VPG - Earnings call transcript Q2 2020 | Vishay Precision Group, Inc.

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Operator

Good day, and welcome to the VPG 2020 Q2 Results Conference Call and Webcast. All participants will be in a listen-only mode. [Operator Instructions]. After today’s presentation, there will be an opportunity to ask a question. [Operator Instructions]. is event this note being recorded. Please now Steve Cantor, would like Relations. to to over conference the Senior turn I Director Investor of Please go ahead.

Steve Cantor

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

governed accessed QX Today's a our site, the call XXXX limited can on by will time Our been available remarks on of be audio Web release and slides vpgsensors.com. Reform and provisions have on press Harbor the site. posted of recording Securities be Private An are Act. our today's Web accompanying Internet Safe also for the Litigation

Our actual vary statements. forward-looking results may from

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

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

Ziv Shoshani

begin impact Thank the financial provide on QX quarter on you, update Bill Steve. I our pandemic and an business. trends our with some and on details sales results outlook. will on the for COVID-XX consolidated of financial VPG’s commentary third will

employees measures investments we continue [indiscernible] pandemic our Despite manufacturing local presented free the in and we’ve sensor our COVID-related which to new in during protect meet and Moving this X. as our to take efficiency. facility Slide businesses, adjusted even to adjusted by continued precautions on to flow, effectively cash the and our We positive we second manufacturing operations epidemic. advanced restrictions We and challenges midpoint achieved guidance, the of COVID-XX quarter. our generated the well executed sales in

restrictions Sales in the $XX.X second around COVID-related Moving world. and closure million, reflecting to were the impact of Slide quarter X. the

effectively. more adjust discuss our Although Force operate impact business, and able operations were to the the in which I on of was shortly, to detail Sensors greatest will our majority

sales to driven by test of space market compared QX, QX sales sales to terms be test of defense portion end measurement to semiconductor by and to and and military continue In were strong. avionic, spending in the markets market the

had we industry to shipment weighing, as markets. some clear with equipment. industrial products other Yet, This in industrial sales our of an consumer overall softer across book-to-bill steel of orders end to and lower such contributed increases sales the saw markets, and addition, general markets, In KELK transportation higher medical of which X.XX. we signs of contrasted several and in

to Slide X. Moving

trends our by segment. Turning to

us traction to The softening of improved to consumer manufacturing offset recorded sensors future was and while FTP in capacity This consecutive underscores FTP improved manufacturing COVID reflecting quarter, FTP adjusted by required test of of our efficiencies. higher our performance the the site which sequentially, to seeing another first the a We have customers Products, Foil sensors medical in XX.X sales of X.X% which advanced in in quarter Book-to-bill quarter in is measurement sensors, markets, advanced resistors general a sensors and validates to commitments. were these in for significant products, second current industrial advanced XX% used volume XX.X% strength million due and in margin driven the FTP foil the for industrial For and in sales X.XX Gross grew operate grew Technology pleased meet applications. and at were XXXX. need products markets. defense-related we for sales new from second by support precision the impacts market the the orders. and for the growth. customer advanced manufacturing with XX.X%, This products quarter it QX other of by in for orders for from near demand maximum weaker for the was

installing qualifying due the in new the vendor as on expect facility delays as production existing equipment demand in fully site in to new manufacturing XXXX. to the the be well and operational Given pandemic, we

Sensors it quarter. challenging was a the For segment, Force

authority X.X pre-COVID quarter This XX.X% The declined the which Second Sensors XXXX across India, in to of about expect limitations. accelerate approval caused efforts facility to in Indian pre-COVID levels, quarter impacted for million operating quarter a Nonetheless, QX, during due restrictions of allowed of million in we revenue capacity the sales profit achieve up much to revenue as the QX at which operate issues. received Force operate to approximately the barring our of any run million. unforeseen from has second second there without ramp rate. production in of from X This X.X we by COVID the shortfall from lower to local mandated X, to first July quarter. partial us resulted to

