VPG Reports Fiscal 2022 Third Quarter Results

Ziv Shoshani, Chief Executive Officer of VPG, commented, "We achieved another solid quarter for VPG, reflecting our diversified and expanded set of markets and applications and the high value that our precision measurement solutions deliver to our broad customer base. Our revenue grew both sequentially and year-over-year despite the continued negative impact from unfavorable foreign currency exchange rates on our top-line. Orders of $96.9 million grew 1.0 percent from the second quarter, resulting in a book-to-bill ratio of 1.08. Our backlog of $171.7 million puts us on track to achieve double-digit growth for full fiscal 2022 versus the prior year."

Mr. Shoshani said: "We achieved an adjusted diluted net earnings per share* of $0.69, and an adjusted EBITDA margin* of 17.9%. We generated $5.0 million of adjusted free cash flow*. Our strong balance sheet and business model supports our capital allocation strategy, which balances growth-focused investments in our business, attractive M&A, and share repurchases."

Third Fiscal Quarter and Nine Month Financial Trends:
The Company's third fiscal quarter 2022 net earnings attributable to VPG stockholders were $10.1 million, or $0.74 per diluted share, compared to $5.4 million, or $0.39 per diluted share, in the third fiscal quarter of 2021.

In the nine fiscal months ended October 1, 2022 net earnings attributable to VPG stockholders were $27.2 million, or $1.99 per diluted share, compared to $14.3 million, or $1.04 per diluted share, in the nine fiscal months ended October 2, 2021.

The third fiscal quarter 2022 adjusted net earnings* attributable to VPG stockholders were $9.5 million, or $0.69 per adjusted diluted net earnings per share*, compared to $7.1 million, or $0.52 per adjusted diluted net earnings per share* in the third fiscal quarter of 2021.

In the nine fiscal months ended October 1, 2022 adjusted net earnings* attributable to VPG stockholders were $25.5 million, or $1.86 per adjusted diluted net earnings per share*, compared to $17.9 million, or $1.32 per adjusted diluted net earnings per share* in the nine fiscal months ended October 2, 2021.

Segment Performance:
The Sensors segment revenue of $37.9 million in the third fiscal quarter of 2022 increased 23.3% from $30.7 million in the third fiscal quarter of 2021; sequentially, revenue decreased 6.0% compared to $40.3 million in the second quarter of 2022. Excluding the unfavorable impact of foreign currency exchange rates, revenue increased 35.1% from the third quarter of 2021. Excluding the unfavorable impact of foreign currency exchange rates, revenue decreased 4.2% from the second quarter of 2022. The year-over-year increase in revenues was primarily attributable to higher sales of precision resistors in the Test and Measurements market and higher revenue of our advanced sensors products primarily in Other markets (mainly for consumer applications). Sequentially, the decrease primarily reflected lower advanced sensors revenue in Other markets (mainly for consumer applications) and lower revenue of precision resistors in the Test and Measurements market.

Gross profit margin for the Sensors segment was 40.5% for the third fiscal quarter of 2022. Gross profit margin increased compared to 31.1% (or 34.3% adjusted to exclude the impact of $1.0 million of advanced sensors facility start-up costs) in the third fiscal quarter of 2021, and declined compared to 44.3% in the second fiscal quarter of 2022. The year-over-year increase in adjusted gross profit margin* was primarily due to higher volume and selling price increases partially offset by unfavorable foreign currency exchange rates and wage increases. Sequentially, the lower adjusted gross profit margin* was primarily due to lower volume, one-time inventory adjustments, and unfavorable foreign currency exchange rates.

The Weighing Solutions segment revenue of $31.4 million in the third fiscal quarter of 2022 increased 2.4% compared to $30.7 million in the third fiscal quarter of 2021 and was 10.3% higher than $28.5 million in the second quarter of 2022. The year-over-year and sequential increases in revenues were primarily attributable to increases in our Other markets for precision agriculture and construction applications.

