Image source: The Motley Fool.

DATE

Wednesday, Nov. 5, 2025 at 9 a.m. ET

CALL PARTICIPANTS

• President and Chief Executive Officer — Joel Smejkal
• Executive Vice President and Chief Financial Officer — David E. McConnell

Need a quote from a Motley Fool analyst? Email [email protected]

RISKS

• Chief Financial Officer David E. McConnell noted, “our cash balance has been decreasing. Think everybody can see that. And in The US, we’re certainly in a net borrowing position,” with $189 million outstanding on the revolver at quarter-end, and said, “we don’t see right now given our current liquidity in The US, that we would wanna be doing any share buybacks.”
• Book to bill fell below one for the first time this year, reported at 0.97, including 0.96 for semiconductors and 0.98 for passives.
• Chief Financial Officer David E. McConnell specified, “Inventory increased to $760 million,” and net free cash flow was negative $24 million, compared to negative $73 million in Q2.
• Gross margin was impacted by “elevated metals prices as well as modest currency headwinds,” according to David E. McConnell, flat sequentially, with Newport facility dragging segment gross margin by approximately 720 basis points for MOSFETs.

TAKEAWAYS

• Revenue – $791 million, up 4% sequentially and 8% year-over-year, exceeding the midpoint of company guidance by 2%.
• Regional Growth – Asia sales rose 7% sequentially, driving overall revenue growth; Americas revenue was up slightly. Europe remained flat due to August seasonality.
• Book to Bill – October book to bill run rate improved to 1.15, signaling a potential upward demand trend.
• Segment Performance – Automotive revenue increased 7% sequentially; industrial orders improved, with high-voltage DC power capacitors as lead indicator; aerospace/defense revenue declined 2% sequentially due to slow U.S. funding; medical revenue up 2% on expanded programs.
• Gross Margin – 19.5% gross margin, flat sequentially and slightly below midpoint of guidance, impacted by “elevated metals prices,” tariff pressures, and currency headwinds.
• Operating Results – Operating margin at 2.4%; EBITDA $76 million (9.6% margin); net loss per share of $0.06; adjusted EPS $0.04.
• Inventory Levels – $760 million inventory, with inventory days improved, and overall inventory holding steady at twenty-three weeks.
• Cash Flow – Operating cash flow was $28 million, but free cash flow was negative $24 million due to $52 million CapEx, most directed at expansion projects.
• Dividend – $13.6 million paid in dividends; no share repurchases completed during the quarter.
• Capacity Expansion – Year-to-date CapEx reached $179 million, with full-year forecast at $300 million to $350 million in capital expenditures, and at least 70% for expansion.
• Product Innovation – Released three new silicon carbide MOSFET products, with further planned platform launches for both industrial and automotive applications in Q4 and Q1.
• Guidance – Next quarter revenue expected at $790 million plus or minus $20 million; gross margin expected in the 19.5% range, including ongoing tariff and metals pressures; Newport headwind expected to be a 150-175 basis point drag on gross margin.

SUMMARY

Vishay delivered sequential and year-over-year revenue growth, driven mainly by Asia and the automotive segment, while book to bill dipped below parity (0.97) for the first time but rebounded in October to a run rate of 1.15. Broad-based volume improvement was partially offset by margin pressures from elevated metals costs, tariff impacts, and operational inefficiencies, keeping gross margin flat. Management maintained its commitment to aggressive capacity expansion, resulting in negative free cash flow and increased reliance on U.S. revolver borrowings, with share buybacks on hold for the near term.

• Chief Executive Officer Joel Smejkal reported, “Orders are up 19% year over year,” as backlog builds gradually across automotive, infrastructure, and AI-related power markets, though more than half of Asian orders remain short-term deliveries.
• Newport facility continued to weigh on MOSFET gross margin but improved sequentially, reducing its negative impact to 720 basis points from 840 basis points in the prior quarter.
• Management confirmed, “we’re passing through additional tariff costs to customers,” though the company is not stockpiling metals and acknowledged ongoing exposure to volatile input markets.

