CTS (CTS) 1 May 242024 Q1 Earnings call transcript

Hello, all, and welcome to CTS Corporation's First Quarter 2024 Conference Call. My name is Lydia, and I will be your operator today. All lines have been placed on mute to prevent any background noise. And after the prepared remarks, there will be an opportunity to ask questions. [Operator Instructions] I'll now hand you over to Kieran O'Sullivan, CEO, to begin. ahead. go Please

Good first Lydia. thank for you Thank XXXX morning earnings our quarter call. joining you, and

reduction stabilize Sales were as the the to quarter non-transportation also trend saw for expectations inventory. an ongoing quarter, from improved we in line non-transportation with sales our in In customer for booking the markets. started

China, vehicle by where regions, a more and Sales vehicle to demand most transplant to markets commercial sales across environment. our declined sales Light OEMs softer except stable as in expected, driven softer. were competitive were

lower While defense the primarily sales Medical, of timing shipments, XXXX. of expect were we for due momentum to solid performance. the good saw Across we rest

will the Ashish, harbor our through us take CFO, safe statement.

Ashish?

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

press contained these regarding the filings. information Additional be found information company's the risks today, in SEC uncertainties is and more can in release and issued

which release to supplemental that the the available refers non-GAAP press measures today's G, To website. can be are the discussion the in Investors required section earnings reconciliations today's Regulation under presentation, explanations extent slide found CTS and with any and of

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

quarter XXXX. with $XXX a million, of XX% quarter the of the sales Ashish. first first finished Thanks, We decline of from

transportation fourth signs versus were Sequentially, of in from as sales were market industrial X% sales of X% same were non-transportation quarter, and early quarter year. down the to market. sales Sales the see down the XXXX. XX%, non-transportation some recovery we the end the For end transportation were period last down XX% up

operations want we a to navigate revenue while managed as for carefully thank environment. support I challenging their we teams our

market book-to-bill up quarter of ratio and The improvement first in the X.XX the ratio OEM from the recovery in XXXX. and with customers. expectations in both line quarter, book-to-bill our Our quarter industrial distribution fourth was of X.XX with end is in in the first the

by encouraged these are We signs. early

to However, and inventories are the will correcting, order carefully. monitor we intake still continue

Adjusted the improvements was from XX.X%, to the quarter non-transportation mix of points by first the XX in driven up basis gross XXXX, first and sales. quarter margin operational shift

teams impacts On from unfavorable front, the help operations the our improvements on lower worked volumes. offset to

experiencing especially certain still are materials from some We and cost pressures, labor cost for increases.

and this and remain chain pressure year, pricing expect supply our markets. drive in ability and We manufacturing transportation to confident sites to our our in improve operational We efficiencies in performance particularly profitability.

made significant also and tremendous in the progress into teams effort supporting this our the We exit Mexico successfully expect second has our customers. of consolidation fully in been the the facility Juarez to on advance by project Matamoros to This site while a location Juarez quarter. the

diluted same of performance. share add adjusted in down per year. color financial $X.XX were quarter earnings First will Ashish period $X.XX last further our Later, on from the

sequentially. X% first in period were up X, new trends Non-transportation was and quarter sales several order prior compared across the but book-to-bill lines. The XX% year the to were product ratio decreased above positive

from XXXX, essentially well In in period as the period from were the sales up but medical bookings year. sequentially flat markets, same last as were same

in applications programs intravascular blood all on further an for in for a new regions ultrasound the X growth had are secured quarter expect XXXX. application. seeing We and and We across and for therapeutic in ultrasound. demand new analysis steady wins were We diagnostic ultrasound multiple engaged order

for disposable a we and Additionally, customers, facial for analyzer. added X therapeutics X second new blood a

technology. the an with capabilities to applications that an expand single our development the potential has quarter, also customer leveraging intravascular crystal advanced we on partnered the by In existing of project our

in for the end enhanced customers. defense primarily to shipments to and were aerospace solid Aerospace timing expect be some down to of defense long-term and quarter, We material sales the formulations. our prospects capabilities the market given due and the

in for as frequency and orders hydrophones, new we strong underwater quarter multiple filters. for unmanned in added applications, quarter buoys, the were sonar RF We applications. filter programs the received controls Bookings RF satellite X AUVs and

