Hello, everyone, and welcome to the VPG's 2025 First Quarter Earnings Conference Call. My name is Ezra, and I will be your coordinator today. I will now hand you over to your host, Steve Cantor, Senior Director of Investor Relations, to begin. Steve, please go ahead.

Thank you, Ezra. Good morning, everyone. Welcome to VPG's 2025 First Quarter Earnings Conference Call. Our Q1 press release and slides have been posted on our website, vpgsensors.com. An audio recording of today's call will be available on the Internet for a limited time and can also be accessed on the VPG 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, 2024, and our other recent SEC filings. On the call today are Ziv Shoshani, CEO and President; and Bill Clancy, CFO. I'll now turn the call to Ziv for some prepared remarks. Please refer to Slide 3 of the quarterly presentation. Ziv?

Thank you, Steve. I will begin with some commentary on our results and trends for the first quarter. Bill will provide financial details about the quarter and our outlook for the second quarter of 2025. Moving to Slide 3. Beginning with revenue, first quarter revenue of $71.7 million declined modestly from the fourth quarter and was impacted by approximately $2 million of delayed shipments of our KELK products. Our consolidated orders grew 2.7% sequentially and resulted in a book-to-bill of 1.04. This marked our second quarter of sequential order growth with bookings increased in both the Sensors and Measurement Systems segments. Despite muted revenue levels, we generated solid cash flow in the quarter. Cash from operations was $5.3 million and adjusted free cash flow was $3.7 million. Before discussing our performance by segment, I want to comment on tariff developments as they relate to VPG. Given our manufacturing footprint and supply chains, we believe VPG is positioned to navigate the changing tariffs. Based on current tariffs and expected volume, we anticipate the impact on our input costs to be minor based on our supply chains. With regards to the US 10% tariffs, we expect to pass the majority of the tariffs impact on to our customers. I'll now review our business segment performance. Moving to Slide 4. Beginning with our Sensors segment, first quarter revenue increased 5.1% sequentially, driven primarily by higher sales of strain gauges and precision resistors in the test and measurement market. Sensors booking rose 6.7% sequentially, reaching the highest level in five quarters and resulting in a book-to-bill of 1.06. This growth reflected higher demand in the test and measurement applications, particularly from semiconductor equipment makers. In addition, our initiatives in humanoid robot applications continue to progress well. We received an additional order of more than $1 million from our initial humanoid robotics customers as they continue to ramp up the development of their robots. We also received an initial prototype order from the second potential robotic customer. Orders for consumer applications in our other markets grew sequentially, although demand related to avionic military and space for sensors was soft due to the timing of defense and space projects in the US and Europe. Moving to slide 5. Turning to our Weighing Solutions segment. First quarter sales increased 2.7% from the fourth quarter. The increase was driven primarily by higher revenue in the transportation market for specialized load scales for heavy used trucks. Following strong bookings in Q4, Weighing Solutions order declined 9.3% sequentially to $26.2 million, resulting in a book-to-bill of 0.99. Higher orders in the transportation market for truck applications were offset by weaker orders for Force Sensors OEM business segments related to precision agriculture, construction, and medical applications. Moving to slide 6. Turning to our Measurement Systems segment. Revenue in the first quarter of $18.2 million declined 13.8% sequentially. The decline reflected continued slow trends in the global steel market, in part due to softness in the automotive sector as well as $2 million shipment delays of KELK products. We expect to ship these products in the second half of this year. In contrast, first quarter Measurement System orders of $19.5 million increased 17.3% sequentially and resulted in a book-to-bill of 1.07. Bookings reflected higher demand, primarily in the transportation for auto safety testing. Of note, we received an order from the University of Alabama for a prototype of DSI's UHTC system to test nonconductive materials such as ceramics. This system will be used as part of a beta test at the University of Alabama we announced in February. Moving to Slide 7. As I indicated, the positive order patterns for VPG in the fourth quarter of 2024 continue into the first quarter of 2025. While the short-term global economic outlook for 2025 has become more uncertain, we continue to be focused on driving the long-term potential for VPG, and we are optimistic about the potential. In February, I outlined three top strategic priorities for 2025. First, driving business development with new customers and applications; second, continuing to reduce costs and increase operational efficiencies; and third, pursuing high-quality acquisitions to build scale and expand our cash flow. We are encouraged by the progress of our business development initiatives in the first quarter as orders of approximately $8 million were broad-based and were on plan. To drive further growth, we plan to refine our internal processes and capabilities related to sales systems, marketing expertise, and digital marketing. In parallel, we have initiated steps to optimize our sales teams and processes. On the cost side, we continue to focus on long-term strategic plans, which include product relocations and efficiency improvements to reduce our cost. We are on track to achieve our targeted annual operational cost reductions of $5 million by year-end. Finally, regarding M&A, our strong balance sheet provides us with the means to acquire businesses with recognized brands and growth path. We remain disciplined and patient in our search for the right opportunity. I will now turn it over to Bill Clancy. Bill?

