VPG - Earnings call transcript Q3 2021 | 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 Third Quarter 2021 Earnings Conference Call. All participants will be in a listen-only mode. [Operator Instructions] After today’s presentation there will be a opportunity to ask questions. [Operator Instruction] Please note this event is being recorded. I would now like to turn the conference over to Steve Cantor, Senior Director of Investor Relations. ahead. go Please

Steve Cantor

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

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

statements. forward-looking actual results from Our vary may

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

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

Ziv Shoshani

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

of for of pleased supports positive the third operating book-to-bill achieved We our outlook margin XX.X%, X.XX of a gross the quarter of results record We sales the $XX.X adjusted which margin are We solid with quarter. We and ended a and fourth quarter. of $XXX.X $X.XX. performance of EPS million, with backlog achieved million. in adjusted our an adjusted XX.X%

advanced in to integrations we is new solid and sensors DTS, generated proceeding and We also of acquired the our XX.X%. EBITDA cash flow June, manufacturing move facility. completed of of adjusted which we margin The smoothly,

to Moving X. Slide

more year strength and addition of third the quarter, X.X% ago from grew the DTS. business the XX.X% Sales quarter the details. Looking reflecting and sales current from second results the environment of in at a

to of X our $XX.X $X to book-to-bill in reporting our availability of constrained hiring impact While performance, the intake from markets. the pleased anticipated, We related the was end revenue revenue. in estimate The strong to in our million million approximately $X ability our translate we the above at challenges all X with our segments and had third million with around orders that of facilities each the as quarter challenges are was labor revenue into world FTP.

sales from DTS. In our steel terms project-driven market, of across by market second the a end majority and the XX.X%, of rebounded mainly driven grew shipments of markets, avionics, and transportation Sales including by space, to trends of and orders. we sales the the military increased addition of XX%, quarter the reflecting XX.X% respectively, full of which quarter timing

million customers, been a placed business $XXX.X $XX.X X.X%, due from OEM In from strong second a continued orders, well resistor's test Sensors quarter for quarter and X.X%. primarily X.XX grew transportation were the for lower of trends had was markets, semi-annual these book-to-bill to and XXXX. third record our was the of of which The Force quarter which sequentially million, net XXXX. terms timing foil the in of of and of of result reflecting backlog up other our measurement demand, a as second in increased a Orders as order the

Moving Slide to X.

another Sales third the solid level facility. at even essentially quarter $XX.X X.X% as segment. remained resistors a sensors sustained precision were achieved Turning the Technology to by completed with driven demand continued semiconductor good results test Foil to were equipment. of lower and quarter the Products we sequentially, by ago. sequentially transition sales million Advanced foil new from of year

the working as a the in to result of moderated As days in revenue expected, facility AS from quarter and fewer due Israel. QX transition

also open with In proved and U.S. in operation headwind. the our FTP filling Israel a across positions challenges to addition, be

this as in hiring. alone reported not companies We challenges many have are similar in respect

make with approximately are open of quarter, in labor inefficiencies, the quarter, fourth in the filled expected and impacted progress recover expect mix, we $X.X to fourth new first foil product XX% in the in quarter FTP volume for in to through an on the remaining In advanced have and third FTP reflected as the compared XX.X% the unfavorable increase including margin was inventory open margin the inventory positions which Adjusted positions and based and factors, train position FTP close exchange volume staff. gross Book-to-bill unfavorable the across X.XX we We and was making second we precision including to of quarter resistors expect progress these filling of for by to XX.X% quarter, portfolio, million filling in sequentially, the and levels, FTP and lower backlog and grew sensors. XX.X% a was gross product rates. reduction XXXX.

to The the quarter. fourth another We growth in we segment achieve are AS the capacity the process for up Force strong and in of expect new advanced quarter reported of sequential sensors, performance. ramping Sensors

XX.X% and sales year of quarter higher second from X.X% improved Third ago. $XX.X a were than the million quarter

of XX.X% third quarter Sequentially, sales sales profits. ago. expand XX.X% of an We DSI $XX.X terms the full Sensors of year year -- from slightly XX.X% as of XXXX Sensors full sales and XX.X% improved third and well, from as first but X.XX. adjusted sales a revenues performed of and well, business in from higher sales, third in to period Control same for year both the months increased be second XX.X% as achieving continued OEM due the of Financially, for higher gross in book-to-bill Sales we quarter, DTS reflected Sensors with continue margin the pleased grew well Weighing of quarter. a XX.X% to the addition the for higher and for products. the us, sequentially to ago. Force compared the with DTS This the In KELK X quarter Systems a declined a did quarter, in of in our to Force million execute initiatives quarter to first OEM Force ago

should DTS growth testing a prospects applications. military even automotive long-term as With in the benefit for and safety encouraged trend smoothly, more integration it continue secular going we to about from are

quarter TruckWeigh, industry-wide by lack from VanWeigh were of $XXX,XXX new third trucks supply components. impacted due our expected, to vans, As and sales approximately initiatives of negatively and chassis

