Q1 2021 Vishay Precision Group Inc Earnings Call
Dead dead, dead dead.
Todd.
Good morning and welcome to the vpg first quarter 2021 earnings conference call all participants will be in listen-only mode. Should you need assistance by pressing the star key followed by zero? After today's presentation, there will be an opportunity to ask questions to ask a question. You may press * then 1 on your touchtone phone to withdraw from the question, can you please press 6, please note. This event is being recorded. I would now like to turn the conference over to see if Cantor senior director of investor relations. Please go ahead.
Thank you, Kate and good morning everyone. Welcome to VG's 2021 first quarter earnings conference, call our q1 press release and accompanying slides have been posted on our website, vpg sensors, and audio recording of today's call will be available on the internet for our 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 about the risks associated with me, Beegees operations. We encourage you to refer to our SEC filings, especially the form 10-K for the year. Ended December Thirty, One twenty twenty and our our recent SEC filings on the call today are zico CEO and president. And Bill Clancy, CFO. I'll now turn the call to Z for some prepared remarks, please refer to slide three of the quarterly presentation. Dave,
Thank you, Steve. I will begin with some commentary on refugees Consolidated, Financial results and sales trends for the first quarter. Bill will provide Financial details in our outlook. For the second quarter of 2021 moving to slide three first-quarter highlights. The first quarter is old, Mark a good start to the year we achieved sales of 70.6 million which was slightly above the high end of our guidance. We ended the quarter with the book-to-bill of 1.21 as we go. Our orders, 22% sequentially 285.5 million reflecting strength. Our businesses and end-markets advanced sensor reported another strong quarter and continued
To broaden its customer pipeline, we executed. Well, operationally going, our gross margin and achieving an adjusted operating margin of 8.7% and adjusted EPS of $0.31 which were within our Target Model.
Moving to slide for Consolidated result and market trends looking at the first quarter sales results in more detail. Same 4.3% from a year ago and declined. 6.4% from from the fourth quarter sequentially, business office Trends, will generally positive and we ended the first quarter with the book-to-bill above 1.1, in all the three reporting segments.
In each.
If our end markets, we had the book-to-bill above one, with the exception of the ViewSonic military and space Market in the test and measurement Market. Place stays Google, 8.3% demand in this market. Grew 41.1% sequentially driven by continued strength related to semiconductor test equipment
Sales sequentially to to the industrial Wing transportation in general industrial and markets. Grew 2.7%, 7.2% off, and 3.7% respectively. All the friends reflected strength in the transportation Market, which grew 29.4% off in the military and space and still markets in which our sales are driven by the timing of customer projects states were softer long as we communicated last photo. However, orders in the steel Market group, 59.1% sequentially reflecting, increase customer activity and improved or driven demand orders in a military and space or 13.1%.
While saving our other markets where essentially flat orders, grew 23.5%, sequentially driven by strong. Demand in Kentucky, medical construction and precision egg.
The net result of these Trends was a book to Bill of 1.21 for the first quarter, and a backlog of a hundred million point hundred point seven million dollars, moving to slide five.
Turning to the results by segment, full technology for that first quarter sales of 32.7 million. Well 10.3%, lower sequential primarily due to lower sales of Pacific instruments, compared to a year ago. FTP sales grew 7.3% driven by a thousand performance in advanced sensors and precision foil resistors advance. And so first quarter sales, grew 80.7% year-over-year wage, 4.5% sequentially to an annualized level approaching the Forty million forty million dollar range. We continue to operate. It's a maximum capacity and we expect to complete the transition of our new manufacturing facility in the third quarter of this year.
Adjusted gross.
Rajan.
For FTP was 40.4%, in the first quarter of 2021, increasing from 38.9% in the fourth quarter of 2028 is the result of favorable product, mix manufacturing efficiencies and one-time inventory adjustment in the in in to one of twenty one month which will not reoccur which will partially offset by lower Revenue. The book-to-bill for FTP was 1.19 in the first quarter, which I acted a 26.2% sequential increase in orders the strength in demand was driven by applications for our Precision foil resistors in the system. Measurements Market mainly for the semiconductor test application and in a m s
Demand for advanced sensors remain strong as we continue to broaden our customer base for this product across the range of n markets.
For the faul sensor segment. It was a quarter of strong performance. First water sales of 16.9 million improved 4.2% off for from the fourth quarter of 2020 and well 15.2%. Higher than a year ago, they all businesses or false sense of Life continues to perform well as its Revenue. Grew 16.6% From A year ago, financially four sensors, adjusted gross, margin of 36% in the first quarter improved from 29.6% in the fourth quarter and 24.3% a year off the sequential Improvement was driven primarily by higher revenue and Manufacturing efficiencies.
