Good morning, and welcome to the VPG Fourth Quarter 2021 Earnings Call. All participants will be in a listen-only mode. After today’s presentation, there will be an opportunity to ask questions. Please note this event is being recorded. I would now like to turn the conference over to Steve Cantor, Senior Director of Investor Relations. Please go ahead.

Thank you, operator, and good morning, everyone. Welcome to VPG's 2021 fourth quarter earnings conference call. In addition to our Q4 press release and accompanying slides that have been posted on our website vpgsensors.com yesterday, we also issued a press release announcing a change in our strategy and business segmentation. We will be discussing both on today’s call. An audio recording of today's call will also be available on the Internet for a limited time and can also be accessed on our website. Today's remarks are governed by the Safe Harbor provisions of the 1995 Private Securities Litigation Reform Act. Our actual results may vary from forward-looking statements. For a discussion of the risks associated with VPG's operations, we encourage you to refer to our SEC filings, especially the Form 10-K for the year ended December 31, 2020, and our other recent SEC filings. On the call today are Ziv Shoshani, CEO and President; and Bill Clancy, CFO. And now I will turn the call to Ziv for some prepared remarks. Please refer to Slide 3 of the quarterly presentation. Ziv?

Thank you, Steve. I am pleased to report we delivered another strong quarter which capped a successful year for VPG. 2021 was one of the best years in VPG history as we grew our sales by 17.8%, achieved an adjusted diluted EPS of $1.87, and improved our adjusted EBITDA margin to 15.7% from 14.1% recorded in the prior year. Moving to Slide 4, before providing more color about our financial results, I am excited to announce today some important changes for VPG, which we believe will bring us into our next phase of growth and profitability. This is a momentous time for VPG. We are a leader in precision measurement sensing technologies, focusing on an expanding array of applications in which accuracy, reliability, and repeatability make the difference. Our deep engineering and application expertise help our customers make their products safer, smarter, and more productive. Moving to Slide 5, over the past several years, we have seen the need for precision measurement sensing solutions evolve and expand into new markets and applications requiring levels of precision that were not needed before. This trend has converged with our own core competencies such as technology, innovation, and market presence as well as investments we have made over the past few years. The result is the emergence of new applications for VPG's products beyond our traditional focus on legacy markets such as industrial processing, avionics, military, space, and steel production. Compared to five years ago, we believe we are much better positioned to address this new promising opportunity. In fact, a greater portion of our 2021 sales were in new or expanded areas. For example, our precision resistors are used in most semiconductor test and production equipment to meet the global demand for increasingly complex generations of microchips. Our load cells are helping new precision agriculture equipment optimize seed planting depth to produce higher crop yields. Our overload monitoring systems are keeping our roads safe by enabling trucks and van operators to stay within load limits and regulations. Our miniaturized data acquisition systems and data loggers are used in safety testing of new cars and vans. We've seen a growing number of applications emerge in consumer markets, an area we did not address just a few years ago. We are addressing these new consumer applications not only with our advanced sensors business but in our other businesses as well. Moving to Slide 6, I am pleased to announce the next phase of VPG's evolution. In the first phase of our journey as an independent public company from 2010 to 2016, we focused on streamlining our organization and operations and instituted a vertical integration structure and strategy for our product and technology. In the second phase, from 2017 to 2021, we made critical investments leveraging our vertical integration structure in operational excellence and several growth initiatives including our advanced sensors and truck weigh runway. Today we are moving into a new phase of our growth. As the need for precision measurement technologies continues to accelerate and transform, driven by the development of higher functionality in our customers' products, we are changing our operating strategy and business reporting segments. In order to capitalize on the expanding market opportunities and our strong competencies, we are applying a strategy and structure that we believe will accelerate our long-term organic growth and optimize our operating leverage, as well as acquire additional high-value businesses. Moving to Slide 7, as a fundamental part of this evolution, we have moved from a strategy of vertical integration to an operationally diversified company, that is to say, one structure built around three distinct business pillars: sensors, weighing