Vishay Intertechnology, Inc.

Good day and thank you for standing by. Welcome to the Vishay Intertechnology first quarter 2025 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 that 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 first speaker today, Peter Henrissi, Head of Investor Relations. Please go ahead.

Thank you, Jill. Good morning and welcome to Vishay Intertechnology's first quarter 2025 earnings 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 first 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 irvichet.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 risk and uncertainty 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 we share Form 10-K and Form 10-Q filings 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.fiche.com, which we believe you will find useful when comparing our gap and non-gap 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 Smacow.

Thank you, Peter. Good morning, everyone. Thank you for joining our first quarter 2025 conference call. I'll start my remarks with the review of the first quarter performance and business condition, and then turn the call over to Dave, who will take you through a review of the first quarter financial results and our guidance for the second quarter of 2025. After that, I'll update you on the strategic levers we are pulling under Vishay 3.0 as we continue to execute our five-year strategic plan and then we'll be happy to answer any of your questions. Revenue for the first quarter was $715 million, slightly above the midpoint of our guidance and flat with fourth quarter revenue for both semis and passes. We started 2025 poised for growth based on the strong execution and accomplishments around our strategic levers. And Bechet 3.0 remains in good position to support a market upturn given the promising indicators we saw in the fourth quarter. These promising market signals continued during the first quarter, and we see indication that much of the channel inventory that overhung the market is normalized. And we are moving past the prolonged period of excess inventory digestion. Book-to-bill continued to improve for semis. crossing over parity to 1.12 and passives held at 1.04. Year-to-date through April, book-to-bill remains positive for both semis and passives. Order intake continued to steadily improve with the strongest demand increase coming from smart grid infrastructure projects and AI. Distribution customer POS was up in all regions, and after steadily declining over the course of 2024. All of these signals support our decision to guide for a 6% revenue increase for Q2 versus Q1, even with the global economic uncertainties. For tariffs, we have assessed the worldwide impact on Bechet from the evolving tariff picture, both the risks and the opportunities, and on what impact tariffs may have on our Q2 revenue, including the effect on raw material costs and supply chain availability. In terms of revenue, tariffs are not new to Vishay. We have procedures and systems in place since 2018 to pass along tariff adders to our customers as a surcharge or an extra line item on the invoice. What is new, however, is the tariffs are higher. and the number of countries has increased. With respect to tariffs between the US and China, most of our semiconductor front-end supply comes from Germany and Taiwan. Our semiconductor back-end supply comes from Taiwan, Malaysia, the Philippines, and China. Most of our passives are manufactured in Europe, North America, Israel, and Taiwan. We analyzed our first quarter from each country of origin to our receiving customers, and we have determined that our exposure to the tariffs, which have gone into effect in April, is limited. Dave will go over the results of this analysis and the assumptions related to the tariff situation that has been factored into our Q2 guidance. Regardless of the direction global trade actions take, our global manufacturing footprint gives us the flexibility to assure customers of reliable supply should they want to shift orders based on country of origin and tariff impact. We are bringing this advantage to our customers, offering them alternative manufacturing locations, showing different costs to which they will pay compared to shipments from China to the US. So now turning back to the first quarter revenue performance, I'll start with the review of revenue by end markets on slide three. Automotive revenue decreased 2% versus the fourth quarter, reflecting lower ASP associated with the 2025 OEM contracts that went into effect in January. The Chinese New Year holiday resulted in tier one customers pulling lower at lower rates in Asia. In the Americas and Europe, Tier 1 customers pulled at normal levels or in some cases accelerating levels with demand of hybrid electric vehicle and EV platforms remaining strong. We remain well positioned to drive volume and automotive with increasing electronic content in all price levels of cars and from developing ADAS programs as they are being adopted by the automakers. In terms of design activity, The shift to increase hybrid powertrains continued in the first quarter, with also electronic power steering, active safety systems, smart cockpit applications, as well as ICE platforms with additional electronic features. The shift toward hybrid powertrains is a positive development for Bichet, as the electronic content in hybrid powertrains is typically greater than ICE by about 50%. Revenue from the industrial market increased 3% from the fourth quarter, led by Europe, which was better than forecasted. We see cases where European customers have overcorrected inventory levels, now resulting in positive book-to-bill for our distributor partners. Demand remains strong for smart grid infrastructure multi-year projects in Europe and Asia. We want two new programs in those regions. We also won our first United States high voltage DC power transmission program. Orders continue to be positive for smart grid applications. We are in discussions with customers on the next smart grid projects as they address electricity demand for AI data centers and EV charging, which the aging electric