WCS third XX.X%, DSI and revenue XX.X% product and in from mainly addition of gross shortages DTS, and favorable second component these revenues mix. expect and and of monitor KELK to quarter, improved to in higher the by quarter the margin closely the in impact Europe. $XXX,XXX the due in We to continue fourth as for chassis was approximately we quarter products shortages Adjusted orders

In X.X% WCS book-to-bill was sequentially, order X.XX. segment, in terms of trends orders declined while

offset KELK for for combined Our project-driven XXXX. reflected cyclical steel-related DSI. Book-to-bill as positive by X.XX, higher indicator for orders KELK lower for a pattern product is and DSI for revenues orders were which was

I'll call Before a comments. the Bill, to turning make additional few

terms balance sheet, accelerate turn needed all and the it enable for generate currently our that acquisitions our our be protect We will details. businesses Clancy with In And investments to growth. flow open to measures our which our growth our we high-quality to now proactive we in and taking are returns. employees believe strategic COVID, additional our add of and will additional will and to to of on where focus facilities in us and operational, attractive I cash to excellence solid markets continue businesses customers. operational over portfolio, long-term that given and we Bill can financial our our expand Bill? believe

Bill Clancy

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

to in $XX.X second million year revenues Our the a third quarter, quarter the and quarter X.X% third ago. XX.X% were XXXX grew above compared

million XXXX an quarter. negatively ago, a quarter compared in Foreign second quarter quarter to second second adjusted On margin positively $XXX,XXX XXXX. gross the $XXX,XXX the third XX.X% XX.X% XXXX, of start-up compared $X.X sensors $X as and of facility exchange for gross as impacted compared million to the the of revenues basis, it cost. costs margin by The year excluding third of quarter in XX.X% revenues purchase in of adjustments, of COVID-XX-related to quarter third compared for accounting is XX.X% the of and impacted by acquisition advanced which to $XXX,XXX was

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

the quarter for as to or excluding XX.X%, the and was adjusted $XX.X mentioned XX.X% XXXX of XX.X% XXXX quarter earnings Selling, were the million XX.X% were net or expenses ago. for quarter or $X.X $XX.X third for compared million a I quarter third per XXXX. was $X.XX $XXX,XXX operating third general or revenues of was administrative above. new increases CapEx $X.X Our and of facility. $X.X margin in third exchange of in of DTS adjustments or to or infrastructure relates just the reflects diluted million, million The $XX.X impact, The to for the of of majority share per of compared costs. $XXX,XXX quarter of related increase to bonus SG&A which million accruals, $XX.X for EBITDA XXXX. compared mainly $XXX,XXX million wage foreign third acquisition, of $XXX,XXX for sensors other $X.X revenues the the diluted advanced rate XX% revenue for the million purchases $X.X of share and Adjusted year adjusted million million $X.XX

expenditures which tax of GAAP for a was fiscal free the plus capital XXXX. flow as of of activities, approximately we operating fixed with We expenditures, $X.X We tax generated rate million third in define onetime compared less capital for $X expect cash to acquisition. to be as of purchase XXXX the cash the of DTS year cash result XX.X%, third full adjusted The the associated sale As free XXXX. assets. these for $XX benefit quarter $XXX,XXX million from in of million a the flow to million $XX third the quarter quarter investments, currently includes of range

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

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

in for sequentially fiscal third constant we challenges We've the quarter is manufacturing transition hiring expect solid spite completed net The grow $XX advanced of outlook, the summary, the fourth performing results FTP. and integration quarter of the exchange facility. they million in quarter, XXXX the are achieved revenues new and to range be In smoothly, at third $XX in of sensors to in our million Regarding fiscal we the to well. DTS going rates.

