four point too.
From 3.9 in quarter, four and up from 4.1 in prior year.
In the Americas 2.3 inventory turns after 2.2 in the fourth quarter and 1.9 prior year.
In Asia 5.6 tons after five points for the year in Q4 and 6.7 in prior year.
In Europe 4.9, after a 4.3 and quarter four and 4.4 in prior year.
I think we can state that the supply chain remain sleep.
Well two motive markets are in process of recovery, but as I said it at lower than expected pace shortages of supply in pandemic related issues continue to slow down the segment.
We in view of the fact that light vehicle inventory remains depleted Nevertheless, expect a strong year for automotive.
Sales to industrial market sectors continue on historically high levels.
General trends towards electrification of driving growth and we'll continue to do so or suite in the future.
Industrial automation and robotics accelerate so to green initiatives oil and gas sectors are getting stronger.
We see markets for P CS, having stabilized and healthy growth at service.
Five cheap continues to provide major growth opportunities in fixed telecom, which will accelerate.
Given the political environment really theory applications should see accelerated growth going forward.
There's also a recovery of commercial aviation markets.
We expect steady growth in medical.
Wearable electronic products and Internet of things applications drive growth in the consumer market segment gaming and television remains stable.
Yes.
Coming to our business development in Q1.
The first quarter sales, excluding exchange rate impacts came in above the midpoint of our guidance.
We were able to master pandemic related issues in China, better than we had expected.
We achieved sales of 854 million versus 843 million in prior quarter.
And 765 million in prior year.
Excluding exchange rate effects sales in quarter, one were up by $16 billion or 2% versus prior quarter.
And up by 109 billion or 15% versus prior year.
Quite remarkable I think is that the fact that despite historically high backlogs book to Bill in the quarter increased to 1.14 from 1.19 in quarter four.
One point 16 half to 1.6 for distribution.
One point 15, after one point 15 for Oems.
One point Fourteens, one point 14 for semiconductors after 1.8 in quarter four.
One point 15 for Passives after one point 11 in quarter four.
One point 24 for the Americas After one point 10 in quarter four.
One point or two for Asia After one point O.
And one point 23 for Europe after one point in 'twenty one.
I think we can state that we see a broad continuation of the excellent economic environment.
Backlogs in the first quarter continued to grow further and reached a new record of 8.5 months after 8.2 months in quarter four.
9.3 months in semi is after eight nine months and quarter four.
And 7.6 months in Passives after 7.5.
There is a broad increase of prices, which was implemented again.
For an increase vis vis prior quarter of plus point to 0.4% repeat 2.4% and six point or percent versus prior year.
In semi as prices went up in the quarter by three 4% versus prior quarter.
And by 8.8% versus prior year and.
And in passives vis a vis prior quarter by 1.4 person.
And by three 2% versus prior year.
Some highlights of operations.
Despite ongoing increases in transportation costs metal prices and the higher general inflation of road glide Vishay in the quarter was able to return to traditional levels so variable margin.
Price increases and quite excellent plant efficiencies supported the improvement.
SG&A costs in the first quarter came in at 113 million and manufacturing fixed costs in the quarter came.
Came in at 144 million.
Fixed costs in total SG&A and manufacturing fixed together came in according to expectations when excluding exchange rate impacts.
Total employment at the end of the first quarter increased to 22, <unk> thousand 395, 2% up from prior quarter.
Excluding.
Exchange rate impacts inventories in the quarter increased by 77 million 29 million in raw materials, and 41 million in width and finished goods.
Impacted by interruption softer supply chains.
Due to pandemic related issues.
Additions to safety stocks devaluation impacts Israelis inflation on materials and logistics costs.
This inventory increase if we normalize for the most part in the course of the year.
Inventory turns in the first quarter remained at satisfactory 4.2 slightly down from prior quarter at 4.5.
Capital spending in the first quarter was 36 million versus 29 million in prior year.
24 million for expansion 2 million for cost reduction and 10 billion for the maintenance of business.
We continue to prepare ourselves for further accelerating growth rates.
For the year 2022, we expect Capex of approximately 325 million, which is a substantial increase versus prior years, mostly due to our project of building a 12 inch most of its fifth.
