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DATE
Nov. 4, 2026
CALL PARTICIPANTS
- Senior Director Investor Relations - Steve Cantor
- President and Chief Executive Officer - Ziv Shoshani
- Chief Financial Officer - Bill Clancy
TAKEAWAYS
- Adjusted Net Revenue -- $87.4 million, representing 10% year-over-year growth and reaching the highest quarterly level in three years.
- Adjusted Orders -- $103 million, driven by record demand for precision resistors in semiconductor equipment and data center infrastructure.
- Sensors Segment Revenue -- $38.4 million, increasing 21% year over year primarily due to higher sales to the test and measurement market.
- Sensors Bookings -- $51.7 million, resulting in a book-to-bill ratio of 1.35 following elevated demand for fiber-optic transmission equipment.
- Adjusted Gross Margin -- 39.3%, up from 38.6% in the second quarter due to higher volumes and manufacturing efficiencies.
- Adjusted EPS -- $0.14, which included a $0.03 reduction caused by an adjusted tax rate of 48% from a shift in geographic income mix.
- Book-to-Bill Ratio -- 1.17, marking the eighth consecutive quarter at or above 1.0 due to positive demand trends across all segments.
- Backlog -- $151 million, providing increased visibility into the first quarter of 2027.
- Cost Savings -- $4.2 million year to date, keeping the company on track to achieve its approximately $6 million annual target.
- Humanoid Robotics Performance -- $200,000 in bookings and $300,000 in sales, as the primary customer shifted its production ramp to the fourth quarter.
- Foreign Exchange Impact -- $3.4 million reduction in adjusted operating profit compared to the prior year period.
- Future Revenue Outlook -- 10% to 12% growth projected for 2027, which exceeds the annual target in the company's original three-year plan.
- Quarterly Guidance -- $84 million to $91 million for the fourth quarter, reflecting aged backlog and fewer working days.
- First Quarter 2027 Outlook -- $90 million or better, supported by projected capacity increases and manufacturing output gains.
- Adjusted EBITDA -- $8.2 million, representing a 9.4% margin compared to 6.5% in the second quarter.
- Business Development Initiatives -- $11.9 million in bookings, maintaining progress toward a $45 million full-year goal.
- Free Cash Flow -- $5.5 million, an improvement of $6.9 million sequentially driven by better receivable collections.
- Capital Expenditures -- $10.6 million for the first nine months, with a full-year 2026 forecast of $14 million to $16 million.
- Measurement Systems Revenue -- $22.1 million, an increase of 10% sequentially led by thermal-mechanical simulation test systems.
- Weighing Solutions Revenue -- $26.9 million, a decline of 11% from the second quarter due to seasonal softness in European process weighing markets.
- AI Revenue Mix -- 20% to 30% estimated contribution to the Sensors segment from AI-related applications and infrastructure.
- Net Cash -- $65 million, comprising $80.9 million in cash and $15.7 million in long-term debt.
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RISKS
- Clancy stated, "Foreign exchange rates continued to represent a significant headwind to profitability," noting that currency impacts reduced adjusted operating profit by $3.4 million compared to the prior year period.
- Shoshani noted that the adjusted tax rate reached 48% in the third quarter due to a shift in the geographic mix of income, which "reduced adjusted EPS by approximately $0.03 per diluted share."
- Shoshani reported that the initial humanoid robotics production ramp was delayed from the third quarter to the fourth quarter because of "the challenges of scaling a highly complex supply chain" by the primary customer.
SUMMARY
Vishay Precision Group, Inc. (NYSE:VPG) reported record bookings and sequential margin improvement during the third quarter. Management stated that growth is being driven by demand from artificial intelligence infrastructure, semiconductor equipment, and aerospace and defense applications. The company is executing a three-year plan focused on operational efficiencies and capacity expansion to support a projected revenue acceleration in 2027. Management indicated that commercialization efforts in humanoid robotics and lead management systems are intended to diversify long-term revenue streams.
- CEO Shoshani stated, "Demand continued to be driven by investments in AI-related infrastructure," specifically citing precision resistors for semiconductor front-end and process control equipment.
- The company completed the first phase of a company-wide CRM rollout for the Sensors segment, with deployment to remaining businesses planned through 2027.
- Management reported that a leading European manufacturer now includes VPG products as standard options for onboard weighing on off-highway heavy-use trucks.
- The company is expanding manufacturing capacity by adding personnel and equipment at key Sensors facilities to address the record $51.7 million segment backlog.
- Management expects the humanoid robotics production ramp to accelerate through 2027, supported by a customer investment in VPG's capacity expansion.
- Measurement Systems recovery was aided by a 40% sequential increase in steel-related orders and high bookings for automotive crash safety testing.
INDUSTRY GLOSSARY
- Sensors segment: A business unit focused on precision resistors and strain gages used in test, measurement, and AI-related equipment.
- Weighing Solutions segment: A division providing load cells and force measurement transducers for industrial and transportation applications.
- Measurement Systems segment: A segment providing highly specialized systems for steel production optimization and safety testing.
- Book-to-bill ratio: The ratio of orders received to revenue recognized, used to measure future demand.
- BD initiatives: Business Development programs focused on expanding revenue in new markets like humanoid robotics and e-bikes.
Full Conference Call Transcript
Operator: Good morning and welcome everyone to the VPG 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 speaker's 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: Great. Thank you, operator. Good morning, everyone. Welcome to VPG'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. On the call today, we will be 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 could 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 onto 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 Ziv Shoshani, President and CEO, and Bill Clancy, Chief Financial Officer. I'll now turn the call over to Ziv for his prepared remarks. You can read of the quarterly presentation. Ziv?
