Q4 2023 Vishay Intertechnology Inc Earnings Call

February 7, 2024

[music].

Yeah.

Operator: Good day, and thank you for standing by. Welcome to the Vishay Intertechnology fourth quarter 2023 earnings call. At this time, all participants are in a listen-only mode.

Speaker Change: Good day, and thank you for standing by welcome to the Vishay Intertechnology fourth quarter 2023 earnings call.

Speaker Change: At this time all participants are in a listen only mode.

Speaker Change: After the speaker's presentation, there will be a question and answer session.

Operator: After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 1 1 on your telephone. You will then hear an automated message advising that your hand is raised.

Speaker Change: To ask a question during the session you will need to press star one one on your telephone.

Speaker Change: You will then hear an automated message advising your hand is raised twits.

Operator: To withdraw your question, please press star 1 1 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your host today, Peter Henrici, Head of Investor Relations.

Speaker Change: To withdraw your question. Please press star one one again.

Speaker Change: Please be advised for today's conference is being recorded.

Speaker Change: I would now like to hand, the conference over to your host today, Peter <unk> head of Investor Relations. Please go ahead.

Peter Henrici: Thank you, Liz. Good morning, and welcome to Vishay Intertechnology's fourth quarter and fiscal year 2023 earnings conference call. I am joined today by Joel Smekal, our President and Chief Executive Officer, and by Lori Lipcaman, our Chief Financial Officer. This morning, we reported results for our fourth quarter. A copy of our earnings release is available in the Investor Relations section of our website at ir.vishay.com. This call is being broadcast live over the web and can be accessed through our website. In addition, today's call is being recorded and will be available via replay on our website.

Peter: Thank you Liz.

Peter: Good morning, and welcome to Vishay, Intertechnology fourth quarter and fiscal year 'twenty to 'twenty three earnings conference call.

Peter: I'm joined today by Joe Smith, our President and Chief Executive Officer, and by Lori and then our Chief Financial Officer.

This morning, we reported results for our fourth quarter, a copy of our earnings release is available in the Investor Relations section of our website at IR Dot reshape dot com.

Peter: This call is being broadcast live over the web and can be accessed through our website.

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

Peter Henrici: During the call, we will be referring to a slide presentation, which we have also posted at IRVishay.com. 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 those in the forward-looking statements.

Peter: During the call, we will be referring to a slide presentation, which we also posted at IR Vishay dotcom.

Peter: You should be aware that in today's conference call, we will be making certain forward looking statements that discuss future events and performance.

Peter: These statements are subject to risks and uncertainties that could cause actual results to differ from the forward looking statements.

Peter Henrici: For a discussion of factors that could cause results to differ, please see today's press release and Vishay's Form 10-K and Form 10-Q filings with the Securities and Exchange Commission. We are including information in our press release and on this conference call on various gap and non-gap measures. We have included a full gap to non-gap reconciliation in our press release as well as in the presentation posted on ir.vishay.com, which we believe you will find useful when comparing our GAAP and non-GAAP results. 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. Now I turn the call over to President and Chief Executive Officer Joel Smekov. Hi. Thank you, Peter. Good morning, everyone.

Peter: For a discussion of factors that could cause results to differ please see today's press release and reshaped Form 10-K, and Form 10-Q filings with the Securities and Exchange Commission.

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

Peter: We have included a full GAAP to non-GAAP reconciliation in our press release as well as in the presentation posted.

On <unk> Dot Vishay Dot com.

Peter: Which we believe you will find useful when comparing our GAAP and non-GAAP results.

Peter: We use non-GAAP measures because we believe they provide useful information about the operating performance of our businesses.

Peter: And should be considered by investors in conjunction with GAAP measures.

Peter: Now I'll turn the call over to President and Chief Executive Officer, and Joel May call.

Joel: Thank you Peter.

Joel: Everyone. Thank you for joining the fourth quarter 2023 earnings conference call.

Joel Smekal: Thank you for joining the fourth quarter 2023 Earnings Conference call. I'll start my remarks on slide three with a review of the demand trends for the fourth quarter by end market, channel, and region. Then Lori will take you through the highlights of our financial results and guidance for the first quarter of 2024. After that, I'll wrap up with a review of our key initiatives, and then we'll be happy to answer any questions.

Joel: I'll start my remarks on slide three with a review of the demand trends for the fourth quarter by end market channel and region.

Joel: And then Lori will take you through the highlights of our financial results and guidance for the first quarter of 2024.

Lori: After that I'll wrap up with a review of our key initiatives and then we'll be happy to answer any questions.

Lori: Before reviewing our fourth quarter performance I want to take a moment to look back at what I shared with you a year ago on my first call as <unk> CEO.

Joel Smekal: Before reviewing our fourth quarter performance, I want to take a moment to look back at what I shared with you a year ago on my first call as Vishay's CEO. It's been a remarkable year of change at Vishay as we began to implement our strategy to become a more business-minded supplier. A top priority was to increase capacity for our highest growth and highest margin product line, to be ready to capitalize on the mega-trends of e-mobility, sustainability, and connectivity. I said that we were going to use the foundation of our operational disciplines to become a customer and market-focused company, from a cash flow managed business to a P&L driven company, from a company that fulfills customer orders to one that anticipates customer needs. Today, the culture of putting the customer first has taken hold.

Lori: It's been a remarkable year of change in Vishay as we began to implement our strategy to become a more business minded supplier.

Lori: A top priority was to increase capacity for our highest growth and highest margin product lines to be ready to capitalize on the mega trends of E mobility sustainability and connectivity.

Lori: I said that we were going to use the foundation of our operational disciplines to become a customer and market focused company.

Lori: From a cash flow managed business to a P&L driven company.

Lori: From a company that fulfills customer orders to one that anticipates customer needs.

Today, the culture of putting the customer first has taken hold.

Joel Smekal: Think customer first is strongly embraced across the organization. Decisions are being made with customers and market dynamics in mind, and we are engaging the OEMs, distributors, and EMS partners on a regular basis because we have successfully invested in incremental capacity to help them scale. This puts Vishay in a unique position to drive growth. It is this customer-focused and business-minded approach that is creating a new Vishay. None of this can happen unless the employees of Vishay embrace the change.

Lori: Bank customer first is strongly embraced across the organization.

Lori: Decisions are being made with the customers and market dynamics in mind.

Lori: And we are engaging the Oems distributors and EMS partners on a regular basis.

Lori: Because we have successfully invested in incremental capacity to help them scale.

Lori: This puts <unk> in a unique position to drive growth.

Lori: It is this customer focus and business minded approach that is creating a new vishay.

Lori: None of this can happen unless the employees of vishay embraced the change.

Lori: I want to take a moment to express my deepest appreciation to all of <unk> employees for their enthusiasm about the future.

Joel Smekal: I want to take a moment to express my deepest appreciation to all of the Vishay employees for their enthusiasm about the future and their energy and commitment to creating the new Vishay. Let's now move forward to the performance of the recent quarter. www.indianwebmix.com for the fourth quarter. We are reporting revenue of 785.2 million U.S. dollars, within our guidance range of $770 million to $810 million. However, as expected, softer demand in industrial end markets. Due to the consumption of higher levels of finished goods inventory by many customers resulted in a revenue decrease from the third quarter.

Lori: And their energy and commitment to creating the new vishay.

Lori: Let's now move forward to the performance of the recent quarter.

Lori: For the fourth quarter.

Lori: We are reporting revenue of $785 2 million U S dollars.

Lori: Within our guidance range of $770 million to $810 million.

Lori: As expected softer demand in industrial end markets due to the consumption of higher levels of finished goods inventory by many customers resulted in a revenue decrease from the third quarter.

Aerospace defense and medical markets continue as bright spots for vishay.

Joel Smekal: Aerospace, Defense, and Medical Markets continue as bright spots for Vishay. Let's start on the left side of slide three with the revenue by market segment. Automotive held steady at 37% of total revenue.

Lori: Let's start at the left side of slide three with the revenue by market segment.

Lori: Automotive held steady at 37% of total revenue.

Lori: After three quarters of sequential growth in 2023, automotive revenue declined seven 5% versus the third quarter.

Joel Smekal: After three quarters of sequential growth in 2023, automotive revenue declined 7.5% versus the third quarter. Compared to the prior year's fourth quarter, automotive revenue increased 9% and grew as a percent of the total. For the year, automotive revenue grew 12.7%.

Lori: Compared to prior year's fourth quarter automotive revenue increased 9% and grew as a percent of the total.

Lori: For the year automotive revenue grew 12, 7%.

Lori: Throughout 2023, we saw increasing demand for electronic content of internal combustion engines hybrid EV.

Lori: Nichols and greater vehicle production as supply chain stabilized.

Joel Smekal: Throughout 2023, we saw increasing demand for electronic content in internal combustion engines, hybrids, and eVehicles, and greater vehicle production as supply chains stabilized. Toward the end of the year, some automotive customers in Tier 1 made adjustments to digest inventory. As automotive OEMs re-evaluate the pace of EV adoption, we see an uptick in volume for hybrid vehicle production. Design activity and activity remain strong in each region, focused on ADAS plus e-mobility, including battery management systems. Traction Inverters and Onboard Chargers.

Lori: Towards the end of the year, some automotive customers in tier ones made adjustments to digest inventory.

Lori: As automotive Oems reevaluate the pace of EV adoption.

Lori: We see an uptick in volume for hybrid vehicle production.

Lori: Design activity in automotive remains strong in each region.

Lori: Focused on Adas, plus E mobility, including battery management systems.

Lori: <unk> Inverters and onboard Chargers.

Lori: At the same time automotive Oems are engaging with us.

Lori: For design.

Lori: And technology capability discussion.

Lori: To develop long term <unk> projects.

Lori: As you know the fourth quarter is when we finalize the annual contracts with large industrial Oems and automotive tier one.

Lori: Overall, the price reduction for 2024 was low single digit percent.

Lori: After negotiating higher volume share in most cases.

Lori: We plan to offset this with cost reductions and margin improvements.

Joel Smekal: At the same time, automotive OEMs are engaging with us for Design and Technology Capability Discussions to develop long-term EV projects. As you know, the fourth quarter is when we finalize the annual contracts with large industrial OEMs and automotive tier one. Overall, the price reduction for 2024 was a low single-digit percent after negotiating higher volume share in most cases.

Lori: The industrial segment accounted for 34% of total revenue declined 11, 1% versus third quarter.

Lori: And 18, 9% versus the fourth quarter last year.

Lori: Industrial revenue for 2023 was 11, 7% lower than 2022.

Lori: Demand remained weak in Asia influenced by the ongoing economic slowdown in China.

Lori: Europe and the Americas were also sluggish as customers continue to digest high inventory levels.

Lori: There were pockets of growth, notably in support of infrastructure projects and we did complete the shipment of our largest capacitors to support an electrical grid probe.

