CTS - Earnings call transcript Q3 2017

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Operator

Good day and welcome to the CTS Corporation Third Quarter 2017 Earnings Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Kieran O'Sullivan. Please go ahead.

Kieran O'Sullivan

Thank you, Jim, and good morning. us call. welcome joining quarter CTS for conference XXXX you today, to and third Thank

sales $XXX.X total Adjusted compared were earnings last quarter in the quarter. million, quarter of in the end XX% same million in quarter Sequentially X.XXX the to from Third of compared XX.X were improved gross of third at flow from improved to second operations XXXX. same and third share XX.X% from from billion per quarter. period billion $X.XX year. We XX.X% period margins quarter the the year improvement. the to in in improved $X.XX at end Cash third XX.X% XX.X our up to the booked X.XXX were second in last from XXXX. million, business of up the X.X% margins Gross

our The is plan. of in to months chain building consolidation XXXX, the have first revised track completed continue transitions line manufacturing crystal will XXXX. manufacturing tracking added We line product for acquired of location to ensure of move On supply we order one to and half single time corporate The into timeline. transfer our our for our in operation the to be the continuity. new corporate three

the CFO, statement. is usual call with through Agrawal take Ashish us safe-harbor As and our me for will today's

Ashish?

Ashish Agrawal

statements statements. statements. results those that to from like subject uncertainties to the These forward-looking would remind a I are in forward-looking materially contains number this our expressed differ that actual risks call to listeners cause could and of conference

today, discussion available any non-GAAP the G, the I'll CEO. CTS reconciliations Regulation website. filings. to required the now are can the turn found over contained extent to Additional today's To uncertainties discussion in in Kieran? measures the information and regarding release back to section is and and SEC investors issued be risks the refers that in of company's the information more our these explanations press relative

Kieran O'Sullivan

Ashish. you, Thank

from acquisition $X.X same were tracking in Noliac contributed our our quarter. to compared Third order million year. to up and $XXX.X the million, are X.X sales third the plan million Sales quarter last integration

total at the third billion the quarter. Our was business end book X.XXX of

ship of business Order of total bookings booked expect were XXXX. momentum. the to this in positive remainder several the years, the our in million XXX strongest We is providing while last

a next to XXX,XXX and to in target We Filters We application new of of be our an added with RF starting a annual million have of mobile the range range added XXXX with expected to application a next new We from for to fourth and gained X year. received customer in customer in a a achieve growth with new in customers defense the and revenue XXX,XXX the We haptic more XX%. million. initial X X the single phones, crystal potential to automotive do award new some of four for the revenue We small for year. in defense new quarter in rate revenues shipments markets. customer Asian communications, quarter in

secured customer a new China application. for also We in tubular a

with received home order a we appliances an valued For million. customer X new at existing

for the current customers. customers, XXXX. with with awards On and existing through We we module with position received accelerator had existing requirements contracts four front, with three transportation wins added customers long-term sensors

during We quarter. the also XX released new encoder a PPR optical

actuator for pedal and We the platforms. development next have generation begun phase

new front, variety the of sensing advancing product innovation applications. for we area new are the On of formulations materials and in a concepts

the from last our on and line steady. markets talent to globally growth and pipeline comments meet geographic M&A line volumes remain while End and adding and We customer our due storms. quarter, have damage supply base in impacted in to reach located September our the monitoring our overall Puerto a work targets inventory days the supplier On-hand to investment broadening remain XX We're some by US. in supply at move. with in connect was products Rico focused Automotive North also hurricane that potential days continue of We sense, with improved that XX with remain to base. from of increases of end in our technology days for unfortunate America. the

supply by China recent alternative XXXX are for We the of Other EVs qualifying announcements start announced into to the quota date carefully time. a on is increase over the trends vehicles that expected normal. to process the in that monitoring various until sources countries. returns are we transition of with XX% to electric

our portfolio continued still We a softness of We have Operational product infrastructure. in account into begun this telecom for our XXXX. for continued are line track momentum our and in products see changes strategic planning XXXX on in the transfers. for taken mix beyond medical

line XXXX. previously in completed Elkhart extended As product the is in announced, as to transfer my continuity. supply ensure months three transfer have by And be to one opening chain mentioned comments we expected I

saw you guidance release, have As for earnings year our full in narrowed we our XXXX.

million. of We to I expected of to $XXX Adjusted $X.XX expect $XXX the range to $X.XX. are in results more detail. will hand you now be the to sales to full-year in earnings Ashish through million over in take the range

Ashish?

