Welcome to Vishay's Q2 2022 earnings call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. Please note this conference is being recorded. I will now turn the conference over to Peter Henrici, Senior Vice President of Corporate Communications. Thank you. You may begin. Thank you, Sherry. Good morning and welcome to Vishay Intertechnology's Q2 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 Q2 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 Q2 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 Q2 of $864 million, a quarterly record despite a temporary closure of 2 key facilities in Shanghai, China for over 2 months. EPS was $0.78 for the quarter. Adjusted EPS was $0.82 for the quarter. We've identified certain charges for the COVID-related shutdowns of our facilities in China during Q2. The cost of these government-mandated shutdowns in China are incremental to and separable from normal operations. These items impacted cost of goods sold by $6.7 million and selling, general and administrative expenses by $0.5 million and are added back net of tax when calculating our non-GAAP adjusted EPS. We do not include in this amount indirect costs of the pandemic, which are normal costs of doing business in 2022. During the quarter, we repatriated cash from Israel as part of a program we initiated in response to a change in Israeli tax law. We repatriated $81 million to the United States, net of paid withholding and foreign taxes of $13 million. We also paid Israeli clawback tax of $12 million. These taxes had been accrued in Q4 2021 when the new tax law was enacted. The payment of these taxes is reflected as operating cash flow on the statement of cash flows. The repatriated cash is used to fund our stockholder return policy. 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. For 2022, we intend to return at least $100 million. During Q2, we repurchased 1.4 million shares of common stock for approximately $26.3 million. We paid $14.3 million for our quarterly dividends for a total stockholder return of $40.6 million. Year to date, we repurchased 1.9 million shares of common stock for approximately $36.2 million and paid $28.8 million in dividends for a total stockholder return of $65 million. Revenues in the quarter were $864 million, up by 1.1% from previous quarter and up by 5.4% compared to prior year. Gross margin was 30.3%. Adjusted gross margin was 31.0%. Operating margin was 17.5%. Adjusted operating margin was 18.3%. EPS was $0.78. Adjusted EPS was $0.82. EBITDA was $192 million or 22.2%. Adjusted EBITDA was $199 million at 23.0%. Reconciling versus prior quarter, adjusted operating income Q2 2022 compared to operating income for prior quarter based on $10 million higher sales or $24 million higher sales excluding FX-rate impacts. Adjusted operating income increased by $12 million to $158 million in Q2 2022 from $146 million in Q1 2022. The main elements were average selling prices had a positive impact of $24 million, representing a 2.9% ASP increase. Volume decreased with a negative impact of $1 million, equivalent to a 0.1% decrease, primarily due to the COVID-related plant shutdowns in Shanghai. Variable costs increased with a negative impact of $15 million, primarily due to higher metals and material prices. Fixed costs were flat quarter-over-quarter. Inventory impacts had a negative impact of $1 million. Exchange rates had a positive effect of $4 million. Reconciling versus prior year. Adjusted operating income Q2 2022 compared to operating income in Q2 2021 based on $44 million higher sales or $78 million higher excluding exchange rate impacts. Adjusted operating income increased by $33 million to $158 million in Q2 2022 from $125 million in Q2 2021. The main elements were average selling prices had a positive impact of $64 million, representing an 8.1% ASP increase. Volume increased with a positive impact of $14 million, representing a 1.6% increase. Variable costs increased with a negative impact of $30 million, primarily due to increases in cost of materials and services, labor, silicon, metals, and logistics, not completely offset by manufacturing efficiencies and cost reduction efforts. Fixed costs increased with a negative impact of $17 million, primarily due to annual wage increases as well as general inflation. Inventory impacts had a positive impact of $4 million. Exchange rates had a negative effect of $3 million. Selling, general, and administrative expenses for the quarter were $110 million, slightly less than expectations due to foreign exchange effects. For Q3 2022, our expectations are approximately $107 million of SG&A expenses at current exchange rates. For the full year 2022, our expectations are $440 million of SG&A expenses. The debt shown on the face of our balance sheet at quarter end is comprised of the convertible notes due 2025, net