Vishay Precision Group Q1 2026 Earnings Call Transcript
Vishay Precision Group (NYSE:VPG) held its first-quarter earnings conference call on Tuesday. Below is the complete transcript from the call.
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Summary
Vishay Precision Group reported Q1 2026 revenue of $84.4 million, an 18% year-over-year increase, with strong growth across all segments and a book-to-bill ratio of 1.21.
The company is focusing on strategic initiatives including business development in AI, defense, and humanoid robotics, with a target of $45 million in orders from new business development in 2026.
Vishay Precision Group introduced a new three-year target operating model aiming for 8-10% annual revenue growth, with plans for cost reductions exceeding $20 million, supported by recent organizational changes and operational excellence initiatives.
The sensors segment saw strong demand driven by AI infrastructure and defense applications, while the measurement systems segment experienced mixed revenue trends.
The company maintains a strong cash position with $82.5 million in cash and $62 million in net cash, providing ample liquidity for business operations and potential M&A activities.
Management expressed optimism about continued demand in AI-related markets and an improved organizational structure, supporting future growth and profitability, with Q2 revenue guidance set at $85-90 million.
Full Transcript
Bella (Operator)
Hello and thank you for standing by. My name is Bella and I will be your conference operator today. At this time I would like to welcome everyone to Vishay Precision Group first quarter 2026 earnings call. All lines have been placed a mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star, then the number one on your telephone keypad. To withdraw your question, press star, then number one again. I would now like to turn the conference over to Stephen Cantor, Senior Director of Investor Relations. You may begin.
Stephen Cantor
Thank you, Bella and good morning everyone. Welcome to VPG's first quarter 2026 earnings conference call. Our press release and 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 the VPG website. Today's remarks, including the targets described in our updated operating model, are governed by the safe harbor provisions of the 1995 Private securities litigation Reform Act. Our actual results may vary from forward looking statements and there can be no assurance that such results, including the targets described in our updated operating model, will be achieved. For a discussion of the risks associated with VPG's operations, we encourage you to refer to our SEC filings, especially the form 10K for the year ended December 31, 2025 and our other recent SEC filings. On the call today are Ziv Shoshani, CEO and President and Bill Clancy, CFO. And now I'll turn the call to Ziv for some prepared remarks. Ziv
Ziv Shoshani
thank you, Steve. I will begin with some commentary on our results and trends for the first quarter. Bill will provide financial details and our outlook for the second quarter of 2026. We will also discuss our revised target operating model, Moving to slide 3. To summarize our Q1 results. We delivered a strong start to the year with first quarter revenue of 84.4 million up 18% year over year, reflecting broad based growth across all three segments. Orders were particularly robust at 102.1 million, growing 26% sequentially driving a book to bill of 121, our strongest since 2022. We increased backlog, particularly in the sensor segment, which positions us for continued growth into the second quarter and for the second half of the year. Gross margin improved from the fourth quarter and the prior year and we continue to implement additional cost reduction programs. Despite ongoing macroeconomic uncertainty from geopolitical tensions, booking trends remained strong. Demand was driven by precision resistors from semiconductor equipment and for data center and fiber optics equipment supporting the build out of AI data centers. Orders in avionic, military and space markets also improved. In addition, orders generated from our business development initiatives totaled 10 million in the first quarter, putting us on track to meet our 2026 goal of 45 million. With our new Chief Business and Product Officer and Chief Operating Officer organizations now in place, we are focused on disciplined execution of both our near term priorities and long term strategic plans. While there is still work ahead, we are already seeing improved visibility into our sales funnel and stronger alignment across vpg. During the first quarter, we continued to launch new marketing programs and further sharpen our focus on priority markets, key customers and our most important growth drivers. I'll now review business performance by segment. Moving to Slide 4 beginning with our sensor segment, first quarter revenue increased 10% sequentially and 23% year over year. Compared to the fourth quarter, we had higher sales of precision resistors in the test and measurement and AMS markets and higher sales of strangers in the general industrial market. Bookings in the sensors were particularly strong totaling 45.2 million, up 29% sequentially and representing the highest level in 15 quarters. This