Q2 2025 Vishay Precision Group Inc Earnings Call
Hello, everyone, and welcome to. The vpg second quarter 2025 earnings School. My name is Ezra, and I will be your coordinator today. If you would like to ask a question, please press star. Followed by 1 on your telephone keypad. And if you change your mind, please press star followed by 2. We will take questions at the end of the presentation. I will now hand you over to our hosts, Steve caner, senior director of investor relations to begin. Please go ahead.
Thank you, Ezra and good morning, everyone. Welcome to VG's 2025 second quarter earnings call. Our Q2 press release and slides have been posted on our website at BPG sensors.com.
And 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 Harbor provisions of the 1995 Private Securities Litigation Reform Act. Our actual results may vary from forward-looking statements due to our discussion of the risks associated with VPG operations. We encourage you to refer to our SEC filings, especially.
The form 10 for the year ended December 31, 2024, and our other recent SEC filings on the call today are Ziv Shoshani, CEO and President, and William Clancy, CFO. And now I'll turn the call over to Z for some prepared remarks. Please refer to slide 3 of the quarterly presentation.
Thank you, Steve. I will begin with some commentary on our results and friends for the second quarter bill will then provide Financial details about the quarter and our outlook for the third quarter of 2025
Friends. It cost, several key, markets reflecting a moderately improved business environment.
Our Consolidated orders grew 7.5% sequentially making the third consecutive quarter of sequential growth.
This resulted in a Consolidated book to Bill of 1.06, width 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 3, business segments. I want to highlight the way Solutions segments, in particular, which delivered a record. Quarterly adjusted, gross margins.
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 divisions segments, I want to comment on the impact of carriage on our second quarter results.
County 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 defective while Paris policies continue to change and our 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 4, beginning with our sensor segments, second quarter revenue decreased 1.8% sequentially, reflecting mixed brands across its market.
As higher sales of strangers products were offset by lower sales of for precision resistors.
Stencils booking roles, 3.7% sequentially reaching the highest level in 6, quarters and resulting in a book to Bill of 1.12.
The bookings growth was driven by higher orders in the testing measurement for precision resistors and higher demand for strangers, sensors in AMS, and Industrial Wing, which was partially offset by lower orders for the testing measurement.
For precision resistors. We recorded a 1.5 million dollars 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 dollars in follow on orders from our initial humanoid customer.
The humanoid robot markets is still in its infancy.
And the the initial real world deployment of these robots 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 has. For vpg and we focus on high Precision. High performing segments of this rapidly evolving Market.
Moving to slide 5 turning to our wing solution. Segment. Second quarter sales, increased 11.3% from the first quarter.
The increase was driven primarily by higher sales in the transportation and Industrial Way markets.
and in our other markets for medical and precision agriculture applications,
When solution orders grew 3.6% sequentially to 207.2 million is resulting in a book to Bill of 0.92.
Higher orders for precision, Agriculture and medical applications. And in industrial weighing offset lower orders in the transportation and General Industry.
Moving to slide 6.
Turning to our measurement system, Segments Revenue in the second quarter was $19.2 million, an increase of 5.1% sequentially.
Acquisition modules in the AMS Market.
Which offset lower sales to the transportation and steel markets.
Second quarter measurement, systems orders of 23.0 million increased 18.1% 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 been 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-fold while testing materials at ultra high temperature of around, 2,000 degrees C.
That is required for this Advanced application.
We are now in discussion with the second University regarding data testing for this system.
Moving to slide 7.
I would like to provide a brief update on our 3 top strategic priorities for 2025.
First.
We are encouraged by our business development initiatives, which generated orders of approximately 700 million to the first half of this year.
This puts on track to achieve our goal for 2025 of securing, 30 million of orders from either new customers or new application, with existing customers.
What is significant is not only the magnitude of these orders, but the breadth which runs across our businesses.
To support this initiative. We are continuing to improve our sales processes and systems as well as our use of digital marketing channels.
Second, we continue to reduce cost and increase operational efficiencies.
To 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 5 million for the full 2025 compared to Bayou year. Excluding inflation.
These measures in 10 Main.
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 flows. 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.
But the ongoing Mac 1, certainties due to tariffs trade policies and geopolitical tensions.
I will now turn it over to Bill Clancy.
Here. Thank you, Steve.
Referring this slide a and the reconciliation tables on the slide deck are second quarter, 2025 revenues for 75.2 million.
