Vishay Precision Group, Inc. Q2 FY2025 earnings call

Management Statement and Operational Highlights

• Revenue for the second quarter was $75.2 million, growing 4.8% from the first quarter. Consolidated orders grew 7.5% sequentially, resulting in a book-to-bill of 1.06, with Measurement Systems and Sensors segments having book-to-bills of 1.2 and 1.12 respectively.
• Adjusted gross margin improved to 41.0%, driven by stronger performance across all 3 business segments, with Weighing Solutions delivering a record quarterly adjusted gross margin.
• Solid cash generation with $6.0 million in cash from operations and $4.7 million in adjusted free cash flow.
• Tariffs impacted gross margin negatively by ~$500,000 in Q2, expected to narrow in Q3.
• Business development initiatives generated ~$17 million of orders in the first half of 2025, on track to reach $30 million for the year.
• Cost reduction initiatives aim to reduce fixed costs by ~$5 million in 2025 compared to prior year, excluding inflation.
• Pursuing high-quality acquisitions to build scale and expand cash flow.
• In Sensors, higher sales of strain gages offset lower sales of precision resistors; received ~$1.5 million in follow-on orders from humanoid robot customer from April-July 2025.
• In Weighing Solutions, sales increased due to higher demand in transportation, industrial weighing, medical, and precision agriculture applications.
• In Measurement Systems, revenue increase due to higher sales of DTS data acquisition modules in AMS market; expect to complete beta installation at University of Alabama of new UHTC system.

Segment Performance

• Sensors Segment: Second quarter revenue decreased 1.8% sequentially. Bookings rose 3.7% sequentially, reaching the highest level in 6 quarters with a book-to-bill of 1.12. Revenue was part of the consolidated $75.2 million total.
• Weighing Solutions Segment: Second quarter sales increased 11.3% from the first quarter. Orders grew 3.6% sequentially to $27.2 million, resulting in a book-to-bill of 0.92. It delivered a record quarterly adjusted gross margin.
• Measurement Systems Segment: Revenue in the second quarter was $19.2 million, up 5.1% sequentially. Orders of $23.0 million increased 18.1% sequentially, with a book-to-bill of 1.2.

Guidance

• For the third fiscal quarter of 2025 at constant second fiscal quarter exchange rates, net revenues are expected to be in the range of $73 million to $81 million.
• Full year 2025 operational tax rate forecasted at approximately 28%.
• 2025 capital expenditures forecasted to be $10 million to $12 million.
• Adjusted free cash flow was $4.7 million in Q2, up from $3.7 million in Q1.

Risks

• Tariff changes impacting gross margin, with uncertainty in tariff policies and trade policies.
• Macro uncertainties including geopolitical tensions affecting business environment.

Q: Great to see the continued trend in improving business activity. Just want to touch on for a minute, I think you mentioned you've received $17 million of business development revenue. You have a goal of getting to, to $30 million this year. Presumably, do you expect some additional revenue from humanoid robot, some of your humanoid robotics customers later this year? And then you mentioned one customer is 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 earlier stage demo today orders that you guys are doing?

A: Regarding the humanoid robotics project, as we indicated, we have received a $1.5 million order from April to July. We are pleased 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 we may expect to get more orders. At this point in time, the customer continues to evaluate based on their schedule. But if -- but potentially, we could see an order, it really depends on the customer. This is regarding the first humanoid customer. The second humanoid customer, I did indicate in prior calls that we did provide an initial prototype lines, prototype products. The feedback was good, and we are expecting to provide another -- we are expecting to see a larger order in the near future. Regarding 2026, we -- Vishay Precision Group is set to support our customers regardless of the volume. We are set regarding the infrastructure. And once the customer is ready to ramp up on higher volume, the company is ready 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 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.

Q: And then just to drill down into that a little bit. I think you previously mentioned somewhere in the range of like $500 to $1,200 per robot. Is that still what you're expecting? And is the margin profile for these customers relatively in line with the corporate average or a little bit better? Or how is that going to impact the businesses at scale?

A: Okay. I did provide a price range given the volume that has been discussed naturally. Once higher volume would be discussed, we already -- we understand that probably a different pricing model will have to be supported, and the company is prepared for that. Regarding the profit schedule, I think it's a little bit premature still to provide this type of information.

Q: I'd like to start with the quarter that we just finished. Ziv, it seems like there is a fair amount of variability in the transportation market for you. Weighing Systems had some good revenue numbers flow through. Measurement Systems didn't. I wonder if you could just talk about what's going on? What are you seeing in the transportation side of your business.

A: Okay. Great. So regarding Transportation, let me start with Measurement Systems. On the Measurement Systems, the upside that we have seen this quarter is coming mainly 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 in the first quarter, there were very high orders of transportation for our onboard 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.

Q: So do you think that was just catch-up from delayed orders from '24 in Q1 and now they're at equilibrium? Any kind of greater thoughts?

A: Okay. 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 sales are expected to continue in the coming months.

Q: And can you talk a little bit also about the steel market? It seems like the order bookings in steel were weak, and I was kind of hopeful maybe that they'd be a little bit stronger given what we're seeing as far as the macro conditions.

A: Okay. So regarding steel, as you know, there are a few moving parts in steel. First, the global steel market as a whole continues to be soft, reflecting slow automotive production and demand and pushouts for some electric vehicle 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 KELK, which is in line or in-line equipment inspection in steel mills, but it's more on the R&D for DSI product. So there is still a lot of tailwind once the steel business would rebound.

Q: And in regards to the $5 million in cost savings, would that program be completed by the third quarter? Or is that going to take to the full year-end?

A: The $5 million are expected to end in Q4. And I believe that for the first 6 months, we have captured $2.8 million out of the $5 million.

Q: One last question. Right. One last question. Should the robotics actually begin production in 2026. At what point would you actually have to add capacity to meet some of the projections for 2030? Have you -- I'm sure you thought about that, but can you maybe share with us what that -- what the ramp would look like as far as you're concerned?

A: As I indicated, the ramp-up -- I mean, the ramp-up schedule is very much dependent on our customers. We share with our customers our capacity, our equipment capacity and our headcount, and we are working hand-to-hand that our capabilities and capacities would be in line with their demand. So to that extent, I think there is a very good collaboration between the two companies. And 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 it's really...