Earnings call transcript Q2 2023

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Operator

Hello, and welcome to the VPG Second Quarter Fiscal 2020 Earnings Call. My name is Elliot, and I will be coordinating your call today. [Operator Instructions]

I'd now like to hand over to Steve Cantor, Senior Director of Investor Relations. Floor is yours, please go ahead.

Steve Cantor

Elliot. you, Thank everyone. Good morning, VPG's second earnings to of quarter call. conference Welcome XXXX

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

of Today's remarks provisions are Securities Private the by XXXX governed Litigation harbor safe the Reform Act.

vary from forward-looking may statements. results actual Our

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

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

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

Ziv Shoshani

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

We cash quarter and adjusted operating of well adjusted to million increased margin, financially QX. gross achieved performed Moving EPS adjusted diluted from another as We We generated three. cash $X.X for of grew capital operations, strategy margin year-over-year supports sequentially. strong which from million stockholder We adjusted of EBITDA, adjusted value. our million $XX free slide allocation we and flow, revenue grow VPG. and $X.X to

our by and quarter, initiatives continue broadening sequentially, technologies. solid backlog. precision for and to third growth long-term for driven engagement our on sensing expanding to strategic grew remains Orders we measurement and a as extend have Customer opportunities the capture high we outlook

Moving to slide four.

first X.X% X.XX. sales ago segments This results million, reflected sequential business of in at higher was for sequentially. ratio million from of $XX.X bookings higher Looking of $XX.X and a Orders than the book-to-bill three X% which a grew resulted second detail. all We and quarter. X.X% in quarter reported year higher the

bookings maintaining are this given to environment, of QX our we custom In nature products, current lower approximately customers our early the see Nevertheless, of inventory the macro improvements will in levels. we XXXX. year anticipate

to selling of As our first higher by a I indicated, from prices favorable gross sales, quarter, improved in XX.X% This the and unfavorable by driven was higher partially our impact XX.X% adjusted Systems in mix FX. product Measurement offset segment. we margin

of supply complete, ago. We higher due material Our of to product to able and year fourth which is The offset one availability redesigned DTS of improve costs, are prices. we in to component chain continued on the we higher quarter. to our a key compared to selling track the were redesign insufficient to incurred product ship

organic emerging capture on In we growth and opportunities key continued sensing terms measurement technologies. strategies, strategic of for our our initiatives precision our focus to

broadening markets have high precision discussed before, As opportunities applications our can benefit from in and seen solutions. we new we have that emerging of high performance,

and quarter, organic second the products including space defense, engagements existing the our we well meet in fiber their about networks, are these continued These to to center made We engagement agriculture, range During their over requirements. are to industrial automation, develop to innovative customers precision with potential in markets, markets equipment emerging optics as contribute past we of as robotics, optimistic expand years, progress many data our consumer. and and few medical the long-term of growth.

for I quarter. as now initiatives the segment's our these of some on performance second review business touch I'll

with five. our Beginning to Moving slide segment. Sensor

down flat measurement to to X.X% the of lower continue test precision revenue to a and declined quarter, customers were $XX.X this quarter resistors sequentially. the were and inventories. ago sales our sales to work sales market Compared as first from were market the for slightly lower lower million year of and Second XX% as AMS was product

quarter. Orders first Sales X.X% with of of flat sequentially, of book-to-bill resulted for advanced $XX.X a X.XX. million higher in were sensors the which sensors were

precision order be AMS the cautious market macro ordering to pattern, semiconductor in to the second were while to the test soft our orders given market, were quarter, flat as the continue resistors, distributors environment. For in the

have progress in second made initiatives secure resistors. our precision for new with to applications for we Strategically, the quarter our designings

specked For projects. number example, into and our products of were new space a missile defense

equipment to key addition, In traction products with a can performance. contribute stability more are that provide new gaining robust we that optics fiber makers life long network with

have market consumer but yet peak Orders for the in improved advanced to returned not sensors to levels. the QX, XXXX

including medical number further to a robotics the get continue and emerging for advanced markets, in industrial in sensors of applications. We traction, with for additional applications

for XX.X% of of volume, XX.X%, terms favorable lower from partially sequentially rates. due currency by margin results, In offset operating declined sensors, primarily foreign adjusted to gross

slide to six. Moving

our Turning segment. to Solutions Weighing

precision of quarter ago million applications. higher lower than construction quarter sales higher Second sales in the X.X% X.X% compared $XX.X the a were agriculture weighing lower year and for of and first Sequentially, XXXX. were by market offset sales to industrial

