Vishay Precision Group(VPG) - 2021 Q4 - Earnings Call Transcript

Financial Data and Key Metrics Changes - In 2021, the company achieved a sales growth of 17.8% and an adjusted diluted EPS of $1.87, with an improved adjusted EBITDA margin of 15.7% compared to 14.1% in the previous year [4][26] - For Q4 2021, the company reported record sales of $90 million, a 19.3% increase compared to Q4 2020, and a 9.8% increase from Q3 2021 [26][13] - The adjusted gross margin for Q4 was 40.3%, down from 41.8% in Q3, while the operating margin was 11.4% [27][26] Business Line Data and Key Metrics Changes - The sensor segment reported Q4 revenue of $34.1 million, growing 11.2% sequentially and 7.1% year-over-year, with a book-to-bill ratio of 1.11 [15][13] - The weighing solutions segment had Q4 sales of $32.1 million, a 4.5% increase from Q3, with OEM revenue growing approximately 35% sequentially [18][19] - The measurement systems segment recorded Q4 revenue of $23.8 million, a 15.6% sequential increase and a 69.7% year-over-year increase, primarily due to the acquisition of DTS [21][11] Market Data and Key Metrics Changes - The company noted that demand for its solutions in the large truck market has improved, with expectations for supply shortages to ease in the second half of the year [20][19] - The company is experiencing growth in consumer markets, which were not addressed a few years ago, indicating a shift in market focus [7][6] Company Strategy and Development Direction - The company is transitioning from a vertical integration strategy to an operationally diversified structure with three distinct business pillars: sensors, weighing solutions, and measurement systems [9][8] - The new strategy aims to capitalize on expanding market opportunities and enhance long-term organic growth, targeting low double-digit revenue growth and adjusted gross margins of 45% [12][9] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in addressing labor challenges and supply chain constraints, with expectations for operational stability by Q2 2022 [36][62] - The company anticipates that price increases will begin to offset higher input costs, with an estimated $800,000 in price increases reported for Q4 [37][36] Other Important Information - The company plans to invest $30 million to $33 million in CAPEX for fiscal 2022, the highest level in its history, to support growth initiatives [24][29] - The company ended Q4 with $84.3 million in cash and cash equivalents, indicating a strong balance sheet to support business requirements and potential M&A opportunities [30][26] Q&A Session Summary Question: Revenue contribution from advanced sensor business for fiscal 2021 - The advanced sensor business contributed approximately $40 million in revenue for the full year [36] Question: Impact and timing of price increases - Price increases of around $800,000 were reported for Q4, with expectations for greater momentum moving into the year [37] Question: Capacity expansions in precision resistors and Force Sensors - The increase in capacity is driven by higher functionality demands from customers, particularly in 5G infrastructure and consumer applications [38] Question: Demand for onboard weighing systems in Europe - Demand is still driven by regulations, with expectations for improved order intake in the second half of the year as supply shortages ease [42] Question: Organic growth and M&A activity expectations - Organic growth is expected to be in the high single digits, with M&A activity anticipated to accelerate due to more reasonable valuations in the current environment [46][52] Question: Margin expansion glide path - The company expects to achieve margin targets through increased volume and operational efficiencies, aiming for adjusted gross margins of 45% over the next three to five years [50] Question: New applications contributing to revenue - New applications in consumer markets and other areas are contributing tens of millions in revenue, which did not exist five years ago [57] Question: Efficiency of advanced sensor plant - The company expects to resolve inefficiencies and achieve operational stability by mid-year, with excess equipment capacity planned [62] Question: Inventory declines in measurement systems and weighing solutions - Inventory declines were due to strong sales and delivery cycles, not intentional reductions or supply chain issues [63][65]