CTS - Earnings call transcript Q1 2021

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Operator

Good day, and welcome to the CTS Corporation First Quarter 2021 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, Olivia. morning. Good joining Call. welcome for Quarter CTS's today Conference XXXX us you to and First Thank the quarter in the Sales first same compared up period to XX% in XXXX. were $XXX million,

been has COVID-XX robust, including demand pandemic. impact and increasing shutdowns semiconductor shortages, of supply to logistic customer While costs the we have due chain challenged been disruptions, customer and resin by the ongoing

increases been also seeing in significant some are pricing, have raw We which in cases. material

persist through of potential the supply to with that chain We second expect the the challenges to point some quarter forward. from improve

First points quarter last the gross year. margin XX.X% period was XX.X%, up XXX same from basis in

Our gross approximately impacting XXXX. margin All was the and up pressure, chain pricing which of supply margin is from operational functioning Mexican first at XXX increasing quarter despite basis our pandemic of European the XX% points capacity commodities performance XX% EBITDA negatively by across in our already year. and challenges impacted operations. challenges are the mentioned several XXX% and plants was this

share earnings of from quarter XXX% in First $X.XX quarter up were first of $X.XX the XXXX. adjusted per

New quarter same last million Operating business from flow were million from cash up $XX of first period XXXX. was million, in year. in million the awards $XX $XXX $XXX of the up

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

Ashish?

Ashish Agrawal

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

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

Kieran O'Sullivan

the from to sales In XX% million, XXXX. first $XXX quarter, up first Ashish. the quarter our you, increased of Thank

well from solid sales our the exceptionally Scientific, acquisition many was sales business XX% disruptions teams Sensor growth. delivered issues were quarter's second in sales improve the are and although of chain performance second challenging we continue up may SSI the remain the result. and despite Excluding those year. half The headwinds quarter, in to deliver expected anticipate performed of organically. this Supply to The strong the

the vehicle volumes the expect in range to We Later, The this million X globally navigating are impacting margin will on by bases in commodity we more Ashish we shortages areas XX%. impact million inflation more pressures cost inflation are our X challenges of units the color and provide facing. than semiconductor to year. is gross certain price

the expanding We our Connect, and and XXXX. Move part are with is for We the remain investments focused to of impact. that planning our working growth of strategic range our as customers our business our Growing products on share priority. Sense,

transportation, we North million height ride customers: OEMs X for OEM with for of X sensing accelerator New applications large business in with $XXX North wins industrial communications. X X were million $XXX a American and Tier Asian safety X with sensors, American X passive for wins secured X In products. modules and we OEMs. were year. awarded last in and awards In added We the up the in from same quarter, new for period X wins -- suppliers

total, as EV percentage position sensor, for vehicle sensor wins In electric Chinese quarter. we awards. sensors, total the awards In X we were OEM modules Across accelerator awarded a were a a had EV brake a addition, first of brake XX% platform. and in

customer printing and an with a existing win secured industrial with large Moving other to auto electronic extension components. an We in customers.

we defense, sales an initial throughout performance. for in $X textured potential in year for next-generation received the for and million for application further supplied awards the with to approximately we applications and year. product expect industrial we ceramic HoloLens also enhance deliver volumes the samples X prototypes first shipped In We undersea next as

for next-generation Additionally, solar ceramic we new formulations programs. are developing

to with customers. qualification new make European progress on continue We sample

awarded Office fourth program. of we multiyear an a our Naval for the design development we're will by Research Finally, a which ship filters grant antenna an had communications, in for and for order wins In the application, quarter.