Given questions. the lines good open strong XXXX. our strong are fourth anticipating book-to-bill, a and backlog you. With start quarter for and let's a that, we for Thank

Operator

[Operator Instructions] Franzreb Sidoti Company. The from & of John come will first question

John Franzreb

I'm fourth in going the for quarter. deferred and FTP outlook, you it into to the In being Ziv, revenue revenue guidance fourth earlier, start where the really of left pushed million, off, there's like million Bill. to mentioned FTP quarter. about $X $X But you that that's strong sounds quarterly

then be question addressed levels? Or pent-up we up this fourth as will enter XXXX? those at one my maybe the is, into to and it's quarter demand, is is time sustainable got So soften

Ziv Shoshani

we At very FTP. a in this a see continuation in business strong time, environment of point

improvements QX As million to to market, fill We that in States open at and in I United open to change the current and start is the in for make million to made the indicated for we staff. $X -- already the particularly Israel significant expect resistors. and new the in due precision advanced labor the more attractive $X those estimate have minimize train impacted see before, and competitive availability in positions to challenges rates to John, has more in all to the it the turnover tight to employee more market, labor going to positions difficult labor that fill pay become already started and fact we to QX sensors current of and adjusted the to to

transition filled capacity We mind be the all end first sensors complete open also to majority Please we the to by the manufacturing to expect facility the new bear of have quarter. had to to in of in order positions advanced transition. the slow that of down the

will the capacity we advanced in positions, also XX% this QX. to up expecting of QX. is And transition, we will to So those of ramp about grow And to to that ramp by respect we end also around we course, start the QX sensors expectation as increase fill in continue post to are in the as up.

the solid expectation FTP revenues strong solid this for is business and continue segment. and So and given to the the reporting in backlog, environment the improve the

John Franzreb

Got it. Got it.

the like was me the So sequential FTP missed it the $X might at when the Can I look for? that. due kind have sounds quarter, in adjusted it profile was gross to of I the of it due rest XXX-basis-point again? transition. drop, of in What million walk margin through that you

Ziv Shoshani

Okay. Very good.

inventory constraints related at labor we we to respect for inefficiencies prior and $XXX,XXX if margin rate at mix. look as unfilled fairly turnover, million, to product of in a including the have levels unfavorable $XXX,XXX then impact are due $XXX,XXX looking FTP, to production quarter, in an we So $XXX,XXX $X.X adjusted due exchange gross indicated on the before, an to of of I headcount, high

XX% we the that so-called if improve inventory singularities So indicated think and I -- singularities, will will the an in to the see start you also exclude that and volume have $XXX,XXX why the that will the back improvement. QX. product the fact unfavorable given least going is efficiencies to range of labor mix short-term increase at an effect, the you And FTP this in see the we we improvement see

John Franzreb

off. didn't Got ahead. sorry, just I you it. cut Perfect. I'm to shifting Go And -- Ziv, mean

Ziv Shoshani

of margin gross QX. No, in no. XX% Adjusted

John Franzreb

much DTS, the And switching you at over a in right. what in was you about Can that DTS. And All remains talking time there? the quarter? line of how on talk about little Perfect. weighing just integration contribution kind bit have to the control DTS the you're

Ziv Shoshani

adjusted quarter of of in with margin has XX.X%. XX.X% contributed EBITDA adjusted gross in all, an million the DTS All $X.X an and

and was it So sizable quite contribution of DTS incremental powerful to WCS.

quarter X standards integration let's and and the would I group, remaining with, prior IT and integration post synergies VPG first sales the is As acquisition, the parent the the and the and into come with policies it, in indicated with while months, the systems the next call in core the with all company's year.

in point and with as time, of integration systems So DTS at this the part applied and policies is being the of DTS.

we indicated are before. on we as So plan

John Franzreb

I just X guess question. Okay. last

to infrastructure benefit as is the of you passage do see Or neutral? the With that net bill, it a your company?

Ziv Shoshani

hand, selling infrastructure selling who we testing is it's structures. providing for -- services some being which -- have have bill the that advanced infrastructure-related The to we are are if infrastructure bridges, strain to of products well, building companies transducer sold we business. concrete, On gages based sensors, one are

in you tier hand, Sensors, our On companies. second the part goes tier, first of other recall to Force that equipment business construction OEM may

are expectation the provide going us see the that when going tailwind into So is the larger investments it would infrastructure we United States. some in to

Operator

B. from The Riley Securities. comes of Sarkis Instructions] next Sherbetchyan [Operator question

Sarkis Sherbetchyan

especially look here. of of parcel backlog evolution segment? and the in Control me guess FTP, look in is the ratios? of Force strong gross book-to-bill maybe expectation and rebounding to evolution margin tailwinds guess, think strong continue for you of and if to I part like understand light first I Weighing here can and margins you XX%. for there, the Sensors kind But about back help 'XX. each the that, and really as talk the Part Bill, book-to-bill we at gross the Ziv, I of said Systems, backlog I it at to sounds

Ziv Shoshani

Okay.