INDUSTRY GLOSSARY

• Book to Bill: Ratio of orders received to products shipped and billed, used to gauge demand relative to supply.
• Turn Business: Customer orders requiring short lead times, often for expedited or pull-in deliveries.
• Newport Facility: Vishay’s U.S.-based manufacturing site focused on MOSFET production, currently ramping capacity but still negatively impacting segment margins.
• SKUs: Stock Keeping Units; unique product or item codes used to track inventory and sales in distribution channels.
• CapEx: Capital expenditures spent on property, plant, equipment, and expansion projects, as distinguished from operating expenses.
• IATF Certification: Automotive industry quality management certification; necessary for qualifying products for automotive OEM supply.

Full Conference Call Transcript

This morning, we reported results for our third quarter. A copy of our earnings release is available in the Investor Relations of our website at ir.vishay.com. 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 on our website. During the call, we will be referring to a slide presentation which we also posted at ir.vishay.com. You should be aware that in 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 release and Vishay’s Form 10-Ks and Form 10-Q filing 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 as well as in the presentation posted on ir.vishay.com which we believe you will find 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 Smejkal.

Joel Smejkal: Thank you, Peter. Good morning, everyone. Thank you for joining our third quarter 2025 conference call. I’ll start my remarks with a review of the third quarter performance and business conditions, and then turn the call over to Dave, who will take you through a review of the third quarter financial results and our guidance for 2025. After that, I’ll update you on the strategic levers we are pulling under three point o. As we continue to execute on our five-year strategic plan and then we’ll be happy to answer any of your questions. For the third quarter, revenue grew sequentially 4% to $791 million, 2% above the midpoint of our guidance.

Many market segments were up over Q2, Automotive, industrial, computer, and medical were positive. Asia achieved the greatest growth notably from automotive customers, and sales to distributors supporting computing and industrial. Our sales to Asia distribution was positive in Q3, because of a large number of orders placed in Q2, to get ahead of the tariffs. Vishay book to bill in the quarter was slightly below parity, Orders from OEMs were up in all regions. Distribution orders in The Americas and Europe were positive. Orders from EMS were positive over Q2. While Asia distribution orders were lower, Above Q2. following the higher order amount in Q2 which was mentioned previously.

Both semi and passive book to bill was slightly below one. Book to bill for October is at a run rate of 1.15. Our backlog continues to build at a gradual pace, as it has since the beginning of the year. Orders are up 19% year over year, indicating that conditions are improving in automotive, smart grid infrastructure, aerospace defense, and AI-related power requirements. However, a very large portion of these orders are still placed with short-term delivery requests. Turns business, expedite, pull-ins, they all continue in nearly all markets. As customers for the most part are still not planning ahead. In Asia, the percentage of short-term delivery orders continues over 50%.

This seems to be the new normal for our business at the moment. Our decision three years ago to invest heavily in incremental capacity has positioned Vishay to satisfy nearly all of these quick turn delivery requests. Without having to choose one customer over another. Today, Vishay is demonstrating to customers that we can reliably satisfy quick turn demand, while still maintaining competitive lead times. At the same time, we remain well positioned to capture the early stages of upturns in market demand and supplying customers as they scale. We are now serving the channels of distribution, OEM, and EMS, more reliably. Let’s turn to review of the revenue which is by end market on slide three.

Automotive revenue increased 7% versus second quarter on higher volume in The Americas and Europe. We had mentioned in the Q2 call that we saw automotive positive in 2025. Tier one customers increased their pull rates, and we’ve increased our engagements with more automotive OEMs in tier one now that we have capacity. Automotive customers have audited our UK and Mexico sites, where we have now gained more site approvals. We work closely now with the OEMs in tier one to further approve our product PCN. Our design activities can continue in all automotive powertrains. ICE, hybrid, and battery electric vehicle.

Increasing our revenue in all automotive applications, is our focus as electronic content increases, particularly in traction inverters, ADAS features, safety and smart cockpit application, and electronic braking and power steering. Revenue from the industrial segment in and leading driven heavily by our shipment of capacitors to smart grid infrastructure projects, for programs led by Europe and China OEM. Q3 seasonality slowed bookings a bit, in The Americas and Europe. The industrial market is showing some improvement. There continues to be a pickup in replenishment orders in the channel now. That inventories are mostly consumed. As reported each quarter, we see the orders for our high voltage DC power capacitor as an early indicator of the improving industrial business.

