VISHAY INTERTECHNOLOGY INC (VSH)

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

This Management's Discussion and Analysis ("MD&A") is intended to provide an understanding of Vishay's financial condition, results of operations and cash flows by focusing on changes in certain key measures from period to period. The MD&A should be read in conjunction with our Consolidated Condensed Financial Statements and accompanying Notes included in Item 1.  This discussion contains forward-looking statements that involve risks and uncertainties.  Our actual results could differ materially from those anticipated in these forward-looking statements as a result of various factors, including those discussed in our Annual Report on Form 10-K, particularly in Item 1A. "Risk Factors," filed with the Securities and Exchange Commission on February 13, 2026.

Overview

Vishay Intertechnology, Inc. ("Vishay," "we," "us," or "our") manufactures one of the world’s largest portfolios of discrete semiconductors and passive electronic components that are essential to innovative designs in the automotive, industrial, computing, consumer, telecommunications, military, aerospace, and healthcare markets.

We operate in six segments based on product functionality: MOSFETs, Diodes, Optoelectronic Components, Resistors, Inductors, and Capacitors.

Our goal is to enhance stockholder value by growing our business and improving earnings per share.  Since 1985, we have pursued a business strategy of growth through focused research and development and acquisitions.  We plan to continue to grow our business through intensified internal growth supplemented by opportunistic acquisitions, while maintaining a prudent capital structure.  As we advance our Think Customer First organizational culture in 2026, we are focused on maintaining capacity readiness to fulfill rising demand, growing existing customer relationships, attracting new customer relationships, driving innovation, delivering new products and solutions, and expanding production in low cost countries to support our regional competitiveness.  We continue to evaluate our manufacturing footprint for ways to improve efficiency and profitability while maintaining capacity readiness.

We are focused on realizing the full value of our broad product portfolio, becoming a customer-first company, and capitalizing on the mega trends of e-mobility, sustainability, and connectivity to drive top line growth, expand margins, and optimize stockholder returns.  We are using eight strategic levers to achieve these goals.  Our elevated capital expenditure levels over the past three years have positioned us with increased capacity in an effort to ensure our customers of reliable supply as they scale production and to supply more part numbers to them.  We are committed to completing our capacity expansion projects, but have modulated and will continue to modulate spending in response to order flow, timing of customer demand and qualification, changes in lead times for equipment, and increases in subcontractor capacity.  For 2026, we plan to spend between $400 million to $440 million for capital expenditures, approximately half of which will be invested in our 12-inch wafer fab we are building in Itzehoe, Germany.

On July 1, 2026, we completed an underwritten public offering of 17.25 million shares of our common stock at a price to the public of $50.00 per share for proceeds of $830.25 million, net of underwriting discounts and issuance costs.  We intend to use the net proceeds from the sale of our common stock in this offering to accelerate our growth initiatives and for general corporate purposes, including to reduce borrowings under our revolving credit facility.

In addition to enhancing stockholder value through growing our business, we continue to follow our Stockholder Return Policy, which calls for us to return at least 70% of free cash flow, net of scheduled principal payments of long-term debt, on an annual basis.  See further discussion in “Stockholder Return Policy” below.

Our business and operating results have been and will continue to be impacted by worldwide economic conditions.  Our revenues are dependent on end markets that are impacted by consumer and industrial demand, and our operating results can be adversely affected by reduced demand in those global markets.  In this volatile economic environment, we continue to closely monitor our fixed costs, capital expenditure plans, inventory, and capital resources to respond to changing conditions and to ensure we have the management, business processes, and resources to meet our future needs.  We believe we can react quickly and professionally to changes in demand to minimize manufacturing inefficiencies and excess inventory build in periods of decline and maximize opportunities in periods of growth.  We believe we have sufficient liquidity to withstand temporary disruptions in the economic environment.