resulted in a healthy book to bill ratio of 136. The sequential growth in bookings reflected strong broad based demand driven by the industry wide ramp up in AI adoption with sensors. We saw particularly robust demand related to AI infrastructure orders group for precision resistors used in semiconductor front end and back end equipment, supporting the manufacturing and testing of AI related chips and systems as well as in data centers and fiber optics equipment. Bookings were strong for precision resistors in defense applications. We also continue to see demand for strain gauges used in humanoid pre production prototypes. With sensors backlog reaching its Highest level since Q1 of 2023, we accelerated hiring and training of additional manufacturing personnel to support our plant production ramps. Turning to Humanoid Robotics, we shipped approximately $600,000 of product to humanoid makers in the first quarter. In the second quarter we expect to more than double that amount. Given our customers focus for a more significant ramp of production in the second half of the year, we have increased our internal projection for 2026. Nonetheless, the precise timing and scale of production ramps remain unclear. In addition, we began early discussions with the Ford Humanoid Maker, a startup developing humanoid platforms for defense, home use and industrial applications. Moving to Slide 5 Turning to our Weighing Solutions segment, first quarter sales grew 9% from the fourth quarter and 14% from a year ago. The sequential increase was primarily due to higher sales in our other markets for medical equipment precision ag equipment, consumer bicycles and in our transportation market for heavy use trucks. Weighing solutions orders were up 17% sequentially to 32.9 million, resulting in a book to bill of 1.09. Orders included annual bookings of onboard weighing systems and higher bookings in our industrial weighing and general industrial markets. Moving to slide six Turning to our measurement system segment, revenue trends were mixed in the first quarter as revenue of 21 million decreased 7% sequentially but was 14% higher than a year ago. Sales of DTS ruggedized miniature data acquisition modules reached a record high driven by defense missile test projects. This was offset by lower sales to the steel market. First quarter measurement system orders of 24 million increased 32% from the fourth quarter and resulted in a book to bill of 1.15. The sequential growth reflected higher DTS and PI orders in AMS for the testing of military jet engines and for hypersonic missiles. Demand for measurement systems used in steel rolling mills softened despite pockets of growth in India and North America. Orders grew for DSI's R&D tool used for development of new metal alloys. One of the technology highlights for DTS and measurement systems this quarter was the Artemis II launch to the moon and which included DTS data loggers on board. DTS data loggers were used to measure extreme forces for the astronauts experienced during the launch and RE entry that can't be fully replicated on Earth. In addition to NASA projects, DTS modules have been used in similar tests for SpaceX Dragon crew capsule as well as for Blue Origin platforms. Moving to Slide 7 this quarter we are pleased to introduce our updated target operating model which reflects a path to faster organic revenue growth, higher profits and cash flow and significant creation of long term stockholders value. Under the new model, we are targeting compounded annual organic growth of 8 to 10% over the next three years, which is higher than our previous model. For organic growth, we expect our sensors and measurement system businesses to grow at or above these rates. Our model target a gross margin of 46.5%, an operating margin of 14.5 to 15.5% and an EBITDA margin of 18.5 to 20.5%. This model includes approximately 5 million of annual incremental cost related to the new CBPO and COO organizations, IT investments and new incentive costs. At the upper end of the model, we have the potential to deliver 50% flow through EBITDA on each incremental dollar revenue. Moving to Slide 8 the top line of our model is driven by two factors. First, we are increasingly aligned with the attractive secular growth and areas where Vishay Precision Group has differentiated high performance technology. These opportunities are being driven by advancements in industrial automation systems which rely on accurate, reliable and highly precise sensing and measurements. That requirement directly aligns with Vishay Precision Group core strength in our long term history of supporting mission critical applications. While adoption is still in the early stages, we are already supporting emerging use cases across multiple markets including advanced robotics, semiconductor equipment used in AI processing and data center and fiber optics infrastructure for humanoid robots. Specifically, our model assumes that revenue growth approximately 50% annually from 2025 levels. We are building capacity and infrastructure today to support the potential for much higher levels of growth. Second, our sales and marketing and business development operating model is now being transformed into cross company processes, IT platforms and execution