Cts Corporation · NYSE:CTS
Cts — Investor Presentation (April 2018)
26 slides from Cts's investor presentation, Apr 27, 2018
Slide 1: Investor Presentation
Investor Presentation
Slide 2: Safe Harbor Statement
Safe Harbor Statement This presentation contains statements that are, or may be deemed to be, forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements include, but are not limited to, any financial or other guidance, stat
Slide 3: Our Company
2017 Sales: $423 Million Sales by Market: ▪ Transportation – 65% ▪ Industrial – 18% ▪ Medical – 9% ▪ Aero & Defense – 4% ▪ Telecom & IT – 4% Sales by Region: ▪ Americas – 54% ▪ Asia – 31% ▪ Europe – 15% Our Company Ticker: CTS (NYSE) Founded: 1896 Business: CTS is a leading designer and manufacturer
Slide 4: Our History - Years of Innovation
Our History - 120 Years of Innovation 4
Slide 5: Our Vision and Value Proposition
Our Vision and Value Proposition We aim to be a leading provider of sensing and motion devices as well as connectivity components, enabling an intelligent and seamless world. 5
Slide 6: Product Applications in Transportation
Product Applications in Transportation Engine Efficiency ▪ Accelerator Pedal Module ▪ Current Sensor ▪ Gear Position Sensor ▪ Throttle Position Sensor ▪ Turbo Actuator ▪ Turbo Position Sensor ▪ Variable Valve Lift Sensor Key Customers 6 Fuel Handling ▪ Contacting Fuel Level Card Chassis / Driveline
Slide 7: Product Applications in Industrial
Key Customers Industrial Printers, HVAC, Automation and Safety Products ▪ Piezo Micro-Actuators ▪ Switches ▪ Encoders ▪ Frequency Control ▪ EMI Filters ▪ Flow Meter Transducers ▪ Thermal Solution For LED High Bay Lighting Product Applications in Industrial 7 Industrial Inkjet Printers Industrial HVA
Slide 8: Product Applications in Medical
Product Applications in Medical Key Customers Ultrasound / IVUS, Infusion Pumps, CPAPs and other medical devices ▪ Single Crystal Piezo ▪ Bulk Piezo ▪ Encoders ▪ Frequency Control ▪ Piezo Micro-Valves ▪ Switches ▪ Joysticks 8 Infusion Pumps CPAP Machines Ultrasound Equipment Dental Equipment
Slide 9: Product Applications in Aero & Defense
Key Customers Military Sonar and Communication Products ▪ Piezo Hydrophones ▪ Piezo Sonar Arrays ▪ Frequency Control ▪ EMI Filters Product Applications in Aero & Defense 9 Unmanned Aerial Vehicles (UAV) Maritime Applications
Slide 10: Product Applications in Telecom & IT
Communications Products ▪ RF Filters ▪ EMI/RFI Filters ▪ Frequency Control ▪ Timing Modules ▪ Thermal Products ▪ Multilayer Piezo ▪ Bulk Piezo Product Applications in Telecom & IT 10 Key Customers Macro Cell Base Stations Small Cell Base Stations Mobile Devices Backhaul CommunicationsWireless Infras
Slide 11: Positioning for Growth with Fundamental Market Trends
Positioning for Growth with Fundamental Market Trends 11 Autonomous Vehicle SMART Smart Home/ Building Unmanned Aerial Vehicles (Drones) Improved Medical Diagnosis Fuel Efficiency/ Vehicle Electrification Miniaturization Energy Harvesting EFFICIENT Green Buildings Diagnos Remote Monitoring Industry
Slide 12: CTS Addressable Markets Expected to Grow Mid-Single Digits
CTS Addressable Markets Expected to Grow Mid-Single Digits 12 ▪ Hydrophones for sonar applications ▪ Military communication Organic Growth Drivers ▪ 100GB & 400GB wireline networks ▪ Small cell deployment ▪ Security and haptics for mobile devices ▪ 3D and textile printing ▪ New products for industri
Slide 13: Organic Growth Investments to Grow Technologies and Products
Organic Growth 13 Investments to Grow Technologies and Products that Sense, Connect and Move Total Booked Business Note: Total Booked Business represents open purchase orders, contractual commitments, and the total expected lifetime revenue from business awarded to CTS in multi-year platform awards.
