Vishay Precision Group, Inc.

Good day and welcome to the VPG 2020 Fourth Quarter and Fiscal Year Earnings Conference Call. All participants will be in a listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star and then one on a touch-tone phone. To withdraw your question, please press star and then two. Please note this event is being recorded. I would now like to turn the conference over to Steve Cantor, Senior Director of Investor Relations. Please go ahead.

Thank you, Operator, and good morning, everyone. Welcome to VPG's 2020 Fourth Quarter Earnings Conference Call. Our Q4 press release and accompanying slides have been posted on our website. An audio recording of today's call will be available on the Internet for a limited time. and can also be accessed on our website. Today's remarks are governed by the safe harbor provisions of the 1995 Privacy and Securities Litigation Reform Act. Our actual results may vary from forward-looking statements. For discussion of the risks associated with BPG's operations, we encourage you to refer to our SEC filings, especially the Form 10-K for the year ended December 31, 2019, and our other recent SEC filings. On the call today are Ziv Shoshani, CEO and President, and Bill Clancy, CFO. And now we'll turn the call to Ziv for some prepared remarks. Please refer to slide three of the quarterly presentation. Ziv?

Thank you, Steve. I will begin with some commentary on VPGs consolidated financial results, and sales trends for the year and for Q4. Bill will provide financial details and our outlook for the first quarter of 2021. On slide three, we ended the year on a solid note. Before discussing the fourth quarter in detail, I want to summarize some of the key highlights of 2020 for VPG. Looking back to the beginning of last year, it is difficult to image the human, social, and economic impacts from a global pandemic that has touched every part of the world. Despite the challenges, I am proud of how VPG's team responded and the resilience we demonstrated and continue to demonstrate through this global crisis. I want to list a few of our accomplishments. First, we responded quickly and decisively to the challenges of the pandemic. As we put in place measures to protect our employees and our customers, these measures included workplace distancing and enabling employees to work remotely if their job permits it, restricting travel as well as cost control, such as salary freezes. Second, with the exception of our four sensors operation, we continue to operate through the crisis and we're able to seamlessly serve our customers around the world. Third, when government imposed lockdown in India, significantly impacted our operation, resulting in $10 million of revenue shortfall for the year, we overcame numerous challenges to return to full production by the end of the third quarter. And fourth, we continue to implement our long-term strategies and investments, which included growing our advanced sensors business by 41% to an annualized run rate of more than $35 million and moving forward with adding additional manufacturing capacity to support future advanced sensors growth with the new facility. And most importantly, I would like to thank the VPG employees around the world for their dedication and customer focus during a turbulent and challenging 2020. Moving to slide four, Looking at the fourth quarter, we achieved fourth quarter sales of $75.4 million, which was 11.7% higher than the third quarter and 9.1% higher than a year ago. Sales grew across our portfolio of businesses and across our end markets with double-digit sequential growth in the test and measurement, transportation, and avionic military and space markets, and continued strength in some of our other markets, such as consumer, medical, and precision agriculture. Orders grew 9.4% from the third quarter of 2020, although trends across our end markets continue to be mixed. The majority of our markets continue to rebound, reflecting the improving economic outlook On the positive side, we had stronger sequential orders in the test and measurement, transportation, industrial weighing, and general industrial. Although these markets remained below pre-pandemic levels, demand in consumer precision agriculture and medical also continued at high sustained levels. Our project-driven orders in the steel market and in avionic, military, and space market remain soft. While demand for the majority of our products is generally driven by economic and industrial activity and our customers' product cycle, our higher average selling price systems, like our CELT, DSI, and Pacific instruments, products are generally driven by specific customer capital projects, in the steel and avionic military and space markets. The quarter-to-quarter variability of orders for these products is due to the project-driven nature, which is what we have experienced in the fourth quarter. The net results of these trends was a book-to-bill of 0.93 for the fourth quarter. Our adjusted gross margin in the quarter excuse me, was 38.0%, included headwinds due to unfavorable product mix, as well as temporary effects of inventory reductions and certain manufacturing inefficiencies as compared to the third quarter of 2020. However, in these items, we were, these items were at normal levels, adjusted gross margin would have been in the 40% range, similar to the level we reported in the third quarter of 2020. We achieved an adjusted operating margin