• Total Sales: $75.7 million, above the mid-range of guidance.
• Orders: $68.6 million, down from $73.5 million in Q2, with a book-to-bill ratio of 0.91.
• Gross Margin: 40%, down from 41.9% in Q2.
• Sensor Segment Revenue: $28.2 million, down 13.3% year-over-year and 2.3% sequentially.
• Weighing Solutions Revenue: $25.2 million, down 13.1% year-over-year and 8.3% sequentially.
• Measurement Systems Revenue: $22.4 million, down 8.2% year-over-year but up 6.2% sequentially.
• Adjusted Net Earnings Per Diluted Share: $0.19, compared to $0.31 in Q2.
• Adjusted EBITDA: $8.1 million, or 10.7% of revenue, compared to $10.2 million or 13.2% in Q2.
• Purchase CapEx: $1.8 million, with full-year expectation of $10 million to $12 million.
• Adjusted Free Cash Flow: Negative $2.3 million, compared to $4.9 million in Q2.
• Cash and Cash Equivalents: $81.1 million.
• Total Debt: $31.6 million.
• Fourth Quarter Revenue Outlook: Expected to be in the range of $70 million to $78 million.

• Warning! GuruFocus has detected 3 Warning Sign with VPG.

Release Date: November 05, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Vishay Precision Group Inc (NYSE:VPG) reported third-quarter sales of $75.7 million, which was above the mid-range of their guidance.
• The company achieved design qualification for resistor products in the telecommunications market and recorded an order from a supplier of source lasers used in fiber optics equipment.
• VPG announced the acquisition of NOKRA, a German niche supplier for laser-based measurement systems, which is expected to be immediately accretive.
• The company is expanding its business in India, one of the fastest-growing markets globally for steel production.
• VPG released its initial sustainability report, marking a significant milestone in its sustainability journey.

Negative Points

• Orders declined to $68.6 million from $73.5 million in the second quarter, resulting in a book-to-bill ratio of 0.91.
• The gross margin decreased to 40% in the third quarter from 41.9% in the second quarter, due to temporary labor inefficiencies and lower revenues.
• The weighing solutions segment saw a decline in sales by 13.1% from a year ago and 8.3% from the second quarter.
• The measurement systems segment reported a book-to-bill ratio of 0.82, reflecting a decline in orders by 16.9% from the second quarter.
• The semiconductor market remains cyclically soft, impacting the company's performance in that sector.

Q & A Highlights

Q: Are the labor inefficiencies in the sensors segment resolved as you enter the fourth quarter? A: Yes, significant improvements have been observed at the beginning of the fourth quarter, resolving the inefficiencies noted in the third quarter.

Q: The free cash flow for the quarter shows higher DSOs. Is this a trend or a one-time occurrence? A: It's likely a one-time occurrence due to sales in the last week of the third quarter. We expect positive free cash flow in the fourth quarter, despite one-time tax and insurance payments affecting the third quarter.

Q: Regarding new projects, particularly with humanoid robots, how does the size of the second customer compare to the first? A: The second customer is in early design stages but has potential similar to the first, which is expected to double revenues in 2025 from pre-production levels.

Q: How do you expect the Nokra acquisition to impact revenue growth in 2025? A: We anticipate significant revenue growth by integrating Nokra into our existing sales channels, potentially doubling its revenue compared to 2024, especially leveraging growth in the Indian steel market.

Q: How has the end market mix changed since the last quarter, and what are the expectations moving forward? A: The biggest drop was in measurement systems due to project delays. We expect bookings to return to mid-$70 million in Q4. While some markets like precision agriculture show optimism, others like Europe remain soft. Interest rate cuts could lead to a recovery in the coming quarters.

Q: Are there any operational cost reduction strategies being considered given the current market environment? A: We are streamlining operations, including relocating products to our India facility, which is expected to yield multi-million-dollar savings. This includes consolidating operations and optimizing staff functions.

Q: Was Nokra a customer before the acquisition, and what is the focus for future M&A? A: Nokra was not a customer but was identified for its complementary technology. Future M&A will focus on similar businesses that offer operational synergies or adjacent technologies, ranging from small to larger potential acquisitions.

Q: How do you balance M&A with stock repurchases given the current stock price? A: Our strong balance sheet supports both M&A and stock buybacks, alongside investments for organic growth. We prioritize enhancing organic growth but also consider M&A and stock repurchases as part of our capital allocation strategy.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.