Vishay Intertechnology(VSH) - 2020 Q3 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Revenues for Q3 2020 were $640 million, up 10% from the previous quarter and 1.9% year-over-year [11][14] - EPS was $0.23, with adjusted EPS at $0.25 for the quarter [11][14] - Gross margin was 23.7%, with adjusted gross margin also at 23.7% [14] - Operating margin was 9.6%, with adjusted operating margin also at 9.6% [14] - EBITDA was $94 million or 14.7%, with adjusted EBITDA at $97 million or 15.2% [14] Business Line Data and Key Metrics Changes - Resistors sales were $145 million, up 5% from the prior quarter but down 7% year-over-year [56] - Inductors sales were $79 million, up 21% from the prior quarter and 7% year-over-year [60] - Capacitors sales were $93 million, up 8% from the prior quarter but down 7% year-over-year [63] - Opto products sales were $65 million, up 29% from the prior quarter and 25% year-over-year [65] - Diodes sales were $124 million, down 2% from the prior quarter and down 1% year-over-year [68] - MOSFET sales were $134 million, up 11% from the prior quarter and 5% year-over-year [72] Market Data and Key Metrics Changes - Backlog at the end of Q3 was $928 million, equating to 4.3 months of sales [33] - Inventory decreased by $15 million quarter-over-quarter [33] - Days of inventory outstanding were 83 days, days sales outstanding were 45 days, and days payable outstanding were 29 days, resulting in a cash conversion cycle of 99 days [33] Company Strategy and Development Direction - The company completed the acquisition of Applied Thin-Film Products to strengthen its thin-film business [12] - Global cost reduction programs are expected to save approximately $15 million annually when fully implemented [26] - The company continues to focus on profitability and cash generation while safeguarding employee health [76] Management's Comments on Operating Environment and Future Outlook - The economic environment improved substantially in Q3, driven by a recovery in the automotive sector and strong Asian markets [37][39] - The company anticipates a sales range of $622 million to $660 million for Q4 2020 [76] - Management expressed optimism for the automotive sector due to the trend of electrification [98] Other Important Information - Total liquidity at quarter-end was $1.4 billion, with cash and short-term investments of $712 million [23] - The company repurchased $59 million of convertible notes during the quarter, totaling $165 million year-to-date [20][21] Q&A Session Summary Question: Inventory levels at distribution - Management indicated that inventory levels at distribution have returned to normal levels in the western world, with expectations of restocking in Asia [79] Question: Sustainability of Opto and Diodes margins - Management believes that Opto margins can sustain in the high 20s, while Diodes margins are expected to return to around 23% with increased volumes [80][82] Question: Capital allocation priorities - The company is focused on investing in the business, maintaining dividends, and evaluating other uses of cash [83] Question: M&A strategy and ATP acquisition rationale - Management confirmed ongoing interest in specialty businesses and highlighted the ATP acquisition as a strategic fit to enhance technology offerings [88] Question: Supply chain and pricing outlook - Management noted that while lead times are stretching, price pressure on commodity products is expected to decrease [91] Question: Automotive segment outlook - Management expressed optimism for the automotive sector, expecting Q4 to maintain levels seen in Q3, driven by electrification trends [98] Question: Capacitors pricing and lead times - Management clarified that Vishay operates in niche markets for capacitors and is not directly affected by mass market trends [102] Question: Raw material availability - Management acknowledged some shortages in raw materials but did not foresee significant availability issues [106] Question: Operating expenses and tax rate outlook - Management expects a 6% increase in operating expenses for 2021, with potential impacts from changes in corporate tax rates depending on the administration [109][113]