Vishay Precision Group, Inc.

by one on your telephone keypad thank you for your patience Hello everyone and welcome to the VPG's third quarter fiscal 2023 earnings call. My name is Nadia and I'll be coordinating the call today. If you would like to ask a question, please press star followed by one on your telephone keypad. I will now hand over to your host, Steve Cantor, Senior Director of Investor Relations to begin. Steve, please go ahead.

Thank you, Nadia. Good morning, everyone. Welcome to our third quarter earnings conference call today. Our third quarter press release and accompanying slides have been posted on VPG's website at vpgsensors.com. An audio recording of today's call will be available on the Internet for a limited time and can be accessed through 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 VPG's operations, we encourage you to refer to our SEC filings, especially the Form 10-K for the year ended December 31, 2022, 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.

Thank you, Steve. I will begin with some comments on VPG's consolidated financial results and sales trends for the third quarter. Bill will provide financial details about the quarter and our outlook for the fourth quarter. Moving to slide three, to summarize the quarter results, We achieved revenue at the low end of our guidance, as the macroeconomic environment was challenging. Orders softened sequentially, primarily due to lower orders in our steel and industrial markets, as trends were mixed across our businesses. Our cash flow remained solid, and we deployed capital to pay down debt, as well as repurchase shares. we continue to execute on long-term growth and cost reduction initiatives. Moving to slide four, looking at the third quarter results in detail. We reported sales of 85.9 million, which declined 4.7% from the year ago and 5.4% from the second quarter of 2023. Sequentially, revenue trends across our three segments were mixed as higher sales of measurement systems were offset by lower sales in the sensors and weighing solution segments. Our cash flow was solid as we generated 13.7 million of adjusted EBITDA and adjusted EBITDA margin of 16.0% and adjusted free cash flow of 6 million. Booking in the third quarter of 76.9 million were 10.2% lower sequentially, resulting in a book-to-bill ratio of 0.9. The majority of the decline, 6.3 million, related to lower steel orders. Order trends overall reflected customers' cautious order patterns across most of our end markets, and the timing of large orders the sensor segment which offset higher demand in avionic military and space market given our visibility and our backlog we continue to see mixed bookings trends with some markets stabilizing and improving and some markets continuing to continuing to be soft i now review our performance by segment moving to slide five beginning with our sensor segment third quarter revenue of $32.5 million declined 14.1% from a year ago and 10.3% compared to the second quarter. Sequentially, the decrease primarily reflected lower revenue of precision resistors in the AMS and test and measurement end markets and lower sales of stringages in the general industrial end market. Overall, sales of advanced sensors were stable were at the stable levels comparable with the second quarter. Orders for sensors of 27.2 million were 11.3 percent lower sequentially, which resulted in a book-to-bill of 0.83. Booking for precision resistors to the semiconductor test market and the AMS market were soft in the third quarter, which offset higher demand for medical applications. In general, our distributors and OEM customers were cautious with their orders as they continue to work down their inventory levels. We are pleased with the progress with advanced sensors of both the ongoing and the new OEM engagements. We continue to be well positioned with our consumer electronic customers. In addition, as part of our strategic initiative to expand our business in robotics, we achieved a key design win with the maker of a humanoid robot, which is currently in a beta phase. In terms of operating results for sensors, adjusted gross margin of 35.9% declined sequentially from 40.1%, primarily due to lower volume and temporary labor inefficiencies due to lower production levels. Moving to slide six, turning to our weighing solution segment, third quarter sales of 29.0 million were 7.7% lower than a year ago and 7.3% lower than the second quarter of 2023. Sequentially, higher sales in the transportation market were offset by lower OEM sales for precision agriculture and construction application and in the industrial weighing market. Book to bill for weighing solutions was 0.89. Orders of 25.9 million declined 14.6% from the second quarter, reflecting lower bookings in the transportation and industrial weighing markets, as well as softness in our other markets for the medical equipment. We are progressing with key growth initiatives in weighing solutions, and we expect to see revenue for our new V-Lite load cell products in 2024. Weighing solution gross margin of 38.7% was flat, with all-time high in the second quarter of 2023, as lower operating costs offset by the impact of the lower volume. As part of our ongoing cost reductions, we took steps to downsize a weighing solution manufacturing operation in China and consolidated the manufacturing of those products in our facility in India. We expect to complete this production relocation in the fourth quarter. Moving to slide seven, turning to our measurement system segment, third quarter revenue of 24.4 million grew 17.2% from a year ago and increased 4.6% sequentially. The sequential increase was driven by higher revenue of DTS products in the AMS and transportation markets, partially offset by lower sales in the steel market. Book-to-bill ratio for measurement systems was 0.98 as orders of 23.8 million declined 3.5% from the second quarter. Consequentially, orders for DTS products grew to a record level, which offset a 6.3 million decline in orders for our KELC and DSI steel-related products. For KELC, the decline from a near-record quarter in Q2 primarily reflected a general slowdown in the steel market, in part due to the slower activity in China. On the technology capabilities for DTS is in the testing of new avionics platforms and systems. This includes supporting the development of missile programs as well as other commercial aviation platforms, such as new prototypes of electric powered aircraft known as EV tolls. While these new avionics platforms are still in the R&D stage, we benefit from the development stages of these platforms since DTS products are used in the testing phase. Adjusted gross margin in the third quarter for measurement systems improved sequentially to 54.5% from 52% primarily reflecting the higher volume. Moving to slide eight, our diversified set of end markets, the high value of our innovative solutions, and our deep customer relationship are among our core strengths that provides a steady foundation across cycles. Despite the uncertainties currently in the global economy, our priorities are clear and unchanged. We are continuing to focus on long-term growth initiatives in a broadening set of applications that offer higher volume, long-term growth potential. These applications are in addition to our traditional industrial ones. As part of these initiatives, we have stepped up actions to grow our OEM business, which leverage the strength of our technical sales teams and our engineer-to-engineer solution selling mindset. At the same time, we are continuing to execute on our cost reductions operational excellence initiatives to maximize our long-term operating leverage. The success we achieved in our weighing solution segment to substantially grow our margin is just one example of these efforts which we have begun several years ago. These programs entail the consolidation and migration of manufacturing from a smaller operating to lower-cost center of manufacturing excellence, as well as introduction of more automated equipment processes. Also, we are continuing to implement our balanced allocation strategy that creates stockholders' value to organic growth, successful M&A, and as warranted, stock repurchases. We continue to look for attractive, and value-creating acquisition opportunities. In addition, in the third quarter, we paid down $7 million of our debt, which will reduce our interest expense. We also continue to repurchase stock in the third quarter, and we have repurchased $1.2 million of stock during the first nine months of the year. Before turning the call to bear, For additional financial details, I would like to add the following point. As a global company, VPG operates facilities in North America, Asia, Europe, as well as Israel. We have long history of operating in Israel and understand the challenges and uncertainties that can arise and have implemented contingency plans to content with them. We are proud to say that there has not been a break in production or supply chain over many years. VPG's Israeli-based hubs have continued to operate at the near normal levels and to deliver products to our customers on schedule. I want to thank VPG's employees in Israel for their daily commitment and contribution in light of the recent events there. Their safety and well-being is our top priority, and we have taken the proper measure to assure that. I will now turn it over to Bill Clancy for additional financial details. Bill?