grid cannot provide. In the Americas, industrial orders indicate that we are moving up from the bottom, as many customers are reporting stronger backlogs from their end customers needing electricity, which should support incremental improvement throughout 2025. New design activity focused on a variety of applications, including high voltage DC for smart grid, alternative energy generation, EV charging stations, uninterruptible power supplies, and next generation encrypted communication systems. In aerospace and defense, revenue declined 5% quarter over quarter as our distributor partners were managing their inventory. As a reminder, our demand came mostly from US military accounts over the recent years. Now our volume in Europe and Asia has been growing significantly. Book-to-bill for the Americas is above one. In Europe, distributors also report book-to-bill rates above one. Commercial aerospace orders remain low due to ongoing issues in their mechanical parts supply chain. Design activity in military remains strong in a broad number of next-generation programs, including missiles, drones, military avionics, communication and weapons systems, and low Earth orbit satellite programs. In the medical end market, results were mixed. In the Americas, orders from many of our top medical customers improved compared to the fourth quarter and outpaced last year. In Europe and Asia, the order intake was mixed. We're seeing results from our strategy to fully leverage the breadth of our portfolio in the medical market. increasing the number of Vichay technologies at design-in and long-standing customers and developing relationships with new customers. Design activity on a mix of applications include patient monitoring, drug delivery systems, surgical assist robots. Each of these is creating new business opportunities for Vichay to sell more of our portfolios. Revenue from the other segments, including computer, consumer, and telecom end markets was up 4%, marking the fifth consecutive quarter of sequential growth. This is a good example of the benefits of the investments we made in capacity. We are able to provide supply assurance to these channels, these existing and new customers. For AI, Building on the initial volumes we had in the fourth quarter, shipment quantities increased in Q1 to support demand for AI servers and server power projects, particularly in Taiwan and China, where customers consume our products and the distributors build up safety stock. AI remains a quick turn business with Asia's CMs frequently placing spot orders. Much of the design activity was focused around AI chipsets and the architecture of the system, which supports the integration of new products. We increased our relationships with CMs to offer product technology advice for power management as they also design around AI chipsets. In addition, design activity expanded to include AI workstations, edge servers, and AI optical modules and graphics cards. We are continuing to leverage our AI reference design positions with chipset manufacturers to place a greater percentage of Bechet components on the board, creating opportunities for us to demonstrate our technical differentiation and how Bechet can support greater than 80% of the components needed in power application. These product types span MOSFETs, polymer tandem capacitors, resistors, voltage suppressors, diodes, power inductors, and IC products. Let's now turn to slide four. Moving on to revenue by channel for the first quarter in slide four, you can see the distributor revenue grew versus the fourth quarter and that the distribution growth was offset by lower OEM and EMS revenue. OEM revenue was impacted by the reduction in ASP as the annual contracts went into effect. Order intake by industrial OEMs in each region was overall positive, reflecting smart grid momentum, while order intake from automotive customers was flat overall. EMS revenue decreased 7% versus the fourth quarter on market softness in non-AI related business. In Europe, regional EMS inventory remained high especially for those supporting aerospace defense customers who want to secure supply in this growing demand environment. In Asia, Chinese New Year shutdowns and volume declined as some programs were pushed out to the second half of the year. Distribution revenue grew 3%. Our strategy is working to position Bechet for market share gains and renewed share with our distributor partners, which we started working on two years ago. By adding nearly 50,000 SKUs to our shelves, we entered 2025 with inventory that is well positioned for POS growth. In the Americas, increased bookings from multiple POS customer segments drove order intake higher than the previous four quarters. In Europe, order flow from distribution partners was higher than the second half of 2024. POS book-to-bill steadily increased during the quarter as end-customer inventory normalized, triggering some replenishment to support a more normal POS for both passives and semis. In Asia, distributor order patterns were normalizing, and book-to-bill was over one at quarter end. Total distribution inventory weeks came down from 27 weeks to 26 weeks, even as worldwide POA grew 4% on the strength of improved turns business. Worldwide POS grew 4% over the fourth quarter, reflecting a 4% increase in the Americas, a 10% increase in Europe while Asia was flat. Let's turn to slide five. Slide five, in terms of the geographical mix, revenue in Europe increased 8% sequentially after lagging the Americas and Asia in the second half of 2024, reflecting inventory overcorrections. In the Americas, industrial sales were soft, resulting in a 6% decline, while Asia was seasonably soft reflecting the impact of Chinese New Year. Before turning the call over to Dave, I'd like to thank the Bechet employees and also our sales reps for their hard work and dedication in making consistent progress toward our shared goals for the company and for our customers. Their focus every day to contribute to making Bechet 3.0 real is very much appreciated. Dave, I'll turn the call over to you now for a review of the financial results for Q1.