Gross profit margin for the Weighing Solutions segment was 33.3% for the third fiscal quarter of 2022, which decreased compared to 37.2% (or 37.6% adjusted to exclude the impact of COVID-19) in the third fiscal quarter of 2021, and decreased compared to 33.7% in the second fiscal quarter of 2022. The year-over-year decrease in adjusted gross profit margin* was primarily due to higher materials costs, unfavorable product mix, unfavorable foreign currency exchange rates, and reduction of inventories, partially offset by higher volume and selling price increases. The sequential decrease in adjusted gross profit margin* was primarily due to higher materials costs and reduction of inventories partially offset by higher volume and selling price increases.  

The Measurement Systems segment revenue of $20.8 million in the third fiscal quarter of 2022 increased 1.0% year-over-year from $20.6 million in the third fiscal quarter of 2021 and was 4.5% higher than $19.9 million in the second fiscal quarter of 2022. The year-over-year increase was primarily attributable to increased revenue in the Steel market. Sequentially, the increase in revenue was primarily due to the higher revenue of Dynamic Systems Inc. ("DSI") products in the Steel market and our Diversified Technical Systems Inc. ("DTS") products in the Transportation market.

Gross profit margin for the Measurement Systems segment was 55.5% (or 56.7% adjusted to exclude the $0.3 million of purchase accounting adjustments related to the DTS acquisition), compared to 52.8% (or 59.2% adjusted to exclude the purchase accounting adjustment related to the DTS acquisition of $1.3 million), in the third fiscal quarter of 2021, and 49.9% (or 53.3% adjusted to exclude the $0.7 million of purchase accounting adjustments related to the DTS acquisition) in the second fiscal quarter of 2022. The year-over-year decrease in adjusted gross profit margin* was mainly due to unfavorable product mix. The sequentially higher adjusted gross profit margin* reflected higher volume and favorable product mix.

Near-Term Outlook:
“We expect net revenues to be in the range of $88 million to $98 million for the fourth fiscal quarter of 2022, at constant third fiscal quarter 2022 foreign currency exchange rates,” concluded Mr. Shoshani.

*Use of Non-GAAP Financial Information:
We define “adjusted gross profit margin" as gross profit margin before purchase accounting adjustments related to the DTS and DSI acquisitions, start-up costs related to our new advanced sensors facility, and COVID-19 costs. We define "adjusted operating margin" as operating margin before purchase accounting adjustments related to the DTS and DSI acquisitions, acquisition costs related to the DTS acquisition, start-up costs related to our new advanced sensors facility, COVID-19 costs, impairment of goodwill and indefinite-lived intangibles, and restructuring costs. We define "adjusted net earnings” and "adjusted diluted net earnings per share" as net earnings attributable to VPG stockholders before purchase accounting adjustments related to the DTS and DSI acquisitions, acquisition costs related to the DTS acquisition, start-up costs related to our new advanced sensors facility, COVID-19 costs, impairment of goodwill and indefinite-lived intangibles, restructuring costs, foreign currency exchange gains and losses, and associated tax effects. We define "EBITDA" as earnings before interest, taxes, depreciation, and amortization. We define "Adjusted EBITDA" as earnings before interest, taxes, depreciation, and amortization before purchase accounting adjustments related to the DTS and DSI acquisitions, acquisition costs related to the DTS acquisition, start-up costs related to our new advanced sensors facility, COVID-19 costs, impairment of goodwill and indefinite-lived intangibles, restructuring costs, foreign currency exchange gains and losses, and associated tax effects. "Adjusted free cash flow" for the third fiscal quarter of 2022 is defined as the amount of cash generated from operating activities ($11.8 million), in excess of our capital expenditures ($6.8 million), net of proceeds, if any, from the sale of assets ($0.0 million).

