Earnings call transcript: Vishay Intertechnology misses Q2 2025 EPS forecast

Vishay Intertechnology (NASDAQ:VSH) reported a second-quarter 2025 earnings per share (EPS) of -$0.07, missing the forecasted $0.02. Despite this miss, the company achieved a revenue of $762 million, slightly above the expected $761.16 million. The stock reacted negatively in pre-market trading, dropping 10.68% to $14.30 from $16.01. According to InvestingPro analysis, the company appears overvalued at current levels, with concerning metrics including weak gross profit margins of 19.72%.

Key Takeaways

• Vishay Intertechnology missed EPS expectations by a substantial margin.
• Revenue slightly exceeded forecasts, showing a 7% sequential increase.
• The stock fell sharply in pre-market trading, reflecting investor disappointment.
• The company remains optimistic about growth in AI and automotive sectors.

Company Performance

Vishay Intertechnology’s performance in Q2 2025 showed mixed results. While the company managed to increase its revenue by 7% sequentially, it struggled with profitability, reporting a GAAP EPS improvement to $0.01 from -$0.03 in Q1. The company’s gross margin reached 19.5%, aligning with the high end of its guidance. InvestingPro data shows the company maintains strong liquidity with a current ratio of 2.7, though its return on invested capital stands at just 1%. Vishay’s strategic focus on high-growth markets like AI, smart grid infrastructure, and automotive electrification is evident from its operational updates and market analysis.

Financial Highlights

• Revenue: $762 million, a 7% sequential increase
• Earnings per share: -$0.07, missing the forecast of $0.02
• Gross margin: 19.5%
• Cash position: $479 million

Earnings vs. Forecast

Vishay Intertechnology reported an EPS of -$0.07, significantly missing the forecasted $0.02, resulting in a surprise of -450%. Revenue slightly surpassed expectations at $762 million against the forecast of $761.16 million, a surprise of 0.15%.

Market Reaction

The stock experienced a notable decline of 10.68% in pre-market trading, falling to $14.30 from $16.01. This drop reflects investor concerns over the significant EPS miss, despite a slight revenue beat. The stock’s current price is closer to its 52-week low of $10.35, indicating a challenging period for the company. InvestingPro reveals the stock has declined 25.56% over the past year, though it maintains a 12-year track record of consistent dividend payments, currently yielding 2.71%.

Outlook & Guidance

Vishay Intertechnology remains optimistic about its future, projecting Q3 2025 revenue to be around $775 million, with a margin of $20 million. The company plans to continue investing in high-growth product lines and expanding its capacity to support AI, automotive, and infrastructure markets. While analysts predict profitability this year, investors seeking deeper insights can access comprehensive analysis and additional ProTips through InvestingPro, which offers detailed financial health scores and extensive metrics for over 1,400 US stocks.

Executive Commentary

CEO Joel Smacow emphasized the company’s progress, stating, "We have made great progress to position Vishay to participate more fully in all market segments." He also highlighted the importance of capacity readiness, saying, "Capacity readiness helps us to be a reliable supplier as the customer scales production."

Risks and Challenges

• Continued pressure on profitability with a significant EPS miss.
• Market volatility affecting stock performance.
• Potential impacts from US tariffs, although currently minimal at less than 4% of revenue.
• Execution risks in capacity expansion and new product launches.
• Global economic uncertainties affecting demand in key markets.

Q&A

During the earnings call, analysts focused on the company’s strategic initiatives and market positioning. Questions highlighted potential mergers and acquisitions in semiconductors and passive components, as well as the outlook for the AI market, which continues to show strong momentum. The company’s positive market signals, including an increasing backlog, were also discussed.

Full transcript - Vishay Intertechnology Inc (VSH) Q2 2025:

Amber, Conference Operator: Good day, and thank you for standing by. Welcome to the Vishay Intertechnology Quarter Two twenty twenty five Earnings Call. At this time, all participants are in a listen only mode. After the speakers’ presentation, there will be a question and answer session. To ask a question during your session, you will need to press 11 on your telephone.

You will then hear an automated message advising that your hand is raised. To withdraw your question, please press 11 again. Please be advised that today’s conference is being recorded. I would now like to hand the conference over to the first speaker today, Peter Henricci, Investor Relations. Peter, go ahead.

