Slide 1: CTS Investor Presentation July 2023
CTS Investor Presentation July 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 is a Leading Designer and Manufacturer of Custom Engineered Solutions
LTM Adj. EBITDA Margin 22% LTM Adj. EPS $2.38 14% Non-Transportation Revenue CAGR LTM Revenue $585 million Global design and manufacturing capabilities Technical and application expertise applied across diverse and growing end markets Notes: 1 Last 12 months Revenue as of June 2023 2 Adj. EBITDA Mar
Slide 4: CTS Positioned to Deliver 10% Organic and Inorganic Growth
CTS Positioned to Deliver 10% Organic and Inorganic Growth Deep custom engineered capability and long-standing customer relationships Megatrend tailwinds – automation, healthcare innovation and electrification Strong new product pipeline – eBrakeTM, textured piezo, medical applications Organic Growt
Slide 5: Secular Themes Drive Growth Across End Markets
Automation Healthcare Innovation Industry 4.0 Factory Automation Passenger Safety Defense Automation Improved Diagnostics Minimally Invasive Therapeutics Patient Experience Secular Themes Drive Growth Across End Markets Applying deep domain expertise to solve today’s most pressing challenges Sustain
Slide 6: Deep Technical Expertise Provides a Sustainable Advantage
Deep Technical Expertise Provides a Sustainable Advantage Piezoelectric Ceramic Bulk Tapecast Single Crystal Textured Imaging: Medical, Defense Medical Therapeutics Micro-actuation Position Sensing Temperature Sensing Capabilities Key Technologies Applications Signal Processing Hall Effect Inductive
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: Enabling Efficiency and Automation in Industrial Markets
Efficiency Material Expertise Up integration into sensors and transducers Addressable Market Size: Estimated Market Growth: Revenue CAGR: $2.9B 12% Industrial 1 Mid-single Digit Drivers of Outperformance: INDUSTRIAL Enabling Efficiency and Automation in Industrial Markets Strong Tailwinds from Susta
Slide 9: Unlocking Important Innovation in Medical Markets
Intravenous Ultrasound High Resolution Ultrasound Drug Delivery Cardiac Rhythm (Wireless Pacemaker) Highly Precise Minimally Invasive Addressable Market Size: Estimated Market Growth: Revenue CAGR: Drivers of Outperformance: MEDICAL $1.5B 13% Unlocking Important Innovation in Medical Markets 1 Utili
Slide 10: Ensuring Performance and Reliability in Aerospace and Defense
Enhanced Performance Underwater Sonar Reliability Space Temperature Applications Vibration Monitoring Radar Addressable Market Size: Estimated Market Growth: Revenue CAGR: Drivers of Outperformance: AEROSPACE & DEFENSE $0.7B 22% Mid-single Digit Increase in defense spending EU market expansion oppor
Slide 11: Electrification Creating Growth Opportunity in Transportation
Electrification Creating Growth Opportunity in Transportation 11 Addressable Market Size: Estimated Market Growth: Revenue CAGR: Drivers of Outperformance: TRANSPORTATION $2.7B 2% Increased Content with New Products for EVs leading to expanded SAM 1 Light Vehicle Content Grows > 2x with EV Applicati
Slide 12: Improved Operational Efficiency and Strong Execution Capabilities
Improved Operational Efficiency Adj. Gross Margin +640 bps1,4 Streamlined Adj. SG&A (440) bps1,4 Improved process improvement capability, business intelligence Strengthened Balance Sheet 91% operating cash flow2,4 135% free cash flow3,4 $164 million returned to shareholders5 Solid acquisition capaci
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 Single Crystal Technology 2016 2017 Tape Cast Technology Bulk Technology Pre 2016 2022 Medical Therapeutics Europe Defense Growing Piezoceramic Platform Current Enhancing Piezoceramic Technology and Geographic Reach Building a Strong
Slide 16: FY 2023 Guidance
