Vishay Precision at East Coast IDEAS: Strategic Shift Towards Growth

Vishay Precision Group (NYSE:VPG) presented a strategic shift towards growth at The 15th Annual East Coast IDEAS Conference on Thursday, 12 June 2025. The company aims to achieve low-teens growth through both organic and inorganic means, despite challenges in reaching ambitious margin targets. VPG’s plans include manufacturing investments and exploring new markets such as humanoid robotics.

Key Takeaways

• VPG targets low-teens growth with 45% gross margins and 22% EBITDA margins.
• Record gross margins were achieved in Q1 FY2024 due to manufacturing investments.
• The company is pursuing a transformational acquisition to boost scale and cash flow.
• VPG is expanding into humanoid robotics and ceramics testing tools.
• Strong balance sheet supports growth and acquisition strategies.

Financial Results

• Record Gross Margin: Achieved in Q1 FY2024 on $80 million revenue.
• Targeted Margins: 45% gross, 18% operating, and 22% EBITDA.
• Cost Reductions: $5 million expected savings this year.
• Revenue Goals: $17 million in business development sales for 2024, $30 million for 2025, and $100 million in the next 2-3 years.
• Acquisition Target: A business with $80-100 million in revenue and $10-20 million in EBITDA.

Operational Updates

• Manufacturing Investments: Over $53 million in CapEx to improve processes and consolidate operations.
• Business Development Initiatives: Focus on sales, marketing, and R&D to explore new markets.
• Humanoid Robotics: Collaboration with two manufacturers, generating $2.5 million in prototypes.
• Ceramics Testing Tool: Developed for high-temperature applications, with beta testing at the University of Alabama.

Future Outlook

• Growth Strategy: Low-teens growth through a balanced mix of organic and inorganic methods.
• Humanoid Robot Market: Anticipated production orders and deployment of 1,000-2,000 robots by year-end.
• Ceramics Testing Revenue: Potential $20-30 million incremental business by 2027.

Q&A Highlights

• Business Development Focus: Enhancements in sales and marketing to attract new customers.
• Humanoid Robots: Adjustments to sensor specifications based on client needs.
• Pricing Strategy: Emphasis on customization for specific applications.

For further details, refer to the full transcript provided below.

Full transcript - The 15th Annual East Coast IDEAS Conference:

Operator: Good afternoon and thank you all for joining us for our next East Coast Ideas presentation. Presenting next is Vishay Precision Group which trades on the New York Stock Exchange under the ticker symbol VPG. Representing the company today is Senior Director and Investor Relations, Steve Kanter. Steve?

Steve Kanter, Senior Director and Investor Relations, Vishay Precision Group: Great, thank you and it’s great to be here today to tell you about VPG. Before I do, want to remind everybody I will be making some forward looking statements so you should read our filings carefully to understand the risks associated with those statements. So at our core, VPG is a sensor company. The sensor market as you know is quite large and it continues to grow. Sensors continue to proliferate.

We play in a corner of that market really where precision, reliability, consistency is vital. And we’ve been doing that for a while. We’ve been addressing a lot of applications which really relate to safety and also increased productivity. So if you think about what value that we provide our customers, it’s really to take that level of precision and performance and really drive their products or processes. We’ve been around as a public company since 2010.

We’re global. We have manufacturing across the world. In India is our largest facility. We have facilities in Israel and The US and Japan. A small one in China and a small one in Europe.

So one of the things that differentiates us from other sensor companies our size, I believe, is the diversity of end markets. So one of our core strengths is to take our technologies and really apply them in ways across a broad array of industries and applications. And so I’m showing on this slide some of the end markets as we disclose our revenues. And as you can see, they touch everything from test and measurement to we have plays in transportation, mostly around trucking, avionics, military space, in steel production, in industrial environments such as manufacturing. And the other segment that I’m showing on this slide includes things like precision ag, construction, medical, and even consumer electronics.