trucks orders and the transportation was vans X.X% some legacy for Europe equipment. Weighing weighing in quarter. Book-to-bill weaker construction the X.XX, for demand first in products offset $XX.X Solutions for onboard applications. grew our for and of Orders grew for from million industrial market weighing This

solutions our Through brand to applications rapidly continue markets, Solutions, technology our XXXX, year being for ag including of XX% market half in have from most to among medical for pleased in position. construction, grew increasing precision the growing ag, embedded the the precision the equipment the sales generation the ago. OEM same and our a Weighing areas strong expand OEM applications and consumer. our first due next in of and part agriculture initiatives OEM a with number We sales to period precision weighing be for of been

successful rolled penetrating consumer bikes applications, both as as been high-end also well e-bikes. have in including We

the favorable was of increasing Solutions grew quarter. to cost high XX.X% due margin The programs. sequential prices in and mix, Weighing all-time increase first gross reached and from primarily product XX.X% selling an reduction

slide to seven. Moving

Turning to our Measurement Systems segment.

Systems of higher the a from sequential grew expect of redesign revenue redesign I mentioned year QX. products fourth XX.X% market. million recover XX.X% DTS for that earlier of begin on ago was steel $XX.X to shipping in in we impact sales the in by $X The Measurement of in and which was revenue the approximately sequentially. product we expect QX million, The driven to increased quarter the Second quarter. increase

Book-to-bill KELK ratio for as $XX.X were Systems was quarter. X.XX, strong. even Measurement productivity orders essentially orders first of our the system with were for million Sequentially, steel

projects can long quarter-to-quarter discussed, have to the the of and we times pattern timing for lead customer these As products. fluctuate order due

the in aluminum represent manufacturing. KELK the used in market a the of for process This opportunities leverage the One our Measurement and strategic whole steelmaking market new to is would technology leadership measurement initiative solutions in to existing an Systems products. force

primarily margin reflecting impact Measurement quarter from the in gross of from product XX% for Adjusted unfavorable to $X mix. sequentially million softened the second Systems, approximately XX.X%,

Moving to slide eight.

of flow Before strong We of million turning Bill, the the generated highlight to call $XX cash in EBITDA, an to quarter. margin adjusted our I EBITDA and adjusted want XX.X%.

Our adjusted million, $X.X operating $XXX cash free sheet to million, balance the cash model. we which our was and nearly during quarter on reflects flow grew our strong

the position this are cash in expected infrastructure-related grow With free later see projects India a XXXX. to Japan, and in in further flow our our in year, we two completion of

allocation stockholders' and sheet capital ample strategy balance M&A to creates can organic a that value to our liquidity, continue support stock successful and Given growth, we repurchases. awarded

designing financial this with activity our with quarter pleased of am our high-level I performance and customers. closing, In

QX similar we solid, in third Our same QX, outlook a XXXX revenues to for is the XXXX and quarter environment. expect level the be as of given business

Bill? I financial over additional to turn details. will now it Bill for Clancy

William Clancy

net million, the table to deck, Thanks operating of of of $XX.X and adjusted million slide our or diluted nine slide gross XX.X% million income $X.XX. profit we reconciliation $X.XX. sales, second On share the or sales, per $XX.X was Steve. earnings XX.X% share $XX.X the an was Referring of net or profit $XX of income basis, of XXXX, million was revenue gross per of of and and sales, XX% million operating quarter of of achieved earnings revenues $XX.X or XX.X% in diluted

in compared reduced in second quarter. and revenues XXXX a were rates $XXX,XXX impact ago. foreign quarter total second first a first compared quarter compared the year Changes year to favorable to increased $XXX,XXX $XX.X revenue of our by quarter a ago million and currency quarter to X.X% the the second above Our had X.X%

second exchange as rates. foreign quarter the XX.X% higher first was of compared adjusted from as and XX.X% an of which compared prices first the in XXXX, to XXXX. second in in favorable benefited was selling On XX.X% quarter quarter XX.X% margin volume, margin Gross the basis, quarter higher average gross to

in the the for quarter. XXXX. second margin as operating XX.X% second quarter Adjusted XX.X% Our in compared quarter was to of was the operating first XX% margin

