Vishay Precision Group, Inc. Q2 FY2026 earnings call

• Overall Operational Performance: Consolidated orders reached $95.5 million, with a consolidated book-to-bill ratio of 1.14, marking the seventh consecutive quarter at or above 1.0. Business development initiatives generated $11.6 million in bookings in Q2 and $21.6 million in H1 2026, putting the firm on track to hit its full-year 2026 target of $45 million. A temporary $3 million shipment delay at the CELC business unit occurred due to supply chain disruptions from a new ERP system implementation; ERP issues have been resolved, production has normalized, and delayed shipments are expected to be completed by the end of Q4 2026. Foreign exchange negatively impacted Q2 operating profit by $900,000 sequentially and $3.3 million year-over-year. - Cost Reduction Initiatives: The company achieved nearly $1 million in cost savings in Q2 2026, bringing year-to-date savings to $1.6 million, and remains on track to hit the full-year 2026 target of $6 million in savings. This is the first phase of a three-year plan to deliver $20 million in total cost reductions via manufacturing footprint optimization, increased automation, and global supply chain procurement efficiencies. - Growth Market Milestones: The company received an official vendor nomination from its first humanoid robotics customer, an important milestone ahead of the expected production ramp starting in H2 2026; humanoid-related Q2 bookings were $500,000 and sales were $320,000. The Sensors segment saw robust demand driven by AI-related end markets, including strong orders for precision resistors from semiconductor equipment OEMs and device makers, and elevated bookings for long-haul fiber optics transmission equipment for data center infrastructure build-out. The DTS business within Measurement Systems won Supplier of the Year from Automotive Testing Technology International and continued to see order growth driven by aerospace and defense demand. - Strategic Priorities: The firm's core strategy is to increase exposure to high-growth secular markets including semiconductor equipment, AI infrastructure, fiber optics communications, aerospace and defense, and emerging physical AI/humanoid robotics applications. The company continues to add manufacturing capacity and personnel to support growing customer demand across high-growth markets. As of quarter-end, VPG had $75.7 million in cash, paid down $5 million in long-term debt (resulting in annual net interest cost reductions of $300,000), leaving it with a net cash position of $60 million.

VPG reported consolidated Q2 2026 revenue of $83.9 million, flat sequentially and up 12% year-over-year. 1. Sensors Segment: Q2 revenue was $33.4 million, flat sequentially and up 26% year-over-year, accounting for ~39.8% of total consolidated revenue. Bookings hit an all-time quarterly record of $48.1 million, up 6% sequentially, with a book-to-bill ratio of 1.44. Gross margin for the segment was 31.5%. 2. Weighing Solutions Segment: Q2 revenue was $30.3 million, flat sequentially and up 3% year-over-year, accounting for ~36.1% of total consolidated revenue. Orders were $28.6 million, down 13% sequentially from a strong Q1, with a book-to-bill ratio of 0.94. Gross margin for the segment increased 300 basis points sequentially to 37.3%. 3. Measurement Systems Segment: Q2 revenue decreased 3% sequentially but increased 5% year-over-year, impacted by $3 million in delayed shipments from ERP implementation issues. Orders were approximately $19 million, down 22% sequentially. Gross margin for the segment was 52.5%, flat sequentially.

• Full-year 2026 organic revenue growth is now expected to exceed the original 8% to 10% annual growth target outlined in the company's three-year plan, with management confirming expected double-digit full-year revenue growth. - 2026 capital expenditures are forecast to be between $10 million and $12 million. - For Q3 2026, net revenues are expected to range between $84 million and $89 million, assuming Q2 2026 exchange rates hold and excluding profit-neutral expected third-quarter tariff refunds to customers. - The company remains on track to deliver the full $6 million in annual cost savings, with the remaining $4.4 million in savings expected to be realized in the second half of 2026.

• Unfavorable foreign exchange movements remain a significant headwind to operating profit, with material negative impacts recorded in Q2 2026. - Inflationary pressures have driven increases in both material and labor costs, creating margin pressure that is being partially offset by targeted price increases and cost reduction initiatives. - Project-based order timing in the Measurement Systems segment can lead to quarterly order volatility. The weighing solutions segment has seen soft demand in some end markets, including transportation impacted by higher oil prices. - Large existing backlog limits the immediate impact of new price increases on profitability, as price increases can only be applied to new orders rather than existing backlog.

Q: The analyst asks for an update on VPG's humanoid robotics pipeline, including the current number of customer engagements and progress compared to the end of 2025. He also asks if capacity expansion is driven primarily by humanoid demand or broader growth across other sensor end markets. / A: VPG has secured formal vendor nomination from its first humanoid customer, which expects to ramp production from tens to thousands of units per week by the end of 2026; VPG has already hired staff, made capital investments, and ordered raw materials to support this ramp. A second customer is reworking designs, VPG is providing prototypes to a third and fourth, and the firm has identified ~150 potential customers and is systematically reaching out to all of them. Capacity expansion in the sensors segment is primarily driven by broad-based demand across AI infrastructure, data center, and defense markets, with the additional capacity allocated to the initial humanoid customer based on their projections. VPG's current investments support potential volumes of thousands of humanoid robots per week once full ramping occurs.

Q: The analyst asks how to expect performance cadence for the slower-performing Weighing Solutions and Measurement Systems segments in the second half of 2026, and asks for clarification on expected tariff reimbursement amounts. / A: Measurement Systems is a project-driven business that saw soft orders in Q2 after a very strong Q1, so management expects improved order intake in Q3. The DTS sub-segment continues to see growth tailwinds, and management expects overall improved performance in the second half, though rapid acceleration is not guaranteed. The CFO notes that expected tariff refunds are not material, totaling roughly $1.5 million, and will be profit-neutral as they reduce both revenue and cost of goods sold by matching amounts.

Q: The analyst asks how much pricing power VPG has to offset rising input costs, what the magnitude of recent price increases will be, when the delayed CELC shipments will be recognized, and what the incremental revenue capacity from humanoid-related expansion is, and updates on cost savings. / A: VPG has implemented selective price increases across product lines to offset material and labor inflation, with benefits expected to hit the income statement in the second half of 2026. The impact will be hundreds of thousands of dollars in Q3, with larger benefits limited by the large existing backlog, as price increases only apply to new orders. Most delayed CELC shipments will be recognized in Q4 2026, with small amounts shipping in Q3. Year-to-date cost savings through Q2 is $1.6 million, with the remaining $4.4 million of the $6 million full-year target expected to be realized in the second half.