Cts Corporation · NYSE:CTS
Cts — Investor Presentation (February 2020)
23 slides from Cts's investor presentation, Feb 4, 2020
Slide 1: Investor Presentation February 2020
Investor Presentation February 2020
Slide 2: Forward Looking Statements
Forward Looking Statements 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,
Slide 3: Solid Foundation With Opportunities For Growth
Solid Foundation With Opportunities For Growth We aim to be a leading provider of sensing and motion devices as well as connectivity components, enabling an intelligent and seamless world. Telecom Aero & & IT Europe Defense 15% 3% Medical 7% 9% North America 56% Asia $469 29% 17% Million Industrial
Slide 4: Broad Product Portfolio Around Targeted Strategy
Broad Product Portfolio Around Targeted Strategy ▪ Controls ▪ EMI/RFI Filters ▪ Piezoelectric ▪ Pedals ▪ Frequency Control Products ▪ Piezoelectric Products Products ▪ Rotary Actuators ▪ Position Sensors ▪ RF Filters ▪ Switches ▪ Specialty Capacitors ▪ Temperature Sensors ▪ Specialty Resistors ▪ Tra
Slide 5: 198% Shareholder Return from 2012 to 2019
198% Shareholder Return from 2012 to 2019 vs. 127% for S&P 500 $1.88 Billion 6.4% CAGR 9.4% to 19.1% Total Booked EBITDA Margin Sales Growth Business Expansion ▪ New business award tracking ▪ End market share gains ▪ Operational excellence ▪ Total booked business tracking ▪ New product introductions
Slide 6: Transportation Market
Transportation Market Sectors Electric/Hybrid Commercial Light Vehicles Motorcycles Relevant Products Vehicles Vehicles/Off-Road Key Customers ▪ Accelerator Pedals ▪ Position Sensors ▪ Temperature Sensors ▪ DPF RF Sensors ▪ Smart Actuator 6
Slide 7: Industrial Market
Industrial Market Sectors Inkjet Print Heads HVAC Systems Commercial Sonar Flow Metering Relevant Products Key Customers ▪ Piezoelectric Components ▪ Transducers ▪ Sensors & Controls ▪ Switches ▪ EMI/RFI Filters 7
Slide 8: Medical Market
Medical Market Sectors Ultrasonic Imaging Therapeutic Ultrasound Dental Equipment Equipment Control Panel Relevant Products Key Customers ▪ Piezoelectric Components ▪ Sensors & Controls ▪ Switches ▪ Frequency Control Products ▪ EMI/RFI Filters 8
Slide 9: Aero & Defense Market
Aero & Defense Market Sectors Torpedo/Missile Airplane Sonobuoys Hydrophones Relevant Products Control Communications Key Customers ▪ Piezoelectric Components ▪ Transducers ▪ RF Filters ▪ Temperature Sensors ▪ Frequency Control Products 9
Slide 10: Telecom & IT Market
Telecom & IT Market Sectors Macro Cell Small Cell Satellite Wireline/ Relevant Products Base Stations Base Stations Communication Network Switching Key Customers ▪ Piezoelectric Components ▪ RF Filters ▪ EMI/RFI Filters ▪ Frequency Control Products ▪ Temperature Sensors 10
Slide 11: End Markets Growing Mid-Single Digits
End Markets Growing Mid-Single Digits Transportation Industrial Medical Aero & Defense Telecom & IT 7% 3% 9% 17% 64% Goal LV 30-50% 20-30% 10-20% 5-15% 10-20% CV 10-20% SAM $3.4B $2.2B $0.4B $0.9B $1.9B ▪ Booked Business, Share Gains ▪ 3D and textile printing ▪ Medical 3D/4D ultrasound ▪ Hydrophones
Slide 12: Strategic M&A Approach
Strategic M&A Approach Expand Enhance Broaden Strengthen Product Technology Geographic Customer Range Portfolio Reach Relationships Case Study: Successfully Built Broad Piezoelectric Ceramic Growth Platform Pre 2016 2016 2017 2018+ Bulk Technology Single Crystal Technology Tape Cast Technology Robus
