VPG - Earnings call transcript Q4 2019 | Vishay Precision Group, Inc.

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Operator

Good day, and welcome to the VPG 2019 Fourth Quarter Results Conference Call. All participants will be in listen-mode. [Operator Instructions] After today's presentation, there will be an opportunity to ask questions. [Operator Instructions] Please note this event is being recorded.

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

Steven Cantor

morning to call. VPG's you, Andrew fourth Welcome good and conference Thank XXXX everyone. quarter earnings

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

governed Reform by XXXX Turning the Harbor remarks to slide the Litigation X. provisions Private are Securities Act. Today's of Safe

results actual forward-looking Our vary may statements. from

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

and CFO. On Bill Clancy, the are and call today Ziv Shoshani, President CEO

turn for And refer quarterly the remarks. Please of Ziv Slide presentation. Ziv? call prepared to to some three the now, I'll

Ziv Shoshani

Bill sales and and you, operational highlights will consolidated Thank I Steve. segment. results provide with some VPG's XXXX trends outlook. and our on QX will commentary financial our begin by then details

in our X. $XXX in million with flow. of business slowed Despite $X.XX and end of of we The the history second sales with and year free after the best year, fourth XX.X% of reflecting and achieved fiscal macro In a the the and capped in of adjusted cash that margin impacted the ever, half of our headwinds, markets. XXXX EPS of results quarter global of our adjusted VPG's economic headwinds, beginning year, $XX.X many adjusted slide slowdown solid second operating for million and one some of in spite strongest revenue terms quarters to profitability. revenue QX trends Moving

slide to Moving X.

were end million of as quarter, in the were strong $XX.X quarter X.X% sales of the total Bookings in sequentially. of was high XX.X% from improvement overall fourth reflected X.XX For the X.XX third expectations for growth result quarter, The orders fourth QX. and fourth quarter an the grew all our book-to-bill the three at grew segments. of an and from million in $XX.X

fourth our saw resistors process applications and in In by softness market. general market, in gas we and in for at test Looking trends and rebounded. oil applications. measurement, quarter In our industrial demand continuous business the precision semiconductor test industrial

our we to the onboard In orders transportation, avionics or where orders track in reflected steel one focus solid and be in nature on space but positive, both and our solutions directionally our market, of trends military products. the AMS continue for market, were weighing VPG market project-driven

markets we replenished construction, In includes industrial, of weighing, inventories. bottoming medical agriculture, other which and precision, applications, customers and the saw signs their as

in operation quarter fourth and financial impacted of profits by perspective, a an From the number our were factors.

-- addition Systems results costs or of $X.X in Dynamic included November XXXX. charges includes DSI First, with of million an our acquisition-related and the associated of Inc.

a relates the we and manufacturing $X.X as to Second, closing align initiative recorded ongoing our charge operations. restructuring downsizing consolidate our to of and million strategic part which facilities primarily of of

these mainly or income million adjustments, or reductions approximately quarter of our Third, X.X% of revenues. $X.X implementations. the well in manufacturing The $X.X and for further related one-time fourth results million adjusted revenues to of and inventory an were X.X% as factors million operating inventory margins by $X.X relocations affected operating was as income of system was

earnings per $X.XX. per diluted earnings share $X.XX was share and diluted quarter Fourth was net adjusted

slide X. to Moving

measurement quarter-to-quarter year ago. Products detail. market. test and Foil to The in Sales in $XX.X segments sequentially Technology than due of the declined fourth was of quarter of reporting lower our the resistors X.X% a XX.X% at decline sales lower Looking were million and precision

X.XX result XXXX robustly quarter. the from place in The Technology up customers ratio was and their semi-annual annual Products quarter in was as fourth However, quarter the which for of significantly the third test of and fourth orders they AMS orders. in Foil for both measurements X.XX for a grew these book-to-bill products and

Technology Products from unfavorable and of the by volume $XXX,XXX; for declined $XXX,XXX, reduction the of mix one-time margin which manufacturing of product Gross partially sales inventory of $X.X XX.X% due XX.X% Foil offset of for million; costs to third lower $XXX,XXX. adjustment in quarter was a

weighing Sensors measurement Looking of due at and the XXXX. from of was markets. primarily in sequential the $XX.X quarter down Force fourth X.X% to segment, destocking the sales in declined The quarter XX.X% were decline sequentially and fourth precision, force million OEM the

decreased related the lower for sequential to Force XX.X% of $XXX,XXX, quarter X.XX, Sensors the and of $XXX,XXX XXXX. adjustments. inventory reflected gross grew which Sensors approximately XX.X% inventory gross X.XX was $XXX,XXX for of third one-time Force quarter margin in profit lower reductions third from in Book-to-bill quarter profit from of of The Fourth XXXX. volume