of 10.7% and an adjusted earning per share of 43 cents in the fourth quarter, which were in line with our quarterly target model. Moving to slide five, turning to the results by segment. We achieved sequential growth in the fourth quarter across all three business segments. For foil technology products, fourth quarter sales of 36.5 million grew 10.9% sequentially and 23.1% from a year ago, driven by a strong performance in the precision foil resistors, advanced sensors product line, and Pacific Instruments product lines. Sequentially, the increase in precision foil resistors reflected growth in the test and measurement market, particularly for semiconductor test equipment. Advanced sensors had another great quarter, growing 5% sequentially and 71% year-over-year, driven by strong demand for consumer-related applications. Our Pacific Instruments product line grew sequentially and year-over-year in avionics, military, and space market. Adjusted gross margin for FTP was 38.9% in the fourth quarter of 2020, declining from 41.6% in the third quarter of 2020, but improving from 34.9% in the fourth quarter of 2019. sequential decline in adjusted gross margin primarily related to unfavorable product mix, manufacturing inefficiencies, and inventory reductions, which was partially offset by higher volume. The book to bill for FTP was 0.84 in the fourth quarter, which reflected a sequential decline of 2.5 million in orders. a portion of the decline related to lower orders for Pacific Instruments data acquisition systems. Orders for these systems are driven by specific defense projects, which can have longer order cycles. In addition, orders for Advanced Sensor declined from an exceptionally strong booking quarter in the third quarter of 2020 but remained at high level given strong demand in its end markets. Orders for our precision foil resistors increased, reflecting demand in the test and measurement end markets. The pipeline of opportunities for advanced sensors continues to be robust, which underscores our confidence in the investments we have made in this initiative. We are continuing to operate at a maximum manufacturing capacity for advanced sensors while we move forward with the installation and qualification of the equipment that will give us the needed additional manufacturing capability at our new facility. We are on track to complete the transition to the new facility in the third quarter of 2021. For the four sensors segment, it was a quarter of continued recovery. Fourth quarter sales of 16.3 million improved 17.2% from the third quarter of 2020. Driven by orders and backlog, we are operating at the pre-pandemic levels at our India facility. In terms of OEM-specific four sensors products, which is one of our key growth initiatives, sales grew 27% sequentially. Financially, four sensors adjusted gross margin of 29.6% in the fourth quarter, declined from 31.2% in the third quarter, but grew from 24.2% in the fourth quarter of 2019. The sequential decline in adjusted gross margin was primarily due to a reduction of inventory, partially offset by an increase in volume. Book to bill for four sensors was 1.18, as orders for both industrial weighing applications and OEM products for precision agriculture, medical, and construction applications were higher. Sales of weighing and control systems in the fourth quarter of 22.7 million, increased 9.4% sequentially, but declined 7.1% from a year ago. Sequentially, we had higher sales of our onboard weighing solutions and process weighing solutions in Europe, while steel-related sales were flat. Sales of our truckway, vanway rebounded by 46%, from the third quarter, and we see the potential for the EU regulation-driven aftermarket opportunities for these products to accelerate in the second half of this year. Adjusted gross margin in the fourth quarter for WCS was 42.5%, adjusted for COVID impacts and declined from 44.9% in the third quarter, mainly due to unfavorable product mix and inventory reductions, partially offset by higher volume. In terms of sequential trends in WCS segment, orders for onboard weighing and process weighing products were higher. Calc and DSI orders were soft. Demand for calc product typically have two-quarter lag relative to inflections in the steel market. The result of these WCS orders trends in the third quarter was a book to bill of 0.88. As we think about 2021, we are encouraged by the progress being made around the world regarding vaccinations and bringing the rate of COVID-19 infections down. While there is much more to do and there are many risks still remaining before the pandemic is fully under control, we believe that as the world and our markets returns to normal, we have the foundation and the ongoing customer opportunities to achieve a year of growth and execution across our businesses. Many of those opportunities are a result of initiatives we have put in place and executed over the past several years, such as our Advanced Sensors Initiative and the move to optimize manufacturing footprint for force sensors. As part of these long-term strategic initiatives, we expect to continue to implement further organic growth and cost-savings projects. We are also continuing to look for attractive acquisition opportunities to add additional high-quality strategic businesses to the VPG platform that will further accelerate our growth and profitability. I will now turn it over to Bill Clancy for additional financial details. Bill?