solutions, and measurement systems. This structure will enable us to create value in our businesses by leveraging our strong corporate competencies, shared resources, investments, and organizational culture. Each segment pillar has its individual growth strategies built on complementary operational technology and competitive capabilities to address the expanded market opportunities and customers' growing needs. Moving to Slide 8. As you can see in Slide 8, each of the new segments has its own growth and margin profile and capital requirements to support its growth strategies. We believe the combination of these businesses will continue to provide both resilience and accelerated growth. The sensor segment is comprised of two businesses, precision resistors and strain gages which include our advanced sensors. The sensor segment had 2021 sales of $127.9 million. Our weighing solutions segment is comprised of Force Sensors, overload monitoring solutions for trucks and other vehicles, and process weighing solutions for specialized weighing systems. In 2021, this segment had sales of $125.4 million. The measurement system segment is comprised of four businesses: KELK, highly specialized measurement systems for steel production; DSI, metal alloy development tools; Pacific Instruments, data acquisition systems; and DTS, safety testing solutions. Each of these businesses has strong established brands and has built a reputation for providing the highest performing products in that category. The measurement system segment recorded $64.7 million in sales in 2021. Beginning today with Q4 and 2021 results and going forward, we are reporting our financial results based on our new reporting segments. Investors can find eight quarters of sales and gross margin data for the new reporting segments in the appendix of today's presentation slides and on our website. Moving to Slide 9, as we embrace this next phase in our evolution, the underlying foundation will continue to leverage our corporate competencies to create value. We will continue to drive operational excellence across all our businesses as well as to build strong brands and management teams. Apply manufacturing focus and innovation, expand our relationship with top-tier Fortune 1000 customers and allocate capital to seek maximum returns. Most importantly, we believe this framework will enable us to build our growth and profitability, which can result in the long-term targets of revenue growth in the low double-digits including M&A, an adjusted gross margin of 45%, an adjusted operating margin of 18%, and an adjusted EBITDA margin of 22%. Moving to Slide 10, turning to the fourth quarter of 2021, we reported record sales of $90 million which increased 9.8% from the third quarter of 2021. And delivered an adjusted earnings per diluted share of $0.56. Book-to-bill was 1.06, reflecting sustained strength in order patterns across the majority of our markets. Operationally during the quarter, we made significant progress in addressing the labor challenges we experienced in the third quarter. While the majority of our open positions have been filled, our operating performance in the sensor segment was impacted by inefficiencies as the new employees were brought onboard and trained. In terms of other global supply chain constraints, we are continuing to effectively manage the supply of key components although this continues to require close attention. Although this continues to require close attention, we are implementing price increases to mitigate higher labor costs, higher material prices, and logistics costs. Looking at our business segment performance, we grew revenue in the fourth quarter across all three business segments, as we continued our focus on accelerating long-term growth across the company. Moving to Slide 11, beginning with our sensor segment which is comprised of our advanced sensors products and our precision resistors. Fourth quarter revenue of $34.1 million grew 11.2% sequentially and 7.1% from a year ago. The sensor segment had a book-to-bill of 1.11 as sequentially higher orders in consumer and general industrial markets were offset mainly by the timing of orders in the test and measurements. I am pleased to report that we continue to make progress in our strategic growth initiatives in the sensors segment. In the fourth quarter, advanced sensors revenues and orders grew by 10% and 30% respectively from the third quarter, resulting in a book-to-bill of 1.41. We continued to engage new customers for this product in the range of new applications including consumer and PCB testing. For our precision resistors for the client, we are pursuing several new opportunities beyond our traditional applications in such areas as battery testing and the testing of optical data networks to support 5G infrastructure, among others. To support this growth, we are expanding manufacturing capacity and new automated processes for precision resistors. Similar to the approach with advanced sensors, we believe this additional capacity which is anticipated to be ready by the end of this year will allow us to address new higher volume opportunities. In terms of operating results for sensors, the adjusted gross margin in the