Vishay Intertechnology (VSH) 7 Aug 24 2024 Q2 Earnings call transcript
In the latest earnings call, Vishay Intertechnology presented its financial performance for the second quarter of 2024. The company reported a revenue of $741.2 million, essentially flat compared to the first quarter. The company's revenue was impacted by lower volume pulls from automotive customers and industrial customer destocking, but was positively influenced by additional revenue from the Newport acquisition and sparks from China and Taiwan related to AI server demand, notebooks, and consumer devices.
Key Themes and Trends
Automotive Market: Vishay's automotive revenue declined by 6.7% from the first quarter and 13.6% compared to the second quarter of the previous year. Tier 1 automotive customers pulled below their schedule agreement plans primarily in Europe, with OEMs in North America and Europe also reducing EV production and postponing new EV platforms. Despite lower sales, design activity in the automotive sector continued, with a focus on battery management systems, ADAS, and AI chipsets. Vishay is investing in capacity expansion to meet the demands of the automotive sector, including the signing of a significant first-time silicon MOSFET supply agreement with an established automotive OEM.
Industrial Market: The industrial sector, excluding Newport, experienced essentially flat revenue quarter-over-quarter due to continued inventory destocking. Late in the quarter, there were signs of improved bookings in Asia for power meters, high-voltage DC applications, and factory automation. The company also received significant follow-on orders for high-voltage capacitors under a smart grid supply agreement with a European customer. Design activity remains focused on smart grid infrastructure, industrial automation, renewable energy, and energy storage.
Aerospace and Defense Market: Revenue in the aerospace and defense sector declined by 3.3% from the quarter and was 17.2% higher than the second quarter of the previous year. Sales were down due to a temporary lull in orders pulls from key OEMs in the Americas and Europe related to supply chain shortages and a directive from the Turkish Government. Orders for applications around missile guidance systems and combat aircraft remained strong, with demand from OEMs in the Americas remaining solid.
Medical Market: Medical revenue increased by 14.7% from the first quarter and was slightly below last year's second quarter. The company delivered an all-time high of custom magnetics to its largest medical customer, who has now resolved their supply chain issues. Vishay has hired a medical segment leader to deepen its engagement with existing customers and develop relationships with new customers, focusing on the breadth of its product portfolio.
Telecom, Computing, and Consumer Markets: Revenue from the telecom, computing, and consumer markets was down 2.3% quarter-over-quarter and 37.3% versus the second quarter of the previous year. Despite this decline, there are pockets of growth, including orders for AI servers and server power projects in China and Taiwan. Design activity continues to increase in the areas of AI server power, AI chipsets, laptops, and tablets, as well as in storage networks.
Financial Performance
Vishay's second quarter revenues were within the guidance range, decreasing 0.7% compared to the first quarter, reflecting a reduction in ASPs and volume, partially offset by an increase in Newport revenues. Gross profit was $162.9 million, with a gross margin of 22.0%, impacted negatively by Newport. The company's operating margin decreased to 5.1% from 5.7% in the first quarter, and EBITDA for the quarter was $88.4 million for an EBITDA margin of 11.9%, down slightly from the first quarter. EPS for the quarter was $0.17 per share, compared to $0.22 per share in the first quarter and $0.68 per share for the second quarter of 2023.
Future Outlook
Looking ahead, Vishay expects revenues for the third quarter to be between $725 million and $765 million, with a gross margin of 21% to 21.0%. The company plans to spend $360 million to $390 million on capital expenditures in 2024, with a focus on expanding capacity both internally and externally and on innovation. Vishay is currently on track to complete technology transfers and ramp up production of industrial and automotive technologies at the Newport wafer fab. The company is also expanding its capacity in Itzehoe, Germany, and Taipei, Taiwan, and is working to increase annualized capacity for MOSFETs and passive components. Vishay is also pursuing M&A opportunities and plans to return up to $100 million to shareholders.