VPG - Earnings call transcript Q3 2018 | Vishay Precision Group, Inc.

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Operator

Good day, everyone, and welcome to the VPG Third Quarter 2018 Results Conference Call. [Operator Instructions]. And please note that today's event is being recorded. I would now like to turn the conference over to Reynee Tung. Please go ahead.

Reynee Tung

Operator. you, Thank everyone. Good morning, VPG's XXXX Conference to Quarter Third Call. Welcome Earnings will An comments the contribute. be conference recording that call may or of questions made audio any today, participants including release, have to time through it important the should taken contains read all it you hope you've now earnings By press information. and as we the received

be An on find today's can call of is it, reconciliations, on the International You time and recording for accessed relevant can limited on Copyright VPG's VPG by protected website. of be available VPG audio non-GAAP including website Internet a Law. U.S. is and at The vpgsensors.com. conference this the will owned and content by call

reproduce, safe make other part or recordings Securities may or Actual display of not any governed this provisions conference perform copies the we by are the may contents call, written forward-looking out call our statement any in significantly Private adapt, may turn or distribute, performance the results, in whole than of transmit, this better today. You or Today's not permission. that conference XXXX indicated remarks make without worse Act. of by and harbor you or Reform may Litigation achievements

introduce other VPG's our complete SEC the more XX, CFO. for filings. host Bill? XX-K Bill discussion and Clancy, filings, now today's For the a President; especially Form for Shoshani, and CEO refer risks And operations, my associated of to with please the SEC call, December to and pleasure our the XXXX, Ziv it's year-ended

William Clancy

a like financials. our everyone, to you then summarizing call would the I us few morning, joining and thank on Thanks, Good and highlights Reynee. start by reviewing today. for

a XX.X% earnings and business income margins view $XX.X of third margin XX.X%, Page of Following good million, million, of of of Referring per his had gross quarter and slide the the provide share to that, deck, XXXX of $X.XX. $XX.X revenues the we operating Ziv with global results X of of environment. diluted will operating

foreign cash are XX.X% $X.X third We the On and administrative third and compared the third X, third performance revenues Selling, to free partially up to XX.X% Slide related inventory, of of in in to impact bonus XXXX. flow $XXX,XXX of our of reserve quarter $XXX,XXX selling, by third XXXX. quarter XXXX million third in of quarter to foreign quarter in increase of the $XXX,XXX adjustments, expense general goods XX.X% imposition attributable for and compared related $XXX,XXX or or million, and offset related was were of The million general $XX.X increases, related rates. to primarily was $XXX,XXX $X.X $XXX,XXX exchange in to an reduction by of on U.S. from volumes tariffs wage of China related in to to administrative XXXX million $XX.X expenses and compared for XXXX The our the of commissions million, revenues $XX.X negative impact fees. increase the $XX.X to $XXX,XXX with quarter pleased negative million million. $XX.X revenues grew also to quarterly in quarter of with of our the we exchange XX.X% as XXXX. of our margin the XXXX was third The to third We of revenues in XXXX $X.X in comparison gross to rates of quarter third of to increased for third the for quarter of profit XXXX as quarter increase quarter million compared to gross $XXX,XXX. the profit XX.X% in

XXX% compared in third $X.X $X.XX diluted of the X.X% our an last $XX.X we adjusted on operating increased $X million year. to The third as adjusted by or basis, income in operating XX% or adjusted of quarter compared to to million at earnings per XX.X% Looking quarter million share of net stockholders the third the share or attributable diluted per or for quarter to $X.X XXXX. increased to VPG's $X.XX million XXXX margin

of compared as $X.X third earnings of were attributable as adjustment of XXXX share. of net Excluded to Tianjin, to of quarter a quarter diluted or XXXX, termination negative XXXX related compared of $XXX,XXX from assets, We third for quarter of had at quarter quarter million of income which third of third location. of per for proceeds define third was were capital one-time the operations, a for million of to an small of of $X.XX rates China of cash net VPG's stockholders XXXX, as quarter the from third $XX.X 'XX. to exchange minimis free flow $X.X lease currency company's net million less payment $X.X cash impact net the any to sale for generated XXXX, quarter the the cash million ended the XXXX. third generated de September XXXX fiscal proceeds the which for free flow of Peoples which quarter net expenditure, Republic for We the the million were Foreign as $X.X XX, in the

