Vishay Precision Group Q3 2026 Earnings Call Transcript

Vishay Precision Group (NYSE:VPG) reported third-quarter financial results on Wednesday. The transcript from the company’s third-quarter earnings call has been provided below.

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Summary

Vishay Precision Group reported third-quarter 2026 adjusted net revenue of $87.4 million, marking the highest quarterly level in three years, with a 4% sequential and 10% year-over-year increase.

The company experienced strong demand in its Sensors segment, driven by AI-related markets, with a book-to-bill ratio of 1.35 and a consolidated ratio of 1.17, indicating sustained order momentum.

Adjusted gross margin improved to 39.3%, and the company achieved $4.2 million in cost savings year-to-date, aiming for a total of $6 million in 2026.

Vishay Precision Group is optimistic about revenue growth of 10% to 12% in 2027, supported by a robust backlog and positive market trends in AI, aerospace, and defense sectors.

The company is expanding manufacturing capacity and personnel to support growth, particularly in the Sensors segment, and continues to drive operational improvements and cost reductions.

Full Transcript

OPERATOR

Good morning and welcome everyone to the Vishay Precision Group third quarter 2026 earnings call. Today’s conference is being recorded. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question-and-answer session. If you would like to ask a question during this time, simply press the star key followed by the number one on your telephone keypad. If you would like to withdraw your question, press star one again.

At this time, I would like to turn the conference over to Steve Cantor, Senior Director, Investor Relations. Please go ahead.

Steve Cantor (Senior Director, Investor Relations & Marketing Communications)

Great. Thank you, operator. Good morning, everyone. Welcome to Vishay Precision Group’s third quarter 2026 earnings conference call. Our press release and slides are available on our website, vpgsensors.com. An audio recording of today’s call will also be available on our website. Today’s remarks are governed by the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Actual results may differ materially from our forward-looking statements and there can be no assurance that the results discussed today, including the targets in our operating model, will be achieved. For a discussion of the risks associated with VPG’s operations, please refer to our SEC filings, particularly our Form 10-K for the year ended December 31, 2025 and our other recent SEC filings.

We also present certain GAAP and non-GAAP measures in our press release and on this call, and we believe these measures provide useful information about the operating performance of our business and should be considered together with the corresponding GAAP measures. Before beginning the call, I want to note that we received $2.3 million in tariff refunds from the U.S. federal government and we intend to pass those refunds on to our customers. GAAP net revenue for the third quarter was $85.1 million. Third quarter adjusted net revenue was $87.4 million, excluding $2.3 million of refunds that had no impact on gross profit. Under GAAP, these refunds are reflected as reductions to revenue and cost of products sold.

Unless otherwise noted, all third quarter financial measures discussed today exclude these refunds, including adjusted gross margin. The refunds have no impact on prior periods. Joining me on the call today are Zeev Shoshany, President and CEO, and Bill Clancy, Chief Financial Officer. I’ll now turn the call over to Zeev for his prepared remarks.

Zeev Shoshany (President and Chief Executive Officer)

Thank you, Steve. I will begin with commentary on the third quarter. Bill will then review our financial results and provide our outlook for the fourth quarter of 2026. Moving to Slide 4, Third Quarter Highlights: Bookings and Sales. Our third quarter reflected continued strong demand, improving revenues and margins, and ongoing progress in our strategic initiatives. Adjusted revenue was $87.4 million, our highest quarterly level in three years, increasing 4% sequentially and 10% year over year. Adjusted orders of $103 million were driven by continued record demand in our Sensors segment from AI-related markets including semiconductor equipment, data center infrastructure, as well as aerospace and defense applications.

Bookings from our business development initiatives totaled $11.9 million in the third quarter and $33.5 million year to date, keeping us on track to achieve our $45 million full year goal. Our consolidated book-to-bill ratio was 1.17, marking the eighth consecutive quarter at or above 1.0 and underscoring continued positive demand trends, led by the Sensors book-to-bill ratio of 1.35. All three segments achieved ratios above 1.0. This sustained order momentum is driving a growing backlog and increasing our visibility into 2027.