This results in part demonstrate the cost reduction or the quality and efficiency improvements. We have made over the past several years, the book-to-bill for four sensors of 1.14, inflected continued, all the strength for the medical and precision, agriculture applications to help me mend. We are expanding the capacity of our China facility regarding the India facility, where we produce the majority of the force sensors product. We are dead. We are currently fully operational at this facility. As we maintain COVID-19, protection measures to protect our employees.
Sales of wing and control systems in the first quarter of 20.9 million declined, 7.8% sequentially and well 7.50% lower than a year ago. Reflecting lower project driven says, in our steel Market sequentially, we had higher sales rep. Well, I will on both Wings solutions for trucks in Europe, sales of our truck weigh vanweigh product, which helps Fleet operates, operation, maximize to maximize truckloads. While minimizing risk of fines due to overloading continues to rebound and grew 5.5% from the fourth quarter.
We are optimistic.
For continued growth in 20, 21 in parties, regulation driven after market opportunities emerge in the second half of this year off.
Adjusted gross margin in the first quarter was 44.3%.
Adjusted for impact and improved from 42.5% in the fourth quarter, mainly due to favorable product mix and and in fact in inventory, partially offset by lower Revenue. In terms of all the trends in WCS, segments, all this group 36.2% sequentially reflecting higher demand for our steel, transportation and general industrial applications with regard to the steel Market. The book-to-bill for kelp often envious. I will 1.37 and 1.74 respectively. As we have discussed, previously orders for calc and deicide are generally driven. A customer topics projects which is in the case of kelp, typically have a 2/4 leg relative to inflection in the steel Market Pub.
The result of this WCS. All those friends in the first quarter was a book-to-bill of 1.3 before turning the call to Bill. I'll make comments in terms of copied, all our facilities are currently open and operational and many of our employees who had been working remotely have received into working on site. Looking forward, we are continuing our long-term strategic initiatives. Including deploying our Capital wouldn't lie to build to build long-term stockholders value for twenty Twenty-One. This initiatives include completing the manufacturing transition and capacity. Increased wage our Advanced sensor or decline. We also are looking at the expansion of our Japanese Precision. Resistor manufacturing facility in addition to deploy wage.
To deploying more automation projects for our resistor. For the client is such. We expect Capital spending to be approximately 22 million, twenty five million for 20 21. We are also continuing to look for attractive Acquisitions opportunities to add addition, adding a quality strategic businesses to the vpg platform, that will further accelerate our growth and profitability.
I will now turn it over to Bill Clancy for additional Financial details. Bill thank Steve referring to page seven of the slide deck in the first quarter of 2021. We achieve revenues of 70.6 million gross profit of twenty eight point six million or 40.5% off sales, operating income of 6.4 million or 9.1% or revenues and net earnings per diluted share of 36 Cents.
That's the basis, which we lay out, and our reconciliation table in the press release. Our gross profit was twenty eight point six million, or 40.5% of sales, operating income was 6.1 million or 8.7% of sales and net earnings per diluted share was $0.31.
Our first quarter 2021 revenues declined 6.4% compared to seventy five point four million in the fourth quarter and we're 4.3% above the first quarter year ago.
Bond exchange, for the first quarter of 2021, had a positive effect on revenues by 2.1 million compared to a year ago and seven hundred thousand dollars as compared to the fourth quarter of 2020.
Our gross margin improved in the first quarter to 40.5% from 38.1% in the fourth quarter on an adjusted basis. First quarter, gross margin of 40.5% through from the 38.0% in the fourth quarter of 2020. Our operating margin was 9.1% of the first quarter of 2021.
Excluding some start-up costs for advanced sensors and receiving COVID-19 subsidies. Our first quarter adjusted operating margin was 8.7%, which decreased and the 10.7% we record it in the fourth quarter of 2020.
Selling General administrative expenses for the first quarter of 2021 for a 22.2 million or 31.4% of revenues. Compared to twenty point three million or 30.0% of revenues of the first quarter of 2020. The increase in sg&a of 1.9 million dollars. Mainly relates to 8,000 for foreign exchange rate in pack, 300,000 wage increases 300,000 of rent and five hundred thousand of other costs.
The adjusted net earnings for the first quarter of 2021 with 4.2 million dollars or $0.31 per diluted share compared to three point. Three million dollars or $0.24 per diluted share in the first quarter of 2020.
Adjusted ebitda was nine point five million dollars as compared to eight point three million dollars a year ago.
Capital spending was five point seven million. The majority of which reflects purchases and related infrastructure for the new Advanced sensors facility. As a result of these Investments, we generated adjusted free cash flow of a negative $100,000 for the first quarter of 2021.
As compared to three million dollars for the first quarter of 2020, we Define it. Just a free cash flow as cash from operating activities, less Capital expenditures, plus sales tax assets,
The Gap tax rate in the first quarter was 26.3%. We are assuming an operational tax rate in the range of 26% to 28% for the full year of 2021.