We continue to win large orders for customers in Europe, Asia, and India, for high voltage DC power transmission to be delivered in 2025. Demand for industrial power management customers will be next to increase. As the smart grid transmission lines are put in place. Growing opportunities for Vishay our industrial power for electricity to AI data centers, automotive hybrid EV, or power management requirements as well for the AI chip production sites. Our design activity is focused largely on AI power structures and grid improvements. As the build of data centers is driving demand for control systems which monitor backup power and cooling.

Along with power supplies and power distribution management, we also work on designs for industrial automation, robotic platforms, energy storage, and smart meters. In aerospace defense, revenue decreased 2% quarter over quarter, as the US Department of Defense was slow to release funding for major program Now in this quarter, orders are beginning to pick up with the release of funding to large military contractors and the replenishment of the distribution channel inventory to support defense business. The majority of designs in The US and remain focused on new and legacy weapon systems, communication systems, drones, commercial aerospace, and satellite program.

In the medical market segment, revenue grew 2%, on increased activity by some of our larger long-standing customers, and in support of new programs, and increased activity for existing programs, in cardiovascular, pacemakers, defibrillators, medical surgical, surgical tools, patient monitoring, and respiratory care, neuroscience, for chronic pain, and movement disorders, and cochlear hearing applications. Ongoing demand for these applications also drove order growth. Our design activities remain focused on all medical products and applications Our strategy to cross sell all Vishay technology to existing medical customers continues to progress positively. As an example, we have designed in and qualified to supply additional passives for a new project, at a long-standing medical customer. This will start in 2026.

We’re continuing to develop opportunities to sell across our with this customer and others. Revenue from the other market segment, computing, consumer, and telecom end markets, was up 4% quarter over quarter. Reflecting ongoing demand for AI servers and server power, Asia is where these transactions take place. We see increased order flow. As new AI server power projects move into production. We continued in the third quarter to increase our customer count, and are now supplying more AI customers. At the same time, in addition to MOSFETs and ICs, we design in and supply customers with diodes, capacitors, inductors, resistors, to expand our overall part counts.

We continue to win qualifications with polymer tantalum, also for magnetics, and current sense resistors. Design activity remains focused on power conversion and power management. Including multiphase DC to DC converters, ultra-low DC resistance inductors, polymer tantalum capacitors for the GPU chipset power, and also AI optical modules. Next generation data centers are requiring higher input voltages in order to deliver more power to each rack with less power loss These are further opportunities for Vishay’s products. Let’s move to slide four for revenue by channel. OEM revenue grew 6% quarter over quarter.

Driven primarily by increased volume with automotive and industrial accounts, plus shipments for smart grid infrastructure projects in Europe and Asia, Order intake increased in all regions during the quarter. And is back to levels last seen in 2022. Sales to the EMS channel fell 7% with reductions in all regions reflecting mix. Order intake for EMS increased from the second quarter also reaching the level the highest level we’ve seen in three years. As a result, our new investment in incremental capacity we are in a much improved position to participate in the EMS channel business. We can reliably satisfy increasing demand from EMS customers that are operating in a short-term visibility.

We are supplying aerospace, defense projects, automotive, industrial, and AI-related program. Distribution revenue increased 4% with nearly all of the Q3 growth coming from Asia. While Europe and The Americas were more seasonal. AI servers, industrial, and smart grid infrastructure projects supported the Asia increase. Our intake grew in all regions to prepare backlogs. As end customers inventory further normalize, In The Americas, order intake increased significantly driven primarily by demand from aerospace defense customers. Distribution inventory was flat compared to Q2 while inventory overall is holding steady at twenty-three weeks. Both POS and POA remained stable in each region. Based on data from our customers, we can see that our initiative to gain share with distributors is working.

We continue to add part number SKUs throughout the channel, recently including many new release inductor products. Placing more part numbers on the distributor shelves, as we deepen engagement with them and position Vishay for further share gain. Turning to slide five. In terms of geographical mix. Revenue growth for this quarter came predominantly from Asia, with a 7% increase in sales, America’s revenue was up slightly, and Europe was essentially flat. Due to the seasonal impacts mostly in August. Before turning the call over to Dave, I’d like to thank the Vishay employees for their hard work and for their continued commitment. To Vishay’s strategic and financial goals. They put the customer first every day.

