Vishay Intertechnology Q1 2026 Earnings Call: Complete Tra...

Vishay Intertechnology (NYSE:VSH) released first-quarter financial results and hosted an earnings call on Wednesday. Read the complete transcript below.

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Summary

Vishay Intertechnology reported first quarter 2026 revenue of $839 million, surpassing the guidance range and marking a 4.8% increase from the previous quarter and 17.3% year-over-year growth.

The company's strategic initiatives under the Vishay 3.0 transformation, including capacity expansion and market share gains in semiconductors and passives, are yielding positive results.

Book-to-bill ratio at quarter end was 1.34, indicating strong order growth momentum across all regions and technologies, with a backlog increase of 21% to $1.6 billion.

Increased consumption and inventory replenishment, particularly in AI-related applications and industrial demand, are contributing to revenue growth.

The company is maintaining its CAPEX plan of $400 to $440 million for 2026, focusing on capacity expansion, including investments in a 12-inch fab in Germany.

Management reiterated confidence in achieving long-term revenue and margin targets despite some delays due to inventory digestion and tariffs.

Guidance for Q2 2026 includes expected revenue between $875 and $905 million and a gross margin range of 22.0%.

Full Transcript

OPERATOR

Good day and thank you for standing by. Welcome to the Vishay Intertechnology first quarter 2026 earnings conference call. At this time, all participants are in listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session you 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. Please be advised today's conference is being recorded. I would now like to turn the conference over to your speaker today, Peter Henriesi, Head of Investor Relations. Please go ahead.

Peter Henriesi

Thank you. Kevin Good morning and welcome to Vishay Intertechnology first quarter 2026 earnings conference call. I am joined today by Joel Smakov, our President and Chief Executive Officer and by Dave McConnell, our chief financial Officer. This morning we reported results for our first quarter 2026. A copy of our earnings release is available in the Investor Relations section of our website at. 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 refer to a slide presentation which we also posted on ir.vishay.com you should be aware that during today's conference call we will be making certain forward looking statements that discuss 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 and Vishay's Form 10K and Form 10Q filings with the securities and Exchange Commission. We are including information in our press release and on this conference call on various GAAP and non GAAP measures. We have included a full GAAP to non GAAP reconciliation in our press release and in the presentation posted on ir.vishay.com which we believe will be 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 Joel Smakov.

Joel Smakov (President and Chief Executive Officer)