Joel Smekal: We plan to offset this with cost reductions and margin improvement. The industrial segment accounted for 34% of total revenue, declined 11.1% versus the third quarter, and 18.9% versus the fourth quarter last year. Industrial revenue for 2023 was 11.7% lower than 2022. Demand remained weak in Asia, influenced by the ongoing economic slowdown in China.

Lori: Jim laid last quarter.

Lori: For industrial design activity, we made progress on programs around renewable energy generation smart grid infrastructure, EV charging infrastructure and energy storage.

Lori: Industrial automation continues to be a major focus for customers in all regions.

Lori: As an example in the Americas, where near shoring factories is a common topic customers want to leverage factory automation.

Lori: In aerospace and defense, our revenue increased eight 5% versus the third quarter and 31% versus last year.

Joel Smekal: Europe and the Americas were also sluggish as customers continued to digest high inventory levels. However, there were pockets of growth, notably in support of infrastructure projects, and we did complete the shipment of our largest capacity, to support an electrical grid program, which had been delayed last quarter. For industrial design activity, we made progress on programs around renewable energy generation, smart grid infrastructure, EV charging infrastructure, and energy storage. Industrial automation continues to be a major focus for customers in all regions. As an example, in the Americas, where nearshoring factories is a common topic, customers want to leverage factory automation.

Lori: For the year revenue grew 26, 5% versus 2020.

Lori: Two.

Lori: We saw continued strong demand from commercial aviation customers and military weapons system contractors with high orders in the fourth quarter due to the two wars.

Lori: For the year Aerospace and defense revenue increased 26, 5% over last year.

Lori: Revenue from medical customers grew four 3% compared to the third quarter and three 6% compared to last year.

Lori: Medical revenue grew 14% for 2023 versus 2022.

Lori: Demand remains strong for medical diagnostic equipment and implantable devices and.

Lori: Shipments to a major customer resumed after a delayed last quarter.

Lori: Medical design activity continues to be strong as customers create technology for remote monitoring of patients.

Joel Smekal: In aerospace and defense, our revenue increased 8.5% versus the third quarter and 31% versus last year. For the year, revenue grew 26.5% versus 2020. We saw continued strong demand from commercial aviation customers and military weapons system contracts, with high orders in the fourth quarter due to the two wars.

Lori: Also there is some news that the China government is planning to launch an upgrade of medical equipment in their hospitals.

Lori: In 2024.

Lori: Revenue from other end markets declined both sequentially and year over year by 13, 7% and 30% respectively.

Lori: Demand in these consumer computer and telecom markets has been weak all year and revenue.

Lori: For the year fell 20% versus 2022.

Lori: Turning to our business channels.

Lori: Revenue from each channel declined relative to the third quarter with distribution accounting for a little more than half of the decrease.

Joel Smekal: Revenue from medical customers grew 4.3% compared to the third quarter and 3.6% compared to last year; medical revenue grew 14% for 2023 compared to 2022. Demand remains strong for medical diagnostic equipment and implantable devices, and shipments to a major customer resumed after a delay last quarter. Medical design activity continues to be strong as customers create technology for remote monitoring of patients. Also, there is some news that the Chinese government is planning to launch an upgrade of medical equipment in their hospitals in 2024. Revenue from other end markets declined both sequentially and year-over-year by 13.7% and 30%, respectively.

Lori: OEM revenue was $6, 9% lower than the third quarter, but four 1% higher than the prior year's fourth quarter.

Lori: Soft demand from industrial customers at year end inventory adjustments by some automotive customers accounted for this reduction.

Lori: However for the year OEM increased 12, 1% versus 2022.

Lori: Ams revenue declined 13, 7% quarter over quarter, and 24, 2% year over year.

Lori: Reflecting another quarter of inventory adjustments in all regions.

Lori: Particularly in Europe, among non global EMS companies and softening demand for industrial programs in Asia.

Lori: EMS revenue for 2023 was eight 9% lower than last year.

Lori: <unk> revenue for the fourth quarter fell eight 2% sequentially.

Lori: <unk> was $14, 4% below prior year as a result of inventory adjustments in all regions.

Lori: For the year, yes.

Lori: Distribution revenue declined 11% from 2022.

Lori: Distribution inventory at quarter end increased to 26 weeks versus 24 weeks last quarter with increases in all regions.

Joel Smekal: Demand in these consumer, computer, and telecom markets has been weak all year, and revenue for the year fell 20% versus 2022. Turning to our business channel, revenue from each channel declined relative to the third quarter, with distribution accounting for a little more than half of the. OEM revenue was 6.9% lower than the third quarter but 4.1% higher than the prior year's fourth quarter. Soft demand from industrial customers and year-end inventory adjustment by some automotive customers accounted for this reduction. However, for the year, OEM increased 12.1% versus 2022. EMS revenue declined 13.7% quarter over quarter and 24.2% year over year, reflecting another quarter of inventory adjustments in all regions, particularly in Europe among non-global EMS companies, and softening Demand for Industrial Programs in Asia. EMS revenue for 2023 was 8.9% lower than last year. Distribution revenue for the fourth quarter fell 8.2% sequentially and was 14.4% below the prior year as a result of inventory adjustments in all regions for the year. Distribution revenue declined 11% from 2022.

Lori: POS decreased six 5% with most of the decline coming from Europe, where customers were still reducing their forecasts are cleaning up inventory positions.

Lori: The dollar value of the distributor inventory was flat quarter over quarter.

Lori: We continue to better position Boucher on the distributors shelves.

Lori: By adding 7200 part numbers during the quarter.

Lori: These steps will help to increase our participation.

Lori: This high margin channel.

Lori: Our customers are telling us.

Lori: That they expect the inventory correction to last through the first half of 2024.

Lori: Some end markets may improve sooner, notably aerospace and defense in the Americas, where we see distributors wanting to increase their position.

Lori: On the vishay passive as well distributors would like to increase their position on the automated automotive grade semiconductors.

Lori: Based on order flow in the fourth quarter, we expect passive to recover faster than semiconductors.

Lori: Now I'll turn the call over to Laurie for the review of our financial results.

Laurie: Thank you Joe good morning, everyone.

Laurie: I'll start my review of our third quarter results on slide four.

Laurie: Revenues for the fourth quarter were $785 $2 million.

Compared to the third quarter revenues decreased eight zero percent.

Laurie: <unk>, a seven 2% decrease in volume and 7% reduction in pricing.

Laurie: Most of the price and volume reduction was in our semiconductor business segments.

Laurie: Pricing for our OEM automotive and industrial customers under contract held steady during the quarter.

Laurie: Soft demand in industrial end markets put pressure on pricing and distribution channels in E&S.

Laurie: Similarly in Europe.

Laurie: Hi, reportable business segments. The decrease in revenues was mainly attributable to MOSFET.

<unk> inventory digestion among customers.

Laurie: The end markets, followed by diodes and aster.

Laurie: Revenues for the three passive components segment resistors inductors and capacitors were generally stable.

Laurie: Compared to the fourth quarter last year revenues were down eight 2%, reflecting a volume decrease of nine 7% and is 0.2% reduction in pricing.

Joel Smekal: Distribution inventory at quarter end increased to 26 weeks versus 24 weeks last quarter, with increases in all regions. POS decreased 6.5% with most of the decline coming from Europe, where customers were still reducing their forecast or cleaning up inventory positions. The dollar value of distributor inventory was flat quarter over quarter.

Laurie: At quarter end book to Bill for consolidated Dee, Shane with zero seven times.

Laurie: And backlog at quarter end was $5 three months compared to $5 five months at the end of the prior quarter.

Laurie: We returned in the fourth quarter, a total of $34 8 million to stockholders comprised of dividends $15 8 million and stock repurchases.

Laurie: <unk> won several million dollars.

Laurie: The next slide presents income statement highlights.

Laurie: Gross profit was $207 million margin of 25, 6%.

Joel Smekal: We continue to better position Vishay on the distributor's shelf by adding 7,200 part numbers during the quarter. These steps will help to increase our participation in this high-margin channel. Our customers are telling us that they expect the inventory correction to last through the first half of 2024. Some in markets may improve sooner, notably aerospace and defense in the Americas, where we see distributors wanting to increase their position on the Vishay passives. As well, distributors would like to increase their position on automotive-grade semiconductors.

Laurie: Compared to 27, 8% for the third quarter and in line with our guidance.

Compared to the third quarter gross margin decreased primarily due to lower volume.

Laurie: SG&A expenses were $122 8 million compared.

Laurie: Compared to $122 5 million for the third quarter slightly.

Laurie: Slightly lower than our guidance due to foreign currency effects.

Laurie: Operating income decreased $37 $3 million versus the third quarter on lower gross profit.

Laurie: Operating income decreased $57 $5 million versus the prior year due to lower volume related gross profit and higher SG&A expenses, primarily reflecting annual salary increases general inflation.

Laurie: <unk> equity incentive compensation.

Laurie: Operating margin was nine 9% compared to 13, 5% for the third quarter and 15, 8% for the first quarter of 2022.

Lori Lipcaman: Based on order flow in the fourth quarter, we expect passives to recover faster than semiconductors. Now I'll turn the call over to Lori for a review of our financial results. Thank you, Joel. Good morning, everyone.

Laurie: EBITDA was $127 6 million for an adjusted EBITDA margin of 16, 3%.

Laurie: Our normalized effective tax rate was 35, 6% and 29, 3% for the quarter and for the year to date periods respectively.

Lori Lipcaman: I'll start my review of our third quarter results on slide. Revenues for the fourth quarter were $785.2 million. Compared to the third quarter, revenues decreased 8.0 percent, reflecting a 7.2 percent decrease in volume and a 0.7 percent reduction in price.

Laurie: Up versus our guidance due to negative exchange rate impact on our deferred tax liabilities in Europe.

Laurie: Our GAAP effective tax rates were 35, 6% and 34% for the quarter and year to date periods respectively.

Laurie: Reflecting the non deductibility most of the loss on early extinguishment of debt, which occurred in <unk>.

Laurie: For 2024, we expect a normalized effective tax rate approximately 31%.

Laurie: Yes.

Laurie: GAAP EPS was <unk> 37 per share.

Laurie: No non-GAAP adjustments.

Lori Lipcaman: Most of the price and volume reduction was in our semiconductor business segment. Pricing for our OEM, automotive, and industrial customers under contract held steady during the quarter, while soft demand in industrial and consumer markets put pressure on pricing and distribution channels and EMS, primarily in Europe. By reportable business segment, the decrease in revenues was mainly attributable to MOSFETs, reflecting inventory digestion among customers in our other end markets, followed by diodes and asterisks. However, revenues of the three passive components segments, resistors, inductors, and capacitors, were generally stable.

Laurie: This compares to GAAP EPS.

Laurie: Seven.

Laurie: Sure and adjusted EPS, <unk> 60 per share for the third quarter.

Laurie: For your convenience on slide six we have included in the body of the presentation chart depicting revenue gross margin and book to Bill ratios for each of our reportable segments.

Laurie: Okay.

Laurie: Turning to slide seven we present cash conversion cycle metrics.