discipline which are expected to support the growth of both cyclical and secular growth markets. In addition, we continue to see durable long term opportunities in aerospace and defense. While demand can fluctuate quarter to quarter, investment trends remain solid, technical requirements are increasing and these markets continue to align well with Vishay Precision Group differentiated capabilities. Operating leverage is a core element of our model. Under our COO led operating structure, we have a clear plan to deliver more than 20 million of cost reductions and efficiency improvements on over the next three years. These operational excellence initiatives are targeted at creating structurally more competitive cost base, not just a near term margin improvements. Our cost programs focused on manufacturing footprint optimization, increased automation and procurement efficiencies across our global supply chain. Importantly, these initiatives also support increased market share by improving execution, shortening lead times and enabling efficient scaling as demand increases. In summary, our operating model reflects faster organic growth and attractive profitability supported by differentiated technology, durable secular demand drivers and a more focused and efficient organization. We believe this position Vishay Precision Group well to create long term value for our customers and stockholders. I will now turn it over to Bill Clancy.
Bill Clancy (Chief Financial Officer)
Bill thank you zee. Referring to Slide 9 and the reconciliation tables on slide deck, our first quarter 2026 revenues were $84.4 million. Gross margin of 39% in the first quarter improved in the fourth quarter sequentially by segment. Gross margin for sensors of 34.8% increased primarily due to higher volume, favorable product mix and manufacturing efficiencies, partially offset by unfavorable foreign exchange rates and higher personnel costs. Weighing solutions. Gross margin of 34.2% increased from the fourth quarter mainly due to higher volume and favorable foreign exchange rates. Gross margin for measurement systems of 52.6% decreased on the fourth quarter primarily due to lower volume and wage increases, partially offset by favorable product mix. Moving to slide 10 our first quarter operating margin was 0.4% adjusted for 449,000 restructuring costs and 837,000 of stock based compensation. Adjusted operating margin was 1.9%. The restructuring costs primarily relate to severance costs from the implementation of our new CBPO and COO organization and the adjustment for stock based compensation expense reflects our evolving compensation structure due to these recent organizational changes including the hiring of senior executives and the expansion of equity based incentive programs to attract and retain key talent. Selling general and administrative. Expense for the first quarter was $32.1 million or 38% of revenues which was higher than Q4 reflecting hiring for the new organizational structure, incentive compensation accruals for 2026 and unfavorable FX. Unfavorable foreign exchange rates impacted adjusted operating margin in the first quarter by $800,000 compared to the fourth quarter and $1.3 million from a year ago. GAAP loss was $319,000 or a loss of $0.02 per diluted share. Adjusted net earnings was $907,000 or $0.07 diluted share adjusted for restructuring costs, stock based compensation and the impact of foreign currency exchange rates on our balance sheet. The GAAP tax rate for the first quarter of 2026 was 81.2% and operationally it was 31.5%. For 2026 we are assuming an operational tax rate of approximately 26%. Moving to slide 11, adjusted EBITDA was $5.9 million or 7% of revenue compared to $6.2 million or 7.8% of revenue in the fourth quarter. Capex in the first quarter was $3 million. For 2026 we are forecasting 14 to 16 million for capital expenditures. Adjusted free cash flow is a negative $3.7 million for the first quarter due to the GAAP net loss and the higher working capital required to support higher demand. This compared to a positive 1.3 million in the fourth quarter. As of the end of the first quarter, our cash position was 82.5 million and our long term debt was 20.6 million. The resulting net cash position of $62 million and the unused portion of our credit facility provides ample liquidity to support our business requirements and define the M and A regarding the outlook for the second quarter of 2026, we expect net revenues to be in the range of 85 million to 90 million assuming constant first fiscal quarter 2026 exchange rates. In summary, quarterly bookings exceeded $100 million for the first time since July 2022 and resulted in a book to bill ratio of 1.21. We continued our progress with our business development initiatives, including the humanoid robots. And we are excited about the potential of our new organization, which is reflected in our new target model. With that, let's open the lines for questions. Thank
Bella (Operator)
you. At this time I would like to remind everyone, in order to ask a question, press star on your telephone keypad. We will pause for just a moment to compile the Q and A roster. Your first question comes from the line of Jon Franzeb with Sidoti and company. Your line is now open. Please go ahead.