$XXX,XXX of $XX.X of XXXX. revenues million were in the Selling, administrative $XXX,XXX million revenues of of quarter $XXX,XXX the second increase SG&A exchange for for mainly of general quarter $XXX,XXX compared positive expenses was $XXX,XXX $XX.X for rates. wage travel, as by and commissions XX.X% $XXX,XXX to and or to costs, other increases, or of foreign The attributable partially XX.X% of offset for second

revenue share ago. The of or million adjusted to compared or million Adjusted of second were to million XX.X% the as the XXXX. diluted in $XX.X earnings net compared share quarter $XX per per for EBITDA year $X $X.XX $X.X XX.X% second $X.XX million or a diluted or was quarter

in six the and first purchases CapEx $X.X equipment related was majority infrastructure. XXXX reflects Purchase which the million, of of months

carryover $XX $XX in includes For CapEx million, to fiscal $X the approximately in million XXXX, be spending from XXXX. to we expect purchase of million which range

the stock. $X.X our During repurchase million second we we last $XXX,XXX have of stock obligation August, stock. Since repurchased the announced purchased quarter, we of

Board stock authorization We our to year. are announce our another pleased for has its that repurchase for plan extended

$X.X $X.X adjusted $X.X compared capital $X.X of quarter was the second flow define million as cash flow free of million operating for XXXX. for which from less the as second were activities of cash cash free Adjusted million. expenditures, quarter XXXX to million We

second XXXX. second tax was quarter XXXX rate of GAAP compared in The in the XX.X% quarter the to of XX.X% as

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

second $XX.X the Moving cash to with equivalents ended cash million. of We debt long-term slide and total million $XX.X quarter and XX. of

to outlook, quarter, range million fiscal XXXX rates. million to of net backlog given exchange $XX of our $XXX.X $XX Regarding in for quarter the constant third the of expect second at the we million, fiscal revenue be

execute we the diluted to well adjusted growth on financially In operating summary, we increase adjusted we've quarter. continue achieved quarter, margin, our first initiatives. gross and solid We performance and strategic the in second as EPS from margin, performed adjusted

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

Operator

Instructions] Thank you. [Operator

comes first from Sidoti. with John Our question Franzreb

line open. is Your

John Franzreb

out sustainability congratulations and that morning of level? really to the like seeing a a reductions quarter. cost coming little I'd about mix Can gross good results the talk bit start margin the on and Good with at great there the guys, margin you and of impressive. Weighing, the a gross that you're fairly

Ziv Shoshani

John. morning, Good

has board on weighing, Solutions, the favorable sales have a for the margin product VanWeigh. seen reflected Regarding mix more prices we an VanWeigh. TruckWeigh offset and And gross sensors TruckWeigh also, margin gross by seen we our XX.X% cost between the increased the Weighing mix. adjusted material for regarding to on increased four the selling reduction. additional Sales sequentially and This also is have

we In which on to are addition cost to our operational higher to will to continuing products plan, are labor -- excellence from location. labor we we cost locations a execute that, lower relocate continuing

is say as I So, the of reduction the product It is is increased prices, well margin a ASPs reflected in few mix, initiatives. would result favorable the the the selling factors. as the cost gross

John Franzreb

Solutions you think that, higher? the Weighing margin reset do means permanently Ziv, you So, profile that

Ziv Shoshani

a is would sustainable a record I And think business reached have going I constant I say range at that that think that level. forward we this So, environment.

John Franzreb

Excellent.

how your touched look from XQ a I the sales. for there balance in but know in also of it's big year? lumpy your in the are versus remarks, steel What jump does XQ this steel hearing a the was but customers? you You it business, on prepared

Ziv Shoshani

record Steel second strong. the In I still think, have quarter, very, steel recorded, business is we very bookings.

rest going bookings. I robust a of we In time, this say to look at very But had is it it's still premature like. think the the looks strong like business. how point year in to quarter, the second

John Franzreb

basis, But ago. volume a mentioned in flat consumer that sensor sensor all-in? Is year-over-year? can the is it you And look give it. in down advanced your versus still a line, was how how business sensor? on performing year sense it's relative total you advanced in Got Just a advanced us

Ziv Shoshani

and recover, Advanced continue consumer adjust softer, flat the in sensors especially quarter customers were industrial levels for continue Europe to were compared for as revenues deplete their orders first to Order schedules. the second in Sure. production applications applications quarter. while to their inventory

pre we consumer, comment -- the to going to consumer see are So, forward back And to point in back -- the more not the stable XXXX consumer, levels at but business improved has regarding for to time, this the environment quarter-over-quarter. going a levels. peak we XXXX

John Franzreb

that? one a business higher rate, driving looking last about the Is on sales that? you that driving that just or significantly just question for. what than or tax bit was little a certain Can And I Okay. certain geography talk

William Clancy

so rate and the where -- driven the tax tax it John, in Yeah. ago. income being truly the quarter for higher than is income, was being the this of is earned obviously mix on year jurisdictions earned rate a is higher

truly where of a earnings being the that's mix are recorded. So

John Franzreb

Bill. Okay. get queue, you. I'll Thanks in guys. back the Thank

Operator

[Operator Instructions]

now turn Inc. to Griffin Securities, Boss We B. Riley with

Your line is open.

