CTS - Earnings call transcript Q4 2024

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Operator

Hello, everyone, and thank you for joining the CTS Corporation Fourth Quarter and Full Year 2024 Earnings Call. My name is Marie, and I will be coordinating your call today.

[Operator Instructions]

I will now hand over to your host, Kieran M. O'Sullivan, Chairman, President and CEO, to begin. ahead. go Please

Kieran O'Sullivan

thank fourth and joining today us Good and you full our quarter year for morning, for XXXX results.

execute products. diversified and accounted for We growth mobility. Revenue progressing to on of diversified strategy in diversification continue markets in overall our Diversification to on existing in electrification XXXX. We year our company the markets, for full of medical, defense be to in revenue continue aerospace XX% portfolio X will from industrial, while also the electrification wins a XX% powertrain our fourth agnostic our quarter and accelerate priority. from had strategic

We expect acquisition. a SyQwest year further of with full revenue contribution the in progress from XXXX

gross margin the XXXX, CTS focus for XXX points initiatives was appropriate acquisitions macroeconomic year also basis strong the for up top the leveraging team. which mind organic through sheet strategic challenging XXXX. and in earnings a improves by for growth leadership adjusted our of Driving as backdrop revenue from of full Our our quality reflected remains by balance

take safe us the harbor through statement. will Ashish

Ashish?

Ashish Agrawal

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

section found required supplemental Investors of presentation, with earnings and today's that information extent Additional G, the non-GAAP slide be the CTS found uncertainties risks press any company's discussion website. is more filings. available measures be and can today information To and press can Regulation these release in regarding explanations contained the and refers in issued the SEC to are the reconciliations the under today's which release in

the discussion CEO, over will Kieran O'Sullivan. now our I to turn back

Kieran O'Sullivan

$XXX X% million, Thank quarter We the sales of quarter the fourth from up XXXX. fourth finished of with you, Ashish.

$XXX X% million, the sales from For down XXXX. year, were full

up markets and sales XX%, the and period quarter, diversified sales to aerospace XX% medical, from end including the industrial were For down sales, were defense same while year. end market last transportation

diversified up market for market acquisition, revenue XXXX. XXXX. full XX% to SyQwest of were Diversified sales quarter the the fourth quarter XX% fourth the the the were and compared company Excluding overall sales end year for in fourth quarter end in X%

book-to-bill fourth remained the fourth of X.XX, Our similar at ratio the for quarter to quarter XXXX.

XXXX, share We fourth For for in the achieved XXXX. ratio probability year-over-year. full the of XXX the gross up diluted versus Fourth in year adjusted basis XXX were margin the X.XX and solid $X.XX up points per quarter X.XX improvements full earnings book-to-bill points with XX% basis was in quarter year.

For the full year earnings XXXX, XXXX. per down share $X.XX, in $X.XX adjusted diluted were from

further financial will later on in Ashish performance our add call. today's color

expectations, million the as line market, $XX sequentially in book-to-bill quarter XXXX. our medical of the the ratio fourth full $XX quarter adjusted customers X%. to year fourth were compared XXXX with down was up In to in XXXX, X.XX in fourth In X.XX inventory compared were sales their million sales The quarter levels.

make it the help invasive medications. which deliver professionals restrictions and for enhanced growth easier for applications We minimally prospects our are ultrasound artery products by excited medical deliver detect for to images, in treatment

We are products that lives. save support proud solutions that to help highlight our

order for a regions had application secured the wins therapeutics. During for medical and medical we across in quarter, ultrasound fourth large used all an

new volume we another in for growth enhance application. a and tumors win expect treatment of second Additionally, customers, our Over application. application, echocardiograph for for medical therapeutics for temperature a application a X a ultrasound had we diagnostics and growth laboratory portable time, an veterinary will one We customer added profile. ultrasound liver

defense sales full $XX $XX XX% therapeutic Aerospace strengthening million, and in seeing in year XXXX for products. XXXX. million up are we mentioned, already I the from were for As demand

the in up a healthy were sales year. maintain of prior Bookings acquisition, down we from year as SyQwest period, backlog. X% our from timing due were sales orders mainly for full to fourth Excluding quarter X% the the

from Our strategy moving is on of sensors, supplier and transducers a focused component to supplier subsystems. a

product of and range integration. market after expand We also period a opportunity expect to our