Ashish Agrawal

Kieran. you, Thank

quarter compared Third same $XXX.X million quarter million, were sales year. to the last up $X.X

increased growth the $XXX,XXX components by electronic Organic the Foreign the of automotive to from third XXXX. X.X% acquisition. Noliac and quarter by Sales was same customers increased X% excluding currency sales X.X% of sales compared impacted by in sales quarter. favorably to

prior in profitability half, discussed in was our first have impacted the rework production we by certain As calls, issues.

XXXX, year of last unfavorable were third XXXX XX% and compared third expenses the to the the XX.X% adjacent quarter mix quarter other Noliac acquisition. impact from was vacant the rate down levels. ongoing amortization on Gross to third last We million the third The margin The land for XXXX. Gross was year, of XX.X% quarter second sale facility. other from to favorable the SG&A XXXX our for was are dollar in million renminbi income was XX.X% year. of quarter by sheet quarter last third in in Massachusetts foreign euro. the XX.X% to primarily loss quarter in $X.X SG&A mostly currency a to In $X.X sales million. and depreciated balance compared assets US the the the of to due year-over-year. of profitability driven exchange expenses against sales sale Hopkinton, as or quarter This costs Chinese of of include $XX.X and getting better translation margin of gains was of third related

third tax the Our effective quarter income of was rate in XX.X%. XXXX

third of now items cover versus per per compared cash the were the on equivalents balance earnings diluted $XXX.X sheet. Third a year. Adjusted quarter quarter Cash share XXXX. representing $XXX.X third were last the $X.XX I'll few million end end quarter of to earnings diluted $X.XX share. XXXX at XX% were at and million of growth

at Our long-term XX, million debt XXXX. balance $XX.X $XX.X from December million, down was

was Noliac were capital of percentage in acquisition quarter increase sales stock XXXX, for as and working safety third controllable a of the capital. in XX.X% main Our drivers bills ago. from the XX.X% up the year The a working

our was third last we compared from in safety million in quarter expect manufacturing $XX.X through part levels maintain Capital operations to $X the the of of Cash $XX.X of as half of third XXXX. the XXXX third $X.X for first We million flow elevated as quarter our stock quarter million the compared transition. year. inventory million expenditures remain to to were

to due lower be expenditures of ongoing the cash to our timing We expect in considerably with the fourth flow capital in quarter, connection primarily projects.

are XXXX. also seeing the expenditures of some We timing shift into

last to This capitalization year. our our debt of your at time. cash prepared in questions the flows be result ratio to at strong operating XX.X%, quarter, at third a comments. As end this XX.X% would down glad of We from the was take concludes

Operator

Company. first from Sidoti our John & take We'll from Instructions] [Operator Franzreb question

John Franzreb

made start the Kieran, a the outlook bit. a you of of outlook. you shaved What's it EPS I the with changed top to guidance, cut some of want little like the couple earnings pennies end seems [ph] that

Kieran O'Sullivan

John, quarter, we really in but impacted in taken that our have reflects talked half and is, that what of just into gross it we first account. margins about year improved last the them our we've the rework that sequentially this the calls we

John Franzreb

impact in of I the have So to continue sorry, the what's might rework I'm impact quarter? magnitude but into third going quarter. the the the fourth is missed,

Kieran O'Sullivan

year. about sequential and improvement the talked it the situation would in we're and margins. that first see and gross impacted out we're you but John said coming second the we've we right in of behind which in the improve, worked us it in overall issue No, trend, But it the third that on

little being just it we that. - we're a to bit trimmed So reflect

John Franzreb

Ashish, of and could you an from think just What is me going 'XX? update be, the into the to CapEx total CapEx is And give 'XX on do XXXX. shifting you in some XXXX some spending,

Ashish Agrawal

X% of range about years. So John, between the have we the talked X% two in to

we the Our on two But when years. still carefully significantly the two know And between is little to same in slower we'll the have we range combine years the XXXX not always whatever together. current view money than overall spend as anticipated. changed CapEx. a you has manage is expectation you bit

John Franzreb

talking And the I there recall EV Could Kieran, monitoring you cited is before. in just your me it? for you're you remind what about China. that and monitoring don't you're opportunity you that what exposure