Slide 14: Targeted Acquisitions
Targeted Acquisitions 14 Disciplined approach to acquisitions: ▪ Returns in excess of cost of capital ▪ Accretive to earnings ▪ Maintain balance sheet strength ▪ Synergy opportunities ▪ Targeting 10% growth (both inorganic and organic) Expand Product Range Broaden Geographic Reach Enhance Technology
Slide 15: The Road Ahead of Us
The Road Ahead of Us LV I M CV T&IT AD LV/CV I T AD M IT/O LV I M CV T&IT AD 30-50% 20-30% 10-20% 10-20% 10-20% 5-15% Targeted End Markets Light Vehicles Industrial Medical Telecom & IT Commercial Vehicles Aero & Defense EMS Divestiture Front End Refocus New Customers Regional Expansion Organic Proj
Slide 16: Noliac Acquisition
Noliac Acquisition Multilayer (Tape cast) ▪ Founded in 1997, facilities in Denmark and Czech Republic ▪ Designer and manufacturer of tape cast and bulk piezoelectric material as well as transducers for use in the telecommunications, industrial, medical and defense industries ▪ Acquisition rationale:
Slide 17: Annual Financial Performance Trend
$382 $397 $423 2015 2016 2017 2018E Sales $0.93 $1.08 $1.23 2015 2016 2017 2018E Adjusted Earnings Per Share $455 Note: 2018E represents guidance provided on April 26, 2018. Annual Financial Performance Trend 17 $435 $1.44 $1.32 ($ Millions) Q3 YTD Actual $0.84 Booked Business $295 Q1 Actual $114
Slide 18: Capital Structure, Cash and Debt
Equity 83% Debt 17% $157 $114 $114 $121 $91 $90 $76 $74 2015 2016 2017 Q1 2018 Note 1: Change in Cash/Debt in 2016 due to Single Crystal Acquisition Note 2: Total available credit increased from $200M to $300M in 2Q 2016 Capital Structure Cash and Debt Net Debt $(66) Current Capital Structure DebtCa
Slide 19: Target Capital Deployment
Capital Structure Leverage = 1.0x - 2.5x EBITDA Operating Cash Flow Return Capital to Shareholders ~4% of Sales* 20-40% of Free Cash Flow 12-14% of Sales 60-80% of Free Cash Flow Target Capital Deployment – Disciplined Approach Growth AcquisitionsInvestment Dividends & Buybacks 19 *7-9% in 2018
Slide 20: Financial Framework
Financial Framework 20 2012 2017 Long-Term Target Range Gross Margin 30.0% 34.3% 34-37% SG&A Expense 20.7% 15.5% 13-15% R&D Expense 6.9% 5.4% 5-7% CapEx 2.6% 4.3% ~4%* Targeting 10% Annual Growth (Organic + Inorganic) *7-9% in 20181 Excludes the impact of the pension settlement charge recorded in Q4
Slide 21: Appendix
Appendix 21
Slide 22: CTS Core Values
CTS Core Values SJ Play to Win Responsiveness Simplicity Solution Oriented
Slide 23: Financial Summary
Financial Summary Note 1: See Regulation G reconciliations from GAAP to Non-GAAP measures and adjustments. Note 2: All figures are from continuing operations except for Adjusted Diluted EPS (As Reported), Operating Cash Flow and Total Debt / Capitalization ($ Millions, except percentages and Adjuste
Slide 24: Regulation G Schedules: Adjusted Gross Margin
Regulation G Schedules ($ Millions, except percentages) Adjusted Gross Margin 24 2018 2017 2017 2016 2015 Gross margin 38.4$ 34.2$ 140.4$ 140.4$ 127.1$ Adjustments to reported gross margin: Pension settlement charge - - 4.8 - - Adjusted gross margin 38.4$ 34.2$ 145.2$ 140.4$ 127.1$ Sales 113.5$ 100.
Slide 25: Regulation G Schedules: Adjusted EBITDA
Regulation G Schedules ($ Millions, except percentages) Adjusted EBITDA 25 2018 2017 2017 2016 2015 Net earnings 11.5$ 8.5$ 14.4$ 34.4$ 7.0$ Depreciation and amortization expense 5.5 4.7 20.7 19.0 16.3 Interest expense 0.5 0.7 3.3 3.7 2.6 Tax expense 3.8 3.7 25.8 22.9 5.3 EBITDA 21.3 17.6 64.2 80.0
Slide 26: Regulation G Schedules: Adjusted Diluted EPS
Regulation G Schedules Adjusted Diluted EPS ($ Millions, except percentages) Total Debt to Capitalization 26 2018 2017 2017 2016 2015 Diluted earnings per share 0.34$ 0.25$ 0.43$ 1.03$ 0.21$ Tax affected adjustments to reported diluted earnings per share: Restructuring charges 0.03 0.02 0.08 0.06 0.