We continue to add manufacturing capacity and personnel to support our growth, particularly in Sensors. Our order momentum in key markets and our growing backlog set the stage for potential revenue growth of 10% to 12% in 2027, which is above the annual target rate in our three-year plan. Adjusted gross margin improved to 39.3% from 38.6% in the second quarter. Third quarter cash from operations was $11.1 million and free cash flow was $5.5 million. Adjusted EPS of $0.14 reflected an adjusted 48% tax rate compared to the 37% through the first half of 2026, driven by a shift in the geographic mix of income. The higher tax rate reduced adjusted EPS by approximately $0.03 per diluted share.

Regarding our operational improvement initiatives, we delivered nearly $4.2 million of cost savings year to date and remain on track to achieve approximately $6 million of savings this year. These actions represent the first phase of our three-year plan to deliver approximately $20 million of cost reduction initiatives through manufacturing footprint optimization, increased automation, and procurement efficiencies across our global supply chain. I’ll now review performance by segment, moving to Slide 5, Sensors Third Quarter Highlights. Beginning with our Sensors segment, third quarter revenue of $38.4 million grew 15% from the second quarter and 21% from a year ago. The increase from the second quarter primarily reflected higher sales to the test and measurement market. Bookings of $51.7 million remained robust, increasing 8% sequentially to a second consecutive all-time quarterly record.

This resulted in a book-to-bill ratio of 1.35. Demand continued to be driven by investments in AI-related infrastructure. We recorded strong orders for precision resistors sold to semiconductor front end, back end, and process control equipment manufacturers. Bookings for manufacturers of high-speed fiber optics transmission equipment remained elevated, supporting the continued build-out of data center infrastructure. We saw continued positive trends in avionics and defense applications with sustained demand from both established and next-generation defense programs.

Turning to Humanoid Robotics, we remain highly optimistic about the long-term opportunity. While the market is still in its early stages, the engineering complexity, demanding performance requirements, and the need to scale sophisticated supply chains create an attractive opportunity for VPG. Humanoid-related bookings were approximately $200,000 and sales were $300,000 in the third quarter as our initial customer shifted the start of its production ramp to Q4, citing the challenges of scaling a highly complex supply chain.

We are prepared to support customer planned production volume and now expect orders to increase gradually beginning in the current quarter with volume accelerating further through 2027. We also received an investment from this customer to support our capacity expansion related to Humanoid, which we view as a solid endorsement of our value proposition and their commitment to VPG as a supplier. Regarding customer number two, discussions continue to progress well and the potential revenue opportunity could be larger than we previously anticipated.

We are also supporting several other Humanoid Robotics customers as they advance from prototype development through commercialization while expanding our engagement with additional prospective customers across the market. Moving to Slide 6, Weighing Solutions Third Quarter Highlights. Turning to our Weighing Solutions segment, third quarter adjusted revenue of $26.9 million, which excludes $2.3 million of tariff refunds to customers, declined 11% from the second quarter and was down 2% from a year ago. The sequential decline reflected seasonal softness in Europe, mainly for process weighing products. Adjusted orders of $28.6 million were flat with the second quarter, resulting in a book-to-bill ratio of 1.06.

Trends in the industrial weighing market and the medical market were mostly stable. Bookings declined for consumer e-bike applications following a large semiannual order in the second quarter, which was offset by higher demand in the transportation market. I am pleased to note that our products are now standard options for onboard weighing on off-highway, heavy-use trucks for a leading European manufacturer, designed to improve efficiency and safety.

These solutions are integrated into the vehicle to measure payload during loading and operations in harsh environments such as mining and construction. Moving to Slide 7, Measurement Systems Third Quarter Highlights. Turning to Measurement Systems, third quarter revenue increased 10% sequentially and 8% year over year. The sequential increase was driven by higher sales of DSI’s thermal mechanical simulation test systems for the steel market. KELK production continued to recover from the second quarter. Because these products operate in a demanding environment and play a mission-critical role in optimization, yields, and productivity for steel producers, we continue to focus on execution, product quality, and customer service.

