Vishay Precision (VPG) 7 Nov 232023 Q3 Earnings call transcript

Hello, everyone, and welcome to the VPG's Third Quarter Fiscal 2023 Earnings Call. My name is Nadia, and I'll be coordinating the call today. [Operator Instructions]

I will now hand over to your host, Steve Cantor, Senior Director of Investor Relations, to begin. Steve, please go ahead.

Nadia. you, Thank everyone. Good morning, our Third Call to Earnings Quarter today. Welcome Conference

today's press Our vpgsensors.com. slides of and available can release website. limited have through for quarter the An will Internet on been recording be at accompanying time website and third a be VPG's posted audio our accessed call on

Today's remarks Securities safe Reform Act. the Litigation of provisions are harbor governed by Private the XXXX

results actual may Our forward-looking vary statements. from

our of discussion December you risks associated filings, operations, XX-K VPG's Form encourage to our XX, other ended the with to recent we for refer SEC For SEC and year the especially filings. a the XXXX,

refer On today the quarterly Slide call the President; now X CEO and presentation. turn and Please Bill call to the some to Ziv CFO. for I'll are of Clancy, Ziv Shoshani, remarks. prepared

sales Steve. on with and I results details about begin consolidated the financial the will quarter. financial our trends for will the you, provide some for quarter VPG's fourth Thank comments outlook third Bill quarter. and

Moving mixed low end summarize to in and as the environment guidance lower the as sequentially, due revenue our was were businesses. to industrial the we macroeconomic achieved steel primarily Slide trends orders quarter Orders of across at softened results, our our X. challenging. markets To

deployed remained flow shares. solid, to cash repurchase Our debt and capital well down as we as pay

We continue to execute on long-term growth and cost reduction initiatives.

Slide to X. Moving

and were from segments. lower ago, trends were reported of X.X% in detail, revenue systems offset at year X of segments $XX.X second sales XXXX. Looking Solutions Sensors and which sales higher in mixed million, X.X% third we quarter by sales our the the the declined from quarter measurement Weighing across results as Sequentially, the of

$X.X Bookings EBITDA majority and generated ratio was and in of The solid XX.X% the of of of of X.X. steel million decline, resulting quarter million. flow related were as a lower orders. adjusted to XX.X%, Our million, lower margin million $XX.X in of EBITDA, $XX.X the $X sequentially, book-to-bill cash cash third flow we adjusted free adjusted

end military markets in segment, and order Order reflected avionic, cautious overall orders timing trends which the customers' demand Sensor and most our offset in higher space market. of of large patterns across the

and visibility trends backlog, to and to some stabilizing some and improving be bookings see with continuing markets mixed markets soft. our Given continue our we

review now by our performance I'll segment.

Moving X. to with segment. Beginning Sensors Slide our

XX.X% Third quarter market. million lower the sales levels quarter. revenue end Sequentially, the the of revenue year stable the and Overall, Measurement -- strain Test and were gages general primarily sales were lower of in to sensors reflected $XX.X XX.X% markets, of at a advanced declined industrial compared ago second from and precision decrease and resistors AMS of in stable quarter. end the with comparable second

in to the with million of to distributors general, for X.XX. semiconductor the inventory were applications. their and third market levels. Orders quarter, continue down OEM resistors $XX.X market cautious work and AMS they book-to-bill our which offset In which test in were precision orders as XX.X% higher resulted demand their a Booking of lower for customers medical soft for sensors sequentially, were the

new progress the advanced both with the sensors pleased engagements. We with of ongoing are and OEM the

continue to We positioned electronic consumer with be customers. well our

maker as phase. our we beta design a of robots, expand robotics, achieved addition, in to of our currently a with in initiative is In business win part key which the strategic humanoid

due margin In levels. XX.X% volume of lower XX.X%, terms sequentially lower due to for and temporary of results gross to labor primarily declined operating from production inefficiencies Sensors, adjusted