We defense also aerospace an added and application testing. one new in customer for nondestructive

European sample are with we defense progress, in multiyear we Additionally, sales opportunity. getting traction on anticipate growth and in growth qualifications a XXXX on

sales printing, EMC overall added industrial sensing, up We quarter for period. applications. metering year market, and and industrial quarter, customers temperature new prior the temperature flow X including in the were and the Sales sequentially. bookings from sales EMC with wins were components, were We in In successful for down several switches. the

we While in inventory still improvement sales reduction progress. bookings, sequential distribution and in a saw is small

Looking in revenue in market the end industrial ahead for end the non-transportation year in we half expect markets, distribution and improvement of XXXX. our second

environment, qualification new continue solid we in the to our with diversification our and on markets, For expect make and products to formulations Longer we we know-how markets, stable a support in-house line in our for growth end of defense expect high-quality progress term, and material strategy. medical to prospective customers. anticipate key

Additionally, automation, procedures efficiency as these us in as expansion provide we we anticipate markets. growth well megatrends medical in of will connectivity minimally continue and as the momentum invasive

the X% million the down $XX.X and XX% approximately first last down from sequentially. period year in were same sales quarter, Transportation

are XXXX, softer second-source We -- market softer experiencing and commercial by demand we're softness environment driven vehicle primarily competition. in demand products a for experiencing

The given and ICE our versus front, concern are products of between vehicle to us for to navigate transplant earlier, hybrids the drivetrain a light the the continue agnostic OEMs. On the mostly we in and are dynamics less for EVs I mentioned rates share competition market given growth technology. as local China,

billion ride new EV booked bBs sensors. we in applications various groups, bar a at passive height current quarter, added first end modules the America modules, on progressing accelerator In the quarter. customer Total sensors had are across sensing. and product safety of and and the $X.X including We EV advanced awards accelerometer North was other with for approximately new development for customers business wins

the excited electrification term. the penetration our by us As we near we to as opportunity look to adjust rates even are transition future, offers

continue modules, as modules, expect the a introduction future our see technology, in e-brake offering and accelerator we product pedal DrivePad new low-travel haptic vehicle space with and where traditional expand product. to We the products to the footwell advantages, our offering cost weight of a

a sensor of applications increase these ability SAM to content potential We than will grow $X greater with billion. expect and other our

vehicle days year, approaching X normalized to to with in million European the million our to Electric production the supply vehicle levels this expected the rates unit Turning most have is North dynamics. in hybrid production down for XX of volumes market the million range. units. now to light of be XX.X in unit adoption XX a improved. market Overall, range has on-hand softened China due XX regions, for expected million unit is in outlook vehicle while the American slightly China we forecasted light are million penetration range. anticipate market

softness in well due as lower primarily commercial expect XXXX source revenue throughout vehicle-related the competition. We to second demand as

of end strategy, second slowly inventory in the apparent becoming our base in line industrial, expand For a and applications shoots corrections markets. of indicators XXXX. quarter potential the in defense and The half range the the are last bookings and we non-transportation to mentioned recovery aim the green we of form in level are customer medical diversification of and with markets, improved

profile. As industrial in and earnings solid we we call, begins soft and Demand as an non-transportation continued see outlined margin sales demonstrate markets challenges distribution expect half near-term signs and defense expected an to we in our improved while early improving of sales trend. first remain a transportation last in in medical is and strengthening to

us on shareholders. which acquisitions returning strategic is Our cash with focus cash sheet by strong strong to liquidity, balance supported to ample and generation, enables

of anticipate of maintaining prior the XXXX, adjusted guidance $X.XX. $XXX $XXX terms in for range in and $X.XX million In we year diluted the full earnings million share to and our to sales guidance per of range are

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

Ashish?

