CTS Announces Third Quarter 2024 Results
LISLE, Ill., Oct. 29, 2024 (GLOBE NEWSWIRE) -- CTS Corporation (NYSE:CTS), a leading global designer and manufacturer of custom engineered solutions that "Sense, Connect and Move," today announced third quarter 2024 results.
"We delivered improved earnings and generated stronger cash flow in the third quarter. Margins expanded as we made progress on operational improvements," said Kieran O'Sullivan, CEO of CTS Corporation. "Near term market conditions remain challenging. We continue to advance our diversification strategy through the expansion of our customer base and end markets. We remain committed to a disciplined capital structure to drive organic growth, strategic acquisitions and returning cash to shareholders."
Third Quarter 2024 Results
Sales were $132 million, down 2% year-over-year, and up 2% sequentially compared to the second quarter of 2024. Sales to diversified end markets* increased 18% year-over-year and 5% sequentially. Sales to the transportation end market decreased 17% year-over-year and 2% sequentially.
Net income was $19 million, or 14% of sales, up from $14 million, or 10% of sales, in the third quarter of 2023.
Earnings per diluted share were $0.61, compared to $0.44 in the third quarter of 2023.
Adjusted earnings per diluted share were $0.63, up from $0.54 in the third quarter of 2023.
Adjusted EBITDA margin was 24.8%, compared to 22.5% in the third quarter of 2023.
Operating cash flow was $35 million up from $22 million in the third quarter of 2023.
2024 Guidance
CTS is updating its guidance for full year 2024 sales to be in the range of $515 - $525 million compared to the prior range of $525 - $540 million and reiterating the adjusted diluted EPS guidance to be in the range of $2.05 - $2.25.
CTS does not provide reconciliations of forward-looking non-GAAP financial measures, such as estimated adjusted diluted earnings per share, to the most comparable GAAP financial measures on a forward-looking basis because CTS is unable to provide a meaningful or accurate calculation or estimation of reconciling items and the information is not available without unreasonable effort. This is due to the inherent difficulty of forecasting the timing and amount of certain items, such as, but not limited to, restructuring costs, environmental remediation costs, acquisition-related costs, foreign exchange rates and other non-routine costs. Each of such adjustments has not yet occurred, are out of CTS' control and/or cannot be reasonably predicted. For the same reasons, CTS is unable to address the probable significance of the unavailable information.
Conference Call and Supplemental MaterialsAs previously announced, the Company has scheduled a conference call for 10:00 a.m. (ET) today. The dial-in numbers for access from the U.S. are: +1-833-470-1428 (Toll-Free) and +1-404-975-4839 (Local), if calling from outside the U.S., please refer to Global Dial In Numbers to identify the applicable dial-in number for your location. The passcode is 230766. In addition, the Company will be using a supplemental slide presentation that will be referred to during the call. The presentation and a live audio webcast of the conference call will be available and can be accessed directly from CTS' website at https://investors.ctscorp.com/news-events/events-and-presentations/.
Any replay, rebroadcast, transcript or other reproduction or transmission of this conference call, other than the replay accessible through the website noted above, has not been authorized by the Company and is strictly prohibited. Investors should be aware that any unauthorized reproduction of this conference call may not be an accurate reflection of its contents.
About CTS
CTS Corporation (NYSE:CTS) is a leading designer and manufacturer of products that Sense, Connect and Move. CTS manufactures sensors, actuators and electronic components in North America, Europe and Asia, and provides engineered products to customers in the aerospace/defense, industrial, medical and transportation markets. For more information, visit www.ctscorp.com.
*Diversified end markets, previously referred as the "non-transportation" market, includes the industrial, aerospace & defense, and medical end markets.
