Q1 2025 Vishay Intertechnology Inc Earnings Call
David McConnell, David McConnell, Vishay Intertechnology Inc.
Speaker Change: Good day and thank you for standing by. Welcome to the Vishay Intertechnology First Quarter 2025 Earnings Call.
Speaker Change: 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 that your hand is raised.
Speaker Change: To withdraw your question, please press star one one again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Peter Henrici, head of investor relations.
Please go ahead
Peter Henrici: Thank you, Jill. Good morning and welcome to Vishay Intertechnology's first quarter, 2025 earnings call.
Speaker Change: I am joined today by Joel Smejkal, our president and chief executive officer and by David McConnell, our chief financial officer
Speaker Change: This call is being broadcast sliced off the web and can be accessed through our website. In addition, today's call is being recorded and will be available by a replay on our website.
Speaker Change: You should be aware that in today's conference call, we will be making certain forward looking statements that discuss future events and performance.
Speaker Change: These statements are subject to risk and uncertainty that could cause actual results to differ from the forward-looking statements.
Speaker Change: For a discussion of factors that could cause results to differ, please see today's press release and appreciate Form 10K and Form 10Q filing with the Security and Exchange Commission.
Speaker Change: We are including information on our press release and on this conference call on various guests and non-GAAP measures .
Speaker Change: We have included a full gap to non-GAAP reconciliation in our press release.
Speaker Change: as well as in the presentation posted on ir.fishay.com which we believe you will find useful when comparing our again and non-get results.
Speaker Change: 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 gap to measures.
Speaker Change: Now I turn the call over to President and Chief Executive Officer Joel Smejkal
Thank you, Peter. Good morning, everyone Good morning.
Thank you for joining our first quarter, 2025 conference call.
Speaker Change: I'll start my remarks with the review of the first quarter performance in business condition.
Speaker Change: And then turn the call over to Dave who will take you through a review of the first quarter financial results.
and our guidance for the second quarter of 2025.
Speaker Change: After that, I'll update you on the strategic levers we are pulling under Vashay 3.0 as we continue to execute our five-year strategic plan and then we'll be happy to answer any of your questions.
Revenue for the first quarter was $715 million.
Speaker Change: Slightly above the midpoint of our guidance, and flat with fourth quarter revenue for both semis and passives.
Speaker Change: We started 2025 poised for growth based on the strong execution and accomplishment around our strategic levers.
Speaker Change: and Bishay 3.0 remains in good position to support a market upturn given the promising indicators we saw in the fourth quarter.
Speaker Change: These promising market signals continue during the first quarter and we see indication that much of the channel inventory that overhung the market is normalized.
Speaker Change: and we are moving past the prolonged period of excess inventory digestion.
Peter Henrici, Peter Henrici,
and Passives Hell at 1.04 at 1.04
Speaker Change: Year-to-date through April , look to Bill remains positive for both semis and passives.
Speaker Change: Order intake continued to steadily improve with the strongest demand increase coming from smart grid infrastructure projects and AI.
Speaker Change: Distribution, customer POS was up in all regions and steadily after steadily declining over the course of 2024.
Speaker Change: All of these signals support our decision to guide for a 6% revenue increase, for Q2 versus Q1, even with the global economic uncertainties.
Speaker Change: For tariffs, we have assessed the worldwide impact on Vishay from the evolving tariff picture, both the risks and the opportunities.
Speaker Change: and on what impact tariffs may have on our Q2 revenue, including the effect on raw material costs and supply chain availability.
In terms of revenue, tariffs are not new to Vishay [inaudible]
Speaker Change: We have procedures and systems in place since 2018 to pass along tariff adders to our customers as the surcharge or an extra line item on the invoice.
Speaker Change: What is new, however, is the tariffs are higher and the number of customers has increased and the number of countries has increased.
With respected tariffs between the US and China
Speaker Change: Most of our semi-conductor front end supply comes from Germany and Taiwan.
Speaker Change: Our semiconductor backend supply comes from Taiwan, Malaysia, the Philippines, and China.
Speaker Change: Most of our passives are manufactured in Europe , North America, Israel, and Taiwan [inaudible]
We analyze our first corner [inaudible]
from each country of origin to our receiving customers.
Speaker Change: and we have determined that our exposure to the tariffs which have gone into effect in April is limited.
Speaker Change: Dave will go over the results of this analysis and the assumptions related to the tear of situation.
that has been factored into our Q2 guidance.
Peter Henrici, David McConnell, Vishay Intertechnology Inc.
Speaker Change: Regardless of the direction global trade actions take, our global manufacturing footprint gives us the flexibility to assure customers of reliable supply should they want to shift orders based on country of origin and tariff impact.
Speaker Change: We are bringing this advantage to our customers, offering them alternative manufacturing locations showing different cost to which they will pay compared to shipments from China to the US.
So now turning back to the first quarter, revenue performance
Speaker Change: I'll start with a review of Revenue by End Markets on Slide 3
Automotive revenue decreased 2% versus the 4th quarter
Speaker Change: Reflecting lower ASP associated with the 2025 OEM contracts that went into effect in January .