Thank you Peter. Good morning everyone. We are excited that you have joined our Q1 earnings call to hear the further progress of Vishay 3.0. On today's call, I'll begin with a review of our first quarter revenue and business performance and Dave will take you through a detailed review of our first quarter financial results and our guidance for the second quarter of 2026. After that I'll update you on the strategic levers we are pulling under our five year strategic plan and then we'll open it up for questions. For the first quarter we are reported revenue of $839 million above our guidance range of 800 to 830 million, 4.8% higher than the fourth quarter, excuse me, and 17.3% higher than last year's first quarter. Revenue is growing across the board in all of our end markets, in all of our channels and in all three regions. Increased consumption, inventory replenishment and Vishay's market share gain drove a 5.8% increase in volume with gains in both semis and passives. Many customer programs in multiple end markets have now started to ramp. While demand for AI related applications remains strong, industrial demand is accelerating. Order growth momentum was also broad based covering all regions, all channels and in each of our technologies and in all end markets. Clearly the Vishay's 3.0 transformation and our growth strategy is working. The growth initiatives that began three years ago are paying off to expand capacity of high growth high margin product lines. We put heavy CapEx investment in place and added subcontractors for many technologies to increase our manufacturing flexibility and also to add part numbers to our product portfolio in semiconductors and passives to move more closer to the customer to listen to their product technology needs and their growth direction for Vishay to scale with them and to gain market share to become a more technically supporting supplier with increased FAE involvement for design support and also to offer Vishay reference designs and solutions. Total company book-to-bill at quarter end was 1.34 up from 1.2 for semis book to bill was 1.47 and for passives it was 1.23. As a result, backlog increased 21% to $1.6 billion at quarter end or 5.7 months. Customers are beginning to proactively place orders based on longer visibility some one-year forecast for Vishay to scale with them. We're also seeing customers building safety stock like in Asia for AI related applications as well as in all regions for automotive and industrial demand. Having positioned Vishay 3.0 to be a reliable supplier to more customers to be a supplier with expanded capacity ready to scale with them. We intend to live up to our commitment of being a leading growth supplier. For this reason we are intently focused on turning the backlog faster so that we participate in the market upcycle much more substantially and aggressively than in the past while also maintaining competitive lead times. We have no intention of backsliding to the business approach of Vishay 2.0. Historically, at this point in the business upcycle, much of Vishay 2.0 capacity would have been sold out on allocation and with lead times longer than one year and because it took too long to fulfill orders, Vishay missed repeat opportunities and we were no longer a reliable supplier to the customers. Today, as the market up cycle takes hold, we are increasing quarterly revenue at a steeper rate to drive margin improvement and realize enhanced returns on our capital investment. Today, OEMs and tier ones are collaborating with Vishay on technology roadmaps and forward demand planning and giving us the opportunity to scale with them. Previously inactive and underserved automotive and industrial customers are placing orders with us following our efforts to reconnect with them. So now let's turn to review of the Q1 revenue, starting with revenue by end market on slide 3, automotive revenue increased 2.7% quarter over quarter, mostly reflecting solid OEM demand in the Americas and Europe as customers continued to increase electronic content and start hybrid and EV programs. In Asia, revenue was weighed down a bit by Lunar New Year and also customers had started to increase production in the the second half of last year to get ahead of the US tariffs. Order intake increased due to our Vishay 3.0 business approach. To support the production ramp up of new vehicle programs in Europe and China and to be responsive to customer concerns about industry leading lead time. We're seeing a lot of success from our efforts to position Vishay with automotive OEMs and Tier One. For example, Vishay is now the top supplier of resistors to multiple OEMs launching new EV platforms and we are committed to supplying these customers as they step up production each year through the planned peak in 2028. Design activity continue to focus on drivetrains for hybrid, EV and ICE vehicles, ADAS battery management and electronic power steering systems. Also smart cockpits, Industrial power revenue increased by 6.5% for the fifth consecutive quarter of sequential gains.. Demand continued to grow primarily for electrical power transmission and power management, renewable energy and smart metering,, factory automation and security systems. In the Americas, customers are ramping up production for new projects supporting AI infrastructure, and in Europe and China we continue to supply smart grid programs. Bookings were up sharply in the Americas and Europe due to greater consumption and due to lower inventories, while customers increase efforts to establish supply assurance.. In Europe, orders were exceptionally strong from smart grid customers for capacitors and we won two new grid development projects.. In the UK, Design activity remained focused on power transmission, power management, power supplies for industrial servers, next generation AI power supplies, power monitoring and control systems, high voltage energy infrastructure, energy storage and also smart meters.. We're also working on designs for 800 volt power management for data centers and other applications. Aerospace and defense revenue increased 14.1% versus Q4 and 16.8% versus last year's Q1. On strong demand from the US government with spending approved to replenish munitions programs, and with production ramping up in allied countries in Asia. With funding now available, US defense contractors have just began to increase orders to support their higher demand, in particular for resistors, capacitors, and custom magnetics.. Book to bill in the Americas at quarter end was 1.4, and has continued to build in Q2. design activity and the first production ramp ups are beginning to drive an increase in orders from, Europe and continued order