Ripple Boruwa

Ripple Boruwa asked CFO Dave McConnell to elaborate on Vishay's capital return strategy, specifically how the company prioritizes debt reduction, share buybacks, and potential acquisitions.

Answer

CFO Dave McConnell explained that Vishay's cash balance is decreasing, and the company is in a net borrowing position in the U.S. due to funding Newport CapEx. Given current U.S. liquidity, share buybacks are not being considered, but the dividend will be maintained. Acquisitions were not explicitly prioritized in his response, but the focus was on current liquidity constraints and funding ongoing investments.

Ripu Boruwa asked about the impact of Nexperia's export restrictions on Vishay's automotive segment, the factors affecting gross margins (including Newport, metal prices, and pricing strategies), the reasonableness of consensus estimates for fiscal 2026 revenue growth and margin expansion, and Vishay's capital return strategy priorities.

Answer

Joel Smejkal, President and CEO, indicated that Vishay is seeing opportunities and engaging daily with automotive OEMs and Tier 1s due to Nexperia's situation, though it hasn't significantly impacted Q4 guidance yet. He attributed flat gross margins to high metal prices (gold, palladium, platinum, silver, copper tariff) and operational inefficiencies. Dave McConnell, CFO, added that FX impacts from the shekel and new Taiwan dollar also contributed, and confirmed plans to pass metal cost increases to customers. Joel Smejkal noted an October book-to-bill of 1.15 and identified five market drivers (aerospace defense, smart grid infrastructure, AI, automotive, industrial) supporting mid-to-high single-digit growth for 2026, aligning with consensus. He also expects Newport to be margin-neutral by the end of Q1, adding 150 basis points to gross margin, alongside other efficiency gains. Dave McConnell stated that given the decreasing cash balance and net borrowing position in the U.S., share buybacks are not planned, but the dividend will continue.