Kieran O'Sullivan

but Yeah countries said John, other I of I well. highlighted China, kind as

in start is, look at there we to we XXXX. hybrid OEMs exposure as to rate. getting are in XX% portfolio what EV have overall the to just and continue And look power product how been a same, plug-in get looking the you beyond, chassis our do quote you're at manufacturing train announced right when and XXXX sure how fuel-cell to XX% So we for EV, wins growth at rate the out much we're make and for Really what's in at globally. versus

have of move a smooth with but concerned the longer that over out we single be forward about, a today, time of and to we nothing exposure So trends. period new points in would expect sales few to

Operator

Gilson we'll next question our take Zacks on, from Research. Investment Ian from Moving

Ian Gilson

of products five the four As place how the that are how at to current sector, much look and much in level new likely line is what old of you to years? we is the call business might auto over next be

Kieran O'Sullivan

any We've back roadmaps we have, generation, up on of at look with vehicle side we've the coming products. several side commercial we're of current got go when interior the of it, to we that exposure generation Chassis vehicle, it, product don't got years. Ian, next the feel we it,

come On side, into little with bit a might powertrain it [indiscernible]. the

some will like investing, products, not of but some we're have design us past help going adding that products we've a new tail, long will have and that and them on just they the had we're forward. particularly focused in We more

out phase percentage about concerned going next exposure we're time. So above year a but some be points few the something that a to points nothing will after, sales, of there, of that or And over it's that's nothing few small year sales.

Ian Gilson

Okay.

drive up? As we hard Do is still on capital are a you continue you letting decay curve? to look at that the or taking how business, natural that just R&D much do

Ashish Agrawal

part Ian, it. repeat missed question? of We could your the you first

Ian Gilson

Okay. are or In the hard drive we investing are you capital that still in that business? business, laying

Ashish Agrawal

for capital. we've because more already, a been We've redeployed year, than working this

We would still customers, investments, that run rates. volumes just maintenance lower substantial the some no but have ship for We big say there. support stuff I our some

Ian Gilson

sector you the numbers Could go of Can repeat back, those and go me? some you for back and missed I growth.

Ashish Agrawal

the where the give up Sector Globally, year we've remaining we've side said number Automotive to don't million and think was X.X%, in units. see a okay on growth we're closer in areas. but X.X up be components was this think North very X.X was the tracking XX in robust, automotive, I in This that XX to high markets share release. to I a in cautious X.X%. but covered XX constant good the last think end sense, been pretty year We you don't we're to certain million and quarters. everybody I that. knows I percentages, last the we're I few gaining for markets, covered America, would press probably

Ian Gilson

is I timeframe that's what line? we the that to looking line bottom and rate growth or So presume in top XX% are return to

Ashish Agrawal

to business. for started John the the and booked the target had shrink we XX% we've rate first positive had a yet. strong time. very and and started XX, we've a XX The our we're then XX% growth get at some not trend is XX, signal, for We very It's smaller growth but buildup the on in

organic between goal, And that won't our seeking goal. still acquisitions. that's and So stop we

Ian Gilson

looking we or we are So are timeframe? looking at XXXX XXXX, next at year

Ashish Agrawal

we're acquisition, but company. is, for we'd at it's like we quite our make the future already for way, fit, the got combination right way the acquisitions, it's and The to year. technology and The fit robustly there, a look be right just globally the strategy of of you to organic see organics not. we'll the and last The can right the along in be the come it decision the requirements

Operator

from Moving from Hendi take on, we'll Gabelli. next Susanto question our

Hendi Susanto

we should should margin we from we stable the how of term or that margin Ashish, gross gross see view it Should quarter? as in see level? near the in upside potential XX.X% a stronger the

Ashish Agrawal

Hendi, first our say happy getting half our I we improvement the that the gross we in guidance are to that haven't year. the margin range. margin would compared we are changed of this gross in

see We XX% swing the impact very the in of that talked first issues at we half The currency short that of as additional quality gross have no to XX% as for We major impacted term. always gross is had our look that in one that. our much drivers had about in margin rework still from XX% can production range that the that of range. second in the our the the And in margins we margin. first we the quarter. and year, first year half issues We the then expect