test to precision gain our areas modems customers traction niche with as XG their We frequency in product applications. for continue

now for intravascular will in relationships application build significant medical and softness in and a sales received sensing a Building signs continue application recently expected help to first a where and Temperature in With behind, line We improving industrial ultrasound. we year. award revenues an single be shipped We a for our crystal later medical with conditions expect remains aviation medical, travel far order applications. to ultrasound strategy. Moving samples travel expanding we to customer new medical technology recovery. of see to international with continues in robust new we our M&A awarded experienced XXXX, strengthening a new and pipeline us were the with an domestic for this companies not to priority. for

enhance customers goal X% to at the continue future of to and time, achieve to end geographic market basis. is seek inorganic stated earnings. our expand our ultimately of growth and quality annual range Our the technologies, same reach, profile an on We diversify products, and

Given on balance while sheet, in to approach. our make our disciplined progress seek remaining meaningful inorganic our goals strong we growth more

went Zhongshan front, we to our SAP our brings recently on On coverage over the operations revenue. at which XX% of facility, live

and of now new capability. provide see will end the as this we Ashish more commentary of can journey the rollout later the

teams, last capital delays very The impact the on efficiencies. this reporting, data from and through analytics announced small maximizing of progress ongoing operational continues enhanced our investment smarter return COVID-XX. plan the are on training restructuring we focused to of with We year

to by markets. EPS end of the improvement annualized on second than Transitioning are track XXXX. We of deliver to more half an $X.XX

for has outlook demand the market, improved from transportation call. last vehicle light U.S. the our For

range ongoing approximately The is million in solid, mid-range of below hand this level, European to backlog the due is for be expect range there million lockdowns On million year. units A growth. commercial Chinese market further production region We in XX the while remains The million to double-digit in up though demonstrate unit XX continues exposure robust, may market to unit XX million XX sales volumes from the below year. softening days. lower. XX days XX of the XX and remains our to of last forecasted XX that Larger supply expected with strong. remains where a Class the million year, this XX vehicle million days X-year unit to is average

challenging this may our sales in industrial the impact supply the chain in expected We shortages good and growth end chain markets to some we half supply issues. of lower risk is medical continue transportation quarter. and second defense second see year. in However, to navigate improve The remain market as

we of year XXXX, communicate update range terms full guidance would for In the progress year. we previously as we the through

sales Our of previous and of guidance million the in for $XXX million adjusted range in the to range $X.XX earnings $XXX $X.XX. was to

to Further supply $XXX the gain now we $XXX expected as We adjusted are sales disruptions range our earnings the be updates updating million be clarity more the to facing. of to range in in and $X.XX. are million, on $X.XX be to chain of will we guidance provided for are

progressing. initiative XXXX is Finally, our Focus

talent the across As X to communicated, progress initiatives across central program. are success and on we previously entire growth the I look

detail. this years, sales of Ashish our to execute, financial continued more will Over time, growth more to X layering ability At in the past need we've which journey is profile. maintain. to robust about improve we us Phase the a take through our on performance

Ashish?

Ashish Agrawal

Kieran. you, Thank

markets were XX% end end XXXX solid down and XX% fourth sequentially. growth sequentially. year-over-year, First quarter but XX% customers in to were up the and were X% X% $XXX increased which Sales end compared to sales by of first soft quarter. quarter medical been We the sequentially XX% the million, markets, XXXX. other up increased last transportation to has all up quarters including double-digit from in Sales market, X year-over-year of saw the

first $X.X sales acquisition, a start quarter. Our Sensor added most had recent and in in Scientific, million the strong

a for challenging achieved price was increases and a us the $X.X increases. impacted by compared million, material price the approximately down margin availability reduced quarter, material is the basis first Raw gross environment, XXX with quarter first up to in Gross cost XX.X% chain due margin fourth quarter including from we Our level of XXXX. to points increases. portion supply offset by XX.X%

We the quarter customers expect second and a trend the are similar our for impact. with working to

$X.XX were so $X.XX in of total XXXX. that We July have savings EPS XXXX, we program far. of place in first of restructuring XXXX, our quarter generated in In cost the put measures savings to temporary most from in announced the EPS also of reduction bringing reinstated the

increase to due the well However, are COVID-XX our some travel an impact challenges demand. on as as projects facing of ongoing of in

achieve of to of the track versus million year. annualized $X.XX end to and or XX% expenses were XXXX. on same SG&A $XX of or still $XX.X R&D targeted sales $X.XX sales XX% savings of the million for period are last by We the

