Cts Corporation · NYSE:CTS
Cts — Investor Presentation (February 2019)
25 slides from Cts's investor presentation, Feb 5, 2019
Slide 1: Investor Presentation
¢ tS Your Partner in Smart Solutions 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
Our Company Ticker: CTS (NYSE) 2018 Sales: $470 Million Founded: 1896 Sales by Market: ▪ Transportation – 64% Business: CTS is a leading designer ▪ Industrial – 18% and manufacturer of sensors, ▪ Medical – 9% actuators and electronic components. ▪ Aero & Defense – 5% ▪ Telecom & IT – 4% Locations: 1
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 Occupant Safety Fuel Handling ▪ Accelerator Pedal Module ▪ Seat Belt Buckle Switch ▪ Contacting Fuel Level Card ▪ Current Sensor ▪ Seat Belt Tension Sensor ▪ Gear Position Sensor ▪ Seat Track Position Sensor ▪ Throttle Position Sensor ▪ Turbo
Slide 7: Product Applications in Industrial
Product Applications in Industrial Industrial Printers, HVAC, Automation and Safety Products ▪ Piezo Micro-Actuators ▪ Switches ▪ Encoders ▪ Frequency Control ▪ EMI Filters ▪ Flow Meter Transducers Industrial HVAC Industrial Inkjet Printers Key Customers 7
Slide 8: Product Applications in Medical
Product Applications in Medical Ultrasound / IVUS, Infusion Pumps, CPAPs and other medical devices ▪ Single Crystal Piezo ▪ Bulk Piezo ▪ Encoders ▪ Frequency Control ▪ Piezo micro-valves ▪ Switches ▪ Joysticks CPAP Machines Infusion Pumps Ultrasound Equipment Dental Equipment Wireless Pacing Key Cus
Slide 9: Product Applications in Aero & Defense
Product Applications in Aero & Defense Military Sonar and Communication Products ▪ Piezo Hydrophones ▪ Piezo Sonar Arrays ▪ Frequency Control ▪ EMI Filters Unmanned Aerial Vehicles (UAV) Maritime Applications Key Customers 9
Slide 10: Product Applications in Telecom & IT
Product Applications in Telecom & IT Communications Products ▪ RF Filters ▪ EMI/RFI Filters ▪ Frequency Control ▪ Timing Modules ▪ Thermal Products ▪ Multilayer Piezo ▪ Bulk Piezo Mobile Devices Wireline Infrastructure Small Cell Base Stations Macro Cell Base Stations Wireless Infrastructure Backhau
Slide 11: Positioning for Growth with Fundamental Market Trends
Positioning for Growth with Fundamental Market Trends Smart Home/ IndustryIndustry 4.04.0 Green Buildings Building Unmanned Autonomous Energy Aerial Vehicles Vehicle Harvesting EFFICIENT (Drones) Medical Information Industrial Technology Fuel Efficiency/ Improved Remote SMART Vehicle CONNECTED Medic
Slide 12: CTS Addressable Markets Expected to Grow Mid-Single Digits
CTS Addressable Markets Expected to Grow Mid-Single Digits Market SAM in $ Billions Organic Growth Drivers Transportation ▪ Actuators for harsh environments $3.4 ▪ RF Sensing for particulate filters ▪ Autonomous drive Industrial ▪ $1.2 3D and textile printing ▪ New products for industrial controls M
Slide 13: Organic Growth
Organic Growth Total Booked Business Investments to Grow ($ Millions) Technologies and Products that Sense, Connect and Move $1,866 +7.4% $1,737 $397 ▪ Improve Customer Intimacy ▪ R&D Investments at ~6% of Sales ▪ Enhance Sales Force Capabilities ▪ Improvements to Cost Structure ▪ Continuous Improve
Slide 14: Targeted Acquisitions
