CTS
$42.09
Cts
($.34)
(.80%)
Earnings Details
2nd Quarter June 2022
Tuesday, July 26, 2022 8:00:00 AM
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Summary

CTS Raises Guidance but Remains In-line with Estimates

Cts (CTS) reported 2nd Quarter June 2022 earnings of $0.62 per share on revenue of $145.0 million. on revenue of $142.8 million. Revenue grew 11.9% on a year-over-year basis.

The company said it expects 2022 earnings of $2.40 to $2.55 per share on revenue of $570.0 million to $600.0 million. The company's previous guidance was earnings of $2.20 to $2.45 per share on revenue of $550.0 million to $580.0 million and the current consensus earnings estimate is $2.40 per share on revenue of $570.57 million for the year ending December 31, 2022.

CTS is a leading designer and manufacturer of products that Sense, Connect, and Move.

Results
Reported Earnings
$0.62
Earnings Whisper
-
Consensus Estimate
Reported Revenue
$145.0 Mil
Revenue Estimate
$142.8 Mil
Growth
Earnings Growth
Revenue Growth
Power Rating
Grade
Earnings Release

CTS Announces Second Quarter 2022 Results

LISLE, Ill., July 26, 2022 (GLOBE NEWSWIRE) -- CTS Corporation (NYSE: CTS), a leading global designer and manufacturer of custom engineered solutions that “Sense, Connect and Move,” today announced second quarter 2022 results.

“We delivered another quarter of profitable growth, underscored by a 12% revenue increase and a 90-basis point Adjusted EBITDA margin expansion, as we continue to drive performance through the execution of our diversification strategy. Our robust portfolio has enabled us to capture secular tailwinds as we expand into premium non-transportation end markets, while also gaining good traction on new electric vehicle applications,” said Kieran O’Sullivan, CEO. “Our recent acquisition of Ferroperm further advances our strategic priorities. Despite a challenging macroeconomic environment, we believe that our operational strength, combined with a strong balance sheet and solid cash generation, position us for long-term sustainable growth.”

Second Quarter 2022 Results

  • Sales were $145.0 million, up 12% year-over-year. Sales to non-transportation end markets increased 21%, and sales to the transportation end market increased 4% over the same period.
  • Net income was $12.6 million, or $0.39 per diluted share, compared to $0.9 million, or $0.03 per diluted share, in the second quarter of 2021.
  • Adjusted diluted EPS was $0.62, up from $0.52 in the second quarter of 2021.
  • Adjusted EBITDA margin was 22.4% compared to 21.5% in the second quarter of 2021.
  • Operating cash flow was $16.1 million compared to $18.7 million in the second quarter of 2021, impacted by changes in foreign currency exchange rates.

2022 Guidance

Including the recent Ferroperm acquisition, CTS now expects full year 2022 sales to be in the range of $570 - $600 million, up from the previous guidance of $550$580 million, and adjusted diluted EPS in the range of $2.40 - $2.55, up from the previous guidance of $2.20$2.45. Management continues to monitor the potential impact of the challenging macro-economic environment and geopolitical events on this guidance.

Conference Call and Supplemental Materials

As previously announced, the Company has scheduled a conference call for 10:00 a.m. (EDT) today. The dial-in number for the U.S. and Canada is 844-200-6205 (+1 929-526-1599, if calling from outside the U.S. and Canada). The passcode is 990568. 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://www.ctscorp.com/investors/events-presentations/.

About CTS

CTS (NYSE: CTS) is a leading designer and manufacturer of products that Sense, Connect, and Move. The company 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.

Safe Harbor

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, statements that reflect our current expectations concerning future results and events, and any other statements that are not based solely on historical fact. 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: the ultimate impact of the COVID-19 pandemic on CTS’ business, results of operations or financial condition, including supply chain disruption; 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, including TEWA Temperature Sensors and Ferroperm Piezoceramics; 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; and 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). 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.

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’ management believes that non-GAAP financial measures can be useful to investors in analyzing CTS’ financial performance and results of operations over time. CTS recommends that investors consider both actual and adjusted measures in evaluating the performance of CTS with peer companies.

The information in this press release includes the non-GAAP financial measures of adjusted gross margin, adjusted operating earnings, adjusted EBITDA, adjusted net earnings, adjusted diluted earnings per share, debt to capitalization ratio, controllable working capital ratio, and free cash flow. Many of these non-GAAP financial measures exclude the effect of certain expenses and income not related directly to the underlying performance of CTS’ fundamental business operations.

CTS believes that adjusted gross margin, adjusted operating earnings, adjusted EBITDA, adjusted net earnings and, adjusted diluted earnings per share provide useful information to investors regarding its operational performance because they enhance an investor’s overall understanding of CTS’ core financial performance and facilitate comparisons to historical results of operations, by excluding items that are not related directly to the underlying performance of CTS’ fundamental business operations or were not part of CTS’ business operations during a comparable period.