XXXX administration. in XX%. in excluding various working of tax be rate may tax new our on discrete to the Biden have quarter result This by years. rate tax of projects XX%, anticipate impacted policies This be rate was tax we improved First of to a the the is XX% initiatives We range of couple the been items. last

in per were First period same the $X.XX last and share. quarter diluted to earnings last XXXX $X.XX earnings diluted were quarter. compared $X.XX $X.XX per Adjusted share year

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

the as Our end is was a first of quarter. from controllable slight at working end sales improvement percentage XX.X% the This the of XXXX. a capital of

while where working few chain efficiency, the last over few have to carrying the concerns manage supply quarters. we anticipate we made And inventory on excess some over We quarters. remain progress next focused possible capital

was from the projects. primarily the flow in the the $XX We timing to in various in $XX.X range million flow. In Our improvement CapEx of sales. cash we first in XXXX. low was XXXX, X.X% first CapEx expect free of operating X% be for an first of CapEx due to which quarter achieved quarter, cash $XX.X million is the million quarter, of to

was XX, balance from cash on $XXX.X XX, Our million December up on XXXX. March XXXX million, $XX

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

facility debt the was to position another of the of on progress XX.X% a balance gives our $XXX large million right April, end at with early end cash us access XXXX. a on credit SAP capitalization liquidity manufacturing over to In went the compared combination The first at live and the make ratio to M&A we the XX.X% through transactions. Our of location. sheet net strong to at quarter

our teams successfully having these work accomplishment. Our which many is despite a to completed significant resources of rollouts remotely,

comes sites are remaining last already The recent on several our XX% more in As SAP. of from Kieran from revenue mentioned, sites the now than are our running years. that acquisitions

XXXX. are these to early We expecting complete in rollouts

This delays. We would questions line our some at cause could for restrictions concludes prepared time. related open COVID the However, this like to comments.

Operator

[Operator Instructions].

our We will with take first Justin Long question Stephens. from

Justin Long

wanted I start on the the to with guidance. So question

-- little there, mean out sequential uncertainties expecting the pretty surprised at that? you're I year. Can that incremental talk was guidance the strong. Because pressure. implies, it see so the macro time be that what look headwinds the was little quarter of some it more that are will I suggesting I and earnings and being the was first that get the the EPS distributed, like the reported full I a vaccine about same The the but remainder over suggests we're guidance bit driving down year When is recovering, at for to feels you a there's that sequentially, some

Kieran O'Sullivan

Yes, Justin, we question it. it's understand fair a and

vaccine It's we've of got business I North very operations. out America, from Mexico think, progress. good. making all, in the the COVID is of China In lot But perspective, the a first Europe, remember, and there.

we've to we concerns as that's And Mexico year. way navigating will operational an through gain continue we're that. we that got side, will to from and why the improve confidence Europe, So through continue just and with our and adjust

several else spending The expeditor the supply out been because than is a you, these of were out days the work where than second an of tell of I'm anything helping and in wildcard have And there that's of in quarter the first sales would There down up we materials where in being I million great we situations. the more ended team. chain. probably times few my time could

on customers, sit We've to go we little dollars. from of we're been of your but going end better. chain -- are our go well as can supply you got we've we've we second a that actually of millions really the got fortunate well get see I'm bumps We're some guidance. know and still that. things because our We're quarter through up we with some if issues. will with -- into you'll being overcome So tell just get big as been we them details our the chain today, into to cautious here chain through also well, took supply supply those. the magnitude have headwinds. of guidance well the to and working the And those really to But upper these of teams point, do because, not managed

