Vishay Intertechnology, Inc. (VSH) Q2 2025 Earnings Call Transcript
Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
Overview
The earnings call reveals strong financial performance across multiple segments, with record high revenues in sectors like AI and industrials. The management's guidance is optimistic, expecting improved margins and a stronger second half of the year. Despite negative free cash flow due to capacity expansion, the strategic focus on growth and customer expansion in AI is promising. The Q&A session supports this positive outlook, highlighting corrected inefficiencies and expanding AI customer base with major tech companies. Given the market cap, the stock is likely to react positively, with a projected increase of 2% to 8%.
Key Financial Performance
Revenue Revenue grew sequentially 7% to $762 million, in line with guidance. Compared to the second quarter of 2024, revenues increased 3%, reflecting a 3% increase in volume, 2% positive foreign currency impact, and a 2% reduction in ASPs, including tariff adders.
Automotive Revenue Automotive revenue increased 4% versus the quarter due to improved demand from Tier 1 customers, modest increase in consignment pulls in the Americas, new ADAS programs in Europe, and higher volumes in Asia.
Industrial Revenue Revenue from the Industrial segment increased 9% from the first quarter, driven by normalization of customer and channel inventories, strengthening demand for smart grid infrastructure, AI chip production, and data center projects.
Aerospace/Defense Revenue Revenue increased 5% quarter-over-quarter due to improved demand for military applications, while commercial aerospace declined due to mechanical parts supply issues in Europe.
Medical Revenue Revenue grew 4%, reflecting stronger demand in implantables and measurement equipment, with design activity focused on defibrillators, surgical assistant systems, drug delivery, diagnostic equipment, and hearing aid implants.
Other Segments Revenue (Computer, Consumer, Telecom) Revenue was up 9% for the sixth consecutive quarter of sequential growth, driven by escalating demand related to AI servers and server power in Asia.
Gross Profit and Margin Gross profit was $149 million, resulting in a gross margin of 19.5%, at the high end of guidance. The increase from quarter 1 was primarily due to additional volume.
SG&A Expenses SG&A expenses were $127 million, including an $11 million benefit recognized upon the one-time favorable resolution of an outstanding matter. Excluding this, SG&A expenses would have been in the range of guidance.
EBITDA EBITDA for the quarter was $75 million for an EBITDA margin of 9.8%. Adjusted EBITDA for the quarter was $64 million for an adjusted EBITDA margin of 8.3%, up from 7.6% in the first quarter.
Cash Flow Used $9 million of operating cash in the second quarter, with free cash flow for the quarter being negative $73 million compared to negative $45 million in the first quarter. This was due to capacity expansion projects and tax payments.
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Operating Highlights
Revenue growth: Revenue grew sequentially 7% to $762 million, driven by growth in semiconductors, passives, and all end markets.
Capacity expansion: Invested approximately $775 million over 2.5 years to expand capacity for high-growth, higher-profit products.
AI and power applications: Strong demand for AI power applications and smart grid infrastructure projects.
Silicon carbide strategy: Advancing silicon carbide strategy with new product releases and preproduction scheduled for early 2026.
Automotive market: Revenue increased 4% due to demand for ADAS programs, battery electric vehicles, and hybrid powertrains.
Industrial market: Revenue increased 9%, driven by smart grid infrastructure projects and AI chip production.
Aerospace/Defense market: Revenue increased 5%, with strong demand for military applications and low earth orbit satellites.
Medical market: Revenue grew 4%, driven by demand for implantables and diagnostic equipment.
Inventory normalization: Inventory correction cycle is behind, with normalized levels for passives and improving for semiconductors.
Distributor engagement: Distribution revenue grew 11%, supported by SKU count expansion and faster consumption rates.
Geographical performance: Revenue grew in all regions, led by Asia with a 12% increase.
Vishay 3.0 strategic plan: Executing a 5-year plan to drive revenue growth, profitability, and capital returns.
Subcontractor initiative: Added 5 subcontractors and qualified over 8,000 part numbers to expand product portfolio.
Technology advancements: Progress in silicon carbide, MOSFETs, and diode technologies to support automotive and industrial applications.
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Risk or Challenges
Inventory Correction Cycle: While the inventory correction cycle for passives is behind, there is still some excess industry inventory in semiconductors, which could impact future sales and production efficiency.
Customer Program Adjustments: Semiconductors experienced a slight dip in book-to-bill ratio due to customer program adjustments, indicating potential volatility in demand.
