VPG Reports Fiscal 2020 Second Quarter Results

Vishay Precision Group

MALVERN, PA — Vishay Precision Group, Inc. (NYSE: VPG), a leading producer of precision sensors and sensor-based systems, announced its results for its fiscal 2020 second quarter ended June 27, 2020.

Second Quarter Highlights:

  • Revenues of $59.1 million declined 16.5% from a year ago.
  • Gross profit margin was 39.1% as compared to 40.4% reported a year ago.
  • Adjusted gross profit margin* was 40.1% as compared to 40.4% reported a year ago.
  • Operating margin was 6.7% as compared to 11.4% reported a year ago.
  • Adjusted operating margin* was 8.4%, as compared to 12.3% reported a year ago.
  • Diluted earnings per share of $0.13 as compared to $0.41 reported a year ago.
  • Adjusted diluted earnings per share* of $0.19, as compared to $0.45 reported a year ago.
  • Cash from operating activities was $10.4 million with adjusted free cash flow* of $3.1 million

Ziv Shoshani, Chief Executive Officer of VPG, commented, “In the second quarter, our businesses and teams around the world responded effectively to the challenges and disruptions due to the COVID-19 pandemic. Despite lower revenue due to COVID-19 impacts, we achieved solid margins and earnings per share due to cost controls and manufacturing efficiencies. Our Foil Technology Products segment performed well driven by sales strength in our advanced sensors and precision foil resistors product lines. In the Force Sensors segment, a government-mandated shutdown in India negatively impacted our sales of these products, while sales in our Weighing and Control Systems segment were softer. We generated positive adjusted free cash flow* while continuing our investments to expand our production capacity for our advanced sensors business.

Mr. Shoshani said: “As the world contends with the global pandemic, there continues to be limited visibility and uncertainty in our markets. Nonetheless, we believe our strong balance sheet and business model, combined with our focus on key long-term growth and cost-savings initiatives, provides us with the foundation to deliver long-term value to our shareholders.”

Second Quarter and Six Month Financial Trends:

The Company’s second fiscal quarter 2020 net earnings attributable to VPG stockholders were $1.8 million, or $0.13 per diluted share, compared to $5.6 million, or $0.41 per diluted share, in the second fiscal quarter of 2019. Foreign currency exchange rates for the second quarter of 2020 decreased net income by $1.2 million, or $0.09 per diluted share, relative to the prior year period.

In the six fiscal months ended June 27, 2020 net earnings attributable to VPG stockholders were $5.1 million, or $0.37 per diluted share, compared to $13.8 million, or $1.02 per diluted share, in the six fiscal months ended June 29, 2019. Foreign currency exchange rates for the six fiscal months ended June 27, 2020 decreased net income by $0.7 million, or $0.05 per diluted share, relative to the prior year period.

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The second fiscal quarter 2020 adjusted net earnings* attributable to VPG stockholders were $2.6 million, or $0.19 per diluted share, compared to $6.2 million, or $0.45 per diluted share in the second fiscal quarter of 2019.

In the six fiscal months ended June 27, 2020 adjusted net earnings* attributable to VPG stockholders were $6.6 million, or $0.48 per diluted share, compared to $14.4 million, or $1.06 per diluted share in the in the six fiscal months ended June 29, 2019.

Segments

Foil Technology Products segment revenues decreased 3.7% to $31.8 million in the second fiscal quarter of 2020, down from $33.0 million in the second fiscal quarter of 2019; sequential revenue increased 4.3% compared to $30.5 million in the first quarter of 2020.

The year-over-year decrease in revenues was primarily attributable to lower precision resistor sales in the test and measurement market, which was partially offset by an increase in the avionics, military and space market.

The decrease was also reflected for distributors and OEM customers in the industrial weighing market, which was mostly offset by an increase in our advance sensors product line in our other markets.

The sequential increase in revenue was attributable to precision resistor products for OEM customers, primarily in the avionics, military and space market and an increase in the advance sensors product line in our other markets.

Gross profit margin for the Foil Technology Products segment was 41.8% (41.7% excluding the impact of COVID-19) for the second fiscal quarter of 2020, a decrease compared to 43.6% in the second fiscal quarter of 2019, and an increase compared to 36.7% in the first fiscal quarter of 2020.