Cautionary Statement Regarding Forward-Looking Statements
Readers are cautioned that the statements contained in this document regarding expectations of our performance or other matters that may affect our business, results of operations, or financial condition are, or may be deemed to be, "forward-looking statements" as defined by the "safe harbor" provisions in the Private Securities Litigation Reform Act of 1995. Such statements are made in reliance on the safe harbor provisions of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. All statements, other than statements of historical fact, included or incorporated in this document, including statements regarding our strategy, financial position, guidance, funding for continued operations, cash reserves, liquidity, projected costs, plans, projects, awards and contracts, and objectives of management, among others, are forward-looking statements. Words such as "expect," "anticipate," "should," "believe," "hope," "target," "continued," "project," "plan," "goals," "opportunity," "appeal," "estimate," "potential," "predict," "demonstrates," "may," "will," "might," "could," "intend," "shall," "possible," "would," "approximately," "likely," "outlook," "schedule," "on track," "poised," "pipeline," and variations of these terms or the negative of these terms and similar expressions are intended to identify these forward-looking statements, but the absence of these words does not mean that a statement is not forward-looking. These forward-looking statements are not guarantees of future performance, conditions or results. Forward-looking statements are based on management's expectations, certain assumptions, and currently available information. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof and are based on various assumptions as to future events, the occurrence of which necessarily are subject to uncertainties. These forward-looking statements are made subject to certain risks, uncertainties, and other factors, which could cause CTS' actual results, performance, or achievements to differ materially from those presented in the forward-looking statements. Examples of factors that may affect future operating results and financial condition include, but are not limited to: supply chain disruptions; changes in the economy generally, including inflationary and/or recessionary conditions, and in respect to the business in which CTS operates; unanticipated issues in integrating acquisitions; the results of actions to reposition CTS' business; rapid technological change; general market conditions in the transportation, as well as conditions in the industrial, aerospace and defense, and medical markets; reliance on key customers; unanticipated public health crises, natural disasters or other events; environmental compliance and remediation expenses; the ability to protect CTS' intellectual property; pricing pressures and demand for CTS' products; risks associated with CTS' international operations, including trade and tariff barriers, exchange rates and political and geopolitical risks (including, without limitation, the potential impact U.S./China relations and the conflict between Russia and Ukraine may have on our business, results of operations and financial condition); the amount and timing of any share repurchases; and the effect of any cybersecurity incidents on our business. Many of these, and other risks and uncertainties, are discussed in further detail in Item 1A. of CTS' most recent Annual Report on Form 10-K and other filings made with the SEC. CTS undertakes no obligation to publicly update CTS' forward-looking statements to reflect new information or events or circumstances that arise after the date hereof, including market or industry changes.
Contact Ashish Agrawal Vice President and Chief Financial Officer CTS Corporation 4925 Indiana Avenue Lisle, IL 60532 USA +1 (630)
CTS CORPORATION AND SUBSIDIARIESCONDENSED CONSOLIDATED STATEMENTS OF EARNINGS - UNAUDITED(In thousands, except per share amounts)
Three Months Ended
Nine Months Ended
September 30, 2024
September 30, 2023
September 30, 2024
September 30, 2023
Net sales
$
132,424
$
134,552
$
388,336
$
425,728
Cost of goods sold
82,636
88,151
247,086
276,933
Gross margin
49,788
46,401
141,250
148,795
Selling, general and administrative expenses
22,509
18,666
66,100
64,339
Research and development expenses
5,031
6,321
17,718
19,628
Restructuring charges
773
3,226
3,657
6,033
Operating earnings
21,475
18,188
53,775
58,795
Other (expense) income:
Interest expense
(1,307
)
(997
)
(2,942
)
(2,509
)
Interest income
973
952
3,800
3,087
Other income (expense), net
1,306
594
(761
)
(1,847
)
Total other income (expense), net
972
549
97
(1,269
)
Earnings before income taxes
22,447
18,737
53,872
57,526
Income tax expense
3,764
4,766
9,364
12,314
Net earnings
$
18,683
$
13,971
$
44,508
$
45,212
Earnings per share:
Basic
$
0.62
$
0.45
$
1.46
$
1.44
Diluted
$
0.61
$
0.44
$
1.45
$
1.43
Basic weighted, average common shares outstanding:
30,300
31,302
30,517
31,474
Effect of dilutive securities
236
209
230
216
Diluted weighted, average common shares outstanding:
30,536
31,511
30,747
31,690
Cash dividends declared per share
$
0.04
$
0.04
$
0.12
$
0.12
CTS CORPORATION AND SUBSIDIARIESCONDENSED CONSOLIDATED BALANCE SHEETS(In thousands of dollars)
(Unaudited) September 30, 2024
December 31, 2023
ASSETS
Current Assets
Cash and cash equivalents
$
94,875
$
163,876
Accounts receivable, net
86,355
78,569
Inventories, net
57,288
60,031
Other current assets
17,043
16,873
Total current assets
255,561
319,349
Property, plant and equipment, net
93,465
92,592
Operating lease assets, net
23,689
26,425
Other Assets
Goodwill
194,821
157,638
Other intangible assets, net
180,872
103,957
Deferred income taxes
26,837
25,183
Other
14,147
16,023
Total other assets
416,677
302,801
Total Assets
$
789,392
$
741,167
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Accounts payable
$
44,951
$
43,499
Accrued payroll and benefits
17,008
14,585
Operating lease obligations
4,591
4,394
Accrued expenses and other liabilities
37,249
34,561
Total current liabilities
103,799
97,039
Long-term debt
102,700
67,500
Long-term operating lease obligations
22,016
24,965
Long-term pension obligations
4,561
4,655
Deferred income taxes
13,784
14,729
Other long-term obligations
11,726
5,457
Total Liabilities
258,586
214,345
Commitments and Contingencies
Shareholders' Equity
Common stock
321,924
319,269
Additional contributed capital
42,908
45,097
Retained earnings
643,088
602,232
Accumulated other comprehensive income (loss)
2,017
4,264
Total shareholders' equity before treasury stock
1,009,937
970,862
Treasury stock
(479,131
)
(444,040
)
Total shareholders' equity
530,806
526,822
Total Liabilities and Shareholders' Equity
$
789,392
$
741,167
CTS CORPORATION AND SUBSIDIARIESOTHER SUPPLEMENTAL INFORMATION - UNAUDITED(In millions of dollars, except percentages and per share amounts)
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 presented are commonly used by financial analysts and others in the industries in which CTS operates, and thus further provide useful information to investors. CTS' definitions of these non-GAAP financial measures may differ from those terms as defined or used by other companies. Non-GAAP measures should not be used by investors or third parties as the sole basis for formulating investment decisions, as they may exclude a number of important cash and non-cash recurring items.
