Vishay Intertechnology, Inc. — Q1 2023 Form 10-Q
Reporting period: Fiscal quarter ended April 1, 2023 (13 weeks). Vishay manufactures discrete semiconductors and passive electronic components across six segments. Dollar amounts below are in millions unless noted.
Financial performance and liquidity
| Metric | Q1 2023 | Comparable period |
|---|---|---|
| Net revenue | $871.0 | $853.8 in Q1 2022 (+2.0%) |
| Gross profit / margin | $278.7 / 32.0% | $259.1 / 30.3% |
| Operating income / margin | $158.6 / 18.2% | $146.3 / 17.1% |
| Net earnings attributable to Vishay stockholders | $111.8 | $103.6 |
| Diluted EPS | $0.79 | $0.71 |
| Operating cash flow | $129.9 | $33.6 |
| Capital expenditures | $45.6 | $35.9 |
| Free cash (company-defined) | $84.6 | $(2.3) |
At April 1, cash and cash equivalents were $847.5 and short-term investments $186.9, versus total debt of $566.8, producing reported net cash and short-term investments of $467.7. Long-term debt included $107.0 drawn on the revolving facility and $465.3 principal on 2.25% convertible notes due 2025. Current assets were $2,305.9 and current liabilities $749.3. The company reported compliance with its credit-facility covenants.
Changes and operating trends
- Revenue rose 2.0% year over year, reflecting a 5.0% contribution from higher average selling prices, offset by lower volume; currency effects were negative year over year. Versus the prior quarter, revenue increased 1.8%, with pricing and favorable currency effects more than offsetting lower volume.
- Gross margin improved from 30.3% to 32.0%; management cited higher selling prices. Some higher input costs were absorbed in inventory and are expected to pressure gross profit when that inventory is sold.
- Demand indicators weakened: company-wide book-to-bill was 0.84, down from 0.94 in Q4 2022; backlog declined to $2,169.4 from $2,292.7. Management attributed this to a continuing distributor inventory correction.
- Performance varied by segment. Resistors revenue increased 7.8% year over year and Capacitors increased 4.2%; Optoelectronic Components fell 25.4%. Diodes revenue decreased 3.6%. Segment revenue and margin trends also reflected volume, pricing, input costs, and currency.
- Inventory was $656.7, up from $618.9 at year-end. Days inventory outstanding increased to 98 from 93, and the cash conversion cycle lengthened to 111 days from 107.
- Cash increased during the quarter, while short-term investments declined, partly as the company aligned maturities for a planned cash repatriation. The company said substantially all cash and short-term investments were held outside the U.S.
Outlook, capital allocation, and risks
- For Q2 2023, management forecast revenue of $860–$900 million and gross margin of 29.0%, plus or minus 50 basis points.
- Management planned approximately $385 million of 2023 capital expenditures and approximately $1.2 billion over three years, primarily for capacity expansion outside China. Projects include a 12-inch wafer fab in Germany, expanded inductor manufacturing, and a GaAs fab expansion.
- The board’s stockholder return policy targets returning at least 70% of free cash flow, net of scheduled long-term debt principal payments, annually through dividends and/or repurchases. Q1 dividends and repurchases totaled $34.2 million. The policy is discretionary and may be changed or suspended.
- On May 8, 2023, after quarter-end, Vishay amended and restated its revolving facility: $750 million of commitments, maturity extended to May 8, 2028, and U.S. dollar pricing changed to SOFR-based terms. The facility includes covenant and restricted-payment conditions and a provision that may accelerate maturity in relation to the 2025 notes.
- Management cited global economic conditions, demand changes, distributor inventory correction, input-cost inflation, manufacturing and supply-chain disruptions, foreign exchange, pricing pressure, capacity-expansion execution, taxes, and acquisition integration among risks. It cautioned that Q1 results are not necessarily indicative of full-year performance.
- MaxPower acquisition consideration may include contingent payments of up to $57.5 million tied to technology milestones, licensing matters, and disposition of an equity investment; the purchase-price allocation remained preliminary.
- The effective tax rate was 28.4%, compared with 23.7% in Q1 2022. Management expects a rate above the U.S. statutory rate, excluding unusual transactions. The 42.9% rate in Q4 2022 included unusual tax items.
Most important facts for investors to verify
- Whether distributor inventory correction and book-to-bill below 1 persist, and how they affect backlog, volumes, and revenue.
- Whether Q2 revenue and gross-margin guidance is achieved, especially as inventory carrying higher input costs is sold.
- Execution, timing, and returns on the planned capacity investments, including the 2023 and three-year capital expenditure programs.
- Cash availability and repatriation, facility covenant headroom, and the terms and maturity interaction between the revolver and 2025 convertible notes.
- Progress and potential cash impact of MaxPower contingent consideration, and the final acquisition purchase-price allocation.
- Future capital returns under the discretionary 70% policy and any proposed increase in equity awards under the 2023 Long-Term Incentive Plan.