Vishay Precision Group, Inc.

Good morning and welcome everyone to the VPG second quarter 2026 earnings call. Today's conference is being recorded. 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 the star key followed by the number one on your telephone keypad. If you would like to withdraw your question, press star one again. At this time, I'd like to turn the conference over to Steve Cantor, Investor Relations and Corporate Communications. Please go ahead.

Thank you, Audra. Good morning, everyone. Welcome to VPG's second quarter 2026 earnings conference call. Our press release and slides have been posted on our website at vpgsensors.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. Before beginning the call, 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, and there can be no assurance that such results, including the targets described in our updated operating model, can be achieved. 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, 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 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 our results and trends for the second quarter. Bill will provide financial details and our outlook for the third quarter of 2026. Moving to slide three. To summarize our second quarter results, we delivered another quarter of a strong order momentum, highlighting the continued success of our strategy to increase our exposure to secular growth markets. orders were 95.5 million, driven by sustained strength in our sensor segment and continued demand from AI-related markets, including semiconductor equipment, data center, infrastructure, and aerospace and defense applications. We generated 11.6 million in bookings from our business development initiatives in the second quarter and 21.6 million in the first half of the year. This puts us on track to reach our goal of 45 million for the year. As a result, our consolidated book-to-bill ratio was 1.14, marking our seventh consecutive quarter at or above 1.0. Within Census, Book to Bill was very strong, 1.44, reflecting robust demand across our key growth markets. We continue to add manufacturing capacity and personnel to support future growth and address rising customer demand. During the quarter, we received an official vendor nomination letter from our initial humanoid robotics customers. This is an important milestone that positions us to support their expected production ramp beginning in the second half of 2026. Revenue was 83.9 million, essentially flat sequentially and up 12% year over year. Second quarter revenue was negatively impacted by the temporary delay in approximately 3 million of shipments at our CELC business. This delay was due to supply chain challenges that resulted from the implementation of a new ERP system. The ERP issue have been addressed and production has increased to a normalized level. We expect to ship the delayed orders by the end of the fourth quarter. Operating profit was down $200,000 sequentially as a result of unfavorable product mix and an unfavorable foreign exchange, which were partially offset by manufacturing efficiencies. FX remained a significant headwind, reducing operating profit by approximately $900,000 sequentially and $3.3 million compared with the prior year period. Our operational improvements initiatives are beginning to gain traction. We generated nearly $1 million of cost savings during the second quarter and remained on track to achieve approximately $6 million of savings this year. As a reminder, these actions represent the first phase of our three-year plan to deliver approximately 20 million of cost reductions through manufacturing footprint optimization, increased automation, and procurement efficiencies across our global supply chain. Most importantly, our strong order trends and backlog support our positive outlook for the year. We expect fiscal 2026 organic growth to exceed the 8% to 10% annual growth target outlined in our three-year plan. I'll now review the performance by segment. Moving to slide four. Beginning with our sensor segment, second quarter revenue of $33.4 million was approximately flat sequentially and grew 26% from a year ago. Our backlog remained at a very high level as we continued to hire manufacturing personnel to increase our output. Sequentially, the increase primarily reflected in higher sales of precision resistors in the test and measurement and AMS markets, which was partially offset by lower sales of stringages in the test and measurement markets. Bookings of 48.1 million remained robust but grew 6% sequentially to an all-time quarterly record. This resulted in a book-to-bill ratio of 1.44, reflecting continued momentum in our largest growth markets. Demand continued to be driven by investments in AI-related infrastructure. We recorded strong orders for our precision resistors products sold to semiconductor OEM equipment makers as well as to semi-device makers for their own custom test systems. Bookings for manufacturers of long-haul high-speed fiber optics transmission equipment remained elevated supporting the build-out of data center infrastructure. We also saw continued good demand for avionics and defense applications given sustained demand from both established and next-generation defense programs. Humanoid-related bookings were approximately 500,000 and sales were 320,000 in the second quarter. We received a vendor nomination letter from our initial humanoid developer customer. This marks an important step as the customer moves from a prototype development to early production ramp in the second half of fiscal 2026. It also reflects more than two years of engineering collaboration, product development, qualification work, and Operational Reviews. Based on this customer's forecast demand, we are adding additional capacity. At the same time, we continue to make progress with other humanoid robotics developers and we are actively engaging additional potential customers. Our record orders, elevated backlog and expanding manufacturing capacity reinforce our confidence in the long-term growth trajectory of the sensors business.