VPG - Earnings call transcript Q3 2019 | Vishay Precision Group, Inc.

Due to licensing restrictions, you must log in to view earnings call transcripts.

Operator

Good morning, and welcome to the VPG 2019 Q3 Results Conference Call. [Operator Instructions]. Please note, this event is being recorded.

I would now like to turn the conference over to Steven Cantor, Senior Director of Investor Relations. Please go ahead.

Steven Cantor

good and Danielle, you, morning, everyone. Thank VPG's to XXXX Third Call. Conference Earnings Quarter Welcome will the contribute. made including audio be An recording of or that any comments conference participants may questions today, call

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

the that note yesterday, issued acquisition to of announcing DSI. want also I a we release

on presentation of and website. release Securities press that find the provisions can are remarks harbor Litigation by the our governed You Today's Private Reform safe Act. XXXX

Our from vary forward-looking actual results statements. may

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

I'll President; and And Shoshani, call will and Bill the now, Ziv begin. CFO. Bill to CEO turn Clancy,

William Clancy

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

Following $X.XX $X.XX. $X.X will adjusted $XX.X or of margin provide DSI the by of of of quarter In acquisition outlook. per net slide we Ziv the revenues, XXXX, XX% revenues of the the achieved earnings share million. $X.X on earnings of diluted of Operating QX of of the and to and segment, was Referring X.X% third million results share diluted million income per deck. or adjusted Page operating revenues, net color X that,

Slide Moving X. on to

million compared revenue million decreased by of XX.X% Our $XX.X in XXXX. third down quarter of to revenues $XX.X quarter $X.X million, to the third XXXX

year third for revenues impacted to XXXX $XXX,XXX Foreign compared exchange the quarter ago. of negatively by a

$X.X decrease partially which to $X.X of decreased margin in offset lower Our and an increase year-over-year in from foreign of was quarter third gross $XXX,XXX, $XXX,XXX. a was XX.X% export rates grant of currency sales impact million primarily XXXX. volume The million to negative of XX.X% in attributable of comparison the by to

was were quarter as compared of third to Selling, million a of of general for which in in XXXX $XXX,XXX and million The adjusted of administrative reserves the XX.X% wages by and The costs third or to XXXX. in in a $X.XX XXXX. for net reduction $XXX,XXX. the third related quarter per offset compared to of bonus share $XXX,XXX, or or earnings quarter $X.XX the SG&A the for $XX.X partially $X.X reduction were in third increase XXXX of in $X.X of of million $XX.X XX.X% million quarter of million share diluted and decrease or expenses diluted per revenues commissions $X other

Foreign diluted was third $X.X generated of quarter of XXXX compared exchange quarter We We to as $XXX,XXX $X.X rates for decreased million or the by share. third compared earnings flow to for net quarter $X.XX XXXX. cash XXXX third the million of define as was per of of the $X.X less third capital quarter of XXXX, net which million $XXX,XXX operations, from the of for flow the sale cash from XXXX. which as the third of assets, generated of quarter $X.X expenditure, which free in quarter XXXX, third cash free the for the of for the third amount million quarter proceeds was

in that from XX%. increased XXXX. quarter year cash the ended to $X.X third the to and cash of was XX% rate the $XX.X range will for second million quarter. as quarter the Total XX, XX.X%. $XXX.X compared GAAP in operational September XXXX which debt ended with million Our equivalents, long-term million the million of second be $XX.X the was the tax quarter for anticipate tax rate We We of

DSI cash our closed $XX which third the by our Even of and these very to strong M&A XXXX, sheet end $XX our opportunities. fund debt that ample balance and by million additional believe and remains requirements from quarter, provides support balance on the approximately approximately transaction, the acquisition DSI, liquidity to of November we impacts business to the million. total reduced our Subsequent increased with us X, long-term with

let that, further on comments to With Ziv. pass me

Ziv Shoshani

and from in was Bill. the million quarter in the second you, the the the company's orders quarter X.XX the for XXXX. million, ago. and year quarter Thank quarter The third compared of third third in were overall second $XX.X to of $XX.X book-to-bill quarter in million Total X.XX down in $XX.X third a XXXX quarter X.XX

from weaker million macro XXXX decreased Overall, and destocking. $XX.X trade channel globally uncertainty, impact trends and industrial ongoing from quarter. second our XX, the to QX as $XX.X sales decelerating as trend September at in backlog reflected demand million Our orders well