CTS believes that debt to capitalization ratio is a measurement of financial leverage and provides an insight into the financial structure of CTS and its financial strength. CTS believes the controllable working capital ratio provides an objective measure of the efficiency with which CTS manages its short-term capital needs. CTS believes that free cash flow is a useful measure of its ability to generate cash.

CTS believes that these non-GAAP financial measures are commonly used by financial analysts and others in the industries in which CTS operates, and thus further provide useful information to investors. Note that CTS’ definitions of these non-GAAP financial measures may differ from those terms as defined or used by other companies.

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.

Contact

Ashish Agrawal
Vice President and Chief Financial Officer
CTS Corporation
4925 Indiana Avenue
Lisle, IL 60532 USA
+1 (630) 577-8800
ashish.agrawal@ctscorp.com


CTS CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS - UNAUDITED
(In thousands of dollars, except per share amounts)

 Three Months Ended  Six Months Ended 
 June 30,
2022
  June 30,
2021
  June 30,
2022
  June 30,
2021
 
Net sales$144,982  $129,585  $292,677  $258,012 
Cost of goods sold 93,134   81,889   186,489   167,725 
Gross margin 51,848   47,696   106,188   90,287 
Selling, general and administrative expenses 22,238   20,937   44,026   39,262 
Research and development expenses 6,294   6,029   12,488   11,716 
Restructuring charges 630   151   942   232 
Operating earnings 22,686   20,579   48,732   39,077 
Other (expense) income:           
Interest expense (602)  (508)  (1,148)  (1,063)
Interest income 263   257   443   459 
Other (expense), net (5,425)  (20,929)  (5,359)  (24,285)
Total other (expense), net (5,764)  (21,180)  (6,064)  (24,889)
Earnings (loss) before income taxes 16,922   (601)  42,668   14,188 
Income tax expense (benefit) 4,324   (1,476)  9,831   1,323 
Net earnings 12,598   875   32,837   12,865 
Earnings per share:           
Basic$0.39  $0.03  $1.02  $0.40 
Diluted$0.39  $0.03  $1.02  $0.39 
Basic weighted – average common shares outstanding: 32,039   32,397   32,096   32,358 
Effect of dilutive securities 204   229   218   259 
Diluted weighted – average common shares outstanding: 32,243   32,626   32,314   32,617 
Cash dividends declared per share$0.04  $0.04  $0.08  $0.08 



CTS CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands of dollars)

 (Unaudited)    
 June 30,
2022
  December 31,
2021
 
ASSETS     
Current Assets     
Cash and cash equivalents$98,739  $141,465 
Accounts receivable, net 98,949   82,191 
Inventories, net 64,158   49,506 
Other current assets 16,704   15,927 
Total current assets 278,550   289,089 
Property, plant and equipment, net 99,637   96,876 
Operating lease assets, net 22,452   21,594 
Other Assets     
Prepaid pension asset 33,860   49,382 
Goodwill 139,617   109,798 
Other intangible assets, net 112,824   69,888 
Deferred income taxes 23,401   25,415 
Other 19,293   2,420 
Total other assets 328,995   256,903 
Total Assets$729,634  $664,462 
LIABILITIES AND SHAREHOLDERS’ EQUITY     
Current Liabilities     
Accounts payable$60,662  $55,537 
Operating lease obligations 3,612   3,393 
Accrued payroll and benefits 14,931   18,418 
Accrued expenses and other liabilities 36,171   36,718 
Total current liabilities 115,376   114,066 
Long-term debt 91,027   50,000 
Long-term operating lease obligations 21,851   21,354 
Long-term pension obligations 6,361   6,886 
Deferred income taxes 6,174   5,894 
Other long-term obligations 2,898   2,684 
Total Liabilities 243,687   200,884 
Commitments and Contingencies     
Shareholders’ Equity     
Common stock 316,502   314,620 
Additional contributed capital 42,585   42,549 
Retained earnings 522,506   492,242 
Accumulated other comprehensive loss (2,670)  (4,525)
Total shareholders’ equity before treasury stock 878,923   844,886 
Treasury stock (392,976)  (381,308)
Total shareholders’ equity 485,947   463,578 
Total Liabilities and Shareholders’ Equity$729,634  $664,462 



CTS CORPORATION AND SUBSIDIARIES
OTHER SUPPLEMENTAL INFORMATION - UNAUDITED
(In millions of dollars, except per share amounts)

Adjusted Gross Margin

 Three Months Ended
June 30,
  Six Months Ended
June 30,
  Twelve Months Ended
December 31,
 
