Third quarter 2026 earnings call, November 4, 2026

Vishay Precision Group reported adjusted third quarter revenue of $87.4 million, its highest quarterly level in three years, up 4% sequentially and 10% from a year ago. The more consequential disclosure for investors was forward-looking. Management put backlog at $151 million, said Q4 orders should run at a rate similar to Q3's $103 million, and said first quarter 2027 revenue could reach "$90 million or better." CEO Ziv Shoshani framed 2027 revenue growth of 10% to 12%, above the annual rate in the company's original three-year plan. The consolidated book-to-bill ratio was 1.17, the eighth consecutive quarter at or above 1.0.

Sensors Is the Engine, and AI Is a Smaller Share Than the Narrative Implies

Sensors revenue of $38.4 million rose 15% sequentially and 21% year over year, led by test and measurement. Bookings of $51.7 million set a second consecutive all-time record, for a book-to-bill ratio of 1.35. Demand came from precision resistors sold into semiconductor front-end, back-end and process control equipment, high-speed fiber optic transmission gear, and avionics and defense programs.

In response to a question from John Franzreb of Sidoti, Shoshani offered the first quantification of AI exposure the company has given. He said semiconductor, fiber optic data and potentially humanoid business are all AI related, and that "a rough estimation would be around 20% to 30%" of the Sensors segment. That is meaningful but well short of a majority, and it suggests much of the segment's current strength rests on aerospace, defense and broader industrial demand. Management also pointed to early signs of recovery in industrial markets. The company declined to give more granular figures.

Sensors adjusted gross margin rose to 32.6% on higher volume, partly offset by higher manufacturing costs. That is the lowest margin of the three segments, so mix shift toward Sensors dilutes the consolidated figure even as it drives growth.

Humanoid Robotics: Timing Slips, but Customer Funding and a Second Customer Add Substance

The humanoid story contained the quarter's main disappointment. Bookings were only about $200,000 and sales $300,000, because the initial customer pushed the start of its production ramp into Q4, citing the difficulty of scaling "a highly complex supply chain." VPG now expects orders to rise gradually beginning this quarter, with volume accelerating through 2027. Management said its own manufacturing and supply chain capabilities are in place for the initial ramp, placing the bottleneck with the customer.

Two items partly offset the delay. The customer has made an investment in VPG to support humanoid-related capacity expansion, which management called "a solid endorsement of our value proposition." Shoshani also said discussions with a second customer continue to progress well and that the revenue opportunity "could be larger than we previously anticipated." VPG is supporting several other humanoid developers moving from prototype to commercialization. With current revenue immaterial, the thesis remains an option on 2027 and beyond. The wider Q4 guidance range of $84 million to $91 million reflects this uncertainty. Shoshani acknowledged the volatility, saying the supply chain is "more complicated than expected" for the customer and that this is part of the buffer built into the range.

Margins, Cash and the FX and Tax Drag

Adjusted gross margin improved to 39.3% from 38.6% in Q2, excluding $141,000 of start-up costs from capacity expansion. Adjusted operating margin was only 4.9%, with GAAP operating margin at 3.2%. SG&A was $31.2 million, or 35.7% of revenue, helped by lower commissions and reduced incentive accruals, which are not a durable source of savings. Adjusted EBITDA rose to $8.2 million, or 9.4% of revenue, from $5.2 million, or 6.5%, in Q2.

Currency remains a substantial drag. Unfavorable exchange rates cut Q3 adjusted operating profit by $3.4 million versus the prior year and by $8.1 million year to date. Taxes were a second problem: the adjusted tax rate was 48%, versus 37% in the first half, on a shift in geographic income mix. Management estimates this cost about $0.03 per share, and assumes an operational tax rate of about 45% for the full year. Adjusted EPS was $0.14, while GAAP EPS was $0.04 on net earnings of $559,000. Revenue growth is therefore translating into earnings far less efficiently than the top-line trend suggests.

Cash flow improved. Adjusted free cash flow was $5.5 million, a $6.9 million sequential swing from negative $1.4 million, on better receivable collections. Quarter-end cash was $80.9 million against $15.7 million of long-term debt, or net cash of about $65 million. Full-year capex is expected at $14 million to $16 million, with $10.6 million spent through nine months.

Capacity Is the Constraint on Converting Backlog

In response to a question from Josh Nichols of B. Riley, management acknowledged that the order surge has strained manufacturing. VPG has ordered equipment, is hiring and training personnel, and is adding manufacturing sites. Shoshani cautioned that "it takes time given the learning curve and the complexity of the product." He expects lead times to shorten and capacity to rise in the coming quarter. Q4 guidance also reflects fewer working days than Q3. The Q1 target of $90 million or better depends on output per day rising, which has yet to be demonstrated.

Weighing Solutions and Measurement Systems

Weighing Solutions adjusted revenue was $26.9 million, down 11% sequentially and 2% year over year, on seasonal softness in European process weighing. Orders of $28.6 million were flat, for a book-to-bill ratio of 1.06. E-bike bookings fell after a large semiannual order in Q2, offset by transportation strength; VPG's products are now standard options for onboard payload weighing on off-highway heavy trucks from a leading European manufacturer. Segment adjusted gross margin fell to 34.6% on lower volume.

Measurement Systems revenue rose 10% sequentially and 8% year over year, led by DSI thermal mechanical simulation systems for steel. Orders of $22.2 million rose 19% sequentially, including a 40% rise in steel-related orders, and automotive crash-test bookings at DTS reached their 2026 high. Segment gross margin rose to 56.5% on volume and mix. KELK production continues to recover, and in answer to Franzreb, Shoshani said that while some of the order deferred from Q2 shipped in Q3, "the main part will be delivered in Q4."

Cost Program and Commercial Initiatives

VPG has realized nearly $4.2 million of cost savings year to date and expects about $6 million for 2026, the first phase of a three-year, roughly $20 million program built on footprint optimization, automation and procurement. Business development bookings were $11.9 million in Q3 and $33.5 million year to date, keeping the company on track for its $45 million full-year goal. The company also completed the first phase of a CRM rollout in Sensors, with the remaining businesses to follow in Q4 and 2027. The company received $2.3 million of tariff refunds, which it is passing to customers. These reduce reported revenue but are profit neutral, and the refunds explain the gap between the $85.1 million GAAP and $87.4 million adjusted revenue figures.