Vishay Precision Group, Inc.

Good morning and welcome to the VPG first quarter 2021 earnings conference call. All participants will be in 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 then one on your touch tone phone. To withdraw from the question queue, please press star 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, Kate, and good morning, everyone. Welcome to VPG's 2021 First Quarter Earnings Conference Call. Our Q1 press release and accompanying slides have been posted on VPG's website, vpgsensors.com. 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 Private Securities Litigation Reform Act. Our actual results may vary from forward-looking statements. For a discussion of the risks associated with VPG's operations, we encourage you to refer to our SEC filings especially the Form 10-K for the year ended December 31, 2020, and our other recent SEC filings. On the call today are Ze Shoshani, CEO and President, and Bill Clancy, CFO. I'll now turn the call to Ze for some prepared remarks. Please refer to slide three of the quarterly presentation. Ze?

Thank you, Steve. I will begin. with some commentary on VPG's consolidated financial results and sales trends for the first quarter. Bill will provide financial details and our outlook for the second quarter of 2021. Moving to slide three, first quarter highlights. The first quarter results marked a good start to the year. We achieved sales of $70.6 million. which was slightly above the high end of our guidance. We ended the quarter with a book-to-bill of 1.21, as we grew our orders 22% sequentially to 85.5 million, reflecting strength across our businesses and end markets. Advanced Sensor reported another strong quarter and continued to broaden its customer pipeline. We executed well operationally, growing our gross margin and achieving an adjusted operating margin of 8.7% and adjusted EPS of $0.31, which were within our target model. Moving to slide four, consolidated results and market trends. Looking at the first quarter sales results in more detail. Sales grew 4.3% from a year ago and declined 6.4% from the fourth quarter. Sequentially, business trends were generally positive, and we ended the first quarter with a book to bill above 1.1% in all the three reporting segments. In each of our end markets, we had a book to bill above 1%, with the exception of the avionic military and space market. In the test and measurement market, sales grew 8.3%. Demand in this market grew 41.1% sequentially, driven by continued strength related to semiconductor test equipment. Sales sequentially increased. to the industrial weighing, transportation, and general industrial end markets grew 2.7%, 7.2%, and 3.7% respectively. Order trends reflected strength in the transportation market, which grew 29.4%. In the avionic military and space and steel markets, in which our sales are driven by the timing of customer projects, sales were softer as we communicated last quarter. However, orders in the steel market grew 59.1% sequentially, reflecting increased customer activity and improved project-driven demand. Orders in avionic military and space, or AMS, grew 13.1%. While sales in our other markets were essentially flat, orders grew 23.5% sequentially driven by strong demand in consumer medical construction and precision ag. The net result of these trends was a book-to-bill of 1.21 for the first quarter and a backlog of 100%. million points, $100.7 million. Moving to slide five, turning to the results by segment, foil technology products first quarter sales of $32.7 million were 10.3% lower sequentially, primarily due to lower sales of Pacific instruments. Compared to a year ago, FTP sales grew 7.3%, driven by strong performance in advanced sensors and precision foil resistors. Advanced sensor first quarter sales grew 80.7% year-over-year and 4.5% sequentially to an annualized level approaching the $40 million range. We continue to operate at a maximum capacity and we expect to complete the transition of our new manufacturing facility in the third quarter of this year. Adjusted gross margin for FTP was 40.4% in the first quarter of 2021, increasing from 38.9% in the fourth quarter of 2020 as a result of favorable product mix, manufacturing efficiencies, and one time inventory adjustment in Q1 of 21, which will not reoccur, which were partially offset by lower revenue. The book-to-bill for FTP was 1.19 in the first quarter, which reflected a 26.2% sequential increase in orders. The strength in demand was driven by applications for our precision foil resistors in the test and measurement market, mainly for the semiconductor test application and in AMS. Demand for advanced sensors remains strong as we continue to broaden our customer base for this product across a range of end markets. For the full sensor segment, it was a quarter of strong performance. First, quarter sales of $16.9 million improved 4.2% from the fourth quarter of 2020 and were 15.2% higher than a year ago. The OEM businesses of four sensors continues to perform well as its revenue grew 16.6% from a year ago. Financially, Four sensors adjusted gross margin of 36% in the first quarter, improved from 29.6% in the fourth quarter, and 24.3% a year ago. The sequential improvement was driven primarily by higher revenue and manufacturing efficiencies. This results, in part, demonstrate the cost reduction, product quality, and efficiency improvements we have made over the past several years. The book to build for four sensors of 1.14 reflected continued order strength. For the medical and precision agriculture applications to help meet demand, we are expanding the capacity of our China facility. Regarding the India facility, where we produce the majority of the four sensors products. We are currently fully operational at this facility as we maintain COVID protection measures to protect our employees. Sales of weighing and control systems in the first quarter of 20.9 million declined 7.8% sequentially and were 7.0% lower than a year ago, reflecting lower project-driven sales in our steel market. Sequentially, we had higher sales of our onboard weighing solutions for trucks in Europe, sales of our truckway vanway products, which helps fleet operators to maximize truck loads while minimizing risk of fines, due to overloading, continues to rebound and grew 5.8% from the fourth quarter. We are optimistic for continued growth in 2021, in part as EU regulation-driven aftermarket opportunities emerge in the second half of this year. Adjusted gross margin in the first quarter for WCS was 44.3%, adjusted for COVID impacts, and improved from 42.5% in the fourth quarter, mainly due to favorable product mix and an increase in inventory partially offset by lower revenue. In terms of order trends in WCS segments, orders grew 36.2% sequentially, reflecting higher demand for our steel, transportation, and general industrial applications. With regard to the steel market, the book to build for KELC and DSI were 1.37 and 1.74, respectively. As we have discussed previously, orders for KELC and DSI are generally driven by customer CAPEX projects, which is, in the case of KELC typically, have a two-quarter lag relative to inflection in the steel market. The result of this WCS order strength in the first quarter was a book-to-bill of 1.3. Before turning the call to bill, I'll make a few additional comments. In terms of COVID, all our facilities are currently open and operational, and many of our employees who had been working remotely have returned to working on-site. Looking forward, we are continuing our long-term strategic initiatives, including deploying our capital prudently to build long-term stockholders' value. For 2021, these initiatives include completing the manufacturing transition and capacity increase of our advanced sensor product line, We also are looking at the expansion of our Japanese precision resistor manufacturing facility in addition to deploying more automation projects for our resistor product line. As such, we expect capital spending to be approximately $22 million to $25 million for 2021. We are also continuing to look for attractive acquisitions opportunities to add addition, adding 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?