CTS - Earnings call transcript Q4 2018

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Operator

Good day and welcome to the CTS Corporation Fourth Quarter and Full Year 2018 Earnings Conference 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, sir.

Kieran O'Sullivan

Thank you. you quarter us conference and thank to and call. and fourth CTS' full morning for today, joining welcome Good year XXXX versus Sales million, XXXX. quarter fourth the X.X% in in same were period the up $XXX added We new the customers quarter. three in XX.X%. margins adjusted were quarter Fourth gross Fourth of were $X.XX per up XXXX. share quarter the fourth of earnings quarter from adjusted $X.XX in year prior year. the sales million $XXX in were Full $XXX.X from million, up XX.X% XXXX. of We ended $X.XX business the million $XXX booked year billion, from with up total compared to year in gross adjusted were XX.X% Full XX.X% margins XXXX. Full of $X.XX year $X.XX were last year, earnings per adjusted share up a from XX% improvement.

live seven gone now have rollout. ERP with We at locations our

with Ashish is us through call Safe me Agrawal and will take for today's statement. Harbor the

Ashish?

Ashish Agrawal

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

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

Kieran O'Sullivan

customers ended customers. we business of new leading of Ashish. our and And than operational with Thank In year These result effectiveness. achievement from to focused billion that end $X.XX of three remain we and a at connectivity XX.X%, full XXXX. XX seamless the sensing end was X.X% focus growth supplier up strategy solid a the team. components, motion quarter, fourth We at XX.X%. in the year-end recognize need we the exceeded markets. year, on growth our for rate execution Total In $X.XX booked of intelligent our with billion, We an the more environment. the added solid uncertain several more We of we economic XXXX, in world. maintain added our of you, reflected our targeted being an XX% sales and results and a devices new by organic CTS enabling

that of for our technology, by We our careful customer footprint associates, in us the relationships, confident and are our global transition talented markets. end competitive positions growth supported

our product reach expand to with now and Europe continue geographic in We revenues. increased our portfolio at XX% sales of

connectivity, Growth as do for electrification advancing and be to size, environment our we connected. more precise motion, as XXXX. improving beyond and driven success more have for automation, safety demand We will world Company reduced sensing, transition by becomes our our

million; future multi-layer we by added the continues quarter, next-generation $X.X we we win with annual We annual telecom our EMC solid with $X.X several revenues secured Defense fourth module of driven customer. revenues notable in two-year and frequency marketplace contract a a application, to medical are were sonar wins wins. large technology; travel imaging customer. component progress. making torpedo In gain applications, with secured In primarily million. share and We future position secured wins we and applications with of sensing product the precision the the wins where new

interest we design and and to secured universal platform. and with continue RF traction our for by transportation, wins portfolio expanding applications, pedal We two gain filter for expansion accelerator our totaling see enhancing driven driven demand customers the with ClearPlex prototypes for by large applications a sensor growth and technology regional and over Organic safety $XX and more will product passive our million lifetime. win our program portfolio. than be In

ensure success. with customers in to by innovation closely our investment We continue to increase our working

in in product next-generation the interest XG We increasing line the RF and are to requirements. increasing investments filters our support

In medical markets, continue we secure applications. on focused technologies. also applications; to in to and into new grow expanding on actuator markets, are identification focused while consumer teams we Our are our new industrial competence

a We XX%; profile for and progress priority combined of us. a continue strategic is to further growth our X% strategic rate target in organic end-market acquisitions. X% Making through

some we have do. we've defense, a in medical While lot progress and to made more

will We reach bringing opportunities relationships. our technologies, in In slightly Indiana as in is our we our we goal adding cost strengthening our to and best transferred from to we products, technology ahead. but weeks customer line our expect product remain the course to and the the single We portfolio. last stay of continuously conclude crystal M&A footprint and targeted more production the review our of behind right The pipeline strengthen the our on rationalization schedule, strategy portfolio our expanding than in transfer January, for XX%. focused Lisle transportation transfer this geographic

our has the product past successfully Additionally, ceramic of Tianjin qualification finishing in advanced team year. back-end this

in and will efficiencies Our continue gain will position beyond XXXX SAP rollout us XXXX. to further

the us was rate for Commodity current headwind We cost XXXX. impact the and tariffs in continue negotiations. a to monitor of