In quarter, one we generated cash from operations of 433 million on a trailing 12 months basis.
We generated in the first quarter free cash of 209 million.
Again on a trailing 12 months basis.
Despite increased capex and some inventory build we also for the current year expect a solid generation of free cash quite in line with our tradition.
Coming to the product lines and starting as always with resistors with resistors, we enjoy a very strong position in the auto industrial and medical market segments.
We offer virtually all resistor technologies and a globally known as a reliable high quality supply of the broadest product range.
Vishay is traditional.
And historically growing business runs at record levels.
Sales in the quarter were two O 7 billion, which includes 4 million from our new acquisition Barry industries.
Up by 19 billion or by 10% versus prior quarter.
And up by 27 billion or 15% versus prior year again, excluding ex rate impacts.
Book to Bill the issue in quarter, one was $1 24 after 114 in prior quarter.
Backlog remained at seven eight months on the level of the fourth quarter.
Gross margin in the quarter was at 31% of sales up from 29% of sales in Q4.
Inventory turns in the quarter remained on a satisfactory level of 4.4 slightly.
Slightly down from prior quarter at 4.5.
Selling prices for resistance continues to increase.
Plus one 9% versus prior quarter, and plus three 4% versus prior year.
We are continuously raising critical manufacturing capacities, mainly 40 since the chips and for power why allowance.
And we continue to broaden our business with specialty resistance by targeted acquisitions like ATP and recently Barry industries.
Inductors the business consists of power inductors and mechanics.
Exploiting the continuously growing need for inductors in general Vishay developed a platform of robust and efficient power inductors and leads the market technically.
With magnetics, we are very well positioned in many specialty businesses demonstrating also this field steady close.
Sito, Cindy inductors in the first quarter were 83 million.
Slightly up by 1 million or by 1% versus prior quarter and flat versus prior year, excluding exchange rate effects.
The recovery of the automotive sector will accelerate again the growth in inductors.
Book to Bill in the first quarter was at one point 14. After one point 13 in prior quarter.
The backlog has increased to $6 three months from six point all months in prior quarter.
Gross margin in the quarter increased to 30% of sales as compared to prior quarter quarter at 29% of sales.
Inventory turns remained at a good level of 4.6.
Some price increases also adding ductus no price increase vis a vis prior quarter past, but 1.1% price increase.
Versus prior year.
We continuously expand our manufacturing capacities for power inductors since remain open for acquisitions in particular in the field of magnetics.
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 field of pellets and submission and of electric cars, namely in Asia.
Sales in the first quarter, we're at 128 million flat versus prior quarter.
But 26 million with 25% above prior year again, excluding exchange impacts.
The book to Bill ratio in the first quarter was one point or two off the one point or four in prior quarter.
And the backlog remained at an extraordinarily high level of eight one months.
Gross margin in the quarter improved to 25% of sales up from 22% in prior quarter, mostly due to better product mix and improved productivity.
Inventory turns in the quarter decreased to 3.2 from three seven in the fourth quarter.
There were some safety stocks, which increased to one.
We continuously raise prices plus 0.1% versus prior quarter, and plus 4.4% versus prior year.
We are confident for capacitors also in light of growing global efforts and Green energy in view of a growing military business and the recovery of oil and gas.
Coming to opto products Vichy this business with opto products consists of infrared emitters receivers sensors and couplers.
Also in October we continue to see a strong acceleration of demand.
Sales in the quarter were 81 million 3 million or 4% above prior quarter.
<unk> 5 million or 7% above prior year, which excludes exchange rate impacts.
Book to Bill in the quarter was hit point 78 after 1.32 in prior quarter.
The backlog is still at a quite extreme level of 9.4 months after 10.4 months in quarter four.
Gross margin in the quarter increased sharply to 40% of sales up from 34% in prior quarter, mostly due to better selling prices and the favorable product mix.
We continue to raise selling prices.
Plus one 8% versus prior quarter, and plus eight 9% versus prior year.
The production in our modernized and expanded Heilbrunn wafer fab has started.
Opto products in general continue to be a very relevant factor for vicious performance and growth.
Diodes.
Diodes for Vishay represents a broad commodity business, where we are the largest supplier worldwide.
She offers virtually all technologies as well as the most complete product portfolio.