Referring to slide seven. We ended the first quarter at ninety six point, two million of cash and cash, equivalents and total long term. Debt of 40.6 million. We believe that we have a strong balance sheet, an ample liquidity to support our business environments and to fund additional m&a opportunities.
The Outlook, we expect, net revenues to grow sequentially, and being the range of 71 million to 77 million. For the second fiscal quarter of 2021 at a constant versus recorder. Twenty Twenty-One exchange rates in summary, we achieve sales slightly above the high end of our guidance. We have strong orders across business and are booked a bill of 1.21. We achieved Financial results within our targeted model.
With that. That's open the lines for questions. Thank you.
Well now begin the question-and-answer session to ask a question. You may press * then 1 on your touchtone phone, if you are using a speaker phone please pick up your handset before pressing the key to life from the question queue. Please press * then two.
The first question comes from <expletive> Ryan of Colliers. Please go ahead.
Thank you morning, guys.
Good job on the gross. Margins. What I think in
the Ford Cordy had talked about some increase logistic cost. Did you see any more supply chain constraints leading to higher costs or what your thoughts of the supply chain and how should we look for gross margins? You know, for the next couple of quarters
Okay, hi, good morning. <expletive> regarding the logistics cost as we have indicated. In the last water, there is an increase in logistics cost due to limited the air and the seat capacity. We have not seen further increases as of last quarter there, for this point in time, we should expect to see a continuation of the cost. And, and we don't expect any any increase, what we had, maybe an item that should be indicated, we had on the gross profit side. We are looking at, as we indicated, at the favorable impact of approximately $800,000 coming, as a one-time effect related to to an inventory, adjustment in q1, which should not repeat itself. In addition to that wage
As we are going to expand.
I will Chinese facility in order to support further demand for four sensors. We should expect to see slightly higher cost month since I will China cost. I will labor cost in China is higher than than India. And in addition to that the fact that we would expand the child care facility will also imply that we will incur Palace cost, as we are going to Expo those products to the United States. So all-in-all for the second quarter, if we are looking at if we are looking at the second quarter of based on based, on the fact we are looking at the gross profit margin to be flat in respect to Pure one, given the one-time effect and the higher labor cost in China Club.
Including the Tariff cost.
I appreciate that color. You know what? What's you indicated? You're India and facility was up and running and, you know, you can hear some of the horror stories. How COVID-19 is spreading over there? What are you guys seeing? And it has there been any impact or do you anticipate any impact Revenue impact from that facility? Okay, at this point in time there was in in the state where we are there was a the the government has announced a lock down for two weeks until May 24th. Vpg is a has been classified already a year ago as a as an essential business due to the fact that we are selling to the medical, any cultural Market. Therefore we have a special waiver to continue and operate our facilities during those lockdown it in.
Much much better prepared in India than a year ago since since we, we were in a in a shutdown situation, a year ago, we had all the all the possible Protections in place already in India for our own employees. So off, I have to say, given the environment, the companies much much better prepared to protect its employees. In addition to the waiver that we have received a full at this point in time. We are fully operational and we have not and we end at this point we are not expecting any any interruption in in manufacturing.
Okay, so the expansion in China will, I mean, where will that be product to? Is that is that to just augment, what India is producing or
With the man that's strong. The, this is correct. We have several product clients. We have several product lines as the book-to-bill for four sensors continues to be strong added capacity in India. And at the end, at the same time, we are increasing the capacity in China mostly for weighing application. So this is great. This is off the, the India, facility and increasing the capacity in order to support the demand.
Great things even. Congratulations on the strong execution.
Thank you.
Okay. And that's a reminder if you have a question please. Press * then 1. The next question is from Sarkis please go ahead.
Hey, good morning. And thank you for taking my question here, you mentioned Advanced sensors demand remains strong. I think you said in the prepared comments 80% year-on-year, growth in that supporting the level approaching forty million in sales annualized, just wanted to kind of see if you can, maybe discuss the comments on broadening the customer base for the product and and across end markets, same color that you can share with us there.
Okay, regarding regarding Advanced and so so you you as you indicated Revenue has has increased by 80.7% year-over-year and 4.5% sequentially. Since we are running really at the at the maximum capacity, at the same time, I have to say that given the strict non-disclosure agreements. We have with most of our customers, I cannot comment on the specific customers. However, we will, we we have continued to broaden the customer among these. We were pleased to add more significant customers but, but unfortunately, I will not, I will not be able to provide more details, but I would like to say that regarding the transition, we are on time and the fact that once we would finalize the transition dead,
Q3 it's not only that we will be fully operational in the new facility but also at the same time we are adding more capacity. So once we complete Invasion we would be able to support a much higher volume and as it seems that even the the strong environment it seems that this capacity that will be required and will be fully operational this year.
