Vishay Precision Group, Inc.

Good morning, all, and thank you for joining us for VPG's second quarter fiscal 2024 earnings call. My name is Carly, and I'll be the call coordinator for today. During the presentation, you can register a question by pressing star followed by one on your telephone keypad, and to remove yourself from that line of questioning, it's star followed by two. I'll now hand over to your host, Steve Cantor, Senior Director of Investor Relations, to begin. Steve, please go ahead.

Thank you, Carly, and good morning, everyone. Welcome to VPG's 2024 second quarter earnings conference call. Our Q2 press release and accompanying slides have been posted on the BPG website at bpgsensors.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 BPG's operations, we encourage you to refer to our SEC filings, especially the Form 10-K for the year ended December 31, 2023, 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.

Thank you, Steve. I will begin with some commentary on PPG's consolidated financial results and sales trends for the second quarter. Bill will provide financial details about the quarter and our outlook for the third quarter of 2024. Moving to slide three, overall, our second quarter was as follows. sales trends continue to reflect a mixed market environment. Revenues grew sequentially in some of our markets, while other markets remained soft. Similarly, order trends were mixed, with sequentially growth in the measurement systems, offset by lower orders in sensors and weighing solutions. We achieved a solid gross margin in light of our revenue levels, as we adjusted our operations effectively to current revenue levels and expanded our cost reduction programs. Customer engagement remains high as we continue our focus on our business development initiatives. Our strong balance sheet and solid free cash flow provides a good foundation for organic and inorganic growth. we expect the macro environment to be stable to the end of 2024 with mixed trends continuing in our markets. Moving to slide four, looking at the second quarter results in detail, we reported sales of 77.4 million, which were 14.8% lower than a year ago and 4.2% lower sequentially. Orders of 73.5 million softened modestly from 75.3 million in the first quarter. Our book-to-bill ratio improved slightly to 0.95. We are seeing mixed trends in our markets. Bookings were soft in the test and measurement, avionic military and space, and industrial weighing. However, orders grew for consumer-related applications and in our transportation and steel markets. Regarding our strategic business development initiatives, we are seeing the early results of these efforts in terms of design wins and initial orders with new customers and additional applications and projects with existing ones. Our gross margin of 41.9% declined from a record of 43.4% in the first quarter. reflecting lower sales in the second quarter. We generated $10.2 million of adjusted EBDA, $7.5 million of cash from operations, and $4.9 million of adjusted free cash flow, which supports our capital allocation strategy to grow stockholders' value. I'll now review our business segment performance for the second quarter. Moving to slide five. Beginning with our sensor segment, second quarter revenue of $28.9 million declined 20.4% from a year ago and was 1.9% lower sequentially. Compared to the first quarter, sales growth in advanced sensors products was offset by lower sales of our precision resistors. Sales of advanced sensors and related strain gauge products grew 17% from Q1 on the strength in consumer applications. Sales of precision resistors to the test and measurement market were softer, particularly in Asia. While second quarter orders for sensors of 26.1 million were slightly lower sequentially, bookings for advanced sensors grew 20%. for our resistor products were soft, particularly in the test and measurement market in Asia. Strategically, in the advanced sensors, we continue to address additional opportunities in both high-end road bikes and e-bikes with European and Asian bike makers. These applications use our sensors to precisely measure the force of every pedal stroke. This helps professional and high-end bike riders train more efficiently. In addition, we received a substantial R&D order for a developer of robotics for medical applications. Our project with a leading developer of a humanoid robot continues to progress well as we recorded revenue related to prototypes for this project. This customer expects to deploy several thousands of these robots in its factories by the end of 2025. Book-to-bill ratio for sensors was 0.9. Moving to slide six, turning to our weighing solution segment, second quarter sales of 27.4 million were 12.2% lower than a year ago and 4.8% below the first quarter of 2024. Sequentially, the decline reflected lower revenue in the transportation market, while revenue in our industrial market was roughly flat. The book-to-bill ratio for weighing solutions was 0.93. Orders of 25.5 million declined 7.3% from the first quarter. The lower orders were primarily in the transportation market for process weighing and onboard weighing systems. In terms of business development initiatives for weighing solutions, we are developing a variety of solutions and applications for existing and new customers in the medical and lab automation, construction, and transportation markets. Moving to slide seven, turning to our measurement system segment, second quarter revenue of 21 million, decline 9.6% from a year ago, and 6.6% sequentially. The sequential decline was driven by lower sales of DTS safety testing products in AMS and the transportation and markets. Book-to-bill ratio for measurement systems was 1.04, as orders of 21.9 million improved 3.8% from the first quarter. Sequentially, orders grew for the DSI comprehensive tools for the development of new metal alloys while bookings for the DTS and KELC steel productivity systems were softer. As we have discussed, order pattern can fluctuate quarter to quarter due to the timing of customer projects and the long lead times of these products. We continue to be encouraged by our business development activity in the measurement systems. In the current quarter, we expect to have the first aluminum manufacturing customer evaluation of our calc optimization system using our optical technology. As we have discussed, the industrial aluminum manufacturing is a new potential adjacent market for us. We believe our solution can offer important cost savings for these customers in terms of reduced downtime and waste. For DSI, we expanded our offering of our global thermal mechanical physical simulation tool for developing new metal alloys with modules that can efficiently test smaller sample size. This capability opens a new market for DSI in the additive material manufacturing equipment market for applications such as commercial 3D metal printers. Moving to slide eight. Before turning the call to build, I want to comment on our capital allocation strategy. Given our balance sheet, and the free cash flow generation, we believe that we can create stockholders' value through organic growth, successful M&A, and as warranted stock repurchases. During the quarter, we repurchased 3.1 million of our stock, or 97,000 shares. In closing, we continue to focus on our strategic initiatives in both business development activities and cost reduction programs. These actions are positioning VPG to realize the significant long-term earnings power embedded in our business model. I will now turn it over to Bill Clancy for additional financial details. Bill?