Adjusted gross margin of 41% in the second quarter increased by 270 basis. Points from 38.3% in the first quarter, reflecting higher, volume, favorable product mix and favorable exchange rates, which offset net tariff costs,
Sequentially by segments, adjusted gross margin for sensors of 32.2%, increase due to an increase in inventories, and favorable FX rates, which offset the impact of lower volume and net tariff costs.
Tariff costs.
Gross margins for measurement systems of 54.6% increase from the first quarter, due to higher volume and favorable product mix.
Moving to slide 9.
our adjusted operating margin of 4.8% was excluded startup and restructuring costs, amounting to 885,000 improved from 1.1% in the first quarter of 2025,
selling General and administrative expense for the second quarter was 27.7 million with 36.9% of Revenue, which increase from 26.7 million with 34.5% of our revenues, for the first quarter of 2025
On an adjusted basis.
Second quarter of 2025 sgna was approximately 27.1 million for 36% of sales.
Excluding approximately 500,000 dollars 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 for 17 cents per diluted share compared to 468,000 or 4 cents per diluted share in the first quarter of 2025.
Moving the slide 10.
Adjusted ibida was 7.9 million for 10 and a half percent of Revenue compared to 5.1 million dollars for 7.2% over Revenue in the first quarter.
Capital expenditures in the second quarter was 1.3 million.
For 2025, we are forecasting, 10 to 12 million dollars for Capital expenditures.
We generated adjusted free cash flow of $4.7 million for the second quarter, 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 sale of the building, which generated approximately $11 million in net proceeds.
We use these proceeds to reduce our outstanding Bank, revolver balance.
which will reduce our annual interest expense by about 700,000 dollars,
Regarding the Outlook.
For the third fiscal quarter of 2025 at constant, second fiscal quarter of 2025 exchange rates.
We expect net revenue 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.
Our business development initiatives continued to advance.
And we generated solid cash flow as we continue 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 devices are 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.
230 million this year. Uh, presumably, do you expect some additional revenue from, uh, humanoid robot? Uh, some of your humanoid robotics customers later this year, and then you mentioned, 1, customers expected to move into production,
Next year, how do you expect the size of those orders would change relative to what you're getting today? Assuming that, that customer does move into production versus, uh, earlier stage, uh, demo today orders. So, you guys are doing,
Good morning. Uh, regarding the humanoid robotics project. As, as we indicated, we have received the 1.5 million order from April to July. We are pleased with with the progress of this customer and our design position on their robot.
At the same time, we have to continue and support the production schedule which are still changing by our customers.
So, uh, we so we may expect to get more orders at this point in time. Uh, the customers continues to evaluate based on their schedule but if
But, but potentially, we could see an order. It really depends on the customer. This is regarding the first humanoid, uh, customer the second humanoid customer. I did indicate in Prior calls that we did provide an initial prototype lines.
Uh, prototype products. The feedback was good and we are expecting uh, to provide the another. We we are expecting to see a larger order in the near future regarding 2026. Uh, we, we shape Precision group is set to support our customers.
Regardless of the volume, we are set regarding the infrastructure. And uh, once the customer is ready to ramp up on higher volume, the company is ready to support.
To support their production. So based on prior discussions that we had with the customer once and if there would be changes in volume, we
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 then just to to drill down into that a little bit. I think you previously, mentioned somewhere in the range of like 500 to 1,200 dollars per robot is that still what you're expecting and and is the margin profile for for this for these customers, you know, relatively in line with the corporate average or a little bit better, or how is that going to impact the the businesses at scale?
Okay. I I did provide a, a price range given the, the volume that has been discussed naturally once higher volume.
Uh, would be discussed. We we, we we are ready. We, we understand that. Probably a different pricing model will have to will have to be supported and uh, and the company is prepared for that.
regarding the regarding the, the
Prophet the the prophet schedule. I think it's a a little bit premature still to to provide this type of information.
Um, fair enough. I appreciate the detail there, I guess. Just one more question. I mean, the business activity has been improving, but if you look, like, I mean, the company has been coming off an extended downturn, and now things are starting to pick up. We've seen a healthy uptick in operating cash flow for POS.
Even throughout the, the more challenging times.