The year-over-year decrease in adjusted gross profit margin was primarily due to lower volume and a negative impact from exchange rates, which was partially offset by cost controls and manufacturing efficiencies. The sequential increase in gross profit margin was primarily due to higher volume and manufacturing efficiencies.

Force Sensors segment revenues declined 45.5% to $8.9 million in the second fiscal quarter of 2020, compared to $16.3 million in the second fiscal quarter of 2019; sequential revenue declined 39.3%, compared to $14.7 million in the first quarter of 2020.

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The year-over-year and sequential decrease in revenues was attributable to a significant limitation in production at our India operations during the second quarter of 2020 as a result of COVID-19 mitigation orders by the Indian government.

Gross profit margin for the Force Sensors segment was 11.6% (19.6% excluding the impact of COVID-19) for the second fiscal quarter of 2020, which was a decrease compared to 26.9% in the second fiscal quarter of 2019, and 24.3% in the first fiscal quarter of 2020.

The year-over-year decrease in adjusted gross profit margin was primarily due to lower volume due to the COVID-19 impacts mentioned above, a reduction in export grants, and a negative impact of foreign exchange, which was partially offset by cost controls.

Sequentially, adjusted gross profit margin decreased due to lower volume due to COVID-19 impacts, which was partially offset by cost controls.

Weighing and Control Systems segment revenues declined 14.3% year over year to $18.4 million in the second fiscal quarter of 2020, down from $21.5 million in the second fiscal quarter of 2019.

Sequentially, revenue decreased 18.1% from $22.5 million in the first fiscal quarter of 2020. The year-over-year decrease in revenues was primarily attributable to the onboard weighing product line in the transportation market, which was partially offset with the additional revenues of Dynamic Systems Inc. (“DSI”) acquired in November 2019.

The sequential decrease in revenue was primarily attributable to a reduction in sales of onboard weighing products for the transportation market and of DSI, which was partially offset by higher steel-related sales.

The second fiscal quarter 2020 gross profit margin for the Weighing and Control Systems segment was 47.6% (47.3% excluding the purchasing accounting adjustments related to the DSI acquisition and the impact of COVID-19), compared to 45.6% from the second fiscal quarter of 2019, and 45.7% (48.0% excluding the purchase accounting adjustment of $0.5 million related to the DSI acquisition) in the first fiscal quarter of 2020.

The year-over-year increase in adjusted gross profit margin was mostly due to favorable product mix and the addition of DSI. The sequential decrease in adjusted gross profit margin was due to lower volume, which was partially offset by cost controls.

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Impacts From the Global COVID-19 Pandemic:

As the COVID-19 pandemic began to unfold around the world, the Company took measures to protect its employees and customers. Those measures included suspending business travel, enabling certain employees to work from home, implementing workplace distancing, and adjusting work shifts to minimize employees’ contact with other employees.

While the majority of the Company’s operations have been able to operate despite the impacts from the COVID-19 pandemic, the Company’s Force Sensors manufacturing facility in India operated at partial capacity through the second quarter of 2020 as a result of government-mandated restrictions.

These restrictions significantly impacted the Company’s financial results in the second quarter, reducing Force Sensors revenue by approximately $6 million from pre-COVID runrate levels and reducing its operating profit by approximately $2.5 million due to the lower revenue.

After the Company received approval from the Indian government to operate its facility without limitation on July 1, 2020, the Company accelerated the ramp of production. Given the timing of these efforts, for the third quarter the Company expects

Force Sensor revenues to be adversely impacted by approximately $3 million to $4 million from pre-COVID runrate levels, and its operating profit to be impacted by approximately $1.0 million to $1.5 million due to the lower revenue.

As of July 1, 2020, all of the Company’s facilities are operating without limitations with some employees working remotely where possible. Nonetheless, given the impacts to date and the ongoing uncertainty concerning the magnitude of the impact and duration of the COVID-19 pandemic, the ongoing economic disruption may continue to adversely affect the Company’s business and financial results.

Near-Term Outlook

“Given our order rates and the ongoing uncertainties and economic impacts of the global pandemic, we expect net revenues to grow sequentially and be in the range of $59 million to $65 million for the third fiscal quarter of 2020, at constant second fiscal quarter 2020 exchange rates,” concluded Mr. Shoshani.

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