Sensors. So let's talk about Force

that's forward we in United States we of have The were customers. indicated offset -- of revenue into been feasible, is Force at given have may a and support this quarters, that China we $XX going -- $XX that Sensors, big we to increases low to the from the past in tariff the gross for given expectation time, change those revenues. is and in years. gross few a it the million, additional which level mid-XX% have margin think revenues, that to well, selling Force margin by manufacturing by prior and already last the as in mid-XX% in costs sales million as seen our price reporting I to incurred you a believe that point Sensors, additional XX% At the current

a is to low Sensors Force low the So sustainable. -- XX% for mid-XX% to

Moving And this is to I of WCS, see time I WCS well, we -- mean, reporting, time, XX.X%. -- for first this the believe, really I the is -- XX% of first we margins DTS. are the over full effect think gross

KELK mix like have margin strong XX%, wing, of of products, XX%. very know, you onboard project-driven the with DSI, a As over WCS, very, to are we for in effect DTS, respect the our process which day, the gross over the end at weighing

that again, XX% So between if the backlog forward. between given a margin revenue product going for it reporting gross segment feasible low the high mix, vary is I think those are sustainable, levels, and to this XX% given -- may

Sarkis Sherbetchyan

say kind kind I like very let's if about what you sensors level you've projects of say, what would That's CapEx so? for bring inclusive advanced be positive would the that the of your NPV of the back step you'd and completed helpful. now and potential the on, it. or that And year then CapEx next I any facility, Got guess to think of normalized of

Ziv Shoshani

Okay.

which So, some may for initial our X% revenue, substantial is we prospects high to in fairly around Sarkis, and you that QX, recall projects projects. year, was it this due about when think of

okay, run between XX%, XX% more takes where to us time, fact a pushed COVID automation back. precision a company, the X% As out of to X% for mean, should revenue, step CapEx. finish, as CapEx, me we going X% projects take to a effect X.X% X% of are the -- has a I level many let between indicated, the normalized The that it Bill normalized to to in

major advanced to XXXX to to XX% part much XX%, of completed. a order The reduce get due and and capacity, the we resistors capacity significantly. reach base. fact advanced -- to big the able once was projects capacity the during the extended times order sensors increase higher and infrastructure support those One next in projects -- were limitation that, in in has for capacity, would were out there pushed the to be was has to of been automation step precision the to this the sensors this we in our in that manufacturing plan lead equipment been vendors cost Unfortunately, the of not original COVID, travel and to addition

So of I United initially extent, be this would in since installed. in the equipment are year, this a will and very all, good them getting way, invest operational. Europe, the XXXX into to able get to as equipment we say pushed improved that, the States, which being has of And and are fully we equipment we situation to those process installing the vendors have getting on that planning in been, now all some in the investment, all out in X% probably been has return

this into a shift gear CapEx is revenue So this next from of year? X.X%, X% X% the year

Sarkis Sherbetchyan

super me X And here. That's for helpful. Great. one final

want chain it able is as that pass And how Is fairly easy? or headwinds potential of the kind about you your customers? of As to from get to a Is think you about conversation environment going? for these it sense supply price difficult? think potential Just any you that. and on situation, to hiccups are inflation

Ziv Shoshani

increases -- to have require a order in gross which the changes to cost in popular popular I started would in with order is fill subject changes to used say, to to the The structure initiate some margin make, or we to Price have that fact customers. us, before, we in is we make been hire already never that positions to. maintain will those never

a are at increases, going So see we FTP, we say, apply which were extent, would large are to I in able not already -- were some to we in able, large we price we next -- year -- to a but wage new the larger will to effect already see apply into extent. a being we to some cannot Naturally, least much as effect those placed, backlog, going offsetting it are on increases. and QX orders

to to hand, other we in were able order we or offset On to are increase -- prices the cost. the compensate to increase tariff able

to of cost. some course, few at we this time, our offset material many able of logistics are that product P&L. cases, of some But we in upsides. And doubt cost no already quarters. should benefit would the those it cases, the affect in lines. would in which So do additional the I we raw enjoy It's And which In just cost, in, we increased, price will in say, other this significant last not point increase. seen already the see the

Operator

Ryan comes question of Dick Colliers. from The next

Dick Ryan

were prior capacity little already? market Ziv, your you're Just the aggressively current business constrained, is now new you opportunities? is on give to to can the refresh to this against And maybe what facility go a is you much advanced bit sensors, bumping expansion online, more up allowing seeking capacity us you to that there? How

Ziv Shoshani

Okay.