Griffin Boss

morning, Hi, guys. thanks. Good

opportunity? Ziv demand wanted of inroads speaking the base? I on leveraging the near technology, for about this term when make talked aluminum So, here? And term? who market? products terms are be market. existing that you in you that to the would Are applying you Or your Is in customer a dig new that longer expect similarly, to into Or in a something customers working have with that KELK to would you targeting

Ziv Shoshani

Sure.

So, is KELK business legacy market. historically, in the for steel the

We have similar a steel opportunity in -- at aluminum mills. aluminum steel the identified

we I would modify Now, in our able systems, so similar performance. a we -- order with are to would say, some provide working similar be customers to

fairly At going scalability phase quickly. the establish discussion are once in discussion this is platform, is but in with customers. But we to fairly those point a believe be time, the you I stage, and the the in in early design that

Griffin Boss

Great.

how, get extent right currently, just could up of picking to into do you the from sense of Okay. orders QX are looking QX about to talk you Thanks want That's it, the they the now Ziv. just of helpful. trending sort a Are the And back then, levels? see at half orders I -- year.

Ziv Shoshani

Sure.

that and business. We rebound soft in cautious up test segments. to the the end in quarter, down So, all and Sensors, measurement If the EMS to very the still few three we to measurement, quarters the segments, regard semiconductor start believe mainly reported a reporting military supply orders see we drill space, we different very, chain, second of very had and in we in macro avionic have the test that going given will industrial orders general, through and will and environment. year, distributors are in of

Measurement respect I quarter. -- going is demand a the see in to one, market. is And the seen there is few the of also the environment vibe see to respect cyclical second which Solutions, should above softening looking steel quarters still see to we to mainly that two industrial, Still, in as forward driven of going have Weighing a strong of the we second of stable And from mentioned, For second orders overall book-to-bill quarters result, is moving half to year, of this we in Systems, business second is ago. into how by but half coming the expectation general quarter-over-quarter, is the the have half year. stability. stable that the to the expect environment a year, we should In

Griffin Boss

Okay. Great. you same end just Did want environment? levels QX, the of lines, then, QX prepared remarks, just I to And similar towards you as make I be -- the you of Yeah. to business sort expected your heard correctly. the along sure so given Ziv,

Ziv Shoshani

in point in to At quarter. business stable about speaking were All-in-all, respect the this second time, second quarter. the to respect is projection environment. in We the

Griffin Boss

QX increase Sure. quarter? expect me, level Or right. should more regarding CapEx level and this CapEx. we the in fourth All similar be last to sort one of Okay. of just a going the to And Is sort QX? for Bill, the for maybe then in

WilliamClancy

spend would roughly, We're the million year. Griffin, yeah, we at for $X.X million $XX about million full $XX to about we $X or what million now. so said

So, in you second will see the spending more half. of the capital

will But finalize year. in think, overall, I the late quarter. Japan, we paying the million in fourth to number Ziv, million close it be his $XX India, majority when for to that, the remarks be third early so expansion we'll quarter, $XX of the -- probably

Griffin Boss

Perfect.

Okay. Super helpful. guys. Thanks

Operator

John now We to Franzreb turn Sidoti. with

is line Your open.

John Franzreb

guys. Hey,

M&A that thoughts recall environment maybe quick update the hearing remarks. a that I on your about the prepared in Just

Ziv Shoshani

M&A balance our radar. interest and few the given environment naturally, But we environment, rate, point John, have a we M&A time, high drop. point companies. this time, in deals or the given And valuation the not very in is Regarding real our sheet, this been interacting on valuation At business higher should down. go with at seen have

and quarters, in it that but are -- hopefully, we we it's At more dialogue this to come coming end, be And we believe still the to fruition, we exploring with So, be -- higher few able valuation we reasonable. believe point, but on exploring the few didn't complete. would a in would options.

John Franzreb

curious growth Ziv. targets? environment currently been there because Are in, three Okay. M&A? still profitability you, just I stagnant potential also any they changes targets is the given they I'm to encompass if are Thank And your in know we there's -- intact, five-year and to

Ziv Shoshani

this in three At to have not target. our we years five time, changed point

John Franzreb

my Okay. for Thank you follow-ups. taking

Operator

Instructions] [Operator

to turning with Now Hendi Gabelli Funds. Susanto

open. Your is line

Hendi Susanto

Good morning, Ziv, and Steve. Bill,

Ziv Shoshani

Morning.

