Vishay Precision Group, Inc.

everyone and welcome to the BPG second quarter 2025 earnings call. My name is Ezra and I will be your coordinator today. If you would like to ask a question please press star followed by one on your telephone keypad. If you change your mind please press star followed by two. We will take questions at the end of the presentation. I will now hand you over to our host Steve Cantor, Senior Director of Investor Relations to begin. Please go ahead.

Thank you Ezra and good morning everyone. Welcome to BPG's 2025 second quarter earnings call. Our Q2 press release and slides have been posted on our website at bpgcensors.com. An audio recording of today's call will be available on the internet for a limited time and also can be accessed on our website. Today's remarks are governed by the safe provisions of the 1995 Private Securities Livigation 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 10k for the year ended December 31, 2024 and our other recent SEC filings. On the call today are Zeve Shoshani CEO and President and Bill Clancy CFO. And now I'll turn the call to Zeve for some prepared remarks. Please refer to slide three of the quarterly presentation.

Thank you Steve. I will begin with some commentary on our results and trends for the second quarter. Bill will then provide financial details about the quarter and our outlook for the third quarter of 2025. Moving to slide three. Beginning with revenue, second quarter revenue of $75.2 million grew .8% from the first quarter. We are pleased to report continued positive booking trends across several key markets, reflecting a moderately improved business environment. Our consolidated orders grew .5% sequentially, making the third consecutive quarter of sequential growth. This resulted in a consolidated book to bill of 1.06, with measurement systems and sensor segments reporting a book to bill of 1.2 and 1.12 respectively. Adjusted gross margin improved to 41.0%, driven by sequentially stronger performance across all three business segments. I want to highlight the Wayne Solutions segment in particular, which delivered a record quarterly adjusted gross margin. We continue to advance our business development and cost optimization initiatives. Our operation execution translated into a solid cash generation with $6.0 million in cash from operation and $4.7 million in adjusted free cash flow. Before reviewing our sales and orders performance by division segments, I want to comment on the impact of tariffs on our second quarter results. Tariff changes impacted our gross margin negatively by approximately 500,000 due to the timing of our offsetting price increases. We expect this gap to narrow in the third quarter as our price adjustments become effective. While tariff policies continue to change and are difficult to predict, we are confident in our ability to respond, given our manufacturing footprint, the geographical distribution, and our sales and our deep customer relationships. Moving to slide four. Beginning with our sensor segment, second quarter revenue decreased .8% sequentially, reflecting mixed trends across its market. As higher sales of strangled products were offset by lower sales for precision resistors. Sensors booking rose .7% sequentially, reaching the highest level in six quarters and resulting in a book to bill of 1.12. The bookings growth was driven by higher orders in the test and measurement for precision resistors and higher demand for strangled sensors in AMS and industrial weighing, which was partially offset by lower orders for the test and measurement. For precision resistors, we recorded a $1.5 million of order for fiber optics data center application, and we expect an additional order in Q3. Regarding humanoid robots, from April 2025 through July, we received approximately $1.5 million in follow on orders from our initial humanoid customer. The humanoid robot market is still in its infancy, and the initial real world employment of this robot is expected now in 2026. As the technology and use case continues to develop, we are optimistic about the long term potential for this market. And we focus on high precision, high performance segments of this rapidly evolving market. Moving to slide five, turning to our weighing solution segment. Second quarter sales increased .3% from the first quarter. The increase was driven primarily by higher sales in the transportation and industrial weighing markets, and in our other markets for medical and precision agriculture applications. Weighing solution orders grew .6% sequentially to 27.2 million, resulting in a book to bill of .92. Higher orders for precision agriculture and medical applications and in industrial weighing offset lower orders in the transportation and general industry. Moving to slide six, turning to our measurement system segment. Revenue in the second quarter of 19.2 million increased .1% sequentially. The increase reflected higher sales of DTS data acquisition modules in the AMS market, which offset lower sales to the transportation and field markets. Second quarter measurement systems orders of 23.0 million increased .1% sequentially and resulted in a book to bill of 1.2. Bookings reflected higher demand primarily in the AMS and steel markets. In the current quarter, we expect to complete the beta installation at the University of Alabama of our new UHTC system. This system is designed to perform band testing on non-conductive materials such as ceramics, which are used in critical high-performance applications, such as for hypersonic missiles in aerospace as well as in avionics, energy and industrial applications. We believe our differentiated solution can increase test throughput by 10 folds while testing materials at ultra-high temperature of around 2000 degrees C that is required for these advanced applications. We are now in discussion with the second university regarding beta testing for this system. Moving to slide seven, I would like to provide a brief update on our three top strategic priorities for 2025. First, we are encouraged by our business development initiatives, which generated orders of approximately 17 million to the first half of this year. This puts on track to achieve our goal for 2025 of securing 30 million of orders for either new customers or new applications with existing customers. What is significant is not only the magnitude of these orders but the breadth which runs across our businesses. To support these initiatives, we are continuing to improve our sales processes and systems as well as our use of digital marketing channels. Second, we continue to reduce costs and increase operational efficiencies through product relocation and efficiency improvements. The measure we have taken to the first half of 2025 put us on course to reduce fixed costs by about five million for the full 2025 compared to prior year excluding inflation. These measures entail mainly the consolidated of production and shared services to lower cost countries. Third, we continue to pursue high quality acquisitions to build scale and expand our cash flow. We remain disciplined and patient in our search for the right opportunity. In summary, we are pleased with the positive order trends which have continued for the third consecutive quarter and our ongoing progress with our growth and cost initiatives. Global economic activity has remained stable in 2025 and improved modestly in several areas. Despite the ongoing macro uncertainties due to tariffs, trade policies, and geopolitical tensions, I will now turn it over to Bill Clancy. Bill?