Speaker Change: The Chinese New Year holiday resulted in Tier 1 customers pulling lower at lower rates in Asia.
Speaker Change: In the Americans in Europe , Chairwoman Customers pulled at normal levels, or in some cases accelerating levels, with demand of hybrid electric vehicle and EV platforms remaining strong.
Thank you.
Speaker Change: We remain well positioned to drive volume and automotive, with increasing electronic contents in all price levels of cars, and from developing ADAS programs as they are being adopted by the automakers.
Thank you for watching!
Speaker Change: In terms of design activity, the shift to increase hybrid power trains continued in the first quarter.
Speaker Change: with also electronic power steering, active safety systems, smart cockpit applications, as well as platforms with additional electronic features.
Speaker Change: The shift toward hybrid power trains is a positive development for Vishay, as the electronic content in hybrid power trains is typically greater than ice by about 50 percent.
Speaker Change: Revenue from the industrial market increased 3% from the fourth quarter, led by Europe which was better than forecasted.
Speaker Change: We see cases where European customers have over-corrected inventory levels, now resulting in positive book to bill for our distributor partners.
Speaker Change: Demand remain strong for smart grid infrastructure, multi-year projects in your
We want two new programs in those regions.
Speaker Change: We also won our first United States High Voltage DC Power Transmission Program
Order's Continuity Be Positive for Smart Grid Applications
Speaker Change: We are in discussions with customers on the next smart grid projects as they address electricity demand for AI data centers and EV charging, which the aging electric grid cannot provide.
Speaker Change: In the Americas, industrial orders indicate that we are moving up from the bottom [inaudible]
Speaker Change: As many customers are reporting stronger backlogs from their end customers needing electricity which should support incremental improvement throughout 2025.
Speaker Change: No design activity focused on a variety of applications including high-voltage DC per smart grid, alternative energy generation, EV charging stations, uninterruptible power supplies, and next generation encrypted communication systems.
Speaker Change: In aerospace and defense, revenue declined 5% quarter-over-quarter as our distributor partners were managing their inventory.
Speaker Change: As a reminder, a more demand came mostly from US military accounts over the recent years.
Speaker Change: Now our volume in Europe and Asia has been growing significantly [inaudible]
Book to Bill for the Americas is above one
In Europe , distributors also report book to bill, rates above one.
Speaker Change: Commercial aerospace orders remain low due to ongoing issues in their mechanical part supply chain.
Speaker Change: Design activity in military remains strong in a broad number of next-generation programs including missile, drones, military avionics, communication and weapon systems, and low earth orbit satellite programs.
In the medical end market, results were mixed.
Speaker Change: In the Americans, orders from many of our top medical customers improved compared to the fourth quarter in outpace last year.
In Europe and Asia, the order intake was mixed [inaudible]
Speaker Change: We're seeing results from our strategy to fully leverage the breadth of our portfolio in the medical market.
Speaker Change: Increasing the number of Vishay technologies at design-in and long-standing customers and developing relationships with new customers
Design activity on a mix of applications include patient monitoring [inaudible]
Draug Delivery Systems, Surgical Assist Rohad [inaudible]
Speaker Change: Each of these is creating new business opportunities for Vishay to sell more of our portfolio.
Speaker Change: Revenue from the other segments, including computer, consumer and telecom and markets was up 4% marking the fifth consecutive quarter of sequential growth.
Speaker Change: This is a good example of the benefits of the investments we made in capacity.
We are able to provide supply assurance.
to these channels, these existing and new customers.
Thank you.
Speaker Change: for AI, building on the initial volumes we had in the fourth quarter. Shipment quantities increased in Q1.
Speaker Change: to support demand for AI servers and server power projects particularly in Taiwan and China.
Speaker Change: where customers consume our products and the distributors build up safety stock.
Speaker Change: A.I. remains a quick-turned business with Asia's CMs frequently placing spot orders.
Speaker Change: Much of the design activity was focused around AI chip sets and the architecture of the systems, which supports the integration of new products.
Speaker Change: We increased our relationships with CMs to offer product technology advice for power management as they also design around AI chipsets.
Speaker Change: In addition, design activity expanded to include AI workstations, edge servers, and AI optical modules and graphics cards.
Speaker Change: We are continuing to leverage our AI reference design positions with chipset manufacturers to place a greater percentage of Vishay components on the board.
Speaker Change: Creating opportunities for us to demonstrate our technical differentiation and how Vishay can support greater than 80% of the components needed in power application.
These product types span MOSFETs
voltage suppressors, diodes, power inductors, and IC products.
Let's now turn to Slide 4.
Speaker Change: Moving on to Revenue by Channel for the first quarter in Slide 4, you can see the Distributor Revenue grew versus the fourth quarter, and that the Distribution Growth was offset by Lower OEM and EMS Revenue.
Speaker Change: OEM revenue was impacted by the reduction ASP as the annual contracts went into effect.
Speaker Change: Order and take by industrial OEMs in each region was overall positive of the world.
