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Good morning, everyone, and welcome to the CPG Fourth Quarter Fiscal 2024 Earnings Call. My name is Ezra, and I will be your coordinator today. If you would like to ask a question, please press star followed by one on your telephone keypad. I will now hand you over to Steven Cantor, Senior Director of Investor Relations, Hibbett. Steven Cantor, please go ahead. Thank you.

Good morning, everyone. Welcome to Vishay Precision Group, Inc.'s 2024 fourth quarter earnings conference call. Our Q4 and full year press release and accompanying slides have been posted on our website. An audio recording of today's call will be available on the Internet for a limited time and can also be accessed on our website. Today's remarks are governed by the safe harbor provisions of the 1995 Private Securities Litigation Reform Act. Our actual results may vary from forward-looking statements. For a discussion of the risks with Vishay Precision Group, Inc.'s operations, we encourage you to refer to our SEC filings, especially the Form 10-K for the year ended December 31, 2023, and our other recent SEC filings. On the call today are

Thank you, Steven Cantor. I'll begin by reviewing our sales and business trends for fiscal 2024 and the fourth quarter and then provide an update on our 2025 priorities, particularly our business development activity. William Clancy will provide financial detail for the fourth quarter and for our Q1 guidance. Beginning with our 2024 performance, it was a challenging year for Vishay Precision Group, Inc. Revenue of $306.5 million reflected continued macroeconomic and cyclical headwinds. Moving to slide four, these headwinds impacted our fourth quarter revenue, which declined 4% sequentially. Revenues were lower in avionic, military, and space (AMS), test and measurement, and in our other markets, mainly consumer. On the other hand, our consolidated orders grew 5.5% sequentially and resulted in a book-to-bill of 1.0. This marked the first quarter of a positive book-to-bill in eight quarters and a return to a sequential order growth after six consecutive quarters. Booking in our sensors and weighing solutions segment grew to the highest quarterly level of the year. Measurement systems booking reflected cyclical softness and a push-out of $5 million of orders, of which $2 million is expected to be booked in Q1 of 2025. Although near-term visibility remains limited, we are encouraged by these order trends and believe they may signal the beginning of the recovery and support our increased optimism for 2025.

I'll now review the business segment performance.

Moving to slide five, beginning with our Sensors segment, fourth quarter revenue declined 8.7% sequentially. However, it's important to note that sensor bookings grew 7.0% sequentially, resulting in a book-to-bill of 1.04. The order growth reflected higher demand for precision resistors in the test and measurement for semiconductor back-end equipment and in AMS. Order trends for advanced sensor stringages were stable. Moving to slide six, in the weighing solutions segment, fourth quarter sales increased 2.2% from the third quarter. The increase was driven by higher revenue in the industrial weighing market and for precision agriculture and construction applications. This offset lower sales in the transportation market. Weighing solution orders of $28.9 million grew 14.5% from the third quarter, resulting in a book-to-bill of 1.12. Bookings were higher for general industrial and for transportation applications, as well as in our other markets, mainly in the medical and construction. Moving to slide seven, in the measurement system segment, revenue in the fourth quarter of $21.2 million declined 5.3% sequentially. The sales decline reflected lower DSI sales, which offset approximately $1 million of added sales related to the acquisition of NOCRA at the end of September. We are pleased to report that the integration of NOCRA is proceeding on track. NOCRA's differentiated laser-based thickness measurement technology broadens our Kelk product offering in the steel market. We believe we can grow this business to $6 million in 2025 as we continue to leverage Kelk's brand and the sales channels. In the fourth quarter, measurement systems orders declined 8.9% sequentially, which includes $5 million in customer push-outs, of which $2 million is expected to be booked in Q1 of 2025. This change was primarily related to orders of DTS products in the AMS market and DSI systems for the steel market, which offset the additional orders for NOCRA. As a result, book-to-bill for measurement systems of 0.78 declined from 0.82 in the third quarter. Moving to slide eight, our priorities for 2025 are clear. First, our business development activity is focused on securing design wins in new applications and new customers in robotics, consumer, data center, medical, and aerospace and defense. These opportunities are being driven by megatrends such as industrial automation and electrification. In 2024, our business development projects contributed about $18 million in revenue. While we are pleased with the early momentum of these efforts, the potential is significant. Typically, the design cycle and lead time for our projects from the initial customer discussions to revenue can be as much as 30 months. Over the next three to four years, we believe that these new opportunities may contribute $100 million of revenue in aggregate across our business segments. We expect to further broaden our business development funnel over this period of time. I want to highlight a couple of the current initiatives. Our project with a leading developer of a humanoid robot to provide advanced sensor stringages continues to proceed well. The project reflects our ability to utilize our extensive expertise in deep engineering design and manufacturing to create high-performance solutions. In the fourth quarter, we received additional prototype orders from this customer. Since the beginning of this project, we have received approximately $1.5 million in prototype revenue. With the project now moving to the preproduction phase, we believe this opportunity could generate millions of dollars in revenue annually as the humanoid robots are expected to be deployed in larger numbers over the next two to three years. As I indicated last quarter, we are also in the process of providing prototypes to more humanoid robotic developers. In January, we announced a partnership with the University of Alabama to test a new DSI system for testing and developing ceramic materials. This innovative system builds on our flagship simulation tool utilized in metal alloy testing and marks our entry into the new and untapped market for Vishay Precision Group, Inc. Its focus is on the testing of ceramic and composite nonconductive materials, which require extremely high temperatures. Since we do not address the ceramics test market today, this represents a significant growth opportunity that could potentially double the size of DSI over time. Another priority for 2025 is to continue to implement our long-term efficiency initiatives. These efforts in 2024 yielded approximately $5 million net improvements resulting from manufacturing efficiencies and higher selling prices. In 2025, we have put in place a minimum of $5 million for additional annual cost reductions. A focal point of our strategy is optimizing our facility in India, which supports high-volume business development initiatives and plays a vital role in our manufacturing consolidation. As a result, our manufacturing footprint in China is dedicated to supporting the Chinese domestic market. To improve efficiency, we are moving most of our shared functional services to the India facility. This transition, expected to take about 18 months, should save us an additional $1 million annually once completed. M&A continues to be an important complement to our organic growth initiatives. Our strong balance sheet provides us with the means to acquire larger businesses with recognized brands and growth paths. Before turning the call to William Clancy for additional comments, I want to thank our employees and our customers around the world for their continued commitment and dedication. I will now turn it over to William Clancy.

