SARATOGA SPRINGS, N.Y., Oct. 22, 2025 (GLOBE NEWSWIRE) -- Espey Mfg. & Electronics Corp. (NYSE American: ESP) announces that full-scale production and testing operations are now underway at its new Magnetics Center of Excellence, following the previously announced completion of construction in April 2025. According to US Navy sources, the Surface Combatant Industrial Base Development Initiative is designed to strengthen the nation’s shipbuilding industrial base and support the increased production rates req ...

Financial Data and Key Metrics Changes - Revenue for the second quarter increased by 7% sequentially to $762 million, aligning with guidance, driven by growth in both semiconductors and passive components [7][22] - Gross profit was $149 million, resulting in a gross margin of 19.5%, at the high end of guidance, primarily due to increased volume [24] - Book to bill ratio was positive at 1.02, marking the third consecutive quarter above one, with a backlog of $1.2 billion [23][24] Business Line Data and Key Metrics Changes - Automotive revenue rose by 4% due to improved demand from tier one customers and new ADAS programs [11] - Industrial segment revenue increased by 9%, driven by normalization of inventories and demand for smart grid infrastructure [12] - Aerospace defense revenue grew by 5%, while medical end markets saw a 4% increase, reflecting stronger demand [15][16] Market Data and Key Metrics Changes - Revenue in Asia grew by 12%, driven by AI power requirements and smart grid projects, while The Americas saw a 7% increase due to improved automotive and industrial demand [20] - Distribution revenue grew by 11%, contributing significantly to total revenue growth, while OEM revenue remained flat [18][19] Company Strategy and Development Direction - The company is focused on capacity expansion under the Vishay 3.0 initiative, with approximately $775 million invested over the past two and a half years [9][10] - Strategic initiatives include strengthening customer relationships, expanding product portfolios, and advancing silicon carbide technology [10][41] - The company plans to invest between $300 million to $350 million in 2025, with a significant portion allocated to high-growth product lines [37] Management's Comments on Operating Environment and Future Outlook - Management noted that the inventory correction cycle is largely behind, with normalized inventory levels for passives and some excess in semiconductors [7] - Positive demand momentum is expected to continue, particularly in smart grid infrastructure and AI applications, with a stronger second half of the year anticipated [45][46] - The company is preparing for a market upturn, with increased backlog and capacity readiness to meet customer demand [45][46] Other Important Information - The company reported a negative free cash flow of $73 million for the quarter, attributed to capacity expansion investments and tax payments [31][32] - The effective tax rate is not meaningful at low levels of pre-tax income, with expectations for normalization as profitability returns [27][35] Q&A Session Summary Question: Impact of Newport fab on gross margin - The Newport fab had a lower than expected impact on gross margin in Q2, with guidance for Q3 indicating a range of 160 to 185 basis points [49][50] Question: MOSFET gross margins decline - MOSFET gross margins declined due to manufacturing inefficiencies, which are expected to improve in Q3 with increased IC sales [51][52] Question: US tariff impact - Less than 4% of products are manufactured in China and returned to the US, indicating a minimal impact from tariffs on overall revenue [55] Question: Inorganic growth and M&A opportunities - The company is actively looking for M&A opportunities, particularly in the semiconductor sector, to enhance customer presence and fill portfolio gaps [56][58] Question: Visibility and backlog for Q3 - The company is seeing a faster building of backlog and anticipates a stronger second half of the year compared to the first half [64][65] Question: Customer demand and inventory management - Customers are still cautious in planning demand, with a significant portion of orders for quick delivery, indicating a transition from an inventory-heavy market [67][68] Question: AI customer expansion and revenue metrics - The customer count for AI applications is growing, with a focus on expanding the part count and customer diversity [72][73] Question: Slipping customer programs - Adjustments in customer programs were due to design changes, impacting planned orders [76][77]

Summary of Conference Call Notes Industry Overview - **Industry**: Electronic Components in Japan - **Key Companies**: Ibiden, TDK, Murata, Taiyo Yuden, HDD manufacturers Core Insights 1. **Investor Interest in HDDs**: There has been a notable increase in investor inquiries regarding HDDs, particularly concerning the production bottlenecks and capacity increases for NL-HDDs in data centers. The production volume of NL-HDDs dropped from 7.45 million units in June 2022 to 2.60 million units in June 2023, with a partial recovery to 6.16 million units by May 2025 [8][8][8] 2. **Earnings Growth Expectations**: Investors have high expectations for Ibiden's earnings growth in the medium term, driven by its significant market share in FC packages for NVIDIA GPUs. However, there are concerns regarding near-term earnings for F3/26 [3][3][3] 3. **AI and Computing Demand**: Companies like Ibiden, TDK, and Murata are expected to benefit from the growing demand for computing components due to the rise of AI technologies. Ibiden is projected to see substantial increases in unit prices of its FC package boards with each new GPU generation [2][2][2] 4. **TDK's Market Position**: TDK has a ~40% share of the global mobile device battery market and is anticipated to see significant sales and profit growth from rechargeable batteries starting in F3/26 2Q. However, there is skepticism among investors regarding TDK's communication strategy about its earnings [4][4][4] 5. **Murata's Earnings Potential**: Investors believe that while Murata's F3/26 1Q earnings are favorable, concerns about declining sales of RF modules for 2025 model smartphones may hinder share price growth. The demand for MLCCs is expected to have a more significant impact on earnings than RF modules [7][7][7] Additional Important Points 1. **Production Bottlenecks**: The decline in NL-HDD production is attributed to workforce reductions during previous downturns, making it challenging to scale up production in response to rising demand. Companies like Suncall have exited the suspension manufacturing market, contributing to supply issues [8][8][8] 2. **Market Dynamics**: The market is demanding increased capacity for NL-HDDs, with manufacturers raising product capacities to 24TB and beyond. This shift is creating a competitive landscape where bottlenecks in production are a critical concern [8][8][8] 3. **Valuation and Risks**: Ibiden's valuation is based on a DCF model with a WACC of 6.3%. Risks include potential competition from overseas in the ABF package market and weaker-than-expected demand for CPUs [15][16][16] Conclusion The electronic components industry in Japan is experiencing significant interest from investors, particularly in the context of AI and computing advancements. Companies like Ibiden, TDK, and Murata are positioned to benefit from these trends, although they face challenges related to production capacity and market dynamics.