Slide X. to Moving

Turning Weighing to segment. our Solutions

for market and Industrial in lower lower year higher X.X% of sales precision X.X% market. the OEM and by were in construction quarter than agriculture second $XX.X a than ago, were the sales lower sales and Sequentially, transportation quarter Weighing of million Third XXXX. the application offset

quarter second of medical equipment. orders X.XX, from the our Weighing the in the for lower markets, markets reflecting as Book-to-bill for was in as and Solutions other well Weighing million softness bookings $XX.X Industrial Transportation XX.X% declined

with products in Weighing new we in our progressing XXXX. growth revenue cell We are Solutions, key initiatives and expect load see vLite to for

gross with costs the in flat, of all-time margin high as lower lower the of quarter XXXX by of XX.X% offset Solutions Weighing volume. the was operating impact second

manufacturing our took our part cost products in of As in and ongoing to downsize Weighing consolidated in operation we China, Solution facility reductions, the steps India. manufacturing those the of

to relocation in the expect complete production this quarter. We fourth

Moving to X. Slide

Turning Measurement to our Systems segment.

and AMS from higher offset XX.X% and grew by X.X% partially was million $XX.X products by sequential in in of of markets, revenue lower ago, sales steel the transportation the The sequentially. increased a quarter driven Third year revenue increase DTS market.

was Systems million DTS second as offset of record for $X.X a million in quarter. Measurement decline products our to products. steel-related grew Sequentially, X.X% for ratio the orders for KELK which orders orders declined $XX.X Book-to-bill and level, X.XX, from DSI a

from due to near decline steel slowdown the record quarter reflected in market part a China. activity slower KELK, the primarily For in in the a in QX general

capabilities new is technology the testing known avionics DTS On platforms, well as eVTOLs. other of missile development platforms the as aviation supporting commercial as aircraft programs electric-powered such of includes This systems. prototypes as for and of in the new

since new these stage, in the development DTS phase. products of the platforms the still stages While benefit these Avionics R&D are testing are we in from platform used

reflecting Systems XX%, margin primarily sequentially gross the third volume. quarter to the Measurement for improved XX.X% higher in from Adjusted

Slide to X. Moving

solutions, of a Despite uncertainties unchanged. core currently cycles. set priorities end markets, our among our relationships across the diversified the customer high steady in value that clear strength global our are the of and Our and deep foundation provides economy, our are innovative

in on focus applications offer are We volume, traditional These that of potential. initiatives growth in our growth set to ones. industrial addition are to long-term higher continuing a applications long-term broadening

initiatives initiatives, solutions sales business, teams same excellence operational stepped we we execute the have time, actions maximize our cost to are to part technical leverage. of these our the to strength OEM our our mindset. long-term As leverage grow operating of At engineer-to-engineer selling on and reductions, continuing our up which

grow consolidation and Weighing just migration processes. substantially example to to our equipment These have these manufacturing is cost from one the more we entail begun ago. Solutions our operating well which years as segment center of achieved efforts, manufacturing lower several programs a of introduction of as a smaller automated excellence of margin we The success in

are our Also, strategy balanced continuing implement warranted, allocation creates we stock to M&A that as to and successful stockholder growth, repurchases. value organic

value-creating We continue and attractive to look for opportunities. acquisition

interest paid In million addition, third which we our of $X the quarter, our reduce will in debt, expense. down

the to we repurchased We repurchase also year. the stock stock X of million continue months of quarter have third first $X.X during the and in

add I the point. to would to Before for the Bill call following financial turning additional details, like

operates Europe, Asia, as well company, VPG a in facilities Israel. As America, North global as

have implemented challenges a understands with in We plans can that long and have Israel operating the them. history contend to arise contingency uncertainties of and and

to to Israeli-based We many that continued hubs over have on has levels years. deliver chain at proud are customers and not there been schedule. say supply our to products VPG's break near-normal or a production operate in to

I the priority, well-being have want for there. their of and commitment in employees to to is Their top safety Israel light taken contribution we daily assure proper that. and measure and our the VPG's in thank recent events