How do you see like the scalability of the business in terms of ibida and operating margin as your sales, get back up to a higher level of cadence, you know, next year and think about the the scale that comes into play on the margin front.
as as, you know, our
Our financial profile is such that for every incremental dollar of of Revenue, we do expect it to be around about I would say 30 to 40 cents dropped to the pre-tax level.
done in Revenue, I should say that given all the cost initiatives that the company has taken
During the last 2 years we should be even in a better cost position to capitalize profitability once the volume rebound. So if there was a certain schedule,
Regarding the, the, the profitability improvements. Once the volume increase historically we should be in a in a better position. Meaning we the profitability level should be accelerated.
In respect to the Past once volume would rebound.
Appreciate thanks. I have 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 1 on your telephone keypad now.
Our next question comes from John franzreb, with sedoti and Company. Your line is now open. Please go ahead.
Uh, hello everybody and thanks for taking my questions.
Um, I’d like to start with the quarter that we just finished. Um, Z, it seems like there is a fair amount of variability in the transportation market for you. You know, Weighing Systems had had some good revenue numbers flow through. Um, you know, measurement systems that didn’t. I wonder if you could just talk about, you know, what’s going on? What are you seeing in the transportation side of your business?
Okay, great. So regarding Transportation, let me start with measurement systems on the measurement systems. The upside, uh, that we have seen this quarter is coming mainly, um, in the steel, mainly the DSi, the project related AMS and to an extent, also the DTs Automotive business. What we can or what we have identified is kind of a slower demand in weighing solution. Is due to the fact that that in the first quarter, there were very high orders.
Of uh, of transportation for our own board weighing which did not repeat itself in the second quarter. So as a matter of fact it's not that the business has been slowing down. It's just that we did not repeat those large orders in q1.
So, do you think that was just catch up from delayed orders from 20? Um, 24 in q1 and now, they're at equilibrium, you know, any kind of
Greater thoughts. Okay. So I so so the q1 orders were considered to be 6 to 9 months orders that the customer has placed in q1 and is expected to continue. The the the the the sales are expected to continue in the coming months.
Got it, got it. And can you talk a little bit? Also, about the steel market, it seems like the order bookings and steel were weak, and I was kind of hopeful maybe that there'd be a little bit stronger, given what we're seeing as far as the macro conditions.
Okay, so regarding steel as you know, there are few moving Parts in steel first. The Global Steel Market is is is a is a whole continues. To be soft reflecting slow to motive production and demand and push outs for some electric vehicle Mo model production.
Secondly, the tariffs which are very high on steel and steel. Related products also makes a significant effect. Our the orders that we have received for steel are not have not been necessarily on our kelp, which
Which is in line or in line equipment, inspection in steel mills, but it's more on the R&D for DSI product. So is there is still a lot of Tailwind once the steel business would would rebound,
Got it. That helps. Um, in regards to the $5 million in cost savings, would that program be completed by the third quarter? Is that going to take until the full year end?
For the first 6 months, we have captured 2.8 million out of the 5 million.
Got it.
um, for the first and just a little bit, I thought
A little bit of thought about um how July looks the, the trends for the company overall compared to what you saw the monthly Trends in June and I'm sorry in the second quarter.
um, I would uh, regarding to lie at this point in time, I would say, uh,
Since, uh, it's already providing information regarding the third quarter. At this point, I could say there are no surprises to us.
1 last question.
Write 1 last question. Should the, um, should the, the robotics actually begin? Um,
Production in in 2026. Um, at what point would you actually have to add capacity to meet some of the, um, projections for 2030? Um, have you, I'm sure you thought about that but could you maybe share with us, you know what that, what what the ramp it looked like as far as your concerned?
Uh, as I indicated the ramp up, I mean the the ramp up schedule is very much dependent on our customers.
we share with our customers our capacity, uh, our cap, our equipment capacity and our headcount, and we are working hand to hand uh, that our
Capabilities and capacities would be in line with their demand. So, uh, so to that extent, I think there is a very good collaboration, uh, between the 2 companies and uh,
They, 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 but it's really fair enough.
To receive.
If you, I think I lost you.
Sorry, I'm sorry, I'm sorry. I think I, I think he was finished. John. Okay, okay. I'll, I'll get back to you and 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 1 on your telephone keypad now.
We currently have no further questions, so I will 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 2 upcoming investor conferences. The 3-part advisors ideas conference in Chicago on August 27th and the Jeffrey's Industrials conference in New York on September 3rd. You can contact us for more information about them. And 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.