For signs which XXXX. in we expect positive, Foil the sentiment of our Technology There market half our demand equipment in trends were Products products market second pickup a for and mixed. our segment, in semi the that is turning are result will

space and continues saw to destocking military our aerospace, in spending, FTP strong markets, FTP, positive of particularly The products, driven Europe. be for industrial we by while defense some market general

OEM For to makers. Force customers construction from customers industrial and our precision and Sensors lower demand general equipment segment, continue reflect agriculture sales to

transportation while push-outs in from for political For related investments, is weighing for U.K. which in onboard we U.S., Weighing capital Control for uncertainty process reflected order remains believe some demand and the Europe solid. Systems the our saw In segment, market, slowing weighing solutions we rates the our our Brexit. to products order

perform Our to products very industry continue for well. the steel

X. Moving to Slide

quarter and Looking reporting segment by lower X.X% the year Foil in sequentially. declined segment details. at our Technology The was third from Products XX.X% last

lower ratio $X.X quarter the volume compared applications, of in in an the the for of Foil for quarter strain X.XX gage in and advanced market Book-to-bill foreign the XX.X% products as quarter the driven and manufacturing Foil military the test continued was XXXX. margin a of avionic, third the decline products, due rate sales The in second third Pacific of for space Instruments of saw by year-over-year from and and Americas of end growth XXXX within XXXX. Technology decrease lower XX.X% exchange measurement X.XX X.XX the products of to sensor Even third of the we to of Americas. XXXX in quarter and $XXX,XXX. million, quarter gross second profit the for impact negative XX.X% $XXX,XXX Gross in was increase of for sales and declined primarily Technology costs of of primarily

declined the X.XX quarter for The third lower X.X% and of which second X.XX, to Force at Sensors book-to-bill decline OEM The sequentially. and the was Sensors flat the customers to Force XXXX was essentially sales volume Looking for X.XX by the primarily of year-over-year was due Americas. in segment, year-over-year, in quarter compared to related XXXX.

quarter $XXX,XXX, was gross XX.X%, an offset Sensors from of sales impact the of Third for profit profit export in efficiencies margin exchange. second in impact XXXX partially lower of XXXX. of quarter was XX.X% and reflected of increase XX.X% grants by increase from The an increase positive gross an volume. and quarter increased in the Force higher third This manufacturing an foreign

segment weighing in the for revenue $XX.X year-over-year and Europe of decrease gross for and Sales Europe, gross -- was and the weighing the for products of for the X.XX efficiencies, sequentially. attributable Weighing Americas margin third the due was profit in onboard primarily XX.X% lower profit in products, This year-over-year in X.XX Control margin controls in Control mainly of Systems of the increase in flat, onboard third and decrease products weighing XXXX XX.X% product products Europe the and which and the primarily and Europe the line the steel to for in improved and to sequential XX.X% XX.X% million manufacturing was Americas. Weighing Sequential quarter the weighing a with to X.XX, XX.X% of in revenue positive segment The was Despite attributable quarter offset was Americas in declined the the from in weighing XXXX XXXX. in quarter second primarily in and XXXX. the to partially Europe. sales, the by Book-to-bill quarter process and of volume. compared process and lower softness second

X. Slide to Moving

strong, of opportunities, simulation key equipment the strategy materials organic to $XX for Dynamic earn-out million mechanical of million. of Inc. VPG $X on an a to additional platform. industries. part used industry-leading, and to our our manufacturers multiple capitalizing growing for a up is announce the I for potential DSI materials to of our high-performance acquisition pleased business optimize leverage addition deploy growth thermal demand premier acquire manufacturer a System, profitable manufacturing market am In high-margin is capital and that to high-margin acquisitions to study the well-established, value-creation add addresses the that niche The processes.