Justin Long

And a way chain that into and then is better. Okay. that, view supply get And the headwinds second to sounds maybe there what to a the cost the it follow-up quarter? as in continue is like quantify first those will the

versus similar directional So do Just guidance costs chain you XQ? be they think some in would are helpful. XQ Do worse? that get the supply

Ashish Agrawal

quantify the of from a their saw. suppliers. material becomes components of to the because The easy There's terms impact we the That's costs Justin, little bit $X.X more business. side. the So pressures talked quantify customers cannot we reducing relatively they raw impact a harder find from is things identify. inflation to on The in harder little that to on other freight impact of other capacity about million bit

looking expect along. to that half to similar earlier, watch second the carefully just mentioned to as are And very and trend. the year So we things a Kieran we'll need second go improvements as quarter of in have we we extent, for

Justin Long

to lastly, the an And on acquisition update Okay. pipeline. love I'd get just

market that seen any update there valuations the you've in year-to-date? an seeing If today? And changes just on you're

Kieran O'Sullivan

our strategy need to we feel progress it. growth working. would goal about It been we've internationally. XX% organic of out know with acquisitions. continue growth there We in we I traveling a X% got our big We've to an a but part domestically, good and pipeline you, and and it's the important focus. work part -- an of a through pipeline It's remains we're tell

Operator

Karl Next will we to move Cowen. with Ackerman

Karl Ackerman

Two questions I if may.

half. have So peers supply inventory future shortages spoken the restocking and automotive across some the your have chain supply into industrial I'm conservatives sales OEMs to across order about your the some curious second have product for you but activity half... lines been any in now possible customer distribution seeing think going are resellers are that and modest, all as in you about where of the second if at you perhaps avert

Kieran O'Sullivan

you I'm little Karl, bit going were to attempt, make So a an faint.

inventory -- bit which on inventory will part little is We we was what's first and some the because there and products they're the we we're there. distribution. a to think And question I of cautious buildup your seen don't pretty what know don't small, after know through doing our our happening. signals distribution manufacturers haven't over concern we sales, go any on buildup, of yes, contract but

a to So we're little it seems okay, cautious there. be but

of The good sure markets, in the I quarter. the side, On and the you're making having would the automotive feel The automotive biggest demand in is about medical, rest I meet we second standing tell say forecast. and supply parts and to would you, problem strong. good is industrial

the something of we If best second that's we're half seen buildups monitoring. It's inventory into it, way the you I probably year, haven't yet. the but still describe look

Karl Ackerman

Got it.

elevated peers how standpoint. my margin -- have other various thinking trajectory understanding substrates the manufacturing balance rising are There are As and from you about components the follow-up, freight passive of that costs for a and there are the freight tightness about across year, spoken costs.

pass with longer offset. I'm to And you've that all them the of volume in may to perhaps as an you cost been be to curious of if able so able engage duration some contracts OEMs, curious of perhaps I'm your not extent to along

you how of along able with pass So any in some and rising helpful. working are OEMs to largest your would of be costs these input commentary terms

Ashish Agrawal

terms Karl, ask if of impact customers voice how bit give the again of raw cost in question fully our had I'll I your it it but little please don't with materials. shot. a a because we sharing are address question, The working faint, of your was increased you was

in pass with. been are customers discussions to able price some we have of several are We our still customers to There it already.

increase ranging options we all evaluating changes permanent with in from how temporary going are them increase price We work forward. contracts, price to to

options relationships. going closely those respect make very nature but are my that forward. teams to not are expectation is be working long-term sure We of with All of our And want our we recovery, will and out solutions to we being the XXX% good customers. Kieran? evaluated those we should work that get able

Kieran O'Sullivan

Yes.

two here there's to go to gave rate through add of run already Ashish to obviously, we're quarter. pressure the to this margin Karl, equation. that, we a some coming going year. One have first out as Just sides And the is

with that's the the do that are getting longer transportation side -- customers, it where do pretty side on component on we electronic fixed. side, volumes, other the to more contracts The contracts or harder can

Ashish Agrawal

on the platform so And volumes are we your Karl, question -- dependent answer more lifetime fully? remaining, that's did

Karl Ackerman

Yes.

