Vishay Intertechnology, Inc.

Hello, and welcome to the SHEA Intertechnology Q4 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 the question during the session, you will need to press star 11 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 11 again. I would now like to turn the call over to Mr. Peter Hirunsi, Investor Relations. You may begin.

Thank you, Tawanda. Good morning and welcome to Vishay Intertechnology's fourth quarter and year 2024 earnings conference call. Joel Smekal, our President and Chief Executive Officer, and Dave McConnell, our Chief Financial Officer, will join me today. This morning, we reported results for our fourth quarter and year 2024. A copy of our earnings release is available in the investor relations section of our website at ir.cshe.com. This call is broadcast live over the web and can be accessed through our website. In addition, today's call is being recorded and will be available by replay on our website. We will be referring to a slide presentation during the call, which we also posted at ir.vishe.com. You should be aware that in today's conference call, we will make forward-looking statements discussing 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 in Vishay's Form 10-K and Form 10-Q filing with the Securities and Exchange Commission. We are including information on various GAAP and non-GAAP measures in our press release and on this conference call. We have included a full GAAP and non-GAAP reconciliation in our press release and in the presentation posted on IRLICHE.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 Thank you, Peter.

Good morning, everyone. Thank you for joining our fourth quarter 2024 conference call. I'll start my remarks with the review of our revenue for the fourth quarter by end market, channel, and region. Then Dave will take you through a review of the fourth quarter financial results and our guidance for the first quarter of 2025. After that, I'll give you a summary of our actions during 2024 to implement Vishay 3.0 and the key initiatives we plan to focus on in 2025 as we continue to execute our five year strategic plan. And then after, we'll be happy to answer any of your questions. Revenue for the fourth quarter was down slightly versus Q3 at $714.7 million. For a full year revenue of 2.9 billion, that was below 2023. As we've talked about all year, the industry has endured a prolonged period of inventory digestion by customers worldwide, compounded by weak macroeconomic conditions in Europe. But after nine straight quarters of inventory consumption, the longest inventory correction cycle we've seen, inventory levels at the end customers and in the distribution channel appear to be normalizing. particularly for semiconductors serving automotive and industrial end markets in Asia and the Americas. As a result, book to bill at quarter end was 1.01 compared to 0.88 in Q3, with most of the improvement coming from semiconductors, which reported a book to bill of near one versus 0.79 in Q3, and a passive book-to-bill that moved into positive territory at 1.03 versus 0.97 last quarter. We're watching book-to-bill data closely in Q1, especially now coming out of the Chinese New Year holiday, to see how this trend continues. Bookings continue to improve, particularly for products related to smart grid infrastructure projects, AI server power, and military defense. Even though revenue was more or less in a holding pattern most of the year, at Vishay, we have not been standing still. We have been pressing ahead and building momentum. The organization has the shared sense of purpose and commitment to make Vishay 3.0 a success, preparing to take full advantage of the megatrends of e-mobility and sustainability. Setting the foundation to transform everyone's thinking to be business-minded is positioning us to accelerate revenue, improving profitability, and enhancing returns. These are top priorities across Bichet. As employees across the globe have adopted a customer-first and a business-minded approach in everything we do, a cultural shift has been taking hold within the company. There's a different vibe now as employees collaborate, exchange ideas, cooperate and make decisions to improve profitability, and everyone is looking ahead to seeing the initiatives they are working on this year pay off in the next industry upturn. I want to express my gratitude to the Bechet employees for their willingness to embrace continued change this year, and for working together to achieve our five-year strategic plan and financial goals. Let's now take a closer look at the fourth quarter revenue relative to the third quarter, starting with the review of revenue by end markets on slide three. Automotive revenue decreased 6% versus the third quarter. Most customers pulled below their schedule agreements, which was also at lower rates than the third quarter. While in Europe, production volume decreased along with lower forecasts later in the quarter. At year end, due to the holidays, some automotive plant shutdowns pushed their scheduled demand out into the first half of 2025. New programs, however, using AI chipsets for driver assist and autonomous driving programs were started with customers during the quarter. In the Americas automotive, customers polled at normal rates through the first 11 weeks of the quarter on strong demand. In the last two weeks of the quarter, polls were very light. In China automotive, demand came from EV production and growing electronic content. Global and China automotive tier one suppliers continue to buy and assemble using Vichet products for China Automotive OEMs. Each product division works to design in and sell technology differentiated products to China Automotive. We completed the contract negotiations with large OEMs during the quarter, which resulted in a typical ASB decline in the low to mid single digits, along with volume and share