Speaker Change: Reflecting smart grid momentum, while ordering take from automotive customers was flat overall.
Speaker Change: EMS revenue decreased 7% versus the fourth quarter on market softness in non-AI-related business.
Speaker Change: In Europe , regional EMS inventory remained high, especially for those supporting aerospace defense customers.
who want to secure supply in this growing demand environment.
Matthew Sheerin, Joshua Buchalter, Peter Henrici, Peter Henrici
Speaker Change: In Asia, Chinese New Year shutdowns and volume declined as some programs were pushed out to the second half of the year
Speaker Change: Distribution revenue grew 3%, our strategy is working to position Vishay for market share gains and renewed share with our distributor partners.
Speaker Change: which we started working on two years ago. By adding nearly 50,000 cubes to our shelves, we entered 2025 with inventory that is well positioned for POS growth.
Speaker Change: In the Americas, increased bookings from multiple POS customer segments drove order intake higher than the previous four quarters.
Speaker Change: In Europe , order flow from distribution partners was higher than the second half of 2024.
Speaker Change: POS book-to-bill steadily increased during the quarter as end customer inventory normalized, triggering some replenishment to support a more normal POS for both passives and semis.
Speaker Change: In Asia, distributor-order patterns were normalizing, and Booktabill was over 1 at quarter end.
Speaker Change: Total Distribution Inventory Weeks came down from 27 weeks to 26 weeks.
Speaker Change: Even as worldwide POA grew 4% on the strength of improved turns business.
A 10% increase in Europe , while Asia was slapped
Let's turn to slide five Five.
Slide 5, in terms of the geographical mix.
Speaker Change: Revenue in Europe increased 8% sequentially after lagging the Americas and Asia in the second half of 2024, reflecting inventory over corrections.
Speaker Change: In the Americas, industrial sales were soft, resulting in a 6% decline.
while Asia was seasonally soft.
Reflecting the impact of Chinese New Year [inaudible]
Dave McConnell: Before turning the call over to Dave, I'd like to thank the Vishay employees and also our sales reps.
Dave McConnell: for their hard work and dedication in making consistent progress toward our shared goals for the company and for our customers.
Dave McConnell: They're focused every day to contribute to making Vishay 3.0 real.
is very much appreciated.
Dave McConnell: Dave, I'll turn the call over to you now for a review of the financial results for Q1.
Thank you, Joel. Good morning, everyone.
Dave McConnell: Let's start a review of the first quarter results with the highlights on slide six.
Matthew Sheerin, Joshua Buchalter, Peter Henrici, Peter Henrici
Dave McConnell: First quarter revenues were $715 million, including $3 million, attributed to legacy newport products. Above the midpoint of our guidance.
Dave McConnell: Revenues were flat compared to the fourth quarter, reflecting a 2% increase in volume, all set by a 1% decrease in average selling prices, as well as some negative foreign currency impacts related mostly to the euro.
David McConnell, David McConnell, Vishay Intertechnology Inc.
Dave McConnell: By reportable business segment, after revenues increased 4 million driven by volume and MOSFETs decreased 5 million primarily due to ASP declines related to annual OEM pricing negotiations.
The remaining report will business segments have more modest fluctuations
Dave McConnell: Compared to the first quarter last year, revenues decreased $31 million, reflecting a 3% reduction in ASPs and a 1% exchange rate impact.
Dave McConnell: Since 2018, we have been charging tariff adders to customers to offset our increased tariff costs
Dave McConnell: The gross profit impact of these is approximately zero, but does negatively impact the gross margin.
Peter Henrici, David McConnell, Vishay Intertechnology Inc.
Dave McConnell: Booked a bill for the court with 1.08, comprised of 1.12 for Semi's and 1.04 for Passage. The second quarter in a row with a book to build greater than 1.
Dave McConnell: Our backlog increased, 0.7 months, with Semi's increasing to 4.3 months versus 3.9 in the fourth quarter, and passes increasing to 5.1 months from 4.9 in the fourth quarter.
Dave McConnell: Moving on to the next slide, presenting the Income Statement Highlights [inaudible]
Dave McConnell: Gross Profit was 136 million, resulting in a gross margin of 19.0 percent, and includes the negative impact from Newport of approximately 200 basis points.
All in line with our guide.
Peter Henrici, David McConnell, Vishay Intertechnology Inc.
Speaker Change: Compared to the fourth quarter, Roy Smarge was 90 basis points lower primarily due to lower average selling prices
Appreciation expense was 51 million, relatively flat with quarter four [inaudible]
Speaker Change: SGNA expenses were 135 million in the range of our guidance for the quarter, up from 132 million for the fourth quarter.
Speaker Change: to do higher incentive compensation accruals for 25 versus the very low level in 24.
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Speaker Change: Gap Operating Margin was 0.1% compared to minus 7.9% in the fourth quarter, and 5.7% in the first quarter of 2024. There were no non-GAAP adjustments in Q1 25 or Q1 24.
Thank you.
