Good morning, and welcome to the VPG First Quarter Results Conference Call. [Operator Instructions] Please note, this event is being recorded. I would now like to turn the conference over to Reynee Tung. Please go ahead.

Thank you, operator. Good morning, everyone. Welcome to VPG's 2018 First Quarter Earnings Conference Call. An audio recording will be made of the conference call today, including any questions or comments that participants may contribute. By now, you all should have received the earnings press release, and we hope you've taken the time to read through it as it contains important information. You can find it, including relevant non-GAAP reconciliations on VPG's website at vpgsensors.com. An audio recording will be available on the Internet for a limited time and can be accessed on the VPG website. The content of this conference call is owned by VPG and is protected by U.S. and international copyright law. You may not make any recordings or other copies of this conference call, and you may not reproduce, distribute, adapt, transmit, display or perform the contents of this conference call, in whole or in part, without a written permission. Today's remarks are governed by the Safe Harbor provisions of the 1995 Private Securities Litigation Reform Act. Actual results, performance or achievements may turn out significantly better or worse than indicated by any forward-looking statements that we may make today. For a more complete discussion of the risks associated with VPG's operations, please refer to our SEC filings, especially the Form 10-K for the year ended December 31, 2017, and our other recent SEC filings. And now it is my pleasure to introduce the host for today's call, Ziv Shoshani, CEO and President; and Bill Clancy, CFO. Bill?

Thanks, Reynee. Good morning, everyone, and thank you for joining us on our call today. I would like to start by reviewing a few highlights and then summarizing the financials. Following that, Ziv will provide his view of the results and the global business environment. We had a strong first quarter of 2018, with revenues of $73.1 million, earnings per diluted share of $0.37 and an adjusted operating margin of 11.2%. We're very pleased with this quarterly performance and with our first quarter book-to-bill of 1.05, a good indication that the near-term business environment remains robust. On Slide 4. We grew our first quarter of 2018 revenues by 22.3% to $73.1 million, up $13.3 million compared to $59.8 million of revenues in the first quarter of 2017. The positive impact of foreign exchange rates to revenues for the first quarter of 2018, as compared to the first quarter of 2017, was $3.2 million. We increased our gross profit margin to 39% in comparison to 37.7% in the first quarter of 2017. The increase in gross profit of $6 million for the first quarter of 2018 as compared to the first quarter of 2017 was attributable to the increase in volumes of $5.4 million and $800,000 of positive exchange rate impact. Selling, general and administrative expenses for the quarter were $20.3 million or 27.8% of revenues as compared to $18 million or 30.1% for the first quarter of 2017. The increase of $2.3 million in selling, general and administrative expenses is related to $1 million of negative exchange rate impact, $400,000 of wage increases, $400,000 of bonus and fringe adjustments and $200,000 of travel expenses. Looking at the operating income on an adjusted basis, you can see that we increased our adjusted operating margin to 11.2% as compared to 7.5% in…

Thank you, Bill. An important part of our strategy is to grow by developing new product offering. A great example of this is our advanced sensor line, which continues to gain adoption. We developed this platform as part of our Foil Technology Products segment a few years ago. It has grown nicely, as more customers included in the product design, and we saw our advanced sensor revenues increases, approximately, 114% in the first quarter of 2018 versus the first quarter of 2017. We are pleased with continued acceptance of this new sensor platform and proud to have provided enhanced performance to customers. We are also pleased to be manufacturing on an efficient platform. A second good example of our innovation is our value-added OEM transducers business. As part of our Force Sensors segment. This has been gaining momentum in the last year. For the first quarter of 2018, while still modestly sized business, its revenues increased by 247% compared to the first quarter of 2017. A final example is in our Weighing and Control System segment, our TruckWeigh and VanWeigh onboard weighing business revenues increased by 85% in the first quarter of 2018 as compared to the first quarter of 2017. We are pleased to see healthy trends continuing in some important end markets for our business, in particular, I'll note, aerospace and defense and steel. In the aerospace industry, the commercial original equipment segment remain strong, also both the aftermarket and business jet segments continue to improve as these improvements are supported by increasingly firm data that indicates a potential turn in what has been a lengthy soft market for the past several years. In the defense market, the outlook continues to improve with potential upside to the current expectation for growth. There has been positive inflection in defense…

[Operator Instructions] The first question comes from John Franzreb with Sidoti & Company.

