Vishay Precision Group, Inc.

Hello, and thank you for standing by. My name is Bella, and I will be your conference operator today. At this time, I would like to welcome everyone to VPG first quarter 2026 earnings call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star, then the number one on your telephone keypad. To withdraw your question, press R1 again. I would now like to turn the conference over to Steve Cantor, Senior Director of Investor Relations. You may begin.

Thank you, Bella, and good morning, everyone. Welcome to VPG's first quarter 2026 earnings conference call. Our press release and 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 the VPG website. Today's remarks, including the targets described in our updated operating model, are governed by the safe harbor provisions of the 1995 Private Securities Litigation Reform Act. Our actual results may vary from forward-looking statements. and there can be no assurance that such results, including the targets described in our updated operating model, will be achieved. For a discussion of the risks associated with BBG's operations, we encourage you to refer to our SEC filings, especially the Form 10-K for the year ended December 31, 2025, 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 Steve for some prepared remarks. Steve?

Thank you, Steve. I will begin with some commentary on our results and trends for the first quarter. Bill will provide financial details and our outlook for the second quarter of 2026. We will also discuss our revised target operating model. Moving to slide three. To summarize our Q1 results, we delivered a strong start to the year, with first quarter revenue of 84.4 million, up 18% year over year, reflecting broad-based growth across all three segments. Orders were particularly robust at 102.1 million, growing 26% sequentially, driving a book-to-bill of 121. our strongest since 2022. We increased backlog, particularly in the sensor segment, which positions us for continued growth into the second quarter and for the second half of the year. Gross margin improved from the fourth quarter and the prior year, and we continue to implement additional cost reduction programs. Despite ongoing macroeconomic uncertainty from geopolitical tensions, booking trends remained strong. Demand was driven by precision resistors from semiconductor equipment and for data center and fiber optics equipment, supporting the build out of AI data centers. Orders in avionic military and space markets also improved. In addition, orders generated from our business development initiatives totaled 10 million in the first quarter, putting us on track to meet our 2026 goal of 45 million. With our new chief business and product officer and chief operating officer organizations now in place, we are focused on discipline execution of both our near-term priorities and long-term strategic plans. While there is still work ahead, we are already seeing improved visibility into our sales funnel and stronger alignment across VPG. During the first quarter, we continue to launch new marketing programs and further sharpen our focus on priority markets key customers, and our most important growth drivers. I'll now review business performance by segment. Moving to slide four. Beginning with our sensor segment, first quarter revenue increased 10% sequentially and 23% year-over-year. Compared to the fourth quarter, we had higher sales of precision resistors in the test and measurement and AMS market. and higher sales of strangages in the general industrial market. Bookings in the censors were particularly strong, totaling $45.2 million, up 29% sequentially, and representing the highest level in 15 quarters. This resulted in a healthy book-to-bill ratio of 136. The sequential growth in bookings reflected strong board-based demand, driven by the industry-wide ramp-up in AI adoption. With sensors, we saw particularly robust demand related to AI infrastructure. Orders grew for precision resistors used in semiconductor front-end and back-end equipment, supporting the manufacturing and testing of AI-related chips and systems, as well as in data centers and fiber optics equipment. Bookings were strong for precision resistors in defense applications. We also continued to see demand for stringages used in humanoid pre-production prototypes. With sensors backlog reaching its highest level since Q1 of 2023, we accelerated hiring and training of additional manufacturing personnel to support our plant production ramps. Turning to humanoid robotics, we shipped approximately $600,000 of product to humanoid makers in the first quarter. In the second quarter, we expect to more than double that amount. Given our customers' focus for a more significant ramp of production in the second half of the year, we have increased our internal projection for 2026. Nonetheless, the precise timing and scale of production ramps remain unclear. In addition, we began early discussions with the Ford Humanoid Maker, a startup developing humanoid platforms for defense, home use, and industrial applications. Moving to slide five, turning to our weighing solution segment. First quarter sales grew 9% from the fourth quarter