Good day, and thank you for standing by. Welcome to the Vishay Intertechnology Quarter 2, 2025 Earnings Call. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to the first speaker today, Peter Henrici, Investor Relations. Peter, go ahead.

Thank you, Amber. Good morning, and welcome to Vishay Intertechnology's Second Quarter 2025 Earnings Conference Call. I am joined today by Joel Smejkal, our President and Chief Executive Officer; and by Dave McConnell, our Chief Financial Officer. This morning, we reported results for our second quarter. A copy of our earnings release is available in the Investor Relations section 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 replay 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 press release and Vishay's Form 10-K and Form 10-Q filings 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.

Thank you, Peter. Good morning, everyone. Thank you for joining our second quarter 2025 conference call. I'll start my remarks with a review of the second quarter performance and business conditions and then turn the call over to Dave, who will take you through a review of the second quarter financial results and our guidance for the third quarter of 2025. After that, I'll update you on the strategic levers we are pulling under Vishay 3.0, as we continue to execute our 5-year strategic plan, and then, we'll be happy to answer any of your questions. For the second quarter, revenue grew sequentially 7% to $762 million, in line with our guidance. We generated revenue growth for both semis and passives, growth in all of our end markets, growth in the distribution and EMS channels and growth in all regions. The promising signals we saw emerging in the fourth quarter have become more firm. The inventory correction cycle is principally behind us. Industry inventory levels have normalized for passives, while there is still some excess industry inventory in semis. Solid order intake during the second quarter reflected continued demand momentum in smart grid infrastructure projects and AI power applications. Overall, book-to-bill was positive at 1.02, with semis slipping slightly due to some customer program adjustments and passives continuing to trend upward. July book-to-bill for semis has bounced back to 1.07. Our decision to invest heavily in capacity expansion between 2023 and 2028 under Vishay 3.0 is positioning us well. Over the past 2.5 years, we have invested approximately $775 million to add capacity for high-growth, higher profit products. I am pleased to state that today, we have the incremental capacity for nearly all products to capture the early stage of this market upturn, assuring our customers of reliable volume as…

Thank you, Joel. Good morning, everyone. Let's start our review of the second quarter financial results with the highlights on Slide 6. Second quarter revenues were $762 million, up 7% compared to the first quarter, reflecting a 4% increase in volume and a 3% positive foreign currency impact related mostly to the euro. Average selling prices, including tariff adders were flat versus the first quarter. All reportable business segments had higher revenues in the first quarter, driven mostly by volume. Compared to the second quarter of 2024, revenues increased 3%, reflecting a 3% increase in volume, 2% positive foreign currency impact, related mostly to the euro. This was partially offset with a 2% reduction in ASPs, including tariff adders. Book-to-bill for the quarter was 1.02, the third quarter in a row with a book-to-bill over 1. Book-to-bill was 0.98 for semis and 1.06 for passives. Backlog in dollars increased to $1.2 billion and is now at 4.6 months. Moving on to the next slide, presenting the income statement highlights. Gross profit was $149 million, resulting in a gross margin of 19.5% at the high end of our guidance. The increase from quarter 1 was primarily due to additional volume. The negative impact from Newport was approximately 160 basis points, slightly better than our guidance. Depreciation expense was $53 million, approximately in line with our guidance, considering exchange rate impacts and up $2 million over quarter 1. SG&A expenses were $127 million, including an $11 million benefit recognized upon the one-time favorable resolution of an outstanding matter. Excluding this one-time benefit, SG&A expenses would have been in the range of our guidance for the quarter, up from $135 million in quarter 1, mostly due to negative exchange rate impacts. GAAP operating margin was 2.9% compared to 0.1% in the first quarter…