$2.40 $2.20 Notes: 1 CAGR based on mid point of 2023 guidance. 2 Adj. Diluted EPS is a non-GAAP financial measure. Refer to Appendix for reconciliation of non-GAAP financial measures to the most directly comparable financial measures calculated and presented in accordance with GAAP. FY 2023 Guidance
Slide 17: Financial Framework
20121 LTM2 Long-Term Target Revenue $304M $585M +10% per year Adj Gross Margin %3 30.1% 35.8% 35-38% Adj SG&A Expense %3 19.4% 15.2% 13-15% R&D Expense % 6.9% 4.3% 5-7% CapEx % 4.4% 2.7% ~4% 2 Financial Framework 1 1 2012 Financials from Continuing Operations 2 LTM through Q2 2023 3 Adj. Gross Margi
Slide 18: ESG Initiatives
Published inaugural ESG Report highlighting ESG progress Continued advancing our goal of deriving more than 25% of sales of components for light vehicles from electrified platforms. 13 new wins for electrified vehicle platforms in Q2 2023 Employees devoted over 2,991 hours to community service event
Slide 19: Appendix
Appendix
Slide 20: Focus 2025
Focus 2025 01 02 03 Develop customer partnerships that are authentic and collaborative, resulting in mutually beneficial revenue growth Deeper Customer Relationships Build a culture of continuous improvement through the development of CTS Operation Systems and process improvement mindset Improved Op
Slide 21: CTS Core Values
CTS Core Values Play to Win Responsiveness Simplicity Solution Oriented
Slide 22: Non-GAAP Financial Measures
Non-GAAP Financial Measures From time to time, CTS may use non-GAAP financial measures in discussing CTS’ business. These measures are intended to supplement, not replace, CTS’ presentation of its financial results in accordance with U.S. GAAP. CTS believes that the non-GAAP financial measures prese
Slide 23: Regulation G Schedules: Adjusted Gross Margin
Regulation G Schedules ($ Millions) Adjusted Gross Margin LTM Full Year Q3-22 to Q2-23 2022 2012 Gross margin 206.7 $ 210.5 $ 91.5 $ Net sales 585.4 $ 586.9 $ 304.5 $ Gross margin as a % of net sales 35.3% 35.9% 30.1% Adjustment to reported gross margin: Inventory fair value step-up 2.9 4.0 - Adjust
Slide 24: Regulation G Schedules: Adjusted SG&A Expenses
Regulation G Schedules ($ Millions) Adjusted SG&A Expenses LTM Full Year Full Year Q3-22 to Q2-23 2022 2012 SG&A Expense 93.2 $ 91.5 $ 63.1 $ Net sales 585.4 $ 586.9 $ 304.5 $ SG&A expense as a % of net sales 15.9% 15.6% 20.7% Adjustments to reported SG&A expense: Environmental charges 4.1 2.8 - Acq
Slide 25: Regulation G Schedules: Adjusted EBITDA Margin
Regulation G Schedules ($ Millions) Adjusted EBITDA Margin LTM Q3-22 to Q2- 23 2022 Net earnings (loss) 58.0 $ 59.6 $ Net sales 585.4 $ 586.9 $ Net earnings (loss) margin 9.9% 10.2% Depreciation and amortization expense 30.2 29.8 Interest expense 2.6 2.2 Tax expense (benefit) 18.9 21.2 EBITDA 109.6
Slide 26: Regulation G Schedules: Adjusted Net Earnings Margin
Regulation G Schedules ($ Millions) Adjusted Net Earnings Margin 2022 Net earnings (loss) (A) 59.6 $ Net sales 586.9 $ Net earnings (loss) as a % of net sales 10.2% Adjustments to reported net earnings (loss): Restructuring charges 1.9 Environmental charges 2.8 Acquisition-related costs 2.5 Inventor
Slide 27: Adjusted Diluted EPS Regulation G Schedules
Adjusted Diluted EPS Regulation G Schedules NOTE: CTS believes that adjusted gross margin, adjusted selling, general & administrative expense, adjusted EBITDA margin, adjusted net earnings and adjusted diluted earnings per share provide useful information to investors regarding its operational perfo
Slide 28: Cash Flow Regulation G Schedules
($ Millions) Cash Flow Regulation G Schedules NOTE: CTS believes that free cash flow is a useful measure because it demonstrates the company’s ability to generate cash. Free cash flow is a non-GAAP measure and should be considered in addition to, but not as a substitute for, information contained in