Vishay Intertechnology, Inc.

Good day and thank you for standing by. Welcome to the Vishay Intertechnology fourth quarter 2023 earnings call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 1 1 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 1 1 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your host today, Peter Henrisi, Head of Investor Relations. Please go ahead.

Thank you, Liz. Good morning and welcome to Vishay Intertechnology's fourth quarter and fiscal year 2023 earnings conference call. I am joined today by Joel Smekal, our President and Chief Executive Officer, and by Laurie Lipkeman, our Chief Financial Officer. This morning, we reported results for our fourth quarter. A copy of our earnings release is available in the Investor Relations section of our website at ir.vishe.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 IRVCA.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 Vichay's Form 10-K and Form 10-Q filings with the Security and Exchange Commission. We are including information in our press release and on this conference call on various gap and non-gap measures. We have included a full gap to non-gap reconciliation in our press release as well as in the presentation posted on ir.vichay.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 Smichoff. Joel Smichoff Thank you, Peter.

Good morning, everyone. Thank you for joining the fourth quarter 2023 earnings conference call. I'll start my remarks on slide three with a review of the demand trends for the fourth quarter by end market, channel, and region. Then Lori will take you through the highlights of our financial results and guidance for the first quarter of 2024. After that, I'll wrap up with a review of our key initiatives, and then we'll be happy to answer any questions. Before reviewing our fourth quarter performance, I want to take a moment to look back at what I shared with you a year ago on my first call as Bechet's CEO. It's been a remarkable year of change in Bechet as we began to implement our strategy to become a more business-minded supplier. A top priority was to increase capacity for our highest growth and highest margin product lines to be ready to capitalize on the mega trends of e-mobility, sustainability, connectivity I said that we were going to use the foundation of our operational disciplines to become a customer and market focused company from a cash flow managed business to a P&L driven company from a company that fulfills customer orders to one that anticipates customer needs today the culture of putting the customer first has taken hold think customer first is strongly embraced across the organization. Decisions are being made with the customers and market dynamics in mind. And we are engaging the OEMs, distributors, and EMS partners on a regular basis because we have successfully invested in incremental capacity to help them scale. This puts Vache in a unique position to drive growth. It is this customer-focused and business-minded approach that is creating a new Vishay. None of this can happen unless the employees of Vishay embrace the change. I want to take a moment to express my deepest appreciation to all of the Vishay employees for their enthusiasm about the future and their energy and commitment to creating the new Vishay. Let's now move forward to the performance of the recent quarter. For the fourth quarter, We are reporting revenue of 785.2 million US dollars within our guidance range of $770 million to $810 million. As expected, softer demand in industrial and markets due to the consumption of higher levels of finished goods inventory by many customers resulted in a revenue decrease from the third quarter. Aerospace defense and medical markets Continue as bright spots for Bichet. Let's start on the left side of slide three with the revenue by market segment. Automotive held steady at 37% of total revenue. After three quarters of sequential growth in 2023, automotive revenue declined 7.5% versus the third quarter. Compared to prior year's fourth quarter, automotive revenue increased 9%. and grew as a percent of the total. For the year, automotive revenue grew 12.7%. Throughout 2023, we saw increasing demand for electronic content of internal combustion engines, hybrids, e-vehicles, and greater vehicle production as supply chains stabilized. Toward the end of the year, some automotive customers and tier ones made adjustments to digest inventory. As automotive OEMs reevaluate the pace of EV adoption, we see an uptick in volume for hybrid vehicle production. Design activity in automotive remains strong in each region, focused on ADAS plus e-mobility, including battery management systems, traction inverters, and onboard chargers. At the same time, automotive OEMs are engaging with us for design, and technology capability discussions to develop long-term EV projects. As you know, the fourth quarter is when we finalize the annual contracts with large industrial OEMs and automotive tier one. Overall, the price reduction for 2024 was low single digit percent after negotiating higher volume share in most cases. We plan to offset this with cost reductions, and margin improvements. The industrial segment accounted for 34% of total revenue, declined 11.1% versus third quarter, and 18.9% versus the fourth quarter last year. Industrial revenue for 2023 was 11.7% lower than 2022. Demand remained weak in Asia, influenced by the ongoing economic slowdown in China. Europe and the Americas were also sluggish as customers continued to digest high inventory levels. There were pockets of growth, notably in support of infrastructure projects, and we did complete the shipment of our largest capacitors to support an electrical grid program delayed last quarter. For industrial design activity, we made progress on programs around renewable energy generation, smart grid infrastructure, EV charging infrastructure, and energy storage. Industrial automation continues to be a major focus for customers in all regions. As an example, in the Americas, where near-shoring factories is a common topic, customers want to leverage factory automation. In aerospace and defense, our revenue increased 8.5% versus the third quarter and 31% versus last year. For the year, revenue grew 26.5% versus 2022. We saw continued strong demand from commercial aviation customers and military weapons system contractors with high orders in the fourth quarter due to the two wars. For the year, aerospace and defense revenue increased 26.5% over last year. Revenue from medical customers grew 4.3% compared to the third quarter and 3.6% compared to last year. Medical revenue grew 14% for 2023 versus 2022. Demand remains strong for medical diagnostic equipment and implantable devices, and shipments to a major customer resumed after a delay last quarter. Medical design activity continues to be strong as customers create technology for remote monitoring of patients. Also, there is some news that the China government is planning to launch an upgrade of medical equipment in their hospitals in 2024. Revenue from other end markets declined both sequentially and year over year by 13.7% and 30% respectively. Demand in these consumer, computer, and telecom markets has been weak all year and revenue for the year fell 20% versus 2022. Turning to our business channels, revenue from each channel declined relative to the third quarter with distribution accounting for a little more than half of the decrease. OEM revenue was 6.9% lower than the third quarter, but 4.1% higher than the prior year's fourth quarter. Soft demand from industrial customers and year-end inventory adjustments by some automotive customers accounted for this reduction. However, for the year, OEM increased 12.1% versus 2022. EMS revenue declined 13.7% quarter over quarter and 24.2% year over year, reflecting another quarter of inventory adjustments in all regions. Particularly in Europe, among non-global EMS companies, and softening demand for industrial programs in Asia. EMS revenue for 2023 was 8.9% lower than last year. Distribution revenue for the fourth quarter fell 8.2% sequentially and was 14.4% below prior year as a result of inventory adjustments in all regions. For the year, distribution revenue declined 11% from 2022. Distribution inventory at quarter end increased to 26 weeks versus 24 weeks last quarter with increases in all regions. POS decreased 6.5% with most of the decline coming from Europe where customers were still reducing their forecast or cleaning up inventory positions. The dollar value of the distributor inventory was flat quarter over quarter. We continue to better position Bechet on the distributor's shelves by adding 7,200 part numbers during the quarter. These steps will help to increase our participation in this high margin channel. Our customers are telling us that they expect the inventory correction to last through the first half of 2024. Some end markets may improve sooner, notably aerospace and defense. in the Americas, where we see distributors wanting to increase their position on the Vichet passives. As well, distributors would like to increase their position on the automotive-grade semiconductors. Based on order flow in the fourth quarter, we expect passives to recover faster than semiconductors. Now I'll turn the call over to Laurie for the review of our financial results.