Vishay Precision Group's Q3 2025 Earnings Call: Contradictions Emerge on Humanoid Robotics Revenue, Cost Savings Progress, and Defense-Related Revenue Impact

Date of Call: None provided

Financials Results

• Revenue: $79,700,000, up 6.1% sequentially and up 5.3% YOY
• EPS: $0.58 GAAP per diluted share; adjusted $0.26 per diluted share, up from $0.17 adjusted prior-year (adjusted net earnings $3.5M vs $2.3M prior-year); GAAP net earnings $7.8M
• Gross Margin: Adjusted gross margin 40.5%, compared to 41.0% in Q2; impacted by $600k unfavorable FX and $800k unfavorable product mix
• Operating Margin: Adjusted operating margin 6.2%, improved from 4.8% prior year and up from Q2; excludes $362k of adjustments and a $5.5M gain on sale

Guidance:

• Net revenues expected in range $75.0M to $81.0M (at constant Q3 2025 FX)
• Full-year 2025 capital expenditures forecast ~$10.0M
• Operational tax rate expected ~28% for full-year 2025
• Targeting $5.0M of annualized cost reductions by year-end (about $4.0M realized year-to-date)

Business Commentary:

• Revenue Growth and Segment Performance:
• VPG reported third quarter revenue of $79,700,000, growing 6.1% from the second quarter and 5.3% from the prior year, with total bookings at similar levels.
• Growth was driven by strong double-digit growth in the Sensors segment, offset by lower orders for Weighing Solutions and Measurement Systems sequentially.

• Sensors Segment Expansion:
• The Sensors segment reported a book to bill of 1.07, with revenue increasing by 19.1% sequentially.

• Growth was attributed to higher sales of precision resistors in test and measurement and industrial markets.

• Weighing Solutions Segment Challenges:

• Weighing Solutions segment experienced a 6.4% decrease in sales and a book to bill of 0.89.

• The decline was due to lower sales in transportation, construction, and precision ag markets, with stable order trends.

• Measurement Systems Segment Softness:

• Measurement Systems segment revenue increased by 7.3% sequentially, with orders decreasing by 6.9%.

• Softness in the DTS product line was attributed to delays related to defense and space government projects, with expectations of continued delays into Q4 due to the U.S. government shutdown.

• Strategic Initiatives and Leadership Changes:

• VPG appointed two new C-suite roles, Chief Business and Product Officer and Chief Operating Officer, to drive business excellence and execution.
• These changes are part of strategic initiatives to increase growth, profitability, and organizational changes aligning segments to accelerate top-line growth.
  

  Sentiment Analysis:

  Overall Tone: Positive

  • Management: "We are pleased with the solid quarter." Reported improved adjusted operating margin (6.2%) and record Weighing Solutions gross margin; strong cash generation ($9.2M adjusted EBITDA, $7.4M adjusted free cash flow) and on-track $26M business development orders toward $30M goal.

Q&A:

• Question from John Franzeb (Sidoti): Why is Weighing Solutions showing book-to-bill below 1 for several quarters while revenue remains relatively stable — is this becoming a shorter-cycle business?
  Response: Softness is driven by large OEMs (precision ag/construction) slowing amid higher rates; general industrial demand remains stable, so bookings are stable but OEM upside is limited.

• Question from John Franzeb (Sidoti): Is the record Weighing Solutions gross margin of 40.3% sustainable on an annualized basis into 2026?
  Response: Yes — management expects sustainability given ongoing cost reductions and moving manufacturing to lower-cost locations (e.g., India) plus operational-excellence initiatives at similar revenue.

• Question from John Franzeb (Sidoti): Do you expect the $5.0M of cost reductions to be realized by year-end and how much has been achieved year-to-date?
  Response: Yes — the $5.0M is expected on an annualized basis by year-end; approximately $4.0M has been realized year-to-date.

• Question from John Franzeb (Sidoti): On humanoid robotics, what ramp do you expect in 2026 and will you need additional manufacturing space?
  Response: There are discussions and customer preparations for higher-volume production (YTD humanoid orders ~$3.6M), but timing and ramp rates are uncertain and specifics not yet available.

• Question from Josh Nicholas (B. Riley): Are you likely to add at least one new humanoid customer in the next couple of quarters — where are you in early customer discussions?
  Response: Management is in engineering dialogues with additional developers; interest exists but designs are not frozen and approval timing is uncertain.

• Question from Josh Nicholas (B. Riley): The $26M business development orders YTD — does that imply additional humanoid orders in Q4 or are they from other new areas?
  Response: The $26M is diversified across applications (humanoids, ceramics/UHTC, semiconductor back-end test, fiber optics, etc.); humanoids are part of the mix but growth is broad-based.