Laurie: Dsos were 50 days two days higher than the third quarter and Dps for two days lower at 31 days.

Laurie: Inventory was $627 $5 million at yearend.

Laurie: Slightly compared to $643 $5 million.

Speaker Change: Thank you.

Speaker Change: Inventory days outstanding or 101 days compared to 96 days for the third quarter.

Speaker Change: Bringing the cash conversion cycle for the fourth quarter to 120 days.

Speaker Change: On slide eight you can see the cash flow from operations of $6 3 million for the fourth quarter.

Speaker Change: With lower than the third quarter and lower than the fourth quarter last year.

Speaker Change: During the quarter, we paid $63 $6 million of cash taxes on repatriation of cash to the U S.

Lori Lipcaman: Compared to the fourth quarter last year, revenues were down 8.2%, reflecting a volume decrease of 9.7% and a 0.2% reduction in price. At quarter end, booked bill for Consolidated Vishay was $0.75, and backlog at quarter end was 5.3 months, compared to 5.5 months at the end of the prior quarter. We returned a total of $34.8 million to stockholders in the fourth quarter, comprised of dividends of $13.8 million and stock repurchases of $21.0 million. The next slide presents the income statement highlights. Gross profit was $200.7 million for a margin of 25.6%, compared to 27.8% for the third quarter and in line with our guidance. Compared to the third quarter, gross margin decreased primarily due to lower volume. SG&A expenses were $122.8 million compared to $122.5 million for the third quarter, slightly lower than our guidance due to foreign currency effects. Operating income decreased $37.3 million versus the third quarter due to lower gross profit.

Speaker Change: The cash taxes paid upon repatriation represented foreign withholding and income taxes as such intercompany dividends are not subject to U S federal taxes.

Speaker Change: These foreign taxes had been previously accrued when we changed our assertion on indefinite reinvestment of earnings in Germany, and Israel and prior years.

Speaker Change: As a result of the repatriation transactions.

Speaker Change: $305 $5 million was received in the U S.

Speaker Change: We plan to use approximately $170 million of this cash to complete the Newport acquisition.

Speaker Change: We also plan to fund future <unk>.

Speaker Change: Pursuant to our stockholder return.

Speaker Change: Policy.

Speaker Change: Total capex was $145 $3 million for the quarter.

Speaker Change: With $77 5 million total invested in capital capacity expansion.

Speaker Change: On a full year basis total capex was nine 7% of revenue compared to nine 3% for the same period last year.

Speaker Change: The capex and cash taxes paid on repatriations during the quarter.

Speaker Change: <unk> been a net use of free cash of $138 9 million in the fourth quarter.

Speaker Change: For the full year cash flows from operations were $365 million and capex of $329 million.

Speaker Change: Stockholder returns for the fourth quarter amounted to $34 $8 million.

Speaker Change: <unk> of $13 8 million, five quarterly dividend and $21 2 million for share repurchases.

Speaker Change: We repurchased two 9 million shares at an average price of $23 32 per share during the quarter.

Lori Lipcaman: Operating income decreased $57.5 million versus the prior year due to lower volume-related gross profit and higher SG&A expenses, primarily reflecting annual salary increases, general inflation, and equity incentive compensation. Operating margin was 9.9% compared to 13.5% for the third quarter and 15.8% for the fourth quarter of 2020. EBDA was $127.6 million for an adjusted EBDA margin of 16.3%. Our normalized effective tax rates were 35.6% and 29.3% for the quarter and for the year-to-date periods, respectively, up versus our guidance due to negative exchange rate impacts on our deferred tax liabilities in Europe. Our gap effective tax rates were 35.6% and 30.4% for the quarter and year-to-date periods, respectively, reflecting the non-deductibility of most of the loss on early extinguishment of debt which occurred in 3Q. For 2024, we expect a normalized effective tax rate of approximately 31.0%. GAP EPS was 37 cents per share. There were no non-gap adjustments for 4K.

Speaker Change: Total stockholder returns amounted to $134 3 million for the year.

Speaker Change: All above our commitment to return at least $100 million or 70% of annual free cash flow.

Speaker Change: For the year, we generated $37 4 million and free cash flow and two on our liquidity to make up the difference.

Speaker Change: Total liquidity at year end was $1 8 billion.

Speaker Change: Including cash and short term investments of $1 7 billion, our undrawn $750 million revolving credit facility.

Speaker Change: And a new Undrawn 30 million Euro facility in Germany.

Speaker Change: We have approximately $315 million of cash on hand in the U S, which includes amounts to be used for the Newport transaction.

Speaker Change: Turning now to slide nine for our guidance for the first quarter of 2024 revenues are expected to be in the range of $735 million plus.

Plus or minus $20 million.

Speaker Change: Gross profit margin is expected to be in the range of 20% plus or minus 50 basis points.

Speaker Change: SG&A expenses are expected to be $130 million, plus or minus $2 million for the quarter.

Speaker Change: And $528 million, plus or minus $5 million for the full year at current exchange rates.

Speaker Change: For 2024, we expect our normalized effective tax rate of approximately 31%.

Speaker Change: Finally, we remain committed to distributing at least 70% of our free cash flow to shareholders in the form of dividends and stock repurchases in accordance with our stockholder return policy.

Speaker Change: For 2024, we expect to return at least $100 million.

Speaker Change: I'll now turn the call back to Joe.

Lori Lipcaman: This compares the gap EPS of $0.47 per share and adjusted EPS of $0.60 per share for the third quarter. For your convenience, on slide six, we have included in the body of the presentation a chart depicting revenue, gross margin, and book-to-bill ratios for each of our reportable business segments. Turning to slide 7, we present the Cache Conversion Cycle Method.

Joe Smith: Thank you Laurie.

Joe Smith: Let's turn to slide 10 for a fourth quarter update on our key near term initiatives.

Joe Smith: During the quarter, we continued staging of our multiyear plan to expand capacity to support our highest growth and highest return product lines.

Joe Smith: Drive higher revenue growth.

Joe Smith: Expand margins and optimize returns and ensure vishay is ready to capitalize on the megatrends in E mobility sustainability of connectivity.

Lori Lipcaman: DSOs were 50 days, two days higher than the third quarter, and DPOs were two days lower at 31 days. Inventory was $647.5 million at year-end, up slightly compared to $643.5 million at the end of 3Q. Inventory dates outstanding for 101 days compared to 96 days for the third quarter, bringing the cash conversion cycle for the fourth quarter to 120 days. On slide 8, you can see the cash flow from operations of $6.3 million for the fourth quarter, which was lower than the third quarter and lower than the fourth quarter last year. During the quarter, we paid $63.6 million in cash taxes on repatriation of cash to the U.S. The cash taxes paid upon repatriation represented foreign withholding and income taxes, as such intercompany dividends are not subject to U.S. federal taxes.

Joe Smith: We invested $329 4 million in capital investments during the year.

Joe Smith: Less than the $385 million, we had planned at the beginning of the year due to delays in delivering and installing equipment.

Joe Smith: During the fourth quarter, we stayed on schedule with our expansion projects, including Fabs located Soho Taipei in Turin to.

Joe Smith: To meet the growing long term demand for our automotive and industrial customers.

Joe Smith: We expect to complete qualification to diodes at our eight inch plants in Taipei and Turin.

Joe Smith: And deliver first shipments this year.

Joe Smith: At our new facilities in Mexico, which opened last quarter, we continued qualification.

Joe Smith: The warrants specifically that is dedicated to increasing output power metal strip resistors.

Joe Smith: We shipped commercial products and began qualification of automotive grade products.

Joe Smith: At our La Laguna campus, where we are initially focusing on mass production of power inductors we.

Joe Smith: We had qualification of commercial products since the beginning of 2020, we have started to qualify automotive products.

Joe Smith: Two increased MOSFET capacity, we continue to construct a 12 inch fab and it's so we.

Joe Smith: We are quality, we're in qualification of SK key foundry.

Lori Lipcaman: These foreign taxes had been previously accrued when we changed our assertion on indefinite reinvestment of earnings in Germany and Israel in prior years. As a result of the repatriation transactions, net $305.5 million was received in the U.S. We plan to use approximately $170 million of this cash to complete the Newport acquisition. We also plan to fund future amounts pursuant to our stockholder returns., Paul Wontorek, and Jian Z

Joe Smith: For commercial MOSFET.

Joe Smith: And still expect to be ready for shipment in the second half of 2024.

Joe Smith: As a reminder, SK key foundries is also in automotive certified foundry.

Joe Smith: Announced the acquisition of the Newport wafer fab located in South Wales last November.

Joe Smith: We still expect to close this transaction in the first quarter of this year pending approval by the UK government.

Joe Smith: As I mentioned last quarter, we plan to make Newport, the home for Max power to develop and scale, our silicon carbide capabilities and for Gan technology development.

Operator: Thank you, everybody. I look forward to seeing you on the next one. Thanks. Bye. Bye. Bye. Bye. Bye. Bye. Bye. Bye. Bye. Bye. Bye. Bye. Bye. Bye. Bye. Bye. Bye. Bye. Bye. Bye. Bye. Bye. Bye. Bye. Bye. Bye. Bye. By

Joe Smith: During the fourth quarter, we released our 1200 volt silicon carbide planner MOSFET as plan.

Joe Smith: To support high volume sampling of production, we are installing additional burn in and test equipment in our <unk> facility.

Lori Lipcaman: Total CapEx was $145.3 million for the quarter, with $77.5 million of the total invested in capacity expansion. On a full year basis, total CapEx was 9.7% of revenue compared to 9.3% for the same period last year. The CAPEX and cash taxes data on repatriation during the quarter resulted in a net use of free cash of $138.9 million in the fourth quarter.

Joe Smith: We are planning to have the silicon carbide package types for three different resistance and current capabilities available during the first half of 2024.

Joe Smith: In parallel we continue the advanced the development of the 1200 volt dual trench technology.

Joe Smith: The 1700 volt planner technology, and the 650 volt planner technology.

Joe Smith: Due to long lead times at foundries.

Joe Smith: We currently expect to have samples available in the second half of 2024.

Joe Smith: We also continued to advance our subcontractor initiative.

Lori Lipcaman: For the full year, cash flows from operations were $365 million, and capital expenditures were $329 million. Stakeholder returns for the fourth quarter amounted to $34.8 million, consisting of $13.8 million for our quarterly dividend and $21.0 million for share appreciation. We repurchased 0.9 million shares at an average price of $23.32 per share during the quarter.

Joe Smith: As a reminder, we began this initiative early in the year in order to create incremental capacity for our high growth and high return products by outsourcing some commodity products.

Joe Smith: During the quarter, we qualified 14 different product families of inductors.

Joe Smith: An additional capacity to support a widening of our portfolio.

Joe Smith: Turning to our strategy to enhance channel management and focusing on maximizing the profitability of each channel.

Joe Smith: We continue to work on expanding participation with our distributors and creating Pos demand.