Speaker Change: As a reminder, in the fourth quarter, we recorded a goodwill impairment charge resulting in an adjusted operating margin of 1.4%.
Ebidah for the quarter was 54 million [inaudible]
Speaker Change: for an EBITDA margin of 7.6% down from adjusted EBITDA margin of 9.3% in the fourth quarter.
Matthew Sheerin, Joshua Buchalter, Peter Henrici
Speaker Change: Our GAP effective tax rate is not meaningful at low levels of pre-tax income or loss.
Speaker Change: As profit building returns, we would expect a more normalized effective tax rate closer to our historical guidance.
Gap lost per share?
Speaker Change: was a minus three cents per share compared to a loss of minus 49 cents per share in the fourth quarter and earnings per share of 22 cents in the first quarter of 24.
Adjusted EPS was break even for the 4th quarter of 24th
[inaudible]
Speaker Change: For seeing a flight eight, for ease of reference, the presentation includes a table, illustrating the revenue, gross margin, and book to bill ratios for each of our reportable business segments.
Speaker Change: Of note, for the first quarter, the results for Newport continue to be reported substantially all in the MOSFETs business segment.
Speaker Change: Wang on that segment goes margin approximately a thousand basis points.
Turning the slide 9 in our Cash Conversion Psychometrics
Speaker Change: Our DSO and DPO remain stable at 53 days and 34 days respectively.
Speaker Change: Inventory increased to 712 million, resulting in an inventory days outstanding of 110 days up one day from the fourth quarter.
Speaker Change: Total Cash Conversion Cycle for the first quarter was 129 days
Speaker Change: Continuing to slide 10, you can see we generated 60 million operating cash for the first quarter.
Speaker Change: Total Cap Ex for the Quarter was $62 million, including $54 million designated for capacity expansion projects.
On a trailing 12-month basis, Capitol Intensity was 11.3%
Prepared to 10.3% for the same period last year [inaudible]
Speaker Change: Consistent with the five-year strategic plan we shared with you last year, we continue to deploy cash for capacity expansion projects.
Speaker Change: As a result, free cash flow for the quarter was a negative 45 million compared to a negative 76 million in the fourth quarter.
Thank you.
Speaker Change: Stockholder returns for the first quarter amounted to 26.1 million, consisting of 13.6 million for our quarterly dividend.
12.5 million for shared repurchases 12.5 million for shared repurchases
Speaker Change: We re-purchased 0.7 million shares during the quarter at an average price of $17.21 per share.
Speaker Change: At the end of the quarter, our global cash and short-term investment bounce was $620 million and we are in a net borrowing position in the US with 218 million outstanding on our revolvers.
Speaker Change: As previously noted, we're required to fund cash dividends, share repurchases, and principal and interest payments using our cash on hand in the US.
Speaker Change: and we are using our US-based liquidity to fund our Newport expansion and other strategic investments.
Thank you.
Speaker Change: We have 248 million accessible on our revolver at the current EBITDA level. We can expect to continue to draw on our revolver to fund our U.S. cash needs.
Thank you.
Turning to 5-11 [inaudible]
Speaker Change: which summarizes the impact of the Tarris as of April 9th [inaudible]
Speaker Change: The footprint of Vishay as a hybrid passive and semiconductor company is significantly different than competitors solely focused on semiconductors.
Speaker Change: Many tires on semi-conductors are currently paused while tires related
Speaker Change: To passives, they're now substantially higher out of China and newly imposed by the larger and significant for much of the rest of the world.
Speaker Change: We are generally passing through additional tariff costs to customers, thus tariff adders increase or revenues without impacting our gross profit.
Speaker Change: Mathematically, this is estimated to reduce the gross margin by approximately 30 basis points.
Speaker Change: The tariffs put into effect April 9th will have a limited direct impact on our Q2 and future results.
Peter Henrici, David McConnell, Vishay Intertechnology Inc.
Thank you very much.
Speaker Change: Less than 4% of our Q1 Consolidate sales are country of origin China products sold to customers in the U.S.
Split approximately equally between semis and passage
Peter Henrici, David McConnell, Vishay Intertechnology Inc.
Speaker Change: Conversely, less than 2% of our consolidated sales represent U.S. manufacturers goods sold into China
Thank you.
Okay, we move on to slide 12 to our guidance.
Speaker Change: For the second quarter of 2025, revenues are expected to be $760 million plus or minus $20 million, representing a 3% volume increase and inclusive additional tire-related
Speaker Change: Rose Margin is expected to be in the range of 19.0% plus or minus 50 basis points.
Speaker Change: Incluses of tire impacts of 30 basis points and also expected higher input costs.
Speaker Change: Newport is expected to continue having approximately 175 to 200 Vases Point drag on the gross margin in the second quarter [inaudible]
Speaker Change: Depreciation expense is expected to be approximately 52 million for the second quarter and 210 million for the full year 2025
Thank you for watching!
Speaker Change: SGNA expenses are expected to be 136 million plus or minus 2 million for the quarter and for the full year are expected to be between 530 and 560 million.
