Vishay Intertechnology, Inc. — Q1 2021 Form 10-Q
Reporting period: Fiscal quarter ended April 3, 2021. Financial figures below are in U.S. dollars; amounts are in millions unless otherwise noted. The comparison quarter ended April 4, 2020.
Business context and performance
Vishay manufactures discrete semiconductors and passive electronic components across six segments: MOSFETs, Diodes, Optoelectronic Components, Resistors, Inductors, and Capacitors. Management reported that the broad recovery in demand, underway since Q3 2020, accelerated during Q1 2021.
| Metric | Q1 2021 | Q1 2020 |
|---|---|---|
| Revenue | $764.6 | $612.8 |
| Gross profit / margin | $202.9 / 26.5% | $147.2 / 24.0% |
| Operating income / margin | $97.3 / 12.7% | $47.4 / 7.7% |
| Net earnings attributable to Vishay stockholders | $71.4; $0.49 diluted EPS | $27.2; $0.19 diluted EPS |
| Operating cash flow | $57.3 | $34.5 |
| Capital expenditures | $28.5 | $24.3 |
| Free cash, a non-GAAP measure | $29.0 | $10.2 |
Revenue grew 24.8% year over year and 14.6% sequentially, primarily from higher volume. Gross margin improvement reflected higher volume and manufacturing efficiencies; management said these offset average selling-price declines and inflationary pressures. All six segments reported higher revenue than a year earlier. Resistors generated the largest segment revenue ($186.6 million); Optoelectronic Components had the highest segment gross margin (33.0%).
Orders and backlog reached reported all-time highs. Backlog was $1.731 billion versus $1.240 billion at year-end 2020, and the companywide book-to-bill ratio was 1.67. Average selling prices fell 0.5% sequentially; management said pricing pressure had eased and continued to ease.
Balance sheet, debt, and liquidity
At April 3, 2021, cash and cash equivalents were $643.8 million and short-term investments were $137.3 million. Reported net cash and short-term investments were $328.0 million, a non-GAAP measure. Long-term debt, net of deferred financing costs, was $453.2 million; the 2025 convertible notes had $465.3 million principal outstanding. The company had no revolver balance at quarter-end. Current assets were $1.781 billion, current liabilities $588.0 million, and the current ratio was 3.0.
Vishay reported compliance with its credit-facility covenants; interest coverage was 19.51:1 and leverage was 1.12:1. The $750 million revolving facility expires in June 2024. Management said cash on hand and operating cash flows are expected to support normal operations, dividends, R&D, and capital spending. Substantially all cash and short-term investments were held outside the United States.
Changes, unusual items, and outlook
- Revenue rose 24.8% year over year; operating income increased to $97.3 million from $47.4 million, while attributable net earnings increased to $71.4 million from $27.2 million.
- Q1 net earnings included a $4.4 million tax benefit from a change in tax regulations. Management’s adjusted net earnings were $67.0 million and adjusted diluted EPS was $0.46; these are non-GAAP measures.
- Effective January 1, 2021, Vishay adopted ASU 2020-06 for convertible instruments. Adoption increased the carrying amount of debt and reduced opening equity; the reported debt increase is therefore not solely a new borrowing. Interest expense also declined as prior non-cash debt-discount amortization ended.
- The company redeemed its remaining convertible debentures in Q1 and reported no debentures remaining. The 2025 convertible notes were not currently convertible.
- For Q2 2021, management expected revenue of $790 million to $830 million and gross margin of 27.3%, plus or minus 60 basis points.
- Management expected approximately $225 million of capital expenditures and approximately $55 million of dividends in 2021; dividends remain subject to board approval. No material restructuring was anticipated in 2021, though a downturn or prolonged pandemic impact could prompt further actions.
Management described COVID-19’s effects on financial condition and liquidity as not significant in Q1 and believed its economic impact would be temporary. The filing cautions that results could be affected by changes in demand, COVID-related manufacturing or supply-chain interruptions, inflation and metals prices, foreign exchange, capacity expansion, pricing, competition, and execution of cost, product-development, and acquisition plans. Backlog orders may be cancelled or rescheduled. The filing reported no material changes to previously disclosed risk factors or market risks and no material developments in previously disclosed legal proceedings.
Important facts for investors to verify
- Whether the high backlog and 1.67 book-to-bill ratio convert into shipments and revenue, given cancellation and rescheduling risk.
- Whether Q2 revenue and gross-margin guidance is achieved, and how volume, pricing, inflation, and manufacturing capacity affect margins.
- Cash conversion and working-capital trends: operating cash flow was $57.3 million, while operating-asset and liability changes used $67.7 million.
- Debt and liquidity implications of the 2025 convertible notes, the largely undrawn revolver, and the concentration of cash outside the United States.
- How much reported earnings benefited from the $4.4 million tax benefit and how non-GAAP adjusted results compare with GAAP performance.
- Execution of planned 2021 capital spending and dividend expectations, subject to demand conditions and board approval.