We in ] and solar the applications [ Europe. orders for in received multiple America quarter North

had in its applications to business temperature integration wins plan, funnel. also for is opportunity the sensing. a and We win for The and filters the RF of to business SyQwest continued anti-jamming tracking drive

gradual naval underscoring recovery During In of the article on we see expectation prior up recovery the work completed XX% the end market, as compared Sales sequentially first up we as quarter fourth industrial with in industrial gradual well the in period, year our platforms. and OEMs. to in X fourth quarter, distribution were X% the market. a a

with compared year Bookings For $XXX million XXXX. appear Inventory from quarter full the million period now in as well successful to last multiple more were for appliances, to printing, XXXX, switches, home sales for were up in EMC and and wins year. in were pool same spa $XXX distribution. We current be wins levels X% as normalized. for the temperature sensing the sensing applications, the industrial quarter industrial

quarter communications the quarter, customer down rebuild year. were approximately is new application. XXXX. prospects. Transportation last $XX the megatrends The and in in across XX% efficiency, fourth from the broadband to a the period for million expected automation, of enhance same added growth sales a longer-term market Demand our in We connectivity industrial

with accelerator Europe and wins We had for chassis module sensor exhaust across XXXX, product softness $XXX wins in wins In competition market. including XXXX, year in from commercial ride groups, position the down America. seat China, OEMs sales North we China million, transplant quarter, in million sensing, full for the and sensing. the fourth $XXX by vehicle height For and driven OEMs in primarily various had were demand sensing

new customer North During and platform in design modules. quarter, our for X added accelerator a fourth accelerator for we wins the modular America EV had

XXXX are us the products drivetrain EVs on mostly Total of earnings a premium our our ICE mentioned hybrids less near-term agnostic from was our concern for we expect the decisions, approximately received and end increased improve have OEM book to and the As sales The Recently, this for delay to America, technology. for continued of administration. get initiatives. policy eBrake EV business award we last at rates are in of $X.X European billion anticipation a predevelopment call, clarity changes subsidy a OEMs the product. likely as from government in more growth North versus have quarter. they on but new in to given sourcing

continues increase. and our expect our forward, with OEMs sales weight design to product eBrake where in Going we advantages team several cost is and samples hybrid proceeding offering customization. across Interest

applications content. to We ability will our expect and our other grow increase sensor eBrake

outlook XXXX. the to for Turning

with to high-quality to orders expected our technologies leading to our backlog growth. expand in end to quarter our line expect is growth range now may and For improve of remain customer in in term, year remainder defense, the demand and that and expected our first is aerospace inventory Industrial levels our solid our gradually aim strategy. Longer diversification volume and X primarily to the and given the distribution normalized. from diversified Demand strategy, end markets sales applications. have markets, momentum In in the supported base XXXX of driven medical are key the with market the formulations of we continue by therapeutic soft strengthen expected medical acquisition. of line the be ultrasound in in by drive to and SyQwest material we

are North XXXX. growing. light in million volumes range to Across transportation expected market days to in vehicle from American of units, supply expected the year with is production be XX on-hand down The markets, be mixed last of

overcapacity and down to rates reducing Some the build production regions, the penetration have burn some showing due improve. while in China volumes forecasted unit hybrid is pressure half unit in softness from some expected in OEMs range Chinese the to million to be adoption inventory million continues first OEMs. XX Electric increased range. softened European are production are vehicle rates in levels. XX.X to

due revenue headwinds factors. other we in dynamics China market and Overall, regional anticipate to the our transportation

We next-generation our second commercial actuator in the to expect quarter. go into production vehicle

However, vehicle commercial we XXXX. anticipate softness revenue throughout in

introduce our the of of The may the U.S. revenue seasonality be from timing influenced of by where SyQwest funding year acquisition approval government. will some full by first revenue

for be the the half XXXX. expect second stronger will We SyQwest revenues in of

of in EPS adjusted year full in $X.XX to $X.XX. $XXX we to sales million For be of the diluted range range and million XXXX, the to expect $XXX

Ashish, turn us walk I'll the detail. more the in over results who will financial through Now call to

Ashish?