All right. Thank you, Dave. Let's turn to Slide 12 for an update on the strategic levers we are pulling, as we execute our 5-year strategic plan to drive faster revenue growth, elevate profitability and enhance returns on capital. For 2025, we plan to spend between $300 million to $350 million, at least 70% of which will be invested in capital expansion projects for our high-growth product lines. During the second quarter, we continued to make progress on our semiconductor expansion projects. As our Newport wafer fab, we remain on schedule for silicon carbide preproduction in early 2026. During the second quarter, we completed the installation of all tools except one, which will be installed in the third quarter. For silicon MOSFETs, we also completed the transfer of 3 additional technologies and plan to transfer another 2 technologies in the third quarter. Finally, we released 1 automotive MOSFET while additional product qualifications are ongoing. Two large Tier 1 customers have audited the facility, and Newport received excellent scores for the facility and the processes. The next customer audit is being scheduled in early Q4. At our foundry partner in Korea, SK Keyfoundry, due to a technical issue, release dates have been pushed out 1 or 2 quarters. We now plan to release a total of 8 technologies in the fourth quarter, 4 of which are commercial, 2 are automotive grade and 1 -- excuse me, 2 are ICs. As a result, we now expect to meet our goal of increasing the annualized capacity for MOSFETs by 12% in the first quarter of 2026. We also expect to increase annualized capacity for our advanced split-gate MOSFETs by 25% to support new automotive and commercial opportunities in 2026. In Taiwan, we continue to advance the automotive qualification process and the volume ramp-up…

[Operator Instructions] Our first question comes from Ruplu Bhattacharya of Bank of America.

My first one is on the impact of the Newport fab. I think you had guided 175 to 200 bps of negative impact on gross margin for the second quarter, but the impact was just 160 bps. But then looking at the guide for fiscal 3Q, it's higher at 160 to 185. So if you can dive a little bit into details on what drove the outperformance versus your expectations for 2Q? And what is happening again in 3Q? And how should we think about this impact going forward? And when does it normalize?

Ruplu, it's Dave. That's a good question. So I think with our guidance, the 180 to 185, it's lower than we've done in the past. You're right, we were 175 to 200, and we came in at 160. They're working hard on getting the product, build wafers, and we're moving towards Q3 and Q4 starting to build inventory and start to ship product. So it's a little unknown. So we want to give ourselves a little bit of a range, okay? So 160, we're hoping we'd be at the low end of that range.

Okay. Understood.

To answer honestly.

Okay. And then can I ask on the MOSFET gross margins? It looks like they declined 200 bps sequentially. What drove that? And how should we think about gross margin improvement in that section -- in that segment going forward?

So Ruplu, another good question. So during Q2, the MOSFET segment had some manufacturing inefficiencies that have been corrected in Q3, that will show some improvement. We also will have an increase in our IC sales Q2 on Q3, which comes at a higher margin for us, which will show some improvement. We're continuing on working on expanding our AI customer list, which will help with the margin improvement towards quarter 4. So right now, the way it stands, we're hoping to exit the year 17% to 18%, excluding Newport on MOSFET.

Okay. Okay. That's helpful. So, Dave, maybe I'll go 3 for 3 with you. Let me ask you another question on U.S. tariff impact. I think on the call, you said that it will be neutral. But if I look at the last quarter's slides, you had a slide where you said passive components can have up to 170% tariff and semis manufactured in China can have up to 70%. So can you talk about the mechanics of this? Like how much of your product line is packaged in China? And how should we think about like how much of that comes into the U.S.? And how is the impact really on -- of tariffs on the P&L?

Okay. Ruplu, this is Joel. I'll take this one. As far as the product percent that is manufactured in China and comes back to the U.S., in Q1, it was less than 4%, and we see about the same percentage in Q2 and Q3. It's a small percent. Semiconductors and passives are similar, but it's a small percent of our overall revenue that comes back to the U.S. that's manufactured in China.

Okay. All right. Let me ask you one final question, and then, I'll pass on the line. Joel, in this environment, how are you thinking about the possibility of inorganic growth M&A? And if you were to think about that, would that be in the passive side or active side? And what are some of the things that would be attractive?

Okay. We always keep our eyes out for M&A opportunities. Semiconductor side, for sure, is something we look at. We look at ways to increase our presence at customers, so semis for sure. Passives, recently, we had the acquisition of a small inrush current liming company, Ametherm. We brought them on board because it did fill a gap in our portfolio, and that is developing. We also look at other passives, which could be vertical. They could be vertical acquisitions to help us with manufacturing materials or it could be with customers. So we do keep our eyes open. We haven't moved away from that. I think we've done a good number of acquisitions in the first 2.5 years of Vishay 3.0, and we continue to have that as a strategy.

Our next question comes from Peter Peng of JPMorgan.

Mentioned about getting more visibility in Q3 and your backlog is building faster and the market appears to turn. And so you guys are prepping for a stronger second half of the year. But if I look at some of your seasonal trends for the December quarter, it's typically down low single digits. So I can still get to a half-on-half growth. But I'm just wondering if we should be expecting more of an above seasonal trend into the December quarter.