Peter Henricci, Investor Relations, Vishay Intertechnology: Thank you, Amber. Good morning, and welcome to Vishay Intertechnology’s second quarter twenty twenty five earnings conference call. I am joined today by Joel Smacow, our president and chief executive officer, and by Dave McConnell, our chief financial officer. This morning, we reported results for our second quarter. A copy of our earnings release is available in the Investor Relations section of our website at ir.vishay.com.

This call is being broadcast live over the web and can be accessed through our website. In addition, today’s call is being recorded and will be available via replay on our website. During the call, we will be referring to a slide presentation, which we also posted at ir.vichet.com. You should be aware that in today’s conference call, we will be making certain forward looking statements that discuss future events and performance. These statements are subject to risks and uncertainties that could cause actual results to differ from the forward looking statements.

For a discussion of factors that could cause results to differ, please see today’s press release and Vishay’s Form 10 ks and Form 10 Q filing with the Securities and Exchange Commission. We are including information in our press release and on this conference call on various GAAP and non GAAP measures. We have included a full GAAP to non GAAP reconciliation in our press release, as well as in the presentation posted on ir.vishay.com, which we believe you will find useful when comparing our GAAP and non GAAP results. We use non GAAP measures because we believe they provide useful information about the operating performance of our businesses and should be considered by investors in conjunction with GAAP measures. Now I turn the call over to President and Chief Executive Officer, Joel Schmeichel.

Joel Smacow, President and Chief Executive Officer, Vishay Intertechnology: Thank you, Peter. Good morning, everyone. Thank you for joining our second quarter twenty twenty five conference call. I’ll start my remarks with a review of the second quarter performance and business conditions, and then turn the call over to Dave, who will take you through a review of the second quarter financial results and our guidance for the 2025. After that, I’ll update you on the strategic levers we are pulling under Vishay three point zero as we continue to execute our five year strategic plan, and then we’ll be happy to answer any of your questions.

For the second quarter, revenue grew sequentially 7% to $762,000,000 in line with our guidance. We generated revenue growth for both semis and passives, growth in all of our end markets, growth in the distribution and EMS channels, and growth in all regions. The promising signals we saw emerging in the fourth quarter have become more firm. The inventory correction cycle is principally behind us. Industry inventory levels have normalized for passives, while there is still some excess industry inventory in semis.

Solid order intake during the second quarter reflected continued demand momentum in smart grid infrastructure projects and AI power applications. Overall, book to bill was positive at 1.02 with semis slipping slightly due to some customer program adjustments and passives continuing to trend upward. July book to bill for semis has bounced back to 1.07. Our decision to invest heavily in capacity expansion between 2023 and 2028 under Vishay three point o is positioning us well. Over the past two and a half years, we have invested approximately $775,000,000 to add capacity for high growth, higher profit products.

I am pleased to state that today, we have the incremental capacity for nearly all products to capture the early stage of this market upturn, assuring our customers of reliable volume as they scale, and to satisfy the quick turn demand we’re seeing in AI and generally across all end markets. We have also been aggressively working growth initiatives to strengthen customer relationships, reengage with previously underserved and inactive customers, and develop new customers. Through innovation and subcontractor engagements, our portfolio has expanded to best serve our customers’ demand and to more fully leverage the breadth of technologies in our portfolio. We create design opportunities that increase our print position at customers targeting our 80% of the bill of materials in power applications. We also work to advance our silicon carbide strategy.

As a result, we have positioned Bashe quite well to support the emerging market upcycle as well as to reinforce our presence to participate in the megatrends of e mobility and sustainability over time. Let’s now turn to slide three for review by end markets. Automotive revenue increased 4% versus the quarter as demand from tier one customers improved on a modest increase in consignment polls in The Americas and the launch of new ADAS programs in Europe and higher volumes in Asia. Consignment polls from European customers were mixed with some of them pulling at normal rates, some at higher rates, and some adjusting their forecasts. Order intake grew in all regions over the course of the quarter.

Automotive electrification continues to be a major focus of design activity in the second quarter for battery electric vehicles and hybrid powertrains, along with smart cockpits, ADAS programs, traction inverters, and onboard chargers. ICE powertrain designs, those activities do still continue. Revenue from the industrial segment increased 9% from the first quarter. The normalization of customer and channel inventories helped this segment turn to more of a forward looking demand planning approach. Also, is being driven by strengthening demand for smart grid infrastructure, multiyear projects in all regions.