 2022  2021  2022  2021  2021  2020  2019 
Gross margin$51.8  $47.7  $106.2  $90.3  $184.6  $139.1  $157.6 
Adjustments to reported gross margin:                    
Inventory fair value step-up$0.5  $  $1.1  $  $  $  $ 
                     
Adjusted gross margin$52.4  $47.7  $107.3  $90.3  $184.6  $139.1  $157.6 
                     
Net sales$145.0  $129.6  $292.7  $258.0  $512.9  $424.1  $469.0 
                     
Adjusted gross margin as a % of net sales 36.1%  36.8%  36.7%  35.0%  36.0%  32.8%  33.6%

Adjusted Operating Earnings

 Three Months Ended
June 30,
  Six Months Ended
June 30,
  Twelve Months Ended
December 31,
 
 2022  2021  2022  2021  2021  2020  2019 
Operating earnings$22.7  $20.6  $48.7  $39.1  $76.5  $45.1  $53.8 
Adjustments to reported operating earnings:                    
Restructuring charges 0.6   0.2   0.9   0.2   1.7   1.8   7.4 
Environmental charges 0.9   0.2   1.5   0.4   2.3   2.8   2.3 
Legal settlement                 (0.5)
Acquisition-related costs 0.3      0.8        0.3   0.7 
Inventory fair value step-up 0.5      1.1             
Costs of tax improvement initiatives                   0.1 
Total adjustments to reported operating earnings$2.3  $0.4  $4.3  $0.7  $3.9  $4.9  $10.0 
                     
Adjusted operating earnings$25.0  $21.0  $53.0  $39.7  $80.4  $50.0  $63.8 
                     
Net sales$145.0  $129.6  $292.7  $258.0  $512.9  $424.1  $469.0 
                     
Adjusted operating earnings as a % of net sales 17.3%  16.2%  18.1%  15.4%  15.7%  11.8%  13.6%

Adjusted EBITDA

 Three Months Ended
June 30,
  Six Months Ended
June 30,
  Twelve Months Ended
December 31,
 
 2022  2021  2022  2021  2021  2020  2019 
Net earnings (loss)$12.6  $0.9  $32.8  $12.9  $(41.9) $34.7  $36.1 
                     
Depreciation and amortization expense 7.0   6.7   13.8   13.5   26.9   26.7   24.6 
Interest expense 0.6   0.5   1.1   1.1   2.1   3.3   2.6 
Tax expense (benefit) 4.3   (1.5)  9.8   1.3   (19.0)  10.8   14.1 
                     
EBITDA 24.5   6.6   57.6   28.8   (31.8)  75.4   77.5 
                     
Adjustments to EBITDA:                    
Restructuring charges 0.6   0.2   0.9   0.2   1.7   1.8   6.9 
Environmental charges 0.9   0.2   1.5   0.4   2.3   2.8   2.3 
Legal settlement                   (0.5)
Acquisition-related costs 2.0      2.5         0.3   0.7 
Inventory fair value step-up 0.5      1.1             
Costs of tax improvement initiatives                   0.1 
Non-cash pension expense    21.8      23.7   132.4   2.5   0.8 
Foreign currency loss (gain) 3.8   (0.9)  3.5   0.4   3.3   (5.3)  1.8 
                     
Total adjustments to EBITDA 7.9   21.2   9.6   24.8   139.7   2.1   12.0 
                     
Adjusted EBITDA$32.5  $27.9  $67.2  $53.6  $107.8  $77.5  $89.5 
                     
Net sales$145.0  $129.6  $292.7  $258.0  $512.9  $424.1  $469.0 
                     
Adjusted EBITDA as a % of net sales 22.4%  21.5%  22.9%  20.8%  21.0%  18.3%  19.1%


Adjusted Net Earnings

 Three Months Ended
June 30,
  Six Months Ended
June 30,
  Twelve Months Ended
December 31,
 
 2022  2021  2022  2021  2021  2020  2019 
Net earnings (loss) (A)$12.6  $0.9  $32.8  $12.9  $(41.9) $34.7  $36.1 
Adjustments to reported net earnings (loss):                    
Restructuring charges 0.6   0.2   0.9   0.2   1.7   1.8   7.4 
Environmental charges 0.9   0.2   1.5   0.4   2.3   2.8   2.3 
Legal settlement                 (0.5)
Acquisition-related costs 2.0      2.5        0.3   0.7 
Inventory fair value step-up 0.5      1.1          
Costs of tax improvement initiatives                 0.1 
Non-cash pension expense    21.8      23.7   132.4   2.5   0.8 
Foreign currency loss (gain) 3.8   (0.9)  3.5   0.4   3.3   (5.3)  1.8 
Total adjustments to reported net earnings (loss)$7.9  $21.2  $9.6  $24.8  $139.7  $2.1  $12.6 
Total adjustments, tax affected (B)$7.3  $16.1  $8.7  $19.2  $108.6  $0.4  $10.2 
                     
