VISHAY INTERTECHNOLOGY INC Q4 FY2024 earnings call

Management Statement and Operational Highlights

• Inventory and Book to Bill: Inventory levels at end customers and distribution channels normalizing, especially for automotive and industrial semiconductors in Asia and Americas. Book to bill at quarter end was 1.01 vs 0.88 in Q3, with semiconductors at near 1 vs 0.79 in Q3 and passives at 1.03 vs 0.97 last quarter.
• Vishay three-point-o: Organization committed to making Vishay three-point-o a success, preparing for e-mobility and sustainability megatrends. Cultural shift towards customer-first and business-minded approach.
• Capacity Expansion: In semiconductor, completed silicon MOSFET structure transfers at Newport, on track for more by Q1 2025, received silicon carbide equipment, and partnered with SK Key Foundry. In passives, qualified facilities for automotive inductors, increased capacity in Mexico, and qualified subcontractors for resistors.
• Innovation: Released silicon carbide products, continued reliability testing, showcased reference designs at Electronica 2024, and expanded product portfolio through acquisitions.

Segment Performance

• Automotive: Revenue decreased 6% versus Q3. Most customers held below schedule agreements, with Europe production volume and forecasts lower. New programs using AI chipsets for driver assist and autonomy started, but renewed schedule agreements showed limited visibility for H2 2025.
• Industrial: Revenue decreased $5 million or 2% for the quarter. Order intake for smart grid infrastructure projects was positive, with strong demand for grid management, power supplies, etc. Design activity focused on automation, robotics, etc.
• Aerospace Defense: Revenue slightly below Q3. Distributors placed orders above one to support U.S. Military demand, and backlog related to low earth orbit satellite programs increased. Europe revenue flat due to seasonality, but continued as a preferred supplier for DoD OEMs.
• Medical: Strong demand from some customers in 2025, but softer orders from one large customer for inductors. Design activity for patient monitoring, surgical robots, etc., continued.
• Other Market Segments (Computing, Consumer, Telecom): Up 3% QoQ due to strong order intake in Asia related to AI servers and server power projects. AI-related design activity focused on MOSFETs, capacitors, resistors, etc.

Guidance

• First Quarter 2025: Revenue expected $710 million ±$20 million. Gross margin expected 19.0%, with Newport dragging ~175-200bps. Depreciation expense ~$53 million Q1, $214 million full year 2025. SG&A expected ~$137 million ±$2 million. Effective tax rate 30-32%. Negative free cash flow expected but will maintain dividend and opportunistically repurchase shares.
• Full Year 2025: SG&A expected $530-560 million, normalized effective tax rate 30-32%, stockholder return policy to return at least 70% of free cash flow as dividends and repurchases.

Risks

• Inventory Digestion: Europe still dealing with weak business conditions and high component inventory planned for Q1 2025 consumption.
• Macroeconomic Conditions: Weak macroeconomic conditions in Europe compounding inventory digestion issues.
• Equipment Delivery: Delays in equipment delivery affecting CapEx plans.
• Legal and Professional Fees: Unanticipated legal and professional fees impacting SG&A.
• Goodwill Impairment: Recorded $66 million non-cash goodwill impairment charge for MOSFETs reporting unit.

Question and Answer

• Q: Peter Payne on AI server power, content per system, and non-NVIDIA designs A: AI revenue in Q4 was small, with CMs lining up for NVIDIA chipsets. Vishay is proactive in preparing components, with design activity positive and content per board in $30-40 range. FAEs positioned to reach out to custom ASIC designers.
• Q: Ruplu Bhattacharya on distributors, inventory, and pricing A: Inventory distribution is stable at 27 weeks, with adjustments to VPA in 2024. Pricing competitive, with opportunities for large volume orders. CapEx guidance $300-350 million, focusing on fabs and product lines.
• Q: Ruplu Bhattacharya on CapEx and free cash flow A: CapEx for 2025 focused on fabs and product lines, with modulation based on order flow. Free cash flow negative but dividend maintained and repurchases opportunistic.
• Q: Ruplu Bhattacharya on regional mix and team positioning A: Asia is a main focus with strong teams engaging with customers. Europe sales team adjusted to be closer to customers, with focus on gaining share despite soft economy.