expect sales was Higher the businesses customers WCS offset were demand sales demand Control by and to we be offset timing revenues run X to XX.X ramping industrial the the to million served second India Given and approximately sequentially. for by impacted headwinds Force the across X many from Weighing facility pre-COVID of adversely slower rate third and used of million lower in levels quarter applications for the COVID-related KELK Sensors Systems strength quarter, Reflecting the due orders, as X.X million trends abnormally lower of to softer [indiscernible] revenue. be the million medical book-to-bill of systems demand markets. low Sensors was Force by X million of as by for sales to were X.XX, mixed rest [indiscernible] in impacted those for approximately impacted XX.X% in QX WCS declined applications

receiving DSI, which shutdowns our lower systems, to closure sales. hindered contributed customers and For some from

in in our shutdowns pandemic-related impacted addition, quarter. In the weighing in second America sales customers, both transportation on-board North to Europe and

from due cost volume, control and for offset in the in Gross second lower COVID orders modestly XX.X% was by of WCS first for quarter resulted in our declined Softer WCS quarter measures. the quarter book-to-bill in adjusted partially margin X.XX. a second the for XX.X%, impacts to

onboard weigh-in-motion initiatives, and TruckWeigh rather platform our finalized EU regulations, its Regarding for states pending European than protection Union overload solution. VanWeigh weighing the opting with an most member the

OEM While achieved this the in France than in had in confidence for pre-COVID the solution. opportunity UK means expected, gives we aftermarket us less our us for opportunities and be will the traction the we

an avoid As VanWeigh and aftermarket complementary it to the sale, regulatory our TruckWeigh, optimize fleet since to their fines. efficiency solution platform of safety weigh-in-motion operators and is fleet helps potential the

Moving to Slide X.

regarding including the permitted. their workplace of if jobs our continuing world, and uncertainty in pandemic employees, distancing and around to remotely work the are the the protect Given our to enabling measures we U.S. the arc with employees

for to our maximize the margin in content of continuing workplace employment future. the to At investments and expected measures control profitability our with believe COVID-XX, is I The will in strategic approximately million impact, the that XXXX. an to a of of earlier and are our costs to approximately impact recover. our time, XX these terms P&L, net the the portion the related to described we represents capital In a well adjustments. addition achieve but target not in $XXX,XXX impact, meaningful costs facility leverage new of and spending us our of We to the steps continuing incurred short-term the expense revenue of example Overall, we to are COVID long-term our our also businesses. the when invest FTP we company’s serve markets strategic only across model beyond fully due initiatives

to We to opportunities shareholders M&A. also through continue attractive for value look build additional

I around would employees to the world Clancy additional Before financials, dedication Bill thank now the will their over quarter provides for VPG challenging focus it Bill? I more times. details to like financial on details. and turn customer the these second for Bill during

Bill Clancy

was $X.XX. related or the adjustments adjusted In profit operating of second restructuring of XXXX, Thank sales November million income XX.X per earnings we and diluted achieved DSI of net of excluding in Ziv. an XX.X net COVID-XX or adjusted of acquisition quarter of the you, was of sales, diluted revenues impacts, operating income slide to revenues X XXX,XXX per Referring Page costs XX.X% and of X.X accounting XX,XXX share million, million adjusted $X.XX. of to or basis, X.X purchase On our XXX,XXX and X.X% the X.X% deck. XXXX, million earnings share gross of of was acquisition and of

to to XX.X compared quarter second declined in million a XXXX second million was as of revenues compared the year XX.X% XX.X in quarter first Our XX.X% the quarter down and ago.

quarter XXXX ago to Foreign a affected exchange quarter revenues the as XXXX. second compared negatively of by for the to of first and compared $XXX,XXX $XXX,XXX year

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

from Our was XXXX. basis on gross XX.X%, in first XX.X% an margin which of adjusted quarter improved the