Bill? turn now to additional over Bill I details. it financial for will Clancy

per operating of Ziv. we million of the deck, of net of Referring million, earnings revenues, $X.XX. and income was share quarter of sales, of of adjusted the sales, $XX.X of to operating $X.X in and of share of diluted or $X.XX. third reconciliation $XX.X and our gross slide XXXX, or revenues $XX.X Thanks, X.X% million the basis, XX.X% XX.X% Slide profit XX.X% earnings net $X.X income diluted gross an per achieved or tables X million, was On or profit sales, million was

year third third XXXX, quarter in were $XX.X in the foreign unfavorable a of quarter $XXX,XXX impact below rates a ago, XXXX. but an compared as to had the compared effect X.X% to compared Our million of year declined ago. second revenues quarter X.X% to currency had second of $XXX,XXX quarter positive and the the Changes a

to XX.X%, Gross On to as lower the XXXX, in third of of third mainly quarter in quarter compared basis, quarter adjusted quarter gross XX.X% XX.X% second in margin the compared XX.X% was margin XXXX. reflecting the volume. an second was

operating in compared XX.X% Our margin third of XXXX. margin X.X% the the quarter operating XX.X% quarter quarter. as Adjusted second was in was the to for third

third and partially million $XX.X $XXX,XXX quarter bonus XXXX. third million general rate of offset $X.X and XX.X% to compared of administrative for weight exchange to of increase by and of positive $XX.X attributable as million for costs, revenues quarter were other for million SG&A commissions, of mainly of count $XXX,XXX the for in and $XXX,XXX or was Selling, expenses of revenues $XXX,XXX foreign effects. $XXX,XXX increases, adjustments, reserve head the The of XX.X% or $X.X travel,

of per production share The the of $X.X the were million net the third China third The facility. quarter some our in $X.XX quarter XXXX. for share to diluted to of a India to or charge adjusted million $X.X relocation products related million third per or diluted in $X.XX $X.X earnings quarter included compared results

purchases $XX.X was was reflects first infrastructure. X a EBITDA year majority the related Adjusted or of to CapEx equipment million million revenue compared XXXX Purchase which XX% in and of $XX.X XX.X% ago. the of or $X.X months million,

fiscal carryover which $XX of full to in spending we approximately in million XXXX. expect to XXXX, $X from For million, CapEx range million the purchase the $XX includes be

XXXX was cash expenditures free $X our plus fixed less to compared sale free capital $XXX,XXX. the cash million During $X XXXX. repurchased for third as $XXX,XXX $X.X activities operating million, quarter common cash as of the of for the of third quarter flow third $X adjusted quarter, define of of We we of assets of from Adjusted million, flow million stock.

third The XX.X% of rate third primarily was to quarter rate jurisdictions. a XXXX in the tax the higher reflecting proportion as XXXX, higher XX.X% of of GAAP quarter income tax in compared in

an XX% full of XXXX. assuming in rate XX% tax are We year to the for range of operational the

reflects third $XX.X quarter, expense XX. the and Slide quarter We total approximately debt the to of and our long-term million the balance interest our of $XX.X million cash This cash reduces which of revolver ended of outstanding $XXX,XXX. during equivalents, Moving $X our by million. on repayment with annual

outlook. Regarding the

flow, to conditions and the revenue exchange given XXXX shares. the repurchase current our market revenue the expect $XX constant summary, generated quarter at net fiscal at to we cash deployed down million the uncertainties solid to we fluid we cash in fiscal and and Israel, third million and end $XX For debt low of in our In we fourth pay guidance, range the situation achieved of rates. be quarter,

open let's the for you. that, questions. With Thank lines

our And first John of Instructions] [Operator question Sidoti Franzreb & Company. to go

on going start correctly, in but counterintuitive that bookings were order if That weak about a Ziv, talk business I the there? in Can the also was Sensors AMS the you segment. only in not little unusually you bit like The what's to weak portion me. I'd seems quarter, to of heard AMS.

