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Vishay Precision (VPG) 5 Nov 24 2024 Q3 Earnings call transcript

AInvestWednesday, Nov 6, 2024 12:43 pm ET
2min read

VPG, a leading provider of sensing technologies, held its third quarter fiscal 2024 earnings call, revealing a mixed performance amidst a volatile business environment. The company reported sales of $75.7 million, above the mid-range of its guidance, but with orders declining to $68.6 million from $73.5 million in the previous quarter. Ziv Shoshani, CEO and President, highlighted the company's strategic moves to expand its product offerings and streamline operations, including the recent acquisition of Nokra, a German supplier of laser-based measurement systems for the steel and metal processing market.

Mixed Market Dynamics and Operational Challenges

VPG's third quarter sales were mostly stable sequentially, with a decline in some markets offset by growth in others. The company noted challenges in certain markets, particularly in steel and consumer applications, while observing healthy demand in sectors like Test and Measurement and AMS. Operationally, VPG faced temporary labor inefficiencies in its Sensors segment, contributing to a lower gross margin of 40%. Despite these challenges, the company remains optimistic about its growth prospects and is focusing on expanding its business development initiatives.

Strategic Acquisition and Growth Opportunities

VPG announced the acquisition of Nokra, a German niche supplier for laser-based measurement systems, which strategically expands its product offering to the steel and metal processing market. The acquisition is expected to be immediately accretive and is part of the company's long-term capital allocation strategy. VPG also highlighted its focus on expanding content with OEM customers in precision agriculture, construction equipment, and medical equipment, as well as its entry into the humanoid robot market with two major customers.

Financial Performance and Outlook

William Clancy, CFO, provided an update on VPG's financial performance, noting a decline in gross margin and operating margin due to lower revenue and unfavorable product mix. The company recorded a loss per diluted share of $0.10 on a GAAP basis, but reported an adjusted net earnings per diluted share of $0.19. VPG expects to finance its capital expenditures within a range of $10 million to $12 million for the full fiscal year of 2024, with a focus on internal investments and potential M&A opportunities.

Outlook and Investor Questions

During the Q&A session, analysts asked about labor inefficiencies, free cash flow, and potential M&A targets. VPG assured that the labor inefficiencies in the Sensors segment had been addressed in the fourth quarter. The company also expects a positive free cash flow in the fourth quarter, following one-time tax payments and insurance renewals in the third quarter. Regarding M&A, VPG is looking at acquiring businesses with adjacent sensing technologies, both small and large, to leverage operational synergies and enhance its product portfolio.

In conclusion, VPG's third quarter earnings call highlighted the company's strategic moves to navigate challenging market conditions, expand its product offerings, and streamline operations. Despite operational challenges, VPG remains focused on its growth initiatives and is optimistic about its future prospects, particularly in the context of its recent acquisition and strategic investments in emerging markets.

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