Okay. We like what we're seeing. It's definitely different than the last 2 years. As we look into the second half of the year, the [ BiBa ], the billable backlog is building at a greater rate than we have seen previously. The second half, Q3, you see our guide up slightly. Also considering that Europe has some shutdowns in August, so August is a slower month. So we still feel we can guide up in Q3. Q4, the way the [ BiBa ] is building, at this point, we see that Q4 can be better than Q3.

Perfect. Okay. That's helpful. And then just on your end markets, we've been hearing a lot of mixed signals across your peers, some saying things are good and refilling, some are talking about pull forward. Maybe you can just provide some color on your customer base and whether you're seeing any pull forward of demand or maybe this is just refilling channel? Maybe any color on that would be helpful.

Okay. I think what's interesting about the climate we're in, the customers as far as planning their demand are still not so forward- looking. If we look at Asia, 55% of our orders seem to be for quick delivery. We talked about this in previous quarters as well. So even though we say the inventory is normalized, the safety net, I think the customers still think there's product out there that's quick to grab. It's not. And we're manufacturing quickly. We talk about turns, orders in the quarter. We're able to take an order and turn it in the quarter. So I don't necessarily call that pull-ins. I just think that's the state of the business that we're in is this transition from an inventory-heavy market to customers looking at their demands as they have to build and trying to now find products. The inventory at distributors, we've seen our inventory go down. We talked about that to go from 27 weeks at the end of 2024 down to 23 weeks. So we're seeing good pull-through with distribution. Automotive, the outlook we see for the second half with the scheduled agreements from customers shows better than the first half. Aerospace/Defense, Defense contractors speak about funding that's coming. So they say a stronger second half with likely orders in Q4. AI is a nice trajectory that moves up positively at a nice slope. And industrial smart grid, we see continued orders each quarter as governments release funding to redesign their electrical transmission lines. So that's positive in Asia, that's positive in Europe and also positive in the Americas. So there is always the conversation about pull-ins, pull-ins to get ahead of tariffs. But I don't think that's the main driver here for us. I think these 4 application opportunities in those segments I talked about are really what's driving us forward.

Okay. That's good color. It's nice to hear that you guys added more AI customers. I'm not sure if you guys can provide any color on what your revenue number is for your AI data centers. If not, maybe you can give us some metrics on customer diversity? And then, more importantly, how are you thinking about expanding applications into like second stage or PSU for the AI data center going forward?

Okay. The customer count is definitely growing. The big 4 that you always hear about, the Microsoft, the Meta, the Google, Apple, those are great design conversations. If you look at EMS, there's EMS that's also involved in the design, not just the manufacture of AI, but also the design. So our customer count has developed significantly. There's good engineering content. As we sit with customers, we speak about more than MOSFETs. We speak about more than ICs. We talk about capacitors, inductors as well as resistors. So we have the broadest portfolio, and we're able to support that. So it's really about expanding the part count as well as the customer count. So we believe we have 2 ways to do this, not just selling 1 technology or 2. We've got multiple, as we sit with the engineers and design in. So we're positive on AI in how Vishay can continue to participate with greater revenue.

Perfect. One more question, if I may. I think in your prepared remarks, you talked about in your semi business, some slipping of customer program. Maybe if you can provide some color on what that is.

We were on the GB300. The original design, if you remember, it was called Cordelia, which had the chipset design that was going to snap in to the board. That design changed. They went to a new design called Bianca, which is no longer using that connector snap-in connection. So we were in a strong position with that first design concept. The orders that we were planning for P6 and P7 have been adjusted because the design change to Bianca. And now we're working on the design side to make sure we're on that program.

I am showing no further questions at this time. I would like to now turn it back over to the President and CEO, Joel Smejkal, for closing remarks.

Thank you, Amber. Thank you, everyone, for joining us for our second quarter earnings conference call. We're making great progress to participate more fully in the market upturn, capacity ready and reliable supply to our customers and to be aligned for the market growth drivers that we've spoken about in AI, smart grid infrastructure, aerospace, defense and automotive. We look forward to reporting our third quarter results to you in November. Thank you very much, and enjoy the rest of your summer.

Thank you for your participation in today's conference. This does conclude the program. You may now disconnect.