of debt issuance costs, and $6 million outstanding on our revolving credit facility at the end of the quarter. No principal payments are due until the expiration of the revolving credit facility in June 2024. We had total liquidity of $1.6 billion at quarter end. Cash and short-term investments comprised $847 million, and $744 million is available on our credit facility. Total shares outstanding at quarter end were 143 million. The expected share count for EPS purposes for the Q3 2022 is approximately 143 million, excluding any impact of share repurchases. Our U.S. GAAP tax rate for the quarter and year to date was approximately 24%. Our normalized effective tax rate, which excludes the tax effect of the COVID costs in China, was also approximately 24% for the quarter and year to date periods. We expect our normalized effective tax rate for full year 2022 to be between 23% and 24%. Our consolidated effective tax rate is based on an assumed level and mix of income among our various taxing jurisdictions. A shift in income could result in significantly different results. Also, a significant change in U.S. tax laws or regulations could result in significantly different rates. Cash from operations for the quarter was $75 million. Capital expenditures for the quarter were $60 million. Free cash for the quarter was $15 million. For the trailing 12 months, cash from operations was $391 million. Capital expenditures were $253 million, split approximately for expansion $161 million, for cost reduction $16 million, for maintenance of business $76 million. Free cash generation for the trailing 12-month period was $139 million. The trailing 12-month period includes $15 million cash taxes paid for the 2022 installment of the U.S. Tax Reform Transition Tax and 25 million cash taxes paid pursuant to our Israeli repatriation program. Vishay has consistently generated an excess of $100 million cash flows from operations in each of the past 27 years, and greater than $200 million for the past 20 years. Backlog at the end of Q2 was at $2.425 billion, or 8.4 months of sales. Inventories increased quarter-over-quarter by $46 million, excluding exchange rate impacts. Days of inventory outstanding were 95 days. Days of sales outstanding for the quarter were 45 days. Days of payables outstanding for the quarter were 37 days, resulting in a cash conversion cycle of 103 days. Now I will turn the call over to our Chief Executive Officer, Dr. Gerald Paul. Thank you, Lori, and good morning, everybody. Despite the pandemic and the further accelerating rate of inflation globally, the Q2 for Vishay has been even more successful than Q1 that had been one of our best quarters ever. Following the increasing market demand, we steadily expand critical manufacturing capacities. In Q2, we achieved quite excellent results. Gross margin of 30.3% on the level of Q1. Adjusted gross margin of 31.0% versus 30.3% in Q1. Operating margin of 17.5% of sales versus 17.1% in Q1. Adjusted operating margin of 18.3% versus 17.1%. Earnings per share of $0.78 versus $0.71 in Q1, and adjusted earnings per share of $0.82 versus $0.71 in Q1. Due to some temporary increase of receivables and inventories in the context of the Shanghai shutdown, free cash generation in the quarter still has been modest, $15 million. For the entire year, we again expect a solid performance concerning free cash. Vishay continues to operate under extraordinarily good economic conditions. Orders and backlogs are at historically high levels. All regions remain principally strong with a currently not transparent situation of the Chinese market. Most of the market segments do very well, whereby there is an exception, computers and smartphones. Major shortages of supply continue to exist for many product lines. In view of increased inflationary pressures on the costs of manufacturers, the market continues to accept price increases. Global distribution overall remains in good shape. Their midterm business outlook continues to be strong. POS in the quarter was 13% below Q1, that clearly represented a spike, and 2% below prior year. POS in all regions declined from a quite extreme Q1. Global inventories in the Q2 increased by $54 million or by 10% versus Q1, and were 28% above prior year. That had been characterized, you remember, by rather extreme shortages. There is an impact of price increases indicating a lower increase in terms of pieces, in particular versus prior year. Inventory turns of global distribution in the Q2 were at a good level of 3.6, noticeably down from 4.2 in the Q1 and down from 4.4 in prior year. The Americas showed 2.1 turns after 2.3 in Q1 and 2.1 in prior year. Asia, 4.6 turns after 5.6 in Q1 and 7.4 in prior year. Europe, 4.3 turns after 4.9 in Q1 and 4.6 in prior year. Summarizing, the extremely lean supply chain of prior quarters is in process