They embrace a business-minded approach to help the customers when looking for support. In the current climate, they may be asked by a customer to expedite a Vishay delivery, or to help prevent a line down due to shortages from another supplier. We work hard to step in, and help the customer. Our sales, business development, marketing, operations, and corporate colleagues do everything they can to show Vishay customers that Vishay three point o is a transforming company. Creating opportunities to satisfy new customers while reengaging previously underserved customers, Thank you to all the Vishay employees and our reps. To show Vishay is a reliable supplier.

I’ll now turn the call over to Dave for a review of the third quarter financial results.

David E. McConnell: Thank you, Joel. Good morning, everyone. Let’s start our review of the third quarter results with the highlights on Slide six. Third quarter revenues were $791 million up 4% compared to the second quarter reflecting a 3% increase in volume, and a 1% positive foreign currency impact related mostly to the euro. Average selling prices, including tariff errors, were flat versus the second quarter. Nearly all reportable business segments had higher revenues than the second quarter, driven mostly by volume. Compared to 2024, revenues increased 8%, reflecting an 8% increase in volume and a 2% positive foreign currency impact related mostly to the euro. This was partially offset by a 2% reduction in ASPs, including tariff adders.

Book to bill for the quarter was 0.97 broken down into 0.96 for semis. And 0.98 for passives. Backlog in dollars was flat at $1.2 billion and is now at four point four months. Moving on to the next slide. Presenting the income statement highlights. Gross profit was $154 million resulting in a gross margin of 19.5%. Slightly below the midpoint of our guidance and flat versus quarter two. The margin performance was driven mostly by elevated metals prices as well as modest currency headwinds. The negative impact from our Newport fab was approximately a 150 basis points, slightly better than our guidance. Depreciation expense was $54 million in line with our guidance and up $1 million over quarter two.

SG and A expenses were $135 million slightly below our guidance and down $2 million from quarter two on an adjusted basis. GAAP operating margin was 2.4%, compared to 2.9% in the second quarter. And a minus 2.5% in 2024. Adjusted operating margin was 1.4% in the second quarter and 3% in the ’4, excluding non-GAAP adjustments. There were no pretax non-GAAP adjustments in quarters. Three. EBITDA for the quarter was $76 million for an EBITDA margin of 9.6%. Adjusted EBITDA margin was also 9.6% up from 8.3% in the second quarter. Our GAAP effective tax rate remains unmeaningful at these low levels of pretax income or loss.

As relatively small items such as foreign currency and repatriation taxes have a disproportionate impact on our effective tax rate. As profitability returns, we would expect a more normalized effective tax rate closer to our historical guidance. In the quarter, we recognized $13.7 million in tax expense, due to changes in tax laws and regulations in The US and Germany. Which is excluded from our adjusted net earnings. GAAP loss per share was minus 6¢ compared to earnings of $01 per share in the second quarter and a loss per share of $0.14 in the third quarter of 24.

Adjusted earnings per share was 4¢ for 2025, compared to a net loss per share of $07 for the ’5 and adjusted net earnings per share of $08 for the ’4. Okay. Moving on, Slide eight. Provides a summary table detailing revenue, gross margin and book to bill ratios across our reportable segments for quick reference. In the third quarter, Newport’s results continued to be reported under the MOSFET business segment, reducing that segment’s gross margin by approximately 720 basis points. An improvement from the eight forty basis points impact seen in Q2. Turning to Slide nine. In the third quarter, our cash conversion cycle remained steady at one and thirty days.

Reflecting our disciplined working capital management, Inventory increased to $760 million primarily driven by production ramp ups and higher metals prices However, inventory days outstanding improved to a hundred and Our DSO was stable at fifty-three days while the DPO decreased one day. From Q2 to thirty-one. Continuing to slide 10, You can see we generated $28 million in operating cash for the third quarter. Total CapEx for the quarter was $52 million including $43 million designated for capacity expansion projects. On a trailing twelve-month basis, capital intensity was 10.8%, relatively flat versus the same period last year.

We continue to deploy cash for capacity expansion projects, Due to these investments, free cash flow for the quarter was a negative $24 million compared to a negative $73 million in the second quarter. Which included significant transition and repatriation tax. Stockholder returns for the third quarter consisted of our $13.6 million quarterly dividend, We did not repurchase any shares in the quarter. At the end of the quarter, our global cash and short-term investment balance stands at $444 million and we remain in a net borrowing position in The U. S. With $189 million outstanding on our revolver.