For quarter to and the primarily higher were was two sales and both and attributable X.X% and the business. months The Europe Systems good in revenue Weighing in segment BSI of fourth of continued XX.X% business sales million performance process a quarter increased Control ago. year fourth quarter third legacy steel weighing our sequential $XX.X addition from of in the the our growth than

segment in Controls which Book-to-bill excluding the to adjustments quarter's fourth of accounting XX.X% of prior for the compared with and was The X.XX line profit XXXX. million in quarter gross was margin for acquisition of profit quarter for purchase margins. or DSI X.XX, the Weighing third $X.X WCS XX.X%

to Moving X. slide

Before of like few turning additional to update are the financial a key an the some elements on call strategic to initiatives -- value-creation quarter, would our provide details that Bill of of the I for for strategy.

slide to Turning X.

of to China. already progress facility the fourth downsizing we relate and in to like manufacturing elaborate closure referenced and quarter which manufacturing realign XXXX, to Force transition of our of First, I footprint. I the to India making are would Sensors on

$X.X of excluding We normal increases. expect these in moves XXXX, to and yield approximately cost inflation million wage savings

complete addition, the we and to we Modi'in, and transition in track enter is quarter expect In consolidation of the Israel to relocation project as XXXX. in XXXX our on third the start

that have efficiencies, certain support not which ramps but provide we major to additional capacity will As the this gives XXXX. production an facility us as business need operations, a advanced our of future we manufacturing legacy growth discussed only before, in the also initiative is sensor consolidate

incur to half in transition. million this as of of complete expect the year approximately start-up the second We we $X costs

number growth on are Second, initiatives. forward we of a VPG-specific pushing

We XXXX have a respect customer continue sensors of advanced as good to to engagement products sales with in grew XXXX. we to XX% our these compared

business, unique were pursue and have we which us described of not manufacturing before, address to cost-effective capabilities As sensor higher enabling before. advanced volume the we the opportunities, to platform are able design

TruckWeigh from relates year. VanWeigh and prior initiative key grew technology, protection to overload in which XXXX our Another the XX%

X.X for further all tons by that have of driven new trucks capability. of be regulations product with in the to expect this vans adoption to more capacities EU and demand load We will this require than

position are are We the of leading While OEMs in all being that are the our finalized, believe, reliability working regulation solutions to terms into in regulations. we products they expected are new develop meet already XXXX. to still large and and capability, the we go of first half the in with effect robustness the

of quarter. We shareholders. which in steel a and value VPG example M&A for Systems for sheet a a Third, great believe Inc., in established is believe a we an great the with among fourth opportunity. DSI the strategic quarter was technology company make industry. bolt-on to support of XXXX. Dynamic a we additional We acquisitions It novel is creating to platform the our was in create and accretive the that we'll profitable highly balance solid the great have highlights footprint hope complements M&A value acquisition existing

it turn to now for financial over I'll details. additional Bill Clancy

Bill Clancy

fourth of per On Thank or X.X% costs margin slide adjusted operating which accounting revenues the X basis, of related per you, DSI slide $X.XX. million sales our of acquisition $X.X XXXX, and $X.X income was an net X.X% adjusted or quarter earnings of adjustments restructuring deck. $X.XX. net and we of share $X.X and exclude million to of of achieved the million adjusted operating diluted Ziv. diluted On of share $X.X $XX.X In earnings revenues of million, the costs, was and purchase million

X. slide on Continuing

million $XX.X X.X% the ago. in $XX.X quarter compared to the as XX.X% fourth we quarter million $XX.X increased XXXX a were year third Our revenue to quarter in and down as compared of by fourth million

by compared quarter compared had ago XXXX Foreign and impact of to year as revenues to $XXX,XXX fourth the as third exchange for the impacted quarter no a negatively XXXX. of

