Vishay Intertechnology(VSH) - 2024 Q2 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Revenue for Q2 2024 was $741.2 million, essentially flat compared to Q1, with a slight decrease of 0.7% reflecting lower volume pulls from automotive customers and industrial customer destocking [6][18] - Gross profit was$ 162.9 million, with a gross margin of 22.0%, down from 22.8% in Q1, primarily due to the inclusion of Newport for the entire quarter [20] - EPS was $0.17 per share, compared to$ 0.22 in Q1 and $0.68 in Q2 2023 [21] Business Line Data and Key Metrics Changes - Automotive revenue declined 6.7% from Q1 and 13.6% year-over-year, impacted by lower production schedules from Tier 1 customers [8][9] - Industrial revenue was flat quarter-over-quarter, with signs of improved bookings in Asia towards the end of Q2 [10] - Medical revenue increased 14.7% from Q1 but was slightly below last year's Q2 [13] - Distribution revenue increased 7.6% quarter-over-quarter but was down 15.5% year-over-year [15] Market Data and Key Metrics Changes - Revenue in the Americas was up 1%, while Asia showed some growth in industrial and AI sectors [17] - Europe experienced lower revenues due to ongoing macroeconomic challenges [17] Company Strategy and Development Direction - The company is focused on executing its five-year strategic plan, emphasizing capacity expansion and innovation [27] - Adjusted CapEx for 2024 is now expected to be between$ 360 million and $390 million, down from an original plan of$ 435 million [28] - The company is actively pursuing M&A opportunities, having already completed two acquisitions in 2024 [60] Management's Comments on Operating Environment and Future Outlook - Management noted that inventory digestion is ongoing, with expectations for normalization in the passive components market within one quarter [62] - The semiconductor market may take two more quarters to fully digest excess inventory [62] - Management expressed confidence in the company's ability to capture market share and position itself for future growth, particularly in AI and automotive sectors [39] Other Important Information - The company repurchased 0.6 million shares at an average price of $22.76 during the quarter [23] - Cash and short-term investments decreased to$ 688 million, with expectations to remain free cash flow negative for the year [24][60] Q&A Session Summary Question: Capacity expansion and utilization - Management confirmed that capacity utilization for MOSFETs is currently at 79% and expressed confidence in filling the new capacity as demand increases [41][42] Question: Automotive market outlook - Management guided automotive revenue to be flat in Q3 despite seeing some positive signals from customers [43] Question: AI server content opportunity - The company is seeing increased content opportunities in AI servers, with an estimated $50 per AI server in Vishay components [44][45] Question: Distribution inventory levels - Management reported that distribution inventory is at 26 weeks globally, with efforts to reduce inventory levels while increasing SKU counts [50][51] Question: Gross margin guidance - Management indicated that gross margin is expected to be lower in Q3 due to pricing pressures and the impact of Newport [56][58] Question: Free cash flow expectations - Management expects to be free cash flow negative in 2024, with ongoing capital allocation strategies focused on M&A and shareholder returns [60]