As we’ve noted in the past, required to find cash dividend cash dividends any share repurchases, as well as principal and interest payments using our US cash on hand and we are using US based equity to fund our Newport expansion and other strategic investments. We have $280 million of accessible on our revolving credit facilities at the current EBITDA level. We expect to continue to draw on our revolver to fund our U. S. Cash needs. Moving on to our guidance on Slide 11. For 2025, revenues are expected to be $790 million plus or minus $20 million. Gross margin is expected to be in the range of 19.5%, plus or minus 50 basis points.

Inclusive of tariff impacts and expected continuing higher input costs. Newport is planned to have an approximate 150 to 175 drag on gross margin in the fourth quarter. As we discussed last quarter, we’re passing through additional tariff costs to customers, plus tariff adders increase our revenues without impacting our gross profit. The impacts of tariffs are generally limited and incorporated into our guidance for the fourth quarter. Depreciation expense is expected to be approximately $55 million for the fourth quarter, and $212 million for the full year ’twenty five. SG and A expenses are expected to be a $138 million plus or minus $2 million the quarter. Our GAAP effective tax rate remains not meaningful.

At low levels of pretax income and loss. As our profitability returns, we expect a normalized tax effective tax rate closer to our historical guidance of 30 to 32%. In quarter four, we expect tax expense be between $4 million and $8 million assuming a similar profit mix amongst our tax jurisdictions. Finally, stockholder return policy calls for us to return loans 70% of our free cash flow to stockholders, in the form of dividends and stock repurchases. For 2025, we once again expect negative free cash flow due to our capacity expansion plans. However, we expect to maintain our dividend and opportunistically repurchase shares based on US available liquidity in line with this policy.

I’ll turn the call back over to Joel.

Joel Smejkal: Alright. Thank you, Dave. Let’s go to slide 12. Slide 12 will give us an update on this strategic levers we are pulling. To drive faster revenue growth, higher margins, and enhanced returns on capital as we execute our five-year plan. Starting with capacity investments, Year to date, we have invested $179 million and we expect to spend between $300 million to $350 million this year. At least 70% of this CapEx is for expansion projects. At our Newport facility, we are in we are on schedule.

Increasing our wafer starts each month During the quarter, we completed the installation of all tools, for silicon and silicon carbide wafers, and we’ve released and started production ramp up for two additional technologies. Automotive customer audits, are continuing. In our passive business at La Laguna Mexico, we released commercial part numbers for production while continuing to qualify additional part numbers. We’ve scheduled side audits with many automotive customers. We’ve completed the IATF certification. Of our automotive grade inductors which opens the door to move for more side audits. And supplying more automotive OEMs from this facility. We’ve had more than 20 audits completed at La Laguna.

At our facility in Juarez, Mexico, we passed the audits conducted by two of the our automotive customers. And continue to increase production of commercial products. Through our subcontractor initiative, we now have qualified more than 9,000 part numbers. Further expanding our portfolio of diodes resistors, capacitors, inductors, As a reminder, this initiative has a couple of objectives. The first one is to create incremental capacity internally. For our high growth products by outsourcing commodity products, The second is to broaden our product portfolio and to increase our share of customers’ bill of materials. Turning to innovation in our silicon carbide strategy during the quarter.

For MOSFETs, we released three additional products, two industrial, and one automotive, for the Gen two twelve hundred volt planner We plan to release eight devices in Q4 for industrial, We remain on track to release the 1,700 volt And eight devices for automotive in Q1. the 650 volt industrial Platforms in Q1. and the automotive platforms in Q2 samples for the Gen three twelve hundred volt trench, Were available in Q3. And on track to release the industrial platform in Q4 at the automotive products in Q1. For silicon carbide diodes, we fully release the industrial and automotive Gen four twelve hundred volt and the 650 volt.

In closing, market signals remain directionally positive, with increasing demand from automotive, AI server, and server power, smart grid infrastructure, and industrial power, aerospace, defense, and medical. Our accelerated investments to expand capacity over the last three years, positions us to capitalize more on the market upcycles in these high growth segments meeting quick turn delivery requirements, while maintaining competitive lead time. We like the feedback we get from customers about Vishay three point o. We keep our feet on the ground because we have a journey to complete, in this transformation of Vishay.