customers manufacturers and the testing to metal help wide around array DSI's Moving to accurately Gleeble to market automotive, York, to universities, aluminum a accelerate research allows time of world and end line industry. markets, heavy optimize X. and steel material including energy performance new and Slide systems labs, industrial producers in to the Based alloys. of the of for production aerospace, simulation This processes predict New and

grow the increasing should new trucks. trends Demand and in meet X. printing Slide drive processes. to for Growth to fuel in end to of continue to aluminum from benefit material facing and continues expected research XD is order Gleeble printing metallurgical these to Moving targets cars number used macro a for of alloys efficiency global steel lightweight, markets. in high-performance XD

users benefit research since should the we Gleeble between steel from competition both certain the addition, systems are aluminum of in for and metals. In used the

in to opportunities We worldwide, XXX it well with combined. clear since more is excess installed of expect the these a portion all of competitors than DSI leader take meaningful system market

of ocean the of to are VPG's a addressed acquisition strategy grow business. earnings VPG's offering new for see and excited There potential develop There and key be XX. leverage Financially, sales and KELK both DSI is expand VPG's platform address value to sales is as a blue stakeholders. many as VPG generation to opportunities. opportunities reasons steel sales our DSI to the DSI. also systems to to customers for well about DSI's Slide create our part to our to Moving by to We of acquisition what means expand to

achieved three past the sales margins. and million purchase before an average the these is DSI's approximately XXx EBITDA synergies earn-out. $XX results, excluding annual on potential the price years, with high Based of Over multiple

months of current the fourth revenues net exchange For in our environment including at $XX range to sales order the DSI, related million approximately acquisition quarter and $XX given business for X and quarter expect constant of we third fourth to fiscal XXXX the trends XXXX. million of of rates, quarter, the

we initiatives businesses. customer and technology Looking are sensor TruckWeigh the leveraging growth VanWeigh to and our products relationships. good such quarter, as and fourth beyond expect long-term strategic momentum differentiated These initiatives, unique achieve in our continue our our to advanced

end of in project, consolidation is increase which The on targeted growth. Modi'in our completion intended manufacturing the to track. XXXX, support is to Our project in at capacity we for our Israel

In our addition, cost is working targets. and part achieve of as profitability strategy the to financial company our further on reduction initiatives our maximize

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

Operator

Instructions]. [Operator

comes first B. The from question Sherbetchyan Sarkis Riley of FBR.

Sarkis Sherbetchyan

to I first acquisition. just want on the start

regards on get the to the plus acquisition I paid EBITDA earn-out. Can price that. congrats you million kind expect perspective? an earn-out, I an of what filed the So seems interesting to between EBITDA describe maybe and saw an documents business the here. $X.X yesterday, purchase the $X.X range on from It generate to like of you'd In think million

Ziv Shoshani

low-XXs for the continue last and to and we going expect at forward a EBITDA running business to going years range, continue would that the forward. was Sarkis, margin three

low-XXs at looking margin-wise. are we low- -- to mid-XXs, So

Sarkis Sherbetchyan

Understood.

like the to think seems that accretive going right it way the so it? to And Is about of it's out gate. be

William Clancy

we I which there's the But looking material. historical be two be only Sarkis. expect accretive the to EBITDA probably won't we and about months XXXX. at XXXX, just in talked would obviously, XXXX, given EPS as in like would Yes, to meaningfully say, levels, left

Sarkis Sherbetchyan

are this kind kind business? of far help chose of opportunity kind Is why kind guys lines was it? expertise about in sell other of and, consumables some very you owner therefore, of purchase to And then of guys understand attractive the of better as of leverage you me a also as there why what an Just asset? to just this business, your

Ziv Shoshani

the to for capabilities for in system enhancements see Sarkis, our market. and developments, of steel further enhance applications, DSI portfolio new our we room expect for we steel product

their KELK, a applications systems very to and market. brand KELK strong are similar own KELK, end within within the end as another within Like a addition as by well markets. -- far market their DSI In both and DSI's in own leaders similar

base potentially to Joining and current we for develop more more VPG, price-effective, DSI end allow VPG, which for customer in opportunities believe, scope, would markets open other for products would which would to new but similar more limited be customers.