Our second XXXX. operating the for of was margin quarter X.X%

to compared compared recorded we operating Selling, as administrative or adjusted above-mentioned purchase in our per SG&A XX.X% adjusted quarter X.X%, million This per year sequential of reserves of partially debt less X.X DSI. to or accounting million $X the for to which were of quarter in by $X.XX expense travel of prior increased restructuring expense or $XXX,XXX the $XXX,XXX, revenues. of impacts, quarter of SG&A of first were exchange of bonus for last $XXX,XXX, $XXX,XXX XX.X first quarter reserves decrease The to expense second a first quarter share $X.X and $X.X diluted million earnings the XXXX full the and $X.XX quarter. in inclusion of of the period of COVID-XX the share of other XX% general $XXX,XXX, and million charges travel XXXX. second $X.X or million, of XX.X% XXXX other The bonus in The year XX.X fee from of $XXX,XXX. net the compared quarter million related rate X.X% bad of reduction XX.X $XXX,XXX, Excluding and impact cost the margin million or for of was SG&A to million quarter the second and expenses diluted XXXX. of in fees offset for reduction relates in the adjustments, of of decrease second

XXXX $X.XX XXXX. sale flow plus operating million capital of to exchange was currency quarter less define adjusted period. for as $X.X share million expenditures, We million fixed cash XXXX second compared the of The second the of to cash net adjusted quarter of Foreign tax diluted year $X.X decreased the $X.X by GAAP prior quarter quarter activities, the cash the or assets. XX.X%. in per second as for generated flow rate free relative from rates free of for income We second

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

the cash support fund second our additional Moving liquidity to believe business balance M&A sheet ended and of We million. equivalents ample total to and strong that debt XX.X XX.X Slide opportunities. a million to of we and We have quarter X. with cash requirements long-term and

we expect In net given and and Regarding to challenges lines initiatives economic for constant fiscal growth million our fiscal the XX we of and outlook, executed and to of grow COVID-XX. well Thank questions. quarter global despite of the performance we delivered you. forward our sequentially move normal. revenues range to and XXXX uncertainties summary, to the performance XXXX the QX solid million on exchange our ongoing third margin order ready rates. as pandemic, With continue lower in quarter maximize return be at to impacts that, the the revenue. with let’s be XX And investments second the to We for conditions of rates open

Operator

Thank you.

Instructions]. session. now question-and-answer begin the [Operator will We

Sarkis question FBR. Riley ahead. First come today with from Please B. go Sherbetchyan will

Sarkis Sherbetchyan

morning. question Hi. taking for here. my Thanks Good

Ziv Shoshani

Good morning.

Sarkis Sherbetchyan

So sequentially lower line. top

was margin and drivers nice. in better-than-anticipated guys understand guys clearly the the model presentation? You investor much Can target you flow-through operating you to us profit the a maybe described have gross recent relative generated help a

Ziv Shoshani

measures model this prior target The quarter and an question. we to Sarkis, based doubt No take challenging very Therefore, the is did model. business that on account we that provided Yes. based identify drastic were living in as we have ahead. in the drastic on did – was our results are not profile that times. move ability there we very we excellent quite

would mix. Then through efficiencies. items the about be have then restrictions, of model would model $XXX,XXX repairs manufacturing utilities, respect not as considered and favorable Those And deviation items $XXX,XXX Let the the which me we from forth. we be this of would account million as to another are quarter. cost control the considered big-ticket speaking big-ticket main The to $X maintenance product close in of that have items. so go we measures in we on travel so be and did

Sarkis Sherbetchyan

then just And segment That’s for helpful. the ratios. that. at Thanks of looking kind book-to-bill

maybe August. If us of in July help you have the the been in far how understand can segments three and so in each orders maybe progressing

exiting saw the XQ? book in what to activity relative the is So improving order we

Ziv Shoshani

maybe start saying quarter. me Let by about second the

below If well the the orders well, dynamics given in as you bill, and India, the in mixed. as to restrictions quarter The limited of WCS capacity are see second the FTP $X.XX naturally was book the except net, for X.

the however, second gap. weaker seeing far, in XX% COVID in to represents the don’t in our placed is industrial, represents effect. general the oil meeting drop intake steel, which in been and the such our effects. medical are traditional in as QX And slowdown the orders industrial that that we for did We mainly sustained in to respect bottom industrial been half. two semiannual we really other consumer. feel hit see have than not in One weighing, strength order important regarding general FTP, AMS, the as intake transportation of markets state order and the provided. All-in-all, around that way, for do and effect the a we well optimistic the placed normal really the But in and WCS XX% and gas more industrial are QX second quarter, and It’s I has demand FTP guidance. Nevertheless, that guidance that has expectation is so provide as is we we