Ashish Agrawal

you, quarter softness diversified commercial XX% reduced the from Organic quarter dynamics. of during Thank fourth the end to vehicle third quarter to were Kieran. to and diversified customers XXXX of year XX% the the Fourth due sales volumes related growth in and million, Sales up down in X% revenue were for due revenue markets China to compared X% end increased market transportation down sales to X%. last quarter. fourth $XX to year-over-year. products from the XXXX. was million of sequentially Sales SyQwest added markets $XXX quarter

to Our of the adjusted of XX.X% compared favorable the fourth in the down in gross the driven for by improvements a diluted fourth per share Adjusted XXXX. points to was gross was margin of The fourth points third basis impact up year-over-year compared basis quarter XXXX XX in improvement quarter margin quarter, changes end and same period share impact $X.XX were year. for compared $X.XX the quarter the share diluted favorable as well exchange the per $X.XX last operational earnings from mix, as market million quarter. rate diluted per Earnings for $X.X changes. fourth to XXX were

XXXX. diversified XX% and a decrease the vehicle markets $XX of China Sales was expectations compared sales to revenue market added million end up transportation end SyQwest XXXX. to of X% down year, in sales revenue softening full to were and due continues line customers the perform were million, in of X% to For commercial year-over-year. Sales $XXX to our in our products. with in competition in to the

basis XXXX. XX.X% in to points up margin was XXXX, gross adjusted Our XXX compared at

Primary and drivers impact favorable improvements. end of mix operational the gross margin of market include the improved

our XXXX. operational end currency Foreign profile approximately margin our on focused impacted We gross by also favorably as well in improvements. continued by growing as remain million rates markets diversified $X.X strengthening us

full For per the diluted share were compared year for earnings were $X.XX $X.XX XXXX XXXX. diluted for full earnings XXXX, Adjusted the year share diluted per share. per to $X.XX our

year EBITDA the improvement basis was XX.X%, for XXXX. XX an margin Our points from of adjusted

cash balance $XX full and generated million of year, sheet. in up the XXXX. $XX $XX for from to flow fourth Moving quarter and million XXXX in generation We the million cash for the operating

December of with as $XX XX, strong cash of XXXX. remains sheet balance million Our balance a

the liquidity Our at long-term $XX good million debt to was end leaving acquisitions. of support 'XX strategic balance us

CTS totaling approximately the million. shares we repurchased quarter, XXX,XXX During stock approximately of $X

buybacks $XX year, over XXXX. For repurchased approximately share totaling In the XXX,XXX returned we we to and shareholders total, in full million shares dividends through million. $XX

and We growth, organic support shareholders. $XX strategic have focused cash program. current share to remain generation repurchase and appropriate continue capital acquisitions strong on another cash to and our remaining We million under allocation returning

questions at for our time. concludes We line like would this to This prepared comments. the open

Operator

Instructions] [Operator

Franzreb We have John a question from Sidoti. of

John Franzreb

I'd what the little of notable outlook? the potential to like like as to Kieran, I'd react talk start with not how your bit to with, week. -- in you've tariffs any could topic as impact? Can about And of maybe start or could hot a the overview of far react CTS changes kind maybe gameplay the tariff you

Kieran O'Sullivan

working on good And track record John, mitigate tariffs, our overall level, the looking just a adapting since perspective, we're to at working from We've even supply our our prior we're the on at We're that. time with course, suppliers a with impact. of supply an adjusting, chain always customers. chain. got

like with our to suppliers. and handle it. We've been proactively So working we're customers we ready feel

to So we're we feel manage. like positioned well

John Franzreb

versus or factories maybe your facilities, particularly of one some risk of the at any others? Is

Kieran O'Sullivan

which We've look on as we given in a coming back That's days, at already a probably China, on the got out that And been watch John, we're was walked the than addressing. the comments for last Europe, of moment. at close Mexico out we're footprint some preparing impact obviously, obviously, what parts called few on of something it when That's basis the were keeping days. for. was global XX well. you our

John Franzreb

you SyQwest the X talk much the full you guidance, how secondly, for Understood. Class Got about revenue And Part two embedded in the truck in plays guess, it. out market a I the thoughts on maybe XXXX. little one And of your have bit how year? contribution regarding questions kind can is there.