intake in Asia as countries expand defense budgets, and as new multi-year programs start. This year we see a long run to drive growth in this end market.. On the design front we are focused on U.S. Department of Defense programs involving drones, low earth orbit satellites, radar systems, next generation communications and hypersonic missiles.. Healthcare sales increased, 4.5% quarter over quarter and 11.1% year over year on demand from long standing customers, particularly in the Americas.. We are continuing to see success from our efforts to leverage the breadth of our portfolio cross selling semis and passives to these customers.. Much of the design work here during the quarter remained around wearables, patient monitoring and implantables such as cardioverter defibrillators and micro implantables for glucose and temperature monitoring.. In the other category which includes telecom computing and consumer revenue, overall was flat versus Q4 but up 25.8% versus last year's Q1. Demand in China for AI related applications was flat reflecting the impact, of the Lunar New Year and some shipments that were pulled in into Q4. However, we did continue to receive orders for quick delivery in Asia mainly for high voltage MOSFETs used in AI power applications.. Customers are continuing to add our passive technologies and AI power management solutions including polymer capacitors, power inductors and current sense resistors.. We keep sharpening our design components while continuing to work on the next generation design opportunities in the areas of server power, optical communication modules and in high-bandwidth network switches. With the Vishay 3.0 expanded capacity, we are seeing demand from telecom and consumer customers which Vishay did not historically supported in volume.. For example, in the Americas we are seeing increasing activity from telecom customers supporting AI optical communication network switches, both 800 gigabits and 1.6 terabits.. In Europe, telecom sales increased 33% with customers forecasting higher demand for 2026 versus 2025. Demand is also tied to 5G expansion and we're starting to receive requests for components for 6G networks.. Let's turn to slide 4 for a review of Q1 revenue by channel. OEM revenue increased 7.1% and 14.4% over Q1 last year. Strong shipments to large automotive, medical, aerospace, defense customers were the primary drivers of this increase along with some high demand from industrial OEMs in Europe. Sales from OEMs in China declined due to the impact of Lunar New Year and shipments again that were pulled into Q4. EMS. Sales grew 14% versus Q4 and 21.6% versus Q1 last year. This increase demonstrates the success of our strategy to leverage our expanded capacity to maintain competitive lead times and reliable supply.. Then we can enjoy demand momentum from more aerospace, defense and industrial end customer business.. EMS is now the fastest growing channel, in Europe and book to bill in The Americas grew to 1.45 at quarter end.. Sales to distribution were up 2.2% on volume gains in each region while up 18.9% year over year. Distribution is seeing higher consumption from industrial, transportation and aerospace, defense customers.. They also see inventory replenishment by some of their end customers. The pace of bookings growth picked up in the Americas and Europe. In Asia, distributors are increasing backlogs in anticipation of further demand growth and lead time extensions,, especially for AI related products. Distribution inventory Overall decreased to 20 weeks at quarter end from 22 weeks and POS increased 10.7% and 24.9% versus Q1 last year with growth in each region. You may recall over the last two years we were deliberately increasing our SKU count and inventory levels at the distributors resulting in an increase in inventory to our target of 26 weeks in Q1 of 2025. in Q1 of 2025. This inventory has supported strong demand led, by Europe with some customers now replenishing inventories as business conditions improved.. The Americas saw a sharp increase in in POS as consumption increased in industrial, automotive, aerospace, defense and medical segments in Asia, POS increased for industrial power, strong demand for AI products. Customers are increasingly turning to distribution for supply assurance and to meet short term needs. Turning to our geographical mix on slide 5, Europe led revenue growth for the quarter increasing 15.3% and the Americas grew 8.6% due to significant aerospace defense demand for capacitors. In addition to strengthening industrial demand in Asia, revenue grew. Excuse me,, revenue fell 4.9% primarily during the impact of Lunar New Year, offset in part by strong AI product demand. Before turning the call over to Dave, I'd like to thank the Vishay employees for their hard work to achieve the quarter's strong results, and for their commitment to driving revenue and profitable growth as the industry's recovery continues to gain momentum.. Vishay's 3.0 has firmly taken hold across the organization and with our external representatives.. Everyone is aligned with our new business approach and energized to increase customer engagement.. Dave, I'll now pass it over to you. Thank you Joe and good morning everyone. Let's start a review of the first quarter results with the highlights on Slide 6. First quarter revenue was 839 million, exceeding our guidance range and increasing 5% sequentially driven by strong volume growth of 6% with only a 1% decline in average selling prices compared to the first quarter of 2025. Revenue increased 17%, driven primarily by a 14% increase in volume. Favorable foreign currency, mainly from the euro, provided an additional 4% benefit, partially offset by a 1% decline in average selling prices. Moving on to the next slide, presenting the income statement highlights gross profit was $177 million, delivering a gross margin of 21.0% and exceeding both our guidance and the prior quarter. Higher volumes drove margin expansion, helping to offset ongoing metals and material cost pressures. We exited the quarter with Newport at gross profit neutrality.. Neutral depreciation expense was 55 million, relatively flat versus quarter four. SGA expenses were 154 million compared to 142 million for the fourth quarter and in line with our guidance. The sequential increase is primarily due to higher stock and bonus compensation expenses. GAAP operating margin was 2.6% compared to 1.8% in the fourth quarter and 0.1% in 1Q25. EBITDA for the quarter was 78 million for an EBITDA margin of 9.3% up from 8.8% in the fourth quarter. Our GAAP effective tax rate remains elevated at low levels of pre tax income as items such as US Taxation of foreign earnings and