Every day, we are demonstrating to the customers that we have the capacity to assure them of reliable volume, as they scale production and to supply more part numbers to them. Over the past three weeks, we contacted many global automotive and some industrial and computer customers. To offer our support to address their manufacturing line down concerns. Customers appreciated very much that we called them. We now have daily conversations with automotive OEMs in tier ones. To cross part numbers and help them manage their risk.

Looking ahead, we are intently focused on creating more opportunities to expand our participation in the full market recovery, to better leverage our entire portfolio, and to deepen our engagement with new and existing customers. We are building on our success to gain share with our channel partners, in cross selling products in our portfolio, designing in and supplying a greater share of the customer’s bill of material, We also focus on creating more value for our customers through innovation with our silicon carbide strategy, by expanding our portfolio of technologies to better serve their demand and by supporting their technology road map.

We remain committed to pulling the eight strategic levers as we execute our strategic plan to accelerate revenue growth improve margins, and enhance returns on capital. Raven, let’s open the call to questions.

Operator: Thank you. At this time, we will conduct the question and answer session. As a reminder, to ask your question, you will need to press 11 on your telephone and wait for the name to be announced. To withdraw your question, please press 11 again. Please stand by while we compile the Q and A roster. Our first question comes from Ruplu Bhattacharya from Bank of America.

Ruplu Bhattacharya: The first one, Joel in the automotive segment, did Vishay see any benefit or impact from the export restrictions that were put on Nexperia?

Joel Smejkal: Hi, Ruplu. Nice to hear, Prima. Thanks for the question. This is a dynamic conversation. I mentioned in the closing that we are in discussion with many OEMs. Daily. And many tier ones. They’ve asked for support in lying down situations and we have been able to support in some cases. Depending on how the part numbers cross. So we at the moment, we’re seeing a lot of opportunity developing. We didn’t guide or didn’t place much of that in our Q4 revenue guide because at this moment, it’s been shortage quantities just to keep factories moving. So we are, we are in the conversation.

Ruplu Bhattacharya: Okay. Okay. Thank you for that. Can I switch to margins? I mean, looks like Newport was not as big a negative impact as you had expected on fiscal 3Q margins. But just looking at the gross margin, it was maybe 20 bps below the midpoint of guidance. I think you mentioned metal prices as one factor. Were there anything else? How was pricing And when it comes to the metal pricing or prices and cost, are you using the strength of the balance sheet to prebuy any metals So just any thoughts on that impact going forward?

Joel Smejkal: Okay. I’ll take the first part of that, and then Dave can comment on the second part. The items that impact gross margin, metals was one. Whether it’s gold, whether it’s palladium, platinum, silver, they’re all at a very high rate plus copper tariff. Copper tariff is another one. So we’re managing the metals, and we’re preparing to pass cost on to customers. There’s negotiation season now, so we’re passing metal cost. On as much as possible. Exchange rate, Dave can elaborate on a little bit. There’s also items. It’s not a perfect operation. There’s always things that we need to improve on. With manufacturing efficiencies, So metals, exchange rate, plus some operational issues.

Is what had the gross margin flat. Q3 versus Q2. Dave, you wanna talk it all about any of those items or the forward buying of metals?

David E. McConnell: No. So, Rupla, it’s a good question. When you combining the metals and the FX impact, we’re looking probably north of 50 basis points. On the total. Okay? So it’s no small impact. So a little I mean, everybody knows what’s going on in the metals markets right now. I mean, gold, year to date, you know, 48% increase. Silver, 59%. And in October, we’re seeing them go up again. Okay? In terms of the FX impacts, we’re we’re well balanced with the euro, but we do make we do build parts in some countries where we don’t have revenue. Okay?

And two countries specifically, currency, the shekel and the new Taiwan dollar, strengthens, and it hurts our p and l.

Ruplu Bhattacharya: Okay.

David E. McConnell: In terms of in terms of the hedging, one thing you have to keep in mind is, we don’t buy just pure copper and pure gold. Right? We buy premanufactured parts a lot of time or semi finished parts or whip, whatever you wanna call it. So our vendors are incurring extra cost and passing it on to us. So I’m doing a lot talking about the pricing. You can. But I think we’re gonna get we’re gonna we’re going to approach we’re gonna put steps in place to address the metal increases where possible to pass it on to our customers.