Jon Franzeb
Good morning everyone and congratulations on a good start to the year. I'd like to start with the the guidance. It's been a while since we've been at that kind of a revenue threshold. Can you kind of talk about how we should think about the profit profile? That kind of revenue, should it be in line with historical gross margins or should we think about it in terms of incremental operating margin contributions like we had in the past?
Ziv Shoshani
Good morning, John. So let me start by saying that the guidance is already based on the new model. The new model is setting a new baseline in respect to the higher organic growth in the prior model in addition to a much more robust and significant cost reduction over 20 million over the next three years. In addition to that, we are taking into account the new investments in respect to the new organization, the CBDO and COO, which would increase the SGA by 5 million. The scalable model where we should see incremental operating margin based on higher revenues would remain, but the baseline would change. The historical financials were based on the old model, while the new guidance is based on the new model. But the incremental, as I indicated before, the incremental by having incremental revenue, which we should see a most substantial incremental operating margins as we did before.
Jon Franzeb
That's great to hear. That's great to hear. And you know, you pointed this out, even your prepared remarks. The bookings profile takes us back to the when coming out of the post Covid bookings when we had a bunch of quarters of substantial book to bills, we're halfway through the second quarter. Do you see that kind of scenario unfolding in the current year that we're going to have sustained booking profile after I guess three years of averaging under 1.0.
Ziv Shoshani
Yes. So you're correct. The booking, the absolute bookings mainly, you know, reminds what maybe in a way similar to what we had in 2022, but the bookings profile are different than before. Currently the bookings are strong in demand for test and measurement, semiconductor equipment, data center, fiber optics and avionic, military and space in addition to general industrial. So what we see is very strong demand around AI infrastructure in addition to defense, while in 2022 the general industrial were much stronger. So the net bookings could be similar but the profile is very different. Regarding your other question, we are optimistic regarding how the year is going to look like and at this point in time, despite our short visibility, we do see and believe that we will see a continued positive trend also moving into Q2.
Jon Franzeb
Got it. And one more question. I'll go back into queue, let someone else take the lead. But I do want to go back to the quarter you just reported. Revenues came in somewhat better than expected. When you look back at what your initial expectations were versus the revenue profile for the quarter, where was the biggest upside?
Ziv Shoshani
The biggest upside? Okay, so let me say the following. Since we we have longer lead items in respect to shorter lead items, what we have seen naturally on the shorter leak items, higher demand than what we have anticipated. So to that respect I think it was avionic, military and space in the measurement systems where we have a shorter cycle time.
Jon Franzeb
Got it. Thanks Stephen. Congratulations again.
Bella (Operator)
Thank you again. If you would like to ask a question, press Star one on your telephone keypad. Your next question comes from the line of Josh Nichols with B. Riley. Please go ahead.
Josh Nichols (Analyst at B. Riley)
Yeah, thanks for taking my questions. Great to see big milestone bookings, over 100 million for the quarter. I want to dive in a little bit more just on the humanoid aspect like one you mentioned. There's now your early discussions with fourth humanoid developer just at a high level. Can you characterize one like the size and tier of that potential customer. And just as one follow on you mentioned like the humanoid assumption was that you'd be growing humanoid business at like a 50% through 26, 27 and what that kind of implies from revenue perspective.