Higher power requirements to support AI chip production, and data center projects as AI adoption continues to fuel electricity requirements. For example, we received multiple large orders for the high voltage DC power transmission programs during this quarter. We expect to win additional smart grid projects as customers address electricity demands in AI data centers. Excuse me. In The Americas, orders steadily increased over the quarter with lead times in the eight to twelve week range, giving us a higher percentage of turns business we haven’t seen for many quarters.

In Europe, order intake for smart grid infrastructure projects more than doubled. In Asia, government in China and India are also accelerating smart grid infrastructure spending. In parallel, demand for excuse me. In parallel, demand for factory automation projects and other industrial applications remains flat in The Americas and Europe as companies are slow to invest in capital projects. New design activity remained focused on energy storage, energy conversion, high voltage DC smart grid infrastructure, uninterruptible power supplies, and next generation AI power structures.

In aerospace defense, revenue increased 5% quarter over quarter on improved demand for military applications where while commercial aerospace declined due to ongoing mechanical parts supply issues in Europe. Book to bill stayed above one in The Americas with orders improving throughout the quarter, including orders for applications related to low earth orbit satellites. At one customer, we are supplying over 30% of the bill of materials. Distributors in Europe also report a book to bill rates above one for aerospace defense. Design activity remained focused on Department of Defense communication programs and low Earth orbit satellite constellation, next generation warfare programs including drones and missiles.

In the medical end markets, revenue grew 4% reflecting stronger demand in implantables and measurement equipment. In The Americas, we are seeing the increase and success of our strategy to cross sell all Vishay technologies to customers who have purchased only one or two products from us in the past years. Design activity remained focused on a variety of applications, including defibrillators, surgical assistant systems, drug delivery, diagnostic equipment for patient monitoring, and hearing aid implants. Revenue from the other segments, including computer, consumer, and telecom end markets, was up 9% for the sixth consecutive quarter of sequential growth on escalating demand related to AI servers and server power in Asia. Consistent with the past two quarters, AI remained a quick turns business with Asia CMs frequently placing spot orders.

Order intake increased anywhere between 20 to 30% depending on the country. The main areas of design activity for computing and AI applications continue to be around power management. We continue to design in a greater percentage of components on the board, expanding our bill of material position to both semis and passives, which fits our profitability and capability to support over 80% of the components needed in a power application. In addition, we expanded the AI customer count and continued design activity with AI optical modules and graphics cards. Let’s move on to slide four.

Moving on to the revenue by channel from the second quarter, you can see that 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 with volume up in all regions, including a recovery in Asia following a seasonal soft first quarter, offset by a bit lower ASPs. Order intake by industrial OEMs in each region remained positive as we move past the inventory correction cycle and see increased demand for industrial power supplies and improved order intake from automotive customers. EMS revenue increased 13% versus the first quarter on increased AI and industrial demand and many short term orders in Asia related to customers who wanted to ship during the tariff pause. In Europe, some regional EMS work to right size their inventory levels, which they hold for aerospace and defense customers.

This is expected to clear by year end. Distribution revenue grew 11%. This reflects the success of our SKU count expansion to sell more Boucher products by having them on the shelf, which intensifies customer engagement. Our total distributor inventory reached twenty seven weeks at the end of Q4 and has been reduced now to twenty three weeks for the second quarter as more Boucher part numbers are being consumed at faster rates. POS increased in each region and worldwide 9%.

In The Americas, POS was at the highest level since the 2023 as end customer demand recovers due to new program launches, expanded backlogs, and normalized inventory levels. POA worldwide grew at a faster rate on continued turns business in each region following a 4% sequential increase in the first quarter. Turning to slide five, in terms of the geographical mix, revenue grew in each region led by Asia, which increased 12% on a rebound from the seasonally soft first quarter on strong volume associated with AI power requirements, smart grid infrastructure projects and also automotive. In The Americas, improved automotive and industrial man resulted in a 7% increase. Europe was essentially flat after having fewer workdays in q two and some inventory overcorrections.