Thank you, Zeke. Referring to slide 8 and the reconciliation tables of the slide deck, our second quarter of 2025 revenues were $75.2 million. Adjust the gross margin of 41% in the second quarter increased by 270 basis points from .3% in the first quarter reflecting higher volume, favorable product mix, and favorable exchange rates which offset net tariff costs. Sequentially by segment, adjusted gross margin for centers of .2% increased due to an increase in inventories and favorable FX rates which offset the impact of lower volume and net tariff costs. Waning solutions adjusted gross margin of .2% increased from the first quarter and reached an all-time record primarily due to higher volume and favorable foreign exchange rates which offset the impact of net tariff costs. Gross margin for measurement systems of .6% increased from the first quarter due to higher volume and favorable product mix. Moving to slide 9, our adjusted operating margin of .8% which excluded startup and restructuring costs amounting to $885,000 improved from .1% in the first quarter of 2025. Selling general and administrative expense for the second quarter was $27.7 million with .9% of revenues which increased from $26.7 million with .5% of revenues for the first quarter of 2025. On an adjusted basis, second quarter of 2025 SG&A was approximately $27.1 million or 36% of sales excluding approximately $500,000 of severance costs. The increase in SG&A is mainly due to unfavorable foreign exchange rates. The operational tax rate in the second quarter was 31% and for the full year of 2025 we are forecasting an operational tax rate of approximately 28%. We reported net earnings of $248,000 or 2 cents per diluted share. Adjusting for manufacturing startup costs, restructuring, severance costs, and foreign currency exchange losses adjusted net earnings for the second quarter was $2.3 million or 17 cents per diluted share compared to $468,000 or 4 cents per diluted share in the first quarter of 2025. Moving to slide 10, adjusted EBITDA was $7.9 million or .5% of revenue compared to $5.1 million or .2% of revenue in the first quarter. Capital expenditures in the second quarter was $1.3 million. For 2025 we are forecasting $10-12 million for capital expenditures. We generated adjusted free cash flow of $4.7 million for the second quarter which compared to $3.7 million in the first quarter. As of the end of the second quarter, our cash position was $90.3 million, an increase of $6.4 million from the first quarter. As part of our ongoing cost reduction and efficiency initiatives, in July 2025 we completed the Salvo building which generated approximately $11 million in net proceeds. We used these proceeds to reduce our outstanding bank revolver balance which will reduce our annual interest expense by about $700,000. Regarding the outlook, for the third fiscal quarter of 2025, at constant second fiscal quarter of 2025 exchange rates, we expect net revenues to be in the range of $73 million to $81 million. In summary, bookings of $79.9 million grew sequentially for the third straight quarter, resulting in a book to bill of $1.06 million. Our business development initiatives continued to advance and we generated solid cash flow as we continued to implement our cost reduction programs. With that, let's open the lines for questions. Thank you.

