Vishay Intertechnology, Inc.

Greetings and welcome to the Vishay Intertechnology's third quarter 2022 earnings call. At this time, all participants are in a listen-only mode. A brief question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Mr. Peter Henrici, Head of Investor Relations. Thank you, sir. You may begin.

Thank you, Michelle. Good morning and welcome to Vishay Intertechnology's third quarter 2022 conference call. With me today are Dr. Gerald Paul, Vishay's President and Chief Executive Officer, and Laurie Lipkeman, our Executive Vice President and Chief Financial Officer. As usual, we'll start today's call with the CFO who will review Vishay's third quarter 2022 financial results. Dr. Gerald Paul will then give an overview of our business and discuss operational performance as well as segment results in more detail. Finally, we'll reserve time for questions and answers. This call is being webcast from the Investor Relations section of our website at ir.vichet.com. The replay for this call will be publicly available for approximately 30 days. 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 risk and uncertainties that could cause actual results to differ from the forward-looking statements. For discussion of factors that could cause results to differ, please see today's press release and Vichay's Form 10-K and Form 10-Q filings with the Securities and Exchange Commission. In addition, during this call, we may refer to adjusted or other financial measures that are not prepared according to generally accepted accounting principles. 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 that we also provide. On the investor relations section of our website, you can find a presentation of the third quarter 2022 financial information containing some of the operational metrics Dr. Paul will be discussing. Now, I turn the call over to Chief Financial Officer Lori Lipkeman.

Lori Lipkeman Thank you, Peter. Good morning, everyone. I am sure that most of you have had a chance to review our earnings press release. I will focus on some highlights and key metrics. Visa reported revenues for Q3 of $925 million, a quarterly record. EPS was $0.98 for the quarter. Adjusted EPS was $0.93 for the quarter. The only reconciling item between GAAP EPS and adjusted EPS is tax-related. There were no reconciling items impacting gross or operating margins. As we announced in February, Vichy has adopted a stockholder return policy which calls for us to return at least 70% of annual free cash to stockholders directly in the form of dividends or indirectly in the form of stock repurchases. During quarter three, we repurchased slightly less than 1 million shares of common stock for $18.5 million. We paid $14.3 million for our quarterly dividends for a total stockholder return of $32.8 million. Year to date, we repurchased 2.9 million shares of common stock for 54.7 million. We paid 43.1 million in dividends for a total stockholder return of 98 million. Revenues in the quarter were 925 million, up by 7.1% from previous quarter. and up by 13.7% compared to prior year. Gross margin was 31.3%. Operating margin was 19.8%. EPS was 98 cents. Adjusted EPS was 93 cents. EBITDA was 224 million, or 24.2%. There were no reconciling items to arrive at adjusted EBITDA. reconciling versus prior quarter operating income quarter three 2022 compared to adjusted operating income for prior quarter based on 61 million higher sales or 76 million higher sales excluding exchange rate impacts adjusted operating income increased by 25 million to 183 million in Q3 2022 from 158 million in Q2 2022. The main elements were average selling prices were flat, volume increased with a positive impact of $39 million, equivalent to a 9.1% increase, primarily due to a catch-up related to Shanghai shutdowns in Q2. Variable costs were flat, lower metal prices and freight costs offset higher prices for materials and services. Fixed costs increased with a negative impact of $4 million. Inventory impacts had a negative impact of $12 million. Reconciling versus prior year, adjusted operating income quarter three, 2022, compared to operating income in Q3, 2021, based on 111 million higher sales or 155 million higher excluding exchange rate impacts, adjusted operating income increased by $60 million to $183 million in Q3 2022 from $124 million in Q3 2021. The main elements were average selling prices had a positive impact of $69 million representing an 8.0% ASP increase. Volume increased with a positive impact of $48 million representing a 10.4% increase. Variable costs increased with a negative impact of $23 million, primarily due to increases in cost of materials and services, labor, silicon, logistics, not completely offset by cost reduction efforts and lower metal prices. Fixed costs increased with a negative impact of $25 million, primarily due to annual wage increases as well as general inflation. Inventory impacts had a negative impact of $8 million. Selling in general and administrative expenses for the quarter for $106 million in line with expectations when considering exchange rate effects. For quarter four 2022, our expectations are approximately $109 million of SG&A expenses. For the full year 2022, our expectations are $438 million of SG&A expenses. excluding any impact from our acquisition of max power. The debt shown on the face of the balance sheet at quarter end is comprised of the convertible notes due 2025 net of debt issuance costs. There were no amounts outstanding on our revolving credit facility at the end of the quarter. However, we did use the revolver from time to time during Q3 to meet short-term financing needs. and expect to continue to do so in the future. No principal payments are due until 2025 and the revolving credit facility expires in June 2024. We had a total liquidity of $1.7 billion at quarter end. Cash and short-term investments comprised $18 million and there were no amounts outstanding on our $750 million credit facility. Total shares outstanding at quarter end were 142 million. The expected share count for EPS purposes for the fourth quarter 2022 is approximately 142 million, excluding any impact of share repurchases. Our US GAAP tax rate year to date was approximately 23%, which mathematically yields a rate of 22% for Q3. We recorded a tax benefit of $5.9 million for the quarter and year-to-date periods to adjust uncertain tax position provisions following the resolution of a tax audit. Our normalized effective tax rate, which excludes the unusual tax item and for the year-to-date period excludes the tax effect of the COVID costs in China in Q2, was approximately 25%, which mathematically yields a rate of 26% for the quarter. We expect our normalized effective tax rate for full year 2022 to be between 24 and 25 percent. Our consolidated effective tax rate is based on an assumed level and mix of income among our various taxing jurisdictions. A shift in income could result in significantly different results. Also, a significant change in U.S. tax laws or regulations could result in significantly different results. Cash from operations for the quarter was $209 million. Capital expenditures for the quarter were $76 million. Free cash for the quarter was $133 million. For the trailing 12 months, cash from operations was $464 million. Capital expenditures were $272 million. Split approximately for expansion, $172 million. For cost reduction, $16 million. For maintenance of business, $84 million. Free cash generation for the trailing 12-month period was $193 million. The trailing 12-month period includes $15 million cash taxes paid for the 2022 installment of the U.S. tax reform transition tax and $25 million cash taxes paid pursuant to our Israeli repatriation program. Vichy has consistently generated an excess of $100 million cash flows from operations in each of the past 27 years and greater than $200 million for the past 20 years. Backlog at the end of quarter three was at $2,261,000,000, or 7.3 months of sales. Inventories decreased quarter over quarter by $3 million, excluding extra impacts. Days of inventory outstanding were 90 days. Days of sales outstanding for the quarter were 42 days. Days of payables outstanding for the quarter were 33 days, resulting in a cash conversion cycle of 98 days. Now I'll turn the call over to our Chief Executive Officer, Dr. Gerald Paul.