Guys, I'd like to start with the -- first of all, great quarter, so the Weighing and Control Systems, Ziv, you just -- you left off there, I just want to make sure -- I kind of want to understand that because the book-to-bill was a sizable increase in the quarter, 1.28 versus the 1.06 last quarter and I think it was 0.92 in the fourth quarter. But I thought, I heard you said something about timings of delivery, so given the revenue outlook you just gave, how much of the Weighing and Control book-to-bill is delivered in the next quarter versus the latter half of the year?

Okay. When we look at the stronger book-to-bill in WCS, which was 1.28 for the quarter, we can see that we have a positive trend in all product lines. But in particular for steel, the steel book-to-bill in the first quarter was 1.9, which indicates of a continuation very strong steel demand. As previously discussed as you know, steel by nature has a more cyclical but also on a longer lead time. So I would say that a big portion of the orders that has been placed, especially for steel, but it can also be applied to an extent for process weighing would be delivered beyond the quarter, which means in Q3 and Q4, while onboard weighing would be delivered within the same quarter. But the biggest effect in regards to the strong book-to-bill or booking is coming from steel.

And that's a Q3, Q4 delivery time. Okay, so then I guess that begs the question that with a book-to-bill in Force of 0.91 and a barely strong 1.01 in Foil. Where is the balance of the revenue coming from, is this more of a currency issue that we should be cognizant of? Or are there some short-term orders that we're not aware of?

Well, I do believe that if we look at the first two segments, FTP and Force Sensors, and since I've indicated there were some very strong annual and semiannual orders being booked in Q4, we should expect to see some of the deliveries moving into Q2 of this year.

So it's the Q4 bookings that you saw in Force and...

This is correct, yes.

And just one last question and I'll jump back into queue. It did seem like FX was a big of an issue, I know we were shekel in the past, and I know the euros had most positive and negative implications in the past. What are your thoughts about currency and how it's going to impact the P&L in the near term?

Well, to be honest, John, I don't have a crystal ball, but I think that we have seen that we did had a significant impact in the past, in regards to currency coming, mainly as you indicated, from the shekel, which we have as a cost base with no offsetting effects on the revenues. I do -- well, at this point in time, I could say that we have -- that we see, at this point in time, a positive trend, meaning we have seen the shekel to date being slightly weakened vis-à-vis the U.S. dollar. But I really don't know and I don't think if -- that anyone know how it's going to develop into the upcoming quarter. But as of today, the situation is better from an exchange rate in regards to the shekel. In regards to the other currencies, there are so many moving parts and much of it is also related to the global politics and other things. So I'm really not sure that we really have any feel how it's going to be developed going forward.

Bill, you want to add anything as far as P&L?

Yes. I mean, John, you saw that in the press release that when we compare the exchange rates from the first quarter of '18 to the first quarter of '17, the impact was only like $240,000 or $0.02, which is -- you see the trend, that's probably like the smallest that's been in a couple of quarters now. So like Ziv mentioned, like the way the shekel is going, at least it has a less of an impact as opposed to the past.

The next question comes from Sarkis Sherbetchyan with B. Riley FBR.

Ziv, if you step back and look at the revenue guidance range. What needs to happen right to get to the low, mid and high end of that guidance range?

Well, first I think that we know already what is already booked as an age backlog that is expected to be shipped in the second quarter. And I would say that the likelihood is already over 50% of the expected -- within our guidance, the expected revenues should be based on, the age backlog should be expected to be shipped. In addition to that, we -- based on the current business environment, we do believe that especially in some specific segments, where we have booking and shipping within the same quarter given the current business environment, we do feel quite confident in regards to this guidance.