Speaker Change: In addition to the incentive compensation or calls, we are assuming continued investment in R&D increased spending on enhancing our technology tools and typical inflationary impacts.
If market circumstances change significantly, we will adapt accordingly [inaudible]
Speaker Change: Our gap-effective tax rate is not meaningful at low levels of pre-tax income or loss As profitability returns, we expect a normalized effect of tax rate closer to our historical guidance of 30 to 32%.
Speaker Change: Finally, our stockholder return policy calls for us to return at least 70% of our free cash stockholders in the form of dividends and stock purchases.
Speaker Change: For 2025, we once again expect negative free cash flow due to our capacity, expansion plans [inaudible]
Speaker Change: For 2025, we expect to maintain our dividend and opportunistically repurchase shares based on US available liquidity in line with this policy.
Peter Henrici, Peter Henrici, Peter Henrici, Peter Henrici
I'll now turn the call back to Joel.
All right. Thanks, Dave.
Let's turn to slide 13
Speaker Change: During the first quarter, we continue to execute our five-year strategic plan.
Speaker Change: to achieve our 2028 financial goals of faster revenue growth, improved profitability, and enhanced returns on capital.
Speaker Change: We have put a foundation in place to participate more fully in the next industry upcycle and to capitalize on the megatrends of emobility and sustainability.
Speaker Change: We continue to strengthen that foundation by pulling the eight growth levers displayed on this slide.
Thank you.
Speaker Change: We remain committed to our long-term plan of increasing Vishay's capacity between 2023 and 2028.
to ensure our customers of reliable volume as they scale.
Speaker Change: While we continue to engage with them about their product and technology roadmap,
Speaker Change: and better serve their demand with the broadening portfolio of technologies.
We watch our capital spending very closely [inaudible]
Speaker Change: Capacity planning and investment is a weekly discussion. We study our capacity utilization of equipment for each of the semiconductor and passive product lines.
Speaker Change: and measure against the delivery time of new equipment, purchases and the timing of customer programs.
Speaker Change: For 2025, we plan to spend between $300 million to $350 million.
Speaker Change: At least 70% of which will be invested in capacity expansion projects for our high growth product lines.
including our way-for-fab expansion.
Speaker Change: I'll take you through our first quarter activities, starting with our semiconductor capacity expansion projects.
Peter Henrici, David McConnell, Vishay Intertechnology Inc.
Speaker Change: At our Newport Facility, we continue to receive delivery of the Silicon Carbide Equipment.
Speaker Change: Through a Q1, we have installed 11 tools with the remaining 21 to be installed mostly in Q2 and we remain on schedule for pre-production in early 2026.
Speaker Change: During the quarter, we completed the transfer of two silicon MOSFET structures to Newport.
Qualification of another four technologies are ongoing
We expect to complete qualifications of automotive grade components.
Speaker Change: in the second quarter for a product release in the third quarter.
At SK Key Foundry, our partner in Korea,
Speaker Change: We released another automotive MOSFET during the first quarter and planned to release two commercial technologies in the second quarter and two commercial technologies in the third quarter along with two automotive technologies and one IC C
Speaker Change: As a reminder, through this partnership, we are able to increase annualized capacity for mosfets by 12% in 2025 compared to 2024.
Speaker Change: But more importantly, we will be able to increase annualized capacity for our advanced split gate MOSFETs by 25% to support new automotive and commercial opportunities.
Speaker Change: In Taiwan, we have ramped up volume of commercial diodes and continue to work through automotive qualification processes.
Speaker Change: In Turin Italy, the qualification of commercial diodes has been pushed out to the third quarter and we expect to begin mass production in the fourth quarter [inaudible]
Speaker Change: We plan to complete qualification of both the 1200-volt technology and the 650-volt technology in the third quarter and begin mass production in the fourth quarter.
Now for passives.
Speaker Change: at our two facilities in Mexico, in La Laguna and in Juarez.
Speaker Change: We continue to qualify more commercial and automotive grade part numbers.
[inaudible]
Speaker Change: We offer these locations to customers who want to ship supply to avoid China and the country of origin tariffs as the part numbers line up.
Speaker Change: During the first quarter, we continue to work directly with automotive customers on partner qualifications and site approval audits at our Lalaguna facility and remain on track to qualify the facility for automotive grade inductors.
Peter Henrici, David McConnell, Vishay Intertechnology Inc.
Speaker Change: We are continuing to expand our roster of subcontractors to further broaden our market participation.
Speaker Change: Subcontractors help us to make our Vishay capacity available for high growth products and also help us to expand our product portfolio.
Speaker Change: During the first quarter, we've completed qualifications of one new subcontractor for diodes.
Speaker Change: and we added a total of 872 part numbers to our portfolio.
Turning to innovation and our Silicon Carbide Strategy
Speaker Change: We are making good progress in our plan to commercialize the 1200 volt planter technology.
Speaker Change: During the quarter, we released another three products bringing the total now to eight products.
Speaker Change: We also released a Gen 2 1200 volt planner for both industrial and automotive applications.