Kieran. you, Thank

sequentially XXXX sales to and in from to to XX% related customers. vehicle and sales fourth saw light quarter the improvements sales XXXX. up last and were products X% compared down X% Sales to of end our year markets customers transportation to the first X% quarter industrial markets. customers quarter quarter increased sales in softness to fourth $XXX to of OEM First to in some mainly first the fourth compared primarily we non-transportation the sales Compared the year-over-year, XX% to by continued XXXX, driven Sales vehicle down transportation the distribution XX% sales down end were of commercial quarter to million, as XXXX. quarter were from in market Sequentially, decreased non-transportation softness customers the the of due to of China. industrial

we were the expect first and saw these stable. Sales sales quarter, lower the momentum end XXXX. medical in to although strong in the end end to markets in of in have both aerospace markets market And we defense

favorable to in adjusted fourth margin of XX customer our in XXXX were of a to manufacturing the first as as compared change Our quarter compared points mix first was the basis gross improvements points up quarter, XXXX. improvements XX.X% basis quarter by up and in driven efficiency XXX operations. well The the

Kieran in made from good production site project the our transition Juarez on our to As progress to highlighted, we location Matamoros.

second quarter of the We transition expect of the XXXX. completion in

reduced XXXX. operating temporary the quarter restored in As of related expenses incentive we through revenue XXXX We reduction the compensation. navigate temporary we fourth to in and cost the environment, of measures cost released measures reserves challenging first quarter these

of As a X% operating sales expenses. result, of our we an approximately in increase saw

our revenue Our funding drive programs market operating objective manage the environment balance investments is for company. future appropriately focus to both will and growth that ensure in considering we the expenses to

first benefited result, from some an and During a had tax XXXX, rate discrete of tax-related the items, as quarter XX.X%. of improved we

our in tax overall, be XX%. to rate range XXXX expect to we For XX% of the

share quarter the were $X.XX $X.XX to were for $X.XX Adjusted of first quarter first diluted Earnings last per the year. diluted compared diluted first earnings share per the per quarter. in for share

cash compared million the and first in $XX to to of cash million quarter of on generated in sheet, we in XXXX. flow quarter Moving first XXXX generation the the balance $XX operating

balance XX, long-term debt sheet Our balance the cash March XXXX, as remains $XXX a $XX balance and with of million of was strong million.

remain are growth, of focused $XX generation acquisitions continue strong to We During shareholders. strategic approximately the to returning to on to cash organic quarter, CTS balance healthy cash and sheet totaling shares committed maintaining support repurchased and million. a we stock XXX,XXX approximately

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

first question today Instructions] Cowen. Josh [Operator of comes from you. Thank TD Our Buchalter

positive wondering. was driven, like And then medical quarter Based business. I This driven, the stand on mostly versus book-to-bill solid. Josh. side transportation? this non-transport A&D billion $X.X to were And bookings non-transport comments, entirely and is by good the sounds exiting But total bookings the book-to-bill positive your at for is a your for XXXX's like It's Sam see just where on it do industrial? billion?.Was $X.XX for of

Yes. overall part of the larger Back the sequentially The book the to double transportation back area. is business is industrial, trend your here, digits. book-to-bill a and being by in the revenue, improving

saw Medical. We book-to-bill. in saw also improvements an all increased in areas, we And

shipments, for On of of bit But side that the as timing book-to-build would tell the good defense a lumpy. little in why orders strong, we about of very full I period some was and those come well. that's year had you it, we the feel some

expectation That reflects related book number. question we our in to talked the expectation our the China because transportation a we the for your business, for the just moment part reflected And total on adjustments in source on revenue did ago. Sam, revenue about of that OEM also sales products long-term commercial business. the second smaller a lower softness the and we of that adjustment of reflect vehicle