Joel Smejkal: Yep. This is in motion now.

Ruplu Bhattacharya: Okay. Got that. But are you doing any pre buys? Like, are you seeing the strength of the balance sheet to buy and store any metals? Is that something you would look into?

David E. McConnell: We have we do that to some extent. We have a fairly long pipeline of some of our manufacturing tie times. And we will place purchase orders out into the future. But and as a general purpose, we’re not stockpiling metals. No. It’s expensive. We’re gonna do that.

Ruplu Bhattacharya: Okay. Let me ask you another question. So like book to bill book to bill fell about to below one this quarter, and this was the first time this year. When we look at the revenue guide for fiscal 4Q, I mean, that would imply total fiscal ’twenty five revenue growth of about 4% year on year. Then when I look at consensus for next year, looks like consensus is modeling an acceleration to 7% year on year for revenues and gross margins to expand to something like 23.6% from 19 half that you’re running at today.

So, Joel, just when you look at the environment, when you look at the book to bill, when you look at consensus estimates for fiscal twenty six, do you see these as reasonable growth and margin expectations? And any color you can give on what can drive revenue growth and margin expansion and how you see that trending over the next year? Okay.

Joel Smejkal: The October run rated book to bill I mentioned is 1.15. So even though Q3 was slightly below one, October orders across the products has moved up quickly. When we look at the market drivers, we’ve got five market drivers in what we see as an improving economy. We’ve got two of them which are supported by government one is aerospace defense. And the other is smart grid infrastructure. Those are two. Of the five. We’ve got AI. That we’re all watching the AI server build and the power requirements. We’ve got automotive. And industrial overall auto industrial aerospace defense AI medical as well. So we’re seeing these market segments lining up.

The customer engagements that we have, people are talking about mid single digit growth next year. Across these segments to high single digit growth. We’ve done a good job of getting into customer meetings. I think the October bill is a nice signal for us. We’ve got some product lines that the customers are placing farther out orders, like the high power has to capacitor. That we’ve got programs that we have to deliver in 2026. And that’ll continue to develop the industrial business behind that. So I see growth next year. I’ve received like you said, consensus of plus 7%. I think that’s in line as we do our budgeting right now. We are developing our budget for 2026.

And we’re expecting to grow because of these five end market segments, which are showing positive sign. It’s kind of a different, year we’re moving into. In the past, when you looked at how many market segments we’re aligning to drive an economy, We had the telecom boom in the 2000, We had auto booms in the late two thousands, and the pre COVID years. But now we’ve got five market segments that Vishay supports. That we see are lining up to be positive in 2026. So I think the revenue growth, what the consensus has put together is in line with what we’re hearing from customers.

The margin growth you talked about we’ve got a plan to get Newport to margin neutral. By the ’1. So that’ll raise our gross margin by one and a half percent, 150 basis points. So we moved to 21% plus the manufacturing efficiency and cost reduction projects we have internally division by division. Passing on the metals cost that we talked about, plus then the volume growth which we expect to see volume efficiencies on. So I think what you listed there is similar to what we’re viewing for 2026.

Ruplu Bhattacharya: Okay. Okay. That’s helpful. And maybe I’ll just throw one more in if we have time. Dave, can you elaborate on the capital return strategy? I mean, how would you prioritize any debt reduction versus buybacks versus, you know, any acquisitions that you pipeline.

David E. McConnell: Sure. Sure. So, you know, our cash balance has been decreasing. Think everybody can see that. And in The US, we’re certainly in a net borrowing position. We’re at a $180,189 million, I think, on the revolver. The Newport CapEx is slowing. But Newport’s not up and running completely yet. So we still need to fund US money to fund Newport. So we don’t see right now given our current liquidity in The US, that we would wanna be doing any share buybacks. We are continuing the dividend. Dividend is important to us. But we’re we’re not looking right now to purchasing shares.

Ruplu Bhattacharya: Okay. Alright. Thank you so much for all the details.

David E. McConnell: You bet. Thank you, Ruplu.

Operator: One moment for our next question. Our next question comes from Peter Peng with JPMorgan. Your line is now open.