Lori Lipcaman: Total stockholder returns amounted to $134.3 million for the year, well above our commitment to return at least $100 million, or 70% of annual free cash flow. For the year, we generated $37.4 million in free cash flow and drew on our liquidity to make up the difference. Total liquidity at year-end was $1.8 billion, including cash and short-term investments of $1.0 billion, our on-drawn $750 million revolving credit facility, and a new on-drawn €30 million facility in Germany. We have approximately $350 million of cash on hand in the U.S., which includes amounts to be used for the Newport transaction.

Joe Smith: Each of our business units is now actively engaged with distributors to identify a broader part number mix by technology.

Joe Smith: As an example, we learned we werent positioned well in the A&P movers for diodes.

Joe Smith: In the Americas, we added 7749 skus during the year across our largest distributors.

Joe Smith: As a result, these distributors saw an increase in their customer accounts by 214.

Joe Smith: In Asia, we added 543 part numbers with one distributor for automotive applications.

Joe Smith: Finally, we continue to develop our vishay solutions, leveraging our broad portfolio of discrete semiconductors and passive.

Joe Smith: By building automotive reference designs for engineers to evaluate.

Lori Lipcaman: Turning now to slide 9, our guidance. For the first quarter of 2024, revenues are expected to be in the range of $735 million, plus or minus $20 million. Gross profit margin is expected to be in the range of 24% plus or minus 50 basis. SG&A expenses are expected to be $130 million plus or minus $2 million for the quarter, and $528,000,000 plus or minus $5,000,000 for the full year at Current Exchange. For 2024, we expect a normalized effective tax rate of approximately 31 percent.

Joe Smith: We now have a high voltage intelligent battery center at.

Joe Smith: At a 48 volt E fuse circuit breaker available for testing.

Customers are sampling products mainly.

For onboard charger application.

Joe Smith: We're also releasing a bi directional 48 volt 12 volt DC to DC converter.

Joe Smith: Rich will now take place in Q1.

Rich: Let's turn to slide 11 for a recap of the goals, we set for 2023 a year ago.

We've added incremental capacity, both internally and externally.

Rich: To support the faster growth and highest margin key product lines.

Rich: The incremental capacity, we invested in last year started to come online this year.

Rich: And we will continue to come online through 2024.

Joel Smekal: Finally, we remain committed to distributing at least 70% of our free cash flow to shareholders in the form of dividends and stock repurchases in accordance with our stockholder return policy. For 2024, we expect to return at least $100 million. And I'll turn the call back to Joel. Thank you, Lori.

Rich: For 2023, we increased capacity by 13%.

Rich: We're developing our silicon carbide capabilities through the addition of <unk> power and Newport.

Rich: We're creating a new vishay throughout the organization.

Rich: To put the customer first and to bring our business minded focus to everything we do.

Rich: At the same time, we're maintaining our operational disciplines.

Rich: Controlling costs to protect margin.

Rich: While building in the ability to accelerate quickly as demand shifts up.

Joel Smekal: Let's turn to slide 10 for a fourth quarter update on our key near-term initiative. During the quarter, we continued to stage our multi-year plan to expand capacity to support our highest growth and highest return product line, drive higher revenue growth, expand margins and optimize returns, and ensure Vishay is ready to capitalize on the megatrends in e-mobility, sustainability, and connectivity. We invested $329.4 million in capital investments during the year.

Rich: We're preparing the company to be ready to take full advantage of the Mega trends.

Rich: And our customers the Oems distributors and MFS are paying close attention to us.

Rich: They see what we're doing and theyre, telling us they want more from V shape.

Rich: More meetings more technology roadmap planning.

Rich: Earlier access to their design engineers.

Rich: More product skus on the shelf.

Rich: And our commitment to scale capacity.

Rich: As an example last December.

Rich: <unk> was selected as one of only five suppliers given preferred access to support design programs at a key MFS.

Joel Smekal: Less than the $385 million we had planned at the beginning of the year due to delays in delivering and installing equipment. However, during the fourth quarter, we stayed on schedule with our expansion projects, including fabs located in Itseho, Taipei, and Turin, to meet the growing long-term demand for our automotive and industrial customers. We expect to complete qualification of diodes at our 8-inch plants in Taipei and Turin and deliver first shipments this year. At our new facilities in Mexico, which opened last quarter, we continue qualification at the Warren facility that is dedicated to increasing output of power metal strip resistors. We shipped commercial products and began qualification of automotive grade products. At our La Laguna campus, where we are initially focusing on mass production of power inductors.

Rich: While fourth quarter calls are typically when you hear about goals and initiatives for the next fiscal year.

I'm going to hold off on a detailed discussion about 2024 until our Investor day.

Rich: Which we are scheduled to take place at the New York Stock Exchange on April 2nd.

Rich: In 2024, we intend to build on the foundation that we laid in 2023.

Rich: We plan to continue to invest in incremental capacity and have budgeted $450 million for 2024, including the roughly $56 million and projects that were pushed from 2023 into 2024 as we advance towards our goal of investing a total of about one.

Rich: One 2 billion U S dollars over three years, excluding Newport.

At our Investor day.

Rich: We'll share our capacity expansion plan.

Rich: Our view is on the evolution of our manufacturing footprint, including Newport.

Rich: Our silicon carbide strategy.

Joel Smekal: We are advancing the qualification of commercial products, and since the beginning of 2024, we have started to qualify automotive-grade products. To increase MOSFET capacity, we continue to construct a 12-inch FAB in Itsehoe.

Rich: And five year financial targets and paths to reaching revenue and margin goals.

Speaker Change: We look forward to seeing everyone there.

Speaker Change: With that we'll open the call to your questions.

Speaker Change: Operator, please start the Q&A session.

Speaker Change: As a reminder, if you'd like to ask a question at this time. Please press star one one on your Touchtone telephone and wait for your name to be announced.

Joel Smekal: We are in the qualification stage of SK Key Foundry for commercial MOSFETs and still expect to be ready for shipment in the second half of 2024. As a reminder, SK Key Foundry is also an automotive certified foundry. Announced the acquisition of the Newport Wafer Fab located in South Wales last November. We still expect to close this transaction in the first quarter of this year, pending approval by the UK government. As I mentioned last quarter, we plan to make Newport the home for Max Power to develop and scale our silicon carbide capabilities and for GAN technology development. During the fourth quarter, we released our 1200-volt silicon carbide planter MOSFETs as planned.

Speaker Change: To withdraw your question. Please press star one again.

Speaker Change: Please standby, while we compile the Q&A roster.

Speaker Change: Yes.

Ruplu Bhattacharya: Our first question will come from the line of <unk> Bhattacharya with Bank of America.

Ruplu Bhattacharya: Hi, Thanks for taking my questions.

Ruplu Bhattacharya: Joel with respect to your discussions with the distributors I know that you've <unk>.

Ruplu Bhattacharya: The number of Skus.

Ruplu Bhattacharya: That the distributors are now holding.

Ruplu Bhattacharya: How long do you think that will last or you're still going to continue to do that over the next couple of quarters and at what point do you think that'll be sufficient and have you seen any meaningful share shifts I mean have you gained any traction in any region from.

Ruplu Bhattacharya: From this leaders what are they giving you in terms of feedback in terms of the product lines that are selling.

Ruplu Bhattacharya: That are more in demand and can you even to the discussion we talked about an inventory correction happening in the channel what are your thoughts in terms of how long that will last in fiscal 'twenty four.

Ruplu Bhattacharya: Okay.

Speaker Change: Thanks for the question.

Speaker Change: The distributors, we have 16 business units in vishay.

Speaker Change: And we're probably about a third have had very active meetings.

Speaker Change: All of our divisions the business units have scheduled meetings and we've got to cover multiple regions. So this is about the leadership of the division head and the product marketing leader.

Joel Smekal: To support high volume sampling and production, we are installing additional burn-in and test equipment in our Kaohsiung facility. We are planning to have the silicon carbide package types for three different resistance and current capabilities available during the first half of 2024. In parallel, we continue to advance the development of the 1200 volt dual trench technology, the 1700 volt planter technology, and the 650 volt planter technology due to long lead times at foundries.

Speaker Change: Visiting the distributors in the Americas in Europe and in Asia.

Speaker Change: So we are not quite at the midpoint of these business units.

Speaker Change: Having the face to face meetings, there is preliminary discussion happening about part numbers.

Where would we go into these meetings were actively identifying and speaking about our capabilities with capacity and lead times to support.

Speaker Change: So I'd say overall, we're about a third.

Speaker Change: Pushing to a half this is going to continue at least through the first half of this year. It may go into the third quarter as well.

Speaker Change: The feedback we're getting.

Speaker Change: Feedback has been really good vishay is showing that we have the capacity available to broadened our support to the distributors.

Speaker Change: We played a narrow role in the part numbers that we're finding in a number of these technologies that narrow role and the participation.

Joel Smekal: We currently expect to have samples available in the second half of 2024. We also continue to advance our subcontractor initiative. As a reminder, we began this initiative early in the year in order to create incremental capacity for our high growth and high return products by outsourcing some commodity products. During the quarter, we qualified 14 different product families of inductors, bringing additional capacity to support a widening of our portfolio.

Speaker Change: The one comment I made about the Americas, we've reached achieved 214 new customers.

Speaker Change: Based on those 7700 part numbers that were placed at key distributors in 2023. So that's good feedback customers are buying vishay that didn't buy boucher.

Speaker Change: And then once we learned about these customers we approach them to offer broader technologies. We've got 16 different technologies, if theyre buying one we want to make sure. They are buying multiples. So the feedback has been good.

Speaker Change: The inventory correction you talk about.

Speaker Change: We have meetings with the Oems, we have meetings with MFS, we have meetings with our distributors. So the chain theres inventory at each one of those steps.

Joel Smekal: Turning to our strategy to enhance channel management and focus on maximizing the profitability of each channel, we continue to work on expanding participation with our distributors and creating POS demand. Each of our business units is now actively engaged with distributors to identify a broader part number mix by technology. As an example, we learned we weren't positioned well in the A and B movers for diodes.

Speaker Change: The correction that we hear most say by the end of Q2.

Speaker Change: But it depends on the products some products are still in high demand or lack of inventory.

Speaker Change: We did not stuffed the channel we did not stuff the OEM with inventory, we were quite flexible we didn't enforce and the CNR or we didn't take that strategy and the meetings, we're having with Oems they are quite happy with.

Speaker Change: With how boucher allow the OEM to be flexible last year adjust there.

Speaker Change: Canceled.

Speaker Change: Cancellations were high in Q3, some cancellations in Q4.

Joel Smekal: In the Americas, we added 7,749 SKUs during the year across our largest distributor. As a result, these distributors saw an increase in their customer counts by 214. In Asia, we added 543 part numbers with one distributor for automotive applications. Finally, we continue to develop our Vishay solutions, leveraging our broad portfolio of discrete semiconductors and passives, by Building Automotive Reference Designs for Engineers to Evaluate. We now have a high-voltage intelligent battery sensor and a 48-volt eFuse circuit breaker available for testing.