take distribution Understood. inventory quarter, talking peers to or burn-down think, kind that through of directionally long you at of XX% the And how you mentioned any like Do on the think were the XX% And progress all that. burn-down the -- clear or working I you asked I update channel. that about then the you the of sounds channel? have that I you're and still time, noted it might last in and

best Sam, of down. probably describing inventories seeing way is it we're continue the to burn

would cautious improvement sales, our our a we've the I few last just our time, in our with also their it's small remember, right about at and and first the POS in the numbers XX% overall moment. direction, trending improved, the quarters, in of sales. very customers, have but being in so seen For bookings And say, here

markets BEV little you known seeing That Does hybrid. that bit to -- more of a market from just ago? China you're status it's well that us is on I wondering. that us in clear. one is seeing down break geographical the you're the seeing? quo X in a can kind And non-Chinese shift are for doing comment last full me, for pretty China was market? And think still well give The that of you split BEV I months and Or than versus to what

say range, maybe higher, America in New a softened got Sam, But Europe the more little BEV little bit Yes. America first Year. in I'd X% little North gone the overall a and flattish. the digits. lower North on has quarter. China a remember, been China double and less, Europe was the low have you've they has Chinese I'm is bit. in the thinking

I that So itself will overall. correct think

some products mostly on that because about have I agnostic. us. we're think does worried so impact not the It much are

concerns we we're thing mostly our out, As that China. losing is That's the where focused. transplant us in customers called share

Understood.

comes question next Justin Stephens. from of Our Long

with to guidance, question expecting the half. industrial more a sounds like improvement start it Maybe the weighted second on you're in is the towards

as both and assume guidance around the then revenue X looks half, that earnings we you quarter the color think the any provide year, similar the can next the the there of the business cadence rest over progression in the So pick to of over back up does the of is first or quarters? and the we second more about

be in it, in quarter, bit in just is I a Justin. an of year, but side on overall improvement of to all Yes, in the of improvement light The second little because commercial it improvement, quarter, But vehicle a the but the Asia factored it, half. would to in. see some give you going challenge say, of definitely you'll back context most see that's the second some will transportation,

[indiscernible]. just Justin,

That's helpful.

in expect industrial we transportation communicated, softer business. previously the have half we recovery second and for As a a

shifting mix the year. the So continue should half non-transportation of revenue in the towards the second

quarter. better we XXX guess I point, gross sequentially a first improvement in did improvements the on forward? much of about us that Ashish, of operational How help basis going this can And gross some versus mix just that margin adjusted of that about discussed? function margins, a And think the point was sustainability you product just the see you margins, in gross of level

Yes.

at is as we would I see as Justin, some without change the as we through to improvement continuing going into year, well. mix. that, expect we there, operational from as rest too we'll see mix time operational more as improvements customer the obviously, much the of continue do detail What go focusing do shift same we efficiency well the tell favorable impact. you And the on

Is like coming that understand versus the source second into gave around as how And and much development? in year market guidance? competition initially could it. that was when vehicle. look one the headwind color is got commercial the a that is from new me I you try provide And production just lower second the we for coming Okay, the guess pressure anticipated from curious. Is the what a that any I'm you of there issues something last with on you more from competitor? can to this

Justin, a it's So, development. newer

of for the the customer, we we know, in unusual markets, going ready to to commercial light -- even relationship good have you there have at product, We're it's forward. we source. nature in going As with if second look vehicle, And we're have not it's that. the business the or vehicle think automotive

built softness we year. then the but softness the some your on built rate, is in, in half softness question has the more of anticipate run yes, the second And been to the in,

got We've we that's and a and obviously, we've got what innovation in as do to in quality, job good other compete. markets our do all well. So to

So overall. that's probably the it best way of describing

Yes.

the just expectation. the year, anticipated when we for of was put in reiterate, our Justin, sales the to guide range this out

honing that in So from part not Kieran we as early that it's XXXX. were perspective, newer it development a is but new, on of in said,

to That's clarify. helpful Okay.

