VISHAY INTERTECHNOLOGY INC Q1 FY2025 earnings call

• First quarter revenue was $715M, slightly above guidance midpoint and flat with Q4. Book-to-bill improved for semis (1.12) and passives (1.04).
• Vishay 3.0 remains positioned for market upturn with normalized channel inventory.
• Discussed strategic levers under Vishay 3.0, including capacity expansion. For semiconductors, ongoing work at Newport facility with silicon carbide equipment installation, and partnerships with SK Keyfoundry. For passives, qualifying more part numbers in Mexico facilities and expanding subcontractors.
• Innovation and silicon carbide strategy progress, with release of new products and plans for further commercialization.

Revenue for the first quarter was $715 million. By end markets: Automotive revenue decreased 2% vs Q4 due to lower ASP from 2025 OEM contracts, but demand for hybrid/EV platforms remained strong in Americas and Europe. Industrial revenue increased 3% led by Europe, with strong demand for smart grid infrastructure. Aerospace & Defense revenue declined 5% as distributor partners managed inventory. Medical end market results were mixed. Other segments (computer, consumer, telecom) had 4% growth, marking fifth consecutive quarter of sequential growth. By channel: Distributor revenue grew, offset by lower OEM and EMS revenue. OEM impacted by ASP reduction from annual contracts. EMS down 7% due to market softness. By geography: Europe revenue increased 8% sequentially, Americas industrial sales soft (-6%), Asia seasonally soft due to Chinese New Year.

• Q2 2025 revenue expected $760M ±$20M, 3% volume increase inclusive of tariff-related revenue.
• Gross margin expected ~19.0% ±50bps, inclusive of tariff impacts (30bps) and higher input costs.
• Newport expected to continue dragging gross margin by 175-200bps in Q2.
• SG&A expenses expected $136M ±$2M for Q2, full year $530M-$560M.
• Expect normalized effective tax rate closer to 30%-32% as profitability returns.
• Stockholder returns: at least 70% of free cash flow to be returned via dividends and repurchases, with negative free cash flow expected in 2025 due to capacity expansion.

• Tariff uncertainties: limited exposure to tariffs in Q1, but analyzed impact on Q2 guidance. Tariffs could affect revenue and margin, but Vishay offers alternative manufacturing locations.
• Global economic uncertainties: impact on order flow and customer demand visibility, requiring adjustment of spending plans if necessary.

Q: Joel, on distribution and SKUs, what's the status and demand pull?

A: Still work to be done, adding SKUs across regions, POS improved, inventory down in some regions. Continue to strategize with distributors to gain share.

Q: On tariffs, framework for 1-2% revenue impact and gross margin?

A: Less than 4% of Q1 sales are China-based to US customers. Tariffs on passives higher, but offering alternate solutions. Q2 guidance based on tariffs in effect as of April 9, with ~30bps margin decrease due to passing through tariff costs.

Q: On AI business size and market share?

A: Q1 AI shipments more than double Q4, design position strong with breadth of portfolio, but exact size tricky due to market movement.

Q: On second half outlook vs last year?

A: Backlog building for Q3, Q4, and Q1 2026, unlike last year. Seasonal effects in Q3, but optimistic for second half to be better than first half.

Q: On Q2 gross margin flattish despite higher revenue?

A: Tariff impact (30bps), metal prices baked in, but some cost reductions and volume impact contributing, with OEM pricing renewals still in progress.