Vishay Precision Group, Inc.

Good morning, and thank you for attending VPG's third quarter fiscal 2022 earnings call. All lines will be muted during the presentation portion of the call with an opportunity for questions and answers at the end. I would now like to pass the conference over to your host, Steve Cantor, Senior Director of Investor Relations with Bichet Precision Group. Thank you. You may proceed.

Thank you, operator. Good morning, everyone. Welcome to VPG's 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 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, 2021, and our other recent SEC filings. On the call today are Ziv Shoshani, CEO and President, and Bill Clancy, CFO. I'll now 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 VPG's consolidated financial results and sales trend for the third quarter. Bill will provide financial details about the quarter and our outlook for the fourth quarter of 2022. We achieved another solid quarter for VPG. We grew our revenue sequentially and from a year ago despite ongoing headwinds from foreign currency. We delivered 69 cents in adjusted EPS and achieved an adjusted EBITDA margin of 17.9%. Orders grew slightly from the second quarter and we had a positive book-to-bill of 1.08. Our strong backlog positions us well for the fourth quarter. Compared to the first nine months of 2021, our revenue year to date increased 16.9% or 22.7% excluding the impact of currency. We generated $11.8 million of cash from operations and $5 million of free cash flow, which supports our capital allocation strategy to grow shareholders' value. We repurchased $1.1 million of our common stock during the third quarter, and we expect to continue to execute our share repurchase program in the fourth quarter. $1.1 million. Moving to slide four, looking at the third quarter results in detail. We reported sales of $90.1 million which was 9.9% higher than a year ago and 1.6% above the second quarter of 2022. Our sales performance was impacted by foreign exchange, which continued to be a significant headwind in the quarter, particularly in our sensors and weighing solution segment. FX impacted our total revenue by $5.3 million compared to a year ago and by $1.8 million when compared to the second quarter. Thus, excluding FX impacts, revenue grew 17.5% from the prior year and 3.7% sequentially. of 96.9 million grew sequentially, and we had a book-to-bill ratio of 1.08. This is our seventh sequential quarter of reporting book-to-bill above one, which we accomplished in an uncertain global macroeconomic environment. We generated an adjusted EBITDA margin of 17.9%, and adjusted diluted net earnings per share of 69 cents. These results reflect the steps we have taken to further optimize our manufacturing operations and footprint while investing in our growth and global competitiveness. While higher costs have continued to impact some of our businesses, we have passed on price increases to mitigate these higher material, labor, and logistics costs. Through the first nine months of 2022, compared to the same timeframe a year ago, we realized $6.3 million from price increases. This puts us on track to achieve the high end of our target of $6 to $8 million of incremental revenue in 2022 from our ASP increases. I will now review our business segment performance in the third quarter. Moving to slide five. Beginning with our sensor segment, which includes our advanced sensors product and our precision resistors. Third quarter revenue of $37.9 million grew 23.3% from a year ago and 6.0% and was 6.0% lower sequentially. Foreign currency continued to significantly impact censors' revenue and resulted in a negative impact of 2.7 million and 700,000 to the censors' top line compared to a year ago and the second quarter, respectively. Excluding the FX impact, censors' revenue grew 35.1% from a year ago and was down 4.2% sequentially. Sales of advanced sensors were at a rate of 50 million annualized run rate in the third quarter. For the first nine months of 2022, AS sales were 45% higher than the same period a year ago. We continue to reduce our manufacturing lead times and work with both existing and new customers on new projects across a range of applications. Sales of precision resistors were modestly lower from the second quarter. Roughly half of the decline was related to unfavorable currency effects. The other half of the decline related to lower sales in the test and measurement market in Asia. We continued our strategic initiatives to secure design wins in new emerging applications in data centers and EV battery. Book to bill for sensors was 0.99. Sensor orders of 37.4 million declined from the second quarter, which reflected two factors. First, the timing of some large semi-annual customer orders which were recorded in the second quarter. And second, we had softer demand for precision resistors in the semiconductor equipment market and lower orders for stringages. In terms of operating results for sensors, gross margin of 40.5% declined sequentially from 44.3%, reflecting lower volume one-time inventory adjustments and unfavorable foreign exchange in conjunction with our strategic operational excellence plan in the third quarter we completed the shutdown of our legacy spring gauge facility in israel which we expect will yield approximately 1 million in annual cost savings we also completed the expansion of our japanese facility for our precision resistors product to support new automated manufacturing line that will give us the infrastructure to address key growth opportunities and will increase our long-term manufacturing efficiency. Moving to slide six, turning to our weighing solution segment, which is comprised of our four sensors, onboard weighing and process weighing businesses. Third quarter sales were 31.4 million or 10.3% higher than Q2. The increase primarily related to higher sales of OEM4 sensors in our precision agriculture and construction markets and higher sales of our onboard weighing products in Europe due to improved availability of electronic components. As we indicated in our prior earnings call, we redesigned electronic boards of some OEM force sensors products to improve the supply chain availability. These redesigned products were shipped in the third quarter. Book-to-bill for weighing solutions was 1.05 orders of 33.1 million increased 12.8% from the second quarter, mainly due to a large order for precision agriculture applications. Weighing solutions gross margin of 33.3% compared to 33.7% in the second quarter. The weighing solutions gross margin was impacted by unfavorable foreign exchange, and higher material costs, which were offset by higher volume and our selling price increases. Moving to slide seven, turning to our measurement system segment. Revenue in the third quarter of $20.8 million increased 4.5% sequentially, reflecting higher project-driven sales of DSI the metal alloy development tools, and higher sales of DTS, the safety crash test systems. Orders rebounded strongly from the second quarter and grew 35.7% sequentially, reflecting higher demand, particularly for DTS products in the avionics, military, and space market, and for calc systems sold to the steel market. As we have discussed before, order pattern can fluctuate quarter to quarter due to the timing of customer projects and long lead time for these products. The stronger orders, which resulted in a book-to-bill ratio of 1.27, positions measurement systems for a sequential growth in the fourth quarter. Adjusted gross margin in the third quarter for measurement systems improved sequentially to 56.7% from 53.3% due to higher sales and favorable product mix. Moving to slide eight, before turning the call to Bill, I want to comment on our capital allocation strategy. and the resilience of our business strategy and cost structure. As I mentioned earlier, in the third quarter, we generated $16.1 million of adjusted EBITDA and an adjusted EBITDA margin of 17.9%. We believe that our strong balance sheet and ample liquidity support the capital allocation strategy that can fund organic growth M&A opportunities, and stock repurchases. We have been executing the stock repurchase program we announced in August and to buy back up to 600,000 shares of our outstanding common stock. In Q3, we repurchased approximately $1.1 million of our stock, or about 33,000 shares and we expect to continue to execute our program in Q4. In parallel, we are continuing to invest to optimize our manufacturing and to accelerate our longer-term growth in addition to the project we have been completing in the sensor segment that I mentioned earlier. We expect to complete our manufacturing project in India in early 2023. We believe this long-term investment supports our ability to address expanding growth opportunities. While there are uncertainties in the current macroeconomic environment, we like our diversified application and customer base. As we have demonstrated in the past, we expect this balance would provide relative stability in the face of economic trends that may impact specific markets. I will now turn it over to Bill Clancy for additional financial details.