Franzreb comes Company. question & John Sidoti from next of The

seeing Just other source in of markets topic are second pricing competition, it as you limited end is it sticking or the the pressure, to to well?

not primarily It's it's it commercial. transportation would markets. across We transportation. John, look just way, all that at all

happened to concerned expect, things last negotiations Detroit will pressure a and what's about non-transportation few transportation but We bit, little in years, are in prices Three from the that with drop union completely that markets. yet, happening, We're vehicle as the different changes expect not on the the start to build market. not we the

non-transportation the than half the is alluded the recover be end to based the within Which XXXX? profiles. first non-transportation to to going to fact the in probably on markets, that Understood. half And better market first in you current you expect the be businesseses bookings second

been John, little well, defense have been been is the bit this we the last has way at expect medical we've -- big improvement improvement and in bookings, I'd frame second doing non-transportation, the if we half. and that Industrial the steady sequential them headwind, expect that's you all we've to the biggest and a year, perform. and where as look into and going sales seen year

John, about strong the And quarter. also in bookings defense in medical as airspace first talked as Kieran and well in

that expect we and in in to aerospace defense medical continue So XXXX. and momentum

ask, to budget capital relocation the spending year, any what just facility, for the looks given the update And Understood. on like? the of

John, we typically So, talk sales. X% about of

less. little a it's years, Some

Some a we as and right XXXX have That years, at we higher. beyond. been feels look little us about for

question Our Hendi [Operator Susanto Instructions] Funds. comes Gabelli from next of

like competitions. to second questions ask would source further I the Kieran, on

source second timing of, to your timing elements, regain of regard or when competition? can shares that are meaning back let's shares, some winning will say, there customers CTS the terms with the like, In losing or

further softness second things to the we rate, drop drop mentioned some Hendi, market due our sales from in the will but already half is in I run -- So the I year. think of that see there. X

So source. the And in way probably know, not question. second transportation, to best unusual characterize have you that's your as to

So in we're do make we've innovation, doing business transportation. good quality, a sure like job we in with we with the XX got do to delivery, OEMs other just on-time

any in it happen terms back, or? And then winning time, of can it

Oh, I understand your question.

Yes.

We always flexibility. But situations, OEM maintain capability. some share? Look. for. here some OEM fight Absolutely. have win. second more we That's for source they to tell aim always will in though, to an would expect you we're like would And Sure, what I I to most

markets, or to And then vehicle among now? then your local plans are current Chinese for is envision current winning we several strategy OEMs? expand And presence transplant, the the the next light what given, in against the we quarters? OEMs what Chinese should Where

Hendi, that's they a question. we just as China, in over expand, well. as OEMs because, It's expand some one know can a that good tough region we globally Thank you. but with not in

the technology play that with hand, are do vertical probably versus tend On because your we over there they of lot won't other to a time. integration taking some

we very we're So careful play. where

then because, this. if been been revenue, we've And thing a know, it takes is, million a but as few the gain already doing the you years working in we've back, it on other you there, lose to cycle few

I we in the mentioned the As calls, last -- on few earnings accelerometers. of last wins had one

needed market that we doing products with motor in new market so applications. with sensing those position the of products are current doing sensing, we're in with So types in e-brake and win can that what the and

we're that's doubling down. So where

can in has factored regard that then whether guidance? your you And pressure with the within Got transportation, been pricing it. to verify in

Hendi. our preserve improve well. obviously, that we're sure margin productivity internally And to profile and within guidance, as doing driving factor our Yes, and we're things improving to right we make the always

over call have We Kieran any Instructions] turn no comment. O'Sullivan closing questions, I'll so the for [Operator further back to

time. you, thank and you, everyone, Thank your Lydia, for

on the innovation. of connectivity, the underscore efficiency increased future. headwinds, driven customers CTS automation, and medical our our growth our opportunities invasive of megatrends minimally by future confidence expansion The continued pipeline Despite is energy focused near-term of and in

call. Thank you the on This for concludes call. joining us today our

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

now disconnect line. your may You