Vishay Intertechnology, Inc. Q2 FY2025 earnings call

• Revenue for the second quarter grew 7% to $762 million, in line with guidance, with growth in all business segments, end markets, channels and regions. The inventory correction cycle is principally behind us. Book-to-bill was positive at 1.02. - Invested approximately $775 million between 2023 and 2028 in capacity expansion for high-growth, higher profit products. - Actively working growth initiatives to strengthen customer relationships, expand product portfolio, targeting 80% of the bill of materials in power applications and advancing silicon carbide strategy. - Automotive demand improved, Industrial segment driven by smart grid projects, Aerospace/Defense saw improved demand for military applications, Medical end markets had stronger demand, other segments driven by AI-related demand. - Distribution revenue grew, OEM revenue flat, EMS revenue up; Asia, Americas and Europe had respective revenue performances.

In the second quarter, revenue grew sequentially 7% to $762 million. Automotive revenue increased 4%; Industrial segment revenue grew 9% quarter-over-quarter; Aerospace/Defense revenue was up 5% quarter-over-quarter; Medical end markets revenue grew 4%; Revenue from other segments including computer, consumer and telecom end markets was up 9% for the sixth consecutive quarter of sequential growth. Distribution revenue grew again quarter-over-quarter and was the strongest contributor to total revenue growth for the quarter. OEM revenue was essentially flat compared to the first quarter. EMS revenue increased 13% versus the first quarter. Geographically, revenue grew in each region, led by Asia with a 12% increase, Americas 7% increase, and Europe essentially flat.

• For the third quarter of 2025, revenues are expected to be $775 million, plus or minus $20 million, representing a 2% volume increase and reflecting some seasonality in Europe. - Gross margin is expected to be in the range of 19.7%, plus or minus 50 basis points, inclusive of tariff impacts and expected higher input costs. Newport is expected to have an approximate 160 to 185 basis point drag on the margin in the third quarter. - Depreciation expense is expected to be approximately $54 million for the third quarter and $212 million for the full year. - SG&A expenses are expected to be $138 million, plus or minus $2 million for the quarter; SG&A expenses for the full year are expected to be between $540 million and $560 million, excluding the one-time benefit in Q2. - Free cash flow is expected to be negative due to capacity expansion plans, and will maintain dividend and opportunistically repurchase shares based on U.S. available liquidity.

• Still some excess industry inventory in semis. - Uncertainties regarding Newport wafer fab's production and product release. - Uncertainties in the transmission mechanism of U.S. tariff impact on P&L. - Technical issues in capacity expansion leading to pushed-out release dates.

Q: On the impact of the Newport fab, guided 175 to 200 bps negative impact on gross margin for Q2 but it was 160 bps, and guidance for 3Q is 160 to 185. Dive into details.

A: They're working hard on getting product, moving towards Q3 and Q4 to build inventory and ship, so give a range, hoping to be at the low end of 160 - 185.

Q: MOSFET gross margins declined 200 bps sequentially. What drove that and future improvement?

A: Manufacturing inefficiencies in Q2 corrected in Q3, IC sales increase in Q3 with higher margin, and expanding AI customer list to help margin improvement towards Q4, hoping to exit the year 17% - 18% excluding Newport on MOSFET.

Q: U.S. tariff impact mechanics. How much product line is packaged in China and impact on P&L?

A: Less than 4% of product manufactured in China and coming back to U.S. in Q1, Q2, Q3, small percent of overall revenue.

Q: Thoughts on inorganic growth M&A, passive or active?

A: Always keep eyes out for M&A opportunities, semiconductor side is a focus, recently acquired Ametherm, also look at other passives or vertical acquisitions.

Q: Thoughts on 3Q and second half market, super seasonal?

A: Seeing billable backlog building faster, feel second half stronger than first half, Q3 has guidance growth, Q4 expected better than Q3.

Q: Customer demand pull forward or channel refilling?

A: Customers not so forward-looking, inventory at distributors down, automotive, aerospace/defense, AI, industrial have positive drivers, not mainly pull-ins for tariffs.

Q: Semiconductor customer program adjustments.

A: GB300 design changed from Cordelia to Bianca, orders for P6 and P7 adjusted, working on new design program.