Vishay Precision Group, Inc.

Good morning. Thank you for attending today's BPG first quarter 2022 earnings call. My name is Hannah and I will be your moderator for today's call. All lines will be muted during the presentation portion of the call with an opportunity for questions and answers at the end. If you would like to ask a question, please press star 1 on your telephone keypad. I would now like to pass the conference over to our host, Steve Cantor, Senior Director of Investor Relations. Please go ahead.

Thank you, Hannah, and good morning, everyone. Welcome to VPG's 2022 First Quarter Earnings Conference Call. Our Q1 press release and accompanying slides have been posted on our website, and an audio recording of today's call will be available on the internet for a limited time and can also be accessed on the VPG 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, 2021, and our other recent SEC filings. On the call today are Ziv Shoshani, CEO and President, and Bill Clancy, CFO. And now I'll turn the call to Ziv for some prepared remarks. Please refer to slide three of the quarterly presentation. Ziv? ZIV SHOSHANI, CEO, President, And Bill Clancy, CFO, And now I'll turn the call to Ziv for some prepared remarks. Please refer to slide three of the quarterly presentation. Ziv? ZIV SHOSHANI, CEO, President, And Bill Clancy, CFO, 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 2022. Moving to slide three, I am pleased to report that VPG achieved solid performance in the first quarter, which included record orders and backlog as we navigated well to the supply chain and labor challenges impacting companies around the world. Before providing additional color, on the Q1 results, I want to review the long-term strategy and priorities we laid out in February, which we believe will accelerate our long-term growth and profitability. As a leader in precision measurement sensing technologies, we are focusing on an expanding array of applications in which accuracy, reliability, and repeatability makes the difference. Our deep engineering and application expertise enable our customers to make their product safer, smarter, and more productive. The need for precision measurement sensing solutions is evolving and expanding into new markets and applications requiring level of precision that were not needed before. Moving to slide four, In the first quarter of 2022, we reported sales of $87.7 million, which was 24.2% higher than a year ago. In the third quarter of 2021, sales declined 2.6% as lower measurement systems revenue offset growth in our sensors and weighing solution segments. The decline in measurement systems revenue was expected due to the timing of shipments for these project-driven systems. Record orders of 109.6 million grew 15.3% sequentially, reflecting growth across all three segments. The strong order performance contributed to our book-to-bill of 1.25 and a record backlog of 170.6 million. This represents a strong start and underscores the strength of our business model and our strategy. We improved our adjusted gross margin to 41.0%, as compared to the fourth quarter adjusted gross margin of 40.3% and generated an adjusted EBDA margin of 14.4% and adjusted earnings per diluted share of 49 cents, which was in line with our quarterly target model. Operationally, we performed well. Given the ongoing global supply chain challenges, Labor availability and surge in COVID-19 cases in some parts of the world in the first half of the quarter, we have filled the majority of our open positions, and we expect improved operating efficiencies in the sensor segment going forward as new hires climb the learning curve. Year over year, we realized 1.6 million from price increases, which we have put in place to mitigate higher labor, materials, and logistics costs. And we expect these increases to contribute 6 to 8 million of incremental revenue in 2022. Looking at our business segment performance in the first quarter, all three businesses segments reported positive order trends and book-to-bill ratios of over one. Moving to slide five, beginning with our sensor segment, which is comprised of our advanced sensors product and our precision resistors, first quarter revenue of $37.7 million grew 18.7% from a year ago and was 10.5% higher sequentially. The sequential growth was driven by advanced sensors, which grew 41.5% sequentially to a 50 million annualized run rate, as we benefited from the expanded capacity we've put in place. The increase in advanced sensors revenue was mainly for consumer and medical applications and in our general industrial market. Total orders for the sensor segment grew 26.5% sequentially, resulting in a book-to-bill of 1.27. Order growth was driven by strong bookings in the test and measurement for precision resistors, resulting from continued robust demand for front-end and back-end semiconductor . We are efforts to address future applications for our precision resistors in EV battery management and in 5G data systems where the reliability and stability of our solutions provide key performance advantages. We also had continued high demand for advanced sensors as orders grew approximately 9% sequentially and were 50% higher than a year ago, resulting in a book-to-bill of 1.09. In addition to the traction of advanced sensors for consumer and consumer electronics applications, we are achieving design-in wins in medical equipment such as infusion pumps. In terms of operating results for sensors, the adjusted gross margin in the first quarter was adjusted to exclude $200,000 of startup cost for the new advanced sensor facility and $100,000 related to COVID. The first quarter Adjusted gross margin improved to 38.6% as compared to 34.8% in the fourth quarter of 2021, reflecting higher revenue and favorable product mix, which was partially offset by wage increases. Moving to slide six, turning to our weighing solution segment, which is comprised of our four sensors, onboard weighing, and process weighing businesses. First quarter sales of 32 million increased 2.2% from 32.1 million from the fourth quarter of 2021. The sales growth was primarily due to higher shipments of our onboard weighing products for heavy trucks. Orders for weighing solutions were 10.9% higher then in the fourth quarter, resulting in a book-to-bill ratio of 1.06, reflecting positive trends in transportation as well as for OEM precision agriculture equipment. Wang Solutions' gross margin of 36.9% in the first quarter increased from 34.0% in the fourth quarter, driven by higher volume, higher selling prices, and favorable product mix offset by higher material costs. Moving to slide seven, turning to our measurement system segment, revenue in the first quarter of $17.1 million declined 27.9% sequentially, reflecting primarily lower sales due to the steel market, as I indicated earlier, demand for these products is largely project-driven, as these products generally have longer selling and delivery cycles. CALC reported strong bookings in the first quarter, reflecting good demand for its productivity systems for hot strip meals. As part of its development plan, KELC is expected to launch new cumbers solution that provides additional features for the steel manufacturers for productivity enhancement. Total measurement system orders grew by 2%, resulting in a book of 1.56, reflecting sequential order growth in steel. Adjusted gross margin in the first quarter for measurement systems was 54.1%, adjusted for purchase accounting related to the DTS acquisition, and declined from 56.8% in the fourth quarter, mainly due to lower revenue and unfavorable product mix. Before turning the call to Bill, I'll make a few additional comments. In terms of COVID, all our facilities are currently open and operating normally. And finally, our priorities for deploying our capital continue to be on funding internal growth-oriented investments that are intended to accelerate our top-line and bottom-line growth. In addition, our solid balance sheet supports M&A activity to expand our market product portfolio and generate attractive returns. I will now turn it over to Bill Clancy for additional financial details. Bill?