The business enjoys a very strong position in the automotive and industrial market segments and keeps growing steadily and profitably since years.
Sales in the quarter with 182 million.
Down by $9 million or by 5% versus prior quarter, but up by 29 million or 19% versus prior year without X rate effects.
Book to Bill ratio in the first quarter was at one point in 16 after one point 10 in <unk>.
Prior quarter.
Backlog increased to another record of nine point in several months from 8.8 months in prior quarter.
Gross margin in the quarter improved to 25% of sales as compared to 24% in Q4 positively impacted by better Asp's.
Inventory turns in Q1, a satisfactory at 4.2 as compared to 4.7 in prior quarter.
Continue we continue to raise selling prices plus three 2% versus prior quarter and plus nine 3% versus prior year.
This large and profitably growing business with diodes is the most relevant part of V shaped volume basis.
Most pets.
Shape.
He is one of the market leaders in most fits and sisters.
With most of its we enjoy a strong and growing market position and particularly in automotive.
Which in view of an increasing use of most fits will provide the very successful future for this line.
Demand over the year has reached extreme levels in D. C is expected to increase further in the years to come.
Sales in the quarter with 173 million.
Especially capacity constrained.
2 million or 1% above prior quarter, and 22 million or 14% above prior year without ex rate impacts.
Book to Bill ratio in the quarter was at one point 28, after one point or one in the fourth quarter.
Backlog increased to another record of nine months from $8 two months in prior quarter.
Gross margin in the quarter increased to 34% of sales after 30% of sales in the fourth quarter.
Mostly driven by better prices and better product mix.
Inventory turns in the quarter, but at a satisfactory level of 4.4 as compared to five point O in quarter four.
We continue to implement price increases also for the most of it.
Plus 4.5% versus prior quarter, and plus eight 3% versus prior year.
Most faith remain key for Vishay is growth 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.
To build a 12 inch wafer fab, it's a whole Germany adjacent to our existing eight inch fabs here.
Increasing our in house wafer capacity by 70% within three to four years. The project has been started.
Let me summarize.
Despite an ongoing influence of the pandemic.
He is reading inflation.
And also despite of growing political instabilities.
Vishay continues to experience quite stellar market conditions generating fairly excellent results.
Ellipse electrification in recent years as gain speed in a major way impacting positively all markets globally.
We do expect this trend to continue longer term.
For sure our business historically is a secret cyclical in nature, and we keep always an eye on the inventory in the supply chain.
But at this point there is absolutely no sign of a short to midterm slowdown.
Backlogs are extremely high and still growing lead times remained long supply chains are fairly lean into important automotive sector is just at the beginning of a recovery.
Trusting in a bright future vishay has accelerated expansion it's expansion programs of production capacities.
Make it a two to three per cent increase by quarter.
Taking into account the present pandemic related disturbances in Shanghai, which in the second quarter will cost us at least 35 million of sales.
We had Q1 rates guide to a sales range for Q2 of 832 870 million at the gross margin of 28.1% plus or minus 50 basis points. Thank you very much.
Yeah.
Thank you Dr. Paul we'll now open the call to questions Hemant. Please take the first question.
Yeah.
Thank you.
No I will take the first question before that I'll just give the instruction here that we have at this time, we will be conducting a question and answer session.
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Now the first question comes from the line of Matt Sheerin with Stifel. Please go ahead.
Yes. Thank you good morning, everyone.
Two questions for me Dr. Paul just starting on the on your guidance.
You're talking about $35 million in sales impact in Shanghai.
Can you tell US you know what product areas I know you have some MOSFET exposure there, but what are some of the product areas that are affected and and you know looking beyond the next quarter are you expecting back to kind of normal levels in the September quarter there.
First of all met you hit the nail on the top it's really for the most part most of it but also some diodes, but for the most part it's indeed most of it and it's.
It's hard to predict what happens there, but we do expect an already start to see some improvements of the conditions in Shanghai. So I'm quite optimistic that we will be able to catch up in a way because this is where you have seen the inventory increasing that's what we did was produced and we are going to reduce the inventory and sell this stuff opiate.
During the year.
Okay. Okay.
And then in terms of the.
A S. S. P increases, which are very significant you're talking 8% to 9% or so across your semiconductor products.