Speaker Change: But the Oems are giving us signals that they intend to grow this year and they want to position Boucher for greater growth because of how we treated them in 'twenty three.

Speaker Change: And the inventory that we have there is a is not as high as some of our peers. So this is the work we have cut out for us. So it's a bit of a long answer, but I will say by the end of Q2 is what we're targeting for inventory correction.

Speaker Change: Okay. Thanks for all the details there can I ask you on the auto gross margin it looks like it was down to 12% this quarter, but was there any one time items that happened. There can you just give us your thoughts on how that.

Speaker Change: Adopted gross margin should trend from here.

Lori: Oliver This is Lori.

Oliver: Yes, there was.

Lori: One time items, we had started setting up a new silicon fab in IHOP and location for the Opto Division.

Joel Smekal: Customers are sampling products, mainly for onboard charger applications. We're also releasing a bi-directional 48 volt, 12 volt DC to DC converter, which will now take place in Q1. Let's turn to slide 11 for a recap of the goals we set for 2023 a year ago. We've added incremental capacity, both internally and externally, to support the faster growth and highest margin key product line. The incremental capacity we invested in last year started to come online this year and will continue to come online through 2024. For 2023, we increase capacity by 13%. We're developing our silicon carbide capabilities through the addition of Max Power and NuPort.

Lori: Now that we have planned to close on the Newport deal with discontinued debt and we had to take a write off on some of the work that had already been achieved up to that point.

Speaker Change: Thank you.

Speaker Change: The Newport Fab is allowing us to we talk about a campus we talk about having this fab silicon fab the ability to support MOSFET.

Speaker Change: Diodes as well as the optimal product plus we will bring in some of the thin film resistor front and this is a new approach for us. So we had to close the project that was initially starting in <unk>.

Speaker Change: And that's the write off that Laurie was talking about will be more efficient.

Speaker Change: And be able to reduce costs overall.

Speaker Change: Not having duplicate fixed cost because we'll be able to put most of his.

Joel Smekal: We're creating a new Vishay throughout the organization to put the customer first and to bring a business-minded focus to everything we do. At the same time, we're maintaining our operational discipline, limiting costs to protect margin while building in the ability to accelerate quickly as demand shifts. We're preparing the company to be ready to take full advantage of the mega, and our customers, the OEMs, distributors, and EMS, are paying close attention to us. They see what we're doing, and they're telling us they want more from Vishay. More meetings?

Speaker Change: Into a single front end campus.

Speaker Change: Newport.

Speaker Change: Okay got it and for the last one if I can ask can you just remind us on your capital allocation priorities you will in terms of M&A do you see any potential for either on the semiconductor side or on the passive side are there I know you talked about some <unk>.

Speaker Change: Areas, where youre trying to improve.

Speaker Change: Your capabilities, but any.

Speaker Change: Any thoughts on M&A and Laurie on the capital return in terms of share buybacks, how should we think about the pace of that versus any delevering. Thank you. So much.

Speaker Change: Laura you want to comment first about the capital allocation. So we still remain firmly committed to returning.

Laura: Our free cash flow, 70% of our free cash flow to shareholders.

Laura: And a minimum of $100 million for this year. So we don't make any changes in that we feel very strongly that's an important part of our capital allocation strategy.

Joel Smekal: more technology roadmap planning, earlier access to their design engineers, more product SKUs on the shelf, and our commitment to scale capacity. As an example, last December, Vishay was selected as one of only five suppliers given preferred access to support design programs at a key EMS. While fourth-quarter calls are typically when you hear about goals and initiatives for the next fiscal year, I'm going to hold off on a detailed discussion about 2024 until our investor day, which we have scheduled to take place at the New York Stock Exchange on April 2nd. In 2024, we intend to build on the foundation that we laid in 2023.

Laura: Regarding M&A we.

We continue to look and we have some targets.

Laura: Circuit protection is one this would be a <unk> addition to <unk> portfolio, we always look to broaden our portfolio. So circuit protection is one we also look at verticals.

Laura: Verticals that help us with.

Laura: Specialty materials that would help to advance our technology and then we look at expansions of suppliers that are in the same businesses us, possibly better positioned in a region as we see customers speak about regionalization we.

Laura: We find that is also an important element that we look at where vishay is manufacturing today do we expand in a particular region or can we make an acquisition that positions as quickly.

Laura: That region.

Joel Smekal: We plan to continue to invest in incremental capacity and have budgeted $450 million for 2024, including the roughly $56 million in projects that were pushed from 2023 into 2024, as we advance towards our goal of investing a total of about $1.2 billion over three years, excluding Newport, which at our Investor Day will share our capacity expansion plan. Our views on the evolution of our manufacturing footprint, including Newport, our silicon carbide strategy, and Five-Year Financial Targets and Paths to Reaching Revenue and Margin Goals We look forward to seeing everyone there.

Laura: Those are the approaches we're taking today.

Speaker Change: Okay. Thanks for all the details appreciate it alright, thanks for the questions.

Speaker Change: Thank you.

Speaker Change: Our next question will come from the line of Matt Sheerin with Stifel.

Matt Sheerin: Yes. Thank you good morning, everyone.

Matt Sheerin: My first question just regarding your guidance for Q1.

Matt Sheerin: In terms of the Youre guiding around six 7% sequential decline in revenue.

Is that primarily the distribution destocking or is that your OEM customers as well.

Matt Sheerin: Primarily the distributor Destocking.

Matt Sheerin: As we've met with the Oems the Oems talk about if it's industrial Oems They talk about single digit growth in 2024.

Matt Sheerin: The automotives were even greater growth.

Matt Sheerin: We're talking about 10% plus in demand of components that isn't necessarily car count as we know that's a lot of electronic content going in so those two segments are the largest segments we have.

Operator: With that, we'll open the call to your questions. Operator, please start the Q&A session. As a reminder, if you'd like to ask a question at this time, please press star 1 1 on your touchtone telephone and wait for your name to be announced. To withdraw your question, please press star 1 1 again.

Matt Sheerin: Aerospace defense will continue to grow medical as well, we see that so those four segments, representing 80 plus percent of vishay.

Ruplu Bhattacharya: Please stand by while we compile the Q&A roster. Our first question will come from the line of Ruplu Bhattacharya with Bank of America. Hi, thanks for taking my questions. Joel, with respect to your discussions with the distributors, I know that you've increased the number of SKUs that the distributors are now holding. How long do you think that will last? Are you still going to continue to do that over the next couple of quarters? And at what point do you think that'll be sufficient?

Matt Sheerin: They're outward shipment of their product they see growth gets the steps in between so it is the distributor.

Matt Sheerin: Digestion of inventory and summit MFS.

Speaker Change: Okay. Thank you and then just backing into.

Speaker Change: The EPS and operating margin.

Speaker Change: On your guidance it looks like operating margins kind of shake out around six 5%, which is actually below the last trough back in late 19, you were just over that so.

Speaker Change: So obviously huge.

Ruplu Bhattacharya: And have you seen any meaningful share shifts? I mean, have you gained any traction in any region from distributors? What are they giving you in terms of feedback, in terms of the product lines that are selling or that are more in demand? And can you weave that into the discussion?

Speaker Change: Step down year over year.

Speaker Change: How should we think about operating.

Speaker Change: Margins as we go through the year is this the trough here.

Speaker Change:

Speaker Change: I'd like to say, yes, as a matter of fact.

Speaker Change: <unk>.

Speaker Change: The margins are reducing to the approximately 6% we have put into place where we're going to have a lower gross margin was approximately 24% and then we have some relatively high SG&A expenses.

Ruplu Bhattacharya: You know, we talked about inventory correction happening in the channel. What are your thoughts in terms of how long that will last?

Speaker Change: Due to inflation wage increases and our long term incentive programs.

Joel Smekal: Hi Ruplu, thanks for the question. The distributors; we have 16 business units in Vishay, and we're probably about a third have had very active meetings. All of our divisions, the business units, have scheduled meetings, and we've got to cover multiple regions. So this is about the leadership of the division head and the product marketing leader, visiting the distributors in the Americas, in Europe, and in Asia. So we are not quite at the midpoint of these business units, having the face-to-face meetings. There is preliminary discussion happening about part numbers, where when we go into these meetings, we're actively identifying and speaking about our capabilities with capacity and lead time to support them. So I'd say overall we're about a third, pushing to a half. This is going to continue at least through the first half of this year, and it may go into the third quarter as well.

Speaker Change: Barry.

Speaker Change: Sure.

Speaker Change: Putting some pressure on to the gross margin or the operating margin.

Barry: But as revenues would pick up in <unk>.

Barry: So I would say just as a potential for the trough, yes. It is tough.

Barry: And actually just on Opex, you're basically guiding for 8%.

Barry: G&A growth this year and revenue should be down at least mid to high single digits for the year.

Why not take some cost cutting actions here.

Barry: We are looking at cost cutting it is the topic of daily and weekly discussion across the company.

Barry:

Barry: Looking at fixed cost are moving.

Barry: Two manufacturing that we have in low cost countries the.

Barry: The volumes are down as we are using.

Barry: Government funded short time work program, there's a number of things that we're working on on the top and.

Barry: And the variable cost to reduce.

Barry: The SG&A cost is also being looked at.

Joel Smekal: The feedback we're getting has been really good. Vishay is showing that we have the capacity available to broaden our support to the distributors. We play a narrow role in the part numbers that we're finding in a number of these technologies, and a narrow role in the participation. The one comment I made about the Americas, we've reached and achieved 214 new customers based on those 7700 part numbers that were placed at key distributors in 2023. So that's good feedback.

Barry: It's very important that we continue to be faced.

Barry: Faced with our customer the technical staff that we've invested in the customer is aligning us in a different way than in the past.

Barry: So we do look at cost.

Barry: As the forecast we've put in for the quarter were staying close to the market.

Barry: It is if we see Q.

Barry: <unk> guidance being different we're going to have to make those appropriate adjustments we have to manage the business as we see it but it is a very important topic to protect our margins.

Joel Smekal: Customers are buying Vishay that didn't buy Vishay before, and then once we learn about these customers, we approach them to offer broader technologies. We've got 16 different technologies. If they're buying one, we want to make sure they're buying multiples.

Speaker Change: Okay. Thank you.

Speaker Change: Please.

Speaker Change: As a reminder, that is star one one to ask a question.

Speaker Change: Our next question will come from the line of Joshua Buchalter with TD Cowen.

Joshua Buchalter: Hey, guys. Thank you for taking my question.

Joshua Buchalter: I wanted to ask a sort of a bit of a bigger picture one so as your you've been very clear about the strategy of trying to rebuild the channel.

Joel Smekal: So the feedback has been good. The inventory correction you talk about. We have meetings with the OEMs. We have meetings with the EMS. We have meetings with our distributors. So in the chain, there's inventory at each one of those steps.