Orders of approximately $22.2 million increased 19% sequentially, which reflected a 40% increase in steel-related orders. We also had another strong quarter at DTS, as bookings related to automotive crash safety testing reached their highest level of 2026 and orders for aerospace and defense applications remained strong. Moving to Slide 8, Priorities and Focus. Our key priorities remain centered on two areas: accelerating commercialization and growth, and driving operational execution and excellence. On the commercial side, we completed the first phase of our company-wide CRM rollout for the Sensors segment, with deployment across the remaining business planned for the fourth quarter and 2027. We rolled out a system and processes for lead management and opportunity management for Sensors, and we have initiated targeted marketing programs in the Humanoid Robotics market.

We also refreshed our corporate website and started the first phase of our plan to accelerate and streamline the new product development processes. Operationally, we achieved $4.2 million of our targeted $6 million in cost savings for 2026. We continue to optimize and relocate manufacturing for key products to support our long-term cost and productivity objectives. At the same time, we are expanding production capacity, adding personnel and equipment at key Sensors facilities. Importantly, our manufacturing and supply chain capabilities are in place to support the initial production ramp for Humanoid Robotics customers.

As we look ahead, given the strong order trends, growing backlog, and continued execution on our growth strategies, we see potential to achieve revenue in the first quarter of 2027 of $90 million or better. This supports our potential to grow our revenues by 10% to 12% in 2027, which is above the targeted annual growth rate in our original three-year plan. I will now turn it over to Bill Clancy.

Bill Clancy (Executive Vice President and Chief Financial Officer)

Thank you, Zeev. Referring to Slide 9 and the reconciliation tables in the slide deck, third quarter 2026 GAAP net revenues were $85.1 million, after $2.3 million of tariff refunds passed through to customers with no impact on gross margin. Excluding these refunds, adjusted revenue was $87.4 million. Adjusted gross margin improved sequentially to 39.3% from 38.6% in the second quarter, excluding $141,000 of startup costs related to expanded production capacity.

This was an improvement from 38.6% in the second quarter. Sequentially by segment, Sensors adjusted gross margin increased to 32.6%, primarily due to higher volume, partially offset by higher manufacturing costs. Weighing Solutions adjusted gross margin of 34.6% declined mainly due to lower volume. Measurement Systems gross margin increased to 56.5%, primarily reflecting higher volume and a favorable product mix. Moving to Slide 10, our third quarter operating margin was 3.2%. Excluding the aforementioned startup costs as well as restructuring, stock-based compensation, and severance costs, adjusted operating margin was 4.9%. Selling, general and administrative expense for the third quarter was $31.2 million, or 35.7% of revenue, down from second quarter levels due to lower sales commissions and reduced incentive compensation accruals. Foreign exchange rates continue to represent a significant headwind to profitability.

Unfavorable exchange rates reduced third quarter adjusted operating profit by $3.4 million compared with the prior-year period. Year to date, unfavorable foreign exchange has reduced operating profit by $8.1 million. GAAP net earnings were $559,000, or $0.04 per diluted share. Adjusted net earnings were $1.8 million, or $0.14 per diluted share. As Zeev noted earlier, the GAAP tax rate for the third quarter of 2026 was significantly higher than the run rate through the first half of the year.

For full year 2026, we are assuming an operational tax rate of approximately 45%. Moving to Slide 11, we also made meaningful sequential progress in EBITDA and cash flow. Adjusted EBITDA increased to $8.2 million, or 9.4% of revenue, from $5.2 million, or 6.5% of revenue, in the second quarter. Capital expenditures were $5.6 million in the third quarter and $10.6 million for the first nine months of 2026. For full year 2026, we expect CapEx of approximately $14 million to $16 million. We improved receivable collections during the quarter, which drove adjusted free cash flow to $5.5 million, a $6.9 million sequential improvement from negative $1.4 million in the second quarter.