and 14% from a year ago. The sequential increase was primarily due to higher sales in our other markets for medical equipment, precision ag equipment, consumer bicycles, and in our transportation market for heavy-use trucks. Weighing solutions orders were up 17 percent sequentially to 32.9 million, resulting in a book-to-bill of 1.09. Orders included annual bookings of onboard weighing systems and higher bookings in our industrial weighing and general industrial markets. Moving to slide six, turning to our measurement system segment, Revenue trends were mixed in the first quarter, as revenue of $21 million decreased 7% sequentially, but was 14% higher than a year ago. Sales of DTS ruggedized miniature data acquisition modules reached a record high, driven by defense missile test projects. This was offset by lower sales to the steel market. First quarter measurement system orders of 24 million increased 32% from the fourth quarter and resulted in a book-to-bill of 1.15. The sequential growth reflected higher DTS and PI orders in AMS for the testing of military jet engines and for hypersonic missiles. Demand for measurement systems used in steel rolling mills softened despite pockets of growth in India and North America. Orders grew for DSIs, R&D tools used for development of new metal alloys. One of the technology highlights for DTS and measurement systems this quarter was the Artemis II launch to the Moon, which included DTS data loggers on board. DTS data loggers were used to measure extreme forces for the astronauts experienced during the launch and re-entry that can't be fully replicated on Earth. In addition to NASA projects, DTS modules have been used in similar tests for SpaceX Dragon Crew, Capsule, as well as for Blue Origin platforms. Moving to slide seven. This quarter, we are pleased to introduce our updated target operating model, which reflects a path to faster organic revenue growth, higher profits and cash flow, and significant creation of long-term stockholders' value. Under the new model, we are targeting compounded annual organic growth of 8% to 10% over the next three years, which is higher than our previous model for organic growth. We expect our sensors and measurement system businesses to grow at or above these rates. Our model targets a gross margin of 46.5%, an operating margin of 14.5% to 15.5%, and an EBITDA margin of 18.5 to 20.5%. This model includes approximately $5 million of annual incremental costs related to the new CBPO and COO organizations, IT investments, and new incentive comp plans. At the upper end of the model, we have the potential to deliver 50% flow through EBITDA, on each incremental dollar revenue. Moving to slide eight. The top line of our model is driven by two factors. First, we are increasingly aligned with the attractive secular growth areas where VPG has differentiated high-performance technology. These opportunities are being driven by advancements in industrial automation systems. which rely on accurate, reliable, and highly precise sensing and measurements. That requirement directly aligns with VPG core strength and our long-term history supporting mission-critical applications. While adoption is still in the early stages, we are already supporting emerging use cases across multiple markets, including advanced robotics semiconductor equipment used in AI processing and data center and fiber optics infrastructure. For humanoid robots specifically, our model assumes that revenue growth approximately 50% annually from 2025 levels. We are building capacity and infrastructure today to support the potential for much higher levels of growth. Second, Our sales and marketing and business development operating model is now being transformed into cross-company processes, IT platforms, and execution disciplines, which are expected to support the growth of both cyclical and secular growth markets. In addition, we continue to see durable long-term opportunities in aerospace and defense, While demand can fluctuate quarter to quarter, investment trends remain solid. Technical requirements are increasing, and these markets continue to align well with VPG differentiated capabilities. Operating leverage is a core element of our model. Under our COO-led operating structure, we have a clear plan to deliver more than $20 million of cost reductions and efficiency improvements over the next three years. These operational excellence initiatives are targeted at creating structurally more competitive cost base, not just a near-term margin improvement. Our cost programs. focused on manufacturing footprint optimization, increased automation, and procurement efficiencies across our global supply chain. Importantly, these initiatives also support increased market share by improving execution, shortening lead times, and enabling efficient scaling as demand increases. In summary, Our operating model reflects faster organic growth and attractive profitability, supported by differentiated technology, durable secular demand drivers, and a more focused and efficient organization. We believe this position VPG well to create long-term value for our customers and stockholders. I will now turn it over to Bill Clancy. Bill?