Targeted Acquisitions Expand Broaden Product Geographic Range Reach Enhance Strengthen Technology Customer Portfolio Relationships Disciplined approach to acquisitions: ▪ Returns in excess of cost of capital ▪ Accretive to earnings ▪ Maintain balance sheet strength ▪ Synergy opportunities ▪ Targetin
Slide 15: The Road Ahead of Us
The Road Ahead of Us AD Targeted End Markets T&IT LV Light Vehicles 30-50% CV Industrial 20-30% Medical 10-20% O M Telecom & IT 10-20% M Commercial Vehicles 10-20% I LV/CV AD Aero & Defense 5-15% T I AD T&IT Organic Growth CV Innovation M&A M LV EMS Divestiture M AD IT/O I Front End Refocus Legend:
Slide 16: Annual Financial Performance Trend
Annual Financial Performance Trend Sales Adjusted Earnings Per Share ($ Millions) $500 $1.70 $460 $470 $1.50 $423 $1.53 $397 $397 Booked $1.23 Business $1.08 2016 2107 2018 2019E 2016 2017 2018 2019E Note: 2019E represents guidance provided on February 5, 2019. 16
Slide 17: Capital Structure
Capital Structure Cash and Debt Current Capital Structure ($ Millions) $157 Debt 12% $114 $114 $101 $91 $90 $76 $50 Equity 88% 2015 2016 2017 2018 Cash Debt Net $(66) $(24) $(38) $(51) Debt Note 1: Change in Cash/Debt in 2016 due to Single Crystal Acquisition Note 2: Total available credit increased
Slide 18: Target Capital Deployment – Disciplined Approach
Target Capital Deployment – Disciplined Approach Operating Cash Flow 12-15% of Sales Growth Return Capital to Investment Acquisitions Shareholders ~4% of Sales* 60-80% of Dividends & Buybacks Free Cash Flow 20-40% of Free Cash Flow *6.1% in 2018 6-8% in 2019 Capital Structure Leverage = 1.0x - 2.5x
Slide 19: Financial Framework
Financial Framework Long-Term 2012 2018 Target Range Gross Margin 30.0% 35.1% 34-37% SG&A Expense 20.7% 15.6% 13-15% R&D Expense 6.9% 5.4% 5-7% CapEx 2.6% 6.1% ~4%* *6-8% in 2019 Targeting 10% Annual Growth (Organic + Inorganic) 19
Slide 20: Appendix
cts Appendix
Slide 21: CTS Core Values
CTS Core Values Play to Win Simplicity cts Responsiveness Solution Oriented
Slide 22: Financial Summary
Financial Summary ($ Millions, except percentages and Adjusted Diluted EPS) 2018 2017 2016 Net Sales $470.5 $423.0 $396.7 Adjusted Gross Margin $165.0 $145.2 $140.4 Adjusted Gross Margin % of Sales 35.1% 34.3% 35.4% Depreciation and Amortization $22.5 $20.7 $19.0 Adjusted EBITDA $92.1 $80.0 $77.4 Ad
Slide 23: Regulation G Schedules Adjusted Gross Margin
Regulation G Schedules Adjusted Gross Margin ($ Millions, except percentages) Q4 Full Year 2018 2017 2018 2017 2016 Gross margin $ 42.6 $ 32.9 $ 165.0 $ 140.4 $ 140.4 Adjustments to reported gross margin: Pension settlement charge - 4.8 - 4.8 - Adjusted gross margin $ 42.6 $ 37.7 $ 165.0 $ 145.2 $ 1
Slide 24: Regulation G Schedules Adjusted EBITDA
Regulation G Schedules Adjusted EBITDA ($ Millions, except percentages) Q4 Full Year 2018 2017 2018 2017 2016 Net earnings (loss) $ 17.6 $ (13.6) $ 46.5 $ 14.4 $ 34.4 Depreciation and amortization expense 6.2 5.6 22.5 20.7 19.0 Interest expense 0.5 1.1 2.1 3.3 3.7 Tax (benefit) expense (0.7) 13.8 11
Slide 25: Regulation G Schedules Adjusted Diluted EPS
Regulation G Schedules Q4 Full Year Adjusted Diluted EPS 2018 2017 2018 2017 2016 Diluted earnings (loss) per share $ 0.52 $ (0.41) $ 1.39 $ 0.43 $ 1.03 Tax affected adjustments to reported diluted earnings per share: Restructuring charges 0.04 0.02 0.12 0.08 0.06 Increase in valuation allowance and