We operate in three business segments, sensors weighing solutions and measurement systems. Sensors, I think as components, we think that business grows in the mid to high single digits with gross margins of 40% or the low 40%. Weighing Solutions grows more in line with GDP plus with gross margins in the high 30s. And Measurement Systems we think grows organically in the mid single digits with our highest gross margins across the company of 55% or so. So we think we’re at an important inflection point in our company’s history and I’ll explain why.

But really what we’re driving for is to grow our business in the low teens. That is a combination of both organic and inorganic growth. You can think of these as half and half. So we seek to grow our business organically in the mid to upper single digits. And we think that can deliver these kinds of operating results.

And 45% gross margin, 18% operating margin, and EBITDA margins of 22%. What is I’d say most encouraging for us these days is that we think that we can get to these levels of operating results at lower revenue levels than we historically were able to. And that is a result of some key manufacturing investments that we’ve been making over the last five to seven years. Both in terms of consolidation of manufacturing from higher cost centers to lower cost centers. But also now as part of those manufacturing investments, we’re now able to make product at higher volume at more price competitive points.

And this we think is a key unlocking point or a key unlocking measure that we think allows us to get to these results. Another encouraging sign for us is that we delivered record gross margin in our first quarter of fiscal twenty twenty four, so first quarter of last year on revenue levels of $80,000,000 For us, if you looked at the business say a few years prior to that, we think that you would probably need another 5,000,000, at least 5,000,000 to get to those kinds of gross margin, a record level gross margin. So we think that as we, as the base business improves from its current levels and gets to revenue levels in the mid-80s, we think we could approach at least this gross margin target. As we’ve been investing in our manufacturing capability really as I mentioned as sort of an unlocking mechanism, we’ve seen opportunities to grow beyond our niche markets. And I think maybe I should back up a minute and just describe for those of you who are not familiar with VPG.

We are a niche market player. We focus again on certain sensing technologies which primarily are focused on measuring weight and force and torque. We provide a premium solution so we come in at the high end of the market, sort of the tip of the spear. We’ve been addressing these niches now for more than decades, a few decades. If you count our predecessor companies before even we became public.

And as we look out and we try to see what is the best path to deliver greater amounts of value to our shareholders, we believe that we need to actually grow beyond these niches. And so again one of the strategies here that we’ve been employing is around investing in our manufacturing. But also we’ve been also seeing these opportunities begin to emerge which require sensing technology that we provide, again at premium levels of performance. But we’re seeing more opportunities in part because of the way the sensor market is growing and also being influenced by some things like artificial intelligence which is really driving new and differentiated applications. So we have this sort of convergence, external, internal that’s really delivering or providing us with opportunity sets.

There are a few what we call, or what could be called mega trends which are in part driving these opportunities. I’ll go through these very quickly. They’re not new to any of you. It’s things like electrification, digital transformation, industrial automation, and defense and space technology. Just to give you a flavor of what we do.

So for example, we have a product on e bikes that help In terms of industrial automation, we’re involved in robotics both in terms of industrial robots as well as medical and surgical robots. We’ve been a player in providing various systems used in manufacturing to help automate manufacturing processes. Also to make them deliver the desired results in terms of performance. Think about like a pharmaceutical or chemical or even a food and bev manufacturing environment. You need to weigh the ingredients as part of the process.

And then you also in some cases need to weigh the product as it’s being manufactured for quality control. We’re involved with precision ag. In terms of defense and space, wouldn’t call this a mega trend but certainly it’s a need that continues to exist and maybe increase given the geopolitical environment we live in today. So we’re involved with testing new space systems such as this parachute system that I’m showing here on the slide. We’re on satellite command and control systems, missile and defense platforms, and also we’ve been involved in the testing and development of all kinds of drones, air, land, and sea.