effect to another million We are recent by which expecting this approximately $X million. $X.X to in minimum million came of impact of Xst will Mexico, XXXX. year in January into increases $X million wage us The $X impact

distribution expect saw cycle to we look always, are have which as productivity year in to robust we ahead, the year growth, decline the first and us. industrial low China fourth slower transportation the transplant a exposure profile solid for global end XXXX, quarter end diesel. we in improvement offset defense more of where the softness by and and the Medical of a trade the market will challenging impacts. digit growth. help the We through half As we be our and these Chinese to have we chain continue In in exposure End see versus From in driving perspective, are supply lower improvements driven in profitable year. and margin have programs Uncertainty we largest markets to stages European growth. challenges little and where priorities markets Asia, strong market have expect flat-to-single remain OEMs bookings the OEMs position. seen and the domestic in at ahead. later In persists declines the

be XXXX, earnings year in of this walk expect to expected $XXX $XXX $X.XX. the will of million to sales full and more $X.XX time, range range Ashish are the we through to us For in financial to At adjusted detail. be million in the performance

Ashish?

Ashish Agrawal

you, $XXX.X quarter the up year. million, Thank Fourth sales Kieran. prior were X.X% versus

by sales sales impacted rates and $XXX,XXX. customers currency markets transportation XX.X%. increased X.X% Foreign unfavorably other Sales to by to increased end by

fourth was XX% the gross XX.X% margin charges. for XXXX, for settlement quarter Our pension of compared in quarter adjusted fourth which was to the

product approximately in line quarter XXXX, fourth million $X.X we During realized transfers. related savings to

tax fourth quarter was items. discrete XXXX in the of to due minus X.X% income Our rate effective certain

our around accounting our As we These to XXXX XXXX to completed rate related tax and planning in low elected XXXX. tax strategies to make the tax resulted changes return during certain fourth a changes Act. XXXX favorable caused Tax be tax the very significant impact GAAP return, our tax we of on method quarter

earnings diluted Our fourth per were XXXX quarter share. $X.XX

other Excluding $X.XX, adjusted last earnings the one-time currency, up of were tax $X.XX items, restructuring, share diluted year. per and to fourth compared quarter

were year. full versus $XXX.X up XXXX, XX.X% million, For the prior year sales

other favorably customers increased end by Foreign transportation $X.X X% to Sales XX.X%. to currency sales and markets by impacted million. by increased rates sales

last XX pension year, earlier. points for the margin margin Our the for basis of improvement adjusted was mentioned from an XX.X% charge gross which of year's gross was XX.X%

$X.X transfers. product approximately in During XXXX, to million realized savings line we related

year tax the XX.X% The took the income mentioned we the of fourth This year. offset in Our charge to certain was tax lower effective quarter tax the I rate in earlier was rate utilize driver partially expiring the for key credits. favorability, was earlier. by Taiwan

to be rate items. to the our XX%, We in of XX% tax expect excluding XXXX discrete range

Our work improvement is projects on rate tax continuing.

diluted of $X.XX late into timing XXXX shifted the earnings these were However, XXXX. share. per

adjusted and XX% $X.XX increase were other items, one-time from per earnings diluted share $X.XX, currency restructuring, in XXXX. Excluding a

and discuss I'll flow. the Now balance sheet cash

fourth Inventory controllable XX.X% of working stock built This customers, result strong million number flows. a was as up a first protect had XXXX. safety we capital, with is cash in the to the half of expected flow quarter percentage sales, in the generation we $XX.X levels decline higher our complete quarter. transfers. line that our Our as operating cash of of are to We in another product

million flow. timing year. of $X.X for quarter $XX.X at into for full CapEx the full operating as completions million For the fourth the was and the low year, certain in $XX.X in came cash shifted range million we XXXX generated the in expected end CapEx project our of XXXX.

XXXX. We expect compared normal XXXX. to range sales the expect million our the of cash December levels to and be equivalents XXXX more in Cash X% XXXX XX, to million end of were on of CapEx in to X% at to return $XXX.X $XXX.X and

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

XXXX. of was at compared XX.X% debt-to-capitalization at ratio XX.X% to end the Our

at This teams live sure of a impact effort customers' minimize our are operations. a that and two on make is the We significant to shared-service and on manufacturing has our work SAP locations. we lot for been done five

Our in goal roll out this to balance our complete locations is the remaining the to year. of

We During the shares for $X.X for to million. XXX,XXX stock line of This we our prepared time. like our this the fourth would quarter, repurchased questions concludes comments. open at

Operator

John Thank Sidoti Our & question Franzreb comes you. of from first Company. [Operator Instructions]

John Franzreb

quarter. Good guys. morning, Good

Kieran O'Sullivan

Thank you, John.

