Greetings. Welcome to Vishay Intertechnology Fourth Quarter End of Year 2021 Earnings Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Peter Henrici, Head of Investor Relations.

Thank you, Sherry (ph). Good morning and welcome to our fourth quarter and year 2021 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 fourth quarter and year 2021 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 fourth quarter and year 2021 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 Q4 of $843 million. EPS was $0.25 for the quarter. Adjusted EPS was $0.62 for the quarter. The only reconciling items between GAAP EPS and Adjusted EPS are tax related. There were no reconciling items impacting gross or operating margins. Yesterday, Vishay announced the Stockholder Return Policy whereby Vishay will return at least 70% of annual free cash to stockholders directly in the form of dividends or indirectly in the form of stock repurchases. For 2022, we intend to return at least $100 million. As a direct result of a change in tax law in Israel during the fourth quarter, the company made the determination that substantially all un -remitted foreign earnings in Israel are no longer permanently reinvested. The distribution of these foreign earnings to the United States, will initially be used to fund the stockholder return policy. We recorded additional tax expense of $53 million during quarter four as a result of this tax law change in Israel. Revenues in 2021 were $3.240 billion, up by 29.5% from prior year. Gross margin was 27.4%. Operating margin was 14.4%. There were no reconciling items to arrive at adjusted operating margin. EPS was $2.05, adjusted EPS was $2.32. EBITDA was $618 million or 19.1%. There were no reconciling items to arrive at adjusted EBITDA. Revenues in the quarter were $843 million, up by 3.6% from previous quarter and up by 26.4% compared to prior year. Gross margin was 27.3%. Operating margin was 14.4%. There were no reconciling items to arrive at adjusted operating margin. EPS was $0.25, adjusted EPS was $0.62. EBITDA was $160…

Thank you, Lori, and good morning, everybody. Despite ongoing pandemic related issues and an increased inflation rate 2021 for Vishay has become one of its most successful years ever. Vishay, like electronics in general throughout the year, enjoyed quite excellent market conditionals in virtually all market segments worldwide. Driving to maximize production output, we continue to expand critical manufacturing capacities, defining at the same time ambitious targets and measures for supporting future accelerated growth. For the year, I think we achieved strong results, gross margin of 27.4% of sales versus 23.3% in 2020. Adjusted gross margin also of 27.4% versus 23.4% last year. Operating margin of 14.4% of sales versus 8.4% in 2020, adjusted operating margin also 14.4% of sales versus 8.5% in 2020. Earnings per share of $2 or $5 versus $0.85 in 2020, adjusted earnings per share of $2.32 versus $0.92 in 2020. The generation of free cash also in 2021 remained on a quite excellent level. We, in 2021, generated free cash of $240 million despite our high rate of CapEx. The fourth quarter shows a continuation of our strong financial performance in prior quarters. However, it's a flat gross margin. Vishay in the fourth quarter achieved the gross margins of 27.3% of sales versus 27.7% in the third quarter. An operating margin of 14.4% of sales versus 15.2% in the third quarter, earnings per share of $0.25 versus $0.67 in the third quarter, adjusted earnings per share of $0.62 versus $0.63 in the third quarter. Vishay in Q4 generated $46 million of free cash. Let me talk about the economic environment. The year 2021 in our industry will be remembered as a fairly unique year of a strong recovery, real, may I say, boom year, characterized by record orders, record backlogs, and lead times, and very…

Thank you, Dr. Paul. We'll now open the call to questions. Sherry (ph), please take the first question.

Thank you. [Operator Instructions] Our first question is from Ruplu Bhattacharya with Bank of America. Please proceed.

Good morning. Thank you for taking my questions.

Morning Ruplu.

Dr. Paul, in the fourth quarter, you had strong revenues, revenues came at the high end of guidance. It looks like gross margin was at the lower end of guidance. Can you just talk about that 40 basis points of sequential decline in margins? What were some of the factors? How much was mix? How much was FX? And how do you see margins going forward?

We, of course, by nature of things dinged into that and it's clear that by far the biggest impact is logistics costs, which were also higher than we expected them to be. This is the [Indiscernible], it's not the efficiencies. They were quite good as they were throughout the year. It's inflationary impacts. It's wages. And as I said, mainly logistics costs. We do expect, but we're not completely master of that -- we do expect logistics costs to become better in the course of this year with the traffic getting more normal. Dr. Paul, with respect to these logistics costs, do you think that you'll be able to pass them onto your customers or as -- it looks like they're going to remain high over the next couple of quarters from what we can tell. Is that something you can pass on? Well, we do so principally as we raise prices. We raise prices in these quarters and we will continue to do so. We will more and more offset that and I guess, as I said, logistics costs depend on the general air traffic. It hopefully will not last a full year; we expect some kind of an improvement in the course of the second half.

Okay. And can I ask you about a longer-term focused question. Right now, the backlog is running very high. Let's say, most product lines you've mentioned about eight months of backlog, but what was that backlog pre -COVID, and as things normalize, where do you think that backlog normalizes to? Do you think it remains high at eight months or if you think as we go through 2022, that normalizes back down and where does it -- where do you think it ends up in?