Supply Chain and Production Delays: Technical issues at the SK Keyfoundry in Korea have delayed the release of certain technologies by 1-2 quarters, potentially impacting the timeline for increasing MOSFET capacity.
Commercial Aerospace Decline: Ongoing mechanical parts supply issues in Europe have led to a decline in commercial aerospace revenue, which could affect overall performance in this segment.
Factory Automation Demand: Demand for factory automation projects remains flat in the Americas and Europe, reflecting slow capital investment by companies.
Tariff and Input Costs: Higher input costs and tariffs are expected to impact gross margins, with tariffs being passed on to customers but still influencing revenue and profitability.
Cash Flow and Liquidity: Negative free cash flow due to capacity expansion plans and reliance on U.S.-based liquidity could strain financial flexibility, especially with ongoing investments and dividend commitments.
Customer Audits and Qualifications: Delays in customer audits and qualifications for new facilities and products, such as in Mexico and Newport, could slow down the ramp-up of production and sales.
Geopolitical and Regional Risks: Regional EMS inventory adjustments in Europe and tariff-related pauses in Asia could create uneven revenue growth across geographies.
Economic Sensitivity: Slow recovery in certain sectors, such as factory automation and commercial aerospace, highlights sensitivity to broader economic conditions.
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Guidance & Outlook
Revenue Expectations: For the third quarter of 2025, revenues are expected to be $775 million, plus or minus $20 million, representing a 2% volume increase and reflecting some seasonality in Europe.
Gross Margin Projections: Gross margin is expected to be in the range of 19.7%, plus or minus 50 basis points, inclusive of tariff impacts and expected higher input costs. Newport is expected to have an approximate 160 to 185 basis point drag on the margin in the third quarter.
Capital Expenditures: For 2025, the company plans to spend between $300 million to $350 million, at least 70% of which will be invested in capital expansion projects for high-growth product lines.
Silicon Carbide Preproduction: The Newport wafer fab remains on schedule for silicon carbide preproduction in early 2026.
MOSFET Capacity Expansion: The company expects to meet its goal of increasing the annualized capacity for MOSFETs by 12% in the first quarter of 2026 and to increase annualized capacity for advanced split-gate MOSFETs by 25% to support new automotive and commercial opportunities in 2026.
Silicon Carbide Product Releases: By year-end 2025, the company plans to release an additional 16 Gen 2 1,200-volt MOSFETs for automotive and industrial applications. The 1,700-volt planar MOSFET and the 650-volt planar MOSFET are expected to be released in the first quarter of 2026. Samples of the 1,200-volt trench MOSFET are expected to be available in the third quarter of 2025, with a market release in the fourth quarter of 2025.
Silicon Carbide Diodes: The company plans to release the entire silicon carbide Gen 4 diode family with all current ratings and power packages in the second half of 2025.
Market Trends and Demand: The company is preparing for a stronger second half of 2025 compared to the first half, with backlog building in both semis and passives. Market indicators are directionally positive, signaling a potential market upturn.
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Shareholder Return Plan
Quarterly Dividend: $13.6 million was distributed as a quarterly dividend in the second quarter of 2025.
Share Repurchase: No shares were repurchased in the second quarter of 2025.
Stockholder Return Policy: The company plans to return at least 70% of free cash to stockholders in the form of dividends and stock repurchases. However, due to negative free cash flow expected in 2025, share repurchases will be opportunistic and based on U.S. available liquidity.
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Key Q&A
Q:What drove the outperformance versus expectations for 2Q in terms of the Newport fab impact on gross margin, and what is expected for 3Q?
A:The Newport fab impact on gross margin was guided at 175 to 200 bps for 2Q but came in at 160 bps due to efforts in building wafers and inventory. For 3Q, the impact is expected to be 160 to 185 bps, with hopes to be at the low end of the range.
Q:What caused the 200 bps sequential decline in MOSFET gross margins, and what is the outlook for improvement?
A:The decline was due to manufacturing inefficiencies in Q2, which have been corrected in Q3. Additionally, an increase in IC sales with higher margins and expanding AI customer lists are expected to improve margins, with a target of 17% to 18% by year-end, excluding Newport.
Q:What is the impact of U.S. tariffs on the company’s P&L, and how much of the product line is packaged in China?