the expect AMS But soft orders demand, for the intake sensors. that market for order indicated sensors given as well you as to cyclical the in we The do the Regarding were semi the in much coming see quarter. higher order next AMS. in

in So effect, this issue. a is, timing

they second indication while inventory year. to we see semiconductor be the half discussion business had see markets, the with half expectation is the coming orders deliveries given say, first to and emerging and that back would I the of next is Regarding beginning is the down levels, working of XXXX, other the their as around -- would of, are customers,

quarter. this cyclical coming expect to a in AMS, cyclical the reiterating higher order intake just We order do just a see intake. the -- But is

Okay.

the that weak the semiconductor impact from is of for in I recall, for on you been what AMS while margin, has just guys. a So Because gross dropping the quarter? mix off

margin. that? is misunderstanding am AMS assume basis, sequential only So Or I impact on difference that's gross mix on the I a would the

have So production lower gross due labor we volume to was or the the but levels. decline identified market. industrial Partially, slower due margin demand due AMS, to in softer also and a lower temporary it's to primarily inefficiencies the

So related of to both business. it's and industrial, the east AMS

Okay.

it Got weakness But of X.XX. it. in was Got steel And out Okay. like quarter. the book-to-bill for the seemed kind profile called the it. the -- you only

that. on demand with through offset going looks the -- sufficient that to to it come that September to of we're kind would that DTS be quarter, me of what's the redesign? kind expecting this quarter? December like And is And of Weighing in the DTS but offset kind So maybe

has has the completion The correct. SLICEX redesign redesign are the you model of bookings. -- DTS Yes, of the supported higher DTS

the to to we higher that, addition have AMS related in much booked orders In in business. DTS

So higher the market orders steel was AMS in for DTS. decline offset by

queue. one I'll back And question, Okay. last and get into

Regarding the your hopes production I'm in certain Israel. everybody best. for

until facilities there try not reason Or normal to? you operate going you to up inventory in is place. just Will your any product You did case? you talk there, or as about plans in to in have your there build just are lines

Sure.

represents in the Israel market So of in our for part production while small operate central a facilities products, we X relatively Israel.

are We as schedule no are at operating we -- are meeting pure currently customers' with levels we normal delays. deliveries operating

interruptions, indicated put At this uncertainties, securing operating our finished regional in includes Those we of material, minimize our to shipping in -- place as point delivery challenges to are on our there and in time, the of understand history raw plans call, I and working we given freight others. and any contingency distribution our goods centers, the the and in given forwarders plans. advance potential business with contingency ensure Israel, to

small of other in a to there the product customers. yes, So a a at certain in in point to additional I is, supply say, of would order or material to ensure to raw steps degree, fairly this build our time,

Griffin question to Riley. The Boss of B. next goes

to that just to I last start off, So on build wanted question.

your increased affect just benchmarks prolonged see then, still of seen February to could to And the aiming is targets that X-year X- you're for? that you potentially that there Israel. your XXXX? February we've risk X-year curious, back good are implemented now targets you any that Russia Or XXXX. X- in those I'm and conflict So you in in since conflict geopolitical

and to in certain high biggest are and our good industrial which to industrial on biggest -- the X a time, the and the the interest mainly business Griffin, our definitely in a this X benchmark. slowdown the rates, China, slowdown point economy, still really our in business. -- degree, years effect is the affects At steel effect the

indication the year. to will next and our expected As is that our growing good I up indicated, market from and strong, as AMS consumer is have well very still distributors semiconductor customers market we the a pick -- as

valid. is the X So definitely years plan to X

strong Okay. was Or you started in speaking was about Can $X and -- systems? there. the measurement third just already implying just the in still Great. there that AMS, had with quarter? were And you the for what the of the shipments strength that third headwind clarify, DTS, you a that talked was million helped the orders there quarter, redesign were in

and higher new we Shipments already while in I QX. crash for, redesign those items. I I would or features AMS new at the But developed dummies seen for the say, QX, that DTS end business, new for more have started completed been applications. the of we this is has say, every say, defense would for or And ASP important, project, would bookings are for higher

developed. we the those in DTS strong So designs coming continue the being expect be due do also AMS to for to to new future business

is Are Or dummies those talking WIAMan features general? in this the just -- about? that new you're