Ziv Shoshani
Absolutely Josh. So let me first take your first question regarding the fourth humanoid potential fourth humanoid customer. So we are speaking about the startup company which are in the very early stage in defense, home use and industrial application where we have reached to them. And I could say that we are in the very early engineering design discussions but as you know with those customers it's a fairly long cycle time. So it's good that we are there. They believe they have a strong business, I would say prospects and we are there to help them solve their problems or their challenges. In respect to sensors regarding humanoid we have, you know, the adoption rate is still fairly low There is a lot of discussion, there is a lot of hype around humanoid prospects. We still believe this is a very good market to be in. I could say that within the two customers where we have a more established, I would say footprint, we are still in the pre production levels. We did booked, I would say, or we have recognized revenue of $600,000 in Q1. We do believe that we could potentially more than double the revenues for Humanoid revenues in the second quarter. And we are, I would say much more optimistic regarding the second half of the year in respect to volume of volume production volume. I would say that there are some discussions regarding already lower volume and higher production run rates. We have the infrastructure to support. Well, we have the infrastructure and we are setting all the related supporting systems in order to support a much quicker, I would say upside or demand from our customers. But we are still, I would say very optimistic regarding this trend. Regarding the model, since we wanted to provide the three years model and naturally we do believe that this is a strong sector, but we had to take certain assumptions. So we did not want to, you know, in order to be in our, I would say in a more in a zone where we believe at this point, based on our own internal estimation, since we have no visibility, we decided to take 2025 as a baseline and based on that to go for 50% year over year increase, which we believe it's reasonable and feasible. It could be much higher than that. But at this point we don't want to speculate. So this was kind of a baseline assumption for the three year model which we wanted to, to announce.
Josh Nichols (Analyst at B. Riley)
Yeah, thanks for that. I was just. It sounds like you're targeting for this year like five plus million for humanoids, so growing that would be like, you know, maybe low teens, millions of revenue on the out year. But as you mentioned, based on some of the production ramps that some of these companies are talking about, you're using pretty conservative assumptions that are quite achievable, I would guess. Is that fair assessment?
Ziv Shoshani
Let me say that the math you calculated sounds right. I think that at this point in time I would say that this is what we, we believe could be a reasonable, you know, assumption. We do hope that things would, you know, would turn quickly, but at this point we had to put assumptions and we feel comfortable with this assumption. But you know, anything can happen.
Josh Nichols (Analyst at B. Riley)
Yep, fair enough. Just last question for me, a lot of organizational investments, you have the cbpo, the coo, of course, could you add a little bit more color on how these new functions have already been Impacting the company's go to market capabilities and these operational excellence initiatives that you've had underway. I'm curious to hear a little bit more there.
Ziv Shoshani
Okay, good. So let me start with the coo. With the COO we already established a global procurement multi year manufacturing footprint, streaming line manufacturing footprint and also a team dedicated for efficiency and improvement of efficiency and automation. I think that to at least our model calls for over 20 million, over $20 million savings in three years. This is a number which exceeds significantly our historical savings or improvements to that extent. So we, we feel strong and there are and by the way I will touch base on that in a second on the cbdo, but they are cross company, I would say operating units which are looking at the complete company and are setting those projects on the cbdo. We have now a unified, I would say a unified marketing team. We have started to use much more marketing automation tool. We are moving into a unified CRM. We are moving into I would say a more unified data system which is going to streamline or consolidate all the data from all the systems in the organizations, erp, CRM, so on and so forth. We have already established a sales operation team cross company which are looking at lead time, service level, demand management. So we are moving ahead with a more holistic approach to provide I would say cross company dashboards in order to set in line best practice processes and capabilities.
Josh Nichols (Analyst at B. Riley)
Appreciate the color there. Thanks. Our hop back in the queue. Let someone else take a turn.
Bella (Operator)
Again. If you would like to ask a question, press Star one on your telephone keypad. Your next question comes from the line of Jason Smith with Lake Street Capital. Please go ahead.
Jason Smith (Analyst at Lake Street Capital)
Hey guys, thanks for taking my questions. Just want to look at that updated three year target model at a high level. Do you expect the segment mix to be relatively stable compared to how it is today?