Speaker Change: and planned to release additional 12 products of different on-resistance and packages this year.
Speaker Change: And shortly after the quarter closed, we released a generation 2.1, 1200 volts, 45 million automotive grade Silicon Carbide MOSFET.
Speaker Change: With respect to our plan to commercialize the 1700 volt planner MOSFETs and the 650 volt planner MOSFET, we are shifting to a more advanced process which will push out the release of these products into early 2026.
Speaker Change: We currently plan to have samples of our 1200-volt trench MOSFET available in the third quarter.
and our targeting full product release in the fourth quarter.
Speaker Change: For Silicon Carbide Diodes, we have fully released our Gen 3 Diode 650-volt and 1,250-volt product and released an automotive version in the first quarter on a limited basis.
Speaker Change: We also released our Gen 4 650 volt automotive power pack and still plan to release the Gen 4 1200 volt automotive diode in the second quarter.
Speaker Change: Finally, we are planning to release additional products during the year to populate the entire family of silicon carbide diodes, Gen 4, 650-volt and 1200-volt.
As for our Solution of Selling Initiative
Speaker Change: During the quarter, we released into catalogue distribution. One of the reference designs we showed at the electronic of 2024 for an automotive application.
Speaker Change: Several automotive OEMs and Tier 1s are sampling our reference designs.
Speaker Change: These reference designs are created in our E-mobility lab where they develop common solutions for automotive, industrial, and AI computer applications.
Matthew Sheerin, Joshua Buchalter, Peter Henrici, Ruplu Bhattacharya
Speaker Change: Through the ongoing execution of these strategic levers, the Shea 3.0 is in a better position to participate in a market upturn and to capitalize on demand, momentum in AI and smart grid infrastructure.
Speaker Change: We have the capacity and place to ensure we are reliable supplier to our customers as they scale production.
Speaker Change: Equally important, the capacity we have available today allows us to pursue new customers.
and re-engage inactive customers.
To Further Drive Revenue Growth
Speaker Change: Each of our salespeople have a portion of their annual incentive program related to new customer revenue generation.
Speaker Change: Positive signals during the first quarter and continuing in the second quarter support our optimism for sequential growth.
Speaker Change: We see the demand for Vashay products more in line with end-market consumption than at any time in the past two years of inventory digestion.
Speaker Change: and program timing can be dynamic, but we are seeing improved visibility and transparency.
Speaker Change: The second half of the year is developing at a better rate than the last year [inaudible]
Speaker Change: Under Bhashay 3.0, we are in close contact with our customers to do our best to minimize the impact of macroeconomic uncertainty.
Speaker Change: We stay close to have an ongoing read on their demand outlook and production timing.
Speaker Change: So we are ready to support them if demand continues to improve, but also to adjust our spending plans where necessary in response to a possible slowdown in order to flow.
Speaker Change: At the same time, we intend to continue executing our growth initiatives [inaudible]
Speaker Change: Engaging with new and existing customers early in their design pipeline
Speaker Change: Designing in and supplying a greater share of the components on the board.
Speaker Change: Expanding our product portfolio through innovation and advancing our Silicon Carbide Strategy.
All creating more value to the customer.
Speaker Change: With more opportunities to leverage the breadth of our entire product portfolio.
Peter Henrici, David McConnell, Vishay Intertechnology Inc
Operator, we will now open the call to question.
Thank you.
Speaker Change: Thank you. At this time, we will conduct the question and answer session. As a reminder, to ask a question, you will need to press star 11 on your telephone and wait for your name to be announced.
Matthew Sheerin, Joshua Buchalter, Peter Henrici,
Speaker Change: First question comes from the line of Ruplu Bhattacharya with Bank of America. Please go ahead, your line is open.
Hi, thank you for taking my questions.
Speaker Change: Can you give us an overall thought on what you're seeing at distribution?
Speaker Change: You know, I think you said that excess inventory had gone down, but in terms of distribution willingness to pull more product at this time.
Speaker Change: You know, what are you seeing from them in terms of demand? And from your own efforts to try and increase Vishay's huge distribution, is that done or is there still work to be done?
Continue the discussions with the distributors to add SKUs
Speaker Change: The POS did improve. We saw the POS improve in Europe and the Americas, and Asia I mentioned was flat.
Our Weeks of Inventory, if we look at the regions...
Our inventory in Europe went down by three weeks.
from Q4 to Q1.
The inventory in
The Americas [inaudible]
went down by two weeks.
from Q4 to Q1
Speaker Change: And the inventory in Asia was down about a half a week, so essentially flat. What does that mean? We had the right products on the shelf. We were able to support POS growth.
So we continue to strategize with our distributor partners about.
Speaker Change: Gaining share, re-engaging customers that we have historically been unable to support.
Speaker Change: So at the moment we're satisfied with our inventory position and we're going to continue to expand skews there's still some work to do
Speaker Change: Okay, thanks for the details there. Can I ask you a question on tariffs? So thanks for the impact in 2Q, I think you said 1-2% increase in revenue.
