Greetings and welcome to the Vishay Intertechnology's Third Quarter 2022 Earnings Call. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Mr. Peter Henrici, Head of Investor Relations. You may begin.

Thank you, Michelle. Good morning and welcome to Vishay Intertechnology's third quarter 2022 conference call. With me today are Dr. Gerald Paul, Vishay's President and Chief Executive Officer; and Lori Lipcaman, our Executive Vice President and Chief Financial Officer. As usual, we'll start today's call with the CFO, who will review Vishay's third quarter 2022 financial results. Dr. Gerald Paul will then give an overview of our business and discuss operational performance as well as segment results in more detail. Finally, we'll reserve time for questions and answers. This call is being webcast from the Investor Relations section of our website at ir.vishay.com. The replay for this call will be publicly available for approximately 30 days. 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 press release and Vishay's Form 10-K and Form 10-Q filings with the Securities and Exchange Commission. In addition, during this call, we may refer to adjusted or other financial measures that are not prepared according to generally accepted accounting principles. 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 that we also provide. On the Investor Relations section of our website, you can find a presentation of the third quarter 2022 financial information containing some of the operational metrics Dr. Paul will be discussing. Now, I turn the call over to Chief Financial Officer, Lori Lipcaman.

Thank you, Peter. Good morning, everyone. I am sure that most of you have had a chance to review our earnings press release. I will focus on some highlights and key metrics. Vishay reported revenues for Q3 of $925 million, a quarterly record. EPS was $0.98 for the quarter. Adjusted EPS was $0.93 for the quarter. The only reconciling item between GAAP EPS and adjusted EPS is tax related. There were no reconciling items impacting gross or operating margins. As we announced in February, Vishay has adopted a stockholder return policy which calls for us to return at least 70% of annual free cash to stockholders directly in the form of dividends or indirectly in the form of stock repurchases. During Q3, we repurchased slightly less than 1 million shares of common stock for $18.5 million. We paid $14.3 million for our quarterly dividends for a total stockholder return of $32.8 million. Year-to-date, we repurchased 2.9 million shares of common stock for $54.7 million. We paid $43.1 million in dividends for a total stockholder return of $98 million. Revenues in the quarter were $925 million, up by 7.1% from the previous quarter and up by 13.7% compared to prior year. Gross margin was 31.3%. Operating margin was 19.8%. EPS was $0.98. Adjusted EPS was $0.93. EBITDA was $224 million or 24.2%. There were no reconciling items to arrive at adjusted EBITDA. Reconciling versus prior quarter, operating income Q3 2022 compared to adjusted operating income for prior quarter, based on $61 million higher sales or $76 million higher sales, excluding exchange rate impacts, adjusted operating income increased by $25 million to $183 million in Q3 2022 from $158 million in Q2 2022. The main elements were average selling prices were flat; volume increased with a positive impact of $39 million, equivalent…

Thank you, Lori and good morning, everyone. Before I will start talking about the quarter, please allow me a personal remark. After 25 years and approximately 100 quarterly earnings calls, today will be the last time I represent Vishay. Let me take the opportunity to thank you for your interest in Vishay and for your fairness along the way. It always has been an honor and a pleasure for me to explain the development of our business. I will step down from my CEO position at the end of this year and I wish my successor continued success in running this exciting enterprise. Now, let me turn to Vishay. Despite ongoing demanding challenges of various kinds globally, the third quarter for Vishay represented another record in terms of sales and profits. Actually, the quarter has been our most successful one since at least 20 years. Our excellent performance in difficult times underlines the robustness of the electronics market in general but, in particular, also the strength of Vishay. Vishay in the third quarter achieved gross margin of 31.3% of sales versus 30.3% in the second quarter, adjusted gross margin of 31.3% versus 31.0% in Q2, an operating margin of 19.8% of sales versus 17.5% in the second quarter, adjusted operating margin of 19.8% versus 18.3% in Q2, earnings per share of $0.98 versus $0.78 in the second quarter and adjusted earnings per share of $0.93 versus $0.82 in Q2. As expected, free cash generation in the quarter recovered sharply. From a relatively low first half, we achieved $133 million free cash flow in Q3. Vishay, despite global pressures, principally continues to operate under good economic conditions. Also as a consequence of increased shipments in the quarter, the historically high backlog level has started to normalize to a degree. All regions…

Thank you, Dr. Paul. We will now open the call to questions. Michelle, please take the first question.

[Operator Instructions] Our first question comes from the line of Joshua Buchalter with Cowen.

Congrats on the results and more importantly, congrats to Dr. Paul on an incredible run. 44 years at one company is, I think, something all -- we can all appreciate. I wanted to start by asking about the MOSFET supply chain issue in China that we saw in the second quarter. Is there a way to sort of isolate the impact in the third quarter? And in particular, what would overall book-to-bill have been for the company if it were not for the MOSFET issue? And any way to sort of isolate the organic growth underneath the packaging delay?

Okay. Listen, basically, we caught up whatever we lost in the second quarter already in Q3. This was somewhat earlier than we expected ourselves, to say it frankly. And if you take all that, quarter 2, 3 and also the guidance for Q4 are virtually on the same level for the whole company. So this takes out the whole -- this was an impact which was a very temporary effect which was taken out.