Before turning the call over to Dave, I’d like to thank the Vishay employees for their hard work and contributions to transforming Vishay to three point o. Our level of service has improved. Vishay employees put the customer first every day and embrace a business minded approach in all that they do. Their continued commitment to advancing the business toward the long term strategy and financial goals is recognized and appreciated. I’ll now turn the call over to Dave, where he will review the financial results of q two.

Dave McConnell, Chief Financial Officer, Vishay Intertechnology: Thank you, Joe. Good morning, everyone. Let’s start a review of the second quarter financial results with the highlights on slide six. Second quarter revenues were $762,000,000 up 7% compared to the first quarter, reflecting a 4% increase in volume and a 3% positive foreign currency impact related mostly to the euro. Average selling prices, including tariff adders, were flat versus the first quarter.

All reportable business segments had higher revenues in the first quarter, driven mostly by volume. Compared to the second quarter twenty twenty four, revenues increased 3%, reflecting a 3% increase in volume, 2% positive foreign currency impact related mostly to the euro. This was partially offset with a 2% reduction in ASPs, including tariff adders. Book to bill for the quarter was 1.02, the third quarter in a row with a book to bill over one. Book to bill was 0.98 for semis and 1.06 for passage.

Backlog in dollars increased to $1,200,000,000 and is now at four point six months. Moving on to the next slide, presenting the income statement highlights. Gross profit was $149,000,000 resulting in a gross margin of 19.5% at the high end of our guidance. The increase from quarter one was primarily due to additional volume. The negative impact from Newport was approximately 160 basis points, slightly better than our guidance.

Depreciation expense was 53,000,000, approximately in line with our guidance considering exchange rate impacts and up 2,000,000 over quarter one. SG and A expenses were 127,000,000, including an $11,000,000 benefit recognized upon the onetime favorable resolution of an outstanding matter. Excluding this onetime benefit, SG and A expenses would have been in the range of our guidance for the quarter, up from $135,000,000 in quarter one, mostly due to negative exchange rate impacts. GAAP operating margin was 2.9% compared to 0.1% in the first quarter and 5.1% in the ’4. Adjusted operating margin was 1.4% in the second quarter, excluding the onetime item.

There were no GAAP adjustments in Q1 ’twenty five or ’4. EBITDA for the quarter was $75,000,000 for an EBITDA margin of 9.8. Adjusted EBITDA for the quarter was $64,000,000 for an adjusted EBITDA margin of 8.3%, up from 7.6% in the first quarter. Our GAAP effective tax rate is not meaningful at these low levels of pretax income or loss, as relatively small items such as foreign currency and repatriation taxes have a disproportionate impact on the effective tax rate. As profitability returns, we expect a normalized effective tax rate closer to our historical guidance.

GAAP EPS was $01 per share compared to a loss of $03 per share in the first quarter, and earnings per share of $0.17 in the ’4. Adjusted loss per share was $07 for the ’5. Proceeding to slide eight. For ease of reference, the presentation includes a table illustrating the revenue, gross margin and book to bill ratios for each of our reportable business segments. Of note, for the second quarter, the results for Newport continue to be reported primarily in MOSFETs, impacting that segment’s gross margin by approximately eight forty bps compared to 1,000 bps for quarter one.

Turning to Slide nine and our cash conversion cycle metrics. Our DSO was stable at fifty three days, while our DPO decreased to thirty two days from thirty four days in the first quarter. Inventory increased to $755,000,000 mostly to exchange impacts. The inventory days outstanding decreased slightly to one hundred and nine days. Total cash conversion cycle for the second quarter is one hundred and thirty days.

Continuing to Slide 10, you can see we used $9,000,000 of operating cash for the second quarter. The quarter included $56,000,000 of tax payments related to cash repatriation and the last installment of The US transition tax. Total CapEx for the quarter was $65,000,000 including $53,000,000 designated for capacity expansion projects. On a trailing twelve month basis, capital intensity was 11.3% compared to 10.5% for the same period last year. Consistent with our strategic plan that we shared with you last year, we continue to deploy cash for capacity expansion projects.

Due to these investments and the aforementioned taxes paid, free cash flow for the quarter was a negative $73,000,000 compared to negative $45,000,000 in the first quarter. Stockholder returns for the second quarter consisted of our $13,600,000 quarterly dividend. We did not repurchase any shares in the quarter. The remaining 42,000,000 of our 2025 convertible notes matured in the quarter. We funded the settlement with a cash draw on our revolver.