fourth quarter of 34.8% included approximately $1.2 million of negative impacts from three factors: unfavorable foreign exchange, labeling efficiencies, and wage increases. The weaker dollar continues to be a significant headwind to margin, impacting sensor results by $600,000 compared to the third quarter and $1.4 million compared to a year ago. Labeling efficiencies, which resulted from the hiring and training of new employees, had a $400,000 impact versus Q3. Lastly, COVID-related wage increases put in place to fill open positions increased our expenses by $200,000 sequentially and $500,000 compared to a year ago. While we don't control the exchange rate, we believe the labeling efficiencies are temporary; if we adjust for the exchange rate and the labeling efficiencies, gross margin for sensors would have been approximately 40%. Moving to Slide 12. Turning to our weighing solutions segment, which is comprised of our Force Sensors, onboard weighing, and process weighing businesses. Fourth quarter sales of $32.1 million increased 4.5% from $30.7 million in the third quarter of 2021. We are pleased with our Force Sensors OEM initiatives as OEM revenue grew approximately 35% on a sequential basis, as well as 16% on a year-over-year basis. The weighing solutions segment had a book-to-bill ratio of 0.98 in the fourth quarter of 2021. Our strategic priorities in the weighing solutions segment include expanding our OEM sales of Force Sensors and growing our sales of onboard weighing solutions to enable truck and van operators to meet vehicle overloading regulations in Europe. For Force Sensors, we continued to address new applications beyond our industrial ones. In such areas as consumer and medical. For example, our Force Sensors are now being used in electric bikes by sensing how hard the rider is pedaling to improve battery efficiency in the new generation of electric bikes by providing real-time feedback to the motor. In spite of these successes, our truck weigh and van weigh products continue to be impacted by the lack of availability of new trucks and vans in Europe due to the global semiconductor shortage. While demand for our solutions for the large trucks has improved, we currently estimate that the supply shortages of the new vehicles will start to ease in the second half of this year. The weighing solutions adjusted gross margin of 34.0% in the fourth quarter declined from 37.6% in the third quarter. This sequential decline in adjusted gross margin was primarily due to unfavorable product mix, reductions of inventories, and higher material costs partially offset by an increase in volume and price increases. Moving to Slide 13. Turning to our measurement system segment, which is comprised of our KELK, DSI, DTS, and Pacific Instrument businesses. Revenue in the fourth quarter of $23.8 million increased 15.6% sequentially, reflecting higher KELK and DTS sales. The increasing sales year-over-year was 69.7% primarily due to the acquisition of DTS in June of 2021. Book-to-bill for measurement systems was 1.08, reflecting sequential order growth in steel, avionics, military and space, and consumer which offset lower orders in transportation. Our measurement systems businesses are strong market leaders in their respective niches. Demand in these businesses is largely project-driven, as the systems generally have a longer selling and delivery cycle and higher ASP. Within these niches, there are a number of attractive avenues for growth. For example, DTS is working on NFL-related projects in sports safety in addition to its core applications in auto and military safety. DSI is expanding its market opportunity for its metal alloy development tool by introducing a new configuration of its market-leading systems. KELK has augmented its product offering for its productivity systems used in steel manufacturing. Adjusted gross margin in the fourth quarter for measurement systems was 56.8%. Adjusted for purchase accounting related to the DTS acquisition and decline from 59.2% in the third quarter, mainly due to unfavorable product mix and inventory reduction partially offset by higher volume. Looking at our priorities for our capital deployment for VPG as a whole, we intend to continue making investments to support growth and margin expansion and to acquire additional high-quality businesses. For fiscal 2022, we expect CAPEX to be in the range of $30 million to $33 million, the highest level in our history. Approximately $10 million is a carryover from 2021, which had been pushed out due to COVID-related matters. Approximately half of our purchases are infrastructure related to support additional capacity expansion for growth initiatives for precision resistors in the sensor segment and Force Sensors in the weighing solutions segment. The other 50% CAPEX is mainly for equipment, for expansion and cost reductions mainly in the sensor segment. Before turning the call to Bill for additional financial details, I want to thank our employees and our customers around the world for making 2021 a successful year for VPG. The passion, dedication, and focus of the VPG team on our customers are the engine of our success. I will now turn it over to Bill Clancy for more details. Bill.

