VPG Reports Fiscal 2020 Third Quarter Results

Vishay Precision Group

MALVERN, PA — Vishay Precision Group, Inc. (NYSE: VPG), a leading producer of precision sensors and sensor-based systems, has announced its results for its fiscal 2020 third quarter ended September 26, 2020.

Third Quarter Highlights:

  • Revenues of $67.5 million increased 0.2% from a year ago.
  • Gross profit margin, on both an as-reported and adjusted* basis, was 40.5% as compared to 38.3% reported a year ago.
  • Operating margin was 12.0% as compared to 9.2% reported a year ago.
  • Adjusted operating margin* was 11.7%, as compared to 10.0% reported a year ago.
  • Diluted earnings per share of $0.41 as compared to $0.33 reported a year ago.
  • Adjusted diluted earnings per share* of $0.40, as compared to $0.37 reported a year ago.
  • Cash from operating activities was $6.1 million with adjusted free cash flow* of $1.4 million.

Ziv Shoshani, Chief Executive Officer of VPG, commented, “Our third-quarter sales reflected sequential growth across all three of our reporting segments and was driven by ongoing strength in our advanced sensors products. Our Force Sensors operation in India, which had been impacted by COVID-related constraints, is now operating at full capacity. Orders in the third quarter grew sequentially driven primarily by strength in our consumer-related markets, and the partial recovery in some of our other end-markets which continue to face headwinds from the pandemic.”

Mr. Shoshani said: “I am pleased with our financial performance for the third quarter, as we achieved solid margins, grew our earnings per share and continued to generate strong cash from operations. This performance reflects both the short-term cost controls we have in place as well as the cost-savings initiatives we have implemented across the business over the past few years.”

Third Quarter and Nine Month Financial Trends:

The Company’s third fiscal quarter 2020 net earnings attributable to VPG stockholders were $5.6 million, or $0.41 per diluted share, compared to $4.5 million, or $0.33 per diluted share, in the third fiscal quarter of 2019. Foreign currency exchange rates for the third quarter of 2020 increased net income by $0.2 million, or $0.01 per diluted share, relative to the prior year period.

In the nine fiscal months ended September 26, 2020 net earnings attributable to VPG stockholders were $10.7 million, or $0.78 per diluted share, compared to $18.3 million, or $1.35 per diluted share, in the nine fiscal months ended September 28, 2019. Foreign currency exchange rates for the nine fiscal months ended September 26, 2020 decreased net income by $0.5 million, or $0.04 per diluted share, relative to the prior year period.

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The third fiscal quarter 2020 adjusted net earnings* attributable to VPG stockholders were $5.5 million, or $0.40 per diluted share, compared to $5.0 million, or $0.37 per diluted share in the third fiscal quarter of 2019.

In the nine fiscal months ended September 26, 2020 adjusted net earnings* attributable to VPG stockholders were $12.0 million, or $0.88 per diluted share, compared to $19.4 million, or $1.43 per diluted share in the nine fiscal months ended September 28, 2019.

Segments

Foil Technology Products segment revenues increased 2.5% to $32.9 million in the third fiscal quarter of 2020, up from $32.1 million in the third fiscal quarter of 2019; sequentially, revenue increased 3.5% compared to $31.8 million in the second quarter of 2020. The year-over-year and sequential increases in revenues were primarily attributable to an increase in Vishay Precision Group’s advanced sensors product line primarily in their consumer-related markets and an increase in their Pacific Instruments product line in the avionics, military and space market, which partially offset a decrease in precision resistor sales in the test and measurement market.

Gross profit margin for the Foil Technology Products segment was 41.1% (or, 41.6% adjusted to exclude the impact of COVID-19) for the third fiscal quarter of 2020, an increase compared to 37.3% in the third fiscal quarter of 2019, and a decrease compared to 41.8% (or, 41.7% adjusted to exclude the impact of COVID-19) in the second fiscal quarter of 2020. The year-over-year increase in adjusted gross profit margin was primarily due to manufacturing efficiencies and cost controls. Sequentially, adjusted gross profit margin was comparable to the second quarter.