Thank you, Ziv. Referring to slide 8 and the reconciliation tables of the slide deck, our first quarter 2025 revenues were $71.7 million. Adjusted gross margin of 38.3% in the first quarter was the same as 38.3% in the fourth quarter. Sequentially by segment, adjusted gross margin for Sensors of 30.8% decreased due to higher fixed costs and unfavorable foreign exchange rates, which was partially offset by higher volume. Weighing Solutions adjusted gross margin of 37.8%, which was adjusted for $278,000 of manufacturing start-up costs, increased in the fourth quarter, primarily due to higher revenue and the effect of our cost reduction programs. Gross margin for Measurement Systems of 50.3% declined from the fourth quarter due to lower revenue. Moving to slide 9. Our adjusted operating margin of 1.1%, which excluded start-up and restructuring costs amounting to $858,000, improved from 0.8% in the fourth quarter of 2024. Selling, general and administrative expense for the first quarter was $26.7 million, or 37.2% of revenues, declined from $27.3 million, or 37.5% of revenues for the fourth quarter of 2024. The decrease in SG&A is mainly due to lower commissions and travel. The GAAP tax rate for the first quarter was not a meaningful number given the geographic mix and level of income. We are assuming an operational tax rate of approximately 27% for the full year of 2025. We reported a net loss of $942,000 or $0.07 per diluted share. Adjusting for the manufacturing start-up costs, restructuring, and foreign currency exchange losses, adjusted net earnings for the first quarter was $468,000 or $0.04 per diluted share compared to $400,000 or $0.03 per diluted share in the fourth quarter of 2024. Moving to slide 10. Adjusted EBITDA was $5.1 million or 7.2% of revenue compared to $5.1 million or 7% of revenue in the fourth quarter. CapEx in the first quarter was $1.5 million. For 2025, we are forecasting $10 million to $12 million for capital expenditures. We generated adjusted free cash flow of $3.7 million for the first quarter, which compared to $4.6 million in the fourth quarter. We increased our cash position from December 31st, 2024, by $4.6 million to $83.9 million in the first quarter. Total outstanding long-term debt was $31.5 million. We believe that we have a strong balance sheet and ample liquidity to support our business requirements and to fund M&A. Regarding the outlook, for the second fiscal quarter of 2025 at constant first fiscal quarter 2025 exchange rates, we expect net revenues to be in the range of $70 million to $76 million. In summary, bookings of $74.4 million grew sequentially for the second straight quarter, resulting in a book-to-bill ratio of 1.04. Our business development initiatives continue to advance, and we continue to generate solid cash flow in a challenging business environment. With that, let's open the lines for questions. Thank you.

Thank you very much. Our first question comes from John Franzreb with Sidoti. John, your line is now open, please go ahead.

Good morning everyone and thanks for taking the questions. Ziv, I'd like to get your opinion on the incoming order book. How does May compare to March? What are your customers saying about inventory trends and what they're thinking on a go-ahead basis?

Good morning John. Regarding the order intake, we've observed a modest recovery already in Q1, particularly in test and measurement from semiconductor customers, as well as with our humanoid robots and somewhat in the transportation markets. We do expect this demand to continue. However, we don't anticipate a significant increase in demand driven by new orders right now, as our customers are responding to market recovery. Currently, much of the demand is focused on replenishing the existing supply chain while also creating new demand through our business development efforts.