to normalize. Coming to the industry segments, automotive customers in general continue to be impacted by shortages of components. Expect a strong demand in the H2 as the customers will start to work down their high vehicle backlog based on an improving supply situation. Growth in the automotive market is expected to remain strong midterm with electric vehicles gaining market share and due to a further growing electronic content in general. Furthermore, significant investment is still to be made in charging infrastructure. Industrial market sectors are expected to show continued growth in view of an accelerated move to green energy, smart home automation systems, factory automation, and growing investments also in traditional power infrastructure projects. As I said, demand for notebooks is declining, but growth is expected to continue in server and storage hardware. 5G continues to provide growth opportunities, but some slowdown is apparent due to supply chain issues. Business with smartphones presently is declining. Extraordinary growth we see in military hardware, which can be expected to continue, and we also realize an ongoing recovery of commercial aviation markets. The medical business remains on a steady growth trend, returning to a more traditional segmentation. The markets for air conditioning and smart TVs presently are in decline, but increasing applications are there in white goods for control and communication. Wearable electronic products and Internet of Things applications continue to drive growth. The Q2 sales of Vishay, excluding exchange rate impacts, came in above the midpoint of our guidance. We were able to master quite severe pandemic-related issues in China, especially in Shanghai, of course, better than expected. We achieved sales of $864 million versus $854 million in prior quarter and $819 million in prior year. Excluding exchange rate effects, sales in the Q2 were up by $24 million or 3% versus prior quarter and up by $78 million or 10% versus prior year. Despite historically high backlogs, book-to-bill in the quarter was 1.07 after 1.14 in prior quarter. 1.05 for distribution after 1.16 in the Q1. 1.11 for OEMs after 1.13. 1.07 for semis after 1.14 in Q1. 1.07 also for passives after 1.15 in Q1. 1.02 for the Americas after 1.24 in the Q1. 0.88 for Asia after 1.02. 1.35 for Europe after 1.23. Backlogs in the Q2 remained on a record level of 8.4 months, close to prior quarter, which had been at 8.5 months. 9.5 months in semis after 9.3 in Q1. 7.3 months in passives after 7.6. Quite broad price increases continued to be implemented +2.9% versus prior quarter and +8.1% versus prior year, which includes a positive effect coming from an unusually high fluctuation of distribution incentives at semis. Semis themselves were +4.7% versus prior quarter and +12.9% versus prior year. Passives prices came up by 1.1% versus prior quarter and by 3.7% versus prior year. Despite high transportation costs, high material prices, and despite further accelerating general inflation rates worldwide, Vishay was able to defend its traditional level of variable margin%. Further price increases and good plant efficiencies helped. SG&A costs in the Q2 came in at $110 million. Manufacturing fixed costs in the quarter came in at $139 million. Fixed costs in total, both together, SG&A and manufacturing fixed costs, were according to expectations when excluding exchange rate impacts. Total employment at the end of the Q2 increased to 23,780, 1.5% up from prior quarter. Excluding exchange rate impacts, inventories in the quarter increased by $46 million, $10 million in raw materials and $36 million in WIP finished goods. Inventory increases in WIP and finished goods were caused mainly by interruptions of the supply chains and by factory shutdowns in Shanghai. Inventories will normalize for the most part in the course of the year. Due to the temporary inventory build, inventory turns in Q2 decreased to 3.8 as compared to 4.2 in prior quarter. Capital spending in the Q2 was $60 million versus $32 million in prior year, $38 million for expansion, $4 million for cost reduction, and $18 million for the maintenance of business. We continue to prepare ourselves for further accelerating growth rates. For 2022, we continue to expect CapEx of about $325 million. We generated in Q2 cash from operations of $391 million on a trailing 12 month basis, which includes $25 million taxes paid for repatriation of cash. We generated in the Q2 free cash of $139 million on a trailing 12 month basis, again, including $25 million taxes paid for the repatriation of cash. Despite increased CapEx and some inventory and receivables increases, we also for the current year expect a solid free cash generation. Coming to Resistors. With the Resistors, we enjoy a very strong position in the auto, industrial, military, and