In terms of digital transformation, is we define it sort of the application of digital technology in ways that maybe didn’t exist before. We have a play in consumer electronics. Semiconductor equipment, both test and front end continues to be an important market for us. And we now have a foothold into a new application for us in data center fiber optics, essentially providing precision resistors around the laser source to provide more consistency of service over longer periods of time. So I mentioned the investments we’ve been making in I guess you could call it operational excellence over the last several years.

We’ve invested more than 53,000,000 of CapEx. That’s both to support the consolidation activity I described as well as to invest in new manufacturing process. Again to allow us to make really in what we believe is the most advanced product in its category but to make it at higher volumes and at lower price to be more price competitive. I mentioned the gross margin we achieved in Q1 of twenty four. We have some additional cost cutting measures that we’re implementing this year and we expect to achieve another 5,000,000 of cost reductions.

At the same time, we have sustained our investments in business development. And we’ve been investing in both our sales forces, our sales systems and tools, as well as in marketing. And these are really critical investments in our view to support a number of initiatives to what we call business development initiatives. Which really is geared towards finding new customers that we didn’t address before, and also to get on new applications with existing customers that we didn’t have or weren’t able to. Primarily because of the price points.

We also are deploying or pursuing an acquisition strategy. We have a net cash position on our balance sheet. A very solid balance sheet with the capacity we think to add a transformational acquisition. In our view, a transformational acquisition would be a business that maybe has 80 to 100,000,000 in revenue and can generate 10 to 20,000,000 of EBITDA. We think that not only gives us greater scale from an investor point of view but also can deliver a significant amount of incremental cash flow and hence value.

I mentioned the business development. So this is again an area of key focus for the company. What’s different today than was existed at the company maybe three years ago is that these initiatives have much higher visibility. They also have much greater accountability in terms of the business leaders and the R and D teams that are driving them. So there’s KPIs associated with across our business with initiatives related to driving a new business development.

We’ve recorded about 17,000,000 of sales from this activity in 2024. We think we can grow that to 30,000,000 this year and then the next two, three years to get that to be 100,000,000. And that’s just what’s in the pipeline itself. There are a couple of these initiatives I do want to focus on today which I think give you a bit of a flavor of why these opportunities are coming towards us and how our products and technologies are actually now perfectly suited to address them. So beginning with the humanoid robot.

So humanoid robots sounds science fiction y but this is real. There’s now a considerable amount of investment going in to developing these humanoid robots. Really we see about six or seven key developers around the world who are aggressively developing them. And the question that I’ve gotten in the past is why humanoid, right? Why not just a box or one of these standing robots with the arm that moves back and And when you think about some of the factors that are really stressing economies around the world such as labor availability.

I know in this country there’s concerted efforts to try to bring in manufacturing. In order for that to happen, I think there is a consensus we do need to have greater amounts of industrial automation. Humanoid robots fit into that. Also the humanoid robot form factor, if you think about the environments that these robots are deployed in, those environments generally are designed for humans. And so it makes perfect sense that a humanoid form factor would be able to be integrated more seamlessly into those kinds of environments.

And then of course there’s all kinds of benefits, cost efficiency benefits of a humanoid. The fact that robot can very adaptable, can do one task one minute, another task another. And can also work alongside humans. So it’s a market, I’m showing here a number in terms of the market growth sides, but frankly I don’t think really anybody really knows. This is a nascent industry and one that could be incredibly important and sizable to the world.

We are working right now with two humanoid robot manufacturers. One we’ve been working with for almost two years. We’ve generated to date 2 and a half million dollars of business with that customer just in prototypes in pre production product. So this is even before production. And I have to tell you that is very unusual and very significant.

And I think illustrates the intensity of investment that’s being applied to this project and humanoid robots in general. We are working on getting a production level quantity order this quarter. So at a size that could be larger than the aggregated revenue that we’ve recorded to date. We’re working with a humanoid robot manufacturer. We’re much earlier in the development phase, but again, that’s an indication of the applicability of our technology.