repatriation taxes have a disproportionate impact on the effective tax rate. Q1 tax expense exceeded our guidance range as pre tax earnings exceeded expectations. GAAP earnings per share was $0.05 compared to $0.01 per share in the fourth quarter and a loss of $0.03 in 1Q25. Moving on to slide 8 provides a summary table detailing revenue, gross margin and book to bill ratios across our reportable segments for quick reference as A reminder, Newport's results are reported in the MOSFET segment's gross margin. All reportable segments delivered revenue growth quarter over quarter except for inductors which was relatively flat. Turning to slide 9 our cash conversion cycle in the first quarter our cash conversion cycle improved to 116 days from 125 days in Q4 in part due to our continued disciplined working capital management. In addition, during the quarter we further utilized our Accounts Receivable Securitization program as a means of providing efficient funding to Support our immediate 12 inch fab equipment purchase needs which contributed to our DSO improvement from 48 days in Q4 to 41 days at the end of quarter one. Inventory days outstanding improved to 106 days due to increased volume and sales. Overall inventory increased to 791 million. Finished goods were relatively flat while raw materials and WIP increased due to the impact of rising metal prices and we built buffer stock to ensure supply to our customers given geopolitical uncertainties continuing to slide 10 you can see we generated $64 million in operating cash for the first quarter which included an additional $63 million from the securitization of our accounts receivable. We continue to deploy cash for capacity expansion projects. Total CapEx for the quarter was $111 million, including approximately $87 million for our new 12 inch fab in Germany. On a trailing 12 month basis, capital intensity was 10.1% which is a decrease from the 11.3% in the prior year. Free cash flow for the quarter was negative 47 million reflecting the high cap X compared to 55 million in the fourth quarter. Stockholder returns for the first quarter consisted of our 13.6 million quarterly dividend. We did not repurchase any shares during the quarter. At the end of the quarter our global cash and short term investment balance was $480 million and we remain in a net borrowing position in the US with 250 million outstanding on our revolver. As discussed in the past, dividends, any share repurchases and required debt service are funded through available US liquidity sources. We have 307 million accessible on our revolving credit facilities. At the current EBITDA levels, we expect to continue to draw on our Revolver to fund US cash needs. Moving on to the guidance on Slide 11 for the second quarter of 2026, revenues are expected to be between 875 and 905 million. Gross margin is expected to be in the range of 22.0% plus or minus 50 basis points inclusive of increased logistics costs and expected continuing higher input costs, specifically higher metals and material costs as well as inefficiencies due to ramping up of new direct labor heads. Depreciation expense is expected to be approximately 54 million for the second quarter and 216 million for the full year. 26. SGA expenses are expected to be 155 million plus or minus 3 million. We're continuing to invest in R and D and customer facing activities as the overall business environment improves. Our GAAP effective tax rate remains elevated at low levels of pre tax income and loss or loss. We expect the effective tax rate to become more predictable and in the range of our historical average as earnings grow for the second quarter. 26 we expect effective tax rate to be between 40 and 50%. Finally, our stockholder return policy calls for us to return at least 70% of our free cash flow to stockholders in the form of dividends and stock repurchases for 2026. We once again expect negative free cash flow due to our capacity expansion plans. I'll now turn the call back to Joel. all right, thank you Dave. Let's turn to Slide 12 for an update on the strategic levers we're pulling as we execute our five year growth plan and set the stage for bache's future growth slide. 12. We are holding to our CAPEX plan to spend between $400 million and $440 million during 2026. As a reminder, about half of this year's spend is allocated to the investments we are making at our 12 inch fab in Germany. Nearly all of the 12 inch fab investment will be spent during the first half of 2026 at which point we will reach the capital intensity peak of our five year capacity expansion plan. Starting with semiconductor projects at our Newport facility, we continue to ramp up wafer production and we completed four audits with tier one automotive customers as planned and have two additional site audits planned for Q2. Following these site audits, the automotive customers need to approve their programs using the Newport, Mosfets at our 12 inch fab in Germany we've started to install equipment during the quarter and plan to finish in the second quarter. Our goal is to start non automotive production in mid-2027. At SK Key Foundry, we are working towards releasing two products to production in the third quarter which will add capacity to meet demand for AI related applications. To supplement our investments in capacity expansion, we qualified two additional subcontractors, one for rectifiers and the other for aluminum capacitors. Through the subcontractor initiative we continue to place more part numbers on distributor shelves to increase our share of our customers bill of materials. Turning to our Silicon Carbide strategy, we released to production the 750 volt gen 2 planar MOSFETs,, both the automotive and industrial platforms. We also plan to release the 1700 volt platforms over the next couple of quarters. With Respect to the 1200 volt trench MOSFET, which we released last quarter using an external fab, we have now started to set up Newport to be an 8 inch wafer fab for silicon carbide. Our Q2 guidance reflects the broadening opportunities we have created for Vishay through the strong execution of our growth levers and the increasingly positive direction of our high growth end markets. We are doing what Vishay's 3.0 was designed to do to position Vishay to serve more customers, take full advantage of market upcycles and lay the foundation for long term revenue and earnings growth. With a strengthening book to bill and increasing rate of revenue growth, we are showing that we are participating much more so than in the past in the demand momentum, leveraging our capacity investments to drive margin expansion and enhance returns. Kevin we're now ready to open the call for questions.