Hendi Susanto

that can expect how then, ERP, much gross operating efficiency the line? operating guys we new Ashish, And margin translates down are and you margin to implementing ERP,

Ashish Agrawal

that Hendi, XXXX implementation implementing will operational we the about is not that. we impact complete in of after start thinking and we have will My then quantified the that improvements. terms them publicly expect the we in changes expectation

we've the in I not operating So XXXX implementation, of look to efficiencies would it. quantified terms but from

Hendi Susanto

XXXX one the year to end may Is XXXX? the? that of from take it So

Ashish Agrawal

would be on as work are time of what well. - in exactly execution That what on plans terms changes and then are we making, we yeah, to be need our some that we the improvements seeing there'll

a is benefits first XXXX a implementation. from good the So target full for year of

Hendi Susanto

then Ashish, on restructuring any update tax project? And Okay. your

Ashish Agrawal

it. on working are We

see starting should Hendi. make XXXX start have we the is, and progress expectation As more are My direction, into about, we to and talking to that talked in XXXX. towards in end XXXX of it be we about improvements

Hendi Susanto

of is some then, Ashish, your revenue how organic give you can much And insight of versus acquisitions? guidance

Ashish Agrawal

the That's past, consistent from Hendi.

about, have or? to XXXX talked are We you referring

Hendi Susanto

if XXXX, split. want to like you

Ashish Agrawal

The That organic inorganic where piece this the the the end to well XXXX to we is year. for expect includes as year. piece XXX XXX as

Hendi Susanto

Can inorganic can you the the quantify range elaborate whether you contribution? for

Ashish Agrawal

it for is in the haven't fourth from Hendi, We sales guided that specifically quarter, to number. the acquisition included but

Hendi Susanto

how strategic of I for enquire acquisitions? And CTS Okay. terms then Kieran, may is in looking

Kieran O'Sullivan

always We're our working pipeline. on

line over with pretty we we're got last just in hard tell we've I bring, areas you. in in to strategy, our that you things sensing we're clear other look and forward on. do working are working there wanted we'll have and We the years Hendi updating That's evident been the that it to things to area and something piezoceramic the few

Operator

Franzreb we'll Company. from John on, Sidoti a Moving have follow-up from &

John Franzreb

Yeah.

the looking be you at since progressed ahead do things I of toward line think goals, new Just you back were it's expectations, better would have you you, your say how was point you that in been some in year or wondering, Day. the a could page, than Investor game? hoping this how of would the you Kieran, are

Kieran O'Sullivan

set for the we team. locations. We've managing a the the challenging transitions, on and got the grow targets lot John, with going moves portfolio, to across ourselves

we And So a give forward, us there's within give I'd of we can us probably company I things A, have B. the level wouldn't stress an improve. move a to healthy some

that's some you way things, being careful. some to where your but you right move and can't So, got in we're the ambitious customers do to it we're you make them, protect of force, sure and

give I would So B. us a

John Franzreb

Okay.

are what thoughts? Just curious your

Operator

Ian we'll from Gilson question Research. on, from Investment Zacks Moving next our take

Ian Gilson

currency the impact have impact I of you it's You mentioned goods. an the again, the cost of believe Chinese, how there? on, peso against about Mexican on currency

Ashish Agrawal

have margin did. Ian, euro currencies. and compared And Mexican yes, the Generally, exposure net But exposure European we have one euro side as part we gross we for year. of we that things cost in exposure the about talked on on peso was of to revenue the quarter and the the side. last other on our in

on margin those are earnings. well have gross does moving, as as as impact currencies an our that So operating

Ian Gilson

you the overall Could quantify impact?

Ashish Agrawal

the It that you year. year of haven't gross last part that. was the And of more point quantified There gross last decrease currency is margins impact in the to in year. reduction We specifically. is from than a margin see from this major of piece percentage

Operator

[Operator Instructions] or additional O'Sullivan for And are there turn I'd at over to back remarks. the closing like this appears further time, conference Mr. it no questions. any to

Kieran O'Sullivan

and of for keep the with and full year everyone updating improving the Jim during forward to quarter Thanks next XXXX you in joining We've ahead and got call. set you, your today's for to you fourth goals Thank we our participation us the thank results. call look call.

Operator

Again, today's We that conference. you will conclude participation. your thank for

You may disconnect. now

CTS (CTS) 26 Oct 172017 Q3 Earnings call transcript