Joshua Buchalter: It's coming at a time when the channel Big picture is trying to get inventory levels down I guess has that dynamic of you leaning in as the channel wants needs to get things right sized major transition go faster or slower I guess.

Joshua Buchalter: Is that an opportunity as your peers are starting to lean out of the channel to move more quickly or does it sort of there the business activity and changes sort of seize up because of the correction. Thank you.

Joel Smekal: The correction that we hear most is by the end of Q2. But it depends on the products. Some products are still in high demand or have a lack of inventory. We did not stuff the channel.

Speaker Change: I would say it's.

Speaker Change: A little slower is the pace because when you look at when we have a discussion with the distributor they speak about their total umbrella of inventory.

Joel Smekal: We did not stuff the OEM with inventory. We were quite flexible. We didn't enforce NCNR.

Speaker Change: Theyre umbrella of inventories all suppliers, they understand where vishay wants to go they are investing in these skus.

Speaker Change: They are conscious of their requirements every quarter.

Joel Smekal: We didn't take that strategy, and the meetings we're having with OEMs, they're quite happy with how Vishay allowed the OEM to be flexible last year, adjust their demand. Cancellations were high in Q3, some cancellations in Q4, but the OEMs are giving us signals that they intend to grow this year and they want to position Vishay for greater growth because of how we treated them in 23. And the inventory that we have there is not as high as some of our peers, so this is the work that we have cut out for. So it's a bit of a long answer, but I'll say by the end of Q2 is what we're targeting for inventory correct. Okay, thanks for all the details there. Can I ask you about the opto gross margin, it looks like it was down to 12% this quarter. Was there any one-time item that happened there?

Speaker Change: To their shareholders and as they report their earnings, but we are making progress as we've shown with their number of part numbers we're adding.

Speaker Change: And the feedback that we get from customers that they are finding the product.

Speaker Change: Continue this it's an important element of our initiative, we'd like it to move faster.

Speaker Change: We are really point to 2024 is a pass year.

Speaker Change: Which requires vishay to be out front with the distributor at the customer to make sure. We're realizing a greater rate of Pos growth.

Speaker Change: Which then facilitates the continued addition, and replenishment of this inventory.

Speaker Change: I appreciate all the color there and then in the prepared remarks, you mentioned the low single digit ASP declines, but also confidence in your ability to offset that with cost improvement.

Speaker Change: You can spend some time talking about the near term steps that are that you're undergoing with your manufacturing footprint and how much of this is also I guess inflationary pressures on input cost easing as a tailwind or again is it mainly the self help levers that you've been outlining for a year plus now thank you okay.

Ruplu Bhattacharya: Can you just give us your thoughts on how the opto gross margin should trend from here? Hello Ruplu, this is Lori. So, yes, there was a one-time item.

Lori Lipcaman: You know we had started setting up a new silicon fab in our Heilbronn location for the Opto Division. Now that we have planned to close on the Newport deal, we discontinued that, and we had to take a write-off on some of the work that had already been achieved up to that point. That will not happen again in the future.

Speaker Change: Cost reduction initiatives are required an important with each of the divisions as we go into each calendar year, so efficiencies cost reductions of materials landing in lower cost manufacturing sites like Mexico, those additions that we spoke about.

Speaker Change: Having some of our commodity products being supported by subcontractors also provides us some cost benefits here.

Joel Smekal: Ruplu, the Newport FAB is allowing us to, we talk about a campus, we talk about having this FAB, the silicon FAB, the ability to support MOSFETs, diodes, as well as the opto product, plus we'll bring in some of the thin film resistor front ends. This is a new approach for us, so we had to close the project that was initially starting in Heilbronn, and that's why the write-off that Lori was talking about will be more efficient and be able to reduce costs overall, not having duplicate fixed costs because we'll be able to put most of this into a single front-end campus in Newport. And for the last one, if I can ask, can you just remind us of your capital allocation priorities?

Speaker Change: We are we have a number of levers we pull.

Speaker Change: The inflationary items, the inflationary items for the most part seem to be leveling out.

Speaker Change: Other than wage inflation, but materials logistics those items are.

Speaker Change: Are fairly flat logistics has declined somewhat.

Speaker Change: So I think it's the initiatives of our <unk> operations team with efficiencies material reductions improvements in the processes, which was going to help us offset this as well as those low cost sites.

Speaker Change: Thanks, Joe Alright.

Josh: Alright, Thanks, Josh.

Josh: That concludes today's question and answer session I would like to turn the call back to Joe <unk> for closing remarks.

Josh: Alright.

Joe Smith: Thank you again, everyone for joining us today for the review of our fourth quarter results.

Joel Smekal: Joel, in terms of M&A, do you see any potential for either on the semiconductor side or on the passive side? Are there, I know you talked about some areas where you're trying to improve your capabilities, but any thoughts on M&A and, Lori, on the capital return in terms of share buybacks? How should we think about the pace of that versus any de-levering? Thank you so much.

Joe Smith: As a reminder, we are holding an investor day, our first ever on April 2nd.

Joe Smith: At the New York Stock Exchange, we look forward to seeing you. There. Thank you very much have a good day.

Speaker Change: This concludes today's conference call. Thank you for participating you may now disconnect.

Speaker Change: Yes.

Speaker Change: Yeah.

Speaker Change: [music].

Ruplu Bhattacharya: Thank you. Lori, do you want to comment first about the capital allocation? So we still remain firmly committed to returning 70% of our free cash flow to shareholders and a minimum of $100 million for this year. So we don't make any changes and we feel very strongly that that's an important part of our capital allocation strategy. Ruplu, regarding M&A, we continue to look, and we have some targets. Circuit protection is one.

Speaker Change: Okay.

Speaker Change: Yes.

Speaker Change: Yeah.

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Speaker Change: [music].

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Speaker Change: Yes.

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Joel Smekal: This would be an addition to Vishay's portfolio. We always look to broaden our portfolio, so circuit protection is one. We also look at verticals.

Speaker Change: Okay.

Speaker Change: Yes.

Speaker Change: [music].

Joel Smekal: Verticals that help us with specialty materials that would help to advance our technology. And then we look at expansions of... suppliers that are in the same businesses, possibly better positioned in a region as we see customers speak about regionalization. We find that to be an important element, that we look at where Vishay is manufacturing today. Do we expand in a particular region?

Speaker Change: Yes.

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Speaker Change: Okay.

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Joel Smekal: Or can we make an acquisition that positions us quickly in that region? Those are the approaches we're taking today. Okay, thanks for all the details.

Speaker Change: Yes.

Okay.

Speaker Change: Yes.

Speaker Change: [music].

Ruplu Bhattacharya: I appreciate it. All right. Thanks for the question. Thank you. Our next question will come from the line of Matt Sheerin with Steve. Thank you. Good morning, everyone.

Speaker Change: Yes.

Speaker Change: Okay.

Speaker Change: Yes.

Speaker Change: [music].

Speaker Change: Okay.

Matt Sheerin: My first question is just regarding your guidance for Q1. In terms of the you're guiding around a six, 7% sequential decline in revenue, is that primarily distribution destocking, or is that your OEM customers as well?

Speaker Change: Okay.

Speaker Change: Yes.

Speaker Change: Okay.

Speaker Change: [music].

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Speaker Change: Yeah.

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Joel Smekal: primarily distributor D stock. As we've met with the OEMs, the OEMs talk about, if it's industrial OEMs, they talk about single-digit growth in 2024. The automotives are talking about even greater growth. They were talking about 10% plus in demand for components. That isn't necessarily car count, as we know.

Okay.

Speaker Change: Okay.

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Speaker Change: Thank you.

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Joel Smekal: That's a lot of electronic content going in. So those two segments are the largest segments we have. Aerospace Defense will continue to grow. Medical, as well.

Speaker Change: Okay.

Okay.

Speaker Change: Okay.

Speaker Change: Hum.

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Speaker Change: Yes.

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Speaker Change: Okay.

Joel Smekal: So those four segments represent 80 plus percent of Vishay. From their outward shipment of their product, they see growth. It's the steps in between. So it is the distributor digestion of inventory and summit EMS. Okay, thank you.

Speaker Change: Yes.

Speaker Change: Okay.

Speaker Change: [music].

Matt Sheerin: And then, just backing into the EPS and operating margin, based on your guidance, it looks like operating margin is going to take out around 6.5%, which is actually below the last trough back in late 19, when you were just over that. So, obviously, a huge step down year over year. So, how should we think about operating margins as we go through the year? Is this the trough here? Um Yeah, I'd like to say yes.

Speaker Change: Sure.

Speaker Change: [music].

Lori Lipcaman: As a matter of fact, the margins are reducing to approximately 6%. We have put into place where we're going to have a lower gross margin of approximately 24%. And then we have some relatively high SG&A expenses due to inflation, wage increases, and our long-term incentive program, um, that are very and that are putting some pressure on the operating margin. But as revenues pick up in the coming years, and I would say this is a potential for the trough, yes. It is trough.

Speaker Change: Okay.

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Speaker Change: Okay.

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Joel Smekal: Yeah, and actually, just on OPEX, you're basically guiding for 8% SG&A growth this year, and revenue should be down at least mid to high single digits for the year. So why not take some cost-cutting actions here? We are looking at cost-cutting. It is a topic of daily and weekly discussion across the company, looking at fixed costs and moving to manufacturing that we have in low-cost countries. The volumes are down. We are using a government-funded short-time work program.

Speaker Change: Okay.

Speaker Change: Yes.

Speaker Change: [music].

Joel Smekal: There's a number of things that we're working on on the top, in the variable cost to reduce. The SG&A cost is also being looked at. It's very important that we continue to be face to face with our customer, the technical staff that we've invested in. The customer is aligning us in a different way than in the past. So we do look at cost.

Speaker Change: Alright.

[music].

Speaker Change: Yes.

Joel Smekal: This is the forecast we put in for the quarter. We're staying close to the market. It will, if we see Q.

Speaker Change: Okay.

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Joel Smekal: Given guidance being different, we're going to have to make those appropriate adjustments. We have to manage the business as we see it, but it is a very important topic to protect our market. Okay, thank you. As a reminder, that is Star 1 1 to ask a question. Our next question will come from the line of Joshua Buchalter with TD Cowan.

Speaker Change: Okay.

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[music].

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Joshua Buchalter: Hey guys, thank you for taking my question. I want to ask a sort of a bit of a bigger picture one. So as you're, you know, you've been very clear about that you're trying to rebuild the channel. It's coming at a time when the channel, in the bigger picture, is trying to get its inventory levels down, I guess, has that dynamic of you leaning in as the channel wants, needs to get things right. Major transitions go faster or slower, I guess.

Speaker Change: Yes.

Speaker Change: [music].

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Joel Smekal: Is that an opportunity as your peers start to lean out of the channel to move more quickly, or does sort of business activity and change sort of seize up because of the correction? Thank you. I would say it's, uh... A little slower the pace because when we have a discussion with the distributor, they speak about their total umbrella of inventory. Their umbrella of inventory is all suppliers. They understand where Vishay wants to go.