Thank you, Ziv. Referring to Slide 14 and the reconciliation tables in the slide deck, in the fourth quarter of 2021 we achieved record revenues of $90.0 million, gross margin of 38.7%, operating margin of 9.7%, and diluted earnings per share of $0.44. On an adjusted basis, which we lay out in a reconciliation table in the press release, our gross margin was 40.3%, our operating margin was 11.4% of sales, and diluted earnings per share was $0.56. Our fourth quarter 2021 revenues grew 19.3% as compared to $75.4 million in the fourth quarter a year ago and were 9.8% above the third quarter of 2021. Foreign exchange for the fourth quarter of 2021 had a negative impact on revenues of $500,000 compared to a year ago and a negative impact of $700,000 as compared to the third quarter of 2021. The gross margin in the fourth quarter was 38.7% compared to 38.8% in the third quarter. On an adjusted basis, fourth quarter gross margin of 40.3% compared to 41.8% in the third quarter of 2021, excluding $916,000 of facility start-up costs for advanced sensors and $516,000 of acquisition purchase accounting adjustments. Our operating margin was 9.7% for the fourth quarter of 2021. Our fourth quarter adjusted operating margin was 11.4%, excluding $76,000 of restructuring costs and the adjustments I just mentioned above. Selling, general, and administrative expenses for the fourth quarter of 2021 were $26.1 million or 28.9% of revenues compared to $24.6 million or 30% of revenues for the third quarter of 2021. The increase in SG&A of $1.5 million mainly relates to $600,000 for stock compensation expense, $500,000 for an increase of working days, and $400,000 of travel and commissions. The adjusted net earnings for the fourth quarter of 2021 was $7.7 million or $0.56 per diluted share compared to $7.1 million or $0.52 per diluted share in the third quarter of 2021. Adjusted EBITDA was $14.2 million or 15.7% of revenue and grew 28% compared to $11.1 million or 14.6% a year ago. CAPEX in the fourth quarter was $5.9 million, the majority of which reflects purchases and related infrastructure for the new advanced sensor facility. We generated adjusted free cash flow of $9.6 million for the fourth quarter of 2021 as compared to $3 million for the third quarter of 2021. We define adjusted free cash flow as cash from operating activities less capital expenditures plus sales of fixed assets. Total CAPEX for 2021 was $17.1 million or 5.4% of revenues, mainly due to the growth-related investments in our advanced sensor facility. The GAAP tax rate in the fourth quarter was 23%. We are assuming an operational tax rate in the range of 25% to 27% for the full year of 2022. Moving to Slide 15. We ended the fourth quarter with $84.3 million in cash and cash equivalents and total long-term debt of $60.7 million. We believe that we have a strong balance sheet and ample liquidity to support our business requirements and to fund additional M&A opportunities. Moving to the outlook, for the first fiscal quarter of 2022 at constant fourth fiscal quarter of 2021 exchange rates, we expect net revenues to be in the range of $83 million to $91 million. In summary, 2021 was one of the most successful years in VPG’s history. We are excited about this next evolutionary step for VPG and the path for faster growth and operating leverage it provides. As a leader in precision measurement technologies, our change in strategy and structure will enable us to pursue emerging opportunities driven by the development of higher functionality in our customers' products. And with that, let's open the line for questions. Thank you.

