Vishay Intertechnology, Inc.

Good day, and thank you for standing by. Welcome to the Vishay Intertechnology Q3 2024 Earnings Conference 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 11 on your telephone. You will then hear an automated message advising that your hand is raised. To withdraw your question, please press star 11 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Peter Henrici. Please go ahead.

Thank you, Felicia. Good morning, and welcome to Vishay Intertechnology's third quarter 2024 earnings conference call. I am joined today by Joel Smekal, our president and chief executive officer, and by Dave McConnell, our chief financial officer. This morning, we reported results for our third quarter. A copy of our earnings release is available in the investor relations section of our website at ir.bichet.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.bichet.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 Fichet's Form 10-K and form 10Q filing with the Securities 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.pichet.com. which we believe you will find useful when comparing our gap and non-gap results. We use non-gap measures because we believe they provide useful information about the operating performance of our businesses and should be considered by investors in conjunction with gap measures. Now, I turn the call over to President and Chief Executive Officer Joel Smacock.

Thank you, Peter. Good morning, everyone. Thank you for joining our third quarter 2024 conference call. I'll start my remarks with a review of our revenue for the third quarter by end market, channel, and region. Then Dave will take you through a review of the third quarter financial results and our guidance for the fourth quarter. After that, I'll give you a progress report on the 2024 initiative supporting our five-year strategic plan. and then we'll be happy to answer any of your questions. For the third quarter this year, revenue has held fairly constant, reflecting a prolonged period of inventory destocking as the pace of consumption by industrial customers remains slow. Backlogs are pushed out and macroeconomic conditions in Europe worsen. Automotive customers continue to adjust their forecast to sluggish demand in Europe, while order rates appear to be under control in the Americas. Despite reported revenue of $735.4 million for the third quarter that was flat with the second quarter, bookings for smart grid infrastructure, military, and high-voltage DC applications continue to improve, and we saw increasing demand related to AI servers. While the electronics industry remains in a down cycle, we are making the necessary adjustments to manage costs. Under Bechet 3.0, we are preparing to participate more fully in the next industry up cycle, and we are putting the foundation in place to capitalize on the long-term demand of e-mobility and sustainability. In previous down cycles, the company became unable to support customer demand, and to scale because the focus was on conserving cash flow, which shelved plans to prepare for the next ups. The customers want more from Bichet, so we are taking a fresh, new approach. Under Bichet 3.0, we are intelligently pressing forward with a sense of urgency, putting the customer first, working on our list of growth initiatives under our five-year strategic plan. to restore confidence and win back customers, to develop new customer relationships, expand capacity and our product portfolio to ensure we are ready to scale with our customers as demand returns, implementing our silicon carbide strategy, and becoming a more business-minded organization focused on driving profitability and enhancing returns on capital. Let's take a closer look at third quarter revenue related to the second quarter, starting with a review of revenue by end market on slide three. Automotive revenue increased 4.3% versus the second quarter, although OEM and tier one customers in Europe and in the Americas continued to pull below their schedule agreement. and EV demand weakened in the Americas and Europe. Government policy in China, however, is boosting demand for EVs and hybrids, which drove strong demand for our Opto products, particularly our rain sensors. Design activity remains focused on battery management, traction inverters, and onboard chargers. Discussions around ADAS for all vehicles and leveraging AI chipsets for driver assist and autonomous applications are advancing and resulting in many new design startups. As for industrial end markets, revenue decreased $18.5 million from the second quarter of which the Newport Legacy products accounted for 8.5 million of that. Distributors continued to adjust inventory in response to ongoing weak demand from industrial customers, more so in Europe. In addition, in Europe, we saw the normal seasonal holidays within the quarter. Also in Europe, government funding for EVs and consumer incentives for solar and heat pumps is uncertain for the foreseeable future. As a result, design activity has shifted to industrial automation, along with smart grid infrastructure, renewable energy generation and energy storage. As evident from the large orders we are receiving, we see smart grid infrastructure as a key growth driver for Vishay. For this reason, we announced this morning that we are acquiring Birkelbach, a manufacturer of metalized technical films and a very important supplier to Vishay. We're acquiring this business to ensure supply of metalized film materials that is used in the high voltage, high power film capacitors for smart grid infrastructure projects. In aerospace and defense, revenue was flat versus the second quarter and 20.2% higher than last year's third quarter. Demand from OEMs in the Americas remained strong, with the book-to-bill running over one for most products, supporting radar systems, munition replenishment, smart soldier electronic gear, and unmanned flight systems. Demand for space programs is driving new opportunities for high reliability and specially products such as custom magnetics. In Europe, commercial aerospace, ongoing supply chain issues are there, which caused orders to be pushed out. Medical revenue declined 6.2%, but was 7.4% higher than the third quarter of 2023. primarily due to delay in orders from one of our larger inductor customers in the Americas. The medical design activity for remote patient monitoring equipment presents a significant upside for Vishay in the Americas to sell our entire product portfolio. We also continue to work on designs for implantable devices. Revenue from other segments, including telecom, computing, and consumer, was up 3.2% quarter over quarter, but down 32% versus the third quarter last year. There were a lot of puts and takes this quarter, but what stands out is increasing demand for AI servers and server power in Asia. We're seeing a surge in spot orders related to AI servers, from CMs who are coming directly to suppliers for quick delivery. They're not finding the part numbers in stock in the distributor inventory. Under Bechet 3.0, our ambition is to quickly fulfill these orders and support the quarters. AI server power, power conversion, power management of the AI chipset for laptops and notebooks. Storage networks continue to dominate design activity in the other segment category. We continue to design more of the Bechet portfolio to put it in place a greater percentage of components on the board and to gain material as key chip makers are designing in the emerging AI market. Let's go to slide four. In terms of channel sales, as shown on slide four, you see that OEM and EMS revenue was essentially flat with the second quarter. Distribution revenue decreased 1.2% quarter over quarter and 7.2% year over year, reflecting the drag in Europe. While customers in the Americas and Asia are returning to normal order patterns, customers in Europe are tapping the brakes. I met with many new of these customers in September. And they told me that uncertainties about future demand trends related to geopolitical development is clouding end market demand. This becomes evident from our POS numbers for the quarter. Worldwide POS decreased 4.7%, weighed down by lower POS in Europe. Again, somewhat seasonally impacted. Distribution inventory worldwide was essentially flat. Inventory inched up by one week to 27 weeks. Let's go to slide five. Turning to slide five, you can see that revenue in Europe declined 3.3%, reflecting the weakening macroeconomic environment and seasonality, which I've been mentioning. Revenue in the Americas down slightly on lower medical volume, while revenue in Asia increased 2.1% on a pickup in automotive volume, along with the lift from AI. Before turning the call over to Dave, I'd like to acknowledge the contributions made by Bichet employees and their commitment to our business-minded approach to increasing customer focus in everything we do. It's great to see new ideas bubbling up from the empowered employees to improve profitability and operational efficiencies as decision making is being pushed down into the organization. And it's also great to see greater collaboration, forward thinking, and a willingness to take calculated risk more so than in the past. I very much appreciate the organization and how it's embracing the changes which are taking place as Bichet 3.0. These efforts keep us together on our path to achieving our 2028 financial targets. I'll now pass the call over to Dave for a review of our financial results for Q3.