Speaker Change: Yes.

Speaker Change: Sure.

Speaker Change: Okay.

Speaker Change: [music].

Joel Smekal: They are investing in these SKUs. They are conscious of their requirements every quarter to their shareholders and as they report their earnings. But we are making progress, as we've shown with the number of part numbers we're adding and the feedback that we get from customers that they are finding the product. We're going to continue this. It's an important element of our initiative, but we'd like it to move faster. We really point to 2024 as a POS year, which requires Vishay to be out front with the distributor at the customer to make sure we're realizing a greater rate of POS growth, which then facilitates the continued addition and replenishment of this inventory. I appreciate all the color there.

Speaker Change: Okay.

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Speaker Change: Thanks.

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Joshua Buchalter: And then, in the prepared remarks, you mentioned, you know, the low single-digit ASP declines but also confidence in your ability to offset them with cost improvements. Maybe you can spend some time talking about the near-term steps that you're taking with your manufacturing footprint and how much of this is also, I guess, inflationary pressures and input costs easing as a tailwind, or again, is it mainly the self-help levers that you've been outlining for a year plus now? Thank you. Okay.

Speaker Change: Yes.

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Speaker Change: Thank you.

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Speaker Change: Thanks.

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Speaker Change: Yes.

Speaker Change: Thanks.

Speaker Change: Yes.

Joel Smekal: Cost reduction initiatives are required and important with each of the divisions as we go into each calendar year. So efficiencies, cost reductions on materials, landing in lower cost manufacturing sites like Mexico, those additions that we spoke about. Having some of our commodity products being supported by subcontractors also provides us some cost benefits here. We have a number of letters we pull.

Speaker Change: [music].

Speaker Change: Okay.

Okay.

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Speaker Change: Okay.

Speaker Change: Yes.

Speaker Change: Thanks.

Joel Smekal: The inflationary items, inflationary items for the most part, seem to be leveling, other than wage inflation, but materials, logistics, those items are fairly flat. However, logistics has declined somewhat. So I think it's the initiatives of our Vishay operations team, with efficiencies, material reductions, improvements in the processes, which is gonna help us offset this, as well as those low-cost sites. Thanks, y'all.

Speaker Change: Okay.

Speaker Change: [music].

Speaker Change: Okay.

Speaker Change: Yes.

Speaker Change: Okay.

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Speaker Change: Okay.

Speaker Change: [music].

Joel Smekal: All right. That concludes today's question and answer session. I'd like to turn the call back to Joel Smaycal for closing remarks. All right.

Speaker Change: Okay.

Speaker Change: [music].

Speaker Change: Okay.

Speaker Change: [music].

Joel Smekal: Thank you again, everyone, for joining us today for the review of our fourth quarter results. As a reminder, we are holding our first ever Investor Day on April 2nd at the New York Stock Exchange. We look forward to seeing you there. Thank you very much. Have a good day.

Speaker Change: Thank you.

Speaker Change: Okay.

Speaker Change: Yes.

Speaker Change: Great.

Speaker Change: Okay.

Speaker Change: Yes.

Speaker Change: Okay.

Operator: This concludes today's conference call. Thank you for participating. You may now disconnect. ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? Copyright© OSHO International Foundation www.

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Operator: OSHO.com copyright OSHO is a registered Trademark of OSHO International Foundation OSHO is a registered Trademark of OSHO International Foundation www. OSHO.com copyright OSHO is a registered Trademark of OSHO International Foundation, ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? Good day and thank you for standing by. Welcome to the Vishay Intertechnology fourth quarter 2023 earnings call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 1 1 on your telephone. You will then hear an automated message advising your hand is raised.

Speaker Change: Yes.

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Speaker Change: Thanks.

Speaker Change: [music].

Peter Henrici: To withdraw your question, please press star 1 1 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your host today, Peter Henrici, Head of Investor Relations.

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Peter Henrici: During the call, we will be referring to a slide presentation, which we have also posted at irvishay.com. 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 those in the forward-looking statements.

Speaker Change: Good day, and thank you for standing by welcome to the Vishay Intertechnology fourth quarter 2023 earnings call.

Speaker Change: At this time all participants are in a listen only mode.

Speaker Change: After the speaker's presentation, there will be a question and answer session.

Speaker Change: To ask a question during the session you will need to press star one one on your telephone.

Speaker Change: We'll then hear an automated message advising your hand is raised.

Speaker Change: To withdraw your question. Please press star one again.

Speaker Change: Please be advised that today's conference is being recorded.

Speaker Change: I would now like to hand, the conference over to your host today, Peter <unk> head of Investor Relations. Please go ahead.

Peter: Thank you Liz good morning, and welcome to Vishay Intertechnology fourth quarter and fiscal year 2023 earnings Conference call.

Im joined today by Joe Smith, our President and Chief Executive Officer, and by Lori, Luke and then our Chief Financial Officer.

Joel Smekal: Thank you for joining the fourth quarter 2023 earnings conference call. I'll start my remarks on slide three with a review of the demand trends for the fourth quarter by end market, channel, and region. Then Lori will take you through the highlights of our financial results and guidance for the first quarter of 2024. After that, I'll wrap up with a review of our key initiatives, and then we'll be happy to answer any questions.

Peter: This morning, we reported results for our fourth quarter, a copy of our earnings release is available in the Investor Relations section of our website at IR Dot reshape dot com.

Peter: This call is being broadcast live over the web and can be accessed through our website and.

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

Peter: During the call, we will be referring to a slide presentation, which we also posted at IR Vishay Dot com.

Peter: You should be aware that in today's conference call, we will be making certain forward looking statements that discuss future events and performance.

Peter: Statements are subject to risks and uncertainties that could cause actual results to differ from the forward looking statements.

Peter: For a discussion of factors that could cause results to differ please see today's press release and <unk> Form 10-K, and Form 10-Q filings with the Securities and Exchange Commission.

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

Peter: We have included a full GAAP to non-GAAP reconciliation in our press release as well as in the presentation posted on <unk> Dot Vishay Dot com.

Peter: Which we believe you will find useful when comparing our GAAP and non-GAAP results.

Peter: We use non-GAAP measures because we believe they provide useful information about the operating performance of our businesses.

Joel Smekal: Today, the culture of putting the customer first has taken hold. The phrase, think customer first, is strongly embraced across the organization. Decisions are being made with customers and market dynamics in mind, and we are engaging the OEMs, distributors, and EMS partners on a regular basis because we have successfully invested in incremental capacity to help them scale. This puts Vishay in a unique position to drive growth. It is this customer-focused and business-minded approach that is creating a new Vishay. But none of this can happen unless the employees of Vishay embrace the change.

Peter: And should be considered by investors in conjunction with GAAP measures.

Peter: Now I'll turn the call over to President and Chief Executive Officer, and Joe Smith.

Joe Smith: Thank you Peter.

Morning, everyone. Thank you for joining the <unk> fourth quarter 2023 earnings conference call.

Joe Smith: I'll start my remarks on slide three with a review of the demand trends for the fourth quarter by end market channel and region.

Joe Smith: And then Lori will take you through the highlights of our financial results and guidance for the first quarter of 2024.

Lori: After that I'll wrap up with a review of our key initiatives.

Speaker Change: And then we'll be happy to answer any questions.

Speaker Change: Before reviewing our fourth quarter performance I want to take a moment to look back at what I shared with you a year ago on my first call as <unk> CEO.

Speaker Change: It's been a remarkable year of change and Boucher as we began to implement our strategy to become a more business minded supplier.

Speaker Change: A top priority was to increase capacity for our highest growth and highest margin product lines to be ready to capitalize on the megatrends of E mobility sustainability and connectivity.

Joel Smekal: Thank you. For the fourth quarter, we are reporting revenue of 785.2 million U.S. dollars, within our guidance range of $770 million to $810 million. As expected, softer demand in industrial end markets and due to the consumption of higher levels of finished goods inventory by many customers resulted in a revenue decrease from the third quarter. Aerospace, Defense, and Medical Markets continue as bright spots for Vishay.

Speaker Change: I said that we were going to use the foundation of our operational disciplines to become a customer and market focused company.

Speaker Change: From a cash flow managed business to a P&L driven company.

Speaker Change: From a company that fulfills customer orders to one that anticipates customer needs.

Speaker Change: Today, the culture of putting the customer first has taken hold.

Speaker Change: Bank customer first is strongly embraced across the organization.

Joel Smekal: Let's start on the left side of slide three with the revenue by market segment. Automotive revenue held steady at 37% of total revenue. However, after three quarters of sequential growth in 2023, automotive revenue declined by 7.5% versus the third quarter.

Speaker Change: Decisions are being made with the customers and market dynamics in mind.

Speaker Change: And we are engaging the Oems distributors and EMS partners on a regular basis.

Because we have successfully invested in incremental capacity to help them scale.

Speaker Change: This puts <unk> in a unique position to drive growth.

Speaker Change: It is this customer focused and business minded approach that is creating a new vishay.

None of this can happen unless the employees of vishay embraced the change.

Speaker Change: I want to take a moment to express my deepest appreciation to all of the vishay employees for their enthusiasm about the future.

Joel Smekal: Compared to the prior year's fourth quarter, automotive revenue increased 9% and grew as 8% of the total. For the year, automotive revenue grew 12.7%. Throughout 2023, we saw increasing demand for electronic content in internal combustion engines, hybrids, and e-vehicles and greater vehicle production as supply chains stabilized. Toward the end of the year, some automotive customers in Tier 1s made adjustments to digest inventory. As automotive OEMs re-evaluate the pace of EV adoption, we see an uptick in volume for hybrid vehicle production, design activity, and automotive design remain strong in each region, focused on ADAS plus e-mobility, including battery management systems, traction inverters, and onboard chargers. At the same time, automotive OEMs are engaging with us for Design and Technology Capability Discussions to develop long-term EV projects.

Speaker Change: And their energy and commitment to creating the new vishay.

Speaker Change: Let's now move forward to the performance of the recent quarter.

Speaker Change: Yes.

Speaker Change: For the fourth quarter.

Speaker Change: We are reporting revenue of $785 2 million U S dollars.

Speaker Change: Within our guidance range of $770 million to $810 million.

Speaker Change: As expected softer demand in industrial end markets due to the consumption of higher levels of finished goods inventory by many customers resulted in a revenue decrease from the third quarter.

Speaker Change: Aerospace defense and medical markets continue as bright spots for vishay.

Speaker Change: Let's start on the left side of slide three with the revenue by market segment.

Automotive held steady at 37% of total revenue.

Speaker Change: After three quarters of sequential growth in 2023, automotive revenue declined seven 5% versus the third quarter.

Speaker Change: Compared to prior year's fourth quarter automotive revenue increased 9% and grew as a percent of the total.

Speaker Change: For the year automotive revenue grew 12, 7%.

Speaker Change: Throughout 2023, we saw increasing demand for electronic content of internal combustion engines hybrid <unk>.

