Cts Corporation · NYSE:CTS
Cts — Investor Presentation (February 2023)
26 slides from Cts's investor presentation, Feb 7, 2023
Slide 1: CTS Investor Presentation Feb 2023
CTS Investor Presentation Feb 2023
Slide 2: Forward-Looking Statements
Forward-Looking Statements This document 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, sta
Slide 3: CTS: Leading Designer and Manufacturer of Custom Engineered Solutions
14% Non-Transportation Revenue CAGR LTM Revenue $587 Million Global design and manufacturing capabilities Technical and application expertise applied across diverse and growing end markets 1 Last 12 months Revenue as of Dec 2022 2 2017-2022 including acquisitions Europe 15% North America 57% Asia 28
Slide 4: Why Invest in CTS
Leveraging operational excellence to drive profitable growth Strong execution led by seasoned leadership team Strengthening and aligning organizational capabilities through Focus 2025 initiative Deep engineering capabilities and custom engineered products for OEMs Strong presence in position, ultras
Slide 5: Leveraging Domain Expertise to Expand into Premium End Markets
Addressable Market Size: Key Applications: Revenue CAGR: Leveraging Domain Expertise to Expand into Premium End Markets $2.9B 12% Industrial Printing Flow Rate Meters Material Handling HVAC Food Service Industrial $1.5B 13% High-Resolution Ultrasound Intravascular Ultrasound Instruments, Neonatal ap
Slide 6: Secular Themes Drive Growth Across End Markets
Sustainability Automation Healthcare Innovation Electrification Reduced Emissions Fluid Metering Energy Efficiency Industry 4.0 Factory Automation Passenger Safety Defense Automation Improved Diagnostics Therapeutics Non-Invasive Patient Experience Secular Themes Drive Growth Across End Markets Appl
Slide 7: Diversifying Revenue in Growing End Markets Outside of Transportation
2017 Revenues $423M Long term target +10% CAGR Utilizing core capabilities and domain expertise in fast-growing end markets Investing in business development resources, process and technology capabilities Disciplined capital investments to support diversification strategy < 50% 5-15% 10-20% 20-30% L
Slide 8: Light Vehicle Portfolio Carries Over to Electric Vehicles
Completed maglab acquisition – strengthening Electrification portfolio Light Vehicle Portfolio Carries Over to Electric Vehicles Chassis Height Sensor Accelerator Modules Brake Position Sensor Belt Tension Sensor Seat Track Position Sensor Seat Belt Buckle Switch Sensor Chassis Height Sensor Acceler
Slide 9: maglab AG – Accelerating Growth in Electrification
maglab will help accelerate our electrification growth across industries maglab AG – Accelerating Growth in Electrification Company Highlights Transaction Rationale Located in Basel, Switzerland, maglab AG is a technology and engineering services provider focused on the acceleration of electrificati
Slide 10: The CTS Advantage – Your Partner in Smart Solutions
Technology and application expertise creates competitive advantage and long-term relationships with blue-chip customers Technology Leadership Recognized leader with global design and engineering capabilities The CTS Advantage – Your Partner in Smart Solutions Domain Expertise Deep experience solving
Slide 11: Long-Term Relationship with Blue-Chip Customers
Long-Term Relationship with Blue-Chip Customers
Slide 12: Strong Execution Capabilities
Improved Operational Efficiency Gross Margin +650 bps1 Streamlined SG&A (442) bps1 Adj. EBITDA +1333 bps1 Improved process improvement capability, business intelligence Strengthened Balance Sheet 135% free cash flow2 $142 million returned to Shareholders3 Solid acquisition capacity Strategic Investm
Slide 13: Capital Allocation Framework
Cash Returned to Shareholders Dividend & Buybacks 20-40% of FCF Capital Structure Leverage 1.0 – 2.5x Operating Cash Flow 15-17% of Sales Growth Capex ~4% of Sales Acquisitions 60-80% of FCF Capital Allocation Priorities Maintain healthy Balance Sheet Disciplined organic investments Growth resources