Our first question today comes from John Franzreb with Sidoti. Please go ahead.

Good morning, Ziv and Bill, how are you doing today?

Good morning, John.

I guess I will start with the advanced sensor business, a couple of questions there. Firstly, how much in revenues did that business contribute for the full year fiscal 2021? And secondly, were there any start-up related issues in the fourth quarter, and are you fully satisfied with the tooling effort and are you done tooling it for now?

Good morning, John. We didn't provide the complete number for 2021, but the rough estimate is around $40 million. It's important to mention that in the advanced sensor sector, we faced direct labor shortages that led to necessary wage increases around November. We started hiring more people, so we are in a ramp-up phase. We should still expect some residual inefficiencies due to the learning curve and the hiring process. I anticipate that starting in Q2, things will stabilize. We are awaiting some equipment that was delayed during COVID, but this does not restrict our operational ability to deliver more. The main issues were personnel-related, which we have addressed. I believe we recorded approximately $3 million of startup costs associated with advanced sensors in Q4, which should significantly decrease in Q1, and we should have no such costs by Q2.

Perfect, thank you, Ziv. And regarding the price increases, can you talk about the timing of the impact of those increases, are you starting to see the benefits, is there a delayed timing to receive those benefits offsetting those higher input costs, and when do you expect to reach equilibrium?

Okay, regarding price increases, as we have seen already a couple of quarters ago, given the environment, higher logistics cost, and there was already a certain sense that we would have to take steps in order to increase wages and also material costs. I would say that we selectively went to each of the product lines and looked at where we could increase prices but at the same time not jeopardize the relationship with the customer. From a price increase standpoint, in this quarter, we are reporting around $800,000 of price increases compared to the prior quarter and around $1.1 million compared to Q4 of a year ago. So, price increases have already started to take effect this quarter, and we will see a bigger momentum moving into this year.

Okay, and just one last question if I can, the capacity expansions you referenced in precision resistors and Force Sensors, what's driving that? Is there a particular end market that you think there is opportunity in those two businesses that you want to capture, or are customers coming to you asking for something and you're just addressing those needs? Can you just give a little bit more color about what’s driving that big increase in spend?

Yes, absolutely. I think it's coming on both ends. On one hand, as we said, there is a higher functionality. We see more and more potential due to the higher functionality from a customer standpoint regarding precision applications while our R&D teams are developing newer products; once those two vectors are meeting each other, we see higher demand. Therefore, one indication that we mentioned here during the call for precision resistors was 5G high-end infrastructure, which we see much more need for than we already started to get more and more design into that. On the Force Sensors side, we indicated more and more consumer applications that we never had before, like electric bikes. So we see more and more opportunities and believe we have to capitalize on that. This is definitely the biggest trigger for the change in the business strategy for the company.

Great, thanks for the color, Ziv, and congratulations on a good quarter. I will get back in the queue.

Our next question will come from Dick Ryan with Colliers. Please go ahead.

Thank you, yep, no thank you. So Ziv, you have talked about some easing in the European market for trucks and vans for your onboard weighing systems. Can you give us a little more color? I mean, has demand still been driven by regulations, and how do you think that it's going to flow? You kind of mentioned the second half of the year, but can you give us a little more specifics on the rebound in that market?

Absolutely, Dick. On one hand, we have our stand-up business, which we have developed, I would say, for a while ago, and this is where we have seen certain shortages, which impacted around $900,000 of potential revenue that we will not be able to book, because we didn’t get the orders due to our customers lacking microchips. This is only referring to the standard business. In addition to that, there is potential regarding the regulation that has been effective as of May concerning onboard weighing. We have been proactively promoting that, but given the situation and the constraints of microchips, there is a delay in respect to the acceptance of our customers to move with the regulation given the shortage. So we are looking to effect that one; once we believe that in the second half, the availability of components would improve, we should see an upside concerning order intake coming from those two potential vectors.

Okay, thank you. So when you look at the supply chain, you have had some revenue pushes in previous quarters. Have you caught up with that, and was there any revenue pushing from Q4 into Q1?