Our XX.X%. gross was the fourth margin quarter in

purchase to related which declined million DSI acquisition, margin on the adjustments $X.X for gross our was basis accounting in third quarter. Excluding the from XX.X%, adjusted XX.X%

third was exclude compared $X.X Ziv quarter million adjusted operating of If mentioned, the operating related above-mentioned expense downsizing restructuring the fourth Our the X.X% closures our and XXXX. $XXX,XXX of to in cost adjustments we and the to XX% purchase margin accounting of facility acquisition as as quarter of X.X% was XXXX. margin fourth for quarter

inventory quarter are The of adjusted $X.X adjustments, and reductions XXXX not which reoccur. inventory-related for included approximately margin gross of expected fourth the to million

gross factors, been adjusted in have these Excluding reported margin XX.X% the quarter XXXX. the of inventory-related third we XX.X% would above

expenses SG&A inclusion Selling, last XX.X% $XX.X general quarter quarter two million of reserves. in reduction and offset or bonus by revenues. the reflected expenses year months SG&A of were for million accrual which sequential XXXX for XX.X% compared to quarter higher fourth the or DSI, $XX.X a fourth the third partially of in were in million the This or for $XX.X of fourth administrative XX.X% and quarter. the The

share of for to were XXXX XXXX. million earnings million compared per $X.XX share or quarter The diluted $X.X diluted third adjusted in net $X.X the $X.XX per fourth of quarter the or

effect rates impacting diluted quarter was by quarter they net bigger much to of fourth year $X.XX the compared $XXX,XXX the had a or While ago foreign exchange quarter share. a to the impact third fourth compared for per modest earnings

third for XXXX million We quarter million of flow $X.X as capital quarter XXXX. for free of We fixed $XXX,XXX. the cash of to operations million adjusted cash for was and the $X.X quarter flow fourth generated free assets cash of million which XXXX generated fourth as expenditures from sales compared of the of define $X.X $X.X less of

DSI benefit tax assets. a deferred of acquisition of against liabilities XXXX recorded our tax fourth million the to quarter deferred in utilizing tax of We $X.X related the

range We to rate purposes. XX% are planning our in assuming for tax an the XX% operational XXXX of

million. balance we very million ratio we for paid and additional the and support DSI, of $XX.X fourth about leverage our have of to Reflecting million net one-time, $XX.X and ended opportunities. of and to liquidity cash with strong we requirements a our fund With M&A business that the quarter equivalents remains sheet ample long-term believe total debt $XX.X cash

Turning to our outlook.

in a the revenues of of constant coronavirus. assumes currently be quarter the signs bottoming time We some customers' to and see quarter the are including for in markets expect exchange net of business million continues range there of $XX in project-driven $XX industrial in the spread we our our number potential the the of uncertainties quarter environment of which of to to While and expected longer portions first fiscal that the fourth XXXX, million lead reflect orders XXXX rates. macroeconomic ship

our our summary, were sales high of ended a for with In the quarter quarter the expectations the we and very at strong fourth book-to-bill. end

Our three-year to achieve the place manufacturing and And on completion. we consolidation are for track on-schedule targets. cost long-term believe, growth we in have strategies projects our financial

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

Operator

the go ahead. Franzreb will comes session. The John [Operator question & begin of We now question-and-answer Please from Sidoti Instructions] first Company.

John Franzreb

are doing? How guys. morning Good you

Ziv Shoshani

Good morning.

Bill Clancy

Good morning, John.

John Franzreb

Can actually the A, want out margin something And of is reduction gross into to just; much how Embedded B, year? would gross else. in parse this the of of I kind there? costs allocated the you for start quarter money the is Okay. margin. continue inventory first those embedded adjusted with and kind

Ziv Shoshani

is that, We almost did to be reduction do not which be monitored reduce expect John mainly to and definitely of should working be is the inventory diminished. intentionally affects long-term reducing inventory balance inventory, part Force reduced around is the which means or be it our will amount this the the reduce levels. of which down the that to we This so inventory of should but as program is We the substantially. effect $XXX,XXX. continually the would our our still the capital dramatic inventory effect, driven this believe we improve by sheet. effect And slowed Sensors, reduction, further

individually is effect, which inventory is process count one-time other the in added implementations, adjustment, annually situation number material, inventory. is a which the our singularities not Because a relocations we expect reoccur. $XXX,XXX significant typically the physical is which to impact of this and We negative, don't this number of manufacturing $XXX,XXX. system those the the And we of but had Regarding aggregate more unusual to of were -- around this negligible. conduct of

John Franzreb

Got it.

just that I in acting the – process? the the And China coronavirus reacting India And manufacturing and guess Okay. maybe are from shutdown. on that far we of transition your China $X.XX facilities discuss to to just or we'll are how how along China