• Question from Josh Nicholas (B. Riley): Can you quantify the impact of the U.S. government shutdown on Measurement Systems (DTS) for Q3 or expected Q4 impact?
  Response: The shutdown is delaying orders/shipments in Measurement Systems (DTS); management expects continued delays and estimates at least a several-hundred-thousand-dollar impact, possibly more.

Contradiction Point 1

Humanoid Robotics Revenue Projections

It involves differing statements about the expected revenue and production timeline for humanoid robots, which are key aspects for evaluating the company's growth prospects in a rapidly evolving market.

Are there opportunities to onboard a new humanoid customer in the next few quarters? - Josh Nicholas (B. Riley)

2025Q3: In engineering dialogue with potential customers. Designs are still in flux, making visibility challenging. Customers see value in VPG's sensing solutions. - Zeev Shashani(CEO and President)

How much additional humanoid robot revenue is expected to reach the $30 million business development goal this year? What is the expected order size increase when the first humanoid customer transitions from demo to production? - Josh Nichols (B. Riley)

2025Q2: Regarding humanoid robots, the company has received $1.5 million in orders from April to July from one customer. The first customer is evaluating their production schedule, and the company anticipates potential future orders. Discussions with the second customer are progressing with expectations for a larger order soon. - Ziv Shoshani (CEO and President)

Contradiction Point 2

Cost Savings Milestones

It involves differing statements about the timeline and progress of cost savings initiatives, which are crucial for understanding the company's financial management and operational efficiency.

Will you achieve $5 million in cost savings by year-end? - John Franzeb (Sidoti)

2025Q3: On track to meet $5 million in annualized cost reductions by year-end. $4 million already realized. - Zeev Shashani(CEO and President)

Will the $5 million cost-cutting initiative be completed by Q3? - John Franzreb (Sidoti & Company)

2025Q2: The $5 million cost savings are projected to be completed by the end of Q4. About $2.8 million has been captured in the first 6 months. - Ziv Shoshani (CEO and President)

Contradiction Point 3

Humanoid Robotics Shipments and Manufacturing Capacity

It relates to the expected ramp in humanoid robotics shipments and the need for additional manufacturing capacity, which could affect production efficiency and cost structure.

What growth rate is expected in humanoid robotics shipments for 2026, and will additional manufacturing capacity be required to meet demand? - Josh Nicholas (B. Riley)

2025Q3: Discussions ongoing for higher volume production. VPG is preparing to support higher volume manufacturing if needed. - Zeev Shashani(CEO and President)

Can you elaborate on the humanoid robot opportunity? How many sensors are in a single robot, and what is the ASP? - Griffin Boss (B. Riley Securities)

2025Q1: We are working on larger orders for the second half of the year. Our value contribution per robot is expected to be between $500 and $1,200, with tens of sensors used per robot. - Ziv Shoshani(CEO & President)

Contradiction Point 4

Defense-Related Revenue Impact

It involves differing expectations regarding the impact of defense-related softness on revenue, which could influence financial forecasts.

Have defense and aerospace orders been weaker year-over-year recently? Do you expect them to remain stable or how do you see this evolving over the next few quarters? - Josh Nicholas (B. Riley)

2025Q3: Impact on Measurement Systems, specifically DTS, likely in hundreds of thousands of dollars. - Zeev Shashani(CEO and President)

What are your thoughts on recent defense spending trends and how are defense orders on the industrial side impacting your current tracking? - Griffin Boss (B. Riley Securities)

2025Q1: Defense orders are stable, and there has been a recent uptick in aerospace and defense demand. - Ziv Shoshani(CEO & President)

Contradiction Point 5

Weighing Solutions Business Cycle and Sustainability

It involves differing views on the business cycle and sustainability of high gross margins in the Weighing Solutions segment, which could impact revenue projections and investor expectations.

Why has revenue remained strong despite the book-to-bill ratio falling below one for several quarters? Is the business shifting to shorter sales cycles? - John Franzeb (Sidoti)

2025Q3: The Weighing Solutions business relies on multiple pillars: OEM business (precision ag and construction, impacted by interest rates and economic environment) and general industrial weighing (stable). Onboard weighing is influenced by the European economy and seasonal effects... - Zeev Shashani(CEO and President)

How did May’s incoming orders compare to March?What are customers’ views on inventory trends and future expectations? - John Franzreb (Sidoti)

2025Q1: The Weighing Solutions business is selling at a volume level that's actually above expectations. It's a very stable business. It has been very stable this year, and we expect it to continue to be that way. - Ziv Shoshani(CEO & President)