fiscal that was X anticipate XX, ended We XX%. the rate year XXXX, operational months the tax for be GAAP tax the Our of will September XX.X%. the to XX% first rate in for range

to of of related the the tariffs by quarter incurred on and monitoring tariffs countries effect, and third $XXX,XXX China to related In other developments China goods mid-July, to from and imposition response closely relating the the of the U.S. the the in are into we U.S. went regulations from XXXX. tariffs cost We tariffs. trade

those in been impacted, goals. Slide effects Ziv. should remain impact. comments on On focused further offsetting to let very that, are these quarters. we our the pass coming that execution me to expect backlog, We basic closely have the continues which on X. With working strategy, effective prove minimize of with to achieving our customers our the in given see we For current products And to

Ziv Shoshani

strategy XX% An quarter developed in of our Sensor is to to as their A this gain include design. line, in saw of adoption. offering. product Technology sensor go which Thank our Products' customers the Advanced example you, our platform third Foil advanced it by been third segment versus XXXX. We increased growing and more nicely the approximately XXXX important developing quarter it product of our Bill. has is by We as revenues new part part this of great continues of

pleased with are to new sensor are provide of customers. acceptance this enhanced platform proud We continued performance and to the

also be to pleased manufacturing platform. an on efficient are We

The of second transducer business. example OEM is value-added our innovation our

segment, Systems example our to for third of increased quarter Force XXXX, part of and Weighing compared Control in segment. As of third quarter Sensors the fine our XX% the its XXXX. revenues A by is

XX% Our in revenues XXXX third quarter as TruckWeigh to quarter and XXXX. increased on-board of the weighing by VanWeigh compared the of third business

in The next note in XX the expectation steel flow measurement. presence the The materialize continue aerospace end in in profitability, global We to robust. retarget is order to are volatile remains and and is the pleased growth, anchor of the that market backed to semiconductor the revenues, test sector balanced continuing trend markets supply-side fundamentals our particular market. demand the volatility maintain and factors, business, despite and macroeconomic XX an sector be stable the proactively to The strength and manufacturers bookings defense, free see important over up profile. Defense be to for a in looks to would recent increasing some to for relatively supply/demand cash I'll months. of a fundamentals' backlog, plans and risk disciplined note

and improved recovery these steel economies. steel steel developed by X.X% to us activities In in economies end XXXX, XXXX, within and our indicators good markets business for to into of gives remain the the Demand is turning performance in for globally. resilience, Finally, to global confidence. investment demand positive growing continued market. All emerging the at expected show major supported are ongoing

increase project-oriented with for quarter $XX.X million third Moving this as or XXXX. of book quarter of environment orders reflects regions, X.XX% to million impact for all quarter X.X% sustained products, decrease The large a Pacific from $X.X the to largest delivered believe and orders XX.X% a the business quarter an sequential our and in which of XXXX $XX.X The the as in of quarter to million of across of quarter third second in overall is the business in is XXXX, the some in to from compared Slide second X. was were of $XX.X orders XXXX recently million the Total in of X.XX% the Instruments' on our or and in million, execution. decrease third focus We markets $XX.X well projects. X.XX% company's bill XXXX. attributable third XXXX,

backlog an at and XXXX, to $XX.X XX, compared September compared increase for XXXX, the to Our million $XXX.X decreased of million June XX, XXXX. $XX.X million third quarter to at

Product the across markets. our XXXX or quarter on all quarter the quarter Moving with to Pacific decreased coming segments. to of Americas Technology of for had orders Sequentially, ratio second avionic, from some reporting XXXX. the the second third details X.XX products and a Foil third Instruments' X.XX of X.XX military for for compared by million of book-to-bill largest segment within XXXX the from and X, end XXXX The space of the in the XX.X% $X.X regions, quarter decrease Slide

million the saw the in segment The in in quarter the - and due gross XX.X% Additionally, was XXXX. measurement orders second XXXX, regions. Products all a across $X.X profit we precision semi-annual of gross volume test was in of quarter market in for the of resistor increase the profit margin to the XX.X% of Asia due down primarily of second end up XX.X% increase from by third of XXXX the year-over-year $X.X product decrease and XXXX. Foil from placed line, third in large primarily quarter The in quarter to million Technology was

market sensor in products. in for Asia Our was and measurement measurement the force resistors, precision advanced test primarily within for market addition the to growth