Our sensors can go in really two areas of the robot. We make what’s called torque sensors which go into the joints. And if you think about how a robot moves in its environment, that feedback in terms of the limbs and the pressure and where that robot is, is incredibly critical. Both for the precision movements of that robot, but also the feedback loop and the safety. Again these robots will be deployed alongside of humans most likely.

So you don’t want to have that robot make an unexpected move that actually could hurt somebody. The other kinds of sensor we are developing are tactile sensors. These are sensors that go into the hand that really give it its touch and feel. And if you think about tactile sensors, so just my motion of picking up this glass and moving it around, You may not realize it but my fingers are actually adjusting very, very slightly, subtly as I move this glass around. So that’s something that this robot is going to need to do as well.

So these are really critical components. We’ve said publicly that at least in the initial engagement our content would represent anywhere between $500 to $1,200 a robot. And that’s more than a few tens of robots. Excuse me, a few tens of sensors in the robots. The initial deployment from this customer, I think they’re targeting having a thousand or a few thousand in their manufacturing environment deployed by the end of this year.

And then of course the ramp from there could be quite significant. The key opportunity, this one is still in the early days but we think that it has the potential to generate an incremental 20 to $30,000,000 of business. So one of our products that we sell today is a high end testing tool used to develop new metal alloys. Both for things like new kinds of steel that are lighter but yet retain the strength or for three d printing. It’s a good business but it’s very, very nichey.

We’ve developed an additional product that can test ceramics or non conductive materials. So this is something that we’re not doing today. As part of the development of this tool we’ve developed a way to increase the throughput of the testing that’s currently being done for these kinds of ceramics by a factor of 10. So a tenfold increase in throughput. And the way we’re doing that is, well maybe I should explain the kinds of ceramics that this tool would be testing really are materials that are used in high temperature applications.

To give you an example of what that might be. One of the areas is in hypersonic missiles which the next generation are said to be designed to go as fast as Mach five speeds. So if you think about the tip of that missile and the heat that’s being generated as it’s moving at Mach five speeds, we’re talking about temperatures upwards of 1,500 to 2,000 C. So in order to develop that material, you have to test it at that heat, at that temperature. So we have a tool now that can obviously reach that temperature, but one of our innovations is that we’re able to heat up that chamber very quickly and cool it very quickly so that you’re not waiting for that chamber to cool to do another test.

Kind of like, think about your inductive stovetop at home Where you put the pot on the stovetop, the water boils in seconds, you take it off, you can actually put your hand on that stovetop and not be burnt. So that is one of the key innovations here. And so we already have a beta set up or lined up for this product with the University of Alabama. Which just so happens to be located in a kind of a cohort of aerospace technology companies. So this is perfect.

They’re really excited to get their hands on this tool. And as I said, we think as that goes well, you know, we should start to see revenue probably as early as 2027 on this and with the potential of 20 to $30,000,000 of incremental business. So that’s a snapshot of EPG. And as I said if you go walk away from this presentation hopefully you got two things. One is A, I think the investment that we’ve been making in our manufacturing and operational is really setting us up to not only deliver meaningful increases in operating leverage as our revenues in our base business improve But also really allows us now to go after these really, really exciting opportunities that are higher volume at a more price competitive point.

Thanks and happy to take any questions. Sure. So if you’re talking about sensors, so one of the core products that we sell is called a strain gauge sensor. And so the price point there could be several dollars to upwards of $50 per sensor. But the sensor itself is only part of it.

That sensor needs to have some componentry and electronics around it to enable it to do what it does. And one of the things about this type of sensor as opposed to let’s say a semiconductor based sensor which is an alternative technology is it provides greater precision because of the corporate know how and IP that we have that is built around the substrate of that sensor that we manufacture. It’s a very specialized manufacturing process. And that’s what allows it to deliver that precision. But also the use of that sensor in terms of how it’s applied requires it to be bonded very, very specifically, very, very carefully to a substrate, to some either piece of metal or something else.