gains. Renewed schedule agreements show improving demand for the first half of 2025, but still limited visibility in the second half of the year. Design activity around EVs continued during the fourth quarter, even though there's an acceleration to design towards hybrid powertrain. Design activity is focused on high performance computing, safety, autonomous driving, infotainment, smart cockpit applications, and in-cabin monitoring. Revenue from industrial end markets decreased $5 million, or 2%, for the quarter. Order intake for smart grid infrastructure projects continues to be quite positive during the quarter. We won another China program during the quarter, and order intake was also strong for grid management products, power supplies, power tools, and industrial inverters. Customers in the Americas and Asia continue to consume semiconductor inventory throughout the quarter, improving the balance between inventories and lead time. Customers in Europe, on the other hand, continue to contend with weak business conditions impaired by seasonality and high component inventory, which is planned for Q125 consumption. New design activity in industrial was focused on automation, including connectivity, robots, agriculture, remote monitoring, and HVDC for smart grid infrastructure, as well as renewables and power supplies. In aerospace defense, with order flow similar to prior quarters this year, revenue was slightly below the third quarter. Distributors continue to place orders at a booking rate above one to support U.S. military demand as we increased our backlog of orders, also related to low Earth orbit satellite program. In Europe, revenue was flattish for this segment on normal year-end seasonality, while commercial aerospace demand faces some supply chain challenges with mechanical products. Our Bechet products are in the queue once the mechanical supply chain issue is improved. We are a preferred supplier and continue designing work on new programs for all U.S. Department of Defense OEMs. Some projects include munition replenishment, missile design programs, hypersonic ballistic tracking space sensors, next generation interceptors, and commercial and military low-Earth orbit satellites. We have multiple products supporting this design activity in the Defense and Space Program. As a reminder, Bechet's passives have the broadest military established reliability certification. We sell to medical end markets, mostly in the Americas. This quarter, medical revenue was flat with the third quarter. with strong demand for some customers based on forecast in 2025. We did have softer orders from one large customer for inductors, however. Design activity for patient monitoring, surgical assist robots, and glucose monitoring continues to create new business opportunities for Vishay to sell our entire portfolio of products. Implantable devices continues to offer us high dollar content opportunities. Revenue from the other market segments, including computing, consumer and telecom end markets, was up 3% quarter over quarter, with strong order intake in Asia related to heightened demand for AI servers and server power projects. We are designing in and supplying a wide variety of products to AI, which supports the unique position of Bechet. These products are MOSFETs, polymer tantalum capacitors, resistors, voltage suppressors, diodes, and inductors. Also for IC products, we're designing in e-fuses, driver moths, and power stage. This list further demonstrates the breadth of our portfolio, which populates a high percentage of components on a board in power application. AI at this point remains a quick turns business. We see unscheduled orders from CMs looking for quick delivery to support AI power management modules. Spot orders are running around 60% of total orders in Asia. Still low visibility. Design activity stayed focused on AI server power, power conversion, and power management of the AI chipsets, along with notebooks, and designs aimed at companies who integrate AI chipsets into their programs. Turning to slide four, which displays revenue mix by channel, you can see that the distribution revenue declined versus the third quarter, while OEM and EMS revenue increased slightly. This is an encouraging sign around consumption. Revenue from OEM and EMS customers grew for the first time since the fourth quarter of 2023. Automotive and industrial OEMs are normalizing inventory level and demand related to smart grid infrastructure projects was strong. EMS customers are starting to buy to direct demand although regional EMS in Europe are still holding high inventory, coupled with soft and customer demand. Most of the EMS in Europe did shut down in the last two weeks of the year. Sales to distribution declined 7% on fewer shipment days during the quarter versus Q3, and a prolonged weak demand in Europe's industrial and markets, particularly for renewable Asia and the Americas distributors manage their year-end inventories and manage their financial P&L. Worldwide POS decreased 3%, once again pulled down by reducing POS in Europe. The holidays fell mid-week in late December. Many distributors stopped accepting shipments after 11 weeks into the quarter. Our distribution inventory remained stable at 27 weeks. Let's go to slide five in terms of the geographical mix. Europe is the lagging region, softening revenues for SHEA as a whole and declining 8% as macroeconomic conditions continue to weaken. Distributors are still working through inventory and customers stopped accepting shipments after week 11 into the quarter. This weakness masked the growth in Europe related to smart grid infrastructure projects. Asia was a bright spot with revenue benefiting from shipments to smart grid infrastructure programs and spot orders related to AI servers and some early signals for industrial. I'll now turn the call over to Dave where he will review the financial results of Q4.