$X.X by in military a within within an was Instruments' despite prior on inefficiencies in reduction Technology compared precision test The measurement growth X.X manufacturing market months and to which segment and in exchange $X.X space negative in the $X.X resistors. growth primarily million offset $X.X flat for Our impact gages. was decrease and of X.X avionic, $X.X and X.X inventory product strain profit Partially primarily was of end Americas, foreign a measurements in million. of market volume million, Pacific million, In rates. the the was offsetting volume months coming of backlog was was increase and months sequential Europe test year inventory last of the for and increase Products markets Foil million The the the gross quarter.

of all profit volume decrease the compared of book-to-bill compared tariffs $X.X regions, an quarter U.S. the to $X.X and the the third The the XXXX markets, goods of force segment, distribution Sequentially, the segment reduction decrease Looking Sensors measurement XXXX. third in of by the the for gross mainly by $X.X imposition second of for the was backlog to million of million reduction increase quarter XXXX of at in X.X million from precision and force XXXX due end China. second to $X.X quarter China, the quarter of $X.X of second end Americas. and due volume the quarter and X.XX in ratio decrease in quarter segment the Force imposition within a in customers margin increase X.X% in gross third XXXX. third largest the to Force profit million, the the X.XX $X.X in quarter measurement of X.XX X.X compared million of inventory and of U.S. to weighing the is within third addition inefficiencies tariffs to orders to million on the the XXXX. third of The on gross in The or Americas the from million increased $X.X XXXX months the XX.X% of markets. Sensors XXXX of X.X to across in was in and measurement profit quarter was in decrease XX.X% Americas related goods million of manufacturing the compared quarter inventory an with from in months of force XXXX, in Asia of million offset for to million months $X.X in and The XX.X% related quarter and $X.X down was XXXX second of $X.X for

largest tariffs to offset primarily of XXXX. primarily to gross of million profit increase the to line and the a weighing. increased million, of XXXX profit by third from for the For of inventory the of Weighing quarter to quarter orders book-to-bill second sequential Control XX.X% and the volume decreased from million Europe increase America quarter products weighing the in and reduction increase X.X of compared in ratio XXXX regions. inefficiencies, related $X.X products the months and related volume million margin third X.XX third The $X.X was quarter of to related Americas. volume Control to was XX.X% in steel quarter increase and second for related X.XX Systems Sequentially, months inefficiencies partially U.S. of third in $X.X of million or by gross million Europe goods process $X.X Weighing in and steel related third in million quarter $X.X manufacturing by the in from X.X steel in third in the The by orders was quarter offset partially segment, effect and China. of Europe $X.X X.XX second goods XXXX quarter in all Systems in - on was XXXX quarter to weighing versus for in XXXX. the the a The all mainly in seasonality third the mainly quarter and X.X% China. of the of to for and reduction the due imposition on-board of million the compared X.X for backlog for is XXXX. manufacturing $X.X The gross attributable product million compared of product process and of segment profit the The tariffs Americas, to of Weighing across Americas products from on impositions million and million, in to decrease regions, and inventory in $X.X was the of in the $X.X the in months an and $X.X to Systems U.S. XXXX the $X.X XXXX due XX.X% in at Control an the XXXX

revenues for fiscal the rates, to Thank at the continued quarter - of we With fourth the light million exchange fiscal to third of rate quarter $XX Moving a net range open questions. environment, solid let's that, Slide X. million in of business constant for the In XXXX. XXXX expect lines you. $XX

Operator

here John first And questioner Franzreb Instructions]. will our Sidoti. [Operator be with

John Franzreb

aided outlook the backlog Okay, to a of improvement, with changing certainly On to the I you some those and X.XX, bill I something projects that ago. a than across would your have little bit the the some coming You've Could the your in want suggest longer-tail is book shorter about saw Are all but revenue you kind talk guess that midpoint, past of guidance, now start Or with at it in quarter quarter? deliveries sequential line. becoming the the of that? weaker mentioned product book-to-bill fourth outlook. fruition lines? timing that they're we