Force Sensors segment revenues decreased 14.5% to $13.9 million in the third fiscal quarter of 2020, compared to $16.2 million in the third fiscal quarter of 2019, reflecting the impact of the COVID-19 pandemic on Vishay Precision Group’s India facility. Sequentially, revenue increased 55.5% compared to $8.9 million in the second quarter of 2020 as a result of COVID-19 mitigation restrictions being lifted as of July 1, 2020 by the Indian government and the subsequent ramping up of production without limitations at their India operations during the third quarter of 2020. The sequential revenue increase reflected higher sales in the industrial weighing and their other markets.

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Gross profit margin for the Force Sensors segment was 30.5% (or, 31.2% adjusted to exclude the impact of COVID-19) for the third fiscal quarter of 2020, which was an increase compared to 30.4% in the third fiscal quarter of 2019, and 11.6% (or, 19.6% adjusted to exclude the impact of COVID-19) in the second fiscal quarter of 2020. The year-over-year increase in adjusted gross profit margin was primarily due to cost controls and a positive impact of foreign exchange, partially offset by lower volume due to the COVID-19 impacts mentioned above and a reduction in export grants. Sequentially, adjusted gross profit margin increased primarily due to higher volume.

Weighing and Control Systems segment revenues increased 8.8% year-over-year to $20.8 million in the third fiscal quarter of 2020, up from $19.1 million in the third fiscal quarter of 2019. Sequentially, revenue increased 12.5% from $18.4 million in the second fiscal quarter of 2020. The year-over-year increase in revenues was primarily attributable to the additional revenues of Dynamic Systems Inc. (“DSI”) acquired in November 2019, which was partially offset by lower volume of Vishay Precision Group’s onboard weighing products for the transportation market and lower KELK steel-related sales. The sequential increase in revenue was primarily attributable to the DSI product line and an increase in sales of their onboard weighing products for the transportation market, which was partially offset by lower KELK steel-related sales.

The third fiscal quarter 2020 gross profit margin for the Weighing and Control Systems segment was 46.2% (or, 44.9% adjusted to exclude the purchasing accounting adjustments related to the DSI acquisition and the impact of COVID-19), compared to 46.6% from the third fiscal quarter of 2019, and 47.6% (or, 47.3% adjusted to exclude the purchase accounting adjustments related to the DSI acquisition and the impact of COVID-19) in the second fiscal quarter of 2020. The year-over-year decrease in adjusted gross profit margin was mostly due to unfavorable product mix, partially offset by higher volume. The sequential decrease in adjusted gross profit margin was due to unfavorable product mix and a reduction in inventory, partially offset by higher volume.

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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 were able to operate despite the impacts from the COVID-19 pandemic, the Company’s Force Sensors manufacturing facility in India had operated at partial capacity as a result of government-mandated restrictions. In the third quarter of 2020, these restrictions reduced Force Sensors revenue by approximately $2.5 million and Force Sensors operating income by approximately $1.0 million due to the lower volume. For the first nine months of 2020, these restrictions impacted Force Sensors revenue in aggregate by approximately $10 million from pre-COVID runrate levels and reduced its operating income by approximately $4 million due to the lower revenue. The Company received approval from the Indian government to operate its facility without limitation on July 1, 2020, and as of the end of the third quarter the facility was operating at full capacity.

As of November 3, 2020, all of the Company’s facilities are operating without limitations with the Company implementing COVID-19 best practices with respect to working conditions and enabling some employees to work 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
“Despite the ongoing uncertainties and economic impacts of the global pandemic, we expect net revenues to grow sequentially and be in the range of $69 million to $75 million for the fourth fiscal quarter of 2020, at constant third fiscal quarter 2020 exchange rates,” concluded Mr. Shoshani.

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