Ladies and gentlemen, thank you for standing by. Welcome to the VPG's First Quarter Fiscal 2024 Earnings Call. [Operator Instructions] I would now like to turn this conference over to our host, Steve Cantor, Senior Director of Investor Relations. Please go ahead.

Great. Thank you, Candice. Good morning, good afternoon, everyone. Welcome to our first quarter 2024 earnings conference call. Our Q1 press release and accompanying slides have been posted on our website at vpgsensors.com. An audio recording of today's call will be available on the Internet for a limited time and can 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, 2023, 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 and refer to Slide 3 of the quarterly presentation.

Thank you, Steve. I will begin with some comments on VPG's consolidated financial results and sales trends for the first quarter. Bill will provide financial details about the quarter and our outlook for the second quarter. Moving to Slide 3 to summarize the quarter results. Operationally, we performed well given the mixed business environment, which resulted in a lower revenue compared to a year ago in the fourth quarter. Orders were flat sequentially, reflecting continued soft demand, mainly in the Industrial Weighing and Semiconductor Test Equipment. We achieved record gross margins despite the lower revenue, reflecting ongoing cost reduction initiatives. Our cash flow remains solid, and we continue to repurchase our common stock. Before providing details regarding the first quarter, I want to take this opportunity to summarize our strategy to accelerate VPG's long-term growth. Moving to Slide 4. As we have described in the past several quarters, we believe VPG is coming to an important inflection point as we pivot our strategic priorities to accelerate our growth and achieve our long-term targets. Our strategy leverage both organic and inorganic initiatives to address larger, faster-growing markets. These opportunities are driven by key technology trends, including electrification, industrial automation, defense and aerospace technologies that requires greater precision and performance. Our organic growth strategy comprises initiatives in each of our business reporting segments that expand our business development and engineering capabilities to capture new customers as well as to expand applications we address. We are investing more in these areas in 2024 and are offsetting this investment with ongoing cost reductions and efficiency initiatives. While some of these initiatives are still in the early stages, we are already seeing an increase in the funnel of opportunities. To summarize some of these opportunities in the Sensor segment, we are leveraging our Advanced Sensor…

Thanks, Ziv. Referring to Slide 10 and the reconciliation tables of the slide deck. Our first quarter revenue declined 9.8% from the fourth quarter of 2023 and were 9.1% below the first quarter a year ago. Gross margin in the first quarter of 43.4% grew from 43.0% in the fourth quarter of 2023 to a record high as improved manufacturing efficiency and cost reductions offset the negative impact of lower volume. By segment, gross margin for the Sensors segment of 36.5% declined sequentially, primarily due to lower volume, partially offset by improved efficiencies. Weighing Solutions gross margin of 39.1% grew in the fourth quarter to a record high, reflecting a reduction of inventory in the fourth quarter, which did not repeat in the first quarter of 2024, as well as cost reduction programs which were partially offset by lower volume. The Measurement Systems gross margin of 58.1% improved from the fourth quarter, reflecting favorable product mix and positive inventory adjustments that were partially offset by lower volume. Total selling, general and administrative expenses for the first quarter were $27.4 million or 33.9% of revenues as compared to $26.4 million or 29.4% of revenues in the fourth quarter of 2023. The sequential $1 million increase in SG&A was mainly attributable to 2024 incentive compensation accruals, typically booked in the first quarter of the year. The first quarter results included a restructuring charge of $782,000 associated with severance and headcount reductions related to cost reduction programs, mainly in the Sensors segment. Operating margin was 8.6% for the first quarter. Adjusted operating margin in the first quarter was 10% as compared to 13.6% in the fourth quarter of 2023, primarily reflecting the lower revenue. The adjusted net earnings for the first quarter were $5.7 million or $0.42 per diluted share compared to $8.2…

Thank you. [Operator Instructions] So the first question that comes from the line of Griffin Boss of B. Riley.