At the end of the third quarter, cash was $80.9 million and long-term debt was $15.7 million, resulting in net cash of approximately $65 million. Regarding the outlook for the fourth quarter of 2026, we expect net revenues of $84 million to $91 million, assuming constant third quarter 2026 exchange rates. Our guidance excludes expected fourth quarter tariff refunds to customers, which are profit neutral. In summary, order momentum remains strong, led by record demand in Sensors and continued strength in AI-related markets. Our financial performance is improving with sequential gains in adjusted gross margin, adjusted EBITDA, and free cash flow, while we continue to execute our cost reduction initiatives. And our growing backlog, expanding capacity, and commercial execution give us increased visibility into 2027, supporting our view that revenue growth can exceed the annual target in our three-year plan.

With that, we will open the call for questions. Thank you.

OPERATOR

Thank you. We will now begin the question and answer session. If you have dialed in and would like to ask a question, please press star one on your telephone keypad to raise your hand and join the queue. If you would like to withdraw your question, simply press star one again. And our first question comes from Jason Smit at Lake Street Capital.

Jason Smit (Analyst)

Hey guys, thanks for taking my questions. Just curious if you could disclose what new business development revenue was in Q3 and, I guess, relatedly, are you still on track to hit that $45 million goal for the year?

Zeev Shoshany (President and Chief Executive Officer)

Yes. Good morning, Jason. So, yes, we did report BD for Q3. The BD contribution is $12 million in orders, and for the first nine months it’s $33.5 million. And we are on track to hit our $45 million target for 2026.

Jason Smit (Analyst)

Okay, perfect. And then looking at 2027, obviously you guys feel pretty confident on next year. Just curious if you could rank order the growth drivers that are giving you the confidence in the ’27 outlook.

Zeev Shoshany (President and Chief Executive Officer)

So as we look into 2027, first, we see a very solid backlog for the end of this quarter. We are running at a backlog of $151 million. The expectation is that the order run rate for Q4 will be similar to the third quarter. Given the business environment, we do see a continuation from a demand standpoint from our end markets regarding AI-related infrastructure and applications as well as aerospace and defense. We do see also some signs in the industrial market in terms of recovery.

Therefore, we are optimistic regarding our projection for 2027, which we expect to be 10% to 12% higher revenues with respect to 2026.

Jason Smit (Analyst)

Okay, appreciate that. I’ll jump back into queue. Thanks a lot, guys.

OPERATOR

We’ll move next to Josh Nichols at B. Riley Securities.

Josh Nichols (Analyst)

Yeah, thanks for taking my question. Just curious, like looking, you know, the backlog, the order activity has been exceptionally strong. You’re assuming 4Q, you know, is kind of similar to 3Q. And then there’s a nice ramp assumed in 1Q and beyond. What’s the right way to think about that wider revenue range that you’re giving for 4Q? And what are kind of the puts and takes that would get you potentially to the higher end of that range? Is it order timing on things like humanoids or other parts of the core business like sensors?

Zeev Shoshany (President and Chief Executive Officer)

So if we are looking at Q4 revenues, our Q4 outlook reflects really our aged backlog and the timing expected to be shipped in Q4. But it also takes into account the number of working days in Q4, which is less than Q3. We do continue to hire and train additional manufacturing personnel to increase our manufacturing production, mainly in the Sensors segment. So all in all, the Q4 revenue projection is based on the backlog and number of working days, while also we increase the output per day based on our projected capacity increase.

We do believe that we will be able to reach the $90 million or higher in Q1 with respect to revenues and… I’m sorry, what was your other question?

Josh Nichols (Analyst)

I was just curious because the range for 4Q was also a bit wider than you normally give. Normally it’s around $5 million.