Ziv Shoshani
Well, if you look at the three year target model, you will see that the sensor segment as well as the measurement system segment outperform growth outperform weighing solution. So as we are looking for those segments to be to grow faster, we should expect also to see a more favorable so called segment mix from a profitability standpoint. But we do believe that at this point in time the emerging growth engines are coming from sensors and the measurement systems.
Jason Smith (Analyst at Lake Street Capital)
Gotcha. That makes sense. And maybe I missed it, but the 45 million in orders that you're targeting for new business development in 2026, is that still the target or do you think there's upside to that just given the traction you're currently seeing? In Q1 and Q2,
Ziv Shoshani
as we indicated before, we booked in Q1, $10 million of business development projects. I think that at this point in time, since we are. I would say that at this point in time, since we are only reporting Q1, I would say that 45 million is still the target. It may change of course as we move ahead, but at this point in time, the 45 million was the original target and I believe that it's achievable.
Jason Smith (Analyst at Lake Street Capital)
Perfect, that's helpful. I'll jump back in the queue. Thank you.
Bella (Operator)
Thank you again. If you like to ask a question, press star one on your telephone keypad. And now we will take John Franzeb from Cydoti and company. Your line is now open.
Jon Franzeb
Thank you. Just a follow up, just the targets, the three year target. What's the slope you expect of achieving those targets? Is it going to be, is it going to progress linearly or is it going to be back ended?
Ziv Shoshani
I'm sorry, John, if we speak about 20, you speak about 2026 or the three year target? The three year target, sir, at this point, again, given the visibility, we just assumed a linear baseline. Again, it's, you know, it's really, it's three years. So we have assumed a linear.
Jon Franzeb
Got it. And in light of some of the investments that you're, that you're undertaking, how does that change. Change or does it change the CAPEX budget starting with this year? And how should we think about it on a go forward basis?
Ziv Shoshani
So in a way it's a very good question given the fact that the significant over 20 million operational excellence, which would relate also to streamlining of manufacturing, would require capex at this point in time. We believe that. I would say that 15 to. Okay, let me say differently. I still believe that we could meet the 4 to 5% of revenue from a capital spending standpoint and achieve the necessary or the targeted operational excellence initiatives. So it would be between 4 to 5% of revenue.
Jon Franzeb
Understood. And you just kind of touched on this. You talk about streamlining to low cost manufacturing sites. Does that mean moving within your existing footprint or adding to it?
Ziv Shoshani
We have a very large infrastructure and we believe that we would be able to, to continue and consolidate within our own manufacturing footprint.
Jon Franzeb
Got it. And just one last question, circling back to the robotics, Humanoid Robotics comments. There's. I guess, I guess the first question is the baseline from what I remember for 2025 was $4 million in revenues from Humanoid Robotics. That's the starting point. This is correct. Okay, just want to double check that. And that there's been a lot in the press about downward pricing on vendors in humanoid robotics because the competitive level is getting pretty sizable out there. Are you seeing that? Can you just walk us through the pricing model and how that's playing out relative to what, maybe what you thought, I don't know, three to six months ago?
Ziv Shoshani
Naturally this is, you know, this is a, in a way we cannot get to too much details in respect to the moving parts pieces. But I could say that on a high level, no doubt it's a very competitive market and we believe that we are, that we can play in that market. I would say that if we are speaking about on a high level, if we are paying about tens of robots per week, on a high level, the content of all the sensing parts within a robot would be between 4 to 500, while if the volume moves to many hundreds or more than that, we believe, again, there is no solid or final negotiation with anybody. But we believe that the expectation is to go to the roundabout, I would say 150 to 250 levels.
Jon Franzeb
Thank you, Steve. Perfect. I appreciate the additional color. Congrats again.
Bella (Operator)
There are no questions at this time. I will now turn the call back over to Steve Cantor for closing remarks.
Stephen Cantor
Thank you, Bella. Before concluding, I would like to note that we will be participating in the B. Riley Investor Conference this month and the Three Part Advisors and the Nobel Conferences in June. We look forward to updating you next quarter. Thank you and have a great day.
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.