We utilize several financial metrics, including net revenues, gross profit margin, operating margin, segment operating income, segment operating margin, end-of-period backlog, book-to-bill ratio, inventory turnover, change in average selling prices, net cash and short-term investments (debt), and free cash generation to evaluate the performance and assess the future direction of our business.  See further discussion in “Financial Metrics” and “Financial Condition, Liquidity, and Capital Resources” below.  Nearly all key financial metrics increased versus the prior fiscal quarter and prior year periods.  Net revenues increased versus the prior fiscal quarter and the prior year periods primarily due to higher sales volume.  Margins were positively impacted by higher sales volume and associated manufacturing efficiencies, which offset higher metals and materials costs.  The order level remained at a high level and backlog continued to increase.

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Net revenues for the fiscal quarter ended July 4, 2026 were $888.6 million, compared to $839.2 million and $762.3 million for the fiscal quarters ended April 4, 2026 and June 28, 2025, respectively.  Net earnings for the fiscal quarter ended July 4, 2026 were $28.1 million, or $0.19 per diluted share, compared to net earnings of $7.2 million, or $0.05 per diluted share for the fiscal quarter ended April 4, 2026, and net earnings of $2.0 million, or $0.01 per diluted share for the fiscal quarter ended June 28, 2025.

Net revenues for the six fiscal months ended July 4, 2026 were $1,727.8 million, compared to $1,477.5 million for the six fiscal months ended June 28, 2025.  Net earnings for the six fiscal months ended July 4, 2026 were $35.3 million, or $0.25 per diluted share, compared to a net loss of $(2.1) million, or $(0.02) per share for the six fiscal months ended June 28, 2025.

Measures such as adjusted net earnings (loss), free cash, and segment operating income are considered non-GAAP measures.  We define adjusted net earnings (loss) as net earnings (loss) determined in accordance with GAAP adjusted for various items that management believes are not indicative of the intrinsic operating performance of our business.  We define free cash as the cash flows generated from continuing operations less capital expenditures plus net proceeds from the sale of property and equipment.  We define segment operating income as operating income excluding selling, general, and administrative costs of our global operations, sales and marketing, information systems, finance, and administrative groups, as well as restructuring and severance costs, goodwill impairments, and other items affecting comparability.  The reconciliations of adjusted net earnings (loss), adjusted net earnings (loss) per share, and free cash are below.  Note 10 to our consolidated condensed financial statements includes the reconciliation for segment operating income.  These non-GAAP measures should not be viewed as alternatives to GAAP measures of performance or liquidity.  Non-GAAP measures such as adjusted net earnings (loss), adjusted net earnings (loss) per share, free cash, and segment operating income do not have uniform definitions.  These measures, as calculated by Vishay, may not be comparable to similarly titled measures used by other companies.  Management believes that adjusted net earnings (loss) and adjusted net earnings (loss) per share are meaningful because they provide insight with respect to our intrinsic operating results.  Management believes that free cash is a meaningful measure of our ability to fund acquisitions, repay debt, and otherwise enhance stockholder value through stock repurchases or dividends.  We utilize the free cash metric in defining our Stockholder Return Policy.  Management uses segment operating income, along with segment gross profit, to make decisions, allocate resources, and assess performance of its operating segments.

Net earnings (loss) attributable to Vishay stockholders include items affecting comparability.  The items affecting comparability are (in thousands, except per share amounts):

Although the term "free cash" is not defined in GAAP, each of the elements used to calculate free cash for the year-to-date period is presented as a line item on the face of our consolidated condensed statement of cash flows prepared in accordance with GAAP and the quarterly amounts are derived from the year-to-date GAAP statements as of the beginning and end of the respective quarter.  Free cash results are as follows (in thousands):

Our accelerated investments to expand capacity have positioned us to be able to better serve our customers and capture the early stages of upturns in end market demand.  The long-term outlook for our business remains strong.