And when you when you talk about backlog I mean is that is that also factoring in price increases we're hearing from some.
Distributors and customers that suppliers are coming back and changing pricing.
Orders that are already in backlog are you doing that and do you expect that to start to improve.
And benefit you as you get through the year.
Met.
Our backlog includes these price increases of course, but as a matter of fact, the backlog is so huge is a secondary effect of let's see.
Oh, Okay, and then I mean, you talked about lean inventory levels at distribution.
If you look at some of the distribution customers specifically the biggie EMS players and I know you have exposure there Joe their inventories are at record highs. We don't know exactly what's there but are you concerned at all that there may be an imbalance in some of your your your your components are sitting in inventory and may lead to some <unk>.
And at some point.
Nowadays noteworthy reporting as you know in this case.
And customers in general you have don't have the same visibility as you have for distribution as a matter of fact, there is more inventory of E. M S. But for us for Vishay inventories at distribution made us so much more because the sales to distribution is so much higher than into M. S. But I don't want to deny that indeed, there is some inc.
Inventory at the Emmys, but altogether idea to say that.
Supply chain is still I would call it lean.
Okay. Thank you and just lastly, I think you just mentioned that you're expecting your capacity to increase 2% to 3% sequentially.
Sequentially and per quarter Azure, you're adding capacity is that correct and then you've got it on a unit basis. So from a given the a S. E. P increases you should grow revenue even faster than that Oh, well. This is really our it. It's the basically it's a simulation of cost of goods sold related.
We have pieces of the pizza in our case, if you have a broad product spectrum. So it's really our ability to sell more this disappear since the ability to sell more 3% to 4% to two 3% excuse me third quarter.
Okay. Thank you very much.
Okay.
At Stifel Nicholas.
Thank you.
The next question comes from the line of Joshua <unk> with shelter with Cowen. Please go ahead.
Hey, guys. Thank you for taking my question and congrats on the solid quarter.
I wanted to ask about gross margins, obviously, a huge beat in the first quarter, but and then the step down in the second quarter.
Is it a function of timing increases that are probably the pricing increase timing to match you know inflationary cost pressures that you maybe you shipped some parts be higher asp's before the higher cost wafers went out or is there something else in the mix that we should be thinking about regarding you know most of the sequential increase in the first quarter and decrease.
In the second quarter.
Okay.
Is that tied to say in the presentation. The first quarter benefited from a few singularity.
There has been a very positive product mix and also there were some inventory valuation adjustments. Moreover, I believe that during the quarter pricing. The increase of prices was a hit of a rising input costs rising input costs. So altogether this feel more normalized somewhat.
In quarter, two but still we expect for quarter, two a very decent yourself, but quarter. One are included as I said some positive securities just to answer your question.
Yeah. That's helpful. Thank you.
For my follow up is there any.
For quantifying the impact that the Covid shutdowns on the top line was there any impact of timing on shipments that might've inquiry inventory a little bit more.
More than you would've expected in the second quarter, and then I guess.
A follow up would you expect as we exit the second quarter that we're sort of back to normal and any or would you expect any lingering impact from second half seasonality.
As a matter of fact, we increased our finished goods and being processed in the quarter and this of course had to do with the disturbed description.
With all of the of the internal supply chain and if you look at our goods in transit they in particularly came up in the quarter. So you can work from the assumption that during the year. We have dispute normalize of course at this will turn into sales most of that increased our inventory will indeed turn.
Into sales as soon as we can ship again in a regular form and I'm quite optimistic.
Take place in the foreseeable future.
Thanks, perfect. Thank you I'll hop back in the queue.
Thank you.
Thank you. The next question comes from the line of Lowe.
With Bank of America. Please go ahead.
Hi, Thank you for taking my questions Doctor Paul I was wondering if you can give some more details on the guidance I mean to Q second quarter is typically our strongest sequential quarter for vishay I I was trying to understand the press release had said due to production challenges Covid Lockdowns in April of your guide.
Adding a five it looks like $8 50 at the midpoint, which is flat.
With respect to <unk>. So I was wondering are our production sites still down in Shanghai and do you expect those to remain down 12 in the quarter.