Speaker Change: Yeah, so two questions there. One is, can you go into a little bit of detail in terms of how you came up with that because there's been so much of back and forth in terms of rates?
Speaker Change: for Terros. What have you assumed in terms of Terros to come up with that, just an overall framework for how you get to 1% to 2%.
Speaker Change: And then if tariffs remain unchanged from here, can we also think of the full-year impact being 1-2%?
Speaker Change: And then maybe one other question on the same topic is, why is the growth profit impact zero and the growth margin impact negative in terms of how does that flow through to the growth margin length?
Speaker Change: Ruplu, all started and David jump in regarding the tariffs. We did a deep dive on the country of origin and where the product was sold to in Q1.
Speaker Change: Those are the percentages that Dave shared, less than 4% of our sales, our China-based country of origin going to U.S. customers and the reverse, U.S. customers going to U.S. country of origin to China-customers is 1%.
in that area.
Speaker Change: We look at the China country of origin and we go speak to customers to offer alternate solutions. This is part of our sales practice.
We want to give the customer option
The tariff on passives is 170% adder
Speaker Change: So, that's the fundamentals of how we're navigating to kind of make sure this is not a long-term impact for Vishay. Save your head. Yeah, right. So, Ruplu, thanks for the question. Yeah. So, in quarter two, I mean, we're assuming where we are on April 9 to the rules and effects of the whole quarter.
Speaker Change: Okay, so that's all we can base it on. And to Joel's point, you know, if we're paying 70% on Sammy's out of China, and the passes are much higher than number, but much less expose your 170%.
Speaker Change: So the whole quarter is based on those tariffs that are in place as of April 9th
Speaker Change: Okay, I think the U.S. and I apologize, you asked what the impact of that would be on our margin and the quantify the impact of that on our margin, right?
Speaker Change: So in terms of pure mathematics because you're revenue of a dollar and cost of a dollar if we pass it through it's approximately the 30 basis points
on our margin, decrease, okay?
in terms of collateral damage.
Speaker Change: I followed or supply chain side obviously metal prices have been impacted with the
Speaker Change: Macro-Economic Environment we live in at the moment, so we had those already included in our Q2.
Speaker Change: podcast. The other item is input costs that would receive tariffs.
Speaker Change: We have minimal exposure to that. At the moment, most our stuff is not sourced in one of these two countries, it's sourced locally, so.
It's really a really diminimous impact of the year.
purchases of supplies.
Speaker Change: Okay. Okay. Alright. Thank you for the details there. If I can ask one last question on the Newport Fab, how do you see that Fab filling up through the course of the year and how should we think about the gross margin impact over the next couple of quarters progressing? Thank you.
Okay, the Newport Fab, Q1 [inaudible]
Speaker Change: We were no longer manufacturing the legacy products from the previous business.
when we acquired the fab.
So here one utilization was very low
Speaker Change: We are qualifying the Vishay Structures now, and we'll be adding volume quarter on quarter, not quite a stair step, but it's going to have increasing volume quarter on quarter. The target is for the fab to be gross margin neutral.
in the first half of 26. We're targeting Q1.
Speaker Change: is what our push is. Dave, you have anything else you want to add there? Yeah, no. We're sticking with the guidance for the next quarter, the 175 to 200 basis points of Ruplu and beyond that, we're not ready to guide a gross margin number.
Speaker Change: Okay. Okay. Thank you for all the details. We really appreciate it.
Thank you, Ruplu
One moment for our next question
Thank you.
Speaker Change: The next question comes from the line of Peter Peng with JP Morgan. Go ahead, your line is open
Peter Peng: Good morning, guys. Thanks for taking my question. Good to see that you guys are continuing to see the positive cyclical recovery trends.
Peter Peng: Maybe just kind of talk about that a little bit. I think there's been a lot of...
Speaker Change: Investor wearing whether these orders could be a potential pull-in head of this 90-day reprieve. So how do you guys distinguish whether this is actually like possible sickle, recovery orders or whether this is just, you know, your customer being there, they're built up. Okay.
Speaker Change: Smart Grid programs are government push projects and those continue to develop. Don't see much of a tariff impact here. Really shouldn't be anything that's going to impact that. No pull-in. These are projects that span multi-year. I mentioned on the...
Speaker Change: Prepared remarks that we won the first USA Smart Grid project so that's quite exciting. We got 100% share of that business.
Speaker Change: So the smart grid will continue to develop irregardless of how the tariff moves.
Speaker Change: If we look at aerospace defense, same thing. This is America, this is Europe , and some in Asia countries are spending more money on defense we're seeing really good growth in Europe .
Speaker Change: The Americas continues and we speak with many projects, not just military, but also low earth orbit satellite space so that continues.
A.I.
A.I. is a significant investment by
Speaker Change: Much of the magnificent seven who are spending $60 to $80 billion for data centers
So, A.I. The Demand?
Speaker Change: Continues to look promising. Paul ends, I wouldn't say so much because what we're seeing is spot-by's.
Speaker Change: on a lot of projects that the Embediat ships that lands and CM quickly is contacting the suppliers to see who can deliver fast.