Sarkis Sherbetchyan

helpful. super that’s Yes,

understand run guidance. a model what exactly you at with line we that’s with better the that maybe like to happens. going to for happens segments was relation kind to the that So us sequential And ratios Maybe the just of guys action, I the and of variable, understand quarter, wanted remind anticipating in are as trying like can play looks a expenses the it looking SG&A top to the for sense forward? for moving the And SG&A much what book-to-bill million. profits maybe rate $XX.X get was operating to cost how looks the what

Bill Clancy

travel. forward believe like million bonus number. use some but number Ziv Sarkis, question. going that a we XX.X I reserve adjustments, believe The very went be XX.X million that’s We to a good is mentioned, a we Yes, forward. XX.X good Obviously, million going less analyzed, good and through to continue to had that would

Sarkis Sherbetchyan

you. I’ll the queue. One for more in hop and back Thank me

what It’s projects the for completion? good just cadence the mentioned, Ziv, against balance And you looks especially how kind $XX capital and maybe the So ongoing, news. for budget, wanted of like of we’re the understand tracking FTP. to that to for million spending time

Ziv Shoshani

Sure.

As during the initially, it – of last recall, earnings in you was Sarkis, can year. QX sometime

low have We this indicated budget level. $XX projected that for million our year would be around

facility, last if since indicated Given cut at the the are to, buffer XX% we during to XXX% COVID manufacturing quarter the will hand manufacturing situation, point I not we new on has capital indicate transition at to running build to changed any capacity buffer the that allow call, cannot for to is, advanced the in this QX we XX% by in to for capacity around running then we going us sensors. the did close as the level. advanced legacy one And transitioning earnings from because spending low sensor build wanted our not stock. are we at facility since at stock time, What the XXX% in back

be installed additional In as capacity allow to demand new to new addition the that, an capacity, standpoint. the to in one increase hand, goes given foresee we us location Therefore, expansion was facility, secondly, the current move on location. which the sensor allow gap to further us, which to advanced the equipment for would and demand, from revenues will a spending from even may up;

back is is how get $XX equipment sensors. the gap we the million. This really to advanced further for So

Sarkis Sherbetchyan

the go back in I’ll queue. you. super Thank That’s helpful.

Operator

John question Sidoti come with the ahead. & go from And Company. Franzreb Please next will

John Franzreb

and Ziv morning, Good Bill.

Ziv Shoshani

John. morning, Good

John Franzreb

about you or And Ziv, at third if do still it I India there? is will think the to you easy wonder back, wave it take the restart. point? bring wave second could talk a India How is employees get this long because having how to

Ziv Shoshani

question, great John. a That’s Okay.

but So fact, we most are where did in this recall zone also the for the India call, country. considered as shutdown. the we the it in earnings was if indicate a red imposed that last you was of countries, located, can Well in

we under a fact, So – in have shutdown. were we few complete weeks been

have were later, that medical applications. delivering And for product we say I While the operating the to partially. for we received would during just quarter, permission operate all

During back to XX% we due homes these to to times, situation. red can capacity. now reach zone the we did out try as go and the that currently to to accommodate allowed to many even we July running to people not at lifting people restrictions, around XX% And are are given the their the

was would improvement fact time significant third goods we a at and ramping logistics we India divisional are full please I that given fairly there the quarter, currently, turnover, QX. This and India running people of an [ph] the around the is distribution But think is able that goes hire that recovery that in to XX%. the the So team job Europe a but in the and mind our see up team the is in great certain bear correct. time to see United revenues There we in are and a we States, but did amount defer we and will in from ramp-up because to quickly. in were centers the

John Franzreb

Okay.

we some labor the get production, you allow right? only should quarter, as So the fourth not into for on force inefficiencies on the but