Ashish Agrawal

John, Hi, good morning.

John Franzreb

midpoint, new in the the actually topline X% industrial would that the my markets. that you to press kind but in At -- program market and want I about [ph] program midpoint, you've bit release guidance. we're you're that tougher concerned, backfill At key the cautioned modestly forward start wins, on you end with of topline. suggesting end growth, of words about your the expectations that limitation are customers? talk in suggest your wins your going to have a to a in going some little for Could new

Kieran O'Sullivan

industrial innovation and and medical to comments I the the in we say, we're our robust, and coming is to strong. continuing we're our of some on transportation, new in would but very give you perspective, areas is distribution for just grow to and about softness cautious in morning, growth John, And defense this just talked bookings still quarter line. pipeline out some add there fourth and in products Yes, the

feel we that. So good about

pipeline. got with we're we're to uncertainty and we're that our like we're So there having number a of just always with strategy things on the whole we going trade, and again, kind following execute we've seeing the what out we're tempering have. of some And global working just

John Franzreb

Okay.

on 'XX? environment, In result couple past wins positive of flat 'XX that are versus plus automotive, So gain offset. you've medical in growth would in going in help defense to the content won program wins years, revenue expect you a to and

Kieran O'Sullivan

cycle, Yes, And well. over then I last with we will it end-markets that we'll comes do now think the about have way wins in to always a other the flattish auto the number the as our with well. talked complement it recent we've even John years, we of market, is, that

John Franzreb

it. got Perfect,

Kieran O'Sullivan

in at of piece lot we're We've on it, versus have where don't other there's And we when the seeing maybe as heavy look color And to softness been term diesel one OEMs we're in sales just all transplants domestic drop the to we in China, a a Europe stronger. the bigger a -- you are exposure where give up. you at well. Chinese of seen

John Franzreb

this of transportation put brackets everybody. Right. business understanding would most And transportation times be Can is to North around your where My geographically? refresh kind good of is American. maybe is you

Kieran O'Sullivan

you If just in America, about our overall the North see and of we over it. Company, it's the at balance talked XX% revenue look Europe, We Asia. in how XX%

John Franzreb

-- Kieran. go switching I'm ahead, sorry Okay,

Kieran O'Sullivan

fine. we're Thanks. No,

John Franzreb

you're Okay, actions restructuring taking. switching to the

in -- calendar actually $X.X in savings You said realized you said Ashish XXXX. realized million

are programs bit those? realizing Sounds in savings. far timing pushed and the expectations the the as additional timing like cost potential of are some realizations back in and your XXXX What of being of as a savings

Ashish Agrawal

There meet to programs was So some actually good maintain fine and chain. John, on a customer tuning the supply schedule. completed were requirements mostly

stock of XXXX through We should after so expect to burn see million will we $X.X million that. be savings a safety in QX another and and it as $X.X we further less ramp-up in the

John Franzreb

inventory really it. gross about next the Got and was That actually impact question margin. my the the on

QX gross fair you in versus is a Ashish? to margin dip expect maybe that little So sequential a QX, assessment would

Ashish Agrawal

I to in than but guide QX. be to out don't quarters gross slightly gross the John, better the quarter expect would in margin margin, We

John Franzreb

Perfect, that Ashish, I'm going for back thank the in queue. to you color, get

Ashish Agrawal

Great, thank you.