So, is it fair to assume that the revenue profile has somewhat troughed and we're at a gradual upslope? Ziv, you there?

Yes, John, your assumption is correct that I believe we have reached this point. There is a continuation of a modest recovery going forward, as Ziv mentioned.

Got it. And just a question on the delay in the KELK, order into the second half, that's a pretty sizable delay. Can you give any color to that? And is there any cancellation risk in that $2 million order?

Yes, absolutely. This is a significant amount. However, considering that KELK is selling high-ticket items priced between $400,000 and $500,000 per order, we encountered some operational issues which have been resolved in light of the cycle time. Those orders are anticipated to be shipped in the second half of the year. As for your question about cancellations, since we provide custom products across the company, we have not experienced any cancellations from customers in the past, and we do not foresee any now.

Got it. I guess one last question I'll get back in the queue. On the $5 million cost savings, what's the timing of realizing that? And is it all in cost of goods sold or SG&A? Or is there a mix that we should kind of be thinking about?

The $5 million savings we are looking at year-over-year, 2025 in respect to 2024. Most, I would say, by far, most of the savings are in the cost of goods sold, resulting from material cost reduction, product relocation, and process improvements.

Got it. Thank you, Ziv. I'll get back in the queue.

Thank you very much. Our next question comes from Griffin Boss with B. Riley Securities. Griffin, your line is now open. Please go ahead.

Hi. Good morning and thanks for taking my questions. Just to start up as a follow-up to the KELK question. Is this $2 million delayed shipment, is that incremental to the $5 million that you mentioned on the fourth quarter earnings call? You mentioned the $5 million shipments were delayed and you expected $2 million to be recognized in the first quarter. Is that related to that same push?

That is a great question. The $2 million is associated with KELK products, which, as I mentioned, will now be delivered in the second half of the year. The $5 million I referred to in Q4 relates to DTS and DSI products, as customers were anticipating those orders, which have now been scheduled for Q1. However, these are distinct product lines; the $5 million comes from DTS and DSI, while the $2 million pertains to KELK steel products.

Okay. Understood. And then I wanted to touch on the humanoid robots opportunity. Obviously, it looks like you guys are continuing to make good progress there. Is there any more color you can give now that you're starting to see more order flow from those two initial customers on how many sensors we should expect are being used in a single robot and to the extent maybe you could discuss certain ASPs for those sensors as well?

I'm not sure how much color I can provide, but I could say that we are working with our customers in the second development phase. There was a very large order over $1 million that has been placed in Q1. We are working on a larger order for, I would say, the second half of the year. We are looking at complete or I would say our value would be between $500 to $1,200 per robot. This is what I can provide at this point. And we are speaking about tens of sensors within each robot. But unfortunately, I don't think I would be able to share more information at this point in time.

Ziv, that was helpful, thanks for that and fully understood. And then just last one for me. Curious about the CapEx ramp. I know you said in the past, we should think about that as 4%, 4.5% of sales going forward. It was pretty light in the first quarter. So curious, Bill, if you can just touch on kind of how you're looking at the cadence throughout the year. Should we expect kind of a gradual ramp-up or maybe a little bit more CapEx investment in the back half of the year?

Since most of the CapEx are related to sensors equipment and some of the equipment are semiconductor type of equipment with a longer lead time, we always see a much larger CapEx in the second half of the year in respect to the first half of the year. So we still believe that we are going to spend between $10 million to $12 million, but we will see most of the spending coming in the second half of the year.

Okay. Great. Thanks for taking the questions. Appreciate it.

Thank you very much. We currently have no further questions. I will now turn back over to Steve for any closing remarks.

Before closing our call, I do want to remind investors and those listening that we will be presenting at the upcoming conference on May 22 and the three-part Advisor Conference in June. We look forward to updating you on VPG next quarter, and thank you, and have a great day.

Thank you very much, Steve. And thank you to Bill and Ziv for being our speakers on today's call. That concludes the conference call for today. We appreciate everyone for joining. You may now disconnect your lines.