Management believes that these non-GAAP measures are useful to investors because each presents what management views as our core operating results for the relevant period. The adjustments to the applicable GAAP measures relate to occurrences or events that are outside of our core operations, and management believes that the use of these non-GAAP measures provides a consistent basis to evaluate our operating profitability and performance trends across comparable periods. In addition, the Company has historically provided these or similar non-GAAP measures and understands that some investors and financial analysts find this information helpful in analyzing the Company’s performance and in comparing the Company’s financial performance to that of its peer companies and competitors. Management believes that the Company’s non-GAAP measures are regarded as supplemental to its GAAP financial results. These reconciling items are indicated on the accompanying reconciliation schedules and are more fully described in VPG’s financial statements presented in our Annual Report on Form 10-K and our Quarterly Reports on Forms 10-Q.

Conference Call and Webcast:
A conference call will be held on Tuesday, November 8, 2022 at 9:00 a.m. ET (8:00 a.m. CT). To access the conference call, interested parties may call 1-844-200-6205 or internationally +1-929-526-1599 and use passcode 301523, or log on to the investor relations page of the VPG website at ir.vpgsensors.com. A replay will be available approximately one hour after the completion of the call by calling toll-free 1-866-813-9403 or internationally +1-929-458-6194 and by using passcode 079968. The replay will also be available on the “Events” page of investor relations section of the VPG website at ir.vpgsensors.com.

About VPG:
Vishay Precision Group, Inc. (VPG) is a leader in precision measurement sensing technologies. Our sensors, weighing solutions and measurement systems optimize and enhance our customers’ product performance across a broad array of markets to make our world safer, smarter, and more productive. To learn more, visit VPG at www.vpgsensors.com and follow us on LinkedIn.

Forward-Looking Statements:
From time to time, information provided by us, including, but not limited to, statements in this press release, or other statements made by or on our behalf, may contain or constitute "forward-looking" information within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements involve a number of risks, uncertainties, and contingencies, many of which are beyond our control, which may cause actual results, performance, or achievements to differ materially from those anticipated.   

Such statements are based on current expectations only, and are subject to certain risks, uncertainties, and assumptions. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those anticipated, expected, estimated, or projected. Among the factors that could cause actual results to materially differ include: general business and economic conditions; impact of inflation, global labor and supply chain challenges; difficulties or delays in identifying, negotiating and completing acquisitions and integrating acquired companies; the inability to realize anticipated synergies and expansion possibilities; difficulties in new product development; changes in competition and technology in the markets that we serve and the mix of our products required to address these changes; changes in foreign currency exchange rates; political, economic, health (including the COVID-19 pandemic) and military instability in the countries in which we operate; difficulties in implementing our cost reduction strategies, such as underutilization of production facilities, labor unrest or legal challenges to our lay-off or termination plans, operation of redundant facilities due to difficulties in transferring production to achieve efficiencies; compliance issues under applicable laws, such as export control laws, including the outcome of our voluntary self-disclosure of export control non-compliance; significant developments from the recent and potential changes in tariffs and trade regulation; our efforts and efforts by governmental authorities to mitigate the COVID-19 pandemic, such as travel bans, shelter-in-place orders and business closures and the related impact on resource allocations, manufacturing and supply chains; our status as a “critical”, “essential” or “life-sustaining” business in light of COVID-19 business closure laws, orders and guidance being challenged by a governmental body or other applicable authority; our ability to execute our new corporate strategy and business continuity, operational and budget plans; and other factors affecting our operations, markets, products, services, and prices that are set forth in our Annual Report on Form 10-K for the fiscal year ended December 31, 2021. We caution you not to place undue reliance on forward-looking statements, which speak only as of the date of this report or as of the dates otherwise indicated in such forward-looking statements. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise.