Excellent. You are absolutely correct, Dick. In the last quarter, we reported challenges, and we did report pushing out $4 million to $5 million of revenue from Q3. This quarter, we were able to capture approximately half of that, and there is still another 50%, which is around $2 million to $2.5 million, which we expect to capture in Q1 this quarter.

Okay. One last one, when you look at the longer-term perspective you laid out in one of the slides, kind of the low double-digit growth, you're combining both organic and acquisitions in that perspective. Can you parse the two? What are you looking at for organic growth, and how should we view your M&A activity going forward?

Okay. So let's talk about organic growth. When we speak about organic growth, we are looking at a few factors. One is each of the reporting segments and then look at each of the reporting segments' potential. We are looking at what the expected growth will be with M&A based on what we may have seen in the past. Coming back to the respective reporting segments, I think that, as far as I know, we did say that we are looking at high-single-digits on the sensor side given those consumer opportunities. In the weighing systems, since it’s a blend of different product lines, the higher-end growth would come from truck weight, van weight, and OEM Force Sensors, while the lower or slower-paced growth would come from the process weighing or more of the general weighing. And in measurement systems, we are still also looking at the high single digits. Historically, we reported for the last five years, 7% top line growth, which I would say is one of the highest in our industry—now in the industrial sector, 7% over five years from 2017 to 2021. Given the expectation and acquisitions that we are looking at, some of them are bolt-on, some may be a little bit larger. I do believe that low double digits can be achieved. This is a three to five-year target, and I believe it can be achieved.

Okay, great. Thanks, Ziv, and congratulations on the strong execution here.

Our next question will come from Sarkis Sherbetchyan with B. Riley Securities. Please go ahead.

Hi, thank you for taking my question. I just want to go back to the growth and profitability slide, Slide 9, with a three to five-year target. More specifically, just kind of focusing on your margin profile, if I look at adjusted gross margin targets of 45%, adjusted operating margin of 18%, unrelated to what you guys posted here for fiscal 2021, what does kind of the glide path look like to expand the margins? It sounds like you're able to get some nice drop-throughs where your operating margins would accelerate faster, given the top-line growth. Can you maybe speak to the glide path of the margins from here to that three to five-year target?

Yes, absolutely, Sarkis. When we are looking from a margin perspective, we have a few moving parts. First of all, we are looking at the current exchange rate, and given the fact that the labor inefficiencies which we have quoted on one hand are temporary effects that we expect to go away. In the second quarter, we are looking at wage increases and material prices, but on the other hand, we are looking at the price increases to customers. To meet that, we should expect what we need is an additional volume, I would say around 10% to improve our operating efficiencies or to improve the operating efficiencies which would trigger more cost reduction. As we expect this low double-digit growth, with additional volume, we should be able to achieve those financial targets concerning adjusted gross margin, adjusted EBITDA, as well as adjusted operating margin.

Understood. If I go back to the top slide on Slide 8, where you're laying out the segments, reclassification, and kind of the growth and margin highlights, it looks like for sensors and measurement systems that's the areas that you're looking for potential M&A opportunities, and then for the weighing solutions segment, you're just relying more on organic growth. Can you maybe delineate the potential for M&A and then perhaps the pace of M&A that you're anticipating for the two respective segments?

On one hand, as you know, the M&A environment in the last few years has been quite challenging due to low interest rates and the amount of cash that has been available in the market. As the inflationary environment continues, we expect to see the valuations becoming more reasonable. Therefore, we expect to see more opportunities. It's not that we haven't seen opportunities before, but we were always extremely selective and disciplined to pay the right price for the right company. So the number of opportunities was limited. Looking forward, given the environment today, we do believe that we should expect to see many more opportunities. Therefore, I believe our M&A transaction should be expected to be accelerated.

If you can kind of talk to sensors versus measurement systems, it seems like those are the two respective areas for M&A, so maybe size or anything to that effect?