Ziv Shoshani

level. the insignificant professional effect this see they as means because point order are very in very, Yes, really We but a they good time on running very, I good manage which a situation a at inefficiencies, manner. would consider second that very – in

John Franzreb

general being what you that that? the just to and drove market the was economy industrial weak. overall Could steel talk And Good. despite strong

Ziv Shoshani

Sure.

we revenue, modest. to spoke about that to saying mind the bear So necessarily quarters for two when bill steel, we please not book about in – quite were last bill. The we when in was book steel

For steel the in second rate. example, was book which lower bill X.XX, to quarter, run have for than order much is seen the last two in intake the means an quarters we revenue our which

and have COVID. been order the that that mainly from business of We climate, delivering by So we also is from affected a feel one the backlog. end intake markets an affected do is is steel from

John Franzreb

equilibrium out So of you’re the high-margin margin, very that shipping backlog for you and backlog hit a it’s shipping? you. run When the high from does bookings and business kind and with

Ziv Shoshani

will would into bigger XXXX. see that effect I expect the coming we

John Franzreb

right. all Okay,

Ziv Shoshani

Unless will order intake higher the much we see in months. coming

John Franzreb

And one answering confidence something it. orders Got semiannual bit customer that you a a or in mentioned have it about elaborate not just come? been about fully expect on Just Could issued. comp? that talk the little that? Do you of questions Is to a little them bit you previous renewed issue?

Ziv Shoshani

Yes, This – is sure. pattern okay.

the For based practices some with manufacturers. contract and they we on orders. products, with of that working And with the distributors the OEM, large do our contract are the semiannual place

So but again, coming the they did place into year. the would semiannual expect quarter, the orders third covering orders to the of rest we in for QX, see

John Franzreb

Okay.

Ziv Shoshani

measurement end and of is precision resistors. one those example, for markets For test

John Franzreb

Got it. And I guess one last question.

expected Just transition. inventory I then you’re that understand on and the And clarify your timeline do like properly? Did the build advanced to sensors – in it sounds whether on that? what’s going business

Ziv Shoshani

premise be a we Due running space the equipment Originally, at to the equipment from let that the to we me are to the new the more capacity, from build allow John, new transition current current Therefore, the the able to inventory. build – are to clarify. ordered us to premises XXX% the in not buffer stock seamless assure to plan us in order have the was to in facility. order close to installed transition. we fact So to

John Franzreb

helpful. was That very actually it. Got

Okay, into get guys, very thank I’ll much. queue. back you

Operator

from Ho And with ahead. the Please will come next go question Patrick Stifel.

Patrick Ho

you much off, buffer about work nice just maybe terms Thank execution. advanced some inventory. Ziv, you very sensors, building and of in on the first the mentioned

bit quarter. color what’s driving You give Can of a you little in first advanced demand saw significant for orders the sensors?

Ziv Shoshani

force I one second I as we medical are and strong order for advanced which the for the quarter. advanced markets sensors said, They strong. the other to is a is behind sensors, Patrick, consumer. for also fairly two or have intake One say are first Yes. driving the but quarter, end have

Patrick Ho

the consumer up of it maybe sensors market? things data you follow of little a side just And the on consumer as consumer strength to where side to relates question advanced technology Great. mixed give things, points a on obviously color that more of Can the as and electronics. on some on seeing clearly, there’s the the especially you’re

Ziv Shoshani

Patrick, in to electronics. strict divulge discussed and the those not any we that very allowed applications, we are have Well, and we the NDAs information unfortunately, on specific consumer especially regarding have past,

more consumer which bicycle environment. consumer We other doing regarding will some applications, provide favorable much bicycle-related applications, see end more we able the But we we color related – electronics, not On high – not a have also unfortunately are be are better. regarding much the to applications. the

Patrick Ho

Fair question final from enough. And me.

and your You core you over of sensors, able manufacturing, across quarters? the given entire across you’ll for the supply transition to both the build customer are different But as of portfolio, makes you that buffer all are talked complete out next your your evaluating that Bill, even meet sense. to about product and internal advanced still customers there terms in demand disruptions couple to building that site. inventory" ensure products "your be How maybe inventory your at chain