So Dick. that's question, very good a

So very sensors, for all, continue first the book-to-bill advanced the see strong let environment of say so sensors. X.X, me business that, was a we to advanced

the the intention transition I've QX. XX% -- up impacted are And QX going expectation hire finalize a more to second we support quarter -- to to end expect revenue annualized. approximately been this as basis, to have hire by as back mean, annually. QX the to potentially manufacturing this to the at transition revenue intake. a and X% bottlenecks QX. is increase to have of we compared as due add were is is respect people, and and increase to We in to million And needed need have backlog on we to in in million another capacity and point be expectation The going that $XX At order the at ramping we time, the see, point have are already expected, the shipments would we the as are on, in the in and increase. up, We this to XX% -- currently $XX discussing. to quarter, seen, I in have negatively ramp labor and are the continuing to challenges by as the people we and time, we we potential if backlog given to equipment the a as back produce, And move

Dick Ryan

And Sensors, business at Or under been that you your there? new just Force looking have OEM wins opportunity? pipeline can of any there describe

Ziv Shoshani

OEM, in seen, Force the For in been time, I'm customers point the I part Sensors, weighing off as we first of our generic have first the at has offset for indicated, business. balanced months. softened X have has this for most an by been quarter-over-quarter, more which the -- increase the which If for Force year, demand or Sensors, looking

this some the are have they on OEMs, first few but, at we we some had tier QX. do therefore, large new see having the we a point reduced in with -- not we at have the bookings have So inventory, opportunities time, designs, in -- based they discussions

Dick Ryan

Okay. Great.

Ziv Shoshani

support We do ago. and to them. levels, to same see are ready we the are they the start confident to we not pressure as see the -- we we seen But of very deplete coming level demand X will capacity But quarters back. we their that inventory have going once with do are not

Operator

from [Operator next Instructions] Management. Dhane of Tieton come Capital question The Matt will

Matt Dhane

where to up, manufacturing beyond capabilities your capacity that, you potentially add with this provides, you that address different additional different and go can say, customer that add around opening product, I to the line? that the sensors around additional to ask you advanced able expansion facility product in wanted and continue to market bit does a little facility further a tweak the opportunities needs like and been historically haven't ways that as way

Ziv Shoshani

platform and -- the not -- advanced design, The have does transition does R&D to cost of the platform we sensors gaining advantages us to give sensors design fruition future we or we to main in project the allow capabilities. more on been volume. respect is that demand and the future The advanced base have that sensors that -- advanced finalized in purpose developed order terms support fact well, based complexity to not funnel any have in came The really -- of us facility as of the the in are already the product this for -- facility we as once has opened R&D new momentum. of those meet

consumer I electronics have part that last important in for quarter, As for part was, of indicated market. -- improved the example, -- have and customer electronics the consumer may added the this environment, end of another in we

So people and I to and we capabilities, the into provide support ramp capacity revenues we also would up I continue say, more, more now and we move going as we equipment along see, are have in becoming opportunities. believe, order because opportunities as and materializing to infrastructure those

Matt Dhane

an see area that Is electronics And, bigger ramped. Is sensors advanced for space? rate really of that consumer you Ziv, as and of growth going you highlighted in have are that a areas opportunity you couple of consumer electronic that that opportunities forward? or the getting one opportunities wins

Ziv Shoshani

it's a is considered high-volume from looking are electronics we historically perspective. opportunity why Consumer always is applications. as revenue This an

on working volume medical also few turn they value, to same the from much the higher Another price which, into are of could extent, been and complexity they may significant that but application. opportunity sheer have have selling not have they due dollar the we But to the opportunities, a mission that critical type, opportunities.

have So consumer. we

We have tooling automotive equipment.

would I those believe customers. because have those we that as we we much once support we people, we lay the and capitalize infrastructure the -- capacity quicker and would truly the other have opportunities. to down hire medical, have But on we out much, lay be We be opportunities once some able to to

Operator

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

Steve Cantor

Carrie. you, Thank

Before see want will to at closing, all for that today, great we the conference call you our be you hope to joining in note there have and January presenting Thank and virtually. Thanks. I a Needham day.

Operator

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

You great a lines. Have may your now day. disconnect

Vishay Precision (VPG) 11 Nov 212021 Q3 Earnings call transcript