If you really look back to history, the normal backlog was three to four months, to say it frankly. This is -- that was the average for a long period of time, then since the year 2017, it started to grow. But at the moment, it's record high and this is, of course, not normal. We do expect that the backlog will come down as we go with the normalization. Whether they will ever return to three months, that is the question. I believe there's more skepticism around concerning low inventories, supply problems, etc. So, I could imagine going forward, we will not go back to these three months, which were indeed historically the case. There will be a reduction, but not to historical levels, I believe.

Okay. And maybe just the last one if I can ask. Yesterday, you announced a shareholder return policy. How does M&A -- further M&A fit into that? Any thoughts on further acquisitions? Are you considering [Indiscernible] any and in which area, either passive or active? So, any thoughts there would be appreciated.

First of all, I think is to say that acquisitions are not in competition with this program. We continue to look for acquisitions in the same way and we -- no change. We will concentrate on specialty businesses as we go. So, this is the insight as which you demanded.

Alright, thank you for all the details. Appreciate it.

Our next question is from Karl Ackerman with Cowen & Company. Please proceed.

Yes. Thank you. Two questions, please. Dr. Paul, I don't think you've grown SG&A above revenue growth since 2013. With SG&A up roughly 6% to 2022, and based on your commentary that contribution margins should improve, it appears you're relatively optimistic about 2022. Clearly, backlog remains elevated at over eight months, but are there market share opportunities or end-market growth opportunities you would call out that anchors your expectations for 2022?

Well, it's really still in foreseeably is -- the whole sales are determined by manufacturing capacities. Of course, everybody expects longer-term cooling down of the economy. We cannot see it; our backlog continues to go up. So, I dare to say our sales and we are optimistic on that is a product of established capacities. And we do increase capacities. We have programs there. If you want to highlight a product line which is in particular hotter, if you want to say it like that, it's the MOSFETs, it continues to be the MOSFETs and everybody wants to increase and does increase manufacturing capacities there, but with good reasons, the application of MOSFETs increase.

I appreciate that. Some of your peers quantify the benefit from automotive restocking in calendar '21 and suggested the inventory benefit may not carry over into 2022. Nevertheless, though, I think at least half of your automotive business is on consignment that better aligns your supply with end-market demand. But I'm wondering if your automotive customers have indicated your products are now balanced at a high level or whether your automotive products remain very tight and have seen lead times extended. Thank you.

It's the latter. It's the latter We see a lot of escalations -- continue to see a lot of escalations for higher shipments from our large automotive customers. And MOSFETs for sure is in that sense the most problematic. We do not see a cooling down. I think it will be the opposite. Automotive based on the better supply situation which they are going to have, is going to increase their demands this year. So, we will be more a problem to serve them than to manager a low demand.

Thank you.

[Operator Instructions] Our next question is from Matt Sheerin with Stifel, please proceed.

Yes. Thank you and good morning. I just wanted to follow up on Karl's questions. One, regarding your outlook for the year, Dr. Paul, like you said, it sounds like you've got confidence. It's really up to your ability to increase your capacity. So, do you have any outlook in terms of what we should be thinking about growth rates for Vishay this year?

We expected, we've said it before, higher sales than in 2021. We expect higher sales. We had put a number to it, it's at least 5% up.

And what about your ability to meet that demand? I know you've got the CapEx. I know there's a lag there of at least 12 months in some products. And if you look at the capacity and your price increases, does 4% or 5% growth sound conservative?

Price increases together with capacity increases exist but as you said, price capacity increases come step-by-step. And in the first quarter, I feel we could still see negative impact of the COVID pandemic especially in our plants in China which make the start a little slow by nature.

Okay. And then you sounded like your distributing inventory levels are still fairly lean but we're hearing from some of your peers that other sectors like OEMs and EMS are starting to build inventory and see some imbalance of parts. Are you seeing any signs of that yet?

There's no report, as you know, it's only our impression concerning -- I think a good indication is the number of escalations which we see. And as a matter of fact, we are still very much under pressure that customers call us and want improved volumes and also shorter lead times. So, my impression -- I think it would be naive to say that inventories at OEMs would not have gone up, but I believe there are still -- overall there are still shortages for very many product lines especially for MOSFETs. But maybe even discrete semiconductors in general, my impression is not that customers build undue inventory.

Okay. And just lastly, a question for Lori regarding that one time, a tax issue in Israel. Was that a cash payment? And it doesn't look like you're guiding, I guess, 23% tax rate going forward, so there's no impact going forward on that?

So maybe I'll start first. So, the $53 million loan was a charge to the P&L, and it will be paid out over a period of time. Because it was previously [Indiscernible] untaxed income to some extent, and then we accrued some withholding tax for the repatriation to the U.S. But the repatriation of the U.S. will be over a period of several years eventually, and therefore it will be cash out but not immediately. We're still guiding to the 22% to 24% tax rate at this point in time.

Okay. Thank you.

We have reached the end of our question-and-answer session. I would like to turn the conference back over to management for closing comments.

Thank you for attending today's call and for your interest in Vishay Intertechnology. This concludes our fourth quarter end of year 2021 earnings call.

Thank you. You may disconnect your lines at this time and thank you for your participation.