8-K: Vishay Intertechnology Reports Mixed Q2 2024 Results Amidst Industry Slowdown

Vishay Intertechnology announced its Q2 2024 results, showing flat revenue quarter-over-quarter and a reduced gross margin, impacted by the addition of Newport and a slower than expected industry recovery.

Summary

• Vishay Intertechnology reported second quarter 2024 revenues of $741.2 million, which was flat compared to the previous quarter.
• The gross margin for the quarter was 22.0%, which included a negative impact of approximately 170 basis points due to the addition of Newport.
• Earnings per share (EPS) for the quarter were $0.17.
• The book-to-bill ratio was 0.86, with 0.82 for semiconductors and 0.90 for passive components.
• The company's backlog at the end of the quarter was 4.6 months.
• Vishay is adjusting the timetable for its Itzehoe, Germany expansion project beyond 2024 due to a slower industry recovery.
• The company plans to invest between $360 million to $390 million in capital expenditures for 2024, part of a larger $2.6 billion investment plan between 2023 and 2028.
• For the third quarter of 2024, management expects revenues in the range of $745 million +/$20 million, with a gross profit margin in the range of 21.0% +/50 basis points, including a negative impact from Newport of approximately 175 to 200 basis points.

Sentiment

Score: 4

Explanation: The sentiment is moderately negative due to the flat revenue, reduced gross margin, and delayed expansion project, despite the company's strategic initiatives and backlog.

Positives

• Vishay is executing on its Vishay 3.0 strategic plan, deepening customer engagements and expanding capacity.
• The company is advancing its silicon carbide strategy to capitalize on megatrends in sustainability and e-mobility.
• Vishay is maintaining its planned capital investment of $2.6 billion between 2023 and 2028 despite adjusting the timeline of the Itzehoe expansion project.
• The company has a strong backlog of 4.6 months.

Negatives

• Revenue was flat quarter-over-quarter, primarily due to schedule adjustments by automotive Tier 1 customers.
• The industry recovery is taking longer than expected at the beginning of the year.
• Gross margin was negatively impacted by the addition of Newport by approximately 170 basis points in Q2 and is expected to be negatively impacted by 175 to 200 basis points in Q3.
• The book-to-bill ratio is below 1, indicating a potential slowdown in future orders.
• The Itzehoe, Germany expansion project is being delayed beyond 2024.

Risks

• The industry recovery is slower than initially anticipated, impacting revenue growth.
• The integration of Newport is negatively impacting gross margins.
• Schedule adjustments by automotive Tier 1 customers are affecting revenue.
• There are risks associated with the company's forward-looking statements, including general business and economic conditions, manufacturing or supply chain interruptions, and changes in customer demand.
• Delays or difficulties in implementing cost reduction strategies and expanding manufacturing capacities could impact results.
• Competition and technological changes in the industry pose a risk to the company's performance.
• Difficulties in integrating acquired businesses, such as Newport, could affect the expected benefits of the acquisition.
• Changes in foreign trade regulations and tariffs, as well as changes in tax regulations, could impact the company's operations.

Future Outlook

Management expects Q3 2024 revenues to be in the range of $745 million +/$20 million, with a gross profit margin in the range of 21.0% +/50 basis points, including a negative impact from Newport of approximately 175 to 200 basis points.

Management Comments

• During the second quarter, we executed well on our Vishay 3.0 strategic plan, deepening our customer engagements supported by capacity that has landed and that we will continue to expand, and advancing our silicon carbide strategy as we prepare for the megatrends in sustainability and e-mobility, said Joel Smejkal, President and CEO.
• At mid-year 2024, it is apparent that the industry recovery is taking longer than we had expected at the beginning of the year.

Industry Context

The announcement reflects a broader trend of slower than expected recovery in the semiconductor industry, with automotive sector demand fluctuations impacting revenue. The company's focus on silicon carbide aligns with the industry's push towards sustainability and e-mobility.

Comparison to Industry Standards

• Vishay's gross margin of 22.0% is lower than some of its peers in the semiconductor and passive component industry, such as Texas Instruments which reported a gross margin of 65.4% in their most recent quarter, although direct comparisons are difficult due to different product mixes and business models.
• The book-to-bill ratio of 0.86 indicates a potential slowdown in demand compared to companies with book-to-bill ratios above 1, such as Analog Devices which reported a book-to-bill ratio of 1.1 in their most recent quarter.
• The delay in the Itzehoe expansion project is a deviation from the aggressive expansion plans of some competitors, such as TSMC, which is continuing to invest heavily in new fabs.

Stakeholder Impact

• Shareholders may be concerned about the flat revenue, reduced gross margin, and delayed expansion project.
• Employees may be affected by the delay in the Itzehoe expansion project.
• Customers may experience changes in lead times due to the industry slowdown.
• Suppliers may be impacted by the company's adjusted capital expenditure plans.

Next Steps

• Vishay will continue to execute on its Vishay 3.0 strategic plan.
• The company will continue to advance its silicon carbide strategy.
• Vishay will invest between $360 million to $390 million in capital expenditures for 2024.
• The company will hold a conference call on August 7, 2024, to discuss the second quarter financial results.

Key Dates

Keywords

semiconductors, passive components, revenue, gross margin, EPS, book-to-bill, backlog, capital expenditure, automotive, Newport, silicon carbide, e-mobility