Vishay Precision Group, Inc.

Good morning and welcome to the VPG third 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 touchtone phone. To withdraw your question, 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, Carrie, and good morning, everyone. Welcome to VPG's 2021 Third Quarter Earnings Conference Call. Our Q3 press release and accompanying slides have been posted on our website. An audio recording of today's call will also be available on the Internet for a limited time and can 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 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, 2020, and our other recent SEC filings. On the call today are Ziv Shoshani, CEO and President, and Bill Clancy, CFO. I'll now return 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 VPG's consolidated financial results and sales trends for the third quarter. Bill will provide financial details and our outlook for the fourth quarter of 2021. Slide three. We are pleased with our results for the third quarter. We achieved solid sales performance of 82.0 million. We ended the quarter with a book to bill of 121 and a record backlog of 146.7 million. which supports our positive outlook in the fourth quarter. We achieved an adjusted gross margin of 41.8%, adjusted operating margin of 11.8%, and adjusted EPS of 52 cents. We also generated solid cash flow and adjusted EBITDA margin of 16.8%. The integrations of DTS which we acquired in June, is proceeding smoothly. And we completed the move of advanced sensors manufacturing to our new facility. Moving to slide four, looking at the third quarter sales results in more details. Sales grew 21.4% from a year ago and 8.8% from the second quarter, reflecting the strength of the current business environment and the addition of DTS. While we are pleased with our revenue performance, as anticipated, challenges with labor availability at our facilities around the world had constrained our ability to translate our strong orders intake of $98.9 million into revenue. We estimate that the impact of revenue from the hiring challenges was approximately 4 to 5 million in the third quarter related to FTP. The book-to-bill was above 1 in all the three reporting segments and in each of our end markets. In terms of sales trends by market, we grew sales from the second quarter across the majority of our end markets. including transportation and avionics military and space, which increased 14.6% and 28.4% respectively, driven mainly by the addition of a full quarter of DTS. Sales to the steel market rebounded 47%, reflecting the timing of shipment of project-driven orders. In terms of orders, test and measurement grew 9.1%, reflecting continued strong demand, and transportation was up 5.1%. Orders were lower sequentially in our other markets, primarily for our four sensors OEM business, as well as due to the timing of a semi-annual order from a foil resistors customers, which had been placed in the second quarter of 2021. The net result of these trends was a book to bill of 1.21 for the third quarter and a record backlog of 146.7 million, which increased 15.8 million from the second quarter of 2021. Moving to slide five. Turning to the results by segment. Foil technology products third quarter sales of 32.8 million were 1.6% lower sequentially and were essentially even with a year ago. Sales of precision foil resistors remained at sustained levels sequentially, driven by continued good demand from semiconductor test equipment. Advanced sensors achieved another solid quarter as we completed the transition to the new facility. As expected, AS revenue moderated from Q2 due to the facility transition and as a result of fewer working days in the quarter in Israel. In addition, challenges with filling open positions across our FTP operation in Israel and the U.S., also approved to be a headwind. We are not alone in this respect, as many companies have reported similar challenges in hiring. We are making progress to filling these positions in the fourth quarter, and we expect to have the remaining open positions filled in the first quarter of 2022. Adjusted gross margin in FTP of 35.1%, was compared with 42.6% in the second quarter, was impacted by approximately 2.4 million of factors, including labor inefficiencies, a reduction in inventory, and unfavorable product mix, lower volume, and unfavorable exchange rates. In the fourth quarter, we expect gross margin for FTP to recover to close to 40% based on expected volume and inventory levels, and as we make progress, filling open positions and train the new staff. Book-to-bill for FTP was 1.38% in the third quarter, and the backlog grew 19.7% sequentially. which reflected an increase across the FTP product portfolio, including precision foil resistors and advanced sensors. We are in the process of ramping up the new capacity for advanced sensors, and we expect AES to achieve sequential growth in the fourth quarter. The fourth sensor segment reported another quarter of strong performance. Third quarter sales of 17.7 million improved, 2.8% from the second quarter, and were 27.7% higher than a year ago. We continue to be pleased with our initiatives to expand 4Sensor's OEM business, as OEM revenues grew 43.8% for the first nine months of 2021, compared to the same period a year ago. Financially, four sensors continued to execute well, achieving an adjusted gross margin of 35.1% in the third quarter. This declined slightly from 35.4% in the second quarter, but improved from 31.2% a year ago due to higher sales. A book-to-bill report for four sensors of 1.01. Sales for weighing and control systems in the third quarter of 31.5 million increased 26.9% sequentially and 51.7% from a year ago. Sequentially, the higher sales in the third quarter reflected the addition of full quarter of sales for DTS as well as higher sales of DSI and Calc products. In the first full quarter with us, DTS performed well, both in terms of sales and profits. With the integration going smoothly, we are even more encouraged about DTS long-term growth prospects, as it should continue to benefit from a secular trend in safety testing for automotive and military applications. As expected, third-quarter sales from our truckway-vanway initiatives were negatively impacted by approximately 300,000 due to lack of industry-wide supply of new trucks and vans, chassis and components. We expect these shortages to continue to impact revenues and orders by approximately 500,000 in the fourth quarter as we closely monitor chassis and component shortages in Europe. Adjusted gross margin in the third quarter for WCS was 52.5% and improved from 46.6% in the second quarter, mainly due to the addition of DTS, higher revenue of calc and DSI products. and favorable product mix. In terms of order trends in WCS segment, orders declined 7.3% sequentially, while book-to-bill was 1.14%. Our project-driven, steel-related products reflected cyclical patterns as higher orders for calc were offset by lower orders for DSI. Book-to-bill combined for CELC and DSI was 1.07, which is a positive indicator for revenues for 2022. Before turning the call to Bill, I'll make few additional comments. In terms of COVID, all our facilities are currently open and operational, and we continue to be proactive in taking measures were needed to protect our employees and our customers. We believe that our operational focus on excellence and the strategic investment in our businesses will enable us to accelerate our long-term growth, and given our solid cash flow and balance sheet, we believe we can add to that growth with additional acquisitions of high-quality businesses to our portfolio, which will expand our market and generate attractive returns. I will now turn it over to Bill Clancy for additional financial details. Bill?