Tax adjustments:                    
Increase in valuation allowances             0.9   0.2   
Other discrete tax items             (4.7)  1.2   1.8 
Total tax adjustments (C)$  $  $  $  $(3.8) $1.4  $1.8 
Adjusted net earnings (A+B+C)$19.9  $17.0  $41.5  $32.1  $63.0  $36.5  $48.1 
                     
Net sales$145.0  $129.6  $292.7  $258.0  $512.9  $424.1  $469.0 
                     
Adjusted net earnings as a % of net sales 13.7%  13.1%  14.2%  12.4%  12.3%  8.6%  10.3%


Adjusted Diluted Earnings Per Share

 Three Months Ended
June 30,
  Six Months Ended
June 30,
  Twelve Months Ended
December 31,
 
 2022  2021  2022  2021  2021  2020  2019 
GAAP diluted earnings (loss) per share$0.39  $0.03  $1.02  $0.39  $(1.30) $1.06  $1.09 
Tax affected charges to reported diluted earnings (loss) per share:                    
Restructuring charges 0.02   0.01   0.03   0.01   0.06   0.04   0.18 
Foreign currency loss (gain) 0.12   (0.03)  0.11   0.01   0.10   (0.16)  0.05 
Non-cash pension expense    0.51      0.56   3.13   0.06   0.02 
Environmental charges 0.02      0.03   0.01   0.05   0.07   0.05 
Acquisition-related costs 0.05      0.07        0.01   0.02 
Inventory fair value step-up 0.02      0.03          
Legal settlement                 (0.01)
Discrete tax items             (0.11)  0.04   0.05 
Adjusted diluted earnings per share$0.62  $0.52  $1.29  $0.98  $1.93  $1.12  $1.45 


Debt to Capitalization

 June 30,  December 31, 
 2022  2021  2021  2020  2019 
Total debt (A)$91.0  $50.0  $50.0  $54.6  $99.7 
Total shareholders' equity (B)$485.9  $454.3  $463.6  $423.7  $405.2 
Total capitalization (A+B)$577.0  $504.3  $513.6  $478.3  $504.9 
Total debt to capitalization 15.8%  9.9%  9.7%  11.4%  19.7%


Controllable Working Capital

 June 30,  December 31, 
 2022  2021  2021  2020  2019 
Net accounts receivable$98.9  $80.8  $82.2  $81.0  $78.0 
               
Net inventory$64.2  $49.0  $49.5  $45.9  $42.2 
               
Accounts payable$(60.7) $(47.8) $(55.5) $(50.5) $(48.2)
               
Controllable working capital$102.4  $82.0  $76.2  $76.4  $72.0 
               
Quarter sales$145.0  $129.6  $132.5  $123.0  $115.0 
Multiplied by 4 4   4   4   4   4 
Annualized sales$579.9  $518.3  $530.1  $492.1  $460.2 
               
Controllable working capital as a % of annualized net sales 17.7%  15.8%  14.4%  15.5%  15.7%


Free Cash Flow

 Three Months Ended
June 30,
  Six Months Ended
June 30,
  Twelve Months Ended
December 31,
 
 2022  2021  2022  2021  2021  2020  2019 
Net cash provided by operating activities$16.1  $18.7  $35.4  $38.8  $86.1  $76.8  $64.4 
Capital expenditures (3.6)  (2.3)  (7.0)  (4.0)  (15.6)  (14.9)  (21.7)
Free cash flow$12.5  $16.3  $28.4  $34.8  $70.5  $61.9  $42.7 


Capital Expenditures

 Three Months Ended
June 30,
  Six Months Ended
June 30,
  Twelve Months Ended
December 31,
 
 2022  2021  2022  2021  2021  2020  2019 
Capital expenditures$3.6  $2.3  $7.0  $4.0  $15.6  $14.9  $21.7 
Net sales$145.0  $129.6  $292.7  $258.0  $512.9  $424.1  $469.0 
Capex as % of net sales 2.5%  1.8%  2.4%  1.5%  3.0%  3.5%  4.6%

Additional Information

The following table includes other financial information not presented in the preceding financial statements.

 Three Months Ended
June 30,
  Six Months Ended
June 30,
  Twelve Months Ended
December 31,
 
 2022  2021  2022  2021  2021  2020  2019 
Depreciation and amortization expense$7.0  $6.7  $13.8  $13.5  $26.9  $26.7  $24.6 
Stock-based compensation expense$1.6  $1.9  $3.6  $3.1  $6.1  $3.4  $5.0 

Primary Logo

Source: CTS Corporation