Slide 14: Strategic Approach to M&A
Strategic Approach to M&A Strengthen Customer Relationships Geographical Expansion Enhance Technology Portfolio Attractive Financials Expand End Markets Expand Product & Applications ~ 5% of Sales Growth From M&A Disciplined approach to acquisitions ROI in excess of cost of capital Maintain balance
Slide 15: Strategic Acquisitions Fueling Diversification – M&A as a Catalyst
Strategic Acquisitions Fueling Diversification – M&A as a Catalyst 48% of sales from Non-Transportation end markets … +360 bps vs. 2021 Single Crystal Technology 2016 2017 Tape Cast Technology Bulk Technology Pre 2016 2022 Medical Therapeutics Europe Defense Growing Piezoceramic Platform Current Enh
Slide 16: FY 2023 Guidance
Notes: 1 CAGR based on mid point of 2023 guidance FY 2023 Guidance Revenue ($ Millions) Adj. Diluted EPS $580 $640 2020-2023 CAGR 9.5% 1 Stable demand from medical & aerospace/defense customers Softer outlook in industrial end market & distribution channel Commercial vehicle sales potentially impact
Slide 17: Financial Framework
2012 2022 Long-Term Target Revenue $304M $587M +10% /yr Gross Margin3 30.1% 36.5% 35-38% SG&A Expense3 19.4% 15.0% 13-15% R&D Expense 6.9% 4.1% 5-7% CapEx 4.4% 2.4% ~4% 2 Financial Framework 1 Notes: 1 2012 Financials from Continuing Operations 2 FY 2022 3 Adjusted Gross Margin and SG&A Expenses
Slide 18: Our Sustainability Journey
Creating long-term sustainable value for stakeholders and communities Continued progress in 2022 : Established DE&I Committee Expanded Compensation & Talent Committee with greater visibility to talent and diversity initiatives Board diversity >40% Supporting sustainable products: Vehicle electrifica
Slide 19: Appendix
Appendix
Slide 20: Focus 2025
10% Revenue CAGR with 23% EBITDA Focus 2025 01 02 03 Develop customer partnerships that are authentic and collaborative, resulting in mutually beneficial revenue growth Deeper Customer Relationships Build a culture of continuous improvement through the development of CTS Operation Systems and proces
Slide 21: CTS Core Values
CTS Core Values Play to Win Responsiveness Simplicity Solution Oriented
Slide 22: Full Year Adjusted Diluted EPS
2022 2021 2020 Diluted earnings (loss) per share 1.85 $ (1.30) $ 1.06 $ Tax affected adjustments to reported diluted earnings (loss) per share: Restructuring charges 0.05 0.06 0.04 Foreign currency loss (gain) 0.15 0.10 (0.16) Non-cash pension expense 0.16 3.13 0.06 Environmental charges 0.07 0.05 0
Slide 23: Adjusted EBITDA Margin
Full Year 2022 2012 Net earnings 59.6 $ 13.5 $ Depreciation and amortization expense 29.8 13.5 Interest expense 2.2 2.6 Tax expense 21.2 1.0 EBITDA 112.7 30.5 Adjustments to EBITDA: Restructuring charges 1.9 4.5 Gain on sale - leaseback (10.3) Environmental charges 2.8 - Legal settlement - 1.5 Addit
Slide 24: Adjusted Gross Margin
Regulation G Schedules Full Year 2022 2012 Gross margin 210.5 $ 91.5 $ Adjustment to reported gross margin: Inventory fair value step-up 4.0 - Adjusted gross margin 214.5 $ 91.5 $ Net sales 586.9 $ 304.5 $ Adjusted gross margin as a % of net sales 36.5% 30.1% Full Year ($ Millions) Adjusted Gross Ma
Slide 25: Adjusted SG&A Expenses
Regulation G Schedules 2022 2012 SG&A Expense 91.5 $ 63.1 $ Adjustments to reported SG&A expense: Environmental charges 2.8 - Acquisition-related costs 0.8 - Additional CEO search, legal costs and acquisition - 2.5 Additional legal costs - 1.5 Total adjustments to reported SG&A expense 3.5 $ 4.0 $ A
Slide 26: Free Cash Flow
($ Millions) Free Cash Flow Regulation G Schedules 2022 2021 2020 2019 Net cash provided by operating activities 121.2 $ 86.1 $ 76.8 $ 64.4 $ Capital expenditures (14.3) (15.6) (14.9) (21.7) Free cash flow 106.9 $ 70.5 $ 61.9 $ 42.7 $ Free Cash Flow as % of Adjusted Net Earnings 135% 112% 170% 89% F