Cts Corporation · NYSE:CTS
Cts — Investor Presentation (February 2024)
30 slides from Cts's investor presentation, Feb 6, 2024
Slide 1: CTS Investor Presentation February 2024
CTS Investor Presentation February 2024
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 $2.22 8% Non-Transportation Revenue CAGR LTM Revenue $550 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 December 2023 2 Adj. EBITDA
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% 2
Slide 8: Industrial: Enabling Efficiency and Automation
Addressable Market Size: $2.9B LTM Revenue:1 $129M (24)% YOY Industrial Estimated Market Growth: Mid-single Digit Efficiency Material Expertise Up integration into sensors and transducers Drivers of Outperformance: INDUSTRIAL Enabling Efficiency and Automation in Industrial Markets Tailwinds from Su
Slide 9: Medical: Unlocking Important Innovation in Medical Markets
Intravenous Ultrasound High Resolution Ultrasound Drug Delivery Cardiac Rhythm (Wireless Pacemaker) Highly Precise Minimally Invasive MEDICAL Unlocking Important Innovation in Medical Markets Utilizing Technology to Enhance Patient Care and Experience Addressable Market Size: $1.5B LTM Revenue:1 $68
Slide 10: Aerospace & Defense: Ensuring Performance and Reliability
Enhanced Performance Underwater Sonar Reliability Space Temperature Applications Vibration Monitoring Radar AEROSPACE & DEFENSE Ensuring Performance and Reliability in Aerospace and Defense Higher Performance and Reliability in Mission Critical Harsh Environments Addressable Market Size: $0.7B LTM R
Slide 11: Electrification Creating Growth Opportunity in Transportation
Electrification Creating Growth Opportunity in Transportation 11 TRANSPORTATION Light Vehicle Content Grows > 2x with EV Applications Chassis Height Sensor Accelerator Modules Brake Position Sensor Belt Tension Sensor Seat Track Position Sensor Seat Belt Buckle Switch Sensor 95% of existing light ve
Slide 12: Strong Execution Capabilities
Improved Operational Efficiency Adj. Gross Margin +472 bps1 Adj. SG&A (488) bps1 Enhanced process improvement capability, business intelligence Strengthened Balance Sheet 74% operating cashflow2 106% free cash flow3 $190 million returned to shareholders4 Solid acquisition capacity Strategic Investme
Slide 13: Capital Allocation Framework
Cash Returned to Shareholders Dividend & Repurchases 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 resour
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 2024 Guidance
$2.35 $2.10 Notes: 1 CAGR based on mid point of 2024 guidance 2 Adjusted Diluted EPS is a non-GAAP financial measure. Refer to the Appendix for reconciliations of non-GAAP financial measures to the most directly comparable financial measures calculated and presented in accordance with GAAP. FY 2024
Slide 17: Financial Framework
20121 LTM2 Long-Term Target Revenue $304M $550M +10% per year Adj Gross Margin %3 30.1% 34.8% 35-38% Adj SG&A Expense %3 19.4% 14.5% 13-15% R&D Expense % 6.9% 4.5% 5-7% CapEx % 4.4% 2.7% ~4% 2 Financial Framework 1 1 2012 Financials from Continuing Operations. 2 LTM through December 2023. 3 Adj. Gro
Slide 18: ESG Initiatives
Published inaugural ESG Report highlighting ESG progress Continued advancing our goal of deriving more than 25% of sales of components for light vehicles from electrified platforms. 40 new wins for electrified vehicle platforms in 2023 Employees devoted over 5,539 hours to community service events a
Slide 19: Appendix
Appendix
Slide 20: Focus 2025
01 02 03 Develop customer partnerships that are authentic and collaborative, resulting in mutually beneficial revenue growth Deeper Customer Relationships Build a culture of continuous improvement through the development of CTS Operation Systems and process improvement mindset Improved Operating Sys
Slide 21: CTS Core Values
Play to Win Responsiveness Simplicity Solution Oriented CTS Core Values
Slide 22: Non-GAAP Financial Measures
Non-GAAP Financial Measures From time to time, CTS may use non-GAAP financial measures in discussing CTS’ business. These measures are intended to supplement, not replace, CTS’ presentation of its financial results in accordance with U.S. GAAP. CTS believes that the non-GAAP financial measures prese
Slide 23: Regulation G Schedules: Adjusted Gross Margin
Regulation G Schedules ($ Millions, except percentages) Adjusted Gross Margin Three Months Ended December 31, Twelve Months Ended December 31, 2023 2022 2023 2022 2021 2012 Gross margin $ 42.1 $ 51.0 $ 190.9 $ 210.5 $ 184.6 $ 91.5 Net sales $ 124.7 $ 142.3 $ 550.4 $ 586.9 $ 512.9 $ 304.5 Gross margi
Slide 24: Regulation G Schedules: Adjusted SG&A Expenses
Regulation G Schedules ($ Millions, except percentages) Adjusted SG&A Expenses Three Months Ended December 31, Twelve Months Ended December 31, 2023 2022 2023 2022 2021 2012 SG&A Expense $ 19.5 $ 23.5 $ 83.8 $ 91.5 $ 82.6 $ 63.1 Net sales $ 124.7 $ 142.3 $ 550.4 $ 586.9 $ 512.9 $ 304.5 SG&A expense
Slide 25: Regulation G Schedules: Adjusted Operating Earnings
Three Months Ended December 31, Twelve Months Ended December 31, 2023 2022 2023 2022 2021 Operating earnings $ 16.3 $ 21.6 $ 75.1 $ 93.0 $ 76.5 Net sales $ 124.7 $ 142.3 $ 550.4 $ 586.9 $ 512.9 Operating earnings as a % of net sales 13.0% 15.2% 13.6% 15.8% 14.9% Adjustments to reported operating ear
Slide 26: Regulation G Schedules: Adjusted EBITDA Margin
Regulation G Schedules ($ Millions, except percentages) Adjusted EBITDA Margin Three Months Ended December 31, Twelve Months Ended December 31, 2023 2022 2023 2022 2021 Net earnings (loss) $ 15.3 $ 14.9 $ 60.5 $ 59.6 $ (41.9) Net sales $ 124.7 $ 142.3 $ 550.4 $ 586.9 $ 512.9 Net earnings (loss) marg
Slide 27: Regulation G Schedules: Adjusted Net Earnings and EPS
Regulation G Schedules ($ Millions, except percentages and per share amounts) Adjusted Net Earnings and Adjusted Diluted Earnings Per Share Three Months Ended December 31, 2023 2023 2022 2022 Per share Per share Net earnings (A) $ 15.3 $ 0.49 $ 14.9 $ 0.47 Adjustments to reported net earnings: Restr
Slide 28: Regulation G Schedules: Adjusted Net Earnings and EPS
Regulation G Schedules ($ Millions, except percentages and per share amounts) Adjusted Net Earnings and Adjusted Diluted Earnings Per Share NOTE: CTS believes that adjusted gross margin, adjusted operating earnings, adjusted EBITDA margin, adjusted net earnings and adjusted diluted earnings per shar
Slide 29: Footnotes to Regulation G Schedules
Reflected in selling, general and administrative and other (expense) income, net. Reflected in cost of goods sold. Reflected in restructuring charges. Reflected in other (expense) income, net. Reflected in income tax expense (income). For 2020, the discrete tax items relate to items we deemed outsid
Slide 30: Free Cash Flow and Controllable Working Capital
($ Millions, except percentages) Free Cash Flow Regulation G Schedules ($ Millions, except percentages) Controllable Working Capital 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 sho