No, thanks for that, I guess just to poke around a little bit more, you know, on this annualized sales level or number for this particular product line, is it one or two thousand specific customers that you can't talk about? Or is, is there a particular segment that you're serving? That's pretty exciting. I guess, as I look at the revenue by market on flight, four of the the reputation, you know, the other markets are growing much more rapidly. You're on. You're I'm assuming Advanced sensors falls into, I guess. Broadly speaking that category Garden growth. Can you kind of help me out there? You are. You are so pleased. And part of the segments that we that I will not be able to provide a nice color is mostly regarding medical consumer and
Mainly around me.
And and and the consumer to some extent. We have some. We have some specific test and measurement customers. Well, hi, who has some highly proprietary dog? I would say yeah.
Applications but those are the type of end markets but but you are correct. The other markets, some the the growth in the other mom also under under the advanced sensors for the time.
Okay thanks thanks for that and I guess if I kind of think about your guidance you know clearly I think it's fairly strong and and nice sequential growth you know, anything that you can share regarding, you know, just kind of the End Market Health real time that you're either excited about or worried about that we should be mindful.
I well we we have seen, I would say a rebound pretty much in in all end markets the ones wage we have seen some good indications and I did provide more details. Regarding the book-to-bill is is the still related product lines like calc and over there, we have seen a month just increasing demand, we are still expecting or looking for a much stronger rebound. But in terms of all the other markets test from measurement industrial, Wayne General industrial we have seen rebound of demand and and at this point in time we still we still believe that there is much more room to go from Adam and standpoint. We do provide competitive lead time.
In all our product lines, we are not on allocations, therefore we do believe that once the demand would increase, we would be able to deliver higher venues.
About it. Just one. Last one for me is the first quarter sg&a. Level kind of the right number to think about going forward on a run-rate basis. I guess, you know, what's kind of off line going forward and, and if there were any, you know, one time things to consider as we look at the the sequential trends of of topics. Thank you.
Yes, our case from the, from the sg&a perspective, mean the the run-rate or the after that you saw in q1. So actually now you know in twenty Twenty-One as like the wage increases that I mentioned there is obviously FX4 adjustments. Um, what we have recorded is probably the base the base number. I mean I I you know, as we roll out the year we always look at and review are accruals in in the second half a year. But as far as bass, what we have recorded so far off, you one would be a good measure for for Q2.
Okay, got it. And and does this assume the facility for for FTP and in advance sensors kind of the costs are are essentially kind of being realized today or do we have some more to think about as that facility comes online and and is more fully-realized in the I think you mentioned the third quarter of this year. Most most of them has been realized since we are already running in the facility. We may expect an incremental cost of some additional overhead supporting a larger operation, a level of 100 to $200,000 a quarter. But but but by far, most of the cost has been realized. The only thing which should be indicated is that may have booked so far in q1 $130,000 of start-up costs. But since the transition has not been, has not been completed, we should expect dead.
To to book further start-up cost until the transition is completed by the end of Q3. But those are one-time. Those are has nothing to do with in with their own going close to support the new facility.
Great. Thank you.
Okay, and if you have a question please press * then 1. The next question is from Tyson Capital. Please go ahead.
Thank you, you had referenced in your remarks interested in Acquisitions and the historically been active. There does the rebounding economy? Does that make Acquisitions either anymore? More difficult, or easier to, uh, to consummate, or does it not have an impact at all in terms of ability to get deals done?
Regarding the the landscape we have seen and and it has been published the last few transactions of large companies. It like like upper court systems by by national instruments. And those has been finalized at the level of 16 17 times. I think that one of the challenges that the m&a landscape has that
That 00 cash is fairly cheap and that the the interest rates are extremely low there, for companies of transactions, are completed at the much higher multiple than they have been a while ago. We still believe as a company that despite this environment. We would we are looking and having always dialogues with fit specific companies. We are as we have been for quite for all along very, very disciplined, with respect to the valuation. Return-on-investment I are our targets that the company has to has to achieve while completing an acquisition off. And we we still believe that despite this environment there are still opportunities. Unfortunately I have I I have nothing to report at this point in time.
We are in.
Some dialogues with with, with companies and hopefully, we would be able to, to complete an acquisition. But at this point in time,
I have nothing to eat both but but it's very high on our radar screen on our
Oh, no commission to, to complete an acquisition given given our strong balance sheet.
Great. Thank you, Steve.
This concludes our question-and-answer session, I would like to turn the conference back over to see if cancer for closing remarks.
Thank you before we close. I want to let everyone know. We will be presenting at the Needham conference on May 17th. And also the stifel conference on June 10th. Please see our website for more details. Thank you again for joining our call and have a good day.
The conference is now concluded. Thank you for attending today's presentation. You may now disconnect