Contact:
Steve Cantor
Vishay Precision Group, Inc.
781-222-3516
info@vpgsensors.com
VISHAY PRECISION GROUP, INC. Consolidated Condensed Statements of Operations (Unaudited - In thousands, except per share amounts) Fiscal quarter ended October 1, 2022 October 2, 2021Net revenues$90,057 $81,974 Costs of products sold 52,737 50,129 Gross profit 37,320 31,845 Gross profit margin 41.4% 38.8% Selling, general, and administrative expenses 25,271 24,580 Restructuring costs 165 — Operating income 11,884 7,265 Operating margin 13.2% 8.9% Other income (expense): Interest expense (636) (328)Other 1,223 174 Other income (expense) 587 (154) Income before taxes 12,471 7,111 Income tax expense 2,323 1,662 Net earnings 10,148 5,449 Less: net earnings attributable to noncontrolling interests 30 70 Net earnings attributable to VPG stockholders$10,118 $5,379 Basic earnings per share attributable to VPG stockholders$0.74 $0.39 Diluted earnings per share attributable to VPG stockholders$0.74 $0.39 Weighted average shares outstanding - basic 13,649 13,626 Weighted average shares outstanding - diluted 13,708 13,664 VISHAY PRECISION GROUP, INC. Consolidated Condensed Statements of Operations (Unaudited - In thousands, except per share amounts) Nine fiscal months ended October 1, 2022 October 2, 2021Net revenues$266,340 $227,902 Costs of products sold 156,436 137,637 Gross profit 109,904 90,265 Gross profit margin 41.3% 39.6% Selling, general, and administrative expenses 77,824 69,216 Acquisition costs — 1,198 Impairment of goodwill and indefinite-lived intangibles — 1,223 Restructuring costs 1,330 — Operating income 30,750 18,628 Operating margin 11.5% 8.2% Other income (expense): Interest expense (1,393) (906)Other 5,006 421 Other income (expense) 3,613 (485) Income before taxes 34,363 18,143 Income tax expense 6,651 3,688 Net earnings 27,712 14,455 Less: net earnings attributable to noncontrolling interests 483 195 Net earnings attributable to VPG stockholders$27,229 $14,260 Basic earnings per share attributable to VPG stockholders$2.00 $1.05 Diluted earnings per share attributable to VPG stockholders$1.99 $1.04 Weighted average shares outstanding - basic 13,645 13,612 Weighted average shares outstanding - diluted 13,692 13,647 VISHAY PRECISION GROUP, INC. Consolidated Condensed Balance Sheets (In thousands) October 1, 2022 December 31, 2021 (Unaudited) Assets Current assets: Cash and cash equivalents$79,910 $84,335 Accounts receivable, net 55,151 58,265 Inventories: Raw materials 31,036 25,464 Work in process 27,903 23,851 Finished goods 26,384 27,112 Inventories, net 85,323 76,427 Prepaid expenses and other current assets 16,160 15,916 Total current assets 236,544 234,943 Property and equipment: Land 4,029 4,241 Buildings and improvements 69,769 68,778 Machinery and equipment 122,412 122,202 Software 9,136 8,871 Construction in progress 6,364 7,747 Accumulated depreciation (129,225) (130,619)Property and equipment, net 82,485 81,220 Goodwill 45,460 45,830 Intangible assets, net 49,081 52,437 Operating lease right-of-use assets 24,737 27,764 Other assets 15,890 19,695 Total assets$454,197 $461,889 VISHAY PRECISION GROUP, INC. Consolidated Condensed Balance Sheets (In thousands) October 1, 2022 December 31, 2021 (Unaudited) Liabilities and equity Current liabilities: Trade accounts payable$10,234 $14,876 Payroll and