Sarkis Sherbetchyan

maybe I on two Understood. for seeing I And about you sales of Can I you know kind environment real here. acquisition's segments? the talk X touch outlook helpful. can included. guess, the in time months mentioned That's macro if you're of the what just the

Ziv Shoshani

environment, the market, the at least macro see were the way that Regarding mixed. QX, the for -- we we trends

would the weighing market headwinds equipment, a slower demand, Europe, onboard QX uncertainty. -- the due weakness include particularly the Our Brexit the in general in our mainly for to transportation industrial semi-test

hand, we is aerospace and other the steel in some in defense the going see the tailwinds aerospace market. regards to very also, defense and On strong. -- market And

destocking precision specifically and test the of in include for would test headwinds market. measurements resistors the semi market, Specifically, the

quarters the due last in weaker customer were few Orders to overstocking.

mid of of for However, we increased products positive shipments delivered to for signals customer terms orders be XXXX. these are seeing in

Germany. economic slowdown, in Europe in we MM impacted mainly the particularly On have and negatively a seen business,

Force market. have our onboard -- has been uncertainty mention the mainly orders Sensors, did before, I softer general to OEM due order And due -- to we -- the this Brexit. is we the weighing industrial of political mainly intake the seen

weighing, see rebound certain process in a the of more expect we and the quarter. would seasonality On to effect, following it's

the products intake going reflecting for the still Specifically, and Foil for us. continued and to continued steel very intake Technologies, strong PI very business very market, the order quarter, strength be very tailwinds KELK good aerospace, order solid, strong strong, quarter. the well, the to defense, continues third the in perform also in our third in in

in to quarters. stabilize quarter orders fourth as in the the of hopefully, expect next semi and resistors political to We be the to Brexit the expect for for resolved would precision to year. the begin related rebound headwinds uncertainty And test coming some may

Operator

next from comes John The Sidoti Instructions]. [Operator & Franzreb of question Company.

John Franzreb

back DSI I first. to to want guess I go

us you're you what that there's looking tell synergies are You mentioned potential that just synergies. Could those for?

Ziv Shoshani

the acquisition, looking business used synergies are revenue. be all This integration from the for concept KELK which back synergies. at leverage our a to that Okay. with the in fit the synergies don't cost for way, we new Rather, to us. When of model. came any to DSI expect is we see not synergies our is KELK. the business on different The similar revenue XXXX, technology In side vertical a will

Now, are the X later, we DSI VPG. years in same integrating situation, into

trend KELK X that will acquisition the same DSI follow ago. that successful expect We integration did our years

John Franzreb

KELK and what it? with KELK had acquisition, from But Okay. dominant player. a the I very remember That's line similar with the product was the you not case is DSI, though,

Ziv Shoshani

application KELK a it acquired product was is any very well KELK our have wide back weighing optical of strip XXXX, We force. a did Nobel as lines had still for of roll No, in we similar have They player measurement mill product they processes. in these and not When as dominant range had a steel other VPG coming lines. subsidiary. from Swedish hot case. have the

any cost did were extent, have not to synergies KELK. we So, for there -- that not the

is carry a DSI DSI. KELK any very Well, leading well leverage to customers its we -- cannot for portfolio in products would to we our expect and would currently the enhance mill brand leader including are expect to on as own between steel a situation. customers enhancing further definitely opportunities the helping I we -- similar a would market, This new or develop DSI them we similar DSI KELK. DSI order to is say, to own and end sales -- opportunities to that the on realize channels markets, in joint customer their synergies new market. order as don't their a in in synergies, position cost and but was their Therefore,

John Franzreb

competitors? Got who DSI's main it. is And

Ziv Shoshani

manufacturer the own DSI far is in by their field. largest

China a product more a company which competitors much and more the in is line have As much smaller combined Xx with very in Japan, all They installed large company fairly nature, $XXX I small X I footprint. competitors, than Xx is at said, in million, base have in Europe, combined that more say -- cannot which a and -- one small they competitor. there. regionally, the limited more a limited a are least the

cannot point large competitor. So time, way -- I smaller extent. we way, second others at a are identify could this in the companies to significant All that