At the end of the quarter, our global cash and short term investment balance was $479,000,000, and we are in a net borrowing position in The US with 185,000,000 currently outstanding on our revolver. As previously noted, we are required to fund current dividends, share repurchases, principal and interest payments using cash on hand in The US, and we are using our US based liquidity to fund our Newport expansion and other strategic investments. To that end, during the quarter, we repatriated $66,000,000 of accumulated earnings net of taxes from Israel to The US, primarily to fund the Newport expansion. We have $275,000,000 accessible on our revolving credit facilities at the current EBITDA level. We expect to continue to draw on our revolver to fund our US cash needs.

Okay, moving on to the guidance. For the third quarter twenty twenty five, revenues are expected to be $775,000,000 plus or minus $20,000,000 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 also expected higher input costs. Newport is expected to have an approximate 160 to 185 basis point drag on the margin in the third quarter. As we discussed last quarter, we are generally passing through additional tariff costs to customers.

Thus, tariff adders increase our revenues without impact on gross profit. The impacts of tariffs are generally limited and incorporated into our guidance for the third quarter. Depreciation expense is expected to be approximately $54,000,000 for the third quarter and $212,000,000 for the full year. SG and A expenses are expected to be $138,000,000 plus or minus $2,000,000 for the quarter. SG and A expenses for the full year are expected to be between $540,000,000 and $560,000,000 excluding the one time benefit in Q2.

Our GAAP effective tax rate is not meaningful at low levels of pre tax income and loss. As profitability returns, we would expect a normalized effective tax rate closer to our historical guidance of 30% to 32%. And finally, our stockholder return policy calls for us to return at least 70% of our free cash to stockholders in the form of dividends and stock repurchases. For twenty twenty five, we have once again we once again expect negative free cash flow due to our capacity expansion plans. For 2025, we expect to maintain our dividend and opportunistically repurchase shares based on U.

S. Available liquidity in line with this policy. Now I’ll turn the call back to Joel.

Joel Smacow, President and Chief Executive Officer, Vishay Intertechnology: Alright. Thank you, Dave. Let’s turn to slide 12 for an update on the strategic levers we are pulling as we execute our five year strategic plan to drive faster revenue growth, elevate profitability, and enhance returns on capital. For 2025, we plan to spend between 300,000,000 to 350,000,000, at least 70% of which will be invested in capital expansion projects for our high growth product lines. During the second quarter, we continued to make progress on our semiconductor expansion projects.

As our Newport Wafer fab, we remain on schedule for silicon carbide preproduction in early twenty twenty six. During the second quarter, we completed the installation of all tools except one, which will be installed in the third quarter. For silicon MOSFETs, we also completed the transfer of three additional technologies and plan to transfer another two technologies in the third quarter. Finally, we released one automotive MOSFET while additional product qualifications are ongoing. Two large tier one customers have audited the facility, and Newport received excellent scores for the facility and the processes.

The next customer audit is being scheduled in early q four. At our foundry partner in Korea, SK Key Foundry, due to a technical issue, release dates have been pushed out one or two quarters. We now plan to release a total of eight technologies in the fourth quarter, four which are commercial, two are automotive grade, and one or excuse me, two are ICs. As a result, we now expect to meet our goal of increasing the annualized capacity for MOSFETs by 12% in the 2026. We also expect to increase annualized capacity for our advanced split gate MOSFETs by 25% to support new automotive and commercial opportunities in 2026.

In Taiwan, we continue to advance the automotive qualification process and the volume ramp up for commercial diodes. In Turin, Italy, the qualification of commercial diodes is on track to be completed in the third quarter, and we will expect to begin mass production in the fourth quarter. We also are on track to complete the qualification of the 1,200 volt technology in the third quarter and begin mass production in the fourth quarter. Now for passive components. At our two facilities in Mexico, in La Laguna and in Juarez, we continue to qualify more commercial part numbers.

We are also continuing to work on automotive grade qualifications for the site. Once the site is up to automotive standards, customers will schedule audits beginning the second half of the year. With respect to our subcontractor initiative, we added another five subcontractors to our roster and qualified more than 8,000 part numbers, expanding our product portfolio of diodes, resistors, inductors. As a result, we can dedicate more of our capacity to high growth products and broaden our product portfolio to meet customer needs. Turning to innovation and our silicon carbide strategy.