Speaker Change: So we're putting some inventory in the channel to account for that.
Automotive
Speaker Change: Automotive, the signals we see in the scheduling agreements are flat, no one's adjusted negatively, they're forward outlook at this point.
Speaker Change: consumer confidence. We got to have a confident consumer to buy cars.
Speaker Change: A statistic we had learned in January , February was the average age of a car in the U.S. has gone from 12 years to 14.
Speaker Change: and the average age of a car in Germany has gone from 8 years to 10.
Speaker Change: So the consumer, there's pent up demand there. We'll see what the Fed does with interest rates and how that may drive the consumer.
and then finally industrial.
Speaker Change: Industrial, a big market segment for us. We are seeing the industrial programs improving. We're talking to any customer that's involved in power, electricity, and they're forecasting mid-single digit or greater growth.
Speaker Change: So, that kind of leads to our outlook. Some of those that I mentioned early, irregardless of tariff pressure, they're going to continue to move forward. Automotive consumer confidence, industrial might be a bit of tariff impact there, but what we're seeing the inventory being normalized. So, that's it.
Speaker Change: The orders we're getting are more in real time with consumption
So we're optimistic We're optimistic
compared to how the year looked in 2024.
Speaker Change: Perfect. Thank you. And then maybe just, you know, dive into the AI front, you know, you fight against a ship volume last quarter or so this quarter. Can you give us a sense on, you know, the size of this business now and your relative market share position?
Thank you.
Size of the business, our cube was more than double.
Speaker Change: versus Q4. Q4, we saw the initial volumes of the, say, first projects for AI. Q1 was more than double. We're adding a lot of products, as I mentioned. It's MOSFETs, it's
Speaker Change: And it's not just the big name and video. We're also talking to CMs who are designing AI servers.
Speaker Change: So our design position is quite good because of the breadth of our portfolio we're bringing in multi-components to the power board.
Speaker Change: to size up the overall business is tricky because things are moving outward. We were excited about the NVIDIA GB300 which was scheduled to be running in P6 and P7, June July , but that got pushed out.
Speaker Change: So, to put a number on it overall, I think we're going to not do that at the moment. We like our design position. We like how our Asia team is working close with the CMs.
to really gain share for Vishay [inaudible]
Perfect.
Speaker Change: Um, I think on your prepare remarks, you talked about, you know, the second half for this year potentially a little bit better than what it, you know, was in the second half of last year and second half of last year, if I look at some of the trends, it looks kind of.
Speaker Change: Seasonal. So, you know, if you're to infer that you might be seeing some above seasonal trends for your second half of the year.
Thank you.
Q3 and Q4. We're starting to see the backlog building.
Speaker Change: in the Q3, Q4, and Q1 of next year. We hadn't seen that last year. We weren't seeing backlogs building beyond the next quarter. So we're starting to see three quarters out now. That gives us some confidence and optimism about how we see the second half.
Speaker Change: Europe in Q3 is a seasonal holiday quarter. It's challenging with the month of August . There's a lot of people that shut down.
Speaker Change: We're going to be watching the automotive. As I said, we haven't seen the schedule agreements change.
Will the automotive factories be running in Europe ?
Speaker Change: in the Q3 time frame at the moment. We don't see anything that shows a decline. So I think there'll be seasonal effects in Q3.
We like to backlog this developing.
Q4
Speaker Change: I guess if you go back to our investor day in 2024 we projected the second half of 24 to be greater than the first half.
We have that same optimism for 2025.
The second half to be better than the first half [inaudible]
Perfect, and one more of my mates is on the...
Speaker Change: June quarter outlook, maybe can talk about the gross margins being kind of, you know, slatters, you know, despite the, you know, higher revenues.
Speaker Change: That's a good question Peter. I have the aforementioned maths on the tariff in fact of the 30 basis points, right? There are still additional ASPs we have baked in. It's more stable than the first quarter but there's still some pockets from the second quarter we have factored in.
We do have a positive eye in the impact.
Speaker Change: and we have positive cost reductions and just, you know, to remind you the cost reductions take
Speaker Change: More than one quarter to get in place for the annual renewal of the OEM pricing.
Speaker Change: So we have some more improvements to go on that area yet but some of them will come in Q2 but the mental prices that I refer to to are baked into the Q2 number.
Perfect. Thank you guys.
Thanks Peter.
Speaker Change: I'm showing no further questions at this time. We would now like to turn the call back to Joel for closing remarks. All right, thank you, Joel.
Speaker Change: Thank you everyone for joining our first quarter earnings conference call.
Speaker Change: We're encouraged by the market signals that we're seeing that support growth in the second quarter, and we look forward to supplying our customers and continuing to execute on our strategic growth plans throughout the year.
Speaker Change: We look forward to reporting again with you the Q2 results in August .
Thank you very much and have a good day.
Speaker Change: Thank you for your participation in today's conference. This does conclude the program. You may now disconnect.
Matthew Sheerin, Joshua Buchalter, Peter Henrici