Vishay Intertechnology(VSH) - 2025 Q1 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Revenue for the first quarter was $715 million, flat compared to the fourth quarter, with a 2% increase in volume offset by a 1% decrease in average selling prices [8][28] - Gross profit was $136 million, resulting in a gross margin of 19%, which includes a negative impact from Newport of approximately 200 basis points [30] - GAAP loss per share was minus $0.03 compared to a loss of minus $0.49 in the fourth quarter [32] Business Line Data and Key Metrics Changes - Automotive revenue decreased by 2% versus the fourth quarter, reflecting lower average selling prices associated with new OEM contracts [13] - Industrial market revenue increased by 3% from the fourth quarter, led by Europe, with strong demand for smart grid infrastructure projects [15] - Aerospace and defense revenue declined by 5% quarter over quarter due to inventory management by distributor partners [16] Market Data and Key Metrics Changes - Book to bill ratio improved for semiconductors to 1.12 and held at 1.04 for passives, indicating positive order intake [10][29] - Distribution revenue grew by 3%, while OEM and EMS revenue decreased due to market softness [22][23] - Revenue in Europe increased by 8% sequentially, while The Americas saw a 6% decline in industrial sales [25] Company Strategy and Development Direction - The company is executing its five-year strategic plan, focusing on capacity expansion and leveraging growth levers to participate in the next industry upcycle [43][44] - Plans to invest between $300 million to $350 million in 2025, with at least 70% allocated to capacity expansion projects [45] - The company aims to enhance its product portfolio through innovation and expand its market participation by working with subcontractors [49][50] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism for a 6% revenue increase in Q2 despite global economic uncertainties, supported by improving market signals [11][54] - The company is closely monitoring customer demand and production timing to adapt to potential market changes [54] - Positive signals during the first quarter support optimism for sequential growth, with demand aligning more closely with end market consumption [53] Other Important Information - The company has been charging tariff adders to customers since 2018 to offset increased tariff costs, with minimal impact on gross profit [29][38] - The Newport facility is expected to reach gross margin neutrality by the first half of 2026, with increasing volume quarter on quarter [70] Q&A Session Summary Question: Distribution and SKU Increase - Management noted ongoing efforts to increase SKUs with distributors, with improvements in POS observed in Europe and The Americas, while Asia remained flat [57][59] Question: Tariff Impact - Management explained that less than 4% of sales are from China to the US, and the tariffs have a minimal long-term impact due to alternative sourcing options [63][64] Question: Newport Fab Utilization - The Newport fab is expected to see increasing volume quarter on quarter, targeting gross margin neutrality by early 2026 [68][70] Question: Cyclical Recovery Trends - Management highlighted positive trends in smart grid and aerospace defense markets, with ongoing demand for AI-related projects [75][78] Question: AI Business Size and Market Share - The AI business saw more than double the volume in Q1 compared to Q4, with a strong design position across various components [83][84] Question: Second Half Outlook - Management expressed optimism for the second half of the year, with backlogs building and expectations for growth compared to the previous year [86][88]