During the quarter, we continued to advance towards commercialization of the planter MOSFETs. The 1,200 volt planner, the 1,700 volt planner, and the 650 volt planner, our 1,200 volt trench MOSFET technology, and our Gen four diodes, 650 volts and 1,200 volts family. We released three more Gen two twelve hundred volt planter MOSFETs in q two, bringing the total now to four. By year end, we plan to release an additional 16 Gen two twelve hundred volt MOSFETs for automotive and industrial applications. We remain on track to release the 1,700 volt planner MOSFET and the 650 volt planner MOSFET in the 2026.

We are also on track to have samples of the 1,200 volt trench available in the third quarter and still plan a market release in the fourth quarter. For silicon carbide diodes, we have fully released the Gen four twelve hundred volt automotive diode and the Gen four six hundred fifty volts. We still plan to release the entire silicon carbide Gen four dial diode family with all current ratings and power packages in the second half of the year. As for our solution selling initiative, we continue to release into catalog distribution reference designs that support common applications for automotive, industrial, and AI computer solutions through our e mobility lab. Specifically during the quarter, we released one reference design for 400 volt active discharge in an automotive application.

We plan to release another 11 designs in the third quarter for battery management, 400 volt, 800 volt active discharge, and current sensor and voltage sensor applications among others. In closing, let’s turn to slide 13. Since the beginning of the year, we have seen some customers giving more visibility on their forward demand. Backlog is building in both semis and passives. With nine weeks left in q three, shippable backlog is higher than at the same point in q two.

The backlog is building at a faster rate, giving us another signal that the market appears to be turning, and we’re making sure we have the right products on the distributor shelves. With market indicators directionally positive, we are preparing for a stronger second half of the year than compared to the first half. As the market upturn begins to become more firm, we work to be ready to meet customer demand in a much better position to offer competitive lead times as the backlog grows. Capacity readiness helps us to be a reliable supplier as the customer scales production, and we are able to supply more part numbers to them. Capacity readiness allows us to reengage with inactive customers and regain their trust over time.

Capacity readiness also means we are positioned to drive new customer engagement. On the technology front, we’re intensifying our efforts to expand MOSFET capacity and develop new business through many avenues. Internal and external capacity expansions for front end and back end production are in place, plus the advancements of silicon carbide as a new product technology for Vishay. In short, we have made great progress to position Vishay to participate more fully in all market segments. In particular, the higher growth markets of smart grid, AI, aerospace defense, and hybrid automotive.

Amber, we’re now ready to open the call up for questions.

Amber, Conference Operator: Thank you. At this time, we will conduct a question and answer session. As a reminder, to ask a question, you will need to press 11 on your telephone and wait for your name to be announced. Our first question comes from Ruplu Bhattacharya of Bank of America. Your line is now open.

Ruplu Bhattacharya, Analyst, Bank of America: Hi, thanks for taking my questions. My first one is on the impact of the Newport fab. I think you had guided one seventy five bps to 200 bps of negative impact on gross margin for the second quarter, but the impact was just 160 bps. But then looking at the guide for fiscal 3Q, it’s higher at 160 bps to 185 So if you can dive a little bit into details on what drove the outperformance versus your expectations for 2Q, and what is happening again in 3Q, and how should we think about this impact going forward, and when does it normalize?

Dave McConnell, Chief Financial Officer, Vishay Intertechnology: Hi, Ruplu. It’s Dave. That’s a good question. So I think with with our guidance, the one eighty to one eighty five, it’s lower than we’ve done in the past year. Right?

We were one seventy five to 200, and we came in at one sixty. They’re working hard on getting the product, you know, build the wafers, and we’re moving towards q three and q four starting to build inventory and start to ship product. So it’s a little unknown, so we wanna give ourselves a little bit of a range. Okay? So $1.60, we’re hoping we’d be at the low end of that range.

Okay. Understood. Answer honestly. Okay.

Ruplu Bhattacharya, Analyst, Bank of America: And then can I ask on the MOSFET gross margins? Looks like they declined 200 bps sequentially. What drove that? And how should we think about gross margin improvement in that section in that segment going forward?