Ziv Shoshani

the line prior QX, say is the the of is backlog prior Okay, backlog to of guidance XX% our guidance. to quarter we we did This that the age our months, of with QX, XX% John, for around the in in in deliver XX% as backlog, which is and would I midpoint expect regarding and complete covers dynamics.

we to be mind backlog the changes our intake, regards a we - the able to that significant X.XX, was fact confident the should feel ratio don't bear of guidance that Pacific target. play we achieve In book-to-bill see role. that So order Instruments we in would

few one the quarters. As of the is in that as this that a get we within booking business the is next matter project-driven deliver fact products this and you - quarter know, a do

ratio if So be this the to effect we the would close the would specific for line, of book-to-bill product exclude X. quarter

in that about that well end confident and the performing that. we markets feel are regard is still So our sentiment

John Franzreb

about Weighing what mentioned as FTP inefficiencies manufacturing your... little I those it two all you believe and talk in margin Could a were headwind, Control. and segments. manufacturing bit you and inefficiencies was Okay. a your Then of

Ziv Shoshani

inefficiencies absolutely. incurred number days mostly to third to The help the yes, primarily regards quarter - the QX, Yes, have to to in - we manufacturing was in that of holidays. to had due in we related the needs the working FTP

have we much, are repeat lower most efficiency and made Or some much, the and to in QX. been that can in magnitude would improvements us, people effect that Weighing repeat it hiring have that it inefficiencies related more in changes of it expect much repeat, to I improve the this the itself. behind tell Control one process System. And would if related is some to we - a of to and don't you to

largest the So already. to be the extent, inefficiencies behind should us

John Franzreb

be them. as Okay. And company just because should days Is impact days fourth we another mention you aware actually quarter fourth you brought company-wide? for quarter it as impact up, any far I've for that guys heard an in working the the working is there

Ziv Shoshani

is FTP, for Yes. have mostly mainly In the relevant expect the This XX% to expect another more to we days, days. FTP. around working should regards should working we for

John Franzreb

working More days, okay.

Ziv Shoshani

In QX. to QX, in respect

John Franzreb

makes question, queue. back into kind little that no, I'll And last one No, sense actually of get a bit.

inventory a You inventory why X force reduction about reduction, mentioned FTP? of in going can talk the you businesses little and bit on you in have

Ziv Shoshani

The inventory Force lead reduction the to manufacturing newer more in lean to efficient in Sensors the introduce is - order improve improve part be to and time. our and to attempt of manufacturing in to our streamline order

So the a that of the - working have that the out in goods. to shipping to time that since a have be we XX%, way only we is was FTP, reason regards drop would were are that are we do Sensors, less inventory part inventory moving that efficient. are In very - for main And deliver more in still had finished more we able say is of very in despite fact high reduce steps the have days fact the seen to and order because - FTP, the I since this and revenues. to large we strategy to that company, we we we Force direction on across manufacturing lead and we a our pushing taken have in

or So order the in in number meet on the and would offset to days the sales was reduction inventory still target for in to FTP essence, to customers less of working our time. I deliver to lower, say, the

John Franzreb

point? is force, your And at there in are levels this equilibrium Or you some Okay. at in in inventory still headwinds QX?

Ziv Shoshani

The that be the streamline to we to expectation and lead more reduce and and would be expect efficient times. operations continue would

we reach a expect the million. $XX as this part were operations me, - would [indiscernible] and of over as from able of part results of to our that, I excuse of [indiscernible], So level a result inventory, which, result of operational our highest reduction

for it of inventory is reduction the part contribution. So of

Operator

next our FBR. And from Sarkis be B. questioner today Sherbetchyan Riley

Sarkis Sherbetchyan

is the So I first revenue Ziv, what rate? run that kind around perhaps the question product in annual you XX% year-on-year advanced growth XQ. of year-to-date Mind think sensor's growth. Or mentioned disclosing is? line revenues of your here

Ziv Shoshani

may quarterly run We this disclosed We this product if already have is run level I on regarding at the I give this product at million $XX line. the $XX - not rough rate. And say estimation say, line. rate that to high a - would always of million

Sarkis Sherbetchyan

Understood. I And recall if correctly...