Slide 13: QTI Sensing Solutions Acquisition
QTI Sensing Solutions Acquisition Company Overview Acquisition Rationale ▪ Founded in 1977, facilities in Boise, ID and Tecate, Mexico ▪ Provides CTS a new core temperature sensing technology ▪ QTI Sensing Solutions is a leading designer and manufacturer ▪ Increases presence in growing industrial, a
Slide 14: Balanced Capital Deployment Approach
Balanced Capital Deployment Approach Operating Cash Flow 12-15% of Sales Growth Return Capital to Investment Acquisitions Shareholders ~4% of Sales* 60-80% of Dividends & Buybacks Free Cash Flow 20-40% of Free Cash Flow *4.6% in 2019 4-5% in 2020 Capital Structure Leverage = 1.0x - 2.5x EBITDA 14
Slide 15: Financial Performance Trend and 2020 Guidance
Financial Performance Trend and 2020 Guidance Sales Adjusted Earnings Per Share ($ Millions) $480 $1.60 $470 $469 $450 $423 $1.53 $1.45 $1.35 $1.23 $387 Total Booked Business $1.08 Q3 YTD Actual 2017 2018 2019 2020E 2017 2018 2019 2020E Note: 2020E represents guidance provided on February 4, 2020. 1
Slide 16: Financial Framework
Financial Framework Long-Term 2012 2019 Target Range Gross Margin 30.0% 33.6% 34-37% SG&A Expense 20.7% 15.0% 13-15% R&D Expense 6.9% 5.5% 5-7% CapEx 2.6% 4.6% ~4%* *4-5% in 2020 Targeting 10% Annual Growth (Organic + Inorganic) 16
Slide 17: Well Positioned For Growth
Well Positioned For Growth Organic Inorganic Healthy Total Booked Business Strong Cash & Debt Availability ($ Millions) ($ Millions) $1,882 +24% $300 Total Facility $1,518 $100 $100 Borrowed Dec 2016 Dec 2019 Cash Debt ▪ Enhance Customer Intimacy ▪ Low leverage, debt-to-equity ratio ▪ Enhance Sales
Slide 18: Appendix
cis Appendix
Slide 19: CTS Core Values
CTS Core Values Play to Win Simplicity cts Responsiveness Solution Oriented
Slide 20: Financial Summary
Financial Summary ($ Millions, except percentages and Adjusted Diluted EPS) 2019 2018 2017 Net Sales $469.0 $470.5 $423.0 Adjusted Gross Margin $157.6 $165.0 $145.2 Adjusted Gross Margin % of Sales 33.6% 35.1% 34.3% Depreciation and Amortization $24.6 $22.5 $20.7 Adjusted EBITDA $89.5 $92.1 $80.0 Ad
Slide 21: Regulation G Schedules Adjusted Gross Margin
Regulation G Schedules Adjusted Gross Margin ($ Millions, except percentages) Q4 Full Year 2019 2018 2019 2018 2017 Gross margin $ 38.7 $ 42.6 $ 157.6 $ 165.0 $ 140.4 Adjustments to reported gross margin: Pension settlement charge - - - - 4.8 Adjusted gross margin $ 38.7 $ 42.6 $ 157.6 $ 165.0 $ 145
Slide 22: Regulation G Schedules Adjusted EBITDA
Regulation G Schedules Adjusted EBITDA Q4 Full Year ($ Millions, except percentages) 2019 2018 2019 2018 2017 Net earnings $ 10.1 $ 17.6 $ 36.1 $ 46.5 $ 14.4 Depreciation and amortization expense 6.6 6.2 24.6 22.5 20.7 Interest expense 0.9 0.5 2.6 2.1 3.3 Tax expense 2.8 (0.7) 14.1 11.6 25.8 EBITDA
Slide 23: Regulation G Schedules Adjusted Diluted EPS
Regulation G Schedules Adjusted Diluted EPS Q4 Full Year 2019 2018 2019 2018 2017 Diluted earnings per share $ 0.31 $ 0.52 $ 1.09 $ 1.39 $ 0.43 Tax affected adjustments to reported diluted earnings per share: Restructuring charges 0.05 0.04 0.18 0.12 0.08 Loss on sale of facilities, net of expenses