Dave McConnell, Chief Financial Officer, Vishay Intertechnology: Let me take a look. Okay. So, Rupla, another good question. So during q two, the mindset segment had some manufacturing inefficiencies that have been corrected in q three that’ll show some improvement. We also will have an increase in our IC sales q two and q three, which comes at a higher margin for us, which will show some improvement.

We’re continuing on working on expanding our AI customer list, which will help with the margin improvement towards quarter four. So we’re right now, the way it stands, we’re hoping to exit the year 17 to 18%, excluding Newport on MOSFETs.

Ruplu Bhattacharya, Analyst, Bank of America: Okay. Okay. That’s helpful. So, Dave, maybe I’ll go three for three with you. Let me ask you the another question on US tariff impact.

I think on the call, you said that it’ll be neutral. But if, you know, if I look at the last quarter’s slide, you had a slide where you said passive components can have up to 170% tariff and semis manufactured in China can have up to 70%. So can you talk about the mechanics of this? Like how much of your product line is packaged in China? And how should we think about, like, how much of that comes into The US?

And how how how is the impact really on on of tariffs on the p

Joel Smacow, President and Chief Executive Officer, Vishay Intertechnology: and l? Okay. Hi, Rupul. This is Joel. I’ll take this one.

As far as the product percent that is manufactured in China and comes back to The US, in q one, it was less than 4%, and we see about the same percentage in q two and q three. It’s a small percent. Semiconductors and passives are similar, but it’s a small percent of our overall revenue that comes back to The US that’s manufactured in China.

Ruplu Bhattacharya, Analyst, Bank of America: Okay. Alright. Thanks for all the details. Let me ask you one final question, and then I’ll pass on the line. Joel, in this environment, how are you thinking about the possibility of inorganic growth, m and a?

And and if if you were to think about that, would that be in the passive side or active side and what are some of the things that would be attractive? Thank you.

Joel Smacow, President and Chief Executive Officer, Vishay Intertechnology: Okay. We always keep our eyes out for M and A opportunities. Semiconductor side for sure is something we look at. We look at ways to increase our presence at customers, so semi is for sure. Passives, recently, we had the acquisition of a small inrush current limiting company, Amatherm.

We brought them on board because it did fill a gap in our portfolio, and that is developing. We also look at other passives, which could be vertical. They could be vertical acquisitions to help us with manufacturing materials, or it could be with customers. So we do keep our eyes open. We haven’t, moved away from that.

I think we’ve done a good number of acquisitions in the first two and a half years of three point o, and we continue to have that as a strategy.

Ruplu Bhattacharya, Analyst, Bank of America: Okay. Thank you for all the details.

Joel Smacow, President and Chief Executive Officer, Vishay Intertechnology: Thank you, Riplu. Have a good day.

Amber, Conference Operator: Thank you. Our next question comes from Peter Peng of JPMorgan. Peter, your line is now open.

Peter Peng, Analyst, JPMorgan: Hey, guys. Thanks for taking my question.

guys mentioned about getting more visibility in Q3 and your backlog is building faster and the market appears And so you guys are prepping for a stronger second half of the year. If I look at some of your seasonal trends for the December, it’s typically down low single digits. So I can still get to a half on half growth. But I’m just wondering, you know, if we should be expecting more of an above seasonal trend, you know, into the December.

Joel Smacow, President and Chief Executive Officer, Vishay Intertechnology: Okay. We like what we’re seeing. It’s definitely different than the last two years. As we look into the second half of the year, the BIBA, the billable backlog, is building at a greater rate than we have seen previously. The second half, q three, you see our guide up slightly.

Also considering that Europe has some shutdowns in August, so August is a slower month. So we still feel we can guide up in q three. Q four, the way the Veeva is building, at this point, we see that q four can be better than q three.

Peter Peng, Analyst, JPMorgan: Perfect. Okay. That’s helpful. And then just on your, you know, end markets, we’ve been hearing a lot of mixed signals across your peers, some saying things are good and refilling, some are talking about pull forward. Maybe you can just provide some color on your customer base and whether you’re you’re you’re seeing any pull forward of demand or maybe this is just, you know, refilling channel.

Maybe any color on that would be helpful. Okay.