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Recent Developments

On July 1, 2026, we completed an underwritten public offering of 17.25 million shares of our common stock at a price to the public of $50.00 per share for proceeds of $830.25 million, net of underwriting discounts and issuanc

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Item 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

This Management's Discussion and Analysis (“MD&A”) is intended to provide an understanding of Vishay's financial condition, results of operations
and cash flows by focusing on changes in certain key measures from year to year. The MD&A should be read in conjunction with our Consolidated Financial Statements and accompanying Notes filed herewith, commencing on page F-1 of this report.  This
discussion contains forward-looking statements that involve risks and uncertainties.  Our actual results could differ materially from those anticipated in these forward-looking statements as a result of various factors, including those discussed
elsewhere in this Annual Report on Form 10-K, particularly in Item 1A. “Risk Factors.”

Overview

Vishay Intertechnology, Inc. ("Vishay," "we," "us," or "our") manufactures one of the world’s largest portfolios of discrete semiconductors and passive electronic
components that are essential to innovative designs in the automotive, industrial, computing, consumer, telecommunications, military, aerospace, and healthcare markets.

We operate in six segments based on product functionality: MOSFETs, Diodes, Optoelectronic Components, Resistors, Inductors, and Capacitors.

Our goal is to enhance stockholder value by growing our business and improving earnings per share. Since 1985, we have pursued a business
strategy of growth through focused research and development and acquisitions.  We plan to continue to grow our business through intensified internal growth supplemented by opportunistic acquisitions, while maintaining a prudent capital structure.
We have developed go-to-market strategies and are investing in and expanding the key product lines for growth that we have identified.  In addition, we are strategically expanding our outsourced production of commodity products to subcontractors.
At the same time, we are enhancing our channel management while investing in internal resources by adding customer-facing engineers and filling gaps in technology and market coverage.  Taken together, each of these initiatives supports our Think
Customer First organizational culture.

We are focused on realizing the full value of our broad product portfolio, becoming a customer-first company, and capitalizing on the mega trends of e-mobility, sustainability, and connectivity to drive top line growth, expand margins, and optimize
stockholder returns.  We are using eight strategic levers to achieve these goals.  Despite the industry recovery being slower than expected, we remain committed to our long-term plan of increasing our capacity to assure our customers of reliable
volume as they scale.  While we plan to advance our capacity expansion projects, we have and will continue to modulate spending in response to order flow and the timing of customer demand and qualification.  The decreased lead time for equipment
and the increased subcontractor capacity are also variables that allow us to adjust our capacity spending.  We invested $273 million for capital expenditures in 2025, 82% of which was invested in capacity expansion projects for high growth product
lines, including our wafer fab expansions.

In addition to enhancing stockholder value through growing our business, in 2022, our Board of Directors adopted a Stockholder Return Policy, which calls for us to return at least 70% of free cash flow, net of scheduled
principal payments of long-term debt, on an annual basis.  See further discussion in “Stockholder Return Policy” below.

Our business and operating results have been and will continue to be impacted by
worldwide economic conditions.  Our revenues are dependent on end markets that are impacted by consumer and industrial demand, and our operating results can be adversely affected by reduced demand in those global markets.  In this volatile
economic environment, we continue to closely monitor our fixed costs, capital expenditure plans, inventory, and capital resources to respond to changing conditions and to ensure we have the management, business processes, and resources to
meet our future needs.  We believe we can react quickly and professionally to changes in demand to minimize manufacturing inefficiencies and excess inventory build in periods of decline and maximize opportunities in periods of growth.  We
implemented restructuring actions in the third fiscal quarter of 2024 designed to optimize our manufacturing footprint and streamline business decision making. We believe we have sufficient liquidity to withstand temporary disruptions in the economic environment.  See additional information regarding our competitive strengths and key challenges as disclosed in Part I.

We utilize several financial metrics, including net revenues, gross profit margin, segment operating income, end-of-period backlog, book-to-bill ratio,
inventory turnover, change in average selling prices, net cash and short-term investments (debt), and free cash generation to evaluate the performance and assess the future direction of our business.  See further discussion in “Financial
Metrics” and “Financial Condition, Liquidity, and Capital Resources” below.  The key financial metrics were mostly higher versus the prior fiscal quarter and the prior year period.  Net revenues increased versus the prior fiscal quarter and
the prior year period primarily due to higher sales volume, but margins were mixed versus the prior fiscal quarter and prior year period.  Margins were negatively impacted by lower average selling prices, higher metals prices and labor
costs, and tariffs.