Ziv Shoshani

Good. Okay.

more So with last relocation Sensors XXXX, end to from for our programs. move able in facility regarding and at end to our we U.K. are the the coming still move production production are where expect we the restructuring At close well net to we before of years, I were Israel million indicated ahead of at but of as come savings more $X.X year, least relocation as the we India the there Force inflation. move China to of from Sensors in realize to in to should Force forward

were it two situation, still which China, Tianjin in ago have small February the a back has two work days to manufacturing Regarding to we facility One aspects. Chinese we on fairly in XXXX. allowed go

up attendees we the high some on China But regarding restrictions we level back seen shift. the catch We are out Naturally, to still deliveries. trying and in are we – of may there are and depending to have – work. moving have with situation al-in-all, but change to of to trying we and goods are

On Force and Sensors the a WCS Chinese mainly in have few hand, customers quite steel the our respect other market. servicing to FTP in we

go of to it's – been Others pending. work. still are back allowed them Some to still have

China that to on situation approval the monitoring we work. are do optimistic are believe we but a vague this progress at – put way in we significant around at We point it should a in effect. they in It's this are time, to point hands we they time, believe little And believe daily a making back to and go the the get still bit don't be a may basis. the given our don't in magnitude,

John Franzreb

have is be by that think of there might or end effect result – Okay. kind When first of has $XX million in to your a that the million coronavirus the guidance as for not when it you significant any affected say revenue Or to quarter customers a been you the reduction $XX the about number? anything? your

Ziv Shoshani

Our the coming from guidance any exclude effect situation. coronavirus

John Franzreb

back queue. will into Thank Okay. Thanks. get you. I

Operator

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

Sarkis Sherbetchyan

my Thanks for question taking here.

to has us that more growth. give sales you how for to So granularity each Can your segment? metric on ratio book-to-bill segment's outlook? some relates the a maybe nice each rebounded And

Ziv Shoshani

Okay.

for more to your each segment's nice us book-to-bill a And on the has each that So to segment? Can ratio give granularity growth. how outlook? some rebounded you relates metric maybe sales

Ziv Shoshani

Okay.

reflects as effect on business, of conditions, of starting -- definitely indicated, a portion DSI, orders maybe is which positive is a high in the So being our sales and -- a in timing the in guidance has a of it's of level, the Pacific Instruments way some way, KELK market those of project-driven our spite very been mainly which how timed. customers'

the was to for book-to-bill FTP addition -- since In that, ratio you extremely mainly strong.

But longer them expect booked exchange booked, would some expected I rate. those that to to since that the would have that quarter and orders assumes expected are been We say, constant ship lead -- quarter we are to of beyond time in QX. ship quarter the ship fourth in has

some still very in positive measurement, test the time regards the in to recovered of nicely, momentum, quite end a fairly momentum, automatic still semiconductor, equipment gas, to general markets in AMS automation, all, is but regards equipment comes FTP especially for when the has markets to other at All oil in to has testing industrial it regards in and positive and still same soft. end

do that or flow As where so. it reached the change the we with in bottom orders believe, destocking the through next we and we and have stated, in had to things believe, to are quarter was I a we expect given we discussions customers situation,

Operator

a there follow-up Was sir?

John Franzreb

about contribution I'm off year? you touch yes. And from putting was earnings if full the I sales sales and maybe then, mute. for quarter? just Can the the myself talk you sorry. the for Yes, can for earnings from contribution your expectations on acquisition maybe and DSI that after

Ziv Shoshani

the and say Revenues to close could DSI of DSI was million. book-to-bill XX%. were $X.X the very two And that operating book For for X.XX. XX.X% adjusted a $XXX,XXX I over margin for and strong margin a we quarter -- quarter, to Gross had was for months.

guidance we in very this are we guidance but At DSI, give year still strong momentum. complete for point time, a running don't or on full

just book-to-bill very And integration going it I is process internal indicated, -- we well I our the As target we X.XX. the of expect do on be mean, and to per expectation.

John Franzreb

on into Thanks what you with the profile those guess for it I that. backtrack a from still call, be of we better? metrics last to would line kind financial were expect to we or of financial kind in communicated if

Ziv Shoshani

could could definitely provided we we with -- that in financial the definitely before. say be metrics it have would I line

John Franzreb

what then, you this goes that manufacturing the year And if of we And can kind CapEx just CapEx and XXXX? and what balance the kind and would at of of remaining on XXXX about shifted of maintenance step look the built, the year? Great. the be talk back out maybe fiscal maybe outlook facility for for your into spend fiscal top for of

Ziv Shoshani

Sure.