Ziv Shoshani: 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 four, third quarter highlights, booking, 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 BD 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%-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 five, Sensors third quarter highlights. Beginning with our Sensor 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 optic transmission equipment remained elevated, supporting the continued build-out of data center infrastructure. We saw continued positive trends in avionic 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 requirement, and the need to scale sophisticated supply chain 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 the additional prospective customers across the market. Moving to slide six, Weighing Solutions third quarter highlights.
Turning to our Weighing Solutions segment, third quarter adjusted revenue of $26.9 million, which exclude $2.3 million of tariff refunds to customers, declined 11% from the second quarter and were 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 semi-annual order in the second quarter, which was offset by a 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 the loading and operations in a harsh environment such as mining and construction. Moving to slide seven, 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 products, 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 of DTS, as bookings related to automotive crash safety testing reached the highest level of 2026, and orders for aerospace and defense applications remained strong. Moving to slide eight, 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 in 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 through 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, 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 10%-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?
Bill Clancy: Thank you, Ziv. Referring to slide nine and the reconciliation tables in the slide deck, third quarter of 2026 GAAP net revenues was $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, with 35.7% of revenue, down from second quarter levels due to lower sales commissions and reduced incentive compensation accruals. Foreign exchange rates continued 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 Ziv 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-$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-$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 remained 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. Our growing backlog, expanding capacity, and commercial execution gives 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. Our first question comes from Jaeson Schmidt at Lake Street Capital.
Jaeson Schmidt: 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?
Ziv Shoshani: Yes. Good morning, Jaeson. Yes, we did report BD for Q3. The BD contribution is $12 million in orders, and for the first nine months, it is $33.5 million, and we are on track to hit our $45 million target for 2026.
Jaeson Schmidt: Okay, perfect. 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 2027 outlook.
Ziv Shoshani: As we look into 2027, first, we see a very solid backlog for the end of this quarter. We are running at the 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 AMS. 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%-12% higher revenues in respect to 2026.
Jaeson Schmidt: Okay. Appreciate that, caller. I will jump back into queue. Thanks a lot, guys.
Operator: We will move next to Josh Nichols at B. Riley Securities.
Josh Nichols: Yeah, thanks for taking my question. Just curious, looking, the backlog, the order activity has been exceptionally strong. You're assuming Q4, it's kind of similar to Q3, and then there's a nice ramp, assumes, in Q1 and beyond. What's the right way to think about that wider revenue range that you're giving for Q4, 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 humanoid robotics or other parts of the core business, like Sensors?
Ziv Shoshani: So, if we are looking at the 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 are also looking at 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, 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 in respect to revenues. And I'm sorry, what was your other question?
Josh Nichols: I was just curious because the range for Q4 was also a bit wider than you normally give. Normally, it's around $5 million.
Ziv Shoshani: We did give larger ranges in the past. I didn't thought 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 expected, the supply chain is more complicated from our customer standpoint. The supply chain is more complicated than expected. But this is part of the, you can call it, of the buffer volatility that we also account in our range.
Josh Nichols: Got it. That makes sense. Last question for me. The Sensors momentum has been exceptionally strong. Another quarter record bookings north of $51 million. I am just curious how you are thinking about, 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.
Ziv Shoshani: Naturally, given the sizable order intake, we had to place order to increase capacity equipment as well as hiring more people. In addition to that, we are setting, I would say, more manufacturing site 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, I would say 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: Got it. Thank you.
Operator: As a reminder, if you would like to ask a question, please press star one. We will move next to John Franzreb at Sidoti.
John Franzreb: Good morning, everyone, and thanks for taking the questions. Ziv, 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?
Ziv Shoshani: We didn't provide any specific information regarding the Sensors segment. We did identify that all our semiconductor business, all our fiber optic data, and potentially also our humanoid robotics business, they are all AI-related. I think that at this point in time, I could estimate that. In addition to that, I would like to state that we have also a very solid demand, AMS business. But if we speak specifically about the AI, I would say that at this point in time, a rough estimation would be around 20%-30%.
John Franzreb: 20%-30% of the Sensors segment or company-wide?
Ziv Shoshani: No, no. Of the Sensors segment.
John Franzreb: Okay, got it. Thank you.
Ziv Shoshani: Of the Sensors segment.
John Franzreb: Appreciate the clarity. Thank you. In the second quarter, there was a KELK order that was deferred. At the time, we were saying in the second half of the year. Was that order fulfilled in the third quarter, or is there still some remaining that is flowing into the fourth?
Ziv Shoshani: You are correct. Some of the order has been fulfilled, but the main part will be delivered in Q4, this quarter.
John Franzreb: Good. That's good to hear. One, I guess, last question. Just for 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: Yeah, John. The way we do our calculation, it's always the opening backlog plus orders, let's say. Basically, we back into the order numbers because the backlog is fixed. It's just a mathematical calculation.
John Franzreb: Okay. Thank you, Bill. I'll get back into queue, everyone.
Operator: 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. We have no further questions at this time. I would like to turn the conference back over to Steve for closing remarks.
Steve Cantor: Before concluding, I want to note that we will be participating in the Roth Conference this month and the Sidoti Conference in December, and 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: This concludes today's conference call. Thank you for your participation. You may now disconnect.
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