Zeev Shoshany (President and Chief Executive Officer)

We did give larger ranges in the past. I didn’t think this is a higher range than in the past. I would say that, as you said, there is a certain volatility regarding the Humanoid business, given the fact that the supply chain is more complicated from our customer standpoint than expected. But this is part of the buffer volatility that we also account for in our range.

Josh Nichols (Analyst)

Got it. That makes sense. And then last question for me. I mean, the Sensors momentum has been exceptionally strong, another quarter of record bookings north of $51 million. Just curious how you’re thinking about, you know, given the influx of orders, about your capacity, lead times, and the ability of the company to really convert that backlog into revenue in a timely manner.

Zeev Shoshany (President and Chief Executive Officer)

So naturally, given the sizable order intake, we had to place orders to increase capacity—equipment as well as hiring more people. In addition to that, we are setting more manufacturing sites to support the higher capacity. So it takes time, given the learning curve and the complexity of the product that we are producing. But the expectation is that in the coming quarter we are going to reduce the lead time and increase our capacity as we expand also in our other manufacturing facility.

Josh Nichols (Analyst)

Got it. Thank you.

OPERATOR

And as a reminder, if you would like to ask a question, please press star one. We’ll move next to Jon Franzreib at Sidoti.

Jon Franzreib (Analyst)

Good morning, everyone, and thanks for taking the questions. Zeev, I’m kind of curious, given how much AI infrastructure markets are driving demand, do we have a sense of how much that is of the revenue and/or booking profile?

Zeev Shoshany (President and Chief Executive Officer)

We didn’t provide any specific information regarding the Sensors segment. We did identify that all our semiconductor business, all our fiber optics data, and potentially also our Humanoid business—they are all AI-related. I think that at this point in time, I could estimate—and by the way, in addition to that, I would like to state that we have also a very solid demand in avionic, military and space business. But if we speak specifically about AI, I would say that at this point in time, a rough estimation would be around 20% to 30%.

Jon Franzreib (Analyst)

20% to 30% of the Sensors segment or company wide?

Zeev Shoshany (President and Chief Executive Officer)

No, no, no. Of the Sensors segment.

Jon Franzreib (Analyst)

Okay, got it. Thank you. Appreciate the clarity. Thank you. And in the second quarter, there was a KELK order that was deferred at the time—we were saying the second half of the year. Was that order fulfilled in the third quarter, or is there still some remaining that’s flowing into the fourth?

Zeev Shoshany (President and Chief Executive Officer)

So you’re correct, some of the order has been fulfilled, but the main part will be delivered in Q4 this quarter.

Jon Franzreib (Analyst)

Good, that’s good to hear. And one, I guess, last question. Just for a point of clarity for me, how are the bookings impacted by the tariff refunds? I understand how the revenue works, but it looks like there was a footnote in the presentation about bookings.

Bill Clancy (Executive Vice President and Chief Financial Officer)

Yeah, Jon. So the way we do our calculation, you know, it’s always the opening backlog and then, you know, plus orders, let’s say. I mean, so basically we back into the order numbers because of the backlog being fixed. So it’s just a mathematical calculation.

Jon Franzreib (Analyst)

Okay, thank you, Bill. I’ll get back into queue, everyone.

OPERATOR

And as a final reminder, if you would like to ask a question, please press star one on your telephone keypad at this time. We’ll pause just a moment. And we have no further questions at this time. I would like to turn the conference back over to Steve for closing remarks.

Steve Cantor (Senior Director, Investor Relations & Marketing Communications)

Before concluding, I want to note that we will be participating in the ROTH conference this month and the Sidoti conference in December. You can contact me for more information about those. We look forward to updating you next quarter. Thank you all and have a great day.

OPERATOR

And this concludes today’s conference call. Thank you for your participation. You may now disconnect.

Disclaimer: This transcript is provided for informational purposes only. While we strive for accuracy, there may be errors or omissions in this automated transcription. For official company statements and financial information, please refer to the company’s SEC filings and official press releases. Corporate participants’ and analysts’ statements reflect their views as of the date of this call and are subject to change without notice.