Operator

Our question comes Susanto Research. next from Hendi G of

Hendi Susanto

Ashish. and Kieran morning, Good

Kieran O'Sullivan

Hendi. Hi,

Ashish Agrawal

Hendi. Hi,

Hendi Susanto

can in and feasibility And but in in characterize that, and feasibility Kieran, expect inventories some, despite know inventories share you to? transportation nowadays do looking place take of in if forecast some points it's a I like uncertainty. or that customers for that to of like what signpost data in you to look you let's have industrials? you rebuilding particular insight when channel are hard say, forward

Kieran O'Sullivan

terms accurately of America it off. In more and -- quarter there, softness China in of the impacts, some there. impacts some and pretty that bit moving be some They bookings was a is some little retail distribution, to products really side to on the a were things seen fourth kind sales take also through. what predict down some side, automotive to bit, side will of And in decent that and the little but bouncing on wish the as bit flat. managing should you supply. know of then how was trade saw I tariff it's could pretty, Hendi, are toward the kind just I relative probably and inventories along we The when a sales not is on-hand doing. some China, it the the look quarter the quarter Europe of we little on only you us concerned at thing saw it and burn in seems I days the of then North clear, in industrial of say, we've first

Hendi Susanto

then, question Ashish. And it. for Got

CTS its you buyback expectations about should mentioned So, -- return in to in buyback share XXXX? to we QX, expect share

Ashish Agrawal

pretty Hendi, been throughout on years. approach has consistent the cash our

at right will We do. look the to thing

and M&A share on more time. buybacks is from priority to opportunistically have Our we used time

we opportunities leave on it for first right would want...? and our priority, you Kieran M&A at would to focused I'd stay So us. finding as that want the

Kieran O'Sullivan

the discuss right something thing meetings capital. I at to No, what's terms only we add of in -- of the that just use Board our I'd always is

Hendi Susanto

And Kieran, secure and you competitive exactly customers how are then identification evaluating Like, many your updates technology's what Okay. have the on technologies? products do the advantage?

Kieran O'Sullivan

with evaluation but our or at them, few talk technology. mobile We working in in ceramic Hendi, is customers secure where we're with this applications at this time in of just different PAs in can't using we're working. a because Yes, customers in point industrial stages area, identification about we're

we're get we'd color progress the more by making. And to we be encouraged obviously, as add well. are We happy further updates, as

Hendi Susanto

Got it, OK.

to Ashish. me Let you, Thank Thank line. the Kieran return you,

Kieran O'Sullivan

Hendi. Thanks,

Ashish Agrawal

you. Thank

Operator

we question have from Next follow-up Franzreb a Sidoti. of John

John Franzreb

kind about us the of you helpful, any of color you ago Could are on and Can on touched would just they your opportunities, Are update allocation guys, Hey strategy viable kind most geographic second an M&A. of give be Kieran. kind capital you acquisition or a strategic? ones? -- what just

Kieran O'Sullivan

is, that area is working changing for in that's that say are us. the in this make market I point, us margin profile pipeline, XXXX. in market and didn't progress we're end profile what John, mentioned in expansion aspect growth, other looking Yes, work are lot doing quite lot in frankly, a priorities remarks, a would expansion, toward, And our and XXXX. and criteria and that Ashish's and expansion my we our I end for we're is, profitable echoing stated And customers and of as the the a primary more it the technology for pipeline of geographic expansion focus with in healthier getting still our

to work it. we're So going

John Franzreb

little your dollars the targeting the expectations to you R&D on opportunity and And rests? think be and bit like there spent where enough. fair most you'd where internally, for Okay, do

Ashish Agrawal

Yes, John wanting the sales R&D spend we've in long the be about range run. X% to talked of in on

at remain and us But work are slightly in in programs. XXXX well. X% range I expect XXXX I'm as than various the to We than we XXXX increase through for expecting as lower an less

John Franzreb

you sorry, range, I'm Ashish? say X% than less

Ashish Agrawal

Yes, under X%.

John Franzreb

attractive opportunities like before, it far as are sounded so... you what dollars? RF filters spending think And R&D I your Okay. do most as mean

Kieran O'Sullivan

transportation the we're side several other in Yes, control and ceramics in well. electronic as the switch along things few in nurturing and markets, a to several -- components in the that RF filters space

good things a John. we've And feel so number got of we about,

John Franzreb

follow thanks guys, ups. for Okay appreciate taking my I it.

Operator

[Operator Instructions] queue. have time, we in further At questions no this

Kieran O'Sullivan

on Great. forward today's Well, of the We again. you to update thank you quarter. you all participation first at an for Thank your look end the call. giving

Operator

teleconference. concludes gentlemen. This and Thank you, ladies today's

disconnect. now may You

CTS (CTS) 5 Feb 192018 Q4 Earnings call transcript