Operator

[Operator Instructions].

will We Funds. with our Hendi That Gabelli is next to move caller. Susanto

Hendi Susanto

can point Ashish, where SAP in Kieran talk some about at XXXX? benefit potentially are and a coming you we now from the

Ashish Agrawal

the a Hendi, last initiated cost that savings program the to year restructuring in QX includes that project. are efficiencies So from SAP related we

$X.XX things a on at our working how is analytics, are talked decision-making, looking highlighted perspective how are look us. of quickly further information operational with to and to we $X.XX available our that along, available that plants; that the help go the us which efficiencies about. at: operations that as information And of we will both and from us will in EPS better of to a data we we then generate consolidating few We other back-office Kieran portion

improvements. My should by see further as restructuring-related at We we'll of But information longer expectation coming out improvements are achieve will looking the better well get further XXXX. new using at that system. we as we is those savings drive term, help the aspects

Hendi Susanto

And operational ceramic I question see. is What foundry and current second of efficiency? yield the then operation. in status

Kieran O'Sullivan

Hendi, last of made you're And for obviously, a nothing progress, concerned lot we year talked We've improved, year. about to be as we about -- a running improvements, never stop well. but correct, there. it's looking

Hendi Susanto

I see.

the So you intended that done year. you that improvement making are from last Is right?

Kieran O'Sullivan

talked Yes. in that, just the turn put Hendi, The looking improvements on further but for then always last about to it year, perspective. we're improvements, corner certainly we

Ashish Agrawal

I all the meant accidentally completed that XXXX. early see. said implementation call, say I participants early And on I be the to SAP the will XXXX. other in

So I correct that just comment. wanted to

Hendi Susanto

helpful. product color development me. last mentioned besides And of you XXXX new for Kieran, one presented Any on awards? That's you question then long like when for Okay. list the that a

Kieran O'Sullivan

brake, Yes. side Hendi, then component sonar on to for on EV sensors it capability thermal, the where the started but customers probably And feedback. and very when samples side look move And getting in applications medical. programs on working electronic at you to we're new expand continue temperature of were ceramics on that's e-brake side, customers transportation already we've it. Texture where on and the looking most into and getting advanced, it. received temperature, the We if side, temperature the concepts industrial, electronic one our over that is -- something side on cold new working you we're markets of and hot good on we're on new on. the to working that the on you're is and for with is we're ship

as you, get for us area. a in too as down that's there. the price new with to little us. that forward and would because time forward moving in of and some will defense as us to these arrays products other It materials is of that few So go arrays nicely enable very curves But to we well come EU products help takes bit working over the we're something qualified. as I towed expect customers on tell new time take a we

as those. frequency yes, So good we're just RF those but on lead ceramics in for side. things working in won't that think And filters, the next some continue the nature some important that also they year, it's see of well. we and expand because in we're getting something are traction to something newer formulations on the be you'll some of areas on future our The we

just of Hendi. So some yes, they're points the I'd highlight,

Operator

turn back additional O'Sullivan, no Thank questions queue, you. to Mr. further conference will in you remarks. I the for any With

Kieran O'Sullivan

all look you the again. We on for Thank Olivia, and in call. on Thank you your Great. again you, updating ends call. forward progress participation This our today's July. thank to you

Operator

all Thank you, thank conclude This conference. today's your you for and attention. does

may disconnect. You now

Kieran O'Sullivan	Chairman, President & CEO
Ashish Agrawal	VP, CFO & Principal Accounting Officer
Justin Long	Stephens Inc.
Karl Ackerman	Cowen and Company
Hendi Susanto	Gabelli Funds

CTS (CTS) 2 May 212021 Q1 Earnings call transcript