Ziv Shoshani

to Excuse accurate. be me, just run more annual rate,

Sarkis Sherbetchyan

if segment profile FTP thank margin correctly, line And right? margins, that than recall accretion your I is different is you margin a you. from sensor's of Right, what remind us advanced the So can the perspective?

Ziv Shoshani

higher, average margin indicated, this would complete line product contribution around around, than that. and margin, I XX% of than high the while segment contribution higher as say XXs, The is is lower the you is

Sarkis Sherbetchyan

this rate annual $XX seeing be growth suppose in helpful. that's run over given we're would you million slice how consistent business of that to I pie, million $XX here? it, rates to time expect And the large the that Got

Ziv Shoshani

the on growth. diligently question. to Once One hand we the regards is expect on would full have a say, see have - full that the and the revenues. that is advanced should But very to the in working and we very for extent for other there on more to some few very are the I say good sensor, is - that say they we - advanced are years factors to growing question. line we this I to OEMs we good it the of potential, key introduce leverage projects other is applications. that and that there condition. sensor the gain - types This are we of In I are to depends products. designing upcoming the we those are we with very, some end market are the see other driving extent momentum, going of a

say, in the this and able should was also continue sustain enormous growth, based extent, revenues last was quite years that So to indicate I hands run on to years. to take this the see product put few we that around the the This expect come. will forward definitely our I but the that, XXX%. future. or increase I should it in it close is that cannot to be would XX% line we how would in platform rate we to to the definitely But current which the to company -

Sarkis Sherbetchyan

of of Got to expenses capital it. type build the platform? along foresee kind And those thoughts, additional what would you

Ziv Shoshani

point expect to would level of capacity, dollars say the this dollars, means say time have capital would order that capacity our demand, which we in future to more next if a invest that to move in another still demand to the is would on have I many doing to to existing support investment Therefore, this capacity, I last few we orders capacity. the produce have products running in But more we not regards would sensors. are at more and of in sensors, we room millions roughly, advanced we for In to have have more - more respect advanced I we of within been growth at to millions have for to materialize come. XXX% revenues quarters. few the which

Sarkis Sherbetchyan

there. additional the for Thanks Got it. color

regard talk? what's with the on gears us kind of in adjusting does understand chain to think in going tariff help location, I you China some termination mentioned of the that align lease here, the switching payment, response the there? Just you to with Can supply strategy maybe

Ziv Shoshani

our strategy year to the our structure, the improvements and before harmonize which global of the overall continue and ago, tariffs. lease operational started which way termination, a restructure, was part of we happened Okay,

As of the a I that products, line it to a result - was in lease would reduce and in we stated the had prior cost upcoming continue to like situation in streaming years and and already Tianjin. to relocation Bill, to the order you in have more plan of of that, something? quarter, part efficient, add also, production make as we

William Clancy

Yes. we I left mean, with recall location one-time due went payment. we're year a that, basically of a and gave and ago would to Sarkis, were to because a arrangements that they in you certain forced and relocate location, we another early us, to because

Sarkis Sherbetchyan

understood. Okay,

So this is...

William Clancy

has is tariffs. a That with nothing ago the year do third to This from the XXXX, quarter.

Sarkis Sherbetchyan

situation, And understood. of you're the that kind customers, maybe can mentioned actions suppose, some Okay, in that? on response then taking a you you elaborate bit I to your little with tariff

Ziv Shoshani

should goods or that order we how on beginning is can the offset we which internal QX, backlog, also we but the Yes, prices that discussions discussions, realize with in to some the the those based our and of we backlog, the say customers go end to already of coming of the into offset in effect. the Since cost. the to were have increase the in price tariffs' from and have increase our we'll QX to we U.S., order able absolutely. discussions, our mainly of we a chain effect have I to tariffs' improve impact optimize Once China tariffs to minimize has - supply started effect.