And that’s not a trivial process. We’ve been doing that for many, many years. We know how to do it really well. And so that combined with the sensor and our ability to integrate it with the necessary components to essentially create a module whether it’s a torque sensor or a load cell force sensor. That’s also part of our differentiation.

Unidentified speaker: Steve, back on the slide that you highlighted, the development initiatives, you made reference to something that you’ve not done in the past. I forget because of something and I didn’t fully understand what you were communicating there and what’s different now.

Steve Kanter, Senior Director and Investor Relations, Vishay Precision Group: Yeah, so I’d say a few things around the business development. So I’ve talked, I think I’ve probably repeated myself a little bit around the importance of the manufacturing innovations. Because been, that is now critical for this business development. Certainly for the higher volume opportunities. The other things though is around improvements in our sales organization, our sales teams, our sales tools and systems as well as marketing.

You know I’m not sure everybody at VPG would agree with what I’m about to say but I think of VPG as because we’ve had such differentiated technology, we’ve had the best mousetrap, we are the company you go to if you need this particular product. And so we’ve been able to establish really strong relationships with a number of Fortune 500 companies like a John Deere, like a, you know, Teradyne, it’s not Fortune 500 but Teradyne, Advantest, Stryker, JLG, you name it. If you look at our customer list they are the Fortune 500. But as we look at these other opportunities with new customers who don’t know us, we need to, and we are stepping up our capabilities to really get in front of them in a more constructive way. And so that’s what I was referring to.

Unidentified speaker: Alright. I’ll ask one more. Humanoids. So you’re in two of the five or seven. That leads to two questions.

Why are you not in the other four opportunities with the other four or five? Or are some of them in countries that you’re just either not interested or locked out of?

Steve Kanter, Senior Director and Investor Relations, Vishay Precision Group: Yeah, so we are, don’t misunderstand what I was saying. So we are sort of going after a broader set of opportunities. I would say two things. One is our focus has been on these two engagements to make sure we get them right. Because if we don’t get them right I don’t think we have much of a play in humanoid.

So that’s been our focus. Certainly the level of back and with customer number one in terms of engineering design and prototypes has been really very very unusual in terms of how we relate to customers. So get the two right, focus on that. The other thing is as we think about the broader opportunities, there is gonna be some sort of stratification in terms of the level of performance for these humanoid robots. We know that it depends on what the use case of the robot is.

I mean there’s, I’ve read things where everybody is going to have a humanoid robot in their home doing their dishes and doing their laundry. I don’t think, I mean you’d be upset if your humanoid robot drops the glass when she’s he he’s doing the dishes. But it’s probably not gonna be the same thing as when you’re manufacturing something, something critical or you’re you know, whatever. So there is gonna be a stratification. And I would say, and that will mean that there is alternative technologies, lower end technologies which might be used.

And I would say the other thing too is there is clearly given the criticality of these components in humanoids, and certainly in the more advanced ones, they will be sources. And I think given, yeah, it’s probably unreasonable to expect that any of these developers would rely on one supplier. So we’re also looking at where we fit into that whole matrix. So I’d say we’re still at the beginning stage. This is very early innings but I think to use a baseball analogy I think we definitely, we’ve definitely got some runs on the board and are now working to get men on the base.

Well I’d say we have really strong differentiated technology. But I would say our core, one of our core strengths is our ability to take that and really modify it and customize it for specific applications. So when we do get an engagement like I described with the humanoid developer and that back and It’s an engagement between engineers and engineers. And so we are modifying whether it’s the form factor, the specs of that sensor, the inputs. We’re able to modify that in ways that I think other companies may not be as good at.

I’d say the other core competency we have is in manufacturing. I kind of say jokingly, maybe not jokingly, you know this company is you know operationally focused and financially driven. I mean this is at the core of our DNA. And that’s probably why we focus on our you know in terms of the strategic shift in our business focusing on our operations and manufacturing.

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