medical market segments. We offer virtually all resistor technologies and are globally known as a reliable high quality supplier of the broadest product range. Vishay's traditional and historically growing business runs at record levels. Sales in the quarter were $213 million, which includes $3 million from our new acquisition, Barry Industries. Up by $11 million or by 5% from previous quarter and up by $30 million or 16% vis-à-vis prior year. All this excludes exchange rate impacts. Book-to-bill ratio for Resistors in the Q2 was 1.05 after 1.24 in prior quarter. Backlog is at 7.6 months, quite on the level of the Q1, which had been at 7.8 months. Gross margin in the quarter improved to 33% of sales, up from 31% of sales in the Q1. Inventory turns in the Q2 were at 4.0, down from prior quarter at 4.4. There was some temporary increase of raw material safety stocks. Selling prices continued to increase, + 1.3% versus prior quarter and + 3.2% versus prior year. We are continuously raising critical manufacturing capacities mainly for resistor chips and shunts. We continue to broaden our business with specialty resistors by targeted acquisitions like ATP and recently Barry Industries. Coming to inductors. The business consists of power inductors and magnetics. Exploiting the continuously growing need for inductors in general, Vishay developed a platform of robust and efficient power inductors and leads the market technically. With magnetics, we are very well positioned in many specialty businesses, demonstrating also in this field steady growth. Sales of inductors in Q2 were $90 million, up by $8 million or by 9% versus prior quarter and up by $6 million or by 7% versus prior year, excluding exchange rate effects. book-to-bill in the Q2 was 0.97 after 1.14 in the Q1. Backlog for inductors has decreased to 5.6 months from 6.3 months in prior quarter. Gross margin in the Q2 increased to 33% of sales as compared to prior quarter at 30% of sales. Inventory turns were at a good level of 4.7, slightly up from 4.6 in prior quarter. Further price increases now also become apparent for Inductors, +1.0% versus prior quarter and +1.9% versus prior year. We continuously expand our manufacturing capacities for power inductors and remain open for acquisitions, in particular in the field of magnetics. In particular, I would like to mention that we are establishing a plant for power inductors in Mexico. Coming to Capacitors. Our business with capacitors is based on a broad range of technologies, with a strong position in American and European market niches. We also enjoy increasing opportunities in the fields of power transmission and of electric cars, namely in Asia, China. Sales in the Q2 were at $132 million, $7 million or 6% above prior quarter, and $19 million or 17% above prior year without exchange rate impacts. Book-to-bill ratio in the Q2 was 1.17 after 1.02 in prior quarter. The backlog remained at a very high level of 8.1 months. Gross margin for capacitors in the quarter remained at 25% of sales. Inventory turns in the quarter were at 3.2 on the level of prior quarter. Also for capacitors, we see continued price increases, 0.9% up versus prior quarter and 5.8% up versus prior year. We are confident for capacitors also in the light of growing global efforts in green energy in view of a growing mill business and the recovery of the oil and gas sector. Opto products. Vishay's business with opto products consists of infrared emitters, receivers, sensors, and couplers. Sales in the quarter were $78 million, $1 million or 2% below prior quarter, but up by $6 million or 9%, excuse me. 9% versus prior year, which excludes FX-rate impacts. Book-to-bill in the Q2 was at 0.86 after 0.78 in prior quarter. Backlog is still at a fairly extreme level of 9.1 months after 9.4 months in the Q1. Gross margin for opto products in the quarter normalized to an excellent level of 34% of sales, down from 40% of sales in prior quarter, which represented clearly a spike. We continue to raise selling prices also for opto products, + 2.5% versus prior quarter and + 8% versus prior year. Opto products continue to be a very relevant element of Vishay's performance. Coming to diodes. Diodes for Vishay represents a broad commodity business where we are largest supplier worldwide. Vishay offers virtually all technologies as well as the most complete product portfolio. The business enjoys a very strong position in the automotive and industrial market segments and keeps growing steadily and profitably for years. Sales in the quarter were $192 million, up by $13 million or 7% versus prior quarter, and up by $24 million or 14% versus prior year. Again, without exchange rate effects. The book-to-bill ratio in the Q2 was at 1.10 after 1.16 in prior quarter. The backlog decreased to 9.3 months from 9.7 months in prior quarter, which