WIAMan new of you're correct, to correct, developed, is that. been definitely of are has addition But part but we You that, have WIAMan in is programs. that features those part

see the was so Okay. nice to right. debt it this quarter. shifting then pay All gears, And Great. down

color wondering how capital Just allocation. give prioritizing could just more you're forward, if some about you going

been X I M&A, trending that prongs just revolver, those debt. about know you're market you multiples curious in now, share there. but just seeing you're pay and that the lines, you talk could if what paying it how the M&A you down you're And too, right of what have some how we're down have seeing now just along seeing prioritizing repurchases and

Sure.

start M&A, will color provide with the our capital So allocation. maybe regarding I more will then Bill and

in of opportunities opportunities of the financial quality high, Regarding many could we more terms in do product rate. believe growth structure, interest M&A, structure, portfolio regarding VPG's to higher see we companies rate the terms continues in the as of do terms more fit that be

dialogue been down. companies. to this we fruition. is but came down So And are have far, much with there valuations point in we doubt, no time, few nothing at going still But in are an to see slowly, that do But extent, going they activity. more

capital allocation the take, you can Bill, please, question?

Sure.

Griffin, $X the that, opportunity But a the priority. the this to had are Board over time, back our looking the debt. point is besides we in buy the So M&A, to of Ziv And we're our mentioned, we stock during quarter for always down Directors. that -- authorization continuing way as to bring at utilize And an best. million the top to obviously, from through also, pay back our like cash third-party

debt So think organic all I buybacks as possible. also priority, growth, opportunities looking in all, M&A pay the when is down and top to then at and and

follow-up from of we Instructions] have a Franzreb Sidoti And & John [Operator Company.

Yes.

that's steel market that, UAW what's the in -- something Or Just interruption to to sector the month you you of thoughts production what's strike on of October? like steel MS impacting I do I'd segment. in the go the going want your hear view. of think it's the different? reflective in to on back Do and and think

as funnel, the is we of picture part you we -- but opportunities. are that, looking how do do the the manage big have Well, how is, big we picture. issues we indicated, the manage And the the at John, in October

Looking at XX% capacity. the than more future has opportunities, the than more world's world steel while -- of China

regarding see is extent is an kind -- and of We that of world. And opportunities. economy parts are slowdown new are looking new at do kind market projects that -- do and there the softening. see how a we of this this to we a projects developments as as the that in other concluding China And market the that the number well new China softening we of projects, other in given the end new and is

standing basis, geographic pointed whole And across you enough. little you're or color out more is a China, seeing give bit that's either positive collectively since negative? what if you've the And company. anything us a could out just Fair else on on

a a one and slowdown. of that, bit sell the I company, across this industrial bag. the where it's products, we Yes. whole have China mixed well, say where we little hand, we would Collectively more On see is

hand, where precision I have -- where we we indicated, to We in Japan are much selling rebound, selling see do expect other the we as are resistors. semiconductor On more more semi much a XXXX.

I strong. of America, think flattish. in is AMS is kind Industrial

started are starting an -- indication well are Asia, order semiconductor looking start we I would place trend they equipment, same at also to increasing that the applies preparing to intake. again. say, are While to Consumer, we they as which have at see or the is an of orders as

that softening intake in kind semiconductor Regarding still of the to AMS next very Europe, order projecting Test an increase I the test is market, respect see of we a the beginning in And say industrial Europe, while would and year. -- general strong. in and we Measurement, are AMS

Thank you.

no back have I'll any hand We for further Steve to questions. And closing comments.

all you to in for we call today, quarter. forward call and our joining you next our you. look updating next Thank Thank

now Thank today's you. all Thank joining. concludes This for you call.

lines. your disconnect now may You