Thank you,

Thank you very much. We will now open the floor for the Q&A session. Please ensure your device is unmuted locally. If you change your mind or your question has already been answered, please press star followed by two. Our first question comes from John Franzreb. John, your line is now open. Please go ahead.

Good morning, everyone, and thanks for taking the questions. I guess I want to start with the Sensors segment. Can you talk a little bit about what's going on in the test and measurement and avionics markets there? And when do you expect to see a turnaround in the sensor business?

Good morning, John. If we look at the sensor business, you see that the book-to-bill is over one for Q4. We already started to receive larger semiannual orders in Q4 for AMS business. We also see recoveries in the back-end equipment for IC chip testing. It didn't yet come at the front end, but already in the back end, which is a strong indication that we start to see the semiconductor continues to go back. So we believe that all in all, given the sensor bookings, we should expect to see a positive trend in net bookings in the sensor segment in Q1 and Q2, and for the rest of the year, I would say that the expectation is that there would be an acceleration of order intake in the second half. But already, we see those positive signs, and it's very encouraging regarding semiconductor equipment and regarding AMS business, and we still expect to see the front-end equipment bookings to come in the next coming quarters.

Good. That's good to hear. And actually, rather than ask you a blanket question about tariffs, I'm actually curious about the steel market in particular. Did you see any meaningful revenue spend during the last 2018 steel tariffs? Anything you can kind of share about your history of the steel market and tariffs based on your experience?

Regarding tariffs, as you know, our main manufacturing facility is in India, and we are sourcing most of our steel and aluminum from Indian suppliers. So tariffs from China were not a significant impact. We did not see any significant impact as the new administration has increased the tariffs from 25% to 35%. Our footprint in China is very, very limited. Most of our Chinese operation is selling into the Chinese domestic market, so the cost or the excess effect on Vishay Precision Group, Inc.'s P&L regarding future tariffs from goods coming from China is going to be extremely limited, at best around $200,000 in 2025 given current volume. We hope and we do expect to see a nice backwind by getting more market share on our loads as in our loaders business in the United States, given the fact that there are very few manufacturers that have non-Chinese operational bases like we do in India, while most of them are manufacturing in China. So I think that the additional 10% tariffs are going to give us a nice backwind in terms of bookings. In regards to tariffs or steel, I would say that if the tariffs would, I believe that we should expect to see more manufacturing from US-based steel manufacturers that should also give us a positive backwind for Kelk products, which are sold into US suppliers.

Yeah. That's what I was kinda curious about. What are you seeing with Kelk and the load sensors and everything? Just curious on those thoughts there.

Yes. We didn't see the effect yet, given the fact that the tariffs have been implemented or put in place a while ago, a very short time, but we do believe it will happen in the coming months. We should expect to see an effect.

Understood. Understood. Regarding the $5 million in cost savings, can you talk a little bit about the expected timings of realizing those cost savings? Is it a mix of pricing and productivity, or is this pure productivity? Color would be helpful.