represented a record. Gross margin in the quarter improved further to 28% of sales as compared to 25% in the Q1, positively impacted by better ASPs, a higher volume, and some inventory build. Inventory turns in the Q2 were at 4.0, close to prior quarter at 4.2. We continue to raise ASP substantially, + 5.2% versus prior quarter and + 13% versus prior year. Our large and profitably growing business with diodes is the most relevant part of Vishay's volume basis. Finally, the MOSFETs. Vishay is one of the market leaders in MOSFET transistors. With MOSFETs, we enjoy a strong and growing market position, in particular in automotive, which in view of an increasing use of MOSFETs, will provide a very successful future for this line. Demand over the years has reached extreme levels and is expected to increase rapidly in the years to come. In the quarter, we had sales of $158 million, $13 million or 8% below prior quarter and $6 million or 4% below prior year without exchange rate impacts. Naturally, severely impacted by an extended COVID-related plant and warehouse shutdown in Shanghai. Book-to-bill ratio in the quarter was at 1.14 after 1.28 in the Q1. Backlog increased to another record of 10.1 months from 9.0 months in prior quarter. Gross margin in the quarter increased further to 35% of sales after 34% of sales in Q1, also supported by some inventory build. Inventory turns in the quarter dropped to 3.4 as compared to 4.4 in prior quarter. A substantial but temporary increase of WIP and finished goods was there as a consequence of the Shanghai shutdowns. We continued to implement price increases in a substantial way, + 5.3% versus prior quarter and + 5.3% versus prior year, which includes the major part of the previously mentioned effect on distribution incentives. MOSFETs remain key for Vishay's growth going forward, and we intend to keep a proper balance between in-house manufacturing of wafers and purchases from foundries. Let me summarize. Despite substantially growing political instabilities, a strongly accelerating rate of inflation, and ongoing disturbances still caused by the pandemic, we continue to enjoy a very high market demand. Backlogs and lead times remain at record levels, and our industry clearly benefits from an acceleration of the electronification in most of our market segments. The move to electric vehicles is one of the drivers, but to a similar extent, the move to green energy and the accelerating automation of factories. We expect this trend to continue long term. Vishay is well-positioned and competitive in terms of product range and costs, and we keep investing in new processes and manufacturing capacities. We are confident also for the Q3 and guide to a sales range between $860 million and $900 million at a gross margin of 29.0% ±50 basis points. Thank you very much. Peter, please. Thank you, Dr. Paul. We'll now open the call to questions. Sherry, please take the first question. Thank you. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. Our first question is from Ruplu Bhattacharya with Bank of America. Please proceed. Hi. Good morning. Thank you for taking my questions. Hi, Ruplu. Hi, Dr. Paul. I wanted to ask first on gross margins. Obviously, they came in better than your guidance. You talked a little bit about the inventory build. I was wondering, of the 70 basis points sequential improvement between 1Q and 2Q, how much of that was related to the inventory build? If you can just talk a little bit more about what this inventory build was, is it all in distribution? No, no. How soon do you think that normalizes? Then when we look at the Q3, you're guiding to 29%, which is, you know, lower than the 31% you reported, but that's on $20 million higher revenues. Just what are the dynamics playing in the gross margins between 2Q and 3Q? Yes. The inventory build, not only, but by far for the most part, happened in MOSFETs. Because this was the phase when our plant was shut down for 8 weeks during the quarter. You can imagine the primary is in the Western Hemisphere, they produced, and we were not able to package to a large extent. This increase happened at MOSFETs, not at distribution in-house, really, in our house because our supply chain, the internal supply chain, had been distorted. We are going to work this down, of course. The quarter, of course, benefited financially from this inventory build to the extent of approximately $8 million. In the Q3, the opposite will happen by nature. We are going to start working this inventory down with objectively then a negative effect of the same magnitude on the results. These are the dynamics. Sorry, just that 200 basis points of gross margin compression. How much of that is because of the inventory drawdown, and how much of that is because of other factors? It's calculated. The impact quarter-over-quarter is $10 million, right? If you compare the 2 quarters, $10 million divided by $900 million sales, approximately 2.2 points, right? I see. Okay. Okay. Understood. Maybe can I ask on diodes? You know, gross margins on the diodes have been trending higher, and they were 28%, which seems very high. Can you just elaborate what is driving the higher margins? Is this level sustainable going forward? No. Because we typically think of diodes as commodity products, but just your thoughts on that. It was first of all, we had better prices. This is number 1 reason in diodes, better prices, and we had higher volume also. All this together, including some good efficiencies which we had, gave the 28%, which I agree for a commodity product is not bad. I see if volume remained and prices remained, this, of course, can be defended in future. This was no spike, but we will see. 28% indeed was a good result. True. Understood. Then just for my last question, you repatriated $81 million from Israel. What is the plan for that cash? I mean, should we expect any more increased buybacks, or is there any thought for a dividend increase or increased M&A? Just your thoughts on how you plan to use that $81 million. Yes. This is Lori speaking. W e identified that we would fund our stockholder return program using this repatriated cash from Israel. As we announced, we plan to return 70% of free cash or a minimum of $100 million in either case. We would continue along that same route. Okay. All right, Lori. Thanks. Thank you, Dr. Paul. Thanks for all the details. Appreciate it. Our next question is from Joshua Buchalter with Cowen and Company. Please proceed. Hey, team. Thanks for taking my questions, and congrats on a pretty stellar set of results in a tough macro backdrop and navigating China issues. My first question, you guys have previously, I think, discussed expectations to grow roughly 5% this year. Even with FX headwinds, given the print and guide, I think that implies a pretty sharp decel in sequential growth in the Q4. Any particular reason why we should be expecting that given the still strong environment? I guess any changes to that growth expectation for the year? Thank you. If I understood you right, you now take the outlook of the Q4 and ask whether there could be the danger of a downturn, if I understood you right. Well, it was more what's the assumption baked in and should we still think about? Yeah. Sorry. As a matter of fact, we believe that the year will pull through very nicely. The deepest reason is, so first of all, our responses from customers, but also if you look at the backlog, the backlog is still sky-high, and we have all reasons to believe that this will become a very good year, record sales year for Vishay. Understood. Thank you. You maintain the $325 million of CapEx expectations, which also implies a sharp update on the Yes, yes. I reconfirmed the $325. Yeah. I guess it implies some higher spending in the H2. Have you had any troubles in the H1 procuring tools? Oh, no. As a matter of fact, we do have a cycle. The capital spending in Vishay is always by far higher in the H2 than in the H1. This would not be a difference to a normal procedure, so to speak, at Vishay. No, we do have. I think we can confirm the 325 CapEx. Got it. Then, you know, given what you're still saying is very strong demand, particularly for your MOSFET, I would imagine, you know, should we still expect you to have elevated spending in 2023 compared to prior years to support that demand? Yes. At the moment, it's not only MOSFET, it's broader, but MOSFETs for sure is the hottest demand at the moment of all our products, shows the hottest demand. W hat would we hear from the market is a further acceleration of the requirements for MOSFETs for the years to come. It's like that. We are going to prepare ourselves. You know, going forward, we are going to build an additional fab in Germany in order to follow the need and to keep balance between own production and purchases from foundries. We believe we need to keep a balance there. We are going to have potential CapEx in the years to come. Vishay is strong, and the cash flow is also strong. No, all makes sense. Thanks and congrats again. Thank you. As a reminder, just star one on your telephone keypad if you would like to ask a question. Our next question is from Matthew Sheerin with Stifel. Please proceed. Yes. Thank you. Good morning. Dr. Paul, I wanted to just double-check some of the numbers that you gave initially on the distribution POS. I think you said it was down year-over-year and quarter-over-quarter. Could you give me those numbers again? Sure. Just a second. Takes 1 second. I don't know them by heart, obviously. Takes another 2 minutes. Yeah. The question there is, it sounds like the POS was down, inventories were up a little bit, but the book-to-bill was still