A:Less than 4% of the product line is manufactured in China and comes back to the U.S., which is consistent across Q1, Q2, and Q3. The tariff impact is neutral due to the small percentage of overall revenue affected.
Q:What is the company’s approach to inorganic growth and M&A opportunities?
A:The company is actively looking for M&A opportunities, particularly in semiconductors and passives. Recent acquisitions, like Ametherm, filled portfolio gaps. They are open to vertical acquisitions to enhance manufacturing materials or customer presence.
Q:Should we expect above seasonal trends into the December quarter given the backlog and market conditions?
A:The company sees a stronger second half of the year, with Q3 guided up slightly despite slower August in Europe. Q4 is expected to be better than Q3 due to a building backlog and market improvements.
Q:Are there any signs of pull-forward demand or channel refilling in the customer base?
A:The company does not see significant pull-forward demand but notes that customers are placing quick delivery orders due to normalized inventory levels. Distribution inventory has decreased, and demand is driven by applications in automotive, aerospace/defense, AI, and smart grid.
Q:What is the company’s progress in AI customer expansion and revenue growth?
A:The company has added more AI customers, including major players like Microsoft, Meta, Google, and Apple. They are expanding both customer and part counts, leveraging their broad portfolio of MOSFETs, ICs, capacitors, inductors, and resistors to increase AI-related revenue.
Q:What caused the slipping of customer programs in the semiconductor business?
A:A design change from Cordelia to Bianca in the GB300 program led to adjustments in orders for P6 and P7. The company is now working on the new design to ensure participation in the program.
Q:Review of Unclear Management Responses
A:Management avoided providing specific revenue numbers for AI data centers, instead discussing customer diversity and application expansion. Additionally, the response to the question about inorganic growth lacked detailed examples of potential targets or timelines.
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Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
AI power
Defense
Executive VP
Newport
Order intake
SGA
Slide
Smejkal
Vishay
basis
capacity expansion
cash
currency
day
design activity
dividend
increase volume
level
loss
margin
market demand
passive
power application
program
rate impact
requirement
revenue
segment
semi
share
tariff adder
tax rate
term
VSH Transcript
Vishay Intertechnology, Inc. (VSH) Q4 2025 Earnings Call Transcript
Unknown2-4
The earnings call presents a mixed picture. While there are positive aspects like strong demand in AI-related applications and stable revenue in healthcare, there are concerns about rising SG&A expenses and declining EBITDA margin. The Q&A reveals cautious optimism with mid-single-digit growth expectations and price adjustments to counter cost pressures. However, uncertainties around share gains, M&A, and memory pricing impact add ambiguity. Given the company's market cap and the balanced positives and negatives, the stock price is likely to remain neutral, with limited short-term movement.
Vishay Intertechnology, Inc. (VSH) Q3 2025 Earnings Call Transcript
Unknown11-5
The earnings call presented mixed signals: revenue and EBITDA improved, but gross margins and book-to-bill ratios were slightly concerning. The Q&A highlighted management's uncertainty on key issues like export restrictions and margin impacts, while also noting no share buybacks due to liquidity constraints. However, the positive revenue growth and margin expansion outlook for 2025, along with improved cash flow, provide a balanced view. Considering the market cap, the stock is likely to experience minimal movement, resulting in a neutral sentiment prediction.
Vishay Intertechnology, Inc. (VSH) Q2 2025 Earnings Call Transcript
Positive8-6
The earnings call reveals strong financial performance across multiple segments, with record high revenues in sectors like AI and industrials. The management's guidance is optimistic, expecting improved margins and a stronger second half of the year. Despite negative free cash flow due to capacity expansion, the strategic focus on growth and customer expansion in AI is promising. The Q&A session supports this positive outlook, highlighting corrected inefficiencies and expanding AI customer base with major tech companies. Given the market cap, the stock is likely to react positively, with a projected increase of 2% to 8%.
Vishay Intertechnology, Inc. (NYSE:VSH) Q1 2025 Earnings Call Transcript
Unknown5-8
The earnings call presented a mix of positive and negative indicators. While the book-to-bill ratio and stockholder returns are positive, revenue and gross profit declines, alongside unclear guidance on AI business size, are concerning. The Q&A session highlighted some optimism for future quarters, but economic uncertainties and flat revenue in key regions temper expectations. With a market cap over $3 billion, the stock's movement is likely to be less volatile. Overall, the sentiment is neutral, with a potential range of -2% to 2% over the next two weeks.
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Frequently Asked Questions
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