Joel Smacow, President and Chief Executive Officer, Vishay Intertechnology: I think what’s interesting, about the climate we’re in, the customers, as far as planning their demand, are still, not so far forward forward looking. If we look at Asia, 55% of our orders seem to be for quick delivery. We talked about this in previous quarters as well. So even though we say the inventory is normalized, the safety net, I think the customers still think there’s product out there that’s quick to grab. It’s not, and we’re manufacturing quickly.

We talk about turns orders in the quarter. We’re able to take an order and turn it in the quarter. So I don’t necessarily call that pull ins. I just think that’s the state of the business that we’re in is this transition from an inventory heavy market to customers looking at their demands as they have to build and trying to now find products. The inventory at distributors, we’ve seen our inventory go down.

We talked about that to go from twenty seven weeks, the 2024 down to twenty three weeks. So we’re seeing good pull through with distribution. Automotive, the outlook we see for the second half with the schedule agreements from customers shows better than the first half. Aerospace defense, defense contractors speak about funding that’s coming, so they say a stronger second half with likely orders in q four. AI is a nice trajectory that moves up positively at a nice slope.

And industrial smart grid, we see continued orders each quarter as governments release funding to redesign their electrical transmission lines. So that’s positive in Asia. That’s positive in Europe and also positive in The Americas. So there is always the conversation about pull ins, pull ins to get ahead of tariffs, but I I don’t think that’s, the main driver here for us. I think these four application opportunities in those segments I talked about are really what’s driving us forward.

Ruplu Bhattacharya, Analyst, Bank of America: Okay. That’s good color.

Peter Peng, Analyst, JPMorgan: It’s nice to to hear that you guys added more AI customers. I’m not sure if you guys can provide any color on what your revenue number is for your AI data. If not, maybe you can give us some metrics on, you know, customer diversity. And then and more importantly, how are you thinking about, you know, expanding applications, you know, into, like, second stage or PSU for for the AI data center going forward?

Joel Smacow, President and Chief Executive Officer, Vishay Intertechnology: Okay. The customer count is definitely growing. The big four that you always hear about, the, Microsoft, the Meta, the Google, Apple, those, are great design conversations. If you look at EMS, there’s EMS that’s been also involved in the design, not just the manufacturer of AI, but also the design. So our customer count has developed significantly.

There’s good engineering content. As we sit with customers, we speak about more than MOSFETs. We speak about more than ICs. We talk about capacitors, inductors, as well as resistors. So we have the broadest portfolio, and we’re able to support that.

So it’s really about expanding the part count as well as the customer count. So we believe we have two ways to do this, not just selling one technology or two. We’ve got multiple as we sit with the engineers and design in. So we’re, we’re positive on AI and how Vishay can continue to participate with greater revenue.

Peter Peng, Analyst, JPMorgan: Perfect. One more question, if I may. I think in your prepared remarks, you talked about in your your semi business, some slipping of customer program. Maybe you can provide some color on on what that is.

Joel Smacow, President and Chief Executive Officer, Vishay Intertechnology: We were on the GB 300. The original design, if you remember, it was called Cordelia, which had the chipset design that was gonna snap in to the board. That design changed. They went to a new design called Bianca, which is no longer using that connector snap in connection. So we were in a strong position with that first design concept.

Concept, the orders that we were planning for p six and p seven have been adjusted because the design changed to Bianca, and now we’re working on the design side to make sure we’re on that program.

Peter Peng, Analyst, JPMorgan: Got it. Okay. That’s helpful. Okay. That’s all I have, and I’ll jump back in queue.

Joel Smacow, President and Chief Executive Officer, Vishay Intertechnology: Peter, thank you. Nice talking to you. Thanks, Peter.

Amber, Conference Operator: Thank you. I am showing no further questions at this time. I would like to now turn it back over to the President and CEO, Joe Smeckel, for closing remarks.

Joel Smacow, President and Chief Executive Officer, Vishay Intertechnology: You, Amber. Thank you, everyone, for joining us for our second quarter earnings conference call. We’re making great progress to participate more fully in the market upturn, capacity ready and reliable supply to our customers, and to be aligned for the market growth drivers that we’ve spoken about in AI, smart grid infrastructure, aerospace, defense, and automotive. We look forward to reporting our third quarter results to you in November. Thank you very much, and enjoy the rest of your summer.

Amber, Conference Operator: Thank you for your participation in today’s conference. This does conclude the program. You may now disconnect.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.