related expenses 20,658 23,772 Other accrued expenses 21,863 17,596 Income taxes 818 3,774 Current portion of operating lease liabilities 4,119 4,610 Total current liabilities 57,692 64,628 Long-term debt, less current portion 60,780 60,714 Deferred income taxes 4,585 5,848 Operating lease liabilities 20,422 25,140 Other liabilities 13,959 16,264 Accrued pension and other postretirement costs 10,259 12,253 Total liabilities 167,697 184,847 Commitments and contingencies Equity: Common stock 1,325 1,322 Class B convertible common stock 103 103 Treasury stock (9,826) (8,765)Capital in excess of par value 200,308 199,151 Retained earnings 147,525 120,296 Accumulated other comprehensive loss (52,995) (35,008)Total Vishay Precision Group, Inc. stockholders' equity 286,440 277,099 Noncontrolling interests 60 (57)Total equity 286,500 277,042 Total liabilities and equity$454,197 $461,889 VISHAY PRECISION GROUP, INC. Consolidated Condensed Statements of Cash Flows (Unaudited - In thousands) Nine Fiscal Months Ended October 1, 2022 October 2, 2021Operating activities Net earnings$27,712 $14,455 Adjustments to reconcile net earnings to net cash provided by operating activities: Impairment of goodwill and indefinite-lived intangibles — 1,223 Depreciation and amortization 11,519 11,033 Gain on sale of property and equipment (182) (35)Reclassification of foreign currency translation adjustment related to disposal of subsidiary 191 — Share-based compensation expense 1,583 1,328 Inventory write-offs for obsolescence 1,451 1,613 Deferred income taxes (72) (1,412)Other (4,319) (2,022)Net changes in operating assets and liabilities: Accounts receivable, net (2,077) (3,078)Inventories, net (14,151) (9,624)Prepaid expenses and other current assets (984) (3,591)Trade accounts payable (1,459) 3,695 Other current liabilities 1,303 4,496 Net cash provided by operating activities 20,515 18,081 Investing activities Capital expenditures (15,545) (11,191)Proceeds from sale of property and equipment 397 181 Purchase of business, net of cash acquired — (47,216)Net cash used in investing activities (15,148) (58,226) Financing activities Principal payments on long-term debt — (18)Proceeds from revolving facility — 20,000 Purchase of treasury stock (1,061) — Distributions to noncontrolling interests (366) (244)Payments of employee taxes on certain share-based arrangements (435) (853)Net cash (used in) provided by financing activities (1,862) 18,885 Effect of exchange rate changes on cash and cash equivalents (7,930) (1,634)Decrease in cash and cash equivalents (4,425) (22,894) Cash and cash equivalents at beginning of period 84,335 98,438 Cash and cash equivalents at end of period$79,910 $75,544 Supplemental disclosure of investing transactions: Capital expenditures purchased$(13,198) $(9,368)Capital expenditures accrued but not yet paid$720 $738 VISHAY PRECISION GROUP, INC. Reconciliation of Consolidated Adjusted Gross Profit, Operating Income, Net Earnings Attributable to VPG Stockholders and Diluted Earnings Per Share (Unaudited - In thousands) Gross Profit Operating Income Net Earnings Attributable
to VPG Stockholders Diluted Earnings Per shareThree months ended October 1,
2022 October 2,
2021 October 1,
2022 October 2,
2021 October 1,
2022 October 2,
2021 October 1,
2022 October 2,