You know what is your expectation for a for a recovery from that so just trying to understand you know where things are right now in terms of Lockdowns for your facilities and how you see that trending over the quarter.
Very clear I hope with the point is indeed.
It's Shanghai, Indeed, it's very much most pets and indeed, we have two problems problem. One is that the plant. Our main main packaging plans. There at the moment is running only at 20% or something off of Mexico, Pasadena, which will improve now as a next step but April was low and this is reflected.
In our guidance of course flip for the sales and then the second one is that we still need to ship of course, and even and also the high but it's not easy.
But also in this case, we do believe to see improvements in the foreseeable future exact timing is of course not possible to give but it's.
It's moving in the right direction safe and but this of course is the explanation for 35 million less sales, which otherwise would have hit in quarter two.
Okay. Okay. Thanks for the clarification for my second question, if I can ask on margins the opto segment gross margins.
Grew to 40%, which seems rather unusual I mean, I think you said you had a mixed benefit and selling prices were higher.
I'm on the MOSFET I think gross margin reached 34% how should we think about these two segment margins as we look over the next couple of quarters do you think they remain high or do you think they normalize back down.
Historically it is a profitable died in a very profitable line as you know, which beachhead a few a few quarters of problems since quite sometime its back on course.
44.
Where should a singularity every all the good things came together like in other quarters. It happens that all the bad things come together, but indeed, our price increases and we believe that they can because there is still more of it.
And ER positive product mix is tangible and it really beefed up the quarter, 40% in op two is not the normal performance.
I would say it's right in the case of more states on the other hand I see the 34% is of course also the result of price increases and on the other hand, I foresee and most of it.
Sometime shortages for some time, so I believe.
In most fits you can produce more.
Even.
Okay. Okay got it and then maybe for my last question. If I can ask your capital allocation priorities. When you look at the current macro environment can you give us your thoughts on share buybacks horses any M&A do you have any opportunities that you're looking at or are you considering things and in this environment and then touch on the dividend increase.
Yeah.
Okay, Hello, Rupe Lou this is Lori.
So as we mentioned we did that.
Begin our shareholder return program and.
And we completed would be returned to shareholders just under $25 million already in Q1. Despite the fact that the program actually started being executed late in February .
So we've indicated that on the shareholder return policy, we plan to return at least 100 million this year.
Okay, and then any any thoughts on M&A or do you think this is an environment that is.
Use it for M&A is that something you're considering.
We we just a quiet despair industries and we continue to look.
Yeah outflows specialty companies and I believe it's a good strategy.
And we continue to look to get to a not getting these these are companies.
Specialty companies not necessarily has to do with the economy. So we are looking and I think there are opportunities.
Okay, great. Thank you for all the details appreciate your help.
Yeah.
Thank you.
Again, if you would like to ask a question.
Please press star one on your telephone keypad.
Yeah.
The next question comes from the line of Matt Sheerin with Stifel. Please go ahead.
Yes. Thanks, I just had a follow up question Dr. Paul and that's regarding the company's announcement of a CEO succession plan that you announced here post your last earnings call and I wanted I was hoping that you could talk about that transition.
What kind of how that transition is going what kind of changes.
At all should investors expect from the company as you get through that change.
I have here since all the times Smith. This you know and I guess you know my age I think it's nothing but natural.
That you think of an end of the Korea I'm very proud of having had.
The opportunity.
And I know since quite some time that that would take to step in to be to have very good people in vishay in two to two once announced for my succession seal and C. O Ednos, it's very many years, they're very.
Loyal to Vishay, they are very capable and I believe the teacher under these two will flourish and I think a few new ideas.
Good for me I'll say it like that.
Okay very good well.
Thank you and best of luck.
Okay.
Yeah.
Thank you.
A quick reminder, if you would like to ask a question. Please press star one on your telephone keypad.
Yeah.
Ladies and gentlemen, we.
We have reached the end of question and answer session.
And I would like to turn the call back to Peter Hen Richey for closing remarks. Thank you.
Thank you for joining us today on today's call and for your interest in Vishay vis.
Shay into technology. This concludes our first quarter conference call.
Yeah.
Right.
Thank you. This concludes today's conference you may disconnect. Your lines at this time. Thank you for your participation.
Yeah.