Kieran O'Sullivan

in you X% going from We good a saw XXXX, Yes, our guide if the you you revenue if contribution it there expect growth prepared for see I going question and growth about remarks, as at John, X% we're understood your feel SyQwest well. And can forward. overall, growth. look on we solid a our to

We're on other half expect there's in the year. a half commercial your color our that, everything more we well. give To that you end to may in a we're than with the overall, mention, bit single-digit by growth stable acquisition, little we transportation, softness, we the in declines as second quarter, but but dealing to our -- be of there. expect on the just think about about we guide SyQwest high some revenue the second To product talking we just be introducing you And hear, some vehicle we're markets. with also question competition softness half. And throughout I from tends the heavier what and we single-digit guide first then talked wanted to we because sense, seasonality give market, said don't

as just it talked covered We the last in well. today earnings about call and

quarter fourth Softness in percentage medical. on few the to a points

into continue the quarter that on and first expect overall We then strengthen an basis. year to

New we in with quarter, to the up, marginally whole the the the but expect with then flat Chinese Year, year. be to the SyQwest, the solid So with for first quarter first medical

So good color. hopefully, some gives you that

John Franzreb

fair. Yes, back Kieran, I else let looking kind going was take to of I'm somebody queue into That's what and Actually, a for. question. get

Operator

We a of Hendi question have from Gabelli Funds. Susanto

Hendi Susanto

to want gradual the about in and distribution I OEMs recovery Kieran, industrials. with ask

decline a then earlier whether road year-over-year high and like What therefore, in XXXX. other recovery companies? I'm with sooner compare are takes terms industrial, sorry, saw -- see it others significant map. versus and QX. be recovery you other of timing growth companies in puts may contrast wondering that since saw and I you If the seen compared the has So like to and and --

Kieran O'Sullivan

you when from a I've understanding period with in happening the had of market other I that look and just XXXX, discussions at say Hendi, would what's Yes. lot companies.

everybody think of the than to burn going same overstocking inventories taken down way was in more. I you tell story, longer the several has expected to quarters

really guidance tell was the the I much So last materialize. on expecting quarter on year, recovery, that I you -- didn't so would which

our XX% your said on year-over-year. that we improvement basis, because question X% see tempered we was But then go-forward prepared a to improvement we a clearly in So a you'll called out sequentially. remarks, it

gradual we're but We improvement sales, We're more improvement we're is feel POS We we're reasonably the an a still levels. see confident right about in looking what improvement gradual forward expecting as seeing now back for and book-to-bill. So now. positive at inventories we see move -- that. a

Hendi Susanto

by eBrake timing remind shipment, us question, share up and colors and in the adoption sales terms ramp contents different second then of you more unit on dollar regions? And can of and expected

Kieran O'Sullivan

Yes. on Hendi, a few that. points

the we First European win from In past, about We've 'XX today of revenues to all, talked about prior earnings premium OEM. with time on we've 'XX in talked calls, the talked a 'XX -- the predevelopment win with period. -- a X call, the the OEM.

if going because are back OEMs here the We watching see new forth. very of and that what's and Hendi, the administration on to that closely, shifts and

on So that's our the something really that's moment. at radar

a -- some where it movement conversations delay that's bit. other little at some some seen will one ahead, around we've pull to something And stage,

it's close to So with we is we'll something not months, more about X going but The that terms thing eBrake, of term, that's important say next really adding very forward, think in the steadily this on. something customers keep trend as longer go revenue and going we eye good grow, we're I be would feel keeping forward in will well. as we a

Hendi Susanto

like XXXX clarify to mentioned XXXX, you that? you can Kieran,

Kieran O'Sullivan

past. $XX give the the we the Yes. year. customer, in of a in about with you the range to sense, first talked we what first is million in 'XX million to 'XX And $X to talked

Hendi Susanto

let's say, or win it Okay. work? the soon And can how like go then predevelopment, toward design

Kieran O'Sullivan

It solid I that, wish I you a could on varies. answer Hendi. give

sometimes for one, overarching Number a is It we real. watch here depends. all things. will is it line. And trend months, X product year. X the It be could me again, could it this happen, believe, the be Sometimes in

on, waiting just the OEM something whole shift think probably making and to making in as they're with Just and powertrains just well decisions this close that's we're mix, and clarification. every -- I for you're is

Hendi Susanto

different then how it a is is transportation one can of markets? market? -- it subsegment more it do like like among eBrake, light vehicle Or like Okay. about universal be which And -- question

Kieran O'Sullivan

it driven Hendi, Yes, primarily as we these see electrification by market, vehicle well. early in light really and stages the in

Operator

no O'Sullivan have Kieran back hand further to currently for We will closing I questions, remarks. so

Kieran O'Sullivan

Thank performance look today. Great. you time thank and XXXX your to all concludes first in for April. on call. We you the updating you, Marie, quarter forward our This you. Thank

Operator

This concludes today's you Thank for call. joining.

may You lines. your now disconnect

CTS (CTS) 4 Feb 252024 Q4 Earnings call transcript