Yes, absolutely. On the sensor side, we have two unique technologies. One is precision resistors, where we have a unique technology. We do have competitors, but the competition is with a different technology. In respect to our technology, we are in a way, we have a proprietary unique technology which nobody else has in the world. On the other hand, therefore, the valuable position is very, very high, and the prospective opportunities are even moving from mission-critical to non-mission-critical applications, higher volume. The projection is also, I would say, there is a higher probability for that to materialize. In advanced sensors, again, it's unique technology—this is an evolution or next-generation technology from our legacy. But again, the product we are able to produce at the existing cost has a unique value proposition. I believe that as we expand our precision sensors, we will continue to buy or expect to buy companies with similar attributes in adjacent sensor technologies to support the growth on one hand while also bringing a similar value proposition to our customers. In measurement systems, on the other hand, we are market leaders in all our niches, with very strong brands and again very high value propositions. So we believe that those two segments can expand much faster than the weighing solution, which is mostly based on load cell-based technology, which is also strong. But the potential for expansion moving out of the load cells, strain gauge-based technology is challenging; the portability to expand and develop is much higher on the sensor side and measurement system side.

Great, thank you. That's all for me.

Our next question comes from Bill Dezellem with Tieton Capital. Please go ahead.

Thank you. Let me start by picking up on something you mentioned on the conference, on your opening remarks relative to the increased number of new applications versus five years ago. What percentage of revenues are in those new applications versus where you would have characterized it five years ago?

We have never reported the number, but currently we are selling to consumer and to other applications that did not exist five years ago. It's in the tens of millions of dollars. But we have not disclosed the exact percentage. In some of those applications, we have strict NDAs around them. But we are speaking about tens of millions of dollars which we did not have five years ago.

And given what you've been describing today, Ziv, would you anticipate that if that same question were posed five years from now and five years after that, the number continues to be larger and larger or if the dynamics are different than that?

Look, I think it's quite clear where the world is heading. Our customers are heading in respect to functionality, precision, and data collection; therefore, we would only expect to see more and more sensing applications in various pieces of equipment that have never been part of that potential customer base or potential ecosystem. So I would say that we are looking at mega trends. Therefore, I believe we should expect to see more and more opportunities coming in the future from current customers and potentially new customers because that is a mega trend—collecting more data, and one of the ways to collect more data is via sensors and applying more sensing applications.

That's very helpful, thank you. And then before your opening remarks, a question that was going through my mind was whether at the end of the calendar quarter, net your advance sensor plant was kind of active, fully efficient, mature level. And you noted that it is not as a result of labor. Given the strength that you see in the advanced sensor applications and the fact that you're going to—sounds like you're going to be in a constant mode of ramping that facility up to accommodate additional demand, do you believe it will—well, I mean, ever achieve kind of fully efficient and mature level, or will you always be in some level of inefficiency as you're ramping that plant up of course until you reach that fully to old and no more extension if possible?

Sure, that's a very good question. The fact that we went into inefficiencies, which I speak about not the start, is part of a normal transition when starting a new manufacturing facility, especially if you are running full steam ahead. The learning curve or inefficiency due to hiring more people is a consequence of the COVID situation, as you know, the big resignation and the fact that it is much harder to get direct labor hiring. We were able to address that in November of last year. Once this has been resolved, how did we do that? We had to increase the pay. Now we are in a hiring mode. From an equipment standpoint, we were slightly behind due to COVID and due to the fact that there were travel restrictions and manufacturers had long lead times. The long lead times of equipment have been ordered and are on the way. We should be in a good shape by mid-year. At this point in time, equipment is not the constraint. Once the people are hired and as I indicated, at the end of Q1, we should be fully staffed; we will have excess equipment capacity. I would say that originally when we looked at the advanced sensors, we wanted to ensure that at any given point in time we have 20% excess equipment capacity to capitalize on any upside we would see from a business standpoint. So we would reach that position already this year for advanced sensors. I expect that the inefficiencies as well as any potential equipment capacity limitation would be resolved this year given the investments we made on the equipment side and the personnel side. So I don't expect it to continue next year or even at the end of this year; we should be in good shape in advanced sensors. Also, in respect to inefficiencies.