CTS has presented these non-GAAP financial measures as it believes that the presentation of its financial results that exclude (1) restructuring charges; (2) restructuring-related charges; (3) environmental charges; (4) acquisition-related costs; (5) inventory fair value step-up costs; (6) foreign exchange (gains) losses; (7) non-cash pension expenses (income); and (8) certain discrete tax items are useful and assist in comparing CTS' current operating results with past periods and with the operational performance of other companies in its industry. Included below is a description of the expenses that CTS has determined are not normal, recurring cash operating expenses necessary to operate its business and the rationale for why providing financial measures for its business with such expenses excluded or adjusted is useful to investors as a supplement to the U.S. GAAP measures.
Restructuring charges, costs primarily related to workforce reductions, building and equipment relocations, asset impairment charges and other facility closure activities in connection with our continued optimization of our organization.
Restructuring-related charges, costs related to restructuring actions that do not qualify as direct restructuring charges under U.S. GAAP. These include duplicative expenses arising from plant consolidation transition activities such as excess rent, utilities, and personnel-related and other costs incurred prior to the start of production at a new location.
Environmental charges, costs associated with our non-operating facilities that are unrelated to ongoing operations. Currently, none of these costs and accruals relate to sites that provide revenue generating activities for the Company.
Acquisition-related costs, diligence and transaction costs related to acquisitions including related contingent earnout adjustments.
Inventory fair value step-up costs, purchase accounting-related inventory costs from acquisitions.
Foreign exchange (gains) losses, remeasurement income and expenses for non-U.S. subsidiaries with the U.S. dollar as the functional currency.
Non-cash pension expenses (income), pension income and expenses related to the non-operating U.S. pension and post-retirement life insurance plans, including historical plan settlement activities.
Discrete tax items, non-recurring, infrequent, or unusual tax adjustments (e.g., valuation allowances, uncertain tax position changes, unremitted assertion changes and discrete impacts associated with pre-tax non-GAAP items or due to tax law changes, etc.).
At times, the reconciliations below have been intentionally rounded to the nearest thousand, or $0.01 for EPS figures, and, therefore, may not sum.
Adjusted Gross Margin
Three Months Ended September 30,
Nine Months Ended September 30,
Twelve Months Ended December 31,
2024
2023
2024
2023
2023
2022
2021
Gross margin
$
49.8
$
46.4
$
141.3
$
148.8
$
190.9
$
210.5
$
184.6
Net sales
$
132.4
$
134.6
$
388.3
$
425.7
$
550.4
$
586.9
$
512.9
Gross margin as a % of net sales
37.6
%
34.5
%
36.4
%
35.0
%
34.7
%
35.9
%
36.0
%
Adjustments to reported gross margin:
Restructuring-related charges (b)
—
—
0.7
—
0.6
—
—
Inventory fair value step-up (b)
1.4
—
1.4
—
—
4.0
—
Adjusted gross margin
$
51.2
$
46.4
$
143.3
$
148.8
$
191.5
$
214.5
$
184.6
Adjusted gross margin as a % of net sales
38.6
%
34.5
%
36.9
%
35.0
%
34.8
%
36.5
%
36.0
%
Adjusted Operating Earnings
Three Months Ended September 30,
Nine Months Ended September 30,
Twelve Months Ended December 31,
2024
2023
2024
2023
2023
2022
2021
Operating earnings
$
21.5
$
18.2
$
53.8
$
58.8
$
75.1
$
93.0
$
76.5
Net sales
$
132.4
$
134.6
$
388.3
$
425.7
$
550.4
$
586.9
$
512.9
Operating earnings as a % of net sales
16.2
%