Joel Smekal: As you know, the fourth quarter is when we finalized the annual contracts with large industrial OEMs and automotive tier one. Overall, the price reduction for 2024 was a low single-digit percent after negotiating higher volume share in most cases. We plan to offset this with cost reductions and margin improvement. The industrial segment accounted for 34% of total revenue, declined 11.1% versus the third quarter, and 18.9% versus the fourth quarter last year. Industrial revenue for 2023 was 11.7% lower than 2022, because demand remained weak in Asia, influenced by the ongoing economic slowdown in China. Europe and the Americas were also sluggish as customers continued to digest high inventory levels. However, there were pockets of growth, notably in support of infrastructure projects. And we did complete the shipment of our largest capacity, to support an electrical grid program, which was delayed last quarter. For industrial design activity, we made progress on programs around renewable energy generation, smart grid infrastructure, EV charging infrastructure, and energy storage. Industrial automation continues to be a major focus for customers in all regions. As an example, in the Americas, where near-shoring factories is a common topic, customers want to leverage factory automation.

Speaker Change: At Kohl's and greater vehicle production as supply chain stabilized.

Towards the end of the year, some automotive customers in tier ones made adjustments to digest inventory.

Speaker Change: As automotive Oems reevaluate the pace of <unk> adoption.

We see an uptick in volume for hybrid vehicle production.

Speaker Change: Design activity in automotive remains strong in each region.

Speaker Change: Focused on Adas, plus E mobility, including battery management systems.

Speaker Change: <unk> and burgers and onboard Chargers.

At the same time automotive Oems are engaging with us.

Speaker Change: For design.

Speaker Change: And technology capability discussion to.

Speaker Change: To develop long term EV projects.

Speaker Change: As you know the fourth quarter is when we finalize the annual contracts with large industrial Oems and automotive tier ones.

Speaker Change: Overall, the price reduction for 2024 was low single digit percent.

Speaker Change: After negotiating higher volume share in most cases.

Speaker Change: We plan to offset this with cost reductions and margin improvements.

Speaker Change: The industrial segment accounted for 34% of total revenue.

Speaker Change: Declined 11, 1% versus third quarter.

Speaker Change: And 18, 9% versus the fourth quarter last year.

Speaker Change: Industrial revenue for 2023 was 11, 7% lower than 2022.

Speaker Change: Demand remained weak in Asia influenced by the ongoing economic slowdown in China.

Speaker Change: Europe and the Americas were also sluggish as customers continue to digest high inventory levels.

Speaker Change: There were pockets of growth, notably in support of infrastructure projects and we did complete the shipment of our largest capacitors to support an electrical grid growth.

Speaker Change: Late last quarter.

Speaker Change: For industrial design activity, we've made progress on programs around renewable energy generation smart grid infrastructure, EV charging infrastructure and energy storage.

Joel Smekal: In aerospace and defense, our revenue increased 8.5% versus the third quarter and 31% versus last year; for the year, revenue grew 26.5% versus 2020, too. We saw continued strong demand from commercial aviation customers and military weapons system contracts, with high orders in the fourth quarter due to the two wars. For the year, aerospace and defense revenue increased 26.5% over last year. Revenue from medical customers grew 4.3% compared to the third quarter and 3.6% compared to last year. Medical revenue grew 14% for 2023 versus 2022. Demand remains strong for medical diagnostic equipment and implantable devices, and shipments to a major customer resumed after a delay last quarter. Medical design activity continues to be strong as customers create technology for remote monitoring of patients. Also, there is some news that the Chinese government is planning to launch an upgrade of medical equipment in their hospitals in 2024.

Speaker Change: Industrial automation continues to be a major focus for customers in all regions.

Speaker Change: As an example in the Americas, where near shoring factories is a common topic customers want to leverage factory automation.

Speaker Change: In aerospace and defense, our revenue increased eight 5% versus the third quarter and 31% versus last year.

Speaker Change: For the year revenue grew 26, 5% versus 2020.

Speaker Change: Two.

Speaker Change: We saw continued strong demand from commercial aviation customers and military weapons system contractors with high orders in the fourth quarter due to the two wars.

Speaker Change: For the year Aerospace and defense revenue increased 26, 5% over last year.

Speaker Change: Revenue from medical customers grew four 3% compared to the third quarter and three 6% compared to last year.

Speaker Change: Medical revenue grew 14% for 2023 versus 2022.

Speaker Change: Demand remains strong for medical diagnostic equipment, and implantable devices and shipments to a major customer resumed after a delay last quarter.

Speaker Change: Medical design activity continues to be strong as customers create technology for remote monitoring of patients.

Speaker Change: Also there is some news that the China government is planning to launch an upgrade of medical equipment in their hospitals in.

Speaker Change: In 2024.

Joel Smekal: Revenue from other end markets declined both sequentially and year-over-year by 13.7% and 30%, respectively. Demand in these consumer, computer, and telecom markets has been weak all year, and revenue for the year fell 20% versus 2022. Revenue from each channel declined relative to the third quarter, with distribution accounting for a little more than half of the decline. OEM revenue was 6.9% lower than the third quarter, but 4.1% higher than the prior year's fourth quarter. Soft demand from industrial customers and year-end inventory adjustment by some automotive customers accounted for this reduction. However, for the year, OEM sales increased 12.1% versus 2022.

Speaker Change: Revenue from other end markets declined both sequentially and year over year by 13, 7% and 30% respectively.

Speaker Change: Demand in these consumer computer and telecom markets has been weak all year and revenue.

Speaker Change: For the year fell 20% versus 2022.

Speaker Change: Turning to our business channels.

Speaker Change: Revenue from each channel declined relative to the third quarter with distribution accounting for a little more than half of the decrease.

Speaker Change: OEM revenue was $6, 9% lower than the third quarter, but four 1% higher than the prior year's fourth quarter.

Speaker Change: Soft demand from industrial customers at year end inventory adjustments by some automotive customers accounted for this reduction.

Speaker Change: However for the year OEM increased 12, 1% versus 2022.

Joel Smekal: EMS revenue declined 13.7% quarter over quarter and 24.2% year over year, reflecting another quarter of inventory adjustments in all regions, particularly in Europe among non-global EMS companies, and softening Demand for Industrial Programs in Asia. EMS revenue for 2023 was 8.9% lower than last year. Distribution revenue for the fourth quarter fell 8.2% sequentially and was 14.4% below the prior year as a result of inventory adjustments in all regions. Distribution revenue declined 11% from 2022.

Ams revenue declined 13, 7% quarter over quarter, and 24, 2% year over year.

Speaker Change: Reflecting another quarter of inventory adjustments in all regions.

Speaker Change: Particularly in Europe, among non global EMS companies and softening demand for industrial programs in Asia.

Speaker Change: EMS revenue for 2023 was eight 9% lower than last year.

Speaker Change: Distribution revenue for the fourth quarter fell eight 2% sequentially.

Speaker Change: <unk> was $14, 4% below prior year as a result of inventory adjustments in all regions.

Speaker Change: For the year, yes.

Speaker Change: Distribution revenue declined 11% from 2022.

Joel Smekal: Distribution inventory at quarter end increased to 26 weeks versus 24 weeks last quarter, with increases in all regions. POS decreased 6.5%, with most of the decline coming from Europe, where customers were still reducing their forecast or cleaning up their inventory position. The dollar value of the distributor inventory was flat quarter over quarter. We continue to better position Vishay on the distributor's shelf by adding 7,200 part numbers during the quarter. These steps will help to increase our participation in this high-margin channel.

Speaker Change: Distribution inventory at quarter end increased to 26 weeks versus 24 weeks last quarter with increases in all regions.

Speaker Change: POS decreased six 5% with most of the decline coming from Europe, where customers were still reducing their forecast are cleaning up inventory positions.

Speaker Change: The dollar value of the distributor inventory was flat quarter over quarter.

Speaker Change: We continue to better position Boucher on the distributor shelves.

Speaker Change: By adding 7200 part numbers during the quarter.

Speaker Change: These steps will help to increase our participation.

Speaker Change: This high margin channel.

Joel Smekal: Our customers are telling us that they expect the inventory correction to last through the first half of 2024. Some in markets may improve sooner, notably aerospace and defense in the Americas, where we see distributors wanting to increase their position on Vishay passives. As well, distributors would like to increase their position on the automotive-grade semiconductor.

Speaker Change: Our customers are telling us.

Speaker Change: That they expect the inventory correction to last through the first half of 2024.

Speaker Change: Some end markets may improve sooner, notably aerospace and defense in the Americas, where we see distributors wanting to increase their position.

Speaker Change: On the vishay passive as.

Speaker Change: As well distributors would like to increase their position on the automated automotive grade semiconductors.

Speaker Change: Based on order flow in the fourth quarter, we expect passive to recover faster than semiconductors.

Speaker Change: Now I'll turn the call over to Laurie for the review of our financial results.

Laurie: Thank you Joe good morning, everyone.

Lori Lipcaman: I'll start my review of our third quarter results on slide 16. Revenues for the fourth quarter were $785.2 million. Compared to the third quarter, revenues decreased 8.0 percent, reflecting a 7.2 percent decrease in volume and a 0.7 percent reduction in price. Most of the price and volume reduction was in our semiconductor business segment. Pricing for our OEM, automotive, and industrial customers under contract held steady during the quarter, while soft demand in industrial and consumer markets put pressure on pricing and distribution channels and EMS, primarily in Europe. By reportable business segment, the decrease in revenues was mainly attributable to MOSFETs, reflecting inventory digestion among customers in our other end markets, followed by Di Otena. Revenues of the three passive components segments, resistors, inductors, and capacitors, were generally stable.

Laurie: I'll start my review of our third quarter results on slide four.

Laurie: Revenues for the fourth quarter were $785 2 million.

Laurie: <unk> third quarter revenues decreased eight zero percent, reflecting a seven 2% decrease in volume and a 0.7% reduction in pricing.

Laurie: Most of the price and volume reduction was in our semiconductor business segments.

Laurie: Pricing for our OEM automotive and industrial customers under contract held steady during the quarter.

Laurie: Soft demand in industrial end markets put pressure on pricing and distribution channels and E&S primarily in Europe.

Laurie: By reportable business segments.

Laurie: The decrease in revenues was mainly attributable to MOSFET.

Laurie: Collecting inventory digestion among customers in our other end markets, followed by diodes and aster.

Laurie: Revenues for the three passive components segments resistors, inductors and capacitors were generally stable.

Laurie: Compared to the fourth quarter last year revenues were down eight 2%, reflecting a volume decrease of nine 7% and is 0.2% reduction in pricing.

Laurie: At quarter end book to Bill for consolidated Dee, Shane with 0.7 times.

Laurie: Backlog at quarter end was five three months.

Laurie: To five five months at the end of the prior quarter.

Laurie: We returned in the fourth quarter, a total of $34 8 million to stockholders comprised of dividends of $15 $8 million in stock repurchases.

Laurie: <unk>.

Q4 2023 Vishay Intertechnology Inc Earnings Call

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