Bill Clancy

Ziv, want inventory that an one do from perspective? to you handle

Ziv Shoshani

to we supply absolutely. order we assure Yes, that require key have our Patrick, would identified in all the chain. materials

have to quarter a in may inventory QX. second that certain You respect we have quarter-over-quarter, seen increase in

all with We suppliers. key in under segments to we the and and be key safety believe trying stock contract, shortage reporting our consignment identified all material, assure have we are could which stock

In line in of situation we we well specific situations product that one were for an for equipment capacity. supplier limited for shutdown as electronic had some seen, a have example, as subassemblies our addition to that, where

all have example, while For is this are California, a the California-based. in we subcontractors Pacific Instruments

But assure we build that in line, material key we case, from product standpoint, all every can. are as the business, general to did inventory much as a and the contract place. business in identify to every we continuity, put we trying So

Patrick Ho

very you Thank much. Great.

Operator

[Operator Instructions].

ahead. will question Capital. from next Tieton go Our come Please from Dezellem Bill

Bill Dezellem

you. I more and for that hoping would and Truck the the VanWeigh was talk details Thank little the business, behind please? and rule more market changes a your implications you about

Ziv Shoshani

weighing, Union with protection Yes. member or its overload most it and if states, was really roads will cost. pick at weighing regulation pending every European This truck weigh them believe this It was to seems the the EU the opting that considerations respect main install weigh-in-motion to finalized every in main point, that highways July, weigh-in-motion weigh-in-motion install X.X or platform. or select fact certain for look van consideration We installation this to we over to in certain in at due for bridges to they the at that onboard onboard to on certain tons. have respect

The given be that fact the of that are effective is believe our regulation – new an May multimillion-dollar next as given the selling will a represents opportunity that the the be the will aftermarket, to most still we already few years. do us, we which Given revenues effective XXXX. by of opportunity, TruckWeigh aftermarket driven in VanWeigh the for and regulation of

the in weigh-in-motion fleet operators truck Our complementary increased solution the in safety platform weigh-in-motion, and to addition terms offers efficiency. penalties avoiding of possible since it value detection before to the by is key the

still initially we an is the level So a enjoy as regulation this kicks aftermarket we revenue if that the point would we in in significant expectations are but time, believe high quite the not round hoped, there have we as and did the same penetration of at UK France. as upside at look in as we

Bill Dezellem

exactly there trucks most had may, line make I that would none and the on instead, new place have have understand them going so if of fleet you’ve Thank for in be put the I that weigh will, you be off this? but equipment happen all operators you, the come and and many just be than I’m to them all on been going will they weighing will you new think across the Is that and bridges. manufacturing to so they Ziv. will before be road sure come trucks would the what the that existing know their is since into retrofitted. existing them that so vans, bridges way as of believe to required already out the rules the down trucks, trucks come But – equipment weight seeing they that this, that the about their to right favorable weighing

Ziv Shoshani

is correct. This

Given the if fact in cross and he on weigh-in-motion safe penalties load the or inefficiency on be involved be just embedded will there efficiency, that to hand, an on will will be you properly, safe wants terms But somebody if other penalties, overweight. of the fined the over side not he and side. truck just be the van have will tons X.X to the you

this going the goes seen or and France in our revenues and we the the to this optimize of this is trend before believe to going weigh-in-motion, most before have and their we So current the – van operators that where our is systems loading truck but correct. operators will UK, enable and to,

Bill Dezellem

the Thank you clarification. for

Operator

back over remarks. to would Steve closing This conclude question-and-answer the now turn session. conference any for Cantor to today’s like will I

Steve Cantor

all call. you joining for Thank our

great do the to Jefferies in in Again, are Industrials I investors you Virtual Before a as all conference being remind day. participating by have closing, we tomorrow want well Sidoti Investor September. and held that virtual thank as Conference another

Operator

you The presentation. conference now now disconnect. you And may concluded. for has Thank today’s attending

Vishay Precision (VPG) 8 Aug 202020 Q2 Earnings call transcript