OPERATOR

Thank you ladies and gentlemen. If you have a question or comment at this time, please press star 11 on your telephone. If your question has been answered or you wish to move yourself from the queue, please press Star 11 Again. We'll pause for a moment while we compile our Q and A roster. Our first question comes from Rupu Bashar with Bank of America. Your line is open.

Rupu Bashar (Equity Analyst)

Hi. Thanks for taking my questions. Joel. I have two or three questions. First one is on the current quarter that you just reported in automotive did you see benefit from share gains against Nexperia and how much was the benefit from that in the quarter? And one on margins did the Newport fab was that still a negative and what was the impact on gross margins in the quarter? And I think you heard that it's gotten to break even. So are we expecting any negative impact from that fab in the second quarter? Hi Rupu, could you repeat your question? We missed out on the first part. The second half was perfectly clear. Okay, sure. Just the question was that for the current reported quarter in the automotive segment, did you see any share gains against Nexperia, and how much was revenue? How much did revenue benefit from such share gain? And then on margins was the Newport fab still a negative to gross margins and how much was the impact in the quarter? Regarding the share gain? Yes, we're gaining share. We've been working very closely on automotive as well as OEMs to make sure there's multi sources on programs where there may have been previously there is share gain. We continue to position supplying product out of Isaho and these qualifications that we speak about in Newport are also driven by that. The four site audits that we had in Q1 are driven because of the expansion of Newport, but also further share gain to support those automotive accounts. Then two more audits coming in Q2. So I would say we gained share based on sites we were approved and we're going to gain more share as we get Newport approved on these programs to become a additional source on their bill of materials from sole source. Second part of the Newport profit. Go ahead. I moved Blue and Steve, so I'll take that one. So what we had at the end of the last quarter, we had said we would exit the quarter as something close to neutral, right? So we can say that our gross profit is neutral exiting the quarter. But obviously January, February, we still had costs. Okay, so it's not zero for the first quarter in the results. The issue, not the issues, but the item that we have to talk about is that the Newport results themselves now are commingled with the rest of Vishay. Right. We have back end elsewhere in Vishay we have other costs we're adding. So the Newport costs by themselves are not so easily separated anymore. So we're going to stop giving specific guidance on the Newport impact and talking generalities. Okay. As Joel said going in second quarter, I think your question to follow up was that we need the automotive qualifications to fill the fab. Right? Okay. Okay, that's helpful. Just going Back to the 2024 Analyst Day, right. If we look at your five year plan that you presented at that time between 2023 and 2028, you had an expectation of growing at the 10% CAGR at the midpoint, I think and then getting to gross margin of 31% and op margin of 20% at the midpoint. And that would imply something like $5 plus EPS given that you're at break even now at Newport and markets are improving and you have a healthy backlog. Joel, can you tell me are those targets still reasonable? Can you still do like 5.5 billion of revenue with the footprint that you now have or that you've planned till 2028 and what is like, are those margin expectations valid and should investors think that you can do that kind of earnings?

Joel Smakov (President and Chief Executive Officer)

Yeah, the targets are still there. Most of the targets, the Timing of the targets was impacted by the inventory digestion that took longer into the first quarter of 2025 and then it was followed quickly thereafter by Liberation Day, tariffs. So Ruploo, the book to bill that we saw in Q4 of 1.2 and now the book to bill of 1.34 is what we expected to see earlier in 2025. We're confident in our position. We have the capacity in place and being approved. We talk about Newport, we Talk about the 12 inch fab coming on board. So we're moving to be able to have in house capacity to increase our revenue on semiconductors, MOSFETs in particular. There's another step that's later called restructuring that is part of supporting the gross margin, the revenue. We are very, very confident the margin is going to be achieved following a restructuring project that is next after we get through this high CAPEX investment. So to answer your question, yes, the target of revenue, still there, gross margin, yes, still there. The timing of it is delayed a little bit because of inventory digestion and the tariff. Right now we feel, as we said in the last call, 2026 is our quarter and our year to take off.