Operator

will be from Sidoti. And with question a John Franzreb follow-up next the today

John Franzreb

And the is first involved sold on number? other guess, follow-up XX% would revenue some advanced I growth, a couple. you is you or stand-alone net a so, there just talked of line? lines cannibalization thing discussion. got have Is that previous if just about - product product might I that some in that on that sensors, a when

Ziv Shoshani

our in business. more consisting that Okay. line, revenues, products I new with the is that, When to the XX% never some - complete Sensor new is we the reported - complete into the have in - The Product we that say platform we addition as legacy at revenues. business. product business. transitioning be current company product order of we information this new would into speak existing when prior conjunction new say, to application the in I had, provided of efficient, new, about say Advanced least, legacy reported XX% and to I way transitioning to would is in Opportunities quarters,

is the combination a of both. So it's number reporting combination, the

John Franzreb

bit. clear midyear that doing ago? process? a larger if a buckets part to the talk kind little about X-month out, the up What's bit at What's Perfect, how secondly, the numbers business? I And well look the helps of little you in through about that months of were, looked strongly up pretty test say, how going they're you markets was and measurement? performing It Can in on end first of and larger the relative business. X talk can the they well

Ziv Shoshani

measurement few exclusively - in see Also, the confidence and selling for line, military very the show market which and and solid avionics, our is This market. has quarters. well. have performing been end is we is it all space solid well very signs last product market Instruments' into that to test continue Pacific We and in market. do We absolutely. the Yes, also

and from into We market equipment back-end I automatic to at are front point and than are market the that intake, we this lower In I selling the equipments testing oil an manufacturers, perform indicate, sensors do been providing We and quarter. oil equipment selling the regards end which the second continues well. QX slightly for second to to for and order and and in manufacturers, been quarter offshore. due for the to have gas, the intake has placed components and we - demand the that orders onshore semi-annual industry, did have and order see was in say, to the time. gas that

the for demand We And have quite well been bit point on maybe solid. In retrofitting, stronger are some that the is a Sensors, it's platforms offshore, X to agg again. some to but has products softening since for as than and Force growing deplete this have regards and the they this new construction. placing at onshore particular, the and we seen built start precision in for will to side they time been waiting have us, orders markets, months. inventory, considered the extent they larger where in rather little end solved OEM still with last our They market end before

John Franzreb

just the a out Have what they little M&A bit valuations there? Perfect. very And are are maybe attractive? seeing you improved? not talk about Or you still can environment,

Ziv Shoshani

to unreasonable, have you you very as disciplined financial companies, extent and meet discussing very, high in know in indicated, order in performance been company valuation demand of to to your KELK target. is we to I very were in I some our execute an focus last, me, steel - if not we M&A are excuse over XX - very, with and and I valuations see KELK. KELK since also, company quite in will being we more up. - the reasonable, become able - our of future. the opportunities the are feel as the will in it The - In is as slightly M&A, and the And say, the that basically deal We were near more rates John, the we do believe our that going reflected a been market going regards are coming well still would interest months. for has in

John Franzreb

tax the purposes. What like? for it's it's what Okay, sense quarter on Bill the perfect. line about XXXX? tax for a would just give and question last we fourth Maybe should And you would modeling think look one Can line. maybe in expect us you

William Clancy

being and your John, based mix always sure, current like, it's where the on, mean, are products made. I Yes,

geographic And we the the continue that be the to quarter a ball and similar XXXX, forward, to at we're within for but XX%, I So going XX%. to or also. running slightly crystal If would fourth we least profit XX% what would think now don't X same XXXX, maintain have if income somewhere over it range. the that have I months extent for of mix, maintain be that were at should we comparable for

Operator

like remarks. turn closing conclude our session. this question-and-answer back for Bill to Clancy [Operator the any will Instructions]. over And now would I to conference

William Clancy

you let performance And to know, very and Okay, the to from in everybody we Thank will I in very talking future. look tomorrow everybody just you presenting Conference much. VPG. And be forward much we near appreciated at Baird to to Chicago. a dialing good in very listening today

Operator

has Thank presentation, may you your now conference attending you today's concluded. for The and lines. now disconnect

Reynee Tung	Director, Global Marketing Communications
William Clancy	EVP & CFO
Ziv Shoshani	CEO, President & Director
John Franzreb	Sidoti & Company
Sarkis Sherbetchyan	B. Riley FBR, Inc.

Vishay Precision (VPG) 11 Nov 182018 Q3 Earnings call transcript