When we are looking at cost reduction or a minimum of additional cost reduction of $5 million in 2025 in respect to 2024, we are looking at the continuation of moving from high-level countries to low-level countries. By now, our India facility is the largest facility for Vishay Precision Group, Inc., and it takes a much bigger role in our future. We are speaking about more automation in some of the facilities. So all in all, it's all about yield and efficiency improvements in all our larger manufacturing base locations.

Okay. And just one last question. I'll get back into queue. Regarding NOCRA, it's about $1 million of revenue contribution. Were they accretive to the operating income line? Any kind of color there would be helpful.

NOCRA in Q4 was a net zero effect in Q4, but the expectation is that we are planning to sell $6 million of NOCRA products in 2025, which is at least a 50% higher run rate than the complete 2024, which definitely would provide us with very nice margins, positive margins, naturally.

Okay. I appreciate you taking my questions. I'll get back into queue.

Thank you very much. Our next question comes from Griffin Boss with B. Riley Securities. Griffin, your line is now open. Please go ahead.

Hi. Good morning, and thanks for taking my questions. So since the last earnings call was in November, there's perhaps a bit more, well, setting aside tariffs, there's perhaps a bit more macro certainty regarding interest rates in the US, and now we have the US presidential election in the rearview mirror. So I'm just curious, seeing sensors and weighing solutions book-to-bill pushing above one, are you seeing any customer trends that might suggest that capital spending and demand is now picking up given less macro uncertainty, or are the increased orders you're seeing today, or I guess in the fourth quarter, more so inventory replenishment?

Well, good morning. We have a couple of effects. Our optimism for the first half, I would say more of positive or more moderate optimism while we are looking for an accelerated uptick in the second half, is based on the fact that we see a continuation of reduction of interest rates by the EU Central Bank, and we do see more demand coming from European customers, especially on the onboard weighing and process weighing on the weighing solutions, which also applies for some customers also in the industrial sensor segment. We are also looking at continued depletion of our customer inventories and also early results of our business development initiatives, which are now picking up, and we do see the additional business being generated by those business development initiatives. So all of the three effects, we feel much more confident regarding the order intake and the demand going forward.

Okay. Got it. Thank you,

The $1 million shared services, we are looking at G&A cost consolidation of G&A cost from higher labor countries into India, and this is a kind of a permanent cost once the system is in place. Regarding the other $4 million, it's a minimum of $4 million. We are looking at further consolidation, mainly in the sensor segment and in the weighing solution segment, which are more operationally driven by nature of further consolidation of products to our India facility while also adding more automation in some other high labor manufacturing facilities. So we are looking at permanent cost savings regardless of volume. In a way, we are just reducing the cost base of our products, of our cost of goods sold. Regardless of volume, this is just putting in place more efficiency initiatives.

Excellent. Okay. Thank you,

Thank you very much. We have our next question from John Franzreb with Sidoti. John, your line is now open. Please go ahead.

Yes. I get just a question about the new product development. I think you said there was $18 million of revenue recognition from new product development in 2024. And I think you alluded to $100 million of new product opportunity. I didn't catch the timeline on that. What's the timeline on that, and does it manifest more likely in one year versus another? What kind of visibility do you have on that?

Sure. So, John, we are thinking about business development. Business development, our definition for business development, we are looking at new products as well as existing products at new customers or new part numbers. So that's, in essence, business which the company did not have in respect to products or customers. The initiative of the BD teams and the infrastructure has been put in place around 18 months to 24 months. And we have teams that started to fill a BD funnel in a much more consistent way. When we are looking into the funnel, given the design cycle that I've indicated earlier that may take up to 30 months, we have realized that $18 million of revenues has been realized in 2024 due to new business development initiatives. Our targets for 2025 is $30 million. And when we are speaking about an additional $100 million, we are speaking about three to four years, which means from 2025 to 2027, 2028, up to, in aggregate, for an additional $100 million of new business with new products or new customers that the company did not have before.

And is it better to assume that the margin profile of the new products is at least as good as the current gross margin profile? Or no, you tell me.

So the profit profile should be similar or better than the existing profile. The fact is that on one hand, our business initiatives go for smaller scale opportunities at higher margins, but when we also speak about significant volume, we also need to be cost competitive. So overall, it could be with slightly lower margins, but overall, it should be at least the same or much better than our current average gross margin.

Great. I appreciate the color. Thank you,

Thank you.

Thank you very much. We currently have no more questions. I will now hand back over to Steven Cantor for any closing remarks.

Thank you. I want to note that we will be participating in the Sidoti conference in March, and we look forward to updating you on Vishay Precision Group, Inc. next quarter. Thank you all, and have a good day.

Thank you very much, Steven Cantor, and thank you to William Clancy and