2021As reported - GAAP$37,320 $31,845 $11,884 $7,265 $10,118 $5,379 $0.74 $0.39As reported - GAAP Margins 41.4% 38.8% 13.2% 8.9% Acquisition purchase accounting adjustments 260 1,329 260 1,329 260 1,329 0.02 0.10COVID-19 impact — 111 — 111 — 111 — 0.01Start-up costs — 970 — 970 — 970 — 0.07Restructuring costs — 165 — 165 — 0.01 —Foreign currency exchange (gain)/loss — — (1,261) 38 (0.09) 0.01Less: Tax effect of reconciling items and discrete tax items — — (194) 754 (0.01) 0.06As Adjusted - Non GAAP$37,580 $34,255 $12,309 $9,675 $9,476 $7,073 $0.69 $0.52As Adjusted - Non GAAP Margins 41.7% 41.8% 13.7% 11.8% VISHAY PRECISION GROUP, INC. Reconciliation of Consolidated Adjusted Gross Profit, Operating Income, Net Earnings Attributable to VPG Stockholders and Diluted Earnings Per Share (Unaudited - In thousands) Gross Profit Operating Income Net Earnings Attributable
to VPG Stockholders Diluted Earnings Per shareNine fiscal months ended October 1,
2022 October 2,
2021 October 1,
2022 October 2,
2021 October 1,
2022 October 2,
2021 October 1,
2022 October 2,
2021As reported - GAAP$109,904 $90,265 $30,750 $18,628 $27,229 $14,260 $1.99 $1.04 As reported - GAAP Margins 41.3% 39.6% 11.5% 8.2% Acquisition purchase accounting adjustments 1,310 2,259 1,310 2,259 1,310 2,259 0.10 0.17 Acquisition costs — — 1,198 — 1,198 — 0.09 COVID-19 impact 138 (66) 138 (574) 138 (574) 0.01 (0.04)Start-up costs 150 2,258 150 2,258 150 2,258 0.01 0.17 Impairment of goodwill and indefinite-lived intangibles — — — 1,223 — 1,223 — 0.09 Restructuring costs 1,330 — 1,330 — 0.10 — Foreign currency exchange (gain)/loss (5,195) (523) (0.38) (0.04)Less: Tax effect of reconciling items and discrete tax items (496) 2,160 (0.03) 0.16 As Adjusted - Non GAAP$111,502 $94,716 $33,678 $24,992 $25,458 $17,941 1.86 $1.32 As Adjusted - Non GAAP Margins 41.9% 41.6% 12.6% 11.0% VISHAY PRECISION GROUP, INC. Reconciliation of Adjusted Gross Profit by segment (Unaudited - In thousands) Fiscal quarter ended October 1, 2022 October 2, 2021 July 2, 2022Sensors As reported - GAAP$15,324 $9,568 $17,831 As reported - GAAP Margins 40.5% 31.1% 44.3%Start-up costs$— $970 $— As Adjusted - Non GAAP$15,324 $10,538 $17,831 As Adjusted - Non GAAP Margins 40.5% 34.3% 44.3% Weighing Solutions As reported - GAAP$10,470 $11,422 $9,585 As reported - GAAP Margins 33.3% 37.2% 33.7%COVID-19 impact — 111 — As Adjusted - Non GAAP$10,470 $11,533 $9,585 As Adjusted - Non GAAP Margins 33.3% 37.6% 33.7% Measurement Systems As reported - GAAP$11,526 $10,855 $9,918 As reported - GAAP Margins 55.5% 52.8% 49.9%Acquisition purchase accounting adjustments 260 1,329 679 As Adjusted - Non GAAP$11,786 $12,184 $10,597 As Adjusted - Non GAAP Margins 56.7% 59.2% 53.3%VISHAY PRECISION GROUP, INC. Reconciliation of Adjusted EBITDA (Unaudited - In thousands) Fiscal quarter ended October 1, 2022 October 2, 2021 July 2, 2022Net earnings attributable to VPG stockholders$10,118 $5,379 $10,755 Interest Expense 636 328 428 Income tax expense 2,323 1,662 2,587 Depreciation 2,937 2,955 2,832 Amortization 960 970 967 EBITDA 16,974 $11,294 $17,569 EBITDA MARGIN 18.8% 13.8% 19.8%Acquisition purchase accounting adjustments 260 1,329 679 Restructuring costs 165 — 904 COVID-19 impact — 111 — Start-up costs — 970 — Foreign currency exchange (gain)/loss (1,261) 38 (3,380)ADJUSTED EBITDA$16,138 $13,742 $15,772 ADJUSTED EBITDA MARGIN 17.9% 16.8% 17.8%