Thank you very much. We will now open the floor for the Q&A session. If you would like to ask a question, please press star followed by 1 on your telephone keypad now. Please ensure your device is unmuted locally and if you change your mind or your question has already been answered, please press star followed by 2. Our first question comes from Josh Nichols with B Riley, your line is now open. Please go ahead.

Thanks for the question and great to see the continued trend in improving business activity. I just want to touch on for a minute, I think you mentioned you received $17 million in business development revenue. You have a goal of getting to $30 million this year. Presumably, do you expect some additional revenue from humanoid robotics customers later this year? Then you mentioned one customer is expected to move into production next year. How do you expect the size of those orders to change relative to what you are getting today assuming that that customer does move into production versus earlier stage demo today orders that you guys are doing?

Good morning. Regarding the humanoid robotics project, as we indicated, we have received the $1.5 million order from April to July. We are pleased with the progress of this customer and our design position on the robot. At the same time, we have to continue and support the production schedule, which are still changing by our customers. So we may expect to get more orders. At this point in time, the customer continues to evaluate based on their schedule, but potentially we could see an order. It really depends on the customer. This is regarding the first humanoid customer. The second humanoid customer I did indicate in prior calls that we did provide an initial prototype line, prototype product. The feedback was good and we are expecting to see a larger order in the near future. Regarding 2026, we shape precision group is set to support our customers regardless of the volume. We are set regarding the infrastructure and once the customer is ready to ramp up on higher volume, the company is ready to support their production. So based on prior discussions that we had with the once and if there would be changes in volume, we are ready to support those customers. We do hope to see those higher volume orders coming in 2026, but it really depends on the customer schedule.

Thanks. Just to drill down into that a little bit, I think you previously mentioned somewhere the range of $500 to $1200 per robot. Is that still what you are expecting and is the margin profile for these customers relatively in line with the corporate average or a little bit better? How is that going to impact the businesses that scale?

Okay. I did provide the price range given the volume that has been discussed naturally. Once higher volume would be discussed, we understand that probably a different pricing model will have to be supported and the company is prepared for that. Regarding the profit schedule, I think it is a little bit premature still to provide this type of information.

Fair enough. I appreciate the detail there. I guess just one more question. The business activity has been improving, but if you look like the company has been coming off an extended downturn and now things are starting to pick up, we have seen a healthy uptick in operating income. Meanwhile, you have been cash flow positive even throughout the more challenging times. How do you see the scalability of the business in terms of EBITDA and operating margin as your sales get back up to a higher level of cadence next year? Think about the scale that play on the margin front.

As you know, our financial profile is such that for every incremental dollar of revenue, we do expect it to be around about I would say 30 to 40 cents drop to the tax level. This model, we do expect to continue once we would see an upturn in revenue. I should say that given all the cost initiatives that the company has taken during the last two years, we should be even in a better cost position to capitalize profitability once the volume rebound. If there was a certain schedule regarding the profitability improvements, once the volume increased historically, we should be in a better position, meaning the profitability level should be accelerated in respect to the past once volume would rebound.