Net revenues for the year ended December 31, 2025
were $3.069 billion, compared to net revenues of $2.938 billion and $3.402 billion for the years ended December 31, 2024 and 2023,
respectively.  The net loss attributable to Vishay stockholders for the year ended December 31, 2025 was $(9.0) million, or $(0.07) per
share, compared to a net loss of $(31.2) million, or $(0.23) per share, and net earnings of $323.8 million, or $2.31 per diluted share, for the years ended December 31, 2024 and 2023, respectively.

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We define adjusted net earnings as net earnings (loss) determined in accordance with GAAP adjusted for various items that management believes are not indicative of the
intrinsic operating performance of our business.  We define free cash as the cash flows generated from continuing operations less capital expenditures plus net proceeds from the sale of property and equipment.  We define segment operating income as
operating income excluding selling, general, and administrative costs of our global operations, sales and marketing, information systems, finance, and administrative groups, as well as restructuring and severance costs, goodwill impairments, and
other items affecting comparability.  The reconciliations below include certain financial measures which are not recognized in accordance with GAAP, including adjusted net earnings, adjusted earnings per share, and free cash.  Note 15 to our
consolidated financial statements includes the reconciliation for segment operating income.  These non-GAAP measures should not be viewed as alternatives to GAAP measures of performance or liquidity.  Non-GAAP measures such as adjusted net earnings,
adjusted earnings per share, free cash, and segment operating income do not have uniform definitions.  These measures, as calculated by Vishay, may not be comparable to similarly titled measures used by other companies. Management believes that
adjusted net earnings, adjusted earnings per share, and segment operating income are meaningful because they provide insight with respect to our intrinsic operating results.  Management believes that free cash is a meaningful measure of our ability
to fund acquisitions, repay debt, and otherwise enhance stockholder value through stock repurchases or dividends.  We utilize the free cash metric in defining our Stockholder Return Policy.  Management uses segment operating income, along with
segment gross profit, to make decisions, allocate resources, and assess performance of its operating segments.

Net earnings attributable to Vishay stockholders for the years ended December 31, 2025, 2024, and 2023 include items affecting comparability.  The items affecting comparability are (in thousands, except per
share amounts):

Although the term "free cash" is not defined in GAAP, each of the elements used to calculate free cash is presented as a line item on the face of our consolidated
statements of cash flows prepared in accordance with GAAP.  Our free cash results are as follows (in thousands):

Our accelerated investments to expand capacity have positioned us to be able to better serve our customers and capture the early stages of upturns in end market demand.
The long-term outlook for our business remains strong.

Our free cash results were significantly impacted by the installment payments of the U.S. transition tax of $47.0 million in 2025,
$37.6 million in 2024, and $27.7 million in 2023, respectively, and payments of foreign and withholding cash taxes of $9.4 million in 2025, $15.0 million in 2024, and $63.6 million in
2023 on foreign earnings of $75.0 million, $105.0 million, and $276.8 million that were repatriated to the U.S. in 2025, 2024, and 2023, respectively.

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Growth and Company Transformation Initiatives

Effective January 1, 2023, a new executive leadership team, promoted from within, embarked on a new era at Vishay ("Vishay 3.0").  The new executive
management team laid out a three-year plan to expand capacity to support our highest growth and highest return product lines and to position Vishay to be ready for the next phase of megatrends in e-mobility, sustainability, and connectivity.
2023 was the staging year for this plan as all elements of the plan progressed throughout the organization.  In 2024, many of these initiatives advanced and increased manufacturing capacity began to be available.  Additional capacity became
available in 2025 and we began to benefit from the additional capacity as we are now able to satisfy quick-turn demand while maintaining competitive lead times.  In 2026, we expect to use our additional capacity to supply customers that are in
need of

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