John Franzreb

debt financing so incremental your deal, about correctly, going what you thoughts thinking regarding What you And on going heard I interest $XX -- repayment debt. said Is I if the the think be Okay. million right or forward? And number? Bill, we about about as that forward? are should expense

William Clancy

all-inclusive, debt. down probably I generating John. we you've heard rate at debt rate all cash like X.X% we're debt. that forward. the and Yes, a U.S. very debt is pay going cash interest XX% EBITDA mean, today, combination XX% it's that's And in predominantly the for about a to This use that of high margins. mentioned and borrowing The

John Franzreb

FTP me And had in Okay. in regarding the that from to gross June through million why Could walk just drop sequential operations, revenue. sequential less you than September legacy $X happened? -- a on drop significant margin

Ziv Shoshani

large. the more The product was drop significant significant was the mix -- drop mix a And in volume. margin you XX% effect was we volume, volume FTP said, that effect, gross very volume, say, a that as of -- within to so sequential profit. have one But I this which not much significant have means in for to

with seen have We lower products, volume, less more profitable profitable much in products. combination

X.X mix. $XXX,XXX So volume unfavorable out is this of effect,

addition of had an have quarter-over-quarter, that, $XXX,XXX. effect we which In to inventory reduction

exchange $XXX,XXX, are that coming and will would inefficiencies, them negative not and a some also manufacturing the occur around which We -- I in assume quarter. have temporary of would rate most also $XXX,XXX which I

improve. to margins the expect should we So

John Franzreb

Okay.

it drag that rollout think -- thoughts you'll and your feel you of advanced a the sensor that about do forward longer? of this have Ziv, in the Or I redundancies a said, you, suggest a but for you how bit. think pose business it I little about new about the Do what downturn? going might if guess think outlook line? short you like the think that's downturn. duration it's all may I going are little to in be depth know during do you high-margin the Because duration? that with And drags, So to production some want a

of can X walk along through kind lines? you your those Just thoughts us

Ziv Shoshani

absolutely. Sure,

First, the the is coming FTP resistors. -- precision in FTP, impact the largest from

would an that half test the negotiations some testing the to before, sometime semi indicated was -- earnings we quarters. more are have down, semi levels you we As say, to is speaking, selling we and than do XXXX. we stocking we of expect go see that will half in running I process first XXXX. the products, their, selling seen channel the to I've would EMS, to projection go slowdown which Generally market of continue distribution as you that that X that do doesn't of expect the large report end cycle of of Based since market. the are say, But would -- positive. on and not Already, biggest I more that that are if we they products, is not seen are to upturn, extent, X that at see believe second should see currently measurement awards testing. we XXXX, specifically, the cycle manufacturers, that in rebound business the and commodity -- and custom for the expect a of -- testing the To have overstocking or main and, equipment mainly end said, I sales see we and are

some the the to sensors, strategic running with also of regarding legacy technology initiative into design many for many, technology. this and wins new a Now is -- advanced transitioning more position company

key believe the near are for that are a looking because could there slowdown. very respect, in we all is in project, dramatic. forward. with to in quarter. is something that which also expect principle, that some this high turn volume of optimistic This time all, expectation not future. in designs It's on the we that is be the in important into significant -- we a But the us, we we coming stabilized So certain But will continuing

Operator

are the [Operator to over closing to remarks. Instructions]. like There back questions. no I would Shoshani further turn conference Mr. for

Ziv Shoshani

the general as In I show tech industrial trade in as well you. headwinds, quarter. industrial economy would to the markets the global continue other uncertainty. reflect third our slowing in Similar the like summarize of some of Thank trends to spite business the quarter impact and sector strength. to of these companies, our the some

that as signs seeing may inventories. are our distributors we their and customers QX, through be our work markets weaker For bottoming

we company's immediately will and acquisition, DSI track, I some quarter. the The factors of excitement progressing looking The about good call, potential accretive, believe terms provide are and on be expectation next not you to you. to in the feel updating some we joining growth we forward Thank strategic initiatives it synergies. but are in you for around will would them. thank like only and the the

Operator

The conference today's attending has now concluded. presentation. Thank you for

You may now disconnect.

Vishay Precision (VPG) 5 Nov 192019 Q3 Earnings call transcript