So first, I'll just -- on the operating expense side, I was expecting to see a bigger ramp in SG&A in the first quarter related to those business development and R&D initiatives you talked about to drive additional growth in 2025 and beyond. I guess can you just talk more about your expectations for growth investments and maybe OpEx projections going forward for the year?

Yes, when we are looking at the initial projection regarding business development and engineering and sales resources in order to accelerate organic growth, we took the assumption that we are expecting a certain hiring within a given time. So as we are moving forward, we started to hire the personnel. Apparently, we are a little bit behind the curve. The expectation is still to meet those targets in order, again, to assure accelerated growth. Regarding OpEx, the OpEx investments currently for this year mostly is expecting to support cost reduction initiatives, which you have seen. Some of them already being realized in Q1. And the others is also, I would say, supporting some high volume expansion product line, which we do expect to see some of the orders coming through next year.

Okay. Great. Ziv, that's helpful. I guess, along those lines in terms of just more operational efficiencies, the gross margin was obviously very strong. In the past, you've published quarterly financial models, which outlined profitability expectations on certain revenue ranges. It seems like that gross margin expectation is sort of structurally higher at this point. Is it -- would it be fair to assume that that's the case going forward with regards to your long-term model?

Yes. I would say that the target that we have published a while ago regarding the 45% gross margin is still viable. You are correct, we are a little bit ahead of the plan. At this point in time, we believe that given the exchange rate, the product mix and the sales revenue, this gross margin is sustainable. And the expectation is to continue and improve that meeting our longer-term targets.

Okay. Great. And then I wanted to dig into the Measurement Systems. You talked about, I mean, obviously, strong sequential growth in orders there and that multimillion-dollar award for an eVTOL customer. Is that a new customer or one of the existing customers you've mentioned in the past that you're working with?

Yes. The whole eVTOL sector is kind of a new sector for us for DTS. As you know, DTS has 2 end market verticals. One is automotive and the other one is defense. In the classical automotive market, the total business was supporting all the sensing related activity for crash damage. Over time, we have developed another vertical, which is selling our miniature data acquisition systems to other type of, let's call it, automotive type applications. EVTOL is one of them and we do expect it to grow at least 20% year-over-year. At this point, it's fairly -- it's really couple of millions. But as this business is expecting to grow, we have been designed already at some key customers, and they are running autotype testing, and we do expect to grow as the market grows.

Okay. Great. And then if I could just squeeze in one more. You mentioned, obviously, the avionics, military and space. Revenue, I guess I was surprised to see it come in where it seems kind of like it's perhaps in the trough right now, but you had sequential growth in orders. If I remember correctly, on the last earnings call, you mentioned expectations for modest growth in that end market, at least as it related to orders in the first half. So are you -- I guess, what are you seeing now heading into the second quarter with regards to order trends in that segment for the second quarter?

So regarding AMS, we are selling 2 different product lines. One product line in precision resistors, which we are selling more to, let's say, call it electronic-based applications, which we see those projects are being, let's say, placed, we are getting those orders. So this is really more project based on the resistor side, and it's quite sustainable. The other piece where we are selling to AMS is the DTS product. The DTS products, we have been designing our, what we called, [women], which is crash dummies for military applications. Those are high-ticket items in terms of sales orders. It's around, I would say, $1.5 million to $2 million per item. At this point in time, we have been designed with some key projects, we have been approved by the U.S. Army and NATO. But I would say that the expectation is once those projects would be released, those orders will be placed. So we are kind of just waiting for the funding to be released for few armies, including the U.S. Army, but we have been designed in. So this is just a matter of timing. And we do hope that through the second half of the year, those large orders would be placed.

Thank you. [Operator Instructions] As there are no additional questions waiting at this time, I'd like to hand the conference call back over to Steve Cantor for closing remarks.

Great. Thank you all for joining the call. I do want to let listeners know before we conclude that we will be participating in the B. Riley Investor Conference on May 23. It's an in-person conference. We do look forward to updating you next quarter. Thank you all, and have a great day...

Ladies and gentlemen, this concludes today's call. Have a great day. You may now disconnect your lines.