So, regarding to the what this project due mainly is spend QX Modi'in we planned to QX as have respect under spent from and fiscal CapEx has some project. have and to capital projected in shifted mainly timing to of spending is in our we in to planned XXXX, this CapEx regards

a We timing are effect. still on but track, was there

to We XX of some side. of the Japanese would second equipment rest resistors, CapEx be precision facility which on would floor the Modi'in while capital encompass million for the in of relates million, the the and infrastructure project XXXX $XX the our India in building around be and majority are of anticipating to approximately spending range $XX the million, to related be for to which expansion

CapEx the should back close more unusual support should to X% around a cost rate, just run definitely X% And to standpoint. old which capital is and that XXXX, of of this capital will go once This business. expansion year maybe and sales, to XX% another fairly spending we a in respect indication -- maintenance of from be the be reduction we

John Franzreb

for me one hop and Got And for it. more Thanks I'll just in. back that.

range. product where advanced $XX line that today? is that sensors the maybe product mentioned help grew of You XXXX. annual maybe for kind you range line's versus understand XX% million stands the in mid sales it Would now us suggest Can

Ziv Shoshani

say provide -- it's sure would not I would regarding -- your revenue we we let's be that level. provided specific a the level but dollar in definitely never A say, did within I'm would we range rough but advanced a number. rough number regarding are a -- the estimation double-digit a number million approximately be indication correct clear sensors,

John Franzreb

the Thanks. I’ll in queue. hop back

Operator

The from of Stifel. Instructions] question Ho next [Operator Patrick go comes ahead. Please

Patrick Ho

of very as any Are talked the on customers manufacturing. you question may the the and the revenue impacts Thank your chain to coronavirus some line? in cause follow-up a terms much. about maybe uncertainty there Ziv, earlier you supply that

Ziv Shoshani

If manufacturing, had the second point I'm supply effect, not effect. may supporting But we some a because in at China. to own inventory that which have we we there this support considering sizable speak production in about certain a it's time, our our as in chain again one, regards a to

Since is to it think base ease raw So long or it not sizable key so up for would manufacturing this that our be in able the in I would anyhow conditions, risk But significant to China. how is don't a provide materials. our revenues. depends sense we really them essential take

Patrick Ho

very does XXXX of you terms the look Great. those -- as a the markets XXXX. in defense that you participate good that like related? last market aerospace some that and you of my in given had That's for over question, project as in, in look helpful. year How forward follow-up very are you Maybe and

Ziv Shoshani

that end think of -- I in would was that intake this say the -- order market. given So AMS the AMS increase significant to in QX respect in regarding part I the

cases, that see a in into case continuation enhancement we XXXX further we we in can And of a moving of -- in even see So XXXX. dynamic investments. some still a similar

even So or we to XXXX. moving be AMS strong to do expect continue stronger into

Patrick Ho

XX%. terms a gross the longer-term goal of you in outlook set So of margin

can over just cost growth the incremental drive that'll on to up? that need Or today next are XXX couple forma I it that more are XX% basis years the to there guess Is pro made narrow a revenue moves basis. structure absorption? additional What still of be that near key that to You're points be variables gap. XXX made

Ziv Shoshani

make projection can which still years X I we it's our and believe, viable Regarding it.

singularities continue expecting to this we business which we significant cost the reported have itself. will not which a inventory reduction are as out to specific in take we We did of few had repeat First, did before. out and we quarter

are QX about the in run by And $X targets, over have XX% of we current reaching those XXXX those themselves than effects the when say, rate. of at level XX% around million were only when two revenue we -- exceeded to higher let's

So those well. to definitely volume have at in we reach targets much a will order higher as be to

Patrick Ho

Great. Thank very you much.

Operator

would like conference the concludes This I to back our question-and-answer for any turn session. Clancy Bill remarks. closing over to

Bill Clancy

you. and QX with our were we to at that achieving are book-to-bill, VPG is to we'll Thank want manufacturing which in note be I addition our Conference our newest summarize, initiatives. and we in Sidoti in New also cost-optimization York. of the the milestones pleased March for the To DSI performance

our you joining forward next I earnings May. we Thank thank for call on you and to updating today very you call want look in to our much.

Operator

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

may You now disconnect.

Vishay Precision (VPG) 19 Feb 202019 Q4 Earnings call transcript