And then if I kind of look at the end markets, maybe can you give us some additional comments on, with the exception of some of the longer project and businesses that you're exposed to? Like, which end markets are you seeing more strength or stability in, and then kind of converse to that, which ones are you may be seeing a little bit more pausing, any color on that, please?

Regarding FTP, I think that we have seen, and we still see a very strong end markets or strong demand coming from the test and measurement, in particular, automatic testing equipment for front end and back end testing. I see testing for various consumer electronics applications. We do see also a very solid demand in regard to process control applications, which does support the same type of testing -- same type of manufacturing which supports some the larger companies for different consumer appliance. We also see a very strong, I would say, avionics, military and space market demand coming in all for this specific -- for FTP, especially in regards to Pacific Instruments but also applies for our sensor and precision resistors product. We are looking at current programs, and now there is some discussion regarding new programs that are coming onboard. We do see also quite a demand, which is now starting to increase more in regards to oil and gas and this is still all within the FTP market. Oil and gas due to the higher prices and more investments are being done in onshore drilling. Now some signs in fracking, and I think that we started to see some slight improvement, which was very much flat or dead for the last few years in regard to offshore operations and offshore investments. I would say, those would be the main drivers in regards to FTP, in regards to Force Sensors, we have the general weighing market, which is targeting scales, which is quite good. On top of that, our OEM market, especially precision agriculture, medical and construction, which is picking up momentum. Regarding WCS, I think I've already indicated, the board recovery in steel in regards to onboard weighing, the fact that we have a strong position in Europe, more specifically in the U.K. and the economy is doing well. We are getting more projects, I did speak a little bit about the TruckWeigh and VanWeigh, new platforms that are picking momentum. Also the construction industry in the U.S. is affecting our business in regards to onboard weighing in the U.S. where we have a very, very dominant position. And last but not least on the process weighing side, we see some signs of recovery in the U.S. mainly more on the food process weighing for food application but the larger effect is coming from our European subsidiary.

And If I step back and look at the P&L and no restructuring charges this quarter, does this mean that the bulk of the cost rationalization or restructuring programs are really out of the way? Or do you expect to resume some of the cost management down the road?

No, this is a very good question. And I think that I did indicate in prior calls that the company, despite the fact that we are ramping up as much as we can in order to support a double-digit organic growth, we continue with our restructuring programs, which -- and we will continue to downsize facilities and to realize more cost savings coming from those restructuring plans. I think at this point in time, it's still premature to announce but there is definite -- but definitely, the restructuring programs and those internal plans are being executed and are in process, and we are going to realize and report the savings in the upcoming quarters. So we continue to do that.

And one more for me; I noticed on the strategy slide -- Slide 5, gross margin profile exceeding 40%, adjusted operating margin profile exceeding 10%. Is it really time to maybe revisit that slide and those metrics and give investors an update as to what your new algorithm is?

Yes. You are correct in a way, Sarkis. I mean, we did indicate that this would have been the target and I think that now we are -- we have -- we are close so we have reached that target but I think that we would like to see a more sustainable few more quarters, last quarter was a very good quarter getting very close to those targets. This one is another very good quarter. And once we are going to hit that target, a few more quarters, we are going to announce the next target to our shareholders from a financial standpoint. But the point is well-taken.

[Operator Instructions] Okay, seeing no further questions. This concludes our question-and-answer session. I would like to turn the conference back over to Mr. Bill Clancy for any closing remarks.

Thank you. And I thank everybody for participating and joining us on our conference call today. Just to let you know, we will -- VPG will be presenting at the B. Riley conference on Thursday, May 24, out in LA. And I do appreciate and thank you once again for your support and I look forward to talking to you soon. Thank you, and have a good day.

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