Thank you, and one final question, your inventories in both the measurement systems and weighing solutions segments were down. Were those declines as a function of the supply chain challenges, or were you all intentionally drawing inventories down?

Sure, let's speak about measurement systems. What do we sell? We sell a complete piece of equipment. So since we have certain delivery dates, and given the fact that Q4 was strong for Measurement Systems, we had inventory waiting to be delivered, the finished goods. This is where we have the highest value at the finished goods level. As those finished goods that were ready to be delivered have been delivered to customers, immediately you see a drop in inventory. So this is just part of the cycle. In a way, weighing solutions have a combination of system-related products and selling products out of stock, since we have two large regional warehouses. So over there, we see a kind of a cycle of orders being sold more from inventory in weighing systems. But there is no plan for inventory reduction or, on the other hand, due to supply chain-related matters, having a lack of inventory. This is just part of the COGS and finished goods and sales cycles for both reporting segments.

Great, thank you for taking all the questions.

Our next question comes from Brett Hendrickson with Nokomis Capital. Please go ahead.

Hi guys, it's great to see advanced sensors moving forward. I think Ziv, in your prepared remarks, I heard you say that the drivers for the growth in orders in advanced sensors were consumer and printed circuit boards. Could you expand on printed circuit board testing? Is that testing that's being done on the production line, or is that some kind of testing that's attached to the device permanently? Because I think people think of PCB testing as being done on semi-cap equipment and relatively lower value-added application, but I'm assuming it's a higher value-added application, and maybe higher units because even in the past, you've talked about getting the form factor and the cost down in advanced sensors to do higher unit volumes?

Yes, you are correct, Brett. The PCB testing—this is not on the device itself, but it's on the production line. Our gauges, a special design of gauges, are embedded in the testing line in order to assure the quality and specifications of the PCB, but this is on the testing line. And regarding the consumer, it's—yes, sorry.

Go ahead.

No, regarding the consumer, since we have strict NDAs, I cannot elaborate. But what I can say is that we do enjoy a very strong momentum, which we see continues into next year.

Okay, and then on the PCB testing, I don't know, where the intellectual property resides, hopefully, it's with VPG. Are you able to take that into, I mean, like I had—those printed circuit boards that have issues; there are just so many printed circuit boards, like there's printed circuit boards in irrigation systems, there's printed circuit boards out in the field that have all sorts of pressure issues and the units are in the millions? Can you take that in various PCB applications, or does the intellectual property reside with one or two customers?

Okay. So on the PCB testing, we have, in a way, two types of products that we sell. On one hand, those are the gauges, but on the other hand, we also sell some of our large data acquisition systems. We do also sell those to the PCB industry. Now, regarding the application itself, since our gauges are highly engineered, I would say that for the simple PCBs for irrigation and other types of, if I may say, lower spec applications, those designs are probably—our gauges are over-designed. Therefore, the use of our gauges is more for complex PCBs where you have multiple layers. The simpler ones so far have not been using those types of gauges; this is something that we may look to develop, a much more cost-effective product. But at this point in time, given the complexity and nature of those products, they are designed only at a high layer or high, yes, high layer amount, more complex PCBs.

Okay, well thanks. Congrats, Ziv on growing this, and we'll follow up afterwards. Thanks.

Ladies and gentlemen, this will conclude our question-and-answer session. I would like to turn the conference back over to Steve Cantor for any closing remarks.

Thank you. Before concluding, I want to let investors know that we will be at the Sidoti Conference in March, and we look forward to meeting with you then. In the meantime, thank you for joining the call, and have a great day.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.