significantly positive. Yes. My papers. You are talking POS? Yeah. Okay. I have it. The POS for this is book-to-bill, what I see here. Here we go. Okay. POS. These are inventory terms. I have here inventory terms at the moment. Oh, I thought you gave a POS number at the beginning. Okay. This was it. Now I have it. It was in the text. POS in the quarter was 13% below the Q1, but the Q1 represented a spike, and it was 2% below prior year. 13% below the Q1 and 2% below prior year. You see this was much closer to prior year. The Q1 was abnormal. There were pull-ins. I'm just wondering why the book-to-bill was positive if it sounds like the demand from the distributors, you know, you know, stabilized or was even down. Book-to-bill was for distribution 1.05. Yeah, that's right. I'm trying to figure the disconnect there between the positive book-to-bill and the negative sellout. There are 2 different comparisons. 1 compares for the same quarter book-to-bill, and the other 1 with the quarter before. Okay. In other words, you're not seeing any signs of weakness from distribution in terms of orders and backlog? Well, as a matter of fact, the distribution is 1.05. It's true that Asia at the moment shows some weakness, but this can be attributed to an extraordinarily strong Q1. I understand that there were many pull-ins really in the Q1 out of certain uncertainties they had. Altogether, we expect for the Q3 for POS in Asia an increase vis-à-vis the Q2. An increase. We expect that. Got it. Okay. On the pricing, which obviously is benefiting you, are you done yet? Are there still ASP increases that you're putting through in any of your areas? Yeah. Well, we expect some further price increases, but at a slower rate. It's also true if inflation accelerated, we will increase also our price increases again. There will be price increases also in the Q3 at a lower rate than we had them in the Q2. Okay. I wanted to get back to a previous question just about outlook for the December quarter. Typically, Europe and North America are down. Well, there's some seasonality obviously in Asia. Looking ahead, obviously, you've got very strong backlog. Your lead times are, you know, 50 weeks out. Do you have visibility in the December quarter, and do you expect it to be more or less seasonal? No, it's better than seasonally obvious. The backlog will make it non-seasonal. This is our conviction. We do not hear signs from any customer that they want to slow down ordering or shipments. They don't want to slow down. Everywhere, in our main, we are talking automotive in reality in Vishay, and we are talking industrial. These are the 2 major areas. We do not hear. Mm-hmm. No signs of any weakness. In fact, automotive insists on their high forecast. We are adding capacity. The backlog is there. Capacity will be even higher in the Q4 and no signs from the customer. I expect a strong Q4. Okay. Then on gross margin, you know, you talked about why it would be down. It still sounds conservative. As you look forward and given your expectation for further growth, can you get back to that 30% + gross margin number sustainably? Principally, yes. It's a matter of volume, and we are investing in capacity. It's a matter of volume. We are not famous for raising fixed costs dramatically. If the volume comes up, you automatically get to better gross margins. The 30%, which we have shown, or 31% even in quarter before, this was of course favored by inventory build. Now we see the opposite because we keep our eye on the inventory levels, so we will reduce them. Which has then quarter-over-quarter this effect. Okay. Just lastly from me, Dr. Paul, I know there's a you know, major management transition going on in the next couple of quarters as you pass the baton on. I'm just wondering if you could give us any idea in terms of you know, planning there, any expectation for any significant change in the company strategy or use of capital or anything else? I know all the new people, so to speak, very well and since many years. I have full trust in all of them. I do not expect that Vishay will change its direction. What we are going to do, we will lay even more emphasis on growth going forward. I believe the markets which we mainly deliver to can make us optimistic that we are not wrong in this expectation. I guess, I expect, guess is too little. I'm sure that the expansion of capacities will become a major subject even more than they have been in recent years going forward. This is the direction, but principally speaking, we will follow the track, no question. Okay, thank you very much. 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 joining us on today's call and for your interest in Vishay Intertechnology. Thank you. This does conclude today's conference. You may disconnect your lines at this time, and thank you for your participation.