Okay, got it. And then I did want to ask about pricing. It was sort of the first order in a while that it flattened out. Are you seeing any material changes in your customer behavior and related to macro slowing? We’ve heard a number of companies in the semiconductor industry call out expanding weakness from consumer to pockets of industrial. I know you guys are heavily exposed there. I was just wondering if there have been any material changes at your customers that you’re seeing. And congratulations, again.

Well, lead times are still high for many parts which we sell and the behavior of the customers has not changed dramatically. But price decline -- price increases, sorry, have slowed down to a degree. And also they will continue in a way but they will slow down further as we expected. But simply speaking, shortages continue to exist for quite a few product lines.

Our next question comes from the line of David Williams with Benchmark.

Dr. Paul, congrats on a tremendous run and we will certainly miss hearing your voice every earnings.

Thank you.

So I guess, as I kind of think about the book-to-bills, they’ve looked like they’ve come down across the majority of the business. Just kind of curious how you’re thinking about maybe the next few quarters relative to the macro and how you think Vishay will perform in a less growthy environment.

I mean, in judging the book-to-bill, you must, of course, take into account the situation concerning the backlog. A backlog of altogether 7, 8 months is more than twice as much as this business has shown for decades, so to speak. So it's an abnormally high backlog level. And you would expect some kind of book-to-bill close to 1 or below 1 to normalize something. So I wouldn't shout fire, so to speak, seeing that. This was to be expected. We believe looking, for instance, at the POS of our distributors which continues to be very strong, that the business per se continues very strong. And of course, you never know what the future brings. But I think for electronics, you can hardly be pessimistic. The electronification in the industrial world in, of course, also automotive continues to push us which is much more than I have as an experience for -- of my long time. This is a new era for growth.

Agreed. Great. And then maybe just in terms of behavior, I know you touched on this earlier but have you noticed anything change in terms of order pushouts or maybe decreasing expedites or just anything there that’s kind of shifting around and maybe more from a specific end market or specific category of end market that you’ve seen, that would be helpful?

As you can imagine, we watch that carefully. And I watched, in particular, the shipped to backlog. We have for rolling 13 weeks shipped to backlog. And this went up even in October, this went up. So as a matter of fact, I do not see -- despite some book-to-bill for the whole thing which is below 1 or close to 1, I do not see a change of the climate at this point in time. And we do see shortages for key parts which we deliver to the market, continued shortages and long lead times, especially in the automotive field.

Our next question comes from the line of Ruplu Bhattacharya with Bank of America.

Let me echo, Dr. Paul, we will miss you. Congrats on a very successful career.

My vision and my piece of furniture, so to speak.

My first question is on the acquisition that you did on MaxPower Semiconductor. Can you give us some more details, like what is the revenue expected from that acquisition? How many people are you taking on? And I think the SG&A guidance was ex that acquisition. So I assume that acquisition is complete already. So are -- should we assume some more SG&A because of that acquisition?

Well, what we acquired is a company, a relatively small company which is $ 10 million sales at this point in time based on basically foundries. But what we really acquired is the potential to participate in the silicon carbide business midterm which I believe everybody agrees is a winner going forward and will accelerate our expected growth in silicon -- in normal MOSFETs and silicon-based MOSFETs substantially. We felt that we had to close this gap because Vishay up to now had nothing to order -- to offer in this field. And now we are in the position of know-how and of patents and we can build on that. This business has to be built, no question about it. But we have decided to do so and I see excellent chances to do so because what we acquired, people know what they do in simple terms.

Okay. Can I ask a question on MOSFET margins? Gross margin came in at 37%. This is a level that we didn't see even in 2010. I mean this is probably the highest margins you’ve had in that segment. I mean, I’m struggling to think if this is sustainable. And if it is, what are the factors that would drive this, either higher or lower?

Ruplu, as I somehow said before, it's a volume game. It's, first of all, a volume game. And of course, we had record sales, as you will see. It was a spike in a way but we are on the way up if sales continues to increase our manufacturing capacity. And as -- strong which we expect, you will see better gross margins. But if you compare now one quarter with actually the one before, predominantly, what you see is a reflection of the volume change between the quarters. And it has been a record quarter, as a matter of fact. And so the gross margins got that high. You see our -- in our guidance for Q4, of course, a small decline but it's still quite high and this is not a quarter which represents a spike. So we continuously go up in gross margin.

Okay. Maybe if I can just squeeze one more in for Lori. Can you talk about your capital allocation priorities now? You've done the $50 million acquisition that you talked about. But can you talk about how much cash you now have in the U.S. versus outside and your propensity for buybacks, dividend increases and further M&A?

Okay. So I'd like to confirm our shareholder return policy, first of all. We announced that we would return to shareholders a minimum of 70% and we're on track to do that and we would continue to do that. We had set a minimum of $100 million. You see that we’ve already returned $98 million but we plan to return the announced minimum of 70% for 2023. So it will be higher than the $100 million that we had stated as a minimum.

We have reached the end of our question-and-answer session. I'd like to turn the call back over to Mr. Henrici see for any closing remarks.

Thank you for joining us on today’s call and for your interest in Vishay Intertechnology.

This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation and have a wonderful day.