Peter Peng: Hey, guys. Thanks for taking my question. You mentioned about some volume growth in the first quarter. Is it right to read into that, that you’re expecting more seasonal trends? I think, typically, your first quarter is up somewhere in the low single digit. Is that kind of the way you’re thinking about seasonal trends into the first quarter? Seasonal is an interesting word now. It’s hard to say what’s seasonal right now. You’re right. In the past, Q1, I did see some increase because of the Q4 is, just a comment about Q4. It’s not a thirteen week quarter. It’s a twelve week quarter. Customers tell us that they’re gonna be closing between Christmas and New Year’s.

So we’re really running a shorter quarter to have flat revenue. So we see that we are making a good push. Q1 Chinese New Year is in February. We’re watching order activity now based on lead times to see is the customer gonna be bringing in product before Chinese New Year? Or setting the stage for after? So I would say that’s the seasonal effect that’s there. That is common Q1 after Q1 is Chinese New Year. However, industrial programs, aerospace, defense, spending, the push to replenish the weaponry I don’t think we’re we’re in anything that could be considered seasonal.

Automotive, with what’s happening with shortages, and preventing lying down We’re doing our best to support OEMs that are coming to us. In tier one. So I don’t think I could put seasonality on that one. The industrial grid designs and those projects continue to move positively. Plus then medical. Medical is always dependent on, FDA approval of programs, So if I said seasonal for compute or because of the China New Year holiday, I think that’s the only part of seasonal I would consider. We see the better bookings again in October at 1.15 right now, that run rate. If that continues, that sets us up for a better Q1.

Peter Peng: Perfect. And then just going back to the gross margin dynamics, you mentioned that you know, the Newport headwind’s gonna roll off in the first quarter, and then your going to be potentially passing some of the metal causes. And so what’s the kind of the right base level to think about the margins? You know, as we kind of look into Q1?

Joel Smejkal: We don’t normally. Guide that far ahead. Right. We’re guiding for Q4. Right. We are diligent in our cost improvement projects internally. The negotiation season is now. With the large customers that have annual contracts. So too early to say we have a result. Of what the change might be Right. I think we need a little more time yet to really dial in what the impact of gonna be AI. Companies. And, building the hardware. Continuing to talk with, the main players, continuing to offer more Vishay products, whether it’s Ausfets and ICs, that’s what gets all the attention in the conversation. So we’re in design activity there. Plus the passive component.

The capacitors, the resistors, the inductors, And we promote the broad portfolio. So we’re gaining good traction. We’re getting good design and print position. Got it. One more if I may. Just a follow-up on the Experian situation. You know, I know you guys are not taking any revenue, but what’s what’s the potential How material impact could this be to your business as you kind of, you know, talk to your customer? Customers? Maybe a sense of what the magnitude is.

Joel Smejkal: We’re crossing part numbers. We’re helping automotives with avoiding line downs, and it’s not just for shit. There’s other suppliers, our competitors who are also helping this because we need to make sure the automotives are running and they don’t have to do production stops because that impacts more than just Nexperia’s volume. It impacts everybody. So I think what I’m hearing on the street is everybody is taking the opportunity to help. Vishay, with the lineup of products, we crossed the best of our ability, but the automotives have to make decision. On how does the program perform with a Vishay product in it or another competitor’s product in it. So it takes some time.

We like the conversations we’re in. We’re being given a great opportunity to tell the automotive OEM and tier one more about Vishay. They like what they hear. They’d like to hear about our footprint. They may not have known much about us in the past, the OEMs. So it’s hard to put a number on it at this point. It’s so dynamic. Because it’s geopolitical, things could change in a moment. We saw what happened with April 2 and the announcement of tariffs and how that changed the business in a moment. We saw what happened here now with the geopolitical announcements to China and the Dutch about Nexperia.

So I think it’s too early for us to really put a any type of number on it. There’s too many moving parts.

Peter Peng: Great. Thank you, guys.

Joel Smejkal: Thanks, Peter.

Operator: I’m showing no further questions at this time. I would like to turn it back over to management for closing remarks.

Joel Smejkal: Alright. Thank you, Raven. Thank you, everyone. Thank you for joining us on our third quarter earnings call. The combination of directionally positive signals and Vishay’s capacity readiness is encouraging. We look forward to reporting our fourth quarter results to you in February. Thank you very much.

Operator: Have a good day.

David E. McConnell: Thank you for your participation in today’s conference. This does conclude the program. You may now disconnect.

Operator: We’re clear.