Hendi Susanto

a have I question. Ziv,

are again, currently, have cautious regard likely let's start customers inventories. they distributors state? path So, toward being comfort the with When that say, and -- normalize, are to when what inventories building to things

Ziv Shoshani

I'm the hear question. last your I repeat didn't sorry, piece of you Could that?

Hendi Susanto

of more inventory we let's no of, should what some be will customers that think optimism may say, on there of distributors then of inventories there step-up step-up to say, there's of and let's you build do they happen more is that Like less function distributors let's could start state Do inventory think concerns, to when -- -- see? their buying buy and So, like Or kind revamp products to terms economy your like the their build -- inventories? inventories, customer in kind excess more start once say like say, when no the anticipation macro you let's -- signs there's incrementally? again. like -- path and there is what

Ziv Shoshani

you. Thank Okay.

So, and a our high-level critical of first, not of market leadership are selling Therefore, commodity. customer products. is engagement the nature there our given we

hesitant, provides the custom intake selling say, would conditions our order at concerned products. I see customers because that condition a a Therefore, value-added robust are We proposition. product we -- a I market been more designed much value will market and order believe be robust less at less may if -- once looking see allow day, we much would end more the of OEM unique pattern once the the our changes. have products we should we that

Hendi Susanto

And then Bill. one you. Thank for question

So, capital is working think Bill, inventory represents That now $XX I invested is that at million. in inventories. a like --

If XXXX dollars $XX Should from able running your decline, you that and in that's the you expect extract think million, like do would capital? how soon back, cash look And you at, take inventories we million in was working $XX that inventory would meaning can like absolute be that more to XXXX. place?

William Clancy

obviously, mean, would statements. upcoming for so. some normalized in built into more the drop I have has to been time, or and quarter would I the a backlog anticipate begin over Hendi, that level, we levels more to to we add would inventory a very, strong financial Yeah. the cash our very which backlog inventory see

Hendi Susanto

I see. Yeah.

you, Okay. Bill. Ziv. Thank you, Thank

Operator

comes Zach Capital. Our from next with [ph] Herzl question Herzl

Your is open. line

Unidentified Analyst

Hey, guys.

firms sell. can in? you guys those other lot that I were share the the reverse, if Is with And be is you could to of guess companies. would $XX bankers to guys valuations the interested touch conversations $XX might. much good I VPG in through up product put I've thought on like right you they question people. I'm so, get if talked and And something to And and a down they haven't Following a confident earlier M&A. the that thing come the on

Ziv Shoshani

including at still we radar. think we M&A you opportunities Well, could that even -- high been that is that once Zach, those the our always all-in-all, the or allocation are always options, I exploring Nevertheless, two and generate and stockholders' of have And we different exploring all at is one have capital Board But that on the times, they're opportunities we exploring mentioned. capital definitely ones different allocation are we is touch, fact believe, value. given all that Board complete few options. in looking we acquisitions, a the

Unidentified Analyst

you a for been guys talking cash to to going buy there for sell an guys opportunity to hear The problem years three, that $XXX get to it. was I've or and company that ago have a I $XX said were to that. And you in sell two XX last had to and the that take know you million didn't when -- is you years. share you've I for

$XX promises would and so, the I keep now, a or rather -- that that is management is And a I share think I stock either going think by to to hasn't now the they going would and $XX Board it double-digits grow to $XX than take going sell $XX to the with price shareholders to they talked to share yet. says to the the But team happened get anyway.

that they I -- the share get to and for $XX the said to a to now. And talked would rather $XX shareholders, sell

So, directly the something get shareholders, that that's go can team something how Board, done? want if management to or I that they to should the do, is or through we

Ziv Shoshani

input. know, whom know of you. hear I to channels say your what you the I would way And there and are and appreciate as your that? really opinion, course, I much you should Definitely, -- are a your to opinion as very you I how respect and you hear I that communicate shareholder, Zach, -- a Well, given is there saying,

thank I So, input. for you really your

Operator

of Steve Q&A. hand Director back Investor Senior Cantor, This to Relations, closing for concludes our I'll remarks. now

Steve Cantor

will participating the and in we joining I Thank note Sidoti Jefferies our be September. in conferences today. Great. you want to for that do call

see information You our for on website that. more can

day, updating look I'd a quarter. all you to that, and forward you with next And wish like good to

Operator

like and concluded. has We'd participation. to call Ladies gentlemen, now thank you today's for your

line. now You your may disconnect

Vishay Precision (VPG) 8 Aug 232023 Q2 Earnings call transcript