I appreciate it. Thanks, Aha. Back in the queue.

Thank you very much. Just as a reminder, if you would like to ask a question, please press star followed by one on your telephone keypad now. Our next question comes from John with Siddoti and company. Your line is now open. Please go ahead.

Hello, everybody. Thanks for taking my questions. I would like to start with the quarter that we just finished. It seems like there is a fair amount of variability in the quarter. We had some good revenue numbers flow through. I wonder if you could talk about what is going on and what you are seeing in the transportation side of your business.

Regarding transportation, let me start with measurement systems. On the measurement systems, the upside that we have seen this quarter is coming mainly in the steel, mainly the DSI, project-related AMS, and to an extent also the DTS automotive business. What we have identified as kind of a slower demand in weighing solution is due to the fact that in the first quarter, there were very high orders of transportation for our onboard weighing, which did not repeat itself in the second quarter. As a matter of fact, it is not that the business has been slowing down. It is just that we did not repeat those large orders in Q1.

Do you think that was just catch-up from delayed orders from 2024 in Q1 and now they are at equilibrium? Any kind of greater thoughts?

The Q1 orders were considered to be six to nine months orders that the customer has placed in Q1 and is expected to continue in the coming months.

Got it. Can you talk a little bit also about the steel market? It seems like the order bookings steel were weak and I was kind of hopeful maybe that they would be a little bit stronger given what we are seeing as far as the macro conditions.

Regarding steel, as you know, there are a few moving parts in steel. First, the global steel market as a whole continues to be soft, reflecting slow automotive production and demand and push-outs for some electric vehicle model production. Secondly, the tariffs, which are very high on steel and steel related products also make a significant effect. The orders that we have received for steel have not been necessarily on our kelp, which is inline equipment inspection in steel mills, but it is more on the R&D for DSI products. So there is still a lot of tailwind once the steel business would rebound. Got it.

That helps. In regards to the $5 million in cost savings, will that program be completed by the third quarter or is that going to take to the full year end?

The $5 million are expected to end in Q4 and I believe that for the first six months we have captured $2.8 million out of the $5 million.

$2.8 million. Got it. A little bit of thought about how July looks, the trends for the company overall compared to what you saw in the monthly trends in June, I'm sorry, in the second quarter.

I would, regarding July, at this point in time, I would say since it's already providing information regarding the third quarter, at this point I could say there are no surprises to us.

One last question. Right. One last question. Should the robotics actually begin production in 2026? At what point would you actually have to add capacity to meet some of the projections for 2030? I'm sure you've thought about that, but can you maybe share with us what the ramp would like as far as you're concerned?

As I indicated, the ramp up schedule is very much dependent on our customers. We share with our customers our capacity, our equipment capacity and our head up. I think we understand that our capabilities and capacities would be in line with their demand. To that extent, I think there is a very good collaboration between the two companies. They would give us enough heads up and enough information that we would be there with enough capacity to support them. We are not going to be the bottleneck. Now, regarding the timing and the schedule, it's up to them. We do hope that it would be sooner rather than later. But it's really not.

Right, can you see? I think I lost you.

Sorry? I'm sorry.

I'm sorry. I think I lost you. I think

he was finished, John.

Okay. I'll get back into queueing if somebody else takes questions. Thank you, guys. Thank you, John.

Thank you very much. Just as a reminder, if you would like to ask a question, please press star followed by one on your telephone keypad now. We currently have no further questions, so I'll hand back over to Steve for any closing remarks.

Thank you. Before concluding our call today, I want to note that we will be participating in two upcoming investor conferences, the Three Part Advisors Ideas Conference in Chicago on August 27th and the Jefferies Industrials Conference in New York on September 3rd. You can contact us for more information about them. With that, thank you for joining our call today.

Thank you very much, Steve, and thank you everyone for joining. That concludes today's call. You may now disconnect your lines.