Sign in

    Vishay Precision Group (VPG)

    Q3 2024 Earnings Summary

    Reported on Mar 18, 2025
    Pre-Earnings PriceN/ADate unavailable
    Post-Earnings PriceN/ADate unavailable
    Price ChangeN/A

    What went well

    • VPG is expecting revenues from their initial humanoid robot customer to double in 2025 even before reaching full production, and is also working with a second humanoid robot customer of similar potential size, indicating significant growth opportunities in this emerging market.
    • The company is streamlining operations by relocating products from high-labor-cost countries to their India facility, expecting to realize multimillion-dollar savings, which should improve margins and operational efficiency.
    • VPG anticipates bookings to return to the mid-$70 million range in Q4 as large Measurement Systems projects delayed from Q3 are booked, reflecting a recovery in demand and improved business environment.

    What went wrong

    • VPG is experiencing softness in key markets, especially in Europe and China, which is negatively impacting revenues in the Measurement Systems and steel business. Ziv Shoshani noted that "Europe and especially U.K., given the economy is still fairly soft" and mentioned headwinds in the steel business due to the "China soft business and soft construction business."
    • The company had the biggest drop in order intake in the Measurement Systems segment during the third quarter, due to projects being pushed out from Q3 to Q4. This indicates potential delays in revenue recognition and customer hesitancy to commit to new projects.
    • Increased orders are primarily due to stock replenishment rather than new demand, suggesting underlying demand remains weak and limiting near-term growth prospects. Ziv Shoshani stated that they "have not seen or we do not expect to see yet a larger potential upside coming from an additional demand... it's coming from the stock replenishment order pattern."

    Q&A Summary

    1. End Market Outlook
      Q: Any notable changes in end market mix since last quarter?
      A: The biggest drop in Q3 order intake was in Measurement Systems due to projects pushed to Q4. We expect Q4 bookings to return to the mid-$70 million range. The outlook is mixed: some optimism in semiconductor and general industrial markets, but Europe, especially the U.K., remains soft. Precision agriculture shows more optimism with increased Q3 orders. Interest rate cuts should foster recovery in the next few quarters.

    2. Cost Reduction Initiatives
      Q: What levers can reduce operating costs under consideration?
      A: We continue to streamline operations by relocating products from high labor countries to our large India facility, expecting to realize multimillion-dollar savings. This includes consolidating operations and streamlining staff-based functions.

    3. Nokra Acquisition and Growth
      Q: How much of Nokra's growth in '25 is organic vs. integrated?
      A: We acquired Nokra to broaden our KELK portfolio. Leveraging KELK's sales channels, we aim to almost double Nokra's revenue in 2025 to around mid-single-digit millions, significantly increasing from 2024. While facing headwinds in steel due to China's soft market, India's significant infrastructure investments make us optimistic about future steel demand.

    4. Humanoid Robot Projects
      Q: Size of second humanoid robot customer?
      A: We're expecting significant revenues from our first humanoid robot customer this year, with revenues expected to double in 2025 even though still in pre-production. The second customer is in early design stages but could be of similar size with sizable potential upside once in full production.

    5. Capital Allocation and Share Buybacks
      Q: Thoughts on M&A relative to current stock price?
      A: Our strong balance sheet allows us to support stock buybacks, acquisitions, and organic growth investments. We repurchased $1.9 million of stock in Q3. We're committed to investing in the company first, but M&A and buybacks are also important capital allocation strategies.

    6. M&A Strategy and Nokra's Role
      Q: Was Nokra a customer, and what's the M&A focus?
      A: Nokra was not a customer, but we identified them to enhance our product portfolio and leverage KELK's sales channels for quick synergy realization. We're looking at similar businesses like Nokra and others that offer operational synergies or adjacent technologies, ranging from small to larger potential acquisitions.

    7. DSO Increase and Cash Flow
      Q: Is the higher DSO this quarter a concern?
      A: The increase in DSO is a one-time event due to sales in the last week of Q3. We had over $3 million in one-time tax payments and $1.4 million related to insurance renewals. We anticipate returning to positive free cash flow in Q4.

    8. Labor Inefficiencies Resolved
      Q: Are the labor inefficiencies in Sensors segment resolved?
      A: Yes, we've seen significant improvement at the beginning of Q4 regarding the inefficiencies booked in Q3. The issues are now completely behind us.

    Analyst Coverage

    Research analysts covering Vishay Precision Group.

    Related Publications